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Washington International Insurance Company and North American v. Ashton Agency

May 8, 2013


The opinion of the court was delivered by: Landya McCafferty United States Magistrate Judge

Opinion No. 2013 DNH 072


In an order dated March 7, 2013, the court granted judgment to plaintiffs (collectively "Washington") in the amount of $592,084.33. Before the court is Washington's motion for attorney's fees, submitted pursuant to Rule 54(d)(2) of the Federal Rules of Civil Procedure ("Federal Rules"). Ashton Agency, Inc. ("Ashton") objects. For the reasons that follow, Washington's motion for attorney's fees is granted in part.

The Legal Standard

The Federal Rules require a party seeking attorney's fees to do so by motion. See Fed. R. Civ. P. 54(d)(2)(A). Among other things, a motion for attorney's fees must "specify . . . the statute, rule, or other grounds entitling the movant to the award." Fed. R. Civ. P. 54(d)(2)(B)(ii). Here, Washington grounds its request for attorney's fees on the court's inherent power to make such an award when circumstances so warrant.

"It is beyond serious dispute that a federal court possesses inherent power to shift attorneys' fees when parties conduct litigation in bad faith." Jones v. Winnepesaukee Realty, 990 F.2d 1, 4 (1st Cir. 1993) (citing Roadway Express, Inc. v. Piper, 447 U.S. 752, 765-66 (1980); Stefan v. Laurenitis, 889 F.2d 363, 370 (1st Cir. 1989); Peltier v. Peltier, 548 F.2d 1083, 1084 (1st Cir. 1977)). More specifically:

Although under the American Rule "the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys' fee from the loser," Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247 (1975), federal courts have the power to award such fees when a party has "acted in bad faith, vexatiously, wantonly, or for oppressive reasons," id. at 258--59 (internal quotation marks omitted).

RTR Techs., Inc. v. Helming, 707 F.3d 84, 94 (1st Cir. 2013) (parallel citations omitted). The party seeking attorney's fees bears the burden of establishing its opponent's bad-faith conduct by clear and convincing evidence. See Dubois v. U.S. Dep't of Agric., No. CIV.A. 95-50-B, 1998 WL 34007445, at *2 (D.N.H. July 17, 1998) (citing Dow Chem. Pac. Ltd. v. Rascator Maritime S.A., 782 F.2d 329, 344 (2d Cir. 1986); Autorama Corp. v. Stewart, 802 F.2d 1284, 1288 (10th Cir. 1986)).

As for the kind of conduct that may justify an award of attorney's fees, the court of appeals has explained that "[t]o invoke [an] exception [to the American Rule] under a claim of 'vexatious' conduct, the moving party must demonstrate that the losing party's actions were 'frivolous, unreasonable, or without foundation, even though not brought in subjective bad faith.'" Dubois v. U.S. Dep't of Agric., 270 F.3d 77, 80 (1st Cir. 2001) (quoting Local 285, Serv. Emps. Int'l Union v. Nonotuck Res. Assocs., 64 F.3d 735, 737 (1st Cir. 1995)). Finally, in Whitney Brothers Co. v. Sprafkin, 60 F.3d 8, 15 (1st Cir. 1995), the court of appeals appears to have tacitly endorsed the principle that an award of attorney's fees may be appropriate when a defendant improperly compels a plaintiff to file suit to enforce a right to which it was clearly entitled.*fn1

While district courts have inherent power to award attorney's fees, the court of appeals has cautioned that "[d]istrict courts are well-advised to use their inherent power cautiously and to grant attorneys' fees sparingly under that power." RTR Techs., 707 F.3d at 94 (citing Chambers v. NASCO, Inc., 501 U.S. 32, 45--46 (1991); Estate of Hevia v. Portrio Corp., 602 F.3d 34, 46 (1st Cir. 2010)). That is, "[b]ecause of their very potency, inherent powers must be exercised with restraint and discretion," Chambers, 501 U.S. at 44 (citation omitted), and thus "'should be used sparingly and reserved for egregious circumstances,'" Whitney Bros. Co., 60 F.3d at 13 (quoting Jones . . ., 990 F.2d [at] 4).

Mullane v. Chambers, 333 F.3d 322, 338 (1st Cir. 2003). Moreover, because "the power to sanction must be used with great circumspection and restraint, [and is to be] employed only in compelling situations," Dubois, 270 F.3d at 80, the court of appeals "require[s] that a district court describe the bad faith conduct with sufficient specificity, accompanied by a detailed explanation of the reasons justifying the award," Mullane, 333 F.3d at 338 (quoting Whitney Bros., 60 F.3d at 13; citing Gradmann & Holler GmbH v. Cont'l Lines, S.A., 679 F.2d 272, 274 (1st Cir. 1982)).


With the foregoing legal principles in mind, the court turns to the relevant facts of this case, which are drawn largely, but not exclusively, from its two summary-judgment orders.

Ashton, as an agent for Washington, sold 834 motor-vehicle-dealer surety bonds for which Washington was the surety. Ashton was contractually obligated to remit premiums for those bonds to Washington by July 15, 2010. It did not do so. On October 1, 2010, Ashton replaced between 551 and 578 of the Washington bonds with bonds issued by Great American Insurance Company ("Great American"). Thus, Washington remained the surety on no fewer ...

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