Opinion ID: 184318
Heading Depth: 2
Heading Rank: 1

Heading: Van Dorn Retail's Appeal

Text: 9 Although Van Dorn Retail has styled its appeal as a challenge to the district court's failure to extend to it the benefit of the reconsideration afforded the Bender Defendants on the fee issue, we believe that it is more properly considered as a direct challenge to the original grant of summary judgment in favor of the FDIC as to the 15 percent attorneys' fees provided in the note. Although Federal Rule of Appellate Procedure [326 U.S.App.D.C. 395] 4(a)(1) requires that appeals be taken within 30 days after the date of entry of the judgment appealed from, Federal Rule of Appellate Procedure 4(a)(4) provides that if any party files a timely motion under Rule 59, the time for appeal for all parties runs from the entry of the order disposing of the last such motion. The Bender Defendants filed two motions for reconsideration; the last, filed on March 13, 1996, was granted on April 17, 1996. Van Dorn Retail's appeal was filed on May 8, 1996, and thus may be considered a timely filed appeal from the initial grant of summary judgment. As a result, we do not need to reach Van Dorn Retail's challenge to the district court's denial of reconsideration. 10 This court reviews de novo the district court's order granting the FDIC's motion for summary judgment. Consumer Fed'n of Am. and Public Citizen v. U.S. Dep't of Health and Human Servs., 83 F.3d 1497, 1501 (D.C.Cir.1996). Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. FED.R.CIV.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). The initial burden on both these determinations rests with the moving party, who must show initially the absence of a genuine issue concerning any material fact, Adickes v. S.H. Kress & Co., 398 U.S. 144, 159, 90 S.Ct. 1598, 1609, 26 L.Ed.2d 142 (1970), as well as her entitlement to judgment in her favor as a matter of law, Bloomgarden v. Coyer, 479 F.2d 201, 207 (D.C.Cir.1973). If the moving party complies with this requirement, the burden shifts to the opposing party, who must set forth, by affidavit or otherwise, specific facts showing that there is a genuine issue for trial, FED.R.CIV.P. 56(e), or demonstrate that the moving party is not entitled to judgment as a matter of law in order to defeat the motion. Our first task, then, is to ascertain whether a factual dispute existed as to any material issue. If we find there to be no controversy with regard to the material facts, we focus on whether the district court correctly applied the relevant law. Painting and Drywall Work Preservation Fund, Inc. v. Dep't of Housing and Urban Development, 936 F.2d 1300, 1302 (D.C.Cir.1991). 11 Because the promissory notes themselves provide, and the parties do not dispute, that their enforcement is to be governed by the law of the District of Columbia, we look to that law to determine how stipulated attorneys' fees provisions are to be interpreted and, thus, the nature of the burden each party must meet in a motion for summary judgment. 2 District law incorporates the American Rule, under which each party bears his or her own attorneys' fees unless a statute or a contract specifically provides for an award of such fees. Cahn v. Antioch Univ., 482 A.2d 120, 132-33 (D.C.1984) (quoting Washburn v. Washburn, 475 A.2d 410, 413 (D.C.1984)); see also Nepera Chemical, Inc. v. Sea-Land Service, Inc., 794 F.2d 688, 695-96 (D.C.Cir.1986). Unlike some jurisdictions, which hold that a contractual provision for a fixed percentage to be paid as attorneys' fees is enforced according to its terms, see, e.g., NationsBank v. Scott Farm, 320 S.C. 299, 465 S.E.2d 98, 101 (1995), the D.C. Court of Appeals has long held, and this court has acknowledged, that in the District such provisions are sustained only as an indemnity for the reasonable fees necessarily and properly paid or incurred, United States v. Reed, 31 A.2d 673, 675 (D.C.1942); see also Manchester Gardens, Inc. v. Great West Life Assur. Co., 205 F.2d 872, 878 (D.C.Cir.1953). 3 The amount of these fees is to be determined by the trial judge on an individual basis. Central Fidelity Bank v. McLellan, 563 A.2d 358, 360 n. 6 (D.C.1989). [326 U.S.App.D.C. 396] Although a court charged with the task of enforcing a contract that provides for attorneys' fees does not have the discretion to award no fees at all, it does retain the discretion to determine what constitutes a reasonable amount. Id. at 360. 12 Included within the scope of this discretion is the nature and amount of proof necessary to determine reasonableness. As the D.C. Court of Appeals noted in Reed, [t]he question of what constitutes a reasonable fee depends on the circumstances of each case. If the court deems it necessary, or if either party desires, testimony may be taken as to the nature of the services rendered, and the reasonable value thereof. Reed, 31 A.2d at 675-76. Subsequent cases interpreting Reed have read testimony may be taken (emphasis added) as permissive rather than hortatory and have taken pains to make clear that the trial judge decides what sort of proof, if any, is needed to determine what a reasonable fee would be in any individual case. See, e.g., Nolan v. Nolan, 568 A.2d 479, 490 (D.C.1990) (Lest there be any uncertainty, we now make explicit that the trial court retains discretion to decide the nature of proof necessary to establish the facts affecting its decision as to the amount of fees to award.). Because a judge who has monitored the case from its inception is considered to be an expert on the value of legal services, she can fix the amount of the fee without hearing any evidence at all. Dew v. Simon, 95 A.2d 482, 484 (D.C.Mun.App.1953); see also Tyler v. Dixson, 57 A.2d 648, 649-50 (D.C.Mun.App.1948); Williams Enterprises, Inc. v. Sherman R. Smoot Co., 938 F.2d 230, 237 (D.C.Cir.1991) (interpreting D.C. law). 13 With these principles in mind, we now consider whether the FDIC met its burden pursuant to Rule 56. The FDIC's legal memorandum accompanying its motion for summary judgment asserted that Van Dorn Retail had defaulted under the terms of the note and thus was liable for the amount due, plus interests, costs, and attorneys' fees pursuant to the provisions of the note. The motion was accompanied by an affidavit supporting the FDIC's claims of default. Van Dorn Retail contends in its argument before this court that because District law requires that only reasonable fees be awarded pursuant to such contractual provisions, the FDIC, in order to make out its case, was required to submit with its motion for summary judgment some evidence of what would constitute a reasonable fee in this case. We disagree. Such a requirement would be inconsistent with our prior reading of District law in Columbia Plaza Corp. v. Security Nat'l Bank, 676 F.2d 780 (D.C.Cir.1982), in which we held that absent a challenge to a stipulated fee provision, the terms of the contract governed. At issue in Columbia Plaza was a foreclosure on property that secured a number of promissory notes held by two banks, each of which provided for attorneys' fees of either 10 or 15 percent. The trial court, on a directed verdict, awarded attorneys' fees to the banks in accordance with the terms of the notes. The debtors challenged this ruling on appeal, claiming that the court erred by not inquiring into the reasonableness of the fee award. We rejected the debtors' contention as to the 10-percent notes--that the trial court, by treating the fee provision as conceded, had precluded them from challenging the reasonableness of the fees--by noting that the parties had stipulated before trial that the foreclosure deficiency included attorneys' fees pursuant to the terms of the note. Id. at 791. With respect to the 15-percent notes, we observed that before the banks presented the court with the amount of claimed interest and fees, the trial court asked the debtors whether they had any issue to present to the jury. Id. The debtors did not take advantage of that or any other opportunity to challenge the attorneys' fees provisions. Because the debtors did not challenge either of the attorneys' fees provisions, and because the trial court did not have an independent duty to examine whether [the debtors] had entered into a favorable bargain, we held that the trial court properly awarded attorneys' fees pursuant to the terms of the notes. Id. 14 A similar analysis of D.C. law was conducted by the Fourth Circuit in Hadid. Hadid involved two promissory notes, each of which provided for attorneys' fees of 15 percent in the event litigation to collect was required. [326 U.S.App.D.C. 397] The trial court, relying on our Columbia Plaza case, after finding that the 15 percent provision was the result of arm's-length bargaining, awarded the contractual amount on a motion for judgment notwithstanding the verdict. Hadid challenged the award on appeal, noting that the amount was unreasonable in light of the bank's affidavit that the actual fees incurred were considerably less than the amount granted. The Fourth Circuit, noting that, unlike the debtors in Columbia Plaza, Hadid had challenged the amount of the award before the trial court, remanded the case to the district court with instructions to award only reasonable attorneys' fees, not exceeding the contractual limit of 15 percent. Hadid, 947 F.2d at 1158. The court noted: 15 [I]n the absence of a challenge to the fees' reasonableness, in which the actual fees are proved, the contractual provision would be enforced, much as a liquidated damage provision would be. When, however, as here, the reasonableness of the fees is challenged before the trial court and the proved actual fees amount to $99,861, an award of $272,035 in accordance with a 15% contractual provision amounts to a windfall, or even a penalty, that the District of Columbia courts will not permit. 16 Id. 17 Columbia Plaza and Hadid both establish that absent a challenge to a stipulated fee provision, the trial court should award attorneys' fees in accordance with the terms of the contract. In effect, as the FDIC argued before this court, a contractual provision creates a rebuttable presumption that the stipulated amount is reasonable. If this provision goes completely unchallenged, the trial court may assume that the parties are in agreement as to the fee provision and award summary judgment to a moving creditor. Van Dorn Retail is therefore incorrect in its assertion that the FDIC was required to submit evidence of reasonableness with its motion for summary judgment, for until an opposition to that motion was received, the district court could properly have assumed that the reasonableness of the contractual provisions would go unchallenged and thus awarded attorneys' fees in the amount of 15 percent. 18 The adequacy of the FDIC's motion does not end our analysis, however. Before we can affirm the district court's grant of summary judgment, we must find that Van Dorn Retail did not establish the existence of a genuine issue of material fact and that the FDIC was entitled to judgment as a matter of law. 19 In its memorandum in opposition to the FDIC's motion for summary judgment, Van Dorn Retail claimed both that there were material facts in dispute and that the FDIC was not entitled to judgment as a matter of law. It went on to argue that the amounts sought as attorneys' fees are not only unreasonable, but clearly unconscionable, since they are based on the contractual rates set forth in the notes, and in no wise constitute an indemnity for the reasonable fees necessarily and properly paid or incurred, citing Hadid, Reed, and Central Fidelityand attaching, as required by Local Rule 108(h), 4 a Statement of Material Facts in Issue, which included 2. Whether the claimed attorneys [sic] fees are justified. 20 In granting the FDIC's motion, the district court held that the promissory notes clearly and unambiguously established the terms of the agreement as to attorneys' fees, which it was bound to enforce given that Van Dorn Retail failed to produce any evidence other than the mere allegation that the attorney's fees are unconscionable. We find this appraisal of the record to be inaccurate. The district court, understandably, construed Van Dorn Retail's challenge as one attempting to present issues of fact. We believe, however, that despite the inclusion of its challenge to the fees in its Rule 108(h) statement, Van Dorn Retail's opposition is more properly read as a challenge to the FDIC's entitlement [326 U.S.App.D.C. 398] to the stipulated fee amount as a matter of District law. In other words, even assuming that Van Dorn Retail conceded the factual matters alleged in the FDIC's motion--the existence of the notes, the occurrence of default, and the language of the fee provision--it is clear that it disputed the legal effect of the fee provision. If its opposition sufficed as a challenge to the stipulated fee, the district court was obliged under District law to award only reasonable fees, with reasonableness a determination to be made by the judge. See Urban Masonry Corp. v. N & N Contractors, Inc., 676 A.2d 26, 34-35 (D.C.1996). Van Dorn Retail's challenge to the FDIC's entitlement to collect the full 15 percent in attorneys' fees thus represented a legal, rather than a factual, dispute. 21 The question thus remaining is whether Van Dorn Retail's inclusion of the fee issue in its Rule 108(h) statement and its identification of the relevant District law in its legal memorandum raised a challenge sufficient to warrant a conclusion that the FDIC was not entitled to 15 percent attorneys' fees as a matter of law without a determination that such an amount would be reasonable. We hold that the challenge was sufficient. By citing to Hadid, Central Fidelity, and Reed, the seminal District case on this issue, and by clearly setting forth in its legal memorandum the appropriate interpretation of the fee provision, Van Dorn Retail put the district court on notice that the controlling law required a determination of reasonableness. The district court's conclusion that Van Dorn Retail failed to discharge its burden under Rule 56 was therefore in error. 22 Given that Van Dorn Retail successfully challenged the contractual fee provision, it was incumbent upon the district court to award only a reasonable fee. Because under District case law, the trial judge has discretion as to the amount of proof, if any, needed to determine a reasonable fee, see, e.g., Nolan, 568 A.2d at 490, we could still uphold a 15-percent fee award if the record before us showed that the district court had awarded the fees on the basis of a finding that the 15-percent figure was reasonable. The district court's opinion shows that this was not the case. From the record before us, it is clear that the district court did not use the lodestar method 5 or, indeed, any other method to arrive at a conclusion that the 15-percent figure was reasonable. Rather, believing that Van Dorn Retail had not raised a sufficient challenge to the stipulated fee, the district court awarded the FDIC attorneys' fees pursuant to the provisions of the note. It did not hold that such an amount was reasonable, nor did it make any attempt to determine whether the amount that 15 percent represented in any way reflected the time and labor exerted by the FDIC's attorneys in litigating this case. 6 [326 U.S.App.D.C. 399] We therefore conclude that the lower court misapplied District law and thus reverse its grant of summary judgment to the FDIC only with respect to the issue of the amount of attorneys' fees for which Van Dorn Retail is liable and remand to the district court with instructions to award only a reasonable attorneys' fee, not to exceed the 15-percent limit in the notes. 7