Opinion ID: 852362
Heading Depth: 1
Heading Rank: 1

Heading: Application of A.D.R. Sanctions to Governmental Entities

Text: The Developers challenge the trial court's conclusion that the Plan Commission, as a governmental entity, is immune from the imposition of sanctions under Alternative Dispute Resolution Rules 2.7(E)(3) and 2.10, which apply to mediation and which state, in relevant part: In the event of any breach or failure to perform under the agreement, upon motion, and after hearing, the court may impose sanctions, including entry of judgment on the agreement. A.D.R. 2.7(E)(3). Upon motion by either party and hearing, the court may impose sanctions against any attorney, or party representative who fails to comply with these mediation rules, limited to assessment of mediation costs and/or attorney fees relevant to the process. A.D.R. 2.10. Our A.D.R. Rules do not contain any provisions expressly granting immunity from sanctions to governmental entities participating in mediation. Supporting the trial court's decision on this issue, the Plan Commission urges that governmental entities should not be subject to costs or attorney fees under the A.D.R. Rules, even if the governmental entity mediates in bad faith, emphasizing State v. Carter, 658 N.E.2d 618 (Ind.Ct. App.1995), trans. not sought, and arguing that the A.D.R. Rules do not expressly permit costs or attorney fees to be assessed against a governmental entity. Carter involved an interlocutory appeal in a negligence action arising from injuries at a branch of the Indiana Bureau of Motor Vehicles. Following an unsuccessful court-ordered mediation, the plaintiff sought, and the trial court granted, sanctions against the State for failing to act in good faith by making a reasonable attempt to resolve the case. The Court of Appeals re versed, finding no evidence of bad faith, id. at 622-23, and, in addition, opined that, even if there had been bad faith, the the trial court should not have sanctioned the State because it is immune from punitive awards, id. at 623. The Developers argue that this latter conclusion in Carter was impliedly overruled by this Court in Noble County v. Rogers, 745 N.E.2d 194 (Ind.2001). There, Rogers sought damages under Indiana Trial Rule 65(C) after being wrongfully enjoined or restrained by Noble County government from adding a second story to her home. Id. at 196. This Court found that the proper construction of the word wrongfully involved the interaction between the governmental immunity provisions of the Indiana Tort Claims Act and our inherent power to sanction litigants for improper or untoward behavior in judicial proceedings. Id. at 197. And we balanced the statutory limitations and the judiciary's inherent power to sanction to conclude that a restraining order or an injunction obtained by the government is wrongful only when the government acts in bad faith or with malice so as to threaten the proper functioning of the court. Id. at 199. Applying this distinction, we found no bad faith by Noble County presented in the record. Significantly, however, we emphasized that the power to sanction is a necessary precondition to the exercise of our independent judicial power, and that [t]o protect the proper functioning of judicial proceedings, we also have imbedded [the sanctioning] power in numerous court rules. Id. at 198. In Brownsburg Community School Corporation v. Natare Corporation, 824 N.E.2d 336 (Ind.2005), which did not involve the A.D.R. Rules, we held that a governmental entity cannot be held liable for treble damages because they are punitive in nature, and we referenced Carter only as an example of the reluctance of courts to impose punitive damages on government entities. Id. at 345-46. And in Noble County, we similarly acknowledged that Carter had refused to award attorneys fees and costs against the government on the grounds that it is immune from `punitive' awards. Noble County, 745 N.E.2d at 199 n. 6. But this example was presented as an incidental contrast to our recognition that inherent judicial power includes the authority to impose sanctions on governmental entities: It is beyond question that this power extends to governmental attorneys and parties. When the State enters the court as a litigant, it places itself on the same basis as any other litigant; subjecting itself to the inherent authority of the court to control actions before it, just as any other litigant. State v. Blenden, 748 So.2d 77, 88-89 (Miss. 1999), reh'g denied. Id. at 199. Mediation proceedings pursuant to our A.D.R. Rules are deemed to be in court, and in a court sanctioned environment, irrespective of whether they actually occur inside a courtroom. Koval v. Simon Telelect, Inc., 693 N.E.2d 1299, 1307 (Ind.1998). And, as we observed in Fuchs v. Martin, [a]n order to mediate is not unlike the requirements imposed by our rules governing discovery and other pre-trial procedure. 845 N.E.2d 1038, 1041 (Ind.2006). Indiana Trial Rule 37(B)(2) specifically permits discovery sanctions to be imposed upon a governmental organization. Even without explicitly relying upon such authorization, we have recognized that a trial court, in the exercise of its inherent power, has wide discretion to impose sanctions to remedy a discovery violation by the State in criminal cases. Carson v. State, 271 Ind. 203, 206, 391 N.E.2d 600, 602 (1979); Reid v. State, 267 Ind. 555, 565, 372 N.E.2d 1149, 1154-55 (1978). The A.D.R. Rules do not exempt governmental entities. They apply in all civil and domestic relations litigation in Indiana courts. A.D.R. 1.4. Furthermore, A.D.R. 2.7(E)(3) authorizes the imposition of sanctions for any breach or failure to perform under an agreement resulting from mediation, and A.D.R. 2.10 authorizes sanctions against any attorney or party representative who fails to comply with the mediation rules. No exception is granted to governmental entities or their attorneys. Until now, this Court has not had occasion to review the proposition espoused in Carter that a trial court may not impose A.D.R. Rule sanctions against a governmental entity. In contrast to the punitive damage rationale employed in Carter, we find that the sanctions authorized by the A.D.R. Rules are more analogous to the exercise of inherent judicial authority than to the imposition of punitive damage awards in civil law suits. Like other parties to litigation who may be involved in a mediation proceeding, governmental entities are equally obligated to comply with the applicable rules and thus should be equally subject to the sanctions authorized to encourage compliance. We therefore disapprove of the portion of Carter that expresses a contrary view, and we now hold that governmental entities are not immune from the power of courts to impose sanctions under the A.D.R. Rules, particularly Rules 2.7(E)(3) and 2.10.