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LIBERTY MUT. INS. CO. v. BANKERS TRUST

United States District Court, Southern District of New York


June 24, 1991

LIBERTY MUTUAL INSURANCE COMPANY, AS SUBROGEE OF ARBOGAST & BASTIAN, INC., AND LIBERTY MUTUAL INSURANCE COMPANY, PLAINTIFFS,
v.
BANKERS TRUST COMPANY AND ROTCHES PORK PACKERS, INC., DEFENDANTS.

The opinion of the court was delivered by: Robert P. Patterson, Jr., District Judge.

OPINION AND ORDER

Plaintiff Liberty Mutual Insurance Company ("Liberty Mutual") seeks attorneys' fees in this case, which arises under the Packers and Stockyards Act, as amended and supplemented, 7 U.S.C. § 181 et seq. The facts of the case are set forth in this Court's Opinion and Order of February 12, 1991. Liberty Mutual Ins. Co. v. Bankers Trust Co. et al., 758 F. Supp. 890 (S.D.N.Y. 1991). The Court granted Liberty Mutual's motion for prejudgment interest in an opinion and Order of March 28, 1991. Liberty Mutual Ins. Co. v. Bankers Trust Co. et al., 761 F. Supp. 9 (S.D.N.Y. 1991). Liberty Mutual also moved for an award of attorneys' fees and the Court reserved decision on the motion pending additional submissions by the parties.

For the reasons stated below, the motion for attorneys' fees is denied.

DISCUSSION

Liberty Mutual argues that Pennsylvania Agricultural Cooperative Marketing Assn. v. Ezra Martin Co., 495 F. Supp. 565, 570-71 (M.D.Pa. 1980), which was cited in this Court's opinion of March 28, 1991 as precedent for awarding prejudgment interest, should also be read as allowing an award of attorneys' fees. In Ezra Martin, supra, the court held that the Packers and Stockyards Act requirement that unpaid cash sellers receive "full payment" allowed an award which included the "principal amount (purchase price), prejudgment interest on that amount from the date following the delivery and acceptance of the livestock, and costs incurred by the suppliers in seeking to enforce their rights." 495 F. Supp. at 570. The court relied on the following language from Section 206 of the Packers and Stockyards Act, at 7 U.S.C. § 196(b): "`All livestock purchased by a packer in cash sales, and all inventories of, or receivables or proceeds from meat, meat food products, or livestock products derived therefrom, shall be held by such packer in trust for the benefit of all unpaid cash sellers of such livestock until full payment has been received by such unpaid sellers . . .' 7 U.S.C. § 196(b) (emphasis added)." 495 F. Supp. at 570. No language can be found in Ezra Martin, however, supporting an award of attorneys' fees in this case. Indeed, counsel for the prevailing party in Ezra Martin did not even include the "costs of litigation" in its proposed stipulation, nor did it object to the court's omission thereof, so the court deemed any such claims waived. 495 F. Supp. at 571. See also, 28 U.S.C. § 1920 (West 1991).

Liberty Mutual also seeks to apply the language in Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975), to its motion. In Alyeska, the Supreme Court listed the Packers and Stockyards Act in a footnote as one of the federal statutes which allows for a recovery of attorneys' fees. 421 U.S. at 260, n. 33, 95 S.Ct. at 1623, n. 33. However, the note referred to 7 U.S.C. § 210(f) as the provision under which attorneys' fees were allowed. Id. By its terms, 7 U.S.C. § 210(f) applies to those actions brought under the Packers and Stockyards Act to enforce an award of damages by the Secretary of Agriculture.*fn1 The present action is not a suit to enforce an award of damages by the Secretary of Agriculture and the Secretary of Agriculture did not issue such an award of damages to plaintiff or its assignors against Bankers Trust or Rotches, Inc.*fn2 Accordingly, 7 U.S.C. § 210(f) is not authority for any award of attorneys' fees in this action.

7 U.S.C. § 196, the section providing for the statutory trust for unpaid cash sellers, contains no express authorization for an award of attorneys' fees to a successful litigant in Liberty Mutual's position, nor has any court so interpreted that provision of the Packers and Stockyards Act.*fn3 The legislative history of 7 U.S.C. § 196 is silent as to any Congressional intent to award attorneys' fees in an action to determine creditors' respective rights under the statutory trust provision. In view of Congress' earlier express inclusion of attorneys' fees in 7 U.S.C. § 210(f), the right to such fees should not be implied under 7 U.S.C. § 196. Cf., e.g., Federal Trade Commission v. Simplicity Pattern Co., 360 U.S. 55, 67, 79 S.Ct. 1005, 1012-13, 3 L.Ed.2d 1079 (1959), reh'g denied, 361 U.S. 855, 80 S.Ct. 41, 4 L.Ed.2d 93 (1959).

Since the general rule is that, with few exceptions, each litigant in federal court should pay its own attorneys' fees and that any statutory authorization for awarding a party attorneys' fees must be express, see Alyeska, supra, 421 U.S. at 245, 247, 257 et seq., 95 S.Ct. at 1615, 1616, 1621 et seq., the Court finds no justification for an award of attorneys' fees in the present case in the Packers and Stockyards Act itself.

Liberty Mutual also argues that, consistent with the provisions of 7 U.S.C. § 209, it is entitled to pursue its common law rights to collect attorneys' fees because it was successful in an action "preserving or recovering a fund for the benefit of others in addition to [it]self." Alyeska, supra, 421 U.S. at 257, 95 S.Ct. at 1621,*fn4 and particularly under the "common fund doctrine," Boeing v. Van Gemert, 444 U.S. 472, 481, 100 S.Ct. 745, 750-51, 62 L.Ed.2d 676 (1980).

The common fund doctrine does not apply to the present case. The common fund doctrine is based on the notion that those who benefit from a lawsuit without contributing to its costs may be taxed with a share of the expense of a successful lawsuit by allowing the actual litigant to recover costs and attorneys' fees from the common fund. Boeing, supra, 444 U.S. at 478, 100 S.Ct. at 749.*fn5 It is a means of dividing the costs of suit among successful litigants. Recovery of attorneys' fees under such a theory would be based on the cash sellers' assignments to Liberty Mutual. The cash sellers' claims lay against A & B as trustee and not against Bankers Trust. The failure to pay cash sellers to date was due to the action of A & B as trustee in subordinating trust assets to Bankers Trust's security interest through the Inter-Creditor Agreement. A & B itself has no assets due to its bankruptcy. Accordingly, the cash sellers' claims under common law could not be collected against A & B. No proceedings were completed against Rotches, Inc. and Bankers Trust by the bankrupt's estate, so that no determination has been made of what accounts receivable were valid and outstanding and were assets of the trust. There is no showing that A & B would have had any funds available to pay attorneys' fees.

With respect to the historic equity power to allow a trustee of a fund to recover its costs, including attorneys' fees, as stated in Alyeska, that also raises a difficult issue. Without citing any other authority for its position, Liberty Mutual states it has previously demonstrated that Rotches, Inc. owed A & B the principal sum of $1,728,135.22. However, the Court's prior opinion only held that "A & B's accounts receivable from Rotches, Inc. can be recovered by Liberty Mutual in this action to the extent that Liberty Mutual can establish that they are valid claims of the statutory trust for funds required to make payments under the statutory trust to the Sellers and not claims asserted on behalf of A & B in a non-trustee capacity." 758 Supp. at 895. See also id., n. 6 ("the Court interprets the Inter-Creditor Agreement as not subordinating to Bankers Trust A & B's security interest in Rotches Inc.'s assets sufficient to pay accounts receivable which A & B held or would hold in trust for sellers of livestock under 7 U.S.C. § 196(b)").

Liberty Mutual suggests it has reached agreement with Bankers Trust as to the amount Liberty Mutual may recover as statutory trust assets, exclusive of interest and costs, as $827,067.73 and states "If counsel fees are not added to the principal and interest, the livestock suppliers will not receive the `full payment' to which they are entitled as beneficiaries of the statutory trust." Plaintiff's Memorandum of Law in Support of Application for Attorneys' Fees, at 11 n. 4. The Court finds that Liberty Mutual has not made an adequate record to establish that those due and payable accounts receivable from Rotches, Inc. which were trust assets exceed the principal and interest due the cash sellers or that it has established that it has a right to deduct attorneys' fees from trust funds due the beneficiaries. Furthermore, since under this common law theory upon which Liberty Mutual would recover, it is suing on behalf of A & B, as trustee, the Court's finding that A & B violated its obligations as trustee under the Packers and Stockyards Act must be considered. Liberty Mutual, supra, 758 F. Supp. at 895. Under these circumstances, there is an inadequate basis on which to determine that any award of attorneys' fees can be paid.

CONCLUSION

Accordingly, Liberty Mutual's motion for attorneys' fees is denied. The parties are ordered to appear for a conference at 9 a.m. on July 9, 1991, in Courtroom 302, United States Courthouse, Foley Square, New York, New York.

IT IS SO ORDERED.


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