Bruser v. Bank of Hawaii
Filing
355
ORDER ADOPTING IN PART AND REJECTING IN PART THE MAGISTRATE JUDGE'S APRIL 10, 2020 ORDER re 304 - Signed by JUDGE LESLIE E. KOBAYASHI on 7/17/2020. On the basis of the foregoing, the 4/10/20 Order, which is construed as the magistrate judge's findings and recommendation, is ADOPTED IN PART and REJECTED IN PART. The portion of the 4/10/20 Order related to the Receiver is ADOPTED, the portion related to the Receiver's counsel is REJECTED and REMANDED to the magistrate judge for further consideration in light of this Court's order. (emt, )
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UNITED STATES DISTRICT COURT
DISTRICT OF HAWAII
MICHAEL DAVID BRUSER, TRUSTEES
UNDER THAT CERTAIN UNRECORDED
REVOCABLE LIVING TRUST AGREEMENT
DATED JULY 11, 1988, AS AMENDED,
DOING BUSINESS AS DISCOVERY BAY
CENTER; AND LYNN BRUSER,
TRUSTEES UNDER THAT CERTAIN
UNRECORDED REVOCABLE LIVING
TRUST AGREEMENT DATED JULY 11,
1988, AS AMENDED, DOING BUSINESS
AS DISCOVERY BAY CENTER;
Plaintiffs,
vs.
BANK OF HAWAII, A HAWAII
CORPORATION, AS TRUSTEE, AS
SUCCESSOR BY MERGER WITH
HAWAIIAN TRUST COMPANY, LIMITED,
A FORMER HAWAII CORPORATION AND
AS SUCCESSOR TRUSTEE UNDER THAT
CERTAIN TRUST AGREEMENT DATED
JUNE 6, 1974;
Defendant.
________________________________
vs.
JULIE G. HENDERSON, as Trustee
of the Julie G. Henderson
Irrevocable Trust, and as
Trustee of the Jean K. Gowans
Irrevocable Trust, and as
Trustee of the Louis L. Gowans,
Jr. Irrevocable Trust; RICHARD
L. GOWANS, as Trustee of the
Richard L. Gowans Irrevocable
Trust; KEVIN I. YOKOHAMA;
ASSOCIATION OF APARTMENT OWNERS
CIV. NO. 14-00387 LEK-WRP
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DISCOVERY BAY; SUSAN SHEETZ; and
PATRICIA SHEETZ BOW,
Intervening Defendants.
________________________________
BANK OF HAWAII, a Hawaii
corporation, as Trustee, as
successor by merger with
Hawaiian Trust Company, Limited,
a former Hawaii corporation and
as successor Trustee under that
certain Trust Agreement dated
June 6, 1974,
Counterclaim Plaintiff,
vs.
MICHAEL DAVID BRUSER and LYNN
BRUSER, Trustees under that
certain unrecorded Revocable
Living Trust Agreement dated
July 11, 1988, as amended, doing
business as Discovery Bay
Center,
Counterclaim Defendants.
ORDER ADOPTING IN PART AND REJECTING IN PART
THE MAGISTRATE JUDGE’S APRIL 10, 2020 ORDER
On February 25, 2020, Temporary Receiver Steve
Sombrero (“Receiver”) and his counsel, David Farmer, Esq.,
jointly filed their fee applications for the interim period of
February 14, 2019 through January 31, 2020 (“Applications”).
[Dkt. no. 283.]
On April 10, 2020, the magistrate judge issued
his order granting the Applications (“4/10/20 Order”).
no. 304.]
[Dkt.
Before the Court is an appeal of the 4/10/20 Order
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(“Appeal”), filed on April 17, 2020 by Plaintiffs/Counterclaim
Defendants Michael David Bruser and Lynn Bruser, Trustees under
that certain unrecorded Revocable Living Trust Agreement dated
July 11, 1988, as amended, doing business as Discovery Bay
Center (“the Brusers”).
[Dkt. no. 309.]
The Receiver filed his
response to the Appeal on April 19, 2020 (“Receiver’s
Response”), Defendant/Counterclaim Plaintiff Bank of Hawaii, as
Trustee under the Trust Agreement dated June 6, 1974, as
amended, and not individually (“BOH”), filed its response to the
Appeal on April 27, 2020 (“BOH’s Response”), and the Brusers
filed their reply on May 11, 2020.
[Dkt. nos. 310, 315, 323.]
The Court has considered the Appeal as a non-hearing matter
pursuant to Rule LR7.1(d) of the Local Rules of Practice for the
United States District Court for the District of Hawaii (“Local
Rules”).
The 4/10/20 Order is adopted in part and rejected in
part for the reasons set forth below.
BACKGROUND
A summary of the factual background is set forth in
the 4/10/20 Order and only the relevant facts will be repeated
here.
After a bench trial, judgment was entered in favor of BOH
in the amount of $137,434.50, representing “the difference
between what the Brusers owed and what they paid between October
2014 and December 2015, including the applicable” general excise
tax.
See Judgment in a Civil Case (“Judgment”), filed 6/28/16
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(dkt. no. 193), at 2.
costs.
[Id.]
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BOH was also awarded attorney’s fees and
On February 7, 2019, the Court granted BOH’s
Motion for Appointment of a Temporary Receiver, [filed 7/31/18
(dkt. no. 221),] finding that the Brusers had failed to pay the
amounts due under the Judgment for over two years.
Order, filed 2/7/19 (dkt. no. 242), at 14.]
2019, the Court appointed the Receiver.
[Amended
On February 13,
[Order Appointing
Temporary Receiver (“Receivership Order”), filed 2/13/19 (dkt.
no. 243).]
On October 28, 2019, Mr. Farmer was appointed as the
Receiver’s counsel.
[Order Granting Temporary Receiver’s
Application for Order Appointing David C. Farmer, Attorney at
Law LLLC, as Temporary Receiver’s Counsel under General
Retainer, filed 10/28/19 (dkt. no. 277).]
In the 4/10/20 Order the magistrate judge granted the
Applications over the Brusers’ objections.
9.]
[4/10/20 Order at
The magistrate judge found that, based on his review of the
invoices submitted by the Receiver, the time accounted for in
the Receiver’s portion of the Applications was reasonably spent
managing the commercial unit at the Discovery Bay Condominium
(“Commercial Unit”), and the Receiver had “sufficiently engaged
with work on the Commercial Unit.”
omitted).]
[Id. at 7 (citation
The magistrate judge, having “reviewed the invoices
and other materials submitted by the [] Receiver in support of
the Applications and find[ing] that they adequately support the
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amounts requested for the [] Receiver and counsel[,]” awarded
the amounts requested for the Receiver and Mr. Farmer as
reasonable in light of the work completed.
[Id. at 8-9.]
In the Appeal, the Brusers urge the Court to review
the 4/10/20 Order and therefore the Applications de novo, rather
than under the clearly erroneous standard of review.
The
Brusers also argue that the 4/10/20 Order should be rejected:
1) even under the clearly erroneous standard, because it was
based solely on the fact that the Brusers had previously been
found to be in civil contempt; 2) under a de novo standard,
because the Receiver was not actively engaged in managing the
Commercial Unit; and 3) because the work performed by Mr. Farmer
was not sufficiently related to the management of the Commercial
Unit.
STANDARD
I.
Standard of Review
It is undisputed that “[t]he power of
federal magistrate judges is limited by 28 U.S.C.
§ 636.” Estate of Conners by Meredith v.
O’Connor, 6 F.3d 656 (9th Cir. 1993). This court
may designate a magistrate judge to hear and
determine nondispositive pretrial motions. 28
U.S.C. § 636(b)(1)(A); see also O’Connor, 6 F.3d
at 658 (“Under 28 U.S.C. § 636(b)(1)(A), a
district judge may designate a magistrate judge
to hear any nondispositive pretrial matter
pending before the court.)”. This court may also
designate a magistrate judge to conduct hearings
and to submit proposed findings of fact and
recommendations for disposition by the district
judge “of any motion excepted in [23 U.S.C.
5
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§ 636(b)(1)(A).]” 28 U.S.C. § 636(b)(1)(B)
(emphasis added). With the consent of the
parties, this court may designate a magistrate
judge to act “as a special master in any civil
case.” 28 U.S.C. § 636(b)(2). In addition, “[a]
magistrate judge may be assigned such additional
duties as are not inconsistent with the
Constitution and laws of the United States.” 28
U.S.C. § 636(b)(3).
In O’Connor, the Ninth Circuit examined a
post-verdict motion for attorneys’ fees brought
pursuant to 42 U.S.C. § 1988. The district court
referred the motion to a magistrate judge without
specifying the subsection of § 636 that formed
the basis of the referral. See O’Connor, 6 F.3d
at 657. The magistrate then issued an order
awarding fees to the plaintiff. The Ninth
Circuit examined whether the magistrate judge
properly issued an order regarding fees.
Initially, the Ninth Circuit noted that, because
the parties had not consented to the magistrate
judge’s determination of the motion, § 636(b)(2)
was inapplicable. Id. at 658. It then
determined that § 636(b)(1)(A) was inapplicable
because the post-verdict motion was not a
nondispositive pretrial matter. Id.
Because the plaintiffs in O’Connor had
sought attorneys’ fees in their complaint under
§ 1988, the Ninth Circuit viewed their motion for
attorneys’ fees as dispositive of a claim or
defense such that it should have been determined
pursuant to § 636(b)(1)(B). This meant that the
magistrate judge should have submitted proposed
findings and recommendations for the district
court’s de novo review. O’Connor, 6 F.3d at 658.
O’Connor held, however, that because the district
court conducted a de novo review and entered its
own award of attorneys’ fees and costs, any error
by the magistrate judge in simply issuing an
order, rather than findings and recommendations,
was harmless. O’Connor, 6 F.3d at 659 and 659
n.2.
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Erum v. Cty. of Kauai, Civil No. 08-00113 SOM-BMK, 2008 WL
2598138, at *2–3 (D. Hawai`i June 30, 2008) (alterations and
emphasis in Erum).
The 4/10/20 Order does not relate to a
nondispositive pretrial matter.
Regardless of how it is titled,
the 4/10/20 Order will be treated as a post-judgment
recommendation regarding receivership fees, entered pursuant to
§ 636(b)(3), and subjected to de novo review.
To the extent
that any error occurred when the magistrate judge designated the
4/10/20 Order as an order rather than a findings and
recommendation, it is cured by this Court’s de novo review of
the 4/10/20 Order and the issues presented in the Applications..
This Court has stated the legal standard applicable to
de novo review as follows:
Under a de novo standard, this Court reviews
“the matter anew, the same as if it had not been
heard before, and as if no decision previously
had been rendered.” Freeman v. DirecTV, Inc.,
457 F.3d 1001, 1004 (9th Cir. 2006); United
States v. Silverman, 861 F.2d 571, 576 (9th Cir.
1988). The district court need not hold a de
novo hearing; however, it is the court’s
obligation to arrive at its own independent
conclusion about those portions of the magistrate
judge’s findings or recommendation to which a
party objects. United States v. Remsing, 874
F.2d 614, 616 (9th Cir. 1989).
However, “‘[f]rivolous, conclusive, or
general objections [to a magistrate judge’s
report and recommendation] need not be considered
by the district court.’” Rodriguez v. Hill,
No. 13CV1191-LAB (DHB), 2015 WL 366440, at *1
(S.D. Cal. Jan. 23, 2015) (some alterations in
Rodriguez) (quoting Marsden v. Moore, 847 F.2d
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1536, 1548 (11th Cir. 1988)). Thus, an objection
to findings “without any analysis as to why [they
are] inaccurate” is “insufficient to trigger
review of those findings.” United States v.
Rudisill, Nos. CR 97-327-PHX-ROX, CV 04-466-PHXROX, 2006 WL 3147663, at *1 (D. Ariz. Nov. 1,
2006) (citation omitted). If courts required
review in such circumstances, “‘judicial
resources would be wasted and the district
court’s effectiveness based on help from
magistrate judges would be undermined.’”
Bridgeman v. Stainer, No. 12-CV-212 BEN (PCL),
2014 WL 1806919, at *1 (S.D. Cal. May 7, 2014)
(some citations omitted) (quoting United State v.
Midgette, 478 F.3d 616, 622 (4th Cir. 2007)); see
also [United States v.] Reyna-Tapia, 328 F.3d
[1114,] 1122 [(9th Cir. 2003) (en banc)] (“the
underlying purpose of the Federal Magistrates Act
is to improve the effective administration of
justice” (citing Peretz v. United States, 501
U.S. 923, 928, 111 S. Ct. 2661, 115 L. Ed. 2d 808
(1991)). Further, “[o]bjections that would not
alter the outcome are moot, and can be overruled
on that basis alone.” Rodriguez, 2015 WL 366440,
at *1.
Muegge v. Aqua Hotels & Resorts, Inc., Civil 09-00614 LEK-BMK,
2015 WL 4041313, at *2 (D. Hawai`i June 30, 2015) (some
alterations in Muegge) (some citations omitted).
DISCUSSION
I.
The Receiver’s Fees
“A receiver appointed by a court who reasonably and
diligently discharges his duties is entitled to be fairly
compensated for services rendered and expenses incurred.”
SEC
v. Byers, 590 F. Supp. 2d 637, 644 (S.D.N.Y. 2008) (citations
omitted).
In determining the reasonableness of the fees and
costs requested, the court should consider the “economy of
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administration, the burden that the estate may safely be able to
bear, the amount of time required, although not necessarily
expended, and the overall value of the services to the estate.”
In re Imperial ‘400’ Nat’l, Inc., 432 F.2d 232, 237 (3d Cir.
1970) (citations omitted).
“The receiver bears the burden to
demonstrate to the court [any] entitlement to [the] payment of
fees and costs in the amount requested.”
SEC v. Total Wealth
Mgmt., Inc., Case No. 15-cv-226-BAS-DHB, 2016 WL 727073, at *1
(S.D. Cal. Feb. 24, 2016) (citation omitted).
This entitlement
to reasonable compensation extends to an attorney employed by
the receiver.
See Drilling & Exploration Corp. v. Webster, 69
F.2d 416, 418 (9th Cir. 1934).
“An award of interim fees is
appropriate where both the magnitude and the protracted nature
of a case impose economic hardships on professionals rendering
services to the estate.”
SEC v. Small Bus. Capital Corp.,
No. 5:12-CV-03237 EJD, 2013 WL 2146605, at *2 (N.D. Cal. May 15,
2013) (citation and internal quotation marks omitted).
A.
The Receiver
The Brusers assert the Receiver and his counsel were
not actively engaged in the management of the Commercial Unit.
In support of this objection, the Brusers allege “most, if not
all, of the active management and operation of the Property for
the period in question . . . was performed” by the Brusers’
property manager, and not the Receiver.
9
See Appeal at 8.
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The Court agrees with the magistrate judge’s statement
that, “[b]ased on its review of the invoices submitted by the []
Receiver reflecting that the time spent was for the management
of the Commercial Unit, the Court finds that the [] Receiver has
been sufficiently engaged with work on the Commercial Unit.”
[4/10/20 Order at 7 (citation omitted).]
Also, the Court finds
that the work performed by the Receiver was appropriate in light
of the Imperial factors.
For each of the ten months (of the
eleven-month period) for which the Receiver submitted a
timesheet, the total hours for each month generally ranged from
one to seven hours per month, with the exception of October
2019, during which the Receiver billed 12.7 hours.
[Applications, Decl. of Steve Sombrero, Exh. A (Timesheet &
Invoice pages for the Receiver dated February 2019 through
January 2020 (“Receiver’s Timesheets”)).]
The increase in hours
in October 2019 was reasonable in light of the events that
transpired in September and October 2019, including but not
limited to: the fact that the books and records of the
Commercial Unit were turned over to the Receiver; and the Court
finding the Brusers to be in civil contempt for refusing to
comply with the Receivership Order.
See BOH’s Status Report,
filed 9/16/19 (dkt. no. 262), at 2; see also, Minutes, filed
9/23/19 (dkt. no. 264).
For the months other than October, the
Receiver’s Timesheets reflect reasonable efforts to fulfill the
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receivership duties, and describe tasks consistent with that
purpose, including communication with relevant parties, review
of the case file, and review of judicial filings.
Receiver billed approximately 52.0 hours.1
Overall, the
This figure was
calculated by adding the monthly fee pre-tax subtotals ($13,000)
and dividing by the Receiver’s hourly rate of $250.
The
Receiver requests a total of $13,612.56 including general excise
tax.
The effort expended by the Receiver was reasonable,
economical, sufficient without being excessive, resulted in an
expense bearable by the receivership estate, and represented a
reasonable amount of time spent over the eleven-month period in
question.
The Brusers’ argument that the Receiver failed to
establish an interest-bearing account does not negate the
otherwise reasonable nature of the efforts expended, and is
rejected.
The Brusers’ argument that the magistrate judge
relied only on this Court finding the Brusers in contempt to
reach his conclusion is rejected as plainly contrary to the
4/10/20 Order and irrelevant on de novo review.
Therefore, the
portion of the 4/10/20 Order related to the Receiver’s fees is
adopted, and the Receiver is hereby awarded $13,612.56.
1
The sum of the hour subtotals each month yields 52.1
hours. Based on the fees requested, the Receiver has elected to
not bill for 0.1 hours.
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However, the Receiver is cautioned that future applications must
include a subtotal of hours billed in a table format, along with
the rate and fee subtotals.
Future applications missing this
information will not be granted.
B.
Mr. Farmer’s Fees
As this Court has stated:
Under federal law, reasonable attorneys’
fees are generally based on the traditional
“lodestar” calculation set forth in Hensley v..
Eckerhart, 461 U.S. 424, 433 (1983). See Fischer
v. SJB–P.D., Inc., 214 F.3d 1115, 1119 (9th Cir.
2000). The court must determine a reasonable fee
by multiplying “the number of hours reasonably
expended on the litigation” by “a reasonable
hourly rate.” Hensley, 461 U.S. at 433. Second,
the court must decide whether to adjust the
lodestar amount based on an evaluation of the
factors articulated in Kerr v. Screen Extras
Guild, Inc., 526 F.2d 67, 70 (9th Cir. 1975),[2]
which have not been subsumed in the lodestar
calculation. See Fischer, 214 F.3d at 1119
(citation omitted).
The factors the Ninth Circuit articulated in
Kerr are:
(1) the time and labor required, (2) the
novelty and difficulty of the questions
involved, (3) the skill requisite to perform
the legal service properly, (4) the
preclusion of other employment by the
attorney due to acceptance of the case,
(5) the customary fee, (6) whether the fee
is fixed or contingent, (7) time limitations
imposed by the client or the circumstances,
(8) the amount involved and the results
obtained, (9) the experience, reputation,
2
Kerr was abrogated on other grounds by City of Burlington
v. Dague, 505 U.S. 557 (1992), as recognized in Stetson v.
Grissom, 821 F.3d 1157, 1167 (9th Cir. 2016).
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and ability of the attorneys, (10) the
“undesirability” of the case, (11) the
nature and length of the professional
relationship with the client, and
(12) awards in similar cases.
Kerr, 526 F.2d at 70. Factors one through five
have been subsumed in the lodestar calculation.
See Morales v. City of San Rafael, 96 F.3d 359,
364 n.9 (9th Cir. 1996). Further, the Ninth
Circuit, extending City of Burlington v. Dague,
505 U.S. 557, 567 (1992), held that the sixth
factor, whether the fee is fixed or contingent,
may not be considered in the lodestar
calculation. See Davis v. City & County of San
Francisco, 976 F.2d 1536, 1549 (9th Cir. 1992),
vacated in part on other grounds, 984 F.2d 345
(9th Cir. 1993). Once calculated, the “lodestar”
is presumptively reasonable. See Pennsylvania v.
Del. Valley Citizens’ Council for Clean Air, 483
U.S. 711, 728 (1987); see also Fischer, 214 F.3d
at 1119 n.4 (stating that the lodestar figure
should only be adjusted in rare and exceptional
cases).
McMillon v. Hawaii, Civil No. 08-00578 LEK, 2011 WL 744900, at
*3–4 (D. Hawai`i Feb. 22, 2011).
Therefore, as an attorney, Mr. Farmer’s fees are
subject to the lodestar analysis and must reflect a reasonable
rate.
In addition to their own statements, attorneys are
required to submit additional evidence that the rate charged is
reasonable.
See, e.g., id. at *5 (citing Jordan v. Multnomah
County, 815 F.2d 1258, 1263 (9th Cir. 1987)).
“Beyond
establishing a reasonable hourly rate, a party seeking
attorneys’ fees bears the burden of proving that the requested
fees and costs are associated with the relief requested and are
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reasonably necessary to achieve the results obtained.”
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United
States v. Chung, Civ. No. 07–00570 ACK–BMK, 2010 WL 5388006, *3
(D. Hawai`i Dec. 17, 2010) (citation omitted).
The Receiver has
not met his burden with respect to the portion of the
Applications related to Mr. Farmer’s fees.
Mr. Farmer has not
provided a subtotal of hours expended, nor addressed any of the
Kerr factors in a way that would allow the Court to perform the
lodestar analysis.
For these reasons, the portion of the
4/10/20 Order related to Mr. Farmer’s fees is rejected and
remanded.
This result does not reflect a decision that the
hourly rate and billing invoices are unreasonable, but only that
the Receiver has not provided the Court with sufficient
information to make such a determination.
On remand, they are
directed to include subtotals of Mr. Farmer’s fee requests in a
table format and to provide sufficient information for the
magistrate judge to perform a lodestar analysis, including
addressing the Kerr factors.
CONCLUSION
On the basis of the foregoing, the 4/10/20 Order,
which is construed as the magistrate judge’s findings and
recommendation, is ADOPTED IN PART and REJECTED IN PART.
The
portion of the 4/10/20 Order related to the Receiver is ADOPTED,
the portion related to the Receiver’s counsel is REJECTED and
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REMANDED to the magistrate judge for further consideration in
light of this Court’s order.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, July 17, 2020.
MICHAEL DAVID BRUSER, ETC., ET AL. VS. BANK OF HAWAII, ET AL; CV
14-387 LEK; ORDER ADOPTING IN PART AND REJECTING IN PART THE
MAGISTRATE JUDGE’S APRIL 10, 2020 ORDER
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