Dauphin v. Jennings et al

Filing 341

MEMORANDUM OPINION. Signed by District Judge Liam O'Grady on 3/27/2017. (dest, )

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division

Katherine R. Dauphin,

Plaintiff,
Civil Action No. 1:15-cv-149

V.

Louis A. Jennings and Beverly L.

Hennager,

Defendants.

MEMORANDUM OPINION

This matter comes before the Court on the Report and Recommendation of Magistrate

Judge Buchanan dated February 8,2017 (the "February 8 Report"), Dkt. No. 286, and the Report
and Recommendation of Magistrate Judge Buchanan dated February 15,2017 (the "February 15

Report") (collectively"Reports"). Dkt. No. 298. Responses or objections to the Reports have
been filed by the Plaintiff, Katherine Dauphin; Defendant Louis Jennings; Defendant Beverly

Hennager; Interested Party Michael Jennings; and non-party Kathleen Holmes. In addressing the
Reports, the Court also rules on Defendant Jennings' Motionto CompelArbitration, Dkt. No.
282, and Defendant Jennings' Motion for Leave to File a Sur-Reply to Holmes' Response to the
Motion to Compel Arbitration. Dkt. No. 325.

Based on a review of the Reports, the objections and responses therewith, and the

supporting exhibits, the Court ADOPTS thefindings and recommendations of Magistrate Judge

Buchanan. Further, the Court hereby ORDERS that the Motion to Compel Arbitration is

DENIED and the Motion for Leave to File a Sur-Reply is GRANTED.^
I. Background

The history ofthis case has been thoroughly documented in prior orders. Accordingly,
the Court focuses this factual recitation on the events germane to the Reports.

On May 7,2015, Kathleen Holmes entered an appearance as attorney of record for Louis
Jennings. Dkt. No. 25. On August 10,2015, on the eve of a summary judgment hearing in the
matter, the parties reached a settlement agreement (the "Settlement Agreement") through which

a Special Master was appointed to manage the affairs ofthe Partnership and maximize the value
of the partnership assets through a sale, lease, or combination thereof of Partnership property. At

this time, Hennager was represented by the firm PCX Law Group. The PCT Law Group moved

to withdraw its representation on August 27,2015, Dkt. No. 65, but Judge Buchanan denied the
motion. Dkt. No. 68. On September 15,2015, David Fiske was substituted as counsel for
Beverly Hennager and PCT Law Group was discharged. Dkt. No. 71. On October 7,2015,
Holmes made an emergency motion to withdraw as counsel for Louis Jennings citing ex parte

communications by the Defendant circumventingcounsel and issues with his power of attorney
authorization. Dkt. No. 72. Hohnes' Motion was denied. Dkt. No. 75. On April 7,2016,

Holmesmoved again to withdraw. Dkt. No. 97. Holmesaverredthat since her first motion she

had proceeded in goodfaith "to carryout the representation of Mr. Jennings and the directives of
the Special Master" but despite the Court's order"that the presence of counsel is beneficial to

these civil proceedings" the relationship between Hohnes and Louis Jennings was so deteriorated

' Defendant Jennings filed the Sur-reply with theMotion forLeave. TheCourt hasreviewed the Sur-reply and
incorporated it into the Court's findings.

that her clientno longerauthorized her to act on his behalf. Dkt.No. 98. The second Motion
was also denied. Dkt. No. 159.

At the same time that Louis Jennings was refusing to cooperate with his counsel,

Hennager was feuding with her own coimsel. As a result, both Defendants beganfilingpro se

pleadings and refused to lettheir counsel communicate on their behalf. Nevertheless, the Special
Master contmued to make use of the services of counsel for each of the partners in the

furtherance of his orders imder the Settlement Agreement. Through these efforts, the Special

Mastermade nimierous reports and recommendations to the Court that led to the Court adopting
the sale of three parcels of the Partnership property on December 13,2016. Dkt. No. 226.

Ultimately, Fiske was permitted to withdraw as counsel for Hennager on September 13,2016.
Dkt. No. 200. Hohnes was permitted to withdraw by the Court on January 13,2017.

Following the sale of the property and at the requestof the Special Master, counsel for
Michael Jennings as well as Holmes, Fiske, and PCT Law Group, filed charging liens or
otherwise moved for attorney's fees. See Dkt. Nos. 227,232,241. The Court asked Judge

Buchanan to authora report and recommendation concerning the fee requests. JudgeBuchanan
issued two reports.

The Court takes notice of the following recommendations by Judge Buchanan from the
February 8 Report:

1. Theattomey's fees andcosts billed by Kathleen Hohnes after August 16,2015 should
be deemed not subject to the representation agreement between Hohnes andLouis
Jennings, and that the arbitration demand shouldbe denied.

2. The Court should alternatively require Louis Jennings to specifically identify those

fees and costs he disputes which were incurred prior to August 17,2015, and the
reasons therefore, before those charges are referred for arbitration.

3. $174,471.44 ofthe Partnership's assets (the full amount of Hohnes' charging lien) be

retained by the Court pending resolution of these issues.
Dkt. No. 286 at 7-8.

Judge Buchanan made the following further recommendations in the February 15 Report:
4. All of the legal fees incurred by the partners in this dispute followingthe Setdement

Agreement shouldbe regarded as expenses of the Special Master. The fees incurred

by Jennings MotorCompany, Inc. ("JMC") related to the dispute overthe breachof
the lease on the DAMN Parcel should be borne by JMC and not the partnership.
5. Holmes should be entitled to $118,893.75 in fees to be paid from the partnership

assetspriorto distribution. JudgeBuchanan also specified that $55,577.69 in
additional fees soughtby Holmes for services prior to settlement were only subjectto
arbitration if Defendant Louis Jennings could advance a good faith dispute over the
pre-setdement fees.
6. Fiske should be entitled to $90,159.11 in fees to be paid from the partnership assets

prior to distribution.

7. PCT Law Group should be entitled to $10,243.05 in fees to be paid from the funds
dueto Beverly Hennager, individually, as no objection was filed to PCTLawGroup's
charging lien.

8. The lawyers for the Plaintiff and for Michael Jennings should submit an accounting

oftheir post-settlement legal fees tobe paid from the partnership assets?
The following responses or objections have been filed to the Reports and
Recommendations.

A. Michael Jennings* Response

Michael Jennings contends that if the Court is to treat the various partners' fees as part of

the expenses incurred by the Special Master then either: each of the partners should bear the fees
for his or her own attorney because each partner bore similar fees pursuant to the adept division
of the work among all counsel by the Special Master; or Michael Jennings should be permitted to

submit his fees incurred in assisting the Special Master to be paid as an administrative expense of
the Special Master and, by extension, the partnership.
B. Plaintiffs Response

Plaintiff objects that a substantialportion of Defendants' post-settlementattomeys' fees
and costs were not incurred in support of the Special Master. Rather, the majority ofthe fees

were expended in the defense of claimsagainst Defendants and the prosecution of their claims

against the Partnership's tenants. Plaintiffexpressed a willingness to waive this objection if
Plaintiff's post-settlementattorney's fees and costs are treated in the same manner as the

Defendants and all partieswaiveany objection or appeal to the Partnership's payment of
Plaintiff's fees and costs.^
C. Defendants' Response

^These feerequests willbe addressed in a separate Report andRecommendation.
^Plaintiffalso objects that she isunable to scrutinize thebilling entries forHolmes because they were originally

produced tothe Court incamera. The fees have since been produced toall parties but Plaintiffstill has not offered
anyparticularized objection to the reasonableness of the fees.

Defendants raise four arguments intheir objections to the Reports."^ First, Defendant
Jennings objects to Judge Buchanan's finding that the attorney's fees and costs billed by
Kathleen Holmes after August 16,2015 are not subject to arbitration. Specifically, Defendant

Jennings contends that Judge Buchanan takes an unduly narrow reading of the arbitration

agreement inthe engagement letter he signed with Holmes.^ Rather, Defendant Jennings
maintains that the arbitration clause sweeps broadly to cover "any disputes, claims, or

controversies between [Defendant Jennings and Holmes] arising from or relating to [their]
attorney-client relationship, the legal services performed, or the fees charged... and any other
alleged wrongfiil act or omission." Defendant argues that the broad clause and federal policy
favoring arbitration require the Court to submit the fee issue to arbitration.
Further to his demand for arbitration. Defendant Jennings objects to the finding that the

Court should require him to specifically identify those fees and costs he disputes which were

incurred prior to August 17, 2015, and the reasons therefore, before those charges are referred for
arbitration. Defendant Jennings argues that his right to invoke arbitration does not depend on
whether he has detailed his defenses to the fees—^merely disputing the claim is sufficient.

Defendant avers that he does not want to "spread upon the public record the details of [Mr.

Jenning's] discontent with the Holmes Law Firm." Defendant Jennings represents that, if
compelled to state the natureof his objections to fees chargedfor services occurring before
August 17,2015, he would identify"various acts and/or omissions by the Hohnes Law Group,

withrespect to the legal services after thatperiod... such as to entitle himto a complete set-off

^Defendants filed theirobjection to the February 8 Report together, Dkt. No.311, butfiled theirobjections to the
February 15 Report separately and throughdifferentcounsel. Dkt.Nos. 319,320.
^Defendants jointly object to Judge Buchanan's reading of thearbitration agreement despite die fact thatonly
Defendant Louis Jennings has standing to dispute thearbitration provision. TheCourt refers to eachDefendant
individually for challenges particular to thatDefendant's former representation even if the objection appears in
Defendants' joint filing.

against that sum or more." See Dkt. No. 317, at 6; Dkt. No. 320 at ^ 34. As an alternativeto
arbitration. Defendant Jennings also offered to submit the fee dispute to mediation by the

Virginia StateBar Fee DisputeResolution Program without prejudice to the dispute on the lien
beforethe Court. Finally, Defendant Jennings notes that if the Courtpays post-settlement fees to
Holmes those fees should be paid by the Partnership.

Second, Defendantsjointly argue that each partner should bear responsibilityfor their
own fees and that no fees should be paid by the partnership. Defendantsjointly contend that
while the Special Master did have authority to hire professionaladvisers, he did not represent at
the time that he had retained Holmes or any of the other parties' attorneys as professional
advisers.

Third, Defendants jointly objectto the partnership bearing the fees for Michael Jennings'

attorney for any services performed in assistance to the Special Master. Defendants note that
MichaelJennings is only a limited partnerand is thus not entitledto equal treatmentwith the

general partners. Further, Defendants averthat Michael Jennings' relationship to the other

parties is adversarial because herepresents a party interested in purchasing the DAMN leasehold
held by thepartnership andwas the adverse party in a derivative suitbrought bythe partnership.
Fourth, each Defendantraises specificobjections to the attorneyfee's analysis in the

February 15 Report. Those objections are addressed infra Part III.D.
D. Holmes' Response

Hohnes argues thatthe Court should overrule Defendant Jennings' objections to the
recommendation that he identify the specific fees and costs they dispute for three reasons. First,
Holmes notes that Defendant Jennings has not offered any objection to the pre-settlement fees.

Second, Hohnes contends that it is dismgenuous for Defendant Jennings to claim that he does not

want to "spread upon the public record the details" ofthe dispute between Louis Jennings and
Holmes when the Defendants have disparaged their counsel, the Special Master, and the Court in

numerous court filings and out of court statements. Third, Defendant Jennings has waived any
desire for confidentiality in the arbitration because he has disputed the post-settiement agreement

fees assessed by Holmes in his oppositionto Kathy Holmes Motion for Attorneys [sic] Fees
Lien. Dkt. No. 251.

Holmes also asks the Court to overrule Defendant Jennings' objection to the
recommendation that the arbitration demand be denied. Holmes notes that the Special Master

sought the use of able counsel to analyze, suggest, and consider everything the Special Master
needed to do and how to do it. To that end. Holmes assisted in her capacity as a representative

not only of Louis Jennings as an individual but also in his role as a general partner to which

Hohnes owed a duty to act in the best interests of the partnership. Accordingly, when the

Special Master assumed responsibility for the management of the partnership afterthe Settlement
Agreement in August 2015, Holmes, as counsel for a general partnerwith a dutyto the best
interests ofthe partnership, was necessarily aligned with the Special Master.
U. Legal Standard

When reviewing a Magistrate Judge's Report and Recommendation, the Courtmust make
a de novo determination of those portions of the Reportand Recommendation to which

objections, if any, are made. Fed.R.Civ.P. 72(b); 28 U.S.C. § 636(b)(1)(C). TheCourt is
authorized to accept, rejector modify, in whole or in part,the recommendations made by the

Magistrate Judge. Fed.R.Civ.P. 72(b); 28 U.S.C. § 636(b)(1)(C). Where noparty hasmade an
objection to a report the Court is notrequired to give any explanation foradopting the
recommendation. Camby v. Davis, 718 F.2d 198, 199 (4th Cir. 1983).

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III. Analysis

As discussed above, Judge Buchanan made three recommendations in the February 8
Report. First, the February 8 Report recommended that Hohnes' post-settlement fees are not

subject to arbitration because they fall outside ofthe scope of her representation of Louis
Jennings. Second, Judge Buchanan found that Defendant Jennings should, but had failed to,
identify a dispute justifying arbitration of Holmes' pre-settlement fees. Third, the February 8
Report recommended setting aside the amount of Holmes' charging lien firom the partnership
assets in order to resolve this claim. In addition Judge Buchanan recommended in the February

15 Report that the legal fees incurred by the partners following the Settlement Agreement should
be regarded as expenses ofthe Special Master except for those incurred by JMC; Hohnes should
be entitled to $118,893.75 in fees to be paid from the partnership assets prior to distribution and
$55,577.69 in additional fees to Holmes were only subject to arbitration if Defendant Louis

Jennings could advance a good faith dispute over the pre-settiement fees; Fiske should be

entitled to $90,159.11 in fees to be paid from the partnership assets prior to distribution; and PCX
Law Group should be entitled to $10,243.05 in fees to be paid from the flmds due to Beverly
Hennager.

Taking into account all of the responses and objections, the Court considers the Reports

togetherand addresses: the arbitration ofpost-settlement fees; the arbitration of pre-settlement
fees; the retention of the amount sought in the Charging Lien; and the reasonableness of the fees
sought by Defendants' former counsel.
A. Arbitration of Post-Settlement Fees

In the February 8 Report, Judge Buchananfound that the arbitration ofHolmes' postsettlement fees was not appropriate in this matter. Further, in the February 15 Report, Judge

Buchanan found that all of the work undertaken by counsel for each ofthe partners post-

settlement, with the exception of work undertaken for the benefit of Jennings Motor Company,

was in support of the Special Master and should be paid out of the Partnership assets as expenses

ofthe Special Master. The Court addresses these findings and the objections therewith below.
Judge Buchanan was correct in finding that Holmes and counsel for the other parties to

this dispute were called upon by the Special Master to provide services in fiirtherance of the
Settlement Agreement. Defendants' objections to this finding are without merit. While
Defendant Jennings contends in the joint objection to the February 8 Report that the legal

services provided to him after settlement "albeit provided and received involuntarily - were legal

servicesfor Louis Jennings'', Dkt. No. 311, f 7 (emphasis original);this narrow treatment of
post-settlement services is belied by Defendant Jennings' representations elsewhere in the
record. Defendant Jennings' present counsel avers that Hohnes "spent much of [her] time

assisting the Special Master in carrying out various activities for the partnership, rather than
representing Louis Jennings, Dkt. No. 282, K2 (emphasis added). Louis Jennings, actingpro se,
also denied that Holmes was acting pursuant to the retainer agreement. See Dkt. No. 251 at 4

("Holmes agreed to violate the retainer agreement with her client by working for the Master at

her expense."). Similarly, Defendants' joint observation that the SpecialMaster did not

expressly designate Holmes or the other counsel to the partners as "professional advisors"

pursuant to the settlement agreement unreasonably elevates form overfimction. In practice, the

Special Master compelled theassistance ofthecoimsel for theparties to expediently dispose of
the partnership property afterdetermining that doing so would maximize the value of the

partnership assets. AsHolmes points out, she had a duty to represent thebest interests of Louis
Jennings and the partnership at the same time. Thus, when Hohnes acted in service of the

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Special Master she was, by extension, acting in the bestinterests of the partnership. The same is
true of all of the general partners' counsel at the time of the Settlement Agreement in relationto
the partnership and their clients.

Therealso can be no dispute that LouisJennings soughtto terminate his relationship with
Holmes after settlement. See Dkt. Nos. 72,97. However, the Court affirmed the Special

Master's determination that keeping the presentcounsel was consistent with the goals set forth in
the Settlement Agreement to expediently act to maximize the valueof the property. Dkt.No.
162 at 28:11-29:5. The Reportscarefullybalance the need to accountfor the contributions made

by counsel in service of the Special Master with Louis Jennings' desire to discharge his counsel.
Rather than hold Louis Jennings solely responsible for the fees incurredafter settlement, those

fees are drawnfrom the partnership funds generated by the effective disposition of the property.

Thus, eachpartnerbearsa shareof the workprovided for the Special Master, relative to their

ownership stake in the partnership. However, workdone on behalfof a client rather than at the
behest of the Special Master is not entitled to this equitable treatment. Those services are better

captured bythe contractual engagements between counsel and their clients. Because this finding
extends to all of the parties to the extent that theircounsel served at the request of the special
master, it addresses the objections raised by Michael Jennings and Plaintiff.

Because the Report found that all but a de minimis amount of Holmes' post-settlement
fees were for the benefit of the Special Master and Defendant Jennings has represented that the

time was spent representing the Special Master as opposed to Louis Jennings, it was reasonable
for Judge Buchanan to find that Hohnes' post-settlement services were outside ofthescope of
theoriginal engagement. Because the Report correctly found that the legal services provided

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post-settlement fell outside of the scope ofthe engagement letter between Louis Jennings and
Hohnes, those services are not subject to the arbitration clause in the engagement letter.

The same conclusion that Judge Buchanan reached in the February 8 Report with respect

to Holmes' post-settlement legal fees was correctly and equally applied to the other partners'
legal fees in the February 15 Report. The lawyers for the partners had their time divided

between two tasks post-settlement—^both in service ofthe Special Master. First, they were called
upon to assist with maximizing the value ofthe property by among other things, zoning

considerations that may bear on the value of the property, as well as facilitating communication
between the Special Master and the partners respecting offers for sale or lease and sundry
requests of the Special Master. Second, the Settlement Agreement expressly provided for the

Special Master to determine whether a former tenant was liable for a breach of the lease

agreement or whether any ftinds must be repaid by a party to the partnership. Dkt. No. 133, Exh.
A, H3. Thus, any hours devoted by the attorneys for the partners to either ofthese endeavors
constituted legal services which were undertaken at the behest ofthe Special Master pursuant to

the Settlement Agreement. Accordingly these services were "necessary to the administration of
duties" of the SpecialMaster and are payable by partnership funds. Dkt. No. 133,Exh. A, 19.
These services are also readily contrasted with the truly adversarial legal filings made by

the Defendants pro se during the timewhich they were represented by theircounsel but refused
to cooperate with them. Whereas Holmes and Fiske prepared zealous piecesof advocacy in
furtherance ofthe SpecialMaster's accounting of the partnership assets. Defendants filedpro se,

among otherthings, a motionto stay all proceedings, Dkt.No. 201; a motion to recuse the

imdersigned and void all orders andjudgments of the Court, Dkt. No. 220; a motion to invalidate
the 1994 amendmentsto the PartnershipAgreement, Dkt. No. 243; and a motion to void the case

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and all orders ofthe Court for abuse of process, Dkt. No. 246. Through these motions.

Defendants attempted to undo the entire operation of the Settlement Agreement in opposition to

the efforts ofthe partnership through the Special Master. The work by Holmes and Fiske, which
was undertaken to maximize the value ofthe partnership assets, was of a different kind from

these adversarial filings made by the Defendants once they had suppressed or disposed of their
counsel.

For the foregoing reasons, the Court adopts the findings ofthe Reports with respect to the
arbitration of post-settlement fees.
B. Arbitration of Pre-Settlement Fees

As the Report notes, Louis Jennings did not object to any of the fees and costs for
services provided prior to the August 10,2015 Settlement Agreement until February 2017. In

light of the eighteen-monthdelay and the Defendants' long history of engaging in dilatory tactics
to obstruct the work ofthe Special Master and overturn the Settlement Agreement, it was

reasonable for Judge Buchanan to request specific identification of objections to the pre-

settlement fees and prevent Defendant Jennings from maintaininga claim lacking a basis in law
or fact. The closest Defendant Jennings has come to answering Judge Buchanan's request is to

represent that objectionable actsor omissions which occurred after settlement entitle himto a
set-off against the fees incurredprior to settlement. Dkt. No. 320, ^ 34; Dkt. No. 317 at 6.
Becausethe Court adopts the findings of the Report with respectto the post-settlement fees, it

mustrejectthe request to rely on post-settlement objections as a set-offagainst pre-settlement
services. Accordingly, Defendant Jennings has not complied with Judge Buchanan's request to

presenta good-faith basis for objecting to the pre-settlement fees.

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Defendant Jennings nevertheless contends that the matter should go to arbitration because

he cannot present a complete list of objections to Holmes' services at this time. Rather, "Louis
Jennings will be using counsel specializing in these matters to press his concerns." Dkt. No. 325,

Exh. 2. This change of counsel does not justify Defendant Jennings' failure to meet Judge
Buchanan's request. Present counsel is very experienced and more than capable ofproviding
some colorable representation as to the nature of the objections to the pre-settlement services.
Defense counsel's February 28,2017 letter to Holmes' law firm makes abundantly clear that

present counsel is capable of articulatingobjections to the fee demand and the letter is further
evidence that no legitimate dispute exists over the pre-settlementfees. See Dkt. No. 325, Exh. 2.
Holmes' fees for services prior to settlement are long overdue. Defendant Jennings never

objected to Hohnes' bills until the post-settlement fallout and he does not presently have an

objection to the pre-settlementfees. While the arbitration provision in the engagementletter
between Holmes and Louis Jennings is broad, it nevertheless requires "a dispute, claim, or

controversy." Dkt. No. 269, Exh. 1 at 9. Because no such controversyexists over the presettlement fees, the findings ofthe Report are appropriate and the arbitration demand is denied.
C. Retention of the Amount Sought in the Holmes Charging Lien

The partiesdo not objectto the finding of the Reportthat $174,471.44 shouldbe retained

by the Court pending resolution of the attorney fee issue. Accordingly, the Court adopts this
finding.
D. Reasonableness of Fee Requests

The Court now turns to review Judge Buchanan's analysis ofthe specific fee requests
made in this case. Consistent with Fourth Circuit precedent. Judge Buchanan conducted a

"lodestar" analysis by multiplying the number of reasonable hours expended times a reasonable

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rate. McAfee v. Boczar, 738 F.3d 81, 88 (4th Cir. 2013) (quoting Robinson v. Equifax Info.
Servs., LLC, 560 F.3d 235,243 (4th Cir. 2009). In determining what is reasonable, Judge
Buchanan considered each of the twelve factors enumerated in Johnson v. Georgia Highway

Express Inc., 488 F.2d 714,717-19 (5thCir. 1974); see also Barberv. Kimbrell's, Inc., 577F.2d
216,226n.28(4thCir. 1978).

The Court reviewsJudge Buchanan's findings with respectto each of these factors,
noting and discussing the parties' objections in each case.
L Time and Labor Expended

Judge Buchanan found that Defendants had made no specific objections to the time

expended and hourly rates forHolmes or Fiske. Rather, Defendants had only made the general

objection that they no longer desired representation firom Holmes or Fiske after settlement and
theydid not authorize their attorneys to perform workfor the benefit of the Special Master.

Judge Buchanan determined thatthe entries of timeexpended by Holmes andFiske were

necessary to thework of the Special Master and didnotexceed time thatthe Court would
reasonably expect to be spent on such matters.

In response to theFebruary 15 Report, Defendants object to the finding that the time and

labor expended bycounsel was reasonable. Defendants contend that the use of lawyers with
duties of loyalty to theirrespective clients, eachcharging substantial hourly rates, was not an

efficient way to carry outadministrative tasks. Further each Defendant, with respect to their

representation, contends that the fee disputes should not beresolved via the Reports but rather,
eachDefendant should have the opportunity to assert legal andequitable affirmative defenses,

counterclaims (mcluding legal malpractice), and object tothe reasonableness and necessity ofthe
fees clauned—and to have all ofthese issues decided by a jury trial.

15

As discussed above, the Court agrees with the findings in the Reports that the lawyers for

the partners were acting in the service ofthe Special Master following the Settlement
Agreement. Further, as Hohnes points out "each general partner continued to owe his or her
highest fiduciary duty to the partnership and as such, was necessarily aligned with the Special
Master and the stated intentions ofthe partners under the settlement agreement." Dkt. No. 321, f
3. Thus, to the extent that counsel had a conflicting duty of loyalty, that conflict was endemic to

the dual role ofthe parties as partners and as individuals. This purported conflict would not be
cured by different coimsel.

The Court also declines to reject the Reports over Defendants' assertion that they are
entitled to a full jury trial over the award of attorney's fees. The Supreme Court has repeatedly

stated that "an application for attorney's fees should not result in a second major litigation."

Kirtsaengv. John Wiley & Sons, Inc., 136 S. Ct. 1979,1988 (2016). Furthermore, the Court has
providedmore than adequate measures for a full adjudication of the fees issues in this matter.
The Court properlyauthorized the Magistrate Judge to review the record and submit proposed

findings of fact and recommendations for disposition. 28 U.S.C. § 636(b)(1)(B). All parties

werepermitted to, and Defendants have, submitted objections to those findings. On February 23,
2017 Judge Buchanan instructed Holmes and Fiske to distribute a statement of fees and coststo
all coimsel of record. Dkt. No. 313. Both attorneys complied the same day. Dkt. Nos. 314, 316.

Objections on the February 15 Reportwhichdealt with the substance of these fee statements
were not due until March 1,2017 and Defendants did not file their objections until that date.

Dkt. Nos. 319,320. Further, the pre-settlement fees had already been invoiced to the Defendants

during the pendency of this matter. Thus, Defendants had a reasonable opportunity to challenge

the specific fee demands as unreasonable or excessive butfailed to so. Notably, despite alleging

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that the lawyers billed unreasonably for administrative tasks neither Defendant pointed to any
"administrative tasks" in the billing records.

Judge Buchanan found that the time and labor was appropriate for the identified tasks.
After reviewing the billing records, the Court agrees with this finding. Consequently, the Court
will not reject the Reports in favor of separate attorneys' fees litigation.

2. Novelty and Difficulty ofthe Questions Raised and (3.) Skill Required to Properly Perform the
Legal Services Rendered
Judge Buchanan combined the second and third factors and found that this case was
"complicated and somewhat unique" which warranted the rates charged by Holmes and Fiske.
Dkt. No. 298 at 9. The February 15 Report bifurcates former counsels' representation into two

categories, (1) preparation for a hearing regarding alleged violations of the lease before the
Special Master, and (2) assisting the Special Master in assessing the fair market value for the
properties, the zoning and future development potential of the properties, and offers made by

third parties for the properties. Judge Buchanan notes that these matters required experienced
and knowledgeable coimsel in part because they were time sensitive—^the Special Master and the
Court were under the impression that certain zoning allowances would expire if a buyer or tenant
was not promptly secured for the property.

With these considerations in mind. Judge Buchanan found that Hohnes and Fiske were

ably qualified and well-matchedto the challenges presented by this matter. Judge Buchanan
noted that Holmes has over 20 years of experience as an attorney focused on business disputes

and management and Fiske has over 40 years of experience in commercial litigation. Both

lawyers are regular practitioners before the Court. Theirexpertise with the Court, the general
subjectmatter of commercial litigation, and the specificsof this case, enabledthem to

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"significantly contribute[] to the ability ofthe Special Master to negotiate successful, highly
profitable contracts for the properties." Dkt. No. 298 at 11.

No party has objected to this finding in the February 15 Report. The Court adopts Judge
Buchanan's finding on this factor.
4. The Attorneys' Opportunity Costs in Pressing the Instant Litigation

Concerning the opportunity costs in the instant proceedings, Judge Buchanan noted that
Holmes and Fiske's considerable time on this matter was further increased by the need to deal

with the conflict posed by their clients demands to withdraw—^time which the attorneys could

have spent assisting other clients. Further, Judge Buchanan noted that neither attorney has been
paid any amount beyond their initial retainers when they joined this matter in 2015.

No party has objected to this finding in the February 15 Report. The Court adopts Judge
Buchanan's finding on this factor.
5. The Customary Feefor Like Work

Judge Buchanan found that the fees assessed in this case were customary for like work.

First, Judge Buchanan noted that the Defendants agreed to the fees as part ofthe retainer

agreementsthey signed with counsel at the time of engagement. Second, Judge Buchanan found
that the fees were within the range of customary fees found acceptable in ViennaMetro LLC v.
Pulte Home Corp., No. 1:10CV502 (E.D. Va. Aug. 24,2011).

Except for the generalized objections discussed and rejected above, no party has objected

to this finding in the February 15 Report. The Court adopts Judge Buchanan's finding on this
factor.

6. TheAttorneys' Expectations at the Outset ofthe Litigation

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Judge Buchanan found that neither Holmes nor Fiske could have anticipated the course of
this litigation at its outsetor that they wouldbe compelled to remainas attorneys of recordin the
matter for the benefit of the Special Master despite their clients' demand for their withdrawal.

No partyhas objected to this finding in the February 15Report. TheCourt adopts Judge
Buchanan's finding on this factor.
7. TimeLimitations Imposed by the Client or Circumstances

Withrespect to the time limitations in this case, Judge Buchanan found in the February 8
Reportthat it was necessary that all parties be represented by counsel in orderfor the Special
Masterto effectively exercise his dutiesunderthe Settlement Agreement. To that end, existing
counselwas the most cost-effective option because of their familiarity with the details ofthe
matter. Further, time was of the essence because of the Court's understanding that zoning rights

for the properties which may bearon the highest andbestuse of the property were set to expire if
a new tenant or owner was not obtained promptly. Accordingly, Judge Buchanan foimd that

Hohnesand Fiskeably assisted the Special Masterparticularly in lightof the trying
circumstances.

Defendants jointlyobject that the property wasnevergoing to loseits zoning status and

thataccordingly there was no need to rush to complete a sale and thatthehighest value of the
property would have instead been achieved by waiting until more desirable circumstances
developed. See Dkt. No. 293, at 12:1-13:6,41:4-42:24. Defendant Hennager citesto a statement
fromthe Fairfax County Supervisor Jeff McKay that he hopedto redevelop the Springfield area

encompassing the Partnership properties such that the highest use oftheproperty would be
mixedcommercial andupscale residential. Dkt. No. 319,68; Dkt. No. 320,H77.

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These objections are controverted by the evidence taken by the Court in its review of the

sale of three of the Partnership property parcels. During the September23,2016 hearing in this
matter the Court took testimony from John Ryan, the commercialreal estate broker retained by
the Special Master to market the Partnershipproperties. Mr. Ryan testified that he considered

optionsto rezone the propertybut that there was limited interestdespitethe expresseddesire of

the County Supervisor to redevelop the area. Dkt. No. 293,10:25-13:6. Therefore, even if
rezoningand redevelopment were possible, it was Mr. Ryan's professional opinionthat autorelated use remained the best option and that this industry was currently in a peak period when

they would pay the highest value for property. Id. Thus, the need to act expediently was not

only supported by the risk that the zoningfor auto-related uses couldexpirebut was also based
on the market interest in the property and the circumstances ofthe auto-sales market. The Court
considered all of these facts when it authorized the sale ofthe D, E, and F parcels ofthe

Partnership property andthesesame considerations support the time limitations condition in the
fee award analysis.
8. Amount in Controversy and Results Obtained

The underlying dispute m this matteraroseout of Plaintiffs complaint that the partners
were unableto make decisionsfor the partnership which led to the need for dissolution and the

sale or leaseof the Partnership property to pay for the debtsand taxes due. As Judge Buchanan

noted, hadthe parties not settled the dispute, dissolution would have followed andtheproperties
would have soldfor substantially lessthanmarket value. TheFebruary 15 Report found that the

efforts of the Special Master, by and through counsel fortheparties including Hohnes and
Fiske, resulted in an orderly competitive bidding process for the properties from which higher
value was obtained than would have been possible in a forced dissolution sale.

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Defendants separately object to the finding that but for the Settlement Agreement the
Partnership would have been forced into a fire sale by dissolution or by foreclosure on the

properties for tax arrears. Defendant Hennager contends that such a factual finding was never
made because the parties instead entered into the Settlement Agreement which suggested
winding up the Partnership's affairs as one of several possible resolutions to the issues raised in
the Complaint. On this basis, Defendant Hennager claims that the results obtained were not

advantageous because the unfavorable outcomes identified in the Reports were "never
reasonably likely to have come to fiiiition." Dkt. No. 319, f 7.
Defendant Hennager is correct that the Settlement Agreement did not limit the Special

Master to a sale of assets and wind-up of the Partnership. Rather, it instructed the Special Master

to identify, as expeditiously as possible, how to maximize the value ofthe partnership assets

including through a lease, sale, or combination thereof. Dkt. No. 133, Exh. A, ^ 2. Thus a result
which maximizes value and is a sale, lease, or a combination thereof, constitutes a favorable

outcome. The Special Master did obtain a sale of the D, E, and F parcels and the Court found
that this sale maximized the value. Dkt. No. 217. Therefore, a favorable outcome was obtained.
The Court need not make a factual determination that a dissolution or tax foreclosure was likely
to occur in order to conclude that such a result would be less favorable than the outcome which

the SpecialMaster obtained. Accordingly, Defendants' objections are without merit and the
Court adopts the findings of the February 15 Report on this factor.
9. Experience, Reputation, and Ability ofthe Attorney

Withrespectto the ninth factor. JudgeBuchanan incorporated the same observations
made in factors two and three respectingthe high reputation and ability of Hohnes and Fiske. As

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discussed above, no party has objected to this finding in the February 15 Report. The Court
adopts Judge Buchanan's finding on this factor.
10. Undesirability ofthe Case within the Legal Community

Judge Buchanan found that this case was highly undesirable within the legal community
because Defendants have repeatedly submitted unjustified and unfounded complaints to the

Court eitherpro se (even while they had retained attorneys) or through counsel. Further, Judge
Buchanan pointed out that Holmes and Fiske's motions to withdraw as coimsel were denied, in
part, until replacement counsel could be secured and that Defendants' inability to obtain

replacementcounsel is telling ofthe undesirabilityofthis representation. No party has objected
to this finding in the February 15 Report. The Court adopts Judge Buchanan's finding on this
factor.

11. Nature and Length ofthe Professional Relationship betweenAttorney and Client

Judge Buchanan found that the eleventh factor was not significantin this matter. No

party has raised an objection to this finding and the Courtadopts JudgeBuchanan's finding on
this factor.

12, Attorney's Fees Awarded in Similar Cases

Judge Buchanan found that this casewas sufficiently complex that there wereno similar
casesfrom whichto draw comparisons. Nevertheless, Judge Buchanan observed that the fees

requested by Holmes andFiske amount to no more than 1.6% of the gross proceeds of the sale of
the Partnership properties. As discussed above, the properties were sold for higheramounts
because ofthe efforts of counsel in the service of the Special Master. Accordingly,the fee

awards are reasonable. No partyhas objected to this finding in the February 15Report. The
Court adopts Judge Buchanan's finding on this factor.

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rv. Conclusion

For the reasons stated above, the Court hereby ADOPTS the February 8 Report and

Recommendation of Magistrate Judge Buchanan, Dkt. No. 286, and ADOPTS the February 15

Report and Recommendation. Dkt. No. 296. It is further ORDEREDthat Defendants' Motion
to Compel Arbitration,Dkt. No. 282, is DENIED; Defendants' Motion for Leave to File a SurReply is GRANTED. Dkt. No. 325.

MarchXl. 2017

UamO'Grady

Alexandria, VA

iJniicd Suites District

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