Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—DNJ: Counsel for FTC Suit Defendant Awarded Fees, but Amount Reduced upon Lodestar Review, (Dec 18, 2012)

By E. Darius Sturmer, J.D.

The federal district court in Camden, New Jersey, awarded an additional $129,095 in attorney fees to a law firm—Venable LLP—representing the corporate and individual defendants in an FTC enforcement action challenging the operators of a website alleged to deceptively market acai berry weight loss products and other opportunities (FTC v. Circa Direct LLC, December 17, 2012, Bumb, R.).

Venable had requested the release from a frozen assets fund of just over $250,000, but the court’s lodestar review of the request found that the rates claimed by the attorneys involved in the case were unreasonable. Therefore, it reduced the rates to figures in line with the rates charged by other identified attorneys in the relevant market area with equivalent experience. The court also authorized the release of $6,139 to compensate Venable for litigation expenses, a figure presented without any objection from the FTC.

Venable sought additional fees after exhausting its initial $150,000 retainer, but the assets of the defendants—Circa Direct LLC and Andrew Davidson—had been frozen by the court under the terms of a 2011 preliminary injunction and a consent decree approved in October 2012.

The evidence submitted by Venable in support of its motion included a chart listing the involved professionals and their hours worked on the case, along with proposed billing rates. The chart was backed by a declaration from one of the principal counsel describing the nature of the firm’s work on the case and also acknowledging the proposed billing rates to be above market, but claiming them to be reductions of those attorneys’ usual rates. The firm additionally offered, in support of the chart, two National Law Journal billing surveys and two personal declarations.

The FTC contended that the requested fees were unjustified, especially in light of fees charged by counsel in other, similar cases, and it proposed a different set of rates that were “reasonable for the work performed and the experiences of the professionals who performed it.”

The court found at the outset that a lodestar-type analysis—a simple calculation of “the number of hours reasonably expended on a litigation multiplied by a reasonable hourly rate”—was appropriate, despite the matter not being a statutory fee-shifting case. Rejected were arguments by the FTC that the court should act within its discretion to preserve the funds for later consumer redress, that equitable considerations precluded release of the purportedly ill-gotten gains, and that the firm had assumed the risk of non-payment when agreeing to represent a client whose funds would likely become frozen.

Identifying the relevant market community to be the southern New Jersey legal market, the court found that the defendants failed to establish that their rates were reasonable for the market. Whereas they submitted no affidavits from attorneys who had practiced in the market, only a survey with a single firm’s self-reported and unsworn figures, the FTC had submitted declarations of attorneys working in that market and prior courts’ consideration of fee applications in other cases in the vicinage.

Based on this evidence, the court shaved the requested rates of the attorneys on the case from $600/hour for partners/of-counsel and $300 for associates to a broader scale that ranged from $400/hour for the most senior attorneys working on the matter to $150 for the most junior, as well as rates from $75 to $100 for support staff. The rates it settled upon were “well within those that have been previously approved,” the court noted.

Further, the court slightly trimmed the number of hours claimed by the defendants’ counsel. Although finding—over the FTC’s objections—that Venable appropriately delegated and distributed work and avoided excessive or duplicative staffing, the court deducted several hours that were claimed on bills but not properly documented. On the whole, however, “Venable’s time spent was reasonable.”

The case is Civil No. 11-2172 RMB/AMD.

Laura M. Sullivan for the FTC. Edwin M. Larkin (Venable LLP) for Circa Direct LLC.

Cases: ConsumerProtection FederalTradeCommissionNews NewJerseyNews