United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
June 30, 2005
FOR THE FIFTH CIRCUIT
_____________________ Charles R. Fulbruge III
Clerk
No. 04-20655
_____________________
WALKER INTERNATIONAL HOLDINGS LTD.,
Plaintiff - Appellant,
versus
THE REPUBLIC OF CONGO; CAISSE CONGOLAISE D’AMORTISSEMENT;,
Defendants - Appellees,
and
MURPHY EXPLORATION & PRODUCTION COMPANY INTERNATIONAL,
Garnishee - Appellee.
__________________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
_________________________________________________________________
Before JOLLY, JONES, and DeMOSS, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
In an effort to recover monies owed to it by the Republic of
Congo (“ROC”), Walker International Holdings, Ltd. (“Walker”) filed
a garnishment action against Murphy Exploration & Production
Company – International (“Murphy”). Murphy ultimately prevailed in
the garnishment proceeding based on the district court’s finding
that the ROC was entitled to sovereign immunity under the Foreign
Sovereign Immunities Act (“FSIA”), 28 U.S.C. §§ 1602-1611. Murphy
thereafter petitioned the district court for costs and attorney’s
fees. The district court granted Murphy’s motion, awarding Murphy
$515,970.18 for costs and attorney’s fees. Walker appealed. We
hold that the district court properly applied Texas Rule of Civil
Procedure 677 regarding the award of attorney’s fees in garnishment
proceedings and that the district court did not abuse its
discretion in awarding $515,970.18 to Murphy. The district court’s
judgment is therefore AFFIRMED.
I
Walker purchased a debt owed by the ROC to an Italian company
for the development and construction of an electric infrastructure
in the ROC. Following an arbitration proceeding before the
International Chamber of Commerce (“ICC”) in Paris, France, the ICC
recognized that the ROC was liable to Walker for approximately $26
million. The French courts subsequently upheld the ICC’s ruling.
In March 2002, Walker successfully registered the foreign
judgment award in the United States District Court for the District
of Columbia. In August 2003, Walker filed a garnishment action in
the United States District Court for the Southern District of Texas
to garnish funds it believed were owed to the ROC by Murphy, a
Texas-based company. Walker claims that it sought to garnish money
from Murphy after Murphy announced in May 2003 that it had signed
two production sharing contracts with the ROC for oil exploration
projects to be operated by Murphy West Africa, Ltd., one of
Murphy’s foreign subsidiaries.
In ex parte proceedings before the district court, Walker
successfully obtained a writ of garnishment against Murphy, an
2
order for expedited discovery, and a temporary restraining order
prohibiting Murphy or any of its subsidiaries from paying any money
to the ROC. Following discovery, the district court1 granted
Walker’s motion to vacate the temporary restraining order, dissolve
the writs of attachment and garnishment, and dismiss the action in
February 2004, based upon its finding that the ROC was immune from
execution under the FSIA.2
In its memorandum opinion dismissing the garnishment
proceeding, the district court ordered the parties to submit
supplemental briefing on the question of whether Murphy was
entitled to costs and attorney’s fees for prevailing in the
garnishment action. The parties briefed the issue, and on April 5,
the court found that Murphy was entitled to an award of costs and
attorney’s fees under Texas Rule of Civil Procedure 677 and ordered
Murphy to submit an application for fees.
Murphy filed an application on April 20 for award of costs and
fees incurred in asserting the Congo’s defense under the FSIA and
1
After the writ of garnishment was issued, the parties
consented to the jurisdiction of the magistrate judge for all
purposes in this case pursuant to 28 U.S.C. § 636(c). Because the
magistrate judge may enter a final judgment under § 636(c), we
refer to the magistrate’s decisions and actions in this case as
those of the district court.
2
This underlying litigation was the subject of a separate
appeal. The appeal was pending at the time the parties began
briefing the instant appeal, but was resolved before Walker filed
its reply brief. See Walker International Holdings, Ltd. v.
Republic of Congo, 395 F.3d 229 (5th Cir. 2004)(hereinafter “Walker
I”) (affirming the dismissal of the suit).
3
in defending against garnishment. Walker filed a response in
opposition, and the district court held a hearing on the subject of
costs and fees on May 27. On July 1, the district court awarded
Murphy $515,970.18 for costs and fees already incurred. Murphy had
requested $525,935.43. The district court also awarded Murphy
$35,000 of the $75,000 requested for appeal to this court; $10,000
of the $50,000 requested if Walker files a petition for review with
the Supreme Court; and $25,000 of the $75,000 requested in the
event that the Supreme Court hears an appeal.
Walker filed a Motion for Reconsideration of the district
court’s order, which was summarily denied by the district court on
July 22. Walker then timely filed this appeal.
II
A
1
Federal Rule of Civil Procedure 69(a) provides:
[t]he procedure on execution, in proceedings
on and in aid of a judgment, and in
proceedings on and in aid of execution shall
be in accordance with the practice and
procedure of the state in which the district
court is held, existing at the time the remedy
is sought, except that any statute of the
United States governs to the extent that it is
applicable.
“State law controls both the award of and the reasonableness of
fees awarded where state law supplies the rule of decision.”
Mathis v. Exxon Corp., 302 F.3d 448, 461 (5th Cir. 2002). Whether
4
state law supplies the rule of decision, however, is a legal
question reviewed de novo by our court.
Walker maintains that because the underlying litigation was
brought, defended and decided under the FSIA, any issue arising out
of Murphy’s claim for costs and attorney’s fees should be governed
by the FSIA. Walker acknowledges that Federal Rule of Civil
Procedure 69(a) functions to apply state law in garnishment
proceedings, but asserts that under Rule 69(a) federal law is to be
applied when the state law conflicts with the federal law. Walker
finds such a conflict between Texas Rule of Civil Procedure 677,
which allows for attorney’s fees in garnishment proceedings, and
the FSIA, which Walker asserts does not allow for attorney’s fees.
Walker concludes that because the FSIA does not contain a fee-
shifting provision, each litigant should pay its own attorney’s
fees pursuant to the American rule.3 In essence, Walker maintains
that the FSIA establishes a process for enforcing judgments against
foreign states by setting forth a vehicle for assessing liability
and then procuring property through attachment and execution.
As to be expected, Murphy does not agree. Murphy argues that
garnishment actions filed in federal court are governed by state
law and procedure except where a particular federal law may apply.
Murphy asserts that federal law does not apply to the question of
3
The American Rule provides that a prevailing party is not
ordinarily entitled to recover attorney’s fees absent a specific
statutory provision stating otherwise. Alyeska Pipeline Serv. Co.
v. Wilderness Soc’y, 421 U.S. 240 (1975).
5
attorney’s fees, suggesting that the FSIA merely supplies the
standards for deciding an issue of immunity.
We are in agreement with Murphy: the FSIA does not supply law
conflicting with Texas law on the issue of attorney’s fees.
Rather, the FSIA “sets forth the sole and exclusive standards to be
used to resolve all sovereign immunity issues raised in federal and
state courts.” See Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d
528, 532 (5th Cir. 1992) (citation and internal quotations
omitted). The purpose of the FSIA is not “to affect substantive
law determining the liability of a foreign state”. First Nat’l
City Bank v. Banco Para el Comercio Exterior de Cuba, 462 U.S. 611,
620 (1983). Stated differently, the FSIA does not create an
independent cause of action. In re B-727 Aircraft Serial No.
21010, 272 F.3d 264, 270 (5th Cir. 2001). It simply provides a
defense to claims raised against a sovereign and a federal forum
for the resolution of such claims.
Because the FSIA does not supply a cause of action, the rule
of decision applied to the issue of attorney’s fees, as well as the
underlying garnishment proceeding, is that of the State of Texas
under Fed. R. Civ. P. 69(a). This court has already suggested as
much in dicta: in a decision vacating a dismissal of a garnishment
action, this court observed that its decision obviated the need to
address the merits of whether Texas law permitted the award of
attorney’s fees. Connecticut Bank of Commerce v. Republic of
Congo, 309 F.3d 240, 260 n.10 (5th Cir. 2004). Although this court
6
did not decide the issue in Connecticut Bank, we agree with the
Connecticut Bank panel’s suggestion that Texas law governs the
provision of attorney’s fees in garnishment actions in which
sovereign immunity is raised as a defense by the garnishee.
2
Having found that Texas law governs the provision of
attorney’s fees, we now turn to the application of Texas law to the
case at hand. As we noted above, state law controls both the award
of and the reasonableness of fees awarded. Mathis, 302 F.3d at
461. The Texas Supreme Court has noted that the availability of
attorney’s fees under a particular statute is a question of law.
Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex. 1999).
Such questions of law are reviewed de novo. See, e.g., Jakab v.
Gran Villa Townhouses Owners Ass’n, Inc., 149 S.W.3d 863, 867 (Tex.
Ct. App. 2004); Pacesetter Pools v. Pierce Homes, 86 S.W.3d 827,
833 (Tex. Ct. App. 2002).
Texas Rule of Civil Procedure 677 provides:
Where the garnishee is discharged upon his
answer, the costs of the proceeding, including
a reasonable compensation to the garnishee,
shall be taxed against the plaintiff; where
the answer of the garnishee has not been
controverted and the garnishee is held
thereon, such costs shall be taxed against the
defendant and included in the execution
provided for in this section; where the answer
is contested, the costs shall abide the issue
of such contest.
Thus, the statute strongly suggests that a garnishee who contests
a writ of garnishment and prevails is entitled to attorney’s fees
7
because of the successful result of that “contest”. Texas case law
confirms this understanding of the statute’s language: “[u]nder
rule 677, (1) a garnishee who contests and loses cannot get
attorney’s fees, and (2) a garnishee who contests and wins must get
attorney’s fees.” Rowley v. Lake Area Nat’l Bank, 976 S.W.2d 715,
724 (Tex. Ct. App. 1998).
Walker makes three arguments that Rule 677 does not provide a
basis for an award of attorney’s fees to Murphy, the prevailing
garnishee. Two arguments have been foreclosed or disposed of by
the resolution of the appeal of the underlying case. See Walker I,
395 F.3d 229.4 Walker’s only viable argument is that under this
statute and Texas case law a garnishee is entitled to fees only
sufficient to cover the expense of filing an answer.5
4
Walker first argues that attorney’s fees are unavailable
because the appeal of the underlying litigation makes it impossible
to determine the outcome of the contest. This court affirmed the
district court’s judgment in Walker I and Walker’s argument has
therefore been rendered moot.
Walker also argues that attorney’s fees are unavailable
because Murphy asserted sovereign immunity on behalf of the ROC
under the FSIA. Walker asserts that it cannot be forced to pay the
costs and fees associated with Murphy’s assertion of a defense that
the ROC had waived under the ICC agreement. This argument was also
foreclosed by Walker I, in which this court determined that there
is no authority to support the contention that it is the
sovereign’s exclusive right to raise the issue of sovereign
immunity. 395 F.3d at 233.
5
To the extent that Walker’s argument relies on the fact that
Murphy asserted the sovereign immunity defense of the judgment
debtor, the argument is resolved by Walker I’s conclusion that no
authority supports the contention that sovereign immunity may be
exerted by the sovereign alone. See supra at Note 4. Walker
argued in its reply brief and at oral argument that Rule 677 does
8
We acknowledge that the statute does not speak in express
terms, but we think Walker’s reading of the statute is
unpersuasive. Rule 677 indisputably contemplates that answers will
be contested and that the award of attorney’s fees is connected to
the ultimate outcome of the case: “where the answer is contested,
the costs shall abide the issue of such contest.” TEX. R. CIV. P.
677. Although Walker argues that this language does not resolve
whether fees are recoverable only for the cost of filing the
answer, or for the costs of the litigation, this language must be
read in the context of the statute as a whole: the above phrase
delineates the third situation for an award of attorney’s fees.
The two previous authorizations in the statute provide for “costs
of the proceeding” that concludes at the outset of garnishment
litigation, i.e. the pleadings stage. Because the statute’s third
provision for attorney’s fees connects the award to the ultimate
result of the litigation, it strongly implies that the costs in
connection with the contest, i.e. the litigation, are recoverable
by the prevailing party. The placement of the phrase and its
language lead us to conclude that the intent of the statute is that
at the conclusion of the litigation, the trial court applies Rule
677, determining which party prevailed in the contest, and to what
not entitle judgment debtors to attorney’s fees and, therefore,
Murphy is not entitled to attorney’s fees because it took the
judgment debtor’s position in active litigation.
9
extent, and then exercises its discretion in setting the award of
the fees.
There appears to be an absence of authoritative Texas case law
on this precise issue.6 Although the Rowley court did not speak
directly to the issue at hand, it noted that, in garnishment cases,
“[a]s is generally the case, the amount of an award of attorney's
fees rests in the sound discretion of the trial court.” 976 S.W.2d
at 724 (emphasis supplied). This statement is consistent with the
rule’s text -- that the decision regarding costs will await the
outcome of the contest and further suggests that attorney’s fees
are assessed in the customary manner, as in other cases. Indeed,
this seems to be the only practical reading of the statute. We
thus decline to read Texas law as holding that a garnishee who
prevails after becoming an active litigant is limited by Rule 677
to recovering costs and fees only for the expense of filing an
answer, and conclude that the district court acted within its
authorized discretion in awarding attorney’s fees and costs for the
entire litigation.
B
We finally reach Walker’s challenge of the reasonableness of
the award of costs and fees to Murphy. Applying Texas law, we
6
One recent case not selected for publication, however,
affirmed an award of attorney’s fees covering both the cost of the
answer and the cost of the active litigation. See Dryden v. Am.
Bank, No. 13-02-379-CV, 2004 WL 1901425 (Tex. Ct. App. Aug. 26,
2004).
10
review the district court’s award of attorney’s fees for abuse of
discretion and its findings of fact supporting the award for clear
error. Id.; see also Rowley, 976 S.W.2d at 722. The district
court’s award of costs and attorney’s fees will not be disturbed on
appeal unless it can be demonstrated that the district court acted
without reference to any guiding rules or principles. DP
Solutions, Inc. v. Rollins, Inc., 353 F.3d 421, 433 (5th Cir.
2003).
The district court held a hearing specifically to determine
the amount of the fee award recoverable by Murphy. Murphy
presented expert witnesses in support of the reasonableness of the
fees it was seeking and submitted the relevant billing records. It
does not appear that Walker presented any evidence specifically
refuting the testimony offered by Murphy at the hearing. Moreover,
in its order awarding Murphy its costs and fees, the district court
addressed the reasonableness of such fees using the factors
delineated by the Texas Supreme Court in Arthur Andersen & Co. v.
Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997).7 Applying
7
These factors include: “(1) the time and labor required, the
novelty and difficulty of the questions involved, and the skill
required to perform the legal service properly; (2) the likelihood
. . . that the acceptance of the particular employment will
preclude other employment by the lawyer; (3) the fee customarily
charged in the locality for similar legal services; (4) the amount
involved and the results obtained; (5) the time limitations imposed
by the client or by the circumstances; (6) the nature and length of
the professional relationship with the client; (7) the experience,
reputation, and ability of the lawyer or lawyers performing the
services; and (8) whether the fee is fixed or contingent on results
obtained or uncertainty of collection before the legal services
11
these factors, the district court concluded that $515,970.18 was
reasonable based on the particular complexities of the case.
Although Walker contends that the amount of costs and fees
awarded Murphy is unreasonable and unnecessary, Walker does not
persuasively argue that the district court acted without reference
to any guiding rules or principles. Because of the degree of
deference afforded to the district court, we cannot find that the
district court abused its discretion when it acted with reasoned
consideration of the proper guiding principles, even when making
such a large award.
III
For the foregoing reasons, the judgment of the district court
awarding Murphy costs and attorney’s fees is
AFFIRMED.
have been rendered.” Id. (citations omitted).
12