The opinion of the court was delivered by: Schiller, J.
Presently before the Court is Defendants' Petition for Attorneys' Fees and Costs. For the reasons that follow, Defendants' petition is granted. Specifically, Defendants are awarded $44,870.45 in fees and $4289.39 in costs.
This petition for fees arises out of a breach of contract dispute between Anesthesia Services & Products, Inc. ("ASAP"), a distributor of medical devices and equipment, and Augustine Temperature Management, LLC and Hot Dog USA (collectively, "ATM"), manufacturers of medical devices. ASAP and ATM entered into a Distribution Agreement ("Agreement") on April 13, 2009, under which ASAP was to distribute warming blankets manufactured by ATM in designated territories. ASAP spent over $125,000 marketing the blankets, including hiring a new employee, but did not fulfill its obligations to sell a certain number of blankets under the Agreement's product quota. (Compl. ¶¶ 12-13.) ASAP then allegedly discovered that its sales employee was supplying information about potential sales directly to ATM and fired her on August 16, 2010. (Id. ¶¶ 11-16.)
On August 19, 2010, ATM attempted to terminate the Agreement based on ASAP's failure to achieve the agreed-upon products quota. (Id. Ex. B [Termination Letter].) On August 31, 2010, ASAP responded, stating that the attempted termination did not comply with the terms of the Agreement and so was ineffective, and additionally claiming that ATM had violated the Agreement through its relationship with ASAP's sales employee. (Id. Ex. C [Aug. 31, 2010 Letter].)
On September 28, 2010, ATM brought an arbitration action against ASAP alleging breach of contract; ASAP counterclaimed for breach of contract. (Id. Ex. D [Demand for Arb.].) However, as of March 31, 2011, ATM had voluntarily discontinued the arbitration to avoid paying arbitration fees, allowing ASAP to pursue its claim in federal court. (Id. Ex. F [Mar. 31, 2011 Email].)
ASAP filed a Complaint against ATM for breach of contract on May 10, 2011, alleging that ATM had wrongfully worked with ASAP's employee and terminated the Agreement. (Id. ¶ 21.) ATM counterclaimed for breach of contract and conversion. (Defs.' Joint Answer, Affirmative Defenses and Countercls. at 8-9.) It alleged that ASAP breached the Agreement by failing to meet the products quota, make timely payments for ATM products, or return products in ASAP's possession to ATM. (Id. at 6-8.) ATM alleged in its conversion claim that ASAP sold to customers demonstration units provided to ASAP for temporary use without charge. (Id.) A jury ultimately found for ATM on both ASAP's claim and ATM's counterclaims, and awarded ATM a total of $18,619.99 on its counterclaims.
Throughout the litigation, ATM was represented by its General Counsel, J. Randall Benham, as well as Andrew S. Gallinaro, a seventh-year associate at Conrad O'Brien, as local counsel. (Decl. J. Randall Benham ¶¶ 2, 6.) On June 13, 2012, ATM filed a petition for attorneys' fees seeking a total of $136,322.39 in fees and costs. (Pet. of Defs. for Att'ys' Fees and Costs at 8.) ASAP filed a response on June 27, 2012, in which it argued that ATM should not recover for the work done by either Benham or Gallinaro. (Pl.'s Answer to Pet. of Defs. for Att'ys' Fees and Costs.)
While each party to a litigation must generally bear its own attorneys' fees, parties may contract to permit recovery of fees. See Kallok v. Medtronic, Inc., 573 N.W.2d 356, 363 (Minn. 1998). The Agreement provides, "The prevailing party shall be entitled to collect from the losing party reasonable costs and expenses (including, but not limited to, its court costs, litigation expenses, attorneys' fees and costs of collection of payments due hereunder) in connection with enforcing its rights under this Agreement." (Pet. of Defs. for Att'ys' Fees and Costs Ex. A [Distribution Agreement] ¶ 18.3.) ASAP admits that ATM is the "prevailing party" within the meaning of the Agreement. (Pl.'s Answer to Pet. of Defs. for Att'ys' Fees and Costs ¶ 8.) The parties further agree that Minnesota law governs the Agreement. (Distribution Agreement ¶ 17.211; Pet. of Defs. for Att'ys' Fees and Costs ¶ 8 n.1; Pl.'s Answer to Pet. of Defs. for Att'ys' Fees and Costs ¶ 8.)
ATM seeks $113,975 in fees for the work done on this case by Benham and $3485.01 in costs. (Pet. of Defs. for Att'ys' Fees and Costs ¶¶ 23, 28.) ATM also requests $20,948.50 in attorneys' fees for Gallinaro's time,*fn1 as well as $804.38 in costs. (Id. ¶¶ 26-27; Reply Mem. in Further Supp. of Pet. for Att'ys' Fees and Costs at 7.) ASAP counters that ATM should recover nothing for the work done by Benham because he was ATM's in-house counsel. ASAP also challenges the validity of Benham's billing record because it was not created contemporaneously with the work he did. ASAP further argues that, at a minimum, it should not have to pay for the 55.5 hours spent by Benham pursuing the arbitration that ATM later abandoned. ASAP additionally rejects payment of Gallinaro's fees because it cannot verify whether Gallinaro's work was duplicative of Benham's, given the deficiency in Benham's billing record; ASAP also objects to Gallinaro's billing rate.
A. Attorneys' Fees for Benham
1. Availability of fees for in-house counsel under the contract ASAP's contention that ATM cannot recover fees for the work of its in-house counsel relies on State ex rel. Head v. Savage, a Minnesota Supreme Court case interpreting a state statute that provides for the recovery of "reasonable costs and expenses including fees of counsel" incurred contesting an eminent domain action. 255 N.W.2d 32, 37 (Minn. 1977) (quoting Minn. Stat. § 117.16 (1969)). The court disallowed recovery for the time spent by a landowner's in-house counsel on the case because the party "did not incur any out-of-pocket expense beyond its lawyer's regularly paid salary." Id. at 39. The court based its denial of fees for in-house counsel on its holding that "the 'reasonable costs and expenses including fees of counsel' recoverable under Minn. Stat. § 117.16, include actual cash outlays for costs and expenses incurred by reason of the condemnation proceeding and the taking of the property." Id. at 38.
ASAP argues that under Savage, "costs and expenses" include only out-of-pocket expenditures, and that this interpretation must apply to the instant agreement, which similarly provides for recovery of "costs and expenses (including . . . attorneys' fees)." Yet the Minnesota Supreme Court's interpretation of a state statute governing attorneys' fees for eminent domain actions does not control the meaning of a contractual agreement to award attorneys' fees. In fact, by stating that the "'reasonable costs and expenses including fees of counsel' recoverable under Minn. Stat. § 117.16, include actual cash outlays," the court made explicit that its interpretation of this phrase applied only to the eminent domain statute directly implicated by the case. See id. at 38 ...