United States District Court, N.D. California
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For Christopher E Banas, CB Tech Ventures, LLC, Kelly Castella, FLP, Paul Castella, FLP, Ian Clements, Alexander Parker Wood, Silbiano V Gonzales, Luis F Angel, M.D., Scientific Health Development, LTD, John E Campion, Fred B Dinger, III, Charles Martin Wender, Steven R Bailey, M.D., Scout Healthcare Fund, LP, Frank Bagatta, James F Traa, Alan H Dean, Philip J Romano, Samson Investments, LP, Stuart Fitts, Roy L White, Joe Piercy, Dan Sims, Joe M Miller, Hugo Londero, M.D., Whitney E Solcher, Former Shareholders of CardioSpectra, Inc., Plaintiffs: Matthew Joseph Zevin, LEAD ATTORNEY, Stanley Law Group, San Diego, CA; Martin Darren Woodward, Scott Andrew Kitner, PRO HAC VICE, Marc R Stanley, STANLEY LAW GROUP, Dallas, TX.
For Volcano Corporation, a Delaware corporation, Volcano Corporation and Does 1-10, Defendants: Michael Graham Rhodes, LEAD ATTORNEY, Amanda Alison Main, Mark Frederick Lambert, Ritesh Kumar Srivastava, Cooley LLP, Palo Alto, CA.
ORDER GRANTING IN PART AND DENYING IN PART VOLCANO'S MOTION FOR ATTORNEYS' FEES AND COSTS; DENYING PLAINTIFFS' MOTION TO SEAL
WILLIAM H. ORRICK, United States District Judge.
Re: Dkt. Nos. 106, 123
Having prevailed on its motion for summary judgment, defendant Volcano Corporation is entitled to its reasonable fees and costs pursuant to an attorneys' fees provision in the merger agreement from which the underlying dispute arose. The amount it seeks--$3,557,034.50 in attorneys' fees and $1,023,995.99 in costs and disbursements, totaling $4,581,030.49--is eye-catching, and the lack of support for such a huge request is surprising. A significant reduction in Volcano's request is warranted due to block-billing, excessive time claimed for specific tasks, and other deficiencies, as detailed below. Volcano is awarded $2,586,963.38 in fees and $937,503.17 in costs and disbursements, totaling $3,524,466.55.
Volcano merged with CardioSpectra, Inc. in 2007 in exchange for $25 million in cash to CardioSpectra's shareholders and the promise to make four additional payments from Volcano to CardioSpectra's then-former shareholders if certain milestones were achieved. Section 13.4 of the merger agreement provided that:
If any action or proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled).
Merger agreement § 13.4 [Dkt. No. 64-19].
Plaintiffs Christopher Banas and Paul Castella, who are former shareholders of CardioSpectra, sued Volcano, alleging that Volcano breached its contractual obligation to use good faith and reasonable commercial efforts to achieve Milestone 2 and that Volcano failed to pay the shareholders after Milestones 3 and 4 were satisfied. See second amended complaint [Dkt. No. 33]. On March 31, 2014, I granted Volcano's motion for summary judgment and denied plaintiffs' motion for summary judgment. Dkt. No. 94.
In determining whether fees are reasonable under Delaware law, courts look to the factors delineated in Rule 1.5(a) of the Delaware Lawyers' Rules of Professional Conduct:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skills requisite to perform the legal services properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent.
Delaware Lawyers' Rule of Professional Conduct 1.5(a).
" [A] court also should consider whether the number of hours devoted to litigation was excessive, redundant, duplicative or otherwise unnecessary." Mahani v. Edix Media Grp., Inc., 935 A.2d 242, 247-48 (Del. 2007) (citation omitted); see also Hensley v. Eckerhart, 461 U.S. 424, 434, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983) (" Counsel for the prevailing party should make a good faith effort to exclude from a fee request hours that are excessive, redundant, or otherwise unnecessary, just as a lawyer in private practice ethically is obligated to exclude such hours from his fee submission." ).
Plaintiffs argue that Volcano's motion should be denied for four reasons: (i) the merger agreement limits Volcano's recovery from plaintiffs to an indemnity escrow fund which has already been depleted; (ii) plaintiffs Banas and Castella cannot be personally liable for attorneys' fees because they were parties to the merger agreement only as shareholder representatives, not in their personal capacities; (iii) Volcano's claimed fees are not reasonable; and (iv)Volcano's claimed costs are not recoverable and not reasonable. I address each argument below.
I. VOLCANO'S MOTION IS NOT MOOT
Plaintiffs argue that Volcano's request for fees is moot because the Exclusive Remedy provision in Section 10.9 of the merger agreement governs Volcano's ability to recover from plaintiffs and limits any recovery, including for attorneys' fees, to an escrow fund which has already been depleted. Section 10.9 provides, in relevant part:
10.9 Exclusive Remedy. . . . [T]he parties hereto acknowledge and agree
that the indemnification provisions of this Section 10 shall be the sole and exclusive remedy of the Parent Indemnitees with respect to any and all claims that a Parent Indemnitee may have against the Company Shareholders . . . .
Merger Agreement § 10.9 [Dkt. No. 33-1].
Plaintiffs misconstrue Section 10.9. bye its own terms, Section 10.9 is limited to situations not present here: claims brought by Parent Indemnitees against the Company Shareholders. The Parent Indemnitees are Volcano and its affiliates. See Merger Agreement at A-13. The Company Shareholders are the former shareholders of CardioSpectra. See Merger Agreement at A-4, A-6. Accordingly, as properly construed, Section 10.9 provides that in the event that Volcano seeks to assert claims against the former shareholders of CardioSpectra, it can only do so pursuant to " the indemnification provisions of this Section 10." 
Section 10.9 says nothing about claims CardioSpectra's former shareholders assert against Volcano, which is what happened here: CardioSpectra's former shareholders filed suit against Volcano, alleging that Volcano breached the merger agreement. Volcano did not assert claims against former CardioSpectra shareholders, much less claims for indemnification. Section 10.9 therefore has no bearing on the present situation.
Unlike Section 10.9, the attorneys' fees provision in the merger agreement is not limited to indemnification claims or claims by one side against the other. The provision provides:
13.4 Attorneys' Fees. If any action or proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled).
Merger Agreement § 13.4.
Volcano obtained summary judgment on plaintiffs' claim that Volcano breached the merger agreement--the only claim asserted in the operative complaint. There is no dispute that this was an action " relating to this Agreement or the enforcement of any provision of this Agreement" and that Volcano is the " prevailing party." Accordingly, as the " prevailing party," the merger agreement entitles Volcano is entitled to its " reasonable attorneys' fees, costs and
disbursements." Merger Agreement § 13.4.
II. VOLCANO IS NOT ESTOPPED FROM SEEKING FEES FROM BANAS AND CASTELLA
Plaintiffs Banas and Castella argue that Volcano is estopped from holding them personally or individually liable for attorneys' fees because Volcano previously argued that Banas and Castella were only parties to the merger agreement in their capacities as shareholder representatives, not as individuals, and could only sue in that capacity. Pltfs.' opp. at 3-4 [Dkt. No. 114].
Plaintiffs' argument is unavailing. Banas's and Castella's allegations that they were parties to the merger agreement as shareholder representatives established their standing to sue for breach of contract; it had no bearing on Volcano's right to recover attorneys' fees pursuant to Section 13.4 of the merger agreement as the " prevailing party."
The cases cited by plaintiffs, Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597, 600, 605 (9th Cir. 1996) and United States v. Alexander, 106 F.3d 874, 876 (9th Cir. 1997), are inapposite and do not support their argument. Rissetto stands for the unremarkable proposition that judicial estoppel precludes a party from taking a position inconsistent with that party's earlier position. Rissetto, 94 F.3d at 605. That is not the case here. Volcano's earlier position that Banas and Castella could only assert breach of contract in the capacities in which they were parties to the merger agreement is consistent with Volcano's current position that, as the prevailing party, it is entitled to attorneys' fees from plaintiffs. Alexander explains that " [u]nder the 'law of the case' doctrine, a court is generally precluded from reconsidering an issue that has already been decided by the same court, or a higher court in the identical case." 106 F.3d at 876 (citation omitted). The law of the case doctrine has no application here because the Court has not previously addressed plaintiffs' liability for attorneys' fees.
Banas and Castella initiated this action against Volcano seeking millions of dollars. It would be patently unfair to hold that Volcano waived its contractual right to attorneys' fees because it appropriately required Banas and Castella to plead the basis for their standing to assert breach of contract. Cf Johnson v. Myers, 2014 WL 2214045, at *2 (N.D. Cal. May 28, 2014) (" it would be inequitable to limit defendants' attorney's fees recovery to the assets of a single plaintiff when every litigant was
invested in the outcome of the action and aspired to win money" ). If Banas and Castella have an arrangement with other former CardioSpectra shareholders, or the dismissed defendants, regarding indemnification for attorneys' fees, that is their business. However, there is no question that, as plaintiffs, Banas and Castella are liable for attorneys' fees in the first instance.
III. VOLCANO IS ENTITLED TO REASONABLE ATTORNEYS' FEES
Having rejected plaintiffs' two threshold arguments above, there is no question that Volcano is entitled to reasonable fees. But is the $3.5 million in fees Volcano paid to its counsel, Cooley LLP, reasonable?
Plaintiffs contend that I should reduce Volcano's request " by $1,356,613.50 for its excessive charges, vague charges, and then make an additional large cut due to block billing." Dkt. No. 123-3 at 10. Specifically, plaintiffs assert that Volcano failed to establish that its fees are the prevailing rates for similar cases in the Northern District; improperly block-billed its time; provided insufficiently detailed billing records; seeks fees for discrepant time entries; overstaffed and duplicated assignments; seeks excessive fees for travel; billed for administrative, clerical, and paralegal work; billed excessive time for document review; and seeks ...