Opinion ID: 1285664
Heading Depth: 1
Heading Rank: 3

Heading: Did R Motors Have Reasonable Grounds to Believe it Might Prevail on the Matters Covered by the Requests for Admission?

Text: R Motors contends it had reasonable grounds to believe it might prevail on the twelve requested admissions it denied. So it is relying on rule 134(c)(3) to avoid imposition of attorney's fees and costs. Although a trial may ultimately result in a finding that matters denied were true, this does not necessarily mean the matters were unreasonably denied. A good illustration of this point is found in Dyer v. United States, 633 F.Supp. 750 (D. Or.1985), aff'd 832 F.2d 1062 (9th Cir.1987). In Dyer, the plaintiff had requested the government to admit that wake turbulence from one of its aircraft caused the crash of a plane in which the decedent was a passenger. After a bench trial the trial court found that wake turbulence indeed caused the crash. Following the trial court's decision, the plaintiff asked the court to grant sanctions for failure to admit pursuant to Federal Rule of Civil Procedure 37(c). (This federal rule tracks verbatim our rule 134(c).) The court refused to do so, finding that the government had reasonable grounds to believe it might prevail on the matter. The court found that the requested admission involved a close factual question. More importantly, the court found that the government relied in good faith on its expert who testified the crash was caused by factors other than wake turbulence. Dyer, 633 F.Supp. at 758-59. The language in rule 134(c)(3)the party failing to admit had reasonable ground to believe that he might prevail on the matterimplies two things. First, the determination whether the denying party had reasonable ground is based on what that party knew at the time of the denial. Second, whether the denying party had a reasonable ground is a factual determination. In making this factual determination the district court must employ an objective test: could a person in the denying party's position, armed with the information available at the time, reasonably believe there was a basis to deny the request? Here the requests primarily asked for an admission that there was an agreement between the Koegels and R Motors, an admission about the various terms of the agreement, an admission that R Motors breached the agreement, and an admission as to the elements of Koegels' damages. R Motors responded by simply denying the requests. Its reason for doing so centered primarily on a mixed question of fact and law: R Motors believed Tom Lind had no authorityactual or apparentto bind R Motors to any agreement with the Koegels. R Motors could have avoided the problem by simply expanding its denial to include its lack of authority defense. And, perhaps, as the district court found, R Motors' failure to qualify the denials by adding this explanation was not a good faith response within the meaning of rule 127. Rule 127, however, has its own sanctions for a failure to properly respond. See Iowa R. Civ. P. 127. Those are not the sanctions that the Koegels sought. Rather they sought sanctions under rule 134(c). Under rule 134(c), R Motors could have avoided those sanctions by showing it had reasonable grounds to prevail on the matters covered by the requests for admission. In short, the Koegels could not recover sanctions under rule 134(c) by merely showing R Motors failed to make a good faith response under rule 127. The Koegels were not entirely in the dark when they received the denials to their requests for admission. Nor were they entirely without fault in this matter. They must have had an inkling why R Motors filed answers simply denying the requests. Why else would they sue R Motors instead of Lind Brothers? If the Koegels were not satisfied with R Motors' answers, the Koegels should have moved to determine the sufficiency of the answers and for expenses in connection with this motion under rule 127. Rule 127 provides in relevant part: The party who has requested the admission may move to determine the sufficiency of the answers.... If the court determines that an answer does not comply with the requirements of this rule, it may order either that the matter is admitted or that an amended answer be served.... The provisions of R.C.P. 134(a)(4) apply to the award of expenses incurred in relation to the motion. Iowa R. Civ. P. 127. Court intervention at that point might have cleared up the matter entirely. It is true that the issue of authority was neither addressed in the original trial nor on appeal. Nevertheless, on the rule 134(c) motion the district court should have determined whether R Motors had reasonable grounds, at the time it denied the requests, to believe its lack of authority defense was good. Our reading of the district court's ruling convinces us the district court did not address this issue. Rather, the tenor of the ruling indicates that the district court may have been influenced by the trial court's findings against R Motors in the original trial. As we said, a finding at trial that the matters denied are true does not necessarily mean the matters were unreasonably denied. R Motors preserved error when it filed a rule 179(b) motion following the district court's ruling on the motion for sanctions. In the rule 179(b) motion R Motors asked the court to set out specifically those denials the court regarded as untrue, and the reasons why the court regarded the denials as untrue. See Iowa R. Civ. P. 179(b). We think this sufficiently alerted the district court to its duty to make findings as to each requested admission. Because the district court did not make such findings, we conclude the district court abused its discretion. We reverse and remand on this issue for further proceedings consistent with this opinion.