Free Surreply - District Court of Colorado - Colorado

Case 1:04-cv-01258-LTB-BNB

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 04-cv-01258-LTB-BNB STUDENT MARKETING GROUP, INC., Plaintiff, v. COLLEGE PARTNERSHIP, INC., f/k/a COLLEGE BOUND STUDENT ALLIANCE, INC., Defendant. ______________________________________________________________________________ DEFENDANT'S SURREPLY IN OPPOSITION TO PLAINTIFF'S MOTION FOR ATTORNEY FEES AND REQUEST FOR HEARING ______________________________________________________________________________ Defendant College Partnership, Inc. ("College Partnership"), by and through its counsel, Rosemary Orsini and Brian K. Matise of Burg Simpson Eldredge Hersh & Jardine, P.C., hereby submits its surreply to Plaintiff Student Marketing Group, Inc.'s ("SMG") Motion for Attorney Fees. Due to the numerous factual disputes that exist, Defendant also requests an evidentiary hearing pursuant to Gamble v. Kerr McGee Corp., 175 F.3d 762, 774 (10th Cir. 1999) (quoting Michael A. Cramer, MAI, SRPA, Inc. v. United States, 47 F.3d 379, 383 (10th Cir. 1995) ("an evidentiary hearing is generally preferred, if not required, when factual disputes exist in connection with a request for attorney fees.")) I. INTRODUCTION Plaintiff sought approximately $285,000 in costs and attorney fees in its initial motion for

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attorney fees, but failed to provide any itemized breakdown of hours billed or costs claimed as is generally required by D.Colo.L.Civ.R. 54.3. The information submitted with that Motion and Supplemental Motion was inadequate to determine the reasonableness of those fees and costs. In addition, Plaintiff did not submit any affidavits from a disinterested third party attorney that attorney fees based on undiscounted hourly rates of $410-440 per hour for partner level attorneys, $210-$235 per hour for associate level attorneys, and $180 per hour for paralegals, or 8-10% volume discount rates, were reasonable for this type of litigation in the Denver, Colorado area. In fact, Plaintiff's local counsel, Daniel Scheid a senior partner with Lewis & Scheid, stated that his firm's rates for this matter were $250 per hour for his time, $185 per hour for another partner in his firm, and $125 per hour for an associate. In its Reply Brief, Plaintiff submitted an 85-page itemized breakdown of its hours billed per task for both Pennsylvania counsel and local counsel, and an Affidavit from Daniel M. Reilly that the rates charged are "comparable" to their rates and "consistent" with certain "boutique litigation law firms" in Denver. Plaintiff also submitted a brief breakdown of the costs sought, by category. Because College Partnership did not have the opportunity to review and respond to this new evidence at the time it submitted its Response Brief, College Partnership requested the opportunity to file this surreply. The Court granted leave to file a surreply at the October 18, 2005 hearing. This surreply will address three issues: 1) the number of hours billed by Plaintiff's counsel for this litigation is excessive; 2) the hourly rates charged exceed reasonable rates for similar services in the Denver, Colorado area; and 3) the itemized costs should be reduced to comport with generally accepted costs in the Denver, Colorado area. -2-

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II. ARGUMENT A. Standard

As an initial matter, the Court should address the standard to be used in assessing the reasonableness of fees. Generally, fees assessed to the opposite party due to cost shifting provisions are carefully scrutinized and the burden is on the party seeking fees to justify every dollar, every hour above zero. Mares v. Credit Bureau of Raton, 801 F.2d 1197, 1210 (10th Cir. 1986). Plaintiff is correct that when attorney fees are awarded pursuant to contract, a less rigorous standard may be applied where the purpose of the attorney fee award is to "make the opposing party whole." United States ex rel. C.J.C. Inc. v. Western States Mech. Contractors, Inc., 834 F.2d 1533, 1547 (10th Cir. 1983). The less rigorous standard applies where the expenses were reasonably incurred and actually paid by the opposing party; in this case, no proof has been presented that SMG actually paid any of these fees and expenses. In particular: · · · no billing agreement or contract is presented between SMG and its attorneys; no invoices are presented as to what was actually billed and paid; no receipts or cancelled checks are presented.

This Court only has evidence that these fees were billed or sought by SMG's counsel, without knowing the contractual arrangement (contingent or otherwise) for payment. Moreover, there is evidence that SMG has not paid these attorney fees to date; the settlement agreement that was filed as Exhibit 1 to SMG's Unopposed Motion to Vacate Stay indicated at Page 2 that College Partnership was to make payment by check payable solely to SMG's counsel, not SMG or SMG and counsel jointly. Accordingly, under these circumstances, the Court cannot conclude automatically -3-

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that this less careful scrutiny is appropriate, or that SMG has actually incurred all of this expense for which it needs to be made whole. Moreover, there is substantial evidence in this litigation that SMG's purpose in conducting this litigation with $400+ per hour out of state counsel was more to harm College Partnership and create a reputation in the relevant commercial community of being aggressive and litigious than to recover the debt. See Affidavit of Thomas Hagglund, attached as Exhibit A; June 1, 2004 letter of Jan Stumacher, attached as Exhibit B at p. 1 ("I am not shy about litigation ­ as your current advisor can attest); at p. 2 ("I will have no choice but to contact CPI's creditors and shareholder, parents and affiliates, in addition to appropriate state and federal agencies, and make them aware of CPI's failure to perform as well as any inappropriate use of SMG's lists"). Although private parties such as Student Marketing Group may wish to agree to particularly aggressive and costly litigation strategies in a private fee agreement, it is not appropriate to impose one party's fee obligations upon the very party who was the subject of that aggressive litigation strategy. Praseuth v. Rubbermaid, Inc., 406 F.3d 1245, 1257 (10th Cir. 2005). Accordingly, the Court should not afford Plaintiff's agreed-to fees any presumption of reasonableness in cases such as this where there is evidence of a particularly aggressive strategy employed due to animosity between the parties and the fees sought are more than double the amount of the judgment. B. SMG's Counsel Failed to Exercise Billing Judgment, as the Number of Hours Billed is Excessive. A fee applicant should exercise billing judgment with respect to the number of hours worked and billed. Hensley v. Eckerhart, 461 U.S. 424, 437 (1983); Praseuth, 406 F.3d at 1257. A district

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court should reduce hours where large amount of hours are spent on relatively straightforward, discrete tasks. Id. at 1258. The fee application submitted by Plaintiff indicates many examples of such excess. A comparison of the time required to perform similar tasks by Plaintiff's counsel and by Defendant's counsel reveals the following: Pre-Complaint litigation June 4 - June 18 (before filing of Complaint): D. Karg 53.6 hours

P. McElhinny 8.3 hours D. Scheid G.E. Parish 9.1 hours 0.8 hours

Thus, a total of more than 70 hours of attorney time - over 1 ½ full time weeks of attorney time - was expended preparing a single claim breach of contract Complaint consisting of 47 paragraphs, an associated 8-paragraph Motion for Temporary Restraining Order, and a Memorandum Brief containing 6 pages of legal argument. Review of the billing records of KLNG (Exhibit 1 to McElhinny deposition at pages 1-4) during that time period indicates numerous vague entries for drafting, re-drafting, reviewing drafts, revising, further review and revising, etc. during that period. What should have been a one or two day project of preparing quite simple pleadings was dragged out over a two week period, with the attendant inefficiencies. By comparison, College Partnership's counsel billed the following time during the month of

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June 2004, the first month of litigation, including appearance at the TRO hearing: 1 Michael S. Burg Matthew McElhiney See Exhibit G ¶ 6. 1.1 hrs. 15.5 hrs

Motion to Dismiss (pages 14 - 17 KLNG; pages 5-6 Local Counsel) D. Karg P. McElhinny D. Scheid Total: 90.1 hours By comparison, counsel for College Partnership expended the following hours on the Motion to Dismiss: Rosemary Orsini 5.8 hours 78.6 hours 5.5 hours 6.0 hours

Matthew McElhiney 7.3 hours Stuart Jay Brian Matise Total: 44.0 hours 23.5 hours 7.4 hours

These hours were obtained by undersigned counsel, from adding up the records in the computer records related to the respective motions. See Declaration of Brian Matise (Exhibit G). The detailed records are maintained by individual timekeeper on the computer, not by task, and then combined by client per billing period. Therefore, it was necessary to manually add up the entries. -6-

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Motion for Summary Judgment Briefing P. McElhinny D. Karg D. Scheid C. Krough Total: 116.9 hours 24.7 hours 88.2 hours 1.1 hours 2.9 hours

College Partnership's counsel expended the following hours including the hearing: Rosemary Orsini Brian Matise Total: 11.5 hours 38.0 hours 49.5 hours

As noted in College Partnership's original response brief on the Motion for Attorney Fees, this matter was not particularly complex. Plaintiff took only five depositions of Defendant's witnesses and did not designate any expert witnesses of its own. Only one set of written discovery was served by each party. Written discovery was not particularly extensive - approximately 1,100 pages of discovery (2 large 3-ring binders) produced by each side. College Partnership's total hours expended on this litigation from inception through October 2005 total the following: Partner-level attorneys: Associate-level attorneys: Paralegal-level: 286.80 hours 351.90 hours 1.00 hours. See Exhibit G ¶ 3 -7-

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By contrast, SMG's hours expended are considerably greater: Partner-level attorneys: Associate-level attorneys: Paralegal-level: 266.9 hours 684.9 hours 133.8 hours

Although the partner-level hours are similar, the number of associate-level work and paralegal-level hours billed is excessive for a case such as this. The ratios of KLNG partner to associate-level work as evidence by the examples above indicate inefficiencies in associate work that billing judgment would have corrected, such as days of associate time expended drafting and re-drafting a 47 paragraph one-claim breach of contract complaint. The paralegal charges were also excessive. An examination of the senior paralegal hours billed indicates that the work was largely clerical, filing clerk, and secretarial work that should not have been billed at all, certainly not at a $160 to $180 undiscounted rate per hour. For example, at page 24 of KLNG's time entries, 1.5 hours were billed for indexing documents that an attorney had already pulled, and 1.0 filing documents. At page 33, 14.4 hours of paralegal services were billed for preparing deposition documents that another attorney had identified into a format for a single witness' deposition (presumably, copying and putting exhibit labels on them and organizing into folders). At page 35, 17.4 hours of paralegal time was spent preparing exhibits that another attorney had pulled for another deposition. Another 20.6 hours related to the same depositions appears at page 36. Another 4.6 hours is listed at page 37, including charges for the paralegal to "refile documents." 7.1 hours of additional time preparing exhibits for depositions appears at page 38, and an additional 2 ½ days of paralegal time (21.1 hours) appears at page 39 related to a single deposition. -8-

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These services are the type of services that should be performed by legal assistants, secretarial personnel, or file clerks rather than senior paralegals billing at the rate of $160-$180 per hour. Plaintiff's local counsel, R. Daniel Scheid, did not charge any hours for paralegal services. Similarly, Defendant's counsel only billed one hour for paralegal-level services, for services accessing a Microsoft Access database and placing it into a usable form. Such skilled, specialized services (similar to paralegals that review medical records, prepare deposition summaries for trial use, analyze financial documents, etc.) are appropriately billed. Clerical services should not be. C. Mr. Reilly's Affidavit is Insufficient to Establish Reasonable Rates

Defendant presented the Affidavit of Bennet S. Aisenberg with its Response Brief. Mr. Aisenberg deposed that the rates of Mr. McElhinny and the senior paralegal were well in excess of prevailing rates in Denver, Colorado for similar attorneys. In response, Plaintiff presents an Affidavit of Daniel Reilly. Mr. Reilly's affidavit does not establish that the requested rates are reasonable for this case because it compares the services in this case to highly specialized complex litigation performed by Mr. Reilly and specialized "boutique litigation" law firms. The Affidavit of Daniel M. Reilly states that his rate is $400 per hour, and that one other partner in his firm charges $450 per hour. He also states that the rates charged by Plaintiff's counsel would be consistent with "boutique" litigation firms or large commercial litigation law firms if a volume-based discount is applied. Mr. Reilly and one of his partners command $400 an hour salaries because of the complexity, sophistication, and size of their cases. Mr. Reilly's biography indicates that he has served as lead counsel in large national class action cases, intellectual property matters (copyright and trademark -9-

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infringement), consumer fraud cases, and disputes over ownership of the Denver Broncos and other businesses. See Exhibit C, attached. These are multi-million dollar (if not hundreds of millions of dollar) cases. On the other hand, the present matter involved a claim for just over $100,000 that Plaintiff's counsel characterized as essentially a collection matter. While a party is free to select counsel from any locality, absent a clear showing that the matter could not have been handled by counsel from the locality, rates above the prevailing hourly rates should not be applied. Praseuth, 406 F.3d at 1259. Plaintiff's local counsel's rates demonstrate that the prevailing rates for commercial breach of contract matters such as this are far below what the Pennsylvania attorneys in this matter are seeking. Plaintiff's local counsel, R. Daniel Scheid, submitted an Affidavit indicating that the rates charged by his Denver, Colorado firm were $250 per hour for his time, $185 an hour for a junior partner, and $125 an hour for an associate. Mr. Scheid's resume indicates that he has over 24 years of experience, and that he has broad experience handling complex commercial litigation matters. See Exhibit D. Mr. Scheid has an "AV" rating from Martindale-Hubbell. See Exhibit E. This matter certainly could have been handled by local counsel at rates similar to that charged by his office. College Partnership's rates in this matter were $275.00 an hour for Michael S. Burg, $200 an hour for other partner-level attorneys, $150 an hour for senior associate attorneys with over 5 years experience, and $135 an hour for junior associates. See Exhibit G ¶ 4. These rates are consistent with the rates charged by Mr. Scheid's law firm ($250/hour for Mr. Scheid, $185/hour for partner level attorneys and $125 an hour for associates). Such rates are reasonable and typical in the Denver, Colorado area for this type of commercial litigation. -10-

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Plaintiff is seeking over $160 per hour for paralegal services. The National Association of Legals Assistants compiled the "2004 National Utilization and Compensation Survey Report" in October 2004 that surveyed paralegals throughout the country between June 1, 2004 and August 31, 2004. See Exhibit F at § 1 p. 3. Region 6 was the Rocky Mountain states that included Denver. Exhibit F § 1 at p. 3. The 2004 average billing rate for Region 6 was $79 per hour for paralegals. Exhibit F § 3 at p. 3. For large firms nationwide, the average hourly billing rate is only about $120 per hour. Exhibit F at § 3 p. 5. By years of experience, paralegals with more than 30 years of experience average $102-$116 per hour billing rates. By any measure, the $160 per hour is far in excess of the prevailing billing rate. D. Plaintiff has Failed to Justify the Additional Costs that It Seeks

Plaintiff has already recovered its taxable costs that the Clerk found to be proper. Plaintiff is now seeking to recover additional costs that are not otherwise taxable. However, the costs listed are the type of costs that either should be included in regular office overhead, see Dewey v. Allstate Ins. Co., 739 F.2d 1494, 1496 (10th Cir. 1984), or would not have been needed if Plaintiff chose to retain local Denver counsel to handle these matters. For example, included in the list of costs that KLNG submitted are the following: $750.30 for "printing" $3,482.56 for "copies" $218.30 for "telephone" $123.00 for "facsimile" $64.88 for "postage" -11-

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$1,557.13 for "word processing" $594.13 for "long distance courier" $3,264.42 for "Westlaw research" $90.02 for "D&B Research" $230.00 for "employee overtime" $7.00 for "overtime expenses" $32.21 for "LEXIS research" $116.00 for "computer research" $538.68 for "other" All of these expenses (particularly such expenses as postage, word processing, overtime, facsimile, etc.) are routine office overhead expenses. It also appears that there is duplicative research being done on Westlaw, LEXIS, and "computer research." Plaintiff also is seeking $3,407.18 "travel expenses," $654.92 "travel meals," and $7,318.95 for Air Fare." These expenses are not broken down by purpose. Some of these charges would be appropriate for out-of-state depositions (there were three); however, the Colorado depositions could have been handled by Colorado counsel without the need for travel. Similarly, appearance at Colorado hearings would not require travel expenses if local counsel attended. III. CONCLUSION The Court should substantially reduce the attorney fees sought by Plaintiff in this matter. The number of hours billed exceeds a reasonable number of hours and the hourly rates are substantially higher than rates in the Denver, Colorado area for this type of litigation. Plaintiff also has failed to -12-

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meet its burden to show any of the expenses it seeks were reasonable or necessary. WHEREFORE, College Partnership respectfully requests that the Court deny the Motion for Attorney Fees or in the alternative reduce the amount to a reasonable amount. College Partnership further requests an evidentiary hearing on this matter due to the factual disputes.

DATED: December 16, 2005.

Respectfully submitted, BURG SIMPSON ELDREDGE HERSH & JARDINE, P.C.

s/ Brian K. Matise Brian K. Matise 40 Inverness Drive East Englewood, Colorado 80112 Telephone: (303) 792-5595 Facsimile: (303) 708-0527 ATTORNEYS FOR DEFENDANT COLLEGE PARTNERSHIP, INC.

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CERTIFICATE OF SERVICE I HEREBY CERTIFY that on the 16th day of December, 2005, I electronically filed the foregoing DEFENDANT'S SURREPLY IN OPPOSITION TO PLAINTIFF'S MOTION FOR ATTORNEY FEES with the Clerk of Court using the CM/ECF System which will send notification of such filing to the following at their email address on file with the Court:

Gary Parish, Esq. R. Daniel Scheid, Esq. Sander, Scheid, Ingebretsen, Miller & Parish P.C. 700 17th St., Suite 2200 Denver, CO 80202 Patrick J. McElhinny, Esq. Dianna S. Karg, Esq. Kirkpatrick & Lockhart LLP 535 Smithfield St. Henry W. Oliver Building Pittsburgh, PA 15222

s/ Brian K. Matise Brian K. Matise

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