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Zest Ip Holdings, LLC v. Implant Direct Mfg., LLC

United States District Court, S.D. California

December 3, 2014

ZEST IP HOLDINGS, LLC, et al., Plaintiffs,
v.
IMPLANT DIRECT MFG., LLC, et al., Defendants.

ORDER SETTING FORTH AMOUNT OF MONETARY SANCTIONS TO BE AWARDED TO PLAINTIFFS

GONZALO P. CURIEL, District Judge.

Zest IP Holdings, LLC, et. al. ("Plaintiffs") filed a motion for spoliation and discovery abuse sanctions ("Motion") against Implant Direct MFG., LLC, et al. ("Defendants"). (Dkt. No. 121.) The Magistrate Judge issued an Order & Recommendation ("O&R") granting in part and denying in part Plaintiffs' Motion. (Dkt. No. 312.) This Court adopted in part the Magistrate Judge's O&R, granted Plaintiffs' Motion, and took under submission the issue of a reasonable amount of sanctions to be awarded to Plaintiffs due to Defendants' discovery abuses. (Dkt. No. 440.) Based on the parties' briefs, supporting documentation, and the applicable law, the Court determines that a reasonable amount of sanctions to be awarded to Plaintiffs is $122, 486.95.

Background

As set forth in prior orders in this case, this is a patent and trademark infringement action involving dental attachment products. (See Dkt. No. 1.) In the First Amended Complaint, Plaintiffs allege that the marketing and sale of the GoDirect and GPS products by Defendants infringes Plaintiffs' patent and trademark rights. (Dkt. No. 13, "FAC, " at 12-13.) The patents at issue are U.S. Patent No. 6, 030, 219 ("the 219 Patent") and U.S. Patent No. 6, 299, 447 ("the 447 Patent"). (Id.) Plaintiffs also allege Defendants infringed Plaintiffs' registered marks "ZEST" and "LOCATOR" without Plaintiffs' authorization, resulting in trademark infringement. (Id. at 13.) Plaintiffs allege several additional federal and state law claims, including false designation of origin, false advertising, unfair business practices, and unfair competition. (Id. at 13-17.)

On August 27, 2012, Plaintiffs filed a motion for spoliation and discovery abuses sanctions ("Motion") against Defendants. (Dkt. No. 121.) On October 5, 2012, Defendants filed an opposition to the Motion, (Dkt. No. 127), and Plaintiffs filed a reply in support of the Motion on October 12, 2012. (Dkt. No. 131.) Plaintiffs and Defendants each submitted supplemental briefs (Dkt. Nos. 192, 197), as well as supplemental declarations and joint statements (Dkt. Nos. 129, 151, 152, 160.) On

October 19, 2012 and May 29, 2013, United States District Court Magistrate Judge Gallo ("Magistrate Judge") heard oral arguments on the Motion. (Dkt. Nos. 145, 228.) On November 25, 2013, the Magistrate Judge issued an O&R, recommending that Plaintiffs' Motion be granted to the extent that Plaintiffs seek an adverse jury instruction, granting Plaintiffs' Motion to the extent that Plaintiffs seek monetary sanctions, and denying Plaintiffs' Motion to the extent that Plaintiffs seek a default judgment. (Dkt. No. 312 at 24.) The Magistrate Judge also ordered Plaintiffs to "file with the Court substantiation of the reasonable attorneys' fees and costs associated with (1) the time spent by Plaintiffs in bringing Defendants' spoliation of evidence to the Court's attention, (2) bringing the current Motion, and (3) obtaining destroyed documents from third parties." (Id.)

On December 31, 2013, pursuant to the O&R, Plaintiffs filed a statement of costs and fees ("Statement of Costs") associated with their Motion for sanctions against Defendants. (Dkt. No. 325.) On January 14, 2014, Defendants filed a reply, objecting to the Statement of Costs. (Dkt. No. 334.)

On June 16, 2014, this Court issued an order adopting in part the Magistrate Judge's recommendation for monetary sanctions and granting Plaintiffs' Motion for monetary sanctions due to Defendants' discovery abuses.[1] (Dkt. No. 440 at 30.) Pursuant to that order, this Court took under submission the issue of a reasonable amount of monetary sanctions to be awarded to Plaintiffs consistent with the Court's findings, stating that a written order would be issued setting forth that amount. (Id.)

Discussion

In the Statement of Costs, Plaintiffs seek reimbursement of $213, 983.25 in fees and $10, 728.43 in costs, or a total amount of $224, 711.68. (Dkt. No. 325 at 7-8.) In particular, Plaintiffs seek fees of $213, 983.25 in connection with: (1) investigating Defendants' spoliation through failure to preserve documents and destruction of documents; (2) researching, writing, and filing papers associated with the instant Motion; (3) reviewing documents produced by Defendants after Plaintiffs filed the instant Motion; (4) preparing for and traveling to hearings on the instant Motion held on October 19, 2012 and May 29, 2013; and (5) obtaining spoliated documents from third parties. (Id. at 7.) Plaintiffs also seek reimbursement of costs of $10, 728.43 for filing fees, travel expenses to attend hearings, legal research, and document reproduction. (Id. at 8.)

In support of their requests, Plaintiffs provide billing records indicating a general description of the work performed, the dates on which the work was performed, the amount of time spent on each date, and which attorney performed the work. (Dkt. No. 325, Ferri Decl., Exs. 1-2.) Plaintiffs discount the hours by 20% "in those entries where multiple tasks are described at least one of which is unrelated" to Plaintiffs' instant Motion. (Id. at 3-4.) Plaintiffs argue that the hours they seek reimbursement for are reasonable, particularly because "[t]he fact that a sophisticated entity like [Plaintiffs] has paid the fees incurred, including long before any sanctions order was entered, is powerful evidence that the number of hours are reasonable." (Id. at 4.) In assessing the prevailing market rates in the relevant community, Plaintiffs present statistical evidence of all patent infringement actions filed in this District between January 2013 and November 2013, including who served as lead counsel in those actions. (Id. at 4-5.) Plaintiffs conclude that "multi-state/national law firms that practice patent litigation in this District" constitute the relevant community, and that Mayer Brown's hourly rates are consistent with the hourly rates among the relevant community. (Id. at 5-6.)

In objecting to the Statement of Costs, Defendants argue that: (1) the award of fees by the Magistrate Judge was improper because Defendants did not act in bad faith; (2) Plaintiffs' fee requests are unreasonable and should be reduced; and (3) Plaintiffs' requests for out-of-pocket expenses are unreasonable. (Dkt. No. 334.) As to the unreasonableness of the requested fees, Defendants argue that Plaintiffs request fees for time that is not authorized by the Recommendation: $26, 515.00 for preparing the Statement of Costs, and $33, 755.00 for other unauthorized activities. (Id.) Next, Defendants argue that this Court should deny excessive and duplicate attorney time sought by Plaintiffs by reducing the award by $5, 805.00, the amount spent by attorney Manuel Velez in preparing for and attending the oral hearings, as well as reducing the award based on Plaintiffs' quarter-hour billing practice. (Id.) Finally, Defendants contend that this Court should not grant fees for time that was block-billed by Plaintiffs' attorneys and should instead deny the total $43, 885.75 of block-billed fees or, alternatively, reduce the block-billed entries by 50%. (Id.)

As for the requested costs, Defendants argue that seeking to recover travel expenses for two attorneys is generally considered duplicative and unreasonable, and request that this Court either deny the total $6, 697.50 of travel-related expenses or award travel expenses only for one attorney's attendance at the October 19, 2012 hearing: $1, 735.82. (Id.)

Overall, Defendants seek to reduce the amount of attorney's fees awarded to Plaintiffs by at least $116, 658.25, representing a reduction of: $26, 515.00 for preparing the fee petition; $33, 755.00 for other activities not authorized by the Recommendation; $43, 885.75for block-billed entries; $5, 805.00 for excessive or duplicate time; and $6, 697.50 for unreasonable travel expenses. (Id.) Defendants also contend that a further reduction of 20% is warranted on the basis of Plaintiffs' quarter-hour billing practice. (Id.)

A. Bad Faith

In objecting to the Statement of Costs, Defendants first argue that the Magistrate Judge improperly awarded fees because Defendants did not act in bad faith. (Dkt. No. 334 at 2-3.) According to Defendants, the Ninth Circuit requires a finding of bad faith for an award of monetary damages pursuant to the court's inherent authority, and the Magistrate Judge did not specifically find that Defendants acted in bad faith. (Id. at 2.) However, this Court, by order issued June 16, 2014, explicitly found that Defendants "acted in bad faith to impede and ...


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