WILLIAM H. ORRICK, United States District Judge.
Having prevailed on its motion for summary judgment, defendant Volcano Corporation is entitled to its reasonable fees and costs pursuant to an attorneys' fees provision in the merger agreement from which the underlying dispute arose. The amount it seeks — $3,557,034.50 in attorneys' fees and $1,023,995.99 in costs and disbursements, totaling $4,581,030.49 — is eye-catching, and the lack of support for such a huge request is surprising. A significant reduction in Volcano's request is warranted due to block-billing, excessive time claimed for specific tasks, and other deficiencies, as detailed below. Volcano is awarded $2,586,963.38 in fees and $937,503.17 in costs and disbursements, totaling $3,524,466.55.
Volcano merged with CardioSpectra, Inc. in 2007 in exchange for $25 million in cash to CardioSpectra's shareholders and the promise to make four additional payments from Volcano to CardioSpectra's then-former shareholders if certain milestones were achieved. Section 13.4 of the merger agreement provided that:
Merger agreement § 13.4 [Dkt. No. 64-19].
Plaintiffs Christopher Banas and Paul Castella, who are former shareholders of CardioSpectra, sued Volcano, alleging that Volcano breached its contractual obligation to use good faith and reasonable commercial efforts to achieve Milestone 2 and that Volcano failed to pay the shareholders after Milestones 3 and 4 were satisfied. See second amended complaint [Dkt. No. 33]. On March 31, 2014, I granted Volcano's motion for summary judgment and denied plaintiffs' motion for summary judgment. Dkt. No. 94.
In determining whether fees are reasonable under Delaware law, courts look to the factors delineated in Rule 1.5(a) of the Delaware Lawyers' Rules of Professional Conduct:
Delaware Lawyers' Rule of Professional Conduct 1.5(a).
"[A] court also should consider whether the number of hours devoted to litigation was excessive, redundant, duplicative or otherwise unnecessary." Mahani v. Edix Media Grp., Inc., 935 A.2d 242, 247-48 (Del.2007) (citation omitted); see also Hensley v. Eckerhart, 461 U.S. 424, 434, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983) ("Counsel for the prevailing party should make a good faith effort to exclude from a fee request hours that are excessive, redundant, or otherwise unnecessary, just as a lawyer in private practice ethically is obligated to exclude such hours from his fee submission.").
Plaintiffs argue that Volcano's motion should be denied for four reasons: (i) the merger agreement limits Volcano's recovery from plaintiffs to an indemnity escrow fund which has already been depleted; (ii) plaintiffs Banas and Castella cannot be personally liable for attorneys' fees because they were parties to the merger agreement only as shareholder representatives, not in their personal capacities; (iii) Volcano's claimed fees are not reasonable; and (iv) Volcano's claimed costs are not recoverable and not reasonable. I address each argument below.
Plaintiffs argue that Volcano's request for fees is moot because the Exclusive Remedy provision in Section 10.9 of the merger agreement governs Volcano's ability to recover from plaintiffs and limits any recovery, including for attorneys' fees, to an escrow fund which has already been depleted. Section 10.9 provides, in relevant part:
Merger Agreement § 10.9 [Dkt. No. 33-1].
Plaintiffs misconstrue Section 10.9. By its own terms, Section 10.9 is limited to situations not present here: claims brought by Parent Indemnitees against the Company Shareholders. The Parent Indemnitees are Volcano and its affiliates. See Merger Agreement at A-13. The Company Shareholders are the former shareholders of CardioSpectra. See Merger Agreement at A-4, A-6. Accordingly, as properly construed, Section 10.9 provides that in the event that Volcano seeks to assert claims against the former shareholders of CardioSpectra, it can only do so pursuant to "the indemnification provisions of this Section 10."
Section 10.9 says nothing about claims CardioSpectra's former shareholders assert against Volcano, which is what happened here: CardioSpectra's former shareholders filed suit against Volcano, alleging that Volcano breached the merger agreement.
Unlike Section 10.9, the attorneys' fees provision in the merger agreement is not limited to indemnification claims or claims by one side against the other. The provision provides:
Merger Agreement § 13.4.
Volcano obtained summary judgment on plaintiffs' claim that Volcano breached the merger agreement — the only claim asserted in the operative complaint. There is no dispute that this was an action "relating to this Agreement or the enforcement of any provision of this Agreement" and that Volcano is the "prevailing party." Accordingly, as the "prevailing party," the merger agreement entitles Volcano is entitled to its "reasonable attorneys' fees, costs and
Plaintiffs Banas and Castella argue that Volcano is estopped from holding them personally or individually liable for attorneys' fees because Volcano previously argued that Banas and Castella were only parties to the merger agreement in their capacities as shareholder representatives, not as individuals, and could only sue in that capacity.
Plaintiffs' argument is unavailing. Banas's and Castella's allegations that they were parties to the merger agreement as shareholder representatives established their standing to sue for breach of contract; it had no bearing on Volcano's right to recover attorneys' fees pursuant to Section 13.4 of the merger agreement as the "prevailing party."
The cases cited by plaintiffs, Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597, 600, 605 (9th Cir.1996) and United States v. Alexander, 106 F.3d 874, 876 (9th Cir.1997), are inapposite and do not support their argument. Risotto stands for the unremarkable proposition that judicial estoppel precludes a party from taking a position inconsistent with that party's earlier position. Rissetto, 94 F.3d at 605. That is not the case here. Volcano's earlier position that Banas and Castella could only assert breach of contract in the capacities in which they were parties to the merger agreement is consistent with Volcano's current position that, as the prevailing party, it is entitled to attorneys' fees from plaintiffs. Alexander explains that "[u]nder the `law of the case' doctrine, a court is generally precluded from reconsidering an issue that has already been decided by the same court, or a higher court in the identical case." 106 F.3d at 876 (citation omitted). The law of the case doctrine has no application here because the Court has not previously addressed plaintiffs' liability for attorneys' fees.
Banas and Castella initiated this action against Volcano seeking millions of dollars. It would be patently unfair to hold that Volcano waived its contractual right to attorneys' fees because it appropriately required Banas and Castella to plead the basis for their standing to assert breach of contract.
Having rejected plaintiffs' two threshold arguments above, there is no question that Volcano is entitled to reasonable fees. But is the $3.5 million in fees Volcano paid to its counsel, Cooley LLP, reasonable?
Plaintiffs contend that I should reduce Volcano's request "by $1,356,613.50 for its excessive charges, vague charges, and then make an additional large cut due to block billing." Dkt. No. 123-3 at 10. Specifically, plaintiffs assert that Volcano failed to establish that its fees are the prevailing rates for similar cases in the Northern District; improperly block-billed its time; provided insufficiently detailed billing records; seeks fees for discrepant time entries; overstaffed and duplicated assignments; seeks excessive fees for travel; billed for administrative, clerical, and paralegal work; billed excessive time for document review; and seeks excessive fees for specific tasks, including the motion to dismiss, motion for summary judgment, and this fees motion; and seeks costs which are not recoverable.
Volcano seeks a staggering amount for a breach of contract case which was resolved at summary judgment. Its documentation of those fees and costs, however, was remarkably deficient. As stated below, I agree with some, but not all, of plaintiffs' criticisms.
Volcano seeks fees for 11 different Cooley timekeepers at hourly rates ranging from $355 to $1,095 per hour for partners and associates, $260 to $325 per hour for an e-discovery staff attorney, and $245 to $290 per hour for paralegals. Lambert decl. ¶ 45, Table 5 [Dkt. No. 108]. Plaintiffs contend that Volcano has failed to provide any competent evidence that these rates are within the prevailing market rates for similar cases in the Northern District. Pltfs.' opp. at 8-10 [Dkt. No. 114].
The rates requested by Volcano, while high, are within the prevailing market rates for similar cases in the Northern District. Volcano submitted the declaration of Chuck Chandler, a partner at Valeo, an international consulting firm. According to Chandler, Valeo maintains the Valeo Attorney Hourly Rates and AFA Database which "identifies rates for attorneys and paralegals at large, middle-market and boutique firms, in over 80 Practice Areas and in over 300 cities." Chandler Decl. ¶ 4 [Dkt. No. 107]. Chandler states that the database "uses actual rates — i.e.,
Along with Cooley's high hourly rates comes an expectation that it will complete tasks efficiently and that its more senior attorneys will limit their involvement to tasks requiring their level of expertise. See, e.g., Hernandez v. Grullense, 2014 WL 1724356, at *11 (N.D.Cal. Apr. 30, 2014) ("The trade-off for the higher billing rate that greater experience and specialized knowledge justifies is that more senior attorneys are expected to delegate routine tasks to others with lower billing rates."). Regrettably, Volcano's motion fails to demonstrate whether it did so in this case.
Plaintiffs contend that "Volcano's time entries are improperly block-billed, and it is therefore impossible to determine the reasonableness of the time spent on each task."
Volcano concedes that its time entries are block-billed. Volcano's counsel, Cooley, states that "[a]s standard practice, attorneys at Cooley LLP block bill their time without specifying the time spent on each task within an entry, unless otherwise requested by a client. Volcano made no such request and paid for block-billed time." Lambert decl. ¶ 2 [Dkt. No. 124-2]. Volcano contends that "[t]he use of block billing, however, is a `typical practice' in the Northern District of California, and supports a fee request where the entries contain `sufficient detail' from which a court can conclude that the total number of hours spent on all tasks was reasonable." Dkt. No. 124 at 1. In support, Volcano cites, Garcia v. Resurgent Capital Servs., L.P., 2012 WL 3778852, at *8 (N.D.Cal. Aug. 30, 2012), in which the Court found that the block-billed entries are issue were "sufficiently detailed to allow the Court to determine the reasonableness of time expended."
If block billing is still a "typical practice" in this District, which I doubt, it flies in the face of repeated criticism by courts throughout the country, including in this
The time entries submitted by Volcano are replete with examples where, because of block-billing, it is impossible to determine whether the time requested for any one task was reasonable.
Similarly, in entry 2071, an associate block-billed 7.7 hours to:
Without specifying how much spent was spent on each distinct task (most of which were also performed on additional days), there is no way for me to determine whether the time spent on any of these tasks — e.g., trial preparation, summary judgment briefing, opposition to sanctions motion, preparations of jury instructions and verdict form — was reasonable. Nor can I determine that the total amount of time spent on all the tasks, in combination, was reasonable, given the amount of time at issue and because most of Volcano's tasks were performed on several days by various attorneys.
In contrast, in the only block-billed entry discussed in Garcia, the plaintiff claimed .4 hours (18 to 24 minutes) for the following work: "REVD signed stip to mediate
Even the summary of Volcano's fees per month, which it submitted in support of its motion for attorneys' fees, is block-billed. See Dkt. No. 108 at 22-25 (Table 6). For example, the summary states that in February 2014, Cooley billed $259,906.50 for the following work:
Dkt. No. 108 at 25. There is no way to determine whether the time claimed for any particular task is reasonable because Volcano did not identify the fees or time associated with these tasks individually. Moreover, each of these tasks was also performed in months other than February 2014, along with other tasks, meaning that I cannot determine whether the total time spent on these tasks combined was reasonable.
Consistent with Cooley's statement that its "standard practice" is to block-bill and that it did not depart from that practice here, essentially all of Cooley's time entries here are block-billed. To the extent that any of Cooley's entries reveal how much time is claimed for any particular task, that is because those entries only include one task; not because Cooley timekeepers specified the amount of time spent on that task.
I am reducing Volcano's bill by 20% for block billing.
I am to going to make a further reduction for excessive billing or inefficiency of 5% because of the matters listed below. See Moreno v. City of Sacramento, 534 F.3d 1106, 1112 (9th Cir.2008) ("the district court can impose a small reduction, no greater than 10 percent — a "haircut" — based on its exercise of discretion and without a more specific explanation"). While block-billing has made it difficult to separate and analyze these problems, they are worth considering separately.
Plaintiffs contend that 124 of Cooley's time entries, totaling $231,498.50, are vague and should be excluded from Volcano's fee award. Plaintiffs discuss two entries specifically. Dkt. No. 123-3 at 3-4. In entry 1268, an attorney billed 4.1 hours (at $710 per hour) for:
In entry 1486, the same attorney billed 4.8 hours for:
Plaintiffs contend that "[t]hese and other descriptions do not recite any specific work performed and therefore cannot provide any basis for judging the reasonableness of the corresponding time." Dkt. No. 133-3.
I agree that these entries and other entries identified by plaintiffs are somewhat vague, rendering it difficult to determine what the timekeeper was actually doing. Cf Santiago v. Equable Ascent Fin., 2013 WL 3498079, at *6 (N.D.Cal. July 12, 2013) ("the work billed for unnamed drafts and telephone calls with unknown parties is too vague to be reviewed"). I disagree, however, that the entries are so vague that the fees should be rejected entirely. Rather, the vagueness of Cooley's entries, in combination with other deficiencies discussed above and throughout this order, demonstrates both the appropriateness of the 20% block-billing reduction and the modest further 5% reduction for other billing deficiencies.
Plaintiffs also contend that Volcano entries are vague because "Volcano's timekeepers repeatedly claim large amounts of hours reviewing documents but do not list the number of documents" and because "Volcano timekeepers also frequently used nearly identical time entries for different days of work, thereby making it impossible to know the true extent of the work done and whether the differing time for each day is reasonable." Dkt. No. 133-3 at 4. I reject both criticisms. Plaintiffs have not cited any authority providing that timekeepers are required to identify how many documents they have reviewed in each entry, or that timekeepers may not use similar phrases to describe similar work performed on different days. Indeed, in a case of this size, where timekeepers will necessarily spend several days on similar tasks, such as reviewing documents, concocting different ways to describe the same task would serve no purpose other than misleading the client or the Court. Absent some identifiable reason to question the amount of time spent on a given task, I cannot conclude that
Plaintiffs contend that Volcano seeks excessive attorneys' fees for routine tasks, such as updating a list of deponents, and for administrative, clerical, and paralegal work, including preparing binders, exhibits, and courtesy copies of pleadings. Pltfs.' obj. at 7. Plaintiffs have identified 78 time entries, totaling $175,413, which they assert relate to such "improperly delegated" tasks. Pltfs.' obj. Ex. 1 at 10-11 [Dkt. No. 123-7]. I have reviewed each of those entries. Only one entry should be discounted in its entirety: in entry 571, Volcano seeks $1,419 in fees for 2.2 hours (at $645 per hour) which a senior associate spent to "prepare review binders for distribution to contract attorney team." Preparing binders for distribution is not a reasonable use of a senior associate's time, particularly not at $645 an hour. $1,419 will be reduced from the award as part of the 5% overall reduction.
The remaining time entries describe tasks which are appropriately performed by attorneys, including reviewing regulatory filings, developing and revising document review protocols, reviewing documents for privilege and quality control, responding to questions from contract review attorneys, reviewing the opposing expert's report, and outlining and drafting briefs. However, the entries at issue reflect the same overstaffing and excessive time expenditure noted throughout this opinion, further validating that a modest across-the-board 5% reduction is warranted.
Plaintiffs contend that Volcano seeks excessive fees for document review. Plaintiffs do not take issue with the $282,997 in fees Volcano seeks for 15 contract attorneys who spent 5,682.2 hours reviewing documents at $47 and $59 per hour. Rather, plaintiffs dispute the separate fees Volcano requests for Cooley's attorneys, at much higher rates, to review documents which Volcano did not collect and produce initially. Plaintiffs have identified 103 time entries, totaling $248,917.50, which, they contend, reflect excessive fees for document review by Cooley attorneys. See Dkt. No. 123-7 at 12-14 (listing entries for "excessive document review").
I have reviewed the entries in detail. Most of the entries reflect document review performed by Cooley's first-year associates or quality control or limited high-level review by more senior attorneys to ensure the integrity of the first-level review. That is not excessive. While Volcano appropriately elected to use contract attorneys for most of the review, resulting in fees hundreds of thousands of dollars less than if the review had been conducted entirely by Cooley attorneys, it was not inappropriate for Volcano to use first-year Cooley attorneys for additional review and more senior Cooley attorneys to perform quality assurance and limited high-level review.
However, a handful of the entries identified by plaintiffs reveal excessive time by senior Cooley attorneys performing first-level reviews. Volcano asserts that some of these entries reflect reviews before Volcano retained contract attorneys to perform the review. That may be true, but it was excessive for a senior attorney, at an hourly rate in excess of $600 an hour, to perform the first-level review.
Plaintiffs assert that they have identified 11 "discrepant time entries," totaling $22,431.00, for which Volcano should not be awarded fees. Plaintiffs state that "for example, Ms. Main's July 30, 2013, entry claims that she conferred with Mr. Lambert `re: upcoming depositions and preparation of J. Sheridan,' but Mr. Lambert's time entry contains no such conference." Dkt. No. 123-3 at 5.
As Volcano points out, Mr. Lambert's entry for the same day includes "discussions with client re: strategy and discovery planning." Ms. Main's and Mr. Lambert's entries are accordingly not inconsistent as they both relate to preparing the client for deposition. I find that the ten other time entries at issue, which plaintiffs do not discuss, are likewise not "discrepant."
Plaintiffs contend that Volcano unreasonably seeks fees for two attorneys with high billing rates to attend or prepare witnesses for the same depositions when only one attorney was actually deposing or defending the witness. Specifically, plaintiffs object to the time Mr. Lambert and Ms. Main both spent preparing Volcano's expert witness on December 16, 2013 at a combined rate of $1,295 (entries 1932 and 1935); the time Mr. Lambert and Mr. Rhodes both claim for attending plaintiff Castella's deposition (entries 1478-79); and the time Mr. Rhodes and Ms. Main both claim for attending plaintiff Banas's deposition (entries 1490 and 1496).
Volcano responds that two attorneys billed time for only 5 of the 27 depositions conducted in this action and that, in those five depositions, it was reasonable for both attorneys to bill because the non-deposing attorney either assisted in the deposition of key witnesses or attended for the purpose of preparing for another deposition occurring only a day or two later. Volcano also asserts that in all but one instance the additional attorney worked on other tasks during the deposition. Volcanoresp. re obj. at 7 [Dkt. No. 124].
I disagree with plaintiffs that it is necessarily unreasonable for two attorneys to prepare for the same deposition. In large cases such as this, it is often the case that one person cannot have a complete command of all relevant facts or areas on which a witness may testify. It may therefore be necessary for several attorneys to prepare for a deposition or prepare a witness. While it is usually unreasonable for two attorneys to bill to attend the same deposition, Volcano only did so in fewer than 20% of the depositions here and I accept its reasons for doing so.
For the same reasons, Volcano's request for travel time for multiple attorneys to attend depositions, hearings, and the mediation and for attorneys to travel out of state to train contract attorneys is not excessive. I have explained why the travel to depositions was not excessive.
It was reasonable for Volcano to bill for two attorneys to attend the mediation. In a case of this type, it may make sense to have two attorneys, even two senior attorneys, attend a mediation, which presents the best opportunity for an early resolution of the matter. Nor was it unreasonable for Volcano to bill for one attorney to travel to train the 15 contract attorneys in person. As discussed below, using contract attorneys to review the bulk of documents collected and produced in this action, rather than Cooley attorneys, resulted in fees millions of dollars less than if the review had been conducted
Plaintiffs assert that Volcano's fee award should be reduced by $204,725.50 to account for excessive time spent on Volcano's motion to dismiss, motion for extension of time, mediation brief, motion for summary judgment, and fees motion. For the reasons stated below, I agree that Volcano seeks excessive fees for specific tasks, though not to the extent that plaintiffs argue. Volcano's requests are most excessive in connection with its motion for summary judgment, motion for extension of time, and motion for attorneys' fees. I have considerably reduced Volcano fees for those tasks, as discussed below. The fees Volcano requests for its motion to dismiss and mediation brief are less excessive, and do not warrant any additional reduction beyond the across-the-board reductions.
Plaintiffs assert that Volcano seeks excessive fees for its summary judgment briefing. I agree. As noted, Volcano's block-billing makes it impossible to determine precisely the fees claimed for specific tasks, including the summary judgment briefing. I have therefore reviewed Volcano's time entries in detail in order to estimate, as accurately as possible in light of the block-billing, the fees and time Volcano claims in connection with its summary judgment briefing. I have conservatively identified approximately 150 separate time entries related to Volcano's opening and reply summary judgment briefs. Based on my review, for its moving summary judgment brief, Volcano's attorneys billed approximately 400 hours from mid-December 2013 to mid-late January 2014, totaling approximately $220,000.
Volcano responds that it does not seek excessive fees in connection with its summary judgment briefing and that "given the successful result Volcano obtained against Plaintiffs, Volcano's efforts were plainly reasonable." Volcanoresp. re obj. at 14.
I disagree that Volcano's fees are presumptively reasonable solely because it prevailed. Santiago v. Equable Ascent Fin., 2013 WL 3498079 (N.D.Cal. July 12, 2013), which Volcano cites, is inapposite. The disputed entries at issue there "mostly consist[ed] of tasks lasting less than 2 hours" and the Court emphasized the "relatively small amount of contested time." Id. at *5. In contrast, 100s of hours of fees are at issue here. Moreover, Santiago relied on Moreno v. City of Sacramento, 534 F.3d 1106, 1112 (9th Cir.2008), for the proposition that "the court should defer to the winning lawyer's professional judgment as to how much time he was required to spend on the case; after all, he won, and might not have, had he been more of a slacker." Santiago, 2013 WL 3498079, at *5 (citing Moreno, 534 F.3d at 1112). But Moreno involved attorneys working on contingency fee cases where the "payoff" is uncertain; not lawyers billing their clients by the hour whether they win or lose, as is the case here. See Moreno, 534 F.3d at 1112 ("It must also be
There is no question that Volcano's summary judgment briefing was of high quality and successfully resolved this matter. But it is beyond me how Volcano's counsel billed approximately 400 attorney hours ($220,000) for the opening brief and 220 attorney hours ($130,000) for the reply brief. While this was not a routine matter, neither was it exceptionally complex, legally or factually. Only one cause of action, breach of contract, was at issue. Volcano capably, and successfully, addressed it within the presumptive page limits.
Volcano's block-billing and many vague entries make it challenging to pin-point specific sources of excessive time. Nonetheless, reviewing the time entries in detail reveals inefficiencies. As one example only, Volcano seeks fees for three different attorneys to "research," "review," or "analyze" case law regarding contracts on 19 different occasions in less than one month, from mid-December to mid-January, in connection with the opening summary judgment brief. See time entries at 96-101. Contract interpretation was certainly central to this motion, but the legal issues were not so complex that they required research by three different attorneys on 19 different occasions. On the contrary, the legal issues consisted largely of black-letter legal principles.
Plaintiffs contend that one Cooley attorney "unreasonably billed 5 hours [at $550 per hour] to research and draft a motion for extension of time." Pltfs.' obj.
Volcano seeks fees for approximately 225 attorney hours for preparing its fees motion, totaling approximately $135,000. This comprises approximately 115 attorney hours in connection with the opening brief and approximately 110 attorney hours for the reply brief.
There is no dispute that Volcano is the prevailing party and is entitled to attorneys' fees. Plaintiffs' arguments that attorneys' fees are not warranted due to estoppel and the indemnification provision, addressed above, were first raised in plaintiffs' opposition brief, and therefore were not addressed in Volcano's opening brief. The issues addressed in Volcano's opening brief were accordingly not particularly complicated and Volcano appropriately dedicated the bulk of the brief to the reasonableness of the requested fees, rather than legal issues. See Dkt. No. 106. Consistent with the straight-forward issues presented, the memorandum of points and authorities in the opening brief was only 12 pages. Volcano nonetheless seeks fees for approximately 115 attorney hours in connection with the brief. That is excessive, even considering preparation of the two attorney declarations Volcano submitted in support of its opening brief.
In contrast to Volcano's opening brief, in its reply brief, Volcano was required to respond to novel legal arguments raised in plaintiffs' opposition.
Plaintiffs assert that Volcano seeks excessive fees in connection with the motion to dismiss and that "Volcano unreasonably prepared a lengthy mediation brief that contained hundreds of pages of exhibits [and] Volcano has not justified this time." Pltfs.' obj. at 8-9. Based on my detailed review of Volcano's time entries, I agree that Volcano seeks excessive time in connection with its motion to dismiss and mediation brief. However, Volcano's requests are not as excessive as those discussed above and may be addressed through the across-the board cuts described above.
For the reasons stated above, I make the following deductions to the attorneys' fees requested by Volcano:
REQUESTED REDUCTION AWARDED Motion for attorneys' fees $135,000.00 $50,000.00 $85,000.00 Motion for summary judgment $350,000.00 $150,000.00 $200,000.00 Motion for extension of time $2,750.00 $2,750.00 $0.00 Remaining fees $3,069,284.50 $767,321.1327 $2,301,963.38TOTALS $3,557,034.50 $970,071.13 $2,586,963.38
Plaintiffs argue that the costs Volcano seeks, including expert, vendor, contract attorney, and "standard" (i.e., filing and service fees, research, photocopying, transcript) costs, are not recoverable under either Delaware or federal law. Plaintiffs also argue that even if some of the costs are recoverable, Volcano did not provide sufficient detail to allow me to determine that the costs were reasonable.
The categories of costs which Volcano seeks to recover are recoverable as "costs" or "disbursements" pursuant to the attorneys' fees provision in the merger agreement. However, Volcano's submission lacks sufficient detail to establish the reasonableness of the costs. A modest reduction is therefore warranted.
The attorneys' fees provision in the merger agreement provides that:
Merger agreement § 13.4. The merger agreement also specifies that it shall be "construed in accordance with, and governed in all respects by, the internal laws of the State of Delaware." Merger Agreement § 13.9(a). Accordingly, the question is whether, under Delaware law, Volcano's "reasonable attorneys' fees, costs and disbursements" include the costs at issue here. I conclude that they do.
Plaintiffs cite Comrie v. Enterasys Networks, Inc., 2004 WL 936505, at *4 (Del. Ch. Apr. 27, 2004). There the court held that "costs" in a contractual fee-shifting provision should be interpreted consistently with how courts have interpreted "costs" under Court of Chancery Rule 54(d), which governs taxable costs. Delaware courts have interpreted "costs" under Rule 54 as excluding certain items, such as photocopying, transcripts, travel expenses, and computer research, express mail, and
But Comrie noted that "Delaware courts have, however, recognized that the scope of `costs' to be allowed may be expanded by agreement of the parties .... to include elements of litigation expenses beyond those allowed by rule." Comrie, 2004 WL 936505, at *4. The court concluded that the parties before it had not agreed to expand the scope of "costs" because the provision at issue merely provided that "the prevailing party shall be entitled to recover its costs, including reasonable attorneys' fees." However, the court observed that it would be a different case if, for example, in addition to "costs," the fee-shifting provision included the "legally recognized broader term `expenses.'" Id.
Unlike Comrie,the fee-shifting provision here is not limited to "fees" and "costs"; it includes the broader term "disbursements." The merger agreement does not define "disbursement." The Oxford English Dictionary defines it as "[t]hat which has been disbursed; money paid out; expenditure."
There is little question that the costs which plaintiffs challenge — including expert, vendor, contract attorney, and "standard" (i.e., filing and service fees, research, photocopying, transcript) costs — are costs, expenses, or "disbursements" arising from this action. The question remains whether those expenses were reasonable.
Volcano seeks the following costs and disbursements:
DESCRIPTION AMOUNT The Oliver Group $19,544.45 TransPerfect Legal Solutions $203,631.28 Legalpeople (contract attorneys) $282,997.00 Travel (airfare, ground transportation, parking) $34,178.88 Depositions (court reporting, videotape service, witness fees) $63,823.13 Expert Services $298,400.36 JAMS Fee (mediation) $6,275.00 Court Fees (call fees, filing fees, transcript charges) $890.05 Printing, copying, and scanning services $56,492.39 Data Hosting Fee $21,790.00 Research Fees $30,306.55 Federal Express $3,716.17 Messenger Service $1,108.91 Postage $21.06 Telephone $820.76TOTAL $1,023,995.99
Lambert Decl. ¶ 52, Table 10.
Plaintiffs contest the $298,400.36 in "expert services" on the grounds that "Volcano provided no documentation from its experts as to what they did, for how long, and at what rate." Dkt. No. 114 at 14. Volcano responds that the reasonableness of the expert costs are adequately described in paragraphs 30 to 34 of the Lambert declaration.
The merger agreement only entitles Volcano to reasonable costs and disbursements. Volcano has the burden of establishing that the $298,400.36 it seeks for "expert services" are reasonable. While the Lambert declaration describes the topics on which Volcano's two experts provided reports and how many total hours and fees they claim ($46,815 for a "regulatory" expert, $62,475 for an "economic value" expert, and $189,110.36 for unnamed researchers to assist the "economic value" expert)
Plaintiffs contend that Volcano did not provide sufficient details to allow the Court to determine what work TransPerfect ($203,631.28) or The Oliver Group ($19,544.45) performed in this case or whether it was reasonable. But unlike with "expert services," Volcano has detailed the electronic information data services performed by TransPerfect and The Oliver Group and provided tables breaking those costs into discrete tasks. See Lambert decl. ¶¶ 10-11, Tables 1 and 2. Given the volume of electronic data involved in this case, those costs are reasonable.
Plaintiffs contend that Volcano "provides no breakdown" of the requested $56,492.39 in "printing, copying, and scanning services" and does not "explain its need to print or copy so many documents when it had access to these documents in electronic form." Volcano does not respond to this contention in its reply and, as plaintiffs note, it did not specify what these costs were or provide invoices with its moving papers. Given the lack of detail, I can only conclude that $56,492.39 for "printing, copying, and scanning services" is excessive. I deduct 50% ($28, 246.20) of these costs.
Volcano seeks $63,823.13 for "depositions (court reporting, videotape service, witness fees)." Plaintiffs assert that these costs are not detailed and, in addition, they include "items of convenience — such as using LiveNote (real time transcripts) at depositions or expedited transcripts — and should be excluded." Dkt. No. 114 at 14-15.
Plaintiffs assert that Volcano cannot recover the $282,997 it seeks for contract attorneys because Volcano characterizes that expense as "costs," but a party may not recover attorney's fees as "costs." I reject this argument. Whether characterized as "fees," costs," or "disbursements," the document review performed by the contract attorneys was necessary to this action and, given the low hourly-rates charged by the contract attorneys ($47 to $59 per hour), the amount is reasonable.
Plaintiffs contend that Volcano's costs for travel ($34,178.88), court fees ($890.05), Federal Express ($3,716.17), messenger service ($1,108.91), postage ($21.06), telephone ($820.76), mediation fee ($6,275.00), and research fees ($30,306.55) should be excluded because these costs are not recoverable or are insufficiently detailed. All of these services are recoverable as "costs" or "disbursements" pursuant to the merger agreement. But since Volcano has not provided any documentation, I cannot determine whether the specific amounts sought are reasonable. Accordingly, aside from the mediation fee, a 10% reduction is warranted, totaling $7,104.24.
For the reasons stated above, I make the following deductions to the costs and disbursements requested by Volcano:
DESCRIPTION REQUESTED REDUCTION AWARDED The Oliver Group $19,544.45 $0.00 $19,544.45 TransPerfect Legal Solutions $203,631.28 $0.00 $203,631.28 Legalpeople (contract attorneys) $282,997.00 $0.00 $282,997.00 Travel (airfare, ground transportation, parking) $34,178.88 $3,417.89 $30,760.99 Depositions (court reporting, videotape service, witness fees) $63,823.13 $6,382.31 $57,440.82 Expert Services $298,400.36 $44,760.05 $253,640.31 JAMS Fee (mediation) $6,275.00 $0.00 $6,275.00 Court Fees (call fees, filing fees, transcript charges) $890.05 $89.01 $801.04 Printing, copying, and scanning services $56,492.39 $28,246.20 $28,246.19 Data Hosting Fee $21,790.00 $0.00 $21,790.00 Research Fees $30,306.55 $3,030.66 $27,275.89 Federal Express $3,716.17 $371.62 $3,344.55 Messenger Service $1,108.91 $110.89 $998.02 Postage $21.06 $2.11 $18.95 Telephone $820.76 $82.08 $738.68TOTALS $1,023,995.99 $86,492.82 $937,503.17
Volcano's motion for attorneys' fees and costs is GRANTED IN PART and DENIED IN PART. Dkt. No. 106. Volcano is awarded $2,586,963.38 in fees and $937,503.17 in costs and disbursements, totaling $3,524,466.55.
Dkt. No. 65 at 12-13. None of these legal principles is novel or was in dispute.
