Davis v. Rupe

307 S.W.3d 528, 2010 WL 761324

• Court: Court of Appeals of Texas
• Decided: April 20, 2010
• Docket: 05-08-00813-CV
• Status: Published

Opinions

OPINION

Opinion by

Justice MORRIS.

This appeal challenges an order imposing sanctions on an attorney. Amy Davis contends the evidence is insufficient to support the trial court’s conclusion that she engaged in sanctionable conduct. Davis argues the record conclusively negates each allegation against her and the trial court abused its discretion in ordering her to pay sanctions. After reviewing the record, we conclude there is evidence to support the trial court’s decision.

The order at issue addresses Davis’s representation of the defendants in the cause below. Appellee Ann Caldwell Rupe sued the defendants, claiming she was oppressed as a minority shareholder of a closely held, family-owned investment corporation. Rupe asserted claims for accounting and valuation, breach of fiduciary duty, and shareholder oppression.

During the course of the proceedings, Rupe filed three motions for sanctions against Davis based on her actions as the defendants’ attorney. The third" motion, filed after the final judgment was signed, alleged that Davis made various misrepresentations demonstrating a lack of candor with the court. In the order granting the motion, the trial court stated that Davis “made multiple misleading statements and misrepresentations.” The court further found that there was “a continuing pattern by Ms. Davis to misstate the facts, avoid direct questions, and engage in a total lack of candor with the Court.” The court concluded that Davis’s “continuing course of conduct” was sanctionable. The court ordered Davis to pay $15,000 to Rupe’s counsel and participate in ten hours of ethics training. In doing so, the court stated that, although it was imposing “lesser sanctions,” the sanctions chosen would “in all likelihood ... deter repetition of the conduct by Ms. Davis, and deter repetition of the sanctionable conduct by other lawyers.”

A trial court’s ruling on a motion for sanctions is reviewed under an abuse of discretion standard. Cire v. Cummings, 134 S.W.3d 835, 838 (Tex.2004). In our review, we do not opine on whether the facts presented an appropriate case for the trial court’s action. Id. at 838-39. Rather, we determine only whether the court acted without reference to any guiding rules or principles. Id. We review the evidence in the light most favorable to the trial court’s ruling and draw all reasonable inferences from the evidence to sustain the judgment. See Kutch v. Del Mar Coll., 831 S.W.2d 506, 512 (Tex.App.-Corpus Christi 1992, no writ). The trial court, as the finder of fact, has the right and the duty to weigh the evidence presented and make reasonable deductions therefrom. See Hlavinka v. Griffin, 721 S.W.2d 521, 524 (Tex.App.-Corpus Christi 1986, no writ).

An order of sanctions by the trial court involves two separate decisions. The first decision is whether to impose a sanction. See Ford Motor Co. v. Tyson, 943 S.W.2d 527, 535 (Tex.App.-Dallas 1997, orig. proceeding). The second decision is what sanction to impose. Id. Davis’s appeal challenges only the first of these two decisions.¹ Our analysis in this case, therefore, is limited to whether the trial court abused its discretion in deciding to impose sanctions. We do not address whether the types of sanctions ultimately chosen were unsupported by the evidence or whether the amount of the monetary sanction was excessive. Instead, we address the question of whether there is any evidence to support the trial court’s findings that Davis made misrepresentations to the court or otherwise engaged in sanc-tionable conduct. In her sole issue on appeal, Davis maintains there is none.

A trial court has inherent power to discipline an attorney’s behavior by imposing sanctions. See In re Bennett, 960 S.W.2d 35, 40 (Tex.1997). This inherent power exists to enable courts to effectively perform their judicial functions and to protect their dignity, independence, and integrity. See Eichelberger v. Eichelberger, 582 S.W.2d 395, 399 (Tex.1979). The power may be exercised to the extent necessary to deter, alleviate, and counteract bad faith abuse of the judicial process, such as any significant interference with the traditional core functions of the court. See Lawrence v. Kohl, 853 S.W.2d 697, 700 (Tex.App.Houston [1st Dist.] 1993, no writ). The core functions of a trial court include hearing evidence, deciding issues of fact raised by the pleadings, deciding questions of law, rendering final judgments, and enforcing judgments. See Dallas County Constable Precinct 5 v. KingVision Pay-Per-View, Ltd., 219 S.W.3d 602, 610 (Tex.App.-Dallas 2007, no pet.). Making misleading statements and misrepresentations to the court interferes with these core functions. See Sims v. Fitzpatrick, 288 S.W.3d 93, 106 (Tex.App.-Houston [1st Dist.] 2009, no pet.).

The first misrepresentation alleged in Rupe’s third motion for sanctions involved discussions between Davis and several jurors after the verdict was rendered. Rupe contended that Davis misrepresented her contact with at least one juror by failing to disclose that she had questioned the juror about evidence of an alleged racial character brought out at trial. Davis’s discussions with the jurors immediately preceded the defendants filing a motion for new trial. In that motion, the defendants argued that plaintiffs counsel “improperly raised the spectre of racial prejudice” by questioning one of the defendants at trial about her family’s ties to the Koon Kreek Klub. At the hearing on the motion for new trial, Rupe’s counsel argued that the defense lawyers had contacted all twelve jurors in an effort to obtain affidavits stating that the reference to the Koon Kreek Klub had impacted the verdict. According to Rupe’s counsel, it appeared that none of the jurors was willing to sign such an affidavit. In response to this argument, Davis’s co-counsel stated that they had not, in fact, sought affidavits from the jurors on the matter. The trial court asked defense counsel, “[y]ou didn’t ask one juror if [the reference to the Koon Kreek Klub] played a factor?” Davis responded that she spoke with four jurors and that “[t]wo of the four mentioned sua sponte, without any — without any probing or inquiry at all, that they were very taken aback and it was very impactful, this reference [to the Koon Kreek Klub]...

Later in the hearing, the court asked again, “are you telling this Court ... that you didn’t ask a single one of [the jurors] that during the course of the trial leading up to the deliberations that that didn’t play a factor ... ?” Davis responded that she did not inquire about the content of the jury’s deliberations. The court pointedly stated “[tjhat’s not what I asked.” After several attempts to clarify the question, Davis again stated she spoke to four jurors and that two of them raised the issue of the Koon Kreek Klub evidence without being asked. The court then said it wanted an affidavit from Davis identifying the jurors she spoke to who were surprised by the Koon Kreek Klub evidence. The court indicated that one of the reasons it wanted the affidavit was because it found it “very hard to believe that your firm did not ask these [jurors] what you spent five hundred pages on trying to get a new trial.”

Approximately a week later, Davis submitted her affidavit to the trial court. The affidavit reiterated Davis’s earlier statement that she interviewed four jurors after the jury was discharged and two of them mentioned, without any prompting from her, that they recalled the reference to the Koon Kreek Klub. Davis then stated, “I did not question the jurors about their mental process of analyzing, discussing, and weighing the evidence which contained reference to ‘Koon Kreek Klub,’ nor did I question the jurors about their mental process of analyzing, discussing, and weighing any argument made by [plaintiffs counsel] in her closing argument. Based on my understanding of the definition of ‘deliberations,’ I maintain that I did not question the discharged jurors regarding their deliberations.”

In the motion for sanctions, Rupe contended that Davis misrepresented her contact with at least one of the jurors and attached as evidence the affidavit of Dale Perkins. Perkins was one of the four jurors with whom Davis spoke after the trial, but was not one of the two jurors who raised the issue of the alleged racist statements without being asked. According to Perkins, Davis asked her if she remembered any racial statements or words of a racial character being used by plaintiffs counsel during the trial. Perkins also stated that Davis asked her if she remembered plaintiffs counsel mentioning the words “cocoon” or “coon.” Davis later conceded to the trial court that she brought up the issue of race when she spoke with Perkins. Davis argues, however, that there is nothing inconsistent between her affidavit testimony and Perkins’s affidavit because she did not ask Perkins whether the alleged racially-charged language played a factor in her deliberations as a juror.

Davis’s argument focuses on whether her affidavit contains any literal misstatements about what occurred in her interviews with the jurors. Even though the affidavit may be literally accurate, the trial court could have viewed Davis’s affidavit as misleading. The focus of the trial court’s concern, as shown by its questions and statements at the hearing, was whether Davis had directly questioned any of the jurors about the Koon Kreek Klub testimony without them raising the issue first. By narrowing her affidavit testimony to address only whether she questioned jurors about their deliberations, Davis avoided admitting she had been engaged in the broader conduct about which the court was concerned.

Davis contends that she attempted to inform the trial court about her discussions with Perkins during the hearing on the motion for new trial but the court cut her off before she could complete her answer. The fact that Davis began to address the issue of her discussions with Perkins at the hearing indicates she was aware that this information was relevant to the trial court’s concerns. Davis had the opportunity to complete her answer and reveal her discussions with Perkins in her affidavit. She chose not to do so. This is some evidence to support the trial court’s finding that Davis purposefully avoided answering the court’s questions.

Another misrepresentation alleged in Rupe’s motion for sanctions was that Davis misstated the arguments presented in the defendants’ motion for summary judgment. This alleged misrepresentation was made by Davis at a hearing on Rupe’s request for a trial amendment. Rupe requested a trial amendment after the defendants moved for a directed verdict on the ground that they had been sued in the wrong capacity. Rupe requested leave to amend her pleadings to sue the defendants in the correct capacity.

At the hearing on Rupe’s request, the defendants vigorously argued they would be unduly prejudiced by the late amendment, and Davis testified in support of this argument. She stated that the defense had pursued a strategy throughout the trial that they had been sued in the wrong capacity and a late amendment would vitiate this strategy. The trial court stated that it thought the defendants had not asserted a lack of capacity defense until thirty days before trial when they filed their first amended answer, counterclaim, and verified denial. The court indicated it was concerned the defendants had been “laying behind the log” until immediately before trial to surprise Rupe with the capacity defense. Davis responded that Rupe was put on notice of the capacity issue well before trial because the defendants’ motion for summary judgment, filed three months earlier, included an argument that they had not been sued in the proper capacity.

On cross-examination, Rupe’s counsel asked Davis to point out exactly where in the motion for summary judgment the defendants had raised the issue of capacity. Davis first responded that a footnote in the motion stated that none of the individual defendants owned a majority interest in the corporation at issue. Davis conceded that the footnote did not specifically mention capacity but stated it was “the necessary implication of that footnote.” Davis further testified that the arguments in the motion concerning whether the individual defendants owed Rupe a fiduciary duty also implicated capacity. The trial court specifically noted that Davis had “made another representation to the court that in [the defendants’] motion for summary judgment on September the 11th that [she] raised the issue that these defendants were sued in their wrong capacity.” Davis responded “Absolutely, 100 percent. The entire breach of fiduciary duty section is talking about the fact that these individuals do not own stock.” The trial court indicated it was hard to believe that, from the breach of fiduciary duty argument, the case against the defendants should be dismissed because they had been sued in the wrong capacity.

A short time later, Davis’s co-counsel, Katherine Elrich, attempted to address the court’s concerns by stating, “please, accept our apologies if we’ve misstated this in today’s argument. The point is that the argument [was] the individual defendants do not own stock, that that was put on notice then.” The trial court then asked, “So would you agree that in your motion for summary judgment ... that the lack of capacity issue was not raised for the court to make a decision upon which it could dismiss the case for that reason?” Elrich responded, ‘Tes, Your Honor. It’s not the lack of capacity argument.”

Elrieh’s statement in her capacity as an officer of the court is some evidence from which the trial court could conclude that Davis misrepresented the contents of the defendants’ motion for summary judgment. Davis asserted to the court that the motion for summary judgment filed three months earlier “absolutely, 100 percent” raised the issue of capacity and put Rupe on notice of the capacity problem. Based on this contention, Davis argued Rupe should not be allowed to file a trial amendment to correct the capacity problem and defeat the defendants’ motion for directed verdict. Yet, Elrich agreed with the trial court that the motion for summary judgment did not raise the capacity argument that was the focus of both the defendants’ request for a directed verdict and Rupe’s request for a trial amendment. Even if the arguments made in the motion for summary judgment could be viewed as “related to capacity,” as Davis argues, there is sufficient evidence to support the trial court’s conclusion that Davis’s statements about the contents of the motion for summary judgment were misleading.

A third misrepresentation alleged by Rupe concerned statements made by Davis about the production of documents. During trial, Rupe’s counsel objected to the testimony of one of the defendants’ expert witnesses on, among other grounds, the fact that the defendants had not produced any documents relating to the expert’s opinions. Davis stated to the court that “[t]o the extent there are documents that reflect his opinions, they’ve been produced in the case.” When the trial court asked whether a compensation study upon which the expert intended to rely had been produced, Davis responded “absolutely, it’s been produced.” Rupe’s counsel then stated they could not find the study on the list of documents produced to them. Davis again insisted the document had been turned over stating, “I know that we produced copies of it.” Finally, in the middle of the court’s statement “[a]nd if you didn’t produce that document ...,” Davis interrupted to reaffirm that “[t]he document has been produced.” Three days later, Davis sent the trial court a letter stating that, upon review of the file, it was discovered that the compensation study had not, in fact, been produced.

Davis argues that her statements to the trial court were an honest and understandable mistake in light of the large number of documents produced in the case. Although Davis has asserted that she did not misstate the facts about producing the document on purpose, the trial court was free to disbelieve her claim that it was an innocent mistake. Davis further argues that her misstatements about the document were “innocuous” because they could not have caused any reversible error. But Davis’s repeated, adamant, unqualified, and incorrect representations that the document had been produced, together with the other misleading statements discussed above, support the trial court’s conclusion that Davis engaged in a pattern of misstating facts. A pattern of misstating facts to the trial court cannot be considered innocuous.² The record supports the trial court’s conclusion that Davis engaged in a continuing course of conduct demonstrating a lack of candor with the court.

As stated above, there is sufficient evidence to support the trial court’s findings that Davis engaged in a pattern of making misleading statements and misrepresentations, avoiding questions, and engaging in a lack of candor with the court. Again, we do not address whether the facts found by the trial court present an appropriate case for sanctions. Because of the arguments made in this appeal, our review has been limited to whether, when viewing the evidence in the light most favorable to the trial court’s ruling, there is evidence to support its findings. And, although we share the dissent’s concern about the possibility of sanctions having an adverse effect on zealous advocacy, we are confident that neither the trial court’s ruling nor ours will discourage attorneys from representing their clients with zeal. Misstating facts or misrepresenting the record can never be justified under the guise of zealous advocacy. Nor should the requirement of complete candor with a court ever conflict with an attorney’s ability to represent her client effectively.

Because there is evidence to support the findings, the trial court did not abuse its discretion in ordering the award of sanctions against Davis. We affirm the trial court’s order.

FITZGERALD, J., dissenting.

1 . Davis's appellate brief contains no argument addressing the trial court’s choice of sanctions, and Davis conceded in oral argument that she was not challenging the amount of the monetary sanction or the requirement that she complete ten hours of ethics training in addition to the hours required for continuing legal education.

2 . Rupe alleged numerous other misrepresentations in her third motion for sanctions. However, because we conclude the evidence supporting the misrepresentations discussed above is sufficient and those actions alone are enough to support the award of sanctions, it is not necessary for us to examine the remaining allegations.