Heartland Materials, Inc. v. Warren Paving, Inc., 384 F. Supp. 3d 786

Background

Heartland assigned an option to purchase 339 acres (with retained royalties) to Warren Paving; parties later executed an Amended Assignment Contract allocating royalty obligations.
After litigation between the parties (the "Prior Litigation") ended with dismissal affirmed by the Sixth Circuit, Defendants ceased royalty payments beginning July 2016.
Plaintiffs sued in the Current Litigation for breach of contract and to recover unpaid royalties; the court granted partial summary judgment for Plaintiffs as to missed royalty payments since June 2016 and the parties later stipulated to $1,671,258.64 in compensatory damages.
Plaintiffs moved to recover attorney's fees, expenses, costs, and prejudgment interest under Paragraph 10 of the Amended Assignment Contract, which provides for recovery of "reasonable legal fees" and costs by the non‑defaulting party.
The fee dispute centered on (1) whether fees from the Prior Litigation are recoverable, (2) whether the hybrid hourly+30% contingency arrangement with current counsel (Arnett) is enforceable against Defendants, and (3) the proper lodestar hourly rate and hours to award; Plaintiffs also sought $2,300 for an accountant and $662.79 in costs.
The Court awarded compensatory damages as stipulated, denied recovery of fees and expenses attributable to the Prior Litigation, rejected enforcement of the hybrid contingency uplift against Defendants, awarded lodestar fees for Wyatt ($37,296.25) and Arnett ($13,324.50), disallowed the accountant fee and unspecified costs, and awarded prejudgment interest at 8% with post‑judgment interest per 28 U.S.C. § 1961.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Entitlement to fees under contract	Paragraph 10 permits recovery of "reasonable legal fees" from breaching party; Plaintiffs are prevailing parties	Defendants concede contractual fee‑shifting applies but contest scope and amount	Court: Fee‑shifting clause applies; Plaintiffs entitled to reasonable fees for work after breach (post‑July 6, 2016)
Recoverability of Prior Litigation fees	Plaintiffs seek fees from both Prior and Current Litigation	Defendants: breach occurred July 2016, so earlier fees not covered	Court: Fees from Prior Litigation not recoverable because breach had not occurred then
Enforceability of hybrid hourly + 30% contingency fee against Defendants	Plaintiffs: hybrid agreements are valid and should be enforced	Defendants: awarding contingency uplift is unreasonable; they never agreed to counsel's contract	Court: Court will not enforce contingency uplift; must award reasonable lodestar fee to third‑party defendant
Reasonableness and amount of fees requested	Plaintiffs: total $704,045.44 (Wyatt + Arnett) is reasonable under contract	Defendants: amount is excessive, contingency inflates fee massively	Held: Wyatt's post‑breach fees reasonable and awarded $37,296.25; Arnett awarded lodestar ($235/hr × 56.7 hrs = $13,324.50); contingency portion disallowed
Expert fee and unspecified costs	Plaintiffs: $2,300 to CPA Enderle and $662.79 in costs recoverable	Defendants: Enderle work related to pre‑breach period; costs unsupported	Court: Denied CPA fee (work pre‑breach) and denied unspecified costs for lack of documentation
Prejudgment and post‑judgment interest rates and accrual dates	Plaintiffs: request prejudgment interest at 8%	Defendants: argue prejudgment interest should be 6%	Court: Prejudgment interest at 8% (KRS §360.010); prejudgment interest accrues from each missed payment date to May 22, 2018; post‑judgment interest per 28 U.S.C. §1961 from May 22, 2018 for compensatory damages and from entry of this order for prejudgment interest and fee awards

Key Cases Cited

City of Burlington v. Dague, 505 U.S. 557 (U.S. 1992) (Supreme Court disallowed contingency‑based enhancement of lodestar under federal fee‑shifting statutes)
Blanchard v. Bergeron, 489 U.S. 87 (U.S. 1989) (lodestar is appropriate method for calculating reasonable attorney fees)
Venegas v. Mitchell, 495 U.S. 82 (U.S. 1990) (distinguishing what a plaintiff owes counsel from what a third‑party must pay as a reasonable fee)
Hensley v. Eckerhart, 461 U.S. 424 (U.S. 1983) (lodestar calculation: reasonable hours × reasonable rate)
Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827 (U.S. 1990) (post‑judgment interest runs from entry of judgment)
Advanced Accessory Sys., LLC v. Gibbs, 71 Fed. Appx. 454 (6th Cir. 2003) (Sixth Circuit applied lodestar reasoning to contractual fee‑shifting and did not enforce contingency enhancement)
Meyers v. Chapman Printing Co., 840 S.W.2d 826 (Ky. 1992) (Kentucky recognizes lodestar as starting point for reasonable attorney fees)
Boden v. Boden, 268 S.W.2d 632 (Ky. 1954) (Kentucky factors for adjusting attorney fee awards)