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Tdg Acquisition Co., LLC v. Vuzix Corporation

United States District Court, Second Circuit

November 7, 2013

TDG ACQUISITION COMPANY, LLC, Plaintiff,
v.
VUZIX CORPORATION, PAUL J. TRAVERS, JOHN DOE #1, Defendants.

Barry I. Friedman, Esq., Brian T. Must, Esq., Metz Lewis Brodman Must O'Keefe LLC, Pittsburgh, PA, for Plaintiff.

Kimberly I. Shimomura, Esq., Stephen B. Salai, Esq., A. Paul Britton, Esq., Harter, Secrest and Emery, LLP, Rochester, NY, for Defendants.

DECISION & ORDER

CHARLES J. SIRAGUSA, District Judge.

INTRODUCTION

On May 10, 2013, the Court granted Defendants' application to dismiss the case in favor of arbitration, to which the parties had agreed in their contract. Decision and Order, May 8, 2013, ECF No. 26. The matter is back before the Court on an application by prevailing counsel for an award of attorney's fees. Motion for Atty's Fees, May 22, 2013, ECF No. 29. For the reasons stated below, the application is granted, but the fees requested are adjusted pursuant to case law.

FACTUAL BACKGROUND

Plaintiff TDG Acquisition Company, LLC ("TDG"), purchased certain intellectual property from Vuzix Corporation ("Vuzix"). The purchase agreement mandated arbitration for most disputes. Nevertheless, TDG filed suit in this Court alleging that: (1) a Vuzix employee passed himself off as the vice president of TDG, used that vice president's email account to contact a prospective TDG customer, and falsely represented the nature, characteristics and qualities of TDG's services and commercial activities, all without authorization; and (2) Paul J. Travers made false and misleading statements to a representative of the United States Army Contracting Command that TDG, to which work was to be transferred, would not be able to perform the work, and caused the Army to not award the contract to TDG.

The agreements at issue permitted TDG to seek injunctive relief in the Court, but mandated that all other disputes be resolved through arbitration. The Court granted TDG's ex parte application for an injunction, and, on Vuzix's motion, dismissed the case pursuant to the parties' arbitration agreement. Vuzix now seeks attorney's fees for its motion to dismiss, to which it contends it is entitled by virtue of TDG's refusal to arbitrate. TDG opposes the motion, arguing that it did not refuse to arbitrate, but merely sought injunctive relief "for claims reasonably believed to fall outside the purview of the parties' arbitration clause." Pl.'s Mem. in Opp'n to Def. Vuzix Corporation's Mot. for Atty's Fees, Aug. 2, 2013, ECF No. 34.

STANDARDS OF LAW

With regard to calculating attorney fees, the Supreme Court addressed the issue in the context of a civil rights case and stated that,

[t]he most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate. This calculation provides an objective basis on which to make an initial estimate of the value of a lawyer's services. The party seeking an award of fees should submit evidence supporting the hours worked and rates claimed. Where the documentation of hours is inadequate, the district court may reduce the award accordingly.

Hensley v. Eckerhart, 461 U.S. 424, 433-34 (1983). Notwithstanding the Supreme Court's use of the lodestar method in Hensley, the Second Circuit, in Arbor Hill Concerned Citizens Neighborhood Ass'n v. County of Albany, 522 F.3d 182 (2d Cir. 2008), observed that the Supreme Court had left intact the twelve factors considered by the Fifth Circuit in its decision, Johnson v. Georgia Highway Exp., Inc., 488 F.2d 714 (5th Cir. 1974). The Second Circuit outlined the confusion engendered in the fee-setting jurisprudence, concluding that, "[t]he net result of the fee-setting jurisprudence here and in the Supreme Court is that the district courts must engage in an equitable inquiry of varying methodology while making a pretense of mathematical precision." Arbor Hill, 522 F.3d at 189.[1] Later, the Supreme Court clarified in Texas State Teacher Ass'n v. Garland Independent School Dist., 489 U.S. 782 (1989), the law as it applies in a case where a plaintiff has achieved limited success, writing:

The Court [in Hensley ] then went on to establish certain principles to guide the discretion of the lower courts in setting fee awards in cases where plaintiffs have not achieved complete success. Where the plaintiff's claims are based on different facts and legal theories, and the plaintiff has prevailed on only some of those claims, we indicated that "[t]he congressional intent to limit [fee] awards to prevailing parties requires that these unrelated claims be treated as if they had been raised in separate lawsuits, and therefore no fee may be awarded for services on the unsuccessful claim." Hensley, supra, 461 U.S. at 435, 103 S.Ct. at 1940. In the more typical situation, where the plaintiff's claims arise out of a common core of facts, and involve related legal theories, the inquiry is more complex. In such a case, we indicated that "the most critical factor is the degree of success obtained." 461 U.S. at 436 , 103 S.Ct. at 1941. We noted that in complex civil rights litigation, "the plaintiff often may succeed in identifying some unlawful practices or conditions, " but that "the range of possible success is vast, " and the achievement of prevailing party status alone "may say little about whether the expenditure of counsel's time was reasonable in relation to the success achieved." ...

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