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Route Triple Seven Ltd. Partnership v. Total Hockey, Inc.

United States District Court, E.D. Virginia, Alexandria Division

August 28, 2015

ROUTE TRIPLE SEVEN LIMITED PARTNERSHIP, Plaintiff,
v.
TOTAL HOCKEY, INC., Defendant

         As Corrected September 4, 2015.

Page 608

[Copyrighted Material Omitted]

Page 609

          For Route Triple Seven Limited Partnership, Plaintiff, Counter Defendant: Frank Douglas Ross, LEAD ATTORNEY, Odin, Feldman & Pittleman, PC, Reston, VA.

         For Total Hockey, Inc., a Missouri corporation, Defendant, Counter Claimant: John Edward Thomas, Jr., McGuireWoods LLP (McLean), McLean, VA; David L. Greenspan, McGuireWoods LLP, McLean, VA.

Page 610

         MEMORANDUM OPINION

         T. S. Ellis, III, United States District Judge.

         At issue post-judgment and appeal in this landlord-tenant case is the tenant's claim for attorney's fees pursuant to a lease provision that granted attorney's fees to the " substantially prevailing party" in any suit brought to enforce the lease. The landlord plaintiff brought such a suit, which, in the end, was resolved by the entry of summary judgment in favor of the defendant tenant on all of the landlord's claims and in favor of the landlord on the tenant's single counterclaim. The landlord's appeal failed as the Court of Appeals for the Fourth Circuit affirmed the grant of summary judgment by unpublished opinion. Route Triple Seven Limited P'ship v. Total Hockey Inc., 607 F. App'x. 299 (4th Cir. 2015) (unpublished). Now at bar is the tenant's fee claim, which the landlord disputes, raising the following questions:

(1) whether the tenant's fee claim is (i) barred by Rule 9(g), Fed. R. Civ. P., or (ii) permitted by Rule 54(c), Fed. R. Civ. P., where, as here, the tenant did not specifically request attorney's fees in its answer and counterclaim but merely relies on the contractual provision granting attorney's fees to a " substantially prevailing party; "
(2) whether the tenant is a " substantially prevailing party" within the meaning of the lease where, as here, the tenant prevailed on all of the landlord's claims, but not on the tenant's single counterclaim;
(3) whether the lease provision limiting the tenant's remedies to termination of the lease bars the tenant from recovering attorney's fees; and
(4) assuming the tenant is entitled to an award of reasonable attorney's fees, whether the fees claimed are reasonable in the circumstances.

         As the parties have fully briefed and argued these questions, this fee dispute is now ripe for disposition.

         I.

         The facts pertinent to the fee dispute may be succinctly summarized.[1] The landlord plaintiff is Route Triple Seven Limited Partnership, a Virginia limited partnership composed of eight partners, three of whom are Virginia attorneys. The tenant defendant is Total Hockey, Inc., a Missouri corporation engaged in the business of selling hockey equipment.

Page 611

          On February 26, 2013, defendant entered into a lease (" Lease" ) with plaintiff for commercial property located in Loudoun County " [f]or the operation of a typical Tenant store selling hockey and/or lacrosse equipment, jerseys and other related merchandise" and " for no other use or purpose whatsoever." Lease § 201(c). The Lease provided for a ten-year initial term with options for renewals thereafter. The Lease further provided that, for the first five years, the minimum rent would be $20 per square foot of the premises with certain additional rent payments specified in the Lease. A rent deposit of one month's minimum rent and tenant's pro rata share of additional rent was also required. Additionally, the Lease required defendant (1) to be qualified to do business in Virginia at the time of the Lease execution and (2) to deliver to plaintiff plans and specifications showing in reasonable detail any alterations that defendant proposed to make to the premises within 30 days of the Lease execution. The Lease also stated that the " Anticipated Delivery Date" of the premises was June 1, 2013. Lease § 201(e). In the event the Premises were not delivered within 15 days of June 1, 2013, defendant, as its sole remedy, was allowed to (i) open for business by September 1, 2013, and pay all minimum rent and all additional rent; (ii) open for business after September 1, 2013, pay only minimum rent through January 2014, and pay minimum rent and additional rent beginning on February 1, 2014; or (iii) open for business on February 1, 2014, and pay both minimum and additional rent.

         At the time the Lease was executed, the defendant was not qualified to do business in Virginia. Shortly thereafter, plaintiff advised defendant of this shortcoming, and defendant then promptly applied for and obtained a Certificate to transact business in Virginia. Defendant had also failed to pay the requisite rent deposit at the time of the Lease execution, but promptly paid this rent deposit within 30 days of the Lease execution. Additionally, defendant sent plaintiff plans and specifications within 30 days of the Lease execution as was required, but it did not send ductwork plans until nearly two months after the Lease execution. Notably, plaintiff did not seek to terminate the Lease on any of these grounds.

         Plaintiff failed to deliver the premises to defendant within fifteen days of June 1, 2013, as the Lease required. As a result, defendant, in accordance with the Lease, elected to open for business after September 1, 2013, and to pay only minimum rent through January 2014, but to begin paying minimum rent and the additional rent payments beginning in February 2014.

         On January 13, 2014, plaintiff filed the instant action, alleging three breaches of the Lease:

(1) that defendant was not qualified to do business in Virginia at the time the Lease was executed;
(2) that defendant did not submit a rent deposit upon the Lease execution; and
(3) that defendant did not deliver plans and specifications showing in reasonable detail any proposed alterations to the premises within 30 days of the Lease execution.

         Plaintiff's complaint further alleged that defendant's exercise of the Lease remedy in response to plaintiff's failure to deliver the premises on time violated Virginia public policy.

         On February 11, 2014, defendant filed an answer denying that any material breach occurred and a counterclaim further alleging that plaintiff failed to provide defendant with an Improvement Allowance as required by the Lease. Thereafter, on August 8, 2014, defendant moved for summary judgment on all of plaintiff's claims.

Page 612

That same day, plaintiff filed a cross motion seeking summary judgment on its breach-of-contract claims and also a motion seeking summary judgment on defendant's counterclaim. Following full briefing and oral argument, an Order issued on September 5, 2014, (i) granting defendant's motion for summary judgment on all of plaintiff's claims; (ii) denying plaintiff's cross-motion for summary judgment on plaintiff's claims; and (iii) granting plaintiff's motion for summary judgment on defendant's single counterclaim.

         Plaintiff's first two breach-of-contract claims--(i) defendant's failure to obtain a certificate of authority to transact business in Virginia and (ii) defendant's brief delay in paying the rent deposit--were not material because defendant promptly cured the breaches. And with respect to the third alleged breach-of-contract claim, no breach in fact occurred because the defendant timely delivered to defendant the requisite plans and specifications. Defendant was also awarded summary judgment on plaintiff's claim that defendant's exercise of its remedies under the Lease violated Virginia public policy, given that (i) the parties were sophisticated, (ii) plaintiff drafted the lease and hence the remedies clause, and (iii) the remedies clause in no way violated any Virginia public policy. In sum, defendant was granted summary judgment on all of plaintiff's claims and plaintiff's cross-motion for summary judgment on its claims was denied. Plaintiff's sole victory occurred with respect to defendant's single counterclaim; the Lease clearly barred defendant from seeking money damages for the breach of the Lease alleged in the counterclaim. An Order issued on September 5, 2014, memorializing these rulings. See Route Triple Seven Limited P 'ship v. Total Hockey, Inc., 1:14cv30 (Sept. 5, 2014) (Order) (Doc. 33).

         Promptly thereafter, defendant filed a motion for attorney's fees pursuant to the Lease provision entitling the " substantially prevailing party" to attorney's fees in any suit to enforce the Lease.[2] When plaintiff appealed the adverse summary judgment rulings, an order issued on October 9, 2014, deferring a ruling on defendant's motion pending final resolution of the appeal and giving defendant leave to renew its motion for attorney's fees, if necessary, within 14 days of the appeal's resolution. Route Triple Seven Limited P'ship, No. 1:14cv30 (Oct. 14, 2014) (Order) (Doc. 43). Defendant did not cross-appeal the summary judgment ruling on its counterclaim.

         On June 22, 2015, in an unpublished per curiam decision, the Fourth Circuit affirmed the entry of summary judgment in favor of defendant in all respects. Route Triple Seven Limited P'ship, 607 F. App'x. 299 (4th Cir. 2015). Defendant then promptly renewed its motion for attorney's fees.

         II.[3]

         Analysis of this fee claim dispute properly begins with plaintiff's threshold argument that because the attorney's fee

Page 613

claim was not specifically pled, Rule 9(g), Fed. R. Civ. P., now bars that claim. Defendant counters, arguing that Rule 9(g) does not apply because the motion for attorney's fees is not a claim for special damages, and therefore Rule 54, Fed. R. Civ. P., controls and permits defendant's fee claim. Although it may appear that Rule 9(g) and Rule 54 conflict, a close examination of both Rules reveals that no conflict exists, and in the circumstances at bar, Rule 54 controls and Rule 9(g) does not operate.

         Rule 9(g) states that " [i]f an item of special damage is claimed, it must be specifically pled." And it is true that the Fourth Circuit has held that " attorneys' fees are items of special damage for Rule 9(g) purposes." Atlantic Purchasers, Inc. v. Aircraft Sales, Inc., 705 F.2d 712, 716 n.4 (4th Cir. 1983). From these two propositions, plaintiff completes the syllogism, arguing that defendant's fee claim is barred because it was not specifically pled in defendant's answer. But there is a flaw in plaintiff's syllogism; defendant's claim for attorney's fees is not an item of special damages; it is not an element of any claim but simply a contract entitlement for a " substantially prevailing party." In these circumstances, Rule 9(g) does not apply. 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.

         Circuit authority is consistent with this result. As plaintiff points out, the Fourth Circuit, in Atlantic Purchasers, concluded that attorney's fees are special damages for purposes of Rule 9(g). Atlantic Purchasers, 705 F.2d at 716 n.4. Significantly, however, the court did so in the context of an action in which the prevailing party sought attorney's fees pursuant to the North Carolina ...


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