Commercial Litigation and Arbitration

§ 1927 Sanctions Properly Denied Because Defense Counsel’s Time Records Did Not Permit Him to Identify Time Specifically Spent Defending 10 Meritless Claims That Were Dismissed on the Eve of Trial

Jackson v. Diversified Collection Servs., Inc., 2012 U.S. App. LEXIS 12392 (10th Cir. June 19, 2012):

DCS sought fees against Mr. Jackson's attorney, claiming that he acted in bad faith dismissing numerous claims at the start of trial. The district court ruled that a sanction under § 1927 for multiplication of proceedings was warranted because Mr. Jackson's "attorney's actions of waiting until the very eve of trial to withdraw several claims and dismiss a defendant" was "objectively unreasonable." ***

DCS then filed a motion seeking fees of $29,647.12. *** It stated in the motion that this amount represented reimbursement for the time spent by Mr. Lico, one of the five attorneys who worked on the Jackson litigation, at his reasonable billing rate. DCS stated that Mr. Lico began his involvement with, and became lead counsel on, the Jackson litigation two months after the pretrial order and litigated the case before the jury. *** Mr. Lico averred that his fees "associated with [DCS's] defense of the case" totaled $31,207.50, and that he reached the $29,647.12 sanction request under § 1927 by taking the first 50% of that amount and applying it to actual damages, another 25% for defending the dismissed defendant, and 80% of the remaining amount "to account for ten (out of thirteen) meritless claims." *** DCS made no other more specific reference to, or identification of, the time spent on any particular claim.

The district court denied DCS's motion for fees. It stated that DCS's motion was based upon "a wholly fabricated theory of relying on recovery of the fees charged by one of apparently several attorneys" "without any effort to address whether those hours relate in any way to the claims that were withdrawn and dismissed." Id. at 89-90. It ruled that DCS "wholly fail[ed] to respond to the specific guidelines" in its March 3 order directing DCS to identify the fees and costs related to the claims withdrawn and dismissed. Id. at 90. DCS appeals, arguing the district court abused its discretion in denying its fee request after ordering a § 1927 sanction. ***


We conclude, based upon our review of the record, that DCS's documentation was not adequate to enable the district court to make these requisite findings. As the district court found, DCS failed to identify how and to what extent Mr. Lico's hours related to the dismissed claims. DCS argues that "[i]t is neither required, nor practical, for attorneys to break down their billing as to each specific claim." Aplt. Br. at 10. To the contrary, the Supreme Court held long ago that an applicant seeking attorney fees "should maintain billing records in a manner that will enable a reviewing court to identify distinct claims." Hensley v. Eckerhart, 461 U.S. 424, 437 (1983).

A party seeking attorney's fees and costs has the burden of proof as to entitlement and amount, and runs the risk that its fees and costs will be denied if it does not carry this burden. See Mares v. Credit Bureau of Raton, 801 F.2d 1197, 1208 (10th Cir. 1986). The district court was entitled to judge the adequacy of DCS's documentation and to deny fees entirely based upon unsatisfactorily supported claims. See Vocca v. Playboy Hotel of Chicago, Inc., 686 F.2d 605, 607 (7th Cir. 1982) ("[D]enial [of attorneys' fees] is an entirely appropriate, and hopefully effective, means of encouraging counsel to maintain adequate records and submit reasonable, carefully calculated, and conscientiously measured claims.") (internal quotation marks omitted)). Because DCS failed to comply with the district court's order to identify the fees and costs incurred after entry of the pretrial order to defend against the claims withdrawn and dismissed, we find no abuse of discretion in the district court's denial of DCS's § 1927 fee request.

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