the cost of litigation: a case study, business law, plymouth state university (2009)

The Cost of Litigation: A Case Study Real Estate Bar Ass'n for Mass., Inc. v. Nat'l Real Estate Info. Servs.,

642 F. Supp. 2d 58 (D. Mass. 2009)

Professor Forgues’ Business Law Class

November 19, 2009

By Kevin M. O’Shea, Esq.

ftp.oshea.org/PSU/

2

The Parties

The Plaintiff

The Real Estate Bar Association for Massachusetts, Inc.

("REBA”)

Represented (primarily) by Yurko, Salvesen & Remz and

Holland & Knight.

The Defendant

National Real Estate Information Services and National Real

Estate Information Services, Inc.'s (collectively "NREIS")

Represented (primarily) by K&L Gates.

3

Plaintiff’s Cause of Action

REBA claimed that NREIS had engaged in the

unauthorized practice of law in Massachusetts

by performing real estate conveyances,

conducting so-called "notary closings,"

and issuing title insurance.

4

Defendant’s Counterclaim I

NREIS counterclaimed under 42 U.S.C. § 1983

that REBA's interpretation of the practice of law,

and enforcement of that interpretation,

violated the Dormant Commerce Clause of the U.S.

Constitution.

5

Defendant’s Counterclaim II

42 U.S.C. § 1983

Every person who, under color of any statute, ordinance,

regulation, custom, or usage, of any State…

subjects, or causes to be subjected, any citizen of the

United…

to the deprivation of any rights, privileges, or immunities

secured by the Constitution and laws,

shall be liable to the party injured in an action at law, suit

in equity, or other proper proceeding for redress…

6

Defendant’s Counterclaim III

Dormant Commerce Clause

The Commerce Clause, U.S. Const. art. I, § 8, cl. 3 grants

Congress the power to regulate commerce among the

several states.

Courts have interpreted that affirmative grant of power to

the federal sovereign to strip state governments of any

authority to impede the flow of goods or services between

states.

7

Defendant’s Counterclaim IV

Dormant Commerce Clause

That so-called "Dormant Commerce Clause" doctrine

prohibits the economic protectionism embodied in the

preservation of local industry by protecting it from the

rigors of interstate competition.

A party may enforce its right to be free from state

regulation of the interstate flow of goods or services under

42 U.S.C. § 1983.

8

Procedural Posture

Real Estate Bar Ass'n for Mass., Inc. v. Nat'l Real Estate

Info. Servs., 609 F. Supp. 2d 135 (D. Mass. 2009)

NREIS's Motion for Summary Judgment on Dormant

Commerce Clause Counterclaim are ALLOWED, and

REBA's Motion for Summary Judgment is DENIED.

9

What is Summary Judgment?

A court may grant summary judgment when the moving

party has shown that there is no genuine issue as to any

material fact and that the moving party is entitled to

judgment as a matter of law.

The court must examine the facts in the light most

favorable to the nonmoving party, resolving any

reasonable inference in that party's favor.

10

Claims Resolved I

Conferring the "practice of law" label on an activity

effectively bars out-of-staters from offering a commercial

service within the commonwealth's borders and

confers the right to provide that service, and to reap the

associated economic benefit,

upon a class largely composed of Massachusetts citizens.

11

Claims Resolved II

An overbroad definition of the practice of law would

have a substantial effect on interstate commerce.

It is highly unlikely that Massachusetts lawyers could

provide the same services at the same expense to the

customer as NREIS provides.

12

Claims Resolved III

Evidence for this proposition are "the savings normally

attributable to large scale operation" and "the very

existence of national companies like [NREIS].”

Moreover, REBA's definition of the practice of law would

"deprive the citizens of Massachusetts of any benefits

arising from competition.

Real Estate Bar Ass'n for Mass., Inc. v. Nat'l Real Estate Info.

Servs., 609 F. Supp. 2d 135 (D. Mass. 2009)

13

Procedural Posture

Motion for Attorneys’ Fess and Costs

Pursuant to 42 U.S.C. § 1988

Real Estate Bar Ass'n for Mass., Inc. v. Nat'l Real Estate Info.

Servs., 642 F. Supp. 2d 58 (D. Mass. 2009)

42 U.S.C. § 1988

“In any action or proceeding to enforce a provision of

sections…1983…the court, in its discretion, may allow the

prevailing party, other than the United States, a

reasonable attorney’s fee as part of the costs…”

14

Who is the Prevailing Party? I

“A prevailing party is one who has succeeded on any

significant issue in litigation which achieves some of the

benefit the parties sought in bringing suit.”

In other words, a party prevails "when the actual relief

on the merits of his claim materially alters the legal

relationship between the parties by modifying

defendant's behavior.”

15

Who is the Prevailing Party? II

“Holding that REBA violated the Dormant Commerce

Clause, and issuing a permanent injunction in NREIS's

favor, resulted in a material alteration of Parties' legal

relationship.

REBA is now "enjoined from enforcing on NREIS its

interpretation of the practice of law as encompassing

(1) all the interconnected activities of a real estate

conveyance and

(2) the issuance of title insurance.”

16

How does the Court Calculate

Attorneys’ Fees?

The court employs a two-step process to determine the

reasonable fees.

First, "the number of hours reasonably expended on the

litigation [is] multiplied by a reasonable hourly rate" to

reach the "lodestar" figure.

Second, the court may adjust "the reasonable fee upward

or downward if any special factors dictate such a result."

17

The Loadstar Figure

K&L Gates divided its efforts in this matter into four

general phases:

(1) "Development and Evaluation of Case; Answers and

Counterclaim; Motion to Dismiss Attorney Solomon";

(2) "Discovery";

(3) "Summary Judgment on Defenses, Counterclaim";

and

(4) "Fee Application.”

18

Phases of Litigation I

These phases consisted of the following efforts:

preparing and filing the Notice of Removal;

preparing and filing the Answer, Counterclaim, and Motion

to Dismiss;

19

Phases of Litigation II

reviewing and producing documents; serving document

requests on REBA;

reviewing documents produced by REBA;

engaging in discovery conferences;

engaging in a protective order dispute, and briefing that

dispute for this court;

deposing nine different witnesses and defending a

deposition of NREIS;

20

Phases of Litigation III

preparing and filing the Motion for Summary Judgment

and Motion for Summary Judgment on Dormant

Commerce Clause Counterclaim;

responding to REBA's Motion for Summary Judgment;

responding to REBA's Motion to Amend and Alter

Judgment; and

preparing and filing this fee application.

21

Invoice Descriptions I

In its invoices, K&L Gates meticulously recorded all the

relevant billing information, including

the date on which the work had been completed,

the name of the attorney who had rendered the work,

the number of hours the attorney had expended,

a description of the attorney's efforts,

the total amount that the attorney charged for the work,

a list of disbursements and other charges, and

a monthly summary.

22

Invoice Descriptions II

From the total number of hours expended on this case,

K&L Gates deducted $ 18,324.25 in unnecessary fees

and a 10% fee discount.

As of NREIS's most recent fee request, attorneys and

staff members at K&L Gates had billed a total of

2,201.60 hours to NREIS.

After deductions, NREIS requests fees for a total of

2,112.00 hours of work.

23

Staffing the Case I

As part of its documentation of these hours, K&L Gates

listed the

eight partners,

ten associates,

and six staff members who billed time for this case.

24

Staffing the Case II

Of these individuals,

partners Irene Freidel and Michael Ricciuti, and

associates Robert Sparkes and Leanne Hartmann,

billed approximately 88% of the total hours requested.

25

Staffing the Case-Freidel

Ms. Freidel

graduated from the University of Michigan Law School in

1991;

has experience in commercial litigation and other areas of

complex civil litigation, including contracts,

environmental, employment discrimination, products

liability, and civil rights;

and billed 594.20 hours for this case

(approximately 28% of the total hours requested)

at hourly rates of $ 410, $ 490, $ 540, and $ 575.

26

Staffing the Case-Hartmann

Ms. Hartmann

graduated from the University of Michigan Law School in

2006;

has experience in commercial litigation;



at hourly rates of $ 325 and $ 365.

27

Staffing the Case-Ricciuti

Mr. Ricciuti

graduated from Harvard Law School in 1987;

has experience in criminal matters, internal investigations,

complex domestic and international commercial

arbitrations and cases, matters related to homeland

security, and matters involving foreign assets and export

controls;



at hourly rates of $ 535, $ 590, and $ 625.

28

Staffing the Case-Others

Other Partners (6)

Other Associates (7)

Staff, including

Paralegals,

a Legal Intern,

Litigation, and

A Legal Librarian

29

Block Billing I

REBA argues that NREIS's documentation lacks

information necessary to determine whether the time

that K&L Gates spent in furtherance of this case was

excessive, redundant, or unreasonable.

In support, REBA cites K&L Gates's block billing method,

by which it would combine all the tasks that an attorney

had performed in a given day into a single invoice entry.

30

Block Billing II

A review of K&L Gates's invoices reveals that its

attorneys and staff members provided

clear,

well-organized, and

sufficiently detailed explanations of all the tasks that they

completed for this case.

31

Block Billing III

The party seeking fees

"is not required to record in great detail how each minute

of his time was expended,”

but "must ensure that contemporaneous time records are

kept in reasonable detail.”

NREIS has met this standard.

32

Redactions I

K&L Gates's redactions do not merit a reduction in fees.

For the invoice entries to which K&L Gates made

redactions, it left portions unredacted so as to provide

an explanation of the work performed.

In addition, NREIS satisfactorily complied with this

court's request to file nonprivileged descriptions of the

documentation that remained redacted.

33

Redactions II

K&L Gates combed through its billing invoices line-by-

line and explained the reason for each redaction, citing

attorney-client communication,

work product, or

expert-related work product.

The unredacted portions of the invoices and K&L Gates's

nonprivileged descriptions of the redacted material are

sufficient to establish that the time spent was

reasonable and in furtherance of this litigation.

34

Summary Judgment & Overstaffing I

REBA contends that the time that K&L Gates expended

on Parties' summary judgment motions was

unreasonable and that

K&L Gates otherwise overstaffed this case.

35

Summary Judgment & Overstaffing II

K&L Gates billed 453.50 hours on Phase III, summary

judgment.

a substantial amount of time for preparing and opposing

motions for summary judgment.

But, given the unique circumstances of this case, this

amount of time was reasonable.

36

Summary Judgment & Overstaffing III

Moreover, REBA had the support of the Massachusetts Bar Association ("MBA”).

In addition to the vigorous and high-quality advocacy in this case, NREIS had to address complex and novel issues of commercial, constitutional, state, and federal law.

Increasing the stakes of litigation were the significant public interest implicated by this case, and the financial consequences NREIS would have faced had it lost.

The combination of these factors reasonably led to the substantial amount of time that K&L Gates devoted to the critical summary judgment stage, and other phases of the litigation.

37

Summary Judgment & Overstaffing IV

Nor was K&L Gates's staffing of this case improper.

Though a total of twenty-four individuals billed time for

this matter, two partners and two associates performed

the majority of the work.

The above factors reasonably justified this level of

staffing.

As the First Circuit has stated, "[g]iven the complexity

of modern litigation, the deployment of multiple

attorneys is sometimes an eminently reasonable tactic.”

38

Hourly Rate I

Next, the court determines "the reasonableness of the

hourly rate claimed” by reviewing "the prevailing

market rates . . . in the community for similar services

by lawyers of reasonably comparable skill, experience

and reputation.”

In addition, "the court is entitled to rely upon its own

knowledge of attorney's fees in its surrounding area in

arriving at a reasonable hourly rate” and

may "apply different hourly rates for work done at

different stages of the case.”

39

Hourly Rate II

K&L Gates submitted two affidavits demonstrating the reasonableness of its rates.

The first was by Mr. Ricciuti, who stated that the rates were "reasonable given the fees usually charged for similarly-qualified professionals in Boston.”

The second was by a partner at the Boston law firm Dwyer & Collora, who conducted an independent fee comparison and attested that the "rates billed were reasonable.”

Because K&L Gates's rates were proportionate to each attorney's level of expertise and the complexity of the work actually rendered, this court finds the billing rates to be reasonable.

40

Hourly Rate-Commercial Litigator or

Civil Rights Litigator? I

REBA also requests this court to reduce NREIS's award to

reflect "the prevailing rates for civil rights work" rather

than "the prevailing rates of commercial litigators.”

REBA estimates these hourly rates to be

$ 300 "for an attorney in Boston with significant civil rights

experience,"

$ 200 to $ 250 for a "senior litigation associate with five or

more years civil rights experience,”

$ 175 for "a junior litigation associate," and

"$ 60 for paralegals.”

41


Civil Rights Litigator? II

First, NREIS's posture as the defendant in this action, and the plaintiff on its counterclaim, strongly militates against reducing its hourly rate.

As already discussed, in defending this suit, NREIS faced a bar association as plaintiff and the entire MBA as amicus curiae.

Filing notices of appearance on behalf of REBA were attorneys from the international commercial law firm Holland & Knight.

It was entirely reasonable for NREIS to respond by hiring a prestigious litigation firm itself.

42


Civil Rights Litigator? III

Moreover, the significant public interest implicated in

this case, coupled with the severe financial

consequences that NREIS could have faced had REBA

succeeded, all support allowing NREIS to recover fees

based on the full rates of K&L Gates's commercial

litigators.

NREIS had no choice but to present a complete defense,

including its counterclaim, to REBA's attempts to

enforce the unlawful practice of law statute.

43


Civil Rights Litigator? IV

The commercial nature of this matter supports a fee award predicated on the rates of commercial litigators.

The novel questions of state and federal law at issue in this case necessitated an understanding of real estate conveyancing, the provision of title insurance, and the market for providing such services.

REBA having argued that NREIS's provision of real estate conveyancing and title insurance services violated the Massachusetts unlawful practice of law statute, it was necessary for NREIS to hire a law firm fully capable of understanding those services and the threat to which REBA'ssuit posed.

44


Civil Rights Litigator? V

Dormant Commerce Clause "cases are often complex"

and "involv[e] complex commercial and constitutional

litigation.”

Unlike the customary civil rights case, NREIS had good

reason to expect that its defense and Dormant

Commerce Clause counterclaim would be best

understood and litigated by a corporate law firm.

45

Total Fees I

K&L Gates's total fees

for the four phases of this litigation,

after deducting $ 18,324.25 in unnecessary work and

the 10% fee discount,

amounted to $ 851,063.35.

46

Total Fees II

Additionally, NREIS requests

$ 48,471.89 in routine litigation costs and

$ 4,540.93 in costs relating to NREIS's Rule 30(b)(6)

depositions.

REBA not having offered a substantive opposition to that

request, it is allowed.

NREIS's total award for attorneys' fees and costs,

therefore, is $ 904,076.17.

47

Fee Adjustment

After computing the lodestar figure, "[i]n rare circumstances the district court can increase a fee award because of the quality of the work performed or the great public importance of the case.”

NREIS requests a fee enhancement "only to the extent the Court finds that K&L Gates' actual fee and costs exceed the Court's lodestar calculation.”

This court agrees that "this case was handled extraordinarily well by both sides with the minimum of delay” and finds that the lodestar figure will fairly compensate NREIS for its attorneys' fees and costs.

This court therefore does not apply a fee multiplier.

48

Conclusion

NREIS's Motion for Attorneys' Fees and Costs Pursuant to

42 U.S.C. § 1988 is ALLOWED.

Court awards NREIS $ 904,076.17 in attorneys' fees and

costs.

49

Could it have been worse?

What if summary judgment had been denied and there

had been a trial or an appeal after trial?

What if there had been no prevailing party?

What if both parties had prevailed in some part?

Should plaintiff have seen the counterclaim coming?

Not only didn’t plaintiff win, they had to pay their own

fees and almost $1 million of the defendant’s fees

Should plaintiff have filed a Motion to Amend and Alter

Judgment after it lost summary judgment?

50

Other Considerations

Deep Pocketed Defendants

Judgment Proof Defendants

Continuing relationship between parties

e.g. Landlords and Tenants

ADR

Mandatory Arbitration

51

"By and large, the court should defer to the

winning lawyer's professional judgment as to how

much time he was required to spend on the case;

after all, he won, and might not have,

had he been more of a slacker."

Moreno v. City of Sacramento,

2008 U.S. App. LEXIS 15951 at *7

(9th Cir. July 28 2008) (Kozinski, C.J.).

52