Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc. et al v. Ocean Capital LLC et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
Tax-Free Fixed Income Fund for
Puerto Rico Residents, Inc., et
al.,
Plaintiffs,
v.
Ocean Capital LLC, et al.,
Defendants.
Civil No. 22-1101(GMM)
Ocean Capital LLC,
Counterclaim Plaintiff,
v.
Puerto Rico Residents Tax-Free
Fund, Inc., Puerto Rico Residents
Tax-Free Fund VI, Inc., and Tax-
Free Fund for Puerto Rico
Residents, Inc.,
Affected Funds.
OPINION AND ORDER
Pending before the Court are Ocean Capital LLC’s Motion to
Award Attorneys’ Fees and Costs and the Amendment to Motion to
Award Attorneys’ Fees and Costs. (together, “Motion for Attorneys’
Fees”) (Docket Nos. 252, 263). For the reasons explained herein,
Ocean Capital LLC’s (“Ocean Capital”) Motion for Attorneys’ Fees
is DENIED.
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I. FACTUAL AND PROCEDURAL BACKGROUND
In February 2022, Plaintiffs1, representing nine closed-end
mutual funds (collectively, “the Funds”), sued Ocean Capital LLC
and several individuals and firms2 (together, “Defendants”) for
allegedly committing securities violations. See (Docket No. 1).
The Funds alleged that Defendants misled their shareholders by
failing to make complete and accurate disclosures, violating
Sections 13(d), 14(a), and 20(a) of the Securities and Exchange
Act of 1934, 15 U.S.C. § 78a et seq., and other applicable rules
of the Securities and Exchange Commission (“SEC”). See Tax-Free
Fixed Income Fund for P.R. Residents, Inc. v. Ocean Cap. LLC, 137
F.4th 6, 11 (1st Cir. 2025); (Docket No. 246). In its core, this
case relates to “a dispute over the sufficiency and accuracy of
Defendants[’] disclosures and proxy materials. Ocean Cap., LLC,
137 F.4th at 12.
In summer 2021, Ocean Capital began to nominate new directors
to the Funds’ boards to be elected by stockholders. (Docket No.
1 Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc. (“Fund I”); Tax-
Free Fixed Income Fund II for Puerto Rico Residents, Inc. (“Fund II”); Tax-Free
Fixed Income Fund III for Puerto Rico Residents, Inc. (“Fund III”); Tax-Free
Fixed Income Fund IV for Puerto Rico Residents, Inc. (“Fund IV”); Tax-Free Fixed
Income Fund V for Puerto Rico Residents, Inc. (“Fund V”); Puerto Rico Residents
Tax-Free Fund, Inc. (“PRRTFF I”); Puerto Rico Residents Tax-Free Fund IV, Inc.
(“PRRTFF IV”); Puerto Rico Residents Tax-Free Fund VI, Inc. (“PRRTFF VI”); and
Tax-Free Fund for Puerto Rico Residents (“TFF I”).
2 Ocean Capital; William H. Hawk; José R. Izquierdo II; Brent D. Rosenthal;
Roxana Cruz-Rivera; Ethan Danial; Mojdeh L. Khaghan; PRCE Management LLC;
Benjamin T. Eiler; Vasileios A. Sfyris; Francisco Gonzalez; Gustavo Nevarez
Torres; Alejandro Acosta Rivera; Honne II, LP; Meir Hurwitz; Mario J. Montalvo;
Jose M. Perez-Gutierrez; RAD Investments, LLC; Sanzam Investments LLC; Juan E.
Soto Alvarado; Sandra Calderon; The Estate of Jose Hidalgo; and Avraham Zeines.
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252 at 8). From there, stockholders elected numerous Ocean Capital
nominees and passed Ocean Capital proposals. (Id. at 8-9).
Stockholders overwhelmingly favored these proposals, generally by
margins larger than the director votes. (Id. at 10). However, the
elected directors were not sat, and the proposals were not
recognized. (Id. at 10).
In the midst of this, the Funds filed their Complaint on
February 28, 2022, subsequently filing the First Amended Complaint
for Violations of the Federal Securities Laws on January 5, 2023.
(Docket Nos. 1, 111). At this point, the Funds refused to
acknowledge these elections, due to this instant case. (Docket No.
252 at 6). Consequently, Ocean Capital filed Ocean Capital LLC’s
Answer and Counterclaims to Plaintiffs’ First Amended Complaint
and asserted claims under Article 7.15 of the Puerto Rico General
Corporations Law, 14 P.R. Laws Ann. § 3655 (“Section 3655”),
against PRRTFF I and PRRTFF VI (“counterclaims”). (Docket No. 121).
Ocean Capital also (1) moved to dismiss the Funds’ claims (and
later for judgment on the pleadings) (Docket Nos. 122-24), and (2)
sought injunctive relief to require the Funds to seat the elected
directors immediately. (Docket No. 169). These motions were
referred to U.S. Magistrate Judge Giselle López-Soler (“Magistrate
Judge López-Soler”). See (Docket Nos. 170, 205).
On August 10, 2023, Magistrate Judge López-Soler issued a
Report and Recommendation proposing that Defendants’ motions for
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judgment on the pleadings and to dismiss be granted. (Docket No.
187). On September 8, 2023, the Court adopted the Report and
Recommendation in its entirety. (Docket No. 195). The Funds then
moved for a stay of the proceedings on the counterclaims on
September 22, 2023, (Docket No. 202), which was also referred to
Magistrate Judge López-Soler. (Docket No. 205). After adopting in
part Magistrate Judge López-Soler’s Report and Recommendation at
Docket No. 218, the Court denied the Funds’ request to stay the
proceedings and granted the Defendants’ requested relief on their
counterclaims by issuing an injunction ordering the Funds to seat
the victorious nominees for the Board of Directors of PRRTFF I,
PRRTFF VI, and TFF I. (Docket No. 236). Judgment was issued on
July 12, 2024. (Docket No. 238).
Thereafter, the Funds continued to refuse to seat the Ocean
Capital nominees and sought a stay of this Court’s judgment pending
their appeal. (Docket No. 252 at 12). The First Circuit granted an
administrative stay on July 17, 2024. (Id.). On May 12, 2025, the
First Circuit issued a decision affirming both the dismissal of
the Funds’ claims and the injunction ordering the Funds to seat
the Defendants’ nominees as members of the board of directors of
those funds. Ocean Cap. LLC, 137 F.4th at 24; (Docket No. 246).
The Funds then appointed the Ocean Capital nominees. (Docket No.
252 at 12-13).
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On July 8, 2025, Ocean Capital filed Ocean Capital LLC’s
Motion to Award Attorneys’ Fees and Costs (“Motion”), seeking
$5,790,575.00 under the corporate benefit doctrine. (Id.).
According to Ocean Capital, “[w]ithout Ocean Capital’s efforts
over the last 39 months to require the Funds to honor the votes of
their stockholders, the stockholders’ chosen directors would not
have been seated, and the multiple proposals that the Funds’
stockholders endorsed and adopted would not have been
implemented.” (Id. at 7). Ocean Capital alleges that Plaintiffs
cited the “mere pendency” of their suit before this Court to
unilaterally refuse to honor the election results and this forced
them to engage in a litigation for three years and a half that
required the filing of numerous motions and briefings. (Id. at 10-
11).
In consequence, Ocean Capital argues that, under the
corporate benefit doctrine, they are entitled to attorneys’ fees
and costs because the litigation vindicated the stockholders’
voting rights. (Id. at 13). Despite being unable to locate a Puerto
Rico case on the doctrine, Ocean Capital asserts that this Court
can adopt this doctrine since Puerto Rico often “looks to Delaware
law for guidance” because the “Puerto Rico law of Corporations is
modeled after the Delaware Law of Corporations” (Id.) (citing
Rishell v. Med. Card Sys., Inc., 982 F. Supp. 2d 142, 150 (D.P.R.
2013).
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Using Delaware’s test for the doctrine, Ocean Capital argues
that their lawsuit conferred substantial benefits to the Funds’
stockholders, since the ability to vote for the directors the
shareholder wants to oversee is a fundamental governance right.
(Id. at 13-14). According to them, this litigation achieved major
benefits for stockholders including that it “forced the Funds and
their incumbent directors to honor the results of at least 12
different stockholder elections at four different Funds over more
than three years — election results that the Funds refused to
recognize until this Court and the First Circuit ordered them to
do so.” (Id. at 14). In addition, they contend that they were able
to implement proposals “which reduce the quorum requirement at the
Funds, and empower Fund stockholders alone to determine whether to
adjourn a stockholder meetings, further vindicate[ing] the
corporate franchise.” (Id. at 15).
Furthermore, Ocean Capital asserts that the Section 3655
counterclaims were meritorious when filed because they prevailed
in this Court and on appeal. They reiterate that “[b]ut for Ocean
Capital’s litigation efforts, the elected directors would not have
been seated, and the stockholder proposals would not have been
implemented.” (Id. at 16). Similarly, Ocean Capital contends that
the request for $5,790,575.00 in fees and expenses is reasonable.
(Id. at 17). Ocean Capital contends that the litigation produced
substantial governance benefits, including the seating of its
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nominees and the implementation of stockholder-approved proposals,
and asserts that the case required extensive and complex motion
practice over several years. (Docket No. 252 at 18–19).
Specifically, Ocean Capital posits that the case required
continuous efforts and filings over the years as it concerned
claims “under Sections 13(d), 14(a), and 20(a) of the Exchange Act
asserted by nine separate Plaintiff Funds against 23 Defendants,
as well as counterclaims for injunctive relief under Section 3655
— a rarely litigated statute under Puerto Rico law.” (Id.). In
support of their motion, Ocean Capital filed thirteen exhibits,
including the declaration of attorney Harold D. Vicente-Colón, the
declaration of attorney Michael L. Charlson, as well as annual
reports and shareholder reports. See (Docket Nos. 252-1 to 13). On
August 15, 2025, Ocean Capital amended the Motion to “include
PRRTFF IV as a fifth benefitted Plaintiff Fund that would share in
the expense incurred in connection with this litigation.” (Docket
No. 263 at 2).
On September 15, 2025, the Tax-Free Fixed Income Fund IV for
Puerto Rico Residents, Inc. and Puerto Rico Residents Tax-Free
Fund IV, Inc.’s Opposition to Ocean Capital LLC’s Motion to Award
Attorneys’ Fees and Costs was filed. (Docket No. 265). Therein,
Plaintiffs Fund IV and PRRTFF IV oppose Ocean Capital’s request
for attorneys’ fees and posit that it fails under both Puerto Rico
and Delaware law. (Id. at 8). According to two of the Funds these
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Plaintiffs, Puerto Rico law - specifically Rule 44.1(d) of the
Puerto Rico Rules of Civil Procedure and Puerto Rico Supreme Court
precedents - squarely forecloses the availability of non-statutory
fee-shifting, such as on equitable grounds, as Ocean Capital seeks.
(Id. at 13). These Plaintiffs add that “[t] here is no tradition
of Puerto Rico law deferring to Delaware on topics like the
historical equitable power of courts. Rather, Puerto Rico courts
have developed their own rules concerning a court’s authority to
award fees.” (Id. at 15).
Furthermore, these Plaintiffs argue that, even if Delaware
law were to be applied, Ocean Capital would still not be entitled
to any fees. First, these Plaintiffs posit that Ocean Capital never
brought any affirmative claim against Fund IV or PRRTFF IV but
rather only defended itself against their securities claims. (Id.
at 16-17). Second, they claim Ocean Capital cannot obtain fees
under Delaware law where its proxy campaign succeeded in part by
its disclaiming any intention to seek those fees. (Id. at 18).
Third, these Plaintiffs contend that Ocean Capital’s requested
fees are unreasonable and unsubstantiated. (Id. at 19). To this
extent, they argue that: (1) Ocean Capital’s fee request should be
denied because it seeks fees from Fund IV and PRRTFF IV regarding
counterclaims even though Fund IV and PRRTFF IV were not
counterclaim parties; (2) Ocean Capital failed to identify which
fees were incurred defending against Fund IV’s and PRRTFF IV’s
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claims and (3) Ocean Capital did not submit any records to justify
any calculation. (Id. at 19). According to these Plaintiffs, the
“requested fee amount — roughly $1.16 million from each Fund” is
unreasonable, since Delaware cases, including those Ocean Capital
relies on, ascribe far lesser value. (Id. at 19-20). They add that
Ocean Capital’s “lawyers did not take this matter on a contingency
basis.” (Id. at 20). Also, these Plaintiffs point out that “[w]hile
Ocean Capital claims its counsel somehow incurred over 5,000 hours
working on this case (without submitting any underlying records),
this case was decided entirely on the pleadings without any
discovery, evidentiary hearing, or a trial.” (Id.).
On September 15, 2025, Plaintiffs Fund I, PRRTFF VI, and TFF
I filed their Opposition to Ocean Capital LLC’s Motion to Award
Attorneys’ Fees and Costs (ECF No. 252 and 263). (Docket No. 266).
Therein, they argue that Ocean Capital’s request is legally
unsupported, overbroad, and inconsistent with Puerto Rico’s
governing framework for fee awards. (Id. at 2). Specifically, they
contend that Section 3655 does not contain a fee-shifting
provision, and that under controlling Puerto Rico Supreme Court
precedent, any award is governed exclusively by Rule 44.1(d) of
the Puerto Rico Rules of Civil Procedure, which authorizes fees
only upon a finding of obstinacy or frivolousness. (Id. at 6).
According to them, the corporate benefit doctrine is rooted in a
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fundamentally different policy framework and has never been
applied within the First Circuit. (Id. at 7-8).
Moreover, Fund I, PRRTFF VI, and TFF I argue that corporate
benefit doctrine cannot be reconciled with this district’s
lodestar approach, as they serve distinct purposes and rely on
different metrics. (Id. at 8-9). In addition, they assert that
Ocean Capital’s fee application “consists solely of aggregate
totals of hours allegedly expended by each firm and corresponding
lump-sum amounts billed” and omits they necessary evidence like
“contemporaneous billing records identifying the dates on which
specific work was performed, sufficiently detailed descriptions of
the work performed, an identification of whether the work was
performed by an attorney or a paralegal, and disclosure of the
hourly rates applicable to each timekeeper”. (Id. at 12). To this
extent, they posit that Ocean Capital’s request only “provides
only aggregate totals and conclusory affidavits, depriving the
Court of the information necessary to determine what, if any,
portion of the claimed hours could be awarded.” (Id. at 14).
As to the corporate benefit doctrine, Fund I, PRRTFF VI, and
TFF I contend that Ocean Capital fails to satisfy the needed
requirements since: (1) “Ocean Capital has failed to establish
that it conferred a cognizable corporate benefit upon the Funds,
given the conclusory and self-serving nature of the benefits it
identifies”; (2) “the only claim Ocean Capital advanced as
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supposedly conferring a corporate benefit was its counterclaim”
under Section 3655 and this counterclaim was not the direct cause
of any validation of the elections; and (3) the request fails to
provide “any reasonable valuation for the act of seating directors
of its own choosing.” (Id. at 15-16). As to the reasonableness of
the requested fees under the corporate benefits doctrine, these
Funds assert that, even applying the framework established in
Sugarland Industries, Inc. v. Thomas, 420 A.2d 142 (Del. 1980),
Ocean Capital’s request fails because the record does not support
any award as to the asserted benefits and the case does not involve
the sort of novel legal issues or intricate factual development
that would justify a substantial fee award. (Id. at 16-18).
On October 15, 2025, Ocean Capital LLC’s Reply in Further
Support of Motion to Award Attorneys’ Fees and Costs was filed.
(Docket No. 273). Therein, they reiterate that “[w]ithout Ocean
Capital’s efforts, Fund stockholders would have their fundamental
right to vote repeatedly rendered meaningless and would still be
represented by legacy directors who squatted in their positions
for years against the will of stockholders.” (Id. at 6).
Additionally, they posit that there is no basis to assert that
Ocean Capital is not entitled to fees just because the two of the
Funds were not formally named in their Section 3655 counterclaim,
because those parties participated fully in the lawsuit, including
the securities claims that the counterclaims were “contingent”
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upon, and their stockholders secured the full benefit of Ocean
Capital’s efforts. (Id. at 7-8).
Furthermore, Ocean Capital argues that this Court can apply
the corporate benefit doctrine. According to Ocean Capital, they
are not making a fee-shifting request, as they seek “a fee award
as (partial) reimbursement — not compensation — for its efforts to
secure benefits for the Funds and their stockholders”. (Id. at 8).
Finally, Ocean Capital asserts that its fee request is
reasonable because the litigation conferred substantial benefits
to stockholders. (Id. at 9). They also posit that the lawsuit was
complex as it concerned claims under Sections 13(d), 14(a), and
20(a) of the Exchange Act asserted by nine Plaintiff funds against
23 Defendants, plus Ocean Capital’s counterclaims for injunctive
relief under Section 3655. (Id. at 11). It also took 3.5 years to
litigate these purportedly simple claims to final mandate and the
Funds even represented to the Court in a previous filing at Docket
No. 202 that the case raised “serious and difficult questions of
law in an area where the law is somewhat unclear.” (Id.). Moreover,
Ocean Capital argues that although the case did not reach discovery
it required 5,150 hours of work because of the claims and amended
claims asserted and challenged by both sides which required
extensive briefing. (Id. at 12). Additionally, Ocean Capital
claims that it is prepared to produce its billing records for this
Court’s in camera review upon the Court’s request. (Id. at 13).
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On November 12, 2025, the Funds filed a Sur-Reply to Ocean
Capital’s Reply to Fund’s: “Opposition to Ocean Capital LLC’s
Motion to Award Attorneys’ Fees and Costs (ECF No. 252 and 263)”
(ECF No. 273). (Docket No. 279). The Funds argue that Ocean
Capital’s 384-page reply included new exhibits and a supplemental
declaration, “introducing — for the first time — a series of new
legal arguments, new evidentiary materials, and multiple
authorities not previously cited.” (Id. at 2) (emphasis omitted).
Specifically, they challenge Ocean Capital’s characterization of
its request as “partial reimbursement” instead of fee shifting.
Accordingly, the Funds submit that the new legal arguments and
factual assertions improperly raised in Ocean Capital’s reply
should be deemed waived. (Id. at 3-4). The Funds argue that even
assuming the Court were to entertain Ocean Capital’s new arguments,
their fee request still fails as a matter of law. (Id. at 4).
Specifically, they posit that the corporate benefits doctrine is
clearly a fee-shifting doctrine which allows “recovery only when
a plaintiff’s affirmative litigation efforts have conferred a
measurable benefit upon the corporation or its shareholders” and
cannot be labeled as reimbursement as Ocean Capital does. (Id. at
5) (emphasis omitted). Furthermore, they argue that Ocean
Capital’s fee request “fails the third Sugarland factor: that the
resulting benefit must be causally related to the lawsuit,” because
the “validation of the elections flowed from the dismissal of the
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Funds’ federal claims, not from Ocean Capital’s counterclaim.”
(Id. at 6). Also, the Funds contend that Ocean Capital cannot
satisfy Sugarland’s causation requirement. (Id. at 7). In
addition, the Funds submit that having failed to substantiate its
hourly rates or provide any competent evidence of prevailing market
conditions, Ocean Capital now attempts make its invoices available
for in camera review, which according to them is not supported by
the cited caselaw. (Id. at 8). The Funds posits that without the
invoices, neither the Funds nor the Court can meaningfully evaluate
the reasonableness of the fees claimed and that this deficiency
warrants denial of the request for attorneys’ fees. (Id. at 9).
On November 13, 2025, Ocean Capital filed Ocean Capital LLC’s
Notice of Supplemental Evidence in Support of Motion to Award
Attorneys’ Fees and Costs. (Docket No. 281). To support its
averment that the requested fee award is reasonable, Ocean Capital
asserts that once its nominees were seated as directors, the newly
reconstituted Boards acted diligently to explore a variety of
options to return fair market value to stockholders and made
various proposals that have resulted in significant monetary
benefits to stockholders. (Id. at 3).
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II. LEGAL STANDARD
The Federal Rules of Civil Procedure provide that a motion
moving for attorney’s fees must: (i) be filed no later than 14
days after the entry of judgment; (ii) specify the judgment and
the statute, rule, or other grounds entitling the movant to the
award; (iii) state the amount sought or provide a fair estimate of
it; and (iv) disclose, if the court so orders, the terms of any
agreement about fees for the services for which the claim is made.
Fed. R. Civ. P. 54(d)(2)(B)(i)-(iv).
Under the American Rule, each party ordinarily bears its own
attorneys’ fees absent statutory or contractual authorization.
Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 247
(1975). Statutory or contractual authorization is not applicable
here. The action that gives rise to the Motion for Attorneys’ Fees
is not grounded in the Securities Exchange Act or any other federal
statute. It is grounded in state law counterclaims filed under
supplemental jurisdiction pursuant to 28 U.S.C. § 1367(a). See
(Docket No. 121 at 39). Those state law claims were brought
pursuant to the Puerto Rico General Corporations Law.
Where state law supplies the basis of the decision — either
in diversity or supplemental jurisdiction — “the applicable
standard of law for the determination of attorney’s fees is state
law.” Flovac, Inc. v. Airvac, Inc., No. CV 12-1348 (SEC), 2017 WL
1194203, at *1 (D.P.R. Mar. 30, 2017); Rodríguez-López v.
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Institución Perpetuo Socorro, Inc., 616 F. Supp. 2d 200, 202
(D.P.R. 2009). Accordingly, state law governs the issue of counsel
fee availability here.
In Puerto Rico, Rule 44.1(d) of the Puerto Rico Rules of Civil
Procedure governs the imposition of attorneys’ fees. P.R. Laws
Ann. tit. 32, App. III, Rule 44.1(d); see also IOM Corp. v. Brown
Forman Corp., 627 F.3d 440, 451 (1st Cir. 2010). Rule 44.1(d)
permits attorneys’ fees only where a “party or its lawyer has acted
obstinately or frivolously.”
In conducting this analysis, courts have “considerable
discretion in determining the amount of attorneys’ fees to be
bestowed.” Rivera v. LifeLink Found., Inc., 255 F. Supp. 3d 327,
333 (D.P.R. 2017).3
III. APPLICABLE LAW AND ANALYSIS
A. Ocean Capital has failed to establish its entitlement to
attorneys’ fees under Rule 44.1(d).
Under Puerto Rico law, attorneys’ fees are not meant to
compensate a litigant for the total costs incurred in litigation.
Id. Since Ocean Capital’s Motion for Attorneys’ Fees is based on
3 Because the issue presented concerns the legal availability of attorneys’ fees
under Puerto Rico law, the Court’s determination rests solely on a question of
law rather than a discretionary assessment of obstinacy.
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the litigation surrounding its counterclaims under Section 3655,
Puerto Rico law governs.
A review of the Puerto Rico General Corporations Law confirms
that neither Section 3655 nor any other provision contains a fee-
shifting clause.
Ocean Capital does not invoke Rule 44.1(d), nor does it base
its request on allegations of frivolousness or obstinacy. In the
absence of a statutory fee-shifting provision and absent a finding
of obstinacy, Puerto Rico law does not authorize an award of
attorneys’ fees. See IOM Corp., 627 F.3d at 451–52.
In addition to its main fee-shifting argument, Ocean Capital
later characterized its request as “partial reimbursement”. That
distinction does not alter the analysis. Under Puerto Rico law,
any court-ordered transfer of litigation expenses from one party
to another constitutes an award of attorneys’ fees subject to Rule
44.1(d), unless expressly authorized by statute. The label
attached to the request cannot circumvent the substantive
limitations imposed by Puerto Rico law.
Thus, based on the governing statutory framework, the Court
DENIES the Motion for Attorneys’ Fees.
B. The corporate benefit doctrine
Ocean Capital alternatively urges the Court to apply
Delaware’s corporate benefit doctrine. Even assuming the doctrine
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applies under Delaware law, Puerto Rico has not adopted such an
equitable exception to the American Rule. Rule 44.1(d) governs fee
awards absent specific statutory authorization. To recognize an
additional equitable basis for fee shifting would expand
substantive state law beyond what Puerto Rico courts have
authorized.4
Even assuming arguendo that Delaware’s corporate benefit
doctrine were applicable, Ocean Capital would still bear the burden
of demonstrating that the alleged corporate benefits were causally
related to its affirmative litigation efforts, rather than to the
dismissal of the federal securities claims or the appellate
mandate. On the present record, the Court need not and does not
resolve that question, because the threshold issue of entitlement
under Puerto Rico law is dispositive.
Thus, the Court declines to apply the corporate benefit
doctrine.
4 The Court does not suggest that Puerto Rico could never recognize an equitable
corporate-benefit theory. The question is whether a federal court may create or
extend such a doctrine in the absence of controlling authority from the Puerto
Rico Supreme Court. Puerto Rico has adopted a specific statutory framework
governing attorneys’ fees and has conditioned recovery on a finding of
frivolousness or obstinacy. Accordingly, it would be inappropriate for this
Court to expand the substantive availability of fee awards beyond those limits.
See Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).
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C. Reasonability of Attorneys’ Fees
Irrespective of the applicability of the corporate benefit
doctrine or any other theory, Ocean Capital bears the burden of
establishing the reasonableness of the fees sought. See Liberty
Mut. Ins. Co. v. Cont’l Cas. Co., 771 F.2d 579, 582 (1st Cir.
1985).
Here, Ocean Capital requests $5,790,575.00 for legal services
rendered by Vinson & Elkins, LLP and Vicente Law Office LLC, and
provides aggregate hours and totals. However, even if fees were
otherwise available, Ocean Capital has not provided
contemporaneous billing records, detailed time entries, or
evidence of prevailing market rates sufficient to permit
meaningful review.5 A fee applicant bears the burden of documenting
the hours expended and rates claimed. See Hensley v. Eckerhart,
461 U.S. 424, 433 (1983). On this record, the Court could not
determine reasonableness.
The Court has also reviewed Ocean Capital’s Notice of
Supplemental Evidence (Docket No. 281). Even accepting those
representations regarding post-seating financial actions by the
5 Ocean Capital attempts to excuse its failure to submit documentation supporting
its request for attorneys’ fees by asserting that billing records are available
for in camera review. However, Ocean Capital has not articulated a basis
warranting in camera review in the first instance. Moreover, the out-of-district
authorities it cites do not support the proposition advanced. In those cases,
in camera review was conducted to examine redacted billing entries that had
already been submitted in connection with a fee application. Here, by contrast,
no supporting documentation has been filed.
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reconstituted boards, the availability of attorneys’ fees turns on
entitlement under governing law, not on the magnitude of any
asserted post-judgment benefits. On this record, the Court could
not determine reasonableness.6 Thus, the Court, need not go any
further in its analysis.
IV. CONCLUSION
For the foregoing reasons, the Motion for Attorneys’ Fees is
DENIED.
IT IS SO ORDERED.
In San Juan, Puerto Rico, on February 20, 2026.
/s/ Gina R. Méndez-Miró
GINA R. MÉNDEZ-MIRÓ
UNITED STATES DISTRICT JUDGE
6 Significantly, Ocean Capital counsel did not assume legal representation in
this action on a contingent basis, (Docket No. 252 at 19), which also weighs
against granting the requested fees.
Case 3:22-cv-01101-GMM Document 289 Filed 02/20/26 Page 20 of 20