Eiu Group, Inc. v. Citibank Delaware, Inc.

• Decision Date: 21 April 2006
• Docket Number: Civil Action No. 00-12565-WGY.
• Citation: 429 F.Supp.2d 367
• Parties: GROUP, INC., Plaintiff, v. CITIBANK DELAWARE, INC. and Kent Zeigler, Defendants.
• Court: U.S. District Court — District of Massachusetts

Page 367

429 F.Supp.2d 367

GROUP, INC., Plaintiff, v. CITIBANK DELAWARE, INC. and Kent Zeigler, Defendants.

Civil Action No. 00-12565-WGY.

United States District Court, D. Massachusetts.

April 21, 2006.

Terri L. Pastori Peabody & Arnold LLP, Boston, MA, for Plaintiffs.

Joseph H. Reinhardt, J.D., Atty. at Law, Boston, MA, Allen N. David Peabody &amp Arnold LLP, Boston, MA, Edwin A. McCabe, McCabe, Brown & Davis, Boston, MA, for Defendants.

MEMORANDUM

YOUNG, District Judge.

In this session of the United States District Court, every effort is made to enhance the quality of juror decisionmaking. This Court—rejecting the now thoroughly discredited six-person jury model¹—routinely empanels twelve jurors in every civil case. In every case, jurors are permitted to take notes,² ask written questions,³ and inspect at will any exhibit received in evidence.⁴ The Court delivers detailed instructions in plain English before counsels' openings,⁵ before final argument,⁶ and after.⁷ During every morning break, refreshments are delivered to the spacious jury room—a room well-lit by the morning sun through large windows. Books and a wide array of magazines (other than news magazines) are available. The Court is daily called to order with the cry: "All rise for the jury."⁸

All of this is designed to inspire and empower the jury, involving it as an equal partner with the judge in reaching out for genuine justice.⁹

You know what? It works.

American jurors routinely rise above stereotypes to grapple with the most complex factual issues with intelligence, common sense, and the most scrupulous discernment. Sometimes, they seek substantial justice beyond the more narrow confines of the legal case as presented by lawyers and judge.¹⁰

This is such a case.

I. INTRODUCTION

The Court draws the following facts from the evidence offered at trial and presents them in the light most favorable to the jury verdict.

The defendant Citibank Delaware, Inc. ("Citibank") was an investor in EIU Group, Inc. ("EIUG"), which sought to develop and market environmental insurance policies. As part of Citibank's deal with EIUG, Citibank was entitled to have a representative on EIUG's board—defendant Kent Ziegler ("Ziegler"). While EIUG's insurance product was in development, Citibank and Ziegler learned of and invested in yet another environmental insurance company. Citibank and Ziegler decided that this second company had more promise than EIUG and worked to channel potential customers to this second company instead of EIUG. They also denied needed financing and worked to prevent EIUG from finding a suitable reinsurer in order to starve EIUG out of existence. Citibank and Zeigler succeeded in this attempt, causing EIUG and its other investors losses totaling, it was claimed, millions of dollars.

EIUG brought suit for breach of fiduciary duty against Citibank and Ziegler for having worked against the interests of EIUG while at the same time serving on its board. After a six-day trial and two days of deliberation, see Electronic Clerk's Notes 11/28/05-12/02/05 & 12/05/05-12/06/05, the jury returned a verdict in the amount of $654,585 against Citibank and Ziegler.¹¹ After finding the amount of monetary damages, the jury went on to award: "plus 100% legal fees incurred by EIUG regarding this litigation".¹² Jury Verdict [Doc. No. 177] at 1.

On January 4, 2006 the Court entered judgment in favor of EIUG in the amount of only $654,585 (plus interest)—i.e., not including "100% legal fees". See Order of 01/04/06 [Doc. No. 180]. In response, EIUG filed a motion pursuant to Federal Rule of Civil Procedure 59(e) requesting that the Court alter its judgment and include attorneys' fees as instructed by the jury. Motion to Alter or Amend Judgment [Doc. No. 185] ("EIUG's Mot."). After oral argument on March 2, 2006, the Court denied EIUG's motion. See Electronic Clerk's Notes 03/02/06. This memorandum analyzes this most unique issue and explains the Court's decision.

II. DISCUSSION

A. The "American Rule"

"For generations of American lawyers it has been boldfaced black letter law that . . . a litigant must, with few exceptions, bear the single greatest cost of asserting his legal rights—his attorney's fees—regardless of the outcome of his action." Comment, Court Awarded Attorney's Fees and Equal Access to the Courts, 122 U. Pa. L.Rev. 636, 637 (1974) [hereinafter Court Awarded Fees ]. This "American Rule" is in contrast to the "British Rule"—loser pays—which has been employed in England since the Statute of Gloucester in 1278.¹³ David A. Root, Attorney Fee-Shifting in America: Comparing, Contrasting, and Combining the "American Rule" and "English Rule", 15 Ind. Int'l & Comp. L.Rev. 583, 590 (2005).

How the contrary American Rule came into existence is a matter of some opacity. The weight of the evidence suggests, however, that the British Rule prevailed in early American history. See Court Awarded Fees, supra, at 640 ("Curiously enough, it appears that early courts in colonial America routinely awarded all costs, including the fees of counsel, to the successful litigant."); W. Kent Davis, The International View of Attorney Fees in Civil Suits: Why is the United States the "Odd Man Out" in How it Pays its Lawyers?, 16 Ariz. J. Int'l & Compl. L. 361, 400 (1999) ("In general, the rule adopted by the colonies did not deviate from the entrenched English fee shifting rule. On both sides of the Atlantic, statutes provided the basis for attorney fee shifting."); Jane P. Mallor, Punitive Attorneys' Fees for Abuses of the Judicial System, 61 N.C. L.Rev. 613, 615 (1983) ("There is some evidence that the English practice was retained for a short while in early America."); Root, supra, at 584 ("Originally, the United States adopted the `loser pays' rule from England and awarded attorneys fees to the successful party."). But see Tenth Circuit Survey: Attorneys' Fees, 75 Deny. U.L.Rev. 711, 712 (1998) [hereinafter Attorneys' Fees] ("The early American colonies rejected the English Rule.").

Whatever the practices in the colonies and (later) states, the general statutory rule in federal courts since the Federal Judiciary Act of 1789 has been to follow state law. See Alyeska, 421 U.S. at 247-57 & n. 19, 95 S.Ct. 1612. As early as 1796, the American Rule must have been entrenched enough for the Supreme Court to declare "that the Judiciary itself would not create a general rule, independent of any statute, allowing awards of attorneys' fees in federal courts." Id. at 249, 95 S.Ct. 1612 (citing Arcambel v. Wiseman, 3 U.S. (3 Dall.) 306, 1 L.Ed. 613 (1796)). The Court in Arcambel concluded that "[t]he general practice in the United States is in op[p]osition to it; and even if that practice were not strictly correct in principle, it is entitled to the respect of the court, till it is changed, or modified, by statute." 3 U.S. (3 Dall.) at 306. "This Court has consistently adhered to that early holding." Alyeska, 421 U.S. at 250, 95 S.Ct. 1612 (citing Day v. Woodworth, 54 U.S. (13 How.) 363, 14 L.Ed. 181 (1851); Oelrichs v. Spain, 82 U.S. (15 Wall.) 211, 21 L.Ed. 43 (1872); Flanders v. Tweed, 82 U.S. (15 Wall.) 450, 21 L.Ed. 203 (1873); Stewart v. Sonneborn, 98 U.S. 187, 25 L.Ed. 116 (1879); Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 87 S.Ct. 1404, 18 L.Ed.2d 475 (1967); F.D. Rich Co. v. United States ex rel. Industrial Lumber Co., 417 U.S. 116, 94 S.Ct. 2157, 40 L.Ed.2d 703 (1974)); see also Roadway Express, Inc. v. Piper, 447 U.S. 752, 100 S.Ct. 2455, 65 L.Ed.2d 488 (1980); Chambers v. NASCO, Inc., 501 U.S. 32, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991).

Justification for the American Rule was slow in coming—which may be understandable for a rule that the Supreme Court admitted may not be "strictly correct in principle". Certainly, early Americans' rejection of all things English played a role.¹⁴ Attorneys' Fees, supra, at 712; Court Awarded Fees, supra, at 641. Americans'"fierce frontier individualism"—"[t]he popular view of the solitary folk-hero fighting for his rights"—is also hypothesized to have been "extraordinarily influential". Court Awarded Fees, supra, at 641 (citing R. Pound, The Spirit of the Common Law 145 (1921)). Moreover, "[c]olonists believed the law was straightforward, and therefore, they considered lawyers unnecessary." Attorneys' Fees, supra, at 713; see also Mallor, supra, at 616 ("The law was not perceived as a complex or scientific body of knowledge, but rather as a matter of common sense and equitable principles, so that acting as an attorney was not thought to entitle one to compensation.").

This legal reflection of American individualism must surely have also been derivative of early Americans' distrust of—even hatred for—lawyers. Even in England the use of fee statutes reflected "more the legislature's goal of limiting the amount a lawyer could charge his client rather than awarding the costs to the prevailing party." Root, supra, at 584. In the Massachusetts Bay Colony, "the Body of Liberties (1641) prohibited pleading for hire." Lawrence M. Friedman, History of American Law 94 (2d ed.1985). In the Carolinas, the Fundamental Constitutions labeled it "a base and vile thing to plead for money or reward." Id. Consequently, no lawyers practiced in South Carolina until 1699. Id. In many colonies, attorneys were forbidden from charging any fee at all. Attorneys' Fees, supra, at 713; Court Awarded Fees, supra, at 641. Some colonies followed English practice, though, and established fee schedules for lawyers' pay. Mallor, supra, at 615. Additionally, lawyers were viewed as members of the upper class and thus reviled by lower classes. Friedman, supra, at 95; Court Awarded Fees, supra, at 640-41. Add to this the fact that lawyers traditionally were officers of the courts of the King of England, and one can further understand the source of lawyers' low standing in Revolutionary America. See also Amar, Constitution, supra, at 207 (explaini...