U.S. v. Claro

• Decision Date: 12 August 2009
• Docket Number: No. 07-20732.,07-20732.
• Citation: 579 F.3d 452
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. John Anthony CLARO, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

579 F.3d 452

UNITED STATES of America, Plaintiff-Appellee, v. John Anthony CLARO, Defendant-Appellant.

No. 07-20732.

United States Court of Appeals, Fifth Circuit.

August 12, 2009.

Vernon Lydell Lewis, Asst. U.S. Atty., Houston, TX, for Plaintiff-Appellee.

William Frank Carroll (argued), Cox Smith Matthews, Dallas, TX, Mark Joseph Barrera, Ellen B. Mitchell, Cox Smith Matthews, San Antonio, TX, for Defendant-Appellant.

Appeal from the United States District Court for the Southern District of Texas.

Before REAVLEY, BARKSDALE and GARZA, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

An indictment against John Anthony Claro, a lawyer, having been dismissed in 2005, and the Government's having neither appealed that dismissal nor sought to reindict Claro, he filed a motion for attorney's fees and litigation expenses, pursuant to the Hyde Amendment, Pub.L. 105-119, § 617, 111 Stat. 2519 (1997), reprinted in 18 U.S.C. § 3006A, Note (providing that prevailing criminal defendants may recover "a reasonable attorney's fee and other litigation expenses" where the Government's position was "vexatious, frivolous or in bad faith"). The motion was granted in part and denied in part. Claro appeals two of the denied fees requests.

At issue are whether the Hyde Amendment allows the recovery of attorney's fees: for Claro's contingent-fee contract with an attorney to pursue Claro's claims under the Hyde Amendment; and for uncompensated paralegal services provided by Claro's wife for defending against the criminal charges against Claro. AFFIRMED IN PART; VACATED IN PART; and REMANDED.

I.

This matter arises from a criminal proceeding in the Southern District of Texas against Claro — a lawyer — and seven others. In 2004, they were indicted for conspiracy, mail fraud, monetary transactions with criminally derived property, and money laundering. Defendants were charged with defrauding millions of dollars of premium payments from employee health-care benefit programs.

In July 2005, the district court dismissed the indictment against Claro without prejudice. The Government neither appealed that dismissal nor sought a new indictment.

That September, under the Hyde Amendment, Claro moved to recover his attorney's fees and expenses, both for defense of the underlying criminal charges and for pursuing the Hyde Amendment claim. A hearing on the motion was held in April 2006, during which the district court admonished the Government for filing an "incomprehensible" indictment and subsequent bill of particulars, and for acting with "reckless disregard for the truth or falsity of the charge". It entered an order that: (1) the Government would pay Claro's attorney's fees and expenses; and (2) along that line, Claro was to submit a one-page calculation of his requested fees and expenses, to be followed by the Government's submitting a one-page "calculation of its position on Claro's calculations".

Claro submitted the following. For fees and expenses incurred in defending against the criminal charges, he requested: (1) $329,106.29 for the law firm of Hartzog Conger Cason & Neville (the Neville firm); (2) $1,686.42 for the law firm of Cruse Scott Henderson; and (3) $292,910.53 for Claro and his wife. For fees and expenses for pursuing the Hyde Amendment claim, he requested: (1) $249,481.29 for the law firm of DeGuerin Dickson & Hennessey (a 40 percent contingent fee based on the total above-described requested fees and expenses); (2) $2,000 for pending legal expenses; and (3) $3,500 for estimated fees and expenses (for the scheduled 9 May 2006 hearing on the submitted requests).

The Government's memorandum in opposition contended: (1) the attorney's fees awarded to Claro should be limited to the criminal prosecution, and they should be further limited to the statutory cap of $125 an hour (plus a cost-of-living adjustment) because there were no "special factors" meriting an upward adjustment from that cap; (2) the fees requested for the work by Claro and his wife were not "incurred" by Claro, as required by the Hyde Amendment, and accordingly not reimbursable; and (3) because no provision in the Hyde Amendment permits a contingent-fee award, Claro's request based on his contingent-fee contract had no legal basis.

At the 9 May 2006 hearing on Claro's claim, several involved in the proceedings for each side testified regarding the requested fees and expenses. The district court's 31 July 2007 opinion granted in part, and denied in part, Claro's claim.

It awarded: (1) $332,606.29 for the Neville firm, for defending against the criminal charges; (2) $28,000 for that same firm for pursuing the Hyde Amendment claim (as discussed infra, it had not done so); and (3) $1,686.42 for Cruse Scott Henderson, for defending against the criminal charges. Finding it unreasonable, the court denied the contingent fee for $249,481.29 for the DeGuerin firm's work on the Hyde Amendment claim, for the reasons discussed infra. Finally, of the $292,910.53 requested by Claro for his and his wife's work, the district court: (1) granted $29,000 for Claro's direct expenses, for items such as copying, filing, air fare for the Neville firm's attorneys, and transcripts; and (2) denied the $75,250 requested for Claro's work and the $183,750 requested for his wife's paralegal work, ruling their work did not constitute "incurred" fees as described by the statute.

In total, through a 31 July 2007 Order on Defense Fees and Expenses, the district court awarded $391,292.29 to Claro for attorney's fees and expenses. That amount has been paid. (The Government voluntarily dismissed its appeal.)

II.

Claro does not contest the denial of his claim for his work in defending against the criminal charges. He does challenge the other two denials.

At issue are: (1) whether Claro can recover attorney's fees for the DeGuerin firm's pursuing, under its contingent-fee contract, the Hyde Amendment claim (as discussed infra, the $28,000 awarded for the Neville firm was in error; it did not pursue the claim); and (2) whether Claro can recover for his wife's paralegal work for the underlying criminal proceedings. Again, the balance of the award of approximately $391,000 is not disputed.

An award or denial of attorney's fees and expenses under the Hyde Amendment is reviewed for abuse of discretion. E.g., United States v. Truesdale, 211 F.3d 898, 905 (5th Cir.2000). Legal determinations underlying the award are, of course, reviewed de novo. Id. at 906.

The Hyde Amendment was enacted by Congress in 1997 to allow wrongfully prosecuted criminal defendants "a means to sanction the Government for prosecutorial misconduct". United States v. Hristov, 396 F.3d 1044, 1046 (9th Cir.2005) (internal quotation marks and citation omitted). The Amendment authorizes the district court to award a prevailing party "a reasonable attorney's fee and other litigation expenses, where the court finds that the position of the United States was vexatious, frivolous, or in bad faith, unless the court finds that special circumstances makes such an award unjust". 18 U.S.C. § 3006A, Note.

A motion under the Hyde Amendment implicates interests identical to those implicated by one under the Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412: "In each case, the movant is seeking an award of attorney's fees [and expenses] based upon a litigating strategy employed by the government that, the movant claims, conflicts with certain statutorily defined notions of fair play." Truesdale, 211 F.3d at 904. Accordingly, in enacting the Hyde Amendment, Congress directed that the procedures and limitations of the EAJA are, with limited exceptions, incorporated into the Hyde Amendment. Id. at 903. In this regard, 18 U.S.C. § 3006A, Note provides: "Such awards [made pursuant to the Hyde Amendment] shall be granted pursuant to the procedures and limitations (but not the burden of proof) provided for an award under section 2412 [of the EAJA]."

Section 2412 of the EAJA, however, contains two provisions relating to attorney's fees: subparts (b) and (d). Subpart (b) provides, inter alia, that a district court "may award reasonable fees and expenses of attorneys ... to the prevailing party in any civil action brought by or against the United States". 28 U.S.C. § 2412(b). Subpart (d) contains the "procedures and limitations" for an award under the Act. 28 U.S.C. § 2412(d). For the two issues at hand, we join our sister circuits that have held the "procedures and limitations" incorporated by the Hyde Amendment are those in subpart (d). See United States v. Aisenberg, 358 F.3d 1327, 1339-42 (11th Cir.2004); United States v. Knott, 256 F.3d 20, 26-27 (1st Cir.2001); United States v. Sherburne, 249 F.3d 1121, 1129 (9th Cir.2001); United States v. Ranger Elec. Commc'ns, Inc., 210 F.3d 627, 633 (6th Cir.2000), overruled on other grounds by Scarborough v. Principi, 541 U.S. 401, 124 S.Ct. 1856, 158 L.Ed.2d 674 (2004).

Section 2412(d) states, in pertinent part: "[A] court shall award to a prevailing party ... fees and other expenses ... incurred by that party ... unless the court finds the position of the United States was substantially justified or that special circumstances make an award unjust". 28 U.S.C. § 2412(d)(1)(A) (emphasis added). "Fees and other expenses" include "reasonable attorney fees ... based upon prevailing market rates for the kind and quality of the services furnished, except that ... attorney fees shall not be awarded in excess of $125 per hour unless the court determines that an increase in the cost of living or a special factor ... justifies a higher fee". 28 U.S.C. § 2412(d)(2)(A). To support an award, the prevailing party is required, inter alia, to "submit to the court an application for fees and other expenses ... [showing] the amount sought, including an itemized statement from any attorney ... representing or appearing in behalf of the party stating the actual time expended and the rate at which fees...