RECENT RULINGS ON CR 11 MAKE IT MORE DIFFICULT TO OBTAIN RULE 11 SANCTIONS

RECENT RULE 11 CASES HANDED DOWN IN 2013 AND 2012

The first case cited below imposes some degree of restriction in the court granting Rule 11 sanctions.

LEXINGTON INVESTMENT COMPANY AND MATTHEW STOCKHAM APPELLANTS
v.
RANDY WILLEROY; CLIFF STIDHAM; AND LYNN STIDHAM APPELLEES
NO. 2010-CA-001027-MR
Commonwealth of Kentucky Court of Appeals
RENDERED: MARCH 1, 2013
TO BE PUBLISHED

APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE PAMELA R. GOODWINE, JUDGE
ACTION NO. 06-CI-03998

We now turn to the central issue in this appeal: the denial of the Brokers’ motions for sanctions and attorney fees against Willeroy. CR 11 requires that all pleadings be signed by the party or counsel of record. The rule further provides, in relevant part:
The signature of an attorney or party constitutes a certification by him that he has read the pleading, motion or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. . . . If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney’s fee.
CR 11 does not provide substantive rights to litigants but is a procedural rule designed to curb abusive conduct in the litigation process. Clark Equip. Co., Inc. v. Bowman, 762 S.W.2d 417, 420 (Ky. App. 1988). It is intended only for exceptional circumstances. Id. The test to be used by the trial court in
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considering a motion for sanctions is whether the attorney’s conduct, at the time he or she signed the allegedly offending pleading or motion, was reasonable under the circumstances. Id. Where a trial court denies a motion for sanctions under CR 11, this Court’s review is limited to a determination of whether the trial court abused its discretion. Id. The test for abuse of discretion is whether the trial court’s ruling was arbitrary, unreasonable, unfair, or unsupported by sound legal principles. Goodyear Tire and Rubber Co. v. Thompson, 11 S.W.3d 575, 581 (Ky. 2000).
In arguing that sanctions were justified, the Brokers primarily focus on two significant facts. First, the Brokers emphasize that they signed the tolling agreement which Willeroy had requested. Thus, the Brokers contend that Willeroy did not need to bring the action against them immediately, but could have conducted further investigation. And second, the Brokers contend that Willeroy’s counsel admitted during litigation that he had not conducted an adequate review of the factual basis for the claims against them. However, we agree with Willeroy that these facts, while relevant, do not compel an award of sanctions.
JEREMI SIMON-KINNAMAN APPELLANT
v.
KENTUCKY UNEMPLOYMENT INSURANCE COMMISSION; AND LIFESKILLS, INC. APPELLEES
NO. 2011-CA-002341-MR
Commonwealth of Kentucky Court of Appeals
RENDERED: JANUARY 25, 2013
NOT TO BE PUBLISHED

APPEAL FROM WARREN CIRCUIT COURT
HONORABLE JOHN R. GRISE, JUDGE
ACTION NO. 11-CI-01160

OPINION
AFFIRMING
benefits. Upon the motion of Lifeskills, Inc., Simon-Kinnaman’s former employer, the circuit court dismissed the action on jurisdictional grounds because Simon-Kinnaman failed to verify his complaint as required by KRS1 341.450(1). In his appeal to this court, Simon-Kinnaman argues that his attorney’s signature on the complaint sufficiently complies with the statutory mandate and that his complaint should be reinstated as a matter of right under CR2 15.01, or he should be granted leave to amend his complaint under that rule. He further asserts that corrections of technical defects such as verification are allowed under CR 11. We disagree.
KRS 341.450(1) permits judicial review of a decision of the Commission providing, among other things, that the complaint is verified by the plaintiff or his attorney. When an aggrieved party is permitted by statute to appeal an administrative agency decision, “the requirements of the statute are mandatory, and a circuit court does not obtain jurisdiction to hear the appeal unless the statutory requirements have been met.” Cabinet for Human Res. v. Holbrook, 672 S.W.2d 672, 675 (Ky. App. 1984) (citations omitted). Kentucky courts have long held that statutes providing for judicial review of administrative agency decisions are to be strictly observed. See Kentucky Unemployment Comm’n v. Carter, 689 S.W.2d 360 (Ky. 1985); Board of Adjustment of the City of Richmond v. Flood, 581 S.W.2d 1 (Ky. 1979); Fisher v. Kentucky Unemployment Ins. Comm’n, 880 S.W.2d
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891, 892 (Ky. App. 1994); Monyhan v. Kentucky Unemployment Ins. Comm’n, 709 S.W.2d 837 (Ky. App. 1986); Frisby v. Board of Educ. of Boyle County, 707 S.W.2d 359 (Ky. App. 1986); Holbrook, 672 S.W.2d 672; Pickhart v. United States Post Office, 664 S.W.2d 939 (Ky. App. 1983); Roberts v. Watts, 258 S.W.2d 513 (Ky. 1953). Further, “[t]he civil rules which would normally permit amendment do not apply to appeals of administrative decisions until after the appeal has been perfected and jurisdiction has attached.” Holbrook, 672 S.W.2d at 675 (citing Pollitt v. Kentucky Unemployment Ins. Comm’n, 635 S.W.2d 485 (Ky. App. 1982)).
Here, Simon-Kinnaman failed to verify his complaint filed with the Warren Circuit Court; thus, the appeal was not perfected. We find Simon-Kinnaman’s reliance on Shamrock Coal Co. v. Taylor, 697 S.W.2d 952 (Ky. App. 1985), in support of his argument of sufficient compliance unavailing. In Shamrock Coal, this court found that the plaintiff’s “clear attempt at verification” constituted sufficient compliance with KRS 341.450(1); specifically, the court found that the plaintiff verified his petition by signing it, though not under oath, and the failure to strictly comply with the statute “was no more than a technical defect.” Id. at 953. Simon-Kinnaman did not sign or attempt to verify his complaint. As such, we find Shamrock Coal distinguishable from this case. We further note that the Kentucky Supreme Court in Carter, 689 S.W.2d at 361, also interpreting KRS 341.450(1), disallowed substantial compliance when the appeal process is statutorily created and implemented.
Page 4
Since the civil rules do not apply to appeals from decisions of administrative agencies until the appeal is perfected, the amendment provision of CR 15.01 and correction of technical defect concept of CR 11 are not viable avenues of relief for Simon-Kinnaman. On this ground alone, the circuit court properly dismissed the appeal for lack of jurisdiction.
The order of the Warren Circuit Court is affirmed.
ALL CONCUR.

DONNA YEAGER, AS EXECUTRIX
OF THE ESTATE OF STACEY CLISE APPELLANT
v.
DANIEL DICKERSON AND STEPHEN DALLAS APPELLEES
AND
ERIC DETERS AND DONNA YEAGER,
AS EXECUTRIX OF THE ESTATE OF STACEY CLISE APPELLANTS
v.
DANIEL DICKERSON AND STEPHEN DALLAS APPELLEES
AND
DANIEL DICKERSON CROSS-APPELLANT
v.
DONNA YEAGER, AS EXECUTRIX OF THE ESTATE
OF STACEY CLISE AND ERIC DETERS CROSS-APPELLEES
AND
STEPHEN DALLAS CROSS-APPELLANT
v.
ERIC DETERS AND DONNA YEAGER,
AS EXECUTRIX OF THE ESTATE OF
STACEY CLISE CROSS-APPELLEES
NO. 2008-CA-000153-MR
NO. 2009-CA-000107-MR
NO. 2009-CA-000108-MR
NO. 2009-CA-000109-MR
Commonwealth of Kentucky Court of Appeals
RENDERED: JANUARY 11, 2013
TO BE PUBLISHED

APPEAL FROM GRANT CIRCUIT COURT
Rule 11 Sanctions
The final issue in this case concerns an appeal filed by Yeager and her attorney Eric Deters and a cross-appeal filed by attorneys Dickerson and Dallas. The issue involves the grant of a motion for sanctions pursuant to Kentucky Civil Rule (CR) 11 against each attorney representing Yeager in this case. The appeal challenges the granting of these fees and the cross-appeal challenges the adequacy of the award. Attorney’s fees are appropriate sanctions for violations of CR 11. CR 11 states that every pleading, motion, or other paper to be filed with the court is to be signed by an attorney of record.
The signature of an attorney or party constitutes a certification by him that he has read the pleading, motion or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.
CR 11. If a signed pleading is filed for an unreasonable purpose, a trial court can sanction the attorney.
We find that sanctions were inappropriate in this case.
While some courts apply an across-the-board abuse of discretion standard of review to all Rule 11 rulings, we think where sanctions are imposed our role requires a multi-standard approach, that is, a clearly erroneous standard to the trial court’s findings in support of sanctions, a de novo review of the legal conclusion that a violation occurred, and an abuse of discretion standard on
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the type and/or amount of sanctions imposed. (Citation omitted).
Clark Equipment Company, Inc. v. Bowman, 762 S.W.2d 417, 421 (Ky. App. 1988). Rule 11 sanctions are to be used only in extraordinary circumstances and this Court has previously emphasized that it is not a “vehicle to obtain relief by one who has suffered damages by simple negligence in the filing of a lawsuit or by the filing of a meritless lawsuit.” Id. at 420. It cautioned that even if a case is meritless, the Rule has no “application unless it is demonstrated that a party or his lawyer signed a paper in violation of the Rule.” Id. (quotation and citation omitted).
The imposition of sanctions in this case is equivalent to an award of attorney’s fees to the prevailing party. Although the trial court found that the complaint alleging violation of HIPAA privacy protections was not well grounded in fact or in existing law and there was no good faith argument for the extension, modification, or reversal of existing law, we believe that its findings were based on hindsight rather than whether the complaint was reasonable when filed. The complaint was filed prior to this Court’s opinions in McMillen v. Kentucky Dept. of Corrections, 233 S.W.3d 203 (Ky. App. 2007), and Young v. Carran, 289 S.W.3d 586 (Ky. App. 2008). In addition, this was also an issue that was newly arisen in the courts, trial counsel consulted with another legal professional, and independent research was performed prior to filing the complaint.
Page 16
We believe that the complaint filed by the appellants was well grounded in fact, because the appellees had utilized records subject to HIPAA protection if disclosed by certain entities. The appellants made good faith arguments for extension, modification, or reversal of existing law; therefore, their complaint was not for improper purposes such as to harass, or to cause unnecessary delay or needless increase in the cost of litigation. Under the facts and applying a de novo standard of review, the trial court’s conclusion that a Rule 11 violation occurred was erroneous.
Conclusion
The circuit court’s decision is hereby affirmed in part and reversed in part. This Court has recently ruled that KRS 446.070 does not give a private right of action for violations of HIPAA. Further, Yeager has not proven that Appellees are “covered entities” to which HIPAA regulations and penalties would apply because Appellees are not medical providers or custodians entrusted with the decedent’s medical records. Moreover, the decedent’s medical records were not introduced into evidence, but merely referred to during court proceedings. Any statements and lines of questioning by the attorneys cannot give rise to action under the Judicial Proceedings Privilege. However the trial court did err in imposing Rule 11 sanctions; therefore, that award is vacated.
ALL CONCUR.

2012
382 S.W.3d 826
Tony C. TAYLOR, Appellant,
v.
KENTUCKY UNEMPLOYMENT INSURANCE COMMISSION and River Metals Recycling, LLC, Appellees.
No. 2011–SC–000346–DG.
Supreme Court of Kentucky.
Oct. 25, 2012.
The Supreme Court affirmed, holding (1) because Appellant failed to comply with the verification provision of section 341.450(1), the circuit court lacked jurisdiction over the controversy; and (2) Appellant did not comply with the verification requirement, as his attorney’s signature on the petition did not constitute “certification.”

On appeal, Taylor raises the following claims for our review: (1) that failure to include a verification clause in the original application did not deprive the circuit court of jurisdiction, and thus the court could have granted his motion to amend; (2) that even if the verification requirement is jurisdictional he substantially complied with KRS 341.450′s verification requirement; (3) that he has met the requirements of KRS 341.450(1) as amended because his attorney signed the petition which pursuant to CR 11 suffices to qualify as a verification; and (4) that KRS 13B.140 grants the circuit court subject matter jurisdiction and supersedes KRS 341.450.
For the reasons stated below, we affirm.

377 S.W.3d 553
KENTUCKY BAR ASSOCIATION, Movant
v.
D. Anthony BRINKER, Respondent.
No. 2012–SC–000386–KB.
Supreme Court of Kentucky.
Sept. 20, 2012.
8
The charge alleged Brinker violated SCR 3.130–3.4(c) (knowingly disobeying an obligation of the rules of a tribunal) in failing to comply with CR 11 in filing his March 25, 2010 motion; SCR 3.130–8.1(b) (knowingly failing to respond to a lawful demand for information from an admissions or disciplinary authority) in failing to respond to the bar complaint; and SCR 3.130–8.4(c) (engaging in conduct involving dishonesty, fraud, deceit or misrepresentation) by representing to the Boone Circuit Court that he would not prevent the settlement check from clearing and subsequently revoking the check. The Board voted nineteen to zero, with one recusal and one absence, to find Brinker guilty on all three counts.

DAVID CHRISTOPHER EATON APPELLANT
v.
KRISTINA NICOLE JOHNSON APPELLEE
NO. 2010-CA-002080-ME
NO. 2011-CA-001907-ME
Commonwealth of Kentucky Court of Appeals
RENDERED: AUGUST 31, 2012
NOT TO BE PUBLISHED

ordering him to give Johnson a copy of the insurance card. The trial court acted wholly properly and rationally in ordering that the card be transferred to Johnson.
Finally, we again note that Eaton’s mother, a licensed attorney, has served as his counsel. The numerous errors, coupled with the frivolous nature of many of the arguments and issues raised, clearly implicate CR 11. At this juncture, we shall refrain from invoking that rule against counsel because of the undoubtedly
Page 10
emotional involvement that she has in this matter. However, we caution that a repetition of the noncompliance with the rules merit a more serious consideration of CR 11 sanctions in the future.
We affirm the orders of the Fayette Circuit Court.
ALL CONCUR.
DAVID A. CLARK APPELLANT
v.
COMMONWEALTH OF KENTUCKY APPELLEE
NO. 2010-CA-000785-MR
Commonwealth of Kentucky Court of Appeals
RENDERED: JULY 20, 2012
NOT TO BE PUBLISHED
A party who is not represented by an attorney shall sign his pleading, motion, or other paper and state his address. . . . If a pleading, motion or other paper is not signed, it shall be stricken unless it is signed promptly after the omission is called to the attention of the pleader or movant.
Kentucky Rules of Civil Procedure (CR) 11. See Brey v. Commonwealth, 917 S.W.2d 558 (Ky. 1996) (court directs clerk to strike from motion the signature of “inmate litigator”).
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