GANTS, C.J.
The issue presented in this case is the scope of a judge's authority under the inherent powers of the court to order an attorney for a party to pay the other parties' attorney's fees as a sanction for the attorney's misconduct where that sanction is not authorized by any statute or court rule, and where the attorney has not violated a court order or rule of procedure. We conclude that a judge may exercise the court's inherent power to sanction an attorney with an assessment of attorney's fees only if the attorney has engaged in misconduct that threatens the fair administration of justice and the sanction is necessary to preserve the judge's authority to administer justice. Because we conclude that the judge abused his discretion in exercising the court's inherent powers to sanction the attorney under the circumstances in this case, and that the attorney's alleged misconduct was more appropriately addressed by a referral to the Board of Bar Overseers (board), we reverse the judge's order imposing sanctions.
Background. Attorney Richard Goren was the attorney for Cheng Lee Co., Inc. (Cheng Lee), one of the plaintiffs in a complex litigation in the Superior Court arising out of the attempted sale of three supermarkets in the Boston area (the Super 88 stores). Eight cases, later consolidated, were brought by three groups of plaintiffs: the "trade creditors" (vendors of the Super 88 stores, including Cheng Lee, the "Hop Lee" plaintiffs, and the "Tin World" plaintiffs); the "workers" (former employees of the Super 88 stores asserting class action wage claims); and the "asset purchasers" (aggrieved attempted purchasers of the Super 88 stores). The cases were brought against three groups of defendants: the "Super 88 defendants" (corporate entities and principals of the Super 88 stores); the "Hong Kong Supermarket defendants" (the prospective purchasers of the Super 88 stores); and the "lenders" (financial institutions that lent money to the Super 88 defendants).
On December 10, 2010, counsel for all parties in the litigation appeared in court for a conference pursuant to Mass. R. Civ. P. 16,
Prior to March 18, the parties had reached a final settlement agreement, which they had intended to sign and file with the court. Under the terms of the settlement agreement, the lenders agreed to release their claims to a security interest in the Super 88 store located in the Dorchester section of Boston in exchange for a release of the claims of all plaintiffs in the consolidated cases. From the proceeds of the sale of the Dorchester store to one of the asset purchasers in settlement of its claims, Cheng Lee was to receive $650,000; the Hop Lee plaintiffs were to receive $264,000; the Tin World plaintiffs were to receive $313,395; and the workers were to receive $950,000, but $500,000 would not be paid for six months. This would leave a balance of approximately $7 million for the lenders from the sale of the other two Super 88 stores.
On March 18, however, counsel appeared in court and announced that there had been a "breakdown in the settlement discussions" because, days earlier, they had learned of a solicitation letter that Goren had sent out the week before to 106 unsecured creditors of the Super 88 defendants that had been identified on a 2009 bankruptcy schedule.
The Tin World and Hop Lee plaintiffs and the Super 88 defendants moved for sanctions against Goren on the grounds that he had violated the rules of professional conduct
Goren replied that sanctions were unwarranted because he had not violated any ethical rule or court order or committed a breach of any agreement with the other parties, and because jurisdiction for sanctioning attorneys for ethical violations lies with the board. He also denied that he had had any intention to "torpedo" the settlement.
The judge ordered Goren to "reimburse all parties in the consolidated cases their necessary and reasonable attorney[']s fees and expenses incurred from December 10, 2010 through April 8, 2011 in connection with the effort to settle the litigation and respond to the solicitation by Attorney Goren."
The judge noted that, "[i]n a technical sense," he did not have jurisdiction to rule on compliance with the rules of professional conduct, but he concluded that the content of the rules "may inform the [c]ourt's assessment of whether Goren acted unreasonably such as to have impeded `the full and effective administration of justice' and `delay[ed] the adjudication of legitimate claims and defenses ... and squander[ed] limited judicial resources.'" The judge found that "[u]nquestionably, Goren did so."
The judge stated that he had "placed on hold [his] earlier effort to move the consolidated cases to prompt trial on counsel's representation in December, joined by Goren, that they had agreed on a settlement framework but that time was needed to finalize it." He did so in reliance "on the good faith of all counsel, as officers of the [c]ourt, in representing to the [c]ourt that they were engaged diligently in the global settlement effort." He found that "but for one participant," impliedly Goren, "they were in fact so engaged."
He found that the settlement negotiations had been "conducted in confidence because of the parties' awareness that if additional claimants appeared, the finite settlement fund would be further diluted and (if a critical mass of new claims were filed) a bankruptcy petition could be triggered that would have left all the plaintiffs without a practical remedy." He also found that, in these circumstances, "the very act of solicitation and its communication of the prospect of a recovery by third parties breached the assumption of confidentiality, which was central to the prospect of achieving settlement."
The judge found that Goren "appeared to have ... violat[ed]" Mass. R. Prof. C. 4.2, as amended, 437 Mass. 1303 (2002), by soliciting five creditors that Goren knew or should have known
The judge further concluded that "[t]he [c]ourt has been materially prejudiced" by Goren's conduct, writing:
In addition to allowing in part the motions for sanctions and ordering sanctions against Goren, the judge referred a copy of his order to the board for its review.
Goren appealed, and we granted direct appellate review.
Discussion. Massachusetts generally follows the "American rule" and denies recovery of attorney's fees unless such fee-shifting is authorized by contract, statute, or court rule. See Police Comm'r of Boston v. Gows, 429 Mass. 14, 17 (1999) (Gows); Preferred Mut. Ins. Co. v. Gamache, 426 Mass. 93, 95 (1997). In some circumstances, a judge in a civil case is expressly authorized by statute or rule to sanction an attorney for misconduct by requiring the attorney to pay opposing counsel's fees. A judge may award an adverse party reasonable attorney's fees and other costs upon a finding that "all or substantially all of the claims, defenses, setoffs or counterclaims ... made by any party who was represented by counsel ... were wholly insubstantial, frivolous and not advanced in good faith." G. L. c. 231, § 6F. See Mass. R. Civ. P. 11 (a), as amended, 456 Mass. 1401 (2010) (attorney may be subjected to "appropriate disciplinary action" for wilful violation of rule requiring that attorney not sign pleading unless "to the best of his knowledge, information, and belief there is a good ground to support it; and that it is not interposed for delay"). A judge is also granted abundant authority pursuant to Mass. R. Civ.
In this case, the judge assessed attorney's fees against Goren without the authority of any statute or rule, without finding Goren in contempt of court, and in the absence of any contractual arrangement among the parties authorizing the assessment of attorney's fees. The judge in his decision imposing sanctions on Goren quoted the legal standard we declared in Beit, noting that a judge, through the exercise of the court's inherent powers, may sanction an attorney by the award of attorney's fees "as necessary to secure the full and effective administration of justice." Beit, 385 Mass. at 859, quoting O'Coins, Inc. v. Treasurer of the County of Worcester, 362 Mass. 507, 514 (1972). But the legal issue in Beit was simply whether a judge, through the exercise of inherent powers, could sanction an attorney for failing to appear at trial. That was effectively a violation of a court order, because when a judge sets a date for trial, and no continuance is sought or allowed, the judge is implicitly ordering counsel in the case to appear on that date for trial, and the counsel's failure to appear, without excuse, is plainly grounds for sanction. See Beit, supra at 859-860 ("authority to make the court's lawful orders effective" includes authority to sanction attorney for failure to appear). Goren did not violate any court order; nor did he engage in any misconduct in the court room. Therefore, this case tests the limits of a judge's inherent powers to sanction in a way that Beit did not, and requires us to revisit the scope of the court's inherent powers.
We have held that a judge has the inherent power to assess
Under Federal law, a judge may exercise the inherent powers of the court to assess attorney's fees against an attorney as a sanction for misconduct where the attorney has "willful[ly] disobe[yed]" a court order or where the attorney has "acted in bad faith, vexatiously, wantonly, or for oppressive reasons." Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991), quoting Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 258-259 (1975). See Gows, 429 Mass. at 18, quoting Newman v. Piggie Park Enters., Inc., 390 U.S. 400, 402 n.4 (1968) (noting that under Federal law, "[c]onduct has been held to justify an award of attorney's fees where a party has acted `in bad faith'"). In Chambers, the bad faith conduct that warranted the assessment of attorney's fees — which included but went beyond violations of court orders and other misconduct that could be sanctioned under Federal statutes and rules — was egregious. See Chambers, supra at 35-42, 58 (affirming award of almost $1 million in attorney's fees against litigant who tried "first, to deprive [the Federal District Court] of jurisdiction [by acts of fraud on the court] and, second, to devise a plan of obstruction, delay, harassment, and expense sufficient to reduce [opposing party] to a condition of exhausted compliance"). However, there appears to be no Federal rule defining what constitutes "bad faith" for the purpose of justifying a court's award of attorney's fees based on the court's inherent powers. See id. at 63 (Kennedy, J., dissenting) (only limitation on court's exercise of inherent power to impose sanctions "appears to be a finding at some point of `bad faith,' a standard the Court fails to define"). We recognize that "bad faith" alone is too vague a standard to establish the scope of a judge's inherent power to assess attorney's fees against an attorney who is not in violation of a court order, statute, or rule of procedure.
A judge's inherent powers — including the inherent power to assess attorney's fees for misconduct — must be broad enough to enable a judge to ensure the fair administration of justice. See Avery v. Steele, 414 Mass. 450, 457 (1993), quoting New England Novelty Co. v. Sandberg, 315 Mass. 739, 746 (1944) ("`[C]ourt[s]
The inherent powers necessary to preserve the court's authority to accomplish justice include the power to sanction an attorney for failing to comply with an order of the court and for undue delay in compliance. See Sommer v. Maharaj, 451 Mass. 615, 620-622 (2008), cert. denied, 556 U.S. 1235 (2009) ("extreme delay in payment of the judgment" warranted forfeiture of party's right to be heard); Gows, 429 Mass. at 17-19; Beit, 385 Mass. at 859-860; Commonwealth v. Rogers, 46 Mass.App.Ct. 109, 112
The judge in this case essentially found that Goren, by sending the solicitation letter, committed a breach of the "assumption of confidentiality" that was "central to the prospect of achieving settlement," and thereby thwarted a settlement that was on the verge of being executed, which wasted three months of attorneys' time that had been invested in negotiating the settlement, and "materially prejudiced" the court by delaying the judge's effort to move the consolidated cases towards trial. Further, although the judge recognized that he had no jurisdiction "[i]n a technical sense" to decide whether Goren had violated the rules of professional conduct, he nonetheless essentially found that Goren had violated these rules, and the judge relied on these violations to demonstrate that Goren had acted unreasonably to impede "the full and effective administration of justice." We review the judge's imposition of sanctions under the court's inherent powers for abuse of discretion. See Chambers, 501 U.S. at 55. "[A] judge's discretionary decision constitutes an abuse of discretion where we conclude the judge made `a clear error of judgment in weighing' the factors relevant to the decision, ... such that the decision falls outside the range of reasonable alternatives" (citation omitted). L.L. v. Commonwealth, 470 Mass. 169, 185 n.27 (2014).
We know of no other case, nor has one been cited by the parties or amicus, where a judge sanctioned an attorney pursuant to the inherent powers of the court for conduct that resulted in a breakdown of settlement negotiations where there was no breach of a settlement agreement or confidentiality agreement, and no violation of an order of the court or rule of procedure.
A settlement agreement, especially in a case as complex as this, no doubt would spare the court the time and resources that would otherwise be devoted to trying the case. But an attorney's conduct during settlement negotiations that results in the failure of those negotiations is not subject to sanctions under the judge's inherent powers where the judge is not participating in those negotiations, because the failure of settlement negotiations does not threaten a judge's ability to ensure the fair administration of justice.
The judge here determined that Goren committed a breach of the "assumption of confidentiality" that was necessary to the entry of a settlement agreement, but where no confidentiality agreement was entered into and where confidentiality was not required by an order of the court, the inherent powers of the court are not properly exercised to sanction the breach of such an assumption.
The judge also found that Goren violated Mass. R. Prof. C. 4.2 by sending his solicitation letter to a few prospective clients who were already represented by counsel in settlement negotiations. The judge recognized that "[i]n a technical sense" the adjudication of an alleged violation of an ethical rule rests solely with the board and this court, and that a judge does not have jurisdiction to rule on issues of compliance.
The judge's finding that Goren committed "a fundamental breach of his duty of candor to the [c]ourt," in violation of rule 3.3, calls for separate analysis, because this rule prohibits an attorney from making a knowing false statement to a court, and it is plain that the inherent powers of the court include the authority to sanction an attorney for such misconduct, regardless of the adjudication of any complaint before the board for violation of this rule. See Rockdale Mgt. Co. v. Shawmut Bank, N.A., 418 Mass. 596, 598 (1994) ("When a fraud on the court is shown through clear and convincing evidence to have been committed in an ongoing case, the trial judge has the inherent power to take action in response to the fraudulent conduct," and "has broad discretion to fashion a judicial response warranted by the fraudulent conduct"); Munshani, 60 Mass. App. Ct. at 718-722. See also Chambers, 510 U.S. at 46, quoting Universal Oil Prods. Co., 328 U.S. at 580 ("if a court finds `that fraud has been practiced upon it, or that the very temple of justice has been defiled,' it may assess attorney's fees against the responsible party"). The judge did not specify what he found to constitute this breach of Goren's duty of candor but we need not remand for such a finding, because the only finding that might support the exercise of the judge's inherent powers to sanction — a finding that, when the attorneys represented to the judge that they were exploring settlement of the case, Goren knowingly misled the judge because Goren knew at the time that he intended to sabotage any possible settlement by sending out the solicitation letter — is not supported by the information presented to the court. Although there was ample information to support a finding that Goren should have recognized that his sending of the solicitation letter put at risk the settlement agreement that he claimed in the letter he was "about to conclude" for his client, there is no information to suggest that Goren sought settlement discussions to procure delay in the litigation, knowing that he would sabotage any possible settlement.
Conclusion. For the reasons stated, we reverse the judge's
So ordered.