261 F.3d 558 (5th Cir. 2001), 99-30973, Crowe v Smith

Docket Nº:99-30973
Citation:261 F.3d 558
Case Date:August 27, 2001
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 558

261 F.3d 558 (5th Cir. 2001)

LARRY D CROWE; ET AL, Plaintiffs,


JAMES W SMITH; ET AL, Defendants,


No. 99-30973

United States Court of Appeals, Fifth Circuit

August 27, 2001

Page 559

John R. Martzell (argued), Regina O. Matthews, Martzell & Bickford, New Orleans, LA, for W. Glenn Burns.

Walter C. Thompson, Jr. (argued), Jan K. Frankowski, Barkley & Thompson, New Orleans, LA, for William Wright.

Daniel Lund (argued), Albert Carter Mills, IV, Montgomery, Barnett, Brown, Read, Hammond & Mintz, New Orleans, LA, for Robert B. Bieck, Jr.

Appeals from the United States District Court for the Western District of Louisiana.

Before EMILIO M. GARZA, and PARKER, Circuit Judges, and ELLISON[*], District Judge.

EMILIO M. GARZA, Circuit Judge:

W. Glenn Burns, William E. Wright, and Robert B. Bieck, Jr., all members of the Louisiana bar, appeal the imposition of sanctions against them by Judge Nauman S. Scott of the U.S. District Court for the Western District of Louisiana. The district court originally sanctioned the attorneys to three months' suspension from practice in the Western District of Louisiana, as part of a broader imposition of fines, reprimands, and suspensions against a group of attorneys and insurance companies involved in the settlement of an underlying civil RICO action (collectively, the "sanctions defendants"). These sanctions were the subject of the first appeal of this case, Crowe v. Smith, 151 F.3d 217 (5th Cir. 1998) ("Crowe Sanctions I"), in which we, inter alia, remanded for further consideration with respect to defendants Burns, Wright, and Bieck. On remand, the district court reimposed the three-month suspension from practice against Burns, Wright, and Bieck, and further ordered payment in solido of costs and attorney's

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fees potentially totaling over $300,000.

The full facts and procedural history of this case, as described in Crowe Sanctions I, 151 F.3d at 221-26, are complicated. The issues on this appeal are much narrower: (1) whether the district court exceeded our mandate by reexamining issues resolved in Crowe Sanctions I; and (2) whether the district court's finding of bad faith conduct by Burns, Wright, and Bieck is supported by clear and convincing evidence. As to the first issue, we hold that the district court did exceed our mandate by revisiting issues decided by necessary implication in Crowe Sanctions I, and we disregard the district court's renewed findings on these matters. The second issue, whether Burns, Wright, and Bieck acted in bad faith, hinges on a singular factual question: whether the settlement meeting in which their alleged misrepresentation occurred was a global settlement meeting, to include defendants other than the clients of Burns, Wright, and Bieck. We hold that the record lacks clear and convincing evidence that this was the purpose of the meeting, such that the district court abused its discretion by finding bad faith conduct. The sanctions against Burns, Wright, and Bieck are therefore reversed.


Burns, Wright, and Bieck served as defense attorneys for various outside attorneys of a defunct savings and loan association in a civil RICO suit. As the trial approached, Burns, Wright, and Bieck attempted unsuccessfully to negotiate individual settlements for their clients. On the eve of the trial, July 11, 1994, Burns, Wright, and Bieck met together with plaintiffs' counsel Joseph R. Ward, Jr., who suggested settlement for $6.2 million. Burns responded, with Bieck and Wright present, that this figure was far beyond any theory of insurance coverage. Days later, the attorneys agreed orally to settle for $2.25 million, and Burns read the oral settlement agreement into the record. Bieck then prepared the written settlement agreement, which included reference to the participation of "American Casualty Co." as a settling defendant.

American Casualty Company is one of a group of insurance companies, referred to collectively as CNA, which had issued an expired directors' and officers' errors and omissions policy (the "D&O policy") to the directors of the savings and loan.1 The policy was a "claims made" policy, and carried a general liability limit of $5 million. Plaintiffs' counsel Ward did not learn of the existence of the D&O policy until the conclusion of the civil RICO trial, after most of the defendants had entered into the $2.25 million global settlement agreement. The existence of the D&O policy was significant because Ward had received negative responses to his discovery requests relating to the possibility of indemnity agreements,2 and had assumed that the savings and loan directors were uninsured.

Ward notified the district court of his discovery, and the court entered its own sanctions motion pursuant to its inherent power. The court held that Burns, Wright, and Bieck, along with the other sanctions defendants had willfully conspired to defraud the Crowes by concealing the D&O policy despite having discovery-related, ethical, and other duties to

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reveal it. Based on this finding, the court ordered, inter alia, that Burns, Wright, and Bieck be suspended from practice before the Western District for a period of three months.

All of the sanctions defendants appealed the district court's judgment to this court. As to Burns, Wright, and Bieck, we found the suspensions to be quasi-criminal in nature, and held that there was no procedural flaw in the district court's sanctions. We rejected the district court's finding of bad faith, however, reasoning that "there was no proper foundation for a finding that these defendants breached a known duty to disclose, as the district court made no finding that these defendants ever made or assisted a false discovery request." Crowe Sanctions I, 151 F.3d at 238. We remanded to the district court for consideration of whether there was a "more supportable finding of other conduct that would constitute bad faith," i.e., Burns' statement at the July 11 meeting that $6.2 million was far beyond any theory of insurance coverage.3 Id. at 239-40. We stated:

In reaching its decision, the district court should address specifically the manner in which the actions of Burns, and, more importantly, Bieck and Wright, can be equated to a misrepresentation for purposes of the Louisiana Rules. In doing so, the court should pay particular attention to our command in [In the matter of Richard A.]Thalheim [853 F.2d 383 (5th Cir. 1988)] that such rules are to be read strictly, resolving all ambiguities in favor of the attorney.

Id. at 241 n.40.

On remand, the district court found breaches of the following duties: honesty and fair dealing to opposing counsel (Louisiana Professional Conduct Rules 3.4, 4.1, and 8.4), and candor to the tribunal (Rules 3.3, 8.3, and...

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