Opinion ID: 1655639
Heading Depth: 2
Heading Rank: 2

Heading: whether the circuit court erred in awarding attorney's fees and expenses pursuant to the litigation accountability act against aussenberg.

Text: ¶ 34. The Litigation Accountability Act of 1988, Miss.Code Ann. §§ 11-55-1 et seq. (Supp.2000), provides that a court shall award reasonable attorney's fees and costs against any party or attorney upon finding that an attorney or party brought an action, or asserted any claim or defense, that is without substantial justification, or that the action, or any claim or defense asserted, was interposed for delay or harassment.... Id. § 11-55-5(1) The fees and costs may be assessed against the offending attorneys or parties, or both. Id. § 11-55-5(3). The Act defines without substantial justification as frivolous, groundless in fact or in law, or vexatious, as determined by the court. Id. § 11-55-3(a). When reviewing a trial court's decision regarding the imposition of sanctions pursuant to the Litigation Accountability Act, this Court is limited by the abuse of discretion standard. Leaf River Forest Prods., Inc. v. Deakle, 661 So.2d 188, 197 (Miss.1995). ¶ 35. In its order granting the motions for summary judgment filed by Wittjen and First State Bank, the circuit court found that the Third Amended Complaint and the complaints filed by Wyssbrod prior to the Third Amended Complaint were filed without substantial justification. The court concluded that Wittjen and First State Bank were entitled to recover their litigation expenses, including reasonable attorney's fees, pursuant to the Litigation Accountability Act. The circuit court then held a hearing to determine the amount of expenses and fees incurred by Wittjen and First State Bank and to determine whether Wyssbrod's attorneys should be personally liable for any of the fees and expenses. ¶ 36. In a detailed order entered February 23, 1999, the court examined each factor listed in § 11-55-7 to be considered by a court in determining an award under the Litigation Accountability Act. The court concluded that the Third Amended Complaint was filed without substantial justification. The court awarded First State Bank attorney's fees and expenses in the amount of $25,724.38, and awarded Wittjen attorney's fees and expenses in the amount of $47,870.64. The court held Wyssbrod and Aussenberg jointly and severally liable for these amounts. ¶ 37. Aussenberg first contends that the circuit court abused its discretion in concluding that the action was frivolous. Specifically, Aussenberg argues that the trial court erred in determining that the first factor set forth in § 11-55-7 was satisfied. Section 11-55-7 provides: In determining the amount of an award of costs or attorney's fees, the court shall exercise its sound discretion. When granting an award of costs and attorney's fees, the court shall specifically set forth the reasons for such award and shall consider the following factors, among others, in determining whether to assess attorney's fees and costs and the amount to be assessed: (a) The extent to which any effort was made to determine the validity of any action, claim or defense before it was asserted, and the time remaining within which the claim or defense could be filed; (b) The extent of any effort made after the commencement of an action to reduce the number of claims being asserted or to dismiss claims that have been found not to be valid; (c) The availability of facts to assist in determining the validity of an action, claim or defense; (d) Whether or not the action was prosecuted or defended, in whole or in part, in bad faith or for improper purpose; (e) Whether or not issues of fact, determinative of the validity of a party's claim or defense, we reasonably in conflict; (f) The extent to which the party prevailed with respect to the amount and number of claims or defenses in controversy; (g) The extent to which any action, claim or defense was asserted by any attorney or party in a good faith attempt to establish a new theory of law in the state, which purpose was made known to the court at the time of filing; (h) The amount or conditions of any offer of judgment or settlement in relation to the amount or conditions of the ultimate relief granted by the court; (i) The extent to which a reasonable effort was made to determine prior to the time of filing of an action or claim that all parties sued or joined were proper parties owing a legally defined duty to any party or parties asserting the claim or action; (j) The extent of any effort made after the commencement of an action to reduce the number of parties in the action; and (k) The period of time available to the attorney for the party asserting any defense before such defense was interposed. Miss.Code Ann. § 11-55-7 (Supp.2000). ¶ 38. The circuit court's order details the court's findings on each factor. Regarding the first factor (the extent to which any effort was made to determine the validity of any action, claim or defense before it was asserted, and the time remaining within which the claim or defense could be filed), the circuit court stated: The court finds that the record is absent any evidence that either Wyssbrod or Aussenberg exercised sufficient effort to determine the validity of the claims before they were asserted. The event that triggered the beginning of the statute of limitations time period was the letter of May 5, 1995 whereby Wittjen withdrew his agreement to cover the overdrafts. The lawsuit was filed on June 19, 1995. There was no time constraint that prevented Wyssbrod and Aussenberg from fully investigating the validity of the claim. There was absolutely no emergency situation existed at the time of filing suit. The lack of an emergency need for filing the lawsuit was further evident by the failure of the claimant to post the bond necessary to implement the TRO he had requested. The TRO was sought to prevent First State Bank from bouncing checks. The irreparable harm was alleged to be the loss of suppliers of materials that QPI needed to build pallets. On the one hand, QPI had sufficient funds to buy materials without writing bad checks on the First State Bank account and on the other hand, the evidence in this case failed to produce any instant in which QPI was unable to buy materials just as it had been able to do prior to May 5, 1995. ¶ 39. Aussenberg contends that he exercised reasonable skill and care in investigating the facts and circumstances of the claims of QPI prior to filing the action. Aussenberg states that he reviewed the pre-incorporation agreement entered into between Wittjen and Wyssbrod, the corporation's charter, minutes of board meetings, and bank records. From these documents Aussenberg maintains that he determined that Wittjen had breached the incorporation agreement and that such had negatively affected QPI's operations. This argument is specious. Regarding Wittjen's obligations under the pre-incorporation agreement, the agreement provides only that Wittjen would provide working capital of $6,000 cash, $60,0000 accounts receivable, and additional monies at his discretion, necessary to get the business started until it has its own working capital to run or can borrow money on its own.... Without question, Wittjen provided the cash and accounts receivable, and such is undisputed by Wyssbrod. There is absolutely no provision in the pre-incorporation agreement or in any other documents contained in the record and reviewed by Aussenberg obligating Wittjen to fund overdrafts on the First State Bank account. Even assuming an oral agreement to do so, the pre-incorporation agreement provides that Wittjen was to supply additional funds at his discretion. Wyssbrod himself testified by deposition that the written agreement contains all terms and conditions of the agreement between Wyssbrod and Wittjen and that Wittjen negotiated for the at his discretion language because he did not want the obligation to be open ended. As the circuit court concluded, there was simply no question of fact existing at the time summary judgment was granted or at the time the third complaint was filed on June 10, 1996, more than one year after the action was initiated, that Wittjen's decision to cease funding the overdrafts constituted a breach of contract or of fiduciary duty. ¶ 40. Wyssbrod maintained that Wittjen was obligated, by the pre-incorporation agreement, to provide working capital by funding overdrafts as long as the company needed capital infusion. It is evident, however, from Wyssbrod's deposition testimony and the very bank statements Aussenberg claims he examined prior to filing the complaint that at the time Wittjen stopped funding the overdrafts, there were sufficient funds in QPI's account at the Bank of Mississippi to fund the overdrafts and to keep the corporation up and running. All relevant facts were readily available to Aussenberg prior to the filing of the lawsuit. ¶ 41. Aussenberg unconvincingly argues that the facts developed during discovery bore out many of the allegations of the complaint. The foremost indication of the lack of foundation to any of Wyssbrod's or QPI's claims rests in the deposition of Wyssbrod, taken one month after the third complaint was filed. From the deposition testimony, it is clear that Aussenberg had no idea at the time of the deposition, and even less at the time the complaint was filed, the damages allegedly suffered by his client by Wittjen's refusal to fund the overdrafts. For instance, the following exchange occurred between defense counsel and Wyssbrod: Q. What I want you to tell me is what it is that Bill Wyssbrod who filed the lawsuit against Jack Wittjen expects to recover from Jack Wittjen. A. Personal losses, company losses. Q. Tell me what those are. A. Monetary losses due to loss of business. Q. Be specific about what those monetary losses are. A. Well, when you lose business, you lose money, and that's about as specific as I can get. Wyssbrod stated that he lost no employees or customers as a result of Wittjen's alleged interference. The supplier Aussenberg claims he interviewed prior to filing the complaint, Golden Timber, did not stop supplying QPI because of the bounced checks. Rather, as shown through the supplier's deposition, Golden Timber stopped supplying QPI when QPI failed to comply with the C.O.D. requirements of that companyrequirements imposed on all businesses to which Golden Timber supplies products. ¶ 42. Aussenberg also maintains that Leigh Ann Rutherford, the first Mississippi attorney associated by Aussenberg in this action, failed to advise him that QPI did not have a viable cause of action. Appearing pro hac vice does not relieve Aussenberg of the responsibility to conduct reasonable investigation into the facts and law supporting actions filed by him in the courts of this state. This Court concludes that this is a rather lame attempt to pass the buck. ¶ 43. Also telling of Aussenberg's lack of preparation is the fact that he filed a complaint on behalf of company which was later determined not to be a legal entity, hence the amendment made to the second complaint, as well as the fact that he arrived at Wyssbrod's deposition without having read the third amended complaint and being unaware that he was representing Wyssbrod individually. ¶ 44. Furthermore, Aussenberg challenges only the circuit court's findings regarding § 11-55-7(a) and does not contest the trial court's findings on any of the other factors. The court found against Aussenberg and his client on each and every factor listed in § 11-55-7, save that of (k), which the court determined was not applicable in this case. The circuit judge did all that he was required to do and found that Aussenberg was in violation of the Litigation Accountability Act. Based on this record, this Court cannot say that the circuit judge abused his discretion. This assignment of error is meritless. ¶ 45. Aussenberg's second attack on the circuit court's award of attorney's fees and expenses rests on the fact that he was not representing Wyssbrod or QPI at the time the expenses and fees were awarded. On January 30, 1997, the day of the status hearing discussed in issue one, Aussenberg informed the court that given the bankruptcy filing, QPI had chosen other counsel and no longer required Aussenberg's services. Aussenberg stated in the facsimile to the court, Consequently, I consider that I have been discharged as counsel in the above matter. At the hearing, the circuit judge stated, I would certainly leap upon this opportunity that Mr. Aussenberg has given me, and Mr. Aussenberg's admission is terminated, voluntarily I might add, because he has informed this Court that he is no longer employed by Quality Pallets. Therefore, he will no longer be representing Quality Pallets and Mr. Wyssbrod in this court. In the order entered pursuant to the status conference, the circuit court rescinded Aussenberg's authority to practice law in the court pro hac vice and dismissed him from further responsibility to the plaintiffs. ¶ 46. Aussenberg asserts that the circuit court lacked personal jurisdiction over him for purposes of the award of attorney's fees and expenses since he was neither a party to the action nor counsel of record. Aussenberg contends that in order for the circuit court to properly enter a judgment against him for fees and expenses, it was essential that he receive service of process. ¶ 47. Wittjen argues that Aussenberg submitted to the jurisdiction of the court by appearing as counsel on behalf of the plaintiffs. Wittjen cites M.R.A.P. 46(b)(2), which states: A foreign attorney appearing as counsel pro hac vice before the Supreme Court or the Court of Appeals or any court or administrative agency of this state shall be subject to the jurisdiction of the courts of this state in any matter arising out of the attorney's conduct in such proceedings. The attorney shall study and comply with the standards of professional conduct required of members of the Mississippi Bar and shall be subject to the disciplinary jurisdiction of the courts of this state, of the disciplinary tribunals of the Mississippi Bar, and of the Mississippi Board of Bar Admissions with respect to any acts occurring during the course of such appearance. Furthermore, M.R.A.P. 46(d) provides as follows: Every petition motion, brief, or other paper filed by a party represented by an attorney shall be signed by at least one attorney of record in the attorney's individual name, whose address shall be stated. The appellate court may, after reasonable notice and an opportunity to show cause to the contrary, and after hearing, if requested by the attorney, take any appropriate disciplinary action against any attorney who practices before it for conduct unbecoming a member of the bar, or for failure to comply with these rules or any order of the Supreme Court or the Court of Appeals, or for filing any frivolous petition, brief, or other paper. ¶ 48. At the hearing regarding attorney's fees and sanctions, the circuit judge stated that he directed that Aussenberg be given notice of the hearing because he could be potentially hit with a great deal of responsibility here. Wittjen's counsel responded that he had sent Aussenberg a copy of the order granting summary judgment and the order setting the hearing by both regular mail and certified mail. Wittjen's counsel had with him the signed return receipt, and Wittjen's counsel stated that he had sent a copy of the receipt via facsimile to Aussenberg's office. Aussenberg made no reply. ¶ 49. Clearly, Aussenberg had actual notice of the order granting summary judgment and the evidentiary hearing regarding the attorney's fees and expenses. He chose not to respond. The rules regarding disciplinary action against attorneys practicing before the court clearly contemplate that no formal service of process is necessary, but rather that by appearing before the court in a matter, attorneys submit themselves to the jurisdiction of the court for disciplinary purposes under the rules of court for matters arising out of their representation. ¶ 50. The cases relied upon by Aussenberg, Rice v. McMullen, 207 Miss. 706, 43 So.2d 195 (1949), and Burns v. Burns, 133 Miss. 485, 97 So. 814 (1923), both involved original actions against non-resident defendants. The claim for recovery of attorney fees asserted by Wittjen is not an original action, but arises out of the actions of Aussenberg committed during the time he was an attorney in this case. As Wittjen asserts, Aussenberg received notice of Wittjen's claim, by mail, the same as he would have received had he remained an attorney in the case. We find this assignment of error is without merit.