PACK Private Capital v. Associated Bank

Background

The dispute arose from lending arrangements involving PACK, Associated Bank, and Silver Fox Energy, LLC. PACK had provided loans to Silver Fox and later worked with Associated to obtain additional funding. PACK executed a subordination agreement and a $1 million guaranty. The guaranty required PACK to pay Associated’s reasonable out-of-pocket costs, including attorneys’ fees, incurred in enforcing the guaranty or other applicable loan documents against PACK. The loan documents included the subordination agreement.

PACK later sued Associated, asserting claims including intentional misrepresentation, negligent misrepresentation, declaratory judgment, equitable estoppel, and economic duress and business compulsion. The claims generally sought to enforce an alleged oral agreement that certain payments would not be subordinated under the subordination agreement. The district court struck PACK’s first amended complaint and granted Associated’s motion to dismiss. PACK appealed, and the Eighth Circuit affirmed the dismissal with prejudice.

Associated then filed two motions for attorneys’ fees: one for work before the district court and one for work before the Eighth Circuit. The appellate fee motion was sent back to the district court for review.

Entitlement to Fees

Because the case was in federal court based on diversity jurisdiction, the court applied Minnesota law to the fee requests. Minnesota generally follows the American rule, under which each party pays its own attorneys’ fees unless a contract or statute provides otherwise.

The court held that the guaranty’s phrase covering fees incurred “in enforcing” the guaranty unambiguously included Associated’s defense of PACK’s lawsuit. The court reasoned that the word “enforce” does not require the party seeking fees to have filed the lawsuit or asserted counterclaims. Instead, the court considered the relief at the heart of the dispute. PACK’s claims sought damages and declaratory relief that could have undermined Associated’s rights under the guaranty and subordination agreement. Associated’s defense therefore sought to require PACK to follow those agreements as written.

The court also rejected PACK’s argument that the guaranty’s $1 million cap limited the fee award. The court read the provision as excluding attorneys’ fees and costs from that cap.

Reasonableness of the Awards

The court used the lodestar method, which calculates reasonable fees by multiplying reasonable hours by reasonable hourly rates, while allowing adjustments for factors such as excessive or duplicative work. PACK did not challenge the hourly rates; it challenged the number of hours billed.

For district-court work, Associated’s attorneys billed 514.3 hours totaling $347,639.00. PACK argued that fees related to the remand motion should be excluded, that the matter was overstaffed, and that work on the second motion to dismiss substantially duplicated work on the first. The court declined to exclude the remand-related fees because the contractual fee provision supplied a separate basis for recovery, even though the court had previously denied fees under the removal statute. The court did find some hours excessive or redundant, particularly work on the second motion to dismiss, and applied a 15 percent reduction to the hours billed by Vedder Price P.C. and Taft Stettinius & Hollister LLP. It awarded $299,942.68 in district-court attorneys’ fees: $225,513.50 to Vedder Price, $44,765.68 to Taft, and $29,663.50 to Winthrop & Weinstine, P.A.

For appellate work, Associated’s attorneys billed 376.4 hours totaling $266,969.00. PACK argued that 276.4 hours were excessive or duplicative between the two firms. The court agreed that some work was duplicative but found that additional appellate arguments justified much of the time. It applied a 10 percent reduction and awarded $240,272.10 in attorneys’ fees and $1,619.64 in costs.

Disposition

The court granted Associated Bank, N.A.’s first motion for attorneys’ fees and awarded $299,942.68. It also granted Associated’s second motion for attorneys’ fees and awarded $240,272.10 in attorneys’ fees and $1,619.64 in costs.