Appeal moot, but attorney fees allowed

The Indiana Court of Appeals dismissed an appeal as moot but awarded the defendant appellate attorney fees and costs because the plaintiff engaged in procedural and substantive bad faith during the appeals process.

In Samuel Lesjak v. New England Financial, No. 29A02-0706-CV-499, Lesjak appealed the trial court’s order that he arbitrate a claim filed against him by New England Financial in a forum other than the National Association of Securities Dealers. Lesjak worked for New England Securities as a broker/dealer. He registered with NASD to be able to buy and sell securities to the public. The agreement he signed when he was hired stated Lesjak would agree to arbitrate through NASD any dispute or claim that may arise between himself and New England Securities.

Lesjak had an assistant, whose salary was reimbursed by New England Securities. After Lesjak quit, the company sought the return of past payments to Lesjak for his assistant’s salary in the sum of more than $24,000.

New England Financial filed a complaint against Lesjak to recoup the money. A letter attached to the complaint stated New England Financial is not a legal entity and is the service mark for New England Life Insurance Co. The complaint never stated which company was suing Lesjak.

Lesjak tried to arbitrate the claim through NASD, but New England Financial opposed it. The trial court ordered the parties to submit the matter to NASD arbitration, but eventually granted New England Financial’s motion for a stay of proceedings because New England Financial is not a member of NASD and cannot arbitrate through them. The court ordered Lesjak to arbitrate the matter through another forum besides NASD. Lesjak appealed, and New England Financial was granted a motion to hold the appeal in abeyance. New England Financial explained that NASD, now the Financial Industry Regulatory Authority, agreed to arbitrate the claim and this appeal should not move forward.

Lesjak filed a motion in opposition to holding the appeal in abeyance and sought a request for damages. He contended that because New England Financial acted with both procedural and substantive bad faith he should be awarded damages.

New England Financial missed the date on which to file a brief and was not granted an extension. The company filed its brief a week later and filed a motion to include documents outside of the clerk’s record in its appendix.

The core issue of the appeal – whether the trial court properly ordered the matter be arbitrated, but not before NASD – is moot because arbitration is under way, wrote Chief Judge John Baker. However, the appellate court denied New England Financial’s motions for extension of time to file its brief and to include documents outside of the clerk’s record in its appendix. New England Financial was told it was required to file its brief by Nov. 13, 2007, and no extensions would be granted.

Chief Judge Baker wrote that based on New England Financial’s actions during litigation of this case and the appeal, New England Financial clearly engaged in both procedural and substantive bad faith during the appeal, if not the entire litigation. The company fought for months to not arbitrate the claim and claimed arbitration with NASD would be impossible because New England Financial was not an NASD member, but the company then suddenly said arbitration would be accepted.

Lesjak has spent more than $19,000 in attorney fees seeking arbitration. He has established he is entitled to appellate attorney fees and costs pursuant to Appellate Rule 66(E) because of New England’s bad faith during this appeal.

The case is remanded to the trial court for a calculation of the amount of attorney fees and costs Lesjak is entitled to and for the trial court to consider if Lesjak is entitled to attorney fees for New England Financial’s conduct prior to this appeal.