Hyatt Franchising, L.L.C. v. Shen Zhen New World I, LLC ( 2018 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 17-2071
HYATT FRANCHISING, L.L.C.,
Plaintiff-Appellee,
v.
SHEN ZHEN NEW WORLD I, LLC, and SHEN ZHEN NEW WORLD
INVESTMENT (USA) INC.,
Defendants-Appellants.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 16 C 8306 — Virginia M. Kendall, Judge.
____________________
DECIDED JANUARY 12, 2018
____________________
Before EASTERBROOK, ROVNER, and HAMILTON, Circuit
Judges.
PER CURIAM. Our first decision in this appeal affirmed a
judgment enforcing an arbitrator’s award of approximately
$9 million against Shen Zhen. 876 F.3d 900 (7th Cir. 2017).
We concluded by observing that commercial parties that re-
fuse to comply with an arbitrator’s decision presumptively
must pay the attorneys’ fees that the prevailing party incurs
2 No. 17-2071
in enforcement proceedings, in both the district court and
the court of appeals. We thought, however, that it would be
unnecessary to make an award as a sanction, because Shen
Zhen had promised in the underlying contract to pay all of
Hyatt’s fees. Just in case, however, we added that Hyatt may
apply for a formal award.
Hyatt has done so. Its motion tells us that Shen Zhen has
refused to reimburse it for fees incurred in the district court,
despite the express language of our opinion. We invited
Shen Zhen to respond, and it told us that it is unwilling to
reimburse Hyatt for any legal expenses unless Hyatt prevails
in a separate arbitration dealing with legal fees—a proceed-
ing that Shen Zhen has asked the American Arbitration As-
sociation to dismiss on the ground that the award of fees is
exclusively a judicial matter.
Hyatt also tells us that Shen Zhen has asked the Central
District of California to relieve it of any obligation to comply
with the award—in other words, Shen Zhen thinks that a
district court in California can and should countermand a
final decision of the Seventh Circuit. Shen Zhen’s response
does not deny Hyatt’s assertion. If one round of litigation on
top of arbitral proceedings is too much, as our opinion con-
cluded, it is hard to find words to describe the conduct of a
party that refuses to accept not only the arbitrator’s decision
but also a final judicial outcome and scours the nation in
search of a different opinion.
Because Shen Zhen is unwilling to pay Hyatt’s fees as a
matter of contract, we now order it to do so as a sanction for
unnecessary and pointless litigation. Our initial opinion cit-
ed Continental Can Co. v. Chicago Truck Drivers Pension Fund,
921 F.2d 126, 128 (7th Cir. 1990), and 28 U.S.C. §1927. Conti-
No. 17-2071 3
nental Can requires the losing litigant to cover the winner’s
legal expenses, and §1927 deals with the responsibility of
counsel. The statute provides: “Any attorney or other person
admitted to conduct cases in any court of the United States
or any Territory thereof who so multiplies the proceedings
in any case unreasonably and vexatiously may be required
by the court to satisfy personally the excess costs, expenses,
and attorneys’ fees reasonably incurred because of such
conduct.” The scorched-earth tactics being employed by
Shen Zhen’s counsel fall comfortably within that description.
Shen Zhen and its lawyers have ignored §1927. With re-
spect to Continental Can, the response observes that it en-
tailed only fees for work on appeal, because that was all the
prevailing party had requested. But Continental Can hardly
establishes that only appellate fees are compensable. It was
the culmination of a line of cases in this circuit establishing
that commercial parties that wage unsuccessful litigation
against an arbitrator’s award must make their adversaries
whole. See, e.g., Production & Maintenance Employees’ Local
504 v. Roadmaster Corp., 916 F.2d 1161 (7th Cir. 1990); Paine-
Webber Inc. v. Farnam, 843 F.2d 1050 (7th Cir. 1988); Bailey v.
Bicknell Minerals, Inc., 819 F.2d 690 (7th Cir. 1987); Hill v. Nor-
folk & Western Ry., 814 F.2d 1192, 1200–03 (7th Cir. 1987);
Dreis & Krump Manufacturing Co. v. International Association of
Machinists, 802 F.2d 247, 254–56 (7th Cir. 1986). See also, e.g.,
Assessment Technologies of Wisconsin, LLC v. WIREdata, Inc.,
361 F.3d 434 (7th Cir. 2004) (an appellate award including
fees incurred in the district court).
Accordingly, we now direct Shen Zhen to compensate
Hyatt for all legal fees and costs incurred, in both the district
court and this court, during the proceedings seeking to con-
4 No. 17-2071
firm and collect the arbitrator’s decision. Moreover, Hyatt is
entitled to compensation for the legal fees incurred in de-
fending and enforcing our conclusion that it is entitled to
fees. See Commissioner of INS v. Jean, 496 U.S. 154 (1990); Rick-
els v. South Bend, 33 F.3d 785 (7th Cir. 1994).
Hyatt’s motion asks for approximately $272,000 in legal
fees and approximately $14,000 in costs. Shen Zhen contends
that some of these fees may have been incurred in the Cali-
fornia litigation rather than the Illinois litigation. Because
our current order rests on our power to penalize misconduct
in this litigation, any expenses from California must be sub-
tracted. Hyatt should submit a new calculation by January
19 omitting any legal expenses from California. Shen Zhen
will have until January 26 to reply.
Shen Zhen’s lawyers (Bruce M. Cohen and Jonah D. King
of Cohen & Lord in Los Angeles) have until January 26 to
show cause why they should not be held jointly and several-
ly responsible for these fees under §1927. Their response
thus is due the same day as Shen Zhen’s.
One final observation: Our mandate has issued, so the
district court is free to entertain any application that Hyatt
may make seeking an injunction against Shen Zhen’s dupli-
cative litigation. A district court is entitled to prevent a liti-
gant from trying to circumvent its orders, and an ongoing
dispute about sanctions does not detract from that authority.