Opinion
X03HHDCV114054881S
08-01-2018
CT RIVER PLAZA, LLC v. CITIGROUP, INC.
UNPUBLISHED OPINION
OPINION
Carl J. Schuman, Judge
The trial judge in this case was Judge Grant Miller. Judge Miller conducted a 47-day court trial over a two-year period between August 2014 and August 2016. Dozens of witnesses testified and the court admitted close to 1,000 exhibits. Judge Miller filed a seventeen-page decision on the merits of the case on March 12, 2018. The decision did not address the issue of attorneys fees and costs but instead called for a separate hearing on those issues. The parties submitted prehearing briefs on the matter and Judge Miller conducted the hearing on June 9, 2018. The parties then submitted post-hearing briefs.
The court presumes familiarity with that decision and the underlying facts of the case.
Judge Miller retired on June 11, 2018 without reaching a decision on attorneys fees and costs. This case was then assigned to the undersigned. The undersigned initially conferred with counsel. The agreement reached with counsel was that the undersigned would read the memorandum of decision and all briefing on the post-trial issues, listen to the recording of the June 9 hearing and then, if necessary, conduct a further hearing on posttrial motions. The undersigned has read all the required materials and listened to the recording of the hearing. The undersigned then conferred with counsel on the telephone on July 18, 2018 for about one hour and asked additional questions about the attorneys fees issue. Based on that background, the undersigned now submits the following memorandum of decision on attorneys fees and costs.
Judge Miller continued after that date to complete work on some matters pursuant to General Statutes § 51-183g, but did not complete work on this matter.
I
The threshold issue is whether the lease authorizes plaintiff CT River Plaza, LLC ("FBE") to obtain attorneys fees and costs arising out of a direct action against the defendant tenant Citigroup or, alternatively, whether Citigroup’s attorneys fee obligation is limited to situations in which FBE has incurred costs in actions involving third parties. Both parties address the cases of Heyman Associates No. 5, L.P. v. FelCor TRS Guarantor, L.P., 153 Conn.App. 387, 102 A.3d 87, cert. denied, 315 Conn. 901, 104 A.3d 106 (2014), and Mazier v. Signature Pools, Inc., 159 Conn.App. 12, 123 A.3d 1, cert. denied, 319 Conn. 933, 125 A.3d 207 (2015). The Heyman decision did establish that a contractual clause including the term "indemnification" could apply to direct claims between the contracting parties. Heyman Associates No. 5, L.P. v. FelCor TRS Guarantor, L.P., supra, 153 Conn.App. 411-17. The ultimate rule stemming from Heyman, however, is actually a neutral one: "[A] contract must be interpreted to effectuate the intent of the parties ... [T]he intent of the parties is to be ascertained by a fair and reasonable construction of the written words and ... the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the [writing]." (Internal quotation marks omitted.) Id., 415.
The starting point is thus the language of the lease. The lease provision in the present case provides in pertinent part: "19. Tenant shall indemnify and save Landlord harmless from and against, and shall reimburse Landlord for, all ... expenses, ... including reasonable ... attorneys fees and court costs, which may be ... incurred or paid by ... Landlord ... by reason or in connection with any of the following occurring during the Term of this Lease: ... 19.1.6 Any failure on the part of Tenant to perform or comply with any of the Provisions contained in this Lease on its part to be performed or complied with ..." Fairly reduced to its relevant essentials, the provision states that the Tenant shall "indemnify" and "reimburse" the Landlord for attorneys fees "incurred ... by" the Landlord in connection with a variety of events, including breaches of the lease by the Tenant. It is apparent that nothing in this portion of the language requires the presence of a third party. Although Citigroup argues that the word "indemnify" necessarily refers to third-party actions, the Heyman Court dispelled that notion by citing the definition of "to indemnify" as meaning "[t]o reimburse (another) for a loss suffered because of a third party’s or one’s own act or default ." (Emphasis in original; internal quotation marks omitted.) Id., 415 (citing Black’s Law Dictionary (9th Ed. 2009) ). Furthermore, the lease also uses the term "reimburse," which in common parlance does not require third-party involvement.
Citigroup also relies on the principle that the intent of the parties in executing a contract must be determined by the law at the time of its execution and that, in 1985, when the parties executed the contract, Connecticut courts interpreted indemnity provisions as applicable to third-party claims. Citigroup, however, cannot cite any Connecticut appellate authority requiring this interpretation. Nor did Heyman overrule any older cases that limited indemnity clauses to third-party claims. Instead, Heyman simply stands for what it labeled the "well established principle"; id. ; that courts must interpret contractual attorneys fees provisions according to the intent of the parties and the language they used. That principle was fully applicable in 1985. See, e.g., Ives v. Willimantic, 121 Conn. 408, 411, 185 A. 427 (1936). Here the only evidence of intent in 1985 is the language used by the parties. That language, as explained, clearly encompasses direct actions between landlord and tenant.
Citigroup next attempts to distinguish Heyman as a case in which, based on the language of the contract in question, no third-party claims were conceivable. To be sure, in the present case there is little doubt that section 19 of the contract does contemplate some actions by third parties against FBE. However, that fact does not preclude its additional application to direct actions between landlord and tenant, such as those involving clause 19.1.6, quoted above.
Finally, Citigroup cites Mazier for the proposition that Heyman "did not create a new blanket rule extending all broadly worded indemnity provisions to disputes between contracting parties." (Opposition to Plaintiff’s Motion for Attorneys Fees, pp. 10-11 (Docket (Dkt.) # 250.00.) The court agrees. Mazier did not, however, overrule (or even cite) Heyman or do anything but apply the traditional rules of contract interpretation to conclude that the clause in question in that case referred only to indemnification for actions by third parties. Mazier v. Signature Pools, Inc., supra, 159 Conn.App. 18-19, 24-25. Thus, Heyman ’s holding- that, depending on the language used, an indemnification clause can apply to direct actions between contracting parties- remains intact. Applying that holding and construing the language of section 19, the court concludes that it authorizes FBE to seek attorneys fees and costs from Citigroup in this case.
II
The remaining issue is how to determine the amount of attorneys fees. It is, of course, the burden of the plaintiff, as proponent, to prove its entitlement to fees. Smith v. Snyder, 267 Conn. 456, 479, 839 A.2d 589 (2004). Based on the fee records that the plaintiff has submitted, certain facts are undisputed. First, the plaintiff’s attorneys billed the plaintiff approximately $1,470,000 in attorneys fees and litigation costs and the plaintiff has paid its bill (Post-Hearing Brief of Plaintiff Regarding Award of Attorneys Fees, Exhibit A (Dkt. # 249.00); Exhibits 1-5, June 7, 2018 hearing). The defendant does not dispute the reasonableness of the total amount of hours that the plaintiff’s attorneys spent on this case or the hourly rates- $325 to $300 per hour for partners- that counsel billed. The parties thus agree in principle that a figure rounded to $1,470,000 is the lodestar amount. See Land Group., Inc. v. Palmieri, 123 Conn.App. 84, 98, 1 A.3d 234 (2010); Wells Fargo Bank, N.A. v. Konover, No. 3:05CV1924 AWT, 2014 WL 3908596, at *13 (D.Conn. Aug. 8, 2014), aff’d sub nom. Wells Fargo Bank, N.A. v. Konover Development Corp., 630 Fed.Appx. 46 (2d Cir. 2015), cert. denied, 136 S.Ct. 1699 (2016) (applying Connecticut law).
The precise amount of the plaintiff’s attorneys fees request is somewhat unclear. The plaintiff ultimately requests attorneys fees at a rate of 37.5% for a net amount of $551,000. (Post-Hearing Brief of Plaintiff, CT River Plaza, LLC, p. 13 (Dkt. # 260.00.) ) At that rate, the 100% value of its attorneys fees would be $1,469,333. The plaintiff also states that it paid its attorneys "a total of just over $1.4 million." (Post-Hearing Brief of Plaintiff Regarding Attorneys Fees, p. 7 (Dkt. # 249.00.) The defendant has actually cited the higher amount of $1,477,153.97 (Memorandum in Further Support of Citigroup, Inc.’s Opposition to Plaintiff’s Motion for Attorneys Fees, p. 3. (Dkt. # 261.00.) ) Based on these statements, the court uses the rounded-off figure of $1,470,000. This figure includes litigation costs, which come to approximately $64,000. Litigation costs encompass matters such as trial transcripts, trial presentation services, and related equipment rental. (Exhibits 2-5, June 7, 2018 hearing.) The court will not address these costs separately but instead will consider these costs included in the references to attorneys fees.
Thus, the undersigned is not in the difficult position of having to assess the quality of representation without having presided over the trial.
Second, the plaintiff’s itemized damages in the underlying suit totaled $9,216,806. (Plaintiff’s Post-Trial Brief, Appendix 1, Schedule A (Docket (Dkt.) # 235.00.) ) In his memorandum of decision, Judge. Miller rejected several of the plaintiff’s larger claims, including a claim for diminution in value of approximately $4,370,000, but found liability and awarded the plaintiff damages on the following three items: 1) $144,516.86 for modernization of the elevator towers; 2) $15,900 to remove dead trees from the exterior plaza; and 3) $23,477.48 for repairs and maintenance to the parking garage. The damages award thus totaled $183,894.34.
Based on this decision, the plaintiff acknowledges that it achieved only partial success and commendably concedes that the court should reduce its attorneys fees award proportionately. The language of the lease fully supports the proposition that there should be an apportionment.
As stated above, § 19 of the lease states in pertinent part: "Tenant shall indemnify and save Landlord harmless from and against, and shall reimburse Landlord for, all ... expenses, ... including reasonable ... attorneys fees and court costs, which may be ... incurred or paid by ... Landlord ... by reason or in connection with any of the following occurring during the Term of this Lease ..." (Emphasis added.)
The plaintiff suggests that it prevailed on claims involving three of the eight "systems" at stake in the case and that the base figure should therefore constitute 3/8, or 37.5%, of the $1,470,000 in fees incurred for a total of $551,000. The plaintiff then seeks an upward adjustment to 45% based on a variety of factors for a net award of $650,000. (Post-Hearing Brief of Plaintiff Regarding Attorneys Fees, pp. 15-19 (Dkt. # 249.00.) The defendant argues that, if the court is to award attorneys fees at all, it should reflect the percentage of the claimed damages that the court awarded. The defendant observes that the court awarded the plaintiff $183,894.34 in damages out of a total claim for $9,216,806, or approximately 2%. It then proposes an award of 2% of the $1,470,000 in fees, which calculates to approximately $29,400. Alternatively, the defendant suggests that the plaintiff prevailed on four of twenty-nine issues in the case and thus achieved success on 4/29, or 13.8%, of its claims. Multiplying 13.8% times $1,470,000 results in a presumptive fee of $202,860. The defendant then proposes a further 50% downward adjustment for a net award of approximately $101,430.
The plaintiff’s final brief, however, makes no mention of the upward adjustment and instead concludes by requesting "an award of 37.5% of the attorneys fees it incurred- or $551,000 ..." (Post-Hearing Brief of Plaintiff, CT River Plaza, LLC, p.13 (Dkt. # 260.00.) ) During the July 18, 2018 telephone conference, the plaintiff renewed its request for an upward adjustment to 45%. In view of the court’s ultimate decision, the court need not decide whether the plaintiff has waived its claim to an upward adjustment.
In addition to maintaining that § 19 of the lease does not authorize attorneys fees based on direct actions between the landlord and the tenant- an argument that the court has rejected above- the defendant mentions in passing in its brief that the plaintiff could have avoided most or all of its attorneys fees if it had accepted the defendant’s settlement offer. The court rejects this contention as well. Although the Connecticut appellate courts have apparently not addressed this issue, the rule in the Second Circuit is that "[a]bsent a showing of bad faith, a party’s declining settlement offers should [not] operate to reduce an otherwise appropriate fee award." (Internal quotation marks omitted.) N.A.A.C.P. v. East Haven, 259 F.3d 113, 119 (2d Cir. 2001), cert. denied, 534 U.S. 1129 (2002). If the defendant wanted to minimize its obligation to pay costs and fees after rejection of its settlement offer, it should have filed an offer of compromise under Practice Book § 17-11. It did not.
In its brief, the defendant claimed that there were 31 items. During the July 18, 2018 telephone conference, the defendant amended its position and agreed that there are 29 items. The court has adjusted the figures proposed by the defendant to reflect a claim for 4/29, or 13.8%, of the fees rather than 4/31, or 12.9%.
The plaintiff thus contends that the court should base its adjustment of the award on the percentage of claims on which it prevailed. The defendant, in contrast, maintains primarily that the court should rely on the percentage of monetary damages that the plaintiff received. Neither side explicitly argues that the court should base its decision on the percentage of time that the plaintiff devoted to the claims that prevailed, although time does play a role in the analysis for both sides.
In this context, the United States Supreme Court has stated: "There is no precise rule or formula for making these determinations. The district court may attempt to identify specific hours that should be eliminated, or it may simply reduce the award to account for the limited success. The court necessarily has discretion in making this equitable judgment." Hensley v. Eckerhart, 461 U.S. 424, 436-37 (1983). "[W]here the plaintiff achieved only limited success, the district court should award only that amount of fees that is reasonable in relation to the results obtained." Id., 440. See also Russell v. Dean Witter Reynolds, Inc., 200 Conn. 172, 195, 510 A.2d 972 (1986) (citing Hensley on the issue of proportioning for partial success but upholding trial court’s decision in that case not to proportion or reduce the fee). Neither side cites any cases, and the court has not discovered any, that dictate precisely whether the court in the present situation should make a deduction for partial success based on the percentage of successful claims, as the plaintiff argues, or instead, as the defendant contends, should rely on the percentage of damages obtained.
The defendant cites Atlantech, Inc. v. American Panel Corp., No. CIV.A. 07-10342-DPW, 2013 WL 870227 (D.Mass. Mar. 6, 2013), aff’d, 743 F.3d 287 (1st Cir. 2014), for support. In that case, the district court awarded fees for prevailing on one count (the "NCA" or "breach" claim) based on the fact that the damages for that count represented 2.37% of the total award. The court noted, however, that the plaintiff added the count in question after filing the original complaint and that the count (unlike the situation here) was "based on a set of facts independent from the parties’ other disputes about the terms of various agreements and purchase orders, the extent to which those agreements were satisfied, and the damages stemming from their breach [and that] ... [p]rosecuting the NCA claim was a discrete and, by comparison, less demanding endeavor ..." Id., *10. The court labeled the 2.37% formula "somewhat crude" and in fact considered the plaintiff’s proposal to award fees based on the fact that the fee-generating claim constituted one count out of seven "a serviceable and not unrealistic way to begin calibration of the proportion of services fairly attributable to its success on the claim for breach ..." Id. The plaintiff appealed and the parties settled the fees issue on appeal. Atlantech, Inc. v. American Panel Corp., 743 F.3d 287, 291 n.3 (1st Cir. 2014). The case thus does not supply strong support for the defendant’s position in the present case.
In writing and at the hearing, both parties discussed at length the issue of how much time the plaintiff may have devoted to achieve partial success. The court believes that the parties have relied on formulas based on the percentage of successful claims or the percentage of claimed damages as proxies for determining the percentage of time to allocate to the successful portion of plaintiff’s case. As one of the components of the lodestar, the percentage of time is an important criteria for determining attorneys fees. See Land Group., Inc. v. Palmieri, supra, 123 Conn.App. 98. Indeed, the ultimate question here is how much time did the plaintiff fairly spend on the successful claims? It is only because there is no time sheet that can possibly answer that question clearly and indisputably that the court must examine indirect ways of determining the time expended.
The defendant’s proposal to rely on the percentage of damages is an inadequate substitute for determining the percentage of time devoted to the successful claims. From the court’s review of the file in this massive, complex case, it is hard to believe that the plaintiff spent only 2% of its time on the successful claims. First, for counsel in every case there are numerous start-up or overhead costs and duties, such as conducting discovery, filing motions, writing briefs, and going to court, that go into prosecuting every claim, large or small. Second, it is entirely possible that it may take a great deal of time to prevail on a relatively small claim.
At the same time, the plaintiff’s proposal to divide the claims into eight groups or systems and then argue that it prevailed on three, or 37.5%, of them is not the best method for estimating the amount of time spent on those three claims. The court has closely examined Schedule A to Plaintiff’s Post-Trial Brief, which is entitled Summary of the Costs of Remedy, and serves essentially as an itemization of damages. (Plaintiff’s Post-Trial Brief, Appendix 1, Schedule A (Dkt. # 235.00.) ) Schedule A reveals that the plaintiff only partially prevailed on the three systems for which it claims complete success. Thus, for plaza repairs, the plaintiff claimed $726,900 in damages but the court awarded only $15,900. For parking garage work, the plaintiff claimed $1,387,977.48 in damages but the court awarded only $23,477.48. For elevator work, the plaintiff claimed $1,830,585.16 in damages but the court awarded only $144,516. Thus, it is simply not fair or accurate to say that the plaintiff prevailed on three of the eight systems and that the adjustment factor should be 37.5%.
For the same reasons, the plaintiff is not entitled to the 7.5% upward adjustment to 45% that it seeks.
The defendant’s alternative proposal represents a better approach. The defendant proposes a subdivision of the eight systems into 29 items as set out in Schedule A. Under this approach, it is clear that, for the plaza repair system, the plaintiff did not prevail on restoration of softscape and hardscape, for which the plaintiff claimed $711,000, but did prevail on tree removal, for which the court awarded $15,900. This approach, when compared to the plaintiff’s assertion that it prevailed on three out of eight claims, more accurately identifies the number of claims on which the plaintiff prevailed and the number on which it did not. Thus, the court concludes that the plaintiff prevailed on four of twenty-nine claims, or 13.8%. This percentage, when multiplied times the plaintiff’s bill of $1,470,000, yields a presumptive attorneys fee of $202,860.
During the telephone conference, the plaintiff contended that several additional items should be grouped and that there are actually only eighteen separate items on Schedule A, of which plaintiff prevailed on four. The court finds the defendant’s approach more objective and accurate. Dividing the damages into a greater number of subcategories reduces the need for grouping of subcategories, which is subjective.
For several reasons, the defendant urges a further downward adjustment of 50% of this amount. First, the defendant argues that the court rejected the plaintiff’s theory that it should recover approximately $4.3 million for diminution in value of the building because of repairs not done. However, Schedule A includes these items as part of the damages. Thus the defendant’s suggestion that the plaintiff succeeded on four of twenty-nine claims already accounts for the $4.3 million.
For example, Schedule A lists damages in section B of $1,364,000 for concrete/waterproofing repairs/drainage and miscellaneous maintenance in the parking garage based in part on the "Walker Condition Appraisal Report." This amount is not based on an actual invoice for work done but rather constitutes an estimate, based in part on an appraisal, of the cost of the work that the plaintiff claimed needed to be done. Because the work was not done, this figure thus represents a component of the diminution in damages. But since the defendant has already counted this item as one of the twenty-five items on which the plaintiff did not prevail, there is no basis for a further downward adjustment.
Second, the defendant asserts that the plaintiff’s attorneys fees invoices lack sufficient detail to calculate the amount of attorneys fees accurately. The court has reviewed these invoices, which the plaintiff introduced as Exhibit 1 at the June 9 hearing and are attached in spread sheet form as Exhibit A to plaintiff’s July 3, 2018 posthearing brief (Dkt. # 260.00.) Although the invoices do not establish the amount of time that counsel spent on each claim, it would simply not be possible to do so because, as explained above, counsel will generally work at one time on matters that affect multiple claims. In that respect, the invoices are typical of those that the court has seen in other complex litigation cases. Hence, the quality of the plaintiffs’ attorneys fees invoices does not warrant a separate downward adjustment. Finally, the defendant simply reiterates its argument that the plaintiff achieved only limited success and that it is not possible to determine precisely how much time the plaintiff spent on its few successful claims. The court, however, has already addressed these concerns in selecting the appropriate formula and downward adjustment in a case of partial success. The same concerns do not present a basis for a second downward adjustment.
III
Accordingly, the court awards the plaintiff attorneys fees and costs in the total amount of $202,860.
The fact that the attorneys fees award slightly exceeds the damages is not a barrier. See Jacques All Trades Corp. v. Brown, 57 Conn.App. 189, 195-97, 752 A.2d 1098 (2000).
It is so ordered.