Court Opinion

ID: 2971949
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:42:19.394612+00
Date Added: 2024-06-11T11:43:38.730700
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                           File Name: 05a0093n.06
                           Filed: February 8, 2005

                                          No. 03-5650

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT

GENERAL ELECTRIC COMPANY, a New                 )
York Corporation, through its GE Appliance      )
business component,                             )
       Plaintiff-Appellant,                     )
                                                )
GE INFORMATION SERVICES, INC.,                  )   ON APPEAL FROM THE UNITED
      Plaintiff                                 )   STATES DISTRICT COURT FOR THE
                                                )   WESTERN DISTRICT OF KENTUCKY
MABE, S.A.,                                     )
    Plaintiff                                   )
v.                                              )
                                                )
LATIN AMERICAN IMPORTS, S.A., dba               )
LATAM,                                          )
     Defendant-Appellee,                        )
                                                )
GUILLERMO GONZALES NEUMANN,                     )
     Defendant-Appellee                         )
                                                )
PERUSPHERE, S.A.,                               )
     Defendant-Appellee.                        )
                                                )

       Before: COLE and ROGERS, Circuit Judges; COHN, District Judge.*

       ROGERS, Circuit Judge.        GE appeals the district court’s denial of its request for

attorneys’ fees arising from litigation described in the companion case of General Electric Co. v.

Latin American Imports, Nos. 03-5137 and 03-5213, also decided today. Because GE did not

provide sufficient documentation to support its request for attorneys’ fees and because a majority

       *
       The Honorable Avern Cohn, United States District Judge for the Eastern District of
Michigan, sitting by designation.
No. 03-5650
GE, et al v. Latin Amer Imports, et al

of the fees appear to have been generated in the defense of counterclaims for which GE cannot

recover, we affirm.

       GE is attempting to recover for attorneys’ fees incurred during the litigation between itself

and Latam.1 The guaranty under which GE was attempting to recover provided that GE would be

reimbursed for “reasonable attorney fees . . . incurred by [GE] in the enforcement of [the] guaranty”

and that the guaranty would be “governed by the law of the State of New York.” In moving for

attorneys’ fees under the guaranty, GE submitted a declaration (“the Bogard declaration”) from

GE’s corporate counsel, Hal N. Bogard, which stated:

       I have reviewed each of the statements for fees and disbursements received by GE
       from outside counsel, and have been involved in the approval of each of the
       statements. These fees total $658,468.30 . . . . I have reviewed each of the statements
       and have determined that the attorney fees were reasonably necessary to enforce
       GE’s right under the Guaranty executed by Guillermo Gonzalez and to rebut the
       defense asserted by Gonzales, to the effect that each of the claims asserted by him
       in the Second Amended Counterclaim constituted a defense to the collection under
       the Guaranty.

JA 70 (emphasis added). The declaration did not attempt to separate the amount of fees expended

on its affirmative claim under the guaranty from those expended in defense of Latam’s

counterclaims. The district court, however, denied GE’s request for attorneys’ fees because GE did

not provide sufficient documentation to support its request for fees, and because a majority of the

fees were produced in the litigation of counterclaims for which GE could not recover. Although the

       1
       The facts of the underlying dispute between GE and Latam are set forth in detail in the case
of General Electric Co. v. Latin American Imports, Nos. 03-5137 and 03-5213, also decided today.

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No. 03-5650
GE, et al v. Latin Amer Imports, et al

district court applied inapplicable Second Circuit law in reaching this conclusion, the denial of

attorneys’ fees was in any event appropriate under Sixth Circuit law. Thus, the decision of the

district court is affirmed.

        In denying the motion for attorneys’ fees, the district court appeared to rely upon Second

Circuit law because “[t]he parties agree[d] that New York law governs the enforceability of the

attorneys’ fees provision of the guaranty.” JA 728 n.1. While it is correct that, per the contractual

choice-of-law provision agreed to by the parties, New York law governs the substantive aspects of

disputes arising under the guaranty, pursuant to the doctrine of Erie R. Co. v. Tompkins, 304 U.S. 64

(1938), federal law governs the procedural aspects of such cases. First Bank of Marietta v. Hartford

Underwriters Ins. Co., 307 F.3d 501, 528 (6th Cir. 2002).

        In Marietta, this court considered a general attorney fee statute to be procedural rather than

substantive in nature, where the award of attorneys fees was based upon the conduct of the parties

in filing and litigating the claim, rather than upon the underlying merits of the claim. Id. at 529.

Similarly, the requirement at issue in this case, the type and amount of documentation needed to

support a request for attorneys’ fees, relates only to conduct required by the parties and does not

relate to the underlying merits of the claim. Accordingly, it is a requirement properly characterized

as “procedural” under the doctrine of Erie and should be analyzed using Sixth Circuit law.

        The Bogard declaration was insufficient to support GE’s request for attorneys’ fees under

Sixth Circuit law. In Perotti v. Seiter, 935 F.2d 761, 764 (6th Cir. 1991), this court stated that a

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No. 03-5650
GE, et al v. Latin Amer Imports, et al

party seeking attorneys’ fees “has the burden of providing for the court’s perusal a particularized

billing record.” See also Moore v. Freeman, 355 F.3d 558, 566 (6th Cir. 2004) (stating that “the

attorney seeking compensation retains the burden of documenting the number of hours spent on the

case and of maintaining records in a way that would allow a court to determine how much time was

spent on each claim.”); Building Service Local 47 Cleaning Contractors Pension Plan v. Grandview

Raceway, 46 F.3d 1392, 1402 (6th Cir. 1995) (stating that the party seeking attorneys’ fees must

present “‘evidence supporting the hours worked and rates claimed’”) (internal citations omitted).

We recognize that an unpublished opinion of this court, Palazzolo v. Benson, No. 95-1067, 1996 WL
156699, at *4 (6th Cir. Apr. 03, 1996), found that the lower court in that case abused its discretion

in denying attorneys fees on several grounds, reasoning in part that a trial court should decide

whether a party is entitled to attorneys’ fees before the party is required to submit documentation

to support its request. However, given the requirement set forth in later, published opinions that the

claimant at least provide the hours worked and the rates charged when requesting attorneys’ fees,

we cannot find the district court to have abused its discretion in this case.

       GE did not sufficiently document its request for attorneys’ fees. The Bogard declaration did

not set forth the number of hours worked or the rates charged by attorneys working for GE. Rather,

it simply stated that it was entitled to $658,468.30, an amount significantly higher than the

$214,693.57 that GE was suing for under the guaranty. As the Bogard declaration was missing even

the minimum requirements of hours worked and rates charged, the decision of the district court was

not an abuse of discretion.

                                                 -4-
No. 03-5650
GE, et al v. Latin Amer Imports, et al

       The failure to set forth hours was particularly significant because, as the district court

properly held, GE should not be allowed to recover attorneys’ fees for time spent defending against

Latam’s counterclaims. Whether GE is allowed to recover for time spent defending against Latam’s

counterclaims is a matter relating to the underlying substantive claims between the parties. The

issue is therefore properly characterized as substantive under the Erie doctrine and, accordingly,

state law applies. See First Bank of Marietta v. Hartford Underwriters Ins. Co., 307 F.3d 501, 528

(6th Cir. 2002) (indicating that when the issue of whether to award attorneys’ fees depends on the

underlying substantive claim, the issue is substantive in nature); Alyeska Pipe Line Service Co. v.

Wilderness Society, 421 U.S. 240, 359-60 n.31 (1975) (indicating that in the typical diversity case,

attorneys’ fees should be awarded only if authorized under state law). As a result of the contractual

choice-of-law provision, the proper state law to be applied is New York’s.

       It does not appear that New York courts have addressed when a party should be allowed to

recover for fees incurred while defending against counterclaims; however, courts in the District of

Columbia and other jurisdictions have. In Kudon v. f.m.e. Corp., 547 A.2d 976, 980 (D.C. 1988),

a four-factor test was developed to guide the decision of “whether a party requesting an award of

attorneys’ fees pursuant to a contract provision is entitled to a fee recovery for defending a claim

by the party opposing payment of such fees.” The factors are as follows:

       (1) whether the party requesting the fees was responsible for precipitating the
       litigation;
       (2) whether the litigation for which the party relying on the contract provision
       recovers the fees was bona fide and made necessary by the party opposing payment
       of such fees;

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No. 03-5650
GE, et al v. Latin Amer Imports, et al

          (3) whether the claim asserted by the party opposing payment of such fees was raised
          by way of offset in an attempt to reduce or extinguish the debt owed to the party
          requesting fees; and
          (4) whether it was necessary for the party requesting the fees to defend against the
          claim of the party opposing the fees in order to collect the underlying contractual
          obligation

Id. (citations omitted). Courts in Vermont and Kentucky have also utilized this test for similar

claims.     See Wright v. Doolin, 607 A.2d 1137, 1139 (Vt. 1992); Tomeo v. Rubarts, No.

2002-CA-002464-MR, 2003 WL 22872406, at *2 (Ky. Ct. App. Dec. 5, 2003); cf. Cordova v.

Southwestern Bell Yellow Pages, __S.W.3d__, No. 08-03-00362-CV, 2004 WL 1800731, *3 (Tx.

App. Aug. 12, 2004) (noting that "[f]ees attributable to the defense of a counterclaim are not

recoverable unless the facts necessary for the plaintiff to recover also serve to defeat the

counterclaim").

          Application of the four-factor test set forth in Kudon supports the district court’s denial of

attorneys’ fees incurred in the litigation of counterclaims brought by Latam. Although Latam was

responsible for precipitating the litigation by admittedly failing to pay GE over $200,000 for

liabilities incurred in connection with the Distributorship Agreement, the counterclaims were

independently brought in a different district, and presumably would have been brought without the

guaranty claim. While the action to recover the money owed to GE under the guaranty was bona

fide and made necessary by Latam’s initial refusal to render payment, the claims asserted by Latam

were not originally raised as a defense. Instead, they were raised in a totally separate action and,

by way of consolidation, transformed into counterclaims and affirmative defenses. Notably, Latam

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No. 03-5650
GE, et al v. Latin Amer Imports, et al

did not answer GE’s complaint until March of 2002, approximately three years after it was filed.

During those three years, it does not appear that GE took any action to force Latam to respond to

its complaint or to proceed on its claim under the guaranty. When Latam finally did answer GE’s

complaint, Latam did not dispute liability; rather, Latam only disputed that the debt was currently

owed. Despite the admission by Latam that it was liable to GE under the guaranty, GE never moved

for summary judgment on the claim. Under the four-factor test set forth in Kudon, GE should not

be able to recover for the fees incurred in the defense of Latam’s counterclaims.

       For the foregoing reasons, the judgment of the district court is AFFIRMED.

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