HONORABLE DAVID H. SANDERS, JUDGE OF THE CIRCUIT COURT OF JEFFERSON COUNTY,
BREEDEN MECHANICAL, INC. , J.S.C. CONCRETE, INC., KEVIN JOY, LOUDON VALLEY CONCRETE,
INC., MODERN ENTERPRISES, INC., NORTH STAR FOUNDATIONS, INC.
WRIT GRANTED AS MOULDED
4. The inherent power of courts to sanction misconduct includes the authority
to enter default judgment orders in appropriate circumstances.
5. Although Rules 11, 16, and 37 of the West Virginia Rules of Civil Procedure do not formally require any particular procedure, before issuing a sanction, a court must ensure it has an adequate foundation either pursuant to the rules or by virtue of its inherent powers to exercise its authority. The Due Process Clause of Section 10 of Article III of the West Virginia Constitution requires that there exist a relationship between the sanctioned party's misconduct and the matters in controversy such that the transgression threatens to interfere with the rightful decision of the case. Thus, a court must ensure any sanction imposed is fashioned to address the identified harm caused by the party's misconduct. Syl. Pt. 1, Bartles v. Hinkle, 196 W.Va. 381, 472 S.E.2d 827 (1996).
6. In formulating the appropriate sanction, a court shall be guided by equitable principles. Initially, the court must identify the alleged wrongful conduct and determine if it warrants a sanction. The court must explain its reasons clearly on the record if it decides a sanction is appropriate. To determine what will constitute an appropriate sanction, the court may consider the seriousness of the conduct, the impact the conduct had in the case and in the administration of justice, any mitigating circumstances, and whether the conduct was an isolated occurrence or was a pattern of wrongdoing throughout the case. Syl. Pt. 2, Bartles v. Hinkle, 196 W.Va. 381, 472 S.E.2d 827 (1996).
7. Imposition of sanctions of dismissal and default judgment for serious litigation misconduct pursuant to the inherent powers of the court to regulate its proceedings will be upheld upon review as a proper exercise of discretion when trial court findings adequately demonstrate and establish willfulness, bad faith or fault of the offending party.
This case is before the Court on a petition for a writ of prohibition. Two of the eight defendants below, (See footnote 1) Richmond American Homes of West Virginia, Inc. (hereinafter Richmond) and M.D.C. Holdings, Inc., (hereinafter MDC), (See footnote 2) invoke the original jurisdiction (See footnote 3) of this Court in an effort to enjoin enforcement of the November 4, 2009, and November 18, 2009, orders of the Circuit Court of Jefferson County. The orders resulted in the striking of Petitioners' defenses and default judgment entered against them on the issue of liability in the underlying tort litigation based on the allegation of the plaintiffs below (hereinafter Respondents) that inadequate radon mitigation systems were installed in their homes. (See footnote 4) Petitioners maintain that the circuit court exceeded its legitimate powers in issuing such harsh sanctions, which warrants the issuance of a writ of prohibition with
direction to the lower court to vacate the orders. Upon due consideration of the briefs and arguments of counsel, review of numerous exhibits supplied by the parties (See footnote 5) and examination of the relevant law, we issue the writ of prohibition as moulded.
According to copies of e-mails supplied by the parties before us, Richmond renewed its remediation efforts after the Joy suit was filed. Richmond's counsel retained to defend the company in the Joy suit sent an e-mail in March 2009 to Mr. Skinner asking for a list of clients who had not yet had active radon systems installed in their homes. In an April 2009 e-mail, Richmond's retained counsel attached a draft letter for Mr. Skinner's clients from Richmond's President, Patrick Annessa, outlining Richmond's offer to arrange for the installation of active radon detection systems. In that e-mail, Richmond's counsel asked: Please let me know by Tuesday (4/14/09) if you will accept the letter on behalf of your clients or if Mr. Annessa should send a letter to each of your clients directly. Mr. Skinner's colleague, Laura Davis, responded by return e-mail disputing portions of the letter and stating: I cannot agree to permit this communication to be sent directly to represented parties in the litigation. I agree that it is wise to formalize the terms of remediation in writing. However, I would prefer that you do so in correspondence to us as opposed to our clients. According to the affidavits of two of the attorneys retained to represent Richmond dated August 27, 2009, negotiations regarding the contents of the letter continued, but Respondents' counsel never accepted the letter on behalf of their clients nor did they agree to give the letter to their clients. In June 2009, (See footnote 8) a letter signed by Mr. Annessa (See footnote 9) was sent to at least eleven of the sixteen families involved in the Joy case. (See footnote 10)
In preparing for trial, Respondents served MDC and Richmond with a set of
interrogatories, request for production of documents and request for admissions along with
the Joy complaint. Apparently a second, third and fourth set of interrogatories and request
for production of documents in the Joy case were subsequently delivered to MDC and
Richmond. Respondents maintain that MDC completely ignored the discovery requests for
over a year. (See footnote 11)
Respondents filed two motions to compel discovery from Richmond which were taken up by the trial court at a scheduling conference on March 12, 2009. (See footnote 12) In the June 24, 2009, order resulting from the scheduling conference, the lower court ruled on the motions to compel as follows:
1. Plaintiff's Motion to Compel Discovery Responses from Defendant Richmond. Plaintiffs and defendant Richmond shall, on or before April 1, 2009, meet and confer in good faith in our [sic] effort to resolve the discovery issues raised or presented in plaintiffs' currently pending motions to compel discovery responses. In the event the plaintiffs' [sic] and defendant Richmond are unable to resolve the discovery issues on or before April 1, 2009, the discovery issues shall be referred to Oscar W. Bean, Esquire, of Moorefield, West Virginia, as discovery commissioner, and Mr. Bean is hereby directed to make written recommendation to this Court as to a resolution of the discovery issues.
The parties dispute whether Richmond complied with the directive in the June 24, 2009,
order to meet and confer, but nonetheless, the discovery issues were submitted to the
discovery commissioner before whom a hearing was held on September 23, 2009. As the
parties confirmed during oral argument, no recommended order was submitted to the court
by the discovery commissioner, nor had the trial court issued any order compelling
Mr. Skinner filed an affidavit with the court (See footnote 13) in which he stated that, while at a two-day mediation meeting in the Joy case in January 2009, he was approached before the meeting began by the in-house attorney representing MDC. The affidavit represents that after the in-house counsel informally expressed her settlement concerns in the three pending radon lawsuits, she asked Mr. Skinner to consider becoming MDC's lawyer to coordinate its nationwide radon litigation. Mr. Skinner stated in the affidavit that his impression from this offer was that Richmond American Homes sought both to create a conflict between me and my clients and to conflict me out of future radon cases.
A motion for sanctions seeking default judgment and striking Richmond's
answers and defenses was filed by Respondents. Although the Annessa letter was the
springboard for filing the motion, Respondents also raised the discovery issues and the job
offer as demonstration of a pattern of litigation misconduct supporting the sanction request.
The matter of sanctions was the primary issue addressed by the trial court at a hearing on
October 30, 2009. Over Respondents' objection, (See footnote 14) the court permitted Petitioners to call
Forest J. Bowman, retired West Virginia University College of Law Professor, to testify
regarding the propriety of communication between the parties in the form of the Annessa
Letter. At the conclusion of the hearing, the trial judge determined that sanctions would be
imposed without deciding what sanctions would be appropriate. The nature of the sanctions
was announced in the order dated November 4, 2009. However, both the November 4 and
November 18, 2009, orders relate findings the lower court made in arriving at the sanctions
of granting the motions for default judgment and striking the defenses. In these orders the
lower court in essence found that: the Annessa Letter was an unauthorized communication
which contained false statements and attempted to undermine the relationship between the
plaintiffs and their counsel; Respondents failed to cooperate fully in the discovery process;
and the MDC job offer of employment was an improper attempt to subvert the plaintiffs'
counsel to work against the interests of his clients. The lower court stated in the November
18, 2009, order that the identified acts of the defendants taken together . . . make a picture
of not only obstructionist conduct, but [also] a desire to fragment the efforts of the Plaintiffs
in this litigation and as such, the aggregated conduct of Richmond merits sanctions. (See footnote 15)
Richmond subsequently invoked this Court's original jurisdiction, seeking a writ of prohibition to stop the enforcement of the two orders. On January 14, 2010, this Court issued a rule to show cause why a writ of prohibition should not be granted.
(1) whether the party seeking the writ has no other adequate means, such as direct appeal, to obtain the desired relief; (2) whether the petitioner will be damaged or prejudiced in a way that is not correctable on appeal; (3) whether the lower tribunal's order is clearly erroneous as a matter of law; (4) whether the lower tribunal's order is an oft repeated error or manifests persistent disregard for either procedural or substantive law; and (5) whether the lower tribunal's order raises new and important problems or issues of law of first impression.
We turn now to weigh these considerations in light of the matters presented in the pending case.
When rules alone do not provide courts with sufficient authority to protect their integrity and prevent abuses of the judicial process, the inherent power fills the gap. As early as 1812, the Supreme Court stated that [c]ertain implied powers must necessarily result in our courts of justice, from the nature of their institution, explaining that such powers cannot be dispensed with in a court, because they are necessary to the exercise of all others. United States v. Hudson, 11 U.S. (7 Cranch) 32, 34, 3 L.Ed. 259 (1812). The inherent power encompasses the power to sanction attorney or party misconduct, and includes the power to enter a default judgment. Other inherent power sanctions available to courts include fines, awards of attorneys' fees and expenses, contempt citations, disqualifications or suspensions of counsel, and drawing adverse evidentiary inferences or precluding the admission of evidence.
Shepherd v. American Broadcasting Companies, Inc., 62 F.3d 1469, 1474-1475 (D.C. Cir.
1995) (some internal citations omitted). Moreover, the United States Supreme Court in Chambers v. NASCO, Inc., 501 U.S. 32 (1991), while discussing the potency of a court's
inherent power to sanction recognized that even though the sanction of dismissal is
particularly severe . . . [it] is within the court's discretion. Id. at 45. It is later stated in Chambers that the inherent power of a court [to sanction] can be invoked even if procedural
rules exist which sanction the same conduct. 501 U.S. at 49. The inherent power of courts
to sanction also provides courts with a means to impose sanctions fashioned to address
unique problems which may not be addressed within the rules. Id. Also see generally C.
Wright & A. Miller, Federal Practice and Procedure: Civil 3d § 1336 (2004). Following
this reasoning we find that the inherent power of courts to sanction misconduct includes the
authority to enter default judgment orders in appropriate circumstances.
The essential parameters governing the imposition of sanctions for misconduct of a party were formulated by Justice Cleckley in syllabus points one and two of Bartles v. Hinkle, 196 W.Va. 381, 472 S.E.2d 827 (1996). In Syllabus point one of Bartles, the general considerations applicable to sanctions are set forth as follows:
Although Rules 11, 16, and 37 of the West Virginia Rules of Civil Procedure do not formally require any particular procedure, before issuing a sanction, a court must ensure it has an adequate foundation either pursuant to the rules or by virtue of its inherent powers to exercise its authority. The Due Process Clause of Section 10 of Article III of the West Virginia Constitution requires that there exist a relationship between the sanctioned party's misconduct and the matters in controversy such that the transgression threatens to interfere with the rightful decision of the case. Thus, a court must ensure any sanction imposed is fashioned to address the identified harm caused by the party's misconduct.
The process trial courts follow in determining the appropriate sanction within the contours of a given case is addressed in syllabus point two of Bartles:
In formulating the appropriate sanction, a court shall be guided by equitable principles. Initially, the court must identify the alleged wrongful conduct and determine if it warrants a sanction. The court must explain its reasons clearly on the record if it decides a sanction is appropriate. To determine what will constitute an appropriate sanction, the court may consider the seriousness of the conduct, the impact the conduct had in the case and in the administration of justice, any mitigating circumstances, and whether the conduct was an isolated occurrence or was a pattern of wrongdoing throughout the case.
196 W.Va. at 384, 472 S.E.2d at 830. The Bartles case was an appeal of a trial court's order
sanctioning defendants for failing to comply with discovery orders. Although the specific
issue in Bartles involved rule-based authority to impose sanctions, nothing in our discussion
or rulings in Bartles limits the holdings in that case to instances when sanctions are imposed
pursuant to provisions of a rule. See State ex rel. Rees v. Hatcher, 214 W.Va. 746, 749 n.
2, 591 S.E.2d 304, 307 n. 2 (2003). The same general process regarding imposition of
sanctions applies whether a trial court is proceeding under the authority of rule, statute or its
As previously mentioned, we review imposition of sanctions under an abuse of discretion standard. However, as made clear in Bartles, this does not mean that we rubber stamp the sanction decisions of trial courts. Instead, we determine whether the trial court acted within its discretion by examining the factual situation in each case to determine if the sanction imposed is fashioned to address the identified harm caused by the party's misconduct. 196 W.Va. at 390, 472 S.E.2d 836.
Petitioners stress that appellate review of the existence of an adequate foundation and proper formulation of a sanction requires close scrutiny, especially in situations where the sanction imposed serves to end litigation of a case. They note that the U.S. Supreme Court has emphasized that a court's inherent powers must be exercised with restraint and discretion [b]ecause of their very potency and the potential for arbitrariness and abuse. Chambers v. NASCO, Inc., 501 U.S. 32, 44 (1991). They also point to this Court's reflection in Dimon v. Mansy, 198 W. Va. 40, 45, 479 S.E.2d 339, 344 (1996), that there is always the unseemly danger of overreaching when the judiciary undertakes to define its own power and authority.
The need for restraint and discretion is a refrain repeated in federal court decisions involving the review of orders of dismissal and default judgment levied as sanctions. See e.g. Estate of Solis-Rivera v. U.S., 993 F.2d 1, 2 (1st Cir. 1993) (finding that because dismissal with prejudice is a harsh sanction it should only be used when misconduct is extreme); Barnhill v. U.S., 11 F.3d 1360, 1367 (7th Cir. 1993) (observing sanctions of dismissal with prejudice and default judgment as draconian for infrequent use by trial courts when there is a clear record of delay or contumacious conduct.); Halaco Engineering Co. v. Costle, 843 F.2d 376, 380 (9th Cir. 1988) (In cases where the drastic sanctions of dismissal or default are ordered, the range of discretion for a district court is narrowed and the losing party's non-compliance must be due to willfulness, fault, or bad faith.). This concern for restraint has led some federal courts of appeal to adopt the heightened standard of clear and convincing evidence of abusive conduct to review of orders ending litigation entered pursuant to the inherent authority of the court. See Shepherd v. American Broadcasting Cos., Inc. 62 F.3d 1469 (D.C. Cir. 1995); Revson v. Cinque & Cinque, P.C., 221 F.3d 71 (2d Cir. 2000). However, other circuits have not established any heightened proof requirement and apply the same considerations which are applied when such litigation ending orders are entered as sanctions pursuant to the rules of civil procedure. The Ninth Circuit Court of Appeals has said that [d]ismissals under a court's inherent powers are subject to much the same considerations as those under the Federal Rules of Civil Procedure. Halaco Engineering Co. v. Costle, 843 F.2d 376 (9th Cir. 1988). Among the considerations enumerated in Halaco is the presence of willfulness, bad faith, or fault by the offending party.
This Court proceeds in its review of orders of dismissal and default judgment cases pursuant to rule-based sanction authority with similar circumspection. As was stated in Cattrell Cos. v. Carlton, Inc., 217 W. Va. 1, 14, 614 S.E.2d 1, 14 (2005), dismissal and default [judgment] are [considered] drastic sanctions that should be imposed only in extreme circumstances.. See also Doulamis v. Alpine Lake Prop. Owners Ass'n, Inc., 184 W. Va. 107, 112, 399 S.E.2d 689, 694 (1990) (stating that dismissal, the harshest sanction, should be used sparingly and only after other sanctions have failed to bring about compliance.); Bell v. Inland Mut. Ins. Co., 175 W. Va. at 172, 332 S.E.2d at 134 (1985) (advising that the sanction of default judgment should be used sparingly and only in extreme situations [in order to effectuate] the policy of the law favoring the disposition of cases on their merits.). The issue raised in Cattrell was the imposition of default judgment as a sanction for a discovery violation pursuant to Rule 37(d) of the West Virginia Rules of Civil Procedure. Due to the severity of sanctions serving to end litigation, this Court established that such sanctions may not be imposed without the trial court first making findings establishing the willfulness or bad faith on the part of the offending party. Syl. Pt. 6, 217 W.Va. at 3, 614 S.E.2d at 3. The approach comports with our earlier decision in Bell v. Inland Mutual Insurance Company, which holds that the sanctions of striking pleadings and rendering a default judgment under Rule 37(b) of the Rules of Civil Procedure for a party's failure to obey an order compelling discovery will only be upheld when it is demonstrated that the failure to comply with the order is due to willfulness, bad faith or fault. Syl. Pt. 2, 175 W.Va. at 168, 332 S.E.2d at129. Seeing no reason to impose a different standard under the present circumstances, we hold that imposition of sanctions of dismissal and default judgment for serious litigation misconduct pursuant to the inherent powers of the court to regulate its proceedings will be upheld upon review as a proper exercise of discretion when trial court findings adequately demonstrate and establish willfulness, bad faith or fault of the offending party.
Having found that the trial court had an adequate foundation in its inherent powers to impose the sanctions of striking pleadings and defenses and entering default judgment, we move to the next step of determining whether the lower court abused its discretion regarding appropriateness issues as set forth in Bartles. Under the provisions of syllabus point two of Bartles, our review actually involves a two-step process of first examining whether the sanctioning court identified the wrongful conduct with clear explanation on the record of why it decided that a sanction was appropriate. 196 W.Va. at 384, 472 S.E.2d at 830. We then must determine whether the sanction actually imposed fits the seriousness of the identified conduct in light of the impact the conduct had in the case and the administration of justice, any mitigating circumstances, and with due consideration given to whether the conduct was an isolated occurrence or a pattern of wrongdoing. Id. We find the orders before us as lacking the specificity needed to conduct this level of review. Although the trial court placed great weight on the Annessa Letter, the court indicated the sanctions were imposed as a result of the totality of litigation misconduct. In addition to the Annessa Letter, the orders identified the misconduct to include a failure to cooperate in discovery and an improper job offer. However, the discovery matters were referred to a discovery commissioner. The only discovery commission order we have before us was entered after the discovery hearing and it directs that the parties submit recommended findings and other matters to the discovery commissioner. The lower court's only order with regard to discovery stated that the discovery commissioner is hereby directed to make written recommendation to this Court as to a resolution of the discovery issues. There is nothing before this Court which indicates any recommendation being submitted by the discovery commissioner to the court, and yet some of the very issues raised and addressed as at least presumably resolved appeared in the sanction orders. Furthermore, our review of the hearing transcript did not indicate that the discovery commissioner would be recommending any finding that Richmond's conduct amounted to bad faith.
We also find the orders contain broad and sweeping statements regarding misconduct regarding the three identified areas which makes it difficult to determine what specific factual basis exists as support for a given conclusion. This problem with lack of specificity in the orders is only compounded by our pronouncement herein regarding the need for the court's order in light of the record to demonstrate willfulness, bad faith or fault of the offending party for a default judgment sanction to be upheld upon review. Based
upon these broader problems with the orders at issue, it would be premature to address the parties' arguments regarding the particular issues raised as to the basis of a sanction, that is, the Annessa Letter, discovery or the offer of employment.
My name is Patrick Annessa. I am President of Richmond American Homes of West Virginia. On April 3, 2009, I sent an offer letter to your attorney. This was an unconditional offer to install a radon reduction system in your home, free of charge. It is my understanding that your attorney chose not to send this letter to you; therefore I am making the offer directly to you. We are offering to hire a licensed subcontractor to unconditionally install a radon-reduction system or to reimburse you should you choose to have an independent company install such a system. This offer is intended to be admissible in court should this lawsuit progress. Our offer is not intended to be a full settlement of all your claims and you can continue to pursue your lawsuit if you chose [sic] to do so.
We have not been give the opportunity to fully inspect and/or repair your home, and by making this offer we do not admit any fault or liability in the construction of your home.
If you want to say YES to this offer and schedule an appointment, please mark the box YES and return this letter to Charlene Currin at 12220 Sunrise Valley Drive, Suite 400, Reston, Virginia 20191. Please provide your contact information and best times for us to reach you, in the space provided below. Once we receive your YES reply, we will then contact you to schedule your appointment.
(b) Failure to comply with order.
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(2) Sanctions by court in which action is pending. If a party or an officer, director, or managing agent of a party or a
person designated under Rules 30(b)(6) or 31(a) to testify on behalf of a party fails to obey an order to provide or permit discovery, including an order made under subdivision (a) of this rule or Rule 35, or if a party fails to supplement as provided for under Rule 26(e), or if a party fails to obey an order entered under Rule 26(f), the court in which the action is pending may make such orders in regard to the failure as are just, and among others the following:
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(C) An order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party.