Missouri COA awards sanctions for frivolous appeal

The trial court correctly dismissed counterclaims filed by a defendant, the Missouri Court of Appeals Eastern District ruled on June 21, finding the appeal to be without merit and awarding damages.

In 2017, two law firms — Pitzer Snodgrass, P.C. and Louis J. Basso, P.C. — initiated a lawsuit against Frederich Construction, Inc. (FCI) to recover unpaid fees.

FCI filed counterclaims against Pitzer and then added claims against Basso; it amended the counterclaims several times over the next six years. FCI’s third amended counterclaims alleged that the law firms had breached the parties’ fee agreement and engaged in civil conspiracy.

In a third motion for sanctions and dismissal against FCI pursuant to Rule 55.03(c), the law firms asserted that FCI’s counterclaims were “frivolous” and “meritless.” The law firms alleged that FCI had assigned the rights pursued in the counterclaims to its bonding company, and as a result of the assignment, had no basis to move forward with any counterclaim. To support the motion, the law firms attached various documents.

FCI acknowledged that the motions were brought pursuant to Rule 55.03 and did not raise any objection to the consideration of the documents attached.

Following a hearing, the trial court granted the law firms’ motion for sanctions. After reciting the standard for issuing sanctions under Rule 55.03, the trial court found that FCI had assigned all of its rights and had no good faith basis to pursue its counterclaims.

As sanctions, the trial court ordered FCI to reimburse the law firms for the attorney fees they expended defending the counterclaims and dismissed FCI’s counterclaims with prejudice.

FCI appealed, arguing that the trial court erred in granting what it called the law firms’ “motion to dismiss,” which it claimed was filed pursuant to Rule 55.27.

Finding “the premise of FCI’s claim of error [] patently false,” the unanimous panel of Judges Michael E. Gardner, Robert M. Clayton III and Lisa P. Page affirmed.

“[T]he Law Firms did not file a motion to dismiss under Rule 55.27; they filed a motion for sanctions under Rule 55.03 that sought dismissal as a sanction,” the court wrote.

Rule 55.27(a) provides a list of defenses to a claim that can be raised by motion, while a motion under Rule 55.03 is not for the purpose of stating a defense to a claim that might require dismissal, but to impose sanctions, the court explained.

“It is plain on the face of the Law Firms’ motion that they did not seek to dismiss FCI’s counterclaims on any of the grounds set out in Rule 55.27(a), much less for ‘failure to state a claim upon which relief can be granted’ under Rule 55.27(a)(6), the only ground to which the conversion provision of that rule applies. Rather, the Law Firms filed the motion explicitly ‘pursuant to Rule 55.03′ and set out the conduct they claimed violated that rule. … To be sure, the motion sought to have those counterclaims dismissed — but only as a sanction for those alleged violations.”

When the trial court granted the law firms’ motion, it too expressly invoked Rule 55.03, set out the parameters of that rule, identified the conduct it found warranted sanctions under that rule and imposed relief authorized by that rule, the court said.

“The dismissal ordered by the trial court was clearly not based on the counterclaims’ ‘failure to state [claims] upon which relief could be granted’ under Rule 55.27(a)(6),” the court said. “Rather, it was expressly based on the trial court’s conclusion that, according to the documents attached to the Law Firms’ motion, FCI had assigned its rights to a third party and had no good faith legal or factual basis to bring the counterclaims against the Law Firms.”

As FCI’s only argument for reversal was predicated on the falsehood that the motion at issue was brought and decided under Rule 55.27, the court denied the appeal.

The court also sided with the law firms on their motion for damages, finding FCI’s appeal was frivolous.

“FCI’s claim for reversal is easily recognizable as being devoid of merit because it is founded on misleading representations that are flatly refuted by the face of the record,” the court wrote. “We find FCI’s depiction of the Law Firms’ motion for sanctions in this court to be disingenuous given that it openly acknowledged in its response in the trial court that the Law Firms had brought the motion pursuant to Rule 55.03, just as it had each time there was a motion for sanctions pending with respect to its earlier counterclaims. Not once did FCI contend those motions actually sought to dismiss the counterclaims under Rule 55.27, nor did it ever object to the trial court’s consideration of the documents attached to those motions.”

The “bald insistence” by FCI that the motion for sanctions on which the trial court ruled was in fact a motion to dismiss under Rule 55.27 “strains credulity and demonstrates the frivolousness of this appeal,” the court added.

“[C]ounsel’s failure to properly present tenable arguments for reversal based on a truthful representation of the record has wasted appellate judicial resources, delayed our consideration of meritorious cases, and compelled the Law Firms to incur unnecessary expenses defending the judgment,” the court said. “There is no indication that counsel’s lack of candor in this Court is attributable to his client, FCI. Therefore, damages are assessed against FCI’s appellate counsel and awarded to both Law Firms.”

The court assessed damages of $5,000 to be paid to each of the law firms as a judgment against FCI’s counsel.

Terese E. Drew of Amundsen Davis in St. Louis represented Basso.

“One takeaway from the decision would be that if you are going to take an appeal, you need to be very careful with what you are appealing,” she said. “The trial court order was very clear that it was addressing sanctions, not a motion to dismiss, and that the dismissal was part of the sanctions. Don’t try to be cute with the Court of Appeals.”

Christopher S. Swiecicki of Swiecicki & Muskett in Chesterfield, who represented FCI, said his client plans on filing a motion for rehearing.

St. Louis attorney James E. Klenc, who represented Pitzer, did not respond to a request for comment.

The case is Pitzer Snodgrass, P.C. v. Frederich Construction, Inc., No. ED113973.