Riley v. Isaacson

• Decision Date: 04 April 1990
• Docket Number: No. 89-0750,89-0750
• Citation: 156 Wis.2d 249,456 N.W.2d 619
• Parties: Daniel RILEY, Kenneth G. Riley, Ray J. Riley, and Betty C. Riley, Plaintiffs-Respondents, v. Walter H. ISAACSON, Appellant, Gary G. Rolando, a/k/a Gary G. Roland, Robert A. Demott, a/k/a Robert A. De Mott, Michelle D. Hicks, a/k/a Michelle Rutzen, a/k/a "Mike" Rutzen, William E. Anderson, and Deborah K. Anderson, Defendants.
• Court: Wisconsin Court of Appeals

Page 619

456 N.W.2d 619

156 Wis.2d 249

Daniel RILEY, Kenneth G. Riley, Ray J. Riley, and Betty C Riley, Plaintiffs-Respondents, v. Walter H. ISAACSON, Appellant Gary G. Rolando, a/k/a Gary G. Roland, Robert A. Demott a/k/a Robert A. De Mott, Michelle D. Hicks, a/k/a Michelle Rutzen, a/k/a "Mike" Rutzen, William E. Anderson, and Deborah K. Anderson, Defendants.

No. 89-0750.

Court of Appeals of Wisconsin.

Submitted on Briefs Dec. 29, 1989.

Opinion Released April 4, 1990.

Opinion Filed April 4, 1990.

Walter H. Isaacson of Hart, Sanborn & Isaacson, Janesville, for appellant.

Louis X. Mineau of Bolgrien, Ruth, Rentz, Mineau & Koepke, S.C. Beloit, for plaintiffs-respondents.

Before BROWN, P.J., and SCOTT and NETTESHEIM, JJ.

SCOTT, Judge.

Attorney Walter H. Isaacson appeals from a judgment ordering him to pay the respondents' costs and attorney's fees. The trial court determined that Isaacson failed in his investigative responsibilities under sec. 802.05, Stats., and that Isaacson's commencement of an action for attorney's fees under the frivolous claims statute and his continued defense of the claim which initiated the litigation were frivolous pursuant to sec. 814.025, Stats. We affirm the judgment based upon sec. 802.05, and therefore need not address the sec. 814.025 issue.

FACTS

In June 1988, Isaacson was retained by Gary Rolando to defend Rolando against a claim of fraudulently selling a motor vehicle. The complaint, filed by Daniel, Kenneth, Ray and Betty Riley, alleged that Rolando, in an unlicensed partnership with Robert DeMott and Michelle Hicks, had defrauded the Rileys by selling to them through a newspaper ad a 1979 Mercury Zephyr of significantly poorer condition and higher mileage than advertised. The complaint also alleged that either the partnership or William and Deborah Anderson, the prior owners, had given the Rileys a fraudulent odometer statement reflecting lower than actual mileage. Finally, the complaint alleged damages, including attorney's fees, of $15,000.

At their initial meeting, Isaacson and Rolando reviewed the complaint. Rolando denied involvement in the auto sales business and in any sort of partnership with DeMott or Hicks. Rolando told Isaacson he had traded cars with the Andersons, receiving the Zephyr as a "throw-in," and had then sold the Zephyr to DeMott, a casual acquaintance. Rolando denied knowing that the Zephyr was then advertised for resale, denied having anything to do with the sale and denied ever meeting the Rileys. Relying solely on Rolando's word, Isaacson answered for his client, not only denying the allegations of the complaint but also asserting that the Rileys' claims were frivolous under sec. 814.025, Stats.

Rolando and Isaacson failed to timely respond to interrogatories and demands for documents and on September 7, 1988, a hearing was held on the Rileys' motion to compel answers. At that time, the Rileys informed the court that Department of Transportation (DOT) records showed that in an eighteen-month period, twelve or fifteen motor vehicles had been titled in Rolando's name. Isaacson did not himself investigate DOT records after learning this information despite being granted an extension of time within which to answer the interrogatories and document demands.

Rolando was scheduled to be deposed on two separate dates in October 1988. Though noticed of those dates and, later, of the Andersons' scheduled depositions, neither Rolando nor Isaacson appeared at any of them.

In November 1988, Isaacson moved to withdraw as counsel for Rolando, asserting that his client's unavailability had thwarted adequate representation. Isaacson claimed Rolando had been difficult to contact, failing to return telephone calls and to keep appointments. Isaacson stated he also had been unable to contact Rolando's employer and DeMott because the phone numbers Rolando had supplied were not in service. On December 16, the motion to withdraw was granted. Rolando's answer was also struck.

The Rileys moved for a default judgment. A hearing on the motion was held on February 3, 1989, at which DOT records were introduced showing that in a two-and-a-half year period Rolando and Hicks had titled in their names at least seventy-eight motor vehicles and had grossed nearly $40,000 from vehicle sales. On February 20, a default judgment for $1900 compensatory damages and $25,000 punitive damages was entered against Rolando.

Three weeks later, a hearing was held concerning both Isaacson's defense of the claims against Rolando and the frivolousness claim asserted by Isaacson against the Rileys and their attorney. The trial court concluded that Isaacson's claim for costs and attorney's fees pursuant to sec. 814.025, Stats., was itself frivolous under that statute. The court also concluded that Isaacson's continued defense of Rolando after September 7, 1988--the date Isaacson learned that DOT records showed Rolando had had a dozen vehicles titled in his name in the previous eighteen months--was also frivolous. The court found that Isaacson should have known the defense was without a reasonable basis in law or equity and was unsupported by a good faith argument for a change in existing law. See sec. 814.025(3). The court also concluded that both Isaacson's frivolousness claim and his defense of Rolando were frivolous under sec. 802.05, Stats. It found that Isaacson, having proceeded without making reasonable inquiry into Rolando's answers to determine if they were well-grounded in fact, pursued the claim and defense for delay and to needlessly increase litigation costs. See sec. 802.05(1)(a). The court ordered Isaacson to pay $1480 in costs and attorney's fees. Isaacson appeals.

I. FEES AWARDED IN THE TRIAL COURT

The trial court awarded costs and fees pursuant to both secs. 802.05 and 814.025, Stats. However, where both statutes apply, and to the extent that there are differences between the two, sec. 802.05 applies. Sec. 814.025(4). Accordingly, we turn first to the determination of frivolousness under sec. 802.05. Section 802.05(1)(a) provides that an attorney's signature on any paper filed in court:

constitutes a certificate that the attorney ... has read the pleading, motion or other paper; that to the best of the attorney's ... knowledge, information and belief, formed after reasonable inquiry, the pleading, motion or other paper 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 the pleading, motion or other paper is not used for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. [Emphasis added.]

Section 802.05(1)(a), Stats., was created by sec. 5, 1987 Wis. Act 256, bringing it into conformity with Fed.R.Civ.P. 11 (Rule 11). See Legislative Reference Bureau Analysis, 1987 S.B. 550. The language of the two is virtually identical. No Wisconsin case law yet exists on what constitutes "reasonable inquiry" within the meaning of the statute. Because the statute was patterned after Rule 11, however, those federal cases interpreting Rule 11 may serve as persuasive authority in our interpretation of sec. 802.05. See Gygi v. Guest, 117 Wis.2d 464, 467, 344 N.W.2d 214, 216 (Ct.App.1984).

Rule 11 and sec. 802.05(1)(a), Stats., virtually identical in language, are each composed of three prongs. First, the person who signs a pleading, motion or other paper certifies that the paper was not interposed for any improper purpose. Second, the signer warrants that to his or her best "knowledge, information and belief formed after reasonable inquiry" the paper is "well grounded in fact." Third, the signer also certifies that he or she has conducted a reasonable inquiry and that the paper is warranted by existing law or a good faith argument for a change in it. See Beeman v. Fiester, 852 F.2d 206, 208-09 (7th Cir.1988). If any one of these three prongs has been violated, sanctions must be imposed. See id. at 209.

Our standard of review is a deferential one. ¹ Mars Steel Corp. v. Continental Bank N.A., 880 F.2d 928, 933 (7th Cir.1989). Determining what and how much pre-filing investigation was done is a question of fact. See id. We are bound by those findings unless they are clearly erroneous. Sec. 805.17(2), Stats. Determining how much investigation should have been done, however, is a matter within the trial court's discretion because the amount of research necessary to constitute "reasonable inquiry" may vary, depending on such things as the particular issue involved and the stakes of the case. Mars Steel, 880 F.2d at 932-33. We will sustain a discretionary act if the trial court examined the relevant facts, applied a proper standard of law and, using a demonstrated rational process, reached a conclusion that a reasonable judge could reach. Appleton Post-Crescent v. Janssen, 149 Wis.2d 294, 302-03, 441 N.W.2d 255, 258 (Ct.App.1989).

A. Factual Findings

The trial court made twenty findings of fact relative to the defense of Rolando and to the claim that the Rileys' suit was frivolous. A few examples serve to illustrate the basis for the trial court's determination that Isaacson's conduct was sanctionable:

(1) Based solely on the client interview, Isaacson asserted a claim that the Rileys' complaint was frivolous.

(2) Isaacson did not independently investigate the number of vehicles previously owned by Rolando, who stated he had never been in the business of selling used cars.

(3) Rolando gave Isaacson varying accounts of the type of sales business he was in.

(4) Answers to interrogatories and responses to document demands were made tardily and only in response to the September 7, 1988 hearing on the motion to compel responses.

(5) Isaacson knew prior to September 7, 1988 that telephone service for Rolando's employer and DeMott was disconnected.

(6) Isaacson exhibited lack of adequate knowledge of the allegations...