Rule 59(e) Motion to Vacate Sanctions Judgment Fails


A defendant to a foreclosure lawsuit in federal court was sanctioned pursuant to Rule 37. The lender then won summary judgment and the court entered judgment in its favor. The Defendant appealed the foreclosure judgment. After judgment was entered, the court entered a second judgment on the fees and costs incurred by the plaintiff. The Defendant then filed a Rule 59(e) motion to vacate the award of attorney fees and costs. The key point to remember is that it is proper for a federal court to enter a second judgment for attorney fees or sanctions or costs after the initial judgment has become final. There is no rule against the court entering two judgments. Should this occur to you, simply file a second notice of appeal challenging the fee or cost award.

The Defendant argued that Rule 54(d) allowed for only one judgment for fees and that Rule 37 does not allow proceedings after the judgment was entered. The court rejected both arguments. The explanation:

In her motion, Ms. Wellington argues that the Court erred in filing two attorney fee awards and contends that Rule 54(d) allows for only one post-judgment fee award. Doc. 223 at 3. This argument fails for several reasons.

First, Rule 54(d)(2) governs attorney’s fees and nontaxable expenses to the prevailing party. FED. R. CIV. P. 54(d)(2)(A)-(D) (describing the procedure to claim attorney’s fees). In this case, MTGLQ was the prevailing party and sought fees pursuant to the promissory note and mortgage agreement between the parties. Doc. 209. The Court granted MTGLQ’s motion and awarded attorney’s fees on October 7, 2020. Docs. 220, 221. The attorney’s fees awarded by the Court’s October 7, 2020 judgment are separate from the attorney’s fees previously awarded as a sanction by the Court on January 18, 2019. Doc. 145. On January 18, 2019, the Court awarded attorney’s fees to MTGLQ—and later enforced the award in the October 30, 2020 judgment—as a sanction pursuant to Rule 37. Rule 54 is not applicable to Rule 37 sanctions. Rule 54 states “[s]ubparagraphs (A)-(D) do not apply to claims for fees and expenses as sanctions for violating these rules or as sanctions under 28 U.S.C. § 1927.” FED. R. CIV. P. 54(d)(2)(E). Because Rule 54 does not apply to the attorney’s fee awarded as sanctions pursuant to Rule 37, there are not two judgments for attorney’s fees under Rule 54, as Ms. Wellington contends.

Second, the Court appropriately awarded and enforced attorney’s fees as a sanction under Rule 37. Rule 37 governs the failure to make disclosures or cooperate in discovery, and sanctions for violations of discovery orders. FED. R. CIV. P. 37. Rule 37 requires the Court to order sanctions if a motion for discovery is denied. FED. R. CIV. P. 37(a)(5)(B) (“If the motion is denied, the court . . . must, after giving an opportunity to be heard, require the movant, . . . to pay the party or deponent who opposed the motion its reasonable expenses incurred in opposing the motion, including attorney’s fees.”). Ms. Wellington filed a motion to compel that the Court denied. See Docs. 107, 114. The Court then awarded MTGLQ its reasonable expenses incurred in opposing the motion, including attorney’s fees. Doc. 145. Ms. Wellington’s failure to pay the sanction prompted MTGLQ’s motion to enforce and the Court’s October 30, 2020 judgment granting that motion. Docs. 208, 222.

Ms. Wellington does not cite any legal authority for the proposition that orders for sanctions made pursuant to Rule 37 cannot be later enforced by a judgment. Rule 37(b)(2) provides that if a party “fails to obey an order to provide or permit discovery, including an order under . . . 37(a), the court where the action is pending may issue further just orders.” Here, the “further just order” came in the form of a judgment enforcing the sanctions imposed on Ms. Wellington under Rule 37(a).

Further, while Ms. Wellington is correct that Rule 37 itself contains no provision for any post-judgment proceedings (Doc. 223 at 3), the Court retains jurisdiction to rule on collateral matters such as discovery sanctions. “Although filing [a] notice of appeal generally divests the district court of jurisdiction over the issues on appeal . . . the district court retains jurisdiction over collateral matters not involved in the appeal.” Lancaster v. Indep. Sch. Dist. No. 5, 149 F.3d 1228, 1237 (10th Cir. 1998)(citations and quotation omitted). “Attorney’s fees awards are collateral matters over which the district court retains jurisdiction.” Id. As the Tenth Circuit Court of Appeals explains:

While the cases typically discuss attorney’s fees awards in the context of statutory grants of attorney’s fees to the prevailing party . . ., we see no basis to distinguish those cases from one like the present case in which fee awards are granted as sanctions. In either context, the award is collateral to the merits of the underlying action. Accordingly, we conclude the district court had jurisdiction to grant the Rule 37 motion.

Id. Thus, the Court had authority to decide MTGLQ’s post-judgment motion to enforce the order awarding attorney’s fees pursuant to Rule 37.

Conclusion: the litigant would have been better off simply filing a separate appeal of the fee judgment.

Citation: MTGLQ Investors, LP v. Wellington, No. 1:17-cv-00487 (D. New Mexico, February 3, 2021).

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