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United States v. High Plains Livestock, LLC

United States District Court, D. New Mexico

August 29, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
HIGH PLAINS LIVESTOCK, LLC, dba PRODUCERS LIVESTOCK AUCTION, MICHAEL FLEN, CALVIN PAREO, and DARCIE PAREO, Defendants.

          MEMORANDUM OPINION AND ORDER OVERRULING DEFENDANTS' OBJECTIONS TO PROPOSED FINDINGS AND RECOMMENDED DISPOSITION OF MOTION FOR ATTORNEY FEES AND ADOPTING THE RECOMMENDED DISPOSITION OF MAGISTRATE JUDGE JERRY H. RITTER

         This matter comes before the Court on Magistrate Judge Jerry H. Ritter's Proposed Findings and Recommended Disposition of Motion for Attorney Fees (Doc. 418), filed May 9, 2018, which recommended that the Court deny Defendants' Application for Attorney's Fees and Other Expenses Pursuant to the Equal Access to Justice Act. Doc. 349. Pursuant to 28 U.S.C. § 636(b) and Federal Rule of Civil Procedure 72(b)(2), Defendants filed objections to the Magistrate Judge's Proposed Findings and Recommended Disposition ("PFRD") and the United States filed a Response to Defendants' Objections. See Docs. 419, 422. The Court, having conducted a de novo review of Defendants' objections, hereby overrules them and adopts the PFRD for the reasons set forth below.

         I) Standard of Review

         "Review of the magistrate judge's ruling is required by the district court when a party timely files written objections to that ruling." Hutchinson v. Pfeil, 105 F.3d 562, 566 (10th Cir. 1997). Specifically, "[d]e novo review is required when a party files timely written objections to the magistrate judge's recommendation." In re Griego, 64 F.3d 580, 583-84 (10th Cir. 1995) (citation omitted). "De novo review requires the district court to consider relevant evidence of record and not merely review the magistrate judge's recommendation." Id. "However, neither 28 U.S.C. § 636(b)(1) nor Fed.R.Civ.P. 72(b) requires the district court to make any specific findings; the district court must merely conduct a de novo review of the record." Garcia v. City of Albuquerque, 232 F.3d 760, 766 (10th Cir. 2000).

         II) Background

         The United States filed its Complaint for Injunctive Relief and Civil Penalties against the Defendants on August 5, 2015. Doc. 1. Counts I through VIII of the Complaint alleged violations of the Packers and Stockyards Act ("PSA") and sought civil penalties resulting therefrom. See Id. at 22. Count IX sought injunctive relief against Defendant Calvin Pareo. Id. at 21. Finally, the United States requested, pursuant to Federal Rule of Civil Procedure 65 and 7 U.S.C. § 228a, a temporary restraining order prohibiting Defendants "from operating as a market agency or dealer while livestock sellers and consignors remain unpaid and livestock buyers remain unreimbursed for overcharges[.]" Id. at 21-22.

         On September 2, 215, this Court referred "the matter of appointment of a receiver to Magistrate Judge William P. Lynch to convene proceedings with the parties and determine whether appointment of a receiver is indicated." Doc. 18. Thereafter, after a four-day evidentiary hearing, Magistrate Judge Lynch issued an Order Appointing a Receiver on December 8, 2015. Doc. 55. In the alternative, Magistrate Judge Lynch stated that, "if HPL decided that it would rather not operate than to do so under a receiver, that is a business decision that will be in accord with the letter and spirit of this Order." Doc. 55 at 30. In response, "[a]fter reviewing the Order, and after consulting with the lienholder of the facility, who considers the mortgage in default and notes terminated, High Plains Livestock dba Producers Livestock Auction, [] decided that it [would] not operate under a receiver and [would] discontinue operations." Doc. 59. Defendants further filed a Notice and Request for Emergency hearing. Id.

         The parties submitted numerous briefs and documents on the issue of the appointment of a receiver, and the Court held two hearings and a telephonic status conference. See Doc. 296 at 5. Ultimately, the Court appointed Special Master Gayland Co wen. Id. at 6. The Court granted the Special Master broad authority to monitor the financial activities of HPL and granted him electronic access to HPL's bank accounts. Id. at 7. On March 16, 2016, the United States filed its Motion for Appointment of Receiver and/or Co-Special Master, or Preliminary Injunctive Relief. Doc. 153. This Motion was granted on March 31, 2017. See generally Docs. 296, 351. A Co-Special Master was appointed on July 10, 2017. Doc. 353.

         Meanwhile, on April 11, 2016 this Court, acting sua sponte, dismissed Counts I through VIII of the Complaint for lack of jurisdiction "for the reasons set forth in Pan American World Airways, Inc. v. United States, 371 U.S. 296 (1963)." Thereafter, the parties briefed Defendants' Motion to Dismiss Count IX for failure to state a claim; however, before the Motion was ruled on, the United States moved to dismiss Count IX without prejudice on May 30, 2017. See Docs. 336, 345; see also Fed. R. Civ. P. 41(a)(2) ("Unless the order states otherwise, a dismissal under this paragraph is without prejudice."). Defendants did not oppose the Motion, and so it was granted, "leaving in place only the United States' request for temporary injunctive relief under 7 U.S.C. § 228a." Doc. 345.

         In retaining jurisdiction under Section 228a, this Court directed the United States to file an administrative claim by a date certain or face dismissal of the request for temporary injunctive relief. Doc. 388 at 2. The United States filed an administrative claim, which was set for a hearing on the merits on September 11, 2017. Id. However, prior to the start of the hearing, the Secretary and Defendants entered into a Consent Order that "directs the Defendants to cease and desist activities that were the subject of the administrative claim and that imposes sanctions under the PSA." Id. (citing Exhibit 1 thereto). Specifically, the Consent Order suspends HPL's registration as a market agency selling on commission for 4 years, requires Defendants to cease and desist from six separate violations of the PSA, and assesses a one-hundred thousand dollar civil penalty against the Defendants, jointly and severally (with $90, 000.00 held in abeyance). Doc. 388 at 9-10. Upon entry of the Consent Order, Defendants filed an Unopposed Emergency Motion to Dismiss Remaining Claims and for an Order Directing Special Masters to cease all Work on and Related to this Matter. See generally Doc. 388. This Court granted the Unopposed Motion on September 12, 2017. Doc. 390.

         In granting the Unopposed Motion, this Court retained jurisdiction to rule on Defendant's Application for Attorney's Fees and Other Expenses Pursuant to the Equal Access to Justice Act. Doc. 349. On November 13, 2017, this Court referred the Application to Magistrate Judge Jerry Ritter to "initiate and complete necessary proceedings deemed necessary in order to address the pending motion[] and submit to this Court a recommended disposition of the motion[]." Doc. 415. Magistrate Judge Ritter issued his Proposed Findings and Recommended Disposition ("PFRD") of Defendants' Motion for Attorney Fees on May 9, 2018. Doc. 418. After summarizing the material facts of this case, Magistrate Judge Ritter concluded that Defendants were not a "prevailing party" under the Equal Access to Justice Act ("EAJA") and that, even if they were, that the position of the United States in litigating this action was substantially justified. Id. at 7-20. As such, Magistrate Judge Ritter recommended that the Court deny Defendant's Application. Id. at 21.

         Defendants object to Magistrate Judge Ritter's conclusion and to many of his findings. Defendants first and foremost object that the Magistrate Judge's discussion of the material facts of this case "does not provide a full and accurate description of the procedural history of this matter." Doc. 419 at 1. In support of this position, Defendants focus their argument on the fact that Judge Ritter's PFRD "does not adequately address the basis for the dismissal of Counts I through VIII and Count IX, which is the basis for the claim for fees under EAJA." Doc. 419 at 1; id. at 4 ("In other words, the United States did not have any legal basis for filing Counts I through VIII against the Defendants. This ruling, along with the dismissal of Count IX against Defendant Calvin Pareo, is the basis for Defendants' EAJA claim for attorney fees."). Unfortunately for Defendants, this approach is not persuasive. "[T]he EAJA-like other fee-shifting statutes-favors treating a case as an inclusive whole, rather than as atomized line-items." Comm'r, IKS. v. Jean, 496 U.S. 154, 161-62 (1990). As such, while the "basis for the dismissal of Counts I through VIII and Count IX" is relevant, it cannot be the focus of the Court's analysis. "[O]nly one threshold determination for the entire civil action is to be made." Id. at 159. Thus, Defendants' position - that the Court should view this case with a narrow perspective - is rejected.

         With this standard in mind, the Court notes certain facts that Defendants do not, and cannot, dispute. For example, Defendants do not dispute that the United States sought an injunction against them pursuant to 7 U.S.C. § 228a in the Complaint. Id. at 2. Defendants cannot dispute that "Section 228a allows a federal district court to grant temporary injunctive relief until such time as an administrative complaint is issued and dismissed by the Secretary of Agriculture." Doc. 388 (Defendants' Unopposed Motion to Dismiss) at 2. Defendants do not dispute that "[f]rom January 11, 2016[, ] to September 12, 2017, the Defendants operated their dealer business under the oversight of Mr. Cowen," the Court-appointed special master. Doc. 419 at 3. Nor do Defendants dispute that a co-special master was appointed on March 31, 2017, and assisted in monitoring their business until September 12, 2017. Id. Defendants cannot dispute that "[t]he United States filed an administrative claim, which was set for hearing on the merits beginning September 11, 2017, [but that] [p]rior to the start of the hearing, the Secretary, through [the Grain Inspection, Packers, and Stockyards Administration], and the Defendants entered into a Consent Order that directs the Defendants to cease and desist activities that were the subject of the administrative claim and that imposes sanctions under the PSA." Doc. 388 at 2. Thus, Defendants do not and cannot dispute that they were subject to the Court's jurisdiction for the purpose of injunctive relief and that they were monitored by Co-Special Masters until entering into a Consent Order before an administrative agency. And, "Defendants are not claiming that they prevailed in regard to the injunctive relief that was in place during the course of the proceedings." Doc. 419 at 7.

         Against this backdrop, Magistrate Judge Ritter concluded that Defendants are not a "prevailing party" under EAJA, because "[w]hen the result is viewed as a whole, as required by the controlling case authorities, there is no logical characterization of Defendants, or any one of them, as prevailing in this litigation." Doc. 418 at 12 (emphasis in original). Moreover, in the event that this Court was to reject that conclusion, Magistrate Judge Ritter concluded that the position of the United States in bringing and litigating this case was substantially justified "given: (1) the need for prompt injunctive relief to protect the public; (2) the evidentiary record of multiple violations of the [A]ct sufficient to justify substantial restrictions on Defendants' business activities; (3) the absence of initiative by Defendants to raise the issue of exclusive jurisdiction before it was raised by the District Court sua sponte; and (4) the lack of any evidence of bad faith by the Government[.]" Id. at 20.

         Contrary to Magistrate Judge Ritter's conclusions, Defendants argue that they both prevailed in this litigation and that the position of the United States was not substantially justified. Having reviewed the ...


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