Bio Med Technologies Corporation et al v. ELA Medical, Inc.
ORDER granting in part and denying in part 175 Motion for Attorney Fees; denying 177 Motion for Joinder; denying 184 Motion for Judgment NOV; denying 185 Motion for New Trial. Defendant is AWARDED attorneys fees in the amount of $476,297.50 and reimbursement of additional expenses in the amount of $49,700.78 pursuant to the contract between the parties. The Clerk shall enter judgment accordingly. Ordered by Judge William J. Martinez on 03/24/2016.(cthom, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 14-cv-0154-WJM-CBS
BIO MED TECHNOLOGIES CORPORATION,
SORIN CRM USA, INC., f/k/a ELA MEDICAL, INC.,
ORDER ON POST-TRIAL MOTIONS
Plaintiff Bio Med Technologies Corporation (“Plaintiff” or “Bio Med”) brought this
action against Defendant Sorin CRM USA, Inc. (“Defendant” or “Sorin”) arising out of an
agreement under which Plaintiff was to sell Defendant’s products as an independent
contractor. (ECF No. 1.) A five-day jury trial in this case commenced on December 7,
2015. (ECF Nos. 161–165.) A verdict was reached on December 11, 2015, in which
the jury found in favor of Defendant. (ECF No. 169.) Final Judgment was entered on
December 14, 2015. (ECF No. 172.)
This matter is before the Court on four post-trial motions: (1) Defendant’s Motion
for Reasonable Attorneys’ Fees and Non-Taxable Costs (“Fee Motion”) (ECF No. 175);
(2) Defendant’s Motion to Join Jack Oliver as an Additional Party Pursuant to Fed. R.
Civ. P. 21 (“Joinder Motion”) (ECF No. 177); (3) Plaintiff’s Motion for Judgment
Notwithstanding Verdict (“JNOV Motion”) (ECF No. 184); and (4) Plaintiff’s Motion for
New Trial Pursuant to Rule 59 (“New Trial Motion”) (ECF No. 185). For the reasons set
forth below, the Fee Motion is granted in part and denied in part, and the Joinder
Motion, JNOV Motion, and New Trial Motion are all denied.
Defendant is a medical device company that develops, manufactures, and sells
medical technologies for the treatment of cardiac rhythm disorders. (ECF No. 76 at 2.)
Plaintiff and Defendant executed an Independent Sales Representative Agreement
(“Agreement”) with an effective date of August 1, 2009. (Id. at 3.) Under the
Agreement, Plaintiff sold cardiac rhythm management products for Defendant. (Id.)
Plaintiff was operated and owned solely by Jack Oliver, a medical device sales
representative, who signed the Agreement on Plaintiff’s behalf. (Id.; ECF No. 95-1 at
15.) Plaintiff filed this action on January 21, 2014, bringing claims for breach of
contract, fraud, conversion, and interference with business relations. (ECF No. 1.) The
Agreement terminated on August 1, 2014 when Defendant provided Plaintiff a nonrenewal notice. (ECF No. 76 at 3.)
On January 30, 2015, the Court granted in part Defendant’s Early Motion for
Partial Summary Judgment, finding in Defendant’s favor as to Plaintiff’s conversion and
interference with business relations claims. (ECF No. 73.) Defendant subsequently
moved for summary judgment as to Plaintiff’s remaining claims. (ECF No. 79.) On
August 17, 2015, the Court granted summary judgment in Defendant’s favor as to
Plaintiff’s express breach of contract claim and fraud claim, as well as the portion of
Plaintiff’s claim for breach of the implied covenant of good faith and fair dealing that
relied on the exclusion of Drs. Kutalek and Blumberg from Plaintiff’s territory. (ECF No.
109.) The Court denied summary judgment as to the remainder of Plaintiff’s claim for
breach of the covenant of good faith and fair dealing based on a finding that material
factual disputes existed. (Id. at 8–16.)
A jury trial on Plaintiff’s good faith and fair dealing claim commenced on
December 7, 2015. (ECF Nos. 161–165.) On December 11, 2015, the jury found in
favor of Defendant. (ECF No. 169.) Final Judgment was entered on December 14,
2015. (ECF No. 172.) The Fee Motion and Joinder Motion were filed on December 28,
2015 (ECF Nos. 175, 177), and the JNOV Motion and New Trial Motion were filed on
January 11, 2016 (ECF Nos. 184, 185). All four motions are fully briefed and ripe for
Plaintiff’s two motions both seek relief based on asserted errors by the Court with
respect to Plaintiff’s breach of contract claim and fraudulent inducement claim. (ECF
Nos. 184, 185.) The Court granted summary judgment as to both of these claims in its
order dated August 17, 2015 (“Summary Judgment Order”). (ECF No. 109.)
Plaintiff brings its JNOV Motion pursuant to Federal Rule of Civil Procedure 50,
seeking judgment in Plaintiff’s favor as to its claim for breach of contract—dismissed at
summary judgment—based on Defendant’s failure to provide product in Barbados and
its failure to provide post-implant technical support. (ECF No. 184.)
As a procedural matter, Plaintiff’s JNOV Motion is utterly perplexing. The plain
language of Rule 50(a) permits judgment as a matter of law “[i]f a party has been fully
heard on an issue during a jury trial,” and notes that a motion under that rule “may be
made at any time before the case is submitted to the jury.” As such, this is patently not
a Rule 50(a) motion, and Plaintiff made no Rule 50(a) motion at trial.
Under Rule 50(b), the Court may consider a renewed Rule 50(a) motion after
trial. Fed. R. Civ. P. 50(b). However, “[a] party may not circumvent Rule 50(a) by
raising for the first time in a post-trial motion issues not raised in an earlier motion for
directed verdict.” United Int’l Holdings, Inc. v. Wharf (Holdings) Ltd., 210 F.3d 1207,
1228 (10th Cir. 2000) (citing FDIC v. United Pac. Ins. Co., 20 F.3d 1070, 1076 (D.C.
Cir. 1994)); see also Marshall v. Columbia Lea Regional Hosp., 474 F.3d 733, 738
(10th Cir. 2007) (holding that a “pre-verdict Rule 50(a) motion” is “a prerequisite to a
post-verdict motion under Rule 50(b)”); 9B C. Wright & A. Miller, Fed. Prac. & Proc. Civ.
§ 2537, at 603–04 (3d ed. 2008) (“[T]he district court only can grant the Rule 50(b)
motion on the grounds advanced in the preverdict motion, because the former is
conceived of as only a renewal of the latter. . . . [T]he case law makes it quite clear that
the movant cannot assert a ground that was not included in the earlier motion.”); Fed.
R. Civ. P. 50, advisory committee’s note (“A post-trial motion for judgment can be
granted only on grounds advanced in the pre-verdict motion.”).
As Plaintiff made no Rule 50(a) Motion, the Court finds that no Rule 50(b) Motion
from Plaintiff can be considered. The JNOV Motion is therefore denied as procedurally
New Trial Motion
Plaintiff’s New Trial Motion is brought pursuant to Rule 59. (ECF No. 185.)
Plaintiff does not cite which subsection of Rule 59 it refers to, but the only subsection
under which the Court can grant a new trial after a jury trial on a party’s motion is Rule
59(a)(1)(A). That subsection permits the Court to grant a new trial, “after a jury trial, for
any reason for which a new trial has heretofore been granted in an action at law in
Plaintiff seeks a new trial based on four assigned errors of the Court: (1) granting
summary judgment on the breach of contract claim; (2) not instructing the jury on
Defendant’s duty to provide post-implant patient checks; (3) not instructing the jury on
rules governing contract interpretation, leading to jury confusion regarding which party
is obligated to provide post-implant patient checks; and (4) granting summary judgment
on the fraudulent inducement claim. (ECF No. 185 at 2–3.)
As to the second and third arguments regarding jury instructions, the Court first
notes that Plaintiff appears to have misread the Court’s Summary Judgment Order
regarding Plaintiff’s allegations on Defendant’s technical support obligations under the
Agreement. While Plaintiff asserts, erroneously, that “the summary judgment ruling
prior to trial found that BioMed was responsible for providing all technicians and subreps for all patient implants and checks,” the Summary Judgment Order in fact stated
only that the Agreement did not expressly require Defendant to provide post-implant
patient checks. (See ECF No. 109 at 5 (“The Agreement states that Plaintiff ‘shall be
responsible for providing any technical service representatives as may be necessary for
[Plaintiff] to provide adequate support and coverage in the Territory.’ This provision
speaks only to Plaintiff’s technical service obligations, not Defendant’s, and is therefore
unambiguous as to the parties’ duties in this regard. . . . Thus, to the extent Plaintiff is
asking the Court to impose an obligation on Defendant that does not exist in the
Agreement, it declines to do so.” (internal citations omitted)).) That finding applied to
Plaintiff’s breach of contract claim insofar as it alleged an express breach of contract
based on Defendant’s alleged failure to provide post-implant patient checks. Because
the parties’ respective obligations under the implied covenant of good faith and fair
dealing were not dependent solely on express contractual provisions, the Court
permitted the parties to discuss this matter at trial. As such, Plaintiff is incorrect that it
was not permitted to explore this issue further at trial.1
Regardless of this misunderstanding, Plaintiff has failed to show that the Court’s
failure to instruct the jury as to post-implant patient checks or contract interpretation
warrants a new trial. Plaintiff did not offer any proposed jury instructions on either of
these issues, nor did Plaintiff object at trial to the Court’s final set of jury instructions,
notwithstanding the opportunity it was provided to do so at the charging conference
phase of trial. Plaintiff’s assertion that it “was not afforded the opportunity to present
jury instructions on the issue” is flatly erroneous. (ECF No. 185 at 3.) “In this circuit, to
comply with Rule 51 [regarding assignment of error in a jury instruction,] a party must
As such, the Court rejects Plaintiff’s assertion in its reply in support of the New Trial
Motion that it did not waive its objection by not proposing these jury instructions because such
proposal would have been futile. (ECF No. 192 (citing Abuan v. Level 3 Commc’ns, Inc., 353
F.3d 1158, 1172 (10th Cir. 2003)).) Abuan held that a party did not show futility of proffering a
jury instruction when it merely stated its legal position in its summary judgment briefing but did
not inform the court that a particular jury instruction was necessary. 353 F.3d at 1173.
Plaintiff’s position here is identical, and thus Plaintiff has not established futility.
both proffer an instruction and make a timely objection to the refusal to give a
requested instruction.” Abuan v. Level 3 Commc’ns, Inc., 353 F.3d 1158, 1172 (10th
Cir. 2003). Plaintiff has failed to do so here, and the Court sees no plain error in the
absence of these instructions. Accordingly, the Court denies Plaintiff’s request for a
new trial based on the failure to properly instruct the jury.
As to Plaintiff’s first and fourth arguments regarding the Court’s summary
judgment ruling, Plaintiff’s briefing is once again procedurally bizarre. As the Court
granted summary judgment on the breach of contract and fraudulent inducement
claims, no jury trial took place on those claims; as such, no “new trial” may be had
either. See Fed. R. Civ. P. 59(a)(1)(A) (new trial may be granted “after a jury trial”).
Perceiving this, Defendant has argued in its response that perhaps as to these claim s,
Plaintiff intended to seek alteration or amendment of the judgment under Rule 59(e).
(ECF No. 187 at 5–9.) Plaintiff’s reply adopts this proposal, now stating that its motion
is brought under Rule 59(a) “as well as Fed. R. Civ. P. 59(e),” but the entirety of the
reply seeks a new trial and never applies the substantive analysis required for a Rule
59(e) motion to alter or amend the judgment. (See ECF No. 192 at 1.)
To support a motion to alter or amend the judgment, a party must show “(1) an
intervening change in the controlling law, (2) new evidence previously unavailable, [or]
(3) the need to correct clear error or prevent manifest injustice.” Servants of Paraclete
v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000). T hough Plaintiff does not point to any
change in the law or new evidence, its New Trial Motion can conceivably be read as
asserting that the Court’s Summary Judgment Order constituted clear error as to the
breach of contract and fraudulent inducement claims. Regardless, the Court finds no
clear error here.
Plaintiff’s argument on its breach of contract claim relies on an allegation of
“fundamental breach” based on Defendant’s failure to provide product when Plaintiff
secured sales in Barbados, but as the Court found in its Summary Judgment Order,
Plaintiff never cited an express provision of the contract that Defendant breached in so
doing. (See ECF No. 109 at 5 n.1, 10–11.) The Court concluded in the Summary
Judgment Order that Plaintiff’s claim regarding Barbados was not an express breach of
the Agreement, but rather an alleged breach of the implied covenant of good faith and
fair dealing with respect to the inclusion of Barbados in Plaintiff’s sales territory. (Id. at
10–11.) That claim was submitted to the jury, which returned a verdict for Defendant.
The Court finds no clear error in the jury’s decision, and declines to amend the
judgment or order a new trial based on the evidence regarding Barbados.
Regarding the fraudulent inducement claim, Plaintiff’s entire argument is as
follows: “The evidence at trial was clear that Sorin misled BioMed, as well as other reps,
concerning its new products.” (ECF No. 185 at 6.) The Court first notes that the
evidence at trial in this regard was far from uncontradicted. Nevertheless, even
assuming the truth of this assertion, it does not establish Plaintiff’s fraudulent
inducement claim. As the Court held in its Summary Judgment Order, “Plaintiff bears
the burden of providing affirmative evidence that Defendant had no intention of
performing at the time the statements were made.” (ECF No. 109 at 23 (emphasis in
original).) Even if Defendant misled Plaintiff by promising new products, Plaintiff failed
to present evidence, both at trial and on summary judgment, showing that Defendant
did so without any intention of complying with such promises, rather than merely
negligently. As such, the Court finds no clear error in its ruling on Plaintiff’s fraudulent
inducement claim, and denies the New Trial Motion in that respect.
Plaintiff’s New Trial Motion is both procedurally improper and fails on the merits.
The Court therefore denies it in its entirety.
Defendant’s Fee Motion and Joinder Motion together seeks two forms of relief:
(1) an award of fees and non-taxable expenses pursuant to a provision of the
Agreement, and (2) an order piercing Bio Med’s corporate veil such that Jack Oliver
might satisfy the fees and costs award, and joinder of Jack Oliver as a party to that end.
(ECF Nos. 175, 177.) While the Fee Motion includes references to both of these goals,
the Court will discuss the two issues separately.
Fees and Expenses
Entitlement to Fees and Expenses
As a preliminary matter, Defendant must demonstrate that it is entitled to an
award of attorneys’ fees and non-taxable expenses. Defendant relies on a fee-shifting
provision in the Agreement, which states, “If the Company prevails in any litigation
relating to this Agreement, the Representative shall pay the Company, in addition to
any other damages awards, its reasonable costs and attorneys’ fees.” (ECF No. 95-1
§ 9.02.) Defendant contends that such unilateral fee-shifting provisions are enforceable
under Minnesota law, which is the applicable substantive law pursuant to the
Agreement’s choice of law provision. (Id. § 14.06; see ECF No. 109 at 3.)
Plaintiff argues that Defendant is not entitled to attorneys’ fees or expenses
because: (1) Defendant did not assert a claim for fees in its Answer or in the Final
Pretrial Order and its belated request should therefore be denied; (2) Defendant did not
meaningfully confer with Plaintiff regarding the Fee Motion pursuant to
D.C.COLO.LCivR 7.1(a); (3) the fee-shifting provision in the Agreement is ambiguous,
and it does not apply to the good faith and fair dealing claim that was tried; and
(4) Defendant should be barred from recovering fees and expenses because it has
unclean hands. (ECF No. 188.) Notably, Plaintiff does not argue that the fee-shifting
provision is unenforceable under Minnesota law, or that any other substantive law
applies to its interpretation or application.
First, the Court is not persuaded that a request for fees and expenses as a
prevailing party pursuant to a contractual provision must be pleaded as a claim or
counterclaim, or that Defendant’s Fee Motion is at all untimely. Plaintiff fails to cite any
authority holding as much. As Defendant points out, Federal Rule of Civil Procedure
54(d)(2)(A) provides that “[a] claim for attorney’s fees and related nontaxable expenses
must be made by motion unless the substantive law requires those fees to be proved at
trial as an element of damages.” Plaintiff has not provided any such substantive law
applicable here, nor is the Court aware of any. Furthermore, such a fee motion is
appropriately made “no later than 14 days after the entry of judgment.” Fed. R. Civ. P.
54(d)(2)(B)(i). The Court concludes that Defendant’s Fee Motion was procedurally
proper and timely.
The Court also rejects Plaintiff’s argument that Defendant’s conferral failed to
comply with this District’s Local Rules. Plaintiff admits that Defendant’s counsel
advised Plaintiff’s counsel of Defendant’s intention to file the Fee Motion, and Plaintiff’s
counsel indicated that Plaintiff opposed any fee award. (ECF No. 188 at 2.) The
purpose of the duty to confer is to avoid unnecessary filings when the issue could have
been resolved without motion practice. See D.C.COLO.LCivR 7.1(a). It is undisputed
that Plaintiff indicated that it opposed Defendant’s Fee Motion regardless of the specific
amounts requested, and the Court concludes that no f urther conferral was required.
As to the fee-shifting provision itself, the Court fails to see any ambiguity in the
language as applied to the claim that was tried. The Agreement provides that, if
Defendant prevails in “any litigation relating to this Agreement,” it shall be entitled to
receive an award of its reasonable attorneys’ fees and costs. (ECF No. 95-1 § 9.02.)
Plaintiff’s argument suggests that “relating to” is ambiguous because, if read extremely
narrowly, it encompasses only litigation based on an express breach of the Agreement
itself. In the Court’s view, however, it would be patently unreasonable to rely on such a
cramped reading of the Agreement to find the fee-shifting provision inapplicable here.
The claim for breach of the implied covenant of good faith and fair dealing that was
tried in this case was not explicitly pleaded as an independent claim, but was found by
the Court, as a matter of Minnesota law, to be implied in Plaintiff’s breach of contract
claim. (ECF No. 109 at 6–7 (“‘Thus, an alleged violation of the implied covenant of
good faith cannot form the basis for an independent tort action or even its own cause of
action.’” (quoting Wilson v. Career Educ. Corp., 729 F.3d 665, 673–74 (7th Cir.
2013))).) The Court has already held that the good faith and fair dealing claim that was
tried before a jury arose directly out of the contract at issue between the parties. Under
any reasonable reading of the fee-shifting provision in the Agreement, the trial in this
case was litigation “relating to” the Agreement. Accordingly, the Court finds that the
fee-shifting provision applies here.
Finally, the Court rejects Plaintiff’s argument that Defendant may not recover
fees and expenses because it has unclean hands. “The equitable defense of unclean
hands, encapsuled in the maxim ‘one who comes into equity must come with clean
hands,’ is premised on withholding judicial assistance from a party guilty of
unconscionable conduct.” Fred O. Watson Co. v. U.S. Life Ins. Co., 258 N.W.2d 776,
778 (Minn. 1977). “A party ‘may be denied relief where his conduct has been
unconscionable by reason of a bad motive, or where the result induced by his conduct
will be unconscionable either in the benefit to himself or the injury to others.’” Peterson
v. Holiday Recreational Indus., Inc., 726 N.W.2d 499, 505 (Minn. Ct. App. 2007)
(quoting Johnson v. Freberg, 228 N.W. 159, 160 (Minn. 1929)).
Here, Plaintiff argues—confusingly, with reference to Maryland caselaw rather
than that of Minnesota—that Defendant’s hands are unclean because it entered into the
Agreement without the financial ability to perform, without the intention of fulfilling precontractual promises to provide new products, and with no ability to supply products to
Barbados. (ECF No. 188 at 9–10.) However, Plaintiff presented evidence in support of
all three of these allegations in the trial of Plaintiff’s good faith and fair dealing claim,
and the jury found in favor of Defendant, concluding that no breach of the implied
covenant of good faith and fair dealing had occurred. Plaintiff’s generalized allegations
do not constitute evidence that Defendant’s conduct, or the result thereof, is
unconscionable under Minnesota law. See Peterson, 726 N.W.2d at 505.
Furthermore, while the implied covenant claim is rooted in equity, Defendant’s
request to enforce the fee-shifting provision in the Agreement is strictly contractual.
Even assuming that Defendant acted wrongfully, Plaintiff has not demonstrated that an
award of fees and costs pursuant to the Agreement is an equitable remedy that would
be barred by unclean hands under Minnesota law. Thus, Plaintiff has failed to show
that the Court may not award fees under the express fee-shifting provision in the
Agreement between the parties.
The Court concludes that Defendant is entitled to an award of reasonable fees
and expenses in accordance with the Agreement.
A party seeking an award of attorneys’ fees and non-taxable expenses must
demonstrate that the fees it seeks are reasonable. See Mann v. Reynolds, 46 F.3d
1055, 1062 (10th Cir. 1995). Therefore, in justifying such an award, counsel must
make a good faith effort to exclude hours or expenses that are “excessive, redundant or
otherwise unnecessary.” Hensley v. Eckerhart, 461 U.S. 424, 434 (1983). Generally,
the starting point for any calculation of a reasonable attorneys’ fee is the “lodestar,” that
is, the number of hours reasonably expended multiplied by a reasonable hourly rate.
Hensley, 461 U.S. at 433; Malloy v. Monahan, 73 F.3d 1012, 1017–18 (10th Cir. 1996).
To determine the number of hours reasonably expended, the Court reviews
counsel’s billing entries to ensure that counsel exercised proper billing judgment. Case
v. Unified Sch. Dist. No. 233, 157 F.3d 1243, 1250 (10th Cir. 1998). Once the Court
determines the lodestar, it may “adjust the lodestar upward or downward to account for
the particularities” of the work performed. Phelps v. Hamilton, 120 F.3d 1126, 1131
(10th Cir. 1997). The Court is not required to reach a lodestar determination in every
instance, however, and may simply accept or reduce a fee request within its discretion.
Hensley, 461 U.S. at 436–37.
As for the hourly rate, the Tenth Circuit has indicated that “the court must look to
‘what the evidence shows the market commands’” for analogous litigation. Burch v. La
Petite Academy, Inc., 10 F. App’x 753, 755 (10th Cir. 2001) (quoting Case, 157 F.3d at
1255). The burden is on the party seeking fees to provide evidence of the prevailing
market rate for similar services by “lawyers of reasonably comparable skill, experience,
and reputation” in the relevant community. Ellis, 163 F.3d at 1203.
Defendant calculates its lodestar at $493,622.50, based on its attorney s’ hourly
rates multiplied by their respective number of hours billed, as follows:
Number of Hours
Jared B. Briant
Jennifer L. Sullivan
Katie A. Feiereisel
Margaret M. Zylstra
Plaintiff challenges both the hourly rates and the number of hours billed, arguing
that both are excessive. (ECF No. 188 at 5–8.) As to hourly rates, Plaintiff does little
more than recite the attorneys’ legal experience and their billed rate and argue that
these rates are too high, citing by way of comparison a single motor vehicle insurance
case tried in 2013 in which the opposing party did not appear to dispute the plaintiff’s
counsel’s rates of $300 and $200 per hour for attorneys with experience of 22 years
and eight years, respectively. (Id. at 7 (citing Etherton v. Owners Ins. Co., 82 F. Supp.
3d 1190, 1200 (D. Colo. 2015)).) In finding that these rates were reasonable, the court
in Etherton quoted from other similar cases in which experienced litigators were
compensated at $400 and $405 per hour. 82 F. Supp. 3d at 1200. T he Court finds that
this case does not provide reason to reduce counsel’s rates.
In support of its motion, Defendant provides data from the National Law
Journal’s 2014 Survey of Law Firm Economics to support its argument that its rates are
well within the average range for the Denver market. (ECF No. 175 at 9–10.) The
Court agrees with Defendant that, in general, counsel’s rates are reasonable. The only
rate that gives the Court pause is that of Ms. Feiereisel, a 2012 law graduate, who billed
a rate of $261 per hour in 2014 (with two years of experience) and $281 in 2015 (with
three years of experience). Based on the Court’s own experience and understanding of
the Denver market, these rates are high given Ms. Feiereisel’s limited experience.
However, the Court notes that Defendant’s effective motions practice in this case was
largely Ms. Feiereisel’s responsibility, which was part of Defendant’s exercise of billing
judgment, and consequently finds that a relatively high billing rate is not unwarranted.
The Court therefore finds that Ms. Feiereisel’s 2014 billing rate of $261 per hour is
reasonable, and will reduce her 2015 billing rate to the same number. As a result of
this reduction, the lodestar is decreased to $486,422.50.
As to the number of hours, Plaintiff argues that Defendant’s billing was excessive
due to overstaffing, resulting in an “‘army’ of rotating personnel [that] inevitably led to
duplication of effort.” (ECF No. 188 at 6.) Plaintiff also raises concerns regarding
redacted portions of Defendant’s invoices, which prevent it from determining whether
those portions were reasonable, as well as a dispute over Defendant’s privilege log that
was ultimately resolved in a mediation Plaintiff had suggested months earlier. (Id. at 7.)
Defendant easily resolves two of these three concerns, pointing out that it did in fact
utilize additional attorneys on this case, but that it seeks compensation for only three of
them and one paralegal, and that it does not seek reimbursement for any of the entries
that are redacted. (ECF No. 190 at 7.) These arguments from Plaintiff therefore do not
provide a basis for reducing Defendant’s billed hours.
As to the privilege log, Defendant does not challenge Plaintiff’s characterization
of this dispute, but notes that the mediator ultimately ruled in Defendant’s favor. (Id. at
7–8.) The Declaration of Jared B. Briant, Defendant’s lead counsel, further notes that
Defendant does not seek compensation for its expenses in using this mediator. (ECF
No. 175-1 at 16.) Despite Defendant’s ultimate success on this issue with a mediator,
the Court finds merit in Plaintiff’s argument that Defendant unnecessarily prolonged the
privilege log dispute by deferring the ultimate decision to seek mediation. The Court
has identified approximately 30 hours Mr. Briant billed in August and September 2014
regarding the privilege log dispute. (See ECF No. 175-5 at 29–34.) This amount will be
reduced by half to reach a reasonable fee for Defendant’s handling of the privilege log
dispute, such that Mr. Briant’s total billed hours will be reduced by 15.
Plaintiff also argues that Defendant’s counsel engaged in block billing, which
prevents Plaintiff and the Court from being able to assess whether the billed hours were
reasonable. (ECF No. 188 at 8.) “So-called block billing consists of attorneys recording
large blocks of time for tasks without separating the tasks into individual blocks or
elaborating on the amount of time each task took. Use of this rather imprecise practice
may be strong evidence that a claimed amount of fees is excessive.” Flying J Inc. v.
Comdata Network, Inc., 322 F. App’x 610, 617 (10th Cir. 2009). However, the
determination of whether a fee is excessive remains in the Court’s discretion. Id.
In response to Plaintiff’s argument, Defendant points out that block billing is not
prohibited, and that the time blocks on Defendant’s invoices are accompanied with
sufficiently detailed narrative descriptions to permit scrutiny. (ECF No. 190 at 8.) The
Court agrees that block billing is not impermissible, but even with detailed narrative
descriptions, it makes it more difficult to determine whether the billed hours are
reasonable if the narrative does not break down the hours by task. Cf. Flying J Inc.,
322 F. App’x at 617 (10th Cir. 2009) (holding that “the decision whether block billing
indicates an unreasonable claim should remain with the district court who should be
allowed to exercise its discretion accordingly”). The Court has reviewed Defendant’s
billing entries, and agrees that their lack of clarity warrants some reduction of hours.
The Court will therefore reduce Mr. Briant’s billed hours by 10 to account for this.
After the above reductions, the Court will award Defendant a fee of $476,297.50,
which the Court finds is a reasonable fee to take this case to trial.
On January 7, 2016, the Clerk of Court taxed costs against Plaintiff in the
amount of $20,046.84. (ECF No. 178.) Defendant now seeks reimbursement for two
categories of non-taxable expenses: (1) $17,184.37 in online legal research, and
(2) $47,320.00 in expert fees for its accounting expert. (ECF No. 175 at 11–13.)
As to the expert fees, Defendant seeks compensation for its expert’s time spent
reviewing Plaintiff’s expert report, preparing a rebuttal expert report, and preparing and
testifying at trial. (ECF No. 175-1 at 16.) The total request of $47,320.00 is comprised
of 41.5 hours of Ms. McCloskey’s work at $450 per hour, and 84.25 hours of work by
Patrice Parsons, Ms. McCloskey’s associate, at $340 per hour. (ECF No. 175-6.)
Plaintiff argues that this amount is excessive because Ms. McCloskey was not even
deposed, and because Defendant fails to justify such a high billing rate for Ms.
Parsons.2 (ECF No. 188 at 8–9.) The Court agrees that both of these arguments have
merit. Given Ms. McCloskey’s relatively limited role in this case, and the lack of any
deposition, the Court finds it reasonable to reduce Ms. McCloskey’s hours from 41.5 to
35. As to Ms. Parsons, Defendant has not provided a CV or any information about her
experience to justify such a high rate of $350 per hour for an accounting associate.
The Court will therefore reduce Ms. Parsons’ rate to $250 per hour. T his results in a
total expense of $36,813, which the Court deems reasonable.
As to Defendant’s request for reimbursement of online legal research fees,
Plaintiff fails to respond at all. Defendant argues that Plaintiff has confessed the Fee
Motion as to these expenses. (ECF No. 190 at 9.) However, the Court notes that the
case law is inconsistent on whether legal research should be considered overhead or
whether it may be billed in its entirety. The Tenth Circuit noted in Case that research
expenses intended “to familiarize the attorney with the area of law would normally be
absorbed into a firm’s overhead and that, therefore, attempting to charge an adversary
Plaintiff also argues that this time is not compensable because it related to damages
associated with the breach of the implied covenant of good faith and fair dealing, which does
not arise out of the Agreement, and no research related to the fraud or conversion claims
should be compensable because those claims were not tried. (ECF No. 188 at 9.) The Court
already rejected Plaintiff’s argument that the claim that was tried was not related to the
Agreement. As to the fraud and conversion claims, the Court granted summary judgment in
Defendant’s favor on those claims, and thus Defendant’s efforts in defeating those claims were
reasonably necessary. The Court declines to reduce Defendant’s expenses based on either of
with time spent conducting background research is presumptively unreasonable.”
Case, 157 F.3d at 1253.
In this case, the online legal research expenses note the date, attorney’s name,
and price, but do not indicate the subject of the research, and only some of these
entries can be cross-referenced to counsel’s time entries. Even of those entries that
can be cross-referenced, most descriptions are so general that the Court cannot
determine whether many of them were merely “background research.” See id. Based
on this lack of clarity, the Court will reduce Plaintiff’s reimbursement for online research
expenses by 25 percent. The resulting amount is $12,888.28, which the Court finds is
In total, the Court grants the Fee Motion in part, and awards Defendant
$476,297.50 in fees and $49,700.78 in non-taxable expenses pursuant to § 9.02 of the
Piercing the Corporate Veil and Joinder
Defendant seeks to hold Mr. Oliver personally liable for paying the instant award
of fees and expenses and the costs already taxed by the Clerk of Court, and to that
end, Defendant requests that Mr. Oliver be joined as a party and the corporate veil be
pierced. (ECF No. 175 at 13–15, ECF No. 177.) For the reasons discussed below , the
Court finds that the instant case is not one of the exceptional circumstances that
warrants piercing the corporate veil, and denies that request. This renders moot
Defendant’s request for joinder, as the purpose of joinder was solely to permit piercing
the corporate veil.
First, Defendant argues that the state of incorporation sets the standard for
piercing the corporate veil. (ECF No. 177 at 7.) Because Plaintiff is a Pennslyvania
corporation, Defendant applies Pennsylvania law to this analysis. (Id.) While Plaintiff
does not explicitly contest Defendant’s argument, Plaintiff’s response to the Joinder
Motion cites the “federal common law” standard articulated by the Tenth Circuit rather
than Pennsylvania law. (ECF No. 189 at 5 (citing NLRB v. Greater Kan. City Roofing, 2
F.3d 1047 (10th Cir. 1993)).) Thus, the Court must determine which law to apply here.
In an unpublished 2011 decision, another judg e in this District reviewed the
relevant law and concluded that “the law of the state of incorporation is applicable to
veil-piercing issues.” Francis v. Starwood Hotels & Resorts Worldwide, Inc., 2011 WL
3351320, at *3 (D. Colo. Aug. 3, 2011). The analysis began with Colorado law, as “[a]
federal court exercising diversity jurisdiction applies the choice of law rules of the forum
state.” Id. at *2. Because Colorado courts have not directly addressed this issue, the
court in Francis noted that Colorado courts generally look to the Restatement (Second)
of Conflict of Laws in resolving such issues, and found that the Restatement agreed
with numerous other federal courts, including another prior decision in this District, in
applying the law of the state of incorporation. Id. at *2–3 (citing cases). The Court
agrees with that analysis, and concludes that Defendant correctly applied Pennsylvania
law to the question of whether to pierce Plaintiff’s corporate veil.
“Piercing the corporate veil is a means of assessing liability for the acts of a
corporation against an equity holder in the corporation.” Vill. at Camelback Prop.
Owners Assn. Inc. v. Carr, 538 A.2d 528, 533 (Pa. Super. Ct. 1988), aff’d, 572 A.2d 1
(Pa. 1990). Under Pennsylvania law, courts evaluating such a claim are tasked with
“determining if equity requires that the shareholders’ traditional insulation from personal
liability be disregarded and with ascertaining if the corporate form is a sham,
constituting a facade for the operations of the dominant shareholder.” Id. Making such
a determination requires an inquiry into “whether corporate formalities have been
observed and corporate records kept, whether officers and directors other than the
dominant shareholder himself actually function, and whether the dominant shareholder
has used the assets of the corporation as if they were his own.” Id. Ultimately,
“[p]iercing the corporate veil is admittedly an extraordinary remedy preserved for cases
involving exceptional circumstances. . . wherever equity requires that such be done
either to prevent fraud, illegality or injustice or when recognition of the corporate entity
would defeat public policy or shield someone from public liability for crime.” Id.; see
also Ashley v. Ashley, 393 A.2d 637, 641 (Pa. 1978) (the corporate f iction “will be
disregarded whenever justice or public policy demand and when the rights of innocent
parties are not prejudiced nor the theory of the corporate entity rendered useless”).
Defendant argues that piercing the corporate veil is warranted here because Mr.
Oliver “has used Bio Med’s assets as if they were his own.” (ECF No. 177 at 8–9.)
Defendant alleges that Plaintiff’s corporate bank account statements are replete with
personal expenses, including restaurant meals, lawn care, and pool maintenance; that
Mr. Oliver commingled corporate funds with other assets, making over $300,000 in
deposits from his personal account into the corporate account; that Plaintif f maintained
no other corporate financial records and filed no tax returns; and that Plaintiff appears
to have been created solely to enter into the Agreement with Defendant, as it had no
prior business or revenues, never entered into any other contract, and currently lacks
any assets. (Id.)
Plaintiff’s response does not contest any of these allegations. Instead, Plaintiff
argues that its current lack of assets is a result of Defendant’s actions interfering with
Plaintiff’s performance of the Agreement. (ECF No. 189 at 5–6.) However, as
discussed above, the jury has already found that Defendant did not breach the implied
covenant of good faith and fair dealing in the Agreement, and the explicit breach of
contract and tort claims were dismissed on summary judgment. By failing to contest
Defendant’s allegations, Plaintiff essentially admits that Oliver failed to observe
corporate formalities and “has used the assets of the corporation as if they were his
own.” Vill. at Camelback, 538 A.2d at 533.
However, the Court must still determine whether the “extraordinary remedy” of
piercing the corporate veil is warranted in order “to prevent fraud, illegality or injustice or
when recognition of the corporate entity would defeat public policy or shield someone
from public liability for crime.” Id. Defendant does not point to any public policy or
criminal liability at issue here, and instead argues that equity requires piercing “because
Sorin will likely be unable to collect” its fees and costs from Plaintiff. (ECF No. 177 at
2.) Without more, the Court disagrees with Defendant that this constitutes “exceptional
circumstances” warranting such an “extraordinary remedy.” Vill. at Camelback, 538
A.2d at 533.
The Court has reviewed numerous cases applying Pennsylvania law and
concludes that a corporation’s mere lack of assets to pay a debt is insufficient to
establish the sort of injustice that merits an extraordinary remedy. See, e.g., Coll.
Watercolor Grp., Inc. v. William H. Newbauer, Inc., 360 A.2d 200, 207 (Pa. 1976)
(piercing corporate veil because individual threatened to cause corporation not to pay
debt to defendant in order for individual to obtain controlling interest in defendant);
Rinck v. Rinck, 526 A.2d 1221, 1222–23 (Pa. Super. Ct. 1987) (piercing corporate veil
because individual formed a corporation in order to avoid paying pre-existing alimony
obligation); Zubik v. Zubik, 384 F.2d 267, 273 (3d Cir. 1967) (applying Pennsylvania
law, declining to pierce corporate veil because disregard of corporate formalities alone
was insufficient to establish “fraud or injustice”). The Court further notes that even
“[t]he organization of a corporation for the avowed purpose of avoiding personal
responsibility does not of itself, however, justify disregard of the corporate entity.”
Zubik, 384 F.2d at 273 n.15; see also id. at 273 (“Limiting one’s personal liability is a
traditional reason for a corporation. Unless done deliberately, with specific intent to
escape liability for a specific tort or class of torts, the cause of justice does not require
disregarding the corporate entity.”).
The Court’s decision is further supported by Tenth Circuit caselaw applying the
federal common law, which, in discussing that law’s parallel requirement to show that
equity requires piercing in order to avoid fraud or injustice, noted that “[i]n most cases
the mere fact that a corporation is incapable of paying all its debts is insufficient for a
finding of injustice. That condition will exist in virtually all cases in which there is an
attempt to pierce the corporate veil.” Greater Kan. City Roofing, 2 F.3d at 1053. The
Court believes that the instant case is such a typical circumstance; while Plaintiff may
be insolvent, its inability to pay its judgment is insufficient to demonstrate injustice
sufficient to require the equitable remedy of piercing the corporate veil.
Consequently, the Court denies Defendant’s request to pierce the corporate veil
in this case. As the sole purpose of joining Mr. Oliver as a party was to permit piercing
the corporate veil, the Court has no need to consider Defendant’s arguments as to
joinder. Accordingly, the Joinder Motion is denied in its entirety.
For the reasons set forth above, the Court ORDERS as follows:
Plaintiff’s Motion for Judgment Notwithstanding Verdict (ECF No. 184) is
Plaintiff’s Motion for New Trial Pursuant to Rule 59 (ECF No. 185) is DENIED;
Defendant’s Motion to Join Jack Oliver as an Additional Party Pursuant to Fed.
R. Civ. P. 21 (ECF No. 177) is DENIED;
Defendant’s Motion for Reasonable Attorneys’ Fees and Non-Taxable Costs
(ECF No. 175) is GRANTED IN PART and DENIED IN PART; and
Defendant is AWARDED attorneys’ fees in the amount of $476,297.50 and
reimbursement of additional expenses in the amount of $49,700.78 pursuant to
the contract between the parties. The Clerk shall enter judgment accordingly.
Dated this 24th day of March, 2016.
BY THE COURT:
William J. Martínez
United States District Judge
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