United States District Court, S.D. Texas, Houston Division
MEMORANDUM OPINION AND ORDER
H. Miller Senior United States District Judge.
before the court an application for attorneys' fees
submitted by the plaintiffs in response to the court's
order granting their motion for sanctions against defendant
MidCap Funding X Trust (“MidCap”) (Dkt. 170).
Dkt. 192. The court awarded the fees associated with the
motion for sanctions and a portion of the fees associated
with the motion to dismiss. See Dkt. 170. The
plaintiffs seek $21, 427.50 in attorneys' fees associated
with the motion for sanctions and $268, 110 associated with
the motion to dismiss. Dkt. 192. MidCap requests that the
court deny the application, arguing that the fees the
plaintiffs seek are not causally linked to the sanctioned
conduct, and under Goodyear Tire & Rubber Co. v.
Haeger, 137 S.Ct. 1178, 1183-84 (2017), a
“‘sanction, when imposed pursuant to civil
procedures, must be compensatory rather than
punitive.'” Dkt. 202 (quoting Goodyear).
After considering the application, response, and applicable
law, the court is of the opinion that a portion of the fees
requested should be approved.
Background and Analysis
September 29, 2017, defendants MidCap Financial Trust and
MidCap Funding X Trust (collectively, the “Original
MidCap Defendants”) filed a motion to dismiss the
plaintiffs' first amended complaint pursuant to Federal
Rule of Civil Procedure 12(b)(2), 12(b)(3) and 12(b)(6). Dkt.
41. The plaintiffs responded to the motion (Dkt. 47) and
requested time to conduct jurisdictional discovery (Dkt. 49).
The court granted the motion for jurisdictional discovery.
Dkt. 59. After jurisdictional discovery was complete, the
parties filed supplemental responses, and then the court
granted in part and denied in part the motion to dismiss.
See Dkt. 113. The court granted the motion as to
MidCap Financial Trust and dismissed the claims against it
for lack of personal jurisdiction, but it denied the motion
with regard to MidCap. Id. The court found that
MidCap had purposefully availed itself of the benefits and
protections of Texas laws as they related to the facts of
this case by litigating a receivership action in Texas
dealing with the property at issue in this case. Id.
September 18, 2018, the plaintiffs filed a motion for
sanctions. Dkt. 129. They noted that the Original MidCap
Defendants produced a settlement agreement between MidCap and
some other defendants in this case that related to a lawsuit
filed in Dallas by MidCap against the other defendants.
See Id. The plaintiffs sought sanctions against the
Original MidCap Defendants because they did not disclose the
settlement agreement or lawsuit in response to the
plaintiffs' requests for production during jurisdictional
discovery. See id.
holding a hearing on the motion for sanctions, the court
entered an order granting sanctions on January 10, 2019. Dkt.
170. The court found that the undisclosed lawsuit was
relevant to the personal jurisdiction analysis and responsive
to the plaintiffs' requests for production. See
Id. The court disagreed with the sanctions proposed by
the plaintiffs, but it determined that awarding
attorneys' fees incurred in submitting the motion for
sanctions and a portion of the fees incurred in defending
against the motion to dismiss was appropriate. Id.
The court therefore ordered the plaintiffs to submit a fee
plaintiffs submitted their application for fees on February
11, 2019. Dkt. 192. They request $400 per hour for partners
with ten years of litigation experience, and they assert that
they exercised billing judgment by not billing for partner
meetings and strategy sessions about the case or paralegal
time, expenses for filing fees, court reporting services, or
travel. Id. They seek fees for time spent conferring
in advance of the motion, reviewing law, drafting the motion,
reviewing the response, drafting the reply, preparing for the
hearing, and preparing the fee application. Id. With
regard to the motion to dismiss, the plaintiffs are
requesting fees for time spent responding to the original
motion, requesting jurisdictional discovery, conducting
jurisdictional discovery, responding to the amended motion to
dismiss, reviewing the law, and preparing supplemental
briefing. Id. The plaintiffs acknowledge that some
of the time spent on the motion to dismiss was beneficial to
prosecuting the merits of the case, but they argue that the
“fees were no less necessary to demonstrating
MidCap's contacts with Texas.” Id. They
argue in the alternative that the court impose a small
reduction of 15%, which they believe is fair since they have
already omitted paralegal fees and expenses. Id. In
total, before this reduction, they seek $268, 110 for fees
associated with the motion to dismiss and $21, 427.50 in fees
associated with the motion for sanctions. Id.
asserts that while the court may impose sanctions, the
sanctions “must be the least severe sanction adequate
to achieve the desired result” under Federal Rule of
Civil Procedure 26(g)(3). Dkt. 202. MidCap contends that in
Goodyear Tire & Rubber Co. v. Haeger, the U.S.
Supreme Court held that courts must limit sanctions to fees
that were incurred solely because of the misconduct, noting
that fees imposed pursuant to Rule 26 must be compensatory
rather than punitive. Id. MidCap contends that
awarding all fees associated with the motion to dismiss,
including amendments to pleadings and jurisdictional
discovery as requested by the plaintiffs, would be punitive.
Id. MidCap points out that the only fee entry
related to consent jurisdiction, which is the argument the
plaintiffs made in the response to the motion to dismiss
relating to receivership action and the same type of argument
that would have been made for the undisclosed lawsuit, was
for $1, 680. Id. (citing Dkt. 192, Ex. A). MidCap
argues that because the plaintiffs did not segregate the
portion of fees related to the nondisclosure that their
request is punitive and the court should deny the request.
additionally points out that the plaintiffs seek to recover
$100, 000 in fees associated with tasks performed prior to
the deadline for discovery responses, which is when the duty
to disclose arose. Id. It points out that the
plaintiffs would have incurred these fees regardless of the
disclosure or nondisclosure of the lawsuit. Id.
MidCap additionally takes issue with the plaintiffs'
request for fees for time spent reviewing documents,
preparing for depositions, and researching for and drafting
the supplemental responses to the motions to dismiss.
Id. It contends that 11% of the motion to dismiss
fee request is attributable to the supplemental response, yet
only one and one half pages of that response address consent
jurisdiction, which is the section of the response under
which the undisclosed lawsuit would have been addressed.
Id. MidCap argues that fees associated with the
other arguments would have been incurred whether the lawsuit
was disclosed or not. Id.
next argues that the plaintiffs seek fees for time spent on
discovery from the other defendants and a third party,
including document review, which would have been conducted
even if MidCap was not a party in this case. Id.
MidCap points to several other items that it contends are not
associated with the nondisclosure of the lawsuit. See
Id. at 9. MidCap additionally points out that the
undisclosed lawsuit was filed after this lawsuit and
that it was therefore not even relevant to the personal
jurisdiction analysis. Id. at 10 (collecting
district court cases in the Fifth Circuit that rely only on
pre-complaint conduct when evaluating personal jurisdiction).
They thus argue that the plaintiffs would have incurred all
of the fees they seek to recover relating to the motion to
dismiss whether the MidCap disclosed the lawsuit or not.
regard to the fees associated with filing the motion for
sanctions, MidCap argues that the court has already found
that the main types of sanctions requested in that motion
were not appropriate and that since the undisclosed lawsuit
would not have been relevant to personal jurisdiction anyway,
the court should not award any fees. Id. MidCap
asserts that if the court still wants to award sanctions, it
should only award sanctions causally linked to the
nondisclosure of the Dallas lawsuit versus the nonmonetary
sanctions the court denied. Id. MidCap posits that
this amount should be limited to $5, 000. Id.
the court agrees with MidCap that its sanctions under the
U.S. Supreme Court's guidance relating to Rule 26
sanctions in Goodyear, the sanction “must be
compensatory rather than punitive in nature.”
Goodyear Tire & Rubber Co., 137 S.Ct. at 1186.
Thus, a “fee award may go no further than to redress
the wronged party ‘for losses sustained'; it may
not impose an additional amount as punishment for the
sanctioned party's misbehavior.” Id. The
fee must therefore be “‘calibrate[d] to [the]
damages caused by' the bad-faith acts on which it is
the “misbehavior” is failing to disclose the
lawsuit in response to discovery requests. The fees related
to the motion for sanctions are clearly harm that resulted
from that failure. The court understands MidCap's
argument that the motion was not entirely successful because
the court did not award the types of sanctions sought, but it
does not believe that fact impacts the time spent on the
motion enough to deduct from the hours spent preparing.
time spent filing the motion to dismiss, on the other hand,
is not as clearly “calibrated to the damages caused
by” the failure to comply with the discovery requests.
First, the court agrees with MidCap regarding tasks performed
prior to the discovery deadline, time spent on discovery
related to other parties, and fees associated with making
arguments for dismissal that are distinct from ...