United States v. Nesglo, Inc.

744 F.2d 887
CourtCourt of Appeals for the First Circuit
DecidedSeptember 20, 1984
DocketNos. 83-1898, 84-1065
StatusPublished
Cited by35 cases

This text of 744 F.2d 887 (United States v. Nesglo, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. Nesglo, Inc., 744 F.2d 887 (1st Cir. 1984).

Opinion

LEVIN H. CAMPBELL, Chief Judge.

This is an appeal from an order entered by the United States District Court for the District of Puerto Rico on October 31,1983, awarding appellees the sum of $11,880 in attorneys’ fees and $123.75 in costs to be satisfied by Mr. Edelmiro Salas Garcia, counsel for appellants, pursuant to 28 U.S.C. § 1927.

I. FACTS

On September 13, 1982, the United States filed a complaint against Nesglo, Inc., and its sole shareholders, Nestor Cruz Soto and Gloria Diaz de Cruz (collectively, appellants), seeking collection on a promissory note and foreclosure of a mortgage. On March 8, 1983, appellants filed a third-party complaint against the Chase Manhattan Bank, N.A., and two of its officers, Enrique Fernandez and Stanley Zych (collectively, appellees). Appellants alleged that appellees had engaged in a variety of illegal activities in the course of the parties’ relationship and prayed for damages. Although appellants now contend that, due to appellees’ conduct, they were deprived of financial stability and thus were unable to meet their obligations to the United States, they alleged no such connection with the main action in the third-party complaint.

Appellants’ claims in the third-party complaint were the same as, or similar to, claims that appellants made in two earlier cases. We briefly describe these prior cases so as to clarify the district court’s actions below.1

[889]*889In the first case, Chase sued appellants in the Superior Court of Puerto Rico, San Juan Part, to collect on promissory notes secured by a factor’s lien. In their answer and counterclaim, appellants made claims very similar to those contained in the instant third-party complaint. Appellants then initiated a second action in the United States District Court for the District of Puerto Rico and repeated essentially the same claims.

On December 2, 1980, the district court dismissed the latter action for lack of jurisdiction, Nesglo, Inc. v. Chase Manhattan Bank, N.A., 506 F.Supp. 254 (D.P.R.1980), and appellants appealed. While the appeal was pending, the Superior Court of Puerto Rico issued an opinion and judgment dated May 15, 1981, striking all' of appellants’ answers and affirmative defenses and dismissing with prejudice all counterclaims. The superior court defaulted the appellants and entered judgment for appellees. The court cited appellants’ willful failure to comply with discovery orders and abuse of the Commonwealth’s adjudicatory process as grounds for its judgment. See Nesglo, Inc. v. Chase Manhattan Bank, N.A., 562 F.Supp. 1029, 1034 (D.P.R.), aff'd memo., No. 81-1097 (1st Cir. Mar. 4, 1983), cert. denied, _U.S--, 104 S.Ct. 342, 78 L.Ed.2d 310 (1983). All of appellants’ subsequent motions and petitions were denied.

This circuit remanded appellants’ appeal in the dismissed federal action for findings on mootness in light of the superior court’s judgment. On February 8, 1983, the district court substituted for its prior judgment of dismissal, Nesglo, 506 F.Supp. 265, another judgment of dismissal on the ground of mootness. Nesglo, 562 F.Supp. 1029 (giving full faith and credit and preclusive effect to Commonwealth court judgment). Finally, on March 4, 1983, this circuit summarily affirmed the district court’s finding and recommendation.

Thus, appellants commenced the present third-party action after the Commonwealth court had dismissed the same claims with prejudice, and after the district court and this court had agreed that the Commonwealth judgment precluded further litigation of the claims. With this in mind, we turn to the facts of the present dispute.

Although appellants filed their third-par-. ty complaint on March 8, 1983, they did not serve appellees until March 29, 1983. On May 12, 1983, Mr. Salas moved for a continuance of the pretrial conference set for May 25, 1983, because he would be absent from Puerto Rico until the first week of June. The magistrate granted the motion and the pretrial conference was set for June 6, 1983. The court did not, however, stay proceedings in Mr. Salas’s absence, and he did not request such a stay. Accordingly, appellees, after receiving two extensions, responded to appellants’ complaint with a timely motion to dismiss and a supplementary motion to dismiss on May 25-26, 1983.

In its motions, appellees argued that the third-party action was improper under Fed.R.Civ.P. 14 and that appellants’ claims were barred under mootness and res judicata principles. In the initial motion, appellees sought attorneys’ fees and costs from Mr. Salas for his bad faith in renewing suit on the already adjudicated claims. In its supplementary motion, appellees cited 28 U.S.C. § 1927 and the court’s inherent power as authority for such an award.

Under the Local Rules of the United States District Court for the District of Puerto Rico, appellants had until June 8, 1983 to file a response or move for an extension. Appellants did not timely respond, nor did they make a late response, which is permissible upon a showing of “excusable neglect.”

On July 26, 1983, appellants finally moved for an extension to respond to appellees’ motion, citing as justification their preoccupation due to preparation of a petition for certiorari in the Nesglo, Inc. v. Chase Manhattan Bank, N.A. case.2 Appellees opposed the motion.

[890]*890Appellants never filed a response and on September 14, 1983, the district court dismissed appellants’ complaint and found Mr. Salas personally liable for attorneys’ fees and costs under section 1927. The court fixed September 23, 1983 as the date for the hearing to determine the amount of costs and fees but, at Mr. Salas’s request, rescheduled the hearing for October 14, 1983.

On October 12, 1983, appellees’ counsel filed and served on Mr. Salas a bill of costs and affidavits and schedules setting out the time spent, rates charged, and services rendered by them in connection with appellees’ defense. Appellees also served an informative motion stating the witnesses appellees would call at the hearing.

The hearing was held on October 14 and continued on October 17. The court deferred admission of the affidavits and schedules into evidence and required counsel to testify. Counsel testified on direct and were cross-examined at length by Mr. Salas. The district court also questioned the witnesses on the nature and extent of their work, hours and pay.

Appellees called an expert legal witness, Mr. Rafael Perez-Bachs, Esquire, who testified on the prevailing local market rates for legal work and the reasonableness of the overall fees charged. Mr. Salas also took the stand.

On October 31, 1983, the district court awarded appellees $11,880 in attorneys’ fees and $123.75 in costs.

II. HEARING

Appellants contend that the district court abused its discretion and deprived them of due process by awarding attorneys’ . fees against them under 28 U.S.C. § 1927 without first holding a hearing on the question of whether Mr.

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744 F.2d 887, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-nesglo-inc-ca1-1984.