Old Republic Ins. Co. v. US

Citation741 F. Supp. 1570,14 CIT 377
Decision Date11 June 1990
Docket NumberNo. 83-10-01525.,83-10-01525.
PartiesOLD REPUBLIC INSURANCE COMPANY, Plaintiff, v. UNITED STATES of America, Defendant. OLD REPUBLIC INSURANCE COMPANY, Plaintiff, v. AMERICAN AIR PARCEL FORWARDING COMPANY, LTD., Defendant.
CourtU.S. Court of International Trade

Wayne Jarvis, Ltd., Wayne Jarvis, Chicago, Ill., for plaintiff.

S. David Harrison, New York City, for defendant.

DiCARLO, Judge:

Old Republic Insurance Co. moves pursuant to Rule 68(a) of the Rules of this Court for attorneys fees and other expenses against American Air Parcel (AAP). AAP cross-moves to dismiss for lack of jurisdiction. Subsequent to filing its motion under Rule 68(a), Old Republic moved pursuant to 28 U.S.C. § 1631 to transfer this action to the United States District Court for the Eastern District of Michigan.

The Court finds that Old Republic has not met its burden of establishing jurisdiction. The motion for attorney's fees and expenses and the motion to transfer are denied. The motion to dismiss is granted.

BACKGROUND

Old Republic is the surety and American Air Parcel is the principal on seventeen import bonds covering merchandise imported by AAP. AAP had sought protection from its creditors under the bankruptcy laws. See In re American Air Parcel Forwarding Co., No. 3-81-01913 (Bankr.N. D.Cal. Sept. 28, 1981). Shortly thereafter, Customs retroactively reliquidated entries of the merchandise pursuant to Treasury Ruling CLA-2-CO:R:CV:V 542643 TLL, TAA # 40 (Oct. 19, 1981) (unpublished). Old Republic paid the duties required to file a protest and instituted an action contesting the reliquidation and the validity of the ruling.

Old Republic sought the joinder of AAP in order to assert a cross-claim for indemnification. After AAP refused to join the action voluntarily, the court ordered it joined as a party plaintiff. When AAP did not comply with the joinder order, the court involuntarily joined it as a party defendant.

In a separate action, the Federal Circuit reversed the contested Treasury Ruling. See E.C. McAfee Co. v. United States, 6 Fed.Cir. (T) 92, 842 F.2d 314 (1988). As a result, Old Republic's action against Customs was settled and dismissed before completion of discovery and Old Republic was reimbursed $497,353.26 in deposited duties. The court then dismissed Old Republic's action for indemnification against AAP.

Old Republic now moves for attorney's fees and other expenses in the amount of $352,150.63 from AAP. Old Republic states no federal-law basis for this claim, but argues that it is supported by general principles of suretyship and indemnification and on an alleged oral agreement that AAP would reimburse it for legal costs incurred in pursuing the action. Old Republic also maintains that AAP is to receive monies from Customs in settlement of other actions following McAfee, from which AAP could pay the claimed fees and expenses.

The list of expenses accompanying Old Republic's petition did not include a schedule showing the nature of many of the services rendered, a breakdown of time spent on the action against the government, an explanation of the fees charged for particular services or proceedings, or the hours spent on individual proceedings. The petition only contained invoices billed to Old Republic with a general description of the work done, total hours worked, billing rate, and total sum charged. Most of the time was billed at a flat rate of $200 per hour until September 1987 when the rate increased to $250 per hour. Between 1983, when it commenced the action against the government, and 1988, when the action was settled, a substantial amount of Old Republic's expenses was incurred in its attempt to join AAP as a party to the action or on other motions unrelated to the claim against the government.

During a telephone conference held after submission of the briefs, the Court requested additional briefs on issues which the parties had not addressed or had inadequately addressed. These issues fell generally into four categories: jurisdiction, choice of law, merits of the claim for fees and expenses, and calculation of the quantum of the recovery.

On the question of jurisdiction, the Court directed the parties to address the following questions: (1) whether 19 U.S.C. § 1583 provides a statutory basis for jurisdiction over the claim for fees and expenses as a cross-claim, counterclaim, or third-party action flowing from the underlying indemnification action; (2) assuming the present alignment of the parties prevents bringing an action under 19 U.S.C. § 1583, whether the Court can realign the parties in order to take jurisdiction; and (3) whether the claim for fees and expenses meets the requirements for exercising ancillary or pendent jurisdiction.

The parties concurred that the agreement was made in Illinois, which has other important contacts to the claim. As they had not addressed the issue previously, the Court requested the parties brief the question of the choice of state law to be applied.

Assuming Illinois law applies, the Court expressed doubt that Old Republic was entitled to fees and expenses under the decision of the Illinois Supreme Court in Kerns v. Engelke, 76 Ill.2d 154, 28 Ill.Dec. 500, 390 N.E.2d 859 (1979), and the Illinois Court of Appeals in Montgomery Ward & Co. v. Wetzel, 98 Ill.App.3d 243, 53 Ill.Dec. 366, 423 N.E.2d 1170 (1981). The Court directed the parties to brief the following questions on the merits of the claim: (1) whether Illinois permits an implied right of recovery for attorneys' fees in the absence of a contract or a statute; (2) whether Illinois permits recovery of attorneys' fees on the basis of an oral agreement; (3) assuming the enforceability of oral agreements, whether an affidavit submitted by Old Republic adequately establishes the existence of the agreement to pay attorneys' fees.

Regarding the quantum of the claim, the Court asked the parties to brief the following questions: (1) whether the award should be limited to those fees and expenses incurred in prosecuting the action against the government; (2) whether the quantum of the award should also include fees and expenses incurred in the action to join AAP and the action for fees and expenses; (3) whether the claim of $352,150.63 is reasonable given that there was only limited discovery in the action against the government, the action never went to trial, the claim was settled for $497,353.26, and a substantial amount of time was spent in seeking joinder of AAP; (4) whether it was reasonable for Old Republic to continue to incur liability for fees and expenses in the action for indemnification when AAP was bankrupt and the possibility of recovery was negligible; and (5) whether it is reasonable for an individual practitioner to bill at a flat rate of $200 or $250 per hour for work that could be done by a paralegal or less experienced attorney.

The Court followed Old Republic's suggestion to divide the briefing schedule into three parts; first the question of jurisdiction, next the merits and choice of law, and finally the quantum of recovery. Old Republic requested 45 days to submit its first brief. After filing a motion for extension of time to file its jurisdictional brief, Old Republic filed a motion under 28 U.S.C. § 1631 to transfer the action to the United States District Court for the Eastern District of Michigan. In its motion, Old Republic stated that transfer was appropriate in order to have its claim adjudicated by a court of "unquestionable jurisdiction."

During a telephone conference following submission of the motion to transfer, the Court told the parties that 28 U.S.C. § 1631 requires the Court to make a finding that it lacks jurisdiction in order to transfer an action and it would not transfer on the basis of "doubtful" jurisdiction. Notwithstanding the Court's request for further briefing, Old Republic declined to file any additional briefs on the question of jurisdiction. The only additional information it provided was citations to two decisions of the Court of International Trade pertaining to ancillary and pendent jurisdiction.

DISCUSSION
I. JURISDICTION

The question presented is whether the Court has jurisdiction over a claim by a surety against its principal for attorneys' fees and expenses incurred by the surety in its action against the government which terminated in a settlement in the surety's favor and in the surety's efforts to join the principal to the main suit.

As AAP has challenged jurisdiction, Old Republic has the burden of establishing jurisdiction. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936); Reynolds v. Army and Air Force Exchange Serv., 846 F.2d 746, 748 (Fed.Cir. 1988). Where this burden has not been met, dismissal is appropriate. Wallach v. City of Pagedale, 376 F.2d 671, 675 (8th Cir.1967).

A. Old Republic's Arguments for Jurisdiction

Old Republic moves pursuant to Rule 68(a) of the Rules of this Court without alleging a statutory basis for jurisdiction. AAP argues that the Court lacks jurisdiction over this claim because it fails to meet the jurisdictional requirements of 28 U.S.C. §§ 1581-84. In reply, Old Republic did not address AAP's contention that there is no statutory basis for jurisdiction. Rather, Old Republic argues that the question of jurisdiction was disposed of by a joinder order issued by the court on April 19, 1985, and states that AAP waived jurisdiction on some counts in its answer to the complaint.

1. Rule 68(a) of the Rules of this Court

Rule 68(a) of the Rules of this Court provides that the Court of International Trade may award attorneys' fees "where authorized by law." Rule 68(a) does not provide an independent basis of jurisdiction because the jurisdiction of the Court may not be expanded through its rules. United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725 n. 13, 86 S.Ct. 1130, 1138 n. 13, 16 L.Ed.2d 218 (1966); United States v....

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