Client Network Services, Inc. v. Smith

Filing 91

MEMORANDUM OPINION AND ORDER granting 78 Plaintiff's Motion for Attorney Fees; adopting Judge Day's 88 Report and Recommendation as an Order of the Court; awarding Plaintiff Client Network Services, Inc. $252,142.00 in attorneys' fees; and directing the Clerk to Close this Case. Signed by Judge Paul W. Grimm on 8/23/2018. (tds, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Southern Division
CLIENT NETWORK SERVICES, INC.,
Plaintiff,

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v.

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STEHPEN A. SMITH,

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Defendant.

Civil Action No. PWG-15-2207

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MEMORANDUM OPINION AND ORDER
ADOPTING REPORT AND RECOMMENDATION

Following a three-day bench trial, I entered a preliminary order of judgment in favor of
Plaintiff Client Network Services, Inc. (“CNSI”) and against Stephen Alan Smith for nominal
damages for the termination of CNSI’s contract with a non-party and order of disgorgement of
Mr. Smith’s salary and “success bonus.” Prelim. Or. J., ECF No. 74. I entered judgment in
favor of Mr. Smith on CNSI’s claim for punitive damages. Id. After CNSI moved for attorneys’
fees, I referred this motion to Magistrate Judge Charles Day for a report and recommendation.
Judge Day issued a thorough and well-reasoned recommendation, ECF No. 88. Plaintiff has
objected to Judge Day’s recommendations regarding a reduction in the hourly rate for Mr. Platt’s
services and Judge Day’s reduction of overall fees by twenty percent. Pl.’s Obj., ECF No. 89.
Mr. Smith objects to (1) Judge Day’s recommended rates for Mr. Antonelli and Mr. McLin
because they were calculated at rates in excess of their years of experience and (2) Judge Day’s
recommendation to reduce Plaintiff’s attorneys’ fees by only 20 percent. Def.’s Obj., ECF No.
90. I find, on de novo review, that the Magistrate Judge’s report and recommendations were
correct with the exception of the hourly rate used for Mr. McLin, and therefore, overrule both
parties remaining objections. Because I find that Mr. McLin’s hours were compensated at too

high a rate, I adopt the report and recommendation with modifications, and award CNSI
attorneys’ fees in the amount of $252,142.00.
Legal Standard
The Court reviews de novo any portions of a magistrate judge’s R&R to which a specific
objection is made, 28 U.S.C. § 636(b)(1), but may adopt, without explanation, any of the
magistrate judge’s recommendations to which no objections are filed, Solis v. Malkani, 638 F.3d
269, 274 (4th Cir. 2011) (citing Camby v. Davis, 718 F.2d 198, 200 (4th Cir. 1983). Any
objection to a magistrate judge’s findings and recommendations must be served and filed within
fourteen days of their issuance. Fed. R. Civ. P. 72(b)(2); see also Loc. R. 301.5(a). Absent a
timely objection, the Court need “only satisfy itself that there is no clear error on the face of the
record in order to accept the recommendation.” Diamond v. Colonial Life & Acc. Ins. Co., 416
F.3d 310, 315 (4th Cir. 2005) (quoting Fed. R. Civ. P. 72 advisory committee’s note).
Discussion
The Fourth Circuit recently articulated the procedure by which attorneys’ fees are
awarded in Randolph v. Powercomm Constr. Inc., 715 F. App’x 227, 230 (4th Cir. 2017):
First, “the court must determine the lodestar figure by multiplying the number of
reasonable hours expended times a reasonable rate.” Id. (internal quotation marks
omitted). “To ascertain what is reasonable in terms of hours expended and the rate
charged, the court is bound to apply the factors set forth in Johnson v. Georgia
Highway Express Inc., 488 F.2d 714, 717-19 (5th Cir. 1974).” McAfee, 738 F.3d
at 88. Second, “the court must subtract fees for hours spent on unsuccessful
claims unrelated to successful ones.” Id. (internal quotation marks omitted). When
“all claims involve a common core of facts much of counsel’s time will be
devoted generally to the litigation as a whole, making it difficult to divide the
hours expended on a claim-by-claim basis.” Brodziak v. Runyon, 145 F.3d 194,
197 (4th Cir. 1998) (alterations, ellipsis, and internal quotation marks omitted).
Third, “the court should award some percentage of the remaining amount,
depending on the degree of success enjoyed by the plaintiff.” McAfee, 738 F.3d at
88 (internal quotation marks omitted).

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“[T]here is a ‘strong presumption’ that the lodestar figure is reasonable, but that
presumption may be overcome in those rare circumstances in which the lodestar does not
adequately take into account a factor that may properly be considered in determining a
reasonable fee.” Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 554 (2010). In determining
whether the lodestar results in a reasonable fee, this Court evaluates “the twelve well-known
factors articulated in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717–19 (5th Cir.
1974) and adopted by the Fourth Circuit in Barber v. Kimbrell’s, Inc., 577 F.2d 216, 226 (4th
Cir. 1978).” Thompson, 2002 WL 31777631, at *6 (footnotes omitted). Those factors are:
(1) the time and labor required; (2) the novelty and difficulty of the questions; (3)
the skill requisite to properly perform the legal service; (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.
Id. at *6 n.19 (citing Johnson, 488 F.2d at 717–19). However, the Supreme Court has noted (and
experience awarding attorneys’ fees has confirmed) that the subjective Johnson factors provide
very little guidance and, in any event, that “‘the lodestar figure includes most, if not all, of the
relevant factors constituting a ‘reasonable attorney’s fee.’”

Perdue, 559 U.S. at 551, 553

(quoting Pennsylvania v. Del. Valley Citizens’ Council for Clean Air, 478 U.S. 549, 566 (1986)).
Overall, Mr. Smith does not object to Judge Day’s recommendations on any of the line
item billing entries or for the rate he awarded fees to Mr. Platt, a Partner at Saul Ewing and the
senior attorney representing Plaintiff. Therefore, I adopt Judge Day’s recommendations as to
Mr. Platt’s hourly rate and the line item billing entries. See Solis, 638 F.3d at 274; Diamond, 416
F.3d at 315.
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Mr. Antonelli and Mr. McLin’s Hourly Rates
Mr. Smith specifically objects to the hourly rates Judge Day recommended for two of
CNSI’s attorneys, Mr. Antonelli and Mr. McLin. Def.’s Obj. 2–3. The Local Rules of this Court
provide guidelines as to what a presumptively reasonable billing rate is, based upon the number
of years of practice of an attorney, paralegal, or law clerk, and Judge Day applied each attorney’s
experience to those guidelines to determine the appropriate rate.
Appendix B to this Court’s Local Rules, Rules and Guidelines for Determining
Attorneys’ Fees in Certain Cases, provides the following “Guidelines Regarding Hourly Rates”:
a. Lawyers admitted to the bar for less than five (5) years: $150–225.
b. Lawyers admitted to the bar for five (5) to eight (8) years: $165–300.
c. Lawyers admitted to the bar for nine (9) to fourteen (14) years: $225–350.
d. Lawyers admitted to the bar for fifteen (15) to nineteen (19) years: $275–425.
e. Lawyers admitted to the bar for twenty (20) years or more: $300–475
f. Paralegals and law clerks: $95-150.
Loc. R. App’x B ¶ 3 (footnote omitted). However, these rates are guidelines, not mandatory and
exist “solely to provide practical guidance to lawyers and judges when requesting, challenging
and awarding fees.” Loc. R. App’x B n.6. The Court may also consider “affidavits of lawyers in
the [relevant] legal community attesting to the customary rates charged for [similar matters].”
Poole ex rel. Elliott v. Textron, Inc., 192 F.R.D. 494, 509–10 (D. Md. 2000).
Mr. Antonelli has been admitted to the bar for 5 years and he billed at rates between
$275.00 and $325.00 over three years. For work prior to his fifth year (two years of this
litigation), the Local Rules would permit Mr. Antonelli to charge a maximum of $225.00 and for
his fifth year (the final year of the litigation), Mr. Antonelli would be permitted to charge up to
$300.00.

I do not find that Judge Day erred in finding that a blended rate of $298 was

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appropriate. For the period prior to his reaching five years’ experience as an attorney, Mr.
Antonelli was billing at a higher rate than the Local Rules allowed. For the period after his fifth
year, his highest billing rate was slightly higher than the highest rate in the authorized range.
But, Mr. Antonelli completed a substantial amount of work on this case as demonstrated by the
billing statements and a large percentage of those hours were completed in 2017. Billing
Statements 35–37, ECF No. 80-1 (demonstrating that more than half of Mr. Antonelli’s hours
were billed in the 2017 calendar year—his fifth year practicing law). Moreover, CNSI has
provided a declaration from Albert D. Brault, an experienced and highly regarded Maryland
attorney, wherein Mr. Brault attests that the rates charged by Plaintiff’s attorneys “are lower than
the standard hourly rates charged by other firms in the District of Columbia, and are lower than
rates that have been approved as reasonable by the Circuit Court for Montgomery County,
Maryland in commercial cases.” Brault Decl. ¶ 12, ECF No. 80-3. Therefore, I will adopt Judge
Day’s recommendation to award fees to Plaintiff for Mr. Antonelli at a blended rate of $298 per
hour given the number of hours he spent on this litigation; many of those hours were completed
as an attorney with five years of experience; a rate of $298 appears to be lower than the standard
rates by other firms and approved by the state court; and that rate is still within the Court’s Local
Rules for attorneys of his current level of experience.
However, Defendant properly states that Mr. McLin was awarded fees at too high a rate.
Mr. McLin graduated from law school in 2017 and began working as an associate in the
Litigation Department of Saul Ewing in September of that year. Platt Decl. ¶ 10, ECF No. 80-2.
Mr. McLin also is admitted to practice in Virginia, id.; however, Mr. Platt’s declaration does not
say when he was admitted. According to Plaintiff’s records, Mr. McLin completed 11.6 hours of
work from September 18, 2017 to September 22, 2017. Billing Statements 35–37, ECF No. 80-

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1. However, it is more likely than not that Mr. McLin was not admitted to the bar at that time.
Having graduated in 2017 and having begun working at Saul Ewing in September 2017, it is
likely that Mr. McLin sat for the bar examination in late July 2017. In September, Mr. McLin
likely did not know if he passed his examination let alone been sworn into the Virginia State Bar.
See

e.g.,

Virginia

Board

of

Bar

Examiners,

Upcoming

Dates,

http://barexam.virginia.gov/dates.html (last visited August 1, 2018) (stating that results from the
July 2018 bar examination would be released on October 19, 2018 and the Admissions
Ceremony would be held on December 5, 2018). Given this uncertainty, I will give Defendant
the benefit of the doubt that Mr. McLin was a law clerk, and therefore, I will award fees at a rate
of $150.00 per hour. Plaintiff is awarded a total of $1,740.00 for Mr. McLin’s 11.6 hours (11.6 x
$150.00). Therefore, the adjusted lodestar amount is equal to $315,177.50.
Success and Overall Reduction
Finally, Judge Day applied a 20 percent reduction overall to the adjusted lodestar amount
because of the amount of damages Plaintiff originally sought and the results achieved. R&R 10–
15. However, Plaintiff has objected to this reduction, arguing that it is too great, Pl.’s Obj. 2,
ECF No. 89; and Defendant has argued that an even greater reduction was required, Def.’s Obj.
3–4. Given these objections, I have completed my own analysis and, keeping in mind the Fourth
Circuit’s precedent in Randolph, have determined that a 20 percent reduction was appropriate.
See 715 F. App’x at 230.
First, I agree with Judge Day that Plaintiff prevailed on three of its four causes of actions
in this case. That alone would indicate that Plaintiff was highly successful; however, Plaintiff
did initially pursue significantly larger damages ($26,086,328) than it was awarded
($101,538.38). Further, Plaintiff continued to pursue an award of approximately $26 million up

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until the pre-trial conference. See Marginal Or. Approving Jt. Pretrial Or. as Edited, ECF No. 66
(demonstrating that the $26 million request for damages was withdrawn by Plaintiff at the pretrial conference). Therefore, some reduction for degree of success is warranted. However,
Defendant argues that I should only award Plaintiff 17.71 percent of the adjusted lodestar
amount. Def.’s Obj. 4. To do so, would be arbitrary given the contentious nature of this
litigation and would create a windfall for Defendant.
First, throughout this case Plaintiff’s attorneys have worked diligently on behalf of their
client, but at almost every turn, they were met by Mr. Smith’s vigorous defense. Prior to a threeday bench trial, Defendant filed a motion to dismiss, ECF No. 20; a motion for summary
judgment (as a cross motion to Plaintiff’s motion for partial summary judgment), ECF No. 46;
and an omnibus motion in limine, ECF No. 62, which included three motions.1 I do not draw
attention to Mr. Smith’s vigorous defense to say that he should have refrained from any of these
filings, but to demonstrate that Plaintiff was required to respond commensurately to all of Mr.
Smith’s actions in order to receive the judgment it did. As I mentioned at trial, both counsel
brought with them a great deal of skill and zeal and it is without question that this case was
challenging and expensive. See Excerpt of Trial Tr. 2:9–24, ECF No. 79.
Second, Plaintiff sought remedies for Mr. Smith’s breach of contract and a breach of the
duty of loyalty.

Both causes of actions implicate important societal norms regarding the

relationship between an employer and employee, and the importance the duty of loyalty owed to
an employer, and its related obligation to preserve confidential business information of the
employer. Weichert Co. of Md., Inc. v. Faust, 19 A.3d 393, 324–25, 400 (Md. 2015) (holding
that “the duty of loyalty is an implied duty read into every contact of employment, and requires
1

Defendant’s motions were supported by approximately 60 pages in memoranda and 130 pages
of exhibits.
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that an employee act solely for the benefit of his employer in all matters within the scope of
employment, avoiding all conflicts between his duty to the employer and his own self-interest.”)
(internal quotations omitted); BEP, Inc. v. Atkinson, 174 F. Supp. 2d 400, 406 (D. Md. 2001)
(“This concern for the integrity of the employment relationship has led courts to establish a rule
that demands of a high level employee an undivided and unselfish loyalty to the corporation. The
Court of Appeals has accordingly read into every contract of employment an implied duty that an
employee must act solely for the benefit of his employer in all matters within the scope of
employment, . . . .”) (citing Maryland Metals, Inc. v. Metzner, 382 A.2d 564 (Md. 1978)).
Mr. Smith owed a duty to CNSI and violated it in a manner that resulted in substantial
monetary and reputational injury. The fact that CNSI ultimately prevailed in its arbitration with
the state of Louisiana, Excerpt of Trial Tr. 58:9-12, (a success that, as of the time of trial, had not
resulted in actual payment to CNSI) made it reasonable for CNSI initially to seek the much
higher damages. The decision on the eve of trial to abandon those monetary claims in no way
diminished the complexity of the litigation or the importance of the overall success it achieved
on the claims on which it prevailed. In these circumstances, to take a cleaver to the attorneys’
fees as Mr. Smith urges me to do would reward his disloyalty, and prove to be a disincentive to
other companies taking action to deal with a turncoat employee. That would not serve the public
interest.
For that reason, I believe a twenty percent reduction properly takes account of the
difference between the monetary recovery initially sought and actually awarded, without
disregarding the important but less tangible value of the result that CNSI obtained at trial.

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After applying this 20 percent reduction to Judge Day’s reductions and my modification
of the fee award as to Mr. McLin’s hourly rate, Plaintiff is awarded $252,142.00 in attorneys’
fees.
Conclusion
For the aforementioned reasons, it is this 23rd day of August, 2018, ORDERED that
1. Plaintiff Client Network Services, Inc.’s Motion for Attorneys’ Fees, ECF No. 78,
IS GRANTED;
2. Judge Day’s Report and Recommendation, ECF No. 88, BE, and HEREBY IS,
ADOPTED AS AN ORDER OF THE COURT, as modified above, and Plaintiff
Client Network Services, Inc. is awarded $252,142.00 in attorneys’ fees; and
3. The Clerk of the Court shall CLOSE this case.
It is so ordered.

/S/
Paul W. Grimm
United States District Judge
jml

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