Opinion
No. 09-cv-5450 (KM)(MAH)
12-12-2017
W. JAMES MAC NAUGHTON, Plaintiff pro se, v. SHAI HARMELECH pro se, CABLE AMERICA, INC., d/b/a SATELLITE AMERICA and USA SATELLITE & CABLE, INC., Defendants.
MEMORANDUM OPINION AND ORDER
KEVIN MCNULTY , U.S.D.J. :
On October 13, 2016, Magistrate Judge Michael A. Hammer filed a report and recommendation ("R&R", ECF no. 426)) denying the application of W. James Mac Naughton, plaintiff pro se, for attorney's fees. Mac Naughton filed a timely objection to the R&R (ECF no. 427). No papers were filed in response to the objection. I have, however, reviewed the papers filed by both sides in connection with the Magistrate Judge's decision. Substantially for the reasons stated by the Magistrate Judge, the R&R is adopted as the ruling of the Court.
My standard of review is de novo. In this diversity case, I must apply State substantive law, which requires me to determine how the State's highest court has decided, or predict how it would decide, the applicable legal issues See Hunt v. U.S. Tobacco Co., 538 F.3d 217, 220-21 (3d Cir. 2008); Norfolk Southern Ry. Co. v. Basell USA Inc., 512 F.3d 86, 92 (3d Cir. 2008); see also West v. AT&T Co., 311 U.S. 223, 237 (1940); McCabe v. Ernst & Young, LLP, 494 F.3d 418, 424 (3d Cir. 2007).
Under [28 U.S.C. § 636(b)(1)] subparagraph (B), a district court may refer a dispositive motion to a magistrate judge "to conduct hearings, including evidentiary hearings, and to submit to a judge of the court proposed findings of fact and recommendations for the disposition." 28 U.S.C. § 636(b)(1)(B). The product of a magistrate judge, following a referral of a dispositive matter, is often called a "report and recommendation." Parties "may serve and file specific written objections to the proposed findings and recommendations" within 14 days of being served with a copy of the magistrate judge's report and recommendation. Fed. R. Civ. P. 72(b)(2). If a party objects timely to a magistrate judge's report and recommendation, the district court must "make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." 28 U.S.C. § 636(b)(1); see also Fed. R. Civ. P. 72(b)(3). If a party does not object timely to a magistrate judge's report and recommendation, the party may lose its right to de novo review by the district court. Nara v. Frank, 488 F.3d 187, 194 (3d Cir. 2007) (citing Henderson v. Carlson, 812 F.2d 874, 878-79 (3d Cir. 1987)). However, we have held that because a district court must take some action for a report and recommendation to become a final order and because "[t]he authority and the responsibility to make an informed, final determination ... remains with the judge," Mathews v. Weber, 423 U.S. 261, 271, 96 S.Ct. 549, 46 L.Ed.2d 483 (1976), even absent objections to the report and recommendation, a district court should "afford some level of review to dispositive legal issues raised by the report," Henderson, 812 F.2d at 878. We have described this level of review as "reasoned consideration." Id. If a party fails to object timely to the magistrate judge's report and recommendation, we generally review the district court's order for plain error. Brightwell v. Lehman, 637 F.3d 187, 193 (3d Cir. 2011); Nara, 488 F.3d at 194. But see Leyva v. Williams, 504 F.3d 357, 363-64 (3d Cir. 2007) (applying de novo appellate review when a pro se litigant did not timely object to a magistrate judge's report and recommendation and the magistrate judge did not "warn[ ] that [the litigant's] failure to object to the Magistrate Judge's report would result in forfeiture of his rights"); Henderson, 812 F.2d at 878 n.4 ("(W]hen the district court elects to exercise its power to review a magistrate's report de novo, a party's previous failure to object becomes irrelevant.").
The issue, as presented to the Magistrate Judge, was primarily one of law. Defendants urged, and Judge Hammer accepted, that a party who happens to be a lawyer but appears pro se is not entitled to an award of fees. The heart of Mac Naughton's objection is that the cases prohibiting such an award deal with statutory fee-shifting provisions. Parties, he urges, should be able to contract for a contrary result, as they did in this case.
The note and security agreement at issue provide that "Maker shall be liable for all reasonable attorneys fees and costs arising out of the collection or enforcement of this Note and Security Agreement." (Quoted at R&R 2-3) --------
Before the Magistrate Judge, Mac Naughton argued that Illinois law applied, and defendants argued that New Jersey law applied. On appeal, Mac Naughton appears to concentrate more on New Jersey law. Judge Hammer considered both Illinois and New Jersey law, but ultimately decided that the choice of law issue was inconsequential, because the two states' laws are similar. (R&R 5)
As to Illinois, Judge Hammer cited Hamer v. Lentz, 132 Ill. 2d 49, 62-63 (1989), as well as intermediate appellate court cases citing Hamer. (R&R 6-7) In particular, he cited Tantiwongse v. Law Offices of Edward R. Jaquays, 371 Ill. App. 3d 1161, 1164 (2007), which extended the reasoning of Hamer to bar a contractually-based fee award. (R&R 7-8)). I agree with Judge Hammer's reasoning.
In New Jersey, as Judge Hammer found, the picture is similar. The leading case is Segal v. Lynch, 211 N.J. 230, 264 (2012), which involved a fee-shifting rule, N.J. Ct. R. 2:11-4. I agree with Judge Hammer that there are strong indications that New Jersey would apply the Segal rule to contractually-based fee awards as well.
First, Segal itself cited at least one prior lower court case disallowing a contractually-based pro se fee award, without distinguishing it in any way. See Gruber & Colabella, P.A., v. Erickson, 345 N.J. Super. 248, 252 (Law Div. 2001) (interpreting a retainer agreement, and stating that "when a law firm appearing pro se prevails in an action to collect legal fees from a former client, it is not entitled to recover additional attorney's fees for its collection efforts.") (cited in Segal, 211 N.J. at 261). Segal did not, however, discuss this aspect of Gruber, which it cited it in connection with documenting a split in the New Jersey case law. (See discussion at R&R 8-9.)
Second, I supplement the R&R by noting that research has uncovered only one only New Jersey case (an unpublished one) that interprets Segal in connection with contractually-based fees. See Ragan & Ragan, P.C. v. Winberry Realty Partnership, 2013 WL 1438102 (Super. Ct. N.J. App. Div. Apr. 10, 2013). Ragan applied the Segal rule and disallowed the fees.
Third, Judge Hammer noted Segal's strong public policy basis for disallowing pro se fees. (See R&R 8 (general policy discouraging fee-shifting); R&R 9 (discouragement of abusive litigation tactics, avoidance of disparate treatment of classes of pro se litigants); R&R 10 (policy of encouraging parties to obtain independent counsel) (citing Kay v. Erhler, 499 U.S. 432, 437-38 (1991)). I agree with Judge Hammer that these policies do not suggest any strong basis for distinguishing between statutory and contractually-based fees. (R&R 10-11)
Now, on appeal, Mac Naughton stresses that Segal represented a change in the law, and that pre-Segal law should apply to a lawsuit begun before Segal was decided in 2012, based on a pre-Segal contract. As Mac Naughton presents it, Segal changed everything; before Segal, pro se fees were allowed (Mac Naughton Brf. at 5 (citing Brach, Eichler et al. v. Ezewko, 345 N.J. Super. 1, 783 A.2d 246 (App. Div. 2001) (statutory fee-shifting case)). Actually, as Segal carefully documented, the pre-Segal New Jersey cases were split; what Segal accomplished was not a U-turn in the law, but a resolution of that split. No vested expectations were defeated by Segal In any event, I am not persuaded that Segal intended to grandfather all existing contracts, permitting fee awards into the future until all such contracts expired or claims were exhausted. Certainly Segal's public policy rationale would argue against creating such an ongoing entitlement for some litigants, but not others.
Again, the only authority on this point seems to be the unpublished Ragan case, which is not binding but persuasive. It held that "[n]othing in the Court's opinion suggests that Segal was intended to have only prospective application." Ragan, 2013 WL 1438102 at *6 (applying Segal to bar fee award in case on direct appeal when Segal was decided).
In sum, based on the sound reasoning of Judge Hammer, the R&R is affirmed and adopted by the Court.
ORDER
ACCORDINGLY, IT IS this 12th day of December, 2017,
ORDERED that the plaintiff's objections (ECF no. 427) to the Magistrate Judge's R&R (ECF no. 426) are DENIED; that the R&R is affirmed and adopted; and that the application for attorney's fees is therefore denied.
The clerk shall close the file.
/s/ _________
KEVIN MCNULTY
United States District Judge
Equal Employment Opportunity Comm'n v. City of Long Branch, 866 F.3d 93, 99-100 (3d Cir. 2017).