FILED

July 1, 1998

Cecil W. Crowson

Appellate Court Clerk

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

HELEN S. ROGERS, )

)

Plaintiff/Appellee, )

) Davidson Circuit

) No. 94C-3689

VS. )

) Appeal No.

) 01A01-9603-CV-00120

THOMAS E. WATTS, JR., )

)

Defendant/Appellant. )

APPEAL FROM THE CIRCUIT COURT

FOR DAVIDSON COUNTY

AT NASHVILLE, TENNESSEE

THE HONORABLE THOMAS W. BROTHERS, JUDGE

For Plaintiff/Appellee: For Defendant/Appellant:

Helen Sfikas Rogers Thomas E. Watts, Jr.

Jones & Rogers Pro Se

Nashville, Tennessee

AFFIRMED AND REMANDED

WILLIAM C. KOCH, JR., JUDGE
1Ms. Rogers’s letter stated that “[t]he settlement moneys are to be wire transferred into my

trust account around the first of next week and I will let you know when we can complete the

settlement.”

-2-

O P I N I O N

This appeal involves another chapter in a lingering, acrimonious dispute

between two Nashville lawyers stemming from a failed settlement of a case in federal

court. After one of the lawyers abandoned his third-party complaint against the other

lawyer for fraudulent misrepresentation, the other lawyer filed a malicious

prosecution action in the Circuit Court for Davidson County. When the trial court

dismissed the complaint on the ground that it was premature, the prevailing lawyer

sought Tenn. R. Civ. P. 11 sanctions against the lawyer whose malicious prosecution

claim had been dismissed. The trial court declined to grant sanctions, and the lawyer

seeking sanctions has appealed. We have determined that the record supports the trial

court’s decision not to award sanctions and, therefore, affirm the trial court’s

decision. 

I.

In mid-1992, Sharon McFarlin obtained a default judgment for approximately

$10,000 against Jim and Rose Winfree. On the afternoon of September 17, 1992, she

arrived at the Winfrees’ home with a moving van and a deputy sheriff armed with an

execution authorizing the seizure of the Winfrees’ personal property to satisfy her

judgment. Faced with immediate loss of their furniture and other possessions, the

Winfrees made a hurried telephone call to their lawyer, Thomas E. Watts, Jr.

At that time, Mr. Watts was also representing a corporation in which Mr.

Winfree had an interest in a proceeding in the United States District Court for the

Middle District of Tennessee. One of the parties in the federal proceeding was

represented by Helen S. Rogers, a lawyer who had once practiced with Mr. Watts

until their association was dissolved over a financial dispute. On the day before Ms.

McFarlin arrived at the Winfrees’ home, Mr. Watts received a letter from Ms. Rogers

confirming the terms of a settlement of the litigation and indicating that she would

shortly have the funds for the settlement in hand.1 Mr. Watts anticipated that Mr.

Winfree’s share of this settlement would be sufficient to pay Ms. McFarlin’s

judgment.
-3-

Mr. Watts requested Ms. McFarlin to forego executing on the Winfrees’

property and promised her that Mr. Winfree would use the expected federal

settlement proceeds to pay her judgment. Ms. McFarlin referred Mr. Watts to her

lawyer. Mr. Watts was unable to reach Ms. McFarlin’s lawyer by telephone but

talked with one of his associates. After receiving Mr. Watts’s assurance that he

would receive the settlement proceeds within five days, the lawyer telephoned Ms.

McFarlin and advised her not to execute on the Winfrees’ property because “money

is better than furniture.” Based on this advice, Ms. McFarlin authorized the lawyer

to release the execution. Unbeknownst to Mr. Watts, Mr. Winfree later sought to

exempt $7,350 of his personal property from execution. 

When Mr. Watts did not receive the settlement proceeds as he expected, he

wrote a pointed letter to Ms. Rogers on September 22, 1992 stating that he would

disavow the settlement unless the funds were delivered to him by the next day. After

he did not receive the funds, Mr. Watts wrote another letter to Ms. Rogers stating that

“I do not believe the creditor [Ms. McFarlin] has any claim against me personally, but

in the unlikely and unfortunate event that I am sued, of course, I will have no option

other than to pass the responsibility on to you, and presumably, you would want to

pass it on to your clients.” Ms. Rogers responded by asserting that she had never

given Mr. Watts a definite payment date. 

On October 23, 1992, Ms. McFarlin sued Mr. Watts for negligent

misrepresentation in the Sumner County General Sessions Court. The general

sessions court awarded Ms. McFarlin a judgment against Mr. Watts, and Mr. Watts

pursued a de novo appeal to the circuit court. Once the case reached the circuit court,

Mr. Watts filed a third-party complaint against Ms. Rogers, alleging fraud and

fraudulent misrepresentation. At the close of his proof at trial, Mr. Watts essentially

abandoned his fraud claims and sought permission at trial to amend his third-party

complaint to add a negligent misrepresentation claim and to conform his pleadings

to the proof. The trial court declined to permit Mr. Watts to amend his third-party

complaint and granted a directed verdict dismissing Mr. Watts’s fraud and fraudulent

misrepresentation claims against Ms. Rogers. The circuit court thereafter awarded

Ms. McFarlin a $7,550 judgment against Mr. Watts.
2Ms. Rogers also filed a motion in the Circuit Court for Sumner County seeking Tenn. R.

Civ. P. 11 sanctions against Mr. Watts and his lawyer for the filing of the third-party complaint.

This motion was eventually denied on April 27, 1995.

-4-

A panel of this court reversed Ms. McFarlin’s judgment against Mr. Watts on

October 28, 1994. See McFarlin v. Watts, 895 S.W.2d 687 (Tenn. Ct. App. 1994).

On November 14, 1994, Ms. Rogers filed a malicious prosecution action against Mr.

Watts in the Circuit Court for Davidson County based on his third-party complaint

that had been dismissed in the Sumner County proceeding.2 Mr. Watts moved for a

summary judgment on the ground that Ms. Rogers’s complaint was premature. After

the trial court dismissed Ms. Rogers complaint, Mr. Watts requested sanctions against

Ms. Rogers under Tenn. R. Civ. P. 11. On July 24, 1995, the trial court denied Mr.

Watts’s motion for sanctions. This appeal followed.

On March 6, 1995, the Tennessee Supreme Court denied Ms. McFarlin’s

application to review this court’s opinion vacating her judgment against Mr. Watts.

On June 9, 1995, Ms. Rogers filed a second malicious prosecution action against Mr.

Watts in the Circuit Court for Davidson County. Following a bench trial, the trial

court awarded Ms. Rogers an $18,000 judgment against Mr. Watts. A divided panel

of this court affirmed the judgment. See Rogers v. Watts, No. 01A01-9611-CV00500, 1997 WL 367477 (Tenn. Ct. App. July 2, 1997), perm. app. denied (Tenn.

Jan. 20, 1998).

II.

We must first determine which version of Tenn. R. Civ. P. 11 applies to this

proceeding because the Tennessee Supreme Court revised the rule after the conduct

giving rise to Mr. Watts’s motion for sanctions occurred. Tenn. R. Civ. P. 11 tracked

Fed. R. Civ. P. 11 from 1987 until December 1, 1993 when the United States

Supreme Court dramatically changed the explicit scope of Fed. R. Civ. P. 11, as well

as its certification requirement and available sanctions. The change in the federal rule

was brought about by a desire to curb some of the abuses in Rule 11 motion practice

in federal courts, see 5A Charles A. Wright & Arthur R. Miller, Federal Practice and

Procedure § 1331, at 4 (Supp. 1998), and by a desire to reduce the number of motions

for sanctions filed in federal courts. See 2A James W. Moore, et al., Moore’s Federal

Practice ¶¶ 11.01[8], 11.02[1.-2] (2d ed. 1995). 
3

See Resolution of April 27, 1995, House Res. No. 30, 1995 Tenn. Pub. Acts 1353.

4

See Resolution of May 4, 1995, Senate Res. No. 13, 1995 Tenn. Pub. Acts 1207.

5The United States Supreme Court’s order amending Fed. R. Civ. P. 11 in 1993 specified that

the amended version of the rule “shall govern all proceedings in civil cases thereafter commenced

and, insofar as just and practicable, all proceedings in civil cases then pending.” See Espinoza v.

United States, 52 F.3d 838, 840 (10th Cir. 1995). 

6The requirement in Tenn. Code Ann. § 16-3-404 that both legislative chambers approve

proposed rules may, as a practical matter, indirectly influence the scope of the Court’s rule-making

authority. The Court could be hesitant to adopt rules that will not meet with legislative approval.

-5-

Even though Tennessee’s courts had not experienced dramatic increases in the

filing of motions seeking Rule 11 sanctions or widespread abuse of these motions, the

Tennessee Supreme Court filed an order on February 1, 1995 conforming Tenn. R.

Civ. P. 11 with the 1993 version of Fed. R. Civ. P. 11. Its reason for amending Tenn.

R. Civ. P. 11 was to prevent the potential for abuse of Tenn. R. Civ. P. 11 sanctions.

See Tenn. R. Civ. P. 11 advisory comm’n cmt. to 1995 amendment. The Court

submitted the proposed rule to the General Assembly in accordance with Tenn. Code

Ann. § 16-3-404 (1994). The House of Representatives approved the rule on April

27, 1995,3 and the Senate followed suit on May 4, 1995.4 By its own terms, the

amended rule took effect on July 1, 1995.

The Tennessee Supreme Court, unlike the United States Supreme Court,

provided no direction concerning the application of the amended version of Tenn. R.

Civ. P. 11 to pending civil cases.5 Thus, we must determine whether all or any

portion of the 1995 version of Tenn. R. Civ. P. 11 applies to conduct occurring before

July 1, 1995. The Tennessee Rules of Civil Procedure themselves do not provide an

answer to this question; accordingly, we must look elsewhere.

The only statute purporting to limit the scope of the Tennessee Supreme

Court’s rulemaking authority is Tenn. Code Ann. § 16-3-403 (1994) which states that

“[t]he rules prescribed by the supreme court pursuant to § 16-3-402 shall not abridge,

enlarge or modify any substantive right, and shall be consistent with the constitutions

of the United States and the state of Tennessee.”6

 This provision invokes Tenn.

Const. art. I, § 20's protection against retrospective laws. Thus, we must determine

whether the 1995 amendments to Tenn. R. Civ. P. 11 are substantive or procedural.

See Kuykendall v. Wheeler, 890 S.W.2d 785, 787 (Tenn. 1994); Saylors v. Riggsbee,

544 S.W.2d 609, 610 (Tenn. 1976). If the amendments are procedural, then they

may be applied to all civil cases pending when the amended rule became effective.
-6-

See Kee v. Shelter Ins. Co., 852 S.W.2d 226, 228 (Tenn. 1993); Pacific Eastern Corp.

v. Gulf Life Holding Co., 902 S.W.2d 946, 956 (Tenn. Ct. App. 1995).

Procedural statutes are ones that affect the method or procedure for prosecuting

or defending a claim. See Shell v. State, 893 S.W.2d 416, 419-20 (Tenn. 1995); State

Dep’t of Human Servs. v. Defriece, 937 S.W.2d 954, 958 (Tenn. Ct. App. 1996). In

this context, procedure includes

the mode or proceeding by which a legal right is enforced,

as distinguished from the law which gives or defines the

right, and which by means of the proceeding, the court is

to administer – the machinery, as distinguished from its

product;. . . including pleading, process, evidence, and

practice. . .. Practice [is] the form . . . for the enforcement

of rights or the redress of wrongs, as distinguished from the

substantive law which gives the right or denounces the

wrong. 

Saylors v. Riggsbee, 544 S.W.2d at 610 (quoting Jones v. Garrett, 386 P.2d 194, 198-

99 (Kan. 1963)).

The 1995 amendments to Tenn. R. Civ. P. 11 contain both substantive and

procedural alterations. Substantively, the 1995 amendments broaden the scope of the

conduct subject to sanctions and expand the nature of the certifications implicit in an

attorney’s or party’s signature on pleadings, written motions, or other papers.

Procedurally, Tenn. R. Civ. P. 11.03 changes decisions to impose sanctions from

mandatory to discretionary decisions. Similarly, Tenn. R. Civ. P. 11.03(1)(a)

provides a 21-day safe harbor provision intended to reduce the likelihood of sanctions

by giving parties an opportunity to correct or withdraw challenged submissions, and

Tenn. R. Civ. P. 11.03(2) places new limits on the nature of the sanctions to be

imposed.

While we have no Tennessee precedents regarding the application of amended

rules to conduct occurring before the amendments became effective, the federal

courts have addressed precisely the same question with regard to the 1993

amendments to Fed. R. Civ. P. 11. With regard to sanctionable conduct occurring

before the effective date of the amendment, the federal courts have noted that both

remanding the cases for consideration under the amended rule and reviewing the trial

court’s decision using the amended rule’s standards would be unjust and impractical.

See Silva v. Witschen, 19 F.3d 725, 728-29 (1st Cir. 1994).
-7-

Because the 1993 amendments to Fed. R. Civ. P. 11 were both substantive and

procedural, the federal courts have held that the key consideration is when the

sanctionable conduct occurred, not when the motion for sanctions was filed. See

Vanderventer v. Wabash Nat’l Corp., 893 F. Supp. 827, 838 (N.D. Ind. 1995). With

regard to the substantive aspects of the rule, the federal courts have held that the pre1993 version of Fed. R. Civ. P. 11 should apply because lawyers and parties should

only be charged with knowledge of the version of the rule that was in effect when the

paper giving rise to the request for sanctions was filed. See MacDraw, Inc. v. CIT

Group Equip. Fin., Inc., 73 F.3d 1253, 1257 (2d Cir. 1996); Cunningham v. Waters

Tan & Co., 65 F.3d 1351, 1361 (7th Cir. 1995); Land v. Chicago Truck Drivers

Union Health and Welfare Fund, 25 F.3d 509, 516 (7th Cir. 1994); Knipe v. Skinner,

19 F.3d 72, 78 (2d Cir. 1994). They have also held, however, that district judges may

exercise their newfound discretion contained in the 1993 amendments when the filing

giving rise to the request for sanctions preceded the amendments to Fed. R. Civ. P.

11. See Moore v. Local 569, Int’l Bhd. of Elec. Workers, 53 F.3d 1054, 1058 (9th Cir.

1995); Knipe v. Skinner, 19 F.3d at 78; Corporate Printing Co. v. New York

Typographical Union No. 6, 886 F. Supp. 340, 343 (S.D.N.Y. 1995); LaVigna v.

WABC Television, Inc., 159 F.R.D. 432, 436 (S.D. N.Y. 1995). 

 The choice of which version of Tenn. R. Civ. P. 11 to apply is not outcome

determinative in this case because the conduct Mr. Watts complains of, if found to

have been inappropriate, would have been sanctionable under either version of the

rule. For the purpose of our analysis, however, we will determine whether Ms.

Rogers conduct amounts to a substantive violation of rule using the unamended

version of the rule. Thus, like the trial court, we will apply the objective standard of

reasonableness contained in the pre-July 1, 1995 version of Tenn. R. Civ. P. 11. See

Business Guides, Inc. v. Chromatic Communications Enters., Inc., 498 U.S. 533, 551,

111 S. Ct. 922, 933 (1991); Andrews v. Bible, 812 S.W.2d 284, 288 (Tenn. 1991).

Ms. Rogers’s conduct must be analyzed in light of the circumstances known

to her at the time she filed her first malicious prosecution complaint. See Krug v.

Krug, 838 S.W.2d 197, 205 (Tenn. Ct. App. 1992). Accordingly, we must pursue

answers to the following two questions: first, whether Ms. Rogers filed her first

malicious prosecution complaint believing it to be “well grounded in fact and . . .

warranted by existing law or a good faith argument for extension, modification, or
-8-

reversal of existing law” and second, whether Ms. Rogers filed this complaint “for

any improper purpose such as to harass or to cause unnecessary delay or needless

increase in the cost of litigation.” 

These inquires call for the trial courts to make fact-intensive close calls. See

Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 404, 110 S. Ct. 2447, 2460 (1990).

Accordingly, appellate courts use the deferential abuse-of-discretion standard when

reviewing a trial court’s decision with regard to the imposition of sanctions. See

Alside Supply Ctr. v. Smith Heritage Siding Co., No 03A01-9702-CH-00069, 1997

WL 414982, at *1 (Tenn. Ct. App. July 25, 1997) (No Tenn. R. App. P. 11

application filed); Berger v. Ratner, No. 02A01-9604-CV-00077, 1997 WL 170327,

at *3 (Tenn. Ct. App. Apr. 11, 1997) (No Tenn. R. App. P. 11 application filed); Krug

v. Krug, 838 S.W.2d at 205. Under this standard of review, a trial court abuses its

discretion if its decision is based on an erroneous view of the law or a clearly

erroneous assessment of the evidence. See Cooter & Gell v. Hartmarx Corp., 496

U.S. at 405, 110 S. Ct. at 2461. An erroneous decision with regard to the imposition

of Tenn. R. Civ. P. 11 sanctions will not be second-guessed on appeal unless it has

caused great injustice and injury to the complaining party. See Binkley v. Cannon,

No. 01A01-9408-CH-00401, 1995 WL 66927, at *5 (Tenn. Ct. App. Feb. 17, 1995)

(No Tenn. R. App. P. 11 application filed). 

III.

The remaining issue to be decided is whether Ms. Rogers engaged in

sanctionable conduct when she filed her first malicious prosecution claim against Mr.

Watts. Mr. Watts insists that Ms. Rogers should have known that her first complaint

was not warranted by existing law because his third-party claim in McFarlin v. Watts

had not been finally terminated in her favor at the time she filed her complaint. Ms.

Rogers responds that Tenn. R. Civ. P. 11 sanctions were not warranted because she

eventuallysucceeded with her second malicious prosecution claim against Mr. Watts.

The reasonableness of Ms. Rogers’s conduct must be established in light of the

circumstances existing when she filed her first malicious prosecution complaint.

Accordingly, the later success of her second malicious prosecution complaint has no
-9-

bearing on our consideration of whether the filing of her first complaint was

sanctionable. As the law stood at the time she filed her first complaint, Ms. Rogers,

like any other reasonably competent lawyer, should have known that she would be

required to prove (1) that Mr. Watts filed his third-party complaint in McFarlin v.

Watts without probable cause, (2) that Mr. Watts acted with malice when he filed his

third-party complaint against her, and (3) that the final disposition of Mr. Watts’s

third-party complaint was favorable to her. See Roberts v. Federal Express Corp.,

842 S.W.2d 246, 247-48 (Tenn. 1992); Christian v. Lapidus, 833 S.W.2d 71, 73

(Tenn. 1992) (both cases holding that the three essential elements of a malicious

prosecution claim are (1) that the defendant brought the prior suit without probable

cause, (2) that the defendant brought the prior suit with malice, and (3) that the prior

suit was terminated in the plaintiff’s favor).

The “favorable termination” element of a malicious prosecution claim can be

satisfied by a showing other than that the defendant’s underlying claim was dismissed

as a result of a final judgment on the merits. Any dismissal indicating the innocence

or nonliability of the malicious prosecution plaintiff will suffice as a favorable

termination. See Sewell v. Par Cable, Inc., No. 87-266-II, 1988 WL 112915, at *3

(Tenn. Ct. App. Oct. 26, 1988) (No Tenn. R. App. P. 11 application filed); see also

Villa v. Cole, 6 Cal. Rptr. 2d 644, 648 (Ct. App. 1992); Restatement (Second) of

Torts § 674 cmt. j (1977); 1 Fowler V. Harper, et al., The Law of Torts § 4.4 (3d ed.

1996). Accordingly, the Tennessee Supreme Court has held that the abandonment

or withdrawal of an allegedly malicious claim is sufficient to establish a final and

favorable termination as long as the abandonment or withdrawal was not

accompanied by a compromise or settlement or was not undertaken in order to refile

the same claim in another forum. See Christian v. Lapidus, 833 S.W.2d at 74. 

When Ms. Rogers filed herfirst malicious prosecution claim against Mr. Watts,

she knew:

(1) that Mr. Watts had filed a third-party complaint against her in McFarlin

v. Watts alleging that she has committed fraud or fraudulent

misrepresentation;

(2) that the trial court had denied Mr. Watts’s motion at the close of the

evidence to conform his third-party complaint to the proof and to

amendment his third-party complaint to add a claim of negligent

misrepresentation;
7Mr. Watts conceded in the second malicious prosecution proceeding that he did not appeal

from the trial court’s decision to grant the directed verdict dismissing his claims against Ms. Rogers

for fraud or fraudulent misrepresentation.

-10-

(3) that the trial court had granted her motion of a directed verdict

dismissing Mr. Watts’s third-party complaint with prejudice;

(4) that Mr. Watts had appealed from Ms. McFarlin’s verdict against him

and from the trial court’s denial of his motion to amend his complaint

but that he had not specifically appealed from the directed verdict

dismissing his third-party claims for fraud or fraudulent

misrepresentation;7 and 

(5) that the Court of Appeals had affirmed the trial court’s judgment.

Based on these facts, Ms. Rogers, or any other reasonably competent lawyer,

could legitimately have concluded that Mr. Watts’s claims based on fraud and

fraudulent misrepresentation had been terminated in Ms. Rogers’s favor. Mr. Watts

had abandoned them at trial by filing the motion to amend, and the trial court had

granted a directed verdict dismissing them. In addition, any reasonably competent

lawyer would have concluded that the trial court’s dismissal of Mr. Watts’s fraud

claims was final because Mr. Watts had not taken issue on appeal with the dismissal

of these claims. By failing to raise this issue on appeal, Mr. Watts placed the issue

of the trial court’s dismissal of his third-party fraud claims beyond the reach not only

of the Court of Appeals but also of the Tennessee Supreme Court. See Tenn. R. App.

P. 13(b). Thus, it was of no consequence that Ms. McFarlin’s Tenn. R. App. P. 11

application had not been disposed of when Ms. Rogers filed her first malicious

prosecution complaint. By virtue of his failure to take issue in the Court of Appeals

with the trial court’s directed verdict dismissing his fraud claims, Mr. Watts had lost

his opportunity to raise these issues in the Tennessee Supreme Court.

In light of these facts, Ms. Rogers, or any other reasonably competent lawyer,

could have concluded that Mr. Watts’s claims based on fraud and fraudulent

misrepresentation had been finally concluded in Ms. Rogers’s favor when she filed

her first malicious prosecution action. This being the case, the trial court could have

properly declined to impose Tenn. R. Civ. P. 11 sanctions for Ms. Rogers’s first

malicious prosecution complaint because it was well-grounded in fact and supported

by existing law.
-11-

IV.

We affirm the judgment dismissing Mr. Watts’s request for Tenn. R. Civ. P.

11 sanctions against Ms. Rogers and remand the case to the trial court for whatever

further proceedings may be required. We tax the costs of this appeal to Thomas E.

Watts, Jr., and his surety for which execution, if necessary, may issue.

____________________________

WILLIAM C. KOCH, JR., JUDGE

CONCUR:

__________________________________

HENRY F. TODD, PRESIDING JUDGE

MIDDLE SECTION

__________________________________

SAMUEL L. LEWIS, JUDGE