Bank of America, N.A. v. JB Hanna, LLC et al

Filing 264

ORDER granting 214 Motion for Attorney Fees in favor of Hanna's Candle Company, JB Hanna, LLC, Kerzen Properties, LLC, Burt Hanna against Bank of America, N.A. in the amount of $415,058.63. ORDER denying 219 Motion for Attorney Fees. Signed by Honorable Brian S. Miller on August 28, 2012. (src)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF ARKANSAS
FAYETTEVILLE DIVISION
BANK OF AMERICA, N.A.
v.

PLAINTIFF

CASE NO. 5:10CV05220 BSM

JB HANNA, LLC;
KERZEN PROPERTIES;
BURT HANNA; and
HANNA’S CANDLE COMPANY

DEFENDANTS
ORDER

Defendant Burt Hanna moves for an award of $619,490.50 in attorney’s fees pursuant
to Federal Rule of Civil Procedure 54(d)(2). [Doc. No. 214]. Plaintiff Bank of America, N.A.
objects [Doc. No. 238] and also moves for an award of its fees in the amount of
$2,275,415.40. [Doc. No. 219]. Hanna’s motion is granted in the amount of $415,058.63 and
Bank of America’s motion is denied.
I. BACKGROUND
This dispute arose out of several loans made by Bank of America to Burt Hanna and
several of his businesses. Bank of America filed its original complaint on November 10,
2010, alleging breach of contract, foreclosure of rents, turnover, and breach of guaranty.
Hanna answered on December 7, 2010, and filed a counterclaim alleging fraud, breach of
contract, breach of fiduciary duty, deceptive trade practices, rescission, and reformation.
Hanna’s counterclaims were dismissed on summary judgment, and Bank of America’s claims
were tried to a jury over seven days beginning on June 18, 2012. Nine separate breach of
contract issues were submitted to the jury, and the jury returned a verdict in favor of Hanna

on all claims.
Hanna now moves for his attorney’s fees pursuant to Arkansas Code Annotated
section 16-22-308, which permits an award of fees to the prevailing party in a breach of
contract action. Bank of America objects, arguing that Hanna is not a prevailing party for
purposes of the statute considering that all of Hanna’s counterclaims, which sought
$37,000,000 in damages, were dismissed before trial. Alternatively, it contends that the
majority of Hanna’s fees were related to the counterclaims. Hanna replies that he ultimately
prevailed in the litigation as evidenced by the judgment entered in his favor. He also asserts
that his counterclaims were not dismissed on the merits, but rather because they were timebarred, and that, in fact, the factual bases for his counterclaims were also the bases for his
affirmative defenses to Bank of America’s claims.
Bank of America also moves for an award of fees, contending that this was a simple
contract case that Hanna made unnecessarily complex with scorched earth litigation tactics.
It further contends that each of the loans at issue contained express attorney’s fees provisions
and that those terms should be enforced for Hanna’s failure to perform under the contracts.
II. DISCUSSION
Hanna’s fee request is granted in the amount of $415,058.63 because Hanna is the
prevailing party, and Bank of America’s fee request is denied because it was not the
prevailing party.
A.

Hanna’s Fee Petition
State law governs petitions for attorney’s fees in diversity cases. Lamb Engineering
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& Const. Co. v. Nebraska Public Power Dist., 103 F.3d 1422, 1434 (8th Cir. 1997). Under
Arkansas law, a court may award reasonable fees to the prevailing party in a breach of
contract case. Ark. Code Ann. § 16-22-308. Such an award is not required; however, it is
instead left to the discretion of the trial court. Perry v. Baptist Health, 238 Ark. 114, 116
(2006). To guide this discretion, the Arkansas Supreme Court has articulated a variety of
factors to be considered, including: (1) experience and ability of the attorneys; (2) time and
labor required to perform the legal service; (3) amount involved in the case and the results
obtained; (4) the novelty and difficulty of the issues involved; (4) the fee customarily charged
in the locality; (5) whether the fee is fixed or contingent; (6) the time limitations imposed on
the client; and (7) the likelihood, if apparent to the client, that the acceptance of the particular
employment will preclude other employment by the lawyer.
Hanna’s fee petition is supported by itemized billing records indicating that Hanna
incurred $619,490.50 in legal fees as a result of this litigation. The following are factors
weighing in favor of granting Hanna’s fee petition. The $265 hourly fee charged by Hanna’s
counsel, Tim Brooks and Jeff Moore, is reasonable based on the complexity of the case, their
years of experience, and their ability as demonstrated in their filings and in their court
appearances. The time and labor required to perform the services provided by counsel, as
demonstrated in the billing records, is somewhat reasonable but includes work performed in
support of Hanna’s unsubstantiated counterclaims. Finally, the fees requested are reasonable
given the dollar amount in dispute and the results Hanna obtained.
Weighing against Hanna’s petition for fees is the fact that a substantial amount of time
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was spent by counsel pursuing counterclaims that proved unfruitful. Based on a review of
the records and an assessment of the in-court time and chambers time expended in reviewing
and ruling on Hanna’s counter-claims, it is determined that 1/3 of the time spent by counsel
was in preparing and pursuing Hanna’s unfruitful counterclaims. For these reasons, Hanna’s
fee request is reduced by $204,431.87 and Hanna is awarded attorney’s fees in the amount
of $415,058.63.
B.

Bank of America’s Fee Petition
Bank of America’s motion for attorney’s fees is denied because it did not ultimately

enforce its rights under the contracts.
Although Bank of America successfully defended against Hanna’s numerous
counterclaims, only one of those counterclaims sounded in contract. The breach of contract
counterclaim asserted that Bank of America was required to refrain from declaring a default
for an improper purpose, to refrain from accelerating for an improper purpose, and to refrain
from assessing default rates of interest without cause or justification. Summary judgment was
granted in favor of Bank of America on this claim; consequently, it was the prevailing party
under Ark. Code Ann. § 16-22-308. Bank of America, however, did not provide a list of time
and money spent defending against this counterclaim. Therefore, it is not possible to
determine the amount of fees properly allocable.
Bank of America’s principal argument, however, is not based on the Arkansas statute,
but on the fact that the loan agreements contain provisions requiring Hanna to pay Bank of
America’s reasonable fees and costs in enforcing its rights under the agreements. The
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question is not whether those provisions are valid and enforceable, but whether the outcome
of this litigation, a total defense verdict, triggers the right to repayment. Importantly, the
provisions do not contain “prevailing party” language. Instead, they provide as follows:
If at any time or times hereafter Lender engages legal counsel for advice or other
representation to enforce the rights of Lender against Borrower under the Loan
Documents upon occurrence of an Event of Default . . . then all reasonable fees and
expenses advanced of such legal counsel and all litigation costs . . . shall constitute
a part of the Obligations and be payable on demand.
The undersigned can find no authority for the proposition that a contractual attorney’s fees
provision is enforceable in favor of a party that ultimately “lost” the litigation over that
contract, even though the provision itself does not require that party to “win.”
Here, Bank of America sued to enforce several contracts and “lost” on each contract.
Notwithstanding the lack of legal authority for the position that a lender can sue a borrower,
lose, and still recover fees, it would seem patently unfair and illogical to force Hanna to pay
Bank of America’s fees incurred in the unsuccessful enforcement of its rights under the
contracts. Although the bank certainly acted in good faith throughout this litigation, if it were
held that a lender could recover any fees incurred in any litigation—regardless of the
result—lenders with less integrity would have incentive to sue their borrowers for any or no
reason at all. Accordingly, Bank of America’s motion for attorney’s fees is denied.
III. CONCLUSION
For the reasons set forth above, Hanna’s motion for attorney’s fees [Doc. No. 214] is
granted in the amount of $415,058.63, and Bank of America’s motion for attorney’s fees
[Doc. No. 219] is denied.
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IT IS SO ORDERED this 28th day of August 2012.

________________________________
UNITED STATES DISTRICT JUDGE

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