United States District Court, M.D. North Carolina
MEMORANDUM OPINION AND ORDER
WILLIAM L. OSTEEN, Jr., District Judge.
Presently before the court is a dispute concerning whether N.C. Gen. Stat. § 6-21.2(2) mandates an attorneys' fees award of exactly fifteen percent of the "outstanding balance" or whether it serves as a cap on such fees. The parties also dispute the definition and application of the term "outstanding balance, " as such term is used in N.C. Gen. Stat. § 6-21.2. This court previously adopted the recommendation of the Magistrate Judge as to all issues (see Doc. 59). This court then requested additional briefing as to two issues related to attorneys' fees, and those briefs have been submitted as directed. This matter is now ripe for resolution, and, for the reasons that follow, this court finds that an award of attorneys' fees would be inappropriate in the present case.
In summary, this court finds that there is no "outstanding balance" due pursuant to the terms of the lease agreement. Further, the present dispute falls outside those creditor-debtor relationships captured by the statutory language of N.C. Gen. Stat. § 6-21.2. Rather, this court finds that the recovery of lease overpayments in this case, while proper, is more accurately characterized as arising from a collateral procedural agreement. That collateral agreement did not contain its own provision for payment of attorneys' fees, and, therefore, such fees are inapposite in the present case.
I. PROCEDURAL HISTORY
In its Complaint, Plaintiff requested "[a]n award of its attorneys' fees and costs pursuant to Section 44(k) of the Phase 1B Lease ("Section 44(k)") and as otherwise permitted by law." (Complaint ("Compl.") (Doc. 1) at 12.) In its motion for summary judgment, Plaintiff contended it was entitled to an award of attorneys' fees and costs in light of the agreement, citing N.C. Gen. Stat. § 6-21.2. (Pl.'s Mem. of Law in Supp. of Mot. for Summ. J. (Doc. 21) at 20-21.) The Magistrate Judge agreed, finding both that Defendant had not responded to this portion of Plaintiff's motion and that the lease constituted "evidence of indebtedness' under N.C. Gen. Stat. § 6-21.2 such that attorney's fees would be authorized at least up to 15% of the outstanding balance on the lease." (Mem. Op. & Recommendation ("Recommendation") (Doc. 52) at 11 n.5.) Defendant filed objections to the recommendation. (Doc. 54.) Although Defendant did not specifically object to this finding as to attorneys' fees, Defendant did object to the entry of summary judgment, contending that the motion was premature until such time as discovery was permitted and conducted. In the absence of a response to Plaintiff's original argument and the Magistrate Judge's finding that the attorneys' fees provision of Section 44(k) was applicable, this court finds such matter established for purposes of this litigation. As noted in this court's order adopting the recommendation, "Plaintiff is entitled to an award of attorneys' fees pursuant to Section 44(k) of the Lease as permitted by N.C. Gen. Stat. § 6-21.2(2)." (Doc. 59 at 2-3.)
However, what may be permitted or required by N.C. Gen. Stat. § 6-21.2(2) presents a complex issue on the facts of this case. As indicated by this court's order, two outstanding questions remain: (1) whether the term "outstanding balance" referenced in N.C. Gen. Stat. § 6-21.2(2) is applicable to the present matter and (2) whether the 15% referred to in the statute serves as a mandate or a cap on reasonable attorneys' fees. These issues have been addressed by the supplemental briefing filed by the parties.
The facts are fully set out in the Magistrate Judge's thorough Recommendation. (See Recommendation (Doc. 52).) Those facts are adopted and will not be repeated in full here. Plaintiff filed this action seeking a declaratory judgment as to the legal effect of certain terms of its lease agreement with Defendant. Those disputed terms dealt with the amount owed as lease payments during two term extensions provided for by the lease and exercised by Plaintiff. Plaintiff alleged in its First Claim for Relief, and this court subsequently found, that Plaintiff "would not be obligated to pay Base Rent during either of the two five-year Term Extensions beginning November 1, 2010, and November 1, 2015, respectfully." (See Compl. (Doc. 1) ¶ 32.) Thus, this court's findings resulted in a declaration that Plaintiff does not owe a Base Rent for the two five-year terms as Defendant contended.
The remaining issues for determination arise as a result of the attorneys' fees provision contained in the lease agreement. Section 44(k) of the lease provides, in relevant part, as follows:
(k) Attorneys Fees. If either Landlord or Tenant reasonably seeks legal services with respect to the proper interpretation or enforcement of this Lease, the party receiving substantially the result it sought or defended (the "Prevailing Party"), whether by award, judgment, stipulation, settlement, workout, default or otherwise... shall be entitled to recover from the adverse party all reasonable fees and costs incurred by the Prevailing Party in connection with such legal services ("Legal Fees").
(Joint Mot. to File Contractual Documents under Seal, Ex. 1, Lease Agreement (Doc. 47-1) at 41.)
Plaintiff argues that its payment of rent amounts demanded by Defendant during the pendency of this litigation creates an "outstanding balance" necessary for the determination of attorneys' fees. In support of the motion for summary judgment, Plaintiff filed the affidavit of Janice Edwards, who stated that Plaintiff had made over $190, 000 in "payments of Base Rent and related costs to [Defendant] under protest under the Phase 1B Lease...." (Declaration of Janice Edwards ("Edwards Decl.") (Doc. 22) ¶ 5.)
Plaintiff's Complaint further alleged that:
Based on [Defendant's] improper demands and threats of legal action, Monsanto has paid ARE-108 Base Rent in amounts that ARE-108 claims are owing under the Phase 1B Lease. All such payments made after November 1, 2010 are expressly made under protest, with a reservation of rights by Monsanto, and ...