Kardonick v. JP Morgan Chase & Co. et al
RESPONSE/REPLY to 406 MOTION for Bond Plaintiffs' Motion to Direct Objectors to Post Appeal Bond by William H. McWhorter. (Bacharach, N.)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA (MIAMI)
David Kardonick, John David, and Michael
Clemins, individual and on behalf of all
others similarly situated and the general public
Case No. 10-CV-23235 (S.D. Florida)
Assigned to: Senior Judge William M.
JP Morgan Chase & Co., and Chase Bank USA,
OBJECTOR/APPELLANT’S RESPONSE TO PLAINTIFFS’ MOTION TO DIRECT
OBJECTORS TO POST APPEAL BOND AND
INCORPORATED MEMORANDUM OF LAW IN SUPPORT
Objector/Appellant, William McWhorter, by undersigned counsel, responds to
Plaintiffs’ Motion to Direct Objectors to Post Appeal Bond and Incorporated
Memorandum of Law in Support and state as follows:
Class Plaintiffs may obtain a bond for costs under Rule 7 Fed.R.App.P., but
those costs may not include attorneys' fees or a frivolous appeal penalty.
In requesting a bond Plaintiffs/Appellees have failed to calculate or ask for the
actual costs of appeal; and, the $35,000 or such other amount that the Court deems
appropriate to cover the potential costs and attorneys’ fees are not bondable on appeal
under the facts of this case. Under Rule 7 Fed.R.App.P., a bond cannot include
attorneys' fees or non designated costs. Class Plaintiffs' claim for $35,000 in attorneys'
fees and non designated costs as part of the requested appeal bond is not supported by
either the Federal Rules or the law and facts of this case. Objectors/Appellant
McWhorter’s objections to the Class Notices, and his appeal from the Order
overruling his objections, is not frivolous and his appeal is highly unlikely to be
declared so by the appellate panel. Furthermore, even assuming arguendo that the
United States Court of Appeals for the 11th Circuit, were to find the McWhorter appeal
to be frivolous, the unlikely and speculative possibility of such a finding is not be the
proper subject of an appeal bond ordered by the District Court.
It is clear that Class Counsel is seeking a $35,000.00 bond in an attempt to stifle
Objector/Appellant McWhorter’s appeal from this Court’s approval of the settlement
agreement. That is not a proper use of the rules relating to bonding, and the Court
should not allow it pursuant to Rule 7 Fed.R.App.P.. Class Plaintiff's' are entitled to a
bond for only those costs explicitly taxable pursuant to Rule 39 Fed.R.App.P., but not
Neither the Objections Nor the Appeal is Frivolous
The overarching theme of Class Plaintiffs' request for this excessive,
unwarranted, and unlawful bond is that McWhorter’s objections to the class notice is
supposedly frivolous and/or were brought in bad faith or vexatiously, and that
Objector/Appellant McWhorter’s counsel is a "professional objector" who pursues
objections for improper purposes.
First, an appeal is frivolous if "the result is obvious or if the claims of error are
wholly without merit." DeWitt v. Western Pacific Railroad Co., 719 F. 2d 1448,
1451(9th Cir. 1983). The fact that there is a body of federal jurisprudence regarding
class notice shows reasonable people often differ on this issue. 28 U.S.C. §1927,
which might support a bond for "vexatious litigation conduct," is inapplicable to this
appeal, as it requires "bad faith or intentional misconduct by counsel." Furthermore,
although the imposition of attorney's fees on appeal as a sanction is allowed under
Rule 38 Fed.R.App.P., it is only available after an appellate court finds the appeal
frivolous, and only upon further motion and hearing. 10 Wright, Miller & Kane,
Federal Practice & Procedure, § 2675; 2675.2 (2001); see also Azizian v. Federated
Department Stores, Inc., 499 F.3d 950, 960 (9th Cir. 2007).
It is well established that whether an appeal is frivolous is solely within the
purview of the appellate court, not the district court. Vaughn v. American Honda
Motor Co., Inc., 507 F.3d 295, 299 (5th Cir. 2007); Cooter & Gell v. Hartmax Corp.,
496 U.S. 384, 407 (1990); In re American President Lines, Inc., 779 F.2d 714, 717
(D.C. Cir 1985). Only the appellate court has the authority to impose sanctions for a
frivolous appeal. Azizian, 499 F.3d at 960; In re Vasseli, 5 F.3d 351, 353 (9th Cir
1993) citing In re American President Lines, Inc., 779 F.2d 714, 717 (D.C. Cir. 1985).
In the case of Azizian v. Federated Department Stores, Inc., the Ninth Circuit
considered the question under what circumstances a district court may require an
appellant to include appellate attorney's fees in an appeal bond. See Azizian, 499 F.3d
950. The Azizian court determined that a district court only may require an appellant
to secure appellate attorney's fees in the appeal bond pursuant to Rule 7 Fed.R.App.P.
if an applicable fee shifting statute includes attorney's fees in its definition of
recoverable costs. Id. at 953. In Azizian, the district court had ordered appellants to
post a $42,000 appeal bond, representing $2,000 in appellate costs under Rule 39 and
$40,000 in appellate attorney's fees. Id. at 954. The district court rationalized its
inclusion of attorney’s fees in the appeal bond by concluding that the Court of Appeal
was likely to find the appeal frivolous. Id. Appellants tendered the $2,000 of the
bond allocated to costs under Rule 39 Fed.R.App.P., but not the $40,000 allocated to
attorney's fees. Id. The Ninth Circuit found that the appeal should not be dismissed
on the merits because appellants had failed to post the full bond required by the
district court. Id. at 954. In discussing the district court's determination that the Court
of Appeal would find the appeal frivolous and therefore award attorney's fees as a
sanction under Rule 38, the Ninth Circuit stated that “even if we were to conclude that
[the appellant's] appeal was frivolous, however, we would reverse the district court's
inclusion of appellate attorney's fees on that basis.” Id. at 960.
The Ninth Circuit held that the district court's inclusion of attorney's fees in the
bond on the grounds that the appeal was likely frivolous was improper for three
reasons. Id. First, because an award of attorney's fees for a frivolous appeal under
Rule 38 Fed.R.App.P. is very unusual, and it would be difficult for the district court to
gauge whether such an award would be likely. Id. Second, if the potentially large
sums possible under Rule 38 were included in Rule 7 bonds, the effect would be to
chill appeals. Id. Third, Rule 38 authorizes the award of attorney's fees as a sanction
for improper conduct on appeal, and only the Court of Appeals may order the sanction
of appellate attorney's fees. Id. The Ninth Circuit concluded that “whether, or how, to
deter frivolous appeals is best left to the courts of appeals...” Id. at 961. Therefore,
there is simply no provision for a district court to make an advance determination that
an appeal is frivolous, much less authority for imposing a bond to include the
anticipated damages and sanctions that the circuit court may ultimately determine.
Bondable Costs Do Not Include Attorneys' Fees
Class Plaintiffs suggest that this Court has the authority to include prospective
attorneys' fees as items of Rule 7 costs. In fact, the majority rule among the Circuits,
endorsed by the Eleventh, Second, Sixth, and Ninth Circuits, is that a district court
may include attorney's fees in a Rule 7 bond only if those attorney's fees would be
considered recoverable costs under an applicable “prevailing party” fee shifting
statute. See Pedraza v. United Guaranty Corp., 313 F.3d 1323, 1329-30 (11th Cir.
2002); Azizian, 499 F.3d at 958; In re Cardizem CD Antitrust Litigation, 391 F.3d
812, 817-818 (6th Cir. 2004); Adsani v. Miller, 139 F.3d 67, 71 (2d Cir. 1998). In
order for attorney's fees to be included in a Rule 7 bond, the statute on which the
action is based must have a “prevailing party” fee shifting provision, or must
expressly hold that attorney's fees are a category of costs. See Arencibia v Miami
Shores, Inc. , 113 F.3d 1212, 1214 (11th Cir. 1997) (statute in issue must define
"costs" to include attorney's fees for the district court to have jurisdiction to award
fees under procedural rules relating to costs). An older minority rule endorsed by the
D.C. and Third Circuits held that Rule 7 costs on appeal are strictly limited to costs
listed in Rule 39. See In re American President Lines, Inc. ,779 F.2d 714, 716 (D.C.
Cir. 1985); see also 16A Charles Alan Wright, Arthur R. Miller & Edward H. Cooper,
Federal Practice & Procedure § 3953 (3d ed. 2006).
Even when a statute contains a fee shifting provision, but only allows fees to be
assessed against the wrongdoer, as where the Clayton Act fee-shifting provision
allows for attorney's fees to be paid by the party found to have violated the antitrust
laws, attorney's fees cannot be included in a Rule 7 appeal bond posted by a party to
whom the fee-shifting provision does not apply, such as the plaintiff/appellant in
Azizian. See Azizian, 499 F.3d at 959-60. There the Ninth Circuit determined that the
Clayton Act's fee-shifting provision was not the type of statute that could support the
inclusion of attorney's fees in an appeal bond, because the provision was
“asymmetrical,” in that it only awarded attorney's fees to plaintiffs who proved an
antitrust injury. Id. at 960.
The case of Adsani v. Miller, 139 F.3d 67 (2d Cir. 1998), which Plaintiffs cite
(Docket #406, page 5) in supposed support of their contention that bondable costs
may include attorney's fees is unapplicable. In Adsani the underlying statute provided
for attorney's fees; i.e. There was a “prevailing party” fee shifting statute, where either
party could recover attorney's fees if the party prevailed. See Adsani is, 139 F.3d at
78-9. Thus, Adsani and all the other cases cited by Plaintiffs are, distinguishable from
the instant case because the instant case has no fee shifting statute.
Case cited by Plaintiffs as allowing attorney's fees to be included in a bond in
an action under the Clayton Act, In re Nasdaq Market-Makers Antitrust Litigation,
187 F.R.D. 124 (S.D.N.Y. 1999), also is easily distinguished from the instant case.
There the court had found that the objector was attempting to use the class action as a
vehicle to litigate his unrelated, 25-year-old claims against the defendants. See In re
Nasdaq, 187 F.R.D. at 126. The fact that the court had explicitly found that the
objector had so flagrantly abused the class action process distinguishes In re Nasdaq
from the instant case, where the court has not found that Objectors/Appellants have
abused the class action process. Furthermore, in In re Nasdaq, the court did not
directly consider the issue of whether an asymmetrical statutory fee shifting statute
could properly justify the inclusion of attorney's fees in an appeal bond. Because the
action in the instant case is not predicated on federal law providing either an
asymmetrical or a “prevailing party” fee-shifting provision, this Court cannot include
attorney's fees in the Rule 7 bond as a part of costs.
The Eleventh Circuit requires that the definition of “costs” for Appellate Rule 7
purposes should come from Rule 39, 28 U.S.C. § 1920, or the statute underlying the
litigation.” Pedraza supra.
This Court should be quided by In Re: AOL, 2007 WL 2741033 at 4 (S.D.N.Y
September 20, 2007) wherein the Court required only that appellant in that case post a
bond in the amount of $800 in order to cover the plaintiff’s printing and copying costs
on appeal. Id. at 6.
This Appeal concerns the inadequateness of the class notice. Therefore, set
forth above, there is no legal or factual support for the imposition of a Rule 7 bond
that exceeds the actual costs to be estimated by Class Plaintiffs pursuant to Rule 39
Fed.R.App.P. No other costs are bondable under Rule 7 in this case.
WHEREFORE, Objector/Appellant McWhorter respectfully submit that any
bond imposed may not exceed the actual costs to be estimated by Class Plaintiffs
pursuant to Rule 39 Fed.R.App.P. and estimated by Objector/Appellant
McWhorter as less than $1000.00
/s/ N. Albert Bacharach, Jr.
N. Albert Bacharach, Jr.
Florida Bar No. 209783
Attorney for Objector William McWhorter
N. Albert Bacharach, Jr. P.A.
115 Northeast 6th Avenue
Gainesville, Florida 32601
Telephone: (352) 378-9859
Facsimile: (352) 338-1858
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 10th day of November, 2011, the
foregoing was filed electronically with the Clerk of the Court using the CM/ECF
filing system and that all counsel of record will automatically be notified by the
CM/ECF electronic mail system.
/s/ N. Albert Bacharach, Jr.
N. Albert Bacharach, Jr.
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