Nollner v. S. Baptist Convention, Inc., 2015 U.S. App. LEXIS 18270 (6th Cir. Oct. 16, 2015):

Ron and Beverly Nollner appeal the district court's order granting defendants' motion to dismiss, and denying the Nollners' motion for leave to amend. Even though the Nollners agreed to a choice-of-law provision stating that Virginia law would govern their employment relationship with defendants, [*2]  their counsel repeatedly pleaded claims under Tennessee law. After disregarding an explicit suggestion from the district court to restyle their claims under Virginia law, the Nollners failed to timely respond to defendants' Rule 12(b)(6) motion to dismiss and provided no explanation for this failure. The district court considered defendants' motion unopposed, dismissed the Nollners' complaint with prejudice, and granted defendants sanctions under 28 U.S.C § 1927. We affirm.

I

In 2006, the Nollners began investigating becoming missionaries through their church, an affiliate of the Southern Baptist Church. In 2008, the Nollners accepted positions with the International Mission Board of the Southern Baptist Convention, Inc. Ron Nollner was to manage construction of a new office building in New Delhi, India. The Nollners sold their home and most of their possessions, and Beverly Nollner resigned from a job she had held for seventeen years.

The Nollners worked in New Delhi from mid-January 2009 until around November 2010. In October 2010, defendants terminated the Nollners' employment, purportedly because they were no longer needed. The Nollners' complaint alleged their employment was terminated after they informed their [*3]  superiors of illegal practices in the construction and permitting of the office building in New Delhi. They attached to their complaint an email from Ron Nollner to IMB's Tom Allinder, in which Ron Nollner communicated his concerns about bribes, false documents to procure permits, and unsafe building practices.

In this action,¹ the Nollners assert Tennessee state-law claims for breach of contract, promissory estoppel, and retaliatory discharge against the International Mission Board of the Southern Baptist Convention, Inc. and Global Enterprise Services, LLC (together, "IMB").

1   The Nollners presented an earlier action based on the same employment relationship before the district court on December 9, 2011. This complaint included a retaliatory discharge claim under the Dodd-Frank Wall Street Reform and Consumer Protection Act and was removed from Tennessee state court to federal district court by defendant IMB on the basis of original federal-question jurisdiction over the Dodd-Frank claim and supplemental jurisdiction over various state-law claims. On April 3, 2012, the district court dismissed the Nollners' claim under Dodd-Frank and remanded to Tennessee state court. The Nollners then [*4]  voluntarily dismissed their lawsuit in Tennessee state court. The Nollners brought the current action on October 18, 2013, in Tennessee state court. Defendants removed the action to federal court on April 25, 2014, on the basis of diversity jurisdiction. Four days later, defendants filed their motion to dismiss. See R. 5.

On July 30, 2014, the district court granted IMB's motion to dismiss the Nollners' complaint, without prejudice, and sua sponte granted the Nollners leave to amend within 15 days. R. 28, Page ID 525; Nollner v. S. Baptist Convention, Inc., No. 3:14-CV-1065, 2014 WL 3749522, at *9 (M.D. Tenn. July 30, 2014) (referred to throughout as "Nollner I"). As the district court later explained, it "expressly informed the plaintiffs that their pleadings were defective and, short of drawing a roadmap, gave plaintiffs very explicit suggestions as to how to remedy the pleadings' deficiencies." R. 39, Final Order at 2, Page ID 768. Specifically, after determining that the Virginia choice-of-law provision was enforceable and required the application of Virginia law, the district court stated that "plaintiffs' common law claims would only be viable if postured as claims under Virginia law." Id.

The Nollners filed an amended complaint on August [*5]  14, 2014, but failed to heed the district court's "express admonition to replead the common-law claims under Virginia law (at a minimum, in the alternative)" in order to remedy the earlier defect. R. 39, Page ID 771 n.2. The Nollners instead reiterated the same claims from their first amended complaint: 1) common law retaliatory discharge under Tennessee law; 2) discharge from employment in violation of the Tennessee Public Protection Act (TPPA) (Tenn. Code Ann. § 50-1-304); 3) breach of contract under Tennessee common law; and 4) promissory estoppel under Tennessee law, and added a statutory claim in the alternative under Virginia's Uniform Computer Information Transactions Act, VA Code § 59.1-507.1. The amended complaint alleged that "the choice of laws provision of the contract the Parties' signed should be disregarded as Defendants did not execute the contract in good faith as they were aware . . . that illegal, immoral, and other breaching events were occurring/going to occur at the time they signed the contract." R. 30 at 12, Page ID 539.

IMB moved to dismiss the amended complaint on August 29, 2014, arguing: 1) the Nollners failed to plead their common-law claims under Virginia law; 2) the alternative claim under the Virginia [*6]  Uniform Computer Information Transactions Act was neither viable nor applicable to an employment contract; and 3) the Nollners should not be permitted to join Southern Baptist Convention, Inc., as a defendant. IMB also moved for sanctions under 28 U.S.C. § 1927, asserting that the Nollners' counsel vexatiously and unreasonably multiplied the cost of proceedings.

The Nollners failed to respond to IMB's motion to dismiss by September 15, 2014, the fourteen-day deadline established by Local Rule 7.01(b). The following day, IMB filed a "Motion to Ascertain Status of the Motion to Dismiss," asking the district court to consider its motion to dismiss unopposed and to dismiss the Nollners' claims with prejudice. Though IMB's motion to dismiss evidently escaped the attention of the Nollners' counsel, the motion to ascertain status did not. The Nollners' counsel immediately filed a motion for leave to respond to IMB's motion to dismiss along with a memorandum in opposition to the motion to dismiss. The Nollners' motion for leave to respond to IMB's motion to dismiss gave no explanation for their delay in responding to the motion to dismiss. Instead, the motion asserted that because IMB's motion to dismiss presented information [*7]  outside the pleadings it should be converted into a Rule 56 motion for summary judgment and the Nollners should have 21 days to file a response. The only mention of a viable claim under Virginia law is in the Nollners' untimely motion to dismiss: "Plaintiff's counsel has conceded an inadvertent mistake in citation due to lack of familiarity with Virginia law. With that said, Plaintiff has outlined the elements of breach of contract in Virginia herein above and would assert that all elements have been met in their Amended Complaint." R. 37, Page ID 761.

The district court rejected the Nollners' argument that IMB's motion was, in essence, a motion for summary judgment, noting that IMB's motion relied only on documents either referenced in or attached to the complaint (i.e., the Acknowledgment of Willingness to Accept Assignment the Nollners signed and the accompanying offer letter, referenced in their Amended Complaint at paragraphs 13, 19-21, 23, 26, 68, 75, and the Nollners' 2008 w-4, referenced at paragraph 49), "the same documents that the court already ruled were properly considered at the Rule 12 stage in this action." 2014 WL 3749522, at 9 n.2; R. 39, Page ID 770.

At this stage, except in the untimely response to the [*8]  defendants' motion to dismiss, which the district court did not consider, the Nollners' counsel had disregarded the district court's sua sponte "lifeline" advice to add common law claims under Virginia law, failed to timely respond to IMB's motion to dismiss and, instead of explaining these failures, asserted that the district court should convert IMB's motion to dismiss into a motion for summary judgment. Accordingly, the district court denied the Nollners' motion for leave to respond, granted IMB's motion to dismiss as unopposed, imposed sanctions under 28 U.S.C. § 1927, and dismissed the Nollners' claims with prejudice.

II

The Nollners appeal the district court's September 19, 2014 final order dismissing their amended complaint. However, their appellate arguments focus primarily on whether the district court properly dismissed their amended complaint in its July 30, 2014 order based on its conclusion that Virginia law applied to the Nollners' employment relationship with IMB. Because the September 19, 2014 final order is the first opportunity the Nollners had to appeal their claim, we will consider their appellate arguments as directed to the district court's July 30, 2014 order in their appeal of [*9]  the September 19, 2014 final order. See Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 712 (1996) (stating that "parties are entitled to a single appeal, to be deferred until final judgment has been entered, in which claims of district court error at any stage of the litigation may be ventilated").

The Nollners essentially contend the district court erred in: 1) denying their motion for leave to amend to include SBC as a defendant; 2) granting IMB's Rule 12(b)(6) motion to dismiss for failure to state a claim; and 3) granting IMB's motion for sanctions.

***

C. Motion for Sanctions

The district court granted IMB's request for sanctions under 28 U.S.C. § 1927 for the Nollners' counsel's "patently unsubstantiated request" to convert IMB's Rule 12(b)(6) motion into a Rule 56 motion for summary judgment. R. 36, Page ID 751-52; R. 39, Page ID 773; see R. 42, Page ID 782 (order granting attorney's fees of $416.00). The Nollners challenge the district court's application of Red Carpet Studios Division of Source Advantage, Ltd. v. Sater, 465 F.3d 642 (6th Cir. 2006), and its determination that the Nollners' counsel "intentionally and needlessly [*17]  caused additional expense to defendants." R. 39, Page ID 773. We review a decision to impose § 1927 sanctions for abuse of discretion. Jones v. Ill. Cent. R. Co., 617 F.3d 843, 850 (6th Cir. 2010).

The district court reasoned:

   The court does not agree with the defendants that the filing of the Amended Complaint constitutes the "very definition of vexatious litigation." The Amended Complaint is manifestly deficient and, as discussed herein, reflects (at least) a lack of attentiveness by plaintiffs' counsel. Notwithstanding its substantive defects, the Amended Complaint was filed with the court's permission; accordingly, the court cannot conclude that counsel needlessly multiplied proceedings by filing it. Therefore, the court will not award sanctions to the defendants for fees related to the defendants' Motion to Dismiss the Amended Complaint.

However, the court concludes that the plaintiffs' next filing--its untimely and unfounded Motion for Leave to File a Response to the Motion to Dismiss (Docket No. 36)--was both frivolous and dilatory. After plaintiffs' counsel missed a deadline (an error that plaintiffs' counsel does not defend), they filed a patently unsubstantiated request to convert the Rule 12 motion into a Rule 56 motion. The filing of that motion intentionally [*18]  and needlessly caused additional expense to the defendants. Accordingly, the court concludes that Section 1927 sanctions in the form of reasonable attorney's fees are appropriate with respect to the defendant's Response to the plaintiffs' Motion for Leave.

As a final note, the court recognizes that, in the interest of having the plaintiffs' claims in this lengthy litigation decided on the merits, it gave great leniency to the plaintiffs as to their pleadings. Unfortunately for the plaintiffs, that leniency did not bear fruit for their claims.

R. 39 at 7-8, Page ID 773-74.

After carefully reviewing the district court's analysis, we find it represents a faithful and proper application of the test outlined in Red Carpet. The Nollners' appellate argument is clearly addressed in the district court's September 19, 2014 final order. Further analysis based on the same reasoning would be duplicative and is unnecessary.

III

For the foregoing reasons, we AFFIRM both the district court's dismissal of the amended complaint with prejudice and imposition of sanctions.