1 The trial court based this f

inding on the emp loyme nt hand boo k which Plaintiffs atta ched to their co mpla int. The cour t’s order stated: “The Trial Court after taking all of the fact

ual allegat

ions contained in t

he Comp laint as true and cons truing the Co mpla int libera lly in fav or of the plaint iff s, the court

finds, based upon the plaintiff s[’] al legations (con tinued ...) 

### IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE July 10, 2001 Session YONA BOYD, ET AL 

### . v. PRIME FOCUS, INC., ET AL 

### . Direct Appeal from the Chancery Court for Davidson County No. 99-3716-II Carol L. McCoy, Chancellor

No. M2000-02105-COA-R3-CV - Filed December 5, 2001

This case began

as a dispute between the plaintiffs and their employ ers. The defendant was awarded summary judgment, and

plaintiff s were sa nctioned by t he court pursuant to Rule 11 of the Tennessee Rules of Civil Procedure. Plaintiffs now appeal this sanction. We affirm sanctions but modify the order. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed as Modified; and Remanded

D AV ID R. F ARMER , J., de liver ed th e opi nion o f the

cour t, in w hich W. F RANK C RAWFORD , P.J., W.S., and H OLLY K. L ILLARD , J., joined.
David E. Danner, Nashville, Tennessee, for the appellants, Yona Boyd and Brenda Collier.

Thomas L. Whiteside, Nashville, Tennessee, for the appellees, Prime Focus, I nc., Donald Bruce, M.D. and D&C Property

Management Corp.

OPINION

This dispute originated in August of 1999, when Plai nti ffs/Appe llants (“ Plaintiff

s”) file d suit in Chancery Court for Dav idson Cou nty against Donald Bruce , M.D. (“Dr. Bru ce”) and D&C Property Management Corp. (“D&C”) alleging breach of employment contract. For simplicity, we shallrefer to this as “Boyd I.” I

n response, Dr. Bruce and D& C filed a motion to dismiss for failure to state a claim and failure to join an indispensable party. The claim was heard on November 19, 1999, and the trial court found that no employ

er-emp loy ee rela

tionship existed betw een the p arties, andthat an employ

er-emp loy ee rela

tionshipdid exist between the Plaintiffs and Prime Focus, Inc. 11 (.. .cont inu ed) contai ned in ¶ 5 of the Complaint and the do cum ent attac hed to Pla intiffs[’] complaint as att achment one, finds t hat the emp loyer-em ploye e relatio nship w as go verne d by the doc ume nt which plaintiffs relied upo n in their C omp laint. Said document unequivo cally establish[es] the exist ence of an employer- employee rel ations hip by and bet ween the named plaintiffs and Prim e Fo cus, Inc .”

2 The Tennessee Rules of Civil Procedure permit a party to amend his complaint once wit hout leave of

the court if no responsive pleading has y et be en se rved by the opposi ng par ty . Once a res ponsi ve pl eadin g has been s erved, however, the pa rty must se cure w ritten agre eme nt from the op pos ing pa rty o r leave of the co urt to am end . Leav e to amend i s l iber all y gr ante d. Tenn. R. Civ . P. 15.01.

3 Rule 11.03 provides t

hat sa ncti ons may be ini tiat ed by motion of

a party or on the i nit iati ve of t he court . When made by mo tion, the m otion must b e serve d as p rovid ed in R ule 5, b ut may n ot be filed with the cour t until 21 d ays aft er servi ce, pro viding the pa rty agains t whom it is served opp ortun ity to make approp riate correcti ons befor e cons ider ati on by the court. Tenn. R. Civ. P. 11.03(1)(a), (b).
-2- Ac co rd in gl y, on December 8, 1999, the trial court granted the motion to dismiss for failure to state a claim and failure to join an indispensable party . Plaintiffs did not appeal this order.

Plaintiffs next filed s uit in cha ncery court a gainst P rime Foc us, I nc. (“Pr ime Focu s”) in December

of 1999, which we shall refer to as “Boy d II ..” In Februa

ry of 2000, Prime Foc

us filed
a Tenn. R. Civ. P. 12.02(6) motion to be considered a motion for summary judgment under Rule 56, arguingthat Plaintiffs were employed by Dr. B ruce and D&C. The trial court denied this motion for failure to comply with Tenn. R. Civ. P. 56. 03, but sta ted that Pr

ime Focu s could

still file a motion for summary judgme

nt. The tri al court

ult imately gr

anted summary judgment to Prime Focus on June 6, 2000. During the course of litigation in Boyd II , the question again arose as to whether the Plaintiffs were actually

employed by

Prime Focus or by D

r. Bruce and

D&C. Plaintiffs thus filed a motion for leave to join Dr. Bruce and D&C a s indispensable parties on February 25, 2000, and filed an
am endedcomplaint on March 10, 2000, to include Dr. Bruce and D& C. Prime F ocus did no t respondto the motion, and it was therefore granted on M arch 2 2, 2000. We note, however, that leave to amend h ad not y et been g ranted b y th

e court w hen Plaint

iffs in fa ct fil ed the am ended complain t. 2 Dr. Bru ce and D &C resp onded throu gh counsel t o Plaintiff s’ counsel, advising him that the complain

t agains t Dr. Bru ce a nd D &C w as u nwa rra nt ed d ue t o t he c our t’s act io n i n Bo yd I, where Plaintiffs’ cause of action was dismissed for failure to state a claim. This response notified Plaintiffs that Dr. Bruce a n d D&C would seek sanctions pursuant to Tenn. R. Civ. P. 11 if the amended complaint was not withdrawn. 3 The complaint was not withdrawn, and in May of 2000, Dr. Bruce and D&C filed a Rule 11 motion for sanctions against Plaintiffs, Plaintiffs’ counsel or both. Dr. Bruce and D&C moved that the c omplaintagainst them be dismissed per the d ecision in Boyd I , and requested expenses and attorney ’s fees.

The issue of sanctions was heard by the trial court on June 2, 2000. A fter he aring a

rgumen ts by co uns el f or b ot h pa rti es, and aft er r evi ewi ng t he e nt ire rec ord s of Boyd I and Boyd II, the court order edthat the amended complaint of March 10, 2000, joining Dr. Br uce and D&C, be strick

e n-3-

from the record. The court further g ranted the motion for s anctions, and awarded Dr. Bruc e and D&C $1,3 37.50 in a

ttorney ’s feesand expen ses. I t is this ord

er which Plaintiff s now appe al.

The issue in this case, as we perceive it, is whether the trial court er red by imposing Rule 11 sanction s on the Pla

intiffs.

Our review o f the tria

l court’ s ruling on a Rule 11 motion is under an abuse of discretion standard. Krug v. Krug , 838 S.W.2d 197, 205 (Tenn. Ct. App. 1992). An abuse of discretion occurs when the decision of the lower court has no ba sis in law o

r fact a nd is ther efore a rbitrar y, i llogica l,
or unconscionable. State v. Brown & Williamson Tobacco Corp. , 18 S. W.3d 186 , 191 (Tenn. 2000). Our review of Rule 11 decisions is governed unde r this deferential standard since the question of whether a Rule 11 violation has oc curred require s the tria

l court to make hig

hlyfactintensive determinations regarding the re asonableness of t he attorney’s (and cl ient’s) conduct. Krug , 838 S.W.2d at 205. We review the trial court’sfinding s of fac t with a pr esumption

of corr ectness

. Tenn. R. App. P. 13(d).

When an attorney sig

ns a motion, document, or other paper submitted to thecourt , he certifies to th e c ou rt th at he ha s r ea d i t, th at he ha s r ea so na bl y i nquired into the fa cts and la w it asserts, that he believes it is well-grounded in both fact and law, a nd that he is acting without improper motive. Andrews v. B ible , 812 S.W.2d 284, 287 (Tenn. 1991). The purpose of Rule 11 sanctions is to e

mpha size to the attorney

that h is si gnatur e is no t mean ingles s, but conve ys a messa ge to the court for which he alone is responsible. Andrews , 812 S.W.2d at 288. Rule 11 establishes that an attorney

who signs such a paper without the required belief is subject to appropriate sanction by the court. Id. It has been characterized by this State’s Supreme Court as a “potent weapon that
can and should be used to curb litigation abuses.” Id. at 292. However, our Supreme Court has cautionedthat while

trial cou rts should impo se sanction s when a Ru le 11 viola

tion is found, it should do so only with the utmost care. Id. Such sanctions may include pa yment of the opposing

party’s legal expenses. Id. at 288.

The Tenness ee Supre

me Court ha s establis hed the st andard f or deter mi n ing whether an
a ttorney’s conduct is sanctionable under Rule 11 as one of objective rea sonableness under t h e circumst ances. Id. The reasonableness of the attor ney’s belief

m ust be evaluated in light of the circumstances as they existed when the docume nt was signed. Id. Sanctions are appropriate when
an attorne y su bmits a motion or other paper on grounds which he knows or should know are without merit, and a

showing of

subjective bad faith is not required. Alside Supply Center of Knoxville v. Smith Heritage Siding Co. , No. 03A01-9702-CH-00069, 1997 WL 414982, at *2 (Tenn. Ct. App. July 25, 1997) ( no perm. app. filed ). When assessing whether a Rule 11 violation has occurred, the trial court should consider all circumstances bearing on the re asonable

ness of the at

torney ’s conduct, including his experience and past performance and the ge neral standards of conduct of the bar, and whether his actions were the result of neglect, willfulness, incompete nce or deliberate choice. Andrews , 812 S.W.2d at 293, FN4.-4-

In imposing sanction s in this case, the trial court found that the doctrine of res judica ta barred Plaintiffs from pursing their claims against Dr. Bruce and D &C in Boyd I I. Res judicat

a bars
a second su

it betwee n partie s or their

privies o n the same

claim. It precludes a second suit with respect to all issues which were or which could have b een litig ated in the first action. Hampton v. T ennessee Truck Sale

s, Inc ., 993 S.W.2d 643, 645 (Tenn. Ct. App. 1999). The doctrine applies only to final judgments on the merits. See id. An order granting a Te nn. R. Civ. P. 12.02(6) motion to dismiss for failure to state a claim upon w hich relief can b e granted is an adjudication on the merits. Dyer v. Intera Corp. , 870 F.2d 1063, 1066 (6 th Cir. 1989) . A dismissa l for failure to join an indispens able par

ty, however , does not a

ct as an a djudicat ion upon the

merits

. Id

. ; R OBERT B ANKS , J R ., ET AL ., T ENNESSEE C IVIL P ROCEDURE §11 -5( b) ( 199 9). It is within the discretion of the trial court to specify tha

t a claim has been dismissed w itho ut prejud ice, or t hat the di smissal sha

ll notoperate as an adjudication on the merits. Id

. §11-5(b). If the orde r of the trial court dismissing
an action for failure to state a claim does not specify that it is without pre

judice or that it should not operate as an adjudication on the merits, the order should be treated by the enforcing court as an adjudication on the merits. Id.

On appeal, Plaintiffs argue that the doctrine of res judicata does not a pply to the trial court’s order of De ce mb er 19 99 , w hi ch gr an te d D r. Br uc e a nd D& C’ s m ot io n t o d is mi ss in Bo yd I. Plaintiffs contendthat the only issue addressed in the order

in Bo yd I w as th e q ue st io n o f t he ap pr op ri at e p ar ty. Ac co rd in gl y, Plaintiffs submit that the decision w as not a decision on the merits or a final adjudication, but a procedural order which allowed the cause of action to survive.

We can not agr ee w it h t hi s ar gum ent . In it s or der in Boyd I, the trial court specifically found: 1) Plaintiffs’ claims were dependent on the existence of an employe r-employee

relationship between the Plaintiff

s and Def endant; 2) that an employer -employee r

elationship existed between Plaintiffs andPrime Foc

us; 3) tha t Prime Fo cus was a

n indispen sable pa

rty to th e claim; and, 4) that no employer-e

mployee relationship existed between Plaintiffs and Dr. Bruce and D&C. The trial court thus granted the motion to dismiss for failure to state a claim, as well as for failure to join an indispens able

party . This wasnot a proc edural o rder, no r did the cour t specify that it wa s not to be considered

an adjudication on the merits. We read the order a s plainly

granting the motion to dismiss for failure to state a claim. Since it was not appealed, this order became a final judgment 30 day s after e

ntry . Tenn. R. Civ. P. 59.02 ; see Jerkins v. McKinney , 533 S.W.2d 275 (Tenn. 1976). Once this order became final, the doctrine of res judica ta operated to bar

Plaintiffs from asserting
a claim against Dr. Bruce a nd D&C which was or which could have been litig atedin the first action. Cl ea rl y, the question of whether an employer-employee relationship existed between the parties not onl y cou ld hav e be en b ut in fac t wa s an is sue res ol ved in Boyd I.

Plaintiffs further

assert that evenif res judica ta did apply, the trial court’s subsequent orders in Boyd I I essentially

nullified what

Plain tiff s cha ract erize as the “pro cedu ral order ” in B oy d I . We
cann otagree wi th th is con tenti on. Th e order in Boyd I was n ot pro cedura l. It di d not gr ant Dr

. Bruce’s and D& C’s motio n to dismiss only for failure to join an indispensable par ty, but also for failure to state a claim upon which relief can be granted. Plaintiff

s’ prope r course of actio n would hav e be en t o ap pea l t he o rde r in Boyd I, no t t o m ere ly re ass ert th e cl aim in Boyd II.-5-

Plaintiffs also argue that Dr. Bruce and D&C should have raised re s jud icata as an affirmative defense, rather than using it as the basis for sanctions. Plaintiffs assert that Rule 11 was used as a “sc are tactic . . . wit h the comp licity

of a cour t that waswilling t

o shift blam

e to appella

nts andtheir counsel for its own prior error . . . .” Reg ardless of how the Rule 11 “tactic” was used by opposing party , a Rule

11 sanction is imposed by the court at its informed discr etion based on an examination of the facts and history of the case in question. We suggest that if Plaintiffs believed the court’saction in

Boy d I to b e in err

or, Plaint iffs should have a

ppealed that acti on in a time

ly
manner pursuant to Tenn. R. App. P. 3. Plaintif fs cannot fail to a

ppeal and then simp ly

reassert the
sameclaim in a later action. Whether the court erred in dismissing the claim in Boy d I, and we do notsuggest that

it did so er

r, Plaintif fs’ remedy i s to appeal, not to seek an end-run around the rules by r aising a claim the y know or re asonably

should kno w is res judica ta

. Plaintiff s’ final assertion is that the court in Boyd I I erred when it found that Plaintiffs failed to secure leave of the cour t before amending

their co mplaint ag ainst

Prime Focus to join Dr. Bruce andD&C. As we understand it, Plaintiffs assert that they were not required to seek leave of the court to amend the

ir compla int beca use, although an

answer had bee n filed by PrimeFocus, no answer had been filed by Dr. B ruce and D&C, to whom the amendm ents applied. This argument is without merit and reflects Plaintiffs’ misreading of the rules. Te nn. R. Civ. P . 15.01 pe

rmits a pa

rty to amendhis complaint once as a matter o f c ourse before a responsive pleading is served. Once a responsive pleading has been filed by the named opposing party , that party’s wr itten consent or leave of the court is required for later amendments. See R OBER T B ANKS , J R ., ET AL ., T ENNESSEE C IVIL P ROCEDURE , § 5-7 (d) ( 1999). Since the defendant in Boy d II , Prime Focus, had filed an answer, leav e of the court was required for Plaintiffs to amend their complaint. The record shows tha

t Plaintiffs improper

ly f iled their amendment on March 10, 2000, before obtaining leave of the cour t to do so.

In light of the foregoi ng, we must de termine w

hether t he trial c ourt abus ed its disc retion in imposing Rule 11 sanctions on Plaintiffs in its July 2000 order. The court ordered sanctions after finding that Plaint

iffs fai led to com

ply with Rule 1 5, inthat Plaintiffs did not obtain leave of the court before amending their complaint in Boyd I I. The court further

found that the December order in Bo yd I c le ar ly granted Dr. Bruce and D&C’s motion to dismiss, and that the doctrine of res judicata theref

ore bar red Plain tiffs fr om asser ting the same cla imagainst Dr. Bruce and D&C in a subsequent case. Plaintiffs were properly notified that Dr. Bruce and D&C would see k sanctio ns, andwere given the opportunity to withdraw their claim as required by Tenn. R. C iv. P. 11.03. Considering the c ircumsta nces as t hey existed at t

he time Plaintiffs filed their amended complaint joining Dr. Bru ce and D &C, Pl ai nt if fs ’ c ou ns el sh ou ld ha ve kn ow n t ha t t he De ce mb er or de r i n B oyd I, which Plaintiff

s failed t o appea l, was a f inal judgment on the

merits and thus precluded litigation of the same claim against the same par ties in Boyd I I. Plaintiffs’ counsel also should have known that leave of the court

was required before the amended complaint could be filed. We therefore do not find that the trial court abused its discretion in imposing Rule 11 sanctions.

While we affirm theimposition o f sanctions, we modify the trial c ourt’s order to the extent that judgment was awarded

ag ainst Plaintiffs. The trial court’s order states, “I T IS FURTHER-6-

ORDERED, ADJUDGED AND DECREED that the defendants, Donald Bruc e, M.D. and D&C Property Management Corp., I

nc., are awarded a [judgment] aga inst plaintiffs in the amountof One ThousandThree Hundred Thirty -Seven Dollars ($1,337.50) an d Fifty Cents, for which execution may issue if necessary .” We modify this order and aw ard judgment agains t Plaintiff

s’ counse l, David Danner, rather than aga

inst Plaintiffs in this cause of action.

Dr. Bruce and

D&C requested this Court to regard this appeal as frivo lous. We de cline to do so.

The order of

the trial court is affirmed as modif ied in this o

pinion. Cos ts of this appeal are ta xe d t o t he Ap pe ll an ts ’ c ou ns el , D av id E. Da nn er , f or wh ic h e xe cu ti on ma y is su e i f n ec es sa ry.

___________________________________ DAVID R. FARMER, JUDGE