Former Shareholders of CardioSpectra, Inc. v. Volcano Corporation and Does 1-10

Filing 126

ORDER GRANTING IN PART AND DENYING IN PART VOLCANO'S MOTION FOR ATTORNEYS' FEES AND COSTS; DENYING PLAINTIFFS' MOTION TO SEAL by Judge William H. Orrick granting in part and denying in part 106 Motion for Attorney Fees; denying 123 Administrative Motion to File Under Seal. (jmdS, COURT STAFF) (Filed on 12/12/2014)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 CHRISTOPHER E BANAS, et al., Case No. 12-cv-01535-WHO Plaintiffs, 8 v. ORDER GRANTING IN PART AND DENYING IN PART VOLCANO'S MOTION FOR ATTORNEYS' FEES AND COSTS; DENYING PLAINTIFFS’ MOTION TO SEAL 9 10 VOLCANO CORPORATION, et al., Defendants. 11 United States District Court Northern District of California Re: Dkt. Nos. 106, 123 12 13 INTRODUCTION 14 Having prevailed on its motion for summary judgment, defendant Volcano Corporation is 15 entitled to its reasonable fees and costs pursuant to an attorneys’ fees provision in the merger 16 agreement from which the underlying dispute arose. The amount it seeks—$3,557,034.50 in 17 attorneys’ fees and $1,023,995.99 in costs and disbursements, totaling $4,581,030.49—is eye- 18 catching, and the lack of support for such a huge request is surprising. A significant reduction in 19 Volcano’s request is warranted due to block-billing, excessive time claimed for specific tasks, and 20 other deficiencies, as detailed below. Volcano is awarded $2,586,963.38 in fees and $937,503.17 21 in costs and disbursements, totaling $3,524,466.55. 22 BACKGROUND 23 Volcano merged with CardioSpectra, Inc. in 2007 in exchange for $25 million in cash to 24 25 CardioSpectra’s shareholders and the promise to make four additional payments from Volcano to CardioSpectra’s then-former shareholders if certain milestones were achieved. Section 13.4 of the 26 merger agreement provided that: 27 28 If any action or proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled). 1 2 3 Merger agreement § 13.4 [Dkt. No. 64-19]. 4 Plaintiffs Christopher Banas and Paul Castella, who are former shareholders of 5 CardioSpectra, sued Volcano, alleging that Volcano breached its contractual obligation to use 6 good faith and reasonable commercial efforts to achieve Milestone 2 and that Volcano failed to 7 pay the shareholders after Milestones 3 and 4 were satisfied. See second amended complaint [Dkt. 8 No. 33]. On March 31, 2014, I granted Volcano’s motion for summary judgment and denied 9 plaintiffs’ motion for summary judgment. Dkt. No. 94. LEGAL STANDARD1 10 In determining whether fees are reasonable under Delaware law, courts look to the factors United States District Court Northern District of California 11 12 delineated in Rule 1.5(a) of the Delaware Lawyers’ Rules of Professional Conduct: 13 (1) the time and labor required, the novelty and difficulty of the questions involved, and the skills requisite to perform the legal services properly; 14 (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; 15 16 (3) the fee customarily charged in the locality for similar legal services; 17 (4) the amount involved and the results obtained; 18 (5) the time limitations imposed by the client or by the circumstances; 19 (6) the nature and length of the professional relationship with the client; 20 (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and 21 22 23 24 25 26 27 28 1 The merger agreement specifies that it shall be governed by Delaware law. Merger agreement § 13.9(a). I therefore look to Delaware law to determine the reasonableness of the fees requested by Volcano. However, I see no meaningful distinction between Delaware law and the law of the Ninth Circuit for purposes of this motion: under both, excessive fees are not reasonable and should not be awarded. Accordingly, Ninth Circuit law is instructive when assessing the reasonableness of the fees requested by Volcano. The parties likewise cite cases from within the Ninth Circuit to support their positions regarding the reasonableness of Volcano’s request. See pltfs.’ obj. [Dkt. No. 123-4]; Volcano resp. to obj. [Dkt. No. 124]. 2 (8) whether the fee is fixed or contingent. 1 2 Delaware Lawyers’ Rule of Professional Conduct 1.5(a). “[A] court also should consider whether the number of hours devoted to litigation was 3 4 excessive, redundant, duplicative or otherwise unnecessary.” Mahani v. Edix Media Grp., Inc., 5 935 A.2d 242, 247-48 (Del. 2007) (citation omitted); see also Hensley v. Eckerhart, 461 U.S. 424, 6 434 (1983) (“Counsel for the prevailing party should make a good faith effort to exclude from a 7 fee request hours that are excessive, redundant, or otherwise unnecessary, just as a lawyer in 8 private practice ethically is obligated to exclude such hours from his fee submission.”). 9 DISCUSSION Plaintiffs argue that Volcano’s motion should be denied for four reasons: (i) the merger 10 United States District Court Northern District of California 11 agreement limits Volcano’s recovery from plaintiffs to an indemnity escrow fund which has 12 already been depleted; (ii) plaintiffs Banas and Castella cannot be personally liable for attorneys’ 13 fees because they were parties to the merger agreement only as shareholder representatives, not in 14 their personal capacities; (iii) Volcano’s claimed fees are not reasonable; and (iv)Volcano’s 15 claimed costs are not recoverable and not reasonable. I address each argument below. 16 I. 17 VOLCANO’S MOTION IS NOT MOOT Plaintiffs argue that Volcano’s request for fees is moot because the Exclusive Remedy 18 provision in Section 10.9 of the merger agreement governs Volcano’s ability to recover from 19 plaintiffs and limits any recovery, including for attorneys’ fees, to an escrow fund which has 20 21 22 23 already been depleted. Section 10.9 provides, in relevant part: 10.9 Exclusive Remedy. . . . [T]he parties hereto acknowledge and agree that the indemnification provisions of this Section 10 shall be the sole and exclusive remedy of the Parent Indemnitees with respect to any and all claims that a Parent Indemnitee may have against the Company Shareholders . . . . 24 25 26 Merger Agreement § 10.9 [Dkt. No. 33–1]. Plaintiffs misconstrue Section 10.9. By its own terms, Section 10.9 is limited to situations 27 not present here: claims brought by Parent Indemnitees against the Company Shareholders. The 28 Parent Indemnitees are Volcano and its affiliates. See Merger Agreement at A-13. The Company 3 1 Shareholders are the former shareholders of CardioSpectra. See Merger Agreement at A-4, A-6. 2 Accordingly, as properly construed, Section 10.9 provides that in the event that Volcano seeks to 3 assert claims against the former shareholders of CardioSpectra, it can only do so pursuant to “the 4 indemnification provisions of this Section 10.”2 Section 10.9 says nothing about claims CardioSpectra’s former shareholders assert against 5 6 Volcano, which is what happened here: CardioSpectra’s former shareholders filed suit against 7 Volcano, alleging that Volcano breached the merger agreement.3 Volcano did not assert claims 8 against former CardioSpectra shareholders, much less claims for indemnification. Section 10.9 9 therefore has no bearing on the present situation.4 Unlike Section 10.9, the attorneys’ fees provision in the merger agreement is not limited to 10 United States District Court Northern District of California 11 indemnification claims or claims by one side against the other. The provision provides: 13.4 Attorneys’ Fees. If any action or proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled). 12 13 14 15 16 Merger Agreement § 13.4. 17 18 19 20 21 22 23 24 25 26 27 28 2 Broadly speaking, the “indemnification provisions of this Section 10” relate to actions by Volcano against CardioSpectra’s former shareholders for inaccuracies or breaches of any of CardioSpectra’s representations or warranties set forth in the merger agreement. See Merger Agreement § 10.2. 3 Plaintiffs are likely correct that, to account for the disproportionate power of Volcano, the parties limited the type of claim and recovery that Volcano could assert against CardioSpectra’s former shareholders without reciprocal limitations on the shareholders. But the merger agreement does not protect the former shareholders from the consequences of their own claims against Volcano. Indeed, as plaintiffs recognize, the merger agreement placed no limits on the claims or recovery which CardioSpectra’s former shareholders could assert against Volcano. 4 Because the plaintiffs’ claims against Volcano are not governed by the indemnification provisions of Section 10, the Escrow Fund likewise has no bearing on Volcano’s request for attorneys’ fees, whether or not that fund has been depleted. See Merger Agreement § 10.2 (“A Parent Indemnitee's rights to indemnification under Section 10 with respect to the Company Shareholders and Terminating Warrantholders shall be limited to recovery against the Escrow Fund and the Milestone Merger Consideration, in each case to the extent not yet delivered to the Company Shareholders or Terminating Warrantholders.”) (emphasis added). 4 Volcano obtained summary judgment on plaintiffs’ claim that Volcano breached the 1 2 merger agreement—the only claim asserted in the operative complaint. There is no dispute that 3 this was an action “relating to this Agreement or the enforcement of any provision of this 4 Agreement” and that Volcano is the “prevailing party.” Accordingly, as the “prevailing party,” 5 the merger agreement entitles Volcano is entitled to its “reasonable attorneys’ fees, costs and 6 disbursements.” Merger Agreement § 13.4. 7 II. 8 Plaintiffs Banas and Castella argue that Volcano is estopped from holding them personally 9 10 United States District Court Northern District of California 11 12 13 or individually liable for attorneys’ fees because Volcano previously argued that Banas and Castella were only parties to the merger agreement in their capacities as shareholder representatives, not as individuals, and could only sue in that capacity.5 Pltfs.’ opp. at 3-4 [Dkt. No. 114]. Plaintiffs’ argument is unavailing. Banas’s and Castella’s allegations that they were parties 14 15 16 17 to the merger agreement as shareholder representatives established their standing to sue for breach of contract; it had no bearing on Volcano’s right to recover attorneys’ fees pursuant to Section 13.4 of the merger agreement as the “prevailing party.” The cases cited by plaintiffs, Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597, 18 19 20 21 22 23 24 25 26 27 28 VOLCANO IS NOT ESTOPPED FROM SEEKING FEES FROM BANAS AND CASTELLA 600, 605 (9th Cir. 1996) and United States v. Alexander, 106 F.3d 874, 876 (9th Cir. 1997), are inapposite and do not support their argument. Risotto stands for the unremarkable proposition that judicial estoppel precludes a party from taking a position inconsistent with that party’s earlier position. Rissetto, 94 F.3d at 605. That is not the case here. Volcano’s earlier position that Banas 5 Volcano moved to dismiss the breach of contract claim in the original complaint on the grounds that the 26 individual and corporate plaintiffs were not parties to the contract and therefore lacked standing to sue for breach of contract. See Dkt. No. 13. The Court granted the motion with leave to amend, explaining that “[o]nly Volcano, Corazon Acquisition, Inc., CardioSpectra, and Christopher E. Banas and Paul Castella, in their capacities as Shareholders’ Representatives, were parties to the Agreement. Neither Banas nor Castella sue in their capacity as Shareholders’ Representatives.” Dkt. No. 31 at 3 n. 1. Plaintiffs filed a second amended complaint in which the only plaintiffs were Banas and Castella, “in their capacities as Shareholders’ Representatives of the Former Shareholders of CardioSpectra, Inc.” Dkt. No. 33 ¶ 9. 5 1 and Castella could only assert breach of contract in the capacities in which they were parties to the 2 merger agreement is consistent with Volcano’s current position that, as the prevailing party, it is 3 entitled to attorneys’ fees from plaintiffs. Alexander explains that “[u]nder the ‘law of the case’ 4 doctrine, a court is generally precluded from reconsidering an issue that has already been decided 5 by the same court, or a higher court in the identical case.” 106 F.3d at 876 (citation omitted). The 6 law of the case doctrine has no application here because the Court has not previously addressed 7 plaintiffs’ liability for attorneys’ fees. Banas and Castella initiated this action against Volcano seeking millions of dollars. It 8 9 would be patently unfair to hold that Volcano waived its contractual right to attorneys’ fees because it appropriately required Banas and Castella to plead the basis for their standing to assert 11 United States District Court Northern District of California 10 breach of contract.6 Cf Johnson v. Myers, 2014 WL 2214045, at *2 (N.D. Cal. May 28, 2014) (“it 12 would be inequitable to limit defendants’ attorney’s fees recovery to the assets of a single plaintiff 13 when every litigant was invested in the outcome of the action and aspired to win money”). If 14 Banas and Castella have an arrangement with other former CardioSpectra shareholders, or the 15 dismissed defendants, regarding indemnification for attorneys’ fees, that is their business. 16 However, there is no question that, as plaintiffs, Banas and Castella are liable for attorneys’ fees in 17 the first instance.7 18 III. VOLCANO IS ENTITLED TO REASONABLE ATTORNEYS’ FEES 19 Having rejected plaintiffs’ two threshold arguments above, there is no question that 20 Volcano is entitled to reasonable fees. But is the $3.5 million in fees Volcano paid to its counsel, 21 Cooley LLP, reasonable? 22 23 24 25 6 At his deposition, Castella apparently recognized that he and Banas, not other shareholders, would be liable for attorneys’ fees if Volcano prevailed in the lawsuit. See Dkt. No. 118-4 at 135:16-22 (Q: [W]ould the shareholders pay our attorneys' fees, or would you and Mr. Banas? A: Right now I understand that I and Chris [Banas] would be responsible, Chris and myself.”). 7 26 27 28 Plaintiffs also argue that Section 10.9 of the merger agreement shields individual shareholders from any personal liability “for anything related to the Merger.” Dkt. No. 114 at 5. As noted above, Section 10.2 relates to claims for indemnification and provides that Volcano’s remedies are limited to the provisions set forth in Section 10. Section 10.9 has no bearing on the unambiguous fee provision in section 13.4. 6 Plaintiffs contend that I should reduce Volcano’s request “by $1,356,613.50 for its 1 2 excessive charges, vague charges, and then make an additional large cut due to block billing.” 3 Dkt. No. 123-3 at 10. Specifically, plaintiffs assert that Volcano failed to establish that its fees are 4 the prevailing rates for similar cases in the Northern District; improperly block-billed its time; 5 provided insufficiently detailed billing records; seeks fees for discrepant time entries; overstaffed 6 and duplicated assignments; seeks excessive fees for travel; billed for administrative, clerical, and 7 paralegal work; billed excessive time for document review; and seeks excessive fees for specific 8 tasks, including the motion to dismiss, motion for summary judgment, and this fees motion; and 9 seeks costs which are not recoverable.8 Volcano seeks a staggering amount for a breach of contract case which was resolved at 10 United States District Court Northern District of California 11 summary judgment. Its documentation of those fees and costs, however, was remarkably 12 deficient. As stated below, I agree with some, but not all, of plaintiffs’ criticisms. 13 A. Prevailing market rates 14 15 16 17 18 19 Volcano seeks fees for 11 different Cooley timekeepers at hourly rates ranging from $355 to $1,095 per hour for partners and associates, $260 to $325 per hour for an e-discovery staff attorney, and $245 to $290 per hour for paralegals. Lambert decl. ¶ 45, Table 5 [Dkt. No. 108]. Plaintiffs contend that Volcano has failed to provide any competent evidence that these rates are within the prevailing market rates for similar cases in the Northern District. Pltfs.’ opp. at 8-10 [Dkt. No. 114]. 20 21 22 23 24 The rates requested by Volcano, while high, are within the prevailing market rates for similar cases in the Northern District. Volcano submitted the declaration of Chuck Chandler, a partner at Valeo, an international consulting firm. According to Chandler, Valeo maintains the Valeo Attorney Hourly Rates and AFA Database which “identifies rates for attorneys and paralegals at large, middle-market and boutique firms, in over 80 Practice Areas and in over 300 25 26 27 28 8 Plaintiffs request that I defer ruling on Volcano’s fees motion until their appeal of the underlying judgment is resolved. That request is DENIED. District courts routinely award attorneys’ fees while an appeal of the underlying judgment is pending. 7 1 cities.” Chandler Decl. ¶ 4 [Dkt. No. 107]. Chandler states that the database “uses actual rates— 2 i.e., the rate a law firm billed a client—as collected from filings in all court dockets accessible 3 online.” Id. The database shows that Cooley’s claimed rates are within the range, though on the 4 high end, of prevailing market rates for comparable firms in the Northern District. That 5 conclusion is consistent with my own knowledge of prevailing market rates for this type of case. 6 See Ingram v. Oroudjian, 647 F.3d 925, 928 (9th Cir. 2011) (it is appropriate for district court to 7 rely on its own familiarity with the legal market when assessing the reasonableness of hourly rates 8 claimed in fees motions). Along with Cooley’s high hourly rates comes an expectation that it will complete tasks 9 efficiently and that its more senior attorneys will limit their involvement to tasks requiring their 11 United States District Court Northern District of California 10 level of expertise. See, e.g., Hernandez v. Grullense, 2014 WL 1724356, at *11 (N.D. Cal. Apr. 12 30, 2014) (“The trade-off for the higher billing rate that greater experience and specialized 13 knowledge justifies is that more senior attorneys are expected to delegate routine tasks to others 14 with lower billing rates.”). Regrettably, Volcano’s motion fails to demonstrate whether it did so in 15 this case. 16 B. Block-billing 17 Plaintiffs contend that “Volcano’s time entries are improperly block-billed, and it is 18 therefore impossible to determine the reasonableness of the time spent on each task.”9 Pltfs.’ obj. 19 at 2 [Dkt. No. 123-4].10 Plaintiffs request that I deny Volcano’s fee request in its entirety or make 20 “very large across-the board percentage cuts” in the number of hours claimed by due to the block- 21 22 23 24 25 26 27 28 9 Block-billing is the practice of including various tasks within one time entry without specifying the time spent on each task within an entry. 10 Plaintiffs move to seal their objection to Volcano’s billing records and exhibit 1 to the objection because they reference Volcano’s time records. Dkt. No. 123. Per Civil Local Rule 79.5(d), within 7 days of plaintiffs’ motion to seal, Volcano should have filed a declaration with the Court “establishing that the designated information is sealable.” Volcano did not do so. The motion is therefore DENIED. Civil L.R. 79-5(d) (“If the designating party does not file its responsive declaration as required by this subsection, the document or proposed filing will be made part of the public record.”). The motion would likely have been denied in any event. Volcano already redacted portions of the records that it provided plaintiffs and lodged with the Court. The remaining information does not appear sealable. 8 1 billing. Volcano concedes that its time entries are block-billed. Volcano’s counsel, Cooley, states 2 3 that “[a]s standard practice, attorneys at Cooley LLP block bill their time without specifying the 4 time spent on each task within an entry, unless otherwise requested by a client. Volcano made no 5 such request and paid for block-billed time.” Lambert decl. ¶ 2 [Dkt. No. 124-2]. Volcano 6 contends that “[t]he use of block billing, however, is a ‘typical practice’ in the Northern District of 7 California, and supports a fee request where the entries contain ‘sufficient detail’ from which a 8 court can conclude that the total number of hours spent on all tasks was reasonable.” Dkt. No. 124 9 at 1. In support, Volcano cites, Garcia v. Resurgent Capital Servs., L.P., 2012 WL 3778852, at *8 (N.D. Cal. Aug. 30, 2012), in which the Court found that the block-billed entries are issue were 11 United States District Court Northern District of California 10 “sufficiently detailed to allow the Court to determine the reasonableness of time expended.” 12 If block billing is still a “typical practice” in this District, which I doubt, it flies in the face 13 of repeated criticism by courts throughout the country, including in this District.11 It may be that, 14 as Garcia stated, “block-billing is not inappropriate per se,” if the party seeking fees provides 15 enough information to reveal whether the amount of time spent performing tasks was reasonable. 16 Volcano did not do so. The time entries submitted by Volcano are replete with examples where, because of block- 17 18 19 20 21 22 23 24 25 26 27 28 11 See, e.g., Apple, Inc. v. Samsung Electronics Co., 2012 WL 5451411, at *5 (N.D. Cal. Nov. 7, 2012) (“in light of the evidence that block-billing inflates hours by between 10% and 30%, the court trims 20% from the block-billed hours in Samsung’s request”); Hajro v. U.S. Citizenship & Immigration Servs., 900 F. Supp. 2d 1034, 1053 (N.D. Cal. 2012) (“the court exercises its discretion to reduce the hours for these block-billed entries by twenty percent, the amount noted by the Ninth Circuit as the middle range for time increases that occurs through block-billing”); Yeager v. Bowlin, 2010 WL 1689225, at *1 (E.D. Cal. Apr. 26, 2010) (“block billing thereby forces the court to take a ‘shot in the dark’ and guess whether the hours expended were reasonable, which is precisely the opposite of the methodical calculations the lodestar method requires”); Lil’ Joe Wein Music, Inc. v. Jackson, 2008 WL 2688117, at *13 (S.D. Fla. July 1, 2008) (20% across the board reduction because “[i]t is impossible to ascertain from the block billing entries whether the amount of time spent on any separate task performed was reasonable”); Aiello v. Town of Brookhaven, 2005 WL 1397202, at *3 (E.D.N.Y. June 13, 2005) (“because block billing renders it difficult to determine whether, and/or the extent to which, the work done by attorneys is duplicative or unnecessary, courts apply percentage cuts where there is a substantial amount of block billing in a fee request”) (citations and internal punctuation omitted) 9 1 billing, it is impossible to determine whether the time requested for any one task was reasonable.12 2 For example, in entry 2259, a Cooley partner block-billed 6.1 hours for: 3 Attention to trial preparation; conference call with M. Rhodes and D. Lippoldt re: trial planning, summary judgment hearing and budget; attention to sanctions motion filed by plaintiff and plan response to motion with A. Main; attention to preparation for summary judgment hearing and communication with M. Rhodes and A. Main re: same; attention to jury instructions and voir dire form and communicate with B. Lobo re: same. 4 5 6 7 Similarly, in entry 2071, an associate block-billed 7.7 hours to: 8 Continue review and analysis of deposition transcript of V. Burgess to identify factual support for opposition to Plaintiffs’ motion; confer with M. Lambert re: release of documents from privilege log; review and analyze additional documents marked privileged and assess whether documents should be produced; begin outlining opposition to Plaintiffs’ motion for partial summary judgment; and provide instructions to vendor re: production of replacement files 9 10 United States District Court Northern District of California 11 12 Without specifying how much spent was spent on each distinct task (most of which were 13 14 also performed on additional days), there is no way for me to determine whether the time spent on 15 any of these tasks—e.g., trial preparation, summary judgment briefing, opposition to sanctions 16 motion, preparations of jury instructions and verdict form—was reasonable. Nor can I determine 17 that the total amount of time spent on all the tasks, in combination, was reasonable, given the 18 amount of time at issue and because most of Volcano’s tasks were performed on several days by 19 various attorneys. In contrast, in the only block-billed entry discussed in Garcia, the plaintiff claimed .4 20 21 hours (18 to 24 minutes) for the following work: “REVD signed stip to mediate from Brachfeld, 22 revised stip, efiled, courtesy copies to court (mail and email), with CMC stmt (mail); email to 23 ADR Unit/Sheila re Monday phone confer.” Id. Given that only .4 hours was claimed for the 24 various tasks combined, the Court could readily determine that the time spent on any individual 25 task could not have been unreasonable. Unlike Garcia, this case involved thousands of hours 26 27 28 12 Per the Court’s instruction, Volcano’s billing records were lodged with the Court and provided to plaintiffs, but not filed on the public docket. 10 1 claimed by 11 different timekeepers (excluding the thousands of hours billed by 15 contract 2 attorneys to review documents). Given that many of the time entries describe similar tasks (or the 3 same task continued over several days or weeks), there is simply no way to determine whether the 4 time spent on any given task was reasonable. 5 Even the summary of Volcano’s fees per month, which it submitted in support of its 6 motion for attorneys’ fees, is block-billed. See Dkt. No. 108 at 22-25 (Table 6). For example, the 7 summary states that in February 2014, Cooley billed $259,906.50 for the following work: Revise and file opposition to Plaintiffs’ motion for summary judgment. Legal research for opposition to Plaintiffs’ motion and reply to Volcano’s motion for summary judgment. Evidence development and analysis. Draft, revise, and file reply to Volcano’s motion for summary judgment. Trial preparation. 8 9 10 11 United States District Court Northern District of California Dkt. No. 108 at 25. There is no way to determine whether the time claimed for any particular task 12 is reasonable because Volcano did not identify the fees or time associated with these tasks 13 individually. Moreover, each of these tasks was also performed in months other than February 14 2014, along with other tasks, meaning that I cannot determine whether the total time spent on 15 these tasks combined was reasonable. 16 17 18 Consistent with Cooley’s statement that its “standard practice” is to block-bill and that it did not depart from that practice here, essentially all of Cooley’s time entries here are block-billed. To the extent that any of Cooley’s entries reveal how much time is claimed for any particular task, 19 that is because those entries only include one task; not because Cooley timekeepers specified the 20 amount of time spent on that task.13 As a result, the percentage of actual time billed in block- 21 billed entries significantly exceeds the percentage of block-billed entries. Based on my close 22 review of the billing entries, I estimate that at least 85% of Volcano’s time was block-billed. 23 I am reducing Volcano’s bill by 20% for block billing.14 In Welch v. Metro. Life Ins. Co., 24 25 26 27 28 13 Even in those situations, the tasks were also claimed in other block-billed entries, meaning I cannot determine whether the total time spent on those tasks was reasonable. 14 As demonstrated in the table below, I am applying the 20% reduction only to fees which I am not separately reducing for specific tasks, i.e., the motions for summary judgment, attorneys’ fees, and extension of time. This results in an effective across-the-board reduction of 17.25%. 11 1 the Ninth Circuit affirmed a district court’s authority to reduce block-billed hours by 10% to 2 30%.15 480 F.3d 942, 948 (9th Cir. 2007). See Lahiri v. Universal Music & Video Distrib. Corp., 3 606 F.3d 1216, 1222-23 (9th Cir. 2010) (affirming district court’s reduction of 80% of attorneys’ 4 and paralegals’ hours by 30% to account for block-billing). I am choosing a reduction in the 5 middle of that range because Volcano has made it impossible to determine how efficiently it has 6 staffed this case and completed the various tasks that were integral to its success. 7 C. Other Billing Deficiencies 8 9 I am to going to make a further reduction for excessive billing or inefficiency of 5% because of the matters listed below. See Moreno v. City of Sacramento, 534 F.3d 1106, 1112 (9th Cir. 2008) (“the district court can impose a small reduction, no greater than 10 percent—a 11 United States District Court Northern District of California 10 “haircut”—based on its exercise of discretion and without a more specific explanation”). While 12 13 block-billing has made it difficult to separate and analyze these problems, they are worth considering separately. 14 1. Detail of billing records 15 16 17 Plaintiffs contend that 124 of Cooley’s time entries, totaling $231,498.50, are vague and should be excluded from Volcano’s fee award. Plaintiffs discuss two entries specifically. Dkt. No. 123-3 at 3-4. In entry 1268, an attorney billed 4.1 hours (at $710 per hour) for: 18 Attention to deposition preparation; attention to deposition scheduling and tactical planning for presenting expert witness testimony and opposing expert witness testimony of plaintiffs. 19 20 21 In entry 1486, the same attorney billed 4.8 hours for: Attention to discovery issues; attention to draft expert reports.16 22 23 Plaintiffs contend that “[t]hese and other descriptions do not recite any specific work 24 25 26 27 28 15 The Ninth Circuit accepted the California State Bar’s Committee on Mandatory Fee Arbitration report that block-billing “may increase time by 10% to 30%.” Welch, 480 F.3d at 948. 16 To the extent entries 1268 and 1486 are vague because they are block-billed, an appropriate reduction has already been made to account for the block-billing, as discussed above. 12 1 performed and therefore cannot provide any basis for judging the reasonableness of the 2 corresponding time.” Dkt. No. 133-3. 3 I agree that these entries and other entries identified by plaintiffs are somewhat vague, 4 rendering it difficult to determine what the timekeeper was actually doing. Cf Santiago v. Equable 5 Ascent Fin., 2013 WL 3498079, at *6 (N.D. Cal. July 12, 2013) (“the work billed for unnamed 6 drafts and telephone calls with unknown parties is too vague to be reviewed”). I disagree, 7 however, that the entries are so vague that the fees should be rejected entirely. Rather, the 8 vagueness of Cooley’s entries, in combination with other deficiencies discussed above and 9 throughout this order, demonstrates both the appropriateness of the 20% block-billing reduction 10 United States District Court Northern District of California 11 and the modest further 5% reduction for other billing deficiencies. Plaintiffs also contend that Volcano entries are vague because “Volcano’s timekeepers 12 repeatedly claim large amounts of hours reviewing documents but do not list the number of 13 documents” and because “Volcano timekeepers also frequently used nearly identical time entries 14 for different days of work, thereby making it impossible to know the true extent of the work done 15 and whether the differing time for each day is reasonable.” Dkt. No. 133-3 at 4. I reject both 16 criticisms. Plaintiffs have not cited any authority providing that timekeepers are required to 17 identify how many documents they have reviewed in each entry, or that timekeepers may not use 18 similar phrases to describe similar work performed on different days. Indeed, in a case of this 19 size, where timekeepers will necessarily spend several days on similar tasks, such as reviewing 20 documents, concocting different ways to describe the same task would serve no purpose other than 21 misleading the client or the Court. Absent some identifiable reason to question the amount of time 22 spent on a given task, I cannot conclude that Volcano’s failure to specify the number of documents 23 reviewed or to use different ways to describe similar tasks warrant reducing the fee award. 24 25 2. Excessive fees for routine, administrative, clerical, and paralegal work Plaintiffs contend that Volcano seeks excessive attorneys’ fees for routine tasks, such as 26 updating a list of deponents, and for administrative, clerical, and paralegal work, including 27 preparing binders, exhibits, and courtesy copies of pleadings. Pltfs.’ obj. at 7. Plaintiffs have 28 identified 78 time entries, totaling $175,413, which they assert relate to such “improperly 13 1 delegated” tasks. Pltfs.’ obj. Ex. 1 at 10-11 [Dkt. No. 123-7]. I have reviewed each of those 2 entries. Only one entry should be discounted in its entirety: in entry 571, Volcano seeks $1,419 in 3 fees for 2.2 hours (at $645 per hour) which a senior associate spent to “prepare review binders for 4 distribution to contract attorney team.” Preparing binders for distribution is not a reasonable 5 use of a senior associate’s time, particularly not at $645 an hour. $1,419 will be reduced from 6 the award as part of the 5% overall reduction. 7 The remaining time entries describe tasks which are appropriately performed by attorneys, 8 including reviewing regulatory filings, developing and revising document review protocols, 9 reviewing documents for privilege and quality control, responding to questions from contract review attorneys, reviewing the opposing expert’s report, and outlining and drafting briefs. 11 United States District Court Northern District of California 10 However, the entries at issue reflect the same overstaffing and excessive time expenditure noted 12 throughout this opinion, further validating that a modest across-the-board 5% reduction is 13 warranted. 14 15 3. Excessive billing for document review Plaintiffs contend that Volcano seeks excessive fees for document review. Plaintiffs do 16 not take issue with the $282,997 in fees Volcano seeks for 15 contract attorneys who spent 5,682.2 17 hours reviewing documents at $47 and $59 per hour. Rather, plaintiffs dispute the separate fees 18 Volcano requests for Cooley’s attorneys, at much higher rates, to review documents which 19 Volcano did not collect and produce initially. Plaintiffs have identified 103 time entries, totaling 20 $248,917.50, which, they contend, reflect excessive fees for document review by Cooley 21 attorneys. See Dkt. No. 123-7 at 12-14 (listing entries for “excessive document review”). 22 I have reviewed the entries in detail. Most of the entries reflect document review 23 performed by Cooley’s first-year associates or quality control or limited high-level review by 24 more senior attorneys to ensure the integrity of the first-level review. That is not excessive. 25 While Volcano appropriately elected to use contract attorneys for most of the review, resulting in 26 fees hundreds of thousands of dollars less than if the review had been conducted entirely by 27 Cooley attorneys, it was not inappropriate for Volcano to use first-year Cooley attorneys for 28 additional review and more senior Cooley attorneys to perform quality assurance and limited high14 1 2 level review. However, a handful of the entries identified by plaintiffs reveal excessive time by senior 3 Cooley attorneys performing first-level reviews. Volcano asserts that some of these entries reflect 4 reviews before Volcano retained contract attorneys to perform the review. That may be true, but it 5 was excessive for a senior attorney, at an hourly rate in excess of $600 an hour, to perform the 6 first-level review. 4. Plaintiffs’ remaining arguments are unpersuasive 7 8 9 a. Discrepant time entries Plaintiffs assert that they have identified 11 “discrepant time entries,” totaling $22,431.00, for which Volcano should not be awarded fees. Plaintiffs state that “for example, Ms. Main’s July 11 United States District Court Northern District of California 10 30, 2013, entry claims that she conferred with Mr. Lambert ‘re: upcoming depositions and 12 preparation of J. Sheridan,’ but Mr. Lambert’s time entry contains no such conference.” Dkt. No. 13 123-3 at 5. 14 As Volcano points out, Mr. Lambert’s entry for the same day includes “discussions with 15 client re: strategy and discovery planning.” Ms. Main’s and Mr. Lambert’s entries are accordingly 16 not inconsistent as they both relate to preparing the client for deposition. I find that the ten other 17 time entries at issue, which plaintiffs do not discuss, are likewise not “discrepant.” 18 b. Overstaffing at depositions 19 Plaintiffs contend that Volcano unreasonably seeks fees for two attorneys with high billing 20 rates to attend or prepare witnesses for the same depositions when only one attorney was actually 21 deposing or defending the witness. Specifically, plaintiffs object to the time Mr. Lambert and Ms. 22 Main both spent preparing Volcano’s expert witness on December 16, 2013 at a combined rate of 23 $1,295 (entries 1932 and 1935); the time Mr. Lambert and Mr. Rhodes both claim for attending 24 25 plaintiff Castella’s deposition (entries 1478-79); and the time Mr. Rhodes and Ms. Main both claim for attending plaintiff Banas’s deposition (entries 1490 and 1496). 26 Volcano responds that two attorneys billed time for only 5 of the 27 depositions conducted 27 in this action and that, in those five depositions, it was reasonable for both attorneys to bill 28 15 1 because the non-deposing attorney either assisted in the deposition of key witnesses or attended 2 for the purpose of preparing for another deposition occurring only a day or two later. Volcano 3 also asserts that in all but one instance the additional attorney worked on other tasks during the 4 deposition. Volcano resp. re obj. at 7 [Dkt. No. 124]. 5 I disagree with plaintiffs that it is necessarily unreasonable for two attorneys to prepare for 6 the same deposition. In large cases such as this, it is often the case that one person cannot have a 7 complete command of all relevant facts or areas on which a witness may testify. It may therefore 8 be necessary for several attorneys to prepare for a deposition or prepare a witness. While it is 9 usually unreasonable for two attorneys to bill to attend the same deposition, Volcano only did so 10 United States District Court Northern District of California 11 in fewer than 20% of the depositions here and I accept its reasons for doing so. c. Excessive travel 12 For the same reasons, Volcano’s request for travel time for multiple attorneys to attend 13 depositions, hearings, and the mediation and for attorneys to travel out of state to train contract 14 attorneys is not excessive. I have explained why the travel to depositions was not excessive. 15 It was reasonable for Volcano to bill for two attorneys to attend the mediation. In a case of 16 this type, it may make sense to have two attorneys, even two senior attorneys, attend a mediation, 17 which presents the best opportunity for an early resolution of the matter. Nor was it unreasonable 18 for Volcano to bill for one attorney to travel to train the 15 contract attorneys in person. As 19 discussed below, using contract attorneys to review the bulk of documents collected and produced 20 in this action, rather than Cooley attorneys, resulted in fees millions of dollars less than if the 21 review had been conducted entirely by Cooley attorneys. Sending one attorney to train those 22 contract attorneys, which helped realize significant savings, was reasonable. 23 D. Excessive billing for specific projects 24 25 26 27 28 Plaintiffs assert that Volcano’s fee award should be reduced by $204,725.50 to account for excessive time spent on Volcano’s motion to dismiss, motion for extension of time, mediation brief, motion for summary judgment, and fees motion. For the reasons stated below, I agree that Volcano seeks excessive fees for specific tasks, though not to the extent that plaintiffs argue. 16 1 Volcano’s requests are most excessive in connection with its motion for summary judgment, 2 motion for extension of time, and motion for attorneys’ fees. I have considerably reduced 3 Volcano fees for those tasks, as discussed below. The fees Volcano requests for its motion to 4 dismiss and mediation brief are less excessive, and do not warrant any additional reduction beyond 5 the across-the-board reductions. 6 1. Motion for summary judgment Plaintiffs assert that Volcano seeks excessive fees for its summary judgment briefing. I 7 8 agree. As noted, Volcano’s block-billing makes it impossible to determine precisely the fees 9 claimed for specific tasks, including the summary judgment briefing. I have therefore reviewed Volcano’s time entries in detail in order to estimate, as accurately as possible in light of the block- 11 United States District Court Northern District of California 10 billing, the fees and time Volcano claims in connection with its summary judgment briefing. I 12 have conservatively identified approximately 150 separate time entries related to Volcano’s 13 opening and reply summary judgment briefs. Based on my review, for its moving summary 14 judgment brief, Volcano’s attorneys billed approximately 400 hours from mid-December 2013 to 15 mid-late January 2014, totaling approximately $220,000.17 For the reply brief, Volcano’s 16 attorneys billed approximately 220 hours from mid-February 2014 to late February 2014, totaling 17 approximately $130,000.18 Volcano responds that it does not seek excessive fees in connection with its summary 18 19 judgment briefing and that “given the successful result Volcano obtained against Plaintiffs, 20 Volcano’s efforts were plainly reasonable.” Volcano resp. re obj. at 14. 21 I disagree that Volcano’s fees are presumptively reasonable solely because it prevailed. 22 Santiago v. Equable Ascent Fin., 2013 WL 3498079 (N.D. Cal. July 12, 2013), which Volcano 23 cites, is inapposite. The disputed entries at issue there “mostly consist[ed] of tasks lasting less 24 than 2 hours” and the Court emphasized the “relatively small amount of contested time.” Id. at 25 *5. In contrast, 100s of hours of fees are at issue here. Moreover, Santiago relied on Moreno v. 26 27 17 Time entries 1915 to 2048, excluding entries not related to summary judgment briefing. 28 18 Time entries 2129 to 2190, excluding entries not related to summary judgment briefing. 17 1 City of Sacramento, 534 F.3d 1106, 1112 (9th Cir. 2008), for the proposition that “the court should 2 defer to the winning lawyer’s professional judgment as to how much time he was required to 3 spend on the case; after all, he won, and might not have, had he been more of a slacker.” 4 Santiago, 2013 WL 3498079, at *5 (citing Moreno, 534 F.3d at 1112). But Moreno involved 5 attorneys working on contingency fee cases where the “payoff” is uncertain; not lawyers billing 6 their clients by the hour whether they win or lose, as is the case here. See Moreno, 534 F.3d at 7 1112 (“It must also be kept in mind that lawyers are not likely to spend unnecessary time on 8 contingency fee cases in the hope of inflating their fees. The payoff is too uncertain, as to both the 9 result and the amount of the fee.”) (emphasis added). There is no question that Volcano’s summary judgment briefing was of high quality and 10 United States District Court Northern District of California 11 successfully resolved this matter. But it is beyond me how Volcano’s counsel billed 12 approximately 400 attorney hours ($220,000) for the opening brief and 220 attorney hours 13 ($130,000) for the reply brief. While this was not a routine matter, neither was it exceptionally 14 complex, legally or factually. Only one cause of action, breach of contract, was at issue. Volcano 15 capably, and successfully, addressed it within the presumptive page limits.19 Of the exhibits 16 attached to the summary judgment brief, all but a handful were created in the course of litigation, 17 e.g., pleadings, discovery correspondence and deposition transcripts.20 Volcano’s block-billing and many vague entries make it challenging to pin-point specific 18 19 sources of excessive time. Nonetheless, reviewing the time entries in detail reveals inefficiencies. 20 As one example only, Volcano seeks fees for three different attorneys to “research,” “review,” or 21 “analyze” case law regarding contracts on 19 different occasions in less than one month, from 22 mid-December to mid-January, in connection with the opening summary judgment brief. See time 23 entries at 96-101. Contract interpretation was certainly central to this motion, but the legal issues 24 were not so complex that they required research by three different attorneys on 19 different 25 26 19 27 28 Volcano did not seek additional pages. 20 Time and fees for the actual depositions are not included in the hours discussed here; those were billed separately. 18 1 occasions. On the contrary, the legal issues consisted largely of black-letter legal principles.21 2 Based on my review of the summary judgment briefing, Volcano’s time entries, and my 3 knowledge of the underlying issues, a reduction of $150,000 is warranted for the summary 4 judgment briefing is warranted. This results in an award of approximately $200,000 for Volcano’s 5 summary judgment brief, which is more than sufficient. 6 2. Motion for extension of time Plaintiffs contend that one Cooley attorney “unreasonably billed 5 hours [at $550 per hour] 7 to research and draft a motion for extension of time.” Pltfs.’ obj. at 9 (citing Entry 18). Volcano 9 does not respond to this contention. No motion for extension of time was filed; rather, three days 10 after the time entry at issue, the parties filed a Stipulated Request for an Order Changing Time Re: 11 United States District Court Northern District of California 8 Extension of Deadline for Defendant Volcano Corporation to Answer or Otherwise Respond to 12 Complaint and Related Briefing Schedule. Dkt. No. 6. The Cooley attorney separately billed for 13 time preparing that stipulation and a supporting declaration. It is possible that he drafted a motion 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 21 For example, Volcano’s opening brief set forth the relevant law regarding contract interpretation as follows: The court decides the meaning of an unambiguous contract as a matter of law. Fu-Kong Tzung v. State Farm Fire & Cas. Co., 873 F.2d 1338, 1340-42 (9th Cir. 1989); JANA Master Fund Ltd. v. CNET Networks, Inc., 954 A.2d 335, 338-39 (Del. Ch. 2008). Where the contract is not reasonably or fairly susceptible to the nonmoving party‘s interpretation, the moving party is entitled to summary judgment. GRT, Inc. v. Marathon GTF Tech., Ltd., 2012 Del. Ch. LEXIS 134, at *4-5, 11 (Del. Ch. June 21, 2012). When determining the contract’s meaning, the true test is not what the parties to the contract intended it to mean, but what a reasonable person in the position of the parties would have thought it meant. Rhone-Poulenc Basic Chem. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992) (citation omitted). This reasonable person is acquainted with all operative usages and know[s] all the circumstances prior to and contemporaneous with the execution of the agreement. Interim Healthcare v. Spherion Corp., 884 A.2d 513, 555 (Del. Super. Ct. 2005); see also Eagle Indus. v. DeVilbiss Health Care, 702 A.2d 1228, 1232 n.7 (Del. 1997) (allowing for the consideration of undisputed background facts to place the contractual provision in its historical setting). Dkt. No. 65 at 12-13. None of these legal principles is novel or was in dispute. 19 1 for an extension of time while the parties negotiated the stipulation which was filed, but that is an 2 assumption which I cannot make. Volcano therefore has not met its burden of establishing that the 3 five hours were reasonably incurred. Volcano’s fee request is accordingly reduced by five hours, 4 totaling $2,750. 5 3. Fees motion Volcano seeks fees for approximately 225 attorney hours for preparing its fees motion, 6 7 totaling approximately $135,000. This comprises approximately 115 attorney hours in connection 8 with the opening brief and approximately 110 attorney hours for the reply brief.22 Plaintiffs 9 contend that this is excessive. I agree. There is no dispute that Volcano is the prevailing party and is entitled to attorneys’ fees. 10 United States District Court Northern District of California 11 Plaintiffs’ arguments that attorneys’ fees are not warranted due to estoppel and the indemnification 12 provision, addressed above, were first raised in plaintiffs’ opposition brief, and therefore were not 13 addressed in Volcano’s opening brief. The issues addressed in Volcano’s opening brief were 14 accordingly not particularly complicated and Volcano appropriately dedicated the bulk of the brief 15 to the reasonableness of the requested fees, rather than legal issues. See Dkt. No. 106. Consistent 16 with the straight-forward issues presented, the memorandum of points and authorities in the 17 opening brief was only 12 pages. Volcano nonetheless seeks fees for approximately 115 attorney 18 22 19 20 21 22 23 24 25 26 27 28 Cooley attorney Lambert states that Volcano seeks 100.2 hours (totaling $60,014) through April 14, 2014 in connection with the opening fees brief. Lambert Decl. ¶ 51, Table 9 [Dkt. No. 108]. However, based on my close review of Volcano’s time entries, I count approximately 115 attorney hours (totaling approximately $70,000) for which Volcano seeks fees through April 14, 2014 in connection with the opening brief. Reasons for the discrepancy are evident. For example, Lambert claims that he billed 10.7 hours and Rhodes billed .5 hours in connection with the opening brief through April 14, 2014. Lambert Decl. ¶ 51, Table 9. But I count approximately 16 hours for Lambert and at least 2 hours for Rhodes (including one individual entry for 1.1 hours: entry 2335) in connection with the opening brief through April 14, 2014. See time entries pp. 12325. Similarly, in its reply brief, Volcano contends that it seeks $105,170.50 in “attorneys’ fees, costs, and disbursements” in connection with the fees motions and related documents (opening and reply briefs combined). Dkt. No. 117 at 15. But my close review of the time entries indicates that Volcano seeks approximately $135,000 in fees alone for its preparation of the fees motion. I am troubled by the discrepancy between what Volcano represents that it seeks and what its own records reveal. I assume that this is inadvertent, though I note that Volcano’s representations were submitted to the Court before I required Volcano to submit its contemporaneous billing records because I was concerned about the overall size of the fee request. 20 1 hours in connection with the brief. That is excessive, even considering preparation of the two 2 attorney declarations Volcano submitted in support of its opening brief.23 Dkt. Nos. 107 3 (Chandler decl.), 108 (Lambert decl.). Based on my close review of the opening brief, Volcano’s 4 time entries, and my knowledge of the underlying issues, a deduction of $30,000 for the opening 5 brief is warranted. In contrast to Volcano’s opening brief, in its reply brief, Volcano was required to respond 6 to novel legal arguments raised in plaintiffs’ opposition.24 Volcano capably did so in four and a 8 half pages. See Dkt. No. 117 at 1-5. Volcano dedicated the remainder of the reply brief to 9 advancing several non-complicated arguments, including that the hourly rates it claims are 10 reasonable and that it provided sufficient detail to support its request, even though it did not 11 United States District Court Northern District of California 7 submit daily time entries.25 Volcano submitted a six-paragraph declaration in support of the reply 12 brief. Dkt. No. 118. Given the nature of the reply brief and the issues involved, Volcano’s request 13 for fees for 110 attorney hours (approximately $65,000) for preparation of the reply brief is not 14 reasonable. Based on my close review of the reply brief, Cooley’s time entries, and my 15 knowledge of the underlying issues, a deduction of $20,000 for the reply brief is warranted. 16 4. Motion to dismiss and mediation brief Plaintiffs assert that Volcano seeks excessive fees in connection with the motion to dismiss 17 18 and that “Volcano unreasonably prepared a lengthy mediation brief that contained hundreds of 19 pages of exhibits [and] Volcano has not justified this time.” Pltfs.’ obj. at 8-9. Based on my 20 detailed review of Volcano’s time entries, I agree that Volcano seeks excessive time in connection 21 23 22 23 24 25 26 27 28 Much of the 30-page Lambert declaration (the other declaration is only two pages) consists of material which is not helpful in determining the reasonableness of the fees, including block summaries of work performed per month, total fees per attorney, and hours billed by attorney per month. None of that information provides the information necessary to determine whether the time spent on any particular task was reasonable. 24 As noted above, plaintiffs argued that (i) Volcano’s fee request was mooted by the indemnification provision in the merger agreement and that (ii) Volcano was estopped from seeking fees. Both arguments were novel (and wrong) and required Volcano to respond. 25 I subsequently ordered Volcano to provide the Court and plaintiffs contemporaneous time records in order to allow the Court and plaintiffs to effectively assess the reasonableness of Volcano’s fees request. Dkt. No. 120. 21 1 with its motion to dismiss and mediation brief. However, Volcano’s requests are not as excessive 2 as those discussed above and may be addressed through the across-the board cuts described 3 above.26 4 E. Summary of reductions to Volcano’s attorneys’ fees request 5 For the reasons stated above, I make the following deductions to the attorneys’ fees 6 requested by Volcano: 7 8 REQUESTED REDUCTION AWARDED Motion for attorneys’ fees $135,000.00 $50,000.00 $85,000.00 Motion for summary judgment $350,000.00 $150,000.00 $200,000.00 $2,750.00 $2,750.00 $0.00 Remaining fees $3,069,284.50 $767,321.1327 $2,301,963.38 TOTALS $3,557,034.50 $970,071.13 $2,586,963.38 9 10 United States District Court Northern District of California 11 12 13 Motion for extension of time 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 26 Notably, Volcano’s motion to dismiss addressed plaintiffs’ three causes of action: breach of fiduciary duty, breach of implied covenant of good faith and fair dealing, and breach of contract, with appropriate citations to dozens of relevant authorities. See Dkt. No. 13. The motion was granted in its entirety, narrowing the issues and discovery and resulting in fewer expenditures going forward. While the Court awarded plaintiffs leave to amend all three claims, plaintiffs’ amended complaint asserted only a claim for breach of contract. Dkt. No. 33. But Volcano’s success does not automatically mean that the hours it claims are reasonable or that a modest reduction is not appropriate to address modest inefficiencies. 27 20% reduction for block-billing and 5% reduction for excessive billing. 22 1 2 IV. VOLCANO IS ENTITLED TO ITS REASONABLE COSTS AND DISBURSEMENTS Plaintiffs argue that the costs Volcano seeks, including expert, vendor, contract attorney, 3 and “standard” (i.e., filing and service fees, research, photocopying, transcript) costs, are not 4 recoverable under either Delaware or federal law. Plaintiffs also argue that even if some of the 5 costs are recoverable, Volcano did not provide sufficient detail to allow me to determine that the 6 costs were reasonable. 7 The categories of costs which Volcano seeks to recover are recoverable as “costs” or 8 “disbursements” pursuant to the attorneys’ fees provision in the merger agreement. However, 9 Volcano’s submission lacks sufficient detail to establish the reasonableness of the costs. A modest 10 United States District Court Northern District of California 11 reduction is therefore warranted. 12 A. The merger agreement provides for reasonable costs and disbursements, beyond those allowed under statutory taxable costs 13 The attorneys’ fees provision in the merger agreement provides that: 14 15 16 If any action or proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements. 17 Merger agreement § 13.4. The merger agreement also specifies that it shall be “construed in 18 accordance with, and governed in all respects by, the internal laws of the State of Delaware.” 19 Merger Agreement § 13.9(a). Accordingly, the question is whether, under Delaware law, 20 Volcano’s “reasonable attorneys’ fees, costs and disbursements” include the costs at issue here. I 21 conclude that they do. 22 Plaintiffs cite Comrie v. Enterasys Networks, Inc., 2004 WL 936505, at *4 (Del. Ch. Apr. 23 27, 2004). There the court held that “costs” in a contractual fee-shifting provision should be 24 interpreted consistently with how courts have interpreted “costs” under Court of Chancery Rule 25 54(d), which governs taxable costs. Delaware courts have interpreted “costs” under Rule 54 as 26 excluding certain items, such as photocopying, transcripts, travel expenses, and computer research, 27 express mail, and process server fees. Id. (citing Gaffin v. Teledyne, Inc., 1993 WL 271443, at *2 28 (Del. Ch. July 13, 1993) (disallowing charges for transcripts, photocopying, travel, express mail, 23 1 and computer research); Barnett v. Braxton, 2003 WL 21976411, at *2 (Del. Super. Aug. 15, 2 2003) (disallowing request to recover fees charged by process servers and couriers)). 3 But Cowrie noted that “Delaware courts have, however, recognized that the scope of 4 ‘costs’ to be allowed may be expanded by agreement of the parties….to include elements of 5 litigation expenses beyond those allowed by rule.” Comrie, 2004 WL 936505, at *4. The court 6 concluded that the parties before it had not agreed to expand the scope of “costs” because the 7 provision at issue merely provided that “the prevailing party shall be entitled to recover its costs, 8 including reasonable attorneys’ fees.” However, the court observed that it would be a different 9 case if, for example, in addition to “costs,” the fee-shifting provision included the “legally 10 recognized broader term ‘expenses.’” Id. Unlike Cowrie, the fee-shifting provision here is not limited to “fees” and “costs”; it United States District Court Northern District of California 11 12 includes the broader term “disbursements.” The merger agreement does not define 13 “disbursement.” The Oxford English Dictionary defines it as “[t]hat which has been disbursed; 14 money paid out; expenditure.”28 I therefore conclude that the parties intended “disbursement” to 15 be synonymous with “expenses.” See, e.g., Lorillard Tobacco Co. v. Am. Legacy Found., 903 16 A.2d 728, 738 (Del. 2006) (“Under well-settled case law, Delaware courts look to dictionaries for 17 assistance in determining the plain meaning of terms which are not defined in a 18 contract….because dictionaries are the customary reference source that a reasonable person in the 19 position of a party to a contract would use to ascertain the ordinary meaning of words not defined 20 in the contract.”). By providing for recovery of reasonable “disbursements,” in addition to “fees” 21 and “costs,” the parties intended to allow recovery of reasonable expenses for actions relating to 22 the merger agreement, beyond those traditionally allowed for “costs” under Rule 54(d).29 Cf 23 28 24 25 26 27 28 See 29 The remaining cases cited by plaintiffs did not involve fee-shifting provisions analogous to the one here. Those cases are therefore inapposite. See Miles, Inc. v. Cookson Am., Inc., 1995 WL 214397 (Del. Mar. 24, 1995) (analyzing costs under Chancery Court Rule 54(d)); FGC Holdings Ltd. v. Teltronics, Inc., 2007 WL 241384, at *17 (Del. Ch. Jan. 22, 2007) (same); Gaffin v. Teledyne, Inc., 1993 WL 271443, at *2 (Del. Ch. July 13, 1993) (same); Cooke v. Murphy, 2013 WL 6916941, at *5 (Del. Super. Nov. 26, 2013) (analyzing costs under Superior Court Civil Rule 54(d)) aff’d, 99 A.3d 226 (Del. 2014). 24 1 Comrie, 2004 WL 936505, at *4 (“Because the Agreement is a heavily negotiated contract 2 between sophisticated persons who were represented by counsel, it is reasonable to assume that 3 the parties and/or their attorneys were aware of the detailed and long-established usage of the 4 word ‘costs .’”). 5 There is little question that the costs which plaintiffs challenge—including expert, vendor, 6 contract attorney, and “standard” (i.e., filing and service fees, research, photocopying, transcript) 7 costs—are costs, expenses, or “disbursements” arising from this action. The question remains 8 whether those expenses were reasonable. 9 10 United States District Court Northern District of California 11 B. A modest reduction is warranted because Volcano did not provide adequate documentation to allow me to confirm the reasonableness of the costs. Volcano seeks the following costs and disbursements: 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 25 1 DESCRIPTION AMOUNT 2 The Oliver Group $19,544.45 TransPerfect Legal Solutions $203,631.28 Legalpeople (contract attorneys) $282,997.00 6 Travel (airfare, ground transportation, parking) $34,178.88 7 Depositions (court reporting, videotape service, witness fees) $63,823.13 8 Expert Services $298,400.36 JAMS Fee (mediation) $6,275.00 Court Fees (call fees, filing fees, transcript charges) $890.05 Printing, copying, and scanning services $56,492.39 13 Data Hosting Fee $21,790.00 14 Research Fees $30,306.55 15 Federal Express $3,716.17 Messenger Service $1,108.91 Postage $21.06 19 Telephone $820.76 20 TOTAL $1,023,995.99 3 4 5 9 10 United States District Court Northern District of California 11 12 16 17 18 21 22 23 24 25 26 27 28 Lambert Decl. ¶ 52, Table 10. 1. Expert services Plaintiffs contest the $298,400.36 in “expert services” on the grounds that “Volcano provided no documentation from its experts as to what they did, for how long, and at what rate.” Dkt. No. 114 at 14. Volcano responds that the reasonableness of the expert costs are adequately described in paragraphs 30 to 34 of the Lambert declaration. The merger agreement only entitles Volcano to reasonable costs and disbursements. 26 1 Volcano has the burden of establishing that the $298,400.36 it seeks for “expert services” are 2 reasonable. While the Lambert declaration describes the topics on which Volcano’s two experts 3 provided reports and how many total hours and fees they claim ($46,815 for a “regulatory” expert, 4 $62,475 for an “economic value” expert, and $189,110.36 for unnamed researchers to assist the 5 “economic value” expert)30, it does not explain in any real detail how the experts divided their 6 time between various tasks: there are no time entries or invoices from the experts, for example. 7 Dkt. No. 108 ¶¶ 31, 33. I have no reason to doubt the experts’ qualifications or the reasonableness 8 of their hourly-rates, but I have no way to determine whether the time claimed by the experts is 9 reasonable. The $189,110.36 claimed for the unnamed researchers, “whose billing rates ranged from $195 to $450/hour,” is especially problematic. Dkt. No. 108 ¶ 33. Volcano states that 11 United States District Court Northern District of California 10 “[a]mong other actions in support of [Volcano’s “economic value” expert], these researchers 12 conducted an analysis of merger and acquisition agreements in the life sciences sector from the 13 relevant time period to assess the usage of CRE provisions and variations among such provisions.” 14 Dkt. No. 108 ¶ 33. Given the amount of money sought for these researchers alone— 15 $189,110.36—that description is wholly insufficient. A 15% reduction of the expert fees is 16 warranted, totaling $44,760.054. See, e.g., Barnett v. Braxton, 2003 WL 21976411, at *3 (Del. 17 Super. Aug. 15, 2003) (costs not recoverable where “they are not identified or itemized in any 18 way, thus precluding any meaningful review by the Court”); Spalluto v. Trump Int’l Hotel & 19 Tower, 2008 WL 4525372, at *17 (S.D.N.Y. Oct. 2, 2008) (reducing expert fees by 15% where 20 lack of detail prevented court from assessing reasonableness of experts’ hours); Laube v. Allen, 21 506 F. Supp. 2d 969, 990 (M.D. Ala. 2007) (“plaintiffs’ descriptions of certain other expenses 22 related to the experts are too vague to be compensable”). 23 2. Vendor costs Plaintiffs contend that Volcano did not provide sufficient details to allow the Court to 24 25 26 27 28 30 The declaration states that Ms. Domecus billed 97.8 hours at $425 per hour and 10 hours at her testifying rate of $525 per hour, for a total of $46,815. Dkt. No. 108 ¶ 31. Dr. Cockburn billed 89.25 hours at $700 per hour for a total of $62,475. Dkt. No. 108 ¶ 33. Dr. Cockburn was assisted by researchers who, at $195 to $450 per hour, who billed an additional $189,110.36. Id. 27 1 determine what work TransPerfect ($203,631.28) or The Oliver Group ($19,544.45) performed in 2 this case or whether it was reasonable. But unlike with “expert services,” Volcano has detailed the 3 electronic information data services performed by TransPerfect and The Oliver Group and 4 provided tables breaking those costs into discrete tasks. See Lambert decl. ¶¶ 10-11, Tables 1 and 5 2. Given the volume of electronic data involved in this case, those costs are reasonable. 6 7 3. Printing, copying, and scanning services Plaintiffs contend that Volcano “provides no breakdown” of the requested $56,492.39 in 8 “printing, copying, and scanning services” and does not “explain its need to print or copy so many 9 documents when it had access to these documents in electronic form.” Volcano does not respond to this contention in its reply and, as plaintiffs note, it did not specify what these costs were or 11 United States District Court Northern District of California 10 provide invoices with its moving papers. Given the lack of detail, I can only conclude that 12 $56,492.39 for “printing, copying, and scanning services” is excessive. I deduct 50% ($28, 13 246.20) of these costs. 14 15 4. Depositions Volcano seeks $63,823.13 for “depositions (court reporting, videotape service, witness 16 fees).” Plaintiffs assert that these costs are not detailed and, in addition, they include “items of 17 convenience – such as using LiveNote (real time transcripts) at depositions or expedited 18 transcripts – and should be excluded.” Dkt. No. 114 at 14-15. 19 The parties conducted 27 depositions. Volcano’s reasonable expenses in connection with 20 those depositions certainly included reporting, videography, and witness fees. I cannot conclude 21 that LiveNote or expedited transcripts were not reasonable costs. But since Volcano did not 22 bother to provide any details or invoices detailing these expenses, a 10% reduction, totaling 23 $6382.31, is warranted. 24 25 5. Legalpeople (contract attorneys) Plaintiffs assert that Volcano cannot recover the $282,997 it seeks for contract attorneys 26 because Volcano characterizes that expense as “costs,” but a party may not recover attorney’s fees 27 as “costs.” I reject this argument. Whether characterized as “fees,” costs,” or “disbursements,” 28 the document review performed by the contract attorneys was necessary to this action and, given 28 1 the low hourly-rates charged by the contract attorneys ($47 to $59 per hour), the amount is 2 reasonable. 3 4 6. Other costs Plaintiffs contend that Volcano’s costs for travel ($34,178.88), court fees ($890.05), 5 Federal Express ($3,716.17), messenger service ($1,108.91), postage ($21.06), telephone 6 ($820.76), mediation fee ($6,275.00), and research fees ($30,306.55) should be excluded because 7 these costs are not recoverable or are insufficiently detailed. All of these services are recoverable 8 as “costs” or “disbursements” pursuant to the merger agreement. But since Volcano has not 9 provided any documentation, I cannot determine whether the specific amounts sought are reasonable. Accordingly, aside from the mediation fee, a 10% reduction is warranted, totaling 11 United States District Court Northern District of California 10 $7,104.24. 12 13 14 C. Summary of reductions to costs and disbursements requested by Volcano For the reasons stated above, I make the following deductions to the costs and disbursements requested by Volcano: 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 1 DESCRIPTION REQUESTED REDUCTION AWARDED The Oliver Group $19,544.45 $0.00 $19,544.45 TransPerfect Legal Solutions $203,631.28 $0.00 $203,631.28 Legalpeople (contract attorneys) $282,997.00 $0.00 $282,997.00 Travel (airfare, ground transportation, parking) $34,178.88 $3,417.89 $30,760.99 9 Depositions (court reporting, videotape service, witness fees) $63,823.13 $6,382.31 $57,440.82 10 Expert Services $298,400.36 $44,760.05 $253,640.31 JAMS Fee (mediation) $6,275.00 $0.00 $6,275.00 Court Fees (call fees, filing fees, transcript charges) $890.05 $89.01 $801.04 15 Printing, copying, and scanning services $56,492.39 $28,246.20 $28,246.19 16 Data Hosting Fee $21,790.00 $0.00 $21,790.00 Research Fees $30,306.55 $3,030.66 $27,275.89 Federal Express $3,716.17 $371.62 $3,344.55 Messenger Service $1,108.91 $110.89 $998.02 Postage $21.06 $2.11 $18.95 Telephone $820.76 $82.08 $738.68 TOTALS $1,023,995.99 $86,492.82 $937,503.17 2 3 4 5 6 7 8 United States District Court Northern District of California 11 12 13 14 17 18 19 20 21 22 23 24 25 26 27 28 30 CONCLUSION 1 Volcano’s motion for attorneys’ fees and costs is GRANTED IN PART and DENIED IN 2 3 PART. Dkt. No. 106. Volcano is awarded $2,586,963.38 in fees and $937,503.17 in costs and 4 disbursements, totaling $3,524,466.55.31 5 Plaintiffs’ motion to seal is DENIED. Dkt. No. 123. 6 IT IS SO ORDERED. 7 Dated: December 12, 2014 ______________________________________ WILLIAM H. ORRICK United States District Judge 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 31 In its moving papers, Volcano requested post-judgment interest on its fees and costs as of the date of the summary judgment order. In opposition, plaintiffs contended that interest should only be added from the date of an order awarding attorneys’ fees. Volcano appears to concede this point: its reply states only that it requests “post-judgment interest accruing as of the date of the Court’s order.” Dkt. No. 117 at 15 (emphasis added). Plaintiffs are correct. To the extent interest is warranted, it did not accrue before this order was entered. See, e.g., Kona Enterprises, Inc. v. Estate of Bishop ex rel. Peters, 243 F. App'x 274, 277 (9th Cir. 2007); Eaves v. Cnty. of Cape May, 239 F.3d 527 (3d Cir. 2001) (post-judgment interest began to accrue after court fixed amount of award). Since there is no disagreement that interest is warranted, it shall accrue at the federal rate set forth in 28 U.S.C. § 1961, as calculated by the parties. 31

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