Genesis Capital, Ltd. Partnership, a West Virginia Limited Partnership, Plaintiff Below, Petitioner
Ralph Hoyer, individually, and Hoyer, Hoyer & Smith, PLLC, a West Virginia Legal Corporation, Defendants Below, Respondents.
Kanawha County 12-C-669
Genesis Capital, Ltd. Partnership, by counsel Thomas E. Scarr
and Sarah A. Walling, appeals the order of the Circuit Court
of Kanawha County entered January 18, 2018 that granted
respondents' motion for sanctions pursuant to Rule 11 of
the West Virginia Rules of Civil Procedure. Respondents Ralph
Hoyer, and Hoyer, Hoyer & Smith, PLLC, by counsel David
D. Johnson, III, filed a response to which petitioner filed a
Court has considered the parties' briefs and the record
on appeal. The facts and legal arguments are adequately
presented, and the decisional process would not be
significantly aided by oral argument. Upon consideration of
the standard of review, the briefs, and the record presented,
the Court finds that the circuit court erred in awarding
attorney's fees that contained duplicate billing entries.
This case satisfies the "limited circumstances"
requirement of Rule 21(d) of the West Virginia Rules of
Appellate Procedure and is appropriate for a memorandum
decision rather than an opinion. For the reasons expressed
below, the decision of the circuit court is affirmed, in
part, and reversed, in part, and this case is remanded to the
circuit court for further proceedings consistent with this
Ralph Hoyer represented Dr. Adla Adi ("Dr. Adi")
and St. Francis West Health Care, Inc., ("St.
Francis") in procuring a series of loans from Petitioner
Genesis Capital, Ltd. Partnership ("Genesis").
According to Genesis, the purpose of the loans was to
purchase medical equipment to be used by Dr. Adi and St.
Francis. In December of 2007, Genesis loaned $73, 500 to Dr.
Adi and St. Francis, and respondents were tasked with
preparing the transactional documents and UCC filings
necessary to perfect Genesis's interest in the equipment
to be purchased. Respondents performed these functions for
the 2007 loan. In 2008, Dr. Adi and St. Francis obtained
another loan from Genesis in the amount of $150, 000 to
purchase additional equipment. Respondents again agreed to
prepare the required transactional documents and UCC filings.
However, Dr. Adi did not purchase equipment, and instead
purchased a condominium in Florida. Respondents filed the
mortgage instrument for the condominium, but did not file any
UCC documents. Dr. Adi subsequently filed for bankruptcy, and
Genesis was unable to recover its interest in the 2008 loan.
drafted a complaint against respondents, and forwarded a copy
of a draft of the complaint to respondents' counsel. The
complaint alleged that respondents owed a duty to Genesis or
were dual agents of Genesis and Dr. Adi and alleged counts of
(1) detrimental reliance on respondents' representations;
(2) fraud; (3) breach of fiduciary duty; (4) breach of
contract; (5) negligent failure by respondents to exercise
their duties as broker, attorney and fiduciary; and (6) legal
malpractice. Respondents' counsel responded by letter
dated August 17, 2011, requesting information and documents
to support the allegations in the complaint, and cautioning
that if the complaint were filed, it would be in violation of
Rule 11 of the West Virginia Rules of Civil Procedure. On
April 16, 2012, Genesis filed a complaint against respondent.
The filed complaint omitted the cause of action for legal
letter dated September 7, 2012, respondents' counsel
explained that Genesis's claims were not supported by
relevant facts and controlling law, and strongly urged
Genesis to voluntarily dismiss the complaint. The letter
further stated that if Genesis did not withdraw the
complaint, respondents intended to move the court for
sanctions in the form of attorney's fees and costs.
Genesis chose not to withdraw its complaint, and
respondents' counsel drafted a motion for sanctions and
delivered a copy of the motion to Genesis's counsel,
warning that if Genesis did not withdraw the complaint within
twenty-one days, then respondents intended to file a motion
for sanctions with the circuit court. Genesis refused and
respondents filed a motion for sanctions on January 7, 2013.
Following a brief discovery period, on October 1, 2013,
respondents filed a motion for summary judgment, and on March
21, 2017, Senior Status Judge John L. Cummings, who
was appointed following recusals by all of the Kanawha County
Circuit Court judges, entered an order granting the motion
for summary judgment. Genesis did not appeal the summary
renewed their motion for sanctions on April 6, 2017, and a
hearing on that motion was heard before the Honorable Joanna
Tabit on November 17, 2017. At the hearing, the
court took note of the procedural history of the case,
including the fact that respondents' counsel requested
that Genesis voluntarily dismiss the complaint on two
occasions, and that, on the second occasion, respondents'
counsel carefully outlined the reasons why Genesis's
claims were without merit. The circuit court also noted that,
after respondents' counsel delivered a draft of their
motion for sanctions to Genesis, requesting that Genesis
dismiss the matter within twenty-one days, that Genesis again
refused to dismiss the claim. The circuit court also found
that the summary judgment order entered by Judge Cummings
embraced the factual and legal arguments presented by
respondents' counsel, in their entirety.
the hearing, the circuit court asked Genesis's counsel
what information they possessed that led them to believe that
the complaint was supported by the facts and law.
Genesis's counsel asserted that they were not permitted
sufficient opportunity to discover evidence that may have
demonstrated their claims, and advised the court that
Genesis's former counsel was convicted of income tax
evasion and disbarred by this Court. The circuit court found
that Genesis's counsel failed to explain how additional
discovery would have supported Genesis's claims, and that
Genesis's counsel was unable to articulate facts to
support Genesis's claims for detrimental reliance, fraud,
breach of fiduciary duty, breach of contract, and negligence.
Also during the hearing, when counsel for Genesis conceded
that there was no attorney-client relationship between
respondents and Genesis, the circuit court concluded that
"the [underlying] civil action constituted an improper
attempt by Genesis to recoup from Dr. Adi's lawyers the
loaned funds which Dr. Adi failed to repay."
December 20, 2017, following the hearing, but prior to the
entry of the circuit court's order, Genesis filed a
Motion Requesting Additional Time, arguing that new counsel
was retained and needed additional time to review the file
and respond appropriately to the motion for sanctions. The
circuit court denied the request for additional time by order
entered January 18, 2018. In a separate order entered January
18, 2018, the circuit court granted the motion for sanctions
finding that, at the time the complaint was filed, the
allegations were not "warranted by existing law or by a
non-frivolous argument for the extension, modification or
reversal of existing law or the establishment of new law. .
." As a result, the circuit court ordered that Genesis
pay attorney's fees and costs in the amount of $85,
078.70. Genesis now appeals.
alleges three assignments of error on appeal. Genesis
complains that the circuit court erred by (1) imposing an
incorrect standard of review in evaluating respondents'
motion for sanctions, and in imposing Rule 11 sanctions; (2)
denying Genesis a "reasonable opportunity to be
heard" before imposing Rule 11 sanctions; and (3)
entering respondent's proposed order granting fees
without regard to Genesis's objections that
respondents' counsel's billable hours were excessive,
and contained duplicate billing entries.
court's assessment of sanctions is reviewed under an
abuse of discretion standard:
The West Virginia Rules of Evidence and the West Virginia
Rules of Civil Procedure allocate significant discretion to
the trial court in making evidentiary and procedural rulings.
Thus, rulings on the admissibility of evidence and the
appropriateness of a particular sanction for discovery
violations are committed to the discretion of the trial
court. Absent a few exceptions, this Court will review
evidentiary and procedural rulings of the circuit court under
an abuse of discretion standard.
Syl. Pt. 1, McDougal v. McCammon, 193 W.Va. 229, 455
S.E.2d 788 (1995). Further,
An important purpose of Rule 11 of the West Virginia Rules of
Civil Procedure is to prevent frivolous lawsuits or lawsuits
filed for an improper purpose. "The purpose of Rule 11
and Rule 37 of the West Virginia Rules of Civil Procedure is
to allow trial courts to sanction parties who do not meet
minimum standards of conduct in a variety of
circumstances." Bartles v. Hinkle, 196 W.Va. at
389, 472 S.E.2d at 835. Rule 11 with its possible sanctions
"deters much frivolous litigation (thereby conserving
judicial resources), compensates the victims of vexatious
litigation, and educates the bar about appropriate standards