Opinion
Case No. 3:21-cv-00054-SMR-SBJ
2023-03-22
ANKENY HOTEL ASSOCIATES, LLC, Plaintiff/Counterclaim Defendant, v. OSK X, LLC, Amerinational Community Services, LLC, d/b/a as AmeriNat, OSP Value Fund III, LP, OSP LLC, d/b/a O'Brien Staley Partners, Defendants/Counterclaimant. OSK X, LLC, Third-Party Plaintiff, v. Kinseth Hospitality Company, Inc., Leslie Kinseth, Gary Kinseth, Linda Skinner, and Bruce Kinseth, Third-Party Defendants.
Robert Blake McMonagle, Spencer Matthew Willems, Dentons Davis Brown PC, Des Moines, IA, for Plaintiff/Counterclaim Defendant/Third-Party Defendants. Lance W. Lange, Stephanie Anne Koltookian, Faegre Drinker Biddle & Reath LLP, Des Moines, IA, for Defendants/Counterclaimant/Third-Party Plaintiff.
Robert Blake McMonagle, Spencer Matthew Willems, Dentons Davis Brown PC, Des Moines, IA, for Plaintiff/Counterclaim Defendant/Third-Party Defendants. Lance W. Lange, Stephanie Anne Koltookian, Faegre Drinker Biddle & Reath LLP, Des Moines, IA, for Defendants/Counterclaimant/Third-Party Plaintiff. ORDER OSK X, LLC's MOTION FOR SUMMARY JUDGMENT ON COUNTERCLAIM AND THIRD-PARTY COMPLAINT STEPHANIE M. ROSE, CHIEF JUDGE
The question before the Court is whether a hotel operator, Ankeny Hotel Associates, LLC, ("AHA") is contractually responsible for indemnification of attorney's fees after suing its lender ("OSK") to prevent the imposition of a penalty interest rate after the hotel experienced financial difficulties caused by the COVID-19 pandemic. OSK argues that the loan documents clearly provide that AHA is responsible for such fees, and that AHA could have avoided the costs of litigation by acknowledging the weakness of their claims after failing to obtain a preliminary injunction earlier in this case. OSK seeks summary judgment on the fees, asking the Court to enter a declaratory judgment finding that AHA and the individual guarantors of the loan are each jointly and severally liable for their attorney's fees and expenses.
AHA responds that the contract provision for attorney's fees violates Iowa public policy because it is unilateral. Additionally, AHA asserts that enforcement of this provision would discourage parties from pressing their legal claims in court and give an advantage to parties who seek to engage in wrongful actions by shielding them from the costs of litigation. It further objects to indemnification for attorney's fees for OSK's loan servicer because there is no contract between AHA and the company. It finally asserts the amount of fees sought by OSK is unreasonable.
I. FACTUAL BACKGROUND
The facts in this Section are derived from OSK's Statement of Undisputed Material Facts in Support of its Motion for Summary Judgment. [ECF No. 131-2] (sealed). None of the facts discussed in this Section are disputed by AHA. See [ECF No. 137-1] (sealed). OSK requested oral argument on the Motion but the Court determines it can be resolved without the benefit of one. See LR 7(c).
A. First Borrowing Agreement
In May 2018, AHA entered into a Loan Agreement, Promissory Note, and Mortgage Agreement (collectively, "Loan Documents") with Great Western Bank for commercial real estate located in Ankeny, Iowa. [ECF No. 131-2 ¶ 10]. The interest rate on the loan was 4.50% per year. Id. ¶ 11. On the same day the Loan Documents were signed by AHA, the individual Defendants ("Guarantors") each signed a personal Guaranty (collectively, "Guarantees"). Id. ¶¶ 28-32. Each Guarantor agreed to fully guarantee all of AHA's obligations and liabilities "in its most comprehensive sense" under the Loan Documents. Id. ¶¶ 34-36.
The Guarantors are the above-captioned Third-Party Defendants: Kinseth Hospitality Company, Inc., Bruce Kinseth, Leslie Kinseth, Gary Kinseth, and Linda Skinner.
The Loan Documents included certain covenants to ensure AHA's financial stability, one of which is the Debt Service Coverage Ratio ("DSCR"). The DSCR required AHA to maintain a certain level of profitability, before and after distributions to members. Id. ¶¶ 12, 14-15. The DSCR was defined in the Loan Agreement as "the relationship, expressed as a numerical ratio, between (i) Borrower's EBITDA before distributions for the applicable calendar annual period and (ii) the interest expense, and current principal portion of long-term debt for the calendar annual period." Id. ¶¶ 14, 15.
EBITDA is an accounting acronym for "Earnings before interest, taxes, depreciation, and amortization."
If AHA did not satisfy the DSCR, the Loan Documents defined that as an event of default. Id. ¶ 16. An event of default would automatically increase the interest rate to 18.00% per year. Id. ¶ 17. If AHA experienced an event of default, it was obligated to notify OSK in writing within five days. Id. ¶ 19.
B. Amendment to the Loan Agreement
On December 18, 2020, AHA and Great Western Bank entered into an Amendment to the Loan Agreement, which included a Notice and Acknowledgement of Noncompliance. Id. ¶ 22. This Amendment stated that AHA had not complied with the DSCR covenants during the calendar year ending on December 31, 2019. Id. ¶ 23. The Amendment added additional reporting requirements for AHA, such as providing a monthly balance sheet and income statement, a Certificate of Compliance, and submission of Smith Travel Accommodation Reports at the end of each quarter. Id. ¶ 24. The Certificate of Compliance also contained a DSCR requirement. Id. ¶ 25.
A Smith Travel Accommodation Report is a metric used to measure hotel performance. See In re Kinser Grp. LLC, Case No. 2:20-bk-09355-DPC, 2020 WL 7633854 (Bankr. D. Ariz. Dec. 18, 2020) (describing a STAR Report as "an important publication if one wishes to obtain information about a hotel's performance.").
C. Assignment of AHA Loan
Shortly after the Amendment was agreed to, Great Western Bank assigned the Loan Agreement, Promissory Note, and Mortgage to OSK. Id. ¶ 42. The Loan Documents expressly stated that Great Western Bank had "the right to sell, assign, transfer[ ] . . . any interest" to successors and assigns. Id. ¶¶ 43-44. AHA was notified of the assignment within days. Id. ¶ 45.
AHA submitted its 2020 financial statements to OSK in early January pursuant to the terms of the Loan Agreement. Id. ¶ 56. The financial statements reflected that AHA was not in compliance with the DSCR covenant for either pre- or post-distribution. Id. ¶ 60. However, OSK's loan servicer, AmeriNat, did not provide a Notice of Event of Default until May 11, 2021. Id. ¶ 64. This notification also included the notice of the default rate and contained a reservation of rights notice. Id. ¶ 64. The Notice of Event of Default expressly stated that OSK had not waived the specific default or any other default and it expressly reserved all of its rights, powers, privileges, and remedies under the Loan Agreement. Id. ¶ 66.
AHA refused to pay the default interest rate, asserting that OSK did not give AHA an opportunity to cure the default. Id. ¶ 69. On June 9, 2021, AHA sought a payoff statement from AmeriNat so it could secure refinancing from another lender. Id. ¶ 70. OSK responded that it would provide a payoff statement on the condition that it collected the default interest that had accrued from January 1, 2021 through the payoff date. Id. ¶ 71.
II. PROCEDURAL BACKGROUND
AHA initiated this case on June 16, 2021 when it filed a motion for declaratory relief and preliminary injunction against OSK. [ECF No. 1]. AHA sought a preliminary injunction to prohibit OSK from collecting the default interest rate on the Loan Agreement and Promissory Note. It stated that a preliminary injunction was necessary because it was prepared to refinance with another lender at a favorable rate which was "time sensitive." [ECF No. 3-1 at 8]. On July 6, 2021, the Court denied the motion for preliminary injunction after finding that AHA could not satisfy the factors necessary for such preliminary relief. [ECF No. 19]. It concluded that AHA could not satisfy any of the Dataphase factors to obtain a preliminary injunction, in particular the irreparable harm element, because the injury could be remedied with money damages in lieu of preliminary relief. Id. at 10.
AHA then refinanced the loan around July 13, 2021. [ECF No. 137-1 ¶ 72]. The payoff amount for the loan refinance included 18.00% interest plus OSK's attorney's fees through that date. Id. ¶ 73. OSK followed up by answering the Complaint and asserting a counterclaim of its own for indemnification of attorney's fees and expenses. [ECF No. 24]. It also filed a Third-Party Complaint against the Guarantors for the same, along with a request for declaratory judgment. [ECF No. 25]. The case then proceeded to discovery.
On February 23, 2022, AHA filed a Second Amended Complaint ("SAC") after obtaining leave from the Court. [ECF Nos. 62, 63]. The SAC added OSP, LLC, AmeriNat, and OSP Value Fund III, LP, as Defendants. [ECF No. 63].
The SAC identifies OSP, LLC as the parent company of AmeriNat. OSK X, LLC is a wholly owned subsidiary of OSP Value Fund III, LP. [ECF No. 63 ¶¶ 3-8]. For simplicity, Defendants will be collectively referred to as OSK except when the distinction is relevant.
Soon after AHA filed the SAC, OSK moved to dismiss. [ECF Nos. 72, 74]. AHA initially filed a resistance to the motions to dismiss and then—on the same day—moved to voluntarily dismiss all parties under Rule 41. [ECF Nos. 78, 79, 80]. AHA explained in its Rule 41 motion that "it believes it has meritorious grounds to continue to pursue its claims against OSK. However, in light of the extensive discovery, strategy, motions practice, and the reality of the time and expense required to fully litigate its claims against OSK, AHA is seeking this Court's leave to voluntarily dismiss OSK—as well as Value Fund and OSP—without prejudice." [ECF No. 80 at 2]. AHA wrote that it "will continue to litigate this matter against AmeriNat," but eight days later the company changed its mind and filed a Rule 41 motion to dismiss AmeriNat explaining that it "elected not to further pursue its claims against AmeriNat at this time as a matter of practicality and economics." [ECF Nos. 80 at 3; 92 at 2].
OSK and AmeriNat responded to AHA's Rule 41 motions by asserting the case "has resulted in a colossal waste of time and resources" and sought a dismissal of AHA's claims with prejudice including an award for attorney's fees and costs. [ECF Nos. 97, 99]. OSK then amended its counterclaims and third-party complaint to recoup attorney's fees incurred by AmeriNat after it was named as a Defendant in the SAC. [ECF Nos. 115, 116].
OSK has now filed a Motion for Summary Judgment on its counterclaim and third-party complaint. [ECF No. 130]. It seeks judgment as a matter of law on its claims for indemnification of attorney's fees and expenses from both AHA and the Guarantors. OSK also asks for declaratory judgment finding that each Guarantor is jointly and severally liable for its reasonable attorney's fees and expenses incurred during the litigation. AHA resists the Motion for Summary Judgment, claiming that the attorney's fees provision is barred under Iowa law as a violation of public policy. [ECF No. 137].
III. DISCUSSION
A. Summary Judgment Standard
Rule 56 of the Federal Rules of Civil Procedure provides that a party may move for summary judgment for each claim on which it asserts that there is no genuine dispute of material fact. Fed. R. Civ. P. 56(a). Summary judgment is proper when the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Paulino v. Chartis Claims, Inc., 774 F.3d 1161, 1163 (8th Cir. 2014). At the summary judgment stage, courts must view "the facts in the light most favorable to the nonmoving party and give that party the benefit of all reasonable inferences that can be drawn from the record." Pedersen v. Bio-Med. Applications of Minn., 775 F.3d 1049, 1053 (8th Cir. 2015). The existence of some alleged factual dispute between the parties will not defeat a motion for summary judgment; there must be no genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In cases such as this one, which represent legal rather than factual issues, "summary judgment is particularly appropriate." Ritchie Cap. Mgmt., LLC v. Stoebner, 779 F.3d 857, 861 (8th Cir. 2015) (quoting In re Cochrane, 124 F.3d 978, 982 (8th Cir. 1997)).
B. Analysis
OSK argues that its contractual right to recover attorney's fees is "absolute and ironclad" and points to several different provisions in the Loan Documents that contemplate indemnification of its attorney's fees and costs incurred in litigation related to the Loan Documents. [ECF No. 133 at 3-4]. It requests the Court enforce these provisions as they were the result of negotiated terms contained in commercial loan agreements between sophisticated parties.
AHA, on the other hand, urges the Court to reject OSK's stance that AHA is responsible for all of its attorney's fees, characterizing the request as "wildly inflated" and "brazen." [ECF No. 137 at 3]. In AHA's view, the provisions on which OSK relies to support its request for attorney's fees "is plainly a violation of public policy" and would serve to "undermine" the Federal Rules of Civil Procedure. Id. at 6. If the Court were to enforce the contract provisions, AHA predicts that it would deter parties from pursuing their contractual claims in court and encourage bad-faith business practices on the part of lenders. Even if the Court determines that the provisions are enforceable, AHA contends it is not obligated to pay AmeriNat's attorney fees in the absence of a written agreement and any fees to which OSK is entitled should be reduced because it urges that the current request is unreasonable.
1. Relevant Contractual Provisions
a. Arguments of the Parties
There are four provisions in the various Loan Documents which contemplate indemnification of attorney's fees for OSK. One such clause is contained in the Loan Agreement:
COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs, and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel), expended or incurred by Bank in connection with . . . (b) the enforcement of Bank's rights and/or the collection of any amounts which become due to Bank under any of the Loan Documents, and (c) the prosecution or defense of any action in any way related to any of the Loan Documents, including without limitation, any action for declaratory relief whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding . . . relating to any Borrower or other person or entity.[ECF No. 131-2 ¶ 21].
Similarly, the Promissory Note provides:
ATTORNEYS' FEES; EXPENSES. Bank may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Bank that amount. This includes, subject to any limits under applicable law, Bank's reasonable attorneys' fees and Bank's legal expenses, whether or not there is a lawsuit, including without limitation all reasonable attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower will pay any court costs, in addition to all other sums provided by law. Agreement provides that OSK is entitled to reasonable attorney's fees expended or incurred "in connection with . . . the prosecution or defense of any action in any way related to any of the Loan Documents."Id. ¶ 20.
The Mortgage Agreement also contemplates an entitlement to attorney's fees under certain circumstances:
In the event Mortgagor should default under any of the provisions of this Mortgage and should Mortgagee employ attorneys
or incur other expenses for the collection of amounts then due or to become due or the enforcement of performance or observance of any covenant, condition, obligation or agreement on the part of the Mortgagor herein contained, Mortgagor agrees pursuant to the provisions of the Promissory Note and the Loan Agreement that it will on demand therefor pay to Mortgagee the reasonable fee of such attorneys and such other reasonable expenses so incurred by Mortgagee.[ECF No. 131-3 at 89].
The Guarantees provide that the Guarantors are jointly and severally liable for all the obligations and liabilities of AHA "in its most comprehensive sense." Id. ¶¶ 27, 34. The obligation of the Guarantors for any attorney's fees incurred is addressed by Section 19 of the Guarantees:
Attorney's Fees. Guarantor shall pay to Bank all costs and expenses, including, but not limited to reasonable attorney fees, incurred by Bank in connection with the administration, enforcement, including any bankruptcy, at trial and on appeal, or the enforcement of any judgment or any refinancing or restructuring of the Guarantor's obligations under this Guaranty or any document, instrument of agreement executed with respect to, evidencing or securing the Indebtedness hereunder.Id. ¶ 41.
AHA contends that the Court should outright "disregard" the attorney's fees provisions in the Mortgage Agreement and the Guarantees. It argues that OSK seems to regard each provision as interchangeable, but it asserts they apply to distinct scenarios providing grounds to obtain attorney's fees in different situations.
AHA argues that the provision in the Mortgage Agreement does not apply to this dispute. It insists that the Mortgage Agreement provision states that the mortgage holder is entitled to reasonable attorney's fees when collecting on amounts due or enforcing the performance of a term of the mortgage. Therefore, AHA maintains the provision in the Mortgage Agreement should not apply because OSK did not file a claim for breach of contract or declaratory action against AHA or the Guarantors, and there are no amounts due to OSK under the loan. It contends that it paid all amounts due under the Loan Documents, so OSK's claim for attorney's fees is circular.
AHA further contends that the clauses in the Guarantees cannot be applied to the Guarantors because those pertain to the enforcement of a judgment or refinancing of obligations. OSK did not file any action to enforce the terms of the Loan Agreement, and the only basis for its claims is seeking attorney's fees, according to AHA. Therefore, it urges the Court to disregard these Loan Documents as a basis for the relief sought by OSK.
OSK responds that the Guarantees provide that payment is due to them "on demand . . . an amount equal to the Indebtedness." [ECF No. 131-2 ¶ 35]. Furthermore, the attorney's fees provision in the Guarantees encompasses "the enforcement, including any bankruptcy, at trial and on appeal, or the enforcement of any judgment or any refinancing or restructuring of the Guarantor's obligations under this Guaranty or any document, instrument of agreement executed with respect to, evidencing, or securing the Indebtedness hereunder." Id. ¶ 41. This provision, OSK argues, does not require a preexisting judgment against AHA or the Guarantors. Rather, it applies to both the enforcement of any judgment or any other kind of judicial enforcement action. [ECF No. 148 at 3].
b. Discussion
AHA's argument disputing the applicability of the Mortgage Agreement provision is a red herring. AHA acknowledges that OSK does not rely on the Mortgage Agreement in its motion for attorney's fees. [ECF No. 137 at 8] (noting that "OSK curiously does not quote from [the Mortgage] in support of its claims[.]"). It also concedes that the provisions located in the Promissory Note and Loan Agreement do provide a "colorable basis" for OSK's attorney's fees claim. Id. at 9. Its argument regarding the Guarantees is incorrect and ignores other clauses which clearly indicate the documents' applicability here.
The language set forth in the Guarantees provides for indemnification of attorney's fees under those documents and it does not necessitate the enforcement of a previous judgment. The provision's reference to "any bankruptcy, at trial and on appeal" is a non-exclusive illustration of its application but the operative language is "the enforcement . . . of the Guarantor's obligations under this Guaranty[.]" See, e.g., [ECF No. 131-3 at 129]. Because the Guarantors agreed to guarantee the debt of AHA "in its most comprehensive sense," such a guarantee would include any obligation for attorney's fees arising under the Loan Documents. Id. at 125. OSK's request for attorney's fees can be considered pursuant to the terms of the Loan Agreement or the Promissory Note, as AHA recognizes, and the Guarantees provide for liability on the part of the Guarantors for any such indebtedness.
2. Violation of Public Policy
a. Arguments of the Parties
AHA asks the Court to refuse to enforce the attorney's fees provisions in this case. It claims that Iowa public policy does not permit an award of unilateral attorney's fees. Iowa law follows the American Rule regarding attorney's fees which provides that "the losing litigant does not normally pay the victor's attorney's fees." Guardianship & Conservatorship of Radda v. Wash. State Bank, 955 N.W.2d 203, 214 (Iowa 2021) (citation omitted). However, attorney's fees may be recovered from the opposing party, if pursuant to a statute or contractual agreement. Thornton v. Am. Interstate Ins., 897 N.W.2d 445, 474 (Iowa 2017); NevadaCare, Inc. v. Dep't of Hum. Servs., 783 N.W.2d 459, 470 (Iowa 2010) (holding "[w]hen a contract contains a clear and express provision regarding attorney fees, the court's award must be for reasonable attorney fees.").
Neither party disputes that the provisions at issue only provide for attorney's fees for OSK and not AHA.
Despite the contractual exception to the American Rule, AHA maintains the provision at issue here should not be enforced because it violates Iowa public policy. It argues that it is Iowa's public policy that legal disputes should be resolved based on the merits, and a unilateral attorney's fees provision benefiting only one of the parties to a contract would discourage parties from pursuing their legal claims in court. AHA maintains that the goal of the American Rule is to serve equity, so as to not punish or deter parties from pressing their legal rights in court for fear of bearing the attorney's fees of their legal adversary. AHA seeks statutory support for its proposition in Iowa Code § 625.22, which it asserts "is simply codification of the American Rule" and codifies the policies underlying it.
AHA goes on to argue that the provisions in the Loan Documents are "ridiculously broad" and are "in profound contradiction" with legal and equitable principles of American law. [ECF No. 137 at 12-13]. If the Court were to enforce the provisions, it would allegedly "sanction conduct expressly prohibited by the court rules of Iowa and the federal judiciary." Id. at 13 (citing Iowa R. Civ. P. 1.413 and Fed. R. Civ. P. 11).
OSK counters that Iowa public policy does not prohibit sophisticated parties from shifting the risk of litigation as part of a multi-million dollar loan agreement. AHA is unable to cite any case law or other clear public policy that would justify voiding an existing contractual right. OSK points out that AHA is the original plaintiff in the case and the party who initiated the lawsuit. It asserts that high costs of the request are the result of AHA's extensive litigation and motion practice including multiple amendments to the pleadings and addition of parties.
b. Case Law
"Ordinarily, indemnifying agreements will be enforced according to their terms, as in any other contract case." United Suppliers, Inc. v. Hanson, 876 N.W.2d 765, 780 (Iowa 2016) (quoting Martin & Pitz Assocs., Inc. v. Hudson Constr. Servs., Inc., 602 N.W.2d 805, 808 (Iowa 1999)). Contractual principles of formation, validity, and construction apply to indemnity agreements as they do to any other contract. McNally & Nimergood v. Neumann-Kiewit Constructors, Inc., 648 N.W.2d 564, 571 (Iowa 2002); see also Alliant Energy-Interstate Power & Light Co. v. Duckett, 732 N.W.2d 869, 877 (Iowa 2007) (explaining "[t]he agreement in each case ultimately determines the rights of the parties because our legal principles concerning indemnification are often qualified by the particular terms of the agreement."). Interpretation of indemnity clauses is a legal issue unless the interpretation of the clause depends on extrinsic evidence. Am. Fam. Mut. Ins. Co. v. Petersen, 679 N.W.2d 571, 575 (Iowa 2004).
AHA does not assert there was invalidity in the formation of the contract. It also does not challenge that OSK performed its duties under the contract. Rather, it expressly states in its resistance that it "asks this Court to deny OSK's claims for attorney fees as predicated on contract language that violates public policy." [ECF No. 137 at 3-4]. Thus, the sole issue which the Court must resolve is whether the attorney's fees provisions that OSK seeks to enforce are in violation of Iowa public policy.
In Iowa, contracts that violate public policy will not be enforced. Rogers v. Webb, 558 N.W.2d 155, 156 (Iowa 1997). The Iowa Supreme Court has determined that a contract violates public policy if it "tends to be injurious to the public or contrary to the public good" and enforcement of the contract "is clearly outweighed in the circumstances by a public policy." Walker v. Gribble, 689 N.W.2d 104, 111 (Iowa 2004) (quoting Rogers, 558 N.W.2d at 157). Establishing a violation of public policy may be accomplished through identification of legislative or judicial determinations and comparison of public policies from other jurisdictions. Walker v. Am. Fam. Mut. Ins. Co., 340 N.W.2d 599, 601 (Iowa 1983).
Iowa courts have emphasized that "[t]he power to invalidate a contract on public policy grounds must be used cautiously and exercised only in cases free from doubt." DeVetter v. Principal Mut. Life Ins. Co., 516 N.W.2d 792, 794 (Iowa 1994); Skyline Harvestore Sys., Inc. v. Centennial Ins. Co., 331 N.W.2d 106, 109 (Iowa 1983) (observing that "[f]or a court to undertake to invalidate private contracts upon the ground of public policy is to mount a very unruly horse, and when you once get astride it, you never know where it will carry you.") (citation and internal quotations omitted). The welfare of the public must "imperatively" demand a court's action before it invalidates a private contract, so as to not "curtail the liberty to contract[.]" Am. Fam. Mut. Ins. Co., 340 N.W.2d at 601 (quoting Tschirgi v. Merchs. Nat'l Bank of Cedar Rapids, 253 Iowa 682, 113 N.W.2d 226, 231 (1962)).
c. Analysis of Provisions
i. Iowa Code Section 625.22
AHA first points to Iowa Code § 625.22 for support. It urges that § 625.22 does not allow for attorney's fees in this case because it requires a judgment related to the subject contract. See Iowa Code § 625.22(1) (providing "[w]hen judgment is recovered upon a written contract containing an agreement to pay an attorney fee, the court shall allow and tax as a part of the costs a reasonable attorney fee to be determined by the court."). If § 625.22 were read to support OSK's position, AHA insists, it would run "contrary to centuries of established legal and equitable principles." [ECF No. 137 at 12]. Without any underlying judgment, AHA objects that OSK is entitled to attorney's fees regardless of the outcome. It argues that this type of contractual fee agreement incorporates "the worst aspects of both the American and the British rule: that [OSK] is entitled to fees in the event it obtained a judgment and that it would be entitled to fees in the event it lost a judgment based on these Loan Documents." Id. at 13.
OSK responds that AHA's argument regarding Iowa Code section 625.22 is meritless. It explains that Iowa Code § 625.22 does not codify the American Rule, but designates two exceptions to it. According to OSK, the purpose of § 625.22 is to set forth a procedure for determining damages, costs, and attorney's fees in a single order after judgment has been obtained on a contract containing a provision for attorney's fees. Here, OSK urges it is entitled to attorney's fees as substantive damages under the Federal Rules of Civil Procedure.
AHA's reliance on § 625.22 is erroneous. Iowa Code § 625.22 does not contemplate a staggered procedure where judgment is entered first and reasonable attorney's fees are determined in a different proceeding. As OSK points out, it provides a streamlined process to address damages, costs, and attorney's fees after a judgment on a contract has been entered. If § 625.22 was intended to "codify" the American Rule, it does so indirectly because its plain terms describe exceptions to the Rule, not a codification of it. The statute does not declare that any exception to the American Rule must comply with it either. Section 625.22 provides no grounds for invalidation of the fee provisions.
Nevertheless, determination of attorney's fees in this case is governed by Federal Rule of Civil Procedure 54(d)(2), which requires attorney's fees to be proven at trial or summary judgment if the contract provides for attorney's fees upon the event of breach and initiation of enforcement activities. See Farmers Coop. Soc'y, Sioux Center, Iowa v. Leading Edge Pork, LLC, No. 16-CV-4034-LRR, 2017 WL 3496498, at *2 (N.D. Iowa Aug. 15, 2017) (holding a contract provision for attorney's fees was not a "prevailing party provision," thus the "attorney's fees became due immediately upon a breach by the contracting party and, therefore, rendered the attorney's fees as substantive damages."). Because this Motion is before the Court on summary judgment, seeking a declaratory judgment to enforce the fee indemnification provision, Rule 54(d) governs the imposition of any attorney's fees.
ii. Vexatious and Harassing Litigation
AHA believes that enforcement of the provision would run afoul of the Iowa Rules of Civil Procedure and enable an increase in vexatious and harassing litigation. Iowa Rule of Civil Procedure 1.413 prohibits meritless legal actions instituted for "improper purpose[s]" including to "harass or cause an unnecessary delay or needless increase in the cost of litigation." Iowa R. Civ. P. 1.413. Indemnified parties would be more inclined to engage in such vexatious litigation, according to AHA, because "there is nothing to deter it from pursuing aggressive litigation with no regard for the merits." [ECF No. 137 at 13]. Under this scenario posited by AHA, a bad-faith litigant would be entitled to attorney's fees from a faultless and prevailing party.
OSK rejects AHA's position on this accord too. It first asserts that it did not violate any rules and it did not use litigation for any improper purpose. Pointing out that AHA initiated this case, OSK responds that it merely defended itself. It argues that its litigation strategy was not intended to accumulate fees, citing its decision to decline to resist AHA's motion to retroactively extend the deadline for motions to amend pleadings and add parties, and it also did not take any depositions after AHA dismissed its claims. It says these were reasonable actions that are consistent with reasonable business judgment.
OSK next contends that AHA's fears about a party pursuing meritless litigation in hopes of recovering attorney's fees is baseless. Furthermore, OSK maintains that AHA's concerns about improper litigation tactics can arise in any context and eliminating the attorney's fees provisions in this case will not further the public policy of encouraging fair resolution of claims on the merits. On the contrary, it writes that striking down these provisions may lead to debtors filing meritless lawsuits, causing lenders to incur significant legal fees and waste time, and then dismiss their cases without any risk of being held to their contractual obligations.
The Court finds that AHA's proffered evils arising from the enforcement of the attorney's fees provisions are groundless. There are numerous reasons why parties should not engage in frivolous litigation beyond concern about legal costs. Such reasons include potential court-ordered sanctions against parties who bring meritless or harassing litigation. See Fed. R. Civ. P. 11(b)(2) (providing that, by filing a complaint, an attorney certifies that to the best of their knowledge "the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law," and "the factual contentions have evidentiary support."). The Iowa Rules of Professional Conduct also prohibit frivolous litigation. See Iowa R. Civ. P. 32:3.1, 32:3.3, 32:3.4, 31.13. Iowa attorneys who engage in such legal tactics risk admonishment and sanction by the Iowa Supreme Court. See Iowa Sup. Ct. Att'y Disciplinary Bd. v. Daniels, 984 N.W.2d 757, 767 (Iowa 2023) (six-month suspension); Iowa Sup. Ct. Att'y Disciplinary Bd. v. Widdison, 960 N.W.2d 79, 98 (Iowa 2021) (ninety-day suspension); Iowa Sup. Ct. Att'y Disciplinary Bd. v. Daniels, 838 N.W.2d 672, 679 (Iowa 2013) (public reprimand).
Additionally, parties have the option to not enter contracts with provisions that indemnify their counterparty to avoid being exposed to any frivolous litigation. Even with a unilateral attorney's fees provision, parties may still choose to bring a suit to assert their legal rights anyway—just like AHA did in this case. AHA was not deterred from pursuing its rights in this Court despite a unilateral attorney's fees provision. In fact, OSK expressly advised AHA of the potential liability for indemnification of its attorney's fees and litigation costs in a July 8, 2021 letter, shortly after AHA initiated this case. [ECF No. 131-5 at 44-46]. Finally, there is absolutely no indication that OSK's litigation tactics served the purpose of accruing attorney's fees and AHA identifies no specific actions taken by the Defendant.
It is worth emphasizing that AHA initiated this case. Upon filing its Complaint, it sought an expedited hearing on its motion for a preliminary injunction. [ECF No. 1]. As required by Local Rule 65, AHA included a statement setting forth the particular facts which necessitated preliminary relief in its favor. Among the reasons for the requested relief, AHA represented to this Court "[w]ithout proper payoff amount and commitment to [release] the mortgage upon payment of such amount, the refinancing cannot occur." [ECF No. 1-10 ¶ 5] (emphasis added). This was the basis for AHA's argument that it would suffer irreparable harm without preliminary relief. [ECF No. 1-11 at 8]. After the Court denied the relief sought by AHA, it proceeded with a refinancing of the loan a week later anyway. [ECF No. 131-2 ¶ 72]. AHA continued with the litigation—amending their complaint twice, adding parties, and engaging in extensive document discovery before moving to dismiss certain defendants on the same day it had resisted motions to dismiss those same defendants. It now asks for the invalidation of the attorney's fees provisions—to which it agreed and of which it was reminded by OSK early in the case—on the basis that it encourages meritless and vexatious litigation. The argument that a unilateral attorney's fee provision should not be enforced in a case where the beneficiary of the provision was a defendant is entirely without merit.
iii. Restatement (Second) of Contracts
Next, AHA argues that the provisions should be invalidated based on the principles in the Restatement (Second) of Contracts, which Iowa courts look to when determining the enforceability of a contract. Mincks Agri Ctr., Inc. v. Bell Farms, Inc., 611 N.W.2d 270, 274 (Iowa 2000). Section 178 of the Restatement (Second) of Contracts provides that "[a] promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms." Restatement (Second) of Contracts § 178(1). Factors favoring contract enforcement include the parties' justified expectations, the forfeiture resulting from non-enforcement, and any special public interest in favor of enforcement. Id.§ 178(2). Factors militating against enforcement of a contract include the strength of the public policy at issue, the likelihood that the policy will be furthered by non-enforcement, the seriousness of any violative conduct, and the connection between that misconduct and the term of the contract at issue. Id. § 178(3).
AHA asserts that its position on the provision is supported by the Restatement factors. Addressing the parties' justified expectations, AHA says it is disingenuous for OSK to assert the contract provision was bargained for because it had entered into the financing agreement with a local and long-time business lender" who excused its non-compliance with the contractual requirements. [ECF No. 137 at 15]. Describing OSK as a "foreign, private equity firm," AHA states it informed OSK of its breach of the DSCR and discussed the need for a waiver shortly after OSK acquired its loan. Id. It complains that AHA was not "disabused" by OSK or AmeriNat that its DSCR was excused but only instructed that its payments would remain at the non-default interest level. Id. Soon thereafter, AHA claims it was ambushed by the notice of intent to default the loan and collect retroactive interest. It then brought this lawsuit "to vindicate its rights under the Loan Documents and point out OSK's negligent, if not oppressive conduct—only to be told that OSK would be demanding AHA to pay for all of OSK's legal fees." Id. In light of these circumstances, AHA argues that it could not have reasonably expected to defend itself from the predatory actions of a new private equity lender, let alone to be required to pay that predatory creditor to vindicate its own rights.
The Complaint identifies OSK as a Minnesota company with its principal place of business in Edina, Minnesota. [ECF No. 1 ¶ 3].
AHA goes on to argue that there is no special public interest in enforcing a provision that requires OSK to bear the cost of its own legal fees in a contract dispute. Rather, it maintains the public interest is best served when parties have equal access and opportunities to press their claims in court, as embodied by the American Rule. According to AHA, when parties can litigate with impunity against opponents who face a Catch-22 of relinquishing their claims and defenses or being forced to pay a premium for the opportunity to assert them, the public interest is "perverted." Id. at 16. AHA insists that the public policy in Iowa is to allow parties access to the courts to litigate their claims and any contractual modification cannot indiscriminately entitle only one party to all attorney's fees regardless of the merits or success of the action.
In other words, AHA insists that Iowa's public policy favors fair litigation and upholds attorney's fee provisions that are awarded through a judgment. Rejecting OSK's position would align with Iowa's public policy by denying the imposition of unfair barriers to debtors asserting their rights. Enforcing such provisions would discourage parties from asserting their rights, punishing them for doing so. AHA argues that OSK is unjustly seeking to penalize it for pursuing its asserted rights under the contract.
OSK retorts that if the attorney's fees provisions are invalidated, it would forfeit its rights to enforce the Loan Documents, which would adversely affect its ability to assess risks and invest in commercial loans. This would go against the public interest in Iowa, which relies on the free flow of investment capital to fund businesses. Additionally, OSK contends that voiding the attorney's fees provisions would not further the policy of obtaining judicial resolution on the merits because it has sought a decision on the merits by moving to dismiss AHA's claims with prejudice and obtain a court order interpreting the Guarantees and indemnification rights under the contracts. It predicts that voiding the attorney's fees provisions would encourage more nuisance suits, draining valuable resources that could have been used to fund more businesses, which is contrary to the public policy of Iowa.
AHA's attempt to invalidate the attorney's fees provisions in the Loan Documents and Guarantees are not supported by any factors identified in the Restatement. This is because the parties involved in a significant commercial transaction, worth over $8 million, have justified expectations that the terms of the contract will be enforced. OSK was entitled to rely on the terms of the contracts when it made the decision to acquire them from Great Western Bank. AHA's position that it should not have expected that it would be liable to OSK for attorney's fees when bringing this suit—despite contract terms providing exactly such indemnity in every relevant Loan Document—is difficult to understand. AHA has not demonstrated that the provision is unenforceable under the Restatement.
iv. Public Policy of Other States
AHA's last refuge in seeking the invalidation of the attorney's fees provisions is that it violates the public policy of other states. While expressly acknowledging that Iowa has not passed laws prohibiting these clauses, it points out that other states have such legislation. Relying on varying laws from California, Connecticut, Delaware, Florida, and Oregon, AHA asks this federal court to impute the public policies of those states into Iowa.
OSK distinguishes AHA's out-of-state authority by pointing out that the state laws cited by AHA convert one-sided attorney's fee provisions into prevailing party provisions. Additionally, OSK argues that some of the states identified by AHA as having similar public policies would not be applicable to the Loan Documents. For instance, Connecticut's law only applies to consumer transactions and aims to safeguard unsophisticated consumers from lenders with disproportionate bargaining power. Furthermore, none of the state laws entirely void the attorney's fees provisions, but rather, they transform the one-sided provisions into prevailing party provisions, as California does. OSK contends that striking down the provisions in this case would not serve the same public policies.
AHA requests that this Court go further than any other state by invalidating the attorney's fees provisions in the Loan Documents retroactively. As AHA acknowledges, Iowa courts "are typically at the forefront in determining whether certain contracts or agreements are void for public policy." [ECF No. 137 at 22]. The Court is persuaded by the fact that, in this case, Iowa has not prohibited or regulated these types of contract provisions. Determining public policy in this sphere is the responsibility of the Legislature and state courts, which have only confirmed that parties are permitted to contract for fee shifting. The Court will decline AHA's invitation and the attorney's fees provisions will be enforced as the parties contracted.
3. Indemnification of AmeriNat
OSK argues that it is entitled to indemnification of its attorney's fees and the attorney's fees it paid on behalf of AmeriNat. [ECF No. 131-1 at 19]. OSK relies on the Loan Agreement which provides, in relevant part: "Borrower shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs, and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel), expended or incurred by Bank in connection with . . . (c) the prosecution or defense of any action in any way related to any of the Loan Documents[.]" [ECF No. 131-2 ¶ 21]. OSK writes that it is entitled as a matter of law to recover the attorney's fees it expended to defend AmeriNat because AmeriNat's attorney's fees were "incurred by" OSK "in connection with" the "defense of an[ ] action . . . related to . . . the Loan Documents." [ECF No. 131-1 at 21].
OSK incurred these fees pursuant to its contractual obligation to indemnify AmeriNat for its attorney's fees arising out of any litigation of AmeriNat's servicing of loans for OSK. [ECF No. 131-2 ¶¶ 46-53]. The relevant contractual language between OSK and AmeriNat is laid out in a Master Services Agreement. [ECF No. 131-4 at 7-24]. It provides that OSK is responsible for indemnifying, defending, and holding AmeriNat harmless:
from and against any and all losses, damages, costs, claims and expenses (including reasonable attorney fees or disbursements of any kind or nature whatsoever (a ' Loss ') which arise after the Closing hereunder and in connection with Servicer's enforcement of the performance or observance of the terms, covenants or conditions of the Asset Documents[.]Id. at 14-15.
OSK argues that this litigation, which included AmeriNat briefly, clearly falls within the language of the Master Services Agreement's indemnification provision because they were "incurred by" OSK "in connection with" the "defense of an[ ] action . . . related to . . . the Loan Documents." [ECF No. 131-1 at 21]. OSK writes that it is entitled to indemnification of the reasonable attorney's fees paid on behalf of AmeriNat as a result.
AHA responds that there is no legal basis for it to be liable for the legal fees accrued by AmeriNat. It contends that it is not a party to any contract with AmeriNat and whatever obligations OSK has to AmeriNat rests solely with OSK. OSK does not assert that AmeriNat is a third-party beneficiary to the Loan Agreement, so AHA contends it has no obligation to pay AmeriNat's attorney's fees. Additionally, AHA points out that AmeriNat, other third-party loan servicers, or indemnitees are not mentioned in any of the Loan Documents at all.
AHA further notes that the Master Services Agreement was not entered into until September 2020, which was years after the Loan Agreement was signed. OSK did not amend the Loan Documents to include attorney's fees for indemnitees, so AHA insists it should not be liable to unnamed parties. AHA points out that some provisions in the Loan Documents contemplate that the company may be obligated to third-parties under certain circumstances, but those relate to collections on the Promissory Note. Id. at 24.
OSK replies that AHA distorts the legal issue by raising third-party beneficiary doctrine, which is inapposite in this case. Because AmeriNat never paid its attorney's fees—OSK did—AHA is liable to OSK for the fees. The Loan Documents provide for AHA to indemnify OSK for reasonable attorney's fees incurred by OSK. OSK argues that its payment of attorney's fees on AmeriNat's behalf was "clearly reasonable" and thus falling within the Loan Document provisions.
The Court agrees with OSK. AmeriNat did not involve itself in this case but was brought in by AHA in the amended complaint. The manner in which OSK "incurred" AmeriNat's attorney's fees arose out of the Loan Documents. Despite dismissing its claims against AmeriNat, AHA insists on continuing to accuse the company of "bad-faith breach of contract, civil conspiracy, and negligent misrepresentation," and maintains this is a basis to deny indemnification of their fees. See id. at 25 (explaining that the "indemnity provision within OSK and AmeriNat's Master Services Agreement expressly excludes its obligation to indemnify AmeriNat for AmeriNat's own 'willful misconduct, bad faith or gross negligence.' "). Because AHA has declined to pursue this case to its merits, the Court will not consider that as a basis for denial of indemnification. The attorney's fees "incurred" by OSK in defense of AmeriNat were reasonable and AHA is contractually liable to OSK for them.
4. Reasonableness of Fees
a. Arguments of the Parties
OSK seeks a judgment in their favor awarding a total of $417,549.61 in attorney's fees, expert fees, and costs. [ECF No. 131 at 5]. In support of this request, OSK has submitted a detailed listing of the time claimed for each specific task and the hourly rate charged. The itemization reflects the total time spent on each task. [ECF No. 131-4 at 29-135].
OSK calculated its request for attorney's fees under the familiar lodestar method. The lodestar "is calculated by multiplying the number of hours reasonably expended by reasonable hourly rates." Snider v. City of Cape Girardeau, 752 F.3d 1149, 1159 (8th Cir. 2014). The lodestar carries with it a strong presumption of reasonableness. Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 552, 130 S.Ct. 1662, 176 L.Ed.2d 494 (2010).
OSK also submitted an expert report from Glen Norris, a local trial attorney with extensive experience in complex business litigation. Norris writes that he is familiar with the hourly rates charged by Des Moines-area attorneys with experience and credentials similar to himself. He states the best credentialed and most experienced attorneys charge between $700 to $1000 per hour. [ECF No. 131-5 at 165]. He writes that he charges $750 per hour. Id. In Norris's view, all of the individuals reflected in the billing statements were consulted for appropriate time periods and specific tasks. He believes that the rates charged were appropriate for the level of experience and comparable to the rates charged by other legal professionals in Des Moines. Norris added that the work they did was necessary for the case and focused on the relevant legal issues. The Norris Report is dated February 23, 2022, so his analysis only pertains to the time period between June 2021 and December 2021. Id. at 169.
AHA takes the position that the hourly rates sought by OSK's counsel are exorbitant and unreasonable. It contends that the reasonableness of the rates should be viewed through the Des Moines market rather than the Minneapolis or national market. AHA asks the Court to reject Norris's Report because it cannot satisfy the Daubert standard for expert opinion testimony. It faults Norris's testimony for failing to provide comparators or a survey of fees charged, just providing "self-interested conclusions." [ECF No. 137 at 27-28]. AHA also urges that his opinion "is neither necessary nor welcome" because the Court can make its own determination on reasonable attorney's fees. Id. at 27. AHA concludes by asking the Court to strike fees charged after AHA filed its motions to dismiss AmeriNat, the last remaining Defendant. Id. at 31. It asserts that its motion to dismiss should conclude the case because there is nothing left to "prosecute." Id.
OSK responds that the requested hourly rates are reasonable in the context of the geographical practices of OSK's counsel, and that AHA's challenge to the rates lacks evidentiary support. It adds that AHA's challenge to the hourly rates of defense counsel is unfounded because the vast majority of the work was performed by Iowa attorneys who billed and were paid at reasonable hourly rates in the Iowa market. Nevertheless, OSK urges that the billing rates for the attorneys in this case should be viewed in the context of the national practices of the attorneys involved. OSK contends that AHA presents no evidence, only argument, that defense counsel's hourly rates are unreasonable. Rather than presenting evidence, AHA references research from Thomson Reuters that is not provided for the Court, making it impossible to evaluate. OSK finally argues that the Norris Report can assist the Court with ascertaining if the attorney's fees request is reasonable. Accordingly, OSK concludes that AHA's arguments cannot satisfy the summary judgment standard, which OSK has satisfied through the introduction of the unrebutted expert testimony of Norris.
OSK urges that the case had larger consequences for its business interests, which further supports its legal strategy. Although this case only concerned AHA's loan, if AHA had won, it could have set a precedent for other debtors to challenge their defaults. [ECF No. 148 at 16]. OSK acquired a substantial amount of debt from Great Western Bank for multiple hotel loans and borrowers. Id. If AHA had prevailed, the argument that OSK acted in bad faith could have had significant implications.
Finally, OSK rejects AHA's assertion that a fee award here would entail fees on fees. OSK points out that AHA is disputing the attorney's fees provisions in the Loan Documents in this very motion. Id. at 17. OSK argues that if it is unable to recover attorney's fees for enforcing the terms of the Loan Documents, it will not receive the benefit of its bargain. Rather, it urges that failure to resolve the attorney's fees issue now would result in a secondary litigation which would lead to a fees-on-fees situation. Id. OSK finally contends it would be an unfair outcome if a borrower can dismiss their case before it reaches the merits stage without being liable under the attorney's fees provisions.
b. Analysis
As an initial matter, AHA's Daubert challenge to the Norris Report is improper under the Local Rules, which requires that a party file a separate or cross-motion for such a challenge. See LR 7(e) (providing "[a] resistance to a motion may not include a separate motion or a cross-motion by the responding party. Any separate motion or cross-motion must be filed separately as a new motion."). If AHA wanted to challenge the admissibility of Norris's opinions, it needed to file a separate Daubert motion. Consequently, the opinions contained in the Norris Report are considered unchallenged for the purposes of this Motion.
The Court has broad discretion to determine reasonable fees. Hanig v. Lee, 415 F.3d 822, 825 (8th Cir. 2005). "The essential goal in shifting fees . . . is to do rough justice, not to achieve auditing perfection." Fox v. Vice, 563 U.S. 826, 838, 131 S.Ct. 2205, 180 L.Ed.2d 45 (2011). The factors for the Court to consider in awarding attorney's fees include: (1) time; (2) nature and extent of the service; (3) the amount involved; (4) difficulty and importance of the issues; (5) responsibility assumed; (6) results obtained; (7) standing and experience of the attorneys in the profession; and (8) customary charges for similar services. Schaffer v. Frank Moyer Constr., Inc., 628 N.W.2d 11, 23-24 (Iowa 2001) (quoting Landals v. George A. Rolfes Co., 454 N.W.2d 891, 897 (Iowa 1990)).
AHA contests only a few of the factors. First, it claims that the damages at stake in this case was limited to $660,496.59, relying on its request for money damages reflected most recently in the SAC. [ECF No. 63 at 13] (requesting "that the court award a money judgment to compensate AHA for its injuries in an amount not less than $660,496.59."). But as OSK points out, AHA also sought attorney's fees and punitive damages. Id. at 20. As a result, the potential damages were much greater than AHA portrays. Next, AHA blamed OSK for many of the expenses related to the litigation, but AHA itself contributed to much of the motions practice and other filings by bringing the lawsuit, requesting a preliminary injunction, adding defendants at the last minute, and raising new legal issues. The fact that some of OSK's motions were denied is not a reason to reject their request for attorney's fees.
AHA lodges objections to the hourly rate charged by defense counsel as exorbitant and beyond the scope of hourly wages within the Des Moines-area market but does not challenge any of the attorneys' qualifications or competence in handling the issues in this case. OSK's response is that their attorneys have a national practice which enables them to charge fees more consistent with those in larger legal markets. Their attorneys were retained to allow them to litigate the complex issues that were before the Court in this case. The Court agrees with OSK that a national perspective on the legal market is appropriate in this case. See Casey v. City of Cabool, Mo., 12 F.3d 799, 805 (8th Cir. 1993) (noting "the opportunity cost of the lawyer's time provides the starting point for determining a presumptively correct hourly rate[.]").
Another factor militating in favor of a higher rate is the nature of relief sought in this case. Not only did AHA seek preliminary relief, but it sought expedited preliminary relief. [ECF No. 1]. This necessitated that OSK retain local counsel who was available to brief and argue the motion for preliminary injunction within two weeks. [ECF Nos. 1, 5, 9-10]. This put OSK's counsel at a disadvantage because a plaintiff will know when it is filing a lawsuit and seeking expedited relief, but it places an exceptional demand on a responding party's time and resources. Nevertheless, OSK's counsel obtained success at the preliminary injunction stage.
Finally, it should be noted the posture in which the motion is before the Court. OSK seeks summary judgment for its indemnification and a declaratory judgment for the same. The only evidence that AHA marshals in support of its resistance is research by Thomson Reuters "obtained by counsel for AHA . . . show[ing] that five of the leading Des Moines law firms—which excluded OSK's local counsel from its analysis—showed that the hourly rate for litigation is $309 and average hourly rate for paralegals is $163. These rates (reflecting those charged in 2021) are a far cry from what OSK claims it is entitled to." [ECF No. 137 at 28 n.11]. On its face, the Court finds this assertion to be plausible but, inexplicably, AHA's counsel does not furnish such research for the Court's evaluation. See Menz v. New Holland N. Am., Inc., 507 F.3d 1107, 1110 (8th Cir. 2007) ("[m]ere allegations, unsupported by specific facts or evidence beyond the nonmoving party's own conclusions, are insufficient to withstand a motion for summary judgment."). Furthermore, OSK did submit evidence—the report of Glen Norris—in support of the reasonability of its hourly rates for the Des Moines legal market. Emery v. Hunt, 272 F.3d 1042, 1048 (8th Cir. 2001) (finding a reasonable billable hourly rate is "usually the ordinary rate for similar work in the community where the case has been litigated.").
Moreover, the Court does not find that the rates for Attorney Lance Lange ($600 per hour) or Stephanie Koltookian ($495 per hour) to be so at odds with AHA's authorities to be unreasonable. AHA cites this district's now senior United States District Court Judge James E. Gritzner's decision in Animal Legal Defense Fund v. Reynolds, 385 F.Supp.3d 840 (S.D.Iowa 2019) as an example of a reasonable rate. However, in that case, Judge Gritzner reduced the highest fee awarded to an attorney to $500 per hour. Reynolds, 385 F. Supp. 3d at 848. Reynolds is nearly four years old at this point and, in conjunction with the Norris Report, the Court is confident that $600 per hour is not an unreasonable rate for this case. AHA has adduced no evidence from which the Court should decide otherwise.
IV. CONCLUSION
For the foregoing reasons, OSK's Motion for Summary Judgment is GRANTED. [ECF No. 130]. Judgment is to be entered in favor of OSK in the amount of $417,549.61 on the Amended Counterclaim and Amended Third-Party Complaint. [ECF Nos. 115, 116]. The Court DECLARES that pursuant to the Loan Documents and Guarantees, each Guarantor is jointly and severally liable for the judgment amount. AHA's motions to dismiss are GRANTED. [ECF Nos. 80, 92]. The pending motions to dismiss by OSK are MOOT. [ECF Nos. 72, 74].
IT IS SO ORDERED.