Wescott Agri-Products, Inc. v. Sterling State Bank, Inc.

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 11-2279
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Wescott Agri-Products, Inc., *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota.
Sterling State Bank, Inc., *
*
Appellee. *
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Submitted: February 16, 2012
Filed: June 28, 2012
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Before RILEY, Chief Judge, WOLLMAN and SMITH, Circuit Judges.
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RILEY, Chief Judge.
The district court1 granted summary judgment to Wescott Agri-Products, Inc.
on Wescott’s claim that Sterling State Bank, Inc. (bank) violated the Perishable
Agricultural Commodities Act, 1930 (PACA), 7 U.S.C. § 499a et seq., but denied
Wescott’s claim for attorney fees and costs. Wescott appeals, arguing the district
court abused its discretion in denying attorney fees and costs without reviewing
Wescott’s billing records. We affirm.
1
The Honorable Paul A. Magnuson, United States District Judge for the District
of Minnesota.
I. BACKGROUND
Wescott is a PACA-licensed wholesale supplier of perishable agricultural
commodities (produce). In 2009, Wescott sold $26,048.75 of produce to Geckler
Companies, Inc. (GCI).2
Beginning March 28, 2008, GCI received a series of loans from the bank. GCI
failed to make scheduled loan payments, and, on February 7, 2010, the bank seized
GCI’s assets located at GCI’s place of business. GCI ceased business operations on
February 8, 2010, and Wescott never received payment for the produce it sold to GCI.
In March 2010, Wescott’s attorney advised the bank of GCI’s produce
purchases and demanded payment from the bank, claiming the bank had seized assets
subject to trust under PACA.3 The bank denied possessing PACA trust assets or any
proceeds of such assets.
On June 10, 2010, Wescott sued GCI, the Gecklers, and the bank, asserting
various claims, including violations of PACA and a conversion claim against the
bank. Wescott sought attorney fees and costs as provided by the terms of its invoices
with GCI. On December 2, 2010, the district court granted Wescott’s motion for
entry of default against GCI and the Gecklers. On April 22, 2011, the district court
entered a consent judgment against GCI and the Gecklers in the amount of
$102,931.09, including costs, attorney fees, and prejudgment interest as provided by
the Westcott/GCI contracts.
2
GCI was operated by Richard Geckler and Vicci L. Geckler (collectively, the
Gecklers).
3
PACA contains statutory trust provisions that provide produce sellers with
superior rights as creditors. See 7 U.S.C. § 499e. If properly notified, a produce
buyer, as a PACA trustee, must maintain sufficient PACA trust assets to pay all
PACA trust claims as they come due. Id. Failing to do so may result in liability to
the seller. Id.
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The bank and Wescott filed cross-motions for summary judgment, and the
district court conducted a hearing on April 28, 2011. On May 2, 2011, the district
court granted the bank summary judgment on Wescott’s conversion claim, but denied
summary judgment for the bank on the PACA claim. The district court granted
Wescott summary judgment on its PACA claim, but denied Wescott’s claim for
attorney fees and costs.
The district court explained “Wescott has not attempted to justify . . .
expenditures” “nearly triple that of the original claim.” The district court determined
“Wescott has not established that its request for fees and costs is reasonable in light
of its conduct in this litigation,” including its “‘evasiveness’ in responding to
discovery.” Noting the “acrimony” in the briefing and prosecution of the case, the
district court described Wescott’s actions as “less than exemplary” and demonstrating
“excessive zeal.”
On May 9, 2011, Wescott requested permission to file a motion to reconsider,
which the district court denied. The district court reiterated “that, based on counsel’s
conduct in the litigation, attorney’s fees were not warranted.” The district court
attributed its decision to (1) Wescott’s claim for fees being almost three times the
invoices at issue, and (2) “[m]ore importantly,” Wescott’s “counsel’s behavior during
the prosecution of the matter, including during discovery and during the matter before
the [district court].” Wescott appeals the district court’s denial of attorney fees and
costs.
II. DISCUSSION
PACA does not explicitly provide for an award of attorney fees under the
circumstances of this appeal. See 7 U.S.C. § 499e. Wescott’s claim for attorney fees
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is based upon contractual terms contained in Wescott’s invoices to GCI.4 Under
Minnesota law, parties to a contract are free to bargain for the remedy of attorney
fees, but to be enforceable, the amount of fees allowed under the contract must be
reasonable. See State Bank of Cokato v. Ziehwein, 510 N.W.2d 268, 270 (Minn. Ct.
App. 1994).
We have not yet addressed whether a contractual claim for attorney fees is
recoverable as part of a PACA trust claim, but the district court followed the line of
cases holding “that where the parties’ contracts include a right to attorneys’ fees, they
can be awarded as ‘sums owing in connection with’ perishable commodities
transactions under PACA.” Coosemans Specialties, Inc. v. Gargiulo, 485 F.3d 701,
709 (2d Cir. 2007) (quoting 7 U.S.C. § 499e(c)(2) and listing cases); accord Country
Best v. Christopher Ranch, LLC, 361 F.3d 629, 632-33 (11th Cir. 2004) (per curiam).
We need not decide this issue because the bank does not challenge the district court’s
conclusion.
The only issue before us is the district court’s denial of Wescott’s attorney fees
and costs. Wescott contends “the [district court’s] methodology for determining the
reasonableness of Wescott’s fees and costs in this case constituted an abuse of
discretion” because the district court “refused to even look at Wescott’s verified
billing records before concluding that 100% of Wescott’s attorneys’ fees and costs
of collection . . . were unreasonable.” According to Wescott, the district court did not
“provide ‘meaningful insight into the [district] court’s thinking’ so as to permit the
appellate court its opportunity to review the district court’s conduct and rationale,”
quoting Padrta v. Ledar Transp., Inc., 116 F. App’x 36, 38 (8th Cir. 2004)
(unpublished per curiam) (quoting Coutin v. Young & Rubicam P.R., Inc., 124 F.3d
331, 337 (1st Cir. 1997)). We disagree.
4
Each invoice stated, “Buyer agrees to pay all costs of collection, including
attorney’s fees.”
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The decision to award or deny attorney fees and the amount of any award “rests
within the sound discretion of the [district] court and we will not disturb [the district
court’s decision] absent a clear abuse of that discretion.” Litton Microwave Cooking
Prods., a Div. of Litton Sys., Inc. v. Leviton Mfg. Co., 15 F.3d 790, 796 (8th Cir.
1994); see also Koam Produce, Inc. v. DiMare Homestead, Inc., 329 F.3d 123, 130
(2d Cir. 2003) (reviewing an award of attorney fees under PACA under a “highly
deferential” abuse-of-discretion standard (quoting Cmty. Television Sys., Inc. v.
Caruso, 284 F.3d 430, 437 (2d Cir. 2002) (internal quotation marks omitted))). In
reviewing the district court’s denial, we are mindful,
The trial court knows the case best. It knows what the lawyers have
done, and how well they have done it. It knows what these efforts are
worth. It knows how to balance portions of the case together to reach a
just and reasonable award.
Young v. City of Little Rock, 249 F.3d 730, 737 (8th Cir. 2001).
We find no abuse of discretion in this case. The district court left little doubt
about its reasons for denying Wescott’s claim for attorney fees—the fees were
excessive and unreasonable, and “[m]ore importantly,” Wescott’s unprofessional
conduct in the case did not warrant an award of fees. In particular, the district court
was troubled Wescott’s fee request nearly tripled Wescott’s original PACA claim—a
claim Wescott itself described as a “very simple,” “four-invoice case.” The district
court also decried Wescott’s “less than exemplary” behavior and “excessive zeal” in
litigating its claims, noting the magistrate judge warned Wescott about its
“‘evasiveness’ in responding to discovery.”
There is ample support in the record for the district court’s findings of
excessive fees and unprofessional conduct. At the summary-judgment hearing, the
district court asked how Wescott’s simple PACA trust claim grew from $35,000 to
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more than $100,000. The bank advised the district court Wescott (1) delayed and
evaded discovery, forcing the bank to file a motion to compel to address the
deficiencies in Wescott’s responses;5 (2) misrepresented testimony and evidence;
(3) produced an unprepared corporate designee under Fed. R. Civ. P. 30(b)(6), who
could not testify to the six topics identified; (4) produced what the bank believed to
be false invoices; and (5) drafted and submitted sham declarations contradicting
previous sworn testimony.
In response, Wescott stated the fees increased because the bank prolonged
discovery and Wescott had difficulty obtaining information on a timely basis because
the bank seized and controlled GCI’s documents. Ultimately, the district court
concluded Wescott “failed to establish that it is entitled to its fees and costs” given
its acrimony in briefing and prosecuting the case.
On appeal, Wescott generally does not dispute the district court’s description
of its unprofessional conduct, rather it challenges the district court’s methodology in
denying attorney fees.6 In particular, Wescott faults the district court for considering
(1) the proportionality of the fees sought to the award obtained, and (2) the “acrimony
between the parties.” Wescott’s arguments are without merit.
5
The magistrate judge overseeing discovery granted the bank’s motion in part,
expressing concern “with the evasiveness of Wescott’s discovery responses,
especially on the eve of the close of discovery,” but denied the bank’s request for
sanctions and attorney fees.
6
Wescott’s strongest response to the district court’s criticism of Wescott’s
litigation conduct is Wescott’s assertion “the Magistrate Judge that oversaw the
discovery proceedings expressly found both parties to share the blame of a fairly
contentious fact discovery process and expressly denied both parties’ requests for any
sanctions relating thereto.”
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It is well within the district court’s broad discretion in reviewing a request for
fees to consider not only the amount of the fees, but also the party’s unprofessional
conduct in the case. See Jaquette v. Black Hawk Cnty., Iowa, 710 F.2d 455, 459, 461
(8th Cir. 1983) (affirming a reduction of attorney fees where the trial court “found
that the hours claimed were ‘excessive,’ spent on issues of ‘marginal merit,’ and that
the plaintiff’s attorneys were guilty of ‘misconduct’ in conducting the litigation”).
Membership in the bar is a privilege burdened with conditions.
A fair private and professional character is one of them. Compliance
with that condition is essential at the moment of admission; but it is
equally essential afterwards.
In re Rouss, 116 N.E. 782, 783 (N.Y. 1917) (Cardozo, J.).
[A lawyer is] received into that ancient fellowship for something more
than private gain. [A lawyer becomes] an officer of the court, and, like
the court itself, an instrument or agency to advance the ends of justice.
People ex rel. Karlin v. Culkin, 162 N.E. 487, 489 (N.Y. 1928) (Cardozo, C.J.).
By its nature as a court of justice, the district court possesses inherent powers
“to manage [its] affairs so as to achieve the orderly and expeditious disposition of
cases.” Chambers v. NASCO, Inc., 501 U.S. 32, 43-46 (1991) (quoting Link v.
Wabash R.R., 370 U.S. 626, 630-31 (1962)). These inherent powers include the
ability to supervise and “discipline attorneys who appear before it” and discretion “to
fashion an appropriate sanction for conduct which abuses the judicial process,”
including assessing attorney fees or dismissing the case. Id. at 43-45.
The district court’s inherent power to govern the practice of lawyers appearing
before it “encompasses, among other things, the authority to police lawyer conduct
and to guard and to promote civility and collegiality among the members of its bar.”
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Sahyers v. Prugh, Holliday & Karatinos, P.L., 560 F.3d 1241, 1244 (11th Cir. 2009)
(footnote omitted). In exercising these inherent powers, it is not unjust to hold a
client responsible for its attorney’s misconduct. See Link, 370 U.S. at 633. The
client “voluntarily chose [its] attorney as [its] representative in the action, and . . .
cannot now avoid the consequences of the acts or omissions of [its] freely selected
agent.” Id. at 633-34.
Applying these principles in Sahyers, the Eleventh Circuit affirmed the trial
court’s denial of the plaintiff’s request for attorney fees and costs as a prevailing party
under the Fair Labor Standards Act of 1938, 29 U.S.C. § 201 et seq. See Sahyers,
560 F.3d at 1244-46. Although the plaintiff received an award on her underlying
claim and would normally have been entitled to attorney fees and costs under the
statute, the trial court found the “reasonable fee and cost award . . . was zero,” id. at
1244, because of the plaintiff and her counsel’s uncivil conduct in the case, see id. at
1245. The Eleventh Circuit found no abuse of discretion in the trial court’s refusal
to “reward—and thereby to encourage—uncivil conduct by awarding [p]laintiff
attorney’s fees or costs.” Id. at 1245-46.
In Litton Sys., Inc. v. AT&T Co., 700 F.2d 785, 827 (2d Cir. 1983), the Second
Circuit affirmed the denial of all costs and attorney fees to which the plaintiff would
have been entitled as a matter of law—an amount exceeding $10 million—based
upon the trial court’s finding the plaintiff’s attorneys engaged in a pattern of
intentionally concealing evidence. The Second Circuit concluded “the trial court
acted soundly and correctly, as well as wisely, in imposing the sanction” to preserve
“the integrity of the discovery process” and to prevent Fed. R. Civ. P. 37 from
becoming a “paper tiger.” Id. at 828. The Second Circuit had “no doubt that
attorneys as officers of the court must operate on an honor system, and must be
appropriately disciplined to provide both specific and general deterrence.” Id. at 827(internal citation omitted).
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The same bedrock principles—civility, professionalism, integrity, efficiency,
expediency, and deterrence—support the district court’s judgment in this case. If our
courts more often recognized and enforced these principles, maybe some of the
discovery abuses and litigation excesses afflicting the court system would decline.
Having thoroughly reviewed the record, we are satisfied the district court did not
abuse its substantial discretion by refusing to award Wescott attorney fees and costs.
We fully support and commend the district court’s efforts to enforce civility,
professionalism, efficiency, and integrity in those privileged to be members of the
bar.
III. CONCLUSION
We affirm.
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