PAOLI PEAKS, INC. v. WEEKS et al

Filing 81

ENTRY ON PLAINTIFF'S MOTION FOR ATTORNEY FEES - 70 Motion for Attorney Fees is GRANTED in the amount of $85,222.50. See Entry for details. Signed by Judge Richard L. Young on 10/18/2012. (LBT)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
NEW ALBANY DIVISION

)
)
)
)
)
vs.
)
PHILIP D. WEEKS, SALLY P. STOUSE, )
and VANN A. WEEKS, individually and as )
co-trustees of the TRUST ESTABLISHED )
)
UNDER THE LAST WILL AND
TESTAMENT OF CHARLES MARVIN )
)
WEEKS,
)
Defendants.
PAOLI PEAKS, INC., a Missouri
Corporation,
Plaintiff,

4:11-cv-00078-RLY-TAB

ENTRY ON PLAINTIFF’S MOTION FOR ATTORNEYS’ FEES
Plaintiff, Paoli Peaks, Inc. (“Plaintiff”), moves for attorneys’ fees pursuant to
Indiana Code Section 34-52-1-1(b), against the defendants herein, Philip D. Weeks, Sally
P. Stouse, and Vann A. Weeks, individually and as co-trustees of the Trust Established
under the Last Will and Testament of Charles Marvin Weeks (“Defendants”), on grounds
that Defendants initially asserted, and continued to assert throughout the litigation,
frivolous, unreasonable, and groundless claims and defenses. For the reasons set forth
below, Plaintiff’s Motion is GRANTED.
I.

Factual Background and Procedural History
Plaintiff operates a downhill ski area on approximately 68 acres of wooded land it

leases from the Defendants pursuant to a Lease Agreement (“Lease”). The ski operations
1

depend on Plaintiff’s ability to manufacture and maintain an adequate quantity and
quality of artificial snow. In this regard, trees are important to the ski area because they
act as a wind break for the snow, insulate snow from the sun, add aesthetic value, and
satisfy the customers’ expectation of skiing in a natural environment. Given the
importance of trees to the ski area, the Lease granted the Plaintiff the right to “cut timber
on the leased premises in order to improve the ski area.” (Lease ¶ 5). Defendants were
given the right to “[a]ny timber cut from the leased premises (whether marketable or
firewood) . . . .” (Id.).
In June 2011, Defendants entered onto Plaintiff’s Leased Land and informed
Plaintiff’s general manager that they intended to commence a logging operation on the
Leased Land before the end of the month. In an effort to resolve the dispute without
litigation, Plaintiff’s counsel informed Defendants’ counsel that pursuant to well-settled
Indiana law and the terms of the Lease, Defendants’ impending logging of the property
would constitute a violation of the covenant of quiet enjoyment and trespass. Defendants’
counsel responded that “extensive case law research” indicated that Plaintiff’s position
was “without merit,” and there was “absolutely no legal authority that would prevent
[Defendants] from cutting the timber on their property.” (Plaintiff’s Ex. B). Left with no
other option, Plaintiff filed a Complaint for Declaratory Judgment and Injunctive Relief
and a Motion for Preliminary Injunction on July 1, 2011.
The court held an evidentiary hearing on the Plaintiff’s Motion for Preliminary
Injunction on October 7, 2011. Plaintiff presented three witnesses, one of whom was a
2

snowmaking expert from Michigan, who testified that trees are the biggest factor in
protecting snow from the sun and wind, and tree removal would result in decreased
revenue and increased costs, making it difficult for Plaintiff to be profitable. Defendants
called one witness, Philip Weeks (“Weeks”). Although Weeks testified on direct
examination that neither he nor a family member ever had an intention to clear cut trees
on the Leased Land, he testified to just the opposite on cross-examination. (See Transcript
of Testimony of Philip Weeks, Docket # 52 at 20 (admitting that he informed Plaintiff’s
general manager that he wanted to set up a logging operation to log the property)). Not
only did Weeks admit Defendants’ intention to log the property, he also admitted that the
Amended Lease did not grant Defendants the right to do so, (id. at 21-22) (“Q: And
nowhere in the lease does it say that the Weeks shall have the right to cut timber, does it?
. . . A: No.”), nor the right to grant an easement to, for example, a logging company (id. at
21). To that end, Weeks admitted that under the terms of the Lease, Plaintiff had the right
of possession and use of the Leased Land. (Id. at 22). At the conclusion of the hearing,
the court orally granted the Plaintiff’s Motion. A formal written Entry followed.
On October 12, 2011, Defendants filed a Motion for Leave to File An Amended
Answer and Counterclaim, where the Defendants admitted on paper for the first time that
“it was their intention to conduct logging and/or timber removal on the Leased Land.”
(Amended Answer ¶ 15, Docket # 44). Defendants also agreed to the entry of a
Permanent Injunction “consistent with the ruling on the Preliminary Injunction.” (Id. ¶
20).
3

Defendants’ Amended Answer also included an Amended Counterclaim for
conversion and breach of contract. In the Amended Counterclaim,1 Defendants alleged
that, pursuant to the Lease, Defendants were entitled to the trees on the Leased Land that
Plaintiff had cut down, and to trees that have been “uprooted,” “broken off,” and/or
“blown over.” (Amended Counterclaim, Counts I & II, Docket # 44). After the
Magistrate Judge granted the Motion for Leave over Plaintiff’s objection on January 25,
2012, Plaintiff filed a Motion to Dismiss and/or Strike all references to trees that have
been “uprooted,” “broken off,” and/or “blown over.” (Motion to Dismiss and/or Strike,
Docket # 55). Plaintiff argued that the newly amended allegations were directly
contravened by paragraph 5 of the Amended Lease, which only grants Defendants the
right to trees that have been “cut” down. Rather than file a response in opposition,
Defendants moved to voluntarily dismiss the Amended Counterclaim to the extent it
referenced “uprooted,” “broken off,” and/or “blown down” trees. (See Voluntary
Dismissal of Portions of Amended Counterclaim and Response to Motion to Dismiss,
Docket # 59). The court granted that motion on April 23, 2012.
On February 22, 2012, Plaintiff filed a Motion for Judgment on the Pleadings
based on Defendants’ Amended Answer and the unambiguous language of the Lease.
Defendants filed a cursory response asserting that, inter alia, they had a right to a

1

Defendants original Counterclaim included a claim for breach of contract and
conversion based upon the allegation that Plaintiff failed to turn over trees that Plaintiff had cut
down to the Defendants, in violation of paragraph 5 of the Lease. (See Answer and
Counterclaim, Docket # 19).
4

reasonable inspection of the land. On April 30, 2012, the court conducted a telephonic
conference on the Motion. During the conference, Defendants ultimately admitted that
they did not have a unilateral right under Indiana law to enter onto the Leased Land and
conduct a “reasonable inspection.” Accordingly, on that same day, the court granted the
Plaintiff’s Motion for Judgment on the Pleadings and entered a permanent injunction
against Defendants from, inter alia, cutting trees and/or timber on the Leased Land, and
from entering onto the Leased Land without the prior, express permission and direction of
Plaintiff. (See Docket # 68).
This Motion followed.
II.

Discussion
In a diversity case, state law governs a party’s motion for attorneys’ fees. Jackman

v. WMAC Inv. Corp., 809 F.2d 377, 383 (7th Cir. 1987) (citing Alyeska Pipeline Serv. Co.
v. Wilderness Soc’y, 421 U.S. 240, 259 n.31 (1975)). Accordingly, Indiana law governs
the present motion.
Indiana Code Section 34-52-1-1(b) authorizes a trial court to award attorneys’ fees
as costs to a prevailing party if the other party:
(1) brought the action or defense on a claim or defense that is frivolous,
unreasonable, or groundless;
(2) continued to litigate the action or defense after the party’s claim or
defense clearly became frivolous, unreasonable, or groundless; or
(3) litigated the action in bad faith.
IND. CODE § 34-52-1-1(b). In the present Motion, Plaintiff proceeds under subsections
5

(b)(1) and (b)(2).
A claim or defense is “frivolous” if it is taken primarily for the purpose of
harassment, “if the lawyer is unable to make a good faith and rational argument on the
merits of the action,” or “if the lawyer is unable to support the action taken by a good
faith and rational argument for an extension, modification, or reversal of existing law.”
Kahn v. Cundiff, 533 N.E.2d 164, 170 (Ind. Ct. App. 1989). “[A] claim or defense is
‘unreasonable’ if, based on the totality of the circumstances, including the law and the
facts known at the time of filing, no reasonable attorney would consider that claim or
defense was worthy of litigation.” Id. at 170-71. A claim or defense is “groundless” if no
facts exist which support the legal claim presented by the losing party. Id. at 171.
Because of the fear of deterring a litigant’s access to the courts, a claim or defense is not
groundless or frivolous merely because a party loses on the merits. Id. The decision to
award fees under Indiana Code Section 34-52-1-1, and the amount thereof, is a matter of
the court’s discretion. Knowledge A-Z, Inc. v. Sentry Ins., 857 N.E.2d 411, 424 (Ind. Ct.
App. 2006) (stating that the decision to award fees and the amount thereof is reviewed for
an abuse of discretion).
This whole case was centered around Defendants’ contention that they were
allowed to enter onto the Leased Land to conduct a logging operation, notwithstanding
the unambiguous language of the Lease which prohibited them from doing so. Both
before and immediately after this case was filed, Defendants argued that because there are
no Indiana cases which hold “that the cutting of timber by a landlord constitutes a breach
6

of the covenant of quiet enjoyment,”2 their entry onto Plaintiff’s Leased Land to conduct
a logging operation must be lawful. (See Defendants’ Response in Opposition to
Plaintiff’s Motion for Preliminary Injunction at 6). In their Response in Opposition to
Plaintiff’s Motion for Preliminary Injunction, Defendants justified their position by
arguing that the logging would not impact Plaintiff’s skiing operation because the logging
operation: (1) would include trees that are at least twenty inches round; (2) would include
trees that have suffered weather-related effects that Plaintiff has “failed and/or refused to
address;” (3) would take place in the off-season, and (4) would take place in areas that
would not impact the ski runs. (Id. at 2-5). Defendants’ “no harm, no foul” argument
provides no support – under Indiana law or the parties’ Lease Agreement – for
Defendants’ position.
In an attempt to distinguish their case from the multitude of cases cited by Plaintiff
which hold that a landlord cannot enter the lessee’s property without the lessee’s
permission, Defendants argued that their case was “unique because Plaintiff does not live
on the property rented from Defendants but rather operates a business on Defendants’
property during the ski season which runs for approximately 3-4 months each year.” (Id.
at 5-6). Defendants never adequately explained how Defendants’ “unique” relationship

2

The covenant of quiet enjoyment has been the subject of Indiana decisions since the
mid-1800s. See, e.g., Avery v. Dougherty, 2 N.E. 123, 125 (Ind. 1885); Grimes v. Alsop, 7
Blackf. 269, 1844 WL 2976, at *1 (Ind. 1844). It serves to “protect[] the lessee from unlawful
entries by the lessor upon the demised premises,” and to “protect the possessory interests of the
lessee in the beneficial use and enjoyment of the demised property.” Sigsbee v. Swathwood, 419
N.E.2d 789, 797 n.8 (Ind. Ct. App. 1981) (citations omitted).
7

with Plaintiff impacted the court’s analysis as to whether Defendants’ entry onto the
Leased Land violated the covenant of quiet enjoyment. To the extent Defendants were
arguing that the covenant of quiet enjoyment only applies to residential properties,
Defendants failed to provide any case law from this or any other jurisdiction to support
that proposition.
Moreover, at the hearing on Plaintiff’s Motion for Preliminary Injunction,
Defendants’ only witness, Philip Weeks, admitted: (1) he had informed Plaintiff’s general
manager that Defendants wanted to log the Leased Land and intended to set up a logging
operation on the Leased Land; (2) the Lease did not grant Defendants the right to cut
timber on the Leased Land; (3) Plaintiff had the right of possession and use of the Leased
Land under its Lease; and (4) Defendants had no right under the Lease to grant easements
over and under the Leased Land, which would have been needed to conduct logging
operations. In light of this testimony and other testimony from the Plaintiff at the hearing,
the court granted Plaintiff’s Motion for Preliminary Injunction from the bench.
Despite Weeks’ devastating testimony, Defendants filed a Motion for Leave to File
An Amended Answer and Counterclaim that alleged, in pertinent part, that Defendants
were entitled to trees that have been “uprooted,” “broken off,” and/or “blown over.”
After the Plaintiff was compelled to file a Motion to Dismiss and/or Strike because the
allegations directly contravened the express provisions in the Lease, Defendants
voluntarily dismissed those allegations. Ultimately, the case ended with Plaintiff’s
Motion for Judgment on the Pleadings, but only after the court held a telephonic
8

conference during which the Defendants admitted they had no right to a “reasonable
inspection” of the land without Plaintiff’s permission.
In the face of facts and law that are clearly against Defendants, they argue that the
portion of their Amended Counterclaim that survives – i.e., that the Plaintiff cut down at
least two trees and did not turn those trees over to Defendants – has merit. The fact that
Defendants may have had a meritorious Counterclaim for conversion and breach of
contract based upon the allegation that Plaintiff cut down two trees on the Leased Land
and did not give them to the Defendants in contravention of paragraph 5 of the Lease does
not persuade the court to change its decision. First, Defendants’ Counterclaim is
irrelevant to the issue of whether Defendants’ defense of Plaintiff’s claims was frivolous,
unreasonable, and/or groundless. Second, Defendants have elected not to pursue the
Counterclaim because, in essence, it is not worth the fight. (See Response to Order to
Show Cause, Docket # 79).
The purpose of Indiana Code Section 34-52-1-1 is to strike a balance between “an
attorney’s duty of zealous advocacy and ‘the important policy of discouraging
unnecessary and unwarranted litigation.’” See Mitchell v. Mitchell, 695 N.E.2d 920, 924
(Ind. 1998) (quoting Kahn, 533 N.E.2d at 170). It is difficult to strike a balance in this
case. At no time was the law from any jurisdiction, nor any terms of the parties’ Lease
Agreement, supportive of Defendants’ defense to Plaintiff’s claims. Defendants knew
this, as best exemplified by Weeks’ testimony at the hearing on Plaintiff’s Motion for
Preliminary Injunction. Yet, they continued to litigate the case; first by moving to amend
9

their Counterclaim with allegations that were not supported by the unambiguous terms of
the Lease, and second, by asserting in their Response to Plaintiff’s Motion for Judgment
on the Pleadings that they had a right to a reasonable inspection of the Leased Land when
in fact, they conceded only after the court’s telephonic conference that they had no such
right. The court therefore finds this case crossed the line from zealous advocacy to
unnecessary and unwarranted litigation. Accordingly, the court GRANTS Plaintiff’s
Motion for Attorney Fees.
At the court’s request, Plaintiff’s counsel supported their fee request with an
affidavit and appropriate documentation, reflecting that their bills amounted to
$85,222.50. (See Plaintiff’s Supplemental Memorandum in Support of its Motion for
Attorneys’ Fees, Exs. 1-4, Docket # 80). An award of fees is “limited to those fees
incurred because of the basis underlying the award.” Brant v. Hester, 569 N.E.2d 748,
755 (Ind. Ct. App. 1991). Because Plaintiff never should have been forced to bring this
case in the first place, the court need not determine which claims or defenses advanced by
Defendants should not be subject to fees. The entire litigation is subject to fees. As to the
amount of the fee request, Defendants did not pose an objection in their Response Brief.
The court must therefore determine for itself whether the fee request is reasonable. Id.
Having reviewed the documentation submitted by the attorneys of record in this case, the
court finds the amount requested for the attorneys’ time in this case is reasonable.
Accordingly, the court GRANTS Plaintiff’s fee request in the amount of $85,222.50.

10

III.

Conclusion
For the reasons stated above, the court finds that Defendants asserted both before

and after the litigation commenced, frivolous, unreasonable, and groundless claims and
defenses, despite ample opportunities to withdraw them. Defendants’ actions resulted in
the unnecessary expenditure of the time and resources of the court and of Plaintiff.
Accordingly, Plaintiff’s Motion for Attorneys’ Fees is GRANTED (Docket # 70) in the
amount of $85,222.50.

SO ORDERED this 18th day of October 2012.
__________________________________
RICHARD L. YOUNG, CHIEF JUDGE
United States District Court
RICHARD L. YOUNG, CHIEF JUDGE
Southern District of Indiana
United States District Court
Southern District of Indiana

Distributed Electronically to Registered Counsel of Record.

11