Opinion
CIVIL ACTION NO. 3:05-CV-172-H.
August 1, 2007
MEMORANDUM OPINION
Bench Billboard Co., Inc. ("Bench Billboard") sued the Louisville-Jefferson County Metro Government ("Metro Government") under 42 U.S.C. § 1983 for deprivation of its freedom of speech in violation of the United States and Kentucky Constitutions when Metro Government refused to issue permits to Bench Billboard to place advertising benches in the public right of way. Nearly two years after the suit began, Metro Government admitted that its denial of the permits violated the First Amendment. Plaintiff now seeks closure by moving for summary judgment on its demand for over $1,000,000 in damages and over $120,000 in attorney fees. Both parties agree that this is a matter for the Court to decide. The Court has carefully considered the request.
I.
Bench Billboard sells advertising space on the backrests of benches it places around cities in Ohio, Michigan, Kentucky and Indiana. In 2002, Bench Billboard sought to place benches in Louisville, Kentucky, and the instant lawsuit arises from Louisivlle-Jefferson County Metro Government's refusal to grant permits allowing Bench Billboard to do so.
Through its General Regulations, Metro Government regulates the placement of "obstructions" on public ways. During the time period relevant to this lawsuit, Metro had two ordinances that combined ostensibly to regulate benches in the right of way. The first such ordinance, Section 97.070 of the General Regulations, made it unlawful to place a "structure of any kind" in the public way that might "impede the full and free use by the public of the entire sidewalk . . . or public way." Louisville/Jefferson County, Ky., Code of Ordinances no. 195, § 97.070 (2005). The same ordinance provided, however, that "the Metro Government may at its discretion, place such . . . structures that it may deem appropriate upon the public way. In no event, however shall such structure impede vehicular or pedestrian traffic." Id. The second relevant ordinance was Section 97.076, entitled "Obstructions Regulated." Louisville/Jefferson County, Ky., Code of Ordinances no. 195, § 97.076 (2005). This ordinance appears to contradict the blanket prohibition of Section 97.070, inasmuch as it provides for the issuance of a permit for the placement of, inter alia, any structure on the sidewalk if one obtains "a written permit to do so from the Director of Public Works." Id.
In December 2002, Bench Billboard sought permits for benches at two locations. In a letter informing Bench Billboard that the permit request was being reviewed, the Assistant County Attorney for Metro Government indicated that:
Our primary concern is safety. The unnecessary clutter on the right-of-ways may very well have an adverse affect on safety. The clutter of benches, newspaper dispensers and so forth can be not only unsightly, but cause the attention of the operators of automobiles to be diverted.
Just over one year after the initial request, in January 2004, Bench Billboard received a letter formally denying the permit request. It stated that it was Metro Louisville's policy to "not allow anything we deem to be hazardous to the safety of our citizens to be placed in our right-of-way. Nor do we allow advertising to be placed in our right-of-way."
In early 2005, Bench Billboard filed the present lawsuit. On January 5, 2007, Metro Government filed an Amended Answer in this case, admitting that Section 97.076 of the General Regulations amounts to a violation of the First Amendment as applied to Bench Billboard. Bench Billboard now moves for summary judgment, seeking damages and attorneys fees.
Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, "summary judgment is proper if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). On summary judgment, the evidence before the Court must be viewed in the light most favorable to the non-moving party. Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970); Pack v. Damon Corp., 434 F.3d 810, 814 (6th Cir. 2006).
II.
Metro Government has now admitted that it has applied Section 97.076 of the General Regulations in an unconstitutional manner as to Bench Billboard. The Court must determine now whether Plaintiff is entitled to damages and attorneys fees. Compensatory damages are available under § 1983 for actions "found . . . to have been violative of . . . constitutional rights and to have caused compensable injury. . . ." Carey v. Piphus, 435 U.S. 247, 255 (1978) (emphasis omitted) (quoting Wood v. Strickland, 420 U.S. 308, 319 (1975)). Such damages under § 1983 are governed by general tort-law compensation theory. Id.
A.
Defendant first argues that Plaintiff has suffered no cognizable injury because the benches were denied for two independent legitimate reasons. In the letter formally denying Bench Billboard's permit request, Metro Government stated that it does "not allow anything we deem to be hazardous to the safety of our citizens to be placed in our right-of-way. Nor do we allow advertising to be placed in our right-of-way." Defendant says that its reasons for denying permits for the benches were threefold: (1) the benches posed a safety hazard in the right-of-way, (2) they are aesthetically unpleasing, and (3) they contained advertising, which Metro Government does not allow in the right-of-way. Thus, it argues, Bench Billboard's permit applications would have been denied for legitimate reasons notwithstanding any constitutional violations. It analogizes the case of Prime Media, Inc. v. City of Brentwood, Tenn., 398 F.3d 814 (6th Cir. 2005).The Court does not agree with this argument. In Prime Media, the city had objective criteria, the height and weight restrictions, that were explicitly stated in its ordinances, which the court found satisfied the tailoring requirements for a content-neutral regulation of time, place, and manner of speech. See id. at 822. Unlike Brentwood, the ordinance here contained no such objective criteria, giving Metro Government and the Director of Public Works seemingly unrestrained discretion. License and permit requirements for the erection of commercial signs must contain clear and fairly objective criteria for issuance. See, e.g., Desert Outdoor Adver., Inc. v. City of Moreno Valley, 103 F.3d 814 (9th Cir. 1996); ACORN v. City of Tulsa, 835 F.2d 735 (10th Cir. 1987). Without objective criteria, an official harboring bias against a particular viewpoint could readily exclude ads communicating that viewpoint simply by "determining" that the advertising bench was aesthetically unpleasing or dangerous. See United Food Commercial Workers Union, Local 1099 v. Southwest Ohio Reg'l Transit Auth., 163 F.3d 341, 357 (6th Cir. 1998).
Therefore, Metro Government's additional stated reasons for denying Bench Billboard's permit application do not mandate a finding that it has suffered no compensable injury.
B.
Defendant next argues that Plaintiff has not proven losses to a reasonable degree of certainty. Since Bench Billboard was prevented from installing its advertising benches, it seeks consequential damages for lost profits. Plaintiff has the burden of proving those damages. See Grantham and Mann, Inc. v. American Safety Prods., 831 F.2d 596, 601-02 (6th Cir. 1987). Damages may only be awarded to compensate for actual injury suffered as a result of the violation of a constitutional right. Carey, 435 U.S. at 248 (absent proof of actual injury, compensatory damages may not be awarded). "[T]he abstract value of a constitutional right may not form the basis for § 1983 damages." Memphis Cmty. Sch. Dist. v. Stachura, 477 U.S. 299, 308 n. 11 (1986). "Damages are not permitted which are remote and speculative in nature." Agricultural Servs. Ass'n v. Ferry-Morse Seed Co., 551 F.2d 1057, 1072 (6th Cir. 1977). Arriving at consequential damages here is challenging because it is based on lost profits of benches that were never installed. Estimates as to the profitability of those benches are necessarily imprecise because there is no way of knowing how long the benches would have remained vacant, whether the benches would be used occasionally for non-income generating messages, and the terms of any advertising leases that would have been created. That being said, reasonable inferences are permitted in making a fair and reasonable assessment of the amount of damages.
Bruce Graumlich, President of Bench Billboards, testified that benches are sometimes installed before procuring an advertiser and are occasionally used for non-income-generating activities, such as self-promotion and public service messages. He also testified that the rental rate varies depending on the individual customer contract.
Bench Billboard was denied permits for two benches, thus permitting the reasonable inference of profits had those permits been granted. According to its Occupational License Fees tax return filed with the Louisville/Jefferson County Metro Revenue Commission, Bench Billboard's gross revenue was $30,914 in 2004 and $25,485 in 2005. Bench Billboard owned ninety-one benches in Jefferson County during that two year period. Thus, the average monthly gross revenue per bench was roughly $26. Bench Billboard was denied permits for two benches in January 2004, and Metro Government amended its ordinances on December 7, 2006. Thus, the benches might reasonably have been leased for about thirty-six months. At $26 per bench per month, the Court estimates total revenue at $1872. According to Mr. Graumlich, costs to Bench Billboard on average are between thirty and forty percent. Estimating costs to be thirty-five percent, the total lost profit on two benches in Jefferson County from January 2004 through December 2006 is $1217.
[($30,914 + $25,485)/(91 benches)]/(24 months) = $26 per bench per month
($26 × 36 months) × (2 benches) = $1872 total
This is a system wide percentage. No Jefferson County market data was supplied.
$1872 — (35% × $1872) = $1217. Bench Billboard's estimate of $1,838,977 in lost profits is dramatically overstated and highly speculative. Bench Billboard also argues, based on testimony by Mr. Graumlich, that its average four-week billing rate in Louisville is $90 per bench. Using its reported revenue from its Jefferson County tax returns is a much more appropriate method of calculating its average revenue per bench.
Bench Billboard makes a damage request based upon the presumption that, absent Metro's unconstitutional actions, it would have installed 1,400 bench advertisements throughout the county. The Court finds this projection to be a complete speculation. Bench Billboard made only two applications. It has no valid evidence that supports an award based upon 1,400 sites. Only recently did Bench Billboard make applications for about 2,000 sites. True, Bench Billboard may have succeeded in some expansion of its business. However, the Court has no reasoned basis for finding that Bench Billboard could actually lease that many spaces (or any particular number) within such a short time frame and an award of damages upon such an aspirational goal would amount to mere speculation. Indeed, the Court has no other evidence upon which to base an award of damages.
Though nominal damages are permitted in the absence of showing actual injury, the Sixth Circuit has noted that "substantial damages should be awarded only to compensate actual injury or, in the case of exemplary or punitive damages, to deter or punish malicious deprivations of rights." See Stachura, 477 U.S. at 308 n. 11. Since actual damages in the form of lost profits have been shown, the Court need not consider nominal damages.
III.
Plaintiff also seeks attorney's fees. 42 U.S.C. 42 U.S.C. § 1988 permits a prevailing party to recover its attorney fees as part of its costs in actions under 42 U.S.C. § 1983. Certainly, Bench Billboard was a prevailing party.
The Sixth Circuit has made clear that such an award is mandatory where the plaintiff prevails, and where special circumstances making a fee award improper are absent. Deja Vu of Nashville, Inc. v. The Metro. Gov't of Nashville and Davidson County, Tenn., 421 F.3d 417, 420 (6th Cir. 2005). There have been no arguments as to any such special circumstances, and attorney's fees are proper in this case.
The fee award must be reasonable, that is, "one that is adequately compensatory to attract competent counsel yet which avoids producing a windfall for lawyers." Adcock-Ladd v. Secretary of Treasury, 227 F.3d 343, 349 (6th Cir. 2000). The Sixth Circuit has enunciated a method for determining reasonable attorneys fees:
A starting point is to calculate "the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate." This is known as the "lodestar" calculation. Jordan v. City of Cleveland, 464 F.3d 584, 602 (6th Cir. 2006). The factors which the district court may consider, either in determining the basic lodestar fee and/or adjustments thereto, include the twelve listed in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974):
These factors are: (1) the time and labor required by a given case; (2) the novelty and difficulty of the questions presented; (3) the skill needed 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.Adcock-Ladd, 227 F.3d at 349 n. 8 (citing Reed v. Rhodes, 179 F.3d 453, 471-72 n. 3 (6th Cir. 1999)). A highly important Johns on factor is the result achieved, and a strong presumption favors the prevailing attorney's entitlement to his lodestar fee. Id. at 349-50. "The fee applicant bears the burden of establishing entitlement to an award and documenting the appropriate hours expended and hourly rates." Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). In determining the reasonable hourly rate for the Court should initially assess the "prevailing market rate in the relevant community." Id. at 350 (quoting Blum v. Stenson, 465 U.S. 886, 895 (1984)). The "relevant community" for fee purposes is "the legal community within the court's territorial jurisdiction," which, in this case, is the Western District of Kentucky. Id.
Defendant challenges Plaintiff's counsels' fee rates, which ranged from $75 per hour for law clerks to $305 per hour for the lead partner on the case. Defendant urges this Court to reject Plaintiff's contracted fees and cap them at $200 per hour, arguing that such a fee would better reflect the prevailing market rate in the relevant community. In support, the Defendant discussed two unpublished Sixth Circuit cases affirming the court for the Eastern District of Michigan that capped billing rates at $200. See Auto Alliance v. U.S. Customs Service, 155 Fed.Appx. 226, 228 (6th Cir. 2005). At least one Kentucky Court sitting in Frankfort has been more lenient with attorney fee rates, approving a rate of $300 for an attorney with twenty-one years of experience. See Custom Tool and Mfg. Co. v. Fuller, Nos. 2005-CA-000857-MR, 2005-CA-001078-MR, 2007 WL 121827 at *11 (Ky.Ct.App. Jan. 19, 2007). Only the two most senior partners in this case billed at rates above $200. Eric C. Holzapfel, with thirty-six years experience and substantial experience litigating complex commercial cases including commercial speech cases, billed at $305. Kyle Citrynell, with twenty-seven years experience in commercial litigation and intellectual property law, billed at $275. All of the rest of the attorneys on the case billed at $200 or below. The Court being generally familiar with the prevailing rates in the District, finds the hourly fees assessed in this case reasonable based on counsel's level of experience and specialization in the field.
Confusingly, Defendant fails to cite the primary case it discusses. Plaintiff assumes it is referring to Lamar Adver. Co. v. Charter Twp. of Van Buren, 178 Fed.Appx. 498 (6th Cir. 2006). In Lamar, the Sixth Circuit deferred to the district court's discretion without explicitly endorsing its decision:
The filings in this case reflect the high quality of Mr. Walsh's lawyering, but be that as it may, we review for abuse of discretion. The district court did not choose to award Mr. Walsh his actual billing rate. That decision was in the district court's sound discretion and is supported by the record.Lamar, 178 Fed.Appx. at 502.
In calculating the number of hours reasonably expended on litigation, the Court should exclude "hours that are excessive, redundant or otherwise unnecessary, just as a lawyer in private practice is ethically obligated to exclude such hours from his fee submission." Hensley, 461 U.S. at 434. Several issues arise when a court considers excessive hours: (1) whether the lawyer actually worked the hours claimed or is padding the account; (2) whether the work performed is sufficiently related to the points on which the client prevailed as to be compensable; and (3) whether the lawyer used poor judgment in spending too many hours on some part of the case or by unnecessarily duplicating the work of co-counsel. See Coulter v. State of Tenn., 805 F.2d 146, 151 (6th Cir. 1986).
No one challenges that the hours claimed are the number of hours actually worked. There is, however, considerable question as to whether all of the work performed is sufficiently related to this litigation. For example, Plaintiff's billing statement includes a fair amount of work prior to the filing of the complaint. A number of these entries appear only tangentially related to the litigation. Meetings with Metro Government officials to obtain information about acquiring a permit and requesting documents from Metro Government and Kentucky's open records in the two years before filing this action cannot be said to time "reasonably expended on the litigation." See Watkins v. Fordice, 7 F.3d 453, 458 (5th Cir. 1993) (holding that lobbying the state legislature and attorney general prior to filing suit could not be recovered). This work is not compensable.
Plaintiff suggests that the lawyers spent too many hours on some parts of the case. It points to the thirty hours billed to draft the complaint. Although that appears long for a nine page complaint that need only contain a short and plain statement of the claims, thirty hours is not unreasonable in a case such as this.
The Court finds it somewhat amusing that the very first billed entry, entered almost two years before the complaint was filed, concerns a conference about the standard for recovery of attorney's fees in § 1983 actions.
Additionally, some entries appear to be related to entirely separate cases. For example, entries four months before filing contain descriptions such as "prepare for trial" and "review Sharold depositions". Elsewhere, counsel bills for a "[m]eeting with client regarding damages submission to the court, review sidewalk studies, governmental reaction in Cincinnati." Such entries appear to refer to some concurrent litigation. Other entries in the billing statement and expense report contain an insufficient description to determine whether they are even remotely related to the litigation. Plaintiff has the burden of proving attorneys fees, and that burden is not met by descriptions stating "Email to [BLANK]; call from [BLANK]" or "Intraoffice conference with KAC re [BLANK]".
Plaintiff also objects to fees for computer assisted research. Although the Sixth Circuit denied such fees when an affidavit was silent concerning how such fees were calculated, see Auto Alliance Int'l v. U.S. Customs Serv., 155 Fed.Appx. 226, 229 (6th Cir. 2005), Defendants sufficiently described such fees in the Affidavit of Eric C. Holzapfel. Holzapfel's firm is charged a flat monthly rate by Westlaw and clients are charged a reduced prorated amount of the flat rate paid to Westlaw on a monthly basis. There appears to be a growing circuit consensus that reasonable charges for computerized research may be recovered, see, e.g., Trustees of the Const. Industry and Laborers Health and Welfare Trust v. Redlands Ins. Co., 460 F.3d 1253, 1258-1259 (9th Cir. 2006), and such fees are a category of cost routinely billed by attorneys to paying clients. See New England Health Care Employees Pension Fund v. Fruit of the Loom, 234 F.R.D. 627, 635 (W.D. Ky. 2006).
In a case such as this, in which at least eight attorneys from three firms billed hours, there is a risk of unnecessarily duplicating the work of co-counsel. See Coulter, 805 F.2d at 151. Admittedly, duplicative work is difficult to spot in a bill. What is disturbing is the shear volume of fees generated in a case of this size. Although it has continued for two years, it has involved relatively little discovery. Seven substantive motions were filed, and Plaintiff's memoranda submitted to the Court totaled ninety-eight pages including the complaint. Motion practice of this type can get expensive, but a fee of $125,000 is excessive, particularly in light of the result achieved.
A total of four depositions were conducted, each lasting only several hours.
The result can be described as mixed, at best. True, the lawsuit has vindicated Plaintiff's rights and has resulted in a better and constitutionally sound ordinance. Metro Government admittedly used an unconstitutional method to determine whether Bench Billboard could advertise in the public right-of-way. Denying its advertising benches in such a manner was a constitutional violation, and Bench Billboard was entitled to recover for its actual injury. However, the actual injury shown was relatively small, and Metro Government has since recognized its error and redrafted the regulations that will determine whether such advertising will be permitted in the future. Bench Billboard's request to install future benches may very well be denied for aesthetic or safety reasons, and this litigation has not guaranteed that Bench Billboard will be permitted to install the two thousand benches in Jefferson County that it purportedly seeks. In light of the foregoing considerations, the Court shall reduce the attorneys fee request of $124,848.70 by 40% for an award of $74,909.22 in attorneys fees and costs.
The Court will enter an order consistent with this Memorandum Opinion.