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Darnell v. Woodbourne Investments, LLC

United States District Court, E.D. Tennessee, Greeneville Division

May 8, 2018



          Clifton L. Corker United States Magistrate Judge

         Defendants have filed a Motion for Sanctions [Docs. 36, 38, 51] along with an accompanying memorandum of law in support [Docs. 37, 39, 52]. Plaintiff has responded [Doc. 45, 47-49]. Defendants filed their reply [Docs. 54, 55]. Plaintiff has also filed a motion to disqualify counsel [Doc. 41]. The matter is now ripe for resolution.

         I. BACKGROUND

         Woodbourne Investments, LLC (“Woodbourne”) and the Walter Schwab Irrevocable Trust (“the Trust”) obtained a judgment against Jimmy Boyd (“Boyd”) in the state of Missouri, the combined amount of which exceeded $600, 000.00 [Doc. 28-3]. Plaintiff does not contend that this judgment was obtained fraudulently, illegally or was not otherwise fully enforceable by Boyd's creditors, Woodbourne and the Trust.

         Woodbourne and the Trust discovered that Boyd held property in Washington County, Tennessee in a LLC titled “JHB & Sons Excavating, LLC” (hereinafter “JHB”).[1] In an effort to collect on that judgment, Woodbourne and the Trust filed a collection action in Tennessee. On March 30, 2017, as part of that action, they obtained from a state court a Temporary Restraining Order, (“TRO”), preventing Boyd from dissipating any of his assets that might be used to satisfy their judgment during the fifteen days the TRO was effective [Doc. 1-1]. The TRO, which expired by its own terms on April 12, 2017, only applied to Boyd and did not mention Plaintiff. Although the TRO mentioned real estate in Washington County, Tennessee, in the name of “JHB & Sons Excavating, LLC, ” the identifiers were to JHB's personal property located in Washington County and not real property. In fact, there was no evidence that “JHB & Sons Excavating, LLC” held any real property in Washington County, Tennessee.

         On May 15, 2017, Plaintiff intervened in the state action, claiming the TRO affected the real property she held in her own name in Washington County, Tennessee [Doc. 20-3, Motion to intervene]. As she did in this case, she alleged in her motion to intervene that she had sustained damages because she “was in the process of obtaining a construction loan in order to improve the property; however, due to her property being included in the Temporary Restraining Order the progress of the loan has been jeopardized….” [Doc. 20-3, pg. 3]. On June 3, 2017, Plaintiff and her counsel in state court (who was not Mr. Vaughn) met with counsel for Woodbourne and the Trust and came to the consensus that her real property was not included in the TRO.[2] Counsel for both Plaintiff and for Woodbourne and the Trust appeared before a state court judge and announced their agreement, clearly and unequivocally, indicating that the TRO did not include any of Plaintiff's real property she held personally in Washington County, Tennessee. [Doc. 20-4, pg. 3].

         Notwithstanding that agreement, on June 27, 2017, Plaintiff and her new counsel, Mr. Vaughn, filed this Complaint, alleging that Woodbourne, and the Trust, Defendant Lisa Michelle Gibson, and her attorney, Mr. Jay Arthur, Esq., committed fraud, intentionally interfered with business relations, and engaged in a civil conspiracy. Specifically, she alleged the TRO improperly included her real property in Washington County, Tennessee [Doc. 1, Complaint, ¶ 22]. She also claimed that an anonymous female called her loan broker, Mr. Ken Mahaffy, and stated “the property had a lien against it and was part of an active lawsuit involving Mr. Jimmy Boyd.” [Doc. 32-3, pg. 2]. The female caller then hung up before Mr. Mahaffy could obtain any other information. As a result, Mr. Mahaffy claimed he “was forced to put the lender on hold indefinitely regarding financing the storage unit project due to the property title being clouded.” [Doc. 32-3, pg. 2]. Plaintiff does not know who this female was. The Court granted Defendants' motions to dismiss after converting it to a motion for summary judgment and providing the parties an opportunity to engage in any discovery necessary to supplement the pleadings [Doc. 63].

         II. ANALYSIS

         Now before the Court are Defendants' motion to sanction Plaintiff and her counsel Mr. Kyle Vaughn, Esq. for filing a false and fraudulent Complaint. In their Rule 11 motion, Defendants allege that Plaintiff's attorney knew or should have known the Complaint he was signing was false. They allege he did not make a reasonable inquiry into the facts before signing and filing the Complaint.

         Pursuant to Rule 11, an attorney's signature on a pleading certifies that, to the best of the attorney's knowledge, information, and belief, formed after a reasonable inquiry:

(1) [the document] is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;
(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;
(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and
(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on ...

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