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Rule 11 Sanctions and Award of Fees

Preston v. Preston, 2022-NCCOA-207.

Facts: Plaintiff and Defendant married in 1988, and began divorce proceedings in 2018. Plaintiff filed his claim for divorce in October of 2018. In July 2019, Defendant filed her answer with motions to dismiss for lack of subject matter jurisdiction, improper venue, insufficiency of process, failure to state a claim, and a motion for sanctions. Defendant’s chief argument was that Plaintiff was not a resident of North Carolina and not a resident of Mecklenburg County. The trial court found otherwise. In an interesting turn of events, Defendant verified her complaint for postseparation support, alimony, equitable distribution and fees just a day before the hearing for her motions to dismiss. In her complaint Defendant actually stated that Plaintiff was a resident of North Carolina. Her complaint was then filed an hour after the hearing on the motions to dismiss. Defendant later filed a motion to stay the divorce, which was denied. Plaintiff then motioned for Rule 11 sanctions based on Defendant’s conduct. The trial court granted and ordered that Defendant pay $15,000 in fees to Plaintiff. Defendant appealed.

Issue: Was the trial court’s granting of Rule 11 Sanctions an error?

Holding: Interlocutory appeal and dismissed.

Rationale: Essentially, the Court of Appeals held that Rule 11 sanctions that grant attorneys fees differ from attorneys fees awarded by Chapter 50 actions. Whereas chapter 50 actions grant the award of fees by statute, Rule 11 can grant fees for conduct in the ongoing lawsuit. Since the sanctioning nature of the Rule 11 grant of fees does not involve or dispose of any underlying issue in the ongoing litigation, it does not affect a substantial right and was dismissed. Rule 11 serves a deterrent to end misconduct.

Lessons: Which statute is implicated in a grant of fees will determine whether a substantial right is at play in an interlocutory appeal. The chapter 50 actions for fees contain legal conclusions, such as which party is supporting and which is dependent, and these may play a role in determining whether an interlocutory appeal affects a substantial right. Note: Judge Tyson dissents, and writes that even if the conduct was sanctionable, it ought to cover only the litigation caused by the conduct, i.e., Defendant’s complaint that was filed acknowledging jurisdiction. But since Defendant was acting under good faith and the advice of counsel—her attorney had preemptively drafted and prepared for filing the complaint in the case that the trial court gave an adverse ruling on jurisdiction and venue—Defendant should not be sanctioned. Defendant’s attorney was seeking to protect the client’s interest in marital property and right to support, which can extinguish upon an entered divorce judgment.