Opinion
No. 59933-0-I.
June 23, 2008.
Appeal from a judgment of the Superior Court for Snohomish County, No. 06-2-12704-6, Richard J. Thorpe, J., entered April 12, 2007.
Affirmed by unpublished per curiam opinion.
Purporting to act on behalf of a Washington corporation and two of its directors, attorney Justin Osemene filed this action against a third director. The trial court found that Osemene lacked authority to represent the corporation and one of the directors and dismissed both parties from the action. The court also awarded attorney fees incurred in resisting the unauthorized litigation and imposed civil rule (CR) 11 sanctions. Finding no error, we affirm.
FACTS
Patricia Harris, Romualdo Zamora, and Zoila Saritama are the three shareholders and directors of Colmex, Inc., a Washington Corporation that owned the El Porton restaurant in Everett. Saritama and her husband, Jonny Strauss, managed and operated the restaurant. Harris was originally the sole shareholder of Colmex, but eventually transferred 55 percent of the shares to Saritama and 25 percent of the shares to Zamora. At some point in 2005, Colmex retained attorney Justin Osemene to represent the corporation in conjunction with the stock transfers and other matters.
In late 2006, dissension arose among the three Colmex shareholders involving operation of the restaurant and Harris's contact with the Washington State Liquor Control Board, which suspended the restaurant's liquor license. On November 8, 2006, Harris and Zamora, represented by attorney Michael Jacobs, filed a Derivative Complaint for Recovery of Damages (derivative complaint) on behalf of Colmex. The complaint named Saritama and Strauss as defendants and alleged breaches of fiduciary duty, waste of corporate assets, abuse of control, and gross mismanagement.
On November 27, 2006, Osemene prepared and filed a Complaint for Breach of Contract, Monies Owed, Breach of Fiduciary Duty, Intentional Misrepresentation, Unlawful Conversion, Unjust Enrichment, and For Violations and Additional Relief under the Unfair Business Practices — Consumer Protection Act (complaint for breach of contract). The complaint named Harris as the defendant and Colmex, Zamora and Saritama as plaintiffs. The complaint recited that Zamora and Saritama had filed the action in their individual capacities and as shareholders. Among other things, Zamora and Saritama alleged that Harris's unauthorized representations to the Washington State Liquor Control Board had effectively divested them of their interest in Colmex and that they were entitled to restitution for the amount of their investments.
On December 8, 2006, Harris and Zamora attended a special Board (the Board) of Directors meeting. Saritama, the third director, received notice of the meeting but did not attend. At the meeting, the Board adopted resolutions removing Saritama as a corporate officer, removing Strauss as manager of the restaurant, and authorizing Harris's actions involving the Washington State Liquor Control Board. The Board also directed Osemene to dismiss the action against Harris immediately and then discharged him from any further representation of Colmex.
Jacobs notified Osemene of the Board's resolutions and asked him to document his authority to file the complaint for breach of contract on behalf of Zamora. On January 4, 2007, Jacobs filed a Motion to Repair Injury under RCW 2.44.020, seeking an order removing Colmex and Zamora as plaintiffs in the action and alleging that Osemene lacked authority to pursue the action on their behalf. In support, Jacobs submitted copies of the Board's resolutions and a declaration from Zamora stating that he had not authorized Osemene to file suit against Harris on his behalf as an individual or shareholder and that Osemene had never discussed the action with him. The hearing on the motion was scheduled for January 12, 2007.
On January 10, 2007, Harris, Zamora, and Saritama attended a special Board meeting. Both Jacobs and Osemene were also present. The parties' accounts of the meeting vary greatly, but it is undisputed that the meeting broke down and the Board took no action. By this time, the restaurant was also seriously in debt.
Osemene did not appear at the hearing on January 12, 2007. The trial court granted Jacobs' motion and entered an Order to Repair Injury, finding that Osemene did not have authority to file the action on behalf of Colmex and Zamora and that he had continued to pursue the action after both parties had directed him to remove them from the complaint. The court dismissed Colmex and Zamora from the action and ordered Osemene to pay Zamora attorney fees of $2,830.80.
On February 6, 2007, Osemene moved to set aside the attorney fee award under CR 60(b)(1). He also asked the court to impose CR 11 sanctions on Jacobs for filing the Motion to Repair Injury. Following a hearing on February 22, 2007, the trial court denied Osemene's motions, finding that he had failed to demonstrate any basis for relief under CR 60(b)(1) or a prima facie defense. The court awarded Zamora $2,542 in additional attorney fees and imposed $500 in CR 11 sanctions against Osemene for bringing a baseless motion for CR 11 sanctions against Jacobs.
Osemene moved for reconsideration citing CR 59(a)(9). He again asked the court to impose CR 11 sanctions on Jacobs for filing the Motion to Repair Injury. The trial court denied the motion for reconsideration on April 11, 2007, and awarded Zamora $1,400 in attorney fees. The court imposed $500 in additional CR 11 sanctions against Osemene for filing a baseless motion for CR 11 sanctions against Jacobs.
DECISION
On appeal, Osemene challenges the trial court's orders requiring him to pay a total of $6,772.80 in attorney fees and $1,000 in CR 11 sanctions. He argues the trial court erred in refusing to vacate the Order to Repair Injury and denying his subsequent motion for reconsideration.
Motion to Vacate
Osemene contends the trial court erred when it denied his motion to vacate the Order to Repair Injury under CR 60(b)(1). CR 60(b)(1) allows relief from a judgment on a showing of "[m]istakes, inadvertence, surprise, excusable neglect or irregularity in obtaining a judgment or order." As the moving party, Osemene also had to demonstrate at least a prima facie defense to the opposing party's claim. See Topliff v. Chicago Ins. Co., 130 Wn. App. 301, 308, 122 P.3d 922 (2005) (citing White v. Holm, 73 Wn.2d 348, 352, 438 P.2d 581 (1968)). We review the trial court's ruling on a motion to vacate for an abuse of discretion. Rivers v. Wash. State Conf. of Mason Contrs., 145 Wn.2d 674, 697, 41 P.3d 1175 (2002).
On appeal, Osemene explains that he decided not to appear or respond to the Motion to Repair Injury because he "inferred, assumed, and concluded" that he had been "constructively discharged" and that the motion was, in any event, contrary to the court rules. But an attorney's deliberate decision not to appear or respond, based on a legal assessment of the situation, does not constitute a "mistake" or "inadvertence" justifying relief under CR 60(b)(1). See Lane v. Brown Haley, 81 Wn. App. 102, 108-09, 912 P.2d 1040 (1996); see also Mosbrucker v. Greenfield Implement, Inc., 54 Wn. App. 647, 652, 774 P.2d 1267 (1989) (an "irregularity" for purposes of CR 60(b)(1) occurs "when there is a failure to adhere to some prescribed rule or mode of proceeding").
Nor has Osemene addressed the legal basis for the Order to Repair Injury, much less demonstrated any defense to the opposing party's motion. The trial court's Order to Repair Injury was based on RCW 2.44.020, which provides:
If it be alleged by a party for whom an attorney appears, that he does so without authority, the court may, at any stage of the proceedings, relieve the party for whom the attorney has assumed to appear from the consequences of his act; it may also summarily, upon motion, compel the attorney to repair the injury to either party consequent upon his assumption of authority.
A related provision, RCW 2.44.030, authorizes the trial court to stay proceedings while an attorney documents his or her authority to appear in the action. Under these provisions, "either the client or the opposing party can raise a challenge to an attorney's authority." Johnsen v. Petersen, 43 Wn. App. 801, 806, 719 P.2d 607 (1986).
Osemene has not submitted any legal arguments challenging the trial court's reliance on RCW 2.44.020 Nor has he challenged the validity of the Board's resolutions directing him to dismiss the action against Harris and discharging him as Colmex's counsel. Because he failed to demonstrate any authority for his continued representation of Colmex or Zamora, Osemene has not established a prima facie defense to the Motion to Repair Injury.
Osemene devotes much of his brief to claims that Jacobs misled the trial court by failing to disclose his misconduct at the January 10, 2007, Board meeting and by failing to disclose which parties he had been representing. But these arguments rest on conclusory factual allegations that are, at best, disputed. Nor has Osemene established that such allegations affected the motion before the trial court, which challenged Osemene's authority to represent Colmex and Zamora.
Osemene also asserts that the trial court made various errors during the hearings on his motions. But his failure to submit a report of proceedings precludes appellate review of the alleged errors. See Bulzomi v. Dep't of Labor Indus., 72 Wn. App. 522, 525, 864 P.2d 996 (1994).
In summary, Osemene has not identified any mistake or inadvertence justifying his failure to respond to the Motion to Repair Injury or established a prima facie defense. Accordingly, the trial court did not abuse its discretion in denying Osemene's CR 60(b)(1) motion to vacate.
Motion for Reconsideration
Osemene moved for reconsideration of the denial of his motion to vacate, citing CR 59(a)(9), which provides for reconsideration on the grounds that "substantial justice has not been done." We review the trial court's ruling on a motion for reconsideration solely for an abuse of discretion. Olpinski v. Clement, 73 Wn.2d 944, 951, 442 P.2d 260 (1968). Courts rarely grant reconsideration under CR 59(a)(9) for lack of substantial justice because of the other broad grounds afforded under CR 59(a). See Lian v. Stalick, 106 Wn. App. 811, 825, 25 P.3d 467 (2001). In seeking reconsideration, Osemene merely repeated the arguments that he made in his motion to vacate. As set forth above, Osemene failed to demonstrate any error or abuse of discretion in the trial court's failure to vacate the Order Repairing Injury. Under the circumstances, Osemene has failed to demonstrate that the trial court abused its discretion in denying reconsideration based on CR 59(a)(9).
Attorney Fees
Osemene next contends the trial court erred in requiring him to pay a total of $6,772.80 in attorney fees. Although the precise nature of his legal argument is unclear, Osemene asserts that there are circumstances in which an attorney can represent both a corporation and its shareholders or directors and that, in any event, despite the references in the complaint, he did not intend to pursue Zamora's individual interests in the action. But these contentions fail to establish trial court error because they do not address the legal basis for the trial court's award of attorney fees.
Osemene made no showing that he had authority to pursue the complaint for breach of contract on behalf of Colmex or Zamora. Under RCW 2.44.020, the court may compel an attorney who has appeared without authority to "repair the injury." When an attorney "starts or pursues litigation without authorization, an obvious and foreseeable injury to the opposing party is the cost of defense, for which the proper method of 'repair' is the award of monetary judgment." Johnsen, 43 Wn. App. at 807. Here, the trial court awarded attorney fees to reimburse the costs of defending against Osemene's attempts to continue the litigation. Osemene has not demonstrated any error in the trial court's decision to award attorney fees.
Osemene also appears to challenge the amount of the award. But in each instance, the trial court reviewed an affidavit setting forth the attorney's hourly rate and an itemized billing report listing the specific expenses incurred in responding to Osemene's motions. Because Osemene has not challenged the sufficiency of the evidence or the reasonableness of the amount of the award, he has not shown any abuse of discretion in the trial court's determination of the amount of the attorney fees.
CR 11 Sanctions
Osemene challenges the trial court's imposition of CR 11 sanctions totaling $1,000. The court imposed the sanctions after Osemene twice moved for the imposition of CR 11 sanctions against Jacobs. We review the trial court's imposition of CR 11 sanctions for an abuse of discretion. Biggs v. Vail, 124 Wn.2d 193, 197, 876 P.2d 448 (1994).
CR 11 is intended to prevent baseless filings and filings made for an improper purpose. MacDonald v. Korum Ford, 80 Wn. App. 877, 883, 912 P.2d 1052 (1996). "A filing is 'baseless' when it is '(a) not well grounded in fact, or (b) not warranted by (i) existing law or (ii) a good faith argument for the alteration of existing law.'" MacDonald, 80 Wn. App. at 883-84 (quoting Hicks v. Edwards, 75 Wn. App. 156, 163, 876 P.2d 953 (1994)).
In moving for CR 11 sanctions, Osemene asserted that Jacobs lacked authority to bring the Motion to Repair Injury and that he was merely attempting to increase the dissension among the Colmex shareholders. But Osemene completely failed to address or challenge the legal basis for the Motion to Repair Injury. Under RCW 2.44.020, either the client or the opposing party may challenge an attorney's authority to file a lawsuit. Johnsen, 43 Wn. App. at 806. Nor did Osemene demonstrate any authority to continue his representation of Colmex and Zamora. Under the circumstances, the record amply supports the trial court's findings that Osemene's motions for CR 11 sanctions were baseless and unsupportable. The trial court did not abuse its discretion in imposing CR 11.
Zamora has requested an award of attorney fees on appeal for continuing to respond to Osemene's pursuit of the underlying litigation. See RAP 18.1(a); Johnsen, 43 Wn. App. at 808. The request is granted subject to compliance with RAP 18.1(d).
Sanctions are imposed on Osemene in the amount of $250 payable to the court for failure to comply with the rules of appellate procedure applicable to brief length and formatting.
Affirmed.