Case 2.1 Scott v. Carpanzano United States Court of Appeals, Fifth Circuit, 2014
ID: 423309 • Letter: C
Question
Case 2.1
Scott v. Carpanzano
United States Court of Appeals, Fifth Circuit, 2014 WL 274493 (2014).
Background and Facts
When is certified mail used? Rick Scott deposited $2 million into an escrow account maintained by a company owned by Salvatore Carpanzano. Immediately after the deposit was made, in violation of the escrow agreement, the funds were withdrawn. When Scott was unable to recover his money, he filed a suit against Salvatore Carpanzano and others, including Salvatore’s daughter Carmela Carpanzano. In the complaint, Scott made no allegations of acts or knowledge on Carmela’s part. Salvatore failed to cooperate with discovery and did not respond to attempts to contact him by certified mail, regular mail, or e-mail. Salvatore also refused to make an appearance in the court, and did not finalize a settlement negotiated between the parties’ attorneys. Carmela denied that she was involved in her father’s business or the Scott transaction. The court found that the defendants had intentionally failed to respond to the litigation and issued a judgment for more than $6 million in Scott’s favor. The defendants appealed to the U.S. Court of Appeals for the Fifth Circuit.
In the Words of the Court …
PER CURIAM.
* * * *
A willful default is an intentional failure to respond to litigation. The district court found that [the] Defendants willfully defaulted based on evidence that the Defendants were aware of the proceedings against them and that [their] attorneys were specifically instructed not to enter an appearance [participate] in this case. [Emphasis added.]
The evidence substantially supports the district court’s finding as to Mr. Carpanzano. First, Mr. Carpanzano’s first attorney withdrew [from the case] because Mr. Carpanzano failed to cooperate with the discovery process and refused to appear as requested and ordered. Second, * * * Mr. Carpanzano instructed his second set of attorneys to negotiate settlement of this matter but not to enter an appearance in the district court. Significantly, Mr. Carpanzano never denies this allegation. Third, * * * Mr. Carpanzano and his attorneys were well aware that the case was proceeding toward default and that they were in communication with each other during this time. Fourth, * * * once final execution of settlement papers was at hand, Mr. Carpanzano also ceased communication with his second set of attorneys and did not finalize the settlement. Finally, other than ambiguously suggesting that a health condition (unsupported by any evidence of what the condition was) and absence from the country (unsupported by any evidence that electronic communication was not possible from that country) prevented him from defending this action, Mr. Carpanzano offers no real reason why he did not answer the * * * complaint.
* * * *
By contrast, the record does not support the district court’s finding that * * * Ms. Carpanzano also willfully defaulted.
* * * Ms. Carpanzano repeatedly indicated that [she was] relying on Mr. Carpanzano * * * to make sure [her] interests were protected. Nothing in the record contradicts this assertion. While [her] reliance on Mr. Carpanzano acting with the attorneys he retained may have been negligent, it does not amount to an intentional failure to respond to litigation.
* * * *
* * * [Furthermore] the * * * complaint * * * contains no factual allegations of acts or omissions on the part of Ms. Carpanzano. It does not allege that she ever was in contact with Scott, that she was in control of the * * * escrow account, or that she wrongfully transferred any funds out of the account. Nor does it allege any intent or knowledge on the part of Ms. Carpanzano * * *. Indeed, an examination of the complaint reveals that there is not a sufficient basis in the pleadings for the judgment * * * entered against Ms. Carpanzano.
The defenses presented by Ms. Carpanzano to the district court assert that she had no knowledge of the details of her father’s business transactions, she did not personally enter into any contracts with Scott or seek to defraud him, and * * * she had limited involvement in the facts of this case.
* * * *
* * * Even if Scott were able to prove the entirety of the * * * complaint, we fail to see how it would justify a judgment * * * against Ms. Carpanzano.
Decision and Remedy
The U.S. Court of Appeals for the Fifth Circuit affirmed the judgment against Salvatore, but reversed the decision against Carmela. Scott had made no allegations of acts on Carmela’s part.
The Legal Environment Dimension
Did Carmela Carpanzano meet the minimum acceptable standard for ethical business behavior? Explain.
The Ethical Dimension
Are the defendants’ actions likely to affect their ability to profit from their business in the long run? Discuss.
PLEASE ANSWER THE TWO QUESTIONS: THE LEGAL ENVIRONMENT DIMENSION AND THE ETHICAL DIMENSION QUESTONS
Explanation / Answer
Here the answer is “no”. We can’t say carpanzano has acted to meet the requirements of minimum standards of ethical business behavior. This is because she was not acting honestly, failed to respond to the litigation. She also didn’t act fairly by refusing to appear in the court. There was also no honesty in behavior as she ceased the communication with her attorneys & also didn’t finalize the settlement
This is because, ethical business behavior is acting in the way that is in line with what society & individuals think as good values. It is considered to be good for business and respect for key moral value like honesty, fairness, equality, dignity, diversity & individual rights.
Hence comparing all the above behavior & integrating them with the business behavior definition shown above, we can conclude that carpanzano didn’t act to satisfy the requirements of ethical business behavior.
These kinds of behaviors of the defendants can result in damaging the relationships, tarnishing the reputations, and also eating huge amount of money, time & talent.
These acts of the defendants can result in loss of future profits and future good will of the business as well. Any business will be having the goal to maximize its profits in the long run or in the future. In this case carpanzano gave importance to his short run goals by making wrong usage of Scott’s money. Due to judgment of punitive damages of Salvatore and subsequent likely bad publicity, the profits of his business will e sorely affected going forward.
The conclusion we can draw from this case is that over emphasizing on short term benefits is the most common cause of ethical problems in the business.
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