Hankins v. City of Inkster

          R. Steven Whalen U.S. Magistrate Judge

          ORDER ADOPTING REPORT AND RECOMMENDATION [177]; OVERRULING PLAINTIFF'S OBJECTION [179]; AND GRANTING SEIFMAN'S MOTION FOR DISBURSEMENT OF FUNDS HELD IN AN INTEREST BEARING ACCOUNT [ 170]

          ARTHUR J. TARNOW SENIOR UNITED STATES DISTRICT JUDGE

         Plaintiff John Hankins filed a Complaint against Defendants City of Inkster and Gregory Gaskin on August 27, 2009. [Dkt. # 1]. The case settled, and the settlement agreement was placed on the record on February 21, 2012. During the pendency of the case, Plaintiff's attorney, Raymond Guzall, left his firm. Following the settlement, Guzall and his former partner, Barry Seifman, began litigating the division of the attorneys fees. The Report and Recommendation before the Court arises from this dispute.

         Factual and Procedural Background

         Plaintiff filed a Motion for Attorney Fees and Costs [109] on April 26, 2012. The Court administratively terminated Plaintiff's motion on March 27, 2013 [140], so Guzall and Seifman could litigate their case in state court. The case was reopened on March 7, 2016 [153].

         On December 8, 2017, the Magistrate Judge issued a Report and Recommendation (“R&R”) [155] recommending that the Court grant Plaintiff's Motion for Attorney Fees and Costs and divide the fees between Guzall and Seifman. Guzall filed an Objection [156] to the R&R on December 21, 2017. The Court overruled that Objection and adopted the R&R in its May 16, 2018 Order [159]. Guzall appealed on May 31, 2018, and the Sixth Circuit affirmed the Court's ruling in a March 22, 2019 Opinion [167].

         The Sixth Circuit summarized the Magistrate Judge's determination and the district court's review as follows.

The magistrate judge held a hearing but limited admissible evidence and argument to six issues: (1) the Firm's shareholder agreement between Seifman and Guzall; (2) when Guzall quit the Firm and when he told Seifman; (3) when and how Hankins told Seifman and Guzall he was firing the Firm; (4) when and how Hankins retained Guzall; (5) when and how Guzall took the Hankins file from the Firm; and (6) the hours Guzall and Seifman each spent on the case, their hourly rates, and whether Seifman was entitled to compensation in quantum meruit. The magistrate judge expressly and emphatically barred evidence, argument, or discussion regarding misconduct, specifically Guzall's accusations against Seifman: “We will not try the [Michigan state court] lawsuit de facto in the context of this evidentiary hearing on attorney fees.” Three witnesses testified at the hearing (Hankins, Guzall, and Seifman), and the magistrate judge admitted several documents, including the shareholder agreement. It was established that, at the time he left, Guzall was a 25% shareholder in the Firm. Guzall insisted the shareholder agreement was not a fee splitting agreement whereas Seifman insisted that it was.

The magistrate judge issued a Report and Recommendation, which the district court, after thoroughly addressing and overruling Guzall's objections to it, adopted as its final judgment. The district court determined that Guzall's individual work on the case was reasonably quantified at 80 hours, at $300 per hour, for direct compensation of $24, 000. The court did not award Seifman any direct compensation for work on the case. Further, the court determined that the shareholder agreement was effectively a fee-splitting agreement, and the Hankins case was a corporate asset subject to that contractual agreement, but which Guzall had taken from the Firm. Therefore, the court held that Guzall was entitled to 25% of the Hankins contingency fee and the Firm (Seifman) to 75%. The court rejected Guzall's claims that Seifman breached the agreement and committed illegal acts, criticizing those claims as “improper attempts to circumvent the findings and conclusions of the Michigan state courts” and concluding that Guzall “previously agreed to dispose of those claims in the [Michigan state court] case.” Guzall had agreed that the district court- rather than the state court-would decide the contingency-fee issue and the district court explained that resolving attorney fee disputes is part of the overall litigation. Thus, its admission of Seifman into the suit and its judgment on that issue were not improper. Finally, the court rejected Guzall's claims that he was denied a fair opportunity to present evidence, as he was invited to and did present evidence at the hearing.

Hankins v. City of Inkster, et al, 768 Fed.Appx. 304, 305-06 (6th Cir. 2019).

         On May 28, 2019, the Sixth Circuit declined to rehear the case en banc. Guzall then filed a petition for a writ of certiorari with the United States Supreme Court, but the Supreme Court denied the petition on December 5, 2019 [181].

         Following the Sixth Circuit's decision, Seifman filed a Motion for Disbursement of Funds Held in an Interest Bearing Account [170]. He sought his share of the (then) $578, 571.00 held in escrow. The Court referred [174] that motion to the Magistrate Judge on August 1, 2019. The Magistrate Judge then issued a Report and Recommendation (“R&R”) [177] in accordance with 28 U.S.C. § 636(b)(1)(b). The R&R advised the Court to grant Seifman's motion and disburse the funds in accordance with its previous order. Guzall has since objected to this R&R, and the objection is fully briefed.

         Analysis

         The Magistrate Judge advises the Court to grant Seifman's motion to withdraw his funds from the escrow account, on the grounds that the Court had properly and ...