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Adhikari v. Daoud & Partners

United States District Court, S.D. Texas, Houston Division

November 30, 2017

RAMCHANDRA ADHIKARI, et al., Plaintiffs,
v.
DAOUD & PARTNERS, et al., Defendants.

          MEMORANDUM AND ORDER

          KEITH P. ELLISON, UNITED STATES DISTRICT JUDGE

         This major human rights lawsuit alleging human trafficking by Defendants KBR and its subsidiaries following the American invasion of Iraq is nearly at an end.[1] One final question remains. Plaintiffs have filed a Motion for Expenses, Including Attorney's Fees, as the Prevailing Party Pursuant to Fed.R.Civ.P. 11(c)(2). (Doc. No. 748.) Defendants KBR and various KBR entities had filed a Motion for Sanctions against Plaintiffs in February 2013. (Doc. No. 480.) Finding that motion “not--even remotely--justified, ” this Court rejected Defendants' sanctions motion in August 2013. Adhikari v. Daoud & Partners, 2013 WL 4511354, at *11 (S.D. Tex. Aug. 23, 2013). Plaintiffs now seek attorney's fees and other expenses incurred in litigating that motion. Based on careful consideration of the filings, applicable law, and oral argument, the Court GRANTS Plaintiffs' motion.

         I. BACKGROUND

         The heart-rending story of this case has been told elsewhere, sparing the need for a full recounting here. See Adhikari v. Kellogg Brown & Root, Inc., 845 F.3d 184, 190-91 (5th Cir. 2017); Adhikari v. Daoud & Partners, 994 F.Supp.2d 831, 832-35 (S.D. Tex. 2014).

         On February 11, 2013, Defendants filed a motion that requested sanctions on three grounds: Rule 11 of the Federal Rules of Civil Procedure; 28 U.S.C. § 1927, which penalizes the unreasonable and vexatious multiplication of proceedings; and this Court's inherent power. (Doc. No. 480.) The motion contained 44 substantive pages, accompanied by around 440 pages of exhibits. At the time, Defendants were represented by attorneys from the Houston and Washington offices of Baker & Hostetler. KBR's Vice President for Litigation, Mark Lowes, was also on the motion. (Doc. No. 480 at 1.) Attorneys from Susman Godfrey would soon replace the Baker & Hostetler attorneys. (Doc. No. 625.) The former litigated the case thereafter, while the latter have had no role.

         Defendants' sanctions motion arrived in the thick of the litigation. Numerous motions to compel, arising from the sharply contested discovery process, were then pending. (Doc. Nos. 427, 478.) According to Plaintiffs, their “two primary attorneys on the case were engaged in their clients' long-scheduled depositions, for which visas had laboriously been obtained and which could not be postponed.” (Doc. No. 755 at 8.)

         Defendants' motion for summary judgment also was pending at the time. (Doc. No. 347.) It too was substantial, containing 41 substantive pages and nearly 800 pages of exhibits. Plaintiffs had already filed their Response (Doc. No. 405), but a hearing on the summary judgment motion was scheduled for April 12, 2013. By filing their sanctions motion two months before the summary judgment hearing, Defendants saddled Plaintiffs with considerable work atop much other pressing business. Plaintiffs provide an email dated February 14, 2013 asking Defendants' agreement to postpone briefing on the sanctions motion until after the Court ruled on the summary judgment motion. (Doc. No. 755-1 at 8.) Defendants evidently refused. (Doc. No. 755 at 9.)

         Waiting for the resolution of the summary judgment motion would have been sensible, because Defendants' sanctions motion mostly challenged Plaintiffs' lack of evidence. (Doc. No. 480 at 4-15, 20-33.) Defendants argued that Plaintiffs had no evidence connecting KBR to Plaintiffs' injuries when the lawsuit began. (Id. at 20-25.) They further argued that the facts revealed in discovery were contrary to Plaintiffs' claims. (Id. at 25-32.) In their view, this showed that Plaintiffs' counsel failed to conduct a reasonable inquiry before filing suit. (Id. at 32-33.) Defendants also charged that Plaintiffs “consistently promoted the false impression that their work on this case has been on a pro bono basis, ” when in fact they were proceeding on a “for-profit basis.” (Id. at 35-38.) Defendants described this as “a pattern of deceit” and insinuated that Plaintiffs' counsel did not deserve a pro bono award that they received in 2011. (Id. at 36-38.)

         Plaintiffs took Defendants' motion for sanctions seriously. Their Response ran to 69 substantive pages, supported by nearly 1, 100 pages of exhibits. (Doc. No. 505.) In it, they described Defendants' sanctions motion as a “sprawling litany” of “baseless accusations and falsehoods, ” which took great time and care to rebut. (Id. at 1.) In the view of Plaintiffs' counsel, the discussion in Defendants' sanctions motion about factual deficiencies essentially just repeated summary judgment arguments. (Doc. No. 748 at 8-9.) As they note, Defendants' summary judgment motion made substantially similar arguments about the evidentiary support for Plaintiffs' claims. (Doc. No. 347 at 10-28, 33-34.) Plaintiffs also rebutted Defendants' allegations about misrepresenting the pro bono nature of the litigation. (Doc. No. 505 at 60-64.) They noted various bar association rules and Pro Bono Institute standards defining pro bono work and represented that their conduct was well within those definitions. (Id.)

         In August 2013, the Court partly granted and partly denied Defendants' motion for summary judgment. Adhikari v. Daoud & Partners, 2013 WL 4511354 (S.D. Tex. Aug. 23, 2013). The Court granted summary judgment to Defendants on Plaintiffs' claims under the Alien Tort Statute, the necessary consequence of the Supreme Court's decision several months earlier on the extraterritorial application of that law in Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108 (2013). Id. at *6-7. The Court also followed the reasoning of Kiobel in granting summary judgment to Defendants on Plaintiffs' RICO claims. Id. at *7-8. The Court found, by contrast, that Plaintiffs had created genuine issues of material fact regarding its claims under the Trafficking Victims Protection Reauthorization Act (TVPRA). Id. at *8-11. The Court would eventually reconsider this judgment and dismiss Plaintiffs' TVPRA claims, having concluded that the version of the TVPRA in effect for the events in question did not apply extraterritorially. Adhikari v. Daoud & Partners, 994 F.Supp.2d 831, 835-40 (S.D. Tex. 2014).

         It was not for lack of evidentiary support, pre-suit investigation, or diligence on the part of Plaintiffs' counsel, however, that Plaintiffs' claims failed. On the contrary, as this Court has previously said, “the herculean efforts of Plaintiffs' counsel have been in the highest traditions of the bar. No lawyer or group of lawyers could have done more or done better.” (Doc. No. 700 at 18.) Given that, the Court rejected Defendants' sanctions motion as “not--even remotely-- justified.” Adhikari, 2013 WL 4511354, at *11.

         II. APPLICABLE LAW

         Rule 11 of the Federal Rules of Civil Procedure authorizes district courts to impose an “appropriate sanction” for various forms of attorney misconduct “on any attorney, law firm, or party that violated the rule or is responsible for the violation.” Fed R. Civ. P. 11(c)(1). The Supreme Court has said that “the central purpose of Rule 11 is to deter baseless filings in district court and thus … streamline the administration and procedure of the federal courts.” Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990).

         The availability of sanctions under Rule 11 carries risks. The Supreme Court has cautioned that “the Rule must be read in light of concerns that it will spawn satellite litigation and chill vigorous advocacy.” Cooter & Gell, 496 U.S. at 393. The Fifth Circuit has added that “misapplication of Rule 11 can chill counsel's ‘enthusiasm and stifle the creativity of litigants in pursuing novel factual or legal theories, ' contrary to the intent of its framers.” CJC Holdings, Inc. v. Wright & Lato, Inc., 989 F.2d 791, 794 (5th Cir. 1993) (quoting Thomas v. Capital Security Servs., Inc., 836 F.2d 866, 885 (5th Cir. 1988) (en banc)).

         In its commentary, the Advisory Committee on Civil Rules has also warned against the misuse of Rule 11:

Rule 11 motions should not be made or threatened for minor, inconsequential violations of the standards prescribed by subdivision (b). They should not be employed as a discovery device or to test the legal sufficiency or efficacy of allegations in the pleadings; other motions are available for those purposes. Nor should Rule 11 motions be prepared to emphasize the merits of a party's position, to exact an unjust settlement, to intimidate an adversary into withdrawing contentions that are fairly debatable, to increase the costs of litigation, to create a conflict of interest between attorney and client, or to seek disclosure of matters otherwise protected by the attorney-client privilege or the work-product doctrine.

Fed. R. Civ. P. 11 advisory committee's note to 1993 amendment.

         Owing partly to the risk of misuse, Rule 11(c)(2) permits the award of expenses to the party prevailing on the sanctions motion: “If warranted, the court may award to the prevailing party the reasonable expenses, including attorney's fees, incurred for the motion.” Fed.R.Civ.P. 11(c)(2). As the Advisory Committee explains, this prevailing-party expenses award will sometimes replace a cross-motion for sanctions:

As under former Rule 11, the filing of a motion for sanctions is itself subject to the requirements of the rule and can lead to sanctions. However, service of a cross motion under Rule 11 should rarely be needed since under the revision the court may award to the person who prevails on a motion under Rule 11--whether the movant or the target of the motion--reasonable expenses, including attorney's fees, incurred in presenting or opposing the motion.

Fed. R. Civ. P. 11 advisory committee's note to 1993 amendment.

         Importantly, the expenses available under Rule 11(c)(2) are not meant only to sanction parties responsible for abusive Rule 11 motions. If the non-movant prevails, there is no requirement in the rule's text or commentary that the movant's conduct be found worthy of sanction. It is also possible for a prevailing movant to get expenses in addition to whichever “appropriate sanction” the court chooses. These features of the rule indicate that Rule 11(c)(2) expenses are not necessarily in the nature of a sanction. This important distinction between sanctions and awards of expenses will recur throughout the analysis that follows.

         III. TIMELINESS

         Before considering whether Plaintiffs' request for expenses is warranted and reasonable, there is a threshold issue: whether Plaintiffs' motion for expenses is timely. Defendants have three arguments on the issue of timeliness. First, they argue that Plaintiffs' motion was filed more than 14 days after entry of final judgment, in violation of Rule 54(d)(2), which requires motions for attorney's fees to be filed before that deadline. (Doc. No. 752 at 4-11.) Second, they argue that Plaintiffs' motion was filed after the dispositive and non-dispositive motions deadline set by the Court's docket control order. (Id. at 11.) Third, they argue that, regardless of rule-based or court-ordered deadlines, Plaintiffs' delay was inordinately long, causing prejudice and requiring denial of the motion. (Id. at 11-12.)

         Defendants' argument concerning the docket control order can be addressed in short order. Rule 11(c)(2) expenses are available only to the prevailing party. When the motions deadline passed on June 9, 2013, the Court had not ruled on Defendants' motion for sanctions, so the prevailing party was not yet known. It would be nonsensical to require motions for expenses in advance of the ruling on the sanctions motion itself.

         Defendants' other two arguments on timeliness warrant more discussion, to which the Court now turns.

         a. Rule 54(d)(2)

         Defendants argue that Rule 54(d)(2) governs Plaintiffs' request for attorney's fees. Rule 54 governs judgment, and Rule 54(d) governs claims for attorney's fees. Defendants rely on Rule 54(d)(2)(B)(i): “Unless a statute or a court order provides otherwise, the motion [for attorney's fees] must … be filed no later than 14 days after the entry of final judgment.” Defendants cite no case applying the 14-day deadline to motions for Rule 11(c)(2) expenses, and the Court knows of none.[2] The cases Defendants cite to illustrate the application of Rule 54(d)(2)'s deadline all involve other statutory bases for attorney's fees.[3] None involves Rule 11.

         Defendants' argument, then, amounts to a request that this Court make new law. There are good reasons to decline to do so, starting with the plain text of the rules. Subsection (E) of Rule 54(d)(2) says that “Subparagraphs (A)-(D) do not apply to claims for fees and expenses as sanctions for violating these rules or as sanctions under 28 U.S.C. § 1927.” The few courts to consider Subsection (E) expressly have understood it to refer to Rule 11. See Baker v. Urban Outfitters, Inc., 249 F. App'x 845, 846 n.3 (2nd Cir. 2007); Royal Surplus Lines Ins. Co. v. Coachmen Industries, Inc., 229 F.R.D. 695, 696 (M.D. Fla. 2005); Miller v. Credit Collection Servs., 200 F.R.D. 379, 382 n.5 (S.D. Ohio 2000). As such, Rule 54(d)(2)(B) should be considered altogether inapplicable to Rule 11.

         Given Subsection (E), Defendants need to explain why Rule 54(d)(2) nevertheless applies to attorney's fees awarded as expenses under Rule 11(c)(2), if not to motions under Rule 11 generally. They focus on the phrase “as sanctions” in Subsection (E), arguing that expenses awarded under Rule 11(c)(2) technically are not sanctions.[4] (Doc. No. 752 at 9.) Indeed, to award expenses under Rule 11(c)(2) to the prevailing party, it is not necessary that the other party actually violated the Federal Rules. That said, as explained above, the Advisory Committee contemplated that Rule 11(c)(2) expenses would sometimes stand in for sanctions against a misbehaving Rule 11 movant. Given that, Rule 11(c)(2) expenses may not always constitute sanctions, but sometimes they do. Consequently, Defendants' interpretation of Subsection (E) would be troublesome in practice. Sometimes motions for Rule 11(c)(2) expenses would be the equivalent of sanctions and sometimes not. Some motions for Rule 11(c)(2) expenses would therefore be excluded from the 14-day deadline by Rule 54(d)(2)(E), but not others. Whether a given motion should be subject to the deadline could only be known after it was filed, the underlying facts considered, and a decision rendered.

         Defendants' attempt to apply Rule 54(d)(2)'s procedures to Rule 11 is further complicated by the different scopes of the two rules. Rule 11(c)(2)'s authorization of “reasonable expenses” is not limited to attorney's fees. The effect of Defendants' interpretation is to apply a special procedural requirement only to certain portions of expense requests. Perhaps there is a sensible reason that Rule 54(d)(2)'s deadline should apply to some forms of expenses awarded under Rule 11(c)(2) but not others. If there is, Defendants have not provided it.

         It is better to view Rule 11 and Rule 54 as altogether distinct and to reject attempts to tie the latter to the former. The Supreme Court has held and the Fifth Circuit has confirmed that district courts have the power to consider Rule 11 motions after final judgment. “It is well established that a federal court may consider collateral issues after an action is no longer pending.” Cooter & Gell, 496 U.S. at 395. See also Qureshi v. United States, 600 F.3d 523, 525 (5th Cir. 2010).[5] Jurisdiction over various other matters outlasts final judgment as well, like cost determinations and contempt proceedings. Qureshi, 600 F.3d at 525. “As the Supreme Court has explained, the reason that these actions survive dismissal is that each requires the determination of a collateral issue…. The maintenance of the original action that occasioned the court's inquiry into that abuse is irrelevant to the court's jurisdiction.” Id. (cleaned up).

         Courts' collateral jurisdiction to address Rule 11 motions extends well beyond 14 days after final judgment. Though some Rule 11 motions have been filed so late that they were deemed untimely, such delays have ordinarily been two or more years after final judgment. See Safe-Strap Co., Inc. v. Koala Corp., 270 F.Supp.2d 407, 413 n.3 (S.D.N.Y. 2003) (collecting cases). If a court's collateral jurisdiction extends to Rule 11 motions more than 14 days after final judgment, it stands to reason that it would extend to the subpart of Rule 11 at issue here. Rule 11(c)(2) expense awards also entail a kind of equitable determination--whether expenses are “warranted”--similar to other collateral issues. This similarity lends further credence to the view that a court's collateral jurisdiction to address Rule 11 motions for sanctions and Rule 11(c)(2) motions for expenses after final judgment is unencumbered by Rule 54(d)(2).

         Moreover, Rule 11 and Rule 54 each lay out procedures that are comprehensive and self-contained. A litigant who studies the rules to learn how to file a Rule 11 motion has no need, and is never told, to refer to Rule 54. As the Seventh Circuit has said about the relationship (or lack thereof) between the two rules, “Subsections (A) through (D) [of Rule 54(d)(2)] merely specify procedures for asking for attorneys' fees, and those procedures happen to be inapplicable to a Rule 11 motion, which specifies its own procedures.” Feldman v. Olin Corp., 673 F.3d 515, 517 (7th Cir. 2012) (Posner, J.). “[W]hen Rule 11 is the basis of the right [to attorney's fees], Rule 54 procedures are inapplicable.” Id. This logic holds for the subpart of Rule 11 at issue here.[6]

         If any possibility remains that Rule 54(d)(2) applies to Rule 11, it contains an exception that arguably is applicable to this case. Rule 54(d)(2)(B)'s 14-day deadline applies to claims for attorney's fees “[u]nless a statute or a court order provides otherwise….” The Court entered an order in this case that likely fits the bill. After the Court granted summary judgment to Defendants and Plaintiffs appealed, Defendants filed a bill of costs. (Doc. Nos. 710-11.) At that point, the Court issued an order saying “[t]he Court will defer consideration of KBR's costs-- and Plaintiffs' objections thereto--until Plaintiffs' appeal has been resolved. In the interim, no action is to be taken and no costs taxed, pursuant to KBR's bill of costs.” (Doc. No. 727.) Of course, this order's own terms limit it to the bill of costs, and the order says nothing about expenses related to the Rule 11 motion. Plaintiffs nevertheless may reasonably have concluded that there was no point in moving for Rule 11(c)(2) expenses until the conclusion of the appeal. As such, the Court's order staying Defendants' bill of costs may be viewed as a court order triggering the exception to Rule 54(d)(2).

         b. Inordinate Delay

          Whatever the impact of the Federal Rules or this Court's orders, Defendants argue that Plaintiffs simply waited too long to file for expenses. (Doc. No. 752 at 11-12.) This argument in essence asks the Court to make a discretionary, ...


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