Opinion
NO. 2015-CA-001943-MR
06-16-2017
TERESA CUNNINGHAM APPELLANT v. MICHELLE KELLER APPELLEE
BRIEF FOR APPELLANT: Firooz Namei Cincinnati, Ohio BRIEF FOR APPELLEE: Mark G. Arnzen Frank K. Tremper Covington, Kentucky
NOT TO BE PUBLISHED APPEAL FROM KENTON CIRCUIT COURT
HONORABLE KATHLEEN LAPE, JUDGE
ACTION NO. 14-CI-02370 OPINION
AFFIRMING
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BEFORE: CLAYTON, JOHNSON, AND MAZE, JUDGES. JOHNSON, JUDGE: Teresa Cunningham ("Cunningham") appeals from the November 20, 2015 Order of the Kenton Circuit Court granting Michelle Keller's ("Keller") motion for sanctions. After reviewing the record and the applicable legal authorities, we AFFIRM the ruling of the Kenton Circuit Court ("Kenton Court").
BACKGROUND
Cunningham filed to run in the 2014 election for Justice of the Kentucky Supreme Court, 6th Judicial District, opposing Keller, the incumbent. The results of the election held on November 4, 2014, as certified by the Kentucky Secretary of State, declared Keller the winner by 24,576 votes.
On December 4, 2014, Cunningham filed an election contest action pursuant to Kentucky Revised Statutes (KRS) 120.155 in the Boone Circuit Court ("Boone Court") alleging that Keller and her supporters in the election had resorted to intimidation in order to win the election. Along with her complaint, Cunningham attached a copy of a subpoena duces tecum addressed to Thomas Weatherford ("Weatherford"), seeking his deposition and asking for a copy of a video he had taken of Keller allegedly showing Keller in a heated debate with a gentleman named Bernie Kunkel ("Kunkel"). In response, Keller filed a Motion to Stay Discovery, or in the Alternative, for a Protective Order. Keller was joined in her motion by Weatherford, who filed a Motion to Quash the subpoena. On December 14, 2014, the Boone Court stayed discovery. In addition, the court ordered that the video in question be filed under seal with the circuit clerk. On December 22, 2014, the Boone Court, after holding a hearing on the issue of venue, transferred the case to the Kenton Court due to a lack of venue in Boone County based upon the statutory requirements of KRS 120.155.
Once the matter was transferred to the Kenton Court, on December 23, 2014, Keller filed her Motion to Dismiss the Case or in the Alternative for Judgment on the Pleadings. On February 13, 2015, the Kenton Court entered an order granting that part of Keller's motion seeking a judgment on the pleadings. The court also made the order final by stating, "There being no just cause for delay, this is a final and appealable Order."
On February 23, 2015, Keller moved the court for sanctions against Cunningham pursuant to Kentucky Rules of Civil Procedure (CR) 11. On April 4, 2015, Cunningham filed a cross motion seeking CR 11 sanctions against Keller. On November 20, 2015, the Kenton Court granted Keller's motion for sanctions and awarded her attorneys' fees of $23,684.56, and denied Cunningham's motion for sanctions.
On December 18, 2015, Cunningham filed her Notice of Appeal, listing the Boone Court's orders of December 14, 2014, and December 22, 2014, and the Kenton Court's orders of February 13, 2015, October 5, 2015, November 20, 2015, and December 3, 2015. On March 17, 2016, we dismissed this appeal as to any order entered by the trial courts on or before February 13, 2015, because the Notice of Appeal was untimely for any of those orders. Cunningham's Motion to Reconsider was denied on June 2, 2016. Therefore, the only issues on appeal are the CR 11 sanctions granted by the Kenton Court against Cunningham, the court's denial of her motion seeking sanctions against Keller, and the court order sealing the billing records of Keller's attorneys.
STANDARD OF REVIEW
The standard of review in Kentucky when a trial court grants CR 11 sanctions requires a multi-standard approach. The appellate court reviewing the trial court's order must first apply a clearly erroneous standard to that court's findings in support of sanctions. Next we review de novo the legal conclusion that a violation has occurred. Finally, the type or amount of sanctions imposed by the court are reviewed on an abuse of discretion standard. Clark Equip. Co., Inc. v. Bowman, 762 S.W.2d 417, 420 (Ky. App. 1988).
ANALYSIS
We first look to determine whether the trial court's findings in support of the award of sanctions were clearly erroneous. A factual finding is not clearly erroneous if it is supported by substantial evidence. Substantial evidence is defined as evidence, when taken alone or in light of all the evidence has probative value to induce conviction in the mind of a reasonable person. Hunter v. Hunter, 127 S.W.3d 656, 659 (Ky. App. 2003).
The Kenton Court noted in its November 20, 2015 Order that Cunningham's basis for filing the original complaint was premised on her unsupported allegations of election campaign fraud or suspected intimidation. Further, the court found that many of Cunningham's allegations were vague, mere conjecture, and unsupported by the facts. The trial court ruled that the factual basis upon which Cunningham filed her lawsuit was not well-grounded and was manipulated or exaggerated to suit her allegations of wrongdoing. In support of its decision, the court points to the fact that Cunningham relied upon an affidavit from Kunkel wherein he stated he was not intimidated by Keller, an email from a non-party's attorney, a video taken by Weatherford which Cunningham had never seen, conversations with other witnesses all of whom are unnamed, allegations of sign and literature removal by unnamed persons, phone calls made by unnamed persons telling Cunningham supporters that Cunningham is a bad person, and concerns that she was being videotaped by Keller supporters. (The court noted that Cunningham supporters were also videotaping Keller.) The court viewed the Weatherford video in camera to determine the merit of Cunningham's claim that it demonstrated intimidation by Keller, and found the claim baseless. This Court has reviewed the record, including watching the Weatherford video, and we agree with the findings of the Kenton Court.
Therefore, we concur with the trial court that Cunningham has no basis upon which to file her complaint in this matter. The Kenton Court's decision is supported by substantial evidence in the record.
Next, we review the legal conclusions of the trial court to determine whether a violation of CR 11 occurred. The court determined as a matter of law that Cunningham's conduct at the time she signed the complaint was unreasonable under the circumstances and thus a violation of CR 11 occurred. CR 11 states in part:
The signature of an attorney or party constitutes a certification by him that he has read the pleading, motion or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry it 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 it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.
In its November 20, 2015 Order, the trial court found that the allegations upon which Cunningham's lawsuit was based, as a matter of law, "would lead no reasonable attorney to conclude that they could support an action to void the election or oust Justice Keller from her position." In reviewing the Kenton Court's order we find that it applied the correct standard in determining that Cunningham violated the requirements of CR 11. When determining whether to impose sanctions even if a case is meritless, CR 11 will not apply unless it is demonstrated a party or his lawyer has signed a pleading in violation of the Rule. Clark, Supra. The test is whether an attorney's conduct at the time he signed the offending pleading was reasonable under the circumstances. Id. Cunningham by her own admission stated she filed the action prior to adequate investigation and without sufficient evidence to support her claim. In paragraph eleven of Cunningham's May 5, 2015 Affidavit, she stated on the record she filed the claim prematurely "in order to toll the statute of limitations, immediately obtain discovery and continually reevaluate the case and dismiss it if the subsequent evidence failed to further support the claim."
Cunningham's investigation prior to filing her complaint was premised in part upon Weatherford's video—which she had not seen, an affidavit from Kunkel that stated he was not intimidated, and other allegations from unnamed witnesses. A party's bad faith or even their lack of good faith is not the basis of a determination of a violation under CR 11. The issue is whether Cunningham filed her lawsuit without reasonable inquiry. We find the court's conclusion that Cunningham failed to make reasonable inquiry prior to filing her lawsuit meets the standard required under CR 11, and that the trial court properly concluded Cunningham violated CR 11.
We next address the issue of whether the amount of the sanction imposed was proper. Our review is based upon an abuse of discretion standard on the type or amount of sanctions imposed. The trial court reviewed the unredacted bills as submitted to the court for an in camera review. (These records are currently under seal by a protective order of the court because they contain privileged attorney-client information.) The trial court relied upon those unredacted invoices, the testimony of Mark Arnzen, attorney for Keller, and the briefs filed in the action before determining the proper amount of sanctions. The court stated it applied the reasonable and ordinary standard it uses in all cases when it awards attorney's fees. The court accepted the partners' billing rate, but adjusted the rate charged for an associate's work. In addition, the court struck several charges as being unreasonable and not meeting the ordinary standard. We find the court's decision to be reasonable, fair, and well-supported.
Cunningham also appeals whether or not the court erred when it ordered Keller to produce unredacted invoices for an in camera review, and then ordered that those invoices not be entered into the record nor made available to Cunningham. Cunningham obtained copies of the redacted invoices, reviewed them and noted her objections to various billings. (Cunningham's brief, filed April 30, 2015.) The court took notice of Cunningham's objections to the redacted invoices and sua sponte, by order dated October 2, 2015, required Keller to submit unredacted copies of her bills. In Commonwealth, Cabinet for Health & Family Servs. v. Scorsone, 251 S.W.3d 328, 330 (Ky. App. 2008), we stated that an in camera review of billing records is an excellent method to balance the confidentiality of privileged materials and the disclosure of nonconfidential records. Because the billing records contained confidential attorney-client information, the court was within its authority to seal those records from review other than by the courts and did so by order dated December 3, 2015.
The last issue raised by Cunningham in her appeal is from the Kenton Court's November 20, 2015 Order overruling her motion for CR 11 sanctions against the attorneys for Keller. Her motion was premised on her belief that Keller's attorneys only filed a CR 11 motion because they were seeking retaliation against her for filing the original complaint. The trial court found no merit to Cunningham's motion for sanctions, nor do we. Keller's attorneys were hired to defend Keller, and their filing of a CR 11 motion was in furtherance of Keller's interests. We concur with the trial court that Keller's motion for sanctions is well-supported in fact and law. Cunningham's objection is meritless.
CONCLUSION
For the foregoing reasons, we find no error in the Kenton Circuit Court's Orders and therefore AFFIRM.
ALL CONCUR. BRIEF FOR APPELLANT: Firooz Namei
Cincinnati, Ohio BRIEF FOR APPELLEE: Mark G. Arnzen
Frank K. Tremper
Covington, Kentucky