Procaps S.A. v. Patheon Inc. et al
Filing
1166
OMNIBUS ORDER on #1030 and 1072 Defendant's Motions for Attorney's Fees and Non-taxable Costs. Signed by Magistrate Judge Jonathan Goodman on 8/17/2017. (jf00)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
CASE NO. 12-24356-CIV-GOODMAN
[CONSENT CASE]
PROCAPS S.A.,
Plaintiff,
v.
PATHEON INC.,
Defendant.
__________________/
OMNIBUS ORDER ON DEFENDANT’S MOTIONS
FOR ATTORNEY’S FEES AND NON-TAXABLE COSTS
Introduction
This Order concerns the consequences, if any, which Plaintiff Procaps S.A.
(“Procaps” or “Plaintiff”) should face after losing this aggressively-litigated lawsuit. It
decides whether Defendant Patheon Inc. (“Patheon” or “Defendant”) is entitled to
approximately $18.5 million in attorney’s fees and non-taxable costs after prevailing in a
full-throttle lawsuit which has generated 1165 docket entries and an appeal (including
oral argument) since it was first filed in mid-December 2012.
The primary issue underlying Patheon’s Motions for Attorney’s Fees and NonTaxable Costs is whether the Florida Deceptive and Unfair Trade Practices Act
(“FDUTPA”) authorizes an attorney’s fees and costs award to a prevailing defendant
when most of the FDUTPA claim involved the same facts and transactions at issue in a
plaintiff’s unsuccessful federal antitrust claims, which were based on a federal antitrust
statute authorizing an award to a prevailing plaintiff but not to a prevailing defendant.
Phrased differently, the issue is whether Procaps, which had an adverse summary
judgment entered against it affirmed on appeal, is required to pay fees and costs when
its FDUTPA claim is what Procaps deems a so-called “tag-along” claim -- i.e., based
mostly (though not entirely) on the same circumstances at issue in its federal Sherman
Act antitrust claim (which does not authorize fees and non-taxable costs to Patheon
even though it prevailed).
Noting the intense, aggressive nature of the litigation, Patheon advocates for a
rule permitting a discretionary award of fees and costs under FDUTPA. On the other
hand, Procaps urges the Court to not enter an award because the federal antitrust
claims, not the FDUTPA claims, were the primary claims. Procaps relies on a few nonbinding federal district court opinions holding that fees and costs are unavailable under
FDUTPA when the FDUTPA claim is a tag-along claim to another primary claim where
fees are otherwise unavailable.
But Patheon (1) argues that those non-binding trial-level cases were incorrectly
decided; (2) emphasizes that the FDUTPA statute does not itself contain any restriction
on a fees/costs award to a party prevailing on a “tag-along” FDUTPA claim; and (3)
relies upon binding state court decisions (including those from the Florida Supreme
2
Court) which do not even mention the supposed tag-along or primary claim theory (but
which instead hold that fees for the entire action are recoverable).
Both sides agree that FDUTPA gives the trial court broad discretion to award (or
not award) fees to a prevailing party, including a defendant, but both sides also contend
that the Court would abuse its wide and considerable discretion if the issue was
decided in favor of the opposing party. Both sides agree that there is no binding United
States Supreme Court or Eleventh Circuit precedent, though Patheon relies upon nonbinding, unpublished Eleventh Circuit case law, which it says is persuasive. Both sides
agree that Florida state law controls the FDUTPA analysis.
In addition to relying on FDUTPA’s prevailing party provision, Patheon’s initial
motion also seeks fees and costs under two other theories: (a) fees incurred as the result
of the forensic analysis of Procaps’ computers to obtain electronically stored
information (“ESI”), and (b) fees and non-taxable costs caused by Procaps’ change in its
basic antitrust theory after the deadlines passed for motions filed under Federal Rules
of Civil Procedure 12(b) and 56.
Patheon’s supplemental fees motion emphasizes even more grounds relating to
the FDUTPA theory: (a) Procaps’ alleged misconduct in its unsuccessful Eleventh
Circuit appeal; (b) Procaps’ alleged misconduct in the arbitration; (c) the purported
weakness of Procaps’ claim (i.e., the appellate court described its claims as “intrinsically
3
hopeless”); and (d) the fact that Procaps’ lead trial counsel had been previously
sanctioned for significant misconduct by another judge. 1
For reasons outlined in greater detail below, the Court grants Patheon’s motions
for attorney’s fees and non-taxable costs. And because Procaps did not challenge the
hourly rates or the reasonableness of the attorney time requested or of the non-taxable
costs, the Court’s award (which is also based on an overall assessment of the
reasonableness of the requested fees and costs) is for the full amount of Patheon’s
requests.
In granting Patheon the full amount of its requested fees, the Court notes that the
calculation is based on significantly-discounted hourly rates for many of Patheon’s
attorneys and further points out that Patheon engaged in a self-discounting approach
(and demonstrated that its requests are on the conservative side). Thus, Patheon is
entitled to an award of $18,494,846. This amount is based on: (1) $14,847,150.56 in fees
and $1,558,708.63 in non-taxable costs sought in the initial motion; (2) $1,395,741.45 in
However, the sanctions Order was later vacated by a successor judge as part of a
settlement agreement. Patheon contends that this Court may still consider the sanctions
award because the settlement-triggered order vacating it does not mean that the
misconduct did not happen. Procaps, of course, takes the opposite position and argues
that the sanctions Order is off limits because it was vacated.
1
4
fees and $45,733.66 in non-taxable costs sought in the supplemental motion; and (3)
Patheon’s Notice of Filing Supplemental Declaration. 2
Factual Background
The Court has outlined the factual scenario underlying this case many times in
many different Orders. Therefore, there is no need to again outline in detail the
comprehensive factual and procedural background. Instead, familiarity with the
background is assumed, and the Court will summarize the basic overall background
and provide details about the appeal and post-appeal developments. Providing a
complete, step-by-step history of the underlying facts and significant procedural
developments would require dozens of pages and the Court does not consider that
necessary here.
The fees and non-taxable costs were current as of June 15, 2017, the day before the
June 16, 2017 supplemental declaration. There are now 1163 docket entries in this case,
many of which were comprehensive motions and memoranda.
2
The Court held a multi-hour hearing on these attorney’s fees motions on May 30,
2017, and the parties then attended mediation on the motions. Patheon’s most-recent
declaration [ECF No. 1156-1, p. 7] notes that the amount it seeks for work from April 1,
2017 to June 15, 2017 is “vastly understat[ed].” Specifically, Patheon explains that it is
seeking an additional $621,489.60 in attorney’s fees even though the amount it actually
incurred (at a negotiated 15% discount) is $987,669.05. [ECF No. 1156-1, p. 7].Thus, the
additional amount sought is slightly less than 63% of the actual fees incurred. Phrased
differently, Patheon’s updated fees request is based on a discount of 37%. Patheon’s
initial motion and supplemental motion are based on the same types of significant
discounts.
5
Procaps and Patheon entered into a Collaboration Agreement (the “Agreement”)
to work together to produce and market a new brand of softgel capsules called P‐Gels.
Several months later, Patheon acquired Procaps’ main competitor, Banner.
The Agreement contained a market allocation provision. Certain opportunities
were allocated to Procaps, while other opportunities were allocated between the parties
by mutual agreement. Neither party could individually develop or manufacture
softgels within the scope of the Agreement. The parties both agreed that the Agreement
allocated markets and customers. [ECF No. 487, pp. 36, 137].
The parties nonetheless took the position that the Agreement, even though it is
one which allocated markets and customers, was procompetitive and lawful when it
originated because it combined the complementary assets and capabilities of two
companies that individually lacked the assets essential to compete in these markets and
introduced a new competitor and a new softgel offering, P‐Gels, into the marketplace.
[ECF No. 565, p. 8].
By September 2012, Patheon, without telling Procaps, began to reconsider
whether it had chosen the right “partner.” [ECF No. 335, ¶ 24]. Patheon began
considering (again) entering into a strategic relationship with Banner, the “#2” player in
the prescription and over‐the‐counter (“OTC”) softgel market by size. [ECF No. 335, ¶
10].
6
By October 2012, Patheon told Procaps that it was considering an acquisition of
Banner, a softgel competitor. [ECF No. 565, p. 9]. On October 22, 2012, during a meeting
in Miami, Patheon notified Procaps that it might acquire Banner, and it proposed that
Banner join the parties’ collaboration. [ECF No. 333, ¶ 14].
Procaps began to analyze the pros and cons of integrating Banner. Procaps had
some initial predictions that procompetitive benefits would result from integrating the
Banner assets. [ECF No. 333, ¶¶ 17‐18]. But it never gave Patheon its blessing to bring in
Banner. [ECF No. 335, ¶ 26]. On October 29, 2012, Patheon went ahead and signed the
Stock Purchase Agreement to acquire Banner without Procaps’ approval. [ECF No. 335,
¶ 26].
By the beginning of November 2012, after further thought, Procaps believed that
it could not continue performing under the Agreement because it believed the
Collaboration had become an illegal horizontal restraint on trade. [ECF No. 335, ¶ 15].
At the same time, some Patheon executives also believed that Banner’s acquisition was
problematic. [ECF No. 335, ¶¶ 32‐33]. In particular, they believed it created a conflict of
interest for Patheon because both Banner and Procaps were engaged in the manufacture
and sale of prescription softgels. [ECF No. 335, ¶¶ 32‐33].
The parties met in November 2012 to try and work out a solution to continue
working together. [ECF No. 333, ¶ 16]. But this “strategic relationship” was, for all
intents and purposes, over. Patheon suggested a few ways where all three entities could
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work together. [ECF No. 396, ¶ 14]. Procaps rejected all of Patheon’s suggestions and
offered none. [ECF No. 396, ¶ 14]. Instead, Procaps focused on getting Patheon to pay it
to leave the Collaboration Agreement or to divest Banner. [ECF No. 333, ¶ 20]. Patheon
was not willing to do either.
After the November 2012 discussion failed to produce a resolution, some
Procaps’ executives predicted, in an email correspondence, that if Procaps filed a
lawsuit to interfere with the Banner acquisition, then Patheon would be willing to settle
and pay Procaps to leave the Collaboration Agreement. [ECF No. 333, ¶ 20].
The Collaboration Agreement, however, contains a dispute resolution clause
which requires arbitration for breach of contract claims, fraud in the inducement claims,
and all other disputes, excluding a limited list of claims. An antitrust claim is one of the
few types specifically excluded from the mandatory arbitration provision. Procaps
decided to file an antitrust lawsuit.
In the antitrust lawsuit, Procaps did not challenge Patheon’s acquisition of
Banner as violating any antitrust laws. Rather, Procaps claimed that the parties were not
competitors before the Collaboration Agreement, but that the acquisition would
transform them into competitors. According to Procaps, this would in turn transform
the Collaboration Agreement’s allocation into an unlawful horizontal restraint on trade.
In the lawsuit, Procaps sought to “terminate” the Collaboration and “enjoin” the
acquisition on the grounds that the acquisition transformed the Collaboration into a per
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se unlawful horizontal allocation in violation of Section 1 of the Sherman Act. Procaps
alleged that the action was filed “as a result of Patheon’s unlawful business conduct and
gross disloyalty in connection with Patheon’s imminent acquisition of companies
organized under the ‘Banner’ trade name.” [ECF No. 1, p. 1].
Count I was for declaratory judgment under the federal antitrust laws, Section 1
of the Sherman Act. Count II was for injunctive relief, under the Clayton Act, for
violations of Section 1 of the Sherman Act. In that count, Procaps sought to enjoin
Patheon from consummating the Banner acquisition or, if the transaction had been
consummated, Procaps sought to require Patheon to immediately divest Banner’s
softgel manufacturing capabilities and facilities to a third party. Count III was for
damages, brought under Section 4 of the Clayton Act, for violations of Section 1 of the
Sherman Act. Count IV was for damages under Florida statutory law, FDUTPA, and
Count V was for common law unfair competition.
Procaps never filed a motion for a temporary restraining order or preliminary
injunction. Instead, it filed a motion for expedited discovery four days after filing the
lawsuit. [ECF No. 13]. Specifically, Procaps asked for permission to serve a request for
production of documents before the parties had engaged in a discovery conference. The
proposed document request it attached to its motion did not contain an accelerated
response time. Instead, it included the standard thirty-day response deadline provided
for in Federal Rule of Civil Procedure 34. Patheon opposed Procaps’ motion to
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propound discovery before the discovery conference and noted that it was “too late” to
accomplish the need articulated by Procaps because Patheon already owned Banner, as
the transaction had already closed. [ECF No. 18]. The Undersigned denied Procaps’
motion, albeit without prejudice, [ECF No. 21], and Patheon filed a motion to dismiss
[ECF No. 34] approximately three weeks later.
The District Court Judge, who presided before the parties consented to full
magistrate judge jurisdiction, initially denied Patheon’s motion to dismiss, holding that
Procaps stated a per se claim for violation of the Sherman Act. [ECF No. 50].
After a more fully‐developed record, however, and after discovery had closed,
the Undersigned ruled on the parties’ cross‐motions for summary judgment and
determined that the restraint embodied in the Agreement should be analyzed under the
rule of reason, the precise structure of which the Court would later determine. [ECF No.
565]. The Court subsequently ruled that Patheon could take additional rule of reason
discovery and file a second summary judgment motion.
In the meantime, Patheon had discovered that “Procaps’ counsel did not
supervise the ESI search, collection and preservation process,” “did not use or develop
any ESI search terms,” “allowed some of its client’s executives to use a single search
term to collect emails, and failed to realize that its client never actually implemented the
litigation hold[.]” [ECF No. 341, p. 4]. Procaps’ actions “strongly suggest[ed]” that it had
not produced responsive discovery to Patheon. [ECF No. 341, p. 6]. Thus, the Court
10
ordered a forensic analysis of Procaps’ computers and ordered it to implement a
litigation hold. [ECF Nos. 324; 341]. As a result, the case was removed from the trial
calendar, a development which caused a year-and-a-half delay. [ECF No. 432, pp. 1112]. The forensic analysis resulted in the production of about 150,000 new documents.
At the same time that the Court permitted Procaps to pursue a rule of reason
claim, the Court dismissed the per se and quick-look antitrust claims, the common law
unfair competition claim, and the FDUTPA claim (except to the extent that it duplicated
the antitrust claim). [ECF No. 565, pp. 3-4, 43-50].
Patheon later filed a second summary judgment motion, which the Court
granted. [ECF Nos. 889, 1020]. In the motion, Patheon contended that it was entitled to
summary judgment for four reasons, any one of which was sufficient to sustain a
defense summary judgment: (1) there were no substantial actual detrimental effects on
competition as a result of the removal of the Banner assets from the relevant markets;
(2) Procaps did not, and cannot, prove substantial market-wide harm; (3) Procaps had
the burden of proving the absence of all procompetitive benefits or justifications, which
it failed to satisfy; and (4) Procaps lacked antitrust standing because it had not been
excluded entirely from the relevant markets. [ECF No. 889, p. 7].
The Court granted summary judgment on the first two grounds, but not on the
third and fourth grounds. [ECF No. 1020]. In that summary judgment Order, the Court
noted that Patheon would not be foreclosed from asserting on appeal (should Procaps
11
pursue an appeal) its theory that Procaps failed to establish the requisite agreement to
establish a violation of Section 1 of the Sherman Act because only its own unilateral
action was involved in the purported unlawful restraint.
The Court entered a final judgment in favor of Patheon, which Procaps appealed.
[ECF Nos. 1021; 1022]. Patheon filed a motion for costs and a motion for attorney’s fees
and non-taxable costs. [ECF Nos. 1023; 1028]. The Court granted in part Procaps’
motion to stay Patheon’s motion for attorney’s fees and non-taxable costs pending the
exhaustion of all appeals but denied it as to taxable costs. [ECF No. 1040]. The Court
later entered an order on Patheon’s bill of taxable costs, awarding Patheon a judgment
of $173,480.80 in taxable costs. [ECF Nos. 1040; 1048].
The Court later granted Procaps’ motion to make a cash deposit into the Court
Registry in lieu of a superseadas bond, and Procaps posted the money. [ECF No. 105051].
The Notice of Appeal [ECF No. 1022] challenged the Court’s: (a) Section 1
summary judgment rulings; (b) July 30, 2014 order rejecting Procaps’ FDUTPA claim as
it related to confidential information; and (c) October 29, 2015 order rejecting Procaps’
Sherman Act claim and the remainder of the FDUTPA claim (i.e., the state law antitrust
claim). Procaps mentioned the Court’s ruling on the FDUTPA claim in its Civil Appeal
Statement under the heading “issues proposed to be raised on appeal” -- and identified
the question of “whether the court additionally erred” in its ruling on “Procaps’ state
12
law claims.” [ECF Nos. 1073-1; 1073-2, Klisch Decl., ¶ 16 & Exhibit A]. And its appellant
brief, filed February 18, 2016: (a) specifically referenced FDUTPA (“Sherman Act claims
and corresponding FDUTPA claim”); (b) admitted that its FDUTPA claim “rises or falls
with the Sherman Act claims;” and (c) argued that “[h]ad the trial court applied the
correct legal standard, it would have imposed liability under Procaps’ Sherman Act § 1
and corresponding FDUTPA claims.” [ECF No. 1045-1, pp. 1, 3, 23 n. 1, 28, 62].
Procaps coupled its 62-page brief with a 13-volume appendix totaling nearly
2,900 pages.
Patheon filed a 65-page brief, followed by a four-volume appendix of nearly 700
pages. Procaps filed a 32-page reply brief, followed by a 121-page supplemental
appendix.
After the parties briefed the issues, and with the benefit of oral argument, the
Eleventh Circuit Court of Appeals affirmed the Court’s summary judgment ruling.
Procaps S.A. v. Patheon, Inc., 845 F.3d 1072 (11th Cir. 2016). In doing so, the Eleventh
Circuit explained that “at bottom, this is essentially a breach of contract case – and so
Procaps’s failure to support an antitrust theory is not all that surprising.” Id. It cited
another appellate case 3 for the proposition that “[s]ome antitrust cases are intrinsically
hopeless because . . . they merely dress up in antitrust garb what is, at best, a business
Stop & Shop Supermarket Co. v. Blue Cross & Blue Shield of R.I., 373 F.3d 57, 69 (1st
Cir. 2004).
3
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tort or contract violation.” Id. And it noted that Procaps’ case “is such a case.” Id. As
noted above, however, a breach of contract claim would have been subject to the
arbitration provision of the Collaboration Agreement.
The Court then entered orders for release of the funds in the Court Registry [ECF
Nos. 1065-66; 1068].
Patheon then filed, under seal, a Supplemental Motion for Attorney’s Fees and
non-taxable costs [ECF No. 1072]. After extensive briefing, a multi-hour hearing and
motion practice on other legal issues, Patheon filed a supplemental declaration [ECF
No. 1156], explaining that the revised total amount sought is $18,494,846. [ECF No.
1156].
In its initial motion, Patheon pointed out [ECF No. 1030, p. 21] that the Court
previously set the hourly rate for eight of its attorneys (concerning an earlier fees
award), which effectively required Patheon to use an average hourly rate discount of
47.25%. In its Supplemental Motion, Patheon used higher hourly rates for fees incurred
in 2016 and 2017 because its hourly rates increased over time.
Nevertheless, the motion noted that the rates represent a 47.25% reduction off its
primary law firm’s standard rates. The declaration which Patheon submitted in support
of its Supplemental Motion [ECF No. 1073-1, p. 12], explained that it incurred $2,245,327
in fees in this case (since the first motion) and on appeal but is seeking only $1,395,741
in fees. This means Patheon is seeking only approximately 62% of its fees since the first
14
motion, reflecting a 38% discount. The hourly fees used for the attorneys from the
Cooley firm (primary, lead counsel) were reduced by 47.25%, regardless of whether the
hourly rates increased in 2016 or 2017.
Alleged Prior Misconduct by Procaps’ Lead Counsel
Patheon argues that the Court should consider the prior litigation history of
Procaps’ primary, lead litigation attorney when assessing the amount of attorney’s fees
it requested here. Procaps objects, and the parties have extensively briefed and argued
the issue. These contrary positions all arise from SP Healthcare Holdings, Inc. v. Surgery
Centers Holdings, LLC, Case No. 11-CA-005595, Thirteenth Judicial Circuit of Florida,
and Case Nos. 2D14-3503 and 2D14-4458 (consolidated), Second District Court of
Appeal.
In a June 2, 2014 Order, Circuit Court Judge Paul L. Huey of the Thirteenth
Judicial Circuit in and for Hillsborough County, Florida, Complex Business Litigation
Division, issued a seven-page, single-spaced Order Granting in Part and Denying in
Part Motion for Sanctions. [ECF No. 1148-1]. Judge Huey began his analysis by noting
that the sanctions motion “raises serious issues.” [ECF No. 1148-1, p. 2]. He then noted
that he “specially finds that it was not filed out of spite, sour grapes or for an ulterior
purpose.”[ECF No. 1148-1, p. 2]. He then explained that Procaps’ lead counsel, who was
representing another party in the state court lawsuit, engaged in “consistent delays and
15
obfuscations” and “made it unpractical to obtain hearing times for every violation in
real time.” [ECF No. 1148-1, p. 2].
Noting that Procaps’ lead litigation attorney “is a bright, experienced and skilled
trial lawyer” who is also “likeable,” Judge Huey’s Order then said that “the record is
clear that he ‘crossed the line’ during the litigation of this case” and that sanctions were
therefore in order. [ECF No. 1148-1, p. 2]. In doing so, he noted that Procaps’ lead
attorney had “set up so many roadblocks to basic discovery” and that he had
“continuously and repeatedly” violated the “boundaries” established by Florida’s Rules
of Professional Conduct, especially those governing meritorious claims, expediting
litigation and fairness to opposing counsel. [ECF No. 1148-1, pp. 2-3].
Judge Huey concluded that Plaintiffs proved that Procaps’ counsel “made
misrepresentations to the trial court and the appellate court.” [ECF No. 1148-1, p. 4].
The judge also described counsel’s behavior at a deposition to be “the very type of
conduct that shames the profession” and was “outside all bounds of integrity, fairness
and civility.” [ECF No. 1148-1, p. 5].
The Surgery Center clients represented by Procaps’ primary litigation attorney
filed a motion for reconsideration of Judge Huey’s Order granting sanctions. [ECF No.
1148-2]. Basically, they urged the Court to carefully reconsider its Order because “it is
necessary to prevent Defendants and their lawyers from being wrongfully indicted by
the Court.” [ECF No. 1148-2, p. 2]. The reconsideration motion contended that “factual
16
misapprehensions” prompted the court to single out one attorney for criticism and
noted that the sanctions order attributed to him by name was a discovery objection that
was actually made by other lawyers at his firm, before he became involved in the case.
[ECF No. 1148-2, p. 2]. It also disagreed with the judge’s general observations about
counsel’s “‘sharp practice’” and “‘petty’ conduct.” [ECF No. 1148-2, p. 23]. The motion
asked Judge Huey to reconsider the findings which caused him to make statements
“unjustifiably damaging” to counsel’s “professional reputation.” [ECF No. 1148-2, p.
23].
At the hearing on the motions for fees and non-taxable costs in this case, Procaps’
primary counsel represented that his clients did not actually and technically seek to
vacate the sanctions order on the merits in the Surgery Centers case. Saying he “want[ed]
to be very careful with my words[,]” he advised that “[e]xactly as phrased, with regard
to a motion directed to Judge Huey to vacate the order on the merits, Carlton Fields
[counsel’s law firm] did not do so.” [ECF No. 1145, p. 77]. Procaps’ counsel also advised
this Court that “a motion to vacate the order titled that way was not done.” [ECF No.
1145, p. 77].
In response to additional questioning from this Court at the hearing, Procaps’
counsel explained that the reconsideration motion
sought, among other things, a correction of mistakes, including conduct
attributed by Judge Huey in his original order imposing sanctions to me
when I wasn’t even involved in the case. There were other mistakes
similar in nature. The motion for reconsideration resulted in the entry of
17
an amended order. I do not believe that we sought to vacate that order
before Judge Huey.
[ECF No. 1145, p. 81].
But the reconsideration motion requested the following relief: “Defendants thus
urge the Court to reconsider and withdraw its misconduct findings.” [ECF No. 1148-2,
p. 23 (emphasis supplied)]. In a post-hearing memorandum, Patheon stated that the
record “shows just the opposite” of the representations Procaps’ counsel made to this
Court and argued that this Court could consider Procaps’ counsel’s prior misconduct
[ECF No. 1155, p. 4].
Judge Huey issued an Order on the reconsideration motion. [ECF No. 1148-3].
Although it made one or two clarifications, the Order did nothing to change the initial
sanctions order. For example, he noted that “the argument about what [Procaps’
counsel] knew during more than a year of hotly contested litigation likewise lacks
credulity, especially in light of the decision by [Procaps’ counsel] to not testify in the
sanctions matter.” [ECF No. 1148-3, p. 2]. Most of the points raised in the
reconsideration motion were resolved with a “needs no response” conclusion by the
judge. [ECF No. 1148-3]. In the final paragraph, Judge Huey noted that he “studied
Florida law at length before ruling” on the initial sanctions order and “found that each
of the violations noted were willful, deliberate and without justification, resulting in
delay, prejudice and waste of Plaintiff’s money and Plaintiff attorneys’ time.” [ECF No.
1148-3, p. 2]. He did not vacate or rescind the sanctions order.
18
On appeal, the parties who obtained the sanctions award in the Surgery Centers
case filed an initial brief, arguing that the trial court abused its discretion by refusing to
dismiss the buyers’ claims as a sanction for their egregious litigation misconduct. [ECF
No. 1148-4]. The appellate brief noted that the trial court had entered “a blistering
sanctions order” and found that the buyers and their counsel “obstructed and evaded
discovery, interfered with depositions and made false statements to the court.” [ECF
No. 1148-4, p. 8]. Therefore, the initial appellate brief argued, it was “unreasonable” to
conclude that they had “a fair and just opportunity to present their case.” [ECF No.
1148-4, p. 8].
Procaps’ counsel’s clients in the Surgery Center case filed an answer brief as the
appellees and, as cross-appellants, filed an initial brief on the cross-appeal. [ECF No.
1148-5]. They challenged Judge Huey’s sanctions order. They noted that the judge,
while criticizing Procaps’ counsel and his law firm “in harsh terms,” never expressly
found that they acted “solely for bad faith purposes.” [ECF No. 1148-5, p. 84]. They
asked the appellate court to reverse Judge Huey’s findings of misconduct “in their
entirety” and to remand for several purposes. [ECF No. 1148-5, p. 95]. The appellants
filed an answer brief in which they asked the appellate court to affirm the sanctions
award. [ECF No. 1148-6]. Procaps’ counsel’s clients filed a reply brief on the crossappeal, repeating their position that “the sanctions order should be reversed in its
entirety.” [ECF No. 1148-7, p. 10].
19
The Second District Court of Appeal issued its order on the consolidated appeals
in the Surgery Center cases. [ECF No. 1148-8]. It said, “[w]e conclude, without comment,
that the arguments raised by the appellants [i.e., the parties opposing the clients
represented by Procaps’ lead counsel and his firm] are without merit.” [ECF No. 1148-8,
p. 2]. It then held, in the same introductory paragraph, that it did not have jurisdiction
to consider the appeal of the sanctions orders, and therefore dismissed that portion of
the appeal. [ECF No. 1148-8, p. 2]. Specifically, the appellate court explained that “an
order that only determines entitlement to attorney’s fees and does not set the amount is
a nonfinal and nonappealable order.” [ECF No. 1148-8, p. 11]. Therefore, the appellate
court determined that it lacked jurisdiction to challenge the order determining
entitlement. [ECF No. 1148-8, p. 11].
At the May 30, 2017 hearing in this Court on the motions for fees and non-taxable
costs, Procaps’ lead trial counsel advised that the Surgery Centers appellate court
“rejected all arguments put forth by the appellants[.]” [ECF No. 1145, p. 87]. And in a
post-hearing memorandum, Procaps’ lead counsel argued that “[i]t was apparent to
undersigned counsel that the Second District sent a message to the parties about the
errant findings in the sanctions order when it rejected the opponents’ appeal as ‘without
merit’ and awarded Carlton Fields’ clients their attorneys’ fees.” [ECF No. 1149, p. 3].
But Patheon contends that “there is no basis whatsoever” for that argument.
[ECF No. 1155, p. 4]. Patheon says that nothing in the appellate opinion “suggest[s]
20
anything of the sort -- nor could it because the appellate court never addressed the
merits of the sanctions order other than” to rule that the “sanctions orders were not yet
appealable.” [ECF No. 1155, p. 4 (emphasis in original)].
After the Second District Court of Appeal issued its opinion and awarded
appellate attorney’s fees to the clients represented by Procaps’ current counsel [ECF No.
1148-9], the Surgery Centers parties entered into a written mediated settlement
agreement in which they, among other provisions, agreed to request by joint stipulation
an order from the trial court withdrawing and vacating nunc pro tunc Judge Huey’s
original sanctions order, his amended order on the motion for reconsideration, and any
motion or orders related to them in any fashion. [ECF No. 1148-10].
In an April 28, 2017 Order, a circuit court judge (not Judge Huey, but a successor
circuit court judge) 4 entered an order withdrawing the sanctions motion, vacating the
initial sanctions order, and vacating the amended sanctions order. [ECF No. 1148-11].
The order was entered three days before Procaps filed its opposition to Patheon’s fees
motion in this Court. In that opposition, Procaps argued that Patheon’s reliance on the
The copy of the written Order which Procaps filed at the Undersigned’s direction
[ECF No. 1148-11] does not contain the name of the judge, nor does it contain a
signature. Instead, the order’s signature block merely says “circuit judge” and
“electronically conformed 4/28/2017” on the signature line. At the May 30, 2017 hearing,
Procaps’ lead counsel identified the judge who vacated the sanctions orders as “Judge
Stevens.” [ECF No. 1145, p. 80 (spelling selected by the court reporter who transcribed
the digital audio recording of the hearing)]. The Court takes judicial notice of the fact
that the Thirteenth Judicial Circuit’s official judicial directory page on its website lists
Scott Stephens as a circuit judge in the business court.
4
21
Surgery Centers sanctions order and findings was misplaced because those rulings were
vacated nunc pro tunc.
Procaps’ Waiver of Challenges to Hourly Fees and Reasonableness of Fees
Local Rule 7.3(b) requires the respondent to “describe in writing and with
reasonable particularity each time entry or nontaxable expense to which it objects, both
as to issues of entitlement and as to amount[.]” In addition, it further requires a party
objecting to an hourly rate to have its counsel “submit an affidavit giving its firm’s
hourly rates for the matter and include any contingency, partial contingency, or other
arrangements that could change the effective hourly rate.” Local Rule 7.3(a).
Procaps never challenged the hourly rates or described the specific time entries it
contested.
In a post-mandate Order [ECF No. 1057], the Court flagged as pending the issue
of whether Procaps waived its objections to the amount of the fees request. In addition,
the Order required Procaps to take certain steps if it were to take the position that
Patheon’s fee requests are unreasonable “because its attorneys did not bill efficiently or
wisely or because there was unnecessary duplication.” [ECF No. 1057, p. 3]. Specifically,
Procaps was obligated to file an affidavit from counsel, explaining the total time for all
Procaps attorneys and paralegals who worked on the case and to file copies of the
billing records. [ECF No. 1057, p. 3].
22
Procaps did not file an affidavit from its counsel, nor did it submit copies of its
attorneys’ billing records. Likewise, Procaps did not address the waiver issue in its
opposition memorandum.
At the May 30, 2017 hearing, Procaps’ counsel conceded that Procaps is “not
challenging the hourly fees or the reasonableness of various tasks” because it is arguing
only that Patheon is “not entitled to fees under FDUTPA or any of the other theories
that they’re seeking fees under.” [ECF No. 1145, pp. 39-40].
So Procaps has undoubtedly waived all arguments about the hourly rates used
by Patheon’s attorneys and about the reasonableness and efficiency of the attorneys’
time.
Applicable Legal Principles and Analysis
FDUTPA
Under FDUTPA, a “prevailing defendant” is permitted to recover its attorney’s
fees and costs from a non-prevailing plaintiff after the exhaustion of all appeals. Am.
Registry, LLC v. Hanaw, No. 2:13-cv-352, 2015 WL 5687693, at *2 (M.D. Fla. Sept. 25,
2015); see, e.g., Fla Stat. § 501.2105(1) (“prevailing party” may recover its “reasonable
attorney’s fees and costs from the non-prevailing party”). Patheon is the “prevailing
party” and Procaps is the “non-prevailing party” under “the FDUTPA claim, as
evidenced by the Final Judgment entered in favor of [Patheon] and against the
plaintiff.” Victory Int’l (USA) LLC v. Perry Ellis Int’l, Inc., No. 08-20395, 2009 WL 1956236,
23
at *5 (S.D. Fla. July 7, 2009); [ECF No. 1021]. Patheon prevailed on appeal, Procaps did
not pursue a motion for reconsideration in the Eleventh Circuit, and did not seek
further review in the United States Supreme Court.
Therefore, there is no dispute that Patheon prevailed and that now is the time to
evaluate its ability to recover under FDUTPA.
Because FDUTPA is a Florida state statute, this Court is bound by Florida
Supreme Court decisions interpreting FDUTPA. If there are no Florida State Supreme
Court cases, then this Court is “bound to follow an intermediate state appellate court
unless there is persuasive evidence the [Florida Supreme Court] would rule otherwise.”
Bravo v. United States, 577 F.3d 1324, 1326 (11th Cir. 2009) (internal citations omitted).
Procaps does not challenge the rule that the Undersigned is obligated to follow
binding Florida state law interpreting FDUTPA. At the hearing, Procaps’ counsel, in
response to a question from the Court, said: “Yes, you are bound to follow Florida law,
but Florida law, Chapter 501, makes it very clear that an award of fees under FDUTPA
is discretionary.” [ECF No. 1145, p. 22].
Both Patheon and Procaps agree that the non-exhaustive list of discretionary
factors that are considered when evaluating a FDUTPA fee application is found in
Humane Society of Broward County, Inc. v. Florida Humane Society, 951 So. 2d 966, 971-72
(Fla. 4th DCA 2007):
(1) the scope and history of the litigation; (2) the opposing party’s ability
to satisfy the award; (3) whether an award would deter others from acting
24
in similar circumstances; (4) the merits of the respective positions,
including the degree of [Procaps’] culpability or bad faith; (5) whether the
claim brought was not in subjective bad faith but was frivolous,
unreasonable, or groundless; (6) whether the defense raised a defense
mainly to frustrate or stall; and (7) whether the claim brought was to
resolve a significant legal question under FDUTPA law. 5
Id.
The Court will discuss these discretionary factors from Humane Society on a
factor-by-factor basis. The Court will then address Procaps’ argument that the FDUTPA
claim is a “tag-along” claim which would not justify a FDUTPA prevailing party fees
award to Patheon. Procaps contends that its “tag-along” theory, supported by several
federal district court opinions, is one of the myriad discretionary factors which the
Court can consider.
Scope and History
As noted in the now-affirmed Order granting Patheon’s summary judgment
motion, this lawsuit was an “expensive, bitter, time-consuming and hard-fought legal
battle in federal court.” [ECF No. 1020, p. 1]. The sheer number of docket entries
establishes the rigor each side fought for its position. This Court held many hearings,
both on discovery issues and substantive motions. Many of the hearings lasted multiple
hours, and few hearings lasted less than an hour.
Before a 1994 amendment, FDUTPA provided for the mandatory award of
reasonable attorney’s fees to any prevailing party. The 1994 amendment “placed an
award of prevailing party attorney’s fees within the discretion of the trial court.”
Humane Soc., 951 So. 2d at 971 (internal citations omitted).
5
25
Nothing was easy in this case. Nothing. Basically, the parties fought about
anything and everything. Scheduling depositions was difficult. Obtaining documents
and ESI was problematic. Taking the depositions was often stressful. The deposition
transcripts and emails exchanged between counsel (many of which were submitted to
the Court) reflect the acrimony underlying every aspect of this case. Facilitating the
forensic analysis of Procaps’ ESI was grueling. Although it was with Court permission,
Procaps changed its theory of the case after the Court’s ruling on the initial round of
summary judgment motions, switching from a per se antitrust theory to a rule of reason
approach. This generated the need for more discovery.
Procaps’ initial litigation strategy was to threaten to derail the Banner acquisition
and cause Patheon to pay a significant settlement to allow the transaction to move
forward. But the Collaboration Agreement required the arbitration of most claims, so if
Procaps wanted to proceed in a Court-filed lawsuit, then it needed to pursue claims
exempt from the arbitration provision. The antitrust claim and the FDUTPA claim,
which was largely based on the same antitrust theories, fit into this narrow exception to
the arbitration provision.
As the Court has noted several other times in this case, the litigation was
especially unpleasant and nasty. Counsel routinely launched personal attacks against
each other, and the motions and memoranda were routinely riddled with insults,
allegations of bad faith and unprofessionalism, and, in general, purple prose.
26
Procaps largely based its FDUTPA claim on its antitrust claim theory and sought
both damages and attorney’s fees under this count. [ECF No. 1, ¶ 108]. It continued to
press despite the Court’s warning that it might be liable for all of Patheon’s fees under
FDUTPA. [ECF No. 487, pp. 115-16]. 6 And after the Court dismissed Procaps’
“confidential information” FDUTPA theory, [ECF No. 565, p. 43], the FDUTPA claim
became wholly duplicative of the federal antitrust claim, but for the prevailing party fee
provision.
Procaps’ Financial Ability to Satisfy the Award
For all practical purposes, this is not a genuine issue, and it certainly appears that
Procaps has the financial wherewithal to pay an award of $18.5 million. In its initial fees
motion, filed in December 2015, Patheon explained that Procaps’ market value was
$238.9 million, that it had total assets of $187.6 million and that its 2012 EBITDA 7 was
$24.3 million. [ECF No. 1028, p. 7]. 8
At the April 24, 2016 hearing on the parties’ competing summary judgment
motions, the Court advised Procaps that it understood its apportionment argument but
then added the following point: “But given the fact that you told me earlier that your
FDUTPA claim is in large part based on the antitrust claim, I don’t know how you
would carve out or segregate out all the work done on the antitrust claim from the
FDUTPA.” [ECF No. 487, p. 116].
6
EBITDA is earnings before interest, tax, depreciation and amortization. Many
financial professionals deem it a helpful measure of a company’s financial health by
allowing analysts to generate useful comparisons between companies and to project
long-term profitability and the ability to pay off future financing. Some financial
professionals argue against the significance of an EBITDA analysis, noting that it is not
part of generally accepted accounting principles, may be deceptive and might not
7
27
In its response [ECF No. 1094], Procaps does not exactly say that it lacks the
ability to pay. Instead, it raises other points, none of which directly address the issue of
ability to pay. Procaps discusses Patheon’s financial situation, such as noting that
Patheon’s revenues are “close to $2 billion.” [ECF No. 1094, p. 13]. But even if that were
true, it would have no bearing on Procaps’ ability to pay. Procaps argues that the 2012
EBITDA figure of $24.3 million is “not the same thing as net profit after taxes and
therefore not an indication of ‘ability to pay.’” [ECF No. 1094, pp. 12-13]. Again, that
may well be correct, but Procaps does not offer any more-current financial information
and does not disclose what its net profits after taxes actually were in 2012 (or any other
year, for that matter).
Procaps argues, in a detail-free, wholly conclusory way, that the requested award
“would have a substantial negative financial impact on Procaps, amounting to more
than 50% of its 2012 EBITDA.” [ECF No. 1094, p. 11]. But it does not say that it cannot
accurately represent a company’s profitability. Nevertheless, EBITDA is one of the most
important measures that investors consider when a company is being bought or sold.
http://www.businessnewsdaily.com/4461-ebitda-formula-definition (last visited July 20,
2017).
This language is extracted from Patheon’s sealed Motion for Attorney’s Fees and
Non-Taxable Costs. [ECF No. 1028]. This same motion was publicly filed with this
financial information redacted. [ECF No. 1030]. Because Procaps discusses its EBITDA
for 2012 and Patheon’s financials, including its filing of Patheon’s 10-K Form for 2012,
in its publicly filed response to Patheon’s motion, the Court finds it appropriate to
discuss Procaps’ redacted financial information from Patheon’s sealed motion. [ECF
Nos. 1094; 1094-1].
8
28
pay the award, nor does it provide clarification of “substantial” impact. Many
companies required to pay an $18.5 million award might deem it to be “significant,” so
that argument is not particularly helpful without further financial details. Significantly,
it does not even address Patheon’s point that Procaps has (or had, at the time the
motion was filed) total assets of $187.6 million. Procaps also argues that Patheon’s fees
request would “provide [Patheon] with a competitive advantage in the marketplace,” but
this is not a factor relating to Procaps’ ability to pay. [ECF No. 1094, p. 13 (emphasis in
original)].
Based on the information presented (and, for some of Procaps’ positions here, not
presented), the Court finds that Procaps does have the ability to pay an $18.5 million
judgment.
The Merits (including a bad faith assessment)
Procaps’ FDUTPA claim was largely based on its antitrust claim. The confidential
information claim was unconvincing, and the Court granted summary judgment
against Procaps because it had no evidence to support the theory. The common law
unfair competition claim failed because there was no evidence to support it, and its
unusual and attenuated customer confusion theory had no legal basis.
The parties do not dispute that Procaps’ primary focus was on its antitrust claim,
which, after the ruling on the first summary judgment motions was handed down, was
based on a rule of reason approach. But the Eleventh Circuit Court of Appeals held that
29
Procaps “failed to establish the foundational requirement of concerted action necessary
for a Section 1 claim under the Sherman Act[.]” Procaps, 845 F.3d at 1077 (emphasis in
original). Moreover, notwithstanding that fundamental failure, the appellate court held
that Procaps “also failed to show any actual anticompetitive effects.” Id.
So Procaps lost on the merits of its primary claim. However, the Eleventh Circuit
characterized the loss as more than a mere victory for Patheon. It pointed out that
Procaps’ failure to support an antitrust case “is not all that surprising” because the
lawsuit was “essentially a breach of contract case.” Id. at 1087. The Eleventh Circuit
compared the scenario here with an explanation in another antitrust case: “[s]ome
antitrust cases are intrinsically hopeless because … they merely dress up in antitrust
garb what is, at best, a business tort of contract violation.” Id. (internal citation omitted).
Although Procaps argues that it “made a good faith argument based on support
from the case law and the record,” [ECF No. 1094, p. 15], it is difficult for Procaps to
overcome the Eleventh Circuit’s negative comments about the merits of its position.
Confronted with the strong language quoted above from the Eleventh Circuit’s opinion,
Procaps argues that the comments are “simply a rhetorical flourish.” [ECF No. 1094, p.
15]. The Court does not find this argument convincing. Instead, the Court views the
appellate court’s comments as a clear indication of its conclusion that Procaps’ entire
antitrust theory was flawed from the start. Thus, the merits factor supports Patheon’s
fees motion under the discretionary multi-factor analysis.
30
Although the Court finds the merits factor in Patheon’s favor, it recognizes that
Patheon urges other arguments. At bottom, Patheon contends that Procaps “engaged in
plenty of other misconduct” (in addition to its purported misconduct concerning its
failure to implement a litigation hold and properly search for ESI, a failure which led to
the Court-ordered forensic analysis, which generated additional fees and costs and
further delayed the case). [ECF No. 1030, p. 18]. Patheon emphasizes its argument (i.e.,
that Procaps acted in bad faith) in the section of its fees motion concerning the forensic
analysis, which is a separate ground asserted for a fees recovery. [ECF No. 1030, pp. 1620]. Because the Humane Society merits factor includes “the degree of the opposing
party’s culpability or bad faith,” 951 So.2d at 971, it is appropriate to also mention it
here.
In its initial fees motion [ECF No. 1030, pp. 18-19], Patheon lists 16 instances or
categories of misconduct, ranging from “repeatedly disavowing a rule of reason theory
to avoid rule of reason discovery, only to later reverse itself when it was beneficial” to
“improperly instructing witnesses not to answer deposition questions,” and including
an “‘indiscriminate designation’ of 95% of the documents produced in the forensic
analysis as ‘highly confidential’” and “changing position on the date it reasonably
anticipated litigation to limit the scope of the forensic analysis.” [ECF No. 1030, pp. 1819].
31
Patheon’s sealed supplemental fees motion asserts new and additional
allegations of Procaps’ purported bad faith, including allegations that Procaps made
false statements to the arbitrators and made unsubstantiated allegations and arguments
to the Eleventh Circuit. [ECF No. 1072, pp. 3-4]. Procaps filed a motion to strike
Patheon’s references to pending international arbitration. [ECF No. 1085]. In an
omnibus order on pending motions [ECF No. 1125], the Court denied Procaps’ motion
to strike but ruled that Patheon’s references to the pending international arbitration
would not be considered for purposes of determining whether Patheon is entitled to
attorney’s fees and/or non-taxable costs, and for determining the amounts owed, if
necessary. Therefore, this Order will not consider and will not further discuss the
specific allegations concerning the positions taken, representations made, and
testimony provided in the pending arbitration. In an August 16, 2017 filing, Patheon
gave notice that the arbitration panel issued its final award on August 15, 2017. [ECF
No. 1165]. Patheon’s notice did not provide any further details about the arbitration
award. The Court does not know which party prevailed in the arbitration, whether a
damages award was issued and, if so, the amount of the award.
Patheon also filed a separate sealed motion to show cause why Procaps should
not be sanctioned for violating a protective order. [ECF No. 1071]. The motion alleges,
in general, that Procaps’ counsel improperly gave one of its client’s principals
documents in violation of a protective order entered by this Court. Patheon’s motion
32
contends that Procaps’ counsel did this in connection with an arbitration proceeding
concerning the very Collaboration Agreement at issue in this federal antitrust/FDUTPA
case. Procaps filed its arbitration demand after losing the summary judgment motion
here and after the appeal of that summary judgment order was filed.
Patheon’s separate show cause motion does not directly implicate its motions for
fees and costs, as those motions are not expressly based on the argument that Procaps
acted in bad faith in the arbitration by violating this Court’s protective order. This Court
has already initially advised the parties that an evidentiary hearing will be needed to
resolve the parties’ competing positions on the protective order issue. The Court has not
yet scheduled that evidentiary hearing but anticipates doing so in the near future.
Nevertheless, the Court has not finally decided whether an evidentiary hearing will
take place. The Court has required supplemental briefing on issues related to some of
Procaps’ objections to an evidentiary hearing.
To the extent Procaps pursues an appeal of this award of fees and non-taxable
costs, the record (including sealed filings) contains the information which Patheon relies
upon for the challenges it makes to Procaps’ conduct in the arbitration (other than the
alleged violation of the protective order, which will be supplemented by the evidence
received in the evidentiary hearing), and what effect, if any, the conduct (or
misconduct) there should have on the analysis here. Therefore, although the Court is
not relying upon any of the events in the arbitration as part of its analysis of the
33
motions for attorney’s fees and non-taxable costs, Patheon would not be foreclosed
from asserting these arguments on appeal. Thompkins v. Lil’ Joe Records, Inc., 476 F.3d
1294, 1302 (11th Cir. 2007), cert. denied, 552 U.S. 1022 (2007) (reviewing court can affirm
summary judgment on any legal ground, regardless of the grounds addressed and
relied upon by the lower court); see, generally, Nat’l R.R. Passenger Corp. v. Rountree
Transp. & Rigging Co., 286 F.3d 1233, 1263 (11th Cir. 2002) (finding that appellate court
may affirm ruling below “as long as the judgment entered is correct on any legal
ground regardless of the grounds addressed, adopted or rejected by the district court”)
(internal quotation omitted).
Concerning the 16 separate categories of purported additional misconduct (and
the newer bad faith assertions raised in Patheon’s supplemental fees motion), the Court
is not going to engage in a point-by-point review of this Patheon theory. Evaluating the
facts and documents underlying each of the 16 types of alleged bad faith (and the new
bad faith assertions concerning representations made to the Eleventh Circuit) would be
an arduous task and would require dozens of pages of discussion to thoroughly
analyze.
Because fees litigation is not intended to “result in a second major litigation,”
Hensley v. Eckerhart, 461 U.S. 424, 437 (1983), the Court declines to tackle this massive
project. It is unnecessary. The Court is able to rule on the fees motion without diving
into a 16-scenario pool of purported misconduct and without further swimming into
34
the waters of purported bad faith from the appeal. As noted, Patheon can, if it wishes,
refer to these arguments (and the evidence it filed to support them) on appeal.
Thompkins, 476 F.3d at 1302.
Patheon also urges the Court to consider the conduct (or, to be more accurate,
alleged misconduct) of Procaps’ lead litigation attorney in the state court Surgery Centers
lawsuit in which Judge Huey entered the sanctions award. Rather than slotting this
argument under the deterrence category of the Humane Society factors for assessing a
FDUTPA fees request, Patheon’s initial fees motion discusses it under its second legal
argument heading -- concerning “the forensic analysis and Procaps’ change in theory.”
[ECF No. 1030, pp. 14-18].
If the Court were to consider the alleged misconduct in Surgery Centers (which it
is not going to do, as explained below), then the Court would consider it under the
deterrence or bad faith Humane Society factors, not in connection with the Patheon
argument about Procaps’ ESI discovery failings which led to the forensic analysis. The
forensic analysis scenario is actually a separate theory being advanced by Patheon,
apart from the primary FDUTPA theory.
Now that Procaps has, at the Court’s direction, filed copies of the relevant
Surgery Centers orders, motions and briefs, there is little or no dispute about what
actually happened. But there is still a dispute (and a significant one, at that) about the
35
significance of Surgery Centers and whether the now-vacated sanctions order could, or
should, be considered here.
Procaps conceded at the hearing that, as a general matter, an attorney’s prior
misconduct could be considered under the discretionary FDUTPA factors. [ECF No.
1145, pp. 71-73]. So the parties agree that, as a matter of law, a court may consider an
attorney’s prior misconduct to determine whether the prevailing party is entitled to fees
and costs under FDUTPA, but neither party actually found a case which specifically
says that. [ECF No. 1155, p. 2]. But the dispute here is not whether a court could consider
the misconduct from another lawsuit in a FDUTPA case. Instead, it is whether this
Court, in this case, can properly consider the purported misconduct when the Surgery
Centers sanctions order against Procaps’ counsel was vacated.
Each side submitted a memorandum on whether this Court may consider the
now-vacated Surgery Centers sanctions order. [ECF Nos. 1149; 1155]. In its
memorandum, Procaps noted that “there appears to be no FDUTPA fees case in which a
court has considered findings of misconduct in another unrelated case, much less one in
which the order was vacated.”[ECF No. 1149, p. 2]. It emphasized that “only the ‘scope
and history of the litigation’ before the Court has ever been cited as a FDUTPA fees
factor.” [ECF No. 1149, p. 2 (emphasis in original)]. Procaps did not, however, cite
anything to rescind, change or modify counsel’s in-hearing concession that prior
attorney misconduct could theoretically be considered as a discretionary FDUTPA fees
36
factor. And it cited no case holding that the prior misconduct could not, or should not,
be added to the mix of non-exhaustive discretionary factors.
Instead, Procaps’ primary argument on the prior attorney misconduct issue is
that a vacated order is void and therefore cannot be judicially noticed for its factual
findings. See, e.g., Anago Franchising, Inc. v. Shaz, LLC, 599 F. App’x. 937 (11th Cir. 2015)
(explaining that a court may judicially notice only that the sanctions order was entered
and then vacated, and “not for the truth of the facts set forth in the order,” and
affirming district court’s declination to judicially notice “factual findings” in a “nowvacated order in the prior lawsuit”) (internal quotation omitted); United States v. Jones,
29 F.3d 1549, 1553 (11th Cir. 1994) (noting “indisputability [of facts] is a prerequisite”
before judicially noticing another court’s findings); Cavero v. The Law Offices of Erskine &
Fleisher, No. 12-21196, 2012 WL 12886982, at *5 (S.D. Fla. Nov. 15, 2012) (“Defendants’
request ignores the fact that the Court cannot examine the contents of these [judiciallynoticed] documents” as evidence).
Procaps’ law firm denies that it settled the Surgery Centers sanction order after
appeal because it was pressured to do so and noted that its Surgery Centers clients
prevailed on every issue raised in the Surgery Centers appeal, including an attorney’s
fees award for both the trial court litigation and the appeal. [ECF No. 1149, p. 3].
Procaps also emphasized that the opponent requested mediation after the appellate
37
decision and that the Surgery Centers clients “obtained a substantial, multi-million dollar
settlement.” [ECF No. 1149, p. 3].
On the other hand, Patheon’s memorandum cites cases to support its view that
“courts may, for determining sanctions, consider sanctions orders in other cases that
were vacated per a settlement.” [ECF No. 1155, p. 2]. For example, Patheon cites
Goodman v. Tatton Enterprises, 2012 U.S. Dist. LEXIS 189060, at *60-67, 107-12 (S.D. Fla.
2012) and Bernal v. All American Investment Realty, Inc., 479 F. Supp. 2d 1291, 1331 & n.
57 (S.D. Fla. 2007). [ECF No. 1155, p. 2]. In Goodman, the Court explained that a
“relevant and proper consideration in the Court’s analysis of whether sanctions are
appropriate includes consideration of [counsel’s] litigation history.” 2012 U.S. Dist.
LEXIS 189060, at *107-08. And in Bernal, the Court considered that other divisions of the
Court “[had] previously admonished or imposed sanctions” against an attorney, “with
no apparent deterrent effect.” 479 F. Supp. 2d at 1331.
The Court observes that the issue of whether the vacated Surgery Centers
sanctions order may be factored into the Humane Society factors is far from clear. Both
sides raise good arguments, and both sides assert valid theories to counter their
opponent’s arguments. In the Court’s view, the more-prudent course is to not
substantively consider the vacated sanctions order. The attorney’s fees award in
Patheon’s favor is based on the other factors, and the purported misconduct in Surgery
Centers is not necessary to justify the FDUTPA fees award. Nevertheless, similar to
38
other Patheon-raised arguments discussed in this Order, Patheon is free to argue the
Surgery Centers factor on appeal, as the record evidences the developments from that
case.
So the Court is not going to consider the Surgery Centers case and similarly will
not specifically consider the 16 bad faith factors (from this case) and the alleged
appellate-level misconduct asserted by Patheon.
Nevertheless, from a 30,000-foot broad view of this case, which consumed a
significant part of the Court’s judicial life for the past few years, the Court is extremely
familiar with the background.
For purposes of this Order, suffice it to say that the Court is, at a minimum,
extremely disappointed in the way that Procaps and its counsel handled many aspects
(both substantive and procedural) of this complex case. It is perhaps conceivable that all
16 bad faith factors and the alleged misconduct before the appellate court and
arbitration panel were merely the results of neutral decisions that only in retrospect
may appear problematic. And it is theoretically possible that Procaps and its counsel
were simply overwhelmed with the complexity of the case and did not have sufficient
time to avoid developments that now are fodder for Patheon’s argument that Procaps
and its counsel repeatedly acted in bad faith.
The facts underlying the 16 bad faith factors are, for the most part, true or
substantially true. They happened. The Court knows that they happened (or
39
substantially happened) because of its involvement in this case for the past four-and-ahalf years. The Court does not, however, have any insight into the accuracy of Patheon’s
newer bad faith allegations concerning Procaps’ representations to the appellate court
or the arbitration panel. The Undersigned has, of course, read the allegations, the
opposition response, and the reply but has not otherwise evaluated the merits of these
new allegations.
Procaps has explanations, rationales, additional information, clarifications and
other ways in which it addresses these 16 bad faith factors from the trial level portion of
this case. As noted, the Court is not going to engage in a fine-tuned, digging-into-theweeds approach for each factor. But the Court has no difficulty in determining that, at a
minimum, Procaps and its counsel made this case far more difficult than it had to be,
and that this caused Patheon to incur additional attorney’s fees and costs. Patheon
contends that Procaps did more than be difficult, but the Court is not going to make a
finding on whether the conduct of Procaps and its counsel reached the bad faith level.
Patheon has preserved the issue for appellate review, however, as it raised the
argument and submitted evidence that it says supports the argument.
Frivolous, Unreasonable or Groundless
Although frivolousness is a factor which may be considered under the
discretionary Humane Society protocol, it is not a requirement for recovery of a FDUTPA
attorney’s fees award as a prevailing party. In fact, courts award fees under FDUTPA to
40
defendants who prevail on summary judgment on a FDUTPA claim after a plaintiff
initially gets past a motion to dismiss. Chow v. Chak Yam Chau, 640 F. App’x 834, 835, 843
(11th Cir. 2015) (finding fee award appropriate under FDUTPA where court granted
summary judgment to defendants on FDUTPA claim); Flexiteek Americas, Inc. v. Plasteak,
Inc., No. 12-60215, 2016 WL 7497485, at *21 (S.D. Fla. Feb. 4, 2016), report and
recommendation adopted, 2016 WL 7508240 (S.D. Fla. 2016) (awarding fees where court
granted summary judgment on FDUTPA claims to defendants even though “there is no
evidence that the Plaintiffs’ FDUPTA [sic] claims were brought in bad faith”); Prato v.
Hacienda Del Mar, LLC, No. 2:08-cv-883, 2011 WL 3875373, at *2 (M.D. Fla. August 31,
2011) (awarding defendant FDUTPA fees where plaintiff prevailed at summary
judgment on FDUTPA claim, plaintiff lost at trial, there was no bad faith, and the claims
were not unreasonable); Mandel v. Decorator’s Mart, Inc., 965 So. 2d 311, 314-15 (Fla. 4th
DCA 2007) (finding fees appropriate where plaintiff lost FDUTPA claim at trial).
In the instant case, the Court rejected Procaps’ non-antitrust FDUTPA claims at
the summary judgment stage. And the antitrust strand of its FDUTPA claim was based
on the same intrinsically hopeless theory (i.e., there never was any agreement or
concerted action to violate the antitrust laws).
Procaps argues that its claims were not meritless or frivolous “simply because
the plaintiff ultimately lost the case.” [ECF No. 1094, p. 17]. While this position is surely
correct as a general proposition of law, it overlooks the specific condemning language
41
used by the Eleventh Circuit in this particular case. Moreover, the factor here is
“frivolous, unreasonable or groundless,” but both parties seem to treat all three subfactors as if they are the same. Both parties discuss only the frivolous factor; they do not
separately discuss whether Procaps’ claim was unreasonable or groundless, which may
well be a lower burden than frivolousness.
In its sealed reply, Patheon notes that it “did not argue that Procaps’ claims were
frivolous.” [ECF No. 1130, p. 2]. The Court is not here making a finding that Procaps’
claim was frivolous. On the other hand, the Court is finding that the antitrust claim,
which was embodied in the FDUTPA claim, was either unreasonable or approaching
the level of being unreasonable. An antitrust plaintiff pursuing a Section 1 Sherman Act
claim must establish “concerted action” between two or more persons. Monsanto Co. v.
Spray-Rite Serv. Corp., 465 U.S. 752, 768 (1984). But the Eleventh Circuit held that
Procaps had “wholly failed” to establish concerted action in restraint of trade. Procaps,
845 F.3d at 1080. It also held that any claim that Banner was Patheon’s co-conspirator “is
dead in the water.” Id. at 1082.
Because Procaps needed to demonstrate concerted action to pursue its antitrust
theory, arguments seeking to establish concerted action which were “dead in the water”
or which “wholly failed” are likely either groundless or close to being groundless. Id. at
1080, 1082. The arguments might not reach the extreme negative level of being frivolous,
but they certainly were not powerful or persuasive.
42
But regardless of what adjective could be appropriately linked to Procaps’
antitrust claims (both separately and embodied in its FDUTPA claim), the significant
point is that the Eleventh Circuit effectively concluded that Procaps lacked a viable
legal theory. Therefore, it is difficult to see how the frivolous, unreasonable or
groundless factor could be fairly analyzed to wind up as a positive point in Procaps’
column. To the contrary, the Court places this factor in the Patheon column.
Deterrence (of others)
Patheon contends, in a somewhat conclusory fashion, that a full award would
deter others from doing the things it condemns Procaps for in this case: “adopting a
litigation strategy designed to delay entry of judgment and multiply proceedings,” and
“shifting the costs of such obligations to their adversaries by requiring their adversaries
to participate in a forensic analysis to ensure document production.” [ECF No. 1030, p.
13]. On the other hand, Patheon also says that a fee award in its favor would “incent
parties to comply with their discovery obligations” and would not deter plaintiffs from
bringing meritorious or even arguable claims -- because, in contrast, it says Procaps’
claims here “were insufficient as a matter of law.”[ECF No. 1030, p. 13]. Patheon also
argues that a strong sanction (by way of a substantial fee award) is needed because
Procaps’ counsel “has not been deterred at all by Judge Huey’s sanctions order.” [ECF
No. 1072, p. 21 (emphasis in original)].
43
Procaps’ opposition argues that a fee award would undermine strong antitrust
policy, designed to “encourage suits by plaintiffs acting as private attorneys general.”
[ECF No. 1094, p. 13]. The Undersigned is not convinced by Procaps’ argument.
First, the record evidence supports Patheon’s perspective that Procaps framed an
antitrust claim (which was in large part the basis for its FDUTPA claim) only because it
was a limited exception to the arbitration provision and because it wanted to use the
threat of treble damages to pressure Patheon into paying a hefty settlement.
Second, the antitrust claim was weak, at best, as evidenced by the Eleventh
Circuit’s negative comments about the antitrust claim. Thus, a fee award would not
deter legitimate antitrust claims brought by private attorneys general. And to the extent
that it would deter a putative plaintiff from bringing an “intrinsically hopeless”
antitrust claim, that is a positive result, not a consequence to be avoided. So this factor is
in Patheon’s favor. Hanaw, 2015 WL 5687693, at *6 (awarding defendant FDUTPA fees
as a “deterrent,” even where the FDUTPA claim was “entirely dependent” on other
claims, because “discovery revealed holes in the theory of the case” and there was a
“relative lack of merit of the claims that formed the basis of the FDUTPA claim”).
Did the defense raise a defense mainly to frustrate or stall?
Patheon did not discuss this factor in its initial motion, and Procaps discusses it
only briefly. Patheon mentions it, though only succinctly, in its reply.
44
This factor appears relevant primarily when a plaintiff prevails in a FDUTPA case
and is based on the reasonableness of the defendant’s positions and the strategy
underlying its tactics. But in the instant case, the defendant prevailed, so it seems
somewhat odd to discuss as a Humane Society factor whether Patheon’s defenses were
designed to frustrate or stall. Its primary defenses succeeded, as evidenced by the
Eleventh Circuit’s opinion, which affirmed the defense summary judgment on two
separate grounds, either one being sufficient.
Nevertheless, Procaps argues that Patheon proffered some defenses that were
unsuccessful. The Court is not convinced that Patheon should be somehow blamed for
asserting a few defenses upon which it did not prevail. Those defenses were not
designed to frustrate or stall the case, and Procaps has not explained why they were.
Instead, Procaps merely notes that some defenses failed. This is insufficient to cause this
factor to tip in Procaps’ favor, and the Court designates this factor in Patheon’s favor
(though it is a comparatively minor factor in the Humane Society analysis in this specific
case).
Was the claim brought to resolve a significant FDUTPA legal question?
In its initial fees motion, Patheon addresses this factor only in a footnote. [ECF
Nos. 1030, p. 13 n. 5; 1147, p.1]. It contends that this factor is neutral because the case
was not brought to resolve a significant legal issue under FDUTPA. Procaps’ response
45
[ECF No. 1094, p. 18] agrees that this factor is neutral. Given the lack of a dispute and
the absence of briefing on this issue, the Court will classify this factor as neutral.
Are Fees Available When a FDUTPA Claim Is A So-called “Tag-along” Theory?
This issue is not one of the specific Humane Society factors, but Procaps’ primary
argument is that FDUTPA fees are legally unavailable here because its FDUTPA claim
was primarily a repeat of its federal antitrust claim (which does not provide for
attorney’s fees for a prevailing defendant).
Procaps argues that this legal position is the most important of the factors used
in the discretionary Humane Society analysis, which, as noted earlier, is a non-exclusive
list of elements. In fact, it contends that this factor is, by itself, dispositive. Procaps argues
that awarding fees and costs under FDUTPA here would be an end run around the
Congressional decision to not award fees and costs to a prevailing defendant in a
federal antitrust claim and would be tantamount to awarding fees under the Sherman
Act.
More specifically, Procaps argues that a FDUTPA fee award might be
appropriate for a prevailing defendant when the FDUTPA claim is the main or primary
claim -- but not when it is a derivative or dependent or a tag-along claim. Procaps also
argues that a FDUTPA award to Patheon would “make for terrible policy” and “would
create a chilling effect” on putative plaintiffs who want to function as “private attorneys
general” in order to “enforce competition laws in this country.” [ECF No. 1145, p. 38].
46
According to Procaps, because this one unlisted factor is in its favor, it prevails on its
opposition, and Patheon, the prevailing party, cannot obtain any fees and non-taxable
costs under FDUTPA, which permits a court to award fees and costs to either a
prevailing plaintiff or a prevailing defendant.
Procaps relies upon several non-binding federal district court cases. And
although it acknowledged that this Court could “theoretically” award fees under
FDUTPA without a finding of bad faith or vexatiousness, it also contends that entering
a fee award here “would be an abuse of discretion.” [ECF No. 1145, p. 49].
Patheon disagrees with all of that.
The starting point for any analysis or interpretation of the FDUTPA statute, other
than the actual text of the statute itself, is the Florida Supreme Court. Because a Florida
statute is at issue, this Court is obliged to follow Florida Supreme Court decisions
interpreting the statute, and, if there are none, to follow the ruling of intermediate state
appellate courts “unless there is persuasive evidence that the highest state court would
rule otherwise.” Bravo, 577 F.3d at 1325-26.
Federal courts look to the decisions of the state courts to determine the meaning
of a state statute because “it is axiomatic that the highest court of the state is the final
arbiter of what is state law,” a rule which means that the state supreme court’s
“pronouncement is to be accepted by federal courts as defining state law unless it has
later given clear and persuasive indication that its pronouncement will be modified,
47
limited or restricted.” In re Schlein, 8 F.3d at 754; see also In re Tobkin, 638 F. App’x. 822,
824 (11th Cir. 2015) (when interpreting a state statute, federal courts look to the
decisions of the state courts). 9
The leading Florida Supreme Court case on interpreting FDUTPA is Diamond
Aircraft Industries Inc. v. Horowitch, 107 So. 3d 362 (Fla. 2013). Because it is the law in
Florida on how to evaluate FDUTPA, Diamond Aircraft deserves a comprehensive
discussion.
The Florida Supreme Court issued its ruling in Diamond Aircraft after the United
States Court of Appeals for the Eleventh Circuit certified four questions for review. 107
So. 3d at 364-65. The case arose from a contract dispute between Dr. Alan Horowitch, a
resident of Arizona, and Diamond Aircraft Industries, Inc., a foreign corporation which
operates in Florida and has an agent in Florida. Id. at 365. Horowitch contracted to buy
a single engine jet aircraft from Diamond, but Diamond failed to deliver the aircraft to
Horowitch and refused to complete the transaction unless Horowitch paid a purchase
price of at least $1.38 million. Id. Horowitch filed a lawsuit against Diamond Aircraft,
which was removed to federal court in the Middle District of Florida. Id. After his
lawsuit was removed, Horowitch amended his complaint to assert four claims: (1)
Procaps readily acknowledged, at the hearing, that this Court is bound to follow
Florida law when interpreting FDUTPA and determining whether a fees and costs
award to a defendant should be rendered unavailable or be apportioned when the
FDUTPA claim is derivative of another claim in which fees are not available. [ECF No.
1145, p. 22].
9
48
specific performance; (2) breach of contract; (3) breach of the covenants of good faith
and fair dealing; and (4) FDUTPA. Id.
Both parties moved for summary judgment. Id. at 366. On the FDUTPA claim,
the district court permitted the deceptive trade practices claim to proceed -- but held
that Arizona law (specifically, the Arizona Consumer Fraud Act (“ACFA”)), not
Florida’s FDUTPA law, applied. Id. The district court reasoned that Arizona law
applied because that state was the location of most of the business contacts between the
parties. Id. After a nonjury trial, the district court entered judgment in favor of Diamond
Aircraft and against Horowitch on the deceptive trade practices claim. Id.
Defendant Diamond Aircraft then moved for attorney’s fees on the basis of,
among other grounds, the prevailing party attorney’s fees provision in FDUTPA. Id.
Diamond Aircraft contended it was entitled to fees under FDUTPA even though the
district court had previously concluded that FDUTPA did not apply to Horowitch’s
deceptive trade practices claim. Id. According to Diamond Aircraft’s theory, Horowitch,
by asserting and seeking recovery under FDUTPA, had invoked FDUTPA’s attorney’s
fees provision even though he did not prevail under that specific statutory provision. Id.
The district court denied Diamond Aircraft’s motion for attorney’s fees. Id. It
held that Diamond Aircraft was not entitled to attorney’s fees under FDUTPA because
Arizona law, not FDUTPA, applied to Horowitch’s deceptive trade practices claim. Id.
The district court concluded that Diamond Aircraft was not entitled to attorney’s fees
49
under Arizona’s ACFA statute because the ACFA did not have an applicable attorney’s
fees provision. Id. Diamond Aircraft sought review of that ruling in the Eleventh
Circuit, which concluded that Florida law had not specifically addressed those issues
and certified four questions to the Florida Supreme Court. Id. Only the first two of those
questions are relevant here.
The first certified question was: “Does Fla. Stat. § 501.2105 entitle a prevailing
defendant to an attorney’s fee award in a case in which a plaintiff brings an unfair trade
practices claim under the FDUTPA, but the district court decides that the substantive
law of a different state governs the unfair trade practices claim, and the defendant
ultimately prevails on that claim?” Id. at 366-67. The Florida Supreme Court answered
that question in the affirmative because Horowitch invoked FDUTPA by filing an action
asserting a claim seeking recovery under that act in which Defendant Diamond Aircraft
ultimately prevailed. Id. at 370.
The second certified question was: “If Fla. Stat. § 501.2105 applies under the
circumstances described in the previous question, does it apply only to the period of
litigation up to the point that the district court held that the plaintiff could not pursue
the FDUTPA claim because Florida law did not apply to his unfair trade practices claim,
or does it apply to the entirety of the litigation?” Id. The Florida Supreme Court
concluded that Diamond Aircraft was entitled to fees for the period of litigation until
50
the federal district court held that FDUTPA did not apply to Horowitch’s claim. Id. at
371.
In deciding the first question, the Florida Supreme Court held that Diamond
Aircraft, as the prevailing defendant, was entitled to attorney’s fees under § 501.2105(1)
because Horowitch “filed an action against it under FDUTPA and ultimately was the
nonprevailing party.” Id. at 369. It provided several insights which shed light on the
issue of whether Patheon is entitled to FDUTPA fees here:
By invoking FDUTPA and seeking redress under its remedial provisions,
Horowitch exposed himself to both the benefits and the possible
consequences of that act’s provisions.
Horowitch cannot assert and invoke the protections of this act by filing a
legal action under its provisions, but then rely on the act’s ultimate
inapplicability as a shield against the application of the act’s attorney’s
fees provision. To hold otherwise would negate individual accountability
in filing actions by permitting meritless filings of FDUTPA claims without
recourse for a defendant who was forced to defend an action initially filed
under a law ultimately held to be inapplicable. As the Fourth District
reasoned in Brown, that approach would permit the plaintiff to assert
claims under FDUTPA pursuant to the dubious rationale: “heads I win,
tails you lose.” Brown, 424 So. 2d at 184. 10
Id. at 370.
In the instant case, of course, no court ever held that FDUTPA was inapplicable.
Instead, the rulings were that Procaps failed to present sufficient evidence to sustain the
claim on certain FDUTPA theories and, later, that Patheon was entitled to summary
10
Brown v. Gardens by the Sea S. Condo. Ass’n, 424 So. 2d 181 (Fla. 4th DCA 1983).
51
judgment because the FDUTPA claim was based on the same doomed antitrust theory
advanced to support the federal Sherman Act claim.
So the equities discussed in Diamond Aircraft -- that a plaintiff cannot
simultaneously seek to obtain the benefits of a FDUTPA claim yet try to avoid its
burdens -- generate even greater support here, where no court ever held that FDUTPA
did not apply because of a choice of law issue (or for any other reason).
When addressing the second certified question, The Florida Supreme Court in
Diamond Aircraft needed to evaluate the scope of attorney’s fees under FDUTPA. It cited
with approval Heindel v. Southside Chrysler-Plymouth, Inc., 476 So. 2d 266, 270 (Fla. 1st
DCA 1985), and it explained Heindel’s holding as “contemplating recovery for the hours
an attorney dedicated to litigating a civil action involving a FDUTPA claim ‘unless the
attorney’s services clearly were not related in any way to establishing or defending an
alleged violation of Chapter 501.’” 107 So. 3d at 370 (citing Heindel, 476 So. 2d at 271)
(emphasis added in the Diamond Aircraft case).
More importantly, the Diamond Aircraft Court expressly agreed with the
interpretation that “even if a FDUTPA claim is based on the same transaction as an
alternate theory of recovery, a court may allocate attorney’s fees under section 501.2105
for only the FDUTPA portion of an action if either (1) counsel admits that the other
services provided in that action were unrelated to the FDUTPA claim, or (2) a party
52
establishes that the services related to non-FDUTPA claims were clearly beyond the
scope of a 501 proceeding.” 107 So. 3d at 370 (internal quotation omitted).
Phrasing its ruling from the opposite perspective, the Florida Supreme Court
also held that FDUTPA fees should not be awarded for “parts of an action clearly
unrelated to or beyond the scope of a FDUTPA violation.” Id. at 371. (emphasis added
and internal citation omitted).
Thus, in the absence of an admission by the prevailing party that some of the
legal services were unrelated to the FDUTPA claim, Diamond Aircraft authorizes
attorney’s fees to a prevailing party for all fees incurred in the case unless the nonFDUTPA claims were clearly unrelated to or clearly beyond the scope of a FDUTPA
proceeding. Patheon does not admit that the services were unrelated. In fact, to the
contrary, Patheon urges that the antitrust claim and FDUTPA claim were, in effect, the
same. Procaps also argues the claims were substantively similar.
The Eleventh Circuit Court of Appeals had a relatively recent opportunity to
explore the contours of Diamond Aircraft in Chow, 640 F. App’x. at 838, a case which, as
here, involved a defendant who sought FDUTPA attorney’s fees because it prevailed on
the FDUTPA claim. The Chow Court held that the fees recoverable “are those devoted to
the entire action, not merely the FDUTPA claim,” unless “the attorney’s services clearly
were not related in any way to establishing or defending an alleged violation of Chapter
501.” Id. (emphasis added and internal quotation omitted).
53
In Chow, the trial court granted summary judgment to all defendants on the
unfair competition claims under FDUTPA and the California Business and Professional
Code and later granted judgment as a matter of law in the defendants’ favor on the
trade secrets misappropriation claim. Id. at 835. The jury returned a verdict for the
corporate plaintiff on the false advertising and unfair competition by deceptive conduct
claims, and it also returned a verdict on those claims in favor of the individual plaintiff.
Id. The plaintiffs prevailed on none of their other claims for trademark infringement,
unfair competition, or conversion. Id. The defendants received verdicts in their favor on
plaintiffs’ remaining FDUTPA claim of unfair or deceptive practices. Id. And none of
defendants’ counterclaims against the plaintiffs succeeded. Id.
In awarding FDUTPA fees to the defendants, the district court explained that the
“major thrust” of the evidence presented by plaintiffs concerned the allegedly stolen
trade secrets and the alleged infringement concerning the plaintiffs’ name and style of
cooking -- and concluded that they were “at the heart of the FDUTPA claim.” Id. at 836.
The plaintiffs raised several objections and challenges to the FDUTPA fees award. Id. at
837. Although it corrected an arithmetic error made in computing the amount of fees,
the appellate court concluded that the district court correctly determined that the
defendants were entitled to fees and costs. Id. Its analysis and holding were based on
Diamond Aircraft.
54
Among other arguments, the plaintiffs contended that the district court made an
unreasonable award of fees and costs because “it did not determine that there was any
‘additional effort’ in defending against the FDUTPA claims and it did not properly
determine how many hours were billed on the FDUTPA claim.” Id. at 843.
The Eleventh Circuit was not convinced by the arguments. It explained that it is
“the non-prevailing party’s burden to show that the services related to non-FDUTPA
claims were clearly beyond the scope of a 501 proceeding.” Id. (emphasis supplied).
The appellate court pointed out that the plaintiffs had not provided any reason to
conclude that the district court erred when it explained that the majority of the
attorney’s fees were substantially related to the FDUTPA violation. Id.
Moreover, the Chow Court was also not swayed by the plaintiffs’ argument that
the FDUTPA claim was only one of nineteen claims and counterclaims litigated by the
parties. Id. The Court rejected the argument because the one-in-nineteen theory “says
nothing about how much time was devoted to the various claims, the importance of
each claim in the litigation and whether some non-FDUTPA claims nonetheless fell
within the scope of the FDUTPA claims.” Id.
The Chow Court also emphasized the district court’s observation that the lawsuit
was “a relatively straightforward dispute which was aggressively litigated” and had
“extensive discovery disputes” that the parties litigated in an “extremely adversarial
posture[.]” Id. at 842. It did so in connection with its conclusion that the district court
55
did not abuse its “considerable discretion” when it awarded FDUTPA fees to the
prevailing defendants. Id. at 843.
Based on these legal standards, it is Procaps’ burden to establish that the
attorney’s fees and costs incurred by Patheon were clearly not related to the FDUTPA
claim, which was largely based on the same antitrust theory as the antitrust count. At
bottom, there is no dispute about the reality of the FDUTPA claim: it was an alternative
theory of recovery to the Sherman Act claim, based in large part on the same transaction
and facts. The antitrust claim work cannot fairly be described as being “totally
unrelated” to the FDUTPA claim. Procaps admits that the FDUTPA claim is duplicative
of the federal antitrust claim. This means that the time Patheon spent defending the
Sherman Act claim was time spent defending the FDUTPA claim (and that the time
spent defending the antitrust theories of the FDUTPA claim was time spent defending
the Sherman Act claim). See, generally, Am. Registry, 2015 WL 5687693, at *6 (finding that
because the FDUTPA claim was “entirely dependent” on the other misappropriation
claims, counsel was not required to limit the fees incurred in connection to the FDUTPA
count).
Therefore, unless Procaps is correct about its tag-along theory adopted by some
federal district courts, Patheon is entitled to attorney’s fees under FDUTPA for the
entire action, without allocation, given that the Court’s Humane Society analysis strongly
tips in Patheon’s favor. Smith v. Bilgin, 534 So. 2d 852, 854 (Fla. 1st DCA 1988)
56
(“[FDUTPA] contemplates recovery of attorney’s fees for hours devoted to the entire
litigation”) (internal quotation omitted); LaFerney v. Scott Smith Oldsmobile, Inc., 410 So.
2d 534, 536 (Fla. 5th DCA 1982) (finding it an abuse of discretion to award only one-fifth
of the total fees under FDUTPA for a five-count complaint because attorney had not
allocated his time records to specifically show only his work on the FDUTPA count
when “only one transaction or set of facts … gave rise to all” of the theories in the
complaint); see also Victory Int’l LLC, 2009 WL 1956236, at *5 (awarding defendant the
attorney’s fees it incurred in the entire action, not merely the FDUTPA claim, where the
plaintiff brought claims under Section 1 of the Sherman Act and FDUTPA, and common
law torts).
Procaps relies on this “tag-along” theory to justify its argument that Patheon is
entitled to absolutely no attorney’s fees or costs under FDUTPA. This theory appears to
have been first articulated in a Florida federal district court case in JES Properties, Inc. v.
USA Equestrian, Inc., 432 F. Supp. 2d 1283 (M.D. Fla. 2006) -- even though it does not
actually use the phrase “tag-along” to describe its approach. Indeed, JES does not cite
any authority for its rule that FDUTPA fees are unavailable when the FDUTPA claim is
linked to a non-FDUTPA claim where fees are not authorized. The entire analysis is
found in one paragraph. Many of the later cases citing JES contain little or no analysis;
they simply cite JES (or parrot its conclusion) and perhaps add one or two sentences of
57
background. Given this dynamic, it is logical to discuss JES (and to explain why this
Court does not find it persuasive).
In JES, the plaintiffs asserted antitrust claims under the federal Sherman Act and
Florida’s Antitrust Act -- and also asserted a FDUTPA violation. Id. at 1288. The trial
court granted summary judgment in favor of the defendants, who then filed a motion
for attorney’s fees and costs under, among other grounds, FDUTPA. Id. at 1288-89.
Significantly, the Court noted that the defendants failed to provide the Court with any
citation of authorities to support their FDUTPA fees request. Id. at n. 5-9. In essence,
defendants argued only that they were prevailing parties and therefore were
automatically entitled to FDUTPA fees and costs. Id.
The district court held that the defendants had not established that a FDUTPA
award was “appropriate” because they “have not demonstrated that they expended any
meaningful attorney time or costs in defending against Plaintiff’s Florida Deceptive and
Unfair Trade Practices Act claim.” Id. at 1291. The Court noted that Plaintiff’s single
FDUTPA claim “was based upon the same allegations as their antitrust claims.” Id.
Pointing out that the plaintiffs conceded that their FDUTPA claims “survive” or “fall”
with their antitrust claims, the Court explained that Defendants “largely relied on the
outcome of their antitrust arguments in defending against” the FDUTPA claim. Id. at
1291-92. The district court then said that granting the FDUTPA fees motion “would be
tantamount to awarding them attorneys’ fees under the Sherman Act, or the Florida
58
Antitrust Act, which they are not entitled to.” Id. at 1292. Therefore, the district court
concluded, an award is “not warranted[.]” Id.
And that is the entire JES analysis.
The Court has several observations about JES. First, the defendants appear to
have done a poor job advocating their position, as the district court saw fit to point out
that they submitted no legal authority. Second, the Court’s discussion and analysis do
not cite to any authorities. Third, the analysis and discussion do not even mention
Florida law, which controls the interpretation of a Florida statute. Fourth, it does not
discuss the other Florida cases (decided before this 2006 opinion), such as Heindel,
which reject this theory.
In addition, to the extent that JES might have been valid under Florida law when
it was issued in 2006, it is no longer a correct interpretation of Florida’s FDUTPA statute
after the Florida Supreme Court’s 2013 Diamond Aircraft decision.
The other non-binding Florida district cases that discuss JES do not cite to
Diamond Aircraft either. The Court will discuss them briefly:
VP Gables, LLC v. Cobalt Group, Inc., 597 F. Supp. 2d 1326, 1330 (S.D. Fla. 2009):
This case has no discussion of Florida law, includes a cryptic citation to JES, and a
conclusion that FDUTPA fees and costs are not recoverable “because the defendant has
not demonstrated that additional effort was expended to defend the case because of the
FDUTPA claim.” Id.
59
Poveda v. Popular Mortgage Servicing, Inc., No. 08-21822, 2009 WL 361093 , at *3
(S.D. Fla. Feb. 9, 2009): The district judge affirmed and adopted the magistrate judge’s
report and recommendations because no objections were filed, listed the non-exclusive
Humane Society factors but included no discussion of other Florida cases construing
FDUTPA. This case also rejected the FDUTPA fees request because movant did not
demonstrate that it expended any significant time in defending the FDUTPA claim and
noted that a fee award “would be tantamount to awarding fees for the other alleged
statutory violation to which it is not entitled.” Id. at *3. The Court did not cite JES (or
any other authority, for that matter, other than Humane Society -- for its list of factors),
but it pointed out that the litigation was “resolved in a matter of months.” Id. The
instant case, of course, was not resolved for several years.
Chastain v. N.S.S. Acquisition Corp., No. 08-81260, 2010 WL 5463859 at *2 (S.D. Fla.
Dec. 29, 2010): This case invoked the term “tag-along FDUTPA claim,” cited JES, and
described the FDUTPA claim as an “incidental one.”
Suntree Technologies, Inc. v. Ecosense International, Inc., No. 6:09-1945, 2013 WL
1174841, at *1 (M.D. Fla. March 20, 2013): This case adopted the magistrate judge’s
report and recommendations, which cited JES and Chastain and recommended denial of
the fees request because the FDUTPA claim was “inseparably intertwined” with
Lanham Act claims, and Defendants did not demonstrate that they expended any time
60
separate from their Lanham Act defense. See Suntree Techs., Inc. v. Ecosense Int'l, Inc., No.
6:09-CV-1945-ORL-28, 2013 WL 1174399, at *7 (M.D. Fla. Feb. 7, 2013).
Pods Enterprises, LLC v. U-Haul International, Inc., 126 F. Supp. 3d 1263, 1292 (M.D.
Fla. 2015): This case cited to Suntree (which cites to JES) and noted that the denial of the
fees request under the Lanham Act supports a denial of a FDUTPA fees request “since
its FDUTPA claim was subordinate to and ‘inseparably intertwined with [the] Lanham
Act claims.’” Id.
Florida Van Rentals, Inc. v. Auto Mobility Sales, Inc., No. 8:13-cv-1732, 2015 WL
4887550, at *41 (M.D. Fla. Aug. 17, 2015): This case notes that the defendant had not
specifically objected to the portions of a magistrate judge’s report and recommendations
which recommended denial of its attorney’s fees request. The report and
recommendations cited Suntree for its conclusion that FDUTPA fees were not warranted
because the plaintiffs’ FDUTPA claims rose or fell with the trademark infringement
claims, and the defendant was not entitled to a fee award under the Lanham Act. See
Florida Van Rentals, Inc. v. Auto Mobility Sales, Inc., No. 8:13-CV-1732-T-36EAJ, 2015 WL
4887529, at *5 (M.D. Fla. Apr. 29, 2015).
Pronman v. Styles, No. 12-80674, 2015 WL 11347666, at *3 (S.D. Fla. Nov. 9, 2015):
This district court explained that the case involved a Lanham Act claim “with a
derivative
FDUTPA
claim,”
and
concluded
that
FDUTPA
fees
would
be
“inappropriate” because the theory of the FDUTPA claim was that the Lanham Act
61
violation was a deceptive practice. The district court cited VP Gables in support of its
finding, which simply and briefly cited JES. Id.
Unlike the other district court cases summarized above, the Pronman court does
discuss Florida state court cases. However, the district court makes a distinction
between primary and secondary claims for recovering fees under FDUTPA.
Because the Pronman case involved a Lanham Act claim, attorneys’ fees would
not automatically be awarded to a prevailing party unless exceptional circumstances
were present. Id. at *1. Presumably, this was the reason that the district court viewed the
derivative FDUTPA claim as essentially a tag-along claim. Without bringing a FDUTPA
claim in the lawsuit, a fee recovery may have not been available for the plaintiffs.
Thus, the district court reasoned that, unlike Heindel, LaFerney, and Covington v.
Arizona Beverage Co., LLC, No. 08-21894-CIV, 2011 WL 11796786 (S.D. Fla. Aug. 25, 2011),
a case the Court will discuss at length below, that were all primarily and “essentially
FDUTPA cases[,]” the Pronman case involved only a secondary FDUTPA claim.
Pronman, 2015 WL 11347666, at *3. The FDUTPA claim was only included in Pronman
for fees, so the prevailing defendant was not entitled to attorneys’ fees where the
plaintiffs may have been barred from recovering attorney fees in the first place under
the plaintiffs’ primary Lanham Act claim.
This case is distinguishable from Pronman in two major ways. First, unlike the
Pronman Court, the Court here applied the binding Diamond Aircraft case, which did not
62
even mention the primary/secondary distinction which drove the Pronman Court to
disallow fees under FDUTPA. Therefore, the logic that convinced the Pronman Court to
deny the fee request was not based on any test or language from the Florida Supreme
Court case that announced the law on this point in 2013. Second, the test adopted by
Diamond Aircraft, that fees under FDUTPA should be awarded for the entire action and
not apportioned unless the non-prevailing party meets its burden of establishing that
the FDUTPA claims were clearly not related to the other claim, was not discussed at all.
At bottom, Pronman ignored the law it should have considered and adopted an
approach never mentioned in the binding Florida case. Therefore, Pronman (and JES, for
that matter) effectively created its own exception to § 501.2105(3) for FDUTPA claims.
But this is contrary to the rule that creating exceptions to a statute is a legislature’s
function. Holly v. Auld, 450 So. 2d 217, 219 (Fla. 1984) (finding that courts are “without
power” to extend, modify or limit an unambiguous statute and “[t]o do so would be an
abrogation of legislative power”) (internal quotation omitted). Under these
circumstances, the Court does not find Pronman (or JES and the cases which followed it)
persuasive.
In Covington, 2011 WL 11796700, at *2 (S.D. Fla. Feb. 15, 2011), report and
recommendation adopted in part, rejected in part, 2011 WL 11796786, the magistrate judge
did not find JES and its progeny persuasive and recommended awarding all fees
63
incurred by the defendants during a certain time period because the FDUTPA claim
and other claims were “inextricably intertwined.”
In the plaintiff’s objections to the report, the plaintiff argued that the magistrate
judge applied the wrong case law and that the appropriate case law “leads to the
conclusion that fees should not be awarded for FDUTPA claims when there is no
additional effort in defending the case because of the FDUTPA claims.” Covington, 2011
WL 11796786, at *3.
The district court, citing Heindel, LaFerney and Bilgin, held that the magistrate
judge did not err in recommending an award to the defendants of all fees, without
apportionment. Id. The district court rejected JES and VP Gables, finding them not
binding when a federal court is interpreting state law and noted that the decisions of a
state court’s intermediate appellate courts are binding, unless there is persuasive
evidence that the state’s highest court would rule otherwise. Id. at *3.
However, the district court did discuss the primary/secondary claim distinction
which was later applied in the Pronman case. Id. at *3. In Covington, the district court
stated that the case involved primarily a FDUTPA claim. As a result, the district court
reasoned that it was proper to award fees under FDUTPA. Id. The Covington court
stated that VP Gables was properly decided because it involved a primary breach of
contract claim, and so was JES because the primary claim there was an antitrust claim.
Id.
64
Arguably, if Covington is binding law (which it is not) or if it is still persuasive
(which it also is not), the Court might not award attorneys’ fees to Patheon because, just
like in JES, the primary claim was a federal statutory antitrust claim which does not
provide for fees to a prevailing defendant. However, Covington was decided before
Diamond Aircraft, so the district court in Covington could not discuss its applicability.
Because of that, this Court finds that, in the aftermath of Diamond Aircraft, this
distinction of primary versus secondary FDUTPA claims no longer controls the Court’s
analysis of whether to award attorneys’ fees. Instead, the correct Florida law is found in
Diamond Aircraft, which uses a standard other than the primary/secondary distinction.
In addition to finding JES (and the few other non-binding federal district court
cases) inapplicable, not persuasive and contrary to controlling Florida law, the
Undersigned’s ruling here also relies on a recent Eleventh Circuit case involving
FDUTPA and the issue of whether fees are recoverable for the entire action: Alhassid v.
Bank of America, No. 16-15834, 2017 WL 2179118 (11th Cir. May 16, 2017).
In Alhassid, a defendant (Nationstar Mortgage LLC) appealed the district court’s
award of $447,446 in attorney’s fees and costs to plaintiff under FDUTPA. Id. at 1. The
claims raised by the plaintiff concerned her reverse mortgage. Id. She alleged that
Nationstar charged improper fees. Id. She raised six claims against Nationstar: three
breach of contract claims, breach of the implied covenant of good faith and fair dealing,
a FDUTPA claim, and a Fair Debt Collection Practices Act claim. Id. The court denied
65
class certification and also granted the plaintiff summary judgment on all counts except
the one for violating the implied covenant of good faith and fair dealing, because it
duplicated other counts. Id. Based on her affidavit, the district court found that she
incurred $5,000 in actual damages because she agreed to pay her attorney that amount
to defend against the foreclosure action. Id.
The plaintiff then moved for attorney’s fees and costs of $827,552. Id. The
magistrate judge held a hearing and recommended that the plaintiff receive the award
under FDUTPA. Id. However, the magistrate judge reduced the hourly rate recoverable
for associates and further reduced the number of hours by 40% to account for the
plaintiff’s failed class action attempt, the settlement with other defendants, and
duplicative or unrecoverable fees. Id. The district court approved the recommended
40% reduction in hours and applied an additional 5% reduction in hours to account for
time spent defending the state foreclosure action. Id. at *2. The district court declined to
further reduce the award of fees and costs “because of the protracted nature of the
proceedings and because [the plaintiff’s] attorneys were largely successful in their
efforts.” Id.
The Eleventh Circuit began its analysis of the FDUTPA fees and costs by looking
to Diamond Aircraft -- the 2013 Florida Supreme Court case which had not yet been
decided when JES and many of the other Florida district court cases relied upon by
Procaps were decided. Id. And it therefore followed the rule that the “fees recoverable
66
are those devoted to the entire action, not merely the FDUTPA claim, ‘unless the
attorney’s services clearly were not related in any way to establishing or defending an
alleged violation of Chapter 501.’” Id. (emphasis added) (quoting Diamond Aircraft, 107
So. 3d at 370).
The
Eleventh
Circuit
rejected
the
argument
that
the
district
court
“misinterpret[ed] Florida law and include[d] fees for services clearly beyond the scope
of a FDUTPA proceeding. Id. at *4. It noted that the trial court reduced the hours in the
lodestar calculation to exclude hours spent on the class claims, the state foreclosure
action, claims against a bank, and a claim asserted by a co-plaintiff who settled and
dismissed her claims. Id. However, the appellate court also held that it would not have
been improper under Florida law “if the district court had not excluded those hours.”
Id.
The Eleventh Circuit explained that “all of the claims in the complaint arguably
concerned deceptive and unfair trade practices, and the success of the FDUTPA claim
depended on a determination that the servicers charged improper fees and initiated
unauthorized foreclosure proceedings.” Id. (internal citation omitted). Therefore, the
appellate
court
further
explained,
the
“work
on
the
non-
FDUTPA claims, class claims, and state foreclosure proceeding related in some way to
establishing a violation of FDUTPA.” Id. (emphasis added and internal citation
omitted).
67
Using this same legal approach, the Court notes that even Procaps admits that
the antitrust theory inherent in its FDUTPA claim was dependent on the success it had
with the federal Sherman Act antitrust claim. Therefore, those federal claims concerned
allegations of deceptive and unfair trade practices, which means that Patheon, as the
prevailing party, is entitled to fees and costs for the entire action. Cf. Yellow Pages Photos,
Inc. v. Ziplocal, LP, 846 F.3d 1159, 1163 n. 3 (11th Cir. 2017) (reversing fee award which
improperly reduced the lodestar by 92.5% and explaining that “if the successful and
unsuccessful claims are intertwined and share a ‘common core’ of facts or a related legal
theory, then a reasonable fee is allowed as to all hours expended on both sets of
claims”) (internal quotation omitted and emphasis added). Procaps’ antitrust count and
its FDUTPA count share both a common core of facts and a related legal theory, so there
would be no need to apportion claims if Patheon had (hypothetically) lost one count but
prevailed on another.
So the Court concludes that Patheon is entitled to attorney’s fees and costs under
FDUTPA for its defense of the entire action. Procaps has not established that the time
incurred defending the antitrust claim was totally unrelated to Patheon’s defense of the
FDUTPA claim. To the contrary, its argument adopts the opposite position: it contends
(correctly) that the antitrust claims inherent in the FDUTPA claim were based on the
same facts as the federal statutory antitrust claims. Indeed, it admits that the FDUTPA
claim was dependent on the antitrust claim.
68
The Court also concludes that Procaps’ argument, which is based on the nonbinding paragraph from JES (that spawned similar rulings), is contrary to Florida law
(Diamond Aircraft) and is also in conflict with recent (and persuasive, though not
technically binding) Eleventh Circuit cases (Chow and Alhassid).
But even if the Court were inclined to follow JES, which I am not, the Court also
notes that several of the other non-binding district court cases viewed the JES rule (i.e.,
no FDUTPA fees if the FDUTPA claim is derivative of another claim or is a tag-along
claim) as merely one of many factors used in the Humane Society assessment, as opposed
to being the sole determining factor. For example, the Chastain Court evaluated all of
the factors listed in Humane Society before ultimately ruling that fees were not
warranted. And in Covington, the Court reviewed all of the Humane Society factors after
concluding that JES is not binding but was properly decided under its
primary/secondary claim analysis.
In doing so, the Covington Court emphasized points which also apply to the
instant case. The Covington case was (1) “heavily litigated for more than two years” and
(2) the district court rejected the notion that a fee award would “have a substantial
chilling effect on future legitimate claims under FDUTPA” because “the deterrence
issue is not just about bringing FDUTPA claims; it is also about deterring future
plaintiffs from abdicating their role in the litigation to their attorneys.” 2011 WL
11796786, at *4-5.
69
In the instant case, of course, the lawsuit was aggressively litigated for more than
four years (and is still being aggressively litigated, for that matter) and the fundamental
antitrust theory underlying the FDUTPA claim was, to use the Eleventh Circuit’s
condemning language, “intrinsically hopeless.” Procaps, 845 F.3d at 1087. Therefore, the
Undersigned would still award attorney’s fees and costs to Patheon under FDUTPA
even if the JES “rule” were factored into the Humane Society analysis. But, as noted, the
Court concludes that JES should not be used because later-issued Florida law (as well as
later-decided Eleventh Circuit cases) adopts a different and opposite approach.
Patheon’s other two theories
The Court need not address the other two theories Patheon advanced in its initial
fees motion (i.e., fees incurred in the forensic ESI analysis and fees incurred after
Procaps’ so-called “change in theory”). As explained in the affidavit Patheon submitted
in support of its motions, the FDUTPA theory encompasses all requested fees and costs
(albeit at discounted hourly rates, as further reduced by Patheon’s additional voluntary
reductions). [ECF No. 1156-1].
Patheon itself notes that there is no need to analyze the other two theories if the
full amount of fees and costs are awarded under FDUTPA (i.e., “[i]f the Court does not
award all fees under FDUTPA, there are two other bases of recovery[.]” [ECF No. 11562, n. 3]. Moreover, in the affidavit Patheon submitted in support of its first attorneys’
fees motion, lead litigation attorney Michael Klisch explained that “if the Court awards
70
Patheon all of the fees sought under FDUTPA, it should not award fees under the other
two categories[.]” [ECF No. 1030-1, p. 43]. In addition, he further explained that
“Patheon seeks all fees submitted for reimbursement under FDUTPA, and the fees in
the other categories are a subset of the fees sought under FDUTPA.” [ECF No. 1030-1, p.
43].
Because the Court is in fact awarding all of the FDUTPA fees (after applying the
discounts on the hourly rates), there is no need to address other theories which, if
accepted, would yield less than the total FDUTPA award. Nevertheless, to the extent
that Procaps pursues an appeal, Patheon has record evidence to point to if it seeks to
justify a lesser award on one or both of the other theories. Similarly, Patheon is also able
to justify this fee award (or one for a lesser amount) on the other grounds it asserted
(but that the Court is not considering on the entitlement issue): misconduct by Procaps’
counsel in another lawsuit; Procaps’ purported misrepresentations to the Eleventh
Circuit; and Procaps’ alleged misstatements to the arbitration panel.
Determining the Amount of Attorney’s Fees and Costs under FDUTPA
Federal appellate courts review an attorney’s fees award for abuse of discretion.
Bivins v. Wrap It Up, Inc., 548 F.3d 1348, 1351 (11th Cir. 2008). “An abuse of discretion
occurs if the judge fails to apply the proper legal standard or to follow proper
procedures in making the determination, or bases an award upon findings of fact that
71
are clearly erroneous.” ACLU of Ga. v. Barnes, 168 F.3d 423, 427 (11th Cir. 1999) (internal
quotation omitted).
The district court’s discretion in determining the amount of a fee award is
appropriate because of its “superior understanding of the litigation and the desirability
of avoiding frequent appellate review of what essentially are factual matters.” Hensley,
461 U.S. at 437. The Court’s understanding of this case is informed by four-and-a-half
years’ worth of litigation, myriad hearings (some lasting more than five hours), several
summary judgment motions, and a lengthy and comprehensive hearing on the motions
for fees and costs. The district court’s “superior understanding of the litigation clearly
places it in the best position to calculate such an award when appropriate.” Yellow Pages
Photos, 846 F.3d at 1163 (internal citation omitted).
The abuse of discretion standard “implies a range of choices,” and an appellate
court “will affirm even if ‘[it] would have decided the other way if it had been [its]
choice.’” Yellow Pages Photos, 846 F.3d at 1163 (internal quotation omitted).
Generally, what constitutes a reasonable attorney’s fee is calculated using the
“lodestar” method, taking the number of hours reasonably expended on the litigation
multiplied by a reasonable hourly rate. Hensley, 461 U.S. at 433-34. 11 When faced with a
voluminous fee application, an hour-by-hour review is both impractical and a waste of
Florida courts use the federal lodestar method to determine appropriate
attorney’s fees. See Fla. Patient’s Comp. Fund v. Rowe, 472 So. 2d 1145, 1150-51. (Fla. 1985).
11
72
judicial resources. Loranger v. Stierheim, 10 F.3d 776, 783 (11th Cir. 1994). Thus, the
Eleventh Circuit has approved across-the-board percentage cuts to the number of hours
claimed. Id.; see also Alhassid, 2017 WL 2179118, at *2.
However, as the Eleventh Circuit made clear in Alhassid, courts will not consider
challenges concerning an award of fees and costs that were not raised below. 2017 WL
2179118, at *2. Procaps challenged only Patheon’s entitlement to attorney’s fees. It did
not in any way challenge the amount of time or the hourly fees or the legitimacy of the
costs. In fact, it specifically declined to offer its own attorney’s hourly rates or submit its
counsel’s billing records. Therefore, it may not object to the amount of this award of fees
and costs. See, e.g., id. at *3 (holding that Nationstar waived argument that the plaintiff
was not entitled to any fees because equitable factors weighed in favor of complete
denial because Nationstar did not assert the argument below and also waived the
argument); see also Resolution Trust Corp. v. Hallmark Builders, Inc., 996 F.2d 1144, 1149-50
(11th Cir. 1993) (barring challenge to number of hours and rate used to calculate
lodestar because of failure to object).
But the Court is not basing its ruling on the amount of fees and costs solely on
Procaps’ waiver. 12 It is also considering the comprehensive submission of affidavits and
“Local Rule 7.3’s requirements are not optional, but mandatory.” Club Madonna
v. City of Miami Beach, No. 13-23762, 2015 WL 5559894, at *9 (S.D. Fla. Sept. 22, 2015)
(internal citation omitted). That court agreed “that Plaintiff’s failure to comply with
Local Rule 7.3 is grounds for granting [defendant’s] requested amount of fees, if
otherwise reasonable.” Id.
12
73
time records and personal familiarity with the case. In addition, the Court is also
factoring in the length and contentiousness of the litigation, the reality that the lawsuit
was aggressively litigated, the presence of extensive discovery disputes, and the fact
that the litigation should have been simpler but had been drawn out and made
unreasonably contentious, and the extremely adversarial posture of these parties since
at least the beginning of this litigation. Cf. Chow, 640 F. App’x. at 842-43 (listing factors
mentioned by the district court as evidence that the trial court had considered the scope
and history of the litigation and the merits of the respective positions).
Moreover, the Court’s ruling is based, in part, on additional factors.
First,
Patheon’s counsel obtained an excellent result. Obtaining a defense summary judgment
on all counts and having that ruling affirmed on appeal is surely a significant defense
victory. In addition, the Court recognizes the complexity of the legal issues and the
intensity with which this lawsuit was fought. Beyond that, the parties were required to
engage in substantially technical issues surrounding the ESI discovery and the forensic
audit, including coordination with a special master.
At bottom, Patheon was well served by a dedicated effort from a wellcoordinated legal team. It would have been impractical (and likely impossible) for
Patheon to have adequately defended this lawsuit without multiple attorneys,
including those with expertise in specific sub-areas. To the extent that there might have
been overstaffing, the Court does not believe that this problem plagued Patheon’s
74
representation. Moreover, the method the Court often uses to assess whether a case
was overstaffed -- comparing the billing records of the law firm representing the party
seeking fees with the billing records of opposing counsel -- is unavailable here because
Procaps failed to submit its counsel’s billing records. 13
The Court is itself an expert on the question of the reasonableness of an
attorney’s hourly rate and I also may use my “own knowledge and experience
concerning reasonable and proper fees and may form an independent judgment either
with or without the aid of witnesses as to value.” Loranger, 10 F.3d at 781 (11th Cir.
1994); see also Crescenzo v. Healthcare Revenue Recovery Grp., LLC, No. 11-60384-CIV, 2012
WL 291431, at *2 (S.D. Fla. Jan. 31, 2012).
The Court previously entered an Order on December 3, 2013, significantly
reducing the hourly fees of the attorneys working for the Cooley law firm, Patheon’s
primary litigation counsel. [ECF No. 223, pp. 26-32]. That Order arose in connection
See, generally, Local Rule 7.3(a); Kalzip, Inc. v. TL Hill Constr., LLC, No. 8-11-cv01842, 2013 WL 3242400, at *2 n. 6 (M.D. Fla. June 25, 2013) (acknowledging that time
incurred by opposing counsel is not “determinative” of what amount of time was
reasonable but, nevertheless, analyzing billing records of both parties and engaging in
detailed comparison before reaching conclusions about reasonableness); cf. Paton v.
Geico Gen. Ins. Co., 190 So. 3d 1047, 1052 (Fla. 2016) (holding that billing records of
opposing counsel are relevant to the issue of reasonableness of time expended on a case,
noting that discovery of those bills is within the trial court’s discretion and explaining
that the billing records of opposing counsel “will demonstrate the complexity of the
case along with the time expended and may belie a claim that the number of hours
spent by plaintiff was unreasonable[.]”).
13
75
with two motions to compel. For the reasons outlined in that Order, 14 the Court reduced
Cooley’s standard market rates by an average of 47.25%. Patheon is using that
discounted rate for the hourly billing rates. Patheon explained that it believes that
Cooley’s actual market rates are reasonable and that it should be reimbursed at that rate
-- but then noted that it would not re-litigate the Court’s decision to apply a 47.25%
reduction even though it maintains its objection to it. [ECF No. 1073-1, p. 14]. Therefore,
Patheon could, on appeal, assert that the hourly billing rates used by this Court to
calculate the lodestar should have been higher.
To the extent that the hourly billing rates of the Cooley attorneys working on the
case increased over time, which is not surprising given that the lawsuit was filed in
The Court reduced the hourly rates for the Cooley attorneys because they were
higher than the prevailing market rates in South Florida for similar services by
attorneys having reasonably comparable skills, experience and reputation. The Court
noted that most of the hourly rates for this Florida-filed lawsuit were for Washington,
D.C. hourly rates, which are among the highest in the country. The Court explained,
when determining the hourly fee, that it must “step[] into the shoes of the reasonable,
paying client, who wishes to pay the least amount necessary to litigate the case
effectively. Arbor Hill Concerned Citizens Neighborhood Ass’n v. Cnty. of Albany, 522 F.3d
182, 184 (2d Cir. 2008) (emphasis added); Tiara Condo. Ass’n, Inc. v. Marsh USA, Inc., 697
F. Supp. 2d 1349, 1364 (S.D. Fla. 2010) (internal citations omitted).” [ECF No. 223, p. 30].
14
The 2013 Order provided illustrations of cases where the hourly rates in fees
awards were reduced to reflect the local billing practices. See, e.g., Golf Clubs Away, LLC
v. Hostway Corp., No. 11‐62326‐CIV, 2012 WL 2912709 (S.D. Fla. July 16, 2012) (awarding
Arthur Miller (nationally known law professor and author of leading federal practice
treatise) only $500 per hour even though he requested $995 per hour); MKT Reps S.A. De
C.V. v. Standard Chartered Bank Int’l (Americas) Ltd., No. 10‐22963‐CIV, 2013 WL 1289261
(S.D. Fla. Mar. 28, 2013) (finding rates of attorneys at large Miami‐based firm to be
excessive and lowering hourly rates from $610 to $500 and from $475 to $350).
76
December 2012, Patheon seeks reimbursement at the higher rates (but reduced by
47.25%). 15 It is reasonable and appropriate for an attorney’s rates to increase over the
course of litigation. Am. Honda Motor Co. v. Motorcycle Info. Network, Inc., No. 5:04-cv-12,
2008 WL 906739, at *5 (M.D. Fla. April 2, 2008) (awarding fees at rates that increased
during litigation). Florida federal courts have awarded fees based on a law firm’s
annual rate increases of between 16% and 66%, and found such annual increases are
“reasonable and appropriate.” Am. Honda Motor Co., 2008 WL 906739, at *5, 11 nn. 18-21
(awarding annual fee increases of 16% ($215 to $250), 18% ($275 to $375), 50% ($100 to
$150) and 66% ($195 to $325)).
Patheon has submitted comprehensive and detailed packages to support its
motions for attorney’s fees and non-taxable costs. It has submitted billing and costs
records and detailed affidavits explaining the hourly rates, how and why the rates were
calculated, the time entries which were not included, and the procedures used to
eliminate entries from attorneys and staffers under certain situations. The background
and experience of the attorneys were provided, along with explanations of the roles
they played in the case. Patheon also explained the nature of the non-taxable costs. Even
if Procaps had interposed a response to any of the motions, as required by Local Rule
Specifically, according to Mr. Klisch’s declaration [ECF No. 1030-1, p. 38],
“Patheon did not apply the 47.25% reduction on top of the 20% fee reduction Patheon
negotiated with Cooley on the November 2013 invoice or the 15% fee reduction Patheon
negotiated with Cooley for invoices dated December 1, 2013 and thereafter.” Instead,
Patheon applied the 47.25% reduction to Cooley’s standard billing rates. [ECF No. 10301, p. 38].
15
77
7.3, it would have been hard-pressed to successfully argue that Patheon had submitted
incomplete or otherwise inadequate requests.
Conclusion
Because “the result is what matters” when determining an appropriate attorney’s
fee, Hensley, 461 U.S. at 426, Patheon’s summary judgment award, which was affirmed
in all respects on appeal, establishes that it obtained significant relief. Moreover, the
Court’s decision to apply a 47.25% discount to the hourly fees for the Cooley attorneys
further establishes that Patheon is not in fact recovering “a fully compensatory fee.” Id.
The approximate $18.5 million it seeks for fees and non-taxable costs is an
extremely large number, to be sure, but the mere fact that the request is substantial does
not somehow mean that the two requests should be denied or reduced even further.
Indeed, it could easily be argued that the award here, large as it may be, should be even
higher because, among other reasons, the 47.25% discount on Cooley’s fees should
either have been lowered or completely eliminated.
District courts do not hesitate to award substantial fee awards when the
circumstances warrant it. See, e.g., Takeda Chemical Indus., Ltd. v. Mylan Labs., Inc., Nos. 03
CIV. 8253, 04 CIV 1966, 2007 WL 840368, at *11 (S.D.N.Y. Mar. 21, 2007) (awarding
approximately $14 million in attorney’s fees and noting that the prevailing party would
“certainly be fairly entitled to an enhancement” of an additional $3 million); BristolMyers Squib Co. v. Rhone-Poulenc Rorer, Inc., No. 95 CIV 8833, 2002 WL 1733681, at *1
78
(S.D.N.Y. July 26, 2002) (awarding $27 million in fees and costs, where $20.7 million
were for fees, based on the Court’s determination that the case was exceptional). Cf.
Barnhill v. Fla. Microsoft Anti-trust Litig., 905 So. 2d 195, 200 (Fla. 3d DCA 2005)
(approving $15.5 million in attorney’s fees in FDUTPA class action settlement).
For more than four-and-a-half years, Patheon has been defending a lawsuit it
should not have needed to defend in the first place. The antitrust theory that drove
Procaps’ case (including the FDUTPA count) was strategically designed to avoid the
arbitration provision and generate pressure for a quick settlement, but Procaps
continued to push it even though it was hopeless and intended to convert a garden
variety commercial contract dispute into a treble damages antitrust claim that spawned
the related FDUTPA claim.
The Court’s ruling does not mean that every party who prevails on a FDUTPA
claim would be entitled to fees, and it likewise does not mean that all defendants who
prevail on both a FDUTPA claim and a federal statutory antitrust claim would be
entitled to fees and non-taxable costs under FDUTPA. To the contrary, the ruling here is
fact-specific, based on an exercise of discretion, which involved an analysis of the nonexclusive Humane Society factors. If some of the factors had tipped in Procaps’ favor,
then the decision here may well have been different. But the factors strongly favor
Patheon, so the Court’s considerable discretion generates a defendant-friendly decision
under the unique circumstances of this acrimonious litigation.
79
The Undersigned finds that the hourly rates, as reduced by 47.25% for the Cooley
lawyers, and the number of hours are reasonable. Procaps, of course, cannot complain
about this finding because it did not comply with Local Rule 7.3 and did not follow this
Court’s Order establishing a protocol for challenging the requested fees. The Court also
finds that the non-taxable costs are reimbursable. Procaps did not interpose any
objection to costs.
The Court grants Patheon’s motion and supplemental motion for attorney’s fees
and non-taxable costs in the full amount requested -- $18,494.846. 16 The Court will enter
a separate judgment.
DONE AND ORDERED in Chambers, in Miami, Florida, on August 17, 2017.
Copies furnished to:
All Counsel of Record
Patheon’s supplemental fees motion was filed on April 14, 2017. Patheon has
incurred additional fees and costs since then, including preparation for, and attendance
at, a multi-hour May 30, 2017 hearing on the fees motions. [ECF No. 1142]. Patheon’s
supplemental fees motion was filed as docket entry No. 1072, but there are now 1163
docket entries.
16
80
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