LONG v. FAIRBANK FARMS INC et al

Filing 437

ORDER ON RENEWED APPLICATION FOR ATTORNEYS FEES & COSTS granting 433 Renewed Motion for Attorney Fees and Costs By JUDGE GEORGE Z. SINGAL. (lrc)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
MARGARET LONG,
Plaintiff,
v.
FAIRBANK FARMS
RECONSTRUCTION CORP.,
Defendant & Third-Party
Plaintiff,
v.
GREATER OMAHA PACKING
COMPANY, INC.,
Third-Party Defendant.

)
)
)
)
) Docket no. 1:09-cv-592-GZS
)
)
)
)
)
)
)
)
)
)
)
)
)

ORDER ON RENEWED APPLICATION FOR ATTORNEYS’ FEES & COSTS

Before the Court is the Renewed Application for Attorneys’ Fees & Costs (ECF No.
433) by Fairbank Farms Reconstruction Corp. (“Fairbank”).

Following the filing of this

application, Fairbank filed a Fee Petition Stipulation (ECF No. 434) reducing its fee and cost
request to $2,434,788.44, plus prejudgment interest in the amount of $429,413.48. Greater
Omaha Packing, Inc. (“GOPAC”) then filed its response (ECF No. 435). Fairbank completed the
briefing on this application with its filing of a reply (ECF No. 436). Having considered all of the
parties’ written submissions, the Court now GRANTS Fairbank’s Renewed Application for
reasons stated herein.

I.

BACKGROUND
Fairbank’s request for attorneys’ fees and costs is based on the contract between Fairbank

and GOPAC.

In relevant part, that contract, referred to throughout this litigation as the

“Fairbank Guarantee,” calls on GOPAC to
... indemnify and hold harmless American Foodservice Corporation and American
Fresh Foods, and its[ ] affiliates [Fairbank], their Officers, Directors, employees
and agents (herein referred to as “Buyer”) harmless from all claims, damages,
causes of actions, suits, proceedings, judgments, charges, losses, costs, liabilities
and expenses (including attorneys' fees) arising from any products (raw materials)
as delivered to Buyer by [GOPAC], that do not comply with the provisions of the
Buyer's Raw Material Specifications or that are caused by the negligence or
intentional misconduct of [GOPAC], its [ ] Agents and employees.
Long v. Fairbank Farms, Inc., 1:09-CV-592-GZS, 2011 WL 2516378 at *13 (D. Me. May 31,
2011) amended, 1:09-CV-592-GZS, 2011 WL 2490950 (D. Me. June 22, 2011); see also Trial
Ex. 2. The Court has already determined as a matter of law that the Fairbank Guarantee
governed the relationship between GOPAC and Fairbank during the time period at issue in this
lawsuit.

See Long v. Fairbank Farms, Inc., 2011 WL 2516378 at *17-*19, report and

recommendation affirmed, 2011 WL 2669199 (D. Me. July 7, 2011). Likewise, the Court has
determined that New York law governs the construction of the Fairbank Guarantee. See Long v.
Fairbank Reconstruction Corp., 824 F. Supp. 2d 197, 201 (D. Me. 2011). As a result of the jury
verdict and final judgment subsequently entered, it has also been determined that GOPAC
breached the Fairbank Guarantee by delivering adulterated beef to Fairbank in September 2009.
See, e.g., Jones v. Fairbank Reconstruction Corp., No. 2:11-cv-437-GZS, 2013 WL 6019294 at
*9 & n.16 (D. Me. Nov. 13, 2013) (holding that the Jones/Smith verdict precludes GOPAC from
rearguing the applicability of the Fairbank Guarantee). As a result of that delivery, the jury
determined that Fairbank was later required to pay settlements to both Long and Smith for
injuries each sustained as a result of consuming this adulterated beef.
2

The sole issue that remains for resolution is what “expenses (including attorneys’ fees)”
GOPAC is contractually obligated to pay Fairbank as a result of the final judgment entered in
this case, which notably was the first of the 2009 Northeast Outbreak cases to proceed to trial.
The parties agreed that the issue of what fees and expenses were due pursuant to this provision
would be resolved by the Court without a jury. (See Trial Transcript (ECF No. 374) at 1291.)

II.

DISCUSSION
In general, “a federal court will enforce contractual rights to attorneys' fees if the contract

is valid under applicable state law” and “where a contract authorizes an award of attorneys' fees,
such an award becomes the rule rather than the exception.” McGuire v. Russell Miller, Inc., 1
F.3d 1306, 1313 (2d Cir. 1993). In this case, GOPAC seeks to avoid this rule by invoking a
novel exception based on the implied covenant of good faith and fair dealing. GOPAC also
alternatively presses some specific objections to Fairbank’s fee request. The Court considers
each of these objections but ultimately finds them lacking as explained below.
A. The Covenant of Good Faith & Fair Dealing
GOPAC devotes most of its opposition to arguing that Fairbank’s fee application should
be entirely rejected based on conduct that GOPAC claims was a violation of the implied
covenant of good faith and fair dealing. (GOPAC Response (ECF No. 435) at 2-9.) In support
of this claim, GOPAC points to various discovery violations and asserts that Fairbank withheld
essential data prior to trial in this case. In GOPAC’s view, this conduct was so egregious that it
can justify the denial of attorneys’ fees that would otherwise be awarded under a contractual feeshifting provision.

3

In accordance with the Court’s prior choice-of-law rulings, the Court looks to New York
law for guidance in assessing GOPAC’s arguments regarding the impact of a breach of the
implied covenant of good faith and fair dealing. As even the First Circuit has recognized, “New
York law recognizes the existence of an implicit covenant of good faith and fair dealing,” which
“embraces a pledge that neither party shall do anything which will have the effect of destroying
or injuring the right of the other party to receive the fruits of the contract.”

Ophthalmic

Surgeons, Ltd. v. Paychex, Inc., 632 F.3d 31, 40 (1st Cir. 2011) (citing & quoting Tractebel
Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89, 98 (2d Cir. 2007) & Dalton v. Educ.
Testing Serv., 663 N.E.2d 289, 291 (N.Y. 1995)). Thus, a party who is alleged to have breached
a contract may raise a claim for breach of the covenant of good faith and fair dealing as a
defense. See, e.g., Scientific Components Corp. v. Sirenza Microdevices, Inc., 03 CV 1851
NGG RML, 2006 WL 6937123 at n.23 (E.D.N.Y. July 11, 2006) report and recommendation
adopted, 03-CV-1851(NGG)(RML), 2006 WL 2524187 (E.D.N.Y. Aug. 30, 2006).

However,

GOPAC has raised this defense only to the post-trial claim for attorneys’ fees. Thus, even
assuming GOPAC breached its agreement with Fairbank in September 2009 by supplying
product contaminated with e.coli O157:H7 (as the jury concluded it did), GOPAC now claims
that Fairbank’s later breach of the implied covenant between approximately October 2010
through May 2013 provides a basis for limiting the amount Fairbank can collect in
indemnification.
In support of this rather novel argument, GOPAC provided the Court with four case
citations. (See GOPAC Response (ECF No. 435) at 2.) Most of the cited cases are quite simply
irrelevant to the motion now before this Court and contain no mention of attorneys’ fees. See
generally, Scientific Components Corp., 2006 WL 6937123, report and recommendation

4

adopted, 2006 WL 2524187; Quail Ridge Assoc. v. Chemical Bank, 558 N.Y.S.2d 655 (3d Dep’t
1990); Super Glue Corp. v. Avis Rent A Car Sys., Inc., 517 N.Y.S.2d 764 (2d Dep’t 1987). At
best, these three cases support the basic proposition that “a party may assert breach of the
covenant as a defense to a contract claim, much like the doctrine of unconscionability, but may
not assert a breach of the covenant as an independent basis for imposing liability on another.”
Scientific Components Corp., 2006 WL 6937123 at n.23 (citing and quoting Quail Ridge Assoc.,
558 N.Y.S.2d at 657; Super Glue Corp., 517 N.Y.S.2d at 766).
GOPAC’s other citation, T.P.K. Const. Corp. v. Southern Am. Ins. Co., 752 F. Supp. 105
(S.D.N.Y. 1990), comes slightly closer to the mark. The contract at issue in T.P.K. was a general
indemnity agreement that explicitly included “counsel fees.” Id. at 107. However, in the context
of a summary judgment motion, the T.P.K. court acknowledged only that a breach of the implied
covenant of good faith and fair dealing by the surety during the performance of the agreement, if
established, might prevent the surety from enforcing the indemnification agreement generally.
See id. at 112-113 (ordering the parties to further brief whether the surety’s conduct met the
requisite standard for breach of the implied covenant under New York law).
In short, GOPAC’s cited cases do not support the exclusion of a specific category of
damages (attorneys’ fees) based on discovery violations during the litigation seeking to enforce
the indemnification provisions. In the Court’s view, New York law on the covenant of good
faith and fair dealing would not support such an exclusion that would nullify the express terms of
the parties’ agreement. See, e.g., Fesseha v. TD Waterhouse Investor Servs., 761 N.Y.S.2d 22,
23 (1st Dep't 2003) (“While the covenant of good faith and fair dealing is implicit in every
contract, it cannot be construed so broadly as effectively to nullify other express terms of a
contract, or to create independent contractual rights.”). Therefore, the Court finds no merit in

5

GOPAC’s argument that the pending motion may be entirely denied based on a finding that
Fairbank’s conduct during discovery amounts to a breach of the implied covenant of good faith
and fair dealing.1
B. Calculation of the Attorneys’ Fee Award
Having concluded that GOPAC cannot entirely avoid the contractual fee-shifting
provision of the Fairbank Guarantee, the Court next considers the amount to be awarded
pursuant to the fee-shifting provision.

The Court notes at the outset that the contractual

provision shifting of attorneys’ fees in this case does not explicitly subject such fees to any
reasonableness cap. Nonetheless, under New York law, contractual fee-shifting provisions are
generally read to allow recovery of “only . . . those ‘expenses, costs and attorney's fees’ that a
reasonable client in like circumstances would have expended absent an indemnification
provision.” Union Cent. Life Ins. Co. v. Berger, 10 CIV. 8408 PGG, 2013 WL 6571079
(S.D.N.Y. Dec. 13, 2013) (citing In Time Products, Ltd. v. Toy Biz, Inc., 38 F.3d 660, 667-68
(2d Cir. 1994) & Chinatrust Bank (U.S.A.) v. Pinter, No. 04CV5331 (SLT)(KAM), 2008 WL
2987152, at *2 (E.D.N.Y. July 31, 2008)). Thus, under New York law, “a party is not entitled to
reimbursement for fees that it would not have agreed to pay if there had been no contractual
provision for reimbursement.” In Time Products, 38 F.3d at 668.
Therefore, the Court begins its consideration of Fairbank’s fee request by considering the
appropriate lodestar. See Cent. Pension Fund of the Int'l Union of Operating Engineers &
Participating Employers v. Ray Haluch Gravel Co., -- F. 3d ---, 11-1944, 2014 WL 930829 at *2
(1st Cir. Mar. 11, 2014) (“The calculation of shifted attorneys' fees generally requires courts to
follow the familiar lodestar approach.”); F.H. Krear & Co. v. Nineteen Named Trustees, 810
1

Having concluded that this argument fails as a matter of law, the Court declines to consider whether the record
contains adequate factual support for a conclusion that Fairbank’s conduct during the litigation amounts to a breach
of the implied covenant of good faith and fair dealing.

6

F.2d 1250, 1263 (2d Cir. 1987) (applying the “‘lodestar’ method, in which the hours reasonably
spent by counsel, as determined by the Court, [are] multiplied by the reasonable hourly rate” to a
contractual fee-shifting case).

With respect to the reasonable hourly rate, the Court notes that

GOPAC has made no objection to the hourly rates charged by Fairbank’s attorneys for their
work in this case. The record also establishes that Fairbank’s primary attorneys charged reduced
rates for their work on this matter. See, e.g., Stevens Aff. (ECF No. 433-2) ¶13 (indicating he
charged a reduced rate of $300 although his standard hourly rate is $450); Webber Aff. (ECF No.
433-29) ¶14 (indicating he charged $350 per hour in this matter but has a typical billing rate of
$395 per hour). Additionally, local counsel charged rates that match the prevailing rates charged
in Maine for similar work.2 See Ex. 14 to Stevens Aff. (consisting of monthly bills received
from Thompson & Bowie, LLP) & Catsos Aff. (ECF No. 433-30) ¶3. Thus, the Court readily
finds that the requested fee amounts reflect reasonable hourly rates.
With respect to the time productively expended on this litigation, the record contains over
700 pages of monthly invoices (Page ID# 12348-Page ID# 13066) detailing the time billed at the
respective hourly rates of various counsel and paralegals. Having reviewed these records and
given the Court’s familiarity with this hard-fought litigation, the Court concludes that the record
supports a lodestar calculation of: $1,831,832.32 for work completed by Gass Weber Mullins
LLC.3 Additionally, the Court concludes that the local counsel appropriately billed fees and
costs totaling $165,162.70. As a result, the presumptively reasonable fee is $1,996,995.02.
Additionally, the records submitted support additional related costs totaling $437,793.42.

2

The undisputed record supports a similar finding with respect to the work done by locally retained counsel in
Nebraska and Washington. See Downer Aff. (ECF No. 433-31) & Slovek Aff. (ECF No. 433-32).
3

The Court has arrived at this figure by deducting the $73,330.18 listed in the June 20, 2013 Fee Petition Stipulation
from the total requested fee ($1,905,162.50) .

7

Given the total settlement payouts in this case were $400,000, it may initially appear
unreasonable for Fairbank to have paid such a significantly larger sum to defend the underlying
case and to bring its related third-party claim against GOPAC. However, as the parties readily
acknowledged during trial, the Long/Smith cases were hard fought precisely because both
GOPAC and Fairbank understood that the verdict at this first trial would have significant
implications on all of the other 2009 Northeast Outbreak cases. In fact, in another related 2009
Northeast Outbreak case pending on this Court’s docket, the Court has held that the verdict
achieved in this case collaterally estops GOPAC from re-litigating some of the key questions
resolved by the Long/Smith jury. See generally Jones, 2013 WL 6019294. Thus, the Court finds
that the amount expended on attorney’s fees and expenses is reasonable when viewed in the
overall context of the litigation surrounding the 2009 Northeast Outbreak and the fact that the
Long/Smith case was the first case to go to trial.4
GOPAC raises only two specific objections to items included in Fairbank’s fee request:
(1) multiple counsel at depositions and (2) fees and costs associated with Fairbank’s expert
Thomas Hoffman, who did not ultimately testify at trial and who, GOPAC now argues, produced
an “inaccurate” expert report. First, the Court notes that GOPAC has not made any effort to
calculate how much of the fee request should be attributable to these two objections. This failure
to specifically request a reduction by amount and direct the Court to the applicable portions of
the records is a standalone basis for overruling these specific objections.
In any event, the Court finds both objections to be without substantive merit. With
respect to multiple counsel attending depositions, Fairbank replies that “GOPAC itself sent
numerous attorneys to multiple depositions.” (Fairbank Reply (ECF No. 436) at 2.)
4

Despite the impact of the Long/Smith verdict on other pending cases, the Court notes that Fairbank is not seeking
fees for work done on other 2009 Northeast Outbreak cases in connection with this fee request. See Stevens Aff.
¶15.

8

Additionally, other federal courts have recognized that in complex cases “it is standard practice
for at least two attorneys to appear at most proceedings,” including depositions. Communities
for Equity v. Michigan High Sch. Athletic Ass'n, 1:98-CV-479, 2008 WL 906031 (W.D. Mich.
Mar. 31, 2008). In this case, multiple depositions were shown as part of the evidence received at
trial and many of the depositions involved experts or other technical evidence. In short, in the
absence of a more specific objection to this allegedly duplicative staffing, the Court declines to
reduce the fee request for having multiple attorneys at depositions.
Turning to GOPAC’s next objection, the Court considers Thomas Hoffman, an expert
retained by Fairbank who produced an expert report but ultimately did not take the stand at trial.
Federal courts have generally allowed for recovery of expenses related to non-testifying experts
under federal statutes that contain fee-shifting provisions. See, e.g., Interfaith Cmty. Org. v.
Honeywell Int'l, Inc., 426 F.3d 694, 717 (3d Cir. 2005) (“It is not unreasonable to expect that
attorneys will rely on experts to educate them as to scientific and technical issues involved in a
given case.”). In the context of the contractual indemnification at issue here, the Court readily
finds that the costs incurred by retaining Thomas Hoffman and Fairbank’s other experts are
clearly expenses that fall within the Fairbank Guarantee and these expenses would have been
incurred by any reasonable client in the context of this litigation. The Court will not exclude
these expenses based on the objections proffered by GOPAC.
Therefore, the Court finds that Fairbank is entitled to recover the requested fees and
expenses totaling $2,434,788.44.
C. Prejudgment Interest
It is clear that New York law allows for prejudgment interest on the attorneys’ fees and
expenses awarded pursuant to this Order. See N.Y. C.P.L.R. §§ 5001 & 5004. As of June 2013,

9

Fairbank estimated the prejudgment interest on its requested fees and expenses totaled
$429,413.48. GOPAC has not specifically objected to this requested amount of prejudgment
interest. Therefore, the Court hereby ORDERS Fairbank to submit an updated calculation of the
prejudgment interest in a format similar to its prior submission (ECF No. 433-1). This updated
calculation shall be filed within seven days of this Order. Absent receipt of a specific objection
to this updated calculation within seven days of its filing, GOPAC will be deemed obligated to
pay the prejudgment interest listed in this updated filing.
III.

CONCLUSION
For reasons stated herein, the Court GRANTS Fairbank’s Renewed Application for

Attorneys’ Fees & Costs (ECF No. 433) and ORDERS that GOPAC pay attorneys’ fees and
expenses in the amount of $2,434,788.44, plus prejudgment interest in an amount to be
determined in accordance with this Order.
SO ORDERED.
/s/ George Z. Singal
United States District Judge
Dated this 27th day of March, 2014.

10