Opinion ID: 1638324
Heading Depth: 2
Heading Rank: 1

Heading: whether the imposition of sanctions against the appellants exceeded the trial court's inherent powers.

Text: ¶ 24. At issue is the trial court's finding that as to the conduct on the part of one or more of the defendants in this matter, the actions for one, if shown to have occurred in the furtherance of the purpose of the joint venture, are the actions for all, and the [c]ourt may order sanctions accordingly. The appellants argue that, absent a finding of bad faith personal to the party to be sanctioned, a court lacks the inherent power impose a sanction on that party. In other words, the appellants argue, a court may not use vicarious liability to sanction an innocent party through the imputation of bad faith to that party. ¶ 25. A court has the inherent power to impose sanctions in order to protect the integrity of the judicial process. Wyssbrod, 798 So.2d at 368. Mississippi's court rules and statutes specifically provide for the imposition of sanctions against parties or attorneys appearing before the court; under these rules the court may: order the payment of money to a party or an attorney; strike pleadings; enter a default; or set aside a judgment. See Miss. R. Civ. P. 11(b), 37(b), 41(b), and 60(b). Of particular relevance in this case, Uniform Rule of Circuit and County Court Practice 1.10 provides that no person shall undertake to discuss with or in the presence or hearing of the judge the law or the facts or alleged facts of any case then pending in the court or likely to be instituted therein,. . . nor attempt in any manner, . . . to influence the decision of the judge in any such case or matter. Uniform Rule of Circuit and County Court Practice 1.03 provides that any person embraced by the rules who violates any provision of the rules may be subjected to sanctions, contempt proceedings, or other disciplinary actions imposed or initiated by the court. ¶ 26. The appellants contend that a court's inherent power to sanction arises upon a showing that the party to be sanctioned acted in bad faith, and that bad faith cannot be imputed to another party through the doctrine of vicarious liability. The Jones Firm counters that there was evidence before the trial court that the appellants had constructive notice of the criminal acts, because the $40,000 in bribe money was reimbursed from joint-venture funds; thus, there was evidence that they acted in bad faith. Nonetheless, the trial court rejected this evidence, concluding that there was little, if any evidence the appellants had knowledge of the bribery conspiracy, and the court ordered sanctions based upon the vicarious liability of joint venturers. Although the Jones Firm does not challenge this finding by the trial court, this Court has held that where the basis for the award is itself a product of abused discretion, so too is the award. Ford Motor Co. v. Tennin, 960 So.2d 379, 395 (Miss.2007). We find that the trial court's refusal to attribute knowledge of the bribery conspiracy to the appellants was not manifestly erroneous; therefore, the finding was within the court's discretion. For that reason, this Court proceeds to review the trial court's decision to award sanctions based upon vicarious liability. ¶ 27. The appellants essentially argue that the trial court applied an incorrect legal standard by imposing sanctions upon them based upon their status as joint venturers with the Scruggs Firm. They cite the rule that a federal court may not, in the exercise of its inherent powers, order attorney's fees as a sanction without a finding that the opposing party personally has acted in bad faith. Roadway Express, Inc. v. Piper, 447 U.S. 752, 765-66, 100 S.Ct. 2455, 2463-64, 65 L.Ed.2d 488 (1980); Alyeska Pipeline Service Co. v. Wilderness Soc'y, 421 U.S. 240, 258-59, 95 S.Ct. 1612, 1622-23, 44 L.Ed.2d 141 (1975); Hall v. Cole, 412 U.S. 1, 5, 93 S.Ct. 1943, 1946, 36 L.Ed.2d 702 (1973). They also cite cases that hold a judicial finding that a plaintiff or defendant acted in bad faith in litigation does not permit the court to impose sanctions against that party's innocent attorney, or against that party's innocent coplaintiff or codefendant. Dow Chem. Pacific, Ltd. v. Rascator Maritime S.A., 782 F.2d 329, 344 (2d Cir.1986) (stating that [a] finding that one defendant has acted in bad faith in conducting litigation does not justify an award of fees against a codefendant); Browning Debenture Holders' Comm. v. DASA Corp., 560 F.2d 1078, 1089 (2d Cir.1977) (stating [s]ince an award of costs or attorneys' fees based on bad faith must likewise be personal, such an award may be assessed against plaintiffs . . . only after reconsideration and such hearing as the district court finds necessary, that they personally were aware of or otherwise responsible for the procedural action instituted in bad faith); Bower v. Weisman, 674 F.Supp. 109, 112 (S.D.N.Y.1987) (the plaintiff's counsel could not be assessed sanctions based upon the plaintiff's perjury because there was no showing that counsel knew of, or aided the plaintiff in, the perjury); Arista Records, L.L.C. v. Tschirhart, 241 F.R.D. 462, 464-65 (W.D.Tex.2006) (citing Pressey v. Patterson, 898 F.2d 1018, 1021 (5th Cir.1990)) (a party's bad-faith discovery violation, consisting of the destruction of evidence, could not be attributed to her attorney). These authorities stand for the tenet that bad faith is personal and cannot be attributed to the acting party's attorney or to another party. ¶ 28. The federal courts have recognized that a court may, pursuant to its inherent powers, impose a sanction upon a partnership based upon its vicarious liability for a partner's litigation misconduct. Perna v. Electronic Data Systems Corp., 916 F.Supp. 388, 402-03 (D.N.J.1995). In Eppes v. Snowden, 656 F.Supp. 1267 (D.Ky.1986), the district court ordered sanctions against a silent partner, Doherty, based upon a fraud upon the court committed by his partner, Snowdon, in the defense of a declaratory judgment action by an insurer. Id. at 1282. Doherty and Snowdon were partners who owned a thoroughbred stallion covered by policies of mortality insurance. Id. at 1268. When the stallion died, the insurer sought a declaratory judgment for purposes including establishing the stallion's cash value at the time of his death. Id. The court declared a mistrial after discovering that Snowdon had produced fraudulent letters from prominent horse dealers who had offered to buy a share in the stallion. Id. at 1269, 1272-73. Snowdon had offered these letters to establish the stallion's high cash value at his death. Id. at 1269. These letters were dated before the horse's death, but witnesses established that at least two of the letters were written after the horse's death and backdated at Snowdon's direction. Id. Snowdon also had coached one letter's author to lie during a hearing concerning the letter's authenticity. Id. at 1276. ¶ 29. The trial court determined that Snowdon's manufacture of false evidence constituted a fraud upon the court that authorized the court to dismiss his answer and counterclaim pursuant to the court's inherent power to protect the integrity of judicial proceedings. Id. at 1279. The court then addressed the question of whether the acts of Snowdon could be imputed to his partner, Doherty. Id. at 1279-81. Doherty had given Snowdon a general power of attorney authorizing him to transact business on his behalf and to institute or defend suits concerning his property rights. Id. at 1270. Doherty had not participated in the litigation and he had not appeared at the trial due to illness. Id. Defense counsel had informed the court that, at the trial, Doherty's interests would be represented by Snowdon. Id. ¶ 30. After reviewing the Uniform Partnership Act and Kentucky law, and citing the fact that Snowdon and Doherty were partners in the stallion, the court ha[d] no doubt that the acts of Snowdon must be imputed to his partner, Doherty, who has remained a silent partner throughout. Id. at 1280. The court noted that because Snowdon was Doherty's partner, agent, and attorney-in-fact, Doherty could not expect to reap any benefits of Snowdon's activities in the litigation without also being held accountable for Snowdon's misdeeds. Id. at 1280-81. The court attributed particular importance to the fact that there was nothing before the court to rebut the inference that Doherty had acquiesced in Snowdon's misdeeds with full knowledge. Id. at 1270. The court struck the partners' answer and counterclaim, and imposed monetary sanctions on Snowdon. Id. at 1282. However, in its discretion, the court found that it would be inequitable to impose monetary sanctions on Doherty, because Snowdon was the active partner in the commission of the fraud on the court, and Doherty had taken no affirmative action at any time in purchasing the stallion, in filing the insurance claim, or in the litigation. Id. at 1280. ¶ 31. A joint venture is a single-purpose partnership. Duggins v. Guardianship of Washington, 632 So.2d 420, 427 (Miss.1993). [4] As a joint venture, SKG was governed by Mississippi's partnership law, the Uniform Partnership Act of 1997, effective January 1, 2005. [5] Under the Act, a joint venture is liable for any penalty incurred as the result of a wrongful act or omission, or other actionable conduct, of a joint venturer acting in the ordinary course of business of the joint venture. Miss.Code Ann. § 79-13-305 (Rev.2009). In the absence of an agreement with the claimant or as otherwise provided by law, all co-venturers are jointly and severally liable for joint-venture obligations. Miss. Code Ann. § 79-13-306(b) (Rev.2009). A litigant may sue a joint venture in the name of the partnership or he may bring an action against any or all of the partners in the same action or in separate actions. Miss.Code Ann. § 79-13-307(a), § 79-13-307(b) (Rev.2009). However, a judgment against a partnership may not be satisfied from a partner's assets unless there is also a judgment against the individual partner. Miss.Code Ann. § 79-13-307(c) (Rev.2009). ¶ 32. We find that the trial court's treatment of this lawsuit as one against SKG or SKG assets was not an abuse of discretion. The lawsuit was an attempt by the Jones Firm to obtain what it asserted to be its rightful share of joint-venture profits under the joint-venture agreement. Rather than suing SKG, the Jones Firm chose to sue the co-venturers, a litigation strategy encouraged by Mississippi Code Section 79-13-307(c), and two individuals who were not co-venturers. Given the facts that: (1) under Section 79-13-307(c), a partnership creditor must sue an individual partner in order to obtain a judgment against the individual partner's assets; (2) accordingly, the trial court found that this suit was against SKG or SKG assets brought in the name of SKG's partners; (3) partners are jointly and severally liable for partnership obligations; and (4) under Section 79-13-305, a partnership may be liable for any penalty incurred as a result of the wrongful act or actionable conduct by a partner in the ordinary course of partnership business; thus, this Court finds that the trial court possessed the discretion to sanction SKG, but only upon a finding that Richard Scruggs's misconduct was within the ordinary course of business of SKG. We proceed to review the trial court's implicit finding that the misconduct occurred within SKG's ordinary course of business.