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$1.2M attorneys’ fee in landlord-tenant dispute

Virginia Lawyers Weekly//April 23, 2020

$1.2M attorneys’ fee in landlord-tenant dispute

Virginia Lawyers Weekly//April 23, 2020

A landlord is entitled to a $1.2 million attorneys’ fee after being awarded $2 million in damages arising from a dispute with its tenants.

The case arose from a commercial lease and assignment of the lease. All three parties contractually agreed to an attorneys’ fee award, as evidenced in the original lease and the assignment.

Not unconscionable

The tenants argue that the lease and assignment are adhesion contracts and that the attorneys’ fee provisions in each are unconscionable. The court disagrees.

The parties had equal bargaining power. “In many ways, Tenants were the more sophisticated parties.” Tenants also negotiated “significant changes to the contract,” undermining the claim that the contract was an adhesion contract.

The tenants cite McIntosh v. Flint Hill Sch., 100 Va. Cir. 32 (Fairfax 2018), where the contract provided that if a parent sued the school concerning the enrollment contract, the parent was responsible, win or lose, for the school’s attorneys’ fees. Unlike McIntosh, the contract in this case provides for payment of reasonable attorneys’ fees to the landlord.

“The fact the provision is not mutual in the context of this case is merely one of contract negotiations. Tenant simply chose not to negotiate a mutuality component to the attorney fees provision. Presumably, Tenant got some other benefit in the Lease it prized ex ante more than attorney fees mutuality.”

Other issues

There is a parallel federal court proceeding involving the parties in this case. The attorneys’ fee award is limited to the Virginia action. “[T]his Court will not award fees incurred to prosecute or defend the federal action. However, where legal work performed for Landlord in state court also incidentally benefitted Landlord’s case in federal court, it may recover fees for those services. …

“Tenant and Assignee claim that any Landlord fees are limited to those necessary to bring the enforcement action and not those to defend against Tenants’ claims. The Court disagrees.

“Landlord commenced litigation by filing an unlawful detainer lawsuit in the General District Court. Tenants filed a counterclaim. And by the time this matter went to trial in this Court, there were three consolidated lawsuits and a variety of claims by Tenant, such as breach of contract, fraud, and statutory business conspiracy.

“The Lease provides for reasonable attorney fees resulting from an event of default and/or Landlord filing suit against Tenant. … It specifically provides a list of nonexclusive examples of recoverable fees: (1) a suit for possession; (2) payment of rent; (3) damages; or (4) enforcement or interpretation of the provisions of the Lease. …

“In this case, Landlord incurred fees for all four examples. First and second, Landlord filed an unlawful detainer action in the General District Court, which commenced the litigation between the parties for possession and unpaid rent. Third, Landlord successfully sought significant damages to its building in the form of incomplete build-out work. Fourth, Landlord successfully litigated both enforcement and contract interpretation claims.

“Tenants set forth their own claims of breach of the Lease and breach of the Assignment, which required Landlord to ask the Court to ‘enforce or interpret’ the Lease. … Virginia law considers defense of a tenant’s breach of contract claim to constitute ‘enforcement’ of the agreement for the purposes of recovering fees.”

Reasonable fee

“Tenants … complain Landlord unreasonably ran up legal fees. However, the Court finds that this case featured two very well-represented sides exercising their prerogatives. Be it remembered that this seemingly routine landlord-tenant case for unpaid rent and dueling breach of contract actions in the General District Court devolved into three complex Circuit Court cases, with counterclaims, that became one of this Court’s most heavily litigated matters for the past two years until a jury, and then this Court, made findings.

“It spawned parallel proceedings in federal court. Certain issues were effectively litigated multiple times. Before this Court even decided a significant portion of the case and entered a final order, vows of appeal were made. One can charitably call this aggressive lawyering or uncharitably call it a war of attrition. In any event, both sides stood toe to toe, each expecting the other side to ultimately reimburse them their attorney fees when they prevailed. …

“Each side incurred over $1.3 million in attorney fees. Tellingly, total fees billed to Landlord were approximately 45 percent less than those billed to Tenants. … The Court cannot say Landlord alone brought the matter to this state of affairs. The Court finds the fees awarded the Landlord herein are reasonable in the face of its skilled opposition.”

Ebadom VA, LLC, et al. v. Lee, et al. Case No. CL-2018-386. April 6, 2020; Fairfax County Cir. Ct. (Oblon). Lauren P. McLaughlin, Joshua E. Holt, Raziye Andican, Thomas J. McKee Jr., Theresa A. Queen. Alexander X. Jackins for the parties. VLW 020-8-029, 7 pp.

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