In Richardson v. Wells Fargo, a mortgage servicer sought recovery of attorneys fees pursuant to a provision in the deed of trust that referred to “paying reasonable attorneys’ fees to protect its interest in the Property and/or rights under this Security Instrument.” No. 13-10002 (Jan. 24, 2014). The issue was whether a Rule 54(d)(2) motion was an appropriate vehicle to make its claim, which turned on “whether the fees are an element of damages or collateral litigation costs.” The Fifth Circuit concluded this provision defined legal fees as collateral costs, not “an independent ground of recovery” where Rule 54 might become inapplicable. The Court went on to hold that “motions for attorney’s fees provided by contract are permissible under Rule 54(d)(2)” after reviewing and rejecting authority that suggested otherwise. (For thorough review of when fees become damages in their own right under Texas law, and other key points about fee awards, please consult “How to Recover Attorneys Fees in Texas” by my colleagues Trey Cox and Jason Dennis.)
The City of Alexandria settled a lawsuit with an electricity supplier for a $50 million recovery. A sordid dispute then broke out among the City and various lawyers who worked on the case and asserted a contingency interest in the recovery. City of Alexandria v. Brown, No. 12-30823 (Jan. 15, 2014). The opinion, which affirms the district court’s resolution of the dispute, provides an overview of when “quantum meruit” principles control over the terms of a contingent fee agreement. As to one lawyer, relevant factors included the end of her involvement relatively early in the matter, and seemingly unreliable time records during that involvement. As to another, the court noted that the contract created a “joint obligation” between him and another lawyer that became impossible of performance after he was disbarred, requiring a quantum meruit analysis. (A related appeal was disposed of later in the year in deference to this panel opinion.)
After a recent example of attorneys fees that were not “inextricably intertwined” under Texas law, the Fifth Circuit followed this month with a practical example of the Texas requirement of “presentment” of a contract claim before fees may be recovered. In Playboy Enterprises, Inc. Sanchez-Campuzano, the Court reminded that the pleading of presentment is procedural, and thus not a requirement in the federal system. No. 12-40544 (Dec. 23, 2013, unpublished). It is, however, a substantive requirement. In this case, sending a “Notice of Default” under a primary obligation was enough to “present” a claim for liability on a guaranty, noting the “flexible, practical understanding” of the requirement by Texas courts. The Court distinguished Jim Howe Homes v. Rodgers, 818 S.W.2d 901 (Tex. App.-Austin 1991, no writ), which found that service of a DTPA complaint was not presentment of a later-filed contract claim, on the ground that the “Notice” here went beyond mere service of a pleading. For thorough review of this principle, and other key points about fee awards, please consult the book “How to Recover Attorneys Fees in Texas” by my colleagues Trey Cox and Jason Dennis.)
New York Life v. Cannatella involved the interpleader of life insurance benefits. The Fifth Circuit affirmed the award of $750 in attorneys fees to the insurance company who filed the action, agreeing that the company was “disinterested,” and identifying these factors about a fee award to a party in its position: “1) whether the case is simple or involved; 2) whether the stakeholder performed any unique services for the claimants or the court; 3) whether the stakeholder acted in good faith and with diligence; 4) whether the services rendered benefited the stakeholder; and 5) whether the claimants improperly protracted the proceedings.” No. 12-30663 (Dec. 23, 2013, unpublished).
Plaintiffs sued Blackburn for breach of contract with respect to three promissory notes and for fraud in a stock transaction. Highground, Inc. v. Blackburn, No. 13-30248 (Sept. 25, 2013, unpublished). Plaintiffs recovered on the notes but not the fraud claim, and the bankruptcy court awarded $25,000 as a “fair fee” for that result. Plaintiffs appealed, seeking fees for the fraud claim as well, arguing that their litigation was “inextricably intertwined” with the note claims. Applying Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006), the Fifth Circuit agreed with the lower court: “Appellants prevailed on the notes claim because Blackburn signed the notes without authority to do so, not because of the allegations of fraud relating to other aspects of the purchase agreement . . . .” The case presents a clean example of claims against the same party that are nevertheless not “inextricably intertwined” for purposes of an attorneys fee award. (For thorough review of this principle, and other key points about fee awards, please consult the book “How to Recover Attorneys Fees in Texas” by my colleagues Trey Cox and Jason Dennis.)
The plaintiff in a personal injury case was found to be judicially estopped from asserting the claim because it was not properly disclosed in her personal bankruptcy, even though it arose post-petition. Flugence v. Axis Surplus Ins. Co., No. 13-30073 (Oct. 4, 2013). The trustee, however, could pursue the claim and its counsel could recover professional fees. Accordingly, the Court declined to declare that the trustee’s recovery was capped at the amount owing to creditors. (applying Reed v. City of Arlington, 650 F.3d 571 (5th Cir. 2011) (en banc)).
In Kenyon International Emergency Services, Inc. v. Malcolm, the Fifth Circuit found no abuse of discretion in an award of attorneys fees under a Texas statute to the defendants in a suit to enforce a noncompetition agreement. No. 12-20306 (May 14, 2013, unpublished). The Court clarified that “the key determination is [plaintiff’s] knowledge of reasonable limits, not . . . its knowledge of the reasonableness of the agreement” (emphasis in original). As it saw the record, the plaintiff’s CEO testified that the restrictions “were worldwide, overreaching in scope of activity, and basically indefinite in time.” The Court also reversed a sanction on the plaintiff’s lawyer related to the unsealed filing of a “sexually-explicit Internet chat,” reminding that “[i]ssuing a show-cause order is a mandatory prerequisite to imposing monetary sanctions sua sponte,” and finding that the lawyer did not have an improper purpose in making the filing and thus did not fall within Rule 11.
The appellants in Texas Medical Providers v. Lakey sought $60,000 in attorneys fees after successful defense of civil rights claims about new abortion laws. No. 12-50291 (Feb. 26, 2013, unpublished). The Fifth Circuit rejected a request based on 42 U.S.C. § 1988, noting: “Lack of merit does not equate to frivolity . . . .” The Court also rejected a request based on inherent power, which relied upon statements by plaintiff’s counsel that they dismissed several challenges because the initial Fifth Circuit panel had declared all future appeals in the case would be heard by the same panel. It stated: “The short answer to this charge is that if courts treated as a willful abuse of process every self-serving statement of counsel at the expense of a judge or judges, there would be no end to sanctions motions.”
The judgment debtors in Seven Arts Pictures v. Jonesfilm were found in civil contempt for failure to answer postjudgment discovery and other issues about enforcement of a judgment. No. 11-31124 (Feb. 18, 2013, unpublished). The Fifth Circuit affirmed, finding that the district court had general personal jurisdiction over the debtors, that the debtors had waived arguments about the orders by not timely and properly objecting below, and that the district court did not abuse its discretion in awarding $21 thousand in attorneys fees. While the holdings on jurisdiction, waiver, and attorneys fees draw heavily from the specific facts of the case, the legal framework used is of broad applicability. Footnote 7 acknowledges the unusual procedural posture of the jurisdiction issue, which had not been raised until after the notice of appeal was filed.
Earlier this year, the Fifth Circuit affirmed a fee enhancement in the Pilgrim’s Pride bankruptcy pursuant to section 330 of the Code. In ASARCO LLC v. Barclays Capital, the Court reversed an enhancement under section 328. No. 11-41010 (Dec. 11, 2012). “Section 328 applies when the bankruptcy court approves a particular rate . . . at the outset of the engagement, and § 330 applies when the court does not do so.” Id. at 13. A “necessary prerequisite” to section 328 enhancement is that the professional’s work was “not capable of anticipation.” Here, the Court found that the length of the ASARCO bankruptcy and the exodus of its employees after filing led to “commendable” work by Barclays that was still “capable of being anticipated.” See id. at 19 (analogizing Barclays to a car buyer who finds a new Corvette “needed far more than a car wash”).
A consumer group sued under the Clayton Act about the market for funeral caskets, and then settled all compensatory damages with one of the defendants. Funeral Consumers Alliance v. Service Corp. Int’l, No. 10-20719 (Sept. 13, 2012). The Fifth Circuit held that, even after that settlement, the group had standing to proceed against the remaining defendants for attorneys fees. Id. at 4-14. Noting, however, that “[t]he fact that death is inevitable is not sufficient to establish a real and immediate threat of future harm,” the Court found no standing for injunctive relief. Id. at 15, 18. The Court also affirmed the denial of class certification, finding that the scope of the putative nationwide class fit poorly with the evidence of localized market activity for funeral services and casket sales. Id. at 27 (distinguishing United States v. Grinnell Corp., 384 U.S. 563 (1996)).
The bankruptcy court in CRG Partners v. Neary awarded a $1 million fee enhancement for a “rare and exceptional” result in the Pilgrim’s Pride bankruptcy. No. 11-10774 (Aug. 10, 2012). The Trustee objected, arguing that Perdue v. Kenny A. ex rel Winn, 130 S. Ct. 1662 (2010) — a case rejecting a comparable enhancement under 42 U.S.C. § 1988 — impliedly overruled older Fifth Circuit authority that allowed them in bankruptcy. The Court carefully reviewed Perdue under the “rule of orderliness,” a set of principles that guide a panel’s fidelity to older panel opinions, and found Perdue distinguishable factually and for policy reasons. Op. at 22-25. The Court reminded that it had recently reached a similar conclusion as to the effect of Stern v. Marshall, 131 S. Ct. 2594 (2011), on magistrate jurisdiction.
Chevron sued Aker Maritime and Oceaneering International in connection with bolt failures on an offshore drilling rig. Chevron USA v. Aker Maritime Inc., No. 11-30369 (July 31, 2012). Chevron recovered a significant damage award against both defendants, and Aker sought indemnity from Oceaneering. Id. at 4. To recover under the indemnity provision, Aker had to establish that it was an agent of Chevron with respect to Oceaneering’s work. The Court concluded that Aker was an agent with respect to the specific activity of procurement, which it found “extends beyond Aker’s mere ordering and includes the receipt of the bolts.” Id. at 8.
In Waldron v. Adams & Reese, LLP, the largest creditor of a bankruptcy debtor paid the retainer fee for debtor’s counsel. No. 11-30462 (March 29, 2012). That payment was not disclosed for some time, after which the trustee sought to disgorge counsel’s fees on the grounds of a disqualifying conflict of interest. The Court affirmed the lower court’s rulings, finding no disqualifying conflict on the “specific facts of [the] case.” Op. at 8 (quoting and distinguishing In re West Delta Oil Co., 432 F.3d 347 (5th Cir. 2005)). It reviewed counsel’s conduct during the bankruptcy case as well as prior representations of the debtors. Then, reminding of the “clear error” standard of review, the Court affirmed a sanction of partial disgorgement (20% of the fee) for the late disclosure. Op. at 15. The Court concluded with a thorough review of the standards for allowing pleading amendments and affirmed the denial of leave for the trustee to add new claims. Op. at 15-16.