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Cain v. Ford

filed: March 15, 1996.

JOHN C. CAIN AND MYRNA J. MACDONALD, APPELLANTS,
v.
KORUM FORD, A WASHINGTON CORPORATION, RESPONDENT.



Superior Court of Pierce County. Superior Court Docket No. 90-2-08063-9. Date Filed In Superior Court: November 5, 1993. Superior Court Judge Signing: Thomas Sauriol.

Seinfeld, C.j., Bridgewater, J., Fleisher, P.t.j., concur

Author: Seinfeld

SEINFELD, C.J. -- Attorney John Cain appeals the imposition of CR 11 sanctions against him arising out of his representation of Myrna MacDonald in a sexual discrimination and wrongful discharge action against Korum Ford. We affirm in part, reverse in part, and remand the case to the trial court for further proceedings consistent with this opinion.

From May 1987 until her termination on January 4, 1988, MacDonald worked for Korum Ford as a salesperson in its used car division. During this period Korum Ford had an unwritten policy requiring all salespersons to sell 8 to 10 cars a month. During her tenure, MacDonald frequently fell far short of this quota; in November 1987, however, she sold 10.5 cars and received that month's high achievement award.*fn1 But in December, she sold only 3.5 cars. On January 4, 1988, Robert Huber, Korum Ford's used-car manager, terminated MacDonald due to "lack of production."

Six months later, MacDonald filed a sexual discrimination complaint with the Washington State Human Rights Commission (the Commission). She alleged that Huber had grabbed and kissed her as she left work on New Year's Eve 1987 and fired her in retaliation for rejecting his sexual advance.

MacDonald later added Jack Yaeger, Korum Ford's assistant used-car manager, to her complaint. She claimed that Yaeger, at times, touched her inappropriately, positioned himself in the office hallway so that she would brush against him when she passed, and used inappropriate language in her presence. MacDonald also claimed that in December Yaeger and Huber made it difficult for her to sell cars.

In the spring of 1990, MacDonald withdrew her complaint with the Commission and retained Cain as her attorney. In August 1990, Cain filed a complaint in superior court against Korum Ford, alleging sexual discrimination and wrongful discharge pursuant to RCW 49.60.180.*fn2 Specifically, it alleged that (1) Huber and Yaeger had subjected MacDonald to "sexual advances and harassment," (2) that Korum Ford had denied MacDonald privileges available to other similarly situated employees and generally subjected her to discriminatory work conditions, and (3) that this discriminatory treatment prevented her from being promoted to other departments within Korum Ford and ultimately resulted in her discharge.

However, in August 1991, MacDonald provided deposition testimony that severely undermined the factual bases for her claims. Nonetheless, Cain continued to prosecute the case: moving to amend the pleadings and join additional parties, conducting several depositions, seeking additional discovery, and ultimately opposing Korum Ford's summary judgment motion.

During this same period, Korum Ford's attorney responded to Cain's motion to amend the pleadings and, also, began preparing a summary judgment motion. In September 1992, Korum Ford substituted attorney one with attorney two. Attorney two familiarized herself with the case, conducted discovery, successfully moved to compel discovery, and prepared and organized the case for trial.

In April 1993, 19 months after MacDonald's deposition, Korum Ford moved for summary judgment of dismissal.

Its supporting brief relied heavily on MacDonald's deposition testimony. The trial court granted Korum Ford's motion.

Korum Ford then moved for attorney fees and costs pursuant to RCW 4.84.185 (frivolous actions) and CR 11. It argued that after MacDonald's deposition, Cain knew or should have known that further pursuit of MacDonald's claims was frivolous. The trial court granted Korum Ford's motion and imposed a $25,727.17 sanction for attorney fees against Cain and MacDonald, an amount equal to Korum Ford's legal expenditures from the date of MacDonald's deposition.*fn3

Cain and MacDonald moved for reconsideration of costs and sanctions. The trial court denied the motion and awarded an additional $1,478 in attorney fees to Korum Ford. MacDonald then hired a new attorney who was able to obtain relief from the judgment against her, leaving Cain solely responsible for the entire sanction.

In its findings of fact and conclusions of law the trial court found: (1) after MacDonald's deposition, Cain continued to rely "almost exclusively" on MacDonald's assurances that she could provide witnesses and develop evidence supporting her case; (2) Cain failed to conduct an "adequate independent investigation"; and (3) Cain failed to advise his client, as the evidence developed, that she should abandon the litigation. The trial court also ruled that at the time MacDonald filed her lawsuit, "it was reasonable to believe that [she] may have a meritorious claim," but that after her deposition, Cain knew or should have known that the facts, the existing law, or a good faith extension of the existing law could not justify further prosecution of her claims. Accordingly, the trial court ruled that Cain's decision to continue to prosecute the

case after the deposition was frivolous and sanctionable under CR 11.

ANALYSIS

CR 11 provides:

Every pleading, motion, and legal memorandum of a party represented by an attorney shall be dated and signed by at least one attorney of record in the attorney's individual name, whose address and Washington State Bar Association membership number shall be stated. . . The signature . . . of an attorney constitutes a certificate by the . . . attorney that the . . . attorney has read the pleading, motion, or legal memorandum; that to the best of the . . . attorney's knowledge, information, and belief, formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law and that it is not interposed for any purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. . . If a pleading, motion, or legal memorandum is signed in violation of this rule, the court, upon motion or upon its own initiative, shall*fn4 impose upon the person who signed it . . . an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or legal memorandum, including a reasonable attorney fee.

[1] CR 11 deals with two types of filings: those lacking factual or legal basis (baseless filings), and those made for improper purposes. Hicks v. Edwards, 75 Wash. App. 156, 162, 876 P.2d 953 (1994), review denied, 125 Wash. 2d 1015, 890 P.2d 20 (1995) (citing Bryant v. Joseph Tree, Inc., 119 Wash. 2d 210, 217, 829 P.2d 1099 (1992)). This case concerns a baseless filing. A filing is "baseless" when it is "(a) not well grounded in fact, or (b) not warranted by (i) existing law

or (ii) a good faith argument for the alteration of existing law." Hicks, 75 Wash. App. at 163.

[2] The purpose behind CR 11 "is to deter baseless filings, not filings which may have merit." Bryant, 119 Wash. 2d at 220. Accordingly, application of CR 11 requires "consideration of both CR 11's purpose of deterring baseless claims as well as the potential chilling effect CR 11 may have on those seeking to advance meritorious claims." Bryant, 119 Wash. 2d at 219.

[3, 4] A trial court may not impose CR 11 sanctions for a baseless filing "unless it also finds that the attorney who signed and filed the [pleading, motion or legal memorandum] failed to conduct a reasonable inquiry into the factual and legal basis of the claims." Bryant, 119 Wash. 2d at 220. The court must use an objective standard, asking "whether a reasonable attorney in like circumstances could believe his or her actions to be factually and legally justified." Bryant, 119 Wash. 2d at 220; Doe v. Spokane and Inland Empire Blood Bank, 55 Wash. App. 106, 111, 780 P.2d 853 (1989). To avoid being swayed by the benefit of hindsight, the trial court should impose sanctions only when it is "'patently clear that a claim has absolutely no chance of success.'" Oliveri v. Thompson, 803 F.2d 1265, 1275 (2d Cir. 1986) (quoting Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 254 (2d Cir. 1985)), cert. denied, 480 U.S. 918 (1987); Bryant, 199 Wash. 2d at 220. We review a sanction order under the abuse of ...


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