Tancredi v. Metropolitan Life Ins. Co.
| Decision Date | 09 August 2004 |
| Docket Number | No. 03-9296.,03-9296. |
| Citation | 378 F.3d 220 |
| Parties | Stephen TANCREDI and Ronald Speidel, Plaintiffs-Appellants, v. METROPOLITAN LIFE INSURANCE COMPANY, a New York Stock Company, and Metlife, Inc., a Delaware Holding Company, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Second Circuit |
Appeal from the United States District Court for the Southern District of New York, Kaplan, J.
COPYRIGHT MATERIAL OMITTED
James M. Pietz, Malakoff Doyle & Finberg, P.C., Pittsburgh, PA (Michael P. Malakoff, on the brief), Peter Wasylyk, Providence, RI, for Plaintiffs-Appellants.
Daniel J. Spillane, Debevoise & Plimpton LLP, New York, N.Y. (Bruce E. Yannett and Carl Micarelli, on the brief), Duncan J. Logan, Metropolitan Life Insurance Company, Long Island City, NY, for Defendants-Appellees.
Before: McLAUGHLIN, CABRANES, and WALLACE,1 Circuit Judges.
This appeal raises three questions: (1) Did the district court lose jurisdiction to award attorneys' fees after the complaint had been dismissed and a notice of appeal filed?; (2) Was the defendants' motion for attorneys' fees timely?; and (3) Was the complaint so utterly lacking in merit as to be frivolous thereby justifying an award of attorneys' fees to the defendants?
Plaintiffs, holders of insurance policies, appeal from a judgment of the United States District Court for the Southern District of New York (Kaplan, J.), granting attorneys' fees to the prevailing defendants, the Metropolitan Life Insurance Company and MetLife, Inc. (together, "MetLife").
Plaintiffs sued MetLife under 42 U.S.C. § 1983, arguing that the conversion of MetLife from a mutual to a stock life insurance company in accordance with New York Insurance Law violated numerous constitutional rights. The district court dismissed the case for failure to state a claim, and this Court affirmed the dismissal. Tancredi v. Metro. Life Ins. Co., 149 F.Supp.2d 80 (S.D.N.Y.2001), aff'd, 316 F.3d 308 (2d Cir.2003). MetLife then moved for attorneys' fees. The district court granted the motion, holding that plaintiffs' claims were frivolous. Tancredi v. Metro. Life Ins. Co., 256 F.Supp.2d 196 (S.D.N.Y.2003).
We hold that the district court properly exercised jurisdiction to award attorneys' fees. Although we cannot resolve on the record whether the district court properly considered MetLife's untimely motion for attorneys' fees, we conclude that the district court misinterpreted the standard for extending the time to make a fee motion. On the merits, we conclude that the court abused its discretion by granting attorneys' fees because the allegation of state action, although indeed meritless, was not frivolous. Thus, we reverse the judgment granting attorneys' fees to MetLife.
Familiarity with the facts of this case, as set forth in our prior decision, Tancredi v. Metropolitan Life Insurance Co., 316 F.3d 308 (2d Cir.2003), is assumed. We repeat only those facts relevant to this appeal.
In April 2000, Metropolitan Life Insurance Company converted from an old-fashioned mutual to a modern stock insurance company pursuant to New York Insurance Law § 7312. The plan obviously affected policyholders' interests in MetLife, converting them to cash, policy credits, or stock in the new publicly-traded MetLife, Inc., a Delaware holding company.
The conversion was initiated by MetLife's Board of Directors, and it received the required approval of two-thirds of the voting policyholders. It was also approved by the New York Superintendent of Insurance who found, after conducting a hearing, that the reorganization plan was fair and equitable to policyholders. Indeed, ninety-three percent of voting policyholders supported the plan. Upon the Superintendent's approval, the conversion became effective in April 2000.
Plaintiff policyholders bottomed their § 1983 claim against MetLife on the contention that the conversion violated their rights under the United States Constitution's Takings Clause, Due Process Clause, and Commerce and Contracts Clauses of Article I. The complaint alleged that MetLife acted under color of state law by receiving the official sanction of the Superintendent of Insurance and by reorganizing pursuant to New York Insurance Law § 7312.
MetLife moved to dismiss under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. The district court granted the motion, holding that Tancredi and Speidel failed to allege state action and, in the alternative, that their substantive constitutional claims lacked merit. Tancredi, 149 F.Supp.2d at 91. The final judgment dismissing the action was entered on July 12, 2001. Plaintiffs filed a timely notice of appeal on July 27.
As the prevailing party, MetLife moved on August 2, 2001 for attorneys' fees in the district court pursuant to 42 U.S.C. § 1988(b). This was seven days beyond the fourteen-day deadline set by Fed.R.Civ.P. 54(d)(2)(B). MetLife did not make a formal showing of "excusable neglect" under Fed.R.Civ.P. 6(b)(2) to justify the extension of time. On October 15, 2001, the district court denied the fee motion without prejudice to renewing the motion after the disposition of the then-pending appeal on the merits. The court conceded that MetLife's motion was untimely, but directed that "[a]ny such renewed motion shall be filed no later than fourteen calendar days following the entry of the appellate mandate on this Court's [i.e., the district court's] docket."
On January 21, 2003, a panel of this Court affirmed the district court's dismissal, holding that MetLife was not a state actor because "`mere approval or acquiescence'" of a state official does not sufficiently intertwine the official with corporate management to cloak the entire enterprise with state actor status. Tancredi, 316 F.3d at 313. This Court issued a mandate on February 21, 2003, which was then entered on the docket of the district court on February 27. In accordance with the district court's October 15, 2001 order, MetLife renewed its motion for attorneys' fees in the district court on March 7, 2003. (MetLife did not request attorneys' fees for the appeal.)
In opposing MetLife's renewed fee motion, plaintiffs argued that: (1) the district court lost jurisdiction over the initial fee motion when plaintiffs filed a notice of appeal; (2) even if there were jurisdiction, the initial motion was untimely, and MetLife did not qualify for an extension of time; and (3) their complaint was not frivolous and thus did not justify an award of attorneys' fees.
Rejecting plaintiffs' contentions, the district court granted MetLife's motion for attorneys' fees. Tancredi, 256 F.Supp.2d at 202. The court found that the filing of a notice of appeal did not divest the court of jurisdiction to consider fee awards. Id. at 198-99. The court also held that the extension of time complied with Rule 54 and Rule 6. Id. at 199-00. Specifically, the court held that under Rule 54, "district courts have discretion to fix the timing of attorneys' fees motions, before or after the fourteen day period expires, without regard to Rule 6(b)(2)" and its requirement of demonstrating excusable neglect. Id. at 199.
On the substantive issue, Judge Kaplan observed that while he had never before granted attorneys' fees to a prevailing defendant under § 1988, the frivolity of plaintiffs' action was so patent that it abused the litigation system and warranted an award of fees. Id. at 202. The court found the action to be frivolous "[i]n view of the fact that proof of state action was an indispensable prerequisite to success and that there was no colorable basis for supposing that this prerequisite could be satisfied." Id.
The precise calculation of fees was referred to Magistrate Judge Francis. Although MetLife asked for $258,770.75, it was awarded only $30,000, based on plaintiffs' ability to pay.
Tancredi and Speidel now appeal the judgment awarding $30,000 to MetLife. They raise the same arguments made in the district court.
Plaintiffs first argue that the district court lacked subject matter jurisdiction over MetLife's attorneys' fees motion because: (1) the underlying § 1983 action failed under the so-called "substantiality doctrine"; and alternatively (2) even if the district court had subject matter jurisdiction over the § 1983 claims, it lost jurisdiction after the dismissal of the complaint and the filing of a notice of appeal. We disagree. The district court properly exercised jurisdiction over MetLife's motion for attorneys' fees.
Under the substantiality doctrine, "federal courts are without power to entertain claims otherwise within their jurisdiction if they are `so attenuated and unsubstantial as to be absolutely devoid of merit.'" Hagans v. Lavine, 415 U.S. 528, 536, 94 S.Ct. 1372, 39 L.Ed.2d 577 (1974) (quoting Newburyport Water Co. v. Newburyport, 193 U.S. 561, 579, 24 S.Ct. 553, 48 L.Ed. 795 (1904)). Claims are deemed insubstantial "only if the prior decisions inescapably render the claims frivolous; previous decisions that merely render claims of doubtful or questionable merit do not render them insubstantial." Id. at 538, 94 S.Ct. 1372.
Turning this doctrine on its head — and to their own advantage — plaintiffs contend that if the complaint was as frivolous as the district court found it, then the court lacked subject matter jurisdiction to entertain the motion for attorneys' fees. MetLife responds that there is nothing in Hagans to suggest that the Supreme Court intended to preclude an award of attorneys' fees in cases where the district court dismissed for lack of subject matter jurisdiction.
We reject plaintiffs' argument. The district court and a prior panel of this Court properly exercised jurisdiction over plaintiffs' underlying § 1983 complaint. Tancredi v. Metro. Life Ins. Co., 149 F.Supp.2d 80 (S.D.N.Y.2001), aff'd, 316 F.3d 308 (2d...
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