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Lichtenstein v. Lichtenstein

decided: June 29, 1973.

FRANCES SHARP LICHTENSTEIN
v.
MAURICE LICHTENSTEIN AND DARBY FARMS, INC., APPELLANT



(D.C. Civil Action No. 42987). APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA.

Aldisert, Circuit Judge, and Stapleton, District Judge.

Author: Aldisert

Opinion OF THE COURT

ALDISERT, Circuit Judge.

The question presented is whether appellant, the losing party in extensive litigation, has demonstrated bad faith, vexation, or wanton or oppressive conduct, warranting the imposition upon him of the prevailing party's counsel fees.

In 1967, Frances Sharp Lichtenstein instituted an action based on diversity of citizenship against her husband, Maurice Lichtenstein, and Darby Farms, Inc., a corporation of which her husband was principal officer and director. Mrs. Lichtenstein, the owner of stock in Darby Farms, claimed that her husband misused corporate funds, and sought an accounting and restitution.

In 1968, the district court approved a settlement agreement which provided for the appointment of a certified public accountant to audit the books of Darby Farms to determine whether Mr. Lichtenstein had misused any funds. The agreement stated that the findings of the accountant "shall be conclusive and binding on all parties," and that if the accountant should find that funds were due Darby Farms, Mr. Lichtenstein was to pay a designated escrow agent any deficiency between the amount found owing by the accountant and funds then on deposit with the escrow agent.

The accountant determined that $47,331.44 was owing to Darby Farms. When Mr. Lichtenstein refused to pay any portion of this amount, Mrs. Lichtenstein instituted contempt proceedings against her husband. Over Mr. Lichtenstein's defense that he had a right to except to the audit, the court adjudged him in contempt, but added that he could purge himself by paying the deficit.

This court reversed because the settlement agreement lacked the required specificity on which to base a civil contempt. Lichtenstein v. Lichtenstein, 425 F.2d 1111, 1113 (3d Cir. 1970). We remanded for the district court to determine the intentions of the parties with regard to the appealability of the accountant's audit. On remand, the district court decided that the findings of the accountant were binding and conclusive, and that the settlement agreement did not include a right to appeal or except to the audit. Lichtenstein v. Lichtenstein, 321 F. Supp. 152, 154 (E.D.Pa. 1970). On appeal, this court affirmed the finding that the agreement did not permit "judicial appeals" from the findings of the accountant, but observed that the husband might take exceptions to those findings. We concluded, however, that Mr. Lichtenstein's repeated failure to meet with the accountant constituted a waiver of the right to except. Also, this court determined that the district court erred in using a revalued figure in calculating the award to corporate defendant Darby, and modified the calculation accordingly. Lichtenstein v. Lichtenstein, 454 F.2d 69 (3d Cir. 1972).

On April 6, 1972, after Mr. Lichtenstein satisfied the judgment, attorneys for Mrs. Lichtenstein and Darby filed in the district court a rule to show cause why Mr. Lichtenstein should not be held responsible for counsel fees and costs. The district court ordered Mr. Lichtenstein to pay to Mrs. Lichtenstein "as costs, the sum of $913.02; to pay to Lewis Kates, Esquire as costs, reasonable counsel fees in the amount of $12,820 and to pay to S. Regen Ginsburg, Esquire as costs, reasonable counsel fees in the amount of $5,530." Lichtenstein v. Lichtenstein, 55 F.R.D. 535 (E.D.Pa. 1972). This is the order now under review.

At the outset, we note our agreement with the applicable law as stated by the district court:

Attorney's fees are not ordinarily taxable as costs and are awarded only in extraordinary cases. Bernstein v. Brenner, 320 F. Supp. 1080 (D.C.D.C. 1970). However, the power to award such fees is within the equity discretion of a district court, Vaughan v. Atkinson, 369 U.S. 527, 82 S. Ct. 997, 8 L. Ed. 2d 88 (1962), and where a losing party has brought an action or raised a defense in bad faith, vexatiously, wantonly or for oppressive reasons an award of counsel fees to the other party is appropriate. Moore's Federal Practice ยง 54.77(2) p. 1348; 6 Moore p. 1352, citing Rolax v. Atlantic Coast Line R. Co., 186 F.2d 473, 481 (4 Cir. 1951).

55 F.R.D., supra, at 537. See also Hall v. Cole, 412 U.S. 1, 93 S. Ct. 1943, 36 L. Ed. 2d 702 (41 U.S.L.W. 4658, 4659, 1973).*fn1

What we disagree with, however, and find clearly erroneous, Krasnov v. Dinan, 465 F.2d 1298 (3d Cir. 1972), is the district court's finding "that the record . . . amply demonstrates that defendant's activities in causing plaintiff to seek to enforce the settlement in Court and his defense to ...


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