Link to Mo. Sup. Ct. Opinion
The Kerckhoffs[2] appealed a trial court order imposing sanctions of $122,425 in attorney fees for acting in bad faith in a mediated settlement meeting.[3] Since the order imposing sanctions was interlocutory in nature and not a “claim for relief,” the Supreme Court of Missouri dismissed the appeal for lack of final judgment.[4]
I. Facts and Holding
Dennis Buemi and other homeowners in the Pevely Farms subdivision (homeowners) brought a contract and tort claim against the Kerckhoffs and other homebuilders.[5] The claim alleged that the subdivision water supply was inadequate, despite a representation to the contrary.[6] The trial court ordered that the case be referred to mediation.[7]
A representative group of the homeowners met with two of the three individual Kerckhoff defendants, along with the other defendants, to mediate the case.[8] The mediation resulted in certain terms being reduced to writing in papers referred to as term sheets one and two.[9] At the close of the mediation all terms had not been agreed to and one of the parties requested the mediator obtain a pre-printed form titled “mediated settlement agreement.”[10] On the pre-printed form, in a space that provided for the conditions to be set out, the mediator wrote, “Case settled in principle – proposed settlement to be reduced to writing by 12-31-08 . . . .Plaintiffs to recommend settlement to property owners.”[11] Some, but not all, of the defendants signed the statement.[12] An additional term sheet was then prepared by some of the plaintiffs, but neither the new term sheet nor term sheets one and two were attached or incorporated into the pre-printed form.[13]
The parties ultimately failed to agree on the terms of a written settlement agreement.[14] The homeowners and PF Development both subsequently filed motions to enforce the settlement in the underlying action.[15] At an evidentiary hearing on the motions, the mediator testified that the parties did not reach a settlement.[16] At the end of the evidentiary hearing, the trial court indicated that it would entertain motions for sanctions regarding the costs incurred by the parties during the mediation and those associated with the Kerckhoffs’ failure to settle.[17] The homeowners and other defendants filed motions against the Kerckhoffs seeking awards of attorney’s fees.[18] The motions alleged that the Kerckhoffs acted in bad faith when they signed the mediation form and failed to advise the homeowners and other defendants that they did not consider themselves legally bound.[19]
The trial court denied the motions to enforce the settlement agreement but granted the motions for sanctions against the Kerckhoffs.[20] The trial court found that the failure to attach the term sheets to the settlement rendered the court unable to enforce the agreement.[21] The trial court did conclude that the parties reached a settlement agreement in principle.[22] It was also determined that the Kerckhoffs executed the mediated settlement agreement form intending not to bind themselves.[23] The trial court found that the Kerckhoffs concealed their intent not to be bound and that they submitted a final settlement proposal that significantly varied from the terms agreed to during mediation.[24] Because the Kerckoffs acted in bad faith, the trial court ordered them to pay $122,425 in attorney fees to various parties as a sanction for their conduct.[25] The Kerckhoffs’ appeal was dismissed by the Missouri Court of Appeals for lack of a final judgment.[26] The Supreme Court of Missouri granted transfer[27] but ultimately dismissed the appeal for lack of final judgment as well.[28]
The Supreme Court of Missouri noted that Revised Statutes of Missouri § 512.020(5), except for non-applicable exceptions, requires there to be a “final judgment” as a prerequisite to appellate review.[29] The court found the trial court’s order imposing sanctions not to be a final judgment but interlocutory in nature, since it was undisputed that the homeowners’ underlying claims for damages and injunctive relief had yet to be resolved.[30]
The court also held that the Kerckhoffs’ assertion that Missouri Rules of Civil Procedure 74.01(b) allowed for an interlocutory appeal in the case to be incorrect.[31] Rule 74.01(b) permits interlocutory appeals “[w]hen more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim.”[32] A “claim for relief” includes only those legal claims that have been asserted in a party’s pleadings.[33] The court also looked to Black’s Law Dictionary to further discover how a “claim” is defined.[34] The two definitions utilized by the court were that a claim is 1) “[a] demand for money, property, or a legal remedy to which one asserts a right; esp., the part of a complaint in a civil action specifying what relief the plaintiff asks for” and 2) “[t]he aggregate of operative facts giving rise to a right enforceable by a court . . . .”[35] The court concluded that the definitions indicated that a “claim for relief” includes only those legal claims asserted in the pleadings.[36]
The court further found that federal court decisions interpreting Federal Rule of Civil Procedure 54(b) supported its interpretation of Rule 74.01 because Missouri’s rule was derived from the federal rule and are worded almost identically.[37] While the federal court decisions are not binding, the court found that it should give significant consideration to them.[38]
Since a motion for sanctions is not a legal claim filed “in an action” by way of a petition, counterclaim, cross-claim, or third-party claim, the court found it was not a “claim for relief,” as the term is used in Rule 74.01.[39] Accordingly, the court dismissed the Kerckhoffs’ appeal for lack of final judgment.[40]
Judge Stith, writing for the dissent, disagreed with the majority and concluded that an order imposing sanctions is a separate claim the resolution of which involves entirely separate issues from those remaining at the trial court.[41] In her dissent, Judge Stith noted the fact that by its very nature the pending case was not something that could be pleaded in the petition unless it was a petition to enforce settlement.[42] As a result of the separate nature of this claim, Judge Stith argued that the claim satisfied the definition of a “distinct judicial unit,” and the trial court was thus correct in certifying the appeal pursuant to Rule 74.01.[43]
Judge Stith further stressed that the majority’s consideration for federal court decisions was misplaced.[44] Judge Stith argued that while the federal court cases are useful for interpreting state rules nearly identical to federal rules, they only represent persuasive authority and are not determinative.[45] Judge Stith argued that Missouri continued to define the term “claim” as a “distinct judicial unit,” as it had prior to the adoption of Rule 74.01.[46] Since Missouri cases have chosen to continue their interpretation of what types of claims may be appealable after Rule 74.01 was adopted, Judge Stith argued Missouri maintains its interpretation of Rule 74.01 separate from its federal analog.[47]
II. Legal Background
Revised Statutes of Missouri § 512.020 requires “final judgment” as a prerequisite to appellate review.[48] The statute states that “[a]ny party to a suit aggrieved by any judgment of any trial court . . . may take his or her appeal to a court having appellate jurisdiction from any . . . (5) Final judgment in the case or from any special order after final judgment in the case . . . .” [49]
The Supreme Court of Missouri has stated that a final judgment is one that resolves “all issues in a case, leaving nothing for future determination.”[50] Additionally, the court has noted that the converse of a final judgment is an interlocutory order, which is defined as “not final” and generally decides some matter between the commencement and the end of the suit.[51] An interlocutory order does not resolve the whole controversy and is not a final decision.[52]
Missouri Rules of Civil Procedure 74.01 allows the trial court to enter an appealable final judgment “[w]hen more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, or when multiple parties are involved.”[53] When doing so, the court may enter the judgment “as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay.”[54]
In construing what the rules mean, the “intent is determined by considering the plain and ordinary meaning of the words in the [r]ule.”[55] In determining how the plain and ordinary meaning should be discovered, the court has held that the dictionary may be used.[56]
In the 1997 case Gibson v. Brewer, the Supreme Court of Missouri defined a single “claim for relief” as a “distinct judicial unit.”[57] The court noted that for there to be a ruling disposing of a “distinct judicial unit,” there had to be a “final judgment on a claim, and not a ruling on some of several issues arising out of the same transaction or occurrence which does not dispose of the claim.”[58] The “distinct judicial unit,” a concept that predates the adoption of Rule 74.01,[59] means “the final judgment on a claim, and not a ruling on some of several issues arising out of the same transaction or occurrence which does not dispose of a claim.”[60]
In Committee for Educational Equality v. State, the Supreme Court of Missouri addressed Rule 74.01.[61] In that case the plaintiffs asserted multiple claims, requesting both declaratory and injunctive relief, but the trial court entered only declaratory judgment while retaining jurisdiction over the case to enforce the judgment through injunctive relief.[62] The court held that the trial court’s judgment did not dispose of all remedies to a single “claim for relief” and that there must at least be one claim resolved to be classified as “final.”[63]
The court in Committee for Educational Equality analyzed the concept of a “claim for relief,” based on federal court decisions interpreting Federal Rule of Civil Procedure 54(b), noting that Missouri’s rule was copied “almost verbatim” from the federal rule when it was adopted in 1988.[64]
The Seventh Circuit addressed the issue of whether a trial court’s order imposing sanctions is subject to interlocutory appeal in Mulay Plastics, Inc. v. Grand Trunk W. R.R. Co.[65] In that case the court held that Federal Rule of Civil Procedure 54(b) does not permit a trial court to certify an order awarding sanctions because the rule only permits for the immediate appeal of an order disposing of a separate “claim for relief,” which federal courts have interpreted to mean a substantive claim.[66] The court found that a separate claim for sanctions was not a “substantive” claim, and was thus improper for immediate appeal.[67] There have been other federal courts that have reached conclusions uniform with Mulay Plastics after the Supreme Court of Missouri adopted Rule 74.01.[68]
III. Comment
The majority’s holding that an order imposing sanctions is not a “claim for relief,” and thereby not an appealable final judgment, is sound. The majority also presents a sound argument that federal court decisions interpreting Federal Rule of Civil Procedure 54(b) are strongly persuasive in interpreting the nearly identical Rule 74.01 in Missouri. The court and the rules fail, however, in providing an adequate remedy for the Kerckhoffs in this situation.
The majority suggested that the order imposing sanctions should be reviewed after the final judgment is entered on the underlying claims or the Kerckhoffs may seek a writ of prohibition (which had already been denied by the trial court).[69] Judge Stith, in her dissent, correctly pointed out that “[t]o suggest that this appeal must be denied and that they again must file a petition for writ to obtain relief to which they assuredly are entitled is pointless. . . .”[70] The current order imposing sanctions needlessly delayed the resolving of this issue in the case. The underlying claim in question has not been settled, and due to the nature of this case, it is unclear when it will be settled. To promote judicial efficiency, the court should allow for issues not claimed in the initial pleadings to be appealed if it represents a separate legal issue and where delay would be a burden on one of the parties. In this case, the issue of sanctions based on whether the Kerckhoffs acted in bad faith was separate from the underlying tort and contract issue, and the $122,425 in attorney fees represents a significant burden that the Kerckhoffs must bear while the underlying claim is resolved.
-Nathan Atkinson
[1] No. SC91132 (Mo. Aug. 2, 2011) (en banc), available at http://www.courts.mo.gov/file.jsp?id=48250. The West reporter citation is Buemi v. Kerckhoff, 359 S.W.3d 16 (Mo. 2011) (en banc).
[2] The “Kerckhoffs consist of Arthur Kerckhoff Jr., Arthur Kerckhoff III, Arthur Kerckhoff IV, and Arthur Kerckhoff Trust.” Id. at 1.
[3] Id. at 4.
[4] Id. at 14.
[5] Id. at 2. PF Development, LLC and Fischer & Frichtel Inc. were also joined as defendants. Id.
[6] Id.
[7] Id.
[8] Id.
[9] Id.
[10] Id.
[11] Id.
[12] Id.
[13] Id.
[14] Id. at 3.
[15] Id.
[16] Id.
[17] Id.
[18] Id.
[19] Id.
[20] Id.
[21] Id.
[22] Id.
[23] Id. at 3-4.
[24] Id.
[25] Id. at 4.
[26] Id.
[27] Id. Transfer was granted pursuant to Mo. Const. art. V, sec. 10. Id.
[28] Id. at 14. Mo. Rev. Stat. § 412.020(5) (2000).
[29] Buemi., No. SC91132, slip op. at 4.
[30] Id. at 5.
[31] Id. at 5-14.
[32] Mo. Sup. Ct. R. 74.01(b).
[33] Buemi., No. SC91132, slip op. at 6.
[34] Id. at 6
[35] Id.; Black’s Law Dictionary 281-82 (Bryan A. Garner, 9th ed. 2009).
[36] Buemi., No. SC91132, slip op. at 6.
[37] Id. at 11
[38] Id.
[39] Id. at 7.
[40] Id. at 14.
[41] Id. at 15. (Stith, J., dissenting).
[42] Id. at 23. (Stith, J., dissenting).
[43] Id. at 27. (Stith, J., dissenting).
[44] Id. at 18-19. (Stith, J., dissenting).
[45] Id.
[46] Id. at 20 (Stith, J., dissenting).
[47] Id. at 20-22 (Stith, J., dissenting).
[48] Mo. Rev. Stat. § 512.020 (2000).
[49] Id.
[50] Transit Cas. Co. ex rel. Pulitzer Publishing Co. v. Transit Car Co. ex rel. Intervening Employees, 43 S.W.3d 293, 298 (Mo. 2001) (en banc).
[51] Id.
[52] Id.
[53] Mo. R. Civ. P. 74.01
[54] Id.
[55] State ex. Rel. Vee-Jay Contracting Co. v. Neill, 89 S.W.3d 470, 472 (Mo. 2002) (en banc).
[56] Tendai v. Mo. Bd. Of Registration for Healing Arts, 161 S.W.3d 358, 366 (Mo. 2005) (en banc; State ex rel. Proctor v. Messina, 320 S.W.3d 145, 156 (Mo. 2010) (en banc).
[57] 952 S.W.2d 239, 244 (Mo. 1997) (en banc).
[58] Id.
[59] See Erslon v. Cusumano, 691 S.W.2d 310, 312 (Mo. App. 1985); State ex re. State Hwy. Comm’n v. Smith, 303 S.W.2d 120, 123 (Mo. 1957) (en banc).
[60] Gibson, 952 S.W.2d at 244 (citing State ex rel. State Hwy. Comm’n v. Smith, 303 S.W.2d 120, 123 (Mo. 1957) (en banc)).
[61] 878 S.W.2d 446 (Mo. 1994) (en banc).
[62] Id. at 451-52.
[63] Id. at 450-52.
[64] Id. at 451.
[65] 742 F.2d 369 (7th Cir. 1984).
[66] Id. at 370-71.
[67] Id.
[68] E.g., M.A. Mortenson Co. v. United States, 877 F.2d 50, 52 (Fed. Cir. 1989); Heffington v. City of Saline, 863 F.2d 48 (6th Cir. 1988).
[69] Buemi., No. SC91132, slip op. at 13.
[70] Id. at 19-20 (Stith, J., dissenting).
