McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir. (2002)

7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
1/24
280 F.3d 26
MCLANE, GRAF, RAULERSON & MIDDLETON, P.A.,
Plaintiff, Appellee/Cross-Appellant,
v.
Alfred RECHBERGER; ARC Partners, Ltd., Defendants,Third-PartyPlaintiffs, Appellants/Cross-Appellees,
v.
Edward L. Hahn; Jon Meyer, Third-Party Defendants,
Appellees.
No. 00-1756.
No. 00-1757.
No. 00-1758.
United States Court of Appeals, First Circuit.
Submitted September 13, 2001.
Decided February 15, 2002.
COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL
OMITTED Valeriano Diviacchi on brief for appellant AlfredRechberger.
Douglas L. Ingersoll and Ingersoll & Sullivan, P.A. on brieffor appellant
ARC Partners, Ltd.
Peter G. Beeson and Devine, Milliment & Branch, P.A. onbrief forappellee Jon Meyer.
James C. Wheat, Jennifer L. Murphy, Todd J. Hathaway, andWadleigh,
Starr & Peters, P.L.L.C. on brief for appellees McLane,Graf, Raulerson,
& Middleton and Edward A. Hahn.
Before SELYA and LIPEZ, Circuit Judges, and DOUMAR,*Senior
District Judge.
LIPEZ, Circuit Judge.
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
2/24
1 These appeals arise from protracted litigation over attorney'sfees allegedly
owed by Alfred Rechberger ("Rechberger") and ARC Partners, Ltd.("ARC") to
the New Hampshire law firm McLane, Graf, Raulerson, &Middleton, P.A.
("McLane"). Rechberger focuses on three rulings against him.First, he
challenges the district court's partial summary judgment awardof $135,157.77
to McLane on its contract claim because he believes that anattorney's allegedly
erroneous initial valuation of the damages exposure from thecase for which theattorney was retained should relieve him fromliability for all fees generated by
the matter. Second, he challenges the jury award to McLane of$39,567.50 in
fees, claiming that he lost because the district court construedthe surviving
count of his third-party complaint and counterclaim toonarrowly. Finally, he
challenges the district court's summary judgment ruling againsthim on his
third-party complaint against an attorney, Jon Meyer ("Meyer"),who handled
the litigation at issue before McLane did. In its appeal, ARCchallenges the
district court's refusal to amend, alter, vacate or clarify thejudgment enteredjointly against it and Rechberger for attorney'sfees.
2 In a cross-appeal, McLane seeks reversal of the districtcourt's decision not to
sanction Rechberger with an additional award of attorney's feesand expenses
for allegedly frivolous and vexatious litigation. McLane alsochallenges the
district court's decision to grant ARC judgment as a matter oflaw with respect
to the $39,527.03 of fees still in dispute at the time oftrial.
3 On this last point raised in the McLane cross-appeal, we mustvacate the
judgment for ARC. In all other respects, we affirm.
I. Background
4 McLane sued Rechberger and ARC for unpaid attorney's fees inthe New
Hampshire Superior Court on July 7, 1997.1On July 11, 1997, aSuperior Court
justice granted McLane's petition for an attachment of $300,000held by
Rechberger and ARC.2Rechberger removed the case from state tofederal court
on August 13, 1997, and filed an answer on September 2, 1997.Rechberger
also countersued McLane and filed a third-party complaintagainst attorneys
Jon Meyer and Edward L. Hahn for 1) malpractice, 2) inflictionof emotional
distress, and 3) breach of an implied covenant to charge fairand reasonable
fees. In order to understand this bitter dispute over attorney'sfees, we must
regrettably review the litigation which generated the fees andthe tortuous
course of this case to its present state.
A. The Underlying Litigation
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
3/24
5 In late 1994, Marion Jacobi, the daughter of AlfredRechberger, filed suit
against her father, alleging that he had sexually assaulted heron several
occasions from 1979 to 1985. See Jacobi v. Rechberger, etal.,No. 94-C-82
(N.H.Super.Ct. filed 1994) ("Jacobi"). Jacobi sued both herfather and ARC,
which she alleged was merely the alter ego of Rechberger. Shealso sued Bio-
San Laboratories, Inc. ("Bio-San"), a company at which she hadworked when
it was owned by Rechberger, alleging that he sexually assaultedher there, andthat the company was liable for assaults on itspremises. Although Rechberger
sold the company in 1990, he was still receiving payments fromit pursuant to a
stock purchase agreement.
6 Rechberger retained attorney Edward L. Hahn in March 1995 tohandle the
defense of the Jacobi lawsuit. Hahn allegedly advised Rechbergerthat his
daughter's suit was a "$50,000 case" and that litigation costsfor his defense
would be "around $200,000." Attorney Hahn worked on the matter,first aloneas a member of Hahn & Associates, later with JonMeyer when he joined
Meyer's law firm, Backus, Meyer, Solomon, Rood & Branch,P.A. ("Backus"),
in June 1995, and finally with attorneys at McLane, which hejoined in March,
1996.
7 TheJacobilitigation spawned another legal dispute. In June,1995, Hahn filed
suit on behalf of Rechberger and ARC against Bio-San.Rechbergeret al. v.
Bio-San Laboratories, Inc.,No. 96-44-JD (D.N.H. filed 1996).Rechberger hadowned several vitamin pill businesses purchased byBio-San in 1990. The
stock-purchase agreement provided for Bio-San to pay Rechbergercertain
moneys, but Bio-San stopped these payments in 1995. Bio-San gaveseveral
reasons for stopping the payments, including Marion Jacobi'ssuit against Bio-
San. Bio-San averred that Rechberger's failure to disclose thealleged abuse in
connection with the sale of the business amounted to a violationof the stock
purchase agreement, which required the seller to disclose allsignificant
liabilities of the purchased entity.
8 Hahn worked on theBio-SanandJacobilitigation, and more generalcorporate
matters for Rechberger at his own firm, at Backus, and atMcLane. Both
Backus and McLane assigned other attorneys to work with Hahn.Rechberger
paid nearly all of the fees billed by Hahn, Backus, and McLanebefore January
1997.
9 Jacobi's suit against Rechberger settled in May 1997 when heagreed to pay her
$1.35 million. Rechberger's suit against Bio-San was settled inarbitration in
July 1997 when Bio-San agreed to pay Rechberger $1.85 million.At the
conclusion of this litigation, Rechberger had incurredapproximately $849,000
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
4/24
in legal fees, and had paid approximately $625,000. About$191,000 of
McLane's unpaid bills stemmed from theJacobilitigation (whichHahn, Wilbur
Glahn, and other McLane attorneys had worked on), and about$28,000
stemmed from general corporate work which Hahn did forRechberger. The
Backus firm claimed $4,000 from theJacobilitigation.
B. The McLane-Rechberger Litigation
10 When Rechberger stopped paying fees to McLane in January1997, McLane
attorneys repeatedly requested payment. Rechberger initiallygave no reason
for not paying. At the subsequent trial, one partner testifiedthat Rechberger
first claimed that he was not paying simply because of a "cashflow problem."
Losing all patience, McLane filed suit against Rechberger in thesummer of
1997 in the New Hampshire Superior Court. After removing thecase to the
United States District Court for the District of New Hampshireon the basis ofdiversity of citizenship, Rechberger filed an answerto McLane's suit, a
counterclaim, and a third-party complaint against attorneysMeyer and Hahn. In
his counterclaim and third-party complaint, he allegedmalpractice, infliction of
emotional distress, and breach of an implied covenant to chargefair and
reasonable fees. Subsequently, the district court granted themotions of
McLane, Meyer, and Hahn for summary judgment on the malpracticeand
emotional distress counts when Rechberger failed to oppose thesemotions.
11 In the surviving count of his counterclaim, Rechbergerasserted that McLane
charged unfair and unreasonable fees for the services itprovided. McLane filed
a motion for partial summary judgment on this remaining countand on its own
claim for fees, noting that Rechberger admitted in his answerthat McLane did
legal work for him and ARC and that he agreed to pay reasonablefees for those
services. McLane averred that Rechberger provided no factualbasis for
disputing the validity of a number of his debts to the firm.McLane also argued
that Rechberger's own expert witness (Finis Williams) did notfind the feescharged by McLane attorney Wilbur Glahn unreasonable,and did not evaluate
the fees of McLane associate Mark Whitney. Williams's reportalso did not
challenge expenses incurred by the McLane firm.
12 In response, Rechberger claimed that there was no written feeagreement. He
asserted that Hahn's allegedly erroneous valuation of hisexposure in theJacobi
case made Rechberger immune from liability for all subsequentfees and
expenses. Finding this and other arguments unconvincing, thedistrict court
granted McLane partial summary judgment on its contract claimand
Rechberger's counterclaim, thereby awarding McLane nearly allthe fees and
expenses it requested on partial summary judgment. These feesand expenses
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
5/24
included:3
1.Bio-Sanfees: $316.97
2. Corporate expenses: $1,254.21
3. Corporate fees: $27,303.00
4.Jacobiexpenses: $27,185.09
13 5.Jacobifees generated by Wilbur Glahn and Mark Whitney:$79,050.084
14 At this point in the case (late April of 1999), a substantialportion of the fees
and expenses claimed by McLane had been adjudged proper and dueto
McLane. McLane asked the district court to sanction Rechberger'scounsel,
Valeriano Diviacchi, for disputing these fees despite hisalleged awareness that
he had no grounds for doing so. Crediting a brief submitted byDiviacchi which
explained his litigation tactics, the district court declined toimpose any
sanctions.
15 As the trial approached on the remaining $83,755.03 of feesin dispute, the
parties sought to clarify the types of evidence which Rechbergercould present
on his third-party complaint against Hahn and his counterclaimagainst
McLane. Seeking to prove that Hahn and McLane had breached animplied
covenant to charge fair and reasonable fees, Rechbergerdisclosed his plan to
introduce evidence of Hahn's negligence in handlingtheJacobicase. After the
district court expressed some doubts about the propriety of thisstrategy,
Rechberger asked the district court to construe the survivingcount of his
counterclaim against McLane and his third-party complaintagainst Hahn,
which challenged the fairness and reasonableness of their fees,to include a
claim that the attorneys had failed to provide representationwith the skill and
knowledge of an average attorney.
16 The district court denied this request. In its view, such aninterpretation of the
surviving count would be tantamount to a reinstatement of thefirst count of
Rechberger's original complaint alleging legal malpractice.Moreover, such
reinstatement would severely prejudice "the third-partydefendants in light of
the history of this case and Rechberger's previous acquiescencein the dismissal
of his attorney malpractice claim." Therefore, the court did notallow
Rechberger to allege at trial "claims for negligent performanceof legal services
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
6/24
... [or] challenges to the fees based on the lawyers' allegedfailure to properly
assess theJacobicase, to settle at an earlier time, or to keepRechberger
informed about the case." Rather, the district court onlyallowed Rechberger to
challenge "the nature (but not the quality) of the workperformed;" for example,
to challenge "an hourly rate as unreasonably high based on thelevel of skill of
the lawyer who did the work or the nature (but not the quality)of the work
performed."
17 In another pre-trial development, Rechberger dismissed hisprevious expert,
Finis Williams, and retained a new expert, Richard Foley, toassess the
reasonableness of the attorney's fees still at issue. Foleysubmitted a report to
the district court and was deposed by McLane. McLane then askedthe court to
exclude Foley's testimony on the grounds that it did not meetthe standards for
expert testimony prescribed by the Supreme Court inDaubert v.Merrell Dow
Pharmaceuticals, Inc.,509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d469 (1993).After conducting a hearing, the district court permittedFoley to testify.
However, the court did grant McLane's motion in limine toexclude evidence
regarding certain fees left uncontested by Foley. In thismotion, McLane
showed that Foley only challenged the reasonableness of$39,527.00 in fees
incurred for the time of Attorney Hahn and $23,562.00 in feesincurred by
McLane between February 7 and February 28, 1997. Subtractingthe
$63,089.00 in fees disputed by Foley from the $83,755.00 stillin dispute,
McLane demonstrated that $20,666.00 in fees were leftundisputed. The districtcourt's final pre-trial order directed"counsel [for Rechberger] to file a
stipulation with respect to" those fees. Rechbergercomplied.
18 The trial began on February 2, 2000 and lasted two days. Atthe completion of
the presentation of evidence, the district court granted McLanejudgment as a
matter of law with respect to $23,562.00 of fees incurred fromFebruary 2 to
February 28, 1997. Although Foley's report had challenged thesefees, that
aspect of his report was discredited at trial. Foley had opinedthat sinceRechberger had instructed Glahn, a McLane attorney, tosettle theJacobicase
in early February 1997, fees incurred in that month wereunreasonable. At trial,
however, Foley admitted that he had never discussed thissettlement issue with
Rechberger. Rechberger himself failed to appear at trial, andGlahn testified
that Rechberger did not instruct him to settle the case in earlyFebruary.
19 Finding that Rechberger and ARC had offered no evidence todispute that
$23,562.00 in fees, the court entered a judgment for this amountin favor ofMcLane against both Rechberger and ARC. Finding thatMcLane had offered
no evidence to demonstrate the liability of ARC for theremaining $39,527.03
in dispute, the court also entered judgment as a matter of lawfor ARC with
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
7/24
respect to this claim. The court did permit the jury todetermine whether
Rechberger owed that money to McLane. The jury ruled that hedid, thus
deciding in favor of McLane on the balance of its contract claimand in favor of
Hahn on Rechberger's third-party complaint.
20 After trial, McLane attempted to recover the legal fees itspent suing
Rechberger and defending against his counterclaim by filing a"Claim for aJudgment with Respect to Count III of its Writ for BadFaith." At the outset of
the litigation, McLane had sued Rechberger not only for thedebts he owed
(Counts I and II), but also for "bad faith refusal to pay avalid debt" (Count III).
McLane alleged that Rechberger and his counsel acted in badfaith throughout
the litigation. Its pre-trial motion for attorney's fees andexpenses incurred
preparing its summary judgment motion had been based on afederal statute (28
U.S.C. 1927); its post-trial motion was predicated on NewHampshire law
and the district court's inherent powers to sanction litigants.Although thedistrict court found the conduct of Rechberger's casetroubling, it did not
sanction Rechberger or his counsel.
C.Rechberger's Litigation with Jon Meyer
21 Rechberger hired Hahn in April 1995, and continued to use himwhen he
moved to the Backus firm, where he was supervised by Meyer.Suing Meyer
for breach of an implied covenant to charge fair and reasonablefees,
Rechberger alleged that Meyer was personally responsible forBackus's alleged
overbilling from June 1995 to March 1996 because Meyer, thesupervising
attorney, had Hahn do work which a less senior (and thus lesswell-paid)
attorney could have done. In response to Rechberger'sthird-party complaint
against him, Meyer filed a motion for summary judgment, arguingthat
Rechberger should be suing Meyer's firm (Backus), not Meyerhimself. The
district court agreed, granting summary judgment for Meyer onRechberger's
third-party complaint.5Perhaps anticipating this result,Rechberger had soughtleave of the court to amend his third-partycomplaint to support his allegations
of Meyer's vicarious liability. The district court denied thismotion on the
ground of timeliness.
D. The Issues on Appeal and Cross-Appeal
22 As a result of these proceedings and the subsequent appealsand cross-appeals,we must address the following: Rechberger'sappeal of the partial summary
judgment entered for McLane prior to the trial (Part II);Rechberger's appeal of
the judgment as a matter of law awarded to McLane at trial andthe jury verdict
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
8/24
for McLane at trial (Part III); Rechberger's appeal of thesummary judgment
granted to Jon Meyer (Part IV); ARC's appeal relating to theliability of ARC
for the judgments entered against it and Rechberger, andMcLane's cross-
appeal of the district court's entry of judgment as a matter oflaw for ARC with
respect to the fees awarded by the jury to McLane (Part V); andMcLane's
cross-appeal from the denial of its claims for attorney's feesas a sanction (Part
VI). We turn to these tasks.
II. The Partial Summary Judgment for McLane
23 Focusing on what it termed the "undisputed fees," McLanemoved for partial
summary judgment on two counts of its complaint againstRechberger: breach
of contract and quantum meruit.In order to rule for McLane onits contract
claim (a ruling that would make the quantum meruitclaimsuperfluous), the
district court first had to find, beyond any genuine issue ofmaterial fact, thatthere was a contract between McLane andRechberger, and that McLane had
performed according to its terms. The district court did so.Although there was
no written fee agreement, "[a]n agreement that is not reduced towriting may be
based on the parties' oral agreement or on theirconduct."McLane, Graf,
Raulerson & Middleton, P.A. v. Rechberger,No. CIV.97-398-JD, 1999 WL
813952, at *6 (D.N.H. Apr.29, 1999) (citing Goodwin R.R., Inc.v. New
Hampshire,128 N.H. 595, 517 A.2d 823, 829-830 (N.H.1986)).6Giventhat
Rechberger had paid McLane's bills through December of 1996, thedistrictcourt ruled that "an unwritten agreement existed throughwhich [Rechberger]
received legal services from the McLane firm and agreed to payfor those
services, to the extent the fees were reasonable."Id.It thenentered partial
summary judgment for McLane in the amount of $135,157.77,having
concluded that Rechberger presented no evidence challengingthe
reasonableness of these fees.
24 On appeal, Rechberger contends that the district courtignored his mainargument: that Hahn's initial representation of thecost of the case, which
Rechberger characterized as a misrepresentation, should cap hisliability for
fees. Rechberger claimed that in May, 1995, Hahn said to himthat "`theJacobi
litigation was a $50,000 case, there are no witnesses,allegations are ten years
old, no attorney in his right mind would touch this case with aten foot pole,
litigation costs including trial will probably be around$200,000.'" In his
affidavit, Rechberger stated that if Hahn had not made thatstatement, he "never
would have authorized the years of litigation and legal workthat was done inthat case ... and would have authorized settlingthe case for $1.8 million in
December of 1995 instead of letting the case proceed to a pointjust before trial
where my attorneys after spending over $600,000 in legal feestell me that I am
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
9/24
. . . . .
. . . . .
. . . . .
looking at a possibility of a four to ten million dollarverdict." Rechberger
claims further that Hahn's initial representation onRechberger's exposure to
legal fees applied to any work performed for him ontheJacobilitigation by the
two firms that Hahn subsequently joined, Backus and McLane.
25 Contrary to Rechberger's assertion, the district courtaddressed this argument in
its carefully reasoned summary judgment ruling. The districtcourt noted that,before Rechberger even hired McLane, he hadalready been billed by the
Backus firm for $167,507.76 for its work ontheJacobicase.McLane,1999
WL 813952, at *6. Since "Rechberger received monthly statementsfrom the
McLane firm and apparently paid bills without protest thatamounted to nearly
$200,000 more in fees and expenses for representation intheJacobicase," he
can scarcely claim that he only accepted legal services oncondition that they
cost no more than $200,000.Id.(finding that "the applicablefacts contradict
[Rechberger's proffered] interpretations" of Hahn's statement).In other words,Rechberger's conduct refuted his contention that theunwritten agreement with
the McLane firm for the provision of legal services was limitedby a cap on the
Jacobifees that derived from an earlier representation by Hahn.Moreover, any
such alleged cap relating to the Jacobi litigation obviouslywould not have
applied to work performed by the McLane firm for Rechberger onother
matters. We find no error in the rulings of the district courtin favor of McLane
on its motion for partial summary judgment.7
26 III. The Construction of Count Three of Rechberger'sCounterclaim and Third-
Party Complaint
27 Rechberger's counterclaim and third-party complaint set forththree counts:
Count I: Attorney Malpractice
28
29 13. The above acts by the Third-Party Defendants [EdwardHahn, Jon Meyer,
and the McLane firm] constitute attorney malpractice that hasdirectly and
proximately caused the Plaintiff damages.
30
Count II: Infliction of Emotional Distress
31
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
10/24
. . . . .
32 15. The above intentional or negligent acts by theDefendants-in-Counterclaim
constitute extreme and outrageous conduct that has caused thePlaintiff severe
emotional distress and resulting physical harm.
33 Count III: Breach of the Implied Contract to chargereasonable and fair
attorney's fees
34
17. Defendants-in-Counterclaim
35 [Hahn, McLane, and Meyer]8in providing legal services to aclient have a legal
duty to do work and charge for work that is fair and reasonable.Defendants-in-
Counterclaim's actions are a breach of the this [sic] impliedcovenant to charge
reasonable and fair attorneys fees.
36 After McLane, Hahn, and Meyer prevailed on their motions forpartial
summary judgment on Counts I and II of Rechberger's counterclaimand third-
party complaint, only Count III of Rechberger's counterclaim andthird-party
complaint remained to be adjudicated.
37 As the trial approached, all parties sought to clarify thetype of evidenceRechberger could present. Rechberger hoped todemonstrate at trial that Hahn
and McLane had handled his case negligently. He submitted amemorandum of
law arguing that the court should construe Count III broadly topermit the jury
to consider evidence of negligence when it assessed thereasonableness of
McLane's fees.
38 McLane responded that Count III could not be construed sobroadly. McLane
also argued that Rechberger mischaracterized his request to thecourt: instead oftrying to construe Count III in a certain way, hewas trying to amend his
complaint by reinstating Count I. McLane argued that it would beseverely
prejudiced by this amendment, having prepared its case on theassumption that
the question of negligence had already been decided in itsfavor.
39 The district court responded to these contentions byconstruing Count III to
"state a claim for breach of an implied covenant to chargereasonable and fair
fees and not to include a negligence claim." The courtelaborated as follows:
40 Count three states a claim for breach of the third-partydefendants' implied
covenant to charge reasonable and fair fees for appropriateservices. Count
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
11/24
three will allow Rechberger to challenge the rates charged forwork and the
fees charged for any duplicative or unnecessary work done on hiscase.... For
example, Rechberger will be able to challenge an hourly rate asunreasonably
high based on the level of skill of the lawyer who did the workor the nature
(but not the quality) of the work performed. Rechberger may alsochallenge
fees charged for an excessive number of lawyers working on asingle project,
such as attendance at a deposition. Count three, however, doesnot includeclaims for negligent performance of legal services, andtherefore, challenges to
the fees based on the lawyers' alleged failure to properlyassess theJacobicase,
to settle at an earlier time, or to keep Rechberger informedabout the case are
not pled in count three and will not be allowed. In summary,count three
challenges the reasonableness of the fees charged for theservices provided, but
does not include claims for substandard representation.
41 In addition, and importantly, the court considered thehistory of the litigationand the possibility of prejudice:
42 To the extent Rechberger seeks to amend count three byimplication, his
request is denied. Any amendment at this point in time toinclude the
negligence claim Rechberger proposes would be highly prejudicialto the third-
party defendants in light of the history of this case andRechberger's previous
acquiescence in the dismissal of his attorney malpractice claim.See, e.g.,
Acosta-Mestre v. Hilton Int'l,156 F.3d 49, 51 (1st Cir.1998)(undue delay andundue prejudice to opposing party are grounds todeny amendment).
43 In the abstract, evidence of "substandard representation"might be an
appropriate part of the inquiry into the reasonableness ofattorney's fees. Here,
however, the specifics of the case must guide our analysis ofRechberger's
challenge to the court's ruling. Rechberger's complaintchallenged the quality of
the legal representation in Count I and the reasonableness ofthe fees charged
for that representation in Count III. Facing a motion forsummary judgment onthe negligence count, he did nothing to opposeit, and the court granted partial
summary judgment. Under these circ*mstances, the district courtacted well
within its discretion in refusing to permit Rechberger toadvance anew the
negligence claims he failed to support at the summary judgmentstage in the
guise of the reasonableness challenge that remained fortrial.
IV. The Summary Judgment Ruling for Meyer
44 Just as he sued McLane and Hahn, Rechberger also sued JonMeyer for breach
of an implied covenant to charge reasonable fees. Meyerresponded with a
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
12/24
motion for summary judgment. In his motion, Meyer emphasizedthat an expert
witness hired by Rechberger (attorney Finis Williams) had foundMeyer's bills
for Meyer's own work "reasonable." Rechberger responded thatWilliams's
report also found that Meyer's firm (Backus) billed in amountsthat were
excessive "by one-quarter to one-third of the amount billed"because of
overbilling by Hahn. Although Rechberger conceded that Backuswas Hahn's
employer at the relevant time, not Meyer himself, Rechbergerasserted thatMeyer was responsible for the overbilling because hesupervised Hahn's work
at Backus. Unimpressed by this improvised respondeatsuperiorclaim, the
district court granted summary judgment for Meyer on threegrounds: (1)
Rechberger did not allege vicarious liability in his complaint;(2) Rechberger
provided no facts or argument that Meyer, rather than the firm,was Hahn's
employer; and (3) Rechberger presented no facts or legalarguments supporting
any other agency relationship between Meyer and Hahn.
45 On appeal, Rechberger lamely invokes liberal interpretationsof Rule 8
pleading requirements, ignoring our holding that "[a]lthough theliberal
pleading policy embodied in Rule 8 does not require a party tospecify its legal
theory of recovery, the pleadings must at least implicate therelevant legal
issues." Schott Motorcycle Supply, Inc. v. Am. Honda Motor Co.,976 F.2d 58,
62 (1st Cir.1992) (citing 5 Charles Alan Wright & Arthur R.Miller,Federal
Practice and Procedure, 1286, at 558 (2d ed.1990) ("the liberalconstruction
accorded a pleading under Rule 8(f) does not require the courtsto fabricate aclaim that a plaintiff has not spelled out in hispleadings")). Rechberger did not
implicate the relevant legal issues in his complaint. Moreover,the court's
dispositive ruling on the claims against Meyer came at summaryjudgment,
when the nonmoving party must muster some facts in the summaryjudgment
record to preserve a claim. We agree with the district courtthat Rechberger
provided no facts to preserve a respondeat superiorclaim againstMeyer.
V. ARC's Liability
46 ARC is a limited partnership, with Rechberger as its generalpartner and ARC
Trust as its limited partner. The district court granted McLanepartial summary
judgment against both Rechberger and ARC for $135,157.77, andgranted
judgment as a matter of law at trial against both Rechberger andARC for
$23,562.00. Rechberger and ARC jointly stipulated to pay$20,666.00 to
McLane. However, the district court also granted judgment as amatter of law
for ARC at the trial, holding only Rechberger liable for the$39,527.03awarded to McLane by the jury.
47 Both ARC and McLane appeal these liability determinations. Inits cross-
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
13/24
appeal, McLane avers that ARC should be liable for all of thejudgments
awarded to McLane. In its appeal, ARC claims that the districtcourt erred in
holding it liable to pay amounts in excess of the $29,266.21which McLane
attorney Wilbur Glahn claimed was due directly from ARC in theaffidavit he
submitted in support of McLane's motion for partial summaryjudgment.
48 A. The Judgment as a Matter of Law for ARC (McLane'sCross-Appeal)
49 McLane's complaint against Rechberger and ARC alleged threecounts, all of
which began by asserting that "defendant Rechberger,individually and as agent
for defendant, ARC, requested the plaintiff to perform legalservices...." The
joint answer of ARC and Rechberger admitted that the defendantsRechberger
and ARC retained McLane "in the matters listed" in thecomplaint, which
included theJacobicase, theBio-Sancase, and general corporateservices.
50 Both before summary judgment and before trial, ARC did notattempt to
distinguish its own liability from that of Rechberger. These twodefendants
filed a joint answer, a joint counterclaim, and joint objectionsto partial
summary judgment. They also filed a joint "Pre-Trial Statement"on December
22, 1999. ARC did not raise the issue of separateness in anypleading, and (with
Rechberger) stipulated to judgments dismissing third-partydefendant Jon
Meyer (on January 6, 2000) and ordering payment of $20,666.00 infees to
McLane (on February 2, 2000).
51 Nevertheless, at the close of evidence in the trial onFebruary 3, 2000, ARC
moved for judgment as a matter of law with respect to theremaining fees in
dispute ($39,527.00 of Hahn's time as a McLane attorney). Thedistrict court
granted the motion, explaining its reasons in a colloquy withthe attorneys:
52 There's nothing about ARC. Now, [plaintiff's counsel]mentioned earlier thatARC and Mr. Rechberger are one and the same,but no certified copy of any
court order making that finding has been filed in this case, andARC appears to
be a party floating around here without a place.... [M]yrecollection of the
evidence [is that] Mr. Hahn was advising Rechberger onARC-related matters
but ARC had its own attorneys, and that the attorney-clientrelationship here
was not ARC and Mr. Hahn or ARC and McLane, it was Rechbergerand the
firm and the individual.... I don't see any evidence from whicha jury could find
that there's an attorney-client relationship between ARC andthese individuals.
53 In light of this ruling, the jury only had to considerwhether Rechberger was
liable for the remaining $39,527.03 of fees in dispute.
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
14/24
54 We review the grant of a motion for judgment as a matter oflaw de novo. St.
Paul Fire & Marine Ins. Co. v. Ellis & Ellis,262 F.3d53, 61 (1st Cir.2001);
Brennan v. GTE Gov't Sys. Corp.,150 F.3d 21, 25 (1st Cir.1998).In so doing,
we must take the facts in the light most favorable toMcLane.Brennan,150
F.3d at 25. We can only allow the judgment as a matter of law tostand if "the
evidence does not permit a finding in favor of [McLane]."Id.
55 On appeal, McLane challenges the judgment as a matter of lawon two grounds.
First, McLane contends that since ARC had never asserted beforetrial that its
responsibility for attorney's fees had to be establishedseparately from
Rechberger's responsibility, the district court should not haveallowed ARC to
submit this defense for the first time at the close of evidenceat trial. McLane
argues that ARC "must be held to the position [it] freelyadopted prior to
trial.... The spirit of flexibility behind the Rules is notintended to permit one of
the parties to be booby-trapped."Reyes v. Marine Enters.,Inc.,494 F.2d 866,868 (1st Cir.1974). Although there is force inthis argument, we cannot
consider it on appeal because McLane did not present it to thecourt in opposing
ARC's motion for judgment as a matter of law. See United Statesv. Taylor,54
F.3d 967, 972 (1st Cir.1995) ("[A] litigant who deems himselfa*ggrieved by
what he considers to be an improper occurrence in the course oftrial or an
erroneous ruling by the trial judge ordinarily must object thenand there, or
forfeit any right to complain at a later time.").
56 However, we do credit the argument that McLane made to thecourt: namely,
that there was enough evidence of ARC's liability presented attrial to require
the submission of McLane's claim against ARC to the jury. Hahn,a McLane
lawyer, testified that he represented both ARC and Rechberger intheJacobi
andBio-Sanlitigation. When asked about his role in thelitigation while
working at Backus, Hahn testified that he "had primaryresponsibility for ...
[e]verything that had to do with ARC and everything that had todo with Bio-
San." He said that his role "remained pretty much the same" whenhe worked atMcLane. He also testified to working on a matterbenefitting both Rechberger
and ARC: arranging payment of theJacobisettlement to MarionJacobi from
the ARC Trust (the limited partner of ARC) while he was atMcLane.
Rechberger and ARC were both defendants in theJacobilitigation.Wilbur
Glahn offered similar testimony about the ARC Trust's payment ofthe $1.35
million settlement ofJacobi.
57 Although there was testimony at trial suggesting that ARC hadbeenrepresented by a firm other than McLane, as noted by the court,that testimony
did not preclude a finding by the jury that McLane also didlegal work for
ARC. A verdict may be directed only if the evidence, consideredin the light
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
15/24
most favorable to the non-movant, "`would not permit areasonable jury to find
in favor of the plaintiff[ ] on any permissible claim ortheory.'"Andrade v.
Jamestown Hous. Auth.,82 F.3d 1179, 1186 (1st Cir.1996)(quotingMurray v.
Ross-Dove Co.,5 F.3d 573, 576 (1st Cir.1993)). The court's entryof judgment
as a matter of law for ARC was not consistent with thisstandard.
58 Of course, if the jury had been permitted to considerMcLane's claim againstARC, found for McLane, and the district courtthen entered a judgment
notwithstanding the verdict, we would have the option ofreinstating the jury's
verdict. It would have been preferable, therefore, for thedistrict court to have
59 reserve[d] decision on [the motion for judgment as a matterof law], passing on
the legal question only after submitting the case to thejury.... [R]efraining from
granting a judgment as a matter of law until the jury has had achance to deal
with the merits is frequently a "wise and time-savingprecaution."
60 Gibson v. City of Cranston,37 F.3d 731, 735 n. 4 (1stCir.1994) (quoting
Talbot-Windsor Corp. v. Miller,309 F.2d 68, 69 (1st Cir.1962)).Under the
present circ*mstances, we must vacate the court's judgment as amatter of law
for ARC at trial, and remand for a possible retrial of ARC'sliability for legal
fees still in dispute when the court ruled. Given the course andduration of this
litigation, we do not relish that prospect. We hope the partiesfeel the same
way.9
B. ARC's Post-Trial Motions
61 After the trial ended, ARC tried to distinguish its ownliability from that of
Rechberger in two motions. ARC first moved to vacate anattachment of funds
that McLane had obtained at the outset of the case.10After thismotion was
denied, ARC moved to "alter, amend, vacate or clarify" thejudgment pursuantto Rule 52(b) of the Federal Rules of CivilProcedure (which allows a trial court
to "amend its findingsor make additional findings and [to] amendthe
judgment accordingly"), Rule 59(e) (which permits motions toalter or amend a
judgment), and Rule 60(b) (which permits motions for relief froma judgment).
The district court denied that motion as well.
62 In essence, with these two motions, ARC wanted the districtcourt to limit its
liability to the $29,266.21 which Wilbur Glahn's affidavit,presented in supportof McLane's partial summary judgment motion,directly attributed to work
performed for ARC. These fees were due for general corporatework and an
escrow matter. According to ARC, it hired McLane solely forthese purposes;
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
16/24
all of the other fees were incurred by Rechberger.
63 Whatever the merits of this argument, the district courtnever reached it on
grounds of timeliness. It ruled that "ARC cannot now challengeits liability for
the fees and expenses arising from Rechberger's representationwhen that
defense was not raised until ARC moved for judgment in its favorat trial as to
the claims then remaining against it." As the district courtpatiently observed,ARC had never before attempted to distinguish*tself from Rechberger:
64 ARC and Rechberger answered the complaint jointly without
distinguishing between themselves.
65 ARC and Rechberger objected jointly to McLane's motion forpartial
summary judgment, again without distinguishing between them, andthe courtreferred to them jointly in the order of April 29, 1999,granting partial summary
judgment in favor of McLane [for the bulk of the contestedfees].
66 [When further amounts were awarded in November, 1999,] ARCdid
not contest its liability on the theory that it was a separateentity....
67 Counsel, on behalf of ARC and Rechberger jointly, stipulatedbefore
trial to certain amounts that were not disputed.
68 The court granted McLane's motion in limine against both ARCand
Rechberger as to other amounts [on February 3, 2000]. ARC stilldid not raise
its new theory.
69 These timeliness considerations are dispositive. The districtcourt did not abuse
its discretion in denying ARC's post-trial motions to vacate theattachment and
to grant ARC relief from the judgment.
70 VI. The Denial of Attorney's Fees and Expenses Sought byMcLane as a
Sanction
71 McLane twice asked the district court to award it additionalattorney's fees as a
sanction for the allegedly egregious conduct of Rechberger andhis counsel
during the litigation over attorney's fees. The district courttwice refused to doso. McLane appeals. In considering that appeal,"[w]e tread very carefully....
for the district court is entitled not only to the ordinarydeference due the trial
judge, and additional deference in the entire area of sanctions,but extraordinary
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
17/24
deference in denying sanctions."Anderson v. Boston Sch.Comm.,105 F.3d
762, 768 (1st Cir.1997).
A. The Post-Trial Decision on Sanctions
72 The district court only considered its inherent authority asa federal court in
denying McLane's post-trial motion for sanctions. McLane arguesthat New
Hampshire state law grants litigants a "substantive equity-basedright" to
attorney's fees, and that the district court erred by refusingto apply this state
law.
73 The U.S. Supreme Court has observed that "`[i]n an ordinarydiversity case
where the state law does not run counter to a valid federalstatute or rule of
court.... state law denying the right to attorney's fees orgiving a right thereto,which reflects a substantial policy of thestate, should be followed.'"Alyeska
Pipeline Serv. Co. vs. Wilderness Soc'y,421 U.S. 240, 260 n. 31,95 S.Ct. 1612,
44 L.Ed.2d 141 (1975) (internal quotation marks omitted).Therefore, a state's
judicially created rule for an award of attorney's fees, otherthan as a sanction
for the conduct of litigation, may provide a basis for a feeaward. See id.
(noting that "a state statute requiring an award of attorney'sfees should be
applied in a case removed from the state courts to the federalcourts," and that "
[t]he same would clearly hold for a juridically created rule")(citingPeople of
Sioux County v. Nat'l Surety Co.,276 U.S. 238, 243, 48 S.Ct.239, 72 L.Ed. 547
(1928)).
74 The district court found that New Hampshire law "permittingan award of
attorney's fees under state law" concerns "sanction[s] derivedfrom the state
court's inherent powers." This is not entirely accurate. NewHampshire permits
"[a]n award of attorney's fees to the prevailing party where theaction conferred
a substantial benefit on not only the plaintiffs who initiatedthe action, but on
the public as well." Claremont Sch. Dist. v. Governor,144 N.H.590, 761 A.2d
389, 392-93 (N.H.1999) (citing Silva v. Botsch,121 N.H. 1041,437 A.2d 313,
314 (N.H.1981);Irwin Marine, Inc. v. Blizzard, Inc.,126 N.H.271, 490 A.2d
786, 791 (N.H.1985)). The New Hampshire courts have reservedsuch awards
for litigation affecting the fundamental rights and interests ofgroups or the
public at large. See id.at 392-94, 490 A.2d 786 (awarding feesto towns that
sought to assure equitable school funding);Irwin Marine,490 A.2dat 790-91
(awarding fees to litigant whose case led to greater fairness ina city's public
bidding procedures). Given the absence of any cognizable publicbenefit from
this litigation, this substantive equity-based right toattorney's fees has no
application to this case.
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
18/24
75 Apart from this public benefit exception, New Hampshirecourts seem to treat
the award of attorney's fees for the conduct of litigation as asanction premised
on their inherent authority. See Nash Family Inv. Props. v.Hudson,139 N.H.
595, 660 A.2d 1102, 1109 (N.H.1995). As the district courtcorrectly observed,
it "does not have inherent powers under state law." It has themunder federal
law. Under the federal standard, a district court may "awardattorney's fees to a
prevailing party pursuant to its inherent powers when the losingparty has`acted in bad faith, vexatiously, wantonly, or foroppressive reasons.'"Dubois v.
United States Dep't of Agric.,270 F.3d 77, 80 (1st Cir.2001)(quoting
Chambers v. NASCO, Inc.,501 U.S. 32, 45-46, 111 S.Ct. 2123, 115L.Ed.2d 27
(1991)). McLane challenges the district court's application ofthis standard. We
review a district court's imposition or denial of sanctionsunder its inherent
power for an abuse of discretion. Chambers,501 U.S. at 55, 111S.Ct. 2123.
76 In its post-trial motion for sanctions, McLane argued thatRechberger litigatedin bad faith, particularly when he failed toappear at trial. Although expressing
some disapproval of the conduct of Rechberger's case, thedistrict court ruled
that McLane did not provide "sufficient factual support from therecord" to
demonstrate that sanctions should be imposed. Specifically, thedistrict court
found that:
77 [D]espite his lack of success, Rechberger's counterclaimsand
defenses were not so patently unreasonable or meritless to bedeemed frivolous.
78 [Given] that he did not have time to take action againstMcLane
before suit was brought, [Rechberger's] counterclaimschallenging [McLane's]
fees cannot be found to have been indisputably retaliatory.
79 [Rechberger may not have testified at trial because] hebelieved ...
criminal proceedings [could be] brought against him (arisingfrom hisdaughter's allegations) if he came to New Hampshire.
80 Searching for an error of law in the court's rulings, McLaneargues that the
district court erroneously focused on Rechberger's conduct andignored its
grievances against his counsel. To support this claim, McLanepoints to the
district court's statement that "the record presented here doesnot show that
Rechberger, rather than his counsel, was the strategist who wasresponsible for
the pleadings, decisions, and method of prosecuting thiscase."
81 McLane assumes correctly that if an attorney, rather than aclient, is responsible
for sanctionable litigation tactics, the court may sanction theattorney. See
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
19/24
M.E.N. Co. v. Control Fluidics, Inc.,834 F.2d 869, 873 (10thCir.1987)
("Where sanctions are concerned ... we have cautioned that `[i]fthe fault lies
with the attorneys, that is where the impact of the sanctionshould be lodged.'")
(quotingIn re Sanction of Baker,744 F.2d 1438, 1442 (10thCir.1984)). In
other words, if the court here concluded that counsel was thestrategist
responsible for pleadings and litigation decisions that meriteda sanction, the
court could not deny sanctions because the party represented bycounsel wasotherwise blameless.
82 In our view, however, the district court considered bothRechberger's and
attorney Diviacchi's conduct in applying the federal standardsfor awarding fees
as a sanction. Its reference to Rechberger not being "thestrategist" was only one
factor in its decision not to sanction him. Indeed, the courtspecifically stated
that "[i]n addition, despite his lack of success, Rechberger'scounterclaims and
defenses were not so patently unreasonable or meritless as to bedeemedfrivolous." We view this finding as a comment both on thesubstance of
Rechberger's story and Diviacchi's advocacy. Moreover, as thediscussion
below indicates, the court had already addressed much ofDiviacchi's conduct
in a post-summary judgment ruling denying McLane's motion forsanctions
against him. Since the district court's analysis addressednearly all of the
wrongs alleged by McLane against both Rechberger and Diviacchi,we find no
error of law or abuse of discretion in its post-trial decisionnot to award
attorney's fees as a sanction.
83 B. McLane's Claim for Fees Under 28 U.S.C. 1927
84 Aside from its post-trial motion based on state law andfederal inherent powers,
McLane also advanced a narrower claim for fees pre-trial basedon a federal
statute permitting the sanctioning of attorneys for abuse of thejudicial process.
This filing followed its successful motion for partial summaryjudgment, when
McLane moved the court to order sanctions against Rechberger'sattorney,Valeriano Diviacchi, pursuant to 28 U.S.C. 1927. Section1927 provides:
"Any attorney... who so multiplies the proceedings in any caseunreasonably
and vexatiously may be required by the court to satisfypersonally the excess
costs, expenses, and attorney's fees reasonably incurred becauseof such
conduct."
85 McLane alleged that Rechberger refused to pay his bills inbad faith, and that
Diviacchi knew that this refusal was in bad faith. Moreover,McLane alleged
that Diviacchi deployed dilatory and deceptive litigationtactics in order to
frustrate its efforts to recover a valid debt. McLane focused onDiviacchi's
repeated refusal to admit that any of the fees and expensessought were
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
20/24
undisputed, when he only had evidence to challenge a portion ofthem. McLane
alleged that Diviacchi's aggressive litigation posture wasadopted only for the
purpose of "`burdening [McLane] with unnecessary expenditures oftime and
effort'" and thus warranted sanctions. Odbert v. UnitedStates,576 F.Supp. 825,
829 (E.D.Cal.1983) (quotingLipsig v. Nat'l Student MarketingCorp.,663 F.2d
178, 181 (D.C.Cir.1980)).
86 In an order entered on April 29, 1999 in response to McLane'smotion, the
district court noted the applicable standard of conduct:
87 The First Circuit does not require a showing of an attorney'ssubjective bad faith
to meet the section 1927 standard. Instead, sanctions may beappropriate under
section 1927 if an attorney's conduct is "unreasonable andharassing or
annoying" judged from an objective standard, whether or not theattorney
intends to harass or annoy. To be vexatious under section 1927,however, theattorney's conduct must "be more severe than merenegligence, inadvertence, or
incompetence."
88 McLane,1999 WL 813952, at *8 (quoting Cruz v. Savage,896 F.2d626, 632
(1st Cir.1990)). The district court then reviewed McLane'sgrounds for alleging
that sanctions should be imposed:
89 Counsel for the McLane firm ... communicated withRechberger's counsel
before filing the motion for partial summary judgment attemptingto resolve
payment of the undisputed fees based in part on the opinion ofRechberger's
expert witness. Rechberger's counsel's response was unhelpful,first claiming
that he did not understand the letter, and then debating whetherpartial
judgment can be entered on an undisputed amount.
90 Id.The district court found that "[c]ounsel's conduct seemsto have beensufficiently unreasonable and vexatious to justify theimposition of sanctions,"
but permitted Diviacchi to show cause why sanctions should notbe imposed.
Id.In response, Diviacchi submitted a brief explaining thelitigation tactics
challenged by McLane in its motion for sanctions. On February 7,2000, the
district court decided against imposing sanctions withoutexplanation, other
than noting its reliance on "the standards set forth in section1927." McLane
challenges that ruling on appeal.
91 As noted, we accord "`extraordinary deference'" to a districtcourt's decision to
deny sanctions.Dubois v. United States Dep't of Agric.,270 F.3dat 80 (1st
Cir.2001) (quotingLichtenstein v. Consolidated Servs. Group,Inc.,173 F.3d
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
21/24
17, 22 (1st Cir.1999)). "[T]he responsibility for imposingsanctions properly
rests with the judicial actor closest to the litigation thedistrict court judge
who is in the best position to evaluate the circ*mstancessurrounding an alleged
violation and render an informed judgment." Cruz,896 F.2d at632.
92 McLane argues that the district court's Order of February 7,2000, to deny the
motion for sanctions pursuant to 1927 does not deserve deferencebecause itwas not explained. However, the district court carefullyanalyzed McLane's
claims and set forth the standards for the imposition ofsanctions pursuant to 28
U.S.C. 1927 in its April 29, 1999 Order requiring Diviacchi toexplain his
conduct. See McLane,1999 WL 813952, at *8. Furthermore, while wehave
encouraged district courts to give reasons for denyingsanctions, we have not
required them to do so: "although the rationale for a denial ofa motion for fees
or sanctions under Rule 11, 1927, or 1988 should beunambiguously
communicated, the lack of explicit findings is not fatal wherethe record itself,evidence or colloquy, clearly indicates one ormore sufficient supporting
reasons."Anderson,105 F.3d at 769.
93 In response to the district court's order to show cause whyit should not impose
sanctions, Diviacchi filed a memorandum outlining his rationalefor defending
Rechberger's refusal to concede the validity of any of his debtsto McLane.
Diviacchi explained that he believed that the fees requested inMcLane's
motions "would be more than cancelled out" by Rechberger'scounterclaim.The district court apparently credited thisexplanation, finding later in its ruling
on the post-trial motion for sanctions that "Rechberger'scounter-claims and
defenses were not so patently unreasonable or meritless to bedeemed
frivolous." There was no abuse of discretion in the court'sdenial of 1927
sanctions.
VII. Conclusion
94 Although we must vacate the judgment as a matter of law forARC, we
commend the district court for handling an exceptionally complexand
frustrating case with great skill and patience. The judge issuedat least six
lengthy memoranda of decision in support of his orders, all ofwhich were most
helpful in reviewing the plethora of issues before us. Inaddition, the court
incorporated the numerous orders it entered during the course ofthis litigation
in a useful final judgment it entered on May 12, 2000(summarized in part in the
appendix attached hereto). We affirm all aspects of that finaljudgment except
for the judgment as a matter of law for ARC.
5 So Ordered. Each art hall bear h or t own co t .
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
22/24
Appendix: Monetary Judgments in the Litigation
Notes:
. .
96
97 The following monetary judgments were entered during thelitigation:
98 1. Order dated April 29, 1999 granting Motion for PartialSummary Judgmenton Count I of McLane's complaint in favor of McLanefor the following:
99 a.Bio-Sanfees: $316.97
100 b. Corporate expenses: $1,254.21
101 c. Corporate fees: $27,303.00
102 d.Jacobiexpenses: $27,185.09
103 2. Order dated November 9, 1999 finding $79,098.50 as theamount owed by
Rechberger and ARC for the services of Glahn and Whitney ontheJacobi
case, pursuant to the partial summary judgment granted on April29, 1999.
104 3. Order dated May 27, 1999, granting Motion for PartialSummary Judgmentin favor of Jon Meyer on the counterclaim againstARC and Rechberger in the
amount of $3,396.40.
105 4. Pre-trial Order dated February 3, 2000, orderingRechberger's counsel to
stipulate to paying $20,666 in fees left undisputed byRechberger's expert at
trial, Richard Foley.
106 5. Oral Order granting McLane's motion for judgment as amatter of law for23,562.00 in fees (McLane's fees from February 7to February 28, 2000.)
107 6. Oral Order granting ARC's motion for judgment as a matterof law with
respect to the fees remaining in dispute ($39,527.03 of feesbilled by Hahn).
108 7. Jury verdict inMcLane v. Rechberger,for McLane in theamount of
$39,527.03 (the remaining fees in dispute).
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
23/24
Of the Eastern District of Virginia, sitting by designation
ARC is a limited partnership; its general partner is AlfredRechberger, and its
limited partner is ARC Trust. Beneficiaries of the trust includeMr.
Rechberger's children. Despite the voluminous record generatedby this
litigation, it contains little information on the exact statusand nature of ARC.
At trial, an attorney at McLane (Wilbur Glahn) described ARC asa "Coloradolimited partnership with a general partner formed on theIsle of Man off the
coast of England ... [designed to] bulletproof Mr. Rechberger'sassets." In an
attachment proceeding, a New Hampshire Superior Court justicedeclared
Rechberger and ARC indistinguishable for purposes of thelitigation underlying
this fee dispute. To simplify the discussion, we refer to bothRechberger and
ARC as "Rechberger" below, unless otherwise noted. ARC adopts byreference
many of the arguments made by Rechberger on appeal
Rechberger, ARC, and McLane dispute the ownership of the$300,000, which
was placed in an escrow account by a company (Bio-San) sued byRechberger
and ARC during the pendency of that litigation. The $300,000became
available as a result of a settlement of the Bio-San lawsuit oneof the legal
disputes in which McLane represented Rechberger. Rechberger andARC now
say the money belongs to ARC; McLane asserts it is the jointpossession of
Rechberger and ARC. Neither party briefed this question onappeal and we do
not address it
For a complete list of all the monetary judgments entered in thecase, see the
appendix to this opinion
The district court directed the parties to agree on the amountdue for thisJacobi
work because the court could not make that determination on thebasis of the
documents before it. McLane submitted a statement assessingGlahn's and
Whitney's outstanding fees at $79,098.50, and Rechberger did notfile any
response with the court. The district court adopted McLane'sestimate.
After Rechberger sued him, Meyer filed a third-partycounterclaim against
Rechberger for $5,000 in unpaid bills and for legal feesgenerated in order to
defend against Rechberger's allegedly frivolous breach ofcontract claim. A
May 27, 1999 order granted a motion for partial summary judgmentin favor of
Meyer on the counterclaim against ARC and Rechberger in theamount of
$3,396.40. On January 6, 2000, all parties stipulated to ceaselitigating the
"remaining disputed portion of Third Party Defendant Meyer'scounterclaim."
The district court did not consider the statute of frauds issuesraised by the
unwritten contract, reasoning as follows: "Although thedefendants (Rechberger
and ARC) raised the statute of frauds as an affirmative defensein their answer,
*
1
2
3
4
5
6
7/26/2019 McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir.(2002)
24/24
they have not pursued a statute of frauds defense in oppositionto McLane's
motion for summary judgment. For that reason, the court will notconsider, sua
sponte, whether the statute of frauds ... would apply in thecirc*mstances of this
case."McLane,1999 WL 813952, at *6, n. 3 (citation omitted).Rechberger
does not challenge this conclusion on appeal.
The district court found that McLane proved the reasonablenessof the feesawarded on partial summary judgment. That ruling alsodisposed of
Rechberger's counterclaim with respect to those fees since thecounterclaim
alleged that McLane charged unreasonable fees
Strictly speaking, only Hahn and Meyer are "third-partydefendants," and only
McLane is a "defendant-in-counterclaim." Since both Rechbergerand the
district court used the terms interchangeably on some occasions,we will
construe each to include Hahn, Meyer, and McLane
The court's error in entering judgment as a matter of law forARC might have
been harmless if the district court had, like the state court intheJacobi
litigation, declared that ARC and Rechberger wereindistinguishable. However,
the district court concluded that the parties had provided itwith an insufficient
factual and legal basis "to permit any definitive resolution ofthe relationship
between ARC and Rechberger."
See footnote 2 above
7
8
9
10

McLane, Graf v. Rechberger, 280 F.3d 26, 1st Cir. (2002) - [PDF Document] (2024)

References