Opinion
Case No. 16bk36934
09-28-2018
In re: DIRECT MEDIA POWER, INC. Debtor.
Chapter 7
FINDINGS OF FACT AND CONCLUSIONS OF LAW IN SUPPORT OF ORDER DETERMINING AMOUNT OF COMPENSATORY DAMAGES AWARDED TO RADIO ONE, INC. [DKT. NOS. 203, 206]
| TOTAL FEES REQUESTED: | $ 221,102.50 | TOTAL COSTS REQUESTED: | $ 35,050.62 |
| TOTAL FEES REDUCED: | $ 88,470.00 | TOTAL COSTS REDUCED: | $ 28,144.12 |
| TOTAL FEES ALLOWED: | $ 132,632.50 | TOTAL COSTS ALLOWED: | $ 6,906.50 |
TOTAL AMOUNT OF AWARD OF DAMAGES: $ 139,539.00
Before the court is Creditor Radio One, Inc.'s Application for Award of Fees and Costs in Connection with This Court's Finding Dean Tucci and Debtor in Contempt of Court [Dkt. No. 206] (the "Application") submitted by Radio One, Inc. ("Radio One"). The Application asks the court to quantify the contempt damages previously awarded by the court. See Order [Dkt. No. 203] (the "Contempt Order"); see also Memorandum Decision [Dkt. No. 202] (the "Contempt Opinion"). Specifically, the Application seeks attorneys' fees and expenses in favor of Radio One and against the debtor Direct Media Power, Inc. ("DMP") and Dean Tucci ("Tucci" and collectively with DMP, the "Respondents") as compensatory damages for the Respondents' contempt.
In the Contempt Order, the court awarded Radio One its reasonable attorneys' fees and expenses incurred on matters directly related to the contempt proceedings and ordered Radio One to submit a qualification of fees and expenses as described in the Contempt Opinion. See Contempt Order, at ¶¶ 3-4; Contempt Op., at pp. 14-15. Radio One complied by filing the Application requesting a total amount of fees and expenses of $256,153.12 (consisting of $221,102.50 in fees and $35,050.62 in expenses) pursuant to attached time records. App., Exh. A [Dkt. No. 206-1] (the "Timesheet"). The Respondents filed a response to the Application and argued that Radio One is entitled to only $3,801.56 for attorney's fees and costs, Debtor Direct Media Power, Inc. and Interested Party Dean Tucci's Memorandum in Opposition to Radio One, Inc.'s Application for Award of Fees and Costs [Dkt. No. 214] (the "Response"). Radio One subsequently filed a reply agreeing to a lower total amount of fees and expenses of $242,317.84. Radio One's Reply in Support of its Application for Award of Fees and Costs [Dkt. No. 216] (the "Reply").
APPLICABLE STANDARDS
An award of attorneys' fees and expenses under section 105 of the title 11 of the United States Code, 11 U.S.C. §§ 101, et seq. (the "Bankruptcy Code"), as compensatory damages in a contempt proceeding lies within the court's discretion. Tranzact Techs., Inc. v. 1 Source Worldsite, 406 F.3d 851, 855 (7th Cir. 2015). The court applies the familiar lodestar method to determine the amount of reasonable attorneys' fees. See, e.g., Pickett v. Sheridan Health Ctr., 664 F.3d 632, 639 (7th Cir. 2011) (the lodestar method is typically the "centerpiece of attorney's fee calculations"); In re Harry Viner, Inc., 520 B.R. 268, 277-78 (Bankr. W.D. Wisc. 2014). The lodestar method calculates a presumptively reasonable amount of attorneys' fees by multiplying the number of hours reasonable expended by a reasonably hourly rate. See, e.g., Johnson v. GDF, Inc., 668 F.3d 927, 929 (7th Cir. 2012).
HOURLY RATE CHARGED
The going hourly rate on the open market for an attorney's services will generally be a reasonable hourly rate. Pickett, 664 F.3d at 640; Denius v. Dunlap, 330 F.3d 919, 930 (7th Cir. 2003). The law presumes that an attorney's actual billing rate for the services is an appropriate market rate. Denius, 330 F.3d at 930. A party opposing an award of fees may rebut that presumption by demonstrating a "good reason" why a court should award fees at a lower rate than that actually billed and paid. Pickett, 664 F.3d at 640.
Radio One's hourly rate is, therefore, presumed reasonable unless shown otherwise. Moreover, Radio One has demonstrated that the hourly rates actually charged by its counsel of the firm Mandell Menkes, LLC ("Mandell") and actually paid by Radio One is a market rate and presumptively reasonable under the circumstances. App., at pp. 1-3; Timesheet, at pp. 1-5; see also Reply, at pp. 2-3; Reply, Exh. 1, Declaration of Stephen J. Rosenfeld [Dkt. No. 216-1] (the "Rosenfeld Declaration"). Per the Rosenfeld Declaration, the hourly rates submitted are the actual rates charged by Mandell and are in the ballpark of customary rates charged in similar circumstances in the market. Rosenfeld Decl., at ¶¶ 5-8. The actual rates charged by counsel for similar work are some of, if not the, best evidence for determining the appropriate market rate. See, e.g., Johnson, 668 F.3d at 933. The Respondents propose, without any backup or reasoning besides a statement that Mandell's rates "appear[] excessive" for the type of work involved, lowering the partner rate by approximately 33.34%, the associate rate by 30%, and the paralegal rate by 60%. This does not carry the Respondents' burden in rebutting the presumption. Respondents have shown no reason, other than their subjective viewpoint, to reduce Mandell's rate. That reason is not a "good reason" as required by the Seventh Circuit. Pickett, 664 F.3d at 640 The court therefore finds that the hourly rates charged are reasonable.
TIME EXPENDED AND EXPENSES INCURRED
Before multiplying the number of hours by the hourly rates, the court must determine the extent of the hours reasonably expended in direct connection with the contempt proceedings. Time descriptions that are lumped or without sufficient descriptions may be excluded from an award of fees, and the time spent must be directly related to the contempt proceeding and otherwise not excessive or duplicative. See, e.g., Johnson, 668 F.3d at 931; Stark v. PPM Am., Inc., 354 F.3d 666, 674 (7th Cir. 2004); Harper v. City of Chi. Heights, 223 F.3d 593, 605 (7th Cir. 2000); In re Pettibone, 74 B.R. 293, 301 (Bankr. N.D. Ill. 1987) (Schmetterer, J.); In re Wildman, 72 B.R. 700, 709 (Bankr. N.D. Ill. 1987) (Schmetterer, J.). Above all, the time expended and expenses incurred must be reasonable under the circumstances.
The attached time and expense entries on the Timesheet have been underlined and numbered to reflect exclusion, in whole or in part, from the court's award of fees and expenses to Radio One. In total, the court has reduced the time expended by 215.8 hours (which yields a reduction of $88,470.00 in fees when multiplied by the corresponding hourly rates) and the expenses incurred by $28,144.12. The basis for each exclusion of hours or expenses, in whole or in part, is reflected by the numerical notations that appear on the left of each underlined entry, which notations correspond to the enumerated paragraphs below.
(1) Fees Unrelated to Contempt - TOTAL of excluded amounts: $ 13,940.00
Pursuant to the Contempt Order, the compensatory damages awarded include only Radio One's "attorneys' fees and expenses on matters directly related to the actions in question." Contempt Order, at ¶ 3. As explained in the Contempt Opinion, "it is facially obvious that Tucci's and DMP's actions caused Radio One to incur significant attorneys' fees, both in responding to DMP's requests to the court, investigation Tucci and DMP, and in bringing its own requests for affirmative relief." Contempt Op., at p. 14. However, the court also cautioned that it "will not award attorneys' fees to a moving party carte blanche. Not every fee or expense relates to Tucci's and DMP's contempt, and over assertion of fees and expenses will result in reduction, not increase." Id., at pp. 14-15.
In the Reply, Radio One agreed to a $13,815.00 reduction of the requested fees. Reply, at p. 1 & n. 1. Specifically, the Reply states that the Application inadvertently included time spent on discovery in a separate proceeding at the line items on page 4 of the Timesheet for the following dates: September 25, 2017; September 29, 2017; October 2, 2017; October 17, 2017; October 23, 2017; October 24, 2017; October 25, 2017; and October 26, 2017. Compare Reply, at p. 6 with Declaration of John H. Ray, III, Exh. A [Dkt. No. 215-1] (the "Coded Timesheet"). at pp. 3-4; Timesheet, at p. 4.
The court agrees that the above time entries relate to discovery in a separate proceeding and, therefore, are not directly related to the contempt proceedings and not compensable. In addition, the line items on page 4 of the Timesheet dated September 14, 2017, for $125.00, and October 5, 2017, for $90.00, are not compensable for the same reason. See Timesheet, at p. 4; Coded Timesheet, at p. 3. Accordingly, $13,940.00 of the services included in the Timesheet are not directly related to the contempt proceedings. See Timesheet, at p. 4; Coded Timesheet, at pp. 3-4; Reply, at p. 6. For that reason, this amount will be excluded in its entirety from the amount of the award.
(2) Lumping - TOTAL of excluded amounts (10% of affected entries): $ 10,810.00
The standard in this District for compensable time entries has been for over thirty years that the applicant must account for its time in minimum increments of tenths of an hour. Wildman, 72 B.R. at 708-09, 726. This minimum increment avoids overbilling by prohibiting parties from reflecting de minimus time entries in larger increments.
To prevent circumvention of this minimum increment, the court prohibits parties from "lumping" tasks together into single time entries. Id. at 709, 715-16, 720; In re Rockford Prods. Corp., Case No. 07bk71768, 2009 WL 2707236, at *6 (Bankr. N.D. Ill. Aug. 24, 2009) (Barbosa, J.). "Each type of service must be listed with the corresponding specific time allotment." Rockford Prods, 2009 WL 2707236, at *6. Lumped tasks are customarily penalized by a ten percent penalty (rounded up to one-tenth of an hour). Poynor v. Cmty. Unit Sch. Dist. #300, Case No. 99cv1290, 1999 WL 1101566, at *1 (N.D. Ill. Nov. 30, 1999) (ten percent reduction for lumping); Rockford Prods., 2009 WL 2707236, at *7 (same); see Wildman, 72 B.R. at 715-16 (varying reductions of at least ten percent depending on particular time entries); accord Pavarini McGovern, LLC v. Waterscape Resort LLC (In re Waterscape Resort LLC), Case No. 11-02248, 2015 WL 289812, at *14 (Bankr. S.D.N.Y. Jan. 21, 2015) (ten percent reduction for lumping); In re Bean, Case No. 04-34850, 2007 WL 81795, at *10 (Bankr. E.D. Tenn. Jan. 8, 2007) (same); In re Auto. Warranty Corp., 138 B.R. 72, 77 (Bankr. D. Colo. 1991) (same).
The Timesheet as submitted is replete with lumping. Where individual tasks are listed, they are not afforded specific time allotments for each such task. As such, ten percent by amount of the offending entries are presumptively unreasonable and the Application will be reduced accordingly.
(3) Insufficient Description of Services - TOTAL of excluded amounts: $ 49,945.00
The court routinely disallows compensation where tasks fail to identify in a reasonable manner the services rendered. See, e.g., Pettibone, 74 B.R. at 301; Wildman, 72 B.R. at 708-09; Rockford Prods., 2009 WL 2707236, at *5-6.
Much of the Timesheet was too generalized or vague in its descriptions for the substantive content or nature of the services performed to be reasonably identifiable, especially in relation to the overall amounts of time billed. Examples include large blocks of time spent "review[ing]" a production of documents or "prepar[ing]" for a hearing, deposition or meeting, without any further information regarding, for example, the volume or contents of the production, the purpose of a document review, the type(s) of work undertaken as preparation, the relative time spent on various aspects of the preparation work, or any other information that might enable to court to conclude the time spent was reasonable.
Such general or vague time descriptions are presumptively unreasonable; the court has therefore reduced the Application by the entirety of the amounts so identified.
(4) Unreasonable Time - TOTAL of excluded amounts: $ 13,775.00
The court also routinely excludes tasks where a professional or paraprofessional expended an unreasonable amount of time on such tasks in light of the nature of the tasks, the experience and knowledge of the professional performing the tasks, and the amount of time expended by the professional or another on the tasks in other instances on the Timesheet. See, e.g., Pettibone, 74 B.R. at 306 ("The Court will determine what is the reasonable amount of time an attorney should have to spend on a given project . . . . An attorney should not be rewarded for inefficiency.").
Where, for example, the timekeeper billed for over an hour to analyze a one-page scheduling order, that time spent was presumptively unreasonable. The court has excluded from the Application such amounts in their entirety.
(5) Expenses Unrelated to Contempt - TOTAL of excluded amounts: $ 654.71
As discussed under heading number one above, the court previously limited the damages award to only those "attorneys' fees and expenses on matters directly related to the actions in question." Contempt Order, at ¶ 3; see also Contempt Op., at pp. 14-15.
Radio One in the Reply agrees to a reduction of the requested expenses by $20.28. Reply, at p. 1 & n. 1. That expense related to the same matters as the time entries discussed under heading number one above—discovery in a separate proceeding. Compare Reply, at p. 8 with Coded Timesheet, at p. 4; Timesheet, at p. 5.
The court will exclude the $20.28 that Radio One agrees is unrelated to the contempt proceedings. In addition, the court will exclude the line item on page 5 of the Timesheet dated October 26, 2017, for $634.43. The expense dated October 26, 2017 relates to the same subject matter—the October 26, 2017 Tucci deposition—as the attorney time that Radio One agrees is unrelated to the contempt proceedings. Compare Timesheet, at p. 5; Coded Timesheet, at p. 4 with Timesheet, at p. 4; Coded Timesheet, at pp. 3-4. The October 26, 2017 line item is, therefore, not compensable and will be excluded from the damages award.
(6) Insufficient Description of Expenses - TOTAL of excluded amounts: $ 26,458.75
The court will also exclude from the amount of the award the $26,458.75 in fees charged by Radio One's expert as these entries and Radio One's submissions lack the necessary detail to evaluate reasonableness of the cost of the expert. The Response and the Reply dispute whether the amount of expert fees is reasonable compared to the nature and value of the expert services provided. See Resp., at pp. 11-12; Reply, at p. 8. In particular, Radio One alleges that "[w]ithout th[e expert's] report, Radio One did not have admissible evidence of the improper transfers being made out of the bankruptcy estate." Reply, at p. 8.
The expert was a forensic financial analyst who prepared a report with fourteen pages of substantive product detailing certain transfers made between or among DMP, Tucci and the various affiliated entities during the period from November 21, 2016 to March 13, 2017, including transfers made after the entry of the February 6, 2017—Interim Order Authorizing Use of Cash Collateral [Dkt No. 85] and the February 13, 2017—Interim Order Authorizing Use of Cash Collateral [Dkt. No. 90]. See Contempt Op., at p. 7; Creditor Radio One, Inc.'s Amended Motion for Civil Contempt, Exh. 1 to Rosenfeld Declaration [Dkt. No. 179-7] (the "Report"); see also App., at p. 3; Reply, at p. 8.
As support for including the expert fees in the damages award, Radio One has offered only the Timesheet, which contains three entries relating to the expert—the first, for $14,901.25, is dated April 30, 2017 and other two, for $10,251.25 and $1,306.25, are dated May 31, 2017. Timesheet, at p. 5. The description for each entry reads: "[p]rofessional fee[s] for Stout Risius Ross, Inc. for services rendered in [month, year]." Id. Each entry also contains a specific invoice number, though Radio One has not submitted any such invoices.
Without more detailed information about the basis for the expert fees, for example, the rate(s) charged and time spent on specific tasks, the court is unable to determine whether the $26,458.75 is a reasonable expense that can be included in the damages award. The value of the expert's ultimate product is only one part of the equation for discerning the reasonableness of charges for professional services rendered; the cost of an invaluable or exemplary product from an expert witness may, nevertheless, be unreasonable, as with any other professional. Additionally, the court notes that the Report is dated April 4, 2017, and that $10,251.25 of the fees relate to services rendered in April 2017 and $1,306.25 to services rendered in May 2017. See Timesheet, at p. 5. There is not enough information available to confirm what other professional services, if any, the expert provided after producing the Report and whether such services directly related to the contempt proceedings.
Accordingly, the $26,458.75 of expert fees will not be included in the amount of the damages award.
(7) Unreasonable Expenses - TOTAL of excluded amounts: $ 1,030.66
Finally, the expenses related to Radio One's demonstrative exhibits will also be excluded from the damages award. The Respondents argue that the expenses incurred to professionally print and deliver large demonstrative exhibits were unnecessary or unreasonable. Resp., at p. 12. Radio One's position is that the demonstrative exhibits, a common tool at trials, were part of ordinary course preparations for evidentiary hearings. Reply, at p. 8. It was not necessary for Radio One to spend $1,030.66 on large, professionally prepared demonstrative exhibits. Radio One attempted to present these demonstrative exhibits at the initial hearing on its emergency motion, but the court declined to hold an evidentiary hearing on an emergency basis. Thereafter, Radio One did not present or use the demonstrative exhibits in any meaningful way in any other hearing. See Contempt Op., at pp. 8-9. Accordingly, the expenses related to the demonstrative exhibits will not be included in the amount of the damages award.
CONCLUSION
In sum, in accordance with the Contempt Order and Contempt Opinion, the court has determined that Radio One is entitled to $132,632.50 in attorneys' fees and $6,906.50 of actual expenses. Accordingly, the amount of the award of compensatory damages awarded to Radio One and against the Respondents will be $139,539.00. Dated: September 28, 2018
/s/_________
Timothy A. Barnes
United States Bankruptcy Judge