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CUNNINGHAM v. BATHON

November 5, 1998

JOSEPH F. CUNNINGHAM, ET AL., APPELLANTS AND CROSS-APPELLEES,
V.
STEPHEN R. BATHON, APPELLEE AND CROSS-APPELLANT.



APPEAL FROM THE SUPERIOR COURT, DISTRICT OF COLUMBIA, ARTHUR L. BURNETT, SR., J. [719 A2d Page 498]

Before Farrell and Ruiz, Associate Judges, and Belson, Senior Judge.

The opinion of the court was delivered by: Ruiz, Associate Judge:

This is an appeal from Rule 11 sanctions. The case began when Joseph F. Cunningham, an attorney and investor, sued Stephen R. Bathon, a stockbroker, in June 1991 for negligent misrepresentation, violation of D.C.Code § 2-2613 (1994) (regulating sales of securities), breach of contract, breach of fiduciary duty, and fraud. These claims arose from Bathon's December 1985 sale to Cunningham of an interest in an ill-fated investment in International Dynergy, Inc. (Dynergy), and Bathon's proposal in December 1987 — which Cunningham signed in agreement — for a third investor, Larry Rochester, to pay off Dynergy's debt to Cunningham in exchange for a release from any personal liability for Bathon and a middleman, Owen Neil Cummins. In 1989, Rochester defaulted on his payments to Cunningham and later declared bankruptcy, preventing Cunningham from obtaining legal relief on the debt. The trial court granted summary judgment in favor of Bathon because the action was barred by the statute of limitations and that ruling was affirmed on appeal to this court. See Cunningham, v. Bathon, No. 93-CV-453 (D.C. June 1, 1994) (memorandum order and judgment). Following our affirmance based on the expiration of the statute of limitations, the trial court granted Bathon's motion for sanctions against Cunningham and his attorney, Donald T. Cheatham, under Superior Court Civil Rule 11, for filing the complaint without a factual basis for believing that it was timely. After reviewing Bathon's submissions of his legal expenses and Cunningham's response to those submissions, the trial court ordered Cunningham and Cheatham, individually and [719 A2d Page 499]

jointly, to reimburse Bathon a total of $46,339.33.

In this appeal, Cunningham and Cheatham contend that the trial court's Rule 11 sanctions order is improper, and that even if this court were to affirm imposition of Rule 11 sanctions, the amount assessed is excessive. On cross-appeal, Bathon contends that the trial court erred in excluding from reimbursement certain legal expenses and reducing others. We find no abuse of discretion by the trial court in its imposition of Rule 11 sanctions. We do, however, conclude that the trial court abused its discretion in excluding, for the reasons it stated, fees for certain legal services from the total sanction amount. Therefore, we affirm in part, reverse in part, and remand for reconsideration of the sanctions amount in conformity with this opinion.

I.

Rule 11(b) provides, in pertinent part,

[b]y presenting to the court . . . a pleading, written motion, or other paper, an attorney . . . is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, . . . (2) the claims, defenses and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law . . . [and] (3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery. . . .

Super.Ct.Civ.R. 11(b)(2)-(3) (emphasis added). Rule 11 further states that attorneys and parties who violate the above provisions may be sanctioned by the trial court, and lists, inter alia, the following guidelines:

A sanction imposed for violation of this rule shall be limited to what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated. . . . [T]he sanction may consist of, or include, directives of a nonmonetary nature, an order to pay a penalty into court, or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of some or all of the reasonable attorneys' fees and other expenses incurred as a direct result of the violation.

Super.Ct.Civ.R. 11(c)(2). This court reviews for abuse of discretion both a trial court's determination that Rule 11 was violated and the amount of sanctions ordered. See Williams v. Board of Trustees of Mt. Jezreel Baptist Church, 589 A.2d 901, 910-11 (D.C.), cert. denied, 502 U.S. 865, 112 S.Ct. 190, 116 L.Ed.2d 151 (1991). *fn1

II.

"A court may impose sanctions under Rule 11 if a reasonable inquiry discloses that the pleading, motion, or paper is . . . not well grounded in fact[,]" and this court must grant wide discretion to a trial court's determination that sanctions are warranted on this ground. Sherman Treaters Ltd. v. Ahlbrandt, 115 F.R.D. 519, 523 (D.D.C. 1987). *fn2 In this case, this court has already reviewed the record and affirmed the trial court's determination that Cunningham's complaint and filings did not create a material issue of fact concerning ...


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