Toshiba America Medical Systems, Inc. v. Valley Open MRI & Diagnostic Center Inc. , 674 F. App'x 130 ( 2016 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 15-4005
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TOSHIBA AMERICA MEDICAL SYSTEMS, INC.
v.
VALLEY OPEN MRI AND DIAGNOSTIC CENTER INC.
f/k/a Valley Open MRI and Diagnostic Center, P.C.;
JUAN D. GAIA, M.D., Individually and d/b/a I &G Realty Company,
Appellants
______________
On Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. No. 3-14-cv-01419)
District Judge: Honorable Malachy E. Mannion
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Submitted Under Third Circuit L.A.R. 34.1(a)
September 16, 2016
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Before: CHAGARES, GREENAWAY, JR., and RESTREPO, Circuit Judges
(Filed: December 28, 2016)
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OPINION*
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RESTREPO, Circuit Judge
*
This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7,
does not constitute binding precedent.
Appellant Valley Open MRI and Diagnostic Center (“VOMRI”) admittedly
breached its lease agreement with Toshiba America Medical Systems when it failed to
make lease payments for MRI equipment. At issue here is whether the District Court’s
grant of summary judgment for Toshiba was improper as to the scope of damages and
attorneys’ fees awarded. We affirm the District Court’s finding that Toshiba had no duty
to mitigate damages. We will vacate the portion of the judgment that awards attorneys’
fees and remand the case to the District Court for an analysis of the reasonableness of the
claimed fees.
I
We write solely for the parties and therefore recite only the facts necessary to our
disposition.1 On December 16, 2010, Toshiba leased to VOMRI a Vantage Titan Open
MRI System and related accessories for a period of sixty months at the monthly rate of
$18,109.28. Pursuant to the lease agreement, a “fail[ure] to make any Lease Payment, or
any other payment, as it becomes due [which] . . . is not cured within 10 days,”
constituted a default. App. 42. Upon default, VOMRI would be liable to Toshiba for the
entire outstanding balance, plus interest, late charges, “reasonable attorney’s fees,” and
costs. App. 43. VOMRI’s obligation to pay damages and fees was “ABSOLUTE AND
UNCONDITIONAL AND IS NOT SUBJECT TO ANY ABATEMENT, SET-OFF,
DEFENSE, OR COUNTER-CLAIM FOR ANY REASON WHATSOEVER.” App. 39
(emphasis in original).
1
As VOMRI failed to file a response to Toshiba’s statement of material facts in
support of its motion for summary judgment, the facts of this case are deemed
undisputed.
2
The parties signed and executed the lease on March 6, 2011.2 Less than two years
later, VOMRI stopped making payments. Toshiba sued for breach of contract on July 23,
2014. On September 18, 2015, Toshiba filed a motion for summary judgment, along with
a statement of undisputed facts that incorporated damages and attorneys’ fees described
in a declaration from its Director of Financial Programs, Trish Malone. In the
declaration, Malone set out the remaining balance and interest under the contract; with
respect to the attorneys’ fees, Malone averred only that, “[a]s of September 11, 2015,
Toshiba’s attorneys’ fees were $87,604.64.” App. 247. The declaration did not set out
the number of hours the attorneys had expended, the rates charged, or any other billing
details to support the demanded fees.
When VOMRI filed its brief in opposition to Toshiba’s motion for summary
judgment, it did not respond to or contest Toshiba’s statement of facts. VOMRI disputed
only the amount that it should owe to Toshiba, and requested a hearing to address that
issue. Toshiba responded that a hearing on damages was unnecessary because its
statement of facts listing damages and attorneys’ fees was uncontested. The District
Court agreed with Toshiba, denying VOMRI’s request for a hearing on the grounds that
VOMRI’s failure to produce any evidence to dispute the amount made a hearing
unnecessary. The District Court ruled that the Malone declaration could be relied upon
because of her personal knowledge of Toshiba’s records, and awarded all damages and
attorneys’ fees listed in the declaration. This timely appeal followed.
2
The parties agreed the contract would be governed by Pennsylvania law.
3
II3
VOMRI raises two issues: (1) whether the District Court erred in finding that
Toshiba did not have a duty to mitigate its damages; and (2) whether the District Court
erred in failing to analyze the reasonableness of Toshiba’s claimed attorneys’ fees when
the lease allowed for an award of “reasonable attorneys’ fees.” We address each issue in
turn.
A
Pennsylvania’s general rule imposes a duty to mitigate damages on the non-
breaching party, Stonehedge Square Ltd. P’ship v. Movie Merchs., Inc., 715 A.2d 1082,
1084 (Pa. 1998) (citing Restatement (Second) of Contracts § 350 (Am. Law. Inst. 1981)).
However, a non-breaching party’s duty to mitigate is limited when the “it is equally
reasonable to expect the [breaching party] to minimize damages” and the breaching party
has “equal knowledge of the consequences of nonperformance.” S.J. Groves & Sons Co.
v. Warner Co., 576 F.2d 524, 530 (3d Cir. 1978). “When a written contract is clear and
unequivocal, its meaning must be determined by its contents alone.” E. Crossroads Ctr.,
Inc. v. Mellon-Stuart Co., 205 A.2d 865, 866 (Pa. 1965).
3
The District Court had jurisdiction under 18 U.S.C. § 1332(a). We have
jurisdiction under 28 U.S.C. § 1291. We review the determination of a district court’s
award of attorneys’ fees for an abuse of discretion. Sec. Mut. Life Ins. Co. of N.Y. v.
Contemporary Real Estate Assocs., 979 F.2d 329, 332 (3d Cir. 1992). We may find an
abuse of discretion when the district court does not properly identify the criteria used for
the award of fees. Silberman v. Bogle, 683 F.2d 62, 64–65 (3d Cir. 1982). A district
court’s factual findings are reviewed for clear error. Krasnov v. Dinan, 465 F.2d 1298,
1302 (3d Cir. 1972).
4
The District Court correctly concluded that Toshiba did not have a duty to
mitigate. VOMRI knew that the contract specified that it would owe Toshiba the full
balance remaining under the lease agreement if it defaulted. The contract clearly
indicates that any damages and reasonable attorneys’ fees incurred were not to be subject
to any “ABATEMENT, SET-OFF, DEFENSE, OR COUNTER-CLAIM FOR ANY
REASON WHATSOEVER” App. 39 (emphasis in original). Having had “equal
knowledge of the consequences of nonperformance,” VOMRI may not now contend that
Toshiba had a duty to mitigate. S.J. Groves, 576 F.2d at 530. We therefore affirm the
District Court’s decision in this respect.
B
When a contract allows for “reasonable” attorneys’ fees to be recovered, the
reasonableness of the claimed fees is within the sound discretion of the trial court. In re
LaRocca’s Tr. Estate, 246 A.2d 337, 339 (Pa. 1968). Pennsylvania courts have found an
abuse of discretion when the trial court fails to provide an “an explanation . . . of the basis
for the award.” Sec. Mut. Life Ins. Co. of N.Y., 979 F.2d at 332 (citing Croft v. P & W
Foreign Car Serv., Inc., 557 A.2d 18, 20 (Pa. Super. Ct. 1989); In re Estate of
Brockerman, 480 A.2d 1199, 1204 (Pa. Super. Ct. 1984)).
VOMRI argues that the District Court abused its discretion in failing to consider
the reasonableness of the fees awarded to Toshiba. We agree. The lease unambiguously
states that VOMRI “shall also be liable for and shall pay to Lessor . . . Lessor’s
reasonable attorneys’ fees.” App. 43. The District Court relied solely on Malone’s
declaration as competent evidence of the claimed attorneys’ fees, without inquiring into
5
reasonableness of the claimed amount. The District Court noted Malone’s position as
financial Director of Toshiba and her “personal knowledge . . . of the damages due under
the Lease Agreement,” but undertook no analysis of the amount and character of the
services performed, the difficulty of the problems involved, the amount of money or
value of property in question, the hours expended by the attorneys, or the rates charged to
Toshiba for the work. App. 19. This was insufficient.
Toshiba argues that VOMRI did not object to the amount of attorneys’ fees prior
to this appeal, and has therefore waived these arguments. To support the award at the
outset, however, Toshiba itself bore the burden of producing evidence as to the
reasonableness of the fees. See Rode v. Dellarciprete, 892 F.2d 1177, 1183 (3d Cir.
1990). As discussed above, offering solely a declaration stating the amount claimed, and
no more, does not justify that award. Also, VOMRI did not waive its right to contest the
reasonableness of the fee award, because it demanded a hearing below to contest the
amount requested. See Waldorf v. Shuta, 142 F.3d 601, 612 (3d Cir. 1998) (defense to
liability waived because no objection had been raised below).
Accordingly, we will vacate the portion of the judgment that awards attorneys’
fees, and remand the case to the District Court for a proper examination of the
reasonableness of these fees. On remand, the District Court should look to factors
examined by Pennsylvania courts in assessing reasonableness of fees, including the
amount and character of the services performed, the difficulty of the problems involved,
and the amount of money or the value of property in question. See McMullen v. Kutz,
985 A.2d 769, 774 (Pa. 2009).
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III
For the foregoing reasons, we will vacate the portion of the judgment that awards
attorneys’ fees and remand to the District Court for a determination as to the
reasonableness of these fees. We will otherwise affirm the judgment of the District
Court.
7