Exco Operating Company LP v. Arnold et al

Filing 242

ORDER deferring ruling on 232 Motion for Attorney Fees. Within the next 14 days, EXCO shall supplement its motion for fees and costs with a memorandum and contemporaneous time sheets and billing/cost records that conform to the fees and costs that the court intends to allow, as detailed herein. EXCO may file the revised attorney time sheets/billing records under seal, but, in any event, shall serve a copy of the revised sheets/records on counsel for defendants, Evelyn Spillers, et al. IT IS FURTHER ORDERED that, within 14 days after EXCO supplements its motion, defendants, Evelyn Arnold, et al., shall file any response thereto. EXCO may seek leave to file a reply within 7 days thereafter. ORDER granting 233 Motion to file exhibits under Seal. Signed by Magistrate Judge Karen L Hayes on 5/20/14. (crt,Crawford, A)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
MONROE DIVISION
EXCO OPERATING COMPANY, LP

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CIVIL ACTION NO. 10-1838

VERSUS

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JUDGE DONALD E. WALTER

EVELYN ARNOLD, ET AL.

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MAG. JUDGE KAREN L. HAYES

MEMORANDUM ORDER
Before the undersigned magistrate judge, on reference from the District Court, are two
motions filed by plaintiff, Exco Operating Company, LP: 1) to award attorney’s fees and costs
[doc. # 232], and 2) to file exhibits under seal [doc. # 233]. For reasons explained below, the
former motion is deferred, and the latter is GRANTED.
Background
On December 14, 2010, EXCO Operating Company, LP (“EXCO”) filed the instant
complaint for statutory interpleader pursuant to 28 U.S.C. § 1335. (Compl.). EXCO deposited
an initial sum of close to $2 million into the court registry, and named almost 200 defendants or
potential claimants to the stake. See Compl. EXCO prayed that each defendant be required to
appear in this action and establish his or her right to the funds on deposit in the court, and that it
be discharged from all liability associated with the fund. (Compl., Prayer).
EXCO explained in its complaint that since November 2006, it has been the operator of
an 18 well Unit located in the Vernon Field, Jackson Parish, Louisiana. (Compl., ¶¶ 4-5). As
operator of the wells, EXCO “has been paying each owner’s respective interest in said wells . . .”
Id., at ¶ 6. At some point, however, EXCO received complaints regarding payments from Lloyd
Turner, an heir of Ned and Nannie Turner. Id. at ¶¶ 6-7. Moreover, EXCO learned from

numerous affidavits of marriage, death, and heirship, that Ned and Nannie Turner may have had
more children than indicated in an October 18, 1932, Judgment of Possession that resolved their
successions. Id. at ¶¶ 7-8. Consequently, EXCO began to doubt which individuals were entitled
to the proceeds from the numerous wells located in Vernon Field and their respective interests.
Id. at ¶ 9. Thus, EXCO provoked the instant proceeding.
On December 20, 2010, the undersigned permitted EXCO to deposit the disputed funds in
the registry of the court, and further ordered that “[p]laintiff recover its costs of bringing this
action out of such fund, including a reasonable attorney’s fee for the services of its counsel . . .”
(Dec. 20, 2010, Order [doc. # 10] (emphasis added)). The parties did not appeal this order to the
District Court.
In July 2012, the District Court appointed George M. Wear, Jr., as Special Master in this
matter. [doc. #s 150, 153]. On May 29, 2013, the Special Master issued his recommended
disposition. (May 29, 2013, R&R [doc. # 197]). On September 6, 2013, the District Court
entered judgment directing the Clerk of Court to return the funds in the court registry to EXCO,
and ordering EXCO to disburse the funds in accordance with the appropriate column of the
spreadsheet appended to the Special Master’s Report and Recommendation. (Judgment [doc. #
216]).
Following entry of judgment, the parties filed motions for a new trial, together with a
notice of appeal. On January 9, 2014, the District Court denied two of the motions for new trial,
granted another, and ordered EXCO to submit an amended judgment. (Jan. 9, 2014, [doc. #
231]). On January 23, 2014, EXCO so complied, but the District Court has yet to endorse and
enter the proposed judgment.
On January 23, 2014, EXCO also filed the instant motions to award attorney’s fees and
costs. [doc. # 232]. EXCO’s motion seeks estimated attorney’s fees of approximately
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$194,634.62 and costs of $14,552.84, for work done in this case from the date the interpleader
was filed until October 2013. EXCO reserved its right to amend its petition to include additional
fees and costs that it has incurred since October 2013. EXCO also filed a motion to file its cost
records and contemporaneous time sheets under seal for in camera review only. [doc. # 233].
On February 3, 2104, defendants, Evelyn Arnold, et al., filed a memorandum in
opposition to the motion for attorney’s fees and costs. In their memorandum, defendants oppose
any award at all, but if the court were to award fees and costs, then the amount should be limited
to the “fees and costs for the first stage of the proceeding, the drafting, filing and service of the
interpleader complaint.” (Opp. Memo., pgs. 4-5 [doc. # 237]). Defendants further protest that
they were unable to review any of the costs and services claimed by EXCO because EXCO filed
its supporting evidence/records under seal. EXCO did not file a reply.
On May 12, 2014, the District Court referred the pending motion for fees and costs to the
undersigned for report and recommendation. (May 12, 2014, Order [doc. # 240]).
Analysis
“A district court has the authority to award reasonable attorney's fees in interpleader
actions. The award of attorney's fees is in the discretion of the district court, and fees are
available when the interpleader is a disinterested stakeholder, and is not in substantial
controversy with one of the claimants.” Rhoades v. Casey, 196 F.3d 592, 603 (5th Cir. 1999)
(citations omitted). The court may consider the following factors to determine whether to award
costs to an interpleader-plaintiff: (1) whether the case is simple; (2) whether the interpleaderplaintiff performed any unique services for the claimants or the court; (3) whether the
interpleader-plaintiff acted in good faith and with diligence; (4) whether the services rendered
benefitted the interpleader-plaintiff; and (5) whether the claimants improperly protracted the
proceedings. Royal Indem. Co. v. Bates, 307 F. App'x 801, 806 (5th Cir. 2009) (unpubl.) (citing
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7 Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure §
1719 (3d ed.2001).
The fee award to the stakeholder is a matter of equity and justice. Louisiana State Lottery
Co. v. Clark, 16 F. 20, 21 (Cir. Court E.D. La. 1883) (citing Internal Imp. Fund Trustees v.
Greenough, 105 U.S. 527, 532 (1881)). In cases where funds have been placed in the court’s
registry, it is standard practice to make fair and just allowance for expenses and counsel fees to
the party that provoked the litigation. Id. Such an award, however, contemplates only costs and
fees that are chargeable between parties – not the fees and expenses that an attorney charges his
or her client. Id. Furthermore, the fees and costs awarded must be made “with moderation and a
jealous regard to the rights of those who are interested in the fund . . .” Id.
Applying the foregoing considerations to the circumstances at hand, the court observes
that the issues in this case were relatively straight forward – once framed, but the matter was
compounded by the large number of claimants. Moreover, the interpleader-plaintiff performed
some work to preserve the funds for the claimants, and continues to assist the court with the
distribution of funds. The court further finds that the interpleader-plaintiff acted in good faith
and with diligence, but that it is likely that the same or similar result could have been obtained
via a complaint for declaratory judgment. In addition, EXCO has not remained completely
disinterested in the matter. It answered a counterclaim filed by Lloyd Turner, and filed responses
to his myriad motions. Moreover, EXCO retains an ongoing interest with respect to the proper
distribution of future royalties. The services rendered by EXCO enured to its benefit by
resolving any latent dispute to the distribution of the funds. Finally, it does not appear that any
claimants improperly protracted the proceedings. While Lloyd Turner may have filed a
premature dispositive motion, the motion did not materially protract or delay these proceedings.
Accordingly, the court will reaffirm its prior order awarding reasonable fees to EXCO.
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However, the undersigned intends to award solely those fees and costs that EXCO incurred for
drafting, filing, and serving the interpleader complaint, i.e. actions typically performed during the
first stage of an interpleader action. Rhoades, supra (in the first stage, the district court decides
whether there is a single fund at issue and whether there are adverse claimants to that fund). The
court does not intend to award fees and/or costs expended by EXCO during the second stage of
the interpleader action, including as a result of its efforts to comply with and/or clarify the
District Court’s order(s) and the Special Master’s directions regarding distribution of the funds.
These are activities that EXCO performs in its ordinary course of business. See Travelers Indem.
Co. v. Israel, 354 F.2d 488, 490 (2d Cir. 1965) (stakeholder may not transfer its ordinary cost of
doing business by bringing an action in interpleader). This equitable approach ensures that
EXCO is reimbursed for its costs of bringing the instant interpleader action and for notifying the
considerable number of claimants, but not reimbursed for fees and costs related to activities that
it would perform ordinarily, and from which EXCO continues to derive benefit.
Toward that end,
IT IS ORDERED that, within the next 14 days from the date of this order, EXCO shall
supplement its motion for fees and costs with a memorandum and contemporaneous time sheets
and billing/cost records that conform to the fees and costs that the court intends to allow, as
detailed herein. EXCO may file the revised attorney time sheets/billing records under seal, but,
in any event, shall serve a copy of the revised sheets/records on counsel for defendants, Evelyn
Spillers, et al. – the only parties who opposed the instant motion.1

1

The vast majority of fee statements are not attorney-client privileged or work product
protected. XL Specialty Ins. Co. v. Bollinger Shipyards, Inc., Civ. Action No. 12-2071, 2014 WL
295053 (E.D. La. Jan. 27, 2014); Olaoye v. Wells Fargo Bank NA, Civ. Action No. 12-4873,
2013 WL 6912691 (N.D. Tex. Dec. 30, 2013). In any event, EXCO waived any privilege by
seeking reimbursement of fees. XL Specialty Insurance Co., supra.
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IT IS FURTHER ORDERED that, within 14 days after EXCO supplements its motion,
defendants, Evelyn Arnold, et al., shall file any response thereto. EXCO may seek leave to file a
reply within 7 days thereafter.
IT IS FURTHER ORDERED that EXCO’s motion to file exhibits under seal [doc. #
233] is hereby GRANTED.
In Chambers, at Monroe, Louisiana, this 20th day of May 2014.

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KAREN L. HAYES
UNITED STATES MAGISTRATE JUDGE

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