Court Opinion

ID: 4562360
Source: CourtListenerOpinion
Date Created: 2020-09-02 18:00:40.406783+00
Date Added: 2024-06-11T09:27:48.254550
License: Public Domain

Case: 19-30791     Document: 00515549988        Page: 1     Date Filed: 09/02/2020

         United States Court of Appeals
              for the Fifth Circuit
                                                                    United States Court of Appeals
                                                                             Fifth Circuit

                                                                           FILED
                                                                   September 2, 2020
                                No. 19-30791                          Lyle W. Cayce
                                                                           Clerk

 In the Matter of: Christopher Martin Ridgeway,

                                                                       Debtor,

 Christopher Martin Ridgeway,

                                                                   Appellant,

                                    versus

 Stryker Corporation; Howmedica Osteonics
 Corporation,

                                                                    Appellees.

                 Appeal from the United States District Court
                    for the Eastern District of Louisiana
                          USDC No. 2:18-CV-7651

 Before Smith, Ho, and Oldham, Circuit Judges.
 Andrew S. Oldham, Circuit Judge:
       For the last seven years, Christopher Martin Ridgeway and his former
 employer have waged scorched-earth lawfare against one another. Ridgeway
 has lost every battle and incurred millions of dollars in damages, sanctions,
 and attorney’s fees along the way. In this appeal, Ridgeway asks us to void
Case: 19-30791      Document: 00515549988         Page: 2     Date Filed: 09/02/2020

                                   No. 19-30791

 one part of his litigation liabilities—namely, a $2 million fee award. We refuse
 his request and affirm.
                                        I.
        Between October 2001 and September 2013, Ridgeway worked for
 Howmedica Osteonics Corporation, a subsidiary of Stryker Corporation
 (collectively, “Stryker”). Stryker believed that Ridgeway intended to use its
 confidential business information at his next job. So Stryker sued Ridgeway
 in the United States District Court for the Western District of Michigan for
 breach of contract, breach of fiduciary duty, and misappropriation of trade
 secrets in violation of Michigan’s Uniform Trade Secrets Act, Mich.
 Comp. Laws §§ 445.1901 et seq. (“MUTSA”).
        A jury found that Ridgeway had breached his contractual obligations,
 breached his fiduciary duty, and violated MUTSA. What’s more, the jury
 found the MUTSA violation was willful and malicious. That’s important
 because MUTSA permits a “court [to] award reasonable attorney’s fees to
 the prevailing party” if “willful and malicious misappropriation [of trade
 secrets] exists.” Mich. Comp. Laws § 445.1905.
        The Michigan district court entered judgment in Stryker’s favor on
 March 9, 2016. That gave Stryker 14 days—until the end of March 23—to
 request attorney’s fees. See Fed. R. Civ. P. 54(d)(2)(B)(i). Come March
 23, Ridgeway filed a Chapter 11 bankruptcy petition in the Eastern District of
 Louisiana. The automatic stay caused by the filing of the petition, see 11
 U.S.C. § 362(a), prevented Stryker from making an attorney’s fee request in
 the Michigan proceedings.
        Instead, Stryker filed a proof of claim for those unliquidated
 attorney’s fees, totaling $2,272,369.54, and supported by hundreds of pages
 of time entries billed by Stryker’s lawyers. But the amount claimed—and the
 corresponding time entries—do not just relate to the lawyers’ work on the

                                        2
Case: 19-30791      Document: 00515549988          Page: 3    Date Filed: 09/02/2020

                                   No. 19-30791

 MUTSA claim. Stryker says that, by virtue of the “Common Core” doctrine,
 its win on the MUTSA claim entitles it to attorney’s fees related to all of its
 claims against Ridgeway. See Hensley v. Eckerhart, 461 U.S. 424, 435 (1983)
 (holding a civil-rights plaintiff can recover attorney’s fees for claims that
 “involve a common core of facts or will be based on related legal theories,”
 even if only one of those claims arises under a fee-shifting statute).
        Ridgeway filed his initial objection to Stryker’s proof of claim in
 December 2016. In that objection, Ridgeway argued that Stryker was entitled
 to nothing—not MUTSA-related attorney’s fees, and certainly not fees for
 the other claims. Ridgeway’s view is that fee recovery under the Common
 Core doctrine “is reserved for fee awards in civil rights cases.” Also in the
 December 2016 objection, Ridgeway faulted Stryker’s attorneys for writing
 billing entries that did not sufficiently separate MUTSA work from work on
 other claims. He also cited 27 time entries that did clearly refer to MUTSA.
        Fast forward to April 2017. On April 3, the bankruptcy court
 confirmed a plan of reorganization, effective April 13. The plan gave
 Ridgeway an additional 30 days from the effective date to levy additional
 challenges to creditors’ claims. On April 6, the court held a scheduling
 conference with the intent to narrow the issues in dispute. In line with that
 aim, the court issued an order the following day attempting to focus the
 dispute over time entries:
        Not later than May 15, 2017, debtor shall file and serve on
        Stryker and Howmedica’s counsel a list of time entries in
        Stryker and Howmedica’s counsel’s billing statements that it
        contends are objectionable, specifying for each entry the
        debtor’s basis for claiming that the debtor should not be liable
        for the charges relating to the time entry, with a concluding
        summary of the total amounts for each objection category.

                                        3
Case: 19-30791     Document: 00515549988         Page: 4     Date Filed: 09/02/2020

                                  No. 19-30791

        Purportedly in response to this April 7 order, Ridgeway filed on May
 15 a document styled as a “Supplemental Objection” to Stryker’s proof of
 claim. The Supplemental Objection included grounds not raised in the
 December 2016 objection. But the Supplemental Objection did not include
 any argument about the Common Core doctrine or a list of time entries.
        Seizing on this omission, Stryker argued that Ridgeway had violated
 the April 7 order. And it moved to strike the portions of Ridgeway’s
 December 2016 objections that related to the Common Core doctrine.
 Ridgeway’s retort was two-pronged: First, he asserted that “[n]owhere in
 [the April 7] order does the Court command the Debtor to prepare any lists
 related to its objections concerning the ‘common core’ doctrine.” Second,
 he argued that it was Stryker’s job to identify the MUTSA entries.
        The bankruptcy court explained at a hearing in July 2017 that it had in
 fact expected to receive a list of time entries with objections—including
 Common Core objections—from Ridgeway by the May 15 deadline. Without
 that list, the judge was “sitting [t]here three months almost to the day after
 [the April] status conference with the ball having not moved down the field,
 perceptibly.” Because Ridgeway did not identify specific time entries to
 which his Common Core objections applied, the court struck those
 objections.
        Ridgeway moved for reconsideration, again arguing that he’d
 complied with the April 7 order. Because the bankruptcy court had already
 rejected that exact argument, it denied the motion.
        In July 2018, after a lengthy evidentiary hearing, the bankruptcy court
 allowed Stryker’s proof of claim, including fees claimed under the Common
 Core doctrine. The district court affirmed. Ridgeway timely appealed.

                                       4
Case: 19-30791      Document: 00515549988           Page: 5     Date Filed: 09/02/2020

                                     No. 19-30791

                                         II.
        Ridgeway says that only a jury can award MUTSA attorney’s fees. He
 also claims that the courts below erred in striking his Common Core
 objections. Reviewing the bankruptcy court’s findings of fact for clear error,
 its conclusions of law de novo, and the striking order for abuse of discretion
 (because it’s a sanction), we reject each of Ridgeway’s arguments in turn. See
 First Nat’l Bank v. Crescent Elec. Supply Co. (In re Renaissance Hosp. Grand
 Prairie Inc.), 713 F.3d 285, 294 (5th Cir. 2013); Perkins Coie v. Sadkin (In re
 Sadkin), 36 F.3d 473, 475 (5th Cir. 1994) (per curiam).
                                         A.
        First, Ridgeway insists that the Michigan jury—not the Louisiana
 bankruptcy judge—needed to decide whether to award Stryker attorney’s
 fees for its MUTSA win. The argument borders on frivolous.
                                          1.
        Ridgeway focuses his argument on what Michigan law has to say about
 jury involvement in attorney’s fees awards. But he spends no time explaining
 why that matters in federal court. Whether “a state practice that relates to
 the division of duties between state judges and juries must be followed by
 federal courts in diversity cases” is a messy topic, implicating the Erie
 doctrine as well as the Seventh Amendment. Gasperini v. Ctr. for Humanities,
 Inc., 518 U.S. 415, 449 (1996) (Scalia, J., dissenting). But as luck would have
 it, there is an on-point federal rule, Federal Rule of Civil Procedure 54(d).
 And a court need “not wade into Erie’s murky water unless the federal rule
 is inapplicable or invalid.” Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins.
 Co., 559 U.S. 393, 398 (2010). Both parties agree Rule 54(d) applies. Neither
 party argues the rule is invalid.

                                          5
Case: 19-30791       Document: 00515549988           Page: 6     Date Filed: 09/02/2020

                                    No. 19-30791

        Federal Rule of Civil Procedure 54(d) requires “[a] claim for
 attorney’s fees . . . [to 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). So what does MUTSA, the substantive law, say?
        If a claim of misappropriation is made in bad faith, a motion to
        terminate an injunction is made or resisted in bad faith, or
        willful and malicious misappropriation exists, the court may
        award reasonable attorney’s fees to the prevailing party.
 Mich. Comp. Laws § 445.1905 (emphasis added). No mention of a jury
 requirement. Even if willfulness and maliciousness must be found by a jury
 (as the jury found in Ridgeway’s case), MUTSA leaves it to “the court” to
 award attorney’s fees. Ibid. As the district court noted, “[t]he term court is
 synonymous with the judge or judges who sit on a tribunal.” (Quotation
 omitted.)
        MUTSA is therefore clear that a judge may award attorney’s fees.
 “And where the statutory language provides a clear answer, [the analysis]
 ends there.” Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438 (1999).
                                         2.
        Or at least it should. Ridgeway relies on an unpublished Sixth Circuit
 decision for the proposition that “in order to obtain ‘prevailing party’
 attorney’s fees under Michigan law, a party must first present them to the
 trier of fact before trial.” Blue Br. at 46 (citing Dryvit Sys., Inc. v. Great Lakes
 Exteriors, Inc., 96 F. App’x 310, 311 (6th Cir. 2004)). Not so. Dryvit requires
 a party to plead attorney’s fees when the claim for fees arises out of a
 “ ‘prevailing party’ contract clause.” Dryvit, 96 F. App’x at 311 (emphasis
 added); see also id. at 312 (“[T]he law requires [plaintiffs] to plead or lose
 attorney’s fees.”). That’s because “[a]ttorney fees awarded under

                                          6
Case: 19-30791     Document: 00515549988        Page: 7     Date Filed: 09/02/2020

                                 No. 19-30791

 contractual provisions are considered damages, not costs.” Cent. Transp.,
 Inc. v. Fruehauf Corp., 362 N.W.2d 823, 829 (Mich. Ct. App. 1984).
        The fees at issue here are statutory, not contractual. Still, even if
 plaintiffs plead an entitlement to attorney’s fees arising out of a contract,
 Michigan law permits a judge, post-trial, to award those fees to a prevailing
 party. See Roberts v. Saffell, No. 312354, 2014 WL 2158159, at *6–7 (Mich.
 Ct. App. May 22, 2014) (per curiam). Therefore, Ridgeway has not shown
 that Michigan law requires statutory attorney’s fees to be “proved at trial.”
 Fed. R. Civ. P. 54(d)(2)(A).
        Ridgeway’s position also finds no support in state court precedent. In
 the handful of cases involving MUTSA attorney’s fees, Michigan state
 courts have raised no red flags over the practice of judges determining
 attorney’s fees post-trial. See, e.g., Bearing360 LLC v. Cameron, No. 330812,
 2017 WL 3798491, at *3 (Mich. Ct. App. Aug. 31, 2017) (per curiam);
 Whitesell Int’l Corp. v. Whitaker, No. 287569, 2010 WL 3564841, at *19–20
 (Mich. Ct. App. Sept. 14, 2010) (per curiam); Facility Grp. of Mich., Inc. v.
 Off. Furniture Servs., Inc., No. 241139, 2003 WL 22872138, at *3 (Mich. Ct.
 App. Dec. 4, 2003) (per curiam). Granted, none of those cases directly
 address this issue. But it leaves Ridgeway without a basis to argue that we
 should depart from the clear text of MUTSA.
                                      3.
        To tie this all together: The federal rules leave it to the judge to
 determine attorney’s fees “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).
 MUTSA empowers a “court”—meaning a judge—to award attorney’s fees.
 So the relevant substantive law does not require “those fees to be proved at
 trial.” Ibid. The federal rule controls. And the courts below were right to
 allow the bankruptcy court to award MUTSA attorney’s fees.

                                       7
Case: 19-30791      Document: 00515549988            Page: 8   Date Filed: 09/02/2020

                                  No. 19-30791

                                       B.
        Next, the Common Core doctrine. Ridgeway raises a host of
 objections to the application of that doctrine in this case. But because the
 bankruptcy court acted within its discretion when it struck the objections, we
 need only discuss the court’s decision to strike.
                                       1.
        Section 105(d) of the Bankruptcy Code permits the bankruptcy court
 to hold status conferences and issue orders “prescribing such limitations and
 conditions as the court deems appropriate to ensure that the case is handled
 expeditiously and economically.” 11 U.S.C. § 105(d)(2).
        The purpose of the April 6 status conference was just that—to narrow
 Ridgeway’s objections. As the bankruptcy court put it, “[t]he idea . . . was to
 start focusing [and] narrowing the issues for trial just as an amended
 complaint and an answer and some discovery would do.”
        That made sense because Ridgeway’s Common Core objections were
 broad—they included objections to three distinct types of billing entries:
    1) Entries that relate solely to non-MUTSA claims (“Category
       1”). See, e.g., Ex. J Pt. 1 p. 149 (“Review and analyze email
       memorandum from R. Marsh regarding breach of contract legal
       research.”).
    2) Entries that bill for both MUTSA and non-MUTSA claims
       without indicating how much time was spent for each
       (“Category 2”). See, e.g., Ex. J Pt. 1 p. 354 (“Research
       additional case law regarding breach of fiduciary duty and
       misappropriation of trade secrets while employed in
       preparation for arguments in anticipated motions for summary
       judgment against defendants.”).
    3) Entries where it’s unclear whether any MUTSA-related work
       was performed (“Category 3”). See, e.g., Ex. J Pt. 1 p. 377

                                       8
Case: 19-30791      Document: 00515549988         Page: 9    Date Filed: 09/02/2020

                                  No. 19-30791

        (“Continue to prepare fact summary document in preparation
        for preparing motions for summary judgment.”).
 It would have expedited the bankruptcy court’s resolution of the claims if
 Ridgeway had placed his objections into these three categories. See 11 U.S.C.
 § 105(d)(2). That way, if the court concluded that the Common Core
 doctrine did not apply, it could have decided each claim quickly: It could
 disallow the Category 1 claims their entirety because they contain no
 MUTSA work; it could allow the Category 2 claims but only for the MUTSA
 portion of the work; and it could require Stryker to indicate what, if any,
 Category 3 work related to MUTSA.
        The April 7 order that followed the status conference sought to tease
 out these differences by requiring Ridgeway to “specify[] for each [time]
 entry [his] basis for claiming that [he] should not be liable.” If, after
 compliance with the order, the court “concluded that Stryker was not
 entitled to claim the fees under the Common Core Doctrine,” the court
 “could go through the time entries and accordingly allow or disallow
 amounts of the claim as appropriate. That was the gist of [the] order . . . .”
 In short, the terms of the April 7 order fell squarely within the bankruptcy
 court’s power to expedite the case.
                                       2.
        Ridgeway didn’t comply with that order. So the decision to strike the
 Common Core objections is best understood as a sanction. Just as the
 bankruptcy court had the authority to issue the April 7 order, so too could it
 punish Ridgeway for noncompliance.
        The Bankruptcy Code “provides equitable powers for the bankruptcy
 court to use at its discretion.” In re Sadkin, 36 F.3d at 478–79; see 11 U.S.C.
 § 105(a). This includes the power to sanction a party. See Carroll v. Abide (In
 re Carroll), 850 F.3d 811, 816 (5th Cir. 2017); 2 Collier on

                                       9
Case: 19-30791       Document: 00515549988          Page: 10     Date Filed: 09/02/2020

                                    No. 19-30791

  Bankruptcy ¶ 105.02[6][b] (16th ed. 2020) (“[Bankruptcy courts] may
  sanction attorneys or their clients for abuses of process and other harms. The
  ability to sanction may take the form of civil contempt, sanctions not
  otherwise authorized in the Code or Bankruptcy Rules[,] or general
  damages.”).
         The bankruptcy court’s action here is akin to a Rule 37(b) sanction
  “striking pleadings in whole or in part” for violation of a discovery order.
  FED. R. CIV. P. 37(b)(2)(A)(iii); see also Fed. R. Bankr. P. 7037
  (incorporating Rule 37 into the Bankruptcy Rules). This sort of sanction is
  justifiable when there is willful misconduct and when lesser sanctions will not
  achieve the desired deterrent effect. See Smith & Fuller, P.A. v. Cooper Tire &
  Rubber Co., 685 F.3d 486, 488–89 (5th Cir. 2012); Timms v. LZM, L.L.C., 657
  F. App’x 228, 230 (5th Cir. 2016) (per curiam). Both criteria are satisfied in
  this case.
                                          i.
         First, willful misconduct. The bankruptcy court held its April 6 status
  conference with the “intent [of] narrowing the issues in dispute for trial.” At
  the status conference, neither party objected to that effort. Accordingly, the
  April 7 order, in no uncertain terms, required Ridgeway to “file and serve . . .
  a list of time entries . . . that [he] contends are objectionable,” along with the
  basis for those objections. The order “was extremely explicit” as to
  Ridgeway’s obligations. Still, Ridgeway didn’t comply.
         When Stryker moved to strike the Common Core objections for
  violation of the April 7 order, Ridgeway had an opportunity to correct this
  mistake. Ridgeway chose instead to double down, insisting that the order was
  somehow unclear. The court set a hearing for July 5 to rule on the motion to
  strike. So if Ridgeway harbored any doubts about the meaning of the April 7

                                         10
Case: 19-30791      Document: 00515549988          Page: 11     Date Filed: 09/02/2020

                                    No. 19-30791

  order—or if he found compliance too burdensome—he had months to
  request guidance or relief from the court before the hearing. He did nothing.
         There’s more. After the court struck the Common Core objections,
  Ridgeway asked the court to reconsider—and he was afforded a hearing on
  the issue in September. That gave him another couple of months to make it
  right. He didn’t. Instead, his attorneys argued again that “we can interpret
  what we’ve already done as in compliance.” The failure to abide by the terms
  of the April 7 order was intentional. The misconduct was willful.
         Ridgeway offers three counterarguments. First, he claims that he did
  in fact comply with the order. In Ridgeway’s view, his December 2016
  objections to time entries that only contain MUTSA work satisfy his
  obligations under the April 7 order—because, by implication, he objected to
  every other time entry on Common Core grounds. That’s incorrect. The
  April 7 order required “a list of time entries . . . that [Ridgeway] contends are
  objectionable,” along with bases of objection, not a much smaller list of only
  those entries that are unobjectionable. Putting that problem aside, Ridgeway’s
  argument ignores the context that led to the order. The bankruptcy court
  already had Ridgeway’s list of unobjectionable MUTSA time entries. If that
  list had been sufficient, the April 7 order would have been redundant. But it
  wasn’t. The list left the court unsure of what to do with the hundreds of other
  pages of time entries, some of which contained time billed for both MUTSA
  and non-MUTSA work (the Category 2 entries):
         Now, suppose I go with [Ridgeway] and I conclude that the
         Common Core Doctrine is inapplicable outside of the Civil
         Rights context or the other context that [Ridgeway has] cited,
         and therefore, disallow the recovery of any fees on the theory
         that Common Core does not apply. How do I figure out—how
         do I figure out what [Stryker is] entitled to?

                                         11
Case: 19-30791      Document: 00515549988         Page: 12    Date Filed: 09/02/2020

                                   No. 19-30791

  Thus, Ridgeway’s December 2016 objections complied with neither the text
  of the April 7 order nor the order’s apparent purpose.
         Second, Ridgeway asserts that compliance with the April 7 order was
  “impossible.” Cf. Dorsey v. Acad. Moving & Storage, Inc., 423 F.2d 858, 860
  (5th Cir. 1970) (holding that severe sanctions are inappropriate when
  noncompliance is due to inability to comply). His attorneys apparently
  “[couldn’t] tell from a time entry as to whether or not that [entry] involved
  Common Core.” That’s wrong too. As shown above, it’s entirely possible to
  categorize the time entries based on whether they implicate the Common
  Core doctrine. It’s a time-consuming activity, and it’s certainly not fun. But
  a party’s unwillingness to engage in unglamorous work does not make that
  work impossible. Even if it had been an impossible task, Ridgeway should
  have brought the issue to the bankruptcy court’s attention, rather than ignore
  the order. He did not:
         [I]n the hearing that resulted in the [strike] order of August
         29th you [Ridgeway’s counsel] said, “You know we really
         can’t do that [with the time entries] because it’s all of them.”
         And I said, “Well, wouldn’t that have been a good thing for
         you to tell me on April 6th when I set up the scheduling order?”
         And I think you said, “Yes, I think it would have been.”
         Third, Ridgeway argues that his objections were proper because they
  “complied with Rule 3007 and the notice pleading requirements.” That may
  be true, but it misses the point. The court struck Ridgeway’s objections
  because he failed to comply with the April 7 order. So it doesn’t matter that
  the objections were otherwise proper under the bankruptcy rules. Cf. United
  States v. $49,000 Currency, 330 F.3d 371, 375–76 (5th Cir. 2003) (holding that
  the sufficiency of an original pleading was irrelevant when the pleading was
  struck for noncompliance with a subsequent court order).

                                        12
Case: 19-30791      Document: 00515549988         Page: 13     Date Filed: 09/02/2020

                                   No. 19-30791

                                        ii.
         On to prong two of the test for striking a pleading: whether lesser
  sanctions were appropriate. See $49,000 Currency, 330 F.3d at 376. They
  were not. At the reconsideration rehearing, Ridgeway asked for a
  continuance to comply with the April 7 order. But, by then, Ridgeway had
  wasted months of the court’s time. A continuance might have been
  appropriate in April or May 2017, but a continuance in July or September
  would only have rewarded Ridgeway’s intransigence. And, as he did in the
  courts below, Ridgeway still incorrectly maintains that his original objections
  satisfy the April 7 order. So it’s far from certain that a continuance would
  have resulted in compliance with that order.
         Ridgeway has pointed to no lesser sanction that would have been
  appropriate for his violation of the April 7 order. The bankruptcy court’s
  choice of sanction was therefore not an abuse of discretion. The court
  properly struck the Common Core objections. Thus, we need not reach their
  merits.
         AFFIRMED.

                                        13