Bertelsen v. Citimortgage, Inc. et al
ORDER granting 100 Motion for Attorney Fees Signed by Magistrate Judge Jeremiah C. Lynch on 7/26/2017. (ELL)
JUL 2 6 2017
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
JONATHAN CHARLES BERTELSEN,
Clerk. U S Dis .
District Of Mtrict Court
CITIMORTGAGE, INC., and JOHN
Following the entry of final judgment in its favor, Defendant CitiMortgage,
Inc. moves to recover $296,569.87 in attorney fees incurred in defending against
Plaintiff Jonathon Bertelsen's claims. CitiMortgage's motion is granted to the
extent set forth below.
Bertelsen commenced this action in state court in December 2015, alleging
breach of contract, violations of Montana's Consumer Protection Act, and tort
claims based on CitiMortgage's alleged wrongful failure to modify the terms of
his home mortgage loan. Bertelson also sought declaratory and injunctive relief
prohibiting CitiMortgage from foreclosing on his property. CitiMortgage
removed the case to this Court based on diversity jurisdiction, and ultimately
prevailed on summary judgment.
Final judgment was entered in CitiMortgage's favor on April 7, 2017, and
CitiMortgage filed the pending motion for attorney fees two weeks later, on April
21, 2017. CitiMortgage seeks fees under Federal Rule of Civil Procedure 54, as
authorized by Mont. Code Ann.§ 28-3-704 and the terms of the promissory Note
and Deed of Trust between the parties.
Where, as here, federal jurisdiction is based on diversity of citizenship, a
motion for an award of attorney fees is governed by federal procedural law and
state substantive law. See Mangold v. California Public Util. Comm 'n, 67 F.3d
14 70, 14 78 (9th Cir. 1995). The procedural requirements applicable to a motion
for attorney fees are set forth in Fed. R. Civ. P. 54, which states that the motion
(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).
Montana follows the general American Rule, pursuant to which a prevailing
party is not entitled recover attorney fees unless expressly provided for by statute
or contract. Mountain West Farm Bureau Mut. Ins. Co. v. Hall, 2001Mt115, 18
(Mont. 2001 ). When "one party to the contract ... has an express right to recover
attorneys' fees from any other party to the contract..., then in any action on the
contract...the prevailing party .. .is entitled to recover reasonable attorneys' fees
from the losing party or parties." Mont. Code Ann. § 28-3-704. Where there is a
contractual provision for attorney fees, the right created is reciprocal. See e.g.
First Citizens Bank v. Sullivan, 200 P.3d 39, 46 (Mont. 2008).
Generally speaking, whether to award fees is within the discretion of the
court. In re Marraige of Szafryk, 232 P.3d 361, 365 (Mont. 2010). But when a
contract "requires an award of attorney's fees and the contract is conscionable,"
the court "lacks discretion to deny attorney's fees." Szafryk, 232 P.3d at 365. See
also In re Estate ofBurrell, 245 P.3d 1106, 1111-1112 (Mont. 2010).
There is no dispute that CitiMortgage has satisfied the procedural
requirements of Fed. R. Civ. P. 54(d)(2)(B). CitiMortgage timely filed its motion
on April 21, 201 7 - within 14 days of the final judgment entered on April 7, 201 7.
The motion states the amount of attorney fees sought, and specifies that
CitiMortgage claims it is entitled to fees based on terms of the Note and Deed of
Trust between the parties.
The Note signed by Bertelsen contains a provision for "Payment of Note
Holder's Costs and Expenses," which reads as follows:
If the Note Holder has required me to pay immediately in full as described
above, the Note Holder will have the right to be paid back by me for all of
its costs and expenses in enforcing this Note to the extent not prohibited by
applicable law. Those expenses include, for example, reasonable attorneys'
(Doc. 38-1, at 3).
The Deed of Trust further provides that the "Lender may charge Borrower
fees for services performed in connection with Borrower's default, for the purpose
of protecting Lender's interest in the Property and rights under this Security
Instrument, including, but not limited to, attorneys' fees .... " (Doc. 39-2, at 7).
CitiMortgage argues it is entitled to attorney fees as the prevailing party
based on these provisions in the Note and Deed of Trust because Bertlesen's
claims related directly to CitiMortgage's enforcement and protection of its interest
in the Note and Deed of Trust.
Bertelsen does not dispute that CitiMortgage is the prevailing party, but
maintains it is not entitled to attorney fees for three reasons. First, Bertelsen takes
the position that the Small Tract Financing Act (STFA) precludes an award of
attorney fees. Second, Bertelsen argues that the Note and Deed of Trust do not
authorize a fee award. Third, Bertelsen contends it would be inequitable and
unreasonable to award CitiMortgage its fees. None of these arguments is
Bertelsen first argues that the STF A prohibits CitiMortgage from recovering
attorney fees. He relies in particular on the last sentence of Mont. Code Ann. §
71-1-320, which provides that "[i]n no event shall trustees' fees and attorneys'
fees be charged to a grantor on account of any services rendered prior to the
commencement of foreclosure." Although a foreclosure sale ofBertelsen's
residence was originally scheduled for February 2016, Citimortgage cancelled the
sale and never recommenced the foreclosure process. Because CitiMortgage did
not commence the foreclosure process during this lawsuit, Bertelsen argues
attorney fees are not allowed.
This argument overlooks the rest of Mont. Code Ann.§ 71-1-320, however,
which makes clear that it applies only to limit attorney fees incurred in connection
with foreclosure proceedings. The statute's opening sentence states that
"[r]easonable trustees' fees and attorneys' fees to be charged to the grantor in the
event of foreclosure by advertisement and sale shall not exceed, in the aggregate,
5% of the amount due on the obligation, both principal and interest, at the time of
the trustee's sale." Mont. Code Ann.§ 71-1-320. Where "no foreclosure by
advertisement and sale has been commenced," Mont. Code Ann. § 71-1-320
"simply does not apply." In re 0 'Connor, 413 B.R. 726, 733 (D. Mont. 2008)
(rejecting argument that STFA precludes attorney fees in bankruptcy proceedings).
Here, CitiMortgage is not seeking to recover any attorney fees incurred in
connection with foreclosure proceedings on Bertelesen's property. CitiMortgage
is instead seeking to recover the attorney fees it incurred in defending against
Bertelson's claims in this case. Because CitMortgage is not seeking attorney fees
incurred in connection with foreclosure proceedings, Mont. Code Ann.§ 71-1-320
simply does not apply.
Bertelsen next argues that CitiMortgage is not entitled to attorney fees
under the terms of the Note and Deed of Trust. The Note provides for the
recovery of attorney fees incurred "in enforcing this Note," and the Deed of Trust
authorizes the recovery of attorney fees incurred "for the purpose of protecting
Lender's interest in the Property and rights under this Security Instrument."
Bertelsen maintains that CitiMortgage was doing neither of these things while
defending against his lawsuit. Bertlesen points out that he was primarily seeking
money damages for CitiMortgage' s allegedly tortious conduct, and claims he was
not attempting to directly affect CitiMortgage's rights under the Note and Deed of
Trust. As Bertelsen thus characterizes it, CitiMortgage was not enforcing the Note
or protecting its interest in the property and rights under the Deed of Trust when it
incurred the attorney fees at issue.
While Bertelsen did allege several state law claims for money damages
based on CitiMortgage's allegedly tortious conduct, his Complaint also included a
claim for declaratory and injunctive relief. (Doc. 9, at 12). In particular, Bertelsen
asked for "declaratory relief that any future foreclosure sale of his home is void,"
and sought to enjoin the foreclosure sale that was set take place in February 2016.
(Doc. 9, at 12). Bertelsen also sought injunctive relief barring "any future
foreclosure sale for any time necessary for the Court to make its determination as
to the loan servicing issues and foreclosure issues, as alleged in this matter."
(Doc. 9, at 12).
There can be no doubt that in defending against these claims, CitiMortgage
was protecting its security interest in the property and rights under the Deed of
Trust. According to CitiMortgage, Bertelsen's loan was severely delinquent by
the time he filed his lawsuit. By defending against Bertelsen's lawsuit,
CitiMortgage was protecting its ability to enforce its security interest by
foreclosing on the property based on Bertelsen's default. Had Bertelsen prevailed
on his claims for declaratory and injunctive relief, CitiMortgage' s security interest
in the property would have been adversely affected, to say the least.
By the same logic, Bertelsen also sought to limit CitiMortgage's rights
under the Note. The Note required Bertelsen pay the $305,000 he borrowed and
incorporated the terms of the Deed of Trust, including its provisions authorizing
foreclosure in the event of a default. (Doc. 38-1). Bertelsen's claims for
declaratory and injunctive relief effectively sought to prevent CitiMortgage from
recovering the amount due under the Note from the proceeds of a foreclosure sale.
By defending against those claims, CitiMortgage was enforcing its rights under
the Note. Because CitiMortgage was enforcing the Note and protecting its interest
in the property and rights under the Deed of Trust while defending against
Bertelsen's lawsuit, attorney fees are authorized under the terms of the Note and
Deed of Trust.
Even assuming attorney fees are allowed, Bertelsen argues it would be
manifestly unjust to award them in this case. For support, Bertelsen relies on
Ninth Circuit authority holding that a federal court can "refuse to enforce a
contractual attorney's fees provision if an award of fees would be 'inequitable and
unreasonable."' Anderson v. Melwani, 179 F.3d 763, 766 (9th Cir. 1999) (quoting
DeBlasio Contr. Inc. v. Mountain States Constr. Co., 588 F.2d 259, 263 (91h Cir.
1978)). In DeBlasio, the court concluded it would have been unjust to award fees
where both parties had acted improperly and were to blame for the dispute.
DeBlasio, 588 F.2d at 263.
As set forth above, however, "the propriety of awarding and calculating
attorneys' fees in a federal lawsuit based on state substantive law is governed by
state law." Strickland v. Truckers Express, Inc., 2007 WL 496368, *4 (D. Mont.
Feb. 12, 2007) (citing Mangold, 67 F.3d at 1478 and Champion Produce Inc. v.
Ruby Robinson Co., Inc., 342 F.3d 101 (9th Cir. 2003)). Even if federal law
provided the appropriate standard, Anderson and DeBlasio are distinguishable
because there is no evidence that CitiMortgage acted improperly.
In fact, CitiMortgage argues that under Montana law, the Court lacks
discretion to deny its motion for attorney fees. The Montana Supreme Court has
held that when a contract "requires an award of attorney's fees and the contract is
conscionable," the court "lacks discretion to deny attorney's fees." Szafryk, 232
P.3d at 365. See also In re Estate ofBurrell, 245 P.3d 1106, 1111-1112 (Mont.
2010). CitMortgage takes the position that the Note and Deed of Trust are both
conscionable and require an award of attorney fees.
While the Court agrees there is no indication that the Note and Deed of
Trust are unconscionable, they do not necessarily require that fees be awarded.
The Deed of Trust simply gives the note holder the right to recover attorney fees
under certain circumstances and the Note states that the lender may recover
attorney fees incurred in connection with protecting its interest in the property and
its rights under the Deed of Trust. Whether to award CitiMortgage its attorney fees
pursuant to the terms of the Note and Deed of Trust remains within this Court's
Bertelsen argues the Court should exercise its discretion to deny fees
because CitiMortgage did not advise him that the Note and Deed of Trust
contained attorney fee provisions, or put him on notice earlier in the litigation that
it would be seeking fees. But the fact that CitiMortgage did not make Bertelsen
aware of the two fee provisions does not necessarily mean it would be
unreasonable to permit CitiMortgage to recover its attorney fees. This is
particularly true since Bertelsen was represented by a law firm of eight attorneys,
presumably knowledgeable in Montana contract law, that prepared the complaint
on his behalf. And the firm has prosecuted a significant number of similar cases in
this Court arising from the servicing of home mortgage loans. Contractual
attorney fees provisions are enforceable under Montana law, and Bertelsen does
not point to any authority for the proposition that CitiMortgage's failure to advise
Bertelsen of those provisions in this case renders them unenforceable.or makes a
fee award unjust.
Bertelsen next argues it would be unreasonable for the Court to award fees
because he is an individual with limited financial resources and CitiMortgage is a
"financial giant" that can easily afford to pay its own attorneys. (Doc. 110, at 10) . .
The fact that there are economic disparities between the parties does not
necessarily make a fee award unjust. Rather, the Court finds that the economic
disparity between the parties is a factor more properly considered when assessing
the reasonableness of the requested fee award.
As the prevailing party, CitiMortgage is entitled to an award of reasonable
attorney fees based on the provisions in the Note and Deed of Trust. CitiMortgage
is asking for $296,569.87 in attorney fees, which it claims is a reasonable amount
based on the time and labor required.
The Montana Supreme Court has endorsed a methodology for awarding and
calculating reasonable attorney fees that is similar, in most respects, to the lodestar
method established by the United States Supreme Court in Hensley v. Eckerhart,
461 U.S. 424, 433 (1983). See, Strickland, 2007 WL 496368 *4 (citing Morning
Star Entrprises, Inc. v. R.H Grover, Inc., 805 P.2d 553 (Mont. 1991) and Western
Media, Inc. v. Merrick, 757 P.2d 1308 (Mont. 1988)). This method requires that
the Court first identify a lodestar amount, which is accomplished by multiplying
the number of hours reasonably expended by a reasonable hourly rate. Hensley,
461 U.S. at 433.
"The party seeking fees bears the burden of documenting the hours
expended in the litigation and must submit evidence supporting those hours and
the rates claimed." Welch v. Metropolitan Life Ins. Co., 480 F.3d 942, 945-46 (9th
Cir. 2007). When assessing the reasonableness of the hours expended, the court is
free to "exclude from the fee request any hours that are 'excessive, redundant, or
otherwise unnecessary."' Welch, 480 F.3d at 946 (quoting Hensley, 461 U.S. at
With regard to identifying a reasonable hourly rate, the court is to consider
"the experience, skill, and reputation of the attorney requesting fees." Welch, 480
F.3d at 946 (quoting Chalmers v. City ofLos Angeles, 796 F.2d 1205, 1210 (9th
Cir. 1986)). Attorney fees are calculated "according to prevailing market rates"
in the relevant legal community." Strickland, 2007 WL 496368 *6. This means
that the court should "apply the market rate of attorneys practicing in the forum
community, not the rates out-of-state counsel charge." Srickland, 2007 WL
496368 *6. The party seeking fees bears of the burden of establishing the
applicable market rate, which can be accomplished by way of affidavits from the
attorney performing the work or another attorney who can testify to the current
market rate. Strickland, 2007 WL 496368 *6.
The reasonableness of attorney fees must be assessed under the facts of each
case. Plath v. Schonrock, 64 P.3d 984, 991 (Mont. 2003). In deciding what
constitutes reasonable attorney fees, Montana courts typically consider the
(1) the amount and character of the services rendered; (2) the labor, time
and trouble involved; (3) the character and importance of the litigation in
which the services were rendered; (4) the amount of money or the value of
the property to be affected; ( 5) the professional skill and experience called
for; (6) the attorneys' character and standing in their profession; and (7) the
results secured by the services of the attorneys."
Plath, 64 P.3d at 991 (citing Swenson v. Janke, 908 P.2d 678, 682-83
(Mont. 1995)). See also Morning Star Enterprises, Inc. v. R.H Grover, Inc., 805
P.2d 553, 559 (Mont. 1991) (applying essentially the same factors in a breach of
contract case). These factors are not exclusive, and the Court may consider other
factors in reaching a decision on reasonable attorney fees. Morning Star
Enterprises, 805 P.2d at 558.
Here, CitiMortgage seeks to recover a total of $296,569.87 in attorney fees,
as set forth in the affidavits and supporting documentation provided by defense
counsel. CitiMortgage has submitted the affidavit of local defense counsel
Michelle Sullivan, along with copies of invoices documenting the work she
performed on the case while employed by Holland & Hart and at Sullivan Miller.
Sullivan billed CitiMortgage at the rate of $215 an hour while employed by
Holland & Hart, and $200 an hour as a partner at Sullivan Miller. Sullivan billed
CitiMortgage a total of $17,716.50 in attorney fees and expenses for the nearly 87
hours she spent working on the case from the time she was retained in January
2016 through April 15, 2017. 1 (Doc. 102, at4; 102-1; 102-2).
CitMortgage has also submitted a supporting affidavit from defense counsel
Regina J. McClendon, setting forth the time she and other attorneys and paralegals
at the California firm of Locke Lord LLP spent on the case, along with their
respective hourly rates and expenses incurred. McClendon billed CitiMortgage at
the rate of $373.50 an hour, and the other attorneys who worked on the case billed
out at rates ranging from to $279 to $517.50 per hour. (Doc. 103, at 3-6).
CitiMortgage was billed for all paralegal work at rates between $150 and $210 per
hour. Between January 2016 and April 2017, Locke Lord billed CitiMortgage a
total of $278,853 .3 7 for approximately 800 hours of attorney and paralegal work,
and expenses. 2 (Doc. 103, at 1O; 103-1; 103-2).
Bertelsen agrees that the Sullivan's hourly rates are reasonable, but
contends the rates charged by Locke Lord's attorneys and paralegals are excessive.
It appears this includes hours worked in April 201 7, which Sullivan had
not yet billed when she completed her declaration on April 21, 201 7. (Doc. 102,
at 4). Presumably, Sullivan has since billed CitiMortgage for those hours.
It appears this includes hours worked in April 201 7, which Lock Lord had
not yet billed when McLendon completed her declaration on April 21, 201 7.
(Doc. 103, at 9). Presumably, Lock Lord has since billed CitiMortgage for those
The Court agrees. Although CitiMortgage points out that it negotiated discounted
rates for each of the Locke Lord attorneys and paralegals who worked on the case,
it has not submitted any evidence establishing that those discounted rates are in
line with the prevailing rates in the District of Montana for similar services by
lawyers of reasonably comparable skill, experience, and reputation. Sullivan is a
Montana attorney of comparable skill, experience, and reputation. She charges
$200 to $215 per hour - far less than the discounted hourly rates of between $279
and $517.50 charged by Lorde Lock's attorneys in this case. The Court is
familiar with prevailing rates in the Montana legal community, and finds that the
hourly rates charged by Sullivan are reasonable. Because CitiMortgage has not
met its burden of demonstrating that the rates charged by the other attorneys on the
case are reasonable for the Montana legal community, the Court will exercise its
discretion and assign a rate of $200 per hour for all Locke Lord attorney services.
The $150 to $200 hourly rates charged by Lorde Lock for paralegal services are
similarly excessive for the Montana community. The Court will assign a
reasonable hourly rate of $75 for all paralegal services performed in this matter.
Bertelsen also argues that CitiMortgage overstaffed the case, and challenges
the number hours billed by Locke Lord as excessive. Defense counsel have
submitted itemized statements of the time spent and tasks performed in litigating
the case from start to finish. Bertelsen does not specifically object to the number
of the hours billed by Sullivan, and CitiMortgage is entitled to recover the
$17,716.50 in attorney fees and expenses requested for her services.
All told, Locke Lord billed approximately 700 hours of attorney time and
approximately 100 hours of paralegal time on the case. The Court is familiar with
the proceedings in this matter - from the filing of the complaint to its resolution on
summary judgment just prior to trial. The Court has reviewed the itemized
statements provided by defense counsel and agrees with Bertelsen that the nearly
800 hours billed by Lorde Lock is excessive given the scope, nature, and
complexity of the case. Bertelsen's claims did not involve particularly difficult or
unusual issues, and defending against them did not call for professional skill and
experience beyond that possessed by a normally competent Montana attorney.
The Court will exercise its discretion and reduce the number of hours for which
CitiMortgage may recover fees for attorney and paralegal work by roughly half,
and eliminate recovery for any claimed expenses. Taking these adjustments into
account, CitiMortgage is entitled recover fees for 3 50 hours of attorney time at a
rate of $200, for a total of$70,000, and 50 hours of paralegal time at a rate of $75,
for a total of $3,750. Adding these amounts, along with Sullivan's fees, the
lodestar calculation comes to $91,466.50.
As noted above, Bertelsen argues it would unreasonable and inequitable to
award fees in this case because CitiMortgage is a large financial institution and he
is an individual facing the potential loss of his home. While the Court rejects the
argument that such disparities make a fee award wholly inappropriate, it does find
that an equitable reduction of the fee award is warranted. The Court will reduce
the fee award by an additional 50 percent, bringing the total amount of the
attorney fee award in this case to $45,733.25. The Court sees no need to adjust
this figure any further based on any other factors.
Accordingly, IT IS ORDERED that Defendants' motion for attorney fees is
GRANTED to the extent set forth above. The Defendants are entitled to recover
from the Plaintiff attorney fees in the total amount of $45, 73 3 .25.
thi7lJ-~ay of July, 20
e miah C. Lynch
nited States Magistrate Judge
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