Zero Down Supply Chain et al v. Global Transportation Solutions et al

Filing 498

MEMORANDUM DECISION AND ORDER denying 467 Motion for Attorney Fees. Signed by Magistrate Judge Dustin B. Pead on 10/19/12 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
ZERO DOWN SUPPLY CHAIN
SOLUTIONS, INC. et al.,

MEMORANDUM DECISION AND ORDER
DENYING MOTION FOR AWARD OF
ATTORNEYS' FEES

Plaintiffs,
v.

Case No. 2:07-cv-400 TC

GLOBAL TRANSPORTATION
SOLUTIONS, INC., et al.,

District Judge Tena Campbell
Magistrate Judge Dustin Pead

Defendants.

Plaintiffs in this matter consist of Zero Down entities and their founder Dan McBride.
Defendants, relevant for the purpose of this decision, consist of Global Transportation Solutions
(AGTS@), Shawn Shaw B the sole shareholder of GTS, and Global Transportation Management
Solutions, LLC (AGTMS@).
Before the Court is Defendants’ motion for an order awarding attorneys’ fees incurred in
connection with the dismissal of Plaintiffs’ federal and Florida RICO claims. (Docket No. 467.)
As outlined below, the Court is not persuaded by Defendants’ arguments, and DENIES the
motion.
I. BACKGROUND
Plaintiffs commenced this action in the Southern District of Florida in June 2006. The
complaint and amended complaint both contained federal and Florida RICO claims. In June
2007, the Florida Court entered an order transferring the case to this district pursuant to 28 U.S.C.
§ 1404(a). (Docket No. 1.) On October 17, 2008, District Judge Tena Campbell issued a
Page 1 of 6

memorandum decision and order dismissing all of Plaintiffs’ Florida and federal RICO claims
because they “fail[ed] to allege conduct that constitute[d] a threat of continuing criminal activity.”
(Docket No. 156.) However, Judge Campbell refused to dismiss Plaintiffs’ remaining claims.
(Id.) On February 5, 2010, Judge Campbell ordered default against Defendants. (Docket No.
329.) A jury trial for damages is set for December 4, 2012 through December 7, 2012.
II. GOVERNING LAW
Where a change of venue occurs, a transferee district court sitting in diversity must apply
the law of the transferor court. Olcott v. Delaware Flood Co., 76 F.3d 1538, 1544-45 (10th Cir.
1996). However, where jurisdiction is based on a federal question, a federal district court is
obligated to apply the law of the circuit in which it sits, unless the issue is one of “geographically
non-uniform” federal law. Id. at 1546.
In this case, Judge Campbell previously ruled the Court would apply Tenth Circuit law to
Plaintiffs’ federal claims. (Docket No. 156.) Therefore, Tenth Circuit law will govern this
Court’s analysis of Plaintiffs’ dismissed federal RICO claims, while Eleventh Circuit law governs
analysis of Plaintiffs’ dismissed Florida RICO claims.
III. DEFENDANTS’ MOTION FOR ATTORNEYS’ FEES
Defendants seek an award of fees for Plaintiffs’ dismissed Florida RICO claims under
FLA. STAT. ANN. § 772.104(3) (2012). Pursuant to this statute, a defendant is entitled to
reasonable attorneys’ fees upon a finding that a claimant raised a civil RICO claim that was
“without substantial factual or legal support.” Smith v. Viragen, Inc., 902 So. 2d 187, 191 (Fla.
Dist. Ct. App. 2005); Hartford Ins. Co of the Midwest v. Miller, 681 So. 2d 301, 301 (Fla. Dist. Ct.
App. 1996); Foreman v. E.F. Hutton & Co., 568 So. 2d 531, 532 (Fla. Dist. Ct. App. 1990).

Page 2 of 6

Defendants seek an award of fees for Plaintiffs’ dismissed federal RICO claims pursuant to
Golden Meadows Properties, LC v. Strand, 241 P.3d 375 (Utah Ct. App. 2010) (finding a party
who prevailed on some of its multiple claims was entitled to all attorneys’ fees incurred in the
litigation because all the claims involved a common core of facts and related legal theories).
Defendants assert they deserve attorneys’ fees on the dismissed federal RICO claims because the
legal work done to defend against these claims was “inextricably intertwined” with the legal work
done to defend against the Florida RICO claims. (Docket No. 468.)
A. Laches
Plaintiffs oppose the grant of attorneys’ fees to Defendants because Defendants “neglected
to file” the motion until “three and a half years after the claims were dismissed.” (Docket No. 475).
The Court construes Plaintiffs’ argument in this regard to relate to the doctrine of latches.
The Supreme Court has held that a post-judgment motion for fees is untimely where it
“unfairly surprises or prejudices the affected party.” White v. New Hampshire Dept. of Emp’t
Sec., 455 U.S. 445, 454 (1982). Along the same lines, both the Tenth and Eleventh Circuits have
found a party’s claims barred by laches where: (1) a party delays bringing a claim; (2) the delay is
unreasonable or inexcusable; and (3) the delay causes undue or material prejudice to the party
against whom the claim is asserted. See, e.g., Jacobsen v. Deseret Book Co., 287 F.3d 936, 949
(10th Cir. 2002); Kason Indus., Inc. v. Component Hardware Group, Inc., 120 F.3d 1199, 1203
(11th Cir.1997).
In this case, the Court fundamentally agrees with Plaintiffs, in that it would be
inappropriate to award attorneys’ fees to Defendants on the dismissed RICO claims. Defendants
delayed bringing their claim for attorneys’ fees on these claims until nearly four years after Judge
Campbell dismissed them, and more than two years after she issued an order of default against
Page 3 of 6

Defendants. (Docket Nos. 156, 329.) The Court finds Defendants’ delay inexcusable and
unreasonable as Defendants failed to offer any explanation for waiting so many years before
seeking attorneys’ fees. Finally, the Court concludes granting Defendants attorneys’ fees at this
late stage in the proceedings would unduly and materially prejudice Plaintiffs. After the
dismissal of the RICO claims, Plaintiffs proceeded with the remainder of their lawsuit with no
anticipation that, years down the road, they would have to defend against a defaulting party’s stale
request for attorneys’ fees.
B. Unclean Hands
Plaintiffs also oppose Defendants’ motion for attorneys’ fees because they allege the
dismissal of Plaintiffs’ RICO claims resulted from the fact that “Defendants flatly refused to
participate in the discovery process, denying Plaintiffs the opportunity to conduct necessary
discovery to determine whether RICO claims may have, in fact, been appropriate.” (Docket No.
475.) Plaintiffs additionally assert that Defendants are “fairly precluded” from bringing a motion
for fees where Defendants’ “[w]illful misconduct . . . led to an entry of default judgment against
them.” (Docket No. 475.) The Court interprets Plaintiffs’ opposition in this regard to relate to
unclean hands.
The unclean hands doctrine requires that “he who comes into equity must come with clean
hands.” Precision Instrument Mfg. Co v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945).
The doctrine “closes the doors of a court of equity to one tainted with inequitableness or bad faith
relative to the matter in which he seeks relief.” Id. Stated conversely, a party seeking relief must
“have acted fairly and without fraud or deceit as to the controversy in issue.” Id. at 815; see
Worthington v. Anderson, 386 F.3d 1314, 1319 (10th Cir. 2004) (using the Supreme Court’s
unclean hands standard from Precision in the Tenth Circuit). See also In re Kingsley, 518 F.3d
Page 4 of 6

874, 878 (11th Cir. 2008) (noting the Eleventh Circuit’s unclean hands doctrine bars relief to a
party who “has acted in bad faith, resorted to trickery and deception, or been guilty of fraud,
injustice or unfairness”).
In this case, Judge Campbell previously noted Defendants’ “history of failing to honor
their discovery obligations, their duty to the Court, and their duty to opposing counsel,” and “not
[being] straightforward in their representations . . . to opposing counsel or the Court.” (Docket
No. 281.) More specifically, Defendants failed to timely answer Plaintiffs’ March 3, 2008
complaint and to comply with court orders compelling discovery. (See Docket Nos. 242, 263,
272.) Their failures resulted in Judge Campbell: (1) issuing an order to show cause (Docket No.
263); (2) deeming Plaintiffs’ requests for admissions admitted (Docket No. 272); (3) imposing
sanctions on Defendants’ previous attorney (Docket No. 272); (4) holding Defendants in contempt
of Court (Docket No. 290); (5) dismissing Defendants’ counterclaims with prejudice and on the
merits (id.); and (6) awarding Plaintiffs their reasonable expenses, including attorneys’ fees,
incurred as a result of Defendants’ failure to comply in good faith with the Court’s discovery
orders. (Id.).
As a result of Defendants’ failure to comply with discovery requests or to participate in the
litigation in any meaningful way, on February 5, 2010, Judge Campbell issued an order of default
against Defendants on Plaintiffs’ remaining claims. (Docket No. 329.) Because of Defendants’
wrongful conduct, Judge Campbell denied Defendants’ motion to set aside the default. (Docket
No. 465.)
This Court finds that Defendants’ persistent, inequitable conduct in this case, as outlined
above, rises to the level of unclean hands. As such, the Court denies Defendants’ motion for
attorneys’ fees under the doctrine of unclean hands.
Page 5 of 6

IV. PLAINTIFFS’ REQUEST FOR SANCTIONS
Plaintiffs request sanctions against Defendants in the form of attorneys’ fees expended in
responding to Defendants’ present motion. (Docket No. 475.) Plaintiffs allege Defendants’
motion violated the timing procedures set forth in the Federal Rules of Civil Procedure. (Id.)
Plaintiffs also allege Defendants lack standing to bring the motion because of the default entered
against them.1 (Id.) However, Plaintiffs’ general allegations are insufficient where they failed to
cite to any specific timing provisions of the Federal Rules of Civil Procedure that Defendants
violated. As such, the Court will not impose sanctions on Defendants.
V. CONCLUSION
For the reasons set forth above, the Court DENIES Defendants’ motion for attorneys’ fees.
(Docket No. 467.)
DATED this 19th day of October 2012.

Dustin Pead
U.S. Magistrate Judge

1 In light of the Court’s decision to deny Defendants’ motion for attorneys’ fees on laches and unclean hands grounds,
the Court declines to address whether Defendants, who have defaulted, have standing to seek attorneys’ fees. (Docket
No. 475.)

Page 6 of 6