Flatiron Acquisition Vehicle, LLC v. CSE Mortgage LLC

Background

Flatiron Acquisition Vehicle, LLC and CS Paradiso Holdings, LLC sued CSE Mortgage LLC, CapitalSource Commercial Loan, 2006-2, CapitalSource Finance LLC, and CapitalSource Inc. The litigation included claims concerning a purchase agreement under which Flatiron acquired the equity of CS Paradiso Holdings. CSE and its affiliated companies prevailed on the claims that remained after motion practice and trial.

The purchase agreement included a fee-shifting provision requiring the losing party to pay the prevailing party’s costs and expenses, including reasonable attorneys’ fees, when either the defined buyer or seller sued the other for breach of that party’s obligations under the agreement. CSE sought $2,426,762.30 in attorneys’ fees and $48,440.87 in costs for the litigation as a whole.

Scope of the Fee-Shifting Clause

The court interpreted the provision strictly under New York law. It held that the clause covered only lawsuits or claims between the agreement’s defined buyer, Flatiron, and defined sellers, CSE and CapitalSource Commercial Loan, 2006-2, involving breaches of obligations created by the purchase agreement.

The provision did not cover claims brought by or against CS Paradiso Holdings, CapitalSource Finance, or CapitalSource Inc. It also did not cover claims based on the settlement agreement, Tennessee lien law, or negligent misrepresentation because those claims did not allege breaches of obligations under the purchase agreement. The court further held that the purchase agreement did not clearly incorporate the settlement agreement by reference for purposes of the fee provision.

The court determined that only a limited set of work fell within the provision: work concerning Flatiron’s claims against CSE for breach of the purchase agreement and CSE’s related claim seeking fees as the prevailing party. The clause did not specifically authorize recovery of fees incurred in pursuing the fee application itself.

Calculation of the Award

Because the billing records did not consistently identify the claim to which each task related, the court used percentage reductions and other estimates rather than requiring a second, extensive review of the litigation. It excluded all fees charged by Bradley Arant Boult Cummings LLP because that firm’s work was directed primarily toward uncovered Tennessee-law and settlement-agreement issues and was not reasonably necessary for the covered claims.

The court awarded 100% of Pillsbury Winthrop Shaw Pittman LLP’s reasonable fees and expenses from the start of the case through March 27, 2018, treating the covered and uncovered work during that period as closely connected. It awarded 10% of Pillsbury’s reasonable hourly fees from March 27, 2018, through March 18, 2019, reflecting the court’s estimate that most work during that period concerned discovery and uncovered claims. For March 18, 2019, and afterward, it awarded only six hours of partner time and ten hours of senior-associate time for the limited covered fee issue.

The court found Pillsbury’s attorney rates reasonable but reduced the rates charged for two legal assistants from $465 and $400 per hour to $150 per hour. It awarded CSE $326,137.64 in attorneys’ fees and $936.40 in expenses, for a total of $327,074.04.

Disposition

Judge Woods granted in part CSE’s motion for attorneys’ fees and costs. The court directed that a separate order would provide for entry of judgment and directed the Clerk of Court to terminate the motion.