Frivolous action; Sanctions; MCL 600.2591(1) & (3)(a)(ii); Reasonable factual basis; Amended complaint; Noncompete & confidentiality agreement; Alleged disclosure of confidential information; Reasonable prefiling inquiry; Speculative belief; Abandoned argument

The court held that the trial court did not err in finding plaintiff-employer E’Mation’s amended complaint frivolous because it lacked a reasonable factual basis for alleging that defendant-former employee DeJong used or disclosed confidential information after leaving the company. DeJong resigned after approximately nine years and went to work for a competitor where he trained panel builders. E’Mation initially sued for breach of a noncompete agreement, but the trial court ruled that the provision applied only if E’Mation terminated DeJong’s employment. E’Mation then amended its complaint to allege that he was using or disclosing confidential information at his new employer. After discovery, E’Mation identified two Internet photographs of electrical panels as evidence that DeJong disclosed its wire-labeling method. But E’Mation’s owner admitted that the photographs were discovered after the amended complaint was filed and that he did not know who took them, when they were taken, who built the panels, or whether DeJong had worked on them. At the time E’Mation asserted the claim, its factual basis consisted essentially of DeJong’s permissible decision to work for a competitor and train employees there. Under MCL 600.2591(3)(a)(ii), an action is frivolous where a party has “no reasonable basis to believe that the facts underlying that party’s legal position were in fact true.” The court emphasized that the reasonableness of a claim is assessed when it is asserted and that “a speculative belief alone does not provide a reasonable basis to believe the facts underlying a party’s suit are in fact true.” Thus, the trial court did not err in imposing sanctions. The court also deemed abandoned E’Mation’s unsupported argument concerning whether DeJong personally paid his attorney fees. Affirmed.