UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 91-3394

OPAL MENNELLA,

Plaintiff-Appellant

Cross-Appellee,

versus

KURT E. SCHON E.A.I., LTD., ET AL.,

Defendants-Appellees

Cross-Appellants.

_________________

No. 91-3747

_________________

OPAL MENNELLA,

Plaintiff/Counterlaim

Defendant-Appellee,

versus

KURT E. SCHON E.A.I., LTD., ET AL.,

Defendants/Counterclaim

Plaintiffs-Appellants.

_________________

No. 91-3857

_________________

OPAL MENNELLA,

Plaintiff-Appellant,

versus

KURT E. SCHON E.A.I., LTD., ET AL.,

Defendants-Appellees.2 Appeals from the United States District Court

For the Eastern District of Louisiana

(December 2, 1992)

Before POLITZ, Chief Judge, SMITH and BARKSDALE, Circuit Judges.

POLITZ, Chief Judge:

In these consolidated appeals, the parties disp ute the

ownership of a masterpiece painted by Sir Anthony Van Dyck. Mrs.

Opal Mennella com plains of the district court's summary judgment

dismissal of her claim of conversion and denial of sanctions; Kurt

E. Schon, E.A.I., Ltd., e t al., complain of the court's award to

Mrs. Mennella of certain payments she made on the painting and of

the dismissal of their claim of defamation. Concluding that the

question of ownership is controlled by basic principles of property

and contract law as adopted and codified in the Louisiana Civil

Code, and concluding that Schon's defamation suit is without merit,

we affirm the district court except as relates to recovery of

interest by Mrs. Mennella.

Background

T his mise en scene began in the Spring of 1988 when Mrs.

Mennella agreed to purchase a painting from Schon's New Orleans art

gallery. She previously had purchased two paintings from Schon and

had admired this piece on previous visits. The painting, entitled

"Princess Mary, Eldest Daughter of King Charles I, Mother of King1 Van Dyck is, after Rubens, the most prominent Flemish painter

of the 17th Centu ry. Under the appointment of King Charles I he

served as "principal paynter in ordinary of their Majesties." It

was during this period that Van Dyck was Knighted and presumably

painted the portrait in question.

2 The appraisal was conducted in January of 1989. The

conclusion was confirmed by a Dr. Erik Larsen in March and reduced

to writing in April of 1989.

3 William III" by the Flemish Master Sir Anthony Van Dyck, was more

than 300 years old

. 1 Princess Mary married William of Orange; it

is their names which identify one of America's first and finest

colleges. The purchase price was $350,000. Motivated to purchase,

she paid Schon $50,000 with the $300,000 balance, according to the

invoice, to be paid on June 1, 1988.

T he painting never left Schon's possession. Mrs. Mennella,

experiencing cash-flow problems, amicably secured an agreement to

pay the balance over a six-month period. By Christmas of 1988,

however, she had mana ged to pay only an additional $90,000. At

that point she demanded authentication of the painting to be used

to secure a loan to pay the balance of the purchase price. Schon

sent an expert's appraisal stating that the portrait was "one of

five copies by Sir Anthony Van Dyck." 2 Concerned that the portrait

might be a counterfeit, Mrs. Mennella enlisted the aid of her

attorneys who moved to vo id the sale and recover the sum paid.

Acting through counsel, Mrs. Mennella repudiated the painting's

value, refused to make further payments, and demanded return of the

$140,000 paid.

Schon responded by letter on April 25, 1989, a full year after

the osten sible sale, that Mrs. Mennella should be satisfied with4

the authenticity of the painting after receiving a second

appraisal. In that letter Schon demanded performance within five

days, absent which he would be forced to place the painting back in

the active sale stock of the gall ery. Mrs. Mennella made no

apparent effort to reply or to enforce her rights under the

contract. She did not make or tender the agreed price or object to

the time period in which Schon demanded payment. Instead, she and

her attorneys insisted on referring to the contract as "an

agreement to purchase" rather than as a sale, obviously seeking to

distance her from ownership and the obligation to pay the balance

of the purchase price.

On May 2, 1989, Schon wrote Mrs. Mennella, informing her that

he regarded her silence and inaction as a default and that he

considered the sale canceled. No money was refunded. Instead, in

September Schon offered to either refund $95,000, representing the

consideration paid less $45,000 for the cost of authentication and

commission paid to Schon's salesman, or to give Mrs. Mennella

$140,000 in store credit. Mrs. Mennella rejected both offers.

Without Mrs. Mennella's knowledge, the painting was shipped to

Christie's in London where, in November 1989, it sold for more than

$1.4 million.

The following month, unaware of the London sale, Mrs. Mennella

filed the instant suit seeking recision of the sale and damages,

claiming that she only agreed to buy the painting upon "proper

authentication and verification." She complained that the painting

she agreed to purchase was a fraud and was worth far less than she3 In her original complaint, Mr s. Mennella claimed that she

"made verbal demands in early 1989 which were followed by written

demand . . . for the return of [her $140,000]."

4 The amended complaint sought to "amend h er [complaint] to

state that: Plaintiff is and has been the owner of the [portrait]."

5 had agreed to pay. 3 Schon answered and counterclaimed, alleging

defamation. Informed of the London sale, Mrs. Mennella's attitude

markedly changed. Her lawyers, presumably somewhat chagrined,

amended the complaint, claiming that the sale was complete from the

start and , as a result, the painting was Mrs. Mennella's and the

London sale constituted a conversion. 4

B a sed on the pleadings, depositions, and affidavits, the

district court concluded that Mrs. Mennella, though entitled to her

payments and interest from the day of her demand, was not entitled

to the proceeds of the London sale. Schon's counterclaim for

defamation was rejected. Mrs. Mennella apparently thought this

claim to be frivolous and moved for sanctions against Schon for

presuming to advance it. The district court denied the motion for

sanctions. Both parties timely appealed.

Analysis

Sitting as an Erie court we are to apply the substantive law

of Louisiana. As an appellate court we exercise plenary review of

the application of that law.

The controlling principles of Louisiana law are neither

complex nor mysterious. This dispute is readily resolved by resort

to its chronology. That the parties formed some manner of contract5 Conversion is a common-law tort recognized by Louisiana

courts as a quasi-offense under Civil Code article 2315. S ee, e.g., Holley v. Singletary , 464 So.2d 410 (La. App. 1985).

6 Mrs. Mennella's claim to the proceeds flows from her right to

the painting. That right is defined by the Civil Code and the

contract. One must recall the boundaries of common-law conversion

before applying it to the unique relation created by Civil Code

sales. Conversion, as the action has evolved, is predicated on (1)

the plaintiff 's right to possession, and (2) the defendant's

exercise of dominion or control over the goods which is in fact

inconsistent with the plaintiff's rights. W. Page Keeton, et al.,

Prosser and Keeton on the Law of Torts

, § 15, at 92, 104-05 (5th

ed. 1984). If the April contract transferred title and Schon was

not within his rights to sell the painting, only then would he be

liable in damages under a conversion theory. The key is whether

Schon, based on Mrs. Mennella's conduct, had the right to sell the

painting.

7 La. Civ. Code art. 2045 (West 1987); M .O.N.T. Boat Rental

Serv., Inc. v. Union Oil Co. of Cal.

, 613 F.2d 576 (5th Cir. 1980);

Kuswa & Assoc., Inc. v. Thibaut Constr. Co., Inc. , 463 So.2d 1264

(La. 1985).

6 on April 5, 1988 is not disputed. Rather, the dispute concerns the

m ore remote question of whether the painting belonged to Mrs.

Mennella so as to lend credence to her claim that Schon's sale of

the painting constituted conversion. 5 We must first decide whether

the contract supports her claim to ownership. 6

1. The nature of the obligation

Whether the contract provided for a present transfer of title

dep ends on the objectively determined intentions of the parties. 7

If the sale was intended to be contingent on adequate

authentication and verification, as Mrs. Mennella originally

claimed, or on the payment of the purchase price and tender of

delive ry, as the district court determined, then the obligation

would have been "suspensive" under the Louisiana Civil Code. The8 La. Civ. Code art. 1767.

9 A written contract is not required to accomplish a sale of a

mov able. La. Civ. Code art. 2441. Where the price or value

exceeds $500, however, proof of the contract must be proved by at

least one witness and other corroborating circumstances. La. Civ.

Code art. 1846. The summary judgment record contains ample proof

of the making of the contract.

10 La. Civ. Code. art. 2053.

7 Code defines a suspensive obligation as one which is "dependent on

an uncertain event." 8 Article 2471 of the Code provides: "A sale,

made with a suspensive condition, does not transfer property to the

buyer, until the fulfillment of the condition." If, on the other

hand, the sale was not conditioned "on an uncertain event," then

title would pass under article 2456 of the Code which provides:

The sale is considered to be perfect between the parties,

and the property is of right acquired to the purchaser

with regard to the seller, as soon as there exists an

agreement for the object and the price thereof, although

the object has not yet been delivered, nor the price paid

[emphasis added].

After reviewing all relevant indicia of the parties' intentions, we

conclude that they did not intend to create a suspensive

obligation.

Because we do not have the luxury of a fully comprehensive

written contract 9 we must glean t he intention of the parties from

other sources. The Civil Code commands our consideration of the

"nature of the contract, equity, usages, the conduct of the parties

before and after the formation of the contract, and of other

contracts of a like nature between the same parties." 10 We find the

con duct of both parties, before and after April 5, 1988, to be

instructive.1 1 Schon later sought to withhold this co mmission from the

refund of Mrs. Mennella's payments.

8 It is clear that Schon regarded the transaction as a perfected

sale, one not contingent on authentication or anything else. The

day after Mrs. Mennella paid the gallery $50,000, Kurt Schon wrote

to congratulate her on the "purchase of the painting." Equally

telling, Schon immediately paid his salesman a substantial sales

commission. 11 The invoice was straightforward; it described the

transaction as a sale without reference to any condition. There

was only the notation of the initial payment, amount and due date

of the balance, and identification of the portrait.

Similarly, Mrs. Mennella never made any claim to a right to

authenticatio n until December, when she was facing financial

difficulties and already had paid $140,000 for the painting. We

are mindful of and consider significant the fact that the parties

had executed two similar contracts without any authentication

requirement. Though the present efforts to reverse an earlier

position may be the cause of uplifted eyebrow s, it appears

consistent with the original understanding and prior dealings.

The district court found the sale to be conditioned on both

the delivery of the painting and the payment of the purchase price.

We find that this reading creates unnecessary tension with the

literal language of article 2456 and fails to comport with the

accepted civilian rubrics.

Article 1767 defines a conditional obligation as "one

dependent on an uncertain event ." If the anticipated performance12 Haymon v. Holliday , 405 So.2d 1304 (La. App. 1981).

1 3 The Code explicitly accommodates such a result: "The sale is

considered to be perfect and the property is of right acquired to

the purchaser with regard to the seller

. . . ." La. Civ. Code art.

9 were treated as an uncertain even t virtually every bilateral

contract would be a condition al obligation and venerable article

2456 would be rendered meaningless. Indeed, if the performance was

so "uncertain" as to create a conditional obligation, it would be

nigh impossible to treat the exchange of promises as a contract.

Louisiana courts long have recognized that the Civil Code does not

allow the parties to condition the transfer of title on the payment

of the purchase price. 12 Instead, in credit sales, Louisiana courts

consistently have held that when the parties consent and agree as

to the price and the thing, title passes inst anter . So sayeth

article 2456.

Therefore we are compelled to hold that title to the painting

passed to Mrs. Mennella in April of 1988. We must now consider

whether that title was divested prior to the London sale.

2. The execution of the duties under the contract

In support of her claim of ownership of the painting, Mrs.

Mennella seizes upon the transfer of title and would ignore all of

her subsequent actions. Legal title is not so barren a concept.

The Civil Code clearly portends a transfer of title subject to the

execution of the contract. For example, the seller may wrongfully

sell and deliver the object to an innocent th ird party who would

acquire title, provided he has paid fair value. 1 3 The seller2456. See also La. Civ. Code art. 518 ("when possession has not

been delivered, a subsequent transferee to whom possession is

delivered acquires ownership provided he is in good f aith");

Yiannopoulos, 2 Louisiana Civil Law Treatise § 354 (1991).

1 4 La. Civ. Code ar t. 3227; C & A Tractor Co. v. Holland

American Ins. Co.

, 445 So.2d 1286 (La. App.), cert denied

, 449

So.2d 1348 (La. 1984).

15 La. Civ. Code art. 2468.

16 La. Civ. Code art. 2013. See e.g.

, Texala Oil & Gas Co. v.

Caddo Mineral Lands Co.

, 152 La. 549, 93 So. 788 (1922); Hay v.

Bush

, 110 La. 575, 34 So. 692 ( 1903). Comment (a) of the 1984

addition of article 2013 cites both opinions.

1 7 When both parties to a contract share a mistake of fact

involving the essence of a party's consent "the granting of relief

presents no problem." La. Civ. Code art. 1949, cmt. (d); s ee

generally , La. Civ. Code arts. 1948-50.

10 retains a security interest in the property 14 pending tender of the

purchase price and has the concomitant duty of due care towards the

object. 15 The seller has the right to put the buyer in default and

to dissolve the contract upon the buyer's failure to perform, and

under certain conditions to simply regard the contract as

dissolved. 16 That divestment is the principal issue presented by

this appeal.

Mrs. Mennella was obliged to carry her end of the bargain,

timely payment, just as Schon was obliged to care for and

ultimately deliver the painting. Mrs. Mennella's erroneous

conclusion th at the painting was not authentic caused her to

repudiate the transaction, demand a return of her partial payment,

and refuse to pay the balance due. This is a course of action she

would have been entitled to follow had she been correct in her

assumption. 17 That assumption was not correct, however. Indeed,1 8 Counsel for Mrs. Mennella concedes that this is the weakest

part of their argument: "that it appears as though she didn't want

it."

11 in forming her belief that the painting was a fraud she relied on

an appraisal which clearly indicated that the painting was executed

by Van Dyck. She received repeated assurances from the seller that

he would perform, accompanied by repeated demands for her

performance. Further, from January to May she made no effort

whatever to authenticate the painting or to investigate the

credentials of the experts from whom she had received appraisals.

Instead, through counsel, Mrs. Mennella made manifest that she had

no intention of performin g 18 and demanded a return of her money,

refusing a "net" refund or a full store credit.

Whether she claims to have been exerci sing her right to

receive adequate authentication under the contract, or an effort to1 9 Neither may her failure to receive what, by her estimation,

was sufficient evidence of authentication

-- a right she did not

have -- serve as an adequate excuse for her failure to perform.

2 0 See generally, Robertson v. Buoni

, 504 So.2d 860 (La. 1987).

12 enforce a warranty, there is no excusing Mrs. Mennella's express

repudiation and continued ref usal to perform after receiving two

a ppraisals. Mrs. Mennella comes before the courts burdened with

the troublesome albatross of her repudiation. We may not ignore

it.

Mrs. Mennell a now offers a somewhat tortured explanation of

the legal significance of her failure to perform. Essentially, the

argument turns on what she characterizes as Schon's failure to

formally accept her offer to rescind the contract. Such

obfuscation need not long detain us. That argument ignores the

fact that Mrs. Mennella was in default by January of 1989, at the

very latest, when the volunt ary extension expired. The

communication from counsel refusing to proceed and demanding a

refund cannot be construed as anything but a definitive refusal to

perform. The lamb of her so-called "offer to rescind" cannot lie

peacefully beside the lion of her refusal to perform. The fact

that she may have based her actions on a mistaken belief that the

pa inting was not genuine 1 9 does not change the character of her

actions; failure to perform does not presuppose a fraudulent

intent, only an inexcusable failure to do that which was promised. 20

If accepted at face value, the argument by counsel for

Mrs. Mennella would stand the law of contracts on its ear.

Contracts bind persons to the assigned risks and benefits. Mrs.2 1 La. Civ. Code art. 2055; see also Douglas Oil Tools, Inc. v.

Demesnil , 552 So.2d 77 (La. App. 1989) (representations which are

relied upon to a party's detriment give rise to estoppel). S ee

also Ranger Nationwide Ins. v. American Cas. Co.

, 658 F. Supp. 103,

108 (D. Del. 1987) ("A party who breaches a contract may not rely

on the benefits of that same contract."), aff'd

, 833 F.2d 306, 307

(3d Cir. 1987).

2 2 Litvinoff, Law of Obligations in the Louisiana Jurisprudence

, 371 (2d ed. 1985) ("[A] situation that could be characterized as an anticipatory breach at common law can be regarded as an active

violation of the contract in Louisiana.").

13 Mennella would blithely shift the benefits and the corres ponding

burdens as best suits her most immediate interests. She may not do

so. 21

We conclude that Mrs. Mennella's written communication through

counsel refusing to perform may justly be t reated as an

anticipatory repudiation 22 and that her failure to pay the balance

in the extend ed period allowed for same constituted an active

repudiation of the contract.

3. Dissolution

Dissolution of the contract would termin ate Mrs. Mennella's

prope rty rights in the painting. Indeed, this was the prayer of

Mrs. Mennella's initial lawsuit. The final question before us is

whether Schon secured a dissolution before the London sale.

When faced with Mrs. Mennella's refusal to perform Schon had

three choices. He could: (1) sue to enforce performance or to

secure a judicial dissolutio n; (2) continue to seek performance

albeit in an untimely manner; and/or (3) put Mrs. Mennella in

default and, if she failed to correct same, regard the contract as2 3 There is some dispute as to when the Larsen appraisal was

sent. It is clear, however, that it was sent by April when Schon

still demanded performance. Mrs. Mennella complains that this

communication by Schon included a demand for two different prices,

one which included interes t and one for the contract price. In

either event she refused to perform at any price and then waited,

saying nothing after receiving Schon's next letter which informed

her that the sale was dissolved; indeed, she was still seeking

dissolution and disavowing ownership, as late as March, 1990.

2 4 Mrs. Mennella cites cases from the 1940s and 1950s suggesting

that judicial dissolution was Schon's exclusive remedy. In light

of much earlier precedents and the recent amendments to the Civil

Code, we can hardly view those decisions as persuasive. S ee n.16,

supra

.

2 5 La. Civ. Code art. 1991. "An obligee may put the obligor in

default by a written request of performance

. . . or by filing suit

for performance. . . ."

14 dissolved.

Initially, Schon opted for the second choice; he invited

untimely performance. Seeking to accomodate Mrs. Mennella's

cash-flow problems, he agreed to a mo dification of the contract,

extending the $300,000 payment from June until the following

January. He then provided two appraisals to assuage her voiced

concerns regardin g the painting's origin. 2 3 Schon informed Mrs.

Mennella she had five additional days to perform; otherwise he

would have to consider the sale dissolved. Finally, when Mrs.

Mennella made clear that she would not perform, Schon gave her

notice that he was treating the sale as canceled and was returning

the painting to the active stock for sale.

Recently, revisions to the Civil Code formally adopted a

practice the Louisiana courts have long recognized: extrajudicial

dissolution. 24 Schon's letters were sufficient to put Mrs. Mennella

in default, a prerequisite to dissolution by notice. 25 We find them26 La. Civ. Code art. 2013.

27 Litvinoff, supra , at 389.

28 Id.

29 La. Civ. Code art. 2015.

30 La. Civ. Code art. 2014.

15 sufficient, under the circumstances, to dissolve the contract.

The Civil Code provides that the obligee has a right, in

certain cases, to treat the contrac t as dissolved. 2 6 The

"unilateral, non-judicial dissolution provided for in the revised

articles is not a novelty." 2 7 Under the civilian tradition, the

obligor must be notified of his default, give n a certain time to

perform, and warned that the contract will be considered dissolved

if performance is not rendered. 28 The time set must be reasonable

according to the circumstances, 29 and the breach must be substantial

to justify the dissolution. 30

The Civil Code is not exhaustive in its description of the

circumstances that will entitle the obligee "to regard the contract

as dissolved" without litigation. Because the pertinent articles

are relatively new, the Louisiana courts have not yet expounded on

the issue. Whether a repudiation is sufficiently clear to allow

dissolution without l itigation undoubtedly will pose a difficult

question in some cases. Fortunately for this Erie court, this is

not one of those cases. Schon prudently waited until Mrs. Mennella

unequivocally refused to perform and de manded the return of her3 1 If extra-judicial dissolution were not appropriate in this

case we have difficulty conceiving of a case in which it would be.

Such a result would be intolerable as litigation would have to

result from every failed sales agreement to clear title.

3 2 The article allows dissolution where the obligor has

partially performed but the part not rendered substantially impairs

the obligee's interest.

3 3 That article provides: "If partial performance h as been

rendered and that performance is of value to the party seeking to

dissolve

. . ., the dissolution does not preclude recovery for that

performance, whether in contract or quasi-contract."

34 See, e.g., La. Civ. Code art. 2018.

3 5 "In either case [judicial or non-judicial dissolution] the

obligee may recover damages." La. Civ. Code art. 2013.

16 money before notifying her of the default and dissolution. 3 1

Article 2013, when read in harmony with related articles, such as

articles 2014 32 and 2018, 33 allows extraj udicial dissolution where

the obligee has received partial payment. The Code makes clear,

however, that the obligee is liable for the return of any partial

payments unless he has a right to retain them. 34

Schon's notice is not rendered ineffective by his failure to

simultaneously return the partial payments. Article 2018 provides

the obligor in default with an action to recover partial payments

to the extent they ex ceed the damages incurred. Article 2013 3 5

states that the obligee who regards the contract as dissolved has

the right to pursue a remedy in damages. The comments to article

201 5 (non-judicial dissolution by notice) likewise state that

"[a]fter such notice is given, the obligor will be liable for any

delay damages that accrue." At the same time, the obligee is duty36 La. Civ. Code art. 2002.

37 La. Civ. Code art. 13.

38 See also La. Civ. Code. art. 1983.

17 bound to mitigate his damages. 36 We conclude that article 2013,

when read in pari materia with other articles, 37 allows the seller

to regard the contract as dissolved and temporarily retain partial

payments when the buyer is in breach. The seller, of course, is

limited in his actions by operation of article 1759, which provides

that "Good faith shall govern the conduct of the obligor or obligee

in whatever pertains to their obligation." 38 Thus he may hold only

the funds nec essary to compensate for the loss he reasonably

believes he will suffer. Under the prevailing circumstances, we

c onclude that Schon's actions were reasonable and that they w ere

executed in good faith.

We hold that Schon validly dissolved the contract by notice of

default after it became obvious t hat Mrs. Mennella would not

perform. Consistent therewith, we therefore hold that Schon had

legal title to the painting when it was sold in London.

4. Schon's retention of the payments after the auction

Next we must consider whether the district court erred in

concluding that Mrs. Mennella was entitled to the return of her

payments. Schon contends that the contract was merely an agreement

to sell and that the presumption is therefore that the money

advanced regardless of the timing, is forfeitable as earnest money.

We have concluded that the contract was a perfected sale, thus3 9 See La. Civ. Code art. 2018 (allowing recove ry after

dissolution where partial performance leaves the obligee unjustly

enriched).

40 La. Civ. Code art. 1994.

41 Cf. La. Civ. Code art. 1995.

18 Schon is only entitled to the money if he can prove injury from the

breach.

Equitable principles enshrined in t he Civil Code will not

allow Schon to ret ain the funds paid by Mrs. Mennella and yet

resell the painting for a quadrupled sum. 39 Mrs. Mennella is liable

to Schon only for the damages she caused him; nothing more. 40 Mrs.

Mennella did not cause Schon any damages whatever; in fact, her

failure to perform resulted in a magnificent legitima te windfall

for Schon. 41 Schon's argument that he could have profited further

from holding the painting is pure speculation and is unworthy.

Indeed, it is equally possible that the sale at Christie's resulted

i n a higher price than Schon ever could have received in his

gallery in New Orleans. We therefore conclude that Mrs. Mennella

is entitled to the full return of her payments with legal interest

from the date of the London sale of the portrait.

5. The remaining claims

Finally, there is the matter of Schon's claim for defamation

and Mrs. Mennella's corresponding motio n for Rule 11 sanctions.

Under Louisiana law, a successful def amation claim requires: (1)

defamatory words; (2) publication to someone other than the one

defamed; (3) falsity; (4) malice, actual or implied; and (5)42 Borne v. New Orleans Health Care, Inc.

, 580 So.2d 1070 (La.

App.), writ denied . 586 So.2d 533 (La. 1991).

4 3 Schon fails to bring to our attention any Louisiana case allowing the statements of an attorney to be attributed to his

client for this purpose.

4 4 Of cou rse the district court's decision not to impose

sanctions is accorded great deference. S ee Sam D. Johnson, et al.,

The Proposed Amendments to Rule 11: Urgent Problems and Suggested

Solutions

, 43 Baylor L. Rev. 647, 661-63 (1991) (discussing Cotter

& Gell v. Hartmarx Corp.

, 496 U.S . 384, 110 S. Ct. 2447, 110

L.Ed.2d 359 (1990) (requiring abuse of discretion review)). We

f ind no reason to disturb the district court's exercise of

discretion in this case.

19 injury. 42 The summary judgment record richly supports the district

court's conclusion: there is no indication that Mrs. Mennella spoke

the allegedly defamatory words; 43 that Mrs. Mennella published the

statements, if any, to a third party; that Mrs. Men nella did so

with malice, express or implied; or that Schon suffered any injury.

We therefore agree with the district court that the action, while

not so meritless as to be sanctionable, 44 is without merit.

For the reasons assigned we AFFIRM in part and VACATE and

REMAND in part for judgment assessing legal interest as set forth

herein.