Planning Partners Int'l, LLC v. Qed, Inc.

• Decision Date: 01 July 2013
• Docket Number: Supreme Court Case No. 11SC961
• Citation: 304 P.3d 562
• Parties: PLANNING PARTNERS INTERNATIONAL, LLC, Petitioner v. QED, INC., Respondent.
• Court: Colorado Supreme Court

304 P.3d 562

PLANNING PARTNERS INTERNATIONAL, LLC, Petitioner

v.QED, INC., Respondent.

Supreme Court Case No. 11SC961

Supreme Court of Colorado.

July 1, 2013

Certiorari to the Colorado Court of Appeals Court of Appeals Case No. 10CA1848.

Attorneys for Petitioner: Messner & Reeves, LLC, Derek C. Blass, Denver, Colorado, Feldman Nagel, LLC, David W. Feeder, II, Denver, Colorado.

Attorneys for Respondent: Campbell Killin Brittan & Ray, LLC, William C. Brittan, Benjamin P. Parrott, Denver, Colorado.

En Banc

JUSTICE HOBBS delivered the Opinion of the Court.

¶ 1 We granted certiorari in Planning Partners International, LLC v. QED, Inc., ––– P.3d –––, No. 10CA1848, 2011 WL 5084925 (Colo.App. Oct. 27, 2011) (selected for official publication), to determine whether the court of appeals erred in concluding that, where reasonable attorney fees are provided for in a promissory note or contract, and the judgment based on that note or contract has been reduced by a counterclaim arising out of the transaction, the trial court must apportion attorney fees in proportion to the amount recovered on the note less the amount recovered on the counterclaim.¹ We conclude that, under these circumstances, the determination whether and how to apportion attorney fees is within the discretion of the trial court and we will overturn its determination only upon an abuse of that discretion. Accordingly, we reverse the judgment of the court of appeals.

I.

¶ 2 Planning Partners International (PPI) is a meeting planning company based in Colorado. Quality Electrical Distribution (QED) is an electrical supply company headquartered in Denver. In February of 2008, PPI and QED entered into a Letter of Agreement, in which PPI agreed to plan, manage, and coordinate all flight reservations for QED's upcoming incentive trip to Barcelona, Spain. PPI agreed to act as QED's agent and, in this capacity, negotiated and entered into a Standard Charter Agreement with Omni Air International, Inc. (Omni) to provide a chartered plane. The Standard Charter Agreement provided that QED would be notified of any cost increases in fuel at least thirty days before the scheduled departure date. It further stated that any such increasegreater than ten percent of the pre-existing charter price (here, equivalent to $63,893.70) would authorize QED to either accept the increase or terminate the trip without penalty.

¶ 3 On June 3, 2008, three days before departure, Omni notified PPI that fuel prices had risen significantly above the originally estimated charter price and that QED would be required to pay an additional $122,428.35. QED's representative informed PPI that he could not access these funds because QED's owner was already in Europe and unavailable. Because Omni demanded immediate payment, PPI offered to lend QED the amount of the surcharge, which QED accepted.

¶ 4 PPI and QED entered into a Loan Agreement & Promissory Note on June 4, 2008. The note provided that PPI would loan QED $122,428.35 for immediate payment to Omni, and QED would repay PPI that amount by June 18, 2008. The note contained the following provision with regard to attorney fees:

The Borrower [QED] agrees to pay on demand reasonable costs and expenses, if any, including reasonable attorneys' fees and expenses, in connection with the enforcement of this Loan Agreement & Promissory Note by PPI.

¶ 5 QED failed to repay the principal on the note. PPI brought suit on July 22, 2008, asserting claims for breach of the note, promissory estoppel, and unjust enrichment. QED counterclaimed, alleging that PPI had breached its duties as QED's agent under the Letter of Agreement based on PPI's failure to enforce, or its waiver of, the thirty-day notice provision in the Standard Charter Agreement. QED also filed a third-party complaint against Omni for breach of its duties under the Standard Charter Agreement. PPI later amended its complaint to add additional claims for fraud and breach of contract related to the PPI/QED Letter of Agreement.

¶ 6 The parties tried the case before a jury on February 22–25, 2010. At trial, the judge granted QED's motion for directed verdict on PPI's fraud claim, as well as PPI's motion for directed verdict on QED's negligence and breach of fiduciary duty counterclaims. On the remaining claims, the jury found in favor of PPI for breach of contract under the promissory note and Letter of Agreement and in favor of QED on its counterclaim for breach of the Letter of Agreement. The jury awarded $131,725.27 to PPI and $58,534.65 to QED. The trial court entered judgment consistent with these verdicts.

¶ 7 Following entry of judgment, both parties moved for an award of costs and attorney fees. The trial court concluded that PPI was the prevailing party pursuant to C.R.C.P. 54(d) and awarded PPI its reasonable fees and costs ² incurred in the litigation. On July 21, 2010, the court held a hearing to determine the amount of reasonable attorney fees to award to PPI. At the hearing, QED argued that Colorado law required the court to apportion PPI's fees among the various claims asserted in the case, particularly in light of the fact that the jury had awarded QED $58,534.65 on its counterclaim. Specifically, QED requested that the trial court limit PPI's attorney fees to those incurred in connection with its promissory note claim and exclude fees incurred defending against QED's counterclaims.

¶ 8 Upon hearing argument and considering the various submissions, exhibits, and expert testimony of the parties, the trial court rejected QED's contention that apportionment was mandatory. It concluded that apportionment is one of “a number of tools” available to trial courts to use in their discretion but it has never been explicitly required by Colorado law. The court declined to apportion fees in the manner requested by QED:

I think that the case was prosecuted in the fashion initially as a result of the promissory note that was in dispute, other issues and defenses, affirmative defenses, third-party claims, Omni International was in the case at one point, all of those matters complicated the case and all of the fees incurred by the plaintiffs in this case were incurred in the fashion of and related to collection on the promissory note. Yes, they may have been to some degree related and related to other claims, including claims that didn't go forward, and I've tried to accommodate for that fact, particularly the common law fraud claim; but at its core, the issues were sufficiently intertwined and inter-related such that [apportionment] of the fees in the fashion that [QED's expert] suggested and [QED's counsel] has requested is not a road that the Court is persuaded is appropriate.

¶ 9 The trial court did not, however, grant PPI the full $262,939 in fees it requested. Instead, it excluded $26,290.50 related to PPI's unsuccessful fraud claim, $88.50 earned by an individual the court found had no apparent reason to be involved in the litigation, and reduced the total amount by twenty percent, finding that, although PPI attorneys charged a reasonable hourly rate, the overall number of hours claimed was unreasonable. In sum, the court awarded PPI $188,748.80 in attorney fees.

¶ 10 The court of appeals reversed, concluding that the trial court erred as a matter of law in calculating PPI's fees. Noting the lack of governing authority on point, the court reviewed several other jurisdictions' approaches to fee apportionment and concluded that, where reasonable attorney fees are provided for in a promissory note or contract, and the judgment based on that note or contract has been reduced by a counterclaim arising out of the transaction, an apportionment of attorney fees is required in proportion to the amount recovered on the note less the amount recovered in the counterclaim. Accordingly, the court of appeals calculated PPI's fees by taking PPI's net recovery ($73,190.62) and dividing it by the total jury award to PPI ($131,725.27), resulting in a factor of 0.5556. It then multiplied the trial court's award of attorney fees ($188,748.80) by 0.5556, resulting in a total fee award of $104,868.83. PPI appeals this judgment.

II.

¶ 11 We conclude that, where a promissory note or contract provides for reasonable attorney fees, and the judgment based on the note or contract is reduced by a counterclaim arising out of the transaction, the determination whether and how to apportion fees rests within the discretion of the trial court and will be overturned only upon an abuse of that discretion.

A. Standard of Review

¶ 12 We typically review the reasonableness of attorney fee awards for abuse of discretion. Crandall v. City of Denver, 238 P.3d 659, 661 (Colo.2010); Haystack Ranch, LLC v. Fazzio, 997 P.2d 548, 556 (Colo.2000). A trial court abuses its discretion if its actions are manifestly arbitrary, unreasonable, or unfair. Colo. Nat'l Bank of Denver v.Friedman, 846 P.2d 159, 167 (Colo.1993). Accordingly, a trial court's determination of a reasonable attorney fee award will generally not be disturbed on review unless it is patently erroneous and unsupported by the evidence. Hartman v. Freedman, 197 Colo. 275, 281, 591 P.2d 1318, 1322 (1979); see alsoHaystack Ranch, 997 P.2d at 556 (“Appellate courts review an award of attorney fees and costs for an abuse of discretion, which occurs when ‘the findings and conclusions of the trial court are so manifestly against the weight of the evidence as to compel a contrary result.’ ” (citing In re Water Rights of Hines Highlands Ltd. P'ship, 929 P.2d 718, 728 (Colo.1996))); Am. Water Dev., Inc. v. City of Alamosa, 874 P.2d 352, 388 (Colo.1994) (“A determination of reasonableness is a question of fact for the trial court and ‘will not be disturbed on review unless it is patently erroneous and unsupported by the evidence.’ ” (citation omitted)). Further, the party requesting fees has the burden of proving that it is entitled to them. Anderson v. Pursell, 244 P.3d...