Magistrate Also Discounts 10% Across the Board for “Block Billing.”
Ceglia v. Zuckerberg, 2012 WL 503810 (W.D.N.Y. Feb. 14, 2012) is a federal opinion from outside California that caught our eye for its departure from the so-called “forum rule”--reasonable attorney’s fees in the fee-shifting area are usually based on the work for comparable attorneys in the venue of the particular case. The departure was inspired by the differences between true fee-shifting statutes versus sanctions.
The dispute in this case was between plaintiff and Mr. Zuckerberg on the authenticity of a contract for development and commercialization of two separate Internet business ventures and the social-networking website created and maintained by defendant Zuckerberg now known as Facebook. So, the odds were high, with Mr. Zuckerberg maintaining that the contract was a forgery. Plaintiff, during the course of the dispute, got hit with e-discovery sanctions for failing to comply with prior discovery orders.
Defendant moved to recover attorney’s fees of $84,196.33, with assigned U.S. Magistrate Judge Leslie G. Foschio actually awarding $75,776.70.
Plaintiff’s main opposition centered on the defense use of attorneys from the New York City metropolitan area rather than less expensive attorneys venued where the case was, namely, Buffalo, N.Y. Although the “forum rule” usually governs fee-shifting contractual/statutory disputes, attorney’s fees awarded as sanctions for discovery abuses under FRCP 37 serve a deterrence rather than fee-shifting compensatory purpose such that a district court has discretion to use out-of-district hourly rates to calculate fee sanctions awards. (Cf. On Time Aviation, Inc. v. Bombardier Capital, Inc., 354 Fed.Appx. 48, 452 (2d Cir. 2009) [same result under FRCP 11].) However, even if the punitive nature of Rule 37 awards did not apply, the circumstances were exceptional so as to justify a deviation from the normal rule given the nature of the claim and need to have specialized counsel to address e-discovery/forgery issues.
Also, fee claimant attorneys did a good job in substantiating their hourly rates and delegating lower level work to “cheaper” attorneys.
However, as we have cautioned before, “block billing” can get you into trouble as far as fee submissions are concerned. Although apparently not prohibited in the Second Circuit, it does raise enough concerns because of making evaluation difficult, if not impossible, such that the court is permitted to make a simple reduction in the number of hours to “trim the fat.” Here, that butchering factor led to an across-the-board 10% reduction.