Bankruptcy Code and again stayed the proceeding. On April 5, 1993, the Idaho Bankruptcy Court issued an order granting Plaintiffs' motion to modify the automatic stay to allow this action to proceed to judgment.
Both of these actions were necessary in order for Plaintiffs to successfully prosecute their case through judgment. Accordingly, the court finds it proper to include such fees incurred in the bankruptcy litigations in the award of attorneys' fees.
2) The Calculation of Post-trial Expenses.
Defendants argue that the post-trial fees that Plaintiffs are claiming are excessive and request that the court "demand a further justification for what appears to be higher than normal bills by attorneys not of record in this Court." (Defendants' Memorandum in Opposition to Plaintiffs' Application for Attorneys Fees at 4.)
However, Plaintiffs have set forth the amount of attorneys' fees being requested, including post-trial fees and expenses, in an affidavit sworn to by Michael J. Levin and in the detailed contemporaneously made time records submitted to the court. The court finds these documents to be adequate justification for the requested post-trial expenses. Accordingly, these expenses, as originally calculated, have been properly included in the lodestar figure.
3) The Award of Out-of-Pocket Expenses.
Plaintiffs have included out-of-pocket expenses in their fee application. Attorneys may be compensated for reasonable out-of-pocket expenses incurred and customarily charged to their clients, as long as they "were incidental and necessary to the representation" of those clients. Reichman v. Bonsignore, Brignati & Mazzotta, P.C., 818 F.2d 278, 283 (2d Cir. 1987) (quoting Northcross v. Board of Education, 611 F.2d 624, 639 (6th Cir. 1979)). Accordingly, the inclusion of disbursements in the fee award is appropriate.
4) Compensation for Paralegal Time.
Plaintiffs additionally included paralegal time in their fee calculation. "[A] 'reasonable attorney's fee' cannot have been meant to compensate only work performed personally by members of the bar. Rather, the term must refer to a reasonable fee for the work product of the attorney." Missouri v. Jenkins, 491 U.S. 274, 285, 109 S. Ct. 2463, 105 L. Ed. 2d 229 (1989). Therefore, "the 'reasonable attorney's fee' . . . should compensate the work of paralegals, as well as that of attorneys." Id. Therefore, it is appropriate to include such paralegal expenses in the calculation of attorneys' fees.
b. Adjustment of the Lodestar Amount.
Both Plaintiffs and Defendants argue for adjustments of the calculated lodestar amount. "The lodestar figure may be adjusted upward or downward, however, there is '(a) strong presumption that the lodestar figure . . . represents a 'reasonable' fee.'" U.S. Football League v. National Football League, 887 F.2d at 413 (quoting Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 478 U.S. at 565).
The Supreme Court noted in Hensley, that a district court, when adjusting the lodestar, may consider the factors identified in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974). Hensley v. Eckerhart, 461 U.S. at 434 n. 9. The Johnson factors that may be considered are 1) the time and labor required; 2) the novelty and difficulty of the questions; 3) the skill requisite to perform the legal service properly; 4) the preclusion of other employment by the attorney due to acceptance of the case; 5) the customary fee; 6) whether the fee is fixed or contingent; 7) time limitations imposed by the client or the circumstances; 8) the amount involved and the results obtained; 9) the experience, reputation and ability of the attorneys; 10) the "undesirability" of the case; 11) the nature and length of the professional relationship with the client; and 12) awards in similar cases. Id.
The Supreme Court additionally noted that the district court should be aware that many of the Johnson factors are "usually subsumed within the initial calculation of hours reasonably expended at a reasonable hourly rate." Id.
The burden of establishing entitlement to an increase or a decrease in the lodestar is on the party advocating such an adjustment. U.S. Football League v. National League, 887 F.2d at 413. Plaintiffs argue that the lodestar, due to the complexity of the litigation, should be increased by a factor of 1.2. Plaintiffs note that they were required to engage in "time consuming and difficult investigation and discovery into a wide-ranging and complicated land fraud," due to the extent of the Myers Defendants' fraud, and that "the case and trial, involved extremely complex issues of law and fact." (Affidavit in support of Plaintiffs' Application for Attorneys' Fees P 28.)
It is true that Plaintiffs were required to travel, rather extensively, in order to complete all discovery. They also dealt with the relatively complex legal issues involved in civil RICO claims, securities fraud claims and breaches of fiduciary duties. However, these facts do not prove an entitlement to an increase in fees.
The difficulty encountered in such a case is generally reflected in the hours spent preparing for and litigating the action. Similarly, while Plaintiffs' counsel were skilled and experienced attorneys, their expertise was reflected and rewarded by their entitlement to charge higher hourly fees. The court finds that Plaintiffs would be adequately compensated by the original lodestar amount. Accordingly, the 1.2 factor will not be applied.
Defendants, on the other hand, suggest that the lodestar figure should be reduced by a factor of .8. Defendants essentially argue that the fees requested by Plaintiffs are excessive for this type of action. However, Defendants have not stated any reasons that would justify a reduction in the fee amount. Defendants make the statement that,
$ 900,000 for a case like this boggles the mind. Whether Plaintiffs' counsel actually spent the thousands of hours that are listed is not the point. There are other reasons that one can infer which would explain the thousands of hours of time spent -- not the least of which is that these lawyers were chasing their own money.
(Defendants' Memorandum in Opposition to Plaintiffs' Application for Attorneys' Fees at 3.)
This is not reasoning which would induce this court, in its discretion, to reduce the lodestar amount. One instance where courts have been inclined to reduce the fee award is where the Plaintiffs have had only limited success on their claims. In Hensley, the Supreme Court noted that where "a plaintiff has achieved only partial or limited success," fully compensating counsel would be excessive. Hensley v. Eckerhart, 461 U.S. at 436, 103 S. Ct. at 1941. Plaintiffs, in the instant case, succeeded on all claims despite Mr. Myers' extensive fraud. Accordingly, the court declines to employ a factor of .8 to reduce the lodestar figure.
Neither Plaintiffs nor Defendants have met the burden of showing that an increase or a decrease in the lodestar is warranted. Therefore, the court will not apply either adjustment factor to the original lodestar figure and grants attorneys' fees in the amount of $ 684,850.07 and $ 117,697.67 in disbursements.
2. Punitive Damages.
The Plaintiffs were awarded punitive damages. The court will now address the question of the amount of punitive damages to be granted.
When awarding punitive damages, the award should not be in an amount that would result in the financial ruin of the defendant. Vasbinder v. Scott, 976 F.2d 118, 121 (2d Cir. 1992); Smith v. Lightning Bolt Productions, Inc., 861 F.2d 363, 373 (2d Cir. 1988). "Nor should it constitute a disproportionately large percentage of a defendant's net worth." Vasbinder v. Scott, 976 F.2d at 121. "'Even outrageous conduct will not support an oppressive or patently excessive award of damages.'" Id. (quoting Brink's Inc. v. City of New York, 546 F. Supp. 403, 413-14 (S.D.N.Y. 1982) (quoting Herman v. Hess Oil V.I. Corp., 379 F. Supp. 1268, 1276 (D.V.I. 1974), aff'd, 524 F.2d 767 (3d Cir. 1975)), aff'd, 717 F.2d 700 (2d Cir. 1983)). The burden is on the defendant to show "that his financial circumstances [are such that would] warrant a limitation of the award." Smith v. Lightning Bolt Productions, Inc., 861 F.2d at 373 (citing Zarcone v. Perry, 572 F.2d 52, 57 (2d Cir. 1978)).
At the September 30 hearing, Plaintiffs argued that despite his on-going proceeding under Chapter 7 of the Bankruptcy Code, Mr. Myers has substantial assets which would allow for an award of some punitive damages. (R. at 11.) Plaintiffs claim that due to Mr. Myers' discharge of liabilities under Chapter 7 and, due to a certain asset Mr. Myers failed to claim in the bankruptcy proceeding, he still has the financial ability to pay some amount in punitive damages.
In support of their assertion that Mr. Myers has undisclosed assets, Plaintiffs introduced into evidence, among other documents, the Certificate of Limited Partnership of Prospector Road Limited Partnership (the "Certificate"), the Limited Partnership Agreement of Prospector Road Limited Partnership, (the "Partnership Agreement"), and the Revocable Trust Agreement of the Sun Valley Trust, (the "Sun Valley Trust Agreement").
The Certificate states that the Partnership's purpose and general character is to acquire, own and operate "for income producing purposes and for long term capital appreciation investment," property located at 200 Prospector Road, Sun Valley, Idaho. (Cert. P 2.) Charles W. Baumgardner is the named general partner and the Sun Valley Trust, Mr. Baumgardner and the Children's Sun Valley Trust are named as the limited partners. (Cert. P 4.) The Sun Valley Trust was required to contribute the property, which, at the time, had a net equity value of $ 525,000, to the partnership. (Cert. P 5.)
The Partnership capital is divided into 100,000 Class A Units and 100,000 Class B Units. (Cert. P 9; Limited Partnership Agreement P 5.01.) The holders of such Units are to receive any cash from operations that becomes available for distribution with a distribution preference given to holders of the Class A Units. (Cert. P 9b; Limited Partnership Agreement P 7.04B.) The Sun Valley Trust, as a limited partner in the Prospector Road Limited Partnership, has been allocated 30,000 Class A Units. (Limited Partnership Agreement, Sched. 1.)
The Sun Valley Trust Agreement, entered into on August 24, 1984 by Mr. Myers as grantor and Mr. Baumgardner as trustee, names Mr. Myers as the designated beneficiary of the trust agreement. (Sun Valley Trust Agreement at 2.) Article III of the Sun Valley Trust Agreement provides in part that,
during the Grantor's lifetime, the Trust Estate shall be held, administered and distributed by the Trustee as follows: A. The Trustee shall pay to or apply for the benefit of the Grantor, quarter-annually or at more frequent intervals, the entire net income from the Trust Estate. B. The Trustee shall also pay to or apply for the benefits of the Grantor such sums from the principal of the Trust Estate as the Grantor may, from time to time, request in writing.