AIRFX.com et al v. AirFX LLC

Filing 121

ORDER granting in part and denying in part 107 Motion for Attorney Fees and Non-Taxable Expenses. We award attorneys' fees to the plaintiffs in the amount of $103,972.50 and deny non-taxable costs. (See document for full details). Signed by Senior Judge Frederick J Martone on 3/7/13. (LAD)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Plaintiffs,
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vs.
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AirFX, LLC;
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Defendant/Counterclaimant, )
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vs.
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AirFX.com and Marc Lurie,
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Counterdefendants.
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AirFX.com and Marc Lurie,

No. CV 11-01064-PHX-FJM
ORDER

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The court has before it plaintiffs' motion for attorneys' fees and non taxable expenses

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(doc. 107), plaintiffs' memorandum of points and authorities in support of the motion (doc.

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111), defendant's response (doc. 119), and plaintiffs' reply (doc. 120).

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I

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This action arises out of a dispute over the internet domain name www.airfx.com.

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Plaintiff Marc Lurie ("Lurie") acquired the domain name airfx.com from a non-party on

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February 2, 2007 for $2,100. In 2008, defendant unsuccessfully sought to purchase

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airfx.com from Lurie. In 2011, defendant filed a domain dispute complaint before the

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National Arbitration Forum ("NAF"). On May 16, 2011, the NAF panel decided in favor of

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defendant, ordering that GoDaddy transfer airfx.com to defendant. Plaintiff filed this action

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asserting a claim for reverse domain name hijacking under Lanham Act, 15 U.S.C. §

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1114(2)(D)(v). Defendant asserted counterclaims for (1) trademark infringement under

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Lanham Act, 15 U.S.C. § 1125; (2) cybersquatting in violation of the Anticybersquatting

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Consumer Protection Act ("ACPA"); (3) intentional interference with prospective

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economic/contractual advantage; and (4) abuse of process. We dismissed counterclaims

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three and four because defendant failed to allege sufficient facts to state a claim (doc. 50).

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We granted summary judgment to plaintiffs on their sole claim because we concluded

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plaintiffs' use of the domain was lawful. We also granted summary judgment in favor of

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plaintiffs on defendant's counterclaims because defendant could show neither that airfx.com

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was distinctive at the time of registration, nor that plaintiffs made commercial use of the

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AirFX mark (doc. 103). Plaintiffs now move for an award of attorneys' fees and non-taxable

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costs under § 15 U.S.C. § 1117(a).

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II

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Under the Lanham Act, “[t]he court in exceptional cases may award reasonable

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attorney fees to the prevailing party.” 15 U.S.C. § 1117(a). A case is exceptional if it is

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“groundless, unreasonable, vexatious, or pursued in bad faith.” Gracie v. Gracie, 217 F.3d

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1060, 1071 (9th Cir. 2000) (citation omitted). This standard applies to prevailing defendants

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as well as prevailing plaintiffs. See id. Here, plaintiffs seek attorneys' fees for prevailing on

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their claim for reverse domain name hijacking and on defendant's counterclaims for

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trademark infringement and cybersquatting.

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Plaintiffs contend that defendant's case was groundless and unreasonable. Plaintiffs

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argue that defendant pursued a meritless argument regarding their ACPA claim which failed

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to raise any debatable issue of law or fact. Plaintiffs also assert that it was unreasonable for

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defendant to controvert facts in plaintiffs' motion for summary judgment that it later asserted

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were undisputed in its own statement of facts. Finally, plaintiffs argue that defendant's

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actions, including its failure to comply with the local rules and the filing of an allegedly

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groundless motion to seal Lurie's deposition transcript, unreasonably multiplied plaintiffs'

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work.
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In response, defendant contends that its trademark infringement claim was merited

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based on plaintiffs' admissions and conduct in connection with their intent to launch and

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market AirFX. Defendant also argues that it was plaintiffs, not defendant who multiplied the

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proceedings by filing ten of the fourteen substantive motions in this matter. However,

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defendant does address plaintiffs' arguments regarding the ACPA counterclaim.

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We conclude that defendant's counterclaims were groundless and unreasonable. On

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August 24, 2012 we granted plaintiffs' motion for summary judgment on defendant's

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counterclaim. Neither the factual basis for our conclusion, nor the law compelling it, were

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genuinely subject to dispute. On October 20, 2011, before defendant filed its counterclaims,

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we informed the parties that the original registration date of airfx.com was the determinative

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issue in connection with any ACPA claims. Specifically, we noted that GoPets Ltd. v. Hise,

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657 F.3d 1024, 1032 (9th Cir. 2011) made it clear that a company's re-registration of a

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domain name that was first registered "long before [trademark owner] registered its service

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mark" did not violate the ACPA, because the re-registration "was not a registration within

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the meaning of § 1125(d)(1)." See Doc. 19 at n. 2. It is unclear from the record whether

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defendant knew the original registration date of the airfx.com domain name at the time it

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filed its counterclaims. However, by the time the parties filed their motions for summary

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judgment, it was undisputed that airfx.com was originally registered more than two years

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before the AirFX mark existed. It was unreasonable for defendant to pursue its ACPA

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counterclaim once it discovered that the airfx.com was originally registered before the AirFX

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mark. As we noted in our order, GoPets is squarely on point in this matter, and there is

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nothing it its language indicating that it should be read as narrowly as defendant suggested

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in its briefs. See Doc. 103 at 6. Defendant should have withdrawn its ACPA counterclaim

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once it discovered that the original registration date of airfx.com preceded the registration

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of the AirFX mark.

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Similarly, defendant's trademark infringement counterclaim was groundless and

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unreasonable. The claim was groundless because defendant did not present any evidence that

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plaintiffs' use of the AirFX mark was commercial. Moreover, it was unreasonable for
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defendant to dispute that Lurie has never sold a product or service with the AirFX name, but

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then assert in its own statement of facts that "[p]laintiffs have never sold a single product

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bearing the name AirFX." See Doc. 103 at 2. Defendant had no reasonable basis to argue

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that plaintiffs had infringed the AirFX trademark.

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Plaintiffs next contend that this case is exceptional because defendant conducted itself

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in bad faith throughout this action. Plaintiffs argue that defendant's characterization of Lurie

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as a serial cybersquatter was unsupported, and therefore it was frivolous and offered in bad

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faith. Plaintiffs also assert that defendant knowingly was represented by a suspended

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attorney in these proceedings, and routinely failed to comply with the federal rules and local

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rules. Finally, plaintiffs note that defendant's counsel levied personal attacks against Lurie

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and Lurie's counsel throughout the litigation, despite this court's admonition that such

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conduct would not be tolerated.

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Defendant counters that plaintiffs' accusations are false and that it is plaintiffs who

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acted in bad faith by filing unfounded disciplinary complaints against defendant's counsel.

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Defendant also disputes plaintiffs' allegation that it was represented by a suspended attorney.

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Defendant's counsel filed an affidavit indicating that he has been the only attorney working

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on this matter, and that his colleague Mr. Haigh is a paralegal at the firm. Finally, defendant

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argues that Lurie's misleading statements and disrespect for the judicial process should not

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be rewarded with attorneys' fees.

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As we have noted before, the parties’ approach to this action has been needlessly

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contentious. See Exhibit O. Both parties have been unnecessarily adversarial and uncivil.

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Id. However, we are not persuaded that defendant or defendant's counsel acted in bad faith.

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Nevertheless, because we find that defendant's counterclaims were groundless and

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unreasonable, we conclude that this case is exceptional within the meaning of 15 U.S.C.

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§ 1117(a). Plaintiffs are entitled to recover attorneys’ fees.

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III
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We turn to establishing a reasonable fee award for this action. Plaintiffs seek an award
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of $133,658.50 in attorneys' fees and $1,128.98 in non-taxable costs, and have submitted a

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supporting memorandum (doc. 111) and supporting documentation (docs. 112-117)

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substantially in compliance with LRCiv 54.2(c)-(d).

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Defendants argue that only fees associated with the Lanham Act trademark

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infringement counterclaim are recoverable. However, under 15 U.S.C. § 1117(a), fees for

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claims brought under the ACPA are also recoverable. See e.g. Lahoti v. Vericheck, Inc. 636

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F.3d 501, 510 (9th Cir. 2011). Accordingly, we will consider fees associated with all of the

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claims and counterclaims in this action.

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Plaintiffs seek to recover fees billed by two different firms throughout the course of

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the litigation. From May 2011 through January 2012, plaintiffs engaged the Randazza Legal

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Group (the "Randazza Firm"). Thereafter, plaintiffs discharged the Randazza Firm and

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retained Urias Law Offices, PLLC ("Urias Law"). In accordance with LRCiv 54.2(d)(3),

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plaintiffs submitted supporting documentation including task-based itemized statements of

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fees from both firms. We must make specific findings as to the rates and hours that we find

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reasonable. Gracie, 217 F.3d at 1070 (citation omitted).

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Plaintiffs request $81,388.50 for the Randazza Firm. However, plaintiffs have

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disputed the total amount of fees charged by the Randazza Firm, and have only paid

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$70,162.28 to date. Motion at 10. “Hours that are not properly billed to one's client are not

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properly billed to one's adversary pursuant to statutory authority.” See Hensley v. Eckerhart,

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461 U.S. 424, 434, 103 S. Ct. 1933, 1940, 76 L.Ed.2d 40 (1983) (citation omitted).

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Accordingly, plaintiffs may only recover up to $70,162.28 in fees for the work done by the

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Randazza Firm. The task-based itemized statement of fees submitted by the Randazza Firm

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indicates work done by four attorneys (Randazza, Fischer, Hutchens, and DeVoy) and one

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law clerk (Laura Tucker), each of whom bills at a different hourly rate. Mr. Randazza's

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affidavit (doc. 111, ex. E) describes his role and qualifications. Given this information and

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our familiarity with the Phoenix legal market, we conclude that his hourly rate ($425) is

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reasonable. However, because the affidavit does not substantively describe the qualifications

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of the other three attorneys or the law clerk appearing on the itemized statement, we cannot
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determine the reasonableness of their rates. See LRCiv 54.2(d)(4)(A). Therefore, fees

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attributable to those individuals are excluded from the award. We award $51,652.50 in fees

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for approximately 122 hours billed by Mr. Randazza from May 2011 through January 2012.

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Plaintiffs seek $52,320.00 in fees for hours billed by Urias Law. Sharon Urias's

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supporting affidavit (doc. 111, ex. D) describes her own qualifications, as well as the role and

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qualifications of her paralegal. Based on this information and our familiarity with the

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Phoenix legal market, we conclude that their hourly rates ($300 and $150, respectively) are

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reasonable. The task-based itemized statement of fees (doc. 111, ex. C) contains adequate

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descriptions of each billed task. Having carefully reviewed each itemized entry, we find the

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billed hours reasonable. Accordingly, we award plaintiffs $52,320.00 in fees for the hours

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billed by Urias Law.

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Finally, we reject in its entirety plaintiffs' request for non-taxable expenses, which are

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not recoverable under the Lanham Act. See Roth v. Naturally Vitamin Supplements, Inc.,

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No. CV-04-2135, 2007 WL 2020114, at *7 (D. Ariz. July 6, 2007).

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Based on the foregoing, IT IS ORDERED GRANTING IN PART and DENYING

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IN PART plaintiffs' motion for attorneys’ fees and non-taxable expenses (doc. 107). We

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award attorneys' fees to the plaintiffs in the amount of $103,972.50 and deny non-taxable

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costs.

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DATED this 7th day of March, 2013.

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