Walker International Holdings, Ltd. v. Republic of Congo

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.

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.

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.

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.

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).