     IN THE COURT OF APPEALS OF TENNESSEE
          MIDDLE SECTION AT NASHVILLE

ERNEST R. FENN and wife,
PATSY S. FENN,
                                     )
                                     )
                                           FILED
                                             December 1,
                                     )          1995
      Plaintiffs,                    )
                                     )     Cecil Crowson,
and                                  )           Jr.
                                     )      Appellate Court Clerk
HARRY W. MILLER, III,                )
                                     )   Davidson Circuit
      Plaintiffs' Counsel/Appellant, )   No. 93C-3327
                                     )
VS.                                  )
                                     )   Appeal No.
HIGHLAND CREDIT BUREAU,              )   01-A-01-9503-CV-00100
INC., d/b/a MID-STATE CREDIT )
BUREAU,                              )
                                     )
      Defendant/Appellee,            )
                                     )
and                                  )
                                     )
MAPCO PETROLEUM, INC., and )
TELECREDIT SERVICE CORP..            )



   APPEAL FROM THE CIRCUIT COURT FOR DAVIDSON COUNTY
                AT NASHVILLE, TENNESSEE
          THE HONORABLE WALTER C. KURTZ, JUDGE



For Harry W. Miller, III:                For Highland Credit Bureau, Inc.:
Larry L. Roberts                         Henry F. Todd, Jr.
ROBERTS & ASSOCIATES                     TODD, SPENCER & ATKINS
Nashville, Tennessee                     Dickson, Tennessee




                 AFFIRMED AND REMANDED



                                         WILLIAM C. KOCH, JR., JUDGE
                                OPINION

      This appeal involves the imposition of Tenn. R. Civ. P. 11 sanctions for
inadequate pre-filing investigation in a malicious prosecution case. After the Fifth
Circuit Court for Davidson County dismissed the plaintiffs’ claims against one of
the defendants, the defendant sought sanctions against one of the plaintiffs’
lawyers. The trial court conducted an evidentiary hearing, found that the
plaintiffs’ lawyer had failed to make an objectively reasonable factual and legal
inquiry before filing the complaint, and ordered the lawyer to pay the defendant
$1,500. On this appeal, the plaintiffs’ lawyer challenges the legal and factual
basis for the sanctions. We have determined that the record fully supports the trial
court’s decision and also that this appeal is frivolous. Accordingly, we affirm and
remand the case for the assessment of damages pursuant to Tenn. Code Ann. § 27-
1-122 (1980).


                                         I.


      Patsy S. Fenn’s purse was stolen from her automobile on November 6,
1992. She immediately reported the theft to the Metropolitan Police Department.
The purse contained a checkbook for a joint account Ms. Fenn and her husband
maintained at NationsBank. On the same evening, the thief made out one of the
stolen checks for $20, forged Mr. Fenn’s signature, and negotiated the check at a
Mapco convenience store on Thompson Lane in Nashville.


      NationsBank refused to honor the check and returned it to Mapco bearing
a stamp indicating that the check had been reported stolen. On November 21,
1992, Mapco sent Mr. Fenn a form letter informing him that NationsBank had
dishonored the check and requesting that he redeem the check. The letter
concluded by stating that “[f]ailure to recover your check will result in prosecution
through the District Attorney’s office and notification of Credit Bureau.”


      The Fenns contacted a Nashville lawyer named Larry Roberts after they
received Mapco’s letter. On December 9, 1992, Mr. Roberts responded to

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Mapco’s letter by pointing out that the check had been stolen and that Mr. Fenn’s
signature was a forgery. The letter also threatened a malicious prosecution action
if Mapco attempted to prosecute Mr. Fenn criminally or if it reported unfavorable
information to any credit reporting agency. The letter concluded by stating that
the Fenns would take “prompt legal action” if they received further
“correspondence of any threatening nature.”


      At some point not apparent in the record, Mapco turned the matter over to
Highland Credit Bureau, Inc. (“Highland”) for collection. There is no evidence
that Mapco provided Highland with Mr. Roberts’ December 9, 1992 letter
threatening litigation if any additional collection efforts were made. Highland sent
a form letter to Mr. Fenn on April 16, 1993, requesting payment of the disputed
check. The tone of Highland’s letter was more conciliatory than Mapco’s original
letter. It stated that Highland would assume that the debt was valid unless Mr.
Fenn notified them that he disputed the debt. The letter also informed Mr. Fenn
that Highland would obtain verification of the debt and provide him with a copy
if he disputed the debt.


      Mr. Roberts responded to Highland’s letter on April 27, 1993. He disputed
the debt and stated that Mr. Fenn would “make no voluntary payment of any
amount.” The letter also threatened legal action if either Mapco or Highland made
any unfavorable report to a credit bureau and demanded a letter of apology from
both Mapco and Highland. Upon receipt of Mr. Roberts’ letter, Highland closed
its file and returned Mr. Fenn’s check to Mapco with a notation that the account
was “uncollectable.” Highland took no further action with regard to Mr. Fenn’s
check. It did not file an adverse report with any credit or check information
service and did not provide the written apology demanded by Mr. Roberts.


      Ms. Fenn encountered a problem in September 1993 when she used a check
to pay for her daughter’s contact lenses. The optician was reluctant to accept the
check after a routine inquiry with Telecredit Service Corporation reported that the
check had been stolen. After Ms. Fenn explained the circumstances, the optician
accepted the check and gave Ms. Fenn a form to discover the basis for Telecredit’s

                                        -3-
report that the check had been stolen. Mr. Fenn did not send in the form but
contacted Mr. Roberts instead.


      Mr. Roberts assigned the matter to Harry W. Miller, III. Messrs. Miller and
Roberts did not discuss the matter with Mapco, Highland, or Telecredit and did
not attempt to obtain the Fenns’ credit report to determine whether it contained
adverse information and, if it did, the source of the information. They believed
that Mapco was the chief culprit but assumed that Highland must have reported
derogatory credit information about the Fenns. Accordingly, they decided to “sue
everyone who had anything to do with this.” On November 3, 1993, Mr. Miller
prepared and filed a complaint against Mapco, Highland, and Telecredit alleging
defamation, extortion, harassment, and violation of the federal debt collection and
state consumer protection laws. The complaint specifically alleged that Highland
had attempted extortion by demanding payment of the check and that it had
engaged in outrageous business conduct for falsely reporting the Fenns to
Telecredit.


      Highland denied the allegations in the complaint and moved for summary
judgment. Their motion was supported by an affidavit stating that Mapco had
turned over Mr. Fenn’s check for collection but that it had returned the check to
Mapco after receiving Mr. Roberts’ letter. The affidavit also stated that it took no
further action with regard to the check and that it did not pass along any
derogatory credit information about the Fenns. After Mr. Miller conceded at the
hearing on Highland’s motion that the Fenns had no claim against Highland
except perhaps for a violation of the federal debt collection statutes, the trial court
granted the motion and dismissed all the claims against Highland.


      Highland then moved for sanctions pursuant to Tenn. R. Civ. P. 11 and for
discretionary costs pursuant to Tenn. R. Civ. P. 54.04. After denying Messrs.
Roberts’ and Miller’s motion to withdraw from the case, the trial court conducted
an evidentiary hearing on September 29, 1994. Thereafter, on October 12, 1994,
the trial court filed a memorandum and order finding that “neither Mr. Roberts nor
Mr. Miller engaged in an adequate investigation as to the role of Highland” and

                                         -4-
granted Highland a $1,500 judgment solely against Mr. Miller because he was the
only lawyer who signed the complaint.


                                            II.


       Mr. Miller’s four issues relate to the factual and legal basis of the trial
court’s decision that he did not conduct a reasonable investigation into the law and
facts before signing and filing the complaint against Highland. He asserts that his
conduct was appropriate and that Highland waited too long to seek monetary
sanctions. We disagree on both counts.


                                            A.


       Tenn. R. Civ. P. 11 responds to the well-publicized problems caused by
overcrowded dockets and pre-trial cost and delay.1 It reminds lawyers that their
duty to their client does not outweigh their duty to their adversaries and to the
justice system itself. City of East St. Louis v. Circuit Court for the Twentieth
Judicial Circuit, 986 F.2d 1142, 1143 (7th Cir. 1993); In re Ronco, Inc., 105
F.R.D. 493, 497 (N.D. Ill. 1985). Its principle goal is to improve lawyers’
behavior,2 and it accomplishes this goal by providing an economic deterrent
against filing complaints and other papers that are not reasonably based in law or
in fact. Con-Tech, Inc. v. Sparks, 798 S.W.2d 250, 253 (Tenn. Ct. App. 1990).


       The rule is straightforward. It requires that a lawyer’s conduct be measured
against an objective standard of reasonableness under all the circumstances.
Andrews v. Bible, 812 S.W.2d 284, 288 (Tenn. 1991); Metropolitan Gov't v. Stout,
App. No. 89-331-II, slip op. at 8, 15 T.A.M. 31-6 (Tenn. Ct. App. July 5, 1990)
(No Tenn. R. App. P. 11 application filed). The Tennessee Supreme Court has
explained the requirements of Tenn. R. App. P. 11 as follows:

       1
       Debbie A. Wilson, Note, The Intended Application of Federal Rules of Civil Procedure
11: An End to the “Empty Head, Pure Heart” Defense and a Reinforcement of Ethical
Standards, 41 Vand. L. Rev. 343, 343-44 (1988).
       2
        5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1331, at
19 (2d ed. 1990).

                                           -5-
             1.    An attorney must READ every paper before
             signing it.

             2.     He [or she] must make a reasonable pre-filing
             investigation of the FACTS.

             3.     He [or she] must research the LAW, unless he [or
             she] is certain he [or she] knows it.

             4.     The law as applied to the facts must
             REASONABLY WARRANT the legal positions and
             steps he [or she] takes. If existing law does not warrant
             these positions, a plausible argument for the extension
             of the law to the facts of the case is required.

             5.     It must be demonstrated, as the basis of pre-filing
             investigation and research, that there is a
             REASONABLE BASIS to name each defendant named,
             and to support each claim asserted. The shotgun
             complaint or answer, filed in the hope that discovery
             will produce the justification for it, is improper.

Andrews v. Bible, 812 S.W.2d at 288 (citing Whittington v. Ohio River Co., 115
F.R.D. 201, 209 (E.D. Ky. 1987)).


      The courts must gauge the reasonableness of a lawyer’s conduct in light of
the circumstances known to the lawyer when he or she signed the document.
Andrews v. Bible, 812 S.W.2d at 288; Krug v. Krug, 838 S.W.2d 197, 205 (Tenn.
Ct. App. 1992). The inquiry is heavily fact-intensive. Thomas v. Capital Sec.
Serv., Inc., 836 F.2d 866, 871-72 (5th Cir. 1988). Accordingly, reviewing courts
defer to trial courts’ factual findings and review their sanctions decisions using the
abuse of discretion standard. Cooter & Gell v. Hartmarx Corp, 496 U.S. 384,
404-05, 110 S. Ct. 2447, 2460-61 (1990); Krug v. Krug, 838 S.W.2d at 205.


                                         B.


      Messrs. Roberts and Miller had no evidence linking Highland with Ms.
Fenn’s check cashing problems when Mr. Miller prepared and filed the complaint
against Highland. Ms. Fenn provided them with no new information. She believed
that “Mapco [had] messed up” and trusted that her lawyers would “do the right


                                         -6-
thing.” Despite the lack of evidence against Highland, neither Mr. Miller nor Mr.
Roberts made any investigation or inquiry into the facts during the seven weeks
prior to filing the complaint. They did not contact Highland directly or attempt
to obtain the Fenns’ credit reports even though they were readily available. They
did not even return the form provided by the optician that would have revealed the
source of Telecredit’s information that Ms. Fenn’s check had been stolen.


      Messrs. Roberts and Miller presented little evidence with regard to their
decision to sue Highland. Mr. Miller did not testify even though he attended the
hearing on Highland’s request for sanctions. Instead, he submitted an affidavit
stating in the most conclusory terms that “a reasonable pre-filing investigation of
the facts were [sic] made before the signing of the said Complaint” and that “a
reasonable research of the law was performed based on the facts before the signing
of the said Complaint.” Mr. Roberts added little substance to Mr. Miller’s
affidavit. He stated that he had not researched the federal debt collection statutes,
that he assumed that Highland must have been involved, and that he might not
have sued Highland if it had sent Ms. Fenn a written apology.


      The evidence does not preponderate against the trial court’s finding that
Messrs. Miller and Roberts failed to conduct a reasonable investigation into the
facts and the law before suing Highland. Their claims against Highland are
quintessential examples of the “shotgun complaint” criticized by the Tennessee
Supreme Court. Andrews v. Bible, 812 S.W.2d at 288. Accordingly, we have
determined that Mr. Miller has not carried his heavy appellate burden to
demonstrate that the trial court abused its discretion by imposing a $1,500
sanction against him.


                                         C.


      Mr. Miller also insists that Highland was not entitled to Tenn. R. Civ. P. 11
sanctions because it waited too long to seek sanctions and because it did not
mitigate its damages. Parties seeking Tenn. R. Civ. P. 11 sanctions must mitigate
their damages by giving prompt notice to the trial court and the offending party

                                        -7-
of their intent to seek sanctions. Andrews v. Bible, 812 S.W.2d at 291-92. Mr.
Miller has not explained precisely how Highland failed to mitigate its damages,
and our review of the record has not revealed any lack of diligence on Highland’s
part.


        The Fenns’ depositions taken in March 1994 revealed that they had no
factual basis for their claim that Highland had reported derogatory credit
information about them to another credit or check reporting agency. Immediately
after the depositions, Highland’s lawyer informed Mr. Miller of Highland’s
intention to seek sanctions. The Fenns continued to press their claims for five
months notwithstanding this warning. Approximately one week after the trial
court summarily dismissed the Fenns’ claims, Highland filed its motion for Tenn.
R. Civ. P. 11 sanctions.


        The sanctions issue is normally determined at the end of the case. Highland
afforded the Fenns an adequate opportunity to withdraw their suit, and the record
demonstrates that the efforts of Highland’s lawyer after March 1994 were focused
on bringing the suit against his client to a swift conclusion. Accordingly, we find
nothing dilatory in the conduct of Highland or its lawyer.


                                         IV.


        Highland has requested additional sanctions on the ground that Mr. Miller’s
appeal is frivolous. Since successful litigants should not have to bear the expense
and vexation of groundless appeals, Davis v. Gulf Ins. Group, 546 S.W.2d 583,
586 (Tenn. 1977), Tenn. Code Ann. § 27-1-122 (1980) empowers the appellate
courts to award reasonable damages, including legal expenses, against appellants
whose appeals are frivolous or taken solely for delay.


        An appeal is frivolous if it is devoid of merit and if it has little chance of
success. Liberty Mut. Ins. Co. v. Taylor, 590 S.W.2d 920, 922-23 (Tenn. 1979);
Industrial Dev. Bd. v. Hancock, 901 S.W.2d 382, 385 (Tenn. Ct. App. 1995). An
appeal has no reasonable chance of success when reversal of the trial court’s

                                         -8-
decision would require revolutionary changes in the established standards of
review. Davis v. Gulf Ins. Group, 546 S.W.2d at 586.


       Notwithstanding the clear precedent establishing the “abuse of discretion”
standard of review in Tenn. R. Civ. P. 11 cases,3 Mr. Miller bases his arguments
on the less stringent standard of review in Tenn. R. App. P. 13(d). This is the
wrong standard by which to review the issues in this case.4 Using the proper
standard of review, this appeal presents no debatable questions of law or factual
findings and conclusions that are not clearly supported. Accordingly, we find that
this appeal is frivolous and remand the case to the trial court for a hearing to
assess damages in accordance with Tenn. Code Ann. § 27-1-122.


                                               V.


       We affirm the judgment and remand the case to the trial court for further
proceedings consistent with this opinion. We also tax the costs of this appeal to
Harry W. Miller, III and his surety for which execution, if necessary, may issue.



                               __________________________________
                                    WILLIAM C. KOCH, JR., JUDGE

CONCUR:

_______________________________
SAMUEL L. LEWIS, JUDGE


__________________________________
BEN H. CANTRELL, JUDGE


       3
       Cooter & Gell v. Hartmarx Corp., 496 U.S. at 404-05, 110 S. Ct. at 2460-61; Krug v.
Krug, 838 S.W.2d at 205.
       4
        This court has held that Tenn. R. App. P. 13(d) is the appropriate standard by which to
review the amount of sanctions imposed pursuant to Tenn. R. Civ. P. 11. Con-Tech, Inc. v.
Sparks, 798 S.W.2d at 254. Mr. Miller’s posture on this appeal is that the trial court should not
have imposed any Tenn. R. Civ. P. 11 sanctions against him; he has not taken issue with the
amount of the sanction award.



                                              -9-
