STATE OF OKLAHOMA ex rel.; JAYCEE CALAN; LUCILLE CALAN; KACE CALAN; JOHN E. KENDALL, JR.; JACQUELYNE KENDALL; DAVID F. HIEBERT, JR.; EDWINA C. HIEBERT; KATHRYN WEATHERBY; JAIME MILLS; and TRAVIS MILLS, Plaintiffs/Appellees,
KEMP STONE, INC., Defendant/Appellant, and CITY OF MIAMI; RUDOLPH SCHULTZ; SCOTT TRUSSLER; TERRY ATKINSON; JOHN DALGARN; BRENT BRASSFIELD; DENNY CRETE, LLC; SCURLOCK INDUSTRIES OF MIAMI, INC.; TRI-STATE ASPHALT, INC.; NEECE CONCRETE CONSTRUCTION; TEETER'S PAVING, LLC; BELL CONTRACTING, INC.; APAC-CENTRAL, INC.; ANDERSON ENGINEERING, INC.; SERVICE SOLUTIONS, INC.; COLLINS CONSTRUCTION CO. OF MIAMI, INC.; BLEVINS ASPHALT CONSTRUCTION CO., INC.; T-G EXCAVATING, INC.; VANCE BROTHERS, INC.; JOHN DOES 1-20, other persons and/or entities who were awarded bids pursuant to the street project in excess of $50, 000.00, Defendants.
Mandate Issued: 05/24/2018
FROM THE DISTRICT COURT OF OTTAWA COUNTY, OKLAHOMA HONORABLE
CARL GIBSON, TRIAL JUDGE
Zachary T. Barron, Bradford D. Barron, THE BARRON LAW FIRM,
PLLC, Claremore, Oklahoma and Kevin Dodson, DODSON LAW
OFFICE, Pryor, Oklahoma, for Plaintiffs/Appellees
A. Rock, K. ELLIS RITCHIE, P.C., Pryor, Oklahoma, for
The defendant, Kemp Stone, Inc. ("Kemp Stone")
appeals an Order denying its request that attorney fees and
costs be assessed against the plaintiffs, The State of
Oklahoma ex rel. Jaycee Calan, Lucille Calan, Kace Calan,
John E. Kendall, Jr., Jacquelyne Kendall, David F. Hiebert,
Jr., Edwina C. Hiebert, Kathryn Weatherby, Jaime Mills, and
Travis Mills (collectively "Taxpayers").
This appeal arises from a qui tam action brought by
Taxpayers and their inclusion of Kemp Stone in their lawsuit.
Kemp Stone claimed that the lawsuit was frivolous as to Kemp
Stone, thereby entitling it to attorney fees and costs.
On September 26, 2011, the City of Miami, Oklahoma
("City") received a qui tam notice signed
by ten persons (a sufficient number then) including
Taxpayers. The notice complained that a City street project
("Project") funded by a sales tax was being
unlawfully carried out. The basis of the claim was that the
City took bids, used the bids as contracts, and paid out more
than $50, 000.00 to contractors. All of this was claimed to
be in violation of the law concerning municipal contracts and
competitive bidding statutes.
On November 23, 2011, the City filed a declaratory judgment
action. Taxpayers intervened and added the qui tam
action against City and named entities including Kemp Stone.
The intervention petition contained detailed allegations
regarding City's actions pertaining to the Project and
the claimed unlawful acts by City's officials. The
intervention petition alleged that the named entities
received unspecified amounts of money from City for the
Project and that such money should be repaid to City. The
entities were not immediately served because City and
Taxpayers engaged in mediation. The mediation was
unsuccessful and City dismissed its declaratory judgment
action before intervention was granted. Subsequent
proceedings not relevant here culminated with Taxpayers
filing this qui tam action. 
The qui tam petition recited the history of the
intervention petition and alleged City's violations
regarding the Project.  The petition named the entities,
including Kemp Stone, and alleged:
In furtherance of the Street Project it [Kemp Stone]
submitted and was awarded a construction bid in excess of
$50, 000. However, it failed to enter into [a] public
construction contract with the City prior to performing
working and/or providing materials. Despite this Kemp Stone,
Inc. received at least $50, 000 for performing work and/or
filed its Answer.  The Answer admitted that Kemp Stone
submitted a bid and performed work. City's Answer denied
the remainder of the allegations about Kemp Stone.
Kemp Stone's Amended Answer  denied all allegations
against it. Kemp Stone alleged that it did have a contract
for all of its work and materials. However, Kemp Stone denied
submitting a bid or being paid any money on the Project.
Kemp Stone submitted request for admission to City. In
response, City admitted that Kemp Stone neither submitted a
bid nor had a bid approved regarding the Project and that
Kemp Stone did not have a contract pertaining to the Project.
Counsel for Kemp Stone wrote to counsel for Taxpayers a
letter dated May 8, 2015, in which he advised of the receipt
of City's discovery request submitted by Kemp Stone and
enclosed a copy.  Counsel described the discovery
response as establishing that Kemp Stone had nothing to do
with the Project. He also advised that City's attorney
stated that City would amend its Answer to conform to its
discovery response about Kemp Stone. City did not file the
Kemp Stone filed a motion for summary judgment based upon its
position that it was not a bidder/contractor on the Project.
Prior to the hearing on Kemp Stone's summary judgment
motion, Taxpayers dismissed the action as to Kemp Stone. Kemp
Stone then sought attorney fees and costs on the ground that
Taxpayers brought a frivolous lawsuit against Kemp Stone
because Kemp Stone never had anything to do with the Project
that could be considered actionable.
Taxpayers defended on the basis that a reasonable
investigation preceded the filing and that the investigation
revealed the existence of a claim against Kemp Stone. The
investigation included an interview with City's chief
financial officer ("CFO"). Taxpayers' claims
about City's acts were confirmed in an audit performed by
the State of Oklahoma State Auditor and Inspector. Taxpayers
further argued that events following the filing served to
confirm the existence of a claim, citing such as the
City's Answer and its failure to amend the Answer.
In summary, the trial court had the following sequence of
events to consider when making its ruling regarding whether
the action against Kemp Stone was frivolous.
Taxpayers' Demand, Record p. 1123. Dated September 26,
2011. Set out specific unlawful acts and demands recovery of
funds expended by City, but does ...