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Landlord awarded more than $1.2 million in fees

house-keys-rent-home-landlordA case that started as a routine action for unpaid rent, then turned into one of the Fairfax circuit court’s “most heavily litigated matters for the past two years,” has reached a punctuation point.

After finding for the landlord in the case in January and awarding more than $2 million in damages, Fairfax Circuit Judge David A. Oblon has ruled the landlord in the case should get more than $1.2 million in attorneys’ fees.

The case is Ebadom VA LLC v. Lee (VLW 020-8-029).

Oblon noted that the matter started as a simple unlawful detainer action in General District Court, then exploded into three lawsuits for breach of contract and various business torts, including fraud.

To handle the attorneys’ fee question, Oblon looked to the attorneys’ fee provision of the lease and the arguments made by the tenants.

The clause in the lease is “a vanilla attorney fees provision that permits a landlord to seek reimbursement of fees and costs should a tenant default or should the landlord need to file suit against the tenant,” Oblon said.

The tenants sought to use a new significant ruling on attorneys’ fees from one of Oblon’s Fairfax colleagues, Judge David Bernhard.

In McIntosh v. Flint Hill School, Bernhard struck an attorneys’ fee provision that required parents at a school to pay the school’s attorneys’ fees in litigation, regardless of who won the case.

The tenants in Oblon’s case sought to claim the fees provision in the lease was unconscionable because it was not limited to the landlord’s prevailing. They also argued the lease was an adhesion contract, similar to the school contract, and that there was an imbalance in sophistication of the parties.

Oblon addressed each argument. He noted that the tenants in this case were the offspring of the operator of a large restaurant business in South Korea “boasting 200 locations.” With so many restaurants and the resources of a major company, “they are far removed from the comparatively unsophisticated private school parents” in McIntosh.

“In many ways, Tenants were the more sophisticated parties” in this transaction, Oblon wrote.

The judge observed that this was no adhesion contract. The tenants negotiated significant changes to the contract before it was signed.

And the attorneys’ fee provision entitles the landlord only to “reasonable” fees. It does not give fees if the landlord sues and loses, like the school contract.

“Had Landlord sued and lost, it would have a hard time persuading a court its fees were reasonable under the ‘results obtained’ consideration prong” of Chawla v. BurgerBusters Inc, 255 Va. 616 (1998), a leading high court case on attorneys’ fees.

There is no mutuality clause in the lease, providing for an award of fees to the tenant, but  that fact is due to contract negotiations, Oblon wrote. The tenant “simply chose not to negotiate a mutuality component” in the lease.

Oblon wrote that there is a parallel federal lawsuit between the parties about the same dispute, and that he would award fees only for the state action.

And he included fees for the landlord’s defense of claims the tenants brought against it, including breach of contract, fraud and statutory business conspiracy.

While some of these claims may be outside the lease, such as a fraud allegation, Oblon said that the landlord “could not enforce its Lease without first defending Tenants’ wrong claims of fraud.”

Oblon fixed the attorneys’ fee award at $1,233,070, and he indicated he would enter a final order on May 8.

The landlord was represented by a team of three lawyers led by Lauren P. McLaughlin at Smith, Currie & Hancock in Tysons; the tenants’ counsel was four lawyers from Greenberg Traurig in McLean, led by Thomas J. McKee.