The opinion of the court was delivered by: Bua, District Judge.
This cause comes before the court on the petition of defendant
Oppenheimer & Co., Inc. for attorneys' fees.
On December 12, 1978 the plaintiff herein, John P. Driscoll,
filed his first complaint in the matter at bar, naming
Oppenheimer & Co., Inc. [Oppenheimer] as a defendant. In this
complaint, Driscoll alleged that defendant Oppenheimer, in its
handling of his account, committed a number of federal securities
law violations. His pleading, though, was rambling, repetitive
and lacking in factual support.
On August 14, 1979, in response to Oppenheimer's motion for
judgment on the pleadings, Driscoll filed an amended complaint.
This amended complaint, while more concise than his earlier one,
suffered from the same defects as those in Driscoll's prior
pleading. The contentions in his amended complaint were supported
almost solely by very general theoretical allegations, which were
seriously lacking in factual substantiation. Shortly after the
plaintiff filed his amended complaint, defendant Oppenheimer
moved both to strike and dismiss the pleading, and for Rule 11,
Fed.R.Civ. P., relief. On January 28, 1980 the defendant's motion
to strike and dismiss was granted. Oppenheimer then presented the
attorneys' fees petition under discussion.
Generally speaking, the subject of attorneys' fees is governed
by the American rule, which provides that each party in a lawsuit
is responsible for his or her own costs and expenses. Congress,
however, has by statute created exceptions to this American rule.
Accordingly, in situations where the matter at bar involves a
statute which specifically authorizes fee awards, a court may
assess and award attorneys' fees to the prevailing party. Alyeska
Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 260-64,
95 S.Ct. 1612, 1623-25, 44 L.Ed.2d 141 (1975). As it pertains to
the present matter, section 11(e) of the Securities Act of 1933,
15 U.S.C. § 77k(e), is just such a statute.
An exception to the American rule also has been recognized
where it is shown that the non-prevailing party acted with malice
and/or in bad faith. Alyeska Pipeline Service Co., 421 U.S. at
258-59, 95 S.Ct. at 1622. In this type of situation, a court may,
in its discretion, award reasonable attorneys' fees when it
believes such to be necessary and in the interests of justice.
Federal courts, in addition, may exercise their inherent power
under Rule 11, Fed.R.Civ.P., and grant attorneys' fees as a
sanction for noncompliance with the various provisions of that
The question pivotal to any taxing of attorneys' fees, however,
whether done under section 11(e) of the 1933 Securities Act, on
a bad faith theory, or pursuant to Rule 11, is whether the
plaintiff instituted the litigation at issue "in bad faith,
vexatiously, wantonly or for oppressive reasons." Alyeska
Pipeline Service Co., 421 U.S. at 258-59, 95 S.Ct. at 1622; Ernst
& Ernst v. Hochfelder, 425 U.S. 185, 210 n. 30, 96 S.Ct. 1375,
1389 n. 30, 47 L.Ed.2d 668 (1976); Browning Debenture Holders'
Committee v. DASA Corp., 560 F.2d 1078, 1087-88 (2d Cir. 1977).
Whether there was bad faith or malice on the part of the
plaintiff, moreover, generally is ascertained by examining the
individual's claim to determine if it was totally without merit
and/or bordered on being frivolous. Klein v. Shields & Co.,
470 F.2d 1344, 1347 (2d Cir. 1972); Can-Am Petroleum Co. v. Beck,
331 F.2d 371, 374 (10th Cir. 1964); Nemeroff v. Abelson, 469 F. Supp. 630,
640 (S.D.N.Y. 1979), modified, 620 F.2d 339 (2d Cir. 1980).
In the case at bar, it is clear that the plaintiff's counsel,
Francis J. Valentine, did not fashion Driscoll's pleadings with
an eye toward compliance with the specificity requirements of the
Federal Rules of Civil Procedure. Rule 8(e), Fed.R.Civ.P. The
failure of his counsel to adequately set forth facts which would
indicate that the claimant is entitled to relief, however,
ordinarily is not sufficient to establish that the plaintiff
himself acted in bad faith. As the Second Circuit has noted in
this regard, "[m]ere failure of a party to present sufficient
evidence to support [his] claim will not in itself warrant a
determination of frivolity." Aid Auto Stores, Inc. v. Cannon,
525 F.2d 468, 471 (2d Cir. 1975).
Plaintiff Driscoll's contentions herein that Oppenheimer
misused his account funds in the manner alleged provide a
colorable basis for his claims. See Nemeroff, 620 F.2d at 348.
That being true, as he was justified in relying upon the
competency of his counsel to adequately present those claims, the
fact that this litigation ultimately proved to be misguided and
unconvincing cannot in itself serve as a basis for assessing
attorneys' fees against the plaintiff. Aid Auto Stores, Inc., 525
F.2d at 471; Nemeroff, 469 F. Supp. at 641.
Regarding the conduct of Francis J. Valentine, while the
question is a closer one the court believes that the materials
now before it are sufficient to allow for a conclusion that, at
all times relevant in this litigation, Mr. Valentine proceeded
with a good faith belief that his client's claims against
Oppenheimer were legally viable. That being so, when cognizance
also is taken of the difficulty known to be associated with the
pleading of securities matters, it is the opinion of this court
that attorneys' fees should not, under the present circumstances,
be assessed against Mr. Valentine. Nemeroff, 620 F.2d at 349-50.
For the reasons stated above, defendant Oppenheimer & Co.,
Inc.'s petition for attorneys' fees is DENIED.
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