Pinnacle Bank v. Bluestone Energy Sales Corporation et al, No. 7:2017cv00395 - Document 75 (W.D. Va. 2018)
Court Description: MEMORANDUM OPINION. Signed by Senior Judge Glen E. Conrad on 12/7/2018. (ck)
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S OFizIkùt-U -,. :l ' AT ROANC'x -s V.I t. -, ....-.,k J!''. FI:1 , 2l' ) 2E êl -b nIJ ?' IN THE UNITED STATES DISTRICT COURT FOR THE W ESTERN D ISTRJCT 0F VIRGIN IA ROAN OKE DIVISION Ju A c BY; (t . r E ' 'M LERK u ajt PIN NA CLE BAN K, CivilA ction N o.7:17CV00395 Plaintiff, M EM OR AND UM O PIN IO N BLU ESTON E EN ERG Y SALES CORPOM TION ,eta1., By:H on.Glen E.Conrad SeniorU nited StatesD istrictJudge D efendants. Pinnacle Bank (dspinnacle'') filed this interpleaderaction seeking to resolve competing claimsto funds in the amountof$1,403,607.47,which were held in a businesschecking account with Pinnacle. On July 20,2018,the courtentered proposed ordersgranting ajointmotion for distribution ofinterpleaderfundsand dismissing the action with prejudice. Pinnaclehasfsled a motion to amend judgment,arguing thatthe orders were entered prematurely since the bank previously reserved the rightto seek attom eys'fees and costs. The case is presently before the court on that m otion and Pinnacle's subsequent m otion for attorneys' fees and costs. For the followingreasons,thecourtwillgrantthemotiontoamendjudgmentandawardPinnaclefeesand costsintheamountof$33,606.71. Backaround BluestoneEnergy SalesCorporation(tdBluestone''),A&G CoalCorporation((W &G Coal'') Dynamic Energy, Inc. (ssDynamic Energy'') Justice M anagement Services, LLC (sslustice Pinnacle Bank v. Bluestone Energy Sales Corporation et al Doc. 75 Management''),KentuckyFuelCorporation(tdKentuckyFuel''),NineM ileMining,lnc.(CsNineMile M ining''), and Tams M anagement,lnc. (ss-l-ams Management'') (collectively, the (dBluestone Defendants'')areaffiliatedcompaniesthatopenedaseriesofbusinesscheckingaccountswithBank ofNorth Carolina((dBNC'')between May 30,2017 and June 9,2017. On June l6,2017,BNC Dockets.Justia.com m erged w ith and into Pinnacle,and BN C'S separate corporate existence cam e to an end. A s a result,the Bluestone Defendant'sBN C accounts becam e Pinnacle accounts. The Bluestone D efendants arranged for their accounts to be linked together through a Sssw eep''or çdzero balance'' arrangem ent, which enabled funds to be easily transferred from one accountto another. Bluestone'saccountselwed asthe m ain account. Atthe end of each day,funds were transferred from the main account to the subsidiary accounts to cover any debits,and any depositsthatwere m ade into the subsidiary accountswere transferred to the m ain account. Between June21andJune29,2017,thelnternalRevenueService(%1IRS'')issued leviesto Pinnacle and BN C,respectively, against certain assets of A & G Coal, Dynam ic Energy, Justice M anagem ent,K entucky Fuel,N ine M ile M ining,and Tam s M anagem ent. In response,Pinnacle froze the accounts opened for each of those entities. Because the accounts w ere linked to Bluestone's account through the çdsw eep''or çizero balance''arrangem ent,Pinnacle also froze the funds in that account. Those funds constituted the disputed funds at issue in this case (the SsDisputedFunds''). 0n July 24,2017,the Bluestone D efendants filed a law suitagainstBN C and Pinnacle in the CircuitCoux forthe City ofRoanoke,alleging thatPinnacle and/orBN C had w rongfully frozen the D isputed Funds in Bluestone's account in response to the IRS levies. Pinnacle rem oved the action to this courton August3,2017. See Bluestone Enem v Sales Corp.v.Bank ofN orth Carolina,No. No.7:17-cv-00365(W .D.Va.Aug.3,2017). Faced w ith com peting claim sto the D isputed Fundsfrom the B luestone Defendants and the IRS,Pinnacle consulted w ith the Bluestone Defendants and the United States aboutthe possibility ofcom m encing an interpleaderaction to resolve the m atter. Afterconferring w ith the otherparties, Pinnacle com m enced this action againstthe B luestone Defendants and the United States on August 22,2017. The first action rem oved from state courtwas then consolidated w ith the interpleader action. The Bluestone D efendants subsequently filed a cross-claim againstthe U nited States,and CarterBank & Trust(tçcarterBank'')movedto intervene. Although an lRS officerhad initially recom m ended thatPinnacle file an intem leaderaction,the United Statesreversed course and m oved to dismisstheactionforlackofsubjectmatterjurisdiction.Pinnacleopposedthatmotionandfiled itsownmotionforsummaryjudgment.TheUnited Stateswastheonly party toopposePinnacle's m otion. H ow ever,less than a m onth later,the United Statesw ithdrew the m otion to dism iss,and the parties negotiated a consent order granting Pinnacle's motion for summary judgment and dismissingtherelated action removed from statecourtwith prejudice. Theconsentorder,which wasentered on April26,2018,provided,in relevantpart,as follows: ltis hereby: ORDERED that the Clerk of the Court shall accept the sum of $1,403,607.47from Pinnacle(theSiDisputedFunds'')anddepositsaid fundsin a non-interest-bearing account; ' ORDERED that the D isputed Funds shall rem ain on deposit until furtherorderoftheCourt;(andq O RDERED thatPinnacle ishereby D ISM ISSED from thisaction,but such dism issalshallnot affect or preclude Pinnacle's richts to m ove for recovel'y of its attorneys' fees from the non-aovernm ental defendants.ortheCout'sconsiderationofthatmotiong.q ConsentOrderGrantingSumm.J.,DktNo.50(emphasisadded). The rem aining parties proceeded to engage in setllem ent negotiations over the next few m onths. On M ay 29,2018,the courtentered a consent orderperm itting a portion ofthe D isputed Funds in the amountof $357,657.82 to be paid to the United States for application toward the unpaid federaltax liabilities ofDynam ic Energy. On June 11,2018,atthe requestofthe rem aining parties,the courtentered an order staying al1furtherproceedings w hile they tsnalized agreed-upon settlem entterms. O n July 20,2018,the courtreceived tw o filings from the rem aining parties. The firstw as a jointmotion fordistribution of interpleader funds and proposed order,in which the Bluestone D efendants,the U nited States,and Carter Bank requested that additionalfunds in the am ount of $792,342.18 be paid to the United Statesfor application toward unpaid federaltax liabilities of Dynam ic Energy,A& G Coal,Justice M anagem ent,Kentucky Fuel,N ine M ile M ining,and Tam s Management.ThejointmotionfurtherrequestedthattheremainingbalanceoftheDisputedFunds, totaling $253,607.47,bedistributed to Bluestone. The second filing wasastipulation andproposed orderofdism issal,in w hich the Bluestone D efendants,the United States,and CarterBank stipulated thatthe action be dismissed with prejudice as to allclaims,with each party to bear its own attorneys'feesand costs.The courtsigned and entered both oftheproposed ordersthatsam e day. On June 23,2018,Pinnacle m oved to amend the July 20,2018 orders to the extentthatthey provided fordisbursem ent of a portion of the D isputed Funds to B luestone. Pinnacle argued that any disbursem ent to B luestone was prem ature in light of the fact that Pinnacle had reserved the rightto seek attorneys'feesfrom thenon-governm entaldefendants. Pinnacle subsequeétly filed a m otion for attorneys' fees and costs in the am ount of $109,635.51. Thereafter,thepartiesagreed to the entry ofan orderrequiring Bluestoneto preserve fundsinan amountnotlessthan $109,635.51in thetrustaccountofitscounsel,pending aruling on Pinnacle's m otion. The order furtherprovided thatBluestone shallrem it any aw ard of attolmeys' fees and costs directly to Pinnacle from the aforementioned funds w ithin seven days of the court's ruling. The courtheld a hearing on Pinnacle's m otionsvia conference callon Septem ber 28,2018. The m otionshave been fully briefed and are ripefordisposition. D iscussion 1. M otion to A m end Judzm ent Forthe reasons stated during the hearing,the courtw illgrant Pinnacle's m otion to amend judgment.Itisclearfrom therecordthatPinnaclereservedtherighttoseek recoveryofattorneys' fees from the D isputed Funds,to the extentthatsuch funds w ere notallocated to the United States for paym ent tow ard outstandihg tax liabilities.1 Consequently,the courtagrees that the proposed orders subm itted by the rem aining parties on July 20,2018 w ere entered prem aturely,and that it wouldbemanifestlyunjusttoprecludePinnaclefrom seekinganawardofattorneys'feesandcosts. Consequently,Pinnacle isentitled toreliefunderFederalRule ofCivilProcedure 59(e),and the orders entered on July 20,2018 w illbe am ended in the m anner setforth below . See M ayfield v. Nat'lAss'nforStock CarAuto Racing.lnc.,674F.3d 369,378(4thCir.2012)(explainingthata Rule59(e)motionmaybegrantedtocorrectaclearerroroflaw orpreventmanifestinjustice). lI. M otion for Attornevs'Fees and C osts Pinnacle seeks to recover $108,969.80 in attolmeys'fees and $665.71 in costs from the portion ofthe D isputed Funds disbursed to Bluestone. Bluestone has opposed the m otion,arguing thatthe requested am ountofattorneys'fees isunreasonable. StDespite the lack of an express reference in the federal interpleader statute to costs or attorney's fees, federal courts have held that proper for an interpleader plaintiff to be reim bursed for costs associated with bringing the action forward.'' Trs. of the Plum bers & PipefittersNat'lPensionFundv.Sprague,251F.App'x 155,156 (4th Cir.2007)(collectingcases from othercircuits).Thetheorybehindsuchanawardisthat(ltheinnocentstakeholdershouldnot 1Itisundisputed thatan aw ard ofattorneys'fees and costsisnotttpayable outofa partofthe f'und impressed with afederaltax lien.'' CavalierServ.Corn.v.W ise,645 F.Supp.31,37 (E. D .Va.1926);seealsoFirstInterstate BankofOr..N.A.v.U.S.Bv& Throuch I.R.S.,291F.Supp.543,542 (D.Or.1995)(noting thatafederaltax lienhad priori tyoverthestakeholder'sabilitytodiminishtheinterpleaderfundbyanawardofattorneys'feesandcosts). 5 have to bearthe costs ofthe interpleaderaction. Rather,the claim ants,thepartiesthatbenetstfrom the action,should bear the costs.'' W eber v.Rivanna Solid W aste A uth.,N o.3:98-cv-0109,2001 U.S.Dist.LEXIS 19644,at *6 (W .D.Va.Nov.27, 2001). Although a stakeholder is not autom atically entitled to fees and costs ddas a matterofcourse,''the dstestfor determ ining attorneys' fees in an interpleader action is less rigorous than the m ore elaborate factors used to consider fee aw ards in civilrights suits and other contexts.'' Sun Life Assurance Co.v.Grose,466 F.Supp.2d 714,717(W .D.Va.2006)(citationand internalquotationmarksomitled). Ultimately,Ccthebroad rule isreasonableness.'' 1d. (tln the nonnalinterpleader action,the attorneys'fees awarded w illbe relatively m odest, in as m uch as all that is necessary to bring an interpleader action is the preparation ofa petition,the depositofthe contested funds into court,service on a11claim ants,and thepreparation ofanorderdischargingthestakeholder.''Id.(citationand internalquotationmarks omitted). H aving considered the parties' arguments and applicable caselaw , the court finds that Pinnacle should be awarded reasonable attorneys'fees and costs from the portion ofthe D isputed Funds distributed to Bluestone. The courtis convinced that Pinnacle brought this action in good faith to resolve the defendants'rights to the D isputed Funds. M oreover,itcannotbe said thatthe claim s atissue in this case are ofthe type thatarise in the ordinary course ofPinnacle's business. See id.(notingthatfeesand coststsmay bedeniedwherethecontlicting claim isonethatarisesin theordinarycourseofthestakeholder'sbusiness''). The courtalso finds,however,thatthe am ountofattorneys'fees requested by Pinnacle m ust be significantly reduced. Pinnacle has been represented by attorneys from the Richm ond,V irginia office ofHunton AndrewsKurth LLP (formerly known asHunton & W illiamsLLP). Pinnacle seekscompensation atthe rate of$650.00 perhourforworked perfonued by two partners,Edward Furrand Eric Feiler. Pinnacle also seekscompensation atthehourly ratesof$570.00 and $300.00, 6 respectively, for w ork perform ed by a senior associate, Johnathon Schronce, and a paralegal, M ichelleH ayden-W inston. W hen determ ining a reasonable rate,the courtconsiders the prevailing m arket rate in the relevantcom m unity,asw ellas the background and experience ofthe individualattorneys involved. See.e.gs,M issouriv.Jenkins,491U.S.274,285-86 (1989);Spellv.MçDaniel,824 F.2d 1380, 1402 (4th Cir.l987). The prevailing marketratecan be established through evidence ofthe attorneys'billing practices,comparison to fee aw ards in sim ilarcases,and affidavitsreciting feesof counselfrom the relevant com m unity with sim ilar qualitscations. Spell,824 F.2d at 1402. After reviewing the affsdavits subm itted by the parties and fee awards in other cases in this district,2the court finds that the follow ing hourly rates are reasonable for the w ork perform ed in this case: $400.00 for the work performed by M r.Furr,$325.00 for the work performed by M r.Feiler, $250.00 forthe work performed by M r.Schronce,and $125.00 for the work performed by M s. Hayden-W inston.3 The courtalso finds itappropriateto reduce the num berofhoursforw hich Pinnacle requests reimbursem ent. A ccording to M r.Schronce's declaration and the attached exhibits,Pinnacle seeks attorneys' fees for nearly 200 hours billed by the attorneys and paralegal. Upon review of the billing records,the courtagreesw ith B luestone thatthe records reflect instances of overstafing or duplication ofeffort,and thatthey include tim e thatdoes n'otclearly relate to the tasksofpreparing the interpleader com plaint,obtaining selwice of process on the claim ants,depositing the Disputed 2Bluestone subm itted declarations from two attolmeys, ScottSexton and David W alker,both ofwhom have overthirtyyearsofexperiencepracticing intheW esternD istrictofV irginia.Pinnacleprovided adeclaration9om one ofitsownattorneys,M r.Schronce,attestingtothefeesandcostsincurredby thebank. 3The courtrecognizesthatthe partnerrates are lowerthan those germitted in Three RiversLandinc of Gulfoort.LP v.Three RiversLandinc.LLC,No.1:09-cv-00022,2014 U.S.Dlst.LEXIS 55871(W .D.Va.April21, 2014),onwhichPinnacleheavily relies.However,thatcaseisdistinguishablefrom theinstantaction inthatitinvolved attsom ewhatcomplicated contractualdisputey''which ultimately proceededto abench trialon multiple counts. 2014 U .S.Dist.LEXIS 55271,at*15;see also Griffin v.Areva.Inc.,No.6:16-cv-00029,2016 U .S.Dist.LEXIS 1s1861,at *5 (W .D.Va.Dec.15,2016),reportand recommendation adonted,20l7 U.S.Dist.LEXIS 4892 (W .D.Va.Jan.12, 2017)(distinguishingThreeRiversandreducinghourly ratesforapartnerand associatewithTroutman SandersLLP to $375.00and$250.00,respectively,inanERISA actiondismissedunderRule12(b)(6)). 7 Funds into the court's registry,or securing Pinnacle's discharge from liability and dism issalfrom the action. See.e.g.,Bank ofA m ..N .A .v.Jericho Baptist Church M inistries.Inc.,No.8:15-cv- 012953,2017 U.S.Dist.LEXIS 9227,at*9 (D.Md.Jan' .23,2017)(holdingthatthestakeholder could not recover the fees and costs associated w ith litigating certain m otions,since such m atters wentSsbeyond thepurposeofinterpleader,which isto requestthat(thecourt)preservethe funds whiledeciding to whichentitythefundswillultimately beawarded'');Healjng v.M inn.Lifelns. Co.,33F.Supp.3d 1035,1044(N.D.lowa2014)(decliningtoallow thestakeholdertorecoverfees foriiattorney-clientcommunications or unspecified legalresearch''l;ReliastarLife Ins.Co.v. LeM one,No.7:05-cv-00545,2006 U.S.Dist.LEXIS 22938,at*10 (W .D.Va.Apr.25,2016) (holding thatthe nature ofthework required in the interpleaderaction did notjustify the(çhefty am ountofattorneys'fees''soughtby the stakeholder,even though the defendantstsled m otionsthat S'somewhatcomplicategdj''theççordinarily simpleprocess''). M oreover,aconsiderableportion of the time billed by Pinnacle's legalteam w as attributable solely to challenges m ade by the U nited States afterthe instant action was filed. As indicated above,the United States initially moved to dismiss the action forlack ofsubjectmatterjurisdiction,and itwasthe only party to oppose Pinnaclt's motion for summat' y judgment. Although Bluestone's initiallawsuit gave rise to m ultiple claim s againstthe Disputed Funds and prom pted Pinnacle to t5le this interpleader action, the courtdoes notfind itappropriate to shiftallofthe attorneys'fees attributed to the governm ent's filingsto Bluestone. For allofthese reasons,the courtw illreduce the num berofhours forwhich Pinnacle seeks reim bursem ent by 35 percent. The reduced num ber of hours,w hen com bined with the applicable hourly rates, produces a lodestar of $32,941.00. W hile this amount may be higher than the ffmodest''aw ard typically m ade in the Ttnonnalinterpleaderaction,''the courtfinds thatno further adjustmentis warranted under the facts and circumstances of this particular case. Sun Life 8 AssllomceCo..466F.Supp.2dat717.Accordvgly,thecourtwillawardPinnacleattomeys'fees 1 theamountof$32,941.00,togeierwith itscostsof$665.71,foratotalof$33,606.71. . Conclusion Forthereasonsstated,Plnnnnle'smotiontoamendjudgmentwillberanted,anditsmotion forattorneys'feesandcosts* 1begrantedinpatïanddeniedinpart.'Iheorderpantingthejoint motion for de ibution of interpleader funds (Dkt No.56) will be amended to reflectthat $33/06.71oftheDisputedFtmdsdisbursedtoBluestoneshallberemittedtoPlnnncletocoverthe attom eys'feesand costsaweded by the court. Addidonslly,thestipulatlon and orderofdismlssal (DktNo.57)willbeamendedtoreflectth1 eachpartywillbearitsownattomeys'feesandcosts, w11 theexcepion ofi oseawardedtoPinnacleby separateorder. n e Clerk lsdirected to send copies ofthismem orandum opinion and the accompanyhg orderto a11coxmKelofrecord. A DATED:ThlsW day ofDecember, 2018. SeàiorUnited StiesDisd ctJudge 9
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