UNITED STATES OF AMERICA et al v. Homeward Residential Inc et al
Filing
368
MEMORANDUM OPINION AND ORDER - It is therefore ORDERED that the Motion by Relators Counsel Fish & Richardson P.C. to Compel Arbitration (Dkt. 337 Homeward; Dkt. #539 Ocwen) is hereby DENIED. Relators' Counsel Boyd & Associates' Emergency Motion to Enforce Settlement Agreement (Dkt. 348 Homeward; Dkt. #550 Ocwen) is hereby GRANTED. Signed by Judge Amos L. Mazzant, III on 3/3/2017. (baf, )
United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
UNITED STATES OF AMERICA
Ex rel. Michael J. Fisher, Brian Bullock and
Michael Fisher, Individually and Brian
Bullock, Individually
v.
HOMEWARD RESIDENTIAL, INC., f/k/a
American Home Mortgage Servicing, Inc.,
ET. AL.
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OCWEN LOAN SERVICING, LLC., ET. AL. §
CASE NO. 4:12-CV-461
Judge Mazzant
UNITED STATES OF AMERICA
Ex rel. Michael J. Fisher, Brian Bullock and
Michael Fisher, Individually and Brian
Bullock, Individually
CASE NO. 4:12-CV-543
Judge Mazzant
MEMORANDUM OPINION AND ORDER
Pending before the Court are (1) Motion by Relators’ Counsel Fish & Richardson P.C. to
Compel Arbitration (Dkt. #337 Homeward; Dkt. #539 Ocwen) and (2) Relators’ Counsel Boyd &
Associates’ Emergency Motion to Enforce Settlement Agreement (Dkt. #348 Homeward;
Dkt. #550 Ocwen). After reviewing the pleadings, the Court finds the Motion by Relators’
Counsel Fish & Richardson P.C. to Compel Arbitration (Dkt. #337 Homeward; Dkt. #539 Ocwen)
is denied. Relators’ Counsel Boyd & Associates’ Emergency Motion to Enforce Settlement
Agreement (Dkt. #348 Homeward; Dkt. #550 Ocwen) is granted.
BACKGROUND
The pending dispute arises from Fish & Richardson (“Fish”) and Boyd & Associates’
(“Boyd”) joint representation of Michael J. Fisher and Brian Bullock (the “Relators”) in False
Claims Act suits against Homeward Residential, Inc., Ocwen Financial Corporation, and Ocwen
Loan Servicing, LLC. See United States of America v. Homeward Residential, Inc., No. 4:12-cv461 (E.D. Tex. 2012); United States of America v. Ocwen Loan Servicing, LLC, No. 4:12-cv-543
(E.D. Tex. 2012). Fish and Boyd dispute the fees incurred during the joint representation and
whether the dispute should be resolved through arbitration.
On December 29, 2014, Fish and Boyd entered into a Letter Agreement governing their
representation of the Relators. The Letter Agreement describes the work to be done by each firm,
litigation expenses, and fee sharing. The Letter Agreement provides that each firm shall “be paid
their respective statutory attorneys’ fees incurred (1) prior to and (2) after the date of the settlement
or award, as awarded to the firms, respectively, by the Court or agreed to in settlement.” The
Letter Agreement further states that
any disputes relating to the construction, interpretation, enforcement, execution or
implementation of this Agreement, shall be resolved by alternative dispute
resolution. . . . Alternative dispute resolution means that the parties agree to submit,
initially, all disputes to an independent mediator mutually agreed to by the
parties. . . . In the event the parties are unable to resolve their disputes through
mediation, the parties agree that the mediator shall require the parties to submit
their disputes to an independent arbitrator selected . . . by JAMS.
Between January 2015 and June 2016, the parties engaged in discovery, motion practice,
and trial preparation. On June 22, 2016, the parties reached a mediated settlement proposal, subject
to final approval by the U.S. Department of Justice and the Ocwen Board of Directors. The
mediated settlement proposal provides that Ocwen Financial Corporation, Ocwen Loan Servicing,
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LLC, and Homeward Residential, Inc. agree to pay a total of $30,000,000 to settle the suits. The
mediator’s proposal states:
1. Ocwen shall pay the sum of $30,000,000.00 as follows:
(a) $15,000,000.00 shall be paid to the Government and Relators (“the Settlement
Amount”), to be apportioned among the parties in accordance with
31 U.S.C. § 3730(d)(2).
(b) $11,444,000.00 shall be paid to Fish & Richardson for reasonable attorney’s
fees, costs, and expenses necessarily incurred in the litigation (“F&R Fee
Award”).
(c) Sam Boyd, Roger Sanders, and their respective law firms may petition the court
for payment of reasonable attorney’s fees, costs, and expenses necessarily
incurred in the litigation (“Boyd/Sanders Fee Award”). Ocwen may challenge
the request. If the cumulative amount of the Boyd/Sanders Fee Award as
determined by the court is less than $3,556,000.00, the difference shall be paid
to F&R.1
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The cumulative amount of attorney’s fees, costs, and expenses incurred by
Boyd and Sanders is based on a summary of fees and costs provided to the
mediator by counsel for Relators on June 14, 2016. According to that
summary, Boyd has incurred $3,175,000.00 in fees and $125,000.00 in
costs, and Sanders has incurred $254,000.00 in fees and $2,000.00 in costs.
Without suggesting a view of whether these fees and costs are reasonable
or necessarily incurred in the litigation, this proposal is intended to establish
enough of a reserve that would enable Boyd and Sanders to petition the
court for all fees and costs incurred by them and their representative firms
through June 14, 2016.
On October 12, 2016, the Court held a status conference on the issue of attorney’s fees.
Fish argued that Boyd had not produced billing records and that Boyd’s attorney’s fees and costs
were unsubstantiated by the amount of work Boyd performed during the litigation. The Court
ordered counsel to exchange fee statements and costs (Dkt. #332 Homeward; Dkt. #535 Ocwen).
The Court further referred counsel to mediation regarding the fee and cost disputes before the
Honorable David Folsom (Dkt. #332 Homeward; Dkt. #535 Ocwen). On November 2, 2016,
counsel participated in a mediation before Judge Folsom. Counsel were unable to resolve the
dispute, and on November 14, 2016, Judge Folsom recommended that the Court require arbitration
pursuant to counsel’s December 29, 2014 Letter Agreement (Dkt. #336 Homeward; Dkt. #538
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Ocwen). That same day, Fish emailed a Demand for Arbitration to JAMS and served a hardcopy
of the demand on Boyd on November 15, 2016. Boyd indicated that it would not agree to submit
the dispute to arbitration.
On November 17, 2016, Fish filed the pending Motion by Relators’ Counsel Fish &
Richardson P.C. to Compel Arbitration (Dkt. #337 Homeward; Dkt. #539 Ocwen). Fish argues
that counsel’s December 29, 2014 Letter Agreement contains a valid arbitration provision and the
fee dispute falls within the scope of the arbitration provision. Fish states that the Letter Agreement
provides that “any dispute relating to the construction, interpretation, enforcement, execution or
implementation of this Agreement, shall be resolved by alternative dispute resolution.” Fish notes
that the accuracy of fee claims and billing statements “unquestionably relates to the construction,
interpretation, enforcement, execution or implementation” of the Letter Agreement. Fish asks the
Court to compel Fish and Boyd to engage in arbitration to apportion the fees awarded in the
mediated settlement proposal.
On December 8, 2015, Boyd filed a response (Dkt. #343 Homeward; Dkt. #545 Ocwen).
On December 15, 2016, Boyd filed Relators’ Counsel Boyd & Associates’ Emergency Motion to
Enforce Settlement Agreement (Dkt. #348 Homeward; Dkt. #550 Ocwen). In both the response
and the motion, Boyd argues that the fee dispute is not within the scope of the arbitration provision.
According to Boyd, the mediated settlement proposal “settled the statutory attorneys’ fee
allocation issue, and it requires this Court, not an arbitrator, to make a final decision regarding
Relators’ law firms’ statutory fees.” Boyd further argues that Fish does not have standing to
compel arbitration because under the mediated settlement proposal, only Ocwen may dispute
Boyd’s statutory fee request. Boyd also states that Fish should be judicially estopped from arguing
the fee dispute is subject to arbitration because Fish previously argued that the Court should order
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the parties to exchange billing records and attend mediation. Boyd asks the court to “summarily
enforce” the mediated settlement proposal because it settles the amount of fees to be awarded to
Boyd, conditioned upon the Court’s approval of the fees.
On December 29, 2016, Fish filed a response (Dkt. #353 Homeward; Dkt. #555 Ocwen).
Fish responds that under the mediated settlement proposal the Court will consider the
“reasonableness and necessity of the overall amount of $15 million that Ocwen has agreed to pay
the law firms, collectively.” Fish argues that while the Court will determine whether the settlement
amount is reasonable, the arbitrator will determine “the precise amount each firm is entitled to
receive from the fixed pool of $15 million mandated by the forthcoming settlement.” Fish
reiterates that arbitration will result in an allocation of the mediated settlement proposal award and
is “wholly consistent with the Court’s consideration of the reasonableness and necessity of the
total amount of the fees and costs.”
On January 9, 2017, Boyd filed a reply (Dkt. #357 Homeward; Dkt. #559 Ocwen). On
January 17, 2016, Fish filed a sur-reply (Dkt. #360 Homeward; Dkt. #561 Ocwen).
LEGAL STANDARD
“The Federal Arbitration Act (“FAA”) expresses a strong national policy favoring
arbitration of disputes, and all doubts concerning the arbitrability of claims should be resolved in
favor of arbitration.” Wash. Mut. Fin. Grp., LLC v. Bailey, 364 F.3d 260, 263 (5th Cir. 2004).
The FAA, “leaves no place for the exercise of discretion by a district court, but instead mandates
that district courts shall direct the parties to proceed to arbitration on issues as to which an
arbitration agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218
(1985).
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When considering a motion to compel arbitration, the Court must address two questions.
Graves v. BP Am., Inc., 568 F.3d 221, 222 (5th Cir. 2009) (citing Fleetwood Enters. Inc. v.
Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002)). “First, whether there is a valid agreement to
arbitrate, and second, whether the dispute in question falls within the scope of the arbitration
agreement.” Id. In regard to the first question of contract validity, the Court should apply
“ordinary state-law principles that govern the formation of contracts.” Id. at 222 (citing First
Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995). The second question of scope is
answered “by applying the ‘federal substantive law of arbitrability . . . .’” Id. (quoting Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)).
ANALYSIS
Boyd argues that Fish does not have standing to compel arbitration or to dispute the
allocation of fees under the mediated settlement proposal. Boyd contends that under the mediated
settlement proposal, only Ocwen may dispute Boyd’s statutory fee request.
However, the
mediated settlement proposal does not state that only Ocwen may dispute Boyd’s statutory fee
request. It states that the firms may submit their fee statements to the Court and the Court will
determine the reasonableness of fees and expenses necessarily incurred in the litigation. This
allows the interested stakeholders to challenge the requested fees for reasonableness. As a party
to both the Letter Agreement and mediated settlement proposal, Fish has standing to compel
arbitration or to dispute the fees under the mediated settlement agreement.
The Court finds a binding agreement to arbitrate exists between Boyd and Fish. Counsel’s
joint representation of Relators is governed by the December 29, 2014 Letter Agreement between
the firms. The Letter Agreement contains an “Alternative Dispute Resolution” provision that
requires the firms to resolve disputes relating to the Letter Agreement through mediation and, if
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mediation is unsuccessful, through arbitration. The Letter Agreement was entered into by two
sophisticated parties and contains a valid arbitration provision.
However, the statutory attorney’s fee dispute does not fall within the scope of the
arbitration provision.
Fish states that the Letter Agreement addresses each firms’ responsibilities in the litigation
and how the firms will share in any recovery. Fish argues that the disagreement regarding the
legitimacy and allocation of attorney’s fees thus relates to the “interpretation, enforcement,
execution or implementation” of the Letter Agreement and is within the scope of the arbitration
provision. This argument is without merit.
First, the False Claims Act provides that the Court will award the parties settling a claim
an amount that “the court decides is reasonable for collecting the civil penalty and damages.”
31 U.S.C. § 3730(d)(2). The statute further provides that the parties shall “also receive an amount
for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable
attorneys’ fees and costs.” Id. The review of attorney’s fees is statutorily assigned to the Court.
Further, the mediated settlement proposal states that “the following proposal is hereby
made for the full and final settlement of all claims . . . including any claims by counsel for Relators
for attorney’s fees, costs, and expenses under the False Claims Act (“FCA”), 31 U.S.C. § 3730.”
Accordingly, the firms agreed that the mediated settlement proposal fully and finally settled any
claims relating to attorney’s fees. Fish cannot avoid this language in the mediated settlement
proposal by stating that any dispute relating to fees falls under the Letter Agreement’s arbitration
provision. By entering into the mediated settlement proposal, Fish agreed to fully and finally settle
all claims by Relators’ counsel for attorney’s fees.
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Moreover, the Letter Agreement provides that each firm shall be paid their respective
statutory attorney’s fees as “agreed to in settlement.” The parties agreed in the mediated settlement
proposal that Boyd “may petition the court for payment of reasonable attorney’s fees, costs, and
expenses necessarily incurred in the litigation.” The parties further agreed that if the Court
determines that the cumulative amount of Boyd’s attorney’s fees, costs, and expenses is less than
$3,300,000, the difference shall be paid to Fish. The mediated settlement proposal notes that the
“proposal is intended to establish enough of a reserve that would enable Boyd . . . to petition the
court for all fees and costs.” The statutory attorney’s fees issue does not fall within the scope of
the arbitration provision because the parties agreed in the Letter Agreement that statutory
attorney’s fees would be awarded as agreed to in settlement. In settlement, the parties expressly
agreed that the Court would determine the payment of reasonable statutory attorney’s fees.
Fish further argues that the mediated settlement proposal does not preclude the parties from
arbitrating the precise amount each firm is entitled to receive from the fixed pool of $15 million in
the mediated settlement agreement. However, the mediated settlement agreement clearly states
that the Court will determine whether the cumulative amount of Boyd’s attorney’s fees, costs, and
expenses is less than $3,300,000. The mediated settlement agreement does not state that an
arbitrator may allocate these fees. Fish acknowledged that the parties agreed in settlement that the
Court would resolve the attorney’s fees dispute. In an email regarding the dispute, Thomas
Melsheimer of Fish stated that “all the firms will follow the same process for fees under the
settlement agreement terms . . . that we have accepted. It is our hope, still, that we can work it all
out among ourselves but if we cannot we will all go to the Court under the provisions set out in
the agreement” (Dkt. #348 Homeward; Exhibit 3, Dkt. #550 Ocwen, Exhibit 3).
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Fish’s motion to compel arbitration is therefore denied. Relators’ counsel may petition the
Court for payment of reasonable attorney’s fees, costs, and expenses necessarily incurred in the
litigation.
CONCLUSION
.
It is therefore ORDERED that the Motion by Relators’ Counsel Fish & Richardson P.C.
to Compel Arbitration (Dkt. #337 Homeward; Dkt. #539 Ocwen) is hereby DENIED.
Relators’ Counsel Boyd & Associates’ Emergency Motion to Enforce Settlement
Agreement (Dkt. #348 Homeward; Dkt. #550 Ocwen) is hereby GRANTED.
SIGNED this 3rd day of March, 2017.
___________________________________
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
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