The Substantially Prevailing Party

The Substantially Prevailing Party

Jan 1, 2011

Typically, contract language addressing fee shifting in the case of litigation provides that the non-prevailing party shall pay the substantially prevailing party’s reasonable fees and expenses. In Signature Flight Support Corporation v. Landow Aviation Limited Partnership, the court awarded Signature, as the substantially prevailing party, attorney’s fees and costs exceeding $1,000,000. What makes this case interesting is that the court declined to award Signature any substantive damages.

Since at least 2006, Signature and Landow were both in business at Washington Dulles Airport, where each provided certain airport concession services for noncommercial aviation businesses. In 2008, Signature sued on the theory that Landow had improperly expanded its services and invaded Signature’s business with the Metropolitan Washington Airports Authority in violation of certain obligations contained in their Ground Sublease Agreement. Signature brought a five count Complaint in U.S. District Court for the Eastern District of Virginia for declaratory judgment, breach of contract, intentional interference with contract, accounting and disgorgement, and permanent injunction. Landow filed a multi-count counterclaim. Signature claimed actual damages of $4,167,910.00

After a bench trial conducted in August and September 2009, the Honorable James C. Cacheris granted Signature’s request for declaratory judgment and injunction, but found for the defendant on the breach of contract and accounting claims, ruling that Signature had failed to prove its damages. The net effect of this decision was that Landow had to discontinue certain business practices but was not obligated to pay Signature any of the more than four million dollars it sought as damages.

Immediately post-trial, Signature filed its application for $1,570,616 in attorney’s fees and a bill of costs seeking $199,475.06 in costs expended. Ultimately, the court awarded the plaintiff attorney’s fees in the reduced amount of $1,130,843.60 and costs of $176,577.34, leaving plaintiff’s responsible to pay its attorney the total amount of $462,670.

While plaintiff’s counsel was entitled to claim recovery of its fees because they “successfully established the rights to which it was entitled to under the GSA,” Judge Cacheris was plainly concerned about the size of plaintiff’s lawyer’s bill, particularly in light of its failure to prove any damages. The governing provision called for an award of “reasonable” attorney’s fees and ultimately Cacheris found large parts of the bill to be unreasonable.

Judge Cacheris reviewed the reasonableness of the bill according to a number of standards, including the time and labor expended, the novelty and difficulty of the questions raised, the skills required to perform the services, the experience, reputation and ability of the attorney, the customary fees and the attorney’s expectations, time limitations, and the amount in controversy and results obtained.

In several particulars, the judge found the attorney’s work to be “unnecessary, redundant and inappropriate.” He also concluded that assigning senior counsel billing at between $475 and $605 per hour to perform “common tasks” demonstrated a “lack of billing judgment,” and reduced the fee claim accordingly.

While Landow didn’t have to pay a dime to its opponent, they had to pay their own attorney’s fees plus $1,307,4290.90 to their opponent’s counsel, which must have been a stinging defeat. By achieving success on the Injunction and Declaratory Judgment claim, Signature forced Landow to discontinue it offensive business practices. Although Signature recovered none of their more than $4,000,000 in claimed damages, they still had to pay their counsel the much reduced fee of $462,670.00 for this result.

While contractual fee shifting can greatly reduce costs to the winning party, it can lead to a disastrous result if you lose. However, most courts have taken the adjective “reasonable” very seriously, even when the gross numbers seem stratospheric.