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Friedman v. SThree PLC.

United States District Court, D. Connecticut

September 15, 2017

DAN FRIEDMAN
v.
STHREE PLC., et al.

          RULING RE: ATTORNEYS' FEES, COSTS, AND SANCTIONS

          HON. SARAH A. L. MERRIAM UNITED STATES MAGISTRATE JUDGE

         Pending before the Court are several motions and applications for attorneys' fees and costs by defendants SThree PLC., SThree Inc., Huxley Associates Ltd., Huxley Associates Inc., Huxley Associates B.V., and Ivanka Radujko (the “SThree defendants”); and by defendants Palladyne International Asset Management B.V., Ismael Abudher, Lily Yeo, Nikolay Tischchenko, Piedad Alonso Gamo, and Bill Stevens (the “Palladyne defendants”). For the reasons set forth herein, the Court GRANTS, in part, SThree Defendants' Second Application for Attorney's Fees [Doc. #206]; GRANTS, in part, Palladyne Defendants' Application for Attorney's Fees and Costs [Doc. #205]; and GRANTS, in part, Palladyne Defendants' Motion to Increase Daily Sanction and for Other Relief [Doc. #225].[1]

         I. BACKGROUND

         The Court presumes familiarity with the background and procedural history of this matter, and thus only discusses information that is necessary to resolution of the motions and applications before it.

         On June 17, 2016, Judge Alvin W. Thompson entered an order setting out the plan for jurisdictional discovery. See Doc. #121. The parties were instructed by Judge Thompson to file a notice with the Court immediately upon becoming aware of a discovery dispute, rather than filing a motion to compel or for a protective order. See Doc. #121 at 2. The Order requires each side to “summarize its position in no more than two pages, ” and states that “the court will hold a telephonic status conference to resolve the dispute.” Id. (emphasis omitted).

         On September 6, 2016, the SThree defendants filed a Notice of Second Discovery Dispute. See Doc. #157. The Notice asserted that plaintiff's jurisdictional discovery production was deficient; that plaintiff's representations about existing discovery were “materially incorrect;” and that the searches that plaintiff had conducted for responsive documents were “insufficient and not reasonably calculated to identify all responsive documents.” Id. at 2. Attached to the Notice were communications between counsel for plaintiff and the defendants, defendants' discovery requests, and a portion of plaintiff's responses. See generally Doc. #157-1 through Doc. #157-9.

         Plaintiff filed a response to the SThree defendants' Notice on September 12, 2016. See Doc. #160. Plaintiff stated that he had “no objection to producing the limited number of items subject to the SThree defendants' filing.” Id. at 2 (footnotes omitted). He argued that defendants received timely responses to their discovery requests, and that reasonable searches had been conducted. See Id. Plaintiff responded to each asserted deficiency arguing that all responsive documents had been produced, and “if additional documents are located they will be produced.” Id. at 2-4. Plaintiff filed a Supplemental Submission in Opposition on September 14, 2016, noting that additional searches had been conducted and additional documents had been produced. See Doc. #162.

         On September 16, 2016, Judge Thompson referred this matter to the undersigned to conduct a discovery conference regarding the dispute. See Docs. #168, Doc. #169. The Court held an in-person conference on October 7, 2016, and issued an Order that same day requiring plaintiff “to perform additional searches; to review the results of each search; to provide a certification detailing the nature of each search; and to identify any records that have not been produced on the basis of privilege in a privilege log[.]” Doc. #182 at 2. The Court imposed a deadline for these additional searches and production. Following two telephonic status conferences and after review of defendants' responses to plaintiff's certification, and review of plaintiff's response, on October 24, 2016, the Court found that “plaintiff has failed to adequately respond to the defendants' discovery requests and to comply with the Court's orders, and that sanctions are therefore appropriate.” Doc. #200 at 3. The Court ordered counsel for defendants to “file an affidavit of fees and costs with the Court ... showing the costs and fees incurred in connection with the filing of all notices and motions related to the instant discovery dispute, as well as the attendance at and participation in all court proceedings necessitated by plaintiff's conduct.” Id. at 21.

         Plaintiff did not file an objection to the Court's Order.[2]On November 4, 2016, the Palladyne defendants and the SThree defendants each filed applications for attorneys' fees and costs. See Doc. #205, Doc. #206. On December 9, 2016, plaintiff filed a Memorandum in Opposition to defendants' fee applications, see Doc. #217, and on December 14, 2016, plaintiff filed an Amended Memorandum in Opposition.[3] Doc. #219. On December 23, 2016, the Palladyne defendants filed a reply to plaintiff's objection, see Doc. #223, and on December 30, 2016, the SThree defendants filed a reply. See Doc. #226.

         II. LEGAL STANDARD

         A. Rule 37 Sanctions

         “[S]anctions for discovery abuses are imposed pursuant to Rule 37.” Doe v. Mastoloni, 307 F.R.D. 305, 311 (D. Conn. 2015)

         (citation omitted). “The mildest sanction [available under Rule 37] is the reimbursement of expenses to the opposing party caused by the offending party's failure to cooperate, while the harshest sanction is the order of dismissal and default judgment.” Martinelli v. Bridgeport Roman Catholic Diocesan Corp., 179 F.R.D. 77, 80 (D. Conn. 1998) (citation omitted).

Disciplinary sanctions under Rule 37 are intended to serve three purposes. First, they ensure that a party will not benefit from its own failure to comply. Second, they are specific deterrents and seek to obtain compliance with the particular order issued. Third, they are intended to serve a general deterrent effect on the case at hand and on other litigation, provided that the party against whom they are imposed was in some sense at fault.

Update Art, Inc. v. Modiin Pub., Ltd., 843 F.2d 67, 71 (2d Cir.1988) (citations omitted).

         Pursuant to Rule 37(a), if a motion to compel “is granted -- or if the disclosure or requested discovery is provided after the motion was filed -- the court must, after giving an opportunity to be heard, require the party or deponent whose conduct necessitated the motion, the party or attorney advising that conduct, or both to pay the movant's reasonable expenses incurred in making the motion, including attorney's fees.” Fed.R.Civ.P. 37(a)(5)(A). However, the Court “must not order this payment if: (i) the movant filed the motion before attempting in good faith to obtain the disclosure or discovery without court action; (ii) the opposing party's nondisclosure, response, or objection was substantially justified; or (iii) other circumstances make an award of expenses unjust.” Id.; see also Mason Tenders Dist. Council of Greater N.Y. v. Phase Constr. Servs., Inc., 318 F.R.D. 28, 43 (S.D.N.Y. 2016) (“If a court grants a motion to compel, it must, after giving an opportunity to be heard, impose the moving party's reasonable expenses incurred in making the motion on the party who created the need for the motion, unless the nondisclosure was substantially justified or other circumstances make such an award unjust.” (quotation marks and citation omitted)).

         Rule 37(b) provides that if a party “fails to obey an order to provide or permit discovery, ” the “court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.” Fed.R.Civ.P. 37(b)(2)(A)-(C); see also Martinelli, 179 F.R.D. at 80 (noting that Rule 37 “provides a non-exclusive list of sanctions that may be imposed on a party for failing to obey an order to provide or permit discovery” (citation omitted)). “Provided that there is a clearly articulated order of the court requiring specified discovery, the district court has the authority to impose Rule 37(b) sanctions for noncompliance with that order.” Tucker v. Am. Int'l Grp., Inc., 936 F.Supp.2d 1, 26 (D. Conn. 2013) (quoting Daval Steel Prods., a Div. of Francosteel Corp. v. M/V Fakredine, 951 F.2d 1357, 1363 (2d Cir. 1991)). Rule 37(b) “requires that the sanctions must be just; and the sanction must relate to the particular claim to which the discovery order was addressed.” Id. at 1366 (citation omitted).

         “A district court has wide discretion to impose sanctions, including severe sanctions, under Federal Rule of Civil Procedure 37[.]” Design Strategy, Inc. v. Davis, 469 F.3d 284, 294 (2d Cir. 2006); see also Reilly v. Natwest Markets Grp. Inc., 181 F.3d 253, 267 (2d Cir. 1999) (“Whether exercising its inherent power, or acting pursuant to Rule 37, a district court has wide discretion in sanctioning a party for discovery abuses.”). “Monetary sanctions pursuant to Rule 37 for noncompliance with discovery orders usually are committed to the discretion of the magistrate [judge], reviewable by the district court under the clearly erroneous or contrary to law standard.” Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir. 1990) (quotation marks and citations omitted). “Rule 37 sanctions must be applied diligently both to penalize those whose conduct may be deemed to warrant such a sanction, and to deter those who might be tempted to such conduct in the absence of such a deterrent.” Roadway Exp., Inc. v. Piper, 447 U.S. 752, 763-64 (1980) (quotation marks and citation omitted); see also S. New England Tel. Co. v. Glob. NAPs Inc., 624 F.3d 123, 149 (2d Cir. 2010) (noting that sanctions may be justified even when “a party finally (albeit belatedly) complies with discovery orders after sanctions are imposed” (citation omitted)).

         B. Attorney's Fees

         An award of attorney's fees pursuant to Rule 37 is calculated “according to the lodestar formula, in which the number of hours spent by the attorneys is multiplied by the hourly rate normally charged for similar work by attorneys of like skill in the area.” Bowne of New York City, Inc. v. AmBase Corp., 161 F.R.D. 258, 266 (S.D.N.Y. 1995) (quotation marks and citations omitted); see also Congregation Rabbinical Coll. of Tartikov, Inc. v. Vill. of Pomona, 188 F.Supp.3d 333, 337 (S.D.N.Y. 2016) (determining that the lodestar is the presumptively reasonable fee in determining the amount of attorneys' fees and costs warranted in connection with a motion for sanctions); Rahman v. The Smith & Wollensky Rest. Grp., Inc., No. 06CV6198(LAK), 2008 WL 1899938, at *2 (S.D.N.Y. Apr. 29, 2008) (“As with the award of statutory attorneys' fees to a party that prevails on the merits, an award of fees as a sanction for discovery abuse begins with a lodestar analysis.” (citations omitted)).

         “The 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.” Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). The resulting amount “is only presumptively reasonable; it is still within the court's discretion to adjust the amount upward or downward based on the case-specific factors.” Tyco Healthcare Grp. LP v. Ethicon Endo-Surgery, Inc., No. 3:10CV60(JBA), 2012 WL 4092515, at *1 (D. Conn. Sept. 17, 2012) (quotation marks and citation omitted). “Hence, the process is really a four-step one, as the court must: (1) determine the reasonable hourly rate; (2) determine the number of hours reasonably expended; (3) multiply the two to calculate the presumptively reasonable fee; and (4) make any appropriate adjustments to arrive at the final fee award.” Adorno v. Port Auth. of New York & New Jersey, 685 F.Supp.2d 507, 511 (S.D.N.Y. 2010).

         “The presumptively reasonable fee boils down to what a reasonable, paying client would be willing to pay, given that such a party wishes to spend the minimum necessary to litigate the case effectively.” Simmons v. N.Y. City Transit Auth., 575 F.3d 170, 174 (2d Cir. 2009) (quotation marks and citation omitted). Factors that the Court may consider in determining a reasonable fee are:

(1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the level of skill required to perform the legal service properly; (4) the preclusion of employment by the attorney due to acceptance of the case; (5) the attorney's customary hourly rate; (6) whether the fee is fixed or contingent; (7) the time limitations imposed by the client or the circumstances; (8) the amount involved in the case 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.

Beastie Boys v. Monster Energy Co., 112 F.Supp. 3D 31, 48 (S.D.N.Y. 2015) (citations omitted).

         “The district court retains discretion to determine what constitutes a reasonable fee.” Millea v. Metro-N. R.R. Co., 658 F.3d 154, 166 (2d Cir. 2011) (quotation marks and citation omitted). “However, this discretion is not unfettered, ” and “the district court must abide by the procedural requirements for calculating those fees articulated by [the Second Circuit] and the Supreme Court.” Id. “Attorney's fees must be reasonable in terms of the circumstances of the particular case[.]” Alderman v. Pan Am World Airways, 169 F.3d 99, 102 (2d Cir. 1999) (citation omitted). In determining a reasonable fee, the Court is mindful that “attorney's fees are to be awarded with an eye to moderation, seeking to avoid either the reality or the appearance of awarding windfall fees.” Tsombanidis v. City of W. Haven, 208 F.Supp.2d 263, 270 (D. Conn. 2002) (quotation marks and citation omitted), aff'd sub nom. Tsombanidis v. W. Haven Fire Dep't, 352 F.3d 565 (2d Cir. 2003); see also New York State Assoc. for Retarded Children v. Carey, 711 F.2d 1136, 1139 (2d Cir. 1983).

         III. DISCUSSION

         The Court will address the reasonableness of the hours and rates sought in each defendants' pending fee applications, but turns first to plaintiff's opposition to the fee applications.

         In his response to the defendants' applications, plaintiff primarily challenges the Court's original order, contending that the sanctions imposed were unwarranted and that plaintiff was not afforded due process. See Doc. #219 at 2-3. Plaintiff also argues that the fees claimed by the defendants are excessive and cannot fairly be imposed on plaintiff. See Id. The Court has already determined that an award of attorneys' fees is proper in this instance, and no timely objection or motion to reconsider was filed. Accordingly, the Court will not revisit that issue. However, the Court will briefly address plaintiff's due process argument.

         “Before imposing sanctions, the court must afford the person it proposes to sanction due process, i.e., notice and opportunity to be heard.” Mickle v. Morin, 297 F.3d 114, 126 (2d Cir. 2002) (quotation marks and citation omitted). “At a minimum, this means that the delinquent party be provided with notice of the possibility that sanctions will be imposed and with an opportunity to present evidence or arguments against their imposition.” Yong Kui Chen v. Wai Yin Chan, 615 F. App'x 10, 12 (2d Cir. 2015) (quotation marks and citations omitted). However, “[a]s a general rule, a court is not obliged to give a formal warning that sanctions might be imposed for violation of the court's orders.” Fonar Corp. v. Magnetic Resonance Plus, Inc., 128 F.3d 99, 102 (2d Cir. 1997) (citation omitted); see also Daval Steel Prod., 951 F.2d at 1366 (“Parties and counsel have no absolute entitlement to be ‘warned' that they disobey court orders at their peril.”). “[I]n the Rule 37 context, [the Second Circuit has] declined to impose rigid requirements on either the timing or the form of the notice afforded to a sanctioned party.” Reilly v. Natwest Markets Grp. Inc., 181 F.3d 253, 270 (2d Cir. 1999) (citation omitted).

         Here, plaintiff was provided: An opportunity to respond to defendants' notices of deficiencies; an opportunity to be heard at the Court's October 7, 2016, hearing during which the Court specifically noted that it assumes “that there will be a motion for sanctions coming, ” Doc. #200 at 69, and that the cost of continuing to conduct searches until there has been satisfaction “will not be borne by defendant[s], ” Id. at 34; notice of the Court's October 7, 2016, Order in which the Court stated: “Failure to comply fully with the Court's Orders and deadlines may result in the imposition of sanctions, including financial sanctions, preclusion of evidence or claims, or dismissal or default, ” Doc. #182 at 14; an opportunity to object to the Court's October 7, 2016, Order; an opportunity to be heard both at the October 13, 2016, and the October 21, 2016, conferences; notice of the Court's October 24, 2016, Order stating that “[m]onetary sanctions will be imposed at this time. ... Failure to comply in the future will result in additional sanctions, ” Doc. #200 at 13-14, and that the Court “finds that defendants are entitled to costs and fees as a sanction for plaintiff's conduct, ” and inviting counsel for defendants to file an affidavit of fees and costs with the Court, Doc. #200 at 21; an opportunity to object to the Court's October 24, 2016, Order; an opportunity to object to the reasonableness of defendants' fee applications; an opportunity to object to defendants' Rule 37 motions for additional sanctions; notice of the Court's May 17, 2017, Order to Show Cause; and an opportunity to respond to said Order. In light of the abundant notice that sanctions could be imposed, and the ample opportunity to be heard, the Court finds that plaintiff's due process rights have been protected.

         Turning to the amount of the award, the Court will address the defendants' applications in turn.

         A. The SThree Defendants' Second Application for Attorneys' Fees [Doc. #206]

         The SThree defendants have submitted an application seeking an award of $52, 272.00 in attorneys' fees and $1, 283.52 in costs, reflecting 157.5 hours of work performed by four attorneys, a law clerk, a litigation support specialist and a paralegal on the instant discovery dispute. After ...


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