Opinion
Civil Action No. 01-2437.
July 19, 2004
MEMORANDUM
Presently pending before this Court is the Motion for Attorneys' Fees and Costs filed by Defendant, Prolease Atlantic Corporation ("Prolease Atlantic"), and the Response and Rely thereto. For the following reasons, Defendant's Motion will be granted in part and denied in part.
This Court sets forth the factual history as relevant to the pending motion. A complete factual history has previously been set forth in a prior Memorandum Opinion in this case. See Mash Enters., Inc. v. Prolease Atl. Corp., No. 01-2437, 2004 WL 405794, at *1-3 (E.D. Pa. Mar. 4, 2004).
This action arises out of the purchase of substantially all of the assets of Human Resource Options, Inc. ("HRO"), the predecessor in interest of Plaintiff MASH Enterprises, Inc. ("MASH"), by Prolease Atlantic pursuant to a Purchase Agreement ("Agreement"). As a result of this purchase, Plaintiffs and Defendants sued each other alleging, among other things, breach of contract and fraud. A non-jury trial was held regarding this matter from November 3, 2003 through November 5, 2003. On March 4, 2004, this Court issued Findings of Fact and Conclusions of Law wherein the following judgments were rendered: judgment was entered in favor of Prolease Atlantic in connection with Plaintiffs' breach of contract claim; Prolease Atlantic was granted a set off in the amount of $2,066,875.00; judgment was entered in favor of Prolease Atlantic against Plaintiffs in the amount of $2,540.00 on the counterclaims for breach of contract, fraud and negligent misrepresentation; and Prolease Atlantic was awarded attorneys' fees and costs. Pursuant to Paragraph 28 of the Purchase Agreement, "the prevailing party in any legal proceeding between the parties would be entitled to attorneys fees and costs." (See Doc. No. 189). This Court awarded Prolease Atlantic its attorneys' fees and costs finding that it was the prevailing party in the action. On March 26, 2004, Plaintiffs filed a Notice of Appeal pertaining to this Court's judgment. Defendant's Motion for Attorneys' Fees and Costs is currently being addressed because it is the sole remaining issue in this case that is within this Court's jurisdiction. II. DISCUSSION
Attorneys' fees and costs were awarded, however, the amount of the fees and costs, as well as evidence pertaining to the requisite reasonableness of such expenses, were ordered to be supplied to the Court at a later date. (See Doc. No. 189). On March 31, 2004, Defendant filed its Motion for Attorneys' Fees and Costs which included exhibits containing relevant records and affidavits regarding the amount of the fees and costs. On April 14, 2004, Plaintiffs filed their Answer to Defendant's Motion. On April 23, 2004, Defendant filed its Reply to Plaintiffs' Answer which addressed Plaintiffs' arguments against awarding certain fees and costs.
Plaintiffs' appeal includes the contention that this Court's awarding of attorneys' fees and costs to Defendant was in error. Mindful of their pending appeal, Plaintiffs filed their Answer to Defendant's Motion for Attorneys' Fees and Costs "strictly to address the reasonableness of the attorneys' fees and costs sought by Prolease Atlantic." (Pls.' Answer Defs.' Mot. Attnys' Fees and Costs at 2).
"A district court retains jurisdiction to determine attorneys' fees while an appeal is pending." Nissim v. McNeil Consumer Prods. Co., Inc., 957 F. Supp. 604, 605 n. 1 (E.D. Pa. 1997) (citing Venen v. Sweet, 758 F.2d 117, 120 n. 2 (3d Cir. 1985)).
Defendant seeks a total award of $316,149.25 in attorneys' fees and costs. Plaintiffs argue that Defendant is not entitled to a judgment in the full amount of its attorneys' fees and costs claimed in its Motion for Attorneys' Fees and Costs. Specifically, Plaintiffs argue that Defendant is not entitled to an award of attorneys' fees and costs: (1) incurred prior to the commencement of the lawsuit; (2) incurred in connection with its Motion to Dismiss for Lack of Subject Matter Jurisdiction; or (3) billed by local counsel McKenna, Walker Capriotti, P.C. Each of Plaintiffs' arguments will be addressed seriatim. A. Attorneys' Fees and Costs
Since Plaintiffs only challenge the awarding of three specific categories of the attorneys' fees and costs sought by Defendant, it is assumed that they do not contest the remaining attorneys' fees and costs Defendant seeks within its Motion for Attorneys' Fees and Costs. Examination of the reasonableness of the uncontested attorneys' fees and costs pursuant to the applicable reasonableness factors reveals that the fees and costs are reasonable. See infra p. 5.
"In Maryland . . . a prevailing party ordinarily is not entitled to recover attorneys' fees as part of compensatory damages." Atl. Contracting Material Co., Inc. v. Ulico Cas. Co., 380 Md. 285, 315, 844 A.2d 460, 477 (2004) (citation omitted). However, "[l]itigation expenses . . . may be awarded where the parties' contract provides for fees and costs."Id. (citation omitted). "A contractual obligation to pay attorneys' fees generally is valid and enforceable in Maryland"Id. (citations omitted); see also Canusa Corp. v. AR Lobosco, Inc., 986 F. Supp. 723, 734 (E.D.N.Y. 1997) ("Under Maryland law, attorney's fees may be awarded to the prevailing litigant when they are provided for in a contract."). "Absent misconduct or fraud, overreaching, misrepresentation, or other grounds for voiding the contract, a contractual provision for awarding attorneys' fees may be enforced." Id. (citation omitted).
In the instant matter, the Purchase Agreement not only contains explicit authority for the award of attorneys' fees and costs, but also contains a choice of law provision directing that "[the] Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland" (See Purchase Agreement, ¶ 16). Since this case's inception, the parties, as well as this Court, have applied the laws of Maryland Accordingly, this Court's award of attorneys' fees and costs is guided by Maryland law.
"Where an award of attorneys' fees is called for by the contract in question, the trial court will examine the fee request for reasonableness, even in the absence of a contractual term specifying that the fees be reasonable." Id. (citation omitted). Generally, "[t]he reasonableness of attorneys' fees is . . . a factual determination within the `sound discretion of the trial judge and will not be overturned unless clearly erroneous.'" Id. (quoting Reisterstown Plaza Assocs. v. Gem. Nutrition Ctr., Inc., 89 Md. App. 232, 248, 597 A.2d 1049, 1057 (1991)). The party seeking recovery carries the burden to provide the evidence necessary for the fact finder to evaluate the reasonableness of the fees. Id. (quoting Maxima Corp. v. 6933 Arlington Dev. Ltd. P'ship, 100 Md. App. 441, 454, 641 A.2d 977, 983 (1994)).
According to Maryland case law, the quality and amount of information that a claimant is required to provide is as follows:
(a) the party seeking the fees, whether for him/herself or on behalf of a client, always bears the burden of presenting evidence sufficient for a trial court to render a judgment as to their reasonableness; (b) an appropriate fee is always reasonable charges for the services rendered; (c) a fee is not justified by a mere compilation of hours multiplied by fixed hourly rates or bills issued to the client; (d) a request for fees must specify the services performed, by whom they were performed, the time expended thereon, and the hourly rates charged; (e) it is incumbent upon the party seeking recovery to present detailed records that contain the relevant facts and computations undergirding the computation of charges; (f) without such records, the reasonableness, vel non, of the fees can be determined only by conjecture or opinion of the attorney seeking the fees and would therefore not be supported by competent evidence.BP Enters. v. Overland Equip. Co., 133 Md. App. 583, 625, 758 A.2d 1026, 1048 (2000) (quoting Maxima, 100 Md. App. at 453-54, 641 A.2d at 977). After the claimant has presented the necessary evidence in support of an award of attorneys' fees, the trial court is required to evaluate the reasonableness of the fees.Id. (citing Holzman v. Fiola Blum, Inc., 125 Md. App. 602, 726 A.2d 818 (1999)). In order to evaluate the reasonableness of the fees, the factors to be considered are as follows:
Regarding the attorneys' fees and costs of defense counsel, as well as local counsel, Defendant has provided detailed records showing hours, rates and descriptions of the services that were performed. (Def.'s Mot. Attnys' Fees and Costs, Exs. 1-6). Defendant also provided affidavits from defense counsel, Stanley H. Goldschmidt, Esq. ("Goldschmidt"), and local counsel, James L. McKenna, Esq. (Id., Exs. 7 and 8).
(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 the 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 length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent.
Id. (citations omitted). "The claimant bears the burden `to provide the evidence necessary for the fact finder to evaluate the reasonableness of the fees.'" Id. (quoting Maxima, 100 Md. App. at 454, 641 A.2d at 977).
B. Evaluation of the Disputed Attorneys' Fees and Costs
1. Attorneys' Fees and Costs Incurred Prior to the Commencement of the Lawsuit
Plaintiffs argue that Defendant is not entitled to an award of fees and costs in the amount of $9,715.39 incurred prior to the filing of the original Complaint. Plaintiffs state that this action was initiated on May 17, 2001, the date of the filing of the original Complaint. In light of the commencement of suit on May 17, 2001, Plaintiffs contend that Defendant's request for an award of fees and costs for invoices dated December 5, 2000, January 9, 2001, February 5, 2001, March 5, 2001, April 4, 2001 and May 4, 2001 should be denied. Defendant asserts that the attorneys' fees and costs incurred prior to the inception of the litigation are properly chargeable to Plaintiffs because they are related to the engagement of counsel by Prolease Atlantic to represent its interests with respect to Plaintiffs' breach of warranties and representations contained in the Purchase Agreement.
Paragraph 28 of the Purchase Agreement, entitled "Attorneys' Fees," provides that "[t]he prevailing party in any legal proceeding between the parties to this Agreement shall be entitled to its attorneys' fees and costs." (Purchase Agreement, ¶ 28). Moreover, Paragraph 11 of the Purchase Agreement, entitled "Indemnification," provides, in pertinent part, as follows:
[b]etween the date of Closing and the date which is four (4) years after the date of Closing, Seller and the Shareholders shall jointly and severally indemnify Buyer, its successors and assigns, and hold it harmless from and against any and all costs, losses and damages (including reasonable expenses and reasonable legal fees), resulting from or arising out of: (1) Any breach of any representation, warranty or covenant set forth in this Agreement, or the untruth or [sic] material inaccuracy thereof, including, but not limited to, all statements or information contained in any of the Exhibits to this Agreement or any document delivered in connection herewith.
(Id., ¶ 11) (emphasis added). A reading of these two paragraphs of the Purchase Agreement negotiated in the instant case reveals that the parties clearly envisioned that the prevailing party in any lawsuit pertaining to the Agreement would be entitled to attorneys' fees and costs, and that Prolease Atlantic (i.e. the "Buyer" referred to in Paragraph 11) would be reimbursed for reasonable expenses and reasonable legal fees resulting from or arising out of any breach, untruth or material inaccuracy of any representation, warranty or covenant set forth in the Agreement. (Id., ¶¶ 11, 28).
In interpreting a contract, courts review the contract as a whole to determine the parties' intentions. Sullins v. Allstate Ins. Co., 340 Md. 503, 508, 667 A.2d 617, 619 (1995). In Maryland, "[c]ontracts . . . are subject to the law of objective interpretation." First Union Nat'l Bank v. Steele Software Sys. Corp., 154 Md. App. 97, 171, 838 A.2d 404, 447 (2003) (citation omitted). "This means that the clear and unambiguous language of a written agreement controls, even when the language is not consistent with the parties' actual intent at the time of the creation of the contract." Id. (citation omitted). In the instant case, the Purchase Agreement, as well as its paragraphs specifically addressing attorneys' fees and costs, are clear and unambiguous. Thus, the clear and unambiguous language of the Purchase Agreement, including the language contained in Paragraphs 11 and 28, controls.
In my Conclusions of Law, I determined that Prolease Atlantic is the prevailing party under the Purchase Agreement and, therefore, is entitled to attorneys' fees and costs pursuant to Paragraph 28. (Doc. No. 189, p. 34). Regarding the sale and purchase of HRO/MASH, as well as various business dealings between the parties, I concluded that "Counterclaim Defendants defrauded Prolease Atlantic." (Id., p. 26-32). Pursuant to Paragraph 11, my conclusion that Prolease Atlantic was defrauded by the Counterclaim Defendants results in Prolease Atlantic being entitled to its reasonable expenses and legal fees resulting from or arising out of the breach and fraudulent misrepresentations. Thus, when reading the unambiguous language contained within Paragraphs 11 and 28 in conjunction with my Conclusions of Law, it is clear that Prolease Atlantic is entitled to an award of $9,715.39 for its reasonable fees and costs that were incurred prior to the filing of the original Complaint that arose out of any breach of any representation, warranty or covenant set forth in the Agreement. Upon considering the fees and costs incurred prior to the filing of the original Complaint with the reasonableness factors previously listed, I conclude that the amount of $9,715.39 in the fees and costs incurred before the original Complaint was filed is reasonable. As a result, Defendant is entitled to an award of $9,715.39 in attorneys' fees and costs incurred prior to the commencement of suit.
Mash Enterprises, Inc. v. Prolease Atlantic Corp., provides an in-depth analysis regarding the numerous ways in which Counterclaim Defendants defrauded Prolease Atlantic pertaining to the Purchase Agreement and other business dealings between the parties. See Mash Enterps., Inc. v. Prolease Atl. Corp., 2004 WL 405794, at *10-16.
2. Attorneys' Fees and Costs Incurred in Connection with Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction
Plaintiffs argue that Defendant is not entitled to an award of attorneys' fees and costs totaling $9,818.75 incurred in connection with Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction. Plaintiffs contend that the fees and costs in relation to this Motion to Dismiss were based upon a number of false statements and premises. On February 1, 2002, Defendants filed a Motion to Dismiss for Lack of Subject Matter Jurisdiction. Defendants premised their Motion to Dismiss on the following two bases: (1) Plaintiffs' Amended Complaint improperly plead that Defendant, Prolease Atlantic, a Delaware corporation, maintains a principal place of business in the State of Maryland, instead of properly pleading that Prolease Atlantic maintains its principal place of business in the State of Maryland and (2) there is no diversity jurisdiction because Prolease Atlantic maintains its principal place of business in Pennsylvania, which destroys diversity jurisdiction because both Plaintiff, MASH, and Defendant, Prolease Atlantic, would be citizens of Pennsylvania.
Regarding the facial challenge to the existence of subject matter jurisdiction concerning the improper use of "a" instead of "its," the Plaintiffs conceded and subsequently corrected their Amended Complaint. (See Sec. Am. Compl.). As for the factual challenge to diversity jurisdiction pertaining to the location of Prolease Atlantic's principal place of business, it was denied because, after a hearing was conducted which included testimony from witnesses, it was clear that diversity jurisdiction existed because Prolease Atlantic's principal place of business was located in Maryland (Doc. No. 53).
In the Memorandum Opinion pertaining to the Motion to Dismiss, I pointed out that the overwhelming evidence revealed that Prolease Atlantic's principal place of business was located in Maryland, not Pennsylvania. (Id.). I also noted that while Prolease Atlantic was "in the best possible position to show the location of its own principal place of business, [it] offer[ed] virtually no evidence to refute the evidence [showing that Maryland is Prolease Atlantic's principal place of business] proffered by Plaintiffs." (Id. at 11). I went on to state that "[a]lthough Defendant Prolease Atlantic is in the possession of all corporate documentation and relevant factual information pertaining to the day-to-day operations of its own business, it has come forward with practically no concrete evidence accounting for the operational aspects of Prolease Atlantic's production or service activities." (Id.). The only evidence presented by Defendants in support of their argument that Prolease Atlantic's principal place of business was located in Pennsylvania was an affidavit by Michael Todd, General Counsel of Prolease. (Id. at 12). However, Michael Todd's affidavit held little to no weight because it was directly contradicted by the testimony and other evidence adduced at the hearing. (Id.).
At the time of the hearing, as well as in writing the Memorandum Opinion, the overwhelming weight of the evidence showed that diversity jurisdiction existed because Prolease Atlantic's principal place of business was located in Maryland, not Pennsylvania. In fact, the purpose behind Defendants defending a position that was so mistaken, especially given Prolease Atlantic's unique position as being in the best position to know its own principal place of business, remains unclear. Having been involved with this case since its inception, through its prolonged discovery, to its eventual resolution following a bench trial, I necessarily have close and intimate knowledge of the issues that arose and the efforts expended towards resolution of those issues. "The amount of attorneys' fees is . . . within the judicial discretion of the trial judge who has close and intimate knowledge of the efforts expended and the value of the services rendered." Rajaram v. Intern'l Typographical Union, No. 80-0012, 1987 WL 46226, at *2 (D. Md. Aug. 11, 1987) (quotation and internal quotation marks omitted). Having been so closely involved in this action and, in particular, the litigation of Defendants' Motion to Dismiss, I find that the time and efforts expended by Defendants to defend their argument that Prolease Atlantic's principal place of business was in Pennsylvania, not Maryland, was unnecessary. Finding that the time and efforts expended were unnecessary, it follows that such costs for the time and efforts are unreasonable. As a result, I find that Defendant Prolease Atlantic is not entitled to an award of $9,818.75 incurred in connection with its unnecessary Motion to Dismiss for Lack of Subject Matter Jurisdiction.
3. Attorneys' Fees and Costs Billed by Local Counsel McKenna, Walker Capriotti, P.C.
Plaintiffs argue that Defendant is not entitled to an award of $8,666.49 in fees and costs billed by McKenna, Walker Capriotti, P.C. Defendants retained McKenna, Walker and Capriotti, P.C. as local counsel. Plaintiffs argue that Goldscmidt and Damari did not need the services of McKenna, Walker Capriotti, P.C. because they had been previously admitted pro hac vice prior to the involvement of the local firm in this action. Thus, Plaintiffs assert that retention of McKenna, Walker Capriotti, P.C. was unnecessary. Plaintiffs argue that local counsel merely "rubber stamped" and filed documents prepared by Goldschmidt and Damari. Thus, Plaintiffs assert that retention of McKenna, Walker Capriotti, P.C. resulted in a significant duplication of efforts. In contrast, Defendant argues that its retention of local counsel was proper. Defendant asserts that it retained local counsel to advise on local nuances and to ensure the proper filing of pleadings. Regarding Plaintiffs' argument as to duplification of efforts, Defendant states that there was little, if any, duplicative work performed by local counsel.
Prolease Atlantic retained the Washington, D.C. law firm of the Law Offices of Stanley H. Goldschmidt, P.C. to represent it in this action. Goldschmidt formed the Law Offices of Stanley H. Goldschmidt, P.C. in approximately 1993. (Def.'s Mot. Attnys' Fees and Costs, Ex. 7, ¶ 4). Tamir Damari, Esq. ("Damari"), who is also counsel in this case, has been associated with the firm since approximately 1999. (Id., Ex. 7, ¶ 5). In relation to this action, Goldschmidt and Damari were admitted to practice pro hac vice in this Court on July 24, 2001. (See Doc. No. 17).
"Local Rule 83.5.2 provides that any attorney who is not a member of the bar of this Court who desires to appear in an action shall have available as associate counsel of record a member of the bar of this Court." Mowrer v. Warner-Lambert Co., No. 98-2908, 1998 WL 512971, at *1 (E.D. Pa. Aug. 19, 1998) (citations omitted). "One purpose of the Rule is to facilitate the service of papers during the course of the litigation upon the party represented by out-of-the-jurisdiction counsel." Id. (citation omitted). However, "the role of associate counsel under the Rule is more than to serve as a post office box for pro hac vice counsel." Id. It appears that another purpose for the Rule is "predicated upon a notion that familiarity with local rules and procedures advances the goal of the efficient administration of justice." Id. (citations omitted). "Thus, by retaining local counsel, pro hac vice counsel can rely upon the benefit of associate counsel's knowledge of and experience with local rules and procedures." Id.
Pursuant to Local Civil Rule 83.5.2(a), attorneys appearing by leave of court must "have as associate counsel of record a member of the bar of this Court upon whom all pleadings, motions, notices and other papers can be served." Local R. Civ. P. 83.5.2(a). Furthermore, Local Civil Rule 83.5 .2(b) provides that "[a]n attorney who is not a member of the bar of this Court shall not actively participate in the conduct of any trial or of any pretrial or post-trial proceeding before this Court unless, upon application, leave to do so shall have been granted." Local R. Civ. P. 83.5.2(b).
Upon considering Plaintiffs' argument in light of the reasonableness factors set forth beforehand, I find that Defendant is entitled to a full award of its attorneys' fees and costs billed by McKenna, Walker Capriotti, P.C. Having been closely involved with this action, I conclude that Defendant's utilization of McKenna, Walker Capriotti, P.C. was justified. The affidavit submitted by James McKenna, Esq. explains the functions that he, and his firm, appropriately performed as local counsel. (Defs.' Mot. Attnys' Fees and Costs, Ex. 8). Viewing the case as a whole, including the extensive motion practice involved therein, Defendant is entitled to its fees and costs expended on behalf of McKenna, Walker Capriotti, P.C. Examination of the fees with the requisite reasonableness factors reveals that the fees and costs charged by McKenna, Walker Capriotti, P.C. are reasonable. As a result, Defendant is entitled to an award of fees and costs billed by McKenna, Walker Capriotti, P.C. in the amount of $8,666.49.
III. CONCLUSION
Defendant's Motion for Attorneys' Fees is granted in part and denied in part. Defendant's Motion is granted as it pertains to all of the requested attorneys' fees and costs, with the exception of the $9,818.75 incurred in connection with its unnecessary Motion to Dismiss for Lack of Subject Matter Jurisdiction. All of the other fees and costs, including the $9,715.39 incurred before the original Complaint was filed and the $8,666.49 in local counsel expenses, are well documented and reasonable under the circumstances of this case. As a result, Defendant is entitled to a total award of its attorneys' fees and costs in the amount of $306,330.50.
An appropriate Order follows.
ORDER
AND NOW, this 19 th day of July, 2004, upon consideration of Defendant Prolease Atlantic Corporation's Motion for Attorneys' Fees and Costs (Doc. No. 193), and the Response and Reply thereto, it is hereby ORDERED that:
1. the Motion is GRANTED IN PART and DENIED IN PART;
2. the Motion is DENIED as it pertains to an award of attorneys' fees and costs in the amount of $9,818.75 incurred in connection with Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction;
3. the Motion is GRANTED as it pertains to the remaining attorneys' fees and costs totaling $306,330.50, which includes the $9,715.39 incurred before the original Complaint was filed and the $8,666.49 in local counsel expenses; and
4. judgment is entered in favor of Prolease Atlantic Corporation and against MASH Enterprises, Inc., Mark Fried and Howard Vogel, jointly and severally, in the amount of its reasonable attorneys' fees and costs totaling $306,330.50.