SC: Underlying tort action-settlement
Facts: Jerry Bittle sustained brain injuries from an automobile accident, rendering him mentally incompetent. Bittle’s mother, Melton, retained Malloy to represent Bittle for his injuries. Melton and Bittle reached a settlement with the insurance company for the claims made, and made several attempts to contact Malloy regarding receiving the settlement funds, but could not reach him. As a result, Melton terminated Malloy’s services for failing to account for the settlement money. Melton then retained Gregory to represent her and Bittle in recovering the settlement funds from Malloy. Fearing that the statute of limitations would soon run, Gregory filed the instant action against Malloy alleging causes of action for negligence, conversion, breach of contract, breach of contract accompanied by a fraudulent act, and constructive trust.
After the action was commenced, Malloy transferred the funds in dispute to Gregory, and filed a motion for Rule 11 Sanctions and counsel fees and expenses against Gregory, claiming specifically that the allegations of conversion were frivolous. Malloy reasoned that Sanctions were appropriate since Gregory relied soley upon Melton’s statements that she did not know where the settlement funds were, instead of conducting a thorough and independent investigation himself to determine the status of the funds.
Did the circuit court correctly find that the suit against Malloy was frivolous because Gregory failed to conduct a proper investigation?
Did the circuit court properly award Malloy attorney fees and expenses?
Ruling: Yes. An attorney may be sanctioned and subject to counsel fees and expenses for bringing a frivolous claim due to that attorney’s failure to first conduct a proper and reasonable investigation into the facts.
Lesson: Before commencing an action, it is important to first always conduct a thorough and reasonable investigation to ensure a sufficient basis for the action(s) being brought.