Armament Systems & Procedures, Inc. v. IQ Hong Kong Ltd.

546 F. Supp. 2d 646, 2008 U.S. Dist. LEXIS 15732
CourtDistrict Court, E.D. Wisconsin
DecidedFebruary 29, 2008
DocketOO-C-1257
StatusPublished

This text of 546 F. Supp. 2d 646 (Armament Systems & Procedures, Inc. v. IQ Hong Kong Ltd.) is published on Counsel Stack Legal Research, covering District Court, E.D. Wisconsin primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Armament Systems & Procedures, Inc. v. IQ Hong Kong Ltd., 546 F. Supp. 2d 646, 2008 U.S. Dist. LEXIS 15732 (E.D. Wis. 2008).

Opinion

DECISION AND ORDER

WILLIAM C. GRIESBACH, District Judge.

Title 35 U.S.C. § 285 allows an award of attorney’s fees in “exceptional cases.” On October 12, 2007, I declared that this was such a case and ordered, with certain limitations, Armament to pay the defendants’ reasonably incurred attorneys’ fees as well as certain other expenses, such as those related to expert witnesses. In light of the burden this ill-begotten action has already placed on the defendants and the court, I directed the parties to attempt to reach agreement on the amount of fees that would be awarded. Agreement has not been reached, however, and from the plethora of trivial objections Armament has raised about billing matters that are “unclear,” it appears consultation was scarcely attempted.

In any event, the defendants have sought a total of roughly $4 million in attorneys’ fees and other expert expenses. As noted, Armament has raised a number of objections to the figures, not least of which is that it simply lacks the ability to pay anything more than $1 million. It also objects to what it describes as over-staff *649 ing on the defendants’ part, “block billing,” and general inefficiencies in the defense’s representation. It raises further objections related to charges for the defendants’ expert witnesses as well as fees it believes were excluded by this court’s October 12 order.

Before reaching Armament’s particular objections, three general observations are worthwhile. First, at a telephonic hearing, the question of billing records arose, and I ordered the defendants to produce their records, subject to any privilege redactions they might wish to make at their own expense. I declined to order Armament to produce its own records, however, and it has not done so. Although I did not order their disclosure, I did note that I would draw any reasonable inferences from the fact that Armament chose not to produce its own records. The inference to be drawn, naturally, is that Armament’s own fees and expenses were similar to those now sought by the defendants. Determining the reasonableness of fees is always a contextual exercise, and in a complex patent case like this one the probative value of the plaintiffs own billings is at a premium; as such, it is reasonable to conclude that Armament’s failure to provide very probative evidence is highly suggestive that its own billings do not support its contention that the defendants’ fees were exorbitant.

[Gjiven the complexity of this matter, the number of counsel retained by Respondent, the number of complex (as well as questionable) issues raised repeatedly by Respondent, and the lengthy process it has taken for this Court to finally reach its decision, the total number of hours spent by GM counsel on this matter are clearly not excessive. Again, Respondent has failed to identify the total number of hours his counsel have spent in this matter. Since this is such an unusual matter, this failure can only be seen, despite Respondent’s protestations, as a concession that GM’s counsel’s total efforts actually were reasonable.

In re General Motors Corp., 110 F.3d 1003, 1033 (4th Cir.1997).

A second general observation is that this was not a typical fee generating case. Some cases begin with an expectation that one’s fees could be awarded, and in such cases a moral hazard may exist and tempt attorneys to run up the tab. Medcom Holding Co. v. Baxter Travenol Laboratories, Inc., 200 F.3d 518, 521 (7th Cir.1999). In such cases, a judge is typically not reviewing actual bills that a client has already paid; he is merely reviewing the amount of hours an attorney has worked for which he could theoretically bill the client in the event fees are not awarded. Because in these cases no paying client has already implicitly agreed that the fees charged were reasonable, it is especially incumbent upon the judge to act as a stand-in for the arm’s length market that gives reasonableness much of its essence.

Here, however, by its nature this was an “extraordinary” case, and only in its twilight did the specter of attorneys’ fees emerge. A law firm is a business, and like any business its charges must be commercially reasonable or its client base will dry up. Thus, before a bill is sent to a client, the bill is typically examined by the partner responsible for that client, who may decide to reduce some of the charges in order to keep the client happy. Sometimes attorneys may be encouraged to cut their hours in a manner not even reflected on the bill itself. Of course, once the firm’s internal review process is complete, the bills are subject to the client’s own review. Many clients are not shy about objecting to fees, and whether they object or not, the bill was sent with the expectation that it will not offend the client — that it is “reasonable.” When a client finally *650 pays the bill and continues to retain the law firm’s services, it has already implicitly conceded the reasonableness of the fees charged.

Courts award fees at the market rate, and the best evidence of the market value of legal services is what people pay for it. Indeed, this is not “evidence” about market value; it is market value.... Although Walentas denies that Balcor got its money’s worth, it does not deny that these were real bills that Balcor paid and it does not argue that Balcor’s lawyers ran the meter because they thought that Walentas would have to cover the tab. Corporate inside counsel monitor bills submitted by outside counsel; nothing in this record suggests that these bills received less than the usual review. They were deemed commercially reasonable and paid.

Balcor Real Estate Holdings, Inc. v. Walentas-Phoenix Corp., 73 F.3d 150, 153 (7th Cir.1996). And when, as here, several clients have paid similar bills, the assumption of reasonableness is that much stronger. In another contract-based attorneys’ fee case, the Seventh Circuit made an observation that has equal weight here:

If the bills were paid, this strongly implies that they meet market standards. The fees in dispute here are not pie-in-the-sky numbers that one litigant seeks to collect from a stranger but would never dream of paying itself. These are bills that MHC actually paid in the ordinary course of its business.

Medcom, 200 F.3d at 520. All of this is not to say that market forces are a complete substitute for a judge’s independent review of reasonableness under § 285, but it seems instead that the need for judicial scrutiny is simply less acute when the fees sought are those that were already billed and paid in the normal course of business.

A final general observation is that the defendants were under no obligation to coordinate their defense of this case, yet in several key matters defense counsel worked together to ensure that briefs and motions were coordinated and presented efficiently.

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Bluebook (online)
546 F. Supp. 2d 646, 2008 U.S. Dist. LEXIS 15732, Counsel Stack Legal Research, https://law.counselstack.com/opinion/armament-systems-procedures-inc-v-iq-hong-kong-ltd-wied-2008.