Beaver County Employees' Retirement Fund v. Tile Shop Holdings, Inc. et al

Filing 42

ORDER RE: GOTHAMS MOTION FOR ATTORNEYS FEES AND COSTS. Signed by Magistrate Judge Jacqueline Scott Corley on 2/2/2017. (ahm, COURT STAFF) (Filed on 2/2/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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BEAVER COUNTY EMPLOYEES’
RETIREMENT FUND, et al.,

United States District Court
Northern District of California

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Plaintiffs,
v.

Case No.16-mc-80076-JSC
ORDER RE: GOTHAM’S MOTION
FOR ATTORNEY’S FEES AND COSTS
Re: Dkt. No. 35

TILE SHOP HOLDINGS, INC., et al.,
Defendants.

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This miscellaneous action arises out of a discovery dispute in a putative securities class

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action pending in the United States District Court for the District of Minnesota. See Beaver

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County Employers Retirement Fund v. Tile Shop Holdings, Inc., No. 14-cv-786-ADM-TNL (D.

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Minn.). That lawsuit was initiated following the publication of a negative report about defendant

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Tile Shop Holdings, Inc. by Gotham City Research, LLC, an investor who shorted Tile Shop

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stock. Both Plaintiffs and Defendants served third-party subpoenas on Gotham and filed separate

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actions in this District seeking to compel Gotham’s compliance. The Court related the actions and

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granted Plaintiffs’ motion to compel in part, but denied Tile Shops’ motion on the grounds that its

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subpoenas were overbroad and the information sought was not relevant. (Dkt. No. 28.) The

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Court subsequently granted Gotham’s motion for attorney’s fees and costs from Tile Shop as a

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sanction under Federal Rule of Civil Procedure 45(d)(1), but ordered the parties to submit

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supplemental briefing regarding the amount of fees. (Dkt. No. 39.) The parties have done so and

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the Court awards fees as set forth below.

DISCUSSION

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The Ninth Circuit utilizes the “lodestar” method for assessing reasonable attorney’s fees.

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Gonzalez v. City of Maywood, 729 F.3d 1196, 1202 (9th Cir. 2013). Under the “lodestar” method,

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the number of hours reasonably expended is multiplied by a reasonable hourly rate. Id.

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Reasonable hourly rates are determined by the “prevailing market rates in the relevant

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community.” Sorenson v. Mink, 239 F.3d 1140, 1145 (9th Cir. 2001). “Although in most cases,

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the lodestar figure is presumptively a reasonable fee award, the district court may, if circumstances

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warrant, adjust the lodestar to account for other factors which are not subsumed within it.”

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Camacho v. Bridgeport Fin., Inc., 523 F.3d 973, 978 (9th Cir. 2008) (internal citation and
quotation marks omitted). Further, while the amount of a fee award is discretionary, the district

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United States District Court
Northern District of California

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court must “provide a concise but clear explanation of its reasons for the fee award.” Carter v.

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Caleb Brett LLC, 757 F.3d 866, 868 (9th Cir. 2014). The court can “impose a reduction of up to

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10 percent—a ‘haircut’—based purely on the exercise of its discretion and without more specific

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explanation,” but “[w]here the disparity between the fees requested and those awarded is relatively

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large, the district court should provide a specific articulation of its reasons for reducing the

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award.” Costa v. Comm’r of Soc. Sec. Admin., 690 F.3d 1132, 1135-36 (9th Cir. 2012).

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A. The Lodestar Calculation
Here, Gotham seeks $59,320 for legal fees incurred in defending against Defendants’

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motions to compel in Delaware and this Court.1 (Dkt. No. 40-1.) Gotham seeks these fees based

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on a total of 125.8 hours of work with 101 hours claimed by Gotham’s lead counsel (Boersch

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Shaprio LLP) and 24.8 hours claimed by Delaware counsel (Young Conaway Stargatt & Taylor

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LLP). (Id. at ¶¶ 7-14.) The breakdown is as follows:
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Partner David Shapiro: 86.7 hours at $500 per hour. For a total of $43,350. Mr.
Shapiro reduced his normal hourly rate of $750 to $500 for purposes of this motion.

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

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Partner Lara Kollios: 7.8 hours at $300 per hour. For a total of $2,340. Ms. Kollios
reduced her normal hourly rate of $500 to $300 for purposes of this motion.

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In its reply brief, Gotham sought $69,570.20, but its supplemental briefing in response to the
Court’s December 13, 2016 Order only seeks $59,320 in fees.
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Paralegal Roxanne Vorkoeper: 6.5 hours at $150 per hour. For a total of $975.

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Partner William D. Johnston: 5.4 hours at $885 per hour. For a total of $4,779.

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Partner Anne Gaza: 6.7 hours at $585 per hour. For a total of $3,919.50.

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Associate Samantha Wilson: 9 hours at $345 per hour. For a total of $3,105.

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Paralegal Linda Hanick: 3.7 hours at $230 per hour. For a total of $851.

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(Id. at ¶¶ 16-22.)
“Generally, when determining a reasonable hourly rate, the relevant community is the

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forum in which the district court sits.” Camacho, 523 F.3d at 979. Here, the relevant community

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is the San Francisco Bay Area, and the reasonableness of rates charges should therefore be
determined by reference to the rates charged by Bay Area attorneys with commensurate skill,

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United States District Court
Northern District of California

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experience, and reputation. The Court finds that the hourly rates sought by Gotham’s counsel

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($885-$150) are within the range of reasonable hourly rates for attorneys of comparable skill,

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experience and reputation litigating similar cases in the San Francisco Bay Area. See Prison Legal

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News v. Schwarzenegger, 608 F.3d 446, 455 (9th Cir. 2010) (district court did not abuse its

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discretion in awarding 2008 hourly rates for Bay Area attorneys of up to $875 for a partner, $700

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for an attorney with 23 years of experience, $425 for an attorney with approximately five years of

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experience, and $190 for paralegals); see also Gutierrez v. Wells Fargo Bank, N.A., 2015 WL

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2438274, at *5 (N.D. Cal. May 21, 2015) (finding reasonable rates for Bay Area attorneys of

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between $475-$975 for partners, $300-$490 for associates, and $150-$430 for litigation support

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and paralegals).

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The Court concludes that, except as noted below, the 125.8 hours claimed here were

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reasonably expended and the requested hourly rates are likewise reasonable. Gotham’s lodestar is

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thus $59,320.

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B. Adjustments to the Lodestar

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The court may adjust the lodestar downward if the fee documentation is inadequate, or the

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hours are duplicative, excessive or unnecessary. See Chalmers v. City of Los Angeles, 796 F.2d

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1205, 1210 (9th Cir.1986). As an initial matter, the Court notes that Gotham voluntarily reduced

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its fees by $10,000 over the course of this motion. Tile Shop nonetheless contends that the Court
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should reduce the lodestar by over half, awarding Gotham only $23,651.80. Tile Shop insists that

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this reduction is appropriate because: (1) Gotham seeks fees related to Plaintiffs’ subpoenas and

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motion to compel, but only fees incurred based on Tile Shop’s actions should be recoverable here;

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(2) some of Gotham’s fee requests are inadequately documented; and (3) the fees sought by

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Delaware counsel are duplicative and for improper tasks.

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1. Fees for Work Opposing Plaintiffs’ and Tile Shop’s Subpoenas

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As the Court noted when it initially granted Gotham’s motion for fees, Tile Shop’s
subpoenas were overly broad and for an improper purpose. Tile Shop’s subpoenas sought all

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documents relating to Gotham’s Report, all documents relating to Tile Shop, and several identified

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individuals, all of Gotham’s communications with Plaintiffs, Plaintiffs’ counsel and several others,

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United States District Court
Northern District of California

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and all trading records related to Tile Shop, as well as deposition testimony regarding the same.

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Plaintiffs’ subpoenas were narrower, but also sought documents related to Tile Shop which would

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necessarily have been encompassed in Tile Shop’s broad subpoenas. Indeed, Gotham filed a joint

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opposition to both Plaintiffs’ and Tile Shop’s motions to compel which raised the same legal

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issues. Thus, any time Gotham spent opposing Plaintiffs’ subpoenas would inevitably have been

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required to oppose Tile Shop’s subpoenas. The Court declines to reduce the award based on the

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fact that Gotham did not prevail on all of its arguments, including its journalist privilege argument.

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Gotham prevailed as to Tile Shop’s subpoenas as a whole and the Court will not fault Gotham for

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making a novel, albeit ultimately unavailing, argument. See Jones v. Corbis Corp., 489 F. App’x

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155, 157 (9th Cir. 2012) (concluding that the district court did not abuse its discretion in awarding

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fees in part because the motion at issue raised “novel issues [], which justified the time spent.”).

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2. Deductions for Inadequacies in Documentation

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Next, Tile Shop argues that the fees should be reduced based on inadequate

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documentation. First, Tile Shop objects to fees sought for biller “FBR” as there is no reference to

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“FBR” in the Second Shapiro Declaration. Gotham has apparently revised its fee request to

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exclude any fees sought by this biller; they are thus not included in the lodestar. Second, although

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Mr. Shapiro attached contemporaneous time records reflecting 6 hours of work performed on the

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underlying sanctions motion, his second declaration seeks fees for 13.7 hours of work during this
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same time period. (Compare Dkt. No. 35-2 at 121-22 with Dkt. No. 40-1 at 8.g.) Because the

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declaration contradicts the contemporaneous time record, the Court will deduct $3,850. J & J

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Sports Prods., Inc. v. Napuri, No. 10-04171, 2013 WL 4428573, at *2 (N.D. Cal. Aug. 15, 2013)

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(“Absent the submission of detailed contemporaneous time records justifying the hours claimed to

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have been expended on this case, the Court gives little weight to the figures provided by

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Plaintiff.”). Likewise, the fees claimed for Roxanne Vorkoeper in the Second Shapiro Declaration

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do not match the contemporaneous time records. The Court deducts $750 from the fees sought for

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Ms. Vorkoeper for inadequate documentation. Third, Tile Shop contends that Gotham is not

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entitled the additional four hours of time Mr. Shapiro seeks for responding to the Court’s
December 13, 2016 Order which required supplemental briefing because Gotham’s initial fee

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United States District Court
Northern District of California

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request failed to comply with Civil Local Rule 54-5(b). The Court agrees and deducts $2,000.

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Further, as the Court noted in its prior order, Gotham’s fee documentation contains

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considerable redaction. (Dkt. No. 39 at 7:25-26.) In fact, every other page of Exhibit 15 which

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contains Gotham’s fee documentation is redacted in its entirety. (Dkt. No. 35-2 at 103, 105, 107,

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110, 113, 115, 118, 120, 122.) In response, Gotham contends that “we redacted only those

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portions of time entries that reflected attorney client privileged communications or attorney work

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product, personal information of our client, and billing information provided to the client that has

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nothing to do with the legal fees incurred.” (Dkt. No. 40 at 3:10-13.) The Court has analyzed the

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fees records and the amount sought and concludes that the redacted pages do not include any

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billing entries. Gotham has however redacted portions of several entries as well as the description

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and amount of three separate entries. See, e.g., Dkt. No. 35-2 at 104, 108, 111, 116. Gotham is

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not entitled to fees that are not documented and wholesale redaction amounts to no documentation.

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See Democratic Party of Washington State v. Reed, 388 F.3d 1281, 1286 (9th Cir. 2004) (stating

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that only “redactions [which] do not impair the ability of the court to judge whether the work was

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an appropriate basis for fees” are allowed). The Court has reverse engineered the math for the

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fully redacted entries and deducts $1,150. (Dkt. No. 35-2 at 104, 108, 111.)

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3. Deductions for Fees Sought by Delaware Counsel

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Of the fees sought, $12,682.30 is for work done by Delaware counsel. Tile Shop insists
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that this amount should be reduced by nearly half to $6,506.80. The Court disagrees. Tile Shop

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issued its subpoenas and filed a motion to compel in Delaware despite being advised by Gotham

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that the venue for compliance would be San Francisco and that Gotham agreed to litigate any

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issues regarding compliance in the Northern District of California. (Dkt. No. 35-1 at ¶¶ 5-15; Dkt.

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No. 35-2 at 26-39.) Tile Shop only withdrew these subpoenas and moved to compel in this Court

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after Gotham hired local counsel in Delaware. Thus, as the Court previously concluded, Tile Shop

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is responsible for needlessly multiplying Gotham’s costs. See Sec. & Exch. Comm’n v. Schooler,

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No. 16-00517, 2016 WL 6821079, at *5 (D. Nev. Nov. 17, 2016) (awarding sanctions where the

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party “draft[ed] an overly broad subpoena; ma[de] absolutely no effort to narrow the requested
documents when confronted by objections and a charge of over breadth by opposing counsel; [but]

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United States District Court
Northern District of California

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then agreeing to narrow the requests when faced with a hearing on a motion to quash the subpoena

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and order to meet and confer.”).
The Court also rejects Tile Shop’s argument that all time spent by supervising partner

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William Johnston, a total of $4,779, should be deducted from the total sought because it is

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duplicative, excessive, and unnecessary. Tile Shop’s insistence on litigating its subpoenas in

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Delaware despite being advised repeatedly by Gotham’s counsel that the proper venue was the

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Northern District of California was duplicative, excessive, and unnecessary. Tile Shop’s conduct

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necessitated Mr. Johnston’s time.
However, the Court declines to award fees for time performing clerical work which is

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generally not recoverable. See Campbell v. Nat’l Passenger R.R. Corp., 718 F. Supp. 2d 1093,

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1105 (N.D. Cal. 2010) (“Clerical and secretarial work is not compensable as attorneys’ fees.

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Thus, the calendaring, docketing and clerical work hours are not compensable.”) (internal citation

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omitted). The Court thus deducts $759 for 3.3 hours of clerical work.

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CONCLUSION

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For the reasons explained above, pursuant to Federal Rule of Civil Procedure 45(d)(1) the
Court awards fees in the amount of $51,961 and costs in the amount of $260.70.
IT IS SO ORDERED.
Dated: February 2, 2017

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JACQUELINE SCOTT CORLEY
United States Magistrate Judge

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United States District Court
Northern District of California

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