Alvarez-Mauras v. Banco Popular of Puerto Rico, Inc., et al

Filing 52

ORDER denying 51 Motion for Attorney Fees. Signed by US Magistrate Judge Bruce J. McGiverin on July 23, 2019. (McGiverin, Bruce)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
VÍCTOR ÁLVAREZ MAURÁS,
Plaintiff,
v.

Civil No. 16-2864 (BJM)

BANCO POPULAR DE PUERTO RICO, et
al.,
Defendants.
OPINION AND ORDER
Defendants Banco Popular of Puerto Rico (“Banco Popular”), Alexander García
(“García”), Wanda O. Meléndez-Santos (“Meléndez”), and the conjugal partnership
comprised by García and Meléndez (collectively, “Defendants”) bring this motion to
recoup attorney’s fees after prevailing against Plaintiff Víctor Álvarez-Maurás
(“Álvarez”). Dkt. 51 at 1 (henceforth “Mot.”). The suit concerned violations of the
Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 (“RICO”),
allegedly committed by Defendants. See Dkt. 48. All claims against Defendants were
dismissed by this court, and the dismissal was upheld by the First Circuit. Dkt. 40 at 1; Dkt
48 at 27. Defendants then filed this motion requesting $53,610 for attorneys’ fees incurred
during this case’s two-and-a-half-year duration. Mot. at 2. For the reasons set forth below,
Defendants’ motion for attorneys’ fees is DENIED.
BACKGROUND
This case arose out of a controversy in which Álvarez alleged that García, a
securities broker at Banco Popular’s affiliate Popular Securities, Inc. (“Popular
Securities”), fraudulently transferred $400,000 out of Álvarez’s investment account. See
Dkt. 48 at 4. Álvarez asked Popular Securities to investigate this issue on two separate
occasions, and both investigations found no evidence of any wrongdoing. Id at 5.

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Álvarez next sought arbitration, which was required pursuant to the agreement he
signed with Popular Securities which stated:
All controversies that may arise between the undersigned [Álvarez] and
you, as introducing or clearing broker, your agents, or employees,
concerning any transaction or the construction, performance, or breach of
this or any other agreement between us, whether such transaction or
agreement was entered in prior, on, or subsequent to the date hereof, shall
be determined by arbitration.1
Dkt. 48 at 6. Accordingly, Álvarez filed a claim with the Financial Industry Regulatory
Authority (“FINRA”). Id. In the arbitration proceedings, FINRA, with no further
explanation, dismissed Álvarez’s claims with prejudice for failing to make out a prima
facie case. Id. at 8. However, FINRA also ordered Popular Securities to pay $16,750 in
arbitration fees and denied its request for $70,000 in attorneys’ fees. Id. FINRA also
returned Álvarez’s filing fee and did not allow the complaint to be expunged from García’s
record. Id. The inconsistencies of this award caused Álvarez to present a complaint to the
Court of First Instance of the Commonwealth of Puerto Rico. Dkt. 1 ¶ 36. The court, which
adhered to Puerto Rico law urging great deference to arbitration decisions, affirmed the
award. Dkt. 48 at 9. Álvarez’s subsequent appeals to the Commonwealth’s Appeals Court
and Supreme Court also were unsuccessful, and he received his final denial from the
Commonwealth’s courts on October 23, 2015. Id.
Following his fruitless litigation in the Commonwealth’s courts, Álvarez attempted
to bring federal RICO claims in this court against García and Banco Popular on October
20, 2016. Id. at 9. These claims were litigated up to the First Circuit, who ultimately
affirmed the orders dismissing the claims against all Defendants. Dkt. 48 at 26–27. The
Court of Appeals found that the claims against Popular Securities and García were subject
to the arbitration agreement and dismissed those claims without prejudice to arbitration.

1

All parties agree that this agreement only binds Popular Securities and García, not Banco
Popular. Dkt 48 at 6.

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Id. at 14–15. The court also upheld the dismissal of Álvarez’s claims against Banco Popular
with prejudice for missing the statute of limitations on RICO claims. Id. at 27.
On April 29, 2019, Defendants filed a motion to recoup attorneys’ fees incurred in
litigating this case. See Dkt. 51.
DISCUSSION
RICO allows for the recuperation of reasonable attorneys’ fees by “any person
injured in his business or property by reason of a violation of section 1962.” 18 U.S.C. §
1964(c). In the case at hand, Defendants do not allege that they were harmed due to a
violation of § 1962; therefore they are ineligible to receive attorneys’ fees based on a
statutory provision within RICO itself. See Mot.; § 1964(c). Defendants instead claim that
they are entitled to attorneys’ fees under 28 U.S.C. § 1927, which states that any attorney
“who so multiplies the proceedings in any case unreasonably and vexatiously may be
required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees
reasonably incurred because of such conduct.” See also Mot. at 8. Álvarez has not opposed
the motion for attorneys’ fees.
Defendants correctly state that the First Circuit does not require a showing of
subjective bad faith to meet the § 1927 standard for imposing attorneys’ fees. Id.; McLane,
Graf, Raulerson & Middleton, P.A. v. Rechberger, 280 F.3d 26 (1st Cir. 2002). However,
the absence of such a requirement does not mean that § 1927 sanctions are to be imposed
liberally. The behavior of the party to be sanctioned must be “more severe than mere
negligence, inadvertence, or incompetence” and must display a “serious and studied
disregard for the orderly process of justice.” Cruz v. Savage, 896 F.2d 626, 632 (1st Cir.
1990); United States v. Nesglo, Inc., 744 F.2d 887, 891 (1st Cir. 1984). Some signs of
vexatious litigation include “duplicative motions being filed or repeated refusals to comply
with court orders.” Rossello-Gonzalez v. Acevedo-Vila, 483 F.3d 1, 7 (1st Cir. 2007).
Moreover, just because a claim ultimately is judged to be without merit does not
make it vexatious or unreasonable. New England Surfaces v. E.I. DuPont de Nemours &

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Co., 558 F. Supp. 2d 116, 126 (D. Me. 2008) (citing McMahan v. Toto, 256 F.3d 1120, 1129
(11th Cir. 2001), amended on reh’g 311 F.3d 1077 (11th Cir. 2002)) (“Something more than
a lack of merit is required for § 1927 sanctions or they would be due in every case.”).
Similar standards are applied when determining if a case is brought frivolously. An appeal
“can be weak, indeed almost hopeless, without being frivolous.” Lallemand v. Univ. of
Rhode Island, 9 F.3d 214, 217 (1st Cir. 1993). The court can only find that a case was
brought frivolously if “the arguments in support of it are wholly insubstantial and the
outcome is obvious from the start.” In re Efron, 746 F.3d 30, 37 (1st Cir. 2014).
When placed up against these strict standards, Defendants have not established that
Álvarez’s decision to pursue this litigation was so misguided as to warrant an imposition
of § 1927 sanctions. In this case, Álvarez presented two principle arguments. First, that
his federal RICO claims are not barred by his arbitration agreement. Mot. at 11. More
specifically he alleged that his claims against Defendants are substantially different from
those litigated through arbitration, and that he had a right inherent in RICO to allow him to
pursue his claims in federal court. Id. at 13. Second, that the statute of limitations on his
claims had not expired. Id. Álvarez argued that the courts wrongly determined that he knew
or should have known about his injury on January 19, 2012 (when he filed his FINRA
claim) as opposed to February 20, 2013 (when forensic examination revealed the extent of
García’s fraudulent actions). Id at 16.
In the end, both arguments were unavailing. The First Circuit held that the claims
against the Defendants were subject to the arbitration agreement, and that the district court
used the correct starting date for determining the statute of limitations. Mot. at 27. Even
though Álvarez’s litigation attempts ultimately were unsuccessful, there is no indication
that any of his actions were sufficiently frivolous to warrant the imposition of sanctions.
Throughout this case, Álvarez has not filed any duplicative motions, nor has he
refused to comply with any court orders. He was never warned by the court that further
pursuit of these claims could result in the imposition of sanctions. See Dkt. 48. Defendants’

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arguments in favor of sanctions are primarily based on the assumption that the evidence
against Álvarez was so overwhelming that continuing to litigate it was an inherently
frivolous and unneeded endeavor. See Mot. 11–14. The First Circuit’s opinion, however,
shows that Álvarez did put forth genuine issues both of law and fact whose outcome wasn’t
necessarily obvious from the start.
Álvarez’s arguments against Banco Popular raised several legal questions as to
when a defendant has been “injured” for the purpose of calculating the statute of
limitations, an issue which has been contested and debated in a number of courts. Dkt. 48
at 15–19. His claims concerning the arbitration agreement dealt with how expansive it was
and whether his new claims could be brought in federal court through RICO. 18 U.S.C. §
1964(c); Dkt. 48 at 12–15. The First Circuit gave full consideration to these arguments,
and nothing in its opinion indicates that that these arguments were “wholly insubstantial”
or that Álvarez was harassing or vexatious by presenting them before the court. In re Efron,
746 F.3d at 37.
Defendants also argue that Álvarez failed to comply with the Federal Rules of Civil
Procedure and the First Circuit’s Appellate Rules. Mot. at 14. However, they do not proffer
any evidence that this noncompliance was anything but “mere negligence, inadvertence, or
incompetence” which has been found not to be a solid basis for granting sanctions. Cruz,
896 F.2d at 632. The rest of their argument in favor of awarding attorneys’ fees is simply
that Álvarez was active in pursuing his case by filing motions and responding to claims
made by Defendants. Mot. at 13–14. All these actions that Defendants take umbrage with
are normal actions undertaken by plaintiffs and their counsel during litigation and are
certainly not “objectively . . . unreasonable, harassing, and annoying” as Defendants claim.
Id. at 14.
Finally, Defendants point out that they sent a letter to Álvarez threatening that
continued litigation would result in requests for attorney’s fees. Dkt. 48 at 11. Defendants

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also allegedly sent a draft Rule 11 motion explaining why this case was unwarranted. 2 Id.
The ultimate decision on awarding fees, however, is a matter of court discretion, and is not
controlled by a defendant’s subjective view of the merits of their opponent’s case. Tang v.
State of R.I., Dep't of Elderly Affairs, 163 F.3d 7, 13 (1st Cir. 1998) (quoting Christiansburg
Garment Co. v. EEOC, 434 U.S. 412, 421 (1978)). (“While decisions to grant defendants
their fees are, and should be, rare, ‘a district court may in its discretion award attorney’s
fees to a prevailing defendant . . . upon a finding that the plaintiff’s action was frivolous,
unreasonable, or without foundation.’”). For the above reasons, it is this court’s view that
Álvarez did not act improperly throughout this litigation.
Álvarez allegedly was the victim of an unfortunate situation and actively pursued
every avenue he could to obtain a remedy. In the end his efforts proved unsuccessful, but
such is the case with many litigants. Zealously seeking justice is not harassment, and not
prevailing on claims does not mean that they were frivolous or unreasonable. Whether or
not Álvarez’s choice to continue litigating this case was a good decision is immaterial, as
it is clear that he did not cross any lines by doing so. See In re Efron, 746 F.3d at 38.
CONCLUSION
For the foregoing reasons, the Defendants’ request for attorney’s fees is DENIED.
All parties shall bear their own costs.
IT IS SO ORDERED.
In San Juan, Puerto Rico, this 23rd day of July, 2019.
S/Bruce J. McGiverin
BRUCE J. MCGIVERIN
United States Magistrate Judge

2

Defendants never filed this Rule 11 motion with the Court.