New London Tobacco Market, Inc. v. Kentucky Fuel Corporation et al
Filing
285
MEMORANDUM OPINION & ORDER: 1) Magistrate's R/R 259 is ADOPTED as and for the opinion of the Court; 2) Plas' Supplemental Motion for Atty Fees 240 is GRANTED in PART; 3) Court HEREBY AWARDS the Plas $109,789.75 in fees and expenses. Signed by Judge Gregory F. VanTatenhove on 07/20/2016.(MRS)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
SOUTHERN DIVISION
LONDON
NEW LONDON TOBACCO MARKET,
INC. and FIVEMILE ENERGY, LLC,
Plaintiffs
V.
KENTUCKY FUEL CORPORATION
and JAMES C. JUSTICE COMPANIES,
INC.,
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Civil No. 12-91-GFVT
MEMORANDUM OPINION
&
ORDER
Defendants
*** *** *** ***
Before the Court is Magistrate Judge Hanly A. Ingram’s Report and Recommendation.
[R. 259.] The Court will now ADOPT the Magistrate’s report.
I
Over the last four years, Defendants Kentucky Fuel Corporation and James C. Justice
Companies, Inc. have inundated this Court with duplicative arguments, deliberately withheld
discoverable material, and violated multiple court orders. The Court need not waste any further
time detailing the Defendants’ startling history of obstruction and delay, but will incorporate by
reference its previous summaries of this conduct. [R. 189, 206, 251, 255.] After contending
with the Defendants’ abusive tactics for almost two years, the Magistrate finally concluded that
he could “fathom no sanction that [would] result in appropriate compliance by Defendants or
sufficiently address Defendants’ behavior other than entry of default judgment.” [R. 189 at 22.]
In September 2014, this Court agreed with the Magistrate that the Defendants’ flagrant and
unapologetic history of non-compliance was, “by definition, contumacious and enough to
conclude they acted in bad faith.” [R. 206 at 8.] The Court noted that the Defendants did “not
even argue that they were unable to comply with the Court’s orders,” compelling the conclusion
“that they could have complied but elected not to do so.” [Id.] With this “appalling” behavior in
mind, the Court found that the Defendants’ conduct “justifie[d] the entry of default judgment.”
[Id. at 21.]
In September 2015, the Court directed the Magistrate to “establish a briefing schedule
and hold proceedings to make appropriate findings and issue a recommendation as to how much
should be awarded to Plaintiffs’ counsel in compensation for attorneys’ fees and reasonable
expenses relating to their motions for sanctions and attempt to depose Mr. Justice.” [R. 227 at
7.] The Plaintiffs then filed three proposed calculations of their fees and expenses. [R. 208, 240,
244.] The Defendants objected to virtually every aspect of the Plaintiffs’ calculations. [R. 209,
241, 256.] On March 16, 2016, the Magistrate filed the present Report and Recommendation
(“R&R”). [R. 259.] The Magistrate recommended sustaining the Defendants’ objections to the
Plaintiffs’ request for fees related to “the Plaintiffs’ notice of supplemental authority” and the
Defendants’ “motion to strike” and “motion for extension of time,” reasoning that those filings
were not sufficiently related to the Plaintiffs’ motions for sanctions and/or attempt to depose Mr.
Justice. [Id. at 13.] The Magistrate overruled the Defendants’ remaining objections, however,
and ultimately recommended that the Court award the Plaintiffs “$109,789.75 in attorneys’ fees
and expenses.” [Id. at 24.] The Defendants now object to almost every aspect of the
Magistrate’s recommendation.
2
II
A
In any case involving a request for attorneys’ fees, “‘[t]he primary concern . . . is that the
fee awarded be reasonable,’ that is, one that is adequately compensatory to attract competent
counsel yet which avoids producing a windfall for lawyers.” Adcock-Ladd v. Sec'y of Treasury,
227 F.3d 343, 349 (6th Cir. 2000). For this reason, attorneys seeking compensation must
“maintain billing time records that are sufficiently detailed to enable courts to review the
reasonableness of the hours expended.” Wooldridge v. Marlene Indus. Corp., 898 F.2d 1169,
1177 (6th Cir. 1990). The fee applicant carries “the burden of providing for the court’s perusal a
particularized billing record” that supports the proposed amount. Perotti v. Seiter, 935 F.2d 761,
764 (6th Cir. 1991). The petitioner, “of course, is not required to record in great detail how
every minute of his [or her] time was expended,” but should “at least . . . identify the general
subject matter of [ ] time expenditures.” Hensley v. Eckerhart, 461 U.S. 424, 437 (1983).
When evaluating these records, “[t]he trial court’s initial point of departure . . . should be
the determination of the fee applicant’s ‘lodestar,’ which is the proven number of hours
reasonably expended on the case by an attorney, multiplied by his court-ascertained reasonable
hourly rate.” Adcock-Ladd, 227 F.3d at 349. After calculating this figure, “[t]he trial judge may
then, within limits, adjust the ‘lodestar’ to reflect relevant considerations peculiar to the subject
litigation.” Id. Although the district court’s “exercise of discretion” in calculating a reasonable
amount “is entitled to substantial deference,” the court must still “provide a clear and concise
explanation of its reasons for the fee award.” Adcock-Ladd v. Sec'y of Treasury, 227 F.3d 343,
349 (6th Cir. 2000). This review “should state with some particularity which of the claimed
hours the court is rejecting, which it is accepting, and why.” Smith v. Serv. Master Corp., 592 F.
3
App’x 363, 366 (6th Cir. 2014) (quoting U.S. Structures, Inc. v. J.P. Structures, Inc., 130 F.3d
1185, 1193 (6th Cir. 1997). And when a counterparty “raises specific objections to a fee award,
a district court should state why it is rejecting them.” Wooldridge, 898 F.2d at 1176.
B
The Defendants lodge five objections to the Magistrate’s recommendation. First, they
argue that the Magistrate “erred in his application of the ‘[l]odestar’ approach when reviewing
the reasonableness of the number of hours charged by Plaintiffs’ counsel.” [R. 261 at 4.] The
Defendants first make the conclusory announcement that “Plaintiffs’ chief counsel” provided “26
entries where the work performed [was] not directly related to the preparation for” the motions
for sanctions or deposition of Mr. Justice. [R. 261 at 11.] The Magistrate reviewed these 26
entries and found that they all directly related to the motions for sanctions and/or attempted
deposition. [R. 259 at 14.] He added that he could “not grasp Defendants’ theory as to why
these entries are unrelated to Plaintiff’s motions for sanctions or the deposition of Mr. Justice,”
and reminded the Defendants that “[b]aldly asserting that the entries are ‘unrelated’ to the
sanctions motions and deposition—without more—is insufficient to raise a contested issue of
fact.” [Id.]
In their objection to the Magistrate’s report, the Defendants merely copy and paste the
same argument cited above. The Court has carefully reviewed each of these 26 entries and
agrees with the Magistrate that they are indisputably related to the motions for sanctions and/or
deposition of Mr. Justice. The “charges for 9/30/13,” for example, describe hours spent
“work[ing] on motion for sanctions” and a conference to “discuss [the] case and motion for
sanctions.” [R. 240-1 at 3.] And an entry dated “1/15/14” lists “research[ing] cases for failure to
appear and entry of default,” and “draft[ing] inserts for [a] memo in support of Rule 37(d)
4
sanctions.” [R. 240-1.] The rest of these entries—considered in the context of the procedural
posture of this case during the time period in question—also plainly relate to the numerous
hearings, motions, and orders arising out of the Defendants’ habitual discovery abuses, the
resulting motions for sanctions, and the final imposition of default judgment. [R. 240-1 at 4-9.]
The Defendants’ unsupported claim that this work was “not directly related” to the motions for
sanctions is, at best, a gross mischaracterization of the record.1
The Defendants also recycle the claim that the record contains “no mention” of whether
some “charges were related to the actual preparation of pleadings as opposed to more
perfunctory tasks.” [R. 261 at 10.] They apparently take issue with the fact that many of the
local counsel’s charges were “for receiving, reviewing and responding to email from cocounsel.” [R. 240-2 at 4.] A simple review of these entries reveals that each email involved
communication about the Defendants’ refusal to obey discovery orders, the Plaintiffs’ attempts
to depose Mr. Justice, and/or the preparation for, drafting, and review of the Plaintiffs’ motions
for sanctions. [R. 242 at 3-10.] The entries also expressly detail the nature of the email
correspondence; the entry at 8/15/14, for example, states that counsel “received and reviewed
email from J. Lucas regarding prejudice from lack of financial information; performed research
and response email with and regarding draft argument.” [Id. at 8.] Counsel also appropriately
limited the number of hours charged for emails, often listing only “.1” or “.2” billable hours and
charging “$20.00” or “$40.00” for his services. [Id.]
The Defendants also suggest that “there are multiple entries included within the statements submitted by
Plaintiffs’ counsel that were never addressed by the Magistrate.” [R. 261 at 10.] The Magistrate
rigorously itemized and addressed each and every exhibit and declaration attached by the Plaintiffs. Of
course, the trial court need not explicitly address each of the hundreds of entries contained in the
attorneys’ exhibits in order to “provide a clear and concise explanation of its reasons for [a] fee award.”
Adcock-Ladd v. Sec'y of Treasury, 227 F.3d 343.
1
5
The Court notes, too, that co-counsel will often use email as a useful and necessary
method of correspondence. Nothing about this form of communication renders the work
performed invalid or otherwise unworthy of compensation. As the Plaintiffs properly observe,
the Defendants have made no attempt to explain “[j]ust how local counsel is supposed to
discharge his duties without ‘receiving, reviewing, and responding’ to communications from his
co-counsel.” [R. 263 at 3.] The Court thus agrees with the Magistrate that the number of hours
charged by Plaintiffs’ counsel were reasonable under the lodestar analysis.2
C
Second, the Defendants argue that “[t]he Magistrate erred in his application of the
‘[l]odestar’ approach when reviewing the hourly rates charged by Plaintiffs’ counsel.” [R. 261 at
4.] They insist that Sixth Circuit precedent requires the fee “to be commensurate with that
charged by counsel in the local forum.” [Id. at 12.] It does not. In fact, the principal case cited
by the Defendants, Adcock-Ladd, 227 F.3d 343, faulted the trial court for “erroneously
conclud[ing] that the hourly rate prevailing within the venue of the court wherein the case was
commenced will always constitute the maximum allowable reasonable hourly rate for legal work
performed by a foreign counselor in a venue other than the jurisdiction wherein the case was
commenced.” Id. at 350 (emphasis in original). Because special circumstances in that case
required an out-of-state attorney to depose a party in the state where the attorney practiced, the
Court determined that market rates in that state, rather than those charged in the local forum,
were appropriate. Id. at 350-51. Similarly, in Louisville Black Police Officers Org. v. City of
The Defendants relatedly argue that “the simple review of a document that was prepared by a different
attorney would constitute ‘unnecessarily duplicating the work of co-counsel’ which is to be excluded.”
[R. 261 at 11.] The record shows that the attorneys often reviewed each other’s work, communicated
with each other about that work, and performed additional research and/or writing following those
conversations. This process simply describes the way that law firms operate; needless to say, the Court
will not penalize attorneys for working together. Collaboration is not duplication.
2
6
Louisville, 700 F.2d 268 (6th Cir. 1983), the court held that “[d]istrict courts are free to look to a
national market, an area of specialization market or any other market they believe appropriate to
fairly compensate particular attorneys in individual cases.” Id. at 278; see also Knop v. Johnson,
712 F. Supp. 571, 582-83 (W.D. Mich. 1989) (holding that, “in keeping with the discretionary
nature of fee awards,” the Sixth Circuit does “not require the district court to look only to [local]
rates,” and district judges remain free to adjust “a fee upward or downward to reflect the quality
of representation.”); Smith v. Serv. Master Corp., 592 F. App’x 363, 369 (6th Cir. 2014) (citing
Louisville Black Police Officers as evidence of “Sixth Circuit authority that [holds] the relevant
market need not be local to the venue.”).
Rather than require lower courts to apply the market rate of the local forum, the Sixth
Circuit holds only that courts should “initially assess” that rate when “calculating the reasonable
hourly rate component of the lodestar computation.” Adcock–Ladd, 227 F.3d at 350 (internal
quotations omitted). But in addition to the local rate, courts may also consider other
circumstances that might support a fee award above or below the local standard. Cf. Smith v.
Serv. Master Corp., 592 F. App'x 363, 370 (6th Cir. 2014) (reversing lower court’s fee award
only because “[t]he district court did not adequately explain its reasons for departing from the
local rate for associates and did not discuss the governing criteria.”). Among these additional
considerations are the twelve criteria announced in Johnson v. Georgia Highway Express, Inc.,
488 F.2d 714 (5th Cir. 1974), which include:
(1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the
skill requisite to perform the legal service properly; (4) the preclusion of other
employment by the attorney due to acceptance of the case; (5) the customary fee; (6)
whether the fee is fixed or contingent; (7) time limitations imposed by the client or the
circumstances; (8) the amount involved and the results obtained; (9) the experience,
reputation, and ability of the attorneys; (10) the “undesirability” of the case; (11) the
nature and length of the professional relationship with the client; and (12) awards in
similar cases.
7
Paschal v. Flagstar Bank, 297 F.3d 431, 435 (6th Cir. 2002) (citing Johnson, 488 F.2d 714)).
The Court may consider these factors separately from its initial assessment, although the Johnson
factors “usually are subsumed within the initial calculation of hours reasonably expended at a
reasonable hourly rate.” Hensley 461 U.S. at 434. And finally, “[w]hen fees are sought for an
out-of-town specialist,” courts should also consider “(1) whether hiring the out-of-town specialist
was reasonable in the first instance, and (2) whether the rates sought by the out-of-town
specialist are reasonable for an attorney of his or her degree of skill, experience, and reputation.”
Hadix v. Johnson, 65 F.3d 532, 535 (6th Cir. 1995). The Court may relatedly “question the
reasonableness of an out-of-town attorney’s billing rate if there is reason to believe that
competent counsel was readily available locally at a lower charge or rate.” Id.
To summarize, then, a proper lodestar analysis in this case requires four broad and related
considerations. First, the Court should “initially assess” the prevailing market rate of the forum.
Adcock–Ladd, 227 F.3d at 350. At the same time, the Court must situate that rate alongside (2)
the twelve criteria enumerated in Johnson, (3) the specific analysis provided in Hadix, and (4)
any other special circumstances warranting an adjustment of the rate. After balancing all of
these considerations, the Court may exercise its substantial discretion in calculating a reasonable
award.
Here, the Magistrate’s R&R carefully followed the steps outlined above. The Magistrate
expressly recognized that a court should “‘initially assess the prevailing market rate of the [local]
community,’” and noted that “Mr. Lucas charged Plaintiffs $425 an hour, while [local counsel]
charged $200 an hour.” [R. 259 at 5, 15, 17.] But the Magistrate also identified many other
factors that warranted an adjustment of the rate. Citing the Johnson test, he found that “this
litigation has been unusually time-consuming and laborious for Plaintiffs” as result of the
8
“tactics that led to these sanctions.” [R. 259 at 20.] He added that these discovery abuses
required a great amount of skill to combat, and “Mr. Lucas’s diligence [was] commendable.”
[Id.] He also noted that the results obtained have been substantial, as the litigation involves
claims in excess of $17 million, and counsel has “already succeeded in obtaining default
judgment on three counts.” [Id.] The “declarations of fellow attorneys and Mr. Lucas’s CV”
also demonstrated “his outstanding experience, reputation, and ability—facts Defendants d[id]
not attempt to challenge.” [Id.] And the president of the Plaintiff corporation, Mr. Brownlow,
“explained the he and his company have a relationship with Mr. Lucas going back to 1994,”
when Lucas represented the Plaintiff in another complex commercial case. [Id. at 18-19.]
Turning to the Hadix factors,3 the Magistrate concluded that “hiring Mr. Lucas (as
opposed to someone from the Eastern District of Kentucky) was reasonable.” [Id. at 18.]
Plaintiff’s corporate counsel indicated that he was “‘intimately familiar with Mr. Lucas’ practice
having been associated with him in the same law firm for seven (7) years.” [R. 259 at 16.]
Brownlow also stated that, based on his “previous relationship with Mr. Lucas,” he had “made
the decision that [Lucas] would be [his] first choice as litigation counsel in any future complex
matters.” [Id. at 17.] Brownlow added that, given “the business practices of the Defendants and
of their president, Mr. James Justice, [he] knew that it would be essential to have highly
experienced and seasoned counsel because the Defendants would be formidable adversaries and
difficult to deal with.” [Id.] This personal exposure to Mr. Lucas’s exceptional skill as a
complex commercial litigator—coupled with Lucas’s reputation as “the most able commercial
litigator in [the Knoxville] area” that had for years “been the first and top choice of commercial
3
The Court notes that many of the facts relevant to the Hadix analysis are equally relevant to the Johnson
criteria.
9
litigators”—led Brownlow to conclude that hiring Mr. Lucas would be a prudent and costeffective decision.4 [Id.]
Lastly, the Magistrate determined that “it was important for [Brownlow] to have lead
counsel where he lived so that he, his wife, and corporate counsel could coordinate effectively.”
[Id. at 19.] Lucas, Brownlow, and corporate counsel all live in Knoxville, Tennessee. [Id. at
17.] Most of the Plaintiff’s records “are retained at [Brownlow’s] home office” in Knoxville,
and he conducts company business from Knoxville.5 [Id.] Brownlow also strongly desired “to
have lead counsel from Knoxville . . . with whom [he and his] wife could interact regularly,” and
The Defendants point out that “Plaintiffs also hired a London attorney,” and argue that “[t]heir apparent
satisfaction with his skill and experiences creates a ‘reason to believe that counsel was readily available
locally at a lower charge of rate.”’ [R. 261 at 14.] Once again, however, the Defendants are simply
describing the way that law firms routinely operate. Out-of-state firms will frequently hire local counsel
to assist them. But it does not logically follow that hiring a local attorney to assist in certain aspects of
litigation—and expressing “apparent satisfaction” with that attorney’s performance—somehow affirms
that local counsel was “readily available” to perform all of the same work performed by lead counsel. For
the reasons explained in this order, the Court finds that Mr. Lucas was unusually well-positioned to act as
lead counsel in this case.
5
The Defendants suggest that “[t]hough the president claimed that most of his company records were in
Knoxville, the filings made with the Kentucky Secretary of State indicate that New London Tobacco
Market is a Kentucky corporation with its principal place of business in London,” and “the Secretary of
State’s records indicate that the now-dissolved Fivemile Energy Resources, Inc. was at or around the time
of the lawsuit headed by Mr. and Mrs. Brownlow and located at the same premises.” [R. 261 at 13.] The
Plaintiff in this case is Fivemile Energy, LLC, not Fivemile Energy Resources, Inc. Brownlow states that
the latter is a company formed in 1988 by another individual and he had “nothing to do with it.” [R. 2152. At 3.] He indicates that he only formed Fivemile Energy, LLC in order “to acquire certain Fivemile
leases” in 2009. [Id.] The Plaintiffs explained this distinction to the Defendants in 2014, though the
Defendants continue to refer to the wrong corporation. In any case, the simple fact that the corporation
owned by Brownlow is located in London does not conflict with his statement that he keeps most
business records in his home office.
4
10
with whom his corporate counsel “could work with and coordinate regularly.” 6 [Id.] Given (1)
Brownlow’s personal history with Mr. Lucas, (2) Lucas’s reputation as an uncommonly skilled
commercial litigator, and (3) the efficiency and convenience of retaining counsel in Knoxville,
the Court finds that it was reasonable for Brownlow to hire Mr. Lucas and pay him a fee roughly
similar to his standard rate.7
The Court will end by emphasizing that the peculiar facts of this case also warrant an
adjustment of Mr. Lucas’s rate. The Defendants’ repeated abuse of the discovery process “began
at the very outset of the case.” [R. 189 at 17.] They have not only refused to produce numerous
discoverable documents, but have also “obstructed the search for truth” by “selectively
disclos[ing] information . . . [and] withholding information they want[ed] to keep from the factfinder.” [Id. at 19.] This Court has previously found that, “[a]lthough the Plaintiffs ‘were
resourceful and did everything they could to be prepared for depositions with the discovery they
had,’ they [ ] plainly suffered prejudice resulting from ‘the waste of time and money [spent]
The Defendants counter that “after reviewing over two (2) years of billing records, however, it appears
that Mr. Brownlow only met with Knoxville counsel three (3) times in person and twice telephonically.”
[R. 261 at 14.] The Plaintiffs argue that “[t]here are so many errors in th[is] statement that one scarcely
knows where to begin, and these “numbers (three meetings and two telephone conferences) appear to
have been pulled out of thin air.” [R. 263 at 5.] The Court agrees. The document cited by the
Defendants to support this claim, R. 244-4, is an unrelated declaration signed by Mr. Brownlow that
contains no mention of the number of meetings that took place between the Brownlows and Lucas. The
Plaintiffs suggest that “the detailed billing records” at DE 240-1 “reflect at least four personal meetings
and nine phone calls between Messrs. Brownlow and Lucas during the 15-month period (not ‘over two
(2) years’) covered by the time records dealing with the sanctions issues.” [R. 263 at 5.] The Court’s
own review of these records reveals that at least six “conferences” took place during the relevant time
period. [R. 240-1 at 5, 6, 7, 8.] In any event, these records only show those specific meetings that
occurred over a 15-month period to discuss the motions for sanctions, and do not include any other
meetings that took place over the last four years. The Plaintiffs indicate that “Messrs. Brownlow and
Lucas met personally in Knoxville on numerous other matters in addition to the sanctions issues.” [R.
263 at 5.] Although these additional meetings are not relevant to the Court’s calculation of the hours
spent dealing with the motions for sanctions, they are relevant to the reasonableness of Brownlow’s
decision to hire Lucas.
7
Although Mr. Lucas’s standard hourly rate ranges from $450-475 per hour, he proposes a discounted
rate of $425 in this case. [R. 259 at 16.]
6
11
dealing with these abuses.’” [R. 251 at 3.] To be clear, the Court does not suggest that a higher
fee award is necessary to punish the Defendants for their contumacy and bad faith, or that Lucas
should be compensated here for work unrelated to the motions for sanctions and/or attempted
deposition of Mr. Justice. Rather, the Court simply recognizes that the Defendants’ obstructive
tactics—which forced counsel to redirect his attention to the sanctions motions for which he now
seeks compensation—amplified the difficulty, complexity, and undesirability of an already
convoluted case. Accordingly, based upon all the considerations detailed above, and in light of
the Court’s deep familiarity with the unusual facts of this case, the Court finds that Mr. Lucas’s
hourly rate was reasonable. Cf. Adcock-Ladd, 227 F.3d at 349 (finding “the trial court’s
discretion in fee award cases sweeps broadly,” particularly “when the rationale for the award [is]
predominantly fact-driven.”).
D
Third, the Defendants claim that “[t]he Magistrate erred in failing to conduct an
evidentiary hearing as to the facts and issues raised by Plaintiffs’ application for fees and
expenses.” [R. 261 at 5.] An attorney’s “fee application may be decided without [an
evidentiary] hearing,” and such a hearing “is required only where the district court cannot fairly
decide disputed questions of fact on the basis of affidavits and other documentation.” Bldg. Serv.
Local 47 Cleaning Contractors Pension Plan v. Grandview Raceway, 46 F.3d 1392, 1402 (6th
Cir. 1995).8 The Defendants argue here that “there are a number of factual issues relevant to the
The Magistrate agreed with the Defendants’ suggestion that “the evidentiary burden is greater if the
party [is] seeking an enhanced award beyond the ‘[l]odestar” amount or when excessive hours are
claimed.” [R. 261 at 8.] But the Magistrate also found that the amount awarded did not represent “an
upward adjustment from the lodestar amount.” [R. 259 at 10.] The case law shows that a fee award does
not represent an upward adjustment from the lodestar amount simply because that fee exceeds the local
rate. See Hensley 461 U.S. at 434 (noting that the Johnson factors “usually are subsumed within the
initial calculation of hours reasonably expended at a reasonable hourly rate.”). The Defendants admitted
as much when they stated that “[t]he Johnson factors have since been subsumed within the ‘[l]odestar’
8
12
reasonableness of the number of hours charged by Plaintiffs’ counsel.” [R. 261. at 9.] They cite
the Magistrate’s comment that he could “not grasp Defendants’ theory as to why [certain] entries
[were] unrelated” to the motions for sanctions, and claim that the “Magistrate should have held
an evidentiary hearing” to resolve this confusion. [Id. at 11-12.] But the Magistrate did not
suggest that he could “not grasp the Defendants’ theory” because that theory was too complex or
sophisticated to comprehend through briefing alone; rather, the Magistrate’s confusion resulted
from the fact that the Defendants’ arguments were vague, conclusory, and facially contradicted
by the record. For the reasons explained above, the Court agrees with the Magistrate that the
Defendants’ bald assertions were “insufficient to raise a contested issue of fact.” [R. 259 at 14.]
The Defendants also insist that “[o]nly through a hearing could the Magistrate accurately
assess the evidence presented as to the accuracy of the averments made by Plaintiffs’ counsel.”
[R. 261 at 9.] They fault the Magistrate for relying “instead upon affidavits made by corporate
counsel and others of unknown biases.” [Id.] But the Sixth Circuit has already held that a
hearing is not required when the district court can “fairly decide disputed questions of fact on the
basis of affidavits and other documentation.” Grandview Raceway, 46 F.3d 1392 at 1402. And
as the Magistrate noted, “the declarations submitted by Plaintiffs have the same force and effect
as sworn statements.” [R. 259 at 9] (citing 28 U.S.C. § 1746). Apart from their naked allusion
to “unknown biases,” the Defendants provide no support for their claim that the Court cannot
fairly resolve these factual issues on the basis of the Plaintiffs’ heavily detailed declarations.
One party cannot simply manufacture grounds for an evidentiary hearing by raising the
possibility, in the absence of any factual support, that a counterparty committed perjury.9
approach adopted by the Supreme Court.” [R. 256 at 4.] But even assuming that a heightened
evidentiary burden is warranted, the Court still finds that a hearing is not necessary because the
Defendants have completely failed to raise a credible factual dispute.
9
The Defendants also briefly argue that the Court should hold an evidentiary hearing because “most of
13
Finally, the Defendants also support their demand for an evidentiary hearing by citing to
two cases—Johnson, 488 F.2d 714, and Adcock-Ladd, 227 F.3d 343—where an appellate court
reversed the trial court’s award of attorneys’ fees. [R. 261 at 7.] But the Defendants
conspicuously decline to explain why those courts reversed the district court’s judgment.
Instead, they summarily suggest that each panel reversed the trial court because “the evidentiary
basis” for the fee was “inadequate” and the lower court needed “to make additional findings.”
[Id. at 6-7.] That is a flat misstatement of both courts’ holdings, neither of which directly
concerned the need for an evidentiary hearing. In Johnson, the court remanded the case only
because the district court had failed “to consider the [Johnson] factors” listed above. Johnson,
488 F.2d 714 at 720. The Magistrate carefully analyzed those factors here. And as previously
explained, the court in Adcock-Ladd reversed a fee award because “the trial court erroneously
concluded that the hourly rate prevailing within the venue of the court wherein the case was
commenced will always constitute the maximum allowable reasonable hourly rate for legal work
performed by a foreign counselor in a venue other than the jurisdiction wherein the case was
commenced.” Adcock-Ladd, 227 F.3d 343 at 350 (emphasis in original). The Magistrate
certainly did not commit that error here, despite the Defendants’ best efforts.
By citing to these cases, the Defendants misconstrue the standard for granting an
evidentiary hearing. The purpose of an evidentiary hearing is not to debate the proper legal
the declarations upon which the Magistrate relied were filed with Plaintiffs’ reply memorandum,” and the
Defendants never had an opportunity to “comment” on those “opinions offered” because “the matter was
by then submitted.” [R. 261 at 8.] What the Defendants fail to mention is that the Magistrate allowed
supplemental briefing on the issue of whether to grant an evidentiary hearing after the Plaintiffs had
already filed their reply memorandum. [R. 254.] The Defendants then filed a 14-page brief in which they
cited the Plaintiffs’ reply memorandum and extensively objected to the reasonableness of the Plaintiffs’
charges. [R. 256 at 6-13.] The Defendants also had an opportunity to dispute the accuracy of these
declarations in their present objections to the Magistrate’s R&R. In each instance, they failed to provide
any credible grounds for granting a hearing.
14
standards governing a particular issue, or to question whether the court has considered all the
legal criteria relevant to the disposition of a party’s motion. All of those issues can be, and have
been, addressed in the parties’ briefing or at oral argument. Rather, the purpose of an evidentiary
hearing is to help resolve a credible, existing factual dispute. As demonstrated throughout this
order, the Defendants have altogether failed to establish such a dispute. At best, they now seek
an evidentiary hearing for the purpose of creating a factual dispute, hoping that crossexamination of “corporate counsel and others of unknown biases” might breathe life into their
presently underdeveloped, conclusory allegations. The Court will not further waste the time of
the Plaintiffs and this Court by granting such a hearing.
E
Fourth, the Defendants argue that “[t]he Magistrate erred by allowing Plaintiffs to
recover attorneys’ fees and expenses incurred after his initial [R&R].” [R. 261 at 16.] The
Magistrate’s initial R&R recommended that the Court impose sanctions on the Defendants for
their repeated violation of court orders. [R. 189.] The Defendants objected to that
recommendation, and the Plaintiffs responded to those objections. [R. 190, 198.] The
Defendants apparently believe that, because the Plaintiffs filed this response after submitting
their “last motion for sanctions,” the Court should not award any fees for work related to that
filing. But the Court did not simply direct the Magistrate to recommend compensation for work
performed on the motions for sanctions; instead, the Court asked the Magistrate to recommend
“compensation for attorneys’ fees and reasonable expenses relating to their motions for sanctions
and attempt to depose Mr. Justice.” [R. 227 at 7] (emphasis added). If the Court had sustained
the Defendants’ objections to the R&R, no sanctions would have been imposed. The Plaintiffs’
opposition to these objections thus plainly related to the motions for sanctions.
15
The Defendants also argue that compensating the Plaintiffs for this work would
“improperly punish[ ] Defendants for exercising their right to seek review under 28 USC
636(b)(1) and Rule 72(b).” [R. 261 at 17.] This claim ignores the parallel right of the Plaintiffs
to recover all fees and expenses relating to their motions for sanctions. As the Magistrate
correctly recognized, “[i]t is Defendants’ contumacious conduct that engendered this litigation
over attorneys’ fees,” and the Plaintiffs’ “right to respond to Defendants’ objections to the R&R
was just as strong as Defendants’ right to object.” [R. 259 at 10.] The Court also agrees that
“[d]isallowing fees incurred in responding to the objections would create a perverse incentive to
abandon a party’s efforts to obtain justified sanctions.” [Id. at 10-11.] The Plaintiffs’ application
for these fees was proper.
F
Fifth and finally, the Defendants claim that “[t]he Magistrate erred in failing to impose a
3% cap on fees and expenses charged by counsel for the preparation and litigation of this claim.”
[R. 261 at 17.] They cite Coulter v. State of Tenn., 805 F.2d 146 (6th Cir. 1986), for the
proposition that “the hours allowed for preparing and litigating the attorney fee case should not
exceed 3% of the hours in the main case when the issue is submitted on the papers without a
trial.” Id. at 151. In Coulter, a law professor sought compensation for (1) fees incurred in his
successful representation of a plaintiff in a civil rights suit, and (2) fees incurred in his drafting of
the motion for attorneys’ fees related to that representation. Id. at 148, 151. The court noted that
the “legislative intent” behind the applicable civil rights statutes “was to encourage lawyers to
bring successful civil rights cases, not successful attorney fee cases.” Id. Any work performed
on a motion for attorneys’ fees, then, would have to “ride piggyback on” the earlier work
performed on the “civil rights case” itself. Id.
16
The court thus held that, in order to strike “the right balance,” those “hours allowed for
preparing and litigating the attorney fee case should not exceed 3% of the hours in the main
case.” Id. This guideline was “necessary to insure that the compensation from the attorney fee
case will not be out of proportion to the main case and encourage protracted litigation.” Id. The
court qualified, however, that “unusual circumstances” might warrant deviation from this
guideline in future cases. Id; see also Bunn Enterprises, Inc. v. Ohio Operating Engineers
Fringe Benefit Programs, 2016 WL 223717 at *5 (S.D. Ohio Jan. 19, 2016) (noting that
“unusual circumstance[s]” can “make the Coulter limitation on attorney fees inapplicable,” and
finding the case before that court distinguishable from civil rights cases under Title VII).
If ever there were an “unusual circumstance” warranting a departure from Coulter’s
suggested rate, this would be the case. The present facts are readily distinguishable from those in
Coulter. The dual concerns animating the Coulter court—that “compensation from the attorney
fee case will not be out of proportion to the main case” or “encourage protracted litigation”—
strongly cut against the Defendants’ claims here. This dispute does not even arise out of work
performed on the main litigation of this case; instead, the Plaintiffs seek compensation for their
unexpected work on Rule 37 motions for sanctions. The Plaintiffs never intended or desired to
work on these motions; it was only the brazen, habitual, and unrepentant obstruction of the
Defendants that necessitated this detour from the substantive claims raised in the main case.
And the “protracted” nature of this fee dispute is entirely attributable to the Defendants’ morass
of conclusory objections and repeated refusal to accept responsibility for their violation of
numerous court orders. Application of the 3% guideline here would not serve the principles
governing Coulter, and would in fact punish the Plaintiffs for their admirable attempts to
expedite the resolution of this case.
17
III
The Defendants’ objections to the Magistrate’s R&R are meritless. Accordingly, the
Court HEREBY ORDERS as follows:
1.
The Magistrate’s Report and Recommendation [R. 259] is ADOPTED as and for
the opinion of the Court;
2.
The Plaintiffs’ Supplemental Motion for Attorney Fees [R. 240] is GRANTED
IN PART; and
3.
The Court HEREBY AWARDS the Plaintiffs $109,789.75 in fees and expenses.
This 20th day of July, 2016.
18
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