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De Lage Landen Financial Services, Inc. v. Miramax Film Corp.

March 16, 2009

DE LAGE LANDEN FINANCIAL SERVICES, INC.
v.
MIRAMAX FILM CORP.



The opinion of the court was delivered by: McLaughlin, J.

MEMORANDUM AND ORDER

De Lage Landen Financial Services, Inc. ("DLL"), sued Miramax Film Corp. ("Miramax") to recover on an alleged contract among itself, Miramax, and MWB Copy Products, Inc. ("MWB"). Miramax defended against DLL's claim by contending that it did not assent to the contract on which DLL sued. Miramax then brought a third-party complaint against MWB, alleging that MWB perpetrated a fraud on Miramax when MWB's Vice President of Sales, Robert Kaminsky, falsified contract documents that MWB sent to DLL. DLL then brought claims against MWB for fraud, breach of contract, and breach of warranty.

On September 23, 2008, the Court issued a Memorandum and Order in which it ruled on the various claims filed by the parties against one another. With respect to Miramax's claim of fraud against MWB, the Court found for Miramax. The Court then ordered that Miramax could submit a petition for attorneys' fees from MWB in connection with the litigation between DLL and Miramax. See De Lage Landen Fin. Servs. v. Miramax Film Corp. ["DLL"], No. 06-2319, 2008 WL 4348074, at *18 (E.D. Pa. Sept. 23, 2008). Miramax submitted its petition on October 8, 2008 (Docket No. 75). MWB filed an opposition on October 24, 2008 (Docket No. 79), and Miramax filed a reply brief on November 6, 2008 (Docket No. 89). In its opposition, MWB argues that the Court incorrectly decided that attorneys' fees are recoverable in this case, that attorneys' fees are not recoverable for the entirety of Miramax's litigation with DLL, i.e., for Miramax's counterclaim, and that the legal fees and costs claimed by Miramax are not reasonable.

The Court concludes that attorneys' fees are recoverable in this case for Miramax's litigation of both its defense to DLL's claims and its counterclaim against DLL. It further concludes that the fees requested by Miramax are reasonable. Miramax's petition is therefore granted.

I. Background

This case concerns a dispute over a contract for the rental of copy machines by Miramax. DLL, a financial services company, sued Miramax in June 2006, alleging that Miramax owed it additional payments for rental of the copiers at issue, and that Miramax had kept the copiers after the expiration of its lease. Miramax then sued MWB, the actual lessor of the copy machines, for fraud, breach of contract, and breach of warranty, based on the fact that Robert Kaminsky, MWB's Vice President of Sales, had falsified documents, leading both Miramax and DLL to sign payment and rental agreements that each believed the other had signed and executed. Miramax also brought a counterclaim against DLL for a declaratory judgment that its versions of the payment and rental agreements were binding.

The Court held a bench trial on the parties' claims on December 10-11, 2007. On September 23, 2008, the Court issued a Memorandum and Order, in which it found for Miramax on DLL's claims against Miramax and on Miramax's claims against MWB. The Court also found for Miramax on its counterclaim for declaratory judgment against DLL.*fn1

To establish the damages element of its fraud claim against MWB, Miramax argued that Kaminsky's misrepresentations caused DLL to mistakenly believe it had an enforceable agreement with Miramax, which, as a result, led to this lawsuit and to Miramax's attorneys' fees incurred in its defense of the suit. See DLL, 2008 WL 4348074, at *13. MWB responded that an action for fraud is not an established exception to the general rule that a litigant is responsible for its own attorneys' fees absent an agreement. The Court disagreed, finding that Pennsylvania recognizes § 914(2) of the Restatement (Second) of Torts. Id. at *14. That provision provides:

One who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover reasonable compensation for loss of time, attorney fees and other expenditures thereby suffered or incurred in the earlier action.

The Court also cited a 1955 case from the Third Circuit, in which the Court of Appeals decided that Pennsylvania courts would follow the rule set forth in § 914(2), and thus would recognize a claim for fraud damages in the amount of the attorneys' fees expended on a suit with a third party occasioned by the fraudulent party's actions. Id. (citing Seaboard Sur. Co. v. Permacrete Const. Corp., 221 F.2d 366, 371-72 (3d Cir. 1955)).*fn2

The Court noted, however, that such damages would not include the fees incurred in litigating the fraud claim itself. Id. at *14.

Having decided that Pennsylvania courts would permit recovery of attorneys' fees as an item of damages in these circumstances, the Court ordered that Miramax could submit to the Court a petition to recover from MWB the attorneys' fees that Miramax expended in defending against DLL's claims. Id. at *18.

As previously stated, Miramax submitted such a petition, which MWB has opposed.

II. Discussion

In its opposition to Miramax's petition, MWB argues that attorneys' fees are not recoverable in this case, or, at least, that fees are not recoverable for the entirety of the litigation between DLL and Miramax - specifically, for Miramax's counterclaim against DLL. MWB also argues that Miramax's claimed legal fees and costs are not reasonable. The Court will first address whether attorneys' fees are recoverable here, and if so, for which portions of the litigation between DLL and Miramax they are recoverable. The Court will then discuss whether Miramax's claimed fees are reasonable.

A. Whether and to What Extent Attorneys' Fees are Recoverable in This Case

MWB's opposition to Miramax's petition presents four main arguments against an award of attorneys' fees to Miramax:

(1) that the Court incorrectly decided that § 914(2) allows any recovery in this case; (2) that Miramax's fees were not incurred in a "separate, earlier action"; (3) that Miramax's legal fees were not incurred "only because of" Kaminsky's fraud; and (4) that Miramax cannot recover legal fees in connection with its counterclaim against DLL.*fn3 None of these ...


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