FDIC v. Z & S Realty Company

Opinion

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

____________________

No. 96-41270 Summary Calendar ____________________

FEDERAL DEPOSIT INSURANCE CORPORATION, As Manager of the FSLIC Resolution Fund,

Plaintiff-Appellee,

v.

Z & S REALTY COMPANY; SCHMUEL S PINTER,

Defendants-Appellants.

_________________________________________________________________

Appeal from the United States District Court for the Southern District of Texas (G-96-CV-180) _________________________________________________________________ November 28, 1997 Before KING, HIGGINBOTHAM, and DUHÉ, Circuit Judges.

PER CURIAM:*

In a motion for panel rehearing, defendants-appellants Z & S

Realty Company and Schmuel S. Pinter seek to reinstate their

appeal following its dismissal by this court for inadequate

briefing. In their appellate brief, defendants-appellants argue

that the district court erred in denying their motion for

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. continuance. In addition, they claim that the district court

incorrectly awarded plaintiff-appellee Federal Deposit Insurance

Corporation judgment against them on a non-recourse note and

incorrectly awarded plaintiff-appellee attorney’s fees without

contemporaneous time records. We grant defendants-appellants

petition for panel rehearing and reinstate their appeal, and we

affirm the judgment of the district court.

I. FACTUAL & PROCEDURAL BACKGROUND

Plaintiff-appellee Federal Deposit Insurance Corporation

(“FDIC”), as Manager of the FSLIC Resolution Fund, filed this

civil action against Z & S Realty Co. and its general partner,

Schmuel S. Pinter (collectively, “Defendants”), alleging that

Defendants had executed a note secured by real property and that

the FDIC had become a holder of that note by assignment. Upon

Defendants’ failure to pay the note when due, the FDIC foreclosed

and later bought the property at the foreclosure sale. After

Defendants refused to relinquish possession of the property, the

FDIC sought a temporary restraining order and an injunction

directing them to turn over possession of the property. The FDIC

also sought monetary damages in the form of (1) attorney’s fees

incurred to obtain possession of the property and to collect the

amount due under the note, (2) attorney’s fees incurred as a

result of Defendants’ failed attempt to have the FDIC’s attorney

sanctioned, and (3) damages under the partial-recourse provisions

2 of the note for deficiency due to Defendants’ failure to maintain

the property and for rentals received after default on the note.

On September 12, 1996, the magistrate judge held an

evidentiary hearing to determine the FDIC’s damages. Thereafter,

the district court, relying on the magistrate judge’s recommended

findings of fact and conclusions of law, rendered judgment for

the FDIC, ordering that the FDIC was entitled to possession of

the real property and enjoining Defendants from interfering with

said possession. The district court also ordered Defendants to

pay damages of $17,872.25 plus interest for the unpaid principal

balance of the note out of the rents collected by Defendants

after the foreclosure. Finally, the district court awarded the

FDIC attorney’s fees totaling $28,169.35.

II. DISCUSSION

A. Motion for Rehearing

Defendants appealed the district court’s judgment, and this

court dismissed their appeal for failure to file a brief with

adequate record citations pursuant to Federal Rule of Appellate

Procedure 28(a)(4) and Fifth Circuit Rule 28.2.3. See Moore v.

FDIC, 993 F.2d 106, 107 (5th Cir. 1993). We noted that we would

reconsider the dismissal if Defendants filed a motion for

rehearing accompanied by a sufficient amended brief within forty-

five days. Because we find that Defendants’ amended brief

complies with applicable Rules of Appellate Procedure and Fifth

3 Circuit Rules, we hereby reinstate the appeal.

B. Continuance

Defendants argue that the magistrate judge erred by refusing

to grant their motion for continuance of an evidentiary hearing

that conflicted with the Jewish holiday of Rosh Hashanah and took

place while Pinter’s mother was hospitalized. We disagree.

This court reviews a magistrate judge’s denial of a motion

for continuance for abuse of discretion. See Dorsey v. Scott

Wetzel Servs., Inc., 84 F.3d 170, 171 (5th Cir. 1996). As the

scope of that discretion is extremely wide, Command-Aire Corp. v.

Ontario Mechanical Sales and Serv., Inc., 963 F.2d 90, 96 (5th

Cir. 1992), this court will affirm such a ruling unless it was

arbitrary or clearly unreasonable, Transamerica Ins. Co. v.

Avnell, 66 F.3d 715, 721 (5th Cir. 1995).

In an order issued on May 17, 1996, the district court

scheduled an evidentiary hearing on damages for Friday, July 19,

1996. Pinter moved for continuance because of the Sabbath, and

although the district court initially denied the request, it

later granted the continuance out of concern for Pinter’s

religious beliefs. It therefore canceled the hearing and

referred the matter to a magistrate judge.

In an order issued on July 17, 1996, the magistrate judge

rescheduled the hearing for August 7, 1996. Two days before the

hearing, Pinter’s newly retained counsel filed a motion for

4 continuance, which the magistrate judge granted. In an order

issued on August 5, 1996, the magistrate reset the hearing for

September 12, 1996. On September 4, only eight days before the

hearing and one month after the hearing date was set, Pinter

again moved for continuance because September 14 was the Jewish

holiday Rosh Hashanah. Additionally, two days before the

hearing, Pinter filed a letter, not in the form of a formal

pleading, again requesting continuance of the hearing. Attached

to the letter was an unauthenticated, handwritten note stating

that Pinter’s mother was in the hospital. The magistrate judge

denied the continuance, noting that the request was not in proper

pleading form, the note was not authenticated, and the hearing

could be completed in time for Pinter to participate in the

holiday. In view of these facts, we cannot say that the

magistrate judge abused his discretion in denying Pinter’s

request for continuance.

C. Judgment for Deficiency out of Rents

Defendants next argue that the district court erred in

awarding a deficiency judgment on a partial non-recourse note.

Although the note lists several exceptions to its non-recourse

provisions, Defendants claim that only one exception, exception

(g), might apply to this case and that the FDIC waived the

application of that exception in its closing argument.

The FDIC responds that although Defendants objected to the

5 magistrate judge’s ultimate conclusion, they did not specifically

object to the sufficiency of the proof or argue that the FDIC had

waived its claim to the deficiency. They therefore argue that

this court should review the district court’s decision only for

plain error. They further contend that they did not waive their

claim to the deficiency. We agree.

Exception (g) of the note allows recourse for “rentals

received by or on behalf of Maker subsequent to the default by

Maker under this note or any Security Documents.” The FDIC

introduced proof that the property was in default as of February

1995, that it foreclosed on March 5, 1995, that the Defendants

received over $192,000 in rentals after the default occurred, and

that after the foreclosure sale a deficiency of $17,872.25

remained. In accordance with this evidence, the magistrate judge

found that the FDIC was entitled to recover $17,872.25 plus

interest.

This circuit has determined that a party’s failure to object

to a magistrate judge’s report and recommendation should be

treated as a forfeiture and therefore is reviewed only for plain

error. Douglass v. United Serv. Auto. Ass’n, 79 F.3d 1415, 1428-

29 (5th Cir. 1996) (en banc). We have explained that

failure to object timely to a magistrate judge’s report and recommendation bars a party, except upon grounds of plain error . . . from attacking on appeal not only the proposed factual findings . . . but also the proposed legal conclusions, accepted . . . by the district court, provided that the party has been served with notice that such consequences will result from a

6 failure to object.

Id. at 1417. In this case, Defendants were advised of the

consequences of failing to object properly. Although Defendants

filed written objections, they did not argue that the FDIC had

waived its claim for the amount of the deficiency,1 and our

review is therefore limited to plain error. Thus, in order to

prevail, Defendants must show “(1) that an error occurred; (2)

that the error was plain, which means clear or obvious; (3) the

plain error must affect substantial rights; and (4) not

correcting the error would ‘seriously affect the fairness,

integrity or public reputation of judicial proceedings.’”

Highlands Ins. Co. v. National Union Fire Ins. Co., 27 F.3d 1027,

1032 (5th Cir. 1994) (quoting United States v. Olano, 507 U.S.

725, 736 (1993)).

Having reviewed the record, we can find no evidence that the

FDIC waived its claim to the deficiency. Even the portion of the

hearing transcript cited by Defendants does not support their

1 Defendants’ entire objection to the magistrate judge’s recommendation that they be held liable for the deficiency plus interest reads as follows:

Defendants object to the finding that they are bound and liable for interest on the unpaid principal balance of SEVENTEEN THOUSAND EIGHT HUNDRED SEVENTY TWO AND 25/100 ($17,872.25) from March 5, 1996 at a rate of 18% per annum until entry of judgment because of pursuant to Plaintiff’s Exhibit 1, this is a non- recourse note and that the individual Defendants are not liable for any type of deficiency judgment, absent specific circumstances that are not applicable here.

7 waiver contention. Further, Defendants offer no argument that

the district court’s legal conclusions were in error, and the

record contains adequate proof of the damages. We therefore find

that the district court did not err in holding that the FDIC was

entitled to $17,872.25 plus interest out of the rentals recovered

after Defendants defaulted.

D. Proof of Attorney’s Fees

Relying on Fifth Circuit Rule 47.8.1, Defendants next argue

that the district court erred in awarding $7,390.62 in attorney’s

fees to the FDIC’s New York counsel because the fees were not

proved by contemporaneous time records. In response, the FDIC

argues that Rule 47.8.1 does not require that the records be

produced to the court unless the reasonableness of the hours

claimed becomes an issue and the parties are unable to resolve

it. They claim that because Defendants never questioned the

reasonableness of the hours claimed and never requested that the

contemporaneous time records be produced, the district court did

not err in awarding them fees.

The issue of attorney’s fees arose after Pinter filed a

motion for sanctions against Walter Cooke, the FDIC’s counsel, in

a bankruptcy proceeding involving a company known as Hardware by

Kramer, Inc. Cooke hired the New York law firm of Fox & Horan to

represent him, and the FDIC agreed to reimburse him. Cooke

testified at the evidentiary hearing to prove up the attorney’s

8 fees, and the record also includes a summary of Fox & Horan’s

work. Additionally, the court admitted into evidence the

deposition of Kathleen Kundar, the attorney who performed the

majority of the legal services. Kundar testified about the

number of hours that her firm spent on the matter and described

the services rendered. Defendants’ counsel cross-examined her

about the time that she spent on the matter. Although he

questioned Kundar as to whether she had prepared contemporaneous

time records, which she had, Defendants’ counsel did not request

the records. Nevertheless, at the evidentiary hearing,

Defendants objected to the lack of contemporaneous time records,

arguing that the summary that had been provided to them was

insufficient. The magistrate judge overruled the objection and

stated that it would review the deposition testimony. It then

recommended an award of $7,390.62 to the FDIC, and the district

court adopted that recommendation.

We review both the district court’s decision to grant

attorney’s fees to a prevailing party and its decision regarding

the amount of fees awarded for abuse of discretion. See Heasley

v. Commissioner of Internal Revenue, 967 F.2d 116, 123 (5th Cir.

1992). We review the district court’s subsidiary findings of

fact only for clear error. See id.

Fifth Circuit Rule 47.8.1 states that “[p]etitions or

motions for the award of attorney’s fees should always be

supported by contemporaneous time records recording all work for

9 which a fee is claimed and reflecting the hours or fractional

hours of work done and the specific professional level of

services performed by each lawyer for whom compensation is

sought.” 5TH CIR. R. 47.8.1.2 Nevertheless, this court has held

that “[f]ailing to provide contemporaneous billing statements

does not preclude an award of fees per se, as long as the

evidence produced is adequate to determine reasonable hours.”

Louisiana Power & Light Co. v. Kellstrom, 50 F.3d 319, 325 (5th

Cir. 1995); see also Dennis v. Warren, 779 F.2d 245, 249 (5th

Cir. 1985) (upholding district court’s award of attorney’s fees

despite lack of contemporaneous records). In this case, the

request for attorney’s fees was supported by the sworn deposition

testimony of Kundar and by a summary of her work. In addition,

Kundar was subject to cross-examination by Defendants’ attorney,

who did not request that she provide Defendants with copies of

2 This court has not held that Fifth Circuit Rule 47.8.1 applies to a district court’s award of attorney’s fees. In Purcell v. Seguin State Bank and Trust Co., 999 F.2d 950 (5th Cir. 1993), this court held that Western District of Texas Local Rule CV-7(j), rather than Fifth Circuit Rule 47.8.1 applied. Id. at 962. The Southern District has no comparable rule, and in other cases this court has failed to clarify the applicability of Rule 47.8.1 to district court proceedings. See, e.g., Alberti v. Klevenhagen, 896 F.2d 927, 931 (discussing pre-1983 award of attorney’s fees by district court and noting that Fifth Circuit Rule 47.8.1 applies to later awards of attorney’s fees), vacated in part on other grounds, 903 F.2d 352 (5th Cir. 1990); Dennis v. Warren, 779 F.2d 245, 249 (5th Cir. 1985) (declining to decide whether Fifth Circuit Rule 47.8.1 applied to a district court proceeding). While we assume, solely for purposes of this appeal, that Rule 47.8.1 does apply to the district court’s award of attorney’s fees, we decline to express an opinion on the merits of that issue.

10 the contemporaneous records that she testified she had made.

More importantly, Defendants do not complain that the fees

awarded were unreasonable, nor do they challenge the legal basis

for the fees. Additionally, Defendants have neither argued nor

attempted to demonstrate that they were prejudiced by the lack of

contemporaneous records. We therefore conclude that the district

court did not abuse its discretion in awarding the FDIC the

requested attorney’s fees.

III. CONCLUSION

For the foregoing reasons, the motion for rehearing is

GRANTED, the appeal is REINSTATED, and the judgment of the

district court is AFFIRMED.