Court Opinion

ID: 812381
Source: CourtListenerOpinion
Date Created: 2012-11-21 19:28:20+00
Date Added: 2024-06-11T18:00:44.708344
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 12-1398

                     HOUSE OF FLAVORS, INC.,

                      Plaintiff, Appellant,

                               v.

                       TFG-MICHIGAN, L.P.,

                      Defendant, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT

                    FOR THE DISTRICT OF MAINE

           [Hon. D. Brock Hornby, U.S. District Judge]

                             Before

                       Lynch, Chief Judge,

                Boudin and Lipez, Circuit Judges.

     Lee H. Bals and Marcus, Clegg & Mistretta, P.A. on brief for
appellant.
     Richard F. Ensor, Vantus Law Group, P.C., Michael Donlan and
Verrill Dana, LLP on brief for appellee.

                        November 21, 2012
             BOUDIN, Circuit Judge.         This commercial fraud case is

before us for a second time following proceedings in the district

court to carry out the "limited correction" ordered on remand in

House of Flavors, Inc. v. TFG Michigan, L.P., 643 F.3d 35, 42 (1st

Cir. 2011).    Our earlier opinion describes in full the underlying

dispute between the parties, House of Flavors, Inc. ("House of

Flavors") and Tetra Financial Group ("Tetra"), and this opinion is

limited to the facts necessary to resolve this appeal.

             In brief, House of Flavors is an ice cream maker that

worked with Tetra, an equipment financier, to acquire an ice cream

hardening system.       House of Flavors purchased the basic equipment

in late 2005 for just over $100,000, and in early 2006 it executed

an agreement with Tetra to fund its installation--an expensive

undertaking that substantially exceeded the cost of the equipment

alone so that the ultimate cost including both equipment and

installation was approximately $1.5 million.

             Under the agreement, Tetra paid for the installation at

House   of   Flavors'    plant;    House    of   Flavors   then   transferred

ownership of the installed system to Tetra; and finally Tetra

leased the system back to House of Flavors. The agreement provided

for a thirty-six-month term, at the conclusion of which House of

Flavors would have an option to purchase the system outright, for

a price to be determined.         Both parties expected House of Flavors

to exercise this option, and, before executing the agreement, the

                                      -2-
company secured a side letter from Tetra saying that Tetra had

"reviewed the list of property" and "estimated an end of term

value" at twelve percent of the equipment and installation costs.

          House of Flavors finished the system's installation,

transferred ownership, and began monthly lease payments in August

2006. Then, in August 2008, the company sought to exercise the buy

back option a year early.       Notwithstanding the twelve percent

estimate it had provided in its side letter, Tetra quoted a

purchase price that was around forty percent of the equipment and

installation   costs--more    than     $570,000.   After   fruitless

negotiations, House of Flavors filed suit in federal district court

in February 2009, advancing a variety of contract, statutory, and

common law claims.

          Following a winnowing of those claims and a three-day

bench trial, House of Flavors prevailed in June 2010. The district

court concluded that Tetra had committed fraud by quoting a twelve

percent "estimate" when in reality it had made no estimate at all.

House of Flavors, Inc. v. TFG-Michigan, L.P., 719 F. Supp. 2d 100,

107-11 (D. Me. 2010).    The court then devised an equitable remedy

"analogous to rescission," id. at 112, under which Tetra was to

transfer the system back to House of Flavors and pay the company

$27,097, id. at 114.    As our previous opinion stated, the district

court believed that this amount represented

          the balance due between the parties, assuming
          that the system passed back to House of

                                 -3-
           Flavors based on the 12 percent purchase price
           and taking account of what Tetra had been
           promised, what it had received, and what was
           needed to compensate House of Flavors for an
           extra cost it incurred due to Tetra's delaying
           the exercise of the purchase option.

House of Flavors, 643 F.3d at 39.

           This court sustained the district court's basic approach

on   appeal,   but--faced   with   Tetra's   claim   of   errors   in   the

calculation just described--was left uncertain as to the balance

due between the parties under that approach. House of Flavors, 643

F.3d at 41.    Accordingly, we remanded the case, instructing the

district court to consider certain payments House of Flavors had

made that Tetra asserted were in satisfaction of pre-installation

payments due to it under the original agreement and thus should not

have been credited against the amount House of Flavors had promised

under the lease after installation.      Id. at 42.

           On remand, the district judge explained that Tetra had

been "entitled to payment for the use of its money before the

lease's base term began, as well as certain incidental fees."

House of Flavors, Inc. v. TFG-Michigan, L.P., 841 F. Supp. 2d 426,

429 (D. Me. 2012). Relying on the parties' joint stipulation as to

the timing and amount of those payments, the judge recalculated the

balance due between the parties and determined that, rather than

owing House of Flavors $27,097, Tetra was in fact due $156,399.

Id. at 429-30.

                                   -4-
               After entering judgment, the judge rejected a later

motion    by    House     of    Flavors      arguing      that    it    was    entitled     to

attorneys' fees under a prevailing-party provision of Utah law,

Utah Code Ann. § 78B-5-826 (West 2008), which both parties had

agreed governed their dispute.                  House of Flavors now appeals; it

argues that the district court ought not to have considered the

parties' prior joint stipulation--which recorded the timing and

amount of the pre-lease payments--without re-opening the record to

allow     the    company        to    present      its    own     evidence      about     the

circumstances under which it made those payments.

               The attack on the recalculated figure is foreclosed by a

jurisdictional objection. This court has jurisdiction over appeals

from all "final decisions" of the district courts.                               28 U.S.C.

§ 1291 (2006).           Under Rule 4 of the Federal Rules of Appellate

Procedure, a party must--with certain exceptions not applicable

here--file      a   notice      of     appeal    within     thirty      days    of   such    a

decision.       Fed. R. App. P. 4(a)(1); 28 U.S.C. § 2107.                     The "taking

of   an   appeal       within        the   prescribed      time    is    'mandatory       and

jurisdictional.'"          Bowles v. Russell, 551 U.S. 205, 209 (2007)

(citation omitted).

               Here,     the    district        court's    judgment       embodying       the

calculation was entered on January 19, 2012; it was a final

judgment       because     it    completely        resolved       the    merits      of   the

underlying dispute, see Quackenbush v. Allstate Ins. Co., 517 U.S.

                                             -5-
706, 712 (1996).         House of Flavors did not file its notice of

appeal challenging that judgment until April 3--long after Rule 4's

thirty-day clock had run.          House of Flavors responds that the

thirty-day period did not begin until March 23--the date of the

post-judgment order denying House of Flavors' February 15 motion

requesting attorneys' fees under the Utah prevailing-party statute

(and   a   motion   to    stay   enforcement    of   the   judgment   pending

resolution of the fees issue).

            While House of Flavors' April 3 notice of appeal was

timely as to the denial of attorneys' fees, a request for statutory

attorneys' fees after a judgment is entered does not render the

judgment on the merits non-final or toll the time for filing an

appeal from it.     Budinich v. Becton Dickinson & Co., 486 U.S. 196

(1988), so held and announced the "bright-line rule . . . that a

decision on the merits is a 'final decision' for purposes of § 1291

whether or    not   there    remains    for   adjudication   a   request   for

attorney's fees attributable to the case." Id. at 202-03; see also

Crossman v. Maccoccio, 792 F.2d 1, 3 (1st Cir. 1986) (per curiam)

(holding even before Budinich that outstanding fee request distinct

from underlying claim does not render judgment non-final).

            Budinich conceded the difficulty that arises "[i]f one

were to regard the demand for attorney's fees as itself part of the

merits," 486 U.S. at 200, and this issue was addressed by 1993

amendments to the Federal Rules of Civil Procedure. One amendment,

                                       -6-
quoted here as later restyled, distinguished between ordinary

requests for attorneys' fees, which "must be made by motion" within

fourteen days of judgment, and requests for fees that are "to be

proved at trial as an element of damages."        Fed. R. Civ. P.

54(d)(2).1    The advisory notes to the rule change explained that

"fees recoverable as an element of damages" include those "sought

under the terms of a contract."

             An accompanying amendment made clear that a judge has

discretion whether to suspend the finality of a judgment where a

party seeks attorneys' fees by motion; by default, following

Budinich, the motion alone does not do so. Fed. R. Civ. P. 58(e).2

By contrast, no provision is made for suspension of finality where

there remains an outstanding claim for attorneys' fees sought as an

element of damages--the implication being that the "merits" have

not been fully resolved until such fees are decided, and thus no

such provision is necessary.      See Carolina Power & Light Co. v.

Dynegy Mktg. & Trade, 415 F.3d 354, 358-59 (4th Cir. 2005).

     1
      In full, the relevant subsection provides: "A claim for
attorney's fees and related nontaxable expenses must be made by
motion unless the substantive law requires those fees to be proved
at trial as an element of damages." Fed. R. Civ. P. 54(d)(2)(A).
     2
      The rule reads: "Ordinarily, the entry of judgment may not be
delayed, nor the time for appeal extended, in order to tax costs or
award fees. But if a timely motion for attorney's fees is made
under Rule 54(d)(2), the court may act before a notice of appeal
has been filed and become effective to order that the motion have
the same effect under Federal Rule of Appellate Procedure 4(a)(4)
as a timely motion under Rule 59." Fed. R. Civ. P. 58(e).

                                  -7-
          We took this view in Central Pension Fund v. Ray Haluch

Gravel Co., 695 F.3d 1, 6 (1st Cir. 2012), where the attorneys'

fees claim rested upon provisions of a collective bargaining

agreement and fees had been sought as part of the remedy for a

breach of that agreement.     In such a case, we held, there was no

final judgment until the court determined the amount of the fees.

Id. at 6-7.      But in the present case, House of Flavors' post-

judgment claim for attorneys' fees was based solely on the Utah

fee-shifting statute.

          Specifically, the underlying agreement gave Tetra the

right to seek attorneys' fees from House of Flavors if the latter

breached the contract (but not the other way around).          House of

Flavors   thus   sought   attorneys'   fees   under    Utah   Code   Ann.

§ 78B-5-826, which provides that a court "may award costs and

attorney fees" to a prevailing party in "a civil action based upon

any . . . written contract" when the underlying contract "allow[s]

at least one party to recover attorney fees."         Whatever House of

Flavors might have urged, its claim for fees derived directly from

the statute.

          This case thus is squarely governed by Budinich, which

made plain that when a party seeks attorneys' fees "authorize[d]"

by "statute or decisional law," that request does not prevent a

judgment on the underlying claim from becoming final under section

1291 and starting Rule 4's thirty-day clock.          486 U.S. at 201.

                                 -8-
Nothing in Rules 54(d) and 58(e) alters this bright-line rule where

the fee request is founded on a statute rather than a claim for

fees as an element of damages.         While the judge may suspend

finality pending decision on such a request, see Fed. R. Civ. P.

58(e), he did not do so here.

          When House of Flavors sought attorneys' fees in this

case, its motion was styled as one to alter or amend the judgment

under Rule 59.   Such a motion--here filed within the twenty-eight-

day period allowed for a Rule 59 motion, Fed. R. Civ. P. 59(e)--

does ordinarily extend the time for appeal from the underlying

judgment to thirty days after the motion's disposition.     Fed. R.

App. P. 4(a)(4).   But only the substance of a motion, not the label

a party attaches to it, controls its effect under the Federal Rules

of Appellate Procedure.   See Buchanan v. Stanships, Inc., 485 U.S.

265, 269 (1988) (per curiam).

          In this instance, the motion did not ask the district

court to alter its judgment on the merits, although a footnote

indicated an intention to ask this court to do so on appeal.

Instead, the sole relief sought by the motion was the addition of

attorneys' fees grounded on the Utah statute.      House of Flavors

otherwise referred to the court's merits judgment only to argue

that the reasoning underlying that judgment bolstered its statutory

claim for fees. Conceivably, the motion could have asked also that

                                 -9-
the damage award be altered, creating a Rule 59(e) issue; it did

not do so.3

          A "motion for attorney's fees is unlike a motion to alter

or amend a judgment" because it "does not imply a change in the

judgment, but merely seeks what is due because of the judgment."

White v. N.H. Dep't of Emp't Sec., 455 U.S. 445, 452 (1982)

(citation and internal quotation marks omitted).   At least this is

so where, as here, the motion does not invoke a prior claim that

asserted recovery of attorneys' fees as part of damages due on the

merits for breach of contract or the like.    So, however labeled,

this motion did not extend the time to appeal.4

          As it happens, the merits claim that House of Flavors is

unable to pursue would likely be hopeless even if timely.      The

district court's new damage calculations rest on a post-remand

stipulation by both parties as to times and amounts of payments.

     3
      House of Flavors denies in its reply brief that its motion to
amend was "exclusively" for an award of attorneys' fees and "as
such" outside Rule 59(e); but both the opening paragraph of the
motion describing the relief sought and the closing paragraph
requesting relief asked only that the decision and judgment be
amended to provide "an award of attorneys' fees to [the]
Plaintiff"; and the merits judgment awarding damages was discussed
only to support such an award.
     4
      Indeed, a proper motion for attorneys' fees under Rule 54(d)
is required to be made within fourteen days of the judgment, Fed.
R. Civ. P. 54(d)(2)(B)(I), unless a statute or court order
otherwise provides. This underscores the distinction between the
Rule 54(d) motion and a Rule 59(e) motion with its longer deadline.
The attorneys' fees motion here was not filed within the fourteen-
day period.

                               -10-
House of Flavors argued to the district judge that if the judge

relied on the stipulation to recalculate the balance due between

the parties, the judge should reopen the record so that the company

could provide more context for the figures.        But neither then nor

now on appeal does the company show why the denial was mistaken,

let alone an abuse of discretion.

          In fact, the context that House of Flavors said would

help   illuminate   the   figures    was   the   understanding   of   the

transaction in the mind of Whit Gallagher, president of the company

when the original agreement was made.      This understanding was well

documented in the record and had helped House of Flavors avoid the

large premium that Tetra demanded.         In refusing to reopen the

record, the district judge indicated that he had reread Gallagher's

deposition testimony and that it did not alter his view of what

Tetra was still owed.     House of Flavors, 841 F. Supp. 2d at 428

n.2.

          Finally, the present appeal is jurisdictionally timely as

to the district court's refusal to award attorneys' fees under the

Utah statute; but, assuming its applicability, such an award is a

matter of discretion, Giusti v. Sterling Wentworth Corp., 201 P.3d

966, 981 n.57 (Utah 2009).     On appeal House of Flavors makes no

argument that the judge abused that discretion or was otherwise

obliged to award attorneys' fees.

                                    -11-
          The denial of attorneys' fees is affirmed. The challenge

to the merits award is dismissed for want of jurisdiction.   Each

side shall bear its own costs on this appeal.

          It is so ordered.

                              -12-