This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. � 480A.08, subd. 3 (2008).
STATE OF MINNESOTA
IN COURT OF APPEALS
A09-0284
James J. Benincasa, et al.,
Appellants,
vs.
Michael J. Antonello, et al.,
Defendants,
Benistar 419 Plan Services, Inc.,
plan sponsor for the Benistar 419 Plan and Trust, et al.,
Respondents,
The Lafayette Life Insurance Company,
Respondent.
Filed September 15, 2009
Affirmed in part and reversed
in part
Worke,
Judge
Hennepin�County
District Court
File No. 27-CV-07-24553
Mark J. Kallenbach,
2260 Ridge Drive, Suite 13, Minneapolis, MN 55416 (for appellants)
Thomas A. Gilligan, Jr.,
Kimberly K. Scott, Christopher G. Angell, Murnane Brandt, 30 East Seventh
Street, Suite 3200, St. Paul, MN 55101 (for respondents Benistar 419 Plan
Services, Inc., plan sponsor for the Benistar 419 Plan and Trust, et al.)
David P. Pearson,
Thomas H. Boyd, Justice Ericson Lindell, Winthrop & Weinstine, P.A., 225
South Sixth Street, Suite 3500, Minneapolis, MN 55402 (for respondent The
Lafayette Life Insurance Company)
����������� Considered and decided by Worke, Presiding Judge; Connolly, Judge; and Schellhas, Judge.�
WORKE, Judge
����������� Appellants argue that the district court abused its
discretion in awarding rule 11 attorney fees and costs to respondents Benistar
419 Plan Services, Inc., plan sponsor for the Benistar 419 Plan and Trust, and
The Lafayette Life Insurance Company for commencing contemporaneous actions in
district court and with the American Arbitration Association (AAA) when
appellants and Benistar had an arbitration agreement.� Appellants also argue that even if
respondents are entitled to attorney fees and costs, the district court abused
its discretion in the amount awarded.� Lafayette
challenges the district court�s referral of the matter to the AAA when it was
not a party to the arbitration agreement.�
We affirm the district court�s award of attorney fees and costs to Benistar
and the district court�s dismissal of the matter.� But because Lafayette did not bring a rule 11
motion, we reverse the district court�s award of attorney fees and costs to
Lafayette, and we also reverse the district court�s referral of Lafayette to
the AAA.�
FACTS
����������� Appellants
James J. and Jody L. Benincasa are the president and vice-president of Mortgage$
Unlimited, Inc. (MUI).� Respondents
Benistar 419 Plan Services, Inc., plan sponsor for the Benistar 419 Plan and
Trust, et al., and Benistar Admin. Services, Inc., plan administrator for the
Benistar 419 Plan and Trust (Benistar), sponsor and administer the Benistar 419
Plan and Trust (419 Plan).� The 419 Plan
is a welfare-benefit plan that provides tax incentives to small employers who contribute
to one trust of pooled assets.� The 419
Plan shifts the risk of providing benefits from an individual employer to the
multiple employers participating in the plan.�
�
����������� In
2001, after consulting with their attorneys and financial advisors, defendants
Michael J. Antonello and Thomas M. Petracek, appellants agreed to participate
in the 419 Plan.� On November 30, 2001, appellants
entered into a formal agreement with Benistar.�
Among other things, appellants agreed that:
Any
dispute or controversy arising under or in connection with this Agreement or
with respect to the Employer�s participation in the [419] Plan shall be settled
by Arbitration, conducted by a single arbitrator in New York City in accordance
with the rules of the [AAA] then in effect.�
The expense of the arbitrator shall be shared equally by the Employer
and the Administrator. The decision of the arbitrator shall be final and
binding, and judgment may be entered on the arbitrator�s award in any court
having jurisdiction.
�����������
����������� In
conjunction with MUI�s participation in the 419 Plan, appellants applied to
respondent The Lafayette Life Insurance Company for insurance policies.� Appellants signed a hold-harmless agreement,
and acknowledged that Lafayette was serving only in the capacity of a
life-insurance provider.� Appellants
agreed to hold Lafayette and its agents
����������������������� harmless
as to any and all consequences of [] participation in [the 419 Plan], including
but not limited to any tax consequences or disallowances of deduction for
contribution to the [419 Plan], and will not seek contribution or reimbursement
from [] Lafayette [] for any loss, liability, damages, settlements, claims,
taxes, penalties or fines, or for any expenses of litigation or administrative
proceedings with all persons, entities or government agencies, including,
without limitation, attorneys� fees and costs, directly or indirectly arising
out of, or in any way related to the existence or administration of the [419
Plan] and its purchase of life insurance.
����������� On
October 22, 2003, Jody Benincasa signed a certificate of coverage confirming
MUI�s participation in the 419 Plan, which provided that �[a]ll unresolved
disputes or claims under the Plan will be settled by arbitration in New York,
New York.�� In December 2003, Jody
Benincasa terminated from the 419 Plan.�
In February 2004, appellants changed ownership of the 419 Plan to respondent
Grist Mill Trust Welfare Benefit Plan.�
Appellants signed an agreement, which provided that �[a]ll unresolved
disputes or claims under the Plan will be settled by arbitration in New York,
New York.�� Appellants also signed an administration-fee
agreement, which included an arbitration clause identical to the one found in
the agreement with Benistar.� On April
13, 2004, appellants terminated the plan with Grist Mill Trust and purchased
the insurance policies for 10% of their cash-surrender value.� �
����������� In
November 2007, appellants filed a complaint against respondents and defendants
alleging, among other things, breach of fiduciary duty; breach of contract;
fraud�intentional misrepresentation; negligent misrepresentation; violation of
regulation of business of financial planning; unjust enrichment; civil
conspiracy; and violation of the consumer fraud act.� Simultaneously, appellants filed a demand for
arbitration against Benistar with the AAA in New York, New York.� Lafayette filed a counterclaim alleging breach
of contract.
����������� In
March 2008, Benistar moved for sanctions against appellants, pursuant to Minn.
R. Civ. P. 11 and Minn. Stat. � 549.211 (2008), for asserting baseless
claims against Benistar and refusing to dismiss the district-court action.� In April 2008, Benistar and Lafayette moved
for summary judgment.� The district court
granted the motions.� The district court
also found that appellants violated rule 11 and awarded Benistar $34,948.78 and
Lafayette $38,339.65 in attorney fees and costs.� The district court dismissed the matter
without prejudice and referred the entire matter to the AAA.� This appeal follows.�
D E C I S I O N
Benistar Attorney Fees and Costs
����������� Appellants argue that the district court abused its discretion
in awarding attorney fees and costs to Benistar, pursuant to Minn. R. Civ. P.
11.� We review a district court�s
decision on a rule 11 motion for abuse of discretion.� Gibson
v. Coldwell Banker Burnet, 659 N.W.2d 782, 787 (Minn. App. 2003).�
����������� Appellants
contend that the district court abused its discretion because their filing in
district court was not for an improper purpose and sanctions may not be awarded
against a represented party.� Rule 11
provides for the imposition of sanctions when a party violates the rule.� See
Minn. R. Civ. P. 11.02 (representations to court), .03 (sanctions).� Rule 11 provides that parties and their
attorneys may be sanctioned for presenting a pleading or motion for an improper
purpose or without sufficient evidentiary support.� Minn. R. Civ. P. 11.02(a), (c), .03.� But �[a] [r]ule 11 sanction should not be
imposed when counsel has an objectively reasonable basis for pursuing a factual
or legal claim or when a competent attorney could form a reasonable belief a
pleading is well-grounded in fact and law.�� Bergmann v. Lee Data Corp., 467 N.W.2d
636, 641 (Minn. App. 1991) (quotation omitted), review denied (Minn. May 23, 1991).
����������� The district court concluded that the district-court
filing was done for an improper purpose.�
The district court found that
because appellants agreed to arbitration, Benistar should not have been forced
to spend attorney fees and costs to defend the matter in district court.� The record supports this finding.� Appellants signed several documents, all with
similar arbitration language.� Appellants
even filed a claim with the AAA and never ��challenged that arbitration is the appropriate
forum for their claims.� Appellants
contend that they filed in both forums because the statute of limitations was
running on their claims.� But the
arbitration clauses are clear and broad; thus, expiration of the statute of
limitations should not have been a concern�appellants should have filed only with
the AAA.� Appellants also contend that
district courts in similar actions ruled that the district court had
jurisdiction.� But appellants do not
provide any authority demonstrating the precedential value of a district court
order.� Additionally, appellants
discovered these similar cases in March 2008 and January 2009�not in 2007 when
they were crafting their complaint.�
Furthermore, Benistar�s attorney wrote to appellants� attorney in
December 2007, providing an opportunity to withdraw the pleadings.� Benistar�s attorney wrote to appellants�
attorney twice again in early March 2008, providing opportunities to dismiss
the complaint.� Each time, appellants�
attorney refused to dismiss the complaint.�
For these reasons, the district court did not abuse its discretion in
awarding attorney fees because appellants knowingly and improperly filed a
claim in district court when they agreed to arbitrate in New York.
����������� Appellants also argue that they cannot be sanctioned as a
represented party.� Under the rule, �[m]onetary
sanctions may not be awarded against a represented party for a violation of
Rule 11.02(b).�� Minn. R. Civ. P. 11.03(b)(1) (emphasis added).� Rule 11.02(b) provides that when presenting a
pleading, motion, or other paper, an attorney or unrepresented party
is certifying that to the best of the person�s knowledge, information,
and belief, formed after an inquiry reasonable under the circumstances, . . . the
claims, defenses, and other legal contentions therein are warranted by existing
law or by a nonfrivolous argument for the extension, modification, or reversal
of existing law or the establishment of new law.
The district court, however,
found that appellants violated rule 11.02(a),
which provides, that by presenting a pleading, motion, or other paper to the
court, an attorney or unrepresented party is certifying that �it is not being
presented for any improper purpose.�� (Emphasis
added.)� Therefore, appellants� argument
is misplaced. ��
����������� Appellants contend that even
if Benistar is entitled to attorney fees and costs, the district court�s award
of $34,948.78 is excessive and an abuse of discretion.� �A
district court has �wide discretion in determining the type of sanctions it
deems necessary.�� Peterson v. Hinz, 605 N.W.2d 414, 417 (Minn. App. 2000), review denied (Minn. Apr. 18,
2000).� A district court �has the
discretion to impose a sanction in the amount sufficient to deter future
litigation abuse, even if the amount is greater than the amount of attorney
fees.�� Gibson v. Trs. of Minn. State Basic Bldg. Trades Fringe Benefits Funds,
703 N.W.2d 864, 871 (Minn. App. 2005), vacated
in part on other grounds (Minn. Dec. 13, 2005).��
����������� Benistar�s
attorneys provided the court with its rates and documentation of the fees incurred
by Benistar in defending the district-court action.� The district court found that �Benistar []
claim[s] $34,948.78 in fees and costs, based on hourly rates ranging from $100
to $210.� The attorney who billed the
most time charged $175 per hour.�� The
district court concluded that the fees were reasonable, stating:
����������������������� Benistar�s
counsel charged immensely reasonable hourly rates and billed an appropriate
amount of hours relative to the high complexity of this case.� The senior counsel . . . billed [a] higher
rate[] but appropriately fewer hours than did the more junior counsel on the
files.� This case is highly complex,
involving a series of contracts and entities, and a large amount of money.
The district court further concluded that it was
appropriate for Benistar to have retained counsel with necessary experience.� The district court did not abuse its
discretion.�
Lafayette Attorney Fees and Costs
����������� Appellants argue that the
district court abused its discretion in awarding attorney fees and costs to
Lafayette.� This issue is reviewed for an
abuse of discretion.� Gibson, 659 N.W.2d at 787.� The district court awarded Lafayette attorney
fees and costs based on appellants� rule 11 violation.� But Lafayette did not file a rule 11 motion
with the court.�� Lafayette concedes this
point, but suggests that we affirm the district court based on a different
theory.� See Brecht v. Schramm, 266 N.W.2d 514, 520 (Minn. 1978) (stating that if the
district court arrives at a correct decision, �that decision should not be
overturned regardless of the theory upon which it is based�).�
����������� Lafayette
argues that because appellants signed a hold-harmless agreement, they breached
that agreement by filing a claim against Lafayette and Lafayette is entitled to
damages as a result of that breach.� In
its breach-of-contract counterclaim, Lafayette moved to recover attorney fees
and costs.� The district court, however,
declined to award attorney fees and costs based on that claim.� Instead, the district court awarded Lafayette�s
attorney fees and costs based on appellants� rule 11 violation.� Lafayette did not bring a rule 11 motion;
therefore, Lafayette was not entitled to recover attorney fees and costs, and
the district court abused its discretion in awarding attorney fees and costs to
Lafayette.� See Minn. R. Civ. P. 11.03(a) (mandating that a motion for
sanctions must be made separate from other motions and must specifically
describe the alleged violation).
Referral of Lafayette to the AAA
����������� Lafayette
argues that the district court erred in ordering the entire matter to the AAA
because it was not a party to the arbitration agreements.� The district court stated that �there is no
doubt that Lafayette was not a direct party . . . to the Benistar contracts
containing the broad arbitration clauses,� but nonetheless referred the entire
case, including appellants� claims against Lafayette, to arbitration.� The district court determined that Lafayette
was involved in appellants� and Benistar�s contractual relationship
sufficiently to be bound by the arbitration clause.� The district court also concluded that it
would be judicially efficient to refer all claims to arbitration.� A district court�s decision concerning the
arbitrability of disputes is reviewed de novo.�
Amdahl v. Green Giant Co., 497
N.W.2d 319, 322 (Minn. App. 1993).
The district
court erred in referring appellants� claims against Lafayette to arbitration
because �arbitration is a matter of contract and a
party cannot be required to submit to arbitration any dispute which he has not
agreed so to submit.�� AT&T Techs., Inc. v. Commc�ns Workers of
Am., 475 U.S. 643, 648, 106 S. Ct. 1415, 1418 (1986) (quotation omitted).� Because Lafayette never agreed to
arbitration, the district court should not have ordered Lafayette to arbitration.� Appellants filed with the AAA only as it
relates to Benistar.� Thus, although the
district court dismissed the matter and ordered the parties to the AAA, the
referral should have pertained only to Benistar.� We therefore affirm the district court�s
dismissal without prejudice, but we reverse the district court�s referral of
Lafayette to the AAA.�
Affirmed in part and reversed in part.