United States Court of Appeals
For the First Circuit
No. 08-1863
JANNEY MONTGOMERY SCOTT LLC;
JOHN J. LENNON,
Petitioners, Appellees,
v.
EMILY E. TOBIN, TRUSTEE OF THE JOHN F. TOBIN FAMILY TRUST
AND EMILY E. TOBIN TRUST; JON S. TOBIN, TRUSTEE OF THE
JOHN F. TOBIN FAMILY TRUST AND EMILY E. TOBIN TRUST,
Respondents, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Boudin, Tashima,* and Howard,
Circuit Judges.
Robert T. Gill, with whom Jennifer L. Markowski and Peabody &
Arnold LLP were on brief, for petitioners.
Dennis A. Murphy, with whom Nixon Peabody LLP was on brief,
for respondents.
July 8, 2009
*
Of the Ninth Circuit, sitting by designation.
HOWARD, Circuit Judge. This appeal presents the question
of whether a Massachusetts statute entitling a party to attorneys'
fees following a successful arbitration entitles the same party to
attorneys' fees incurred in successfully defending against an
attempt to overturn the arbitral award in court. The district
court denied the request for fees without explanation. We reverse
and remand for further proceedings.
I.
Appellants Emily E. Tobin and Jon S. Tobin are trustees
of various trusts established in 1991 by the late John F. Tobin.
In June 1998, the trust accounts were transferred to appellee
Janney Montgomery Scott, LLC ("JMS"). Appellee John Lennon, who is
John F. Tobin's son-in-law, was to be the accounts' broker.
Over the course of the next few years, the accounts'
value dropped from approximately $1 million to slightly under
$500,000. The Tobins, believing the losses stemmed from Lennon's
and JMS's malfeasant investment choices, filed a claim in July 2004
with the National Association of Securities Dealers ("NASD")
against JMS and Lennon asserting several causes of action,
including violation of Massachusetts' consumer protection statute,
Mass. Gen. Laws ch. 93A. In May 2007, following an eleven-day
hearing, the arbitration panel found, inter alia, JMS and Lennon
jointly and severally liable for $416,250 in compensatory damages
and $205,000 in attorneys' fees pursuant to chapter 93A.
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Lennon and JMS responded by filing a petition to vacate
the arbitration award in federal district court; the Tobins filed
a combined opposition and motion to confirm the award, in which
they requested an award of attorneys' fees incurred in defending
the district court action. In April 2008, the district court
issued a brief electronic order denying the petition to vacate the
arbitration award. The order was silent as to the request for
attorneys' fees. The Tobins subsequently filed a separate motion
for attorneys' fees which was denied by electronic order entered
June 2, 2008.1 Neither of the district court's orders provided
explanations for the outcomes. On appeal, the Tobins challenge the
denial of attorneys' fees incurred in the district court defending
the petition to vacate the arbitration award.2
II.3
While an award of attorneys' fees is generally reviewed
for abuse of discretion, De Jesus Nazario v. Morris Rodriguez, 554
1
This motion also sought an award of interest, a matter not
before us on appeal.
2
JMS has not appealed the district court's denial of its
petition to vacate. Thus, the merits of the original arbitral
award, including the attorneys' fees awarded by the panel, are not
part of this appeal.
3
We reject JMS's contention that we are without jurisdiction
to hear this appeal because the Tobins' Notice of Appeal was
untimely filed. The district court order denying attorneys' fees
was entered on June 2, 2008. The Notice of Appeal was filed on
July 1, 2008, safely within the 30-day window allowed by Fed. R.
App. P. 4(a)(1)(A).
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F.3d 196, 199 (1st Cir. 2009), the parties disagree about whether
the district court had any discretion to award fees or not. The
Tobins argue that an award is mandatory, with only the amount of
the award falling within the district court's discretion. In the
alternative, they maintain that even if the award was
discretionary, the district court abused its discretion. JMS's
position is a little more murky. While they certainly dispute that
a fee award is mandatory, it is not clear whether they argue that
such an award is entirely prohibited or whether the district court
acted within its discretion when it denied the Tobins' motion for
fees. In an abundance of caution, we will analyze each of the
potential permutations.
As previously noted, the arbitration panel awarded the
Tobins attorneys' fees under chapter 93A, which provides in
relevant part that a party who establishes a violation "shall . .
. be awarded reasonable attorney's fees and costs incurred in
connection with said action." Mass. Gen. Laws ch. 93A §9(4)
(emphasis added); see also Mass. Gen. Laws ch. 93A §11 (same). As
the parties acknowledge, however, there is no case that directly
answers the question before us: whether and to what extent the
right to fees under chapter 93A extends to a party who successfully
defeats an attempt to vacate an arbitration award in court. Where
the state's highest court has not definitively weighed in, a
federal court applying state law "may consider analogous decisions,
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considered dicta, scholarly works, and any other reliable data
tending convincingly to show how the highest court in the state
would decide the issue at hand." N. Am. Specialty Ins. Co. v.
Lapalme, 258 F.3d 35, 38 (1st Cir. 2001) (citing Gibson v. City of
Cranston, 37 F.3d 731, 736 (1st Cir. 1994)). We must "make an
informed prophecy -- to 'discern the rule the state's highest court
would be most likely to follow under these circumstances, even if
our independent judgment might differ.'" Id. (quoting Ambrose v.
New Eng. Ass'n of Schs. & Colls., 252 F.3d 488, 497-98 (1st Cir.
2001)).
We start by noting the Massachusetts' highest court's
relatively recent pronouncement that "[w]here a statute provides
for the payment of reasonable attorney's fees, an award of
attorney's fees on appeal is within the discretion of the appellate
court." Twin Fires Inv., LLC, v. Morgan Stanley Dean Witter & Co.,
837 N.E.2d 1121 (Mass. 2005). Twin Fires was built in part upon a
foundation laid in Yorke Mgmt. v. Castro, 546 N.E.2d 342 (Mass.
1989), in which the Supreme Judicial Court ("SJC") stated that the
language of chapter 93A "leaves no doubt as to the right to recover
attorney's fees without any suggestion that fees for the appeal are
excluded." Id. at 344. The court in Yorke Mgmt. reasoned that
"The statutory provisions for a 'reasonable attorney's fee' would
ring hollow if it did not necessarily include a fee for the appeal.
The right to appellate attorney's fees . . . is beyond dispute."
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Id. The SJC reiterated this stance in Bonofiglio v. Commercial
Union Ins. Co., 591 N.E.2d 197 (Mass. 1992) (prevailing party is
entitled to fees incurred in successfully opposing appeal). We
followed a similar path in Federal Insurance Co. v. HPSC, Inc., 480
F.3d 26 (1st Cir. 2007), awarding attorneys' fees to the prevailing
party with respect to that portion of an appeal that related to a
chapter 93A claim. Id. at 37.
Though HPSC, Twin Fires, Yorke and Bonofiglio each
involved attorneys' fee awards under chapter 93A, they of course
differ from this case in that each of those fee questions arose in
the context of an appeal from a court judgment, rather than in a
proceeding contesting a motion to vacate an arbitration award.
This distinction is central to JMS's attempts to distinguish them.
We think it likely, however, that Massachusetts courts would find
that to be a distinction without a difference. We reach this
conclusion based on our reading of Drywall Systems Inc. v. ZVI
Construction Co., Inc., 761 N.E.2d 482 (Mass. 2002), the genesis of
which was an arbitration award of damages and attorneys' fees to
the plaintiff, a subcontractor, under chapter 93A. Id. at 483. In
the plaintiff's subsequent action to enforce the award, the state
court partially upheld the damage award, but concluded that
attorneys' fees could not be awarded under Massachusetts
arbitration law.4 The state appeals court agreed. Id. at 484
4
See Mass. Gen. Laws ch. 251, §10.
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(citing Drywall Sys. Inc. v. ZVI Constr. Co., 747 N.E.2d 168 (Mass.
App. Ct. 2001)). On further appeal, the SJC held that the
attorneys' fee provision of chapter 93A trumped the general
unavailability of such fees in arbitration. Id. at 488. Most
significantly for our purposes, the Court concluded by inviting
Drywall to "request appellate legal fees and costs." Id. at 490.
It seems to us then, that the trail of the Drywall case thus short-
circuits JMS's attempt to differentiate matters that begin in court
from those that begin in an arbitral forum.
Nevertheless, although it is close, Drywall is not a
perfect analog for our situation, because the SJC explicitly
addressed only the question of fees awarded by the arbitration
panel and those generated by defending the appeal before the SJC
itself. The court was silent as to those fees generated in the
intermediate stops at the superior and appeals courts. JMS seizes
on that silence as support for its position that no fees are
allowable for the trial court's arbitration review proceedings. We
have trouble, however, following the logic of allowing attorneys'
fees in a chapter 93A arbitration, denying them in the court
proceeding to oppose vacating the award, only to allow them at the
final appellate stage. This is especially so where the "entire
tenor of [chapter] 93A is to award attorney's fees and costs to a
party who succeeds in demonstrating that a defendant has violated
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[the chapter]." Comm. v. Fall River Motor Sales, Inc., 565 N.E.2d
1205, 1214 (Mass. 1991).
Against this backdrop, we think that the Massachusetts
courts would allow attorneys' fees to be awarded to a party who
successfully defends a petition to vacate a chapter 93A
arbitration award at the trial court level. Thus, to the extent
that JMS contends that the district court was prohibited from
awarding attorneys' fees, we reject that argument.5
We turn next to the Tobins' counter argument that an
attorneys' fee award is indeed mandatory. The foundation of this
claim is the description of appellate attorneys' fees as a "right"
in Bonofiglio, 591 N.E.2d at 199, and Yorke, 546 N.E.2d at 344. We
would be hard pressed to take issue with this point, if not for the
language in Twin Fires, a case to which the Tobins make only
passing reference. There, while citing Bonofiglio and Yorke, the
5
JMS relies on three cases, each of which denied post-
arbitration attorneys' fees, in support of its position. Two of
them, Floors, Inc. v. B.G. Danis of New England, 401 N.E.2d 839
(Mass. 1980) and Sun Fire Prot. & Eng'g v. D.F. Pray, Inc., 899
N.E.2d 114 (Mass. App. Ct. 2009) are inapposite, because the claims
in those cases were not based on chapter 93A. The third case,
Raytheon Co. v. Computer Distrib. Inc., 632 F. Supp. 553 (D. Mass.
1986), upheld the decision of an arbitrator not to award attorneys'
fees. Although that case was based on chapter 93A, the district
court relied on the inapposite Floors. Moreover, given the trail
later hewn by the SJC in Yorke, Bonofiglio, Drywall and Twin Fires,
it appears that Raytheon Co. stands as an inaccurate forecast of
the rule Massachusetts courts would follow in chapter 93A cases.
Finally, Raytheon applied the very deferential standard of review
which courts must apply to arbitral decisions. Id. at 560. That
is different from this case, as the arbitral award is not presented
for review.
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SJC unequivocally said that the award of fees on appeal "is within
the discretion of an appellate court." 837 N.E.2d at 1140; accord
Day v. Hyman, 2007 Mass. App. Div. 59, 2007 WL 1412845 (May 11,
2007)(acknowledging discretion, and denying appellate fees in
chapter 93A case). We cannot ignore this clear statement, and thus
reject the Tobins' contention that an award of attorneys' fees at
the district court was mandatory. Nevertheless, given the SJC's
clear and consistent statements about the importance of attorneys'
fees to the chapter 93A regime, we believe that an award of fees to
a party that successfully fends off a petition to vacate a chapter
93A arbitration award would be the usual practice, absent some
affirmative reason not to make such an award.
As noted above, the Tobins' fallback position is that
even if the fee award was not mandatory, the district court abused
its discretion in failing to make such an award in this case. An
abuse of discretion occurs if a district court "fails to consider
a significant factor in its decisional calculus, if it relies on an
improper factor in computing that calculus, or if it considers all
of the appropriate factors but makes a serious mistake in weighing
such factors." De Jesus Nazario, 554 F.3d at 199 (citing Coutin v.
Young & Rubicam P.R., Inc., 124 F.3d 331, 336 (1st Cir. 1997)). In
addition, "an error of law is always tantamount to an abuse of
discretion." Id. (quoting Torres-Rivera v. O'Neill-Cancel, 524 F.3d
331, 336 (1st Cir. 2008)). Finally, "a trial court can abuse its
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discretion by failing to exercise that discretion." In re Grand
Jury Investigation, 545 F.3d 21, 25 (1st Cir. 2008).
Here, the district court's lack of explanation makes it
impossible to assess any of these factors. Indeed, the best we can
do on the current state of the record is to conclude that the
district court abused its discretion by not exercising it.
Therefore, we reverse the district court's denial of the Tobins'
motion for additional attorneys' fees and remand for further
proceedings consistent with this opinion, including consideration
by the district court of the Tobins' request for attorneys' fees in
connection with this appeal. See 1st Cir. R. 39.1(b). Costs are
awarded to appellants.
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