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Signatures Network, Inc. v. Estefan

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA


January 24, 2005

SIGNATURES NETWORK, INC., PLAINTIFF,
v.
GLORIA ESTEFAN AND ESTEFAN ENTERPRISES, INC., DEFENDANTS.

REPORT AND RECOMMENDATION ON DEFENDANTS' MOTION FOR AN AWARD OF ATTORNEYS' FEES AND COSTS

On July 30, 2004, the Honorable Saundra Brown Armstrong granted defendants' motion for summary judgment. After judgment was entered defendants moved for an award of attorneys' fees and costs. Judge Armstrong referred that motion to me for a report and recommendation.

The underlying dispute arose out of a "Merchandising Licensing Agreement" entered into by defendant Estefan Enterprises, Inc. and plaintiff's predecessor, Sony Signatures, Inc., and the amendments thereto ("Agreement").*fn1 On October 20, 2003, Estefan Enterprises, Inc. and Gloria Estefan (collectively "the Estefan parties") filed an action in the United States District Court for the Southern District of Florida ("the Florida action") against Signatures Network, Inc. ("Signatures"). The Estefan parties sought a declaratory judgment that they were not obligated to repay unrecouped advances under the Agreement. Four days later, Signatures filed this action ("the California action") seeking to recover unrecouped advances under the Agreement. On November 26, 2003, Signatures moved to dismiss, stay, or in the alternative, transfer the Florida action. On December 12, 2003, the Estefan parties filed a similar motion in this Court.

The Honorable Ursula Ungaro-Benages, the district judge presiding over the Florida action, dismissed it on January 15, 2004, finding that the Estefan parties had "improperly filed" the declaratory relief action "in anticipation of a lawsuit by [Signatures] for breach of the parties' agreement."*fn2 January 15, 2004 Order Granting Defendant's Motion to Dismiss, p. 8. The Estefan defendants then elected to withdraw their motion to dismiss and proceed with this lawsuit. Defendants ultimately obtained summary judgment and now seek $256,847.00 in attorneys' fees and $12,004.90 in costs for filing the Florida action and defending this action.*fn3

One Florida and two California law firms represented defendants. Broad & Cassel, a Florida firm, has represented defendants from the inception of this dispute. Declaration of Karen Stetson in Support of Estefan Amended Motion for An Award of Attorneys' Fees and Costs ("Stetson Decl.") ¶¶1,3 Ex. A. The Los Angeles office of O'Melveny & Myers LLP represented defendants in this action from October 30, 2003 to February 2004. Declaration of Robert C. Welsh in Support of Estefan Amended Motion for An Award of Attorneys' Fees and Costs ("Welsh Decl.") ¶3. Coblentz, Patch, Duffy & Bass LLP replaced the O'Melveny firm and represented defendants in this action from February 2004 to present. Declaration of Jeffrey G. Knowles in Support of Defendants' Amended Motion for An Award of Attorneys' Fees and Costs ("Knowles Decl."), ¶3.

Under California law, the prevailing party in a contract action may recover reasonable attorneys' fees and costs where the contract so provides.*fn4 PLCM Group, Inc. v. David Drexler, 22 Cal. 4th 1084, 1099 (2000). Paragraph 15.14 of the Agreement provides:

15.14 Attorneys' Fees. If any legal action or any other proceeding is brought for the enforcement of this Agreement, or if a dispute arises under this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it may be entitled.

Declaration of David M. Given in Opposition to Defendants' Motion for an Award of Attorneys' Fees and Costs ("Given Decl."), Ex. A. As defendants prevailed in the California action, they are entitled to reasonable attorneys' fees and costs.*fn5 See Cal. Civ. Code § 1717; Hsu v. Abbara, 9 Cal. 4th 863, 870 (1995)("It is now settled that a party is entitled to attorney fees under section 1717 even when the party prevails on grounds that the contract is inapplicable, invalid, unenforceable or nonexistent.") (citations omitted).

The trial court has broad authority to determine whether attorneys' fees are reasonable. PLCM Group, 22 Cal. 4th at 1095. The party requesting fees must make an adequate showing of the time expended and the rates claimed. Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). In California, as in federal court, reasonable attorneys' fees are typically determined using the lodestar method. See Jordan v. Multnomah Cty., 815 F.2d 1258, 1262 (9th Cir. 1987); PLCM Group, 22 Cal. 4th at 1095. The lodestar is determined by multiplying the number of hours reasonably spent on the litigation by a reasonable hourly rate. PLCM Group, 22 Cal. 4th at 1095. The reasonable hourly rate is that prevailing in the community for similar work. Id. (citations omitted). "After the trial court has performed the calculations of the lodestar, it shall consider whether the total award so calculated under all of the circumstances of the case is more than a reasonable amount and, if so, shall reduce the section 1717 award so that it is a reasonable figure." Id. In awarding fees, the court should also consider "the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case." Id. (quoting Melnyk v. Robledo, 64 Cal. App. 3d 618, 623-24 (1976)); see also Morales v. City of San Rafael, 96 F.3d 359, 363-64 & n.8 (9th Cir. 1996)(noting factors to be considered in awarding fees)(citing Kerr v. Screen Extra Guild, Inc., 526 F.2d 67, 70 (9th Cir. 1975)).

Prelitigation Fees

Defendants claim $15,976.89 in attorneys' fees and costs incurred prior to the filing of the Florida and California actions. Reasonable pre-litigation fees are compensable under both Ninth Circuit and California law. Frevach Land Co. v. Multonomah Cty., Dept. of Env. Svcs., 2001 WL 34039133, at *3 (D. Or. Dec. 18, 2001)(citing G & G Fire Sprinklers, Inc. v. Bradshaw, 156 F.3d 893 (9th Cir. 1998)); Stokus v. Marsh, 217 Cal. App. 3d 647, 655-56 (1990). However, "[t]he burden of establishing an entitlement to an attorneys' fee award lies solely with the claimant." Hensley, 461 U.S. at 437. Counsel must submit "detailed time records justifying the hours claimed to have been expended." Chalmers v. City of Los Angeles, 796 F.2d 1205, 1210 (9th Cir. 1986). "Where the documentation is inadequate, the district court is free to reduce an applicant's fee award accordingly." Hensley, 461 U.S. at 433.

To prove their prelitigation fees and costs, defendants have submitted the declaration of Karen Stetson, a partner at Broad & Cassel. Ms. Stetson's declaration establishes that she spent approximately thirty-five hours working on this case prior to the filing of either the Florida or California actions. Stetson Decl. ¶4, Ex. A. She practices in both federal and state court in Florida, and her customary rate of $335.00 per hour is reasonable based on her qualifications and experience. See id. at ¶4.

According to the spreadsheet, Ms. Stetson primarily spent her pre-litigation time in conferences with general counsel for defendants, telephonic and email communications with her client, and research on both factual and legal issues related to this dispute. Id., Ex. A. Three other individuals billed a small number of hours. Id., Ex. A. Thomas Rebull billed 5.7 hours at a rate of $235.00 per hour; Meredith Frank billed 5.5 hours at a rate of $210.00 per hour; and Patricia Anzalone billed 2.9 hours at $120.00 per hour. Id. The total lodestar is $14,567.50, which is less than the $15,474.00 requested by defendants for prelitigation fees.*fn6 Defendants also incurred $502.89 in prelitigation costs.

While the spreadsheet generally demonstrates that these fees were reasonably incurred, many of the entries fail to identify the subject matter of the work performed. See id. As a result, I am unable to determine whether the fees associated with these entries are reasonable.*fn7 I therefore recommend that the Court reduce the lodestar by ten percent, and award defendants $13,110.75 in pre litigation fees and $502.89 in prelitigation costs.

The Florida Action

Defendants next seek $37,368.34 in attorneys' fees and costs in the Florida action. That there were two actions is not surprising. The Estefan parties reside in Florida and Signatures resides in California. The parties did not include a forum selection clause in the contract and intentionally omitted a choice of law provision. See Given Decl., Ex. A ("Merchandising Licensing Agreement" attached as Exhibit A to the Amended Compl. for Declaratory Judgment). Under such circumstances each of them could have reasonably anticipated that in the event of a dispute, the other party would try to venue the dispute in its home state. Each party likewise should have reasonably anticipated that in the event it filed a suit in its state, the other party would attempt to move the dispute to its home state if legally possible. Because both actions were pending simultaneously, the Estefan parties are seeking to recover fees spent in Florida for trying to get the underlying dispute resolved there and for fees spent in California trying to move this case back to Florida. I recommend that they only receive fees for their efforts in the California action.

Judge Ungaro-Benages concluded that the Estefan parties "improperly filed" the Florida action as a "preemptive litigation strike used as a means of forum shopping." January 15, 2004 Order Granting Defendant's Motion to Dismiss, 8-10. Having reviewed Judge Ungaro-Benages' ruling and considered the parties' arguments both in their papers and at the hearing on this motion, I recommend that this Court defer to her ruling. See Hill v. City of Pontotac Miss., 993 F.2d 422, 425 (5th Cir. 1993)(noting that judges of coordinate jurisdiction generally defer to another's ruling). I therefore recommend that defendants recover no fees for the Florida action.

The California Action

Defendants seek $180,385.50 in attorneys' fees and $10,797.06 in costs in the California action. In the California action, defendants filed a motion to dismiss or, alternatively to transfer or stay, a motion for judgment on the pleadings or, in the alternative, for summary judgment, and this motion for attorneys' fees and costs. Defendants also opposed plaintiff's ex parte application for additional discovery.

I recommend that defendants recover fees incurred in connection with their motion to dismiss.*fn8 Having reviewed their motion, defendants' arguments appear to be reasonable, and plaintiff has not demonstrated otherwise. As noted above, it was not unreasonable for defendants to try to move the dispute to Florida. Had they not filed a motion, they likely would have waived the defense. See Fed. R. Civ. P. 12(h)(1). While defendants later withdrew the motion, defense counsel explained that they did so following the dismissal of the Florida action because they concluded that they would prefer to litigate the case rather than incur additional fees in a forum dispute. As resolution of the forum dispute was a necessary step to the eventual decision in this matter, I find that their decision to withdraw their motion to allow the matter to proceed in California was reasonable.*fn9 See Cabrales v. Cty. of Los Angeles, 935 F.2d 1050, 1053 (9th Cir. 1991)(noting that the court may award fees for time expended on an unsuccessful stage litigation that ultimately contributed to the successful resolution of the matter); Frevach Land Co., 2001 WL 34039133, at *8 ("If a plaintiff ultimately wins on a particular claim, she is entitled to all attorney's fees reasonably expended in pursuing that claim-even though she may have suffered some adverse rulings.").

I also recommend that defendants recover fees associated with their motion for summary judgment and their opposition to plaintiff's ex parte application for additional discovery. Defendants prevailed on their motion for judgment on the pleadings, or in the alternative, summary judgment. Judge Armstrong denied plaintiff's ex parte application for additional discovery. Defendants are therefore entitled to reasonable fees incurred for work performed on both the application and the motion. See Cal. Civ. Code § 1717; Hsu, 9 Cal. 4th at 877. As "[t]his Court has repeatedly held that time spent by counsel in establishing the right to a fee award is compensable," I also recommend that defendants recover fees incurred establishing their right to a fee award. Davis v. City & Cty. of San Francisco, 976 F.2d 1536, 1544 (9th Cir. 1992) vacated in part, 984 F.2d 345 (9th Cir. 1993)); see also Ketchum v. Moses, 24 Cal. 4th 1122, 1133 (2001)("[A]n attorney fee award should ordinarily include compensation for all the hours reasonably spent, including those relating solely to the fee.").

Finally, defendants are entitled to reasonable fees for the work performed in the California action by both California and Florida counsel. "There is nothing unreasonable about an out-of-state party choosing to employ both local and out-of-state counsel." See Koam Produce, Inc. v. DiMare Homestead, Inc., 329 F.3d 123, 130 (2d Cir. 2003). As defendants reside in Florida and plaintiff sued them here even though a Florida action was pending, defendants decision to employ both Florida and California counsel was reasonable. I recommend that defendants recover reasonable fees for time expended by Broad & Cassel and the Coblentz and O'Melveny firms.

Plaintiff argues that the time spent by defense counsel in intraoffice and interoffice conferences is duplicative. While "[i]t is appropriate for a district court to reduce duplicative fees when awarding attorney's fees," Earthquake Sound Corp. v. Bumper Indus., 352 F.3d 1210, 1219 (9th Cir. 2003), the party opposing the fee application has the burden of specifying those hours that it finds duplicative. See Gates v. Rowland, 39 F.3d 1439, 1449 (9th Cir. 1992). There is nothing unreasonable about intraoffice or interoffice conferences. In fact, in Signature's fee petition in Florida, counsel claimed hours for time expended in such conferences. See Affidavit of David C. Phillips in Support of Defendant's Motion for Attorneys' fees, Ex. A. Yet here, all plaintiff did was identify the hours during which defendants engaged in intraoffice conferences between attorneys within each law firm and interoffice conferences between California and Florida counsel and assert that this time is duplicative. See Marone Decl. ¶¶9-10. Despite having received discovery regarding defendants' fees, plaintiff's have not explained which of the hours claimed by defendants for intraoffice or interoffice conferences are duplicative. For this reason plaintiff has not met its burden.

I find that the time expended by defense counsel in intraoffice conferences was reasonably necessary to successfully litigate this lawsuit and that plaintiff failed to establish that any of it was duplicative. I also find that local and out-of-state counsel reasonably coordinated their efforts under the circumstances presented in this case. And I find that plaintiff has not established that any of the hours specified by plaintiff are duplicative.*fn10

Defendants claim $84,719.50 in attorneys' fees and $3,011.96 costs for work performed by the Coblentz firm.*fn11 See Knowles Decl., Ex. A; Supplemental Declaration of Jeffrey G. Knowles in Support of Defendants' Amended Motion or An Award of Attorneys' Fees and Costs ("Knowles Supp. Decl."), Ex. K. Two attorneys at the Coblentz firm worked on the California action. Knowles Decl. at ¶¶3,6, Ex. A. Jeffrey G. Knowles, a partner at the firm, has been practicing for sixteen years and rendered approximately 174 hours at a rate of $345.00 per hour.*fn12 Id. at ¶3, Ex. A. Clinton L. Todd, an associate who has been in practice since 2000, expended 162 hours at a rate of $215.00 per hour.*fn13 Id. at ¶6, Ex. A. Their work consisted primarily of preparing and arguing defendants' summary judgment motion, regularly corresponding with defendants, Florida counsel, and opposing counsel, and preparing and arguing this motion. See id., Ex. A. These hours were reasonably expended and are not excessive in relation to the work performed and the complexity of the issues involved in this case. The hourly rates charged are comparable to those charged in the community for similar work. See PLCM Group, 22 Cal. 4th at 1095. Defendants also reasonably incurred $3,011.96 in costs associated with work performed by the Coblentz firm. Id., Ex. A. Based on the declarations and billing records submitted in support of their motion, I recommend that defendants recover $87,731.46 in attorneys' fees and costs for the work performed by the Coblentz firm.

Defendants also claim $73,080.25 in fees for work performed by the O'Melveny firm in the California action. This represents a fifty percent discount from the actual number of hours expended on this case. See Marone Decl., Ex. A. Four attorneys at the O'Melveny firm worked on this case. Id. at ¶4. Robert C. Welsh, a partner at the O'Melveny firm, spent 35.8 hours on this matter. See Welsh Decl. ¶¶1; Errata to the Exhibit to the Declaration of Ricardo J. Dopico in Support of Defendants' Amended Motion for An Award of Attorneys' Fees and Costs ("Errata to Dopico Decl."), Ex. A. He charged rates of $480.00 per hour for 2003, and $525.00 per hour for 2004. Welsh Decl. ¶3. Three associates at the firm claim approximately 193 hours on the case. Id. at ¶¶4,8; Errata to Dopico Decl., Ex. A. Two of the associates charged hourly rates of $280.00 in 2003, and $345.00 in 2004, and one associate charged an hourly rate of $390.00. Welsh Decl. ¶¶4,8; Errata to Dopico Decl., Ex. A. Paralegals at the O'Melveny firm spent an additional 1.15 hours at $125.00 per hour, 0.35 hours at $85.00 per hour, and 5.4 hours at $30.00 per hour. Welsh Decl. ¶4; Errata to Dopico Decl., Ex. A.

While the hours claimed by defendants for the work performed by the O'Melveny firm appear reasonable, defendants have not met their burden of showing that their rates are reasonable. See Hensley, 461 U.S. at 433. Where the party seeking a fee award fails to establish that its rates are reasonable, the Court has discretion to adjust the fee award. See Cal. Civ. Code § 1717 ("Reasonable attorney's fees shall be fixed by the court."); Jane L. v. Bangerter, 61 F.3d 1505, 1510 (10th Cir. 1995)(holding that the setting of a reasonable hourly rate is discretionary); PLCM Group, 22 Cal. 4th at 1095 (noting the lodestar rate may be adjusted "in order to fix the fee at the fair market value for the legal services provided"); Levy v. Toyota Motor Sales U.S.A., Inc., 4 Cal. App. 4th 807, 816-17 (1992)("The person seeking an award 'is not necessarily entitled to compensation for the value of attorney services according to [his] own notion or to the full extent claimed by [him].'")(citations omitted). Defendants have not specified the number of years that Mr. Welsh has practiced, nor have they described the relevant qualifications and experience of the associates that worked on this case. See Civ. L.R. 54-5(b)(3)(requiring a "brief description of relevant qualifications and experience"). Defendants have also failed to demonstrate that the rates charged by O'Melveny's Los Angeles office are comparable to the rates charged by other local firms for similar work. PLCM Group, 22 Cal. 4th at 1096 (affirming an award of fees based on comparable legal services in the local market). Finally, defendants have not explained why they could not have retained the Coblentz firm earlier in the litigation.

I recommend that the Court award defendants fees for time expended by the O'Melveny firm at rates equivalent to those charged by the Coblentz firm. Based on the rates charged by the Coblentz firm, defendants are entitled to $345.00 per hour for the time expended by Mr. Welsh, and $215.00 per hour for the time expended by his associates, plus paralegal time, for a total award of $54,181.50.*fn14 I am satisfied that this amount is reasonable in relation to the work performed on the California action. I therefore recommend that defendants recover $54,181.50 for the time expended by the O'Melveny firm in this action.

Finally, defendants seek attorneys' fees and costs for the work performed by Broad & Cassel in the California action. As evidence of their fees, defendants submitted the Stetson declaration. The spreadsheet attached to Ms. Stetson's declaration does not differentiate between work performed in the California and Florida actions. See Stetson Decl., Ex. A. As mentioned above, Ms. Stetson has also failed to identify the subject matter of many of the entries. Id. I am therefore unable to determine which of Broad & Cassel's fees relate to the California action. To determine Broad & Cassel's fees, I have taken the total amount of fees requested in the California action, $180,385.50, and subtracted the amount of fees claimed by the O'Melveny and Coblentz firms. Using this procedure, I have determined that defendants claim $22,585.75 in attorneys' fees for work performed by Broad & Cassel in the California action.

According to her declaration, Ms. Stetson consulted regularly with California counsel and negotiated with opposing counsel. See Stetson Decl. ¶¶3,5, Ex. A. She also prepared declarations in support of the motions filed in California and kept her clients apprised of the status of the case. Id., Ex. A. I recommend two deductions from the Broad & Cassel claim: $536.00 for time spent on a "fee dispute" with O'Melveny, and ten percent of the balance to reflect the inadequacies in the spreadsheet discussed above, leaving a total fee award of $19,844.75.*fn15 See Marone Decl. ¶12; Stetson Decl., Ex. A (8/17/04; 8/18/04).

The spreadsheet also establishes that Broad & Cassel incurred a total of $2,691.66 in costs. Stetson Decl., Ex. A. Defendants have failed to explain which of these costs are attributable to the California action. As discussed above, however, defendants claimed $502.89 in prelitigation costs and $358.34 in costs in the Florida action.*fn16 Subtracting these costs from the total costs incurred by Broad & Cassel, I have determined that the firm expended $1,840.43 in costs in the California action.*fn17 I therefore recommend that defendants recover $21,685.18 in attorneys' fees and costs for work performed by Broad & Cassel in the California action.

Fees on Fees

In their reply, defendants request an additional $23,977.50 in fees for work performed in connection with this motion. Since September 9, 2004, Mr. Knowles has spent 39.4 hours and Mr. Todd has expended 48.3 hours on this motion. Supp. Knowles Decl., Ex. K. These hours were primarily spent responding to discovery propounded by plaintiff with respect to defendants' fees, as well as reviewing plaintiff's opposition to their attorney fee motion and researching and preparing their reply. Id. The time expended on these matters was reasonable, in light of plaintiff's discovery requests. Defendants also reasonably incurred $346.61 in costs. I recommend that defendants recover the additional $24,324.11 in attorneys' fees and costs incurred in connection with this motion.

Conclusion

For the foregoing reasons, I recommend that defendants recover $13,613.64 in prelitigation fees and costs, $163,598.14 in attorneys' fees and costs for work performed on the California action, and $24,324.11 in attorneys' fees and costs for this motion, for a total award of $201,535.89 in attorneys' fees and costs. I have attached a chart comparing the attorneys' fees and costs claimed by defendants with the recommended award.

Bernard Zimmerman United States Magistrate Judge

FEE CHART

 FEES CLAIMEDFEES AWARDEDCOSTS CLAIMED*COSTS AWARDEDTOTAL CLAIMEDTOTAL AWARDED PRELITIGATION$15,474.00$13,110.75$502.89$502.89$15,976.89$13,613.64 FLORIDA ACTION$37,010.00$0$358.34$0$37,368.34$0 CALIFORNIA ACTION O'Melveny & Myers LLP$73,080.25$54,181.50$0$0$73,080.25$54,181.50 CALIFORNIA ACTION Coblentz, Patch, Duffy & Bass LLP$84,719.50$84,719.50$3,011.96$3,011.96$87,731.46$87,731.46 CALIFORNIA ACTION Broad & Cassel$22,585.75**$19,844.75$1,840.43***$1,840.43$24,426.18$21,685.18 FEES ON FEES$23,977.50$23,977.50$346.61$346.61$24,324.11$24,324.11 TOTAL$256,847.00$195,834$6,060.23$5,701.89$262,907.23$201,535.89

*A discrepancy exists between the amount claimed in defendants' papers and the amount specified in the declarations submitted in support of defendants' motion. See, supra, note 15.

**This amount is based on the total fees claimed in the California action, $180,385.50, less the fees claimed by the Coblentz and O'Melveny firms.

***This amount is based on the total costs claimed by Broad & Cassel, $2,961.66, less the prelitigation costs and costs in the Florida action.


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