Title: CALDWELL, III v. CUMMINGS

State: wyoming

Issuer: Wyoming Supreme Court

Document:

CALDWELL, III v. CUMMINGS2001 WY 10633 P.3d 1138Case Number: 00-283Decided: 11/06/2001

OCTOBER TERM, A.D. 2001

 

                                                                                                
   

 

DAN O. 
CALDWELL, III,

Attorney 
at Law,1 

Appellant(Plaintiff),

 

v.

 

MARTHA 
CLARK CUMMINGS

and LISA 
VICE, 

Appellees(Defendants).

 

 

Appeal 
from the District Court of Hot Springs County

The 
Honorable Gary P. Hartman, Judge

 

Representing 
Appellant: 

            
Dan O. Caldwell III, Thermopolis, Wyoming.

 Representing 
Appellees: 

John P. 
Worrall of Worrall, Bancroft & Greear, P.C., Worland, 
Wyoming.

 

 

Before 
LEHMAN, C.J., and GOLDEN, HILL, KITE, and VOIGT, JJ.

 
            
HILL, Justice.

 [¶1]      The attorney for 
Appellant, Owl Lumber, Inc. (Owl Lumber), challenges the jurisdiction of the 
district court to have entertained, and then granted, Appellees', Martha Clark 
Cummings and Lisa Vice, motion for sanctions under W.R.C.P. 11(c)(1)(A).2

 

[¶2]      We will reverse 
the order of the district court and remand with directions that the order 
imposing sanctions be vacated.

  

 

[¶3]      Owl Lumber states 
this issue:

 

1.  Whether the district court had 
jurisdiction over Appellees' MOTION FOR SANCTIONS where Appellees had failed to 
comply with W.R.C.P. Rule 11(c)(1)(A)1 [sic].

 

Appellees 
rephrase the issue thus:

            
1.  The sole issue in this 
case is whether or not the District Court committed error when considering 
Appellees' Motion for Judgment on the Pleadings, Memorandum in Support of Motion 
and Letter of May 21, 1999, as sufficient compliance with Wyoming Rule of Civil 
Procedure 11(c)(1)(A) such as to justify the sanctions imposed by this Court 
[sic] against counsel for the Appellant [Owl Lumber] in this 
matter.

 

 

[¶4]      We note at the 
outset that the provisions of the parallel federal rule and Wyoming's rule are 
identical.

 

[¶5]      On May 14, 1999, 
Owl Lumber filed its complaint for breach of contract and unjust 
enrichment.  The complaint alleged 
that Mercil Construction (Mercil) entered into a contract with Appellees to 
construct one residence and to remodel a second property.  Under that contract, the Appellees 
agreed to pay for goods and materials used in the contract work.  Mercil received $5,152.73 in goods from 
Owl Lumber to do the work.  Owl 
Lumber further alleged that Mercil had not paid for the goods in accordance with 
the contract between Mercil and Owl Lumber.  Owl Lumber also alleged that the 
Appellees were unjustly enriched by receipt of goods provided by Owl Lumber to 
Mercil.

 

[¶6]      On May 24, 1999, 
Appellees filed a motion for judgment on the pleadings, with respect to the 
unjust enrichment claim, based on our decision in Bowles v. Sunrise Home 
Center, Inc., 847 P.2d 1002, 1004-5 (Wyo. 1993).  In their brief, Appellees assert that 
the pleading was adequate to put Owl Lumber on notice of its Rule 11 claim.  Mercil filed an answer to the complaint, 
putting Owl Lumber to its proof and filing a counterclaim against the Appellees 
for the sum of $25,739.84 (which included amounts owed by Mercil to Owl 
Lumber).

 

[¶7]      On July 19, 1999, 
the district court entered judgment on the pleadings in favor of Appellees upon 
a stipulation of the parties.  On 
January 11, 2000, Appellees filed a motion for sanctions.  Appellees noted that, by letter dated 
March 5, 1999, they had advised Owl Lumber that its claim against them was 
specious (making no mention of W.R.C.P. 11, but rather referring to Wyo. Stat. 
Ann. § 29-1-311 (LexisNexis 2001), which provides for damages and/or penalties 
for the filing of false or frivolous liens).  Owl Lumber answered that letter 
indicating it was going ahead with the claim.  On May 21, 1999, after the complaint was 
served on Appellees, they wrote another letter to Owl Lumber and this time 
advised that they would be seeking sanctions under W.R.C.P. 
11.

 

[¶8]      On May 12, 2000, 
the district court issued a decision letter imposing sanctions against counsel 
for Owl Lumber and subsequently entered an order awarding attorney's fees to 
counsel for Appellees in the amount of $1,197.82.  On July 11, 2000, a "Settlement 
Agreement and Mutual Release" was filed in the district court, memorializing an 
agreement reached between Appellees and Mercil that Appellees would remit 
$3,000.00, payable to Mercil, Owl Lumber, and JADECO.  On July 18, 2000, an Agreement for 
Confession of Judgment was filed in the district court, which provided that 
Mercil would pay $5,000.00 to Owl Lumber.

 

[¶9]      We take note that 
the pleadings also appear to establish that there were telephone calls 
concerning this issue between the attorneys involved in this case, but we do not 
view those calls as adding anything meaningful to the resolution of this 
case.

 

 

[¶10]   When construing rules of civil 
procedure, which are virtually identical to their federal counterparts, 
pertinent federal authority interpreting those rules is persuasive in our review 
process.  Panamerican Mineral 
Services v. KLS, 916 P.2d 986, 989 (Wyo. 1996).  With respect to the rule at issue here, 
Charles Alan Wright and Arthur R. Miller have summarized the pertinent authority 
as follows:

 

            
When the opposing party moves for sanctions, a "safe harbor" provision 
gives the party and attorneys against whom sanctions are sought the opportunity 
to withdraw the challenged paper.  
The opposing party must serve the sanctions motion according to the 
requirements of Rule 5 but may not file or present the motion to the court 
unless, within twenty-one days, the allegedly improper document is not corrected 
or withdrawn.  Otherwise, the motion 
will be rejected.  According to the 
Advisory Committee, this will encourage the withdrawal of improper papers since 
litigants will no longer be exposed to sanctions upon withdrawal of the 
challenged paper.

 

            
. . . .

 

            
The safe harbor period begins upon service of the sanctions motion, but 
"counsel are expected to give informal notice" of the potential violation before 
preparing the sanctions motion.  A 
party's failure to give advance notice may result in a denial of its motion for 
sanctions.

 

            
After the court has entered judgment or dismissed claims, service of the 
sanctions motion and subsequent filing of the motion with the court may not 
comply with the safe harbor provision.  If service was delayed until after the 
judgment, the motion will be rejected as the party served is unable to withdraw 
the improper papers or otherwise rectify the situation.

 

            
The rule also requires that a motion for Rule 11 sanctions be made 
separately from other motions.  
Thus, a party cannot include a Rule 11 motion in a motion to dismiss, a 
motion for summary judgment, or any other motion.  Failure to comply with this requirement 
will result in denial of the motion.

 

            
. . . .

 

            
The Supreme Court in Cooter & Gell v. Hartmarx Corporation held that 
an appeals court should apply an abuse-of-discretion standard of review to all 
aspects of a Rule 11 determination.  
The Court reasoned that deferential review would promote Rule 11's 
purpose of streamlining the judicial process and discouraging satellite 
litigation.  In addition, the 
standard was consistent with the standard selected by the Court in Pierce v. 
Underwood, for review of district court determinations of the United States 
position under Equal Access to Justice Act suits.  However, the Court also said that legal 
errors by the district court constitute an abuse of 
discretion.

 

5A 
Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure: 
Civil 2d § 1337 at 114-17 (Supp. 2001) (footnotes 
omitted).

 

[¶11]   We have recently concluded that we 
should no longer describe an abuse of discretion as an error of law under the 
circumstances because a court does not enjoy any discretion with respect to an 
error of law.  Vaughn v. 
State, 962 P.2d 149, 151 (Wyo. 1998).

 

[¶12]   In this instance, we view the 
district court's decision to impose sanctions, given the procedural posture of 
this case, as an error of law and, thus, not subject to review under the abuse 
of discretion standard.  The 
Appellees' motion for judgment on the pleadings was not a substitute for serving 
a separate Rule 11 motion on Owl Lumber, the letter sent to Owl Lumber's counsel 
by Appellees' counsel was not a substitute for service of a motion for 
sanctions, and Appellees' motion for sanctions was not filed with the court 
until after a judgment was entered  when it was too late for Owl Lumber to 
exercise its option to withdraw or dismiss its claim against Appellees.3  Appellees' papers did not meet "the 
strict procedural requirements of Rule 11."  5A Wright & Miller, supra, at 
114-17 (Supp. 2001).  Harding 
University v. Consulting Services Group, 48 F. Supp. 2d 765, 770 (N.D. Ill 
1999) (quoting Sears Roebuck & Company v. Sears Realty Company, 932 F. Supp. 392, 408 (N.D.N.Y. 1996); Elliot v. Tilton, 64 F.3d 213, 216 
(5th Cir. 1995); and Thomas M. Geisler Jr., Proof of Violation of 
Federal Rule of Procedure 11 and of Sanctions Thereunder, 47 Am. Jur. Proof 
of Facts 3d 241 § 14 (1998).  For 
these reasons, we reverse the district court's order granting sanctions and 
remand to the district court with directions that the order be vacated and held 
for naught.

 

[¶13]   For instructive purposes only, we 
take note of two other aspects of this matter, which may serve to provide 
guidance in future cases.  First, 
had Appellees fully complied with the procedural requirements of Rule 11, we 
note that sanctions are not appropriate where an asserted violation of Rule 11 
is de minimus.4  As set out in Wright & 
Miller:

 

The 
Advisory Committee Notes list factors the judge should consider in deciding 
whether to impose a sanction, or what sanction to impose:

 

Whether 
the improper conduct was willful, or negligent; whether it was part of a pattern 
of activity, or an isolated event; whether it infected the entire pleading, or 
only one particular count or defense; whether the person has engaged in similar 
conduct in other litigation; whether it was intended to injure; what effect it 
had on the litigation process in time or expense; whether the responsible person 
is trained in the law; what amount, given the financial resources of the 
responsible person, is needed to deter that person from repetition in the same 
case; what amount is needed to deter similar activity by other 
litigants.

 

5A 
Wright & Miller, supra, § 1336 at 109-10 (1990); 68-69 (Supp. 2001); 
and see Harding University, 48 F. Supp. 2d 765 at 772; Stepanek 
v. Delta County, 940 P.2d 364, 370-71 (Colo. 1997); Zuk v. Eastern 
Pennsylvania Psychiatric Institute of the Medical College of Pennsylvania, 
103 F.3d 294, 300-01 (3rd Cir. 1996); and Bradgate Associates, 
Inc. v. Fellows, Read & Associates, 999 F.2d 745, 752-53 (3rd 
Cir. 1993).  In this case, none of 
those factors appears to have relevance, and clearly, Appellees would have 
remained as defendants in this matter, even if Owl Lumber's counsel had acted 
more promptly in conceding his error.  
Moreover, Owl Lumber's claims were not "groundless," though very thorough 
research probably would have convinced him that Owl Lumber did not have a direct 
claim against Appellees, but only a claim against Mercil (which had a claim 
against Appellees).

 

[¶14]   Second, sanctions are not intended 
to be a fee-shifting device.  A 
district court should consider monetary, as well as non-monetary, sanctions and 
any monetary sanction should be carefully tailored to the violation under 
consideration.  5A Wright & 
Miller, supra, § 1336 at 69-70 (Supp. 2001); and see Harding 
University, 48 F. Supp. 2d 765 at 772-73.  In this instance, it appears that the 
sanction was used only as a fee-shifting device and that Appellees were 
rewarded, rather than Owl Lumber's counsel having been appropriately 
punished.  In many instances, the 
sanctions may be levied in favor of the court rather than a party, or a 
combination of sanctions favoring the court and a party.  Other alternative sanctions include 
admonition, censure, additional mandatory Continuing Legal Education, and 
referral to the Board of Professional Responsibility.  See Geisler, Proof of 
Violation of Federal Rule of Procedure 11 and of Sanctions Thereunder, 
supra, at § 21; and Gregory P. Joseph, The Federal Law of Litigation 
Abuse, § 16 (3rd ed. 
2000).

 

[¶15]   The order of the district court is 
reversed and this matter is remanded to the district court with direction 
that the order imposing sanctions be vacated.

FOOTNOTES

   1We have amended 
the caption on our own motion.  The 
sanction at issue in this appeal was imposed on Mr. Caldwell in favor of the 
Appellees.  Owl Lumber, Inc. had no 
interest in this appeal, but Mr. Caldwell does.

  
2                     
Rule 11.  Signing of 
pleadings, motions, and other papers; representations to court; 
sanctions.

                        
. . . .

   (c) Sanctions.  If, after notice and a reasonable 
opportunity to respond, the court determines that subdivision (b) 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 (b) 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 (b).  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.

 

            

  
3Failure to 
comply with the procedural requirements set out in Rule 11 (for Wyoming the 1994 
amendments, which are referred to in the pertinent authorities as the 1993 
amendments to the F.R.C.P.) is likely the result of inattention (inadequate 
research) to the 1994 amendments.  
See Thomas M. Geisler Jr., Proof of Violation of Federal Rule 
of Procedure 11 and of Sanctions Thereunder, supra, at § 21 (1998 and 
Supp. 2000).

 

  4Gregory P. 
Joseph, The Federal Law of Litigation Abuse, § 15(B) (Technical or De 
Minimus Violations) at 251-53 (3rd ed. 2000).