Atmosphere Hospitality Management, LLC v. Shiba Investments, Inc. et al

Filing 202

ORDER granting in part and denying in part 175 Motion for Attorney Fees. Signed by US Magistrate Judge Veronica L. Duffy on 3/3/2015. (CG)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
ATMOSPHERE HOSPITALITY
MANAGEMENT, LLC,

5:13-CV-05040-KES

Plaintiff,
vs.

ORDER GRANTING SANCTIONS ON
PLAINTIFF’S DOCKET NO. 127
MOTION TO COMPEL
[DOCKET NO. 175]

ZELJKA CURTULLO,
Defendant,
and
SHIBA INVESTMENTS, INC. and
KARIM MERALI,
Defendants and
Third-Party
Plaintiffs,
vs.
JAMES HENDERSON,
Third-Party
Defendant.

INTRODUCTION
This matter is before the court on plaintiff Atmosphere Hospitality
Management, LLC’s complaint, filed pursuant to the court’s diversity
jurisdiction, 28 U.S.C. § 1332. Now pending is a motion for sanctions [Docket
No. 175] on plaintiff’s previously-filed motion to compel, Docket No. 127. The
district court, the Honorable Karen E. Schreier, referred this motion to this
magistrate judge for decision. See Docket No. 165.

FACTS
Plaintiff filed a motion to compel discovery on numerous written
discovery requests consisting of interrogatories, requests for the production of
documents, and requests for admissions. See Docket No. 127. In ruling on the
motion, the court grouped the discovery requests into 13 groups. See Docket
No. 168. Of those 13 groups, the court granted plaintiff’s motion fully as to 10
of the groups. Two other groups of discovery requests were partially granted.
Id. The court denied in its entirety only one group of discovery requests. Id.
The court indicated that sanctions would be granted and directed plaintiff to
file a motion for attorney’s fees and costs associated with the motion. Id.
Plaintiff has now filed that motion and seeks an award of $12,665 in
attorney’s fees and $2,381.77 in costs. See Docket No. 175 & 176. Defendants
resist the motion and assert that the court should award no more than $1,500
in sanctions. See Docket No. 192.
DISCUSSION
A.

Lodestar Method of Determining Reasonable Award of Attorney=s
Fees
Plaintiff must carry the burden to establish a factual basis for the award

of fees it requests and the court must evaluate plaintiff=s request for attorney=s
fees to determine whether it is reasonable. See Johnston v. Comerica Mortg.
Corp., 83 F.3d 241, 246 (8th Cir. 1996). ABecause any award [of attorney’s
fees] has the potential for >precedential value= in future cases, the Court owes a
duty to the principled development of the law to exercise careful judgment in
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reviewing agreed-upon [or undisputed] fees.@ Duhaime v. John Hancock Mut.
Life Ins. Co., 989 F. Supp. 375, 379 (D. Mass. 1997) (citing Weinberger v. Great
N. Nekoosa Corp., 925 F.2d 518, 526 (1st Cir. 1991)).
The appropriate amount of attorney’s fees is highly fact-specific to the
case. There are two methods of determining attorney’s fees: the lodestar
method and the Apercentage of the benefit@ method. See H.J. Inc. v. Flygt
Corp., 925 F.2d 257, 259-60 (8th Cir. 1991); Comerica Mortg. Corp., 83 F.3d at
246; Walitalo v. Iacocca, 968 F.2d 741, 747-48 (8th Cir. 1992). The court has
discretion to decide which method of determining fees is appropriate.
Comerica Mortg. Corp., 83 F.3d at 246. Here, the parties address only the
lodestar method, so the court chooses to employ that method.
The lodestar is figured by multiplying the number of hours reasonably
expended by the reasonable hourly rates. Finley v. Hartford Life & Accident
Ins. Co., 249 F.R.D. 329, 332-33 (N.D. Cal. Feb. 22, 2008); Tequila Centinela,
S.A. de C.V. v. Bacardi & Co., Ltd., 248 F.R.D. 64, 68 (D.D.C. 2008); Creative
Resources Group of New Jersey, Inc. v. Creative Resources Group, Inc., 212
F.R.D. 94, 103 (E.D.N.Y. 2002); Kayhill v. Unified Gov=t. of Wyandotte County,
197 F.R.D. 454, 459 (D.Kan. 2000); and Trbovich v. Ritz-Carlton Hotel Co., 166
F.R.D. 30, 32 (E.D. Mo. 1996). The burden is on the moving party to prove that
the request for attorney’s fees is reasonable. Tequila Centinela, S.A. de C.V.,
248 F.R.D. at 68; Creative Resources Group, Inc., 212 F.R.D. at 103; Kayhill,
197 F.R.D. at 459.
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Once the lodestar is calculated, there are twelve factors that are relevant
in considering whether that figure should be adjusted up or down:
(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 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
Aundesirability of the case; (11) the nature and length of the
professional relationship with the client; and (12) awards in similar
cases.
See Hensley v. Eckerhart, 461 U.S. 424, 430 n.3, 434 (1983) (citing the
American Bar Association Code of Professional Responsibility, Disciplinary
Rule 2-106). A[T]he most critical factor is the degree of success obtained.@ Id.
at 436.
B.

Reasonable Hourly Rate is the Prevailing Rate in the District of
South Dakota
The reasonable hourly rate is usually the ordinary rate for similar work

in the community where the case is being litigated. Tequila Centinela, S.A. de
C.V., 248 F.R.D. at 68 (citing Laffy v. Northwest Airlines, Inc., 746 F.2d 4, 16
(D.C. Cir. 1984) (hourly rate must be sufficient to attract competent counsel,
but not so excessive as to produce a windfall, and generally must be in line
with rates charged by other attorneys of comparable skill, reputation, and
ability within the community.) Here, defendants do not take issue with
plaintiff’s counsel’s hourly rates, but that does not relieve the court from its
obligation to make that determination.
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Neither party informs the court what prevailing attorneys fee rates are for
commercial litigation in South Dakota. However, the court may determine
those rates based on its own knowledge of prevailing rates here. See Creative
Resources Group, Inc., 212 F.R.D. at 103-104 (holding that Ait is within the
judge=s discretion to determine reasonable fees based on his or her knowledge
of prevailing community rates@). Plaintiff has requested an hourly rate of $250
per hour for its lead counsel, Ms. Sara Frankenstein; $210 per hour for Jana
Smoot White and Nathan Chicoine, co-counsel; and $100 per hour for
paralegal Audrey Belitz. See Docket Nos. 178, 179 & 180.
The hourly rate of $75.00 per hour for paralegal time has been approved
in attorneys fee awards. See Page v. Hertz Corp., Civ. No. 09-5098, Docket No.
67 (D.S.D. 01/20/12); Kale, 2008 WL 2776494 *4 (D.S.D.); Cottier v. Martin,
2008 WL 2696917 * 5 (D.S.D.). Experienced, partner-level trial counsel in this
community have received awards of attorney’s fees ranging from $200.00 per
hour to $225.00 per hour in lawsuits requiring highly specialized knowledge
such as the Voting Rights Act. See Cottier v. City of Martin, Civ. No. 02-5021,
Docket No. 469, page 6 (March 25, 2008); Bone Shirt v. Hazeltine, Civ. No. 013032, Docket No. 411, page 4 (June 22, 2006).

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In other cases where the hourly rate is limited by statute, courts have
awarded fees based on an hourly rate of $150 per hour. See Kahle v. Leonard,
Civ. No. 04-5024, Docket No. 259 (D.S.D. July 14, 2008). In awards of
attorney’s fees as sanctions for motions to compel, the hourly rates of
attorney’s fees have ranged from $145 per hour to $250 per hour. See Heil v.
Belle Starr Saloon & Casino, Inc., Civ. No. 09-5074, Docket No. 68 (D.S.D.);
Beyer v. Medco Ins. Group, Civ. No. 08-5058, Docket No. 65 (D.S.D.); Howard
Johnson Internat=l, Inc. v. Inn Development, Inc., Civ. No. 07-1024, Docket No.
73 (D.S.D.); Oyen v. Land O=Lakes Inc., Civ. 07-4112, Docket Nos. 56, 62
(D.S.D.).
In a case involving a franchisor which sued to enforce a franchise
agreement where the defendants put up little or no resistance to the lawsuit,
the franchisor=s out-of-state lawyers were awarded attorney’s fees based on the
prevailing rates for South Dakota counsel because the franchisor had not
shown that local counsel were not available or knowledgeable. See Howard
Johnson Internat=l, Inc. v. Inn Development, Inc., Civ. No. 07-1024, Docket No.
73, (D.S.D. 6-23-08). In that case, the franchisor=s senior partner-level lawyer
was awarded fees at a rate of $225 per hour. Id. A senior associate was
awarded fees at a rate of $180 per hour. Id. And a junior associate was
awarded fees at a rate of $140 per hour. Id.
Ms. Frankenstein is a partner at her firm, Gunderson Palmer Nelson &
Ashmore, LLP. She has been a member of the bar since 2002. She has
handled a number of lengthy, complex trials and is highly experienced,

especially for the number of years she has been in practice. The court finds
that a rate of $250 per hour for her services is reasonable.
Nathan Chicoine was just admitted to the bar in 2014, making him a
brand new associate lawyer at Gunderson, Palmer. The court finds that an
hourly rate for Mr. Chicoine of $210 is not reasonable. His hours will be
considered at a rate of $140 per hour.
Jana Smoot White graduated from law school in 2006 and practiced law
in Kentucky before coming to South Dakota in 2013. She is currently an
associate with the Gunderson, Palmer law firm. The court also finds that $210
per hour for Ms. White is not reasonable and will consider her hours at the rate
of $180 per hour as a relatively new associate, but one with more than five
years’ experience outside South Dakota.1
Plaintiff does not assert any facts in support of the $100 per hour it
requests for paralegal time other than to say that Ms. Belitz is a paralegal at

An hourly rate of $365 per hour was approved for out-of-state counsel
in Nienaber v. Citibank (South Dakota) N.A., Civ. No. 04-4054, Docket No. 101
(D.S.D. July 5, 2007). However, the decision in Nienaber is distinguishable.
That was a case involving a high degree of risk for the plaintiff=s attorney and a
high degree of specialized knowledge as it was a class action representing at
least 1,000,000 class members under the Fair Debt Reporting Act against a
very large South Dakota employer. Id. at 1-2, 6. Few lawyers in the district
could be expected to have the funds to finance such a class action, and fewer
still would be expected to risk their funds against a defendant who might be
sympathetic to a large number of prospective jurors. Thus, it was
understandable that out-of-state counsel were retained. Furthermore, the
Nienaber case is distinguished by virtue of the fact that the parties had a Aclear
sailing@ provision in their settlement agreement whereby the defendant agreed
not to oppose the application for attorney’s fees in return for the plaintiffs=
promise to cap their request for attorney’s fees at an agreed-upon figure. Id. at
1-2.
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the Gunderson, Palmer law firm. Since no supporting documentation has been
submitted in support of the requested hourly rate for Ms. Belitz, the court finds
that $75 per hour is a reasonable rate for her.
C.

Reasonable Hours

The “most critical factor” in determining what constitutes a reasonable
award of attorney’s fees is the degree of plaintiff’s success. El-Tabech v.
Clarke, 616 F.3d 834, 843 (8th Cir. 2010) (quoting Warnock v. Archer, 397
F.3d 1024, 1026 (8th Cir. 2005)). In civil rights litigation, the damage award is
not the sole factor to be considered in determining the plaintiff’s degree of
success because “damages awards do not reflect fully the public benefit
advanced by civil rights litigation.” Wal-Mart Stores, Inc. v. Barton, 223 F.3d
770, 773 (8th Cir. 2000) (quoting City of Riverside v. Rivera, 477 U.S. 561, 575
(1986)).
Courts are charged with excluding from awards of attorney’s fees hours
that were not Areasonably expended.@ Hensley, 461 U.S. at 434. ACases may
be overstaffed, and the skill and experience of lawyers vary widely.@ Id. Where
more than one attorney is employed, courts may reduce the total attorney
hours and fees if there is duplication or inefficiency. A.J. by L.B. v. Kierst, 56
F.3d 849, 864 (8th Cir. 1995). “Time spent by two attorneys on the same
general task is not, however, per se duplicative” and “[c]areful preparation often
requires collaboration and rehearsal.” Rodriguez-Hernandez v. Miranda-Velez,
132 F.3d 848, 860 (1st Cir. 1998). In determining the reasonable hours
expended by plaintiff=s lawyers and paralegal in this matter, the court turns to
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the itemizations provided by plaintiff in support of its motion for attorney’s
fees. See Docket No. 178-1, 179-1, & 180-1.
In comparing the lawyers’ time submitted, there is very little duplication
of effort. Sara Frankenstein and Jana Smoot White both worked on the letter
of August 15, 2014 to defendants’ counsel explaining why defendants’
responses to plaintiff’s second set of discovery requests were insufficient. They
spent (respectively), 1.9 hours and 1.3 hours on that task for a combined total
of 3.2 hours. Compare Docket No. 180-1 with Docket No. 178-1. The court
will eliminate one hour of this time from Sara Frankenstein’s time.
In addition, Nathan Chicoine worked on the reply brief on plaintiff’s
motion to compel for 6 hours and Sara Frankenstein worked on the reply brief
for 6.9 hours for a combined total of 12.9 hours. Compare Docket No. 179-1
with Docket No. 180-1. The court will eliminate five hours of Mr. Chicoine’s
time in view of the fact that he was a very new attorney at the time of his work
on this file and did not have the benefit of past experience which likely would
have rendered his work more efficient.
Paralegal Audrey Belitz spent 2.5 hours drafting the initial brief in
support of the motion to compel while Sara Frankenstein spent 21 hours on
the initial brief. The court will reduce Ms. Frankenstein’s time by 2 hours.
The total hours the court finds to be non-duplicative, then, is as follows:
Audrey Belitz: 3.5; Sara Frankenstein: 35.7 hours; Jana Smoot White: 1.9
hours; and Nathan Chicoine: 1.7 hours. The total hours spent by attorneys
and the paralegal in this matter total 42.8.
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Contrary to defendants’ assertion, the court finds this number of hours
to be reasonable given the many discovery issues at stake in the motion to
compel, and defendants’ pattern of delay, nonresponsiveness, and obfuscation
in responding to plaintiff’s discovery requests. In this district, this court has
approved requests for attorney’s fees ranging from $1,041.45 to $1,509.97 for
run-of-the-mill motions to compel. See Heil, Civ. No. 09-5074, Docket No. 68
($1,041.45 awarded); Howard Johnson Internat=l. Inc., Civ. No. 07-1024,
Docket No. 73 ($1,453.50 awarded); Oyen, Civ. No. 07-4112, Docket Nos. 56
and 62 ($1,509.97 awarded to defendant on defendant=s motion to compel;
$1,140.75 awarded to plaintiff on plaintiff=s motion to compel).
In one extraordinary case in which the plaintiff made a detailed motion to
compel involving numerous issues, the court granted that motion, and then
plaintiff had to make a second motion to compel when the defendant refused to
comply with the court= previous order, the court awarded $13,480 in attorney’s
fees. See Beyer, Civ. No. 08-5058, Docket No. 65 (D.S.D.). This case resembles
the facts in Beyer more than it does the other cases deemed to be “run-of-themill.” In this case, like Beyer, defendants continued to deny plaintiff relevant
discovery even after the district court orally ordered it at the September
hearing. Also, defendants repeatedly found different excuses for not producing
the same discovery requested multiple times by plaintiff.
Finally, the court notes that it only partially granted plaintiff’s motion to
compel. Of the 13 groups of discovery requests, 10 were granted wholly, 2
were partially granted and partially denied, and one was denied wholly. Thus,
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the court will reduce the total amount requested by plaintiff in attorney’s fees
by 11/13. The court’s calculation of fees is as follows:
Sara Frankenstein: 35.7 hours x $250/hr =
Audrey Belitz: 3.5 hours x $75/hr =

$ 263

Jana Smoot White: 1.9 hours x $180 =

$ 342

Nathan Chicoine: 1.7 hours x $140 =

$ 238

Subtotal of Reasonable Hours x Reasonable Rates

$9,768

Reduced Hours Based on Benefit Gained

x 11/13

Total Award of Attorney’s Fees
E.

$8,925

$ 8,265

Costs
Plaintiff also requests out-of-pocket costs in the amount of $2,381.77 for

a computer expert who created mirror images of three of defendants’ computers
and defendant Karim Merali’s cell phone as well as the cost of serving a
subpoena duces tecum on defendants’ expert. Those costs are itemized by
plaintiff in its brief in support of its motion for sanctions. See Docket No. 176
at pp. 4-5.
Defendants object to this request on a number of bases. They argue that
plaintiff has not provided its computer expert’s actual billing statement so that
defendants can ascertain what actions were taken at various times.
Defendants also assert that the costs of plaintiff’s expert were necessary
discovery costs that plaintiff would have incurred in the ordinary course of
pursuing this litigation and not occasioned by defendants’ actions.

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In response to defendants’ objections, plaintiff filed the numerous billing
statements received from its computer expert. See Docket No. 184-5. Plaintiff
argues these expenses were directly caused by defendants’ discovery abuses in
that defendants kept making excuses for not producing emails, stating at
various times that the computer on which the emails resided had crashed, that
defendants could not find any emails, and also the simple tactic of not
responding at all. These actions are what finally prompted the district court to
order that defendants allow plaintiff’s expert to inspect defendants’ computers.
See Docket No. 169 at pp. 23-26. However, the court did not specifically order
that a mirror image of defendants’ computers be made. Accordingly, the court
will disallow the $300 cost of hard drives included in plaintiff’s request for outof-pocket costs. The remainder of the plaintiff’s computer expert’s expenses
were directly occasioned by defendants’ discovery misconduct.
CONCLUSION
Plaintiff’s motion for sanctions [Docket No. 175] is granted in part and
denied in part. Defendants shall pay to plaintiff the sum of $8,265 in
attorney’s and paralegal’s fees and the sum of $2,081.77 in out-of-pocket costs.
This payment shall be remitted by defendants to plaintiff within 14 days of the
date of this order.
DATED this 3rd day of March, 2015.
BY THE COURT:

VERONICA L. DUFFY
United States Magistrate Judge
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