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Gum v. Dudley
Citations: 505 S.E.2d 391; 202 W. Va. 477Docket: 23845
Court: West Virginia Supreme Court; December 8, 1997; West Virginia; State Supreme Court
Sylvia Gum, as executrix for the estate of Charles Lee Gum, appealed a Circuit Court order that denied her motion to set aside a jury verdict and grant a new trial. This motion was based on the failure of Tamera Suzette Baker and Lillian B. Ayr, defendants in the wrongful death action, to disclose a settlement agreement between them. The key issues for the Supreme Court of Appeals of West Virginia included whether this nondisclosure warranted setting aside the verdict and if it constituted a breach of the attorneys' duty of candor to the court. The facts of the case reveal that Charles Lee Gum died from a heart attack after being involved in a vehicle accident on October 9, 1992. Mrs. Gum initiated a wrongful death lawsuit against four individuals: Roger Dudley, the driver; Robert Dudley, the car's owner; and Tamera Suzette Baker and Lillian B. Ayr, the driver and owner of a tractor trailer, respectively. Ayr also filed cross-claims against Baker and the Dudleys, seeking indemnification and contribution. Initially, Baker and Ayr were represented jointly under a Commerce Insurance policy. However, recognizing a conflict due to Ayr's cross-claim against Baker, an agreed order was prepared where Baker confessed judgment on Ayr's cross-claim, stating that Baker would indemnify Ayr for any amounts awarded against her in the wrongful death action. The Supreme Court affirmed in part, reversed in part, and remanded the case, indicating that the failure to disclose the settlement agreement raised significant legal questions about the integrity of the proceedings. Attorney Tammy Mitchell Bittorf submitted an agreed order to Judge Wilkes during a pretrial hearing without notifying or copying opposing counsel, attorney Skinner. The trial commenced on August 30, 1995, with the Dudleys represented by Thomas G. Steele and Baker and Ayr represented by Christopher D. Janelle. On the second day, a motion was filed by Mrs. Gum's attorney to compel disclosure of any settlement agreements among the defendants, to which Steele stated no such agreement existed, while Janelle remained silent. Believing there was no settlement, the circuit court proceeded with the trial, leading to a jury verdict for the defendants on August 31, 1995. Two weeks post-trial, Mrs. Gum's attorney discovered a settlement agreement between Baker and Ayr from a copy of the agreed order received from the circuit clerk. She filed motions for post-trial discovery and to set aside the verdict due to the failure to disclose the settlement. At a March 11, 1996 hearing, it was revealed that no formal request had been made for the agreed order's entry, and Janelle's silence implied no settlement existed. The circuit court found no prejudice to Mrs. Gum's case and denied her motions. An appeal followed, questioning whether a new trial should have been granted due to Janelle's lack of disclosure, which could indicate a violation of the duty of candor. The standard of review for denying a new trial allows the trial judge to assess evidence credibility and weight, with appellate review limited to cases of abuse of discretion. The court's findings of fact are reviewed for clear error, while legal conclusions receive de novo review. Mrs. Gum argues that the court's decision in **State ex rel. Vapor Corp. v. Narick** mandates the disclosure of the settlement agreement between defendants Baker and Ayr. The court previously established the necessity of disclosing 'Mary Carter' type agreements to both the court and opposing counsel to ensure fair trial conduct, as such agreements can affect party loyalties and trial strategies. However, the settlement in question does not fit the definition of a Mary Carter agreement, which involves a plaintiff and at least one defendant, rather than a cross-claim between defendants. The court references **State Farm Fire and Casualty Company v. Fullerton**, which confirms that cross-claim settlements do not constitute a Mary Carter situation. Although there is no existing case law specifically addressing the failure to disclose cross-claim settlements, the court suggests extending the general disclosure requirement established in **Vapor Corp.** to these agreements. This extension is justified because the principles of disclosure apply broadly to all settlement agreements, as they can similarly impact the dynamics and fairness of the trial process. Settlement agreements between defendants in cross-claims must be promptly disclosed to the court and all parties involved in the litigation. In this case, Mrs. Gum was not informed of the settlement between Baker and Ayr until two weeks after the agreed order was signed, which was contrary to the requirement for immediate disclosure. Additionally, Mr. Janelle failed to disclose this agreement during the court's inquiry about settlements. The circuit court determined that this failure did not prejudice Mrs. Gum, reasoning that since Ayr was named in the complaint as the truck owner, their positions were identical, and thus the trial's outcome would likely remain unchanged. However, Mrs. Gum argued that the lack of disclosure affected her trial strategy, as she chose not to call Ayr as a witness or question Baker about the cross-claim. She believed that knowledge of the settlement would have led her to explore the relationship between Ayr and Baker further and argue for the jury to be aware of the settlement. The court acknowledged that while Mrs. Gum's trial tactics might have differed with timely knowledge of the settlement, it was speculative whether this would have changed the verdict. The trial court, having observed the trial proceedings, concluded that the verdict would have been the same regardless of the disclosure. Ethical considerations arose from Mr. Janelle's silence regarding the settlement, particularly regarding the general duty of candor that attorneys owe to the court. This duty is well-established in legal ethics, emphasizing that attorneys must maintain honesty and transparency in their dealings with the tribunal. Historical precedents highlight that lawyers, as officers of the court, are bound to avoid deceiving the court, underscoring the importance of candor in legal practice. A lawyer's primary responsibility to a client must align with their broader duty to uphold the integrity of the legal system. When the court's integrity is at risk, lawyers are obligated to prioritize the administration of justice over their client's immediate interests. This principle establishes a general duty of candor, recognized in West Virginia, which mandates that attorneys inform the court about any developments that could influence the outcome of litigation. Key elements of this duty include: 1. **Requirements of the General Duty of Candor**: Attorneys must continually disclose relevant information and cannot engage in misleading conduct toward the court or opposing counsel. Concealing material facts is as misleading as making false statements. 2. **Determining Violations**: A violation occurs when an attorney fails to meet the duty of candor, potentially undermining the judicial process. 3. **Sanctions for Violations**: The document suggests that a lack of candor can lead to severe repercussions, as it jeopardizes the public's trust in the legal system, which thrives on the pursuit of truth through an adversarial process. Overall, lawyers, as officers of the court, play a critical role in maintaining the integrity of legal proceedings, and any compromise of this duty can have serious implications for the justice system. Lawyers have a paramount duty of confidentiality to their clients and must advocate for their clients' positions honestly. This obligation is superseded by the need to prevent justice from being compromised by deceitful practices. The case examines Mr. Janelle's adherence to his duty of candor to the court, despite the trial court not addressing this issue directly in its post-trial motions. The court asserts its inherent authority to evaluate whether Mr. Janelle's conduct breached this duty, referencing the case Spence-Parker v. Maryland Ins. Group. In Spence-Parker, the court dealt with a consent judgment that was challenged due to misrepresentation by the plaintiff and insured defendant regarding the involvement of the insurer in settlement negotiations. The original court ruled that this misrepresentation did not constitute actual fraud but rather constructive fraud, which can occur without intent to mislead. To establish constructive fraud, five elements must be proven: a material false representation, belief in its truth by the hearer, intent for it to be acted upon, actual action taken based on it, and resultant damage. The court concluded that the attorneys' failure to disclose the non-arms-length nature of the settlement constituted a misrepresentation. All five elements of constructive fraud were satisfied, leading to the conclusion that the consent judgment should be set aside. This case serves as a framework for assessing violations of the duty of candor through silence. Constructive fraud serves as the framework for evaluating whether an attorney's silence constitutes a violation of the duty of candor. The determination requires a preponderance of evidence to demonstrate that: 1) the silence resulted in a material misrepresentation; 2) the court accepted this misrepresentation as true; 3) the misrepresentation was intended for action; 4) the court acted on it; and 5) damages ensued. In the present case, Mr. Janelle’s silence during a court inquiry about any settlement agreements led to a material misrepresentation, specifically regarding the existence of a settlement between defendants Baker and Ayr, which he knew but did not disclose. The court believed this misrepresentation, proceeded with the trial without further inquiry, and ultimately, this conduct harmed the judicial process. Consequently, Mr. Janelle has been found to have violated his duty of candor. The document emphasizes that any duty must be accompanied by a remedy or sanction for violations to retain significance. Mrs. Gum is seeking a new trial due to Mr. Janelle’s conduct, prompting the court to consider appropriate sanctions. Precedents, such as In re Dinova and Shaffer I, illustrate that breaches of the duty of candor by court officers, resulting in misleading actions or omissions, have led to severe sanctions, including vacating dismissals or case dismissals, thereby reinforcing the necessity for accountability in upholding the duty of candor. The district court dismissed the government's case against the defendants as the most severe sanction for violations of the duty of candor by counsel, asserting that dismissal with prejudice was the only appropriate response. The court emphasized the importance of upholding this duty and deterring future misconduct. It referenced the Shaffer I decision, which outlined that a court can impose various sanctions, including dismissal, but must do so with caution, considering factors such as the culpability of the wrongdoer, the client's blameworthiness, prejudice to the judicial process, harm to victims, availability of alternative sanctions, and public interest. The Fourth Circuit criticized the severity of the dismissal, reversing part of the decision and remanding for a lesser sanction, potentially including attorney's fees. The excerpt underscores that sanctions for violations of candor must be case-specific, acknowledging that such violations can occur at any litigation stage. Possible sanctions include disclosing undisclosed information, granting continuances, holding counsel in contempt, or dismissing the case. Sanctions are subject to appellate review for abuse of discretion. The circuit court is tasked with determining an appropriate sanction for Mr. Janelle’s violation while considering the need for public respect for the judicial system. Finally, the excerpt addresses Mr. Janelle's conduct in relation to the West Virginia Rules of Professional Conduct, which aim to prevent deception by attorneys. In State v. Layton, the Court emphasized the importance of adhering to the Code of Professional Conduct to ensure lawful attorney participation in legal matters that uphold justice. The Rules recognize that true testimony aids in the fair administration of justice, while false evidence hinders it. Mr. Janelle's silence regarding settlement agreements raised concerns about potential violations of the Rules of Professional Conduct, as argued by Mrs. Gum, who sought a new trial based on these violations. However, precedent indicates that typical remedies for such violations involve disciplinary actions against attorneys rather than granting new trials. The Court noted that the RPC's Preamble warns against using the Rules as tactical tools in litigation. Consequently, if a case suggests conduct inconsistent with the RPC, the Court will refer the matter to the Office of Disciplinary Counsel (ODC) for review. The Court affirmed the circuit court's decision not to grant a new trial since the failure to disclose the settlement did not affect the case's outcome. However, it reversed the part of the order that overlooked Mr. Janelle's lack of candor and remanded for appropriate sanctions against him. The conclusion emphasizes both the affirmation and reversal of the circuit court's decisions and the need for further action regarding Mr. Janelle's conduct. Additional notes highlight uncertainties about how the agreed order was presented to the trial court and compliance with procedural requirements for serving all parties. Rule 5(a) specifies that all required orders, pleadings, discovery documents, written motions (excluding ex parte motions), and various notices must be served on all parties involved. However, no service is required for parties in default, except for pleadings asserting new claims, which must be served according to Rule 4. Mrs. Gum claims a violation of the written motion requirement in Rule 7(b)(1); however, this rule exempts motions made during hearings or trials, and the record shows the agreed order was presented during a pretrial hearing, thus negating the need for a written motion. A "Mary Carter" agreement involves one or more defendants secretly collaborating with the plaintiff in multi-party litigation, which reduces their own liability by increasing that of non-agreeing defendants. The term originates from Booth v. Mary Carter Paint Co. and has been analyzed in several West Virginia cases. Disclosure of such agreements to the jury is at the trial court's discretion and is not mandatory unless it prejudices nonsettling defendants. During oral arguments, Mr. Janelle claimed he did not consider it necessary to disclose the agreement between defendants Baker and Ayr, attributing his failure to disclose to an honest mistake. Additionally, evidence presented showed a dispute among experts about the cause of Mr. Gum's death, with the jury concluding that the accident did not cause it. The jury's lack of knowledge regarding the settlement did not affect their determination of the cause of death. The court's record lacks documentation on the number of jury strikes granted to defendants Baker and Ayr, and had this information been available, it might have influenced the outcome. Mrs. Gum's request for a new trial based on the denial of her post-trial discovery motion was also rejected. This discovery was aimed at revealing the settlement's terms, which indicated that Baker confessed judgment on Ayr's cross-claim and agreed to indemnify Ayr. The court concluded that the failure to disclose the settlement did not prejudice the trial's outcome, and thus, the trial court did not abuse its discretion in denying the discovery motion. The court has the authority to examine attorneys' conduct regarding their duty of candor, independent of any professional conduct rules violations. Numerous precedents affirm that lawyers must exhibit candor to the tribunal, accurately present the record, and maintain good faith in their dealings with the judiciary. Deceptive practices by attorneys towards opposing counsel can lead to disciplinary actions. Counsel has a duty to engage fairly and honestly with opposing counsel and the court, which includes avoiding misleading statements and omissions. Various cases establish that lawyers must disclose relevant information and not engage in selective omissions that could mislead the court. The duty of candor extends beyond avoiding false evidence to ensuring full transparency in dealings with judicial authorities. Misleading a judge is considered a serious offense, and attorneys must not advocate in ways that could deceive the court. If an attorney's misconduct undermines the fairness of a trial, it may justify a new trial, although in this particular case, the jury's findings indicated that the alleged misconduct did not affect the trial's outcome. Moreover, attorneys are required to report violations of the Rules of Professional Conduct (RPC) that raise questions about a colleague's integrity, and judges must take appropriate actions upon receiving credible information about such violations.