Court Opinion

ID: 74580
Source: CourtListenerOpinion
Date Created: 2010-04-26 08:51:12+00
Date Added: 2024-06-11T17:20:38.912807
License: Public Domain

CAPITAL ASSET RESEARCH CORPORATION, Plaintiff-Counter-Defendant-Appellant,

                                                       v.

       Roger FINNEGAN, Breen Capital Holdings, Inc., Defendants-Counter-Claimants-Appellees.

                                                No. 99-12932.

                                       United States Court of Appeals,

                                               Eleventh Circuit.

                                                June 30, 2000.

Appeal from the United States District Court for the Northern District of Georgia.(No. 96-00453-CV-GET-1),
G. Ernest Tidwell, Judge.

Before ANDERSON, Chief Judge, and BLACK and HALL*, Circuit Judges.

        PER CURIAM:

        Capital Asset Research Corporation ("Capital Asset") brought suit against Roger Finnegan and Breen

Capital Holdings, Inc. The instant appeal is brought by Capital Asset, challenging the district court's award

of attorneys' fees to Finnegan. Capital Asset makes two primary arguments on appeal: (1) that the district

court lacked subject matter jurisdiction to award attorneys' fees to Finnegan; and (2) that any such award

should have been denied in any event because Finnegan's motion for attorneys' fees was untimely.

                                               BACKGROUND

        The background facts and proceedings relevant to the above-mentioned issues on appeal can be stated

concisely. Capital Asset asserted three claims against Finnegan: (1) a breach of contract claim asserting a

breach of the Consulting Agreement; (2) a breach of contract claim asserting a breach of the Non-disclosure

Agreement; and (3) a claim asserting a violation of the Georgia Trade Secrets Act. After a 1997 bench trial,

the district court found in favor of Finnegan with respect to the two breach of contract claims; in other words,

Finnegan successfully defended the contract claims. However, the district court found in favor of Capital

Asset on its trade secrets claim. As a result of prevailing on its trade secrets claim, Capital Asset was awarded

by the district court all of the relief that it could have received had it prevailed on its breach of contract

   *
    Honorable Cynthia Holcomb Hall, U.S. Circuit Judge for the Ninth Circuit, sitting by designation.
claims. After the district court's judgment in its favor, Capital Asset moved for attorneys' fees. The district

court granted same. Finnegan appealed.1 This Court reversed both the judgment in favor of Capital Asset

and its award of attorneys' fees. On remand, Finnegan moved for an award of attorneys' fees based on a

contractual provision allowing attorneys' fees to the prevailing party, and the district court granted same.

Capital Asset now appeals the district court's award of attorneys' fees in favor of Finnegan. We turn first to

Capital Asset's argument on appeal that the district court had no subject matter jurisdiction to award fees to

Finnegan.

                                                DISCUSSION

A.       Subject Matter Jurisdiction

         Capital Asset argues that motions for attorneys' fees filed after judgment are usually governed by

Fed.R.Civ.P. 54(d)(2),2 but that Rule 54(d)(2) does not apply in the instant case because in the instant case

"the substantive law governing the action provides for recovery of such fees as an element of damages to be

proved at trial." Fed.R.Civ.P. 54(d)(2)(A). Continuing its argument, Capital Asset asserts that when

substantive law (such as the contractual provision here) provides for the recovery of such fees, they must be

pled and proved as damages at trial, and that the district court has no jurisdiction to entertain a plea for

attorneys' fees when such a request was not made in the pleadings. In the instant case, Capital Asset argues,

Finnegan made no request for attorneys' fees in its pleadings, and thus the district court had no subject matter

jurisdiction to entertain Finnegan's motion for attorneys' fees.

     1
    Actually, both Finnegan and Breen appealed, as the judgment in favor of Capital Asset was against both
Finnegan and Breen. We refer only to Finnegan, however, because at the later stage after remand, see infra,
attorneys' fees were awarded only to Finnegan, and thus Breen is not involved in this appeal.
     2
    Rule 54(d)(2) provides that "Claims for attorneys' fees and related nontaxable expenses shall be made by
motion unless the substantive law governing the action provides for the recovery of such fees as an element
of damages to be proved at trial." Fed.R.Civ.P. 54(d)(2)(A). The Rule requires that such motions be "filed
and served no later than 14 days after entry of judgment." Fed.R.Civ.P. 54(d)(2)(B).

                                                       2
        We reject Capital Asset's jurisdictional argument. It is clear that the district court had subject matter

jurisdiction of this diversity case under 28 U.S.C. § 1332. Nothing in Rule 54(d)(2) suggests that the district

court in the instant case had no subject matter jurisdiction to entertain Finnegan's request for attorneys' fees.

Rule 54(d)(2)(A) mandates that claims for attorneys' fees be made by a motion "unless the substantive law

governing the action provides for the recovery of such fees as an element of damages to be proved at trial."

Fed.R.Civ.P. 54(d)(2)(A). It is true that the Advisory Committee notes clarify that Rule 54(d)(2) is not

applicable to attorneys' fees recoverable as an element of damages, and the Advisory Committee cites

attorneys' fees pursuant to the terms of a contract as an example thereof. The Advisory Committee notes go

on to say that such damages "typically" are to be claimed in a pleading, and may involve issues to be resolved

by a jury. However, nothing in the language of the Rule itself or in the Advisory Committee notes suggests

that the failure to seek attorneys' fees in a pleading is a defect depriving the district court of subject matter

jurisdiction. To the contrary, the Advisory Committee notes state that such damages are "typically" to be

claimed in a pleading. Moreover, a failure to plead is rarely, if ever, a jurisdictional defect. Rather, both the

text of Rule 15(a) and the cases indicate that leave to amend pleadings shall be freely given when justice so

requires. See Fed.R.Civ.P. 15(a). Indeed, even jurisdictional defects may often be cured by amendment. See

28 U.S.C. § 1653 ("Defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate

courts.").

        Contrary to Capital Asset's argument that the failure to plead entitlement to such fees is a defect

depriving the district court of subject matter jurisdiction, Rule 54(c) expressly provides that "every final

judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if the party

has not demanded such relief in the party's pleadings."3

  3
    We note incidentally that Finnegan's pleading did seek "such other and further relief as the Court deems
just and proper."

                                                       3
        The case law also supports our conclusion that Finnegan's failure to make an explicit request for

attorneys' fees in its pleadings is not a defect depriving the district court of subject matter jurisdiction. In

Engel v. Teleprompter Corp., 732 F.2d 1238 (5th Cir.1984), the Fifth Circuit held that it was appropriate to

award attorneys' fees to a prevailing defendant despite its failure to seek attorneys' fees in its pleadings.

There, the plaintiff in its pleadings had sought an award of attorneys' fees, as provided for in the relevant

contract. Plaintiff prevailed in the district court. Defendant appealed and obtained a reversal. On remand,

defendant for the first time moved for attorneys' fees. The Fifth Circuit held that the defendant's failure to

seek attorneys' fees in its original pleadings did not bar it from seeking an award of fees upon attaining the

status of prevailing party. The court held that Rule 54(c)—providing that "every final judgment shall grant

the relief to which the party in whose favor it is rendered is entitled, even if the party has not demanded such

relief in its pleadings"—justified an award of fees under the circumstances despite the pleading failure. The

Fifth Circuit did not expressly address an argument that there was no subject matter jurisdiction, but its

exercise of jurisdiction constitutes a holding inconsistent with Capital Asset's argument in the instant case.

Accord Klarman v. Santini, 503 F.2d 29, 36 (2d Cir.1974) (relying on Rule 54(c) and rejecting an argument

that a party's failure specifically to request attorneys' fees in its pleadings is in itself a bar to recovery);

Paliaga v. Luckenbach Steamship Co., 301 F.2d 403, 410 (2d Cir.1962) (same); see also Thorstenn v.

Barnard, 883 F.2d 217, 218 (3d Cir.1989) (citing Rule 54(c) and holding that a plaintiff who finally

succeeded on appeal could rely on 42 U.S.C. §§ 1983 and 1988 to support an award of attorneys' fees even

though plaintiff failed to rely on such statutes in the complaint in the district court).4 For the foregoing

  4
    Capital Asset relies upon Allgood Electric Company v. Martin K. Eby Construction Company, Inc., 179
F.R.D. 646 (M.D.Ga.1998) and Caremark Inc. v. Coram Healthcare Corporation, 924 F. Supp. 891
(N.D.Ill.1996). In both cases, the district court declined to entertain a motion for attorneys' fees, where
entitlement to fees was based on a contractual provision, because the request for attorneys' fees was made by
motion and the party had failed to seek attorneys' fees in its pleadings. Both cases noted that Rule
54(d)(2)—providing that attorneys' fees should be sought by motion no later than 14 days after
judgment—does not apply where, inter alia, the substantive law governing the action (e.g., a contractual
provision) provides for recovery of such fees as an element of damages. In declining to entertain a request
for attorneys' fees that was not included in the pleadings, the court in Caremark used jurisdictional

                                                       4
reasons, we reject Capital Asset's argument that the district court lacked subject matter jurisdiction to entertain

Finnegan's request for attorneys' fees.

B.      Timeliness

          Having established the district court's jurisdiction and authority to award attorneys' fees

notwithstanding the pleading defect, we turn to Capital Asset's argument that Finnegan's motion for attorneys'

fees was untimely. To understand Capital Asset's argument, it is appropriate to recall that Finnegan

successfully defended the breach of contract claims asserted by Capital Asset during the 1997 bench trial.

Finnegan's entitlement to attorneys' fees is based upon a contractual provision that provides in substance that

in any lawsuit brought to enforce the contract, the prevailing party, either plaintiff or defendant, would be

entitled to attorneys' fees. The gist of Capital Asset's argument is that Finnegan had prevailed with respect

to the contract claims as of the conclusion of the 1997 trial, after the district court held that Finnegan had

successfully defended against Capital Asset's claims of breach of contract. Thus, Capital Asset argues,

Finnegan should have sought attorneys' fees either before the 1997 judgment or within a short time thereafter

(suggesting by analogy the 14-day period indicated in Rule 54(d)(2)). Instead, Capital Asset points out that

Finnegan waited until after its successful appeal of the 1997 judgment against Finnegan on Capital Asset's

terminology—"I do not have jurisdiction under Rule 54(d)(2) to order Caremark to pay Coram its attorneys'
fees." Id. at 892. While Allgood may well have been based upon an exercise of the district court's discretion,
its citation of Caremark with approval might be interpreted as suggesting a jurisdictional basis. For the
reasons set out in the text above, we reject as unpersuasive any implication in Caremark or Allgood that the
failure to plead and prove attorneys' fees before judgment deprives a district court of subject matter
jurisdiction to entertain a request for attorneys' fees after judgment.

                 Capital Asset also cites dicta from an unpublished opinion from the Sixth Circuit, Clarke v.
        Mindis Metals, Inc., 99 F.3d 1138 (table), No. 95-5517 (6th Cir. Oct.24, 1996). Capital Asset cites
        the jurisdictional language used by the court at *8 in the context of noting that a Rule 54(d)(2)
        motion was unnecessary and in referring to the Caremark court's holding that the district court in
        such a context would have no jurisdiction to hear such a motion. We construe the Sixth Circuit as
        having inadvertently picked up Caremark 's loose jurisdictional terminology, and in any event, the
        cited phrase is dicta. The Clarke court specifically rejected the argument that the district court had
        no subject matter jurisdiction. Indeed, the jurisdictional ruling in Clarke is entirely consistent with
        our jurisdictional holding.

                                                        5
trade secrets claim. Capital Asset argues that Finnegan's motion for attorneys' fees on remand after its

successful appeal was untimely.

          We reject Capital Asset's arguments. We emphasize that an award of attorneys' fees in circumstances

such as those presented in this case is a matter addressed to the broad discretion of the district court. Because

most of the arguments asserted by Capital Asset on appeal were also presented to the district court, we

construe the district court's award of attorneys' fees in this case as an exercise of its broad discretion. In

affirming the district court's exercise of discretion in this case, we deem it significant that the parties in the

instant case "agreed during the trial of this matter, and the court consented, to the bifurcation of attorneys' fees

for later hearing." Dist. Ct. Order dated March 25, 1998.5 Thus, Capital Asset's assertions of surprise and

prejudice—on account of not having been forewarned of attorneys' fees by Finnegan's pleadings—ring

hollow.

          Even more significant is the fact that Capital Asset, as a result of prevailing at the 1997 trial on its

trade secrets claim, received relief at the expense of Finnegan which amounted to all of the relief that it could

have received had it prevailed on its breach of contract claims. Capital Asset conceded this fact in its brief

on appeal, and also made the same representation to the district court.6 In light of the fact that Capital Asset

received all of the relief it would have received had it prevailed on the contract claims, it can hardly be said

that Finnegan, although it successfully defended against recovery of such relief on the contract theories, was

the prevailing party.7 Cf. Taylor v. City of Ft. Lauderdale, 810 F.2d 1551, 1555-56 (11th Cir.1987) ("In order

   5
    The district court so found in the course of awarding attorneys' fees in favor of Capital Asset after the
1997 trial. Finnegan had opposed Capital Asset's motion for attorneys' fees on the grounds that it was
untimely, not having been filed within 14 days of the 1997 judgment.
  6
    In seeking reimbursement of all of its attorneys' fees following the 1997 trial, plaintiff represented to the
district court that "plaintiff's success on the trade secrets claim afforded plaintiff the complete relief it sought
from defendants." Dist.Ct. Order dated March 25, 1998.
      7
    As the Supreme Court stated in Hensley v. Eckerhart, 461 U.S. 424, 103 S. Ct. 1933, 76 L. Ed. 2d 40
(1983), "the most critical factor is the degree of success obtained." Id. at 436, 103 S.Ct. at 1941.

                                                         6
to qualify as a prevailing party under 42 U.S.C. § 1988, the plaintiff must be successful on the central issue

in the case, exhibited by the fact that the plaintiff acquired the primary relief sought."); Miami Herald

Publishing Co. v. City of Hallandale, 742 F.2d 590, 591 (11th Cir.1984) ("Prevailing for purposes of § 1988

is exhibited by the fact that the litigant 'has acquired the primary relief sought.' ") (quoting from Iranian

Students Association v. Edwards, 604 F.2d 352, 353 (5th Cir.1979)); see also Worthington v. Lick, 783 F.2d
1369, 1370 (9th Cir.1986) (Although the case presented several theories of recovery, and although the

plaintiff prevailed on his conversion claim, the action was a single lawsuit, and the defendant "prevailed"

because he was the one who received the net award and the party in whose favor judgment was rendered).

In any event, it is entirely understandable that Finnegan would thus construe the matter.

        The Fifth Circuit Engel case discussed above is also relevant to our inquiry concerning timeliness.

Although the Engel court held that a district court has the authority to award attorneys' fees (pursuant to a

contractual provision) to a prevailing defendant who has failed to plead same and who seeks same for the first

time after successfully appealing a judgment in favor of plaintiff, the court also recognized potential prejudice

to the opposing party, and indicated that an award in such circumstances would be discretionary. Examining

the plaintiff's assertion of prejudice there, the Engel court acknowledged that the defendant had not sought

attorneys' fees in its pleadings, but noted that the contract was in evidence and clearly provided that the

prevailing party could recover attorneys' fees, that plaintiff's own application for attorneys' fees had

specifically focused attention on the attorneys' fees clause, and that "[o]nly the identity of the prevailing party

had to be established before that party's right to this form of relief became manifest." Engel, 732 F.2d at

1242.

        In the instant case, the same factors are present: although Finnegan did not seek attorneys' fees in

its pleadings, the contract was in evidence and expressly provided for attorneys' fees for the prevailing party,

and only the identity of the prevailing party had to be established before that party's right to attorneys' fees

became manifest. It is true that Engel is distinguishable in that the appeal in Engel involved the very contract

                                                        7
claim on which the entitlement to attorneys' fees depended.8 On the other hand, in the instant case, Finnegan's

original appeal challenged only the district court's judgment in favor of Capital Asset on the trade secrets

claim. Indeed, Finnegan had successfully defended Capital Asset's claim against it based upon breach of the

contract. However, the instant case is like Engel in that, as a practical matter, the identity of the prevailing

party could not be ascertained until after the appeal. As explained above, although Finnegan had successfully

defended Capital Asset's claim that Finnegan had breached the contract, Finnegan probably would not have

been considered the prevailing party because Capital Asset obtained via its trade secrets claim all of the relief

that it might have gotten had it succeeded on its breach of contract claim.

          Under the particular circumstances of this case, we hold that the district court did not abuse its

discretion in finding Finnegan's request for attorneys' fees timely, and in awarding same.

          Accordingly, the judgment of the district court is

          AFFIRMED.9

      8
    The Advisory Committee notes to Rule 54(d)(2) state that "[a] new period for filing [i.e., a new 14-day
period] will automatically begin if a new judgment is entered following reversal or remand by the appellate
court." Although we suspect that the commentary was contemplating an appeal and reversal on the very issue
on which entitlement to fees hinged, as in Engel, the common sense of the proposition lies in the fact that the
identity of the prevailing party is unascertained until after the appeal.
  9
   Capital Asset's other arguments on appeal—that Finnegan was not the prevailing party and that the district
court abused its discretion with respect to the amount of the fees—are rejected without need for discussion.
Thus, the district court's award of fees and the amount thereof are affirmed without modification. In addition,
Finnegan's motion for attorneys' fees on appeal is granted as to entitlement, and that matter is remanded to
the district court for a determination of amount.

                                                       8