NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 05a0093n.06
Filed: February 8, 2005
No. 03-5650
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
GENERAL ELECTRIC COMPANY, a New )
York Corporation, through its GE Appliance )
business component, )
Plaintiff-Appellant, )
)
GE INFORMATION SERVICES, INC., ) ON APPEAL FROM THE UNITED
Plaintiff ) STATES DISTRICT COURT FOR THE
) WESTERN DISTRICT OF KENTUCKY
MABE, S.A., )
Plaintiff )
v. )
)
LATIN AMERICAN IMPORTS, S.A., dba )
LATAM, )
Defendant-Appellee, )
)
GUILLERMO GONZALES NEUMANN, )
Defendant-Appellee )
)
PERUSPHERE, S.A., )
Defendant-Appellee. )
)
Before: COLE and ROGERS, Circuit Judges; COHN, District Judge.*
ROGERS, Circuit Judge. GE appeals the district court’s denial of its request for
attorneys’ fees arising from litigation described in the companion case of General Electric Co. v.
Latin American Imports, Nos. 03-5137 and 03-5213, also decided today. Because GE did not
provide sufficient documentation to support its request for attorneys’ fees and because a majority
*
The Honorable Avern Cohn, United States District Judge for the Eastern District of
Michigan, sitting by designation.
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GE, et al v. Latin Amer Imports, et al
of the fees appear to have been generated in the defense of counterclaims for which GE cannot
recover, we affirm.
GE is attempting to recover for attorneys’ fees incurred during the litigation between itself
and Latam.1 The guaranty under which GE was attempting to recover provided that GE would be
reimbursed for “reasonable attorney fees . . . incurred by [GE] in the enforcement of [the] guaranty”
and that the guaranty would be “governed by the law of the State of New York.” In moving for
attorneys’ fees under the guaranty, GE submitted a declaration (“the Bogard declaration”) from
GE’s corporate counsel, Hal N. Bogard, which stated:
I have reviewed each of the statements for fees and disbursements received by GE
from outside counsel, and have been involved in the approval of each of the
statements. These fees total $658,468.30 . . . . I have reviewed each of the statements
and have determined that the attorney fees were reasonably necessary to enforce
GE’s right under the Guaranty executed by Guillermo Gonzalez and to rebut the
defense asserted by Gonzales, to the effect that each of the claims asserted by him
in the Second Amended Counterclaim constituted a defense to the collection under
the Guaranty.
JA 70 (emphasis added). The declaration did not attempt to separate the amount of fees expended
on its affirmative claim under the guaranty from those expended in defense of Latam’s
counterclaims. The district court, however, denied GE’s request for attorneys’ fees because GE did
not provide sufficient documentation to support its request for fees, and because a majority of the
fees were produced in the litigation of counterclaims for which GE could not recover. Although the
1
The facts of the underlying dispute between GE and Latam are set forth in detail in the case
of General Electric Co. v. Latin American Imports, Nos. 03-5137 and 03-5213, also decided today.
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district court applied inapplicable Second Circuit law in reaching this conclusion, the denial of
attorneys’ fees was in any event appropriate under Sixth Circuit law. Thus, the decision of the
district court is affirmed.
In denying the motion for attorneys’ fees, the district court appeared to rely upon Second
Circuit law because “[t]he parties agree[d] that New York law governs the enforceability of the
attorneys’ fees provision of the guaranty.” JA 728 n.1. While it is correct that, per the contractual
choice-of-law provision agreed to by the parties, New York law governs the substantive aspects of
disputes arising under the guaranty, pursuant to the doctrine of Erie R. Co. v. Tompkins, 304 US 64
(1938), federal law governs the procedural aspects of such cases. First Bank of Marietta v. Hartford
Underwriters Ins. Co., 307 F.3d 501, 528 (6th Cir. 2002).
In Marietta, this court considered a general attorney fee statute to be procedural rather than
substantive in nature, where the award of attorneys fees was based upon the conduct of the parties
in filing and litigating the claim, rather than upon the underlying merits of the claim. Id. at 529.
Similarly, the requirement at issue in this case, the type and amount of documentation needed to
support a request for attorneys’ fees, relates only to conduct required by the parties and does not
relate to the underlying merits of the claim. Accordingly, it is a requirement properly characterized
as “procedural” under the doctrine of Erie and should be analyzed using Sixth Circuit law.
The Bogard declaration was insufficient to support GE’s request for attorneys’ fees under
Sixth Circuit law. In Perotti v. Seiter, 935 F.2d 761, 764 (6th Cir. 1991), this court stated that a
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party seeking attorneys’ fees “has the burden of providing for the court’s perusal a particularized
billing record.” See also Moore v. Freeman, 355 F.3d 558, 566 (6th Cir. 2004) (stating that “the
attorney seeking compensation retains the burden of documenting the number of hours spent on the
case and of maintaining records in a way that would allow a court to determine how much time was
spent on each claim.”); Building Service Local 47 Cleaning Contractors Pension Plan v. Grandview
Raceway, 46 F.3d 1392, 1402 (6th Cir. 1995) (stating that the party seeking attorneys’ fees must
present “‘evidence supporting the hours worked and rates claimed’”) (internal citations omitted).
We recognize that an unpublished opinion of this court, Palazzolo v. Benson, No. 95-1067, 1996 WL
156699, at *4 (6th Cir. Apr. 03, 1996), found that the lower court in that case abused its discretion
in denying attorneys fees on several grounds, reasoning in part that a trial court should decide
whether a party is entitled to attorneys’ fees before the party is required to submit documentation
to support its request. However, given the requirement set forth in later, published opinions that the
claimant at least provide the hours worked and the rates charged when requesting attorneys’ fees,
we cannot find the district court to have abused its discretion in this case.
GE did not sufficiently document its request for attorneys’ fees. The Bogard declaration did
not set forth the number of hours worked or the rates charged by attorneys working for GE. Rather,
it simply stated that it was entitled to $658,468.30, an amount significantly higher than the
$214,693.57 that GE was suing for under the guaranty. As the Bogard declaration was missing even
the minimum requirements of hours worked and rates charged, the decision of the district court was
not an abuse of discretion.
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The failure to set forth hours was particularly significant because, as the district court
properly held, GE should not be allowed to recover attorneys’ fees for time spent defending against
Latam’s counterclaims. Whether GE is allowed to recover for time spent defending against Latam’s
counterclaims is a matter relating to the underlying substantive claims between the parties. The
issue is therefore properly characterized as substantive under the Erie doctrine and, accordingly,
state law applies. See First Bank of Marietta v. Hartford Underwriters Ins. Co., 307 F.3d 501, 528
(6th Cir. 2002) (indicating that when the issue of whether to award attorneys’ fees depends on the
underlying substantive claim, the issue is substantive in nature); Alyeska Pipe Line Service Co. v.
Wilderness Society, 421 U.S. 240, 359-60 n.31 (1975) (indicating that in the typical diversity case,
attorneys’ fees should be awarded only if authorized under state law). As a result of the contractual
choice-of-law provision, the proper state law to be applied is New York’s.
It does not appear that New York courts have addressed when a party should be allowed to
recover for fees incurred while defending against counterclaims; however, courts in the District of
Columbia and other jurisdictions have. In Kudon v. f.m.e. Corp., 547 A.2d 976, 980 (D.C. 1988),
a four-factor test was developed to guide the decision of “whether a party requesting an award of
attorneys’ fees pursuant to a contract provision is entitled to a fee recovery for defending a claim
by the party opposing payment of such fees.” The factors are as follows:
(1) whether the party requesting the fees was responsible for precipitating the
litigation;
(2) whether the litigation for which the party relying on the contract provision
recovers the fees was bona fide and made necessary by the party opposing payment
of such fees;
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(3) whether the claim asserted by the party opposing payment of such fees was raised
by way of offset in an attempt to reduce or extinguish the debt owed to the party
requesting fees; and
(4) whether it was necessary for the party requesting the fees to defend against the
claim of the party opposing the fees in order to collect the underlying contractual
obligation
Id. (citations omitted). Courts in Vermont and Kentucky have also utilized this test for similar
claims. See Wright v. Doolin, 607 A.2d 1137, 1139 (Vt. 1992); Tomeo v. Rubarts, No.
2002-CA-002464-MR, 2003 WL 22872406, at *2 (Ky. Ct. App. Dec. 5, 2003); cf. Cordova v.
Southwestern Bell Yellow Pages, __S.W.3d__, No. 08-03-00362-CV, 2004 WL 1800731, *3 (Tx.
App. Aug. 12, 2004) (noting that "[f]ees attributable to the defense of a counterclaim are not
recoverable unless the facts necessary for the plaintiff to recover also serve to defeat the
counterclaim").
Application of the four-factor test set forth in Kudon supports the district court’s denial of
attorneys’ fees incurred in the litigation of counterclaims brought by Latam. Although Latam was
responsible for precipitating the litigation by admittedly failing to pay GE over $200,000 for
liabilities incurred in connection with the Distributorship Agreement, the counterclaims were
independently brought in a different district, and presumably would have been brought without the
guaranty claim. While the action to recover the money owed to GE under the guaranty was bona
fide and made necessary by Latam’s initial refusal to render payment, the claims asserted by Latam
were not originally raised as a defense. Instead, they were raised in a totally separate action and,
by way of consolidation, transformed into counterclaims and affirmative defenses. Notably, Latam
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did not answer GE’s complaint until March of 2002, approximately three years after it was filed.
During those three years, it does not appear that GE took any action to force Latam to respond to
its complaint or to proceed on its claim under the guaranty. When Latam finally did answer GE’s
complaint, Latam did not dispute liability; rather, Latam only disputed that the debt was currently
owed. Despite the admission by Latam that it was liable to GE under the guaranty, GE never moved
for summary judgment on the claim. Under the four-factor test set forth in Kudon, GE should not
be able to recover for the fees incurred in the defense of Latam’s counterclaims.
For the foregoing reasons, the judgment of the district court is AFFIRMED.
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