BladeRoom Group Limited v. Facebook, Inc.

• Court: District Court, N.D. California
• Decided: April 6, 2020
• Docket: 5:15-cv-01370
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 BLADEROOM GROUP LIMITED, et al., 8 Case No. 5:15-cv-01370-EJD Plaintiffs, 9 ORDER GRANTING IN PART AND v. DENYING IN PART MOTION FOR 10 ATTORNEYS’ FEES AND COSTS EMERSON ELECTRIC CO, et al., 11 Dkt. No. 962 Defendants. 12

13 Plaintiffs BladeRoom Group Limited and Bripco (UK) Limited’s (collectively 14 “BladeRoom”) prevailed at trial on a claim for trade secret misappropriation. The jury awarded 15 compensatory damages of $30 million and the Court later awarded exemplary damages in the 16 amount of $30 million under California Code of Civil Procedure §3426.4 and prejudgment 17 interest. Dkt. No. 956. 18 Pending before the Court is BladeRoom’s motion for attorneys’ fees and costs. 19 BladeRoom seeks $17,002,267.76 in fees for work performed by Farella Braun (“Farella”), 20 $3,379,350.00 for work performed by in-house counsel, $71,744.95 for work performed by UK- 21 based outside counsel, and $3,605,616.37 in costs. 22 On December 11, 2019, the Special Master filed a Report and Recommendation regarding 23 BladeRoom’s motion (“R&R”). Dkt. No. 1028. The Special Master found BladeRoom’s attorney 24 billing records were “improper and in various ways problematic under the relevant caselaw and 25 facts of this case.” Id. 31. Therefore, the Special Master recommended a 40% reduction of 26 BladeRoom’s fees to “mirror[] the percentage of billing records that the Special Master has 27 Case No.: 5:15-cv-01370-EJD 1 identified as problematic.” R&R at 19. The Special Master stated that the “reduced amount more 2 appropriately represent[ed] BladeRoom’s reasonable attorneys’ fees in this litigation.” Id. The 3 40% reduction of BladeRoom’s lodestar left BladeRoom with a final lodestar and attorneys’ fee 4 recovery of $12,272,017. The Special Master recommended taxing costs in the amount of 5 $2,495,161.87. Lastly, the Special Master recommended that his fees be split evenly between 6 BladeRoom and Defendants Emerson Electric Co., Emerson Network Power Solutions Inc., and 7 Liebert Corporation (collectively “Emerson”). 8 The parties filed their respective objections to the R&R (Dkt. Nos. 1031, 1032) and 9 responses to objections (Dkt. Nos. 1035, 1036). The matter was heard via telephonic conference 10 on March 26, 2020. Based upon all pleadings filed to date, the extensive evidentiary record, and 11 the comments of counsel, the Court adopts the R&R with the exceptions noted herein. 12 A. STANDARDS 13 The parties agree that the lodestar method of determining attorney’s fees applies. The 14 lodestar is calculated by multiplying the number of attorney hours the prevailing party reasonably 15 expended on the litigation by a reasonable hourly rate. Morales v. City of San Rafael, 96 F.3d 16 359, 363 (9th Cir. 1996). “The reasonableness of an hourly rate should be determined based on 17 the rates prevailing in the community for ‘lawyers of reasonably comparable skill, experience and 18 reputation.’” Lewis v. Silvertree Mohave Homeonwers’ Ass’n, Inc., No. 16-3581 WHA, 2017 WL 19 5495816, at *3 (N.D. Cal. Nov. 16, 2017) (quoting Blum v. Stenson, 465 U.S. 886, n.11 (1984)). 20 There is a strong presumption that the lodestar figure represents a reasonable fee. Lopez v. San 21 Francisco Unified Sch. Dist., 385 F. Supp. 2d 981, 986 (N.D. Cal. 2005) (citing Jordan v. 22 Multnomah Cty., 815 F.2d 1258, 1262 (9th Cir. 1987)). “That presumption is particularly forceful 23 where, as here, the fees were billed to and actually paid by [BladeRoom] during the course of the 24 litigation.” Stonebrae, L.P. v. Toll Bros., Inc., No. 08-221 EMC, 2011 WL 1334444, at *6 (N.D. 25 Cal. April 7, 2011); see also Sazerac Co., Inc. v. Fetzer Vineyards, Inc., No. 15-4618 WHO, 2017 26 WL 6059271, at *11 (N.D. Cal. Dec. 7, 2017) (“[t]he fact that the fees have been paid by 27 Case No.: 5:15-cv-01370-EJD 1 [defendant] . . . ‘adds weight to the presumption of reasonableness’” (quoting Stonebrae, 2011 2 WL 1334444, at *6)). 3 B. DISCUSSION 4 The Court has conducted a de novo review of the R&R. The Court concurs with the 5 Special Master’s finding that the hourly rates for Farella’s attorneys were “wholly reasonable” and 6 consistent with market rates in the San Francisco Bay Area. R&R at 6, n.2. Each of the parties’ 7 discrete objections to the Special Master’s assessment of allowable fees are discussed separately 8 below. Whether the Special Master’s recommended across-the-board 40% reduction to all fees 9 should be adopted is discussed in Section 5 of this Order. 10 1. Emerson’s Objection re Expert Witness Fees 11 BladeRoom seeks more than $2 million in expert witness fees pursuant to the California 12 Uniform Trade Secrets Act (“CUTSA”), specifically California Civil Code section 3426.4. Section 13 3426.4 states, in relevant part:

14 If . . . willful and malicious misappropriation exists, the court may award reasonable attorney’s fees and costs to the prevailing party. 15 Recoverable costs hereunder shall include a reasonable sum to cover the services of expert witnesses, who are not regular employees of 16 any party, actually incurred and reasonably necessary in either, or both, preparation for trial or arbitration, or during trial or arbitration, 17 of the case by the prevailing party. 18 Cal. Civ. Code § 3426.4. Prior to 2006, §3426.4 permitted an award of only attorney’s fees to the 19 prevailing party. CRST Van Expedited, Inc. v. Werner Enterprises, Inc., 479 F.3d 1099, 1111 n.13 20 (9th Cir. 2007). In 2006, the statute was amended to permit the award of costs as well as 21 attorney’s fees. Id. The Special Master determined that under the rule of Erie R. Co. v. Tompkins, 22 304 U.S. 64 (1938), §3426.4 applied because it is a substantive rather than procedural statute. 23 R&R at 22. Accordingly, the Special Master concluded that BladeRoom was entitled to expert 24 witness fees under §3426.4. 25 Emerson objects to any award of expert witness fees. Emerson contends that the Special 26 Master mistakenly applied §3426.4 to award these fees instead of applying Federal Rule of Civil 27 Case No.: 5:15-cv-01370-EJD 1 Procedure 54(d), in conjunction with 28 U.S.C. §§ 1821 and 1920, which do not authorize 2 recovery of expert witness fees.1 The Court disagrees. 3 In Hanna v. Plumer, 380 U.S. 460 (1965), the Supreme Court set forth the test for 4 resolving conflicts between state law and the Federal Rules. The first step is to determine whether 5 the Federal Rule “is ‘sufficiently broad’ to cause a ‘direct collision’ with the state law, or 6 implicitly, to ‘control the issue’ before the court, thereby leaving no room for the operation of that 7 law.” Burlington Northern R. Co. v. Woods, 480 U.S. 1, 4-5 (1987) (quoting Walker v. Armco 8 Steel Corp., 446 U.S. 740, 749-750, and n. 9 (1980)). If so, “[t]he Rule must then be applied if it 9 represents a valid exercise of Congress’ rulemaking authority, which originates in the Constitution 10 and has been bestowed on this Court by the Rules Enabling Act, 28 U.S.C. § 2072.3.” Id. (citing 11 Hanna, 380 U.S. at 471-74). The second step of the analysis is to look at the “twin aims of the 12 Erie rule: discouragement of forum-shopping and avoidance of equitable administration of the 13 laws.” Hanna, 380 U.S. at 468. The Supreme Court has further instructed, “[w]e do not wade 14 into Erie’s murky waters unless the federal rule is inapplicable or invalid.” Shady Grove 15 Orthopedic Associates, P.A. v. Allstate Ins. Co., 559 U.S. 393, 407 (2010). 16 Here, Federal Rule of Civil Procedure 54(d) authorizes the award of “costs” to the 17 prevailing party. Title 28 United States Code sections 1920 and 1821 specify the categories of 18 costs that are recoverable. Section 1920 “now embodies Congress’ considered choice as to the 19 kinds of expenses that a federal court may tax as costs against the losing party.” Crawford Fitting 20 Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 440 (1987). Expert witness fees are not listed in section 21 1920, and section 1821(b) limits recoverable witness fees to $40 per day for attendance at 22 depositions and trial. Accordingly, federal courts limit recovery of expert witness fees to $40 per 23

24 1 See also Civil Local Rule 54-3 (“Witness Expenses. Per diem, subsistence and mileage 25 payments for witnesses are allowable to the extent reasonably necessary and provided for by 28 U.S.C. § 1821. No other witness expenses, including fees for expert witnesses, are allowable.”) 26

27 Case No.: 5:15-cv-01370-EJD 1 day. See Rimini Street, Inc. v. Oracle USA, Inc., 139 S. Ct. 873, 877 (2019) (When “a prevailing 2 party seeks reimbursement for fees paid to its own expert witnesses, a federal court is bound by 3 the limit of §1821(b), absent contract or explicit statutory authority to the contrary.”) (quoting 4 Crawford, 482 U.S. at 439). 5 In Aceves v. Allstate Ins. Co., 68 F.3d 1160, 1168 (9th Cir. 1995), the district court, sitting 6 in diversity, awarded the prevailing party costs, including expert witness fees, under California’s 7 offer of judgment rule stated in Code of Civil Procedure section 998(c). Faced with what was 8 perceived as a “choice of law . . . between state and federal expert witness cost provisions,” the 9 Aceves court concluded that the district court erred in applying California law. The Aceves court 10 reasoned:

11 California law controls the substance of this lawsuit, but federal law controls the procedure by which the district court oversaw the 12 litigation. See Hanna v. Plumer, 380 U.S. 460, 473, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965). Because reimbursement of expert witness fees 13 is an issue of trial procedure, federal law should have controlled this costs issue, unless one of two factors indicated otherwise. State 14 procedure would only have applied if the pedigree of the federal rule could not be traced back to a federal statute or a Federal Rule of Civil 15 Procedure, duly enacted pursuant to the Rules Enabling Act, see id. at 470–71, 85 S.Ct. 1136, or if the federal rule created an incentive to 16 shop for the federal forum, see id. at 467–68, 85 S.Ct. 1136. See also Olympic Sports Prods., Inc. v. Universal Athletic Sales Co., 760 F.2d 17 910, 914–15 (9th Cir. 1985). 18 Id. at 1167–68. 19 Although the Aceves decision provides some guidance, it is not controlling here because 20 BladeRoom is seeking expert witness fees under a different California statute. Moreover, the 21 premise of the Aceves court’s decision was that the federal and state offer of judgment rules were 22 procedural, not substantive. In contrast, the entitlement to expert witness fees under §3426.4 is 23 arguably a substantive provision. In CRST Van Expedited, Inc. v. Werner Enterprises, Inc., 479 24 F.3d 1099 (9th Cir. 2006), the Ninth Circuit held that the district court properly applied the 25 attorney’s fees provision of §3426.4 under the rule of Erie. Id. at 1111. The CRST court first 26 observed that “[w]e have held that when state statutes authorize fee awards to litigants in a 27 Case No.: 5:15-cv-01370-EJD 1 particular class of cases, the statutes are substantive for Erie purposes if there is no ‘direct 2 collision’ with the Federal Rules.” Id. The CRST court noted that §3426.4 was such a statute in 3 that it applied only in cases where a trade secret misappropriation claim was filed. Id. 2 The CRST 4 also reasoned that the attorney’s fees provision of §3426.4 did not supplant or collide directly with 5 any Federal Rule and embodied a substantive state policy against the frivolous filing of trade 6 secret claims. Id. 7 The cost-shifting provision of §3426.4 was not at issue in CRST. Nevertheless, this Court 8 finds that the CRST court’s reasoning regarding the attorney’s fees provision applies with equal 9 force to the cost-shifting provision. The cost-shifting provision of §3426.4 applies only in trade 10 secret misappropriation cases and does not collide directly with the federal cap on daily witness 11 fees. Section 3426.4 provides for the recovery of expert witness fees only if there is a finding of 12 willful and malicious misappropriation, whereas the federal cap on daily witness fees is one of 13 many taxable costs available to a prevailing party. The two rules can be reconciled because they 14 answer different questions. Shady Grove, 559 U.S. at 410. Consistent with CRST, in RBC 15 Bearings Inc. v. Caliber Aero, LLC, No. 12-1442 FMO, 2016 WL 6562068, at *11 (C.D. Cal. 16 Aug. 1, 2016), the court construed CRTS Van Expedited as holding that federal courts sitting in 17 diversity may properly award attorney’s fees and costs under §3426.4. The RBC court 18 accordingly awarded expert witness fees under §3426.4. In Eldorado Stone LLC v. Renaissance 19 Stone, No. 04-2562 JM, 2007 WL 3308099, at *6 (S.D. Cal. Oct. 24, 2007), which was decided 20 before CRST, the court similarly awarded expert witness fees to the prevailing party under 21

22 2 The case of In re Larry’s Apartment, L.L.C., 249 F.3d 832 (9th Cir. 2001) is distinguishable from 23 CRST in that the statute at issue in Larry’s Apartment was procedural, not substantive. In Larry’s Apartment, the trial court awarded attorneys’ fees as a sanction for attorney misconduct. On appeal, 24 the Ninth Circuit held that under Erie, federal law, not Arizona law, governed. The Ninth Circuit explained that when fees are based upon the misconduct of an attorney or a party to the litigation, 25 rather than upon a matter of substantive law, the matter is procedural. Id. at 838. “Imposition of sanctions in that instance ‘depends not on which party wins the lawsuit, but on how the parties 26 conduct themselves during the litigation.’” Id. at 838 (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 53 (1991)). Here, imposition of fees and costs under section 3426.4 depends on which party 27 wins the lawsuit, not on how the parties conducted themselves during the litigation. Case No.: 5:15-cv-01370-EJD 1 §3426.4. This Court joins RBC Bearings and Eldorado Stone in concluding that § 3426.4 applies.3 2 This result is bolstered by step two of the Hanna analysis. The application of §3426.4 in state 3 court and not in federal court may very well lead to forum-shopping and the possible inequitable 4 administration of the laws. Although BladeRoom chose to initiate suit in federal court, there may 5 be future diversity cases in which the defendant will be able to remove the case to federal court 6 and seek to eliminate exposure to liability under §3426.4. 7 BladeRoom’s motion for expert witness fees is granted. The Court adopts the 8 recommendation of the Special Master and awards BladeRoom $2,017,851.59 in expert witness 9 fees.

10 2. Emerson’s Objections re In-House Counsel and Foreign Counsel Fees, Failure to Apportion, and Failure to Consider the Lack of Success 11 a. In-House Counsel Fees 12 13 BladeRoom seeks $3,379,350.00 in attorneys’ fees for work performed by BladeRoom’s 14 General Counsel, Michael Joy. Mr. Joy has been a practicing barrister in England since 1997. 15 Decl. of M. Joy ¶ 2 (Dkt. No. 962-7). BladeRoom paid him a salary. Mr. Joy spent 5,199 hours 16 working on this case. BladeRoom applied a $650 hourly rate to Mr. Joy’s work to arrive at the 17 requested amount of $3,379,350.00. 18 The Special Master reviewed Mr. Joy’s record and found that “for the majority of the time 19 that [Mr.] Joy was working with BladeRoom attorneys, he was acting in the traditional role of in- 20 house counsel; that is, he was acting as a liaison between the client and the legal team.” R&R at 21 14. The Special Master also found “[n]o persuasive evidence” that Mr. Joy was “a core part of the 22 BladeRoom legal team or that his litigation or skills were critical to the success of the case.” Id. 23 Instead, Mr. Joy “brought more of his technical expertise to the table, which is more of a 24

25 3 This result is also consistent with Clausen v. M/V New Carissa, 339 F.3d 1049 (9th Cir. 2003) 26 (affirming award of expert witness fees under Oregon Oil Spill Act); Base v. FAC US LLC, No. 17-1532 JCS, 2020 WL 363006, at *7 (N.D. Cal. Jan. 22, 2020) (awarding expert witness fees 27 under California’s Song-Beverly Act). Case No.: 5:15-cv-01370-EJD 1 traditional in-house counsel role.” Id. Further, the Special Master found that when Mr. Joy was 2 acting as an attorney rather than a technical advisor, Mr. Joy’s work was at times duplicative of 3 the efforts of outside counsel. Id. at 15. The Special Master concluded that BladeRoom was not 4 entitled to recoup the entirety of Mr. Joy’s attorneys’ fees and applied a 40% reduction to his fees. 5 Id. at 19. 6 Emerson objects to the R&R to the extent it fails to deduct Mr. Joy’s fees in full. First, 7 Emerson argues that Mr. Joy’s fees are not recoverable because he is not a U.S. attorney. Second, 8 Emerson contends that there is not reasonable support for any of Mr. Joy’s time. Emerson points 9 out that Mr. Joy did not maintain contemporaneous time records and characterizes Mr. Joy’s 10 declaration in support of the fee request as “a self-serving declaration prepared years after much of 11 the work was allegedly performed.” Defs.’ Obj. 3. Third, Emerson argues that none of Mr. Joy’s 12 fees are recoverable based on the Special Master’s findings that Mr. Joy acted primarily in a 13 traditional in-house role and the legal work he did perform was duplicative of the efforts of outside 14 counsel. 15 The Court overrules Emerson’s first two objections. BladeRoom is entitled to recover fees 16 for Mr. Joy’s work even if he is not a U.S. attorney. In Winterrowd v. Am. Gen. Annuity Ins. Co., 17 556 F.3d 815 (9th Cir. 2009), the plaintiffs sought an award of attorney’s fees pursuant to 18 California Labor Code section 218.5. Id. at 825. The district court determined that plaintiffs 19 could not recover attorney’s fees for the portion of work performed by an out-of-state attorney due 20 to his alleged violation of the State Bar Act or the Central District of California’s Local Rules. Id. 21 at 820. The Ninth Circuit determined that the State Bar Act did not control, and looked instead to 22 the Central District’s rules (which allow for out-of-state attorneys to participate pro hac vice) and 23 federal case law to determine whether the plaintiffs may recover for the attorney’s work. Id. at 24 822. The Ninth Circuit observed that case law suggested “two ways” in which the plaintiffs could 25 recover the attorney’s fees: (1) if the attorney would have “certainly been permitted to appear pro 26 hac vice”; and (2) if the attorney’s conduct “did not rise to the level of ‘appearing’ before the 27 Case No.: 5:15-cv-01370-EJD 1 district court.” Id. at 823. As to the second basis for recovering attorney’s fees, the Winterrowd 2 court reasoned: “This court has permitted fee recovery for the work of paralegals, database 3 managers, legal support, summer associates, and even attorneys who have yet to pass the bar. 4 [citation]. These participants in the legal process do not ‘appear’ before the district court, as they 5 do not argue cases or sign briefs. They are nevertheless an integral part of the litigation process.” 6 Id. at 823. The Winterrowd court characterized the out-of-state attorney’s role as litigation support 7 or consultant, and ultimately held that the plaintiffs may recover for the attorney’s work because 8 his conduct did not rise to the level of “appearing” before the district court. Id. at 823-824. The 9 out-of-state attorney “never appeared or argued in front of the district court, nor did he sign 10 briefs.” Id. at 824. Rather, the out-of-state attorney had the role of “advising” and “reviewing 11 pleadings.” 12 Like the attorney in Winterrowd, Mr. Joy’s role was primarily one of litigation support and 13 consultant, and the legal work he did perform did not rise to the level of appearing before the 14 court. Therefore, Mr. Joy’s fees are recoverable to the same extent as outside counsel’s fees. 15 Further, the lack of contemporaneous bills does not foreclose an award of fees. Winterrowd, 556 16 F.3d at 827 (“[i]n California, an attorney need not submit contemporaneous time records in order 17 to recover attorney fees”); Ackerman v. Western Elec. Co., Inc., 643 F. Supp. 836, 863 (N.D. Cal. 18 1986) (in the absence of contemporaneous time records, “the Ninth Circuit requires only that 19 affidavits be sufficient to enable the court to consider all the factors necessary to determine a 20 reasonable attorney’s fee award”). 21 Emerson’s third objection, however, has some merit. Having reviewed Mr. Joy’s 22 declaration, travel logs, notebooks, iConnect log and select e-mails, the Court concurs with the 23 Special Master’s finding that Mr. Joy appears to have acted in the role of in-house counsel for a 24 substantial portion of the time he worked with BladeRoom’s attorneys. For example, Mr. Joy 25 collected and reviewed contracts, emails, attachments, company manuals and specifications (see 26 Joy Decl. ¶ 13); interviewed employees (¶ 13); searched for and reviewed publicly available 27 Case No.: 5:15-cv-01370-EJD 1 materials about how Facebook and Emerson might be using BladeRoom’s technology (¶ 14); met 2 with BladeRoom’s board and executives regarding the pre-filing investigation (¶ 15); coordinated 3 and participated in meetings with outside counsel (¶ 16); communicated regularly with outside 4 counsel (¶¶ 16, 22, 24, 25); reviewed BladeRoom’s confidentiality policies (¶ 17); helped 5 BladeRoom respond to discovery (¶¶ 28-32); helped develop trial strategy and prepare for trial (¶¶ 6 48, 51, 55); attended every day of trial (¶ 53); and participated in calls with outside counsel to 7 discuss the appellate process and strategy (¶ 59). In-house counsel cannot recover fees for time 8 spent acting as a client “liaison” or “client representative.” See El Dorado Irrigation Dist. v. 9 Traylor Bros., Inc., No. 03-949 LKK, 2007 WL 512428, at *5 (E.D. Cal. Feb. 2, 2007) (deducting 10 hours of in-house counsel because party failed to distinguish when counsel was “representing” 11 party as a lawyer and when he was acting as a “client representative”); Milgard Tempering, Inc. v. 12 Selas Corp. of Am., 761 F.2d 553, 558 (9th Cir. 1985) (“Of course, if in-house counsel are not 13 actively participating (e.g., acting only as liaison), fees should not be awarded.”); cf. Scripps 14 Clinic & Research Foundation, Inc. v. Baxter Travenol Labs., Inc., No. 87-140-CMW, 1990 WL 15 146385, at *1 (D. Del. July 31, 1990) (“Fees for in-house counsel are appropriate only when 16 counsel is performing legal work that would otherwise be performed by outside counsel; time 17 spent by in-house counsel in the role of a client, such as time spent keeping abreast of the progress 18 of the litigation and advising outside counsel of the client’s views as to litigation strategy, is not 19 compensable in a fee award.”). 20 Mr. Joy also provided substantial technical support, which is more of a traditional in-house 21 counsel role. See R&R at 14 (citing Joy Decl. ¶15 (“I also helped set up a data room to enable 22 outside counsel to access relevant documents and conduct interviews and meetings with several 23 potential outside counsel”); ¶19 (“I continued helping the Farella attorneys to better understand 24 BladeRoom’s technology and our case. This included sharing and explaining numerous company 25 manuals and specifications . . . .”); ¶40 (“I was heavily involved in helping Farella attorneys work 26 with our technical experts, Mr. Quale and Mr. Brannigan, so that they could explain BladeRoom’s 27 Case No.: 5:15-cv-01370-EJD 1 trade secrets in their reports.”); ¶41 (“I helped Mr. Andrea and Farella attorneys to provide 2 information for his report and to help him better understand the state of the data center industry”)). 3 The Court agrees with the Special Master’s assessment that Mr. Joy also performed legal 4 work that would otherwise be performed by outside counsel. For example, Mr. Joy investigated 5 potential claims, drafted discovery responses, responded to briefs and motions, and prepared 6 witnesses for deposition and trial. This type of work by in-house counsel is ordinarily 7 compensable. Scott Paper Co. v. Moore Business Forms, Inc., 604 F. Supp. 835, 837 (D. Del. 8 1984) (awarding value of in-house counsel's servicers in-house counsel had “participated 9 throughout these proceedings, attended depositions, and was involved in witness preparation, trial 10 of the case, and brief writing”). 11 Nevertheless, it appears that Mr. Joy’s legal work was largely duplicative of the work of 12 the Farella attorneys. Without the benefit of contemporaneous billing records from Mr. Joy 13 (which he was not required to maintain), it is not feasible to identify with specificity the non- 14 duplicative work Mr. Joy contributed to the litigation of this case. Scripps, 1990 WL 146385, at 15 *2 (reducing requested in-house fees by fifty percent in part because in-house counsel’s “affidavit 16 is helpful in determining the types of tasks he did, but it is not a complete substitute for detailed 17 time records”). 18 Based upon the records and other supporting documentation that is available, the Court 19 finds that the requested $3,379,350.00 for work performed by Mr. Joy is not completely 20 substantiated and to some degree excessive. Emerson’s request that Mr. Joy’s fees be deducted in 21 full, however, goes too far. Mr. Joy unquestionably played a vital and unique role in this complex 22 litigation. His institutional knowledge was of great value to the prosecution of BladeRoom’s case. 23 Mr. Joy’s significant contributions to the litigation potentially saved Emerson attorneys’ fees 24 because he was able to perform services more efficiently than a host of junior level attorneys with 25 less institutional knowledge and less expertise. The Court finds that a 55% reduction of his fees is 26 appropriate because his work was primarily that of a traditional in-house counsel, and in other 27 Case No.: 5:15-cv-01370-EJD 1 respects, appears to have been duplicative of work performed by the Farella attorneys. The Court 2 recognizes the significant support Mr. Joy gave to BladeRoom through the course of the litigation; 3 however, the Court would have been in a better position to analyze Mr. Joy’s fees had there been 4 greater notation of those fees. See PLCM Group, Inc. v. Drexler, 22 Cal.4th 1084, 1096 n.4 5 (2000) (“We note that maintaining contemporaneous records by in-house counsel of hours spent 6 on a case involving a possible request for attorney fees would facilitate accurate calculation of the 7 lodestar and minimize possible inaccuracies in reconstructing time spent on a matter months or 8 even years after the fact.”). 9 Mr. Joy’s fees will therefore be reduced to $1,520,707.50. 10 b. Foreign Counsel Fees 11 BladeRoom seeks $71,744.95 in fees for two outside UK law firms and a UK paralegal. 12 The Special Master concluded that BladeRoom was not entitled to fees under Winterrowd, and 13 reduced these fees by 40% instead of excising them entirely from BladeRoom’s fee award. 14 Emerson asks the Court to remove the remaining 60% of these fees from the fee award, 15 contending that all of the UK law firm’s fees are not recoverable as a matter of law under 16 Winterrowd. 17 The Court overrules Emerson’s categorical objection to all of the UK law firm’s fees for 18 the reasons discussed above regarding Mr. Joy’s fees. 19 c. Block-billing/ Allocation of Facebook Related Fees 20 The Special Master recommended a 40% reduction of BladeRoom’s lodestar in part 21 because of block-billed entries for work “that included issues unique to Facebook and not 22 applicable to Emerson, making it impossible to determine how much of this block-billed time 23 should be discounted and how much should be recoverable.” R&R at 10. In particular, the 24 Special Master noted that BladeRoom was seeking over $1.3 million in fees incurred before 25 Emerson was even named as a defendant. Emerson was not added as a party until Bladeroom was 26 granted leave to file the Second Amended Complaint (“SAC”) in April of 2016. Dkt. No. 105. In 27 Case No.: 5:15-cv-01370-EJD 1 his review of the billing records, the Special Master also identified several other block-billed 2 entries for work relating to Facebook, including but not limited to entries for time spent 3 communicating with and preparing for meet and confer efforts with Facebook counsel, working on 4 BladeRoom’s opposition to Facebook’s Motion to Dismiss, and propounding and responding to 5 Facebook-specific discovery. 6 Emerson objects to the R&R in that it does not apportion 50% of the recommended award 7 of $12,272,017 to Facebook. Emerson contends that a 50% apportionment of the fees to Facebook 8 is appropriate based upon the Special Master’s findings that “the manner of block billing did not 9 permit delineation of fees, but that the bills included, at least in some places, what appeared to be 10 Facebook only time in the fees sought against Emerson.” Emerson’s Obj. 3. BladeRoom counters 11 that the 40% across-the-board reduction (or “haircut”) recommended by the Special Master is 12 already excessive, and moreover, that this 40% haircut already takes into account the purported 13 lack of apportionment. BladeRoom’s Resp. 1. The Court agrees that an apportionment of fees to 14 Facebook is appropriate, but not to the extent Emerson requests. 15 A fee applicant bears the burden of submitting “evidence supporting the hours worked and 16 rates claimed.” Fischer v. SJB-P.D. Inc., 214 F.3d 1115, 1121 (9th Cir. 2000). Block-billing is 17 “less than ideal” for meeting this burden, but is not per se objectionable if the descriptions 18 provided are adequate. See Gilead Scis. v. Merck & Co, No. 13-4057 BLF, 2017 WL 3007071, at 19 *8 (N.D. Cal. July 14, 2017) (“While block-billing is less than ideal in providing a complete 20 record to assess reasonableness, adequate descriptions can still make it acceptable.”). A court has 21 authority to reduce hours that are billed in block format because “it makes it more difficult to 22 determine how much time was spent on particular activities.” Loretz v. Regal Stone, Ltd., 756 F. 23 Supp. 2d 1203, 1213 (N.D. Cal. 2010) (quoting Welch v. Metro. Life Ins. Co., 480 F.3d 942, 948 24 (9th Cir. 2007)). 25 As a starting point, it bears noting that BladeRoom took significant steps to omit activities 26 from its billing records that pertained to Facebook only:

27 Case No.: 5:15-cv-01370-EJD So the way that we broke it down was if -- you know, anything 1 -- any activities that generated attorneys’ fees that had to do with Emerson’s wrongdoing, we sought those fees. 2 Any activities that had to do with wrongdoing committed by 3 Facebook and Emerson together, we sought those fees as well because those activities contributed to the overall success of the case, which 4 is the standard.

5 Now, for the activities where Facebook engaged in separate independent wrongs, we excluded those fees. Here’s how we did it: 6 first, we reviewed the records and we looked for the activities -- for entries that referred only to Facebook. 7 We reviewed each of those entries to confirm whether or not 8 they related to Facebook-only wrongdoing. And if they did, we did not seek those fees. We highlighted those in the billing records to 9 indicate which ones we were not seeking.

10 The second thing that we did was we canvassed the entire litigation team that represented BladeRoom, and that included several 11 people who represented BladeRoom from the very first day and they stayed all through the trial, myself included, and we generated a list 12 of search terms, activities, and discovery sought, and theories that we pursued that we knew related only to separate acts by Facebook. We 13 ran those search terms through the billing records, and we reviewed those entries as well. Some of those search terms related to separate 14 discovery that did not relate to Emerson.

15 For example, Facebook misused BladeRoom’s technology in combination with some other third parties and some other Facebook 16 data centers that Emerson did not build for Facebook, [sic] we excluded those time entries. 17 Some of the search terms related to very specific disputes with 18 Facebook, discovery fights. For example, Facebook filed a motion to try to force BladeRoom to submit a bond late in the case shortly before 19 summary judgment was due. Emerson did not join in that motion. We omitted that time as well. 20 Just to be clear, when we found an entry, a time entry that 21 included one activity that was directed toward Facebook only wrongdoing, we omitted the entire time entry. 22 So just to take an example, if there were six hours devoted to 23 a dozen different tasks and one of those tasks had to do with something that wasn’t related to Facebook’s independent 24 wrongdoing, we omitted the entire six hours.

25 * * * When we found a time entry that involves work directed 26 toward a Facebook-only wrongdoing, we omitted the entire time entry. That swept in lots of work that focussed [sic] on Emerson’s 27 Case No.: 5:15-cv-01370-EJD wrongdoing and lots of work that focussed [sic] on joint wrongdoings 1 between the defendants.

2 We wanted to be conservative, and we wanted to acknowledge the task that guessing how much time was spent within a time entry, 3 how much time was spent on Facebook-only act would be difficult to do, so to be conservative we omitted the entire time entry. 4 And Farella, Braun & Martel and BladeRoom identified 5 roughly $1.3 million in fees incurred by Farella that focussed [sic] only on Facebook’s wrongdoing that BladeRoom is not seeking to 6 recover.

7 Mr. Joy, BladeRoom’s in-house counsel, used the same approach to identify his work that related to Facebook-only 8 wrongdoing. 9 Transcript at 24-27. This culling process led to BladeRoom identifying roughly $1.3 million in 10 fees uncured by Farella that focused only on Facebook’s alleged wrongdoing, and which 11 BladeRoom is not now seeking. Transcript at 27. The Court finds counsel’s representations 12 above, when combined with the Court’s in camera review of the billing records and other 13 evidence submitted in support of BladeRoom’s fee request, are trustworthy. 14 i. Work Performed Before Emerson Was Named A Defendant 15 The Court agrees with the Special Master’s assessment that the 976 pages of billing 16 records include many instances of block-billing. For the most part, the block billing entries are 17 sufficiently descriptive for the Court to assess the reasonableness of the fees requested. The 18 activities captured in the block-billing “are clearly listed and are not unreasonably vague.” 19 Genesis Merch. Partners, LP v. Nery’s USA, Inc., No. 11-1589 JM (WVG), 2013 WL 12094825, 20 at *4 (S.D. Cal. Dec. 6, 2013). The block entries, however, are problematic for a different reason. 21 In some instances, the block entries make it difficult to determine which entries reflect Facebook 22 only activities from other activities. 23 Block entries for work completed while Facebook was the only named defendant are 24 particularly problematic. Emerson was not added as a party until Bladeroom was granted leave to 25 file the SAC on April 18, 2016. Dkt. No. 105. The vast majority of these pre-SAC entries do not 26 mention Emerson. Nor do the entries contain sufficient information to determine what portion of 27 Case No.: 5:15-cv-01370-EJD 1 the pre-SAC block-billed work, if any, pertained to Emerson. 2 The Court recognizes that some of the work performed before the SAC was filed may be 3 fairly attributable to Emerson because that pre-filing work led to evidence supporting the 4 allegations against Emerson. Nevertheless, BladeRoom, as the fee applicant, bears the burden of 5 showing that the requested fees were “allowable,” that they were “reasonably necessary to the 6 conduct of the litigation,” and that they were “reasonable in amount.” Levy v. Toyota Motor Sales, 7 U.S.A., Inc., 4 Cal. App. 4th 807, 816 (1992); Carson v. Billings Police Dept., 470 F.3d 889, 891 8 (9th Cir. 2006). BladeRoom has not completely substantiated its request for the fees incurred 9 prior to the filing of the SAC. A percentage reduction of the requested pre-SAC fees is 10 appropriate to account for the block-billed entries that lack sufficient information for the Court to 11 make an Emerson-Facebook apportionment. See Bell v. Vista Unified School Dist., 82 Cal. App. 12 4th 672, 689 (2000) (explaining that court should exercise its discretion in assigning reasonable 13 percentage to block-billed entries, or “simply cast them aside”). The Court concludes that the 14 approximately $1.3 million in fees incurred prior to the filing of the SAC on April 21, 2016 must 15 be apportioned 70% to Facebook and 30% to Emerson. 16 ii. Work Performed After Emerson Was Named A Party & Before Facebook Settled 17 Whether the fees incurred after the filing of the SAC and before Facebook settled should 18 be apportioned is a separate question. The Special Master noted, and this Court agrees, that some 19 of Farella’s work necessarily related to both Facebook and Emerson because this case revolved 20 around a conspiracy between Facebook and Emerson. R&R at 10, n.5. At the hearing, 21 BladeRoom gave a description of the case that was entirely consistent with the Court’s 22 observations throughout this lengthy litigation:

23 The heart of this case involves a conspiracy between Emerson and Facebook to steal BladeRoom’s technology and to build -- to use that 24 technology to build a very large and very expensive data center located in Sweden. That was the vast majority of the evidence that 25 was presented at trial had to do with that conspiracy. . . . and the culmination of that conspiracy took place in October of 2012 when 26 Facebook approved the design that Emerson presented to it, which was based on stolen BladeRoom technology to build the Sweden data 27 Case No.: 5:15-cv-01370-EJD center, the Lulea 2 data center. 1 Transcript at 19-22. The Special Master noted, and the Court agrees, that some of Farella’s work 2 relating to the two defendants was intertwined, and ultimately, some of Farella’s seemingly 3 Facebook-related work was tied to some of the allegations against Emerson (i.e., defining and 4 ascertaining the extent of protection for BladeRoom’s trade secrets, understanding the industry 5 and the context of the technology, investigating the facts surrounding the misappropriation of 6 BladeRoom’s trade secrets, and investigating possible defense positions). Id. For this reason, 7 Emerson’s specific objection to fees incurred in connection with the deposition of J. Park is 8 unfounded. Although in Emerson’s view, Mr. Park’s deposition would have involved Facebook- 9 only issues, in BladeRoom’s view, Mr. Park was an essential witness to the conspiracy: 10 Mr. Park was an essential witness to the conspiracy. He was the head 11 of the data center team at Facebook. He directed his subordinates to collaborate with Emerson to steal and copy BladeRoom’s technology. 12 And so much of his testimony at trial, much of the documents relating to his activity, much of the deposition would have involved this joint 13 conspiracy.

14 Transcript at 23. 15 There are, however, block-billed entries that include work on issues that appear to be 16 specific to Facebook. The Special Master noted that these entries included work on the following 17 issues: (1) a breach of contract claim against Facebook alone; (2) at least four separate discovery 18 disputes that exclusively or primarily involved Facebook; (3) significant discovery relating to 19 other Facebook data centers that Emerson did not construct and in no way involved Emerson; (4) a 20 deposition related solely to a Facebook document preservation issue; (5) expert reports and 21 Daubert motions involving Facebook experts; (6) Facebook-only damages claims and issues; and 22 (7) motions in limine that were Facebook issue specific. R&R at 11. 23 At the hearing, BladeRoom contended that the Special Master had the wrong focus. 24 BladeRoom argued that “[t]he issue is not were we pursuing a discovery dispute with Facebook or 25 was the discovery dispute joined or was it with Emerson,” but rather “what was the purpose of the 26 activity and did the discovery that was being sought contribute to the overall victory of the case?” 27 Case No.: 5:15-cv-01370-EJD 1 Transcript at 32. BladeRoom reasoned that:

2 Even if Facebook had been a third party in this lawsuit and even if BladeRoom had only sued Emerson from the start, it would have 3 needed to pursue lots of discovery from Facebook, [sic] it would have needed Facebook witnesses at trial to prove its claims against 4 Emerson. And so just because we were having meet and confer with Facebook, that -- or Facebook’s attorneys rather, that doesn’t mean 5 that the activity should be excluded. 6 Id. 7 BladeRoom’s reasoning is sound. Nevertheless, the Special Master noted that the problem 8 with BladeRoom’s fee application is that in many instances, the block-billed entries made it 9 difficult (and sometimes impossible) to determine what proportion of the block-billed work had 10 been reasonably spent on Emerson or joint Emerson/Facebook successful claims. The Court 11 agrees with Special Master’s assessment in this regard but disagrees as to the extent or 12 pervasiveness of the problem. The Court has carefully reviewed the billing records and has 13 verified that Facebook-only time is not “permeating” the bills, as Emerson suggested during the 14 hearing. Transcript at 17. 15 In sum, a percentage reduction of the requested fees is appropriate to account for the block- 16 billed entries that lack sufficient information for the Court to make an Emerson-Facebook 17 apportionment. Bell, 82 Cal. App. 4th at 689. What that percentage should be is discussed in 18 Section 5 of this Order. 19 iii. Work Performed After Facebook Settled 20 A few days after trial commenced, BladeRoom and Facebook settled. A dismissal was 21 filed on April 9, 2018. Dkt. No. 772. None of the fees incurred for work after April 9, 2018 are 22 subject to apportionment. 23 d. BladeRoom’s Degree of Success 24 Emerson contends that the R&R does not take into consideration BladeRoom’s “limited 25 success” in the litigation. Emerson’s Obj. 3. Emerson points out that the jury found in 26 BladeRoom’s favor on only one of the three asserted trade secrets and that BladeRoom voluntarily 27 Case No.: 5:15-cv-01370-EJD 1 dropped twenty other asserted trade secrets before trial. Emerson theorizes that “BladeRoom 2 would have incurred substantially lower fees had it properly tailored the scope of issues at the 3 front end of the litigation.” Id. 4 The Court rejects Emerson’s argument. The jury awarded BladeRoom $30 million in 5 compensatory damages and found by clear and convincing evidence that Emerson’s 6 misappropriation of trade secrets was willful and malicious. Dkt. No. 867. The jury’s finding of 7 willful and malicious conduct exposed Emerson to additional liability for exemplary damages under 8 the CUTSA. This Court awarded BladeRoom $30 million in exemplary damages—an amount equal to 9 the compensatory damages awarded by the jury, reasoning as follows:

10 Here, the nature of Emerson’s misconduct favors an award of exemplary damages, though not in the full amount permitted under 11 CUTSA. This court is intimately familiar with the evidence, having presided over a 21-day jury trial and having since undertaken several 12 additional reviews of the record in conjunction with several post- verdict motions. While the trial evidence was extensive, the conduct 13 relevant to exemplary damages can be condensed down to the following statement: after Facebook expressed to Emerson the desire 14 for a data center consistent with BladeRoom’s technology, employees from Emerson (and Facebook) lured BladeRoom into revealing its 15 trade secrets under the guise of a possible data center contract or corporate acquisition, and then used the information it obtained to 16 surreptitiously design and build Facebook’s data center at Lulea 2. Contrary to what Emerson argues now, the evidence does not support a 17 series of minor errors in judgment or mistakes which can be remedied with an apology, and Emerson fails to grapple with the broader effects 18 of its misconduct. From a commercial ethics perspective, the misconduct certainly falls within the category of reprehensible; it undermines the 19 confidence market participants can place in confidentiality agreements and causes those who possess trade secrets to seriously question the 20 motivations of those who superficially appear to be interested in legitimate acquisition. The consumer loses as a result, as innovation and 21 competition are stifled while trade secrets are kept buried in the proverbial vault. 22 Given its effects on the marketplace, society has a genuine 23 interest in deterring similar misconduct. That need for deterrence is not at its strongest in this case, however, because Emerson’s offenses have 24 been exposed to all other participants in the data center market, and indeed to all other participants in other markets in which Emerson has a 25 stake. See Mattel, Inc., 801 F. Supp. 2d at 955. These participants “are likely to cast a wary eye” toward Emerson in all future dealings. Id. 26 27 Case No.: 5:15-cv-01370-EJD 1 Order Granting Request for Exemplary Damages, Fees, Costs and Prejudgment Interest 3-4 (Dkt. 2 No. 956). 3 In total, BladeRoom was awarded $60 million in damages. This can only be described as 4 an excellent result at trial, especially considering the three years of hard fought litigation 5 preceding trial. That BladeRoom did not pursue or obtain misappropriation findings at trial on all 6 of its trade secrets in no way diminishes BladeRoom’s success at trial. Dang v. Cross, 422 F.3d 7 800, 812–13 (9th Cir. 2005) (“[A] plaintiff does not need to receive all the relief requested in order 8 to show excellent results warranting the fully compensatory fee.”). Emerson makes much of the 9 fact that the jury did not award all of the damages BladeRoom sought; nevertheless, the sum 10 awarded is substantial and far exceeds the $5 million range for lost profits and $3 million range for 11 unjust enrichment urged by Emerson’s expert. 12 3. Emerson’s Objection re the Lack of Adversarial Discovery 13 Emerson objects to the R&R on due process grounds because it was based on the Special 14 Master’s in camera review of billing records that, despite repeated requests, were not made 15 available to Emerson. Emerson also asserts a due process objection based on BladeRoom’s in 16 camera submission of Mr. Joy’s alleged work product. 17 The Court overrules these objections because Emerson was later provided with redacted 18 copies of BladeRoom’s billing records and Mr. Joy’s work product and had an opportunity to 19 object to these records. During the hearing, Emerson repeatedly criticized BladeRoom’s 20 redactions of the billing records as excessive, and BladeRoom defended its redactions as necessary 21 to protect counsel’s mental impressions or work product. Having conducted a thorough review of 22 the hundreds of pages of billing records, the Court agrees with both parties to some extent. There 23 are instances of excessive redacting and instances of appropriate redacting alike. The excessive 24 redacting is a factor the Court will take into consideration in assessing fees, but ultimately the 25 Court and the parties should be mindful of the Supreme Court’s guidance that “the determination 26 of fees ‘should not result in a second major litigation.’” Fox v. Vice, 563 U.S. 826, 838 (2011) 27 Case No.: 5:15-cv-01370-EJD 1 (quoting Hensley v. Eckerhart, 461 U.S. 424, 437 (1983)). “The essential goal . . . is to do rough 2 justice, not to achieve auditing perfection. So trial courts may take into account their overall sense 3 of a suit, and may use estimates in calculating and allocating an attorney’s time.” Id. 4 Emerson asserts a separate due process objection based upon BladeRoom’s “failure to 5 provide a full disclosure of the Facebook settlement agreement and BladeRoom’s fee 6 arrangements and payments made to counsel.” Emerson’s Obj. 3. The Court previously 7 considered and rejected these arguments (Dkt. No. 985) and Emerson does not now offer any new 8 factual or legal basis for reconsideration. These objections are overruled. 9 4. Emerson’s Objection re Offset For Facebook Settlement 10 Emerson objects to any fee award that fails to include an offset based on the Facebook 11 settlement agreement. The objection is overruled. 12 As a general rule, when one defendant settles with a plaintiff, but another defendant does 13 not, the “non-settling defendant is entitled to offset attorney’s fees owed by the amount already 14 paid by settling defendants.” Corder v. Brown, 25 F.3d 833, 40 (9th Cir. 1994); Bravo v. City of 15 Santa Maria, 810 F.3d 659, 668 (9th Cir. 2016) (“district court abuses its discretion when it 16 refuses to offset an award of attorney fees by a settling defendant’s payment of those same fees”). 17 Here, upon entry of the settlement, BladeRoom and Facebook agreed to “bear their own attorneys’ 18 fees and costs.” Dkt. No. 968 at 19. Counsel for BladeRoom, Jeffrey Fischer, also represented 19 that “BladeRoom’s settlement agreement with Facebook did not apportion any money 20 toward attorneys’ fees. BladeRoom was required to pay its own attorneys’ fees, from its own 21 funds, through the conclusion of the litigation.” Supp. Decl. of Jeffrey M. Fisher in Support of 22 BladeRoom’s Motion for Fees and Costs ¶ 19 (Dkt. No. 972-2). This is clear and unequivocal 23 evidence that BladeRoom did not receive any attorneys’ fees from the Facebook for which offset 24 would be required under Corder. 25 Notwithstanding BladeRoom’s evidence, Emerson remains suspicious that BladeRoom 26 used part of the Facebook settlement funds to pay Farella. Emerson persists that it should be 27 Case No.: 5:15-cv-01370-EJD 1 allowed to conduct discovery regarding the Facebook settlement because “it would be helpful if 2 we just learned what Farella was paid after the Facebook settlement was paid.” Transcript at 45. 3 In response, BladeRoom repeatedly represented during the hearing that “[e]very cent of what 4 we’re seeking that Farella billed to BladeRoom was paid by BladeRoom. Transcript at 19; see 5 also Transcript at 20 (“every cent of outside counsel fees that we are seeking here was in fact paid 6 by BladeRoom”). To further dispel any suspicion that the Facebook settlement funds were even 7 indirectly applied to Farella bills, BladeRoom represented that it paid Farella within a roughly 8 thirty day cycle of Farella issuing bills. Transcript at 46; see also Supp. Decl. of Fischer ¶ 4 (Dkt. 9 No. 972-2) (“Farella submitted bills to BladeRoom each month, and BladeRoom paid them on a 10 rolling basis.”). Therefore, there is no basis for offsetting fees. 11 5. BladeRoom’s Objection re 40% “Haircut” 12 The Special Master recommended a 40% reduction of BladeRoom’s fees to “mirror[] the 13 percentage of billing records that the Special Master has identified as problematic.” R&R at 19. 14 The Special Master found that the “reduced amount more appropriately represent[ed] 15 BladeRoom’s reasonable attorneys’ fees in this litigation.” Id. BladeRoom objects to this 16 “haircut” as “excessive” and because it fails to take into account the nature of this hard fought 17 and time consuming litigation.” BladeRoom’s Obj. 3. The Court agrees. 18 As the Special Master observed, this was a “complex, hard-fought case.” R&R at 6-7, n. 3. 19 The Special Master’s R&R succinctly described the breadth of discovery, motion practice, and 20 trial schedule:

21 Discovery was extensive, with nearly 1 million documents totaling over 4.3 million pages produced by the parties and third parties; 58 22 depositions of 46 different deponents across several U.S. states and two foreign countries; and site inspections of data centers and related 23 facilities in England, Sweden, California, Illinois and Ohio. BladeRoom had to respond to numerous interrogatories from 24 Facebook and each of the three Emerson defendants as well as 157 requests for admission from Emerson. The case also involved 25 extensive motion practice, including four motions to dismiss, three summary judgment motions, seventeen discovery disputes, twenty- 26 two motions in limine and numerous motions made during trial and post-trial, each raising complex issues of fact and law. This all 27 Case No.: 5:15-cv-01370-EJD culminated in a five-week jury trial in which BladeRoom was 1 awarded $30 million, which was followed by post-trial briefing. 2 Id. The one thousand thirty-seven (1,037) entries on the docket sheet are indicative of the 3 frequency with which the Court was called upon to adjudicate disputes. The Court observed first 4 hand the seemingly unlimited resources Emerson and Facebook brought to bear in defense of this 5 action. Eight attorneys made appearances on behalf of Facebook. Facebook described the scope 6 of the litigation as enormous. By October 2017 (months before trial), Facebook had incurred in 7 excess of $13.5 million in fees and costs. Fifteen attorneys from three different firms appeared on 8 behalf of Emerson. In this context, the approximately $20 million in fees is not per se 9 unreasonable. 10 Although the Special Master cited several legitimate reasons for the 40% haircut, the Court 11 finds that none of the cited reasons, individually or collectively, warrant such a drastic reduction 12 of BladeRoom’s fee request. First, the Special Master faulted BladeRoom for duplicative work 13 and inefficient staffing. The Court has reviewed the billing records and agrees with the Special 14 Master that there are instances where the billing records suggest duplicative and inefficient 15 staffing. The Court, however, does not share the Special Master’s view that the records “clearly 16 demonstrate that, not only did Farella significantly overstaff this case, but also, its overstaffing 17 lead to across-the-board duplicative and inefficient efforts.” R&R at 8. The Special Master did 18 not have the benefit of the years of direct involvement that this Court had. In this Court’s view, 19 the work described in BladeRoom’s billing records, even if certain entries may appear duplicative 20 or inefficient, was reasonably necessary in the context of this heavily contested and time 21 consuming litigation. The Defendants’ legal teams were significantly larger than Farella’s team. 22 Emerson and Facebook’s combined group of 23 attorneys put on a persistent and aggressive 23 defense, which BladeRoom’s core team of six attorneys4 was forced to meet with an equally 24 persistent and aggressive offensive. Farella’s team was comprised of three partners (Jeffrey 25

26 4 The Special Master thought Farella’s legal team was comprised of five partners and five associates (R&R at 7), when in fact it was comprised of three partners and three associates 27 (BladeRoom’s Obj. 5). Case No.: 5:15-cv-01370-EJD 1 Fisher, Stephanie Skaff and Eugene Mar) and three associates (Alex Reese, Julia Kropp and Erik 2 Olson5). BladeRoom’s Obj. 5. Four other Farella attorneys provided assistance on a limited basis 3 during different periods of the litigation: one partner assisted during double-tracking of expert 4 depositions; two associates were added to the case in the lead-up to trial and were part of the trial 5 team; and one additional associate helped with BladeRoom’s fee request. Id. In general, Farella 6 staffed the case in a balanced and reasonable manner such that each partner worked with a smaller 7 group of associates to complete various tasks. Id. 5-6. During trial, the Court observed that the 8 Emerson legal team significantly outnumbered the BladeRoom team on a daily basis. 9 There were some instances where partners performed tasks that could have been done by 10 associates or other lower-level timekeepers, such as legal research, brief writing, discovery and 11 document review and the drafting of pre-trial statements and discovery requests. There were also 12 instances where multiple partners worked on the same briefs. Nonetheless, these staffing 13 decisions were not unreasonable in a case of this magnitude and complexity, especially when 14 BladeRoom was litigating against Facebook and Emerson’s formidable defense teams. The 15 schedule in the case also dictated that certain tasks be completed quickly. For example, 16 BladeRoom had two weeks to respond to Defendants’ motions for summary judgment, and later in 17 the case, ten days to respond to Defendants’ thirteen separate motions in limine. It is not 18 surprising, nor was it unreasonable, for BladeRoom to pull in every member of its litigation team 19 to help research and prepare responses to these critically important motions. As BladeRoom 20 pointed out during the hearing, litigation can resemble a tennis game or war in that when one side 21 hits the ball or shoots heavy artillery, the other side necessarily spends time hitting the ball or 22 shooting heavy artillery back. Transcript at 82 (citing Democratic Party of Wash. v. Reed, 388 23 F.3d 1281, 1287 (9th Cir. 2004). In short, the Court did not observe “across-the-board duplicative 24 and inefficient efforts” that would justify a 40% reduction of BladeRoom’s lodestar. 25 Second, the Special Master found the 40% reduction was warranted because Farella 26

27 5 Mr. Olson was elevated to partnership in January 2018. Case No.: 5:15-cv-01370-EJD 1 attorneys consistently used block billing that made it difficult if not impossible to determine how 2 much time had been reasonably spent on non-Facebook specific work. As discussed previously, 3 an apportionment of fees for Facebook specific work is appropriate. The case can be divided into 4 roughly three phases, only two of which require apportionment: work performed before the SAC 5 was filed (which the Court has already apportioned 70% to Facebook and 30% Emerson); and 6 work performed after the SAC was filed and before Emerson and Facebook settled. No 7 apportionment is required for the third phase (work performed after the settlement). As to the 8 middle phase, a full 40% haircut is not justified. BladeRoom has already reduced its fees by 9 approximately $1.3 million to account for work related only to Facebook. BladeRoom’s Obj. 9. 10 Moreover, for the middle phase, much of Farella’s work related equally and inextricably to both 11 Defendants. This is because BladeRoom’s claims were based in large part on Emerson’s 12 interactions with Facebook. From the inception of the lawsuit, BladeRoom alleged that: 13 “Emerson and Facebook had pre-arranged and attended a clandestine meeting among themselves 14 in the UK immediately following their separate visits to BladeRoom in June 2012 at which 15 Emerson and Facebook discussed BladeRoom’s technology and what they had each learned from 16 BladeRoom’s confidential disclosures to them; and that Facebook partnered with Emerson to build 17 the Lulea 2 data center using BladeRoom’s technology.” Id. 10. These alleged events remained 18 central issues throughout the case. 19 The Special Master’s third basis for the 40% reduction was that BladeRoom was not 20 entitled to recoup fees for work performed by in-house counsel, Mr. Joy. As discussed previously, 21 the Court finds that a 60% reduction of Mr. Joy’s fees is appropriate. No further reductions are 22 warranted as to Mr. Joy’s fees. 23 Fourth, the Special Master found that BladeRoom was not entitled to recoup the UK law 24 firm’s fees. As discussed previously the UK law firm’s fees are compensable and the 25 recommended 40% reduction is not warranted. 26 Fifth, the Special Master found that BladeRoom was not entitled to recover fees for one 27 Case No.: 5:15-cv-01370-EJD 1 Case Clerk and two Litigation Support personnel because Farella failed to provide information 2 about their qualifications and experience as required by Local Rule 54-5(b)(3) and most of the 3 work performed by these individuals was “purely clerical or secretarial.” R&R at 18. BladeRoom 4 does not challenge this finding. Once again, however, this deficiency does not warrant a drastic 5 40% reduction to the lodestar. 6 Although the Court finds that none of the five bases cited by the Special Master, 7 individually or in the aggregate justify a 40% reduction to the lodestar, the Court does find that a 8 10% reduction to the lodestar is appropriate to account for the deficiencies in the billing records 9 discussed herein, but primarily due to the block-billing. 10 6. BladeRoom’s Objection re Ketchum Factors 11 If the Court does not award BladeRoom the entirety of its fee requests, BladeRoom asks 12 that the Court exercise its discretion to adjust the lodestar upwards based on the factors stated in 13 Ketchum v. Moses, 24 Cal. 4th 1122, 1132 (2001) to award BladeRoom the entire amount of the 14 fees it expended in this litigation. The Ketchum factors are: (1) the novelty and difficulty of the 15 questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of 16 the litigation precluded other employment by the attorneys, and (4) the contingent nature of the fee 17 award. Ketchum, 24 Cal. 4th at 1132 (citing Serrano v. Priest, 20 Cal.3d 25, 48 (1977) (“Serrano 18 III”)). 19 Having considered the relevant factors6, the Court declines to adjust the fee award 20 upwards. The first two Ketchum factors are already encompassed within the lodestar, and 21 therefore an enhancement based on those factors would result in a form of “unfair double 22 counting.” Ketchum, 24 Cal. 4th at 1138 (“We emphasize that when determining the appropriate 23 enhancement, a trial court should not consider these factors to the extent they are already 24 encompassed within the lodestar.”). Next, BladeRoom represents that the intensity and 25 complexity of the litigation often required nearly all of BladeRoom’s trial team’s time, effectively 26

27 6 BladeRoom does not contend that the fourth Ketchum factor warrants enhancement. Case No.: 5:15-cv-01370-EJD 1 precluding other employment by many of the trial team members. The Court appreciates that this 2 case was very intense and time consuming. Nevertheless, BladeRoom has not shown that the case 3 actually precluded other employment. Therefore, the third factor does not warrant an upward 4 enhancement. See e.g. Jadwin v. Cty. of Kern, 767 F. Supp. 2d 1069 (E.D. Cal. 2011) (rejecting 5 reliance on this factor where “Plaintiff’s counsel have not provided any specific examples for 6 work they turned away”); Robbins v. Alibrandi, 127 Cal. App. 4th 438, 454 (2005) (reversing 7 enhancement where “[t]here [was] no showing that the firm employed by plaintiffs in fact was 8 forced to turn away other work because of this case”). 9 7. BladeRoom’s Objection re Lodging Costs 10 BladeRoom incurred $299,534.32 for lodging costs during trial. These costs included a 11 block of rooms at the Fairmont Hotel in San Jose for attorneys and witnesses. The block of rooms 12 consisted of thirteen rooms for Farella attorneys and trial support staff, nine rooms for BladeRoom 13 employees, witnesses and graphics and trial technician consultants, and five rooms for work space. 14 The Special Master recommended that only $29,165.34 be taxed as costs for lodging individuals 15 on BladeRoom’s witness list. BladeRoom contends that it is entitled to reimbursement for all of 16 its lodging costs pursuant to California Civil Procedure Code § 1033.5(c)(2). The Court disagrees. 17 Title 28 U.S.C. § 1920, Federal Rule of Civil Procedure 54, and Civil Local Rule 54-3 18 govern in this case, and none of them allows for the recovery of lodging or hotel expenses for 19 attorneys and other members of the trial team. Self v. FCA U.S. LLC, No. 17-1107 SKO, 2019 20 WL 1994459 (E. D. Cal. May 6, 2019) (applying federal procedural law governing and 21 disallowing lodging costs). The cases relied upon by BladeRoom are unpersuasive because the 22 parties in those cases did not raise the Erie question of whether state law governs. See Genesis 23 Merch. Partners, LP v. Nery’s USA, Inc., No. 11-1589 JM (WVG), 2013 WL 12094825, at *10 24 (S.D. Cal. Dec. 6, 2013) (noting that, “[w]hile not specifically allowed under Section 1033.5, 25 courts have authorized out-of-town travel expenses where reasonably necessary to conduct 26 litigation,” and granting costs for an attorney’s out-of-town travel and meals); Page v. Something 27 Case No.: 5:15-cv-01370-EJD 1 Weird Video, 960 F. Supp. 1438, 1447 (C.D. Cal. 1996) (granting travel costs for New York 2 attorney to attend hearings in California, based on section 1033.5); Okada v. Whitehead, No. 15- 3 1449 JLS, 2017 WL 2626990, at *5 (C.D. Cal. June 12, 2017) (granting travel costs under section 4 1033.5). 5 The Court adopts the Special Master’s recommendation that only $29,165.34 be taxed as 6 costs for lodging individuals on BladeRoom’s witness list. 7 8. Special Master’s Fees 8 The Special Master’s fees total $32,854. The Special Master recommended that 9 BladeRoom and Emerson each pay half of his fees. Federal Rule of Civil Procedure 53(g)(3) 10 provides:

11 (3) Allocating Payment. The court must allocate payment among the parties after considering the nature and amount of the controversy, the 12 parties’ means, and the extent to which any party is more responsible than other parties for the reference to a master. An interim allocation 13 may be amended to reflect a decision on the merits. 14 Fed. R. Civ. P. 53(g)(3). The Court has considered the factors above. The Court agrees with the 15 Special Master’s observation that neither party was more responsible than the other for the 16 reference to the Special Master. Accordingly, the Court adopts the Special Master’s 17 recommendation that the parties each pay fifty percent of the fees. 18 III. Conclusion 19 The R&R of the Special Master is adopted as an order of the Court, with the following 20 modifications: 21 1. BladeRoom is awarded $1,520,707.50 for Mr. Joy’s fees without any further 22 reductions. 23 2. BladeRoom is award $71,744.95 in fees for two outside UK law firms and a UK 24 paralegal, less 10%, for a total of $64,570.45. 25 3. BladeRoom is awarded 30% of the fees incurred prior to the filing of the SAC 26 without any further reductions. 27 Case No.: 5:15-cv-01370-EJD 1 4. BladeRoom is awarded all fees incurred after the filing of the SAC and before 2 || Facebook settled, less 10%. 3 5. BladeRoom is awarded all fees incurred after Facebook settled on April 9, 2018, 4 || less 10%. 5 BladeRoom shall calculate the deductions ordered above, prepare a proposed order that 6 specifies a total fee award and a total cost award consistent with the R&R and this Order, and 7 submit the proposed order to the Court after obtaining Emerson’s approval as to form no later than 8 April 20, 2020. 9 The parties shall each pay fifty percent of the Special Master’s fees. 10 IT IS SO ORDERED. 11 Dated: April 6, 2020 L EDWARD J. DAVILA 13 United States District Judge

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Z 18 19 20 21 22 23 24 25 26 27 Case No.: 5:15-cv-01370-EJD 28 || ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR ATTORNEYS’ FEES AND COSTS