Beware! Tennessee Courts Beginning to Issue Sanctions Awards
As we travel across the State of Tennessee representing litigants in a variety of different matters, we have noticed what appears to be an increased interest in courts sanctioning parties (and unfortunately sometimes their lawyers!) A quick Westlaw or Lexis search reveals a startling number of sanction award cases in recent years, many of which have ultimately been upheld by the appellate courts.
For example, not long ago we wrote about our real estate case in Williamson County Chancery Court, where multiple judges issued several separate sanction awards against a party for the misdeeds of their counsel based upon previous precedent obtained by our firm's founder. See In re Foreign Court Subpoena, 2012 WL 2126960 (Tenn. Ct. App. June 12, 2012) (Party was assessed a significant sanction for misdeeds of his counsel in an out of state deposition). The Williamson County case eventually resulted in the "civil death penalty" - dismissal with prejudice pursuant to Rule 37.
There, an untimely filed response to our client's Motion to Dismiss resulted in a nominal monetary sanction. The Court was communicating its displeasure with the plaintiffs' failure to comply with the Local Rules. The plaintiffs were allowed to oppose our motion, which was ultimately denied. Next, the plaintiffs were sanctioned for filing untimely responses to outstanding written discovery requests. When payment of that sanction was late and the plaintiffs failed to comply with the Court's compel Order, a second judge dismissed the case entirely and awarded our clients their attorney's fees.
More recently, we obtained a significant monetary sanction on behalf of our client against a defendant/counter-plaintiff in a Hardeman County Circuit Court case. After filing an extensive Motion to Dismiss a Counter-Complaint containing multiple causes of action, the other side effectively "cried uncle" and failed to oppose the motion. The Counter-Complaint was then dismissed by the trial court with prejudice. Further, our client filed a motion to recover its costs and attorney's fees under Tennessee's new "loser pays" statute. Tenn. Code Ann. § 20-12-119(c).
The "loser pays" statute essentially provides that any claim dismissed under Rule 12 entitles the movant to recovery of its attorney's fees and expenses in the form of costs up to $10,000.00. While trial courts have discretion to determine what constitutes reasonable fees and expenses, it is important to note that a dismissal of a claim requires the court to award fees and expenses as costs.
Tenn. Code Ann. § 20-12-119(c) provides, in pertinent part: “[W]here a trial court grants a motion to dismiss pursuant to Rule 12 of the Tennessee Rules of Civil Procedure for failure to state a claim upon which relief can be granted, the court shall award the party or parties against whom the dismissed claims were pending at the time the successful motion to dismiss was granted the costs and reasonable attorney’s fees incurred in the proceedings as a consequence of the dismissed claims by that party or parties.” (emphasis added) In other words, the "loser pays."
The Tennessee Court of Appeals has repeatedly held that making such an award under the “loser pays” statute is mandatory after a dismissal motion has been granted. See Snyder v. First Tennessee Bank, N.A., 2016 WL 423806 (Tenn. Ct. App. Feb. 3, 2016); Schodowski v. Tellico Property Owners Association, Inc., 2016 WL 1627895 (Tenn. Ct. App. Apr. 22, 2016). Of particular interest, even dismissal of a counter-complaint or individual cause of action entitles the movant to recover its fees related to the claim. See McCord v. HCA Health Services of Tennessee, Inc., 2016 WL 5416334 (Tenn. Ct. App. Sept. 27, 2016) (Noting logically that "claim" under the statute should not be interpretted to include an entire lawsuit).
It remains to be seen whether Tennessee courts will continue this trend in issuing sanction awards under the "loser pay" statute or the relevant Tennessee Rules of Civil Procedure. However, as dockets increase with contentious cases and the appellate courts continue to uphold sanctions such as these, it would certainly not be a surprise. For the time being, both litigants and their lawyers should be well aware of the risks associated with sanction awards.