Walker Intern. Holdings, Ltd. v. Republic of Congo

• Decision Date: 30 June 2005
• Docket Number: No. 04-20655.,04-20655.
• Citation: 415 F.3d 413
• Parties: WALKER INTERNATIONAL HOLDINGS, LTD., Plaintiff-Appellant, v. The REPUBLIC OF CONGO; Caisse Congolaise D'Amortissement, Defendants-Appellees, and Murphy Exploration & Production Company International, Garnishee-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

415 F.3d 413

WALKER INTERNATIONAL HOLDINGS, LTD., Plaintiff-Appellant, v. The REPUBLIC OF CONGO; Caisse Congolaise D'Amortissement, Defendants-Appellees, and Murphy Exploration & Production Company International, Garnishee-Appellee.

No. 04-20655.

United States Court of Appeals, Fifth Circuit.

June 30, 2005.

Sanford M. Saunders, Jr., Laura Metcoff Klaus (argued), Greenberg Traurig, Washington, DC, Jane M.N. Webre, Quentin Doug Sigel, Scott, Douglass & McConnico, Austin, TX, for Plaintiff-Appellant.

Michael K. Swan, James Stephen Barrick, Akin, Gump, Strauss, Hauer & Feld, Houston, TX, Rex S. Heinke (argued), Akin, Gump, Strauss, Hauer & Feld, Los Angeles, CA, Jerry E. Rothrock, Akin, Gump, Strauss, Hauer & Feld, Washington, DC, for Garnishee-Appellee.

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

Before JOLLY, JONES and DeMOSS, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

In an effort to recover monies owed to it by the Republic of Congo ("ROC"), Walker International Holdings, Ltd. ("Walker") filed a garnishment action against Murphy Exploration & Production Company-International ("Murphy"). Murphy ultimately prevailed in the garnishment proceeding based on the district court's finding that the ROC was entitled to sovereign immunity under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1602-1611. Murphy thereafter petitioned the district court for costs and attorney's fees. The district court granted Murphy's motion, awarding Murphy $515,970.18 for costs and attorney's fees. Walker appealed. We hold that the district court properly applied Texas Rule of Civil Procedure 677 regarding the award of attorney's fees in garnishment proceedings and that the district court did not abuse its discretion in awarding $515,970.18 to Murphy. The district court's judgment is therefore AFFIRMED.

I

Walker purchased a debt owed by the ROC to an Italian company for the development and construction of an electric infrastructure in the ROC. Following an arbitration proceeding before the International Chamber of Commerce ("ICC") in Paris, France, the ICC recognized that the ROC was liable to Walker for approximately $26 million. The French courts subsequently upheld the ICC's ruling.

In March 2002, Walker successfully registered the foreign judgment award in the United States District Court for the District of Columbia. In August 2003, Walker filed a garnishment action in the United States District Court for the Southern District of Texas to garnish funds it believed were owed to the ROC by Murphy, a Texas-based company. Walker claims that it sought to garnish money from Murphy after Murphy announced in May 2003 that it had signed two production sharing contracts with the ROC for oil exploration projects to be operated by Murphy West Africa, Ltd., one of Murphy's foreign subsidiaries.

In ex parte proceedings before the district court, Walker successfully obtained a writ of garnishment against Murphy, an order for expedited discovery, and a temporary restraining order prohibiting Murphy or any of its subsidiaries from paying any money to the ROC. Following discovery, the district court¹ granted Walker's motion to vacate the temporary restraining order, dissolve the writs of attachment and garnishment, and dismiss the action in February 2004, based upon its finding that the ROC was immune from execution under the FSIA.²

In its memorandum opinion dismissing the garnishment proceeding, the district court ordered the parties to submit supplemental briefing on the question of whether Murphy was entitled to costs and attorney's fees for prevailing in the garnishment action. The parties briefed the issue, and on April 5, the court found that Murphy was entitled to an award of costs and attorney's fees under Texas Rule of Civil Procedure 677 and ordered Murphy to submit an application for fees.

Murphy filed an application on April 20 for award of costs and fees incurred in asserting the Congo's defense under the FSIA and in defending against garnishment. Walker filed a response in opposition, and the district court held a hearing on the subject of costs and fees on May 27. On July 1, the district court awarded Murphy $515,970.18 for costs and fees already incurred. Murphy had requested $525,935.43. The district court also awarded Murphy $35,000 of the $75,000 requested for appeal to this court; $10,000 of the $50,000 requested if Walker files a petition for review with the Supreme Court; and $25,000 of the $75,000 requested in the event that the Supreme Court hears an appeal.

Walker filed a Motion for Reconsideration of the district court's order, which was summarily denied by the district court on July 22. Walker then timely filed this appeal.

II

A

Federal Rule of Civil Procedure 69(a) provides:

[t]he procedure on execution, in proceedings on and in aid of a judgment, and in proceedings on and in aid of execution shall be in accordance with the practice and procedure of the state in which the district court is held, existing at the time the remedy is sought, except that any statute of the United States governs to the extent that it is applicable.

"State law controls both the award of and the reasonableness of fees awarded where state law supplies the rule of decision." Mathis v. Exxon Corp., 302 F.3d 448, 461 (5th Cir.2002). Whether state law supplies the rule of decision, however, is a legal question reviewed de novo by our court.

Walker maintains that because the underlying litigation was brought, defended and decided under the FSIA, any issue arising out of Murphy's claim for costs and attorney's fees should be governed by the FSIA. Walker acknowledges that Federal Rule of Civil Procedure 69(a) functions to apply state law in garnishment proceedings, but asserts that under Rule 69(a) federal law is to be applied when the state law conflicts with the federal law. Walker finds such a conflict between Texas Rule of Civil Procedure 677, which allows for attorney's fees in garnishment proceedings, and the FSIA, which Walker asserts does not allow for attorney's fees. Walker concludes that because the FSIA does not contain a fee-shifting provision, each litigant should pay its own attorney's fees pursuant to the American rule.³ In essence, Walker maintains that the FSIA establishes a process for enforcing judgments against foreign states by setting forth a vehicle for assessing liability and then procuring property through attachment and execution.

As to be expected, Murphy does not agree. Murphy argues that garnishment actions filed in federal court are governed by state law and procedure except where a particular federal law may apply. Murphy asserts that federal law does not apply to the question of attorney's fees, suggesting that the FSIA merely supplies the standards for deciding an issue of immunity.

We are in agreement with Murphy: the FSIA does not supply law conflicting with Texas law on the issue of attorney's fees. Rather, the FSIA "sets forth the sole and exclusive standards to be used to resolve all sovereign immunity issues raised in federal and state courts." See Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d 528, 532 (5th Cir.1992) (citation and internal quotations omitted). The purpose of the FSIA is not "to affect substantive law determining the liability of a foreign state". First Nat'l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 620, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983). Stated differently, the FSIA does not create an independent cause of action. In re B-727 Aircraft Serial No. 21010, 272 F.3d 264, 270 (5th Cir.2001). It simply provides a defense to claims raised against a sovereign and a federal forum for the resolution of such claims.

Because the FSIA does not supply a cause of action, the rule of decision applied to the issue of attorney's fees, as well as the underlying garnishment proceeding, is that of the State of Texas under Fed.R.Civ.P. 69(a). This court has already suggested as much in dicta: in a decision vacating a dismissal of a garnishment action, this court observed that its decision obviated the need to address the merits of whether Texas law permitted the award of attorney's fees. Connecticut Bank of Commerce v. Republic of Congo, 309 F.3d 240, 260 n. 10 (5th Cir.2002). Although this court did not decide the issue in Connecticut Bank, we agree with the Connecticut Bank panel's suggestion that Texas law governs the provision of attorney's fees in garnishment actions in which sovereign immunity is raised as a defense by the garnishee.

Having found that Texas law governs the provision of attorney's fees, we now turn to the application of Texas law to the case at hand. As we noted above, state law controls both the award of and the reasonableness of fees awarded. Mathis, 302 F.3d at 461. The Texas Supreme Court has noted that the availability of attorney's fees under a particular statute is a question of law. Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex.1999). Such questions of law are reviewed de novo. See, e.g., Jakab v. Gran Villa Townhouses Homeowners Ass'n, Inc., 149 S.W.3d 863, 867 (Tex.Ct.App.2004); Pacesetter Pools v. Pierce Homes, 86 S.W.3d 827, 833 (Tex.Ct.App.2002).

Texas Rule of Civil Procedure 677 provides:

Where the garnishee is discharged upon his answer, the costs of the proceeding, including a reasonable compensation to the garnishee, shall be taxed against the plaintiff; where the answer of the garnishee has not been controverted and the garnishee is held thereon, such costs shall be taxed against the defendant and included in the execution provided for in this section; where the answer is contested, the costs shall abide the issue of such contest.

Thus, the statute strongly suggests that a garnishee who contests a writ of garnishment and prevails is entitled to attorney's fees because of the successful result of that "contest". Texas case law confirms this understanding of the...