Cellport Systems, Inc. v. Peiker Acustic GMBH & Co. KG

Filing 327

ORDER: Fees, costs and interest are awarded to Cellport Systems, Inc. and against Peiker Acustic GMBH & Co. in the total amount of $1,340,235.55. by Judge R. Brooke Jackson on 12/20/16. (jdyne, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge R. Brooke Jackson
Civil Action No. 09-cv-01007-RBJ-MJW
CELLPORT SYSTEMS, INC.,
Plaintiff,
v.
PEIKER ACUSTIC GMBH & CO. KG,
Defendant.

ORDER

The parties ask the Court to determine the amount of attorney’s fees and costs that Peiker
must pay Cellport. Peiker does not challenge the hourly rates charged by Cellport’s attorneys,
nor does it dispute that the time recorded was reasonable for the work done. The dispute is
whether all of the work done was necessary or reasonable in light of the result obtained and an
opportunity Cellport had as early as May 2011 to settle for approximately what it ultimately
recovered. For the reasons discussed in this order, the Court awards $1,340,235.55 in fees and
costs and directs that the final judgment be amended to reflect that award.
BACKGROUND
This case arises from a License Agreement into which the parties entered as of October 1,
2004. Cellport has patents concerning systems for the use of mobile telephones in vehicles. It
granted Peiker a license to use its patented technology in Peiker products in exchange for
royalties on terms spelled out in the License Agreement. The parties’ disagreement as to

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whether Peiker breached the agreement and/or infringed Cellport’s patents spawned eight years
of hotly contested litigation.
To recall just a few milestones:
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The case was filed in state court in Boulder, Colorado on March 9, 2009 and was
removed to federal court on April 30, 2009.

•

On May 25, 2011 the parties participated in mediation with former state district judge
Murray Richtel of the Judicial Arbiter Group in Denver. They did not reach a settlement,
but Peiker made a substantial settlement offer that is relevant to the current issue, as I will
discuss later.

•

On February 6, 2012 this Court resolved disputes between the parties concerning
interpretation of certain key terms of the License Agreement. ECF No. 201. Without
getting into details, the Court concluded that the Agreement created presumptions that
Peiker products with certain characteristics were covered by the Agreement, but that
Peiker could rebut the presumptions if it could show that the product did not use
technology covered by a Cellport patent. Id. at 5-11. The Court also interpreted various
terms in the relevant patents pursuant to a Markman hearing that had been conducted
earlier. Id. at 15-17.

•

The case was tried to the Court September 20-21, 24-25, and 27-29, 2012 with final
arguments given on November 29, 2012.

•

This Court issued its findings, conclusions and judgment on January 2, 2013. ECF No.
259. In that order the Court addressed Cellport’s claims with respect to seven Peiker
products. It concluded that Cellport was entitled to royalties as to two of those products

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and awarded damages, including prejudgment interest, in the amount of $613,443. Id. at
44.
•

Although Cellport received a money judgment, it was for far less than Cellport sought.
Cellport appealed. It challenged this Court’s rulings on the five products as to which
Peiker prevailed, its determination of the appropriate rate of prejudgment interest, and its
determination that neither party prevailed for purposes of a contractual award of
attorney’s fees. Peiker filed a conditional cross-appeal. ECF Nos. 262 and 265.

•

The Court of Appeals affirmed in part, reversed in part, and remanded for further
proceedings. Cellport Systems, Inc. v. Peiker Acustic GMBH & Co., KG, 762 F.3d 1016
(10th Cir. 2014). The court disagreed that the License Agreement created only rebuttable
presumptions and found that, for the most part, the disputes must be resolved under the
terms of the contract, not on whether the products infringed Cellport’s patents. See id. at
1021-23. The court noted that Peiker conceded that the Agreement covered two of the
five remaining disputed products (CKII/CIB’s sold to Volkswagen and BMW), but that
the district court did not award royalties due to its finding that the products did not
infringe a Cellport patent. The court therefore remanded with directions to determine the
royalties due on the CKII/CIB products. Id. at 1023. The court also directed this Court
to consider further whether royalties were due on the BT-PSC and CKVI products, but it
affirmed this ruling for Peiker as to the BMW SIAB product. Id. at 1023-28. The court
affirmed the determination of the prejudgment interest rate and directed this Court to
reconsider the prevailing party/attorney’s fees issue “given the new terrain in the case.”
Id. at 1029.

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•

On remand this Court addressed and resolved a new dispute concerning the date from
which prejudgment interest should run. ECF No. 301. It determined that royalties are
owed on the CKVI product but not on the BT-PSC. ECF No. 305. And it determined
that Cellport was the prevailing party and is entitled under the License Agreement to an
award of its reasonable attorney’s fees. ECF No. 320. In the latter order the Court urged
the parties to attempt to reach an agreement on the amount of the fees to be awarded. Id.
at 2-4.

•

The parties did not agree on the amount of fees to be awarded, but they did jointly submit
a stipulation that resolved several matters. ECF No. 325. They stipulated that Cellport
had incurred $2,501,607.79 in attorney’s fees and costs from May 8, 2008 (before the
lawsuit was filed) through November 30, 2016, and broke that figure down according to
various stages of the case. Id. at ¶2 and their Exhibit A, ECF No. 325-1. They stipulated
to the corresponding amounts incurred by Peiker. Id. at ¶4. They informed the Court that
they would provide the itemized billings supporting these numbers at the hearing
scheduled for December 13, 2016 (although at the hearing the attorneys for both sides
acknowledged that they had not attempted to evaluate or to make an argument based on
individual line items due to the voluminous nature of the billing sheets). Id. at ¶¶3, 5.
Peiker stipulated that it would not challenge either the reasonableness of the hourly rates
charged by Cellport’s attorney’s or the amount of time recorded for the work Cellport
asked them to perform. Id. at ¶¶6, 8. Finally, they provided as Exhibit B a chart that
showed as to each of the seven disputed Peiker products the total amounts of royalty
damages and interest claimed by Cellport versus the total amount ultimately awarded to
Cellport. ECF No. 325-2.

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•

During the hearing Cellport’s counsel argued that because the reasonableness of the rates
and hours had been stipulated, and because Cellport had been deemed the prevailing
party, the Court should award 100% of all fees included in the parties’ stipulation. After
the Court indicated that it probably would not find a 100% award to be reasonable and
pressed counsel for an alternative, counsel suggested that an award of two-thirds of the
total amount might be reasonable. That would amount to approximately $1,667, 738.

•

Peiker countered that it had prevailed on the two products that were by far the most
important to both parties from an economic standpoint – the BMW SIAB and the BTPSC. Those two products together accounted for the vast majority of the amounts sought
by Cellport. Pressed by the Court for what it would consider a reasonable number,
counsel suggested something in the $300,000 to $488,000 range.
FINDINGS AND CONCLUSIONS
The License Agreement provides that the prevailing party is entitled to recover its

reasonable attorney’s fees. ECF No. 308-2 at 18, ¶10.3. As I reminded the parties in my order
designating Cellport as the prevailing party, reasonableness is generally determined by applying
the analysis and factors set forth originally in Johnson v. Georgia Highway Express, Inc., 488 F.
2d 714 (5th Cir. 1974],1 and the Colorado Rules of Professional Conduct. 2

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Johnson requires determination of the “lodestar” (reasonable rates times reasonable hours). It lists 12
factors or guidelines for courts to consider in determining reasonableness: (1) the time and labor required;
(2) the novelty and difficulty of the questions; (3) the skill required; (4) preclusion of other employment;
(5) the customary fee in the community; (6) whether the fee is fixed or contingent; (7) time limitations
imposed by the client; (8) the amount involved and the results obtained; (9) the experience, reputation and
ability of the attorney’s; (10) the undesirability of the case; (11) the nature and relationship of the
professional relationship with the client; and (12) awards in similar cases. Id. at 717-19.

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The Colorado Rules of Professional Conduct are found as an Appendix to Chapters 18 to 20,
COLORADO COURT RULES – STATE (2015). These factors identified in Rule 1.5 are (1) time and labor
required, (2) likelihood of preclusion of other employment, (3) fee customarily charged in the locality, (4)
amount involved and results obtained, (5) time limitations imposed by the client or circumstances, (6)
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I repeat now that Cellport was the prevailing party. Cellport prevailed as to five of the
seven disputed products. It obtained a substantial money judgment, $2,346,926. See Exhibit B
to the parties’ stipulation, ECF No. 325-2, last column. It established its theory of the case – that
resolution of the case was a matter of the interpretation and application of the Agreement, not
infringement or non-infringement of its patents. That affected royalties on three products (the
two CKII/CIB’s and the CKVI), and it accounts for $1,725,226 of the $2,346,926 in royalties
and interest ultimately awarded.
Cellport’s Chairman Pat Kennedy testified at the December 13, 2016 hearing that
Cellport undertook this case to show licensees that Cellport would enforce its agreements.
According to him, the value of Cellport’s victory on the contract interpretation issue was much
greater than the monetary result. He mentioned in that regard that Cellport has another important
customer with which Cellport has a license agreement similar to the Peiker agreement. In
general I did not find Mr. Kennedy’s testimony convincing. I found his failure on crossexamination to recall details concerning Peiker’s settlement offers to lack credibility, and I
similarly found his effort to downplay the monetary consequences of the lawsuit to be selfserving and unconvincing. However, I will assume that prevailing on the contract issue might
have had some importance to Cellport independent of its monetary consequence.
Nevertheless, it is impossible to ignore the monetary results in determining what is
reasonable. The Johnson factors and the Colorado Rules of Professional Conduct both include
the result obtained and the time required to obtain the result as factors that the Court should
consider in determining reasonableness. In that regard, I consider the following facts to be
particularly significant:
nature and length of the professional relationship, (7) experience, reputation, and ability of the lawyer(s),
and (8) whether the fee is fixed or contingent.
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First, Peiker prevailed on the two products that were by far the most important in the
monetary sense. As the parties’ chart shows, the BMW SIAB product, as to which Peiker
prevailed in both this Court and on appeal, by itself accounted for $12,623,682 or approximately
64% of the total royalties and interest sought by Cellport. See ECF No. 325-2 (second to last
column). The BT-PSC product, as to which Peiker prevailed in this Court both initially and after
remand, accounts for $4,111,655 or approximately 21% of the royalties and interest sought. Id.
In contrast, the royalties and interest claimed by Cellport on the five products as to which it
ultimately prevailed totaled $3,003,222 or approximately 15% of Cellport’s total claim. Id. The
royalties and interest ultimately awarded to Cellport on those five products was less than its
claim, totaling $2,346,926. Id. (last column). This was only about 12% of the amount claimed
on the seven disputed products.
I cannot say that the time spent by Cellport’s attorneys (or Peiker’s attorneys) on each of
the seven disputed products was strictly proportional to the monetary significance of the
products. The only way to attempt such an allocation would be to study literally several hundred
pages of billing records, and even then it is unlikely that it could be done. Suffice it to say that
neither party has attempted such an analysis of the records, nor has either party suggested that
the Court should do so. But it stands to reason that sophisticated businessmen and their
sophisticated lawyers would devote more attention to the products that had by far the biggest
economic impacts on their companies. Counsel for Peiker put it bluntly at the hearing: If the
BMW SIAB and the BT-PSC products had not been in dispute, the case would have been settled.
Not only does that make sense, but one other fact in the case’s history tends to support it.
That fact comes from the parties’ unsuccessful mediation on May 25, 2011, but before
turning to that I should explain why the Court here considers settlement offers. Ordinarily such

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offers are inadmissible under Rule 408 of the Federal Rules of Evidence. However, Rule 408
“does not bar a court’s consideration of settlement negotiations in its analysis of what constitutes
a reasonable fee in a particular case.” Lohman v. Duryea Burough, 574 F.3d 163, 167 (3d Cir.
2009) (holding in in a civil rights case that “such evidence can be relevant when comparing what
a plaintiff ‘requested’ to what the plaintiff was ultimately ‘awarded’”). Cf. Marek v. Chesny,
473 U.S. 1, 11 (1985) (holding that the losing defendants in a civil rights case were not liable for
the plaintiff’s attorney’s fees incurred after defendants’ pretrial offer of settlement under Rule 68
where plaintiff recovered a judgment less than the offer). In the present case plaintiff did not
make a Rule 68 offer of judgment. However, in Lohman the court specifically rejected the
plaintiff’s argument that defendants’ failure to make an offer of judgment under Rule 68
precluded the district court from considering settlement negotiations in determining the degree of
the plaintiff’s success. 574 F.3d at 168. I agree.
The evidence is that near the end of the mediation, during which various offers and
counteroffers were apparently exchanged, Peiker made a settlement offer of approximately the
same amount that Cellport ultimately recovered. William Meyer, at the time the lead counsel for
Cellport, testified during the December 13, 2016 hearing that he thinks Peiker’s last settlement
offer was $2.315 million, although he was not sure. Peiker’s counsel Timothy Getzoff testified
that Peiker’s offer was $2.5 million, and that Cellport rejected that offer without a counter. Mr.
Getzoff’s recollection is more definite, but it makes little difference. Cellport ultimately was
awarded $2,346,926 including damages and interest. ECF No. 325-2. 3 It took Cellport five
more years of litigation and attorney’s fees to get back to what it had been offered.

3

The interest calculation was through November 30, 2016.
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In short, the two principal arguments on Peiker’s side coalesce. The amount that we
know Peiker was willing to pay in May 2011 was approximately the amount of damages and
interest eventually awarded to Cellport on the five smaller products.
The parties have stipulated that the fees and costs incurred by Cellport for the period May
8, 2008 through May 31, 2011, which they label the “Pre-Mediation Period,” was $1,211,194.19.
They have stipulated to the “lodestar” for those services (reasonable hourly rates times
reasonable time billed). That amount surely includes time spent on the two principal products as
to which Cellport ultimately did not prevail. But I have no reasonable means of segregating that
time. Moreover, much of that time was generic to the prosecution of the case regardless of the
individual claims, such as pre-litigation discussions and planning, the preparation of the initial
pleadings, preparation and service of discovery, and briefing the claim construction (Markman)
issues, and various motions and court appearances. Importantly, this early block of time got the
case and the parties to the settlement table, resulting in an opportunity for Cellport to achieve the
monetary result that was ultimately achieved.
The remaining time and expense invested in the case by Cellport totals $1,290,413.60
($2,501,607.79 minus $1,211,194.19). I find that this time and expense was largely unnecessary
and unreasonable in view of the results obtained and the settlement offer that was made. As I
have said, establishing Cellport’s interpretation of the License Agreement might have had some
value to Cellport independent of money, but given that I did not find Mr. Kennedy’s testimony
about its importance to be credible or convincing, I do not find that it justified putting Cellport
and Peiker through five more years of expensive litigation. More significantly, Cellport would
not have been able to seek an award of attorney’s fees without “prevailing.” By the same token,
no evidence was presented that $2.5 million was Peiker’s final offer. There was evidence that

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Cellport did not counter that offer. And, my award of 100% of the “Pre-Mediation Period” fees
and costs was, if anything, generous.
Taking all these things into account, I will add 10% of the remaining time to the 100%
award I am making for the time through May 31, 2011. This is the maximum I can find to be
reasonable. That amounts to $129,041.36. Accordingly, the Court finds and concludes that a
total award of $1,340,235.55 is reasonable.
That figure is intended to be a complete, total and final award. The additional 10% is
meant to include fees, costs, and pre-judgment interest. It is also meant to take into account that
the figures submitted to the Court were as of November 30, 2016, and additional time (including
preparation for and appearance at hearing) will have been incurred. No further fees, costs or
interest will be awarded.
ORDER
The Court awards to Cellport Systems, Inc. and against Peiker Acustic GMBH & Co.
fees, costs and interest in the total amount of $1,340,235.55. A Second Amended Final
Judgment will issue to include that award.
DATED this 20th day of December, 2016.

BY THE COURT:

___________________________________
R. Brooke Jackson
United States District Judge

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