Monday, October 25, 2010

Deliverance II: Dueling Attorney's Fees

by Jennifer McDonald

Kwon v. Eaton, 2010 VT 73 (mem.).

The Court was asked in this appeal to determine: (1) whether a party may obtain an award of attorney’s fees where the party satisfies its burden of proof but does not obtain an award of net damages and (2) whether an award of attorney’s fees is reasonable if it is greater than the award of damages.

The underlying litigation arose out of a dispute over unpaid rent.  Tenants in this case were 6 college students who signed an agreement to rent Landlord’s house in Burlington.  The parties agreed that during the summer of 2007 Landlord would renovate the apartment during the college recess.  Prior to the start of the school semester, it became clear that renovations would not be complete in time.  Tenants were given the option to either: (1) stay at a nearby inn at Landlord’s expense or (2) stay at a friend’s house and receive $39 per day rebate from Landlord.  Under either option, Tenants were required to continue paying rent in full.

Over the course of the fall school semester, Landlord unsuccessfully attempted to collect unpaid rent from Tenants and eventually terminated the tenancy on December 15.  Landlord brought litigation to collect the unpaid rent and Tenants counterclaimed for (1) breach of lease; (2) breach of warranty of habitability; and (3) violation of Vermont’s Consumer Fraud Act.

At trial, the court directed a verdict for Landlord on the breach of lease claims for $26,286.50.  With respect to the Counterclaims, the jury found for the Tenants on all three claims and awarded $8,215 in damages—40% for the breach of lease and 60% on the breach of warranty claims.  No additional damages were awarded for the Consumer Fraud claim. 

Landlord moved for attorney’s fees pursuant to the lease agreement and Tenants moved for attorney’s fees under the Consumer Fraud Act and the statutory warranty of habitability (9 V.S.A. § 4458).  The trial court granted both motions but reduced Landlord’s award because discovery/motion work prior to the trial preparation “was not entirely productive, or useful to the court in moving the case to the conclusion.”  The court similarly awarded Tenants a reduced sum.  Landlord appealed.

On appeal, the Vermont Supreme Court rejected Landlord’s arguments that Tenants should not be able to recover attorney’s fees because they did not recover net damages, and thus could not have “prevailed.”  The Court rejected Landlord’s argument based on the plain language of the breach of warranty of habitability statute that provides for an award of attorney’s fees “if the landlord fails to comply with the landlord’s obligations of habitability.”  Since under the plain language there is no requirement that the Tenant receive overall net gain in the lawsuit or prevail, the Tenants are entitled to attorney’s fees.

Second, Landlord’s argument that the award of attorney’s fees was unreasonable because it was out of proportion to the damages award was also without merit.  The Court stated that an award of attorney’s fees “need not be directly ‘proportionate’ to the damage award . . .” but instead must be reasonable in light of the number of hours reasonably expended multiplied by a reasonable hourly rate.  Given that counsel for Tenants represented 6 out-of-state clients with inherently more difficult claims to prove than Landlord’s unpaid rent claim, the trial court’s award was reasonable.

Finally, the Court refused to alter the award of attorney’s fees to Landlord, since the Vermont Supreme Court will only alter a fee award upon a strong showing of abuse of discretion. 

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