De Simone v. VSL Pharmaceuticals, Inc. et al

Filing 1058

MEMORANDUM OPINION. Signed by Judge Theodore D. Chuang on 9/30/2022. (jf3s, Deputy Clerk)

UNITED STATES DISTRICT COURT
DISTRICT OF MARYLAND

CLAUDIO DE SIMONE,
Plaintiff/Counterclaim Defendant,
EXEGI PHARMA,LLC,
Plaintiff,
V.

VSL PHARMACEUTICALS,INC.,
Defendant/Counterclaim Plaintiff,

Civil Action No. TDC-15-1356

LEADIANT BIOSCIENCES,INC. and
ALFASIGMA USA,INC.,
Defendants,
V.

DANISCO USA,INC.,
Counterclaim Defendant.

MEMORANDUM OPINION

This case, which was resolved after a jury trial in 2018, involved a dispute over the
ownership of a proprietary formulation used in a probiotic known by the tradename VSL#3 and
now used in a product known as Visbiome. After the jury returned a verdict in favor of Plaintiff

and Counterclaim Defendant Claudio DeSimone and Plaintiff ExeGi Pharma, LLC ("ExeGi")
(collectively, "the De Simone Parties") and against Defendant and Counterclaim Plaintiff VSL

Pharmaceuticals, Inc.("VSL"), Defendant Leadiant Biosciences, Inc. and Defendant Alfasigma
USA, Inc.("Alfasigma"), the Court issued a permanent injunction on June 20, 2019 barring the

use of promotional statements suggesting that the current product marketed as VSL#3 uses the

original formulation invented by De Simone. Afterwards, on July 30, 2020, the Court granted in
part ExeGi's Motion for an Order of Civil Contempt, held VSL and Alfasigma (collectively,"the
VSL Parties")in contempt for violating the permanent injunction,and ordered them to pay ExeGi's
attorney's fees as a sanction. Presently pending is ExeGi's Motion and Application for Attorneys'
Fees. ECF No. 996. Having reviewed the briefs and submitted materials, the Court finds that no
hearing is necessary. See D. Md. Local R. 105.6. For the reasons set forth below,the Motion will
be GRANTED IN PART and DENIED IN PART.
BACKGROUND

Prior relevant factual background and procedural history is set forth in the Court's
September 23, 2015 Memorandum Opinion on the First Motion for a Preliminary Injunction, De
Simone v. VSL Pharm., Inc., 133 F. Supp. 3d 776(D. Md. 2015); its June 20,2016 Memorandum

Opinion on the Second Motion for a Preliminary Injunction, De Simone v. VSL Pharm., Inc., No.
TDC-15-1356, 2016 WL 3466033 (D. Md. June 20, 2016); its October 9, 2018 Memorandum

Opinion on the Parties' Cross Motions for Summary Judgment, De Simone v. VSL Pharm., Inc.,
352 F. Supp. 3d 471 (D. Md. 2018); its June 20, 2019 Memorandum Opinion on the VSL Parties'

Rule 50 and 59 Motions, De Simone v. VSL Pharm., Inc., 395 F. Supp. 3d 617(D. Md. 2019); its
June 20, 2019 Memorandum Opinion on the De Simone Parties' Motion for a Permanent

Injunction, De Simone v. VSL Pharm., Inc., No. TDC-15-1356, 2019 WL 2569574(D. Md. June
20, 2019); and its July 30, 2020 Memorandum Opinion on the De Simone Parties' Motion for an
Order of Civil Contempt, De Simone v. VSL Pharm., Inc., No. TDC-15-1356, 2020 WL 4368103

(D. Md. July 30, 2020). These opinions are incorporated by reference. Additional facts and
procedural history are provided below as necessary.

On July 30, 2020, the Court issued its Memorandum Opinion and Order (the "Contempt
Order")granting in part ExeGi's Motion for an Order ofCivil Contempt("the Contempt Motion"),
and holding the VSL Parties in civil contempt of the permanent injunction. As a sanction, the

Court ordered the VSL Parties "to pay the De Simone Parties' reasonable attorney's fees expended
in advancing the [Contempt] Motion" and ordered the parties to meet and confer with the aim of
reaching an agreement on the amount ofattorney's fees. Contempt Order at 2, ECF No.986. After

the parties could not agree on an amount, ExeOi filed its Motion and Application for Attorneys'
Fees ("the Motion for Attorney's Fees"). ECF No. 996. The Motion was stayed while the VSL

Parties appealed the Contempt Order to the United States Court of Appeals for the Fourth Circuit.
After the Fourth Circuit affirmed this Court's Contempt Order, ExeOi filed a Supplement to its
Motion for Attorney's Fees ("the Supplement") in which it sought to include in its request
attorney's fees incurred on the appeal. The Motion is now fully briefed.
DISCUSSION

In its Motion, ExeOi seeks an award of attorney's fees pursuant to the Contempt Order.
Sanctions may be imposed on a finding of civil contempt if they are "remedial and intended to

coerce the contemnor into compliance with court orders or to compensate the complainant for
losses sustained." Cromer v. Kraft Foods, N.A., Inc., 390 F.3d 812, 822 (4th Cir. 2004)(quoting
Buffington v. Bait. Cnty., 913 F.2d 113, 133 (4th Cir. 1990)). Remedies for civil contempt may
"include ordering the contemnor to reimburse the complainant for losses sustained and for
reasonable attorney's fees." In re General Motors Corp.,61 F.3d 256,259(4th Cir. 1995).
ExeOi was represented throughout this litigation by attorneys from the law firm of

Schulman Bhattacharya, LLC. ExeOi initially requested $104,548.00 in attorney's fees incurred
in advancing the Contempt Motion, as well as $18,698.40 in attorney's fees incurred in preparing

the Motion for Attorney's Fees. In its Supplement, ExeGi has requested additional attorney's fees
of$106,496.00 incurred in opposing the appeal ofthe Contempt Order and $17,229.50 incurred in
preparing the Supplement. Thus, ExeGi seeks a total of$246,971.90 in attorney's fees associated

with the Contempt Motion. The VSL Parties do not dispute that ExeGi is entitled to attorney's
fees but instead argue that the fees are excessive because: (1)the hourly rates exceed the prevailing
rates in the community; (2) the number of hours expended was excessive, redundant, or
unnecessary; and (3)the fees sought are inconsistent with fee awards in similar cases. The VSL

Parties also argue that ExeGi should not receive attorney's fees for time spent pursuing
unsuccessful claims, for time spent opposing the appeal of the Court's Contempt Order, or for the
preparation of the Motion for Attorney's Fees and the Supplement.
1.

Appeal Fees
As an initial matter, the VSL Parties argue that ExeGi cannot recover fees in connection

with the appeal of the Contempt Order. Specifically, they argue that such recovery would alter or
amend the Court's prior order, that only the Court of Appeals may award fees associated with an

appeal, that such an award runs contrary to the "American Rule" that parties typically pay their
own attorney's fees, and that an award for fees incurred on appeal would constitute an
impermissible sanction on the VSL Parties. Opp'n Supp. Mot. Fees at 5, ECF No. 1057. All of
these arguments fail.

First, an award of attorney's fees in connection with the appeal is consistent with the terms
of the Contempt Order. In the Contempt Order, the Court ordered the VSL Parties "to pay the De

Simone Parties' reasonable attorney's fees expended in advancing the [Contempt] Motion."
Contempt Order at 2. The broad term "advancing" of the Contempt Motion fairly includes fees

incurred at all stages ofthe litigation ofthat motion, without limitation, and thus encompasses fees

incurred in defending on appeal this Court's ruling on the Contempt Motion. See id As the Fourth

Circuit has recognized, although a contemnor has "the right to put on a vigorous defense," a

contemnor may end up paying more in associated attorney's fees by "contesting each and every
aspectof[a]contempt proceeding." InreGen. Motors Corp., 110F.3d 1003,1006(4thCir. 1997).
That is what has occurred here. The attorney's fees expended on the appeal are within the ambit
of the Contempt Order.

Second,contrary to the VSL Parties' claim, this Court has the authority to award attorney's

fees incurred on appeal in the context of a sanction such as the one imposed by the Contempt
Order. Although the Fourth Circuit has not addressed the precise issue of whether a district court
may award attorney's fees for legal work performed in advancing an appeal, other courts have held
that a district court may do so. For example, in a case in which a party appealed a contempt order,
the United States Court of Appeals for the Second Circuit held that the district court erred in

refusing to award attorney's fees incurred on the appeal because those fees were caused by the
contempt, and the appeal would not have been necessary but for the contemnor's actions.

Weitzman v. Stein,98 F.3d 717, 720(2d Cir. 1996). Likewise, the United States Court of Appeals
for the Third Circuit has held that it was "entirely appropriate" for a district court to award costs,

including charges for attorney time,incurred during the appeal ofthe district court's civil contempt
order. Schauffler v. United Ass'n ofJourneymen & Apprentices,246 F.2d 867,870(3d Cir. 1957).
The VSL Parties' reliance on Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178

(2017), is misplaced. In that case, which involved not sanctions pursuant to a contempt order but
a court's inherent authority to sanction a party for bad faith conduct, Goodyear engaged in
misconduct by concealing crucial evidence during discovery. Id. at 1183-84. When the Haegers
discovered this misconduct after the case concluded, the district court awarded them $2.7 million,

the full amount of attorney's fees incurred since Goodyear engaged in that misconduct, and that
decision was affirmed on appeal. Id. at 1185. The United States Supreme Court reversed on the
grounds that the district court failed to determine which fees were incurred solely because of the

misconduct. Id. at 1189. Here, however, there is no question that the attorney's fees incurred on
the appeal are directly and solely caused by the VSL Parties' contumacious conduct.
Third, the VSL Parties' claim that awarding attorney's fees is inconsistent with the

"American Rule" is unpersuasive. This general rule for attorney's fees is subject to multiple
exceptions, and the award of attorney's fees as a sanction for civil contempt is one of them. See
De Simom v. VSL Pharm.,36 F.4th 518, 536(4th Cir. 2022)(stating that a court has "the inherent

authority ... to award attorneys' fees in a civil contempt proceeding"). Finally, where an award
of attorney's fees arising from the appeal of the Contempt Motion plainly serves a remedial and
compensatory purpose by allowing ExeOi to recoup its financial losses associated with having to

litigate the contempt issue on appeal, it is not a punitive sanction. See In re General Motors Corp.,
61 F.3dat259.

For all of these reasons, the Court finds that an award of attorney's fees arising from the
litigation of the appeal is permissible.
II.

Lodestar Calculation

In calculating an award of attorney's fees, a court first "detennine[s] the lodestar figure by
multiplying the number ofreasonable hours expended times a reasonable rate." McAfee v. Boczar,
738 F.3d 81,88(4th Cir. 2013)(quoting Robinson v. Equifax Info. Servs., LLC,560 F.3d 235,243

(4th Cir. 2009)). In determining the reasonableness of the billing rates and hours worked to be

used in a lodestar calculation, the Fourth Circuit has directed courts to consider the following

factors originally set forth in Johnson v. Georgia Highway Express. Inc., 488 F.2d 714 (5th Cir.
1974)(the ^'Johnson factors"):

(1) The time and labor expended;(2) the novelty and difficulty of the questions
raised;(3)the skill required to properly perform the legal services rendered;(4)the
attorney's opportunity costs in pressing the instant litigation;(5)the customary fee
for like work;(6)the attorney's expectations at the outset of the litigation;(7)the
time limitations imposed by the client or circumstances; (8) the amount in
controversy and the results obtained;(9) the experience, reputation, and ability of
the attorney;(10)the undesirability ofthe case within the legal community in which
the suit arose;(11) the nature and length of the professional relationship between
attorney and client; and (12)attorneys' fees awards in similar cases.

McAfee, 738 F.3d at 88 & n.5. A court is not required to conduct a specific analysis ofeach of the
Johnson factors if they are considered and addressed more broadly. See, e.g., Imgarten v. Bellboy
Corp., 383 F. Supp. 2d 825,836(D. Md. 2005); Murrill v. Merrill, No. DKC-17-2255, 2020 WL

1914804,at *3(D. Md. Apr.20,2020). Here,the Court finds that, upon consideration,the seventh,
tenth, and eleventh Johnson factors are not particularly relevant to the present case.
A.

Reasonable Rates

In considering the reasonableness of the proposed hourly rates, the Court primarily
considers the fourth, fiffh, ninth, and twelffh Johnson factors. The reasonable hourly rate
requirement is typically met by compensating attorneys at prevailing market rates in the
community, ordinarily "the community in which the court where the action is prosecuted sits."
Rum Creek Coal Sales, Inc. v. Caperlon, 31 F.3d 169, 175 (4th Cir. 1994). This Court's Local

Rules provide presumptively reasonable hourly rates keyed to an attorney's years of experience.
See D. Md. Local R. App. B.

Here, ExeGi has requested that the Court apply, for its five different counsel, hourly rates

exceeding the guideline ranges for hourly rates based on each attorney's years of experience.
Where Jeremy Schulman has 23 years of experience, the proposed hourly rate of $580 is higher

than the applicable Local Rules guideline range of $300 to $475 per hour for attorneys with more
than 20 years of experience. Where Jeffrey Gavenman has 13 years of experience, the proposed
hourly rate of $390 is higher than the applicable Local Rules guideline range of $225 to $350.
Where Sabina Schiller has 8 years of experience, the proposed hourly rate of $450 is higher than
the applicable Local Rules guideline range of$165 to $300. Where Jessica Bustamante has 3 years
ofexperience,the proposed hourly rate of$275 is higher than the applicable Local Rules guideline

range of$150 to $225. Finally, where Mace Phillips has 4 years ofexperience,the proposed hourly
rate of$395 is higher than the applicable Local Rules guideline range of$150 to $225.
In arguing for the higher hourly rates, ExeOi asserts that the proposed rates are reasonable
because they represent a substantial discount from ExeGi's counsel's typical rates, are "a fraction

of the rates" charged by the VSL Parties' own counsel, and have remained the same over the past
four years, even in the face of annual inflation. Mot. Atty's Fees at 9, ECF No. 996. ExeGi has
also submitted a declaration from Maury Epner, a local commercial litigation attorney who is
"familiar with the hourly billing rates of other attorneys engaged in commercial litigation in

Maryland, and specifically in Montgomery County" and with lead plaintiffs' counsel, Jeremy
Schulman, whom Epner describes as "one of the most zealous, diligent, fearless, and effective
commercial litigators." Epner Decl.

9,11, ECF No.996-4. Epner attests to the reasonableness

of the proposed rates. The affidavit of a local attorney "familiar both with the skills of the fee
applicants and more generally with the type of work in the relevant community" can be sufficient
to verify the prevailing market rate. Robinson v. Equifax Info. Servs., LLC,560 F.3d 235,245 (4th
Cir. 2009). This declaration, which addresses the second, third, fifth, and ninth Johnson factors,
provides support for the reasonableness ofthe hourly rates.

Nevertheless, based on the present record and a consideration of the relevant Johnson

factors, the Court finds that the legal work conducted in relation to the Contempt Motion,including
on appeal, was not so novel or complex, and did not require skill beyond the typical case, so as to
warrant the use of hourly rates above those contemplated by the Local Rules. Indeed, where these

rates have been consistently published in the Local Rules, application of hourly rates within the
guideline ranges is consistent with the sixth Johnson factor, the attorney's expectations at the
outset of the litigation.

At the same time, where the Court has not recently adjusted these rales for inflation, and
where the rates are lower than the standard billing rates for ExeGi's attorneys, the Court finds that
the reasonable hourly rates are those at the high end of the guideline ranges set forth in the Local
Rules. The Court will therefore award fees based on the following hourly rates:
Table: Revised Rates

Name

Jeremy Schulman
Jeffrey Gavenman

Years

Requested Rate

23

$580

Guideline Range
$300-475

13

$390

$225-350

$475
$350

Revised Rate

Sabina Schiller

8

$450

$165-300

$300

Jessica Bustamante

3

$275

$150-225

$225

Mace Phillips

2

$395

$150-225

$225

B.

Reasonable Hours

As for the reasonableness of the hours worked, the Court primarily considers the first,
second, third, and eighth Johnson factors. ExeGi has provided charts reflecting actual hours

worked by ExeGi's counsel with descriptions of the specific tasks performed. See Mot. Atty's
Fees Ex. 2, ECF No. 996-2; Reply Mot. Atty's Fees Ex. C, ECF No. 998-2; Supp. Mot. Atty's
Fees Ex. A,ECF No. 1055-2; Supp. Mot. Atty's Fees Ex. B,ECF No. 1055-3. In considering the
submitted charts, the Court finds that the general tasks performed by the attomeys were reasonable
under the circumstances of this case. The Contempt Motion spanned nearly three years fi-om the
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filing in October 2019 to the resolution ofthe appeal in June 2022. The resolution ofthe Contempt
Motion in both this Court and the Fourth Circuit required significant factual and legal analysis and
substantial briefing. The issues were significantly distinct and unique that the Fourth Circuit issued
a published opinion on the matter. Although the hours incurred by ExeGi's counsel are substantial,
as ExeOi points out, a substantial portion ofthe hours expended was required to respond to actions
and arguments initiated by the VSL Parties, not ExeOi.

The VSL Parties argue that the number of hours expended by ExeOi to oppose their
arguments was excessive, redundant, or unnecessary. The Court agrees that the presence of

multiple attorneys working on the Motion necessarily created some redundancies in the billing
entries, and that the number of hours expended on the drafting of the briefs appears higher than
necessary. However,these issues must be viewed in the context of this highly contested case that

has spanned seven years, in which both sides have employed multiple attorneys and asserted every
possible legal or factual argument on every issue. Notably, as reflected in the briefs, the VSL

Parties engaged seven attorneys to litigate the Contempt Motion, seven attorneys to litigate the
appeal, and six attorneys to handle the Motion for Attorney's Fees. Thus, the need for multiple
attorneys to address all of the arguments made by the opposing legal team, and the greater than
typical number of hours needed to draft ExeGi's briefs, are generally justified. To the extent that

the billing entries include more hours than would be reasonable for given tasks, they are fairly
addressed by ExeGi's voluntary agreement to a 20 percent reduction in billing charges incurred on

the Contempt Motion and on the Motion for Attorney's Fees. The Court will apply that 20 percent
reduction to the revised fee calculations for these categories, as adjusted for the lower hourly rates.
Finally, as for the VSL Parties' argument that ExeGi may not recover attorney's fees
associated with preparing the Motion for Attorney's Fees and the Supplement, the Fourth Circuit

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has upheld inclusion of such fees in related contexts. See, e.g., Trimper v. City ofNorfolk, 58 F.3d
68, 77 (4th Cir. 1995)(in relation to an award of attorney's fees under 42 U.S.C. § 1988, stating
that "it is well settled that the time spent defending entitlement to attorney's fees is properly
compensable"); Mercer v. Duke University, 401 F.3d 199, 202 n.3 (4th Cir. 2005)(affirming an
attorney's fee award under Title IX ofthe Education Amendments of 1972,20 U.S.C.§ 1681,that
included "fees incurred in litigating the question of fees"). Inclusion of such charges is typical in
attorney's fee calculations and is warranted here. See D. Md. Local R. App. B.l.b.x. (listing "fee
petition preparation" as a litigation phase for which billing records should be submitted as part of
a fee application).

The Court's revised lodestar calculation, based on the Court's adjustments to the hourly
rates and the application of ExeGi's voluntary 20 percent reduction across legal work conducted

on the Contempt Motion and the Motion for Attorney's Fees,consists of$78,056 for the Contempt
Motion, $13,200 for preparation of the Motion for Attorney's Fees, $75,975 for the appeal, and
$10,657.50 for preparation of the Supplement, for a total of$177,888.50.
III.

Adjustments to the Lodestar Amount

After calculating the lodestar amount, the Court must then "subtract fees for hours spent
on unsuccessful claims unrelated to successful ones" and then award "some percentage of the
remaining amount, depending on the degree of success enjoyed by the plaintiff." McAfee, 738
F.3d at 88 (quoting Robinson, 560 F.3d at 244). When calculating a reasonable fee award,"the
most critical factor" is "the degree of success obtained." Brodziak v. Runyon, 145 F.3d 194, 196

(4th Cir. 1998)(quoting Hensley v. Eckerhart, 461 U.S. 424, 436(1983)).
Here, the VSL Parties correctly note that although ExeOi prevailed on the Contempt

Motion, it did not prevail on all of its arguments for contempt. ExeOi identified six specific

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promotional statements—three online statements, one press release statement, and two product

information sheet statements—that it claimed to have violated the permanent injunction, but the
Court ruled in its favor on only four of those statements. De Simone,2020 WL 4368103, at *4-6.

When considering that ExeGi prevailed on other overarching issues in the Contempt Motion,
including the issues of whether the violations caused harm,and whether and in what form sanctions

should be imposed, the Court finds that ExeGi's degree of success on the Contempt Motion was

in the range of80 percent. The Court will therefore reduce the lodestar calculation relating to the
work on the Contempt Motion at the district court level by an additional 20 percent. Though an
approximation, this calculation is consistent with the Supreme Court's recognition that "[t]he
essential goal in shifting fees ... is to do rough justice, not to achieve auditing perfection." Fox
V. Vice, 563 U.S. 826, 838(2011).

As for the attorney's fees on appeal, however, ExeGi received a complete victory before

the Fourth Circuit. The Fourth Circuit affirmed the Contempt Order on all issues after "rejectfing]
all" ofthe VSL Parties' arguments. De Simone,36 F.4th at 529,537. Accordingly, the Court will
award 100 percent of the lodestar amount relating to the appeal. Likewise, where the Court
generally accepts ExeGi's arguments in the Motion and the Supplement, the Court will award the
full lodestar amount relating to that legal work.

With the adjustment discussed above, the total attorney's fee award will be $159,637.30,

consisting of$62,444.80 for the original Contempt Motion,$10,560 for preparation ofthe Motion

for Attorney's Fees, $75,975 for the appeal, and $10,657.50 for preparation ofthe Supplement to
the Motion for Attorney's Fees.

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CONCLUSION

For the foregoing reasons, ExeGi's Motion for Attorney's Fees will be GRANTED IN
PART and DENIED IN PART. The Motion will be granted in that the Court will award

$159,637.30 of attorney's fees and will be otherwise denied. A separate Order shall issue.

Date: September 30,2022
THEODORE D. CHI

United States District

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