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Breezevale Limited v. Dickinson

August 4, 2005


Appeals from the Superior Court of the District of Columbia (CA-10818-94). (Hon. Steffen W. Graae, Trial Judge).

The opinion of the court was delivered by: Steadman, Senior Judge

Argued December 8, 2004

Before SCHWELB and REID, Associate Judges, and STEADMAN, Senior Judge.

This case comes to us for the second time on an appeal from a trial court order imposing upon appellant Breezevale a total of $5,061,353 in attorneys' fees and punitive damages, in addition to dismissal of its cause of action for legal malpractice, as a consequence of the trial court's finding by clear and convincing evidence that Breezevale knowingly brought the litigation in principal reliance upon documents that it knew to be forgeries. We sustain the dismissal and the award of attorneys' fees. Both of these sanctions in the circumstances here bear punitive elements, a factor that the trial court did not sufficiently take into account. Accordingly, we vacate the separate award of punitive damages as excessive. In all other respects, we affirm.

I. Litigation History

The circumstances behind the litigation in this case and the trial court's imposition of sanctions have been set forth at length in the prior appeal to this court and need only be briefly outlined here. See Breezevale Ltd. v. Dickinson, 759 A.2d 627 (D.C. 2000) ("Breezevale I"). The present dispute began in October 1989, when Breezevale hired Gibson, Dunn & Crutcher LLP ("GDC") to represent the company in a contractual dispute with Bridgestone-Firestone, Inc. ("Firestone"). During trial preparation, it came to light that Rebecca Paul, a Breezevale employee, intended to testify during her deposition that she had personally forged documents, namely spreadsheets and offer letters, which related to Breezevale's claims against Firestone. Moreover, Ms. Paul maintained that these forgeries were performed at the direction of and with the participation of top Breezevale executives.

GDC's response to Ms. Paul's revelation is what formed the basis for Breezevale's malpractice action. Rather than postpone the deposition, GDC elected to go forward as planned; GDC did not initially notify Breezevale of Ms. Paul's anticipated testimony. When GDC did eventually alert a Breezevale executive to the impending testimony prior to the afternoon session of Ms. Paul's deposition, the executive immediately asserted that Ms. Paul was lying and asked GDC to delay the testimony until the allegations could be further investigated. GDC refused and Ms. Paul proceeded to give her damaging testimony. Firestone's attorneys immediately began drafting a motion to dismiss all of Breezevale's claims with prejudice as a sanction for fraud and misconduct. Upon threat of imminent filing of the motion, and at GDC's behest, Breezevale settled with Firestone for $100,000.*fn1

In October 1994, Breezevale brought a claim for legal malpractice against GDC in the District of Columbia Superior Court. In its complaint, Breezevale alleged that "[h]ad [GDC] conducted a competent and thorough investigation of [Ms. Paul's] allegations, they would have discovered that such allegations of wrongful conduct by Breezevale or its principal executives were untrue." According to Breezevale, by not conducting an adequate investigation of the employee's allegedly false claims, GDC violated the legal standard of care and irreparably damaged Breezevale's suit against Firestone. Thus, in its malpractice suit against GDC, Breezevale continued to assert that the allegedly forged documents were in fact genuine, and litigated its claim in Superior Court accordingly.

A seven-week trial was held during which the parties litigated both the legal malpractice claim and the underlying "case within a case" in order to determine what a "hypothetical jury" would have awarded Breezevale had its case against Firestone actually gone to trial. Utilizing a special verdict form, the jury found in favor of Breezevale on the legal malpractice claim. Specifically, the jury found that GDC had breached the standard of care in its representation of Breezevale and thereby proximately caused damage to Breezevale's case against Firestone. However, the jury further found that forgeries did in fact occur with the participation of "one or more Breezevale executives." Nevertheless, the jury also found that such forgeries did not "play[] a substantial part in damaging" Breezevale's lawsuit against Firestone and that Breezevale still would have won three of its claims for a total of $3,430,000.

Notwithstanding the jury's verdict, the trial court entered judgment as a matter of law in favor of GDC. In the alternative, the court granted GDC's motion for a new trial. In addition, the trial court granted GDC's equitable counterclaim for "bad faith litigation." Consistent with the jury's factual finding by a preponderance of the evidence, the court found by clear and convincing evidence that forgery had occurred with the participation of one or more Breezevale executives. Accordingly, the court concluded that Breezevale acted in "bad faith" by continuing to maintain before the court that the documents were not forgeries and that the employee was lying, despite the overwhelming evidence to the contrary. Proclaiming that it was "difficult to imagine a clearer case of bad faith litigation," the court imposed the following sanctions: (1) $4,061,353 for GDC's fees and costs in litigating the malpractice action; (2) $1,000,000 in punitive damages; and (3) $295,280 in unpaid legal fees.

On appeal, this court addressed a number of Breezevale's arguments. First, the court concluded that the trial court erred in awarding judgment as a matter of law because "[l]ooking at the record in the light most favorable to Breezevale," it could not "agree with the trial court that there was no evidence from which a reasonable jury could find" in Breezevale's favor. Breezevale I, 759 A.2d at 634. Second, the court remanded the case to the trial court to "consider further its grant of a new trial," since the trial court's "summary grant of a new trial by reference to the judgment notwithstanding the verdict, without express consideration of the evidence on both sides and its relative weight, cause[d] difficulty in terms of appellate review." Id. at 638. As to sanctions, the court vacated all sanctions "without prejudice to a decision whether to impose an award following an exercise of discretion based on correct legal principles." Id. at 640. The court was careful to caution, however, that it did "not intend to suggest that Breezevale [was] necessarily beyond the sanctioning power of the trial court on remand," nor that "the trial court lack[ed] authority to sanction parties for illegal or unethical litigation tactics simply because their substantive claims have some merit."*fn2 Id. A rehearing en banc was held, whereupon the en banc court "adopt[ed] and reaffirm[ed] the appellate rulings . . . ." Breezevale Ltd. v. Dickinson, 783 A.2d 573, 575 (D.C. 2001) ("Breezevale II").

On remand, the trial court focused on the issue of sanctions. First, the court ruled that Breezevale was not entitled to a new hearing on sanctions, declaring that "[g]iven the exhaustive litigation of the forgery issue before the jury, there would have been no point in additional proceedings before the bench on the very same question." Second, the court granted the "ultimate sanction" of dismissal of Breezevale's claim. Reasoning that "the forgery issue should never have been made central to [the malpractice case]" and "[b]y making it a major component of its malpractice suit against GDC, Breezevale perpetrated a fraud on the court," the court concluded that dismissal of the action was justified under the circumstances.

Third, the court reimposed the same monetary sanctions, ordering Breezevale to pay $4,061,353 in attorneys' fees and costs, and $1 million in punitive damages.*fn3 The punitive damages were awarded based upon "Breezevale's persistent refusal to acknowledge its wrongdoing." Breezevale filed a timely appeal, and we find ourselves yet again addressing this dispute.

II. Substantive Findings

Breezevale challenges the substantive findings of the trial court on three grounds. We conclude that each claim lacks merit.


Breezevale first asserts that the evidentiary record before the trial court did not support its finding by clear and convincing evidence that the documents were known forgeries, which formed the basis of the court's order of sanctions against Breezevale. Although GDC initially filed its request for sanctions against Breezevale as a "counterclaim," the trial court's (as well as our own) treatment of the issue is more appropriately viewed as a motion for sanctions based upon "abuse of the judicial process." See Breezevale I, 759 A.2d at 639 n.18. The trial court has inherent power to sanction parties for intentionally abusing the litigation process. Id. We made clear in Breezevale I that, given this inherent power, "sanctions may properly be imposed against a party found to have forged documents in an apparent attempt to bolster a portion of its case and then steadfastly lied about it while litigating another case . . . ." Id. at 639. Accordingly, sanctions may properly lie against Breezevale so long as there is sufficient evidence that Breezevale knew the documents at issue were ...

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