Opinion
Case No. CV-98-0037-BH-M
July 18, 2000
ORDER
This matter is before the Court on Volvo Trucks North America's (VTNA) Motion for Relief (Doc. 102). The Court determines that VTNA is due to be granted the relief requested. However, the Court does not make this determination in an effort to enforce the settlement agreement signed by the parties in this action. Rather the Court is in fact exercising its inherent authority to regulate members of the bar who practice before it. The Court is persuaded that the law firm of Hogan, Smith, Alspaugh, P.C. has failed to uphold its duty of candor, good faith, and fair dealings with this Court and with opposing counsel in this matter. It is indeed unfortunate when this Court is required to publish on the record that the law firm of Hogan, Smith, and Alspaugh P.C., through its participating members, has brought this condition upon itself by way of their clear and unrepentant disrespect of this Court, and the manner in which they have dealt with fellow members of the bar.
For the reasons set forth more fully below, it is the ORDER of this Court that; (a) Hogan, Smith Alspaugh P.C. shall provide to VTNA and the Court a list of every person and entity to whom Hogan, Smith Alspaugh P.C. distributed copies of "The Legal Edge" during the years 1999 and/or 2000; (b) Hogan, Smith Alspaugh P.C. shall cause to be published the retraction proffered to it by VTNA and shall distribute copies of such, via certified mail return receipt requested, to every person and entity to whom Hogan, Smith Alspaugh P.C. distributed a copy of the certified mail receipts, when the above has been published and delivered as ordered; and (d) Hogan, Smith, and Alspaugh P.C. shall immediately deposit with the Clerk of Court the amount of $1000,000 which shall be repaid to Hogan, Smith and Alspaugh P.C. after the terms and conditions of (a), (b) an (c) above have been fulfilled. It is further ORDERED that Hogan, Smith Alspaugh P.C. shall pay to VTNA the reasonable cost of attorneys' fees incurred by VTNA to obtain the remedies provided in this Order. This is the remedy the Court deems necessary to rectify the wrong committed against VTNA.
As for the wrongs committed against this Court, the attorneys at Hogan, Smith Alspaugh P.C. are advised to carefully read this opinion so as to understand the sanctions imposed against them, and to do their best to remedy the injury suffered by this Court. The following are pertinent facts relating to the sanctionable offenses committed by Hogan, Smith Alspaugh P.C.
FINDINGS OF FACT
1. On the morning of June 7, 1999, just prior to commencement of trial, the parties, with the direct and active assistance of the Court, agreed to a confidential settlement of the case.
2. In the course of the parties' settlement negotiations, VTNA's corporate representative (Mr. Scharf) made clear to plaintiff Hornady, plaintiff's counsel Mr. Hogan, and the Court that VTNA's agreement to settle was conditioned upon the fact that the settlement was not an admission of fault or liability by VTNA, and that the settlement would be completely confidential. Mr. Scharf expressly raised the issue of possible publication of the settlement with plaintiff, plaintiff's counsel, and the Court in chambers during the settlement negotiations. As part of the settlement, both Mr. Hogan and plaintiff Hornady represented to the Court and agreed that they would not publish the fact of the settlement, or any information about the settlement in any way. The assurances from Hornady and Mr. Hogan that the settlement would not be published in any manner through any medium by them was part of the complete confidentiality agreed to by the parties.
3. VTNA's counsel specifically expressed concern that information related to this settlement might find its way into Hogan, Smith Alspaugh P.C.'s publication "The Legal Edge". The Court expressly inquired of Mr. Hogan whether he understood that his law firm would not publish any information related to this settlement. Mr. Hogan unequivocally stated to the Court that his firm would not publish any information related to the settlement of this matter. Relying on these assurances, the Court actively assisted the parties' efforts to reach a settlement agreement.
4. On June 7, 1999, once again relying on Mr. Hogan's representations made in chambers, the Court issued an Order dismissing the case with prejudice. Said Order was based on the negotiated settlement agreement "for an undisclosed sum with no admission of fault." (Doc. 101.)
5. In accordance with the settlement agreed to in this Court's Chambers, on or about June 17, 1999, the parties, including Mr. Hogan as counsel for plaintiff, executed a SETTLEMENT AND CONFIDENTIALITY AGREEMENT containing the following confidentiality and publication provisions:
Hornady acknowledges and agrees that an essential inducement for VTNA to enter into this settlement is the agreement by Hornady to preserve the confidentiality of the monetary amount paid by VTNA under this settlement agreement. Hornady represents and agrees that the amount paid by VTNA to Hornady for settlement of the Lawsuit, and pursuant to the Settlement agreement is confidential and shall not be disclosed by Hornady, or by Hornady's attorneys, agents, or assigns, to any other person or entity except as otherwise required by law. Hornady further acknowledges and agrees that an essential inducement for VTNA to enter into this Settlement Agreement is the agreement by Hornady that neither it nor its attorneys or agents shall cause the fact of the settlement to be published in any way, including but not limited to publication in newspaper, newsletter, brochure, magazine, or on the internet. Hornady hereby acknowledges and agrees that neither it nor its attorneys or agents will cause the fact of the settlement to be published. By signing this settlement agreement, Hornady's counsel agrees to the provisions of this settlement agreement regarding confidentiality and publication.
(emphasis added).
6. On or about January 24, 2000, counsel for VTNA received a newsletter from Hogan, Smith Alspaugh, P.C. titled, "The Legal Edge." The newsletter contained a description of the confidential settlement of this case under the heading, "RECENT SIGNIFICANT CASES: Selected 1999 Six and Seven Figure Settlements and Verdicts," as follows:
Baldwin County.
The small business plaintiff owned a fleet of Volvo tractor trailer trucks equipped with air suspension systems. The air suspensions tended to be unstable and allowed tractors to overturn easily when carrying certain high center of gravity loads that can be easily handled by trucks with other type suspension systems. The small business plaintiff brought an action against Volvo alleging, among other things, improperly designed suspension systems. The plaintiff brought suit to recover money spent by the small business to stabilize the suspension system of its fleet of trucks and to recover the costs of eleven overturn accidents.
7. It is a blinding flash of the obvious to say that the published quotes in paragraph 6 above, are a violation of the SETTLEMENT AND CONFIDENTIALITY AGREEMENT quoted in paragraph 5. More importantly (for the purposes of this Order), the act of publishing this information was clearly contrary to the express and unambiguous assurances given by Mr. Hogan to this Court on behalf of Hogan, Smith Alspaugh, P.C.
8. VTNA attempted to remedy this violation without court intervention. However, Hogan, Smith Alspaugh P.C. obstinately chose to deny any wrongdoing and suggested a remedy which would only poor salt over the wound. (See Letter dated February 8, 2000; "Retraction"; and Letter dated February 24, 2000; attached as Exhibit A to Doc. 109.) Rather than simply publishing a proper retraction, as requested by VTNA, Hogan, Smith Alspaugh P.C. offered to publish a message to the readership of "The Legal Edge," which would only serve to cast VTNA in an even worse light, without admitting any wrongdoing on the part of Hogan, Smith Alspaugh P.C.
"We disagree that our firm has in any way violated the settlement agreement." (Letter dated February 8, 2000, signed by R. Ben Hogan, III.) ". . . we do not agree that there has been a violation of the confidentiality order." (Letter dated February 24, 2000, signed by R. Ben Hogan, III.)
9. On March 1, 2000, VTNA filed with this Court a Motion for Relief (Doc. 102), wherein many of these facts were brought to the attention of the Court.
10. Hogan, Smith Alspaugh P.C. responded to said motion by "acknowledg[ing] that the firm brochure contained a technical violation of the Confidentiality Agreement" while at the same time contending that there was nothing this Court could do about it. (Doc. 103, signed by R. Ben Hogan, III.) From that moment forward, Hogan, Smith Alspaugh P.C. has played games with this Court. In a display of arrogance, R. Ben Hogan III and his law firm have repeatedly stated to this Court that although they made certain assurances to the Court, and proceeded to act directly contrary to those assurances, this Court is powerless to do anything about it. The Court disagrees.
See transcript of oral arguments held in open court on May 11, 2000; See also Doc. 108.
CONCLUSIONS OF LAW
JURISDICTION
Contrary to the arguments of Hogan, Smith Alspaugh P.C., this Court is not without power, authority, or jurisdiction in this matter. The federal court system has long recognized the inherent power of a court to punish contemptuous acts as well as supervise the members of the bar who practice before it.
A court's ability to punish contempt is thought to be an inherent and integral element of its power and has deep historical roots. Thus, the Supreme Court, in Ex parte Robinson
said the power to punish for contempt is inherent in all courts; its existence is essential to the preservation of order in judicial proceedings, and to the enforcement of judgments, orders and writs of the court and, consequently, to the due administration of justice. The moment the courts of the United States were called into existence and invested with jurisdiction over any subject, they became possessed of this power.
Charles Allen Wright, et al., Federal Practice and Procedure § 2960 (2d ed. 1995) (quoting Ex parte Robinson, 86 U.S. 505 (1874)). See generally 18 U.S. Code § 401 (allowing Federal Court to impose summary criminal contempt sanctions for "disobedience or resistance of its . . . order, rule, decree, or command," or "misbehavior of any person in its presence or so near thereto as to obstruct the administration of justice.")
Likewise, it has long been "beyond dispute that lawyers are officers of the court and that the courts have the inherent authority to regulate their professional conduct." In re Gopman, 531 F.2d 262, 266 (5th Cir. 1976). As the Eleventh Circuit has explained
Courts possess the inherent power to protect the orderly administration of justice and to preserve the dignity of the tribunal. "The inherent power of a court to manage its affairs necessarily includes the authority to impose reasonable and appropriate sanctions upon errant lawyers practicing before it." A trial court possesses the inherent power to discipline counsel for misconduct, short of behavior giving rise to disbarment or criminal censure, without resort to the powers of civil or criminal contempt. The Court's power to impose appropriate sanctions on attorneys practicing before it "springs from a different source than does the power to punish for criminal contempt."Kleiner v. First National Bank, 751 F.2d 1193, 1209 (11th Cir. 1985) (citations omitted).
Furthermore, it is well established that the dismissal of the underlying case against VTNA does not affect either of these sources of the Court's inherent authority. The Supreme Court has previously rejected [Hogan, Smith Alspaugh P.C.'s] contention that a dismissal "automatically deprives a court of jurisdiction of the action, rendering the court powerless to impose sanctions thereafter." See Cooter Gell v. Hartmarx Corp, 496 U.S. 384, 394 (1990). Instead, "[i]t is well established that a federal court may consider collateral issues after an action is no longer pending," and "may make an adjudication of contempt and impose a contempt sanction even after the action in which the contempt arose has been terminated." Id. at 395-96. The Court's authority to impose sanctions for improper attorney conduct under Rule 11 or other authority also continues unabated after the dismissal of the case. Id. at 395; see also In re E.I. DuPont de Nemours Company — Benlate Litigation, 99 F.3d 363, 368 (11th Cir. 1996) (citing Cooter Gell in holding that a district court possessed jurisdiction to conduct contempt proceedings over a year and a half after a case was settled and dismissed.); Baker v. Alderman, 158 F.3d 516, 523 (11th Cir. 1991) (same). Under established Supreme Court and Eleventh Circuit precedent, therefore, this Court retains full authority to impose sanctions against [Hogan, Smith Alspaugh P.C.] for contempt or for other misconduct in their role as lawyers and officers of this court.
This paragraph is quoted directly from VTNA's brief at page 3 (Doc. 109).
Hogan, Smith Alspaugh P.C. cite Kokkonen v. Guardian Life Insurance Co., as authority for the proposition that this Court does not have jurisdiction to deal with this matter. 511 U.S. 375 (1994). However,Kokkonen only held that a federal court does not normally have the authority (without an independent showing of jurisdiction) to enforce a settlement agreement negotiated by the parties. In this case, the Court does not seek to enforce the settlement agreement negotiated by the parties. Rather, the Court is attempting to preserve and protect the orderly administration of justice and the dignity of this Court while at the same time managing its proceedings and dealings with members of the bar.
This should not be confused with an attempt by the Court to "vindicate" its authority by punishing the errant lawyers. See Martin v. Guillot, 875 F.2d 839, 845 (11th Cir. 1989). A proper examination of the sanctions imposed by this Court reveals that the sanctions are remedial in nature rather than punitive. Although the Court opines that Hogan, Smith Alspaugh P.C.'s offense is worthy of punishment, the Court feels lenient today and will not impose punitive criminal sanctions.
The Court views itself as an aggrieved party in this instance, along with VTNA and its counsel who have also been injured. Anticipating occasions such as this, the Supreme Court recognized in Kokkonen a court's authority to exercise ancillary jurisdiction "to enable a court to function successfully, that is, to manage its proceedings, vindicate its authority, and effectuate its decrees." Kokkonen, 511 U.S. at 380. Additionally, the Supreme Court has specifically held that "[a] court may make an adjudication of contempt and impose a contempt sanction even after the action in which the contempt arose has been terminated." Cooter Gell v. Hartmarx Corp., 496 U.S. 384, 396 (1990) (citations omitted). Thus the imposition of contempt sanctions is not a judgment on the merits of an action. See Cooter, 496 U.S. at 396 (1990). Rather, it is a determination of a collateral issue: "whether the attorney has abused the judicial process, and, if so, what sanction would be appropriate. Such a determination may be made after the principal suit has been terminated."See Cooter, 496 U.S. at 396 (1990).
Likewise, "[i]t is beyond peradventure that all federal courts have the power, by statute, by rule, and by common law, to impose sanctions against recalcitrant lawyers and parties litigant." Carlucci v. Piper Aircraft Corp., 775 F.2d 1440, 1446 (11th Cir. 1985) "[D]eeply rooted in the common law tradition is the power of any court to `manage its affairs [which] necessarily includes the authority to impose reasonable and appropriate sanctions upon errant lawyers practicing before it.'" Carlucci v. Piper Aircraft Corp., 775 F.2d 1440, 1447 (11th Cir. 1985) (quotingFlaksa v. Little River Marine Construction Co., 389 F.2d 885, 888 (5th Cir. 1968)).
Thus this Court has jurisdiction and authority over this matter via its contempt powers, if the Court chooses to exercise that power, and also via its inherent authority to regulate and discipline the bar. Furthermore, this Court also has the ability to enforce the Local Rules of the Southern District of Alabama. Local Rule 83.6(a) states: "For good cause shown and after an opportunity to be heard, a member of the bar of this Court may, by a district judge of this Court, be disbarred or suspended from practice in this Court, be reprimanded, or be subjected to such other discipline as the judge may deem proper." Wherefore, this Court determines that it does indeed have jurisdiction to handle this matter, and must now determine whether the judicial process has been abused, and, if so, what sanctions are appropriate.
HOGAN, SMITH ALSPAUGH P.C.'S CONDUCT WAS CONTUMACIOUS
It is the determination of this Court that Hogan, Smith Alspaugh P.C.'s conduct was contumacious rising to the level of professional misconduct, and an abuse of the judicial process. The Southern District of Alabama has adopted the American Bar Association's Model Rules of Professional Conduct, insofar as they are not inconsistent with the "ethical limitations and requirements governing the behavior of members of the Alabama State Bar." Local Rule 83.5(f). Rule 8.4 of the American Bar Association's Model Rules of Professional Conduct states in pertinent part:
It is professional misconduct for a lawyer to:
(c) engage in conduct involving dishonesty, fraud, deceit or misrepresentations; [or]
(d) engage in conduct that is prejudicial to the administration of justice. . . .
The Court determines that Mr. Hogan and his law firm, Hogan, Smith Alspaugh P.C. have made misrepresentations to this Court, to VTNA and to VTNA's counsel. The contumacious impact of said misrepresentations were compounded by Hogan, Smith Alspaugh P.C.'s further misconduct when the law firm, through Mr. Hogan, asserted that they had done nothing wrong. Furthermore, Hogan, Smith and Alspaugh P.C. and Mr. Hogan have continued to frivolously argue (both orally and in written briefs) that although they may have acted contrary to their assurances, this Court is powerless to do anything about it.
In twenty-nine years on the bench, this Judge has never witnessed such a blatant disregard for the Court's authority or lack of respect for fellow members of the bar. Making it worse is the fact that Hogan, Smith Alspaugh P.C.'s conduct was not an overzealous attempt to vigorously represent their client. This was clearly an economic decision; nothing more than a means of generating "star power" among the bar and potential clients. Obviously these motives are more compelling and more important at Hogan, Smith Alspaugh P.C. than keeping their assurances sacred.
CONCLUSION
Considering the tone of this opinion, it should be apparent to all who read it that the Court is truly offended by Hogan, Smith Alspaugh P.C.'s conduct and finds it to be abhorrent. The Court notes that misrepresentations to the court provide a basis for contempt sanctions.U.S. v. Griffin, 84 F.3d 820 (7th Cir. 1996). Nevertheless, the Court also recognizes that its contempt powers are to be used sparingly. Therefore, the Court will stop short of finding Mr. Hogan and Hogan, Smith Alspaugh P.C. in contempt of Court. Rather, as stated above, the Court finds that they have committed professional misconduct and are deserving of remedial sanctions. Thus, exercising its inherent power to regulate the bar and manage its own affairs, this Court imposes the following sanctions against Mr. R. Ben Hogan III and the law firm of Hogan, Smith Alspaugh P.C.:
1) Hogan, Smith Alspaugh P.C. shall provide to VTNA and the Court a list of every person and entity to whom Hogan, Smith Alspaugh P.C. has distributed a copy of "The Legal Edge" during the years 1999 and/or 2000.
2) Hogan, Smith Alspaugh P.C. shall publish the retraction proffered by VTNA and send copies of such, via certified mail, to every person and entity to whom Hogan, Smith Alspaugh P.C. has distributed a copy of "The Legal Edge" during the years 1999 and/or 2000.
3) Hogan, Smith, and Alspaugh P.C. shall deposit with the Clerk of Court the amount of $100,000 which shall be returned to Hogan, Smith and Alspaugh P.C. after the Court is convinced the above mentioned retraction has been published and delivered as ordered.
4) Hogan, Smith Alspaugh P.C. shall pay to VTNA an amount equal to the reasonable cost of attorneys' fees incurred by VTNA to receive the remedies provided in this Order.
Additionally, the Court determines that this is an appropriate occasion to exercise its power of suspension under Local Rule 83.6. To protect itself from further abuses, the Court SUSPENDS Hogan, Smith Alspaugh P.C. from practicing law in the Southern District of Alabama until such time as its members demonstrate to the Court that they have amended their ways, and are capable of practicing law with the dignity and respect deserving of this fine profession. Local Rule 83.6(a) also grants a judge the authority to subject errant lawyers to "such other discipline as the judge may deem proper." The Court `deems proper' one final sanction in this instance. Hogan, Smith Alspaugh P.C. is hereby ORDERED to publish this opinion along with the retraction referenced above. Proper publication of this opinion is a further prerequisite to redeeming the $100,000 deposited with the Clerk of Court. These sanctions are not only reasonable and appropriate, but are in fact quite lenient considering the level of disrespect demonstrated by Mr. Hogan and his law firm along with the plethora of much more painful remedies available to a court in circumstances such as these.