United Central Bank v. Kanan Fashions, Inc. et al

Filing 570

MEMORANDUM Opinion and Order Signed by the Honorable Michael T. Mason on 4/23/12.(rbf, )

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED CENTRAL BANK
Plaintiff,
v.
KANAN FASHIONS, INC., et al.
Defendants.

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No. 10 CV 331
District Judge Gary Feinerman
Magistrate Judge Michael T. Mason

MEMORANDUM OPINION AND ORDER
Michael T. Mason, United States Magistrate Judge.
Currently pending before this Court is plaintiff United Central Bank's (“plaintiff” or
“UCB”) Petition for Fees and Costs Related to Its Motion for Sanctions (the “fee
petition”) [505]. UCB is seeking $332,929.34 in fees and costs incurred as a result of
defendants' spoliation of evidence. For the reasons set forth below, we grant UCB’s fee
petition in part, and we award UCB fees and costs in the amount of $322,416.84.
I. Background
UCB filed this action against defendants Kanan Fashions, Inc., Creative
Warehousing (Chicago) LLC, Kanan Cruises, Inc., Kanan Holdings, LLC, Varsha Shah,
and Mehul Shah (“defendants”) on January 18, 2010. UCB alleges that defendants
breached four loan agreements and seeks damages in excess of $26 million. In
response, defendants have denied the material allegations in the complaint.
Defendants have also asserted two affirmative defenses, and filed a counterclaim for
breach of contract.
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Discovery of defendants’ electronically stored information (“ESI”) has not been an
easy process in this case. Defendants maintained ESI on a number of different
computer servers, one of which was located at a warehouse in Aurora, Illinois ("the
warehouse server"). On several occasions, defendants, through their former counsel
Bailey Borlack Nadelhoffer LLC ("Bailey Borlack”), represented to the Court and to UCB
that all of defendants’ computer servers were within defendants’ control and that
appropriate procedures had been put in place to avoid any spoliation issues. Despite
these representations, on August 20, 2010, UCB received notice from Bailey Borlack
that defendants did not, in fact, have access to or control of the warehouse server
because the warehouse had been foreclosed upon and was now owned by First
Midwest Bank (“FMB”). Although defendants removed almost all of their belongings
from the warehouse prior to the foreclosure, the warehouse server was left behind.
Defendants claimed that they attempted to buy back the lease on the warehouse server
from FMB, but before they could reach an agreement, FMB abruptly sold the server to
an unknown entity located in Dubai. Counsel for UCB made several attempts to track
down the warehouse server and locate the purchaser in Dubai but they were
unsuccessful.
The warehouse server contained information that was directly relevant to UCB's
claims, as well as its defenses to defendants’ counterclaim. On September 24, 2010,
UCB filed a motion for sanctions against defendants and Bailey Borlack for spoliation of
evidence [206]. In the motion, UCB claimed that both defendants and Bailey Borlack
were responsible for the spoliation. Defendants and Bailey Borlack blamed each other
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for the loss of the server. The parties engaged in extensive written and oral discovery,
and submitted a number of briefs on these issues [207, 272, 309, 320, 355, 369]. In
addition, this Court held a five-day evidentiary hearing, which included testimony from
ten witnesses and 240 exhibits. The parties also submitted post-hearing briefs [407,
410, 412].
Ultimately, this Court found that there was strong circumstantial evidence that
defendants actually orchestrated the “sale” of the server, and then went to great effort to
hide their actions from both UCB and Bailey Borlack.1 As a result, we found that “the
evidence amply demonstrate[d] defendants acted wilfully and in bad faith” [425]. We
recommended that the District Court grant UCB's Motion for Sanctions and award UCB
“all fees and expenses incurred in bringing the Motion for Sanctions,” including “fees
and expenses incurred in all discovery related to the Motion, as well as briefing the
Motion and preparing for and participating in the five-day evidentiary hearing” [425].2
The District Court subsequently adopted our Report and Recommendation over
defendants' objections [486].3 UCB then filed this fee petition.
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The facts surrounding the disappearance of the server are complicated to say the
least. For a full recitation of these underlying facts, see this Court's Report and
Recommendation to the District Court [425], and the District Court's Memorandum
Opinion and Order, United Central Bank v. Kanan Fashions, Inc., 10 C 331, 2011 WL
4396856 (N.D. Ill. Sept. 21, 2011).

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In addition to the fees, we also recommended that defendants be barred from
introducing any evidence at trial regarding information on the server, and that the jury
be instructed that defendants’ failure to preserve the server may be considered
evidence that the server contained information unfavorable to defendants’ position.
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The District Court adopted the Report and Recommendation in its entirety with one
exception: it referred the matter back to this Court for a determination as to whether
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II. Analysis
"District courts possess wide latitude in fashioning appropriate sanctions and
evaluating the reasonableness of the attorneys’ fees requested." Heriaud v. Ryder
Transp. Services, 03 C 289, 2006 WL 681041, at *2 (N.D. Ill. Mar. 14, 2006) (quoting
Johnson v. Kakvand, 192 F.2d 656, 661 (7th Cir. 1999)). In order to determine a
reasonable fee, we use the lodestar method, “multiplying the number of hours
reasonably expended on the litigation...by a reasonable hourly rate.” Pickett v.
Sheridan Health Care Ctr, 664 F.3d 632, 639 (7th Cir. 2011) (citing Hensley v.
Eckerhart, 461 U.S. 424, 433 (1983)). The party requesting fees bears the burden of
documenting the appropriate hours expended and establishing its entitlement to
reasonable hourly rates. Hensley, 461 F.3d at 433. “There is a strong presumption that
the lodestar calculation yields a reasonable attorneys’ fee award.” Pickett, 664 F.3d at
639.
A. Reasonable Hourly Rates
In order to determine a reasonable fee under the lodestar method, we first look at
the proposed billing rates for UCB’s attorneys. A reasonable hourly rate is determined
by “the market rate for the services rendered.” Spegon v. Catholic Bishop of Chicago,
175 F.3d 544, 554 (7th Cir. 1999). The market rate is the “rate that lawyers of similar

some or all defendants should be liable for the sanctions [486]. After further briefing on
this issue, we held that all defendants were equally liable [530]. Defendants have
objected to this finding [532], and the matter is currently pending before the District
Court.

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ability and experience in their community normally charge their paying clients for the
type of work in question.” Id. at 555; Williams v. Z.D. Masonry Corp., No. 07 C 6207,
2009 WL 383614, at *2 (N.D. Ill. Feb. 17, 2009). The attorney’s actual billing rate for
comparable work is “presumptively appropriate” to use as the market rate. Denius v.
Dunlap, 330 F.3d 919, 930 (7th Cir. 2003).
In its fee petition, UCB has listed six attorneys and four paralegals who worked
on the issues raised in the motion for sanctions. The attorneys listed have experience
ranging from five years to thirty-five years and their hourly billing rates range from $200
to $350. The experience of the paralegals ranges from five to six years, and each
paralegal has an hourly billing rate of $125. UCB has also included an affidavit from its
lead attorney, Vilia Dedinas, in which Ms. Dedinas describes the role and
responsibilities for each attorney and paralegal in the briefing, discovery and evidentiary
hearing on the motion for sanctions. She also avers to each attorney and paralegal’s
experience, credentials and billing rate. In addition, Ms. Dedinas attests that UCB has
paid all invoices (tendered to UCB as of the date of the affidavit) on this matter at the
proposed hourly rates.
Because UCB counsel has attested that their clients actually pay these billing
rates, these rates are “presumptively appropriate.” See, e.g., DeBartolo v. Health &
Welfare Dept. of the Constr. & General Laborer’s Dept., No 09 C 39, 2011 WL 1131110,
at *7 (N.D. Ill. Mar. 28, 2011) (“The best evidence of the market value of legal services
is what people will pay for it”). Defendants do not assert that the proposed rates are too
high, and given the experience and expertise of plaintiff’s counsel, we find these rates of
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$125 for the paralegals and $200-$350 for the attorneys to be entirely reasonable.
Accordingly, we will award UCB its fees at the proposed rates, and we move on to the
remaining issue of whether the time expended on the sanctions motion was reasonable.
B. Reasonable Number of Hours Expended
According to the fee petition, UCB counsel (both attorneys and paralegals) spent
a total of 1309.85 hours on all matters related to the motion for sanctions. It is our job to
determine whether these hours were reasonably expended. “An hour reasonably
expended is an hour that is not excessive, redundant or otherwise unnecessary.”
Williams, 2009 WL 383614, at *1. Where a party has “failed to exclude or otherwise
tailor unreasonable time entries, the district court may reduce the number of hours
accordingly.” Lizak v. Great Masonry, No. 08 C 1930, 2010 WL 3001906, at *4 (N.D. Ill.
July 29, 2010). As the party requesting reimbursement of attorneys' fees, UCB counsel
is expected to exercise “billing judgment.” Heriaud, 2006 WL 681041, at *3. Billing
judgment requires counsel to “exclude from a fee request hours that are excessive,
redundant, or otherwise unnecessary, just as a lawyer in private practice ethically is
obligated to exclude such hours from his fee submission.” Spegon, 175 F.3d at 552
(citing Hensley, 461 U.S. at 434).
Defendants have made numerous objections to the amount of time UCB counsel
expended on the motion for sanctions. Indeed, defendants’ response brief includes 18
exhibits, totaling 61 pages, objecting to most of UCB counsel’s time. For the most part,
we find these objections unpersuasive. The motion for sanctions raised a number of
complex and fact intensive issues, all of which were the direct result of defendants’
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wilful and inappropriate conduct. Defendants’ spoliation of evidence led to extensive
discovery and a lengthy evidentiary hearing, and plaintiff’s counsel was required to
expend a considerable amount of time pursuing its request for sanctions. Defendants
cannot now object to the fees incurred as a direct result of their own wrongful conduct.
Nevertheless, we do find that some of defendants’ objections have merit and we
address each of their objections below.
1. Secretarial or Clerical Tasks and Overhead Costs
Defendants first argue that plaintiff should not recover fees for certain tasks that
were secretarial or clerical in nature. (Ex. H to Defs’ Br.) Defendants are correct that a
plaintiff should not be reimbursed for clerical tasks “that are easily delegable to nonprofessional assistance.” Spegon, 175 F.3d at 553. In particular, “[c]ourts have found
organizing file folders, preparing documents, copying documents, assembling filings,
electronically filing documents, sending materials, docketing or ‘logging’ case events
into an internal case tracking system, and telephoning court reporters to be clerical.”
Delgado v. Village of Rosemont, No. 03 C 7050, 2006 WL 3147695, at *2 (N.D. Ill. Oct.
21, 2006).
Here, defendants argue that plaintiff should not be reimbursed for 17.1 hours
paralegal David West spent communicating with court reporters and coordinating with a
conference room center regarding upcoming depositions, preparing and delivering
copies of pleadings to the court house, ordering deposition transcripts, conferring with a
process server regarding service of subpoenas and organizing files. (Ex. H to Defs’ Br.)
Except for .5 hours Mr. West spent conferring with a process server, we agree with
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defendants that these tasks are clerical in nature, and UCB should not be reimbursed
for this time. See, e.g., Delgado, 2006 WL 3147695, at *2 (disallowing time spent
updating database, phone calls with clerks, filing documents and deliveries); Heriaud,
2006 WL 681041, at *3 (disallowing time for communicating with court reporter). This
adjustment reduces plaintiff’s fee award by $2,075.00.
Similarly, defendants argue that 2.5 hours spent by lead attorney Vilia Dedinas
should also be disallowed because the work was secretarial or clerical. In particular,
Ms. Dedinas spent .5 hours “communicat[ing] with [an] investigator regarding service of
subpoenas” and 2.0 hours “organiz[ing] files, briefs and research materials.” (Ex. H to
Defs’ Br.) While we do not believe that Ms. Dedinas’ time spent conferring with the
investigator should be stricken, we agree that her time spent organizing files is clerical
in nature and should be disallowed. Delgado, 2008 WL 3147695, at *3 (time spent
organizing case database was disallowed because it was clerical in nature). Taking this
adjustment into consideration, UCB’s fee request is reduced by another $700.
Defendants also argue that $2,650 in fees for the use of the Summit Executive
Conference Center (a conference room in UCB counsel=s building) for depositions is
part of the overhead cost of doing business for a law firm and should not be passed
along to defendants. Defendants assert that it was UCB counsel=s choice to use this
conference room, rather than a conference room within their own firm, and this charge
should not be included in their fee request. We agree with defendants and we will
deduct this charge from the final amount to which they are entitled as well. See, e.g.,
Mason v. Smithkline Beacham Corp., 05 C 1252, 2008 WL 5397579, at *3 (C.D. Ill. Oct.
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7, 2008) (denying reimbursement for fees for the rental of a conference room for a
deposition because “such fees are more akin to administrative fees incurred in the cost
of doing business”); Bosch v. Ball-Kell, No 03 C 1408, 2007 WL 2994085, at *2 (C.D. Ill.
Oct. 11, 2007) (disallowing conference room rental fee).
2. Excessive Time and Insufficient Detail in Time Entries
Defendants also argue that many of UCB counsel’s time entries should be
disallowed because the entries do not include sufficient detail and the time expended
was excessive. A court may reduce the number of hours where the description of the
work performed is inadequate. Lopez v. City of Chicago, No. 01 C 1823, 2007 WL
4162805, at *5 (N.D. Ill. Nov. 20, 2007). However, a “court should not require any more
than the level of detail paying clients find satisfactory.” Garcia v. City of Chicago, No.
01 C 8945, 2003 WL 22175620, at *3 (N.D. Ill. Sept. 19, 2003). In addition, if a fee
request includes excessive, redundant or otherwise unnecessary expenses, the district
court may reduce the number of hours accordingly. Hensley, 461 U.S. at 433.
Several of defendants’ objections can be dismissed without much analysis. For
example, defendants assert that plaintiff’s counsel has failed to provide sufficient detail
for time spent on “preparation of documents.” (Ex. K to Defs’ Br.) But we have
reviewed these entries and we find that plaintiff’s counsel provided sufficient
descriptions for these entries. (See, e.g., “Preparing of documents received from First
Midwest in response to subpoena for production to opposing counsel in preparation of
D. Clark deposition;” “Prepare documents for Blumenthal deposition;” and “Prepare
documents received from third-parties for attorney review”). Defendants also refer the
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Court to a number of other entries that they claim are “impermissibly vague.” (Exs. R-S
to Defs’ Br.) But again, we find that these entries include more than enough information
to allow the court to assess the work that counsel performed. (See, e.g., “Meeting with
V. Didinas and A. Rylko regarding documents produced by First Midwest Bank;”
“Meeting with V. Dedinas re: preparation for S. Blumenthal deposition and newly filed
documents;” and “Preparations for Bhansali deposition”). Nothing about these entries
strikes us as “impermissibly vague.”
a. Legal Research
Defendants also object to time UCB counsel spent on “legal research,” arguing
that plaintiff has not provided sufficient detail about the particular issue that was the
subject of the research. (Exs. B-C to Defs’ Br.) While it is true that a party must specify
the “nature and the purpose of the legal research,” we believe plaintiff has satisfied this
burden here. In re Rockford Prods Corp, No. 07–71768, 2009 WL 2707236, at *6 (N.D.
Ill. Bankr. Aug. 24, 2009). The time records specify legal research regarding “motion for
sanctions,” “hearing issues,” “evidentiary issues” or “post-hearing brief.” (Exs. B-C to
Defs’ Br.) Because all the time that is the subject of the fee petition relates in some way
to the motion for sanctions, we do not believe that plaintiff’s counsel needed to be any
more specific in recording their time. In re Rockford Prods Corp, 2009 WL 2707236, at
*6 (allowing time for researching “authority regarding ESOP litigation”); see also
Greenfield Mills, Inc. v. Carter, 569 F.Supp.2d 737, 751, n.15 (N.D. Ind. 2008) (allowing
time spent on “legal research” when that research coincided with drafting a brief and it
appeared the research related to the issues raised in the brief).
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Defendants also argue that plaintiff is not entitled to recover fees for legal
research for certain issues because UCB counsel should have had independent
knowledge of these issues. (Ex. D to Defs’ Br.) In particular, defendants refer to
research regarding Bailey Borlack’s motion to file its response to the sanctions motion
under seal. We disagree with defendants that this legal research should not have been
necessary. This motion raised a number of complicated legal issues, including
attorney-client privilege and the rules of professional conduct [263]. Plaintiff’s counsel
spent 21.3 hours on research and drafting their brief in opposition [283], and this Court
ultimately agreed with UCB on the issue [313]. We do not find that UCB counsel spent
an unreasonable amount of time on this issue.
b. Preparing for the Evidentiary Hearing
Next, defendants object to 167.8 hours spent preparing for the evidentiary
hearing. Defendants assert that UCB counsel’s time was excessive and that these time
entries lack sufficient detail. (Ex. F to Defs’ Br.) We have reviewed these entries and,
for the most part, we find that there is sufficient detail to justify the time spent preparing
for the hearing. As we have noted, the hearing took place over five days, and included
ten witnesses and 240 exhibits. Any reasonable attorney would have to spend a
considerable amount of time on preparation, and it is not necessary for an attorney to
detail every task that went into the preparations. Delgado v. Mak, 06 C 3757, 2009 WL
211862, at *4-5 (N.D. Ill. Jan. 29, 2009) (“the standard for evaluating the amount of
itemization and detail in time entries in a fee petition, to the extent that there can be said
to be one, appears to be based on the market-that is, ‘the level of detail paying clients
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find satisfactory’”); Catalan v. RBC Mortg. Co., No. 05 C 6920, 2009 WL 2986122, at *4
(N.D. Ill. Sept. 16, 2009) (“while the time entries of Plaintiff's counsel are not as detailed
as they might have been, they are not outside the boundaries of what paying clients
would accept, nor are they so cryptic as to preclude reasonable analysis”).
However, we do agree with defendants that some of the paralegals’ entries for
preparation for the hearing should have included more detail in order to justify the
amount of time expended. For example, over the course of nine days leading up the
hearing, paralegal David West spent a total of 80.7 hours on “prepare for sanctions
hearing” without any further description of the tasks performed. (See, e.g., 01/19/11,
10.5 hours, “Prepare for sanctions hearing”; 01/20/11, 9.7 hours, “Prepare for sanctions
hearing”; 01/21/11, 11.6 hours, “Prepare for sanctions hearing”). We do not believe that
this is sufficient detail to justify reimbursing plaintiff for such large blocks of a paralegal’s
time. While it is true that there were 240 exhibits to prepare and organize into binders,
the billing summaries also indicate that in addition to the 80.7 hours, Mr. West and the
other paralegals billed another 51.2 hours during this same period for preparing and
organizing the exhibits for the hearing. Because we agree that Mr. West’s large blocks
of time should have included additional details, we will reduce this time by 50% (from
80.7 hours to 40 hours). This will reduce plaintiff’s fees by $5,087.50.
c. UCB Counsel’s Fees and Costs Related to Depositions
Next, defendants argue that the amount of time UCB counsel spent preparing
deposition and trial subpoenas, preparing for depositions and summarizing the
deposition transcripts was excessive. We disagree. First, as plaintiff points out, it
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subpoenaed eight individuals (some more than once), and service on a few of these
individuals was complicated. UCB spent 18.2 hours drafting and coordinating service of
these subpoenas and we do not find that this amount of time is excessive.
We also do not find that the amount of time spent preparing for depositions was
excessive. Defendants point to four depositions in particular: defendant Mehul Shah,
Paresh Joshi, Stephen Blumenthal and Dave Clark. (Exs. L-N to Defs’ Br.) These four
individuals were critical witnesses at the evidentiary hearing. Plaintiff’s counsel spent
27.65 hours preparing for and attending the deposition of Steven Blumenthal,
approximately 40 hours preparing for the deposition of Dave Clark, and 23.1 hours
preparing for the depositions of both Mehul Shah and Paresh Joshi. Plaintiff’s billing
summaries indicate that the time spent preparing for the depositions included time spent
reviewing written discovery for relevant documents. Based on our knowledge of the
facts and the central role these individuals played in the loss of the warehouse server,
we do not find this time to be excessive.
We also disagree that plaintiff’s counsel spent an unreasonable amount of time
summarizing the deposition transcripts. (Ex. J to Defs’ Br.) There were eight
depositions taken during this time, on an expedited schedule, all of which were directly
relevant to the hearing on the motion for sanctions. It was not unreasonable for
plaintiff’s counsel to have this testimony summarized for use during the hearing and the
post-hearing briefing. Only those attorneys billing at the lower rates ($200-$225 an
hour) performed this work, and we do not find that the amount of time spent on these
summaries was excessive.
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We also dismiss defendants’ argument that the court reporter fees for the
depositions of Snehal and Pareg Bhansali should be disallowed. Defendants argue that
because UCB did not use these depositions at the hearing, they were unnecessary.
However, because there was circumstantial evidence linking these two individuals to the
sale of the warehouse server, even if UCB did not use these depositions at the hearing,
it was perfectly reasonable for UCB to depose them.
d. Drafting Pleadings
Next, defendants argue that UCB counsel spent too much time drafting the reply
brief on the sanctions motion (45.4 hours) and responding to defendants’ objections to
this Court’s Report and Recommendation on the sanctions motion (38.3 hours). (Exs.
O, Q to Defs’ Br.) UCB’s reply brief was 20 pages long, incorporated the facts obtained
during discovery (which were not previously included in plaintiff’s opening brief), and
responded to defendants’ brief, as well as Bailey Borlack’s response brief. We do not
believe 45 hours on this task is excessive. Similarly, plaintiff’s response to defendants’
objection to this Court’s Report and Recommendation was 15 pages long and
incorporated the testimony from the five-day evidentiary hearing. We do not agree that
spending 38.3 hours to research and draft this brief was excessive.
Defendants also object to the 89.5 hours UCB counsel spent preparing the fee
petition. (Ex. P to Defs’ Br.) “Time spent in preparation of a fee petition is compensable
so long as the time spent is not disproportionate to that spent on the merits of the case.”
Delgado, 2006 WL 3147695, at *4. The relevant inquiry is whether the hours claimed to
have been expended on the fee request bear a rational relation to the number of hours
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spent litigating the merits of the case. Spegon, 175 F.3d at 554. Courts in this Circuit
have held that time spent on a fee petition is reasonable where it amounts to less than
10% of the time spent litigating the merits. Delgado, 2006 WL 3147695, at *4 (collecting
cases). Here, plaintiff seeks to be reimbursed for 1220.35 hours litigating the merits of
the motion for sanctions (excluding the time spent on the fee petition). We have
reduced this amount to 1161.05 hours. The 89.5 hours spent on the fee petition is 7.7%
of the time spent on the underlying motion, and in our review of the billing entries for this
work, we do not believe any of the work was excessive or unnecessary.
e. Excessive Interoffice Communications
Next, defendants argue that UCB counsel spent an excessive amount of time on
intra-firm conferences. (Ex. R to Defs’ Br.) However, as UCB points out, defendants
have made a number of misstatements and mischaracterizations here. For example,
defendants state that on 09/23/12 attorney Nada Djordjevic spent 5.3 hours on
“[c]orrespondence to/from V. Dedinas re: same.” In fact, the actual time entry states:
“Draft motion for sanctions and correspondence to/from V. Dedinas re: same (5.3
hours).” (See Ex. A to Pl’s Fee Petition [505] (emphasis added).) Thus, defendants
have blatantly mischaracterized UCB counsel’s time. This example is not the only
instance in which defendants omitted relevant portions of UCB’s time entries.
We have reviewed UCB counsel’s actual billing summaries, and we do not find
that any of counsel’s time was excessive. “There is no hard-and-fast rule as to how
many lawyers can be at a meeting or how many hours lawyers can spend discussing a
project.” Edwards v. Rogowski, 06 C 3110, 2009 WL 742871, at *8 (N.D. Ill. Mar. 18,
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2009) (quoting Gautreaux v. Chicago Housing Auth., 491 F.3d 649, 661 (7th Cir. 2007)).
“Multiple lawyers, working together, may lead to more efficiency and reduced costs” and
“[a]s long as the meetings are appropriate and necessary and the billing is reasonable,
the court will not exclude the hours.” Id. Here, plaintiff was required to engage in
extensive discovery and prepare for an evidentiary hearing within a matter of months. It
was reasonable for UCB to involve a number of attorneys and other staff to work on
these issues, and of course, this requires intra-firm communication. We do not find that
UCB counsel’s time conferring with one another was excessive or unreasonable in any
way.
3. Plaintiff’s Counsel Did Not Provide Actual Billing Records
Defendants also object to the fee petition on the grounds that plaintiff did not
produce actual billing records. Instead, plaintiff provided this Court with summaries of
its billing records along with an affidavit, attesting to the veracity of the summaries.
Plaintiff also explained that it did not file actual billing records because these records
included privileged information and attorney time that did not relate to the sanctions
motions. UCB offered to provide the Court with copies of any billing records for an in
camera review if necessary. We agree with plaintiff that it was not required to provide
the Court with actual billing records, and we found the billing summaries adequate for
purposes of resolving the fee petition.
4. Costs Incurred for Expert Susan Cheng
Finally, defendants object to the $7,425 in costs and expenses incurred for
plaintiff’s expert witness, Ms. Susan Cheng, arguing that Ms. Cheng’s testimony was
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unnecessary. Again, we disagree. As part of its sanctions motion, UCB was required to
prove that it was prejudiced by the loss of the evidence. UCB believes that the
warehouse server contains evidence that defendants overstated their inventory (the
collateral for the loans at issue in the complaint) and engaged in accounting fraud, all of
which would be defenses to defendants’ affirmative defenses and counterclaim. Ms.
Cheng testified that there were significant discrepancies in the accounting records of
defendants and one of its customers. This testimony is directly relevant to the issue of
prejudice. As a result, we believe that plaintiff should be reimbursed for the costs and
expenses incurred in connection with Ms. Cheng’s testimony.
III. CONCLUSION
For the foregoing reasons, we grant UCB’s fee petition in part and award UCB
$322,416.84 in fees and costs incurred in connection with the motion for sanctions.

ENTERED:

__________________________
MICHAEL T. MASON
United States Magistrate Judge
Dated: April 23, 2012

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