William A. Brewer Iii v. Lennox Hearth Products, LLC Turner & Witt Plumbing, Inc. Strong Custom Builders, LLC Thermo Dynamic Insulation, LLC State Farm Lloyds Insurance Company Ken and Becky Teel Ross and Meg Rushing

IN THE SUPREME COURT OF TEXAS

══════════ No. 18-0426 ══════════ WILLIAM A. BREWER III, PETITIONER, v.

LENNOX HEARTH PRODUCTS, LLC; TURNER & WITT PLUMBING, INC.; STRONG CUSTOM BUILDERS, LLC; THERMO DYNAMIC INSULATION, LLC; STATE FARM LLOYDS INSURANCE COMPANY; KEN AND BECKY TEEL; ROSS AND MEG RUSHING,

RESPONDENTS ══════════════════════════════════════════

ON PETITION FOR REVIEW FROM THE COURT OF APPEALS FOR THE SEVENTH DISTRICT OF TEXAS

══════════════════════════════════════════

JUSTICE BOYD, concurring in part and dissenting in part.

An attorney commissioned a pretrial telephone survey of residents within the community where the suit was about to be tried. After an extensive evidentiary hearing, the trial court found the attorney engaged intentionally and in bad faith in “an abusive litigation practice that harms the integrity of the justice system and the jury trial process.” Relying on its inherent authority to sanction such misconduct, the court ordered the attorney to pay other parties’ attorney’s fees and expenses and to complete ten extra hours of legal-ethics education. Today the Court vacates that order, holding that (1) a court cannot exercise its inherent authority to sanction an attorney who abuses the judicial system unless the court finds the attorney acted in bad faith, ante at ___, and (2) this record contains no evidence to support the trial court’s finding that this attorney acted in bad faith, ante at ___.

Regarding the Court’s second holding, I have repeatedly documented my view that “no evidence” should mean “no evidence.” 1 The trial court entered specific fact findings after conducting a hearing “over the course of seven days,” ante at ___, and three distinguished appellate jurists—after making “an independent inquiry of the entire record,” including “the evidence, arguments of counsel, written discovery on file, and the circumstances surrounding the party’s sanctionable conduct”—unanimously agree that some evidence supports the trial court’s findings, Brewer v. Lennox Hearth Prods., LLC, 546 S.W.3d 866, 876 (Tex. App.—Amarillo 2018). Holding that the evidence on which those judges relied was not actually any evidence at all should be a most difficult task.

But I find the Court’s first holding far more important and concerning. Before today, this Court has never held that trial courts can only exercise their inherent authority to sanction a party or attorney if they first find that the party or attorney acted in “bad faith.” Globally applying a bad- faith requirement to all inherent-authority sanctions for all sanctionable conduct unnecessarily handcuffs our state’s trial courts and undermines the very reason they possess inherent authority in the first place. 2

Instead of globally requiring bad faith in all contexts, we have explained that the courts’ inherent authority, 3 which derives from their constitutional creation and duties, exists so that they can “effectively perform their judicial functions and . . . protect their dignity, independence and integrity.” Eichelberger v. Eichelberger, 582 S.W.2d 395, 399 (Tex. 1979). We have held that courts may rely on this power to sanction both “recalcitrant litigants,” Altesse Healthcare Sols., Inc. v. Wilson, 540 S.W.3d 570, 572 (Tex. 2018) (per curiam), and “errant counsel” who engage in “improper trial conduct,” Remington Arms Co. v. Caldwell, 850 S.W.2d 167, 172 (Tex. 1993). We have said that courts have inherent authority to sanction attorneys for an “abuse of the judicial process” and for conduct that “breeds disrespect for and threatens the integrity of our judicial system.” In re Bennett, 960 S.W.2d 35, 40 (Tex. 1997) (per curiam). 4 And they have “not only the power but the duty to insure that judicial proceedings remain truly adversary in nature.” Pub. Util. Comm’n of Tex. v. Cofer, 754 S.W.2d 121, 124 (Tex. 1988).

To protect the integrity of the judiciary and judicial process, trial courts rely on their inherent authority to impose a wide array of sanctions—from slap-on-the-wrist ethics-education orders to death-penalty dismissal orders—in response to an equally wide array of sanctionable conduct. In each case, however, we have repeatedly demanded that with all sanctions, whether based on inherent authority or not, the punishment must fit the crime. See Altesse Healthcare, 540 S.W.3d at 572 (citing TransAmerican Nat. Gas Corp. v. Powell, 811 S.W.2d 913, 917 (Tex. 1991)). 5

As the Court explains today, a trial court’s decision to impose sanctions involves two determinations—“(1) whether conduct is sanctionable and (2) what sanction to impose”—but because the punishment must fit the crime, the two are not nearly as “distinct” as the Court suggests. Ante at ___. Because “a direct relationship must exist between the offensive conduct and the sanction imposed,” conduct that is “more” sanctionable justifies sanctions that are “more” punitive. Altesse Healthcare, 540 S.W.3d at 572 (quoting TransAmerican, 811 S.W.2d at 917). The most “extreme sanctions,” like a death-penalty dismissal order (or worse), requires a finding not just of “bad faith,” but of “flagrant” or “extreme” bad faith. Id. at 575–76. But for the less extreme sanctions, like an order requiring legal-ethics training, we have never required “bad faith” at all.

Different levels of culpability—such as bad faith, intent, or negligence—warrant different types of sanctions. Take, for example, spoliation sanctions. When a party loses, alters, or destroys relevant evidence, the trial courts inherently “have discretion to fashion an appropriate remedy to restore the parties to a rough approximation of their positions if all evidence were available.” Wal- Mart Stores, Inc. v. Johnson, 106 S.W.3d 718, 721 (Tex. 2003). Neither the Texas Rules of Evidence nor the Texas Rules of Civil Procedure specifically addresses spoliation, although they do enumerate remedies for discovery abuses. Brookshire Bros., Ltd. v. Aldridge, 438 S.W.3d 9, 18 (Tex. 2014). But a trial court also has the inherent “discretion to craft other remedies it deems appropriate in light of the particular facts of an individual case, including the submission of a spoliation instruction to the jury.” Id. at 21. As with all sanctions, the remedy must have a direct relationship to the act of spoliation and may not be excessive. Id. (citing TransAmerican, 811 S.W.2d at 917). “Key considerations in imposing a remedy are the level of culpability of the spoliating party and the degree of prejudice, if any, suffered by the nonspoliating party.” Id. at 14. And while a spectrum of available remedies exists, “the harsh remedy of a spoliation instruction is warranted only when the trial court finds that the spoliating party acted with the specific intent of concealing discoverable evidence, and that a less severe remedy would be insufficient to reduce the prejudice caused by the spoliation.” Id. 6 Thus, intentional wrongful conduct is required for the harshest spoliation sanction, but is not required for all spoliation sanctions. 7

Here, the trial court imposed two different sanctions: It ordered the attorney to pay opposing parties’ attorney’s fees and expenses and to complete ten extra hours of legal-ethics education. Consistent with U.S. Supreme Court precedent, I can accept the Court’s new rule that a sanction order requiring a litigant or attorney to pay another party’s attorney’s fees and expenses must be based on a finding that the sanctioned party “has acted in bad faith, vexatiously, wantonly, or for oppressive reasons.” F. D. Rich Co. v. United States ex rel. Indus. Lumber Co., 417 U.S. 116, 129 (1974); see also Goodyear Tire & Rubber Co. v. Heager, — U.S. —, 137 S. Ct. 1178, 1186 (2017) (“[O]ne permissible sanction is . . . an order . . . instructing a party that has acted in bad faith to reimburse legal fees and costs incurred by the other side.” (emphasis added)). As the Supreme Court has repeatedly explained, bad faith (or its equivalent) should be required for this type of sanction to ensure it remains a limited but well-established exception to the long-standing American Rule, which requires each party to pay its own attorney’s fees unless a statute or contract provides otherwise. F. D. Rich Co., 417 U.S. at 129; see also Chambers v. NASCO, Inc., 501 U.S. 32, 45–46 (1991); Roadway Express, Inc. v. Piper, 447 U.S. 752, 765–66 (1980); Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 258–59 (1975). To preserve the policies behind the American Rule, a trial court may exercise its inherent sanctions authority to require payment of another party’s attorney’s fees only in these “narrowly defined circumstances” involving bad-faith conduct. Roadway Express, 447 U.S. at 765.

Like the Supreme Court, we have consistently affirmed the American Rule and the policies behind it. See JCB, Inc. v. Horsburgh & Scott Co., No. 18-1099, — S.W.3d —, 2019 WL 2406971, at *8 (Tex. June 7, 2019); In re Nat’l Lloyds Ins. Co., 532 S.W.3d 794, 809 (Tex. 2017); Tucker v. Thomas, 419 S.W.3d 292, 295 (Tex. 2013); In re Nalle Plastics Family Ltd. P’ship, 406 S.W.3d 168, 172 (Tex. 2013); Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. Nat’l Dev. & Research Corp., 299 S.W.3d 106, 120 (Tex. 2009); Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 310–11 (Tex. 2006). To preserves those policies, I agree that a finding of bad faith or its equivalent should be required before a trial court may exercise its inherent sanctions authority to require payment of another party’s attorney’s fees.

But the American Rule does not justify globally requiring bad faith as a prerequisite for all inherent-authority sanctions imposed to protect the integrity of the judicial process. Contrary to the Court’s assertions, the U.S. Supreme Court does not require a bad-faith finding for all inherent- authority sanctions. See, e.g., Young v. U.S. ex rel. Vuitton et Fils S.A., 481 U.S. 787, 796 (1987) (“The ability to punish disobedience to judicial orders is regarded as essential to ensuring that the Judiciary has a means to vindicate its own authority without complete dependence on other Branches.”); Illinois v. Allen, 397 U.S. 337, 343 (1970) (recognizing trial courts’ inherent authority to ban criminal defendants who disrupt conduct of trial); Link v. Wabash R. Co., 370 U.S. 626, 630–31 (1962) (recognizing trial courts’ inherent authority “to manage their own affairs so as to achieve the orderly and expeditious disposition of cases”); Anderson v. Dunn, 19 U.S. 204, 227 (1821) (“Courts of justice are universally acknowledged to be vested, by their very creation, with power to impose silence, respect, and decorum, in their presence, and submission to their lawful mandates.”).

Ignoring the Supreme Court’s express recognition that courts have the inherent authority “to manage their own affairs so as to achieve the orderly and expeditious disposition of cases,” Link, 370 U.S. at 630–31, the Court instead relies repeatedly and exclusively on a single statement in the concluding paragraph of the Supreme Court’s decision in Roadway Express, in which the Court summarized its point that “the trial court did not make a specific finding as to whether counsel’s conduct in this case constituted or was tantamount to bad faith, a finding that would have to precede any sanction under the court’s inherent powers.” See ante at ___ & n.32, ___ n.49, ___ n.71 (quoting Roadway Express, 447 U.S. at 767). But the sanction at issue in Roadway Express was an award of attorney’s fees, and the Court’s analysis and holding specifically addressed not a global bad-faith requirement for inherent-authority sanctions, but the “bad-faith exception [to the American Rule] for the award of attorney’s fees.” Roadway Express, 447 U.S. at 766 (emphasis added). Noting that “New York courts have sanctioned lawyers for mere negligence,” the Court did not reject that standard but instead clarified that it was addressing only the attorney’s-fees sanction before it: “this opinion addresses only bad-faith conduct.” Id. at 767 n.13. In short, the Supreme Court has never held that bad faith is required to support every sanction under the courts’ inherent authority, and neither should we.

The Court also relies on Texas courts of appeals decisions, which it says have universally required bad faith for “decades.” Ante at __. But this is simply not true. Some of the courts of appeals—like the McWhorter case on which the Court relies, ante at ___ n.28 (citing McWhorter, 993 S.W.2d at 781)—divided the inquiry between bad-faith conduct and conduct that interferes with the legitimate exercise of the trial court’s core functions, finding either sufficient for a trial court to use its inherent authority. 8 For example, one appellate court explicitly denounced the global requirement of bad faith, explaining, “‘Bad faith’ may indeed be one basis for imposing inherent authority sanctions, but a survey of pertinent cases demonstrates broader considerations are involved when reviewing the propriety of sanctions imposed.” In re J.V.G., No. 09-06-015CV, 2007 WL 2011019, at *5 (Tex. App.—Beaumont July 12, 2007, no pet.) (mem. op.). In the absence of bad faith, the court found the trial court did not abuse its discretion by imposing sanctions because the attorney’s conduct, “when taken together, could be found to have significantly interfered with the court’s management of its docket as well as the issuance and enforcement of its orders.” Id. at *10; see also Kennedy v. Kennedy, 125 S.W.3d 14, 19 (Tex. App.—Austin 2002, pet. denied) (“[A] court cannot invoke its inherent power to sanction without some evidence and factual findings that the conduct complained of significantly interfered with the court’s legitimate exercise of one of its traditional core functions.”).

Based on the evidence submitted in this case, the trial court specifically found, and the court of appeals agreed, that some of the survey questions, which the attorney personally reviewed and approved, were “designed to influence or alter the opinion or attitude of the person being polled.” Brewer, 546 S.W.3d at 880. And the pool of those considered for survey included potential jurors, court personnel and their family members, city council members and their spouses, city managers, witnesses and their spouses, and designated third parties and their spouses. Id. at 879 n.7, 881. The trial court specifically found that the survey, as designed and implemented, was “highly prejudicial and inimical to a fair trial by an impartial jury,” was “disrespectful to the judicial system,” “threatening to the integrity of the judicial system,” was incompatible with a “fair trial by an impartial jury,” was “an abusive litigation practice that harms the integrity of the justice system and the jury trial process,” and negatively affected “the rights of parties to a trial by an impartial jury of their peers” and “the due process and seventh (7th) amendment protection due to litigants in the case before the Court.” Id. at 880. Today, the Court does not find that “no evidence” supports these trial-court findings. 9 It finds only that “no evidence” supports the trial court’s finding that the attorney acted in bad faith when he authorized the survey. The attorney argued that, although he may have exercised “bad judgment” or been negligent or even grossly negligent, the trial court could not sanction him because no evidence established that he acted in “bad faith.” Id. at 878–79.

The Court agrees, suggesting that the “mere violation” of an “ethical standard in connection with conducting a pretrial survey does not ipso facto constitute bad faith.” Ante at ___. That may be, but it does ipso facto constitute the violation of an ethical standard. And here, at least, the trial court found that the attorney’s unethical conduct seriously threatened the integrity of the judicial process, and that finding on this evidence would justify the court’s decision to exercise its inherent authority to impose an appropriate sanction, regardless of whether the attorney acted negligently, intentionally, or in bad faith. Assuming the absence of any evidence to support a finding of bad faith, the sanction may not include an order requiring payment of other parties’ attorney’s fees, but it certainly may include an order requiring the attorney to attend additional legal-ethics education courses.

Accepting for these purposes the Court’s conclusion that the record contains “no evidence” of bad faith, I concur in the Court’s judgment to the extent it vacates the trial court’s order requiring the attorney to pay other parties’ attorney’s fees and expenses. But to the extent the Court vacates the trial court’s order requiring the attorney to take additional legal-ethics education courses, and to the extent it requires trial courts to find bad faith before exercising their inherent authority to impose any form of sanction, I respectfully dissent.

____________________ Jeffrey S. Boyd Justice

Opinion delivered: April 24, 2020