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Professional Liability Insurance Services Inc v. U.S. Risk Inc

United States District Court, W.D. Texas, Austin Division

May 14, 2018

PROFESSIONAL LIABILITY INSURANCE SERVICES, INC.
v.
U.S. RISK, INC. and CRYSTAL JACOBS

          THE HONORABLE SAM SPARKS UNITED STATES DISTRICT JUDGE

          REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

          ANDREW W. AUSTIN UNITED STATES MAGISTRATE JUDGE.

         Before the Court are Plaintiff's Motion and Affidavit for Attorney's Fees and Costs (Dkt. No.131), Defendants' Response (Dkt. No. 140), and Plaintiff's Reply (Dkt. No. 144); and Defendants' Motion for Attorney's Fees (Dkt. No. 133), and Plaintiff's Response (Dkt. No. 135). The district judge referred these Motions to the undersigned Magistrate Judge for report and recommendation.

         I. GENERAL BACKGROUND

         Professional Liability Insurance Services, Inc. (PLIS) brought this suit against U.S. Risk, Inc. and Crystal Jacobs (collectively U.S. Risk) for federal trademark infringement and unfair competition, common law trademark infringement and unfair competition, Texas statutory trademark dilution, breach of contract, and tortious interference with contract. After nearly two years of litigation and shortly before the case was set to go to trial, the parties reached a settlement on all claims. The parties moved to cancel the trial setting, which was granted, but have not yet moved to dismiss the lawsuit.

         II. ANALYSIS

         PLIS seeks attorney's fees as the prevailing party for its claims under the Lanham Act and for breach of contract. U.S. Risk objects to this request arguing that because the parties reached a private settlement, neither party is the prevailing party entitled to attorney's fees. Alternatively, U.S. Risk contends that PLIS has not met the requirements to recover attorney's fees under either of its claims. In turn, U.S. Risk seeks attorney's fees from PLIS as sanctions for PLIS's alleged bad faith conduct during the litigation.

         A. PLIS's Motion for Attorney's Fees

         PLIS and U.S. Risk reached a confidential settlement, informed the Court of this fact, and requested that the Court cancel the trial setting. In the agreement, the parties agreed to submit “whether either Party is entitled to attorney's fees” to the Court, and further agreed that the parties would move to dismiss the case after the attorney's fees issue had been resolved. Dkt. No. 126 at 6. PLIS thereafter filed the present motion seeking its fees as the prevailing party. U.S. Risk, however, contends that the settlement agreement does not provide the judicial imprimatur necessary to confer prevailing party status on PLIS, and that neither party is entitled to attorney's fees.

         “[P]arties are ordinarily required to bear their own attorneys' fees and the winner is not entitled to collect from the loser, absent explicit statutory authority.” Salazar v. Maimon, 750 F.3d 514, 521 (5th Cir. 2014) (citing Buckhannon Bd. & Care Home, Inc. v. W.V. Dep't of Health & Human Res., 532 U.S. 598, 602 (2001)). Here, PLIS has requested attorney's fees as the prevailing party under two statutes: (1) Tex. Civ. Practice & Rem. Code § 38.001 (for breach of contract); and (2) the Lanham Act, 15 U.S.C. § 1117(a), for its trademark claims. The Supreme Court has held that a prevailing party is “one who has been awarded some relief by a court.” Salazar, 750 F.3d at 521 (quoting Buckhannon, 532 U.S. at 604). Thus, to be awarded attorney's fees, the party must “(1) obtain actual relief, such as an enforceable judgment or a consent decree; (2) that materially alters the legal relationship between the parties; and (3) modifies the defendant's behavior in a way that directly benefits the plaintiff at the time of the judgment or settlement.” Id. (quoting Walker v. City of Mesquite, Tex., 313 F.3d 246, 249 (5th Cir. 2002) (internal quotations omitted) (emphasis omitted). “Actual relief” as used in Salazar includes not only a judgment on the merits, but also “settlement agreements enforced through a consent decree.” Id. On the other hand, “private settlements that do not entail the judicial approval and oversight involved in consent decrees” will not have the requisite “judicial imprimatur” to entitle a party to attorney's fees. Id.

         PLIS contends that the settlement agreement in this case is sufficient to confer prevailing party status, due to the parties' agreement to submit attorney's fees to the Court. Dkt. No. 144 at 1. However, in Salazar-on which both parties rely-the “district court entered a settlement order memorializing the terms of their agreement.” Salazar, 750 F.3d at 516. It was this settlement order that then conferred the judicial imprimatur necessary to award attorney's fees, because in the settlement agreement in that case, “the parties chose to invoke the injunctive powers of a federal court.” Id. at 521-22. Salazar's “consent decree [did] more than merely validate a compromise between the parties”-it was “a judicial act.” Id. (internal quotations omitted). Nothing of that sort occurred here. Instead, the parties simply agreed to submit the attorney's fees question to the Court for resolution. The Court has not issued a consent decree or settlement order memorializing the terms of the agreement. In fact, there has been no final judicial action at all.[1] Moreover, the Settlement Agreement merely states that “the Parties will dismiss the lawsuit with prejudice” following the Court's resolution of the attorney's fees issue. Dkt. No. 126 at 6. Nothing in this agreement indicates any intent for the Court to retain jurisdiction to enforce the agreement, or to otherwise enter an order that includes any of the terms of the Settlement Agreement. In fact, the agreement states the very opposite:

This Settlement Agreement is not and shall not in any way be construed as an admission of liability by any Party for any wrongful or unlawful acts. This Settlement Agreement is the compromise of disputed claims and will be entered into to avoid the time and expense of contested litigation. This Settlement Agreement will not and does not constitute a finding on the merits of any of the Parties' allegations. No judge or jury has made a determination as to any of the Parties' claims or defenses.

Id. Thus, the settlement agreement is plainly insufficient to meet the judicial imprimatur required by the case law to establish either PLIS or U.S. Risk as the “prevailing party.”

         PLIS further argues that it is “unreasonable” for U.S. Risk to now challenge whether the Settlement Agreement conferred prevailing party status, as it had previously agreed to submit the question of attorney's fees to the Court. In the Agreement, the parties agreed “to submit the issue of whether either Party is entitled to attorney's fees to the sound discretion of the Court . . . in which this dispute is pending.” Id. (emphasis added). PLIS argues that by challenging PLIS's standing to even request fees, U.S. Risk is breaching its obligation under the settlement agreement to “reasonably cooperate in court filings and to take other necessary actions to effectuate the purposes” of the attorney's fees clause. Dkt. No. 144 at 2 (quoting ¶ 12.b of Settlement Agreement, which is redacted from Dkt. No. 126). This is a specious argument. The Settlement Agreement does not state that the parties agree that the Court will award attorney's fees, and the parties plainly reserved the right to object to an award of fees to their opponent. In fact, the agreement specifically states that “[t]he Parties agree and understand that the Court may deny either party or both parties any request for attorney's fees.” Dkt. No. 126 at 6. Thus, U.S. Risk was ...


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