Fighting the Frivolous
If you’re in the right and have good records within your
grasp, you can turn the tables on a lawsuit.
About two years ago, my clients—a real estate agent
and his brokerage—listed a home for sale. After the
closing, the buyer sued alleging that she had found
signs of water intrusion in the “rotted” subfloor. The
court dismissed the case and directed the plaintiff
to pay $60,000 to my clients for their attorney’s
fees—almost the entire amount—deeming the lawsuit frivolous. The plaintiff is appealing the decision,
so the final outcome is pending. But the key to this
dramatic turn of events was my clients’ meticulous
When the plaintiff filed her claim, she asserted
that my clients had “failed to ensure that the property was properly inspected” and that “the plaintiff’s agent failed to ascertain the defects.” She also
claimed she had never received all of the documents
she was owed and later claimed that drainage “
upgrade repairs” ordered by the previous owner had not
been done completely. The plaintiff also made allegations against others in the transaction, including
the home inspector, the termite inspector, and the
contractor and engineer for the prior seller.
The plaintiff’s assessment of the damages
changed over time. Experts that my clients brought
in estimated damages bet ween $22,000 and $35,000.
Just before mediation, the plaintiff estimated damages at $62,000, but then, at the mediation session,
she changed the number to $365,000.
After depositions on behalf of my clients (the
plaintiff took no depositions), we filed a motion asking the court to recover my clients’ attorney’s fees or,
at a minimum, to dismiss the case—arguing that the
action taken by the plaintiff was frivolous. Before
our sanctions motion was heard by the court, the
plaintiff’s attorneys failed to respond to all but one of
15 letters we’d sent to them, asking them to dismiss
the case on the grounds that the plaintiff had failed
to show any evidentiary support for her claim.
Aside from the lack of evidence, the grounds for
our motion centered on my clients’ record-keeping.
They had gone above and beyond what’s required
for California law and were able to document that.
Among the documents my clients were able to show
that had been provided to the plaintiff at the time of
the transaction were 1) a Receipt for Reports, which
lists all of the reports that were prepared on the
property (termite, home inspection, and so on); 2) a
Transfer Disclosure Statement, which covers “red
flags” identified at the property; 3) a Seller Property
Questionnaire, a checklist of some 35 property attributes, including whether material repairs have been
made; 4) Seller’s Additional Disclosures, which provides disclosures required by law that aren’t included
on the TDS, such as whether there have been any
insurance claims made on the home; and 5) Agent’s
Visual Inspection, which agents complete based on a
visual inspection of accessible areas of the property.
What’s more, my clients had represented the sellers
in their purchase of the property and provided the
plaintiff with the entire file of that transaction.
In addition to having all of these reports documented, my clients had included in their files all pertinent e-mails that were sent at the time. “Pertinent”
in this instance means material e-mails that are considered admissible in court because they serve as reliable business records in a transaction. In short, my
clients weren’t on cruise control; they took a pride-of-authorship approach and were aware of everything that needed to be in the file.
Mark D. Stavros is the
principal of Stavros &
Associates in La Jolla,
Calif. His practice focuses
on the representation of
residential and commercial
real estate professionals
in trial, litigation, state
disciplinary matters, and
areas. He can be reached
“You never know when someone will claim
you failed to meet the standard of care. That’s
what happened here.”
To say you should keep good records of your
transaction is a little like saying you should always do
the right thing: It’s true and everyone knows it. But
it can’t be emphasized enough, because you never
know when someone will claim you failed to meet
the standard of care. That’s what happened here, and
now the tables have turned because my clients know
what they did, and when, and can show it. W