Developers Diversified of Tenn., Inc. v. Tokio Marine & Fire Ins. Co.

DEVELOPERS DIVERSIFIED OF TENNESSEE, INC., Plaintiff/Counter-Defendant, v. THE TOKIO MARINE & FIRE INSURANCE CO., Defendant/Counter-Plaintiff.

No. 3:04-cv-00015

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION

April 25, 2019

Magistrate Judge Frensley

MEMORANDUM

Pending before the Court is Plaintiff's motion for attorneys' fees and related nontaxable expenses (Docket Entry No. 411) and Defendant's motion to stay resolution of Plaintiff's motion for attorneys' fees and costs pending appeal (Docket Entry No. 417). For the reasons discussed below, the Court concludes that Plaintiff's bill of costs (Docket Entry No. 416) be granted, that Plaintiff's motion for attorneys' fees (Docket Entry No. 411) be granted in part and denied in part, and that Defendant's motion to stay resolution of Plaintiff's motion for attorneys' fees and costs pending appeal (Docket Entry No. 417) be denied as moot.

I. INTRODUCTION

On January 8, 2004, Plaintiff, Developers Diversified of Tennessee, Inc. n/k/a DDR CORP., ("DDR"), filed this declaratory judgment action under 28 U.S.C. § 1332, the federal diversity jurisdiction statute, against Defendant, Tokio Marine & Fire Insurance Company ("Tokio"), to determine Plaintiff's liability as landlord for property damage resulting from a partial roof collapse over retail space leased by Defendant's insured, Sports Authority ("SA"). As SA's insurer, Defendant covered SA's loss of merchandise in the amount of $1,926,888, and as SA's subrogee, Defendant sought reimbursement from Plaintiff. Plaintiff preemptively filed for declaratory relief, seeking a declaration that it was not liable to Defendant. Defendant thereafter filed a counterclaim, asserting that Plaintiff breached its lease agreement with SA and that Defendant suffered a loss of $2,056,073.

The Court¹ initially denied the parties' cross-motions for summary judgment on March 18, 2005. (Docket Entry Nos. 45 and 46; Docket Entry No. 250, at 3).² After further discovery, the parties again filed cross-motions for summary judgment. On May 20, 2008, the Court granted Plaintiff's motion for summary judgment and denied Defendant's motion for summary judgment. (Docket Entry Nos. 232 and 233). The Court held that actual notice and ability to cure a defect were required before liability could be imposed on Plaintiff. (Docket Entry No. 250, at 4). The Court did not reach the causation issue. Id. On February 7, 2011, the Sixth Circuit affirmed in part and reversed in part, and remanded. (Docket Entry No. 250). The Sixth Circuit concluded that actual notice was not required, but that liability could be imposed if Plaintiff had constructive notice of defects for which it bore responsibility under the lease. Id. at 18.

The parties again filed cross-motions for summary judgment that were denied by the Court, finding genuine issues of material fact as to causation. (Docket Entry Nos. 341 and 342). On January 12, 2016, the Court conducted a bench trial that concluded on January 21, 2016. (Docket Entry Nos. 370 and 371). On September 29, 2016, the Court found that Plaintiff was entitled to a declaratory judgment that it was not liable to Defendant for any damages caused by the partial roof collapse and that Plaintiff had no duty to pay Defendant for any subrogated damages. (Docket Entry Nos. 407 and 408). Defendant appealed. (Docket Entry No. 410). Pursuant to the terms of the lease, Plaintiff, as the prevailing party, filed its motion for attorney fees and bill of costs. (Docket Entry Nos. 411 and 416; Docket Entry No. 179-3, at 14). Thereafter, Defendant filed its motion to stay resolution of the motion for attorneys' fees and costs pending appeal. (Docket Entry No. 417).

On January 23, 2018, the Sixth Circuit affirmed the Court's Judgment (Docket Entry No. 421). The Sixth Circuit denied Defendant's petition for rehearing en banc, and issued its mandate on March 29, 2018. (Docket Entry No. 423). Plaintiff subsequently filed a supplemental memorandum (Docket Entry No. 429) in support of its initial motion for attorneys' fees, seeking attorneys' fees and related nontaxable expenses, following this Court's Judgment and Defendant's appeal. Defendant filed a response (Docket Entry No. 438) to Plaintiff's motion for attorneys' fees, to which Plaintiff filed a reply (Docket Entry No. 442). On October 3, 2018, the Court conducted a telephone conference. (Docket Entry No. 443). The Court declined to order any formal discovery or depositions of experts, but gave Plaintiff until November 1, 2018 to file any additional documentation or supplemental affidavits; Defendant until January 14, 2019 to respond; and Plaintiff until to January 28, 2019 to file a reply. (Docket Entry Nos. 443 and 444).

Plaintiff currently seeks attorneys' fees in the amount of $1,943,961.47 ($1,687,163.00 in initial attorneys' fees request, plus $187,903.68 to defend Defendant's second appeal, plus $68,894.79 incurred since March 2018³); costs in the amount of $936,014.72 ($922,784.72 in initial request for costs, plus $13,230.00 in expert costs incurred since March 2018); and a bill of costs in the amount of $24,904.80, all for a grand total of $2,904,880.99⁴ in fees and costs. (Docket Entry No. 451, at 2, 13). Plaintiff also requests post-judgment interest and an upward adjustment of attorneys' fees in an amount the Court deems reasonable and appropriate. (Docket Entry No. 429, at 12, 14).

In response (Docket Entry No. 438), Defendant contends that (1) because SA sought and received Chapter 11 bankruptcy protection, Plaintiff is not entitled to any recovery against SA and therefore cannot recover from Defendant, as SA's subrogee, because Plaintiff failed to protect its rights during the bankruptcy proceeding; (2) Plaintiff's attorneys' fees are excessive; (3) Plaintiff is not entitled to an upward adjustment because this action is not so rare and exceptional as to warrant and enhancement; (4) Plaintiff's counsel's law firm of Lewis Brisbois, Bisgaard & Smith, LLP ("LBBS") maintains a conflict of interest in this matter, and therefore, an award of attorneys' fees and expenses in its favor is unjust under the circumstances; (5) invoices show that Plaintiff's counsel invoiced Sedgwick Claims Management Services, Inc., and thus, Plaintiff fails to show that it actually incurred any attorneys' fees; and (6) Plaintiff's request for costs and expenses for courier and delivery charges, costs associated with travel, legal research costs, and expert witness fees are not recoverable under 28 USC § 1920 and Plaintiff's request for copy costs is excessive.

Plaintiff filed a reply (Docket Entry No. 442) refuting Defendant's contentions. Pursuant to the Court's Order (Docket Entry No. 44), Plaintiff filed a supplemental reply (Docket Entry No. 445), contending that the attorneys' fees are reasonable, as the hours expended were not excessive and the hourly rates are reasonable; that Defendant's rationales for why the fees were unreasonable or excessive are unsupported or incorrect; that Plaintiff is entitled to and upward adjustment of its fees; and that Plaintiff is entitled to post-judgment interest.

In its supplemental response (Docket Entry No. 447), Defendant contends that Plaintiff's attorneys' fees are unreasonable, citing excessive staffing and time entries, the disproportionality of fees to relief sought, and that the fees at the Bollinger and Lewis Brisbois law firms should be reduced by thirty-three percent to fifty-percent; Plaintiff's expert fee request is unreasonable; that Plaintiff is not entitled to an upward adjustment; and Plaintiff is not entitled to post-judgment interest. Plaintiff filed a final reply (Docket Entry No. 451), challenging Defendant's contentions.

II. LEGAL DISCUSSION

Under the "American Rule," "[e]ach litigant pays his own attorney's fees, win or lose, unless a statute or contract provides otherwise." Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 253 (2010); Green Party of Tennessee v. Hargett, 791 F.3d 684, 697 (6th Cir. 2015). Tennessee law governs this diversity action. First Am. Nat'l Bank v. Fidelity & Deposit Co. of Maryland, 5 F.3d 982, 984 (6th Cir. 2005). Tennessee follows the "American Rule" for awarding attorney's fees. John Kohl & Co. P.C. v. Dearborn & Ewing, 977 S.W.2d 528, 534 (Tenn. 1998). "In the context of contract interpretation, Tennessee allows an exception to the American rule only when a contract specifically or expressly provides for the recovery of attorney fees." Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303, 309 (Tenn. 2009) (emphasis in original). Here, the express terms in the lease allow the prevailing party to recover all reasonable attorneys' fees and costs incurred in enforcing the terms of the lease, stating:

43. ATTORNEYS' FEES AND COSTS. In any action or proceedings between Landlord and Tenant arising from or relating to the interpretation or enforcement of this Lease or any dispute between the parties (including without limitation, any mediation or arbitration and all appeals) or any action is brought to enforce the terms of this Lease (including, without limitation, the indemnity obligations hereunder), the prevailing party shall be entitled to recover all reasonable costs incurred, including, without limitation, reasonable attorneys' fees.

(Docket Entry No. 179-3, at 14). Plaintiff is clearly the prevailing party.

A. Bankruptcy of SA

Defendant contends that because SA sought and received Chapter 11 bankruptcy protection, Plaintiff was required "to either pursue its claim against [SA] in the Bankruptcy Court or seek relief from the Bankruptcy Court to pursue the present claim outside bankruptcy." (Docket Entry No. 438, at 3). Thus, Defendant contends that because Defendant "stands in SA's shoes" and Plaintiff failed to protect its rights in the bankruptcy court, Plaintiff is precluded from pursuing its attorneys' fee claim in this action. Id. at 3-4.

"'Subrogation is an...