Renamba, LLC v. Red Mortgage Capital, LLC

Background

Renamba, LLC and Red Mortgage Capital, LLC (RED) entered into a $29,559,600 mortgage loan in 2013. The loan financed Renamba’s purchase of land at 25 Saxon Woods Road in Scarsdale, New York. In 2014, the parties signed a Modification Agreement. Section 28 required Renamba to pay RED’s expenses, including reasonable attorneys’ fees, if RED became involved in a lawsuit because of the mortgage or the secured debt.

RED was named as a defendant in two state-court lawsuits involving Beebe Construction Services, Inc. The lawsuits concerned claims related to construction work, liens, and the mortgage. When Renamba sought to pay off the loan in late 2017, RED’s payoff statements included $1,130,100.96 for legal fees. Renamba asked for a breakdown and objected that the amount was excessive. RED declined to provide detailed billing descriptions, citing attorney-client privilege, but provided other documents concerning the fees. Renamba paid the loan and legal fees on January 31, 2018, while reserving its right to challenge them. RED later reimbursed Renamba $79,421.25 for fees it said had been improperly billed.

Renamba then sued RED for breach of contract, unjust enrichment, and breach of the implied covenant of good faith and fair dealing. The parties filed cross-motions for summary judgment under Rule 56. Summary judgment is appropriate when no genuine dispute about an important fact exists and the moving party is entitled to judgment under the law.

Breach-of-Contract Claim

The parties agreed that the Modification Agreement entitled RED to reasonable attorneys’ fees. The dispute was whether RED breached the agreement by charging Renamba an unreasonable amount for the work performed by its attorneys, particularly Morris, Manning & Martin, LLP (MMM), in the Beebe Actions.

Renamba argued that MMM billed for excessive and duplicative hours even though Renamba’s own attorneys served as lead counsel and performed most of the work. Renamba also challenged block billing and vague billing entries. RED argued that MMM’s work was necessary and appropriate because the lawsuits exposed RED to substantial potential liability, involved extensive discovery, and required RED to protect its interests and the interests connected with the loan.

The court found genuine disputes about the amount of time MMM spent, the work it performed, and whether the resulting fees were reasonable. The parties submitted sharply conflicting declarations about MMM’s role and the necessity of its work. Resolving those conflicts would require assessing witness credibility and weighing evidence, which a court may not do on summary judgment. The court therefore denied both Renamba’s and RED’s motions for summary judgment on the breach-of-contract claim. The court did not need to decide at this stage whether a judge or factfinder would later determine the precise amount of reasonable fees.

Unjust-Enrichment and Implied-Covenant Claims

The court denied Renamba’s motion for summary judgment on unjust enrichment. It granted RED’s cross-motion for summary judgment on Renamba’s unjust-enrichment claim and on the claim for breach of the implied covenant of good faith and fair dealing.

The court explained that the parties’ valid written Modification Agreement covered the subject of the dispute. Renamba’s unjust-enrichment and implied-covenant claims relied on the same alleged conduct as its contract claim and sought essentially the same relief. Under the court’s application of New York law, unjust enrichment is unavailable when an enforceable contract covers the matter, and a separate implied-covenant claim is not recognized when it is based on the same facts as a breach-of-contract claim.

Disposition

Renamba’s motion for summary judgment was denied. RED’s cross-motion for summary judgment was granted in part and denied in part: it was denied as to the breach-of-contract claim and granted as to the unjust-enrichment and implied-covenant claims. The court stated that it would issue a separate scheduling order concerning the next steps.