Opinion ID: 740690
Heading Depth: 2
Heading Rank: 2

Heading: The district court correctly applied Schultz v. Hembree.

Text: 25 In Schultz v. Hembree, this court reversed the district court's award of attorneys' fees, and remanded for the district court to recalculate fees using the stand-alone approach: 26 We hold that the prevailing party may recover that amount in fees it would have incurred had the shifting claims been litigated by themselves. This amount may well differ from the amount actually expended in advancing (or defending against) the claim in the context of the multiple-claim litigation. It might be less, if the parties would have litigated the shifting claims less vigorously, or compromised them early in the litigation. Or it might be more, as the parties may have devoted more resources to the shifting claims had they not been distracted by others. In any event, this method avoids both overcompensating and undercompensating the prevailing party, because the fees award is pegged precisely to the claim under which it is authorized. 27 975 F.2d at 577. 28 Casares and Schultz argue that the district court failed correctly to apply this methodology. First, they argue that the district court erred in not requiring appellees to present new evidence of what attorneys' fees would have been in a hypothetical stand-alone case. This argument lacks merit. The evidence of what fees actually were expended is the best evidence of what fees would have been in a hypothetical stand-alone case. The district court and appellees took the actual fees expended on the shifting claims, and then adjusted them to account for how the litigation would have differed in a stand-alone case. For instance, the district court added $240,000 in fees regarding insurance litigation that would have been incurred in a stand-alone Ohio RICO claim. Moreover, neither Casares nor Schultz suggested any contrary methodology or evidence. 29 Second, Schultz argues that the district court refused to consider what course the litigation would have taken had the Ohio RICO claim been litigated alone. Before the district court, Schultz argued that (1) given the weakness of his claim, appellees would have defeated the claim with only $2000 of legal work from each appellant, and (2) appellees would have settled the claim before expending the $4.1 million in legal fees they were ultimately awarded. The district court, however, did not refuse to consider these arguments. Instead, the district court found that factually it was not credible that the claim would have been dismissed after only $2000 in legal work. Likewise, the district court noted several reasons why the appellees would not have settled so early. Not only did the appellees face millions in direct claims, and the possibility of being collaterally estopped in future litigation against the purchasers of the public offering; they also faced the damage to their professional reputations which any settlement would have brought. 30 Schultz and Casares also argue that appellees failed to differentiate between shifting and non-shifting claims and between the Ohio and Florida shifting claims. This argument is incorrect. All three appellees did distinguish between shifting and non-shifting claims, and between Ohio and Florida shifting claims. Kemper and Bryant went through their fees line-by-line and identified each entry as work that would have been performed (1) in a stand-alone Ohio RICO case; (2) in a stand-alone Florida blue-sky case; (3) in both cases; or (4) in neither case. Hembree used a slightly different methodology. He divided the litigation into five phases, and for each phase he decided what percentage of the fees expended would have been expended in a stand-alone Ohio RICO or Florida blue-sky claim. Both methodologies differentiate between the claims. If Casares or Schultz disagreed with the allocation among the claims, they should have raised these problems below, which they did not. 31 Schultz's only compelling argument is that he should not pay the costs associated with the statute of limitation defense, since that defense did not apply to his Ohio RICO claim. He raised this argument in his motion for reconsideration, which the district court denied. An argument is not waived if it is raised for the first time in a motion for reconsideration. Whittaker Corp. v. Execuair Corp., 953 F.2d 510, 515 (9th Cir.1992). Schultz argues that his Ohio RICO claim presented no statute of limitation issue. The Ohio RICO statute has a five-year limitation period. Ohio Rev.Code § 2923.34(K). Schultz's second complaint was filed on March 8, 1988, less than five years from the date on which he invested. We remand for the district court to determine whether the statute of limitation defense applied to Schultz's claim, and if not, to recalculate the fee award against Schultz accordingly. 32 C. The district court did not err in failing to explain the reasonableness or justness of the fee award. 33 Schultz v. Hembree requires the district court to provide a clear and concise explanation of its decision, which will inform the parties--and this court, if necessary--of the basis for and reasonableness of the fee award. 975 F.2d at 577. Casares and Schultz argue that the district court failed to explain the reasonableness of the fee award. In fact, the district court made explicit findings that the methods of allocation and computations of Hembree, Kemper and Bryant were reasonable. Furthermore, this court in Schultz noted that Casares and Schultz did not challenge the district court's earlier finding that the amounts the defendants expended in attorneys' fees were reasonable. Id. at 575. 34 Casares and Schultz also argue that the district court erred in not making a new finding of justness. Such a finding, however, was not required by Schultz, which is the law of the case. Schultz required that the district court follow the stand-alone methodology, and then explain why the result was reasonable, which the district court did. Indeed, Schultz specifically noted that the issue of justness had already been decided and not appealed, and was not subject to further review: Casares made no showing that an award of fees would be 'unjust,' nor could he.... Schultz makes no claim that such an award would be unjust. Id. at 575 and n. 3. Under Schultz, the district court did not need to make an explicit determination of justness. 35 D. The district court did not abuse its discretion in denying discovery. 36 Casares and Schultz argue that the district court abused its discretion in denying their request for discovery. It appears, however, that Casares and Schultz never properly requested discovery. The district court noted that although Casares and Schultz said in their briefs they would like some discovery, they requested no specific discovery. Unfocused requests to initiate discovery without indicating its nature or extent serve no purpose, and the District Court has full discretion to deny such requests. National Ass'n of Concerned Veterans v. Secretary of Defense, 675 F.2d 1319, 1329 (D.C.Cir.1982). 37 Moreover, the district court would have had discretion to deny the request even had it been properly made. Broad discretion is vested in the trial court to permit or deny discovery, and its decision to deny discovery will not be disturbed except upon the clearest showing that denial of discovery results in actual and substantial prejudice to the complaining litigant. Sablan v. Department of Fin. of N. Mariana Islands, 856 F.2d 1317, 1321 (9th Cir.1988) (citations omitted). Since Casares and Schultz have still not specifically identified what they desire discovery of, i.e. what gaps in the record they believe that discovery could fill, the district court did not abuse its discretion in denying discovery.