Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—E.D.N.Y.: Motor vehicle franchisor awarded attorney fees, costs for defending New York Dealer Act claims, (Jul 17, 2013)

By John W. Arden, J.D., LL.M.

A motor vehicle franchisor that successfully defended a franchisee’s claims that it unreasonably withheld consent to two proposed dealership sales, forcing the franchisee to sell the dealership for less, was entitled to recover $150,050 in attorney fees and $1,370 in costs of suit, according to the federal district court in Central Islip, New York (Gray v. Toyota Motor Sales, U.S.A., Inc., July 16, 2013, Seybert, J.).

William S. Gray and his related corporations were the owners and operators of a motor vehicle dealership, Sunrise Toyota. Gray alleged that his franchisor, Toyota Motor Sales, U.S.A., unreasonably withheld its consent to two proposed franchise sales. In doing so, Toyota breached the parties’ franchise agreement, violated the implied covenant of good faith and fair dealing, committed tortious interference with contract and tortious interference with a prospective economic advantage, committed negligence, and violated the New York Franchise Motor Vehicle Dealer Act, and violated the federal dealer day-in-court law.

Toyota moved to dismiss all claims, and the motion was granted by the court. Toyota then moved for an award of attorney fees, costs, and disbursements under the Motor Vehicle Dealer Act. The court held that the award of attorney fees was discretionary, rather than mandatory, under the Motor Vehicle Dealer Act. Nevertheless, Toyota was entitled to such an award.

The court addressed whether Toyota was entitled to fees incurred in defending all claims or just the Dealer Act claims before determining the amount of fees and costs to be awarded.

Interrelationship of claims. Toyota claimed that, even though the Dealer Act provided the only authority for the award of fees, the claims were so interrelated that it was entitled to fees for the litigation as a whole. The court noted that Gray, not Toyota, chose to bring multiple causes of action, several of which were held to be duplicative. Moreover, the court ultimately dismissed the Dealer Act claims based on the same reasoning and analysis used to dismiss the breach of contract claim.

Gray’s claims were based on a “common core of facts”—that is, the franchisee’s right to transfer his franchise. All of the claims essentially pertained to Toyota’s withholding of consent to proposed franchise sales due to the proposed purchasers’ rating, which the franchisee claimed was a pretext. Since the claims were interrelated, Toyota was entitled to recover attorney fees for time spent on all of the claims.

Amount of attorney fees. In determining the amount of fees, a court should first calculate the “lodestar”—the reasonable hourly rate times the reasonable number of hours required by the case. The court determined the reasonable hourly rate by looking at rates prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation. Following the “forum rule,” the court settled on a reasonable rate of $300-$450 per hour for partners, $200-$300 per hour for associates, and $100-$200 for junior associates.

The partners involved in this case had extensive experience in the area of automobile franchise law. Thus, the court determined a reasonable rate of $450 per hour. The rate for a senior associate was set at $300 per hour. The rates for two junior associates were determined at $200 per hour. The number of hours was calculated to cover discovery spanning a year and the research and drafting of a Rule 11 motion, which was never filed.

The court significantly reduced the amount of the requested fee of nearly $254,000, awarding a total of $150,050.

Costs. Toyota sought $1,370 in costs and disbursements, for expenses such as printing, postage, and discovery vendor costs. The court found these expenses to be reasonable.

The case is 10-CV-3081 (JS) (ETB).

Attorneys: David A. Rosenfeld (Robbins Geller Rudman & Dowd LLP) for William S. Gray. Carl J. Chiappa and Nathaniel S. Boyer (Hogan Lovells US LLP) for Toyota Motor Sales, U.S.A., Inc.

Companies: Auto Partners, LLC; Sunrise Automotive, LLC; Toyota Motor Sales, U.S.A., Inc.

Cases: FranchisingDistribution NewYorkNews