Rothenberg v. Security Management Co., Inc.

• Decision Date: 19 July 1984
• Docket Number: No. 82-8748,82-8748
• Citation: 736 F.2d 1470
• Parties: Jack ROTHENBERG and Shirley Rothenberg, Plaintiffs-Appellants, v. SECURITY MANAGEMENT COMPANY, INC., et al., Defendants-Appellees. Non-Argument Calendar.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1470

736 F.2d 1470

39 Fed.R.Serv.2d 744

Jack ROTHENBERG and Shirley Rothenberg, Plaintiffs-Appellants, v. SECURITY MANAGEMENT COMPANY, INC., et al., Defendants-Appellees.

No. 82-8748

Non-Argument Calendar.

United States Court of Appeals, Eleventh Circuit.

July 19, 1984.

Andrew J. Ekonomou, Atlanta, Ga., for plaintiffs-appellants.

J. Michael Lamberth, Atlanta, Ga., for Security, et al.

John M. Graham, III, Rome, Ga., for Invesco.

Appeal from the United States District Court for the Northern District of Georgia.

Before HATCHETT, ANDERSON and CLARK, Circuit Judges.

PER CURIAM:

Appellants, Jack and Shirley Rothenberg, appeal from the district court's award of attorneys' fees to appellees, Security Management Co., et al. Both Jack and Shirley had filed individual actions, on their own behalf, and derivative actions, putatively on behalf of the corporation, against appellees. Their derivative actions were dismissed, and the district court awarded attorneys' fees to appellees, finding that appellants had brought and pursued the derivative actions in bad faith. The district court entered judgment separately against Jack in the amount of $3,541.79 and against Shirley in the amount of $77,919.28. In this appeal, appellants contend that both the basis for, and calculation of, the attorneys' fees award constitute error warranting reversal and/or remand.

A. Basis for the Award

Under the traditional "American rule," attorney's fees are not ordinarily recoverable in the absence of a statute or enforceable contract providing therefor. Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 717, 87 S.Ct. 1404, 1407, 18 L.Ed.2d 475, 478 (1967). Courts, however, have developed a "bad faith" exception to this general rule. Fees will be awarded if a party or attorney ¹ acted in "bad faith, vexatiously, wantonly, or for oppressive reasons." F.D. Rich Co. v. United States ex rel. Indus. Lumber Co., 417 U.S. 116, 129, 94 S.Ct. 2157, 2165, 40 L.Ed.2d 703, 714 (1974).

In the instant case, appellees sought attorneys' fees on two grounds. First, they urged the district court to award fees based upon a statute, O.C.G.A. Sec. 14-2-123(f), which provides that "upon final judgment and a finding that the [derivative] action was brought [by the plaintiff] without reasonable cause, [the court] may require the plaintiff or plaintiffs to pay to the parties named as defendant the reasonable expenses, including fees of attorneys, incurred by [the defendant] in the defense of such action." Alternatively, appellees suggested that the "bad faith exception" warranted an award of attorneys' fees under the circumstances of this case. Finding that appellants had acted in "bad faith," the district court awarded attorneys' fees on the latter ground. Appellants now contend that the factual findings of the district court are inadequate to support a fee award on this basis.

Federal Rule of Civil Procedure 52(a) provides that "[i]n all actions tried upon the facts without a jury ..., the court shall find the facts specially and state separately its conclusions of law thereon...." These findings may "appear in an opinion or memorandum of decision filed by the court." Id. Such findings are designed to aid appellate courts in reviewing the decision below, but they are not a jurisdictional requirement of appeal. Armstrong v. Collier, 536 F.2d 72, 77 (5th Cir.1976). Thus, while a district court's failure to comply with Rule 52(a) complicates review, reversal is unnecessary if a full understanding of the question presented may be had without the aid of such findings. See Gupta v. East Tex. St. Univ., 654 F.2d 411 (5th Cir.1981). On the other hand, an appellate court will normally vacate the judgment and remand the action for appropriate findings where "the finding of fact and conclusions of law are mere conclusory statements and do not fully address all the issues raised in the litigation." 5A Moore's Federal Practice p 52.06.

In the instant case, a remand is appropriate. The district court's findings can be broken down into two sets. In the first set, the court recited those facts which supported dismissal of both Jack's and Shirley's derivative actions: Jack did not own stock in the corporation at the time the derivative suit was filed and Shirley had not read the complaint, had no personal knowledge of the facts surrounding the allegations made in the complaint, and "displayed an obvious unwillingness to learn about the suit by not acquiring more than a rudimentary understanding of the case." ² The second set of findings relates to appellants' motive for bringing the suit: the Rothenbergs brought the derivative actions as "leverage" to enhance their personal claims. (Supplemental Record at 62-63). Based upon its finding that the derivative actions were brought as leverage, the district court found that appellants had acted in bad faith.

In determining the propriety of a bad faith fee award, "the inquiry will focus primarily on the conduct and motive of a party, rather than on the validity of the case." ³ In the instant case, only the second "set" of findings focuses on the proper inquiry. ⁴ This second set, however, contains "mere conclusory statements." Moore's, supra. The district court found that "[w]ithout question" Mr. Rothenberg brought the derivative action "to enhance his personal claims ..." and that "[t]he entire record of this case points to [the] conclusion ... [that] Mrs. Rothenberg filed this action as an attempt to enhance her personal claims...." In a case, such as this one, which has dragged on for more than six years and produced a voluminous record of thousands of pages, such bald assertions provide no meaningful basis for this court to review the ultimate finding of "bad faith." Therefore, the case is remanded for the district court to indicate the factual basis for its ultimate conclusion. Cf. Fortner v. Balkcom, 380 F.2d 816, 821 (5th Cir.1967) (conclusory findings of district court that defense counsel's decisions not to present critical witnesses were in the nature of "trial tactics" without any findings concerning the lawyer's actual activities did not satisfy the requirements of Rule 52(a)). ⁵

B. Calculation of the Award

The district court awarded attorneys' fees to three different counsel teams. Each team submitted affidavits in support of the dollar amounts claimed as reasonable fees. Counsel for defendants Rose and Stern provided detailed affidavits itemizing each aspect of their services to their clients, and the district court correctly observed that these affidavits provided the court "sufficient information to determine whether the fees and costs requested are reasonable." Supp.R. at 64. However, the district court was also correct in observing that

The affidavits and documents filed by counsel for [Invesco International, Inc.] and counsel for Burke and the Davises are no more than self-serving, conclusory statements that the amounts requested are reasonable. Counsel for these defendants did not adequately itemize what services were rendered, the amount of time...