|
COURT OF
APPEALS DECISION DATED AND
RELEASED August
29, 1996 |
NOTICE |
|
A party may file with the Supreme Court a petition to review an
adverse decision by the Court of Appeals.
See § 808.10 and Rule
809.62, Stats. |
This opinion is subject to further editing. If published, the official version will appear in the bound
volume of the Official Reports. |
No. 95-2841
STATE OF WISCONSIN IN
COURT OF APPEALS
DISTRICT IV
ROSETTA
A. JORENBY, A/K/A ROSE JORENBY,
Plaintiff-Respondent,
v.
JOHN
HEIBL,
Defendant-Appellant.
APPEAL
from order of the circuit court for Dane County: RICHARD J. CALLAWAY, Judge.
Reversed.
Before
Eich, C.J., Vergeront and Roggensack, JJ.
VERGERONT,
J. Attorney John Heibl appeals from an order determining that
the motion he filed on behalf of his client to strike a jury demand was
frivolous under § 814.025, Stats.[1] The court ordered Heibl to pay $1,126.06 for
plaintiff's attorney fees and costs in defending the motion. Heibl contends that the trial court erred
because the motion had a reasonable basis in law and there was no evidence from
which the court could find that the sole purpose of the motion was to harass or
maliciously injure another. We agree
with each of these contentions and reverse.
Rose
Jorenby and other persons similarly situated filed a complaint against
Ohmeda/Anaquest Employees Credit Union (Ohmeda) alleging that Ohmeda violated
the Equal Credit Opportunity Act 15 U.S.C. § 1691. The complaint did not demand a jury trial. Heibl represents Ohmeda. After Ohmeda's motion to dismiss for lack of
personal jurisdiction was denied and Ohmeda had answered the complaint, the
court sent a notice to both counsel entitled "Notice of
Hearing." This notice stated that
"[t]his case is scheduled for:
Pre-trial/scheduling conference" on February 28, 1995. The minutes from that event stated
"Activity: pre-trial/scheduling
conference" and report that the court granted plaintiff's counsel's request to amend the complaint to delete
the class action allegations and proceed as an individual action. The court set dates for filing the amended
complaint, for answering the amended complaint, and for Ohmeda's filing of a
summary judgment motion. The minutes
stated: "Depending upon the
outcome for the S.J. motion the case will either be dismissed or a scheduling
conference will be scheduled."
The
amended complaint, filed on March 10, 1995, requested a jury trial, and jury
fees were paid on that date. Heibl, on
behalf of Ohmeda, filed a motion to strike the jury demand on the ground that
the plaintiff had failed to comply with § 805.01(2), Stats., which provides:
Any party entitled
to a trial by jury or by the court may demand a trial in the mode to which
entitled at or before the scheduling conference or pretrial conference,
whichever is held first. The demand may
be made either in writing or orally on the record.
The
court held a hearing on the motion on June 19, 1995, and heard argument. At the close of the hearing, the court gave
the plaintiff ten days to file a brief in response to the motion and gave
Ohmeda ten days to reply. Heibl did not
file a reply brief for Ohmeda or write to the court stating that he did not
intend to do so. In its written
decision, the court concluded that Heibl's argument made at the hearing on the
motion was without merit because "under no stretch of the imagination can
the hearing of February 28, 1995 be considered a scheduling or pretrial
conference." The court noted that
it had made this fact clear to Heibl at the hearing on the motion to strike and
also noted that the February 28, 1995 hearing was held to address the
defendant's objection to the plaintiff's discovery request.
The
court then concluded that the motion to strike was frivolous under
§ 814.025, Stats. The court determined that Heibl knew or
should have known that the motion to strike the jury demand had no reasonable
basis in law or equity and that Heibl failed to support his motion with a good
faith argument for the extension, modification or reversal of existing law.
"Indeed," the court stated, "defense counsel failed to support
the motion with any argument as ordered by the court on June 19,
1995." The court considered that
it was "beyond question" that the jury demand was timely. The court also concluded--based on Heibl's
arguments at the June 29 hearing, his failure to file a reply brief and the
previous pleadings filed in the case--that the motion to strike was
"initiated in bad faith, in order to harass and increase plaintiff's
litigation costs." The court
directed that, upon plaintiff's application, a hearing be held on the amount of
fees and costs.
The
court's written decision and order were entered on August 24, 1995. On October 2, 1995, Ohmeda moved the court
to reconsider the portion of the decision and order that related to
§ 814.025, Stats. Heibl filed with the motion his affidavit
and attachments, including the "Notice of Hearing" for February 28,
1995, and correspondence between counsel.[2] Plaintiff filed an objection to
consideration of this motion on the ground that it was untimely under
§ 805.17(3), Stats., because
it was not filed within twenty days. At
the hearing on October 4, 1995, scheduled on plaintiff's application to
determine the amount of attorney fees, the court denied the motion to reconsider
on the ground that it was untimely and denied Heibl's request to make an offer
of proof in addition to that which was contained in his affidavit. Heibl had no objection to the amount of fees
requested by plaintiff's counsel. He
requested that the award be entered against him, not his client, because the
decision not to file a reply brief was his alone.
We
first address the procedure followed by the trial court in deciding the issue
of frivolousness. Neither the court nor
plaintiff's counsel raised the issue of frivolousness at the June 29, 1996
hearing on the motion to strike the jury demand and there is no motion by
plaintiff asking for a determination that the motion to strike was
frivolous. The court raised this issue
sua sponte in deciding the merits of the motion to strike.[3] While it is appropriate for a court to raise
the issue of frivolousness on its own, the party against whom the claim is made
must have notice and an opportunity to respond. See In Matter of the Estate of Bilsie, 100
Wis.2d 342, 356, 302 N.W.2d 508, 517 (Ct. App. 1981). There need not always be a separate hearing on the issue. If the person against whom the claim of
frivolousness is made is on notice of the claim and has the opportunity to
respond, and if there are no factual disputes, the court may decide based on
the record. See Radlein v.
Industrial Fire & Casualty Ins. Co., 117 Wis.2d 605, 608, 629, 345
N.W.2d 874, 876, 886 (1984) (separate hearing not required where attorney was
on notice to defend position because claim of frivolousness contained in motion
to dismiss). See also Kelly v.
Clark, 192 Wis.2d 633, 653, 531 N.W.2d 455, 462 (Ct. App. 1995)
(evidentiary hearing not necessary where facts are undisputed).
It
appears that neither Ohmeda nor Heibl knew the issue of frivolousness was being
considered until the written decision and order was entered on August 24,
1995. When Heibl attempted to present
the court with factual material and argument against the determination of
frivolousness in the form of a motion for reconsideration, the court denied the
motion for reconsideration as untimely.[4] Heibl should have had the opportunity to
address the claim of frivolousness and have all his arguments and factual
material considered before the decision was made. An opportunity to argue the merits of the motion to strike is not
a substitute for the opportunity to defend against a claim that the motion is
frivolous.
We
now consider whether the trial court erred in determining that the motion to
strike was frivolous under § 814.025(3)(b), Stats., because it had no reasonable basis in law.[5] This presents a mixed question of law and
fact. Stern v. Thompson &
Coates, Ltd., 185 Wis.2d 220, 241, 517 N.W.2d 658, 666 (1994). A determination of what a reasonable
attorney knew or should have known with regard to the facts require the trial
court to determine what those facts were.
Stoll v. Adriansen, 122 Wis.2d 503, 513, 362 N.W.2d 182,
187-88 (Ct. App. 1984). We do not
overturn findings of fact unless they are clearly erroneous. Id. at 513, 362 N.W.2d at
188. However, the legal significance of
those findings of facts, in terms of whether those facts would lead a
reasonable attorney or litigant to conclude the claim is frivolous, presents a
question of law. Id. We review questions of law de novo. Stern, 185 Wis.2d at 241, 517
N.W.2d at 666. Doubts are resolved in
favor of finding the claim nonfrivolous.
Id. at 235, 517 N.W.2d at 663. A position is not frivolous simply because it is
unsuccessful. Id. at 243,
517 N.W.2d at 667.
The
legal basis for the motion to strike is § 805.01(2) and (3), Stats.
Paragraph 2 provides that any party entitled to a trial by jury may
demand a jury trial "at or before the scheduling conference or pretrial
conference, whichever is held first."
Section 805.01(3) provides that failure to demand a jury trial in
accordance with subsec. (2) constitutes a waiver of trial "in such
mode." If a reasonable attorney
could consider that the February 19, 1995 hearing was a scheduling conference
or pretrial conference, then Heibl's motion did have a reasonable basis in
law.
Section
802.10(3)(a), Stats., provides
for scheduling conferences, on a court's own motion or the motion of a party,
no earlier than ninety days after the filing of the complaint. Matters set at a scheduling conference
include the time for filing a motion for a default judgment, for completing
discovery, for amending pleadings, for filing pretrial motions, and dates for a
pretrial conference and trial. Section
802.10(3)(a)1-5. The judge is then to
issue a written order reciting the schedules established. Section 802.10(3)(b). Section 802.11(1), Stats., requires that a pretrial conference be held in each
case unless waived by the parties with the judge's approval. Pretrial conferences may address the
numerous items listed, including whether pleadings should be amended, whether
issues should be tried by the court or jury and "such other items as may
aid in the disposition of the action."
Section 802.11(1)(b), (e) and (m).
The court may adjourn pretrial conferences from time to time or may
order an additional pretrial conference.
Section 802.11(3). The
pretrial order issued after the conference sets or confirms the final trial
date. Section 802.11(4).
At
the hearing on June 19, 1995, plaintiff's counsel argued that the February 28, 1995
proceeding was not a scheduling
conference because that was "set aside" to allow the pleading
amendments and summary judgment motion.
Although she stated that it was a pretrial conference "in
effect," she also argued that it
was not really a pretrial because "you can't have a pre-trial without a
scheduling conference." The court
referred to the February 28, 1995 proceeding as a pretrial, and expressed its
concern that the demand for a jury trial had not been requested at the
pretrial. However, the court gave
plaintiff's attorney the opportunity to brief the issue. After plaintiff's counsel said she could
file her brief within ten days, the court asked Heibl: "Do you want ten days to
respond?" Heibl answered: "Please."
Apparently
after that hearing, based on plaintiff's counsel's brief, the court became
convinced that the February 28, 1995 proceeding was neither a scheduling
conference nor a pretrial conference.
However, the court's statement in its written decision that it made this
clear to the defendant at the June 19, 1995 hearing is not supported by the
record of that hearing. The comments
the court made, which we have noted above, indicate just the opposite. The record also does not support the court's
finding that the February 28, 1995 proceeding was held to address the
defendant's objection to the plaintiff's discovery request. There is no reference to discovery issues in
the notice of the February 28, 1995 proceeding, in the minutes, or in Heibl's
letter to plaintiff's counsel summarizing the proceeding. Plaintiff does not point us to anything in
the record that indicates that the proceeding was held to discuss discovery
issues, and does not even argue that that was the case.
For
purposes of this appeal, we need not decide whether the February 19, 1995
proceeding was a scheduling conference or a pretrial conference or something
else. The narrow issue is whether a
reasonable attorney could consider it either a scheduling conference or a pretrial
conference for purposes of applying § 805.01(2), Stats. We conclude a
reasonable attorney could consider it a scheduling conference. We reach this conclusion based on the
denomination "pretrial/scheduling conference" in the notice and the
minutes, and the nature of the issues addressed at the proceeding. Some of the matters covered in a scheduling
conference--amendment of pleadings and pretrial motions--were discussed and
scheduled. The fact that the court chose
to hold a scheduling conference after the summary judgment motion was disposed
of, rather than scheduling everything, perhaps unnecessarily, on February 28,
1995, does not mean it is unreasonable to consider the February 28, 1995
proceeding as a scheduling conference for purposes of making a jury demand. The evident intent of § 805.01(2) is that
the jury demand be made at or before the first conference at which the
management and course of the action is discussed. A reasonable attorney could believe that the February 28, 1995
proceeding was such a conference.
In
support of its conclusion that the motion to strike was frivolous under
§ 814.025(3)(b), Stats., the
court also referred to Heibl's failure to file a reply brief "as ordered
by the court" at the June 19, 1995 hearing. At the October 4, 1995 hearing, the court indicated that the
failure to file the reply brief showed that Heibl, thought his motion to strike
was improper. Heibl explained that he
did not file a reply brief because he thought § 805.01, Stats., was clear on its face, that the
court was inclined to agree with his arguments at the June 19 hearing and
simply wanted to give the plaintiff the opportunity to persuade the court
otherwise, and that he did not think he was ordered to reply but could do so if
he chose.[6] Since we have concluded that Heibl's motion
had a reasonable basis in law, his failure to file a reply brief and the
reasons for that are not relevant.
Heibl presented his arguments in support of his motion at the June 19,
1996 hearing and that provides a sufficient basis for evaluating whether the
motion had a reasonable basis in law.
Plaintiff
argues on appeal that the motion to strike did not have a reasonable basis in
law because the right to a jury trial is "inviolate" and the court
could extend the time for filing a demand for a jury trial even if there were a
waiver. Section 805.01(1), Stats., does provide that the right to
a jury trial as declared in Article I, Section 5 of the Wisconsin Constitution
or by statute is preserved "inviolate." However, that right may be waived in civil proceedings if
statutory procedures for asserting the right are not followed. State ex rel. Prentice v. County Court,
70 Wis.2d 230, 239-40, 234 N.W.2d 283, 288 (1975). If statutory procedures are not followed, parties lose their
right to a jury trial and it becomes discretionary with the court. Id. at 240, 235 N.W.2d at
288. A court may, under
§ 801.15(2)(a), Stats.,[7]
grant a motion made after the expiration of the specified time for making a
demand for a jury trial upon a finding of excusable neglect. See Chitwood v. A.O. Smith
Harvestore, 170 Wis.2d 622, 628, 489 N.W.2d 697, 701 (Ct. App. 1992).
Clearly,
the trial court had the authority, had it determined that plaintiff's demand
for a jury trial was untimely, to extend the time period if it found excusable
neglect. Perhaps it would have done
so. In view of the court's
discretionary authority to enlarge the deadline, one may question the wisdom of
bringing the motion to strike the jury demand in the circumstances of this
case. But the court's discretionary
authority to enlarge the deadline does not mean there was no reasonable basis
in law for the motion to strike.
We
now turn to the issue of frivolousness under § 841.025(3)(a), Stats.
Whether Heibl acted in bad faith in bringing the motion to strike and
solely for the purpose of harassing or maliciously injuring another is analyzed
under the subjective standard. Stern,
185 Wis.2d at 236, 517 N.W.2d at 663.
The court must determine what was in the person's mind and whether his
or her actions were deliberate or impliedly intentional with regard to
harassment or malicious injury. Id.
at 236, 517 N.W.2d at 664. The findings
must be specific. Id. The requirement that the "sole"
motivation be harassment or malicious injury is a "... high standard
[that] typically would require a finding of bad faith based upon some
statements and actions, including, for example threats. [Citation omitted.]" Id. at 239-40, 517 N.W.2d at
665.
This
inquiry also involves a mixed question of fact and law. Id. at 241, 517 N.W.2d at
666. Since the inquiry is subjective
and not generally susceptible to direct proof, the state of mind of the person
must be inferred from the acts and statements of the person in view of the
surrounding circumstances. Id. The reviewing court must accept the
reasonable inferences drawn from the established facts by the trial court if
more than one reasonable inference may be drawn; but if the underlying facts
are undisputed or there is only one reasonable inference to be drawn, the
drawing of that inference is a matter of law.
Id. at 237, 517 N.W.2d at 664.
The
trial court based its determination that § 841.025(3)(a), Stats., was violated on three
factors: Heibl's argument on the motion
to strike at the June 19, 1995 hearing; his failure to file a reply brief and
"previous pleadings" filed by Ohmeda. We have already eliminated the first factor as an appropriate
basis by our conclusion that the motion to strike did have a reasonable basis
in law. With respect to Heibl's failure
to file a reply brief, as we noted above, the court apparently inferred from
that failure that Heibl knew the motion lacked a reasonable basis in law and
brought the motion for an improper purpose.
However, we have concluded that his motion did have a reasonable basis
in law. Heibl's explanation as to why
he did not file a reply brief is supported by the record of the June 19, 1995
hearing. The trial court's findings that
it "ordered" Heibl to file a reply brief and that it made clear to
Heibl that the February 28, 1995 proceeding was not a scheduling conference or
pretrial is not supported by the record of the June 19, 1995 hearing. While it certainly would have been
preferable for Heibl to advise the court that he did not intend to file a reply
brief and the reasons for that, Heibl's
failure to do so, based on this record, does not give rise to a reasonable
inference that he filed the motion solely for the purpose of harassment.
Although
the trial court does not specify which previous pleadings it was referring to,
we assume it meant Ohmeda's motion to dismiss for lack of personal
jurisdiction. We have examined this
motion, the affidavits in support and opposition, the minutes of the first
hearing, the evidentiary hearing and the court's decision denying the motion.[8] The process server's affidavit (and
presumably her testimony was consistent with the affidavit) avers that at the
address of 33 Ohmeda Drive, she asked for Roger Nolden, Chairman of
Ohmeda/Anaquest Employees Credit Union; after the receptionist paged him with
no response, another person present said to contact Gloria Smail; the
receptionist said Gloria Smail was Nolden's secretary; Gloria Smail came out to
the reception area and the process server said she had legal papers for Roger
Nolden, Chairman of Ohmeda/Anaquest Employees Credit Union; Smail said she
could take the papers and could give them to Nolden since she was his secretary
and had accepted papers for him when he was not available; the process server
explained who she was and what the papers were and gave them to Smail.
Smail's
affidavit states that she is not and never has been an employee of
Ohmeda/Anaquest Employees Credit Union; has never knowingly accepted service of
process on behalf of Ohmeda/Anaquest Employees Credit Union; is not and never
has been the secretary for Nolden; and has never stated to anyone that she was
his secretary. In addition to Smail and
the process server, Nolden and James Huberty testified at the evidentiary
hearing on the motion. The minutes
stated that Nolden was employed at Ohmeda and Huberty was president of
Ohmeda.
The
trial court's decision states that it is undisputed that Ohmeda and Ohmeda
Systems Division/BOC Group have the same street address, although the Ohmeda
offices are located a short distance away in a different building. In determining that proper service was obtained,
the court relied on Horrigan v. State Farm Ins. Co., 106 Wis.2d
675, 317 N.W.2d 474 (1982). The
citation the court relied on states that, "[a] process server has a right
to expect that when he asks for someone to accept service, and, apparently in
response to that request, a person comes out and accepts the papers, proper
service has been obtained." Horrigan,
106 Wis.2d at 683, 317 N.W.2d at 478.
The record does not provide a basis for
drawing an inference from the motion to dismiss that Ohmeda or Heibl was
motivated solely by the desire to harass or maliciously injure. Without the briefs that were filed and a
transcript of the evidentiary hearing, we cannot determine whether the motion
to dismiss was frivolous under § 814.025(3)(b), Stats. The most we
can say based on the record is that it does not appear that it was. However, we need not resolve this issue for
two reasons. First, it does not appear
that Heibl or Ohmeda ever had notice that the court or the plaintiff considered
the motion to dismiss frivolous.
Second, even if the motion to dismiss were frivolous under para. (b),
that does not necessarily mean a violation of para. (a). Stern, 185 Wis.2d at 239, 517
N.W.2d at 665. A finding of
frivolousness under para. (a) must be based on an evidentiary foundation
separate from the elements of para. (b).
Id. In the absence
of any other evidence that supports the court's determination under para. (a),
we cannot affirm that determination.
We
appreciate that the trial court may have been frustrated with Ohmeda for
bringing two motions that, in the court's view, did not serve to advance the
progress of the litigation. However,
more is needed for a determination of frivolousness under § 814.025, Stats.
We conclude the requirements of neither § 814.025(3)(a) nor (b)
have not been satisfied.
By
the Court.—Order reversed.
Not
recommended for publication in the official reports.
[1] Section 814.025, Stats., provides:
Costs upon
frivolous claims and counterclaims. (1) If an action or
special proceeding commenced or continued by a plaintiff or a counterclaim,
defense or cross complaint commenced, used or continued by a defendant is
found, at any time during the proceedings or upon judgment, to be frivolous by
the court, the court shall award to the successful party costs determined under
s. 814.04 and reasonable attorney fees.
...
(3) In order
to find an action, special proceeding, counterclaim, defense or cross complaint
to be frivolous under sub. (1), the court must find one or more of the
following:
(a) The
action, special proceeding, counterclaim, defense or cross complaint was
commenced, used or continued in bad faith, solely for purposes of harassing or
maliciously injuring another.
(b) The party
or the party's attorney knew, or should have known, that the action, special
proceeding, counterclaim, defense or cross complaint was without any reasonable
basis in law or equity and could not be supported by a good faith argument for
an extension, modification or reversal of existing law.
[2] The correspondence consisted of a letter
dated March 3, 1995, from Heibl to plaintiff's counsel confirming
"the sum and substance of the PreTrial Conference of February 28,
1995," and specifically noting:
"Neither party requested trial by jury and you projected that a
trial to the court would take approximately two days;" and correspondence
from plaintiff's counsel dated March 14, 1995, stating in part:
I misstated at the
pretrial conference that we would be seeking a trial before the court. My client instructed me to demand a jury
trial and, therefore, I have made such demand on the Amended Complaint. I do not believe this request prejudices
your client in that this demand is taking place only ten (10) days after the
date of the pretrial conference, and no substantive motions or other matters
have been heard since the pretrial motion.
[3] Plaintiff's brief states in its summary of
facts that the court sua sponte contended that the motion was frivolous.
[4] The time limits in § 805.17(3), Stats., on which the court apparently
relied, apply only to motions for reconsideration after trials to the
court. Continental Casualty Co.
v. Milwaukee Metropolitan Sewerage District, 175 Wis.2d 527, 535, 499
N.W.2d 282, 285 (Ct. App. 1993). When
§ 805.17(3) does not apply, trial courts have the authority without any
specific statutory basis to correct prior nonfinal rulings upon a motion for
reconsideration. Fritsche v. Ford
Motor Credit Co., 171 Wis.2d 280, 295, 491 N.W.2d 119, 124 (Ct. App.
1992).
[5] Neither the court nor the parties refer to
§ 802.05(1)(a), Stats.,
which permits a trial court to impose sanctions, including attorney fees, if a
petition, motion or other paper is signed without the signer first determining
that to the best of the signer's knowledge, information and belief, formed
after reasonable inquiry, the pleading, motion or paper is well-grounded in
fact, is warranted by existing law or a good faith argument for the extension,
modification or reversal of existing law, and is not used for any improper
purpose, such as to harass or cause unnecessary delay or needless increase in
the cost of litigation. Section
814.025(4), Stats., provides that
"[t]o the extent s. 802.05 is applicable and differs from this section, s.
802.05 applies." Therefore, even
if § 814.025 applies to the motion to strike (§ 814.025 applies to
"an action ... special proceeding ... counterclaim, defense or cross
complaint"), we should apply § 802.05 if it differs from
§ 814.025. However, in the absence
of any discussion in the parties' briefs, we assume without deciding that the
requirements for frivolousness because of no reasonable basis in the law and
because of harassment are the same under both §§ 814.025 and 802.05(1) and also
that the standard of review is the same.
[6] This same explanation is contained in Heibl's
affidavit filed with the motion for reconsideration.
[7] Section 801.15(2)(a), Stats., provides in part:
When an act is
required to be done at or within a specified time, the court may order the
period enlarged but only on motion for cause shown and upon just terms.... If the motion is made after the expiration
of the specified time, it shall not be granted unless the court finds that the
failure to act was the result of excusable neglect....