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Nexus Services, Inc. v. Moran

United States District Court, W.D. Virginia, Harrisonburg Division

March 23, 2018

NEXUS SERVICES, INC., et al., Plaintiffs,
DONALD LEE MORAN, et al., Defendants.


          Elizabeth K. Dillon, United States District Judge.

         The plaintiffs voluntarily dismissed this case after repeatedly seeking leave to amend and after opposing numerous motions to dismiss filed by defendants. Sheriff Donald L. Smith and deputies Donald Lee Moran and Michael Roane (collectively “the Sheriff defendants”) have now filed a motion for attorneys' fees, asking that fees be assessed against plaintiffs and plaintiffs' counsel. The motion has been fully briefed and was argued before the court.

         As discussed in more detail herein, plaintiffs' lawsuit included several frivolous claims at the outset, requiring defendants to expend considerable resources reviewing and responding to those claims. The court further concludes that the Sheriff defendants are prevailing parties, having obtained a dismissal that operates as a dismissal with prejudice. Thus, the Sheriff defendants are entitled to fees as a prevailing party against plaintiffs. The court also imposes an award of fees on plaintiffs' attorneys because it finds that they acted in bad faith. Not only did they assert frivolous claims and steadfastly cling to them, but they also unnecessarily complicated and extended this litigation through their conduct. They included numerous irrelevant allegations in every complaint or proposed complaint that they filed and mischaracterized documents upon which they relied. They sought leave to file an amended complaint mere days before a hearing on the first round of motions to dismiss, even though those motions had been fully ripe for months. Then, at the hearing, and after the court raised questions about the sufficiency of plaintiffs' allegations, they sought additional leave to amend, initially to add “new” allegations against two individual defendants and then expanding their request to be permitted to add allegations against all defendants. But after the court allowed them to file a new motion to amend, plaintiffs' counsel took a completely different course. Rather than adding “new” allegations against those two defendants, plaintiffs' proposed amended complaint dismissed them from the case and instead simply added allegations against other defendants, some of which were again irrelevant to the claims, and attempted to add a new defendant. In short, the conduct of plaintiffs' counsel extended this case unnecessarily and caused the Sheriff defendants to expend resources unnecessarily.

         For these reasons, the court will grant the motion for attorneys' fees, although it will not grant the full amount sought by the Sheriff defendants. It will stay the imposition of the fee award until it has the opportunity to make a final determination of the amount, taking into account any additional fee request by the Sheriff defendants for fees incurred as a result of plaintiffs' opposition to the motion for attorneys' fees. It will also allow plaintiffs' attorneys to present any evidence they desire regarding their ability to pay.[1]

         I. BACKGROUND

         Plaintiffs NEXUS Services, Inc. (Nexus) and two of its officers, Micheal Donovan[2] and Richard Moore, initially filed suit in state court against the same defendants named in this federal suit, alleging violations of state law. (Compl. ¶ 83, Dkt. No. 1; Proposed Am. Compl. ¶ 111, Dkt. No. 77.)[3] After demurrers were filed there, the plaintiffs nonsuited that case. (Proposed Am. Compl. ¶ 111 n.6.) They then filed this lawsuit on June 6, 2016, alleging most of the same facts and including federal and state claims. Because the court's imposition of fees is intertwined with the factual allegations in this case and their lack of merit, it is necessary to provide a fair amount of background about the plaintiffs' factual allegations, in addition to the procedural history of the case.

         According to the original complaint, Nexus is a Virginia corporation with its principal place of business in Augusta County. Donovan is the President and CEO of Nexus; Moore is its Executive Vice-President. (See Compl. ¶¶ 1-3; Proposed Am. Compl. ¶¶ 9-10.)

         The activities at issue in this lawsuit primarily concern Nexus's charitable criminal bonding program, launched in 2015, called “Serve by Nexus, ” which plaintiffs describe as “the nation's most successful charitable bonding program.” (Compl. ¶ 26; Proposed Am. Compl. ¶ 28.) The program is a “charitable criminal bonding program designed to secure bonds for any individual who was awaiting a criminal trial in Harrisonburg, Augusta, and Rockingham Counties, who qualified for a bond, but who remained incarcerated because he or she could not afford to post bond.” (Proposed Am. Compl. ¶ 28.) Based on the facts set forth in the Complaint and incorporated exhibits, it appears that Nexus pays a licensed bail bondsman to post a bond for incarcerated persons, but Nexus itself pays the bond fees, rather than requiring any payment from the incarcerated person. (Id. ¶¶ 35-38 & Ex. A; see also Pls.' Post-Hr'g Mem. 7 n.2, Dkt. No. 88.)

         Defendant Bourne is a licensed bail bondsman and, according to the allegations in the complaint, is the primary for-profit criminal bondsman in Augusta County. He works as a general agent for several companies. Defendant Deputy Moran used to be employed by Bourne. In addition to Bourne and the Sheriff defendants, the original complaint also included as defendants Wanda Jean Shrewsbury, the Commissioner of Revenue of Augusta County, and Gene R. Ergenbright, one of her employees. As discussed in more detail below, plaintiffs voluntarily dismissed those defendants after the first hearing on motions to dismiss.

         In their proposed amended complaint, Donovan and Moore described themselves as “outspoken civil rights leaders, philanthropists[, ] and entrepreneurs who live and work in Augusta County.” (Proposed Am. Compl. ¶ 21.) Donovan also anchors a radio and television program known as “Breaking Through, ” which defendants characterize as an infomercial. According to the complaint, the “Breaking Through” program “focuses on: the civil rights of women and minorities, including persons of African or Hispanic descent; the LGBTQ community; and on criticizing the actions of government officials which may amount to misconduct, or abridgement of civil rights.” (Id. ¶ 24.) In addition to the “Breaking Through” program, which apparently contained some commentary critical of the Sheriff, Nexus also was advertising its charitable bonding program starting at some point in the early part of 2016.

         Both the original complaint and the proposed amended complaint included extensive detail about (and attached as exhibits) various documents that plaintiffs obtained through the inadvertent and overbroad response of the Augusta County Attorney, not a party here, to a Freedom of Information Act (FOIA) request.[4] The documents included various emails sent to and from Bourne, who expressed concern both about the possible criminality of Nexus's bonding program and about the impact it would have on his bail bonding business. Based substantially on those documents and on other alleged acts of harassment by the sheriff's deputies against Nexus or its employees, [5] plaintiffs alleged that there was a conspiracy between all the defendants and further alleged that the Sheriff defendants acted in retaliation for Nexus's speech. Specifically, plaintiffs allege that defendants retaliated against them for plaintiffs' protected speech, i.e., the Breaking Through program and ads for Nexus's charitable bonding program. Plaintiffs also alleged that defendants' actions were in response to its First Amendment petitioning rights, in filing both the state lawsuit and this lawsuit, given that the alleged harassment continued after that point. The only other federal claim alleged was plaintiffs' allegation that they were seized in violation the Fourth Amendment, during a May 28, 2016 incident. (See generally Proposed Am. Compl. Count I.)

         In their original complaint, plaintiffs asserted various claims against different defendants. As noted, the federal claims included Section 1983 claims alleging that all defendants except Bourne violated plaintiffs' First Amendment rights, as already discussed. Plaintiffs also asserted a Section 1983 claim against the Sheriff defendants premised on an alleged seizure that occurred in May 2016 at Donovan and Moore's home. State law claims included a common law defamation claim and “insulting words” claim against Bourne, as well as a state civil conspiracy claim against all defendants. (See generally Compl.)

         After the lawsuit was filed, the defendants filed motions to dismiss, and the court scheduled a hearing on the motions for October 2016, which was later rescheduled to January 2017. In September 2016, plaintiffs filed their first motion to amend. All of the briefing on all motions was completed by October 2016. Three days before the rescheduled hearing, however, plaintiffs filed a second motion to amend or correct their complaint.

         At the January 13, 2017 hearing, the court asked rather pointed questions of plaintiffs' counsel regarding the lack of supporting factual allegations for a number of their claims. By way of example only, the plaintiffs had made much (in their complaint, in comments to the press, and at the motion to dismiss hearing) about a “Hitler emoji” that appeared in an email between Shrewsbury and Ergenbright. While any image evoking Hitler obviously can be offensive, the emoji was contained in an internal email between two work colleagues in which, taken in context, one was jokingly calling the other a “meanie” and a taskmaster. The emails did not pertain to Nexus, nor should they ever have been disclosed to Nexus. The only reason Nexus had them was due to the improper response to the FOIA request. There was certainly no indication that those emails were intended to chill the First Amendment rights (or any other rights) of the plaintiffs, particularly given that they were never intended to be seen by the plaintiffs. The court also questioned repeatedly whether there were allegations showing knowledge on the part of Shrewsbury and Ergenbright about plaintiffs' protected activity and also what allegations showed any connection between Shrewsbury and Ergenbright and the other defendants, so as to support the plaintiffs' conspiracy claim.

         In response specifically to the court's questioning about defendant Shrewsbury and Ergenbright, plaintiffs' counsel repeatedly assured the court that there were additional allegations that had not yet been included in their pleading (or in the pleading attached to the second motion to amend, which had been filed three days prior). In large part because of counsel's representation that there were additional allegations that would bolster their claims against Shrewsbury and Ergenbright, the court granted the plaintiffs permission to withdraw their prior motions to amend, and to file a single, omnibus motion for leave to amend. The court thus directed plaintiffs to file a motion for leave to file a third amended complaint by January 30, 2017.

         On that date, plaintiffs filed such a motion, but also filed a notice of voluntary dismissal of Shrewsbury and Ergenbright. Effectively, then, the plaintiffs used their deficient claims against Shrewsbury and Ergenbright to request an additional opportunity to seek leave to amend their complaint, but then chose to dismiss those defendants and add additional allegations against the other defendants instead. While the court believes that the voluntary dismissal of the claims against Shrewsbury and Ergenbright was appropriate, it is concerned that counsel was not candid with the court about why it was seeking leave to amend.

         The proposed amended complaint filed in January contained additional allegations, omitted others, and modified the claims slightly. The primary changes to the claims were that: (1) the alleged constitutional violations (previously counts I, II, and III) were grouped in a single count, and the statutory basis for them was amended to include 42 U.S.C. § 1988; and (2) the Insulting Words claim against Bourne was dropped.

         The third motion to amend and related motions were argued before the court at a hearing on March 2, 2017. Before the court issued its rulings, plaintiffs filed a notice of voluntary dismissal with regard to all remaining claims.[6] Pursuant to Federal Rule of Civil Procedure 41(a)(1)(B), and due to the prior nonsuit of the state court suit, that dismissal operates as a dismissal with prejudice of the plaintiffs' claims.


         The Sheriff defendants argue that an award of fees is appropriate on three different grounds. The court addresses each in turn. It turns first, though, to a discussion and analysis of the strength and procedural history of one of plaintiffs' two federal claims-its Section 1983 claim based on an alleged violation of the Fourth Amendment, which is relevant to the court's analysis. As will be shown, plaintiffs' pursuit of their Fourth Amendment claim is illustrative of the conduct the court believes warrants an award of fees against counsel. As discussed in more detail below, that claim was weak from the outset, but once a video apparently showing the supposed violation was published by plaintiff Donovan, the continued pursuit of that claim was in bad faith. The court does not find the First Amendment claim to be frivolous, although the court believes it lacked factual and legal merit and was subject to dismissal. The court also discusses briefly why the civil conspiracy claim was frivolous.

         A. Claims

         1. The Section 1983 claim alleging a violation of the Fourth Amendment

         In their original complaint, one of plaintiffs' claims (presumably brought only by Moore and Donovan, although both complaints grouped all plaintiffs together as to the Fourth Amendment claim) was a Section 1983 claim based on the supposed seizure of the two men in violation of the Fourth Amendment.

         In order to state a Section 1983 claim based on an unreasonable seizure, a plaintiff must establish that he was “seized” for purposes of the Fourth Amendment and that the seizure was without adequate justification. Santos v. Frederick Cty. Bd. of Comm'rs, 725 F.3d 451, 460 (4th Cir. 2013).

         The original complaint failed to allege adequately any seizure of Moore and Donovan by anyone, let alone by any named defendant. The complaint merely alleged that, on May 28, 2016, “two uniformed deputies of the August County Sheriff's Office in marked government cars made a rapid approach to the personal residence of Moore and Donovan in tactical formation and blocked the ingress and egress to their residence.” (Compl. ¶ 84; Proposed Amended Compl. ¶ 113.) Plaintiffs originally alleged that the deputies blocked the driveway of the residence “so as to prohibit ingress or egress” and thus “prohibited Moore and Donovan from leaving the residence without officer permission” (Compl. ¶ 108), although that allegation was omitted from the proposed amended complaint.

         Both the complaint and the proposed amended complaint were scant on the details of this incident. For example, plaintiffs did not specify how long the cars were parked there, or whether anyone in the home attempted or asked to leave. They appear to allege that the deputies spoke to the plaintiffs' private security guards, stating that “[t]he Deputies advised the Plaintiffs' personal security guards that their visit was simply to determine what type of car Mr. Donovan drove, despite the fact that they had already run the details on his plate information two months earlier in March.” (Proposed Am. Compl. ¶ 113.) But there is certainly no allegation of the deputies speaking with Donovan or Moore.

         In their proposed amended complaint, plaintiffs added the allegation that Moore and Donovan were present in the home and witnessed the deputies arrive at their home. They also allege that they “perceived the arrangement of police cars as blocking their ability to leave their home, which constituted an unlawful detainment.” (Id.)

         The standard in determining a seizure, however, is not whether plaintiffs thought egress to their home had been blocked by the deputies stopping their cars in a public roadway in front of their home, but whether “in view of all [of] the circumstances surrounding the incident, a reasonable person would have believed that he was not free to leave.” United States v. Gray, 883 F.3d 320, 322 (4th Cir. 1989). That standard clearly is not met by plaintiffs' allegations.

         In opposition to the motion to dismiss this claim, plaintiffs relied on United States v. Jones, 678 F.3d 293 (4th Cir. 2012). That reliance was entirely misplaced, however, because Jones is easily distinguishable. In Jones, a marked police car turned around to follow the defendant's car and the police proceeded to follow the car for blocks, closely enough to look for traffic violations. Although the police did not observe any traffic violations, when the car pulled into a private driveway, the police parked the cruiser in such a way as to block the defendant's car from leaving the scene. The police officers then “quickly approached Jones by the driver's side of his car.” Id. at 300, 305. Thus, the court held that the facts “lacked a traditional hallmark of a police-citizen consensual encounter: the seemingly routine approach of the police officer.” Id. at 300 (citation omitted).

         Critically, the Jones court discussed a number of cases that reached the opposite conclusion, i.e., that there was no seizure, and it distinguished them from the facts before it. Those cases are closer to the facts here, although even those cases showed something more akin to a seizure than what allegedly occurred here. The Jones court explained:

We agree that when an officer blocks a defendant's car from leaving the scene, particularly when, as here, the officer has followed the car, the officer demonstrates a greater show of authority than does an officer who just happens to be on the scene and engages a citizen in conversation. For this reason, the three cases on which the Government relies are inapposite. See United States v. Thompson, 546 F.3d 1223 (10th Cir. 2008); United States v. Kim, 25 F.3d 1426 (9th Cir. 1994); United States v. Pajari, 715 F.2d 1378 (8th Cir. 1983). In those cases, unlike the one at hand, the officers did not target and follow the defendant's car before blocking it in. The officers here did not merely “come upon an already parked car” as they did in Kim, 25 F.3d at 1430, or approach incognito from behind the defendant's parked car as they did in Pajari, 715 F.2d at 1380-81. Nor did the police merely ask to speak with a pedestrian who happened to be walking toward his car, as the officer did in Thompson, 546 F.3d at 1224-25. Rather, Jones saw the officers follow his car from a public street onto private property and then block the car from exiting in their haste to speak with him.

Jones, 678 F.3d at 302.

         Furthermore, although the Jones court analyzed the encounter at the point before the “verbal encounter” began and held that a reasonable driver in Jones's position would not have felt free to leave, it also stated that it was the “totality of the facts” of the entire encounter that showed a seizure, rather than a consensual encounter, had occurred. It summarized:

[T]wo police officers in uniform in a marked police patrol car conspicuously followed Jones from a public street onto private property and blocked Jones's car from leaving the scene. The officers then quickly approached Jones by the driver's side of his car-letting two other vehicle occupants walk away-and nearly immediately asked first that he lift his shirt and then that he consent to a pat down search for weapons. . . . Any one of these facts on its own might very well be insufficient to transform a consensual ...

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