Suarez, No. 4:2010cv00047 - Document 10 (S.D. Tex. 2010)
Court Description: MEMORANDUM OPINION AND ORDER affirming the Bankruptcy Court's Orders Denying Motion for Reimbursment of Attorneys' Fees.(Signed by Judge Sim Lake) Parties notified.(hcarr, )
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IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTR ICT OF TEXAS HOUSTON DIVISION IN RE : IFS FINANCIAL CORPORATION , Debtor . RAMON GARCIA SUAREZ, , 5 5 5 . 5 CASE NO . 02-39553-H1-7 5 5 Appellant , W . STEVE SMITH, TRUSTEE 0F THE ESTATE OF IFS FINANCIAL CORPORATION, et a1 ., 5 $ 5 5 5 5 Appellees . Appellant, ( Consolidated with H-10-0052) 5 5 5 f 5 5 CIVIL ACTION NO . H-10-0047 ADVERSARY NO . 04-3745 WOODBERRY #2, CIVIL ACTION NO . H-10-0052 ADVERSARY NO . 04-3768 W . STEVE SM ITH , TRUSTEE OF THE ESTATE OF IFS FINANCIAL CORPORATION, et al .r 5 Appellees . MEMORANDUM OPINION AND ORDER Appellantsr Ramon Garcia Suarez and Woodberry Suarez Bankruptcy Court's December Doc. 10 appeal the 2009, Orders Denying Motions Reimbursement of Attorneys' Feesx Pending before the court is the Appellants' Brief ( Docket Entry No. 7), Brief of Appellee, W. Steve Smith, Trustee ( Docket Entry and Appellants' Reply Brief lDocket Entry No . 260 in Adversary No . 04-3745 and Docket Entry No . 189 in Adversary No . 04-3768 . Dockets.Justia.com ( Docket Entry No. 9). the reasons explained below, the Bankruptcy Court's orders will be affirmed . 1. Factual Background On October 8, 2004, the Trustee filed two separate adversary proceedings against the appellants, Suarez and Woodberry, seeking recovery of allegedly fraudulent transfers pursuant to 5 544 of the Bankruptcy Code, and 55 24.005 and 24.006 of the Texas Business and Commerce Code . The Suarez and Woodberry adversaries were consoli- dated for purposes of trial, and trial began on July 2008 . 2008, the Bankruptcy Court continued the trial to allow July additional discovery . January continued through January on January 2009. and February 2009, trial resumed, and Two more trial days were held 2009 . June 2009, the Bankruptcy Court heard final argument . On September 10, 2009, the Bankruptcy Court entered a Memorandum Opinion dismissing al1 claims against Suarez and Woodberry .z the same day, i .e ., September 1O, 2009, the Bankruptcy Court entered a Judgment in both the Suarez and Woodberry adversary proceedings stating nCosts are awarded E defendantq and against Trustee.z3 z z Memorandum Opinion , Exhibit 3 attached to Appellants' Brief, Docket Entry No. 7 ( Docket Entry No. 225 in Adversary No. 04-3745 and Docket Entry No. 169 in Adversary No. 04-3768). 3 See Judgment, Docket Entry No . 226 in Adversary No . 04-3745 and Docket Entry No . 170 in Adversary No . 04-3768 . On September 2009, Suarez and Woodberry filed their notice of appeal to the district court .4 September Motions Bankr. a Reimbursement 7054 .5 hearing on the motions 2009, the Bankruptcy Court held for the hearing attorneys' fees Woodberry filed their Attorneys' Fees/costs Under Fed. December fees/costs.f motions 2009, Suarez reimbursement attorneys' Bankruptcy Court denied the stating that longer have jurisdiction over whether to award attorney's fees or not because that's up on appeal .z7 The Bankruptcy Court explained that ' I don't think that a federal judgment that awards costs also awards attorney's fees unless it says so or unless you seek attorney's fees within 14 days after the judgment, which you did, but that only applies in a civil matter not in an adversary proceeding . In an adversary proceeding I think you have to say I'm awarding attorney's fees under the judgment, which I didn't do. ( TJo me, costs does not include attorney's fees unless you say it does or unless there is a 54 ( motion that's d) filed, which you can 't file in the adversary .8 4 Docket Entry No . 229 in Adversary No . 04-3745, and Docket Entry No . 173 in Adversary No . 04-3768. s Exhibit 1 attached to Appellants' Brief, Docket Entry No . 7 ( Docket Entry No. 232 in Adversary No. 04-3745, and Docket Entry No. 176 in Adversary No. 04-3768). 6 See Transcript, Appendix A attached to Brief of Appellee, Steve Smith, Trustee ( Appellee's Brief), Docket Entry No . 8 . 7Id . 8Id . at 6-8. The Bankruptcy Court explained, don't think the judgment includes attorney's fees and so any testimony about the attorney's fees is irrelevant . I'm not awarding attorney's fees based on what my judgment said.'g Accordingly, when ' evidence relation attorney's Appellants proffered fees, the court ruled response to Appellants' attempt recover unon-traditional' costs, i .e ., costs that are ' listed U .S .C . 1920, Bankruptcy Court asked Appellants' counsel, ' wlhat authority do I have for awarding costs 'E that aren't included U . C .i Section 1920?'1 S. '1 Before the close of the hearing the Bankruptcy Court told coun sel, nLet me get you to file a supplement I'm not aware what listed in 28 U .S .C . goes into the law , because award addition to g those costs 1920 .'1 '2 On December 21, 2009, the Bankruptcy Court entered an Order Denying Motion for Reimbursement Attorneys' Fees b0th the Suarez and the Woodberry adversary proceedingsx 3 II . Standard of Review district court has jurisdiction bankruptcy court's final judgment hear an appeal from order. See 28 9Id . 1 jd 0g at ll . at 14-15 . ld l . at 16. 2Id HDocket Entry No . 260 in Adversary No . 04-3745 and Docket Entry No . 189 in Adversary No . 04-3768. - 4- 5 158 ( a). The Bankruptcy Court's findings of fact are reviewed under the nclearly erroneous' standard . In re Perrv, ' 309 ( 5th F .3d 303, 2003). The nclearly erroneous' standard allows this ' court to reverse the Bankruptcy Court's findings of fact nonly left with Athe definite and firm conviction that a m istake has been committed.'' ' Id. ( quoting Tn re Dennis, 33O F.3d 696, Cir. 2003)). See also In re Connola, 2005) F. 323, 3d The Bankruptcy Court's conclusions ( 5th Cir. 1aw and conclusions on m ixed questions of law and fact and questions concerning the application of 1aw to the facts are reviewed de novo . Brass Corr w court's F.3d 1016, 1021 ( 5th decision deny 1999). attorneys ' In re U .S. A bankruptcy fees generally discretionary; therefore , the exercise of that power is generally reviewed for abuse of discretion . and Lube, Inc w F .3d 609, a fee decision is based on Code, the district court de novo . See Matter of Terrebonne Fuel 1997). However, when legal construction of the Bankruptcy reviews the underlying construction See In re West Delta Oi1 Co ., Inc ., ( 5th Cir. 2005) C'( W)e review a bankruptcy court's determination of attorneys' fees for abuse of discretion . Specific findings of fact supporting the award are reviewed for clear error, and conclusions of 1aw are reviewed de novo . ' /) uIn resolving whether request for attorneys' fees was timely E courtsq apply a de novo standard of review .' ' Romaquera v . Geqenheimer, - 5- F. 3d 893, ( 5th Cir. 1998), clarified upon denial of rehearinq, 169 F.3d at 223 ( 5th 1999) ( citing Bellaire General Hospital v . Blue Cross Blue Shield of Michiqan, 97 F.3d 822, ( 5th Cir. 1996) ( reviewing JA novo a district court's interpretation the Federal Rules Civil Procedure). 111 . Analysis Appellants argue that determining that Fed . attorneys' fees proceeding./' /4 claim s as nE tqhe Bankr . costs Bankruptcy Court 7054 recoverable erred by provide within an adversary Asserting that ' als a general rule, defendants' U attorneys' fees constitute costs, damages,' ' Appellants contend that ' wqhen fees are sought as costsr no demand 'E fees within the complaint is required ./o ' Appellee argues that the Bankruptcy Court's denial of attorneys' fees should be affirmed because appellants waived their right recover attorneys' fees ( i) three different ways: PRE-TRIAL AND TRIAL. Neither Suarez nor Woodberry sought attorneys' fees in their Answer to Complaint, their Amended Answer to Comp laint or at Trial - no request for attorneys' fees was made under any provision, including Fed. R . Bankr. P. 7054 ( nBankruptcy Rule 7054'), and no evidence to support same was offered until , AFTER the Court issued its Opinion . .; ( ii) POST-TRIAL. Even in their post-Trial Motion for Reimbursement of Attorneys' Fees/costs Under FED. R. BANKR. P . 7054 ( the nMotion for Fees'), although ' l Appellants' Brief, Docket Entry No . 4 l . at 1O . 5Id p. mentioning Bankruptcy Rule 7054 in the title of such document, in sub stance , Suarez and Woodberry sought relief under Federal Rule 54 ( which applies in civil d) suits, but NOT in adversary proceedings ( Docket No. 23227 ( iii) APPEAL. Neither Suarez nor Woodberry raised as an issue in this Appeal whether the Bankruptcy Court erred in not awarding them attorneys' fees. ( Docket No. 265, Statement of the Issues). In fact, neither Suarez nor Woodberry even designated the Trial transcript in this Appeal to evidence such entitlement to attorneys' fees . Rather, they specifically limited their uissue' before ' this Court to whether nthe Bankruptcy Court erred in its determination that Acosts' under Fed . R . Bankr. P. 7054( does not include attorneys' fees when a statute 5) of the United Stats E sic) or rules provide otherwise .'6 'l A. Applicable Law State Law Appellants' claim attorneys' fees arises from the fact that the Trustee filed the adversary proceedings against them under the Texas Uniform Fraudulent Transfer Act ( TUFTA), Tex. Bus. Comm . Code 24 .001, et seq w which expressly provides nIn any p roceeding under this chapter, the court may award costs and reasonab le attorney's fees as are equitable and just.' ' Tex . Bus . & Comm . Code 5 24 .013 .1 7 nThis provision of TUFTA gives the trial court the sound discretion to award attorney's fees based on the evidence Anderson, S. .3d W ( Tex. App . l Appellee 's Brief, Docket Entry No . 6 Walker v . Dallas 2007, no pet.). 4. UMotion for Reimbursement of Attorneys' Fees/costs Under Fed. R . Bankr . P . 7054 at p . 2 % 2 .1, Exhibit 1 attached to Appellants' Brief, Docket Entry No . 7 ( Docket Entry No. 232 in Adversary No. 04-3745, and Docket Entry No. 176 in Adversary No . 04-3768). Federal Law ( a) Federal Rules of Civil Procedure ( 1) Pleading Requirements circuit attorney's fees are generally treated uas special damages that must be specifically pleaded under Federal Rule of Civil Procedure 9( g).' United Industries, Inc. v. Simon ' Hartlev, Ltd w F.3d Cir. 1996) United Industries the Fifth Circuit explained that E wqhile this Circuit has not specifically held that attorneys' fees are items of special damage that must be specifically p leaded , we have intimated that this is so . See Crosbv v . O1d Republic Ins . Co ., 978 F .2d 210, 211 n. 1 ( 5th Cir. 1992) ( noting that any pleading defect caused by a party's failure to plead for attorneys' fees under Rule 9 was cured by advancing the claim during the pretrial conference). Similarly, our district courts have denied attorneys' fees in the absence of appropriate pleading and we have affirmed on appeal . See Wilson v . William Hall Chevrolet , Inc w 87l F .supp . 279, 282-83 ( D. S. Miss. 1994), aff'd in part and rev'd in part, 77 F.3d 479 ( 5th Cir. 1996) ( unpublished per curiam) ( affirming on all issues except award of interest). Id . at 764-65 . Federal Rule of Civil Procedure 9( provides that ' iqf an g) 'E item of special damage is claimed, The purpose of the rule is avoid unfair surprise by informing the parties as to the nature of the damages claimed, and to inform the court of the substance of the claims . Great American Indemnitv Co. v . Brown, F.2d 306, 1962). Accordingly, this circuit requests for attorney's fees must be p leaded . But the failure to plead for attorney's fees will not necessarily preclude - 8- party's ability recover attorney 's fees the party's opponent is on notice that attorney's fees are being sought . Crosbv, 978 F.2d at 211 n.1 ( failure See plead attorney's fees as special damages does not bar recovery if the defect can be cured by amendment). The existence exceptions the general rule requiring special damages such as attorney's fees to be pleaded was recognized by the Fifth Circuit in United Industries : We have noted that there may be exceptions to this general rule, such as when the issue is tried by consent or included in a pretrial order . See Crosbv, 978 F .2d at 211 n . 17 see also Sevbold v . Francis P . Dean , Inc w 628 F. supp . 912, 914-15 ( W.D.Pa. 1986). Likewise, we have held that under certain circum stances not present here that Rule 54 ( allows the district court to consider the c) fees issue even in the absence of a specific pleading . See Engel r v. Telerromrter Corp w 732 F. 2d 1238,) 1241 E( 5th Cir. 1984)2. As a general rule, however, we find nothing inapprop riate with requiring a party to put its adversaries on notice that attorneys' fees are at issue in a timely fashion or waive that claim . This is accomplished by specifically pleading for attorneys' fees in the comp laint . 91 F .3d at 764-65. Encel, F .2d at 1238, the parties had an explicit contract provision that the prevailing party would be entitled to fees in the event of litigation. Id . at 1240E -412. The validity and interpretation of the provision was E sic) never in dispute. Moreover, following remand to the district court, Teleprompter made a timely application for attorneys' fees and submitted supporting materials before the district court officially entered its final judgment. Id . at 1242 . None of these characteristics are present in the case now before us . = Id n .4 . ( 2) Motion Requirements a civil case not enough merely to request attorney's fees in the pleadings because Federal Rule of Civil Procedure 54( d) requires parties seeking attorney's fees file a timely motion : ( 1) Costs Other Than Attorney ' Fees. Unless a federal s statute, these rules, or a court order provides otherwise, costs--other than attorney's fees--should be allowed to the prevailing party . . . The clerk may tax costs on 14 days' notice . On motion served within the next 7 days, the court may review the clerk's action . ( 2) Attorney ' Fees. s ( A) Claim to Be by Motion. A claim for attorney's fees and related nontaxable expenses mu st be made by motion unless the substantive 1aw requires those fees to be p roved at trial as an element of damages. ( B) Timing and Contents of the Motion . Unless the statute or a court order p rovides otherwise, the motion must : ( i) be filed no later than 14 days after the entry of judgment; ( ii) specify the judgment and the statute, rule, or other grounds entitling the movant to the award; ( iii) state the amount sought or provide a fair estimate of it; and ( iv) disclose, if the court so orders, the terms of any agreement about fees for the services for which the claim is made . Fed. R. Civ. P. 54 ( d). Thus, to be entitled to recover attorney's fees in a civil action, a party must pleadings attorney's fees otherwise place request attorney's fees in counter-party on notice that being sought , and under Rule 54( d). Romaauera, file a timely motion F. at 895. 3d ( b) Federal Rules of Bankruptcy Procedure ( 1) Pleading Requirements Federal Rule of Civil Procedure is made applicab le adversary proceedings by Federal Rule of Bankruptcy Procedure 7009. In addition, Federal Rule of Bankruptcy Procedure 7008( provides b) that requests for attorney's fees must 'be pleaded as a claim ' complaint, cross-claim , third-party complaint, answer, reply as may be appropriate .' ' (2) Motion Requirements Federal Rule of Bankruptcy Procedure 7054 does not contain a counterpart to Rule 54 ( that requires parties seeking attorneys' d) file a timely motion . fees Bankruptcy Rule 7054 incorporates Rule 54 ( a)- ( c), but does not incorporate Rule 54( d): ( a) Judgments. Rule 54( a)- ( c) F. . R CiV.P. applies in adversary p roceedings. ( b) Costs. The court may allow costs to the prevailing party except when a statute of the United States or these rules otherwise provides. . . . Costs may be taxed by the clerk on one day's notice; on motion served within five days thereafter, the action of the clerk may be reviewed by the court. Fed . Bankr . P . 7054 . Thus, fees an adversary action , a party must request attorneys' fees pleadings be entitled to recover attorneys' otherwise place counter-party on notice that attorneys' fees are being sought, but need not file a timely motion like required by Rule 54( d) civil actions. B. Application of the Law to the Facts Appellants titled their request for attorneys' fees nMotion for Reimbursement of Attorneys' Fees/costs Under Fed . R . Bankr. 7054,' but based their motion on Fed. R . / P. 54 ( d): 2 .1 The cause of action was filed by Smith under Tex . Bus . & Comm . Code 5 24 .001, et seq w which expressly provides : ' 'In any proceeding under this chapter, the court may award costs and reasonable attorney's fees as are equitable and just.' ' Tex . Bus . & Comm . Code 5 24 .013 . 2.4 Under Fed. R. Civ. P. 54( d), a claim for attorneys' fees and non-related, non-taxed expenses is to be made by motion, which is to be filed no later than fourteen ( 14) days after the entry of judgment, and must specify the statute , rule or other grounds entitling the moving party to be awarded attorneys' fees . Under Fed . R . Civ . P . 54, a movant may request attorneys' fees . 2 .5 As a general rule, claims for attorneys' fees constitute costs, not damages. See Budinich v. Becton Dickinson & Co ., 486 U .S. 196, 200, 108 S.Ct . 1717, 1721 ( 1988). A party seeking attorneys' fees as ncosts' is ' seeking fees for work done in a case . See Rissman v. Rissman, 229 F.3d 586, 588 ( 7th Cir. 2000). One seeking attorneys' fees as damages is usually seeking fees incurred prior to the case . Td. When attorneys' fees are recoverable as costs, the party is not usually required to include a demand within the complaint . United Industries v . Sim on -Hartley , Itdw 91 F .3d 762, 765-66 ( 5th Cir. 1996).1 8 Appellants dispute that they failed raise their request for attorneys' fees until after the Bankruptcy Court lMotion for Reimbursement of Attorneys' Fees/costs Under Fed. 8 R . Bankr . P . 7054, Exhibit 1 attached to Appellants' Brief, Docket Entry No . 7. entered Judgment their adversary proceedings . Instead, Appellants contend that when attorneys' fees are sought as costs instead as damages, requests for attorneys' fees need not be raised before judgment entered. Appellants rely on the Fifth Circuit's opinion in United Industries, 91 F .3d at 362, opinion does not support their argument . that case United sued appellee Simon-Hartley, Ltd . seeking reformation of a license agreement . The license agreement included a choice of 1aw p rovision that ' 'this agreement shall be interpreted and the rights of the parties determ ined in accordance with English law .' ' United's complaint did not include a request for attorneys' fees . It did r however, request 'costs .' ' ' Similarly, the pretrial order did not include a request for attorneys' fees . The district court conducted a three-day bench trial in September 1992 . Following trial, the district court issued a memorandum op inion on October 29, 1992, indicating its intention to rule in United's favor on the reform ation claim . . . On April 5, 1994, the court issued its opinion explaining the reasons for granting United's claim . Judgment was entered on April 11, 1994. Simon-Hartley then appealed and E the Fifth Circuit) affirmed in an unpublished per curiam opinion on March 23 , 1995. On April 28, 1995 , nearly one year after entry of judgment, United filed a nNotice of Application to Include Attorneys' Fees as Costs' in the district court . ' United based its tardy claim for fees on the English choice-of-law provision . United argued that under substantive English 1aw it was entitled to attorneys' fees as 'costs' because it was the prevailing party . ' ' Without addressing the merits of whether the English rule applied, the district court denied the fee request for two reasons . Initiallyr the court found that United's failure to request attorneys' fees in its complaint or pretrial order p recluded recovery . Alternatively, the court noted that the judgment in the case was final and that it only had jurisdiction to enforce the judgment. that Id . at 763-64 . Although the Fifth Circuit held that the district court has, at a basic level, the authority to hear such a fee request, this does not mean that United has complied with the procedural requirements making such a motion for attorneys' fees appropriate . In its order denying United 's fee request, the district court specifically grounded its ruling on the fact that United failed to plead for attorneys' fees . This was not reversible error . = Id ( emphasis added). Appellants do not dispute the Trustee's assertions that they failed request attorneys' fees answers, at trial, their answers, amended post-trial p roceedings . Nor do Appellants dispute that their initial request therefore, their initial notice attorneys' fees and , the Trustee that they were seeking attorneys' fees -- was made in the motion for reimbursement fees/costs that they filed after the Bankruptcy Court entered judgment in their adversary proceedings. Appellants have not cited any case where a trial court has awarded attorneys' fees under analogous circum stances, i .e ., where a statute provided the court discretionary authority such as TUFTA award attorneys' fees, but the party seeking to recover those fees failed either plead or otherwise place counter-party on notice that attorneys' fees were being sought until after a final judgment had been entered . Moreover, at least one of the cases that Appellants cite rejects Appellants' contentions that attorneys' fees are generally available as costs and that attorneys' fees are available pursuant Federal Rule Bankruptcy Procedure 7054 under the - 14- circumstances at issue . See In re Lance Richard Kellar, 125 B .R . ( Bankr. N.D. N.Y. 1989) ( nBankr. permissible bankruptcy analogue 7054 ( b), the more Fed. . R CiV.P. 54 ( d), does generally encomp ass an award of attorney's fees absent exceptional circumstances demanding equitable redress, since Acosts are merely court costs incurred from the filing the p roceeding .' GATX Terminals Corp . v . A . Tarricone, Inc. (In re Tarricone, Inc .), 83 B. R. ( Bankr. D. R.I. 1984). Concrete Contractors, Inc w 58 B .R . But see In re J & A ( Bankr. W . D. Tex . 1986) ( attorney fees and expenses imposed as sanctions treated as costs under Bankr. 7054): AM International, Inc. v. Tennessee Vallev Authoritv ( re AM International, Inc.), 46 B . 566, 578 ( In R. Bankr. Tenn . 1985) (A costs may be awarded under Bankruptcy Rule 7054 and attorney's fees may included these costs when specifically requested in the pleadings under Bankruptcy Rule 7008 ( b).'' ( ') emphasis addedll). Conclusions TUFTA , Tex . Bus. Comm . Code 5 24.001, et seq w the statute underlying the adversary p roceedings court the discretion issue, gives the trial award attorney's fees . attorney's fees are treated as In this circuit special damages that must be specifically pleaded under Federal Rule of Civil Procedure 9 ( g), made applicable adversary proceedings by Federal Rule Bankruptcy Procedure 7009 . In addition , Federal Rule of Bankruptcy - 15- Procedure 7008( b) requires requests for attorney's fees pleaded claim complaint, answer, nbe complaint, cross-claim , third-party reply may be appropriate .' ' Because otherwise place the Trustee on Appellants notice that attorneys' fees were being sought until after final judgments had been entered, the Bankruptcy Court neither abused its discretion by failing to award attorneys' fees to the Appellants in judgments, nor erred by failing consider Appellants' post- judgment applications for attorneys' fees as costs under Fed. Bankr . 7054, or entering orders that denied Appellants' motions for reimbursement attorneys' fees . IV . Order For the reasons explained above, the Bankruptcy Court's Orders Denying Motion for Reimbursement of Attorneys' fees are AFFINMED . SIGNED at Houston , Texas, on this the 18th day of May, 2010. e SIM LAKE UNITED STATE S DISTR ICT JUDGE
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