Armstead v. Allstate Property & Casualty Insurance Company

Filing 165

OPINION AND ORDER. The Court finds Attorney Sandra Finch refused, in bad faith, to comply with lawful orders of the Court, and the Court exercises its inherent power to sanction her. Defendant Allstate Property & Casualty Insurance Company shall, on or before December 16, 2016, submit to the Court the attorney's fees it incurred in connection with its participation in the pretrial conference and the Contempt Hearing. Respondent shall, on or before February 28, 2017, personally author and s ubmit for publication to the Georgia Bar Journal and the Arizona Attorney an article discussing the practical and legal consequences of failing to be candid with the court and failing to comply with court rules and orders. The article shall be no fe wer than 5,000 words in length and Respondent shall, on or before March 15, 2017, submit to the Court a copy of the article, evidence of each Publication's receipt of the article, and that Respondent asked for it to be considered for publication. Signed by Judge William S. Duffey, Jr on 12/6/2016. (bgt)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
ELAINE ARMSTEAD,
Plaintiff,
v.

1:14-cv-586-WSD

ALLSTATE PROPERTY &
CASUALTY INSURANCE
COMPANY,
Defendant,
SANDRA FINCH,
Respondent.

OPINION AND ORDER
I.

BACKGROUND
On June 28, 2016, Defendant Allstate Property & Casualty Insurance

(“Defendant”), as part of its response to a motion in limine filed by Plaintiff Elaine
Armstead (“Plaintiff”), provided an affidavit. In the affidavit, Defendant’s witness
Mark Gould stated his belief that Sandra Finch, counsel for Plaintiff and the
Respondent in this proceeding (“Respondent”), “entered areas of [his] office
building without permission and took many photographs without permission . . . .”
(Gould Aff. [115.1] ¶ 13). Mr. Gould’s affidavit stated further that, during Mr.
Gould’s deposition, Respondent handed him a document titled “Steamatic Guide to

Restoration Services,” which had been photographed page-by-page. (Id. ¶ 5). The
photographs revealed Respondent’s letterhead in the background. (Id.). Mr. Gould
testified that it “became apparent to [him] Plaintiff’s counsel had obtained the
document from [his] office without [his] permission.” (Id. ¶ 6). After he
confronted Respondent about trespassing in his office, Respondent stated, “I
caution you on defaming me, because if you defame me, I can promise you it will
not be good.” (Id. ¶ 9). Mr. Gould considered this a threat. (Id.). At the
deposition, Respondent stated that, in order for trespassing to occur, “you have to
have told somebody they can’t come on your property . . . .” (Id. ¶ 8).
After the deposition, Mr. Gould went to his office and confirmed the
location of the Steamatic Guide, which was on a bookshelf in his project
manager’s office. (Id. ¶ 11). Mr. Gould’s office manager, Leonor Alarez, later
told him:
On May 20, 2016, she heard some noise in the office and asked if
anyone was there. There was no response. So, Ms. Alarez continued
working. Approximately 30 minutes later, Ms. Alarez was walking to
the copier and came upon Plaintiff’s counsel sitting in the reception
area. Ms. Alarez asked Plaintiff’s counsel how long she had been
there, but she never received an answer. At which point, Plaintiff’s
counsel hand delivered the subpoena.

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(Id. ¶ 12). It is Mr. Gould’s opinion and belief “that Plaintiff’s counsel entered
areas of [his] office building without permission and took many photographs
without permission . . . .” (Id. ¶ 13).
In connection with her reply in support of her motion in limine, Respondent
attached a sworn affidavit [116.1] denying Mr. Gould’s claim that she had
trespassed on his property. She stated the doors to Mr. Gould’s place of business
were not locked, and “there were no signs of ‘no trespass.’” ([116.1] ¶ 4).
Respondent stated she obtained the photographs of Mr. Gould’s certifications
“[t]hrough attorney work product and privileged investigation,” and that the
“framed certifications were obviously being displayed for potential customers to
view in an effort to convince customers of the company’s competency for hire.”
(Id. ¶ 6). She stated that she has “litigated many cases involving franchises with
different owners and ha[s] numerous sources for” the Steamatic Guide, including
“data banks, other lawyers, other Steamatic franchisees, etc.” (Id. ¶ 9). She did
not address whether the Steamatic Guide pictures she used at the deposition were
from the guide in Mr. Gould’s office.
The Court found Respondent’s explanations insufficient and evasive. In
light of Mr. Gould’s affidavit, and because Respondent sought to admit into
evidence at trial the Steamatic Guide and a photograph depicting certifications that

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were displayed in a hallway away from the public reception areas of Mr. Gould’s
office, on July 1, 2016, the Court entered an Order [121] (“July 1st Order”)
requiring Respondent to provide, on or before July 5, 2016, an affidavit stating, in
detail, how and under what circumstances she obtained the photographs of
Mr. Gould’s office and the Steamatic Guide so the Court could consider if these
proposed exhibits would be allowed into evidence at trial.
On July 5, 2016, Respondent filed her Objections to Court Order to Produce
an Affidavit [125] (“Objections”). Respondent objected to “lack of notice, due
process and relevance.” ([125] at 1). She stated that her representation of her
client “has been within the boundaries of the law and ethics as she has zealously
advocated for her client in the face of Defense Counsel’s personal vendetta against
her.” (Id. at 2). After considering Respondent’s Objections, on July 6, 2016, the
Court entered an Order [127] (“July 6th Order”) overruling them and requiring her
to file the affidavit on or before 5:00 p.m. EST on July 6, 2016. Respondent failed
to file the required affidavit by the time ordered, and otherwise failed to respond to
the July 6th Order, or explain why she could not or did not comply.
Beginning at 9:31 a.m. on July 7, 2016, the Court conducted the pretrial
conference. During the conference, the Court reiterated to Respondent that she
was under a Court order to provide the required affidavit. Respondent stated she

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objected to the Court’s orders, and that she did not “understand what the complaint
is or what it is that I’m responding to.” (Pretrial Conference Tr. [138] 4:23-24).
Respondent questioned the lawfulness of the Court’s orders. (See id. at 7:17-20).
The Court explained to Respondent that the information required in the affidavit
was to determine its impact on evidence that Respondent stated she intended to
offer at trial. (Id. at 5:14-6:4). The Court offered to allow Respondent additional
time to file the affidavit, and Respondent stated “I would like some additional time
to respond.” (Id. at 4:20-23). The Court stated “[i]f what you want is a little more
time today to provide the information . . . then I will give you more time . . . .” (Id.
at 6:24-7:2). Respondent stated “I will file a response.” (Id. at 7:7). The Court
gave her until the end of the day to do so.
By the end of the day, Respondent had not filed the required affidavit or
explained why she would not or could not comply. At 5:07 p.m. on July 7, 2016,
the Court entered an order requiring Respondent to show cause [136] (“Show
Cause Order”) why the Court should not hold her in contempt of the Court’s July
1st Order and July 6th Order. Respondent still did not file the required affidavit or
explain why she would not or could not comply.
On July 11, 2016, after the first day of the trial in this matter, the Court held
a hearing (“Contempt Hearing”) on the Show Cause Order. Respondent and

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Defense counsel were present at the hearing. At the end of the hearing,
Respondent suggested, for the first time, that she should not be required to file the
required affidavit based on her Fifth Amendment right against self-incrimination.
(Contempt Hr’g Tr. [147] 13:21-14:2). Respondent requested, and the Court
agreed, that the hearing be continued so that she could be represented by counsel.
(See id. at 17:22-18:13). On August 17, 2016, the Court entered an order
clarifying that “it has not found [Respondent] in contempt, because [Respondent]
advised the Court she needed more time to prepare and wanted to be represented at
the hearing.” ([152]). A hearing was scheduled for August 23, 2016.
On August 22, 2016, the Court held a pre-hearing status conference with
Respondent’s attorney. At the hearing, Respondent’s attorney indicated his
position, considering that Respondent had settled the case she was litigating and in
which she intended to introduce the Gould materials, that contempt proceedings
would be criminal in nature because there was no need now to compel
Respondent’s compliance with the Court’s orders. He argued further that the
requirements of Fed. R. Crim. P. 42 would apply to any further contempt hearing.
The same day, the Court issued an order [155] requiring Respondent to file, on or
before September 14, 2016, her legal authority and argument regarding her opinion

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as to the nature of the hearing and the procedural requirements to conduct it. The
Court continued the contempt hearing scheduled for August 23, 2016.
On September 19, 2016, Respondent filed the memorandum the Court
ordered her to submit. ([158]). Respondent argued that, the principal civil case
having been dismissed after the settlement, there is no possibility of civil contempt,
and, where the sole purpose of a sanction is to vindicate the Court’s authority,
criminal contempt proceedings are required. Respondent also argued contempt
sanctions could not be imposed for the valid exercise of a Fifth Amendment
privilege.
On October 26, 2016, the Court issued an order [159] (“October 26th
Order”) in response to the arguments in Respondent’s September 19, 2016,
submission. The Court determined that criminal contempt proceedings were not
appropriate and agreed not to conduct them. The Court advised, however, that it
would conduct a hearing to determine whether sanctions were appropriate to
address Respondent’s professional conduct pursuant to the Court’s inherent power
to sanction attorneys. (October 26th Order at 9-10). The Court acknowledged that
a contempt sanction cannot be imposed for the valid exercise of the Fifth
Amendment, but that the misconduct at issue at this stage of the proceedings is
“Respondent’s pattern of disruptive behavior and her flagrant disregard for the

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Court’s orders without adequate justification or explanation.” (Id. at 10-11). The
Court set a hearing for November 22, 2016, to determine whether the Court should
exercise its inherent authority to sanction attorneys and, if so, whether sanctions
are appropriate. The hearing was rescheduled for November 29, 2016.
On November 29, 2016, the Court held a hearing (“Inherent Power
Hearing”) to determine whether the Court should exercise its inherent power to
sanction Respondent. At the hearing, Respondent argued that the Court’s
October 26th Order is “not specific enough” to put Respondent on notice “as to
what it is we have to defend against,” and that Respondent “do[es] not know what
orders . . . [she] disregarded without adequate justification or explanation.”
(November 29, 2016, Hr’g Tr. 4:5-15). Respondent argued that her request, during
the July 7, 2016, pretrial conference, for additional time to respond to the Court’s
orders was an adequate response to the Court’s orders. (Id. at 7:22-8:17).
Respondent also argued that, should the Court find monetary sanctions appropriate,
the Court should take Respondent’s financial position into account. (Id. at
10:11-14). Respondent submitted an exhibit reflecting that her 2016 year-to-date
income is $27,500.00. (See id. at 10:21-11:21). She stated she is an employee of
her husband’s firm and that is the only salary she received. (See id. at 11:2-12).
The Court requested Respondent’s credit card statements for the last six months

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“to see what money [Respondent] has been spending to see if that tracks against”
Respondent’s claimed income of $27,000. (Id. at 11:17-21). Respondent stated
her husband pays a large portion of her credit card bills, (id. at 12:6-11), and she
declined to provide her credit card statements, stating they were irrelevant, (id. at
13:18-19). Finally, Respondent noted that, on September 29, 2016, the United
States Supreme Court granted a writ of certiorari in Goodyear Tire v. Haeger to
determine the contours of a court’s inherent powers, arguing that the Court should
not proceed until the Goodyear case was decided. (Id. at 17:6-18:4).
II.

DISCUSSION
A.

Legal Standard

Courts have the inherent power to sanction attorneys. See, e.g. In re
Charbono, 790 F.3d 80, 85 (1st Cir. 2015); In re Sunshine Jr. Stores, Inc., 456 F.3d
1291, 1304 (11th Cir. 2006) (“Federal courts have the inherent power to impose
sanctions on parties, lawyers, or both.”); Mark Indus., Ltd v. Sea Captain’s Choice,
Inc., 50 F.3d 730, 733 (9th Cir. 1995) (non-contempt inherent-power sanction can
be employed to vindicate a court’s authority); United States v. Shaffer Equip. Co.,
11 F.3d 450, 457 (4th Cir. 1993) (inherent power to impose sanctions “is organic,
without need of a statute or rule for its definition, and it is necessary to the exercise
of all other powers”); Harlan v. Lewis, 982 F.2d 1255, 1259 (8th Cir. 1993)

9

(approving non-contempt monetary sanction as within district court’s inherent
powers); Eash v. Riggins Trucking Inc., 757 F.2d 557, 565-66 (3d Cir. 1985) (en
banc) (noting that a court’s “broad power to discipline attorneys as officers of the
court for misconduct not properly categorized as contempt is substantially different
from the contempt power”). The “inherent power of a court can be invoked even if
procedural rules exist which sanction the same conduct.” Chambers v. NASCO,
Inc., 501 U.S. 32, 46 (1991).
Exercise of a court’s inherent power is appropriate where a client or her
attorney has “acted in bad faith, vexatiously, wantonly, or for oppressive reasons.”
Byrne v. Nezhat, 261 F.3d 1075, 1106 (11th Cir. 2001), abrogated on other
grounds by Douglas Asphalt Co. v. QORE, Inc., 657 F.3d 1146 (11th Cir. 2011)
(quoting Chambers, 501 U.S. at 46). “The key to unlocking a court’s inherent
power is a finding of bad faith.” Barnes v. Dalton, 158 F.3d 1212, 1214 (11th Cir.
1998). “A court should be cautious in exerting its inherent power and ‘must
comply with the mandates of due process, both in determining that the requisite
bad faith exists and in assessing fees.’” Byrne, 261 F.3d at 1106 (quoting
Chambers, 501 U.S. at 50). “Because the court’s inherent power is so potent, it
should be exercised ‘with restraint and discretion.’” Id. (quoting Chambers, 501
U.S. at 50).

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“Once unlocked, the [inherent] power carries with it the authority to assess
attorney’s fees as a sanction for bad faith conduct.” Sciarretta v. Lincoln Nat. Life
Ins. Co., 778 F.3d 1205, 1212 (11th Cir. 2015) (citing Chambers, 501 U.S. at
45-46); see also Charbono, 790 F.3d at 96 (exercising its inherent power, a “court[]
may levy sanctions (including punitive sanctions) for such varied purposes as
disciplining attorneys, remedying fraud on the court, and preventing the disruption
of ongoing proceedings”); Eash, 757 F.2d at 564 (“myriad violations of court rules,
deadlines, or orders” may be grounds to impose sanctions based on a court’s
inherent authority, grounded in “the control necessarily vested in courts to manage
their own affairs so as to achieve the orderly and expeditious disposition of cases.”
(quoting Link v. Wabash RR Co., 370 U.S. 626, 630-31 (1962))).
B.

Analysis
1.

Due Process

Respondent first argues she has not been afforded due process because the
Court’s October 26th Order is “not specific enough” to put Respondent on notice
“as to what it is we have to defend against,” and that Respondent “do[es] not know
what orders . . . [she] disregarded without adequate justification or explanation.”
(November 29, 2016, Hr’g Tr. 4:5-15). This argument is disingenuous. Over the
course of multiple hearings and orders, including the Court’s October 26th Order,

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the Court made clear to Respondent that her failure to comply with the Court’s
July 1st and July 6th Orders were central to the issue here. The Court specified in
its October 26th Order that “Respondent ultimately—after multiple Court orders
and conferences—asserted her Fifth Amendment right against selfincrimination . . . .” (October 26th Order at 11). The Court then stated that it
“does not—nor could it—now require Respondent to forego her asserted Fifth
Amendment rights by requiring her to comply with the Court’s July 1st and July
6th Orders. Rather, the misconduct at issue at this stage of the proceedings is
Respondent’s pattern of disruptive behavior and her flagrant disregard for the
Court’s orders without adequate justification or explanation.” (Id.). The October
26th Order is clear that Respondent’s repeated and flagrant disregard for the
Court’s July 1st and July 6th Orders, as detailed above, is the conduct at issue here.
The Court also notes that Respondent has had multiple occasions—including at the
pretrial conference, the Contempt Hearing, the August 22, 2016, pre-hearing status
conference, and the Inherent Power hearing—to clarify the basis for the Court’s
actions and to present evidence and argument that her conduct was not
contemptuous, that she did not act in bad faith, or that sanctions otherwise are not
warranted. Respondent has been afforded more than the process she is due.

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2.

Bad Faith

The Court finds Respondent acted in bad faith when she repeatedly and
flagrantly disregarded the Court’s orders. The Court’s July 1st Order required
Respondent to provide, on or before July 5, 2016, an affidavit providing specific
information. Rather than providing the required affidavit or asserting her Fifth
Amendment right against self-incrimination, on July 5, 2016, Respondent filed her
Objections, arguing a “lack of notice, due process and relevance.” ([125] at 1).1
The following day, the Court overruled Respondent’s Objections and required
Respondent to file the affidavit on or before 5:00 p.m. EST on July 6, 2016.
Respondent again failed to file the required affidavit or to explain why she could
not or did not comply. On the morning of July 7, 2016, during the pretrial
conference, the Court again reiterated to Respondent that she was under a Court
order to provide the required affidavit. Respondent questioned the lawfulness of
the Court’s orders. The Court offered “a little more time today to provide” the
affidavit, and Respondent stated “I will file a response.” ([138] 6:24-7:7). Despite
this representation, Respondent again failed to file the affidavit or to explain why

1

In view of the fact that Respondent had time to draft and file her four-page
Objections by July 5, 2016, Respondent’s objection based on a “lack of notice” is
not credible.

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she would not or could not do so.2 The evening of July 7, 2016, the Court issued
its Show Cause Order. Respondent did not provide an adequate justification for
her failure to file the required affidavit until July 11, 2016, ten days after the Court
first required it.
In short, Respondent, fully aware she was under Court orders to provide the
affidavit, chose instead (1) to challenge the Court’s authority to issue the orders,
and (2) to ignore the orders. Under these circumstances, the Court finds
Respondent acted in bad faith when she failed to comply with the Court’s July 1st
and July 6th Orders without adequate justification or explanation.
3.

Sanctions

Having found Respondent acted in bad faith, the Court may exercise its
inherent power to sanction Respondent. See Barnes, 158 F.3d at 1214 (“The key to
unlocking a court’s inherent power is a finding of bad faith.”). With respect to the
sanctions available, Respondent notes that, on September 29, 2016, the United
2

Respondent argues that her request, during the July 7, 2016, pretrial
conference, for additional time to respond to the Court’s orders, was an adequate
response to the Court’s orders. (November 29, 2016, Hr’g Tr. 7:22-8:17). First,
the context of the hearing shows that the Court allowed Respondent until the end
of the day on July 7, 2016, to file the affidavit or otherwise respond to the Court’s
orders, which Respondent failed to do. Second, Respondent’s argument overlooks
her failure to respond to the Court’s July 6th Order requiring her to file the
affidavit by 5:00 p.m. EST on July 6, 2016.

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States Supreme Court granted a writ of certiorari in Goodyear Tire v. Haeger, No.
15-1406, 137 S. Ct. 30 (2016). The question the Supreme Court will decide is
whether a federal court is required to tailor compensatory civil sanctions imposed
under inherent powers to harm directly caused by sanctionable misconduct when
the court does not afford sanctioned parties the protections of criminal due process.
See id.; Petition for Writ of Certiorari, Haeger, 2016 WL 2937089 (2016)
(No. 15-1406). Because the Court is exercising its inherent power rather than
proceeding under the criminal contempt rules, the Supreme Court’s decision in
Haeger may affect the scope of sanctions available here. Without weighing in on
the merits of the issue before the Supreme Court in Haeger, the Court here chooses
to tailor the sanctions it imposes to the harm directly caused by Respondent’s
sanctionable misconduct.
Defendant participated in the July 7, 2016, pretrial conference, nearly all of
which was devoted to discussing Respondent’s failure to comply with the Court’s
July 1st and July 6th Orders. Defendant also participated in the July 11, 2016,
Contempt Hearing. Had Respondent not engaged in her sanctionable
misconduct—that is, had she provided an adequate explanation or justification for
her failure to comply with the Court’s July 1st and July 6th Orders—Defendant
would not have incurred attorney’s fees participating in, and preparing for, these

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hearings. Respondent is required to pay Defendant these fees. The Court finds the
fees will not be so great as to unduly burden Respondent. Defendant shall, on or
before December 16, 2016, submit to the Court the attorney’s fees it incurred in
connection with its participation in the pretrial conference and the Contempt
Hearing. The Court will review the fees detailed and evaluate them as an
appropriate sanction for Respondent’s bad faith conduct.
The Court imposes a further sanction tailored toward Respondent’s bad faith
conduct. A lawyer has legal, ethical, and professional responsibilities to a court.
Respondent failed to meet these standards in this case. To encourage Plaintiff to
engage in proper litigation conduct in the future, and to assist other lawyers to
understand their legal, ethical, and professional obligations to the court, the Court
also requires Respondent to author, personally, an article to be submitted for
publication to the Georgia Bar Journal and the Arizona Attorney (the
“Publications”). The article is required to discuss the practical and legal
consequences of failing to be candid with the court and failing to comply with
court rules and orders.

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III.

CONCLUSION
For the foregoing reasons,
IT IS HEREBY ORDERED that the Court finds Attorney Sandra Finch

refused, in bad faith, to comply with lawful orders of the Court, and the Court
exercises its inherent power to sanction her.
IT IS FURTHER ORDERED that Defendant Allstate Property & Casualty
Insurance Company shall, on or before December 16, 2016, submit to the Court the
attorney’s fees it incurred in connection with its participation in the pretrial
conference and the Contempt Hearing.
IT IS FURTHER ORDERED that Respondent shall, on or before
February 28, 2017, personally author and submit for publication to the Georgia Bar
Journal and the Arizona Attorney an article discussing the practical and legal
consequences of failing to be candid with the court and failing to comply with
court rules and orders. The article shall be no fewer than 5,000 words in length
and Respondent shall, on or before March 15, 2017, submit to the Court a copy of
the article, evidence of each Publication’s receipt of the article, and that
Respondent asked for it to be considered for publication.

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SO ORDERED this 6th day of December, 2016.

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