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United States v. Nosal

United States District Court, N.D. California

May 3, 2018

DAVID NOSAL, Defendant.

          ORDER RE RESTITUTION DOCKET NOS. 628, 634, 639

          EDWARD M CHEN United States District Judge

         Defendant David Nosal was found guilty of, inter alia, violating the Computer Fraud and Abuse Act (“CFAA”). This Court originally sentenced Mr. Nosal to one year and one day in prison, three years of supervised release, a $60, 000 fine, a $600 special assessment, and approximately $828, 000 in restitution to Korn/Ferry International (“KFI”), the victim of the crimes. The restitution award had three components: (1) $27, 400 represented KFI's costs incurred in attempting to ascertain the nature and scope of Mr. Nosal's misconduct; (2) approximately $247, 700 represented the value of KFI's employee time spent participating in and assisting the government's investigation and prosecution; and (3) approximately $595, 800 represented the attorney's fees incurred by KFI in aid of the investigation or prosecution of the offense. With respect to (3), the government had asked for a significantly higher amount - approximately $964, 900 - but the Court reduced the fee component “for invoices 'not demonstrably reasonably necessary to the government's investigation and prosecution, ' for 'staffing inefficiencies, ' and for 'time spent on “press” and file/order reviewing charges.'” United States v. Nosal, 844 F.3d 1024, 1046 (9th Cir. 2016).

         Mr. Nosal appealed the conviction and sentence to the Ninth Circuit. In December 2016, the Ninth Circuit largely affirmed this Court's rulings but remanded with respect to the restitution award - more specifically, component (3) above related to attorney's fees. On remand, the government reduced its request to approximately $458, 000 while Mr. Nosal argued that restitution for fees should be $0 but, at the very least, no more than approximately $55, 000. The Court held a hearing but did not decide the issue at that time, instead giving the parties additional guidance and then directing them to meet and confer. The parties have now met and conferred and their dispute has narrowed. The government now asks for an award of approximately $183, 000 (covering an eight-year period, from July 2005 to January 2014); Mr. Nosal asks that the award be limited to approximately $60, 000. The parties have provided a spreadsheet which shows, inter alia, the attorney time entries, where the government seeks compensation, and where Mr. Nosal objects.

         Having considered the Ninth Circuit's remand order, the parties' post-remand briefs, the spreadsheet, the oral argument of counsel, and all other evidence of record, the Court hereby finds that the proper amount for restitutionary attorney's fees is $163, 766.18.

         I. DISCUSSION

         A. Ninth Circuit Remand Order

         Restitution in the instant case is governed by the Mandatory Victim Restitution Act (“MVRA”). See 18 U.S.C. § 3663A. The Act provides in relevant part that a “court shall order, in addition to . . . any other penalty authorized by law, that the defendant make restitution to the victim of the offense.” Id. § 3663A(a)(1). Victim is defined as one “directly and proximately harmed as a result of the commission of [the] offense.” Id. § 3663A(a)(2). “The order of restitution shall require that [the] defendant . . . reimburse the victim for lost income and necessary child care, transportation, and other expenses incurred during participation in the investigation or prosecution of the offense or attendance at proceedings related to the offense.” Id. § 3663A(b)(4). “Any dispute as to the proper amount or type of restitution shall be resolved by the court by the preponderance of the evidence.” Id. § 3664(e).

         In its remand order, the Ninth Circuit noted that “other expenses” for purposes of § 3663A(b)(4) can include attorney's fees. However, there are certain parameters:

• “[T]he fees must be the direct and foreseeable result of the defendant's conduct.” Nosal, 844 F.3d at 1047.
• It must have been “'reasonably necessary for [the victim] to incur attorneys' . . . fees to participate in the investigation or prosecution of the offense.'” Id.
• The fees must be reasonable - e.g., there should be no award for “duplicate effort” or “time that is disproportionate to the task.” Id. at 1048.
• The fees must reflect participation in the investigation or prosecution of the offense -thus, the attorneys' work is not a substitute for the work of the prosecutor and it does not duplicate the work of the prosecutor. See Id. (regarding the latter, referring to a “shadow prosecutor”).

         With regard to Mr. Nosal's case specifically, the Ninth Circuit stated that,

[e]ven after reduction [i.e., by this Court], the total amount of fees awarded is striking, particularly given that the trial ultimately involved only three discrete incidents of criminal behavior. Although resulting in multiple counts, at bottom the events were temporally circumscribed and limited in scope. We note that a highly disproportionate percentage of the fees arose from responding to requests and inquiries related to sentencing, damages, and restitution. The reasonableness of the fees needs to be reexamined to consider (i) whether the sizeable fee related to restitution matters was reasonable; (ii) whether there was unnecessary duplication of tasks between [KFI] staff and its attorneys since the [district] court awarded a substantial sum [almost $250, 000] for the time of [KFI] employees; and (iii) whether the outside attorneys were substituting or duplicating the work of the prosecutors, rather than serving in a participatory capacity.


         B. Categories of Disputes

         As indicated above, the parties have significantly narrowed their dispute regarding restitutionary attorney fees, with the governing now asking for an award of approximately $183, 000 and Mr. Nosal asking that the award be limited to approximately $60, 000. The Court has reviewed the spreadsheet submitted by the parties, which reflects each time entry in dispute. Based on the Court's review of the spreadsheet, the subject matters of the disputes largely fall into one of the following categories

(1) Time spent on responding to government subpoenas.
(2) Time spent following up on issues identified by the USAO or FBI.
(3) Time spent in conferences with Ms. Briski (a KFI employee).
(4) Time spent attending trial.
(5) Time spent on post-trial matters such as loss and restitution.

         Below the Court addresses each category. The Court then addresses some disputed time entries that do not fall ...

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