United States District Court, D. Alaska
UNITED STATES OF AMERICA, EX REL, THOMAS A. BERG, TIMOTHY A. BERG, RYNE J. LINEHAN, NAYER M. MAHMOUD, and STANLEY E. SMITH, Plaintiffs,
v.
HONEYWELL INTERNATIONAL, INC., and HONEYWELL, INC., Defendants.
ORDER RE MOTION FOR ATTORNEY FEES
SHARON
L. GLEASON UNITED STATES DISTRICT JUDGE.
Before
the Court at Docket 325 is Defendants' Motion for
Attorney Fees. The motion is fully briefed.[1] The Court heard
oral argument on the motion on April 24, 2017.
DISCUSSION
Honeywell
contends that it is entitled to recover attorneys' fees
under any of three standards: the False Claims Act provision
for attorneys' fees at 31 U.S.C. § 3730(d)(4); the
Vexatious Litigant Statute at 28 U.S.C. § 1927; and the
Court's inherent authority to impose sanctions for bad
faith conduct. Honeywell seek fees from the Relators
themselves under the FCA, and from Relators' counsel
under § 1927 and the Court's inherent authority.
I.
The FCA Provision
The
default rule for an FCA action is that a successful relator
is entitled to an award of attorneys' fees.[2] But the award of
fees to a prevailing defendant “under the False Claims
Act is reserved for rare and special
circumstances.”[3] A successful defendant in an FCA action is
entitled to such an award only if “the court finds that
the claim of the person bringing the action was clearly
frivolous, clearly vexatious, or brought primarily for
purposes of harassment.”[4] This standard largely mirrors
that used to determine whether a prevailing defendant is
entitled to attorneys' fees under 42 U.S.C. §
1988.[5]
As the
Ninth Circuit has explained:
An action is “clearly frivolous” when “the
result is obvious or the appellant's arguments of error
are wholly without merit.” An action is “clearly
vexatious” or “brought primarily for purposes of
harassment” when the plaintiff pursues the litigation
with an improper purpose, such as to annoy or embarrass the
defendant.[6]
Honeywell
does not contend that this action was “clearly
vexatious” or “brought primarily for purposes of
harassment.”[7] Rather, Honeywell contends that it was
“clearly frivolous” because of the substantial
evidence of government knowledge and participation in
crafting the Electrical Baseline Adjustment and because
separate federal investigations into the contracts concluded
there was insufficient evidence of fraud.[8] Relators respond
that their argument that the government knowledge in this
case was insufficient to defeat liability was not
frivolous.[9]
The
Ninth Circuit has explained that a court should deny an award
of attorneys' fees when the “circumstances furnish
some basis, albeit somewhat tenuous, for one to
theorize” a claim, even if “evidence to support
such a theory failed to materialize, and summary judgment was
properly granted in favor of the
defendant[].”[10] Relators were not required to accept the
government investigators' assessments of the evidence.
The fact that this Court granted summary judgment in favor of
Honeywell does not mean the result was “obvious”
or that Relators' arguments were “wholly without
merit.” Honeywell has not shown that this is a
“rare and special circumstance[]” that warrants
attorneys' fees under the FCA. Accordingly, the Court
will deny Honeywell's motion seeking attorneys' fees
against Relators pursuant to the False Claims Act.
II.
Vexatious Litigant Statute and Inherent Power
Congress
has authorized the award of attorneys' fees against an
attorney who “multiplies the proceedings in any case
unreasonably and vexatiously.”[11] To support an award of
attorneys' fees, Honeywell must show that Relators'
counsel “knowingly or recklessly raise[d] a frivolous
argument, or argue[d] a meritorious claim for the purpose of
harassing an opponent.”[12] “[R]eckless nonfrivolous
filings, without more, may not be sanctioned” under
§ 1927.[13] To support a fee award pursuant to
§ 1927, then, Honeywell must show that Relators'
counsel recklessly made frivolous filings or arguments, or
otherwise acted “for the purpose of harassing an
opponent” or some other improper purpose.
Independent
of its statutory authority, a court may also award
attorneys' fees when a party or attorney has acted in bad
faith.[14] Under a court's inherent power,
“[s]anctions are available for a variety of types of
willful actions, including recklessness when combined with an
additional factor such as frivolousness, harassment, or an
improper purpose.”[15] Although a court's inherent power
permits it to award sanctions against either a party or an
attorney, [16] Honeywell mostly seeks fees only from
Relators' counsel.[17]
These
standards are not identical-a fee award may in some cases be
appropriate under § 1927 but not under a court's
inherent power, and vice versa.[18] But because the standards
under each largely overlap as relevant to this case, and
because Honeywell briefed them together, the Court also
addresses them together. The alleged sanctionable conduct
falls into four distinct categories: (1) representations made
to the Ninth Circuit; (2) actions related to Paul Knauff; (3)
frivolous motions practice; and (4) frivolous legal
arguments. The Court addresses each category in turn.
a.
Ninth Circuit Appeal
Honeywell
relies on Relators' representations to the Ninth Circuit
that Honeywell “overwrote” the DOE software, that
Steve Craig “admitted” knowing the project would
not save money, and that Honeywell planned from the outset
for the project to fail in order to capture profits at a
later renegotiation.[19] In Honeywell's view, Relators'
representations were knowingly false when made.[20] As to the
“overwriting” claim, Honeywell merely indicates
that the evidence produced and reviewed during discovery in
this case after the representations made to the
Ninth Circuit-recall that the Ninth Circuit was considering
only allegations in a complaint-did not support those
representations. That an allegation turns out to be
unsupported by evidence does not automatically render it
either frivolous or harassing.[21] Honeywell has not shown that
Relators' counsel's representations on overwriting
justify a fee award.
As to
the “Craig” claim, Honeywell has not met its
burden to show that this claim was made recklessly or with
intent to harass. Rather, the Court simply held in its order
on summary judgment that Relators had failed to present
sufficient evidence on which a reasonable jury might return a
verdict in their favor with regard to that
claim.[22]
The
Court notes that in Relators' briefing on the motion for
attorneys' fees, Relators have substantially augmented
the record in this regard beyond what was submitted to or
relied on by the Court in support of their summary judgment
briefing. This includes the submission of a new declaration
by Teresa Robison, one of the attendees at the July 2006
meeting, which she signed in February 2017-two months after
the Court had ruled on summary judgment, and more than ten
years after the July 2006 meeting.[23] Relators have also just
filed a memorandum apparently written by Tim Berg shortly
after the July 2006 conference call and around the same time
as the Tyler Memorandum.[24] For unknown reasons, Mr. Berg's
previous declaration in support of the summary judgment
briefing did not append his own contemporaneous memorandum
but instead relied only on the Tyler
Memorandum.[25] But in any event, Mr. Berg's
recently filed memorandum, consistent with Mr. Tyler's,
indicates that Mr. Craig's comment at the July 2006
meeting was conditional: “Mr. Craig . . . reiterated
that unless the Government lived up to its commitment to
ensure actual facility heat loads that both Honeywell and the
Government knew the project would not be economically
viable.”[26] While the newly submitted materials
reflect the extent of certain FRA employees' distrust of
Honeywell, they do not undermine the Court's ruling on
summary judgment.[27] But neither do they-or any other
evidence before the Court on this motion-establish that
Relators and their counsel knowingly or recklessly relied on
Mr. Craig's July 2006 remarks in pressing their claims.
The fact that Honeywell prevailed on summary judgment does
not render the Relators' claim “frivolous, ”
nor does it prove an intent to harass. Relators' and
counsel's conduct as to this issue does not warrant an
award of attorneys' fees.
Relators
also proffered a “renegotiation” theory to the
Ninth Circuit. Although ultimately this Court found no
genuine issue of material fact to support such a theory, the
advancement of that theory also does not warrant an award of
attorneys' fees. Despite Honeywell's contention that
government documents already in Relators' possession at
the time of the Ninth Circuit oral argument disproved this
theory, matters concerning Honeywell's intentions in its
original bidding would not necessarily be found in the
government's documents. Oral argument before the Ninth
Circuit took place before any extensive discovery had begun.
The government's documents then in Relators'
possession merely reveal that the government contemplated
alternative resolutions to the AAA findings, and ultimately
decided to pursue renegotiation. Honeywell has not shown the
absence of any factual basis for Relators to allege the
renegotiation theory to the Ninth Circuit during the prior
appeals, for that theory necessarily would turn on the
later-acquired discovery related to Honeywell's documents
and personnel.[28]
b.
Paul Knauff
Honeywell
maintains that attorneys' fees are warranted for
Relators' counsel's conduct related to Paul
Knauff's affidavit, documents, and deposition. Much of
that alleged conduct, standing alone, would not warrant
sanctions or an award of fees even if true. Counsel's
alleged failure to notify the government or Honeywell prior
to contacting Mr. Knauff, for example, does not, by itself,
demonstrate bad faith. Likewise, counsel's failure to
timely produce documents collected from Mr. Knauff was not
shown to be done in bad faith.
The
allegations that Relators' counsel procured a false
affidavit and persuaded Mr. Knauff to sign it, however, are
far more serious. But the record on this issue is
insufficient to support Honeywell's proposed remedy. So
far as the Court can discern, Relators' counsel met with
and interviewed Mr. Knauff, drafted an affidavit that
reflected counsel's understanding of the relevant facts,
reviewed that draft affidavit with Mr. Knauff, made
corrections as directed, and then provided a final version of
the affidavit for Mr. Knauff to sign before a notary public.
In Mr. Knauff's own telling, this notary public then went
through and read each line, confirming Mr. Knauff's
agreement, before having Mr. Knauff sign and date the
affidavit.[29] That notary public-whose credibility is
not in question- averred that Mr. Knauff was alert and
appeared to fully understand the contents and import of the
affidavit, after reviewing supporting documentation in his
own file.[30] And Honeywell's contention that Mr.
Knauff “would not have included almost any of the
paragraphs” is somewhat misleading.[31] Mr.
Knauff's testimony indicates only that he had written
affidavits in the past and that if he had written this one
“[i]t wouldn't have been this
long.”[32]
An
attorney must always exercise caution to ensure that an
unrepresented individual does not mistake that attorney for
his own.[33] But there is no indication that
Relators' counsel actively misled Mr. Knauff as to their
relationship; rather, Mr. Knauff testified that he had
assumed they represented him.[34] Relators' counsel
explained that they represented Relators in the
matter.[35] Any misunderstanding between Mr. Knauff
and Relators' counsel on this point is not grounds for a
fee award.
In its
Reply, Honeywell argues that the Knauff affidavit contained
statements that Relators' counsel knew to be false.
Honeywell points to the contradiction between an After Action
Review account of Mr. Knauff's actions with regard to
calculating the baseline and the account of Mr. Knauff's
actions in the affidavit.[36] But many a witness's
recollection will vary over time, even if Mr. Knauff's
varied substantially. In light of this conflict in the
evidence, at summary judgment the Court specifically did not
decide the issue of Mr. Knauff's role in setting the
baseline.[37]
“Fair
competition in the adversary system is secured by
prohibitions against destruction or concealment of evidence,
improperly influencing witnesses, obstructive tactics in
discovery procedure, and the like.”[38] While certain
of the interactions between Relators' counsel and Mr.
Knauff are questionable, Honeywell has not shown that the
conduct was in bad faith so as to justify a fee award.
c.
Motions Practice
Honeywell
points to five filings by Relators that Honeywell maintains
were “frivolous and vexatious.”[39] The Court
addresses each filing in turn.
1.
Docket 174 - Case Status Report
After
over eight years of litigation, this case was reassigned to
the undersigned judge on January 13, 2016.[40] Three days
prior to a scheduling conference, Relators filed a
“Case Status Report” that summarized their
argument and view of the facts.[41]Honeywell moved to strike
that submission, and the Court did so at the scheduling
conference.[42] Although the Court struck the filing,
the Court does not find it warrants a fee award: counsel
appears to have been acting in good faith to inform the newly
assigned judge of the relevant legal, factual, and procedural
background of the case.[43] No fees will be awarded for this
filing.
2.
Docket 181 - Motion to Compel
In the
midst of fact discovery, Relators filed a Motion to Compel
seeking production of certain of Honeywell's internal
documents that Honeywell had withheld as
privileged.[44]The Court denied the motion without
prejudice to renew and with specific instructions for
renewal.[45] Honeywell appears to contend that
Relators' failure to renew the motion shows it to have
been vexatious.[46] The Court disagrees: that the motion was
denied without prejudice to renew does not entitle Honeywell
to fees; neither does Relators' decision not to renew the
motion. Indeed, the Court's order denying the motion
recognized that its assessment of any renewed motion would
turn on the content of Honeywell's motion for summary
judgment.[47] That Relators opted not to renew the
motion to compel after reviewing the motion for summary
judgment does not show that the original motion was vexatious
or otherwise sanctionable.
3.
Docket 225 - Motion for Partial Summary Judgment
Relators
filed a motion for partial summary judgment, contending that
the undisputed facts unequivocally demonstrated
Honeywell's liability.[48] The Court, of course, denied
the motion and granted summary judgment to
Honeywell.[49] Honeywell's particular complaint
with regard to this filing is the insufficiency of factual
citations and the late filing of “corrected”
briefing and omitted exhibits.[50]
The
Court will not revisit its rulings on summary judgment.
Honeywell prevailed on summary judgment in light of the
relevant briefing and submitted evidence. Relators did not.
But a fee award on this basis is unwarranted.[51]
4.
Docket 231 - Motion to Compel
After
the close of fact discovery, and after the filing of motions
for summary judgment (and related oppositions), Relators
filed a Motion to Compel.[52] The Court granted that motion
in part.[53] In addition to seeking fees for its
briefing on this matter, Honeywell apparently also seeks
recovery of its “fees for engaging in further discovery
and responding to deposition by written
question.”[54] No fees are warranted for responding to
what the Court deemed a meritorious motion or for complying
with the Court's order.
5.
Docket 307 - Motion to Compel
Following
Honeywell's compliance with the Court's order on the
motion to compel discussed above, Relators filed another
Motion to Compel seeking additional production of internal
correspondence related to ESPC audits.[55] The motion
was denied. But the filing of the motion to ...