Tina K. Williams et al. v. Rector Phillips Morse, Inc. et al.

ca05-379

ARKANSAS COURT OF APPEALS
NOT DESIGNATED FOR PUBLICATION

DIVISION IV

CA05-379

FEBRUARY 1, 2006

TINA K. WILLIAMS, et al. AN APPEAL FROM THE PULASKI

APPELLANTS COUNTY CIRCUIT COURT [CV-02-010148]

V.

RECTOR PHILLIPS MORSE, INC., HONORABLE TIMOTHY FOX,

et al. JUDGE

APPELLEES

AFFIRMED

Olly Neal, Judge

Appellants Tina Williams et al. appeal the judgment of the Pulaski County Circuit Court dismissing with prejudice their claim for deceptive trade practices and breach of fiduciary duty against appellees, Rector Phillip Morse, Inc. et al. Appellants raise one point for reversal-that the trial court erred in dismissing appellants' complaint against the Stewart defendants on the grounds that appellants failed to respond adequately and in good faith to the Stewart defendants' interrogatories. Finding no error, we affirm.

On September 26, 2002, appellants filed a class action lawsuit against appellees, alleging that, from September 29, 1997, appellees Stewart Title Company of Arkansas, Inc., and Stewart Title Guaranty Company (Stewart), in alliance with appellees Rector Phillip Morse, Inc., Real Estate Central, Inc., Interactive Management.com, and Rainey Realty, Inc., all real estate companies, participated in "systematic, hyper-aggressive business practices designed to flaunt the law and to extract ill-gotten and excessive fees from them during the real estate closing process." According to appellants' complaint, Stewart orchestrated a referral scheme by which it essentially offered real estate companies incentives for suggesting Stewart's closing services to its clients. In exchange for referring customers, appellants alleged that Stewart would either (1) pay the real estate company a "marketing" fee, (2) pay "rent" to lease space in the real estate company's office, (3) pay the salary of a real estate employee, (4) pay for "title services" not actually performed; or (5) contribute to a charitable organization on behalf of the real estate company. The complaint further alleged that Stewart, as a standard business practice, subjected real estate buyers to illegitimate charges and overages, going so far as to convert a two-page settlement statement into a three-page settlement statement so that only the customer's signature, acknowledging acceptance of the terms, would be on the third page and Stewart could, without the buyer's consent and after the closing, redistribute funds and pocket the overages.

The record reflects that on April 14, 2004, Stewart propounded sixty-three written interrogatories and sixteen requests for production. Appellants responded to each of the interrogatories as follows:

Plaintiffs object to this interrogatory on the basis that it is unduly broad and unduly burdensome, at least in part because the Stewart Defendants' First Requests violate Rule 33 in that they exceed the number of interrogatories allowed without leave of court. In addition, Plaintiffs cannot satisfactorily respond to the Stewart Defendants interrogatory until the Stewart Defendants themselves produce the documents covered by this Court's Order Granting Plaintiff's Motion to Compel, some of which the Stewart Defendants have apparently destroyed. In addition, this interrogatory is impermissible to the extent it purports to require Plaintiffs to undertake an analysis more appropriately conducted by an expert.

Consequently, Stewart filed a motion to compel discovery on June 21, 2004. That motion reflected that Stewart had sent interrogatories to appellants, who failed to provide any meaningful answers or documentation in response to their requests.

At a hearing on September 7, 2004, the trial court determined that all of the interrogatories were "reasonable questions" related to class certification. The trial court stated:

Here's what I'm going to do: I've kind of generally gone over my position with respect to what the Stewart defendants are entitled to. So I'm going to give you all 30 days to give them what you think based upon what I've told you ought to be there. If the Stewart defendants do not believe that a good faith attempt was made to provide that information, then they can file a pleading. Let me just tell you what we're going to do: If I have to go through these things one by one, which I'll be happy to take the time to do at [sic] the next time that we're here, and I decide that there has not been a material effort by the plaintiffs, then I am going to strike the complaint with prejudice with respect to the Stewart defendants. Are we clear?

By the same token, I would like for the Stewart defendants to remember that we haven't even had the class certification hearing yet, and I'm not going to get into anything on the merits, and anything that even smacks of discovery on the merits at this point in time is unnecessary. So I don't expect to see anything from the Stewart defendants with respect to their responses that addresses the merits. We all know what the issues are with respect to Rule 23 and the class certification hearing, and that's what you guys need to be getting ready for and that you're entitled to be getting ready for. That 30-day period runs from today.

Counsels approved an order as to form, and the trial court signed the order. That order, filed September 20, 2004, enumerated that, if the court found appellants to have failed to make a good faith effort to respond to the discovery requests, the court would strike their complaint with prejudice.

On October 11, 2004, appellants again responded to the interrogatories propounded by Stewart. To most of the interrogatories, appellants responded as follows:

Plaintiffs object to this interrogatory to the extent that it is unduly broad and overly burdensome. Plaintiffs also object that this interrogatory is not calculated to lead to the discovery of admissible evidence.

Subject to these objections, and without waiving the same, Plaintiffs repeat their allegations from the Complaint that [Stewart] violated the Arkansas Deceptive Trade Practices Act, along with its duty to act as a fiduciary on the plaintiff's behalf, by doing such things as charging Plaintiffs more than [Stewart] paid for, as an example, overnight delivery of documents. Fundamentally, however, this case is about much more than the excess amounts Plaintiffs paid for specific items at their closings. At its heart, as detailed in the Complaint, this lawsuit involves an illegal, not to mention complex, kickback and referral scheme between [Stewart] and various Arkansas realtors. At least in part, and unbeknownst to Plaintiffs, this machination was funded by overcharging for such things as title insurance premiums (made possible by the Title Max program) and employing phantom overnight charges. In other words, [Stewart] collected from Plaintiffs an exorbitant sum to close their deals. In addition to the illicit conspiracy described above, and as a vital component to its existence, [Stewart] ran afoul of Arkansas law because it did not, as required, disclose to Plaintiffs the entire amount it would cost them to close the transaction involving their properties, and it did not attempt to obtain the lowest price possible for Plaintiff to achieve this task.

On October 20, 2004, Stewart filed with the circuit court a motion to strike for failure to comply with the court order, and a hearing was held on November 12, 2004. The court went through some of the interrogatories with counsel. For example, the court asked appellants' counsel:

Court: Are part of the allegations of the complaint that Stewart Title overcharged fees for overnight delivery service? Yes or no. It seems to me to be an easy answer. Are part of the allegations of the complaint that Stewart Title overcharged fees for overnight delivery service?

Appellant's Counsel: Well, as a component of being overcharged by using Stewart's service in general, yes, they are. But the real issue is whether the entire amounts paid by plaintiffs can be refunded to them. ...

Court: Interrogatory Number 5: ["]For each of the named plaintiffs that want to be class representatives, state whether he or she asserts a claim that STAR, one of the Stewart defendants, overcharged the plaintiff fees for overnight delivery service.["] That should have been a simple yes or no for each of the plaintiffs. And instead there is: "Objection that it's not calculated to lead to discovery of admissible evidence."

Appellant's Counsel: We put the standard objections, but then we say yes. But what we're trying to make clear is that this case is not about particular fees; it's about the entire amounts charged the plaintiffs that got in the Stewart defendants' pockets because of an illicit scheme they had with realtors. They want the entire amounts back, not the amounts for particular fees.

Court: But don't all of the components add up to the total?

Appellant's Counsel: Yes, they do, obviously.

Court: Interrogatory Number 9: "For each plaintiff who asserts a claim based on overcharges for fees for overnight delivery service, state the amount he or she claims as an overcharge for fees for overnight delivery service and show the calculation of the overcharge." And there is nothing.

Appellant's Counsel: Like I said, they have copies of the HUD-1 statements provided to these plaintiffs and can figure out that information for themselves.

Court: That's not how discovery works.

. . .

They're asking you to declare what your clients' position is with respect to what the alleged overcharges are.

Appellant's Counsel: Our clients allege that they're entitled to the entire funds that they paid back. And the Stewart defendants know the amounts that were charged to a particular client.

Court: On December 16th or whenever we're set, when your clients come for this certification, and these exact questions are asked of them, how are they going to answer them?

Appellant's Counsel: "I want a refund of the entire amounts that I paid to the Stewart defendants."

Court: The Stewart defendants didn't charge them any amounts that were legitimate?

Appellant's Counsel: The Arkansas Deceptive Trade Practices Act allows you to recover the entire amount that was paid or that you outlaid as a result of the deceptive practice, and it's our -

Court: But at each step you have to prove what amount was overcharged before you can prove that there was some type of fraudulent or deceptive activity going on. So if it was supposed to be $20 and you were charged $30, and there's some alleged kickback to somebody, then that's what the discovery wanted.

"We want to know what you say you were supposed to be charged, how much were you overcharged, and then we'll go from there figuring out whether we want to settle the case, whether we think your case is ridiculous, or whether we want to go tee it up."

. . .

So your perspective is that these are full and complete answers and these are good enough?

Appellant's Counsel: That's my position.

. . .

Court: I am not going to get into the merits of the case. But this is totally unacceptable. They're entitled to some dollar amounts, and they're entitled to know . . . this before they go to the class certification.

. . .

I told you back when an order was entered . . . that full and complete discovery answers were going to be filed. And that something really, really bad might happen unless there was a good faith effort made to respond to the discovery requests.

Appellant's Counsel: And viewing it from our theory of the case, which I understand is different from the defendants', we thought we were making a good faith effort.

Court: Well, that's the decision I'm going to make. I'm going to make it by 4:00 today, and I'm going to issue a letter to you guys.

The trial court entered an order on November 15, 2004, dismissing the action against Stewart with prejudice and finding that appellants responses were not a "good faith effort," and left Stewart without necessary information to prepare for the class certification hearing. Thereafter, appellants voluntarily non-suited their action against the remaining appellees, and this appeal followed. On appeal, appellants argue that the trial court erred in dismissing their complaint against Stewart on the grounds that they failed to respond adequately and in good faith to Stewart's interrogatories. They contend that their responses to the interrogatories were proper and fully responsive to the issues presented in the case and that they acted in good faith.

Arkansas Rule of Civil Procedure 26(b)(1) provides that "[p]arties may obtain discovery regarding any matter, not privileged, which is relevant to the issues in the pending actions[.]" Rule 37(a)(2) of the Arkansas Rules of Civil Procedure provides that, if a party fails to answer an interrogatory submitted under Ark. R. Civ. P. 33, "the discovering party may move for an order compelling an answer[.]" Subsection (a)(3) of Rule 37 provides that an "evasive or incomplete answer or response is treated as a failure to answer or respond." Subsection (d) states that if a party fails to serve answers or objections to interrogatories "the court in which the action is pending on motion may make such orders in regard to the failure as are just[.]" One such order is dismissal with prejudice under subsection (b)(2)(c). See Ark. R. Civ. P. 37; Cook v. Wills, 305 Ark. 442, 808 S.W.2d 258 (1991).

Compliance with the rules of discovery is necessary in all cases, and is especially important in cases involving complex issues and multiple parties. See Rush v. Fieldcrest Cannon, Inc., 326 Ark. 849, 934 S.W.2d 512 (1996). The imposition of sanctions for the failure to provide discovery rests in the trial court's discretion, Calandro v. Parkerson, 333 Ark. 603, 970 S.W.2d 796 (1998), and we have often upheld the trial court's exercise of discretion in granting severe Rule 37 sanctions for flagrant discovery violations, including affirming a dismissal with prejudice for failing to answer interrogatories. Dunkin v. Citizens Bank of Jonesboro, 291 Ark. 588, 727 S.W.2d 138 (1987). There is no requirement under Rule 37, or any of our rules of civil procedure, that the trial court make a finding of willful or deliberate disregard under the circumstances before sanctions may be imposed for the failure to comply with the discovery requirements. Calandro v. Parkerson, supra. In the instant case, the trial court specifically found that appellants had failed to make a "good faith" effort to comply with its order and respond to the interrogatories. Because the trial court was in a superior position to judge the actions or motives of the litigants, we will not second-guess its ruling. See Calandro v. Parkerson, supra.

While dismissal is a drastic sanction, Cagle v. Fennel, 297 Ark. 353, 761 S.W.2d 926 (1988), the record in the instant case demonstrates that appellants' answers were, at a minimum, incomplete. The record reflects that appellants initially submitted a general objection to all interrogatories. Following the hearing, the trial court directed appellants to make a good faith attempt to provide information to appellees. Appellants, however, continued in their assertion that the inquiry was genuinely not which of them was overcharged for what fee but whether they had a "common wrong." The trial court, however, made it clear to appellants that their answers to the interrogatories were deficient in that they failed to apprise appellees of the alleged misconduct, thereby hindering appellee's ability to adequately prepare for the class certification hearing. The trial court stated, and the order reflected that, if appellants did not make such a good faith effort, it would dismiss the complaint with prejudice. Appellants again responded to the interrogatories by objecting to most of the questions, in violation of the court's directive to provide full and complete discovery to appellees. Therefore, we cannot say that the trial court abused its discretion in dismissing the case with prejudice.

Affirmed.

Hart and Bird, JJ., agree.