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Paul D. Ceglia v. Mark Elliot Zuckerberg

February 14, 2012

PAUL D. CEGLIA, PLAINTIFF,
v.
MARK ELLIOT ZUCKERBERG, AND FACEBOOK, INC., DEFENDANTS.



The opinion of the court was delivered by: Leslie G. Foschio United States Magistrate Judge

DECISION and ORDER

JURISDICTION

This case was referred to the undersigned by Honorable Richard J. Arcara on May 27, 2011 for pretrial matters. The action is presently before the court on Defendants' Fee Application filed January 20, 2012 (Doc. No. 286) for attorney's fees and costs awarded pursuant to this court's Decision and Order filed January 10, 2012 (Doc. No. 283).

BACKGROUND and FACTS*fn1

The parties to this action dispute the authenticity of a contract ("the contract")*fn2 allegedly executed between Plaintiff Paul D. Ceglia ("Plaintiff") and Defendant Mark Elliot Zuckerberg ("Zuckerberg"), on April 28, 2003, pursuant to which Plaintiff and Zuckerberg, then a student at Harvard University ("Harvard"), established an agreement for the development and commercialization of two separate Internet business ventures, including an on-line database developed by Plaintiff, and the social-networking website created and maintained by Zuckerberg, and now known as Defendant Facebook, Inc. ("Facebook"). Throughout this litigation, Defendants have been represented by several law firms, including lead counsel Gibson, Dunn & Crutcher, LLP ("Gibson Dunn"), with offices in New York City and Washington, D.C., and local counsel Harris Beach LLP ("Harris Beach"). Plaintiff has been consistently represented by local counsel Paul A. Argentieri, Esq. ("Argentieri"), and by a series of lead counsel including, most recently, Boland Legal, LLC ("Boland"), of Lakewood, Ohio.

At the request of the parties, the undersigned, by Order filed July 1, 2011 (Doc. No. 83) (July 1, 2011 Order"), directed expedited discovery designed to establish whether the putative contract on which Plaintiff sues, and related emails allegedly exchanged between Plaintiff and Zuckerberg, are authentic or forgeries, and also directed Plaintiff to produce certain emails and to make all computers and electronic media within Plaintiff's possession available for inspection by Stroz Friedberg LLC ("Stroz Friedberg"), a digital forensic consulting firm whose services Defendants have retained in this action. Plaintiff, however, failed to produce certain email account information ("Plaintiff's email account information"), including addresses and passwords for all the email accounts Plaintiff had used since 2003. The parties then filed cross-motions seeking to compel discover under the July 1, 2011 Order and, as relevant to this discussion, the undersigned, by Order filed August 18, 2011 (Doc. No. 117) ("August 18, 2011 Order"), directed Plaintiff to identify all email accounts accessible through web-based interfaces Plaintiff had used since 2003, and to provide to Stroz Friedberg, by August 29, 2011, on consent forms to be provided by Stroz Friedberg, the email account information necessary to access the email accounts.

Plaintiff, however, did not timely provide, as ordered by the court, his email account information on the consent forms supplied by Stroz Friedberg but, rather, provided the email account information on modified consent forms restricting Defendants' use of such information until after the court had resolved Plaintiff's motion to stay discovery filed on August 29, 2011, thereby rendering the email account information useless. Accordingly, on September 1, 2011, Defendants filed their Accelerated Motion to Compel (Doc. No. 128), advising of Plaintiff's failure to fully comply with the August 18, 2011 Order, and seeking a court order directing Plaintiff provide his unqualified consent on the Stroz Friedberg consent forms, asserting that Plaintiff's conditioning of his consent to resolution of Plaintiff's objections to the August 18, 2011 Order was a self-imposed stay of discovery, initially ordered by the court on July 1, 2011, which had already been denied three times.*fn3 Also filed on September 1, 2011, was yet another motion by Plaintiff objecting to discovery pursuant to the August 18, 2011 Order (Doc. No. 131).

Plaintiff, on September 2, 2011, moved to delay the deadline for filing papers in response to the Accelerated Motion to Compel until Judge Arcara ruled on Plaintiff's then-pending objections to the August 18, 2011 Order (Doc. No. 134). On September 16, 2011, Judge Arcara denied Plaintiff's most recent objections to the August 18, 2011 Order (Doc. No. 145), and, on September 20, 2011, the undersigned denied as moot Plaintiff's Motion to Delay (Doc. No. 146).

By Order filed September 28, 2011 (Doc. No. 152) ("September 28, 2011 Order"), the undersigned granted the Accelerated Motion to Compel, directing Plaintiff's full compliance with the August 18, 2011 Order by September 30, 2011, and also ordering Plaintiff to show cause why Defendants' request for sanctions, including costs and attorney's fees based on Plaintiff's failure to fully comply with the August 18, 2011 Order, should not be granted. Plaintiff's response, filed October 7, 2011 (Doc. No. 153), included affidavits from his former attorneys who explained that the delayed production of Plaintiff's email account information was at Plaintiff's behest and against his attorneys' advice. In a Decision and Order filed January 10, 2012 (Doc. No. 283) ("D&O"), the undersigned imposed a civil contempt sanction of $5,000 on Plaintiff, based on Plaintiff's unwarranted refusal to comply with the August 18, 2011 Order, and ordered Plaintiff to pay Defendants their expenses, including attorney's fees, incurred in connection with the Accelerated Motion to Compel. D&O at 28. Defendants were also directed to file within ten days an affidavit of costs and attorney's fees incurred. D&O at 30. No objections to the D&O were filed by Plaintiff. According to the docket for this action, on January 23, 2012, Plaintiff paid the $5,000 civil contempt sanctions.

As directed in the Decision and Order, Defendants filed on January 20, 2012, Defendants' Fee Application (Doc. No. 285) ("Fee Application"), and the supporting Declaration of Alexander H. Southwell, Esq. (Doc. No. 286) ("Southwell Declaration"), with attached exhibits A through D ("Defendants' Exh(s) __"). On January 30, 2012, Plaintiff filed in opposition a Memorandum (Doc. No. 288) ("Plaintiff's Response"). On February 1, 2012, Defendants filed Defendants' Reply Memorandum in Support of Their Fee Application (Doc. No. 289) ("Defendants' Reply"), and the Supplemental Declaration of Alexander H. Southwell in Support of Defendants' Fee Application (Doc. No. 290) ("Southwell Reply Declaration"), with attached exhibit A ("Defendants' Reply Exh. A"). In addition attorney's fees, Defendants request the court direct that Plaintiff be prohibited from further prosecution of the instant action until Plaintiff has paid Defendants' attorney's fees. Oral argument was deemed unnecessary.

Based on the following, Defendants' Fee Application is GRANTED in part and DENIED in part; Defendants are awarded in connection with their Accelerated Motion to Compel $75,776.70 in attorney's fees, and are also entitled to an award of costs, including attorney's fees, incurred preparing and defending the Fee Application, but Defendants' request for an order prohibiting Plaintiff from filing any papers in support of this action until such fees are paid is DENIED.

DISCUSSION

As stated, Defendants were awarded attorney's fees and costs incurred in connection with preparing and defending the Accelerated Motion to Compel, as a sanction pursuant to Fed.R.Civ.P. 37(a)(5)(A) and 37(b)(2)(C) ("Rule 37"), and Defendants were directed to file affidavits of costs and attorney's fees relevant to the determination of the fee award. D&O at 28. Defendants' Fee Application seeks fees for five attorneys who worked on the Accelerated Motion to Compel, requesting a total of $84,196.33 in attorney's fees.*fn4 Defendants maintain they are not seeking full reimbursement of the attorney's fees incurred in connection with the Accelerated Motion to Compel but, rather, to avoid any dispute over the reasonableness of the fees requested, have excluded certain work, declined to seek reimbursement for several timekeepers who worked on the Accelerated Motion to Compel, and have reduced by 25 % the hourly attorney rates for those attorneys for whose work Defendants do seek reimbursement, asserting that because they have already voluntarily and substantially reduced both the hours and hourly rates, their requested fees should not be further reduced. Fee Application at 1, 9, 14, 18-19; Southwell Declaration ¶¶ 3, 16, 18. Defendants also request an award of attorney's fees incurred preparing the Fee Application, maintain that Plaintiff should be ordered to pay the court-awarded attorney's fees within 14 days of this Decision and Order, and also seek an order prohibiting Plaintiff from filing any papers, other than those responsive to the Fee Application, until Plaintiff satisfies the full attorney's fee award. Id. at 20.

Plaintiff, in opposing the Fee Application, argues Defendants' hourly attorney rates are not reasonable compared to rates for comparable legal services within the Western District of New York. Plaintiff's Response at 4-5. According to Plaintiff, the "forum rule" requiring awards for attorney's fees be calculated based on the prevailing hourly rate in the geographic area where the case is litigated should be applied because this action is a breach-of-contract case, Defendants cannot make the requisite particularized showing to support the use out-of-district counsel with special expertise, and who charge higher hourly rates, to obtain substantially better results that what could be procured using local counsel at lower hourly rates, and because such fees are intended to be compensatory, rather than punitive. Id. at 5-9. Plaintiff also asserts Defendants' attorneys failed to adequately document their time and engaged in "block- billing" wherein multiple tasks were aggregated into single billing entries, rendering it difficult, if not impossible, to discern what portion of such entries constituted work on the Accelerated Motion to Compel. Id. at 9-11. Plaintiff questions the amount of attorney's fees requested given that Defendants' papers filed with regard to the Accelerated Motion to Compel were not voluminous. Id. at 11-12. Finally, Plaintiff argues there is no legal authority supporting Defendants' request for a court order prohibiting Plaintiff from filing further papers until the fee award is paid. Id. at 12-13.

In further support of the Fee Application, Defendants dispute Plaintiff's characterization of this action as a "garden-variety contract dispute," and draws the court's attention to the fact that in litigating this matter Plaintiff has not relied on local counsel. Defendants' Reply at 1-3. Defendants maintain that the attorney hourly attorney rates sought are reasonable when compared to "other peer global law firms with attorneys located in New York City." Id. at 3-4. Defendants argue Plaintiff misrepresents Defendants' assertions regarding the reconstruction of some of the billing entries, and that summaries of contemporaneous time records are sufficient to support a fee application. Id. at 4-5. Defendants point out that Plaintiff has not refuted the number of hours for which Defendants seek attorney's fees, but rather, merely trivializes the work required to litigate the Accelerated Motion to Compel. Id. at 6. Finally, Defendants advise that although Plaintiff opposes Defendants' request for a court order prohibiting Plaintiff from filing additional papers prior to satisfying the attorney's fees award, Plaintiff does not object to Defendants' request that Plaintiff be ordered to pay the awarded attorney's fees within 14 days of the filing of this Decision and Order. Id.

1. Lodestar Method

Here, the undersigned found that the court must, upon granting Defendants' Accelerated Motion to Compel, award attorney's fees under Rule 37(a)(5)(A) and, based on the imposition of the $5,000 civil contempt sanction, award attorney's fees under Rule 37(b)(2)(C). D&O at 24-28. Although Rule 37(a)(5)(A) addresses those situations in which a party incurs expenses in making a motion to obtain a court order for discovery, whereas Rule 37(b) addresses the situation where expenses are incurred as a result of the violation of a court order directing discovery, both Rules 37(a)(5)(A) and 37(b)(2)(C) require payment of attorney's fees unless the disobedient party's nondisclosure was substantially justified, which Plaintiff had failed to establish. Id.

The Second Circuit Court of Appeals has not opined as to how to calculate attorney's fees awarded as a sanction pursuant to Rule 37, yet has discussed an award of attorney's fees as a sanction for a violation of Fed.R.Civ.P. 11. See, e.g., Eastway Construction Corp. v. City of New York, 821 F.2d 121, 122 (2d Cir.) (reviewing district court's award of attorney's fees as Rule 11 sanctions), cert. denied, 484 U.S. 918 (1987). Traditionally, "[i]n determining a fee award, the typical starting point is the so-called lodestar amount, that is 'the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate.'" Healey v. Leavitt, 485 F.3d 63, 71 (2d Cir. 2007) (quoting Hensley v. Eckerhart, 461 U.S. 424, 433 (1983)).*fn5 The Second Circuit has held that when awarding attorney's fees as a sanction, the "lodestar amount "need not routinely be awarded." Eastway Construction Corp., 821 F.2d at 121-22 (discussing that attorney's fee awarded as Rule 11 sanction can vary from lodestar amount, yet must still be within a range reasonable to achieve deterrent objective of such award). Nevertheless, a "presumption of reasonableness" attaches to the lodestar figure. Farbotko v. Clinton County of New York, 433 F.3d 204, 208 (2d Cir. 2005). As such, in determining the amount of attorney's fees to be awarded Defendants as a sanction, the court commences with the lodestar or "presumptively reasonable fee," which is then adjusted as necessary to assure Rule 37's deterrent objective is achieved.*fn6

In calculating the lodestar amount, the initial burden is on the requesting party to submit evidence supporting the number of hours worked and the hourly rate claimed. Hensley, 461 U.S. at 433. This "lodestar" calculation should exclude fees for work that is "excessive, redundant or otherwise unnecessary," as well as hours dedicated to severable unsuccessful claims. Quaratino v. Tiffany & Co., 166 F.3d 422, 425 (2d Cir. 1999) (citing Hensley, 461 U.S. at 433-35). To prevent the court from reviewing and ruling on each item for which reimbursement is requested, courts have permitted a percentage-based reduction from the number of hours submitted as a means of trimming excess time from the fee request. McDonald v. Pension Plan of the NYSA-ILA Pension Trust Fund, 450 F.3d 91, 96 (2d Cir. 2006) ("A district court may exercise its discretion and use a percentage deduction as a practical means of trimming fat from a fee application.") (internal quotation marks and citation omitted); see Walker v. Coughlin, 909 F.Supp. 872, 881 (W.D.N.Y. 1995) (reducing by 15 % the total hours requested).

In the instant case, the form in which Defendants' Fee Application presents the fees Defendants seek establishes the fees were calculated according to the lodestar method. The five Gibson Dunn attorneys for whose work Defendants seek payment from Plaintiff include senior partner Orin S. Snyder ("Snyder"), partner Thomas H. Dupree, Jr. ("Dupree"), partner Alexander H. Southwell ("Southwell"), sixth-year associate Matthew Benjamin ("Benjamin"), and second-year associate Amanda Aycock ("Aycock"). The following schedule sets forth these attorneys' standard and claimed, i.e., discounted, hourly billing rates, the hours each attorney worked, and the total fees claimed by each attorney calculated using the claimed rate:

Attorney Standard Rate Claimed Rate Hours Total Fees

Snyder $955 $716.25 9.75 $6,983.44 Dupree 850 637.50 21.75 13,865.63 Southwell 825 618.75 24.50 15,159.38 Benjamin 670 502.50 44.65 22,436.63 Aycock 450 337.50 76.30 25,751.25

Total: 176.95 $84,196.33

The parties do not quarrel over Defendants' calculation of the attorney's fees requested according to the lodestar method, yet Plaintiff protests Defendants' request for attorney's fees insofar as Defendants seek payment of their attorney's fees at out-of-district rates specifically, the metropolitan New York City region in the Southern District of New York, which are substantially higher than the prevailing hourly rates in Buffalo in the Western District of New York. Plaintiff also maintains that the number of hours for which Defendants seek attorney's fees is excessive, and that the use of "block-billing" makes it impossible to determine how much time was actually spent on the Accelerated Motion to Compel.

2. Presumptively Reasonable Rate

Defendants' Fee Application calculates the fees for their lead counsel, Gibson Dunn, according to Gibson Dunn's hourly rates charged at their New York City firm in the Southern District of New York, voluntarily discounted by 25% to avoid any dispute over the reasonableness of such fees. Fee Application at 1, 6-9, 14. Plaintiff challenges the hourly rate used to calculate such fees as exceeding the prevailing market rate for the Western District of New York, despite this being a breach-of-contract action for which the use of out-of-district counsel is unnecessary to obtain substantially better results. Plaintiff's Response at 4-8. Defendants, however, maintain that this action is more than a "'garden variety' contract dispute," as indicated by the fact that Plaintiff has retained at least four out-of-district law firms, including DLA Piper LLC, one of the largest and most expensive law firms in the world, whose hourly rates exceed those of Gibson Dunn, a fact not disputed by Plaintiff. Defendants' Reply at 1. Defendants maintain that the special expertise of Gibson Dunn is necessary given the extraordinary circumstances of this action, corroborated by the fact that Plaintiff has created an extensive document titled "Lawsuit Overview: Paul D. Ceglia v. Mark Elliot Zuckerberg & Facebook, Inc." ("Lawsuit ...


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