This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
IN COURT OF APPEALS
Brent A. Johnson, etc.,
Robert M. Gardner,
Jill M. Wright, f/k/a Jill M. Gavle, et al.,
Daniel J. Boivin, et al.,
Filed August 23, 2005
Dakota County District Court
File Nos. C1-03-9706 & C7-03-10293
Gardner, Gardner Law Office,
Lundberg, Bassford Remele, P.A.,
Considered and decided by Willis, Presiding Judge; Klaphake, Judge; and Shumaker, Judge.
U N P U B L I S H E D O P I N I O N
In this appeal from an imposition of sanctions for violations of Minn. R. Civ. P. 11.02, appellant argues that the district court abused its discretion by imposing sanctions without providing appellant with an opportunity to withdraw the offending claims. Because the sanctions imposed violate the Minnesota Rules of Civil Procedure, we reverse.
In 1994, Money Changer LLC financed respondent Jill Wright’s lawsuit against her former employer. Throughout the litigation, Money Changer assisted Wright with her litigation and personal expenses, and, in 1999, Wright signed a promissory note payable to Money Changer in the amount of $140,000, with an annual interest rate of 4%. Brent Johnson, the sole owner of Money Changer, assigned the note to himself. Wright also assigned to Johnson 27.67% of any recovery she received from the litigation.
2000, Wright settled her lawsuit against her employer, and in 2002, Johnson sued
Wright to enforce the note and the assignment agreement (Johnson I). The district
court granted summary judgment in favor of Johnson, and Wright appealed. This court affirmed summary judgment on the
note but reversed summary judgment on the assignment, holding that the
assignment was champertous. Johnson v. Wright, 682 N.W.2d 671, 677-78
(Minn. App. 2004), review granted (
In August 2003, Johnson, represented by appellant Robert M. Gardner, commenced another lawsuit (Johnson II) in connection with his financing arrangement with Wright. In Johnson II, he sued Wright and her husband, as well as the attorneys that represented Wright in her lawsuit against her employer and their law firms (the attorney defendants), alleging consumer fraud, conspiracy, breach of contract, breach of implied covenant of good faith and fair dealing, tortious interference, penalties for deceit or collusion, attorney misconduct, conversion, and negligence.
October 2003, Johnson, again represented by
The district court granted summary judgment for the defendants and dismissed Johnson’s claims with prejudice in both Johnson II and Johnson III, determining that Johnson’s claims were unsupported by the facts and were based on erroneous assertions of law. In its order granting summary judgment and dismissing the claims in Johnson III, the district court noted that “[m]ost of the allegations and other factual contentions have no evidentiary support, and are . . . a substantial departure from acceptable litigation conduct.” In that order, the district court gave the defendants in Johnson III “leave to file motions for sanctions” against Johnson and Gardner, and it ordered Johnson and Gardner to appear at a hearing and show cause why they did not violate Minn. R. Civ. P. 11.02. The attorney defendants moved for sanctions against Johnson and Gardner for rule 11 violations in connection with Johnson II and Johnson III.
After the show-cause hearing, the district court issued two orders imposing sanctions against Johnson and Gardner for violations of rule 11. In connection with Johnson II, the district court imposed sanctions against Johnson and Gardner, jointly and severally, awarding Wright and her husband $10,000 and the attorney defendants $5,000 each. In Johnson III, the district court awarded Wright and her husband a $5,000 sanction against Johnson and Gardner, jointly and severally, and the attorney defendants a $14,773.50 sanction against Gardner alone.
Johnson filed notices of
appeal in Johnson II and Johnson III, challenging both the
dismissal of the claims and the imposition of sanctions. This court consolidated the appeals and
construed Johnson’s appeals as having been taken by
D E C I S I O N
The decision to impose rule
11 sanctions lies within the discretion of the district court, and we will not
reverse absent an abuse of that discretion.
Gibson v. Coldwell Banker Burnet,
659 N.W.2d 782, 787 (
The district court may
impose sanctions against attorneys, law firms, or parties “[i]f, after notice
and a reasonable opportunity to respond, the court determines that Rule 11.02
has been violated.” Minn. R. Civ. P.
11.03. Parties may move for sanctions or
the district court may, on its own initiative, “enter an order describing the
specific conduct that appears to violate Rule 11.02 and directing an attorney,
law firm, or party to show cause why it has not violated Rule 11.02.”
It is not clear from the record whether the attorney defendants followed the 21-day safe-harbor provision in rule 11.03(a)(1). But even if they hadfiled their motion for sanctions more than 21 days after serving the motion on Johnson and Gardner, “motions for sanctions brought after the conclusion of the trial must be rejected precisely because the offending party is unable to withdraw the improper papers or otherwise rectify the situation.” Gibson, 659 N.W.2d at 790 (quotation omitted). When the attorney defendants filed their motion for sanctions, the district court had already granted the attorney defendants’ motion for summary judgment and dismissed the claims in both Johnson II and Johnson III; neither Johnson nor Gardner was able to withdraw the claims or rectify the situation. To the extent that the sanctions imposed are based on the attorney defendants’ motion, we conclude that the district court abused its discretion.
But the district court also
initiated sanctions as described in Minn. R. Civ. P. 11.03(a)(2). The memorandum attached to the district
court’s August 30, 2004 order describes Johnson’s claims in Johnson III as “not warranted by
existing law nor by a nonfrivolous argument for the extension of existing
law.” It also notes that the claims in Johnson III are the “mirror image” of
the claims in Johnson II. The order directed Johnson and Gardner to
appear and show cause why the claims were not violations of rule 11.02. But court-initiated sanctions are limited to
“directives of a nonmonetary nature [or] an order to pay a penalty into court.”
Because the attorney defendants’ motion for sanctions was filed after the district court dismissed Johnson’s claims and because the district court may not on its own initiative impose monetary sanctions payable to a party, we conclude that the sanctions imposed by the district court are an abuse of discretion.