EDVA Allows Recovery of Attorney’s Fees under a Contract Despite No Request in Pleadings

Judge T.S. Ellis, III, recently issued a useful primer on how to collect attorney’s fees per a contractual provision after successful litigation. Judge Ellis addressed a number of issues that often frustrate successful litigants attempting to mitigate the high cost of prevailing in court, and this guidance is a useful road map to federal practitioners.

In Route Triple Seven Ltd. Partnership v. Total Hockey, Inc., No. 1:14-cv-30, 2015 WL 5123302 (E.D. Va. Aug. 28, 2015), the landlord of a strip mall in Loudoun County brought suit for breach of a lease against a tenant corporation that sold hockey equipment in a retail store. The tenant counterclaimed for failure by the landlord to provide certain tenant improvement allowances. Judge Ellis granted summary judgment for the defendant on the landlord’s breach of lease claims, which constituted the most substantial claims in the litigation, and at the same time, granted summary judgment to the plaintiff on the tenant’s single counterclaim.

The lease between the parties had a provision that granted attorney’s fees to the “substantially prevailing party” in any suit brought to enforce the lease, and after the summary judgment rulings, the tenant filed a petition for attorney’s fees.

Judge Ellis first grappled with the question of whether the tenant could even claim attorney’s fees in the litigation because it had never expressly demanded attorney’s fees in its pleadings. The landlord argued that, under Fed. R. Civ. P. 9(g), any item of special damages must be specifically pled. The landlord then turned to Atlantic Purchasers, Inc. v. Aircraft Sales, Inc., 705 F.2d 712, 716 n. 4 (4th Cir. 1983), which held that a claim for attorney’s fees is a claim for special damages and triggers Rule 9(g). Thus, since the tenant never demanded attorney’s fees in its pleadings, the landlord argued, the tenant was out of luck.

Judge Ellis rejected this argument, holding that the tenant was still entitled to attorney’s fees even though it never claimed the fees in any pleading. Judge Ellis ruled that because the attorney’s fees claim was based upon a contract provision (as opposed to a statutory provision), the fees were not “special damages” that trigger Rule 9(g). Judge Ellis distinguished Atlantic Purchasers, Inc. by noting that in that case, the Fourth Circuit examined attorney’s fees that were awarded pursuant to a statute and not a contract. This was enough of a difference. As Judge Ellis said, “Put differently, attorney’s fees are special damages to which Rule 9(g) applies only when the substantive law requires that the prevailing party prove attorney’s fees as an element of damages; Rule 9(g) does not apply where, as here, attorney’s fees are sought as a recoverable cost pursuant to a contract.” (emphasis in original).

Judge Ellis allowed the attorney’s fees to be claimed as a recoverable cost under Fed. R. Civ. P. 54(d)(2)(A), which allows a successful litigant to make a motion for attorney’s fees. Judge Ellis was not moved by the landlord’s protestation that it was never on notice of the tenant’s claim, saying that the landlord was already on notice: “[W]hen attorney’s fees are sought as recoverable costs at the conclusion of a dispute pursuant to a contractual provision between the parties, notice by way of pleading is unnecessary because, as here, the contract itself provides notice.”

Judge Ellis also included a lengthy paragraph that focused on Fed. R. Civ. P. 54(c), which states that “every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if the party has not demanded such relief in his pleadings.” The judge said that allowing attorney’s fees in this case “comports” with the purpose of Rule 54(c), and the rule appears to be an alternate justification for the result in Judge Ellis’s opinion.

Judge Ellis next turned to the issue of whether the tenant qualified as the “substantially prevailing party.” Here, this seemed an easy decision for the judge, who first examined precedent from the Supreme Court of Virginia and then noted “that a substantially prevailing party need not succeed on every claim raised, but rather need only achieve significant success on a majority of issues in dispute.” Judge Ellis then went on to discuss the scorecard for the litigation:

Here, defendant is a substantially prevailing party because it won summary judgment on all three of plaintiffs breach-of-contract claims . . . These rulings . . . were the bulk of the matters in dispute. Although plaintiff won summary judgment on defendant’s counterclaim, this counterclaim was limited to one relatively small issue. Thus, there can be little doubt that defendant was awarded summary judgment on the vast majority of the significant issues in dispute.

Apparently having some fun with his opinion, Judge Ellis concluded, “[t]his result comports with the common sense intuition that a substantially prevailing party need not be a completely prevailing party. Indeed, to say the defendant did not substantially prevail in this dispute is to deny that the San Francisco Giants won the 2014 World Series because they won only four of the seven games.”

The useful guidance for federal practitioners does not end there in Judge Ellis’s opinion. In a subsequent blog post, we will examine the hourly rates approved by the judge, the judge’s criticism of the attorneys’ time entries, and what practitioners can learn from this opinion.