State ex rel. Schmidt v. Nye

• Decision Date: 29 March 2019
• Docket Number: No. 118,666,118,666
• Citation: 56 Kan.App.2d 883,440 P.3d 585
• Parties: STATE of Kansas EX REL. Derek SCHMIDT, Attorney General, Appellant, v. Ronald NYE, Joyce Nye, Terri Hurley, and Gary McAvoy, Individually and d/b/a Vintage Memorabilia, and Empraxis, LLC d/b/a Vintage Memorabilia, Appellees.
• Court: Kansas Court of Appeals

56 Kan.App.2d 883

440 P.3d 585

STATE of Kansas EX REL. Derek SCHMIDT, Attorney General, Appellant,

v.Ronald NYE, Joyce Nye, Terri Hurley, and Gary McAvoy, Individually and d/b/a Vintage Memorabilia, and Empraxis, LLC d/b/a Vintage Memorabilia, Appellees.

No. 118,666

Court of Appeals of Kansas.

Opinion filed March 29, 2019.

Bryan C. Clark, assistant solicitor general, Dwight R. Carswell, assistant solicitor general, M.J. Willoughby, assistant attorney general, and Derek Schmidt, attorney general, for appellant.

Tai J. Vokins and Krystal Vokins, of Sloan, Eisenbarth, Glassman, McEntire & Jarboe, LLC, of Lawrence, and O. Yale Lewis Jr., pro hac vice, of Hendricks & Lewis, PLLC, of Seattle, Washington, for appellees.

Before Standridge, P.J., Pierron and Green, JJ.

Standridge, J.:

The State appeals from the district court's order requiring it to pay attorney fees incurred by Ronald Nye, Joyce Nye, Terri Hurley, Gary McAvoy, and Vintage Memorabilia (hereinafter Defendants) in resisting and obtaining the dissolution of a preliminary injunction that was wrongfully issued. Finding no error, we affirm.

FACTS

On September 27, 2012, the State filed an ex parte verified petition asking the district court, among other things, to temporarily restrain and then preliminarily and permanently enjoin Defendants from the sale, publication, replication, and distribution of any and all Kansas Bureau of Investigation file materials relating to the 1959 murder of members of the Clutter family in Holcomb, Kansas. That same day, the district court entered the ex parte temporary restraining order as requested. An amended ex parte temporary restraining order was filed on October 9, 2012.

On December 17, 2012, the district court held an evidentiary hearing on the State's request to convert the ex parte temporary restraining order into a preliminary injunction. At the end of the hearing, the court granted the parties' joint request to submit legal arguments in support of their respective positions. On April 23, 2013, the district court granted the State's request and entered a preliminary injunction but left open the possibility for Defendants to request the court vacate it at a later date. Citing K.S.A. 60-905(b) as authority, the district court noted the State would not be required to post a bond in conjunction with the preliminary injunction.

On August 22, 2013, Defendants filed a motion to vacate the preliminary injunction. After significant delay due to discovery disputes, the State filed a motion for summary judgment on January 29, 2014. Defendants supplemented their motion to vacate on March 14, 2014, March 21, 2014, and June 6, 2014. The district court heard oral argument from the parties with regard to all pending motions on June 26, 2014, and took the matters under advisement. On November 7, 2014, Defendants filed an urgent request for a ruling on their motion to vacate. On November 26, 2014, the district court granted Defendants' motion to vacate the preliminary injunction, concluding that it should not have been granted in the first place.

On May 27, 2015, Defendants filed a motion to compel discovery that the State previously had failed to produce. Following a hearing, the district court granted that motion and ordered the State to produce the requested documents no later than July 7, 2015. Rather than produce the documents as ordered, the State filed a motion to voluntarily dismiss the case. Defendants indicated they did not object to voluntary dismissal but noted that allowing the State to do so before Defendants had an opportunity to present the court with various motions related to the litigation (including but not limited to their forthcoming motion for costs and attorney fees pursuant to K.S.A. 60-905 [b] ) would be highly prejudicial. Defendants subsequently filed a motion for costs and attorney fees. After further briefing and a hearing, the district court granted Defendants' motion for fees, awarding them $ 152,585 in attorney fees, but denied awarding costs. The district court held that the amount of fees it awarded all stemmed from the wrongfully issued preliminary injunction that was requested by the State. The district court also granted the State's motion to dismiss.

ANALYSIS

On appeal, the State argues the district court erred in awarding Defendants attorney fees. Specifically, the State claims (1) it is protected from an award of attorney fees under K.S.A. 60-905(b) based on the doctrine of sovereign immunity, (2) the district court failed to consider the "injunction-bond" rule in making its decision to award fees, and (3) the district court abused its discretion in awarding fees. We address each of the State's claims in turn.

1. Sovereign immunity

The State argues it is entitled to sovereign immunity with respect to the district court's award of damages and attorney fees incurred by Defendants as the result of a wrongfully issued preliminary injunction. For the reasons stated below, we are not persuaded by the State's argument.

At common law, a state—as the sovereign—is immune from suit unless it consents or waives its immunity. Commerce Bank of St. Joseph v. State , 251 Kan. 207, 213-14, 833 P.2d 996 (1992). Questions concerning sovereign immunity are jurisdictional and can be raised at any time. Purvis v. Williams , 276 Kan. 182, 197, 73 P.3d 740 (2003). Because sovereign immunity is jurisdictional, courts are compelled to address it. Connelly v. Kansas Highway Patrol , 271 Kan. 944, 962, 26 P.3d 1246 (2001).

In support of its decision to award damages and attorney fees to Defendants that were incurred as the result of a wrongfully issued preliminary injunction, the district court determined the State waived any sovereign immunity to which it may have been entitled. On appeal, the State challenges that determination. Specifically, the State asserts that only the Legislature can provide the consent necessary to waive sovereign immunity and that it must do so in express terms through legislative enactment. The State argues that K.S.A. 60-905(b), the legislative enactment under which the district court awarded damages and fees here, does not expressly consent to suit or waive sovereign immunity with respect to damages incurred by a defendant as the result of a wrongfully issued preliminary injunction requested by the State as a plaintiff.

We begin our analysis of the State's argument with K.S.A. 60-905(b), which provides as follows:

"Unless otherwise provided by statute or this section, no temporary injunction shall operate unless the party obtaining the same shall give an undertaking with one or more sufficient sureties in an amount fixed and approved by the judge of the court, securing to the party injured the damages such injured party may sustain including attorney fees if it be finally determined that the injunction should not have been granted. Neither the state nor any of its agencies shall be required to give an undertaking with one or more sufficient sureties in order to be granted a temporary injunction. For any other party, at the discretion of the judge, the undertaking required by this subsection may be waived."

In this statute, the Legislature expressly contemplates the State (1) as a party plaintiff seeking a temporary injunction and (2) as a party liable for damages and attorney fees when the temporary injunction is granted but later is determined to have been wrongfully issued. Based on the language of the statute, we find it is the injury sustained as a result of the wrongfully issued temporary injunction that gives rise to the State's liability for damages and attorney fees, not the posting of a bond. The Legislature's decision to exempt the State from posting a bond is immaterial to the issue of sovereign immunity. The purpose of a bond is to secure to the party injured by a temporary injunction those damages the injured party may sustain, including attorney fees. Idbeis v. Wichita Surgical Specialists , 285 Kan. 485, Syl. ¶ 3, 173 P.3d 642 (2007). By waiving the bond requirement, the Legislature is simply allowing the State and its agencies to act as their own sureties.

While a clear expression by the Legislature is the hallmark of an effective waiver of sovereign immunity, the United States Supreme Court also has recognized that waiver can be premised on litigation conduct. See Lapides v. Board of Regents of Univ. System of GA , 535 U.S. 613, 624, 122 S.Ct. 1640, 152 L.Ed.2d 806 (2002). In Lapides , the Court determined that when a state is involuntarily brought into litigation in state court but then chooses to voluntarily remove the case to federal court, it thereby consents to the federal court's jurisdiction and waives immunity from suit by its litigation conduct. 535 U.S. at 619, 122 S.Ct. 1640.

No Kansas court has ever held that the State may waive its immunity from suit in state court through its litigation conduct. But sovereign immunity finds its source in the common law, and the common law adapts to changing circumstances to advance notions of fair play and equity. And, as noted above, recognizing that the State can waive sovereign immunity through its litigation conduct is not a novel notion. See Lapides , 535 U.S. at 624, 122 S.Ct. 1640. Holding that a state's litigation conduct may constitute a waiver of the doctrine of sovereign immunity would be a reasonable and fair adaptation of the common law. Sovereign immunity is a shield, not a sword to be used by the State when it invokes the court's equitable jurisdiction to obtain what ultimately was a wrongful injunction that caused damages to be incurred.

Such a holding provides the optimal balance between the interests of government entities and the interests of the wrongfully enjoined litigants. To that end, we note that a governmental entity seeking injunctive relief has the option not to seek a temporary injunction but instead to wait and obtain a permanent injunction after a full presentation of evidence and a determination of...