JAMES J. BRADY, District Judge.
These matters are before the Court on two motions. The first is a Motion (doc. 161) for an Award of Attorneys' Fees brought by Louisiana Generating LLC and NRG Energy, Inc. (collectively referred to herein as "LaGen"). Illinois Union Insurance Company ("ILU") has filed an opposition (doc. 183). Several replies have been filed by both parties. The second is a Motion (doc. 175) for Summary Judgment on Defense Cost Damages brought by LaGen. ILU has filed an opposition (doc. 192). Several supplemental briefs and replies have been filed by both parties. LaGen has submitted unredacted copies of attorney invoices to the Court for in camera review. This Court has jurisdiction pursuant to 28 U.S.C. § 1332. For the reasons stated herein, LaGen's motions (docs. 161 & 175) are GRANTED.
The crux of this highly contentious dispute is ILU's obligation to defend LaGen pursuant to a Premises Pollution Liability II Insurance Policy (the "Policy") issued by ILU. The underlying suit, instituted by the Environmental Protection Agency ("EPA") and later joined by the Louisiana Department of Environmental Quality ("LDEQ"), involved allegations that LaGen had performed work on its coal-fired electric steam generating plant that increased certain emissions. It was alleged that this work was done without the requisite permit in violation of the Clean Air Act. Once faced with legal action from both the EPA and LDEQ, LaGen sought the benefit of the ILU issued Policy to defend against the claim. ILU denied coverage and LaGen was forced to pay for its defense costs out of pocket.
LaGen challenged ILU's denial of coverage through a series of letters exchanged between the parties. Additionally, the parties met to discuss the coverage dispute. However, while negotiations were seemingly ongoing, ILU filed a declaratory judgment action in the United States District Court for the Southern District of New York seeking a declaration that it had no obligation to cover the defense costs incurred by LaGen during the underlying action. Believing that venue was improper in the Southern District of New York, LaGen filed a declaratory judgment in this Court seeking a declaration that ILU had a duty to defend arising under the Policy. Concomitantly, LaGen filed a motion to dismiss in the Southern District of New York, or in the alternative, a motion to transfer the case to the Middle District of Louisiana. After reviewing the motions, including one concerning the propriety of venue in the Southern District of New York, that court granted LaGen's motion to transfer and the declaratory action was transferred to this Court where the underlying action was also being adjudicated. Once transferred, both LaGen and ILU moved to have both LaGen's and ILU's filed declaratory actions consolidated, which the Court subsequently did.
After the Court decided to bifurcate the trial into a duty to defend phase and an indemnity phase, both LaGen and ILU filed cross-motions for summary judgment to resolve the duty to defend issue. After reviewing the briefs, the Court granted LaGen's motion and denied ILU's holding that the Policy imposed a duty upon ILU to defend LaGen in the underlying suit. Ruling, Doc. 111, at 8. After the Court's ruling, LaGen moved to recoup attorneys' fees incurred during the litigation to obtain a ruling on the duty to defend. (Doc. 113). ILU moved to stay consideration of this motion until its motion for a new trial, or in the alternative, for certification for immediate appeal of the Court's duty to defend ruling was determined. (Doc. 124). The Court treated ILU's motion as one for reconsideration and denied it, but certified its ruling for immediate appeal. The Court also dismissed LaGen's motion for attorneys' fees without prejudice pending the Fifth Circuit's resolution of the appeal. Subsequently, the Fifth Circuit affirmed this Court's ruling confirming that ILU had a duty to defend in the underlying action and refused ILU's later petition for a rehearing. The case was remanded to this Court where it currently stands.
Now, LaGen seeks recovery of two types of fees: (1) the attorneys' fees associated with resolving the issue of ILU's duty to defend; and (2) the defense costs incurred during the litigation of the underlying action. As to the first type of fees, LaGen argues that it is entitled to attorneys' fees because it was placed in a defensive position once ILU filed its declaratory judgment in a New York federal court. LaGen argues that this result is mandated under applicable New York state law precedent which also holds that LaGen's submitted attorneys' fees are entitled to the presumption of reasonableness. LaGen further argues that New York state law provides that it is entitled to prejudgment interest. While ILU does not contest the general rule upon which LaGen relies, ILU does contest LaGen's assertion that it was placed in a defensive position, arguing instead that it was ILU that was placed in a defensive position when LaGen filed and served ILU its petition from this Court. ILU further argues that LaGen's fees are not entitled to a presumption of reasonableness and asserts that a reasonableness analysis must be conducted by looking at the reasonable rates of attorneys in the local forum.
Concerning the second type of fees, LaGen argues that it is entitled to the defense costs incurred during the underlying action as provided for under the Policy. It again avers that its fees are entitled to the presumption of reasonableness and that it is entitled to prejudgment interest. Alternatively, and in the event the Court finds that its fees are not entitled to a presumption of reasonableness, LaGen argues that its fees were justified given the complexity of the issues involved, the potential liability, and the obtained results. In response, ILU argues that LaGen's rates are unreasonable because they are inconsistent with reasonable rates in the local forum. Additionally, ILU requests additional time to allow a third-party consultant to review LaGen's submitted invoices and conduct a reasonableness analysis.
Under New York law,
ILU argues that LaGen was not placed in a defensive posture because though ILU filed suit in New York, it did not effectuate service of process, and therefore, the institution of the suit was not complete. The argument continues that LaGen acted affirmatively when it filed suit in this Court, forcing ILU to be a party to the declaratory suit. ILU's argument is unpersuasive and ILU has failed to provide any case law to support its asserted distinction between filing and serving suit. To the contrary, courts look beyond mechanical formulations like the one upon which ILU would like this Court to rely. Danaher Corp. v. Travelers Indem. Co., No. 10 Civ. 0121(JPO)(JCF), 2013 WL 364734, *3 (S.D.N.Y. Jan. 31, 2013) ("[C]ourts have made clear that in certain cases the rule need not be quite so mechanically applied."). Moreover, courts have interpreted the actions constituting "legal steps" to free itself from its obligations broadly and found that filing suit is sufficient to cast an insured in a defensive posture. See Specialty Nat. Ins. Co. v. English Bros. Funeral Home, 606 F.Supp.2d 466, 473 (S.D.N.Y. 2009) (finding that "by taking steps—that is, filing this action," the insurer had placed the insured in a defensive posture); American Motorists Ins. Co. v. GTE Corp., Nos. 99CV512 (RCC), 99CV2214 (RCC), 2000 WL 1459813 (S.D.N.Y. Sept. 29, 2000) (finding that the insured was entitled to attorneys' fees despite filing suit because the insured's case was in direct response to the insurer's attempt to avoid its obligations under the policy); City of New York v. Zurich-American Ins. Group, 811 N.Y.S.2d 773, 775 (N.Y. App. Div. 2006) (concluding that the insurer casted the insured in a defensive position when it filed motions after the trial court granted the insured's motion for summary judgment). In the present matter, the Court finds that LaGen was cast in a defensive posture when ILU filed suit in the Southern District of New York. Furthermore, by filing suit in this Court, LaGen was acting in direct response to the affirmative action taken by ILU when it filed suit. Accordingly, LaGen is entitled to receive its reasonable attorneys' fees. The issue the Court must now determine is whether the fees sought by LaGen are reasonable.
In its motion, LaGen seeks $2,403,286.39
"[T]he fee applicant bears the burden of establishing entitlement to an award and documenting the appropriate hours expended and hourly rates." Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). "The fee applicant has the burden of presenting adequate documentation of the hours reasonably expended." League of United Latin American Citizens No. 4552 v. Roscoe Independent School District, 119 F.3d 1228, 1233 (5th Cir. 1997). "[T]he burden of proof of reasonableness of the number of hours is on the fee applicant, and not on the opposing party to prove their unreasonableness." Leroy v. City of Houston (Leroy I), 831 F.2d 576, 586 (5th Cir. 1987). "The applicant should exercise "billing judgment" with respect to hours worked, and should maintain billing time records in a manner that will enable a reviewing court to identify distinct claims." Hensley, 461 U.S. at 437. "If the applicant's documentation of the hours claimed is vague or incomplete, the district court may reduce or eliminate those hours. Id. Hourly records are not too vague if they contain the date, the number of hours spent (calculated to a tenth of an hour), and a short but thorough description of the services rendered by each attorney.
The Second Circuit has recently outlined a simplified analytical rubric by which to evaluate the reasonableness of attorney's fees. In Arbor Hills Concerned Citizens Neighborhood Ass'n v. County of Albany and Albany County Bd. of Elections, 493 F.3d 110 (2d Cir. 2007) amended on other grounds by 522 F.3d 170 (2d. Cir. 2008), the court abandoned the "lodestar" method in favor of a "presumptively reasonable fee" in which a court is advised to consider "all of the case-specific variables that [the Second Circuit] and other courts have identified as relevant to the reasonableness of attorney's fees in setting a reasonable hourly rate." 493 F.3d at 117-18.
In Simmons v. New York City Transit Authority, 575 F.3d 170 (2d Cir. 2009), the court had occasion to specifically address the parameters of the forum rule. In Simmons, the court established a rebuttable presumption in favor of applying the forum rule. Id. at 175. The court provided that,
Id. at 175-76 (citations omitted).
Read together, the cases set forth a three-step analysis. First, a district court must determine whether it should apply an in-district or out-of-district hourly rate in accordance with the guidance set forth in Simmons. GuideOne Specialty Mutual Ins. Co. v. Congregation Adas Yereim et al, No. 1:04-cv-5300 (ENV)(JO), 2009 WL 3241757, *1 (Sept. 30, 2009). Second, the district court must decide if the applicable rate is presumptively reasonable in light of casespecific variables. Id. Third, the court must use the reasonable hourly rate to calculate the reasonable fee by multiplying the reasonable rate by the hours reasonably expended on the litigation. Id.
In this case, LaGen asks the Court to apply the out-of-district rate of their counsel Dickstein Shapiro LLP, a law firm located in Washington D.C. with another office located in New York City.
Turning next to the second step of the presumptively reasonable fee analysis, district courts must determine if the charged hourly rate is reasonable. "The reasonable hourly rate is the rate a paying client would be willing to pay." Arbor Hill, 493 F.3d at 117. The reasonable hourly rate is set by evaluating case-specific variables like those presented by the factors outlined in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974). Id. The Johnson factors are:
Johnson, 488 F.2d at 717-19. When determining the appropriate hourly rate, a district court should take "judicial notice of the rates awarded in prior cases and the court's own familiarity with the rates prevailing in the district." Farbotko v. Clinton Cnty of N.Y., 433 F.3d 204, 209 (2d Cir. 2005).
ILU argues that the fees charged by Dickstein Shapiro are unreasonably high, specifically honing in on Heintz's hourly rate of $1,000. After reviewing the documents provided by LaGen, including copies of the unredacted invoices, the Court concludes that the hourly rates of (1) Heintz for $,1000; (2) Kanemitsu for $630; and (3) the various associates for between $290-490 are reasonable.
Specifically addressing Heintz's hourly rate of $1,000, while without context, this hourly rate may seem high, Heintz's decades worth of experience, honed expertise, and the complex nature of the issues involved justify such an hourly rate. Moreover, such a rate is not so uncommon among those with similar credentials, experience, and expertise. See LaGen Reply Brief, Doc. 196, at 18-19 (citing Nathan Koppel, Lawyers Gear Up Grand New Fees, WALL STREET JOURNAL, Aug. 22, 2007, http://online.wsj.com/news/articles/SB118775188828405048) (discussing Barry Ostager, an attorney known for representing insurers in coverage disputes, and his hourly rate of $1,000); see also Koppel, supra (explaining the growing trend of law firm partners with special expertise billing an hourly rate of $1,000 at the nation's top firms). Finally, it is important to bear in mind that Heintz's rate, as well as those of all Dickstein Shapiro attorneys working on this matter, were subject to a negotiated 10% discount.
Lastly, the Court must determine if the hours expended during the litigation of ILU's duty to defend were reasonable. The Court concludes that such hours were reasonable. The Court is very familiar with the litigation process involved in the coverage action. There was extensive motion practice at various stages of the litigation including battles over the proper venue and jurisdiction, which involved an appeal to the Second Circuit; a battle on the merits of the declaratory judgment before this Court; and an appeal of this Court's decision to the Fifth Circuit. Therefore, after reviewing the unredacted invoices and in reliance upon the Court's intimate knowledge of the litigation process, the Court finds that the hours expended were reasonable.
ILU makes several objections to the fees submitted by LaGen. First, ILU argues that LaGen and its counsel are seeking to impose what amounts to a premium on ILU for amounts that LaGen would not actually have to pay. ILU also challenges the use of vague and blockbilled entries. Finally, ILU objects to the inclusion of several allegedly improper charges. In response, LaGen asserts that the fee that ILU refers to as a premium is not a discretionary fee but rather a fee that LaGen committed to pay Dickstein Shapiro for services rendered. LaGen argues that ILU's objection on the basis of block-billing is meritless given that attorneys' fees are authorized as consequential damages of ILU's breach of contract and not by a statutory fee shifting scheme. LaGen asserts that in any event, there is nothing improper about the use of block-billing. Finally, LaGen provides justification for each of the allegedly improper charges.
Addressing the alleged premium being imposed on ILU, the Court finds that ILU's argument is based upon a misreading of the Retention Agreement. (Doc. 161-5, Exh. C. at 3-4). The Retention Agreement provides that LaGen must pay Dickstein Shapiro both a 20% holdback fee and a "success fee" equal to the 20% holdback fee in the event that Dickstein Shapiro's representation resulted in a favorable judgment on the duty to defend issue. Since Dickstein Shapiro did deliver such a judgment, see Louisiana Generating LLC v. Illinois Union Ins. Co., 719 F.3d 328 (5th Cir. 2013), Dickstein Shapiro is entitled to, and LaGen is required to pay, both the holdback fee and the "success fee." Furthermore, for the reasons asserted by LaGen in its brief, the Court finds that ILU's objection to the use of blocked-billing is without merit. (Doc. 207). Finally, after reviewing the unredacted invoices, the Court finds that invoice entries are not vague.
Turning its attention to ILU's remaining objections, the Court now addresses the allegedly improper charges. ILU argues that the following charges are improper: (1) charges for online legal research; (2) fees incurred during the filing of Cajun Electric's bankruptcy proceeding; (3) fees paid to Wendy Decker, a former LaGen employee hired in this matter as an independent contractor to compile and review discovery documents; and (4) fees paid to paralegals. Additionally, ILU alleges that there are issues with discounted rates negotiated by LaGen and requests further time for discovery.
Addressing those objections seriatim, the Court finds that the issue of charges for online legal research has been mooted by the fact that LaGen deducted these charges from the relevant invoice. See Declaration of Marla Kanemitsu, Doc. 181, Ex. 2, Invoice No. 2287227. The Court further finds that the filings made concerning the bankruptcy proceedings of Cajun Electric went part and parcel with the underlying action as those filings were a defensive measure taken to help LaGen avoid liability in the underlying action. Additionally, the Court agrees with LaGen's contention that the hiring of Wendy Decker was not done in order to circumvent the policy against paying fees to salaried employees for work within their scope of employment given that 10 years had elapsed since the work at issue was performed. Instead, Wendy Decker was hired because she possessed a special knowledge of the documents needed during discovery that no other current employee possessed. Finally, the Court finds that the fees paid to paralegals are reimbursable. See GuideOne Specialty Mut. Ins. Co., 2009 WL 3241757 at *5.
Accordingly and for the reasons stated herein, the Court GRANTS LaGen's motion for attorneys' fees, costs, and prejudgment interest. LaGen is entitled to the fees incurred in the amount of $2,403,286.39 plus interest.
LaGen seeks $7,652,367.31
Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact." FED. R. CIV. P. 56(a). The party seeking summary judgment carries the burden of demonstrating that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). When the burden at trial rests on the non-moving party, the moving party need only demonstrate that the record lacks sufficient evidentiary support for the non-moving party's case. Id. The moving party may do this by showing that the evidence is insufficient to prove the existence of one or more essential elements of the non-moving party's case. Id. A party must support its summary judgment position by "citing to particular parts of materials in the record" or "showing that the materials cited do not establish the absence or presence of a genuine dispute." FED. R. CIV. P. 56(c)(1).
Although the Court considers evidence in a light most favorable to the non-moving party, the non-moving party must show that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). Conclusory allegations and unsubstantiated assertions will not satisfy the non-moving party's burden. Grimes v. Tex. Dep't of Mental Health, 102 F.3d 137, 139-40 (5th Cir. 1996). Similarly, "[u]nsworn pleadings, memoranda or the like are not, of course, competent summary judgment evidence." Larry v. White, 929 F.2d 206, 211 n.12 (5th Cir. 1991). If, once the non-moving party has been given the opportunity to raise a genuine fact issue, no reasonable juror could find for the non-moving party, summary judgment will be granted for the moving party. Celotex, 477 U.S. at 322-23.
As previously mentioned, it is undisputed that ILU owes LaGen for defense costs pursuant to the Policy. The issue is whether, viewing the evidence in a light most favorable to ILU, the fees submitted are reasonable. Applying the presumptively reasonable fee analysis set forth supra, the Court finds that the fees submitted by LaGen are reasonable. First, LaGen has overcome the forum rule presumption by showing that Baker Botts was chosen based upon objective criteria and a desire to attain a superior result. Baker Botts has an expertise in the specific issues involved in the underlying action which LaGen knew from firsthand experience since Baker Botts was NRG's counsel in a similar matter brought by the state of New York. Moreover, the selection of Baker Botts was appropriate given the complexity of the issues presented in the underlying action and the substantial liability that LaGen faced therein. Therefore, LaGen has overcome the forum rule presumption and the Court will use the out-ofdistrict rates to determine the reasonableness of the incurred fees.
Turning its attention to the reasonableness of the hourly rate, the Court agrees that the rate is presumptively reasonable. Judge Posner's reasoning in Taco Bell Corp. v. Continental Cas. Co., 388 F.3d 1069 (7th Cir. 2004) is particularly persuasive. There, writing for a unanimous panel, Judge Posner found that the defense costs sought were reasonable because of the uncertainty the plaintiff had concerning whether it would be reimbursed for its defense costs. Judge Posner wrote,
Taco Bell Corp, 388 F.3d at 1076-77 (citations omitted). Here, like the court in Taco Bell Corp., the Court is persuaded by the fact that LaGen negotiated payment terms with its counsel after ILU had reneged on its duty to defend and without any assurances that it would be reimbursed for the defense costs incurred. Paying out of pocket gave LaGen every incentive to negotiate a reasonable rate and minimize costs. Furthermore, ILU explicitly approved the use of Baker Botts for its insureds and the Court finds unpersuasive ILU's contention that such approval was solely predicated on competence. Finally, and in light of the Johnson factors, the hourly rate charged is reasonable given the time and labor required to litigate the underlying action; the complexity of the issues therein presented; the level of skill and expertise necessary to effectively litigate the action; the amount of liability involved and the results obtained; the experience, reputation, and ability of the attorneys; and the nature and length of the professional relationship with the client. Therefore, the Court finds that the fees sought to be recovered for costs incurred during the defense in the underlying action are reasonable.
Finally, after reviewing the unredacted invoices, the Court concludes that the hours expended were reasonable in light of the time required to litigate the underlying action and the complexity of the issues that it presented. Furthermore, as the Court concluded supra, the Court finds that ILU's arguments concerning block-billed and vague entries lack merit.
Accordingly and for the reasons stated herein, the Court GRANTS LaGen's motion for defense costs and prejudgment interest. LaGen is entitled to fees incurred in the amount of $7,652,367.31 plus interest.
Accordingly, LaGen's motion (doc. 161) for attorneys' fees is GRANTED. Furthermore, LaGen's motion (doc. 175) for summary judgment is GRANTED. LaGen is entitled to recover attorneys' fees, defense costs, and interest in the amount of $11,275,309.64.
