EE Mart F.C., L.L.C. v. Delyon

PRESENT: Lemons, C.J., Goodwyn, Millette, Mims, McClanahan, and
Powell, JJ., and Koontz, S.J.
EE MART F.C., L.L.C.
OPINION BY
v. Record No. 140708 JUSTICE CLEO E. POWELL
FEBRUARY 26, 2015
SUZANNE DELYON, ET AL.
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Brett A. Kassabian, Judge
EE Mart F.C., L.L.C. (“EE Mart”), appeals the judgment of
the trial court ordering it to pay sanctions under Code § 8.01-
271.1. Specifically, EE Mart takes issue with the trial court’s
award of attorney’s fees that were incurred as a result of
actions filed by EE Mart in other jurisdictions.
I. BACKGROUND
EE Mart is a Virginia limited liability company that owned
and operated an international grocery store in Merrifield,
Virginia. Suzanne Delyon (“Delyon”) is the former chief
financial officer of EE Mart. She is also the owner of SDES,
LLC; Expo Emart, LLC; Expo Emart I, LLC; and Expo Emart III, LLC
(collectively the “Other LLCs”).
On May 24, 2010, EE Mart brought an action against Delyon
and the Other LLCs in Fairfax County Circuit Court alleging
wrongful conversion and other claims (the “Original Action”).
These claims related to insurance proceeds paid to Delyon by
Traveler’s Insurance Company (“Traveler’s”). On the eve of
trial, EE Mart nonsuited the case.
In October 2011, EE Mart brought an action against
Traveler’s in the Circuit Court of Carroll County, Maryland (the
“Maryland Action”). This action related to Traveler’s payment
of the insurance proceeds to Delyon. Traveler’s subsequently
removed the case to federal court. After the case was removed
to federal court, EE Mart amended its complaint to add Delyon
and the Other LLCs as defendants. The claims brought by EE Mart
against Delyon and the Other LLCs were, for the most part, the
same as the claims it brought against them in the Original
Action. However, EE Mart also brought a civil RICO claim
against Delyon and the Other LLCs to avoid losing federal
jurisdiction over the matter because of a lack of diversity.
Delyon and the Other LLCs filed a motion to dismiss the RICO
claim, and the motion was sustained by the district court. The
case was transferred back to the Circuit Court of Carroll
County, where it is still pending.
On June 15, 2012, Delyon and the Other LLCs filed the
present action in Fairfax County Circuit Court (the “Present
Action”), seeking to enjoin EE Mart from proceeding with the
Maryland Action and seeking declaratory judgment that the
Maryland Action was without merit. On November 6, 2012, EE Mart
filed a counterclaim against Delyon and the Other LLCs,
2
reasserting the same claims it had pled in the Original Action.
In their answer to the counterclaim, Delyon and the Other LLCs
sought sanctions under Code § 8.01-271.1 on the grounds that the
assertions in the counterclaim were frivolous and based on false
statements.
On August 23, 2013, EE Mart’s attorneys were granted leave
to withdraw from the case. EE Mart failed to engage new
attorneys. As a result, EE Mart did not file a witness list or
exhibit list prior to trial or otherwise participate in pretrial
activities. Accordingly, the trial court determined that EE
Mart had abandoned its counterclaim. After hearing the evidence
presented by Delyon and the Other LLCs, the trial court ruled in
their favor. The trial court also entered a judgment order
dismissing EE Mart’s counterclaim with prejudice, finding that
the counterclaim was “frivolous and without support in law or
fact.”
Delyon and the Other LLCs then made an oral application for
sanctions against EE Mart, claiming that the Original Action,
Maryland Action and the counterclaim to the Present Action were
frivolous. In their motion, they sought the total amount of
attorney’s fees that they had expended in defending against the
Original Action and the Maryland Action, as well as the
attorney’s fees expended in the Present Action. Relying on Code
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§ 8.01-271.1, the trial court granted the motion and awarded
$25,550 in attorney’s fees. 1
EE Mart subsequently retained an attorney and timely filed
a motion for reconsideration. In its motion for
reconsideration, EE Mart argued that its various litigation
filings were not frivolous and that the calculation of the
attorney’s fees was in error. The trial court denied the motion
for reconsideration.
EE Mart appeals.
II. ANALYSIS
In its appeal, EE Mart argues that the trial court abused
its discretion in determining the amount of sanctions to award
because it “overreached and exceeded the bounds of its
jurisdiction.” Specifically, EE Mart takes issue with the fact
that the sanctions award included attorney’s fees that Delyon
and the Other LLCs had incurred in suits that pre-dated the
filing of the Present Action or were tried in other
jurisdictions. According to EE Mart, the proper procedure for
seeking those sanctions would be a timely application in the
actual action or court in which Delyon and the Other LLCs
incurred those attorney’s fees.
1
This amount represented the full and exact amount Delyon
and the Other LLCs sought to recover in attorney’s fees.
4
As an initial matter, it is important to note that EE Mart
does not assign error to the fact that sanctions were awarded.
Rather, it only assigns error to the trial court’s calculation
of the attorney’s fees it ultimately awarded as a sanction.
Accordingly, our analysis in the present case is limited to
whether the trial court’s calculation of attorney’s fees was
proper.
Code § 8.01-271.1 expressly limits the amount that may be
awarded to an appropriate sanction, which may include those
attorney’s fees and expenses “incurred because of the filing of
the pleading, motion, or other paper or making of the motion.”
(Emphasis added.) See Oxenham v. Johnson, 241 Va. 281, 289-90,
402 S.E.2d 1, 6 (1991) (holding that an award of attorney’s fees
is limited to fees incurred in responding to the sanctionable
pleading in the present action). The use of the phrase
“incurred because of” clearly indicates that a court cannot
award attorney’s fees or expenses for actions that occurred
prior to the sanctionable act. Cf. Cardinal Holding Co. v.
Deal, 258 Va. 623, 632, 522 S.E.2d 614, 619 (1999) (permitting
“a recovery of such fees and expenses incurred in defending
against an unwarranted claim, but also a recovery of those fees
and expenses incurred in pursuing a sanctions award arising out
of such a claim”).
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Furthermore, because a trial court’s authority to award
sanctions under Code § 8.01-271.1 is triggered by the filing of
a pleading, motion, or other paper or making of a motion in
violation of the statute, while not expressly stated, the clear
implication is that the filing or making of the motion must
occur in the same action and same court that subsequently awards
the sanctions. To hold otherwise would contravene the finality
guaranteed by Rule 1:1, because a trial court’s authority to
award attorney’s fees as sanctions to related but previously
litigated matters could be extended beyond 21 days after final
judgment has been entered. It could also effectively impose the
requirements of Code § 8.01-271.1 on every litigant in every
court in the country by allowing a party to seek sanctions in
Virginia for filings or motions made elsewhere. 2 Thus, under
Code § 8.01-271.1, a trial court may only award attorney’s fees
incurred because of a filing or motion made to the trial court
in the matter then pending before the court; it may not award
attorney’s fees incurred for a filing or motion made elsewhere.
2
That is not to say, however, that evidence of similar
frivolous suits may not be considered in determining whether an
award of sanctions is warranted. Indeed, such evidence may be
highly probative for such a purpose. Rather, as discussed
above, our holding today addresses only the principle that, when
determining the amount of sanctions to award, a trial court is
limited to the attorney’s fees incurred as a result of a filing
or motion made in the case presently before it.
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Here, it is undisputed that the sanctions award included
attorney’s fees that were not “incurred because of” any filing
or motion made in the Present Action. Indeed, it is readily
apparent that the sanctions award included attorney’s fees for
actions that not only pre-dated any filing by EE Mart in the
Present Action, but also actions that occurred in a different
state. Accordingly, the trial court erred in its calculation of
the attorney’s fees it could award as a sanction.
III. CONCLUSION
For the foregoing reasons, we will reverse the judgment of
the trial court with regard to the amount of sanctions awarded
and we will remand the matter to the trial court for further
proceedings in accord with this opinion to calculate the proper
amount of attorney’s fees to be awarded.
Reversed and remanded.
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