Court Opinion

ID: 2963564
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:12:06.847324+00
Date Added: 2024-06-11T08:37:13.439806
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

          No. 94-2042

                              WHITNEY BROS. CO., ET AL.,

                               Plaintiffs - Appellees,

                                          v.

                   DAVID C. SPRAFKIN AND JOAN BARENHOLTZ, TRUSTEES
                     OF THE BERNARD M. BARENHOLTZ TRUST, ET AL.,

                               Defendants - Appellants.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF NEW HAMPSHIRE

                   [Hon. Joseph A. DiClerico, U.S. District Judge]
                                              ___________________

                                 ____________________

                                        Before

                               Torruella, Chief Judge,
                                          ___________

                            Aldrich, Senior Circuit Judge,
                                     ____________________

                               and Cyr, Circuit Judge.
                                        _____________

                                _____________________

               James P. Bassett, with whom Orr and Reno, P.A. and Samuel M.
               ________________            __________________     _________
          Sprafkin, were on brief for appellants.
          ________
               James R.  Muirhead, with whom Peter D.  Anderson and McLane,
               __________________            __________________     _______
          Graf,  Raulerson &  Middleton Professional  Association, were  on
          _______________________________________________________
          brief for appellees.

                                 ____________________

                                    July 20, 1995
                                 ____________________

                    TORRUELLA, Chief Judge.   At issue here  is whether the
                    TORRUELLA, Chief Judge.
                               ___________

          Defendants  were   properly  required  to  pay   the  Plaintiffs'

          attorneys'  fees.    Plaintiffs/appellees  are  Whitney  Brothers

          Company  ("Whitney  Brothers") and  Griffin  M.  Stabler, Whitney

          Brothers'  president,  chief  executive  officer  and   director.

          Defendants/appellants, David C. Sprafkin and Joan Barenholtz, are

          the   trustees  of  the  Bernard  M.  Barenholtz  Trust,  Whitney

          Brothers' majority shareholder.

                    In the underlying litigation, Plaintiffs sued to compel

          Defendants to sell their stock  in Whitney Brothers pursuant to a

          written buy/sell  contract.  After  two years of  litigation, the

          district  court ordered the sale  at Defendants' asking price and

          held  that the Plaintiffs  were entitled to  satisfy the purchase

          price with a prepayable promissory note.  The district court also
                       __________

          concluded  that  the  Defendants had  resisted  their obligations

          under the buy/sell  agreement in bad faith, and  accordingly used

          its inherent  powers to  shift the  Plaintiffs' attorneys'  fees.

          The  district court  predicated its bad  faith finding  on, inter
                                                                      _____

          alia, the  Defendants'  continuous insistence  that the  purchase
          ____

          price was not prepayable.

                    On  appeal, we  reversed the district  court's judgment

          with respect  to prepayment.   The Defendants  filed a  Motion to

          Reconsider the  imposition of  attorneys' fees  in  light of  our

          reversal on  the prepayability of  the note.  The  district court

          held that the  fee award was  still justified but  amended it  to

          exclude  fees earned  in connection  with  the prepayment  issue.

                                         -2-

          Defendants now appeal.  For the following reasons, we vacate that

          portion of the court's order imposing fees and remand for further

          proceedings consistent with this opinion.

                                      BACKGROUND
                                      BACKGROUND

                    Whitney  Brothers is a  New Hampshire  corporation that

          produces wooden learning materials.  Bernard Barenholtz  acquired

          62.6% of  the company's  outstanding shares in  1969.   Ten years

          later, he transferred  these shares to the  Bernard M. Barenholtz

          Trust  (the  "Trust")  and  named  himself  and  defendant  David

          Sprafkin trustees.  Plaintiff Griffin  Stabler owned 32.7% of the

          shares, and his son, David Stabler, owned the remaining 4.7%.

                    On  January 27, 1987,  Whitney Brothers,  the trustees,

          and Griffin Stabler  executed a written buy/sell  agreement ("The

          Agreement").  Under The Agreement, Whitney Brothers would buy the

          Trust's  shares  within  ninety  days  of the  death  of  Bernard

          Barenholtz and buy Griffin Stabler's shares within ninety days of

          Stabler's death.   To determine  the purchase price,  the parties

          would plug  an agreed-upon appraisal into a  formula to determine

          the purchase  price.   If  the  parties  could not  agree  on  an

          appraisal, they  would each  get their own  and plug  the average

          into the  formula.  The contract  also provided for payment  by a

          promissory note, with monthly installments over ten  years at 10%

          interest  per  annum.   The  Agreement  did  not  mention whether

          prepayment of the note was permissible.

                    On   February  3,   1987,   Bernard  Barenholtz'   (and

          Defendants')  attorney Samuel M. Sprafkin wrote a letter advising

                                         -3-

          Mr.  Barenholtz that  the promissory  note  should be  prepayable

          without  penalty.   The  district court  found  that the  parties

          orally agreed to  the letter's prepayment provision.   Barenholtz

          then placed the letter in a file with the written contract.

                    When  Bernard Barenholtz died,  on August 5,  1989, his

          daughter,  defendant   Joan  Barenholtz,   assumed  his   trustee

          position.   A  few days  later,  plaintiff Stabler  and defendant

          Sprafkin discussed  the contract's required  stock sale.   One of

          the  parties asked  E.F. Greene  to  update a  past appraisal  of

          Whitney  Brothers.1     Sprafkin  rejected   Greene's  appraisal;

          Whitney Brothers  accepted it.   Relying  on Greene's  appraisal,

          Whitney  Brothers tendered to  Defendants a prepayable promissory

          note for $1,178,000 for the stock.2

                    Instead of responding immediately, Defendants secured a

          significantly  higher appraisal  from  Alfred  Schimmel,  a  real

          estate appraiser from New York  City.  They then rejected Whitney

          Brothers'  tender  by  letter,   without  mentioning  the  note's

          prepayment  clause.     When  Stabler   learned  of   Defendants'

          appraisal, he rejected it as too high.

                    Ultimately, Plaintiffs  sued to compel  the transfer of

          the stock.   Ten months later, on  December 13, 1990, as  part of

          their cross-motion  for summary  judgment, Plaintiffs offered  to

                              
          ____________________

          1  The parties disagree over who requested the update.

          2  Defendants  contend that Stabler made the  tender knowing that
          they did not accept Greene's  appraisal and planned to obtain one
          of their own.

                                         -4-

          tender  either $1,349,3433  immediately or,  if  the court  found

          that The  Agreement did not  permit prepayment, that  amount over

          ten years at 10% interest.  Defendants again rejected the tender.

          They now  contend that they  rejected it because: (1)  it omitted

          $145,000  worth of  interest that  had accrued since  November 3,

          1989, 90 days  after the death of Bernard  Barenholtz, and (2) it

          was  invalid because the  first option permitted  prepayment, and

          the  second option  was conditioned  upon a  court judgment  that

          prepayment  was   prohibited.    Plaintiffs  maintain   that  the

          Defendants   continually  and   in  bad   faith  resisted   their

          obligations under The Agreement so that they could sell the stock

          to one of Whitney Brothers' competitors at a higher price.

                    In response to the cross-motions for summary  judgment,

          the district court: (1)  ordered Defendants to sell their  stock;

          (2) found that  Plaintiffs were not entitled to  prepay the note;

          and (3) decided  that a trial was  necessary on the issue  of the

          stock  price.   See Whitney  Bros. Co.  v. Sprafkin,  No. 90-54-S
                          ___ __________________     ________

          (D.N.H. filed June 5, 1991)(the "Summary Judgment Opinion").

                    After a  six-day trial,  the court  issued an  order in

          which it: (1)  required the Plaintiffs to pay  $1,349,343 for the

          stock;4 (2) reconsidered  and reversed, sua sponte,  its previous
                                                  __________

          order  and ruled that  the parties' oral  agreement regarding the

                              
          ____________________

          3  This  was the price calculated under the  contract by plugging
          the average of the two appraisals into the formula.

          4   The  court  held that  the  Plaintiffs were  bound  by  their
          summary-judgment-motion stipulation  that  the  stock  price  was
          $1,349,343.

                                         -5-

          prepayability of  the note was  binding and, therefore,  that the

          Plaintiffs  could pay for the stock  with a prepayable promissory

          note; (3)  ruled that interest on the  note would begin to accrue

          when it was executed, and not  before; and (4) used its  inherent

          powers to  assess attorneys' fees against the Defendants based on

          their  bad faith  conduct throughout  the  litigation.5   Whitney
                                                                    _______

          Bros. Co. v. Sprafkin, No. 90-054-S, 1992 WL 686272 (D.N.H. Sept.
          _________    ________

          30, 1992)("the Order").  The  Order cited the Defendants' refusal

          to accept a prepayable note despite their oral agreement to do so

          as one of five instances of their bad faith.

                    On  appeal  (the  "First  Appeal"),   we,  inter  alia,
                                                               ___________

          reversed  the district  court's  judgment  with  respect  to  the

          prepayability of the  note, holding that The  Agreement precluded

          the  Plaintiffs'  efforts  to  prepay  regardless  of  whether  a

          subsequent oral agreement provided for prepayment.  Whitney Bros.
                                                              _____________

          Co. v. Sprafkin, 3 F.3d 530 (1st Cir. 1993).
          ___    ________

                    Defendants  then filed a  motion asking that  the court

          reconsider the  imposition of  attorneys'  fees in  light of  our

          reversal on the prepayment issue.  The court denied the Motion to

          Reconsider without a hearing,6 holding that the integrity  of the

          court's previous  bad  faith  finding was  not  damaged  by  this

                              
          ____________________

          5   Although the  parties briefed the  issue, the  district court
          imposed the fee award without the benefit of a hearing. 

          6  Judge Stahl, who presided over the trial and issued the Order,
          requested that the  matter be assigned to another  judge after he
          was  appointed to  the Court  of Appeals  for the  First Circuit.
          Judge   DiClerico  presided  over  the  remainder  of  the  case,
          including the Defendants' Motion for Reconsideration.

                                         -6-

          Court's  reversal  on  the  prepayment issue.    The  court  did,

          however,  amend the  fee  award  to exclude  all  fees earned  in

          connection with the prepayment issue.  Defendants now appeal.

                                  STANDARD OF REVIEW
                                  STANDARD OF REVIEW

                    We  review a district  court's imposition  of sanctions

          under its inherent power for  an abuse of discretion, Chambers v.
                                                                ________

          NASCO, 501 U.S. 32, 55  (1991), giving recognition to the premise
          _____

          that the  "district court  is better situated  than the  court of

          appeals  to marshal  the  pertinent  facts  and apply  the  fact-

          dependent  legal standard" that  informs its determination  as to

          whether  sanctions are  warranted.   Cooter  &  Gell v.  Hartmarx
                                               _______________     ________

          Corp., 496 U.S.  384, 402 (1990).  We  nonetheless remain mindful
          _____

          that a "district court would necessarily abuse  its discretion if

          it  based its  ruling on  an erroneous  view of  the law or  on a

          clearly erroneous assessment of the evidence."  Id. at 405.
                                                          ___

                                      DISCUSSION
                                      DISCUSSION

                    The issue  before us  is whether  the district  court's

          imposition of attorneys' fees constitutes an abuse of discretion,

          particularly in  light of our  reversal on the  prepayment issue.

          The  Plaintiffs  allege  that  the  Defendants  raised  frivolous

          defenses in bad faith solely to avoid their obligations under The

          Agreement  so that  they  could  sell the  securities  to one  of

          Whitney  Brothers' competitors at  a higher price.   Accordingly,

          the Plaintiffs contend, the fee award  is appropriate despite our

          reversal on the  prepayment issue.  The Defendants  maintain that

          they resisted the Plaintiffs' attempts to implement The Agreement

                                         -7-

          in good  faith because, inter  alia, (1) the  Plaintiffs insisted
                                  ___________

          that  the note  was  prepayable, and  (2) they  were legitimately

          concerned that the  Plaintiffs were both financially  and legally

          incapable of fulfilling  their obligations  under The  Agreement.

          The   Defendants  further  maintain  that  our  reversal  on  the

          prepayment issue completely  justifies their position  throughout

          the course  of  the  litigation,  and  that  the  district  court

          therefore  abused  its  discretion in  assessing  attorneys' fees

          against them.  

                    With regard to  the original finding of  bad faith, the

          district court stated the following:

                      A retrospective  look at  this litigation
                      reveals   Defendants'   bad    faith   in
                      resisting  their  obligation  to  perform
                      under The  Agreement.  In support  of its
                      bad  faith ruling,  the  Court makes  the
                      following observations and findings:

                         1.   In   initially   resisting  their
                      obligation    under     The    Agreement,
                      Defendants  relied  primarily   upon  the
                      argument   that   Plaintiffs   were   not
                      financially able  to  perform.   However,
                      Defendants  advanced  no  expert  opinion
                      either  to  support   their  claim  or to
                      counter the opinion of Plaintiffs' expert
                      that Plaintiffs   were  indeed ready  and
                      able to perform.  Moreover, The Agreement
                      itself  certainly   did  not   explicitly
                      contemplate the  sort of  financial "veto
                      power"  Defendants attempted to assert in
                      the   earlier   stages  of   this   case.
                      Finally, an  examination of the financial
                      data   advanced   by   Plaintiffs'  amply
                      supports a finding  that Plaintiffs were,
                      in fact,  in a position to  perform under
                      the  Agreement;

                         2.   Samuel   Sprafkin,   despite  his
                      fiduciary  obligation  to  Whitney  as  a
                      director   thereof,    actively   opposed

                                         -8-

                      implementation of the oral agreement that
                      Plaintiffs'    obligation    under    The
                      Agreement  would  be  prepayable  without
                      penalty;

                         3.  Both  David  and  Samuel  Sprafkin
                      testified  that Samuel  Sprafkin did  not
                      speak with E.F. Greene  during the course
                      of the  August  10, 1989,  meeting.    In
                      light of  all the evidence in  this case,
                      such testimony simply was not credible;

                         4.  Both  David  and  Samuel  Sprafkin
                      testified  that  prior to  being  shown a
                      copy   of The Agreement during the August
                      10,  1989,  meeting  at  the  Barenholtz'
                      home, they had forgotten  about it.  Such
                      testimony simply was not credible;

                         5.   Defendants'   sole   reason   for
                      proceeding to  trial after the  Court had
                      ruled on  the parties'  cross-motions for
                      summary   judgment   was  to   seek   the
                      utilization of the  Schimmel appraisal in
                      implementing   Article   Three   of   The
                      Agreement.   The Schimmel  appraisal was,
                      however, so lacking in factual foundation
                      that it would not have assisted the trier
                      of fact on the  issue of the  securities'
                      value.   It  thus would  have been  ruled
                      inadmissible  under  Rule  702,  Fed.  R.
                      Evid., were the price  issue not resolved
                      at the  summary judgment  stage of  these
                      proceedings.   (In so stating,  the Court
                      adopts in toto the argument  set forth in
                             _______
                      the  Plaintiff's  Motion  to  Strike  the
                      Testimony   and  Report   of  Alfred   E.
                      Schimmel.)

                         Nonetheless, despite  both Defendants'
                      acknowledged duty as  trustees to advance
                      a competent  appraisal, see Tr.  VI, 118,
                      and   the  obvious   inadequacy  of   the
                      Schimmel appraisal, Defendants continued,
                      indeed continue, to endorse the  Schimmel
                      appraisal.

                         While  perhaps none  of the  foregoing
                      facts and findings, standing alone, would
                      persuade the  Court to  award Plaintiffs'
                      all of their  fees, the sum total  of the
                      delineated behavior  convinces the  Court

                                         -9-

                      that  such a  fee  award is  appropriate.
                      Indeed,    the    record   overwhelmingly
                      indicates  that  Plaintiffs  should never
                      have  had  to  institute this  action  to
                      enforce their clear right to purchase the
                      disputed  securities   pursuant  to   The
                      Agreement.  [FN17]7     Accordingly,  the
                      Court rules that  Plaintiffs are entitled
                      to  recover  their attorneys'  fees  from
                      Defendants. . . .[FN18]8

          Whitney Bros. Co., No. 90-054-S, 1992 WL 686272 at *7.  
          _________________

                    We  must  first  analyze whether  our  reversal  on the

          prepayment  issue significantly affects  the overall integrity of

          the fee award.  The  order states that "the record overwhelmingly

          indicates that Plaintiffs should never have had to institute this

          action  to enforce  their clear  right  to purchase  the disputed

          securities  pursuant to  The  Agreement."    It  enumerates  five

          instances  of  alleged  bad   faith,  including  the  Defendants'

                              
          ____________________

          7  Footnote 17 states: "At   minimum,   Defendants   could   have
          accepted the December 13, 1990, Tender, which adopted Defendants'
          purchase  price, and terminated this costly litigation."  Whitney
                                                                    _______
          Bros. Co., No. 90-054-S, 1992 WL 686272 at n.17.
          _________

          8  Footnote 18 states:

                         The   Court's    decision   to    hold
                      Defendants   responsible   for   all   of
                      Plaintiffs' fees  in this  case has  been
                      made with  due consideration of  the fact
                      that  the  price issue  should  have been
                      disposed   of   at    summary   judgment.
                      However,  the Court's  ruling on  fees is
                      necessarily  informed  by the  bad  faith
                      Defendants   exhibited   throughout   the
                      six-day trial.   In light  of Defendants'
                      bad faith, the Court  finds that it would
                      be patently unfair  to require Plaintiffs
                      to pay any amount of  the attorneys' fees
                      in this case.

          Id. at n.18.
          ___

                                         -10-

          continuous  insistence  that  the debt  was  not  prepayable, and

          clearly states that the fee award is predicated on the "sum total

          of  the delineated behavior."9  Accordingly, because our reversal

          on the prepayability issue undermines the fee award, we therefore

          must  determine whether  the other  enumerated  instances of  bad

          faith are sufficient to support the fee award.

                    We   begin  by  emphasizing  that  the  district  court

          assessed the  fees pursuant  to the  court's "inherent  power" to

          "manage [its] own affairs."  Link v. Wabash R. Co., 370 U.S. 626,
                                       ____    _____________

          630-31  (1962).   It is  beyond serious  dispute that  a district

          court  may use  its  inherent powers  to  assess attorneys'  fees

          against  a  party that  has  "'acted in  bad  faith, vexatiously,

          wantonly, or for oppressive reasons,'"  Chambers, 501 U.S. at 45-
                                                  ________

          46 (quoting Alyeska  Pipeline Service Co. v.  Wilderness Society,
                      _____________________________     __________________

          421 U.S. 240,  258-59 (1975)); see also Roadway  Express, Inc. v.
                                         ________ ______________________

          Piper,  447  U.S.  752, 765-66  (1980)  (recognizing  "bad faith"
          _____

          exception to general  rule that federal courts  cannot ordinarily

          make  fee-shifting awards); Jones v. Winnepesaukee Realty, et al,
                                      _____    ___________________________

          990 F.2d 1, 3 (1st  Cir. 1993)(citations omitted).  Nevertheless,

          "[b]ecause  of  their  very  potency,  inherent  powers  must  be

          exercised with restraint  and discretion."  Chambers, 501 U.S. at
                                                      ________

          44 (citation omitted).  Accordingly, a court's  inherent power to

          shift attorneys'  fees "should be used sparingly and reserved for

          egregious circumstances."  Jones, 990 F.2d  at 3.  Significantly,
                                     _____
                              
          ____________________

          9  As we noted above, the district court took this statement into
          consideration by  reducing the fee  award to the extent  that the
          fees were attributable to the prepayment issue.

                                         -11-

          we have held that a district court exercising its inherent powers

          in  this  fashion  must  describe  the  bad  faith  conduct  with

          "sufficient specificity," accompanied by  a "detailed explanation

          of the reasons justifying the award."   See Gradmann & Holler  v.
                                                  ___ _________________

          Continental, 679 F.2d  272, 274 (1st Cir.   1982) (vacating   fee
          ___________

          award  for district  court's failure  to  provide a  sufficiently

          detailed  justification)(citing F.D. Rich Co. v. United States ex
                                          _____________    ________________

          rel.  Industrial Lumber  Co., 417    U.S. 116,  129 (1974));  cf.
          ____________________________                                  ___

          Jones,  990  F.2d  at  3-4  (holding  that  the  district court's
          _____

          "specific,  meticulously  detailed  finding  of  bad  faith"  was

          supportable on appeal).  These principles, when combined with the

          effect of our reversal on  the prepayment issue, render the order

          assessing fees unsustainable.

                    The  district court predicated its first finding of bad

          faith on the Defendants'  failure to advance expert  testimony in

          support  of their  earlier insistence  that  the Plaintiffs  were

          financially incapable  of performing.   We agree that  a district

          court could find  bad faith where a party  maintains an unfounded

          action or  defense without any  reasonable hope of  prevailing on

          merits.    See  Chambers,  501  U.S. 32;  see  also  Perichak  v.
                     ___  ________                  _________  ________

          International Union of  Elec. Radio & Machine Workers, Local 601,
          _________________________________________________________________

          AFL-CIO, 715 F.2d 78, 83 (1978) (awarding  fees because plaintiff
          _______

          brought  action without "any reasonable prospect of prevailing on

          the merits"); Nemeroff v. Abelson,  704 F.2d 652, 659-60 (2d Cir.
                        ________    _______

          1983) (affirming an award of fees based on a finding of bad faith

          in maintaining an action after it became clear that the claim was

                                         -12-

          no longer  colorable).  Nevertheless,  the facts here are  not so

          clear.    In   their  cross-motion  for  summary   judgment,  the

          Defendants advanced eight grounds for resisting their obligations

          under the Agreement.  The stated grounds  included the following:

          (1)   Whitney  Brothers'  financial   condition  would  not  have

          permitted  it to  make  the  installment  payments;  (2)  Whitney

          Brothers' funds were restricted because its bank had liens on the

          company's assets; and  (3) payment of the note  would be unlawful

          because, under  New Hampshire  corporate law,  a corporation  can

          repurchase  its  own  shares   only  with  unrestricted  surplus.

          Although the district court's Summary Judgment Opinion holds that

          none   of  the  stated  grounds  preclude  the  stock  repurchase

          contemplated  by the  Agreement, neither  it  nor the  subsequent

          order imposing  fees explains how these defenses are frivolous or

          why they  were objectively  or subjectively  unreasonable at  the

          time  they were advanced.   Cf. Blue  v. U.S. Dept.  of Army, 914
                                      ___ ____     ___________________

          F.2d  525,  544  (4th Cir.  1990)(finding  that  district court's

          claim-by-claim  description  of  the  frivolous   nature  of  the

          plaintiffs' complaint demonstrated clearly that their "widespread

          charges  of  racial  discrimination  [were  leveled]  without any

          regard for the truth . .  . in order to harass and  embarrass the

          personnel at Fort Bragg").

                    The  third and  fourth  instances  of  bad  faith  were

          predicated on the  district court's  belief that  both David  and

          Samuel  Sprafkin had  offered  testimony  that  "simply  was  not

          credible."   We have  no doubt that  when a party  has materially

                                         -13-

          perjured himself, this, standing alone, is sufficient grounds for

          finding bad faith.  See Chambers, 501 U.S. at 46 (noting that the
                              ___ ________

          "inherent power extends  to a full  range of litigation  abuses);

          see  also  Perichak, 715  F.2d  at  84-85 &  n.9  (3d Cir.  1983)
          _________  ________

          (holding  that  the  defendant's  "'materially  false  statements

          [made] under  oath' are, having  been critical to the  success of

          his  case, alone,  enough to  support a  finding of  bad faith");

          Carri n  v.  Yeshiva University,  535  F.2d  722 (2d  Cir.  1976)
          _______      __________________

          (affirming fee award  after a civil rights bench  trial where the

          court found that plaintiff's testimony was an "unmitigated tissue

          of lies").  However, "[a]  factfinder's decision that one party's

          version of the events is more credible than the other party's is,

          without more, insufficient to justify an award of attorneys' fees

          .  .  .  ."    Roth  v.  Pritikin,  787  F.2d  54,  58  (2d  Cir.
                         ____      ________

          1986)(discussing  fee awards under  the Copyright Act);  see also
                                                                   ________

          Blue, 914 F.2d  544 (noting that "not  every instance in which  a
          ____

          district court credits one side's  witnesses over another's is an

          occasion for sanctions").

                    Here,  the  district  court  merely  stated   that  the

          Sprafkins' testimony,  "[i]n light of  all the  evidence in  this

          case,  .  .  .  simply  was  not  credible."   It  set  forth  no

          explanation for this conclusion.   We think that a district court

          cannot  predicate  the use  of  its  inherent  powers on  a  mere

          conclusory statement that the  witnesses were not credible.   Cf.
                                                                        ___

          Blue, 914 F.2d  at 544 (holding  that although the fee  award was
          ____

          assessed against  plaintiffs in a  complex civil rights  suit, it

                                         -14-

          was  proper  because  the district  court's  order  imposing fees

          meticulously describes each  instance of perjury and  bad faith).

          Because the  district court  neither explained  why it  concluded

          that the Sprafkins had perjured themselves nor  explained why any

          allegedly untrue statements were material, we cannot say that the

          bad  faith conduct was described with "sufficient specificity" or

          accompanied  by a "detailed explanation of the reasons justifying

          the  award."    See Gradmann  &  Holler,  679 F.2d  at  274.   We
                          ___ ___________________

          therefore  conclude that the district court abused its discretion

          when it based  the fee award on the  unexplicated conclusion that

          the Sprafkins "simply [were] not credible."

                    The court predicated  its fifth finding of bad faith on

          the  Defendants' endorsement of  the Schimmel appraisal.   In its

          order, the  court found the  Schimmel appraisal to  be completely

          lacking   in   factual  foundation,   adopting   the  Plaintiffs'

          contention that "the trustees and their attorney found someone in

          Mr. Schimmel  who would say  anything they wanted him  to say."10

          The Order states  that the Defendants proceeded to  trial for the

          sole purpose of advancing the Schimmel appraisal "despite [their]

          acknowledged  duty as trustees to advance a competent appraisal."

          The  record  fully  supports this  finding,  indicating  that the

          Schimmel appraisal relied upon inflated rental and capitalization

          rates and disregarded the fact that the Whitney Brothers facility

                              
          ____________________

          10    The  district  court's   fee  order  adopted  in  toto  the
                                                              ________
          Plaintiffs' arguments  set forth  in their  Motion to  Strike the
          Testimony of Alfred E. Schimmel.

                                         -15-

          was located in an "A-2  flood zone."11  The record  also supports

          the  district court's  finding that  Schimmel neither  associated

          with a "qualified  local appraiser" nor spent "sufficient time to

          understand the  nuances of the  local market" as required  by the

          Appraisal  Foundation's Standards  of  Professional Practice  and

          Conduct.  Moreover, Michael Monks, a local industrial real estate

          broker testified that the Sprafkins were aware of the infirmities

          infecting the Schimmel opinion before  they advanced it at trial.

          Consequently, we find that the district court's fifth finding  of

          bad faith  was well  grounded in  the record  and set  forth with

          sufficient  particularity  and  is  accordingly  sustainable   on

          appeal.

                    The  district  court's  fee  order  indicated  that  it

          predicated  the fee  award  on  the  cumulative  effect  of  five

          specific instances of alleged bad  faith and its finding that the

          "record  overwhelmingly indicates  that  Plaintiffs should  never

          have had to institute this action to enforce their clear right to

          purchase  the  disputed securities  pursuant  to  The Agreement."

          Although  we affirm  the fifth  finding of  bad faith,  the First

          Appeal obviated the second, and further examination of  the order

          seriously  undermines the facial validity of the remaining three.

          Moreover,   we  do  not  agree  that  the  record  overwhelmingly

          indicates that the Defendants improperly forced the Plaintiffs to

                              
          ____________________

          11  Mr. Green testified that the area floods not only seasonally,
          but also  during periods of  heavy rain.   We think the  district
          court  was  entitled to  find  that  this  data would  have  been
          considered in any competent appraisal.

                                         -16-

          file  suit.   As we  noted  above, neither  the district  court's

          Summary Judgment Opinion nor the Order explains why  the defenses

          maintained  by the  Defendants were  objectively or  subjectively

          unreasonable  when  asserted.   Perhaps  more  significantly, the

          Defendants  ultimately   prevailed  on   the  prepayment   issue,

          apparently vindicating their rejection of the Plaintiffs' initial

          tenders.  This case  involves a complex set  of facts and  events

          that occurred both in and out of court.  In the end, we think the

          district  court's cursory  explanation of the  bases for  the fee

          award is  simply inadequate,  particularly in  light of  the fact

          that no hearing was held on the issue.

                    We   remain   cognizant   of    the   Supreme   Court's

          pronouncement that  appellate tribunals should  give deference to

          the  district courts'  determinations on  sanctions  in order  to

          "streamline  the litigation  process  by  freeing  the  appellate

          courts from the duty of reweighing evidence . . . already weighed

          and considered by  the district court."  Cooter  & Gell, 496 U.S.
                                                   ______________

          at 404.  In  the context of a  court's inherent powers,  however,

          this  deference  is only  proper  where  the district  court  has

          explained  its actions with  sufficient detail.   Accordingly, we

          find that the  combined effect of our reversal  on the prepayment

          issue  and the district  court's failure to  adequately set forth

          its  justifications render its  imposition of attorneys'  fees an

          abuse of discretion.   We therefore  vacate the district  court's

          fee order and remand so that the district court can make specific

          findings consistent with this opinion.

                                         -17-

                    Vacated.
                    _______

                                         -18-