Opinion
Civil Action No. 3:99CV706
May 1, 2000
MEMORANDUM OPINION
This matter is before the Court on the Plaintiffs request for attorneys' fees and costs pursuant to the granting of relief in favor of the Plaintiff as set forth in the Court's Memorandum Opinion and Orders herein of March 9, 2000 and April 6, 2000. The Plaintiff has submitted under seal an accounting reflecting its expenses in the related state tort action and the instant matter, including a supplemental accounting for representation in responding to the Defendant's post-judgment Motion to Alter or Amend Judgment. All relevant issues have been fully briefed and neither party has requested oral argument which the Court finds would not be of additional assistance.
BACKGROUND
The Court granted the Plaintiffs motion for summary judgment seeking attorney's fees and costs incurred in the defense of both the underlying state tort action and the pursuit of the instant action for declaratory relief. Plaintiffs counsel was directed to submit an accounting accordingly. The Defendant thereafter moved to alter or amend the judgment and the Court denied the motion, instructing the Plaintiff to file a supplemental accounting reflecting any efforts and related costs expended in defense of the motion. The Defendant noted its objections to the initial accounting of the Plaintiff and subsequently declined to respond to the supplemental submission, relying instead on its prior arguments.
DEFENDANT'S OBJECTIONS
The Defendant objects to the amounts sought for fees and costs by Plaintiffs counsel on several grounds. First, the Defendant objects on the basis that the Plaintiff "seeks to recover . . . fees that are not recoverable under the applicable statute." Second, the Defendant asserts that the request includes fees incurred at an unreasonable rate for the type of litigation involved. . . ." Last, the Defendant objects on the basis that an excessive amount of time was allegedly expended "for the tasks accomplished." (Reliance Ins. Co.'s Resp. to Virginia Elec. and Power Co.'s Acct'g of Atty's Fees and Costs, filed March 30, 2000).
APPLICABLE LAW
Perhaps not surprisingly, given the subjective nature of the issue, the case law addressing the applicable standards for awarding attorney fees and costs is less than a model of clarity and consistency over time. Nevertheless, certain basics emerge, including the following:
1. An "insured shall be entitled to recover from the insurer costs and such reasonable attorney's fees as the court may award." Va. Code Ann. § 38.2-209 (Repl. Vol. 1999) (emphasis added).
2. A court must make "detailed findings of fact with regard to the factors considered . . . in arriving at a determination of reasonable attorneys' fees in any case where such determination is necessary." Barber v. Kimbrell's Inc., 577 F.2d 216, 229 (4th Cir.), cert. denied, 439 U.S. 934 (1978).
3. The moving party has the burden of "establishing the reasonableness of the requested amount [citing cases] both by showing the reasonableness of the rate claimed and the number of hours spent [citing cases]." Rehabilitation Assoc. of Va., Inc. v. Metcalf, 8 F. Supp.2d 520, 527 (E.D. Va. 1998).
4. The "reasonableness of the rate" must be based on an assessment of the prevailing market rate in the relevant legal community. . . . for similar services by lawyers of reasonably comparable skill, experience, and reputation. . . ." Blum v. Stenson, 465 U.S. 886, 895-6 n. 11 (1984); see also Rehabilitation Assoc. of Va., Inc. v. Metcalf, 8 F. Supp.2d at 527 (citing authority).
5. The court can (and should) assess the degree of skill demonstrated in performing the representation and factor that into a determination of the prevailing market rate. See Johnson v. Georgia Highway Exp., Inc., 488 F.2d 714, 718 (1974).
6. The hourly rate charged (consistent with the prevailing market rate), multiplied by the number of hours spent, equals the "lodestar" figure that is presumed to be reasonable. See e.g ., United States Football League, et al. v. National Football League, 887 F.2d 408, 413 (1989), cert. denied, 493 U.S. 1071 (1990).
7. Many of the factors involved in the twelve point analysis in Johnson v. Georgia Highway Express Inc., 488 F.2d 714, are "subsumed within the initial calculation of hours reasonably expended at a reasonable hourly rate." Hensley v. Eckerhart, 461 U.S. 424, 434 n. 9 (1983).
8. In addition, the lodestar figure may be adjusted upward or downward to take into account additional or remaining factors set forth in the twelve point analysis of Johnson so as to result in a combined lodestar and Johnson standard whereby". the product of reasonable hours times a reasonable rate represents a proper fee . . . In re Great Sweats of Virginia, Inc., 109 B.R. 696, 697-98 (E.D. Va. 1989) (discussing the evolution of relevant precedent to result in the combined analysis). See also EEOC v. Service News Co., 898 F.2d 958 (4th Cir. 1990) (holding that the twelve factors should be considered in determining the lodestar figure).
9. . . . [W]here full relief is obtained, the plaintiffs attorney should receive a fully compensatory fee,' and in some cases of exceptional success, even an enhancement." Rehabilitation Assoc. of Va., Inc. v. Metcalf, 8 F. Supp.2d at 529 (quoting Rum Creek Coal Sales, Inc. v. Caperton, 31 F.3d 169, 175 (4th Cir. 1994), quoting Hensley v. Eckerhart, 461 U.S. 424, 435 (1983)).
10. "If more than one attorney is involved, the possibility of duplication of effort along with the proper utilization of time should be scrutinized." Johnson v. Georgia Highway Express. Inc., 488 F.2d at 717.
11. An objecting party must demonstrate specific instances of unreasonable charges and/or efforts and cannot simply rely on general protestation. Blum v. Stenson, 465 U.S. at 892 n. 5; United States Football League, et al. v. National Football League, 887 F.2d at 413.
The often-referred-to Johnson factors are: "(1) the time and labor expended; (2) the novelty and difficulty of the questions raised; (3) the skill required to properly perform the legal services rendered; (4) the preclusion of other employment by the attorney as a result of acceptance of the case; (5) the customary fee for like work; (6) whether the fee is fixed or contingent; (7) the time limitations imposed by the client or the circumstances; (8) the amount in controversy and the results obtained; (9) the experience, reputation and ability of the attorney; (10) the undesirability' of the case within the legal community in which the suit arose; (11) the nature and length of the professional relationship with the client; and (12) attorneys' fees awards in similar cases." Rehabilitation Assoc. of Va., Inc. v. Metcalf, 8 F. Supp. 2d at 526-7 (citing authority).
ANALYSIS
1. The fees and costs incurred in the related state tort action should be included in the award
The Plaintiff sought and the Court awarded relief in the form of `. . . reasonable attorneys' fees and costs for the efforts expended on behalf of Virginia Power to do that which the coverage was intended to include, the providing of a defense." (Order of March 9, 2000 at 18). The award included the efforts expended to defend the underlying state tort action as well as the declaratory judgment action. The Court issued the comprehensive judgment because the efforts undertaken before, during, and throughout the pendency of the state tort claim were necessitated by or otherwise directly related to the Defendant's failure to provide coverage from the inception of the controversy. Therefore, the Court finds that all reasonable fees and costs incurred in both related actions are included within the award and thereby encompassed within the breadth of the relevant state statute Va. Code § 38.2-209. The Court specifically declines to arbitrarily reduce the requested award for the effort spent in defending the state court action, as urged by the Defendant, not only because of what the Court views as only a general protestation by the Defendant, but also because any summary reduction in hours spent would be entirely subjective and therefore unreasonable in and of itself.
The state statutory scheme that provides relief for the bad faith failure of an insurer to extend coverage necessarily contemplates a separate action to enforce its provisions and, therefore, it necessarily contemplates an underlying action. Accordingly, if the state desired to restrict or limit relief to only the separate action needed for enforcement, it presumably would have done so.
In addition, given the vexatious history of this litigation, the Court is not sure but that the time spent in attending to what the Defendant claims to have been routine matters in the state action was on the "low side."
2. Determination of the prevailing rate
The applicable case law as discussed earlier requires the Court to determine the prevailing market rate in the Richmond, Virginia legal "market" on the basis of such factors, among others if they apply, as the complexity of the issues involved, the level of skill demonstrated, the degree of success achieved, and the fees charged in the same community for similar services by attorneys of comparable skill. The Court finds that the latter enumerated factors are the relevant ones for the present analysis.
First, the Court finds that although the issue of bad faith was ultimately resolved on the basis of what was deemed to be established law, the obstreperous efforts of the Defendant to continually deny coverage in the face of such precedent caused the process to become sufficiently complex so as to preclude any reduction for lack of complexity from what would otherwise constitute a rate that is consistent with the market norm. Additional considerations in determining the prevailing market rate in this case are the skill demonstrated by counsel and the degree of success achieved. The Court finds that both factors were amply accounted for in this litigation. Not only did the Plaintiff prevail on all issues, but the legal skills demonstrated in doing so, including the legal memoranda and oral argument presented, were of the highest quality. The foregoing considered, the Court would have no basis to reduce the requested award because of such considerations, and, if anything, is inclined to provide an enhancement.
The Court relied on the precedent of Virginia and Elec. Power Co. v. Northbrook Prop. Cas. Ins. Co., 252 Va. 265, 475 S.E.2d 264 (1996), in reaching its decision on the core issue of whether coverage existed.
The court is also constrained to note that it appears disingenuous for the Defendant to now argue that it was essentially a simple case while arguing previously that there was a genuine dispute of law that it relied on to vigorously contest the matter.
Finally, the Court does not believe there is a sufficient basis on which to objectively conclude that excessive time was spent in the matter with the sole exception of those entries that reflect possible duplication of effort by attorneys in the same law firm such as conferences between co-counsel and preparation of internal memoranda for corresponding review and comment. Although such efforts involving internal coordination, review and comment among attorneys within the same law firm are appropriate in the representation of any client in most any case, such efforts appear to be duplicative or corrective, at least to the extent that the Court concludes it is not reasonable to compel compensation from the Defendant for such efforts. Accordingly, the Court has reviewed the accountings provided by the Plaintiff and reduced the amount requested by eliminating either the total amount indicated for a single entry that reflects such internal communication and related effort or by apportioning the total amount for any combined entry by the number of functions included.
The Court will maintain under seal as an attachment to the accompanying Order (which shall also remain under seal) a copy of the relevant exhibits submitted by the Plaintiff which reflect the Court's calculations and redactions, including the discounting of one entry that did not appear to involve any conferencing between co-counsel or internal review activity, but rather inadvertent duplication of the same entry. The Court also notes as an additional reason for not further reducing the amount of hours involved that the Plaintiff apparently does not seek reimbursement for the time and effort expended by counsel and staff in the preparation of the accountings that include affidavits and related documentation.
The Court is constrained, moreover, to reduce the quoted hourly rates quoted by Plaintiffs counsel because the prevailing market rate must be determined in light of comparable rates for similar services by area lawyers of comparable skill, experience, and reputation. The Court is reluctant to do so in this case because it is assured from its own prior experience in the private sector that the negotiated rates with a substantial client like Virginia Power are already competitive for comparable services and skills. Such large-volume retained clients understandably use their "clout" to negotiate lower than usual rates for legal services such that the determining factor (or an additional factor) in the present analysis ought to be whether the charged rate is already reduced from normal levels for the "average" client. However, such is not the apparent standard and the Court agrees with the defense position (up to a point) that the quoted rates of Plaintiffs counsel are higher than the comparable area norm. The Court has therefore also reduced the stated hourly rates of the Plaintiffs attorneys, after deduction of conference — related and review entries, to a level of $170.00 an hour for the partner's time and $125.90 an hour for the associates. The Court specifically declines to distinguish between different hourly rates for different activities, e.g., in-court and out-of-court, because of the relatively brief time spent in the different functions and the substantial overall reduction otherwise effected. The Court has also selected rates that are somewhat higher than what the Defendant asserts to be the norm in light of its own perception of the relevant marketplace and in recognition of the level of skill demonstrated by counsel and the unqualified success achieved.
The sum total is therefore arrived at by multiplying the respective hours spent by each attorney, as revised by the Court, by the adjusted hourly rates for each, the Court not finding the quoted rates and resulting amount for the minimal involvement of staff to be unreasonable. The Court also accepts the total number of hours attributed to the efforts involved in responding to the Defendant's Motion To Alter or Amend Judgment as set forth in the supplemental accounting without the necessity of reviewing more detailed time records to determine if internal conferencing and/or review functions occurred because the Court notes that only one attorney was involved at that stage with only minimal involvement (1.25 hours) of an obviously non-duplicative nature from another attorney. The Court also notes that it has reviewed all cost entries and finds the corresponding request for reimbursement to be reasonable, noting, for example, that the requested reimbursement rate for in-house copying is but ten cents, far below many standard rates.
See Rehabilitation Assoc. of Va., Inc. v. Metcalf, 8 F. Supp. at 528 (citing authority for the proposition that the Court may employ its own knowledge and experience in determining a reasonable hourly rate in the absence of a sufficient evidentiary base or, presumably as here, in the face of a conflicting one). In this same regard, the Court also takes note of the outstanding reputation of Plaintiff counsels' law firm for being "staffed with lawyers of exceptional capability," just as the court did in Metcalf to partially justify a similar rate schedule in regard to the Richmond legal community two years ago Id.
The court has refrained from mentioning specific monetary totals in this Memorandum Opinion and will only do so in the accompanying Order which shall remain under seal out of deference to the Plaintiffs concern for preserving applicable privileges. Respective counsel are permitted to disclose the contents of the Order and attachment to their clients, but there shall be no further disclosure except by consent of the Plaintiff, Plaintiff's counsel, or by leave of court.
CONCLUSION
For the foregoing reasons, the Court will enter an award for attorney's fees and costs in favor of the Plaintiff in an accompanying Order commensurate with its analysis herein.