Ceglia v. Zuckerberg et al

Filing 289

REPLY/RESPONSE to re 285 Memorandum/Brief in Support of Fee Application filed by Facebook, Inc., Mark Elliot Zuckerberg. (Snyder, Orin)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
-----------------------------------PAUL D. CEGLIA,
Plaintiff,
v.
MARK ELLIOT ZUCKERBERG and
FACEBOOK, INC.,
Defendants.
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Civil Action No. 1:10-cv-00569RJA

DEFENDANTS’ REPLY MEMORANDUM IN SUPPORT OF
THEIR FEE APPLICATION

Thomas H. Dupree, Jr.
GIBSON, DUNN & CRUTCHER LLP
1050 Connecticut Avenue, NW
Washington, DC 20036
[phone]
Terrance P. Flynn
HARRIS BEACH PLLC
726 Exchange Street
Suite 1000
Buffalo, NY 14210
[phone]
February 1, 2012

Orin Snyder
Alexander H. Southwell
GIBSON, DUNN & CRUTCHER LLP
200 Park Avenue, 47th Floor
New York, NY 10166-0193
[phone]

REPLY MEMORANDUM OF LAW
In submitting their fee application, Defendants’ counsel substantially discounted their
standard rates and sought reimbursement for an amount far less than what Defendants actually
paid. Plaintiff Paul Ceglia — whose obstructionist misconduct and defiance of court orders
necessitated the fee award — nonetheless opposes even this heavily-discounted amount. He
offers several arguments in response. None has merit.
1.

Ceglia challenges Defendants’ use of out-of-district counsel, describing his

fraudulent lawsuit as nothing more than a “garden-variety” contract dispute. This is absurd.
Ceglia’s original complaint claimed 84 percent ownership of one of the most prominent
companies in the world — a claim, in Ceglia’s estimation, worth billions of dollars — based on a
purported seven-year-old document. Moreover, Ceglia himself has retained no fewer than four
out-of-district law firms, including one of the largest and most expensive in the world, DLA
Piper — a firm that has 4,200 lawyers located in 76 offices worldwide and whose billing rates
exceed those requested here. To serve as local counsel to the three San Diego-based DLA Piper
partners and two New York City-based DLA Piper attorneys who appeared on his behalf, Ceglia
retained the former Attorney General of New York State, Dennis Vacco.
When DLA Piper and Mr. Vacco’s firm abruptly withdrew two days before the scheduled
hearing on Defendants’ Motion for Expedited Discovery, Ceglia publicly announced
“discussions with several nationally recognized law firms to lead the litigation efforts in the
much-publicized Facebook ownership case involving Mark Zuckerberg.” Ceglia’s long-time
attorney, Paul Argentieri, explained that “[t]he directive from our client was clear: find a firm
with the resources, experience, and legal horsepower to handle a case of this magnitude.” See
Ceglia v. Zuckerberg, available at http://www.cegliavmz.com/press.html (last visited February 1,
2012). Those public pronouncements echoed the strategy that Ceglia had set out in his “Lawsuit
1

Overview” pitch materials: to interview “multiple top tier law firms”; to hire a “larger firm,”
given the “size, complexity and commitment required”; and to engage in “immediate settlement
negotiations.” Ex. A to Supplemental Southwell Declaration at 3. Ceglia used the “Lawsuit
Overview” document to shop his fraudulent lawsuit to several out-of-district firms, including the
New York City-based firm Kasowitz Benson Torres & Friedman LLP, whose partner hourly
rates exceed those requested here.1
The firm that Ceglia hired after DLA Piper’s withdrawal, Lake, A.P.C, is based in
Southern California. Mr. Lake left the case soon after Ceglia instructed him to defy this Court’s
expedited discovery orders; he was then replaced by yet another out-of-district lawyer, Dean
Boland. Given his own retention of numerous out-of-district firms and statements regarding the
“magnitude” of this lawsuit, Ceglia has no basis to challenge Defendants’ retention of out-ofdistrict counsel or the applicability of out-of-district market rates. His recitation of cases
following the forum rule is unavailing, particularly given Defendants’ ample showing of special
expertise and extraordinary circumstances. See Doc. No. 285 at 19-20.
Furthermore, as Defendants explained in their Fee Application, see id. at 14-15,
application of out-of-district market rates is warranted as both an appropriate means of
compensation and a sanction for Ceglia’s egregious discovery misconduct. Indeed, both the
Second Circuit and this Court have recently held that an award of attorneys’ fees under Rule 37
constitutes a deterrent sanction for discovery misconduct. See Robbins & Myers, Inc. v. J.M.
Huber Corp., 2011 U.S. Dist. LEXIS 45386, at *10 (citing On Time Aviation, Inc. v. Bombardier
1
See Jan. 20, 2012 Southwell Decl. Ex. C (Doc. No. 286-3) at 8 (describing award of attorneys’ fees based
on hourly rates of $825-1,000 for certain partners in Lehman Brothers Holdings Inc., No. 08-1355-jmp (Bankr.
S.D.N.Y.)). The Kasowitz Benson firm did not appear in this case for Ceglia. Yet another out-of-district law firm,
Edelson McGuire, LLC based in Chicago, represented Ceglia briefly during the early expedited discovery phase but
also did not appear.

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Capital, Inc., 354 Fed.Appx. 448, 452 (2d Cir. 2009); Southern New England Telephone
Company v. Global NAPS Inc., 624 F.3d 123, 149 (2d Cir. 2010)). Ceglia attempts to side-step
the regular application of out-of district rates in sanctions cases by claiming that the punitive
effect of the Court’s order has been satisfied by his payment of the $5,000 fine in connection
with this matter. See Doc No. 288 at 8. But this Court ordered a fine and attorney’s fees as a
discovery sanction. Both vindicate the Court’s interest in sanctioning Ceglia’s brazen discovery
misconduct and reimbursing Defendants’ actual costs in litigating the discovery dispute. Thus,
application of out-of-district market rates is warranted in this case.
2.

Ceglia asserts that Defendants provided “no evidentiary support” that their rates

— either their standard hourly rates or the substantially discounted rates at which they actually
seek reimbursement — are reasonable. Id. at 2. This is false. Both recent judicial decisions and
empirical data, attached as Exhibits C and D to the Southwell Declaration, confirm that Gibson
Dunn’s claimed rates are reasonable relative to other peer global law firms with attorneys located
in New York City. See Doc. No. 285 at 16-17. For instance, a 2011 National Law Journal selfreported survey found that partner billing rates at DLA Piper, Ceglia’s own former out-of-district
counsel, exceeded the rates claimed here.2
Ceglia also asserts that Defendants’ claimed rates are “nearly three times the highest rate
that this Court has awarded to out-of-district attorneys.” Doc. No. 288 at 2. This is also false.
In fact, this Court recently determined that an hourly rate of $530 was reasonable for a partner at
a mid-sized national firm located in New Jersey. See Robbins & Myers, Inc. v. J.M. Huber
2
And, of course, Defendants have actually paid substantially more than the claimed rates. In an effort to
avoid any dispute as to the reasonableness of this fee request, Defendants made an across-the-board 25 percent cut to
their standard hourly rates. Thus, Defendants’ claimed rates are significantly lower than Gibson Dunn’s standard
rates, which are themselves reasonable relative to other leading law firms, and significantly less than what
Defendants actually paid.

3

Corp., 2010 U.S. Dist. LEXIS 108562, at *25. That award further supports the reasonableness of
Defendants’ claimed rates for attorneys located in the New York City and the District of
Columbia offices of a global law firm.3
3.

Ceglia mischaracterizes the manner in which Defendants’ time records were

created and the law governing the presentation of those records to the Court. As described in the
Southwell Declaration (Doc. No. 286), the billing narratives attached as Exhibit B reflect the
time spent on particular tasks related to legal services for which Defendants seek reimbursement.
See Doc. No. 286, ¶16. Those narratives are based on contemporaneous time entries for each
Gibson Dunn attorney in the firm’s time management system, which were entered in accordance
with firm policy. The time spent on the particular tasks reflect a conservative claim of time
worked based on the contemporaneous records and Mr. Southwell’s personal involvement with
all of the tasks. Ceglia’s claim that Defendants’ billing narratives were only “‘based . . . upon
Mr. Southwell’s personal experience with the case’” is false and made in bad faith. Doc. No.
288 at 11. In fact, the ellipses employed by Ceglia and quoted above obscure what Mr.
Southwell actually said: that the narratives are “based on the time entries themselves and upon
my personal experience with the case.” Doc. No. 286, ¶16 (emphasis added).
Having misrepresented the nature of Defendants’ submission, Ceglia proceeds to misstate
the law. Although attorneys must maintain contemporaneous billing records, they are not
3
Neither of the cases cited by Ceglia supports his contention that Defendants’ claimed rates are “nearly three
times the highest rate that this Court has awarded to out-of-district attorneys.” Doc. No. 288 at 2. To begin,
Ghadersohi v. Health Research, Inc. did not even involve an out-of-district attorney; rather, this Court awarded a
Buffalo law firm partner his requested rate based on what it considered appropriate “in this community.” 2011 U.S.
Dist. LEXIS 107285, at *14 (W.D.N.Y.). And in Disabled Patriots of America, Inc. v. Niagara Group Hotels, LLC,
the Court applied the forum rule and proceeded to consider the reasonableness of in-district rates. See 688 F. Supp.
2d 216, 223-24 (W.D.N.Y. 2010). Elsewhere in his opposition, Ceglia suggests that there are numerous firms in the
Western District of New York that “routinely handle large contract dispute cases.” Doc. No. 288 at 7-8. But
nowhere does Ceglia submit any evidence that those firms’ actual in-district rates are lower than Defendants’
claimed rates.

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required to attach those records to a fee application.4 Rather, a fee applicant may provide
detailed summaries of contemporaneous records accompanied by an affidavit stating that the
summaries are accurate. See Gavenda v. Orleans, No: 95-0251E, 1999 U.S. Dist. LEXIS 22703,
at *1-*2 (W.D.N.Y. July 27, 1999) (noting that “this circuit has allowed attorneys to submit
summaries of contemporaneous records accompanied by affidavits stating that the summaries are
accurate and based on contemporaneous records”); Carrero v. New York City Housing Authority,
685 F. Supp. 904, 908-09 (S.D.N.Y. 1988), aff’d 890 F.2d 569 (2d Cir. 1989) (“Where the
attorneys have provided the court with affidavits that have been reconstructed from
contemporaneous records and that set forth all charges with specificity, fees have not been
denied.”); Cruz v. Local Union No. 3 of Int’l Bhd. of Elec. Workers, 34 F.3d 1148, 1160 (2d Cir.
1994) (holding that billing records based on contemporaneous records accords with Second
Circuit precedent). Fee applications routinely attach narrative summaries based on
contemporaneous time entries in order to present the information in a convenient fashion and
avoid burdening the court with the underlying entries, which are often bulky and require heavy
redaction due to privilege.
Here, Defendants submitted detailed billing narratives based on contemporaneous
records. Those narratives were attached to a sworn declaration in which Mr. Southwell
described the process by which the narratives were prepared. This submission, in a presentation
meant to ease the Court’s review, conforms to clear Second Circuit precedent.5
4
The two primary cases on which Ceglia relies, N.Y. State Ass’n for Retarded Children v. Carey, 711 F.2d
1136 (2d Cir. 1983) and Scott v. City of New York, 643 F.3d 56 (2d Cir. 2011), involve fee applicants who
maintained no contemporaneous billing records whatsoever, which is not the case here.
5
Ceglia also claims that Defendants’ purported “block-billing … merits reduction of legal fees.” Doc. No.
288 at 10. Block-billing is not prohibited in the Second Circuit. See Molefi v. Oppenheimer Trust, No. 03-5631,
2007 WL 538547, at *7 (E.D.N.Y. 2007). The practice is disfavored to the extent it prevents courts from assessing

[Footnote continued on next page]
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4.

Ceglia does not attempt to refute Defendants’ requested hours expended in

connection with their attempts to compel Ceglia’s compliance with this Court’s orders. Rather,
he tries to trivialize the amount of work for which Defendants seek reimbursement, describing it
as “a grand total of 22 pages, rounded up.” Doc. No. 288 at 12. This flippant response does not
change the fact that Ceglia’s months-long campaign of obstruction — intended to deny
Defendants additional evidence of his fraud — necessitated the expenditure of considerable
attorney time for multiple briefs, correspondence with counsel, legal research, and handling the
consent forms. In support of their Fee Application, Defendants provided a detailed sworn
description of the legal services they provided under tight timetables. See Doc. No. 286, ¶¶5-15.
They also excluded from their application multiple categories of legal services and costs that
might otherwise have been included. See id., ¶¶19-20. Defendants’ requested hours are
reasonable.6
5.

Ceglia does not object to Defendants’ request that the fee award be payable within

fourteen days of this Court’s Order. See Doc. No. 285 at 20. Accordingly, this Court should
impose a fourteen-day deadline.
Although Ceglia agrees to a fourteen-day deadline, he objects to the inclusion of an
additional provision prohibiting him from filing any additional non-responsive papers or
otherwise prosecuting this action until he satisfies the fee award in full. Again, Ceglia resorts to

[Footnote continued from previous page]
the reasonableness of the hours billed. But here, the narrative descriptions are clear and Ceglia does not identify a
single task or billing narrative as purportedly unreasonable, vague, inconsistent, redundant, or deficient in any
respect. Moreover, as even the case law that Ceglia invokes makes clear, it is reasonable to collect multiple tasks
related to a single general task that are performed on one day. See Wise v. Kelly, 620 F. Supp. 2d 435, 451
(E.D.N.Y. 2008).
6

Ceglia does not object to Defendants’ application for the time spent preparing the instant Fee Application.

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the fact that his payment of the $5,000 fine has supposedly discharged any relevant sanction in
this matter. But as the Second Circuit and this Court have held, an award of attorneys’ fees
under Rule 37 constitutes a deterrent sanction for discovery misconduct. And in Corley v.
Rosewood Care Ctr., Inc., the Seventh Circuit affirmed the district court’s requirement that
plaintiff immediately satisfy a mere $200 sanction before he could enjoy “the privilege of
continuing to litigate.” 142 F.3d 1041, 1057 (7th Cir. 1998). Given Ceglia’s egregious
discovery misconduct and recent blizzard of meritless and premature motions, this Court should
require no less.
CONCLUSION
For the foregoing reasons, Defendants respectfully request that this Court grant their Fee
Application in full.
Dated:

New York, New York
February 1, 2012
Respectfully submitted,
/s/ Orin Snyder
Orin Snyder
Alexander H. Southwell
Matthew J. Benjamin
Amanda M. Aycock
GIBSON, DUNN & CRUTCHER LLP
200 Park Avenue, 47th Floor
New York, NY 10166-0193
[phone]

Thomas H. Dupree, Jr.
GIBSON, DUNN & CRUTCHER LLP
1050 Connecticut Avenue, NW
Washington, DC 20036
[phone]
Terrance P. Flynn
HARRIS BEACH PLLC
726 Exchange Street
Suite 1000
Buffalo, NY 14210
[phone]

Attorneys for Defendants Mark Zuckerberg and Facebook, Inc.

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