Highsteppin Prods., LLC v. Porter (In re Porter)

• Decision Date: 14 February 2014
• Docket Number: CASE NO. 10-13553,ADVERSARY NO. 10-1130,ADVESARY NO. 10-1131
• Parties: IN RE: GEORGE JOSEPH PORTER, JR. ARALEAN H. PORTER DEBTORS HIGHSTEPPIN PRODUCTIONS, LLC PLAINTIFF v. GEORGE JOSEPH PORTER, JR. ET AL DEFENDANTS ADMINISTRATIVELY CONSOLIDATED FOR TRIAL WITH HIGHSTEPPIN PRODUCTIONS, LLC PLAINTIFF v. BRIAN HERBERT STOLTZ, ET AL DEFENDANTS
• Court: U.S. Bankruptcy Court — Eastern District of Louisiana

IN RE: GEORGE JOSEPH PORTER, JR. ARALEAN H. PORTER DEBTORS

HIGHSTEPPIN PRODUCTIONS, LLC PLAINTIFF v. GEORGE JOSEPH PORTER, JR. ET AL DEFENDANTSADMINISTRATIVELY CONSOLIDATED FOR TRIAL WITH HIGHSTEPPIN PRODUCTIONS, LLC PLAINTIFF v. BRIAN HERBERT STOLTZ, ET AL DEFENDANTS

CASE NO. 10-13553

ADVERSARY NO. 10-1130

ADVESARY NO. 10-1131

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF LOUISIANA SECTION A

Dated: February 14, 2014

CHAPTER 7

REASONS FOR PARTIAL JUDGMENT

On August 16, 2013 an Opinion and Partial Judgment were entered on the above captioned adversarial proceeding granting in part and denying in part defendants' counterclaims and denying plaintiffs' demands. Specifically, George Porter, Jr. ("Porter"), Brian H. Stoltz ("Stoltz"), David Russell Batiste ("Batiste") and Porter, Batiste, Stolz, L.L.C. ("PBS") (collectively referred to as "Artists"), prevailed against HighSteppin Productions, L.L.C. ("HSP") and Philip Stepanian ("Stepanian"), with respect to their claims for breach of contract, violation of the MassachusettsUnfair Trade Practices Act ("MUTPA"), negligence, and breach of fiduciary duty. The Court denied the Artists' claims for copyright infringement as well as HSP's claims for breach of contract and damages. The Partial Judgment reserved for later determination the Artists' claim for attorneys fees and costs associated with its claims.

On January 17, 2014, the Court ordered the Artists to submit evidence of fees and costs for which it sought damages. Briefs on the issue were submitted on January 24, 2014, following which the matter was taken under advisement.

I. Entitlement to Attorneys' Fees

Under MUTPA, specifically, Chapter 93A, Section 11, a prevailing party is entitled to an award of reasonable attorneys' fees and costs.¹ Stepanian, the owner of HSP, argues that the Artists were not the prevailing party and, as such, are not entitled to attorneys' fees and costs, because they suffered "no actual injury" from a violation of MUTPA.² In support, Stepanian relies on the Court's finding that "[n]either HSP nor the Artists are owed sums under the PMA due to offsetting claims."³

In its Partial Judgment this Court awarded the following:

Because HSP's discharge of its duties was substantially below the standard of care owed and it failed to disclose conflicts of interest between itself or the Artists in the management of their affairs, the Court finds that its conduct constitutes a wilful violation of MUTPA and awards the injunctive relief set forth below . . . .

1. HSP must account for any and all proceeds received from the sale, license, or use of merchandise or music of the Artists after June 2012 and remit the gross proceeds to the Artists' Trustee within fourteen (14) days.

2. HSP must immediately notify all parties with whom it contracted or authorized any distribution, sale, license or use of the Artists' works of the termination of its nonexclusive license in same and the corresponding termination of the third party's rights. It must also instruct the addressees to contact Trustee should they possess any property or revenue belonging to Porter, Batiste Stoltz, or PBS. Copies of confirming correspondence should be provided to the Artists within fourteen (14) days of this ruling.

3. HSP must deliver all merchandise, CDs or other product purchased or produced during the term of the PMA to the Trustee. To the extent a the merchandise or music is in the hands of a third party, HSP must recover said property and deliver it to the Trustee.

4. This ruling may require the amendment of the Artists' tax returns for tax years 2006, 2007, 2008 or 2009. To the extent amendments are possible, the Artists will be reimbursed for all fees and costs associated with the preparation of amended tax returns, as well as any penalties or interest payable on any taxes owed due to late filing or change in the amounts originally due. To the extent an amendment generates a refund, HSP is responsible for the payment of interest on the refund generated by the amended return at the federal rate from the date of the original tax return's filing through the date of receipt of the refund. To the extent an amendment cannot be filed due to the intervention of time, HSP will be responsible for the additional refund amount which might otherwise be claimed with interest at the federal rate until paid.⁴

Chapter 93A, Section 11 of MUTPA provides, in pertinent part: "If the court finds in any action commenced hereunder, that there has been a violation . . . , the petitioner shall, in addition to other relief . . ., be awarded reasonable attorneys' fees and costs . . . ." (Emphasis added). The above provision "says nothing explicitly about proof of a loss of money or property as a condition to a right to recover attorneys' fees," but rather, provides that a prevailing party, i.e., one that has shown a violation of MUTPA, must be entitled to "other relief" in order to be eligible for attorneys' fees and costs. Jet Line Services, Inc. v. American Employers Insurance Co., 537 N.E.2d 107, 115 (Mass. 1989). The Artists established that HSP violated MUTPA and the Artists were awardedrelief. The Artists satisfied the above prerequisites and, as such, are entitled to attorneys' fees and costs.

II. Apportionment of Attorneys' Fees

It is well-established that when a party prevails on both its common law claim and its MUTPA claim and both claims arise from the same series of events or single chain of events, it is not necessary, for purposes of awarding attorneys' fees, to "cull out" the time spent on the non-MUTPA claim.⁵ Stepanian argues that there has been no showing that the Artists' common law breach of contract and breach of fiduciary duty claims were so related and interconnected to the MUTPA claims that apportionment is not warranted.⁶ A review of the Court's Opinion supports justsuch a finding.

The Court, in addressing the MUTPA issue, specifically observed that the same facts served to support both the breach of contract claim, breach of fiduciary duty and the MUTPA claim. "In addition to a claim in contract and fraud, HSP asserts the Artists violated MUTPA. The facts upon which HSP relies are the same ones as those giving rise to HSP's claims for breach of contract and fraud. The Court incorporates those facts as set forth above."⁷

Broadly speaking, the basis for the Artists' breach of contract claims was HSP's failure to properly account for the expenses incurred and the revenue received, in addition to its failure and to obtain the Artists' consent to expenses or charges.⁸ The Court specifically rejected the notion that this basis served only to support a breach of contract claim.

[HSP] argues that [its] failure to acquire the Artists' approval [of charges] constitutes a breach of contract, not fiduciary duty. The two (2) claims presented by the Artists are not mutually exclusive. A breach of duty may or may not be a breach of contract. Similarly, a breach of contract may or may not be a breach of duty. In this case, HSP breached the terms of its personal management contract by incurring charges without [the Artists'] approval and by failing to exercise proper judgment as to the expenses it incurred. It also breached an independent fiduciary duty to the Artists . . . by failing to account for revenues it collected and expenditures it paid on their behalf.⁹

Stepanian also argues that because the other claims and the defense of HSP's affirmative claims "were the major part of the case, while MUTPA claims were a minor part," the attorneys'fees devoted to MUTPA should be culled out.¹⁰ When Stepanian refers to "other claims," he is including not only the claims related to breach of contract, but also the claims related to copyright infringement. As noted earlier, the Artists concede that they are not entitled to attorneys' fees related to their claims of copyright infringement. However, Stepanian has failed to identify any specific entries of time spent in connection with the Artists' copyright claim. Based on this Courts' observation at trial, a reduction of 15% will be taken from the total hours billed to account for the time spent on the copyright claim.

Finally, and most importantly, a review of this Court's opinion reflects that the claims based upon a violation of MUTPA cannot properly be characterized as a "minor part" of the case. Indeed, both parties claimed that the other violated MUTPA. Much of the Court's lengthy opinion was devoted to setting forth the applicable provisions and parameters of MUTPA,¹¹ enumerating each parties' claims and explaining the basis of its finding that HSP violated MUTPA and the Artists did not,¹² as well as allocating the relief to which the prevailing party was entitled.¹³

Accordingly, the Court finds that because the Artists were injured and, correspondingly, were awarded relief, the Artists are entitled to be awarded reasonable attorneys' fees and costs. The Court also finds that because the breach of contract claims and MUTPA claims arise from a single chain of events, the efforts devoted to the breach of contract claims need not be culled out from the efforts expended on the MUTPA claims.

III. Basis of Attorneys' Fees

Stepanian suggests that the amount of damages recovered by the Artists should serve as the basis for ascertaining the amount of attorneys' fees to which the Artists are entitled. "Here, the claimed fees . . . dwarf the comparatively small benefit [the Artists] stand to receive . . . ."¹⁴ Thus, under Stepanian's reasoning, if a prevailing party was awarded only nominal relief, he would be entitled to only nominal attorneys' fees.

Stepanian's suggestion in this regard is specifically refuted by the pertinent provisions of MUTPA itself. Chapter 93A, Section 11 provides that a successful MUTPA litigant is entitled to attorneys' fees "irrespective of the amount in controversy . . . [emphasis added]." The amount recovered is not the fundamental factor in determining attorneys' fees. If such were ...