Settle Your Civil Claim; or Else. Threats of Criminal Prosecution to Gain Advantage in Civil Proceedings.

In the past few weeks unKAP-ed Legal, PLLC has come across the issue of whether a civil attorney can "threaten" criminal prosecution in a demand letter or civil litigation. The answer is not as clear cut as one might think, and largely depends on the purpose of the threat.

The American Bar Association (hereinafter, "ABA") "Model Code of Professional Responsibility" originally contained an express prohibition on making threats of criminal prosecution in civil litigation. Former DR 7-105 stated: "A lawyer shall not present, participate in presenting, or threaten to present criminal charges solely to gain advantage in a civil matter. When the model code was withdrawn and replaced in 1983, the new "Model Rules of Professional Conduct" dropped the express prohibition contained in DR 7-105. However, the notes of the Model Rules of Professional Conduct indicated that its drafters believed the express prohibition to be redundant, as Model rules 8.4 (Misconduct); 4.4 (Respect for Rights of Third Parties); and 3.1 (Meritorious Claims and Contentions) already provided adequate limitations that would encompass criminal threats of prosecution in civil proceedings.

Since the adoption of the Model Code of Professional Conduct, and the adoption of State specific code provisions which contain express prohibitions or follow a similar path from the Model Rules, Courts have dealt numerous times with civil litigants who threaten criminal prosecution during the course of their civil case. The courts dealing with the issue have generally focused on the intent of the attorney in making the threat as well as whether the threat was solely for the purpose of obtaining advantage in the litigation. These terms are obviously difficult to define, and have sparked substantial litigation regarding the ethical obligations of attorneys in civil proceedings.

In Florida, unlike the Model Code formulated by the ABA, there is an express prohibition on using threats of criminal prosecution to gain advantage in a civil proceeding. Rule 4.-3.4 of the Florida Rules of Professional Conduct provides: A lawyer shall not . . . present, participate in presenting, or threaten to present criminal charges solely to obtain an advantage in a civil matter." Interestingly, in the next line, the same rule prohibits: "present[ing], participat[ing] in presenting, or threaten[ing] to present disciplinary charges under these rules solely to obtain an advantage in a civil matter.

Pursuant to the ethical rules in Florida a civil attorney may arguably threaten criminal prosecution in their civil case, so long as the purpose of that threat is not to gain advantage in the proceeding. Arguably, the safe and best practice would be to avoid these types of tactics all together, as proving intent and purpose can be difficult – especially in the context of a written threat that does not have the benefit of tone, context, or other social cues that could help determine the purpose or intent behind the threat. Attorney's faced with an opposing counsel that arguably "threatens" criminal prosecution should be wary however of their own ethical obligation under Florida Rule 4-3.4 to avoid threatening disciplinary charges in response to the threat of criminal prosecution. Again, the "threat" will have to be proven to have been made solely for the purpose of gaining advantage, and as noted, intention is a difficult concept to ascertain after the fact. The attorney threatening to report misconduct should be cautious of their own words, tone, and purpose in their threat to report.

Long and short: save yourself the headache- avoid threatening criminal prosecution in a civil dispute. Ultimately these threats rarely "scare" a seasoned opposing counsel into a settlement, and more times than not such a threat would be construed to have no other purpose apart from attempting to gain advantage in the corresponding civil matter.

What Constitutes Fraud on the Court?

By the number of motions to dismiss, filed under this guise of “fraud on the court”, you may be shocked to learn that fraud on the court is rare, and motions alleging fraud should be granted sparingly in only the most egregious of circumstances. This post discusses the procedure for the life of a motion to dismiss based on fraud, and also some key requirements for the success, or failure, of this type of motion.

As to the procedure:

(1) File the Motion: Obviously the motion breathes first life to this issue once composed and filed. However, after that there has been some confusion as to “what happens next”? (2) Set the Motion for an Evidentiary Hearing: Numerous cases have reversed an order of dismissal based on fraud where the trial court below failed to hold an evidentiary hearing or the record was otherwise insufficient. See Health First, Inc. v. Hynes, 114 So. 3d 995, 998 (Fla. 5th DCA 2012) (“Given the gravity of the conclusions in the order [of dismissal based on fraud] there will have to be an evidentiary hearing to sort out whether fraud or similar misconduct occurred.”); In re M.W., 181 So. 3d 1263, 1267 (Fla. 2d DCA 2015) (explaining that trial counsel’s representations to the court were “insufficient” to sustain a fraud on the court dismissal); Stephens v. Bay Med. Center, 839 So. 2d 858, 858 (Fla. 1st DCA 2003) (“The failure to allow plaintiff an opportunity to present additional evidence [at an evidentiary hearing] was error.”);Laussermair v. Laussermair, 55 So. 3d 705, 706-707 (Fla. 4th DCA 2011) (reversing an order dismissing a case for fraud where the trial court relied on deposition testimony, but no live testimony; finding that evidence short of in person testimony was insufficient to sustain the heavy burden of the defendant in proving fraud). But see Obregon v. Rosana Corp., 232 So. 3d 1100 (Fla. 3d DCA 2017) (finding that the issue of entitlement to an evidentiary hearing prior to dismissal for fraud on the court was not preserved for appellate review, where neither party requested an evidentiary hearing in the trial court below). Based on this authority it appears that the trial court must hold an evidentiary hearing, but that a party’s failure to request the same, and object to a denial of that right, could be considered a waiver of the issue on appeal.

(3) Burden of Proof: The party seeking dismissal has the burden of proving fraud by “clear and convincing evidence.” See Gilbert v. Eckerd Corp. of Fla., Inc., 34 So. 3d 773, 776 (Fla. 4th DCA 2010) (“It is the moving party’s burden to establish by clear and convincing evidence that the non- moving party has engaged in fraudulent conduct warranting dismissal.”); Suarez v. Benihana Nat’l of Fla. Corp., 88 So. 3d 349 (Fla. 3d DCA 2012) (explaining that the moving party bears the burden of proving fraud by clear and convincing evidence). Some authority goes so far as to suggest that this burden necessarily requires that the defendant (or party seeking dismissal) produce in person testimony in support of their claims; not just sworn deposition or interrogatory responses. See Laussermair, 55 So. 3d at 707. Accordingly, in the abundance of caution, the moving party should subpoena witnesses to testify at the hearing, in addition to any depositions, interrogatories, or certified medical records on which the moving party intends to rely to prove fraud.

(4) Written Order: You’ve had your hearing; now what? Can the court issue a standard short order? Is it permissible for the moving party to submit an agreed order? The answer is probably no to both questions. In Chacha v. Transport USA, Inc., the court granted a motion to dismiss based on fraud and made a very cursory written finding that clear and convincing evidence of fraud supported dismissal. 78 So. 3d 727, 730 (Fla. 4th DCA 2012). The appellate court reversed and remanded, for the lower court to make “express written findings sufficient to assist [the appellate court] in determining whether the trial court properly considered the proper mix of factors and carefully balanced the policy favoring adjudication on the merits with the competing policy to maintain the integrity of the judicial system.” Id. at 731. In finding remand appropriate, the appellate court stated, “We do not think it too great a task to require the trial court to make a written finding of the essential facts which supports the imposition of the most severe sanction [of dismissal]” and held that “an order granting a dismissal or default for fraud on the court must include express written findings demonstrating that the trial court has carefully balanced the equities and supporting the conclusion that the moving party has proven, clearly and convincingly, that the non-moving party implemented a deliberate scheme calculated to subvert the judicial process.” Id. It appears that the trial court must compose a written order, granting the motion, which specifically points to record evidence in support of a finding of fraud. The non-moving party should object to anything less. The moving party would likely also be wise to object to less for purposes of the appellate record.

Having established the process, what is the standard for dismissal? What conduct will support the most severe sanction of dismissal with prejudice of the Plaintiff’s cause of action? The answer is honestly unclear.

Although the standard itself is fairly straightforward, and is repeatedly written or quoted, the type of conduct sufficient to meet its dictates can be described as “all over the map”. In its most basic form the standard for dismissal is as follows: “The requisite fraud on the court occurs where it can be demonstrated, clearly and convincingly, that a party has sentiently set in motion some unconscionable scheme calculated to interfere with the judicial system’s ability impartially to adjudicate a matter by improperly influencing the trier of fact or unfairly hampering the presentation of the opposing party’s claim or defense.” Cox v. Burke, 706 So. 2d 43, 46 (Fla. 5th DCA 1998). In reviewing the case under this standard, the “court should consider a proper mix of factors and carefully balance a policy favoring adjudication on the merits with competing policies to maintain the integrity of the judicial system.” Id. “Because dismissal sounds the death knell of the lawsuit, courts must reserve such strong medicine for instances where the defaulting party’s misconduct is correspondingly egregious.” Id. Seems simple, right? Wrong.

Subsequent cases have further defined what constitutes “fraud” explaining that: “poor recollection, dissemblance, even lying, can be well managed through cross-examination” and does not amount to “fraud” that would support dismissal. See Bologna v. Schlanger, 995 So. 2d 526, 528 (Fla. 5th DCA 2008). See also JVA Enterprises, I, LLC v. Prentice, 48 So. 4d 109, 114 (Fla. 4th DCA 2010) (explaining that “fraud” that supports dismissal of an action must be more than poor recollection, dissemblance, or even lying, instead the conduct must be a scheme purposefully hatched to subvert the truth seeking function of the judicial system); Gehrmann v. Cty of Orlando, 962 So. 2d 1059, 1061 (Fla. 5th DCA 2007) (finding that fraud requires a clear and convincing showing that the non-moving party “committed knowing deception intended to prevent the defense from discovery essential to defending the claim). Unfortunately this new “definition” of “fraud” creates as many questions as it answers. If a blatant lie won’t amount to fraud, then what conduct does equate with the standard?

In interpreting this standard, courts have been understandably inconsistent; likely because all cases subject to dismissal for fraud must be carefully examined based on their specific facts. For instance, in Cox (which is one of the leading cases on fraud on the court) the Appellate court affirmed dismissal with prejudice based on fraud where the non-moving party gave multiple inconsistent answers in her discovery responses (including her actual legal name, whether she held a valid driver’s license and from what state, her social security number, and her prior injuries). 706 So. 2d at 46.

Since that holding, the Fifth DCA has receded from the broad grant of dismissal seemingly authorized by the decision, explaining that Cox is a case that should be “limited” to its very “unique” facts. See e.g., Ruiz v. Cty of Orlando, 859 So. 2d 574 (Fla. 5th DCA 2003) (“In Cox, we anticipated, although we apparently underestimated, the seductive power of [the remedy of dismissal for fraud]. . . . Cox was an extremely unusual fact pattern, wholly unlike the more conventional impeachment issues that have shown up in some more recent decisions.”); Amato v. Intindola, 854 So. 2d 812 (Fla. 4th DCA 2003)(emphasizing that the inconsistencies or falsities in the Cox case were pertinent to name, place of residence, social security number and other information that actually prevented the defendants from conducting or investigating their claim). However, that still begs the question of what conduct should be considered fraudulent and what false, misleading, or incomplete responses will amount to a “scheme” calculated to “subvert” the judicial process?

It seems that more current cases have limited the instances in which dismissal may be proper. For instance, in Laschke v. Reynolds Tobacco Co., the Second District reversed dismissal with prejudice in a case where the non-moving party had actually attempted to have her medical records changed, in an attempt to mislead and deter the moving party. 872 So. 2d 344 (Fla. 2d DCA 2004). It seems hard to image a case that could be subject to dismissal for fraud where volitional conduct by the non-moving party to actually alter medical records fell short of the standard of fraud on the court. Id. In Bob Montgomery Real Estate v. Djokic, the Court found that apparently forging a document attached to the complaint was not sufficient to warrant dismissal based on fraud. 858 So. 2d 381 (Fla. 4th DCA 2003). Although admittedly, in Bob Montgomery the issue was really one of proof rather than sufficiency of conduct. Id. Further, in Bologna, the trial court noted that “fraud on the court” has become a “strategy on the part of defense counsel” and cautioned against permitting a defendant to ask overly broad questions in discovery or depositions with no meaningful follow up and thereafter slapping the plaintiff with a motion to dismissed based on fraud. 955 So. 2d at 529.

However, even in light of these questions and the appellate court’s attempt to limit the application of this doctrine, numerous cases still find fraud where cross-examination and traditional discovery tools or sanctions could arguably remedy the inconsistencies in the non- moving party’s discovery responses. See e.g., Middleton v. Hager, 179 So. 3d 529 (Fla. 3d DCA 2015) (finding dismissal appropriate where the plaintiff failed to disclose prior vehicle accidents which resulted in treatment); Herman v. Intracoastal Cardiology Center, 121 So. 3d 583 (Fla. 4th DCA 2013) (affirming dismissal with prejudice where contents of the litigants diary showed that she lied on various occasions throughout the litigation).

The long and short is this: whether you are a moving, or a non-moving party, in the fraud dance the outcome of the motion to dismiss is largely dependent on the specific factual circumstances of your case. Having said that, if you are a moving party: you have the burden, which is high. A such, to support a claim of fraud, the moving party should produce adequate evidence that shows the intent of the non-moving party in making inconsistent, incomplete, or even false statements. It appears that this intent to defraud or intent to subvert the truth seeking function is the key factor in determining whether dismissal is appropriate. Under the standard and current trends, presumably mere “lack of memory” “inconsistencies” or “even lies” without this critical intent element would be considered short of fraud on the court. On the flip-side: the non-moving party should be

prepared to combat this evidence by showing lack of intent, mere inaccurate memory, innocent misunderstanding, or even (in the case of false statements) an innocent intention on the part of the non-moving party.

Why Most Attorneys Are Doing it Wrong & Why that Matters

Ah the dreaded 57.105; the moment you receive one, your heart sinks in your chest. However, should you find yourself in the precarious position of receiving a 57.105, take comfort in a few simple facts.

First, a 57.105 (or “Motion for Sanctions”) can only be granted in limited situations. The The statute provides that a Motion for sanctions should be granted where a motion or pleading: (a) was not supported by material facts necessary to establish the claim or defense; or (b) would not be supported by the application of then- existing law to those material facts. When considering what that means in reality it is pretty hard to establish. The claim has to be completely unsupported by the record facts and/or completely unsupported by the law. The statute even provides that sanctions cannot be award where either counsel is relying in good faith on representations from her client (regarding the material facts) or counsel is making a good faith claim for extension, modification, or reversal of existing law or the establishment of new law. So, rest easy that you have to really drop the ball for this Section to apply (although the way some attorney’s serve these, you’d be hard pressed to believe it).

Second, a 57.105 Motion will be completely insufficient if the party who is seeking attorney’s fees under that section has failed to comply with the “safe harbor provision” contained in subsection (4) of the statute. If you did not receive a “Motion for Sanctions” twenty-one (21) days before the motion was filed with the Court: the Court cannot grant the Motion.

Third, and somewhat related to the notice: the statute is strictly construed because it is in derogation of common law. See Global Xtreme, Inc. v. Advanced Aircraft Center, Inc., 122 So. 3d 487, 490 (Fla. 3d DCA 2013). Accordingly, safe harbor notice that must be sent has to comply with certain requirements. For instance: a safe harbor “letter” advising you that opposing counsel will file a 57.105 motion for sanctions is completely insufficient. See Anchor Towing, Inc. v. Fla. Dept. of Transp., 10 So. 3d 670, 672 (Fla. 3d DCA 2009) (reversing an award of sanctions where the “safe harbor notice” was a letter, even though the letter complied with all the statutory requirements). In addition to the requirement of service of an actual motion, not just a letter – the motion must be served in accordance with Rule 2.516 of the Rules of Judicial Administration.

See Matt v. Caplan, 140 So. 3d 686 (Fla. 4th DCA 2014). This means that it must: (1) be emailed; (2) if an attachment, it must be in pdf form; (3) the subject line must being “SERVICE OF COURT DOCUMENT” in all capital letters and thereafter state the case number, and style; (4) the body of the email must identify the court in which the proceeding is pending, the case number, the name of the initial party on each side, the title of each document served with that e-mail, and the name and telephone number of the person required to serve the document; (5) a signature in one of these forms “/s/”, “/s” or “s/”; (6) meet the size limitations specified in the Florida Supreme Court Standards for Electronic Access to the Court. Id. Failure to meet these requirements renders the notice deficient and precludes an award of fees under the Statute. Id. In my experience, it is rare to find an attorney that has complied with these strict requirements in serving their “safe harbor notice” – yet we still shutter at the receipt of a 57.105 notice.

The long and short is: next time you receive a safe harbor notice, take note of whether Section 57.105, Florida Statutes has been strictly complied with by the opposing party. If the answer is no, the chance of an award of fees is almost nil. However, don’t feel too safe: A court has the inherent power to award attorney’s fees as a sanction under Fla. Stat. 57.105(1) without notice where the pleading meets the requirements of (1)(a) or (1)(b). See HFC Collection Center, Inc. v. Alexander, 190 So. 3d 1114, 1120-21 (Fla. 5th DCA 2016) (remanding to the trial court to determine whether imposition of fees was appropriate, notwithstanding deficient safe harbor notice, under the authority of 57.105(1)).