George E. Failing Company v. Cascade Drilling, Inc.

CourtCourt of Appeals of Washington
DecidedDecember 27, 2016
Docket73017-7
StatusUnpublished

This text of George E. Failing Company v. Cascade Drilling, Inc. (George E. Failing Company v. Cascade Drilling, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Washington primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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George E. Failing Company v. Cascade Drilling, Inc., (Wash. Ct. App. 2016).

Opinion

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

GEORGE E. FAILING COMPANY, dba GEFCO, a division of Blue Tee Corp., No. 73017-7-1 C3 a Delaware corporation, p";

DIVISION ONE Respondent,

v.

CASCADE DRILLING, INC., a UNPUBLISHED OPINION Washington corporation, and BRUCE NIERMEYER, FILED: December 27, 2016

Appellants,

HUB CITY, INC., a Delaware corporation,

Third-Party Defendant.

Becker, J. — Exercising its inherent power, the trial court imposed

sanctions of more than $1.6 million for the appellant's bad faith in using

fabricated evidence to carry on three years of litigation. Substantial evidence

supports the finding of bad faith, and we conclude the court did not abuse its

inherent power. No. 73017-7-1/2

FACTS

The order of sanctions at issue in this appeal was entered against

appellant Cascade Drilling Inc. in favor of respondent George E. Failing

Company. The respondent company, also known as Gefco, manufactures and

sells large drilling machinery.

The source of their dispute is a project that began in 2008. Cascade was

hired to drill a water well at a housing development in Wheeler Canyon,

California. Cascade used a 50k drilling rig purchased from Gefco. Between

March and June 2008, the pump drive shafts on the drilling rig failed four times.

After each failure, Cascade ordered a replacement pump drive shaft from Gefco.

In September 2008, Cascade ordered drilling equipment for an unrelated

drilling rig from Gefco but did not pay. In July 2009, Gefco sued to collect.

Cascade admitted not paying and asserted counterclaims alleging that Gefco

was indebted to Cascade for nonconforming and defective goods, including the

replacement pump drive shafts purchased for the Wheeler Canyon project.

For the next three years, the parties litigated extensively. Cascade

produced three pump drive shafts, representing them to be the second, third, and

fourth pump drive shafts that failed on the Wheeler Canyon job.

In August 2012, Cascade voluntarily dismissed its counterclaims with

prejudice and paid Gefco the amount due on the disputed invoice. This resolved

the merits of the original claim and counterclaim.

Gefco moved for sanctions against Cascade. Based on information that

came to light late in the litigation, Gefco alleged that the three pump drive shafts No. 73017-7-1/3

produced by Cascade did not come from the rig used on the Wheeler Canyon job

and that Cascade had fabricated evidence to the contrary. In October 2012, the

court held a hearing on the motion.

Over a year later, on November 27, 2013, the trial court issued a letter

ruling, accompanied by findings of fact and conclusions of law, that Cascade

engaged in bad faith litigation and fabricated the pump drive shaft evidence. The

court ordered Cascade and Bruce Niermeyer, Cascade's president, to pay

Gefco's "reasonable" attorney fees and costs.

For the next year, the parties litigated the amount of "reasonable" attorney

fees and costs. On December 29, 2014, the trial court issued findings of fact and

conclusions of law, ordering Cascade and Niermeyer to pay Gefco attorney fees

and costs of $1,394,435 and expert fees of $247,286 in partial reimbursement of

the fees and costs incurred in the litigation. On January 26, 2015, Cascade filed

a notice of appeal from the order of December 29, 2014.

TIMELINESS OF APPEAL

Cascade assigns error to the order of November 27, 2013, in which the

court set forth its decision that sanctions would be ordered, as well as to the

order of December 29, 2014, which quantified the amount of the sanctions

ordered. Gefco, relying on RAP 2.4(b), contends that because the notice of

appeal referred only to the second order, it is timely only as to that order, such

that the only issues properly before this court are those related to the amount of

the sanction and the interest rate. Gefco is mistaken. The appeal of the second

order brings the first order up for review. No. 73017-7-1/4

We have held that under RAP 2.4(b), an appeal from an award of attorney

fees does not bring up for review the merits of the underlying summary judgment

decision. Bushonq v. Wilsbach. 151 Wn. App. 373, 376, 213 P.3d 42 (2009). A

litigant must appeal from the judgment "establishing the legal basis for an

attorney fee award" within 30 days of the entry of that judgment. Bushonq, 151

Wn. App. at 377. Unlike in Bushonq. here the legal basis for the attorney fee

award was not established by a judgment on the merits of the underlying case.

Gefco was already awarded contractual attorney fees for its debt collection action

when the merits of that claim were resolved in 2012. George E. Failing Co. v.

Cascade Drilling. Inc.. No. 69627-1-1 (Wash. Ct. App. Feb. 18, 2014)

(unpublished), http://www.courts.wa.gov/opinions/pdf/696271.pdf (affirming

award).

The present appeal concerns an order of attorney fees awarded on a

motion for sanctions that was litigated and decided after and separately from the

merits of the underlying claims. The order of November 27, 2013, did not inhere

in the outcome of the underlying case and was not itself a final judgment.

Rather, it was analogous to a preliminary decision on liability. In that sense, it did

not become "final" and appealable under RAP 2.2(a)(13) until the court

determined the amount for which the defendant was liable. See Miller v. City of

Port Angeles. 38 Wn. App. 904, 907 n.2, 691 P.2d 229 (1984) ("A judgment of

liability is not ordinarily appealable until damages have been awarded"), review

denied, 103 Wn.2d 1024 (1985); Zimmerman v. W8LESS Prods.. LLC. 160 Wn.

App. 678, 691, 248 P.3d 601 (2011) (summary judgment order on liability not No. 73017-7-1/5

appealable until after determination of damages). Cascade's timely appeal of the

December 2014 order setting the amount of sanctions serves as a timely appeal

of the November 2013 order holding that sanctions would be awarded.

EVIDENCE OF BAD FAITH

The United States Supreme Court has recognized that "certain implied

powers must necessarily result to our Courts of justice from the nature of their

institution," powers "which cannot be dispensed with in a Court, because they are

necessary to the exercise of all others." United States v. Hudson. 11 U.S. (7

Cranch) 32, 34, 3 L. Ed. 259 (1812).

In general, a court may resort to its inherent powers only to protect the

judicial branch in the performance of its constitutional duties when reasonably

necessary for the efficient administration of justice. State v. Wadsworth. 139

Wn.2d 724, 740-41, 991 P.2d 80 (2000); In re Salary of Juvenile Director. 87

Wn.2d 232, 245, 552 P.2d 163 (1976). Inherent powers must be exercised with

restraint and discretion because they are "shielded from direct democratic

controls," and therefore, the inherent power to assess attorney fees exists only in

"narrowly defined circumstances." Roadway Exp.. Inc. v. Piper. 447 U.S. 752,

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