Court Opinion

ID: 1014966
Source: CourtListenerOpinion
Date Created: 2013-07-04 21:25:39.705147+00
Date Added: 2024-06-11T15:37:10.677192
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                               No. 03-2172

CITICORP U.S.A., INCORPORATED,

                                              Plaintiff - Appellant,

           versus

CHARLES C. EDWARDS; FIRST EQUITABLE REALTY
III, L.P.,

                                             Defendants - Appellees,

           and

TOURE JANTOR, INCORPORATED,

                                                            Defendant.

Appeal from the United States District Court for the District of
Maryland, at Baltimore. Catherine C. Blake, District Judge; Paul
W. Grimm, Magistrate Judge. (CA-99-696-PWG)

Argued:   September 30, 2004             Decided:    December 17, 2004

Before WILKINSON, GREGORY, and SHEDD, Circuit Judges.

Affirmed by unpublished per curiam opinion. Judge Gregory wrote an
opinion concurring in part and dissenting in part.

ARGUED: Michael Joshua Lichtenstein, SWIDLER, BERLIN, SHEREFF,
FRIEDMAN, L.L.P., Washington, D.C., for Appellant. Robert Alvin
Gordon, TYDINGS & ROSENBERG, Baltimore, Maryland, for Appellees.
ON BRIEF: Roger Frankel, SWIDLER, BERLIN, SHEREFF, FRIEDMAN,
L.L.P., Washington, D.C., for Appellant. Toyja E. Kelley, TYDINGS
& ROSENBERG, Baltimore, Maryland, for Appellees.

Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).

                                2
PER CURIAM:

     Citicorp U.S.A., Incorporated appeals from the magistrate

judge’s partial denial of its post-trial motion for attorneys’ fees

and expenses.   We affirm.

                                I

     We review a district court’s decision awarding or denying

attorneys’ fees and expenses for abuse of discretion.     American

Reliable Ins. Co. v. Stillwell, 336 F.3d 311, 320 (4th Cir. 2003).

“Reversal for abuse of discretion is reserved for those instances

in which the court is clearly wrong; an award within the discretion

of the court should be affirmed even though we might have exercised

that discretion quite differently.”   Brodziak v. Runyon, 145 F.3d

194, 196 (4th Cir. 1998) (internal quotation marks omitted).1

     The parties agree that New York substantive law governs this

appeal.   Under New York law, when a contractual fee-shifting

arrangement provides for payment by one party of another party’s

attorneys’ fees and expenses, courts should order payment so long

as the amount claimed is not unreasonable.    F.H. Krear & Co. v.

Nineteen Named Trustees, 810 F.2d 1250, 1263 (2nd Cir. 1987).

However, “[t]o compute a reasonable amount of attorneys’ fees in a

     1
      Generally, we will find that a district court has abused its
discretion if its conclusion “is guided by erroneous legal
principles” or “rests upon a clearly erroneous factual finding.”
Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261 (4th Cir. 1999).

                                3
particular case requires more than simply a report of the number of

hours spent and the hourly rate.” McGuire v. Russell Miller, Inc.,

1 F.3d 1306, 1315 (2nd Cir. 1993).           Rather, courts must consider a

variety   of   factors      in   determining    the   reasonableness    of   an

attorneys’ fee request, including the difficulty of the legal

issues involved; the skill required to handle the issues; the time

and labor required; the experience, ability, and reputation of the

attorney; the customary fee charged by attorneys for similar

services; the burdensomeness of the fees; the fairness to the

parties; and the amount involved.            See McGuire, 1 F.3d at 1315;

F.H. Krear, 810 F.2d at 1263.

                                        II

     The litigation underlying this appeal arises from a series of

commercial lending transactions between the parties that began in

1996.   It culminated in 2003 with a bench trial before a magistrate

judge, who entered judgment for Citicorp on its claim against

Appellees for default interest in the amount of $469,735.              Because

the parties’ loan documents entitle Citicorp to seek its reasonable

attorneys’     fees   and    expenses    associated    with   a   default    or

collection of its loans to Appellees, Citicorp also sought judgment

for fees and expenses it incurred during its business relationship

with Appellees.       These fees and expenses were generated by seven

law firms which represented Citicorp both before and during this

                                        4
litigation, and they are documented in “several thousand pages of

invoices.”     Brief of Appellant, at 15.            The parties agreed before

trial that the magistrate judge would resolve Citicorp’s request

for fees and expenses by way of motion after the bench trial.

     Initially, the magistrate judge denied Citicorp’s request

without prejudice “for lack of particularity.”                 J.A. 3017.        The

magistrate judge noted that although Citicorp’s right under the

parties’ agreements to recover some fees and expenses related to

any default or collection of the loans is undisputed, from the

materials presented he was “unable to make a principled decision

regarding reasonableness, or even to apply the factors in an

informed manner.”      J.A. 3017.        The magistrate judge specifically

observed that although Appellees had “raised significant issues

regarding    the   number   of   law   firms       that   provided    services    to

Citicorp, the reasonableness of the work performed, the number of

attorneys staffing the case, the possibility of duplication of

effort between attorneys and firms, and the reasonableness of the

rates charged,” Citicorp had responded “in a conclusory way,

without support of any affidavits or other information” that would

allow him to properly resolve the dispute.                    J.A. 3017.         The

magistrate judge also noted that “the format of the fee invoices

presented, amounting to a mere chronological recitation of services

provided, makes meaningful analysis nearly impossible, and any

attempt   to   make   sense   out   of       the   invoices   would   consume     an

                                         5
inappropriately large amount of court time.”                   J.A. 3017.

     To resolve the matter on the merits, the magistrate judge

directed Citicorp to “provide a restatement of each of the bills in

the format identified in Appendix B to the [district court’s] local

rules.”    J.A. 3017.    The magistrate judge recognized that Appendix

B   --    which    applies    to     fee   requests      in     civil    rights     and

discrimination cases -- was “technically inapplicable to this

contract    dispute,”    but    he     believed    that       the    requirements    of

Appendix    B     regarding    the    organization       of    fee    invoices    into

specified       categories    would     insure    “the    presentation       of     the

information in a manner that facilitates efficient review and

analysis by the court.”              J.A. 3017 n.1.       The magistrate judge

further instructed Citicorp:

     Any explanation of underlying facts needed to address the
     evaluative factors set forth in the New York case law
     will be in the form of affidavits prepared by persons
     with personal knowledge and under penalty of perjury. As
     it is Citicorp’s burden of proof to establish
     reasonableness, any memorandum filed needs to discuss
     each of the factors and clearly explain Citicorp’s
     position with respect to each.

J.A. 3017-18.

     In    response     to    the     magistrate    judge’s         order,   Citicorp

submitted a revised motion for attorneys’ fees and expenses, to

which Appellees objected. The magistrate judge ruled on Citicorp’s

revised motion in a twenty-nine page order.

     The magistrate judge began by noting that of the $786,573.94

in fees and expenses requested by Citicorp, approximately 55%

                                           6
pertains to Citicorp’s actions related to Appellees’ alleged loan

defaults   prior   to     filing   the    underlying    lawsuit,   such     as

renegotiating the loan documents between the parties and monitoring

the collateral used to secure the loans.           After recognizing the

factors pertinent to calculation of a reasonable fee award, the

magistrate judge stated:

     Having reviewed the parties [sic] contracts, and keeping
     in mind that Citicorp bears the burden of demonstrating
     its entitlement to reasonable fees, see Hensley v.
     Eckerhart, 461 U.S. 424, 433 (1983), I conclude that
     Citicorp has not persuasively demonstrated that it would
     be reasonable to award it all fees generated as a result
     of [Appellees’] alleged defaults that date back to 1997.
     Under the facts of this case, it is reasonable to award
     attorneys’ fees related to reasonable efforts to enforce
     the agreements by filing suit and prosecuting it. To
     also award substantial fees for multiple amendments to
     the contract documents that [Citicorp] successfully re-
     negotiated would be excessive, in the absence of evidence
     that the earlier negotiations were undertaken by
     [Appellees] in bad faith, facts that are not patent here.

J.A. 3111-12.    The magistrate judge further observed that “many of

the fees sought by Citicorp prelitigation have not convincingly

been related to proven defaults by [Appellees].”           J.A. 3112.

     The   magistrate     judge    next   turned   to    consideration      of

Citicorp’s evidentiary presentation and concluded that Citicorp

failed to comply with his prior order that the fee request be

resubmitted under the Appendix B format.           The magistrate judge

noted   that   Citicorp   had   instead    “submitted,   as   it   had    done

previously, a mass of invoices from the various law firms it

engaged accompanied by a general description as to the work done

                                     7
with a total amount of fees and expenses generated.”       J.A. 3114.

The magistrate judge continued:

     Citicorp is relying on . . . a mass of unorganized
     invoices, billing records, and letters, presumably
     consisting of all information regarding the attorneys’
     fees and expenses in this case. The revised request now
     also lists each law firm, the dates that it was involved
     in [Appellees’] loan arrangements, and the type of work
     done. Each law firm’s entry also lists the total amount
     of fees generated, hours worked, and expenses billed,
     which is further broken down into fees and expenses.
     There are no affidavits from the attorneys of the law
     firms attesting to the work performed and the hourly
     rates of the lawyers and paralegals involved in such
     work.    In addition, Citicorp does not provide any
     worksheet breaking down each law firm by the amount
     billed, the work done, by whom, and at what hourly rate.
     Instead, Citicorp has offered the affidavits of [two
     Citicorp employees], who each attest to the law firms’
     roles in connection with [Appellees’] loans.

J.A. 3114-15.   In light of the foregoing, the magistrate judge

ruled:

     It is not the Court’s burden to sift through literally
     hundreds of pages of invoices relating to legal work
     performed over a six-year period in an effort to
     determine whether the fees sought are reasonable and not
     excessive. If a reviewing court is to conduct a review
     that is meaningful, the party seeking the fee award must
     do its part to facilitate this review. Where, as here,
     this was not done, even though specifically requested by
     the Court, it is appropriate to take this failure into
     consideration in determining a reasonable fee. Given the
     sheer volume of the invoices and the lack of specific
     details offered by Citicorp, I conclude that any fee
     award must be reduced by thirty-five percent to reflect
     the fact that a full accounting of each and every fee
     generated is impossible in this case.

J.A. 3115-16.

     The   magistrate   judge   then   specifically   considered   and

addressed Citicorp’s request as it pertains to each of the seven

                                  8
law firms.2      With respect to four of these firms, the magistrate

judge denied Citicorp’s requests in their entirety for a variety of

reasons, including the fact that many of the fees and expenses

involve prelitigation services; that Citicorp failed to establish

a connection between some of the fees and expenses and a default by

Appellees; that many of the fees and expenses appear to document

services that are duplicative of work done by other firms; and that

the legitimacy of some of the fees and expenses is questionable.

       As for the other three firms, the magistrate judge found that

Citicorp is entitled to an award for fees and expenses.     However,

the magistrate judge reduced the request for each of these firms by

20%.       The magistrate judge made this reduction for the firms of

Bilzin Sumberg Dunn Basena Price & Axelrod, LLP; and Howrey &

Simon, because of “apparent duplicativeness of . . . effort with

other law firms, the breadth of the fees sought, and the lack of

detail.”       J.A. 3121, 3126.3    The magistrate judge made this

reduction for the firm of Swidler Berlin Shereff Friedman, LLP,

because Citicorp’s request lacks “specificity as to the number of

attorneys, the type of work done, the billing rate, and the hours

       2
      The magistrate judge noted that Citicorp failed to provide a
breakdown of the lawyers for each firm who worked on the particular
tasks involved and their hourly rates.
       3
      The magistrate judge also denied part of the request for the
Howrey firm based on his finding that it represents prelitigation
work and, in any event, the prelitigation work done by this firm
appears to overlap with work that was done by other firms.

                                   9
worked, all of which is important information to enable a court to

conduct a meaningful review for reasonableness.”                J.A. 3129.4

     After    making   these   determinations,        the   magistrate       judge

concluded that Citicorp was entitled to recover $412,660.02 for

work done by three of the seven law firms.           However, the magistrate

judge then reduced this award by 35% based on his prior ruling

concerning Citicorp’s failure to comply with his initial order.

The final award to Citicorp is $268,229.02.

                                     III

     Citicorp argues on appeal that the magistrate judge acted

arbitrarily    in   reducing   its   request       for   fees    and   expenses.

Citicorp points specifically to the magistrate judge’s decision to

deny prelitigation fees and expenses and to his decision to reduce

the award by 35% (and then make additional reductions) “without

even considering the reasonableness of the fees and expenses.”

Brief of Appellant, at 8.

     Having   had   the   benefit    of    the   parties’   briefs     and    oral

argument, and after careful consideration of the applicable law, we

are not persuaded that the magistrate judge abused his discretion

in making the fee and expenses award.            The record shows that under

     4
      The magistrate judge denied Citicorp’s request for $22,277.50
in additional expenses based on his determination that “[n]o
detailed explanation was provided as to why these services were
performed.” (J.A. 3130).

                                     10
the circumstances the magistrate judge conducted a thorough review

of Citicorp’s motion, and we do not find that his factual rulings

are clearly erroneous or that his legal rulings are incorrect. See

generally Trimper v. City of Norfolk, Va., 58 F.3d 68, 77 (4th Cir.

1995) (holding that “the district court acted well within its

discretion in disallowing those costs which were insufficiently

documented” and noting that the ruling “is exactly the type of

factual determination which should not be disturbed on appeal”);

Fair Housing Council of Greater Washington v. Landow, 999 F.2d 92,

98 (4th Cir. 1993) (rejecting the argument that “the district court

has the burden to identify which hours in a fee applicant’s time

sheets are recoverable”); In re Conklin, 946 F.2d 306, 316 (4th

Cir. 1991) (affirming district court’s reduction of fee and expense

request to account for “duplicative and repetitive work” and for

“incomplete, inaccurate and irregular records”); Daly v. Hill, 790

F.2d 1071, 1079-80 (4th Cir. 1986) (finding no abuse of discretion

in substantial reductions in fee requests based on lack of detailed

affidavits supporting request and duplicativeness); Jane L. v.

Bangerter, 61 F.3d 1505, 1510 (10th Cir. 1995) (holding that 35%

reduction based on inadequate fee request was within district

court’s discretion).5

     5
      Concerning the denial of prelitigation fees, we note that the
magistrate judge -- sitting as the factfinder -- concluded based on
the record presented to him that Citicorp failed to “persuasively
demonstrate” its entitlement to prelitigation fees or that an award
of such fees would be reasonable under the circumstances of this

                                11
    We therefore affirm the judgment of the district court.

                                                        AFFIRMED

case. See J.A. 3108, 3111-13. In light of the record presented
below, we are not prepared to say that these determinations
constitute an abuse of discretion.

                              12
GREGORY, Circuit Judge, concurring in part and dissenting in part:

        I concur with the majority’s decision to affirm the district

court’s award of litigation attorney’s fees.        I disagree, however,

with the majority’s decision to affirm the district court’s ruling

summarily denying pre-litigation attorney’s fees in this case.

Accordingly, I must respectfully dissent in part.

        Appellant argues that the district court erred in denying all

pre-litigation attorney’s fees.        Citicorp seeks fees and expenses

in the amount of $786,573.94. Approximately 55% of the fees sought

pertain to actions taken by Citicorp prior to filing suit in this

case, such as renegotiating loan documents between Citicorp and Dr.

Edwards.     The remainder of fees and expenses claimed by Appellant

relate to litigating this action from March 10, 1999 when the suit

was filed, until March 12, 2003 the date the district court found

in favor of Citicorp.

        The parties do not dispute that in various loan documents Dr.

Edwards agreed to pay Appellant’s reasonable attorneys’ fees,

whether or not legal proceedings may have been instituted.             In

addition,    the   district   court   “determined   that   the   contracts

generally do refer to the ability of Citicorp to collect legal fees

in its attempt to enforce its rights under the contract.” J.A. at

3107.     The district court also found that “under basic principles

of contract law, a contractual fee-shifting provision may be

enforced according to its terms.” J.A. at 3108.             However, the

                                      13
district court concludes that while litigation-related fees are

clearly recoverable under New York law, other fees related to

Citicorp’s attempt to renegotiate the loan documents as well as

monitoring the collateral used to secure such documents should not

automatically be awarded.

     I agree with the majority that the district court has the

discretion to determine the appropriateness of the fee award

pursuant to factors delineated by New York cases under a standard

of “reasonableness.” Hensley v. Eckerhart, 461 U.S. 424, 437 (1983)

(“the district court has discretion in determining the amount of a

fee award. This is appropriate in view of the district court’s

superior understanding of the litigation and the desirability of

avoiding frequent appellate review of what essentially are factual

matters.”).   However, the majority does not address the district

court’s erroneous conclusion that “it is reasonable to award

attorneys’ fees related to reasonable efforts to enforce the

agreements by filing suit and prosecuting it. [However,] [t]o also

award substantial fees for multiple amendments to the contract

documents   that   the   Bank   successfully   re-negotiated   would   be

excessive, in the absence of evidence that the earlier negotiations

were undertaken by Dr. Edwards in bad faith.” J.A. at 3111-12.

There is no citation to case law or a contract provision that

requires Citicorp to prove or demonstrate Appellee’s bad faith in

order to seek or be granted attorneys’ fees for negotiation of the

                                    14
loan agreements or in connection with the collection or attempted

collection of any collateral. Consequently, the district court has

no support for its assertion that Appellant must show bad faith on

the    part   of   Dr.   Edwards   in   order   to   collect   pre-litigation

attorneys’     fees.      Moreover,     the   district   court’s   conclusion

virtually strips the meaning from the attorney’s fee provision in

the loan agreements, and the New York case law that supports it.

While a determination of reasonableness is always required when a

court decides whether or not to grant attorneys’ fees, bad faith is

not.

       In this case, the loan agreements provide in relevant part:

       Borrower agrees to pay to the Lender all fees and costs
       incurred or to be incurred by the Lender, including all
       legal expenses, in connection with the negotiation,
       documentation and closing of the First Amendment and/or
       any documents and instruments executed in connection with
       the First Amendment.

J.A. at 840.

       Borrower agrees to pay to the Lender all fees and costs
       incurred or to be incurred by the Lender relating to the
       matters described herein, including all reasonable legal
       expenses . . . in connection with the negotiation . . .
       of this Second Amendment and/or any of the documents and
       instruments executed in connection with this Second
       Amendment.

J.A. at 857.

       Borrower agrees to pay all costs incurred by any holder
       hereof, including reasonable attorneys’ fees (including
       appellate proceedings), incurred in connection with any
       Event of Default . . . or in connection with the
       collection or attempted collection of enforcement hereof,
       or in connection with the protection of any collateral
       given as security for the payment hereof, whether or not

                                        15
       legal proceedings may have been instituted.

J.A. at 878-79 (emphasis added).

       All of these provisions were included in loan agreements that

were   negotiated      by    the   parties    and   signed   by    Dr.   Edwards.

Presumably these provisions were bargained for by the parties,

therefore neither the district court nor this court is at liberty

to disregard them.          The December 8, 2000 settlement agreement,

which the parties executed but failed to implement, contained an

admission from Dr. Edwards stating that he was in “default in the

payment of certain monetary obligations . . . .” J.A. at 3112.                 The

district    court   disregarded      that     admission   and     concluded   that

because the only default that was before the court and adjudicated

was the December 8, 2000 settlement agreement, the earlier defaults

alleged by Citicorp were never “proven defaults” by Dr. Edwards.

Consequently, the district court found that Citicorp failed to

relate convincingly the pre-litigation fees it sought to “proven

defaults” by Dr. Edwards.

       Contrary   to   the    district    court’s    finding      regarding   pre-

litigation attorney’s fees, the district court acknowledges the

February 1, 1999 Default Letter (“Default Letter”) which discusses

a number of acts of default in connection with the first mortgage

and with other documents that were entered into by Dr. Edwards and

Citicorp.    The district court stated during the March 12, 2003

bench trial:

                                         16
      It is not necessary for me to reach a finding as to each
      and every item of default alleged. I am convinced from
      having heard the testimony that there are at least one or
      more acts of default as identified in Exhibit 11 [the
      Default Letter] that exist to include but not limited to
      at a minimum on page 2 Roman Numeral II-A, that of the
      $122,763 payment, Dr. Edwards acknowledged that there was
      some balance unpaid . . . . And so at a minimum, there
      were some acts of default that existed with respect to
      loan documents and were established by Citicorp in
      connection with Exhibit 11. . . . So therefore, I find as
      a matter of fact and conclude as a matter of law there
      were defaults under the loan documents . . . .

J.A. at 2171.*

      The Default Letter states that Dr. Edwards had “failed to pay

(i) $122,763 of the October 1, 1998 Credit Note installment and

(ii) the $1,500,000 January 2, 1999 installment of the Credit Note

as and when due.” J.A. at 2559.             Thus, the district court found

that Dr. Edwards had defaulted on at least one loan agreement prior

to February 1, 1999, but held that the award of default interest

would not commence until February 1999.          Based on this alone, this

court can not affirm the district court’s decision to summarily

disallow all pre-litigation fees and expenses that Appellant sought

to   recover.    O&Y   (U.S.)   Financial      Co.   v.   Chase   Family   Ltd.

Partnership No. 3, Nos. 93 Civ. 1855 to 93 Civ. 1857, 1994 U.S.

Dist. LEXIS 13249, at *13-14 (S.D.N.Y. Sept. 20, 1994) (“whether a

party     seeking   enforcement   of   a     promissory    note   can   recover

attorneys’ fees incurred in settlement negotiations is a matter on

      *
      Although the district court was discussing the issue of
default interest, the district court does acknowledge that defaults
had occurred prior to 1999.

                                       17
which this court has not consistently ruled . . . . the better view

is that such fees should be recoverable.”).

     I agree with the district court that Citicorp bears the burden

of demonstrating its entitlement to reasonable fees. Hensley v.

Eckerhart, 461 U.S. 424, 433 (1983) (“party seeking an award of

fees should submit evidence supporting the hours worked and rates

claimed. Where the documentation of hours is inadequate, the

district court may reduce the award accordingly.”).                     However, I

disagree with the standard that the district court applies in

denying    CitiCorp’s      request   of    pre-litigation       fees,   which     the

majority seems to accept as correct.              In this case, the agreements

provide that reasonable attorneys’ fees connected to negotiation

and to defaults, are to be paid by Dr. Edwards.               The district court

seems to be under the belief that the pre-litigated attorneys’ fees

allowed under the loan agreements require that they be directly

related    to   an   adjudicated     default      and/or    that   there   must   be

evidence    that     the   negotiation     they    are     associated   with    were

undertaken due to bad faith on the part of Dr. Edwards.                 Neither of

these conditions are required in order to grant pre-litigation fees

to Citicorp.       The loan agreements merely require that the fees be

related to negotiations of the First and Second Amended Agreements

and/or default on the part of Dr. Edwards.                  In fact, the Second

Amended and Restated Credit Note, executed in July 1998, expressly

states that “reasonable attorneys’ fees” incurred in the event of

                                          18
any default, would be paid by Dr. Edwards “whether or not legal

proceedings may have been instituted.” J.A. at 878-79.           Although

the provisions arguably were meant to encourage the parties to

settle   any   defaults   without   involving   the   courts,   the   plain

language of the provisions protects CitiCorp’s right to seek

attorney’s fees incurred in resolving non-adjudicated defaults.

There is evidence in the record including testimony of Richard

Werner, a Citicorp Vice President, that some of the attorneys’ fees

included in Appellant’s request were related to resolving Dr.

Edwards’s defaults. Tige Real Estate Development Co. v. Rankin-

Smith, 650 N.Y.S.2d 114 (N.Y. App. Div. 1996) (finding that the

landlord’s entitlement to attorney fees, including fees expended in

negotiation, was the law of the case, however the court, found that

the attorney’s fees were excessive and reduced the award, but did

not deny them all together).

     Accordingly, I respectfully submit that the district court’s

denial of pre-litigation fees should be reversed and remanded to

the district court to determine what reasonable amount of pre-

litigation fees should be awarded.

                                    19