Ohio-Sealy Mattress Mfg. Co. v. Sealy Inc.

• Decision Date: 21 October 1985
• Docket Number: Nos. 84-2886,84-2926,OHIO-SEALY,s. 84-2886
• Citation: 776 F.2d 646
• Parties: , 1985-2 Trade Cases 66,832 MATTRESS MANUFACTURING COMPANY, Sealy Mattress Company of Houston, Sealy Mattress Company of Puerto Rico, Inc., Sealy of the Northeast, Inc., and Sealy Mattress Company of Georgia, Inc., Plaintiffs-Appellees, Cross- Appellants, v. SEALY INCORPORATED, Sealy Spring Corporation-Indiana, Sealy Spring Corporation-East, Sealy Spring Corporation-West, Sealy Mattress of Colorado, Inc., Sealy Mattress Company of Northern California, Inc., Sealy Mattress Company of Southern California, Inc., Schnoor Manufacturing Company, Inc., Sealy Mattress Company of Florida, Inc., Sealy Mattress Company of Pittsburgh, Inc., and Sealy Mattress Company of Philadelphia, Inc., Defendants-Appellants, Cross-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 646

776 F.2d 646

54 USLW 2254, 1985-2 Trade Cases 66,832

OHIO-SEALY MATTRESS MANUFACTURING COMPANY, Sealy Mattress Company of Houston, Sealy Mattress Company of Puerto Rico Inc., Sealy of the Northeast, Inc., and Sealy Mattress Company of Georgia, Inc., Plaintiffs-Appellees, Cross- Appellants, v. SEALY INCORPORATED, Sealy Spring Corporation-Indiana, Sealy Spring Corporation-East, Sealy Spring Corporation-West Sealy Mattress of Colorado, Inc., Sealy Mattress Company of Northern California, Inc., Sealy Mattress Company of Southern California, Inc., Schnoor Manufacturing Company Inc., Sealy Mattress Company of Florida, Inc., Sealy Mattress Company of Pittsburgh, Inc., and Sealy Mattress Company of Philadelphia, Inc., Defendants-Appellants, Cross-Appellees.

Nos. 84-2886, 84-2926.

United States Court of Appeals Seventh Circuit.

Argued June 6, 1985.

Decided Oct. 21, 1985.

Frederic F. Brace, Jr., Brace & O'Donnell, Chicago, Ill., for defendants-appellants, cross-appellees.

Phil C. Neal, Friedman & Koven, Chicago, Ill., for plaintiffs-appellees, cross-appellants.

Before CUMMINGS, Chief Judge, WOOD, Circuit Judge, and WRIGHT, Senior Circuit Judge. ^*

HARLINGTON WOOD, Jr., Circuit Judge.

This is an appeal from an award of attorneys' fees in a seemingly unending private antitrust action that has come to be referred to as "Ohio I." See Ohio-Sealy Mattress Manufacturing Co. v. Kaplan, 745 F.2d 441, 443-46 (7th Cir.1984) (Ohio II case giving description of Ohio I litigation), (U.S. appeal pending); Ohio-Sealy Mattress Manufacturing Co. v. Duncan, 714 F.2d 740 (7th Cir.1983) (Ohio III), cert. denied, 464 U.S. 1044, 104 S.Ct. 712, 79 L.Ed.2dF176 (1984); Ohio-Sealy Mattress Manufacturing Co. v. Kaplan, 712 F.2d 270 (7th Cir.), cert. denied, 464 U.S. 1002, 104 S.Ct. 509, 78 L.Ed.2d 698 (1983); Ohio-Sealy Mattress Manufacturing Co. v. Sealy, Inc., 669 F.2d 490 (7th Cir.), cert. denied, 459 U.S. 943, 103 S.Ct. 257, 74 L.Ed.2d 201 (1982); Ohio-Sealy Mattress Manufacturing Co. v. Sealy, Inc., 585 F.2d 821 (7th Cir.1978), cert. denied, 440 U.S. 930, 99 S.Ct. 1267, 59 L.Ed.2d 486 (1979). The district court determined that the plaintiff ("Ohio-Sealy") paid its attorneys approximately $1,295,924 for hours reasonably spent on issues on which the plaintiff prevailed. The district court then multiplied this figure by two to compensate plaintiff for the time-value of money and for inflation. Finally, the court rounded off the fee award to $2.6 million in order to be fair to the plaintiff in light of all the uncertainties of the fee calculation. The defendant ("Sealy") appeals, arguing that a multiplier is inappropriate when the plaintiff compensated its attorneys on an hourly basis rather than on a contingency basis. The plaintiff cross-appeals, claiming that the district court underestimated the value of its attorneys' services. We affirm in part, reverse in part, and remand. ¹

I.

Section 4 of the Clayton Act provides that a person injured by an antitrust violation "shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee." 15 U.S.C. Sec. 15 (1982). A plaintiff who substantially prevails in an action for injunctive relief under the antitrust laws also recovers "the cost of suit, including a reasonable attorney's fee." 15 U.S.C. Sec. 26 (1982). Although the successful antitrust plaintiff recovers attorneys' fees as a matter of right, the plaintiff bears the burden of establishing the amount of compensable attorney time. See Spray-Rite Service Corp. v. Monsanto Co., 684 F.2d 1226, 1249 (7th Cir.1982), aff'd, 465 U.S. 752,.104 S.Ct. 1464, 79 L.Ed.2d 775 (1984); see also Hensley v. Eckerhart,F4611U.S. 424, 437, 103 S.Ct. 1933, 1941, 76 L.Ed.2d 40 (1983). The determination of what constitutes reasonable attorneys' fees lies in the sound discretion of the district court, and we will disturb the district court award only for an abuse of that discretion. See Illinois v. Sangamo Construction Co., 657 F.2d 855, 862 (7th Cir.1981).

In this case, the plaintiff suggested an attorneys' fees award of more than $17 million. It based this request on evidence that its lawyers, law clerks, and paralegals worked a total of 41,072.30 hours. Ohio-Sealy asked that the court base the award of the attorneys' then-current (1983) hourly rates, yielding a fee request of $4,331,997.00, and that the court also apply a multiplier of 4 to compensate plaintiff for accepting "the risk of not prevailing, and therefore the risk of not recovering any attorney's fees." The defendant, needless to say, thought $17 million was a bit too much.

The district court first analyzed the hours claimed by plaintiff for the damages portion of this litigation and disallowed, among other things, hours devoted to an arbitration that Ohio-Sealy requested and lost, hours spent on two unsuccessful claims, and hours the court deemed attributable to excessive advocacy. The district court then examined the hours spent on Ohio-Sealy's claims for equitable relief. Ohio-Sealy had obtained a decree enjoining Sealy from enforcing a number of provisions in the license agreement and from taking other specified acts. The decree did not, however, enjoin Sealy from enforcing the exclusive manufacturing provision of the agreement, and it did not order Sealy to divest the Florida, Philadelphia, and Pittsburgh licenses. The district court concluded that Ohio-Sealy had prevailed on only seventy-five percent of the issues relevant to equitable relief and therefore disallowed twenty-five percent of the hours claimed in connection with the first equitable relief proceeding, the appeal, and the second proceeding.

To determine a reasonable attorneys' fees award, the district court started with the total dollar amount claimed at historical hourly rates. The court then obtained a weighted average historical hourly rate by dividing the total dollar amount claimed (based on historical rather than current hourly rates) by the total number of hours claimed. ² This procedure resulted in weighted average historical hourly rates of $52 per hour for attorneys and $20 per hour for paralegals. The court multiplied these average rates by the number of hours allowed, producing a base figure of $1,524,616. The court reduced this figure by fifteen percent "[d]ue to the overall vagueness of the plaintiff's petitions, the inconsistencies between the petitions submitted, the inadequate identification of hours claimed on the computer printouts, and the overall lack of detailed analysis." These calculations produced an award of $1,295,924. Finally, in order to compensate plaintiff for the time-value of money and to account for inflation, the court applied a multiplier of two. With rounding off, this procedure resulted in the award of $2.6 million.

II.

Although the district court never used the term "lodestar," the court's analysis paralleled the Third Circuit's "lodestar" approach to determining reasonable attorneys' fees. See Lindy Bros. Builders, Inc. of Philadelphia v. American Radiator & Standard Sanitary Corp., 540 F.2d 102, 109-18 (3d Cir.1976) (en banc) ("Lindy II "); Lindy Bros. Builders, Inc. of Philadelphia v. American Radiator & Standard Sanitary Corp., 487 F.2d 161, 167-69 (3d Cir.1973) ("Lindy I "). The "lodestar" approach involves two steps. First, the district court calculates a lodestar amount. To do this, the court determines the number of hours reasonably expended in the litigation. Of course the number of hours actually worked rarely equals the number of hours reasonably expended, so the court must disallow hours devoted to unrelated, unsuccessful claims and hours which the attorneys would not bill to their clients. See Copeland v. Marshall, 641 F.2d 880, 891-92 (D.C.Cir.1980) (en banc). Also excluded are hours for which the plaintiff provides inadequate documentation. See Hensley, 461 U.S. at 433, 103 S.Ct. at 1939. Multiplying the number of hours reasonably expended by the appropriate hourly rate or rates produces the lodestar amount--an initial, objective measure of the value of the attorneys' time. ³ In the present case, the district court calculated a lodestar of $1,295,924.

In the second step, the district court considers whether any special circumstances of the case justify adjusting the lodestar up or down. See Sangamo Construction Co., 657 F.2d at 862; see also Lynch v. City of Milwaukee, 747 F.2d 423, 426 (7th Cir.1984) (outlining twelve considerations and citing Hensley, 461 U.S. at 430 n. 3, 103 S.Ct. at 1937 n. 3 and Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.1974)). For example, the court may consider whether the contingent nature of success or the quality of representation merit an upward adjustment. See Copeland, 41 F.2d at 892-94; Lindy II, 540 F.2d.at 117-18. Of course the court should not make any adjustment if the lodestar already reflects these factors. See Lindy II, 540 F.2d at 117-18; see also Blum v. Stenson, 465 U.S. 886, 104 S.Ct. 1541, 1548-49, 79 L.Ed.2d 891 (1984) (no upward adjustment for novelty and complexity of issues since large number of hours claimed reflected that difficulty). In the present case, the district court adjusted the lodestar upward by a multiplier of two in order to compensate the plaintiff for inflation and for the time-value of money.

We begin with the issues related to calculating the lodestar, leaving the alleged errors in adjustments to the lodestar to Part III. Sealy did not appeal the lodestar calculation, but Ohio-Sealy raised a number of issues on its cross-appeal. Ohio-Sealy asserts that the district court abused its discretion (1) by disallowing twenty-five percent of the hours spent on equitable relief issues, (2) by using across-the-board hourly rates of $52 per hour for attorneys and $20 per hour for paralegals, (3) by relying on a Sealy exhibit that underestimated the number of hours claimed and rates charged, (4) by failing to compensate ...