Virginia Diesel and Truck Repair v. Werth ( 2022 )

NOT DESIGNATED FOR PUBLICATION
No. 124,218
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
VIRGINIA DIESEL AND TRUCK REPAIR INC.,
Plaintiff,
(WILLIAM C. O'KEEFE),
Appellant,
v.
BRUCE WERTH and FOLEY EQUIPMENT COMPANY,
Appellees.
MEMORANDUM OPINION
Appeal from Shawnee District Court; MARY E. CHRISTOPHER, judge. Opinion filed July 29,
2022. Affirmed.
William C. O'Keefe, of O'Keefe Law Office, of Seneca, for appellant.
Blake A. Robinson, of Robinson Firm, LLC, of Manhattan, for appellees.
Before GREEN, P.J., ATCHESON and HURST, JJ.
PER CURIAM: William O'Keefe appeals the district court's imposition of sanctions
against him and his client, Virginia Diesel and Truck Repair Inc., for violating K.S.A.
2021 Supp. 60-211(b) by undertaking a suit for the purpose of harassment and retaliation.
The record, including O'Keefe's brief to this court, is replete with examples of his
disregard for the rules of civil procedure and dereliction of his professional
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responsibilities. This court cannot condone the use of litigation as a weapon for improper
reprisal, and finds no error in the district court's imposition of sanctions. Affirmed.
FACTUAL AND PROCEDURAL BACKGROUND
The present case results from a prior case in which Virginia Diesel and Truck
Repair Inc. (Virginia Diesel), a corporation specializing in the remanufacture of
Caterpillar engines, was found liable for damages to Steve Gudenkauf and Gudenkauf
Tree Service (collectively Gudenkauf). This prior lawsuit—the Gudenkauf case—
centered on the Gudenkaufs' allegations that Virginia Diesel committed fraud, breach of
warranty, and unjust enrichment by allegedly selling them a defective engine. Gudenkauf
took the engine to Foley Equipment Company (Foley Equipment) for diagnosis and
repair, but the engine could not be repaired; Foley Equipment eventually sold and
installed Gudenkauf a replacement engine. During the Gudenkauf case, Bruce Werth, a
former employee of Foley Equipment, testified that the engine sold by Virginia Diesel
was defective and not remanufactured. The district court found Virginia Diesel liable and
entered a $16,560.04 judgment in favor of Gudenkauf due to Virginia Diesel's failure to
perform on its contract, and Virginia Diesel unsuccessfully appealed. See Gudenkauf
Tree Service Inc., v. Jacobs, No. 122,028, 2021 WL 2603385 (Kan. App. 2021)
(unpublished opinion).
On October 30, 2019, while its appeal in the Gudenkauf case was still pending,
Virginia Diesel filed suit against Bruce Werth and Foley Equipment—the suit at issue in
the present appeal—for "malicious and fraudulent acts," "unlawful interference," "unfair
competition," and "[intentional or negligent] fraudulent misrepresentation." William
O'Keefe—who had represented Virginia Diesel in the Gudenkauf case—drafted the
petition and sought "temporary and permanent injunction," a "restraining order," a "court
order that the engine be torn down, in [its] presence," damages, and attorney fees. Much
of the petition against Werth and Foley related to arguments and evidence presented in
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the Gudenkauf case and heavily relied on allegations that Werth provided fraudulent
testimony in that case. Specifically, Virginia Diesel claimed that Werth and Foley
Equipment had conspired to make false reports about the engine it sold to Gudenkauf in
order to boost their own sales.
Several months after Werth and Foley filed their answers in the present case,
Virginia Diesel requested the court enter an order requiring the engine at issue in the
Gudenkauf case be placed in the custody of Foley Equipment and that it be preserved,
disassembled, and inspected. At the time of Virginia Diesel's request, the engine was in
the possession of Gudenkauf Tree Service per a court order in the Gudenkauf case. While
Virginia Diesel conceded that the Nemaha County District Court had issued an
outstanding order regarding possession of the engine, the company's president expressed
concerns "that there [was] going to be some irreparable and permanent harm" should the
engine continue to be in Gudenkaufs' possession. The district court in the present case
denied Virginia Diesel's request, noting the prior order issued by the Nemaha County
District Court and Virginia Diesel's failure to provide any factual basis to support its
alleged concerns.
In November 2020, as the parties closed in on the discovery deadline, Virginia
Diesel replaced O'Keefe as counsel, and Werth filed a motion to dismiss for failure to
state a valid claim. Thereafter, at the hearing on Werth's motion to dismiss, the district
court noted that the petition was "not a model of clarity," but that Virginia Diesel had
done enough to allege claims of (1) civil conspiracy to commit fraud; (2) fraud; and (3)
negligent misrepresentation against Werth. However, the court determined these claims
were not legally cognizable and dismissed all of Virginia Diesel's claims against Werth.
In reaching this conclusion, the court explained that Virginia Diesel made no claim that it
had relied on any statements made by Werth—the petition only alleged that Werth
misrepresented facts about the engine to Gudenkauf. Moreover, the court ruled that
Werth's allegedly false testimony in the Gudenkauf case could not serve as a basis for a
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civil tort claim—the proper remedy was an action for perjury. Finally, the court denied
Virginia Diesel's motion to amend its petition, finding that Werth and Foley Equipment
would potentially suffer extreme prejudice if the case were prolonged any further. Foley
Equipment then filed its own motion to dismiss, and Virginia Diesel promptly agreed to
dismiss Foley Equipment with prejudice.
After winning his motion to dismiss, Werth moved for sanctions in the form of
attorney fees against both Virginia Diesel and its former attorney, O'Keefe, in the amount
of $13,346.65. Werth argued that Virginia Diesel's claims were patently baseless and that
the lawsuit was merely intended to deter Werth from any future involvement in the
Gudenkauf case, which at that time was still on appeal before this court. Virginia Diesel
and O'Keefe filed separate responses to Werth's motion.
The district court concluded that Virginia Diesel's case "was filed in retaliation for
trial testimony offered by Mr. Werth . . . with the intent to reinvestigate, cross-examine,
and/or otherwise improperly attack Mr. Werth's trial testimony in the [Gudenkauf case]
in an effort to influence Mr. Werth to go back on his sworn testimony." In short, the court
found that Virginia Diesel brought the case against Werth for an improper purpose in
violation of K.S.A. 60-211(b). Moreover, the court held that Virginia Diesel's "claims and
legal defenses were not warranted by existing law" and thus violated K.S.A. 60-
211(b)(2). After finding Virginia Diesel violated K.S.A. 60-211(b), the court determined
that sanctions were warranted and awarded a monetary sanction of $6,021.65 against
O'Keefe and Virginia Diesel, jointly and severally.
O'Keefe—but not Virginia Diesel—appeals the district court's sanctions order.
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DISCUSSION
As a matter of clarification, this court must first address what—if any—claims
O'Keefe raises on appeal. In his brief, O'Keefe spends dozens of pages reciting trial and
deposition testimony both in the Gudenkauf case and in the present case—none of which
is pertinent to this appeal. O'Keefe eventually identifies two issues: "Did Judge Mary E.
Christopher ever have any evidence to sanction Mr. O'Keefe?" and "Where does it put the
rest of us when a person lies to the Court about his participation in a case?"
In his first issue, O'Keefe includes the standard for judicial misconduct but does
not provide any argument or additional authority regarding judicial misconduct. To the
extent O'Keefe intends to assert an argument for judicial misconduct, the conclusory
allegation is incidentally raised, inadequately briefed, and is therefore deemed abandoned
and waived. See Russell v. May, 306 Kan. 1058, 1089, 400 P.3d 647 (2017). The second
issue simply does not actually contain any legal argument. After thoroughly reviewing
O'Keefe's discursive brief, this court believes that he alleges only one issue—that the
district court properly imposed sanctions pursuant to K.S.A. 2021 Supp. 60-211.
Under K.S.A. 2021 Supp. 60-211, a district court has discretion to award
sanctions if a party files suit for an improper purpose, presents frivolous legal arguments,
or presents factual contentions that lack evidentiary support:
"(b) Representations to the court. By presenting to the court a pleading, written
motion or other paper, whether by signing, filing, submitting or later advocating it, an
attorney or unrepresented party certifies that to the best of the person's knowledge,
information and belief formed after an inquiry reasonable under the circumstances:
(1) It is not being presented for any improper purpose, such as to harass, cause
unnecessary delay or needlessly increase the cost of litigation;
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(2) the claims, defenses and other legal contentions are warranted by existing law
or by a nonfrivolous argument for extending, modifying or reversing existing law or for
establishing new law;
(3) the factual contentions have evidentiary support or, if specifically so
identified, will likely have evidentiary support after a reasonable opportunity for further
investigation or discovery; and
(4) the denials of factual contentions are warranted on the evidence or, if
specifically so identified, are reasonably based on belief or a lack of information.
"(c) Sanctions. If, after notice and a reasonable opportunity to respond, the court
determines that subsection (b) has been violated, the court may impose an appropriate
sanction on any attorney, law firm or party that violated the statute or is responsible for a
violation committed by its partner, associate or employee. The sanction may include an
order to pay to the other party or parties that [the] reasonable expenses, including
attorney's fees, incurred because of the filing of the pleading, motion or other paper."
K.S.A. 2021 Supp. 60-211.
This court reviews a district court's decision to award sanctions for an abuse of
discretion. In re Marriage of Bergmann & Sokol, 49 Kan. App. 2d 45, 50, 305 P.3d 664(2013); Thornburg v. Schweitzer, 44 Kan. App. 2d 611, 625, 240 P.3d 969 (2010). A
court abuses its discretion if its decision is based on an error of law or fact, or if its
decision is so arbitrary, fanciful, or unreasonable that no reasonable person would take
the view adopted by the court. When reasonable people could differ as to the propriety of
the court's action—then it cannot be said that the court abused its discretion. Wood v.
Groh, 269 Kan. 420, 429, 7 P.3d 1163 (2000). As the party alleging the district court
abused its discretion—O'Keefe bears the burden of demonstrating such abuse. See
Northern Natural Gas Co. v. ONEOK Field Services Co., 296 Kan. 906, 935, 296 P.3d
1106 (2013).
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In a bold strategic choice, O'Keefe does not challenge the district court's finding
that he and his client violated K.S.A. 2021 Supp. 60-211(b) by filing the petition for the
improper purpose of harassing and dissuading Werth and Foley Equipment from
participating further in the Gudenkauf case. Furthermore, O'Keefe does not appear to
challenge the district court's finding that the claims in the petition were not supported by
existing law—and that the proper remedy for untruthful testimony in the Gudenkauf case
was not a civil tort claim. Because O'Keefe does not challenge the findings that he and
Virginia Diesel violated K.S.A. 2021 Supp. 60-211(b) and (b)(2), this court will not
review them for error, and will assume they are true and accurate.
Assuming the district court correctly found that Virginia Diesel and O'Keefe
violated K.S.A. 2021 Supp. 60-211(b), it then proceeded to determine whether to impose
sanctions. See Wood, 269 Kan. at 431 (setting forth the factors to consider when
determining if sanctions are appropriate for a violation of K.S.A. 60-211). These factors
include:
"(1) whether the improper conduct was willful or negligent;
"(2) whether it was part of a pattern of activity or an isolated event;
"(3) whether it infected the entire pleading or only one particular count or
defense;
"(4) whether the person has engaged in similar conduct in other litigation;
"(5) whether it was intended to injure;
"(6) what effect it had on the litigation process in time or expense;
"(7) whether the responsible person is trained in the law;
"(8) what amount, given the financial resources of the responsible person, is
needed to deter that person from repetition in the same case; and
"(9) what amount is needed to deter similar activity by other litigants." 269 Kan.
at 431.
The district court found that O'Keefe negligently filed the petition and engaged in
improper conduct, explaining that "a little legal research would've revealed that you
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cannot [file this suit], that it's improper." Although the district court did not find a pattern
of conduct in the present case, it noted that O'Keefe had been involved in a previous case
involving sanctions, which demonstrated that he was at least "aware of the wrongfulness
of litigation misconduct." The court also found that although Virginia Diesel's petition
may not have been intended to injure Werth, it was certainly aimed at dissuading him
from further involvement in the Gudenkauf case. The court explained:
"At first, when I looked at this case it was not at first apparent to the Court the
basis for the suit was solely the trial testimony of Mr. Werth. And that was just because
the wording of the petition was not exactly clear. . . .
"But looking at the course of this, piecing this together, and also with knowledge
that there was a prior trial that was appealed and on appeal when this was filed, it seems
fairly obvious that this lawsuit was an attempt to get Mr. Bruce Werth to go back on his
prior testimony . . . . And that is concerning to me."
Finally, the court noted the time and expense of Virginia Diesel's lawsuit on both
Werth and Foley, and it explained that O'Keefe was trained in the law and therefore had
little excuse for filing a suit unsupported by the evidence or existing law. Given all of
those reasons, the district court determined that sanctions were warranted and awarded
the appropriate amount to deter the parties and prevent future misconduct—$6,021.65—
half the amount Werth requested.
This court finds no support in O'Keefe's briefing—either legal, logical, or
theoretical—for his conclusion that the district court abused its discretion in awarding
sanctions to Werth. The court had ample evidence to order sanctions, and O'Keefe fails to
explain how the court abused its discretion in any manner. Under these circumstances,
this court cannot say that no reasonable person would agree with the district court's
decision. O'Keefe and Virginia Diesel had notice and a reasonable opportunity to respond
to Werth's request for sanctions. Given his personal stake in the outcome of the sanctions
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motion, O'Keefe was permitted to argue at the hearing although he was no longer
representing Virginia Diesel in the case.
Affirmed.
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