Opinion
Case No. 1:00-CV-387.
December 8, 2000.
ORDER AND JUDGMENT
In accordance with the Opinion filed on this date,
IT IS HEREBY ORDERED that Defendant United Bank of Michigan's Motion For Partial Summary Judgment (docket no. 22), Defendant Gruel Mills Nims Pylman LLP's Motion For Partial Summary Judgment (docket no. 29), and Plaintiff FPT Industrie, S.P.A.'s Motion For Recovery Of Attorney Fees And Costs (docket no. 32) are GRANTED. IT IS FURTHER ORDERED that the $262,571.21 of Settlement Proceeds shall be distributed as follows: (1) $87,568.64 for the one-third contingency fee and $4,673.72 for unreimbursed expenses shall be paid to Defendant Gruel Mills Nims Pylman LLP; (2) $ $3,238.50 for attorney fees and $194.84 for expenses shall be paid to Plaintiff FPT Industrie, S.P.A.; and (3) the balance of the Settlement Proceeds shall be paid to Defendant United Bank of Michigan.
IT IS FURTHER ORDERED that the Clerk shall disburse the Settlement Proceeds as set forth above after thirty (30) days from the date of this Order, when the appeal period has run. This case is closed.
OPINION
Plaintiff, FPT Industrie, S.P.A. ("FPT"), filed this action seeking interpleader and declaratory relief with regard to a sum FPT is required to pay pursuant to a settlement (the "Settlement Proceeds") reached with Defendant Pick Machinery, Inc. ("Pick") in the matter captioned Pick Machinery, Inc. v. FPT Industries, S.P.A., No. 1:98-CV-492 (W.D.Mich.) (the "Underlying Action"). In this action FPT requests that the Court determine which of Pick's creditors, United Bank of Michigan ("United Bank"), The Budd Company ("Budd"), Klaus Meine ("Meine"), Robert Ohlman, d/b/a Robert Ohlman Properties ("Ohlman"), and Gruel Mills Nims Pylmar. LLP ("GMNP"), are entitled to the Settlement Proceeds. Now before the Court are United Bank's Motion for Partial Summary Judgment, GMNP's Motion for Partial Summary Judgment, and FPT's Motion for Recovery of Attorney Fees and Costs.
Ohlman and Meine have advised the Court by letter that they consent to United Bank's claim to the Settlement Proceeds. (See docket nos. 32, 33.) Therefore, for purposes of this Opinion, Ohlman's and Meine's claim to the Settlement Proceeds will be considered subordinate to United Bank's claim, which exceeds the amount of the Settlement Proceeds.
I. Facts
The material facts in this case, which are set forth below, are not in dispute.A. The Underlying Action
On or about June 1, 1998, Pick sued FPT in the Kent County Circuit Court alleging claims for breach of contract, violation of the Michigan Sales Representatives Commissions Act, M.C.L. § 600.2961, and injunctive relief. FPT then removed the case to this Court. Shortly before trial, the parties settled the matter for $265,000. At some point in time, FPT became aware that United Bank, GMNP, Budd, Ohlman, and Meine each asserted a claim to the Settlement Proceeds. Accordingly, FPT sought resolution of the competing claims through this interpleader action.
B.The Claimants
1. GMNP
GMNP represented Pick in the Underlying Action pursuant to a contingent fee agreement, under which GMNP was entitled to one-third of any recovery plus expenses. GMNP's one-third fee is $87,568.64. GMNP also initially claimed expenses of $18,749.64, but has reduced that portion of its claim to $4,673.72 to reflect its receipt of the remaining amount ($14,075.92) from a trust account. (See Stipulation of Facts Between United Bank and GMNP ¶¶ 2-3.) United Bank has agreed that GMNP is entitled to payment of its claim before payment of United Bank's claim. (See Agreement of 8/30/2000 ¶¶ 2-3, GMNP's Br. Supp. Ex. 4.)
2. United Bank
United Bank is a secured creditor of Pick. United Bank perfected its secured interest through the filing of a UCC-1 financing statement on July 25, 1996. There is no dispute that United Bank's security interest covers the Settlement Proceeds under the category of "general intangibles." Pick is in default on its obligations to United Bank, and United Bank has accelerated all of Pick's obligations. As of August 18, 2000, Pick owes United Bank $233,386.93, with interest accruing from that date at $70.72 per day. Although United Bank holds a second mortgage on the residence of Gary Pickerd ("Pickerd"), the president and sole owner of Pick, because of the amount of the first mortgage there is insufficient value in the property to fully satisfy Pick's debt to United Bank.
3. Budd
In 1998, Budd filed suit against Pick and Pickerd in Oakland County Circuit Court to recover $172,384.75 which Budd alleged was wrongfully retained by Pick (the "Disputed Funds"). Budd sent the Disputed Funds to Pick as a progress payment on a piece of equipment Budd ordered from FPT. After Budd learned that Pick was no longer representing FPT and requested that Pick return the Disputed Funds, Pick refused to do so, asserting that it was entitled to retain the Disputed Funds as an setoff against funds FPT allegedly owed Pick. Sometime before or after Budd filed suit, Pick deposited $67,000 of the disputed finds into GMNP's trust account. On July 16, 1999, Budd, Pick and Pickerd entered into a settlement agreement pursuant to which $47,000 was released to Budd from Pick's trust account with GMNP, and Pick and Pickerd agreed to allow Budd to hold a consent judgment for the remaining balance of $125,385.15 until completion of the Underlying Action. In addition, Budd was granted a lien against any recovery received in the Underlying Action and a second mortgage on certain industrial property. In the event no funds were available from the Underlying Action to satisfy Pick's obligation to Budd, Budd was permitted to enter the consent judgment. Of the $20,000 of the Disputed Funds remaining in Pick's trust account with GMNP, $14,075.92 was used to fund expenses in the Underlying Action.
II. Discussion
A. Priority of Claims to Settlement Proceeds
The parties do not dispute that GMNP is entitled to recover $87,568.64 as its one-third contingency fee from the Settlement Proceeds, either under the common fund doctrine or pursuant to United Bank's agreement to subordinate its claim to GMNP's claim for fees. The parties also do not dispute that GMNP is entitled to recover $4,673.72 in unreimbursed expenses under either or both of those grounds. Finally, there is no dispute that United Bank holds a first secured interest in the Settlement Proceeds.
The only dispute with regard to priority is whether Budd is entitled to recover $14,075.92 from the remainder of the Settlement Proceeds (after payment of GMNP's claim) as reimbursement of the portion of the Disputed Funds used to pay some of the expenses for the Underlying Action. Budd advances two grounds for awarding it the portion of expenses paid by GMNP out of the trust account. First, Budd contends that because it funded a portion of the expenses of the Underlying Action, it has a lien similar to an attorney's lien in the Settlement Proceeds. Second, Budd contends that the lien granted by Pick to Budd should have the same priority as an attorney's common law charging lien because Budd advanced part of the costs of the Underlying Action.
Budd does not claim in this case that the Disputed Funds were subject to a constructive trust.
The Court rejects both arguments. Budd's first argument must fail because Budd has not cited any case, either from Michigan or any other jurisdiction, recognizing a lien similar to an attorney's lien in favor of a non-attorney based upon payment of litigation expenses. Even if there were some authority for such a lien, Budd's rationale for imposing such a lien to defeat United Bank's superior interest in the Settlement Proceeds is faulty. Budd asserts that it was forced to pay the expenses of the Underlying Action because Pick and Pickerd unlawfully retained the Disputed Funds. However, nothing in the record demonstrates that Pick's retention of the funds paid by Budd was unlawful. There is no order or judgment by the state court to that effect, and the settlement agreement between Budd and Pick provides that it "does not constitute an admission of liability by either party." (Full and Final Release and Settlement Agreement ¶ 10, Budd's Resp. Br. Ex. D.) Furthermore, the equities do not support the imposition of such a lien. Budd has not shown that it was misled by United Bank in any manner, and there is no indication that Budd attempted to discover whether Pick's assets were subject to a valid prior security interest, although it certainly had the means to do so. Had Budd taken appropriate steps, it could have sought United Bank's agreement to subordinate its claim to Budd's claim for reimbursement of expenses for the Underlying Action as a means of protecting itself.
Contrary to United Bank's assertion, Budd would not have been required to demonstrate fraud to support imposition of a constructive trust. See Blachv v. Butcher, 221 F.3d 896, 904 (6th Cir. 2000).
Budd's second argument, that its lien granted by Pick should be given the priority of an attorney's common law charging lien, also fails because it is unsupported by case law. In Warner v. Tarver, 158 Mich. App. 593, 405 N.W.2d 109 (1986) (per curiam), the court concluded that even though prior security interests had priority over an attorney's lien, equity required that the attorney be awarded a reasonable fee from the proceeds of a lawsuit resulting from the services rendered by the attorney. The court pointed out that the secured creditors were aware of the attorney's substantial efforts to collect the proceeds, knew that they would benefit from those efforts, but never offered or provided any assistance in those efforts. See id. at 599-600, 405 N.W.2d at 112. The court concluded that under those circumstances, an award out of the litigation proceeds was reasonable because the proceeds "were produced by the sole efforts of the attorney. Id. at 600, 405 N.W.2d at 113. Except as to GMNP, the reasoning of Warner does not extend to this case. Budd has not shown that United Bank was aware that GMNP may have been using funds provided by Budd to fund the expenses of the Underlying Action. Thus, United Bank did not knowingly benefit either from Budd's efforts or its funds. More importantly, unlike the situation in Warner. the Settlement Proceeds were not produced by the sole, or even any, efforts of Budd, but rather were produced by GMNP's efforts. Budd's claim that GMNP's use of its funds allowed the Underlying Action to occur must also be rejected because there is no evidence indicating that the Underlying Action would not have proceeded without Budd's funds. In fact, GMNP filed the complaint in the Underlying Action at least one month before Pick deposited the Disputed Funds into the GMNP trust account. There is no indication that GMNP or Pick intended to use those funds from the outset to fund the Underlying Action, nor has there been any showing by Budd that GMNP could not have obtained finding for expenses from another source, such as GMNP itself or United Bank. Therefore, the Court finds no basis for granting Budd's lien priority over United Bank's prior security interest.
B. FPT's Attorney Fees
FPT has filed a motion to recover its attorney fees and costs expended in filing the interpleader action in the amount of $3,433.34. The motion is unopposed, except by United Bank in a footnote in its reply brief to GMNP's motion for summary judgment and Budd's response brief. United Bank asserts that FTP has waived any claim for attorney fees because FTP failed to file a motion for recovery of attorney fees within the time set forth in the Court's September 21, 2000, Consent Order for Interpleader Relief. The September 21, 2000, Order provided that FTP's failure to file a motion for recovery of attorney fees within ten days of FTP's deposit of the Settlement Proceeds into Court shall constitute a waiver by FTP of the right to recover attorney fees. United Bank's assertion is based upon the assumption that the Settlement Proceeds were deposited with the Court on September 30, 2000, which would have resulted in an October 12, 2000, filing deadline for FPT. However, the docket sheet in this case indicates that a receipt for the Settlement Proceeds was issued on October 2, 2000. If that date is used as the deposit date, FTP was required to file its motion no later than October 17, 2000, taking into account all intermediate Saturdays, Sundays, and legal holidays (in this case 2 Saturdays, 2 Sundays, and one legal holiday), as required by Fed.R.Civ.P. 6(a). Therefore, FTP's motion, which was filed on October 17, 2000, is timely.
Having reviewed the summary of legal fees and expenses submitted by FPT, the Court concludes that attorney fees of $3,238.50 (12.7 hours @ $255/hour) and expenses of $194.84 were reasonably incurred. Therefore, the Court will award FPT its attorney fees and expenses in the amount of $3,433.34.
III. Conclusion
For the foregoing reasons, the Court will grant United Bank of Michigan's motion for partial summary judgment, GMNP's motion for partial summary judgment (awarding $4,673.72 rather than $18,749.64 in expenses), and FPT's motion for recovery of attorney fees.
An Order consistent with this Opinion will be entered.