Opinion
Case No.: 3:16-cv-0480-BEN-WVG
10-22-2020
H.I.S.C., INC. and DEPALMA ENTERPRISES, INC., Plaintiffs, v. FRANMAR INTERNATIONAL IMPORTERS, LTD.; MARIA RAJANAYAGAM; and RAVI INDUSTRIES LIMITED, Defendants.
ORDER ON MOTIONS FOR (1) TREBLE DAMAGES (2) ATTORNEY'S FEES
[ECF Nos. 260, 261]
Before the Court are Defendants Franmar International Importers, Ltd. and Maria Rajanayagam's (collectively, "Defendants") Motion for Treble Damages and Motion for Attorney's Fees and Costs. ECF Nos. 260, 261. Plaintiffs H.I.S.C., Inc. and DePalma Enterprises (collectively, "Plaintiffs") oppose the motions. For the reasons set forth below, the Motion for Treble Damages is denied and the Motion for Attorney's Fees and Costs is granted in part.
I. Background
Following trial, the jury awarded Defendants $265,977.00 for their counterclaim that Plaintiffs committed trade dress infringement in violation of 15 U.S.C. § 1125(a). Verdict, ECF No. 210. On February 22, 2019, the Court entered final judgment on Plaintiffs' claims and Defendants' counterclaims, documenting the award. Judgment, ECF No. 213. Plaintiffs appealed the judgment, and the Ninth Circuit Court of Appeals affirmed both the jury verdict and the Court's denial of request for a new trial on June 23, 2020. Mandate & Order, ECF No. 263. The Court of Appeals also denied Defendants' request for attorney's fees on appeal. Order, ECF No. 262.
Defendants now ask the Court for treble damages based on Plaintiffs' alleged willful infringement of Defendants' trade dress, as well as attorney's fees and costs pursuant to 15 U.S.C. § 1117(a).
II. Legal Standards
A. Treble Damages or Enhanced Damages
Under 15 U.S.C. § 1117(a), a prevailing party may recover (1) the infringing party's profits, (2) damages sustained by the injured party, and (3) the costs of the action. Where the case involves a counterfeit mark, damages are trebled absent extenuating circumstances. 15. U.S.C. § 1117(b). However, even in non-counterfeiting cases such as this, the statute provides that "[i]f the court shall find that the amount of the recovery based on profits is either inadequate or excessive the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case." 15 U.S.C. § 1117(a) (emphasis added). The increased monetary award must have a remedial or compensatory purpose and must not be punitive in nature. Id.; see also SkyDive Arizona, Inc. v. Quattrocchi, 673 F.3d 1105, 1114 (9th Cir. 2012).
B. Attorney's Fees
The fee-shifting provisions in the Patent Act, 35 U.S.C. § 285, and the Lanham Act are interpreted in tandem. SunEarth, Inc. v. Sun Earth Solar Power Co., Ltd., 839 F.3d 1179, 1180 (9th Cir. 2016) (en banc). Thus, in "exceptional cases," the Court "may award reasonable attorney's fees to the prevailing party." 15 U.S.C. § 1117(a). Courts examine whether a case is "exceptional" under a "totality of the circumstances test." SunEarth, Inc., 839 F.3d at 1180 (citing Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014). The Court must evaluate a "nonexclusive list of factors, including frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence" in exercising its discretion to award fees. Id. (quoting Octane Fitness) (internal quotations omitted).
III. Analysis
A. Treble Damages
Defendants' motion requests this award be trebled or at least enhanced due to Plaintiffs' allegedly willful infringement. Mot., ECF No. 260, 3.
Plaintiffs object that Defendants' Motion for Treble Damages is untimely. Opp'n, ECF No. 264, 1. Plaintiffs note that while Defendants' initial Motion for Attorney's Fees and Costs was denied without prejudice by the Court pending Plaintiffs' appeal, Defendants did not make a separate Motion for Treble Damages at that time. Id. Instead, the Motion for Treble Damages was filed only after the Court of Appeals issued its mandate, more than sixteen months after the Court entered judgment in this case. Mot., ECF No. 260. Plaintiffs argue the Motion for Treble Damages should be treated as a Motion to Alter or Amend a Judgment pursuant to Federal Rule of Civil Procedure 59(e). Opp'n, ECF No. 264, 1.
While neither party cites cases addressing this issue, the plain language of Rule 59(e) provides that "[a] motion to alter or amend a judgment must be filed no later than 28 days after the entry of the judgment." Here, the Court entered judgment on February 22, 2019. Judgment, ECF No. 213. Judgment was for the amount awarded by the jury, $267,977.00. Id. While Defendants filed a Motion for Attorney's Fees, Expert Fees, and Costs only eleven days later, they did not file their Motion for Treble Damages until the appeal was completed. ECF No. 221; ECF No. 260. In the instant motion, Defendants plainly seek to alter the Court's judgment to increase the award. Mot, ECF No. 260, 3.
Defendants' response is that they could not file this Motion because the case was stayed on appeal, and that the Motion for Treble Damages does not seek to alter or amend the judgment. Reply, ECF No. 267, 4. These arguments are unpersuasive. Notice of Appeal was not made until May 2, 2019, more than twenty-eight days after the entry of judgment, which left Defendants all the time allowed by Rule 59(e) to make this Motion for the Court to "enter judgment for such sum as the court shall finding to be just, according to the circumstances of the case." 15 U.S.C. § 1117(a). Moreover, the Parties entered a Satisfaction of Judgment on June 3, 2019. ECF No. 246.
Section 1117(a) plainly contemplates adjusting the award based on the circumstances of the case when the Court "enter[s] judgment." Thus, a motion to amend that judgment to request additional compensation must conform with the timeliness requirements of Rule 59(e). In short, Rule 59(e) provides a party twenty-eight days after entry of judgment to seek the upward or downward relief requested under 15 U.S.C. § 1117(a). Defendants' motion does not do so here, and the substantial delay in filing the instant motion results in prejudice to Plaintiffs by forcing them to litigate an issue that the Court squarely put to rest. Even if the motion had been timely, the Court would have exercised its discretion to decline awarding treble damages.
Accordingly, Defendants' Motion for Treble Damages is denied.
B. Attorney's Fees
Section 1117(a) provides that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." 15 U.S.C. § 1117(a). Defendants argue they are the prevailing parties in this case and that the case is exceptional, entitling them to an attorney's fee award. Mot., ECF No. 261, 7. Plaintiffs argue that Defendants are not the prevailing party and that the case is not exceptional, precluding any fee award. Opp'n, ECF No. 265, 3.
The Court first notes that law of the case doctrine does not prohibit the Court from considering an attorney's fee award where appellate attorney's fees were denied by the Court of Appeals. Order, ECF No. 262. Defendants' request for attorney's fees on appeal involved applying Federal Rule of Appellate Procedure 39 to Defendants' claims under 15 U.S.C. § 1117(a). Id. Because the instant motion instead involves attorney's fees before the District Court, the issue is different and the law of the case doctrine does not apply.
Next, the Court finds that Defendants are the prevailing party. The jury found that Plaintiffs committed trade dress infringement and awarded Defendants $265,977.00. Verdict, ECF No. 210, 9. While Plaintiffs argue Defendants did not prevail on other claims involved in this suit, Defendants unquestionably prevailed on their Lanham Act counterclaims that serve as the basis for their request for attorney's fees. See Brighton Collectibles, Inc. v. Coldwater Creek, Inc., No. 06-CV-1848-H-POR, 2009 WL 160235, at *2 (S.D. Cal Jan. 20, 2009) (holding that a jury's finding of trade dress infringement created a prevailing party).
Finally, the Court finds this to be an exceptional case. "[A]n 'exceptional' case is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated." SunEarth Inc. 839 F.3d at 1180 (quoting Octane Fitness, 572 U.S. at 545) (citations omitted). There, "[t]he Court eschewed a precise rule or formula for making these determinations and instructed that equitable discretion should be exercised in light of the considerations we have identified." Id. at 1180-81) (internal quotations and citations omitted).
Here, Plaintiffs had a three-year working relationship with Defendants from which they substantially benefitted. Plaintiffs took the knowledge they acquired from the relationship and not only set up a competing enterprise but attempted to drive Defendants out of business. Defs.' Trial Ex. 319 (an email from Plaintiffs' agent stating "we need to keep the village busy so they don't make [brooms] for [Defendants]"). Plaintiffs' motivation in filing this case, the Court concludes, was not to fairly litigate meritorious claims but an attempt to corner the market for the products at issue. Other courts in this district have found such severe conduct to demonstrate an unreasonable litigation position. See Left Coast Wrestling, LLC v. Dearborn Int'l LLC, No. 17-CV-0466-LAB-NLS, 2018 WL 2328471, at *11 (S.D. Cal. May 23, 2018). The Court agrees with this reasoning, which supports the finding that this case is exceptional. See SunEarth, Inc., 839 F.3d at 1181. Accordingly, the Court exercises its discretion to award attorney's fees.
C. Attorney's Fees Award
Having determined that Defendants are entitled to attorney's fees, the Court must determine whether the requested fees are reasonable. See 15 U.S.C. § 1117(a); Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). Defendants seek $477,010.00 in fees to Flyer & Flyer, PLC, and $93,667.45 in fees to Dorsey & Whitney, LLP for a total of $570,677.45 in attorney's fees.
i. Global Fee Analysis
The award of attorney's fees under the Patent Act, 35 U.S.C. § 285, and the Lanham Act are interpreted in tandem. SunEarth, Inc., 839 F.3d at 1180. Some courts have become concerned about the "wasted effort focused on the recovery of fees" in such cases, which require an extraordinary amount of time and effort that turns the courts into "green-eyeshade accountants." Universal Electronics, Inc. v. Universal Remote Control, Inc., 130 F. Supp. 3d 1331, 1335 (quoting Fox v. Vice, 563 U.S. 826, 838 (2011)); see also Arbor Hill Concerned Citizens Neighborhood Ass'n v. Cty. Of Albany, 522 F.3d 182, 189 (2d Cir. 2007) (O'Connor, J., sitting by designation, joining in the opinion) ("[t]he net result of fee-setting jurisprudence . . . is that the district courts must engage in an equitable inquiry of varying methodology while making a pretense of mathematical precision"); ITN FLIX, LLC v. Hinojosa, No. 14-CV-8797-ODW, 2020 WL 1032344, at *3 (C.D. Cal. Mar. 2, 2020) ("[t]he Court instead considers the reasonableness of thehours expended on each motion and the appeal by employing a global view of reasonableness"). "The essential goal in shifting fees (to either party) is to do rough justice, not to achieve audit perfection." Fox, 563 U.S. at 838. "So trial courts may take into account their overall sense of a suit, and may use estimates in calculating and allocating an attorney's time." Id.
Reflecting the modern trend described by the Supreme Court in Fox, this Court will begin by generally reviewing this case to determine a reasonable aggregate global amount for fees. The Court's familiarity with this case and these attorneys over a significant period of time provides it sense of the suit and the experience needed to determine a reasonable fee in the context of this litigation.
Here, Defendants seek $570,667.45 in attorney's fees and $12,942.11 in costs. This case involved substantial litigation, damages, and the awarding of a permanent injunction. However, the damages awarded by the jury were significantly lower than the amount sought by Defendants. Taking the global fee analysis approach and considering all of the circumstances, the Court finds an award of $134,000.00 to be an appropriate award for attorney's fees. The Court now turns to a more granular analysis to provide further detail.
ii. Granular Fee Analysis
In Lanham Act cases, the attorney's fee award begins by calculating "the presumptive loadstar figure by multiplying the number of hours reasonably expended on the litigation by the reasonable hourly rate." Intel Corp. v. Terabyte Int'l, Inc., 6 F.3d 614, 622 (9th Cir. 1993). The award may be adjusted based upon the factors set forth in Kerr v. Screen Extras Guild, Inc., 526 F.2d 67, 69-70 (9th Cir. 1975). Id. Those factors include:
"(1) the time and labor required, (2) the novelty and difficulty of the questions involved, (3) the skill requisite to perform the legal service properly, (4) the preclusion of other employment by the attorney due to acceptance of the case, (5) the customary fee, (6) whether the fee is fixed or contingent, (7) time limitations imposed by the client or the circumstances, (8) the amount involved and the results
obtained, (9) the experience, reputation, and ability of the attorneys, (10) the 'undesirability' of the case, (11) the nature and length of the professional relationship with the client, and (12) awards in similar cases.Kerr at 69-70. "[T]he opposing party has the burden of submitting evidence challenging the accuracy and reasonableness of the hours charged or the facts asserted by the prevailing party." Rodriguez v. Barrita, Inc., 53 F. Supp. 3d 1268, 1280 (N.D. Cal. 2014) (internal quotations and citations omitted).
Here, Defendants seek $477,010.00 in fees to Flyer & Flyer, PLC. Mot., ECF No. 261, 18. Defendants' request is based on David Flyer's hourly rate of $600 per hour and 529.5 hours of work on this case, and Raquel Flyer's hourly rate of $350 per hour and 411 hours of work on this case. Id. Plaintiffs argue several specific time entries contain vague descriptions of services rendered and block billing, "such that it is impossible to determine how much time counsel billed for each individual task, rendering [impossible] a determination of whether that time was reasonable." Opp'n, ECF No. 265, 15. Plaintiffs further argue that certain Kerr factors warrant a downward departure from the lodestar, and that Defendants' counsel took this case on a contingent fee basis which would make its requested attorney's fees unreasonable given the amount awarded at trial. Id. at 16-17. Defendants do not address any of Plaintiffs' specific challenges to their billing entries in their Reply.
As to the lodestar, Defendants first argue David Flyer's entries such as "[r]eceive and review documents from Keyes, advise client," "[a]dvise client, prepare memorandum," and "[d]ictate opinion letter to client" are vague and should be discounted. Opp'n, ECF No. 265, 15. The Court disagrees. These descriptions adequately document tasks that are required to carry out the attorneys' duties during this litigation while necessarily being somewhat limited to protect work product and privileged information. See Pierce v. City of Orange, 905 F. Supp. 2d 1017, 1029 (C.D. Cal. 2012). Moreover, many of Defendants' objections to block billing involve document review in a case that contained 20,000 pages of discovery documents and pleadings. Opp'n, ECF No. 265, 15. One such entry is for five hours. Decl. of David R. Flyer, Ex. C, ECF No. 221-6, 8. Many others, however, are for time periods as short at twenty-four minutes. The Court also reasons that entries closer to the date of trial, which upon review tend to skew longer and are generally labeled "Prepare for Trial; Opposition to MIL [then specifying a particular motion in limine to which counsel is responding]" convey all that could possibly be required without piercing into protected work product. Id. at 12.
Defendants additionally argue certain entries by Raquel Flyer are improper. Defendants specifically point to block billed entries and those including overnight hours, where the Court is unable to determine what time was spent working on the case. Opp'n, ECF No. 265, 16. For example, Ms. Flyer billed forty-eight hours from March 19, 2018, to March 21, 2018, for "[t]ravel to and attend depositions in Vancouver." Decl. of Raquel Flyer, Ex. D, ECF No. 221-7, 2. Another entry bills twenty-four hours on April 10, 2018, to "[c]onduct deposition of Sam Ahilan, including travel and overnight stay." Id. Entries beginning August 7, 2018, February 4, 2019, and February 11, 2019, suffer the same infirmary and total 114 hours. Id. at 3, 6. The Court reduces these entries by fifty percent because while the Court is aware Ms. Flyer performed work on this case during those days, it is unable to assess the exact amount of time reasonably expended.
Having become the "green-eyeshade accountant," the Court calculates Ms. Flyer reasonably worked 318 hours at $350 per hour. Flyer & Flyer's lodestar is therefore $429,000.00.
Applying Kerr, the Court finds a downward departure from the lodestar is warranted. First, the Court considers the hourly fees in the lodestar to be reasonable. The second Kerr factor likewise does not warrant departure. The case was not particularly novel, but the litigation was very contentious and both Mr. Flyer and Ms. Flyer represented their clients well on challenging trade dress infringement issues. Though Defendants cursorily argue the third Kerr factor supports downward departure because the case required no specialized skill, Opp'n, ECF No. 265, 17, the Court - having presided over the jury trial at which counsel skillfully performed their craft - finds that this factor is neutral. Nonetheless, the tenth Kerr factor, namely the amount involved and the results obtained, supports reduction. See Hensley, 461 U.S. at 440 ("[a] reduced fee award is appropriate if the relief, however significant, is limited in comparison to the scope of the litigation as a whole").
Defendants' counterclaims sought approximately $604,000.00, and the jury awarded $265,977.00. Awarding $477,010.00 or even $429,000.00 under these circumstances would be unjustifiably high, representing close to double the amount of actual damages awarded by the jury. See McCown v. City of Fontana, 565 F.3d 1097, 1104 (9th Cir. 2009) (finding that while a pro rata distribution makes no sense, the Court must reduce the fee award to be commensurate with the prevailing party's success); see also Farrar v. Hobby, 506 U.S. 103, 114 (1992) (the Court should "give primary consideration to the amount of damages awarded as compared to the amount sought") (internal quotations omitted). Accordingly, the Court reduces the fee award to $133,988.50, representing fifty percent of Defendants' recovery.
This reduction in fees is not a "mechanical" reduction that the Ninth Circuit has frowned upon. See Vargas v. Howell, 949 F.3d 1188, 1196 (9th Cir. 2020). Nor is the reduction intended to "punish" Defendants' counsel. Id. And while the Court notes that Vargas is distinguishable in that this case does not involve a settlement where a motion for attorney's fees was expressly contemplated, see id. at 1197, the Court's discussion above reflects its thoughtful consideration of the Kerr factors and "the excellence of the overall result, not merely the amount of damages won." McCown, 565 F.3d at 1104.
Regarding fees charged by Dorsey & Whitney, LLP, Plaintiffs alleged that Defendants' attached invoice does not contain "information about the individuals identified in the invoices, including those who were not attorneys of record in this matter, their relative experience, or any other information that would support the reasonableness of the rates charged." Opp'n, ECF No. 265, 18. The Court agrees. Accordingly, no attorney's fees shall be awarded based on the invoice submitted on behalf of Dorsey & Whitney, LLP.
D. Costs
Plaintiffs' correctly note that expert witness fees are only a recoverable cost to the extent allowable for an ordinary witness. See 28 U.S.C. ¶ 1821(b) and (c); Rimini Street, Inc. v. Oracle USA, Inc., 139 S. Ct. 873, 879 (2019). Defendants accordingly withdrew several of their claimed costs in their Reply. ECF No. 266, 6. Defendants remaining fee requests include $1,876.10 in travel costs and witness fees and $11,066.01 in deposition costs. Plaintiffs' argument that the deposition was unnecessary is rejected, as Defendants' needed to obtain confirmation of financial data to calculate their damages. Accordingly, Defendants are awarded $12,942.11 in costs.
IV. Conclusion
For the reasons set forth above, Defendants Motion for Treble Damages is denied. Defendants' Motion for Attorney's Fees and Costs is granted in part. The Court awards Defendants $133,988.50 in attorney's fees and $12,942.11 in costs and expenses.
IT IS SO ORDERED. DATED: October 22, 2020
/s/_________
HON. ROGER T. BENITEZ
United States District Judge