Muthig v. Brant Point Nantucket, Inc., 87-1292

• Decision Date: 05 October 1987
• Docket Number: No. 87-1292,87-1292
• Citation: 838 F.2d 600
• Parties: , 10 Fed.R.Serv.3d 512 Charles MUTHIG and Rhoda Muthig, Plaintiffs, Appellants, v. BRANT POINT NANTUCKET, INC., et al., Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 600

838 F.2d 600

98 A.L.R.Fed. 417, 10 Fed.R.Serv.3d 512

Charles MUTHIG and Rhoda Muthig, Plaintiffs, Appellants, v. BRANT POINT NANTUCKET, INC., et al., Defendants, Appellees.

No. 87-1292.

United States Court of Appeals,

First Circuit.

Heard Oct. 5, 1987.

Decided Feb. 8, 1988.

Opinion on Denial of Rehearing March 24, 1988.

Robert V. Lizza with whom Sherburne, Powers & Needham, Boston, Mass., was on brief, for plaintiffs, appellants.

Edward Notis-McConarty with whom Kevin M. Brill and Hemenway & Barnes, Boston, Mass., were on brief, for defendant, appellee Donald M. Jordan.

Before CAMPBELL, Chief Judge, TIMBERS, ^* Senior Circuit Judge, and BREYER, Circuit Judge.

BREYER, Circuit Judge.

In 1984, Charles and Rhoda Muthig signed a contract to buy condominium property on Nantucket Island for about $20,000. After the seller (a property development company) refused to carry out the bargain, the Muthigs brought a diversity action charging the company, one of its owners, and one of its salesmen with breach of contract, fraud, unfair trade practices, and intentional infliction of emotional suffering. Eventually, the Muthigs won their breach of contract and unfair trade practice claims against the company and its owner. But, the district court found their claims against the salesman so "unjustified" and plainly "devoid of merit" that he awarded the salesman $18,335 for legal expenses. The Muthigs appeal the fee award. We find the award a lawful sanction under Fed.R.Civ.P. 11.

I

The appellants' pleadings, affidavits, depositions, and related documents reveal the following basic facts on which their lawsuit rests:

A development company called Brant Point Nantucket, Inc., one of whose owners was William Cameron, built a group of time-sharing condominiums called Brant Point Courtyard. In 1984, the Muthigs signed a purchase and sale agreement for one time-share unit, and they obtained an option to buy additional condominium space. Salesman Donald Jordan signed for the company. On June 29, 1985, the Muthigs arrived on Nantucket, ready to exchange money for deed and to spend a week of vacation in their new condominium. Unfortunately, as they drove to the courtyard, they found that a jeep truck blocked the street. The driver refused to move. The Muthigs say that the driver laughed at them and made an obscene gesture.

The Muthigs then took a different route to the courtyard. When they arrived, they met Jordan, who told them the deed was not yet ready, but that they nonetheless could occupy their unit. They moved in. They started to return to the main office when Brant Point owner William Cameron drove into the courtyard. Lo and behold: Cameron was the very jeep driver who had previously blocked the Muthigs' way.

Cameron, who was less than pleased to see the Muthigs, challenged them with questions, such as "Who the hell are you, and what are you doing here?" To make a long story short, there was another argument. And, despite Jordan's efforts to calm everyone down and the Muthigs' efforts to call in the local police, Cameron successfully induced the Muthigs to leave, saying (they claim) "get your garbage off my property." Subsequently, Brant Point refused to convey the Muthigs' condominium share, refused to allow them to exercise their options, and refused even to return their deposit. The Muthigs later discovered that Brant Point would not have had the legal ability to convey good title to their property in early July, 1985 had it wished to do so. The title suffered from a technical legal defect. Brant Point had not yet recorded a necessary amendment to the "master deed," and it did not do so until four months later.

The most significant of the many procedural events in the case are the following:

1. In August, 1985, plaintiffs filed a one-count "breach of contract" claim against the development company.

2. In October, 1985, plaintiffs amended the complaint and joined owner Cameron and salesman Jordan as defendants. The amended complaint asserted: (a) breach of 3. On February 14, 1986, Jordan moved to dismiss the two counts against him, namely fraud and intentional infliction of emotional distress.

contract against Brant Point (Counts I and II), (b) fraud against Brant Point, Cameron, and Jordan (Count III), (c) intentional infliction of emotional distress against Cameron and Jordan (Count IV), and (d) unfair trade practices (Mass.Gen.Laws ch. 93A (1984)) against Brant Point (Count V).

4. One week later, on February 21, 1986, the plaintiffs amended their complaint again, substituting Cameron for the company as a defendant in their unfair trade practice claim in Count V, and adding an unfair trade practice against Jordan (Count VI).

5. On March 19, 1986, the district court denied Jordan's motion for summary judgment. The court wrote:

While the record shows the plaintiffs' allegations are far-reaching and expansive, they do present factual conflicts which must be resolved by a factfinder, thus precluding dismissal.

6. On July 30, 1986, after further pretrial proceedings, the court referred the case to the Boston Bar Association Mediation Panel in an effort to reach a settlement without a full trial. The court issued an order of transfer on September 2.

7. On September 19, 1986, defendants deposed the Muthigs.

8. On November 4, 1986, the court set the case for trial.

9. On November 20, the parties filed a stipulation of facts, issues to be tried, and a list of witnesses.

10. On November 21, the plaintiffs, Cameron, and the company agreed to submit the dispute to the Bar Association's Mediation Panel for a binding decision. Jordan did not agree. The plaintiffs and Jordan then signed a stipulation that the plaintiffs "voluntarily dismiss with prejudice all claims ... against Donald Jordan," and the plaintiffs filed the stipulation with the court.

11. On January 30, 1987, Jordan moved for attorneys' fees under Fed.R.Civ.P. 11 and under Mass.Gen.Laws ch. 231, Sec. 6F (1984).

12. On February 3, 1987, plaintiffs moved to strike Jordan's motion for attorneys' fees on the ground that the voluntary dismissal deprived the court of the legal power to act on either motion.

13. On March 3, 1987, the Bar Association Mediation Panel issued its decision, finding for the Muthigs on the contract and unfair trade practice claims and for Cameron and the company on the fraud and emotional suffering claims. It also issued a "non-binding recommendation" that "the court award reasonable attorney's fees to Defendant Jordan." The panel said (1) "the evidence clearly and unambiguously showed that Jordan has consistently acted courteously to the plaintiffs and did all in his power to facilitate the sale [to] the Muthigs," and (2) "whatever technically inaccurate statements he might have made" in respect to the title defect "do not form any basis for the plaintiffs' claims against him." The Panel said the Muthigs' claim against Jordan was "wholly insubstantial, frivolous, and not advanced in good faith."

14. On March 9, the court awarded Jordan approximately $18,000 in fees. It wrote:

Based on the recommendation of the Panel and the record, this was a wholly unjustified action and the defendant need not be subjected to these expenses.

15. On March 19, the plaintiffs moved for reconsideration of the fee award.

16. On March 31, the court denied the motion for reconsideration, stating in part:

The record is so clear that the claim against Jordan was devoid of merit that counsel's fee award is the only reasonable sanction.

These sixteen major procedural events are part of a six-page docket sheet that lists 121 items, together generating a record of many hundreds of pages. We have read that record. It shows that the dispute was, or should have been, simple and capable of speedy, inexpensive resolution. In resolving the dispute, the Panel and district court held, or wrote, that Cameron

should pay the Muthigs, because he injured them; that Jordan should not pay the Muthigs, because he tried to help them, not to hurt them; and that Jordan should not have to pay the $18,335 that the suit has cost him, for he is an innocent bystander, and the Muthigs knew or should have known it. Our reading of the record convinces us that this outcome is fair, and that the $18,335 fee award is lawful.

II

Jordan based his attorneys' fees request upon two different, independent sources of law, Fed.R.Civ.P. 11 and Mass.Gen.Laws ch. 231, Sec. 6F (1984) (permitting an award of "reasonable counsel fees" incurred in defending a claim that is "insubstantial, frivolous, and not advanced in good faith.") See Pan American World Airways, Inc. v. Ramos, 357 F.2d 341 (1st Cir.1966) (federal court in a diversity case may award attorneys' fees under a state statute). The district court's brief statement of reasons for its award and its use of the word "sanction" (a word that appears only in Rule 11) indicate to us that the court invoked both sources of legal authority. As a result, the district court's award is lawful if either source offers adequate legal support. Since we find sufficient support in Rule 11, we need not consider the appellants' arguments in respect to the state statute.

Rule 11 provides in relevant part that if an attorney files a "pleading, motion, or other paper" without a belief

formed after reasonable inquiry [that] 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 improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation ... the court ... shall impose [upon the attorney, the client, or both] ... an appropriate sanction, which may include an order to pay to the other party ... the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee.

An appellate court will...