Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—NDCal: Attorney Fees, Costs of $243,206 Awarded Under PMPA to Gasoline Dealer that Prevailed Over Chevron, (Mar 7, 2013)

By Peter Reap, J.D., LLM

A gasoline station franchisee, Transbay Auto Service, Inc., that prevailed in litigation with its franchisor Chevron U.S.A., Inc., over whether the franchisor provided the dealer a “bona fide” offer to buy the service station property in question from Chevron under the meaning of the Petroleum Marketing Practices Act (PMPA) was entitled to an award of attorney fees, expert fees, and costs in the amount of $243,206, the federal district court in San Francisco has decided (Transbay Auto Service, Inc. v. Chevron U.S.A., Inc., March 6, 2013, Illston, S.).

In addition, Transbay’s requests for an award of exemplary damages under the PMPA and for an increase in the pre-judgment interest rate, were denied.

Background. In October 2009, Transbay sued Chevron, alleging a violation of the PMPA. The complaint alleged that Chevron failed to provide Transbay a “bona fide” offer to sell the service station in question at a price that approached fair market value.

At the conclusion of trial, the jury determined that Chevron had not made a bona fide offer to sell the service station property, thus violating the PMPA, and awarded Transbay $495,000. Transbay now brings this motion, seeking (1) an award of reasonable attorneys’ fees, expert fees, and costs; (2) an award of exemplary damages based on Chevron’s wilful disregard of the requirements of the PMPA; and (3) a determination of an increased pre-judgment interest rate based on substantial equities.

Attorney Fees. Section 2805(d) of the PMPA provides that a prevailing franchisee shall be entitled to “reasonable attorney and expert witness fees to be paid by the franchisor.” Here, there was no dispute that Transbay is the prevailing franchisee as envisioned by the PMPA, the court observed.

A district court begins its calculation of fees by multiplying the number of hours reasonably spent on the litigation by a reasonable hourly rate. The resulting number is frequently called the “lodestar” amount.

In determining the appropriate number of hours to be included in a lodestar calculation, the district court should exclude hours that are excessive, redundant, or otherwise unnecessary. Further, the party seeking the award should provide documentary evidence to the court concerning the number of hours spent, and how it determined the hourly rate(s) requested, the court noted.

In establishing the reasonable hourly rate, the court may take into account: (1) the novelty and complexity of the issues; (2) the special skill and experience of counsel; (3) the quality of representation; and (4) the results obtained. Other factors that can be considered are (1) the time and labor required; (2) the preclusion of employment by the attorney due to acceptance of the case; (3) time limitations imposed by the client or circumstances; (4) the amount involved and the results obtained; (5) the “undesirability” of the case; and (6) awards in similar cases.

Transbay’s documentation showed that eight Bleau Fox timekeepers worked on this matter at the following rates: (1) Martin Fox, $350 per hour, (2) Thomas Bleau, $350 per hour, (3) Samuel T. Rees, $350 per hour, (4) Gennady L. Lebedev, $350 per hour, (5) Melissa Rhee, $350 per hour, (6) Megan Childress $250 per hour, (7) Jacquelynn Remery, $75 per hour (8) Robert Arias, $75 per hour. Bleau Fox’s practice at the time this case began was to bill senior attorneys at $350 per hour and junior attorneys at $250 per hour. Ms. Remery was a paid law clerk who worked for Bleau Fox while attending law school. Mr. Arias was a paralegal at Bleau Fox.

Chevron objected to these hourly rates on the basis that Transbay failed to sufficiently detail the qualifications of several timekeepers, or provide evidence or affidavits suggesting that the requested rates are in line with those qualifications. However, Transbay demonstrated that the attorney and paralegal rates charged in this case were reasonable, the court ruled. Each of the attorneys had considerable experience litigating similar types of cases to the one here, and Transbay provided satisfactory evidence to show that the rates charged were in line with, if not lower than, the overall market rate for attorneys with litigation experience in this area. Similarly, the paralegal rate was reasonable.

Chevron contended that the total fee award should be reduced by $7,905, amounting to 28.38 hours of work, because several of Transbay’s time entries consisted of non-descriptive shorthand abbreviations or were otherwise incomprehensible and provide no basis for determining that the time was reasonably spent.

However, after reviewing Transbay’s billing statements, (1) Transbay has sufficiently linked the attorney abbreviations with the individual attorneys to have worked on the matter, and (2) Transbay has insufficiently described one time entry to justify reimbursement for that time spent, the court determined.

One time entry was too vague and too brief to permit the court to assess the reasonableness of the hours claimed. Among the fifteen time entries that Chevron contended were too imprecise, the entry merely listing “Research,” without providing a description of the substance of the work done, the issues that were researched, was insufficient. Unlike the other fourteen questioned entries, this entry provided no context for the court to determine whether that which was researched was reasonable. Accordingly, the court exercised its discretion to reduce the amount of fees owed by $82.50.

Chevron also argued that it should not be responsible for $5,057.50 in fees related to Transbay’s pre-litigation activities that arose more than a year before Transbay filed its original complaint in October 2009.

However, The Ninth Circuit, in the context of an action under the Employee Retirement Income Security Act, wherein the statute allows the court in its discretion to “award reasonable attorneys’ fees and costs of action to either party,” has noted that fees for work done on the lawsuit prior to the filing of the lawsuit are recoverable. Between the time Transbay accepted the offer and the time it filed this lawsuit, it was reasonable for Transbay to consult with counsel to investigate the facts and the law prior to initiating any action against Chevron, the court held. After reviewing the time entries dated prior to the commencement of the lawsuit in 2009, there was nothing to suggest that Transbay billed for anything other than that which was a necessary pre-cursor to the filing of a lawsuit.

Chevron also argued that Transbay’s billing statements contain seven entries that amounted to “obvious over billing,” The first three time entries, August 26, 2010, September 14, 2010, and May 11, 2011, actually constituted block billing, which was permissible, according to the court. These entries blocked bill travel time with the time spent performing the substantive task such as preparing and taking a deposition, or attending the pretrial conference. Similarly, three other disputed entries were permissible.

The court, however, agreed with Chevron that the September 13, 2010 time entry, in which Megan Childress billed $650 for 2.50 hours to “prep for PMK depos,” constituted over-billing. The record indicated that the only “PMK” depo occurred on August 26, 2010. It was unreasonable to bill to “prep” for a deposition after the deposition had already taken place. Accordingly, the court reduced the total amount of attorneys’ fees owed by $650.

Chevron contended that the travel time Transbay billed was unreasonably excessive. It conceded that Transbay was free to select the counsel of its choice, but argued that Transbay’s decision to employ non-local counsel did not automatically mean that Chevron should be accountable for the hours Transbay’s attorneys spent commuting to litigate the matter.

The court rejected Chevron’s objection and declined to reduce the fees related to travel time for two reasons. First, it is not clear that the 65.65 hours Chevron complained of were entirely travel hours. Second, the 65.65 hours complained of constituted less than ten percent of the total number of hours, 804.59, that Transbay billed to litigate this case. This ratio of travel time to litigation time was reasonable.

Transbay sought a multiplier of 2 on the lodestar, arguing that it is warranted because of “Chevron’s scorched earth litigation strategy, the contingent nature of the representation, the difficulty and complexity of the matters at issue and the results obtained.” Although the court recognized the PMPA was a specialize area of the law, and that Transbay’s counsel achieved a favorable jury award close to the full difference between the appraisal presented by Transbay and the one presented by Chevron, this did not amount to a “rare” or “extraordinary” case. Accordingly, the court would not award a multiplier.

Transbay’s supplemental fees brief included an additional 86.69 hours for post trial motions not included in Transbay’s original fees request. In light of the substantial briefing that occurred after the jury entered its verdict in this case, Transbay’s time spent litigating the fee application and Chevron’s post trial motions was reasonable.

Costs. Transbay sought $37,683.11 in expert fees, overhead costs, and the court mandated Bill of Costs. These costs incurred by Transbay were recoverable because they were reasonable out of pocket expenses that would normally be charged to a fee paying client, the court held.

Exemplary Damages. Transbay sought an award of exemplary damages against Chevron based upon Chevron’s willful disregard of the PMPA’s requirement that Chevron, as a franchisor seeking to sell a service station property, provide Transbay, as the franchisee, with a “bona fide” offer. The PMPA provided that a prevailing franchisee is entitled to an award of exemplary damages, “where appropriate,” if the franchisor acted in “willful disregard of the requirements” of the statute.

Neither the PMPA nor its legislative history defined the standard to be applied in determining whether a franchisor acted in “wilful disregard” of the statutory requirements, but in common usage, the word “wilful” is considered synonymous with such words as “voluntary,” “deliberate,” and “intentional,” the court noted. The phrase “willful disregard” has been interpreted to mean that a franchisor either knew its conduct was prohibited by the PMPA or if the franchisor acted with plain indifference to its prohibitions.

Transbay failed to demonstrate that Chevron acted in wilful disregard of the requirement that it provide a bona fide offer to sell the service station property, the court reasoned. The case turned squarely on a factual dispute—the effect on the market value of a San Francisco ordinance precluding the closing and redevelopment of the service station without government approval. Both Transbay and Chevron obtained expert appraisals that valued the property at different prices in light of their respective determinations regarding the effect of the ordinance. There was no evidence that these reports were obtained or prepared in bad faith.

Pre-judgment Interest. Transbay requests that the Court increase the pre-judgment interest rate from 0.19% annum, the statutory 52-week U.S. treasury bills rate, to 8% per annum to account for the period between when the sale of the service station closed until the date of judgment.

The Ninth Circuit has made clear that prejudgment interest is an element of compensation and is not a penalty. In light of the Ninth Circuit’s strong policy in favor of the Treasury bill rate, any departure from it must be accompanied by reasoned and substantial justification, the court observed.

Transbay failed to demonstrate substantial equities sufficient to overcome the strong presumption against departing from the Treasury bill rate, the court decided. Transbay conceded that it made the same arguments to the jury in seeking higher damages that it now made for increased pre-judgment interest. In awarding Transbay damages, the jury took into account these very same arguments. While it was the Court, not the jury, that sets the pre-judgment interest rate, the court would not exercise its discretion to increase the prejudgment interest rate where the jury weighed the very same issues in setting damages.

The case is No. C 09-04932 SI.

Attorneys: Samuel Tasker Rees (Bleau Fox) for Transbay Auto Service, Inc. Adam Friedenberg (Glynn & Finley, LLP) for Chevron U.S.A. Inc.

Companies: Transbay Auto Service, Inc.; Chevron U.S.A. Inc.

Cases: FranchisingDistribution CaliforniaNews