Scruggs, Millette, Bozeman & Dent, P.A. v. Merkel & Cocke, P.A. ( 1999 )

IN THE SUPREME COURT OF MISSISSIPPI
NO. 1999-CA-00406-SCT
SCRUGGS, MILLETTE, BOZEMAN & DENT, P.A. f/k/a SCRUGGS, MILLETTE, LAWSON,
BOZEMAN & DENT, P. A., RICHARD F. SCRUGGS, RICHARD F. SCRUGGS, P. A. AND
ASBESTOS GROUP, P.A.
v.
MERKEL & COCKE, P.A., WILLIAM ROBERTS WILSON, JR., AND WILLIAM ROBERTS
WILSON, JR., P.A.
CONSOLIDATED WITH
NO. 2000-CA-01370-SCT
SCRUGGS, MILLETTE, BOZEMAN & DENT, P.A; RICHARD F. SCRUGGS, ASBESTOS
GROUP, P.A. AND RICHARD F. SCRUGGS, P.A.
v.
MERKEL AND COCKE, P. A.
DATE OF JUDGMENT: 8/4/2000
TRIAL JUDGE: HON. WILLIAM G. WILLARD, JR.
COURT FROM WHICH APPEALED: COAHOMA COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANT: DANIEL M. WEIR
JEFFERY P. REYNOLDS
JIM WARREN
JAMES L. CARROLL
CHARLES E. WEBSTER
MYLES A. PARKER
H. HUNTER TWIFORD
KATE MARGOLIS
TERI DUNAWAY GLEASON
ATTORNEYS FOR APPELLEE: CHARLES M. MERKEL
NATURE OF THE CASE: CIVIL - CONTRACT
DISPOSITION: REVERSED AND RENDERED - 12/13/2001
MOTION FOR REHEARING FILED:
MANDATE ISSUED: 1/3/2002
EN BANC.
EASLEY, JUSTICE, FOR THE COURT:
¶1. In September of 1997, Scruggs, Millette, Bozeman & Dent, P.A. ("SMBD") filed a lawsuit in the
Jackson County Chancery Court against Merkel & Cocke, P.A. ("Merkel & Cocke"), Charles Merkel
("Merkel"), Cynthia Mitchell ("Mitchell"), William Roberts Wilson, Jr., P.A. ("Wilson") and Asbestos
Group, P.A ("Asbestos Group"). Prior to SMBD bringing the Jackson County action, Scruggs assigned his
interest in the Scott litigation over to SMBD. The lawsuit filed in Jackson County placed in issue the alleged
mishandling of attorneys' fees received by Merkel & Cocke in 1994. These fees were derived from the
Scott litigation, a wrongful death action against the asbestos industry.
¶2. Approximately six (6) months later, on March 26, 1998, Merkel & Cocke filed the instant action in the
Chancery Court of Coahoma County seeking to interplead a share of the 1996 and 1998 attorneys' fees
received from the Scott litigation. SMBD responded by filing a motion to dismiss Merkel & Cocke's
complaint, primarily stating that the complaint should be barred by the doctrine of priority jurisdiction as the
attorneys' fees were already an issue in the Jackson County Chancery Court litigation. Richard F. Scruggs,
Richard F. Scruggs, P.A., and Asbestos Group, P.A., (hereafter collectively referred to as "Scruggs") also
filed a motion to dismiss upon similar grounds. The Coahoma County Chancery Court denied both motions
to dismiss and granted the interpleader relief, finding Merkel & Cocke to be a disinterested stakeholder
with respect to the $4,953.43 of attorneys' fees interpled. The Coahoma County Chancery Court also
discharged Merkel & Cocke from any liability for the handling of the interpled funds and transferred the
remaining dispute over entitlement to pending litigation in the Circuit Court of Hinds County. Additionally,
the Coahoma Chancery Court ordered SMBD to pay Merkel & Cocke attorneys' fees pursuant to Miss.
R. Civ. P. 11(b). Both SMBD and Scruggs timely perfected an appeal to this Court. This Court, in its
opinion dated July 20, 2000, dismissed the appeal. This Court held that "in the absence of a Rule 54(b)
certification, the orders are interlocutory and are not appealable as final judgments," and the appeal was
dismissed. Scruggs, Millette, Bozeman & Dent, P.A. v. Merkel & Cocke, P.A., 763 So. 2d 869, 872
(Miss. 2000). From that ruling, Merkel & Cocke obtained certification of a final judgment pursuant to Rule
54(b) of the Coahoma County Chancery Court on August 4, 2000. This appeal is taken from the final
judgment of the Chancery Court of Coahoma County.
STATEMENT OF ISSUES
I. WHETHER MERKEL & COCKE WERE REQUIRED TO FILE ITS CLAIM FOR
INTERPLEADER RELIEF AS A COMPULSORY COUNTERCLAIM IN THE
JACKSON COUNTY LITIGATION?
II. WHETHER MERKEL & COCKE'S ACCOUNTING ISSUES IN JACKSON COUNTY
CHANCERY COURT SHOULD BE TRANSFERRED TO HINDS COUNTY CIRCUIT
COURT?
III. WHETHER THE CHANCELLOR ERRED IN GRANTING THE INTERPLEADER
AND RELIEVING MERKEL AND COCKE FROM LIABILITY?
IV. WHETHER THE CHANCELLOR ERRED IN AWARDING ATTORNEYS' FEES TO
MERKEL & COCKE?
LEGAL ANALYSIS
I. Compulsory Counterclaim
¶3. Scruggs and SMBD contend that the Coahoma County Chancery Court erred in accepting jurisdiction
and granting the interpleader requested by Merkel & Cocke. Scruggs and SMBD argue that Merkel &
Cocke had a compulsory counterclaim which should have been filed in Jackson County Chancery Court as
part of the already pending claims and litigation. In Fulgham v. Snell, 548 So. 2d 1320, 1323 (Miss.
1989), this Court stated that when a party does not file a compulsory counterclaim, the right to raise that
claim in subsequent litigation is thereby waived. Mississippi Rules of Civil Procedure 13(a) establishes when
filing a compulsory counterclaim is proper. Rule 13(a)(1)-(3) of M.R.C.P. states as follows:
(a) Compulsory Counterclaims. A pleading shall state as a counterclaim any claim which at the time of
serving the pleading the pleader has against any opposing party if it arises out of the transaction or
occurrence that is the subject matter of the opposing party's claim and does not require for it
adjudication the presence of third parties over whom the court cannot acquire jurisdiction. But the
pleader need not state the claim if:
(1) at the time the action was commenced the claim was the subject of another pending action; or
(2) the opposing party brought suit upon his claim by attachment or other process by which the court
did not acquire jurisdiction to render a personal judgment on that claim, and the pleader is not stating
any counterclaim under this Rule 13; or
(3) the opposing party's claim is one which an insurer is defending.
In the event an otherwise compulsory counterclaim is not asserted in reliance upon any exception
stated in paragraph (a), re-litigation of the claim may nevertheless be barred by the doctrines of res
judicata or collateral estoppel by judgment in the vent certain issues are determined adversely to the
party electing not to assert the claim.
M.R.C.P. 13.
¶4. In Magee v. Griffin, 345 So. 2d 1027, 1032 (Miss. 1977), this Court further stated:
It is, and should be, a paramount concern of the judiciary to prevent multiple suits where one suit will
suffice. There is a tendency, perhaps, to forget that one who undergoes the rigors of an action, with all
of its traumatic impact, loss of time, delay, substantial expense and disruption of his affairs, with
consequent appeals and possible retrials and still other appeals, should be spared having to do this
more often than is strictly necessary. Even the successful party after bearing the expense of one trial
and of one appeal is, in many instances, hardly a winner.
A logical relation must exist between the claim and the counterclaim for the counterclaim to be a
compulsory counterclaim. M.R.C.P. 13(a); Fulgham, 548 So.2d at 1322.
¶5. This Court in Fulgham developed a test for whether the case in question arose from the same
transaction or occurrence on which the opposing action was based as required under M.R.C.P. 13(a) for a
compulsory counterclaim. In Fulgham, the Court used the following questions to determine the connection
of the claim to the counterclaim:
(1) Whether the same evidence or witnesses are relevant to both claims;
(2) Whether the issues of law and fact in the counterclaim are largely the same as those in the
plaintiff's claim;
(3) Whether, if the counterclaim were asserted in a later lawsuit, it would be barred by res judicata;
(4) Whether or not both claims are based on a "common nucleus of operative fact"?
548 So.2d at 1322-23 (citing Robertson, Joinder of Claims and Parties - Rule 13, 14, 17, and 18; 52
Miss. L.J. 47, 48-63 (1982)).
¶6. The United States Court of Appeals for the Fifth Circuit has adopted the "logical relation test" to
determine whether a counterclaim is compulsory or permissive. In Plant v. Blazer Fin. Servs., 598 F.2d
1357, 1361 (5th Cir. 1979), the Fifth Circuit stated that "the test which has commended itself to most
courts, including our own, is the logical relation test." The logical relation test is based on the "interest of
avoiding a multiplicity of suits." Id.; 3 Moore's Federal Practice ¶13. 13 at 300. The Court in an earlier case
defined "logical relationship" as existing when a counterclaim arises from the same "aggregate of operative
facts." Revere Copper & Brass, Inc. v. Aetna Cas. & Sur. Co., 426 F.2d 709, 715 (5th Cir. 1979).
This is applicable where the same operative facts that serve as the basis of both claims also create
additional legal counterclaims from the opposing party. Plant, 598 F.2d at 1361.
¶7. Merkel & Cocke argues that the doctrine of priority jurisdiction cannot possibly apply to the facts at
hand. Merkel & Cocke alleges that neither the same subject matter nor the rights of the same parties are
being adjudicated. In support of its position, Merkel & Cocke cites In re D.L.D., 606 So. 2d 1125 (Miss.
1992). There, this Court stated for the "priority of jurisdiction" rule, "which prevents interference by another
court with the jurisdiction of the court first assuming it," to be applicable "the second action should be
between the same parties, seeking on the one hand, and opposing on the other, the same remedy, and
should relate to the question." Id. at 1129 (quoting Beggiani, 519 So.2d at 1210).
¶8. We find that the parties of both the Jackson County Chancery Court and Coahoma County Chancery
Court litigation are clearly the same parties. Furthermore, both cases address the issues derived from the
Scott litigation and its disbursement of attorneys' fees from that litigation.
¶9. The parties named in the Jackson County Chancery Court action were as follows: Plaintiff, SMBD (as
successors in interest to Scruggs), and Defendants, Wilson; Alwyn H. Luckey ("Luckey"); Merkel &
Cocke; Merkel, individually, and as shareholder in Merkel & Cocke; Mitchell, individually and as
shareholder in Merkel & Cocke; and Asbestos Group.(1)
¶10. The pending Jackson County Chancery Court litigation sought to address: (1) an accounting from
Merkel & Cocke, Merkel, Mitchell, Wilson and Luckey, for the attorneys' fees received from the Scott
litigation settlements in order to be able to ascertain the extent or amounts of fees improperly paid; (2) the
intentional willful and reckless interference by Merkel & Cocke, Merkel, Mitchell and Luckey with the
agreement between Scruggs and Wilson, despite their knowledge of Scruggs's and Wilson's agreement, in a
total disregard for the law and the rights of others; and (3) a determination of the validity of the August
1992 agreement for attorneys' fees between Scruggs and Wilson.
¶11. The complaint filed in Jackson County Chancery Court was filed on September 22, 1997, obviously
preceding the complaint filed in Coahoma County Chancery Court on March 26, 1998. The Coahoma
County Chancery Court case named the following parties: Plaintiff, Merkel & Cocke and Defendants,
Scruggs; SMBD; Wilson; William Roberts Wilson, Jr., P.A.; Luckey; and Asbestos Group. In the
Coahoma County Chancery Court complaint, Merkel & Cocke sought to interplead $4,953.43 into the
registry of the court and to be discharged from further responsibilities and liability as to the attorneys' fees
from the Scott litigation already in legal dispute in the Jackson County Chancery Court litigation.
¶12. In Ciechanowicz v. Bowery Savs. Bank, 19 F.R.D. 367 (S.D.N.Y. 1956), a New York federal
district court, relying on F.R.C.P. 13(a), determined that the defendant's prayer for interpleader was a
compulsory counterclaim arising out of the same subject matter as the plaintiff's claim. Therefore, the
interpleader did not require an independent basis of federal jurisdiction to be brought in federal court. The
interpleader was ancillary to the federal action that was properly founded on diversity of citizenship since it
involved the same subject matter and parties of the already pending federal litigation.
¶13. In the case sub judice, the Jackson County Chancery Court action and the later filed Coahoma
County Chancery Court action both clearly addressed the same parties, as well as, the same issues in
controversy.
¶14. Since the claim filed by Merkel & Cocke addressed the same parties and controversy as the action
previously filed by SMBD in Jackson County Chancery Court, Merkel & Cocke's claim for interpleader
should have been filed as a compulsory counterclaim in the Jackson County Chancery Court action
pursuant to M.R.C.P. 13(a). In other words, we find that the interpled funds should have been pled as a
compulsory counterclaim in the Jackson County Chancery Court litigation rather than filed as multiple
litigation involving the same parties and controversies in another chancery court in another county. See
M.R.C.P. 13(a). We find that the Coahoma Chancery Court lacked jurisdiction over Merkel & Cocke's
interpleader action.
¶15. This Court has repeatedly stated that it is a "well established rule in this jurisdiction that where two (2)
suits between the same parties over the same controversy are brought in courts of concurrent jurisdiction,
the court which first acquires jurisdiction retains jurisdiction over the whole controversy to the exclusion or
abatement of the second suit." Beggiani, 519 So.2d at 1210. See Hancock v. Farm Bureau Ins. Co.,
403 So. 2d 877 (Miss. 1981); Huffman v. Griffin, 337 So. 2d 715 (Miss. 1976). In Huffman, 337
So.2d at 719, this Court also stated that "in this state priority of jurisdiction between courts of concurrent
jurisdiction is determined by the date the initial pleading is filed, provided process issues in due course." See
Euclid-Mississippi v. Western Cas. & Sur. Co., 249 Miss. 547, 559-60, 163 So. 2d 676 (1964);
Shackelford v. New York Underwriters Ins. Co., 189 Miss. 396, 407-08, 198 So. 31 (1940). "The
court which first acquires jurisdiction retains jurisdiction over the whole controversy to the exclusion or
abatement of the second suit. Huffman, 337 So.2d at 719; see Lee v. Lee, 232 So. 2d 370, 373 (Miss.
1970), 20 Am.Jur.2d Courts § 128, at 481 (1965); 1 C.J.S. Abatement and Revival § 33, at 58-59
(1936); 21 C.J.S. Courts § 492, at 745 (1940). Further, it has been stated, in regard to the "priority of
jurisdiction" rule that:
In order that the rule may be applicable which prevents interference by another court with the
jurisdiction of the court first assuming it, the second action should be between the same parties,
seeking on the one hand, and opposing on the other, the same remedy, and should relate to the same
questions.
Beggiani, 519 So.2d at 1210 (emphasis added).
¶16. We find that the Coahoma County Chancery Court erred in accepting jurisdiction over Merkel &
Cocke's interpleader. We further hold that the Coahoma County Chancery Court lacked jurisdiction under
the doctrine of priority of jurisdiction. If Merkel &Cocke seek interpleader relief, the pending litigation in the
Chancery Court of Jackson County is the proper jurisdiction for Merkel & Cocke to bring its action to
interplead funds as a compulsory counterclaim to the pending Jackson County Chancery Court litigation.
II. Accounting Issue
¶17. Merkel & Cocke contend that all other parties that are necessary in order to litigate the accounting of
funds received and disbursed from all other asbestos settlements including Scott have already been joined in
the pending litigation in the Circuit Court of Hinds County. Merkel & Cocke seek to have all accounting
issues involving Merkel & Cocke in the Jackson County Chancery Court litigation transferred to Hinds
County Circuit Court.
¶18. It should first be noted that the jurisdiction of the accounting issue involving Merkle & Cocke in the
Jackson County Chancery Court is not properly before us at this time. The action before this Court is an
appeal from the judgment of the Coahoma County Chancery Court, and the issue raised is whether that
court lacked jurisdiction to render the appealed judgment because of the prior jurisdiction of the Jackson
County Chancery Court. The question of whether Hinds County Circuit Court has prior jurisdiction over
Jackson County Chancery Court is not properly before us at this time and could be brought before us only
by an appeal from a judgment of the Jackson County Chancery Court.
¶19. Furthermore, even assuming the question of Jackson County's jurisdiction were properly before this
Court, the doctrine of priority of jurisdiction would not preclude the Jackson County Chancery Court from
maintaining jurisdiction over the action before it. For the doctrine of priority jurisdiction to apply, the second
action must be "between the same parties, seeking on the one hand, and opposing on the other, the same
remedy, and should relate to the same question." In re D.L.D., 606 So. 2d at 1129 (quoting Beggiani,
519 So. 2d at 1210 (emphasis added)). Merkel & Cocke, Merkel, and Mitchell, all parties to the action in
Jackson County Chancery Court, are not parties to the action in Hinds County Circuit Court. Rather,
Merkel & Cocke represents Luckey in the Hinds County Circuit Court action. Also, Luckey, Wilson, and
the Asbestos Group have been dismissed from the action in Jackson County Chancery Court based on that
court's finding that Hinds County Circuit Court had priority jurisdiction over the Scott fees at issue. The
only action left pending in Jackson County Chancery Court is SMBD's claim against Merkel & Cocke,
Merkel, and Mitchell for alleged tortious interference with Scruggs's contractual relationship with Wilson.
The Jackson County Chancery Court has held the remaining claim against Merkel & Cocke in abeyance
pending the outcome of the Hinds County Circuit Court action because the outcome could potentially affect
the Jackson County Chancery Court action against Merkel & Cocke.
¶20. The Jackson County Chancery Court has recognized the prior jurisdiction of the Hinds County Circuit
Court. Not only is this question not properly before us, but the doctrine of priority of jurisdiction does not
apply to the action before the Jackson County Chancery Court.
III. Interpleader
¶21. SMBD contends that the Coahoma County Chancery Court erred in discharging Merkel & Cocke
from all liability associated with the interpled funds.
¶22. The comment to Rule 22 of the M.R.C.P. states that:
[T]he purpose of Rule 22, interpleader, is to permit a stakeholder who is uncertain if and to whom he
is liable for money or properly held by him to join those who are or who might asset claims against
him and to thereby obtain a judicial determination for the proper disbursement of the money or
property.
¶23. In First Nat'l Bank v. Middleton, 480 So. 2d 1153, 1155 (Miss. 1985), this Court stated:
We are of the opinion that Rule 22 of the Mississippi Rules of Civil Procedure, adopted by this Court
on May 26, 1981, terminated the historical requirements for interpleader in the chancery courts. We
are of the opinion that Rule 22 does not enlarge the jurisdiction of the chancery courts, that it is
procedural, and its purpose is to broaden and extend the scope of the remedy in the chancery court.
¶24. The comment to Rule 22 of M.R.C.P. further states:
Historically, equitable interpleader was characterized by four requirements: (1) the same thing, debt or
duty must be claimed by both or all the parties against whom the relief is demanded; (2) all their
adverse titles or claims must be dependent on or be derived from a common source; (3) the person
asking the relief - the plaintiff - must not have or claim any interest in the subject matter; (4) he must
have incurred no independent liability to either of the claimants; that is, he must stand perfectly
indifferent between them, in the position of a stakeholder. See V. Griffith, Mississippi Chancery
Practice, § § 420-426 (2d ed. 1950). It is intended that Rule 22 be applied liberally with the view
toward increasing the availability of interpleader in eliminating historical technical restraints on the
device that are not founded on adequate policy consideration. As a result, the four historic limitations
on interpleader should be of no great significance.
¶25. We find that an interpleader action was available to Merkel & Cocke to use to facilitate paying the
attorneys' fees within their possession into the registry of the court. However, Merkel and Cocke's action
for interpleader should have been brought as a compulsory counterclaim to the pending litigation in the
Chancery Court of Jackson County. The Coahoma County Chancery Court erred by assuming jurisdiction
of the interpleader action and deciding Merkel & Cocke's liability in connection with the attorneys' fees. As
previously stated, we find that the Coahoma County Chancery Court erred in allowing Merkel & Cocke to
proceed with the interpleader and further erred in releasing Merkel & Cocke from all liability in connection
with the interpled funds.
IV. Attorneys' Fees
¶26. The Coahoma County Chancery Court granted Merkel & Cocke attorney fees against SMBD. It
found SMBD's Motion to Dismiss Merkel & Cocke's interpleader to be without merit.
¶27. In Brown v. Hartford Ins. Co., 606 So. 2d 122, 127 (Miss. 1992), this Court stated:
Sanctions are appropriate when a claim is either frivolous or filed for harassment value.... When a
party espouses a viable legal theory, MRCP 11 sanctions are inappropriate.
See Bean v. Broussard, 578 So. 2d 908, 912-13 (Miss. 1991) (citing Dethlefs v. Beau Maison Dev.
Corp., 511 So. 2d 112, 118 (Miss. 1987)). See also Tricon Metals & Sers., Inc. v. Topp, 537 So. 2d
1331, 1335 (Miss. 1989).
¶28. Rule 11 (b) of M.R.C.P states in pertinent part as follows:
If any party files a motion or pleading which in the opinion of the court, is frivolous or is filed for the
purpose of harassment or delay, the court may order such a party, or his attorney, or both, to pay to
the opposing party of parties the reasonable expenses incurred by such other parties and by their
attorneys, including reasonable attorney's fees.
¶29. To say that a legal argument is viewed as weak is not enough to establish that the argument was
brought for the purpose to harass the other parties or that it is without merit. See In re Fankboner v.
Jones, 638 So. 2d 493, 498 (Miss. 1994); Brown v. Hartford Ins. Co., 606 So.2d at 127. In order to
avoid Rule 11(b) sanctions, the party or his attorney at the time of filing the pleading or pleadings, when
viewed objectively, must have reasonably believed that he had a "hope of success." In re Fankboner, 638
So.2d at 498; Bean, 587 So.2d at 912; Tricon Metals, 537 So.2d at 1336.
¶30. We have determined the Coahoma County Chancery Court erred in not dismissing Merkel and
Cocke's interpleader action under the doctrine of priority of jurisdiction. Merkel and Cocke's interpleader
should have been brought as a compulsory counterclaim in the pending Jackson County litigation. Since,
SMBD presented a viable legal argument, Rule 11(b) sanctions were improper.
CONCLUSION
¶31. For all the foregoing reasons, the Coahoma County Chancery Court erred as to all issues raised by
SMBD. Therefore, the judgment of the Coahoma County Chancery Court is reversed and rendered.
Merkel & Cocke can seek interpleader relief by filing an interpleader action as a compulsory counterclaim
in the prior pending Jackson County Chancery Court litigation.
¶32. REVERSED AND RENDERED.
PITTMAN, C.J., SMITH, P.J., WALLER, COBB, DIAZ AND GRAVES, JJ., CONCUR.
McRAE, P.J., AND CARLSON, J., NOT PARTICIPATING.
1. Wilson, Luckey and Asbestos Group were all dropped from the Jackson County action based on the
pending Hinds County Circuit Court case's priority of jurisdiction over their claims. The pending litigation in
Hinds County Chancery Court addresses the issue of accounting for the attorneys' fees received from
asbestos litigation and settlements involving Scruggs, Wilson, Luckey, and Asbestos Group.