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E. & J. Gallo Winery v. Strategic Materials, Inc.

United States District Court, E.D. California

December 10, 2019

E. & J. GALLO WINERY, et al., Plaintiff,
v.
STRATEGIC MATERIALS, INC., et al., Defendants.

          ORDER GRANTING STRATEGIC MATERIALS, INCS's MOTION FOR ATTORNEY FEES AND COSTS IN PART (ECF NO. 77.)

         Plaintiffs E. & J. Gallo Winery and Gallo Glass Company (“Gallo”) filed this suit against Defendant Strategic Materials, Inc. (“SMI”) alleging breaches of the parties' Supply Agreement. (ECF No. 1.) On August 8, 2019, the Court ruled on SMI's “Motion to Strike Expert Opinions Based on Undisclosed Damage Claims.” (ECF No. 71.) The Court found that Gallo failed to adequately disclose certain categories of damages relating to energy costs and a 2019 furnace shutdown. As part of its sanctions for the inadequate disclosure, it ordered that “Gallo shall pay SMI's reasonable attorney fees and costs related to this motion, as well as the supplemental deposition related to batch costs.” (Id. at 13.) The Court ordered the parties to meet and confer regarding the amount of attorney fees and costs to be awarded to SMI.

         The parties were unable to stipulate to an amount of attorney fees and costs to be awarded to SMI pursuant to the Court's order; thus, SMI filed the instant “Motion for Attorneys' Fees” (referred to herein as “the motion”). For the following reasons, the motion is GRANTED IN PART.

         I. BACKGROUND[1]

         According to the Complaint, SMI is a Texas-based corporation that supplies recycled glass and plastic. Gallo is a wine producer and bottle manufacturer that purchases recycled glass (also known as cullet) from SMI to produce wine bottles.

         Gallo and SMI entered into a 10-year Supply Agreement in which SMI agreed to make available certain volumes of cullet to Gallo each year at certain prices, subject to volume and price adjustments.

         Gallo filed this lawsuit in December 2017, alleging that SMI breached the Supply Agreement. Gallo's complaint sought “consequential damages.” More specifically, the breach of contract allegations assert, in pertinent part that: (1) Gallo was forced to obtain alternative source of cullet due to SMI's breach of the supply agreement; (2) Gallo was forced to pay higher prices for cullet from SMI's Madera, Sacramento, San Leandro, Commerce, and Vernon glass processing plants and incurred additional costs to make glass due to SMI's failure to supply the appropriate amount of cullet under the Supply Agreement; and (3) Gallo suffered damage due to the failure of certain SMI cullet shipments to meet the specifications in the supply agreement.

         On June 19, 2019, SMI filed a “Motion to Strike Expert Opinions Based on Undisclosed Damages Claims” (ECF No. 53.), contending that Gallo's damages theories related to batch costs, energy costs, and the February 2019 furnace shutdown were not properly disclosed and seeking to have all evidence of those categories of damages excluded.

         On August 8, 2019, the Court ruled on SMI's “Motion to Strike Expert Opinions Based on Undisclosed Damage Claims.” (ECF No. 71.) The Court found that certain categories of damages relating to energy costs and a 2019 furnace shutdown were inadequately disclosed and precluded Gallo from offering evidence of same at trial. The Court also addressed whether Gallo adequately disclosed its intention to seek batch costs as a category of damages. The Court refused to preclude Gallo from offering evidence of batch costs altogether; however, the Court did order that “Gallo shall pay SMI's reasonable attorney fees and costs related to this motion.” The Court ordered the parties to meet and confer regarding the amount of attorney fees and costs to be awarded to SMI. The parties were unable to stipulate to an amount of attorney fees and costs to be awarded to SMI pursuant to the Court's order; thus, SMI filed this motion. Gallo filed an opposition to the motion on September 27, 2019. (ECF No. 82.) SMI filed a reply on October 4, 2019. (ECF No. 85.)

         II. LEGAL STANDARDS

         Reasonable attorneys' fees are recoverable under Federal Rule of Civil Procedure 37(c)(1)(A), which provides that, if a party fails to provide information as required by Rule 26(a) or (e), the court “may order payment of the reasonable expenses, including attorney's fees, caused by the failure…” Courts apply the lodestar analysis to Rule 37 sanctions to determine the reasonable value of the services performed. See Kraszewski v. State Farm General Ins. Co., 1984 WL 1027 at *5 (N.D. Cal. June 11, 1984) (applying a “lodestar” analysis to Rule 37 sanctions). “The ‘lodestar' amount is calculated by multiplying the number of hours the prevailing party reasonably expended on the litigation by a reasonable hourly rate.” Ferland v. Conrad Credit Corp., 244 F.3d 1145, 1149 n.4 (9th Cir. 2001) (citations omitted). “In determining reasonable hours, counsel bears the burden of submitting 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). The Court “should also exclude from this initial fee calculation hours that were not ‘reasonably expended.'” Hensley v. Eckerhart, 461 U.S. 424, 434 (1983) (citation omitted). “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…” Id.

         As to the reasonable hourly rate, reasonable hourly rates are calculated by reference to “prevailing market rates in the relevant community, ” with a special emphasis on fees charged by lawyers of “comparable, skill, experience, and reputation.” Davis v. City of San Francisco, 976 F.2d 1536, 1546 (9th Cir. 1992), vacated on other grounds, 984 F.2d 345 (9th Cir. 1993). “Generally, the forum district represents the relevant legal community.” J & J Sports Productions Inc. v. Cervantes, 2019 WL 935387 at *2 (E.D. Cal. Feb. 26, 2019) (citing Gates v. Deukmejian, 987 F.2d 1392, 1405 (9th Cir. 1992) (further citations omitted). The fee applicant bears the burden of producing satisfactory evidence “that the requested rates are in line with those prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation.” Blum v. Stenson, 465 U.S. 886, 895 n. 11 (1984). “Affidavits of the plaintiff['s] attorney and other attorneys regarding prevailing fees in the community, and rate determinations in other cases, particularly those setting a rate for the plaintiff['s] attorney, are satisfactory evidence of the prevailing market rate.” United Steelworkers of Am. v. Phelps Dodge Corp., 896 F.2d 403, 407 (9th Cir. 1990).

         III. ANALYSIS

         SMI seeks an award of $116, 110.00 in attorney's fees. Gallo objects to this request, arguing both that the rate SMI uses to calculate the award is incorrect as a matter of law and that SMI expended unnecessary time and resources related to the motion to strike. Each argument is addressed in turn.

         A. Reasonable Hourly Rate in the Eastern District of California

         SMI calculates its proposed fee award using the unadjusted billing rates of five attorneys that worked on the motion to strike. SMI is seeking a total of $61, 000.50 for associate work, composed of approximately 91 hours, at an average rate of approximately $670.00 per hour. SMI is also seeking $55, 109.50 for partner-level work, composed of approximately 48 hours, at a rate of approximately $1150.00 per hour. SMI claims these figures are “within the range charged by other similarly-experienced attorneys at similar international law firms with comparable resources and expertise.” (ECF No. 78, p. 6.) Gallo objects to these rates as far higher than the prevailing rates in the Eastern District of California, which, according to Gallo, is the pertinent metric.

         The Court agrees with Gallo that the rates are should be reduced to more accurately reflect the prevailing market rates in the Eastern District of California. “[G]enerally, the relevant community [for the prevailing market rate] is the forum in which the district court sits.” See Camancho v. Bridgeport Fin., Inc., 523 F.3d 973, 979 (9th Cir. 2008). However, rates outside the forum may be used “if local counsel was unavailable, either because they are unwilling or unable to perform because they lack the degree of experience, expertise, or specialization required to handle properly the case.” Gates, 987 F.2d at 1405.

         Here, SMI does not offer any evidence to support an argument that local counsel was “unavailable” other than the results of a Bloomberg search that show litigants in this area often use international law firms for significant commercial disputes.

         While the Court appreciates the complexity of this matter and that SMI obtained a favorable outcome on the motion to strike, the Court finds this evidence inadequate to show that local counsel is “unavailable” under Ninth Circuit jurisprudence. First, SMI points to nothing to show that counsel in the Eastern District of California are “unwilling” to accept representation in complex commercial litigation cases such as this. Second, as to the apparent argument that counsel in the Eastern District of California lack the ability to litigate complex commercial litigation cases, the Court finds SMI's proof insufficient. That litigants often use outside counsel for complex disputes does not necessarily mean that competent counsel is not present in this district. Indeed, SMI's declaration in support of its motion for attorney fees does not discuss whether counsel in the Eastern District ...


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