UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

W. ALVIN JACKSON, et al.,

CIVIL ACTION NO. 09-10779

Plaintiffs,

DISTRICT JUDGE PAUL D. BORMAN

v.

MAGISTRATE JUDGE DONALD A. SCHEER

MIKE BUTLER, et al.,

Defendants.

_________________________________/ 

REPORT AND RECOMMENDATION

I. RECOMMENDATION:

I recommend that Defendant PRS Franchise Systems, LLC, be awarded attorney

fees in the sum of $9,450.00, together with such costs as may be taxed by the clerk of the

court in accordance with Fed.R.Civ.P. 54 and E.D. MI LR 54.1.

II. REPORT:

A. Procedural History

Plaintiffs’ Complaint was filed on March 2, 2009. Plaintiffs alleged that the

Defendants engaged in racketeering, fraud and violations of the Michigan Franchise

Investment Law in connection with the formation of certain franchise agreements between

themselves and Defendant PRS Franchise Systems, LLC (“PRS”). Defendants filed their

Motion to Dismiss on April 14, 2009, asserting improper venue and seeking to enforce a

mandatory mediation/arbitration clause which appeared in each of the Plaintiffs’ various

franchise agreements. Plaintiffs filed their Response to the Motion to Dismiss on May 21,

2009, and Defendants filed their Reply Brief on June 15, 2009. The Motion was heard by

the district judge on July 2, 2009.

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On July 27, 2009, the court entered its Opinion and Order granting Defendants’

Motion to Dismiss. The district judge determined that the arbitration provision contained

in each of the Plaintiffs’ franchise agreements is valid and enforceable. The court

determined that the provision encompasses Plaintiffs’ entire dispute against the Defendants

in this action. Accordingly, the Motion to Dismiss was granted, on July 27, 2009, as follows:

This action came to trial or hearing before the court. The issues

have been duly tried or heard and a decision has been

rendered. 

The court has ordered that the Plaintiff(s) recover nothing, the

action be dismissed on the merits, and the Defendant(s)

recover costs from Plaintiff(s). 

Judgment for Defendants, Docket Entry 16.

Plaintiffs filed a Motion to Amend/Correct Judgment on July 31, 2009. Defendants

filed their Response on August 4, 2009. In an Opinion and Order on August 18, 2009, the

court denied the Motion. Plaintiffs moved for reconsideration of that decision on August 27,

2009. Reconsideration was denied in an Opinion and Order of September 8, 2009.

On August 6, 2009, following the entry of Judgment in their favor, Defendants filed

their Motion for Costs. The Motion seeks an award of both costs and attorney fees pursuant

to Fed.R.Civ.P. 54(d). Defendants asserted that an award of fees and costs is permitted

under 28 U.S.C. §§1920 and 1923. Plaintiffs filed their Response in Opposition to the

Motion on August 17, 2009. The matter was referred to the undersigned magistrate judge

by Order of Reference on August 18, 2009. The Motion was brought on for hearing on

September 8, 2009, and held in abeyance pending Defendants’ submission of a Bill of

Costs to the Clerk of the Court and the filing a Supplemental Brief. 

Defendants’ Bill of Cost was submitted to the Clerk on September 11, 2009. The

Clerk taxed costs in the amount of $0.00 against Plaintiffs on September 18, 2009. The

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hearing was resumed on October 22, 2009, and the issue of fees and costs was taken

under advisement.

B. Applicable Law and Standard of Review

Fed.R.Civ.P. 54(d) provides as follows:

(d) Costs; Attorney’s Fees.

(1) Costs Other Than Attorney’s Fees. Unless

a federal statute, these rules, or a court order

provides otherwise, costs - other than attorney’s

fees - should be allowed to the prevailing party. 

But costs against the United States, its officers,

and its agencies may be imposed only to the

extent allowed by law. The clerk may tax costs 

on 1 day’s notice. On motion served within the

next 5 days, the court may review the clerk’s

action.

(2) Attorney’s Fees.

(A) Claim to Be by Motion. A claim

for attorney’s fees and related

nontaxable expenses must be

made by motion unless the

substantive law requires those

fees to be proved at trial as an

element of damages.

(B) Timing and Contents of the

Motion. Unless a statute or a court

order provides otherwise, the

motion must:

(i) be filed no later than 14 

days after the entry of judgment;

(ii) specify the judgment

and the statute, rule, or other

grounds entitling the movant to the

award;

(iii) state the amount sought

or provide a fair estimate of it; and

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(iv) disclose, if the court so

orders, the terms of any

agreement about fees for the

services for which the claim is

made.

(C) Proceedings. Subject to Rule

23(h), the court must, on a party’s

request, give an opportunity for

adversary submissions on the

motion in accordance with Rule

43(c) or 78. The court may decide

issues of liability for fees before

receiving submissions on the value

of services. The court must find

the facts and state its conclusions

of law as provided in Rule 52(a).

(D) Special Procedures by Local

Rule; Reference to a Master or a

Magistrate Judge. By local rule,

the court may establish special

procedures to resolve fee-related

issues without extensive

evidentiary hearings. Also, the

court may refer issues concerning

the value of services to a special

master under Rule 53 without

regard to the limitations of Rule

53(a)(1), and may refer a motion

for attorney’s fees to a magistrate

judge under Rule 72(b) as if it were

a dispositive pretrial matter.

(E) Exceptions. Subparagraphs

(A)-(D) do not apply to claims for

fees and expenses as sanctions

for violating these rules or as

sanctions under 28 U.S.C. §1927. 

C. Analysis

As a general rule, the federal courts apply the traditional “American Rule” that each

party to a lawsuit must pay its own attorney’s fees. See Alyeska Pipeline Serv. Co. v.

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Wilderness Society, 421 U.S. 240, 247-57 (1995). Although Congress has made specific

provision for the recovery of attorney fees under certain federal statutes, it has not

repudiated the general rule. Supreme Court cases have reaffirmed the general proposition

that, absent statutory or enforceable contract provisions to the contrary, litigants must pay

their own attorney’s fees. See F.D. Rich Co., Inc. v. U.S. For Use of Indus. Lumber Co.,

Inc., 417 U.S. 116, 128-31 (1974); Hall v. Cole, 412 U.S. 1, 4 (1973). Thus a prevailing

party may normally recover no more than the “costs” enumerated in 28 U.S.C. §§1920 and

1923. Under §1920, a court may tax as costs the various items specified, including the

“docket fees” under §1923(a). The latter section provides that “[a]ttorney’s and proctor’s

docket fees in courts of the United States may be taxed as costs as follows: $20.00 on trial

or final hearing (including a default judgment whether entered by the court or by the clerk)

in civil, criminal or admiralty cases . . ..” In the case at bar, however, Defendant seeks far

more than the $20.00 fee which §1923 authorizes as part of a prevailing party’s entitlement

to costs. 

Defendants are seeking an award of $11,340.00, including 37.8 hours of attorney

time billed at the rate of $300.00 per hour. Their Motion cites only 28 U.S.C. §§1920 and

1923 and Fed.R.Civ.P. 54(d) in support of the request. As stated above, the U.S. Code

Sections relied upon would authorize a maximum award of $20.00. While they assert that

“Fed.R.Civ.P. 54(d) provides for costs and attorney fees,” their initial Motion and Brief failed

to “specify the . . . statute, rule, or other grounds entitling the movement to the award,” as

required by Fed.R.Civ.P. 54(d)(2)(B)(ii). At the hearing on the Motion, however, counsel

for Defendants clearly relied upon the terms of the PRS contracts with the Plaintiffs as a

basis for the relief requested. Accordingly, I directed Defendants to file a Supplemental

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Brief disclosing “the terms of any agreement about fees for the services for which the claim

is made,” in accordance with Fed.R.Civ.P. 54(d)(2)(B)(iv). I further directed that Defendants

submit a Bill of Costs to the Clerk of the Court.

In their Supplemental Brief, Defendants rely upon §21.3 of PRS’s respective

contracts with the Plaintiffs. That common contract provision provides as follows:

21.3 Costs of Enforcement or Defense.

If franchisor or franchisee is required to enforce this agreement

in a judicial or arbitration proceeding, the prevailing party shall

be entitled to reimbursement of its costs, including reasonable

accounting and legal fees, in connection with such proceeding.

Defendants maintain that PRS was required to enforce the mandatory arbitration provision

in their agreements in this judicial proceeding and, accordingly, is entitled to recover

reasonable accounting and legal fees. I agree. It is clear that this court has found the

arbitration clause to be valid and enforceable. I am satisfied that the terms of §21.3 in each

of the contracts is similarly valid and enforceable. Accordingly, I conclude that the terms

of that section should be given effect in this case. See Morris v. Homeowners Loan Corp.,

2007 WL 674770 (E.D. MI). 

Plaintiffs argue in their Response to Defendants’ Motion for Costs that their

Complaint did not state a contract claim. They imply that, in the absence of such a claim,

Defendants could not have been required to enforce their respective agreements. I find that

argument unpersuasive. The Complaint makes it plain that the causes of action asserted

are based on the communications and negotiations which gave rise to the contractual

relationship between Plaintiffs and PRS. Absent the creation of that contractual

relationship, there would be no case or controversy. Defendants quite correctly based their

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Motion to Dismiss upon the terms of the Plaintiffs’ contracts. The court considered and

accepted as valid and enforceable the contractual provision relating to mandatory

arbitration. Plaintiffs cannot plausibly maintain that the terms of the contract are irrelevant

to their claims. In fact, Plaintiffs’ counsel, in oral argument, declared that this lawsuit was

filed, despite the arbitration clause, in order to challenge its enforceability. That challenge

was considered and rejected by the court. The Judgment of Dismissal reflects the court’s

conclusion that the terms of the Plaintiffs’ written agreements with PRS defines their legal

relationship and dictates the disposition of their disagreements. I am fully satisfied that

Defendants’ Motion to Dismiss constituted an effort to enforce the contract in a judicial

proceeding, and that Defendant PRS is entitled to an award of its attorney’s fees in

connection with that successful effort. 

Plaintiffs rely upon Lindsly v. Worley, 2009 WL 2044811 (S.D. Ohio) for the

proposition that an award of costs and attorney fees is inappropriate despite the court’s

enforcement of an arbitration agreement. That case, however, is inapposite. Dismissal of

that plaintiff’s civil rights complaint was based upon his failure to exhaust administrative

remedies, as required by the Prison Litigation Reform Act. There was no consideration of

the merits of the underlying claims. In fact, those claims were reasserted in identical form

following the plaintiff’s release from custody (and from the restrictions of the PLRA). In the

case at bar, the district judge ruled that the terms of the contract encompassed the entirety 

of Plaintiffs’ claims, and dismissed the Complaint on the merits. Defendants were prevailing

parties. 

Plaintiff further relies upon Cook v. All State Home Mortg., Inc., 2009 WL 1391527

(6th Cir. (Mich)). In that case, a district judge enforced an arbitration agreement, but denied

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the defendant’s motion for costs and attorney fees. The circuit court affirmed that decision. 

A careful reading of the case, however, reveals that the affirmance was based upon the

narrow language of the contract, and not upon a finding that attorney fees are unwarranted

in all circumstances. In fact, the circuit court distinguished the case before it from Morris

v. Homeowners Loan Corp., 2007 WL 674770 (E.D. Mich.), in which a Michigan federal

district court held plaintiffs responsible for reimbursing the defendant’s attorney’s fees and

costs pursuant to a broadly written contract clause. Thus, Cook actually supports

Defendants’ position in the case at bar, as the terms of contract §21.3 are broad and

unrestricted.

Plaintiffs’ argue that the attorney fee provisions of §21.3 of their contracts only

enures to the benefit of the “franchisor” or “franchisee.” That argument is fully consistent

with the plain language of the documents. Defendants Butler, Butler and Fragen are not

parties to the contracts, and only Defendant PRS, as franchisor, is entitled to the attorney

fee award. Nonetheless, I accept the argument of defense counsel that they would have

expended essentially the same number of hours in the defense of PRS alone as were

expended on behalf of all the Defendants. Accordingly, I am satisfied that, while PRS alone

is entitled to a fee award, no reduction in that award should be made by reason of the fact

that the individual Defendants were benefitted as well.

The only remaining issue is the reasonableness of the fee request.

A starting point is to calculate “the number of hours reasonably

expended on the litigation multiplied by a reasonable hourly

rate.” (This is known as the “lodestar” calculation.) The court

should then exclude excessive, redundant, or otherwise

unnecessary hours. Next, the resulting sum should be

adjusted to reflect the “result obtained.” 

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Wayne v. Village of Sebring, 36 F.3d 517, 531 (6th Cir. 1994) (quoting Hensley v. Eckerhart,

461 U.S. 424, 433-34 (1983) (calculation of attorney fees under 42 U.S.C. §1988). The

lodestar approach has been adopted by our Circuit for determining reasonable attorney’s

fees in a number of litigation contexts.

For purposes of the lodestar calculation, a reasonable hourly rate for attorney fees

is determined by reference to the marketplace. Missouri v. Jenkins, 491 U.S. 274, 285

(1985). The court requires more than a mere affidavit that the attorney claimant charges

a particular rate. Rather, the claimant must provide evidence of the prevailing rates in the

relevant community. Blum v. Stenson, 465 U.S. 886, 896 n.1 (1984). A higher level of

attorney experience warrants the award of a higher fee. Id. While some courts apply higher

hourly rates to in court work than out of court services, most apply a flat rate for all work by

a particular attorney. See In Re: Meese, 907 F.2d 1192, (D.C. Cir. 1990).

In calculating the fee to be imposed, the court must multiply the appropriate hourly

rate by the number of hours reasonably expended in rendering the service. Hours

attributable to excessive, redundant or otherwise unnecessary work must be excluded. 

Hensley v. Eckerhart, 461 U.S. 424, 434 (1983). Thus, courts have reduced fee awards

where the requested fee reflected duplication of services, excessive time for simple or

routine tasks, the use of too many attorneys, excessive conferencing, unnecessary

consultant work, or the performance of clerical tasks by legal professionals. Hirsch and

Sheehey, Awarding Attorneys Fees and Managing Fee Litigation (2nd Ed.), Federal Judicial

Center 2005, p. 26. Nonetheless, “courts have held that it is improper to engage in an ‘ex

post facto determination of whether attorney hours were necessary to the relief obtained.’ 

The issue ‘is not whether hindsight vindicates an attorney’s time expenditures, but whether

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at the time the work was performed a reasonable attorney would have engaged in similar

time expenditures.’” Id. at 29 (citing Grant v. Martinez, 973 F.2d 96, 99 (2nd Cir. 1992) cert.

denied, 113 S.Ct. 978 (1973); Woolridge v. Marlene Indus. Corp., 898 F. 2d 1169, 1177 (6th

Cir. 1990).

It is the fee claimant’s obligation to provide sufficient documentation of the hours

spent as well as of the market rate. Inadequate documentation is grounds for a reduction

of the award. Hensley, 461 U.S. at 433. A diary or journal is not essential, but most courts

prefer contemporaneous fee records as documentation of the time expended. 

Unfortunately, counsel for Defendants have not provided information to support the

$300.00 per hour billing rate reflected in their attorney fee request. The Motion papers do

reflect their association with a well established law firm of more than 150 attorneys. Their

Michigan Bar registration numbers indicate that they have been members of the bar for

twenty or more years. The 2007 Economics of Law Practice Summary Report by the State

Bar of Michigan states that the median hourly rate for attorneys in the 20 to 29 year

experience range is $200.00, and that the 75th percentile rate is $250.00. In view of the

level of success achieved in their representation of Defendants in this action, I find that a

reasonable hourly rate for the services rendered to the moving Defendants is $250.00 per

hour.

Counsel for Defendants have produced copies of their billing invoices reflecting the

hours of work expended in the defense of this action. (Docket Entry No. 19, Motion for

Costs, Exhibit B). Upon my review of the docket sheet, Complaint and Motion papers, I am

satisfied that the 37.8 hours of attorney time devoted to the defense case is reasonable. 

“The issue ‘is not whether hindsight vindicates an attorney’s time expenditures, but whether

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at the time the work was performed, a reasonable attorney would have engaged in similar

time expenditures.’” Hirsch and Sheehey, Awarding Attorney Fees and Managing Fee

Litigation (2nd Ed.), Federal Judicial Center 2005, p. 25. (Citing Golfstream 3 Assocs., Inc.

v. Gulfstream Aerospace Corp., 995 F.2d 414, 420 (3rd Cir. 1993)). Under the facts of the

case at bar, I would be hard pressed to determine that the time invested in a fully

successful defense was unwarranted.

The attorney fee statements submitted in support of the instant Motion include

charges for court fees, copy expenses and filing clerk services. I do not recommend that

those amounts be recovered as part of an attorney fee award. To the extent that such

amounts represent non-taxable costs, I find that they represent routine expenditures in the

course of legal representation, and are reflecting in the standard hourly rate charged by the

attorneys of record. I conclude that only the attorney time should be included in an award

pursuant to the instant Motion. 

For all of the above reasons, I recommend that Defendant PRS Franchise Systems

LLC recover judgment against the Plaintiffs in the sum of $9,450.00, as reasonable

attorney fees, together with such costs as the Clerk of the Court may tax in accordance

with Fed.R.Civ.P. 54(d)(1).

III. NOTICE TO PARTIES REGARDING OBJECTIONS:

The parties to this action may object to and seek review of this Report and

Recommendation, but are required to act within ten (10) days of service of a copy hereof

as provided for in 28 U.S.C. Section 636(b)(1) and E.D. Mich. LR 72.1(d)(2). Failure to file

specific objections constitutes a waiver of any further right of appeal. United States v.

Walters, 638 F.2d 947 (6th Cir. 1981), Thomas v. Arn, 474 U.S. 140 (1985), Howard v.

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Secretary of HHS, 932 F.2d 505 (6th Cir. 1991). Filing of objections that raise some issues

but fail to raise others with specificity, will not preserve all the objections a party might have

to this Report and Recommendation. Smith v. Detroit Federation of Teachers Local 231,

829 F.2d 1370, 1373 (6th Cir. 1987), Willis v. Secretary of HHS, 931 F.2d 390, 401 (6th Cir.

1991). Pursuant to E.D. Mich. LR 72.1(d)(2), a copy of any objections is to be served upon

this Magistrate Judge.

Within ten (10) days of service of any objecting party's timely filed objections, the

opposing party may file a response. The response shall not be more than five (5) pages

in length unless by motion and order such page limit is extended by the Court. The

response shall address specifically, and in the same order raised, each issue contained

within the objections.

s/Donald A. Scheer

DONALD A. SCHEER

UNITED STATES MAGISTRATE JUDGE

DATED: November 25, 2009

______________________________________________________________________

CERTIFICATE OF SERVICE

I hereby certify on November 25, 2009 that I electronically filed the foregoing paper

with the Clerk of the Court sending notification of such filing to all counsel registered

electronically. I hereby certify that a copy of this paper was mailed to the following nonregistered ECF participants on November 25, 2009: None.

s/Michael E. Lang 

Deputy Clerk to 

Magistrate Judge Donald A. Scheer

(313) 234-5217 

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