Am. Infoage, LLC v. Regions Bank

• Decision Date: 07 December 2016
• Docket Number: Case No: 8:13-cv-1533-T-23JSS
• Parties: AMERICAN INFOAGE, LLC and SAGO NETWORKS, LLC, Plaintiffs, v. REGIONS BANK, Defendant.
• Court: U.S. District Court — Middle District of Florida

AMERICAN INFOAGE, LLC and SAGO NETWORKS, LLC, Plaintiffs, v. REGIONS BANK, Defendant.

Case No: 8:13-cv-1533-T-23JSS

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION

December 7, 2016

REPORT AND RECOMMENDATION

THIS MATTER is before the Court on Defendant's Motion for Attorneys' Fees and Expenses as to Plaintiff, Sago Networks, LLC, (Dkt. 128), and Defendant's Motion for Attorneys' Fees and Expenses as to Plaintiff, American Infoage, LLC, and Motion for Entry of Judgment for Attorneys' Fees and Expenses Against Both Plaintiffs Jointly and Severally (Dkt. 143). The Plaintiffs opposed Defendants' motions and filed the Declaration of Judith Bronsther in support of Plaintiffs' opposition. (Dkts. 153, 154.) Defendant filed the Affidavit of Timothy W. Weber and the Declaration of Regions' counsel Casey R. Lennox in support of its motions. (Dkts. 129, 130.) For the reasons that follow, it is recommended that the motions be granted in part and denied in part.

BACKGROUND

This action resulted from a dispute concerning three variable-rate loans executed by Defendant, Regions Bank ("Regions"),¹ and Plaintiffs, American Infoage, LLC ("Infoage") and Sago Networks, LLC ("Sago"): the Infoage Tampa Loan, the Infoage Norcross Loan, and the SagoLoan.² The Infoage Tampa Loan and the Infoage Norcross Loan (collectively, "Infoage Loans") included separate interest-rate swap agreements to stabilize the loans' effective interest rate ("Swap Agreement").³ As described in the District Court Judge's prior order, "[g]enerally, a swap is an exchange of 'cash flows'—a fixed-interest-rate 'flow' and a variable-interest-rate 'flow'—for a fixed duration. A variable-rate borrower can employ a swap to stabilize a loan's effective interest rate." (Dkt. 96 at 2.)

In 2013, Plaintiffs refinanced the loans with a third-party lender, and Regions charged Infoage a fee ("Swap Breakage Fee") in the amount of $582,762 for terminating the Swap Agreement prior to its maturity date. Plaintiffs then sued to recover the Swap Breakage Fee and other damages under a variety of theories, including fraudulent misrepresentation (Count I), negligent misrepresentation (Count II), breach of contract (Counts III, IV, and V), unjust enrichment (Count VI), and breach of good faith and fair dealing (Counts VII and VIII). (Dkt. 44.) According to Plaintiffs, Regions misrepresented the terms of the Infoage Loans, misrepresented the duration and the effect of each swap agreement, misrepresented the consequence of pre-paying the Infoage Loans, levied pre-payment penalties prohibited under the Infoage Loans, over-charged the interest permitted under the Sago Loan, and concealed material information and documentation about the Infoage Loans.

In Counts III and IV, Infoage alleged that Regions breached the Infoage Tampa Loan Promissory Note ("Infoage Tampa Note") and the Infoage Norcross Loan Promissory Note("Infoage Norcross Note"), (collectively, "Infoage Notes"). In Count V, Sago alleged that Regions breached the Renewal Promissory Note ("Sago Note"), which constitutes the most recent renewal of the original promissory note executed by Sago and Regions on October 18, 2005. (Dkt. 44, Ex. F.) The breach of contract claim in Count V relating to the Sago Note was the sole claim asserted by Sago. (Dkt. 44 ¶¶ 70-81); (Dkt. 53 at 2 n.1.) Regions defended against all of the claims in the Second Amended Complaint, demanded judgment as to each claim, and sought "court costs and attorneys' fees" as to each claim. (Dkt. 45.)

Ultimately, summary judgment was granted in favor of Regions as to Counts III, IV, VII, and VIII. (Dkt. 56.) After a bench trial, judgment was entered in favor of Regions on the remaining claims, Counts I, II, V, and VI. (Dkt. 96.) In particular, the Court found that Regions was entitled to impose the Swap Breakage Fee under the Swap Agreement, which permitted imposition of a fee for early termination. (Dkt. 57 at 12.) Plaintiffs then appealed the judgment to the Eleventh Circuit Court of Appeals, and the judgment was affirmed. (Dkt. 131.) During the appeal, but before briefing, the appeal as to Sago was dismissed. (Dkt. 123.) Regions now seeks attorneys' fees and costs against Sago and Infoage as the prevailing party. (Dkts. 128, 143.)

APPLICABLE STANDARDS

Ordinarily, under the traditional "American rule," attorneys' fees are not recoverable in the absence of a statute or enforceable contract providing otherwise. Rothenberg v. Sec. Mgmt. Co., 736 F.2d 1470, 1471 (11th Cir. 1984). In awarding fees under a contract, federal courts apply state law when ruling on the interpretation of contractual attorneys' fees provisions. In re Sure-Snap Corp., 983 F.2d 1015, 1017 (11th Cir. 1993).

In this case, the contracts at issue state that they are governed by Florida law, and both parties apply Florida law in their respective memoranda. See Mazzoni Farms, Inc. v. E.I. DuPontDe Nemours & Co., 761 So. 2d 306, 311 (Fla. 2000) (providing that Florida courts enforce choice-of-law provisions absent a conflict with public policy). Therefore, the Court must apply Florida law to interpret the attorneys' fees provisions at issue. Under Florida law, contractual attorneys' fees provisions are strictly enforced, Brickell Bay Club Condo. Ass'n, Inc. v. Forte, 397 So. 2d 959, 960 (Fla. 3d DCA 1981), and strictly construed, Succar v. Safra Nat'l Bank of N.Y., 237 F. App'x 526, 528 (11th Cir. 2007).

ANALYSIS

A. Sago Networks, LLC

Regions moves for an award of reasonable attorneys' fees and expenses incurred in successfully defending the breach of contract claim alleged in Count V of the Second Amended Complaint. In Count V, Sago alleged that Regions breached the Sago Note by charging Sago a higher monthly interest rate than provided in the Sago Note, despite that Sago was not in default. (Dkt. 44 ¶ 79.) In particular, the Sago Note allowed for an increase to the interest rate "[u]pon the occurrence of an Event of Default," but Count V alleged that "Sago never engaged in any event and/or activity that constituted or was deemed to be an Event of Default." (Dkt. 44 ¶¶ 74, 75.) Following a bench trial, the Court found in favor of Regions as to Count V, finding that Sago had defaulted under the Sago Note, therefore permitting Regions to impose the increased interest rate. (Dkt. 96.) Judgment was entered accordingly on July 9, 2015. (Dkt. 97.)

1. Entitlement to Fees and Costs

Regions seeks to recover its attorneys' fees, costs, and expenses under the Sago Note, which provides as follows:

Upon the occurrence of an Event of Default . . . [Sago] and each Guarantor shall pay all costs and expenses incurred by [Regions] in enforcing its rights hereunder, under the other Loan Documents, under applicable law and in equity. In the event this Renewal Promissory Note and/or the other Loan Documents are referred to anattorney for collection or otherwise for enforcement of [Regions'] rights, [Sago] and each Guarantor shall be liable for and shall pay all costs and expenses thereof including, but not limited to, reasonable attorneys' fees and expenses, whether incurred with respect to collection, trial, appeal, enforcement of any judgment based on this Renewal Promissory Note, or otherwise, whether suit be brought or not.

(Sago Note ¶ 13(d).) Therefore, under the terms of the Sago Note, Regions is entitled to recover its reasonable attorneys' fees, costs, and expenses incurred in enforcing its contractual right to increase the interest rate following Sago's default, as provided in the default interest provision in the Sago Note. See Price v. Tyler, 890 So. 2d 246, 251 (Fla. 2004) (providing that, under Florida law, each party is responsible for its own attorneys' fees unless a contract or statute authorizes their recovery). Sago does not dispute that Regions is entitled to recover its attorneys' fees and costs related to Count V under the terms of the Sago Note, acknowledging that "Regions defended this case on the basis of its right to enforce the default interest provisions of the [Sago] Note" and therefore that "Sago is obligated to pay attorney's fees per contract." (Dkt. 153 at 2, 4.)

2. Reasonableness of Attorneys' Fees

Regions seeks to recover $25,365.57 in attorneys' fees for the 44.8 hours expended by attorney Andrew W. Lennox, billed at $275 per hour, and the 48 hours expended by attorney Casey R. Lennox, billed at $275 per hour.⁴ Regions also seeks to apportion and shift certain attorneys' fees, ranging from $10,325.95 to $17,205.42, that were billed to Infoage onto Sago. (Dkt. 128 at 9-10.)

Sago does not object to the requested hourly rates. (Dkt. 153.) Rather, Sago argues that Regions failed to properly allocate fees between Sago and Infoage. Sago also disputes Regions' entitlement to fees as to Infoage and therefore contends that the allocation of fees from Infoage toSago constitutes an improper attempt to recover fees from Sago that Regions is not entitled to recover at all.

Regions states that the total hours billed in this case were billed to two separate internal matters: (1) Infoage's claims; and (2) Sago's claims. Specifically, Regions states that tasks related solely to the claims brought by Sago were billed to the Sago billing matter, while tasks related solely to Infoage's claims were billed to the Infoage billing matter. Tasks that were "incapable of being divided between the claims asserted by [Sago and Infoage]" were also billed to the Infoage billing matter. (Dkt. 128 at 9.) These "indivisible tasks" included: removal, case management, mediation, depositions and discovery, pre-trial, and initial post-judgment pursuit of attorneys' fees. However, in an effort to apportion the total hours and resulting fees associated with these indivisible tasks between Sago and Infoage, as advised by Regions' fee expert Timothy W. Weber, Regions allocated between fifteen and twenty-five percent of the fees billed to Infoage to Sago. According to Mr. Weber, "a portion of the hours and...