COURT OF APPEALS RULING AFFIRMS HARSH CONSEQUENCES FOR FAILURE TO ABIDE BY THE RULES
By: Aaron M. Lumpkin
Any litigator will tell you that some of the most difficult quagmires they have had to navigate on behalf of their clients are ones born out of their client’s failure to abide by, or take seriously, obligations under the rules of civil procedure or court orders. It slows down efforts to move the case towards resolution, drives up costs, and can have dire consequences for the outcome of the matter. Nothing serves as a better cautionary tale about the importance of playing by the rules than Division One of the Court of Appeals’ recent decision in Smith v. Olsen. There, the losing party’s failures to abide by court orders and the Rules resulted in their inability to object to trial exhibits even when arguably inadmissible, and prohibition from introducing any of their own. That is not to say the sanctioned party would have prevailed if they could have objected, but when the jury handed down a verdict awarding over $3,000,000.00 in damages, the inability to preclude and challenge the admissibility of evidence is a haunting factor. Take a lesson from the ballad Smith v. Olsen.
I. History of the Matter
Smith and Olsen shared use of an easement providing them both access to their respective properties in a remote part of Cave Creek, Arizona. Over twenty plus years, neighborly relations devolved into anything but civil as Olsen engaged in conduct ranging from assault, breach of the easement, blocking access, public disparagement, threats, and use of a firearm. At one point in time Olsen even resorted to placing rattlesnakes on the easement to interfere with Smith’s ability to access her property. Over the years Olsen’s conduct took a physical and psychological toll on Smith.
The decades of drama were followed by the legal drama that interests us. Throughout much of the litigation, Olsen represented himself and clearly stood to benefit from some sound legal advice. When the time came for parties to prepare their joint pretrial statement pursuant to court order, Olsen did not participate at all. He ignored the court outright, including directions to prepare trial exhibits and to submit them on the day of the final trial management conference. Smith eventually submitted her pretrial statement without Olsen’s contributions and also included her 227 exhibits. At the pretrial management conference Smith appeared, represented by counsel, but Olsen was absent. Olsen called the court’s chambers the day before and left a message to the effect that he had other things to do and might or might not attend.
Pursuant to Rule 16 of the Arizona Rules of Civil Procedure, which states that “the court-on motion or on its own-must enter such orders as are just… if a party…fails to appear at a… Trial Management conference…” When Olsen failed to appear and did not show good cause as to his absence and failure to participate, the court acted. The trial court handed down a sanction that prohibited Olsen from objecting to any of Smith’s 227 exhibits, and also prevented him from presenting exhibits of his own at trial, finding that he had waived the objections by his failure to participate. This would effectively allow Smith free range to present the jury with evidence of Olsen’s bad conduct both related and arguably unrelated to the matter at hand. The court issued a minute entry warning Olsen that he needed to show good cause for his nonparticipation to avoid the sanctions. Olsen provided nothing of the sort even after second chances and retaining counsel.
At trial, the court enforced the sanction and Smith was able to introduce exhibits to build her case free of objections, including documents like a twenty-page timeline of Olsen’s supposed behavior since the 1990s. After a ten-day trial, the jury returned a verdict awarding Smith $3,000,000.00 for Breach of Easement, Intentional infliction of emotional distress, negligent infliction of emotion distress, assault, trespass, and punitive damages. Then there was the inevitable appeal.
II. The Appeal
Olsen appealed on the grounds that the sanction was an abuse of discretion and the damages awarded by the jury suggested “passion and prejudice that shocks the judicial conscience.” The court upheld the jury’s damages on all points except those for negligent infliction of emotional distress, which it found to be duplicative of damages for intentional infliction of emotional distress, and punitive damages were reduced to $525,000.
On the question of the trial court’s sanctions, the Court of appeals spent far less ink than the discussion of damages. It held that Rule 16 of the rules of procedure required the trial court to sanction Olsen for his failure to participate. Rule 16’s reference to Rule 37 allowed the trial court to fashion a sanction that fits and is a consequence of the misconduct. Since Rule 37 “bars parties hiding the ball in discovery or disclosure from proving those matters up at trial,” the Court of Appeals determined that baring Olsen from submitting exhibits and objecting to Smith’s was appropriate.
III. Leason Learned
Failure to abide by court order, even in what may feel like a boilerplate line in a scheduling order, and refusal to participate in court-ordered conferences can have dire consequences. As attorneys, it is of the utmost importance to impress the gravity of these consequences on our clients, and especially in circumstances where disclosure and evidence are involved. Compliance with court orders and active participation in the pretrial process are crucial. Remember, Rule 16 makes sanctions mandatory for failure to participate and the standard on review is abuse of discretion. The Court of Appeals has signaled to all of us that it is going to uphold sanctions with severe consequences when they are fashioned to fit the misconduct.