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Seventh Avenue Inc v. Shaf International Inc

United States District Court, E.D. Wisconsin

March 7, 2018

SEVENTH AVENUE, INC., Plaintiff,
v.
SHAF INTERNATIONAL, INC., Defendant.

          ORDER DENYING DEFENDANT'S MOTION TO STRIKE PLAINTIFF'S REPLY (DKT. NO. 40) AND REQUIRING ADDITIONAL INFORMATION FROM THE PLAINTIFF BY MARCH 21, 2018

          HON. PAMELA PEPPER United States District Judge.

         On June 23, 2017, plaintiff Seventh Avenue Inc. filed an amended motion for attorneys' fees and costs, asking the court for an award of $27, 322.32. Dkt. No. 35. The defendant responded, arguing that the plaintiff has used excessively expensive attorneys, expended excessive hours litigating the case and failed to use less costly alternatives. Dkt. No. 37 at 1. The plaintiff filed a reply, in which it updated the amount requested to $34, 975.90. Dkt. No. 38. The defendant then filed an “objection to and motion to strike” the plaintiff's reply. Dkt. No. 40. The court will deny the motion to strike, and will require the plaintiff to provide additional information regarding the reasonableness of hourly rates.

         I. Background

         On March 16, 2016, the plaintiff filed this case under the Lanham Act, alleging trademark infringement. Dkt. No. 1 at 1. Six months later, the parties asked the court to enter a consent judgment, dkt. nos. 7 and 8, and on September 20, 2016, the court entered an order for consent judgment, permanent injunction, and other relief. Dkt. No. 10. As part of the consent judgment, the court ordered that “[the plaintiff] shall be awarded its damages, reasonable attorneys' fees and all costs incurred in enforcing any provision set forth in the Judgment.” Dkt. No. 10 at 4, ¶7.

         On January 17, 2017, the plaintiff filed a motion, asking the court to find the defendant in contempt of the consent judgment. Dkt. No. 11. The motion alleged that the defendant continued to sell the infringing goods and that the defendant had not provided the plaintiff with the “certified statement” of compliance that the consent judgment required. Dkt. No. 11 at 3, ¶¶8-9. The plaintiff included declarations from the plaintiff's outside counsel and in-house counsel, detailing how they had discovered the defendant's alleged breach. See Dkt. Nos. 12, 13.

         Under the court's local rules, the defendant had twenty-one days to respond to the motion, see Civil L.R. 7(b) (E.D. Wis.)-in this case, around February 7 or 8, 2017. The defendant did not respond to the motion in that time. So, on February 13, 2017, the plaintiff filed a motion for its attorney's fees and costs incurred in enforcing the consent judgment. Dkt. No. 15. That motion asked for $16, 292.85 and costs of $384.35. Dkt. No. 15 at 2-3. The deadline for responding to that motion would have been around March 6, 2017.

         The day after it received the motion for fees and costs, the court held a hearing on the plaintiff's motion for an order of contempt. Dkt. No. 19. Counsel for the defendant did not appear at the telephonic hearing. Id. The court told the plaintiff that it would grant the motion for contempt, but would wait to rule on the motion for attorneys' costs and fees until after the period for objections had expired. Id. On February 16, 2017, the court issued two orders: (1) an order granting the plaintiff's motion for contempt and ordering that the defendant “shall pay all of the plaintiff's attorney's fees and costs associated with the motion for contempt[, ]” dkt. no. 20 at 2; and (2) an order to show cause requiring the defendant to show cause as to why Attorney Seifert (the only counsel on record for the defendant) did not appear at the February 14, 2017 motion hearing and why the defendant did not respond to the plaintiff's motion for contempt, dkt. no. 21.

         Two weeks later, on March 2, 2017, the court received the defendant's response to the motion for contempt, dkt. no. 22; a response from Attorney Seifert as to why he did not appear for the February 14, 2017 hearing, dkt. no. 24; a motion for reconsideration and to vacate the judgment, dkt. no. 23; and the defendant's objections to the plaintiff's petition for fees, dkt. no. 25. The plaintiff responded to these motions on March 13, 2017, dkt. no. 26, and the court held a telephonic hearing on May 17, 2017, dkt. no. 29. At this hearing- while the court was in the process of discussing the pending motions-Attorney Seifert told the court that he was in state court and that he could not continue on the phone call. Dkt. No. 29. With some frustration, the court terminated the call, and set an adjourned hearing for June 7, 2017-a date on which all parties could appear and participate. Id.

         On June 6, 2017, the plaintiff filed a “supplement” to its motion for attorneys' fees and costs. Dkt. No. 30. The supplement sought an additional award of $14, 108.97 in attorneys' fees and costs, for a total award of $30, 401.82. Id. at 3. The plaintiff grounded its increased request on the additional work the plaintiff's lawyers had done in the intervening weeks.

         At the June 7, 2017 hearing, the court denied the defendant's motion to reconsider and vacate the judgment, concluding that the defendant had had the opportunity to respond to the motion for contempt (and to appear at the February 13, 2017 hearing) but had not done so. Dkt. No. 34 at 3. As for the plaintiff's motion for fees and costs, the court noted that the motion requested fees both for work performed by outside counsel and for work performed by the plaintiff's in-house lawyer, who was an employee of the plaintiff. The court said that it was willing to award fees to in-house counsel only if he had done work that the plaintiff otherwise would have had to pay outside counsel to do. Id. (citing Procter & Gamble Co. v Weyerhaeuser Co., 711 F.Supp. 904 (N.D. Ill. 1989)). “The court opined that a number of things [in-house counsel] had billed for appeared to be traditional in-house counsel work, such as review of documents prepared by outside counsel.” Id. The court concluded the hearing by asking the parties to submit more information regarding the attorneys' fees, and “indicated that it would grant the motion for attorneys' fees, but would defer issuing its ruling until the parties had the opportunity to brief the appropriate amount of the award.” Id.

         On June 23, 2017, the plaintiff filed an “amended motion for attorney fees and costs[, ]” dkt. no. 35, together with a declaration from Attorney Engling, the in-house lawyer, dkt. no. 36. The motion asked the court to award a total of $27, 322.32-a reduction of $3, 079.50 from the previous request. Id. The defendant responded, dkt. no. 37, and the plaintiff replied, dkt. no. 38. The plaintiff's reply brief asked for a different award of fees; it asked for $34, 975.90-some $7, 600 more than it had requested in the amended petition. Dkt. No. 38. In a footnote, the plaintiff explained that its June 23, 2017 request had included estimated costs for the June 2017 hearing (and associated preparation) and that, since filing that amended motion, the plaintiff's outside counsel had provided an invoice for actual fees associated with the June 2017 proceedings. Id. at 1, n.1. Additionally, the plaintiff stated that its outside counsel had expended “an additional $2, 352.00 in preparing this reply brief.” Id.

         On July 25, 2017, the defendant filed an “objection to and motion to strike plaintiff's reply[.]” Dkt. No. 40. In one paragraph of its sixteen-page submission, the defendant argued that the court should disregard the plaintiff's reply brief (and its supporting declaration) because the defendant did not have an opportunity to respond. Dkt. No. 40 at 12. The defendant also reiterated its arguments against awarding the plaintiff any attorneys' fees at all, and asked the court to award the defendant attorney's fees “for the work [its] counsel had to complete in order to repeatedly respond [to the plaintiff].” Id. The plaintiff responded on August 2, 2017, dkt. no. 41, and the defendant (untimely) filed a reply on August 30, 2017, dkt. no. 42.

         II. Analysis

         A. Standard For Awarding Attorneys' fees

         To determine the amount of an award of attorneys' fees, the court uses the “lodestar” method, in which it multiplies “‘the number of hours reasonably expended on the litigation . . . by a reasonable hourly rate.” Pickett v. Sheridan Health Care Ctr., 664 F.3d 632, 639 (7th Cir. 2011) (citing Hensley v. Eckerhart, et al., 461 U.S. 424, 433 (1983)). “When calculating attorneys' fees, the reasonable hourly rate is to be derived from the market rate for the services rendered.” Denius v. Dunlap, 330 F.3d 919, 930 (7th Cir. 2003). While “[t]he fee applicant bears the burden of ‘produc[ing] satisfactory evidence-in addition to the attorney's own affidavits-that the requested rates are in line with those prevailing in the community[, ]'” Pickett, 664 F.3d 640 (quoting Blum v. Stenson, 465 U.S. 886, 895 n.11 (1984)), “[t]he best evidence of an attorney's market rate is his or her actual billing rate for similar work.” Johnson v. GDF, Inc., 668 F.3d 927, 933 (7th Cir. 2012).

         “If the fee applicant satisfies their burden, the burden shifts to the other party to offer evidence that sets forth ‘a good reason why a lower rate is essential.'” Pickett, 664 F.3d at 640 (quoting People Who Care v. Rockford Bd. of Educ., 90 F.3d 1307, 1313 (7th Cir. 1996)). “Once the district court has established the lodestar, the court may adjust it to account for factors not subsumed by the lodestar calculations.” Id.[1]

         B. Parties' Arguments

         The plaintiff argues that its outside attorneys seek compensation for time spent (a) investigating and drafting the contempt motion; (b) drafting responses to the defendant's motion for reconsideration and objection to the plaintiff's petition for attorneys' fees; (c) preparing for and attending the February 14, May 17 and June 7 hearings; and (d) drafting and submitting the amended petition. Dkt. No. 35 at 3. Both of the plaintiff's outside attorneys work for Michael Best & Friedrich, LLP; in the first billing affidavit submitted, Attorney Scheller attested that in January 2017, he billed at $530 an hour and Attorney Salman billed at $260 an hour. Dkt. No. 16 at 2, ¶3. In a later affidavit, Attorney Scheller stated that his “2017” billing rate was $545, and that Salman's was $280. Dkt. No. 31 at 3, ¶3.

         The plaintiff cites Heder v. City of Two Rivers, 255 F.Supp.2d 947, 953 (E.D. Wis. 2003), for the proposition that all it has to do is identify outside counsel's actual billing rates in order to prove the “market rate” for the purposes of calculating the lodestar. Dkt. No. 38 at 3. The plaintiff notes that Seventh Avenue has timely paid all of Michael's Best's invoices, stating that “‘[t]he best evidence of whether attorney's fees are reasonable is whether a party has paid them.'” Id. at 2-3 (quoting Cintas Corp. v. Perry, 517 F.3d 459, 469 (7th Cir. 2008)).

         The plaintiff observes that the defendant has not suggested an alternative billing rate, and asserts that courts have found this omission fatal to a party's assertion that billing rates are unreasonable. Id. at 4 (citing Design Basics LLC v. Lexington Homes Inc., No. 14-C-1102, 2017 WL 1901453 (E.D. Wis. May 8, 2017) and Doden v. Plainfield Fire Prot. Dist., No. 94 C 6294, 1996 WL 180073, at *2 (N.D. Ill. Apr. 11, 1996)).

         As for in-house Attorney Engling, the plaintiff says that “if Attorney Engling had not completed this work, Attorneys Scheller and Salman would have completed this work and petitioned the Court to award these fees for their work instead.” Dkt. No. 35 at 4 (citing Textor v. Bd. of Regents of N. Ill. Univ., 711 F.2d 1387, 1396-97 (7th Cir. 1983)). The plaintiff asserts that an hourly rate of $490 is appropriate for Attorney Engling's services due to his twenty-two years of experience and because that was his billing rate before leaving Michael Best. Id. at 5-6.

         Finally, as an umbrella reason for the court to grant the requested fees, the plaintiff argues that the court is enforcing the consent judgment, which stated that the plaintiff could recover all reasonable attorneys' fees-whether they be from outside or in-house counsel. Id. at 5.

         The defendant responds that the plaintiff has not produced satisfactory evidence supporting its assertion that the hourly rates and hours expended are in line with the prevailing market rates. Dkt. No. 37 at 4-5 (citing Pickett, 664 F.3d at 639). After explaining how it believes the court should calculate the “lodestar” method, the defendant contends that the plaintiff “never explain[ed] why its' requested rates and hours are in line with those prevailing in the community.” Id. at 7. As the plaintiff noted in its papers, the defendant does not argue (nor introduce evidence of) what the “reasonable” rate should be. The defendant also argues that the plaintiff over-litigated the case and failed to mitigate costs. Id. It points to the plaintiff's first motion for fees (dkt. no. 15) and states that a bill of $16, 000 to purchase three items of clothing and to draft a motion for contempt is excessive. Id.

         As for the plaintiff's in-house counsel's fees, the defendant argues that “[the plaintiff] did not refer to a single specific act of in-house counsel that involved work that would otherwise have been performed by outside counsel.” Id. at 8. It contends that the plaintiff failed to justify Attorney Engling's fees because the plaintiff's data in support of his request made it difficult for the defendant to determine whether Attorney Engling rendered duplicative or unnecessary services. Id.

         In reply, the plaintiff increased the amount of its requested reward, asserting that “[s]ince drafting the Amended Petition . . . Michael Best has prepared its June 2017 invoice[, ]” dkt. no. 38 at 1, n.1, and claiming that its hourly rates are reasonable because they are actual billing rates for Michael Best (which are, in turn, based on an annual survey of rates charged by local firms of comparable size), id. at 2.

         Because the plaintiff changed the amount of its fee request in the reply brief and included a new declaration from Attorney Salman, the defendant objected, and asked the court to strike the plaintiff's reply. Dkt. No. 40. The majority of the motion to strike reiterates arguments the defendant made to the court in its response brief: that the plaintiff did not provide sufficient detail; that the plaintiff over-litigated the case; and that the defendant cannot tell whether the plaintiff's in-house counsel provided unnecessary services. Id. at 2. The defendant does not mention striking the reply until page five, where it states that “the exhibits [the plaintiff] tendered with its reply brief were required to have been submitted previously with its ...


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