State v. Carter

Decision Date07 December 1995
Docket NumberNo. 49A05-9506-CV-207,49A05-9506-CV-207
Citation658 N.E.2d 618
PartiesSTATE of Indiana, Appellant-Defendant, v. Debbie CARTER, Individually and Kayla Woods, by her next friend and natural mother, Debbie Carter, Appellees-Plaintiffs.
CourtIndiana Appellate Court

SHARPNACK, Chief Judge.

The State brings this case before us on interlocutory appeal, challenging the trial court's award of sanctions against it for failing to mediate in good faith as required by the Alternative Dispute Resolution Rules ("A.D.R. rules"). We consolidate and restate the issues raised as whether the trial court erred in sanctioning the State. 1 We reverse.


The facts relevant to the interlocutory appeal follow. Plaintiff, Debbie Carter, brought a negligence claim against the State on behalf of herself and her daughter after she slipped and fell while holding her daughter in a branch of the Bureau of Motor Vehicles. The State's answer denied the substance of Carter's allegations and asserted several affirmative defenses, including contributory negligence, lack of proximate cause of the injuries, and lack of notice of the allegedly dangerous condition.

Upon Carter's motion, the trial court ordered the cause to be submitted for mediation. Deputy Attorney General Amy Johnson, who represented the State, spoke with her supervisor prior to mediation and had authority to settle the case for a specified amount.

On January 30, 1995, the mediation conference was held at the office of Mediator Eugene Maley. During the course of the mediation, the parties remained approximately $20,000 apart in their offers to settle and failed to reach an agreement. Later that day, Johnson made a formal offer of judgment for $3000, the largest amount she had offered during mediation. Carter did not accept this offer.

On February 1, 1995, Carter moved for sanctions against the State on the grounds that the State had "failed to act in good faith in making a reasonable attempt to resolve this case." Record, p. 17. Without holding a hearing, the court granted the motion on February 3, 1995, stating:

"IT IS THEREFORE ORDERED ADJUDGED AND DECREED that Plaintiffs' Motion for Costs and Sanctions is granted, and the defendant is hereby ordered to pay the costs of said mediation and sanctions are to be levied against the defendant for failure to act in good faith."

Record, p. 18. A hearing was set for April 6, 1995.

On February 7, 1995, the State filed a motion to set aside the award. The court set a hearing for the State's motion on April 6, 1995, the same day as the previously scheduled hearing on the sanctions.

On April 6, 1995, the trial court heard oral arguments on the motion to set aside the sanctions. 2 The following day, the court denied the State's motion to set aside the earlier order and assessed the sanctions against the State in the amount of $500.00 for attorney's fees and $212.50 for mediation costs. The State brings this interlocutory appeal of the court's order imposing sanctions in the form of fees and costs pursuant to Ind. Appellate Rule 4(B)(1).


The issue before us is whether the trial court erred in sanctioning the State for failure to act in good faith. Generally when reviewing cases involving a sanction against one party made at the request of the opposing party, we apply an abuse of discretion standard. See Nesses v. Specialty Connectors Co. (1990), Ind.App., 564 N.E.2d 322, 327. The trial court commits an abuse of discretion only when it reaches an erroneous conclusion and judgment--that is to say, one which is clearly against the logic and effect of the facts or the reasonable, probable deductions which may be drawn from the facts. Boles v. Weidner (1983), Ind., 449 N.E.2d 288, 290.

The State contends that a determination of bad faith should require a specific finding of misconduct. Specifically, the State argues that the record is devoid of any evidence of bad faith because the unwillingness to settle during mediation does not constitute evidence of bad faith. Also, the State maintains that it is immune from punitive sanctions such as those the trial court imposed. However, Carter argues that the State did not mediate in good faith because a State's representative with the authority to settle was not present during mediation and because the State was not in a position to mediate. Moreover, Carter maintains that the State is not immune from sanctions in this case.


First, the State argues that the trial court erred in imposing sanctions because there was insufficient evidence from which it could conclude that the State acted in "bad faith." Although the trial court does not explicitly state the rule under which it imposed sanctions, we presume it acted pursuant to Ind. Alternative Dispute Resolution Rule 2.11. This rule states:

"Upon petition by either party, the court may impose sanctions against any attorney, or party representative who fails to comply with these rules, limited to assessment of mediation costs and/or attorneys' fees relevant to the process."

A.D.R. 2.11.

This rule authorizes a trial court to impose sanctions against a party who fails to comply with the other mediation rules. One such rule is 2.1, which states, "[p]arties and their representatives are required to mediate in good faith." A.D.R. 2.1. While Indiana courts have not yet directly addressed the issue of bad faith and sanctions in mediation under the A.D.R. rules, the issue has been litigated in other contexts.

Bad faith amounts to more than bad judgment or negligence; "[r]ather it implies the conscious doing of wrong because of dishonest purpose or moral obliquity.... [I]t contemplates a state of mind affirmatively operating with furtive design or ill will." Oxendine v. Public Service Co. (1980), Ind.App., 423 N.E.2d 612, 620. Since a bad faith determination inherently includes an element of culpability, a finding of bad faith should require more than the unsubstantiated allegations of an adverse party. See Island Entertainment, Inc. v. Castaneda (1994), Tex.Ct.App., 882 S.W.2d 2, 5, reh'g denied, error denied (holding that the trial court did not act within its power when it sanctioned appellants where there was no evidence that appellants mediated in bad faith).

Carter submitted no evidence of bad faith with the motion for sanctions. 3 Moreover, the parties stipulated that no evidence was "heard or taken" at the hearing after the sanctions had been imposed. Supp. Record, p. 10. Indeed, we find no evidence anywhere in the record itself to support the court's "bad faith" determination. Rather, the only evidence in the record of what transpired at the mediation conference is the report of the mediator submitted to the court on March 3, 1995. The report stated that "[t]he mediation conference was conducted in accordance with procedures provided in the A.D.R. Rules." Record, p. 20. Because the report states that the rules were complied with, it implies that the parties mediated in good faith pursuant to A.D.R. 2.1. However, there is no evidence that the court considered this report in rendering its decision after the hearing. In fact, the court wholly failed to mention the report or to set forth any legal or factual basis for its finding that the State mediated in bad faith.

Accordingly, there is no evidentiary basis to support the trial court's finding of "bad faith" against the State. Because Carter bore the burden of proof on these issues, the lack of evidence should have been fatal to her motion. See Watson v. Thibodeau (1990), Ind.App., 559 N.E.2d 1205, 1211.

Additionally, Carter argues that the A.D.R. rules require a person with settlement authority to be present during mediation. A.D.R. 2.7(B)(2). By statute, the governor is the sole authority to bind the State in a legal settlement. Ind.Code § 34-4-16.5-13. He is, therefore, the only State official having any settlement authority. Both parties agree, however, that it would be impracticable to expect the governor to appear in person at all of the State's mediation sessions. As a result, a substitute representative for the State is acceptable during most sessions. Nevertheless, Carter maintains that attendance at the mediation by Deputy Attorney General Amy Johnson amounted to bad faith because her supervisor, David Hurley, was not also present. However, Carter offers no explanation of why the presence of Hurley rather than Johnson would have been acceptable since technically only the governor has settlement authority. Practically speaking, Johnson did have the ability to settle for a specified amount on behalf of the State after speaking with Hurley prior to mediation. The State submitted a Confidential Mediation Statement, participated in mediation, and raised its initial offer from $2000 to $3000. It is not for us to decide whether the State's assessment of the value of the case was reasonable, only that the State, via Johnson, was prepared to settle at some point. That it was not a point to the liking of Carter is of no consequence.

The Colorado Supreme Court addressed this issue in Halaby, McCrea & Cross v. Hoffman (1992), Colo., 831 P.2d 902. In Halaby, the Colorado Supreme Court held that the trial court abused its discretion by sanctioning a law firm for not participating in a court-ordered settlement conference in good faith. In its settlement conference statement, the defendant advised the court that the "Plaintiffs' claims are frivolous and groundless ... Accordingly, Defendant is unprepared at the present time to make a settlement offer." Id. at 904. During the settlement conference, the plaintiffs...

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