Mains v. Russ Darrow Grp., Inc.

• Decision Date: 12 August 2020
• Docket Number: Appeal No. 2019AP870
• Citation: 394 Wis.2d 188,949 N.W.2d 885 (Table),2020 WI App 60
• Parties: Harry B. MAINS, Plaintiff-Respondent, v. RUSS DARROW GROUP, INC. and Russ Darrow Leasing Co., Inc., Defendants-Appellants.
• Court: Wisconsin Court of Appeals

394 Wis.2d 188

949 N.W.2d 885 (Table)

2020 WI App 60

Harry B. MAINS, Plaintiff-Respondent,

v.RUSS DARROW GROUP, INC. and Russ Darrow Leasing Co., Inc.,^† Defendants-Appellants.

Appeal No. 2019AP870

Court of Appeals of Wisconsin.

DATED AND FILED August 12, 2020

PER CURIAM.

¶1 The circuit court denied Russ Darrow Group, Inc.’s (Darrow) motion for sanctions and damages against Harry B. Mains (Mains) as being untimely under WIS. STAT. §§ 802.05 and 895.044 (2017-18).¹ As Darrow's motion was timely, we reverse.

Facts

¶2 The facts are not in dispute. Mains sued his former employer, Darrow, on May 10, 2016. Darrow answered and alleged that all of Mains’ five causes of action, arising out of termination of his employment, were "frivolous and without any reasonable basis in law or equity." Darrow served Mains with a WIS. STAT. § 802.05 "safe harbor" letter on June 14, 2016, informing Mains and his counsel that if the lawsuit was not dismissed, Darrow would seek sanctions against each of them under § 802.05. Mains did not withdraw the complaint. Darrow then brought a motion for judgment on the pleadings on the grounds that Mains’ alleged oral contract had no basis in law. The circuit court denied the motion and allowed Mains to pursue discovery to prove up the oral agreement via writings that Mains alleged were in the possession of Darrow.² Extensive discovery ensued for sixteen months. Mains did not discover any documents to support his claims.

¶3 Darrow filed for summary judgment on April 30, 2018. The court granted summary judgment to Darrow on four of Mains’ five causes of action, but it allowed Mains’ unjust enrichment claim to proceed for further discovery. Following the additional discovery, Darrow filed a renewed motion for summary judgment on the unjust enrichment cause of action, which the court orally granted on August 31, 2018.³ The court directed Darrow's counsel to prepare the final order of dismissal. Darrow filed the final order and a motion for sanctions and damages pursuant to WIS. STAT. §§ 802.05 and 895.044 on September 27, 2018.

¶4 The court held multiple hearings on Darrow's motion and found the motion "untimely" as it was filed after the court had dismissed Mains’ action. The court reasoned: "In order to have an effective sanctions motion, the motion must be filed before the merits of the case are decided.... Any time you wait until after the merits are decided, you've taken away the target's ability to withdraw and to, if you will, bar the motion for sanctions." On appeal, Darrow challenges the order denying its motion for sanctions and damages.

Analysis

¶5 Whether a motion is timely under WIS. STAT. §§ 802.05 and 895.044 requires an interpretation and application of the statutes to the facts presented. The interpretation and application of statutes are questions of law that we review independently. Phelps v. Physicians Ins. Co. of Wis. , 2009 WI 74, ¶36, 319 Wis. 2d 1, 768 N.W.2d 615 ; see also Trinity Petroleum, Inc. v. Scott Oil Co. , 2007 WI 88, ¶32, 302 Wis. 2d 299, 735 N.W.2d 1.

1. WIS. STAT. § 802.05

¶6 WISCONSIN STAT. § 802.05(2) describes the responsibilities of counsel and pro se litigants when making representations to the court:

(2) Representations to court. By presenting to the court, whether by signing, filing, submitting, or later advocating a pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, all of the following:

(a) The paper is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

(b) The claims, defenses, and other legal contentions stated in the paper are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law.

(c) The allegations and other factual contentions stated in the paper have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.

(d) The denials of factual contentions stated in the paper are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.

Sanctions are discretionary and "may" be imposed/awarded if an attorney or a pro se litigant violates one or more of the responsibilities described above. Sec. 802.05(3). The "timing" requirement for sanctions under § 802.05 is that the moving party must provide notice to the offending party that it would seek sanctions for a violation of § 802.05(2) and the reasons why (the so-called "safe harbor" provision). If the offending party does not withdraw or correct the offending pleading, then the party must wait at least twenty-one days before filing the motion with the court. Sec. 802.05(3)(a)1. As long as proper notice was given, the court has the authority to "impose an appropriate sanction upon the attorneys, law firms, or parties that have violated sub. (2) or are responsible for the violation." Sec. 802.05(3).

¶7 On June 14, 2016, approximately a month after Mains filed his complaint in this case, Darrow served its "safe harbor" letter on Mains along with a copy of a Notice of Motion and Motion for Costs and Attorneys’ Fee Pursuant to WIS. STAT. § 802.05, that would be filed with the court at a later date, detailing why Main's claims were frivolous. Darrow repeated its assertions of frivolousness in its answer to the complaint. Darrow ultimately filed the motion for sanctions with the court on September, 27, 2018. Darrow's motion for sanctions complied with the requirements under § 802.05(3)(a)1. as it was filed as a separate motion, described the specific conduct which it claimed violated the statute, and was filed more than twenty-one days after the June 14, 2016 safe harbor letter. Accordingly, Darrow's motion for sanctions under § 802.05 was timely filed.

¶8 The crux of Mains’ argument on appeal is that Darrow's motion for sanctions was untimely as at the time Darrow filed its motion for sanctions, the court had already ruled on the merits of all of Mains’ claims. We disagree as Darrow complied with all requirements of WIS. STAT. § 802.05. There is no explicit prohibition in § 802.05 against filing a motion for sanctions after judgment has been orally granted. See State v. Schwarz , 2005 WI 34, ¶20, 279 Wis. 2d 223, 693 N.W.2d 703 ("We will not ‘read into the statute language that the legislature did not put in.’ " (citation omitted)).

¶9 Mains relies on three cases to support his argument that Darrow's motion for sanctions was untimely: Ridder v. City of Springfield , 109 F.3d 288 (6th Cir. 1997) ; Booth v. American States Ins. Co. , 199 Wis. 2d 465, 544 N.W.2d 921 (Ct. App. 1996) ; and Northwest Wholesale Lumber, Inc. v. Anderson , 191 Wis. 2d 278, 528 N.W.2d 502 (Ct. App. 1995). We conclude that these cases are distinguishable.

¶10 Ridder , a Sixth Circuit Court of Appeals case, considered the timing requirements of a motion for sanctions under Rule 11 of the Federal Rule of Civil Procedure (Rule 11).⁴ The defendant in Ridder not only filed the motion for sanctions after the entry of judgment in the case, but the defendant did so without complying with the safe harbor provision. Ridder , 109 F.3d at 291-92, 296. The court concluded that "a motion for Rule 11 sanctions must be served on the opposing party at least twenty-one days before it is filed with or presented to the court; this ‘safe harbor’ service and delayed filing must be completed prior to final judgment or judicial rejection of the offending contention." Ridder , 109 F.3d at 299.

¶11 Ridder is distinguishable by the fact that the defendant in Ridder never filed a "safe harbor" letter, which effectively denied the plaintiff the opportunity to withdraw or cure the offense to avoid sanctions prior to final judgment. Mains, in contrast, was provided the opportunity to avoid sanctions and withdraw his claims prior to the court granting summary judgment as Darrow provided a safe harbor letter well before filing its motion for sanctions.

¶12 Northwest and Booth also do not bind this court as to WIS. STAT. § 802.05 under the circumstances. Northwest , decided in 1995, addressed the time in which motions for sanctions must be filed under the former WIS. STAT. § 814.025 (1993-94) and WIS. STAT. § 802.05(1)(a) (1993-94). The court determined that the phrase "upon judgment," used in § 814.025 (1993-94), required frivolous action motions to be filed before the court enters judgment in the case. Northwest , 191 Wis. 2d at 281. Further, although the court acknowledged that § 802.05 (1993-94) was silent as to the time in which motions were required to be filed, it interpreted the statute to include the same requirement. Northwest , 191 Wis. 2d at 281-82. It based its analysis on federal authority from the Third Circuit Court of Appeals. Id. at 287-90. The Northwest court concluded that motions for sanctions are to be filed prior to the entry of judgment. Id. at 292-93. Booth , decided a year later and relying on Northwest , reached the same conclusion. Booth , 199 Wis. 2d at 476-78.

¶13 We do not rely on Northwest and Booth in deciding the issue before us as both of the statutory provisions relied on by the court in those cases have been repealed.⁵ As our supreme court explained in Trinity , "Supreme Court Order 03-06 repealed both WIS. STAT. §§ 802.05 and 814.025 (2003-04), and recreated WIS. STAT. [ RULE ] 802.05 (2005-06)." Trinity , 302 Wis. 2d 299, ¶3 (emphasis added). The current § 802.05 is different from the former in two significant ways: (1) it includes the "safe harbor" provision, providing the "non-moving party an opportunity to correct or withdraw its allegedly offending paper," and (2) sanctions are no longer mandatory even if the court finds frivolousness. Trinit...