Heyman Associates No. 5, L.P. et al. v. TRS (2013)

MEMORANDUM OF DECISION RE MOTION FOR AN AWARD OF ATTORNEYS FEES AND EXPENSES (268.00)

I. Background

This civil action was commenced in 2006 by the three members of BRS Realty Associates, LLC (BRS) seeking a declaratory judgment that certain restrictive covenants in a contract, sublease and deed, all made in 1996 and related to the sale of a hotel property in Stamford, Connecticut by BRS to a predecessor of the defendant FelCor TRS Guarantor, L.P. (FelCor) were enforceable until July 2011.   The plaintiffs, Heyman Associates No. 5, AIM Management, Corp. and TRJ II, were the members of BRS, and FelCor owned the hotel in 2006.   The plaintiffs also had interests in a neighboring Marriott hotel, and the restrictive covenants in question sought to prohibit the buyer of the hotel property, and any subsequent owner, from operating or permitting the operation of the property as an “upscale” hotel for a period of fifteen years.

After protracted litigation culminating in a trial in April 2012, and a written decision by this court on November 9, 2012, 55 Conn. L. Rptr. 109, 2012 WL 6118712 (2012 decision) sustaining the plaintiffs' claims that the restrictive covenants were valid, effective and enforceable to July 12, 2011 in accordance with their terms and finding a Notice of termination of the covenants filed on the Stamford Land Records in 2006 by FelCor, to the effect that the covenants did not exist or were unenforceable, was null and void.

In the fourth count of their amended complaint (Dkt Entry 178.00) the plaintiffs asserted a breach of contract claim entitling them to reasonable attorneys fees and expenses arising out of the buyer's breach of the restrictive covenants.   The plaintiffs have now moved for an award of attorneys fees and litigation expenses incurred in prosecuting their declaratory judgment action.   The basis for the fourth count and for this motion is found in what is known as the Sublease Assignment Agreement between Holiday Inn International (HII) and BRS executed in July 1996 whereby HII became the sublessee of property on which the hotel property was situated and covenanted not to operate the hotel as an “upscale hotel” for a period of fifteen years.   The Sublease Assignment Agreement stated:

[HII] agrees to and does hereby indemnify and hold [BRS] harmless hereunder from all claims, demands, losses, damage, expenses and costs including, but not limited to, reasonable attorneys fees and expenses arising out of or in connection with HII's failure, from and after delivery of this instrument, to observe, perform and discharge on time each and every one of the covenants, obligations and liabilities assumed by Assignee in this instrument and relating to, or accruing with respect to the period from and after, but not before the date hereof.1

Subsequently, BRS became owner of the ground lease for the hotel property, and per an agreement with HII, transferred the ground lease to HII in a written assignment which stated:

[HII] hereby indemnifies and agrees to defend, and hold [BRS] harmless from all claims, demands, liabilities, damages, loses or judgments, including the defense thereof, including attorneys fees and expenses, made against or suffered by [BRS] which relate to any obligation of HII accruing, to be performed or arising out of events occurring on or after the date hereof with respect of the Lease, the Sublease or the Property.

In their motion the plaintiffs contend that the actions of FelCor, the corporate successor to HII in recording on the Stamford Land Records a “Notice” of termination declaring the restrictive covenant to be “null” and “void” in May 2006, and marketing the hotel property by claiming it had “eliminated a use restriction” which limited the property from carrying the “most upscale” brand of hotels, was a violation of the restrictive covenant forcing the plaintiffs to begin their ultimately successful declaratory judgment action.

Plaintiffs' motion seeks $1,507,266.04 in reasonable attorneys fees and expenses incurred from November 2006 to date arising primarily from the expenditure of well over 4,000 hours of attorney time.   FelCor opposes the plaintiffs' motion, contending that, under the so-called “American Rule,” in the absence of any statutory or contractual provision allowing for such, there can be no recovery for litigation fees or expenses, and that the contract provisions relied by plaintiffs only call for indemnification for third-party claims, and no such claims exist or were asserted in this matter.²  FelCor also asserts that no right to indemnification has been triggered under the contract;  that plaintiffs lack standing to sue for fees and expenses because another entity paid the bills, and finally, the amount of recovery sought is unreasonable and unfair.

II. Discussion

A. Whether the Contract Provisions Authorize Recovery of Attorneys Fees from the Other Contracting Party

As the court has experienced throughout this case, the briefs and oral arguments of counsel on this issue have been exceptionally well done.   The question before the court is a close one, and the authorities and arguments that tend to support the parties' opposing positions have been well presented.

In Amoco Oil Company v. Liberty Auto and Electric Company, 262 Conn. 142 (2002) the Connecticut Supreme Court construed a provision providing for attorneys fees in a contract between Amoco and Liberty calling for Liberty to install an underground storage tank on Amoco's property.   When the tank leaked eight years later, Amoco sued Liberty for property remediation costs under the following contractual provision:

Liability and Indemnity:  ․ Contractor [Liberty] shall reimburse Company (Amoco) for, and indemnify Company and hold it harmless from and against any and all loss, costs (including reimbursement of all attorney fees and other costs of defense), damage, expense, claims (including claims of strict liability and for fault imposed by statutes, rules or regulations), suits and liability on account of any and all bodily injuries or death of any persons (including the employees of Company, Contractor, or its subcontractors) or damage to, or loss of destruction of any property (including without limitation, the work covered hereunder and the property of Contractor, and subcontractors and Company) arising directly or indirectly out of or in connection with the performance of this Contract ․

Id. 144–45.

The Connecticut Supreme Court was faced with the issue of whether the above language constituted a claim for indemnity governed by General Statutes § 52–598a (three-year statute of limitations from determination of the loss) or a breach of contract claim governed by General Statutes § 52–576(a) (six years from the breach).

With respect to indemnity, the Connecticut Supreme Court said:

The logic and rationale underlying our indemnity case law are based on the premise that an action for indemnification is one in which one party seeks reimbursement from another party for losses incurred in connection with the first party's liability to a third party.

* * *

Specifically, the concept of indemnity usually involves a indemnitor, A, and in indemnitee, B, who enters into a contract whereby A agrees to indemnify B for any money B becomes legally obligated to pay to a third party.

Id. 148–49.

The Amoco court held that Amoco's claim was not a claim for indemnification, but “rather a claim for Amoco's own damages.”  Id., 148.   “[A] loss in the context of indemnity is the payment that discharges a liability,” noting that

It is theoretically impossible for an indemnitee to have an actionable claim against the indemnitor until the indemnitee actually has paid something he is legally obligated to pay.

Id. 149–50.   The Connecticut Supreme Court held that under the language of the contract “Amoco effectively seeks enforcement of a specific contract provision that provides reimbursement for loss.   Thus, the claim that Amoco asserts ․ constitutes a breach of contract claim.”  Id. 152.

FelCor contends that the language of the Sublease Assignment Agreement and the Ground Lease Assignment have been “uniformly interpreted” in Connecticut as indemnity language to apply to third-party claims only.   Def. Memorandum, February 19, 2013 (Dkt. Entry 273.00) 9. In DeCarlo & Doll, Inc. v. Chester, Superior Court, judicial district of Middlesex, CV 07 5003058 (September 17, 2008, Holzberg, J.) (46 Conn. L. Rptr. 315), the court held that the indemnification provision at issue required an allegation in the complaint of third-party loss that was absent.   Judge Holzberg stated he was guided by the holding in Connecticut Resources Recovery Authority v. Murtha Cullina, LLP, Superior Court, judicial district of Waterbury, CV 02 0174569 (May 23, 2006, Eveleigh, J.) (41 Conn. L. Reptr. 349).   In the latter case, the Superior Court held that a contract provision using the words “Defend, indemnify and hold harmless” was not applicable to claims between the contracting parties because it was “a pure indemnification clause” designed to “protect one contracting party from third-party claims when the other contracting party is at fault.”

In support of their motion, the plaintiffs contend that other Connecticut cases are more in line with Amoco and interpret contractual language similar to that at issue in this case to allow one of the contracting parties to obtain attorneys fees from the other party who breached the contract.   In Dow–Westbrook v. Candlewood Equine Practice, 119 Conn. 703 (2010), the Appellate Court affirmed a trial court decision granting attorneys fees to the defendant for the plaintiff's breach of a release and hold harmless provision in a contract covering any liabilities, claims or damage arising from the boarding of, or medical care provided to, a horse.

In Total Recycling Services of Connecticut v. Connecticut Oil Recycling Services, LLC, Superior Court, judicial district of Middlesex, CV 06 50000447 (November 30, 2009, Jones, J.) the trial court, on remand from the Appellate Court, 114 Conn.App. 671 (2009), considered the defendant's application for attorneys fees based on provisions of agreements effecting a sale of plaintiffs' oil recycling business to the defendant.   One provision in the Asset Purchase Agreement said,

Seller [Total Recycling] agrees to indemnify and hold Buyer harmless from any costs or damages, including reasonable attorneys fees, resulting from any breach of any representation, warranty or covenant in this agreement.

A similarly worded provision in a non-compete agreement called for another plaintiff, Whitewing, to indemnify the defendant for any costs, damages and reasonable attorneys fees resulting from a breach of the non-compete provision.   At the first trial, the defendant's request for attorneys fees had been rejected, but on appeal the Appellate Court held that the plaintiffs,

have not challenged the jury's findings that Total Recycling breached the agreement to transfer its customer list and that Whitewing breached the agreement not to compete.   The attorneys fees clauses did not require the defendant to prove more than breach.

114 Conn.App. 671, 680–81.   On remand, Judge Jones held that the similarly worded provisions in the Asset Purchase Agreement (Good Will) and the Non–Compete Agreement had the “plain meaning” of obligating the plaintiffs to compensate the defendant for any costs plus reasonable attorneys fees resulting from plaintiffs' breaches.

The subsequent history of Total Recycling is worth noting.   While determining that defendant was entitled to attorney fees under the contractual provisions cited above, Judge Jones decided it was necessary for the defendant to identify which attorney fees were related to the defendant's prosecution of its breach of contract claims.   Apparently, the defendant felt it was impossible or impractical to allocate or apportion the fees in that manner, and the trial court eventually denied the fee application, and the denial was upheld by a divided Appellate Court.   129 Conn.App. 296 (2011).

On certification, the Connecticut Supreme Court recently had its say in the matter, and reversed the Appellate Court.   Total Recycling Services of Connecticut, Inc. v. Connecticut Oil Recycling Services LLC, 308 Conn. 312 (2013).   In that decision it was held that both the trial court and Appellate Court misapplied the law of the case doctrine;  id. 321–25;  determined that when some contractual provisions call for recovery of attorneys fees and others do not, a party is entitled to recover all reasonable fees “if apportionment is impracticable because the claims arise from a common nucleus and are intertwined”;  id., 333;  remanded the case to the trial court to “determine the appropriate award of attorneys fees”;  and held appellate attorneys fees are recoverable as attorneys fees in the absence of contractual language to the contrary.  Id., 337.

At no point in its Total Recycling opinion did the Connecticut Supreme Court discuss whether Judge Jones' interpretation of the contractual provisions at issue was correct or not;  nevertheless, the certified question before it was broad,³ and Judge Jones' interpretation was not questioned by the Connecticut Supreme Court, which ordered the trial court to determine an “appropriate award” of fees.

As part of its consideration of the contractual claim for attorneys fees the Connecticut Supreme Court said:

In reviewing a claim that attorneys fees are authorized by contract, we apply the well established principle that “[a] contract must be construed to effectuate the intent of the parties, which is determined from its language ․ interpreted in light of the situation of the parties and the circumstances connected with the transaction.”

Id. 327 (quoting FMC Group, Inc. v. Miller, 300 Conn. 774, 811 (2011).   In undertaking that task, this court notes at the outset that the actual language of the contractual provisions in the Sublease Assignment Agreement and Ground Lease Assignment that comprise the undertaking to pay attorneys fees make no specific reference that they are, as FelCor has urged, limited only to such instances where a third party has sued BRS. In both agreements HII (FelCor's predecessor in interest) agreed to indemnify and hold BRS harmless from all “losses, damages, expenses and costs including ․ reasonable attorneys fees and expenses arising out of HII's failure ․ to observe, perform and discharge on time each and every one of the covenants assumed by Assignee.”   One of the covenants was an undertaking not to permit anyone from operating an upscale hotel on the property for fifteen years, a covenant which this court has found was valid and enforceable in 2006.   Under these agreements, HII, and subsequently FelCor, obligated itself to pay to BRS all expenses and costs BRS incurred, including attorneys fees arising from FelCor's breach of the restrictive covenant.   This obligation is not limited to only costs and expenses incurred from demands, claims or suits by a third party against BRS. Indeed, it is hard to envision anybody but BRS being injured by a breach of this covenant because it was BRS' interest in protecting the position of the neighboring Marriott hotel that was the reason for including the covenant in the agreements.  2012 Decision, 11–12.   Therefore, the court finds that the language of the agreements, the circumstances of and acknowledged intent of the parties to protect BRS from injury that an upscale hotel near the Marriott might engender, supports the interpretation that the agreements formed an obligation to pay the attorneys fees and expenses incurred by BRS caused by the breach of the covenant.

Amoco Oil Co. v. Liberty Auto and Electric Co., supra, and Dow–Westbrook v. Candlewood Equine Practice, supra, provide appellate authority for interpreting contractual attorneys fees provisions as permitting claims by one contracting party against another contracting party that breached the contract.   That is precisely the situation here, and in the Total Recycling case where Judge Jones interpreted a provision very similar to the provision in this case to allow one contracting party to claim attorneys fees from the breaching party, a result which the Connecticut Supreme Court did not disturb.

The court is also not persuaded by the cases relied upon by FelCor.   In Connecticut Resource Recovery Authority v. Murtha Cullina, LLP, supra, then Judge Eveleigh parsed the language differences in the attorneys fee provisions in that case and those in Amoco Oil Co. v. Liberty Auto & Electric Co., supra, and emphasized, to a degree, that in the latter case the contract provision included the word “reimburse” whereas the provision in Connecticut Resource Recovery did not.   However, to this court the gist of the Connecticut Resource Recovery decision is the following paragraph:

It has been held that the phrase “defend, indemnify and hold harmless” is not applicable to claims between contracting parties, but rather is “intended to protect one contracting party against liability from third party claims when the other contracting part is at fault.”   Pinkert v. Oliveri, at 99–380 SLR, 2001 U.S.Dist. Lexis 8133, at 20–21, 2001 WL641737 (D.Del. May 24, 2001).   Indeed, it does not make sense that either consultant, herein, would agree to “protect, defend, indemnify and hold harmless CRRA” from a lawsuit brought by CRRA itself against the consultant.

The conclusory statement that a certain phrase “is not applicable to claims between contracting parties” is not persuasive authority to this court particularly when, as pointed out above, the subject phrase is not at all clear on that point.   Perhaps more importantly, contrary to Judge Eveleigh's description of the case that it “does not make sense” for the defendants to hold CRRA harmless, there was every reason in this case for BRS to seek and obtain protection from HII's and FelCor's breach of the covenant not to compete for the reasons mentioned above.

For all the reasons discussed above:  the lack of specific language in the subject contractual provisions limiting its scope to third-party claims, the factually established intent of BRS and HII to protect the former's interest in the nearby Marriott hotel, the greater force of the appellate and the trial court decisions holding that similar provisions authorize a party to obtain attorneys fees from another party's breach, all persuade this court to hold that the Sublease Assignment Agreement and Ground Lease Assignment authorize the plaintiffs to seek attorneys fees from FelCor.

B. Whether The Right to Attorneys Fees Was Triggered

FelCor contends that its obligations were limited to a covenant or liability of BRS that HII assumed, and that not a single such liability or covenant was “assumed.”   Def. Memo, Feb. 19, 2013 (Dkt Entry 273.00) 12–13.   This is an unconvincing and tortuous interpretation of the subject contracts.   It seeks to limit FelCor's responsibility to BRS' liabilities under the sublease, but that is not what the language states.   The Sublease Assignment Agreement requires FelCor to “observe, perform and discharge” the covenants and obligations “in this instrument.”   One of those covenants was a restriction on the owner (not BRS) to not market the hotel property as an upscale hotel.⁴

FelCor also argues it did not breach the restrictive covenant.   This contention is belied by the facts found by this court in its earlier decision, or facts that are undisputed.   Without any notice to the plaintiffs, FelCor, ten years after the restrictive covenants were executed, took the position that they were “null, void and of no further force or effect,” published this interpretation to the world in the Stamford Land Records, invited potential buyers of the property to consider putting any upscale hotel brands on the property and reached a tentative deal to sell the property to a buyer planning to remake it into a Hilton Hotel, one of the brands specifically described as “upscale” in the restrictive covenant.   When the plaintiffs learned all of this, they objected, contending that the use restriction had not been eliminated or terminated.   The objection was rejected by FelCor, and the plaintiffs commenced this lawsuit.  2012 Decision, 5–6.   FelCor consistently maintained and pleaded through the trial of this case, that the restrictive covenant no longer existed.   The court finds FelCor's stance to be either a breach or anticipatory breach of the restrictive covenant, falling squarely within the language cited by FelCor from Andy's Oil Service, Inc. v. Hobbs, 125 Conn.App. 708, 722 (2010), cert. denied, 300 Conn. 928 (2011) (to be liable for anticipatory breach one must communicate “a definite and unequivocal manifestation of intent not to render the promised performance”).

C. Fees Paid by HD Hotels

According to the plaintiffs' motion papers, the attorneys fees and expenses for the prosecution of this case were billed to Heyman Properties, formerly a doing business name, and now a Connecticut limited liability company, charged with overseeing the real estate assets of the family of the late Samuel J. Heymann.   The bills were paid by HD Hotel, LLC which owns the Stamford Marriott hotel.   HD Hotel is a plaintiff in this case and is owned by the three former member of BRS:  Heyman Associates (90%), TRJ II(5%) and AIM Management Corporation (5%).   FelCor contends that while HD Hotel is a plaintiff, it was not a party to the contracts which provide the basis for the pending claim for attorneys fees, and therefore has no standing to seek those fees.   That may be the case, but the uncontroverted evidence shows that the subject legal expenses were apportioned among Heyman Associates, TRJ II and AIM in proportion to their ownership interests, and this court has already held those three entities were the proper entities to enforce the covenant, and by logical extension to enforce the attorneys fee contractual provision.  2012 Decision, 10;  Mazzeo Affidavit.   FelCor's cursory argument is rejected for lack of legal merit and for elevating form over substance.

D. The Reasonableness of the Fees

In support of their motion, the plaintiffs submitted the affidavit of Attorney Marc Kurzman describing the nature and course of the litigation, the attorneys involved representing the plaintiffs, their hourly billing rates, time spent on the matter, and the monthly bills rendered.   This submission conforms with the dictates of the Connecticut Supreme Court that there must be a factual predicate for the fees sought, and that the fees seeker must present a statement of fees and a description of services.  Smith v. Snyder, 267 Conn. 456, 477, 479 (2004).   In addition to the affidavit of James Mazzeo of Heymann Properties, there was an affidavit by Attorney Edward O'Hanlon attesting to the experience and skills of the lead attorneys involved for the plaintiffs (Attorneys Kurzman and Nolin), and opining that their hourly rates were comparable to and usual for attorneys of similar experience in this area.   The breakdown of the fees and expenses sought are:

Legal fees and expenses of Sandak, Hennessy & Greco LLP:  $1,400,662.05;  (copying, filing fees, computer research, transcripts, overnight delivery, etc.);

Legal fees and expenses of Green & Levine, LLP:  $43,403.36;

Expert fees paid to Shipman & Goodwin, LLP:  $40,170.00;

Court Reporter fees paid directly by Plaintiffs:  $15,315.37;

Jury Consultant fees:  $5,250;

Trial management support fees:  $2,465.26.

In opposing the pending motion, FelCor did not initially contend either that the hourly rates of the plaintiffs' attorneys or the amount of time spent on the case was unreasonable.   FelCor does argue that the fees and expenses are unreasonable and unfair in certain specific instances which will be enumerated below.

The initial estimate of a reasonable attorneys fee is properly calculated by multiplying the number of hours reasonably expended on the litigation times a reasonable hourly rate ․ The courts may then adjust this lodestar calculation by other factors ․ For guidance in adjusting attorneys fees, Connecticut courts have adopted the twelve factors set forth in Johnson v. Georgia Highway Express, Inc., 488 F.2d 715, 717–19 (5th Cir.1974).

Conservation Commission of Fairfield v. Red II, 135 Conn.App. 765, 786 (2012)[quoting from Ernst v. Deere & Co., 92 Conn.App. 572, 575 (2005).

The plaintiffs are, of course, limited by the contractual provisions they rely on.   The Sublease Assignment Agreement provides for reasonable attorneys fees and expenses.   The Ground Lease Assignment does not contain the word reasonable, but that limitation should be inferred and the plaintiffs do not contend otherwise.

The court finds that the hourly rates charged by plaintiffs' attorney ranging from $195 per hour to $425 per hour were reasonable.⁵  See Conservation Commission of Fairfield v. Red II, supra, 135 Conn.App. 784 14 (affirming trial court approval of fee award based on hourly rates ranging from $190 to $575 per hour);  Parris v. Pappas, 844 F.Sup.2d 262, 267 (D.Conn.2012), approving $400 per hour rate for an experienced and skilled attorney who had practiced law since 1981;  the court noted that it was unlikely that the plaintiffs in that Federal Housing Act case would be willing to pay even a discounted hourly rate of $575 for a partner in a national law firm);  Emerald Investments LLC v. Porter Bridge Loan Co., 3:05–CV–1598 (JCH) June 25, 2007 (D.Conn.) 2007 WL 1834507 (approving fees for Attorney Nolin at $400 per hour, approving two partners working on case and noting that fees charged in Fairfield County are higher than the rest of Connecticut).

The court also finds that the number of attorney hours spent on behalf of plaintiffs, while high, are reasonable.   This was a difficult and complex case.   Considerable discovery and investigation were required;  various motions were pursued by FelCor necessitating research and briefing, and substantial briefing took place before and after trial evidencing in-depth research.   The court notes that plaintiffs' attorneys appropriately divided the work between partners and associates, with one associate charging more time on the matter (at a considerably lower hourly rate) than the total time billed by the partners Kurzman and Nolin.

In a “sur-reply” memorandum eventually dated April 5, 2013 (an earlier version was withdrawn), a submission not anticipated nor scheduled by the court, but which the court has considered, FelCor added two additional objections to the requested fees.   Docket Entry 280.00, Pp. 10–11.   First, it claims that plaintiffs should be denied reimbursement for fees incurred as a result of an allegedly untimely disclosure that two of the plaintiffs had undergone restructuring that “called into question their standing to pursue their claims.”  Id., 10.   Second, FelCor objects to fees and expenses incurred for unspecified “non-compliance with discovery obligations” including late disclosure of additional documents from the files of Richard Jabara of TRJ II. The court does not accept these objections.   Even if one accepts the argument, FelCor has not even attempted to identify what specific time entries or expenses contained in the legal bills are related to these events.   Further, the lack of standing argument made by FelCor was rejected and there is no showing that the Jabara documents caused any sort of prejudice or harm to FelCor.

E. FelCor's Objections

In its initial opposition FelCor asserted that plaintiffs are not entitled to recover attorneys fees and expenses incurred prior to April 6, 2010, the date when the plaintiffs amended their complaint to add the claim for fees and expenses.   No legal authority is cited to support this argument.   Rather FelCor contends that “[p]laintiffs' failure to provide such notice [of this claim beforehand] while racking up hundreds of thousands of dollars in fees and costs to be taxed to FelCor is fundamentally unfair,” because FelCor, with such notice, would have litigated the case in a fashion to keep fees to a minimum.   Def. Memo, Feb. 16, 2013, 17.   The court is unpersuaded.   First, the contractual documents on which the plaintiff's reply for fee reimbursement were in existence since 1996.   Second, the plaintiffs were making a breach of contract claim and the amendment, which related back, was well within the six-year statute of limitations.   Finally, the assertion that had it been on notice earlier, FelCor would have litigated the case less expensively is simply not supported by the record which indicates that the great majority of the plaintiffs' fees were engendered after the complaint was amended.

The court also rejects FelCor's objection to paying any fees and expenses related to litigation over the virtually identical restrictive covenant contained in the limited warranty deed HII received from BRS in 1996, because that deed did not contain any attorneys fee provision.   On this issue, the court is guided by the recent Connecticut Supreme Court decision in Total Recycling which held:

[W]hen certain claims provide for a party's recovery of contractual attorneys fees but others do not, a party is nevertheless entitled to a full recovery of reasonable attorneys fees if an apportionment is impracticable because the claims arise from a common factual nucleus and are intertwined.   On remand, the trial court, in applying this standard, must determine the appropriate award of attorneys fees to which the defendant is entitled.

Total Recycling, supra, 308 Conn. 333.   At trial in this case was the issue of the intent of the parties as expressed in the same restrictive covenants which appeared in both the leased and subleased portions of the property and the deeded portion.   The facts developed through discovery and trial as to the purposes and intent of these provisions were the same;  both provisions were developed and placed in the documents at the same time, by the same parties, and for the same reasons.   There is no evidence that there was any separate pre-trial or trial activity relating to the covenant in the limited warranty deed alone.   The court finds that the litigation activity with respect to both covenants were inextricably intertwined and apportionment is not only impracticable, but impossible.   Indeed, this court found after trial, in a single sentence, that both covenants were valid and enforceable.  2012 Decision, 26.

A third objection of FelCor is that plaintiffs are not entitled to fees and expenses after March 1, 2007 when FelCor sold the hotel property to another company, Davidson Hotel, which operated the hotel as a Holiday Inn in compliance with the restrictive covenant language.   Beyond that date, FelCor contends, it did not have the capacity or ability to violate the use restriction, and therefore, it was entirely unreasonable for the plaintiffs to continue to litigate their declaratory judgment action.

This argument is not convincing.   First, the restrictive covenant, which this court has found to have been valid and enforceable from 1996 to 2011 bound FelCor not to allow the property to be used for an upscale hotel, and in 2006 FelCor put on the land records a Notice that this restriction no longer had any force and effect.   There is no evidence that FelCor has ever removed that Notice, and Davidson might have chosen to operate the property as an upscale hotel on that representation.   Wisely, they did not, although they only committed to keep the Holiday Inn designation for the “near term.”   Gora Affidavit, Ex. C (Dkt Entry, 276.00).   Second, on March 22, 2007 FelCor filed counterclaims in this case seeking substantial money damages from plaintiffs for allegedly wrongfully asserting the continued validity of the use restriction.   Therefore, the central issue of the covenants' enforceability remained in this case at the instigation of both parties through trial, and the litigation expenses understandably continued.

F. Other Issues

Two other issues have arisen in one fashion or another during the briefing and argument of the attorneys fees claim.   The first might be construed as a hint of an argument presented by the plaintiffs based on a decision issued by the Honorable Edward Karazin denying FelCor's motion for summary judgment dismissing the fourth count made largely on the same grounds now asserted by FelCor.   That 2011 decision is mentioned in passing in the plaintiffs' initial memorandum;  Dkt. Entry 269.00;  and again in their reply brief which urged this court to “adhere” to Judge Karazin's prior ruling that the fourth count makes “a legally sufficient contract claim.”   Dkt. Entry 274.00.   FelCor did not mention Judge Karazin's decision in its initial opposition memorandum, but argued in its “Sur–Reply” that Judge Karazin had simply decided that plaintiffs had pleaded a claim for breach of contract without determining whether the contracts at issue applied to first-party claims.   Dkt. Entry 280.00, 3. In response, the plaintiffs asserted Judge Karazin's decision was based on a finding that the contract provisions supported a recovery of litigation expenses “(if they could be proved at trial).”   Dkt. Entry 277.00, 7–8.⁶

The plaintiffs' papers never explicitly made a “law of the case” argument.   Nevertheless, at oral argument of this matter, all parties debated the import of the denial of FelCor's summary judgment motion.   This court declines to determine whether the law of the case doctrine should affect the outcome of this proceeding because, while it is evident that summary judgment was denied, it is not crystal clear to what extent, if any, the scope of Judge Karazin's decision went beyond that simple fact.   In such event, the court is of the firm conviction that the important issue before it deserves (and hopefully has received) a thorough and appropriate analysis untrammeled by speculation as to what went before.

The second issue involves the claim for fees paid to the firm of Green & Levine primarily based on the work of Attorney Tamara Levine.   FelCor, in its original Sur–Reply objected to those fees in toto.   This submission was subsequently withdrawn and replaced with a substitute Sur–Reply that omits any mention of, or opposition to, the Green & Levine bills.   Therefore, the court will include the billed amounts from Green & Levine in the breach of contract damages.

Conclusion

The court determines the issues in favor of the plaintiffs, and finds for plaintiffs on the Fourth Count of the Amended Complaint.   Damages are awarded to the plaintiffs in the amount of $1,507,266.04.

TAGGART D. ADAMS

JUDGE TRIAL REFEREE

FOOTNOTES

FN1. The parties do not dispute that at one point in the above section there is a typographical error where “Assignor” rather than “Assignee” is used, and “Assignor” should be read as “Assignee.”.  FN1. The parties do not dispute that at one point in the above section there is a typographical error where “Assignor” rather than “Assignee” is used, and “Assignor” should be read as “Assignee.”

FN2. The parties agree that the relevant contract provisions are those quoted above from the Sublease Assignment Agreement and Ground Lease Assignment..  FN2. The parties agree that the relevant contract provisions are those quoted above from the Sublease Assignment Agreement and Ground Lease Assignment.

FN3. The question was:  “Did the Appellate Court improperly affirm the judgment of the trial court denying the defendant's motion for contractual attorneys fees.”  Id. 320..  FN3. The question was:  “Did the Appellate Court improperly affirm the judgment of the trial court denying the defendant's motion for contractual attorneys fees.”  Id. 320.

FN4. The Ground Lease Assignment does not even limit FelCor's responsibilities to covenants “assumed” and therefore provides no basis for FelCor's argument..  FN4. The Ground Lease Assignment does not even limit FelCor's responsibilities to covenants “assumed” and therefore provides no basis for FelCor's argument.

FN5. A long time real estate attorney for Heyman properties, Eugene Kagan, billed $450 per hour, but his time, primarily in 2006, was limited to under 15 hours, and was clearly accepted as reasonable by the plaintiffs.   The primary attorneys Marc Kurzman and Peter Nolin billed at a slight discount from their normal hourly rates..  FN5. A long time real estate attorney for Heyman properties, Eugene Kagan, billed $450 per hour, but his time, primarily in 2006, was limited to under 15 hours, and was clearly accepted as reasonable by the plaintiffs.   The primary attorneys Marc Kurzman and Peter Nolin billed at a slight discount from their normal hourly rates.

FN6. Judge Karazin's decision reads in full:  “The legal sufficiency of a claim should not be determined on how it is labeled.   This court reads the Fourth Count as a legally sufficient contract claim for the recovery of plaintiff's litigation expenses.”.  FN6. Judge Karazin's decision reads in full:  “The legal sufficiency of a claim should not be determined on how it is labeled.   This court reads the Fourth Count as a legally sufficient contract claim for the recovery of plaintiff's litigation expenses.”

Adams, Taggart D., J.T.R.