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Millennium Drilling Co., Inc. v. Beverly House-Myers Revocable Trust

United States District Court, D. Nevada

September 12, 2017

MILLENNIUM DRILLING CO., INC., A DELAWARE CORPORATION, Plaintiff,
v.
BEVERLY HOUSE-MYERS REVOCABLE TRUST, BEVERLY HOUSE-MYERS, TRUSTEE; GRACE MAE PROPERTIES, LLC; HAMRICK TRUST, ROBERT H. HAMRICK AND MOLLY KAY HAMRICK, TRUSTEES; DOES I through X; and ROES I through X, Defendants. MOLLY HAMRICK, BEVERLY HOUSE-MYERS, R&M HAMRICK FAMILY TRUST; Third-Party Plaintiffs,
v.
JONATHAN FELDMAN; MONTCALM, LLC; PATRIOT EXPLORATION COMPANY, LLC; CARTER HENSON, JR.; MATTHEW BARNES; ROBERT HOLT; ELIZABETH HOLT; AND SCHAIN, LEIFER, AND GURALNICK, Third-Party Defendants.

          ORDER

          MIRANDA M. DU, UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         Before the Court is Plaintiff and Third-Party Defendants' (“Patriot Parties”) Motion for Attorneys' Fees (“Motion”) (ECF No. 333) and Supplemental Motion for Attorneys' Fees (“Supplemental Motion”) (ECF No. 402). The Court has reviewed Defendants and Third-Party Plaintiffs' (“HHM Parties”) response (ECF No. 343) and Patriot Parties' reply (ECF No. 351) as well as all accompanying exhibits regarding the Motion.[1]

         For the reasons discussed below, Patriot Parties' Motion and Supplemental Motion are denied.

         II. RELEVANT BACKGROUND

         On March 19, 2012, Plaintiff Millennium initiated a lawsuit in this Court against Defendants Beverly House-Myers Revocable Trust (“House-Myers Trust”), Beverly House-Myers, Grace Mae Properties, LLC (“Grace Mae Properties”), Hamrick Trust, Robert H. Hamrick, and Molly Kay Hamrick (collectively, “the Hamricks”) to recover the amounts that the House-Myers Trust/Grace Mae Properties and the Hamricks owed to Millennium pursuant to particular assumption agreements and subscription note and security and pledge agreements (“subscription notes”). (ECF No. 1.) On June 6, 2012, Beverly House-Myers, Molly Hamrick, and R&M Hamrick Family Trust (“Hamrick Trust”) initiated a separate lawsuit in state court in Texas against a variety of Defendants including Jonathan Feldman and Patriot Exploration Company, LLC, generally alleging that the Defendants had fraudulently induced them to enter into these agreements. (ECF No. 333-2.) That lawsuit was then removed to the District Court for the Southern District of Texas on July 7, 2012, and the case was transferred on January 15, 2013, to this Court. (ECF No. 333 at 4.) The two cases were then consolidated into one action on May 6, 2013. (ECF No. 79.)

         On November 21, 2016, after a nine-day jury trial, a jury rendered a verdict in favor of Plaintiff Millennium Drilling Co., Inc. (“Millennium”) and Third-Party Defendants Jonathan Feldman and Patriot Exploration Company, LLC (“Patriot”) (collectively, all three are referred to as “Patriot Parties”). (ECF No. 330.) At trial, Patriot Parties were represented by three law firms while HHM Parties were represented primarily by Anthony Vitullo. Patriot Parties now move for reasonable attorneys' fees and costs of litigation based on the language of the relevant subscription notes.

         III. MOTION

         A. Whether Patriot Parties Are Entitled to Attorneys' Fees

         As a threshold matter, HHM Parties argue that Patriot Parties are not entitled to fees, costs or expenses under the Colt and Lion Subscription Notes because Patriot Parties failed to actually collect the money on those two notes at trial.[2] (ECF No. 343 at 3-7.) The Court disagrees.

         The Colt Subscription Note states that “Maker shall pay all costs of collection of principal or interest owing under this Note, including (without limitation) reasonable attorneys' fees and expenses.” (ECF No 343-2 at 4; ECF No. 343-3 at 3.) Similarly, the Lion Subscription Note states that “Maker shall pay all costs of enforcement and collection of this Note after default, including (without limitation) reasonable attorneys' fees and expenses.” (ECF No. 343-4 at 3.) HHM Parties rely on New York and Delaware law, as well as the plain meaning of “collection, ” to argue that Patriot Parties must first actually obtain payment of the notes before they may seek attorneys' fees, costs, and other expenses. Parties contend that because the jury failed to award Millennium any payment under the Colt or Lion Subscription Notes, Millennium did not “collect” on the Notes. (ECF No. 343 at 5.) For instance, they state that based on New York law, which controls the Colt Subscription Note, “Receiving payment under the note (i.e., ‘collection') is the sole condition under which Millennium could successfully assert a claim for expenses, costs, and attorneys' fees under the plain language of the Colt Subscription Note.” (Id.)

         However, the relevant provision is not “collection”; rather, it is “costs of collection.” Both the plain meaning and legal definition of “costs of collection” include those costs expended in an effort to collect on monies owed. See Costs of Collection, Black's Law Dictionary (10th ed. 2014) (“attorney's fees incurred in the effort to collect a note”).

         Moreover, the cost of bringing this suit to get a judicial determination that the subscription notes are legally enforceable falls within the purview of “costs of collection” or “costs of enforcement and collection.” The jury found that an event of default occurred under the Colt Subscription Note when Colt became insolvent, implicitly finding that the Colt Subscription Note is presently due. (See ECF No. 343 at 7, n.5; see also ECF No. 379 at 76; see also ECF No. 330 at 2-3.) Similarly, the jury found that HHM Parties had breached the Lion Subscription Note by disavowing their debt, implicitly finding that this disavowal constituted an event of default under the subscription note, permitting Millennium to accelerate all debt owed under the agreement. (See ECF No. 279 at 19; see also ECF No. 330 at 2-3.) Thus, because all debt under the Colt and Lion Subscription Notes is now due, despite Patriot Parties' failure to obtain damages for HHM Parties breach of their obligations under the contracts, the amounts under the contracts are legally enforceable. To wait until HHM Parties actually pay these amounts to obtain attorneys' fees and costs-which they propose is the correct reading of the contracts-results in an absurd consequence whereby Patriot Parties cannot obtain attorneys' fees for the litigation, a cost of collection, because the time for doing so would have expired. See Fed. R. Civ. P. 54(d)(2)(B)(i) (requiring that a claim for attorneys' fees be by motion filed no later than fourteen days after entry of judgment).

         Therefore, the Court finds that Patriot Parties are entitled to attorneys' fees, costs and expenses relating to ...


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