Opinion
No. 60919-0-I.
November 3, 2008.
Appeal from a judgment of the Superior Court for Whatcom County, No. 07-2-01006-4, Charles R. Snyder, J., entered November 16, 2007.
Affirmed in part, reversed in part, and remanded by unpublished opinion per Ellington, J., concurred in by Dwyer, A.C.J., and Appelwick, J.
UNPUBLISHED OPINION.
This appeal centers upon Civil Rule (CR) 11 sanctions imposed for alteration of evidence. The trial court imposed a monetary sanction and then, when the sanction went unpaid, dismissed the action in its entirety. The court did not err in imposing the monetary sanction, but the record is insufficient to support the dismissal sanction. We affirm in part, reverse in part, and remand for further proceedings.
BACKGROUND
This action was filed to enforce a noncompete agreement and to seek damages for trade secret misappropriation and tortious interference with business relationships.
Anderson Paper Packaging, Inc. employed Rick Johnson as a sales representative between 1994 and 1998. Johnson returned to Anderson Paper in January 2002. Anderson Paper contends Johnson signed a noncompete agreement upon his return. Anderson Paper's president Rick Anderson and its vice president Bob Cline declared that Johnson at first refused to sign, but that when Johnson was offered a signing bonus as consideration, he agreed to the noncompete agreement. The parties' understanding was allegedly memorialized in a letter dated January 5, 2001 delivered by Cline to Johnson on January 7, 2002. Johnson denies that he agreed, and denies he ever received the letter.
Anderson explained that the 2001 date was a clerical error.
Johnson did sign a noncompete agreement on December 4, 2002, for which he allegedly received assignment of additional lucrative accounts.
In 2007, Johnson left Anderson Paper for a job at a competitor, The Great Little Box Company (GLBC). Anderson Paper alleges that Johnson disclosed and used confidential information regarding customer identities, vendor identities, and pricing information during his employment with GLBC. Anderson Paper brought this action alleging breach of the noncompete agreement (against Johnson), misappropriation of trade secrets (against both Johnson and GLBC), tortious interference with business relationship (against GLBC), and conspiracy to tortious interference with business relationship (against both Johnson and GLBC).
Anderson Paper sought a temporary restraining order and preliminary injunction enforcing the noncompete agreement. The initial motion papers made no reference to the January 5 letter. Rick Anderson then submitted a second declaration, to which he attached the January 5 letter. The court granted the motion in part and denied it in part.
Johnson then moved for summary judgment on the noncompete claim, contending there was no January agreement and no consideration for the December agreement. The court granted the motion.
Subsequently it came to light that the January 5 letter had been submitted to the court bearing a letterhead the company was not using at the time the letter was allegedly written. Johnson moved for CR 11 sanctions. The court found:
1. Anderson Paper's Rick Anderson attached a letter to his sworn declaration that he manipulated by adding company letterhead prior to filing with the court. . . . Anderson took this action for the improper purpose of misleading the court and opposing parties[.] . . . [T]his action was therefore not well grounded in fact.
. . . .
A. The court determines that Rick Anderson and Anderson Paper violated CR 11 by submitting written evidence that is not well grounded in fact and/or was submitted for an improper purpose.
Clerk's Papers at 213-14.
The court imposed both evidentiary and monetary sanctions, ruling that at trial, Anderson Paper could not rely upon the January 5 letter or any discussions alleged to have occurred at the time the letter was allegedly delivered to Johnson, and ordered Rick Anderson and Anderson Paper to pay attorney fees and costs incurred by Johnson in responding to the noncompete claim and in bringing the CR 11 motion (a total of $24,348). The court cautioned Anderson Paper that if the sanction amount was not paid within 60 days, the court would dismiss its remaining claims. The 60 day time limit elapsed without payment. The court then dismissed the action with prejudice.
Anderson Paper appeals, challenging the order dismissing the noncompete claim on summary judgment, the amount of CR 11 monetary sanctions, and the dismissal of Anderson Paper's remaining claims after Anderson failed to pay the sanction.
ANALYSIS CR 11 Sanctions
CR 11(a) requires parties or attorneys to date and sign all pleadings, motions, and legal memoranda. Such signature constitutes the attorney's certification that:
to the best of the party's or attorney's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances: (1) [the pleading, motion, or memoranda] is well grounded in fact; (2) it is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law or the establishment of new law; (3) it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.
The determination of whether a violation of CR 11 has occurred is within the sound discretion of the trial court. If it appears the rule has been violated,
Doe v. Spokane Inland Empire Blood Bank, 55 Wn. App. 106, 110, 780 P.2d 853 (1989).
the court, upon motion or upon its own initiative, may impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or legal memorandum, including a reasonable attorney fee.
CR(11)(a).
The trial court retains broad discretion regarding the nature and scope of sanctions.
Miller v. Badgley, 51 Wn. App. 285, 303, 753 P.2d 530 (1988).
Anderson Paper does not assign error to two findings: that Anderson Paper manipulated the January 5 letter "for the improper purpose of misleading the court and opposing parties and that this action was therefore not well grounded in fact," and that Johnson expended $19,270 in attorney fees and costs in defending against the noncompete claim, plus $5,073 in attorney fees and costs incurred in bringing the CR 11 motion. Unchallenged findings of fact are verities on appeal.
State v. Hill, 123 Wn.2d 641, 644, 647, 870 P.2d 313 (1994).
Further, Anderson Paper does not challenge the court's conclusion that Anderson and Anderson Paper violated CR 11, nor the court's imposition of monetary sanctions.
Monetary Sanction
Anderson Paper challenges the sanction as excessive because it encompassed all the fees Johnson expended in defending the noncompete claim. Anderson contends the alteration to the letter was minor and that the letter "was never the primary basis of Anderson's case." Whether expenses were incurred because of a violation of CR 11 is a question of fact, which we review for substantial evidence.
Br. of Appellant at 15.
Ridgeview Properties v. Starbuck, 96 Wn.2d 716, 719, 638 P.2d 1231 (1982).
To be enforceable, a noncompete agreement must be supported by independent consideration. On that issue, the initial declarations of Anderson and Cline conflicted with that of Johnson. But the January 5 letter clearly stated that Johnson agreed to a noncompete in exchange for a signing bonus, and it is undisputed that Johnson received a signing bonus.
Labriola v. Pollard Group, Inc., 152 Wn.2d 828, 836, 100 P.3d 791 (2004).
No other documentary evidence supported Anderson Paper's theory of consideration. Both parties addressed the letter in their summary judgment briefing. The record supports the court's finding that Anderson Paper relied upon the letter throughout the litigation and its implicit finding that the letter was a central part of Anderson Paper's noncompete claim. The court therefore did not err in awarding the fees incurred by Johnson in defending against that claim.
Dismissal Sanction
Anderson Paper maintains that dismissal of its remaining claims, some of them asserted only against GLBC, was an extreme measure and not the "narrowly tailored relief demanded by CR 11."
Br. of Appellant at 19.
Where CR 11 sanctions are appropriate, the trial court "must of necessity determine priorities in light of the deterrent, punitive, compensatory, and educational aspects of sanctions as required by the particular circumstances." An appropriate sanction may be payment of the other party's expenses and reasonable attorney fees. Dismissal is also a legitimate sanction under CR 11, when it conforms to due process protections.
Miller, 51 Wn. App. at 303.
CR 11(a); accord Miller, 51 Wn. App. at 303.
See Biomed Comm, Inc. v. State Dept. of Health Bd. Of Pharmacy, No. 60751-1-I, 2008 WL 4560734 (Wash.Ct.App. Oct. 13, 2008). The case law on the federal counterpart to CR 11 is to the same effect. "The present CR 11 was modeled after and is substantially similar to the present Federal Rule of Civil Procedure 11 (Rule 11). We may thus look to federal decisions interpreting Rule 11 guidance in construing CR 11." Bryant v. Joseph Tree, Inc., 119 Wn.2d 210, 218-19, 829 P.2d 1099 (1992) (citing Miller, 51 Wn. App. at 299). Dismissal is available under Rule 11. See, e.g., Williams v. Chicago Bd. of Educ., 155 F.3d 853, 857 (7th. Cir. 1998) ("Dismissal is a very harsh sanction, however, and should be used `only in extreme situations, when there is a clear record of delay or contumacious conduct, or when other less drastic sanctions have proven unavailing.'") (quoting Dunphy v. McKee, 134 F.3d 1297, 1299 (7th Cir. 1998)).
See Hovey v. Elliot, 167 U.S. 409, 413, 444, 17 S. Ct 841, 42 L. Ed. 215 (1897); Bryant, 119 Wn.2d at 220.
In deciding upon a CR 11 sanction, the trial court should impose the least severe sanction necessary to carry out the purpose of the rule. Washington cases require findings supporting the determination that a CR 11 violation occurred. In addition, numerous courts have emphasized the importance of an adequate record for appellate review, especially when the sanction applied is significant.
Bryant, 119 Wn.2d at 225.
Id. at 220.
See, e.g., Biomed Comm, 2008 WL 4560734 at *2 (faulting an order of dismissal with prejudice which "fail[ed] to reflect any consideration of whether dismissal was the least severe sanction adequate to serve the purpose"); Thomas v. Capital Sec. Services, Inc., 836 F.2d 866, 883 (5th. Cir. 1988) ("Like a sliding scale, the degree and extent to which a specific explanation must be contained in the record will vary accordingly with the particular circumstances of the case, including the severity of the violation, the significance of the sanctions, and the effect of the award.").
Here, the court made no findings on the dismissal sanction, and did not otherwise explain why judgment against Anderson was insufficient or why dismissal was the least severe sanction adequate to serve the purpose of CR 11. Without such findings, we are left to guess at the court's rationale. Meaningful appellate review is thus impossible. We reverse the dismissal order and remand for the trial court to reconsider the sanction.
Summary Judgment
Anderson Paper also assigns error to the summary judgment dismissal of its noncompete claim. However, Anderson Paper does not challenge the court's finding that the noncompete claim was "not well grounded in fact." It is thus a verity on appeal, and leaves no genuine issue of material fact to be decided. We therefore affirm the judgment of dismissal on this claim.
Clerk's Papers at 213.
GLBC's Request for Attorney Fees on Appeal
GLBC seeks attorney fees for a frivolous appeal under RAP 18.9. Given our disposition of the issues, Anderson Paper's appeal was not frivolous and we award no fees.
CONCLUSION
We affirm summary judgment dismissal of Anderson Paper's noncompete claim, affirm the order imposing monetary and evidentiary sanctions, reverse the order dismissing all claims for failure to pay the sanction as unsupported by findings, and remand for further proceedings.
Affirmed in part, reversed in part, remanded.