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Security Firm Tells Federal Circuit It Can’t Pay Attorney Fees

October 16, 2020 | Posted in : Ability to Pay, Expenses / Costs, Fee Issues on Appeal

A recent Law 360 story by Julia Arciga, “Security Firm Tells DC Circ. It Can’t Pay Union’s Atty Fees,” reports that a security guard service told the D.C. Circuit it's not able to cough up over $51,000 in attorney fees and costs it was ordered to pay a union for "stonewalling" arbitration over an employment dispute, claiming the district court was erroneous in finding the company had means to pay the sum.  In a hearing, an attorney for Preeminent Protective Services Inc., Eden Brown Gaines of Brown Gaines LLC, told a three-judge panel the lower court had "ignored" evidence of the company's inability to pay the attorney fees.

If the company is unable to pay the sum, Gaines said, "Preeminent's officials will be held in contempt, and they won't have the ability to purge it."  She also claimed the disconnect between what Preeminent could pay and the court's demands showed the court did not adequately tailor its remedy to the company's alleged misconduct.  On top of that, Gaines said, Preeminent's inability to pay the attorney fees would negatively affect contempt proceedings against the company — after the court found it was slow-walking arbitration proceedings with the union in an employment dispute.

Judge Gregory G. Katsas expressed doubt toward Gaines' claim, stating it was Preeminent's "burden to show that" it couldn't pay the fees.  "The court didn't ignore evidence," he said, adding that the lower court "didn't discharge your burden" because it felt the evidence wasn't enough.  The lawyer for the union said the court looked at the evidence, and completely debunked the notion that Preeminent couldn't pay.

"The district court had ample reason to conclude it had the ability to pay," Michael Anderson of Murphy Anderson PLLC told the appeals panel, pointing to Preeminent's public statements on its website boasting about its profits.  Anderson also said Preeminent asking the courts to ease up on a payment it had to make due to its financial situation was ignoring a path for financial relief through bankruptcy.  "It is a circumvention of the bankruptcy code for the court to give relief due to one party's inability to pay," he said.

Gaines, however, claimed the attorney fees Preeminent had to pay were "not a debt" and therefore "can't be discharged in bankruptcy."  "[Company] officials can be jailed if they can't pay. ... Financial statements were submitted under seal to the court, which is more accurate than an outdated website, and it showed Preeminent can't pay," she said, adding that the court was not giving the company a proper chance to purge itself from further contempt against the court.

The dispute between Preeminent and the union dates to 2017, when Preeminent took over a security subcontract from Business Resource and Security Services USA Inc., which had employed union members Crystal Middleton and Renay Campbell at a Washington, D.C., public site as security officers.  Six months after Preeminent's takeover, the union filed a complaint claiming a collective bargaining agreement required Preeminent to hire Middleton and Campbell, but Preeminent had refused to take them on.

The union won its bid to compel arbitration of the issue, but the district court later found the company was dragging its feet for more than a year.  In June 2019, the court found Preeminent in civil conditional contempt for disrupting the arbitration process.  The court then ordered the company in November 2019 to pay $51,097.20 in the union's attorney fees and expenses in connection with its "stonewalling" throughout arbitration.

The company appealed the decision to the D.C. Circuit, and asked the court to put off its attorney fees payment while its challenge proceeded — but the district court denied Preeminent's request in May.  During the hearing, Gaines and Anderson also argued over the validity of Preeminent's appeal and whether the D.C. Circuit could hear the case.  According to Anderson, Preeminent should have filed its complaint within a month after the court found it in contempt, rather than after the court finalized the attorney fees amount in November 2019.