Court Opinion

ID: 1001017
Source: CourtListenerOpinion
Date Created: 2013-07-04 17:49:11.974752+00
Date Added: 2024-06-11T15:12:27.429381
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

MAJESTIC DISTILLING COMPANY,
INCORPORATED,
Plaintiff-Appellee,

v.                                                                  No. 98-2624

STANLEY STAWSKI DISTRIBUTING
COMPANY,
Defendant-Appellant.

Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Catherine C. Blake, District Judge.
(CA-96-1486-CCB)

Argued: December 1, 1999

Decided: February 28, 2000

Before WIDENER and LUTTIG, Circuit Judges, and
Margaret B. SEYMOUR, United States District Judge
for the District of South Carolina,
sitting by designation.

_________________________________________________________________

Affirmed by unpublished opinion. Judge Seymour wrote the opinion,
in which Judge Widener and Judge Luttig joined.

_________________________________________________________________

COUNSEL

ARGUED: Michael S. Blazer, MICHAEL S. BLAZER, P.C., Chi-
cago, Illinois, for Appellant. Alan Michael Warshauer, WORMSER,
KIELY, GALEF & JACOBS, L.L.P., New York, New York, for
Appellee. ON BRIEF: Heidi L. Levine, PIPER & MARBURY,
L.L.P., Baltimore, Maryland, for Appellant.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

SEYMOUR, District Judge:

This appeal arises from an action in which Appellee Majestic Dis-
tilling Company ("Majestic") sought damages against Appellant Stan-
ley Stawski Distribution Company ("Stawski") for fraudulent
misrepresentation, negligent misrepresentation, contribution, and
indemnification. We address three issues raised by Stawski on appeal:
(1) whether the district court erred in its apportionment of damages
attributable to Stawski; (2) whether the district court properly
awarded attorney's fees and costs; and (3) whether the district court
properly imposed a discovery sanction. Finding no error, we affirm.

I.

Majestic is a Maryland corporation that manufactures and sells
alcoholic beverages. Stawski is an Illinois corporation that distributes
alcoholic beverages. Stawski placed approximately sixteen orders for
liquor that Majestic completed in twenty-seven shipments. Stawski
represented to Majestic that the liquor was being purchased for expor-
tation. As such, the shipments were not subject to excise taxes, and
Majestic did not collect excise taxes from Stawski.

Subsequent to the sale, Stawski completed Bureau of Alcohol,
Tobacco, and Firearms ("ATF") Forms 5100.11 with respect to the
shipments and returned them to Majestic. These forms affirmed that
the liquor had been shipped out of the country. However, it later was
revealed that the forms bore fraudulent signatures and stamps.

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The ATF investigated Majestic for the Stawski shipments, as well
as shipments of four other purchasers, including fifty-two shipments
to the St. Regis Mohawk Indian Reservation ("Indian Reservation").
In August 1995, the ATF billed Majestic $2,547,816.74 in overdue
excise taxes and interest, of which $1,254,168.13 was attributable to
the twenty-seven Stawski shipments. In April 1996, Majestic and the
ATF agreed to a settlement of $200,000.

Majestic subsequently brought an action against Stawski for fraud-
ulent misrepresentation, negligent misrepresentation, contribution,
and indemnification. The district court granted Majestic summary
judgment as to its claims of negligent misrepresentation and indemni-
fication.

The district court thereupon held a hearing on damages, at which
time it determined that Stawski should be liable for a portion of the
$200,000 settlement. The district court reasoned that the
$1,254,168.13 attributable to Stawski was 46% of Majestic's total tax
liability of $2,715,838.74. Thus, Stawski was liable for 46% of the
total tax liability of the $200,000 settlement, or $92,000.

The district court further determined that Stawski should be liable
to Majestic for the costs Majestic incurred to protect its interests
against the ATF because of Stawski's wrongdoing. After hearing tes-
timony from Lee Shuman, current President and then Vice-President
of Majestic, the district court found that Shuman had expended
approximately 200 hours of his time at a value of $60.57 per hour to
oversee Majestic's response to the ATF investigation. The district
court declined to accept Shuman's testimony regarding the time spent
by other Majestic personnel, finding that testimony to be hearsay. The
district court determined the total costs incurred by Majestic for Shu-
man's services to be $12,114.

The district court also concluded that Stawski should be liable for
a portion of the attorney's fees incurred by Majestic in defending the
ATF investigation. Majestic had retained an attorney who was an
expert in the field of alcohol regulation. The attorney billed Majestic
for his time with respect to all five matters in which Majestic was
implicated. He then reviewed his files and records in an attempt to
discern specifically what portion of the bill could be attributed to the

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Stawski matter. The district court reduced the amount of hours the
attorney requested after Stawski challenged some travel time, thereaf-
ter awarding Majestic $18,728 in attorney's fees.

This appeal follows.

II.

We review the district court's damages award under a clearly erro-
neous standard. See Little Beaver Enter. v. Humphreys Rys., Inc., 719
F.2d 75, 79 (4th Cir. 1983).

Stawski first contends that the district court lacked an evidentiary
basis for apportioning the $200,000 settlement with the ATF. Specifi-
cally, Stawski asserts that neither the ATF nor Majestic assigned any
percentage of the $200,000 settlement to the five claims being negoti-
ated.

We find no error in the district court's determination that Stawski
should be liable for 46% of the settlement. Under Maryland law, com-
pensatory damages "must be proved with reasonable certainty, and
may not be based on speculation or conjecture." Asibem Assocs., Ltd.
v. Rill, 286 A.2d 160, 162 (Md. 1972). Stawski's actions concerning
the fraudulent signatures and stamps had exposed Majestic to an addi-
tional tax liability of $1,254,168.13. That amount was 46% of the
total tax liability of $2,715,838.74. Consequently, we find the district
court made an equitable, reasonable decision when it determined that
Stawski was responsible for $92,000 based on Stawski's percentage
of Majestic's total tax liability.

Stawski further contends that the district court erred in declining to
assign a monetary amount to the Indian reservation claim. However,
that claim exposed Majestic to criminal fines, not tax liability. This
court concludes that the district court did not err in refusing to attri-
bute any portion of the $200,000 tax settlement to that claim.

III. Attorney's Fees and Internal Costs

Stawski also asserts that the district court had no evidentiary basis
for awarding Majestic business costs of $12,114 and attorney's fees
of $18,728.

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This court reviews the award of attorney's fees and costs for abuse
of discretion. See Brodziak v. Runyon, 145 F.3d 194, 196 (4th Cir.
1998).

Maryland courts have long recognized the "collateral litigation"
exception to the general rule that costs and expenses of litigation,
other than ordinary court costs, are not recoverable in an action for
damages. See Archway Motors, Inc. v. Herman, 394 A.2d 1228, 1231
(Md. Ct. Spec. App. 1978). The "collateral litigation" exception pro-
vides that a plaintiff can recover costs and attorney's fees when the
wrongful acts of a defendant have involved the plaintiff in litigation
with a third party. Id. Here, Stawski's fraudulent representations
resulted in Majestic being liable to the ATF for an additional
$1,254,168.13. Thus, the district court properly determined that
Stawski should be held liable for a portion of the business costs and
attorney's fees incurred by Majestic in defending the underlying
actions.

A.

We find no error in the district court's determination of Majestic's
costs. Company President Shuman testified as to Majestic's business
costs and his role in the ATF investigation. He indicated that he was
the coordinator of all requests for information. He was involved in
meetings and phone calls. He fielded requests for information and
assigned them to his staff, followed up on the information, and trans-
mitted the responses to the ATF. Shuman estimated that he spent
approximately 400 hours on the ATF investigation, attributing
approximately half of the time to Stawski because half of the ship-
ments in question were Stawski's.

The district court's determination that Shuman spent 200 hours of
his time, at a value of $60.57 per hour, is reasonable based on Shu-
man's testimony. In addition, the district court properly refused to
consider Shuman's testimony regarding the time spent by other
Majestic employees on the Stawski matter as that testimony was hear-
say. The court concludes that the district court's award of $12,114 for
costs is not clearly erroneous.

                    5
B.

The district court properly awarded Majestic $18,728 in attorney's
fees. In determining whether an award of attorney's fees is reason-
able, Maryland courts look at the following factors:

          a. the time and labor required, the novelty and difficulty
          of the questions involved, and the skill requisite to per-
          form the legal service properly;

          b. the likelihood, if apparent to the client, that the accep-
          tance of particular employment will preclude other
          employment by the lawyer;

          c. the fee customarily charged in the locality for similar
          legal services;

          d. the amount involved and the results obtained;

          e. the time limitations imposed by the client or by the cir-
          cumstances;

          f. the nature and length of the professional relationship
          with the client;

          g. the experience, reputation, and ability of the lawyer or
          lawyers performing the services; and

          h. whether the fee is fixed or contingent.

Maxima Corp. v. 6933 Arlington Dev. Ltd. P'ship, 641 A.2d 977, 982
(Md. Ct. Spec. App. 1994).

Contrary to Stawski's assertion, the district court had ample evi-
dence to make a determination concerning the reasonableness of the
attorney's fees sought by Majestic. Majestic submitted detailed state-
ments concerning the services rendered by its counsel. In addition,
Majestic's attorney testified that he relied upon files and meeting
notes to determine a fair amount to apportion to Stawski.

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Even with this evidence, the district court reduced the total amount
of hours the attorney submitted. The district court did not accept into
evidence the handwritten notes that the attorney used to refresh his
recollection of the time he spent on the Stawski matter. Nor did the
district court include the full amount of travel time requested by
Majestic. Instead, the district court based its decision on the detailed
statements concerning the attorney's services and the relevant testi-
mony. This court concludes that the district court did not err in award-
ing Majestic $18,728 in attorney's fees.

IV.

Stawski next complains that the district court abused its discretion
in imposing a $500 sanction subsequent to Majestic's Motion to Com-
pel. Although Stawski now argues that it complied with the discovery
request, the fact remains that Stawski neither responded to the Motion
to Compel nor submitted objections to the documents requested.

Pursuant to Rule 37 of the Federal Rules of Civil Procedure, the
district court has broad discretion in determining the appropriate sanc-
tion for a party's noncompliance with a discovery request. Fed. R.
Civ. P. 37. In light of the fact that Stawski neither responded to the
motion nor objected to documents requested, we find no error.

The district court's judgment is hereby affirmed.

AFFIRMED

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