Opinion
3-99-CV-665-H
July 18, 2002
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Pursuant to the District Court's order of reference filed on May 15, 2002, Defendant BancTec USA, Inc.'s Supplemental Application for Attorneys' Fees has been referred to the undersigned magistrate judge for report and recommendation, and the magistrate judge finds and recommends as follows:
PROCEDURAL HISTORY:
This action was previously transferred to Magistrate Judge Jane Boyle on May 17, 1999, pursuant to the written consents of the parties and the provisions of 28 U.S.C. § 636 (c). The case was tried to a jury, beginning on March 26, 2001, and thereafter on July 19, 2001, a final judgment in favor of BancTec was entered which in pertinent part found that BancTec was the prevailing party in this action, entitled to taxable costs.
On August 1, 2001, BancTec filed its "Motion for Attorneys' Fees and Alternatively Motion to Amend Judgment. BancTec explicitly cited Federal Rule of Civil Procedure 59(e). Thereafter on August 17, 2001, Sanmina filed its notice of appeal from the court's "take nothing" judgment.
On August 21, 2001, Sanmina filed a response to BancTec's motion. Thereafter Magistrate Judge Boyle filed an order on January 4, 2002, which in pertinent part found that BancTec was entitled to attorneys' fees in successfully defending against Sanmina's claims. However, the court further ordered BancTec to re-segregate its fees in accordance with the findings set out in the order.
Sanmina filed a notice of appeal from this order on February 2, 2002.
On January 25, 2002, BancTec filed its supplemental application for attorneys' fees in response to the January 4th order. Sanmina in turn filed its response on February 14, 2002. BancTec's reply was filed on February 19, 2002.
The undersigned is not entirely satisfied with BancTec's efforts to comply with Magistrate Judge Boyle's order requiring it to re-segregate its fees. "A failure to segregate attorney's fees in a case containing multiple causes of action, only some of which entitle the recovery of attorney's fees, can result in the recovery of zero attorney's fees. Green International, Inc. v. Solis, 951 S.W.2d 384, 389 (Tex. 1997).
In BancTec's supplemental application no effort was made to segregate attorneys' time devoted to research and preparation of its motion for partial summary judgment, nor did it attempt to explain how the expended attorneys' time related to its defense against Sanmina's claims which were presented at trial. Instead Mr. Cox created 17 categories of expenditures and allocated a percentage of each category attributable to BancTec's defense against Sanmina's claims. Sanmina in response provided its own assessment of the percentages under each category to which BankTec was entitled to recoup its attorney's fees.
Magistrate Judge Boyle resigned her position as a United States magistrate judge on April 21, 2002. Upon her resignation this case was reassigned to the undersigned magistrate judge, but having been apprised that both parties did not consent to my exercise of jurisdiction pursuant to 28 U.S.C. § 636 (c), this case was transferred to District Judge Barefoot Sanders, the district judge to whom this case was initially assigned upon the filing of Sanmina's complaint on March 26, 1999. See e.g. Mendes Junior International Co. v. M/V Sokai Maru, 978 F.2d 920 (5th Cir. 1992).
FINDINGS AND CONCLUSIONS:
Although the District Court has the authority to reconsider Magistrate Judge Boyle's determination that BancTec is entitled to the recovery of attorneys' fees, See e.g. Cooper v. Berkshire, 70 F.3d 377, 378, n. 6, reh. and suggestion for reh. en banc denied, 77 F.3d 481 (5th Cir. 1995), the undersigned magistrate judge's recommendation is limited to the determination and calculation of the attorneys' fees to which BancTec is entitled.
Subject to Sanmina's objection that BancTec is not entitled to recover any attorneys' fees, the parties agree that the billing records submitted with BancTec's supplemental application (See affidavit of John T. Cox, III with attached exhibits) accurately reflect hours expended by BancTec's attorneys and that the hourly rates charged by each attorney were reasonable and customary in light of each attorney's background and experience. However, Sanmina joins issue on how much of BancTec's attorneys' fees may be appropriately shifted in accordance with Magistrate Judge Boyle's order filed on January 4, 2002. Specifically Sanmina claims that only BancTec's fees charged prior to the court's memorandum opinion and order filed on January 9, 2001, wherein the court granted BancTec's motion for partial summary judgment, are recoverable
In its supplemental motion BancTec makes reference to the twelve factors noted in Johnson v. Georgia Highway Express, 488 F.2d 714, 717-719 (5th Cir. 1974). See also Arthur Andersen v. Perry Equipment Corp. 945 S.W.2d 812, 818 (Tex. 1997) wherein the Texas supreme court adopted these factors in assessing attorneys' fees under Texas fee-shifting statutes. In light of Sanmina's agreement that the work performed was reasonable and the rates charged were customary and the fact that BancTec does not seek an enhancement of the lodestar amount, these factors are largely irrelevant.
In her memorandum opinion and order filed on January 4, 2002, Magistrate Judge Boyle found that BancTec was entitled to attorneys' fees under the acknowledgments which provided: "Reasonable attorneys' fees and costs will be awarded to the prevailing party in the event of litigation involving the enforcement or interpretation of this Agreement." (Emphasis added).
Both parties filed motions for partial summary judgment on October 19, 2002. For its part Sanmina sought a declaratory judgment to the effect that the Corporate Option Agreement ("COA") executed by it and BancTec was invalid and unenforceable and that the operative agreement between them was the Contract for Usage of BancTec Related Inventory at Sanmina ("CFU"). BancTec's motion on the other hand argued just the opposition, to wit: that it was the COA which constituted the agreement rather than the CFU.
On January 9, 2001, the court filed its memorandum opinion and order, sustaining BancTec's position and rejecting Sanmina's, by granting BancTec's motion and finding the COA to be a valid and binding contract (Id. at page 14) and denying Sanmina's motion, to wit: finding that the CFU was not a valid contract (Id. at page 16).
The case was subsequently tried before a jury beginning on March 26, 2001. In light of the court's prior ruling that the CFU was not a binding contract Sanmina's claims against BancTec were predicated on its theory that BancTec had engaged in acts of fraud, fraudulent inducement and negligent misrepresentation. Sanmina did not rely on the provisions of the CFU, but rather attempted to prove that the parties had entered into oral arguments which BancTec subsequently breached. Sanmina's economic duress claim was dismissed on the first day of trial.
BancTec pursued a counterclaim against Sanmina based on Sanmina's alleged breach of the COA.
At the hearing before the undersigned on July 2, 2002, counsel for the parties agreed that BancTec made a timely motion for judgment as a matter of law in its favor against Sanmina's claims. Magistrate Judge Boyle took the motion under advisement pending receipt of the jury's verdict.
By its answers to the questions submitted to it with reference to Sanmina's claims against BancTec the jury found that BancTec did not commit fraud against Sanmina (See answer to Question No. 1) and that the parties did not enter into oral contracts (See answers to Question Nos. 8 and 12). Although the jury found that BancTec made a negligent misrepresentation (See answer to Question No. 5), it further found that Sanmina was barred from pursuing this claim (See answer to Question No. 6).
With respect to BancTec's breach of contract counterclaim the jury found that Sanmina breached the COA (See answer to Question No. 16), but further found that Sanmina's failure was excused (See answer to Question No. 17). Due to the conditional language in the court's charge at page 29, the jury did not assess any damages in favor of BancTec.
In its instructions to the jury the court described conduct on the part of BancTec which would excuse any breach on Sanmina's part. See Court's Charge to the Jury at page 28. See also Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691 (Tex. 1994) — "A fundamental principle of contract law is that when one party to a contract commits a material breach of that contract, the other party is discharged or excused from any obligation to perform"; See also Purvis Oil Corp. v. Hillin, 890 S.W.2d 931, 937 (Tex.App.-El Paso 1994, no writ) — "Any contractual right can be waived." In the court's order filed on January 4, 2002, at page 3, the court found that "BancTec is not entitled to attorneys' fees under the purchase orders because the jury found that Sanmina's breach of the COA was excused.
Despite vigorous and protracted efforts of counsel for the parties and a twelve day jury trial, the jury by its answers to the questions submitted to it rejected each party's claims against the other, essentially leaving them in the same positions in which they found themselves prior to the filing of this action.
In her order filed on January 4, 2002, Magistrate Judge Boyle found that BancTec was entitled to recover attorneys' fees under the terms of the acknowledgment provisions as the prevailing party". See also Final Judgment filed on July 19, 2001.
Consonant with the terms of the acknowledgments, recited verbatim in the January 4, 2002, order at page 3 and the findings made but given the less than precise information provided by BancTec, See n. 2, supra, I am of the opinion that in light of BancTec's success in obtaining an order holding the COA to be an enforceable contract that BancTec is entitled to recover $104,404.00 of attorneys' fees in obtaining a ruling that the COA was an enforceable contract and the CFU was not.
As noted at page 2 of this recommendation Sanmina objects to the award of any attorneys' fees. The undersigned has some difficulty in accepting the fact that BancTec is the prevailing party by reason of its success in obtaining a favorable interlocutory opinion of the trial court that the COA was an enforceable contract. The effect of the opinion did not constitute a final outcome favorable to BancTec. Compare City of Amarillo v. Glick, 991 S.W.2d 14, 17 (Tex.App.-Amarillo 1997, pet. denied) where attorneys' fees were awarded, notwithstanding the fact that the plaintiffs received no money damages, but in which the final judgment voided the results of prior civil service examinations and ordered that plaintiffs be permitted to retake the tests. In contrast, the court's memorandum opinion filed on January 9, 2001, merely foreclosed Sanmina's presentation of a breach of contract claim predicated on the CFU and permitted BancTec to proceed with its breach of contract claim based on the acknowledgments issued pursuant to the COA. Based on the jury's verdict neither side prevailed on their respective claims and the status quo ante was not altered.
With respect to the attorneys' fees incurred by Sanmina, following the entry of the court's summary judgment opinion, both the undersigned and the District Court are under a severe handicap in assessing the amount of fees attributable to BancTec's defense against Sanmina's claims since neither presided at the trial of this case and Magistrate Judge Boyle is unavailable by reason of her resignation and subsequent appointment as the United States Attorney for the Northern District of Texas. See also n. 2, supra.
The undersigned is unable to discern the rationale for Magistrate Judge Boyle's finding that BancTec is entitled to attorneys' fees as the prevailing party on Sanmina's claims against it. "In Texas, attorney's fees are recoverable only by statute or by contract . . . Because attorney's fees are not recoverable on tort claims, the only basis [on which attorney's fees are recoverable is] on [a] breach of contract claim pursuant to Tex.Civ.Rem. Code Ann. § 38.001(8) (Vernon 1997) . . . To recover attorney's fees under § 38.001, the party must (1) prevail on a cause of action for which attorney's fees are recoverable, and (2) recover damages. See Green International, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997)." Academy v. Interior Buildout Turnkey, 21 S.W.3d 732, 743 (Tex. app.-Houston [14th Dist.] 2000, no writ).
In the trial of the present action Sanmina alleged inter alia that BancTec breached two oral contracts. However, in both instances the jury found that no such agreements existed. See answers to Questions 8 and 12. It is difficult to perceive how § 38.001(8) would provide a basis for recovery of BancTec's fees when as a matter of fact there was no contract. It necessarily follows that there was no contractual provision similar to that in the acknowledgment which provides for recovery of attorneys' fees to a "prevailing party" and absent contractual terms attorneys' fees are available to a party under § 38.001(8) only if the party recovers damages. Finally, BancTec has cited no case in which a defendant, who successfully defended against a breach of contract whereby the plaintiff received a "take nothing" judgment is entitled to recover its attorneys' fees. See also Ventana Investments v. 909 Corp., 879 F. Supp. 676 (E.D. Tex. 1995) vacated on other grounds, 65 F.3d 422, reh. denied 71 F.3d 168 (5th Cir. 1995).
As noted above, Sanmina proceeded to trial on at least three theories of liability, only one of which involved contracts. In calculating the percentages of attorneys' time devoted to each category of expenditures Mr. Cox has not segregated work into that devoted to the defense of each theory of liability asserted by Sanmina — either prior to trial or during the course of the trial. Additionally, although Sanmina's case-in-chief took 90% of the actual trial, it is difficult to perceive that none of the cross-examination by BancTec of Sanmina's witnesses related to its own breach of contract claim on which it did not succeed. Such cross-examination coupled with BancTec's lack of success on its counterclaim counsels against granting the full amount of attorneys' fees listed under categories 1-8; 10-13; 16 and 17. Under the above circumstances the undersigned is of the opinion that BancTec is entitled to recover 40% of the sum of the amounts listed in these categories, i.e. $294,611.76.
Categories 9, 14 and 15 are addressed above.
RECOMMENDATION:
For the foregoing reasons —
Unless the District Court determines that all or a portion of BancTec's attorneys' fees are not recoverable,
It is recommended that the District Court file an amended judgment in this case which includes a paragraph awarding BancTec attorneys' fees in the amount of $399,015.76 through the date on which the amended judgment is filed.
The magistrate judge further recommends that any additional fees relating to any appeal be deferred.
A copy of this recommendation shall be transmitted to counsel for the parties.