Outlaw Laboratory, LP v. DG in PB, LLC et al, No. 3:2018cv00840 - Document 453 (S.D. Cal. 2023)
Court Description: Order Granting in Part Motion for Attorneys' Fees and Costs of Suit (ECF No. 448 ). Signed by Judge Gonzalo P. Curiel on 10/5/23. (All non-registered users served via U.S. Mail Service)(jmo)
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Outlaw Laboratory, LP v. DG in PB, LLC et al Doc. 453 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 IN RE OUTLAW LABORATORIES, LP Case No.: 18-cv-840-GPC-BGS 12 LITIGATION ORDER GRANTING IN PART MOTION FOR ATTORNEYS’ FEES AND COSTS OF SUIT [ECF No. 448] 13 14 15 16 17 Before the Court is a Motion for Attorney’s Fees and Costs brought by Roma 18 Minkha, Inc., doing business as Bobar #2 Liquor; NMRM, Inc., doing business as Sunset 19 Liquor; and Skyline Market Inc., doing business as Skyline Farms Market (collectively 20 “The Stores”) against third-party defendant and counterdefendant Tauler Smith LLP. 21 ECF No. 448. The Stores prevailed at trial and now request fees and costs pursuant to 18 22 U.S.C. § 1964(c), the Racketeer Influenced and Corrupt Organizations Act (“RICO”) fee- 23 shifting provision. Id. Tauler Smith filed an opposition, ECF No. 450, and The Stores 24 replied, ECF No. 451. The Court finds the matter suitable for decision based upon the 25 papers and vacates the hearing scheduled for October 6, 2023. Upon consideration of the 26 27 28 1 18-cv-840-GPC-BGS Dockets.Justia.com 1 Motion and related papers, the Court GRANTS IN PART the Motion, finding that The 2 Stores are entitled to $862,314.32 in attorneys’ fees and $33,410.48 in costs of suit. 3 Background 4 Beginning in 2017, Tauler Smith and Outlaw Laboratory, LP (“Outlaw”), then 5 represented by Tauler Smith, sent thousands of letters to small retail stores asserting that 6 the stores were selling male sexual enhancement pills subject to FDA warnings in 7 violation of RICO and the Lanham Act. ECF No. 114 ¶¶ 2, 26; ECF No. 434 at 278:17- 8 23; ECF No. 1 ¶¶ 1-2. Outlaw sells a competing natural male enhancement product. 9 ECF No. 1 ¶ 4. Typically, the letters threatened to sue for more than $100,000 if the store 10 did not pay a settlement of around $10,000-15,000. See e.g., ECF No. 438-4. Attached 11 were usually a draft complaint and photos of the store. See id. The Stores received such 12 demand letters, and Skyline Market paid a settlement fee and incurred attorneys’ fees. 13 ECF No. 114 ¶¶ 33-35. 14 In May 2018, Tauler Smith, on behalf of its client Outlaw, filed suit against 15 roughly 50 stores for unlawfully selling sexual enhancement pills that allegedly competed 16 with Outlaw’s product. ECF No. 1 (complaint); ECF No. 28 (consolidation order). On 17 August 24, 2018, The Stores filed a Third-Party Complaint and Counterclaims 18 (“counterclaims”) against Outlaw that alleged a class action against Outlaw for (1) civil 19 RICO violation, 18 U.S.C. § 1962(c), (2) RICO conspiracy, 18 U.S.C. § 1962(d), and (3) 20 rescission of any settlement agreements like the one entered into by Skyline Market. 21 Case No. 18-cv-1882 ECF No. 4.1 The counterclaims asserted that Outlaw was operating 22 a scheme to defraud small businesses by mailing baseless demand letters to obtain a 23 quick settlement. The Stores amended their counterclaims for the second time in August 24 2019, alleging the same causes of action and adding Tauler Smith, as well as the owners 25 26 1 27 28 Case No. 18-cv-1882 was later consolidated with above-captioned case. ECF No. 28. 2 18-cv-840-GPC-BGS 1 of Outlaw, as counterdefendants. ECF No. 114 at 1. The counterclaims are framed as a 2 class action and The Stores accordingly moved to certify a class in April 2020. ECF No. 3 179. In June 2020, the Stores, Outlaw, and Outlaw’s owners but not Tauler 4 Smith signed a settlement agreement. ECF No. 359-1 at 14. Shortly thereafter, but 5 unrelatedly, the Court dismissed Outlaw’s last remaining claim against The Stores in July 6 2020. ECF No. 251 at 1-2. 7 In April 2021, as a result of the settlement with Outlaw and the parties’ joint 8 motion, the Court dismissed The Stores’ counterclaims against Outlaw. ECF Nos. 362- 9 63. As part of the settlement, Outlaw paid The Stores $125,000 and agreed to abandon 10 the “scheme” and its efforts to collect payments from all stores nationwide that it had 11 already targeted. ECF No. 361 at 3; ECF No. 249 at 1. Within a week of signing the 12 settlement, Outlaw dismissed at least some of the lawsuits it had already brought. 13 Compare ECF No. 448-4 (nine cases brought by Outlaw in the Eastern District of 14 Michigan were closed on June 29, 2020), with ECF No. 359-1 at 14 (settlement 15 agreement signed on June 24, 2020). 16 Following the settlement, The Stores filed an amended motion for class 17 certification on the same claims. ECF No. 365. The Court denied the motion, finding 18 that Skyline Market, the proposed class representative, and Gaw | Poe, the proposed class 19 counsel, were inadequate to represent the class. ECF No. 375 at 18. The Court explained 20 that the provision of the settlement agreement preventing Gaw | Poe and The Stores from 21 cooperating with or assisting “in any manner” any non-party with any claims against 22 Outlaw would “create a material conflict of interest” with the absent class members 23 because it would hinder Gaw | Poe’s ability to present evidence against Tauler Smith that 24 implicated Outlaw. Id. at 16, 18. As the Court noted, the “[s]ettlement should have been 25 drafted differently if Skyline Market and Gaw | Poe wished to prosecute Tauler Smith 26 themselves.” Id. at 18. 27 28 3 18-cv-840-GPC-BGS 1 The Stores’ individual claims against Tauler Smith proceeded to trial in March 2 2023. At trial, Joseph Valerio, an independent contractor who provided chief financial 3 officer services to Tauler Smith, testified that Robert Tauler, a partner at Tauler Smith, 4 “came up with the idea of . . . create[ing] a new product [to] . . . sue everybody else 5 who’s putting in illegal stuff and . . . recoup [the] money back.” ECF No. 434 at 264:8- 6 11. Valerio further testified that when Tauler Smith tested an enhancement pill from 7 Sunset Liquor, the pill did not contain the active ingredients subject to the FDA notice, 8 but that Robert Tauler “did not care.” Id. at 296:11-297:17. Valerio estimated that 9 Tauler Smith sent around 15,000 demand letters. Id. at 278:18-23. On March 16, 2023, 10 after three days of proceedings, the jury returned a verdict in favor of The Stores, finding 11 that Tauler Smith violated RICO, and awarded $2,700 to Roma Mikha, $5,940 to 12 NMRM, Inc., and $3,300 to Skyline Market, totaling $11,940 in damages. ECF No. 427. 13 The parties have vigorously litigated the case since it began in 2018 and they 14 continue to do so. Tauler Smith, first as counsel for Outlaw and then as a 15 counterdefendant, has engaged in extensive motion practice, filing over a dozen 16 substantive motions. 2 It also appealed the judgment, now pending at the Ninth Circuit. 17 ECF No. 446. In addition to attempting to certify a class, The Stores for their part 18 19 20 2 21 22 23 24 25 26 27 28 See Motion to Dismiss Counterclaims, Case No. 18-cv-1882 ECF No. 15; Anti-SLAPP Motion, Case No. 18-cv-1882 ECF No. 16; Motion to Dismiss Amended Counterclaims, ECF No. 38; Motion for Judgment on the Pleadings, ECF No. 80; Motion for Sanctions, ECF No. 102; Motion to Dismiss Second Amended Counterclaims, ECF No. 143; a second Anti-SLAPP Motion, ECF No. 156; Motion to Disqualify Gaw | Poe, ECF No. 191; Motion for Reconsideration of Denial of Motion to Dismiss, ECF No. 204: Motion for Summary Judgment, ECF No. 260; Motion for Reconsideration of Summary Judgment Order, ECF No. 306; a second Motion to Dismiss Second Amended Counterclaims, ECF No. 385; Motion for Certification of Interlocutory Appeal, ECF No. 399. 4 18-cv-840-GPC-BGS 1 amended their counterclaims twice and requested leave to do so a third time.3 ECF No. 2 114; ECF No. 126. The parties also engaged in somewhat contentious discovery.4 3 Most recently, on August 18, 2023, The Stores filed the instant motion for 4 attorneys’ fees and costs. ECF No. 448. Tauler Smith opposed, ECF No. 450, and The 5 Stores replied, ECF No. 451. The Stores seek $1,067,881.5 in fees for 1,106.5 hours of 6 work and $33,410.48 in costs. ECF No. 448; ECF No. 451 at 8. 7 Attorneys’ Fees 8 Under 18 U.S.C. § 1964(c), “any person injured in his business or property by 9 reason of a [RICO] violation . . . may sue . . . and shall recover threefold the damages he 10 sustains and the costs of suit, including a reasonable attorney’s fee[.]” This language 11 mandates that a party injured by a RICO violation receive attorneys’ fees and costs. See 12 Valadez v. Aguallo, No. C-08-03100, 2009 WL 10680866, at *4 (N.D. Cal. Dec. 10, 13 2009), aff’d, 433 F. App’x 536 (9th Cir. 2011) (collecting cases). Because The Stores 14 won on each of their RICO claims at trial, the parties do not dispute that The Stores are 15 entitled to attorneys’ fees and costs under this provision. ECF No. 450 at 4 (Opposition) 16 (“[T]here is no dispute that the RICO statute provides for attorney’s fees.”). Rather, the 17 parties dispute what amount of fees is reasonable. 18 19 20 21 3 22 23 24 25 26 27 28 Other than filings discussed above and those regarding the settlement and discovery, The Stores filed three motions. See Motion for Summary Judgment, ECF No. 90; Motion for Judgment on the Pleadings, ECF No. 168; Motion for Sanctions, ECF No. 300. 4 See Motion to Compel Discovery Responses filed by The Stores, ECF No. 116; Motion to Compel Discovery Reponses filed by Tauler Smith, ECF No. 192; Motion to Compel Compliance with Subpoenas filed by Tauler Smith, ECF No. 255; Motion for Sanctions and to Compel Document Production and Interrogatory Response filed by The Stores, ECF No. 269. 5 18-cv-840-GPC-BGS 1 2 I. Calculating the Lodestar To determine what constitutes a reasonable fee award, the Court uses the lodestar 3 method. See Monex Deposit Co. v. Gilliam, No. SA-cv-09287, 2010 WL 2380873, at *3 4 (C.D. Cal. May 24, 2010) (using the lodestar method to determine reasonableness of a fee 5 award under 18 U.S.C. § 1964(c)); Ally Bank v. Karakasevic, No. 11-cv-00896, 2016 WL 6 7971245, at *3 (N.D. Cal. Dec. 19, 2016) (same); see also Gisbrecht v. Barnhart, 535 7 U.S. 789, 801 (2002) (“the lodestar figure has . . . become the guiding light of our fee- 8 shifting jurisprudence”). The lodestar is the hours reasonably expended by counsel 9 multiplied by counsel’s reasonable hourly fee. In re Apple Inc. Device Performance 10 Litig., 50 F.4th 769, 784 (9th Cir. 2022). After calculating the lodestar, the court may 11 adjust it to account for other reasonableness factors. See Yamada v. Nobel Biocare 12 Holding AG, 825 F.3d 536, 546 (9th Cir. 2016). 13 14 a. Reasonable Hourly Rates Reasonable hourly rates are rates “in line with those prevailing in the community 15 for similar services by lawyers of reasonably comparable skill, experience and 16 reputation.” Gonzalez v. City of Maywood, 729 F.3d 1196, 1206 (9th Cir. 2013). The 17 relevant community is the Court’s forum San Diego in the Southern District of 18 California. See id. at 1205. And although the litigation began in 2018, the Court uses 19 currently prevailing rates in its analysis. See In re Washington Pub. Power Supply Sys. 20 Sec. Litig., 19 F.3d 1291, 1305 (9th Cir. 1994) (“Full compensation requires charging 21 current rates for all work done during the litigation, or by using historical rates enhanced 22 by an interest factor.”). 23 Here, Gaw | Poe requests $996 per hour for its senior partners, Randolph Gaw and 24 Mark Poe, and $855 per hour for the other attorneys, Flora Vigo and Samuel Song. ECF 25 No. 448 at 11. Tauler Smith does not dispute these requests. ECF No. 450 (absence). 26 Still, the Court briefly reviews the requested rates, and finds that they are reasonable. See 27 28 6 18-cv-840-GPC-BGS 1 Vogel v. Harbor Plaza Ctr., LLC, 893 F.3d 1152, 1160 n.5 (9th Cir. 2018) (“district 2 courts have a duty to ensure that claims for attorneys’ fees are reasonable” (internal 3 quotation marks and citation omitted)). 4 The requested rates are roughly within the range of hourly rates previously 5 approved in this district. See, e.g., CliniComp Int'l, Inc. v. Cerner Corp., No. 17-cv- 6 02479, 2023 WL 2604816, at *3 (S.D. Cal. Mar. 22, 2023) (approving hourly rates over 7 $1,000 for partners in complex patent litigation); Lopez v. Mgmt. & Training Corp., No. 8 17-cv-1624, 2020 WL 1911571, at *8-9 (S.D. Cal. April 20, 2020) (finding hourly rates 9 ranging from $500 to $900 reasonable). And, in 2020, the Northern District of California 10 approved an hourly rate of $1,000 for Gaw | Poe senior partners and $855 for junior 11 partners and Counsel. AdTrader, Inc. v. Google LLC, No. 17-cv-07082, 2020 WL 12 1921774, at *8 (N.D. Cal. Mar. 24, 2020). 13 The requested hourly rate for Mr. Poe and Mr. Gaw is $996, the rate charged by 14 the third quartile of partners in San Diego according to the 2022 Real Rate Report. 5 Both 15 Mr. Poe and Mr. Gaw have been practicing for over two decades, were Counsel at large 16 firms prior to founding their own firm, and have been recognized as “Super Lawyers” for 17 multiple years. ECF No. 448 at 8; ECF No. 448-2 ¶¶ 4-5. Their backgrounds justify 18 placing them in the third quartile for partner pay and compensating them at $996 per 19 hour. See Trendsettah USA, Inc. v. Swisher Int'l Inc., No. SA-cv-14-01664, 2017 WL 20 11477621, at *9 (C.D. Cal. Feb. 27, 2017) (placing the attorneys at Gaw | Poe in the third 21 quartile for hourly rates). 22 23 24 25 26 27 28 5 The Real Rate Report is an “analysis of law firm rates based on invoice data . . . [and] has been cited with approval by courts inside and outside this district.” Kries v. City of San Diego, No. 17-cv-1464, 2021 WL 120830, at *7 (S.D. Cal. Jan. 13, 2021) (collecting cases). 7 18-cv-840-GPC-BGS 1 “Given their fewer years of experience and lower level of responsibility for 2 managing the case,” The Stores request $855 per hour for Mr. Song and Ms. Vigo. ECF 3 No. 448 at 10. The rate is justified. Mr. Song, a partner, has over a decade of experience 4 and Ms. Vigo, Counsel, has close to two decades of experience and was previously 5 Counsel at a large firm. Id. at 8; ECF No. 448-2 ¶¶ 6-7. 6 7 Thus, the Court holds that $996 is a reasonable rate for Mr. Poe and Mr. Gaw and $855 is a reasonable rate for Mr. Song and Ms. Vigo. 8 b. Reasonable Number of Hours Expended 9 “In determining the appropriate number of hours to be included in a lodestar 10 calculation, the district court should exclude hours that are excessive, redundant, or 11 otherwise unnecessary.” McCown v. City of Fontana, 565 F.3d 1097, 1102 (9th Cir. 12 2009) (internal quotation marks and citation omitted). The Stores “bear[] the burden of 13 documenting the appropriate hours expended in the litigation and must submit evidence 14 in support of those hours worked.” Gates v. Deukmejian, 987 F.2d 1392, 1397 (9th Cir. 15 1992). The burden then shifts to Tauler Smith to challenge “the accuracy and 16 reasonableness of the hours charged.” Id. at 1397-98. 17 The Stores request a lodestar calculation based on 1,106.5 hours, including time 18 spent working on the Attorneys’ Fees Motion and Reply, and submit a log of their hours. 19 ECF No. 448 at 6; ECF No. 451 at 8 (adding in the time spent drafting the Reply); ECF 20 448-7 (time-keeping entries). The Stores’ counsel testify that they expended a total of 21 1,186.2 hours on the litigation, but do not request reimbursement for 90.6 hours spent 22 working on the failed class certification.6 ECF No. 448-2 at ¶ 2. Tauler Smith does not 23 object to any specific time entry in the log, but contends that The Stores cannot be 24 25 26 27 28 6 They also do not request compensation for 2.8 hours recorded by partner Victor Meng. Id. 8 18-cv-840-GPC-BGS 1 reimbursed for (i) time spent before moving to join Tauler Smith as a counterdefendant 2 on July 1, 2019, and (ii) time spent during an alleged conflict of interest between Gaw | 3 Poe and absent members of the proposed class from June 11, 2020 to July 12, 2021. 4 ECF No. 450 at 4-7. 5 As a whole, 1,106.5 hours, beginning on August 11, 2018, is a modest amount to 6 spend litigating a complex civil RICO with over fifteen substantive motions and fairly 7 contentious discovery. See notes 2-4 supra (listing motions). There is a description for 8 each time entry, and the amount of time spent is within reason for the tasks described. 9 ECF No. 448-7. However, a few individual entries do not contain enough information 10 for the Court to assess whether they are related to the RICO claims on which The Stores 11 succeeded. For example, The Stores’ counsel logged 30 minutes of work on August 31, 12 2018 for “[p]hone call with M. Walton re service of state subpoena on Namou Group 13 store,” id. at 2, and one hour of work for “call with D. Jaffer and M. Meyer re potential 14 collaboration” on August 19, 2019, id. at 10. Because there are only a few such entries 15 and because they record brief periods of time, the Court finds that a small “haircut” of 16 5% ensures that the hours requested are not “excessive, redundant, or otherwise 17 unnecessary.” McCown, 565 F.3d at 1102 (citation omitted). 18 Hours Expended Before Joining Tauler Smith as a Counterdefendant 19 Tauler Smith’s argument that it should not pay attorneys’ fees for the time period 20 before The Stores moved to join it as a counterdefendant on July 1, 2019 omitting 21 roughly the first year of the case is unpersuasive. ECF No. 450 at 6. The only law 22 Tauler Smith cites to support this argument is for the proposition that the prevailing party 23 cannot receive attorneys’ fees “for time spent on unsuccessful claims that are unrelated to 24 the plaintiff’s successful . . . claim.” Id. (quoting McCown, 565 F.3d at 1103). But the 25 claims The Stores brought against Outlaw, before joining Tauler Smith, are the same as 26 those they alleged against Tauler Smith, and on which they succeeded. Compare Case 27 28 9 18-cv-840-GPC-BGS 1 No. 18-cv-1882 ECF No. 4 ¶¶ 41-58 (original counterclaims), with ECF No. 114 ¶¶ 83- 2 99 (second amended counterclaims). There were no unsuccessful claims. 3 Additionally, The Stores point out that RICO co-conspirators are jointly and 4 severally liable, Oki Semiconductor Co. v. Wells Fargo Bank, Nat. Ass’n, 298 F.3d 768, 5 775 (9th Cir. 2002), and both the First Circuit and the Northern District of California 6 have held that that joint and several liability applies to attorneys’ fees where the claims 7 against the defendants are “factually related” and “[p]laintiffs devoted their resources 8 generally to the litigation as a whole.” Ally Bank, 2016 WL 7971245, at *6-7 (citation 9 omitted) (collecting cases); Aetna Cas. Sur. Co. v. P & B Autobody, 43 F.3d 1546, 1570 10 (1st Cir. 1994), abrogated on other grounds by Salinas v. United States, 522 U.S. 52, 63 11 (1997). But see Abou-Khadra v. Bseirani, 971 F. Supp. 710, 717 (N.D.N.Y. 1997). 12 Because the claims against Outlaw and Tauler Smith are effectively identical and 13 plaintiffs devoted their resources “to the litigation as a whole,” when Tauler Smith was 14 named as a counterdefendant is irrelevant because Tauler Smith would be jointly and 15 severally liable for damages anyway. 16 The Court has no equitable concerns about charging Tauler Smith attorneys’ fees 17 for work The Stores’ counsel performed before July 2019 because Tauler Smith was 18 central to the underlying conduct found in violation of RICO. In fact, the original RICO 19 claim against Outlaw identified Tauler Smith as a member of Outlaw’s RICO conspiracy, 20 Case No. 18-cv-1882 ECF No. 4 ¶ 30, and there is evidence suggesting that Robert 21 Tauler initiated the “scheme,” ECF No. 434 at 264:8-11, and benefited substantially more 22 than the other defendants, compare id. at 305:24-306:5 (testimony estimating that Tauler 23 Smith took in $2.3 million), with ECF No. 272-17 at 159 (testifying that Outlaw and its 24 owners obtained about $120,000). Moreover, even though Tauler Smith was not a 25 defendant prior to July 2019, Tauler Smith acted as counsel for Outlaw, and in fact 26 brought the complaint, ECF No. 1. 27 28 10 18-cv-840-GPC-BGS 1 2 The Court therefore declines to omit the hours expended by Gaw | Poe prior to joining Tauler Smith as a counterdefendant. 3 Hours Expended During the Alleged Conflict of Interest 4 Tauler Smith also argues that The Stores should not recover fees for work 5 performed during the time Gaw | Poe was allegedly in violation of its ethical 6 responsibilities by having a conflict of interest with the proposed absent class members. 7 ECF No. 450 at 4-5, 7. The Stores have already omitted from their request the 90.6 hours 8 their counsel spent on class certification matters. ECF No. 448-2 ¶ 2. Nonetheless, 9 Tauler Smith argues that the Stores should not be compensated for any hours worked 10 between June 11, 2020, when the time-keeping log first reflects work on the settlement 11 that created the potential conflict, ECF No. 448-7 at 14, and July 12, 2021, when the 12 Court found Skyline Market and Gaw | Poe inadequate to represent the class, ECF No. 13 375 at 18. 14 The Stores argue that the class action case law cited by Tauler Smith is 15 inapplicable because the RICO fee-shifting statute makes granting of reasonable 16 attorneys’ fees mandatory. ECF No. 451 at 2-4. However, the Ninth Circuit has held that 17 a court has equitable power to deny attorneys’ fees because of a conflict of interest under 18 a mandatory fee-shifting provision. Image Tech. Serv., Inc. v. Eastman Kodak Co., 136 19 F.3d 1354, 1357-58 (9th Cir. 1998) (holding that the district court abused its discretion by 20 awarding attorneys’ fees to disqualified counsel for the time period prior to its 21 disqualification under the mandatory fee-shifting provision in the Clayton Act). 22 As Tauler Smith argues, The Stores’ counsel “implicated ethical concerns” by 23 entering into a settlement agreement that prevented it from assisting non-parties “in any 24 manner” in any litigation against Outlaw and in attempting to serve as class counsel in 25 the suit against Tauler Smith. ECF No. 451 at 5; ECF No. 375 at 16. Nevertheless, The 26 Stores’ counsel never simultaneously represented clients with conflicting interests, and 27 28 11 18-cv-840-GPC-BGS 1 the Court will not reduce its hours on that basis. Cf. In re Lithium Ion Batteries Antitrust 2 Litig., No. 13-md-02420, 2020 WL 7264559, at *21 (N.D. Cal. Dec. 10, 2020), aff’d, No. 3 21-15120, 2022 WL 16959377 (9th Cir. Nov. 16, 2022) (refusing to reduce attorneys’ 4 fees for counsel’s advocacy for a distribution proposal that allegedly created a 5 representational conflict of interest that the court never entertained or approved). 6 When courts reduce a fee award for unethical conduct, they generally do so by not 7 compensating counsel for the period of time during which counsel was in breach of their 8 professional responsibility. See Image Tech, 136 F.3d at 1358 (“An attorney may claim 9 fees only for services provided before the conflict arose and the ethical breach 10 occurred.”). However, at least where the breach is not egregious, courts award fees for 11 the period prior to the breach or after the breach is cured. See id.; Rodriguez v. Disner, 12 688 F.3d 645, 660 n.12 (9th Cir. 2012) (“The district court properly determined that its 13 rejection of the incentive awards cured any conflict of interest and that [counsel’s] 14 services thereafter were properly performed and conferred a benefit on the class” and 15 could be compensated.). Moreover, a court is not required to deny attorneys’ fees for 16 work conducted by counsel while engaged in conflicting representation. Rodriguez, 688 17 F.3d at 658 (“The district court . . . could have reasonably concluded that [counsel that 18 engaged in conflicting representation] was entitled to some attorneys’ fees for its efforts 19 and notable success[.]”). 20 The Court found Gaw | Poe inadequate to serve as class counsel because it was 21 concerned that the settlement agreement between The Stores and Outlaw created a 22 conflict of interest, or at least the appearance of one, with the proposed absent class 23 members. ECF No. 375 at 18. Specifically, the Court explained that the provision 24 preventing Gaw | Poe and The Stores from cooperating with or assisting “in any manner” 25 any non-party with any claims against Outlaw would “create a material conflict of 26 interest” with the absent class members because it would limit the evidence The Stores 27 28 12 18-cv-840-GPC-BGS 1 could present against Tauler Smith. Id. at 16, 18. Because the Court denied the motion 2 for class certification, id. at 20, Gaw | Poe never represented the proposed absent class 3 members, meaning that it never simultaneously represented clients with conflicting 4 interests. That the Court’s order, as opposed to counsel’s actions, prevented the potential 5 breach does not alter the analysis. See Rodriguez, 688 F.3d at 660 n.12 (holding that the 6 district court’s rejection of the incentive awards that created the conflict of interest cured 7 the conflict). Thus, there is no block of time for which the Stores’ counsel should not 8 receive attorneys’ fees. 9 c. The Resulting Lodestar 10 Finding that the hourly rate of $996 is reasonable for Mr. Gaw and Mr. Poe and the 11 hourly rate of $855 is reasonable for Mr. Song and Ms. Vigo, the chart below details the 12 hours worked and amount requested for each attorney’s time. ECF No. 448-7; ECF No. 13 451 at 8. Including all the hours Gaw | Poe requested, the lodestar would be 14 $1,067,881.50. Accounting for the 5% haircut, the Court holds that the lodestar is 15 $1,014,487.43. 16 Individual Hours Rate Total 17 Mark Poe 771.6 $996 $768,513.60 18 Randolph Gaw 92.4 $996 $92,030.40 19 Samuel Song 2.8 $855 $2,394.00 20 Flora Vigo 239.7 $855 $204,943.50 21 Totals 1106.5 $1,067,881.50 - 22 (1,067,881.50*.05) = 23 1,014,487.43 24 25 26 27 28 II. Adjustments to the Lodestar Based on Limited Success Though the lodestar is presumptively reasonable, in rare cases courts may apply an upward or downward multiplier to account for reasonableness factors not subsumed into 13 18-cv-840-GPC-BGS 1 the reasonable hourly rates or hours expended, including the party’s success in the 2 litigation, the risk of nonpayment, the quality of representation, and the complexity of the 3 issues. Yamada, 825 F.3d at 546; Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 553-54 4 (2010) (noting that, for example, the complexity of a case is usually accounted for in the 5 number of hours billed). The most critical factor is a party’s success in the litigation 6 because the fee award should be “reasonable in relation to the results obtained.” Hensley 7 v. Eckerhart, 461 U.S. 424, 436 (1983). “[W]here the plaintiff has achieved ‘only limited 8 success,’ counting all hours expended on the litigation—even those reasonably spent— 9 may produce an ‘excessive amount.’” In re Bluetooth Headset Prod. Liab. Litig., 654 10 F.3d 935, 942 (9th Cir. 2011) (quoting Hensley, 461 U.S. at 436). The Court finds that a 11 multiplier of .85 is necessary to account for the Stores’ limited success in the litigation 12 failing to obtain class certification and to reflect the modest amount of recovery actually 13 received directly by The Stores. 14 Without suggesting a particular multiplier, Tauler Smith contends that the lodestar 15 should be adjusted downward because The Stores’ approximately $12,000 verdict at trial 16 makes the request for over $1 million in attorneys’ fees unreasonable. ECF No. 450 at 1- 17 2, 4-5, 7. Tauler Smith relies heavily on Lowery v. Rhapsody Int’l, Inc., a recent Ninth 18 Circuit case that reversed the district court’s attorneys’ fees award of $1.7 million where 19 the class members collectively recovered only about $50,000. 75 F.4th 985, 988 (9th Cir. 20 2023); ECF No. 450 at 1-2. The Ninth Circuit decried the high fee award in relation to 21 the awarded compensation, noting that “[e]xcept in extraordinary cases, a fee award 22 should not exceed the value that the litigation provided to the class.” Lowery, 75 F.4th at 23 994. However, it noted that this is true only “absent meaningful nonmonetary relief or 24 other sufficient justification.” Id. This aligns with prior case law holding that a lodestar 25 higher than the damages award is not “per se unreasonable,” Gonzalez, 729 F.3d at 1209. 26 27 28 14 18-cv-840-GPC-BGS 1 Courts regularly grant fee awards that exceed the damages award, sometimes many times 2 over, across a variety of fee-shifting statutes. 7 3 Lowery specifically distinguished civil rights cases in which nonmonetary relief 4 “can provide considerable benefits to society” and in which fee-shifting provisions are 5 intended to “ensure that lawyers would be willing to represent persons with legitimate 6 civil rights grievances.” Id. at 995-96. Like the civil rights fee-shifting provisions, 7 “Congress did not intend that attorneys’ fees [under RICO] should be awarded only in 8 some proportion to the plaintiff’s damages.” Planned Parenthood Fed’n of Am., Inc. v. 9 Ctr. for Med. Progress, No. 16-cv-00236, 2020 WL 7626410, at *4 (N.D. Cal. Dec. 22, 10 2020) (internal quotation marks omitted). Especially where monetary damages amounts 11 are small, as here, fee-shifting under 18 U.S.C. § 1964(c) ensures that persons with 12 legitimate racketeering concerns can obtain representation. See Andrews v. Am. Tel. & 13 Tel. Co., 95 F.3d 1014, 1025 (11th Cir. 1996) abrogated on other grounds by Bridge v. 14 Phoenix Bond & Indem. Co., 553 U.S. 639 (2008) (“even small individual claims under 15 RICO can be feasible given the possibility of the award of treble damages and attorneys’ 16 fees to successful plaintiffs”). Plus, not all cases accounting for nonmonetary success 17 and benefit to society involve civil rights claims. See Fleet Inv. Co. v. Rogers, 620 F.2d 18 19 20 21 22 23 24 25 26 27 28 7 See City of Riverside v. Rivera, 477 U.S. 561, 564-65, 567 (1986) (plurality) (approving attorneys’ fees of about $245,000 for a police excessive force case in which about $33,000 was awarded in damages); Bravo, 810 F.3d at 662, 665, 667 (approving attorneys’ fees of about $1 million where the parties settled a warrantless search claim for $360,000 with some defendants and won a $5,000 compensatory award against other defendants); Johnson v. MGM Holdings, Inc, 943 F.3d 1239, 1241-42 (9th Cir. 2019) (approving attorneys’ fees of about $184,000 where the class in a consumer protection action settled for $138,000); Wallis v. BNSF Ry. Co., No. C13-40, 2014 WL 1648472, at *1, 6-7 (W.D. Wash. Apr. 23, 2014), aff’d sub nom. Wallis v. Burlington N. Santa Fe Ry. Co., 680 F. App’x 515 (9th Cir. 2017) (granting attorneys’ fees of about $231,000 in a Federal Railroad Safety Act case in which the jury awarded $20,000 in damages). 15 18-cv-840-GPC-BGS 1 792, 794 (10th Cir. 1980) (“The value of an attorney's services is not only measured by 2 the amount of the recovery to plaintiff, but also the non-monetary benefit accruing to 3 others, in this case the public at large from his successful vindication of a national policy 4 to protect consumers from fraud in the used car business.”); Brazil v. Dell Inc., No. C-07- 5 01700, 2012 WL 1144303, at *1 (N.D. Cal. Apr. 4, 2012) (“The structural changes to 6 Dell's marketing practices resulting from this litigation, particularly Dell's elimination of 7 allegedly false representations regarding the pricing of its computers, conferred a benefit 8 on both the class members and the public at large.”). The plaintiffs in Lowery achieved 9 no meaningful nonmonetary relief. 75 F.4th at 988. Here, The Stores did.8 10 The success of a case encompasses the damages award, potentially a related 11 settlement amount, and “the significant nonmonetary results . . . achieved for [plaintiffs] 12 and other members of society.” Morales v. City of San Rafael, 96 F.3d 359, 365 (9th Cir. 13 1996); Bravo v. City of Santa Maria, 810 F.3d 659, 666 (9th Cir. 2016) (permitting 14 consideration of a settlement paid by a co-defendant in some circumstances). “[T]he 15 district court must consider the excellence of the overall result, not merely the amount of 16 damages won.” McCown, 565 F.3d at 1104. The Stores argue that they obtained an 17 excellent result because they succeeded with a positive jury verdict on each of their 18 claims and ended Outlaw’s scheme to defraud mom and pop businesses around the 19 country through settlement, preventing potentially thousands of small businesses from 20 having to pay Outlaw and Tauler Smith. ECF No. 451 at 5-6. 21 The Court begins by assessing The Stores’ success and the benefit of the case to 22 the Plaintiffs and to the public. In addition to collectively winning a damages award of 23 24 8 25 26 27 28 Moreover, the litigation in Lowery consisted of only one substantive motion and a few discovery disputes. 75 F.4th at 990. This is in contrast to the over fifteen substantive motions and multiple discovery motions in this case. See notes 2-4 supra (listing motions). 16 18-cv-840-GPC-BGS 1 $11,940, ECF No. 427, The Stores settled with Outlaw and its owners for $125,000 2 regarding the same claims for which Tauler Smith was named, ECF No. 361 at 3. See 3 Bravo, 810 F.3d at 666 (permitting consideration of a settlement payment by a co- 4 defendant if the time counsel spent on the settling defendant “cannot be fairly separated 5 from the time spent on non-settling defendants.”). Thus, the monetary success of the case 6 is around $100,000.9 But “it would be wrong to evaluate the extent of the results 7 Plaintiffs’ counsel obtained based solely on the number of dollars they recovered for their 8 clients.” Gonzalez, 729 F.3d at 1210. 9 The nonmonetary success of the case is harder to value. As part of the settlement, 10 Outlaw agreed to abandon its efforts to collect money from small businesses, including 11 from those to which it had already sent demand letters. ECF No. 249 at 1, 3. Ending the 12 “scheme” that had victimized The Stores is certainly a successful result. And it 13 undoubtably saved some number of small businesses from being targeted and from 14 paying settlement fees to Tauler Smith and Outlaw or being forced to litigate. The 15 Outlaw conspiracy sent an estimated 15,000 demand letters, ECF No. 434 at 278:18-23, 16 and sued roughly 50 small businesses in this case alone, ECF No. 1, so the impact of the 17 settlement was widespread. And it was especially valuable because it is unlikely that 18 many of the targeted small businesses would have been able to hire counsel to fight the 19 claims in the demand letters and lawsuits given the small amount at stake and that many 20 are immigrants and non-native English speakers. ECF No. 104-1 ¶ 2. 21 The Stores assert that the monetary value of these savings is roughly $7.7 million 22 because the project was estimated to yield $10 million and had already made an estimated 23 $2.3 million according to trial testimony. ECF No. 451 at 5-6. Assigning a specific 24 number to this aspect of The Stores’ success is speculative, but the Court finds that 25 26 9 27 28 Presumably, some of the settlement award went to counsel instead of to The Stores. 17 18-cv-840-GPC-BGS 1 ending Outlaw’s efforts to collect resulted in at least $1 million of savings to non-party 2 small businesses and potentially much more. In just one corner of the conspiracy, the 3 settlement resulted in the dismissal of at least nine cases in the Eastern District of 4 Michigan brought by Boss Law PLLC, an alleged member of the Outlaw conspiracy, on 5 behalf of Outlaw. ECF No. 448-1 at 10; Compare ECF No. 359-1 at 14 (settlement 6 agreement signed on June 24, 2020), with ECF No. 448-4 (nine cases brought by Outlaw 7 in the Eastern District of Michigan were closed on June 29, 2020). Emails sent by Mr. 8 Tauler estimated that Boss Law obtained over $2 million in uncollected default 9 judgments prior to the settlement. ECF No. 448-6 at 2-3 (emails sent in early July 2020). 10 By preventing further collection, the settlement which covers all of Outlaw’s activities, 11 not just those with Boss Law likely saved at least that much. Given how broadly Tauler 12 Smith and Outlaw targeted small businesses, the level of monetary value to similarly 13 situated stores is almost certainly greater than $1 million.10 14 Even though the precise value of these savings is uncertain, the Court may still 15 consider them as part of The Stores’ success. See Gonzalez, 729 F.3d at 1210 16 (considering as part of the litigation’s success that the “filing and prosecution of these 17 lawsuits . . . may have contributed to the City’s loss of insurance coverage, and 18 subsequent decision to shut down its beleaguered police department” (emphasis added)). 19 20 Averaging the jury’s damages awards to the three plaintiffs $5,940, $2,700, and $3,300, ECF No. 427, the targets of the “scheme” likely suffered about $3,980 in damages each. Outlaw and Tauler Smith sent an estimated 15,000 demand letters and sued roughly 50 small businesses in this case alone. ECF No. 434 at 278:18-23; ECF No. 1. So very conservatively assuming that the settlement provision requiring Outlaw to abandon its efforts to collect saved at least 100 businesses from paying Outlaw and Tauler Smith, litigating, or removing products from their shelves, the value of the litigation to the public is at least $398,000. If, on the higher end, the settlement saved 1,000 businesses from paying, litigating, or removing products from their shelves, the value to the public is closer to $3.98 million. 10 21 22 23 24 25 26 27 28 18 18-cv-840-GPC-BGS 1 Taking into account the nonmonetary results of the litigation, the differential between the 2 Stores’ success and the requested attorneys’ fees shrinks to nothing. 3 Next, The Stores argue that they were fully successful because they succeeded on 4 each of their causes of action for the amount sought. ECF No. 451 at 5. However, that 5 the Court denied their motion to certify a class, one of the primary goals of the lawsuit, 6 warrants a reduction. See Vargas v. Howell, 949 F.3d 1188, 1196 (9th Cir. 2020) (“A 7 reduction in fees could . . . be appropriate if a settlement were prompted by adverse court 8 rulings that doomed the plaintiff’s chances of achieving anything more than ‘partial or 9 limited success.’”). The Ninth Circuit has approvingly discussed reductions to the 10 lodestar of 10-20% for success on only one of multiple claims. See Yamada, 825 F.3d at 11 546 (approving a reduction of 20% because plaintiff succeeded on only one of five 12 claims); Hamed v. Macy’s West Stores, Inc., No. 10-2790, 2011 WL 5183856, at *7 13 (N.D. Cal. Oct. 31, 2011) (reducing attorneys’ fees by 10% because plaintiff succeeded 14 on only one of five original claims). Here, the Stores succeeded on each claim, so a 15 reduction of 15% sufficiently accounts for their failure to certify a class and the modest 16 amount of recovery actually received directly by The Stores. 17 Accordingly, the Court applies a multiplier of .85. Thus, with a lodestar of 18 $1,014,487.43 and a multiplier of .85, the Court finds that the Stores are entitled to 19 $862,314.32 in attorneys’ fees. 20 21 Costs 18 U.S.C. § 1964(c) states that, under RICO, the injured party shall recover “the 22 cost of the suit.” This permits recovery of standard out-of-pocket litigation expenses, 23 such as printing and legal research, as well as costs that are normally non-taxable, such as 24 travel expenses. Jung Ja Kim v. Quichocho, No. 1:09-cv-0046, 2015 WL 13357617, at 25 *4-6 (D. N. Mar. I. Mar. 23, 2015) (awarding non-taxable travel costs under § 1964(c)); 26 Oracle Am., Inc. v. Mai, 2014 WL 12588632, at *3 (C.D. Cal. Mar. 3, 2014); see also 27 28 19 18-cv-840-GPC-BGS 1 Grove v. Wells Fargo Fin. California, Inc., 606 F.3d 577, 580 (9th Cir. 2010) (“[W]e 2 repeatedly have allowed prevailing plaintiffs to recover non-taxable costs where statutes 3 authorize attorney's fees awards to prevailing parties.”) 4 The Stores request $33,410.48 in out-of-pocket litigation expenses. ECF No. 448- 5 11. They provide a description of each individual expense, including filing fees, airfare, 6 lodging, and other travel expenses, deposition videotaping, and copying. Id. The Stores 7 note that they claim $5,762.82 less than their counsel’s out-of-pocket litigation expenses. 8 Tauler Smith does not object to the request for costs. ECF No. 450 (absence). The Court 9 finds that the Stores’ requested costs are reasonable litigation expenses and holds that the 10 Stores are entitled to the full amount of their request. 11 12 Conclusion The Court GRANTS IN PART The Stores’ Motion for Attorneys’ Fees and Costs 13 of Suit, holding that the Stores are entitled to $862,314.32 in attorneys’ fees and 14 $33,410.48 in costs. 15 16 IT IS SO ORDERED. Dated: October 5, 2023 17 18 19 20 21 22 23 24 25 26 27 28 20 18-cv-840-GPC-BGS
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