Falk & Mayfield L.L.P. v. Molzan

974 S.W.2d 821, 1998 Tex. App. LEXIS 3716, 1998 WL 323705

• Court: Court of Appeals of Texas
• Decided: June 18, 1998
• Docket: 14-96-01134-CV
• Status: Published

Opinions

OPINION

HUDSON, Justice.

Attorneys David Falk and Marc Mayfield and their law firm Falk & Mayfield appeal from a sanctions order awarding triple attorney fees to Chef Bruce Molzan and Molzan, Inc. d/b/a The Ruggles Grill. We affirm the sanctions order.

According to appellant’s petition, Angela Mogan drove her 1982 Toyota Tercel to Rug-gles Grill on December 20,1991, where it was parked by H.F. Valet Parkers. When she left the restaurant, the valet service was unable to start Ms. Mogan’s automobile due to a defective ignition switch and/or a bent ignition key. Ms. Mogan authorized H.F. Valet Parkers to begin repair work on her automobile and left it in their custody. When Ms. Mogan returned a few days later, she discovered the repairs had not yet been initiated, her car had been vandalized, and Christmas presents had been stolen from the vehicle.

Two years later, on December 20, 1993, Ms. Mogan sued Ruggles Grill and H.F. Valet Parkers for negligence and alleged violations of the Deceptive Trade Practices Act. Ms. Mogan, who was represented by appellants, settled her claims against H.F. Valet Parkers on August 8, 1995. Ms. Mogan continued, however, to pursue her claims against Ruggles Grill. After an unsuccessful attempt to mediate the suit, the owner of Rug-gles Grill, on or about January 9, 1996, placed a portable sign in front of his business which said:

ASK ME ABOUT LAWSUIT ABUSE & THE LAW FIRM OF FALK & MAYFIELD ATTORNEY ANGELA MOGAN MCALLISTER DETAILS INSIDE

Appellants immediately requested the sign be removed. Appellees refused, but the sign was altered to read:

ASK ME ABOUT THE LAW FIRM OF FALK & MAYFIELD AND ATTORNEY ANGELA MOGAN MCALLISTER DETAILS INSIDE

Several customers of Ruggles Grill and a private investigator retained by appellants reported that when they inquired about the “details” referenced by the sign, they were told by restaurant personnel that appellants had filed a “frivolous lawsuit” against the restaurant in an attempt to extort food or money from the owner. One employee referred to the cause of action as a “bulls — t” lawsuit. The following day, appellants sued the owner of Ruggles Grill for libel, slander, and invasion of privacy seeking $500,000 in actual damages and $1,000,000 in exemplary damages.¹

Several months later, appellants non-suited their entire case. Appellees immediately filed a motion to reinstate for the purpose of awarding sanctions under Rule 13. At the conclusion of the hearing on appellees’ motion for sanctions, the trial judge held that appellants’ suit was groundless and brought in bad faith for the purpose of harassment. The court further concluded that sanctions were warranted against Falk and Mayfield individually, and each was ordered to pay $21,180. The total award for sanctions, therefore, was $42,360, or triple the amount of appellees’ attorney fees.

In their first point of error, appellants contend the trial court erred in awarding triple attorney fees as a sanction because its authority was limited to awarding “compensatory,” rather than “punitive” sanctions. In other words, appellants argue that if sanctions were warranted in this case, the trial court was authorized under Rule 13 to impose sanctions equaling appellees’ attorney fees, but had no authority to award sanctions over and above appellees’ expenses.

Rule 13 provides that where a pleading is groundless and has been filed in bad faith for the purpose of hai’assment, the court shall impose an appropriate sanction available under Rule 215-2b. See Tex.R. Civ. P. 13. Rule 215(2)(b) grants the trial court authority to “make such orders ... as are just.” See Tex.R. Civ. P. 215(2)(b). The rule also recites examples of eight specific sanctions that may be imposed. One such sanction is “reasonable expenses, including attorney fees.” Tex.R. Crv. P. 215(2)(b)(8). Thus, appellant claims the trial court’s sanction should not have exceeded the cost of attorney fees. The rule states, however, that the listed sanctions are inclusive, not exclusive. See Tex.R. Civ. P. 215(2)(b). Accordingly, while this provision of Rule 215(2)(b) certainly authorizes the imposition of sanctions in the amount of attorney fees, we do not interpret it as being in the nature of a limitation or ceiling upon such sanctions.

Sanctions may be imposed for a variety of reasons and their function can be compensatory, punitive or deterrent in nature. See TransAmerican Natural Gas Corp. v. Powell, 811 S.W.2d 913, 922 (Tex.1991) (Gonzalez, J., concurring). For example, when imposed for discovery abuse, sanctions are directed primarily at (1) seeming compliance with the discovery rules, (2) deterring other litigants from similar misconduct, and (3) punishing the violators. See Arkla, Inc. v. Harris, 846 S.W.2d 623, 628 (Tex.App.-Houston [14th Dist.] 1993, no writ). When imposed under Rule 13, however, the chief purpose of sanctions is to cheek further abuses in the pleading process. See Monroe v. Grider, 884 S.W.2d 811, 818 (Tex. App.-Dallas 1994, writ denied); Home Owners Funding Corp. of America v. Scheppler, 815 S.W.2d 884, 889 (Tex.App.-Corpus Christi 1991, no writ). The degree of deterrence achieved by a sanction is inextricably related to its punitive effect. Restitution is not punishment; it is simply the restoration of a loss caused by one’s own misfeasance or malfeasance. We hold, therefore, that a trial court may, under appropriate circumstances, impose sanctions under Rule 13 in excess of the costs or expenses incurred by the defendant. Accordingly, the trial court’s imposition of sanctions for three times the amount of attorney fees was not impermissible per se.

While sanctions imposed under Rule 13 may be punitive, they must also be “just.” See Butan Valley, N.V. v. Smith, 921 S.W.2d 822, 827 (Tex.App.-Houston [14 th Dist.] 1996, no writ). The propriety or justness of a sanction is a matter on which reasonable minds may differ, and we must therefore extend to the trial court some measure of discretion. Accordingly, “[a] trial court’s decision to impose sanctions under Tex.R. Civ. P. 13 will not be overruled on appeal unless an abuse of discretion is shown.” Zarsky v. Zurich Management, Inc., 829 S.W.2d 398, 399 (Tex.App.-Houston [14th Dist.] 1992, no writ); Notgrass v. Equilease Corp., 666 S.W.2d 635, 638 (Tex.App.—Houston [1st Dist.] 1984, writ ref'd n.r.e.). The test for abuse of discretion is “whether the court acted without reference to any guiding rules and principles,” or “whether the act was arbitrary or unreasonable.” Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.1985).

Here, the trial court examined appellants’ pleadings and concluded they were groundless and filed in bad faith for the purpose of harassment. That conclusion is amply supported by an examination of the pleadings. An essential element of libel “is that the alleged defamatory statement be a statement of fact rather than opinion.” Howell v. Hecht, 821 S.W.2d 627, 631 (Tex.App.-Dallas 1991, writ denied). Here, the meaning of the sign is somewhat ambiguous, but at most it accused appellants of “lawsuit abuse.” To say that one has engaged in lawsuit abuse is to accuse him of legally manipulating the civil justice system to gain an unfair advantage in a personal or commercial dispute. It is an individual judgment that rests solely in the eye of the beholder. Admittedly, the accusation is derogatory and disparaging, but this is no different than saying that one is ugly, scurrilous, or disgusting.² The term “lawsuit abuse” does not, in its common usage, convey a verifiable fact, but is, by its nature, somewhat indefinite and ambiguous. Because it is a loose and figurative term employed as metaphor or hyperbole, it is an expression of opinion which is absolutely protected by the First Amendment of the United States Constitution and Section 8, article I, of the Texas Constitution. See Carr v. Brasher, 776 S.W.2d 567, 570 (Tex.1989) (“All assertions of opinion are protected by the first amendment of the United States Constitution and article I, section 8 of the Texas Constitution.”); Yiamouyiannis v. Thompson, 764 S.W.2d 338, 340-41 (Tex.App.-San Antonio 1988, writ denied).

A lawsuit is not “groundless,” and therefore subject to sanctions under Rule 13, merely because a plaintiff chooses to pursue a “weak” case. See Monroe, 884 S.W.2d at 817. “Groundless,” as used in Rule 13, means “there is no arguable basis for the cause of action.” Attorney General of Texas v. Cartwright, 874 S.W.2d 210, 215 (Tex.App.Houston [14th Dist.] 1994, writ denied) (emphasis added). Here, however, appellant’s lawsuit is so blatantly vacuous, it is hard to conceive that any lawyer, or even a layman, would not immediately discern its absurdity.³ Having no legal viability, the value of this cause of action rests solely upon its power to intimidate and coerce.

Moreover, to establish the element of “bad faith,” appellees offered two witnesses who testified of other allegedly frivolous lawsuits filed by appellants. One defendant testified he was sued for “negligent rescue” when he pulled the plaintiff from Clear Lake. According to the defendant, the plaintiff, who had become intoxicated while socializing on a boat, fell overboard. After the defendant pulled the plaintiff from the lake, she dried off, and continued drinking. Two years later, appellants sued him for “negligent rescue” claiming the plaintiff was suffering from a clavicular dislocation allegedly suffered when she was rescued.⁴

In another case, an attorney testified that his client, a home builder, entered into an earnest money contract to purchase a small tract of land. While the sale was still pending, Falk sued both the builder and the prospective seller seeking a temporary injunction to prevent the builder from constructing two houses on the property. The attorney, who is board certified in commercial real estate, testified the injunction was predicated upon deed restrictions that, on their face, had expired in 1946 pursuant to the express terms of the restrictive covenants. Nevertheless, the builder canceled the prospective purchase with the consent of the seller. The builder’s attorney then contacted Falk, informed him that his client had never had anything other than an executory contract, that the earnest money contract had been canceled, and that he had no interest in the property. The builder’s attorney further requested that his client be dismissed from the suit.

Rather than dismiss the builder, Falk proceeded to file an amended petition naming the builder as a defendant and alleging facts that were no longer true. In the amended petition, Falk alleged (1) the builder had entered into an agreement to purchase the property in question, (2) the builder had a reputation for “shoddy workmanship,” (3) that the construction of multiple residences on the property would violate existing deed restrictions, and (4) the plaintiff, an adjacent property owner, had no adequate remedy at law to prevent the prospective construction. Falk requested an injunction, an independent environmental impact study to be paid for by the defendants, reasonable attorney fees, and all such other and further relief to which the plaintiffs might show themselves to be entitled. Although the suit was ultimately dismissed 18 months later, the builder incurred unnecessary legal expenses while defending himself against a frivolous suit.

In the face of this evidence, the trial court apparently concluded $42,360 was a just sanction for the filing of a one and a half million dollar frivolous lawsuit. In light of the record before us, we cannot say the trial court abused its discretion. Accordingly, appellants’ first point of error is overruled.

Appellants argue in their second point of error that their cause of action was not entirely frivolous and that the greater portion of their suit was proper. Appellants claim, therefore, that the trial court erred in awarding sanctions based upon attorney fees generated while defending against the entire cause of action.

Falk and Mayfield filed their lawsuit against appellees on January 10, 1996. Thereafter, Falk and Mayfield retained Michael Garrett to represent them in the suit. On March 19, 1996, Garrett filed Plaintiffs First Amended Original Petition which differed only slightly from the original petition filed by Falk and Mayfield. Two days later, Garrett filed a notice of non-suit. Although the trial court sanctioned Falk and Mayfield, it concluded that no sanctions were warranted against Garrett. Because Garrett was not sanctioned, appellants contend the trial court must have concluded the First Amended Original Petition filed by Garrett was neither groundless nor filed in bad faith. Appellants theorize that since their original petition was very similar to the first amended original petition filed by Garrett, only a small portion of the original petition must have been sanc-tionable. Appellants argue, therefore, that appellees should not be compensated for attorney fees generated for defending against the entire suit, but only that small portion of the suit which was groundless and filed in bad faith.

The trial judge, however, was “entitled to consider the entire history of the ease before him.” Allied Chemical Co. v. DeHaven, 824 S.W.2d 257, 262 (Tex.App.-Houston [14th Dist.] 1992, no writ). Further, he was obliged to determine whether the offensive conduct was referable to the attorney, the party, or both. See Remington Arms Co., Inc. v. Caldwell, 850 S.W.2d 167, 172 n. 9 (Tex.1993). Garrett did not initiate the suit against appellees, and although he filed an amended petition, he followed it two days later with a notice of non-suit. The trial court may have taken these facts into consideration when concluding no sanctions were warranted against Garrett. It does not logically follow, as appellants contend, that the trial court found some plausible merit in the First Amended Original Petition. Accordingly, appellants second point of error is without merit.

In the third point of error, appellants contend there is insufficient evidence to support the trial court’s findings and that the find-bigs, even if true, do not justify sanctions. Appellants argue appellees had the burden of proving the libel suit was groundless and filed in bad faith. Because no evidence was offered regarding the facts and circumstances surrounding the filing of the suit, appellants contend the trial court’s findings cannot be sustained by the evidence.

Appellants correctly observe that the trial court’s findings are highly unusual and many are not supported by evidence.⁵ However, appellee’s request for sanctions was not grounded upon contested facts, but upon appellants’ pleadings. While pleadings are not normally cognizable evidence of the events alleged therein,⁶ they may show, as they do here, the alleged defamatory statement was absolutely privileged under both our state and federal constitutions.

Nevertheless, “Rule 13 imposes a duty on the trial court to point out with particularity the acts or omissions on which sanctions are based.” Zarsky v. Zurich Management, Inc., 829 S.W.2d 398, 399 (Tex.App.-Houston [14 th Dist.] 1992, no writ).⁷ Here, as Justice Fowler correctly observes in her dissenting opinion, the trial judge’s irregular findings raise a question as to whether he complied with this provision of the rule. While the court’s written findings are certainly no model for other courts to emulate when attempting to draft a statement of particulars, the document satisfies, at least minimally, the requirements of Rule 13. Most importantly, the trial judge found:

Plaintiffs filed this lawsuit less than one day after Bruce Molzan put a portable sign in front of his restaurant in Houston, Texas, that invited the public to ask him about lawsuit abuse, the law firm of Falk & Mayfield, and Angela Mogan McAllister.

The term “lawsuit abuse” is vague and does not have a definite meaning. It is a hyperbolic expression of opinion, not a verifiable statement of fact.

The sign may have offended Plaintiffs or caused them discomfort, but it was not actionable.

Plaintiffs should not have filed this lawsuit. It is groundless and brought in bad faith and for the purpose of harassment.

Whether an accusation is one of fact or opinion, and hence whether it is defamatory, is a question of law for the court. See Simmons v. Ware, 920 S.W.2d 438, 446 (Tex.App.-Amarillo 1996, no writ); Carr, 776 S.W.2d at 570. Here, the court concluded the accusation of lawsuit abuse was, as a matter of law, a statement of opinion. We agree. The court further concluded the suit was filed in bad faith. In light of the pleadings alone, we do not believe the trial court abused its discretion in concluding the suit was filed solely for the purpose of harassment.

The purpose of Rule 13 is to “ ‘check abuses in the pleading process, ie., to insure that at the time the challenged pleading was filed the litigant’s position was factually grounded and legally tenable.’” Tarrant County v. Chancey, 942 S.W.2d 151, 155 (Tex.App.—Fort Worth 1997, no writ). A suit is groundless if it has no basis in law or fact. See Tex.R. Crv. P. 13. Here, there is no material dispute regarding the facts, and appellants’ suit is, on its face, nakedly frivolous. The essential findings necessary to support the sanctions were made by the trial court. Moreover, these findings are supported by the pleadings and evidence. Accordingly, appellants’ third point of error is overruled.

In their final point of error, appellants contend the trial court abused its discretion by imposing sanctions. The degree of discretion afforded the trial court is, we believe, greater when sanctions are imposed for groundless pleadings than when imposed for discovery abuse. Sanctions imposed for discovery abuse often impede a litigant’s ability to present his ease. As such, “ ‘[tjhere are constitutional limitations upon the power of courts, even in aid of their own valid processes, to dismiss an action without affording a party the opportunity for a hearing on the merits of his cause.’ ” TransAmerican, 811 S.W.2d at 917. Thus, a sanction “ ‘for discovery abuse should be no more severe than necessary to satisfy its legitimate purpose.’ ” Hamill v. Level, 917 S.W.2d 15, 16 (Tex.1996). The trial court must always explore the possibility of whether lesser sanctions might compel compliance with the discovery rules and correct the abuse that has occurred. See Occidental Chemical Corp. v. Banales, 907 S.W.2d 488, 490 (Tex.1995).

When sanctions are imposed under Rule 13 for filing a groundless suit in bad faith, the considerations are not the same. Because the suit has been decided, the imposition of sanctions under these circumstances does not obstruct a litigant’s access to the courts or threaten the presentation of his ease upon the merits. Rule 13 sanctions must, as we have said, be just, and a tidal court does not have unfettered authority to punish an offender. He may not, for example, sanction him simply for innovative applications of the law or for advocating changes in the law. See Dyson Descendant Corp. v. Sonat Exploration Co., 861 S.W.2d 942, 951 (Tex.App.—Houston [1st Dist.] 1993, no writ). Moreover, “bad faith” is not simply bad judgment or negligence. It is the “conscious doing of a wrong for dishonest, discriminatory, or malicious purposes.” Campos v. Ysleta General Hosp., Inc., 879 S.W.2d 67, 71 (Tex.App.—El Paso 1994, writ denied); Elbaor v. Sanderson, 817 S.W.2d 826, 829 (Tex.App.-Fort Worth 1991, no writ).

However, as we have previously stated, , in light of the pleadings and evidence before us, we cannot say the trial court abused his discretion in imposing sanctions of $42,360. Accordingly, appellants’ fourth point of error is overruled, and the trial court’s sanction order is affirmed.

1 . On January 11, 1996, the day after the lawsuit was filed, the sign was changed to read:

I FEEL THAT THE LAW FIRM OF FALK & MAYFIELD & ATTORNEY ANGELA MOGAN MCALLISTER COMMITS LAWSUIT ABUSE CHEF BRUCE

2 . "A statement may be false, abusive, unpleasant, and objectionable ... without being defamatory.” Schauer v. Memorial Care Sys., 856 S.W.2d 437, 446 (Tex.App.-Houston [1 st Dist.] 1993, no writ.).

Under the First Amendment there is no such thing as a false idea. However pernicious an opinion may seem, we depend for its correction not on the conscience of judges and juries but on the competition of other ideas.

Gertz v. Robert Welch, Inc., 418 U.S. 323, 339-40, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974).

4 . Appellants also sued the owner of the boat, who was not present when the plaintiff fell overboard, and numerous businesses which they claimed had polluted the water into which the plaintiff fell. The aspiration of lake water allegedly caused "pits” in the plaintiff’s lungs.

6 . See Howell v. Hecht, 821 S.W.2d at 631.

7 . "No sanctions under this rule may be imposed except for good cause, the particulars of which must be stated in the sanction order.” Tex.R. Civ. P. 13.