Opinion ID: 1951537
Heading Depth: 1
Heading Rank: 3

Heading: Award of Attorney Fees and Expenses and Imposition of Sanction

Text: [¶ 15] Foy next contends that the court's abatement of the entire purchase price for the SMA stock effectively charged him with Linscott's and the receiver's fees and expenses and imposed an additional $383,612.42 sanction on him. [10] Although the court's decision to sanction Foy through the abatement of the purchase price in the amount of the fees and costs incurred by Linscott was within its authority and did not constitute an abuse of discretion, we are unable to discern the reason for the abatement of the remainder of the purchase price.
[¶ 16] Whether the court was authorized to award attorney fees in these circumstances is a question of law. See Gibson v. Farm Family Mut. Ins. Co., 673 A.2d 1350, 1354 (Me.1996). The court's authority to award attorney fees may be determined by statute, by the `American Rule' at common law that generally prohibits taxing the losing party in litigation with a successful opponent's attorney fees, or by certain recognized common law authorizations of attorney fees.  See id. (emphasis added). Although the prevailing party is not ordinarily entitled to an award of attorney fees, courts may award fees as damages for certain egregious conduct. See Chadwick-BaRoss, Inc. v. T. Buck Constr., Inc., 627 A.2d 532, 536 (Me.1993). [T]he trial court does possess inherent authority to sanction parties and attorneys for abuse of the litigation process. Chiappetta v. LeBlond, 544 A.2d 759, 760 (Me.1988) ( quoting Link v. Wabash R.R. Co., 370 U.S. 626, 630-31, 82 S.Ct. 1386, 1388-89, 8 L.Ed.2d 734 (1962)); see also Chambers v. NASCO, Inc., 501 U.S. 32, 46, 111 S.Ct. 2123, 2133, 115 L.Ed.2d 27 (1991) (stating that the federal district court has inherent power to impose attorney fees as a sanction when a party shows bad faith by hampering enforcement of a court order). [¶ 17] Because of the strictures of the well-established American Rule, courts should exercise the inherent authority to award attorney fees as a sanction only in the most extraordinary circumstances. As we cautioned in Chiappetta, the court's authority to sanction parties and attorneys for abuse of the litigation process should be sparingly used and sanctions imposed only when the abuse of process by parties or counsel is clear. Chiappetta, 544 A.2d at 761. In other words, attorney fees may not be awarded as a sanction in the absence of significant bad faith on the part of a litigant or his agents. [¶ 18] Foy's actions here were unquestionably egregious. He repeatedly refused to comply with a final order of the court. Instead of transferring the stock, executing the releases contemplated by the settlement agreement, and ending the expensive and time-consuming litigation that prompted the settlement, Foy filed multiple suits in several jurisdictions. Despite his protestations, these suits amounted to little more than collateral attacks on the order to close the settlement agreement. Even if aspects of the settlement were not fully addressed by the agreement, these lacunae did not justify an obstinate refusal to comply with a valid order to close in accordance with the agreement. In short, we have no difficulty concluding that these actions were undertaken in bad faith and were abusive of the court and the other parties, thereby providing the court with authority to consider imposition of attorney fees. [¶ 19] The next issue is whether the court exceeded its discretion by awarding the entire amount of the attorney fees and costs as a sanction. See Gibson, 673 A.2d at 1354. The court implicitly determined that an offset of the purchase price was necessary in view of the costs generated by Foy's refusal to close. Linscott not only advanced all of the funds for the receiver's defense of Foy's actions, but also incurred substantial fees and costs in defending himself against those actions. These fees and costs would not have been generated but for Foy's refusal to comply with the Rule 70 order. On this record, the trial court did not exceed the bounds of its discretion by awarding Linscott over $400,000 of fees and costs. [11]
[¶ 20] Finally, we turn to Foy's argument that the difference between the $800,000 purchase price and the fees and costs awarded to Linscott constituted an unreasonable and excessive sanction. The court could have imposed further sanctions only pursuant to specific authority. Conceivably, that authority might have been found in M.R. Civ. P 11 or pursuant to the court's inherent power to punish contempt. [¶ 21] Unfortunately, the record does not reveal whether the court intended to invoke its authority to impose sanctions pursuant to M.R. Civ. P. 11. Cf. 2A JAMES WM. MOORE ET AL., MOORE'S FEDERAL PRACTICE ¶ 11.02[4] at 11-73 (2d ed.1994) (noting that, under F.R. Civ. P. 11, the trial court should articulate the justification for imposing sanctions [a]s a general practice, and as an aid to appellate review.). Similarly, although the court has inherent power to impose sanctions for contempt, including failure to comply with a lawful judgment or order, M.R. Civ. P. 66 establishes specific procedures for exercising that authority. See M.R. Civ. P. 66(a)(1). Because the court did not invoke the procedures set forth in Rule 66, we can only assume that its order was not designed to punish Foy as a contemnor for his failure to comply with the Rule 70 order. [¶ 22] Accordingly, we vacate the order to the extent that it sanctioned Foy by abating the purchase price beyond that necessary to compensate Linscott for his and the receiver's attorney fees and costs. The matter must be remanded for a determination of whether any of the funds from the escrow account should have been retained by Linscott. This determination will necessarily involve a determination of whether a further sanction against Foy is appropriate and, if so, in what amount. [12] Upon remand, the court may also consider whether to award additional attorney fees generated through the date of its next hearing. The entry is: Order dated June 14, 1995 affirmed. Order dated November 28, 1997 affirmed in part, vacated in part. Remanded for further proceedings consistent with this opinion.