Hustler Cincinnati, Inc. v. Elm 411, L.L.C. , 2014 Ohio 5648 ( 2014 )

[Cite as Hustler Cincinnati, Inc. v. Elm 411, L.L.C., 2014-Ohio-5648.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
HUSTLER CINCINNATI, INC., : APPEAL NO. C-130754
TRIAL NO. A-0905138
Plaintiff-Appellee, :
vs. :
ELM 411, LLC, :
Defendant-Appellant. :
_________________________ :
ELM 411, LLC, : APPEAL NO. C-130754
TRIAL NO. A-0908462
Plaintiff-Appellant, :
vs. : O P I N I O N.
HUSTLER CINCINNATI, INC., :
Defendant-Appellee. :
Civil Appeal From: Hamilton County Court Common Pleas Court
Judgment Appealed From Is: Affirmed
Date of Judgment Entry on Appeal: December 24, 2014
Dinsmore & Shohl, LLP, Mark A. Vander Lann, Amanda P. Lenhart and Robert M.
Zimmerman, for Appellant Elm 411, LLC,
Reminger Co., LPA, Robert W. Hojnoski and Carrie M. Starts, for Appellee Hustler
Cincinnati, Inc.
Please note: this case has been removed from the accelerated calendar.
OHIO FIRST DISTRICT COURT OF APPEALS
CUNNINGHAM, Presiding Judge.
{¶1} Appellant Elm 411, LLC, appeals from that portion of the trial court’s
final judgment entry awarding to appellee Hustler Cincinnati, Inc. (“HCI”), its tenant,
attorney fees and expenses pursuant to a fee-shifting clause in their commercial
lease. Because the trial court did not err as a matter of law in finding HCI to be the
prevailing party in this landlord-tenant dispute, and did not abuse its discretion in
determining the amount of fees reasonably necessary under the circumstances, we
affirm.
{¶2} HCI is owned by Jimmy Flynt. In early 2000, HCI leased the premises
from a third party. In 2001, HCI purchased the premises. In 2004, HCI transferred title
of the premises to Elm 411, a limited liability corporation owned by Larry Flynt, as part of
the Flynts’ existing business relationship. A written purchase agreement, dated November
30, 2004, and a ten-year lease agreement, dated January 1, 2005, were executed by Elm
411 and HCI.
{¶3} In the spring of 2009, family discord between Larry and Jimmy Flynt
spread to their commercial relationships. A dispute arose between the parties regarding
the occupancy of the premises. Elm 411 claimed that the parties did not have a valid
written lease agreement and that HCI was a month-to-month tenant subject to eviction.
HCI claimed that the parties’ relationship was governed by the ten-year lease that entitled
HCI to the continued use and enjoyment of the premises. Elm 411 sought to evict HCI.
HCI sought to remain in the premises.
{¶4} Litigation of the landlord-tenant dispute began in May 2009 when
HCI filed a complaint in Hamilton County Common Pleas Court in the case
numbered A-0905138, seeking a declaratory judgment that the parties had a valid
ten-year lease that permitted it to operate a retail store at the premises. In the event
that the lease was not upheld and HCI was required to vacate the premises, HCI
asserted claims against Elm 411 for unjust enrichment, breach of the covenant of
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quiet enjoyment, breach of the duty of good faith dealing, and tortious interference
in a business interest.
{¶5} In August 2009, Elm 411 filed a separate complaint in Hamilton
County Municipal Court seeking to evict HCI from the premises. In its answer to this
action in forcible entry and detainer, HCI raised additional claims and equitable
defenses including ratification, reformation, part performance, and rescission. This
action was transferred to common pleas court, in the case numbered A-0908462.
The cases were consolidated on the common pleas court’s commercial docket under
the second case number.
{¶6} This consolidated case was continued for several years while the
larger dispute between Larry and Jimmy Flynt over partnership in other Hustler
enterprises was adjudicated in federal court. Following extensive discovery,
including numerous depositions, some taken in California, the trial court denied the
parties’ cross-motions for summary judgment. In 2013, the trial court bifurcated the
issues for trial. Because the trial court found that many of the issues and claims
raised by HCI in support of its claim that there was a valid lease “were equitable in
nature,” the court first held a bench trial to determine if a tenancy existed.
{¶7} At the conclusion of the bench trial, the trial court found in favor of HCI,
rejected Elm 411’s forcible-entry-and-detainer action and specifically found that the
parties’ commercial lease agreement was valid and was in full force and effect. In its
September 17, 2013 opinion letter, the trial court explained that:
In the case before me, the issues were limited to whether a valid lease
existed for the [premises]. The evidence showed that the executed
lease was completed before Elm 411 even had ownership of the
premises. Nevertheless, I found, based on the evidence, that [Elm
411] acquired the ability to lease the premises and [HCI] moved in
and occupied the space that was the subject of the lease. The lease has
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OHIO FIRST DISTRICT COURT OF APPEALS
since formed the basis of the entire relationship. The parties have
conformed the lease payments to the lease. All this ratifies the lease.
[HCI] pursued an alternative theory that involved an unexecuted
lease but since I found the executed lease was valid, I never really
analyzed the unexecuted lease. * * * As to who is the prevailing party,
on the issue of the landlord-tenant dispute from a legal perspective, it
is clearly [HCI].
{¶8} In its final judgment entry, the trial court formally concluded that “[HCI]
is granted its declaratory relief and is entitled to occupy the Premises according to the
terms of the Retail Lease. [Elm 411’s] claim for forcible entry and detainer is dismissed.”
{¶9} As the prevailing party in the litigation, HCI moved for recovery of its
reasonable attorney fees and costs. HCI claimed that it was entitled to recover its fees and
costs pursuant to the fee-shifting provisions contained in the parties’ November 30, 2004
“Agreement of Purchase and Sale” and the parties’ 2005 commercial lease agreement.
Pursuant to section 24 of the January 1, 2005 lease agreement, which was validated and
enforced by the trial court following the bench trial:
In any dispute between the parties (whether or not litigated) arising
hereunder or out of Lessee’s use or occupancy of the Premises, the
prevailing party’s reasonable costs and expenses (including fees of
attorneys and experts) will be paid or reimbursed by the unsuccessful
party.
{¶10} The purchase agreement contains a similar fee provision in section 10(b),
Default and Legal Fees. Following an evidentiary hearing at which HCI’s lead counsel and
its attorney expert testified, the trial court awarded HCI the full amount of its requested
attorney fees and expenses, $170,652.75. Elm 411 appeals.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶11} Elm 411 has appealed only from that portion of the trial court’s final
judgment entry awarding HCI attorney fees and expenses. Elm 411 has not provided a
transcript of any other portions of the proceedings except those which occurred during the
evidentiary fee hearing.
{¶12} In its sole assignment of error, Elm 411 contends that the trial court erred
in awarding HCI $170,652.75 in attorney fees. First, Elm 411 argues that the trial court
erred in determining that HCI was a “prevailing party” as a matter of law. It contends that
HCI was not a prevailing party because it did not prevail on “a majority of its claims and
issues” including HCI’s equitable defenses and its claims for monetary relief.
{¶13} Generally, attorney fees are not recoverable in a lawsuit. Ohio courts
follow the so-called “American rule,” which requires that each party involved in litigation
pay his or her own attorney fees. But there are three well-recognized exceptions to this
rule: (1) where statutory provisions specifically provide that a prevailing party may recover
attorney fees, (2) where there has been a finding of bad faith, and (3) where the contract
between the parties provides for fee shifting. Keal v. Day, 164 Ohio App.3d 21, 2005-
Ohio-5551, 840 N.E.2d 1139, ¶ 5 (1st Dist.). Contractual fee-shifting provisions are
enforceable so long as the fees awarded are fair, just and reasonable as determined by the
trial court upon a full consideration of all of the circumstances of the case. Nottingdale
Homeowners’ Assn. v. Darby, 33 Ohio St.3d 32, 514 N.E.2d 702 (1987), syllabus; see
Wilborn v. Bank One Corp., 121 Ohio St.3d 546, 2009-Ohio-306, 906 N.E.2d 396,¶ 8.
{¶14} We review de novo the trial court’s interpretation of the fee-shifting
provisions. Keal at ¶ 7. Absent ambiguity in the language of the contract, the parties'
intent to award fees only to prevailing parties must be determined from the plain language
of the document. See id. at ¶ 7. Here, the 2005 lease agreement and the 2004 purchase
agreement expressly provided that attorney fees and expenses may be awarded to a
prevailing party in “any dispute” between the parties “arising * * * out of [the] use or
occupancy of the Premises.”
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶15} A prevailing party is one in whose favor the decision or verdict is rendered
and judgment entered. Keal at ¶ 8. But a party may be a prevailing party for fee-shifting
purposes even if he obtains only some of the relief originally sought. See id. In Keal v.
Day, this court interpreted a fee-shifting provision in a commercial lease. We held that
the tenant-appellant was a prevailing party because he had obtained “some relief” by
successfully defending the opposing party’s forcible-entry-and-detainer action, even
though he had been denied monetary relief in arbitration. A judgment in Keal’s favor,
ordering retention of the premises, was sufficient for Keal to be a prevailing party for fee-
shifting purposes. See id. at ¶ 9.
{¶16} In EAC Properties, L.L.C. v. Brightwell, 10th Dist. Franklin No. 13AP-773,
2014-Ohio-2078, the court interpreted a commercial lease between a tenant and landlord
that also provided for the shifting of attorney fees. The court held that the tenant was the
prevailing party because he had prevailed on the main issue in the action—$30,000 in
back rent. The fact that the landlord had received a monetary award for the outstanding
utilities did not alter its conclusion that the tenant was the prevailing party. Id. at ¶ 12.
{¶17} Moreover, a party’s success on motions leading up to the granting of
judgment is not determinative of which party is a prevailing party. See Hikmet v.
Turkoglu, 10th Dist. Franklin No. 08AP-1021, 2009-Ohio-6477, ¶ 72. A party’s status as
the prevailing party “does not depend upon the degree of success at different stages of the
suit, but whether, at the end of the suit, or other proceeding, the party who had made a
claim against the other, has successfully maintained it.” Id. at ¶ 75, quoting Moga v.
Crawford, 9th Dist. Summit No. 23965, 2008-Ohio-2155, ¶ 6.
{¶18} Here, as in Keal, the tenant in possession of the premises, HCI,
successfully retained possession of the premises after the resolution of the consolidated
actions by bench trial. HCI had initiated the actions seeking a declaration that the lease
was valid and that Elm 411 be compelled to cease interfering with HCI’s quiet enjoyment
of the premises. The landlord, Elm 411, pursued a single claim of forcible entry and
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OHIO FIRST DISTRICT COURT OF APPEALS
detainer seeking return of the premises. The trial court’s June 10, 2013 letter opinion
stated that:
A bench trial was held and based on the evidence received, I found
that the 2005 lease was valid. We then met in chambers where I was
informed by the attorneys that this decision would resolve the
landlord-tenant issue and there was nothing left to try.
{¶19} In its final judgment entry, the trial court formally concluded that “[HCI]
is granted its declaratory relief and is entitled to occupy the Premises according to the
terms of the Retail Lease. [Elm 411’s] claim for forcible entry and detainer is dismissed.”
The court had earlier noted, in its September 17, 2013 opinion letter, that since the 2005
lease was valid and had been ratified by the parties’ conduct, HCI’s pursuit of alternative
equitable theories that involved an unexecuted lease had no impact on the litigation.
{¶20} Therefore, we hold, on the authority of Keal, that HCI was the prevailing
party in whose favor judgment was entered. See Keal, 164 Ohio App.3d 21, 2005-Ohio-
5551, 840 N.E.2d 1139, at ¶ 8. At the end of the litigation, HCI had successfully defended
against Elm 411’s forcible-entry-and-detainer action and had retained occupancy of the
premises—the principle issue in dispute. See EAC Properties, L.L.C., 10th Dist. Franklin
No. 13AP-773, 2014-Ohio-2078, at ¶ 12; see also Hikmet, 10th Dist. Franklin No. 08AP-
1021, 2009-Ohio-6477, at ¶ 75. Therefore, for purposes of the fee-shifting agreement in
the lease and purchase agreement, HCI was a prevailing party entitled to reasonable and
necessary fees and expenses.
{¶21} Elm 411 next argues on appeal, as it did in the trial court, that even if HCI
was “a prevailing party,” it may only recover costs it incurred in prosecuting its
successful claims and not costs for work performed on other issues in the litigation. Elm
411 contends that where a party has only limited success in litigation, albeit on an
important issue, the trial court is vested with broad discretion to reduce an attorney fee
award.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶22} Any attorney fee awarded must be “fair, just and reasonable as
determined by the trial court upon full consideration of all of the circumstances of
the case.” Nottingdale Homeowners’ Assn., 33 Ohio St.3d 32, 514 N.E.2d 702,
syllabus. When, as here, contractual agreements provide for attorney fees but do not
specify the amount of fees that are awardable, a trial court has discretion to
determine the amount of fees reasonably necessary under the circumstances.
See Edlong Corp. v. Nadathur, 1st Dist. Hamilton No. C-120369, 2013-Ohio-1283, ¶ 14,
citing Lake Pointe Townhomes Homeowners’ Assn. v. Bruce, 178 Ohio App.3d 756,
2008-Ohio-5264, 900 N.E.2d 636, ¶ 10 (8th Dist.).
{¶23} The Ohio Supreme Court has held that where claims can be separated
“into a claim for which fees are recoverable and a claim for which no fees are
recoverable, the trial court must award fees only for the amount of time spent
pursuing the claim for which fees may be awarded.” Bittner v. Tri-County Toyota,
Inc., 58 Ohio St.3d 143, 145, 569 N.E.2d 464 (1991); see Edlong Corp. at ¶ 15.
Nonetheless, a court should not reduce attorney fees “based on a simple ratio of
successful versus unsuccessful claims.” Edlong Corp. at ¶ 15, citing Hollingsworth v.
Time Warner Cable, 168 Ohio App.3d 658, 2006-Ohio-4903, 861 N.E.2d 580, ¶ 82
(1st Dist.).
{¶24} But it is not always possible to divide attorney fees among distinct claims.
The inability of a prevailing party to allocate attorney fees to each claim does not
necessarily render a fee award for the full amount unreasonable. See Edlong Corp.
at ¶ 17. Where claims “ ‘involve a common core of facts or [are] based on related legal
theories,’ it may be ‘difficult to divide the hours expended on a claim-by-claim basis.’ ” Id.
at ¶ 16, quoting Hensley v. Eckerhart, 461 U.S. 424, 435, 103 S.Ct. 1933, 76 L.Ed.2d 40(1983). Thus, “where multiple claims are rooted in the same allegations, facts, discovery,
and legal arguments, a trial court does not abuse its discretion in awarding attorney fees
for the time spent on the claims.” Edlong Corp. at ¶ 16.
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{¶25} In Edlong Corp., the plaintiff unsuccessfully sued its former employee,
and his new employer, for breach of a confidentiality clause in his employment contract
and for trade-secret violations. The employee unsuccessfully counterclaimed for tortious
interference with a business relationship. The prevailing employee sought attorney fees,
relying upon a fee-shifting provision in the confidentiality agreement providing that the
prevailing party in any action to enforce the agreement was entitled to recover reasonable
attorney fees. See Edlong Corp., 1st Dist. Hamilton No. C-120369, 2013-Ohio-1283, at ¶
14. The trial court awarded half of the fees requested, finding that the employee was only
entitled to recover fees related to his defense of the contract claim, and that he was not
entitled to fees related to any other claims, including the trade-secret claim. See id. at ¶ 6.
On appeal, this court reversed, noting that the trade-secret claim was too intertwined with
the breach-of-contract claim to be extracted for purposes of an attorney-fee award. See id.
at ¶ 18. The trial court had abused its discretion by excluding a portion of the attorney fees
in light of the uncontradicted evidence that the fees were indivisible. See id. at ¶ 17; see
also Miller v. Grimsley, 197 Ohio App.3d 167, 2011-Ohio-6049, 966 N.E.2d 932 (10th
Dist.) (holding that, in a breach-of-contract action involving a single contract and multiple
claims, it was not possible to separate attorney hours on a claim-by-claim basis).
{¶26} Here, after HCI filed its motion for attorney fees and costs, the trial
court continued the matter for an evidentiary hearing. HCI’s lead counsel, Robert W.
Hojnoski, testified, and presented evidence of the legal fees that he and his associate
had incurred to maintain HCI’s occupancy of the premises. Hojnoski’s detailed
billing statement was admitted into evidence. The statement contained nearly 32
pages of billing entries—around 500 separate entries. The billing entries were not coded
or recorded based on any particular claim or defense. According to Hojnoski’s
uncontradicted testimony, the billing statement reflected the indivisible time
expended during the four-year-long dispute over HCI’s occupancy of the premises.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶27} Attorney Jack Scott, the managing partner of a local law firm, with
experience in commercial leases, testified as an expert for HCI. Elm 411 stipulated to
Scott’s qualifications as an expert. Scott stated that he had reviewed the billing statements
and the record of the litigation. He testified that all the legal fees reflected in the statement
related to the common question of whether HCI had a valid tenancy interest in the
premises. “That was the core issue that permeated all of [these] lawsuits in my opinion.”
While Elm 411 carefully questioned Hojnoski and Scott, it did not call any witnesses to
rebut their testimony that each claim, counterclaim, and issue shared a common core of
operative facts.
{¶28} Moreover, the express language of the fee-shifting provisions of the lease
and the purchase agreement did not limit HCI to fees incurred in enforcing the
agreements themselves. The provisions permitted fees to the prevailing party in “any
dispute” regarding the “use or occupancy of the premises.”
{¶29} As Elm 411 has noted, the trial court has broad discretion to determine
the amount of fees reasonably necessary to compensate a prevailing party under
these circumstances. See Edlong Corp., 1st Dist. Hamilton No. C-120369, 2013-Ohio-
1283, at ¶ 14. An abuse of that discretion is shown when the court’s decision is
unreasonable, arbitrary, or unconscionable; that is, when the trial court issues a ruling
that is not supported by a “sound reasoning process.” AAAA Ents., Inc. v. River Place
Community Urban Redev. Corp., 50 Ohio St.3d 157, 161, 553 N.E.2d 597 (1990). In
applying this standard, “[i]t is not sufficient for an appellate court to determine that
a trial court abused its discretion simply because the appellate court might not have
reached the same conclusion or is, itself, less persuaded by the trial court’s reasoning
process than by the countervailing arguments.” State v. Morris, 132 Ohio St.3d 337,
2012-Ohio-2407, 972 N.E.2d 528, ¶ 14, citing AAAA Ents. at 161.
{¶30} Here, the trial court had presided over the litigation since September
2009. Most of those proceedings, including the bench trial, have not been transcribed for
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OHIO FIRST DISTRICT COURT OF APPEALS
our review. The trial court had reviewed the extensive record of HCI’s billing statements.
It had heard Hojnoski’s and Scott’s uncontradicted testimony that HCI’s attorney fees
were indivisible because the claims involved were so intertwined. The foundation of HCI’s
and Elm 411’s claims was their dispute regarding the use and occupancy of the premises.
The same factual allegations supported their various claims and defenses whether
questioning the validity of the 2005 lease agreement and the unexecuted 2006 lease, or
supporting Elm 411’s action in forcible entry and detainer or HCI’s mooted equitable
defenses. As Scott testified, counsel’s efforts would have been devoted to discovering and
arguing the significance of these shared facts. Thus, even if we believed that we could have
parsed the billing entries and placed the fees under discrete columns related to a particular
claim, the trial court’s decision to render an award for the full amount of fees and
expenses was supported by a sound reasoning process. See Edlong Corp., 1st Dist.
Hamilton No. C-120369, 2013-Ohio-1283, at ¶ 18. We will not substitute our judgment
for that of the trial court.
{¶31} Finally, Elm 411 argues that since HCI’s counsel had failed to identify
any basis for his proffered hourly rate, the trial court abused its discretion in
awarding HCI over $170,000 in attorney fees. Elm 411 asserts that because HCI’s
counsel had no written engagement letter in which HCI had agreed to pay the lead
counsel’s hourly rate of $250 per hour, because HCI had not paid a bill reflecting
that hourly rate, and because HCI’s fee expert admitted that his own hourly rate was
often less than $250 per hour, HCI’s hourly rate appeared “to be made up out of thin
air.”
{¶32} Again, when a contract provides for attorney-fee shifting but does not
specify the amount of fees that are awardable, a trial court has discretion to
determine the amount of fees reasonably necessary under the circumstances. See
Edlong Corp., 1st Dist. Hamilton No. C-120369, 2013-Ohio-1283, at ¶ 14.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶33} At the evidentiary hearing on the attorney fee issue, HCI’s lead
counsel testified that he assessed HCI a billing rate of $250 per hour, and that his
associate’s time was charged at $175 per hour. Hojnoski testified that he had
informed HCI of those rates in May 2009. His detailed billing statement was
admitted into evidence. The statement reflected those charged rates. HCI’s attorney
fee expert testified that based upon his review of the billing statements and the record
of the litigation, and his knowledge of the rates customarily charged in the Cincinnati area,
HCI’s attorney fees of over $147,000, and its claimed expenses were reasonable and
necessary with regard to the overall dispute related to the occupancy of the premises.
{¶34} Elm 411’s counsel thoroughly cross-examined Hojnoski and Scott. He was
able to highlight weaknesses in their testimony, as, for example, when Scott admitted that
his average fee for similar work would not likely exceed $215 per hour, or when Hojnoski
acknowledged that he had no written fee agreement with HCI. But Elm 411 did not call
any witnesses to rebut their testimony.
{¶35} On September 17, 2013, the trial court issued a letter opinion in which it
found HCI to be the prevailing party in the litigation. It also found that “[t]he fees
requested [were] high but on the record before me reasonable. This matter went on for a
number of years.” In its October 11, 2013 final judgment entry, the trial court found that
pursuant to the lease agreement, HCI, as the prevailing party, was entitled to receive
reasonable attorney fees and expenses “arising from this dispute related to HCI’s use and
occupancy of the Premises” in the amount of $170,652.75.
{¶36} Here, the trial court had reviewed the extensive record of HCI’s billing
statements. It had heard the detailed testimony of Hojnoski and Scott’s uncontradicted
opinion that the fees were reasonable, necessary, and in line with local hourly rates, and it
had entertained the arguments of counsel. The evidence before it included a record of the
time spent by HCI’s attorneys and a reasonable rate for the attorneys’ time. The trial
court’s decision as to the measure of the fees awarded was supported by a sound reasoning
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process. See Edlong Corp., 1st Dist. Hamilton No. C-120369, 2013-Ohio-1283, at ¶ 18.
Therefore, we will not substitute our judgment for that of the trial court which presided
over substantially all of the proceedings.
{¶37} The assignment of error is overruled. Therefore, the judgment of the
trial court as to the award of attorney fees and expenses is affirmed.
Judgment affirmed.
DINKELACKER and FISCHER, JJ., concur.
Please note:
The court has recorded its own entry on the date of the release of this opinion.
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