InterCon Constr. v. Team Indus. Servs.

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INTERCON CONSTRUCTION, INC., Plaintiff, v. TEAM INDUSTRIAL SERVICES, INC., Defendant.

No. 18-CV-2081-KEM

United States District Court, N.D. Iowa, Eastern Division

March 7, 2023

MEMORANDUM OPINION AND ORDER

KELLY K.E. MAHONEY, CHIEF UNITED STATES MAGISTRATE JUDGE

Plaintiff InterCon Construction, Inc., moves for an award of attorney's fees. Doc. 74. Defendant TEAM Industrial Services, Inc., resists. Doc. 75. I grant the motion in part and deny the motion in part (Doc. 74). I also sua sponte award pre- and postjudgment interest.

I. BACKGROUND

InterCon initiated this action in October 2018, raising claims of breach of contract and contractual indemnification. Doc. 1. On February 10, 2020, when the parties had completed written and expert discovery but not yet conducted any depositions TEAM offered to settle the lawsuit for $100,000. Docs. 13 74-1, 75-1. InterCon rejected this offer. Doc. 75-1. According to InterCon, at the time of the settlement offer, it had already incurred nearly $80,000 in attorney's fees. Doc. 74-1.

The case proceeded to a bench trial, in which InterCon requested $214,349.96 in damages. Doc. 66. I ultimately found for InterCon on the breach-of-contract claim and for TEAM on the contractual-indemnification claim. Doc. 72. I found that InterCon had not proven causation for its claimed damages beyond a one-week period in which it prepared for a third hot tap and line stop and that these costs (labor and materials) totaled $43,809.01. Id. Because early in the dispute, TEAM had agreed to forgo the $29,450 InterCon owed it under the contract, I awarded the difference between InterCon's costs and the contract price-$14,359.01. Id. Judgment entered on November 4, 2022. Doc. 73.

Under the subcontract between the parties, “the prevailing party” in a lawsuit “arising under” the subcontract is “entitled to recover reasonable attorney fees in addition to any other relief granted by the court. Ex. 5.^[1] InterCon now seeks to recover $273,000.50 in attorney's fees under this provision. Doc. 74. TEAM resists, arguing that InterCon forfeited attorney's fees by failing to plead them in its complaint; that TEAM, not InterCon, was the prevailing party; and that InterCon's requested fees are unreasonable, particularly in light of InterCon's net award for much less than demanded and TEAM's settlement offer. Doc. 75. InterCon did not file a reply.

II. ATTORNEY'S FEES

A. Pleading Standard

TEAM argues that InterCon failed to adequately plead its request for attorney's fees in its complaint. In connection with its breach-of-contract claim, InterCon alleged it “has suffered damages in an amount to be determined at trial.” Doc. 1. In connection with its contractual-indemnification claim, InterCon alleged TEAM must “indemnify InterCon from any claims arising out of the Subcontractor Agreement, including all of InterCon's costs and actual attorneys' fees InterCon expended in pursuing its claim and this action.” Id. InterCon concluded:

WHEREFORE, [InterCon] demands judgment on the foregoing claims as follows:

A. That judgment be entered in InterCon's favor and against TEAM for all the monetary damages suffered by InterCon; together with all further costs and expenses, including attorneys' fees by reason of TEAM's breach of the Subcontractor Agreement; and

B. That InterCon be granted such other relief as this Court deems just and appropriate.

Id. I disagree with TEAM that InterCon only requested attorney's fees in connection with its contractual-indemnification claim; InterCon's conclusion (applicable to both claims) also requested attorney's fees.

TEAM suggests that attorney's fees are “special damages” that must be pleaded with specificity. Here, InterCon's complaint does not cite the relevant contractual provision awarding fees to the prevailing party. Thus, TEAM suggests InterCon's pleading is inadequate.

Although state law governs the award of attorney's fees in a diversity case,^[2]whether InterCon properly pleaded attorney's fees in its complaint is a procedural matter subject to federal law.^[3] Federal Rule of Civil Procedure 9(g) provides that “[i]f an item of special damage is claimed, it must be specifically stated.” “‘Special damages' are those types of damages that, although resulting from the wrongful act, are not usually associated with the claim in question and must be plead [sic] in order to avoid unfair surprise to the defendant.”^[4] Contractual attorney's fees may be considered special damages when required to be proved at trial.^[5] This aligns with Federal Rule of Civil Procedure 54(d)(2)(A), which provides “[a] claim for attorney's fees . . . must be made by motion unless the substantive law requires those fees to be proved at trial as an element of damages.”^[6]

Since Rule 54 was amended in 1993, the vast majority of courts have held that it governs the award of attorney's fees under a contractual provision awarding fees to the “prevailing party”; these courts have held that such fees are not “special damages” under Rule 9(g) and do not need to be proved at trial.^[7] And indeed, an Iowa statute provides:

“When judgment is recovered upon a written contract containing an agreement to pay an attorney fee, the court shall allow and tax as part of the costs a reasonable attorney fee to be determined by the court.”^[8] Attorney's fees here were not a substantive element of damages to be proved at trial; thus, they did not need to be specifically pleaded under Rule 9(g). InterCon adequately raised the issue of attorney's fees by generally requesting attorney's fees in its complaint and by filing a post-judgment motion for attorney's fees under Rule 54.

The case relied on by TEAM, Nelson Cabinets v. Peiffer,^[9] is distinguishable. First, that case involved a statutory claim for attorney's fees, not a contractual claim for attorney's fees (which both Iowa and federal law indicate are to be determined after judgment along with other costs). Second, to the extent Nelson Cabinets noted federal courts “require[e] a claim for attorney fees to be specifically pleaded,” it relied on a discussion of federal law from 1990-before Rule 54's amendment.^[10]

Accordingly, I reject TEAM's argument that InterCon forfeited its request for attorney's fees based on pleading deficits.

B. Prevailing Party

TEAM argues that InterCon is not the prevailing party under the contract because although it prevailed on the breach-of-contract claim, TEAM prevailed on the contractual-indemnification claim. In NCJC, Inc. v. WMG, L.C., the case relied upon by TEAM, the Iowa Supreme Court held that the plaintiff was the prevailing party, even though the defendant had prevailed on one count (it was dismissed at summary judgment) and even though the jury had awarded the plaintiff far less than it demanded and less than the defendant's (rejected) settlement offer.^[11] The court noted that a “prevailing party” is “one ‘in whose favor a judgment is rendered, regardless of the amount of damages awarded.'”^[12] Accordingly, here, InterCon is the prevailing party under the contract.

C. Reasonableness of Fees

“When a written contract allows for the recovery of attorney's fees, the award must be for reasonable attorney's fees.”^[13] The party seeking fees must “prove both that the services were reasonably necessary and that the charges were reasonable in amount.”^[14] Factors to consider include:

the time necessarily spent, the nature and extent of the service, the amount involved, the difficulty of handling and importance of the issues, the responsibility assumed and results obtained, the standing and experience of the attorney in the profession, and the customary charges for similar service.^[15]

“The district court must look at the whole picture and, using independent judgment with the benefit of hindsight, decide on a total fee appropriate for handling the complete case.”^[16]

1. Hourly Rate

InterCon submitted its attorney billing sheet to support its request for fees. Doc. 74-1. InterCon seeks fees only for its main counsel, a large law firm based in Wisconsin; InterCon does not seek fees for local counsel. The firm billed InterCon $495 to $540 per hour for attorney William McCardell; $280 to $350 per hour for attorney Chase Horne; $185 to $215 per hour for paralegal Richard Hendricks; $230 per hour for the services of Kai Hovden; and $180 to $185 per hour for the services of Stephanie Meister. InterCon provided the court with no information on the attorneys' and paralegals' respective experience to differentiate their rates, and InterCon's submission does not even make clear Hovden's and Meister's position at the law firm. The court has gleaned from the law firm's website that McCardell is an experienced attorney specializing in construction law and named a “best lawyer” in 2007 (the website does not otherwise indicate how long McCardell has been practicing); that Horne is an equity partner with more than ten years' experience; that Hovden is an attorney; and that Meister is a paralegal.

TEAM challenges the reasonableness of the hourly rates requested by InterCon. TEAM argues that McCardell's and Horne's “escalating hourly rate[s] . . . are not customary in the state of Iowa, especially for the nature of this simple contractual dispute.” Doc. 75. InterCon did not file a reply providing the court with any additional information in response to this argument.

As an initial matter, it is commonplace for law firms (both in Iowa and around the country) to increase their hourly rates on an annual basis. When determining the reasonableness of a requested hourly rate, the court may consider the submitted evidence as well as its own expertise.^[17] By nature of the court's involvement in discovery disputes, which often involve an...