Virginia Lawyers Weekly VA Lawyers Weekly
Where the court previously found a company was liable for fees and costs incurred by two other companies in responding to a hepatitis A virus outbreak, the prevailing companies were awarded more than $1.4 million in attorneys’ fees.
Background
This action arises out of a 2016 outbreak of hepatitis A virus linked to consumption of frozen strawberries used as ingredients, and then served to customers, by various Tropical Smoothie Cafe, or TSC, LLC franchises. The contaminated strawberries were alleged to have been imported by VLM Foods Inc. VLM sold the strawberries to Patagonia Foods LLC, a wholesale seller of frozen produce based in California, who then relied on two companies to deliver the frozen strawberries to TSC franchises.
In the fall of 2016, over 200 claims were asserted against TSC and various TSC franchises to recover damages for bodily injuries sustained from consuming the contaminated strawberries. Although TSC tendered the claims to Patagonia and VLM and asked for defense and indemnity under the three aforementioned agreements, Patagonia and VLM refused. As a result, TSC’s insurance company, Sentinel Insurance Company Ltd, ultimately incurred $3,548,292.90 in attorney’s fees and litigation expenses to defend TSC against the claims and to settle three of the claims.
Sentinel initiated this civil action to recover that amount plus interest from Patagonia and VLM under the various hold harmless agreements. The court held that VLM and Patagonia were jointly and severally liable to Sentinel for the $3,548,292.90 that it incurred to defend TSC against the claims, plus prejudgment interest on that amount and the “reasonable attorney’s fees and costs Sentinel incurred in pursuing this litigation.” The court also found that VLM was contractually obligated to indemnify Patagonia for Patagonia’s liability to Sentinel.
Those opinions left the issues of the fees and costs that Sentinel and Patagonia incurred in this action and the calculation of prejudgment interest for further briefing. These issues are now before the court.
Sentinel’s motion
Sentinel argues that it is entitled to prejudgment interest at an annual rate of 10% on the $3,548,292.90 judgment, in addition to $1,243,564.00 in attorney’s fees and $326,568.28 in costs that it incurred to pursue this action. Because Sentinel paid for TSC’s defense of the claims (and the settlement of some claims) when defendants failed to fulfil their duty to defend, indemnify and hold TSC harmless against those claims, Sentinel will be awarded prejudgment interest from Nov. 1, 2019, the date Sentinel filed the complaint in this civil action, in which Sentinel put defendants on clear notice that it was seeking to be indemnified.
Sentinel also moves to recover the attorney’s fees and expenses it incurred in this action under the relevant agreements, which VLM concedes allow for the recovery of attorney’s fees incurred to enforce those agreements. Sentinel has the burden of proving that its requested fees were reasonable and necessary. Even a brief comparison with the Vienna Metro matrix shows that the rates Sentinel’s attorneys charged were extremely low. It is telling that VLM’s attorney’s fees expert, Bernard J. DiMuro, never opined that these rates were unreasonable. The court finds that all of plaintiff’s claimed hourly rates were reasonable.
VLM argues that Sentinel’s fees should be reduced by half, or $621,782.00, because half of Sentinel’s fees were for pursuing an unnecessary equitable subrogation claim. Sentinel correctly responds that it had to expend attorney time and costs on this issue because VLM argued that equitable subrogation requires proof that someone is “primarily liable.” Accordingly, the amount of time Sentinel’s attorneys spent on causation and equitable subrogation were not unreasonable.
VLM also challenges Sentinel’s purported lack of billing judgment. To the contrary, the billing entries for Sentinel’s attorneys appear specific and not block billed, with the vast majority of entries being for less than one-hour increments. But Sentinel’s efforts related to the application of Quebec law were unreasonable and its fees will be reduced by $17,045.20, for resulting award of $1,226,518.80.
Turning to expenses, VLM argues primarily that the experts were “entirely unnecessary.” The court reduce Sentinel’s proposed expenses by $34,090.39, meaning that Sentinel is entitled to expenses in the amount of $292,477.89.
Patagonia’s motion
Patagonia moves to recover $253,491.95 in attorney’s fees and expenses from VLM under the terms of the VLM-Patagonia agreement. Of that amount, Patagonia incurred $224,103.95 to defend itself in this action and $29,388.00 to defend itself in the underlying state litigation. VLM does not claim that the amount of fees and expenses is unreasonable; however, it opposes any award of fees because the VLM-Patagonia agreement does not allow Patagonia to recover fees and costs associated with enforcing that agreement. Patagonia concedes this point. The court thus reduces Patagonia’s fee request by $6,603.00. Accordingly, Patagonia will be awarded $246,888.95 in fees and costs.
Sentinel’s motion for fees and costs granted in part, denied in part. Patagonia’s motion for fees and costs granted in part, denied in part.
Sentinel Insurance Company Ltd. v. VLM Foods Inc., Case No. 1:19-cv-1395, Oct. 20, 2022. EDVA at Alexandria (Brinkema). VLW 022-3-479. 21 pp.
