The Mitchell Company, Inc. et al v. Campus

Filing 95

REPORT AND RECOMMENDATIONS re 1 Complaint stating that the Court order TMC to immediately advance to Campus, within ten (10) days of entry of judgment, $148,506.50 in legal fees and $12,607.26 in expenses for services rendered through the end of May, 2009 pertaining to the defense of Campus in the underlying action (07-0177-KD-C) and the instant action (08-0342-KDC),with post-judgment interest accruing at the rate of 12% per annum. In theevent TMC fails to timely make this advancement, the Court should STAY theunderlying action pending advancement. Objections to R&R due by 8/14/2009. Signed by Magistrate Judge William E. Cassady on 7/29/09. Copies to parties.(mpp) Modified on 8/3/2009 (jlr).

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION THE MITCHELL COMPANY, INC., et al., Plaintiffs, : vs. : JOSEPH J. CAMPUS, III, : Defendant. vs. JOHN B. SAINT, Additional Counterclaim Defendant. REPORT AND RECOMMENDATION This cause is before the undersigned upon specific reference by United States District Judge Kristi DuBose, made pursuant to 28 U.S.C. 636(b)(3) (see Doc. 71, at 7), "for the handling of all issues related to the preliminary injunctive relief" granted in favor of defendant Campus, as well as expedited enforcement of that relief "and resolution of any remaining disputes as to what constitutes reasonable expenses (including Campus' pending request for entry of a stay)." (Id.) Upon consideration of The Mitchell Company's ("TMC's") brief and evidentiary submission regarding defense costs and in opposition to : : CA 08-0342-KD-C : :

staying the underlying action (Doc. 75), the defendant's brief regarding the amount of reasonable defense expenses due from TMC and whether a stay should be ordered (Doc. 76), the response brief filed by defendant Campus (Doc. 79), TMC's response brief (Doc. 80), the parties' oral arguments on June 29, 2009, Campus' response to the Order dated June 29, 2009 (Doc. 83), TMC's response to the June 29, 2009 Order (Doc. 91), and all other pertinent materials contained in this file, the undersigned enters the following report and recommendation pursuant to the foregoing reference and Rule 54(d)(2)(D) of the Federal Rules of Civil Procedure ("By local rule, the court may establish special procedures to resolve fee-related issues without extensive evidentiary hearings. Also, the court may refer issues concerning the value of services to a special master under Rule 53 without regard to the limitations of Rule 53(a)(1), and may refer a motion for attorney's fees to a magistrate judge under Rule 72(b)1 as if it were a dispositive pretrial matter.").

"A magistrate judge must promptly conduct the required proceedings when assigned, without the parties' consent, to hear a pretrial matter dispositive of a claim or defense[.] . . . The magistrate judge must enter a recommended disposition, including, if appropriate, proposed findings of fact." Fed.R.Civ.P. 72(b)(1). 2

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FINDINGS OF FACT 1. TMC, Model Homes, LLC, and Hexagon Investments, LLC filed

a complaint in this Court for equitable relief and declaration of rights and obligations against Joseph J. Campus, III on June 16, 2008. (Doc. 1) 15. On April 9, 2007, Campus filed suit against the LLCs . . . seeking an injunction and accounting of his interest in the LLCs . . . . 16. Campus' suit was dismissed November 6, 2007, as Campus prematurely filed his Complaint. Because one hundred and eighty (180) days have passed following Campus' notice of withdrawal, complete diversity exists, and the issues herein are ripe for determination. Related to Campus' withdrawal, the parties have engaged in a valuation process pursuant to the LLC's Operating Agreements. 17. On May 26, 2008, the valuation process was completed with respect to one of the valuation dates, November 30, 2007. Campus' share of Model Homes was valued at $1,152,450 as of that date and his share of Hexagon was valued at $96,642. Collectively, these are referred to as "the Pawlowski valuation." 18. On June 2, 2008, counsel for Campus sent letters to the LLCs demanding full payment of these amounts (or notification of the LLCs' intentions to make installment payments) within ten business days. Request for Equitable Relief . . .

20. Plaintiffs LLCs object to making payments based on the amounts established in the Pawlowski valuation. These
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amounts should be greatly reduced, if not eliminated, because of Defendant's actions. Further, the Pawlowski report does not take into account the unique nature of the assets of the LLCs and the timing of the withdrawal. The Validity of Defendant's Interests in the LLCs is Dubious and the Subject of Current Litigation Seeking Defendant Disgorge Himself of the Same. 21. By virtue of his position as an officer of the Mitchell Company, Campus became a member of the LLCs. Campus paid only a minimal fee for membership in each LLC. Campus would not have been offered the opportunity to join either LLC if not for his role as an officer and director of the Mitchell Company. Further, if the Mitchell Company had known of Campus' activities that were a violation of his fiduciary duties to the Mitchell Company, he would not have been offered membership in the LLCs. Campus' interests in Model Homes and Hexagon were part of his compensation with the Mitchell Company that were tied to his fiduciary role in his capacity as employee, officer and director. 22. Campus obtained his position with the LLCs by virtue of his suppression of his activities that were contrary to the best interest of the LLCs, as well as the Mitchell Company. 23. On March 7, 2007, the Mitchell Company filed suit against Campus, seeking damages for his disloyal service to the Company . . . . This litigation is ongoing. The Mitchell Company seeks, inter alia, disgorgement of wages paid and business opportunities granted to Campus during the period of his faithless service. 24. The Mitchell Company Suit demonstrates an actual and real controversy regarding the proper ownership of the money ordered to be paid to Campus by the LLCs' valuation, which was completed without regard for the ongoing litigation in The Mitchell Company Suit. In the near future, it is
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likely that Campus will have to disgorge some or all of this amount based on the outcome of the Mitchell Company suit. Therefore, while the legitimacy of Campus' interest in the LLCs is litigated, the LLCs should not be compelled to turn over the value of that contested interest until such litigation is concluded. Prayer for Relief 25. Plaintiffs, pursuant to 28 U.S.C. § 2201 et seq. and Rule 57 of the Federal Rules of Civil Procedure, thus seek a declaratory judgment as to the rights and obligations of the parties hereto. 26. In recognition of the fact that Campus' entitlement to any interest in the current value of the LLCs is the subject of ongoing litigation, Plaintiffs pray this Court enter an Order that the LLCs maintain in trust certain real properties in their possession which shall sum to a value approximately equal with the Pawlowski valuation amounts until such time as the measure of Campus' obligation to disgorge himself of increased valuation while he was engage in faithless service for the Mitchell Company. Doing so will protect Campus' maximum possible interest (if no disgorgement is ordered), the LLCs' interests (by not liquidating real property­the source of most of its assets­at losses during an economic and housing slump), and The Mitchell Company's interest and the interests of fairness (in avoiding Campus' possible wasting, hiding, or spending money which is rightfully The Mitchell Company's). WHEREFORE, the premises considered, Plaintiffs pray the Court will enter an Order protecting the interests of all parties as well as the interests of justice in ensuring that all parties have a complete opportunity to resolve the issue of disgorgement in the ongoing litigation. (Id. at 3 & 4-7 (internal citations and footnotes omitted; emphasis in original)) 2. Campus filed his answer and counterclaim on July 28, 2008.
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(Doc. 15) On October 1, 2008, the defendant filed a motion for leave to amend his counterclaim. (Doc. 39) This motion was granted by the court on December 29, 2008 (Doc. 47) and the amended counterclaim of Campus was filed on January 5, 2009 (Doc. 48). Facts A. Campus' Rights to Indemnification from TMC

10. From June 6, 1990 to March 7, 2007, TMC employed Campus as an Executive Vice President and Head of its Single Family Home Division. 11. On August 1, 1994, Campus and TMC entered into an Indemnity Agreement2 . . . whereby TMC agreed to

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The Indemnity Agreement reads as follows:

WHEREAS, the Company has requested that the Indemnitee become, or remain in his capacity as, an officer of the Company and of certain of its affiliates, including, without limitation, the corporate general partners of Mitchell Equities (collectively, the "Mitchell Group"), and the Indemnitee has agreed to do so upon condition that the Company indemnify him against certain liabilities which may arise from the Indemnitee's agreement to serve, or service, as an officer of the Mitchell Group; NOW THEREFORE, in consideration of the Indemnitee's agreement to serve as an officer of the Mitchell Group and for other good and valuable considerations, the receipt and sufficiency of which are acknowledged by the parties hereto, the Company and the Indemnitee agree as follows: 1. The Company shall indemnify and hold harmless the Indemnitee, his heirs, successors and assigns, against loss or liability, including reasonable expenses and attorney['] fees, which result from any claim arising from: (1) the agreement of the Indemnitee to serve as an 6

officer of the Mitchell Group; and (2) the performance by the Indemnitee of duties as an officer of the Mitchell Group;

provided, however, that this Indemnity Agreement shall not apply to any expenses, costs, penalties or the like which are incurred in any action or proceeding which results in a final order or judgment against the Indemnitee and in favor of the Mitchell Group or any person or entity on behalf of the Mitchell Group, but only where liability is established in such final order or judgment as based upon the Indemnitee's negligence, gross negligence or intentional misconduct. 2. Notwithstanding any provision in this Agreement to the contrary, this Indemnity Agreement shall not cover ay amounts paid or incurred as the result of claims which could have been enforced against the Indemnitee had the Indemnitee not agreed to become or remain an officer of the Mitchell Group. 3. The Indemnitee shall use best efforts to notify the Company within a reasonable time of all material claims which are subject to this Indemnity Agreement, and shall make no payment thereon or settlement in respect thereof unless such notification shall first have been given and the Company shall not have provided a defense or the Company or the Mitchell Group not otherwise have assumed the burden of responding to such claims. 4. In the event suit is brought against the Indemnitee with respect to any claim covered by this Indemnity Agreement, the Company shall conduct, at its expense, the defense thereof. The Indemnitee shall cooperate in the defense of such claims to the extent reasonably required by the Company. The Company's liability for any expenses of litigation incurred by the Indemnitee shall extend only to such expenses as shall have been incurred following notification as described in paragraph 3 above. 5. If any provision of this Indemnity Agreement is found to be invalid or unenforceable, then, to the extent possible, all other remaining provisions of this Indemnity Agreement shall remain in full force and effect and shall be binding upon the parties hereto. 6. This Indemnity Agreement and the rights and duties of the parties 7

indemnify Campus against loss or liability, including expenses and attorneys' fees, incurred by Campus in defending any claims arising from Campus' agreement to serve as an officer of TMC and his performance of his duties as an officer of TMC. The Indemnity Agreement also provides that TMC shall, at its expense, defend Campus against such claims. 12. On March 7, 2007, TMC terminated Campus and filed the Underlying Action against Campus alleging, among other things, that Campus breached his fiduciary duties to TMC and/or was negligent in the performance of his duties. 13. Since the Underlying Action was initiated, Campus has denied TMC's accusations of wrongdoing and vigorously defended against TMC's claims. As a result, Campus has incurred and paid substantial litigation expenses. 14. On June 25, 2008, Campus, through counsel, sent a letter to counsel for TMC addressing TMC's obligation to indemnify Campus against expenses incurred defending the Underlying Action, requesting acknowledgment of TMC's obligation to fund Campus' defense, and acknowledging Campus' obligation to repay any expenses incurred by TMC on behalf of Campus in the event that the Underlying Action results in a final judgment in TMC's favor.

hereto shall not be assignable by either party hereto, other than by operation of law or succession, and any attempt to assign this Indemnity Agreement shall render it void and unenforceable. All terms and provisions of this Indemnity Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Indemnitee and of the Company. 7. This Indemnity Agreement shall be governed by the laws of the State of Alabama, to the extent Federal law does not apply. (Doc. 80, Exhibit A)

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15. To date, TMC has not acknowledged its obligations under the Indemnity Agreement or provided any substantive response whatsoever to Campus' indemnification letter. . . .

COUNT I DECLARATORY JUDGMENT: CAMPUS' RIGHTS UNDER THE INDEMNITY AGREEMENT (Against TMC) . . .

35. The Indemnity Agreement TMC executed in favor of Campus requires TMC to pay Campus' defense expenses incurred defending claims arising from Campus' service as an officer of TMC. 36. As TMC's claims in the Underlying Action pertain to Campus' conduct in his capacity as an officer of TMC, the Underlying Action is a covered proceeding and TMC is obligated to pay Campus[] for all expenses incurred defending the Underlying Action. 37. As of the date of this filing, TMC has not substantively responded to Campus' indemnification letter. 38. TMC's failure and refusal to acknowledge or confirm its obligation to fund Campus' defense in connection with the Underlying Action is without justification and is in violation of Campus' rights under the Indemnity Agreement and Alabama law. 39. There is an actual, justiciable controversy between Campus and TMC as to the obligations of TMC under the Indemnity Agreement.
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40. Accordingly, Campus is entitled to a summary declaration that TMC is obligated to fund Campus' defense of the Underlying Action. COUNT II INDEMNIFICATION FOR EXPENSES INCURRED PURSUING COUNTERCLAIMS PERTAINING TO TMC'S INDEMNIFICATION OBLIGATIONS (Against TMC) . . .

42. Campus is entitled to advancement of legal fees and expenses incurred with respect to the Underlying Action pursuant to the Indemnity Agreement. Campus is also entitled as a matter of law to recover his legal fees and expenses incurred in enforcing his rights under the Indemnity Agreement ("fees on fees") herein. 43. There is an actual, justiciable controversy between Campus and TMC as to the obligation of TMC to pay "fees on fees." 44. Accordingly, Campus is entitled to summary declaration that TMC must indemnify Campus and pay all "fees on fees" incurred in prosecuting his indemnification counterclaim against TMC herein. COUNT III-DECLARATORY JUDGMENT: CAMPUS' RIGHTS TO ADVANCEMENT IN THE INSTANT ACTION (Against TMC) . . .

46. In the Instant Action, Plaintiffs TMC, Model Homes, and Hexagon's [] claims are also based on Campus' alleged "violation of his fiduciary duties to the Mitchell
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Company" as an officer and director. 47. According to Plaintiffs, due to Campus' "disloyal service" to TMC, Model Homes and Hexagon should be able to avoid or (at least) delay their respective obligations to pay Campus[] for the fair value of his membership interest in each respective LLC while the Underlying Action is ongoing. 48. As the claims in the Instant Action also pertain to Campus' conduct in his capacity as an officer of TMC, the Instant Action is likewise a covered proceeding and TMC is obligated to pay Campus[] for all expenses incurred defending the Instant Action. 49. Therefore, on September 25, 2008, counsel for Campus sent a letter to counsel for TMC requesting advancement of legal expenses because the claims asserted in the Instant Action triggered Campus' right to advancement under the Indemnity Agreement. 50. TMC's counsel denied Campus' request.

51. TMC's failure and refusal to fund Campus' defense in connection with the Instant Action is without justification and is in violation of Campus' rights under the Indemnity Agreement and Alabama law. 52. There is an actual, justiciable controversy between Campus and TMC as to the obligations of TMC under the Indemnity Agreement. 53. Accordingly, Campus is entitled to a summary declaration that TMC is obligated to fund Campus' defense of the Instant Action. COUNT IV-INDEMNIFICATION ("FEES ON FEES"): EXPENSES INCURRED PURSUING COUNTERCLAIMS
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PERTAINING TO TMC'S ADVANCEMENT OBLIGATIONS IN THE INSTANT ACTION (Against TMC) . . .

55. Campus is entitled to advancement of legal fees and expenses incurred defending against the Instant Action pursuant to the Indemnity Agreement. Campus is also entitled as a matter of law to recover his legal fees and expenses incurred in enforcing his rights under the Indemnity Agreement ("fees on fees") herein. 56. There is an actual, justiciable controversy between Campus and TMC as to the obligation of TMC to pay "fees on fees." 57. Accordingly, Campus is entitled to summary declaration that TMC must indemnify Campus and pay all "fees on fees" incurred in prosecuting his advancement counterclaim against TMC for defense expenses incurred in the Instant Action. (Id. at ¶¶ 10-15, 35-40, 42-44, 46-53 & 55-57 (internal citations omitted; footnote added)) 3. Prior to the filing of his amended counterclaim,3 that is, on

August 22, 2008, Campus moved for partial summary judgment in his favor as to Counts I and II of his originally-stated counterclaim. (Doc. 24) On

The amended counterclaim added a new Count III, seeking a declaratory judgment as to his rights to advancement in the instant action and a new Count IV, seeking indemnification of "fees on fees" or the expenses incurred while pursuing defendant's counterclaims relating to TMC's advancement obligations to him in the instant action. (Compare Doc. 47, at 12-13 with Doc. 48) 12

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December 9, 2008, Campus filed a motion to dismiss the plaintiffs' complaint. (Doc. 44) 4. On March 3, 2009, the Court entered an order granting Campus'

motion for partial summary judgment on Count I of his counterclaim, relating to advancement of fees but denying his motion with respect to his claim for fees on fees (Count II). (Doc. 54) While not stating the word "advancement" and not specifically providing a separate paragraph entitled "advancement of legal expenses," the Indemnity Agreement provides for advancement. Paragraph 4 unequivocally states that if an action with respect to any covered claim is brought against Campus, TMC shall conduct Campus' defense at its own expense (i.e., pay for the expenses incurred) and that Campus shall cooperate in the defense to the extent his participation is reasonably required. The Indemnity Agreement is not ambiguous with regard to these requirements. Thus, TMC contracted to conduct Campus' defense, at its expense (i.e., pay for Campus' defense), for actions which have not yet concluded­ meaning that TMC contracted to pay Campus' defense expenses until such time. This contractual language cannot be reasonably construed to mean anything other than TMC agreed to pay for Campus' defense in advance. . . .

In sum, it is clear what TMC and Campus contracted to do, and it is clear what TMC and Campus did not contract to do. The Indemnity Agreement contains a provision providing for TMC's mandatory payment of the costs of Campus' defense. This contract provision renders mandatory TMC's duty to pay for his defense before the litigation concludes ­ i.e., in advance. Accordingly, TMC cannot now seek to escape the consequences
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of [its] own contractual freedom[] by [r]egretting the broad grant of mandatory advancement they forged on a clear day . . . [and] seek[ing] to have the judiciary ignore the plain language of the[] contract[] and generate an after-the-fact judicial contract that reflects [its] current preference. . . .

A reading of [] paragraphs [1, 3, and 4 of the Indemnity Agreement] suggests that the parties envisioned not only thirdparty actions but a direct action by TMC against Campus [] and moreover, that they intended for something more than mere payment of Campus' defense (i.e., that in addition to paying for Campus' defense, TMC would also assume the burden of providing his defense and defend him), but this does not mean absolute control. To characterize the provision in the manner that TMC suggests (that TMC would have the power to control Campus' defense, to hire and fire his attorney, review his legal bills, render legal service to him and take custody of and review his personal documents, etc.) would open the door to violations of the Model Rules of Professional Conduct governing attorneyclient representation, insofar as counsel would then simultaneously represent both TMC and Campus. As such, even if the Court were to determine that the term "conduct the defense" means that TMC has total control over Campus' defense and selection of his counsel, the counsel "conducting" Campus' defense would still owe his or her undivided loyalty to his client, Campus, not TMC, such that TMC could in no way interfere with that relationship. Accordingly, the finding that the Indemnity Agreement provides for advancement of legal expenses is not an unreasonable construction; rather, it is a reasonable construction of the terms of the Agreement itself. It would be an unreasonable construction of the contract to conclude that TMC's mandatory contractual duty to pay for Campus' defense would also mean that TMC can control all aspects of his defense in litigation which TMC has pursued against Campus.

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To obtain advancement under the former Act [i.e., the Alabama Business Corporation Act], an officer is required only to provide an undertaking to repay the advance in the event it is ultimately determined that he does not meet the indemnification standard. Specifically, Section 10-2A-21(e) of the Act (the corollary to RABCA's Section 10-2B-8.53(a)) requires only an undertaking . . . to repay . . . if and to the extent that it shall be ultimately determined that (the director) is not entitled to be indemnified. The former Act has no requirement for an officer to provide a written affirmation of good faith belief that he has met the standard of conduct. The former Act has no requirement for a determination of "facts then known" to be conducted by the corporation. TMC concedes this much. Thus, to comply with the former Act and Alabama's law on advancement, to then obtain advancement of the expenses of his defense from TMC, Campus need only fulfill the undertaking to repay requirement. On June 25, 2008, Campus' attorney provided TMC with a written undertaking, executed on Campus' behalf, stating that he will repay the expenses if there is ultimately a judgment issued against him: [i]f, at some time in the future, [TMC] . . . obtains final order or judgment against Campus based on Campus' negligence, gross negligence or intentional misconduct, then Campus will repay and refund to [TMC] . . . any expenses, costs, or penalties that [TMC] . . . has incurred pursuant to the Indemnity Agreement. TMC has conceded in its opposition that [u]nder the former Act, advancement required only an undertaking to repay the advance if it was ultimately determined he did not meet the indemnification standard[] [and in this case] Campus' attorney has provided such a statement on his behalf, arguably satisfying the former statute . . . . Thus, due to the absence of a genuine issue of material fact, Campus is entitled to summary judgment on his advancement claim. . . .

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TMC's claim that Campus is not entitled to advancement because he will not be entitled to indemnification lacks merit. TMC's position presumes that it has already prevailed on its, as yet, unproven claims. TMC's position also discounts that entitlement to advancement is independent of the merits of the suit for which the money is sought, and is a remedy independent of the remedy of indemnification. . . .

TMC contends that the doctrines of unjust enrichment, faithless servant and unclean hands, bar Campus' equitable claim for advancement . . . . There has been no trial. There have been no "findings" with regard to Campus' alleged conduct. There has been no determination ­ whatsoever ­ regarding his liability. Additionally, Campus has repeatedly denied liability to TMC, as well as TMC's allegations against him. Moreover, the issue before the Court is not Campus' purported bad conduct, because at this point, only his right to advancement under the terms of the Indemnity Agreement, not indemnification, is at issue. This means that even if the Court views TMC's allegations in the light most favorable to the corporation, Campus' alleged conduct is irrelevant, such that any doctrines premised on same are simply inapplicable. An officer's entitlement to advancement is a matter independent of the merits of the suit for which the money is sought and the right to advancement is not dependent upon the right to indemnification. . . .

Campus asserts that he is entitled to recovery of "fees on fees" (the fees incurred in having to file this action to enforce his advancement rights) . . . . The terms of the Indemnity Agreement do not expressly address recovery for fees on fees (for fees incurred to enforce the contractual right to either advancement or indemnification). While there is an absence in Alabama of case law
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addressing fees incurred in establishing the right to advancement of legal expenses, the Alabama Supreme Court has held that recovery of "fees on fees" for seeking the right to indemnification is generally not permissible. The general rule is that, in the absence of express language giving the indemnitee such a right, an indemnitee cannot recover its attorney's fees incurred in establishing its right to indemnification. . . . Accordingly, unless the agreement provides for fees on fees, they are not allowed under Alabama law. Paragraph 4 of the Indemnity Agreement requires TMC to pay the expenses of Campus' legal defense for covered claims. Paragraph 1 of the Indemnity Agreement defines covered claims and also expressly requires TMC to indemnify Campus against any loss or liability including reasonable expenses and attorney[']s fees which result from any claim arising from his agreement to serve as a officer of TMC and the performance of his duties as a TMC officer. The Court disagrees with Campus that the fees incurred in establishing his right to advancement of fees is a loss or liability arising from Campus' agreement to serve as a TMC officer. Rather the claim arises from TMC's breach of its commitment to defend Campus' covered claims, at TMC's expense. The breach of contract claim is not the result of Campus' service as an officer of TMC and is not an indemnified claim. For these reasons, Campus is not entitled to recover from TMC "fees on fees"­ the fees he has incurred in having to file this action to enforce his advancement rights. . . .

The Indemnity Agreement provides that Campus shall use best efforts to notify TMC within a reasonable time of all material claims which are subject to the Indemnity Agreement. TMC initiated the underlying action against Campus on March 7, 2007. On March 15, 2007, Campus' counsel sent a letter to TMC's counsel, requesting copies of indemnification policies in its possession (among other things). While the record indicates
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correspondence between the opposing parties thereafter, there is no indication that TMC responded to Campus' counsel's request and/or that Campus specifically asserted that TMC's claims against him were subject to the Indemnity Agreement. On June 25, 2008, however, Campus, through his attorney, made a specific claim for advancement and indemnification against TMC . . . . TMC asserts that even if the Indemnity Agreement requires advancement, Campus is not entitled to reimbursement of the expenses he incurred in the underlying action prior to June 25, 2008 ­ the date of the letter from his attorney. TMC is correct. Pursuant to the terms of the Indemnity Agreement, in order to obtain advancement, Campus was required to, first, notify TMC of the material claims which were subject to the Indemnity Agreement. While Campus' counsel requested a copy of any indemnification policies in March 2007 and communicated with opposing counsel thereafter, there is no indication in that letter or other correspondence of record, that Campus made a specific claim that the underlying action was subject to the Indemnity Agreement and/or that he made a claim for advancement against TMC, until June 25, 2008. As such, Campus is entitled to be reimbursed only for the expenses incurred after June 25, 2008. . . .

The pertinent question for this summary judgment then, has been not whether Campus may later be found to have engaged in negligence, gross negligence or intentional conduct, but rather, whether he has demonstrated that TMC has denied a right to advancement to which he is entitled. The merits of the underlying action are irrelevant to whether advancement (and fees on fees for having to seek same) must be awarded here and now. . . . If it is ultimately determined that Campus' conduct is not indemnifiable due to negligence, gross negligence or intentional misconduct, then Campus will have to repay any
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expenses advanced. Unless or until such final order or judgment is issued, however, TMC is required to pay and advance the defense costs to Campus. The court is not in a position, after the fact, to relieve the parties of the burdens of the contract that they executed and that now, one party, wishes had been drafted differently. Based upon the foregoing, the Court finds Campus' motion for partial summary judgment as to his advancement claim is GRANTED to the extent explained herein. Campus' motion for summary judgment on his claim for fees on fees is DENIED. (Id. at 13, 15, 16-17, 25-26, 27, 27-28, 28-31, 32 & 33 (internal citations and most internal quotation marks omitted; emphasis in original)) 5. On March 24, 2009, Campus filed an emergency motion to hold

TMC in contempt and to require compliance with the Court's order of March 3, 2009 (Doc. 56). As this Court has already recognized, "TMC chose, and more importantly contracted, to be 100% responsible for the legal expenses incurred by Campus defending any claims pertaining to his status as an officer of TMC." Unless and until it is determined that Campus is not entitled to indemnification, TMC must advance Campus's defense costs as ordered by the Court. TMC's defiance of the Court's Order must not be tolerated. WHEREFORE, Campus requests that this Court: A. B. Order that TMC show cause as to why it should not be held in contempt of this Court; Order that TMC pay within seven (7) days all
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defense costs, which Campus has incurred since June 25, 2008, in the amount of $91,526.53; C. Order that TMC pay Campus's defense costs each month within seven (7) days of receipt of invoices from Campus's counsel; Stay the Underlying Action until such time as TMC complies with its advancement obligations and pays Campus's defense costs; Award Campus his fees and costs in bringing this motion; and Award further relief as this Court deems necessary and appropriate to ensure obedience to its orders and prevent prejudice to Campus.

D.

E. F.

(Id. at 7 (internal citation and footnote omitted; emphasis in original)) The Court denied Campus' emergency motion by order dated April 9, 2009. (Doc. 61) "The Court's March 3, 2009 Order, granting partial summary judgment on Campus' counterclaim for advancement of defense expenses (Count I), was not issued in response to a claim or request for injunctive relief, nor was it accompanied by entry of a final Rule 54(b) judgment. Accordingly, TMC is not in contempt of this Court's Order [] as it now stands." (Id. at 2 (internal citation and footnote omitted)) 6. On May 4, 2009, Campus filed a motion for preliminary

injunction and stay (Doc. 63).

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Joseph J. Campus, III [] moves this Court to issue a preliminary injunction requiring The Mitchell Company [] to advance Campus' legal fees and expenses incurred in defense of claims asserted against him in . . . the "Underlying Action"[] and this action [] until further order of this Court and to stay these actions until TMC pays all expenses incurred and subject to advancement to date. . . .

Campus respectfully prays that this Court grant injunctive relief requiring that the following procedures be followed until further order of this Court: 1. Campus' counsel, Carlton Fields, P.A. and Johnstone, Adams, Bailey, Gordon & Harris, L.L.C. [], shall submit to TMC on a monthly basis invoices for legal fees and expenses which they determine in good faith are fees and expenses that are properly advanceable under this Court's March 3, 2009 Order. Campus' counsel's invoices shall include those fees and expenses for legal services provided in the Underlying Action since June 25, 2008 and in the Instant Action since September 25, 2008. TMC shall promptly pay the invoices of Carlton Fields and Johnstone Adams at their normal hourly rates. If TMC has objections to any of the invoices submitted, it shall specify those objections within ten (10) days of receipt. TMC shall also pay within ten (10) days of receipt of the invoices any portion of the invoices to which it does not object, but in no event shall TMC pay less than seventy-five (75%) of the fees submitted and all of the expenses. If TMC's objections cannot be resolved by the
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2.

3.

parties, the matter shall be submitted to Magistrate Judge Cassady for expedited resolution. TMC's right to ultimately challenge the reasonableness of Campus' fees shall be preserved until a final indemnification hearing. . . .

TMC should not be permitted to pursue its claims against Campus before this Court in the Underlying Action or the Instant Action, unless and until it honors its obligation to advance Campus' defense costs. Otherwise, the proceedings before this Court will become the means of oppression and vexation as Campus is forced to incur additional defense costs, which TMC is obligated to advance. (Id. at 1 & 8-9 (internal citations and footnote omitted)) Following the filing of TMC's response in opposition (Doc. 68; see also Doc. 69), the Court entered an order on June 4, 2009 granting Campus' request for a preliminary injunction (Doc. 71). To be eligible for preliminary injunctive relief under Rule 65 of the Federal Rules of Civil Procedure, a movant must establish each of the following elements: 1) a substantial likelihood of success on the merits; 2) that irreparable injury will be suffered if the relief is not granted; 3) that the threatened injury to the movant outweighs the harm that the relief would inflict on the non-movant; and 4) that entry of the relief would not disserve the public interest. In the Eleventh Circuit, a preliminary injunction is an extraordinary and drastic remedy not to be granted unless the movant clearly established the burden of persuasion as to the four requisites. The Court addresses each of these elements in turn. First,
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Campus not only has shown a substantial likelihood of success on the merits of his advancement claim, but he has established actual success on the merits of one of his claims as evidenced by this Court's prior ruling which awarded him advancement of expenses in the underlying action under the terms of the Indemnity Agreement. Also, Campus seeks­for the first time­a determination concerning advancement of defense expenses in the instant action. In the instant action, Plaintiffs allege that their claims against Campus are based on his violation of fiduciary duties to TMC and set forth specific allegations revealing that their claims arise from Campus' performance of duties as TMC officer. While Campus set forth a count for such relief in his Amended Counterclaim, he did not seek summary judgment on this count, instead only seeking such relief with regard to his claim for advancement of defense expenses in the underlying action (CV 07-177). As such, in ruling on Campus' prior motion for partial summary judgment, the Court found that he was entitled to advancement of his expenses in the underlying action. Nevertheless, for those same reasons articulated in the Court's Order (i.e., because TMC contracted to be 100% responsible for the legal expenses incurred by Campus defending any claims pertaining to his status as an officer of TMC, the Court finds that Campus' claim for advancement of defense expenses in the instant action is likely to succeed. On the issue of irreparable harm, TMC contends that Campus has failed to show irreparable injury because he has not shown that he is unable to retain counsel from his own funds. However, the issue is not whether Campus has sufficient funds to pay for his defense. Rather, the issue is whether Campus will irreparably suffer a loss. Pursuant to the Indemnity Agreement, Campus is contractually entitled to payment of his defense costs until there is a judicial determination that he has engaged in behavior that vitiates his right to indemnification. If the Court does not issue
23

injunctive relief requiring TMC to pay for the advances during the litigation, then Campus' advancement right will be eviscerated and rendered meaningless. Third, Campus has shown that the threatened injury to him outweighs the harm that an injunction requiring advancement of expenses may cause TMC. The threatened injury to Campus is an irretrievable loss of a contractual right and having to pay for his own defense out of his own pocket. Interestingly, TMC's opposition is silent on this issue. In fact, apart from alleging that Campus has stolen from the company and engaged in wrongdoing, TMC does not address precisely how advancement of Campus['] legal expenses will harm TMC to such an extent as to outweigh any threatened injury to Campus. TMC's prospective harm, at worst, is that it runs the risk of non-payment if it is ultimately found that Campus is not entitled to indemnification and Campus is unable to pay the amounts advanced. TMC, however, contracted for such when it entered into the Indemnity Agreement with Campus, contracting to pay for his defense at its own expense. As such, Campus' threatened injury outweighs the harm to TMC. Fourth, Campus has shown that an injunction will not disserve the public interest. Public policy favors honoring advancement agreements. . . . Alabama's public interest would be served by protecting Campus' right to advancement through the issuance of a preliminary injunction to enforce that right. . .. In sum, Campus' Motion for Preliminary Injunctive Relief is GRANTED with respect to advancement of his defense expenses both in the underlying action (CV 07-177), as well as in the instant action (CV 08-342). Accordingly, TMC is hereby preliminarily enjoined from refusing to provide such expenses to Campus and is required to immediately pay the reasonable expenses of Campus' defense. This matter is REFERRED to U.S. Magistrate Judge
24

William E. Cassady for the handling of all issues relating to the preliminary injunctive relief granted herein, as well as its expedited enforcement and resolution of any remaining disputes as to what constitutes reasonable expenses (including Campus' pending request for entry of a stay). (Id. at 3-6 & 6-7 (internal citations, quotations, and footnotes omitted; emphasis in original)) The same day this order was entered, Campus filed a motion for a hearing before the undersigned. (Doc. 72) Campus' motion for a hearing was granted by the undersigned on June 5, 2009. (Doc. 73) [P]laintiff The Mitchell Company, Inc. [] and defendant Campus are ORDERED to file briefs, with supporting evidence, on or before the close of business on June 12, 2009 directed to the amount of reasonable defense expenses due Campus in the underlying action (CV 07-177) and this action (CV 08-342), as well as whether these actions should be stayed pending payment of the foregoing defense expenses. Thereafter, the interested parties are to each file their responses on or before the close of business on June 19, 2009. Briefing will then be CLOSED. Counsel for Campus and TMC are to appear for oral argument before the undersigned on June 29, 2009 at 3:00 p.m., [in] Courtroom 3A, United States Courthouse, Mobile, Alabama. (Id. at 2) TMC and Campus accomplished this briefing, as ordered (Doc. 75 (TMC's brief and evidentiary submission regarding defense costs and in opposition to staying the underlying action); Doc.76 (Campus' brief regarding the amount of reasonable defense expenses from TMC and whether a stay

25

should be ordered);4 Doc. 79 (Campus' response brief);5 Doc. 80 (TMC's
4

Campus' brief reads, in relevant part, as follows:

The issues to be determined in the litigation between TMC and Campus are complex and extensive. In the Underlying Action alone, Campus has been called upon to answer and defend twelve causes of action that TMC has asserted against him pertaining to his conduct as an officer of TMC. Yet, after nearly a year of active litigation in both cases, Campus seeks only $296,127.70, which represents legal expenses incurred for discovery, legal research, preparation of pleadings, travel, and other pre-trial expenses. By comparison, TMC incurred $429,357.86 in attorney[']s fees and $205,614.54 in investigative costs incurred between August of 2006 and September of 2007 to investigate the underlying facts relative to TMC's claim. This comparison underscores the reasonableness of Campus' expenses due to be paid here. . . .

This Court must establish the guidelines and parameters to be followed by the parties with regard to advancement of Campus' legal expenses from this point forward. Campus suggests that the Court should impose a framework for future advancement very similar to the one utilized in the Westar case. . . .

For nearly two years, TMC has avoided its contractual obligation to advance Campus' expenses. As a result, Campus has incurred significant hardship and been prejudiced by being required to pay several hundred thousand dollars in defense costs, which should have been paid by TMC at its expense. . . . Having been required to pay for his own defense thus far because TMC has refused to fulfill its advancement obligations to date, Campus should not now be forced to incur further expenses defending against TMC's claims after this Court has ordered TMC to immediately advance Campus' expenses. If TMC does not immediately obey the Court's Orders, TMC should not be permitted to maintain its claims in this Court. Instead, a stay should be entered pursuant to the Court's authority to stay an action for a party's failure to pay costs as ordered. Moreover, permitting TMC to maintain its claims without advancing Campus' defense costs, would make the proceedings in this Court the means of 26

oppression and vexation, a result which is to be avoided. In both Wishneski and Matthews, the courts held that the courts had authority to stay subsequent cases for failure to pay costs in prior cases. It logically follows then that, if a court can control its own proceedings by staying a second suit for failure to pay costs from a prior case, this Court can certainly control the proceedings in these pending actions through entry of a stay until TMC advances Campus' defense costs as ordered. (Id. at 6-7, 7, 8 & 8-9 (internal citations, quotation marks, and footnotes omitted; emphasis in original))

5

This brief reads, in part, as follows:

The cases relied upon by TMC [] do not address the standards governing advancement of reasonable attorneys' fees based on a contract, which is the issue presently before the Court for resolution. Accordingly, the cases cited by TMC are inapposite to this Court's determination of the reasonable amount of fees due to be advanced to Campus. . . .

TMC argues for a reduction in the amount of costs that are due to be reimbursed arguing that reasonable attorneys' fees do not include overhead costs such as most paralegal expenses and copying costs. Here again, TMC supports its argument by citing to cases pertaining to statutory fee-shifting awards, not cases addressing contractual attorneys' fees and costs awards. Moreover, Campus' Indemnity Agreement provides for advancement of reasonable expenses and attorneys' fees. Because the Indemnity Agreement separately provides for payment of both reasonable expenses and attorneys' fees, under the express terms of the Indemnity Agreement, these expenses are subject to advancement in addition to Campus attorneys' fees as long as they are reasonable. Any other interpretation would render the term reasonable costs in the Indemnity Agreement meaningless, a result which is to be avoided. . . .

TMC also asserts that Campus should be required to affirm that he has the 27

response brief6)),7 and counsel appeared before the undersigned for oral
ability to repay the expenses paid by TMC, provide proof of ability to repay, affirm that he will not impair his ability to repay those expenses, and provide a bond for the value of advancement. Here again, TMC attempts to rewrite the Indemnity Agreement after-the-fact to condition and limit Campus' right to advancement of defense costs, a position the District Court has already soundly rejected. As the District Court has already determined, the only condition on Campus' right to receive advancement of defense costs is an undertaking to repay. If TMC had meant to condition Campus' advancement right on Campus affirming and proving his ability to repay or on Campus posting a bond, TMC could have and should have done so in the Indemnity Agreement. Furthermore, with regard to TMC's request that Campus be required to post a bond [i]t is in the discretion of the district court to decide that, under the circumstances, no security is required. . . .

TMC's arguments regarding Campus' counsel's billing practices, which costs qualify for advancement, and reductions that should be made to the amounts due, raise issues that need not be determined while the litigation between Campus and TMC is ongoing. (Id. at 2-3, 5-6, 7-8 & 9 (internal citations, quotation marks, and footnotes omitted; emphasis in original))

6

TMC's response brief reads, in part, as follows:

Mr. Cox's affidavit [does] not meet the burden of establishing a reasonable rate in the market in which the action is filed, Mobile, Alabama. The burden of establishing that rate is on the moving party, which Mr. Cox never attempts to do. In so doing, a party cannot rely merely on its attorneys' bill for services. . . . As the rates of Johnstone Adams attorneys billed in this matter are in line with the Mobile market for legal services and these rates conform to what was charged by the firm attorneys in recent litigation which was the subject of a fee award before this Court and as TMC does not object to these rates, the Court 28

should impose these rates ($255 for attorneys with 25+ years experience; $155 for senior associates like Mr. Harris of Carlton Fields and Mr. LaTrace of Johnstone Adams) on all legal work performed. . . .

TMC's­and the judicial system's­objections to block billing were wellexplored in its previous brief. The reduced redaction in the invoices attached to Campus' brief of June 12, 2009, allows TMC to state unequivocally that Campus' attorneys have engaged in block billing. . . .

Paralegal expenses are unrecoverable overhead expenses. Yet the Carlton Fields attorneys have attempted to recover significant paralegal costs. Not only are the hourly rates charges by these non-attorneys in excess of what many an associate charges in Mobile­and therefore unreasonable­but they are not recoverable expenses under Eleventh Circuit law. Also, Carlton Fields copying costs for April 2009 are hugely excessive, as well as unexplained, at $829.40. Standard copying for the convenience of the attorneys is not a recoverable expense. . . .

For March and April, Cox billed 116.3 hours[] and Harris bill[ed] 176.6, a significant and costly variation from the previous workload wherein Harris performed the great majority of the work. Counsel for TMC had determined, as best it could, from Carlton Fields' previous bill, that Cox had billed 42.3 hours to Harris' 181.6. This Court has criticized senior attorneys who seek fees where they perform the lion's share of the work involved rather than shifting that work to capable and more junior attorneys. . . .

For the period of March 1, 2009, until April 30, 2009, there is a resurgence in the number of attorney time entries [which] appear to be rounded to the half-hour. In its initial brief on this matter, TMC noted that from June 26, 2008, to October 31, 2008, that over 61% of Mr. Cox's time entries for that period were in whole or half hour increments and that for the same period, over 77% of Mr. Harris' entries were in whole or half hour increments. TMC also noted, that, 29

as far as it was aware, this pattern of imprecise billing appears to have recessed around November 1, 2008. However, the new time records from the Carlton Fields' attorneys reveal that this practice renewed itself around March 1, 2009. For March and April 2009, over 65% of Mr. Harris['] entries were in whole or half hour increments. For the same period, over 80% of Mr. Cox's time entries were in whole or half hour increments; in fact, for April 2009, eighteen of Mr. Cox's twenty time entries (90%) were in hole or half hour increments. . . .

In the Indemnity Agreement, TMC stated it would conduct the defense. If that language would not entitle it to select counsel in less hostile circumstances, then it at least allows reasonable, Mobile-based limitations on charges those attorneys incur. Mr. Cox and Mr. Harris are based out of Atlanta. Mr. Cox has charged for travel time, which would not have been charged by an attorney based in Mobile and is therefore inappropriate. Consider Mr. Cox's 17.50 hour day of April 23, 2009[.] . . . In addition to being an example of inappropriate block billing . . . and opposing counsels' tendency to charge by the half hour, it levies the charge of traveling on TMC for what was a local­to Mobile­deposition, which attorneys from Johnstone Adams could have ably conducted. . above: # Carlton Fields attempts to recover for having Mr. Harris attend the depositions of some deponents which Mr. Cox actually conducted. . . . Many clients and insurers reject paying for the presence of a second attorney in depositions. The Carlton Fields invoices reveal billing for consultation and compiling documents with a Hartford attorney as early as June 2008. Hartford did not file its declaratory judgment action until October of 2008. . .

[A] few irregularities [in billing] have stood out in addition to those cited

#

(Doc. 80, at 4, 6, 7, 8, 9 & 9-10 (internal citations and footnotes omitted; emphasis in original)) 30

argument on June 29, 2009. Immediately following that hearing, the undersigned endorsed the following order on the docket sheet in CV 08-342: "Mr. Campus shall resubmit, not later than 5 p.m. on Friday, July 3, 2009, the invoices submitted by his attorneys without redaction and with a specific identification of any fees and/or costs not included in his request for reimbursement; TMC shall respond to this new submission of fees and costs and file its brief regarding the need for a Rule 65(c) bond not later than 5 p.m. on July 10, 2009." (Doc. 82) 7. In response to the undersigned's order dated June 29, 2009,

Campus, on July 2, 2009, submitted the affidavit of James H. Cox, Esquire, and attached thereto "supporting documentation identifying all fees and expenses subject to advancement and specifically identifying any fees and expenses not included in his request for advancement." (Doc. 83) The affidavit

On June 17, 2009, the Court entered an order granting Campus' motion to dismiss the plaintiffs' complaint. (Doc. 78; see Doc. 44) "There is no allegation that TMC has any legally protected interest in either Model Homes and/or Hexagon, or vice-versa. Accordingly, Campus' motion to dismiss is due to be granted as to TMC's request for declaratory relief because TMC lacks standing to seek a declaration of the rights of Campus or the obligations of the LLCs under the Operating Agreement or to seek a stay of the LLCs['] obligations. . . . As to the LLCs, they contend that they have standing to request declaratory relief and a constructive trust over Campus' interest in the LLCs because in the near future it is `likely' that Campus will have to disgorge some or all of his interests in the LLCs based on the outcome of TMC's underlying action against him. However, the LLCs cannot base their claim for equitable relief upon the purported interests and injuries of TMC." (Doc. 78, at 12) 31

7

of Cox, lead counsel for Campus, reads, in relevant part, as follows: 3. . . . I have reviewed all of the time records of Carlton Fields for legal services rendered and expenses incurred in Case No. 07-177-KD-C beginning June 25, 2008 through May 31, 2009, and in Case No. [] 08-342-KD-C beginning September 25, 2008 through May 31, 2009, for the purpose of determining the amount of fees and expenses that The Mitchell Company should be ordered to immediately advance to Campus pursuant to the Orders of this Court. 4. In conducting my review, I examined each time entry carefully in order to determine which services and expenses should be considered as having been incurred as "defense expenses" as a result of any claim arising from Campus' service as an officer of The Mitchell Company and his performance of his duties as an officer of The Mitchell Company. In the course of conducting my review, I excluded fees and expenses related to the prosecution of Campus's counterclaims in the Underlying Action and the Instant Action and fees billed for travel time by me or other members of Carlton Fields between Atlanta, Georgia, Mobile, Alabama and Pensacola, Florida. I also excluded fees and expenses related to our assertion of Campus' right to advancement (i.e., "fees on fees"). 5. The attached invoices as marked up represent the result of my review as described in the preceding paragraph. The entries or portions of entries that are "lined through" represent fees and expenses that Campus is not requesting to be advanced to him pursuant to the Court's Orders. With respect to the time entries that have been partially excluded, I allocated the total time spent for a particular entry between advanceable and nonadvanceable fees and expenses based on my familiarity with the work that was done. All the work was done either by me or under my supervision. 6. Based on the foregoing, The Mitchell Company
32

should be ordered to immediately advance to Campus $236,847.00 in legal fees and $12,451.96 in expenses for Case Nos. 07-177-KD-C (the Underlying Action) and 08-342-KD-C (the Instant Action) for services rendered by Carlton Fields pertaining to the defense of Mr. Campus in both actions through May 31, 2009. The Mitchell Company should further be ordered to immediately advance to Campus $6,072.50 in legal fees and $155.30 in expenses, for services rendered by Johnstone Adams pertaining to the defense of Mr. Campus in the Instant Action and the Underlying Action through May 31, 2009. 7. Accordingly, The Mitchell Company should be ordered to advance a total of $242,919.50 in attorney's fees and $12,607.26 in expenses for Mr. Campus' defense in the Underlying Action and the Instant Action through May 31, 2009. (Doc. 83, Exhibit A, Affidavit of James H. Cox, Esquire, at ¶¶ 3-7 (footnote omitted)) 8. TMC filed its response to Campus' new submission of fees and

costs and its arguments regarding the need for a Rule 65(c) bond on July 10, 2009. (Doc. 91) Basically, TMC argues that this Court should require Campus to post an injunction bond in the amount the Court orders advanced to him since the defendant "has provided no evidence of his ability to repay, or actions taken to preserve his ability to repay," and "TMC is more likely to be harmed in the absence of the bond[.]" (Id. at 3-4 & 4; see also id. at 1-5) In addition, TMC, in arguing that billing disputes and errors remain in Campus' most recently-revised invoice, renewed "its arguments in the previous briefs
33

. . . regarding, among other things, the reasonable rate,8 its right to conduct the litigation (including selection of counsel),9 the exclusion of staff and overhead
TMC contends that the hourly rates for attorney work performed by Carlton Fields is unreasonable and excessive. (Doc. 75, at 2-5) Campus' attorneys from Carlton Fields have charged an unreasonable hourly rate in this matter. James Cox, the most senior attorney from Carlton Fields . . ., a 1975 graduate of the University of Georgia School of Law, is charging $500 to $525 per hour as of March 2009. The primary other attorney from Carlton Fields . . . is Derek Harris, an associate who, according to the Carlton Fields website, has no more than eight years post-law school experience, is charging $300 to $320 per hour. It also appears that Carlton Fields charges $165 to $175 per hour for paralegals or other non-lawyer support. These rates are far outside fair market rates and are unreasonable. A reasonable hourly rate is the prevailing market rate in the relevant legal community for similar services by lawyers of reasonably comparable skills, experience, and reputation. . . . Fortunately, for purposes of comparison, the Mobile firm Campus has selected to defend him, Johnstone Adams, LLC, has . . .submitted bills for two comparable attorneys. . . . Alan Christian, a litigator with 29 years of experience, has significant administrative, trial, and appellate experience. Mr. Christian is AV-rated by Martindale-Hubbell. . . . Mr. Christian is an attorney, in the relevant community, of similar experience to Mr. Cox. Mr. Christian charges $255 an hour . . . . Rick LaTrace of Johnstone Adams, like Derek Harris of Carlton Fields, graduated law school in 2002. Mr. LaTrace has billed $155 an hour in this matter. . . .
8

Carlton Fields' hourly rates in this matter should be adjusted to conform with those of Johnstone Adams in this matter. That means that Mr. Cox's reasonable hours are reimbursed at a rate of $255 and Mr. Harris' at $155. (Id. at 2-3, 3-4 & 5 (internal citations, quotation marks, and footnote omitted; emphasis in original)) "Per the Indemnity Agreement, TMC has the authority to `conduct' the defense of the case. In exercise of that authority, Counsel for TMC sent a letter to Mr. Cox informing him that, as of March 13, 2009, TMC will reimburse no expenses from Carlton Fields, but only from 34
9

bills,10 and its demand for reasonable billing practices (including accurate timekeeping and recording,11 no block billing,12 cost-effective distribution of
Campus' local counsel, Alan Christian of Johnstone Adams. Johnstone Adams, a Mobile, Alabama, law firm, was selected by Campus and offers significant cost and practical advantages in its proximity to the Court, most parties and witnesses, and TMC's counsel at Lyons, Pipes & Cook." (Doc. 75, at 9; see also id. at 4 ("TMC, per the agreement, has the authority to conduct the defense of the case. From a general insurance standpoint, that involves selection of qualified, local representation. The Agreement does not give Campus the right to select his own counsel, and it was not drafted with the intent of providing a litigation weapon to malfeasant executives by allowing them to select counsel in any locale, at any rate, to maximize costs and perhaps inconvenience to TMC.")) "Paralegal expenses are recoverable only to the extent that the paralegal performs work traditionally done by an attorney. Otherwise, paralegal expenses are unrecoverable overhead expenses. . . . Unexplained and unnecessary copies are not reasonable costs. Additionally, Carlton Fields has billed for significant copying costs, in excess of $1,220, to an entity called Digital Legal Tampa for the processing of documents into an Iconnect System. These costs would appear to be facially excessive, even if they were adequately explained. Document management, for the convenience and organization of counsel, is an overhead expense, and not a reasonable cost which TMC could (sic) be required to pay. Also, bills for fax and postage would seem to fall into the overhead category, and should be excluded." (Doc. 75, at 5 & 5-6 (internal citations and quotation marks omitted)) "From June 26, 2008, to October 31, 2008, Mr. Cox had 34 billing entries, 21 of which were for a quantity of hours ending in `.00' or `.50.' In other words, over 61% of Cox's time entries for that period were in whole or half hour increments. For the same period, Mr. Harris had 58 billing entries, 45 of which were for a quantity of hours ending in `.00' or `.50.' By proportion, over 77% of Mr. Harris' entries were in whole or half hour increments. During the same period, both attorneys also occasionally billed in quarter-hour or tenth-hour increments, per industry standard, so it is not as [if] these more usual billing increments were not used by the firm. It is unlikely that the majority of the undertakings for this matter in this period involved half-hour increments; and such a pattern of billing would arouse suspicion and inquiry in many diligent clients. This pattern of imprecise billing appears to have ended around November 1, 2008. . . . TMC proposes that each half-hour increment entry in the time period of June 26, 2008, through October 31, 2008, be reduced by 0.25 hours." (Doc. 75, at 8-9) "Block-billing, or grouping several activities in one time entry, makes it much more difficult to determine time actually expended on a given assignment, document, or issue, making it impossible to assess the reasonableness of the entries. Block-billing is disfavored by 35
12 11 10

work), and a reasonable time table,13 commensurate with actual industry practice, for review and payment." (Doc. 91, at 5) The District Judge ordered a determination on the reasonableness of fees and did not license Campus and his attorneys to collect pre-judgment or post-judgment interest on top of those fees, especially when Campus and his attorneys are only now turning over decipherable billing records, and this Court has not yet set standards for reasonableness. Accordingly, pre-judgment interest may not attach to any amounts due before this Court renders a ruling on the amount due because the amount to be advanced has, as yet, not been "`certain or are capable of being made certain.'" The Alabama Court of [Civil] Appeals has explained that to be certain or capable of being made certain, "`(1) The amount due must be certain; (2) the time when it is due must be certain; [and] (3) the amount due and time of payment must be known to the debtor.'" Until the Court defines an amount currently due (and parameters for obtaining that amount), the amount is not ascertainable under Alabama law. Since there has not been a judgment to finalize the amount to be advanced, there of course cannot be post-judgment interest either.

the court, and can be penalized by discounting time entries. . . . TMC proposes that all blockbilling entries which are not otherwise objectionable be reduced by 20%." (Doc. 75, at 8) "In his motion for preliminary injunction, Campus proposed a fairly punitive schedule of payment, including allowing TMC only ten days to object to any bill, and requiring that TMC [] pay 75% of the bill's total, regardless of its objections. . . . [T]o the extent Campus seeks an accelerated time line as a punitive measure, TMC has not been in contempt of court or disobeyed any final order that would merit punitive measures . . . . TMC has proposed a reasonable timeline[] that would provide timely payment or objections and responses that are generally in keeping with industry standard. Specifically, TMC proposes thirty days for its review and objections, ten days for the billing firm's response, up to fifteen days for a conference among counsel to resolve the matter without the court's intervention, and­if the issue is not resolved­then ten days after that conference for the billing firm to bring the dispute to this Court." (Doc. 75, at 9 & 10 (internal footnote omitted)) 36
13

.

.

.

Having reviewed the affidavit of James Cox and the attached invoice submitted per this Court's order, in addition to the general issues raised in its previous briefs and summarized above, TMC notes the following issues in the most recent invoice: 1.) The reduction for travel time appears unrealistic. Mr. Cox reduced an entry by four hours for travel, and Mr. Harris only three hours for travel on April 14 and 17, respectively. Per a number of mapping websites and experience, the trip between Mobile and Atlanta is approximately 330 miles, and takes around 5 hours each way. Counsel did not actually omit all travel time. Mr. Cox's 17.5 billed-hour day on April 23, 2009, which included