NOTREDAN, L.L.C. v. Old Republic Exchange Facilitator Company et al

Filing 45

ORDER granting in part and denying in part 39 Motion for Attorney Fees. Signed by Judge S. Thomas Anderson on 7/25/12. (Anderson, S.)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
______________________________________________________________________________
NOTREDAN, LLC,
)
a Tennessee Limited Liability Company, )
)
Plaintiff,
)
)
v.
)
No. 11-2987-STA-tmp
)
OLD REPUBLIC EXCHANGE
)
FACILITATOR COMPANY
)
and REGIONS BANK,
)
)
Defendants.
)
______________________________________________________________________________
ORDER GRANTING IN PART, DENYING IN PART DEFENDANT OLD REPUBLIC
EXCHANGE FACILITATOR COMPANY’S MOTION FOR ATTORNEY FEES AND
COSTS
______________________________________________________________________________
Before the Court is Defendant Old Republic Exchange Facilitator Company’s Motion for
Attorney Fees and Costs (D.E. # 39) filed on June 19, 2012. Plaintiff Notredan, LLC has filed a
response in opposition to Defendant’s Motion (D.E. # 41).1 For the reasons set forth below,
Defendant’s Motion to Dismiss is GRANTED IN PART, DENIED IN PART.
BACKGROUND
The Court has reviewed the factual and procedural background of this case in previous
orders. Plaintiff sought a property transaction that would allow it to take advantage of Section 1031
of the Internal Revenue Code. On February 11, 2011, Plaintiff entered into a contract with
1

Defendant has filed a motion for leave to file a reply brief (D.E. # 43). Because the
Court finds that a reply is unnecessary to reach the issues presented, Defendant’s motion is
denied.
1

Defendant by which Defendant would act as a “qualified intermediary” for the 1031 exchange.
Pursuant to the parties’ contract, David J. Johnson, P.C. (“Johnson”) was appointed to act as the
closing agent for the property transfer. Johnson received as part of the 1031 exchange a wire transfer
of $525,000.00, and was to hold the funds in his trust account pending the completion of the
transaction. When the parties could not finalize the 1031 exchange and Plaintiff sought the funds
from Johnson, Plaintiff learned that Johnson no longer had the money. Plaintiff brought this suit
against Defendant, alleging that Johnson acted as Defendant’s agent and seeking to hold Defendant
vicariously liable for Johnson’s negligence.
On April 6, 2012, the Court dismissed all of Plaintiff’s claims against Defendant for failure
to state a claim. Viewing the pleadings in the light most favorable to Plaintiff, the Court assumed
that Plaintiff had pleaded sufficient facts to show that Johnson acted as Defendant’s agent during the
proposed 1031 exchange. However, the Court construed section 21 of the parties’ contract to limit
Defendant’s liability to Plaintiff for “circumstances beyond the reasonable control of” Defendant.
The Court further construed the agreement to define such acts to include Johnson’s “failure to follow
closing instructions and/or failure to perform.” The Court held then that Plaintiff’s claim to hold
Defendant vicariously liable for the acts of Johnson failed because the contract between the parties
removed Defendant’s liability for the agent’s failure to follow closing instructions and failure to
perform. As such, the Court granted Defendant’s Rule 12(b)(6) motion.
In its Motion for Attorney Fees and Costs, Defendant seeks an award of $19,248.34 in
attorney fees and $1,095.42 in costs. Defendant cites section 17 of the parties’ contract, which
entitles the prevailing party in a suit to enforce or interpret any part of the contract to recover its
reasonable attorney fees. Defendant argues that it based its requested fees on a lodestar calculation
2

of the number of hours reasonably expended in this case multiplied by the prevailing market rate.
Defendant has attached a billing summary to its Motion, demonstrating that counsel for Defendant
spent 77.65 billable hours providing legal services. Defendant has also attached the affidavit of Don
L. Hearn, Jr., lead counsel for Defendant in this matter. In his affidavit, Hearn explains the hourly
rates of each attorney and paralegal who provided legal services to Defendant and attests that these
rates are the prevailing market rates for legal professionals within this District. Defendant further
asserts that it has achieved excellent results in this case, obtaining the dismissal of all of Plaintiffs’
claims against it at the pleadings stage. Based on this showing, Defendant seeks a full award of its
reasonable attorney fees in the amount of $18,331.75. Finally, Defendant seeks its fees incurred in
preparing its fee petition, specifically $916.59, an amount representing five percent (5%) of its total
award of attorney fees.
Plaintiff has responded in opposition to Defendant’s Motion for Attorney Fees and Costs.
Rather than objecting to the reasonableness of the award sought by Defendant, Plaintiff argues that
an award of fees is not warranted because the contract between the parties is a contract of adhesion.
Plaintiff cites for support the affidavit of William Anderton, the Chief Manager of Notredan, L.L.C.,
in which Anderton states that he had no input or other opportunity to negotiate the agreement with
Defendant. Plaintiff also briefs relevant Tennessee law on fiduciary duty and contracts of adhesion.
Plaintiff does not, however, show why reasonable attorney fees should not be awarded.
ANALYSIS
In a diversity case such as the one at bar, state law governs the issue of attorney fees.2

2

Hometown Folks, LLC v. S & B Wilson, Inc., 643 F.3d 520, 533 (6th Cir. 2011)
(applying Tennessee law).
3

Tennessee generally follows the “American Rule” that a party may not recover its attorney fees
unless a statute or contract specifically provides for an such award.3 “Parties who have prevailed in
litigation to enforce contract rights are entitled to recover their reasonable attorney’s fees once they
demonstrate the contract upon which their claims are based contain[s] a provision entitling the
prevailing party to its attorney’s fees.”4 Here it is undisputed that section 17 of the parties’ contract
provided as follows: “Should suit be brought to enforce or interpret any part of this Agreement, the
prevailing party shall be entitled to recover as an element of its costs and not as damages, reasonable
attorney fees to be fixed by the court.”5 The Court construes this plain and unambiguous provision
to mean that Defendant as the prevailing party in this case is entitled to its reasonable attorney fees.
Therefore, based on the parties’ contract, Defendant has shown that it is entitled to an award of
reasonable attorney fees.
Once a party has demonstrated the right to fees under a contractual provision, the Court has
no discretion regarding whether to award reasonable attorney fees.6 Although Tennessee has “no
fixed mathematical rule” for arriving at the amount of a reasonable attorney fee,7 the fee

3

Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303, 311 (Tenn. 2009)
(citing Pullman Standard, Inc. v. Abex Corp., 693 S.W.2d 336, 338 (Tenn. 1985)); Engstrom v.
Mayfield, 195 F. App’x 444, 451 (6th Cir. 2006) (applying Tennessee law). Just as it did at the
pleadings stage, the Court will apply Tennessee substantive law to the issues presented unless
otherwise noted.
4

Hosier v. Crye–Leike Commercial, Inc., No. M2000–01182–COA–R3–CV, 2001 WL
799740, at *3 (Tenn. Ct. App. July 17, 2001).
5

Contract § 17 (D.E. # 1-2).

6

Albright v. Mercer, 945 S.W.2d 749, 751 (Tenn. Ct. App. 1996); Airline Constr. Inc. v.
Barr, 807 S.W.2d 247, 270 (Tenn. Ct. App.1990)).
7

Wright ex rel. Wright v. Wright, 337 S.W.3d 166, 176 (Tenn. 2011) (citation omitted).
4

determination lies within the Court’s discretion.8 Defendant as the prevailing party “has the burden
to make out a prima facie case for his or her request for reasonable attorney’s fees.”9 The Tennessee
Supreme Court has held that “where an attorney’s fee is based upon a contractual agreement
expressly providing for a reasonable fee, the award must be based upon the guidelines by which a
reasonable fee is determined”10 and not simply a percentage of recovery.11 More specifically, the
Court should analyze the reasonableness of the fees with reference to the factors set out in the
Tennessee Rules of Professional Conduct 1.5.12 Rule 1.5 provides:
A lawyer’s fee and charges for expenses shall be reasonable. The factors to be considered in
determining the reasonableness of a fee include the following:

8

Barr, 807 S.W.2d at 270. See also Graceland Fruit, Inc. v. KIC Chems., Inc., 320 F.
App’x 323, 325 (6th Cir. 2008) (“Where a district court has awarded attorneys’ fees under a valid
contractual authorization, we recognize that it has broad discretion in doing so, and an award of
such fees may be set aside only for abuse of discretion.”).
9

Wilson Mgmt. Co. v. Star Distribs. Co., 745 S.W.2d 870, 873 (Tenn. 1988).

10

Id. (citations omitted).

11

Nutritional Support Servs., Ltd. v. Taylor, 803 S.W.2d 213, 216 (Tenn. 1991).

12

Wright, 337 S.W.3d at 176 (citing United Med. Corp of Tenn., Inc. v. Hohenwald Bank
& Trust Co., 703 S.W.2d 133, 137 (Tenn. 1986)). Defendant argues that the Court should
calculate the fee award using the lodestar method; however, the Tennessee Supreme Court has
cautioned that “[r]elying on the lodestar calculation alone to determine a reasonable attorney’s
fee is problematic.” Wright, 337 S.W.3d at 180 (holding that the lodestar method alone should
not apply to arrive at the reasonable attorney fees in a case involving a minor party).
Nevertheless, the attorney’s time spent and hourly rate billed remain important factors in
the Court’s analysis. Id. at 181. (“An affidavit . . . which detailed how much time [counsel] spent
on the case, what work he accomplished during that time, and when he spent that time—helps the
trial court analyze several factors relevant to the determination of a reasonable attorney’s fee. It
not only provides the amount of time and labor that the case required, but also is useful for
assessing the difficulty of the questions presented, the skills required, and the time constraints
that the attorney faced.”).
5

(1) The time and labor required, the novelty and difficulty of the questions involved, and the
skill requisite to perform the legal service properly;
(2) The likelihood, if apparent to the client, that the acceptance of a particular employment
will preclude other employment by the lawyer;
(3) The fee customarily charged in the locality for similar legal services;
(4) The amount involved and the results obtained;
(5) The time limitations imposed by the client or by the circumstances;
(6) The nature and the length of the professional relationship with the client;
(7) The experience, reputation, and ability of the lawyer or lawyer performing the services;
(8) Whether the fee is fixed or contingent;
(9) Prior advertisements or statements by the lawyer with respect to the fees the lawyer
charges; and
(10) Whether the fee arrangement is in writing.13
The United States Supreme Court has held that “the most critical factor is the degree of success
obtained.”14 Although the factors in Rule 1.5 guide the Court’s analysis, the reasonableness of the

13

Wright, 337 S.W.3d at 176 (citing Tenn. R. Prof. Resp. 1.5). See also Connors v.
Connors, 594 S.W.2d 672, 676 (Tenn. 1980); Reed v. Rhodes, 179 F.3d 453, 472 (6th Cir. 1999)
(reciting proper factors for determining whether an attorney fee awarded under 42 U.S.C. § 1988
is reasonable, including (1) the time and labor required by a given case; (2) the novelty and
difficulty of the questions presented; (3) the skill needed to perform the legal service properly;
(4) the preclusion of employment by the attorney due to acceptance of the case; (5) the customary
fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the
circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation,
and ability of the attorneys; (10) the “undesirability” of the case; (11) the nature and length of the
professional relationship with the client; and (12) awards in similar cases).
14

Hensley v. Eckerhard, 461 U.S. 424, 436 (1983).
6

fee ultimately depend upon the particular circumstances of each case.15
Having carefully reviewed Defendant’s Motion, the billing records submitted by counsel, and
the Hearn affidavit, the Court finds that the documented time and fees in this case were reasonable.
Counsel has shown that his hourly rates and the rates for the other attorneys and the paralegal who
assisted in this case are entirely consistent with the prevailing market rates for similar legal services
in this District. Counsel’s time records further show that the time spent on this matter was not
excessive or duplicative. Defendant prevailed at the pleadings stage and had only begun to
participate in discovery. As a result, the record shows that counsel for Defendant had devoted a little
less than seventy-eight hours to the case, of which approximately forty-seven hours were related to
the preparation of Defendant’s motion to dismiss and the briefing in support of the motion. Due to
the complexity of the issues presented in this case, including Plaintiff’s theory of liability against
Defendant and Defendant’s theories in support of dismissal, the Court finds that counsel’s time is
consistent with the time, labor, and skill required to perform these legal services properly. Therefore,
the Court grants Defendant’s Motion for an award of reasonable attorney fees in the amount of
$18,331.75.
Defendant has made separate requests for expenses and an award of attorney fees incurred
for the preparation of the fee petition. With respect to Defendant’s request for expenses, Defendant
has produced counsel’s billing records, indicating that Defendant spent $2.50 for photocopies,
$1,090.52 in “Credit Card Charges,” and another $2.40 in photocopies. While Defendant has shown
that it is entitled to recover $4.90 in costs for photocopying, the record before the Court provides no
15

Wright, 337 S.W.3d at 177 (citing White v. McBride, 937 S.W.2d 796, 800 (Tenn.

1996)).
7

details about the $1,090.52 in credit card expenses. Defendant has not attached an itemization of
these expenses, and counsel has not addressed these charges in his affidavit. In the absence of
clearer proof about these charges, the Court cannot determine whether Defendant is entitled to
recover them here.16 Therefore, the Court awards Defendant expenses in the amount of $4.90.
As for Defendant’s request for fees relating to the Motion for Attorney Fees, the Court grants
that request but only in part. Defendant’s Motion seeks an award of five percent (5%) of the total
attorney fees incurred in this case. Attorney fees related to the preparation of a fee application are
compensable.17 The Sixth Circuit has limited the recovery of such a fee to three percent (3%) of the
hours in the main case and allowed a maximum recovery of 5% where the case actually went to
trial.18 Even though the Court is bound to apply Tennessee substantive law on attorney fees, the
Court finds that applying the Sixth Circuit cap of 3% is reasonable under the circumstances. In this
case, Defendant prevailed on a Rule 12(b)(6) motion, entitling Defendant to an additional award for
litigation related to the fee issue of no more than 3% of the hours spent in the case. Therefore, the
Court awards Defendant an additional attorney fee in the amount of $549.95.
In its opposition to Defendant’s Motion for Attorney Fees, Plaintiff essentially restates the

16

Neither party has addressed whether expenses are even recoverable under the terms of
the contract. Apart from any contractual basis for recovery of costs, a prevailing party is entitled
to recover certain expenses under federal law. See 28 U.S.C. § 1920 (permitting the prevailing
party to recover only specified kinds of costs: (1) fees of the clerk and marshal; (2) fees of the
court reporter for all or any part of the stenographic transcript necessarily obtained for use in the
case; (3) fees and disbursements for printing and witnesses; (4) fees for exemplification and
copies of papers necessarily obtained for use in the case; (5) docket fees under 28 U.S.C. § 1923;
and (6) compensation of court appointed experts, compensation of interpreters, and salaries, fees,
expenses, and costs of special interpretation services under 28 U.S.C. § 1828).
17

Gonter v. Hunt Valve Co., Inc., 510 F.3d 610, 620 (6th Cir. 2007).

18

Id. (citing Coulter v. Tenn., 805 F.2d 146, 151 (6th Cir. 1986)).
8

argument it made at the pleadings stage, asserting that the contract, including the section on the
recovery of attorney fees, is unenforceable. Plaintiff contends that the parties’ agreement is a
contract of adhesion and is otherwise unenforceable under Tennessee law. The Court holds that
Plaintiff has failed to show that the Tennessee courts would not enforce a contractual fee-shifting
provision such as the one in section 17. On the contrary, the Tennessee Supreme Court has held that
where a contract provides for attorney fees, “[t]he parties are entitled to have their contract enforced
according to its express terms.”19 Furthermore, the Court previously reached Plaintiff’s argument
at the pleadings stage. In granting the motion to dismiss, the Court found that Plaintiff had failed
to show how it lacked a “realistic opportunity to bargain” or “no choice at all” in its dealings with
Defendant. As a result, Plaintiff had not shown how the contract was adhesive.20 The Court went
on to hold that even if Plaintiff had demonstrated that the contract was adhesive, Plaintiff did not
show why the Court should not enforce the contract as against Tennessee public policy. Plaintiff has
raised no argument here that would lead the Court to revisit these conclusions. Therefore, the Court

19

Hometown Folks, LLC, 643 F.3d at 533 (quoting Wilson Mgmt. Co., 745 S.W.2d at
873). Cf. Big Lots Stores, Inc. v. Luv N’ Care, Ltd., 302 F. App’x 423, 426 (6th Cir. 2008)
(holding that a contractual provision for attorney fees, which was not specifically negotiated by
the parties, was unenforceable under Ohio law).
20

Just as it did at the pleadings stage, Plaintiff relies here on the Anderton Affidavit to
present facts about the “take it or leave it” nature of the transaction between the parties. The
Court declined to consider the affidavit at the pleadings stage because it was not part of the
pleadings. Order Granting Def.’s Mot. Dismiss 8-9. Even if the Court considered the affidavit
here in its analysis of the Motion for Attorney Fees, the affidavit would not change the outcome.
The evidence contained in the affidavit shows at most that the contract was a standardized form
prepared with no input from Plaintiff. The evidence, however, does not show how Plaintiff had
no other choice but to sign the contract. Cooper v. MRM Inv. Co., 367 F.3d 493, 501-502 (6th
Cir. 2004) (applying Tennessee law) (“The last element of adhesion is the absence of a
meaningful choice for the party occupying the weaker bargaining position.”). Therefore, the
facts in Anderton’s Affidavit do not alter the Court’s conclusion that Plaintiff has failed to show
how the contract was adhesive.
9

finds no merit in Plaintiff’s position.21
CONCLUSION
The Court holds that the contract between the parties allows the prevailing party in a
contractual dispute to recover reasonable attorney fees. As the prevailing party, Defendant has met
its burden to show that a reasonable attorney fee would be $18,331.75, an amount including all of
counsel’s time billed in this case. Defendant has shown that it is entitled to expenses in the amount
of $4.90 and an additional attorney fee of $549.95 for making its fee application to the Court.
Therefore, Defendant’s Motion for Attorney Fees and Costs is GRANTED IN PART, DENIED
IN PART.
IT IS SO ORDERED.
s/ S. Thomas Anderson
S. THOMAS ANDERSON
UNITED STATES DISTRICT JUDGE
Date: July 25, 2012.

21

Plaintiff’s response in opposition also includes the following statement concerning the
order of dismissal: “The court further noted that fiduciary relationships and fiduciary obligations
are not generally created as between ‘sophisticated commercial entities’ but there was no proof of
Notredan’s sophistication, apart from the fact that it once owned some real estate and that it had
been duped into losing $525,000.00 by Old Republic’s closing agent.” Pl.’s Resp. in Opp’n 3
(D.E. # 41). The Court’s order of dismissal never refers to Plaintiff as a “sophisticated
commercial entity” and none of the Court’s holdings were based on such a finding. Rather the
Court cited the following rule from contract law: “contracts between sophisticated commercial
entities, negotiated at arm’s length, do not create fiduciary duties between the parties.” Order
Granting Def.’s Mot. Dismiss 20, n.48 (citing O’Neal v. Burger Chef Sys., Inc., 860 F.2d 1241,
1349 (6th Cir. 1988); Calipari v. Powertel, Inc., 231 F. Supp. 2d 734, 736 (W.D. Tenn. 2002)).
The Court never concluded that Plaintiff was a sophisticated commercial entity, only that
Plaintiff had not alleged the existence of a fiduciary duty Defendant owed to Plaintiff or briefed
such a theory in response to the motion to dismiss.
10