Allied Property & Cas. Ins. Co. v. Good, No. 85A04-0902-CV-89, ___ N.E.2d ___ (Ind. Ct. App., Dec. 31, 2009)

VAIDIK, J.

We conclude that Indiana trial courts possess the inherent power to sanction parties and attorneys for violating orders in limine and causing mistrials. This power is designed to protect the integrity of the judicial system and to secure compliance with the court‘s rules and orders. In order for a trial court to impose sanctions against a party or attorney, the court must find that the party engaged in egregious misconduct that causes a mistrial. We review a trial court‘s sanctioning power for an abuse of discretion. Here, the trial court did not abuse its discretion in (1) concluding that Allied Property and Casualty Insurance Company intentionally violated its order in limine when Allied‘s own employee referenced a party‘s criminal history and (2) awarding over $26,000 in attorneys‘ fees and expert witness fees to Plaintiff Linda Good and Third Party Defendant Randall Good and jury costs to the county as compensatory damages. We therefore affirm the trial court.

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Allied raises one issue in this interlocutory appeal: whether the trial court erred in ordering Allied to pay more than $26,000 in sanctions, including attorneys‘ fees, expert witness fees, and costs for the jury, when its own employee, Hornung, apparently after having been warned, violated the trial court‘s order in limine by testifying on direct examination about felony convictions, which resulted in a mistrial. Because this is an interlocutory appeal as of right from the payment of money, Allied does not appeal the trial court‘s grant of Linda‘s motion for mistrial.

We emphasize that this case is about our trial courts‘ inherent authority to enforce their own orders and not about their statutory contempt power. Our Supreme Court has recognized on multiple occasions that our courts have inherent authority. See, e.g., Major, 822 N.E.2d at 169 (“[A]mong the inherent powers of a court is that of maintaining its dignity, securing obedience to its process and rules, rebuking interference with the conduct of business, and punishing unseemly behavior.”). In Rogers, our Supreme Court expounded upon a trial court‘s inherent power to sanction attorneys and parties appearing before it and noted that it is a necessary precondition to the exercise of its independent judicial power:

To deny a court the power to enforce obedience to its lawful orders against parties who have been subjected properly to its jurisdiction in the first instance, is to nullify its effectiveness as an independent branch of our government. The power of a court to enforce compliance with its orders and decrees duly entered is inherent. No statutory sanction is needed. In both equity and law a court would be powerless to give effective relief were its arms tied by such requirements as relator asserts are necessary. To protect the proper functioning of judicial proceedings, we also have imbedded this power in numerous court rules. See, e.g., Ind. Trial Rule 11, Ind. Trial Rule 37. Similarly, the judicial power encompasses the ability to hold a litigant in contempt. See, e.g., Meyer v. Wolvos, 707 N.E.2d 1029, 1031 (Ind. Ct. App. 1999) (“We have recognized the inherent judicial power to deal with contempt. No statutory sanction is needed as a court‘s power to enforce compliance with its orders and decrees duly entered is inherent.”), transfer denied.

745 N.E.2d at 198 (citations omitted).

We also have recognized a trial court‘s inherent authority in Nichols. In doing so, we relied on a D.C. Circuit case, Shepherd v. American Broadcasting Companies, Inc., in which the district court entered default judgment against the defendant for its misconduct before trial. The Circuit Court stated on appeal, “As old as the judiciary itself, the inherent power enables courts to protect their institutional integrity and to guard against abuses of the judicial process with contempt citations, fines, awards of attorneys‘ fees, and such other orders and sanctions as they find necessary, including even dismissals and default judgments.” Shepherd, 62 F.3d 1469, 1472 (D.C. Cir. 1995). The court, however, “cautioned restraint in the use of inherent powers” “because of their very potency.” Id. at 1475.

From the above cases, it is clear that Indiana trial courts possess inherent power to sanction for discovery violations, contempt, and the government‘s wrongful conduct pursuant to Trial Rule 65(C). But the question presented in this appeal is whether this inherent power extends to imposing sanctions for violating an order in limine and causing a mistrial. Although it appears that Indiana appellate courts have not addressed this issue head-on, other jurisdictions have.

In the recent Vermont Supreme Court case of Turner v. Roman Catholic Diocese of Burlington, Vermont, — A.2d —, 2009 WL 3233764 (Vt. Oct. 9, 2009), the trial court imposed monetary sanctions against the Diocese for “repeatedly and deliberately” violating an order in limine and causing a mistrial. Id. at —. The sanctions, which amounted to $112,000, included attorneys‘ fees and expert witness fees. The trial court characterized defense counsel‘s actions as “misconduct.” Id. The Diocese appealed. On appeal, the Vermont Supreme Court first articulated that a mistrial can be an appropriate remedy for violation of an order in limine. Id. “Further, the court has inherent power to sanction a party ‗to protect the integrity of the judicial system.‘“ Id. Citing to its own law as well as Texas law, the court held that trial courts have inherent power to assess expenses for consequential damages suffered by the opposing side, including attorneys‘ fees and witness expenses, incurred due to an abuse of the judicial process. Id. at —. “Abuse of the judicial process includes ignoring court orders and acting in bad faith.” Id. But for the court to take action in response to a pre-trial order, the order must be specific. Id. Concluding that the trial court‘s pre-trial order was specific and definite and that the court had no obligation to specifically warn the Diocese that a violation of its order in limine may result in a mistrial and sanctions, the supreme court concluded that the trial court acted within its authority in declaring a mistrial and imposing a compensatory sanction on the Diocese. Id. at —. See also Red Carpet Studios Div. of Source Advantage, Ltd. v. Sater, 465 F.3d 642, 646 (6th Cir. 2006) (“Furthermore, Roadway Express, Inc. v. Piper, 447 U.S. 752, 766-67, 100 S. Ct. 2455, 65 L.Ed.2d 488 (1980), held that federal courts have the inherent power to assess attorney‘s fees against counsel who willfully abuse judicial processes or who otherwise act in bad faith.”); Lasar v. Ford Motor Co., 399 F.3d 1101, 1118 (9th Cir. 2004) (“When a district court sanctions an attorney or a party based on its inherent powers, a primary aspect of [its] discretion is the ability to fashion an appropriate sanction for conduct which abuses the judicial process. The district court‘s decision to require Ford to pay compensatory sanctions to the court was well within the court‘s discretion, particularly because the payments were carefully tailored to reimburse the court for those costs that were incurred as a result of the mistrial.”) (quotation omitted); Walker v. Ferguson, 102 P.3d 144, 145 (Okla. 2004) (holding that an award of sanctions for causing a mistrial under the trial court‘s inherent authority must reflect a finding of bad faith or oppressive conduct on the part of the sanctioned party); Terry v. Sweeney, 10 P.3d 554, 558 (Wyo. 2000) (holding that the authority for the trial court‘s sanctions, which included attorney‘s fees, against the plaintiffs for violating an order in limine and causing a mistrial “is founded in the inherent authority of all courts to take actions reasonably necessary to administer justice efficiently, fairly, and economically and [to ensure] the court‘s existence, dignity, and functions”) (quotation omitted). But see Clark v. Optical Coating Lab., Inc., 80 Cal. Rptr. 3d 812, 827, 828-29 (Cal. Ct. App. 2008) (holding that the trial court‘s award of attorney fees against plaintiff‘s counsel for their violation of the order in limine did not fall within the court‘s inherent powers because “allowing the trial courts to impose attorney fees as sanctions for attorney misconduct without statutory protections would undermine due process and threaten the independence of the bar”), reh’g denied, review denied.

In line with the Vermont Supreme Court, the Michigan Court of Appeals aptly stated a decade ago:

This Court has repeatedly recognized that a trial court has inherent authority to impose sanctions on the basis of the misconduct of a party or an attorney. In addition, our Supreme Court has “recognized the inherent power of a court to control the movement of cases on its docket by a variety of sanctions.” . . .

[T]his Court [has] held that a court has the inherent authority to dismiss a lawsuit as a sanction for litigant misconduct. It therefore follows that the less severe sanction of an assessment of attorney fees is within a court‘s inherent power as well. We conclude that a court‘s inherent power to sanction misconduct and to control the movement of cases on its docket includes the power to award attorney fees as sanctions when the egregious misconduct of a party or an attorney causes a mistrial. The ability to impose such sanctions serves the dual purposes of deterring flagrant misbehavior, particularly where the offending party may have deliberately provoked a mistrial, and compensating the innocent party for the attorney fees incurred during the mistrial.

Persichini v. William Beaumont Hosp., 607 N.W.2d 100, 108-09 (Mich. Ct. App. 1999) (citations omitted) (footnote omitted).

Based upon our Supreme Court‘s opinion in Rogers, which holds that the power of a court to enforce compliance with its orders duly entered is inherent and no statutory sanction is needed, and given the other jurisdictions‘ sound reasoning for sanctioning parties and attorneys for violating orders in limine and causing mistrials, we conclude that Indiana trial courts possess the inherent power to sanction parties and attorneys for violating orders in limine and causing mistrials. This power is designed to protect the integrity of the judicial system and to secure compliance with the court‘s rules and orders. We review a trial court‘s sanctioning power for an abuse of discretion.

The trial court has the power to impose sanctions against a party or attorney who engages in egregious misconduct that causes a mistrial. Egregious misconduct consists of intentional, reckless, or negligent conduct by the party or attorney. In addition, the court has the power to impose sanctions for violation of an order that the party or attorney believes to be (or turns out to be) erroneous. Therefore, if the party or attorney believes that the court‘s order is erroneous, then the proper remedy is to appeal that order and not violate it, thereby risking a mistrial and sanctions. Sanctions may include compensating the innocent parties for attorney‘s fees and other expenses incurred during the mistrial. To hold otherwise would work an injustice against the innocent party.

Before a trial court can impose sanctions against a party or attorney, the party or attorney is entitled to due process, which includes notice and the opportunity to be heard. See Lasar, 399 F.3d at 1109-10. These minimal procedural requirements give the party or attorney an opportunity to argue that its actions were acceptable, present mitigating circumstances, or apologize to the court for its conduct. See id. at 1110. Because these sanctions are compensatory in nature and are distinguishable from criminal contempt, a full-scale oral or evidentiary hearing is not required. This is particularly so because, “[u]sually, the events have occurred before the judge‘s own eyes, and a reporter‘s transcript is available” if needed. Id. at 1112 (quotation omitted).

On appeal, Allied does not argue it was justified in violating the order in limine as the order, in its opinion, was erroneous. Rather, Allied properly indicated at the oral argument that it was appealing the trial court‘s ruling precluding evidence of prior fires and criminal history from being admitted. Allied, however, argues that it was not afforded procedural due process because the trial court did not allow it to present Hornung‘s testimony concerning why she testified in violation of the order in limine and because the evidence does not show that it intentionally violated the order. We first address Allied‘s argument that it was not afforded due process.

Allied asserts that before the trial court could find that it violated the order in limine, the court should have questioned Hornung under oath. We first point out that the trial court imposed the sanctions against Allied and not Hornung. Allied‘s attorney, Mr. Jennings, spoke at length regarding Hornung‘s knowledge of the order in limine. Mr. Jennings told the court that he advised Hornung “on many occasions, in writing and orally, . . . not to talk about the prohibited areas.” Appellant‘s App. p. 54. Mr. Jennings said that Hornung knew about “these things,” apologized for her testimony, said it was just a simple mistake, and forgot that she was not supposed to talk about “these things.” Id. at 55. Thus, although Hornung did not testify, Mr. Jennings was able to relay to the court what Hornung would have said. Furthermore, although the trial court told Allied that it could make a record of Hornung‘s testimony later, Allied did not later ask to do so. In fact, when the trial court asked the parties if there was anything else they needed to do on the record, Allied said no. The trial court afforded Allied notice and the opportunity to be heard.

Allied next argues that the evidence does not show that it intentionally violated the order in limine. The trial court found “that Defendant Allied has intentionally violated the Court‘s Order in Limine.” Appellant‘s App. p. 33 (emphasis added). The court also found that given the ruling excluding Keel‘s deposition, Allied‘s trial strategy was to throw “an intentional harpoon . . . into this proceeding.Id. at 56 (emphasis added). Notwithstanding these findings, it is Allied‘s position that Hornung “accidently violated an Order in Limine even though she had been informed orally and in writing of the prohibited areas of discussion for Phase I, including Randall Good‘s felony history.” Appellant‘s Br. p. 20.

However, the trial court, and not this Court, is in the best position to gauge Allied‘s motives given that the court not only observed the violation first hand but also the attorneys‘ remarks. Just before Hornung testified there was a discussion on the record about the importance of Allied advising its witnesses of the orders in limine because of the violation that had occurred the day before with Allied‘s witness, Copeland. Nevertheless, Hornung violated the court‘s order a few answers into her testimony with a question posed by her own employer‘s attorney, Mr. Jennings. This violation occurred shortly after the trial court had ruled that Allied would not be able to introduce into evidence Keel‘s damaging deposition, which provided that Randall had offered him $3000 to burn down the Jackson Street property. From this evidence, the trial court could have reasonably inferred that Allied intentionally violated the order in limine. Because the trial court determined that Allied intentionally violated the order and such violation required a mistrial, the evidence supports the conclusion that Allied‘s conduct was egregious and caused a mistrial. Furthermore, the sanctions imposed by the court against Allied were compensatory in nature to reimburse the Goods, their attorneys, and the county for costs incurred as a direct result of Allied‘s violation of the order in limine. The trial court did not abuse its discretion in sanctioning Allied.

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Affirmed.

DARDEN, J., and BRADFORD, J., concur.

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