Fruit Creations, LLC v. Edible Arrangements, LLC

• Decision Date: 10 August 2021
• Docket Number: 3:20-cv-00479
• Parties: FRUIT CREATIONS, LLC et al., Plaintiffs, v. EDIBLE ARRANGEMENTS, LLC et al., Defendants.
• Court: U.S. District Court — Middle District of Tennessee

FRUIT CREATIONS, LLC et al., Plaintiffs, v. EDIBLE ARRANGEMENTS, LLC et al., Defendants.

No. 3:20-cv-00479

United States District Court, M.D. Tennessee, Nashville Division

August 10, 2021

MEMORANDUM AND ORDER

ALETA A. TRAUGER, UNITED STATES DISTRICT JUDGE

Before the court is the defendants’ Motion for Attorneys’ Fees and Costs (“Fee Motion”). (Doc. No. 35.) For the reasons set forth herein, the motion will be granted, though the fees awarded will be slightly less than the sum sought by the defendants.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs Fruit Creations, LLC, Fruit Creations of Clarksville, LLC Fruit Creations of Nashville, LLC, Tony Constant, and Kimberly Constant filed their initial Complaint on March 21 2020 against defendants Edible Arrangements, LLC,^[1] Netsolace, Inc., Edible Connect, LLC, Berry Direct, LLC, Edible Brands, LLC, and Tariq Farid. (Compl., Doc. No. 1-1.) On May 4, 2020, the plaintiffs filed an Amended Complaint adding Incredible Edibles, LLC, as a defendant. (Am. Compl., Doc. No. 1-22.) The plaintiffs made no attempt to serve the original Complaint, but defendants accepted service of the Amended Complaint on May 11, 2020 and removed the case to federal court on June 8, 2020 on the basis of diversity jurisdiction. (Doc. No. 1.) The Amended Complaint asserts claims related to a series of franchise agreements (“Franchise Agreements”) between the plaintiffs, the franchisees, and Edible Arrangements, LLC for breach of contract, breach of the implied covenant of good faith and fair dealing, violation of the Tennessee Consumer Protection Act, misappropriation of funds, conversion, fraud in the inducement, and accounting. (Doc. No. 1-22.)

On June 11, 2020, defendants’ counsel wrote to plaintiffs’ counsel to demand that any and all claims asserted in the lawsuit and otherwise arising out of the Franchise Agreements and the parties’ relationship be referred to arbitration (Doc. No. 19-1), citing Paragraph 20.F of the various Franchise Agreements (see, e.g., Doc. No. 1-3, at 71 ¶ 20.F; Doc. No. 1-4, at 71 ¶ 20.F). The plaintiffs did not accede to this demand, so, on June 22, 2020, the defendants filed a Motion to Compel Arbitration (Doc. No. 18), which the plaintiffs opposed. On August 27, 2020, the court issued a Memorandum and separate Order, granting the Motion to Compel Arbitration and staying this matter pending completion of arbitration. (Doc. Nos. 33, 34.) The court found the plaintiffs’ arguments in opposition to arbitration to be “creativ[e]” but “wholly without merit.” (Doc. No. 33, at 11.)

The defendants thereafter filed their Fee Motion and separate Memorandum of Law (Doc. Nos. 35, 36), arguing that the Franchise Agreements authorized an award of attorney’s fees incurred in enforcing the arbitration clauses in the parties’ agreements. The plaintiffs oppose the motion (Doc. No. 38), and the defendants have filed a Reply (Doc. No. 41).

In this case, the defendants seek attorney’s fees pursuant to a similar provision contained in each of the Franchise Agreements. For example, Paragraph 20.C of the 2017 Franchise Agreement between Edible International, LLC (“EI”) and Fruit Creations, LLC as “Franchisee” states:

If EI incurs costs and expenses (both internal and external) to enforce its rights or Franchisee’s obligations under this Agreement due to Franchisee’s failure to pay when due amounts owed to EI, to submit when due any reports, information, or supporting records, or otherwise to comply with this Agreement, Franchisee agrees to reimburse EI for all of the costs and expenses (both internal and external) that EI incurs, including, without limitation, reasonable accounting, attorneys’, arbitrators’, and related fees. Franchisee’s obligation to reimburse EI arises whether or not EI begins a formal legal proceeding against Franchisee to enforce this Agreement. If EI does begin a formal legal proceeding against Franchisee to enforce this Agreement, the reimbursement obligation applies to all costs and expenses (both internal and external) EI incurs preparing for, commencing, and prosecuting the legal proceeding and until the proceeding has come to a complete end (including appeals and settlements).

(Doc. No. 1-3, at 70 (emphasis added); see also Doc. No. 1-4, at 70; Doc. No. 1-5, at 89; Doc. No. 1-6, at 65; Doc. No. 1-8, at 63; Doc. No. 1-10, at 61.)^[2]

Based on these provisions, defendants now seek to recover attorney’s fees in the amount of $18,057 incurred through August 31, 2020, plus expenses in the amount of $471.60, for a total recovery of $18,528.60. Attorney Kevin Klein testifies in the Declaration submitted in support of the defendants’ motion that he, as lead counsel, worked a total of 41.9 hours on this case, and his billing rate is $375 per hour; his associate Ryan Loofbourrow devoted 12.8 hours to the case, and his billing rate is $275 per hour; associate William Cox spent one hour on the case, and his billing rate is $200 per hour. (Doc. No. 37 ¶¶ 18, 20.) Mr. Klein attests that the hourly rates charged by the attorneys at his firm are comparable to, or less than, the prevailing rates in the community for similar work and that the hours he, Mr. Loofbourrow, and Mr. Cox spent on the case were reasonable and necessary. (Id. ¶ 21.) Detailed invoices are attached as an exhibit to the Declaration, documenting the attorneys’ time on the case from May 12, 2020 through August 31, 2020. (Doc. No. 37-1.) The costs reflected in the invoices are related to a Tennessee Secretary of State document request fee ($60), the filing fee for the Notice of Removal and exhibits ($400), and postage in the amount of $11.60. (Doc. No. 37-1, at 1, 4.)

The plaintiffs oppose the Motion for Attorneys’ Fees (Doc. No. 38), and the defendants filed a Reply (Doc. No. 41).

II. LEGAL STANDARD

The federal courts’ “basic point of reference when considering the award of attorney’s fees is the bedrock principle known as the American Rule: Each litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise.” Baker Botts L.L.P. v. ASARCO LLC, 576 U.S. 121, 126 (2015) (quoting Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 252– 53 (2010)). Likewise, “[i]n the context of contract interpretation, Tennessee state law allows an exception to the American rule only when a contract specifically or expressly provides for the recovery of attorneys’ fees.” EPAC Techs., Inc. v. HarperCollins Christian Publ’g, Inc., 362 F.Supp. 3d 446, 449 (M.D. Tenn. 2019) (citing House v. Estate of Edmondson, 245 S.W.3d 372, 377 (Tenn. 2008)). “If a contract does not specifically or expressly provide for attorney fees, the recovery of fees is not authorized.” Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303, 309 (Tenn. 2009); see also Starnes Family Office, LLC v. McCullar, No. 10-2186, 2012 WL 566749, at *1 (W.D. Tenn. Feb. 21, 2012) (“Under Tennessee law, . . . contracts permitting the prevailing party to recover attorney’s fees are enforceable, but strictly construed.” (citing Cracker Barrel, 284 S.W.3d at 310–11)).

The party seeking attorney’s fees bears the burden of proving that the requested fees are reasonable. EPAC Techs., 362 F.Supp. 3d at 450 (citing VRF Eye Specialty Grp., PLC v. Yoser, 765 F.Supp. 2d 1023, 1034 (W.D. Tenn. 2011)). In deciding whether requested fees are reasonable, courts consider:

1. The time devoted to performing the legal service.

2. The time limitations imposed by the circumstances.

3. The novelty and difficulty of the questions involved and the skill requisite to perform the legal service properly.

4. The fee customarily charged in the locality for similar legal services.

5. The amount involved and the results obtained.

6. The experience, reputation, and ability of the lawyer performing the legal service.

VRF Eye Specialty Grp., 765 F.Supp. 2d at 1034 (quoting Connors v. Connors, 594 S.W.2d 672, 676 (Tenn.1980)).

III. DISCUSSION

In their Response in Opposition to the Fee Motion, the plaintiffs argue, first, that the Franchise Agreements “do not contemplate awarding fees and expenses to the Franchisor where the Franchisor seeks to compel arbitration and is successful in doing so,” because (1) the Franchisor did not bring an action to enforce its rights as a result of the plaintiffs’ failure to comply with the Franchise Agreements; and (2) the proceeding has not come to a “complete end,” as required by the attorney’s fee clause. (Doc. No. 38, at 3.) Next, the plaintiffs contend that the court does not have jurisdiction to rule upon a “claim for damages (in the form of attorney’s fees and costs),” because the matter has been referred to arbitration, and the arbitrator has “the exclusive authority to award any fees and costs” under ¶ 20.F of the Franchise Agreements. (Id. at 4.) Relatedly, the plaintiffs argue that the defendants’ motion is untimely, as it was filed after the court granted their motion to compel arbitration and administratively closed the case. (Id. at 6.) And finally, the plaintiffs object very generally that they “believe that the amount of fees and costs being claimed by Defendants in connection with a single motion (without even having to attend a hearing) is not even remotely reasonable,” and, therefore, that the court should conduct a hearing to determine reasonableness. (Id.)^[3]

A. Jurisdiction and Authority to Consider the Motion

The plaintiffs argue that, having referred this matter to arbitration, the court lacks jurisdiction to consider the Fee Motion. The court disagrees. First, as the defendants point out, the Federal Arbitration Act does not deprive the courts of jurisdiction over a case that the parties have agreed to arbitrate. See Hall Street Assocs., LLC v. Mattel Inc., 552 U.S. 576, 581 (2008) (“As for...