Antitrust Law Daily Wrap Up, ADVERTISING—D. Nev.: Prevailing party’s request for attorney fees under Lanham Act partially reduced, (May 8, 2015)

By Michael Menzhuber, J.D., LL.M.

A barter and exchange company’s motion for attorney fees and costs, after being awarded attorney fees in a prior proceeding in which it alleged Lanham Act violations by a real estate development company, was granted in part and denied in part by the federal district court in Reno, Nevada. (Itex Corporation v. Global Links Corp., May 7, 2015, Jones, R.).

Background. Itex Corporation, a trade barter company, prevailed in an action, alleging that Global Links Corp, a real estate development company, and Global’s exchange company, BXI Trade Exchange, Inc., violated the Lanham Act by making false and misleading statements regarding BXI-TE’s origin and history. The court determined that the case was “exceptional” under the Lanham Act and ruled that Itex was entitled to an award of reasonable attorneys’ fees on its second and third causes of action.

Itex filed a motion requesting $90,284 in attorney fees and $1,669 in taxable and non-taxable costs. The defendants argued that, given the state of the proceedings and complexity of the claims at issue, the amount of fees was unreasonable and sought a reduction of the award.

Reasonableness of Award. A two-step process is applied when calculating whether a fee is reasonable. The first step is the calculation of the “lodestar figure.” This is done by multiplying the number of hours reasonably expended on the litigation by a reasonable hourly rate.

In applying this lodestar figure calculation, the court noted that the defendants did not object to the rates billed by the counsel for Itex. The court agreed that the rates were reasonable based on their expertise, the litigation subject-matter, and the facts of the case.

The court then considered whether the number of hours that had been expended on the litigation was unreasonable. The court disagreed with the defendants’ arguments that: (1) the number of hours billed was unreasonable because the fees requested represented only two of Itex’s six causes of action; and (2) the attorneys’ records were ambiguous on the amount of time spent only on Itex’s false advertising claims, as opposed to Itex’s trademark claims.

The court did, however, find that the hours billed by the partners at the law firm were duplicative. The defendants pointed to specific time entries as proof of unnecessary work. The court agreed that these entries were redundant and should be excluded. In addition, the court excluded the remaining entries of one of the partners after it determined that those entries lacked sufficient detail to determine whether the time spent was reasonably expended.

The court partially agreed with the defendants that the amount of time Itex’s counsel claimed to have spent on the motion for partial summary judgment was excessive. The court determined the substantial number of hours billed by one of the partners was excessive because another partner was also billing towards that same motion.

With respect to the number of hours spent on preparing the instant motion, the court was in complete agreement with the defendants that it was excessive. The court determined the amount of hours was excessive after considering the motion was only ten pages long and did not include any novel or complicated arguments.

Based on its findings, the court reduced the amount of time spent by Itex’s counsel by 69.1 hours. Accordingly, the lodestar calculation for fees attributable to Itex’s second and third causes was $64,560, a reduction of $25,724 from Itex’s fee request.

The second step in determining whether fees are reasonable requires an evaluation of the “Kerr factors” that are not already subsumed in the initial lodestar calculation: (1) the time and labor required; (2) the novelty and difficulty of the questions involved; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is contingent; (7) the time limitations imposed by the client or the circumstances; (8) the amount involved 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. Kerr v. Screen Extras Guild, Inc., 526 F.2d 67 (1975).

After the court found that the majority of Kerr factors were “already subsumed” in the lodestar calculation, it considered the defendants’ arguments that a fee reduction was warranted. The court began by rejecting the defendants’ argument that the amount sought by Itex was disproportional to the amount of its stake in the litigation. It did so because 15 U.S.C. § 1117(a), which provides for fee recovery, does not impose any requirement of proportionality between a fee request and damages proven.

The court also rejected the defendants’ claim that the amount should be reduced because BXI-TE did not have the financial resources to pay the fee award sought by Itex. It noted that it was the defendants’ own willful and deliberate actions that served as the basis for its “exceptional” finding and award of attorney fees. Also, while BXI-TE might have limited financial resources, Global was just a responsible for payment of the award. The court further noted that, even if Global represented a lack of financial ability to pay the award, it still would have rejected the defendants’ claim.

The court did, however, agree to partially reduce the fee award considering the defendants’ perceived uncertainty regarding its legal position as it related to the ownership and right to the use the BXI trademark. The court acknowledged that the defendants successfully registered a BXI mark and, although they acted deliberately and willfully when making various statements at issue in the case, it could not say that their efforts to defend the lawsuit were completely unreasonable. Consequently, the court reduced the fee award by an additional $10,000.

Finally, the court considered whether Itex could recover its taxable and non-taxable costs. It determined, and the defendants did not argue otherwise, that the costs incurred appeared to be reasonable and it held that Itex was entitled to recovery.

The case is No. 2:14-cv-00057-RCJ-NJK

Attorneys: Brian Chung Park (Stoel Rives LLP), and Josephine Binetti McPeak (McDonald Carano Wilson) for ITEX Corp. David R. Koch (Koch & Scow LLC) for Global Links Corp., and BXI Trade Exchange, Inc.

Companies: ITEX Corp.; Global Links Corp.; BXI Trade Exchange, Inc.

Cases: Advertising NevadaNews