United States v. Staton

UNITED STATES OF AMERICA, Plaintiff, v. RONALD B. STATON; BRENDA L. STANTON; NAVY FEDERAL CREDIT UNION;CAPSTEAD MORTGAGE CORPORATION; STATE OF HAWAII, Defendants.

CIVIL NO. 12-00319 ACK-KSC

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII

September 27, 2018

FINDINGS AND RECOMMENDATION DENYING IN PART AND GRANTING IN PART DEFENDANTS NAVY FEDERAL CREDIT UNION AND CAPSTEAD MORTGAGE CORPORATION'S MOTION FOR ATTORNEYS' FEES AND COSTS

Before the court is Defendants Navy Federal Credit Union and Capstead Mortgage Corporation's (collectively "Lender Defendants") Motion for Attorneys' Fees and Costs ("Motion"), filed May 4, 2018. The Court finds this matter suitable for disposition without a hearing pursuant to Rule 7.2 (d) of the Local Rules of Practice for the United States District Court for the District of Hawaii ("Local Rules"), after careful consideration of the parties' submissions and the applicable law, the Court FINDS AND RECOMMENDS that Lender Defendants' Motion be GRANTED IN PART and DENIED IN PART.

BACKGROUND

The Court and the parties are familiar with the extensive factual and procedural history of this case, therefore, the Court includes only those facts relevant to the disposition of this Motion.

On June 4, 2012, the United States of America ("Plaintiff") filed this action seeking to reduce federal tax assessments to judgment and to foreclose federal tax liens on real property. Judgments were entered on September 30, 2014 and November 25, 2014 in favor of the Plaintiff. In February 2015, Plaintiff and Defendant Capstead Mortgage Corporation ("Defendant Capstead") executed a Stipulation and Order Regarding Priority Between Plaintiff and Lender Defendants ("Stipulation"). In this Stipulation, Plaintiff and Lender Defendants Capstead agreed that Defendant Capstead would have priority over Plaintiff's tax liens. They further agreed that Defendant Capstead would be entitled to $35,000.00 in attorneys' fees and costs plus any fees and costs over that amount that were incurred by it after the date of the Stipulation for "necessary affirmative legal action". Stipulation 8. On February 24, 2015, the Stipulation was sent to the Court. On March 2, 2015, Judge Kay issued an Entering Order which stated:

On February 24, 2015, counsel submitted to Chambers a proposed Stipulation and Order Regarding Priority Between Plaintiff UnitedStates of America and Defendants Capstead Mortgage Corporation and Navy Federal Credit Union ("Stipulation"). The Stipulation states that the "amount owed to Capstead under the Staton Mortgage, as of 2/2/2015, is $297,421.35. Stipulation 7. It also states that the "total amount of legal fees and costs owed to Capstead for defending this case is $35,000.00. Id. 8. However, because these figures have not been established, the Court is unable to issue an Order approving the Stipulation at this time.

ECF No. 115.

On April 10, 2018, Judge Kay issued an Order Confirming Sale, Approving Commissioner's Report, and Determining Priority of Future Disbursement, which among other things, reserved consideration of the distribution of the sale proceeds "pending a final determination of: (a) the reasonable amount of attorneys' fees and costs to which Capstead Mortgage Corporation is entitled . . ." . ECF No. 330.

On May 4, 2018, Lender Defendants filed the present Motion and a Bill of Costs. This Court, on May 9, 2018, issued an Entering Order ("EO") striking the Bill of Costs, saying in pertinent part, "[i]nsofar as the Bill of Costs fails to comply with Local Rule 54,2, it is HEREBY STRICKEN". Doc. No. 359. On May 11, 2018, Lender Defendants filed a Motion to Set Aside Order Striking Bill of Costs, or in the Alternative, for Leave to Re-File Bill of Costs ("Motion to Set Aside"). The Court on June 25, 2018, denied the Motion to Set Aside.

Plaintiff filed its Objection to the Motion for Attorney Fees byCapstead Mortgage Company and Navy Federal Credit Union on June 8, 2018.¹ Defendants Brenda Staton and Ronald Staton (collectively, "Defendants Statons") filed their Objection to the Motion for Attorney's Fees Filed by Capstead Mortgage Company and Navy Federal Credit Union on June 13, 2018.² A Reply was filed by Lender Defendants on June 22, 2018.

On July 9, 2018, the Court directed Plaintiff and Defendants Statons to file responses to Lender Defendants' argument regarding the 2015 stipulation by August 1, 2018. Plaintiff filed its Brief in Response to the Court's July 9, 2018 Minute Order on July 25, 2018. On August 1, 2018, Defendants Statons filed their Response to Court's July 9, 2018 Minute Order.

DISCUSSION

Insofar as Judge Kay has already determined that Lender Defendants are entitled to reasonable attorneys' fees and costs, this Court need only evaluate the reasonableness of the requested fees and costs. See Order Confirming Sale, Approving Commissioner's Report and Determining Priority of FutureDisbursements filed on April 10, 2018. ECF No. 330

A. Attorneys' Fees

Lender Defendants request a total of $106,257.22 in attorneys' fees. Before determining the reasonableness of these fees, the Court will address the Stipulation.

Plaintiff and Lender Defendants executed a Stipulation in February 2015 that provided, among other things, that Lender Defendants would have priority over the Plaintiff's tax liens and an agreement of a cap of $35,000.00 in attorneys' fee and costs. The Stipulation states, "[t]he parties to this Stipulation acknowledge that the $35,000.00 amount is a cap on the amount of legal fees and costs that Capstead (and/or N[avy] F[ederal] C[redit] U[nion] can recover . . ." Stipulation 8. The Stipulation goes on further to state that the $35,000.00 may increase "to the extent that any necessary affirmative legal action is hereafter taken in this litigation by Capstead . . ." Id.

Lender Defendants contend that the cap on attorneys' fees is legally unsubstantiated and is against "applicable law and common sense". Lender Defendants' Reply Memoranda page 4. Lender Defendants further contend that the $35,000.00 cap was conditioned on Lender Defendants being able to recover all the amounts owed to them without any further action on their part. They argue thatthe condition precedent of lack of action on their did not occur, therefore the cap of attorneys' fees and costs is not triggered. Id. This Court finds this argument unpersuasive. The interpretation of a stipulation is governed by principles of contract law. Jeff D. V. Andrus, 899 F.2d 753, 759 (9^th Cir. 1989). See also, Miller v. Fairchild Indus., 797 F.2d 727, 733 (9th Cir.1986) ("[s]ettlement agreements have the attributes of contracts, and they should be construed as such.") ; Fred Hutchison Cancer Research Ctr. v. United of Omaha Life Ins. Co., 821 F.Supp. 644, 647 (D.Or.1993)("[T]he interpretation and enforceability of [a] stipulation ... [is] governed by the basic principles of contract law."). There is no dispute that the parties to the Stipulation negotiated and agreed to the terms in the Stipulation, as well as signed the document.

Under the plain language of the Stipulation, Defendant Capstead could recover amount above the $35,000.00, if they undertook "necessary affirmative legal action" after the date of the Stipulation. Id. Therefore, if Lender Defendants showed that they took affirmative legal actions after the execution of the Stipulation, they would be able to recover fees and costs above the $35,000.00 cap. Lender Defendants made no such showing, instead they relied on the argument that lack of action on their part was the condition precedent to capping their attorneys' fees and costs. As the Court stated above, it disagrees with thatassessment. As such, the Court finds that the Stipulation is controlling as to the attorneys' fees and costs expended in the foreclosure action. Therefore, Lender Defendants are granted attorneys' fees and costs in the amount of $35,000.00 for the foreclosure action.

With regards to the requested $27,527.50 in fees for the bankruptcies actions, the Court will assess the reasonableness of the fees requested by Lender Defendants.³ Reasonable attorneys' fees are generally based on the traditional "lodestar" calculation set forth in Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). See Fischer v. SJB-P.D., Inc., 214 F.3d 1115, 1119 (9th Cir. 2000). The court must determine a reasonable fee by multiplying "the number of hours reasonably expended on the litigation" by "a reasonable hourly rate." Hensley, 461 U.S. at 433. Second, the court must decide whether to adjust the lodestar amount based on an evaluation of the factors articulated in Kerr v. Screen Extras Guild, Inc., 526 F.2d 67, 70 (9th Cir. 1975), which have not already been subsumed in the lodestar calculation. See Fischer, 214 F.3d at 1119 (citation omitted).

The factors articulated by the Ninth Circuit in Kerr are as follows:

(1) the time and labor required, (2) the novelty and difficulty of the questions involved, (3) the skill requisite to perform thelegal service properly, (4) the preclusion of other employment by the attorney due to acceptance of the case, (5) the customary fee, (6) whether the fee is fixed or contingent, (7) time limitations imposed by the client or the circumstances, (8) the amount involved and the results obtained, (9) the experience, reputation, and ability of the attorneys, (10) the "undesirability" of the case, (11) the nature and length of the professional relationship with the client, and (12) awards in similar cases.

Kerr, 526 F.2d at 70. Factors one through five have been subsumed in the lodestar calculation. See Morales v. City of San Rafael, 96 F.3d 359, 364 n.9 (9th Cir. 1996). Further, the Ninth Circuit, extending City of Burlington v. Dague, 505 U.S. 557, 567 (1992), held that the sixth factor, whether the fee is fixed or contingent, may not be considered in the lodestar calculation. See Davis v. City & County of San Francisco, 976 F.2d 1536, 1549 (9th Cir. 1992), vacated in part on other grounds, ...