SA Luxury Expeditions, LLC v. Schleien

Background

SA Luxury Expeditions, LLC operates a tour business in Latin America, including Peru. Bernard Schleien owns Peru For Less LLC. In 2015, SA Luxury and Schleien entered into a settlement agreement resolving an earlier lawsuit. The agreement required Schleien not to make written or oral disparaging comments about SA Luxury, including negative online reviews.

SA Luxury later sued Schleien and Peru For Less, alleging that they were responsible for fraudulent reviews, pay-per-click advertising activity, and client leads. SA Luxury asserted a breach-of-contract claim based on the settlement agreement and claims under New York and California unfair-competition laws. The court dismissed the original contract claim with prejudice and the unfair-competition claims without prejudice. After SA Luxury filed an amended complaint, the court dismissed that complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).

Entitlement to Fees

Schleien and Peru For Less moved for attorneys’ fees and costs under Paragraph 15 of the settlement agreement. That paragraph states that, when a party brings a legal proceeding arising out of, relating to, or seeking to enforce any term of the agreement, the prevailing party may recover reasonable attorneys’ fees and costs incurred in enforcing the agreement.

SA Luxury argued that the phrase concerning costs incurred in enforcing the agreement limited fee recovery to a party that actually enforced the agreement. The court rejected that interpretation. It held that Paragraph 15 is a prevailing-party provision covering proceedings arising out of or relating to the settlement agreement, not only proceedings in which the prevailing party brings an enforcement claim. The court therefore held that Schleien was entitled to fees connected to his successful defense of the breach-of-contract claim. Because the court interpreted the provision to cover any action arising out of the agreement, it also held that the provision allowed recovery of reasonable fees for preparing the fee application itself.

Amount Awarded

Schleien requested $9,404.24: $5,565 for work on the breach-of-contract claim, $3,600 for preparing and briefing the fee motion, and $239.24 in costs. The court accepted the defendants’ estimate that 40% of the $13,912.50 billed for the motion to dismiss was attributable to the contract claim. It found the $375 hourly rate reasonable and the billing records sufficiently specific.

The court denied recovery for work on the unfair-competition claims because the settlement agreement was the only basis for attorneys’ fees. It also found that the requested 9.6 hours for the fee motion and reply was excessive and insufficiently documented, so it reduced the $3,600 request by 50%, to $1,800.

Disposition

Judge Valerie Caproni granted defendants’ motion for attorneys’ fees in part. The order states that Defendant Schleien is entitled to recover $7,604.24 in attorneys’ fees and costs from SA Luxury: $5,565 for the contract-related defense, $1,800 for the fee motion, and $239.24 in costs.