Cooperative Finance Ass'n, Inc. v. Garst, C 94-3052-MWB.

Decision Date11 June 1996
Docket NumberNo. C 94-3052-MWB.,C 94-3052-MWB.
Citation927 F. Supp. 1179
PartiesThe COOPERATIVE FINANCE ASSOCIATION, INC., Plaintiff, v. David GARST and Marilyn Garst, Defendants. David GARST, Counterclaimant, v. The COOPERATIVE FINANCE ASSOCIATION, INC., Counterclaim Defendant.
CourtU.S. District Court — Northern District of Iowa

COPYRIGHT MATERIAL OMITTED

Mark A. Shaiken of Stinson, Mag & Fizzell, P.C., in Kansas City, Missouri, Rodney P. Kubat of Whitfield & Eddy, P.L.C., in Des Moines, Iowa, local counsel, for Plaintiff/Counterclaim defendant CFA.

Peter Riley of the Tom Riley Law Firm, P.C., in Cedar Rapids, Iowa, for Defendant/Counterclaimant David Garst.

MEMORANDUM OPINION AND ORDER REGARDING PLAINTIFF/COUNTERCLAIM DEFENDANT'S MOTION FOR ATTORNEYS FEES

BENNETT, District Judge.

                                                 TABLE OF CONTENTS
                  I. BACKGROUND ............................................................. 1182
                     A. Procedural History .................................................. 1182
                     B. The Fee Claim ....................................................... 1183
                 II. LEGAL ANALYSIS ......................................................... 1185
                     A. Applicable Federal And Local Rules .................................. 1185
                     B. Fee-Shifting ........................................................ 1186
                        1. The "American Rule" and the contract clause exception ............ 1186
                        2. Appellate review of fee awards ................................... 1187
                        3. "Reasonableness" ................................................. 1187
                        4. Fee provisions and fees claimed here ............................. 1188
                           a. Applicable law ................................................ 1188
                           b. Construction of the fee-shifting provision .................... 1188
                           c. Evaluation of the fee claim under applicable law .............. 1189
                III. CONCLUSION ............................................................. 1193
                

This case calls to mind the aphorism of Judge Tamm of the District of Columbia Circuit Court of Appeals that "to the old adage that death and taxes share a certain inevitable character, federal judges may be excused for adding attorneys' fees cases." Kennedy v. Whitehurst, 690 F.2d 951, 952 (D.C.Cir.1982). Having obtained by summary judgment the balance and interest due on a defaulted promissory note, a lender, citing fee-shifting provisions in the loan agreement and note, now seeks to recovery attorneys fees as well. Notwithstanding the contractual fee-shifting provisions, requiring the debtor to pay the lender's costs of recovering a judgment upon default on the loan, the court must scrutinize the lender's fee request under the lens of reasonableness. Here, the plaintiff lender has submitted a fee and expense claim roughly equal to the amount of the judgment the lender recovered on the note for the unpaid balance and accrued interest. The lender asserts that the fee claim should be considered in proportion to the multi-million dollar value the debtor placed upon his counterclaim, while the debtor argues that, even apart from any issues he injected into the litigation, the lender's suit was overdone from the start. The court confronts the question, how much of the cost of a "Rolls Royce" prosecution and counterclaim defense may reasonably and fairly be shifted to a debtor under a contractual fee-shifting provision?

I. BACKGROUND

This matter comes before the court pursuant to the March 7, 1996, motion of plaintiff and counterclaim defendant Cooperative Finance Association, Inc. (CFA), for an award of attorneys fees and expenses against defendant David Garst. CFA's motion is made pursuant to Fed.R.Civ.P. 54(d) and N.D.Ia. LR 22. CFA seeks an award of attorneys fees in the amount $81,845.00 and expenses in the amount of $10,700.20 purportedly incurred in its prosecution of claims to enforce a loan agreement and promissory note, the so-called 1993 Revolver Note, as well as in CFA's defense to Garst's counterclaims. The note provided, in pertinent part, that "Borrower will pay on demand, to the extent permitted by applicable law, all costs of collection and attorney fees incurred or paid by Lender enforcing this Note on default."

In granting CFA's motion for summary judgment against Garst on February 21, 1996, the court awarded the unpaid principal balance due on the 1993 Revolver Note in the amount of $82,148.78, plus interest in the amount of $8,869.78 accrued as of May 15, 1995, plus further interest accrued at the per diem rate of $36.57 to the date of the judgment, which amounted to an additional $6,911.72. The court also concluded that CFA was entitled to the award of reasonable attorneys fees under the terms of the 1993 Revolver Note at issue. A brief review of the procedural history of this litigation and the court's conclusions in the summary judgment ruling is necessary in order to assess what fee award is reasonable. Also, in order to assess the reasonableness of the fees claimed, the court must survey the breakdown of fees by categories of work performed and a summary of the rates at which hours of service were billed, which CFA has provided pursuant to N.D.Ia. LR 22(a).

A. Procedural History

The court does not propose to survey the entire procedural history of this matter previously stated in its summary judgment ruling. However, it is useful to note that CFA filed this diversity lawsuit on July 28, 1994, seeking a judgment in the amount of the outstanding balance on a note for a loan made to a farming partnership known as Double G Ranch (DGR). One of the two partners in DGR was defendant David Garst. CFA subsequently amended the complaint to include as a defendant Garst's estranged wife, who had also signed the note for the loan in question. Both defendants answered the amended complaint on September 22, 1994. David Garst then filed a counterclaim on October 6, 1994, alleging generally that CFA was barred from recovering on the note owing to various kinds of misconduct. CFA answered the counterclaim on October 24, 1994.

The record indicates that discovery in this case did not proceed smoothly. Eventually, on January 17, 1996, Chief Magistrate Judge John A. Jarvey entered an order, inter alia, striking David Garst's counterclaim for failure to make discovery, pursuant to Fed. R.Civ.P. 37(b)(2)(B) & (C), and for failure to comply with court orders, pursuant to Fed. R.Civ.P. 41(b). On February 6, 1996, although Judge Jarvey's order striking the counterclaim was not cast as a report and recommendation for dismissal, but as an order imposing discovery sanctions, in an abundance of caution, this court allowed the parties ten more days to state any objections to Judge Jarvey's determination that the counterclaim should be stricken.1 Final disposition of the counterclaim was later made in the court's summary judgment ruling, which followed some time later.

In the midst of the discovery dispute that led to Judge Jarvey's dismissal of David Garst's counterclaim, CFA filed a motion on May 15, 1995, for summary judgment in its favor against both defendants on its own claim and against David Garst on his counterclaim. Both defendants resisted the motion for summary judgment. Defendant David Garst's resistance to the motion for summary judgment principally asserted the issues apparently, though imprecisely or vaguely, raised in his stricken counterclaim as grounds for denying CFA the judgment it sought on the 1993 Revolver Note. Additionally, his resistance asserted that CFA was improperly pursuing judgment against the Garsts on the 1993 Revolver Note instead of pursuing the other partner in DGR or the collateral identified in the companion security agreement. CFA's reply was that Garst had failed to generate any genuine issue of material fact concerning the loan or amount due thereon. CFA also argued that the other partner in DGR had the power to act as he did, thus binding the partnership and the signatories to the note for the amounts due, and furthermore both Garst's liability and the propriety of CFA's conduct were apparent under governing law.

On February 21, 1996, the court granted summary judgment in favor of CFA in the amount of the unpaid balance, interest, and attorneys fees due under the 1993 Revolver Note against David Garst, but not against Marilyn Garst. The court concluded, first, that David Garst's counterclaim and any defenses asserted therein were properly stricken by Judge Jarvey as a sanction for failure to make discovery and failure to comply with a court order compelling discovery. Because the counterclaim and defenses were stricken, CFA's motion for summary judgment on the counterclaim was denied as moot. The court also concluded that there were no genuine issues of material fact concerning CFA's entitlement to judgment on the 1993 Revolver Note and that CFA was entitled to judgment on the note as a matter of law. The court concluded that David Garst was liable as a partner on the debt of the partnership, but that genuine issues of material fact precluded summary judgment in favor of CFA on Marilyn Garst's defense that she was an "accommodation party" on the 1993 Revolver Note, which might preclude her liability to CFA on the note. Therefore, the court held that judgment would be entered in favor of CFA against David Garst in the amount of the principal balance due upon the 1993 Revolver Note plus interest accrued. Such judgment was entered on February 22, 1996. In its summary judgment ruling of February 21, 1996, the court further directed CFA to file a post-judgment motion for an award of attorneys fees in compliance with N.D.Ia. LR 22 within twenty-one days of the date of the summary judgment order. That motion is now before the court.

B. The Fee Claim

The motion seeks an award of fees for no less than twelve attorneys and paralegals who worked the case on behalf of CFA, some of whom were with CFA's principal law...

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2 cases
  • Andrade v. Lomas Auto Mall Inc.
    • United States
    • U.S. District Court — District of New Mexico
    • April 30, 2010
    ...is an implied term in any contract for attorney's fees.... We agree with this reasoning.”); Cooperative Finance Ass'n, Inc. v. Garst, 927 F.Supp. 1179, 1189 (N.D.Iowa 1996) (“Even where a contract does not expressly limit the prevailing party's fee claim to fees reasonably incurred, an atto......
  • Bublitz v. E.I. Dupont De Nemours and Co.
    • United States
    • U.S. District Court — Southern District of Iowa
    • August 27, 2002
    ...at 175. According to Coop. Fin. Ass'n, Inc. v. Garst, the way to deter that type of conduct is to deny the entire request. 927 F.Supp. 1179, 1187 (N.D.Iowa 1996) ("an intolerably inflated fee request justifies a complete denial of fees") (quoting Brown, 152 F.R.D. at 175) (Bennett, J.). Whi......

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