In Re: RFC and RESCAP Liquidating Trust Litigation

Background

ResCap Liquidating Trust sued Home Loan Center, Inc. under a contract called the Client Guide. The contract included an indemnification provision requiring the lender to reimburse GMAC-RFC for court costs, attorneys’ fees, and other expenses incurred in enforcing the contract. After extensive consolidated litigation and a jury trial, the jury awarded ResCap $28.7 million. The Court also awarded ResCap $14,066,931.50 in preverdict prejudgment interest, making the recovery approximately $42.8 million before any postverdict prejudgment interest.

ResCap moved for reimbursement of $28,745,901.93 in fees and costs incurred between December 2013 and January 2019. Its revised request included $18,370,135.55 in attorneys’ fees, a separate contingency payment to Quinn Emanuel, and $5,078,519.47 in costs. The costs included expert and support-firm expenses, document-vendor fees, and trial-witness and other trial-related expenses. Home Loan Center argued that the request should be reduced to between $6.7 million and $11 million, focusing especially on work and costs incurred from July through November 2018.

Reasonableness Review

The Client Guide’s fee provision did not expressly use the word “reasonable.” ResCap argued that the Court should enforce the provision as written and award all covered expenses. Home Loan Center argued that Minnesota public policy required a reasonableness review. The Court concluded that public policy supported reviewing the request for reasonableness, while also recognizing that the Client Guide was a freely negotiated agreement between sophisticated parties.

The Court used the lodestar method, which generally calculates reasonable fees by multiplying reasonable hours by reasonable hourly rates. It found the discounted hourly rates charged by Quinn Emanuel and the regular rates charged by Felhaber Larson, Carpenter Lipps & Leland, and Spencer Fane appropriate. The Court also found that the case’s complexity, the amount involved, the results obtained, the work required, and counsel’s experience supported the requested fees generally.

The Court rejected Home Loan Center’s proposed reductions based on comparisons with defense counsel’s hours, alleged limited success, and the size of the award compared with the jury’s verdict. It found that the case involved extensive consolidated discovery, complex damages and sampling issues, the need to explain the bankruptcy settlements, and a 16-day jury trial. The Court also found that the successful indemnification claim overlapped substantially with the breach-of-contract claim that ResCap later dismissed, so the dismissal did not justify the proposed 25% to 50% reduction.

Specific Adjustments and Ruling

The Court found some reduction necessary for duplicative work and excessive internal and between-firm communications. It deducted 2%, or $367,402.71, from the $18,370,135.55 fee request. This produced an attorneys’ fee award of $18,002,732.84. The Court found that ResCap could recover fees incurred preparing and litigating the fee motion because the Client Guide covered expenses incurred in enforcing the contract.

The Court declined to award Quinn Emanuel’s requested contingency payment. It concluded that the revised lodestar already represented reasonable compensation and that no exceptional circumstances justified increasing it. The Court found the revised cost request of $5,078,519.47 reasonable and made no further reduction.

Judge Susan Richard Nelson ordered that ResCap’s Motion for Attorneys’ Fees and Costs be granted in part and denied in part. Home Loan Center was ordered to pay ResCap $23,081,252.31, consisting of $18,002,732.84 in attorneys’ fees and $5,078,519.47 in costs. The Court also directed ResCap to promptly calculate postverdict prejudgment interest and temporarily filed the order under seal while directing the parties to explain whether sealing should continue.