The Colorado Court of Appeals issued its opinion in SRS, Inc. v. Southward on February 2, 2012.
Attorney Fees—C.R.C.P. 11—Applies Only to Pre-Filing Conduct
Steven G. Francis, an attorney, appealed the district court’s order awarding attorney fees to Stanton B. Southward. The order was vacated.
Francis was the attorney for SRS, Inc., which operated an automotive service business. Southward was a co-owner and employee of SRS. On SRS’s behalf, Francis filed a complaint in August 2008 alleging that Southward had converted to his own use a number of company vehicles and violated his employment contract.
By May 7, 2010, Southward had disclosed two documents that proved that one of the vehicles, a van, had not been converted but had been sold to a customer. The trial court first ruled that the disclosure was too close to trial and therefore inadmissible. The trial was continued and Southward filed a motion for reconsideration of the motion, which was granted, rendering the documents admissible.
On August 22, 2010, three days before trial, SRS withdrew its conversion claim concerning the van. At trial, Southward argued that SRS’s witnesses should not be believed with respect to the remaining claims because of the delay in the withdrawal of the claim concerning the van. In rebuttal, Francis argued that the blame for failure to withdraw the claim lay with him, not the witnesses. The jury awarded damages to SRS on its conversion claim and returned a verdict for SRS on the breach of contract claim, but awarded no damages.
After trial, Southward moved for sanctions against Francis, alleging that the failure to promptly withdraw the claim was a violation of C.R.C.P. 11, entitling Southward to an award of fees and costs incurred from May 2010 through August 22, 2010. The court entered judgment in favor of Southward and against Francis for $2,858.65.
On appeal, Francis argued it was error to award Southward attorney fees under C.R.C.P. 11. The Court of Appeals agreed. The Court held that Colorado’s Rule 11 is not as broad as its federal counterpart and only focuses on pre-filing and pre-pleading behavior of the attorney; it does not reach post-filing attorney conduct. Because the sanction was imposed based on post-filing conduct, the court’s award of fees and costs was vacated.