Fee Award Based on ‘Reasonable’ Virginia Rates

In these international business tort cases involving tire manufacturers’ trade secrets and a final jury verdict of $26 million for plaintiff, the Alexandria U.S. District Court concludes the appropriate value of the law firm lien filed by plaintiffs’ former law firm is $1,958,341.67, based on “reasonable” Virginia hourly rates of $400 for partners, $350 for counsel and $275 for associates, and with a 65-percent reduction in the claimed hours.

Gilbert LLP, plaintiffs’ former counsel filed a lien for fees and expenses pursuant to Va. Code § 54.1-3932, claiming more than $4.5 million in fees plus a share of the moneys received from the currently underway judgment collection efforts, and more than $1.8 million in expenses. Plaintiffs do not contest the validity of the lien, but reject the amounts claimed as excessive, unreasonable and contrary to settled and controlling Virginia law, which allows the discharged Gilbert law firm a reasonable fee based not on the fee contract between plaintiffs and the Gilbert law firm, but solely on the basis of quantum meruit.

Plaintiffs in the underlying case are Jordan Fishman, a Florida citizen, and three companies he owns and controls, namely Tire Engineering and Distribution LLC, a Florida company; Bearcat Tire ARL LLC, also a Florida company; and Bcatco ARL Inc., which is incorporated under the laws of the Jersey Channel Islands. Plaintiffs were in the business of dredging, manufacturing and selling highly specialized tires for use on underground mining vehicles.

There were two sets of defendants in the underlying litigation, the first set including multiple businesses headquartered in the United Arab Emirates and owned by Surender Kandhari, a Dubai citizen; and the second set of defendants were two companies incorporated and based in China.

Plaintiffs hired the Gilbert law firm to pursue copyright infringement claims against defendants.  In October 2011, the two lead Gilbert lawyers working on the case left to form their own firm, taking the case with them. The Gilbert firm filed a notice of former counsel’s lien under Va. Code § 54.1-3932. As of November 2013, approximately $546,000 has been recovered on plaintiffs’ $26 million judgment. Additional collection efforts have led to an agreement by the second group of Chinese business defendants to pay $15.5 million to settle the case against them.

Where, as here, a client discharges counsel without cause – as clients are entitled to do in Virginia – it is settled Virginia law that the discharged counsel may recover only a reasonable fee for actual services rendered on a quantum meruit basis regardless of any contract to the contrary. The court rejects Gilbert’s claim that it is entitled to more than a quantum meruit recovery or to a 40 percent contingent fee. In Virginia, the focus is on the objective value of the services rendered by the terminated attorney, not the value of the benefit conferred.

In this fee dispute, the Gilbert firm claims its lawyers spent 10,955.8 hours on the case at hourly rates ranging from $375 to $900 per hour, totaling a fee of $4,542,228.50. The firm claims expenses of $1,812,149.20.

The law firm’s claimed rates are not reasonable by Virginia standards. At least one court has noted that experienced intellectual property attorneys working in Northern Virginia can reasonably charge up to $380 per hour for partners and $250 per hour for associates. The fact that some D.C. attorneys may charge close to $1,000 per hour does not serve to make the Gilbert law firm’s asserted rates reasonable.

Close examination of the submitted time entries makes clear that the Gilbert firm’s billing records are rife with flawed entries that make its records inadequate and unreliable for lodestar calculation purposes. Case law confirms that in these circumstances – excessively vague task descriptions and lumping – courts must exercise sound judgment based on knowledge of the case and litigation experience to reduce the number of hours by an appropriate percentage. Here, a 55 percent reduction in the claimed hours is appropriate. The court further reduces the claimed hours by an additional 2 percent to account for inadequately justified claims for travel time, and by an additional 3 percent for time entries that read simply “attend hearing,” with multiple attorneys attending. The court reduces the claimed hours by a further 3 percent to account for claimed time spent on unsuccessful causes of action or motions, and another 2 percent for excessive post-trial hours billed.

In sum, the claimed hours for the lodestar calculation will be reduced by 65 percent to reflect the numerous deficiencies in the submitted time entries.

The law firm is entitled a fee award measured by quantum meruit of $1,237,720 and costs of $720,621.67, for a total of $1,958,341.67 as the fair and reasonable value of the law firm’s lien.

In re: Outsidewall Tire Litigation (Ellis) No. 1:09cv1217, Sept. 29, 2014; USDC at Alexandria, Va. VLW 014-3-521, 27 pp.

Editor’s Note: The 4th Circuit vacated this decision in an unpublished opinion and remanded the case on Jan. 11, 2016.