Straitshot Communications Inc et al v. Telekenex Inc et al
Filing
647
ORDER by Judge Thomas S. Zilly. The court GRANTS in part and DENIES in part Plaintiffs motions for spoliation sanctions, docket no. 511 , and for attorney's fees and costs pursuant to Washington's Consumer Protection Act ("CPA"), docket no. 512 . (CL)
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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
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STRAITSHOT COMMUNICATIONS,
INC., et al.,
Plaintiffs,
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v.
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ORDER
TELEKENEX, INC., et al.,
Defendants.
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C10-268 TSZ
THIS MATTER comes before the Court on plaintiffs’ motions for spoliation
sanctions, docket no. 511, and for attorney’s fees and costs pursuant to Washington’s
Consumer Protection Act (“CPA”), docket no. 512. Having reviewed all papers filed in
support of, and in opposition to, each motion, the Court enters the following Order.
Background
Plaintiff Straitshot Communications, Inc. (“Straitshot”) commenced this action in
King County Superior Court on February 5, 2009. See Ex. 5 to Martin Decl. pursuant to
Local Rule CR 101(b) (docket no. 4-6); see also Complaint, Ex. 1 to Praecipe (docket
no. 28-2). The complaint was amended twice before the matter was removed to this
Court on February 12, 2010, based on federal question jurisdiction, Straitshot having
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ORDER - 1
1 added in its Second Amended Complaint a claim under the Racketeer Influenced and
2 Corrupt Organizations (“RICO”) statute, specifically 18 U.S.C. § 1962. See Notice of
3 Removal (docket no. 1); see also Second Amended Complaint, Ex. A to Notice of
4 Removal (docket no. 1-2). The Court subsequently dismissed the RICO claim, as well as
5 a claim under a similar state statute, without prejudice and with leave to amend. Order
6 (docket no. 139). By Fourth Amended Complaint, Straitshot RC, LLC (“SRC LLC”) was
7 added as a plaintiff, and the federal and state RICO claims were realleged. See Fourth
8 Amended Complaint (docket no. 173). By Fifth Amended Complaint, defendant
9 Telekenex, Inc.’s successor-in-interest, IXC Holdings, Inc. (collectively “Telekenex”),
10 was named as a defendant. Fifth Amended Complaint (docket no. 175). A few months
11 later, the Court granted summary judgment against plaintiffs, and dismissed the federal
12 and state RICO claims, as well as a claim for “corporate disregard,” with prejudice.
13 Order (docket no. 229). The Fifth Amended Complaint was the operative pleading for
14 the remainder of the case.
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The case proceeded to trial on eight claims asserted by plaintiffs against various
16 defendants and one counterclaim asserted by defendant Mammoth Networks, LLC
17 (“Mammoth”) against plaintiffs. See Court’s Instructions (docket no. 388). After hearing
18 evidence and counsel’s arguments over a 14-day period and deliberating for 2½ days, the
19 jury rendered a verdict as follows:
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Claim
No.
Theory of Relief
1
Breach of Contract
2
Tortious Interference
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ORDER - 2
Defendant(s)
Prudell
Radford
Telekenex
Verdict in Favor of
Damages
Plaintiffs
$0
Telekenex
N/A
1
Claim
No.
Theory of Relief
2
3
Breach of Loyalty
3
4
Tortious Interference
All Defendants
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5
Trade Secret Misappropriation
5
6
Lanham Act Violation
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Consumer Protection Act
All Defendants
Telekenex
Zabit
Chaney
Prudell
Radford
Telekenex
Zabit
Chaney
Summers
Prudell
Radford
Mammoth
Plaintiffs
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8
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10
8
CC
Breach of Contract
Breach of Contract
Defendant(s)
Prudell
Radford
Summers
Verdict in Favor of
Damages
Plaintiffs, except as to
Radford
$6,490,000*
Plaintiffs, except as to
Mammoth/Worthen
Defendants
Defendants
Plaintiffs, except as to
Summers
Mammoth
Mammoth
$6,490,000*
N/A
N/A
$6,490,000*
N/A
$674,431
See Verdict (docket no. 403); see also Judgment (docket no. 411). Plaintiffs’ award of
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damages (indicated with an asterisk in the foregoing chart) is the same regardless of the
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theory of relief on which it is based. See Judgment (docket no. 411); see also Court’s
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Instruction No. 27 (docket no. 388).
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After the jury reached its verdict, the Court entered two separate sets of findings of
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fact and conclusions of law, one concerning the affirmative defenses of estoppel, waiver,
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and the doctrine of unclean hands, and the other regarding spoliation and the failure to
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produce documents during discovery. See Findings of Fact and Conclusions of Law
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(docket no. 410); Spoliation Findings of Fact and Conclusions of Law (docket no. 416)
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[hereinafter “Spoliation FFCL”]. In the former, the Court concluded that the affirmative
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defenses had not been proven, and in the latter, the Court awarded sanctions in favor of
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plaintiffs and against defendants Joshua and Julia Summers, Telekenex, Inc., and IXC
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ORDER - 3
1 Holdings, Inc. for (i) costs in attempting to identify and recover destroyed documents,
2 including the fees and costs of expert Erik Laykin; (ii) reasonable attorney’s fees in
3 pursuing the destroyed documents and documents that Summers and/or Telekenex failed
4 to produce; and (iii) other costs caused by defendants’ conduct related to the Straitshot
5 laptop. Spoliation FFCL No. 32 (docket no. 416 at 13). In their pending motion
6 seeking to quantify these sanctions, docket no. 511, plaintiffs request a total award of
7 $519,074.99, which includes (i) $185,769.72 in costs, including the charges of expert
8 Erik Laykin of Duff & Phelps, LLC; (ii) attorney’s fees in the amount of $222,203.51,
9 adjusted in light of defendants’ response identifying certain computational errors and
10 other discrepancies, see Reply (docket no. 551); and (iii) a multiplier of 1.5, which
11 plaintiffs argue is warranted by contingency enhancements plaintiffs are contractually
12 obligated to pay to their attorneys.
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In their other pending motion for attorney’s fees and costs pursuant to the CPA,
14 docket no. 512, plaintiffs originally asked for $3,385,983.92, but revised the figure to
15 $3,145,861.56, conceding as to some but not all of defendants’ challenges regarding the
16 calculation of the lodestar amount and the inclusion of non-compensable costs. See
17 Reply (docket no. 549). The total requested by plaintiffs includes: (i) $1,955,460.39 in
18 attorney’s fees accrued by three different law firms; (ii) $212,670.97 in expenses,
19 including attorney’s fees charged by two other law firms; and (iii) a multiplier of 1.5 to
20 reflect the contingent nature of the litigation, its alleged difficulty, and the perceived
21 quality of the services provided. In preparing their motion, plaintiffs represent that they
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ORDER - 4
1 have excluded time spent on matters unrelated to the CPA claim, for example, the federal
2 and state RICO claims and the claims between plaintiffs and Mammoth.1
3 Discussion
4 A.
Spoliation
5
The Court’s authority to impose sanctions for spoliation of evidence is derived
6 from two sources: (i) the inherent power of federal courts to take appropriate measures in
7 response to abusive litigation practices, and (ii) the available remedies outlined in Federal
8 Rule of Civil Procedure 37 when a party fails to comply with a duty or obey an order to
9 provide or permit discovery. See Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir.
10 2006). Sanctions may take the form of attorney’s fees against a party who acts in “bad
11 faith, vexatiously, wantonly, or for oppressive reasons.” Id. at 961. The Court has
12 already found that defendant Joshua Summers engaged in bad faith spoliation of evidence
13 and that he did so while an employee of Telekenex and acting within the scope of his
14 employment. See Spoliation FFCL Nos. 25 & 31 (docket no. 416). During the course of
15 trial, the parties stipulated that various e-mails, which were recovered from the despoiled
16 laptop that had been issued to and untimely returned by Summers, were not produced in
17 discovery by Telekenex. See id. at No. 21; Stipulations (docket no. 377). Telekenex’s
18 failure to disclose these e-mails, which were either received or sent by individuals, other
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1
Although the Fifth Amended Complaint contained fifteen causes of action, see docket no. 175, in light
of plaintiffs’ efforts to segregate the attorney’s fees related to claims dismissed prior to trial, the Court has
22 treated the CPA claim as one of only eight, rather than fifteen, causes of action.
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ORDER - 5
1 than Summers, who were associated with Telekenex, undermines any claim that it was
2 not complicit in or otherwise liable for Summers’s spoliation efforts.
3
In determining the amount of monetary sanctions, the Court must be guided by a
4 standard of reasonableness. Leon, 464 F.3d at 961. Recovery should not exceed “those
5 expenses and fees that were reasonably necessary to resist the offending action.” In re
6 Yagman, 796 F.2d 1165, 1185, amended by 803 F.2d 1085 (9th Cir. 1986). The starting
7 point for computing reasonable attorney’s fees is the lodestar figure, which represents the
8 number of hours reasonably expended multiplied by a reasonable hourly rate. See Jordan
9 v. Multnomah County, 815 F.2d 1258, 1262 (9th Cir. 1987). A reasonable hourly rate is
10 one “in line with those prevailing in the community for similar services of lawyers of
11 reasonably comparable skill and reputation.” Id. at 1263. Upward adjustments from the
12 lodestar amount, based on certain “other considerations,” are proper only in “rare” and
13 “exceptional” cases, and they must be supported by specific evidence in the record and
14 detailed findings by the Court. Id. at 1262.
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1.
16
Turning now to the calculation of the lodestar value, the Court acknowledges and
Lodestar
17 appreciates plaintiffs’ attorneys’ attempts to apportion the attorney’s fees and costs
18 associated with the spoliation issue,2 but the Court must agree with many of the criticisms
19 lodged by defendants.
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Defendants contend that plaintiffs should not be compensated for the time required to segregate the
spoliation fees and costs. To the contrary, the Court concludes that the number of hours spent on such
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effort was both necessary and reasonable. Lawyers do not ordinarily keep separate records for particular
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ORDER - 6
1
2
a.
Rates
Although plaintiffs have appropriately not requested the full hourly rates charged
3 by Massey & Gail LLP (“Massey & Gail”), namely $660 for named partners and $375
4 for a first-year associate, the reduced amounts still far exceed the prevailing rates in the
5 local legal community for comparable work. Plaintiffs were, of course, within their
6 rights to retain out-of-state counsel, but they may not pass along the monetary
7 consequences of such decision to defendants when many equally competent attorneys in
8 the greater Seattle area could have provided similar services. With regard to the Massey
9 & Gail attorneys, the Court will apply the following hourly rates:
10
Attorney
Leonard A. Gail (named partner)
Jonathan Massey (named partner)
Bruce Doughty (affiliated lawyer)
Matthew Reedy (first-year associate)
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12
Rate
$425
$425
$375
$195
13 These rates are consistent with those charged by other attorneys retained by plaintiffs in
14 this case, and they are within the range of rates used by the Court in connection with
15 attorney’s fee applications involving similar claims and equivalent representation during
16 the timeframe at issue here. Defendants have not challenged the hourly rates ascribed to
17 lawyers and paralegals at the other two firms representing plaintiffs, namely the Summit
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tasks or services performed in a particular case, and counsel here could not have arranged in advance to
not expected in most cases.
to determine the amount
21 track fees associated with spoliation, which isspoliation, plaintiffs’ counsel Thus,required to engage in an
of attorney’s fees and costs relating solely to
were
after-the-fact parsing of voluminous billing records to cull out the subset of entries on which sanctions
22 could be based. The Court will fully credit plaintiffs’ attorneys for the time spent on this endeavor.
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ORDER - 7
1 Law Group PLLC (“Summit”) and Savitt Bruce & Willey LLP (the “SBW Firm”), and
2 the Court has therefore employed all of those rates.
3
b.
4
Hours
Having fixed the rates to be used in calculating the lodestar amount, the Court
5 must evaluate whether the hours claimed were reasonably expended in connection with
6 the spoliation matter. The Court concludes that the following reductions are warranted.
7
i.
Block Billing
The Court agrees with defendants that, with respect to block billing, plaintiffs’
8
9 counsel cannot simply assign an amount of time to a particular activity in the entry absent
10 some contemporaneous record to support such allocation. Ordinarily, in deciding
11 attorney’s fee motions, when a billing entry contains more than one activity, the Court
12 apportions the reported time equally among the described activities. The Court generally
13 does so when the moving party has made no or minimal effort to segregate compensable
14 time within one or more block-billed entries. Recognizing that plaintiffs’ counsel has at
15 least attempted to parse through the various block-billed entries, the Court declines to
16 follow its usual course, which is unlikely to result in any more accurate estimate of the
17 time spent on spoliation issues, particularly given the incompleteness of Massey & Gail’s
18 submissions.3 Instead, the Court will apply a reduction of ten percent (10%), which will
19 sufficiently account for the generous nature of plaintiffs’ counsel’s approximations.
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Plaintiffs have not provided a full set of billing statements from Massey & Gail, instead proffering pared
down “invoices” that were created specifically for the pending motions, and the Court is therefore unable
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ORDER - 8
1
ii.
Quarter-Hour Increments
Pursuant to plaintiffs’ concession that a deduction is justified because of Massey
2
3 & Gail’s practice of billing in quarter-hour (rather than tenth-of-an-hour) increments, the
4 Court will decrease the attorney’s fees associated with Massey & Gail’s work by another
5 five percent (5%).
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iii.
Duplication
The Court shares defendants’ view that plaintiffs’ counsel are seeking fees for
7
8 duplicative work. The most glaring examples involve the trial testimony of plaintiffs’
9 expert Erik Laykin, concerning which five different attorneys and three paralegals billed
10 time, and closing argument, as to which, in addition to the lawyer who delivered the
11 remarks, three others charged time. To adjust for such duplication of effort, which was
12 most apparent in connection with trial work, the Court will decrease by 50% the fees
13 relating to trial testimony and to opening and closing arguments. This reduction will not,
14 however, apply to attorney’s fees associated with discovery and pretrial efforts, including
15 motions in limine, proposed findings of fact and conclusions of law, proposed spoliation
16 jury instructions, and supplemental briefing on spoliation.4
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18
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20 to determine what proportion of plaintiffs’ overall attorney’s fees and costs are reflected in their current
estimates of spoliation and CPA fees and costs.
21
With regard to defendants’ other complaints about duplication, the Court declines to penalize plaintiffs
for substituting and adding attorneys, and will not otherwise second guess counsel’s decisions concerning
22 the efficient distribution of responsibilities or management of specific work.
4
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ORDER - 9
1
c.
2
Calculation
Based on the adjustments described above, the Court has computed the following
3 attorney’s fees and costs:
4
Firm or Party
Massey & Gail LLP
Summit Law Group PLLC
Savitt Bruce & Willey LLP
Straitshot RC, LLC
TOTALS
5
6
7
2.
Costs5
Atty’s Fees
TOTAL
$91,265.36 $185,479.59 $276,744.95
$35,104.95
$182.00 $35,286.95
$18,274.28
$0.00 $18,274.28
N/A
$108.13
$108.13
$144,644.59 $185,769.72 $330,414.31
Multiplier
8
Having calculated the lodestar amount, the Court must now consider plaintiffs’
9
request for an upward adjustment. In seeking an enhancement, plaintiffs rely on their
10
agreements to pay some of their attorneys a multiple of their customary rates, depending
11
on the outcome of the case.6 In response, defendants contend that, under the “Discovery
12
Fee Award” provision of the Attorney-Client Fee Agreement between plaintiffs, Summit,
13
and Massey & Gail, plaintiffs owe no premium to counsel, and they should not receive an
14
15
5
Defendants have not challenged the costs that plaintiffs have requested in connection with spoliation,
16 which include $184,555.19 for the services of expert Erik Laykin, $182.00 in service fees, $924.40 in
travel expenses relating to Joshua Summers’s second deposition, and $108.13 in e-mail server fees.
17
18
19
20
21
22
Plaintiffs have not provided copies of these agreements, but they have offered their attorneys’
summaries of the relevant provisions. According to Jessica Goldman, plaintiffs are obligated to pay
Summit, in the event of a recovery, 145% of the standard hourly rate for work performed after May 2010.
Goldman Decl. at ¶ 22 (docket no. 515). Before that date, Summit was apparently compensated on an
hourly basis. The SBW Firm entered into a slightly different agreement whereby plaintiffs would pay
(i) nothing if the recovery was less than $600,000; (ii) fees at between 2.5 and 5 times the actual rate,
depending on the number of hours expended and the types of services performed, up to a maximum of
$25,000, if the recovery was between $600,000 and $1,902,000; and (iii) fees at similar multiples, up to a
maximum of 50% of the recovery, if the recovery was in excess of $1,902,000. Savitt Decl. at ¶¶ 12 & 13
(docket no. 514). In contrast, Massey & Gail has a more traditional contingency fee agreement with
plaintiffs, expecting no payment unless the recovery exceeds a certain amount, and being entitled to
specific percentages of any recovery over such sum, with the percentages increasing as various conditions
and thresholds are met. Gail Decl. at ¶ 7 (docket no. 513).
6
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ORDER - 10
1 upward adjustment from the lodestar amount.7 The Court need not and does not decide
2 whether the spoliation sanctions constitute a “Discovery Fee Award” within the meaning
3 of the fee agreement. Defendants are not parties to the fee agreement, and the Court need
4 not interpret or enforce the agreement to determine the amount of attorney’s fees and
5 expenses “reasonably necessary to resist the offending action.” Yagman, 796 F.2d at
6 1185. Whether the spoliation sanctions are governed by the quoted provision of the fee
7 agreement is a matter strictly between plaintiffs and their counsel, and regardless of how
8 such question might ultimately be resolved, the Court is satisfied that an upward
9 adjustment of the lodestar figure for the spoliation sanctions is not warranted. The
10 spoliation dispute was only one among many battles fought in this case. None of the
11 factors on which a lodestar may appropriately be enhanced are present with regard to this
12 particular skirmish. See Jordan, 815 F.2d at 1262 nn.4 & 6 (reciting a previous twelve13 element approach to calculating a reasonable attorney’s fee, which was articulated in
14 Johnson v. Ga. Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974), and identifying four
15 Johnson considerations on which an upward adjustment of the lodestar may not be
16
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17
18
19
20
21
The section of the fee agreement on which defendants rely reads in relevant part:
Counsel may recover from defendants certain sums as sanctions, for fees and costs
incurred in a discovery dispute (“Discovery Fee Award”). It is agreed that, because a
Discovery Fee Award is a result of the additional work and expense required by the
discovery dispute, each Counsel shall be paid that portion of the Discovery Fee Award
that resulted from such Counsel’s work as reflected in the fee application filed with the
Court. Such a Discovery Fee Award would not qualify for the premium (145%) billing
rate and in addition would be reduced from the fees owed Counsel under, respectively
Subparagraphs 4(a)(i) and (ii) above (for Summit) and Subparagraphs 4(c)(i) and (ii)
(for Massey).
See Ex. H at ¶ 4(e) to Silverstein Decl. (docket no. 547).
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ORDER - 11
1 based). In particular, the contingent nature of plaintiffs’ counsel’s fees has no bearing
2 with respect to the spoliation sanctions because the “risk of non-payment due to lack of
3 success” was exceedingly low. See Jordan, 815 F.2d at 1264. Even if plaintiffs had not
4 prevailed at trial, the Court would still have imposed monetary sanctions relating to the
5 spoliation. The Court DECLINES to impose a multiplier and HOLDS that the lodestar
6 amount is adequate and reasonable compensation for the efforts expended by plaintiffs’
7 attorneys in detecting the spoliation, exposing the culprits, and securing the various
8 remedies.
9 B.
10
Consumer Protection Act
Under the CPA, a prevailing plaintiff need not prove bad faith, or even actual
11 damages, to be entitled to an award of reasonable attorney’s fees. See RCW 19.86.090;
12 see Mason v. Mortg. Am., Inc., 114 Wn.2d 842, 855-56, 792 P.2d 142 (1990). In
13 computing, for purposes of the CPA, a reasonable amount of attorney’s fees, the Court is
14 not bound by the lodestar figure; rather, the Court is charged with making “an
15 independent decision” as to what represents a reasonable amount of attorney’s fees.
16 Nordstrom, Inc. v. Tampourlos, 107 Wn.2d 735, 744, 733 P.2d 208 (1987). With regard
17 to reasonableness, an attorney’s billing records, although relevant, are “in no way
18 dispositive.” Id.
19
1.
20
For the reasons discussed in connection with the spoliation sanctions, the Court
Lodestar
21 will use hourly rates for the Massey & Gail attorneys that are commensurate with those
22 prevailing in the Seattle legal community, and will apply the rates requested for the
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ORDER - 12
1 lawyers at Summit and the SBW Firm. The various concessions plaintiffs have made,
2 including the five percent (5%) reduction in fees for work performed by Massey & Gail
3 to compensate for the firm’s quarter-hour billing practice, will also be incorporated into
4 the Court’s calculations. The remaining issue for the Court’s consideration is whether
5 plaintiffs, in their attorney’s fee application, have exceeded the scope of efforts necessary
6 to achieve a favorable result on their CPA claim. The Court concludes they have and has
7 made the following adjustments.
8
a.
Vague Descriptions
The Court has not credited vague descriptions, for example “correspondence re
9
10 strategy issues,” “correspondence re discovery cut off,” or “conference re discovery
11 issues,” see Ex. 3 to Tab 2 to Gail Decl. (docket nos. 513-6 through 513-9), which
12 provide no indication that the services related to plaintiffs’ CPA claim. All of the time
13 associated with such vague entries has been disregarded.
14
b.
Unrelated and Unsuccessful Matters
The Court has excluded all entries referencing Brian Worthen and/or Mammoth,8
15
16 against which the CPA claim was not alleged, and all entries mentioning Telekenex’s
17 creditor “Wellington,” which provided no evidence relevant to liability under the CPA
18 and only minimally pertinent information indirectly related to damages. The Court has
19 also omitted the time spent deposing, conducting discovery concerning, or examining
20 Joshua and Julia Summers, as to whom plaintiffs did not prove their cause of action under
21
8
Plaintiffs have, however, received a portion of the attorney’s fees requested for deposing and examining
22 Jeremy Malli and Wayne Worthen.
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ORDER - 13
1 the CPA.9 To the extent that Brian Worthen, Mammoth, Wellington, and/or Summers
2 appears in a block-billed entry, all of the time for such entry has been omitted.
3
c.
4
Duplicate Recovery
With respect to the CPA claim, the Court has not awarded any fees for motions in
5 limine or proposed findings of fact and conclusions of law, which primarily concerned
6 spoliation and which have already been taken into account in the spoliation sanctions.
7 With regard to jury instructions, in addition to the amount included in the spoliation
8 sanctions, the Court has credited only one (1) hour of attorney time at the rate of $195,
9 which more than sufficiently compensates for the almost verbatim use of Washington’s
10 pattern instructions concerning the elements of a CPA claim.
11
d.
12
Block Billing
With respect to legal research and dispositive motions, to the extent that billing
13 entries reflected the quantity of time devoted solely to the CPA claim, the Court has
14 attributed the full amount; however, to the extent that billing entries refer to such efforts
15 or motions generally, only a pro rata portion of the fees was allowed.
16
e.
Pro Rata Recovery
The Court is unpersuaded by plaintiffs’ assertion that the CPA claim was so
17
18 closely related to other claims that “no reasonable segregation” can be made. See Motion
19 at 10 (docket no. 512). Plaintiffs suggest that, “[b]y misappropriating Plaintiffs’
20
Although labeling as “fallacious” defendants’ position that
should not receive attorney’s fees
21 relating to Summers’s testimony because they did not prevailplaintiffsclaim against him, see Reply at 4
in their
9
n.3 (docket no. 549), plaintiffs offer no citation to the record to support their apparent contention that
22 Summers’s testimony helped establish the CPA violation at issue.
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ORDER - 14
1 confidential business information, the Telekenex Defendants were able to make their
2 disinformation campaign more effective,” id. at 13, but plaintiffs notably did not prevail
3 on their trade secret misappropriation or false advertising (Lanham Act) claims. With
4 respect to the other causes of action on which plaintiffs were successful, namely breach
5 of employment contract, breach of loyalty, and interference with contractual relations,
6 plaintiffs fail to explain how the evidence underlying such legal theories overlapped with
7 the proof necessary to support their CPA claim, the sole premise of which was that
8 defendants made false statements about Straitshot to its customers. See Instruction
9 No. 20 (docket no. 388). Indeed, the other three causes of action could have been
10 established without reference to false statements, see Instructions Nos. 14, 16, & 17, and
11 the making of false statements could have been demonstrated without showing any
12 breach of contract or duty of loyalty and in the absence of any tortious interference.
13 Thus, unless a billing entry specifically referred to the CPA claim, the Court has reduced
14 the number of hours in the billing entry by the ratio that the CPA claim bears to the total
15 number of claims presented at trial, specifically one-to-eight (1/8). Moreover, time spent
16 on the current motion for attorney’s fees has been discounted by 40% to reflect plaintiffs’
17 limited success.
18 / / /
19 / / /
20 / / /
21 / / /
22 / / /
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ORDER - 15
1
f.
2
Calculation
The Court has computed a lodestar sum of $212,088.91, which is derived from the
3 following data:
4
Attorney/Paralegal
Hours
Rate
Discount
Award
Summit Law Group PLLC
5
AAR
ALV
JEK
JLG
KMO
6
7
8
LMH
9
383.1
230.75
31.9
863.25
175.8
44.2
2.5
$
$
$
$
$
$
$
170
90
170
320
170
270
270
0.125
0.125
0.125
0.125
0.125
0.125
1.000
$ 8,140.88
$ 2,595.94
$ 677.88
$ 34,530.00
$ 3,735.75
$ 1,491.75
$ 675.00
67.7
55.9
0.7
0.4
323.9
$
$
$
$
$
155
345
155
155
395
0.125
0.125
0.125
1.000
0.125
$ 1,311.69
$ 2,410.69
$ 13.56
$ 62.00
$ 15,992.56
625.0
2.75
565.55
79.25
659.85
427.0
69.5
1.0
$
$
$
$
$
$
$
$
375
375
425
425
425
195
195
195
0.95 0.125
0.95 1.000
0.95 0.125
0.95 1.000
0.95 0.125
0.95 0.125
0.95 0.600
0.95 1.000
TOTAL10
$ 27,832.03
$ 979.69
$ 28,542.60
$ 31,997.19
$ 33,301.80
$ 9,887.72
$ 7,724.93
$ 185.25
$212,088.91
Savitt Bruce & Willey LLP
DBP
DEM
10
11
DMC
12
JPS
Massey & Gail LLP
13
BMD
14
JSM
15
LAG
16
MJR
17
18
10
The Court has not awarded fees for the time billed by the following individuals: DEJK (David Kruse),
DLA (Denise Ashbaugh), DNB (David Bruce), LCL (Larry Locker), MAT (Molly Terwilliger), MAY
(Miles Yanick), MLM (Maureen Mitchell), RCB (Rex Browning), SAS (Sivan Steffens), SCW (Stephen
20 Willey), and SDM (Sofia Mabee). Almost all of the time claimed for Mr. Browning was associated with
fully redacted billing entries, and what services Mr. Browning actually provided in connection with this
21 case remains a mystery. The descriptions of work performed by Mr. Kruse, Mr. Locker, Ms. Mabee, and
Ms. Steffens are not much more informative, with the exception of the eight hours Mr. Locker spent
22 assisting then lead counsel Jessica Goldman prepare to defend Philip Howe’s deposition, which the Court
has not credited because it was unnecessarily duplicative. Messrs. Bruce, Yanick, and Willey billed
19
23
ORDER - 16
1
2.
2
Plaintiffs have requested 150% of the attorney’s fees they allege were incurred in
Multiplier
3 connection with their CPA claim. Plaintiffs bear the burden of justifying such deviation
4 from the lodestar result. Bowers v. Transam. Title Ins. Co., 100 Wn.2d 581, 598, 675
5 P.2d 193 (1983). Under Washington law, adjustments to the lodestar figure may be
6 based on one or both of the following considerations: the contingent nature of a fee
7 arrangement and the quality of work performed. Id. The latter basis is extremely limited,
8 and may be applied “only when the representation is unusually good or bad, taking into
9 account the level of skill normally expected of an attorney commanding the hourly rate
10 used to compute the ‘lodestar.’” Id. at 599 (emphasis in original). Plaintiffs make
11 reference to this factor, but they offer no support for a determination that counsel in this
12 case provided services of an exceptional quality. Thus, the only ground on which
13 plaintiffs might demonstrate the appropriateness of an enhancement is the contingent
14 character of the fee arrangements with counsel.
15
The purpose of the contingency adjustment is to account for the risk that the suit
16 will not succeed. See id. at 598 (quoting Samuel R. Berger, Court Awarded Attorneys’
17 Fees: What is “Reasonable”?, 126 U. PA. L. REV. 281, 324-25 (1977) (In contingent
18 cases, “counsel bear the risk that they will not be compensated at all for their time and
19
20
solely for reading (and preparing to read) at trial designated portions of deposition transcripts; the Court
with respect
21 has awarded $40 per day of testimony in witness fees for such non-legal services. Moreover, only witness
to similar activities performed by Messrs. Doughty and Manville, the Court has also credited
fees and not attorney’s fees. Finally, Ms. Ashbaugh, Ms. Mitchell, and Ms. Terwilliger appear to have
22 devoted most of their minimal time on this case to issues unrelated to the CPA claim.
23
ORDER - 17
1 effort. The experience of the marketplace indicates that lawyers generally will not
2 provide legal representation on a contingent basis unless they receive a premium for
3 taking that risk.”)). Thus, before using a contingent fee arrangement as a basis to
4 enhance the lodestar amount, the Court must assess the likelihood of success at the outset
5 of the litigation, bearing in mind that the contingency enhancement is designed solely to
6 compensate for the possibility that the action would be unsuccessful and that counsel
7 would receive no fee. Id. at 598-99. The adjustment may not be employed if the fee
8 agreement assures the attorney of fees regardless of the outcome of the case, or if the
9 hourly rate underlying the lodestar amount includes a premium, taking into account the
10 contingent nature of the representation. Id. at 599. Finally, the multiplier should not be
11 applied to time expended after recovery is assured, for example, for efforts made toward
12 securing attorney’s fees as the prevailing party under a fee-shifting statute. Id.
13
Thus, plaintiffs’ assertion that they are entitled to an across-the-board multiplier
14 lacks merit. In applying the contingency enhancement to time devoted to obtaining
15 attorney’s fees, as well as to post-verdict motions practice, plaintiffs completely disregard
16 the Washington Supreme Court opinion referenced in their motion. See Motion at 14
17 (docket no. 512) (citing Bowers). Moreover, because Summit was compensated on an
18 hourly basis until May 2010, plaintiffs have no basis for requesting a contingency-based
19 adjustment as to over 70% of the attorney’s fees accrued by Summit. On the other hand,
20 with regard to attorney’s fees incurred prior to verdict, for work performed by Massey &
21 Gail and the SBW Firm, as well as for services provided by Summit after May 2010, the
22 Court is persuaded that a slight upward departure from the lodestar figure is justified.
23
ORDER - 18
1 Plaintiffs’ counsel prepared for and proceeded to trial in this matter with no assurance of
2 payment absent recovery. Indeed, in the event that the jury’s award failed to exceed
3 certain thresholds, two of the three firms were positioned to receive no fees even if
4 plaintiffs prevailed. Thus, the Court concludes that a multiplier is necessary to account
5 for the risk that the suit would not be sufficiently successful.
6
In determining the appropriate quantum of such enhancement, the Court is mindful
7 that plaintiffs are entitled to attorney’s fees only on their CPA claim, which was only one
8 of eight causes of action they pursued at trial, and only one of four causes of action on
9 which they prevailed. Of the various hurdles plaintiffs surmounted in proving their CPA
10 and three other claims, the one to which the Court would assign the highest risk of failure
11 was establishing damages. Indeed, the crux of defendants’ post-verdict motions was that
12 the evidence did not support the jury’s award of $6.49 million in damages. See Tr. (Apr.
13 10, 2012) at 56:20-61:10 (docket no. 528). With respect to the CPA claim, however,
14 plaintiffs did not have to prove actual damages to prevail; the injury element of a CPA
15 claim is met “if the consumer’s property interest or money is diminished because of the
16 unlawful conduct even if the expenses caused by the statutory violation are minimal.”
17 Mason, 114 Wn.2d at 854. Moreover, plaintiffs did not have to prove actual damages to
18 obtain attorney’s fees pursuant to the CPA; only an award of treble damages requires an
19 underlying determination of actual damages. Id. at 855. Thus, with respect to the CPA
20 claim, plaintiffs did not face the same challenges as existed in connection with their other
21 theories of recovery. The Court is therefore of the opinion that the 1.5 (150%) multiplier
22 plaintiffs seek is not reasonable, and the Court will instead use a factor of 1.2 (120%).
23
ORDER - 19
1 Applying this enhancement to Summit’s fees after May 2010 and before February 6,
2 2012, as well as to the pre-verdict fees of Massey & Gail and the SBW Firm, the Court
3 derives the following sum to be awarded to plaintiffs in addition to the lodestar figure:
4
Firm
5
Fees Eligible for Additional Amount
Enhancement
to be Awarded
Summit Law Group PLLC
$ 17,979.63
$ 3,595.93
Massey & Gail LLP
$ 110,866.63
$ 22,173.33
TOTAL
7
$
Savitt Bruce & Willey LLP
6
$ 14,225.00
2,845
$ 28,614.26
8
The Court concludes that the computed lodestar amount, together with the stated
9
contingency enhancement, constitutes a reasonable attorney’s fee in light of the nature of
10
the CPA claim, the course of the proceedings, the results achieved, and the underlying
11
purpose of the CPA. See Brand v. Dep’t of Labor & Indus., 139 Wn.2d 659, 667, 989
12
P.2d 1111 (2000) (observing that a “central” consideration in the Court’s analysis should
13
be “the underlying purpose of the statute authorizing the attorney fees”). Defendants
14
Telekenex, Inc., IXC Holdings, Inc., Brandon Chaney, Mark Radford, and Anthony
15
Zabit, and the marital community of each individual defendant,11 shall be jointly and
16
severally liable for the attorney’s fees awarded by the Court to plaintiffs Straitshot
17
Communications, Inc. and Straitshot RC, LLC. See Venegas v. Mitchell, 495 U.S. 82,
18
90 (1990) (fee-shifting statute controls “what the losing defendant must pay” to the
19
20
11
Defendants Mark and Maria Josefina (a/k/a Joy) Prudell having filed a voluntary petition
21 Chapter 7 of the Bankruptcy Code, the Court STAYS all further proceedings concerning thepursuant to
Prudells, see
11 U.S.C. § 362(a), and the Court will enter supplemental judgment only as to defendants other than the
22 Prudells.
23
ORDER - 20
1 prevailing party, not what the successful plaintiff must pay his, her, or its attorney); see
2 also Astrue v. Ratliff, 130 S. Ct. 2521 (2010) (the prevailing party, rather than the lawyer,
3 is entitled to receive the attorney’s fees awarded under a fee-shifting provision); compare
4 Okla. ex rel. Okla. Bar Ass’n v. Weeks, 969 P.2d 347, 357 (Okla. 1998) (a prevailing
5 plaintiff’s attorney may not recover both a contingency fee and the statutory award
6 (citing Venegas v. Skaggs, 867 F.2d 527, 534 n.7 (9th Cir. 1989), aff’d, 495 U.S. 82
7 (1990))).
8
3.
9
Plaintiffs seek costs to which they are not entitled under the CPA. Costs are
Costs
10 limited to those defined in RCW 4.84.010. See Nordstrom, 107 Wn.2d at 743 (“We
11 believe it gives the plaintiff in a Consumer Protection Act action an unwarranted
12 recovery to extend costs beyond those statutorily defined in RCW 4.84.010.”). Under
13 RCW 4.84.010, plaintiffs are entitled to filing fees, fees for service of process, notary
14 fees, reasonable expenses for obtaining certain reports and records that are admitted into
15 evidence at trial, statutory attorney and witness fees, and reasonable expenses for the
16 transcription of depositions used at trial.
17
Plaintiffs will not be awarded as costs the fees paid to other law firms, attorney
18 travel and subsistence expenses,12 legal research service charges, copying, mailing, and
19
20
Plaintiffs’ reliance on Panorama Vill. Condo. Owners Ass’n Bd. of Dirs. v. Allstate Ins. Co., 144 Wn.2d
130, 26 P.3d 910 (2001), for the proposition that attorney travel and subsistence expenses may be
21 recovered as costs is entirely misplaced. In Panorama, the plaintiff did not tax costs pursuant to
RCW 4.84.010. See id. at 143. Instead, the plaintiff was awarded attorney’s fees as an insured that was
22 “forced to file suit to obtain the benefit of [its] insurance contract,” pursuant to Olympic S.S. Co. v.
Centennial Ins. Co., 117 Wn.2d 37, 811 P.2d 673 (1991). See 144 Wn.2d at 143. In Panorama, the issue
12
23
ORDER - 21
1 messenger fees, pro hac vice application fees, electronic filing (PACER) fees, or
2 undefined printing costs. See Estep v. Hamilton, 148 Wn. App. 246, 261-63, 201 P.3d
3 331 (2008) (declining to award costs of deposition transcripts that were not made part of
4 the record, airfare for a party, expert witness fees, or photocopying costs); compare 28
5 U.S.C. § 1920.
6
Costs will be awarded only as follows:
7
CATEGORY
Filing Fee & Ex Parte Fees
Service of Process Fees13
Deposition Transcripts14
8
9
AMOUNT
$306.00
$790.00
$9,312.90
10
11
12
13
14
was whether Westlaw charges and expert witness fees should have been included within the Olympic
Steamship attorney’s fees; the opinion does not provide any ruling concerning reimbursement of airfare or
charges for food and lodging. Plaintiffs refer to the portion of the Panorama decision that cites hazardous
waste cleanup and civil rights cases in which expenses beyond the costs enumerated in RCW 4.84.010
were allowed, id. at 142-43 (quoting La.-Pac. Corp. v. Asarco Inc., 131 Wn.2d 587, 934 P.2d 685 (1997),
and Blair v. Wash. State Univ., 108 Wn.2d 558, 740 P.2d 1379 (1987)), but as the Washington Court of
Appeals has recently reiterated, the CPA is not analogous to such statutes, and unlike such statutes, the
CPA is not “liberally construed to serve its beneficial purposes,” 224 Westlake, LLC v. Engstrom Props.,
LLC, 169 Wn. App. 700, 739, 281 P.3d 693 (2012).
13
15
16
17
18
The cost summary submitted by plaintiffs, Ex. 4 to Tab 2 to Gail Decl. (docket nos. 513-9 through
513-10), includes numerous charges by ABC Legal Services, Inc. for “service” on individuals and entities
that are not parties to this case. By definition, such “service” does not constitute service of process, see
BLACK’S LAW DICTIONARY 1325, 1491 (9th ed. 2009); see also Wash. CR 4(d) (outlining the methods
for service of “summons and other process”), and plaintiffs are not entitled to reimbursement for such
expenses. The Court has credited plaintiffs with the charges associated with service on defendants
Brandon Chaney ($140), Mark Radford ($160), Anthony Zabit ($75), IXC Holdings, Inc. ($245), and
IXC, Inc. ($170), but not for service on Joshua Summers, as to whom plaintiffs did not prevail on their
CPA claim. Plaintiffs have not requested process service fees relating to defendants Mark Prudell or
Telekenex, Inc.
14
The Court has included the costs of transcripts for the depositions of individual defendants other than
Joshua Summers, namely Brandon Chaney ($1,860.25), Mark Prudell ($2,033.25), Mark Radford
($1,902.50), and Anthony Zabit ($3,516.90). The Court has not awarded the costs of transcripts for the
20 depositions of Carl Thomas Hunsinger, Jeremy Malli, Larry Marcus, Oscar Molnar, and Wayne Worthen,
portions of which were read into the record during trial, see Minutes (docket nos. 370, 375, 376), because
21 plaintiffs have provided no documentation concerning these depositions. The description “Court Reporter
fee,” which appears several times in the cost summary prepared by Massey & Gail, does not suffice. The
22 expenses relating to Andrew Gold’s and Phil Howe’s depositions have been excluded because both
individuals provided live testimony on behalf of plaintiffs, and such transcripts were not used by plaintiffs
19
23
ORDER - 22
1
CATEGORY
Statutory Attorney Fee (RCW 4.84.080)
Witness Fees15
TOTAL
2
3
AMOUNT
$200.00
$760.00
$11,368.90
4 Conclusion
For the foregoing reasons, plaintiffs’ motions for spoliation sanctions, docket
5
6 no. 511, and for attorney’s fees and costs pursuant to Washington’s Consumer Protection
7 Act (“CPA”), docket no. 512, are each GRANTED in part and DENIED in part. The
8 Clerk is DIRECTED to enter two separate supplemental judgments as follows. The first
9 supplemental judgment shall be in favor of plaintiffs Straitshot Communications, Inc. and
10 Straitshot RC, LLC and against defendants Joshua and Julia Summers, Telekenex, Inc.,
11 and IXC Holdings, Inc., jointly and severally, in the amount of $144,644.59 in attorney’s
12 fees and $184,555.19 in costs, for a total of $330,414.31 as spoliation sanctions, together
13
14
at trial. Finally, with regard to the deposition of Brian Worthen, the Court declines plaintiffs’ request for
such expenses in light of the fact that the CPA claim was not even alleged against Worthen or Mammoth.
15
Plaintiffs have not sought mileage or other travel expenses of witnesses. As to witness compensation,
15 although Washington contemplates a lower amount, see RCW 2.40.010; RCW 2.36.150, the Court has
applied the federal rate of $40 per day, see 28 U.S.C. § 1821(b). The Court has taxed the witness fees as
follows:
16
Witness
17
No. of
Days
Costs
Awarded
No. of
Days
Costs
Awarded
Scott MacPherson
1
$40
Witness
Lorraine Barrick
1
$40
Stephen C. Perry
2
$80
4
$160
Zachary Sargent
1
$40
2
$80
Stephen Willey
(Malli deposition)
1
$40
Erik Laykin
1
$40
Miles Yanick
1
$40
TOTAL
ORDER - 23
$40
Philip Howe
23
1
Andrew Gold
22
(W. Worthen deposition)
(Marcus deposition)
21
$40
Bruce Doughty
20
1
Duncan Manvill
(Hunsinger deposition)
19
$120
David Bruce
18
3
$760
(Molnar deposition)
1 with interest at the rate of eighteen-hundredths of one percent (0.18%) per annum from
2 the date of entry of the Court’s Spoliation Findings of Fact and Conclusions of Law,
3 namely March 6, 2012, until paid in full. See 28 U.S.C. § 1961; see also Friend v.
4 Kolodzieczak, 72 F.3d 1386, 1391-92 (9th Cir. 1995) (“Interest runs from the date that
5 entitlement to fees is secured, rather than from the date that the exact quantity of fees is
6 set.”).
7
The second supplemental judgment shall be in favor of plaintiffs Straitshot
8 Communications, Inc. and Straitshot RC, LLC and against defendants Telekenex, Inc.,
9 IXC Holdings, Inc., Brandon Chaney, Mark Radford, and Anthony Zabit, and the marital
10 community of each individual defendant, jointly and severally, in the amount of
11 $240,703.17 in attorney’s fees and $11,368.90 in costs, for a total of $252,072.07, which
12 is awarded pursuant to RCW 19.86.090, RCW 4.84.010, and 28 U.S.C. § 1920, together
13 with interest at the rate of seventeen-hundredths of one percent (0.17%) per annum from
14 the date of the original judgment, namely February 23, 2012, until paid in full. See
15 Friend, 72 F.3d at 1391-92.
16
This matter is STAYED with respect to defendants Mark and Maria Josefina
17 (a/k/a Joy) Prudell (the “Prudell Defendants”) pursuant to 11 U.S.C. § 362(a), and is
18 CLOSED with respect to all other parties. Plaintiffs and the Prudell Defendants are
19 DIRECTED to file a joint status report within fourteen (14) days after the conclusion of
20 bankruptcy proceedings or by June 10, 2013, whichever occurs earlier.
21
22
23
ORDER - 24
1
The Clerk is further DIRECTED to send a copy of this Order to all counsel of
2 record.
3
IT IS SO ORDERED.
4
Dated this 20th day of November, 2012.
A
5
6
THOMAS S. ZILLY
United States District Judge
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
ORDER - 25
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