In Re: RFC and RESCAP Liquidating Trust Litigation, 399 F.Supp.3d 827

Background

ResCap Liquidating Trust (successor to RFC after a $9B bankruptcy settlement) sued Home Loan Center (HLC) under RFC’s Client Guide, which contains a broad indemnity and fee-shifting clause covering “all court costs, attorney’s fees and any other costs, fees and expenses incurred…in enforcing the Client Contract.”
ResCap consolidated dozens of related RMBS-originator suits in D. Minn.; extensive discovery produced millions of documents, hundreds of depositions, and complex statistical sampling and damages work.
After multi-year litigation and a detailed summary-judgment phase, a bellwether jury trial against HLC (Oct–Nov 2018) resulted in a $28.7M verdict for ResCap; later awarded substantial pre-judgment interest increasing total damages to roughly $42.8M.
ResCap moved for contractual attorneys’ fees and costs totaling roughly $28.7M (fees ≈ $18.37M plus costs ≈ $5.08M and a requested contingency bonus for Quinn Emanuel); HLC opposed, arguing the petition was excessive and asked for large reductions.
Threshold dispute: whether the Client Guide’s unqualified “all…attorney’s fees” language bars a court’s reasonableness review. The court decided to review reasonableness (declining strict literalism) but gave weight to the parties’ sophistication and contract terms.
The court ultimately awarded $18,002,732.84 in attorneys’ fees (lodestar after a 2% reduction for duplication) and $5,078,519.47 in costs, denying the requested contingency enhancement.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether court must assess reasonableness despite Client Guide lacking "reasonable" modifier	ResCap: enforce contract literally; no reasonableness inquiry required	HLC: public policy and precedent require reading in a reasonableness limitation	Court: will conduct a reasonableness review (public policy and Minnesota precedents permit it) but give deference to negotiated terms
Appropriate lodestar hourly rates and firms' billing	ResCap: submitted discounted Quinn Emanuel rates and market rates for other firms; lodestar reflects reasonable rates	HLC: rates high for Twin Cities market and should be reduced for inefficient staffing	Court: discounted Quinn Emanuel and other rates are reasonable and within market; declined to reduce rates for alleged inefficient staffing
Whether billed hours (esp. July–Nov 2018 trial period) were excessive or duplicative	ResCap: hours reflect complexity, burden of proof, bellwether role, and multi-defendant discovery/trial prep	HLC: ResCap overstaffed, billed far more hours than defense, and devoted disproportionate effort to narrowed issues	Court: overall hours reasonable given complexity; reduced total lodestar by 2% ($367,402.71) for duplication/redundant communications
Recovery of contingency enhancement and fees for preparing the fee petition	ResCap: contingency bonus and fees-on-fees appropriate under contract and hybrid fee arrangement	HLC: contingency should be folded into effective hourly rates or denied; fees-on-fees not recoverable absent explicit contract term	Court: denied contingency enhancement; awarded fees for preparing the petition (contract authorizes recovery of attorneys’ fees generally)

Key Cases Cited

Hensley v. Eckerhart, 461 U.S. 424 (lodestar method and fee-shifting principles)
Blum v. Stenson, 465 U.S. 886 (market rates as lodestar benchmark)
Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air, 478 U.S. 546 (presumption that lodestar is reasonable; enhancements rare)
Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542 (standards for lodestar enhancements)
Fox v. Vice, 563 U.S. 826 (use of rough justice and estimates in fee calculations)
Residential Funding Co. v. Terrace Mortgage, 725 F.3d 910 (8th Cir.) (Client Guide previously characterized as authorizing recovery of fees without limitation; court distinguished but considered in analysis)
Hanig v. Lee, 415 F.3d 822 (8th Cir.) (attorney-fee award discretion and lodestar application)