Opinion
No. 57587-2-I.
October 22, 2007.
Appeal from a judgment of the Superior Court for King County, No. 97-2-22252-4, Carol A. Schapira, J., entered December 16, 2005.
Affirmed in part and reversed in part by unpublished opinion per Cox, J., concurred in by Baker and Dwyer, JJ.
The primary issue on appeal is whether the trial court's order imposing attorney fees on John M. Keefe, counsel for Thomas and Marlene Cacciola and Peter and Lena Vetrano, fails to meet the requirements set forth in Biggs v. Vail. A related issue is whether that order, which also imposes fees against the Cacciolas and Vetranos, is proper without findings of fact and conclusions of law respecting the amount of the award, as required by Mahler v. Szucs. Because the order on attorney fees fails to meet the requirements of these controlling authorities, we reverse.
124 Wn.2d 193, 876 P.2d 448 (1994).
135 Wn.2d 398, 957 P.2d 632 (1998).
This case arose after a settlement between the parties in 1995. Under the settlement agreement, the Cacciolas and Vetranos accepted $17,500 and shares of stock in Sims Communications from James Caprio, Melvin Leiner, and Darren Marks. The restricted stock that the Cacciolas and Vetranos received could not be sold until February 1997. Financial statements and offering documents were not provided to the Cacciolas and Vetranos as required by the agreement. In late 1997, the Cacciolas and Vetranos commenced this action against Caprio, Leiner, and Marks alleging, among other claims, violations of the Securities Act of Washington (WSSA) and Securities and Exchange Commission (SEC) Rule 144 in the issuance of their stock.
This is the second appeal of this case. In the prior appeal, this court affirmed the dismissal of most of the asserted causes of action, but reversed the dismissal of the WSSA claim and remanded for further proceedings. This court also reversed the award of sanctions against Keefe with directions that the trial court either vacate the award or enter findings and conclusions sufficient to support the sanctions.
Cacciola v. Sims Commc'ns, Inc., No. 45616-4-I, 2001 WL 1630587, at *1 (Wn.App. Dec. 17, 2001).
Id.
On remand, the trial court granted summary judgment as to liability in favor of the Cacciolas and Vetranos against Caprio, Leiner, and Marks in July 2004. That order reserved the issue of damages for trial.
In March 2005, the Cacciolas and Vetranos moved for summary judgment on claims arising from federal SEC Rule 144. The court denied the motion.
The trial court declined to enter a money judgment in a subsequent motion against the defendants, and the matter went to trial on the question of damages. The jury awarded no damages in its verdict.
Subsequent to the jury verdict, the court entered an order imposing fees of $70,000 against the Cacciolas and Vetranos. The same order imposes fees against Keefe. Notwithstanding this court's prior directive, no findings or conclusions support the award of these amounts.
The Cacciolas and Vetranos as well as their attorney, John M. Keefe, appeal.
ATTORNEY FEES AND COSTS
Keefe argues, pro se, that the trial court imposed sanctions by way of attorney fees against him without the required showing. We agree.
For the first time at oral argument, John M. Keefe informed this court that he is no longer a member of the Washington State Bar Association. He also advised that he is appearing solely on behalf of himself in this matter. We note that he did not sign either brief on appeal by the Vetranos and Cacciolas and that those briefs are signed only by Peter Vetrano, pro se.
We start with the observation that this court, in the prior appeal, vacated a prior order imposing fees and costs against Keefe and remanded "with instructions to vacate or for entry of findings sufficient to support an award against [Keefe]."
Cacciola, 2001 WL 1630587 at *6.
Moreover, Biggs v. Vail requires that when a court imposes CR 11 sanctions, it must specify the sanctionable conduct in its order. This means that the court must make a finding that either the claim is not grounded in fact or law and the attorney or party failed to make reasonable inquiry into the law or facts, or the paper was filed for an improper purpose. A trial court's findings must explicitly indicate which filings violated CR 11 and indicate how such pleadings constitute a violation. Similarly, where the court awards attorney fees against an attorney because of bad faith filings, it must make a specific finding of bad faith.
Id. at 201.
Id. at 202.
Recall of Pearsall-Stipek, 136 Wn.2d 255, 266-67, 961 P.2d 343 (1998).
Here, notwithstanding the prior admonition of this court and the requirements of the authorities we have cited, the requisite findings are nowhere to be found in this record. The trial court did not specify how CR 11 was violated, if at all. Moreover, there is no finding that Keefe had made filings in bad faith, what specific filings so qualified, and why those filings were in bad faith. As counsel properly conceded at oral argument, the order that is on appeal is simply inadequate to meet the requirements of the controlling authorities.
The trial court's order found that "John Keefe is included in the judgment since it is clear to the court that said attorney had a financial interest in the case and that his role in the case as a possible witness and attorney for the plaintiffs was inappropriate. Further, that said attorney had been put on notice by Judge Alsdorf, prior judge on this case, as far back as 1997, and the appellate court, that his role as counsel and witness created a conflict of interest." Clerk's Papers at 2777-2778.
For these reasons, we reverse the order imposing fees and costs to the extent that it imposes them as sanctions against Keefe, who was acting as counsel for the Cacciolas and Vetranos at trial.
A separate but related question is the propriety of the award of fees and costs against the unsuccessful plaintiffs following trial and the jury verdict of no damages.
In Washington, a party may recover attorney fees only when they are authorized by a private agreement, statute, or recognized ground of equity.
Mellor v. Chamberlin, 100 Wn.2d 643, 649, 673 P.2d 610 (1983).
Here, no one appears to contest that fees were arguably awardable to "the substantially prevailing party" on the basis of the underlying contract between the parties. Thus, the defendants, who were successful in avoiding any liability for damages, arguably would be entitled to fees in a proper amount.
Rather, the question is whether the amount of fees was proper in this case. Mahler v. Szucs requires a court to use the lodestar method in determining the amount of an award of attorney fees and costs. In doing so, a court must determine that counsel expended a reasonable number of hours in securing a successful recovery for the client, exclude any duplicative or wasteful hours, and determine the reasonableness of counsel's hourly rate. The lack of an adequate record upon which to review a fee award will result in a remand of the award to the trial court to develop such a record.
Mahler, 135 Wn.2d at 433.
Id. at 433-34.
Id. at 435.
Here, the trial court awarded fees in an amount less than the request. Thus, it appears that it likely followed the lodestar method. But we have no basis to evaluate its exercise of discretion in this respect because the court failed to enter findings of fact or conclusions of law to show its work. We must reverse this portion of the award.
We are faced with an odd procedural posture with respect to the other issues briefed on appeal. We have a brief signed only by Peter Vetrano in a pro se capacity. We were first informed at oral argument by Keefe that he no longer is a member of the Washington State Bar Association and that Vetrano is not an attorney. Moreover, it is unclear at this writing whether the Cacciolas join in the brief signed by Vetrano in his pro se capacity.
Nevertheless, we exercise our discretion and proceed to address the other issues raised in the brief to bring this matter to a close.
RAP 1.2(a) provides that our rules of appellate procedure will be liberally interpreted to promote justice and facilitate the decision of cases on the merits. Cases and issues will not be determined on the basis of compliance or noncompliance with the rules except in compelling circumstances where justice demands, subject to the restrictions in rule 18.8(b).
SUMMARY JUDGMENT MOTIONS Claims under SEC Rule 144
Vetrano argues that the trial court erred in denying his motion for summary judgment and subsequent motion for reconsideration on SEC Rule 144 claims. We disagree.
Summary judgment is proper where there are no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law.
We review de novo a trial court's order denying a summary judgment motion. Here, we start with an observation made by this court in the prior appeal. This court noted that although the trial court had not ruled on the initial summary judgment motion based on the same claim, the motion was moot after the dismissal of the claims based on the Securities Act of 1933 and its regulations. Vetrano fails to explain how a motion that was moot in the prior appeal is not so now. The federal claims were dismissed and have not been revived.
Hertog, ex rel. S.A.H. v. City of Seattle, 138 Wn.2d 265, 275, 979 P.2d 400 (1999).
Cacciola, 2001 WL 1630587 at *5.
For this reason, the denial of the summary judgment motion based on SEC Rule 144 was proper.
Damages
Vetrano also claims the trial court improperly denied the motion for entry of judgment for damages on their WSSA claim. We also disagree with this argument.
Summary judgment is not proper where a genuine issue of material facts exists. The record shows that the parties offered conflicting evidence on whether the consideration had been properly tendered. The determination of damages for violation of the WSSA depends, in part, on the resolution of these conflicting claims. Vetrano argued that the stock had been tendered back, that its stock value was a sum certain, and that damages could be readily calculated according to the statutory formula. Sims argued that tender had not been properly made nor had rescission been pled.
In short, there was a genuine issue of material fact that remained for trial — damages. It is undisputed that this question was submitted to the jury for trial after the denial of summary judgment. Accordingly, there is no basis for the unsuccessful plaintiffs to now complain on appeal.
See Adcox v. Children's Orthopedic Hosp. Med. Ctr., 123 Wn.2d 15, 35 n. 9, 864 P.2d 921 (1993); Caulfield v. Kitsap County, 108 Wn. App. 242, 249 n. 1, 29 P.3d 738 (2001) (Where a trial court denies a motion for summary judgment because disputed material facts remain, and a subsequent trial occurs on those issues, the moving party cannot appeal the summary judgment denial.).
The court's order was proper.
JURY INSTRUCTION
Vetrano argues that the trial court erred in its instruction to the jury on damages. Because the error was, apparently, not preserved at trial, and the Vetranos failed to provide a record sufficient for review, we do not reach this issue.
In order to preserve the issue of jury instructions for review, the party must object if the court refuses to accept the party's proposed instructions. A party has a duty to propose alternative jury instructions if that party is dissatisfied with those proposed by the other party.
Goehle v. Fred Hutchinson Cancer Research Ctr., 100 Wn. App. 609, 614-15, 1 P.3d 579 (2000); CR 51(f).
Id.
Here, Vetrano failed to provide the portion of the trial record that addresses this issue. Caprio, Leiner, and Marks claim this issue was not preserved by any exception below. The duty of the appellant, among others, is to provide a record sufficient for this court to review. Vetrano failed to do this. There is no basis to overturn the trial court's jury instruction.
State v. Spring, 128 Wn. App. 398, 407, 115 P.3d 1052 (2005), review denied, 156 Wn.2d 1032 (2006); RAP 9.6 (a), (b).
VERDICT
Vetrano argues that there is not substantial evidence to support the jury verdict of no damages for their stock. We disagree.
An appellate court may not overturn a jury verdict unless the verdict is outside the range of substantial evidence in the record, shocks the conscience of the court, or seems to result from passion or prejudice. Substantial evidence is evidence sufficient to convince a fair-minded, thinking person of the truth of the matter.
Bunch v. King County Dep't of Youth Servs., 155 Wn.2d 165, 179, 116 P.3d 381 (2005) (quoting Bingaman v. Grays Harbor Com'ty Hosp., 103 Wn.2d 831, 835, 699 P.2d 1230 (1985)).
Bunch, 155 Wn.2d at 179.
The trial court gave the jury the following damages instruction:
Instruction No. 6
It is the duty of the court to instruct you as to the measure of damages. . . . If your verdict is for the plaintiffs, then you must determine the amount of money that will reasonably and fairly compensate the plaintiffs for such damages as you find were caused by the acts or omissions of the defendants. The burden of proving damages rests upon the plaintiffs. It is for you to determine, based upon the evidence, whether any damages have been proved by a preponderance of the evidence. Your award must be based upon evidence and not upon speculation, guess, or conjecture.
Clerk's Papers at 2568 (emphasis added).
Based on evidence in the record, a fair-minded juror could have been convinced that the Cacciolas and Vetranos suffered no damages as a result of Caprio's, Leiner's, and Marks' failure to provide required financial statements under the agreement. The record contains evidence to support the determination that the Cacciolas and Vetranos suffered damages because they relied on their attorney, did no research of their own, and mismanaged their stock holdings.
For example, Peter Vetrano testified that in signing the settlement agreement, he relied only on information from Keefe and the fact that Sims was listed on the NASDAQ. Similarly, the testimony of Thomas Cacciola by deposition showed that he believed Sims was a stable and profitable company based on its stock being listed on the NASDAQ, and he entered into the settlement agreement after relying only on advice from Keefe that the company was financially stable and secure.
Sims's former president, Melvin Leiner, testified that a prospectus was available several months before the settlement agreement was signed. He testified:
You got the prospectus prior. The prospectus was available from February 10, 1995, six or seven months prior to you entering into the agreement, and it is really hard for me to believe that you did your due diligence, recommended the settlement to your clients without at least looking at a prospectus which showed a history of losses for the past three years of the company, the company's direction — this was available anywhere. . . .
Report of Proceedings (July 7, 2005) at 287.
Testimony also indicated that the Cacciolas and Vetranos knew stock investments could be risky, but they believed their Sims stock would still have value two years later when they could sell it. Additionally, the jury heard evidence that the Cacciolas and Vetranos held onto their stock despite major fluctuations in the market during the time they could have sold. When asked why Peter Vetrano had held onto the stock, he testified that his losses would have been too great if he had sold. Vetrano said his Sims stock was "worth nothing" and not worth selling. Further, he testified that he did not purchase the stock, but it had been given to him in exchange for a release of claims against Caprio, Leiner, and Marks.
Vetrano relies on Sommer v. Dep't of Social and Health Servs. to argue that the verdict is unsupported because there must be more than a "mere scintilla" of evidence to support it. He highlights that no evidence showed that the market price for the stock ever increased to a level where they would have realized "an equivalent return" or a profit on the shares they received under the settlement agreement. Additionally, he argues that when they tendered the shares back, they were valued at around $550, which is more than $0.
104 Wn. App. 160, 172, 15 P.3d 664 (2001).
This case does not support their argument. Sommer says that substantial evidence is distinguished from a "mere scintilla" of evidence as evidence that would convince an unprejudiced, thinking mind of the truth of the fact to which the evidence is directed. The fact that the Cacciolas and Vetranos presented "substantial evidence" at trial that their stock had value is not helpful in examining the verdict. Our inquiry asks not whether there was evidence in the record for the jury to find differently, but whether sufficient evidence supports the verdict. Because there is evidence in the record that would allow an unprejudiced jury to conclude that the Cacciolas and Vetranos suffered no damage as a result of the WSSA violation, the jury verdict is supported by more than a scintilla of evidence and should not be overturned.
Id. at 172.
We affirm the summary judgment order on SEC Rule 144 claims, the trial court's denial of the motion for entry of judgment, and the judgment on the jury's verdict. We reverse the order awarding attorney fees and costs.