FSM Development Bank v Gilmete [2017] FMSC 14; 21 FSM R. 236 (Pon. 2017) (5 April 2017)

FSM SUPREME COURT TRIAL DIVISION

CIVIL ACTION NO. 2014-013

FSM DEVELOPMENT BANK, )
)
Plaintiff/Counter-Defendant, )
)
vs. )
)
QUIRINO GILMETE, ETWIHKA GILMETE, and )
GILLIARD GILMETE, )
)
Defendant/Counterclaimants. )
)
QUIRINO GILMETE, ETWIHKA GILMETE, and )
GILLIARD GILMETE, )
)
Third-Party Plaintiffs, )
)
vs. )
)
APSCO, INC., )
)
Third-Party Defendant. )
)
APSCO, a partnership of A&P ROCK )
PRODUCTS, INC. and SAITO GUMI, LTD., and )
APSCO CONSTRUCTION CO., a partnership, )
)
Third-Party Counterclaimants, )
)
vs. )
)
QUIRINO GILMETE and FSM DEVELOPMENT )
BANK, )
)
Third-Party Counterdefendants. )
_____________________________________________ )

ORDER AWARDING FEES

Larry Wentworth
Associate Justice

Decided: April 5, 2017

APPEARANCES:

For the Plaintiff: Nora E. Sigrah, Esq.
P.O. Box M
Kolonia, Pohnpei FM 96941

For the Defendants: Salomon M. Saimon, Esq.
Directing Attorney
Micronesian Legal Services Corporation
P.O. Box 129
Kolonia, Pohnpei FM 96941

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HEADNOTES

Attorney’s Fees Court-Awarded
The starting point of a reasonable attorney’s fee calculation is done by multiplying the number of hours reasonably expended on the litigation times a reasonable hourly rate. FSM Dev. Bank v. Gilmete, 21 FSM R. 236, 238 (Pon. 2017).

Attorney’s Fees Court-Awarded
When the market rate is not one set figure but a range from $100 to $125 an hour; when the court is confident that with its large presence and large volume of legal work, the bank, if it were to contract out its legal work to the private bar, could negotiate a favorable rate; but when the litigation involved some novel issues beyond the usual run-of-the-mill collection work, the court will set $112 an hour as the reasonable rate to be awarded to the bank this time. FSM Dev. Bank v. Gilmete, 21 FSM R. 236, 238 (Pon. 2017).

Attorney’s Fees Court-Awarded
To determine the number of hours reasonably spent, the court must first determine the number of hours actually spent and then subtract from that figure hours which were duplicative, unproductive, excessive, or otherwise unnecessary. Redundant, or otherwise unnecessary hours must be excluded from the amount claimed because courts are charged with deducting for redundant hours. FSM Dev. Bank v. Gilmete, 21 FSM R. 236, 238 (Pon. 2017).

Attorney’s Fees Court-Awarded Contractual
When the borrowers promised to pay to the bank all reasonable attorney’s fees, expenses, and costs of collection, the borrowers were liable for the costs of collecting from them, but they were not liable for the bank’s attorney’s fees either defending against a third party’s claims against the bank or reviewing the litigation between the third party and the borrowers since those fees are not part of the cost of collecting from the borrowers. Those hours will be disallowed. FSM Dev. Bank v. Gilmete, 21 FSM R. 236, 238 (Pon. 2017).

Attorney’s Fees Court-Awarded
Attorney’s fees for travel time are not allowed. FSM Dev. Bank v. Gilmete, 21 FSM R. 236, 238 (Pon. 2017).

Attorney’s Fees Court-Awarded Contractual
Attorney’s fees in collection cases ordinarily should not exceed 15% of the outstanding principal and interest, and an award will be reduced accordingly. FSM Dev. Bank v. Gilmete, 21 FSM R. 236, 238-39 (Pon. 2017).

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COURT’S OPINION

LARRY WENTWORTH, Associate Justice:

This comes before the court on plaintiff FSM Development Bank’s Motion for Enlargement of Time, filed March 8, 2017; and its Submission for Requested Attorney’s Fees, with supporting affidavit, filed March 15, 2017; the Gilmetes’ Opposition to the Rate of Attorney’s Fees, filed March 26, 2017; and the FSM Development Bank’s Reply to Gilmetes’ Opposition of Attorney’s Fees Sought, filed March 28, 2017.

Due to the delay in service of the February 27, 2017 order authorizing a fee award, the bank’s motion to enlarge time to submit its fee request is granted.

The bank seeks an attorney’s fee award of $17,562.50, calculated at $125 an hour for 140½ hours of attorney work. The Gilmetes contend that $125 an hour rate is not reasonable, and that the bank should only be awarded fees at the $100 an hour rate in FSM Development Bank v. Kaminaga, 12 FSM R. 454 (Chk. 2004). The bank responds that it is entitled to the market rate, and that, in its view, $125 an hour is the market rate.

The starting point of a reasonable attorney’s fee calculation is done by multiplying the number of hours reasonably expended on the litigation times a reasonable hourly rate. Bank of the FSM v. Truk Trading Co., 16 FSM R. 467, 470 (Chk. 2009). The bank is correct that it is entitled to the market rate. However, the market rate is not one set figure but a range from $100 to $125 an hour. The court is confident that with its large presence and large volume of legal work, the bank, if it were to contract out its legal work to the private bar, could negotiate a favorable rate. On the other hand, this litigation involved some novel issues beyond the usual run-of-the-mill collection work. The court will therefore set $112 an hour as the reasonable rate to be awarded in this case.

To determine the number of hours reasonably spent, the court must first determine the number of hours actually spent and then subtract from that figure hours which were duplicative, unproductive, excessive, or otherwise unnecessary. Truk Trading Co., 16 FSM R. at 470. Redundant, or otherwise unnecessary hours must be excluded from the amount claimed because courts are charged with deducting for redundant hours. People of Rull ex rel. Ruepong v. M/V Kyowa Violet, 15 FSM R. 53, 66 (Yap 2007), rev’d on other grounds, 16 FSM R. 49 (App. 2008).

"[T]he Promisor(s) shall pay to [the bank] all reasonable attorney’s fees, expenses and costs of collection." Promissory Note para. 4 (June 17, 2011). The Gilmetes are thus liable for the costs of collecting from them. About 12.1 hours are attributable to APSCO aspects of the litigation either defending against APSCO’s claims against the bank or reviewing the litigation between APSCO and the Gilmetes, particularly Quirino Gilmete’s employment claims. Those fees are not part of the cost of collecting from the Gilmetes because the hours are not spent trying to collect from the Gilmetes but instead defending against APSCO’s claims against the bank or "reviewing" APSCO’s litigation with the Gilmetes. Those hours will be disallowed.

A total of about 2.4 attorney hours seem to be attributed to travel time to the courthouse. Attorney’s fees for travel time are not allowed. M/V Kyowa Violet, 15 FSM R. at 67.

These disallowances reduce the bank’s attorney work hours to 126 hours, which at $112 an hour equals $14,112. Under FSM Development Bank v. Adams, 14 FSM R. 234, 244 n.4 (App. 2006) and Bank of Hawaii v. Jack, 4 FSM R. 216, 221 (Pon. 1990), attorney’s fees in collection cases ordinarily should not exceed 15% of the outstanding principal and interest. The outstanding principal and interest on October 19, 2016, the day the summary judgment motion was heard, was $90,124.89. Fifteen percent of that is $13,518.73.

Accordingly, the FSM Development Bank is awarded $13,518.73 in attorney’s fees.

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