Quaker Oats Company v. Burnett, Civ. A. No. 2050.

• Decision Date: 27 February 1968
• Docket Number: Civ. A. No. 2050.
• Citation: 289 F. Supp. 283
• Parties: The QUAKER OATS COMPANY, Plaintiff, v. L. T. BURNETT et al., Defendants.
• Court: U.S. District Court — Eastern District of Tennessee

289 F. Supp. 283

The QUAKER OATS COMPANY, Plaintiff, v. L. T. BURNETT et al., Defendants.

Civ. A. No. 2050.

United States District Court E. D. Tennessee, Northeastern Division.

February 27, 1968.

Kramer, Dye, Greenwood, Johnson & Rayson, Knoxville, Tenn., for plaintiff; R. Arnold Kramer and David E. Rogers, Knoxville, Tenn., of counsel.

Bacon & Dugger, Morristown, Tenn., for defendants; John F. Dugger, Morristown, Tenn., James W. Dorsey, Atlanta, Ga., of counsel.

MEMORANDUM OPINION AND ORDER

NEESE, District Judge.

The plaintiff Quaker sued the defendants Burnett on two certain promissory notes, including interest and attorneys' fees, and on an open account. Exclusive of interest and fees judgment was sought for $496,296.29.

The Court granted Quaker a partial summary judgment for $60,000 as the balance on one of those notes, viz., dated April 12, 1965, and directed a verdict for Quaker in the sum of $356,629.40 on the second note of September 25, 1965 and for $809.33 on the open account. A jury awarded Quaker judgment for $28,370.60 on the latter note and for $11,319.58 on the account. When the accrued interest was computed, the Court added to the overall judgment an aggregate of $69,992.06 for accrued interest and reserved the question of attorneys' fees.

Now confronting the Court is the perplexingly difficult duty of ascertaining what portion of the obviously substantial compensation due Quaker's attorneys herein should be borne by the defendants Burnett. The problem has been the subject of much cogitation by the Court since December 15, 1967, when the aforementioned judgment was entered.

Sometime in the spring¹ of 1965, Mr. L. T. Burnett, the chief operating partner of the defendants, noticed a marked decline in the production of eggs in the Burnetts' comparatively extensive integrated poultry producing and processing operations. This became a matter of overriding concern for the Burnetts and Quaker's representative, who was assigned to help them, for several months. Multiple investigations of the probable cause were made.

The size of the Burnetts' open account with Quaker reached large proportions at times, resulting in the aggregating of the amounts and their reduction to the form of promissory notes. Of the two notes coming to the Court's attention in this and companion litigation, one² contained the provision that: "* * * If this note is placed with an attorney for collection because of default, we * * * promise to pay a reasonable amount as attorneys' fees. * * *"

During the progress of the extensive and intensive investigations mentioned, an official of a Quaker feed plant advised one of the Messrs. Burnett that its laboratory technicians had reported, following analytical tests of samples of feed taken from the Burnetts' operations, that the feed contained a contaminating drug, nicarbazin. Mr. Burnett was counselled not to worry by this official, who expressed his opinion that Quaker was "* * * big enough to pay for any mistakes it makes. * * *"

The Burnetts, evidently relieved by this assurance, and confident that the necessary adjustments would follow, made the promissory note for $385,000, interest and attorneys' fees on default in payment, to Quaker and renewed same, with the same provisions, on September 25, 1965. The due date thereon was Christmas Day, 1965.

Subsequent to the initial laboratory test, Quaker's technicians were informed that the sample theretofore tested also included a nitrofuran. Nicarbazin and nitrofurans producing similar reactions in the test to which the samples were subjected initially, further testing by Quaker's technicians resulted in their amended report that there was no nicarbazin present in the samples.

The foregoing assurances given the Burnetts, the amended report of Quaker's laboratory technicians, and other tests and examinations inspired by the Burnetts, produced a heated controversy between the parties as to legal responsibility for the alleged contaminant's presence in breeder-hen feed concentrate sold by Quaker to the Burnetts. Apparently Quaker wanted the Burnetts to pay their notes and open account, and the Burnetts wanted a satisfactory adjustment of their claim against Quaker before paying.

Quaker instituted this action in this Court on November 18, 1966, but before process herein was served on the Burnetts, they had instituted an action in damages against Quaker in a state court.³ The Burnetts then made the basis of a counterclaim herein the same claim laid for their action in damages in the state court. The matter was not put to rest until the jury herein returned a verdict for Quaker in the companion case, civil action no. 2056, D.C., 289 F. Supp. 280, and a verdict for Quaker herein on those parts of the note of September 15, 1965 and the open account owing by the Burnetts to Quaker, which then remained in dispute between the parties.

It cannot be seriously doubted that from the viewpoints⁴ of the novelty and difficulty of the issues herein, the skill and eminence of counsel who opposed Quaker's counsel herein, the time⁵ required to be expended by counsel for Quaker, the probable loss of other employment while counsel were so engaged, the skill and standing of Quaker's counsel, the great value to Quaker of the interests it had involved directly and indirectly in the outcome of this litigation, the ability of the litigants involved to pay a fair fee, the results secured for Quaker by their counsel, the customary charges in this area for similar services, the inflated cost of living, and office overhead expenses, the attorneys for Quaker qualify eminently for substantial compensation for their professional services. Quaker was in dire need of the effective assistance of able counsel. It was confronted, not only with the prospect of losing the recoupment of substantial amounts from the Burnetts if the latter could establish a failure of consideration because of the alleged presence in the feed sold of the contaminant, and not only with the prospect of an adverse judgment for damages in six figures, more importantly, Quaker was in peril of the prospective loss of a valuable business reputation it could ill afford to surrender. As has been said in this District in a case involving the fixing of a fee in a Tort Claims action: "* * * This was a close case,⁶ and Quaker's counsel has handled it in an expert manner. * * *" Cf. Seeber v. United States, D.C.Tenn. (1964), 232 F. Supp. 68, 714.

"* * * In this state a fee * * * provided for in a note is a constitutent part of the obligation, enforceable by or in behalf of the holder of the note * * *." Jenkins et al. v. Harris et al., C.A.Tenn. (1935), 19 Tenn.App. 113, 12210, 83 S.W.2d 562, 567, certiorari denied (1935); Noone v. Fisher, D.C. Tenn. (1942), 45 F.Supp. 653. "* * * Generally speaking, a stipulation in an instrument to pay attorneys' fees is in the nature of an indemnity contract, and the promisee can recover thereunder only such sums as he * * * necessarily expended or became liable for on account of the default of the promisor. * * * What may be a reasonable fee in a particular case must depend to some degree on the facts thereof. 7 Am. Jur. 869, Bills and Notes § 142. * * *" Anno: Provision for Attorneys' Fees, 41 A.L.R.2d 677, 678 § 1.

Leading counsel for Quaker and two distinguished members of the bar of this Court testified that a fee of ten per cent (10%) of the...