Opinion
CV-17-01199-PHX-GMS (JZB)
01-12-2022
David Khalaj, et al., Plaintiffs, v. City of Phoenix, et al., Respondents.
HONORABLE G. MURRAY SNOW, CHIEF UNITED STATES DISTRICT JUDGE:
REPORT AND RECOMMENDATION
Honorable John Z. Boyle United States Magistrate Judge
I. Summary of Conclusions.
On January 22, 2021, this Court entered an Order granting Defendants' Motion for Sanctions (doc. 219). (Doc. 230.) Therein, the Court found that Plaintiffs had engaged in significant discovery violations warranting sanctions. Specifically, Plaintiff David Khalaj failed to disclose his application for Social Security Disability, wherein Khalaj avowed that he had been unable to work since 2018, despite claiming more than $1.3 million in damages for lost employment income between 2016 and 2021. (Id.) Additionally, Plaintiff provided misleading or false answers to Defendants' discovery requests directly inquiring about Khalaj's current work status and job duties, and failed to later supplement those deficient answers in a timely manner. (Id.) Plaintiffs also failed to appear for a deposition. (Id.) In light of Plaintiffs' abuses, the Court granted Defendants additional discovery made necessary by the violations and directed Defendants to file a motion for attorneys' fees and costs related to that additional discovery. (Id.)
The additional discovery and summary judgment briefing is now complete, and Defendants have filed their Motion for Attorneys' Fees, as directed by the Court. (Doc. 275.) The Motion is fully briefed. (Docs. 278, 279.) The Court will recommend that the District Court adopt this Court's January 22, 2021 Order (doc. 230) pursuant to LRCiv 72.2(a)(1), and grant Defendants' Motion for Attorneys' Fees in part, as detailed below.
II. Background.
On January 22, 2021, the Court issued an order granting Defendants' Motion for Sanctions (doc. 219) pursuant to Fed.R.Civ.P. 26(e), 37(c) and 37(d). (Doc. 230.) In that order, the Court provided the following summary of conclusions:
Throughout this action, Plaintiff David Khalaj, through his attorneys, disclosures, and personal declarations, has asserted that his arrest on January 1, 2016 negatively impacted his earning potential from his employment as a Real Estate Agent. His assertions made clear that his active participation in client development was crucial to both his brand and business development. Plaintiff Khalaj is seeking more than $1.3 million in damages for his lost income between 2016 through 2021.
In February 2020, Plaintiff Khalaj submitted a response to Defendants' Interrogatory No. 19, in which he has been employed as a Real Estate Agent at Pro Sports Realty from “September 2015 - to present.” On April 15, 2020, Plaintiff Khalaj submitted an application for Social Security Disability benefits, wherein he claims he has been unable to work and unemployed since July 17, 2018. At no time following his application did Plaintiff supplement his discovery response or disclose the existence of his Social Security Application to Defendants. Indeed, Defendants only discovered Plaintiff's failure to supplement when, by chance, on December 23, 2020 - three weeks before the close of discovery - Defendants stumbled upon the fact during the deposition of Plaintiff Youmaran's social security attorney, Mr. Jefferey Milam.
After briefing and a hearing on this issue, it is clear to this Court that Plaintiff Khalaj was aware of inaccurate information that he disclosed, and that Plaintiff Khalaj failed to timely supplement his incorrect disclosure in violation of Federal Rule of Civil Procedure 26(e). Plaintiff Khalaj's failure has caused prejudice to Defendants through the loss of time, resources, and opportunity to fully develop and defend their case. Accordingly, the Court will grant Defendants' Motion for Sanctions based on that failure. Additionally, the Court will grant Defendants' Motion for Sanctions for Plaintiff's failure to appear at a properly noticed deposition, and Defendants' Motion to Deem Admitted Requested Admissions to which Plaintiffs failed to respond.(Id. at 1-2.) In short, the Court granted Defendants' Motion for Sanctions because Plaintiffs failed to supplement their discovery responses to reflect that Plaintiff Khalaj has been disabled and unable to work since July 2018, failed to disclose that Plaintiff Khalaj had applied for disability benefits through the Social security Administration, and Plaintiffs failed to appear for their December 22, 2020 depositions. (See generally Doc. 230.)
As sanction against Plaintiffs for these various discovery abuses, the Court intended to award Defendants certain attorneys' fees and costs for the supplemental discovery made necessary by Plaintiffs' violations. (Id. at 21-22.) The Court directed Defendants to file a motion for attorneys' fees detailing those costs after they were incurred. (Id. at 22-23.)
On April 14, 2021, Defendants filed a Motion to Strike Plaintiff's Untimely and Unauthorized “Supplemental” Report of Plaintiff's Expert John Foltz. (Doc. 269.) On April 15, 2021, the Court granted the Motion, and further held that “Defendants may petition the Court for the fees and costs associated with this motion in their upcoming motion for attorneys' fees, which was authorized by this Court in its prior Order granting discovery sanctions against Plaintiff (see doc. 230).” (Doc. 270 at 5.)
II. Discussion.
In the Court's January 22, 2021 Order, the Court ordered that Plaintiffs would be required to pay Defendants' attorneys' fees and costs for the additional discovery required by Plaintiffs' discovery abuses. (Doc. 230.) Specifically, the Court ordered Defendants to file a motion for attorneys' fees detailing the following:
a. All fees and costs, including for preparation, associated with the additional deposition time for Mr. Foltz and Ms. Youmaran.
b. All fees and costs associated with Defendants' Motion for Sanctions (doc. 219).
c. All fees and costs incurred as a result of Plaintiffs' non-appearance at their December 22, 2020 deposition.
d. All fees and costs associated with Defendants' Motion for Attorneys' fees, directed to be filed in this order.(Id. at 21-22.) On April 15, 2021, the Court denied without prejudice Defendants' request for attorneys' fees incurred as a result of their Motion to Strike Plaintiff's Untimely and Unauthorized “Supplemental” Report of Plaintiff's Expert John Foltz (doc. 269). (Doc. 270.) The Court ordered that “Defendants may petition the Court for the fees and costs associated with this motion in their upcoming motion for attorneys' fees, which was authorized by this Court in its prior Order granting discovery sanctions against Plaintiffs (see doc. 230). Plaintiffs may respond to that motion with any opposition to the Court granting fees that they have.” (Doc. 270 at 5.)
As directed by the Court, Defendants have filed their Motion (doc. 275), and now seek $24,877.40 in costs and fees. (See Doc. 279 (including “additional attorneys' fees incurred in drafting this Reply in the amount of $1,932.50”).) After review, and pursuant to LRCiv 72.2(a)(1), the Court will recommend the District Court grant Defendants' Motion for Attorneys' Fees to the extent provided below.
a. Legal Standard.
Federal courts possess certain “inherent powers, ” not conferred by rule or statute, “to manage their own affairs so as to achieve the orderly and expeditious disposition of cases.” Bruner v. City of Phoenix, No. CV-18-00664-PHX-DJH, 2020 WL 554387, at *6 (D. Ariz. Feb. 4, 2020) (citing Link v. Wabash R. Co., 370 U.S. 626, 630-31 (1962)). That authority includes “the ability to fashion an appropriate sanction for conduct which abuses the judicial process.” Chambers v. NASCO, Inc., 501 U.S. 32, 44-45 (1991); see also E. & J. Gallo Winery v. Gibson, Dunn & Crutcher LLP, 432 Fed.Appx. 657, 659 (9th Cir. 2011) (“A court may levy a sanction on the basis of its own inherent power when a party has acted in bad faith, vexatiously, wantonly or, for oppressive reasons.”) (internal quotation omitted). And one permissible sanction is an “assessment of attorney's fees”-an order instructing a party that has acted in bad faith to reimburse legal fees and costs incurred by the other side. Chambers, 501 U.S. at 45.
“Rule 37(b) . . . provides a wide range of sanctions for a party's failure to comply with court discovery orders.” United States v. Sumitomo Marine & Fire Ins. Co., Ltd., 617 F.2d 1365, 1369 (9th Cir. 1980). Instead of or in addition to another sanction, the district court must require “the delinquent party or his attorney to pay the reasonable expenses, including attorney's fees, incurred by the innocent party as a result of the failure to obey the order.” Id. Rule 37 authorizes the imposition of various sanctions for discovery violations, including a party's failure to obey a court order to provide discovery. Additionally, pursuant to Rule 37(b)(2)(C), the Court “must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure . . . .” Fed.R.Civ.P. 37(b)(2)(C). Rule 37(d)(3) permits the Court to order a party who inexcusably fails to attend a noticed deposition to “pay the reasonable expenses, including attorney's fees, caused by the failure. . . .” Fed.R.Civ.P. 37(d)(3).
Determining a “reasonable” amount of attorneys' fees and expenses pursuant to a Rule 37 order is “‘not a precise science.'” IMA North America, Inc. v. Marlyn Neutraceuticals, Inc. 2007 WL 3231976, 3 (D. Ariz. 2007) (quoting Green v. Baca, 225 F.R.D. 612, 614-15 (C.D. Cal. 2005)). Courts can consider a number of factors, including: “the number of hours reasonably expended by counsel; the propriety of the hourly rate requested by counsel, given the skill and experience of counsel and the level of sophistication required for the legal services at issue; whether counsel has made a good faith effort to exclude from [the] fee request hours that are excessive, redundant, or otherwise unnecessary; and the level of success obtained through counsel's efforts.” Id.
“In short, ‘The district court has a great deal of discretion in determining the reasonableness of the fee . . . including its decision regarding the reasonableness of the hours claimed by the prevailing party.'” Ultimate Creations, Inc. v. McMahon, No. CV-06-0535-PHX-ROS, 2009 WL 10673614, at *2 (D. Ariz. Sept. 21, 2009).
b. Recommendation to Adopt Prior Order re: Motion for Sanctions.
As an initial matter, the Court will recommend that the District Court adopt this Court's January 22, 2021 Order (doc. 230) granting Defendants' Motion for Sanctions (doc. 219). As discussed above, on January 22, 2021, after full briefing and a hearing on Defendants' Motion for Sanctions, this Court entered an Order granting Defendants' Motion pursuant to its authority under Fed.R.Civ.P. 26(e), 37(c)(1)(C), and 37(d). (Doc. 230.) The Court permitted additional discovery in this action and directed that Plaintiffs would be required to pay for certain attorneys' fees and costs associated with that additional discovery as sanction for their discovery violations. (Id.)
However, the Court overlooked Local Rule of Civil Procedure 72.2(a)(1), which states in relevant part, that
In any motion in which the parties are seeking the sanctions provided for in Rule 37(b)(2)(A), (B), or (c), Federal Rules of Civil Procedure, if the Magistrate Judge is inclined to grant such requests the Magistrate Judge shall be limited to filing a report and recommendation with the District Court; a Magistrate Judge may enter an order denying such request.LRCiv 72(a)(1). Accordingly, the Court incorporates by reference into this Report and Recommendation this Court's January 22, 2021 Order granting Defendants' Motion for Sanctions (doc. 230). The Court will recommend that, to the extent the District Court must review this Court's finding that sanctions in this action are appropriate under Federal Rules of Civil Procedure 26(e), 37(c), and 37(d), the District Court accept the findings, analysis, and conclusions set forth in the January 22, 2021 Order (doc. 230) as recommendations to the District Court made pursuant to LRCiv 72.2(a)(1).
c. Recommendation to Grant Motion for Attorneys' Fees in Part.
The Court will further recommend the District Court grant Defendants' Motion for Attorneys' Fees. (Docs. 275, 279.) In their Motion, Defendants seek $24,877.40 in attorneys' fees and costs. (Doc. 275, 279.) In support of their fee request, Defendants have submitted timesheet entries for attorneys Lori V. Berke and Jody C. Corbett, and paralegal Laine M. Roberts. (See Doc. 275-1 at 19-58.) Defendants have also provided declarations from each of the above, detailing Ms. Berke's, Ms. Corbett's, and Ms. Roberts's credentials, experience, and hourly rate. (Id. at 2-18.) After careful review of Defendants' submissions (see Doc. 275-1 at 2-58), the Court finds that Defendants requested attorneys' fees and costs are mostly reasonable, and will grant the Motion in large part.
First, the Court finds that Defendants have presented sufficient evidence that their proposed hourly rates for Ms. Berke, Ms. Corbett, and Ms. Roberts are reasonable. “The prevailing market rate in the community is indicative of a reasonable hourly rate. The fee applicant has the burden of producing satisfactory evidence, in addition to the affidavits of its counsel, that the requested rates are in line with those prevailing in the community for similar services of lawyers of reasonably comparable skill and reputation.” See Jordan v. Multnomah County, 815 F.2d 1258, 1262 (9th Cir. 1987)) Here, Ms. Berke bills at a rate of $250 per hour, Ms. Corbett at $175 per hour, and Ms. Roberts at $125 per hour. (See Doc. 275-1 at 2-18.). In her declaration, Ms. Berke states that she is “familiar with billing rates charged for similarly qualified attorneys and paralegals[, ]” and that those hourly rates “are consistent with and in some instances lower than local practice and are reasonable for the work performed in this case.” (See Doc. 275-1 at 6, ¶15.) Plaintiffs do not challenge the reasonableness of the reported hourly rates. The Court finds Defendants' reported rates are reasonable.
This Court has consistently found higher hourly rates to be reasonable in similar circumstances. See, e.g., Excel Fortress Ltd. v. Wilhelm, No. CV-17-04297-PHX-DWL, 2019 WL 5294837, at *4 (D. Ariz. Oct. 18, 2019) (finding hourly rates of $500 and $250 reasonable for attorneys of similar skill and experience.); Hall v. Coolidge Unified Sch. Dist. No. 21, 2012 WL 2217043, at *4 (D. Ariz. Jan. 20, 2012) (finding $350/hour reasonable); Reed v. Purcell, 2011 WL 5128142, at *3 (D. Ariz. 2011) (noting that from 2010 to 2011, the reasonable rate for a Phoenix attorney with 20 plus years of experience was $446/hour, 1-3 years of experience was $216/hour, and paralegals was $127/hour).
Second, the Court finds that Defendants' detailed billing descriptions largely apply to tasks contemplated by the Court's order sanctioning Plaintiffs (with one exception discussed below). Specifically, Defendants seek $2,034.90 in costs for Plaintiffs' failure to appear for depositions, filing of the motion for sanctions, and the preparation and taking of supplemental depositions for Plaintiff Youmaran and Foltz. (See Doc. 275-1 at 19.) Each of Defendants' reported costs are reasonable and supported. Defendants further seek $22,842.50 in attorneys' fees for a combined 119.8 hours of billable time on covered actions, including time associated with Plaintiffs' failure to appear for depositions, drafting and arguing the motion for sanctions, preparation for depositions, moving to strike Plaintiffs' improper supplemental expert report, taking supplemental depositions, and drafting the pending motion for attorneys' fees and its reply. (See Id. at 19-47.) The Court finds that all but 9.7 hours of Defendants' reported time is reasonable and related to covered tasks. Accordingly, the Court will award Defendants a total of $23,082.40 in attorneys' fees and costs.
Spent on Defendants' Motion to Strike Plaintiffs' improper expert report. (See Docs. 269, 270.)
Plaintiffs argue that Defendants should not be permitted fees for their Motion to Deem Admissions Admitted (doc. 220), and their Motion to Strike Plaintiffs' Improper Supplemental Expert Report (doc. 269). (Doc. 278 at 2-8.) Plaintiffs are mistaken as to the first point. The Court's Order sanctioning Plaintiffs (doc. 230) was issued after oral argument was held on both the Motion for Sanctions and Motion to Deem Admissions Admitted (doc. 225). In that Order, the Court granted both the Motion for Sanctions (doc. 219) and Motion to Deem Admissions Admitted (doc. 220), and noted that Plaintiffs failed to file a response to the Motion to Deem Admissions Admitted even after being ordered to do so by the Court. (Doc. 230 at 20.) At the hearing, the Court questioned Plaintiffs about why no response to the Motion to Deem Admissions Admitted had been filed, and Plaintiffs' counsel informed the Court “it had been overlooked.” (Id.) Plaintiffs' failure to respond required Defendants to prepare for oral argument on that Motion, as well as the Motion for Sanctions, because both discovery issues were set before the Court at that hearing. Accordingly, Plaintiffs' objection to Defendants' inclusion of fees and costs for the Motion to Deem Admissions Admitted (doc. 220) is overruled.
The Court will, however, decline to award attorneys' fees and costs related to Defendants' Motion to Strike. In its Order granting Defendants' Motion to Strike the Report, the Court found that Foltz's supplemental report is “an entirely new report with conclusions that are completely different from those in his initial report” and that, if allowed, “Defendants would be prejudiced by this new report and its novel opinions, which has been produced less than 4 business days before the scheduled deposition, and one month before the close of discovery[.]” (See Doc. 270 at 4.) On review, the Court finds that additional attorneys' fees for the Motion to Strike are not warranted. Plaintiffs were not permitted to use the supplemental report, and Defendants suffered no prejudice because of Plaintiffs' belated and excluded expert disclosure. Defendants succeeded in having the supplemental report struck, the additional sanction of attorneys' fees is not warranted.
Accordingly, the Court will reduce Defendants' fee award by $1,795.00, the amount billed for bringing the Motion to Strike. (See Doc. 275-1 at 19.)
Plaintiffs next argue that Defendants' fees are inflated and include duplicative entries for the same work done by multiple attorneys. (Doc. 278.) The Court disagrees. Close review of the provided timesheets does not reveal any duplicative work. (See Doc. 275-1 at 19-58.) Plaintiffs' objection is overruled.
Lastly, Plaintiffs argue that Defendants' counsel spent an unreasonable number of hours to prepare the Motions for Sanctions, Supplement to the Motion for Sanctions, Second Supplement to the Motion for Sanctions, and preparation for Motion for Sanctions hearing. (Doc. 278 at 9-11.) The Court disagrees. The time sheets show that Ms. Corbett spent 23.3 hours drafting the 17-page Motion for Sanctions with over 100 pages of exhibits. Ms. Berke spent just 4.8 hours reviewing and revising the Motion. Under 30 hours of attorney time to prepare such a motion is plainly reasonable. Similarly, the combined 7 hours spent by Ms. Corbett and Ms. Berke on the supplement, 10 hours spent on the second supplement that had been verbally ordered by the Court at the hearing, and the combined 11.5 hours spent preparing for the hearing, are also reasonable. After careful review of Defendants' provided timesheets, the Court finds Defendants' time expenditures were reasonable for the tasks reported. Therefore, Plaintiffs' objections will be overruled, and the Court will grant Defendants' Motion for Attorneys' Fees to the extent provided in this Order.
Accordingly, IT IS RECOMMENDED that the District Court adopt this Court's January 22, 2021 Order (doc. 230) granting Defendants' Motion for Sanctions (doc. 219), pursuant to LRCiv 72.2(a)(1).
IT IS FURTHER RECOMMENDED that Defendants' Motion for Attorneys' Fees (doc. 275) is granted to the extent provided herein.
IT IS FURTHER RECOMMENDED that Defendants be awarded $21,047.50 in attorneys' fees and $2,034.90 in costs, for a total award of $23,082.40 to be assessed against Plaintiffs.