Swift Financial Corporation v. Bath Planet of Mississippi, LLC et al

Filing 64

ORDER denying 54 Motion for Attorney Fees for the reasons set out in the Order. Signed by District Judge Daniel P. Jordan III on August 31, 2016. (SP)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION
SWIFT FINANCIAL CORPORATION
d/b/a SWIFT CAPITAL

PLAINTIFF

v.

CIVIL ACTION NO. 3:15cv846-DPJ-FKB

BATH PLANET OF MISSISSIPPI, LLC, et al.

DEFENDANTS

ORDER
This case is before the Court on the Motion for Attorney’s Fees [54] filed by Defendants
Kelty Tile & Marble, LLC, Kelty Plumbing, LLC, and KTM, Inc. (“Kelty Defendants”).
Because the Kelty Defendants have not established their entitlement to attorney’s fees at this
stage, the motion is denied.
I.

Facts and Procedural History
This case arises from a January 13, 2015 Future Receivables Sale Agreement between

Plaintiff Swift Financial Corporation d/b/a Swift Capital (“Swift”) and Defendant Bath Planet of
Mississippi, LLC (“Bath Planet”). Bath Planet defaulted, and its president, Mark Kelty, filed for
bankruptcy in June 2015. Believing that Mark Kelty’s wife, Christina Kelty, and the Kelty
Defendants, three companies owned and operated by Mark Kelty’s brother and sister-in-law,
might share some liability for Bath Planet’s default and alleged wrongdoing, Swift filed this
lawsuit against Bath Planet, Christina Kelty, and the Kelty Defendants on November 20, 2015.
Christina Kelty and the Kelty Defendants moved to dismiss, and the Court granted the
Kelty Defendants’ motion and granted in part Christina Kelty’s motion. Order [53]. The Kelty
Defendants’ motion for attorney’s fees followed. Plaintiff has responded in opposition to the
motion, and the Kelty Defendants failed to file a reply. The Court has personal and subjectmatter jurisdiction and is prepared to rule.

II.

Analysis
In their motion, the Kelty Defendants reference 28 U.S.C. § 1927 and the Court’s

inherent authority as bases for a fee award. In their memorandum, they also refer to the
Mississippi Litigation Accountability Act. The Court will address each potential basis for a fee
award in turn.
A.

28 U.S.C. § 1927

Under 28 U.S.C. § 1927, the Court may tax reasonable attorney’s fees against “[a]ny
attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously . . . .”
28 U.S.C. § 1927. To justify an award under the statute, the Court “must find that the sanctioned
attorney multiplied the proceedings both “unreasonably’ and ‘vexatiously.’ This requires
‘evidence of bad faith, improper motive, or reckless disregard of the duty owed to the court.’”
Procter & Gamble Co. v. Amway Corp., 280 F.3d 519, 525 (5th Cir. 2002) (quoting Edwards v.
Gen. Motors Corp., 153 F.3d 242, 246 (5th Cir. 1988)) (additional citation omitted). Sanctions
under § 1927 should be “‘sparingly applied’” and “‘require clear and convincing evidence’ that
sanctions are justified.” Lawyers Title Ins. Corp. v. Doubletree Partners, L.P., 739 F.3d 848,
872 (5th Cir. 2014) (quoting Meadowbriar Home for Children, Inc. v. Gunn, 81 F.3d 521, 535
(5th Cir. 1996); Bryant v. Military Dep’t of Miss., 597 F.3d 678, 694 (5th Cir. 2010)); see also
id. (“Section 1982 sanctions should be employed ‘only in instances evidencing a serious and
standard disregard for the orderly process of justice,’ lest ‘the legitimate zeal of an attorney in
representing [a] client [be] dampened.’” (quoting FDIC v. Conner, 20 F.3d 1376, 1384 (5th Cir.
1994))).

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Stated simply, the Kelty Defendants have not demonstrated the type of bad faith required
to justify an award under § 1927. While the Court ultimately dismissed the claims against them,
it cannot say that Swift’s conduct in naming them in this lawsuit was both unreasonable and
vexatious. Although the entities’ corporate structure cut against Swift’s legal position under
Mississippi law, there was a factual basis for it to perceive some interconnectedness between the
Kelty Defendants and Bath Planet. The Kelty Defendants have failed to establish the
requirements for relief under § 1927.
B.

The Court’s Inherent Authority

“A court should invoke its inherent power to award attorney’s fees only when it finds that
‘fraud has been practiced upon it, or that the very temple of justice has been defiled.’” Boland
Marine & Mfg. Co. v. Rihner, 41 F.3d 997, 1005 (5th Cir. 1995) (quoting Chambers v. NASCO,
Inc., 501 U.S. 32, 46 (1991)). As explained above, the Court declines to find that Swift’s
conduct in pursuing claims against the Kelty Defendants rises to the level of bad faith. The
Court likewise concludes that the Kelty Defendants have not demonstrated a fraud upon the
Court. An award of attorney’s fees as a sanction under the Court’s inherent authority is not
warranted.
C.

Mississippi Litigation Accountability Act

Assuming but not holding that it applies in this diversity case, the Mississippi Litigation
Accountability Act permits the assessment of attorney’s fees against “an attorney or party” who
“brought an action, or asserted any claim or defense, that is without substantial justification, [or]
was interposed for delay or harassment . . . .” Miss. Code Ann. § 11-55-5(1). “Without
substantial justification” under the statute “means that [a claim] is frivolous, groundless in fact or

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in law, or vexatious . . . .” Id. § 11-55-3(a). And “[a] claim is frivolous when, ‘objectively
speaking, the pleader or movant has no hope of success.’” Russell v. Beachwalk Condominums
Ass’n, Inc., 193 So. 3d 657, 661 (Miss. Ct. App. 2016) (quoting Leaf River Forest Prods. Inc. v.
Deakle, 661 So. 2d 188, 195 (Miss. 1995)). “Though a case be weak or ‘light-headed,’ that is
not sufficient to label it frivolous.” Scruggs v. Saterfiel, 693 So. 2d 924, 927 (Miss. 1997)
(internal quotation marks and citations omitted).
For the same reasons discussed above, the Court finds that Swift’s filing of claims against
the Kelty Defendants does not rise to the level of frivolous under the Mississippi statute. Swift’s
actions were no different than that of any plaintiff whose claims are dismissed under Rule
12(b)(6). A successful motion to dismiss, standing alone, does not indicate sanctions against the
plaintiff are warranted.
III.

Conclusion
The Court has considered all arguments. Those not specifically addressed would not

have changed the outcome. For the foregoing reasons, the Kelty Defendants’ Motion for
Attorney’s Fees [54] is denied.
SO ORDERED AND ADJUDGED this the 31st day of August, 2016.
s/ Daniel P. Jordan III
UNITED STATES DISTRICT JUDGE

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