United States District Court, S.D. California
ORDER GRANTING IN PART AND DENYING IN PART
MADSEN’S MOTION FOR ATTORNEY’S FEES AND
NON-TAXABLE COSTS AND DENYING NUVASIVE’S MOTION TO
RETAX COSTS
Barry
Ted Moskowitz, Chief Judge.
Defendant
and counterclaimant Madsen Medical, Inc. (“MMI”)
and defendant Kris Madsen (collectively “Madsen”)
have filed a Motion for Attorney’s Fees and Non-Taxable
Costs. NuVasive, Inc. (“NuVasive”) has filed a
Motion to Retax Costs. For the reasons discussed below,
Madsen’s motion for attorney’s fees and
non-taxable costs is GRANTED IN PART and DENIED IN PART, and
NuVasive’s motion to retax costs is DENIED.
I.
BACKGROUND
On
September 5, 2013, NuVasive commenced this action against MMI
and Kris Madsen. NuVasive asserted claims based on
MMI’s alleged failure to return items to NuVasive upon
MMI’s termination as well as claims for breach of the
ESR Agreement (breach of nondisclosure agreement and
noncompetition agreement). Subsequently, NuVasive added
additional claims including tort claims for intentional
interference with contractual relations.
MMI
asserted counterclaims for intentional interference with
contractual relationships, breach of the ESR Agreement by
soliciting and hiring MMI’s employees, intentional
interference with prospective economic advantage, breach of
contract relating to failure to pay commissions, unfair
competition, breach of the implied covenant of good faith and
fair dealing, and unjust enrichment.
NuVasive
abandoned its claim for breach of the noncompetition
agreement in the ESR Agreement after Madsen filed a motion to
dismiss. NuVasive also did not oppose Madsen’s Motion
for Judgment on the Pleadings on NuVasive’s claim that
MMI is the alter ego of Kris Madsen.
After
cross-motions for summary judgment were filed, the Court
granted summary judgment in favor of Madsen on
NuVasive’s claims based on allegedly missing
“sets” of instruments and implants (as opposed to
“disposables”) and NuVasive’s breach of
contract and tort claims based on threats and disparagement.
The Court granted summary judgment in favor of NuVasive on
MMI’s claim for breach of § 11.5(d) of the ESR
Agreement by soliciting and hiring MMI’s sales
representatives and breach of the implied covenant of good
faith and fair dealing.
By the
time of trial, the remaining claims of NuVasive included
claims based on missing disposables (conversion, common
count, breach of contract) and claims based on disclosure of
confidential information (breach of contract and unfair
competition). The claims of MMI to be tried included
intentional interference with contractual relations,
intentional interference with prospective economic advantage,
breach of the ESR Agreement (failure to pay commissions),
unfair competition, and unjust enrichment.
Just
before trial, NuVasive voluntarily dismissed with prejudice
its claims based on disclosure of confidential information.
During trial, NuVasive dismissed its remaining claims based
on missing disposables after NuVasive witness Derrick Von
Stein testified that his chart of lost inventory was
unreliable. On February 17, 2016, judgment was entered in
favor of Madsen on NuVasive’s affirmative claims for
relief.
After a
thirteen-day trial, MMI prevailed on all of its counterclaims
that were tried. The jury awarded MMI (1) $294, 805.16 in in
unpaid commissions (breach of the ESR Agreement); (2) $7.5
million in lost profits on the tort claims; (3) $14 million
in unjust enrichment on the tort claims (disgorgement of
profits earned by NuVasive); and (4) $20 million in punitive
damages. On March 18, 2016, the Court entered judgment in
favor of MMI in the amount of $27, 794.805.16. The judgment
did not include the award for unjust enrichment.
II.
DISCUSSION
A.
Attorney’s Fees
Madsen
moves for an award of attorney’s fees in the total
amount of $1, 184, 066.03.[1] Madsen requests that of these fees, $637,
165.27 be allocated as having been incurred in connection
with the litigation of NuVasive’s affirmative claims
against Madsen. For the reasons discussed below, the Court
grants attorney’s fees but reduces them to $1, 094,
508.03, with $356, 661.96 allocated to NuVasive’s
affirmative claims.
1.
Prevailing Party under ESR Agreement
NuVasive
contends that MMI’s interference counterclaims relate
to MMI’s employment agreements with its former
employees, not the ESR Agreement, and that MMI is not the
prevailing party under the ESR Agreement. But, as discussed
below, the attorney’s fees clause in the ESR Agreement
is worded so broadly that it extends to MMI’s
interference counterclaims and renders MMI the
“prevailing party” as to the entire action.
Section
12.1(b) of the ESR Agreement provides: “The prevailing
party in any action or suit shall be entitled to recover all
costs it incurred in connection therewith, including, without
limitation, reasonable attorney’s fees.”
Under
Cal. Civ. Code § 1717, upon which NuVasive relies,
“In any action on a contract, where the contract
specifically provides that attorney's fees and costs,
which are incurred to enforce that contract, shall be awarded
either to one of the parties or to the prevailing party, then
the party who is determined to be the party prevailing on the
contract . . . shall be entitled to reasonable attorney's
fees in addition to other costs.” Cal. Civ. Code §
1717(a). The “party prevailing on the contract”
is defined as “the party who recovered a greater relief
in the action on the contract.” Cal. Civ. Code §
1717(b). The court may also determine that there is no
prevailing party on the contract. Id.
However,
parties are free to draft attorney fee clauses that are
broader than the type of clause discussed in section 1717.
Cal. Civ. Proc. Code § 1021 provides: “Except as
attorney’s fees are specifically provided for by
statute, the measure and mode of compensation of attorneys
and counselors at law is left to the agreement, express or
implied, of the parties.”
Section
1021 allows parties to agree to an attorney fee clause that
entitles the prevailing party in litigation to recover fees
whether the litigation sounds in contract, tort, or both.
Maynard v. BTI Group, Inc., 216 Cal.App.4th 984
(2013). If the attorney fee provision is broad enough to
encompass tort claims, “the prevailing party entitled
to recover fees normally will be the party whose net recovery
is greater, in the sense of most accomplishing its litigation
objectives, whether or not that party prevailed on a contract
cause of action.” Id. at 992. Furthermore,
“in awarding fees to the prevailing party it [is]
unnecessary to apportion fees between those claims.”
Id.
In
Maynard, the agreement at issue was a listing
agreement between the seller of a retail business and the
broker. The agreement contained the following attorney fee
clause: “All parties to this agreement agree to
mediate, in good faith, any dispute prior to initiating
arbitration or litigation. The prevailing party in the event
of arbitration or litigation shall be entitled to costs and
reasonable attorney fees.” The California Court of
Appeal found that “an attorney fee provision awarding
fees based on the outcome of ‘any dispute’
encompasses all claims, whether in contract, tort or
otherwise.” Id. at 993. Therefore, the court
determined that the plaintiff was the prevailing party
because she obtained a net recovery in the action, even
though she recovered on a negligence claim rather than a
breach of contract cause of action.
Similarly,
in Gonzales v. Personal Storage, Inc., 56
Cal.App.4th 464 (1997), a customer sued a storage facility
after all of her belongings were stolen from the facility by
a woman falsely claiming to be the plaintiff. The jury
awarded her damages for breach of contract, conversion, and
emotional distress. The trial court denied the
plaintiff’s request for attorney’s fees,
appearing to rely on the fact that the plaintiff was awarded
a substantial sum in tort damages. Id. at 480. The
California Court of Appeal found that the trial court had
erred because the attorney fee provision in the lease
agreement provided: “In the event of any legal action
or proceeding between the parties hereto, reasonable
attorney’s fees and expenses of the prevailing party in
any such action or proceeding may be added to the judgment
therein.” Id. at 478. The court explained that
by its terms, the attorney fee clause applies to “any
legal action” and that clauses with such broad language
permit the recovery of attorney fees in tort as well as
contract actions. Id. at 480. See also Thompson
v. Miller, 112 Cal.App.4th 327 (2003) (holding that
Share Purchase Agreement’s attorney fee provision gave
the defendants the right to recover attorney’s fees in
defending against tort claims because the provision stated
that the prevailing party “in any dispute under this
Agreement shall be entitled to reasonable attorneys fees
incurred in such dispute.”); Xuereb v. Marcus &
Millichap, Inc., 3 Cal.App.4th 1338 (1992) (holding that
Purchase Agreement’s attorney fee clause, which
entitled the prevailing party in a lawsuit arising from the
Agreement to attorney’s fees, encompassed acts and
omissions occurring in connection with the Purchase Agreement
and the entire transaction).
Here,
the attorney fee clause is extremely broad, entitling the
prevailing party “in any action or suit” to
recover reasonable attorney’s fees. To the extent that
there has to be some nexus between the ESR Agreement and the
counterclaims, the counterclaims certainly relate to the ESR
Agreement because NuVasive sought to defend its actions based
on the language of the ESR Agreement and MMI sought damages
for lost profits due to termination of the ESR Agreement.
Accordingly, section ...