Opinion
4:21-CV-00156-M
10-31-2023
Hampton Peterman, Plaintiff, v. RAMod Brewers, LLC, Aaron Avery, and Matthew Rouse, Defendants.
MEMORANDUM & RECOMMENDATION
Robert T. Numbers, II United States Magistrate Judge
This matter is before the court on Plaintiff Hampton Peterman's motion for default judgment. He claims that Defendants RAMod Brewers, LLC, Aaron Avery, and Matthew Rouse have abandoned this case. Defendants did not respond to Peterman's motion.
Peterman filed a Complaint, which Defendants answered. But shortly after that, they stopped participating in the case. The Defendants' unresponsiveness impeded discovery and the progression of litigation. Peterman moved to compel discovery, which the court granted. But even that determination elicited no response from Defendants.
Peterman now moves for default judgment on all claims alleged in the Complaint. He contends that it is the appropriate sanction for Defendants' unresponsiveness.
After considering the record, the undersigned concludes that Peterman has shown he is entitled to relief he requests. The Defendants have not refuted his evidence on the claims asserted.
The undersigned finds that the only appropriate sanction to address Defendants' abandonment of the case is to resolve all pending claims against them. By ignoring counsels' communications, disregarding court orders, and flouting their obligations in a manner that prejudices Peterman, the judicial process, and the administration of justice, Defendants have created a situation that demands a severe response from the court. And default judgment against them is the only viable sanction.
I. Background
The individual parties formed a business but the collaboration ultimately faltered. Defendants Aaron Avery and Matthew Rouse bought out Plaintiff Hampton Peterman's interest. Avery and Rouse then formed RAMod Brewers. Peterman filed a Complaint alleging trademark infringement, unfair and deceptive trade practices, and breach of contract, to which the Defendants filed an Answer. D.E. 19.
The parties held a Rule 26(f) meeting and submitted a joint report. D.E. 35. Defendants agreed to make initial disclosures by April 21, 2023. Id. The court issued a Scheduling Order setting out various case management deadlines. D.E. 36. Included was a requirement that the parties exchange initial disclosures by their agreed-upon deadline. Id. ¶ 2.
But Peterman encountered difficulty exchanging discovery with Defendants. They failed to respond to at least two requests by Peterman to serve their initial disclosures. See Exhibits A and B, D.E. 40-1, 40-2. So Peterman moved to compel discovery. D.E. 39. Defendants did not respond to the motion to compel.
As Rule 26 states, service of initial disclosures does not require a request from another party. So Defendants' obligation under Rule 26 arose before Peterman asked about the status of Defendants' initial disclosures after the date for service has passed. Second, initial disclosures are not optional. The Rule states that a party “must” provide certain information to other parties.
The court granted Peterman relief. D.E. 41. It instructed Defendants to serve initial disclosures. Id. And the Order directed Defendants to show cause why they should avoid paying the fees Peterman incurred with the motion to compel. Id. Yet again, Defendants failed to respond.
Peterman has moved the court to enter default judgment against Defendants. D.E. 42. He argues that they have abandoned this litigation. Id. And Peterman requests attorneys' fees and costs associated with the motion. Id.
II. Analysis
Peterman asks the court to enter default judgment against Defendants for violating the court's Scheduling Order establishing discovery obligations and its Order granting his motion to compel. Defendants filed no response. The court should grant Peterman's motion because Defendants have violated court orders and all the requirements for entry of default judgment are satisfied. And Peterman has shown entitlement to relief on the claims asserted in his Complaint.
A. Motion for Default Judgment
The Federal Rules allow the court to sanction a party who violates a discovery order. Fed.R.Civ.P. 37(b)(2). These sanctions can include entering a default judgment against the offending party. Id.
Defendants have violated the March 2023 Scheduling Order establishing case management responsibilities, including a deadline to serve initial disclosures. D.E. 36. And they ignored a July 2023 Order granting Peterman's motion to compel that directed them to serve initial disclosures. D.E. 41. So the only question is what sanction the court should impose for their conduct.
Before entering a default judgment as a sanction, a court must consider four things. Wilson v. Volkswagen of Am., Inc., 561 F.2d 494, 503-04 (4th Cir. 1977). To begin with, it must consider whether the offending party acted in bad faith. Id. Next, the court must determine the amount of prejudice that the failure to respond caused to the party who served the discovery. Id. Then, the court must determine the need to deter similar conduct. Id. Finally, the court must evaluate whether less drastic sanctions would be effective. Id.
After analyzing these factors, it is appropriate for the district court to enter a default judgment against Defendants.
1. Bad Faith
The court first looks to whether Defendants' conduct amounts to bad faith. A party acts in bad faith when it shows a “callous disregard for the authority of the district court and the Rules.” Mut. Fed. Sav. & Loan Ass'n v. Richards & Assocs., Inc., 872 F.2d 88, 92 (4th Cir. 1989). A primary example of bad-faith conduct is ignoring the opposing party's discovery requests and the court's orders requiring compliance. Id. at 93; Anderson v. Found. for Advancement, Educ. & Emp. of Am. Indians, 155 F.3d 500, 504 (4th Cir. 1998) (responding party “stonewall[ing] on discovery from the inception of the lawsuit” constituted bad faith).
The Defendants violated the court's discovery orders at least twice. And they also ignored discovery requests and their obligations under the Federal Rules. Their continued disregard of court orders despite warnings shows their indifference towards the authority of the court and this litigation. Their behavior amounts to bad faith.
2. Prejudice
The second factor focuses on whether Defendants noncompliance prejudiced Peterman. One type of prejudice a party can suffer from a discovery order violation is the inability to effectively prepare and litigate its case. See Mut. Fed. Sav. & Loan Ass'n, 872 F.2d at 93 (affirming district court's determination that requesting party “suffered great prejudice” because the requested documents were necessary for the party to prove its case); Porter v. Guarino, F.R.D. 282, 284 (M.D. N.C. 2004) (requesting party “suffered great prejudice” when he could not prepare his case and wasted considerable resources moving to obtain discovery material).
The Defendants' continued evasive behavior has hindered this litigation. Their failure to abide by court orders or participate in discovery has left Peterman with no option but to repeatedly ask the court to intervene. And their failure to turn over evidence has interfered with Peterman's ability to litigate this case. So this factor supports entering default judgment against Defendants.
3. Deterrence
The Defendants have disregarded the court's instructions more than once. This behavior impedes the administration of justice and wastes significant resources of both the court and the parties involved. This type of conduct-by Defendants and others who may come before this court-must be deterred.
4. Sufficiency of Lesser Sanctions
The court previously admonished Defendants, but they continue to ignore its orders. Given that repeated orders directing Defendants to participate in the litigation and produce discovery were ineffective, the case cannot proceed. Defendants appear to have abandoned this case. So no sanction less than entry of a default judgment would effectively address their conduct.
5. Warning About Potential Entry of a Default Judgment
Along with considering the Wilson factors, the court must ensure that a party had explicit notice about the potential for a default judgment before imposing that sanction. See Hathcock v. Navistar Int'l Transp. Corp., 53 F.3d 36, 40 (4th Cir. 1995) (“[T]his court has emphasized the significance of warning a defendant about the possibility of default before entering such a harsh sanction.”).
The court cautioned Defendants about the consequences of failing to heed its orders. See D.E. 41 at 3. It warned that sanctions, including dismissal, could result from their noncompliance. Id. But Defendants disregarded this admonition. Peterman's motion also alerted Defendants that the court could enter default judgment against them.
Each Wilson factor supports entry of a default judgment against Defendants.
B. The Complaint supports the relief Peterman seeks.
Having determined that it is appropriate to enter a default judgment against a defendant, the court must ensure that, as a factual matter, the plaintiff is entitled to judgment in its favor. While a default judgment means that a defendant has admitted the complaint's well-pleaded allegations, it is not “an absolute confession” of a defendant's liability or plaintiff's right to recover. Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001) (quoting Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)). The court must “determine whether the well-pleaded allegations in [the operative] complaint support the relief sought.” Id. If facts as alleged in the Complaint entitle Peterman to relief, Defendants, by their abandonment and default, cannot now controvert them successfully. See Trans World Airlines, Inc. v. Hughes, 449 F.2d 51, 64 (2d Cir. 1971), rev'd on other grounds, Hughes Tool Co. v. Trans World Airlines, Inc., 409 U.S. 363 (1973).
In a previous Order, the court determined that the Complaint asserted the following factual allegations:
In 2018, Peterman and Avery formed the corporate entity Big Game Brewing, LLC, which operated a brewery that was first located in Trenton, North Carolina but later moved to Kinston, North Carolina. D.E. 1 ¶ 9. For purposes of operating the brewery, Peterman registered the trademark “BIG GAME BREWING” with the U.S. Patent and Trademark Office (Serial No. 88180524). Id. ¶ 10. Along the way, Rouse joined the business. See id., ¶ 11. Peterman, Avery, and Rouse, through Big Game Brewing, LLC, used this mark in a variety of ways to sell and advertise the brewery's goods and services. See Id. ¶ 122. For example, the mark was used on the brewery's social media accounts and on signage in and around the building of the brewery. Id.
On June 11, 2021, Peterman, Avery, and Rouse entered into an Agreement for Sale of LLC Interest. Id. ¶ 11. Under the terms of the sale agreement, Peterman
sold his 49.5% interest in Big Game Brewing, LLC to Avery and Rouse for $20,000. Id. ¶ 12. The sale agreement also provides that the mark is the sole property of Peterman and that Avery and Rouse disclaim any ownership, rights, entitlement, or obligations associated with the mark. Id., ¶ 13. The sale agreement required Avery and Rouse to wind down the operation of Big Game Brewing, LLC, and by July 26, 2021, cease use of existing signage, merchandise, and other media which contain or use the mark. Id. ¶ 14.
Within the same month, on or around June 30, 2021, Avery and Rouse formed a new corporate entity, RAMod Brewers, LLC. Id. ¶ 21. They subsequently “merged” Big Game Brewing, LLC into RAMod Brewers, LLC. Id. However, Avery and Rouse, through RAMod Brewers, LLC, continued to sell goods bearing the mark and advertise under the name “BIG GAME BREWING” after the July 26, 2021 use-of-mark deadline. Id. ¶ 22. Peterman enumerates the following specific instances of continued use of the mark:
a. Released a new beer bearing the Mark on or around July 23, 2021, which they then continued to sell after the July 26, 2021 cut-off date;
b. Maintained social media accounts and pages that use the Mark;
c. Continued using the Mark on the signage outside of the brewery facility, specifically the sign on the bar building remained until around August 10, 2021, at which point the bar building was rebranded as The Beer Barn, and the sign on the front brewery building, closest and most visible to traffic, remained until around September 5, 2021;
d. Continued displaying the Mark in the interior decor of the brewery facility, including wall decals and framed awards and accomplishments;
e. Continued using A-frame sidewalk signs bearing the Mark; and f. Maintained two billboards, as well as the marquee at the Neuse Sport Shop and the sign on their office space, each of which advertises the brewery under the Mark.Id.
As Defendants continued to use the mark in connection with the new brewery, consumers posted negative comments regarding the quality of Defendants' beer. Id. ¶ 31. In so doing, the reviewing consumers “associated Defendants' beer with Peterman's Mark.” Id.
On July 27, 2021-a day after the use-of-mark deadline-Peterman sent his first cease and desist letter regarding Defendants' continued use of the mark. Id. ¶ 25. Because Defendants' use persisted, Peterman sent a second letter on August 25, 2021. Id. ¶¶ 26, 27.
As of October 14, 2021, Defendants continued to use the mark on the aforementioned billboards. Id. ¶¶ 28, 29.D.E. 33, Order.
1. Trademark Infringement
To establish a trademark infringement claim, a plaintiff must show two things. First, he must establish that he owns a valid and protectable mark. 15 U.S.C. § 1114(a). And second, a plaintiff must show that the defendant's use of a reproduction, counterfeit, copy, or colorable imitation of that mark is likely to cause confusion or mistake, or to deceive. Id; Variety Stores, Inc. v. Wal-Mart Stores, Inc., 888 F.3d 651, 660 (4th Cir. 2018).
The Defendants did not contest that Peterman sufficiently alleged an ownership of a valid and protectable Mark. D.E. 33 at 5. They raised no challenge to his claims about their use of the Mark. Id. And the court previously determined that the Complaint alleged sufficient facts “to raise a reasonable expectation that discovery will reveal evidence” showing the likelihood of confusion over the Mark. Id. at 9.
Thus, there are enough facts in the Complaint to support a trademark infringement claim. So the allegations related to this claim are well-pled and support the relief Peterman seeks.
2. Unfair and Deceptive Trade Practices
To state a claim of Unfair and Deceptive Trade Practices under North Carolina law, a plaintiff must allege “(1) an unfair or deceptive act or practice, (2) in or affecting commerce, and (3) which proximately caused injury to plaintiffs.” Walker v. Fleetwood Homes of N.C., Inc., 362 N.C. 63, 71-72, 653 S.E.2d 393, 399 (2007) (quotation omitted). The North Carolina Supreme Court has explained that an unfair practice “offends established public policy” or “is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers.” Id. (quotation omitted). And a deceptive practice is one that “has the capacity or tendency to deceive.” Id. (quotation omitted).
Peterman's Complaint claims that Defendants engaged in unfair and deceptive acts or practices by infringing on the Mark through their continued use of it in advertising, productions, and sales bearing the Mark, as well as displaying it in their business. D.E. 1 ¶¶ 22, 49. Peterman asserts that the continued use and display of the Mark has harmed both him and consumers. Id. ¶¶ 31, 50. Through Defendants continued use of the Mark, the Complaint maintains that consumers have associated their product, which has received negative comments about quality, with the Mark. Id. ¶¶ 31, 32. And because of these actions, Peterman maintains that he has sustained damages. Id. ¶ 51.
The well-pled allegations of the Complaint support Peterman's claim for Unfair and Deceptive Trade Practices. So he is entitled to damages on this cause of action.
3.Breach of Contract
Peterman brings two claims for breach of contract against the individual defendants, Rouse and Avery. In North Carolina, the elements of breach of contract are “(1) existence of a valid contract and (2) breach of the terms of that contract.” Poor v. Hill, 138 N.C.App. 19, 26, 530 S.E.2d 838, 843 (2000) (citation omitted). Peterman contends that Avery and Rouse failed to abide by conditions of the sales agreement and violated the terms of the promissory note.
a. Sales Agreement
The Complaint alleges that the individual parties entered into a sales contract to transfer ownership of Big Game Brewing to Avery and Rouse. D.E. 1 ¶ 54. The terms of the contract required Avery and Rouse to cease use of the Mark in July 2021. Id. ¶ 55. But they continued to use the Mark after that time, breaching the contract terms. Id. ¶ 56. The Complaint elaborates on the various ways Avery and Rouse used the Mark after July 2021. See Id. ¶ 22. And Peterman maintains that he suffered damages as a result. Id. ¶ 57.
Attached to the Complaint is a signed copy of the Sales Agreement. D.E. 1-1. It supports the allegations stated in the Complaint. Id. ¶ 4.2. So the Complaint contains enough well-pled facts to support Peterman's Breach of Contract claim related to the Sales Agreement. He is thus entitled to damages on Count Three.
b. Promissory Note
The Complaint also asserts that Avery and Rouse executed a promissory note with Peterman for the sale of Peterman's interest in Big Game Brewing. D.E. 1 ¶ 60. The promissory note required the payment of a fixed sum in monthly installments. Id. ¶ 61. According to the Complaint, Avery and Rouse did not make the first payment on time and failed to promptly cure their default. Id. ¶ 62. Peterman then demanded full payment under the promissory note's acceleration clause. Id. ¶ 63. But Avery and Rouse failed to satisfy their obligation. Id. ¶ 64.
Attached to the Complaint is a signed copy of the promissory note on which Peterman bases the fourth cause of action. D.E. 1-2. It spells out the terms as alleged in the Complaint. Id. The Complaint contains enough well-pled facts to support Peterman's Breach of Contract claim related to the Promissory Note. So Peterman is entitled to the relief he requests on Count Four.
C. Damages
Well-pled factual allegations can establish a defendant's liability in the context of default judgment. Ryan, 253 F.3d at 780 (4th Cir. 2001). But a complaint's allegations on the amount of damages suffered are not controlling. Joe Hand Promotions, Inc. v. Coaches Sports Bar, 812 F.Supp.2d 702, 703 (E.D. N.C. 2011) (citing SEC v. Lawbaugh, 359 F.Supp.2d 418, 421 (D. Md. 2005)). When the court “determines that liability is established and default judgment is warranted, then it must make an independent determination of the appropriate amount of damages.” United States v. John Hudson Farms, Inc., 2018 WL 4119950, at *5 (E.D. N.C. Aug. 29, 2018).
Having determined Peterman is entitled to prevail on the claims in his Complaint, the court must determine what that relief entails. Peterman submitted an affidavit setting forth the damages he incurred on the claims asserted in his Complaint. D.E. 43-2. The Defendants do not contest these claimed damages. And the affidavit contains enough facts to establish the damages Peterman incurred with sufficient certainty for the court to issue a judgment.
Peterman's affidavit outlines the damages he incurred through July 2023. Id. On the promissory note that establishes his fourth claim, Peterman acknowledges that Avery and Rouse made full payment, although belatedly. Id. ¶¶ 5, 6. He claims entitlement to $299.25 in interest related to their late satisfaction. Id. ¶ 6.
Peterman contends that Defendants' continued use of his Mark after July 2021 has likely confused consumers over their beer and brewery and Peterman's own. Id. ¶ 10. As a result, Peterman maintains that he could not move forward with a potential business partner on plans to brew and sell beer under his Mark. Id. ¶¶ 9, 11.
Peterman calculates his actual damages of $54,060.00. Id. ¶ 13. He bases this on a monthly revenue of $4,980.00, less expenses of $2,727.50, for a monthly profit of $2,252.50. Id. ¶ 14. In support of this valuation, Peterman states he has 12-13 years of experience with brewing beer and three years of experience operating a brewery. Id. ¶ 12. Peterman notes that his estimate is conservative and does not account for unrealized opportunities for expansion and growth. Id. ¶ 15.
So by Peterman's calculation, when coupled with the $299.25 interest he is owed, he has damages of $54,359.25 through July 2023.
The Complaint requests treble damages on Count Two. North Carolina's Unfair and Deceptive Trade Practices Act permits a prevailing plaintiff an award of treble damages. 75 N.C. Gen. § 75-16. Under this section, a successful plaintiff's right to treble damages are not subject to judicial discretion. Atl. Purchasers, Inc. v. Aircraft Sales, Inc., 705 F.2d 712, 715 (4th Cir. 1983), cert. denied, 464 U.S. 848 (1983).
Count One's Trademark Infringement claim forms the basis of the Unfair and Deceptive Trade Practice alleged of Count Two of the Complaint. So the damages Peterman calculates as $54,060.00 are tripled. Peterman is thus entitled to damages of $162,180.00. Added to the $299.25 interest Defendants owe him, Peterman's damages total $162,479.25.
D. Injunctive Relief
Peterman asks the court to grant injunctive relief for trademark infringement. Having established that he should prevail on that claim, injunctive relief is appropriate. So Defendants are permanently enjoined from infringing on United States Trademark No. 88180524.
E. Attorneys' Fees
In connection with the motion for default judgment, Peterman requests attorneys' fees and costs. As Defendants filed no response to the motion for default judgment, they have not opposed its request to award Peterman attorneys' fees and costs. Peterman's attorneys have submitted a memorandum in support of the attorneys' fees incurred. D.E. 43. It includes exhibits of billing statements from his attorneys to support the request to recover those expenses.
Peterman also seeks attorneys' fees related to his motion to compel. D.E. 39, 41, 45. The court addressed that request by separate Order. D.E. 46.
1. Authorization
Three sources support Peterman's recovery of attorneys' fees and costs. First, Peterman grounds his request for reimbursement of the costs and fees associated with the litigation on the parties' contracts. Second, the UDTPA allows Peterman to recoup these costs. N.C. Gen. Stat. § 75-16.1. And third, because this matter is an “exceptional case” under the Lanham Act, he may recover attorneys' fees and costs. 15 U.S.C. § 1117(a).
a. Contracts
Both the Sales Agreement and the Promissory Note contemplate attorneys' fees and costs.
The Sales Agreement provides:
If either party brings a claim or lawsuit against the other party to this Agreement to interpret or enforce any of the terms of this Agreement, or to interpret or enforce the Equity Promissory Note, . . . the prevailing party shall . . . be entitled to reasonable attorney' fees and costs . . . from the non-prevailing party.D.E. 1-1, ¶ 5.6. The Promissory Note, too, allows Peterman to recover such costs: “Upon default . . . the maker, principal, surety, guarantor and endorsers of this Note hereby agree to pay the holder reasonable attorneys fees[.]” D.E. 1-2 at 2. So these contracts establish that Peterman may recover attorneys' fees and costs.
b. Unfair and Deceptive Trade Practices
Under North Carolina's UDTPA, a prevailing party may recover reasonable attorneys' fees upon a finding that “[t]he party charged with a violation willfully engaged in the act or practice, and there was an unwarranted refusal by such party to fully resolve the matter which constitutes the base for the suit[.]” N.C. Gen. Stat. § 76-16.1(1).
Peterman has shown that the Defendants willfully infringed on the Mark through their continued exhibition of it after July 26, 2021. D.E. 43-2 ¶ 8. And their refusal to resolve the matter was unwarranted. Defendants admitted that Peterman notified them of their continued use of the Mark and demanded that they cease using it. D.E. 1 § 27, Complaint; D.E. 19 § 27, Answer. Defendants ignoring his entreaties to desist in their display of the Mark in all manners. And the Defendants failed to respond to Peterman's discovery requests and court orders. This demonstrates the Defendants unwarranted refusal to resolve the matter. This, too, provides a basis for awarding attorneys' fees to Peterman.
c. Lanham Act
Finally, Peterman contends the Lanham Act supports an award of attorneys' fees. 15 U.S.C. § 1117(a). The Act provides that a “court in exceptional cases may award reasonable attorney fees to the prevailing party.” Id; Verisign, Inc. v. XYZ.COM LLC, 891 F.3d 481, 482 (4th Cir. 2018). Following Supreme Court guidance, the Fourth Circuit has interpreted an “exceptional case” as one where
1. there is an unusual discrepancy in the merits of the positions taken by the parties, based on the non-prevailing party's position as either frivolous or objectively unreasonable;
2. the non-prevailing party has litigated the case in an unreasonable manner; or
3. there is otherwise the need in particular circumstances to advance considerations of compensation and deterrence.Id. at 483-84 (quoting Georgia-Pac. Consumer Prods. LP v. von Drehle Corp., 781 F.3d 710, 719-21 (4th Cir. 2015) (internal citations and quotations omitted)).
This action satisfies the “exceptional case” criteria of § 1117(a) to allow the court to award Peterman attorneys' fees. Peterman has shown that the Defendants willfully continued to used his Mark. And the Defendants have litigated this case in an unreasonable manner. By failing to respond to Peterman's discovery requests, motions to compel and for default judgment, and court orders, they have abandoned any defense to this case. As noted above, they have acted in bad faith.
Considering the totality of circumstances, the court thus concludes that this is an exceptional case justifying an award of attorney fees under the Lanham Act. See Choice Hotels Int'l, Inc. v. A Royal Touch Hosp., LLC (NC), 409 F.Supp.3d 559, 570 (W.D. Va. 2019) (party's unauthorized use of mark and failure to respond to pleadings constituted an exceptional case).
2.Calculation of Attorneys' Fees
Having determined that Peterman may recover attorneys' fees and costs, the court must determine their sum. Courts in the Fourth Circuit employ a three-step process to calculate an attorney fee award. The first step involves determining a “lodestar figure by multiplying the number of reasonable hours expended times a reasonable rate.” Robinson v. Equifax Info. Servs., LLC, 560 F.3d 235, 243 (4th Cir. 2009) (citing Grissom v. The Mills Corp., 549 F.3d 313, 320 (4th Cir. 2008)). Twelve factors play into the reasonableness of the hours expended and the rate charged:
• The time and labor expended.
• The novelty and difficulty of the questions raised.
• The skill required to properly perform the legal services rendered.
• The attorney's opportunity costs in pursuing the case.
• The customary fee for similar work.
• The attorney's expectations at the outset of litigation.
• The time limitations imposed by the client or circumstances.
• The amount in controversy and the results obtained.
• The experience, reputation, and ability of the attorney.
• The undesirability of the case within the legal community in which the suit arose.
• The nature and length of the professional relationship between attorney and client.
• Fee awards in similar cases.Id. at 243-44 (quoting Barber v. Kimbrell's Inc., 577 F.2d 216, 226 n.28 (4th Cir. 1978)). There may be cases, however, where not all factors are relevant. In such instances, the court “is under no obligation to go through the inquiry of those factors that do not fit.” In re A.H. Robins Co., Inc., 86 F.3d 364, 376 (4th Cir. 1996).
After determining the lodestar figure, the court should consider whether to reduce that figure based on the results the attorney obtained for her client. If a fee request includes “fees for hours spent on unsuccessful claims unrelated to successful ones” the court should subtract those fees from the lodestar figure. Johnson v. City of Aiken, 278 F.3d 333, 337 (4th Cir. 2002). Then the court should “award[] some percentage of the remaining amount, depending on the degree of success enjoyed by the” applicant. Id.
With this framework in mind, the court turns to its assessment of Peterman's fee request.
1. Reasonable Hourly Rate
The court begins by considering the reasonable hourly rate to apply in the lodestar calculation. The court should use an hourly rate that reflects “the prevailing market rates in the relevant community for the type of work for which [a party] seeks an award.” Plyer v. Evatt, 902 F.2d 273, 277 (4th Cir. 1990) (citations omitted). The relevant community will typically be the “community in which the court sits[.]” Rum Creek Coal Sales, Inc. v. Caperton, 31 F.3d 169, 179 (4th Cir. 1994). But the court may look to market rates elsewhere if there are no local attorneys with the relevant skills because of “‘the complexity and the specialized nature of a case' . . . and the party choosing the attorney from elsewhere acted reasonably in making the choice.” Id. (quoting Nat'l Wildlife Fed. v. Hanson, 859 F.2d 313 (4th Cir. 1988)).
Once the court has determined the relevant community, it must then determine the prevailing market rate in that community for the type of work involved in the fee request. The chosen rate should reflect “what attorneys earn from paying clients for similar services in similar circumstances[.]” Depaoli v. Vacation Sales Assocs., LLC, 489 F.3d 615, 622 (4th Cir. 2007). The party seeking the fee award must provide “specific evidence of the ‘prevailing market rates in the relevant community' for the type of work for which he seeks an award.” Spell v. McDaniel, 824 F.2d 1380, 1402 (4th Cir. 1987) (quoting Blum v. Stenson, 465 U.S. 886, 895 (1984)). A party meets this burden by supplying the court with “affidavits of other local lawyers who are familiar both with the skills of the fee applicants and more generally with the type of work in the relevant community.” Robinson, 560 F.3d at 245.
Here, the factors relevant to determining the reasonable hourly rate include the customary fee for similar work and the experience, reputation, and ability of the attorneys. Peterman has provided an affidavit from one of his attorneys, Joseph A. Schouten. D.E. 43-3. It attests to his knowledge of the prevailing market rates in the Raleigh, North Carolina metro community for work involving similar litigation. Id. ¶¶ 6, 7. It provides evidence relating to the attorney's legal experience and personal knowledge of the case. Id. ¶¶ 2-5. Schouten includes as an attachment the billing records for him and his associates, Jordan Spanner and Christopher Wear. D.E. 45-1. Schouten has thus shown that its rates are consistent with the prevailing market rate for similar work. D.E. 43-3 ¶ 13.
2. Reasonable Hours Expended
Next the court considers the hours that should be part of the reasonable fee calculation. To meet its burden on this issue, a fee applicant must submit billing records that contain “sufficient detail that a neutral judge can make a fair evaluation of the time expended, the nature and need for the service, and the reasonable fees to be allowed.” Hensley v. Eckerhart, 461 U.S. 424, 441 (1983) (Burger, C.J., concurring). If an attorney submits a request made up of “vague task entries or block billing,” the court may exclude these entries from the fee award. Two Men & A Truck/Intern., Inc. v. A Mover Inc., 128 F.Supp.3d 919, 925-26 (E.D. Va. 2015). After receiving the records, the court will independently review them to ensure their reasonableness as well as ensure that the applicant is not compensated for “excessive, redundant, or otherwise unnecessary work.” Rivers v. Ledford, 666 F.Supp.2d 603, 606 (E.D. N.C. 2009) (citing Trimper v. City of Norfolk, 846 F.Supp.2d 1295, 1307 (E.D. Va. 1994)).
In this case, the factors relevant to the reasonable number of hours expended include the time spent on the matter, the novelty and difficulty of the issues, and the skill required to address the questions. For the litigation, Peterman states that his attorneys performed the following work at the listed hourly rate, which changed throughout their representation:
Schouten: 5.7 hours at $485.00;
Spanner: 47.0 hours at $245.00;
Wear: 5.6 hours at $170.00.
Total: $15,231.50.
Schouten: 2.8 hours at $495.00;
Spanner: 10.9 hours at $265.00;
Wear: 1.8 hours at $175.00.
Total: $4,589.50.
Schouten: 3.0 hours at $495.00;
Spanner: 5.1 hours at $285.00;
Total: $2,938.50.
Schouten: 10.1 hours at $525.00;
Spanner: 47.4 hours at $290.00;
Wear: 10.7 hours at $200.00.
Total: $21,188.50.
In addition, the exhibit includes three billing statements to Peterman detailing the work done. But these attorneys' fees neither identify the attorney(s) who performed the work nor the exact hours expended:
September 2021 invoice: $2452.50
October 2021 invoice: $1407.00
December 2021 invoice: $3131.00
Total: $6990.50D.E. 43-3 at 31, 34, 41. Included on the December 2021 invoice is an expense of $402.00 for the filing fee. Id. at 41. Additionally, the billing statements recording the attorneys' time and work include the entries below:
Angela P. Doughty 0.3 hours at $425.00 hourly rate = $127.50
Isabelle M. Chammas 0.5 hours at $290.00 hourly rate = $145.00
Thomas C. Wolff 0.5 hours at $350.00 hourly rate = $175.00
Direct Administrative Services $25.00
Total: $472.50Id. at 43-44, 65-66, 87, 89.
Finally, Peterman's attorneys submit that some of the itemized entries include tasks related to the motion to compel. D.E. 45 at 3 n.2. So the court should reduce the requested sum by $2600.00, the amount associated with the motion to compel.
To avoid the possibility of a double recovery, Peterman advised the court that he has sought all fees and costs, including those related to the motion to compel, in connection with his pending Motion for Default Judgment. D.E. 45 at 1 n.1; see D.E. 42. The court issued an Order granting attorneys' fees of $2,600.00 for his motion to compel. D.E. 46.
The court begins by considering whether Peterman's attorneys can recover for each of the entries in the fee request. After reviewing the billing records, the court finds that the entries were incurred in making the litigation. Peterman's attorneys have accounted for tasks related to the motion to compel by reducing the amount requested in attorneys' fees. So the court deducts only the sum related to the motion to compel from the total of the entries submitted.
Turning to the complexity of the motion, the court notes that this was a straightforward matter. Defendants have ignored the discovery requests. They did not respond to Peterman's motion to for default judgment at all. And Defendants have still produced no discovery, despite the court's order directing them to do so. Given the routine nature of the motion, the court finds that the allowed hours sufficiently represent the number of hours for which Peterman may recover.
Combining the reasonable hours expended by Peterman's attorneys with the reasonable hourly rate adopted by the court results in a lodestar of $48,811.00.
This sum reflects the amount sought for attorneys' fees, but excluding costs, of $51,411.00, less $2,600.00 for attorneys' fees associated with the motion to compel.
3. Results Obtained
Because Peterman prevailed in his motion for default judgment, the court need not reduce the lodestar amount.
4. Costs
Peterman also seeks a reimbursement of cost in the amount of $402.00.
5. Computation
Peterman's may recover attorneys' fees in the amount of $48,811.00 and costs of $402.00. In sum, Peterman is entitled to $49,213.00 in attorneys' fees and costs from Defendants on his motion for default judgment.
This sum reflects the amount sought for attorneys' fees ($51,411.00) and costs ($402.00), less $2,600.00 to which Peterman is entitled for attorney's fees associated with the motion to compel, which the court addresses by separate Order.
III. Conclusion
Peterman has shown by clear and convincing evidence that Defendants defaulted by ignoring multiple overtures to participate in this litigation. Defendants' refusal to partake in discovery and failure to comply with court orders warrants serious penalties. And the court construes their unresponsiveness as conceding to the substance of Peterman's claims and his requests for admission. D.E. 43-1.
Defendants' egregious misconduct subjects them to a severe sanction. The undersigned recommends that the court grant Peterman's motion and enter a default judgment against Defendants on the claims brought in the Complaint.
And should the court agree with the recommendation to enter default judgment against Defendants, Peterman is entitled to damages from Defendants, jointly and severally, in the amount of $162,479.25 through July 2023. He is also entitled to injunctive relief against Defendants permanently enjoining them from infringing on United States Trademark No. 88180524.
And should the court agree with the recommendation to enter default judgment against Defendants, Peterman is entitled to attorneys' fees and costs from Defendants, jointly and severally, in the amount of $49,213.00. So the court should enter a judgment awarding him that amount.
The Clerk of Court must serve a copy of this Memorandum and Recommendation (“M&R”) on each party who has appeared in this action. Any party may file a written objection to the M&R within 14 days from the date the Clerk serves it on them. The objection must specifically note the portion of the M&R that the party objects to and the reasons for their objection. Any other party may respond to the objection within 14 days from the date the objecting party serves it on them. The district judge will review the objection and make their own determination about the matter that is the subject of the objection. If a party does not file a timely written objection, the party will have forfeited their ability to have the M&R (or a later decision based on the M&R) reviewed by the Court of Appeals.