Opinion
No. W1999-01771-COA-R3-CV.
Filed August 24, 2000. May 2000 Session.
A Direct Appeal from the Circuit Court for Shelby County No. 77595 T.D., The Honorable Robert L. Childers, Judge.
Affirmed and remanded.
Mark Vorder-Bruegge, Jr., Memphis, Union Planters Bank, For Appellant.
Richard Glassman, Memphis, John Burton Tigrett, For Appellee.
OPINION
This appeal involves a claim for Tenn.R.Civ.P. 11 sanctions. Defendant, Union Planters Bank (Bank), appeals the trial court's order denying its motion for sanctions against plaintiff's lawyers, Tim Edwards, and Glassman, Jeter, Edwards and Wade, P.C. (Attorneys).
This suit, which brought about Bank's motion for sanctions, was dismissed by the trial court on summary judgment. This Court affirmed the trial court, and the Supreme Court denied John Burton Tigrett's application for permission to appeal. See Tigrett v. Union Planters Nat'l Bank, 973 S.W.2d 208 (Tenn.Ct.App. 1997). Since our decision on the motions of sanctions is dependent upon the facts and law as established in our prior Opinion, we attach the prior Opinion hereto as an addendum, and it is incorporated herein by reference. As this Court noted, "The crux of Tigrett's complaint is that Union Planters, by virtue of its false and fraudulent misrepresentations to the court, procured the order authorizing the sale of the GOI stock." Id. at 211.
Bank asserts that Tigrett's complaint is frivolous and has absolutely no basis in the law. Bank argues that it was merely a stake holder and was seeking instructions as to whether the stock should be disposed of pursuant to the tender offer as demanded by the city and county. Bank also argues that the representations made to the court were true and that it merely furnished the court with information it had acquired concerning the saleability of the stock and its value.
On the other hand, Attorneys assert that there was proof that the stock was readily marketable and that Bank's assertions to the contrary were potentially misleading and only made for the purpose of inducing the court to order the disposition of the stock pursuant to the tender offer. Attorneys argue that they were asserting a legal theory that was a "nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law. . . ." Tenn.R.Civ.P. 11.02 (2). They also contend that a cause of action should exist against a party who grossly and intentionally misrepresents facts to a trial court or an appellate court and that they made this argument with the intention of establishing new law in Tennessee.
The trial court denied Bank's motion for sanctions, and Bank has appealed. The only issue for review is whether the trial court erred in denying the motion for sanctions.
Tenn.R.Civ.P. 11 requires all pleadings of a party represented by an attorney to be signed by at least one attorney of record in that attorney's individual name. Rule 11.02 provides, as pertinent to our inquiry:
11.02 Representations to Court. — By presenting to the court (whether by signing, filing, submitting, or later advocating) a pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, —
(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;
(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;
(3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery. . . .
Tenn.R.Civ.P. 11.03 states in pertinent part:
11.03 Sanctions If, after notice and a reasonable opportunity to respond, the court determines that subdivision 11.02 has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision 11.02 or are responsible for the violation.
(1) How Initiated.
(a) By Motion. A motion for sanctions under this rule shall be made separately from other motions or requests and shall describe the specific conduct alleged to violate subdivision 11.02. It shall be served as provided in Rule 5, but shall not be filed with or presented to the court unless, within 21 days after service of the motion (or such other period as the court may prescribe), the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected. If warranted, the court may award to the party prevailing on the motion the reasonable expenses and attorney's fees incurred in presenting or opposing the motion. Absent exceptional circumstances, a law firm shall be held jointly responsible for violations committed by its partners, associates, and employees.
* * *
(2) Nature of Sanction; Limitations. A sanction imposed for violation of this rule shall be limited to what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated. Subject to the limitations in subparagraphs (a) and (b), the sanction may consist of, or include, directives of nonmonetary nature, an order to pay a penalty into court, or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of some or all of the reasonable attorneys' fees and other expenses incurred as a direct result of the violation.
* * *
(3) Order. When imposing sanctions, the court shall describe the conduct determined to constitute a violation of this rule and explain the basis for the sanction imposed.
Rule 11 has been part of the Federal Rules of Civil Procedure since 1938, while Tennessee's version of Rule 11 became law in 1971. Tennessee's Rule 11 was not amended to conform to its federal counterpart until 1987. Con-Tech, Inc. v. Sparks, 798 S.W.2d 250, 252 (Tenn.Ct.App. 1990). Andrews v. Bible, 812 S.W.2d 284 (Tenn. 1991), appears to be the only Tennessee Supreme Court case dealing with Rule 11 sanctions. Because of the lack of Tennessee authorities on the subject, the Court looked to federal authorities for guidance. The Court said:
The certification which results from the attorney's signature on a motion, pleading, or other document is directed at the three substantive prongs of Rule 11: its factual basis, its legal basis, and its legitimate purpose. Schwarzer, "Sanctions Under the New Federal Rule 11 — A Closer Look," 104 F.R.D. 181, 186 (1985). See also, Note, "the Intended Application Of Federal Rule of Civil Procedure 11: An End To The Empty Head, Pure Heart Defense," 41 Vand.L.Rev. 343, 361-62 (1988). A signature signifies to the Court that the signer has read the pleading, motion, or other paper, has conducted a reasonable inquiry into the facts and the law, and is satisfied that the document is well-grounded in both, and is acting without any improper motive. Business Guides v. Chromatic Communications Ent., ___ U.S. ___, 111 S.Ct. 922, 929, 112 L.Ed.2d 1140 (1991); Cooter Gell v. Hart Marx Corp., 496 U.S. ___, 110 S.Ct. 2447, 2454, 110 L.Ed.2d 359 (1990). "The essence of Rule 11 is that signing is no longer a meaningless act; it denotes merit. A signature sends a message to the [trial judge] that this document is to be taken seriously." Business Guides, 111 S.Ct. at 930. The purpose of Rule 11 as a whole is to bring home to the individual signer his personal, nondelegable responsibility. "The message thereby conveyed to the attorney, is that this is not a team effort but in the last analysis, yours alone, precisely the point of Rule 11." Pavelic LeFlore v. Marvel Entertainment Group, 493 U.S. 120, 110 S.Ct. 456, 460, 107 L.Ed.2d 438 (1989).
* * *
The test to be applied in deciding whether an attorney's conduct is sanctionable, is one of objective reasonableness under all the circumstances, Business Guides, 111 S.Ct. at 933, and the reasonableness of the attorney's belief must be assessed in light of the circumstances existing at the time the document in question was signed. 104 F.R.D. at 189. The Advisory Committee notes to the federal version of Rule 11 state that "[t]he Court is expected to avoid using the wisdom of hindsight and should test the signer's conduct by inquiring what was reasonable to believe at the time [of signing]." Cruz v. Savage, 896 F.2d 626, 631 (1st Cir. 1990).
812 S.W.2d at 287-288 (emphasis in original).
Bible was decided before Rule 11 of the Federal Rules of Civil Procedure was amended in 1993. Tennessee amended its version of Rule 11 in 1995 to track the federal rule as amended in 1993. The rules now are identical and provide, among other things, a "safe harbor" protection period, the nonmandatory requirement for sanctions, and the requirement that if the sanctions are imposed, the conduct requiring sanctions must be described. As to the extension, modification, or reversal of existing law, the rule now requires that the signing individual certify that the document is warranted by a "nonfrivolous" argument, rather than the "good faith" argument of the pre-amendment rule. The 1993 Advisory Committee Notes provide some guidance as to the meaning of "nonfrivolous":
This establishes an objective standard, intended to eliminate any "empty-head pure-heart" justification for patently frivolous arguments. However, the extent to which a litigant has researched the issues and found some support for its theories even in minority opinions, in law review articles, or through consultation with other attorneys should certainly be taken into account determining whether paragraph (2) has been violated.
Appellate courts review Rule 11 under the "abuse of discretion" and "deferential" standard. Krug v. Krug, 838 S.W.2d 197, 205 (Tenn.Ct.App. 1992); Cooter and Gell v. Hartmarx Corp., 496 U.S. 384, 405 110 S.Ct. 2447, 2460-61, 110 L.Ed.2d 359 (1990); Ridder v. Springfield, 109 F.3d 288, 293 (6th Cir. 1997). The test for imposition of Rule 11 sanctions remains "whether the individual's conduct was reasonable under the circumstances." See Union Planters Bank v. LJ Development Co., Inc., 115 F.3d 378, 384 (6th Cir. 1997).
As noted in this Court's Opinion attached as an addendum hereto, in the underlying litigation Tigrett filed an amended and supplemental counter-claim against the bank alleging that the bank "had a fiduciary duty to give the parties to the agreement true and accurate information regarding the available market and the potential sales price of the GOI stock, and that Union Planters made a false representation concerning difficulty in obtaining quotes on the stock." It is also averred that Bank made false representations to the court that the stock was not saleable, that there was no market for the stock, and that the tender offer should be accepted.
There is no dispute that the underlying chancery court action was dismissed with prejudice by consent except for the counter-claim, which was dismissed without prejudice to the refiling of same. The complaint in the instant case was filed less than a month after the dismissal of the underlying action. It appears that the attorneys are asserting that since they had the unquestioned right in the underlying action to present their claims against the bank, the consent dismissal without prejudice to refiling the suit allowed them to litigate the same issues in the independent action seasonably filed. While this is a novel and somewhat tenuous theory and was implicitly rejected by this Court on appeal, we feel that it falls short of being frivolous. Under these circumstances, we cannot say that the trial court abused its discretion in refusing to award sanctions in this case.
Accordingly, the order of the trial court is affirmed, and the case is remanded to the trial court for such further proceedings as may be necessary. Costs of the appeal are assessed against the appellant, Union Planters National Bank.
_______________________________ W. FRANK CRAWFORD, P.J., W.S.
CONCUR:
_______________________________ DAVID R. FARMER, J.
_______________________________ HOLLY KIRBY LILLARD, J.