United States v. Harris ( 1998 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 96-30851
_____________________
LARRY D. CROWE, ET AL.,
Plaintiffs,
versus
JAMES W. SMITH, ET AL.,
Defendants,
MICHAEL P. TONE; ANNE FIEDLER;
ROBERT B. BIECK, JR.; JAMES W.
BERRY; WILLIAM E. WRIGHT;
JUDY L. BURNTHORN; W. GLENN
BURNS; AMERICAN CASUALTY COMPANY
OF READING, PENNSYLVANIA,
Appellants.
_________________________________________________________________
Appeals from the United States District Court for the
Western District of Louisiana
_________________________________________________________________
August 12, 1998
Before JOHN R. GIBSON,* JOLLY, and EMILIO M. GARZA, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
American Casualty Company of Reading, Pennsylvania (“CNA”1),
Michael P. Tone, Anne Fiedler, W. Glenn Burns, Robert B. Bieck,
Jr., William E. Wright, Judy L. Burnthorn, and James W. Berry
*
Circuit Judge for the Eighth Circuit, sitting by designation.
1
“CNA” is an acronym for a group of insurance companies, one
of which is American Casualty Company--the “A” in “CNA.”
Continuing the practice of the parties and the district court, we
will refer to American Casualty Company as CNA in this opinion.
(collectively, the “sanctions defendants”) appeal the imposition of
sanctions against them by Judge Nauman S. Scott of the Federal
District Court for the Western District of Louisiana.
All of the defendants are attorneys except for CNA. After the
settlement of an underlying civil action in which these attorneys
were involved as either defense counsel or insurer’s counsel, the
district court was advised by the plaintiffs that an applicable
insurance policy issued by CNA (the “D&O Policy”) had not been
disclosed to them, although its existence had long been known to
the sanctions defendants. The district court appointed the
attorney for the plaintiffs in the underlying case to investigate
and present evidence to the court of the offense. After the
conclusion of a civil bench trial, the district court entered an
extensive opinion, which included numerous findings of fact and
conclusions of law. Briefly stated, the district court held that
the sanctions defendants willfully conspired to defraud the
plaintiffs by concealing the D&O Policy despite having discovery-
related, ethical, and other duties to disclose it. Acting under
its inherent power, the court then imposed sanctions consisting of
fines, reprimands, and suspensions from the practice of law. In
particular, it imposed fines of $5 million on CNA and $75,000 on
Tone. All fines were made payable to the district court.
We hold that the district court abused its discretion by
imposing serious criminal sanctions on CNA and Tone via a
manifestly civil process. The sanctions against those defendants
are therefore reversed. Furthermore, and although we find the
procedure to have been adequate as to the suspended and reprimanded
defendants, we also hold that the district court abused its
discretion as to all of the sanctions defendants, save the
defendant Berry, in finding that they engaged in bad faith conduct
by failing to disclose the D&O Policy. Because a finding of bad
faith is a prerequisite to the exercise of a court’s inherent
power, we therefore reverse the district court’s judgment as to
defendants Burns, Bieck, Wright, Fiedler, and Burnthorn as well.
In addition, as to defendants CNA, Tone, Fiedler, and Burnthorn, we
also hold that the record is completely insufficient to support a
finding of bad faith conduct. As to those defendants, the
sanctions proceeding is dismissed. With respect to defendants
Burns, Bieck, and Wright, we find the record potentially sufficient
to support a finding of bad faith conduct, and remand the case to
the district court for further consideration in the light of our
opinion. We affirm the sanctions imposed against Berry.
I
The sanctions proceeding in this case concerned the actions of
several attorneys during a period of time leading up to the
signature of a settlement agreement in a civil RICO2 suit. To
understand the significance of those actions, it is necessary
briefly to review the circumstances of that case.
In December 1992, as the latest installment of a long and
tangled saga of partnership litigation, Larry D. Crowe and the
2
Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.
§ 1961 et seq. (“RICO”).
3
Succession of Reba Coody Crowe (the “Crowes”) brought suit against
James W. “Sonny” Smith in the Federal District Court for the
Western District of Louisiana. The Crowes alleged, among other
things, that Smith, who was a former business partner of Larry
Crowe, conspired with Peoples Homestead Savings and Loan
Association of Monroe, Louisiana, (“Peoples”) to defraud the Crowes
of their interest in certain commercial agricultural property in
violation of RICO. Also made defendants in this suit were Russell
Hart, the former president of Peoples, and several of Peoples’s
former directors and outside attorneys. Eventually, the case was
set for trial on July 12, 1994, in Monroe, Louisiana.
Most of the sanctions defendants served as defense counsel in
the 1992-94 litigation. Berry represented four former directors of
Peoples. Bieck, Wright, Burnthorn, and Burns represented various
of the outside attorneys. The remaining individual sanctions
defendants, Tone and Fiedler, represented CNA as coverage counsel
and were not directly involved in the case. The following
chronology traces the activities of these attorneys in the months
leading up to the trial. It is based on the factual findings of
the district court, which in all relevant respects are undisputed.
Late into the litigation--in March 1994--as part of his
research for the upcoming trial, Bieck made a fateful discovery
among the files of one of the attorney defendants. He learned that
in 1983, CNA had issued a directors’ and officers’ errors and
omissions policy--the D&O Policy--to Peoples. This policy was a
4
“claims made” policy, and carried a general liability limit of $5
million. It expired in 1986, but not before Larry Crowe had
brought suit against Peoples under a conversion theory in February
of that year.3 Shortly thereafter, the directors of Peoples began
corresponding with CNA regarding Crowe’s claims.4 It was this
correspondence that Bieck discovered in March 1994. He conveyed
his findings almost immediately to Burnthorn.
Three weeks later, the Crowes issued certain discovery
requests to counsel for each of the director defendants and one of
the attorney defendants, Johnny Dollar.5 Dollar was represented,
significantly, by Wright and Burnthorn. The discovery requests in
question were for the production of certain described documents.
Two are relevant to this case:
5. All claims or notices of claim that were
transmitted to any of your insurance carriers in
relation to any of the claims of Larry Crowe and/or
the Succession of Reba Crowe.
8. All indemnity agreements related to service as bank
officer, director, attorney, or representative.
3
This suit was an earlier chapter in the same epos of
litigation to which the 1992 suit belonged. A successor to the
1986 suit eventually settled, resulting in a complex transfer of
funds, property rights, and liabilities between Peoples and Larry
Crowe.
4
At about this time, CNA opened a file for the Crowe
litigation.
5
Dollar was included in this request because he had
subsequently served on Peoples’s board of directors.
5
It is important to note that these discovery requests were very
significant ones in the Western District in 1994. Although Fed. R.
Civ. P. 26(a)(1)(D) generally provides for the automatic disclosure
of relevant insurance policies, the Western District had opted out
of that provision in its local rules. See ULLR 6.06W (1994). At
the time, the only way for a party to find out about insurance
policies in the Western District was by way of a properly
propounded discovery request.
On April 27, Berry responded to the discovery requests on
behalf of three of his four director clients. He answered Requests
5 and 8 with the words “none” or “none known.” On that same day,
Burnthorn faxed Berry a copy of the CNA correspondence first
discovered by Bieck. At this point, Burnthorn also began preparing
a letter to CNA requesting defense and indemnification for her
client, Dollar, under the D&O Policy. On April 28, she faxed Berry
a copy of this letter as well, so that he could use it as a model
for letters written on behalf of his clients. On April 29, one of
Berry’s director clients sent such a letter to CNA. Letters from
two of the other directors followed soon thereafter.
On May 1, Burnthorn responded to the discovery requests on
behalf of Dollar. Her response to Request 5 read as follows:
Response to request #5: New England Insurance Company
and the Home Insurance Company have been notified of
plaintiff’s lawsuit. Dollar objects to the request on
grounds of attorney-client privilege and work product
immunity.
6
On May 5, Berry responded to the discovery requests on behalf
of his fourth and final director client. His answers to Requests
5 and 8 for this client were identical to the ones he had sent the
week before on behalf of the other directors--in the negative.
On May 12, Fiedler wrote to Burnthorn advising that CNA was
proceeding under a reservation of rights with respect to the D&O
Policy, and requesting certain additional information. On June 7,
Burnthorn provided this information.
As the trial drew nearer, settlement negotiations intensified.
On June 23, Berry made a written offer to settle on behalf of the
directors for $10,000. He emphasized in this letter that his
clients were not insured, and did not have access to substantial
funds for settlement purposes. The Crowes counter-offered for
$25,000.
On June 30, CNA made a formal response to the notice of
lawsuit letters sent by Berry’s and Burnthorn’s clients. CNA
advised that the D&O Policy was a $5 million indemnity policy that
might not provide coverage for several reasons, and that CNA would
be proceeding under a reservation of rights to deny coverage. A
specimen policy was attached to the responses.
During the week of July 4, Wright, Bieck, and Burns attempted
to negotiate a settlement on behalf of their clients and two other
insurers.6 Their offer was rejected, whereupon they discussed
6
New England Insurance Company and Home Insurance Company, the
two insurers referenced in Burnthorn’s above-quoted discovery
7
among themselves the possibility of coverage under the D&O Policy
and the feasibility of bringing CNA and Berry’s director clients
into a global settlement. On July 7, Wright informed Bieck that he
would be speaking with CNA representatives the next day about the
possibility of CNA contributing to a global settlement. On July 8,
the telephone conference took place as scheduled, with Berry,
Wright, Tone, and Fiedler in attendance. During the conversation,
Tone stated that he had not yet received authority to commit any
money to a settlement fund, and that no one should raise the
possibility of a CNA contribution with the Crowes. Wright
subsequently relayed the substance of this conversation to Bieck.
On July 11, the day before the trial began, Tone wrote to
Wright and Berry informing them that CNA was willing to contribute
to a settlement package. On this same day, and obviously before
receiving the letter, Wright, Bieck, and Burns met to discuss the
possibility of making a global settlement offer, which would
include CNA, prior to the commencement of the trial. In this
conversation, Wright reminded Burns and Bieck that CNA had
requested that its possible inclusion in a global settlement not be
disclosed. Later that afternoon, Wright, Bieck, and Burns, along
with Smith’s attorney, met with the Crowes’ counsel to discuss
settlement. The Crowes made an offer of $6.2 million. Burns
response.
8
replied that this figure was far beyond any theory of insurance
coverage. No one at the meeting objected to this statement.
The trial began as scheduled on July 12. Shortly thereafter,
Berry spoke to Tone regarding the payment of his fees by CNA. On
July 13, Tone sent a letter to Berry advising him that CNA would
pay $25,000 for the legal fees of his clients. Later that same
day, Berry continued to pursue his $10,000 settlement offer with
the Crowes’ counsel. During these discussions, one of the Crowes’
lawyers remarked that he was surprised that the directors had no
insurance. Berry replied that there was an old policy, but that it
had lapsed and his clients were not covered by it.
At this point, Burns became the chief settlement negotiator
for all of the defendants. On July 21, Burns received word from
Berry that CNA had given Tone authority to make a $100,000
contribution to the settlement. Berry also relayed that Tone had
reiterated his request that the source of the $100,000 remain
anonymous.
At a meeting on July 26, Wright reminded Bieck and Burns of
CNA’s request for anonymity. The three discussed the matter, and
agreed that CNA’s participation ought to be revealed. They also
decided that discovery responses should be checked to see if anyone
had breached a duty to disclose the D&O Policy. Bieck raised
particular concern about Berry’s discovery responses. The meeting
was then adjourned to check those responses. Wright consulted with
Burnthorn about the responses they had given, and concluded that
9
they were adequate. Bieck, Wright, and Burns each attempted to
check Berry’s responses, but apparently none of them had brought
those documents along. No one followed up on this with Berry.
On July 27, Tone and Fiedler arrived in Monroe to monitor the
settlement progress directly. On this day, they were able to have
a number of discussions with various of the defense counsel during
breaks in the ongoing trial. First, Berry asked Tone to increase
the amount of CNA’s contribution. Tone had authority to do this,
and accordingly upped CNA’s offer to $150,000. Tone then raised
the subject of disclosure and was informed by Hart’s7 attorney that
the settlement would fall apart if CNA were revealed. After these
exchanges, Burns informed the Crowes’ counsel that the attorney and
director defendants would meet the Crowes’ prior settlement offer
of $2.25 million. Back in the defense camp, the subject of
disclosure arose one last time. Wright told Tone that he thought
CNA’s contribution should be revealed. Tone apparently concurred.
Tone and Fiedler then departed Monroe.
The Crowes accepted the $2.25 million offer, and the substance
of the agreement was recited to the court that same day by Burns.
The court recessed the trial so that a final written agreement
could be prepared and signed. Bieck subsequently drafted that
agreement. In it, the name “American Casualty Company” appeared
once, along with several other insurers, in a long section titled
7
Again, Peoples’s former president, and one of the principal
defendants in the underlying suit.
10
“Settling Defendants.” The agreement was signed on July 28. On
that same day, Berry sent a letter to Tone informing him that the
language in the final agreement did not specifically say “CNA.”
CNA subsequently made its promised payment anonymously through
Wright and Burnthorn.
With respect to Hart and Smith, the trial continued. At its
conclusion, the jury returned a verdict in favor of the Crowes for
$8.5 million. This figure was subsequently trebled in accordance
with the statute. Both Hart and Smith appealed that judgment to
this court.8
During the pendency of that appeal, Joseph R. Ward, Jr., the
Crowes’ principal attorney throughout the 1992-94 litigation,
conducted a judgment debtor examination of Hart. As a result of
that examination, Ward discovered the D&O Policy.
II
On November 15, 1994, the district court received a letter
from Ward addressed to eleven of the defense counsel. It stated
that he had recently become aware of the D&O Policy, and that he
believed there may have been a number of instances where the
defense attorneys violated their discovery obligations by not
8
As we shall see, Hart subsequently settled with the Crowes.
Smith pressed on with his appeal, however, and on February 26,
1996, this court reversed the verdict and rendered in his favor.
Crowe v. Smith, No. 94-41205, 81 F.3d 155 (5th. Cir. 1996)
(unpublished).
11
revealing the policy to him. He gave notice that he was preparing
a motion to set aside the settlement and sanction the directors.
After receiving the letter, the court had several ex parte
contacts with Ward in an attempt to determine what action should be
taken on the matter of the sanctions. As the court has since
repeatedly emphasized, it was in a quandary because neither it nor
Ward knew any facts that might substantiate or refute the
allegations of misconduct. Ward subsequently brought his motion,
however, and the court then decided that it would conduct an
informal meeting with all of the defense attorneys to discuss the
situation. At that meeting, it was decided that a full-fledged
trial would be held to resolve the question. This trial was
originally scheduled for September 6. Based on its conversations
with Ward, however, the court had already become convinced at the
time of the informal meeting that the directors would likely enter
into a renewed settlement with the Crowes, and that sanctions might
well be waived therein. Concerned for its own judicial integrity,
the court began to consider bringing an alternate sanctions
proceeding itself, on its own motion. To investigate and, if need
be, prosecute that action, the court appointed Ward as attorney for
the United States in the matter. The court made this choice based
on Ward’s existing familiarity with the case and a lack of viable
alternatives. Ward accepted the appointment, and informed the U.S.
Attorney for the Western District of Louisiana of his new status.
12
Shortly thereafter, the U.S. Attorney’s civil and criminal
section chiefs paid a visit to the court to discuss the case. The
civil chief declined to pursue the matter himself, as he did not
consider the sanctions to be civil in nature. The criminal chief
indicated that he would be willing to pursue the matter as a
criminal case, if the court declared it to be such. The court
declined his offer on the grounds that it “did not consider the
defendants criminals,” and continued its employment of Ward. After
reflecting on the meeting, however, the court did change Ward’s
title, designating him attorney for “the court” instead of “the
United States.”
On June 10, CNA and its counsel procured a new settlement with
the Crowes,9 who then, as the district court feared, stopped
prosecution of their sanctions motion. The court then entered its
own motion for sanctions pursuant to its inherent power.10 Ward
dutifully investigated the facts of the settlement negotiations and
presented them to the court during a rescheduled bench trial.
Based on its conversations with the U.S. Attorney’s office, and
because it was concerned with the possibility that Ward would be
erroneously viewed as a “prosecutor,” the court expressly limited
9
For an additional $4 million. In addition to the Crowes’
claims against the clients of the attorney sanctions defendants,
this settlement also terminated the Crowes’ claims against Hart, as
he was also covered by the D&O Policy.
10
As opposed to its power under Fed. R. Civ. P. 11, which is
not implicated here.
13
him, at all times, to a role of gathering and presenting the
evidence. In particular, the court “kept its own counsel” as to
relevant legal theories, the designation of defendants, and the
overall appropriateness of sanctions, with the sole exception that
the defendants were allowed to present briefs on the legal issues.
The court did, however, engage in a few additional ex parte
contacts with Ward during the investigation period, in an effort to
resolve procedural questions relating to his representation and to
ensure that the subjects that the court found most relevant were
adequately investigated in discovery. It was also the case that
Ward testified at the trial in addition to serving as the court’s
attorney. The defendants, for their part, were at all times
represented by counsel, and were able to hear and respond to all
the evidence accumulated against them. After extensive discovery
and some five days of trial, on July 25, 1996, the court found the
conduct of the defendants sanctionable. The court raised multiple
theories of liability, but the essential basis for its judgment was
the finding that all of the sanctions defendants had willfully
conspired to defraud the Crowes by concealing the D&O Policy from
them despite having discovery-related, ethical, and other duties to
reveal it. Based on this finding, the court ordered the following
sanctions: (1) for CNA to pay $5 million to the court; (2) for Tone
to pay $75,000 to the court;11 (3) for Berry to be suspended from
11
One might wonder what the district court intended to do with
this money. It seems that the general plan was to create a fund
14
practice before the Western District of Louisiana for a period of
nine months; (4) for Wright, Burns, and Bieck to be suspended from
practice before the Western District of Louisiana for a period of
three months; and (5) for Fiedler and Burnthorn to be reprimanded.
The sanctions defendants appeal this judgment on multiple grounds.
III
We review a district court’s imposition of sanctions under its
inherent power for abuse of discretion. Dawson v. United States,
68 F.3d 886, 895 (5th. Cir. 1997); Chambers v. NASCO, Inc., 501
U.S. 32, 55 (1991). Nonetheless, “the threshold for the use of
inherent power sanctions is high.” Elliot v. Tilton, 64 F.3d 213,
217 (5th Cir. 1995). The inherent power “is not a broad reservoir
of power, ready at an imperial hand, but a limited source; an
implied power squeezed from the need to make the court function.”
Chambers, 501 U.S. at 42 (quoting NASCO, Inc. v. Calcasieu
Television and Radio, Inc., 894 F.2d 696, 702 (5th Cir. 1990)).
Perhaps for this reason, we have repeatedly emphasized that, where
the inherent power is involved, “‘our review is not perfunctory.’”
Dawson, 68 F.3d at 896 (quoting Shepherd v. American Broadcasting
Companies, 62 F.3d 1469, 1475 (D.C. Cir. 1995)). “As the Supreme
Court has explained, ‘[b]ecause inherent powers are shielded from
direct democratic controls, they must be exercised with restraint
from which the court could pay appointed counsel to prosecute this
and other sanctions actions throughout the Western District.
15
and discretion.’” Shepherd, 62 F.3d at 1475 (quoting Roadway
Express, Inc. v. Piper, 447 U.S. 752, 764 (1980)).
IV
The sanctions defendants argue that the district court abused
its discretion in two main respects in this case. First, they
assert that the court deprived them of their right to due process
by imposing criminal sanctions on them via a manifestly civil
process. Second, they argue that the court clearly erred in making
its required finding of bad faith conduct. We address each
contention in turn.
A
The sanctions defendants first argue that the district court
deprived them of their right to due process by imposing criminal
sanctions in a civil proceeding. In particular, they contend that
their due process rights were infringed because the district court
appointed Ward to “prosecute” their sanctions. They insist that,
because Ward’s other clients, the Crowes, were the purported
victims of the fraud, and maintained private rights of action for
any wrongdoing, he was not a disinterested prosecutor, as required
for the prosecution of criminal sanctions. In this regard, they
also note that Ward had a personal interest in finding their
conduct sanctionable, in the sense that, if the conduct of his
former opponents had been found to be unobjectionable, he would
have faced potential malpractice liability for his own failure
earlier to locate the D&O Policy. In addition to these problems
16
associated with Ward serving as “prosecutor,” the sanctions
defendants also assert separate due process violations based on the
fact that Ward both testified and served as attorney, and the fact
that he had ex parte contacts with the court. After lengthy
consideration, we find substantial merit in these due process
arguments as applied to defendants CNA and Tone, but not as to
defendants Burns, Bieck, Wright, Fiedler, Burnthorn, and Berry.
1
As the sanctions defendants correctly point out, and as the
Supreme Court has often explained, the initial touchstone for
determining the due process rights of a sanctions defendant lies in
the characterization of the particular contempt as either “civil”
or “criminal”:
Because civil contempt sanctions are viewed as
nonpunitive and avoidable, fewer procedural protections
for such sanctions have been required. To the extent
that such contempts take on a punitive character,
however, and are not justified by other considerations
central to the contempt power, criminal procedural
protections may be in order.
International Union, United Mine Workers of America v. Bagwell, 512
U.S. 821, 831 (1994); see also Hicks v. Feiock, 485 U.S. 624, 632
(1988) (in a contempt action, as in any other, “criminal penalties
may not be imposed on someone who has not been afforded the
protections that the Constitution requires of such criminal
proceedings”).
17
As the Supreme Court has also made clear, “conclusions about
the civil or criminal nature of a contempt sanction are properly
drawn . . . ‘from an examination of the character of the relief
itself.’” Bagwell, 512 U.S. at 828 (quoting Hicks, 485 U.S. at
635). In this case, we are presented with two principal types of
“relief”: fines payable to the court for CNA and Tone, and
suspensions from practice or official reprimands for Burns, Bieck,
Wright, Fiedler, Burnthorn, and Berry. We consider each class of
relief in turn.
18
2
We begin with the fines imposed on CNA and Tone. With regard
to these sanctions, we have little difficulty in finding that they
were criminal in character. As the Supreme Court has expressly
stated:
A contempt fine . . . is civil and remedial if it “either
coerce[s] the defendant into compliance with the court’s
order, [or] . . . compensate[s] the complainant for
losses sustained.” Where the fine is not compensatory,
it is civil only if the contemnor is afforded an
opportunity to purge. Thus, a “flat, unconditional fine”
totaling even as little as $50 announced after a finding
of contempt is criminal if the contemnor has no
subsequent opportunity to reduce or avoid the fine
through compliance.
Bagwell, 512 U.S. at 829 (quoting United States v. Mine Workers,
330 U.S. 258, 303-04 (1947), and Penfield Co. of Cal. v. SEC, 330
U.S. 585, 590 (1947), respectively); cf. In re Terrebonne Fuel and
Lube, Inc., 108 F.3d 609, 612 (5th Cir. 1997) (“If the purpose of
the order is to punish the party whose conduct is in question or to
vindicate the authority of the court, the order is viewed as
criminal. If, on the other hand, the purpose of the contempt order
is to coerce compliance with a court order or to compensate another
party for the contemnor’s violation, the order is considered to be
civil.”). Because the fines in this case were payable to the
court, they were not compensatory. Because they were also flat
fines that did not afford an opportunity to purge, they were
criminal in character. To the extent that the district court
concluded to the contrary, it was clearly in error.
19
Having determined that the fines were criminal in character,
the question becomes whether the procedures applied by the district
court were adequate for criminal contempt. In Young v. United
States ex rel. Vuitton et Fils S.A., 481 U.S. 787, 804 (1987), the
Supreme Court held that “[a] private attorney appointed to
prosecute a criminal contempt . . . should be as disinterested as
a public prosecutor who undertakes such a prosecution.” In this
case, Ward’s concurrent representation of the Crowes, who retained
substantial possibilities for private recovery against the
defendants, coupled with his own potential malpractice liability
for the events at issue, combine to belie any contention that he
was “as disinterested as a public prosecutor.” There can therefore
be no doubt that, at least to the extent that Ward was in fact
allowed to serve as “prosecutor,” the district court failed to
follow the command of Young. Furthermore, the argument that Ward
was not actually acting as a prosecutor--in the sense that he only
investigated and presented the evidence, leaving to the judge and
defendants the entirety of the legal argument--is of no moment in
this context. As we have expressly held in the past, where
criminal contempt is involved, there must actually be an
independent prosecutor of some kind, because the district court is
not constitutionally competent to fulfill that role on its own.
See FDIC v. LeGrand, 43 F.3d 163, 169 & n.6 (5th Cir. 1995); see
also Fed. R. Crim. P. 42(b); cf. Young, 481 U.S. at 798-99 (noting
other general requirements of criminal procedure in the contempt
20
context, including a presumption of innocence, the beyond-a-
reasonable-doubt burden of proof, the right against self-
incrimination, the right to notice, the right to be heard, the
right to counsel, the right to call witnesses, the right to an
unbiased judge, and the right to a jury trial where the contempt is
serious). Thus, in whatever way the situation is characterized,
the district court would appear to have violated CNA and Tone’s
right to due process by denying them an independent and impartial
prosecutor for the manifestly criminal sanctions that it imposed.
One response to this reasoning might be that the Supreme Court
in Bagwell stopped short of saying that the full range of
traditional criminal procedural protections is mandated in every
criminal contempt proceeding. As noted above, the rule of that case
was simply that “criminal procedures may be in order,” if the
imposition of contempt is not “justified by other considerations
central to the contempt power.” Bagwell, 512 U.S. at 831 (emphasis
added). Thus, it might perhaps be argued that the lack of an
independent and impartial prosecutor was somehow justified in this
case by such “other considerations.”
Upon closer inspection, however, this response lacks merit.
The Bagwell Court identified only two classes of criminal contempt
in which the “other considerations” might indicate a lesser degree
of procedural protection. The first is the case of the “direct
contempt” committed “in the presence of the court,” and the
rationale is the quite sensible one that “[t]he necessity
21
justification for the contempt authority is at its pinnacle . . .
where contumacious conduct threatens a court’s immediate ability to
conduct its proceedings.” Bagwell, 512 U.S. at 832. The second
exception is for “petty” fines, which the district court has been
traditionally allowed to impose in a summary manner. See id. at 837
n.5 & 838-39. Although our own recent decision in Carroll v. The
Jaques Admiralty Law Firm, P.C., 110 F.3d 290, 293 (5th Cir. 1997)
(Jones, J.), would appear to indicate either that a $7000 fine is
“petty,” or that “direct contempt” includes the disruption of
ongoing, out-of-court discovery,12 nothing in that case or Bagwell
can be read as saying that there is any “other consideration” that
might justify curtailed criminal procedures for the imposition of
$5 million and $75,00013 fines to punish a months-old discovery
violation in a long-settled case. Indeed, the Bagwell Court was
quite clear that for “indirect [criminal] contempts” involving, for
example, “out-of-court disobedience to complex injunctions,”
criminal protections are clearly “necessary and appropriate to
protect the due process rights of parties and prevent the arbitrary
exercise of judicial power.” Id. at 833-34; cf. Green v. United
12
See also Bagwell, 512 U.S. at 833, with regard to the proper
procedure for such ongoing discovery violations.
13
We need not decide today what the precise limit is for a
“petty” fine, because $75,000 is manifestly non-petty in the case
of an individual, just as $5 million is non-petty in the case of a
corporation. We note, however, that the Bagwell Court strongly
suggested, without deciding, that $5000 was an appropriate limit
for individuals, and $10,000 for corporations. See Bagwell, 512
U.S. at 837 n.5.
22
States, 356 U.S. 165, 217 n.33 (1958) (Black, J., dissenting)
(“Alleged contempts committed beyond the court’s presence where the
judge has no personal knowledge of the material facts are especially
suited for trial by jury. A hearing must be held, witnesses must
be called, and evidence taken in any event. And often . . . crucial
facts are in close dispute.”). For this reason, we see no
justification here for a departure from the mandate of Young, and
therefore conclude that the district court committed a clear
violation of CNA and Tone’s right to due process in this case when
it imposed determinative criminal fines on them without affording
the benefit of an independent and impartial prosecutor.14 These
sanctions must therefore be reversed and vacated.15
3
We turn next to the suspensions and reprimands meted out to
sanctions defendants Burns, Bieck, Wright, Fiedler, Burnthorn, and
Berry. Although these sanctions present a very close question, we
are ultimately persuaded by our clear precedents that they are not
14
And, of course, potentially in a number of other respects as
well, as the majority of the other standard criminal protections
noted by the Court in Young, 481 U.S. at 798-99, were ignored in
this case as well.
15
We note in passing that our judgment on this point accords
in both reasoning and result with the Eleventh Circuit’s decision
in In re E.I. Dupont de Nemours & Co.-Benlate Litigation, 99 F.3d
363 (11th Cir. 1996) (finding the imposition of a $6.8 million
determinative fine without benefit of criminal procedural
protections to violate due process under Bagwell and Hicks).
23
so criminal in character as to render the district court’s chosen
procedures faulty.
We must concede, however, an initial impression that Bagwell
appears to mandate the opposite result. In addition to the above-
discussed analysis of criminal versus civil character in the fine
context, the Court noted in that case that, as a general matter,
sanctions that serve to “vindicate the authority of the court” are
criminal in character. Bagwell, 512 U.S. at 828; see also
Terrebonne, 108 F.3d at 612 (“If the purpose of the order is to
punish the party whose conduct is in question or to vindicate the
authority of the court, the order is viewed as criminal.”).
Suspensions and reprimands surely serve to accomplish the goal of
vindication, so to that extent they would appear to be criminal in
character.
In this case, however, our investigation cannot be limited to
so simplistic an analysis. Unlike some of the other likely
candidates for use as contempt sanctions, those that address
attorney discipline have been squarely placed in a decidedly
different and grayer area by both the Supreme Court and our own past
decisions. See, e.g., Cammer v. United States, 350 U.S. 399, 408
n.7 (1956) (“‘The power to disbar an attorney proceeds upon very
different grounds’ from those which support a court’s power to
punish for contempt.”) (quoting Ex Parte Robinson, 86 U.S. (19
Wall.) 505, 512 (1873)); Ex Parte Wall, 107 U.S. 265, 288 (1883)
(stating that a disbarment proceeding requires no formal indictment,
24
because it “is not for the purpose of punishment, but for the
purpose of preserving the courts of justice from the official
ministration of persons unfit to practice in them”); Johnson v.
Ayers, 921 F.2d 585, 586 (5th Cir. 1991) (Wisdom, J.) (“‘Disbarment
proceedings are not for the purpose of punishment, but rather seek
to determine the fitness of an official of the court to continue in
that capacity and to protect the courts and the public from the
official ministration of persons unfit to practice.’”) (quoting In
re Derryberry, 72 B.R. 874, 881 (Bankr. N.D. Ohio 1987)). As we
recently restated the matter in Dailey v. Vought Aircraft Co., 141
F.3d 224 (5th Cir. 1998), “disbarment is intended to protect the
public” in addition to being “a ‘punishment or penalty imposed on
the lawyer,’” and it is therefore “quasi-criminal in nature.” Id.
at 229 (quoting In re Ruffalo, 390 U.S. 544, 550 (1968)). Although
both the Supreme Court and this court have often relied on this
“quasi-criminal” characterization to hold that “an attorney is
entitled to procedural due process which includes notice and an
opportunity to be heard in disbarment proceedings,” see, e.g.,
Dailey, 141 F.3d at 229; Ruffalo, 390 U.S. at 550, we have only
rarely gone farther.16 Cf. In re Ming, 469 F.2d 1352, 1355 (7th
Cir. 1972) (“‘All that is requisite to their [disbarment
proceedings] validity is that, when not taken for matters occurring
16
In this case, there is obviously no contention that the
district court failed to provide either adequate notice of the
sanctions or an opportunity to be heard.
25
in open court, in the presence of the judges, notice should be given
to the attorney of the charges made and opportunity afforded him for
explanation and defence.’”) (quoting Randall v. Brigham, 74 U.S. (7
Wall.) 523, 540 (1868)). Indeed, even in the limited instances
where this court has mandated specific additional protections, the
manner in which we have done so leaves the unmistakable impression
that “quasi-criminal” means “less than criminal” for due process
purposes. See, e.g., In re Thalheim, 853 F.2d 383, 388 n.9 (5th
Cir. 1988) (requiring “clear-and-convincing” evidence of a
disbarrable offense, rather than proof “beyond a reasonable doubt,”
as a blind application of full criminal contempt procedure would
suggest).17 Furthermore, and as noted in Cammer, the imposition of
disciplinary sanctions itself implicates an independent and
17
But see Thalheim, 853 F.2d at 388 (also requiring that the
court’s disciplinary rules be read strictly, resolving any
ambiguity in favor of the person charged, in an unexplained but
obviously intentional application of criminal law’s rule of
lenity). In response to that point, we can only note that the
question whether the rule of lenity is even a fundamental
requirement of due process in more traditional criminal settings is
a question of some complexity.
We should also note that the other major additional procedural
protection that we have specifically mandated for disbarment
cases--the requirement that the district court strictly abide by
such rules of disciplinary enforcement as it has created, see
Thalheim, 853 F.2d at 388--is not implicated in this case, because
the Western District of Louisiana, unlike the Eastern District, did
not have such rules at the time these sanctions were imposed. Cf.
ULLR 83.2.10E (1994). As such, we need only analyze the procedures
actually employed to see if they meet the requirements of due
process. Cf. Ming, 469 F.2d at 1355 (“The district courts are free
to adopt their own local rules defining grounds for disbarment and
suspension and the procedures to be followed. But these rules must
meet the requirements of due process.”).
26
fundamental duty of the district court--the supervision of the
attorneys who practice as members of its bar--in ways that other
sanctions simply cannot. Cf. RTC v. Bright, 6 F.3d 336, 340 (5th
Cir. 1993) (“It is beyond dispute that a federal court may suspend
or dismiss an attorney as an exercise of the court’s inherent
powers.”); Howell v. State Bar of Texas, 843 F.2d 205, 206 (5th Cir.
1988) (“Since the early days of English common law, it has been
widely recognized that courts possess the inherent power to regulate
the conduct of attorneys who practice before them and to discipline
or disbar such of those attorneys as are guilty of unprofessional
conduct.”); Flaksa v. Little River Marine Constr. Co., 389 F.2d 885,
889 n.10 (5th Cir. 1968) (“‘The power of a court to discipline
members of its own bar can scarcely be doubted seriously. An
attorney is under no obligation to seek admission to the bar of a
United States district court. He is at liberty to abstain from
membership in that or any other bar. But when he does apply and is
admitted he secures certain privileges and also assumes definite
obligations. The power of a court to impose appropriate and
reasonable sanctions upon those admitted to its bar is a familiar
phenomenon and lies within the inherent power of any court of
record.’”) (quoting Gamble v. Pope & Talbert, Inc., 307 F.2d 729,
735 (3d Cir. 1962) (Biggs, CJ., dissenting)); Woodham v. American
Cystoscope Co., 335 F.2d 551, 557 (5th Cir. 1964) (referencing
Gamble and noting that appropriate “modes of discipline against the
attorney might include: (1) a reprimand by the court, (2) a finding
27
of contempt, or (3) a prohibition against practicing for a limited
time before the court whose order was neglected or disregarded”)
(quoting Comment, Sanctions at Pre-Trial Stages, 72 Yale L. J. 819,
830 (1963)); Roadway Express, Inc. v. Piper, 477 U.S. 752, 766 n.12
(1980) (citing Chief Judge Biggs’s dissent in Gamble with approval).
Thus, whatever might be the implications of the more general
statements in Bagwell--and we also note, for the record, that
Bagwell did not directly address the status of disbarments or other
disciplinary sanctions--in the light of the extensive disciplinary
case law we have cited, we are constrained by binding precedent to
reject the sanctions defendants’ invitation in this case to apply
a blunt requirement of full criminal procedure to every disbarment
that the district courts of this circuit choose to issue in the
exercise of their inherent power. Even more surely, our precedent
emphatically dismisses such extensive procedural hoop-jumping for
the far less serious disciplinary sanctions of suspension and
reprimand. In resolving this case, we must simply remain content
to retain the vague, “quasi-criminal” designation that our
precedents have expressly chosen to place upon such sanctions, and
conduct our due process analysis on that basis.
In so doing, we may rely on the well established propositions
that “[t]he fundamental requirement of due process is the
opportunity to be heard ‘at a meaningful time and in a meaningful
manner,’” Mathews v. Eldridge, 424 U.S. 319, 333 (1976) (quoting
Armstrong v. Manzo, 380 U.S. 545, 552 (1965)), and that “[t]he very
28
nature of due process negates any concept of inflexible procedures
universally applicable to every imaginable situation,” Cafeteria &
Restaurant Workers Union v. McElroy, 367 U.S. 886, 895 (1961).
Stated another way, due process, “‘unlike some legal rules, is not
a technical conception with a fixed content unrelated to time,
place, and circumstances.’” Mathews, 424 U.S. at 334 (quoting
McElroy, 367 U.S. at 895). In each individual case, identification
of the specific dictates of due process is “guided by a Mathews v.
Eldridge balancing which requires the weighing of the private
interests affected by the official action, the risk of erroneous
deprivation through the existing procedure, and the government’s
interest in minimizing its administrative and financial burdens.”
Metro County Title, Inc. v. FDIC, 13 F.3d 883, 887 (5th Cir. 1994)
(citing Mathews, 424 U.S. at 334-35); cf. Santosky v. Kramer, 455
U.S. 745, 753-54 (1982) (applying the Mathews test and requiring
only a “fundamentally fair procedure” for the state to terminate the
rather weighty rights of parentage); Burnett v. Collins, 982 F.2d
922, 928 n.8 (5th Cir. 1993) (Garwood, J.) (noting that, even in a
criminal case where evidentiary errors have occurred, due process
requires nothing more than “a fundamentally fair trial”); Link v.
Wabash Railroad Co., 370 U.S. 626, 632 (1962) (noting that the
“adequacy of notice and hearing respecting proceedings that may
affect a party’s rights turns, to a considerable extent, on the
knowledge which the circumstances show such party may be taken to
have of the consequences of his own conduct”). Furthermore, it is
29
well established that, even where the sanction is patently criminal,
“[u]nless an action violates a specific provision of the
Constitution, the due process clause requires ‘only the most basic
procedural safeguards.’” Young v. Herring, 938 F.3d 543, 557 n.3
(5th Cir. 1991) (King, J.) (quoting Patterson v. New York, 432 U.S.
197, 210 (1977)).
That said, just which “basic procedural safeguards” will be
generally implicated by imposition of the “quasi-criminal” sanction
of disbarment is a close and vexatious question. It is not,
however, a question that requires a thorough answer at the present
juncture, so long as we remain focused, as we surely must, on the
specific faults alleged by the sanctions defendants in the instant
case: First, Ward’s service as “prosecutor”; second, the fact that
he testified in addition to serving as attorney; and third, his ex
parte contacts with the court. We address each in turn.
a
With regard to Ward’s service as prosecutor, our decision in
NASCO, Inc. v. Calcasieu Television and Radio, Inc., 894 F.2d 696(5th Cir. 1990) (Higginbotham, J.), is largely dispositive of the
issue. In that case, the district court imposed, among other
things, a compensatory civil sanction of attorney’s fees and
expenses, and a “quasi-criminal” sanction of a three-year
disbarment, against G. Russell Chambers, the owner of Calcasieu
Television, and A. J. Gray, his chief attorney, in response to a
“long and arduous campaign of fraud, deceit, delay, harassment,
30
oppression and expense” in Calcasieu’s litigation of a contract
claim brought against it by NASCO. See NASCO, Inc. v. Calcasieu
Television and Radio, Inc., 124 F.R.D. 120, 143-45 (W.D. La. 1989).
The motion for monetary sanctions had been brought by NASCO, and it
was resolved by way of a one-day bench trial in which each side was
allowed to present evidence and argue the merits of its position.
Gray’s disbarment, on the other hand, was brought by the court, and
legal argument on the issue was limited to the court’s own research
and such briefs as the parties chose to submit after the hearing on
the monetary sanctions.18 In response to Gray’s argument on appeal
that he had been deprived of his right to due process, and in
particular of his right to a disinterested prosecutor for the
“criminal” sanction of disbarment, we stated:
[W]e are not persuaded that NASCO’s “prosecution” of the
sanctions proceeding violated the strictures of Young v.
United States, 481 U.S. 787, 107 S.Ct. 2124, 95 L.Ed.2d
18As the district court itself described the procedure:
. . . We finally decided that NASCO’s counsel would
certainly make application for sanctions in the form of
attorney’s fees and expenses. The Court would rely on
that application and the oppositions filed by defendants
for investigation and the appropriateness of that kind of
sanction. The Court would rely on its own research and
any additional research that we might request of the
parties regarding the imposition of other types of
sanctions. On appeal, NASCO’s counsel is to defend the
entire judgment of this Court, including sanctions other
than attorney’s fees and expenses. If sanctions are
found and become final, they shall include the attorney’s
fees and expenses of NASCO’s counsel in representing
NASCO and the public in the sanction phase of this suit.
NASCO, 124 F.R.D. at 137.
31
740 (1987). There the Court held the appointment of the
opposing counsel in the underlying litigation to
prosecute a criminal contempt proceeding violated due
process. The Court reasoned that counsel could not
adequately represent the interests of the government and
the interests of his private client at the same time.
107 S.Ct. at 2135-2139. Gray argues that because we have
characterized a disbarment proceeding as quasi-criminal,
In re Thalheim, 853 F.2d 383, 388 (5th Cir. 1988), the
reasoning in Young should apply. We are unable to find
any authority to support Gray’s contentions and he points
us to none. Further, we conclude that the danger present
in Young, that private counsel would be overzealous in
the contempt proceedings in an effort to further the
interest of his client, was not present here. The
arguments of counsel at the hearing were devoted entirely
to the issue of monetary sanctions. The court later
relied on its own research, aided by any briefs the
parties wished to file, in determining the propriety of
nonmonetary sanctions. 124 F.R.D. at 137, n.10. The
court thus avoided placing NASCO’s counsel in the role of
prosecutor for the disbarment proceedings.
NASCO, 894 F.2d 707-08.
We read NASCO as standing for the proposition that Young is not
infringed, even where the district court relies on interested
opposing counsel to present the facts19 giving rise to an imposition
19
Although Judge Higginbotham’s description might leave some
room for ambiguity, in point of fact there can be no doubt that the
district court in NASCO relied primarily on the extensive factual
development of the monetary sanctions proceeding in finding Gray
disbarrable. As the following excerpt of its findings makes clear,
the court disbarred Gray on the basis of a wide variety of actions
and culpable mental states derived from the whole course of
Chambers’s scheme, including much out-of-court plotting and other
activity that the court could not possibly have known about save
for the trial:
. . . In his conduct in this case, Gray has actively
violated almost every one of [his] ethical and
professional responsibilities. He accepted and tried a
case for the explicit purpose of doing injustice, i.e.,
he used every means at his disposal to defeat a perfectly
legal and enforceable purchase contract against which he
32
of the quasi-criminal sanction of disbarment, so long as the court
relies on its own research (as supplemented by appropriate briefing
by the parties) with regard to relevant legal issues and the overall
appropriateness of disbarment. The logic would appear to be that,
by avoiding putting opposing counsel in the position of making legal
argument in favor of disbarment, the court sufficiently avoids
well knew his client had no defenses. He misused the
injunction notice given by NASCO. He devised a
fraudulent and illegal scheme to deprive this Court of
the jurisdiction which it had at the time NASCO's notice
was delivered on Friday, October 14, 1983. The sale to
the Trust as attempted was an absolute simulation and
totally void and incomplete at the time it was recorded.
It was recorded in haste for the purpose of rendering the
impending injunction ineffective. He not only failed to
disclose essential and pertinent facts, he actively
misled the Court and recorded his conversation with the
Court without disclosing to the Court his intent to do
so. By these actions the Court was forced to delay
action on the merits until it was determined by trial
that the Court again had jurisdiction. During this delay
Gray utilized his legal skills and experience to lead, on
behalf of Chambers, a campaign of harassment, oppression
and delay sufficient to force NASCO to spend over a
million dollars in attorney’s fees and expenses to defend
its rights to the performance of a perfectly legal and
enforceable contract. More amazing, this was
accomplished without the introduction by defendants of
one single item of evidence against the validity of the
Purchase Agreement. This case is unique. The manner in
which it was conducted by Gray is a disgrace to the legal
profession. It is our reluctant duty as a sanction to
disbar Gray from practice as an attorney in the Western
District of Louisiana . . .
NASCO, 124 F.R.D. at 144-45. In this regard, it might also be
noted that the above description of Gray’s conduct was part and
parcel of the court’s unified and consistent description of
Chambers’s entire “campaign,” which surely would not have been the
case had Gray been afforded the benefit of factual development
independent of the monetary sanctions proceeding.
33
placing him in the role of prosecutor so as to escape the mandate
of Young.20 Whatever we might think of this reasoning as a de novo
matter, we are of course bound by our prior circuit precedent and
must accept NASCO’s rule in this case. See Hogue v. Johnson, 131
F.3d 466, 491 (5th Cir. 1997) (Garwood, J.) (“One panel of this
Court may not overrule another (absent an intervening decision to
the contrary by the Supreme Court or the en banc court . . .).”).
Furthermore, were we to consider the question afresh, we would note
that the “compromise” nature of the NASCO rule seems to us to be
highly consistent with other aspects of the murky “quasi-ness” of
disbarment’s criminal character, including particularly the use of
a “clear-and-convincing” (as opposed to “beyond-a-reasonable-doubt”)
burden of proof, and the fact that the normal criminal requirement
that there actually be a separate prosecutor does not appear to
apply in the disciplinary context.
In applying the NASCO rule to this case, our review of the
record casts no doubt on the district court’s express assurance
that, in order to “‘preserve the court’s independent thought,’ Ward
was restricted to a statement of the facts.” He “conducted
investigations, took depositions, collected other evidence, and
cross-examined witnesses,” but he “was not allowed to present
argument, submit legal authorities after trial, or suggest the
20
Young does not, of course, apply to civil sanctions
proceedings. See, e.g., Portland Feminist Women’s Health Center v.
Advocates for Life, Inc., 877 F.2d 787, 790 (9th Cir. 1989).
34
sanctions to be imposed.” On those matters, as well as on the
selection of the particular defendants to be charged, the court
“kept its own counsel.” With the exception of the issues of
attorney testimony and ex parte contacts discussed separately below,
we can find no serious deviation21 from the procedure expressly
approved in NASCO,22 and therefore conclude that the employment of
Ward as “prosecutor” did not violate the remaining sanctions
defendants’ right to due process.
b
We turn next to the question of attorney testimony. On this
point, we are confronted with less precedent, but an arguably
clearer answer. Although Rule 3.7 of the Louisiana Rules of
Professional Conduct (applicable to attorneys practicing before the
Western District, see ULLR 83.2.4W (1994)) is clear that “[a] lawyer
shall not act as advocate at a trial in which the lawyer is likely
to be a necessary witness” (with exceptions not applicable here),
local ethical rules are “not the ‘sole’ authority governing motions
to disqualify counsel.” FDIC v. United States Fire Ins. Co., 50
F.3d 1304, 1312 (5th Cir. 1995). Federal courts decide such motions
on the basis of federal, not state, law, and “‘consider the motion
21
Indeed, to the extent that Ward, unlike NASCO’s attorneys,
was not arguing a live sanctions motion of his own while presenting
the evidence forming the basis for disbarment, this case arguably
presents a far less problematic scenario.
22
A fact that is not in the least surprising, given that Judge
Scott was the very district judge whose procedures we affirmed in
NASCO.
35
governed by the ethical rules announced by the national profession
in the light of the public interest and the litigant’s rights.’”
Id. (quoting In re Dresser Indus., 972 F.2d 540, 543 (5th Cir.
1992)). Although local ethical rules are certainly relevant to that
analysis, they are not dispositive.
Furthermore, and as numerous courts and commentators have
recognized, the only justification for the attorney testimony rule
that might be viewed as affecting the rights of the opposing party
is that derived from the fear that the jury will either accord such
testimony undue weight, or will be unable to distinguish between the
attorney’s testimony, offered under oath, and his legal argument,
offered in rhetorical support of his client’s case. See, e.g.,
Dawson v. Orkin Exterminating Co., 736 F.Supp. 1049, 1054 (D. Col.
1990) (noting that the rule “is designed primarily to preclude the
unseemly situation in which the lawyer must argue his own
credibility before the jury”); In re Whitney-Forbes, Inc., 31 B.R.
836, 842 (Bankr. N.D. Ill. 1983) (“The principal danger which
results from having active participation by an attorney who will be
a witness is that a jury will accord a disproportionate weight to
his testimony.”); People v. Superior Court of San Luis Obispo
County, 84 Cal. App. 3d 491, 501 (Cal. Ct. App. 1978) (noting that
“the reluctance of courts to allow such testimony . . . is the
danger that a jury would believe the . . . attorney to be more
credible than an ordinary witness”); Greenebaum-Mountain Mortgage
Co. v. Pioneer National Title Ins. Co., 421 F.Supp. 1348, 1354 (D.
36
Col. 1976) (citing the “fear that the statements of counsel in
closing arguments might bear too much weight with the jury, since
the jury previously observed the attorney taking an oath to tell
only the truth”); cf. United States Fire Ins. Co., 50 F.3d at 1311(generally noting the reasons for the rule); 6 Wigmore on Evidence
§ 1911 (1940 ed.) (same). As the majority of these courts have also
recognized, this justification is inapplicable where, as here, the
testimony is made to a judge, not a jury. See Orkin, 736 F.Supp.
at 1054 (“Here, . . . counsel testified in a hearing before [a
judge] . . . . The rule is therefore inapplicable.”); Whitney-
Forbes, 31 B.R. at 842 (“That problem does not exist in a bench
trial.”); Superior Court, 84 Cal. App. 3d at 501-02 (noting that
“where the . . . attorney will only be testifying at pretrial
hearings where the trier of fact is a judge, not a jury, th[e]
danger does not exist”); Greenebaum-Mountain Mortgage Co., 421
F.Supp. at 1354 (“Because this case involves a trial to the court,
rather than to a jury, we are confident that the finder of fact can
make the necessary distinctions.”).
In the light of this wide swath of opinion on this particular
rule of the “national profession,” and in the light of the
additional fact that the attorney testimony rule has been held to
be completely inapplicable to attorney pro se litigants, see Duncan
v. Poythress, 777 F.2d 1508, 1515 n.21 (11th Cir. 1985) (also
noting, consistent with the above cases, that, because “a judge was
the trier of fact, . . . there was no danger that the trier of fact
37
could not distinguish between testimony and advocacy”), we find no
merit to the contention that allowing Ward to testify at the bench
trial in this case could have infringed the remaining defendants’
right to due process.23
c
We come, then, to the final alleged procedural defect: Ward’s
ex parte contacts with the court. After extensive research, we
could locate no Fifth Circuit case that found ex parte “contacts”
to constitute a reversible violation of due process. What we did
find were a vast number of cases holding the contrary--often in far
23
We also note that, as a practical matter, such testimony will
often be necessary. One of the primary justifications for allowing
opposing counsel to present evidence in these cases is the fact
that he will already be familiar with the underlying events, having
taken part in the proceedings in which the allegedly improper
conduct by his opponent occurred. In these circumstances, it is an
almost foregone conclusion that counsel will also have relevant
evidence of those proceedings. If we are to abide by NASCO and
allow the district court a workable way to investigate these
matters, we must accept the admittedly unusual fact of attorney
testimony as part of the bargain.
38
more serious criminal and deportation contexts.24 Other courts
treat such claims similarly.25
24
See, e.g., Herring, 938 F.2d at 557 (King, J.) (“Because the
ex parte instruction in the instant case does not implicate a
specific constitutional provision, [the defendant] must demonstrate
that, based on all the circumstances, the instruction prevented him
from receiving a fair and just hearing.”) (citing United States v.
Widgery, 778 F.2d 325, 330 (7th Cir. 1985)); United States v.
Patterson, 809 F.2d 244, 248 (5th Cir. 1987) (“The defendants argue
that the district court’s ex parte, in camera procedure violated
their rights under the confrontation and due process
clauses . . . . We need not consider these claims because any
possible errors made by the district court in connection with its
ex parte, in camera inquiry would be harmless.”); Vardas v.
Estelle, 715 F.2d 206, 208 (5th Cir. 1983) (“The district court in
denying habeas corpus in this case determined that the ex parte
procedure followed here violated state procedures, but was not in
violation of constitutional due process. A state court’s failure
to follow its own procedural rules does not of itself raise a
federal constitutional question cognizable in habeas corpus.”); In
re Eisenberg, 654 F.2d 1107, 1112 (5th Cir. Unit B Sept. 4, 1981)
(finding no due process violation for ex parte hearings on
discovery questions); Chan v. INS, 634 F.2d 248, 258 (5th Cir.
Jan. 15, 1981) (“[The deportee] argues that the immigration judge,
at the time of his motion to reopen, violated due process when he
engaged in ex parte communications with a deportation
officer . . . . Chan has failed to make any allegation that the
alleged ex parte communications between the immigration judge and
the deportation officer at the time of the motion to reopen
prejudiced the merits of his case. Therefore, he may not claim
that his due process rights were violated.”).
25
See, e.g., United States v. Lutz, No. 95-17040, 103 F.3d 142,
1996 WL 711435 (9th Cir. 1996) (unpublished) (“[The defendant]
contends that his due process rights were violated in the course of
this section 2255 motion because the district court . . . allowed
[the government] to file ex parte motions . . . . [T]he district
court did not exceed its authority when it . . . allowed the
government to file ex parte motions.”); In re Grand Jury Subpoena,
72 F.3d 271, 276-77 (2d Cir. 1995) (stating, in the context of
discussing whether the failure to provide a witness with ex parte
material submitted by the government and reviewed in camera by the
court violated that witness’s due process rights in a subsequent
proceeding to hold him in contempt for refusing to testify, that
“while this procedure does not occur frequently, it is not
forbidden when justified”); In re Grand Jury Witness, 835 F.2d 437,
39
Based on this rather extensive tradition of affording little
or no weight to isolated ex parte contacts, and in the light of the
fact that our review of the record reveals the contacts in this case
to have been limited to the most de minimis and harmless procedural
matters (such as ascertaining whether Ward would indeed prosecute
a sanctions motion on the Crowes’ behalf, so the court could decide
whether it need even consider bringing its own motion, and directing
that discovery be conducted in certain areas that the court had
itself determined to be particularly relevant), we find no merit to
the contention that the ex parte contacts rendered the proceeding
“fundamentally unfair” such as to violate the remaining defendants’
right to due process.
d
441 (2d Cir. 1987) (“Appellant next asserts that during the
contempt hearing the government presented the district court with
a sealed ex parte affidavit, and adjourned to the robing room to
discuss it outside the presence of . . . counsel, . . . [and] that
this submission . . . denied him his right to a fair hearing. . .
. [T]he procedures followed by the district court in adjudicating
appellant in civil contempt did not deprive him either of due
process of the law or of a fair hearing.”); Fitzgerald v. Kingston,
1998 WL 372763, *5 (D. Mass. 1998) (“[The defendant] alleges that
the . . . the ex parte receipt of the additional . . . information
. . . violated his procedural due process . . . rights. . . .
[W]hile the ex parte receipt of additional information on the
subject of the suspension was culpable (even the Town’s counsel
conceded at oral argument that the omission was not good practice),
it did not rise to a constitutional level. Full judicial-type
hearings are not required when local boards engage in granting or
revoking permits, [even] in cases, such as this, of the revocation
of a professional or occupational license.”) (quotations and
citations omitted) (emphasis added).
40
Having concluded that the remaining defendants’ due process
rights were not themselves violated by the district court’s
procedures, the only potential question remaining is whether the
violation of CNA and Tone’s rights somehow “tainted” the proceeding,
such that the remaining defendants are also entitled to a reversal
of their sanctions. It has been argued in this regard that our due
process ruling must be made on the proceeding as a whole, and not
as to individual defendants.
In LeGrand, we were confronted with the far more serious
question of a single defendant who was subjected to both criminal
and civil contempt sanctions. We stated:
The contempt order in this case involves a true mixture
of both criminal and civil relief. Accordingly, it
should be characterized as criminal for purposes of
appeal. This characterization permits the review of
civil contempt orders which would otherwise not be final
and appealable. However, it does not necessarily follow
that, even if this is a true “mixed relief” case, a Court
must vacate and remand the whole proceeding for failure
to comply with criminal procedure. In Lamar[ Financial
Corp. v. Adams, 918 F.2d 564, 567 (5th Cir. 1990)], the
reviewing court vacated and remanded the criminal portion
of the order but affirmed the civil portion after finding
the district court had not abused its discretion in
granting the civil relief.
LeGrand, 43 F.3d at 169-70. In the light of this precedent, we are
confident that we have followed the correct path by making an
individual evaluation of each defendant’s right to due process, and
conclude that our analysis of CNA and Tone’s procedural claims is
41
irrelevant to the outcome for the other defendants.26 Because we
have found the procedure individually sufficient as to defendants
Burns, Bieck, Wright, Fiedler, Burnthorn, and Berry, we therefore
decline to reverse their sanctions for want of due process, and
proceed to their other arguments.
B
Turning, at very long last, to the substance of this case, the
sanctions defendants next argue that the district court clearly
erred in making its required finding of bad faith conduct. With
regard to sanctions defendants Burns, Bieck, Wright, Fiedler,
Burnthorn, and Berry, we must obviously consider this argument, as
we have found no procedural basis for a reversal of those
defendants’ sanctions. We also consider this merits question as to
defendants CNA and Tone, however, because it allows us to determine
whether the proceeding can be dismissed as to them, thereby avoiding
the potentially vexatious double jeopardy concerns that would be
raised by a remand in the light of the criminal nature of their
sanctions.
1
26
Obviously, in any sanctions proceeding involving both
criminal and civil (or, as here, quasi-criminal) defendants, the
proper procedure is to provide full criminal safeguards throughout.
We merely note that a lack of proper criminal procedure in a mixed
proceeding does not constitute reversible error as to the civil
defendants. As to those defendants, there is simply no entitlement
to heightened procedure, and therefore no prejudice in its
deprivation.
42
As noted above, “the threshold for the use of inherent power
sanctions is high.” Elliot, 64 F.3d at 217. “In order to impose
sanctions against [a defendant] under its inherent power, a court
must make a specific finding that the [defendant] acted in ‘bad
faith.’” Chaves v. M/V Medina Star, 47 F.3d 153, 156 (5th Cir.
1995). Where the sanction is disbarment, we have required that this
finding be based on “clear-and-convincing” evidence. See In re
Medrano, 956 F.2d 101, 102 (5th Cir. 1992). We have also noted
that, where the finding of bad faith is based on “an erroneous view
of the law or on a clearly erroneous assessment of the evidence,”
the imposition of sanctions is “‘necessarily [an] abuse [of]
discretion.’” Dawson, 68 F.3d at 896 (quoting Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 405 (1990)).
In this case, we note at the outset that the district court did
make a facially sufficient finding when it ruled that all of the
sanctions defendants had engaged in a conspiracy to willfully
defraud the Crowes by concealing the D&O Policy from them. The sole
question for this court is whether that finding was based on “an
erroneous view of the law or on a clearly erroneous assessment of
the evidence.”
As indicated in Dawson, when sanctions are imposed under the
inherent power, our investigation of legal and evidentiary
sufficiency is particularly probing. The hand of the district
court, as we are reminded by the Supreme Court, is sometimes wont
to be imperial, and when the district court dips into its reservoir
43
of inherent power, the attorneys practicing at its bar are likely
to be in their most vulnerable setting. Because direct democratic
controls are not available to guard against the inherent power of
individual judges, we must, on appeal, assure that this power is
exercised in the most careful manner. This means that we will probe
the record in detail to get at the underlying facts and ensure the
legal sufficiency of their support for the district court’s more
generalized finding of “bad faith.”
2
The basis for the district court’s finding of bad faith in this
case was an attempt to defraud. There were two distinct classes of
conduct cited by the court in support of this theory. First, and
primarily, the district court found that all of the sanctions
defendants willfully failed to disclose the D&O Policy to the Crowes
despite having a known duty to reveal it. Second, the district
court found that some of the attorney defendants engaged in
affirmative misrepresentations or near misrepresentations in an
attempt to keep the policy a secret. Clearly, either of these
grounds would be sufficient to support a finding of bad faith
conduct. The question is whether the record is sufficient to
support them.
With respect to the first asserted ground, there is no
particular dispute that the sanctions defendants failed to disclose
the D&O Policy. Less clear, however, is the extent to which this
omission constituted a willful breach of some known duty to act.
44
In its opinion, the district court theorized two principal duties:
First, a general duty to reveal applicable insurance policies prior
to settlement;27 second, a more specific duty to respond accurately
to discovery requests.28 At oral argument, however, Ward conceded
that the sanctions in this case could only be premised on the duty
to respond accurately to discovery requests, either as directly
implicated or under a theory of aiding and abetting.29 For this
27
Based on the somewhat trailblazing case of Spaulding v.
Zimmerman, 116 N.W.2d 704 (Minn. 1962), and its dubious progeny.
In Spaulding, the court held that a defendant had a duty to reveal
his greater knowledge of the extent of a plaintiff’s injuries in
the context of a settlement requiring court approval. Id. at 709.
28
A duty that should need no further clarification. Rule
3.3(a)(2) of the Louisiana Rules of Professional Conduct expressly
provides that “[a] lawyer shall not knowingly . . . fail to
disclose that which he is required by law to reveal,” and we have
expressly held that inherent power sanctions are an appropriate
response to discovery violations. See Carroll, 110 F.3d at 293(noting that “intentional disruption of the discovery process [is]
misconduct that is recognized in the rules, in common sense, and in
respect for the court’s processes”)
29
The Court: The problem, to me, is, uh . . . like in
negotiations, just as a general proposition,
no lawyer is obligated to tell everything that
he has before he puts it on the table.
Mr. Ward: Absolutely. That’s right.
The Court: So, I mean, here, uh . . . let’s just assume
that there was no proper interrogatory, or no
proper request for production, it seems to me
there would have been no obligation for the
lawyers to reveal the existence of the CNA
policy. Do you agree with that?
Mr. Ward: I agree with you 100 percent, Judge. That’s
true. I think there would be an argument--
The Court: So then only if each of these defendants
45
reason, we will constrain our analysis of the failure-to-disclose
prong to this theory of duty.30 Under this theory, the question
becomes whether the record supports a finding that the sanctions
defendants either knowingly made a false response to a discovery
request, or knowingly assisted someone else in making or concealing
a false response. After a thorough review of the record, we have
determined that it is completely insufficient on this point as to
all of the sanctions defendants except Berry.
violated some . . . some discovery rule, would
they be subject to the sanctions of the court.
Mr. Ward: I think the discovery devices gave rise to the
initial duty. But this is the problem you
have, is when you move over to settlement,
these gentlemen and their clients become aware
that certain parties had a duty to disclose
something. And we get into the problem of an
in glo . . . an in globo settlement. All the
defendants know, the record’s very . . . very
clear; every defendant knows that I have asked
questions in discovery that give rise to
duties to disclose. So, what . . . what duty
do you have when you know someone’s
perpetrating a fraud, and you assist, or
you’re going to achieve a benefit from it?
30
As a general matter, we will not consider arguments that have
not been urged by the parties on appeal. United States ex rel.
Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 n.3
(5th Cir. 1998). We note in passing, however, that, were we not so
constrained, we, like Ward, would nonetheless find it difficult to
identify any non-discovery-related duty that required the sanctions
defendants to reveal all applicable insurance policies to opposing
counsel in this case. Spaulding was an unusual case with a narrow
range of factual applicability, and its rather extreme (when more
broadly applied) rule finds no support in the jurisprudence of this
circuit.
46
With respect to the second asserted ground, affirmative
misrepresentations, the dispute is less complex. Rules 4.1(a) and
8.4(c) of the Louisiana Rules31 are quite clear in their mandate
that attorneys not lie in the course of representation. The
question simply becomes whether the record supports a finding that
any of the attorney defendants actually lied with respect to the D&O
Policy. After a thorough review of the record, we have determined
that it is also at least partially insufficient on this point as to
all of the sanctions defendants except Berry.
a
With respect to CNA, Tone, Fiedler, and Burnthorn, there was
no finding or evidence32 of any incorrect answer to any discovery
31
And parallel provisions of every other professional
responsibility code, for that matter. See, for example, Rules 4.1
and 8.4 of the ABA’s Model Rules of Professional Responsibility.
32
With respect to Burnthorn, we should note that there was
initially some evidence of discovery abuse. In making her client
Dollar’s claim of privilege in response to Request 5, Burnthorn
identified the privileged material (as required by Fed. R. Civ. P.
26(b)(5)) as notifications of claim sent to New England Insurance
Company and Home Insurance Company only. Yet barely a week before,
Burnthorn had herself drafted a notification of claim to be sent to
CNA as well. The failure to identify this notice would appear to
be an error so conspicuous that a reasonable trier of fact may have
been justified in concluding that Burnthorn (and, through her,
Wright) had made a willful omission.
As noted, however, the district court made no such finding,
even though it was clearly aware of the nature of the response.
Indeed, the district court expressly disclaimed any reliance on
alleged discovery violations as a basis for finding bad faith
conduct on the part of Wright and Burnthorn, and in assessing
sanctions against them, the court relied exclusively on a breach of
the now abandoned Spaulding duty. In the light of this treatment,
we conclude that the cited evidence was essentially discredited,
and we therefore decline to consider it for purposes of this
47
request at all, much less a willfully false response. Furthermore,
there was no finding or evidence that any of these defendants
willfully aided anyone else in making or concealing an incorrect
response, or even that they knew that anyone had made an incorrect
response. Finally, there was no finding or evidence that Tone,
Fiedler, or Burnthorn ever engaged in any affirmative
misrepresentations with respect to the D&O Policy. As to CNA, Tone,
Fiedler, and Burnthorn, the district court’s finding of bad faith
conduct was therefore clearly in error and its imposition of
sanctions an abuse of discretion.
b
With respect to Burns, Bieck, and Wright, there was also no
finding or clearly convincing evidence of any incorrect response33
to a discovery request, or of any knowing assistance34 of an
incorrect response.35 There was, however, an implicit finding of
appeal.
33
With regard to Wright, see the discussion of Burnthorn’s
discovery responses in the preceding note.
34
The closest that these defendants came to willful aiding and
abetting was the meeting on July 26. At that meeting, it became
clear that all three were concerned about the possibility that
Berry’s discovery responses were inaccurate. Although the evidence
was clear that none of these defendants exercised an appropriate
amount of care in investigating this possibility, neither did they
knowingly assist Berry in perpetrating a fraud.
35
There was a finding of bad faith failure to disclose under
the now abandoned Spaulding theory of duty. As the Spaulding duty
is no longer a viable one for purposes of this case, we disregard
this finding.
48
misrepresentation. The district court held that Burns made a
willfully misleading statement at the July 11 meeting when he
declared a settlement proposal of $6.2 million to be far beyond any
theory of insurance coverage. Furthermore, the court held that
Bieck and Wright maintained a knowing silence during this statement.
The record supports the district court’s characterization of
events, and we are unable to say that the court was clearly in error
in declaring the facts of the July 11 meeting, even under the
heightened clear-and-convincing evidentiary standard applicable to
the sanction of disbarment. Whether the actions of Burns, Bieck,
and Wright constituted misrepresentation for purposes of the
Louisiana Rules is a better question, but one which we need not
reach at this juncture.
For regardless of this “misrepresentation,” the district court
purported to base its finding of bad faith conduct exclusively on
a breach of the duty to reveal the D&O Policy. As we just
clarified, however, there was no proper foundation for a finding
that these defendants breached a known duty to disclose, as the
district court made no finding that these defendants ever made or
assisted a false discovery response. As to these three defendants
as well, the district court’s finding of bad faith conduct was
therefore clearly in error.
c
Berry presents a different case. The district court
specifically found that he knowingly and deliberately made blatantly
49
incorrect discovery responses to Requests 5 and 8. Berry does not
seriously dispute that his responses were in fact false, and, with
respect to at least one of them,36 the record clearly supports the
district court’s inference that he knew his answer to be incorrect
at the time it was offered. Furthermore, the district court also
found that Berry attempted to cover up his lapse with outright
deception when he repeatedly assured the Crowes’ counsel that his
clients would be paying for any settlement out of their own pockets.
This finding, too, has adequate support in the record. In the light
of these specific findings, we cannot say that the district court
clearly erred in concluding that Berry engaged in bad faith conduct,
or that the evidence was not sufficient to overcome the clear-and-
convincing hurdle.
We are not swayed from this view by the fact that there may
have been other explanations for Berry’s actions. Berry argues, for
instance, that he did not disclose the D&O Policy or the past claims
correspondence because he simply did not realize that there was a
possibility that the policy would actually cover his clients. He
essentially pleads incompetence in this respect, stemming from his
lack of experience with insurance law. This explanation is
supported in some respects by the district court’s finding that
Berry once actually mentioned the D&O Policy to the Crowes’ counsel,
referring to it as “lapsed.” It is soundly contradicted, however,
36
The response sent on behalf of his fourth director client.
50
by the fact that Berry sought defense and indemnification for his
clients under the policy simultaneous with his purported conclusion
that it did not cover them.
Even if we were content to characterize Berry as a mere bungler
in a de novo review, we would not have that authority in this case.
Even under the more than perfunctory review applicable to inherent
power sanctions proceedings, the factual findings of the district
court are entitled to respect unless clearly erroneous. Berry’s
purported interpretation of his discovery duties was neither proper
nor even rationally consistent. It was not for him to decide, sub
silencio, which documents facially covered by a discovery request
would be important, and we are certain that no competent attorney
would make this presumption. The district court found Berry’s
explanation to be inherently incredible, and we cannot say that this
finding was clearly wrong. We therefore conclude that the district
court did not clearly err in finding bad faith conduct on the part
of James W. Berry.
d
Because the district court clearly erred in making its required
finding of bad faith conduct on the part of defendants Fiedler and
Burnthorn, we must reverse and vacate the imposition of sanctions
against those defendants. Furthermore, because the record before
us indicates no possible evidentiary basis for a proper finding of
bad faith conduct on the part of either those defendants or CNA and
Tone, we will dismiss the sanctions proceeding as to them. Because
51
we find no clear error with regard to the finding of bad faith
conduct on the part of Berry, we will not disturb his sanctions for
lack of evidentiary sufficiency.
Burns, Bieck, and Wright present a more intriguing question.
As it stands, the district court’s finding of bad faith conduct on
their part was clearly in error because its assigned basis finds no
specific support in the record. As noted above, the district court
found that Burns, Bieck, and Wright acted in bad faith because they
breached a duty to disclose the D&O Policy. Yet the record reveals
that there was no breach of the only relevant duty. The record also
indicates, however, that there was a supportable finding of other
conduct that would constitute bad faith, in the form of the
misrepresentation offered at the July 11 meeting. Because this
purported misrepresentation, which we do not take lightly, could be
a sufficient independent basis for the imposition of sanctions,37 we
must ask whether it would be proper for this court simply to affirm
the sanctions imposed against these defendants under this alternate
theory. Because the district court’s discretionary decision to
sanction these defendants was irreparably intertwined with the
37
We also note, in this regard, the rather fine distinction
between the evidence of Burns, Bieck, and Wright’s
“misrepresentation,” which we consider, and the evidence of Wright
and Burnthorn’s discovery abuse, which we do not. As discussed
above, the district court expressly disclaimed any reliance on
Burnthorn’s discovery responses as a basis for sanctions, which we
read as a rejection of the evidence on that point. The
misrepresentation evidence, on the other hand, was never rejected
by the district court, and impresses us as having figured
prominently in the background of its decision.
52
breach-of-duty theory of fraud,38 we have concluded that we may not
simply affirm it based on another arguably sufficient theory.
The imposition of sanctions under the inherent power is a
decision particularly committed to the sound discretion of the
district court. The inherent power was expressly derived from that
“‘control necessarily vested in courts to manage their own affairs
so as to achieve the orderly and expeditious disposition of cases.’”
Chambers, 501 U.S. at 43 (quoting Link v. Wabash R.R. Co., 370 U.S.
626, 630-631 (1962)). When a district court imposes sanctions under
the inherent power, it is because the court has determined, in its
discretion, that the particular sanctions are necessary to
effectuate these important goals as to the particular defendants
under its particular theory of the case. For this court to affirm
inherent power sanctions on grounds other than those expressly
chosen by the imposing court would constitute an encroachment upon
that court’s discretion unwarranted by the concerns for order and
necessity inherent in their use. The district court in this case
imposed sanctions for breach of a duty to disclose, and we have now
clarified that this basis is insufficient as to these defendants,
although another basis, misrepresentation, might be. In this
situation, we believe the better course is to reverse and vacate the
district court’s original imposition of sanctions, and, in the
38
And the now abandoned Spaulding theory of duty.
53
absence of any other error, remand for reconsideration in the light
of our clarification.39
39
We may also dispense, at this juncture, with the additional
miscellaneous arguments of Burns, Bieck, Wright, and Berry. First,
all of these remaining defendants make several unclear and
undeveloped arguments regarding improper bias in the district
court. They can point us towards no motive for or evidence of
expressed partiality, however, and we can see no indication that
the district court was either more or less biased than is natural
and unavoidable where inherent power sanctions are involved. The
mere fact that the court sees fit to bring a sanctions motion will
not give rise to an inference of improper bias. See Lemaster v.
United States, 891 F.2d 115, 120-21 (6th Cir. 1989).
Second, Berry argues that his sanction was unnecessarily
severe. We think it clear, however, that the particular amount of
an inherent power sanction is uniquely committed to the sound
discretion of the imposing court. In this case, we are content
that the district court adequately considered all of the relevant
circumstances, and that Berry’s sanction was appropriate
thereunder. Lest there be any doubt on this point, those
circumstances, again, were a deliberate deception leading to a $5
million potential loss. We cannot say that a nine-month suspension
from practice was not the least severe sanction necessary to deter
such conduct in the future. See Natural Gas Pipeline Co. of Am. v.
Energy Gathering, Inc., 86 F.3d 464, 467 (5th Cir. 1996) (noting
that the “sanction chosen must employ ‘the least possible power
adequate to the end proposed’”) (quoting Anderson v. Dunn, 19 U.S.
(6 Wheat.) 204, 231 (1821)).
54
V
For the foregoing reasons, we hold that the district court
violated CNA and Tone’s right to due process by imposing serious
criminal fines on them via a civil process. We find no procedural
fault as regards the “quasi-criminal” suspension and reprimand
sanctions meted out to the other sanctions defendants. We also
hold, however, that the district court’s required finding of bad
faith conduct was clearly in error as to all of the sanctions
defendants save Berry. We therefore REVERSE and VACATE the district
court’s imposition of sanctions against all of these defendants.
Furthermore, because the evidence is completely insufficient to
support the sanctions imposed against defendants CNA, Tone, Fiedler,
and Burnthorn, we DISMISS the sanctions proceeding as to them. With
respect to defendants Burns, Bieck, and Wright, we find the record
potentially sufficient to support sanctions, and REMAND to the
district court for further consideration in the light of our
opinion.40 We AFFIRM the sanctions imposed against Berry.
Accordingly, the judgment of the district court is REVERSED and
RENDERED as to sanctions defendants American Casualty Company of
Reading, Pennsylvania, Michael P. Tone, Anne Fiedler, and Judy L.
40
In reaching its decision, the district court should address
specifically the manner in which the actions of Burns, and, more
importantly, Bieck and Wright, can be equated to a
misrepresentation for purposes of the Louisiana Rules. In so
doing, the court should pay particular attention to our command in
Thalheim that such rules are to be read strictly, resolving all
ambiguities in favor of the attorney. See id., 853 F.2d at 388.
55
Burnthorn. Judgment is REVERSED and REMANDED as to defendants W.
Glenn Burns, Robert B. Bieck, Jr., and William E. Wright. Judgment
is AFFIRMED as to defendant James W. Berry.41
REVERSED in part, AFFIRMED in part, and
REMANDED with instructions.
ENDRECORD
41
With regard to Judge Scott’s outstanding motion for leave to
file an amended judgment, we have determined that it has no bearing
on the issues or outcome of this appeal. The motion is therefore
DENIED AS MOOT.
56
EMILIO M. GARZA, Circuit Judge, concurring in part and dissenting
in part:
The district court below not only appointed plaintiffs’
attorney Ward to prosecute the court’s sanctions motion at the same
time that Ward had his own private sanctions motion pending before
the court (as well as related civil proceedings), but also engaged
in extensive ex parte communications with Ward, ordered Ward not to
disclose the substance of the communications with the defendants,
and allowed Ward to testify as a fact witness and cross-examine
other witnesses during the proceedings.42 Using these unprecedented
procedures and operating under its “inherent powers,” the district
court imposed serious criminal fines and quasi-criminal disbarment,
suspension, and reprimand sanctions on the defendants.
In evaluating these proceedings, the majority correctly
concludes that the procedures failed to comport with basic
principles of due process with respect to the criminal fines imposed
on defendants CNA and Tone. Ironically, notwithstanding this
conclusion, the majority holds that the same defective procedures
did not violate due process with respect to the quasi-criminal
disbarment, suspension, and reprimand of defendants Burns, Bieck,
Wright, Fiedler, Burnthorn, and Berry. I respectfully disagree.
42
Although the district court ultimately denied the private
sanctions motion one week before issuing its opinion in this case,
Ward’s motion was pending before the court during the court’s
investigation and the entirety of the hearings in which Ward played
such a vital role.
-57-
57
The majority cites no case where inherent powers sanctions have been
imposed or upheld under similar procedures, and I can find none.
Indeed, a thorough review of our case law demonstrates that we have
reversed and vacated disbarment, suspension, and reprimand sanctions
in far less troubling circumstances than those posed by the case at
hand.43 Moreover, the Supreme Court’s decisions in International
Union, United Mine Workers v. Bagwell, 512 U.S. 821, 837-38, 114 S.
Ct. 2552, 2563-64, 129 L. Ed. 2d 642 (1994), and Young v. United
States, 481 U.S. 787, 800, 107 S. Ct. 2124, 2133-34, 95 L. Ed. 2d
43See, e.g., Dailey v. Vought Aircraft Co., 141 F.3d 224,
229 (5th Cir. 1998) (reversing and vacating attorney disbarment
because the district court failed to provide adequate notice and
opportunity to be heard); Scaife v. Associated Air Center Inc., 100
F.3d 406, 412 (5th Cir. 1996) (reversing and vacating attorney
reprimand sanction because it was overbroad and excessive in
relation to the alleged conduct); United States v. Brown, 72 F.3d
25, 29 (5th Cir. 1995) (reversing and dismissing attorney
suspension sanction because disciplinary rule must be strictly
construed resolving ambiguities in favor of the person charged);
Elliott v. Tilton, 64 F.3d 213, 217 (5th Cir. 1995) (reversing and
remanding attorney sanction because the district court failed to
make a finding of bad faith); Chaves v. M/V Medina Star, 47 F.3d
153, 156 (5th Cir. 1995) (reversing attorney sanction because the
magistrate judge failed to exercise the mandated restraint before
assessing sanctions under the inherent power of the court);
Resolution Trust Corp. v. Bright, 6 F.3d 336, 340-41 (5th Cir.
1993) (reversing attorney disbarment because the record did not
support the district court’s bad faith finding); In re Medrano, 956
F.2d 101, 103-05 (5th Cir. 1992) (reversing attorney disbarment
because the district court applied the preponderance of the
evidence rather than clear and convincing evidence standard);
Johnson v. Ayers, 921 F.2d 585, 586 (5th Cir. 1991) (reversing
bankruptcy court’s decision to suspend attorney from practice
because “a reasonable person would have a reasonable basis for
questioning [the judge’s] impartiality in the contempt
proceeding”); In re Thalheim, 853 F.2d 383, 388 (5th Cir. 1988)
(reversing attorney suspension because the district court violated
due process by failing to follow its own requirements concerning
proper disciplinary proceedings).
-58-
58
740 (1987), as well as our own warnings in NASCO, Inc. v. Calcasieu
Television & Radio, Inc., 894 F.2d 696, 707-08 (5th Cir. 1990),
aff’d sub nom. Chambers v. NASCO, Inc., 501 U.S. 32, 111 S. Ct.
2132, 115 L. Ed. 2d. 27 (1991), mandate a reversal of the quasi-
criminal sanctions imposed under such defective procedures.
Accordingly, I dissent from the majority’s affirmance of the
suspension of attorney-defendant Berry. I concur in the judgment
reversing the disbarment, suspension, and reprimand of Wright,
Burns, Bieck, Fiedler, and Burnthorn, as well the majority’s
reversal of the criminal fines imposed on CNA and Tone; I disagree,
however, with the majority’s approval of the unprecedented
procedures that the district court used to impose the suspension,
disbarment, and reprimand sanctions under its inherent powers.
I
“A court must, of course, exercise caution in invoking its
inherent powers, and it must comply with the mandates of due
process, both in determining that the requisite bad faith exists and
in assessing fees.” See NASCO, 501 U.S. at 50, 111 S. Ct. at 2136.
Moreover, “the threshold for the use of inherent power sanctions is
high.” Chaves v. M/V Medina Star, 47 F.3d 153, 156 (5th Cir. 1995).
“Unlike most areas of law, where a legislature defines both the
sanctionable conduct and the penalty to be imposed, civil contempt
proceedings leave the offended judge solely responsible for
identifying, prosecuting, adjudicating, and sanctioning the
contumacious conduct.” Bagwell, 512 U.S. at 831, 114 S. Ct. at
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2259; see also Mackler Productions, Inc. v. Cohen, No. 97-7789, 1998
WL 325233, *2-3 (2d Cir. June 22, 1998) (“A troublesome aspect of
a trial court’s power to impose sanctions . . . pursuant to the
court’s inherent power . . . is that the trial court may act as
accuser, fact finder and sentencing judge, not subject to
restrictions of any procedural code and at times not limited by any
rule of law governing the severity of sanctions that may be imposed.
The absence of limitations and procedures can lead to unfairness or
abuse.”) (internal citation omitted). In addition, “[t]o the extent
that such contempts take on a punitive character [] and are not
justified by other considerations central to the contempt power,
criminal procedural protections may be in order.” Id. at 831, 114
S. Ct. at 2559.
Significantly, both the Supreme Court and our own court have
emphasized that disbarment is a punishment with punitive
characteristics. See, e.g., In re Ruffalo, 390 U.S. 544, 550, 88
S. Ct. 1222, 1226, 20 L.Ed.2d 117 (1968) (“Disbarment, designed to
protect the public, is a punishment or penalty imposed on the
lawyer.”); Dailey v. Vought Aircraft Co., 141 F.3d 224, 229 (5th
Cir. 1998) (“Although disbarment is intended to protect the public,
it is a ‘punishment or penalty imposed on the lawyer.’”) (quoting
In re Ruffalo, 390 U.S. at 550, 88 S. Ct. at 1226). We have further
concluded that disbarment proceedings are adversarial and quasi-
criminal in nature. See In re Thalheim, 853 F.2d 383, 388 (5th Cir.
1988) (“Attorney disbarment and suspension cases are quasi-criminal
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in character.”); In re Medrano, 956 F.2d 101, 102 (5th Cir. 1992)
(“A disbarment proceeding is adversarial and quasi-criminal in
nature and the moving party bears the burden of proving all elements
of a violation.”); see also In re Ruffalo, 390 U.S. at 551, 88 S.
Ct. at 1226 (“These are adversary proceedings of a quasi-criminal
nature.”). Consequently, while disbarment proceedings are “quasi-
criminal,” rather than purely criminal, we have consistently
rejected claims that civil procedural protections are adequate to
meet due process requirements. See, e.g., In re Medrano, 956 F.2d
at 102 (rejecting the district court’s application of the
preponderance of the evidence standard in a disbarment proceeding);
United States v. Brown, 72 F.3d 25, 29 (5th Cir. 1995) (“Because
attorney suspension is a quasi-criminal punishment in character, any
disciplinary rules used to impose this sanction on attorneys must
be strictly construed resolving ambiguities in favor of the person
charged.”).
Furthermore, we must closely scrutinize the district court’s
use of its inherent powers to insure that the court exercised such
powers with restraint and discretion. “Indeed, the Supreme Court
has cautioned that ‘[b]ecause of their very potency, inherent powers
must be exercised with restraint and discretion.’” Chaves, 47 F.3d
at 156 (quoting NASCO, 501 U.S. at 44, 111 S. Ct. at 2132); see also
Natural Gas Pipeline Co. v. Energy Gathering, Inc., 2 F.3d 1397,
1406-07 (5th Cir. 1993) (inherent powers must be exercised with
restraint and discretion and only sparingly so). “Disbarment being
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the very serious business that it is, ample opportunity must be
afforded to show cause why an accused practitioner should not be
disbarred.” Theard v. United States, 354 U.S. 278, 282, 77 S. Ct.
1274, 1276-77, 1 L. Ed. 2d 1342 (1957); see also Ex parte Robinson,
86 U.S. (19 Wall.) 505, 511, 22 L. Ed. 205 (1873) (“Before a
judgment disbarring an attorney is rendered he should have . . .
ample opportunity of explanation and defence.”). At rock bottom,
“ample opportunity” to present a defense to a charge of disbarment
must include an impartial decision maker and, if one is needed, a
disinterested prosecutor. See, e.g., Bagwell, 512 U.S. at 831-38,
114 S. Ct. at 2559-64; Young, 481 U.S. at 800-06; NASCO, 894 F.2d
at 707-08.
II
A
As the Supreme Court explained in Bagwell, “[the] fusion of
legislative, executive, and judicial powers [in inherent powers
proceedings] summons forth . . . the prospect of the most tyrannical
licentiousness” and is “uniquely [] liable to abuse.” Bagwell, 512
at 831-33, 114 S. Ct. at 2559-61. Accordingly, our jurisprudence
requires “progressively greater procedural protections” when
sanctions have punitive characteristics (as they do here) and where
the conduct giving rise to the sanctions occurs outside the presence
of the court and requires elaborate factfinding (as it did here).
See id. The Supreme Court explained that a district court must be
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particularly circumspect in exercising its inherent powers when the
proceedings require elaborate factfinding:
For a discrete category of indirect contempt, however,
civil procedural protections may be insufficient.
Contempts involving out-of-court disobedience to complex
injunctions often require elaborate and reliable
factfinding. Cf. Green, 356 U.S. at 217 n.33, 78 S. Ct.
at 660 n.33 (Black, J. dissenting) (citation omitted)
(“Alleged contempts committed beyond the court’s presence
where the judge has no personal knowledge of the material
facts are especially suited for trial by jury. A hearing
must be held, witnesses must be called, and evidence
taken in any event. And often . . . crucial facts are in
close dispute”). Such contempts do not obstruct the
court’s ability to adjudicate the proceedings before it,
and the risk of erroneous deprivation from the lack of a
neutral factfinder may be substantial.
Bagwell, 512 U.S. at 833-34, 114 S. Ct. at 2560-61 (alteration in
original).
Here, as the majority’s recitation of the facts demonstrates,
the district court was required to make elaborate and detailed
factual findings after the presentation of conflicting testimony at
the sanctions proceedings (including the testimony of the court’s
attorney Ward). The conduct giving rise to the sanctions stemmed
from a series of complicated, out-of-court, off-the-record, and much
disputed events that occurred during settlement negotiations. In
fact, the district court conceded that prior to the sanction
proceedings, “the court knew none of the facts.” The district court
attempted to justify the appointment of plaintiffs’ attorney Ward
by explaining that “the appointment of an attorney was even more
important because the court had absolutely no knowledge of the
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factual basis for any charges for sanctions.”44 Accordingly, under
Bagwell, these sanction proceedings were the precise type of
situation where the “risk of erroneous deprivation from the lack of
a neutral factfinder” was substantial.45 See id. Moreover, as I
discuss below, where the district court appointed a self-interested
prosecutor who continued to represent the private plaintiffs,
communicated ex parte (and secretly) with the court-appointed
prosecutor, and allowed the prosecutor to testify as a fact witness
during the inherent powers proceedings, “the mandated restraint
[was] lacking.” Chaves, 47 F.3d at 156.
B
In Young v. United States, under facts decidedly similar to the
case at hand, the Supreme Court explained that “the appointment of
counsel for an interested party to bring the contempt prosecution
. . . at a minimum create[s] opportunities for conflicts to arise,
and create[s] at least the appearance of impropriety.” Young, 481
U.S. at 806, 107 S. Ct. at 2137. The Court explicitly rejected the
argument, similar to the one made by the district court and accepted
44
As I discuss infra at Part II.B, it is precisely because
the district court had no knowledge of the factual basis for any
sanctions that the extended ex parte communications with Ward, as
well as Ward’s testimony as a factual witness at the proceedings,
violated the strictures of Young, Bagwell, and NASCO.
45
Although the majority concedes that “an initial
impression [of] Bagwell appears to mandate” a reversal of the
district court’s faulty procedures for the disbarment proceedings,
see Op. at 25, the majority nonetheless approves the very
procedures that it concludes violate due process for the criminal
fines.
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by the majority, see Op. at 40 n.23, that appointment of opposing
counsel was justified because that person was most familiar with the
underlying events. The Court explained that:
The potential for misconduct that is created by the
appointment of an interested prosecutor is not outweighed
by the fact that counsel for the beneficiary of the court
order may often be most familiar with the allegedly
contumacious conduct. That familiarity may be put to use
in assisting a disinterested prosecutor in pursuing the
contempt action, but cannot justify permitting counsel
for the private party to be in control of the
prosecution.
Young, 481 U.S. at 806 n.17, 107 S. Ct. at 2137 n.17. In
unambiguous terms, the Court condemned the practice of appointing
a self-interested prosecutor in inherent power contempt proceedings:
“If a Justice Department attorney pursued a contempt prosecution for
violation of an injunction benefiting any client of that attorney
involved in the underlying litigation, that attorney would be open
to a charge of committing a felony . . . . Furthermore, such
conduct would violate the ABA ethical provisions, since the attorney
could not discharge the obligation of undivided loyalty to both
clients where both have a direct interest.” Young, 481 U.S. at 805,
107 S. Ct. at 2136. The rule and principles set out in Young,
particularly in light of Ward’s pending motion for private
sanctions, his extensive ex parte communications with the court, and
his testimony as a fact witness, are directly applicable to the case
at hand.
The majority attempts to “escape the mandate of Young,” see Op.
at 36, by asserting that our decision in NASCO, where we allowed the
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use of opposing counsel to present evidence on the amount of
attorneys’ fees, is “largely dispositive” with regard to Ward’s
service as prosecutor. See Op. at 32. I disagree. First, in
attempting to draw a parallel to the case at hand, the majority
asserts that “the district court in NASCO relied primarily on the
extensive factual development of the monetary sanctions proceeding
in finding Gray disbarrable.” See Op. at 35 n.19. The record, both
here and in NASCO, completely refutes this assertion. Indeed, in
Judge Scott’s own opinion in this case, he explicitly states that
in NASCO the court did not have to rely on any factual development
because the court already knew all of the facts before the sanction
proceedings started: “This was a more serious case than NASCO v.
Chambers where the court knew all the facts before trial.”46 Judge
Scott then explicitly distinguished the case at hand from NASCO,
explaining that “[i]n this case the court knew none of the facts.
. . . [and] had absolutely no knowledge of the factual basis for any
charges for sanctions.”
Our own opinion in NASCO illuminates the fundamental
distinction between this case, where the sanctionable conduct
occurred out of court and required elaborate factfinding, and NASCO,
where it did not: “Since the misconduct alleged occurred in the
46
As the majority notes, Judge Scott was also the presiding
judge in the sanctions proceedings in NASCO; thus, his own
concession that he knew all of the facts before the sanctions
proceedings in NASCO (and that he knew none of them in the case at
hand) is more persuasive than the majority’s assertion to the
contrary.
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court, there was no need for elaborate proof of the facts, and the
parties offered none.” NASCO, 894 F.2d at 707; see also id. at 708(“There is no dispute that the appellants did everything the
district court said they did.”). Thus, contrary to the majority’s
conclusion, NASCO cannot be read as support for the district court’s
appointment of an interested opposing counsel who simultaneously
testifies as a fact witness to the much-disputed, out-of-court
conduct of which the judge has no personal knowledge.
Additionally, in upholding the attorney suspensions in NASCO,
we specifically distinguished Young on the grounds that “the danger
present in Young, that private counsel would be overzealous in the
contempt proceedings in an effort to further the interest of his
client” was not present. See NASCO, 894 F.2d at 707. We explained
that “[t]he arguments of counsel at the hearing were devoted
entirely to the issue of monetary sanctions [and] [t]he court relied
on its own research . . . in determining the propriety of
nonmonetary sanctions [i.e., suspension and disbarment].” NASCO,
894 F.2d at 707-08. Because the plaintiff’s attorney in NASCO
played such a limited role in the sanction proceedings, we held that
“[t]he court thus avoided placing NASCO’s counsel in the role of
prosecutor for the disbarment proceedings.” Id. at 708. Here, we
cannot make the same conclusion. Indeed, if there is any case to
which the rule in Young applies, it is this one.
First, Ward undoubtedly had an interest in the court’s
sanctions proceedings because he continued to represent the
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plaintiffs in related civil proceedings and had his own private
motion for sanctions pending before the court at the same time. The
majority states that the case here “arguably presents a far less
problematic scenario” than in NASCO because Ward’s private motion
was merely pending during the course of his investigation and
testimony for the court’s sanctions motion. See Op. at 37 n.21.
I cannot agree that this presents a “far less problematic scenario.”
In NASCO, the opposing counsel’s testimony related only to the
appropriate amount of attorneys’ fees to award; the proceedings did
not involve an interested private party arguing the sanctions motion
for the district court while he had his own private motion, as well
as related civil proceedings, pending before the court. The
fundamental problem that the Supreme Court recognized with the
appointment of an interested party to prosecute a serious contempt
is not diminished simply because the interested party has not yet
argued his private motion. Young prohibits the inherent conflict
of interest, and more importantly, the appearance of impropriety,
that arises when an interested private party prosecutes the
contempts. See Young, 481 U.S. at 807, 107 S. Ct. at 2137(“Regardless of whether the appointment of private counsel in this
case resulted in any prosecutorial impropriety (an issue on which
we express no opinion), that appointment illustrates the potential
for private interest to influence the discharge of public duty.”).
Moreover, the district court compounded its error and the
appearance of impropriety by having extensive ex parte
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communications with Ward. See MODEL CODE OF JUDICIAL CONDUCT Canon
3(B)(7) (1990) (“A judge shall not initiate, permit, or consider ex
parte communications, or consider other communications made to the
judge outside the presence of the parties concerning a pending or
impending proceeding . . . .”). Although the majority states that
the ex-parte contacts in this case were limited “to the most de
minimis and harmless procedural matters,” see Op. at 43, the record
belies this contention. The district court’s own opinion documents
several of the ex parte communications between Ward and the court:
Thereafter, we had several long conversations with Mr.
Ward trying to determine what action should be taken
addressing this matter and emphasizing the fact that the
court knew absolutely nothing of the alleged fraud in the
settlements . . . .
Naturally we called Ward on several occasions but he knew
of no facts to support his allegations of fraud.
We both felt that considering the experience and
character of the attorneys in this suit, a chance should
be given to those who were not involved to clear
themselves without being openly accused and forced to
defend themselves in court.
See Crowe v. Smith, No. 92-2164, slip. op. at 32-33 (W.D. La. July
25, 1996).
Moreover, the district court gave Ward explicit instructions
not to disclose the nature of the ex parte communications to the
defendants and denied several motions by the defendants seeking to
be apprised of the nature of these communications. In light of the
three hats worn by plaintiffs’ attorney Ward (i.e., prosecutor, fact
witness, and private attorney for the opposing party), the district
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court’s secret ex parte communications with the private prosecutor
create an overwhelming appearance of impropriety. Cf. Bagwell, 512
U.S. at 833-34, 114 S. Ct. at 2560-61 (setting forth the
circumstances under which the risk of erroneous deprivation from the
lack of a neutral factfinder is substantial). The majority attempts
to avoid this conclusion by analyzing the ex parte communications
independently, as if they did not occur in the context of the
inherent powers contempt proceeding where Ward was acting as the
prosecutor as well as testifying before the court. See Op. at 37-38
(“With the exception of the issues of attorney testimony and ex
parte contacts discussed separately below, we can find no serious
deviation from the procedure expressly approved in NASCO . . . .”).
Because inherent powers “must be exercised with restraint and
discretion,” NASCO, 501 U.S. at 44, 111 S. Ct. at 2132, the majority
errs in failing to consider the ex parte communications in the
appropriate context and in conjunction with the other procedural
deficiencies.
The majority’s citation to the “extensive tradition of
affording little or no weight to isolated ex parte contacts,” see
Op. at 41-43, n.24 & n.25, provides no support for approving the
extensive and secret ex parte communications in the case at hand.
Significantly, none of the cases cited by the majority involve the
district court’s exercise of its inherent powers. Furthermore, none
of the cases involve ex parte communications with the attorney
acting as a private prosecutor for the court; none of the cases
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involve ex parte communications with an attorney who had a private
sanctions motion and civil claims pending before the court; and none
of the cases include ex parte communications with an attorney who
also testified as a major fact-witness in the proceedings.
Finally, although Ward prosecuted the sanctions on behalf of
the court, he also testified as a fact-witness during the disbarment
proceedings. For obvious reasons, the Rules of Professional Conduct
prohibit attorney testimony under most circumstances. See LOUISIANA
RULES OF PROFESSIONAL CONDUCT Rule 3.7(a) (1995 ed.) (“A lawyer shall not
act as advocate at a trial in which the lawyer is likely to be a
necessary witness . . . .”). Once again, the majority attempts to
analyze this error independently, instead of in the context of
Young, Bagwell, and NASCO. The majority cites a “wide swath” of
district court and bankruptcy court cases for the general
proposition that the rule barring attorney testimony does not apply
when testimony is “made to a judge, not a jury.” See Op. at 38-40.
It is significant to note, however, that none of the cases cited by
the majority involve a testifying attorney who is also the
prosecutor appointed by the court. The same fear that leads us to
bar attorney testimony in jury trials))i.e. that the factfinder (the
jury) would tend to believe the testifying attorney more than an
ordinary witness))applies when the testifying attorney represents
the factfinder (here, the court) rather than (as normal) a private
party. As the Supreme Court noted in Bagwell, “the risk of
erroneous deprivation from the lack of a neutral factfinder” is
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greatest when, like here, the judge has no personal knowledge of the
material facts that are the basis for the sanctions. See Bagwell,
512 U.S. at 834, 114 S. Ct. at 2560-61; see also id. at 831-32, 114
S. Ct. at 2559 (“Contumacy often strikes at the most vulnerable and
human qualities of a judge’s temperament, and it’s fusion of
legislative, executive, and judicial powers summons forth . . . the
prospect of the most tyrannical licentiousness.”) (internal
quotations and citations omitted) (alterations in original).
III
After a thorough search of the relevant case law, I have found
no case in which a district court used procedures like the ones here
to impose inherent powers sanctions, let alone where such procedures
were upheld on appeal. Particularly where the district court
appoints the interested opposing attorney to prosecute the contempt,
engages in secret ex parte communications with the attorney, and
allows the attorney to testify as a fact witness, this court errs
in condoning the district court’s use of its inherent powers. See
NASCO, 501 U.S. at 44, 111 S. Ct. at 2132 (“Because of their very
potency, inherent powers must be exercised with restraint and
discretion.”). In light of these unprecedented and unparalleled
procedures, I conclude that the district court failed to provide due
process in imposing the disbarment, suspension, and reprimand
sanctions. In direct contradiction of our warning in NASCO, the
district court here “plac[ed] [plaintiff’s] counsel in the role of
prosecutor for the disbarment proceedings.” NASCO, 894 F.2d at 708.
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Accordingly, I respectfully dissent from the majority’s affirmance
of the suspension of attorney-defendant Berry and its approval of
the proceedings used in this case.
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