Lewis v. Nical of Palm Beach, Inc.

Citations: 959 So. 2d 745; 2007 WL 1062911Docket: 4D05-1841, 4D05-1987, 4D05-2835

Court: District Court of Appeal of Florida; August 1, 2007; Florida; State Appellate Court

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Consolidated appeals arise from three trial court orders regarding contempt motions filed by Scott and Carol Lewis and Scott Lewis Gardening, Trimming, Inc. (SLG) against Nical of Palm Beach, Inc. and its representatives, Amy Habie and Patrick Bilton. The trial court found Nical and Bilton guilty of indirect criminal contempt, imposing a fine on Nical and a suspended incarceration sentence on Bilton, contingent on fine payment and compliance with court orders. Additionally, the court disqualified the law firm representing the Nical parties. The third order denied further civil contempt motions against Nical, Habie, and Bilton. 

The Lewis parties appealed all three orders, while the Nical parties appealed the criminal contempt ruling and sentence. The appellate court affirmed the trial court's finding of indirect criminal contempt against Nical and Bilton, as well as Bilton's sentence and Nical's fine. However, it reversed the contempt ruling and fine against Nical related to a subpoena and the disqualification of their legal counsel, remanding for a hearing on that issue. The court upheld the trial court's conclusion that evidence did not support compensatory civil contempt sanctions, but reversed the denial of coercive civil contempt as a possible remedy, allowing the trial court to revisit the entire penalty scheme on remand.

The initial litigation involved Amy Habie’s purchase of SLG from Scott Lewis, with the agreement that Lewis would continue working for Habie, who operated her business under Nical. Habie owns 50% of Nical, with Bilton and the Boies family trust holding 25% each.

Disputes arose between Lewis and Nical, leading to litigation that culminated in a 1998 settlement agreement. Key provisions of the agreement included: (1) Nical transferring rights to the name "Scott Lewis Gardening, Trimming, Inc." to Lewis; (2) Nical ceasing to use any business names containing "Scott Lewis" and removing such listings from directories; and (3) both parties agreeing not to contact or solicit each other’s customers. The trial court adopted this settlement in a final judgment on February 19, 1999.

Subsequent violations of the settlement agreement resulted in multiple contempt findings against Nical and Habie for breaching court orders, particularly regarding business name usage and client contact. Lewis filed a contempt motion on September 30, 2004, alleging violations that included a conversation between Bilton and a Town of Palm Beach official. On December 7, 2004, Lewis claimed further violations when Nical's counsel issued a subpoena without court approval. 

Following an evidentiary hearing, Judge Gerber found Nical and Bilton guilty of indirect criminal contempt for these actions. Habie was acquitted regarding the conversation but had no specific findings related to the subpoena issue. The judge characterized the violations as criminal contempt, citing the lack of purgeable sanctions or demonstrated actual loss for compensatory fines. The court disqualified Nical's counsel, imposed two $500 fines on Nical, and sentenced Bilton to 90 days in jail (with 60 days suspended upon payment of a $500 fine and compliance with court orders). 

Both Lewis and Nical appealed these contempt and sentencing orders. On June 2, 2005, Lewis filed another motion for civil contempt against Nical, Habie, and Bilton for further violations involving another client, which the trial court denied on June 15, 2005, citing insufficient claims of financial damages and lack of coercive actions to compel compliance. The Lewis parties appealed this decision as well.

The court's decision to deny the motion 'without prejudice' was deemed a final ruling regarding its lack of authority to impose coercive sanctions. The Nical Parties challenged the indirect criminal contempt ruling against A. Patrick Bilton, arguing that he was not specifically named in the February 1999 order prohibiting Nical from contacting the Lewis parties' clients. However, the court indicated that the order could still be enforced against Bilton, as Florida Rule of Civil Procedure 1.610(c) binds not only the named parties but also their agents and those in active concert with them who have notice of the injunction. Evidence revealed that Bilton, as a shareholder and employee of Nical, was aware of the order. 

The court also rejected claims that the contempt ruling against Bilton should be reversed due to ambiguity regarding contact with Steve White and insufficient evidence of interference. Although White was not listed as a client, the Town of Palm Beach was, and Bilton's communication with White was deemed to constitute interference, as it diverted Lewis's attention to address issues raised by Bilton's comments regarding the cutting of hedges. 

Regarding Nical, the court found that the trial court did not err in holding Nical in indirect criminal contempt due to a subpoena issued to White. The Nical parties argued that there was no evidence of involvement from Nical's officers in the subpoena's issuance, that the subpoena did not violate the July 6th order, and that evidence was insufficient to show an intent to violate the order.

The appellate court reversed the trial court's finding of criminal contempt against Nical stemming from a subpoena and the $500 fine associated with it. The court addressed the trial court's disqualification of the law firm Boies, Schiller, Flexner from representing Nical and its employees. Disqualification arose from several conflicts of interest: Nical and its representatives were not paying the firm, Bilton was married to a firm attorney, Habie served as the firm's CFO, and a trust benefiting David Boies's children owned 25% of Nical. The trial court indicated that the law firm's ability to exercise independent judgment was compromised by these financial ties and referred the firm to the Florida Bar for violating Rule 4-1.7(b). The court deemed disqualification necessary to prevent further noncompliance with prior court orders. 

However, the appellate court found that the Nical parties had not been adequately notified that disqualification was a potential sanction, violating due process principles. Although the special prosecutor's proposed order referenced disqualification shortly before the hearing, this did not constitute sufficient notice. The appellate court cited precedents emphasizing the necessity of notice and opportunity to be heard before disqualifying counsel. Consequently, while the court upheld the trial court's authority to disqualify counsel for misconduct, it reversed the disqualification of the Boies, Schiller, Flexner firm, allowing the trial court to reconsider the issue with proper notice to the involved parties. The appellate court noted that disqualification is an extraordinary remedy but did not find the initial sanction as excessively harsh or an abuse of discretion.

The trial court denied the Lewis Parties' motion to hold the Nical Parties in civil contempt, ruling that the alleged violations, based on past conduct, did not meet the criteria for civil contempt, which requires ongoing noncompliance. The Lewis Parties contended that both coercive and compensatory fines were warranted and argued that civil contempt can involve sanctions aimed at ensuring compliance, including fines conditioned on future adherence to court orders. The excerpt emphasizes that civil contempt is remedial, aimed at benefiting the complainant, and can include sanctions for inaction. The distinction between civil and criminal contempt is based on the purpose of the sanctions, with criminal contempt focusing on punishment for intentional violations, while civil contempt is intended to compel compliance. The excerpt cites various legal precedents affirming that coercive sanctions can be imposed for civil contempt, including instances where fines are suspended based on compliance. Florida courts consistently recognize the coercive nature of civil contempt when the objective is to compel action or inaction by a party.

Andrews v. Walton, 428 So.2d 663, 665 (Fla.1983) references Pugliese and discusses the distinction between valid coercive fines and criminal fines. The Florida Supreme Court clarified that a fixed fine imposed and suspended pending future compliance with court orders qualifies as a purgeable sanction (Parisi, 769 So.2d at 365, quoting Bagwell, 512 U.S. at 829). The trial court was found to have the authority to impose such a coercive civil contempt sanction in this case. The court affirmed the trial court's denial of compensatory sanctions based on the evidence presented. Other issues raised by the Nical and Lewis parties were reviewed, revealing no additional errors beyond those addressed. The appeals court affirmed in part, reversed in part, and remanded for further proceedings. Subsequent motions from the Lewis and Nical parties for clarification, rehearing, or en banc consideration were denied. The court noted that the Supreme Court's approval of a suspended fine as a coercive sanction applies only when the required conduct to purge the fine is clearly defined. The prohibited actions under the prior settlement agreement were deemed sufficiently clear to allow the trial court to formulate a purge provision for the Nical parties.