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Service Employees International Union Local 32BJ v. Preeminent Protective Services Inc.

United States District Court, District of Columbia

November 8, 2019

SERVICE EMPLOYEES INTERNATIONAL UNION LOCAL 32BJ, Plaintiff,
v.
PREEMINENT PROTECTIVE SERVICES, INC., Defendant.

          MEMORANDUM OPINION [1]

          TREVOR N. McFADDEN, U.S.D.J.

         Service Employees International Union Local 32BJ (the “Union”) brought this case to compel Preeminent Protective Services, Inc. (“Preeminent”) to arbitrate a dispute about two Union members. Despite a clear court Order directing the parties to arbitrate, Preeminent dragged its feet for over a year. It took dozens of attorney hours, three show cause hearings, two failed arbitrations, and a civil contempt Order for Preeminent to comply. The original dispute itself is now overshadowed by Preeminent's stonewalling. The issue here is what amount of the Union's attorneys' fees Preeminent should bear because of its long and calculated obstruction.

         The year-long effort to force Preeminent's compliance cost the Union over $50, 000 in attorney hours and expenses. Preeminent requested that the Court mitigate the amount owed because of its limited ability to pay. After considering the parties' briefings, the Court rejects Preeminent's inability-to-pay arguments. Preeminent alone caused the delay. And Preeminent alone must bear the costs of its contemptuous and dilatory tactics. For the reasons stated below, the Court will order Preeminent to pay the Union's attorneys' fees and expenses.

         I. BACKGROUND

         After reviewing the parties' arguments on the merits of the case, in May 2018 the Court agreed with the Union and ordered Preeminent to arbitrate. See Order (May 9, 2018), ECF No. 14. Four months later, Preeminent still had not entered arbitration. The Union filed for a show cause order, suggesting Preeminent should be held in contempt for violating the Court's Order. See Pl.'s Mot. for Order to Show Cause, ECF No. 15.

         In response, the Court held the first of three show cause hearings. See ECF Minute Entry (Nov. 16, 2018). At this hearing, and with the hope of encouraging arbitration, the Court ordered the parties to split the cost of arbitration but determined that a contempt order was premature. See Hr'g Tr. 8:19-9:4 (Nov. 16, 2018), ECF No. 33. The Court continued the show cause hearing until January 3, 2019, with the understanding that it would be discharged upon completion of arbitration. Id. at 9:6-9. And the Court warned Preeminent against any further refusal to pay its half of the arbitration costs. Id. at 9:10-11.

         The Union immediately tried to resume the arbitration process, but within two weeks Preeminent refused to pay and forced the recusal of a potential arbitrator. See Status Report, Ex. A, ECF No. 20-1. The arbitrator required a written assurance of payment “[g]iven Preeminent's history of denying [its] responsibility” to pay its share of the arbitration. Id. at 3. But Preeminent refused, forcing the arbitrator's recusal. Id. at 2. In his recusal, the arbitrator noted that Preeminent's actions amounted to “an effective refusal . . . to participate in good faith in this Arbitration proceeding” and showed that “Preeminent has no intention of ever paying its share.” Id. The arbitrator also “strongly suggest[ed] that the Court be notified of Preeminent's continued refusal to participate fully, and in the required good faith.” Id.

         Shortly afterward, the Union informed the Court, see Status Report, ECF No. 20, prompting the second show cause hearing. See ECF Minute Entry (Jan. 3, 2019). There, the Court recounted the history of the case to date, including its clear order at the first hearing “that Preeminent needed to agree to pay its half of the arbitration.” Hr'g Tr. 16:16-17. Then the Court found that Preeminent “repeatedly” and “explicitly ignor[ed] the continued request from [the arbitrator and the Union] to agree to pay their half to allow the arbitration to commence.” Id. at 17:11-13, 19:15. The Court noted that it “continued the show cause hearing . . . to ensure [its] order was followed and that the arbitration took place. Neither happened.” Id. at 18:17-20. And the Court warned Preeminent in no uncertain terms that it could not ignore court orders or dictate their terms. Id. at 18:24-19:1.

         After denying Preeminent's “borderline frivolous” motion for attorneys' fees, and to compensate the Union for the time it had wasted to date, the Court granted the Union's motion for attorneys' fees and invited a memorandum outlining its fees and expenses. Id. at 19:16-24, 23:12-15; see Def.'s Resp. to Show Cause Order and Mot. for Atty's Fees, ECF No. 16. The Union identified nearly $20, 000 in fees. See Pl.'s Mem. in Support of App. For Atty's Fees (“Pl.'s Fee Mem.”), ECF No. 24.

         Even so, Preeminent dragged its feet in paying the second arbitrator, delayed arbitration yet again, and willfully forced the recusal of the arbitrator. See Hr'g Tr. 25-26 (June 6, 2019). After being “shocked and disappointed” to learn the circumstances of the first arbitrator's recusal, the second arbitrator insisted upon “enforceable assurances from both parties that I will be paid for my services.” See Def.'s Mot. to Cont. (4/23/2019), Ex. 7, ECF No. 34-7. Through back-and-forth with both parties, the second arbitrator proposed a revised fee agreement that incorporated the parties' suggested language. See Errata Entry, Ex. A (“Sec. Arbitrator's Recusal”) 2, ECF No. 39-1; see Hr'g Tr. 25:10-12 (June 6, 2019). But Preeminent failed to sign by the deadline. See Sec. Arbitrator's Recusal at 2. After receiving an extension, Preeminent signed the fee agreement but continued to delay its invoice payment. Id.; see Hr'g Tr. 25:17-19 (June 6, 2019). When Preeminent still had not remitted payment within hours of the new deadline, the arbitrator reached out to the parties by email with a final notice. See Sec. Arbitrator's Recusal at 2.

         In response, Preeminent claimed-without cause-that the arbitrator was biased against it and in favor of the Union. See Id. The arbitrator replied that “based solely on [the first arbitrator's] recusal email, ” his only concern was ensuring he was paid for his services. Id. at 3. He also noted “that during my 30 plus years as a neutral, my reputation regarding impartiality as an Arbitrator or a Mediator has never been questioned.” Id. Maintaining his neutrally, the arbitrator insisted once again that both parties abide by their fee agreement. Id. Preeminent finally remitted payment later that day. See Id. But before the scheduled arbitration, Preeminent challenged the arbitrator once again, contending that his messages regarding payment indicated a bias against Preeminent that “any objective observer” would interpret as partiality. See id.

         This final challenge led directly to the arbitrator's recusal. After describing Preeminent's challenges, he found that “its attack upon my impartiality put me in an untenable position as the arbitrator of this case.” Id. He predicted that no matter which way he ruled on the Union's grievances, Preeminent's challenges lay the foundation for a challenge; either from the Union “because of Preeminent's allegations of prejudice, ” or from Preeminent, who “would believe that my decision confirmed its allegations that I was prejudiced.” Id. He formally recused himself and directed the parties to find another arbitrator. Id.; see Status Report, Ex. A at 2. As a piece of parting advice, he “strongly suggest[ed] that payment for arbitration services be handled before or immediately after the arbitrator is selected.” Id. n.2.

         In June 2019, more than a year after the initial Order directing arbitration, the Court held a third show cause hearing, which the clients were required to attend. See ECF Minute Entry (June 6, 2019). The Court found “clear and convincing evidence that Preeminent has violated the Court's clear and unambiguous orders compelling arbitrations” through “a deliberate strategy to delay, perhaps indefinitely, the arbitration I ordered.” Hr'g Tr. 21:4-11, 27:1-3 (June 6, 2019). So the Court held Preeminent in civil contempt and ordered a $20, 000 sanction if Preeminent failed to arbitrate within 30 days. See Conditional Order of Civil Contempt, ECF No. 40. Properly motivated, Preeminent finally completed arbitration with the Union-418 days after the Court's initial order. See Notice of Completion of Arbitration Hearings, ECF No. 41; Order, ECF No. 14.

         In its June 2019 Order, the Court also ordered Preeminent to pay all the Union's attorneys' fees accrued as a direct result of Preeminent's contemptuous behavior, which the Court calculated by the date of the first show cause hearing in November 2018. See Conditional Order of Civil Contempt at 2. At the Court's direction, the Union filed a supplemental memorandum listing nearly $50, 000 in fees and expenses not already in its previous filings, and Preeminent responded. See Pl.'s Mem. in Supp. of Attys' Fees and Costs (“Pl.'s Second Fee Mem.”), ECF No. 42; Def.'s Mem. in Opp'n, ECF No. 44.

         After reviewing both parties' briefs on the payment of attorneys' fees, the Court requested supplemental briefing about Preeminent's ability to pay the Union's attorneys' fees and expenses. See Order (Aug. 6, 2019), ECF No. 47. The Court has received the parties' supplemental briefs and the issue is now ripe for decision. See Pl.'s Sealed Mem., ECF No. 48; Def.'s Sealed Opp'n, ECF No. 52.

         II. LEGAL STANDARD

         Federal courts possess “inherent powers, not conferred by rule or statute, to manage their own affairs so as to achieve the orderly and expeditious disposition of cases.” Goodyear Tire & Rubber Co. v. Haeger, 137 S.Ct. 1178, 1186 (2017) (cleaned up). This inherent power includes the ability to hold a bad-faith litigant responsible for reimbursing the other side's legal fees and costs. Chambers v. NASCO, Inc., 501 U.S. 32, 45 (1991). When acting under this inherent authority, the Court must take care only to issue sanctions that are compensatory, not punitive. Goodyear Tire, 137 S.Ct. at 1186.

         A compensatory award must be “calibrated to the damages caused by the bad-faith acts on which it is based.” Id. (cleaned up). To make this assessment, the Court awards fees to the wronged party that it would not have incurred but for the other side's bad faith. Fox v. Vice, 563 U.S. 826, 836 (2011). The Court awards the sum of the fees that “would not have been incurred in the absence of the sanctioned conduct.” Goodyear Tire, 137 S.Ct. at 1187. But as exacting as the Court must ...


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