Babcock Power Inc. et al v. Kapsalis

Filing 500

MEMORANDUM OPINION AND ORDER by Magistrate Judge Colin H. Lindsay on 4/24/2018 - Within fourteen (14) days of entry of this memorandum opinion and order, plaintiffs shall pay to Kapsalis the amount of $57,108.92. cc:counsel (DAK)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
LOUISVILLE DIVISION
CIVIL ACTION NO. 3:13-CV-717-CRS-CHL

BABCOCK POWER, INC., et al.,

Plaintiffs,

v.
STEPHEN T. KAPSALIS, et al.,

Defendants.

MEMORANDUM OPINION AND ORDER
This matter has a long and contentious history. The Court will only repeat as much as is
necessary to deal with the issue at hand, specifically the award of attorney’s fees to defendant
Stephen T. Kapsalis (“Kapsalis”) as a result of the June 30, 2017 memorandum opinion and
order (DN 450).
I.

BACKGROUND
On February 7, 2017, Kapsalis1 filed a “Motion for Discovery” (DN 398) and

“Supplemental Memorandum in Support of his Written Objections and Motion for Protective
Order and to Quash the January 23, 2017 Subpoena and Motion for Discovery” (“Supplemental
Memorandum”) (DN 398-1). On February 22, 2017, plaintiffs Babcock Power, Inc. and Vogt
Power International, Inc. (“plaintiffs”) filed a response (DN 405). On February 22, 2017, nonparty Sterling Group, LP (“Sterling”) filed a brief (DN 410) addressing the issues raised in the
Motion for Discovery and Supplemental Memorandum. On March 1, 2017, Kapsalis filed a
reply (DN 417), and plaintiffs filed a response (DN 418) to Sterling’s brief. On March 8, 2017,
the Court held an evidentiary hearing on the issues raised in these filings. On April 10, 2017,
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The other defendant in this matter, Express Group Holdings, LLC (“Express), has filed for bankruptcy;
consequently, this action has been stayed with respect to Express. (DNs 377, 379.)

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plaintiffs, Kapsalis, and counsel for plaintiffs, Kelly Gallagher (“Gallagher”), filed proposed
findings of fact and conclusions of law. (See DNs 437-39.)
On June 30, 2017, the undersigned issued a memorandum opinion order finding that
plaintiffs had issued the January 23, 2017 subpoena to the Express bankruptcy trustee in
violation of a scheduling order. In the June 30 memorandum opinion and order, the undersigned
denied the Motion for Discovery, but sanctioned plaintiffs sua sponte.

In particular, the

undersigned awarded Kapsalis “reasonable attorneys’ fees and expenses incurred in (1) preparing
the Motion for Discovery (DN 398) and Supplemental Memorandum (DN 398-1) as well as the
reply in support of same; (2) preparing for and attending the March 8, 2017 evidentiary hearing;
and (3) preparing the proposed findings of fact and conclusions of law.” (DN 450 at 56.) The
June 30 memorandum opinion and order also directed Kapsalis to file an itemization of
attorneys’ fees and expenses incurred in conjunction with (1) through (3), including why the fees
and expenses included therein were reasonable. Thereafter, plaintiffs were directed to file any
objections to the requested fees and expenses, limited to the reasonableness of the amounts
claimed.2
A.

“Notice of Stephen Kapsalis’ Compliance with the Court’s Memorandum
Opinion and Order Dated June 30, 2017 [DN 450]” (“Notice of Compliance”)
(DN 451)

On July 6, 2017, Kapsalis filed the Notice of Compliance (DN 451) in response to the
June 30 memorandum opinion and order. Included with the Notice of Compliance are several
2

ON July 14, 2017, plaintiffs filed an objection (DN 455) to the June 30 memorandum opinion and order; that
objection was overruled and the memorandum opinion and order affirmed by Senior District Judge Charles R.
Simpson. (DN 468.) In the dong so, Judge Simpson noted that plaintiffs requested that any award of attorney’s fees
pursuant to the June 30 memorandum opinion and order be held in abeyance until the final resolution of the action.
However, Judge Simpson left the final determination of the amount of the monetary sanction and terms of payment
to the undersigned’s discretion. (DN 468 at 16 n.8.)

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exhibits: (1) an affidavit of counsel for Kapsalis, Dennis Murrell (DN 451-1), which includes a
request for a total fee award of $74,582.42; (2) the itemization of fees and expenses specifically
requested by the Court in its June 30 memorandum opinion and order (DN 451-2), totaling
$60,129.42 ($55,685.00 in fees and $4,444.42 in expenses); (3) the itemization of additional fees
and expenses associated with two motions to quash the January 23 subpoena issued by plaintiffs,
one filed in this Court and one in the Northern District of Oklahoma (DN 451-3), totaling
$14,453.00; and (4) various biographies of counsel or other people working for or with counsel
for Kapsalis (DNs 451-4 through 451-10).
B.

Plaintiffs’ Objections (DN 457) to the Notice of Compliance

On July 20, 2017, plaintiffs filed objections (DN 457) to the attorneys’ fees award and
itemization of attorneys’ fees and expenses. Plaintiffs appears to object to the following specific
items:3 (1) the inclusion of attorneys’ fees and expenses associated with the motions to quash; (2)
the inclusion for time entries related to communications with counsel for Sterling; (3) the
inclusion of fees for items that are purely clerical in nature; (4) bills for expert, One Source
Discovery, in December 2016 in the amount of $675.00 before the subject subpoena was issued;
and (5) bills for One Source Discovery in preparation for the evidentiary hearing.
C.

Kapalis’s Response (DN 460) to the Objections

On July 28, 2017, Kapsalis filed a response (DN 460). Kapsalis asserts that he is entitled
to the total amount of fees and expenses requested, minus $675.00, for a total of $73,907.42.
The Court notes that, while not pointed out by Kapsalis in his response, the $73,907.42 includes

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The Court states “appears” because plaintiffs have contested these categories and then given some examples of
each type – the Court assumes that these examples constitute the entirety of the entries disputed by plaintiffs.

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the fees and expenses associated with the motions to quash, in addition to those fees and
expenses specifically awarded in the June 30 memorandum opinion and order.
II.

DISCUSSION
A.

The Request for Additional Fees and Expenses Totaling $14,453.00 is Denied.

The Court will first address the fees and expenses totaling $14,453.00 sought by Kapsalis
in conjunction with the motions to quash as described in I.A. Included in Murrell’s affidavit is a
request, as reflected in (3), for “additional fees and expenses that were incurred by Kapsalis in
conjunction with the Motion to Quash filed in this Court, as well as in Oklahoma.” (Id. at 1.)
With respect to (3), Mr. Murrell states,
Although not specified in the Court’s Opinion by docket number,
because the Court stated its intent to make Kapsalis whole for
Plaintiffs’ violations of this Court’s Order (see, e.g., Opinion, DN
450, p., 43, stating that “[s]uch an award is not unjust as it directly
correlates to time spent by Kapsalis’s attorneys in response to the
actions of plaintiffs in causing the January 23, 2017 subpoena to be
issued in violation of the March 2, 2016 order”), Kapsalis believes
that these fees and expenses were also incurred in conjunction with
the Motion for Discovery and Evidentiary Hearing. However, in
an effort to be transparent, I have segregated these costs and
expenses at Exhibit 2.

(Id. at 1-2.) The total amount of the fees and expenses requested by Kapsalis with respect to the
motions to quash total $14,453.00.
The Court will deny this request for several reasons. First, it is apparent from the June 30
memorandum opinion and order that the Court was aware of the various motions to quash filed
by Kapsalis in conjunction with the issuance of the January 23, 2017 subpoena by plaintiffs.
(DN 450 at 14-17 [describing, in detail, the motions to quash].) The Court purposefully chose
not to include fees and expenses related to those motions to quash in issuing sanctions under
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Rule 16 of the Federal Rules of Civil Procedure. If Kapsalis disagreed with the June 30
memorandum opinion and order in that regard, he should have filed an objection or a motion, not
included a request in an affidavit.4
Second, the Court did not intend to “make Kapsalis whole” through the sanctions
imposed upon plaintiffs.

The quote cited does not imply that either.

Instead, the Court

determined that the sanctions, in the form of an attorneys’ fees award to Kapsalis, were
appropriate and not unjust. In short, the purpose of the sanctions was to punish the conduct of
plaintiffs’ counsel in a proportionate manner.
Finally, it is worth noting that one of the motions to quash for which Kapsalis seeks fees
and expenses was denied without prejudice by this Court because it should have been filed in the
district where compliance was required – the Northern District of Oklahoma. (DN 436 at 1
[denying Motion to Quash (DN 390) without prejudice].) Kapsalis does not mention this in the
Notice of Compliance or Response. Kapsalis then filed another motion to quash (for which he
also seeks fees) in the Northern District of Oklahoma; because plaintiffs ultimately withdrew the
January 23 subpoena, that motion was denied as moot.
Consequently, the Court will not award Kapsalis the $14,453.00 in fees and expenses or
anything else above and beyond what was expressly provided for in the June 30 memorandum
opinion and order.
B.

Plaintiffs’ Other Objections

The Court has already addressed plaintiffs’ objection to the request for fees and expenses
related to the motions to quash. The Court will address the remaining objections next.
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Notably, this request is not even mentioned in the Notice of Compliance itself.

5

1.

Inclusion of time entries related to communications with Sterling

Plaintiffs contest time entries that include communications with counsel for Sterling.
Plaintiffs argue, in essence, that Sterling is a non-party and the subpoena was not issued to it;
therefore, Kapsalis should not be able to recover fees based on communications with Sterling.
Kapsalis essentially argues that plaintiffs have misrepresented Sterling’s role in this situation,
and that plaintiffs benefitted from the collaboration between counsel for Kapsalis and counsel for
Sterling.
The Court will permit the inclusion of fees related to communications with counsel for
Sterling under the circumstances of this case. Sterling was actively involved in the evidentiary
hearing and the events leading up to it; as a result, it was understandable and reasonable for
counsel for Kapsalis to communicate with counsel for Sterling in preparation for same.
Additionally, it was reasonable for counsel for Kapsalis to communicate with counsel for
Sterling to strategize about how to deal with the January 23 subpoena.
Accordingly, the Court declines to subtract the fees associated with these entries from the
sanctions.
2.

Inclusion of fees for items clerical in nature

Plaintiffs contest two fees related to clerical work performed by paralegals for counsel for
Kapsalis.5 First, plaintiffs contest a February 8, 2017 entry by paralegal “LAS” for 1.80 hours at
the rate of $180/hour for a total of $324.00. (DN 451-2 at 3.) The entry reads, “ATTENDED
TELEPHONIC CONFERENCE WITH COURT ALONG WITH D. MURRELL AND E.
GRAY; REVIEWED NOTES FROM CLARK MARTIN REGARDING SAME; REVIEWED
5

The Court will not discuss the contest fees associated with the February 3, 2017 entry for “.10” by “LAS” to “set
up meeting on calendar.” (DN 451-3 at 4.) This fee was requested by Kapsalis in conjunction with the motions to
quash, and the Court has denied that request.

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WORKING GROUP EMAILS AND RESPONDED AS NEEDED; UPDATED CALENDAR.”
(Id.)
Second, plaintiffs contest a February 14, 2017 entry by “AMT” for .30 hours at the rate
of $180/hour for a total of $54.00. (DN 451-2 at 4.) That entry reads, “CONTACT COURT TO
OBTAIN TRANSCRIPT.” (Id.)
Kapsalis argues that the time reflected by these entries was necessarily incurred. Neither
Kapsalis nor plaintiffs cite any case law in support of their respective positions.
Generally speaking, case law indicates that strictly clerical tasks should not be included
in an award of attorneys’ fees. See, e.g., Salamango v. NCSPlus Inc., No. 2:14-CV-10189, 2014
WL 3900583, at *6–7 (E.D. Mich. Aug. 11, 2014) (citing B & G Min., Inc. v. Dir., Office of
Workers' Comp. Programs, 522 F.3d 657, 666 (6th Cir.2008)) (“It is well-settled that purely
clerical tasks, even performed by a paralegal, cannot be included in an award of attorney's
fees.”); see also Richards v. Johnson & Johnson, No. 2:08-CV-279, 2010 WL 3219138, at *7
(E.D. Tenn. May 12, 2010), report and recommendation adopted, No. 2:08-CV-279, 2010 WL
3219133 (E.D. Tenn. Aug. 12, 2010) (“Work traditionally performed by attorneys may be
properly awarded in a motion for attorney's fees, because allowing subordinates to perform those
tasks ultimately reduces the overall cost of litigation. ‘[S]trictly clerical tasks,’ however, are part
of the overhead cost necessary to operate any law firm, and should not be compensated by a fee
award.’”) (citation omitted). Thus, the Court will not allow them in this instance.
The Court finds that the February 8, 2017 entry should be reduced by .10, which equals
$18.00, to account for the paralegal’s work in updating the calendar. The Court declines to
reduce the time reflected in the February 14, 2017 entry as it is not purely clerical in nature.
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Accordingly, the Court will reduce the sanctions by $18.00.
3.

Bills for One Source Discovery from December 2016

Kapsalis agrees to withdraw the $675.00 in bills from One Source Discovery incurred in
December 2016, prior to the issuance of the January 23 subpoena.
Accordingly, the Court will reduce the sanctions by $675.00.
4.

Other bills from One Source Discovery

Plaintiffs contest not only the December 2016 bills form One Source Discovery, but the
all the other bills from One Source Discovery included by Kapsalis.

Kapsalis does not directly

address this argument in his response to the objections. However, Murrell’s affidavit indicates
that counsel for Kapsalis disclosed its expert witness, Andy Cobb Ph.D. – an employee of One
Source Discovery – as a witness for the evidentiary hearing, and that counsel was prepared to
take testimony from Cobb at same. (DN 45-1- at 2.)
Accordingly, the Court declines to subtract the expenses associated with One Source
Discovery, other than the $675.00 already discussed.
C.

Fees and Expenses Awarded Pursuant to the June 30 Memorandum Opinion
and Order

The Court has conducted an independent review of the $60,129.42 (DN 451-2 at 13)
sought by Kapsalis in conjunction with the June 30 memorandum opinion and order. For the
reasons discussed next, the Court finds that the sanctions should be reduced further.
1.

Fees for purely clerical tasks

The Court found one other purely clerical task, a March 16, 2017 entry by paralegal
“LAS,” in the requested fees. The March 16, 2017 entry, which is 1.90 hours at $180/hour
includes, among other things, the following notation: “UPDATED CALENDAR WITH
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DEADLINES FOR POST HEARING BRIEFS.” (DN 451-2 at 9.) Therefore, the Court will
deduct .10 from this entry for this purely clerical task.
Accordingly, the Court will reduce the sanctions by $18.00.
2.

Fees for unrelated work

Upon review, it appears that the following entries, or parts of entries, do not relate to the
fees incurred in (1) preparing the Motion for Discovery (DN 398) and Supplemental
Memorandum (DN 398-1), as well as the reply in support of same; (2) preparing for and
attending the March 8, 2017 evidentiary hearing; and (3) preparing the proposed findings of fact
and conclusions of law. The Court has highlighted the portions at issue. Specifically, these
portions appear to be related to action taken with respect to the action in the Northern District of
Oklahoma, the Motion for Leave to File Supplemental Evidence of Contempt (DN 426) filed by
plaintiffs, and the Notice of Potential Filing (DN 430) filed by plaintiffs – items not
contemplated by the June 30 memorandum opinion and order. The Court will also reduce by
one-third the amount expended by counsel for Kapsalis in preparing the Notice of Compliance
and supporting documents; the Court does so to exclude time spent requesting fees and expenses
for items not specifically awarded in the June 30 memorandum opinion and order. The Court
will therefore reduce the sanctions award as follows:

2/9/2017

ESG MULTIPLE E-MAIL
CORRESPONDENCE WITH C. MARTIN
REGARDING CONVERSATION WITH
TRUSTEE; MULTIPLE E-MAIL
CORRESPONDENCE WITH
OKLAHOMA LOCAL COUNSEL
REGARDING COMPLIANCE WITH
COURT ORDER OF SERVICE;
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1.30 hours The Court will
at
reduce this fee
$310/hour
by half.
= $403.00
Accordingly,
the Court will
reduce
the
sanctions award

REVIEW FILING REGARDING
SERVICE COMPLIANCE; E-MAIL
CORRESPONDENCE WITH D.
MURRELL REGARDING STATUS AND
STRATEGY OF MOTION FOR
DISCOVERY
3/15/2017 ESG MULTIPLE E-MAIL
CORRESPONDENCE WITH STERLING
COUNSEL REGARDING FINDINGS OF
FACT; E-MAIL CORRESPONDENCE
WITH COURT REPORTER REGARDING
TRANSCRIPT; PREPARE E-MAIL
CORRESPONDENCE TO PLAINTIFFS’
COUNSEL REGARDING HASH
VALUES; REVIEW PLAINTIFFS’
MOTION TO DESIGNATE
ADDITIONAL EVIDENCE FOR
CONTEMPT MOTION
3/23/2017 ESG REVIEW NOTICE OF POTENTIAL
FILING FROM PLAINTIFFS

3/27/2017 ESG DRAFT RESPONSE TO MOTION TO
SUPPLEMENT CONTEMPT RECORD;
REVIEW AND REVISE SAME; EMAIL CORRESPONDENCE WITH D.
MURRELL REGARDING SAME

3/28/2017 ESG REVIEW AND REVISE RESPONSE TO
MOTION
TO
SUPPLEMENT
CONTEMPT EVIDENCE; E-MAIL
CORRESPONDENCE
WITH
STERLING COUNSEL REGARDING
SAME; REVIEW AND ANALYZE
TRANSCRIPT OF HEARING FOR
FINDINGS
OF
FACT;
E-MAIL
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by $201.50.

1.00 hours The Court will
at
reduce this entry
$310/hour
by .10.
=$310.00
Accordingly,
the Court will
reduce
the
sanctions award
by $31.00.

.10 hours at The Court will
$310/hour
exclude
this
= $31.00
entry entirely.
Accordingly,
the Court will
reduce
the
sanctions award
by $31.00.
1.80 hours The Court will
at
exclude
this
$310/hour
entry entirely.
= $558.00
Accordingly,
the Court will
reduce
the
sanctions award
by $558.00.
3.00 hours The Court will
at
reduce this fee
$310/hour
by half.
= $930.00
Accordingly,
the Court will
reduce
the

CORRESPONDENCE
WITH
S.
SOUTHWICK REGARDING SAME
3/29/2017 ESG REVIEW AND REVISE RESPONSE TO .70 hours at
MOTION
TO
SUPPLEMENT $310/hour
EVIDENCE; FINALIZE AND FILE = $217.00
SAME; E-MAIL CORRESPONDENCE
WITH S. SOUTHWICK REGARDING
SAME

7/3/2017

7/5/2017

III.

ESG MULTIPLE CONFERENCES AND EMAIL
CORRESPONDENCE
REGARDING FEE AFFIDAVIT AND
COMPLIANCE WITH OPINION FOR
ATTORNEYS’ FEES; DRAFT NOTICE
OF COMPLIANCE WITH COURT
OPINION ON ATORNEY [SIC] FEES;
REVIEW AND REVISE SAME; DRAFT
AFFIDAVIT
OF
D.
MURRELL
REGARDING FEES; REVIEW AND
ANALYZE BILLING ENTRIES TO
COMPLY WITH COURT ORDER
ESG CONTINUE TO REVIEW AND REVISE
D.
MURRELL
AFFIDAVIT
AND
REVIEW
TIME
ENTRIES
FOR
INCLUSION;
MULTIPLE
E-MAIL
CORRESPONDENCE
REGARDING
SAME

sanctions award
by $465.00.
The Court will
exclude
this
entry entirely.

Accordingly,
the Court will
reduce
the
sanctions award
by $217.00.
7.00 hours The Court will
at
reduce this fee
$310/hour
by one-third.
= $2,170.00
Accordingly,
the Court will
reduce
the
sanctions award
by $723.33.

.80 hours at The Court will
$310/hour
reduce this fee
=
by one-third.
$248.00
Accordingly,
the Court will
reduce
the
sanctions award
by $82.67.

CONCLUSION
In sum, the Court will order Kapsalis to pay $60,129.42 minus the amounts the Court has

deducted in accordance with this memorandum opinion, i.e., $60,129.42 minus $18.00 minus
$675.00 minus $18.00 minus $201.50 minus $31.00 minus $31.00 minus $558.00 minus $465.00
minus $217.00 minus $723.33 minus $82.67 = $57,108.92.
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The Court will not stay payment of the award to Kapsalis, as there is no need for further
delay on this issue.
Accordingly,
IT IS ORDERED that, within fourteen (14) days of entry of this memorandum opinion
and order, plaintiffs shall pay to Kapsalis the amount of $57,108.92.

cc: Counsel of record

Colin Lindsay, MagistrateJudge
United States District Court

April 24, 2018

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