Opinion
Civil Action No. 98-2308-GTV.
May 18, 2000.
Jeffrey S. King, Leawood, KS, for JESSE FOLSOM, JULIE COLBERT and RICHARD COLBERT, plaintiffs/counter-defendants.
David R. Nachman, Brown Nacliman, P.C., Kansas City, MO, for HEARTLAND BANK, defendant/counter-claimant.
James A. Leonard, Shawnee, KS, for CW CLEVENGER, dba The Renovators, defendant.
MEMORANDUM AND ORDER
This case is before the court on plaintiffs' motion (Doc. 150) for an award of attorneys' fees and costs following settlement of the case. In the motion plaintiffs ask the court to determine statutory attorneys' fees and costs authorized by the Truth in Lending Act, 15 U.S.C. § 1601, et seq., and specifically 15 U.S.C. § 1640. There is also some suggestion that fees are sought under the Federal Home Owners' Loan Act, 12 U.S.C. § 1461, et seq., but plaintiffs do not pursue that claim in their supporting memorandum and reply to defendants' response, and it is subsumed in their claim under the Truth in Lending Act, as I later discuss in this order.
The case involves a dispute over renovation work performed on residential property owned by the plaintiffs Jesse Folsom, Julia Colbert, and Richard Colbert. The defendants are Heartland Bank, which financed the renovation work and held a prior mortgage on the property, and C. W. Clevenger, the contractor for the work. The case proceeded on plaintiffs' Third Amended Complaint which asserted the following claims: Count 1 alleged a breach of contract claim; Count 2 was a claim for intentional misrepresentation; Count 3 contained a negligence claim; Count 4 alleged a violation of the Kansas Consumer Protection Act; Count 5 was the Truth-in-Lending Act claim, based on the failure of the defendant Heartland Bank to provide a three-day notice of the right to rescission on a loan for renovation of the property; Count 6 was a claim for an accounting and a declaratory judgment; a civil conspiracy was alleged in Count 7; punitive damages were sought in Count 8; and Count 9 alleged a violation of 12 U.S.C. § 1464(q), the Home Owners' Loan Act.
After a mediation of the case was conducted before Magistrate Judge Waxse, a settlement agreement was reached by the parties. The terms of the settlement, which were made a part of the record in the case, included the payment of $9,000 by defendants to plaintiffs, mutual releases of all claims between the parties, the release by Heartland Bank of its mortgage on plaintiffs' real estate, and the release and satisfaction of a $42,000 promissory note given by plaintiffs to the bank. The settlement agreement left the issue of an award of attorneys' fees and costs to plaintiffs for later determination by the court, with the provision that recoverable costs were not to exceed $3,500.
In their motion, plaintiffs seek an award of attorneys' fees of $37,440, and the recovery of costs of $2,210. According to the plaintiffs' memorandum in support of their motion, attorneys' fees are sought only against the defendant Heartland Bank. In their memorandum in support of the motion, plaintiffs rely on the Truth in Lending Act, because, they contend, it was under that statute that they sought the relief of rescission in Counts 5 and 6 of their Third Amended Complaint. Defendant Heartland Bank addresses only plaintiffs' claims for attorneys' fees under the Truth in Lending Act. The court will consider the claim for fees under the Truth in Lending Act.
Defendant argues that the Truth in Lending Act does not apply, because this case falls within the exception set out at 15 U.S.C. § 1635(e). That subsection exempts residential mortgage transactions from the rescission remedies of the Act. A residential mortgage transaction is defined at 15 U.S.C. § 1602(w) as a mortgage created to finance the acquisition of a dwelling. This argument fails to persuade me because of the recitals contained in the parties' settlement agreement, which states that plaintiffs' claim in Count 5 involves "failure of Heartland Bank to provide a three (3) day notice of the right of recission (sic) on loan for renovation of property allegedly owned by plaintiffs at the time of loan closing. . . ." I conclude that the loan in question was not a residential mortgage transaction as defined in the Act, and was not exempted from the rescission remedies available — it was a loan for renovation, and not exempted from the Act.
The defendant Heartland Bank also claims that plaintiffs are unable to show that they were prevailing parties on their Truth-in-Lending Act claim. A party may be the prevailing party by virtue of a settlement. Ellis v. University of Kansas Medical Center, 163 F.3d 1186, 1194 (1999). Although Ellis involved a claim for attorneys' fees under 42 U.S.C. § 1988, the same principles apply here. As in Ellis, the settlement terminated the case, and the settlement agreement materially altered the legal relationship of the parties. In the Tenth Circuit a two-pronged "catalyst test" is used in § 1988 cases to determine if a party has prevailed. Foremaster v. City of St. George, 882 F.2d 1485, 1488 (10th Cir. 1989). If the same test is applied here (and it seems appropriate to do so), I conclude that plaintiffs were prevailing parties on their Truth-in-Lending Act claim; (1) their legal action brought about the relief they obtained, and (2) the settlement of the case was not a gratuitous response to a frivolous or groundless action.
The Truth in Lending Act applies, and plaintiffs were the prevailing parties on the claim. Attorneys' fees are recoverable with respect to this claim.
In an application for the allowance of attorneys' fees, the burden upon the applicant is to prove and establish the reasonableness of each hour and each dollar claimed. Jane L. v. Bangert, 61 F.3d 1505, 1510 (10th Cir. 1995). To meet that burden, lawyers must keep meticulous time records that "reveal . . . all hours for which compensation is requested and how those hours were allotted to specific tasks." Id., (quoting Ramos v. Lamm, 713 F.2d 546, 553 (10th Cir. 1983)). The hours actually expended should be winnowed down to the hours reasonably expended. Case v. Unified School District No. 233, Johnson County, Kansas, 157 F.3d 1243, 1250 (10th Cir. 1998). It is not necessary that the court identify and justify each disallowed hour. Id., (citing Mares v. Credit Bureau of Raton, 801 F.2d 1197, 1201 (10th Cir. 1986)). Instead, a general reduction of hours claimed may be utilized to achieve what the court determines to be a reasonable expenditure of time. Case, 157 F.3d 1243 at 1249; Mares, 801 F.2d at 1203 (approving the trial court's reduction of hours claimed by 77%).
Where records are imprecise, the court has discretion to reduce the number of compensable hours. Jane L., 61 F.3d 1505 at 1510, (approving 35% reduction of hours claimed as within trial court's discretion). In calculating lodestar hours, it is proper for the court to reduce claimed hours for work performed on unsuccessful claims. United Phosphorous, Ltd. v. Midland Fumigant, Inc., 205 F.3d 1219, 1234 (10th Cir. 2000) (approving a 35% reduction in requested hours prior to calculating the lodestar). In the case now before the court a percentage reduction is appropriate, because attorneys' fees are allowable on only a part of plaintiffs' claims, and the time records are imprecise.
"To determine a reasonable attorneys' fee, the district court must arrive at a `lodestar' figure by multiplying the hours plaintiffs' counsel reasonably spent on the litigation by a reasonable hourly rate." Jane L., 61 F.3d at 1509. The court will first determine an appropriate percentage reduction in order to find the number of hours plaintiffs' counsel reasonably spent. Although the court finds that virtually all of plaintiffs' recovery in this action is based on their Truth-in-Lending Act claim, the court is not able to find that all of the time spent by plaintiffs' counsel was related to that claim. In determining the hours reasonably spent, the court takes into account that plaintiffs asserted a number of claims in their Third Amended Complaint, but are entitled to be awarded their attorneys fees only on their Truth-in-Lending Act claim. It is not possible for the court to determine from the billing records submitted the precise number of hours attributable to the Truth-in-Lending Act claim. Consequently, the court will make an analysis of the claims of plaintiffs, and determine the percentage of the hours billed by counsel which may be assigned to that claim.
Count 1 of plaintiffs' Third Amended Complaint asserts a breach of contract claim against Heartland Bank and the defendants C. W. Clevenger and Chris Clevenger. Claim is made against the same defendants in Count 2 for intentional misrepresentation, and in Count 3 against Heartland only for negligent misrepresentation. Count 4 is a claim against Heartland for violations of the Kansas Consumer Protection Act, and Count 5 is plaintiffs' Truth-in-Lending Act claim against Heartland. Count 6 is a claim against Heartland for an accounting and for declaratory relief. Count 7 alleges a civil conspiracy against Heartland and the Clevengers. Count 8 is a claim for punitive damages against Heartland, and Count 9 alleges a violation of 12 U.S.C. § 1464(q). Three of plaintiffs' claims are made against both Heartland Bank and the Clevengers (Counts 1, 2, and 7), and the other six claims are solely against Heartland. Because the attorney work on the six counts exclusively against Heartland appears to be sufficiently related to the Truth-in-Lending Act claim, the court finds that it may fairly be said to be time spent on that claim. The court will group the claims against Heartland alone as one claim related to the Truth-in-Lending Act violation, and having done so, concludes that it represents one-fourth of the claims of plaintiffs in the case. The court considers the claims in Counts 1, 2, and 7 to be separate claims. Thus, the claimed hours by plaintiffs' counsel are reduced by 75% to arrive at a reasonable number of hours spent on the Truth-in-Lending Act claim.
The court has examined Exhibit 10 attached to plaintiffs' Reply to Heartland's Opposition to Attorney Fee Motion (Doc. 155), and notes that in a number of instances plaintiffs' counsel has reduced or eliminated certain hours claimed. The result is a claim for 249.6 hours. As previously stated, the court attributes one-fourth of those hours to the Truth-in-Lending Act claim, and the court finds that 62.4 hours were reasonably spent on the claim.
The hourly rate to be set must reflect the prevailing market rate in the relevant community. Jane L., 61 F.3d 1505 at 1510. The evidence before the court sustains a reasonable hourly rate of $150 for plaintiffs' counsel. The evidence consists of affidavits supporting a local market rate of $150 per hour. Heartland has not submitted evidence controverting that hourly rate for counsel. Applying the hourly rate of $150 to the 62.4 hours results in a lodestar figure of $9,360 for plaintiffs' counsel, and that lodestar amount will be allowed.
Plaintiffs also make a claim for the allowance of their costs in the action. Costs will be allowed to plaintiffs, not as a matter of course, but pursuant to Fed.R.Civ.P. 54(d)(1) as directed by the court. The same standards apply to the taxation of costs as are applied in awarding attorneys' fees. Case, 157 F.3d 1243 at 1249 (citing Jane L., 61 F.3d 1505 at 1517.) Applying the same analysis as that used in determining the reasonable attorneys' fee, the court will allow 25% of the costs. The total claim for costs is $2,214.54, and the court allows $533.64.
IT IS, THEREFORE, BY THE COURT ORDERED, that plaintiffs' motion (Doc. 150) for an award of attorneys' fees and costs is granted in part. Plaintiffs are awarded $9360.00 in attorneys' fees and $533.64 in costs against the defendant Heartland Bank.
The clerk is directed to mail copies of this order to counsel of record.
BY THE COURT IT IS SO ORDERED.
Dated at Kansas City, Kansas, May 18, 2000.