Mountain Mech. Contractors v. Bes Design/Build, LLC

OPINION AND ORDER

TIMOTHY L. BROOKS UNITED STATES DISTRICT JUDGE

On February 9, 2023, a jury found in favor of Mountain Mechanical Contractors, Inc. on its breach of contract claim and awarded it a total of $112,694.14 in damages. See Docs. 94, 96. As the prevailing party, Mountain Mechanical sought an award of attorney's fees and costs (Doc. 100). The Court's review of Mountain Mechanical's billing records, however, raised serious concerns about both the legal basis for Mountain Mechanical's Motion and the candor of its counsel.

The Court held a hearing to investigate its concerns and, after oral argument, imposed sanctions against Mountain Mechanical's attorneys. This Opinion further explains that ruling,^[1] as well as addresses Mountain Mechanical's Motion for Fees and Costs (Doc. 100). For the reasons explained below, the Court GRANTS IN PART AND DENIES IN PART Mountain Mechanical's Motion.

I. SANCTIONS

Attorneys Steve Bingham and Amber Bagley, both with Cross Gunter Witherspoon Galchus P.C., represented Mountain Mechanical between 2020 and 2023. Following Mountain Mechanical's win at trial, Mr. Bingham and Ms. Bagley jointly filed a Motion for

Fees and Costs (Doc. 100). Both attorneys signed the motion, as well as filed affidavits in support (Docs. 100-1 & 100-2). According to the motion, Mountain Mechanical incurred $331,928.00 in attorney's fees. To document Mountain Mechanical's fee request, Mr. Bingham and Ms. Bagley submitted affidavits in which they provided the following testimony as to their hourly billing rates:

Bingham	Bagley
2020	$ 320	$ 300
2021	$ 330	$ 310
2022	$ 340	$ 320
2023	$ 350	$ 330

See Docs. 100-1 & 100-2. Based on these hourly rate representations, Mr. Bingham claimed entitlement to $196,363 for 572.5 hours dedicated to the litigation, See Doc. 1001, and Ms. Bagley claimed entitlement to $135,565 for 417.3 hours, See Doc. 100-2.

When BES Design/Build, LLC objected to the fee request as unreasonable, see Doc. 103, the Court entered a text order instructing the attorneys to provide the underlying billing statements to the Court for review in camera, See Doc. 104. When Mr. Bingham provided the billing records, he noted (ex parte) a discrepancy that would be revealed by the Court's review. As it turned out, the billing records did not corroborate Mountain Mechanical's representation that it had incurred $331,928.00 in attorney's fees. Rather, the records reflected that Mountain Mechanical actually incurred something closer to between $260,000 and $270,000 in fees.

According to Mr. Bingham's explanation (in his March 23, 2023, cover email), both the billing records and affidavits correctly reflect the number of hours that he and Ms.

Bagley worked on the matter.^[2] See Doc. 107-1. But, Mountain Mechanical was not charged-and thus did not incur or pay-attorney fees at the billing rates cited in the attorneys' respective affidavits. According to Mr. Bingham, Cross Gunter charged Mountain Mechanical at the lower hourly rates of $290 for Mr. Bingham's time and $230 for Ms. Bagley's time. Id. According to Mr. Bingham, Mountain Mechanical received a “preferential rate,” but Cross Gunter did “not consider [the losing party] to be entitled to the preferential rate.” Id. Mr. Bingham argued that Mountain Mechanical's fee petition was properly calculated based on the “full amounts” that would have been incurred if the attorneys billed their “standard hourly rates.” Id. After all, Mr. Bingham noted, “Mr. Unser . . . did not object to the normal rates claimed, only to the time expended.” Id.

The problem, of course, was that Mr. Bingham did not disclose this post hoc rate increase to either the Court or opposing counsel in the fee motion or supporting affidavits. Nor was Mr. Unser copied on Mr. Bingham's ex parte email. Consequently, the Court entered a Show Cause Order (Doc. 107) instructing Mr. Bingham and Ms. Bagley to show cause as to why their conduct did not violate Federal Rule of Civil Procedure 11. They complied, and on June 9, 2023, the Court held an in-person hearing. Mr. Bingham and Ms. Bagley, as well as Mountain Mechanical's corporate representative, attended.^[3]

A. Legal Standard

Pursuant to Federal Rule of Civil Procedure 11(b), by presenting the Motion for Fees & Costs to the Court, Mr. Bingham and Ms. Bagley certified to the following:

(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;

(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;

(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.

Rule 11(c) provides that a Court may impose sanctions on any attorney, law firm, or party that violates Rule 11(b). “[T]he standard under Rule 11 is whether the attorney's conduct, ‘viewed objectively, manifests either intentional or reckless disregard of the attorney's duties to the court.'” Jones v. United Parcel Serv., Inc., 460 F.3d 1004, 1010 (quoting Perkins v. Spivey, 911 F.2d 22, 36 (8th Cir. 1990)). The sanction “must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated” and may include “nonmonetary directives” and/or “an order to pay a penalty into court.” Fed.R.Civ.P. 11(c)(4).

The Court also has substantial inherent authority to issue sanctions. “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.'” Wescott Agri-Products, Inc. v. Sterling State Bank, Inc., 682 F.3d 1091, 1095 (8th Cir. 2012) (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 43-45 (1991)).

B. Analysis

Mountain Mechanical's Motion for Fees and Costs contained material misrepresentations. It misled the Court and opposing counsel. The Court concludes that

Mr. Bingham's and Ms. Bagley's conduct warrants sanctions. The Motion for Attorney's Fees and accompanying affidavits strongly implied and affirmatively misrepresented that the billing rates used to calculate the requested fee award reflected the rates actually charged to-and incurred by-Mountain Mechanical. For example, the motion stated, “As the Exhibits confirm, the attorney's fees incurred in the defense and recovery efforts are $331,928.00.” (Doc. 100, p. 4) (emphasis added). In describing the application of the Chrisco factors, Mountain Mechanical's Brief in Support referenced “the fees charged to Mountain Mechanical,” (Doc. 101, p. 4) (emphasis added), and both affidavits stated that the attorney “expended a total of . . .,” before providing the fee calculations based on the inflated rates, (Docs. 100-1 & 100-2) (emphasis added).

In its response to the Court's show cause order, Mr. Bingham and Ms. Bagley maintain that “[t]here was never any intent to conceal or mislead the Court or opposing counsel.” (Doc. 108, p. 1). Incredibly, they contend the amount a litigant agrees to pay and actually incurs is irrelevant to the attorney's fee analysis, and thus they did...