Opinion
99 C 4261
September 4, 2003
REPORT AND RECOMMENDATION
Currently before the Court is Plaintiff's Motion for Prove-Up of a Default Judgement against Defendants Harvard Scientific Corp. ("Harvard") and Thomas Waite. For the reasons set forth below, the Court recommends granting Plaintiff's Motion in part, and denying Plaintiff's Motion without prejudice in part.
BACKGROUND FACTS
Plaintiff claims that Defendants fraudulently induced Plaintiff to invest $500,000 in Defendants' start-up biopharmaceutical company by misrepresenting and omitting information concerning its product development, clinical trials, and financing agreements. Defendants had announced that they had developed a new drug for male erectile dysfunction that stood a good chance of being approved by the Food and Drug Administration ("FDA"), even though Defendants had no reasonable basis for believing that the product would gain FDA approval. According to Plaintiff, the information Defendants provided to the FDA regarding its scientific studies of the product was misrepresented, false, and non-scientific.
On June 25, 1999, Plaintiff filed suit against Defendants. Plaintiffs Complaint alleged that Defendants had violated Sections 10(b), 18, and 20 (a) of the Exchange Act ( 15 U.S.C. § 78j(b), 78r, 78t(a) (West 2003)); Rule 10(b)-5 (17 C.F.R. § 240.10(b)5); the State of Illinois "Blue Sky" security laws ( 815 ILCS 5/1 et seq.) and the Illinois Consumer Fraud and Deceptive Business Practices Act ( 815 ILCS 505/1, et seq.).
In November or December of 2001, Defendant Harvard filed for bankruptcy protection in Nevada. On March 20, 2002, Judge Nordberg entered an automatic stay as to Harvard until the bankruptcy case was discharged. Harvard's bankruptcy action was dismissed on May 29, 2002, and the automatic stay was lifted. Nevertheless, Harvard failed to appear at status hearings held before Judge Nordberg on July 31, 2002 and on September 11, 2002.
On September 25, 2002, Judge Nordberg granted Plaintiff's Motion for a Default Judgment against Harvard, and gave Plaintiff leave to prove-up its damages by affidavit. On January 15, 2003, Judge Nordberg entered a similar Default Judgment against Mr. Waite, once again permitting Plaintiff to prove up the judgment via affidavit.
Counsel representing each of the Defendants have subsequently withdrawn their representation in this matter. Mr. See, who is not the subject of the present Motion, has informed the district court that he will continue pro se.
Defendants Harvard and Mr. Waite have failed to respond to Plaintiff's statement of damages, and request for attorneys' fees and costs.
DISCUSSION
Plaintiff contends that it paid $500,000 for the stock at issue, which is valueless, due to the conduct of Harvard and Mr. Waite. See Affidavit of Kim Plencner, Vice President of RK Company, Ex. D to 4/16/03 Affidavit of Richard S. Porter. Defendants do not dispute that Plaintiff is entitled to receive $500,000 in damages, and the Court agrees that Plaintiff is entitled to recover this amount from Defendants.
Plaintiff further seeks $213,905.10 in attorneys fees and costs in this matter. Plaintiff is entitled to its reasonable attorneys' fees and costs pursuant to § 18 of the Exchange Act ( 15 U.S.C. § 78r) and the Illinois Consumer Fraud and Deceptive Business Practices Act ( 815 ILCS 505/1 et seq.).
In support of its fee request/ Plaintiff has submitted an itemized expense statement and supporting affidavit from Hinshaw and Culbertson, documenting its attorneys' fees and costs in the amount of $91,333.40. Plaintiff has also submitted billing statements from Ungaretti Harris, which represented Plaintiff prior to Hinshaw and Culbertson, allegedly totaling $120,571.70. Initially, the Court notes that Plaintiff's math simply does not add up; Hinshaw's $91,333.40 bill added to Ungaretti's $120,571.70 bill totals $211,905.10, not the $213,905.10 that Plaintiff is seeking. There are other deficiencies in the submission, which prevent the Court from recommending granting Plaintiff's fees and costs at this time. These deficiencies are discussed below.
Legal Standard to Determine Reasonableness of Fees
Determination of a fee award is left to the court's discretion. Eddleman v. Switchcraft, Inc., 965 F.2d 422, 424 (7th Cir. 1992). Attorneys' fees are calculated by multiplying the number of hours reasonably expended by a reasonable hourly rate. Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). What constitutes a reasonable hourly rate is determined by "prevailing market rates in the relevant community." Blum v. Stenson, 465 U.S. 886, 895 (1984); see also McNabola v. Chicago Transit Auth., 10 F.3d 501, 519 (7th Cir. 1993).
The party requesting the fee award bears the burden of substantiating, to the Court's satisfaction, the requested rate as well as the hours expended. McNabola, 10 F.3d at 518; Borst v. O'Brien, 979 F.2d 511, 515 (7th Cir. 1992); see Hensley, 461 U.S. at 433. Where the documentation of hours is inadequate, the Court may reduce or deny the award accordingly. Hensley, 461 U.S. at 433; EMC Corp. v. Varonos, 892 F.2d 1308, 1316 (7th Cir. 1990) (where the claim for fees is not supported by accurate or detailed records, the Court may deny the fee request). Additionally, the Court should scrutinize the fee petition carefully for indications of duplicative time. FMC, 892 F.2d at 1316. The Court may increase or decrease the fee request in light of the twelve Hensley factors:
(1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion of 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.461 U.S. at 429-430 n. 3 (citing Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-719 (5th Cir. 1974)).
Many of these factors are "subsumed within the initial calculation of hours reasonably expended at a reasonable hourly rate." Hensley, 461 U.S. at 434 n. 9.
1. Hinshaw and Culbartson.
Numerous attorneys with Hinshaw and Culbertson billed time in this case; primarily Richard Porter. The hourly rate charged by these various attorneys appears to range from a low of $110/hour, for services rendered by Ms. Renee Mortimer, to $180 to $200/hour, for services rendered by Mr. Porter. Although Mr. Porter's affidavit attests to the fact that Hinshaw and Culbertson's submission represents its actual billing in this case, neither Mr. Porter nor anyone else from Hinshaw avers that the various charged hourly rates are consistent with prevailing market rates, or explains that the time spent was reasonable.
Nevertheless, the Court finds that, based upon its substantial experience with such matters, the rates requested are reasonable. Similarly, a review of the hours expended in this matter reveals that the requested attorneys fees are appropriate and reasonable. The Court agrees that Plaintiff is entitled to receive the $84,177.50 it incurred in attorneys' fees with Hinshaw and Culbertson.
The deficiencies in Hinshaw and Culbertson's documentation of its costs, however, prevent the Court from recommending that the district court grant Plaintiff all of the requested costs at this time. Initially, the Court notes that Plaintiff seeks to recover $.23/page for in-house copying. Although some courts in this district have allowed up to $.20/page as a reasonable copying charge, Figueroa v. City of Chicago, No. 97 C 8861, 2000 WL 1036019, at *2 (N.D. Ill. July 20, 2000), the Court finds that a charge of $.15/page is more appropriate. McCraven v. City of Chicago, No. 97 C 8845, 2001 WL 62573, at *2 (N.D. Ill. Jan. 25, 2001) (comparing cases); see also, Manley v. City of Chicago, 236 F.3d 392, 398 (7th Cir. 2001) (charges for in-house copying should not exceed the charges of an outside print shop, unless the party can demonstrate why the higher charge is appropriate). The Court recommends disallowing $809.76 as excessive copying charges.
Hinshaw billed Plaintiff for copying 10,122 pages of relevant materials.
In addition, Hinshaw and Culbertson billed Plaintiff for 837 "pages" at $.75/page. There is no explanation as to what these pages are, what was done with or to the pages, or why the rate of $.75/page is reasonable. Unless Hinshaw and Culbertson provides additional documentation explaining these charges, and substantiating that the rate charged is reasonable, the Court recommends disallowing the recovery of $627.75 in costs.
The Court finds that Hinshaw and Culbertson's remaining costs, consisting of online research, phone charges, permissible travel charges, postal charges, etc., appear reasonable and should be recoverable. Therefore, the Court recommends awarding Plaintiff $5,718.39 in costs associated with Hinshaw and Culbertson's representation.
2. Ungarotti and Harris
Ungaretti and Harris has not submitted an affidavit substantiating that the (largely unidentified) hourly rate charged by its attorneys, and the time expended in representing Plaintiff in this matter was reasonable. In support of its claim that it is entitled to receive $120,571.70, stemming from Ungaretti and Harris' representation in this matter, Plaintiff has submitted only the approximately three dozen invoices that Ungaretti and Harris had sent to it.
There is no attempt made to identify rates charged by the various attorneys billing time to this matter, or the fees charged for copying and various other costs. Plaintiff has not submitted even a crude spreadsheet demonstrating that these invoices, which frequently relate back to one another and (in some instances) appear to cover overlapping periods of time, actually total $120,571.70.
While the Court is willing to afford Plaintiff a fair amount of latitude in proving up its damages, the Court is not inclined to blindly award Plaintiff over $100,000 in fees and costs simply because Plaintiff claims it was billed in that amount. Plaintiff bears the burden of demonstrating that its costs and fees are reasonable, and it has failed to carry that burden with request to Ungaretti and Harris' fees and costs. The Court is of the opinion that Plaintiff should be granted leave to file additional documentation demonstrating its entitlement to these fees and costs.
The Court notes that Ungaretti and Harris has been less than fully cooperative in assisting Plaintiff in recovering its fees, as Ungaretti has apparently ignored Plaintiff's requests for supporting affidavits. In addition, the defaulting Defendants have failed to challenge Plaintiff's fee request. Counsel have ten days from the date of service to file objections to this Report and Recommendation with the Honorable John A. Nordberg. See FED. R. CIV. P. 72(b); 28 U.S.C. § 636(b)(1). Failure to object constitutes a waiver of the right to appeal. Egert v. Connecticut Gen. Life Ins. Co., 900 F.2d 1032, 1039 (7th Cir. 1990).
CONCLUSION
The Court finds that Plaintiff is entitled to $500,000 in damages. In addition, the Court finds that Plaintiff has demonstrated that it is entitled to receive $89,895.89 in attorneys' fees and costs. However, the Court is of the opinion that additional documentation is required before awarding Plaintiff the remaining requested fees. Therefore, the Court recommends that Plaintiffs' Motion for Prove-Up of a Default Judgement against Defendants Harvard Scientific Corp. and Thomas Waite be Granted in part, and Denied without prejudice in part.