Overlawyered: prevailing defendant gets reduced fee award

Spalding Laboratories, Inc. v. Arizona Biological Control, Inc., 2008 WL 2227501 (C.D. Cal.)

Spalding sued defendant (ARBICO) for false advertising of its fly control products under the Lanham Act. The case went to a jury; the court allowed Spalding to re-open its case to address evidentiary holes. After Spalding rested, the court granted judgment as a matter of law to ARBICO. ARBICO moved for attorneys’ fees, which the court granted in part. (ARBICO asked for over $800,000, and the court granted $95,000.)

The Lanham Act allows a fee award in exceptional circumstances, which can occur when a plaintiff’s case is groundless, unreasonable, vexatious, or pursued in bad faith. Spalding had a good faith basis for making its claims at first. However, after the court excluded all the key elements of Spalding’s case, “doom[ing]” its claims, Spalding’s insistence on pursuing the case for 10 days in front of a jury became exceptional. Its evidence of literal falsity was excluded, and it had no survey evidence showing that a significant portion of the relevant consuming public was misled, but it made “empty promises” of such survey evidence and “afforded no time in proving liability,” focusing instead on “self-serving damages calculations.”

As a result, ARBICO was entitled to fees from the first day of trial through the motion for fees. ARBICO’s billing records showed over $220,000 in fees for that period, but the court adjusted downwards to account for the attorneys’ block billing, as well as some duplication, mistakes, and excesses. “While the Court does not contend that ARBICO’s attorneys intended to ‘pad’ their bills, it surmises that ARBICO’s attorneys (and paralegals) often acted with a degree of zeal and thoroughness beyond that which would have been exercised by a reasonable attorney.” Attorneys and paralegals who billed 13-17 hours a day for attending and preparing for trial, when trial never exceeded 6 hours per day, “show[ed] commendable industry but [were] nonetheless unreasonable.” In the end, the court deducted 15% for block billing; 30% for duplicative, multiple and excessive billing; 5% for time billed as travel; and 10% apportioned to non-Lanham Act unfair competition claims.