Court Opinion

ID: 21202
Source: CourtListenerOpinion
Date Created: 2010-04-25 07:42:26+00
Date Added: 2024-06-11T15:04:26.596637
License: Public Domain

UNITED STATES COURT OF APPEALS
                      FOR THE FIFTH CIRCUIT
                        __________________

                          No. 99-10294
                       __________________

               WESTERN HERITAGE INSURANCE COMPANY,

                                               Plaintiff-Appellee,

                             versus

                    STEVE ROBERTSON; ET AL.,

                                                        Defendants,

                        STEVE ROBERTSON,

                                               Defendant-Appellant,

                               and

                       JEFFREY R. SECKEL,

                                                         Appellant.

_________________________________________________________________

          Appeals from the United States District Court
                for the Northern District of Texas
                          (4:96-CV-250-Y)
_________________________________________________________________

                          June 19, 2000

Before REAVLEY, DAVIS, and BARKSDALE, Circuit Judges.

PER CURIAM:1

     Steve Robertson and his attorney, Jeffrey R. Seckel, contest

the attorney’s fees awarded Western Heritage Insurance Co. under

     1
      Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
the district court’s Declaratory Judgment Act equitable powers, 28

U.S.C. § 2202 (“[f]urther necessary or proper relief based on a

declaratory judgment ... may be granted”), and awarded, in the

alternative, against Seckel under 28 U.S.C. § 1927 (attorney who

unreasonably and vexatiously multiplies proceedings may be liable

for attorney’s fees).      Finding no abuse of discretion, we AFFIRM.

                                       I.

      This action arises out of an automobile accident in August

1995, when Robertson’s automobile was hit by a vehicle owned by

North American Wholesale Motors and driven by Jones (the vehicle).

In the light of the post-accident photographs of Robertson’s

vehicle, the damage appears to have been extremely minor.           In any

event, law enforcement officers were not summoned.          By handwritten

statement at the scene of the accident, Jones admitted fault and

stated he was employed by “Hearn Transport at the time” of the

accident.

      Shortly thereafter, Western was notified about the accident.

It had issued a garage policy to Bob Hearn, Sr., d/b/a Bob Hearn

Transport. The policy covered owned vehicles and listed employees.

But, the vehicle driven by Jones in the accident was neither owned

by   Bob   Hearn,   Sr.,   nor   his    company,   Bob   Hearn   Transport.

Additionally, Jones was not listed in the policy as an employee.

      Based on its investigation, Western informed Hearn, Sr., that

the claim was denied, because the vehicle was owned by North

                                   - 2 -
American Wholesale Motors. It further informed Hearn, Sr., that

Robertson would be advised his claim was being denied.

     On 29 December 1995, Robertson, represented by Seckel, filed

suit in Texas state court against Jones and “Bob Hearn, d/b/a Bob

Hearn Transport”, alleging that the vehicle operated by Jones was

owned by Bob Hearn d/b/a Bob Hearn Transport.   Bob Hearn, Jr., not

Bob Hearn, Sr., was served.   And, he was served at home, not at the

address given for Bob Hearn Transport.

     Hearn, Jr., did not answer the state court suit; and, on 26

February 1996, a default judgment for approximately $900,000 was

taken. Jones was non-suited the same day, because he allegedly

could not be located for service of process.

     Shortly thereafter, on 7 March, Robertson, still represented

by Seckel, filed a state court action against Jones, based on the

same automobile accident.     The following day, Jones was served.

When served, Jones received a letter for his signature, requesting

Western assume his defense pursuant to its policy covering Bob

Hearn Transport.   The letter had been prepared by Seckel.   Western

received Jones’ defense-request letter, ghostwritten by Seckel, in

the same envelope as a demand for $295,000, submitted by Seckel.

The defense-request stated:

               Please be advised that on March 7, 1996,
          I was served with process in connection with
          the above-referenced suit.    Attached hereto
          for your review and reference, is a copy of
          the suit papers.   I am requesting that you
          assume the defense of this matter pursuant to

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           the   obligations  which   Western  Heritage
           undertook in connection with the issuance of
           policy AGP 0230911, which was issued to Bob
           Hearn d/b/a Bob Hearn Transport.

(Emphasis added.)

      Meanwhile, Appellants sought, and the state court appointed,

a receiver for Bob Hearn d/b/a Bob Hearn Transport. On 1 April

1996, Seckel, representing the receiver, filed a coverage action in

state court against Western.        It was served on 15 April.

      Western had provided a defense in certain portions of the

state court proceedings.       And, on 8 April, prior to receiving

service for the state court coverage action, Western filed this

declaratory judgment action in federal district court against

Robertson, Jones, and Bob Hearn d/b/a Bob Hearn Transport. Western

claimed, inter alia, it     was not liable to Robertson.       S e c k e l

answered for Robertson only.

      That June, Appellants and Hearn, Jr., signed a settlement

agreement by which Hearn, Jr., agreed not to contest the state

court default judgment and, in return, would receive one-third of

any recovery from Western. The district court later found that the

agreement formally established Seckel as Hearn, Jr.’s, attorney.

Western,   in   the   declaratory   judgment   action   at   hand,   sought

discovery of this settlement agreement. Appellants did not produce

it.   In fact, the district court later found they denied it even

existed.     Eventually, in March 1998, Hearn, Jr., revealed its

existence.

                                    - 4 -
      In August 1996, Hearn, Jr., filed a pro se motion to set aside

a   default   judgment    taken       against    Bob    Hearn    d/b/a    Bob   Hearn

Transport in the federal declaratory judgment action.                    (The motion

was   stricken,   because       he    failed    to    conference      with   opposing

counsel.)     On Hearn, Jr.’s, motion was document identification

number “661-1594-0001-60080-653”.               This number also appears on

Robertson’s papers filed by Seckel in federal district court.                     The

district court later found that Seckel had prepared this motion for

Hearn, Jr.

      Earlier, in June 1996, Appellants had moved to have the

federal court abstain, pursuant to Wilton v. Seven Falls Co., 515

U.S. 277, 282 (1995).       The motion was denied in February 1997.

      In August 1997, the district court granted Western summary

judgment,     holding    that    Robertson      had     failed   to     produce   any

competent summary judgment evidence that Jones was an employee of

Bob Hearn Transport or that Bob Hearn, Jr., was an insured.                        It

awarded Western attorney’s fees, pursuant to the Texas Declaratory

Judgment Act, against Robertson and Bob Hearn d/b/a Bob Hearn

Transport.

      Robertson appealed the summary judgment and the fees award.

Our court affirmed the judgment, but held fees could not be awarded

under the Texas Declaratory Judgment Act.                 Western Heritage Ins.

Co.   v.    Robertson,    No.        97-11306    (5th    Cir.      19    Aug.   1998)

                                        - 5 -
(unpublished). The action was remanded to allow the district court

to determine whether to award fees on other grounds.   Id.

     The district court, on Western’s post-remand motion, and based

upon detailed findings of fact and conclusions of law, awarded fees

against Robertson and Seckel, pursuant to its 28 U.S.C. § 2202

declaratory judgment equitable powers, as well as against Seckel,

pursuant to 28 U.S.C. § 1927. Approximately $52,000, together with

prospective fees, was awarded.

                                 - 6 -
                                     II.

     As discussed infra, the fees award under each basis — § 2202

and § 1927 — is reviewed only for abuse of discretion.            In this

regard,   Appellants   fall   far   short   of   demonstrating   that   the

district court’s underlying, and exhaustive, findings of fact are

clearly erroneous.     Nor have they shown error in the accompanying

conclusions of law.

                                     A.

     The award of attorney’s fees pursuant to the district court’s

equitable powers under 28 U.S.C. § 2202 is reviewed only for abuse

of discretion.   Cf. Chambers v. NASCO, Inc., 501 U.S. 32, 55 (1991)

(court’s inherent powers to award attorney’s fees).          Such § 2202

awards are permitted in “cases of bad faith, vexation, wantonness,

or oppression relating to the filing or maintenance of the action”.

Mercantile Nat’l Bank v. Bradford Trust Co., 850 F.2d 215, 218 (5th

Cir. 1988).2     Because conduct is sanctionable under one of the

Federal Rules of Civil Procedure does not mean that the court

cannot, under another basis, impose sanctions against that conduct.

See Woodson v. Surgitek, Inc., 57 F.3d 1406, 1418 (5th Cir. 1995).

                                     1.

     2
      Notwithstanding the district court stating the award was
pursuant to § 2202, the parties’ briefs refer to the award as being
an exercise of the court’s inherent powers. For purposes of this
appeal, it is a distinction without a difference.

                                    - 7 -
     Appellants contend that the district court did not make an

explicit finding of bad faith.           The court stated, however, that

Western reasonably incurred approximately $52,000 in attorney’s

fees as a result of Robertson and Seckel’s “bad faith and vexatious

litigation”.

                                       2.

     Appellants next maintain there was insufficient evidence of

bad faith conduct in the district court to support sanctions. They

claim they are being sanctioned for conduct outside the federal

court proceedings.          Appellants point to the district court’s

findings of fact, which detail their conduct in state court.            These

findings establish, however, that: their claim was meritless; they

should have realized it; they did everything they possibly could to

maintain   it;   and   it    should   have    been   dismissed   voluntarily.

Several examples follow.

     The September 1995 letter from Western denying coverage states

that the vehicle was owned by North American Wholesale Motors.            The

vehicle’s title states the same thing.           Yet, Seckel initiated and

maintained suits against, or concerning, Bob Hearn d/b/a Bob Hearn

Transport on the grounds that he owned the vehicle.              Seckel knew,

or at least certainly should have known after early and reasonable

investigation, that this was not correct.

     Additionally, as he admitted at oral argument here, Seckel had

the insurance policy no later than when the declaratory judgment

                                      - 8 -
action was filed (8 April 1996).   He requested a copy from Western

by letter dated 11 March 1996, shortly after he filed the second

state court action — against Jones.     He referenced that action in

the letter

     Correspondingly, Seckel knew, or certainly should have known,

that Jones was not a listed operator.         And, in his numerous

conversations with the unrepresented Bob Hearn, Jr., Seckel did not

verify that Hearn, Jr., was the policyholder.     The policy listed

the address, date of birth, and driver’s license number for Bob

Hearn, Sr.    Seckel did not verify any of these facts.

     Of course, the failure to adequately investigate Robertson’s

claim and its factual basis is sanctionable.     FED. R. CIV. P. 11;

see Blue v. United States Dep’t of the Army, 914 F.2d 525, 542 (4th

Cir. 1990).

     Furthermore, the district court determined that Seckel failed

to respond to Western’s discovery request to produce the settlement

agreement between Robertson and Hearn, Jr.     Of course, discovery

violations are sanctionable.    FED. R. CIV. P. 37; see Carroll v.

Jaques Admiralty Law Firm, P.C., 110 F.3d 290, 293-94 (5th Cir.

1997).

     In responding to Western’s summary judgment motion, Robertson

maintained it did not matter which Bob Hearn was served, claiming

both were covered under the policy.     He did so even after Seckel

knew, or certainly should have known, that:         the policy only

                                - 9 -
covered owned vehicles and listed operators; the vehicle was not an

owned vehicle; and Bob Hearn, Jr., was neither the policyholder nor

a listed operator. In awarding summary judgment to Western, the

district court found “patently ludicrous” Robertson’s claim that,

even though the wrong Bob Hearn was served, Robertson had a viable

claim.

     Moreover, at oral argument here, Seckel admitted that:             in

December 1996, when Western moved for summary judgment, he knew

there were two Bob Hearns; and he had sued and served the wrong

Hearn.   Nevertheless, he continued with the actions, contending

both Bob Hearns were insureds.      Of course, continuing to prosecute

a meritless action is sanctionable.         See Edwards v. General Motors

Corp., 153 F.3d 242, 246 (5th Cir. 1998).

     Furthermore, at oral argument here, Seckel admitted preparing

Jones’   request   for   defense   under    Western’s   insurance   policy.

Restated, he admitted preparing correspondence for the person he

was suing.

     Additionally, the 19 digit file number on Bob Hearn, Jr.’s,

pro se motion, filed in federal court, to vacate the default

judgment is identical to the file number on papers filed by Seckel

on Robertson’s behalf in federal court.        As noted, Seckel prepared

this motion for Hearn, Jr.

     Each of these abuses, standing alone, is sufficient to impose

sanctions. Taken collectively, they reflect the district court did

                                   - 10 -
not abuse its discretion in finding that:     Appellants engaged in

bad-faith, sanctionable conduct in federal district court; the

proceedings, in state and federal court, were unwarranted; and, as

a result, Appellants should be assessed all of Western’s attorney’s

fees.

                                 3.

     Concerning the amount of the award, Appellants claim that,

because the district court did not limit the award to identified

bad faith conduct, the amount is excessive.       Full fees, however,

may be awarded if the frequency and severity of the abuses so

warrant to insure such abuses are not repeated.    Chambers, 501 U.S.

at 56.   As discussed supra, and given the wide range of abuses, the

district court did not abuse its discretion.

                                 B.

     The award of attorney’s fees pursuant to 28 U.S.C. § 1927 is

in the discretion of the district court; we again review only for

abuse of that discretion.   Travelers Ins. Co. v. St. Jude Hosp. of

Kenner, La., Inc., 38 F.3d 1414, 1417 (5th Cir. 1994).        Section

1927 states:

           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.

                               - 11 -
     Because § 1927 is penal in nature, it is strictly construed.

Travelers, 38 F.3d at 1416.         Therefore, the court must find the

offending conduct unreasonable and vexatious.            Id. at 1416-17.

This requires evidence of bad faith, improper motive, or reckless

disregard of the duty owed the court.          Id. at 1417.        It goes

without saying that, in reviewing the imposition of sanctions, we

do not substitute our judgment for that of the district court.

E.g., Topalian v. Ehrman, 3 F.3d 931, 935 (5th Cir. 1993).

     As discussed, the district court found:       Seckel acted in bad

faith;   he   brought   vexatious    litigation;   and   the    claim   was

frivolous.    Obviously, keeping alive a meritless action in the

hopes of obtaining a nuisance settlement is unreasonable. Edwards,

153 F.3d at 246.        Counsel’s failure to reasonably investigate

plaintiff’s claim or material produced in discovery, which would

have revealed the claim’s lack of merit, is bad faith litigation.

Blue, 914 F.2d at 542.     For the same reasons noted in Part II. A.,

the entire litigation was unwarranted, unreasonable, vexatious, and

in bad faith.     In short, the district court did not abuse its

discretion in awarding fees pursuant to § 1927.

                                    III.

     Having found no abuse of discretion, the award of attorney’s

fees against Robertson and Seckel is

                                                               AFFIRMED.

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