Melaleuca, Inc. v. Shan et al

Filing 94

MEMORANDUM DECISION AND ORDER. The Court HEREBY ORDERS: Kots Motion for Attorney Fees (Dkt. 78 ) is DENIED in PART, as it relates to litigation surrounding the 2011 Agreements, and GRANTED in PART, as it relates to litigation surrounding the 2010 Ag reements. The Court hereby awards Kot attorney fees in the amount of $13,300. Melaleuca has 30 days to comply with this Order. Signed by Judge David C. Nye. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (km)

UNITIED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
MELALEUCA, INC., an Idaho corporation,
and MELALEUCA (CHINA) WELLNESS
PRODUCTS CO., LTD. a wholly-owned
subsidiary of Melaleuca, Inc.,
Plaintiff,

Case No. 4:18-cv-00036-DCN
MEMORANDUM DECISION
AND ORDER

v.
KOT NAM SHAN, an individual, and
SHAKLEE CORP., a Delaware corporation,
Defendants.

I. INTRODUCTION
Pending before the Court is Defendant Kot Nam Shan’s (“Kot”) Motion for
Attorney Fees. Dkt. 78. Having reviewed the record and briefs, the Court finds that the
facts and legal arguments are adequately presented. Accordingly, in the interest of
avoiding further delay, and because the Court finds that the decisional process would not
be significantly aided by oral argument, the Court will address the motion without oral
argument. Dist. Idaho Loc. Civ. R. 7.1(d)(2)(ii). For the reasons outlined below, the
Court finds good cause to DENY in PART and GRANT in PART Kot’s Motion for
Attorney Fees.

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II. BACKGROUND
The factual background underlying this dispute is set forth in the Court’s previous
Decision. Dkt. 74. The Court incorporates that background in full by reference.
Procedurally, on February 26, 2018, Kot filed a Motion to Dismiss Plaintiffs
Melaleuca Inc. and Melaleuca (China) Wellness Products Co., Ltd.’s (hereinafter referred
to collectively as “Melaleuca”) claims against him on several grounds. Dkt. 47. The
Court held oral argument on this motion on March 23, 2018 and issued a Memorandum
Decision and Order on April 24, 2018. While it found that it has personal jurisdiction
over Kot concerning the 2010 Agreements, it ultimately dismissed all of Melaleuca’s
claims against Kot on forum non conveniens grounds and directed Melaleuca to refile
those claims in China. Dkt. 74, at 21. Kot then filed a Motion for Attorney Fees on May
8, 2018. Dkt. 78.
III. ANALYSIS
As this Court’s subject matter jurisdiction is based on diversity, Idaho state law
applies. Clark v. Podesta, No. 1:15-CV-00008-CWD, 2017 WL 4855845, at *2 (D. Idaho
Oct. 26, 2017) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 34, (1991); Alyeska
Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 260 n. 31 (1975)). Kot specifically
requests attorney fees under section 12-120(3) of the Idaho Code, which provides as
follows:
In any civil action to recover on an open account, account stated, note, bill,
negotiable instrument, guaranty, or contract relating to the purchase or sale
of goods, wares, merchandise, or services and in any commercial
transaction unless otherwise provided by law, the prevailing party shall be
allowed a reasonable attorney’s fee to be set by the court, to be taxed and
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collected as costs.
However, Idaho Code section 12-120(3) “is a substantive law that enlarges the
rights of litigants in a commercial transaction.” Boise Tower Assocs., LLC v. Washington
Capital Joint Master Trust Mortg. Income Fund, No. 03–141–S–MHW, 2007 WL
4355815, at *2 (D. Idaho Dec. 10, 2007). “[P]arties are not entitled to attorney fees under
an Idaho substantive statute that enlarges the rights of litigants to a commercial dispute
when the law governing the contract denies litigants that right.” Id. at *4.
“In China, litigation costs include court costs and party expenses, but generally,
attorney’s fees are not included in the latter. . . . Generally, in China, attorney’s fees are
borne by the parties on their own accounts separately, and neither party can get
reimbursements from the counterparty.” Xiao Jianguo and Tang Xin, Cost and Fee
Allocation in Civil Procedure: China National Report, 4 TSINGHUA CHINA L. REV. 43, 45
(2011). In an earlier decision, the Court determined that “it will apply Idaho law to the
2010 Agreements and Chinese law to the 2011 Agreements.” Dkt. 74, at 12. The Court
also determined that Chinese law would apply to Melaleuca’s claim of fraud in the
inducement with regard to the 2011 Non-Competition Agreement. Consequently, Kot is
not entitled to fees—as related to litigation surrounding the 2011 Agreements—under
Idaho Code section 12-120(3), because the Chinese law governing the underlying
contracts generally denies such awards.1 Kot’s Motion for Attorney Fees is therefore

1

The 2011 Agreements both contain a provision that states: “In the event legal action is taken as
a result of any breach of this Agreement or to enforce the terms of this Agreement, the prevailing
party shall be entitled to an award of reasonable attorneys’ fees and costs.” Dkt. 40-7; 40-8. Due
to this provision, Kot may be entitled to attorney fees under Chinese law if the contract is found

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DENIED in PART, as it relates to fees stemming from litigation surrounding the 2011
Agreements.
That leaves only Kot’s request for attorney fees related to the 2010 Agreements.
While the Court has not reached the merits of Melaleuca’s claims regarding the 2010
Agreements, that does not automatically foreclose Kot’s request for fees. The Idaho
Supreme Court has held that a court may award attorney fees even when the case is
dismissed without prejudice and the court never reaches the merits of the dispute. See
Charney v. Charney, 356 P.3d 355, 360 (Idaho 2015). In Charney, the Idaho Supreme
Court stated:
[Defendant] argues that there was no final judgment, apparently meaning
that there was no decision on the merits. In the Parkside Schools case, there
was also no decision on the merits. We still remanded the case so that the
defendant could request an award of attorney fees. . . . Rule 54(a) . . . states:
“A judgment shall state the relief to which a party is entitled on one or
more claims for relief in the action. Such relief can include dismissal with
or without prejudice.” Thus, a judgment includes a dismissal without
prejudice. The rule also states, “A judgment is final if either it has been
certified as final pursuant to subsection (b)(1) of this rule or judgment has
been entered on all claims for relief, except costs and fees, asserted by or
against all parties in the action.” A dismissal of all claims for relief without
prejudice would be a final judgment. A final judgment in a civil action does
not require a decision on the merits; it would include a dismissal of all
claims for relief without prejudice.

to be valid and enforceable. See Xiao Jianguo and Tang Xin, Cost and Fee Allocation in Civil
Procedure: China National Report, 4 Tsinghua China L. Rev. 43, 45 (2011) (“[P]arties are not
prohibited from reaching agreements on allocation of litigation costs and fees. Such agreements
will be valid as long as the requirements for a valid contract are satisfied.”). However, for the
same reasons set forth in the Court’s previous decision (See Dkt. 74, at 8-28), whether the 2011
agreements are valid and enforceable is a determination that must be made in China. Because
Chinese law generally does not award attorney fees to the prevailing party as a matter of course,
the Court denies Kot’s request for fees stemming from litigation surrounding the 2011
Agreements based upon Boise Tower Assocs., LLC v. Washington Capital Joint Master Trust
Mortg. Income Fund, No. 03–141–S–MHW, 2007 WL 4355815, at *2 (D. Idaho Dec. 10, 2007).

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Id. (discussing Parkside Sch., Inc. v. Bronco Elite Arts & Ath., LLC, 177 P.3d 390 (Idaho
2008).
Under Idaho Code section 12-120(3), an award of fees is mandatory if Kot is the
prevailing party. Scott USA Inc. v. Patregnani, No. 1:14-CV-00482-BLW, 2015 WL
7013204, at *1 (D. Idaho Nov. 12, 2015) (citing Merrill v. Gibson, 87 P.3d 949, 954
(Idaho 2004)). The prevailing party determination is committed to the discretion of the
trial court. Sanders v. Lankford, 1 P.3d 823, 826 (Idaho 2000).
There are “three principal factors” the Court should consider when determining
which party, if any, prevailed. These include: “(1) the final judgment or result obtained in
relation to the relief sought; (2) whether there were multiple claims or issues between the
parties; and (3) the extent to which each of the parties prevailed on each of the claims or
issues.” City of Middleton v. Coleman Homes, LLC, 418 P.3d 1225, 1232 (Idaho 2018);
see also I.R.C.P. 54(d)(1)(B). It is not a “claim-by-claim analysis,” but instead
“determined from an overall view” of the litigation. Eighteen Mile Ranch, LLC v. Nord
Excavating & Paving, Inc., 117 P.3d 130, 133 (Idaho 2005); see also Syringa Networks,
LLC v. Idaho Dep't of Admin., 367 P.3d 208, 226 (Idaho 2016) (adopting the “overall
view” approach even when there are not counterclaims between opposing parties).
1. Application of the Law
Melaleuca does not dispute that section 12-120(3) of the Idaho Code applies in
this case. Instead, Melaleuca argues that the Court’s dismissal of its claims against Kot,
primarily on forum non conveniens grounds, does not render Kot the prevailing party.

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The Court disagrees. While there is little Idaho caselaw regarding the forum non
conveniens doctrine, a consideration of the three factors set forth above shows Kot to be
the prevailing party.
Melaleuca brought multiple claims against Kot, however, the Court has not
reached the merits of those claims. As such, the most important and relevant factor here
is the result Kot obtained in relation to the relief sought in his answer to Melaleuca’s
complaint. In his answer, Kot sought to dismiss all of Melaleuca’s claims against him for
four reasons: (1) the Court lacked personal jurisdiction over him; (2) Melaleuca failed to
join Shaklee China, an indispensable party; (3) forum non conveniens; and (4)
insufficient service of process. Dkt. 47. As noted above, despite finding that it had
personal jurisdiction over Kot regarding the 2010 agreements, the Court ultimately
dismissed all of Melaleuca’s claims against Kot on forum non conveniens grounds. While
the Court did not specifically address all of Kot’s arguments for dismissal, it still
dismissed every claim—precisely the relief Kot sought. As such, the Court determines
Kot is the prevailing party. See Willie v. Bd. of Trs., 138 Idaho 131, 136 (Idaho 2002)
(“[Defendant’s] are the prevailing party because they have received all relief sought in
their answer.”)
Admittedly, the Court is troubled by the notion that Melaleuca should pay Kot’s
fees now, when it may yet prevail on the dismissed claims when the merits are finally
reached in China. However, equally troubling is the possibility that Kot will be left
without a means of recovering fees if Melaleuca decides to forego any pursuit of its
claims against Kot. Since Kot received all relief he sought in his answer, the Court deems
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him the prevailing party, and his motion for attorney fees is GRANTED in PART, as it
relates to attorney fees stemming from litigation surrounding the 2010 Agreements.
2. Reasonableness and Calculation of Fees
Melaleuca next argues that the hourly rate charged by Kot’s lead attorney, Sean
Coletti, is unreasonable. “The calculation of reasonable attorney fees is within the
discretion of the trial court.” Bott v. Idaho State Bldg. Authority, 917 P.2d 737, 749
(Idaho 1996). Rule 54(e)(3) of the Idaho Rules of Civil Procedure lays out a number
factors for the Court to consider in making this determination, however, “[t]he bottom
line in an award of attorney fees is reasonableness.” Lettunich v. Lettunich, 185 P.3d 258,
262 (Idaho 2008).
Mr. Coletti is a partner with the law firm Hopkins Roden Crockett Hansen &
Hoopes, PLLC, based out of Idaho Falls, Idaho. Mr. Coletti has over ten years of
experience as an attorney and charged Kot a fee of $300 per hour. Both Melaleuca and
Kot have submitted affidavits from other local attorneys regarding reasonable billing
rates in the area.
To support his position that Mr. Coletti’s hourly rate is reasonable, Kot submitted
the Declaration of John M. Avondet, a partner with the law firm of Beard St. Clair
Gaffney, PA in Idaho Falls. Mr. Avondet has practiced law for twelve years, and
regularly charges between $250 to $300 per hour. Dkt. 89-1. Additionally, other partners
in his firm, namely Lance Schuster (who has been practicing law since 1996), Jeffrey
Brunson (who has been practicing law since 2004) and Dan Dummar (who has been
practicing law since 2001), “all charge between $250 and $300 per hour for litigation
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cases” in the Idaho Falls area. Dkt. 89-1.
To support its position that Mr. Coletti’s hourly rate is unreasonable, Melaleuca
submitted the Declaration of Richard Friess, an attorney of record for the Plaintiffs in this
matter, and a partner at the law firm of Thomsen Holman Wheiler, PLLC in the Idaho
Falls area. Dkt. 86-1. Mr. Friess has been practicing law since 2007, and charges $225
per hour. Another partner at his firm, Curt Thomsen, “has been practicing civil litigation
for over 30 years in Eastern Idaho,” and typically bills $275.00 per hour. Dkt. 86-1.
After considering the factors set forth in Rule 54(e)(3) of the Idaho Rules of Civil
Procedure, the Court finds Mr. Coletti’s rate of $300 per hour to be reasonable. This
finding is particularly appropriate in light of the complex and unique nature of this case
(i.e. representing a client residing in China in a case involving both Chinese and Idaho
law).
The Court must next determine what measure of fees Kot may recover, based upon
the Court’s denial of Kot’s motion for attorney fees as it relates to the 2011 Agreements
in conjunction with the Court’s granting of Kot’s motion as it relates to the 2010
Agreements. This raises additional uncertainty because, understandably, there is no way
to clearly determine when Mr. Coletti’s work was focused exclusively on the 2010
Agreements, and when his work was focused on the 2011 Agreements. As such, the
Court must determine how to best apportion the requested fees.
There were five claims brought against Kot.2 Three of those claims stemmed from

2

The claims brought against Kot include four breach of contract claims, and one tort claim—
fraud in the inducement related to the 2011 Non-Competition Agreement. Kot seeks attorney

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the 2011 Agreements and two stemmed from the 2010 Agreements. See Dkt. 74, at 7-8.
Accordingly, the Court finds it proper to limit Kot’s recovery to forty percent (i.e. twofifths) of his requested fees. In this case, based upon the calculation Kot submitted to the
Court, this amount equals $13,300.
Admittedly, Judge Dale rejected a similar approach to apportioning fees in J.R.
Simplot Co. v. Nestle USA, Inc., No. CV 06-141-S-EJL-CWD, 2009 WL 10678269 (D.
Idaho July 20, 2009). Simplot involved three contracts—one governed by California law
and two governed by Delaware law. Id. at *1-2. Judge Dale found that the applicable
laws in both California and Delaware generally only allowed for an award of attorney
fees if the contract at issue in the case contained a clause granting such a right. Id. at *56. As only one of the three agreements at issue in Simplot contained such a clause—
namely, the Distribution Agreement—the Plaintiff argued that the Court should limit
defendant’s award of attorney fees to one-third of its requested amount. Judge Dale
disagreed.
A closer examination of the Distribution Agreement revealed that its language was
broad. Specifically, it provided for “attorney fees to the prevailing party when the
litigation concerns ‘the rights or duties of any party in relation to’” the agreement. Id. at

fees for all claims under Idaho Code section 12-120(3). It could be argued that this section
should not apply to the tort claim. On the other hand, it could be argued that the gravamen of the
claim is a commercial transaction, and therefore, section 12-120(3) was the proper means of
seeking attorney fees on that claim. Regardless, because neither party raised the issue, the Court
does not need to address it. Further, even if the Court determined that a different section of the
Idaho Code applied to the tort claim, Kot would still be unable to recover attorney fees because
he only sought fees under section 12-120(3).
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*7 (emphasis in original). Judge Dale found that “all of the counts [were] ‘related to’ the
rights and duties of the parties with respect to the Distribution Agreement.” Id.
Accordingly, Judge Dale awarded all of Defendant’s requested fees, even though only the
Distribution Agreement contained a provision allowing attorney fees for the prevailing
party.
The contracts at issue in this case, however, are distinguishable. Only one of the
2010 Agreements contains a provision regarding attorney fees. While all of Melaleuca’s
claims against Kot are arguably related to this 2010 Agreement, unlike the Distribution
Agreement in Simplot, its language is narrowly tailored to cover only “action[s] to
interpret or enforce the terms of this Agreement.” Dkt. 40-5, at 6 (emphasis added).
Stretching this provision to encompass the 2011 Agreements—which are governed by
Chinese law—is a step too far, and Kot’s award should be limited to attorney fees arising
out of the 2010 Agreements. Accordingly, the Court awards Kot attorney fees in the
amount of $13,300.
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IV. ORDER
The Court HEREBY ORDERS:
1. Kot’s Motion for Attorney Fees (Dkt. 78) is DENIED in PART, as it relates to
litigation surrounding the 2011 Agreements, and GRANTED in PART, as it
relates to litigation surrounding the 2010 Agreements.
2. The Court hereby awards Kot attorney fees in the amount of $13,300.
3. Melaleuca has 30 days to comply with this Order.

DATED: September 5, 2018

_________________________
David C. Nye
U.S. District Court Judge

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