IN THE SUPREME COURT OF MISSISSIPPI

NO. 1999-CA-00406-SCT

SCRUGGS, MILLETTE, BOZEMAN & DENT, P.A. f/k/a SCRUGGS, MILLETTE, LAWSON,

BOZEMAN & DENT, P. A., RICHARD F. SCRUGGS, RICHARD F. SCRUGGS, P. A. AND

ASBESTOS GROUP, P.A.

v.

MERKEL & COCKE, P.A., WILLIAM ROBERTS WILSON, JR., AND WILLIAM ROBERTS

WILSON, JR., P.A.

CONSOLIDATED WITH

NO. 2000-CA-01370-SCT

SCRUGGS, MILLETTE, BOZEMAN & DENT, P.A; RICHARD F. SCRUGGS, ASBESTOS

GROUP, P.A. AND RICHARD F. SCRUGGS, P.A.

v.

MERKEL AND COCKE, P. A.

DATE OF JUDGMENT: 8/4/2000

TRIAL JUDGE: HON. WILLIAM G. WILLARD, JR.

COURT FROM WHICH APPEALED: COAHOMA COUNTY CHANCERY COURT

ATTORNEYS FOR APPELLANT: DANIEL M. WEIR

JEFFERY P. REYNOLDS

JIM WARREN

JAMES L. CARROLL

CHARLES E. WEBSTER

MYLES A. PARKER

H. HUNTER TWIFORD

KATE MARGOLIS

TERI DUNAWAY GLEASON

ATTORNEYS FOR APPELLEE: CHARLES M. MERKEL

NATURE OF THE CASE: CIVIL - CONTRACT

DISPOSITION: REVERSED AND RENDERED - 12/13/2001
MOTION FOR REHEARING FILED:

MANDATE ISSUED: 1/3/2002

EN BANC.

EASLEY, JUSTICE, FOR THE COURT:

¶1. In September of 1997, Scruggs, Millette, Bozeman & Dent, P.A. ("SMBD") filed a lawsuit in the

Jackson County Chancery Court against Merkel & Cocke, P.A. ("Merkel & Cocke"), Charles Merkel

("Merkel"), Cynthia Mitchell ("Mitchell"), William Roberts Wilson, Jr., P.A. ("Wilson") and Asbestos

Group, P.A ("Asbestos Group"). Prior to SMBD bringing the Jackson County action, Scruggs assigned his

interest in the Scott litigation over to SMBD. The lawsuit filed in Jackson County placed in issue the alleged

mishandling of attorneys' fees received by Merkel & Cocke in 1994. These fees were derived from the

Scott litigation, a wrongful death action against the asbestos industry.

¶2. Approximately six (6) months later, on March 26, 1998, Merkel & Cocke filed the instant action in the

Chancery Court of Coahoma County seeking to interplead a share of the 1996 and 1998 attorneys' fees

received from the Scott litigation. SMBD responded by filing a motion to dismiss Merkel & Cocke's

complaint, primarily stating that the complaint should be barred by the doctrine of priority jurisdiction as the

attorneys' fees were already an issue in the Jackson County Chancery Court litigation. Richard F. Scruggs,

Richard F. Scruggs, P.A., and Asbestos Group, P.A., (hereafter collectively referred to as "Scruggs") also

filed a motion to dismiss upon similar grounds. The Coahoma County Chancery Court denied both motions

to dismiss and granted the interpleader relief, finding Merkel & Cocke to be a disinterested stakeholder

with respect to the $4,953.43 of attorneys' fees interpled. The Coahoma County Chancery Court also

discharged Merkel & Cocke from any liability for the handling of the interpled funds and transferred the

remaining dispute over entitlement to pending litigation in the Circuit Court of Hinds County. Additionally,

the Coahoma Chancery Court ordered SMBD to pay Merkel & Cocke attorneys' fees pursuant to Miss.

R. Civ. P. 11(b). Both SMBD and Scruggs timely perfected an appeal to this Court. This Court, in its

opinion dated July 20, 2000, dismissed the appeal. This Court held that "in the absence of a Rule 54(b)

certification, the orders are interlocutory and are not appealable as final judgments," and the appeal was

dismissed. Scruggs, Millette, Bozeman & Dent, P.A. v. Merkel & Cocke, P.A., 763 So.2d 869, 872

(Miss. 2000). From that ruling, Merkel & Cocke obtained certification of a final judgment pursuant to Rule

54(b) of the Coahoma County Chancery Court on August 4, 2000. This appeal is taken from the final

judgment of the Chancery Court of Coahoma County.

STATEMENT OF ISSUES

I. WHETHER MERKEL & COCKE WERE REQUIRED TO FILE ITS CLAIM FOR

INTERPLEADER RELIEF AS A COMPULSORY COUNTERCLAIM IN THE

JACKSON COUNTY LITIGATION?

II. WHETHER MERKEL & COCKE'S ACCOUNTING ISSUES IN JACKSON COUNTY

CHANCERY COURT SHOULD BE TRANSFERRED TO HINDS COUNTY CIRCUIT

COURT?
III. WHETHER THE CHANCELLOR ERRED IN GRANTING THE INTERPLEADER

AND RELIEVING MERKEL AND COCKE FROM LIABILITY?

IV. WHETHER THE CHANCELLOR ERRED IN AWARDING ATTORNEYS' FEES TO

MERKEL & COCKE?

LEGAL ANALYSIS

I. Compulsory Counterclaim

¶3. Scruggs and SMBD contend that the Coahoma County Chancery Court erred in accepting jurisdiction

and granting the interpleader requested by Merkel & Cocke. Scruggs and SMBD argue that Merkel &

Cocke had a compulsory counterclaim which should have been filed in Jackson County Chancery Court as

part of the already pending claims and litigation. In Fulgham v. Snell, 548 So.2d 1320, 1323 (Miss.

1989), this Court stated that when a party does not file a compulsory counterclaim, the right to raise that

claim in subsequent litigation is thereby waived. Mississippi Rules of Civil Procedure 13(a) establishes when

filing a compulsory counterclaim is proper. Rule 13(a)(1)-(3) of M.R.C.P. states as follows:

(a) Compulsory Counterclaims. A pleading shall state as a counterclaim any claim which at the time of

serving the pleading the pleader has against any opposing party if it arises out of the transaction or

occurrence that is the subject matter of the opposing party's claim and does not require for it

adjudication the presence of third parties over whom the court cannot acquire jurisdiction. But the

pleader need not state the claim if:

(1) at the time the action was commenced the claim was the subject of another pending action; or

(2) the opposing party brought suit upon his claim by attachment or other process by which the court

did not acquire jurisdiction to render a personal judgment on that claim, and the pleader is not stating

any counterclaim under this Rule 13; or

(3) the opposing party's claim is one which an insurer is defending.

In the event an otherwise compulsory counterclaim is not asserted in reliance upon any exception

stated in paragraph (a), re-litigation of the claim may nevertheless be barred by the doctrines of res

judicata or collateral estoppel by judgment in the vent certain issues are determined adversely to the

party electing not to assert the claim.

M.R.C.P. 13.

¶4. In Magee v. Griffin, 345 So.2d 1027, 1032 (Miss. 1977), this Court further stated:

It is, and should be, a paramount concern of the judiciary to prevent multiple suits where one suit will

suffice. There is a tendency, perhaps, to forget that one who undergoes the rigors of an action, with all

of its traumatic impact, loss of time, delay, substantial expense and disruption of his affairs, with

consequent appeals and possible retrials and still other appeals, should be spared having to do this

more often than is strictly necessary. Even the successful party after bearing the expense of one trial

and of one appeal is, in many instances, hardly a winner.
A logical relation must exist between the claim and the counterclaim for the counterclaim to be a

compulsory counterclaim. M.R.C.P. 13(a); Fulgham, 548 So.2d at 1322.

¶5. This Court in Fulgham developed a test for whether the case in question arose from the same

transaction or occurrence on which the opposing action was based as required under M.R.C.P. 13(a) for a

compulsory counterclaim. In Fulgham, the Court used the following questions to determine the connection

of the claim to the counterclaim:

(1) Whether the same evidence or witnesses are relevant to both claims;

(2) Whether the issues of law and fact in the counterclaim are largely the same as those in the

plaintiff's claim;

(3) Whether, if the counterclaim were asserted in a later lawsuit, it would be barred by res judicata;

(4) Whether or not both claims are based on a "common nucleus of operative fact"?

548 So.2d at 1322-23 (citing Robertson, Joinder of Claims and Parties - Rule 13, 14, 17, and 18; 52

Miss. L.J. 47, 48-63 (1982)).

¶6. The United States Court of Appeals for the Fifth Circuit has adopted the "logical relation test" to

determine whether a counterclaim is compulsory or permissive. In Plant v. Blazer Fin. Servs., 598 F.2d

1357, 1361 (5th Cir. 1979), the Fifth Circuit stated that "the test which has commended itself to most

courts, including our own, is the logical relation test." The logical relation test is based on the "interest of

avoiding a multiplicity of suits." Id.; 3 Moore's Federal Practice ¶13. 13 at 300. The Court in an earlier case

defined "logical relationship" as existing when a counterclaim arises from the same "aggregate of operative

facts." Revere Copper & Brass, Inc. v. Aetna Cas. & Sur. Co., 426 F.2d 709, 715 (5th Cir. 1979).

This is applicable where the same operative facts that serve as the basis of both claims also create

additional legal counterclaims from the opposing party. Plant, 598 F.2d at 1361.

¶7. Merkel & Cocke argues that the doctrine of priority jurisdiction cannot possibly apply to the facts at

hand. Merkel & Cocke alleges that neither the same subject matter nor the rights of the same parties are

being adjudicated. In support of its position, Merkel & Cocke cites In re D.L.D., 606 So.2d 1125 (Miss.

1992). There, this Court stated for the "priority of jurisdiction" rule, "which prevents interference by another

court with the jurisdiction of the court first assuming it," to be applicable "the second action should be

between the same parties, seeking on the one hand, and opposing on the other, the same remedy, and

should relate to the question." Id. at 1129 (quoting Beggiani, 519 So.2d at 1210).

¶8. We find that the parties of both the Jackson County Chancery Court and Coahoma County Chancery

Court litigation are clearly the same parties. Furthermore, both cases address the issues derived from the

Scott litigation and its disbursement of attorneys' fees from that litigation.

¶9. The parties named in the Jackson County Chancery Court action were as follows: Plaintiff, SMBD (as

successors in interest to Scruggs), and Defendants, Wilson; Alwyn H. Luckey ("Luckey"); Merkel &

Cocke; Merkel, individually, and as shareholder in Merkel & Cocke; Mitchell, individually and as

shareholder in Merkel & Cocke; and Asbestos Group.(1)

¶10. The pending Jackson County Chancery Court litigation sought to address: (1) an accounting from
Merkel & Cocke, Merkel, Mitchell, Wilson and Luckey, for the attorneys' fees received from the Scott

litigation settlements in order to be able to ascertain the extent or amounts of fees improperly paid; (2) the

intentional willful and reckless interference by Merkel & Cocke, Merkel, Mitchell and Luckey with the

agreement between Scruggs and Wilson, despite their knowledge of Scruggs's and Wilson's agreement, in a

total disregard for the law and the rights of others; and (3) a determination of the validity of the August

1992 agreement for attorneys' fees between Scruggs and Wilson.

¶11. The complaint filed in Jackson County Chancery Court was filed on September 22, 1997, obviously

preceding the complaint filed in Coahoma County Chancery Court on March 26, 1998. The Coahoma

County Chancery Court case named the following parties: Plaintiff, Merkel & Cocke and Defendants,

Scruggs; SMBD; Wilson; William Roberts Wilson, Jr., P.A.; Luckey; and Asbestos Group. In the

Coahoma County Chancery Court complaint, Merkel & Cocke sought to interplead $4,953.43 into the

registry of the court and to be discharged from further responsibilities and liability as to the attorneys' fees

from the Scott litigation already in legal dispute in the Jackson County Chancery Court litigation.

¶12. In Ciechanowicz v. Bowery Savs. Bank, 19 F.R.D. 367 (S.D.N.Y. 1956), a New York federal

district court, relying on F.R.C.P. 13(a), determined that the defendant's prayer for interpleader was a

compulsory counterclaim arising out of the same subject matter as the plaintiff's claim. Therefore, the

interpleader did not require an independent basis of federal jurisdiction to be brought in federal court. The

interpleader was ancillary to the federal action that was properly founded on diversity of citizenship since it

involved the same subject matter and parties of the already pending federal litigation.

¶13. In the case sub judice, the Jackson County Chancery Court action and the later filed Coahoma

County Chancery Court action both clearly addressed the same parties, as well as, the same issues in

controversy.

¶14. Since the claim filed by Merkel & Cocke addressed the same parties and controversy as the action

previously filed by SMBD in Jackson County Chancery Court, Merkel & Cocke's claim for interpleader

should have been filed as a compulsory counterclaim in the Jackson County Chancery Court action

pursuant to M.R.C.P. 13(a). In other words, we find that the interpled funds should have been pled as a

compulsory counterclaim in the Jackson County Chancery Court litigation rather than filed as multiple

litigation involving the same parties and controversies in another chancery court in another county. See

M.R.C.P. 13(a). We find that the Coahoma Chancery Court lacked jurisdiction over Merkel & Cocke's

interpleader action.

¶15. This Court has repeatedly stated that it is a "well established rule in this jurisdiction that where two (2)

suits between the same parties over the same controversy are brought in courts of concurrent jurisdiction,

the court which first acquires jurisdiction retains jurisdiction over the whole controversy to the exclusion or

abatement of the second suit." Beggiani, 519 So.2d at 1210. See Hancock v. Farm Bureau Ins. Co.,

403 So.2d 877 (Miss. 1981); Huffman v. Griffin, 337 So.2d 715 (Miss. 1976). In Huffman, 337

So.2d at 719, this Court also stated that "in this state priority of jurisdiction between courts of concurrent

jurisdiction is determined by the date the initial pleading is filed, provided process issues in due course." See

Euclid-Mississippi v. Western Cas. & Sur. Co., 249 Miss. 547, 559-60, 163 So.2d 676 (1964);

Shackelford v. New York Underwriters Ins. Co., 189 Miss. 396, 407-08, 198 So. 31 (1940). "The

court which first acquires jurisdiction retains jurisdiction over the whole controversy to the exclusion or

abatement of the second suit. Huffman, 337 So.2d at 719; see Lee v. Lee, 232 So.2d 370, 373 (Miss.
1970), 20 Am.Jur.2d Courts § 128, at 481 (1965); 1 C.J.S. Abatement and Revival § 33, at 58-59

(1936); 21 C.J.S. Courts § 492, at 745 (1940). Further, it has been stated, in regard to the "priority of

jurisdiction" rule that:

In order that the rule may be applicable which prevents interference by another court with the

jurisdiction of the court first assuming it, the second action should be between the same parties,

seeking on the one hand, and opposing on the other, the same remedy, and should relate to the same

questions.

Beggiani, 519 So.2d at 1210 (emphasis added).

¶16. We find that the Coahoma County Chancery Court erred in accepting jurisdiction over Merkel &

Cocke's interpleader. We further hold that the Coahoma County Chancery Court lacked jurisdiction under

the doctrine of priority of jurisdiction. If Merkel &Cocke seek interpleader relief, the pending litigation in the

Chancery Court of Jackson County is the proper jurisdiction for Merkel & Cocke to bring its action to

interplead funds as a compulsory counterclaim to the pending Jackson County Chancery Court litigation.

II. Accounting Issue

¶17. Merkel & Cocke contend that all other parties that are necessary in order to litigate the accounting of

funds received and disbursed from all other asbestos settlements including Scott have already been joined in

the pending litigation in the Circuit Court of Hinds County. Merkel & Cocke seek to have all accounting

issues involving Merkel & Cocke in the Jackson County Chancery Court litigation transferred to Hinds

County Circuit Court.

¶18. It should first be noted that the jurisdiction of the accounting issue involving Merkle & Cocke in the

Jackson County Chancery Court is not properly before us at this time. The action before this Court is an

appeal from the judgment of the Coahoma County Chancery Court, and the issue raised is whether that

court lacked jurisdiction to render the appealed judgment because of the prior jurisdiction of the Jackson

County Chancery Court. The question of whether Hinds County Circuit Court has prior jurisdiction over

Jackson County Chancery Court is not properly before us at this time and could be brought before us only

by an appeal from a judgment of the Jackson County Chancery Court.

¶19. Furthermore, even assuming the question of Jackson County's jurisdiction were properly before this

Court, the doctrine of priority of jurisdiction would not preclude the Jackson County Chancery Court from

maintaining jurisdiction over the action before it. For the doctrine of priority jurisdiction to apply, the second

action must be "between the same parties, seeking on the one hand, and opposing on the other, the same

remedy, and should relate to the same question." In re D.L.D., 606 So. 2d at 1129 (quoting Beggiani,

519 So. 2d at 1210 (emphasis added)). Merkel & Cocke, Merkel, and Mitchell, all parties to the action in

Jackson County Chancery Court, are not parties to the action in Hinds County Circuit Court. Rather,

Merkel & Cocke represents Luckey in the Hinds County Circuit Court action. Also, Luckey, Wilson, and

the Asbestos Group have been dismissed from the action in Jackson County Chancery Court based on that

court's finding that Hinds County Circuit Court had priority jurisdiction over the Scott fees at issue. The

only action left pending in Jackson County Chancery Court is SMBD's claim against Merkel & Cocke,

Merkel, and Mitchell for alleged tortious interference with Scruggs's contractual relationship with Wilson.

The Jackson County Chancery Court has held the remaining claim against Merkel & Cocke in abeyance

pending the outcome of the Hinds County Circuit Court action because the outcome could potentially affect
the Jackson County Chancery Court action against Merkel & Cocke.

¶20. The Jackson County Chancery Court has recognized the prior jurisdiction of the Hinds County Circuit

Court. Not only is this question not properly before us, but the doctrine of priority of jurisdiction does not

apply to the action before the Jackson County Chancery Court.

III. Interpleader

¶21. SMBD contends that the Coahoma County Chancery Court erred in discharging Merkel & Cocke

from all liability associated with the interpled funds.

¶22. The comment to Rule 22 of the M.R.C.P. states that:

[T]he purpose of Rule 22, interpleader, is to permit a stakeholder who is uncertain if and to whom he

is liable for money or properly held by him to join those who are or who might asset claims against

him and to thereby obtain a judicial determination for the proper disbursement of the money or

property.

¶23. In First Nat'l Bank v. Middleton, 480 So.2d 1153, 1155 (Miss. 1985), this Court stated:

We are of the opinion that Rule 22 of the Mississippi Rules of Civil Procedure, adopted by this Court

on May 26, 1981, terminated the historical requirements for interpleader in the chancery courts. We

are of the opinion that Rule 22 does not enlarge the jurisdiction of the chancery courts, that it is

procedural, and its purpose is to broaden and extend the scope of the remedy in the chancery court.

¶24. The comment to Rule 22 of M.R.C.P. further states:

Historically, equitable interpleader was characterized by four requirements: (1) the same thing, debt or

duty must be claimed by both or all the parties against whom the relief is demanded; (2) all their

adverse titles or claims must be dependent on or be derived from a common source; (3) the person

asking the relief - the plaintiff - must not have or claim any interest in the subject matter; (4) he must

have incurred no independent liability to either of the claimants; that is, he must stand perfectly

indifferent between them, in the position of a stakeholder. See V. Griffith, Mississippi Chancery

Practice, § § 420-426 (2d ed. 1950). It is intended that Rule 22 be applied liberally with the view

toward increasing the availability of interpleader in eliminating historical technical restraints on the

device that are not founded on adequate policy consideration. As a result, the four historic limitations

on interpleader should be of no great significance.

¶25. We find that an interpleader action was available to Merkel & Cocke to use to facilitate paying the

attorneys' fees within their possession into the registry of the court. However, Merkel and Cocke's action

for interpleader should have been brought as a compulsory counterclaim to the pending litigation in the

Chancery Court of Jackson County. The Coahoma County Chancery Court erred by assuming jurisdiction

of the interpleader action and deciding Merkel & Cocke's liability in connection with the attorneys' fees. As

previously stated, we find that the Coahoma County Chancery Court erred in allowing Merkel & Cocke to

proceed with the interpleader and further erred in releasing Merkel & Cocke from all liability in connection

with the interpled funds.

IV. Attorneys' Fees
¶26. The Coahoma County Chancery Court granted Merkel & Cocke attorney fees against SMBD. It

found SMBD's Motion to Dismiss Merkel & Cocke's interpleader to be without merit.

¶27. In Brown v. Hartford Ins. Co., 606 So.2d 122, 127 (Miss. 1992), this Court stated:

Sanctions are appropriate when a claim is either frivolous or filed for harassment value.... When a

party espouses a viable legal theory, MRCP 11 sanctions are inappropriate.

See Bean v. Broussard, 578 So.2d 908, 912-13 (Miss. 1991) (citing Dethlefs v. Beau Maison Dev.

Corp., 511 So.2d 112, 118 (Miss. 1987)). See also Tricon Metals & Sers., Inc. v. Topp, 537 So.2d

1331, 1335 (Miss. 1989).

¶28. Rule 11 (b) of M.R.C.P states in pertinent part as follows:

If any party files a motion or pleading which in the opinion of the court, is frivolous or is filed for the

purpose of harassment or delay, the court may order such a party, or his attorney, or both, to pay to

the opposing party of parties the reasonable expenses incurred by such other parties and by their

attorneys, including reasonable attorney's fees.

¶29. To say that a legal argument is viewed as weak is not enough to establish that the argument was

brought for the purpose to harass the other parties or that it is without merit. See In re Fankboner v.

Jones, 638 So.2d 493, 498 (Miss. 1994); Brown v. Hartford Ins. Co., 606 So.2d at 127. In order to

avoid Rule 11(b) sanctions, the party or his attorney at the time of filing the pleading or pleadings, when

viewed objectively, must have reasonably believed that he had a "hope of success." In re Fankboner, 638

So.2d at 498; Bean, 587 So.2d at 912; Tricon Metals, 537 So.2d at 1336.

¶30. We have determined the Coahoma County Chancery Court erred in not dismissing Merkel and

Cocke's interpleader action under the doctrine of priority of jurisdiction. Merkel and Cocke's interpleader

should have been brought as a compulsory counterclaim in the pending Jackson County litigation. Since,

SMBD presented a viable legal argument, Rule 11(b) sanctions were improper.

CONCLUSION

¶31. For all the foregoing reasons, the Coahoma County Chancery Court erred as to all issues raised by

SMBD. Therefore, the judgment of the Coahoma County Chancery Court is reversed and rendered.

Merkel & Cocke can seek interpleader relief by filing an interpleader action as a compulsory counterclaim

in the prior pending Jackson County Chancery Court litigation.

¶32. REVERSED AND RENDERED.

PITTMAN, C.J., SMITH, P.J., WALLER, COBB, DIAZ AND GRAVES, JJ., CONCUR.

McRAE, P.J., AND CARLSON, J., NOT PARTICIPATING.

1. Wilson, Luckey and Asbestos Group were all dropped from the Jackson County action based on the

pending Hinds County Circuit Court case's priority of jurisdiction over their claims. The pending litigation in

Hinds County Chancery Court addresses the issue of accounting for the attorneys' fees received from

asbestos litigation and settlements involving Scruggs, Wilson, Luckey, and Asbestos Group.