Opinion
HHDCV136042758S
11-29-2018
John B. CLINTON v. Michael E. ASPINWALL et al.
UNPUBLISHED OPINION
OPINION
ROBERT B. SHAPIRO, JUDGE TRIAL REFEREE
On March 28, 2018, after a ten-day trial, the jury rendered a verdict in favor of the plaintiff, John B. Clinton, and against the defendants, Michael E. Aspinwall, Steven F. Piaker, and David W. Young. On July 10, 2018, by memorandum of decision (# 247) (decision), the court denied the defendants’ motions for judgment notwithstanding the verdict and to set aside the verdict and for remittitur.
On September 14, 2018, the court held an evidentiary hearing concerning the plaintiff’s motion for attorneys fees and costs (# 248). Pursuant to an agreed schedule, the parties then presented supplemental submissions, the last of which was dated September 21, 2018 (# 255). After consideration, the court issues this memorandum of decision.
The plaintiff claims entitlement to attorneys fees and costs pursuant to section 15.7 of the Amended and Restated Limited Liability Company Agreement of CCP Fund Managers, LLC (Agreement) and Practice Book § 11-21. The plaintiff seeks the recovery of attorneys fees in the amount of $757, 079.44 (see plaintiff’s hearing Exhibit 8 (105), plus additional fees that have been incurred subsequently; and the recovery of costs in the amount of $151, 544.79. The Agreement allows for recovery of attorneys fees and costs and includes a provision expressing that the Agreement is governed by the law of Delaware.
References to exhibits are to those presented at the September 14, 2018 hearing.
The Agreement states, in relevant part, that "[i]n the event of a breach by any party to this Agreement of its obligations under this Agreement, any party injured by such breach, in addition to being entitled to exercise all rights granted by law, including recovery of damages and costs (including reasonable attorney fees) ..."
Agreement, section 15.7.
In addition, the parties agreed that the governing law of the Agreement "shall be construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflict of law thereof that would cause application of the laws of any jurisdiction other than the State of Delaware."
Agreement, section 15.5.
I
Attorneys Fees
As stated above, paragraph 15.5 of the Agreement provides that it shall be construed in accordance with the laws of the State of Delaware. As to the plaintiff’s claim for attorneys fees, the parties agree that the applicable law is that of Delaware.
The plaintiff argues that he is entitled to fees in the amount of $757, 079.44, plus additional fees that have been incurred subsequently. The defendants assert that the plaintiff seeks recovery of fees that are unrelated to the causes of action on which the plaintiff prevailed or which are otherwise unreasonable. In particular, they argue that attorney time spent in 2008, over five years before suit, and time spent in 2012, also pre-suit, when the plaintiff was preparing to give testimony in a separate case brought by Preston Kavanagh, is not compensable.
In addition, the defendants object to the plaintiff’s attorneys fees claim to the extent that it includes attorney time spent on settlement discussions and mediation. Also, they argue that time should be excluded for researching legal theories which were never brought, for defending claims which were stricken, and for pursuing claims which do not carry an entitlement to attorneys fees under the Agreement.
"Delaware law dictates that, in fee shifting cases, a judge determine[s] whether the fees requested are reasonable. To ascertain whether a fee is reasonable, case law directs a judge to consider the factors set forth in the Delaware Lawyers’ Rules of Professional Conduct, that include: (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service 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." (Footnotes omitted.) Mahani v. Edix Media Group., Inc., 935 A.2d 242, 245-46 (Del. 2007). The same factors are utilized in evaluating such claims under Connecticut law. See Schoonmaker v. Lawrence Brunoli, Inc., 265 Conn. 210, 259, 828 A.2d 64 (2003).
Thus, the amount involved in litigation and the results obtained are only two of several factors to be considered. See Mahani v. Edix Media Grp., Inc., supra, 935 A.2d 248 (contrasting contractual fee shifting cases with "statutory fee shifting cases, in which the court awarded the prevailing parties’ attorneys fees and expenses in proportion to their success as an incentive for other attorneys to prosecute cases that enforce legislative goals"). There, the Delaware Supreme Court cited a trial court decision which held that "the reasonableness of attorneys fees ... in a contractual fee shifting case should be assessed by reference to legal services purchased by those fees, not by reference to the degree of success achieved in the litigation." (Internal quotation marks omitted.) Id.
"Unless otherwise stated in the contract, a contractual provision entitling the prevailing party to fees will usually be applied in an all-or-nothing manner. Th[e] Court has typically looked to the substance of a litigation to determine which party predominated." (Footnote omitted; internal quotation marks omitted.) Ivize of Milwaukee, LLC v. Compex Litig. Support, LLC, No. CIV.A. 3158-VCL, 2009 WL 1111179, at *14 (Del.Ch. Apr. 27, 2009, Lamb, Vice Chancellor) (agreement provided for indemnification, including award of reasonable attorneys fees, for claims arising out of or relating to breach or violation of agreement), appeal dismissed, Ivize of Milwaukee v. Compex Litigation Support, 984 A.2d 124 (2009).
Delaware "law is clear that the Court will not engage in a line-item review of invoices and second-guess with hindsight the appropriateness of an attorney’s judgment ... Determining reasonableness does not require that this Court examine individually each time entry and disbursement." (Footnotes omitted.) Mooney v. Echo Therapeutics, Inc., No. CV 10054-VCP, 2015 WL 3413272, at *6 (Del.Ch. May 28, 2015, Parsons, Vice Chancellor).
As discussed above, the parties to the Agreement agreed that in the event of a breach by any party of its obligations under this Agreement, any party injured by such breach is entitled to recover reasonable attorney fees. While the Agreement "allows reasonable attorneys fees, it does not explicitly tie reasonableness to success in the underlying litigation ..." Comrie v. Enterasys Networks Inc., C.A. No. 19254, 2004 WL 936505 *3 (Del.Ch. April 27, 2004, Lamb, Vice Chancellor), aff’d, Enterasys Networks, Inc. v. Comrie, 864 A.2d 929 (Del. 2004).
Concerning factors (1) (time and labor required, novelty and difficulty of the questions involved, and the skill requisite to perform properly), and (4) the amount involved and the results obtained, in this protracted litigation, which began in 2013, the jury awarded to the plaintiff the full amount of damages he sought at trial, $1, 122, 535.00, and he prevailed on each of the substantive issues presented to the jury. See Verdict Form (# 238.10).
The jury was not required to reach the plaintiff’s breach of fiduciary duty claim since it found in his favor as to breach of contract and awarded the full amount of damages sought. There was a substantial identity of the facts required to prove the breach of contract and breach of fiduciary duty claims, which may not be readily separated. See, in contrast, Great Am. Opportunities, Inc. v. Cherrydale Fundraising, LLC, No. CIV. A. 3718-VCP, 2010 WL 338219 (Del.Ch. Jan. 29, 2010, Parsons, Vice Ch.) (agreement permitted the court to award reasonable attorneys fees only for willful and malicious misappropriation of trade secrets; court awarded one-half of claimed attorneys fees since trial involved "roughly equal roles" for misappropriation of trade secrets claim and tortious interference claim).
Here, the issues involved detailed preparation and analysis. Expertise in commercial litigation was required. For example, the defendants asserted fourteen special defenses to the plaintiff’s First Count and thirteen special defenses to the plaintiff’s Second Count. See Defendants’ Answer and Special Defenses (# 163).
The fact that the plaintiff prevailed before the jury and on most of the contested motions throughout the litigation supports awarding him reasonable attorneys fees. The defendants’ conduct required the plaintiff to pursue his claims to verdict and to litigate post-verdict issues, such as concerning the defendants’ post-verdict motions and the current motion for attorneys fees and costs.
As explained in the court’s July 2, 2018 memorandum of decision on post-verdict motions (# 247), page 3, "[o]n March 11, 2008, notwithstanding their representation to the plaintiff that the 2006 amendments would lock in the members’ economics, the defendants, collectively controlling 61 percent of the Percentage Interests in CCP, voted (over the objections of the plaintiff and Kavanagh) to amend the LLC Agreement (2008 Amendments) effective January 1, 2007 ... The 2008 Amendments were made effective retroactively to January 1, 2007, and materially changed the individual members’ economics for more than fourteen months prior and forever after. The 2008 Amendments reduced the plaintiff’s and Kavanagh’s Percentage Interest and the balances of their capital accounts, while increasing the Percentage Interests of the defendants and the balances of their capital accounts." The jury found that March 2008 adoption of the 2008 amendments breached the Agreement. See Verdict Form (# 238.10), paragraph 1.
The plaintiff includes in his attorneys fees claim time billed for services in 2008 which related to advice concerning employment separation from CCP, preparation for the March 2018 meeting of CCP’s members, and Preston Kavanagh’s situation. See plaintiff’s Exhibit 3 (100), February, March, and April 2008 invoices from plaintiff’s counsel. These mostly predate the breach of the Agreement, and their relationship to the litigation is too attenuated. These total $14, 552.00 and are excluded from the award of attorneys fees.
Exclusions and additions are rounded to the nearest dollar.
Similarly attenuated and excluded are pre-suit invoices for the period July 2012-April 2013, and, in part, May 2013. These concern employment separation and do not appear sufficiently related to the plaintiff’s claims of breach of the Agreement. These total $35, 323.00. Also excluded are time entries in May 2013 and September 2013 concerning research into claims which were not brought or for other clearly separable claims as to which attorneys fees are not warranted, and time entries in March 2017 for opposing the defendants’ counterclaims, which the plaintiff revised his claim to omit, amounting to $10, 220.00.
The defendants’ argument that time related to efforts at settlement and mediation should be excluded is unpersuasive. Such attorney hours clearly relate to the litigation of the plaintiff’s claims concerning the defendants’ breaches of the Agreement. Attorney time would not have had to be incurred had the defendants not breached the Agreement and engaged in extended, contested litigation. See Mahani v. Edix Media Grp., Inc., supra, 935 A.2d 248 (awarding full amount of attorneys fees and noting time and labor spent in preparation for trial and defendant’s refusal to cooperate and responsibility for amount of fees incurred).
The defendants also argue that time spent on the case prior to the filing of the October 2014 third amended complaint (# 152) was not spent on the plaintiff’s claim that carried a fee-shifting provision that formed the basis of the jury’s verdict. They contend that plaintiff’s assertion of legal arguments to justify non-contract theories are not intertwined with the breach of contract claims and can be practicably separated. See defendants’ memorandum (# 252), pp. 20-21.
The court is guided by Delaware law, including Comrie v. Enterasys Networks Inc., supra, C.A. No. 19254, 2004 WL 936505 *3 (Del.Ch. April 27, 2004, Lamb, Vice Chancellor), which was also cited by the defendants. In Comrie, the defendants argued that the parties’ agreement required a claim-by-claim, rather than an all-or-nothing approach in determining the prevailing party. See id., *1. In determining whether the attorneys fees which were sought were reasonable, the Comrie court stated that the provision at issue required an all-or-nothing approach when awarding fees: "Although that provision only allows reasonable attorneys fees, it does not explicitly tie reasonableness to success in the underlying litigation; for this court to do so would be to frustrate the language requiring an all-or-nothing approach. Rather, Section 10.6 requires a general review of fees to determine if they are reasonable. That is, reasonableness should be assessed by reference to legal services purchased by those fees, not by reference to the degree of success achieved in the litigation." Id., *3.
Here, similarly, this court has generally reviewed the attorneys fees sought by the plaintiff for reasonableness, and has assessed the request by reference to the legal services purchased by the plaintiff. This court also may not employ an approach which frustrates the language requiring a general all or nothing approach, rather than a claim by claim analysis of attorney time entries.
As noted above, the plaintiff also seeks recovery for attorneys fees incurred subsequently, for September 2018. The court credits the testimony presented by the plaintiff’s attorneys at the hearing, in which, in total, they claimed an additional $19, 216.00. Their testimony was supported by individual time entries set forth on plaintiff’s Exhibit 11.
The court also has considered factors (3) the fee customarily charged for similar legal services, and (7) the experience, reputation, and ability of the plaintiff’s attorneys. Based on the court’s knowledge of hourly rates in the Hartford area, the hourly rates charged by plaintiff’s counsel are found to be reasonable. Plaintiff’s counsel are able, experienced attorneys of commendable reputation.
Here, factors (2) (other employment), (5) (time limitations), (6) (relationship with the client), and (8) (fixed or contingent fee) are not relevant.
In summary, the court awards reasonable attorneys fees as follows: plaintiff’s claim of $757, 079.00 was supplemented by an additional $19, 216.00 incurred. Subtractions discussed above amount to $60, 095.00. The resulting total amount awarded for attorneys fees is $716, 200.00 ($776, 295.00 minus $60, 095.00).
II
Costs
As to costs, although the parties contracted for the application of Delaware law, the parties differ on how the law should apply. The defendants argue that the Rules of the Court of Chancery of the State of Delaware (54)(d) should be applied to the scope of "costs" under the Agreement. The plaintiff argues that Rule 54(d) is not applicable because it is a procedural rule and therefore this Connecticut court need not follow it, and further, an application of the procedural rule would render the contractual provision redundant. The plaintiff’s additional argument is that the Agreement’s cost shifting provision itself suggests a broad definition of "costs."
Rule 54(d) provides for costs as: "[e]xcept when express provision therefor is made either in a statute or in these Rules, costs shall be allowed as of course to the prevailing party unless the Court otherwise directs. The costs in any action shall not include any charge for the Court’s copy of the transcript of the testimony or any depositions."
Delaware’s general rule for conflicts of law "is that [the] courts will apply their own procedural rules to all cases brought therein, even those where foreign substantive law applies to the underlying claims." LPS USA, Inc. v. Block 142 Houston, L.P., C.A. No. N16C-01-031 CLS, 2016 WL 3453850 *2 (Del.Super.Ct. June 17, 2016). See also In re Rehabilitation of Manhattan Re-Insurance Co., C.A. No. 2844-VCP, 2011 WL 4553582 *8 (Del.Ch. October 4, 2011, Parsons, Vice Chancellor) (noting that Delaware law controls procedural rules as the law of the forum). The Connecticut Appellate Court has similarly explained that in an action concerning a breach of contract the ‘judicial rule of thumb, ’ is that in "a choice of law situation the forum state will apply its own procedure ..." (Citation omitted). Paine Webber Jackson & Curtis, Inc. v. Winters, 22 Conn.App. 640, 650, 579 A.2d 545, cert. denied, 216 Conn. 820, 581 A.2d 1055 (1990). See also Macrolease International v. Nemeth, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV-990364471-S (June 9, 2000, Skolnick, J.) (27 Conn.L.Rptr. 342) (where the court refused to apply Connecticut’s own substantive law since the agreement provided for application of New York law).
The Connecticut Appellate Court has also found that a conflicts of law analysis was needed when the parties did not have a complete choice of law clause. See Western Dermatology Consultants, P.C. v. Vitalworks, Inc., 146 Conn.App. 169, 202, 78 A.3d 167, 189 (2013), aff’d, 322 Conn. 541, 153 A.3d 574 (2016). However, in the present case the parties have addressed more than just construction and interpretation of the Agreement; here the Agreement designates clearly that Delaware is the only applicable law to be applied to the Agreement.
The Connecticut Supreme Court has stated that, "[w]hile there is no precise definition of either [substantive or procedural law], it is generally agreed that a substantive law creates, defines and regulates rights while a procedural law prescribes the methods of enforcing such rights or obtaining redress." Investment Associates v. Summit Associates, Inc., 309 Conn. 840, 868, 74 A.3d 1192 (2013).
Delaware law determines the scope of costs for several reasons. The Agreement between the parties expressly states that Delaware law applies. The Agreement specifically forbids the application of Delaware’s choice of law rules that would lead to the application of substantive law of any other jurisdiction other than Delaware.
Also, construing Delaware law concerning costs, Delaware courts have treated the issue as one involving substantive contract law, and not as strictly procedural in nature. See Ivize of Milwaukee v. Compex Litigation Support, C.A. No. 3158-VCL, 2009 WL 1930178 *1 (Del.Ch. June 24, 2009, Lamb, Vice Chancellor), appeal dismissed, Ivize of Milwaukee v. Compex Litigation Support, 984 A.2d 124 (2009) (citing Delaware case law interpreting agreements).
Delaware-Costs
Rule of the Court of Chancery of the State of Delaware 54(d) provides that "[e]xcept when express provision therefor is made either in a statute or in these Rules, costs shall be allowed as of course to the prevailing party unless the Court otherwise directs. The costs in any action shall not include any charge for the Court’s copy of the transcript of the testimony or any depositions." "The rule, however, does not define the term ‘costs.’" Dewey Beach Lions Club v. Longacre, C.A. No. 162-S, 2006 WL 2987052 *1 (Del.Ch. October 11, 2006, Lamb, Vice Chancellor).
Because of Comrie, the defendants claim Rule 54(d) is the operative rule before the court regarding how "costs" should be interpreted. The court in Comrie noted that an agreement between sophisticated persons represented by counsel that included the recovery of costs meant that the usage of the statement "including reasonable attorneys fees," by the parties "indicated their knowledge that the ordinary legal usage of the term ‘costs’ is limited and would not include attorneys fees." Id., *4. Therefore, the court interpreted the inclusion of the term "costs" as corresponding with the Rules of the Court of Chancery of the State of Delaware Rule 54(d).
Comrie v. Enterasys Networks Inc., C.A. No. 19254, 2004 WL 936505 (Del.Ch. April 27, 2004, Lamb, Vice Chancellor), aff’d, Enterasys Networks, Inc. v. Comrie, 864 A.2d 929 (Del. 2004).
In the present case, looking at the language of the Agreement, this court similarly finds that the term "costs" corresponds with Rule 54(d) because, similar to Comrie, the parties used language stating that an injured party was entitled to "costs (including reasonable attorney fees)." This language similarly indicates the acknowledgment that attorneys fees are not covered in the "costs" definition within Delaware law.
"Costs" have a distinct meaning under Delaware law. Delaware case law has defined "costs" under this rule as the "allowances in the nature of incidental damages awarded by law to reimburse the prevailing party for expenses necessarily incurred in the assertion of his rights in court." (Emphasis omitted; footnote omitted; internal quotations omitted.) Comrie v. Enterasys Networks, Inc., supra, *4. Delaware courts "have interpreted ‘costs’ to include expert witness fees that are covered by statute, court filing fees, and the usual and customary costs incurred in serving of process. Courts have excluded the expense of computer legal research, transcript fees, miscellaneous expenses (such as travel and meals), and the cost of photocopying." (Footnotes omitted.) Dewey Beach Lions Club v. Longacre, supra, *1. See also Gaffin v. Teledyne Inc., C.A. No. 5786, 1993 WL 271443 *2 (Del.Ch. July 13, 1993, Hartnett, Vice Chancellor) (the court found that the expenses where a plaintiff sought reimbursement for $18, 683.76 for the costs of computerized legal research were not considered costs); Ripsom v. Beaver Blacktop, Inc., C.A. No. 83C-AU-128, 1989 WL 147336 (Del.Super.Ct. December 4, 1989), modified, Ripsom v. Beaver Blacktop, C.A. No. 83C-AU-128 (Del.Super.Ct. January 3, 1990) (holding that research services used for the primary benefit of plaintiff’s counsel, were not" ‘necessarily incurred in the assertion of [plaintiff’s] rights in court, ’ and are therefore not recoverable as costs"). However, the scope of "costs" could be expanded by agreement of the parties. See Dewey Beach Lions Club v. Longacre, supra, *1.
See Ivize of Milwaukee v. Compex Litigation Support, C.A. No. 3158-VCL (Del.Ch. June 24, 2009, Lamb, Vice Chancellor), supra, *1 (the court stated that "the terms ‘costs’ and ‘expenses’ have distinct meanings under Delaware law. The definition of ‘costs’ under Court of Chancery Rule 54 and under Delaware case law interpreting agreements between parties has been held to exclude items ‘such as photocopying, transcripts, travel expense, and computer research.’ ‘Expenses, ’ on the other hand, has a legally recognized broader definition") (footnote omitted; internal quotation marks omitted).
In the present case, the plaintiff seeks to recover costs in the amount of $151, 544.79. The court is guided by Delaware decisional law which has defined costs as the "allowances in the nature of incidental damages awarded by law to reimburse the prevailing party for expenses necessarily incurred in the assertion of his rights in court." (Emphasis omitted; internal quotations omitted.) Comrie v. Enterasys Networks Inc., supra, *4.
As to expert fees, Comrie stated that Delaware law "allows prevailing parties compensation for a trial expert’s actual testimonial time, waiting time, and certain travel time as ‘time necessarily spent in attendance upon the court.’ ... Travel time, however, is not compensated at the same rate as in-court time ... Further, expressly excluded from the scope of recoverable expert witness fees are fees incurred in connection with the experts’ time spent (1) consulting with or advising a party’s attorney; ... (2) preparing for testimony in court; ... and (3) preparing for and providing deposition testimony." (Footnotes omitted; internal quotation marks omitted.) Comrie v. Enterasys Networks, Inc., supra, *5.
Under Delaware law, personal costs, such as those incurred by the plaintiff himself for travel and accommodations during trial should be excluded from recoverable costs. The court in Dewey held that miscellaneous expenses such as travel and meals are excluded from costs.
After review, the court awards costs as follows: Marshal Fees, $384.40 and filing fees, $784.35 (duplicate jury claim fee excluded). In addition, expert fees incurred concerning the trial testimony of Kenneth Pia, plaintiff’s expert, are awarded in the amount of $4, 950.00, representing nine hours (at $550.00 per hour). The total amount of costs awarded is $6, 118.75.
CONCLUSION
For the reasons stated above, and those stated in the court’s previous decision, judgment may enter for the plaintiff and against the defendants in the amount of the jury’s verdict, $1, 122, 535.00, plus $716, 200.00 for reasonable attorneys fees and $6, 118.75 for costs.