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United States v. All Funds On Deposit With Rj O'Brien & Associates

United States District Court, N.D. Illinois, Eastern Division

May 9, 2014

UNITED STATES OF AMERICA, Plaintiff,
v.
ALL FUNDS ON DEPOSIT WITH R.J. O'BRIEN & ASSOCIATES, HELD IN THE NAME OF BRIDGE INVESTMENT, S.L., BEARING ACCOUNT NUMBERS XXX-X3931 AND XXX-X1784, MAINTAINED AT HARRIS BANK, ACCOUNT NUMBER XXX-171-6, Defendant.

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge.

The United States filed an in rem action seeking forfeiture of about $6.7 million held in futures trading accounts and belonging to an affiliate of the Al Qaeda terrorist organization. Several insurance companies that paid billions of dollars on their insureds' property damage claims arising from the September 11, 2001 terrorist attacks then filed verified claims to the funds, along with answers to the government's complaint. The Court first granted the government's motion to strike claimants' claims and answers. Claimants, having registered a judgment against Al Qaeda in this district, then served a citation to discover assets on the United States Marshal and obtained a writ of execution from another judge in this district. The Court subsequently granted claimants' motion to amend their claims and denied the government's motion to quash the writ of execution. Both the government and claimants then moved for summary judgment. The Court granted claimants' motion and denied the government's motion. The Court then issued a judgment order, finding claimants substantially prevailed and were entitled to attorney's fees.

Claimants have now moved for an award of attorney's fees and costs. For the reasons stated below, the Court grants the claimants' motion but reduces the requested award.

Background

The Court assumes familiarity with the facts of this case from its earlier decisions. In 2005, insurance companies filed suit against Al Qaeda in the Southern District of New York seeking reimbursement for their losses from the terrorist attacks of September 11, 2001. The companies received an order of default in April 2006, but the court did not issue an order specifying a damages award until December 2011. That amount was $9, 351, 247, 965.99. The court entered a final judgment in January 2012.

In 2005, an individual named Mohammad Qasim al Ghamdi took control of a commodities futures trading account at R.J. O'Brien & Associates (RJO), a Chicago company. The account had been opened two years earlier in the name of Bridge Investment, S.L. The funds belonged to Muhammad Abdallah Abdan Al Ghamdi, a member of Al Qaeda also known as Abu Al Tayyeb. In June 2007, the United States Department of the Treasury's Office of Foreign Assets Control (OFAC) blocked the two RJO accounts in question. Four years later, on June 19, 2011, the United States filed a verified complaint in this Court for forfeiture of the funds, an action in rem under 18 U.S.C. § 981(a)(1)(G)(i) and (iv), the civil forfeiture statute.

On June 21, 2011, the Chicago Tribune published an article about the government's decision to block the RJO/Al Ghamdi accounts. The article served as the first notice about the funds for the insurance companies that had obtained the order of default against Al Qaeda in the Southern District of New York. In August 2011, the insurance companies filed in the forfeiture action verified claims to the RJO/Al Ghamdi funds. After briefing and argument, the Court granted the government's motions to strike the claims in March 2012. See United States v. All Funds on Deposit with R.J. O'Brien & Assocs., No. 11 C 4175, 2012 WL 1032904 (N.D. Ill. Mar. 27, 2012). The Court did not decide whether claimants had constitutional standing, but it granted the government's motion to strike and denied claimants' motion to amend their claims on the ground that they lacked statutory and prudential standing.

Claimants registered their judgment against Al Qaeda in this district on February 27, 2012, and the matter was assigned to Judge Gettleman. They sought a writ of execution in that matter on March 13, 2012 and filed a notice of citation to discover assets on April 6. Four days later, Judge Gettleman ordered issuance of a writ of execution. The matter was later transferred to this Court's docket. In September 2012, this Court denied the government's motion to quash the writ and granted claimants' motion to amend their claims to reflect the entry of final judgment in the Al Qaeda litigation. See United States v. All Funds on Deposit with R.J. O'Brien & Assocs., 892 F.Supp.2d 1038 (N.D. Ill. 2012). Among other issues, the Court concluded that the claimants had both prudential and statutory standing based on their interest in the defendant property. Both sides thereafter moved for summary judgment. The Court granted summary judgment to claimants and denied summary judgment to the government. The Court found that claimants had constitutional, statutory, and prudential standing and that sovereign immunity did not preclude them from asserting their interest in the defendant funds. See United States v. All Funds on Deposit with R.J. O'Brien & Assocs., No. 11 C 4175, 2013 WL 5567562 (N.D. Ill. Oct. 9, 2013).

The Court issued a judgment order in this case in November 2013. The order stated that "[c]laimants have substantially prevailed in this litigation and therefore are entitled to reasonable attorney fees and other litigation costs reasonably incurred as well as pre- and post-judgment interest pursuant to the provisions of 28 U.S.C. § 2465(b)." Nov. 13, 2013 Judgment Order at 2, Case No. 11 C 4175 [docket no. 162]. Claimants filed the present motion for fees and costs in December 2013.

Discussion

The United States is liable for "reasonable attorney fees and other litigation costs reasonably incurred by the claimant" in "any civil proceeding to forfeit property under any provision of Federal law in which the claimant substantially prevails." 28 U.S.C. § 2465(b)(1)(A). In general, "[m]ultiple equitable factors govern the crafting of an attorneys' fees award, so district courts have wide discretion to determine what constitutes reasonable attorneys' fees." Serafinn v. Local 722, Int'l Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers of Am., 597 F.3d 908, 919 (7th Cir. 2010) (internal alterations and quotation marks omitted).

In their initial memorandum, Claimants request $345, 347.50 in fees and $7155.19 in costs for a total of $352, 502.69, which they reduced to $341, 535.62 after making concessions following the government's filing of its response brief. The government argues that claimants' original total request should be reduced by $194, 893 and that claimants' requested hourly rates should also be reduced. The government challenges the fees and costs claimants incurred at a time when the government contends their claims were insufficient as a matter of law, as well as fees that the government argues relate to other cases. The government also argues that claimants are not entitled to certain of their travel expenses related to this litigation or fees for clerical (as opposed to legal) work that claimants' paralegals performed. Finally, the government argues that certain of claimants' attorneys' discrete tasks are not compensable and that the requested hourly rates for claimants' attorneys should be reduced by twenty percent.

A. Fees for work prior to claimants' citation to discover assets

The government argues that the Court should deny $142, 757.40 in claimants' requested fees and costs because they were incurred before April 10, 2012-a time when, the government argues, claimants' claim to the funds was "hopelessly deficient" and "insufficient as a matter of law." Gov't Resp. at 8. This argument is based on the fact that claimants did not obtain a writ of execution against the defendant funds until that date, shortly before which they received a judgment in a New York federal case against al Qaeda and registered the judgment in this district. Claimants respond that they originally stated their interest in the defendant funds in June 2011 and that they deserve compensation for work performed from that date through their successful motion for summary judgment. They contend that their efforts prior obtaining the writ of execution preserved their interest in the funds, advanced their claim to the funds, expedited proceedings, provided research and argument for later proceedings, and helped them prevail on several issues. They also argue that the cases the government cites for its argument are distinguishable, because they deal with parties who simultaneously make successful and unsuccessful claims, rather than those who pursue a single claim.

The Supreme Court has observed that a "fee award should not be reduced simply because the plaintiff failed to prevail on every contention raised in the lawsuit.... The result is what matters." Hensley v. Eckerhart, 461 U.S. 424, 435 (1983). At the same time, if "a plaintiff has achieved only partial or limited success, " a district court may find plaintiff's counsel's lodestar to "be an excessive amount" and eliminate specific hours or reduce the overall award "to account for the limited success." Id. at 436-37. There is "no precise rule or formula" for doing so. Id. at 436. Courts are to differentiate "winning and losing claims [that] are just different legal theories in support of the same relief" from "losing claims seeking different or additional relief, or damages against different defendants." Richardson v. City of Chicago, 740 F.3d 1099, 1103 (7th Cir. 2014). In the former category, "full compensation is proper"; in the latter, the judge can calculate the time "devoted to the winning claims, had no clunkers been presented" or otherwise "make an across-the-board reduction that seems appropriate in light of the ratio between winning and losing claims." Id. This is "a highly contextual and fact-specific enterprise, " and "[p]recision is impossible in such calculations, " but "the district court must justify its decision." Sottoriva v. Claps, 617 F.3d 971, 975-76 (7th Cir. 2010).

The Court originally struck claimants' claim in March 2012 because they did not have the requisite interest in the specific funds at issue. In its March 2012 order, the Court noted that claimants had no security interest or lien on the defendant funds, which precluded statutory standing to pursue those funds. The Court also denied claimants' motion to amend their claims, noting in particular that they had not served a citation to discover assets on the government, which would have created a lien on the funds in question and given them an interest in the property. Claimants subsequently served such a citation. Thereafter, the service of this citation and claimants' acquisition of a writ of execution ...


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