Knight v. Sharif

• Decision Date: 19 June 1989
• Docket Number: No. 88-4620,88-4620
• Citation: 875 F.2d 516
• Parties: James P. KNIGHT, Jr., Plaintiff-Counter Defendant-Appellant, v. Rasool S. SHARIF, Defendant-Counterclaimant Cross-Claimant-Appellant, v. Earl C. WALSH, et al., Defendant-Cross Defendants-Appellees. and Edward P. Turner, Jr., David Michael Huggins and Harlon W. Turner, Attorneys for Sharif, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 516

875 F.2d 516

James P. KNIGHT, Jr., Plaintiff-Counter Defendant-Appellant, v. Rasool S. SHARIF, Defendant-Counterclaimant Cross-Claimant-Appellant, v. Earl C. WALSH, et al., Defendant-Cross Defendants-Appellees. and Edward P. Turner, Jr., David Michael Huggins and Harlon W.

Turner, Attorneys for Sharif, Appellees.

No. 88-4620.

United States Court of Appeals Fifth Circuit.

June 19, 1989.

Rehearing Denied Aug. 1, 1989

Rehearing Denied Aug. 1, 1989.

Edward P. Turner, Jr., Halron W. Turner, Turner, Onderdonk & Kimbrough, Chatom, Ala., for Sharif.

Barry H. Powell, Jackson, Miss., for Turner, Huggins & Turner.

James R. Mozingo, Thomas B. Alexander, Stennett, Wilkinson & Ward, Jackson, Miss., for Walsh.

Martin R. Jelliffe, Richard M. Edmonson, Edmonson, Biggs & Jelliffe, Jackson, Miss., for Knight.

Appeal from the United States District Court for the Southern District of Mississippi.

Before GOLDBERG, JOHNSON, and DUHE, Circuit Judges.

JOHNSON, Circuit Judge:

Appellant Rasool Sharif appeals an order of the United States magistrate granting summary judgment in favor of the shareholders of Green Acre Farms, Inc. (GAF) in a contract dispute evolving out of the attempted purchase by Sharif of all the issued and outstanding common stock of GAF. Further, counsel for the GAF shareholders, James Knight, appeals an order entered by the district court denying Knight's request for Rule 11 sanctions against Sharif after Sharif filed a counterclaim against Knight alleging tortious interference with contract. We now affirm the order of the magistrate on the merits of the contract dispute and affirm in part and vacate and remand in part the order of the district court denying the motion of Knight for Rule 11 sanctions against Sharif.

I. CONTRACT DISPUTE

On April 19, 1986, Rasool Sharif and the shareholders of GAF entered into a letter of intent providing certain terms and conditions for the possible sale of all of the issued and outstanding common stock of GAF to Sharif. Several important issues Anticipating a dispute between the parties, Knight commenced the instant interpleader action by depositing in federal district court the $250,000 previously tendered by Sharif as potential earnest money. The GAF shareholders and Sharif both subsequently filed answers in the interpleader action claiming the $250,000. Sharif also filed a cross-claim against the shareholders alleging breach of contract and tortious breach of contract. Additionally, Sharif filed a counterclaim against Knight alleging tortious interference with contract. Thereafter, by consent of the parties, the instant action was referred to a United States magistrate for trial on the merits. After the GAF shareholders filed a motion for summary judgment against Sharif, the magistrate issued a complete and thorough opinion granting summary judgment in favor of the GAF shareholders on the contract claim asserted by Sharif. Sharif now appeals that order. After reviewing the record, we affirm the order of the magistrate granting summary judgment in favor of the GAF shareholders for the reasons enunciated in the magistrate's opinion set forth below which adequately details why the April 19 and May 19 letters of intent do not constitute an enforceable contract between the parties for the sale of the GAF stock.

regarding the sale of stock, however, were left unresolved between the parties by the April 19 letter of intent. Further, the April 19 letter provided for the preparation of a "final definitive agreement" within 30 days--May 19, 1986--which would be subject to the approval of counsel for both parties. Despite repeated negotiations, the parties had not yet reached a definitive agreement for the sale of the GAF stock as of the May 19 deadline. As a result, counsel for both parties negotiated a second letter of intent which was executed by the parties on May 19, 1986. Pursuant to the terms of the May 19 letter, Sharif placed in trust with counsel for the GAF shareholders, James Knight, approximately $250,000 to become earnest money in the event the parties executed a final agreement for the sale of the GAF stock on or before June 20, 1986. After numerous efforts by the parties to negotiate a definitive agreement for the sale of the GAF stock, the June 20 deadline expired without such an agreement for the sale of the stock having been executed by the parties. Nevertheless, Sharif thereafter demanded that the GAF stockholders sell the GAF stock to him in compliance with the terms of the April 19 and May 19 letter agreements executed by the parties. To support his demand, Sharif maintained that the April and May letters constituted a binding agreement between the parties for the sale of the GAF stock.

II. RULE 11 SANCTIONS

Prior to the transfer of the instant interpleader action to a magistrate for trial on the merits, the federal district court initially responsible for this case entered a summary judgment in favor of Knight on the counterclaim filed by Sharif against Knight alleging tortious interference with contract. Thereafter, Knight filed with the district court a request for Rule 11 sanctions against Sharif on the basis of the tortious interference counterclaim, as well as on the basis of subsequent filings by Sharif in connection with that counterclaim. Those subsequent filings by Sharif for which Knight sought sanctions included: (1) a motion for leave to amend the tortious interference counterclaim, (2) a motion for continuance of the summary judgment motion filed by Knight, (3) a Rule 56(f) affidavit, and (4) a motion to vacate the order of the district court granting summary judgment in favor of Knight. The district court ultimately denied the motion by Knight for Rule 11 sanctions against Sharif. In doing so, the district court reasoned that it could not say that the tortious interference counterclaim filed by Sharif against Knight was not warranted by a good faith argument for the extension, modification or reversal of existing law, since no Mississippi case directly precluded the tort of contract interference by a client against an attorney based on the representation by that attorney of his client. Persuaded that the above decision by the district court to deny Knight's request for Rule 11 sanctions against Sharif on the basis of the tortious As to the subsequent filings by Sharif for which Knight sought Rule 11 sanctions, however, we reach a different result. In Thomas v. Capital Security Services, 836 F.2d 866 (5th Cir.1988) (en banc), this Court stated that Rule 11 applies to each and every paper signed during the course of the proceedings, not just the initial filing in an action. Thomas, 836 F.2d at 875. In this regard, an attorney must comply with the affirmative duties imposed by Rule 11 as to each and every filing with the district court. In the instant case, the district court failed to set forth in its order denying Rule 11 sanctions against Sharif any reasons for denying such sanctions for the conduct of Sharif in filing with the district court the subsequent documents in connection with the tortious interference counterclaim against Knight. "[I]t should be clearly understood that when the basis and justification for a Rule 11 decision is not readily discernible on the record, an adequate explanation by the trial court for the decision will be necessary. In its absence, a prompt remand for such findings will be made." Id. at 883. In the instant appeal, such an adequate explanation by the district court as to the subsequent filings listed above is lacking; therefore, we remand for the limited purpose of allowing the district court to set forth reasons for its Rule 11 decision as to the subsequent filings by Sharif. ¹

interference counterclaim did not constitute an abuse of discretion, we reject the claim of Knight in this regard.

For all of the above reasons, we affirm the order granting summary judgment in favor of the GAF shareholders on the merits of the contract dispute. We further affirm the order of the district court denying Knight's request for Rule 11 sanctions against Sharif on the basis of the tortious interference counterclaim; however, we vacate and remand that portion of the order of the district court denying Rule 11 sanctions as to the subsequent filings by Sharif in connection with the tortious interference counterclaim against Knight.

AFFIRMED IN PART, VACATED AND REMANDED IN PART.

OPINION

The Court has before it for consideration a Motion for Summary Judgment by Defendants/Cross-Defendants, Earl C. Walsh, et al (hereinafter the "Shareholders"). For the reasons set forth hereinafter, the Court is of the opinion that Summary Judgment should be entered in favor of the Shareholders.

This case originated as an interpleader action filed by Jackson, Mississippi attorney James P. Knight, Jr. on July 3, 1986. Knight was a stakeholder of certain funds, $250,000.00 plus interest, which had been placed with him by agreement of the Shareholders and Rasool S. Sharif ("Sharif") pursuant to a letter agreement between them dated May 19, 1986. At the time of the escrow the parties were negotiating over the possible purchase by Sharif of all of the issued and outstanding common stock of Green Acre Farms, Inc. ("GAF") from the Shareholders collectively.

In response to Knight's interpleader the Shareholders answered making claim to the fund. Sharif answered making claim to the fund. Sharif also cross-claimed against the Shareholders alleging breach of contract and tortious breach of contract. Sharif also cross-claimed against one of the Shareholders, Dr. Earl C. Walsh, and counter-claimed against Knight for tortious interference with contract. Knight had acted as attorney for the Shareholders throughout the negotiations with Sharif. Summary judgment in favor of Knight was granted as to Sharif's counter-claim.

Subsequently, the SAAR Foundation, Inc. ("SAAR") was granted leave to intervene in this case. SAAR apparently...