Opinion
No. C3-99-40.
Filed August 31, 1999.
Appeal from the District Court, Ramsey County, File No. 62-C1-97-008533.
Daniel T. Westerman, (for appellant)
Holly J. Newman, Barak J. Babcock, Moore, Costello Hart, P.L.L.P., (for respondents)
Considered and decided by Anderson, Presiding Judge, Toussaint, Chief Judge, Randall, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1998).
UNPUBLISHED OPINION
Appellant challenges the district court's judgment imposing sanctions against him, which was entered after the district court denied appellant's motion to vacate sanctions order. We affirm.
FACTS
Appellant Thomas M. Brudvig represented Recovery Equipment Sales Corporation (RES) and Jay Waalen in a suit against respondents Twin Cities Wrecker Sales, Inc., Rodney L. Pellow, Jean Pellow, and Richard M. Pellow for tortious interference with contractual relations, defamation, and slander. Respondents counterclaimed, alleging conversion, defamation, misappropriation of trade secret, breach of duty of loyalty, and deceptive trade practices. After plaintiffs' action against respondents was dismissed, respondents were permitted to proceed with their counterclaims.
Respondents scheduled depositions for July 16, 1998, but the depositions were postponed at Brudvig's request. Respondents rescheduled the depositions to July 21, 1998. A letter attached to the amended deposition notices requested that Brudvig notify respondents' attorney in writing if he was unable to attend the rescheduled depositions. Neither Brudvig nor his clients gave respondents' counsel written notification that they would not be attending, but none of them appeared for the depositions. Respondents then filed a motion for sanctions.
In moving to vacate the sanctions order again him, Brudvig alleged that he left respondents' counsel a voicemail message the day before the rescheduled depositions. Brudvig did not state the content of the alleged message, however, and respondents' counsel denied receipt of any message.
The sanctions motion was heard on August 5, 1998. Just before the hearing began, the district court informed respondents and their counsel that Jay Waalen, one of the plaintiffs, had filed bankruptcy that morning and that neither the plaintiffs nor Brudvig would be coming to the sanctions hearing. The district court granted respondents default judgment against plaintiffs and imposed sanctions against Brudvig, ordering him to pay respondents' attorney fees and costs for the deposition and the sanctions hearing.
Brudvig moved to have the sanctions order vacated. The district court stayed entry of judgment on the order pending a decision on Brudvig's motion. After a hearing, the district court denied the motion to vacate and directed entry of judgment on the sanctions order.
DECISION I. Hearing
Determining whether a court has jurisdiction is a question of law, and a reviewing court is not bound by the district court's legal conclusions. Vegemast v. DuBois , 498 N.W.2d 763, 764 (Minn.App. 1993).
Brudvig first argues that the district court did not have jurisdiction to hold a hearing on respondents' sanctions motion following notification that one of the plaintiffs had filed bankruptcy. Brudvig asserts that because the proceedings should have been stayed, the district court did not have jurisdiction to award sanctions against Brudvig at the hearing.
Brudvig represented both plaintiffs, RES and Waalen, in the original action. Only Waalen filed for bankruptcy. Respondents sought sanctions against both plaintiffs. A bankruptcy petition stays proceedings only against the bankruptcy petitioner and does not stay proceedings against co-obligors. See 11 U.S.C. § 362(a)(1) (1994) (stating filing bankruptcy petition stays all judicial proceedings against filer); see also Lynch v. Johns-Manville Sales Corp. , 710 F.2d 1194, 1196 (6th Cir. 1983) (stating co-obligors not entitled to automatic stay of proceedings as result of bankruptcy petition filed by other party). Thus, the district court did not err in holding the sanctions hearing because there was no reason to stay the proceeding against RES.
Even if both plaintiffs had filed bankruptcy, the district court would have had jurisdiction to proceed with a hearing on the motion for sanctions against Brudvig. In a factually similar case, the Seventh Circuit rejected the argument that a bankruptcy petition filed by a client deprives the court of jurisdiction to impose sanctions against the client's attorney. Fox Valley Constr. Workers' Fringe Benefit Funds v. Balog , 140 F.3d 661, 666 (7th Cir. 1998) ("[Appellant's] specious argument that the automatic stay protects his personal assets hardly merits the brief discussion we have given it.").
II. Eighth Amendment Excessive Fines Clause
Brudvig next asserts that these sanctions violate the Eighth Amendment's Excessive Fines Clause. Brudvig notes that although this was a civil sanction, the amendment should apply because it was a form of punishment.
Only sanctions payable to the government are potentially subject to the Eighth Amendment's Excessive Fines Clause. See Browning-Ferris Indus. of Vt., Inc. v. Kelco Disposal, Inc. , 492 U.S. 257, 268, 109 S.Ct. 2909, 2916 (1989) ("[T]he Excessive Fines Clause was intended to limit only those fines directly imposed by, and payable to, the government."). Here, the court ordered sanctions payable only to respondents. Thus, Brudvig's argument on this issue is without merit.
III. Minn. Stat. § 549.211/Minn.R.Civ.P. 11
Brudvig also asserts that his actions in this case did not constitute bad faith, and that he did not assert a frivolous claim or an unfounded position, as required for a sanctions order under Minn. Stat. § 549.211 (1998) or Minn.R.Civ.P. 11.
The district court did not award sanctions for bringing a frivolous action or proceedings in bad faith. Instead, the court was awarding discovery sanctions. Under Minn.R.Civ.P. 37.04, the district court shall order a party or the party's attorney to pay reasonable expenses, including attorney fees, for failure to appear for depositions. The only exception is where the failure to appear is substantially justified or circumstances make an award unjust. Minn.R.Civ.P. 37.04.
Here, respondents moved for sanctions after plaintiffs and Brudvig, their attorney, failed to appear for depositions. Neither the plaintiffs nor Brudvig appeared at the motion hearing. The sanctions imposed against Brudvig included expenses and fees for preparing for, and appearing at, both the depositions and the sanctions hearing. We find no merit to Brudvig's argument that sanctions should not be awarded in this case because the elements of Minn. Stat. § 549.211 and rule 11 were not met.
IV. Support for Sanctions
Finally, Brudvig asserts that the district court's decision to impose sanctions is unsupported by the record and that the sanctions are unreasonable.
The district court ordered Brudvig to pay $6,542.65 based on an affidavit submitted by opposing counsel. Opposing counsel later submitted an itemized list of their fees and expenses. Brudvig asserts that much of the opposing attorneys' time was spent reviewing the file and that this review enabled respondents to establish a basis for a default judgment of $581,000 against plaintiffs.
It is true that a portion of respondents' attorneys' time listed on the itemization sheet as preparation for depositions and preparation for the hearing likely included reviewing the file, and this review likely aided respondents' ability to prove their damages caused by plaintiffs. But, because neither plaintiffs nor Brudvig attended the hearing, Brudvig waived the right to contest the reasonableness of the fees requested. Based on Brudvig's failure, without excuse, to appear at the scheduled deposition and hearing, the district court acted within its discretion by imposing sanctions. See Cornfeldt v. Tongen , 262 N.W.2d 684, 697 (Minn. 1977) (stating district court has discretion in determining appropriate discovery sanctions).
Brudvig did bring a rule 60.02 motion to vacate the order imposing sanctions. He asserted that he was entitled to relief under Minn.R.Civ.P. 60.02(a) because he was unaware that respondents intended to seek sanctions against him personally. See Minn.R.Civ.P. 60.02(a) (stating court may vacate final judgment or order for "[m]istake, inadvertence, surprise, or excusable neglect"). The district court denied this motion.
We find no merit to Brudvig's argument that these sanctions constituted surprise. Before the sanctions hearing, respondents served a motion seeking default judgment against plaintiffs and "further sanctions as the Court may deem appropriate." The attached memorandum makes it clear that respondents were seeking discovery sanctions under rule 37.04. Under rule 37.04, such sanctions may be imposed against a party or the party's counsel. Brudvig should have been aware that he faced potential sanctions. The district court did not err by denying Brudvig's rule 60.02 motion. See Meyer v. Best W. Seville Plaza Hotel , 562 N.W.2d 690, 694 (Minn.App. 1997) (stating whether to grant rule 60.02 relief is within district court's discretion and reviewing court will not reverse that decision absent abuse of discretion), review denied (Minn. June 26, 1997); see also Nguyen v. State Farm Mut. Auto. Ins. Co. , 558 N.W.2d 487, 490 (Minn. 1997) (stating in order to obtain rule 60.02 relief, party must demonstrate reasonable excuse for failure to act).