Equity Partners HG, LLC et al v. Samson, Inc. et al
Filing
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AMENDED ORDER granting in part and denying in part 27 Motion for Attorney Fees. Signed by Chief Judge Jeffrey L. Viken on 9/30/19. (SB)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
EQUITY PARTNERS HG, LLC and
HERITAGE GLOBAL PARTNERS, INC.,
CIV. 18-5006-JLV
Plaintiffs,
vs.
AMENDED ORDER
SAMSON, INC.; BLACK EARTH, LLC;
and KENNETH PRICE,
Defendants.
INTRODUCTION
In January of 2018, plaintiffs brought this diversity action alleging
breach of contract, unjust enrichment and tortious interference with a
contract. (Docket 1). Now pending before the court is plaintiffs’ motion for
service costs and attorney’s fees. (Docket 27). Plaintiffs assert defendants
refused to waive service without good cause. Defendants respond that
defendants improperly sent the request to waive service and that plaintiffs
unnecessarily incurred service expenses without giving defendants the
opportunity to waive service. (Docket 29). Defendants also contest the amount
of attorney’s fees plaintiffs seek. (Docket 32). For the reasons given below, the
court finds defendants must pay service costs and attorney’s fees to plaintiffs
but disagrees with plaintiffs’ calculation of those costs.
I.
Facts
Plaintiffs communicated with defense counsel Nathan Chicoine prior to
filing the complaint. (Docket 27-1 at pp. 2-4). On January 29, 2018, plaintiffs’
counsel asked Mr. Chicoine via e-mail if he would waive service on behalf of
defendants. Id. at p. 2. Plaintiffs’ counsel followed up on this request on
January 31 and March 2. Id. at pp. 1-2. On March 6, Mr. Chicoine informed
plaintiffs he was not representing defendants. Id. at p. 1. Plaintiffs then
attempted to personally serve defendants and were unsuccessful. See Docket 7
at pp. 1-2 (describing service attempts).
On May 30, plaintiffs’ counsel contacted defendant Kenneth Price—who
is also the registered agent for defendants Samson, Inc. and Black Earth Inc.—
by e-mail with a waiver request. (Docket 27-5). Plaintiffs also sent the waiver
request to defendant Price’s home by FedEx. Id. In June, plaintiffs hired law
enforcement local to defendant Price to complete service, which was also
unsuccessful. (Docket 27-6). Defendants never returned the service waivers.
Defendant Price asserts he was away from his home in March, April and May of
2018. (Docket 28 at ¶¶ 6-8). He does not assert he was away from home in
June, but states he does not recall receiving any FedEx package and never
refused service. Id. at ¶¶ 9-10. Defendant Price further states he does not
monitor the e-mail address plaintiffs used to contact him. Id. at ¶ 11.
On June 27, the court authorized plaintiffs to complete service by
publication. (Docket 13). Plaintiffs published notice in the Rapid City Journal
and the Black Hills Pioneer. (Dockets 17-19). The publication ended on
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August 15. On September 6, defendants answered the complaint through Mr.
Chicoine. (Docket 21). Defendant Price now states he was unaware of this
action until notice was published in the Journal and the Pioneer. (Docket 28
at ¶ 13). He further states he hired counsel in August. Id. at ¶ 14.
II.
Legal Standards
Federal Rule of Civil Procedure 4(d)(2) states:
If a defendant located within the United States fails, without good
cause, to sign and return a waiver requested by a plaintiff located
within the United States, the court must impose on the defendant:
the expenses later incurred in making service; and the reasonable
expenses, including attorney’s fees, of any motion required to collect
those service expenses.
Fed. R. Civ. P. 4(d)(2)(A)-(B). Defendants “ha[ve] a duty to avoid unnecessary
expenses of serving the summons.” Fed. R. Civ. P. 4(d)(1).
Where, as here, the applicable fee-shifting provision does not explain how
to calculate attorney’s fees, the court uses the lodestar method. See Perdue v.
Kenny A. ex rel. Winn, 559 U.S. 542, 550-51 (2010).
The most useful starting point for determining the amount of a
reasonable fee is the number of hours reasonably expended on the
litigation multiplied by a reasonable hourly rate. This calculation
provides an objective basis on which to make an initial estimate of
the value of a lawyer’s services. The party seeking an award of fees
should submit evidence supporting the hours worked and rates
claimed. Where the documentation of hours is inadequate, the
district court may reduce the award accordingly.
Hensley v. Eckerhart, 461 U.S. 424, 433 (1983).
“A reasonable hourly rate is usually the ordinary rate for similar work in
the community where the case has been litigated.” Emery v. Hunt, 272 F.3d
1042, 1048 (8th Cir. 2001) (citation omitted). “In a case where the plaintiff
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does not use local counsel, the court is not limited to the local hourly rate, if
the plaintiff has shown that, in spite of his diligent, good faith efforts, he was
unable to find local counsel able and willing to take the case.” Id. (citation
omitted). “When determining reasonable hourly rates, district courts may rely
on their own experience and knowledge of prevailing market rates.” Hanig v.
Lee, 415 F.3d 822, 825 (8th Cir. 2005).
III.
Analysis
A.
Lack of waiver
The court first finds defendants did not show good cause for their failure
to waive service. It is undisputed that defendants did not waive service. The
question is whether there was good cause for that failure. If not, defendants
are liable for plaintiffs’ service costs and the attorney’s fees associated with this
motion. Fed. R. Civ. P. 4(d)(2).
In an attempt to establish good cause, defendants argue plaintiffs did not
send the request for a waiver by “reliable means.” (Docket 29 at p. 3) (citing
Fed. R. Civ. P. 4(d)(1)(G)) (“The . . . [waiver] request must be sent by first-class
mail or other reliable means.”). Defendants note plaintiffs sent their waiver
request to defendant Price’s “old email” and argue plaintiffs “knew Defendant
Samson, Inc. had sold assets of the company and Mr. Price had not been in
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communication with him by email for many months.”1 Id. Defendants also
argue FedEx is unreliable because packages may be lost or stolen. Id.
These arguments are unavailing. The advisory committee that drafted
this portion of Rule 4 stated “private messenger services or electronic
communications . . . may be equally reliable” as first-class mail. 1993 Advisory
Committee Notes to Rule 4. “In the decades since the 1993 Advisory
Committee Notes were drafted, other forms of electronic communication—such
as email—have become more prevalent and have been used effectively to send
waiver requests under Rule 4(d).” 4A Charles Alan Wright & Arthur R. Miller,
Federal Practice & Procedure § 1092.1 (4th ed.). There is simply no indication
that e-mail or FedEx are unreliable methods of transmitting a waiver request.
The court finds it highly unlikely that both methods of communication would
simultaneously fail.
Defendants would show good cause for failing to waive service if they
showed they did not receive the waiver request. Id. (“The most obvious
illustration of good cause would be never having received the notice and
request for waiver and the complaint.”); see also 1993 Advisory Committee
Notes to Rule 4 (“Sufficient cause not to shift the cost of service would exist . . .
1Defendants
appear to argue plaintiffs knew defendant Price was not
checking his e-mail, but do not support that argument. Defendants do not
explain why plaintiffs knowing defendant Samson, Inc. sold company assets
shows knowledge that defendant Price was no longer checking e-mail. In
addition, defendant Price is the “CEO and Vice President of defendant Samson,
Inc.” (Docket 28 at ¶ 2). How defendant Price could not be in communication
with defendant Samson, Inc. is perplexing, since they appear to be the same
entity.
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if the defendant did not receive the request.”). However, defendants never state
they did not receive the waiver request. In his affidavit, defendant Price
carefully avoids stating he did not receive the request. He states he was on
vacation, that he does not recall receiving a FedEx package and that he does
not monitor his email. (Docket 28). The court cannot conclude from these
facts defendants did not receive a waiver request.
In addition, the court finds it improbable that defendants first learned of
this suit through notice published in local newspapers. At the very least, it
seems more likely that Mr. Chicoine notified defendants of the impending suit.
In any event, it is sufficient for the court to conclude defendants failed to show
plaintiffs’ methods of sending the waiver request were unreliable or that they
did not receive the request.
B.
Costs
Having concluded defendants failed to waive service and did not show
good cause for the failure, the court “must impose on the defendant[s] the
expenses later incurred in making service and the reasonable expenses,
including attorney’s fees, of any motion required to collect those service
expenses.” Fed. R. Civ. P. 4(d)(2)(A)-(B). The parties dispute those costs.
Defendants argue they cannot be liable for service costs plaintiffs incurred
before they had “a reasonable time to return the waiver.” (Docket 29 at p. 3).
They assert they cannot be liable for costs incurred before June 24, 2018—30
days after plaintiffs sent the waiver request via FedEx and e-mail on May 25.
Id. at p. 4. Defendants also argue plaintiffs’ attorney’s fees request is
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unreasonable under the lodestar method. (Docket 32). The court agrees with
both these arguments.
Rule 4(d) only requires the court to impose service costs incurred after
defendants failed to waive.
Some plaintiffs may send a notice and request for waiver and,
without waiting for return of the waiver, also proceed with efforts to
effect formal service on the defendant. To discourage this practice,
the cost-shifting provisions . . . are limited to costs of effecting
service incurred after the time expires for the defendant to return
the waiver.
1993 Advisory Committee Notes to Rule 4. This is exactly the situation in the
present case, where plaintiffs request service costs incurred before the
expiration of the time allotted to defendants to return the waiver. Plaintiffs’
waiver request was dated May 25 and allowed 30 days for defendants to return
the waiver, in accordance with Federal Rule of Civil Procedure 4(d)(1)(F).
(Docket 27-5). Therefore, only service costs incurred after June 24, when the
waiver request expired, can be imposed on defendants.
Plaintiffs incurred $677.55 in service costs after June 24. See Docket 27
at p. 4 (listing service costs by date). The court must order defendants to pay
those costs.
Plaintiffs also request $2,420 in attorney’s fees associated with the
motion for service costs. (Docket 31). Plaintiffs state two attorneys, Greg
Hearing and Zachary Weiss, worked on the motion. Id. Mr. Hearing, an
associate attorney, worked on this motion for 5.6 hours at a rate of $300 per
hour, billing $1,680 in total. Id. at ¶ 5. Mr. Weiss, a law clerk, researched the
legal standards for a Rule 4 motion for four hours. Id. at ¶ 6. Mr. Weiss’
billing rate is $185 per hour, for a total bill of $740.
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Defendants assert the amount of time Mr. Hearing and Mr. Weiss spent
on this matter was duplicative and unnecessary. (Docket 32 at pp. 3-4). They
also assert Mr. Hearing’s and Mr. Weiss’ hourly rates are unreasonably high by
South Dakota standards. Id. at p. 3.
The court notes plaintiffs did not support Mr. Hearing’s claimed hours
with client invoices. While plaintiffs’ affidavit asserts Mr. Hearing worked 5.6
hours on the motion, the attached invoices only show 3.6 hours worked.
(Docket 31 at pp. 2, 7). The court accordingly will only calculate the attorney’s
fees for Mr. Hearing for 3.6 hours. Otherwise, the court does not find a total of
7.6 hours spent preparing the briefing for this motion is excessive or
duplicative.
The court finds Mr. Hearing’s and Mr. Weiss’ hourly rates are excessive
in the South Dakota legal community. Plaintiffs did not show they were unable
to find competent local counsel to litigate this matter, so the court need not
evaluate Mr. Hearing’s and Mr. Weiss’ billing rate by the standards of their
home market in Colorado. See Hunt, 272 F.3d at 1048. As noted by
Magistrate Judge Veronica Duffy, “[e]xperienced, partner-level trial counsel in
[western South Dakota] have received awards of attorneys fees ranging from
$200.00 per hour to $225.00 per hour in lawsuits requiring highly specialized
knowledge.” Anspach v. United of Omaha Life Ins. Co., Civ. No. 10-5080, 2011
WL 4832563, at *1 (D.S.D. Oct. 12, 2011). Three hundred dollars per hour for
an associate and $185 per hour for a law clerk is unreasonably high for legal
costs in western South Dakota.
Mr. Hearing is a 2012 law school graduate who practices commercial
litigation. (Docket 31 at ¶ 4). Mr. Weiss is a 2018 law school graduate. Id. at
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¶ 6. The matters presented in this motion are neither excessively fact-intensive
nor legally complex. The court concludes a rate of $150 per hour for Mr.
Hearing and $100 per hour for Mr. Weiss is in line with fees charged by
attorneys with equivalent levels of skill and experience for a relatively simple
dispute. See Black Hills Molding, Inc. v. Brandom Holdings, LLC, CIV. No.
12-5051, 2014 WL 112361 at *5 (D.S.D. Jan. 10, 2014) (approving hourly rate
of $150 for associate attorney).
At a rate of $150 per hour multiplied by 3.6 hours worked on this
motion, Mr. Hearing is entitled to $540 in attorney’s fees. At a rate of $100 per
hour multiplied by 4 hours worked on this case, Mr. Weiss is entitled to $400
in attorney’s fees. The court must order defendants to pay these costs.
ORDER
For the reasons given above, it is
ORDERED that plaintiffs’ motion for attorney’s fees and service costs
(Docket 27) is granted in part and denied in part.
IT IS FURTHER ORDERED that defendants must pay to plaintiffs
$677.55 in service costs and $940 in attorney’s fees. Defendants must pay
these amounts to plaintiffs within 21 days of the date of this order.
Dated September 30, 2019.
BY THE COURT:
/s/ Jeffrey L. Viken
JEFFREY L. VIKEN
CHIEF JUDGE
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