Schultz v. Hembree

• Decision Date: 19 June 1992
• Docket Number: Nos. 90-15605,90-15883,90-15-606,s. 90-15605
• Citation: 975 F.2d 572
• Parties: Richard L. SCHULTZ, Plaintiff-Appellee, v. Charles R. HEMBREE; Kincaid, Wilson, Schaeffer & Hembree, P.S.C.; Frank L. Bryant, Defendants, and Bateman Eichler, Hill Richards, Inc.; Robert J. McGuiness, Defendants-counter-claimants-Appellants. Richard L. SCHULTZ; Blas R. Casares, Plaintiffs-Appellees, v. BATEMAN EICHLER, HILL RICHARDS, INC., Defendant, and Frank L. Bryant, Defendant-Appellant. Blas R. CASARES, Plaintiff-Appellee, v. SPENDTHRIFT FARM, INC., et al., Defendants, and Bateman Eichler, Hill Richards, Inc.; Robert J. McGuiness, Defendants-Appellants. Blas R. CASARES; Richard L. Schultz, Plaintiffs-Appellees, v. SPENDTHRIFT FARM, INC., et al., Defendants, and Frank L. Bryant, Defendant-Appellant. Blas R. CASARES, Plaintiff-Appellee, v. SPENDTHRIFT FARM, INC., et al., Defendants, and Charles R. Hembree; Kincaid, Wilson, Schaeffer & Hembree, P.S.C., Defendants-Appellants. Richard L. SCHULTZ, Plaintiff-Appellee, v. BATEMAN EICHLER, HILL RICHARDS, INC., et al., Defendants, and Charles R. Hembree; Kincaid, Wilson, Schaeffer & Hembree, P.S.C., Defendants-Appellants. Richard L. SCHULTZ, Plaintiff-Counter-defendant/Appellee, v. BATEMAN EICHLER, HILL RICHARDS, INC., Defendants, and Frank L. Bryant, Defendant/Counter-claimant/Appellant. Blas R. CASARES, Plaintiff/Counter-defendant/Appellee, v. SPENDTHRIFT FARM, INC., et al., Defendants, and Frank L. Bryant, Defendant/Counter-claimant/Appellant. Richard L. SCHULTZ, Plaintiff-Appellant, v. Brownell COMBS, II, Defendant, and Bateman Eichler, Hill Richards, Inc.; Robert J. McGuinness, Defendants-Appellees. Richard L. SCHULTZ, Plaintiff-Appellant, v. Brownell COMBS II, Defendant, and Charles R. Hembree; Kincaid, Wilson, Schaeffer & Hembree, P.S.C., Defendants-Appellees. Richard L. SCHULTZ, Plaintiff-Appellant, v. Frank L. BRYANT, Defendant-Appellee. *to 90-15887, 90-15889, 90-15890, 90-15922 and 90-15923.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 572

975 F.2d 572

Richard L. SCHULTZ, Plaintiff-Appellee, v. Charles R. HEMBREE; Kincaid, Wilson, Schaeffer & Hembree, P.S.C.; Frank L. Bryant, Defendants, and Bateman Eichler, Hill Richards, Inc.; Robert J. McGuiness,

Defendants-counter-claimants-Appellants.

Richard L. SCHULTZ; Blas R. Casares, Plaintiffs-Appellees, v. BATEMAN EICHLER, HILL RICHARDS, INC., Defendant, and Frank L. Bryant, Defendant-Appellant.

Blas R. CASARES, Plaintiff-Appellee, v. SPENDTHRIFT FARM, INC., et al., Defendants, and Bateman Eichler, Hill Richards, Inc.; Robert J. McGuiness,

Defendants-Appellants.

Blas R. CASARES; Richard L. Schultz, Plaintiffs-Appellees, v. SPENDTHRIFT FARM, INC., et al., Defendants, and Frank L. Bryant, Defendant-Appellant.

Blas R. CASARES, Plaintiff-Appellee, v. SPENDTHRIFT FARM, INC., et al., Defendants, and Charles R. Hembree; Kincaid, Wilson, Schaeffer & Hembree, P.S.C., Defendants-Appellants.

Richard L. SCHULTZ, Plaintiff-Appellee, v. BATEMAN EICHLER, HILL RICHARDS, INC., et al., Defendants, and Charles R. Hembree; Kincaid, Wilson, Schaeffer & Hembree, P.S.C., Defendants-Appellants.

Richard L. SCHULTZ, Plaintiff-Counter-defendant/Appellee, v. BATEMAN EICHLER, HILL RICHARDS, INC., Defendants, and Frank L. Bryant, Defendant/Counter-claimant/Appellant.

Blas R. CASARES, Plaintiff/Counter-defendant/Appellee, v. SPENDTHRIFT FARM, INC., et al., Defendants, and Frank L. Bryant, Defendant/Counter-claimant/Appellant.

Richard L. SCHULTZ, Plaintiff-Appellant, v. Brownell COMBS, II, Defendant, and Bateman Eichler, Hill Richards, Inc.; Robert J. McGuinness,

Defendants-Appellees.

Richard L. SCHULTZ, Plaintiff-Appellant, v. Brownell COMBS II, Defendant, and Charles R. Hembree; Kincaid, Wilson, Schaeffer & Hembree, P.S.C., Defendants-Appellees.

Richard L. SCHULTZ, Plaintiff-Appellant, v. Frank L. BRYANT, Defendant-Appellee. ^*

Nos. 90-15605, 90-15-606, 90-15883 to 90-15887, 90-15889,

90-15890, 90-15922 and 90-15923.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Sept. 13, 1991.

Decided June 19, 1992.

John I. Alioto and Michael J. Bettinger, Alioto & Alioto, San Francisco, Cal., for plaintiff/counter-defendant/appellee/appellant Richard L. Schultz.

Richard M. Trautwein and Susan L. Williams, Alagia, Day, Marshall, Mintmire & Chauvin, Louisville, Ky., for plaintiff/counter-defendant/appellee Blas R. Casares.

M. Laurence Popofsky, Michael L. Rugen, Richard DeNatale, and Daniel J. Kroll, Heller, Ehrman, White & McAuliffe, San Francisco, Cal., for defendants/appellants/appellees Charles R. Hembree and Kincaid, Wilson, Schaeffer & Hembree, P.S.C.

James E. Burns, Jr., Kevin P. Muck and Suzanne D. Kay, Brobeck, Phleger & Harrison, San Francisco, Cal., for defendants/counter-claimants/appellants/appellees Bateman Eichler, Hill Richards, Inc. and Robert J. McGuinness.

Thomas K. Bourke, Riordan & McKinzie, Los Angeles, Cal., for defendant/counter-claimant/appellant/appellee Frank L. Bryant.

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

Before: CANBY and KOZINSKI, Circuit Judges, and CARROLL, ^** District Judge.

KOZINSKI, Circuit Judge.

We consider an issue near and dear to almost every lawyer's heart--legal fees.

I

Casares and Schultz were investors in a private placement of stock in a thoroughbred horse breeding farm. When the market in thoroughbreds declined, their stock was almost worthless; they sued a stable full of defendants but lost on every claim. ¹

The Casares and Schultz actions were harnessed with five others; the plaintiffs collectively asserted almost twenty claims, most of which were based on the same allegedly fraudulent acts and omissions. Most of the claims were disposed of on summary judgment, the district court directed a verdict on a couple others and the jury found for the defendants on the rest. Casares had included in his complaint a claim under the Florida blue sky laws, which he lost on summary judgment because the statute of limitations had run; Schultz had alleged a violation of the Ohio RICO statute, which he voluntarily dismissed. Three sets of defendants--Frank Bryant; investment banker Bateman Eichler, Hill Richards and its employee Robert McGuinness; and Charles Hembree and his law firm Kincaid, Wilson Schaeffer & Hembree--sued for attorneys' fees under the state statutes. ² Had they prevailed, Casares and Schultz undoubtedly would have sought attorneys' fees for almost all the time spent on the case. Cf. Arceneaux v. Merrill Lynch, Pierce, Fenner & Smith, 595 F.Supp. 171, 176 (MD Fla.1984) (awarding all but 31.2 hours of 556.5 hours spent on state and federal securities claims), affirmed, 767 F.2d 1498 (11th Cir.1985). They, as plaintiffs, chose what causes of action to include in their complaints. The defendants, by contrast, were forced to defend against the claims with which they were confronted. In the absence of a contrary legislative determination, rules that benefit one class of litigants must apply to all.

Under the Florida blue sky statute, "the court shall award reasonable attorneys' fees to the prevailing party unless the court finds that the award of such fees would be unjust." Fla.Stat.Ann. § 517.211(6) (emphasis added). The defendants were the prevailing parties. The Florida statute has been interpreted by the Florida courts to allow defendants to recover attorneys' fees to the same extent as plaintiffs. Pirretti v. Dean Witter Reynolds, Inc., 578 So.2d 474, 475 (Fla.App.1991); Newsom v. Dean Witter Reynolds, Inc., 558 So.2d 1076, 1077 (Fla.App.1990) ("Because [defendant] successfully escaped liability on all counts, ... it was the prevailing party in the suit."). The district court properly construed the statutory language as requiring an award of fees in this case. See Golub v. J.W. Gant & Associates, 863 F.2d 1516, 1521 (11th Cir.1989) ("The award of attorneys' fees is compelled by [section 517.211(6) ] unless the result would be unjust.") (emphasis added). ³

Under the Ohio RICO statute, "the trial court may grant a defendant who prevails ... all or part of his reasonable attorney fees, unless the court finds that special circumstances ... make an award unjust." Ohio Rev.Code § 2923.34(H) (emphasis added). The district court correctly held that the statute creates a presumption in favor of awarding fees. Cf. Hensley v. Eckerhart, 461 U.S. 424, 429, 103 S.Ct. 1933, 1937, 76 L.Ed.2d 40 (1983) (interpreting similar language in 42 U.S.C. § 1988 to create such a presumption). ⁴ The fee award was within the district court's statutory discretion; Schultz makes no claim that such an award would be "unjust." The court therefore had statutory authority to award attorneys' fees to the defendants.

The district court found that the defendants had submitted sufficient documentation to establish the amount of time expended and the work done, as required by Chalmers v. City of Los Angeles, 796 F.2d 1205, 1210-11 (1986), amended, 808 F.2d 1373 (9th Cir.1987). Furthermore, the district court considered the factors we articulated in Kerr v. Screen Extras Guild, Inc., 526 F.2d 67, 70 (9th Cir.1975), cert. denied, 425 U.S. 951, 96 S.Ct. 1726, 48 L.Ed.2d 195 (1976), and concluded that the amounts claimed by the defendants were reasonable. ⁵ The plaintiffs do not challenge this portion of the district court's ruling.

The problem is corralling the fees. The district court found that "the causes of action involved a common core of facts," that "[a]ll were based on related, and in some cases identical, legal theories" and that "[m]uch of defense counsel's time had to be devoted to resisting the claims as a whole." Order Regarding Attorneys' Fees at 6 (March 28, 1990). The defendants did not request an award of all the fees incurred defending the action, but only for work related to the state-law claims with fee-shifting provisions. Specifically, Bateman Eichler asked for 70% of its total expenditures, Frank Bryant for 90% and the Kincaid firm for 10%.

The court, however, was concerned that Casares and Schultz were only two of many plaintiffs, and that only two of many claims provided for fee shifting. After noting these problems, it stated that "[b]alancing all of the factors, including the number of plaintiffs, the number of causes of action, and the history of this group of cases," the defendants were entitled to five percent of their total expenditures during the period before the state-law claims dropped out of the race. Id. at 8-9. The court did not state how it arrived at that figure, nor what it was about the number of claims and plaintiffs that led it to reject the defendants' fee requests.

II

We live in a society which, unfortunately, sanctions the view that litigation is a proper response to many of life's hard knocks. Lawyers capitalizing on this phenomenon often multiply unnecessarily the number of legal theories under which suit is brought. The result in many cases is shotgun litigation: A barrage of claims, emanating from a point source and fanning out in the hopes of wounding someone in the process. Whatever the outcome, under the American rule each party ordinarily bears its own attorneys' fees, although some state and federal statutes provide for fee shifting. We refer to the former as ordinary claims and the latter as shifting claims.

As lawsuits become ever more complex, and joinder, consolidation and other case management techniques are pressed into service with increasing regularity in an effort to cope with the litigation explosion, we will frequently face the problem confronting us here: Cases in which the prevailing party is entitled to recover its attorneys' fees for some, but not all, claims. In such cases, attorneys may bill their clients for three different types of work: Work devoted solely to shifting claims, work devoted solely to ordinary claims and work that advances both ordinary and shifting claims. Awarding fees for the first two categories is easy: Work devoted only to shifting claims...