Securities and Exchange Commission v. Sethi Petroleum LLC et al

Filing 135

MEMORANDUM OPINION AND ORDER re 131 MOTION to Allow Interpleader filed by American National Bank of Texas. It is therefore ORDERED that Intervenors, American National Bank of Texas, Motion to Allow Interpleader (Dkt. #131) is hereby GRANTED IN PART AND DENIED IN PART.American National is awarded attorneys fees in the amount of $8,120 and costs in the amount of $464.87. Signed by Judge Amos L. Mazzant, III on 6/8/16. (cm, )

United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

SECURITIES AND EXCHANGE
COMMISSION
v.
SETHI PETROLEUM, LLC and
SAMEER P. SETHI

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Case No. 4:15-cv-338
Judge Mazzant

MEMORANDUM OPINION AND ORDER
Pending before the Court is Intervenor’s, American National Bank of Texas, Motion to
Allow Interpleader which includes a request for attorney’s fees (Dkt. #131). After considering
the relevant pleadings, the Court finds that the request for attorney’s fees should be granted in
part and denied in part.
BACKGROUND
American National Bank of Texas (“American National”) explains that it is “caught
between conflicting claims.” (Dkt. #131 at ¶ 1). American National “has been holding the nine
accounts listed in its original Complaint for Interpleader” (Dkt. #131 at ¶ 1). This is because
Praveen Sethi, individually or on behalf of various entities, has made a claim for
those funds. The Receiver has objected to Praveen Sethi’s request for the funds.
American National Bank has not received clear instructions as to what to do with
the funds and/or who it should pay with regard to the funds. Consequently, it has
filed an interpleader proceeding.
(Dkt. #131 at ¶ 1).
American National seeks to recover the reasonable and necessary attorney’s fees, costs,
and expenses that it has already incurred as well as any future fees and costs (Dkt. #131 at ¶ 13).
American National states that it “expects to incur the additional amount of Four Thousand Two
Hundred Sixty and no/100 Dollars ($4,260.00) if, for example, it has to prepare for and attend a

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hearing in this matter.” (Dkt. #131 at ¶ 13). American National also seeks conditional appellate
fees (Dkt. #131-2 at ¶¶ 7-9).
ANALYSIS
A district court has the authority to award reasonable attorneys’ fees in interpleader
actions. Rhoades v. Casey, 196 F.3d 592 (5th Cir. 1999). The award of attorneys’ 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. Id. at 603. One
commentator stated that:
Because of the discretionary character of the court’s power, and because its
exercise depletes the fund, costs and fees will not be allowed as a matter of
course. Typically, they are available only when the party initiating the
interpleader is acting as a mere stakeholder, which means that he has admitted
liability, had deposited the fund in court, and has asked to be relieved of any
further liability.
Wright, Miller and Kane, Federal Practice and Procedure § 1719 (3d ed. 2007). Five factors
have been identified for consideration: (1) whether the case is simple or involved; (2) whether
the stakeholder performed any unique services for the claimants or the court; (3) whether the
stakeholder acted in good faith and with diligence; (4) whether the services rendered benefitted
the stakeholder; and (5) whether the claimants improperly protracted the proceedings. Noeller v.
Metro. Life Ins. Co., 190 F.R.D. 202, 207 (E.D. Tex. 1999). Assuming that the interpleader is
entitled to a fee, the next step is the calculation of the fee. To calculate an award of attorneys’
fees the district court first calculates the “lodestar.” Forbush v. J.C. Penney Co., 98 F.3d 817,
821 (5th Cir. 1996).
The computation of a reasonable attorneys’ fee award is a two-step process. Rutherford
v. Harris County, Texas, 197 F.3d 173, 192 (5th Cir. 1999) (citation omitted). First, the court
must utilize the lodestar analysis to calculate a “reasonable” amount of attorneys’ fees. Id. The

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lodestar is equal to the number of hours reasonably expended multiplied by the prevailing hourly
rate in the community for similar work. Id. Second, in assessing the lodestar amount, the court
must consider the twelve Johnson factors before final fees can be calculated. Id.
The Johnson factors are:
(1) time and labor required; (2) novelty and difficulty of issues; (3) skill required;
(4) loss of other employment in taking the case; (5) customary fee; (6) whether
the fee is fixed or contingent; (7) time limitations imposed by client or
circumstances; (8) amount involved and results obtained; (9) counsel’s
experience, reputation, and ability; (10) case undesirability; (11) nature and length
of relationship with the client; and (12) awards in similar cases.
Id. at 192 n.23 (citing Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.
1974)).
After considering the twelve Johnson factors, the court may adjust the lodestar upward or
downward. Shipes v. Trinity Indus., 987 F.2d 311, 320 (5th Cir. 1993). “If the plaintiff obtained
limited success, the hours reasonably spent on the case times the reasonable hourly rate may be
excessive.” Verginia McC v. Corrigan-Camden Indep. Sch. Dist., 909 F. Supp. 1023, 1032 (E.D.
Tex. 1995). “‘[T]he most critical factor’ in determining the reasonableness of an attorney’s fee
award ‘is the degree of success obtained.’” Giles v. Gen. Elec. Co., 245 F.3d 474, 491 n.31 (5th
Cir. 2001) (quoting Farrar v. Hobby, 506 U.S. 103, 113 (1992)); see also Migis v. Pearle Vision,
Inc., 135 F.3d 1041, 1047 (5th Cir. 1998). “The district court may attempt to identify specific
hours that should be eliminated, or it may simply reduce the award to account for the limited
success.” Verginia McC, 909 F. Supp. at 1032 (quoting Hensley v. Eckerhart, 461 U.S. 424, 436
(1983)).
The fee applicant bears the burden of proof on this issue. See Riley v. City of Jackson,
Miss., 99 F.3d 757, 760 (5th Cir. 1996); Louisiana Power & Light Co. v. KellStrom, 50 F.3d 319,
324 (5th Cir. 1995). “Many of these factors usually are subsumed within the initial calculation

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of hours reasonably expended at a reasonable hourly rate and should not be double-counted.”
Jason D.W. v. Houston Indep. Sch. Dist., 158 F.3d 205, 209 (5th Cir. 1998) (internal citations
omitted).
The United States Supreme Court has barred any use of the sixth factor as a basis for
enhancement of attorneys’ fees. See Walker v. United States Dep’t of Hous. & Urban Dev., 99
F.3d 761, 772 (5th Cir. 1996) (citing City of Burlington v. Dague, 505 U.S. 557, 567 (1992)). In
addition, three of the Johnson factors – complexity of the issues, results obtained, and preclusion
of other employment – are fully reflected and subsumed in the lodestar amount. Heidtman v.
Cty. of El Paso, 171 F.3d 1038, 1043 (5th Cir. 1999). “[T]he court should give special heed to
the time and labor involved, the customary fee, the amount involved and the result obtained, and
the experience, reputation and ability of counsel.” Migis, 135 F.3d at 1047 (citation omitted).
The lodestar is presumptively reasonable and should be modified only in exceptional
cases. Watkins v. Fordice, 7 F.3d 453, 457 (5th Cir. 1993). The fee-seeker must submit
adequate documentation of the hours reasonably expended and of the attorney’s qualifications
and skill, while the party seeking reduction of the lodestar must show that a reduction is
warranted. Hensley, 461 U.S. at 433; Louisiana Power & Light Co., 50 F.3d at 329.
A.

INTERPLEADER
The Court finds that American National is a disinterested stakeholder that is

entitled to attorneys’ fees. Application of the five specific factors does not involve complicated
analysis: This was a simple case. The stakeholder performed no unique services for the
claimants. The stakeholder acted in good faith and with diligence once there was litigation. The
attorney’s services benefitted the stakeholder. The claimants did not improperly protract the

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proceedings. Therefore, American National’s attorneys’ fees should not be reduced due to the
five factors that courts consider in awarding fees to interpleaders.
B.

LODESTAR
1.

Hours Expended

American National seeks $18,042.87 in attorneys’ fees for 104 hours expended (Dkt.
#131-2 at ¶ 6). According to the bill, the hours expended are divided as follows:
William P. Huttenbach (“Mr. Huttenbach”)…….. 23.2
Michael D. Conner (“Mr. Conner”)………. .4
Jacob M. Stephens (“Mr. Stephens”)……….9.7
Montye B. Holmes (“Mr. Holmes”)………. 27.6
This means that only a total of 60.9 hours were billed. American National provides no
explanation for why the total number of hours billed is different from the number of hours that
they assert within their motion. However, the Court assumes that this difference is a result of
American National’s counsel’s exercise of billing judgment.
The party seeking fees has “the burden of showing . . . that the attorneys exercised billing
judgment.” Black v. SettlePou, P.C., 732 F. 3d 492, 502 (5th Cir. 2013) (citing Saizan v. Delta
Concrete Prods. Co., Inc., 448 F. 3d 795, 799 (5th Cir. 2006)). Billing judgment is defined as
“documentation of the hours charged and of the hours written off as unproductive, excessive, or
redundant.” Saizan, 448 F. 3d at 799. The bill reflects billing judgment. For example, over
twenty entries note that the attorney working spent more time on a task than was actually billed
(Dkt. 131-2 at pp. 7-23). However, American National’s counsel cannot be found to have
exercised billing judgement while simultaneously seeking compensation for hours that were
removed through their exercise of billing judgment. Therefore, the Court will only consider the

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hours that American National included within their bill, 60.9 hours, and the Court will not reduce
the overall number of hours billed due to a lack of billing judgment.
2.

Prevailing Hourly Rate

American National seeks compensation for its attorneys at the following hourly rates:
Mr. Huttenbach…….. $355.00
Mr. Conner………. $345.00
Mr. Stephens………. $240.00
Mr. Holmes………. $160.00
Mr. Huttenbach’s affidavit states that he is a shareholder in his firm and that he has an
expertise in banking law (Dkt. #131-2 at ¶ 11-12). He states that “[t]he fee is based on hourly
rates being charge to American National Bank.” (Dkt. #131-2 at ¶ 12). The Court has previously
found that within the Eastern District, $350 per hour is a reasonable rate for partners. Geoffrion
v. Nationstar Mortgage LLC, No. 4:14-CV-350, 2016 WL 2758127, at *6 (E.D. Tex. May 12,
2016).

American National has not presented relevant evidence, other than counsel’s own

affidavit, that suggests otherwise. See Champion v. ADT Security Services, Inc., No. 2:08-cv417-TJW, 2010 WL 4736908 (E.D. Tex. Nov. 16, 2010) (stating that only evidence of $500 fee’s
reasonableness was counsel’s own affidavit and finding that it was not sufficient and the
appropriate fee was $350 per hour). Therefore, the Court finds that $350 is a reasonable hourly
rate for Mr. Huttenbach’s work.
The bill accompanying the affidavit includes hours billed by the three other individuals
mentioned above, with hourly rates ranging from $160.00 to $345.00 (Dkt. #131-2 at pp. 7-23).
However, it is not clear if the three other individuals are attorneys or paralegals. In Mr.
Huttenbach’s affidavit he states, “I, or another attorney or paralegal with my firm, have

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performed reasonable and necessary legal services[.]” (Dkt. #131-2 at ¶ 3). This makes it
unclear if Mr. Holmes is a paralegal, if Mr. Stephens is one as well, or if American National was
not billed for paralegal work.

Simply put, it is impossible for the Court to determine a

reasonable rate for the other parties when the Court not been given any information about the
other parties’ expertise, level of experience, or even if they are lawyers or paralegals.
The case at hand is similar to that of Speaks v. Kruse, because “[t]here is no information
in support of the request for attorney’s fees further identifying these individuals or describing
their experience and expertise.” No. CIV.A.04 1952, 2006 WL 3388480, at *5 (E.D. La. Nov.
20, 2006) (holding that the court would not consider the request for attorney’s fees to apply to
any of the attorneys except the one who stated that he was a partner at a major law firm in New
Orleans). Therefore, the Court will consider American Nation’s request for attorney’s fees, but
only to the extent that it relates to Mr. Huttenbach’s work.
3.

Calculating the Lodestar

Based on American National’s calculation of billable hours and the elimination of the
other attorney’s hours for the reasons discussed above, the Court calculates the lodestar based on
the equation below.
Mr. Huttenbach: 23.2 hours X $350/hour = $8,120
Lodestar = $8,120
C.

THE JOHNSON FACTORS
In analyzing the Johnson factors, the Court finds that the requested fee is unreasonable.
1.

Time and Labor

The time and labor required for this lawsuit was not excessive.
2.

Novelty and Difficulty of Issues

The Court has already considered this factor in determining the lodestar.

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3.

Skill Required

The Court has already considered this factor in determining the lodestar.
4.

Preclusion of Other Employment

Preclusion of other employment is subsumed within lodestar amount and is not
appropriate basis for enhancement of lodestar amount. Heidtman, 171 F.3d 1038 (5th Cir. 1999).
The Court has already considered this factor in determining the lodestar.
5.

Customary Fee

The Court has already considered this factor in determining the lodestar.
6.

Whether the Fee is Fixed or Contingent

This factor cannot be considered in adjusting the lodestar.
7.

Time Limitations Imposed by the Client or Circumstances

This factor is not applicable to the instant action.
8.

Amount Involved and Results Obtained

The Court has already considered this factor in determining the lodestar.
9.

Experience, Reputation and Ability of the Attorneys

The Court has already considered this factor in determining the lodestar.
10.

Undesirability of the Case

The Court has already considered this factor in determining the lodestar.
11.

Nature and Length of the Professional Relationship with the Client

The Court has already considered this factor in determining the lodestar.
12.

Awards in Similar Cases

American National does not point to cases that have facts similar to the facts of this case.

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The Court finds the analysis of the Johnson factors does not necessitate an adjustment of
the lodestar. Therefore, the Court finds that the lodestar analysis is reasonable and American
National is awarded attorneys’ fees in the amount of $8,296.90.
D.

CONDITIONAL APPELLATE ATTORNEYS’ FEES
American National is also seeking recovery of conditional appellate attorneys’ fees (Dkt.

#131-2 at ¶ 8). American National states that
[i]f the parties file a notice of appeal to the Fifth Circuit, American National Bank
should be entitled to an additional Thirty Thousand and No/100 Dollars
($30,000.00) in reasonable and necessary attorneys' fees in the event that
American National Bank ultimately prevails. In the event that the parties appeal to
the Supreme Court, American National Bank should be entitled to recover an
additional Twenty-Five Thousand and No/100 Dollars ($25,000.00) in reasonable
and necessary attorneys' fees in the event that American National Bank ultimately
prevails, and if a petition/writ is granted, American National Bank should recover
an additional Twenty Thousand and No/l00 Dollars ($20,000.00) in the event that
American National Bank ultimately prevails.
(Dkt. #131-2 at ¶ 8). However, the Court finds that American National’s counsel has not
produced sufficient evidence to support such an award. Therefore, the Court will address this
issue following the resolution of an appeal. Instone Travel Tech Marine & Offshore v. Int'l
Shipping Partners, Inc., 334 F. 3d 423, 433 (5th Cir. 2003). See also Carroll v. Sanderson
Farms, Inc., No. H-10-3108, 2014 WL 549380, at *5 (S.D. Tex. Feb. 11, 2014) (declining to
award conditional appellate fees before the appeal because the request “is merely a speculative
dollar figure without any information by which the Court could determine whether the amount
requested is reasonable”). American National’s request for conditional appellate fees is therefore
denied.1

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American National also states that “[i]f I have to attend a hearing on this motion, I will spend additional time
preparing for and attending the hearing . . . I believe that the additional amount of at least Four Thousand Two
Hundred Sixty and No/100 Dollars ($4,260.00) would be reasonable and necessary[.]” (Dkt. #131-2 at ¶ 7).
However, the Court finds that it is unnecessary to address this argument due to the fact that it did not hold a hearing
on this motion.

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E.

COSTS
American National is also seeking recovery of various costs. Specifically, it is seeking

costs for certified mail, research charges, and a flight to and from Sherman, Texas to attend a
hearing (Dkt. #131-2 at pp. 7-23).2 The Fifth Circuit expressly holds that modern federal courts
retain discretion to award attorney’s fees and costs to the stakeholder in an interpleader action,
whenever it is fair and equitable to do so. Noeller v. Metro. Life Ins. Co., 190 F.R.D. 202, 206
(E.D. Tex. 1999) (citing Corrigan Dispatch Co. v. Casa Guzman, 696 F.2d 359, 364 (5th Cir.
1983)). See also Murphy v. Travelers Ins. Co., 534 F.2d 1155, 1164 (5th Cir. 1976) (“as a
general rule, when an interpleader action is successful, the court often awards costs, as well as
attorneys’ fees, to stakeholder”). Therefore, the Court finds that it is equitable to award a total of
$464.87 in costs to American National.
CONCLUSION
It is therefore ORDERED that Intervenor’s, American National Bank of Texas, Motion

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to Allow Interpleader (Dkt. #131) is hereby GRANTED IN PART AND DENIED IN PART.
American National is awarded attorneys’ fees in the amount of $8,120 and costs in the amount of
$464.87.

SIGNED this 8th day of June, 2016.

___________________________________
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

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American National includes in its costs: $1.76 for Lexis-Nexis, $14.00 for Westlaw; $7.15 for certified mail; and
$441.96 for a flight to and from Sherman (Dkt. #131-2 at pp. 9, 18, 23). Therefore, American National is requesting
a total of $464.87 in costs.

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