T.S. ELLIS, III, District Judge.
At issue post-judgment and appeal in this landlord-tenant case is the tenant's claim for attorney's fees pursuant to a lease provision that granted attorney's fees to the "substantially prevailing party" in any suit brought to enforce the lease. The landlord plaintiff brought such a suit, which, in the end, was resolved by the entry of summary judgment in favor of the defendant tenant on all of the landlord's claims and in favor of the landlord on the tenant's single counterclaim. The landlord's appeal failed as the Court of Appeals for the Fourth Circuit affirmed the grant of summary judgment by unpublished opinion. Route Triple Seven Limited P'ship v. Total Hockey Inc., 607 Fed. Appx. 299 (4th Cir.2015) (unpublished). Now at bar is the tenant's fee claim, which the landlord disputes, raising the following questions:
As the parties have fully briefed and argued these questions, this fee dispute is now ripe for disposition.
The facts pertinent to the fee dispute may be succinctly summarized.
At the time the Lease was executed, the defendant was not qualified to do business in Virginia. Shortly thereafter, plaintiff advised defendant of this shortcoming, and defendant then promptly applied for and obtained a Certificate to transact business in Virginia. Defendant had also failed to pay the requisite rent deposit at the time of the Lease execution, but promptly paid this rent deposit within 30 days of the Lease execution. Additionally, defendant sent plaintiff plans and specifications within 30 days of the Lease execution as was required, but it did not send ductwork plans until nearly two months after the Lease execution. Notably, plaintiff did not seek to terminate the Lease on any of these grounds.
Plaintiff failed to deliver the premises to defendant within fifteen days of June 1, 2013, as the Lease required. As a result, defendant, in accordance with the Lease, elected to open for business after September 1, 2013, and to pay only minimum rent through January 2014, but to begin paying minimum rent and the additional rent payments beginning in February 2014.
On January 13, 2014, plaintiff filed the instant action, alleging three breaches of the Lease:
Plaintiff's complaint further alleged that defendant's exercise of the Lease remedy in response to plaintiff's failure to deliver the premises on time violated Virginia public policy.
On February 11, 2014, defendant filed an answer denying that any material breach occurred and a counterclaim further alleging that plaintiff failed to provide defendant with an Improvement Allowance as required by the Lease. Thereafter, on August 8, 2014, defendant moved for summary judgment on all of plaintiff's claims.
Plaintiff's first two breach-of-contract claims — (i) defendant's failure to obtain a certificate of authority to transact business in Virginia and (ii) defendant's brief delay in paying the rent deposit — were not material because defendant promptly cured the breaches. And with respect to the third alleged breach-of-contract claim, no breach in fact occurred because the defendant timely delivered to defendant the requisite plans and specifications. Defendant was also awarded summary judgment on plaintiff's claim that defendant's exercise of its remedies under the Lease violated Virginia public policy, given that (i) the parties were sophisticated, (ii) plaintiff drafted the lease and hence the remedies clause, and (iii) the remedies clause in no way violated any Virginia public policy. In sum, defendant was granted summary judgment on all of plaintiff's claims and plaintiff's cross-motion for summary judgment on its claims was denied. Plaintiff's sole victory occurred with respect to defendant's single counterclaim; the Lease clearly barred defendant from seeking money damages for the breach of the Lease alleged in the counterclaim. An Order issued on September 5, 2014, memorializing these rulings. See Route Triple Seven Limited P'ship v. Total Hockey, Inc., 1:14cv30 (Sept. 5, 2014) (Order) (Doc. 33).
Promptly thereafter, defendant filed a motion for attorney's fees pursuant to the Lease provision entitling the "substantially prevailing party" to attorney's fees in any suit to enforce the Lease.
On June 22, 2015, in an unpublished per curiam decision, the Fourth Circuit affirmed the entry of summary judgment in favor of defendant in all respects. Route Triple Seven Limited P'ship, 607 Fed. Appx. 299 (4th Cir.2015). Defendant then promptly renewed its motion for attorney's fees.
Analysis of this fee claim dispute properly begins with plaintiff's threshold argument that because the attorney's fee
Rule 9(g) states that "[i]f an item of special damage is claimed, it must be specifically pled." And it is true that the Fourth Circuit has held that "attorneys' fees are items of special damage for Rule 9(g) purposes." Atlantic Purchasers, Inc. v. Aircraft Sales, Inc., 705 F.2d 712, 716 n. 4 (4th Cir.1983). From these two propositions, plaintiff completes the syllogism, arguing that defendant's fee claim is barred because it was not specifically pled in defendant's answer. But there is a flaw in plaintiff's syllogism; defendant's claim for attorney's fees is not an item of special damages; it is not an element of any claim but simply a contract entitlement for a "substantially prevailing party." In these circumstances, Rule 9(g) does not apply. Put differently, attorney's fees are special damages to which Rule 9(g) applies only when the substantive law requires that the prevailing party prove attorney's fees as an element of damages; Rule 9(g) does not apply where, as here, attorney's fees are sought as a recoverable cost pursuant to a contract.
Circuit authority is consistent with this result. As plaintiff points out, the Fourth Circuit, in Atlantic Purchasers, concluded that attorney's fees are special damages for purposes of Rule 9(g). Atlantic Purchasers, 705 F.2d at 716 n. 4. Significantly, however, the court did so in the context of an action in which the prevailing party sought attorney's fees pursuant to the North Carolina Unfair Trade Practices Act, which requires attorney's fees to be proven as an element of damages. 705 F.2d at 715.
Although it appears the Fourth Circuit has not squarely addressed whether attorney's fees are special damages for purposes of Rule 9(g) in the circumstances at bar, close examination of Rule 9(g) and Rule 54(d)(2)(A) points persuasively in favor of the result reached here. Classifying attorney's fees as special damages where, as here, the fee award is sought as a recoverable cost pursuant to a contract is inconsistent with Rule 54(d)(2)(A), which provides that "[c]laims for attorneys' fees... shall be made by motion unless the substantive law governing the action provides for the recovery of such fees as an element of damages to be proved at trial." If all attorney's fees were special damages and subject to Rule 9(g), Rule 54(d)(2)(A) would make little sense, as it would effectively require a party seeking attorney's fees to plead its claim for a fee award as an element of damages pursuant to Rule 9(g) and later file an additional — and superfluous — motion for attorney's fees pursuant to Rule 54(d)(2)(A). In summary, a
Moreover, this conclusion is consistent with the purpose of Rule 9(g), namely to give notice to the opposing party "`as to the nature of the damages claimed in order to avoid surprise'" and to the court as to "`the substance of the complaint.'" Carnell Const. Corp. v. Danville Redev. & Housing Auth., 745 F.3d 703, 725 (4th Cir.2014) (quoting Great Am. Indem. Co. v. Brown, 307 F.2d 306, 308 (5th Cir. 1962)). When attorney's fees are sought on the basis of a statutory right as an element of damages, the opposing party would lack notice that it could be liable for attorney's fees but for inclusion of these special damages in the pleadings. But when attorney's fees are sought as recoverable costs at the conclusion of a dispute pursuant to a contractual provision between the parties, notice by way of pleading is unnecessary because, as here, the contract itself provides notice.
The result reached here comports not only with the purpose of Rule 9(g) but also with Rule 54(c), which prescribes that "every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if the party has not demanded such relief in his pleadings." The Fourth Circuit has "liberally construed" Rule 54(c), "leaving no question that it is the court's duty to grant whatever relief is appropriate in the case on the facts proved." Robinson v. Lorillard Corp., 444 F.2d 791, 803 (4th Cir.1971). Of course, Rule 54(c) is not limitless; as the Fourth Circuit has noted, even where Rule 9(g) does not apply "[a] party will not be given relief not specified in its complaint where the `failure to ask for particular relief so prejudiced the opposing party that it would be unjust to grant such relief.'" Atlantic Purchasers, 705 F.2d at 716 (quoting United States v. Marin, 651 F.2d 24, 31 (1st Cir.1981)). A party may be prejudiced if the additional relief would significantly increase its liability and the party was not "notified of the possibility of the ... relief prior to the plaintiff's tender of a proposed judgment." Id. at 717. Although the Fourth Circuit has not determined whether failure to plead attorney's fees results in prejudice, a district court in this circuit has found that there is no prejudice when the governing law gives notice to the opposing party that it might be liable for attorney's fees. Calland v. Carr, No. 9:14-cv-0420, 2015 WL 4394977 at *3 (D.S.C. July 16, 2015) (finding no prejudice when plaintiff "`ha[d] notice of the potential for an award of attorney fees'") (quoting Utilities Constr. Co. v. Wilson, 321 S.C. 244, 468 S.E.2d 1 (S.C.Ct. App.1996)). Importantly, Rule 54(c)'s prejudice exception and Rule 9(g) are two complimentary means of advancing the same goal — to ensure that parties receive notice that they could be liable for attorney's fees. Indeed, it is precisely because an opposing party is not prejudiced by a failure to plead attorney's fees pursuant to a contract that Rule 9(g) is unnecessary and does not apply.
Although there is scant authority directly on point, the few pertinent published opinions are fully consistent with the result here.
Yet, plaintiff argues that Rule 54(c) does not apply in this case because defendant's fee claim is barred by res judicata. Specifically, plaintiff contends that because defendant pled its fee claim only in connection with its counterclaim, and the counterclaim was subsequently dismissed on summary judgment without appeal, claim preclusion bars consideration of the fee claim. It is well-settled that there "are three elements necessary to trigger claim preclusion by res judicata: (1) a judgment on the merits in a prior suit resolving (2) claims by the same parties or their privies and (3) a subsequent suit based on the same cause of action." Aliff v. Joy Mfg. Co., 914 F.2d 39, 42 (4th Cir.1990). When res judicata applies, the effect of claim preclusion is "that if a later litigation arises from the same cause of action as the first, then the judgment in the prior action bars litigation `not only of every matter actually adjudicated in the earlier case, but also of every claim that might have been presented.'" Orca Yachts, LLC v. Mollicam, Inc., 287 F.3d 316, 318 (4th Cir.2002) (quoting In re Varat Enters., Inc., 81 F.3d 1310, 1315 (4th Cir.1996)).
Here, defendant's fee claim was neither actually adjudicated nor could it have been adjudicated. Although defendant pled attorney's fees in its counterclaim, the issue was never argued prior to
Proper analysis of the fee claim dispute next considers whether the defendant is not a "substantially prevailing party" within the meaning of Section 2701 of the Lease and is therefore barred from recovering attorney's fees. This argument needs little attention because, as defendant correctly argues, there can be no doubt that defendant substantially prevailed.
Under Virginia law, it is well-settled that a "lease is a contract, and when the terms of a contract are clear and unambiguous, a court must give them their plain meaning." Levisa Coal Co. v. Consolidation Coal Co., 276 Va. 44, 662 S.E.2d 44, 51 (2008). The Supreme Court of Virginia has defined "prevailing party" as a "party in whose favor a judgment is rendered, regardless of the amount of damages awarded." Sheets v. Castle, 263 Va. 407, 559 S.E.2d 616, 620 (2002). In determining whether a party is a prevailing party, the "general result should be considered, and inquiry made as to who has, in the view of the law, succeeded in the action." Sheets, 559 S.E.2d at 620. Similarly, in RF & P Corp. v. Little, 247 Va. 309, 440 S.E.2d 908, 917 (1994), the Supreme Court of Virginia held that a litigant was entitled to attorney's fees as the "substantially prevail[ing]" party under the Virginia Freedom of Information Act even though the litigant "did not prevail on each theory he advanced to the trial court." Id. at 917 n. 5. Instead the Supreme Court went on to say that "[t]o obtain an award of attorney's fees ... [the litigant] was required to show that he substantially prevailed on the merits of the case, not that he prevailed on every issue he raised." Id. In sum, close examination of pertinent Virginia case law reveals that a substantially prevailing party need not succeed on every claim raised, but rather need only achieve significant success on a majority of issues in dispute. In this regard, a Seventh Circuit decision in similar circumstances reached the conclusion that a party is a "substantially prevailing party" if "it win[s] more [issues] than it loses." Tax Track Sys. Corp. v. New Investor World, Inc., 478 F.3d 783, 788 (7th Cir. 2007).
Here, defendant is a substantially prevailing party because it won summary judgment on all three of plaintiff's breach-of-contract claims and also on plaintiff's argument that defendant's invocation of § 201(e) of the Lease violated Virginia public policy. These rulings, affirmed by the Fourth Circuit, clearly were the bulk of the matters in dispute. Although plaintiff won summary judgment on defendant's counterclaim, this counterclaim was limited to one relatively small issue. Thus, there
Thorough analysis of the fee dispute next considers plaintiff's argument that defendant is precluded from recovering attorney's fees by virtue of the Lease provision limiting defendant's remedies to termination of the Lease. This argument fails because it ignores the Lease's controlling terms and general principles of contract interpretation.
Plaintiff argues that Section 3302 of the Lease overrides Section 2701 and bars an award of attorney's fees. In pertinent part, Section 3302 states:
By its own terms, however, this provision deals exclusively with claims for breaches of the Lease; it does not bar claims for attorney's fees that arise only after the contract issues have been adjudicated. More importantly, Section 3302's exclusivity clause begins with the phrase "[e]xcept as set forth herein" and clearly Section 2701 falls squarely within this exception.
What is more, plaintiff's argument violates the well-settled maxim of contract interpretation that "[n]o word or clause in the contract will be treated as meaningless if a reasonable meaning can be given to it, and there is a presumption that the parties have not used words needlessly." City of Chesapeake v. States Self-Insurers Risk Retention Grp., Inc., 271 Va. 574, 628 S.E.2d 539, 541 (2006). Here, plaintiff's interpretation of the Lease would render Section 2701 of the Lease meaningless. Plaintiff seeks to avoid this conclusion by contending that the provisions can be read together by interpreting the attorney's fee award as allowing enforcement of that award against only the plaintiff's interest in the property that is the subject of the Lease. But this argument overlooks the fact that, by its own terms, Section 3302 applies only to claims for breaches of the Lease. Defendant's claim for attorney's fees is not based on plaintiff's breach of the Lease and is governed by an entirely different section.
In sum, by the Lease's terms, defendant is entitled to an award of attorney's fees. Determination of the award's magnitude remains.
Because there is no bar to the fee recovery, the next question to address is whether the fees claimed are reasonable in the circumstances. They are not. Some hourly rates are excessive in the circumstances and the descriptions of many tasks are deficient, as many time entries lump multiple
In its petition, defendant seeks attorney's fees in the amount of $224,428.00, along with nontaxable costs in the amount of $8,163.59 and taxable costs in the amount of $3,084.50. Plaintiff argues that $112,311.00 is a reasonable figure for attorney's fees in this case,
The well-settled lodestar methodology is the important starting point in fee claim evaluation. As the Supreme Court has noted, "the lodestar figure has, as its name suggests become the guiding light." See Gisbrecht v. Barnhart, 535 U.S. 789, 801, 122 S.Ct. 1817, 152 L.Ed.2d 996 (2002).
With these principles in mind, analysis appropriately proceeds to the determination of a reasonable attorney's fee in this case.
The starting point in the lodestar analysis is an assessment of the reasonableness
The prevailing market rate of attorney's fees must be determined based on the "relevant community where the district court sits (i.e., the Eastern District of Virginia)." Grissom, 549 F.3d at 321. Accordingly, in order to support the claimed rates, defendant must produce "satisfactory specific evidence of the prevailing market rates in the relevant community." Robinson v. Equifax Info. Servs., LLC, 560 F.3d 235, 244 (4th Cir.2009) (internal quotation marks and citations omitted). Such evidence consists of "affidavits of other local lawyers who are familiar both with the skills of the fee applicants and more generally with the type of work in the relevant community." Id. at 245.
Defendant has submitted an affidavit from Craig C. Reilly, who details his extensive experience litigating cases in this district and his familiarity with commercial disputes similar to the instant case. The Reilly Declaration states that defendant's rates are reasonable because they are within the range established pursuant to the so-called Vienna Metro Matrix, which establishes a range of reasonable hourly rates in Northern Virginia based on the attorneys' experience level. See Intelligent Verification Sys., LLC v. Microsoft Corp., No. 2:12-cv-525, 2014 WL 6685440 at *3 (E.D.Va. Nov. 25, 2014) ("[Plaintiff] further supported its claim for the hourly rates sought by relying on the matrix established in Northern Virginia in Vienna Metro LLC v. Pulte Home Corp., 786 F.Supp.2d 1090 (E.D.Va.2011)."). According to the Reilly Declaration, the "rates set forth in the Vienna Metro Matrix are the appropriate guideposts for the determination of reasonable, prevailing hourly rates in this action" because these rates comport with those charged by Northern Virginia firms for "complex commercial real estate litigation." See Reilly Decl. ¶ 15.
Defendant seeks fees for time logged by seven individuals who work for two different law firms. From Armstrong Teasdale LLP, defendant has submitted rates of $195/hour for paralegal Michelle Sutton, $260/hour for second-year associate Laura Bentele, $400/hour for partner Nancy Hawes, who has ten years' experience, $400/hour for partner Matthew Reh, who has sixteen years' experience, and $575/hour for partner Thomas Weaver, who has more than twenty years' experience.
All hourly rates sought by defendant are at or below the rates quoted in the Vienna Metro Matrix, but this fact, by itself, does not conclusively establish that they are reasonable. To begin with, the Vienna Metro Matrix, which comes from a district court opinion, is not binding here. In addition, that case involved complex commercial real estate litigation, not a straightforward lease dispute. Vienna Metro LLC, 786 F.Supp.2d at 1091. Moreover, the Reilly Declaration does not explain why Mr. Greenspan, for example, a partner who has less experience than both Mr. Reh and Mr. Weaver, has submitted an hourly rate greater than the rates submitted by the more experienced lawyers. Nor is there an explanation for why Mr. Thomas, a fourth-year associate, has submitted an hourly rate that exceeds those
At bottom, the Vienna Metro Matrix is a glove that does not fit here. It describes a type of litigation significantly more complex than presented in this case. Indeed, although Mr. Reilly is correct that commercial real estate cases are generally more complex than standard breach-of-contract cases, this case did not present complex or novel legal issues and did not require extensive fact-finding. At the end of the day, its resolution required straightforward application of breach-of-contract principles relevant to what constituted a material breach and whether the election of remedies clause in the Lease accorded with Virginia public policy. Indeed, the case was disposed of by entry of a relatively simple summary judgment Order, which the Fourth Circuit affirmed in a brief, unpublished per curiam decision. Thus, contrary to plaintiff's position, this landlord-tenant dispute was not complex; it was more akin to a garden-variety commercial dispute over a lease for a single store.
In cases similar in nature, difficulty, and complexity to the instant case, courts in this district have recognized rates up to $420/hour for partners, $275/hour for associates with several years' experience, $200/hour for associates with only a few years' experience, and $118.90/hour for paralegals.
Accordingly, for purposes of determining the lodestar amount, Ms. Sutton and Ms. LaBossiere's hourly rates for paralegal work are each reduced to $120/hour. Additionally, Mr. Thomas's hourly rate is reduced to $250/hour, and Ms. Bentele's
The next step in the lodestar analysis is to examine defendant's fee petition to determine the appropriate number of attorney hours to multiply by the hourly rates. Defendant's counsel has already properly exercised billing discretion by removing a number of time entries from the fee petition. See Reh Aff. ¶¶ 11-13; Greenspan Supp. Decl. ¶ 19. Nonetheless, defendant's submitted time entries, in some instances, are unreasonable insofar as they suffer from two common flaws: (1) lumping and (2) vague task descriptions.
Entries that lump multiple tasks together under a single time entry present a significant barrier to a reasonableness review. Indeed, as a court in this district has noted, lumping "simply does not provide the court with a sufficient breakdown to meet [the claimant's] burden to support [a] fee request in specific instances." Project Vote/Voting for Am., Inc. v. Long, 887 F.Supp.2d 704, 716 (E.D.Va.2012). As the court further noted, "[i]nadequate documentation includes the practice of grouping, or `lumping.' several tasks together under a single entry, without specifying the amount of time spent on each particular task." Id. Vague task descriptions present another barrier to a reasonableness review. Entries that do not disclose the nature, volume, or relevance of the documents frustrate any attempt to assess the reasonableness of the time devoted to that task. As one court put it, the absence of detailed documentation precludes the court, as well as opposing counsel, from making a "fair evaluation of the time expended... [and] the nature and need for the service." Uzzell v. Friday, 618 F.Supp. 1222, 1226 (M.D.N.C.1985) (citing Hensley v. Eckerhart, 461 U.S. 424, 441, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983)).
In these circumstances, courts must exercise sound judgment based on knowledge of the case and litigation experience to reduce the number of hours by an appropriate percentage. Courts faced with excessively vague or inadequate descriptions of tasks in fee claims have reduced fee claims by percentages ranging from 20% to 90%.
Here, a reduction is proper because defendant's fee petition is replete with lumped entries
Applying the relevant reductions to the hourly rates and the claimed hours, defendant's total reasonable attorney's fees award in this case is $150,527.35.
For the reasons stated here, it is appropriate that defendant be awarded $150,527.35 in attorney's fees, $1,026.75 in nontaxable costs, and $3,084.50 in taxable costs. It is also worth noting that the litigation over the fee claim in this case bids fair to be the proverbial tail that wags the dog.
An appropriate order will issue.