Opinion
A-22-CV-1234-ADA
04-11-2024
COVENTRY FIRST, LLC, Plaintiff, v. EQUITABLE HOLDINGS, INC., EQUITABLE FINANCIAL LIFE INS. CO., EQUITABLE FINANCIAL LIFE INS. CO. OF AMERICA, and EQUITABLE DISTRIBUTORS, LLC, Defendants.
TO THE HONORABLE ALAN D. ALBRIGHT UNITED STATES DISTRICT JUDGE:
REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
MARK LANE UNITED STATES MAGISTRATE JUDGE
Before the court are Plaintiff Coventry First LLC's Motion for Attorneys' Fees (the “Motion”) (Dkt. 67), Defendants' Response to Plaintiff's Motion for Attorneys' Fees (Dkt. 69) and Plaintiff Coventry First LLC's Reply in Support of Its Motion for Attorneys' Fees (Dkt. 70).After reviewing the Motion and related briefing, against the backdrop of the entire docket, the court submits the following Report and Recommendation to the District Court.
On February 21, 2024, the Motion was referred by United States District Judge Alan Albright to the undersigned pursuant to 28 U.S.C. § 636(b)(1)(B), Rule 72 of the Federal Rules of Civil Procedure, and Rule 1(d) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas for a report and recommendation. Dkt. 71.
I. THE MOTION AND RESPONSE
Plaintiff seeks the recovery of attorneys' fees, costs and expenses (collectively referred to as “fees”) related to Defendants' failed effort to remove this litigation to federal court. Dkt. 67. The procedural history of this case is fairly described in the Motion. See id. at 2-5. In sum, Defendants removed this matter from state court and thereafter engaged in an aggressive and robust effort to defend that decision. That effort ended with the District Court determining that the matter should be remanded to state court “because the joinder of [] Equitable Holdings, Inc. destroys jurisdictional diversity.” Dkt. 63. The Motion contends that Defendants' removal efforts were “objectively unreasonable” and entitle Plaintiff to recovery. Dkt. 67 at 9. Plaintiff seeks the recovery of $632,132.50 fees pursuant to Title 28, United States Code § 1447. Id. at 15 In support of the Motion, Plaintiff attached a five-page sworn declaration by attorney Eliot T. Burriss. Attached to the declaration was the following exhibit:
EXHIBIT A TO BHRR1SS DECLARATION
Dkt. 67-1 at 6.
Tasks performed
Wkd Hours
Tees Incurred
Work related to Removal and Motion to Remand
91.8
$87,424.50
Work related to 12(b)(2) Motion to Dismiss (Lack of personal Jurisdiction)
234.8
$232,809.50
Work related to Jurisdictional Discovery
101.3
$106542.50
Work related to 12(B)(6) Motion to Dismiss (Failure to State a Claim)
197.6
$216,000.00
Work related to preparation for 11/14/23 hearing on all pending motions
51
$59593.00
SUBTOTAL
$702,368.50
Discount
10%
($70,236.95)
TOTAL FEES REQUESTED
$632,132.55
In response, Defendants lodged several objections. Initially, Defendants contend that the Motion was untimely in that it failed to comply with Local Rule CV-54(b)(1). Dkt. 69 at 7-9. According to Defendants, the Motion was filed thirty days rather than fourteen days after the entry of final judgment. Defendants also argue Plaintiff is not entitled to the recovery of fees under § 1447(c). Defendants maintain that there was an objectively reasonable basis for removal and the subsequent defense of that removal. Id. at 9-12.
Defendants argue that should the court find a that the recovery of fees is warranted, the evidence submitted by Plaintiff is “wholly insufficient” to support its request. Id. at 13. Defendants contend that the fee request includes a significant amount of fees dedicated to work unrelated to the removal. Defendants also contend that the Burris Declaration does not comply with minimum Fifth Circuit requirements and this District's local rules. Specifically, the “declaration fails . . . to provide the required details that are necessary for meeting a fee applicant's burden of proving that the number of hours expended were reasonable or that the hourly rates for the attorneys who rendered legal services were reasonable in the community in which this Court sits.” Id. at 18.
In reply, Plaintiff insists that the request for fees was timely for a number of different reasons. Dkt. 70 at 1-6. Plaintiff refutes Defendants' arguments that Plaintiff procedurally waived any right to the recovery of fees. Id. at 6-7. Plaintiff also offers additional argument in support of its contention that Defendants' removal was objectively unreasonable. Id. 7-8. Lastly, Plaintiff defends its decision to support its request for fees. Id. at 8-9. Plaintiff maintains that Burris's declaration and summary chart provide a sufficient basis upon which to award fees. Id. at 9-10.
II. IS PLAINTIFF ENTITLED TO THE RECOVERY OF ATTORNEYS' FEES?
The Motion and Response spend considerable time on what the undersigned believes are distractions irrelevant to the critical determination at issue: Is Plaintiff entitled to the recovery of fees and, if so, how much? Instead, significant time is spent on whether Plaintiff's request for fees was timely and whether Plaintiff waived any entitlement to fees.
The Motion was timely filed. Plaintiff's original Motion to Remand was filed on January 6, 2023 and included a specific request for fees pursuant to 28 U.S.C. § 1447(c). Dkt. 20 at 6-7. The Motion for Remand placed Defendants on notice of Plaintiff's intent to seek the recovery of fees in the event Plaintiff prevailed. Even if Defendants' interpretation and application of Rule 54 to a request for attorneys' fees following a remand order is accurate, Defendants have not described any harm attributable to the sixteen-day delay associated with the filing of the Motion. Similarly and as Plaintiff notes, cases cited by Defendants in support are distinguishable. The court finds the cases cited by Plaintiff persuasive. See Dkt. 70 at 4-7 (citing Sanders v. Farina, 183 F.Supp.3d 762, 767 (E.D. Va. 2016); Nan Hanks & Assocs. v. Orig. Footware Co., 2018 WL 3155247, at *1, 3 (E.D. Cal. 2018); Ratliff v. Stewart, 508 F.3d 225 (5th Cir. 2007)). Having determined the Motion was timely filed, the court turns to whether Plaintiff's request for fees is authorized and appropriate given the posture of Defendants' removal and defense of that decision.
The parties agree that 28 U.S.C. § 1447(c) is the appropriate vehicle to determine whether an award of fees is appropriate. Section 1447(c) provides that “[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” 28 U.S.C. § 1447(c). Application of this provision is “evenly balanced between a pro-award and anti-award position ....” Cooter v. Hartmarx Corp., 496 U.S. 384, 396 (1990). A removing party must have “lacked an objectively reasonable basis” at the time it sought removal to be subject to the imposition of costs and expenses. The Lamar Co. v. Miss. Transp. Comm'n, 976 F.3d 524, 534 (5th Cir. 2020) (citing Martin v. Franklin Cap. Corp., 546 U.S. 132, 141 (2005)). “If no objectively reasonable basis was present, attorneys' fees may be awarded in the discretion of a court, but not otherwise.” Id.
Defendant initially removed this case from state court, claiming Plaintiff's description of the parties' citizenships in the Complaint established diversity. As we now know, Plaintiff's description of the citizenship of Equitable Holdings, Inc. (“Equitable Holdings”) as a corporate citizen of New York was in error. Instead, Equitable Holdings is a citizen of Delaware, thereby defeating diversity since Plaintiff is also a corporate citizen of Delaware. This fact and Plaintiff's erroneous description of Equitable Holdings citizenship should have been-and undoubtedly was-immediately obvious to Defendants. As Plaintiff points out, Defendants' Notice of Removal fails to affirmatively state the corporate citizenship of Equitable Holdings, as it does for the other named defendants. Dkt. 67 at 6-7; Dkt. 70 at 7-8. Instead, the Notice of Removal only references the erroneous citizenship description in Plaintiff's state complaint. To be clear, Defendants had an affirmative duty to accurately describe their own citizenship in the Notice of Removal but appear to have purposely avoided doing so.
After Plaintiff detected the error and advised Defendants of same, Defendants doubled-down and asserted that removal remained appropriate because Equitable Holdings was fraudulently joined. See Dkt. 17 (Supplemental Notice of Removal). The District Court made short shrift of Defendants' insistence that removal remained appropriate. See Dkt. 66 (Hearing Transcript). At the hearing, counsel for the Defendants acknowledged that the state complaint's description of Equitable Holdings citizenship was inaccurate. After doing so, the following colloquy took place:
THE COURT: And was it a statement about your client?
MR. WEBER: It was. Yeah. It had to do with the
THE COURT: And so you would know it was a mistake, right?
MR. WEBER: Correct.
THE COURT: So really what you're telling me is you'd like to take advantage of the mistake, even though you know -- you -- I mean, I get the pleading and all that.
I deal with that a lot. But you knew it was wrong and you -- I'm -- I don't know why you would take advantage of that mistake and remove it.
MR. WEBER: All I can say is that in looking at the petition, we
THE COURT: You knew the petition was wrong.
MR. WEBER: Well, we didn't until we further investigated. We assumed that the plaintiff was correct
THE COURT: So you removed it - you acted under Rule 11 and removed it without checking your own -- your own -- with your own client whether it was correct or not?....
THE COURT: ...This case doesn't belong here. Whatever the additional motions are, it -- it should never have been removed. There wasn't diversity. Dkt. 66 at 8-11.
Defendants' decision to remove this matter to federal court unquestionably lacked an objectively reasonable basis. Plaintiff's request for the recovery of fees is authorized and otherwise appropriate.
III. WHAT IS AN APPROPRIATE RECOVERY?
To secure an award of attorneys' fees from an opponent, the prevailing party must prove that: (1) recovery of attorneys' fees is legally authorized, and (2) the requested attorneys' fees are reasonable and necessary for the legal representation, so that such an award will compensate the prevailing party generally for its losses resulting from the litigation process. Having determined that Defendants' decision to remove this case from state court was objectively unreasonable and that its continued decision to defend removal was equally unreasonable, the court concludes that Plaintiff is clearly the prevailing party, and an award of attorneys' fees is legally authorized. 28 U.S.C. § 1447(c); LOC. R. CV-54(b)(2).
A determination of reasonable and necessary attorneys' fees is premised on the application of the lodestar method. Courts in the Fifth Circuit apply the lodestar method to calculate attorneys' fees. Black v. SettlePou, 732 F.3d 492, 502 (5th Cir. 2013) (citing Heidtman v. Cnty. of El Paso, 171 F.3d 1038, 1043 (5th Cir. 1999)). The lodestar amount is calculated by multiplying the number of hours an attorney reasonably spent on the case by an appropriate hourly rate. Id. (citing Smith & Fuller v. Cooper Tire & Rubber Co., 685 F.3d 486, 490 (5th Cir. 2012)). The appropriate hourly rate is defined by the market rate in the community in which the district court sits and should reflect the prevailing market rates, not the rates that “lions at the bar may command.” Black, 732 F.3d at 502 (citing Smith & Fuller, 685 F.3d at 490). The lodestar amount is entitled to a strong presumption of reasonableness. Black, 732 F.3d at 502 (citing Perdue v. Kenny A., 559 U.S. 542, 552 (2010)).
Litigants seeking attorneys' fees have the burden to show the reasonableness of the hours billed and that the attorneys exercised reasonable billing judgment. Black, 732 F.3d at 502 (citing Saizan v. Delta Concrete Prods. Co., 448 F.3d 795, 799 (5th Cir. 2006)); Riley v. City of Jackson, 99 F.3d 757, 760 (5th Cir. 1996); cf. Fox v. Vice, 563 U.S. 826, 838 (2011) (in the 42 U.S.C. § 1988 context, “The fee applicant (whether a plaintiff or a defendant) must, of course, submit appropriate documentation to meet ‘the burden of establishing entitlement to an award.'” (quoting Hensley v. Eckerhart, 461 U.S. 424, 437 (1983)).
After calculating the lodestar amount, the district court may adjust the amount of attorneys' fees based on the twelve factors set forth in Johnson v. Georgia Highway Express. Id. Many of these factors are subsumed within the initial calculation of hours reasonably expended at a reasonable hourly rate and should not be double counted. See id.; Jason D.W. v. Houston Indep. School Dist., 158 F.3d 205, 209 (5th Cir. 1998) (internal citations omitted).
The factors are: (1) the time and labor required; (2) the novelty and difficulty of issues in the case; (3) the skill required to perform the legal services properly; (4) the preclusion of other employment by the attorney due to accepting the case; (5) the customary fee charged for those services in the relevant community; (6) whether the fee is fixed or contingent; (7) the time limitations imposed by the client or circumstances; (8) the amount involved and results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the undesirability of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases. Black, 732 F.3d at 502 n.7 (citing Johnson v. Georgia Highway Express, 488 F.2d 714, 717-19 (5th Cir. 1974)).
A. THE MOTION, THE EVIDENCE AND THE LOCAL RULES
Local Rule 54(b)(2) requires the parties to meet and confer for the purpose of resolving all disputed issues relating to attorneys' fees prior to making application. LOC. R. CV-54(b)(2); see also LOC. R. CV-7(G). Rule 54(b)(2) requires the applicant to certify that such a conference occurred. LOC. R. CV-54(b)(2) In the event an agreement cannot be reached, the applicant is further required to “certify the specific reason why the matter could not be resolved by agreement.” Id. The Motion makes no reference to an attempt to meet and confer on this matter or otherwise comply with Local Rules.
An application for fees also must:
include a supporting document organized chronologically by activity or project, listing attorney name, date, and hours expended on the particular activity or project, as well as an affidavit certifying (1) that the hours expended were actually expended on the topics stated, and (2) that the hours expended and rate claimed were reasonable. Such application shall also be accompanied by a brief memo setting forth the method by which the amount of fees was computed, with sufficient citation of authority to permit the reviewing court the opportunity to determine whether such computation is correct. The request shall include reference to the statutory authorization or other authority for the request.Id.
Plaintiff's brief declaration and summary chart may evidence minimum compliance with Rule 54(b)(2). But Defendants' Response directly challenged the paltry evidence that Plaintiff submitted in support of the Motion. Dkt. 69 at 12-15, 17-19. Defendants' Response accurately described the court's preference for the submission of contemporaneous time or billing records in support of a fee award. These records are critical to the court's effort to determine whether Plaintiff exercised sound billing judgment and the propriety of individual billing entries. Plaintiff maintained that the evidence that had been submitted was sufficient and offered no additional evidentiary support. See Dkt. 70 at 2, 9-11.
Defendants state: For example, the Court and Defendants are unable to determine a number of factors, including whether: (a) the requested fees would have been incurred had the action remained in state court; (b) the hours claimed were reasonably expended; (c) the fee request includes hours that are not “excessive, redundant, or otherwise unnecessary,” eliminating the possibility of duplication of effort; (d) the fee request was for actual legal work and not clerical, secretarial, or administrative work; and (e) Coventry's counsel “exercised billing judgment” by documenting “the hours charged and the hours written off as unproductive, excessive, or redundant.” Dkt. 69 at 19-20 (internal citations omitted).
B. THE HOURLY RATE
The appropriate hourly rate is defined by the market rate in the community. Black, 732 F.3d at 502 (citing Smith & Fuller, 685 F.3d at 490). The relevant market is the community in which the district court sits. Tollett v. City of Kemah, 285 F.3d 357, 368 (5th Cir. 2002). The fee applicant bears the burden of proving that the number of hours and the hourly rate for which compensation is requested is reasonable. Riley, 99 F.3d at 760. As discussed above, hourly rates are computed according to the prevailing market rates in the relevant legal market, not the rates that “lions at the bar may command.” Hopwood v. State of Tex., 236 F.3d 256, 281 (5th Cir. 2000).
Plaintiff submits that its request for fees is based on “an average hourly rate of approximately $1038 per hour for all attorneys.” Dkt. 67-1 at 4. The only other information related to the hourly rates charged includes the following assertion “[t]he rate charged by attorneys in the Firm on this matter are $1,100 - [ sic ]$1,220 per hour for partners, $540 - $870 an hour for associates, depending on their seniority, and $385 for paralegals.” Id. at 2. That's it.
Defendants again pointed out the inadequacy of Plaintiff's evidence in support of an hourly rate. Dkt. 69 at 18. Despite Defendants' pointed response on this subject, Plaintiff maintained that the evidence submitted was sufficient. Plaintiff is incorrect. See Dkt. 70 at 1.
Plaintiff has failed to provide any reasonable support for a blended or average rate of $1038 per hour. Instead, Plaintiff essentially asks the court to trust them, despite Defendants' objections. This the court cannot, and will not, do. Any average rate is a function of the attorneys' and paralegals' individual hourly rates coupled with how many hours the attorneys or paralegals worked on the case. Plaintiff fails to describe specifically how Plaintiff arrived at the blended or average $1038 rate. Consequently, Plaintiff's proposed hourly rate is of little use.
Defendants did not offer an alternative hourly rate.
Based on this court's experience, the crafting of previous attorneys' fee awards and a review of the entire docket in this case, the court will apply an hourly rate of $500. This hourly rate is reasonable and consistent with the rates charged in the Austin Division of the Western District of Texas.
C. TIME EXPENDED
Plaintiff seeks recovery for work in five distinct categories, three of which are not directly related to the Motion to Remand. Defendants take issue with the award of any fees not incurred as result of removal as described in § 1447(c). In addition, Defendants point out that:
Work related to 12(b)(2) Motion to Dismiss (Lack of Personal Jurisdiction); Work related to Jurisdictional Discovery; and Work related to 12(b)(6) Motion to Dismiss (Failure to State a Claim). Dkt. 67-1 at 6.
The Fifth Circuit has “interpret[ed] this language to limit the litigation expenses that may be awarded under this section to fees and costs incurred in federal court that would not have been incurred had the case remained in state court.” Avitts v. Amoco Prod. Co., 111 F.3d 30, 32 (5th Cir. 1997)) (emphasis added). “By contrast, ordinary litigation expenses that would have been incurred had the action remained in state court are not recoverable because such expenses are not incurred ‘as a result of the removal.'” Id. (quoting Section 1447(c)).Dkt. 69 at 13.
In the absence of billing or time records, Plaintiff has again asked both Defendants and the court to accept that the number of hours worked is accurate, reasonable and appropriate. Defendants are not obligated to simply accept whatever Plaintiff demands. Similarly, in the wake of Defendants' objections, the court must review the hours worked, determine if the amount of time expended was reasonable and, if not, make necessary adjustments. There is simply no way for the court to effectively meet this obligation given the limited amount of information submitted by Plaintiff.
As noted by the District Court during the hearing on the Motion to Remand, this issue should have been resolved much earlier. See Dkt. 66 at 10-11. Instead, following removal, the case was assigned to a succession of different dockets through no fault of the attorneys. Dkts. 34, 37, 52. Because the case remained on the docket, the parties were eventually required to enter a scheduling order (Dkt. 51) and otherwise engage in motions practice. The case advanced quickly once it was reassigned to the current District Judge. While sympathetic to Plaintiff's argument that everything done in federal court was related to Defendants' erroneous decision to remove the case, the undersigned is hesitant to find that this work was “incurred as a result of the removal.” Avitts v. Amoco Prod. Co., 111 F.3d 30, 32 (5th Cir. 1997) (“Congress has plainly limited such an award to those costs and fees ‘incurred as a result of removal.'” (quoting 28 U.S.C. § 1447(c))..
Instead, the undersigned finds that any recovery of fees is limited to only two of the summary categories set out in the above chart, supra at 2, namely (1) work directly related to removal and (2) the removal hearing. Plaintiff seeks the recovery of 91.8 hours of work related to removal and motion to remand as well as another 51 hours related to preparation and attendance at the November 14, 2023 hearing. Dkt. 67-1. These two categories total 142.8 hours of work. This summary of hours suffers from the same deficiency articulated above in that Plaintiff fails to provide any detail in support. Nonetheless, the total amount of hours appears reasonable in light of the entire docket and Defendants erroneous decision to not only remove the matter but to continue to defend that erroneous decision.
D. THE LODESTAR
The court has found that an hourly rate of $500 is reasonable and appropriate and should be used with reference to Plaintiff's pending fee request. The court has further found that a total of 142.8 hours is directly related to Defendants' objectively unreasonable decision to remove this matter to federal court. Consequently, the lodestar is $71,400.00.
Neither party addressed the application of any of the Johnson factors to the fee award. The court finds that none of the Johnson factors requires an adjustment to the $71,400 lodestar.
IV. ATTORNEYS' FEES AWARD
The court has determined the appropriate lodestar and considered any adjustments. Having done so, the court finds that Plaintiff is to be awarded reasonable and necessary attorneys' fees and costs in the amount of $71,400.00.
V. RECOMMENDATIONS
For these reasons, the undersigned RECOMMENDS that Plaintiff Coventry First LLC's Motion for Attorneys' Fees (Dkt. 67) be GRANTED, in part, and DENIED, in part. The undersigned further RECOMMENDS that the court order Defendants to pay Plaintiff a total of $71,400.00 in relation to Defendants' erroneous removal of this matter to federal court.
Finally, the undersigned RECOMMENDS that this sum be paid to Plaintiff within 30 days of the District Court's final order on Plaintiff's fee request.
The referral to the undersigned should be canceled.
VI. Objections
The parties may file objections to this Report and Recommendation. A party filing objections must specifically identify those findings or recommendations to which objections are being made. The District Court need not consider frivolous, conclusive, or general objections. See Battles v. United States Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
A party's failure to file written objections to the proposed findings and recommendations contained in this Report within fourteen (14) days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report and, except upon grounds of plain error, shall bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150-53 (1985); Douglass v. United Services Auto. Ass'n, 79 F.3d 1415 (5th Cir. 1996) (en banc).