Opinion
Civil Action No. 00-1835, Section: "F" (4)
February 7, 2002
ORDER AND REASONS
Introduction
The plaintiff, John Atari, filed suit seeking relief for a failed business deal between him and the defendants. Atari sought to open a SpeeDee Oil Change Tune-Up franchise in Asheville, North Carolina. When Atari was unable to pay the required site procurement fee, he sued defendants for reimbursement of $30,000 he paid for franchise rights pursuant to a Franchise Agreement. The case was originally filed in North Carolina state court and was eventually removed to this Court on the basis of diversity jurisdiction.
Three months after filing suit, Atari filed a Motion for Partial Summary Judgment, which he withdrew two weeks later. Defendants who planned to oppose the motion incurred expenses in preparing to defend against it. After Atari failed to respond to discovery requests and orders, defendants filed a Motion to Compel and a Motion for Contempt and Sanctions against Atari. Then, on April 17, 2001, defendants filed a Motion for Summary Judgment which was granted as unopposed on May 1, 2001 and final judgment was entered against Atari on May 8, 2001.
Thereafter, the defendants filed a Motion to Fix Attorney's Fees and Tax Costs on May 15, 2001, seeking to recover $12,201.25 in legal fees and $1,459.81 in expenses incurred in defending against Atari's claims. Defendants claim they are entitled to their fees under Paragraph 24(d) of the Franchise Agreement. On June 11, 2001, Magistrate Roby found that defendants failed to submit sufficient information for the Court to make a determination of the "hours reasonably expended" or the "reasonable hourly rate." Magistrate Roby ordered the defendants to provide additional information in support of their claim.
Paragraph 24(d) reads: Attorney's Fees. In the event that any action or proceedings is filed by one party against the other party to enforce any of the covenants or conditions hereto, the party in whose favor final judgment shall be entered shall be entitled to recover from the other reasonable attorneys' fees, to be fixed by the court in which judgment is entered.
On June 18, 2001, the defendants filed a supplemental motion addressing the deficiencies raised by the Court, and provided additional supporting documents. The added evidence included billing records, the affidavit of counsel in this case, the current billing rates of the attorneys involved in this case, and the affidavit of an attorney who practices in the New Orleans area. The defendants also supplemented the figure previously requested as erroneously calculated and they now seek to recover $12,767.50 in attorney's fees. The defendants object to the Report and Recommendation denying an award of fees.
I. Standard of Review
An award of attorney's fees is reviewed for abuse of discretion. See Volk v. Gonzales, 262 F.3d 528 (5th Cir. 2001) Factual findings supporting an award of attorneys' fees are reviewed for clear error, but the conclusions of law underlying the award are reviewed de novo. Id.
II. Standard for Calculation Attorney's Fees
In this case, Magistrate Roby applied the lodestar calculation in determining the reasonableness of the attorney's fees sought by defendants. But the lodestar approach is followed only in cases brought under federal law. See Liljeberg Enters., Inc. v. Emmett, Cobb, Waits Kessenich, 1996 WL 169128, at *6 (E.D.La. 1996). In ordinary diversity cases, awards of attorney fees are governed by applicable state law.Perkins State Bank v. Connolly, 632 F.2d 1306 (5th Cir. 1980). The Supreme Court has stated,
A very different situation is presented when a federal court sits in a diversity case. "(I)n an ordinary diversity case where the state law does not run counter to a valid federal statute or rule of court, and usually it will not, state law denying the right to attorney's fees or giving a right thereto, which reflects a substantial policy of the state, should be followed. 6 J. Moore, Federal Practice P 54.77(2), pp. 1712-1713 (2d ed. 1974).Id. at 1310 (citing Alyeska Pipeline Service v. Wilderness Society, 421 U.S. 240, 259 n. 31, (1975)). See also Gulf Union Industries v. Formation Security, Inc., 842 F.2d 762, 766 (5th Cir. 1988) (applying Texas law in diversity action where attorney's fees, as an element of damages, are a matter of state substantive law).
Although the substantive right to receive attorney's fees is governed by state law, the Fifth Circuit has declined to answer whether the actual calculation of the fee should be governed by federal or state standards.See Robinson v. State Farm Fire Cas. Co., 13 F.3d 160, 164 (5th Cir. 1994) (whether state or federal law controls the calculation of fees need not be answered where Texas courts look to many of the same factors as do the federal courts); Powell v. Old Southern Life Ins. Co., 780 F.2d 1265, 1267-1268 (5th Cir. 1986) (declining to resolve whether federal or state standard applies where the issue was not raised by the parties). However, there is a strong implication that the manner used to calculate an award of attorney fees is governed by state practice. Id. at 1268,noting Woods v. International Harvester Co., 697 F.2d 635, 640-641 (5th Cir. 1983) (enforcing a contingency fee arrangement under state law). Moreover, the Fifth Circuit has affirmed attorney's fees computed along state-law guidelines in diversity cases. See Powell, Woods, and, Gulf Union Industries, supra; see also Carlton v. H.C. Price Co., 640 F.2d 573, 582-84 (5th Cir. 1981) (trial court did not abuse its discretion in awarding fees in accordance with state law fee schedule). The Fifth Circuit has also remanded cases with instructions for district courts to compute fees and clarify findings according to state law considerations.See Jerry Parks Equip. Co. v. Southeast Equip. Co. Inc., 817 F.2d 340, 344 (5th Cir. 1987) (lawyers' stipulation as to the amount of attorney's fees did not relieve the district court of its obligation under Texas law to assure that fees awarded were reasonable); Falcon Constr. Co. v. Economy Forms Co., 805 F.2d 1229, 1235 (5th Cir. 1986) (lack of explanation for award of attorney fees was error and case was remanded for a determination of fees using factors provided by Texas courts). But see Sweeney v. Vindale Corp., 574 F.2d 1296, 1301 (5th Cir. 1978) (remanding the case for specific findings where the trial court in a diversity case stated only that it relied on the Johnson factors without setting forth its reasons or findings). Thus, the Fifth Circuit prefers to follow state law fee-setting requirements in cases involving state substantive law. Gulf Union Industries, 842 F.2d at 767.
Prior to adopting the lodestar method for determining a reasonable fee in Copper Liquor, Inc. v. Adolph Coors Co., 624 F.2d 575, 583 n. 15 (5th Cir. 1980), the Fifth Circuit used the guidelines set forth inJohnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-719 (5th Cir. 1974). These included: (1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other 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.
The "lodestar enhancement" is foreign to Louisiana law. See Walle Corp. v. Rockwell Graphics Systems, Inc., 1992 WL 245975 (E.D.La. 1992). Under Louisiana law, the trial court must award a reasonable fee commensurate with the required level of legal services performed. Cates v. Sears, Roebuck Co., 928 F.2d 679, 690 (5th Cir. 1991) (citing Moody v. Arabie, 498 So.2d 1081 (La. 1986)). "Courts may inquire as to the reasonableness of attorney fees as part of their prevailing, inherent authority to regulate the practice of law." Vignette Publications v. Harbourview, 799 So.2d 531, 538 (La.App. 4 Cir. 2001) (citing State. Dept. of Transp. and Development v. Williamson, 597 So.2d 439, 441-42 (La. 1992)). Factors to be taken into consideration in determining the reasonableness of attorney fees include: (1) the ultimate result obtained; (2) the responsibility incurred; (3) the importance of the litigation; (4) the amount of money involved; (5) the extent and character of the work performed; (6) the legal knowledge, attainment, and skill of the attorneys; (7) the number of appearances made; (8) the intricacies of the facts involved; (9) the diligence and skill of counsel; and (10) the court's own knowledge. Id.
In the present case, defendants submitted an affidavit by a local New Orleans attorney who confirmed that the fee in this case was reasonable given the type of case, the amount of work performed, and the experience and skill of counsel. Using the lodestar analysis, Magistrate Roby found that the affidavit was insufficient to meet the burden of establishing a reasonable rate because it failed to include evidence of what other local firms routinely bill for similar cases. This information is not necessary under the Louisiana standard for determining the reasonableness of an award of attorney's fees. As such, Magistrate Roby's denial of the award of attorney's fees based upon the deficiencies of Mr. Willeford's affidavit, was in error.
Accordingly, the portion of the Magistrate's Report and Recommendation denying an award of attorney's fees is remanded for further findings in accordance with this Order and Reasons. The remainder of the Report and Recommendation granting defendants' request for court costs and denying recovery of costs for photocopies and miscellaneous litigation expenses, such as postage expense, automated research expense, long distance telephone expense, outgoing telegram/telecopy expense, and courier expense, is adopted.
The Report and Recommendation is affirmed in part, reversed in part, and remanded for further proceedings not inconsistent herewith.