Opinion
CIVIL NO. SA-00-CA-0757-OG
September 30, 2003
ORDER
Pending before the Court is Healthpoint's Motion for Attorney Fees and related Non-taxable Expenses (Dkt. #478). Having reviewed the motion, response, reply and the applicable law, the Court finds that such motion should be granted in part and denied in part as follows:
Under the Lanham Act, the Court, in exceptional cases, may award reasonable attorney fees to the prevailing party. 15 U.S.C. § 1117(a). The Court has already determined that this is an exceptional case. Therefore, the only question remaining is the amount of fees to which Healthpoint, Ltd. is entitled.
A. Whether Healthpoint, Ltd. incurred the fees sought herein:
Before determining the appropriate amount of fees, however, the Court must address Ethex Corporation's argument that Healthpoint is not entitled to recover attorneys fees because it did not actually pay the fees that were incurred in this lawsuit. In reply, Healthpoint submitted the affidavit of Kyle Jaster, Controller for DFB Pharmaceuticals, Inc., which is the general partner for DPT Laboratories, Ltd. and Healthpoint, Ltd., limited partnerships. (Dkt. #491, Exh. B). In his affidavit, Mr. Jaster explains that DFB operates as a services company, providing accounting, legal, human resources and other support to both limited partnerships. Although the legal bills were submitted to DPT Laboratories in San Antonio, they were routed to General Counsel for DFB for review and approval. After being approved for payment, the bills were paid with checks drawn on a DPT checking account. However, the checks have both DPT and Healthpoint logos on them and are routinely used to pay bills incurred by both limited partnerships and the general partner. Through internal accounting functions, the fees and expenses were allocated to Healthpoint's books. Thus, "Healthpoint was ultimately charged for the fees and expenses incurred in this litigation." Dkt. #491, Exh. B. While Ethex claims the Jaster affidavit is self-serving, there is no reason for the Court to second-guess the accounting practices of Healthpoint, DFB or DPT, and the affidavit is sufficient proof that Healthpoint was ultimately responsible for the fees and expenses incurred in this lawsuit.
B. Expert fees:
In its motion, Healthpoint also sought to recover reasonable and necessary fees it paid to experts, whose testimony was critical to Healthpoint's success at trial. However, Ethex objected to such request, and Healthpoint has withdrawn its request.
C. Method of calculating fees:
The Supreme Court has determined that "[t]he most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate." Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, (1983). This is known as the "lodestar." Mid-Continent Cas. Co. v. Chevron Pipe Line Co., 205 F.3d 222, 232 (5th Cir. 2000); LULAC v. Roscoe Indep. Sch. Dist., 119 F.3d 1228, 1232 (5th Cir. 1997). The fee applicant bears the burden of proving the reasonableness of the number of hours claimed. Hensley, 461 U.S. at 437; Cooper v. Pentecost, 77 F.3d 829, 832 (5th Cir. 1996). The court may reduce the fee award if the documentation of hours is inadequate. Hensley, 461 U.S. at 433. The court may also reduce the award where the hours are "excessive, redundant, or otherwise unnecessary," Id. at 434. The fee applicant also bears the burden of proving the reasonableness of the hourly rate claimed.Blum v. Stenson, 465 U.S. 886, 895-96, 104 S.Ct. 1541 (1984). Once the lodestar has been calculated, the court must then address its reasonableness as a whole. Hensley, 461 U.S. at 434;Longden v. Sunderman, 979 F.2d 1095, 1099 (5th Cir. 1992). In doing so, the court is to consider the factors pronounced by the Fifth Circuit in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974), which are:
(1) the time and labor required;
(2) the novelty and difficulty of the questions involved;
(3) the skill required to perform the legal service properly;
(4) the preclusion of other employment by the attorney due to the acceptance of the case;
(5) the customary fee;
(6) whether the fee is fixed or contingent;
(7) the time limitations imposed by the client or the circumstances;
The Supreme Court has prohibited use of the sixth Johnson factor.See Rutherford v. Harris Co., 197 F.3d 173, 192 (5th Cir. 1999).
(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 the length of the professional relationship with the client; and
(12) awards in similar cases.Johnson, 488 F.2d at 71749; Singer v. City of Waco, 324 F.3d 813, 829 (5th Cir. 2003). After considering these factors, the court may adjust the lodestar upward or downward.LULAC, 119 F.3d at 1232; see Walker v. United States Dep't of Hous. and Urban Dev., 99 F.3d 761, 771-73 (5th Cir. 1996) (describing limited circumstances in which adjustment to lodestar is appropriate).
D. Calculating the lodestar in this case:
In this case, Healthpoint seeks fees based on the hourly rates set forth in Tab 1 of its Motion for Attorneys Fees. (Dkt. #478, Tab 1). Although Ethex objects to Healthpoint's motion in several other respects, there is no objection to the hourly rates set forth in the motion. Having reviewed the hourly rates (Tab 1), the summaries of the attorneys' experience and qualifications (Tab 2), the Declaration of David Kinder, lead counsel (Tab 6), and the Declaration of Jesse R. Castillo, fee expert (Tab 7), the Court finds that the requested rates are in line with the prevailing market rate for similar services by lawyers of reasonably comparable skill, experience and reputation. Therefore, the hourly rates set forth in Tab 1 of the motion are reasonable and shall be used to calculate the lodestar.
Ethex objects to the number of hours claimed to be expended in this litigation, citing inadequate documentation, incomplete descriptions and vague time entries. Ethex further asserts that Healthpoint failed to separate out time that was spent in pursuit or defense of claims asserted by or against DFB and DPT, which are not entitled to fee awards. Ethex also states that Healthpoint has failed to apportion fees among its successful Lanham Act claims and its other claims. Ethex further claims that Healthpoint should not be entitled to recovery of fees for services provided by Larry Alexander, in-house counsel for DFB. The Court has considered all of these objections in calculating the lodestar.
1. Hours for work by Larry Alexander:
Healthpoint originally sought the sum of $125,887.50 for services provided by Larry Alexander, in-house counsel for DFB, the general partner. Ethex objected to paying any fees for work performed by Mr. Alexander during the litigation, stating that Mr. Alexander served mainly as a liaison for outside counsel and is not employed by Healthpoint. In reply, Healthpoint substantially reduced the amount that it is seeking, but still requests reimbursement in the amount of $26,400.00.
The prevailing authority allows recovery of fees for services provided by in-house counsel as long as counsel is actively prosecuting or defending the case and not merely acting as a liaison between outside counsel and the client. See e.g. Delaware Valley Citizens' Council for Clean Air v. Pennsylvania, 762 F.2d 272, 278 (3rd Cir. 1985), aff'd in part, rev'd in part on other grounds, 478 U.S. 546 (1986); Textor v. Board of Regents, 711 F.2d 1387, 1396-97 (7th Cir. 1983); Nat'l Treas. Employee Union v. U.S. Dep't. of Treas., 656 F.2d 848, 853-854 (D.C. Cir. 1981). Such fees are calculated using the prevailing market rate, even if the attorney is a salaried employee. See Blum, 465 U.S. at 892-896;Textor, 711 F.2d at 1396-1397. After reviewing the declaration of Larry Alexander and the description of services in his time records, the Court is convinced that Mr. Alexander played an active role in litigating this case, and was not merely a liaison for outside counsel. (See Dkt. #478, Tab 3; Dkt. #491, Exh. D). Moreover, Healthpoint has agreed to seek reimbursement for only those time entries relating to preparation for depositions and presenting witnesses at depositions. Those hours devoted to depositions should be calculated at $250.00 per hour (the prevailing market rate) for a total of $26,400.00. (See Dkt. #478, Tab 3).
The fact that Mr. Alexander is a salaried employee of DFB, the general partner, does not change the Court's opinion.
The Court's calculation of hours was slightly higher, but Healthpoint has agreed to the amount of $26,400.00, which is based on a total of 105.6 hours.
2. Hours involving claims by or against DFB and DPT:
Ethex further objects to Healthpoint's fee request to the extent that any time entries involve work on behalf of DFB and DPT, rather than Healthpoint. In reply, Healthpoint has addressed those objections and has withdrawn or reduced those time entries which reflect work performed solely on behalf of DFB and DPT. (Dkt. #491, Exh. A). The fees that Healthpoint voluntarily deducted on this basis total $3,208.50. Additionally, the Court compared the record with the time entries submitted by Healthpoint, and found only one additional time entry on 7/20/01 which should be reduced by 1.0 for work performed on behalf of DFB. (Dkt. #491, Exh. A, p. 26). Thus, the total reduction for time spent on work performed solely for DFB and DPT is $3,558.50. The remaining time entries reflect work performed on behalf of Healthpoint, and while DFB and DPT may have also benefitted from the work, the primary beneficiary was Healthpoint. Any further reduction in fees on this basis would be completely arbitrary, because the remaining time entries reflect work on claims that were inextricably intertwined with Healthpoint's Lanham Act claims.
The claims between Healthpoint and Ethex obviously form the core of this lawsuit and the work performed by Akin, Gump focused primarily on those issues crucial to Healthpoint's Lanham Act claims.
3. Hours involving Non-Lanham Act claims:
Ethex further objects to Healthpoint's fee request because it includes time entries which are not limited to only those fees expended in successfully prosecuting its Lanham Act claims. Ethex claims that the time entries should be proportionately reduced for time spent on non-Lanham Act claims or those claims that were not successful. In reply, Healthpoint states that all of its claims involve a common core of facts or are based on related legal theories, and that counsel's work on various claims in the case overlapped to the extent that dividing the time and apportioning the fees would not be practical.
The U.S. Supreme Court in Hensley explained how the courts should evaluate fees when the plaintiff has succeeded on only some of its claims:
In some cases a plaintiff may present in one lawsuit distinctly different claims for relief that are based on different facts and legal theories. In such a suit, even where the claims are brought against the same defendants . . . counsel's work on one claim will be unrelated to his work on another claim. Accordingly, work on an unsuccessful claim cannot be deemed to have been "expended in pursuit of the ultimate result achieved."
In other cases, the plaintiff's claims for relief will involve a common core of facts or will be based on related legal theories. Much of counsel's time will be devoted generally to the litigation as a whole, making it difficult to divide the hours expenses on a claim-by-claim basis. Such a lawsuit cannot be viewed as a series of discrete claims. Instead the district court should focus on the significance of the overall relief obtained by the plaintiff in relation to the hours reasonably expended on the litigation.461 U.S. at 434-435 (citation omitted) (emphasis added); see also Romaguera v. Gegenheimer, 162 F.3d 893, 896 (5th Cir. 1998);Schwarz v. Secretary of Health Human Services, 73 F.3d 895, 902-903 (9th Cir. 1995).
In this case, all of Healthpoint's claims arose from the same course of conduct and required the same type of discovery and basically the same presentation of evidence at trial. The legal theories are related, and the injury and damages are essentially the same. As a result, the Court is not required to engage in an hour-by-hour division of time entries. Instead, the Court must focus on the overall success by Healthpoint in relation to the hours reasonably expended on the case.
The Court finds one exception, however. As noted by Ethex, the Lanham Act claims were not raised until Healthpoint's amended complaint was filed. Therefore, those time entries reflected in the first invoice (#749614) may be deducted, for a total reduction of $1,622.50.
This case involved complex issues and required extensive discovery, and counsel on both sides did a superb job for their clients both before and during the trial. However, Healthpoint ultimately prevailed, with an award totaling $16,163,545.00. As noted in Healthpoint's reply, the fee request amounts to about 10% of the total amount of damages. This is a conservative fee request under the circumstances, and to reduce it further just because the jury did not find liability on every single claim would be unreasonable.
4. Other time entries:
Ethex further alleges that some of Healthpoint's time entries are too vague and contain incomplete information, making it difficult or impossible to determine whether such fees are reasonable or necessary. The Court has reviewed the record and disagrees. The information provided in the time entries is sufficient to allow a meaningful review, and the redactions appear to delete only information that is unnecessary to the Court's review. The Court is familiar enough with this case to understand the descriptions contained in the time entries, and none of the entries — when read in context — are so vague that the Court cannot understand the nature of the services being provided.
Ethex also objects to some time entries that reflect work that is purely "clerical" in nature, as well as a few entries that do not relate to the case and were included by error. Healthpoint has agreed to withdraw those time entries, and has already deducted the amount of $16,620.00 from its original fee request. No further reductions appear to be necessary.
E. Adjustment of the Lodestar:
After calculating the lodestar, the Court may, in its discretion, adjust the lodestar upward or downward in determining a reasonable fee award. Healthpoint's success in prosecuting this case is obvious. However, after considering the Johnson factors, and the particular circumstances of this case, the Court declines to do so. Healthpoint is entitled to full compensation for the fees it has incurred, and it will be fully compensated without any further adjustment in the lodestar.
F. Non-taxable costs:
In addition to attorneys fees, Healthpoint seeks to recover those expenses that are non-taxable but are necessary expenses incurred in providing effective legal representation. Those expenses include travel, meals, photocopies, telephone and fax charges, postage and courier fees. Ethex objects to the request for expenses, stating that non-taxable expenses are not recoverable under the Lanham Act.
The Lanham Act states that the "plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action." 15 U.S.C. § 1117 (emphasis added). Neither the Fifth Circuit nor this Court have determined whether "costs of action" means only taxable costs or all costs and expenses related to litigation. There appears to be a split of opinion among other district courts on this issue. Compare Tri-Star Pictures, Inc. v. Unger, 42 F. Supp.2d 296, 306 (S.D.N.Y. 1999) (allowing recovery of non-taxable costs) with Neles-Jamesbury, Inc. v. Bill's Valves, 974 F. Supp. 979, 985 (S.D. Tex. 1997) (limiting expenses recoverable under § 1117 to taxable costs). The Fifth Circuit has allowed recovery of non-taxable litigation expenses under other fee shifting statutes and, in the absence of any controlling authority to the contrary, the Court will do so herein.
See Associated Builders and Contractors v. Orleans Parish Sch. Bd., 919 F.2d 374, 380 (5th Cir. 1990) (reasonable out-of-pocket expenses are recoverable as part of attorney fee awards under 42 U.S.C. § 1988).
Healthpoint has summarized the costs, produced invoices itemizing the costs and verified that such costs were incurred by the client during the course of litigation. (Dkt. #478, Tabs 4, 5 and 6). After Ethex objected to such costs, Healthpoint agreed to reduce its request by $62,697.91, for a total of $234,223.14. This sum shall be included in the award.
Accordingly, IT IS ORDERED that Healthpoint's Motion for Attorney Fees and related Non-taxable Expenses (Dkt.#478) is GRANTED IN PART and DENIED IN PART, and Ethex Corporation shall pay Healthpoint, Ltd. the sum of $1, 590, 981.00 for attorneys fees and the sum of $234,223.14 for related expenses, pursuant to 15 U.S.C. § 1117(a).
The revised fee request, as set forth in Healthpoint's reply, was $1,592,953.50. The Court has further reduced the total amount by $1,972.50 (which includes $350.00 for work on behalf of DFB and DPT, and $1,622.50 for fees incurred prior to Lanham Act claims).
SIGNED and ENTERED
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