EE Mart F.C., L.L.C. v. Delyon

• Court: Supreme Court of Virginia
• Decided: February 26, 2015
• Docket: 140708
• Status: Published

Opinion

PRESENT: Lemons, C.J., Goodwyn, Millette, Mims, McClanahan, and Powell, JJ., and Koontz, S.J.

EE MART F.C., L.L.C. OPINION BY v. Record No. 140708 JUSTICE CLEO E. POWELL FEBRUARY 26, 2015 SUZANNE DELYON, ET AL.

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY Brett A. Kassabian, Judge

EE Mart F.C., L.L.C. (“EE Mart”), appeals the judgment of

the trial court ordering it to pay sanctions under Code § 8.01-

271.1. Specifically, EE Mart takes issue with the trial court’s

award of attorney’s fees that were incurred as a result of

actions filed by EE Mart in other jurisdictions.

I. BACKGROUND

EE Mart is a Virginia limited liability company that owned

and operated an international grocery store in Merrifield,

Virginia. Suzanne Delyon (“Delyon”) is the former chief

financial officer of EE Mart. She is also the owner of SDES,

LLC; Expo Emart, LLC; Expo Emart I, LLC; and Expo Emart III, LLC

(collectively the “Other LLCs”).

On May 24, 2010, EE Mart brought an action against Delyon

and the Other LLCs in Fairfax County Circuit Court alleging

wrongful conversion and other claims (the “Original Action”).

These claims related to insurance proceeds paid to Delyon by Traveler’s Insurance Company (“Traveler’s”). On the eve of

trial, EE Mart nonsuited the case.

In October 2011, EE Mart brought an action against

Traveler’s in the Circuit Court of Carroll County, Maryland (the

“Maryland Action”). This action related to Traveler’s payment

of the insurance proceeds to Delyon. Traveler’s subsequently

removed the case to federal court. After the case was removed

to federal court, EE Mart amended its complaint to add Delyon

and the Other LLCs as defendants. The claims brought by EE Mart

against Delyon and the Other LLCs were, for the most part, the

same as the claims it brought against them in the Original

Action. However, EE Mart also brought a civil RICO claim

against Delyon and the Other LLCs to avoid losing federal

jurisdiction over the matter because of a lack of diversity.

Delyon and the Other LLCs filed a motion to dismiss the RICO

claim, and the motion was sustained by the district court. The

case was transferred back to the Circuit Court of Carroll

County, where it is still pending.

On June 15, 2012, Delyon and the Other LLCs filed the

present action in Fairfax County Circuit Court (the “Present

Action”), seeking to enjoin EE Mart from proceeding with the

Maryland Action and seeking declaratory judgment that the

Maryland Action was without merit. On November 6, 2012, EE Mart

filed a counterclaim against Delyon and the Other LLCs,

2 reasserting the same claims it had pled in the Original Action.

In their answer to the counterclaim, Delyon and the Other LLCs

sought sanctions under Code § 8.01-271.1 on the grounds that the

assertions in the counterclaim were frivolous and based on false

statements.

On August 23, 2013, EE Mart’s attorneys were granted leave

to withdraw from the case. EE Mart failed to engage new

attorneys. As a result, EE Mart did not file a witness list or

exhibit list prior to trial or otherwise participate in pretrial

activities. Accordingly, the trial court determined that EE

Mart had abandoned its counterclaim. After hearing the evidence

presented by Delyon and the Other LLCs, the trial court ruled in

their favor. The trial court also entered a judgment order

dismissing EE Mart’s counterclaim with prejudice, finding that

the counterclaim was “frivolous and without support in law or

fact.”

Delyon and the Other LLCs then made an oral application for

sanctions against EE Mart, claiming that the Original Action,

Maryland Action and the counterclaim to the Present Action were

frivolous. In their motion, they sought the total amount of

attorney’s fees that they had expended in defending against the

Original Action and the Maryland Action, as well as the

attorney’s fees expended in the Present Action. Relying on Code

3 § 8.01-271.1, the trial court granted the motion and awarded

$25,550 in attorney’s fees. 1

EE Mart subsequently retained an attorney and timely filed

a motion for reconsideration. In its motion for

reconsideration, EE Mart argued that its various litigation

filings were not frivolous and that the calculation of the

attorney’s fees was in error. The trial court denied the motion

for reconsideration.

EE Mart appeals.

II. ANALYSIS

In its appeal, EE Mart argues that the trial court abused

its discretion in determining the amount of sanctions to award

because it “overreached and exceeded the bounds of its

jurisdiction.” Specifically, EE Mart takes issue with the fact

that the sanctions award included attorney’s fees that Delyon

and the Other LLCs had incurred in suits that pre-dated the

filing of the Present Action or were tried in other

jurisdictions. According to EE Mart, the proper procedure for

seeking those sanctions would be a timely application in the

actual action or court in which Delyon and the Other LLCs

incurred those attorney’s fees.

1 This amount represented the full and exact amount Delyon and the Other LLCs sought to recover in attorney’s fees.

4 As an initial matter, it is important to note that EE Mart

does not assign error to the fact that sanctions were awarded.

Rather, it only assigns error to the trial court’s calculation

of the attorney’s fees it ultimately awarded as a sanction.

Accordingly, our analysis in the present case is limited to

whether the trial court’s calculation of attorney’s fees was

proper.

Code § 8.01-271.1 expressly limits the amount that may be

awarded to an appropriate sanction, which may include those

attorney’s fees and expenses “incurred because of the filing of

the pleading, motion, or other paper or making of the motion.”

(Emphasis added.) See Oxenham v. Johnson, 241 Va. 281, 289-90,

402 S.E.2d 1, 6 (1991) (holding that an award of attorney’s fees

is limited to fees incurred in responding to the sanctionable

pleading in the present action). The use of the phrase

“incurred because of” clearly indicates that a court cannot

award attorney’s fees or expenses for actions that occurred

prior to the sanctionable act. Cf. Cardinal Holding Co. v.

Deal, 258 Va. 623, 632, 522 S.E.2d 614, 619 (1999) (permitting

“a recovery of such fees and expenses incurred in defending

against an unwarranted claim, but also a recovery of those fees

and expenses incurred in pursuing a sanctions award arising out

of such a claim”).

5 Furthermore, because a trial court’s authority to award

sanctions under Code § 8.01-271.1 is triggered by the filing of

a pleading, motion, or other paper or making of a motion in

violation of the statute, while not expressly stated, the clear

implication is that the filing or making of the motion must

occur in the same action and same court that subsequently awards

the sanctions. To hold otherwise would contravene the finality

guaranteed by Rule 1:1, because a trial court’s authority to

award attorney’s fees as sanctions to related but previously

litigated matters could be extended beyond 21 days after final

judgment has been entered. It could also effectively impose the

requirements of Code § 8.01-271.1 on every litigant in every

court in the country by allowing a party to seek sanctions in

Virginia for filings or motions made elsewhere. 2 Thus, under

Code § 8.01-271.1, a trial court may only award attorney’s fees

incurred because of a filing or motion made to the trial court

in the matter then pending before the court; it may not award

attorney’s fees incurred for a filing or motion made elsewhere.

2 That is not to say, however, that evidence of similar frivolous suits may not be considered in determining whether an award of sanctions is warranted. Indeed, such evidence may be highly probative for such a purpose. Rather, as discussed above, our holding today addresses only the principle that, when determining the amount of sanctions to award, a trial court is limited to the attorney’s fees incurred as a result of a filing or motion made in the case presently before it.

6 Here, it is undisputed that the sanctions award included

attorney’s fees that were not “incurred because of” any filing

or motion made in the Present Action. Indeed, it is readily

apparent that the sanctions award included attorney’s fees for

actions that not only pre-dated any filing by EE Mart in the

Present Action, but also actions that occurred in a different

state. Accordingly, the trial court erred in its calculation of

the attorney’s fees it could award as a sanction.

III. CONCLUSION

For the foregoing reasons, we will reverse the judgment of

the trial court with regard to the amount of sanctions awarded

and we will remand the matter to the trial court for further

proceedings in accord with this opinion to calculate the proper

amount of attorney’s fees to be awarded.

Reversed and remanded.