Court Opinion

ID: 1047113
Source: CourtListenerOpinion
Date Created: 2013-10-08 02:42:36.637797+00
Date Added: 2024-06-11T12:16:40.761674
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                                December 6, 2011 Session

             BRIAN DOUGLAS SPIVEY v. DAVID N. KING ET AL.

                    Appeal from the Circuit Court for Knox County
                      No. 1-441-10    Dale C. Workman, Judge

             No. E2011-01114-COA-R3-CV-FILED-FEBRUARY 2, 2012

The plaintiff Brian Douglas Spivey (“the Plaintiff”) alleges that the defendants, his former
business partners, David N. King and Anthony G. Brown (collectively “the Defendants’),
engaged in a conspiracy, and, pursuant to that conspiracy, took actions that include forcing
him into bankruptcy and harassing him in the bankruptcy case, expelling him from a business
entity, defaming him, and initiating unwarranted criminal charges that were dismissed. The
Defendants filed a motion to dismiss asserting that this was simply an attempt to relitigate
issues that had been determined in the Plaintiff’s bankruptcy and in a chancery court case the
Defendants had pursued. They also filed a motion for sanctions. It turns out that the
bankruptcy court did not issue its opinion until after the complaint in this case was filed and
that the chancery court action was stayed as to the Plaintiff as a result of his bankruptcy
filing. The trial court dismissed the complaint in an order that states that the dismissal was
for “failure to state a claim.” The trial court also awarded sanctions against the Plaintiff and
his attorney. The Plaintiff appeals. We affirm that part of the judgment dismissing the
claims related to forcing the Plaintiff into bankruptcy and harassing him in bankruptcy as
well as the claims related to expelling him from the business entity. We vacate that part of
the judgment dismissing claims related to defamation and the allegedly unwarranted criminal
prosecution. We also vacate that part of the judgment sanctioning the Plaintiff and his
attorney.

        Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
               Affirmed in Part and Vacated in Part; Case Remanded

C HARLES D. S USANO, J R., J., delivered the opinion of the Court, in which H ERSCHEL P.
F RANKS, P.J., and J OHN W. M CC LARTY, J., joined.

R. D. Hash, Maryville, Tennessee, for the appellant, Brian Douglas Spivey.
Glenna W. Overton, Knoxville, Tennessee, for the appellees, David N. King and Anthony
G. Brown.

                                         OPINION

                                              I.

        This is an action filed on September 1, 2010, by the Plaintiff against the Defendants.
The Plaintiff alleges that he and the Defendants formed a business entity called Brown, King,
Spivey Group, LLC (“BKS LLC” or “the LLC”) in November of 2006. The Plaintiff was
initially appointed as the managing member of the LLC and then relieved later of that
position approximately one year after the LLC’s formation. Within a short time he was also
expelled as a member of the LLC.

       The Plaintiff alleges that the Defendants engaged in a civil conspiracy to destroy him
financially and personally. Their actions pursuant to the conspiracy allegedly constituted or
included, among other things, malicious prosecution, false imprisonment, abuse of process,
defamation, wrongful expulsion from the LLC, and forcing him into bankruptcy.

        The Plaintiff alleges that the Defendants caused him to be arrested, booked, and
fingerprinted on false charges of felony forgery and misdemeanor theft. The Plaintiff alleges
that the forgery charge was dismissed by nolle prosequi before the preliminary hearing and
that the theft charge was dismissed due to expiration of the statute of limitations. The
Plaintiff alleges that the warrants were processed only because of the “dogged determination
and insistence of the . . . Defendants and their counsel.” The Plaintiff claims there was an
“unabated personal barrage of pleas” to the district attorney general by the Defendants and
their attorney and that they supplied hundreds of pages of documents, made numerous
personal visits, and made numerous phone calls pursuing a vigorous prosecution of the
charges.

       The criminal charges relate to an insurance check written by State Farm Insurance to
payees, the Plaintiff, defendant King and First Tennessee Bank. The check was in the
amount of $16,681.32 for a casualty loss related to a theft at a house under construction by
the LLC and The Spivey Group, Inc., the general contractor for a development undertaken
by the LLC. Spivey Group is partially owned by the Plaintiff. The Plaintiff deposited the
check into the account of Spivey Group at First Tennessee Bank. According to the
allegations in the complaint, the insurance company mistakenly placed Mr. King’s name on
the check. The Plaintiff alleges that he deposited the funds in the account of The Spivey
Group, Inc. and used them for the benefit of the LLC.

                                             -2-
        The Plaintiff makes several allegations concerning the motivation behind the criminal
prosecution. He says the theft charge is nonsense because it was allegedly based on
depositing the check without King’s endorsement but King knew he was never personally
entitled to the funds. He says also that he acted on the advice of First Tennessee Bank, a co-
payee on the check. The Plaintiff also alleges that if King really believed that a forgery had
occurred, he could have simply presented the facts to First Tennessee Bank and it would have
been obligated to pay King the face amount of the check.

        The Plaintiff alleges the Defendants wrongfully forced him into bankruptcy by
resisting, with lies, his request for a continuance of a trial. The trial to which he refers is in
a case filed by the Defendants against him and others in Knox County Chancery Court. He
alleges that the Defendants defeated his request for a continuance with the falsehood that
their lender, First Tennessee Bank, was in the process of foreclosing against them on loans
they guaranteed for BKS LLC. The Plaintiff alleges that First Tennessee was “never even
close to foreclosure.” The Plaintiff filed a chapter 7 bankruptcy petition on the day before
a trial was scheduled in chancery court. The lawsuit was stayed as to claims asserted against
the Plaintiff personally, but the Defendants secured a judgment by default against The Spivey
Group, Inc. in the amount of $441,482. The Spivey Group, Inc. is one of the assets the
Plaintiff listed in his bankruptcy petition. The Plaintiff alleges that the amount of the default
judgment was grossly inflated by false testimony.

       The Plaintiff alleges that the Defendants

               have continued their civil conspiracy to destroy [him] by
               continuing their pattern of willful and wanton harassment in the
               United States Bankruptcy Court. Instead of respecting [the
               Plaintiff’s] federal right to discharge any obligations to [the
               Defendants] in a no or limited asset bankruptcy . . . they next
               alleged in the Bankruptcy Court [that the Plaintiff] was not
               entitled to discharge certain indebtedness . . . which
               indebtedness was based upon the exact same misrepresentations
               and incomplete data they used to obtain the Default Judgment in
               Chancery Court. . . .

               . . . [The Defendants], in a continued concerted effort to harass
               [the Plaintiff], with dogged determination, filed a Complaint in
               the United States Bankruptcy Court, thereby objecting to [the
               Plaintiff’s] discharge of certain indebtedness to them, on the
               exact same incomplete, flawed and misleading facts they

                                               -3-
              presented to the Chancellor and obtained Default Judgment in
              the Knox County Chancery Court.

       The Plaintiff also alleges that the Defendants, in furtherance of their conspiracy, have
made false, defamatory statements to others, including his banker, his insurance agent, his
vendors, and his subcontractors. His complaint alleges numerous forms of damages
including the expense of defending the malicious criminal charges, loss of assets, and
damage to his credit. His complaint demands compensatory damages of $5,000,000 and
punitive damages of $5,000,000. The only attachments to the complaint are the two criminal
warrants.

        Approximately one month after the complaint was filed, the Defendants filed their
“Motion to Dismiss for Failure to State a Claim Upon Which Relief Can be Granted.” The
motion does not allege that either the bankruptcy case or the chancery court case somehow
bars the present case. In fact, the motion expressly states that “the Bankruptcy court has not
rendered an opinion.” The motion contains the strange statement that “[a] motion to dismiss
for failure to state a claim shall be treated as a motion for summary judgment.” Other than
the assertion that “there was no conspiracy between the Defendants and their counsel,” and
some descriptive criticism of the litigation strategy of the Plaintiff in both bankruptcy and
chancery court, the thrust of the motion is found in the statement, “[t]hrough pleadings,
transcripts and affidavits, Defendants will show to this Court that it is the Plaintiff that has
filed this lawsuit for purposes of harassment.”

       The same day the Defendants filed their motion to dismiss, they filed a motion for
extension of time to answer some pending request for admissions. They argued that their
pending motion to dismiss rendered the request moot.

        Strangely enough, even though they had not filed a motion for summary judgment, or
even asserted in their motion to dismiss that they were entitled to judgment as a matter of law
for lack of an issue of material fact, the Defendants filed a “Statement of Undisputed Facts”
along with several exhibits. The exhibits include (1) a copy of the chancery court complaint;
(2) a copy of the Plaintiff’s bankruptcy petition; (3) a three-page excerpt taken from the
Plaintiff’s deposition in the chancery court case in which he testified that the insurance check
was deposited into the LLC’s account; (4) the affidavit of Mr. Brown in which he denied
making defamatory statements but admitted making derogatory statements that were true; (5)
the affidavit of King in which he (a) asserted that his name was forged on the check and
denied giving the Plaintiff permission to sign his name, and (b) denied making defamatory
statements about the Plaintiff but admitted making derogatory statements that were true; (6)
excerpts of the testimony of several witnesses in the bankruptcy case; and (7) the affidavit
of attorney Overton, the Defendants’ counsel, asserting (a) that she had only one telephone

                                              -4-
call and one personal meeting with the state prosecutor in the criminal cases, (b) that she had
one telephone conversation with the Plaintiff’s banker, (c) that she had not talked to others
as alleged in the complaint, and (d) that the bankruptcy court had not issued an opinion.

       Shortly after filing their Statement of Undisputed Facts, the Defendants filed a motion
for sanctions. They asserted that the “Complaint has no merit and was filed for the purposes
of harassment.”

        The Plaintiff responded to the Defendants’ motion for extension of time with the
assertion that the motion to dismiss “is actually a MOTION FOR SUMMARY JUDGMENT
in that it relies upon information outside the pleadings.” (Capitalization in original.) The
plaintiff asserted that the Defendants should be required to respond to the pending request
to admit and that the Plaintiff intended to take the depositions of the parties and other key
witnesses.

       On October 8, 2010, the Defendants filed an amended motion to dismiss in which they
asserted that

              [o]n October 7, 2010, the Bankruptcy Court issued an Opinion
              awarding the [Defendants] . . . a judgment against [the Plaintiff]
              in the amount of $344,604.29 and the judgment was not
              dischargeable. The Bankruptcy Court found that [the Plaintiff]

                     . . . misappropriated large sums of BKS LLC
                     funds, presumably for other projects and
                     admittedly for his personal use, both without the
                     authorization or knowledge of the [Defendants].
                     By using BKS LLC funds for projects other than
                     BKS LLC projects, the [Plaintiff] acted
                     knowingly and fraudulently, and the [Defendants]
                     are entitled to a nondischargeable judgment
                     against him for the amounts misappropriated from
                     BKS LLC.

              The Opinion from the Bankruptcy Court is further indication
              that the Plaintiff has filed a Complaint which is without
              merit. . . .

The motion attached, as an exhibit, a full copy of the judgment and memorandum opinion
of the bankruptcy court.

                                              -5-
        The Plaintiff then filed an “Interim Response to Defendant’s Motion to Dismiss and
Amended Motion to Dismiss” which reiterated his position that the motion to dismiss must
be treated as a motion for summary judgment and asserted that he had filed a motion for new
trial in the bankruptcy court. He asked the court for time to conduct discovery and to
prosecute the motion for new trial. The motion for new trial filed in the bankruptcy case and
brief in support were filed as attachments to the “interim” response.

        The Plaintiff also filed an “interim” response to the motion for sanctions. He asked
that the motion be continued until the completion of the case when “all the facts and evidence
are before the court.”

        On or about November 5, 2010, the Plaintiff filed in this action a “Notice” that the
affidavits of the Defendants contained false testimony. The Plaintiff attached numerous
exhibits that purported to show the Defendants testified falsely that they did not learn the
Plaintiff had deposited the insurance check in the wrong account until certain disclosures
were made in bankruptcy; the Plaintiff testified in his second deposition in the chancery court
case that the check was deposited into the account of The Spivey Group, Inc.

        On January 24, 2011, the Plaintiff filed a “supplemented interim response” to the
motion to dismiss. In narrative form it purports to show (1) the Defendants conspired not
to pay his company, The Spivey Group, Inc., a 10% builder’s fee that they had previously
agreed upon; (2) the Defendants “made false and defamatory statements about [the Plaintiff]
to First Tennessee Bank Officials, John Verdeaux, the Board for Licensing Contractors, . . .
various sub-contractors including Ron Kidd, and others;” (3) the expulsion of the Plaintiff
as a member and as the managing member was done in meetings held without proper notice;
(4) the Defendants testified falsely in the chancery court case, and elsewhere, “about the 10%
builders fee, the status of the homes [under construction], the status of the financials, and
more”; (5) the Defendants submitted false and incomplete information to the authorities
prosecuting the criminal charges. The Plaintiff specifically charges that the Defendants “did
not disclose that the check was mailed to Spivey at Spivey’s home and business address, that
Spivey and King had an 88 minute phone conversation on the day that Spivey received the
check where King gave Spivey permission to endorse the check, and that the charge for theft
was past the one year statute of limitations.” The Plaintiff specifically asserts that he

              should be allowed proper time for discovery which will prove
              that Brown and King did not make completely truthful
              statements to the detective which were presented by King and
              Brown to the magistrate to pursue Spivey’s false arrest and false
              imprisonment, all as part of their malicious prosecution, abuse
              of process, and civil conspiracy.

                                              -6-
(Capitalization in original omitted).

        In support of his supplemented interim response, the Plaintiff filed several affidavits,
including his own affidavit of 26 narrative pages. The Plaintiff’s affidavit directly asserts
that the Defendants and persons acting on their behalf submitted incomplete information to
the criminal investigators and others involved in the criminal prosecution. The affidavit also
indicated persons to whom the Defendants made false and defamatory statements, including
the Plaintiff’s banker and a subcontractor named Ron Kidd, to whom the Defendants had
“bragged” about what they had done to the Plaintiff. The Plaintiff also filed numerous
attachments to the affidavits, including photographs of the houses under construction.

        On January 2, 2011, the Defendants supplemented their motion to dismiss with a copy
of the order denying the motion for new trial in bankruptcy court. They asserted that the
affidavits the Plaintiff filed constitute a further attempt “to relitigate issues that were already
tried.”

        On March 1, 2011, the trial court entered an order in the present case which states, in
its entirety as follows:

               The Defendants filed a Motion to Disqualify Plaintiff’s Counsel;
               Motion to Dismiss for Failure to State a Claim, Motion for Rule
               11 Sanctions and Motion for Extension of Time to Respond to
               Request for Admissions. On December 9, 2010 the Defendants’
               motions came to be heard before the honorable Judge Dale
               Workman. During argument, it was announced to the Court that
               the Plaintiff in this case had filed a Motion for a New Trial in
               the adversary proceeding in the Bankruptcy Court. The
               adversary proceeding contained allegations that were also raised
               in this Circuit Court action.

               The Court denied the Defendants’ Motion to Disqualify
               Counsel. The Court continued the remaining motions until after
               the Bankruptcy Court ruled upon the Motion for a New Trial.

               On January 28, 2011, the remaining motions came to be heard
               before the honorable Judge Dale Workman. It was announced
               to the Court that the Bankruptcy Court denied this Plaintiff’s
               Motion for a new trial. Upon hearing the argument by counsel,
               the Court granted Defendants’ Motion to Dismiss for Failure to
               State a Claim. The Court also granted the Defendants’ Motion

                                                -7-
              for Rule 11 Sanctions. The Motion for Extension of Time to
              Respond to Request for Admissions became moot.

              The Court ordered that the Defendants are to prepare a Bill of
              Particulars within fifteen (15) days [of] the date of this hearing.
              The Bill of Particulars shall state specifically what sanctions the
              Defendants are seeking and against whom the Defendants wish
              for the sanctions to be assessed. . . . The Plaintiff will have
              forty-five (45) days from the date that the Defendants file their
              Bill of Particular[s] to perform any discovery and respond. It is
              hereby ordered that the Bill of Particulars shall be heard on
              April 8, 2011 at 9:00 a.m..

       On March 30, 2011, the Plaintiff filed a motion to alter or amend the order entered on
March 1, 2011. The Plaintiff asserted the order was improper pursuant to Tenn. R. Civ. P
58 for lack of the approval of all counsel or the appropriate certificate of service. He also
asserted that the order should have contained a ruling on his request for discovery. Further,
he argued that the court should amend the order to allow him to proceed on the malicious
prosecution and related claims because he could not present them in the bankruptcy court
proceedings which were limited to the issue of whether a debt owed to the Defendants was
dischargeable.

       The Defendants filed their “Bill of Particulars.” Unfortunately, the record contains
only the front page of that filing. There is very little substance in that one page.

       In an order entered April 19, 2011, the court denied the motion to alter or amend and

              granted the Defendants’ Bill of Particular[s] with respect to the
              attorney fees only. The Court awarded sanctions in the amount
              of four thousand nine hundred sixty-eight dollars ($4,968.00)
              against the Plaintiff. . . . The court awarded sanctions in the
              amount of one thousand eighteen dollars ($1,018.00) against the
              Plaintiff’s attorney, R.D. Hash. The sanctions against attorney
              Hash is a portion of the sanctions awarded against Plaintiff
              Spivey.

                                              II.

       The Plaintiff timely filed a notice of appeal. He raises these issues:

                                              -8-
              Whether the . . . Trial Court erred in dismissing [the] Plaintiff’s
              Complaint pursuant to the motion to dismiss for failure to state
              a claim upon which relief can be granted filed pursuant to
              [Tenn. R. Civ. P.] . . . 12.02.

              Whether the . . . Trial Court erred in not treating [the
              Defendants’] motion to dismiss for failure to state a claim upon
              which relief can be granted as a motion for summary judgment.

              Whether the . . . Trial Court erred in granting [the Defendants’]
              motion for sanctions.

Although they have not listed any new issues, the Defendants ask in their brief that we
modify the award of sanctions to make counsel for the Plaintiff responsible jointly with the
Plaintiff for the full amount, and award sanctions for this appeal.

                                              III.

       It appears to us that the dispositive issue in this case is whether the judgment of the
bankruptcy court bars the Plaintiff’s claims as a matter of law. It is upon that issue that we
will endeavor to decide whether the trial court erred in dismissing the Plaintiff’s claims.

        Before we look at the particulars of that key issue, it is appropriate that we comment
upon the briefs. We believe the essence of the first and second issues as raised and argued
by the Plaintiff is the same; namely, that the trial court obviously looked outside the
pleadings when it considered the judgment of the bankruptcy court, and, as a consequence,
the trial court’s judgment became a summary judgment rather than a dismissal for failure to
state a claim. The Defendants’ response appears to argue both that the trial court treated this
as a motion for summary judgment and that the trial court treated the motion as a pure motion
to dismiss and that whatever it did was correct. The trial court obviously stated that it was
granting the motion for failure to state a claim. We agree with the Plaintiff that the court,
despite what it said in its order, was bound to treat the motion as a motion for summary
judgment and did, in fact, treat the motion as a motion for summary judgment.

        Our agreement to this one proposition, however, takes us only one step along the path
that the Plaintiff attempts to lead us. The Plaintiff wants us to conclude that the trial court’s
language describing the dismissal as being pursuant to Tenn. R. Civ. P. 12.02 for failure to
state a claim, rather than pursuant to Tenn. R. Civ. P. 56 for summary judgment, makes the
judgment wrong as a matter of law because the trial court did not allow him discovery. There
are two reasons we cannot accept the Plaintiff’s argument as the basis for our decision. First,

                                               -9-
as to any claims that the bankruptcy court judgment bars as a matter of law through the
doctrines of res judicata or collateral estoppel, we cannot understand how any amount of
discovery would reverse the effects of those doctrines. We are not inclined to reverse the
trial court and remand this case just so the case can be dismissed on remand in an order that
is called something different. See Tenn. R. App. P. 36(b)(reversal is not required for an error
that does not affect a substantial right). Second, the record before us does not support the
assertions that the Plaintiff was denied discovery altogether or did not have it within his
power to respond factually to any portion of the motion that went outside the pleadings.1
Clearly the Plaintiff was on notice when the motion to dismiss was filed on or about October
4, 2010, that the court was being asked to consider matters outside the complaint. Yet the
Plaintiff did not move the court to compel any discovery. Other than the few requests to
admit, there is no record of any attempt to undertake discovery, such as a notice of deposition
or notice of service of interrogatories. There is no order in the record before us suspending
or prohibiting discovery. Thus, we are not inclined to base the outcome of this case on the
label that the trial court gave its ruling. In Mills v. Booth, 344 S.W.3d 922 (Tenn. Ct. App.
2010) we affirmed a trial court’s order “granting [defendants’] motions to dismiss” even
though we held that the motions were converted into summary judgment motions by
consideration of materials outside the pleadings. Id. at 924, 926. We took the approach of
simply reviewing the trial court’s order pursuant to the standards of Tenn. R. Civ. P. 56 to
determine whether the claims failed as a matter of law. We will follow that same approach
in the present case.

       We note the Defendants’ repeated mention, both in the trial court and this court, of
the chancery court case. It is undisputed that the chancery court case is still pending and that
no judgment was entered against the Plaintiff in his individual capacity. We have been
presented no authority and no reasoned argument why a judgment in the chancery court
against some person or entity other than the plaintiff could bar any of his claims. We
therefore hold that the judgment in chancery court does not furnish a basis for the dismissal
of any of the Plaintiff’s claims.

        If the claims are barred, the bar must be based upon the judgment of the bankruptcy
court. Neither the order of the trial court nor the brief of the Defendants directly addresses
how the judgment of the bankruptcy court constitutes a bar to the entirety of the complaint.
The Defendants admit in their brief that the terms “ ‘res judicata’ and ‘collateral estoppel’
were never mentioned in the . . . [m]otion [to dismiss].” They contend, however, that either
the controlling facts were previously determined or were matters that the Plaintiff failed to
raise in the previous litigation. The thrust of their argument, as we perceive it, is that the

       1
       Counsel for the Plaintiff asserted at oral argument that the trial court prohibited discovery, but
acknowledged that there is no such order in the record.

                                                  -10-
bankruptcy court judgment bars all claims in the Plaintiff’s complaint either by res judicata
or collateral estoppel.

       This Court discussed the doctrine of res judicata in Lien v. Couch, 993 S.W.2d 53
(Tenn. Ct. App. 1998), wherein we stated:

               Res judicata is a claim preclusion doctrine that promotes finality
               in litigation. It bars a second suit between the same parties or
               their privies on the same cause of action with respect to all the
               issues which were or could have been litigated in the former
               suit.

               Parties asserting a res judicata defense must demonstrate that (1)
               a court of competent jurisdiction rendered the prior judgment,
               (2) the prior judgment was final and on the merits, (3) the same
               parties or their privies were involved in both proceedings, and
               (4) both proceedings involved the same cause of action. . . .

Id. at 55-56 (citations omitted). In general terms, the principle of res judicata requires a party
to raise in a single lawsuit all the claims he or she has that arise from a single incident. Id.
at 56. Collateral estoppel was discussed in Mullins v. State, 294 S.W.3d 529 (Tenn. 2009):

               The party invoking collateral estoppel has the burden of proof.
               To prevail with a collateral estoppel claim, the party asserting it
               must demonstrate (1) that the issue to be precluded is identical
               to an issue decided in an earlier proceeding, (2) that the issue to
               be precluded was actually raised, litigated, and decided on the
               merits in the earlier proceeding, (3) that the judgment in the
               earlier proceeding has become final, (4) that the party against
               whom collateral estoppel is asserted was a party or is in privity
               with a party to the earlier proceeding, and (5) that the party
               against whom collateral estoppel is asserted had a full and fair
               opportunity in the earlier proceeding to contest the issue now
               sought to be precluded.

               Moreover, in order for the doctrine of collateral estoppel to
               apply, the issue must not only have been actually litigated and
               decided, it must also have been necessary to the judgment.
               Determinations of an issue or issues that are not necessary to a

                                              -11-
              judgment have the characteristics of dicta and will not be given
              preclusive effect.

              The question of whether collateral estoppel applies is a question
              of law. Accordingly, summary judgment is an appropriate
              vehicle for resolving a collateral estoppel claim. Courts
              reviewing a lower court’s decision to grant a summary judgment
              based on a collateral estoppel claim must review the record de
              novo without a presumption of correctness. The reviewing
              courts must also view the evidence in the light most favorable
              to the non-moving party and must resolve any doubts and draw
              all inferences in the non-moving party's favor.

Id at 535 (citations and footnote omitted).

        Under both doctrines, our analysis must include a close examination of the opinion
of the bankruptcy court to determine the issues that were decided and those that were not
decided. This makes it necessary that we quote extensively from the 35-page opinion of the
bankruptcy court. We caution the reader that our editorial changes, indicated in brackets,
include a change in the designation of the parties to accommodate our previously defined
terms. “The Plaintiff” in the present case, and in the quote that follows, was “the Defendant”
in the bankruptcy opinion as originally worded. “The Defendants,” as defined in the present
case and as labeled in the quotation below, were “the Plaintiffs” in the bankruptcy case. We
have reversed the defined terms in the material from the bankruptcy court to conform to the
designations in our opinion. The part of the bankruptcy opinion that is pertinent to our
analysis follows:

              This adversary proceeding is before the court upon the
              Complaint to Determine Nonsdischargeability of Debt Pursuant
              to 11 U.S.C. § 523 . . . filed by [the Defendants] . . . asking the
              court to award them a money judgment and requesting a
              determination that the judgment is nondischargeable under 11
              U.S.C. § 523(a)(2), (4), and/or (6) (2006). The trial was held on
              May 24, 2010. . . .

              This is a core proceeding. 28 U.S.C. § 157(b)(2)(I) (2006).

              Pursuant to an Operating Agreement . . . , the parties formed
              BKS LLC. . . [The Plaintiff] was . . . appointed as managing
              member of BKS LLC although he was not to receive any

                                              -12-
additional payment for serving in that capacity. Under the
Operating Agreement, [the Plaintiff’s] authority as managing
member included all rights and powers necessary to manage the
business and affairs of BKS LLC and his responsibilities
included, but were not limited to, furnishing financial reports
and records of the LLC to the other members, ensuring tax
returns were filed, executing documents on behalf of the LLC,
conducting the day-to-day management of the LLC, and
employing attorneys, certified public accountants, and other
persons to assist in the management of the LLC. . . .

                            *    *     *

Following its formation, BKS, LLC obtained construction loans
with First Tennessee Bank totaling approximately $1,300,000,
which were also personally guaranteed by [the Defendants and
the Plaintiff], along with an operating line of credit in the
amount of $100,000 from First Tennessee Bank and an
American Express credit card to be used to pay expenses and
finance the LLC’s projects. The loan proceeds were used to
purchase seventeen lots – thirteen in Montclair subdivision and
four in Cantrell Heights subdivision – and in February 2007,
[the Plaintiff] pulled the building permits for and BKS LLC
began construction of homes on Lots 1, 2 and 3 in Montclair and
Lots 20, 28, 29, and 30 in Cantrell Heights. Together with the
initial investment of $1,000 funded by the parties, BKS LLC’s
sole source of funds was derived from the American Express
card and the line of credit with First Tennessee Bank.

In early November 2007, [the Defendants] called a meeting to
discuss concerns about the time-lines for the houses being built.
At roughly that same time, [the Plaintiff] advised [the
Defendants] that he expected a 10% builders [sic] fee, and on
November 8, 2007, he advised [the Defendants] that he was
stopping construction on the homes and would not be attending
the meeting they had called. At the November 8 meeting, [the
Defendants] removed [the Plaintiff] as managing member of the
LLC for not providing financial information, not accounting for
money borrowed for construction purposes, starting construction

                                -13-
on houses outside of BKS LLC, and not managing day-to-day
operations in the LLC’s best interest. Subsequent to [the
Plaintiff’s] removal as managing member, Mr. Brown retrieved
the LLC’s financial records which showed, among other things,
that although construction of the homes BKS LLC had started
was not completed, the construction loans and line of credit with
First Tennessee Bank were nearly depleted, that the American
Express credit card had a balance of nearly $100,000, and that
an insurance check for reimbursement of a copper theft at Lot
20 of the Cantrell Heights subdivision had been deposited into
the bank account for The Spivey Group, Inc. . . . rather than
BKS LLC’s account. Thereafter, at a special meeting held on
November 30, 2007, [the Defendants] voted unanimously to
expel [the Plaintiff] from BKS LLC for violations of items (4)
through (9) of unnumbered paragraph 6 . . . of the Operating
Agreement. [These include “misappropriation of funds or
property of the Limited Liability Company.”]

                            *    *     *

On February 21, 2008, The Spivey Group, Inc., through [the
Plaintiff], its president, recorded with the Knox County Register
of Deeds a Notice of Mechanic’s Lien in the amount of
$54,767.59 for work performed at Lot 20 in Cantrell Heights
subdivision, which was paid out of the proceeds realized from
the sale of that property at closing. At some point thereafter,
[the Defendants] brought a lawsuit against The Spivey Group,
Inc in the Knox Count Chancery Court and, using the summary
of damages prepared by Mr. Brown based upon his comparison
of the invoices to the construction draws entered into the record
in this adversary proceeding as Trial Exhibit 10, obtained a
default judgment against The Spivey Group, Inc. in the amount
of $441,481.54.

[The Plaintiff] filed the Voluntary Petition commencing his case
under Chapter 7 of the Bankruptcy Code on November 12, 2008,
and on March 16, 2009, [the Defendants] timely filed the
Complaint initiating this adversary proceeding, requesting a
monetary judgment . . .and a determination that the judgment is
nondischargeable. [The Defendants] contend that [the Plaintiff]

                                -14-
                obtained monies from them through misrepresentation, false
                pretenses, and actual fraud, that he embezzled funds from BKS
                LLC while in a fiduciary role, and that he maliciously intended
                to cause financial devastation to [the Defendants].

                It is within the jurisdiction and authority of the bankruptcy court
                to adjudicate [the Defendant’s] claims and award any necessary
                damages . . . [citations omitted].

                                                 *    *     *

                Notwithstanding Mr. Brown’s testimony to the contrary, many
                of the expenses listed on . . . Trial Exhibit 10 cannot be directly
                attributable to any fraudulent action by [the Plaintiff] and are
                thus not recoverable damages by [the Defendants]. Included
                among those amounts are the expenses incurred by [the
                Defendants] in order to keep BKS LLC operational after [the
                Plaintiff’s] expulsion . . . .

                With respect to the $272,186.32 in monies either spent over the
                loan amounts or unaccounted for, as shown on . . . Trial Exhibit
                10, the court similarly finds that [the Defendants] have proved
                entitlement to some, but not all of these funds. . . .

                                                 *    *     *

                The court agrees that, with respect to any money spent over the
                loan amount, [the Defendants] have not proved an entitlement
                to damages against [the Plaintiff]. . . . Accordingly, of the
                $272,186.32 referenced on . . . Trial Exhibit 10 as being spent
                over the loan amount or not accounted for, only the unaccounted
                for funds in the amount of $187,492.93 may be rightfully
                included in any damages calculation.2

        2
          This includes the [monies] attributed to the copper wiring theft and subsequent reimbursement by
State Farm Insurance Company. [The Defendants] proved that [the Plaintiff] deposited the $16,681.32
reimbursement check dated March 13, 2007, into The Spivey Group, Inc.'s bank account; however, they did
not prove that [the Plaintiff] spent those funds on projects outside those of BKS LLC. The court also finds
[the Plaintiff's] explanation as to why he did not deposit the check into the BKS LLC checking account – that
the deposit would be credited toward the loan balance and not available for payment on invoices – to be
plausible and within the parties’ established routine for payment of invoices by The Spivey Group, Inc. on
behalf of BKS LLC.

                                                     -15-
                             *    *     *

The court likewise finds that [the Plaintiff] is not entitled to the
10% builder’s fee in the amount of $30,557.09 included with his
mechanic’s lien and referenced on . . .[his invoice]. Although
[the Plaintiff] testified that he, on behalf of The Spivey Group,
Inc., had an agreement with [the Defendants] that he would be
paid a 10% builder’s fee by BKS LLC there was no contract
between The Spivey Group, Inc. and BKS LLC setting forth any
such agreement, nor was there any reference within the
Operating Agreement or other document in the record that
establishes any such agreement. Without a written contract or
other such documentation, the court cannot find the existence of
any such arrangement, and [the Defendants] are entitled to
recover it within their damages.

                             *    *     *

As demonstrated by the record, [the Plaintiff] charged a total of
$223,444.75 on the American Express card, and of that total,
[the Plaintiff] testified that $84,491.36 was for personal charges.
Assuming that the entire $73,391.86 payment [that the Plaintiff
testified of making] came from The Spivey Group, Inc. funds
rather than BKS LLC funds, by his own testimony, [the
Plaintiff] owes $11,099.50 above the payment he made towards
his admitted personal charges. In addition to that amount, the
court also finds that [the Plaintiff] is liable to [the Defendants]
for the $38,062.11 for business-related expenses shown on the
Transaction Detail Report which are not found on the Job Costs
Detail Report, the $971.64 for charges listed on the Job Costs
Detail Report as “credit card purchases” not appearing on the
Transaction Detail Report, and the $61,235.01 for expenses
listed on the Job Costs Detail Report for different amounts than
those listed on the Transaction Detail Report for a total of
$111,368.26 associated with the American Express card.

Determinations as to the dischargeability of debts are governed
by 11 U.S.C. § 523(a), which, as relevant to this adversary
proceeding, provides that:

                                 -16-
       (a) A discharge under section 727. . . of this title
       does not discharge an individual debtor from any
       debt –

                             *    *     *

       (2) for money, property, services, or an extension,
       renewal, or refinancing of credit, to the extent
       obtained, by –

       (A) false pretenses, a false representation, or
       actual fraud, other than a statement respecting the
       debtor’s or an insider’s financial condition;

                             *    *     *

       (4) for fraud or defalcation while acting in a
       fiduciary capacity, embezzlement, or larceny; [or]

                             *    *     *

       (6) for willful and malicious injury by the debtor
       to another entity or to the property of another
       entity[.]

11 U.S.C. § 523(a). . . .

                             *    *     *

In order to be a nondischargeable debt under subsection
(a)(2)(A), there must be a showing of fraud in the inducement;
i.e., [the Defendants] must prove that [the Plaintiff] intentionally
misled them into personally guaranteeing the construction loans
and line of credit and opening the American Express account
through fraudulent or material untruths and that they relied upon
the untruths when they formed BKS LLC and incurred the
liability. Without the initial inducement, it is not sufficient to
show that [the Plaintiff] made misrepresentations and/or false
statements concerning the financial information after the fact,
just as it is not sufficient for a finding under this subsection to
show that [the Plaintiff] denied [the Defendants] access to the
books and records. The record is clear that the representations

                                 -17-
           [the Plaintiff] made when he was approached by [the
           Defendants] about forming the company that he was a licensed
           contractor and that he had business relationships with vendors
           and subcontractors were accurate. Additionally, the court is not
           convinced that the representation by [the Plaintiff] that he could
           manage the day-to-day operations was false and made with an
           intent to deceive and induce, based upon his approximately
           twelve years of experience in the building field and the fact that
           he had operated The Spivey Group, Inc. for approximately two
           years prior to forming BKS LLC with [the Defendants].
           Accordingly, based upon the record before the court, [the
           Defendants] have not met their burden of proof that the debt is
           nondischargeable under § 523(a)(2)(A).

           Section 523(a)(4) provides that debts obtained by
           embezzlement, larceny, or through fraud or defalcation while
           acting in a fiduciary capacity are nondischargeable. For the
           purposes of this subsection and as it relates to this adversary
           proceeding, embezzlement is “the fraudulent appropriation of
           property by a person to whom such property has been entrusted
           or into whose hands it has lawfully come.”[Citation in original
           omitted] 3 . . .

           To prove fraudulent misappropriation, the [party opposing
           discharge] must prove “fraud in fact, involving moral turpitude
           or intentional wrong, rather than implied or constructive fraud.”
           [Citation in original omitted] . . . .

                                           *    *     *

           In his capacity as managing member, [the Plaintiff] was chosen
           by the parties to have the initial responsibility for setting up the
           LLC’s books and finances and to be responsible for its day-to-
           day management. In association with these duties and with [the
           Defendants’] knowledge and acquiescence, [the Plaintiff]
           requested draws on the construction loans and line of credit,
           withdrew funds from the BKS LLC account, and deposited them
           into The Spivey Group, Inc.’s account for disbursements to

3
    . . . Only the embezzlement aspect of § 523(a)(4) is at issue in this adversary proceeding.

                                               -18-
contractors and vendors on behalf of BKS LLC for its projects.
Nevertheless, as previously discussed, [the Plaintiff]
misappropriated large sums of BKS LLC funds, presumably for
other projects and admittedly for his personal use, both without
the authorization or knowledge of [the Defendants]. By using
BKS LLC funds for projects other than BKS LLC projects, [the
Plaintiff] acted knowingly and fraudulently, and [the
Defendants] are entitled to a nondischargeable judgment against
him for the amounts misappropriated from BKS LLC.

[The Defendants] also aver the applicability of §523(a)(6) for a
“willful and malicious” injury. . . .

                            *    *     *

Based upon the record, the court finds that although [the
Plaintiff] did exercise dominion and control over funds
belonging to BKS LLC, he did not do so to the exclusion of [the
Defendants], and they are not entitled to a determination that his
actions were willful and malicious for purposes of § 523(a)(6).
...

The court agrees that [the Plaintiff] acted in conscious disregard
to [the Defendants], constituting malicious conduct, but they
have not proved that he acted willfully, with an intent to cause
them harm, which is likewise required by § 523(a)(6).

                            *    *     *

In summary, the court finds that [the Plaintiff] fraudulently
misappropriated and embezzled funds which were entrusted to
him pursuant to his position as managing member of BKS LLC.
The record supports a judgment in favor of [the Defendants] and
against [the Plaintiff] in the total amount of $344,604.29,
representing $3,961.81 in late fees and missed discounts,
$120.18 for failing to return key sensors, $187,492.93 in funds
received from the construction draws and line of credit with
First Tennessee Bank by the Spivey Group, Inc. but not
attributable to any BKS LLC project, a credit of $2,617.69 for
interest paid by The Spivey Group, Inc. to First Tennessee Bank
but not accounted for by [the Defendants], $13,721.71 for
invoices attached to the mechanic’s lien filed by [the Plaintiff]

                                -19-
              against Lot 20 Cantrell Heights that had previously been paid
              with BKS LLC funds, $30,557.09 for the 10% builder’s fee also
              included within the mechanic’s lien, and $111,368.26 for
              charges made by [the Plaintiff] on the American Express card
              for personal charges and charges which cannot be reconciled.
              This judgment is nondischargeable pursuant to 11 U.S.C. §
              523(a)(4).

(Headings omitted; citations to bankruptcy record omitted; our footnotes 2 and 3 are in the
original with other footnotes in original omitted; legal citations in original retained except
when otherwise indicated in brackets).

        It is clear from the record in the present case that the Plaintiff moved the bankruptcy
court to give him a new trial. At least one ground for the motion was that the Defendants
testified falsely in that trial. The bankruptcy court denied the motion for new trial. The
Plaintiff did not appeal the judgment of the bankruptcy court. It has now become final.

        With this background, we can now consider whether the bankruptcy court’s judgment
precludes any of the issues or claims raised by the Plaintiff’s complaint in this action. The
bankruptcy court’s opinion leaves no room for doubt that Brown and King were entitled to
expel Spivey from his position as managing partner and as a member of the LLC based upon
his misappropriation of funds for his own use. It also leaves no room for doubt that Brown
and King were justified in the approach they took in the bankruptcy court. That court found
that they proved substantial damages from the Plaintiff’s misappropriation of their funds, and
that his fraudulent actions justified a finding that the debt would not be discharged. The
bankruptcy was commenced by the Plaintiff’s “voluntary” petition. Any contention that the
Defendants testified falsely or took unjustifiable positions in the chancery court are best left
to that court, where the case remains pending.

       This leaves for our consideration only the civil conspiracy claim, the defamation
claim, and the claim or claims related to Spivey’s criminal prosecution:

              The elements of a cause of action for civil conspiracy are: (1) a
              common design between two or more persons, (2) to accomplish
              by concerted action an unlawful purpose, or a lawful purpose by
              unlawful means, (3) an overt act in furtherance of the
              conspiracy, and (4) resulting injury.

Kincaid v. SouthTrust Bank, 221 S.W.3d 32, 38 (Tenn. Ct. App. 2006).

       There is nothing in the bankruptcy court’s opinion that addresses the conspiracy claim
other than as relates to the specific claims that we have already held were determined by the

                                              -20-
bankruptcy court. Since there is nothing unlawful in expelling a member that is embezzling
money from an entity, and nothing unlawful in proving the damages from that embezzlement
and in successfully opposing a discharge of any such damages in bankruptcy, we must treat
any actions of the alleged conspiracy that concern these aspects of the complaint as barred.
In going forward, we will focus on the alleged defamation and claims related to the criminal
prosecution.

       We turn first to the defamation claim:

              To establish a prima facie case of defamation, the plaintiff must
              prove that (1) a party published a statement; (2) with knowledge
              that the statement was false and defaming to the other; or (3)
              with reckless disregard for the truth of the statement or with
              negligence in failing to ascertain the truth of the statement.
              Sullivan v. Baptist Mem'l Hosp., 995 S.W.2d 569, 571 (Tenn.
              1999) (relying on Restatement (Second) of Torts § 580 B
              (1977)).

Hibdon v. Grabowski, 195 S.W.3d 48, 58 (Tenn. Ct. App. 2005). We cannot imagine how
it would be that the determination of the dischargeability of the debt would insulate the
Defendants from liability for defamation. The bankruptcy court’s opinion found that the
Plaintiff was liable to the Defendants, but it also found that they had included within their
claim certain damages that were simply a cost of doing business and not properly chargeable
to the Plaintiff. It further found specifically that, when the parties were forming the LLC,
the Plaintiff spoke truthfully with regard to his contractor’s credentials and experience. In
short, the bankruptcy opinion establishes, if anything, that the parties on both sides were
making statements that the true facts do not support. King and Brown admitted in their
affidavits filed in the trial court that they made derogatory statements about the Plaintiff.
They claimed, however, that any such statements were true, without further elaboration. We
are not convinced that a party can shift the burden of production for summary judgment
purposes by an affidavit that merely asserts, in blanket form, that every derogatory statement
they made was true. We need not decide that in this present case because the Plaintiff
countered the Defendants’ affidavits with his own that identifies persons to whom statements
were made as well as the subject matter of the statements and asserts that they were false.
We conclude that issues of material fact are present regarding the defamation claim.
Therefore, the trial court erred in granting summary judgment against the Plaintiff on his
defamation claim.

       We also conclude that there is nothing in the bankruptcy court opinion that defeats the
claims related to the unsuccessful criminal prosecution of the Plaintiff. If anything, the
bankruptcy court’s opinion tends to support the Plaintiff’s claim. It found that the Plaintiff’s
explanation of his handling of the insurance check was plausible and consistent with the

                                              -21-
parties’ business practices. Further, it found that the Defendants failed to prove that the
Plaintiff used the proceeds for something other than to pay legitimate obligations of the LLC.

        The only reason that the Defendants offer in their brief, other than the bankruptcy
opinion, is that it was police officers and the district attorney’s office that did the
prosecuting. A person who reports an alleged crime to authorities may nevertheless be held
liable for malicious prosecution as we explained in Spicer v. Thompson, No. M2002-03110-
COA-R3-CV, 2004 WL 1531431 (Tenn. Ct. App. M.S., filed July 7, 2004):

              For a plaintiff to be successful in a malicious prosecution case
              growing out of an arrest for an alleged criminal act, it must be
              alleged and proved that: a criminal proceeding has been
              instituted by the defendant against the plaintiff; such proceeding
              terminated in favor of accused; there was an absence of probable
              cause for the proceeding; and, there was malice or a primary
              purpose other than that of bringing defendant to justice.

                     Definitions of probable cause, however
                     differently expressed, all agree in these two
                     essentials: (1) The prosecutor must in good faith
                     have honestly believed the accused was guilty of
                     the crime charged; and (2) his belief must have
                     been reasonable-based on facts and circumstances
                     sufficient to lead an ordinarily prudent person to
                     believe the accused was guilty of the crime
                     charged. The prosecutor must have made the
                     investigation an ordinarily prudent person would
                     have made in the circumstances.

              The entry of a nolle prosequi whether or not the defendant in the
              criminal case has been put in jeopardy is a sufficient termination
              in favor of the defendant in the criminal prosecution to comply
              with the rule in malicious prosecution cases that the underlying
              suit must have been terminated in favor of the defendant.

                                          *    *     *

                     Advice of counsel is an affirmative defense:

                     . . . To make out this defense, the burden was . . .
                     to prove that he honestly sought such advice, that
                     he fully disclosed to his counsel all the material

                                              -22-
                     facts he knew and all he could have known by
                     reasonable diligence, that his counsel advised the
                     prosecution, and that he acted in good faith upon
                     such advice.

              The district attorney general is counsel whose advice can
              constitute a defense to a malicious prosecution action. This
              affirmative defense is dependent upon full, correct and honest
              disclosure to counsel of all material facts within the knowledge
              of the prosecutor or that could have been ascertained by
              reasonable diligence. This Court has held:

                     But the party must state not only all material facts
                     within his knowledge but all facts which he had
                     reasonable ground to believe existed at the time of
                     making the statement, or all material facts which
                     he could have ascertained by reasonable
                     diligence.

Id. at *23-25 (emphasis added; citations omitted). The Defendants did not even assert in
their statement of undisputed facts that they fully disclosed all matters known to them that
would have impacted the probable cause evaluation of the magistrate and district attorney
general. Even if they had, the filings made on behalf of the Plaintiff specifically assert and
explain that there were material omissions from the Defendants’ affidavits and statements
to prosecutors that instigated the criminal prosecutions. Moreover, the Defendants fail to
even mention anywhere in their brief to this court or in their filings in the trial court the
affirmative defense of advice of counsel. For all of these reasons, we conclude that the
Defendants did not conclusively establish the affirmative defense of advice of counsel so as
to defeat the claims related to the criminal prosecutions.

        Before leaving this point, we will consider whether the Plaintiff was obligated to
litigate the defamation claim or the malicious prosecution and related claims in the
bankruptcy court. Neither party addresses this point in the briefs, other than maybe a
conclusory suggestion by the Plaintiff that it makes no sense to litigate personal injury torts
in bankruptcy court. Our research confirms the Plaintiff’s suggestion. “In the absence of
very special circumstances or obvious prejudice, the bankruptcy court should abstain from
resolving controversies which do not involve the property or administration of a debtor’s
estate, and where another court provides a more suitable forum.” In re Marrs, 36 B.R. 22,
24 (Bankr. M. D. Tenn.1983) (internal citations omitted). Our research produced one case
that reads Marrs as authority for abstaining, on the court’s own motion, from deciding a

                                             -23-
debtor’s counterclaim for malicious prosecution against his creditor in an adversary action.
In re Fornaro, 402 B.R. 104, 110 (Bankr. D. N.J. 2009). We conclude that the Plaintiff was
not obligated to bring his conspiracy, defamation and claims related to the criminal
prosecution in the bankruptcy case. We further hold that the trial court erred in dismissing
the claims on what we have treated as summary judgment.

        The last issue for our consideration is whether the trial court erred in awarding
sanctions pursuant to Tenn. R. Civ. P. 11. Rule 11.01 requires that every pleading be signed
by a pro se party or the attorney of a party that is represented. Rule 11.02 makes that
signature equivalent to a certification that a reasonable inquiry has been made into the facts
and law and that the pleading is not filed for an improper purpose, “such as to harass or to
cause unnecessary delay or needless increase in the cost of litigation.” Rule 11.03 allows a
trial court, subject to expressly stated conditions, to “impose an appropriate sanction upon
the attorneys, law firms, or parties that have violated subdivision 11.02 or are responsible for
the violation.” The conditions expressly stated in Tenn. R. Civ. P. 11.03 that are pertinent
to this appeal are:

              . . . A motion for sanctions under this rule shall be made
              separately from other motions . . . and shall describe the specific
              conduct alleged to violate subdivision 11.02. . . .

                                           *    *     *

              . . . When imposing sanctions, the court shall describe the
              conduct determined to constitute a violation of this rule and
              explain the basis for the sanction imposed.

Tenn. R. Civ. P. 11.03(1)(a) and (3)(emphasis added).

       As we stated in Marra v. Bank of New York, 310 S.W.3d 329 (Tenn. Ct. App. 2009):

              In determining whether . . . conduct is sanctionable under Rule
              11, the trial court must determine if such conduct was
              reasonable at the time the document was signed. Krug v. Krug,
              838 S.W.2d 197, 205 (Tenn. Ct. App. 1992) (quoting Andrews
              v. Bible, 812 S.W.2d 284, 288 (Tenn.1991)). “[T]he question of
              whether a Rule 11 violation has occurred requires the trial court
              to make highly fact-intensive determinations regarding the
              reasonableness of the attorney’s (and client’s) conduct.” Boyd
              v. Prime Focus, Inc., 83 S.W.3d 761, 765 (Tenn. Ct. App.

                                               -24-
              2001). As such, we review a trial court's ruling on a Rule 11
              motion for an abuse of discretion. Krug, 838 S.W.2d at 205.

Id. at 340. The mere fact that a claim ultimately fails does not make it per se frivolous. Id.
at 343. Any doubts as to the merits of the underlying action, and the motion for sanctions,
should be resolved against awarding sanctions. Id.

       The Plaintiff points out that neither the motion nor the trial court’s order describe the
specific conduct alleged to have violated Rule 11. The motion for sanctions contains little
more than the conclusory allegation that the “[c]omplaint has no merit and was filed for the
purpose of harassment.” The order granting sanctions, which was part of the order that
dismissed the case, states only that “[t]he Court also granted the Defendants’ Motion for Rule
11 Sanctions.” Apparently, the trial court attempted to cure any deficiencies in the motion
and order by directing the Defendants to file a “Bill of Particulars.” However, the order did
not require that the filing describe the specific conduct alleged to violate the Rule 11; it only
requires that the Defendants state “specifically what sanctions [they] are seeking and against
whom the Defendants wish for the sanctions to be assessed . . . .” Furthermore, we have only
the front page of the “Bill of Particulars” in the record, and that page does not describe
specific conduct that allegedly justifies sanctions. Under these circumstances, we would not
be justified to presume that the trial court conducted the “highly fact-intensive
determinations” as to specific conduct necessary to support an award of sanctions.

        However, we need not base our analysis of the award of sanctions on the procedural
deficiencies alone. The only justification the Defendants offer in their brief for the award
of sanctions is that the claims were either without merit or already litigated. We have
expressly held that some of the claims were not shown to be without merit. As to the ones
that were litigated, they were not litigated to conclusion by the time the complaint in this case
was filed. The bankruptcy opinion was not filed until after the complaint was filed, and the
denial of the motion for new trial happened just shortly before the trial court dismissed the
case. The chancery court judgment was not against the Plaintiff, and therefore determined
nothing with regard to the present case. The trial court’s award of sanctions can only be
based upon the same erroneous premise that the court used to dismiss the complaint in its
entirety, that premise being that the judgment of the bankruptcy court barred all of the
Plaintiff’s claims in the present case as a matter of law. Accordingly, we conclude that the
trial court abused its discretion in awarding sanctions against the Plaintiff and his attorney.

        The Defendants suggest that we should even increase the award of sanctions against
the Plaintiff for the filing a frivolous appeal. For the reasons we have already articulated, we
do not find the appeal to be frivolous. The Defendants’ request that we make the attorney
for the Plaintiff responsible for all of the sanctions jointly with the Plaintiff is now moot.

                                              -25-
                                              V.

       The judgment of the trial court is affirmed in part and vacated in part. That part of the
judgment dismissing the Plaintiff’s claims for expelling him from the LLC, forcing him into
bankruptcy, and opposing his discharge in bankruptcy is affirmed. That part of the judgment
dismissing the Plaintiff’s claims for defamation and for wrongfully prosecuting him, as well
as conspiracy to accomplish those wrongs, is vacated. That part of the judgment awarding
sanctions against the Plaintiff and his attorney is vacated. Cost on appeal are taxed to the
appellees, David N. King and Anthony G. Brown. This case is remanded, pursuant to
applicable law, for further proceedings.

                                                     _______________________________
                                                     CHARLES D. SUSANO, JR., JUDGE

                                              -26-