Bunnett & Co. v. Dores, A-15-CV-1104 -LY-AWA
| Decision Date | 07 September 2018 |
| Docket Number | A-15-CV-1104 -LY-AWA |
| Parties | BUNNETT & CO., INC., et al. v. FRANK DORES |
| Court | U.S. District Court — Western District of Texas |
Before the Court are Plaintiffs' Motion for Attorney's Fees and Expenses (Dkt. No. 222); Ray Gearheart's Response (Dkt. No. 246); Todd Gearheart's Response (Dkt. No. 247); and Plaintiffs' Reply (Dkt. No. 249) The District Court referred the above-motion to the undersigned Magistrate Judge for report and recommendation pursuant to 28 U.S.C. §636(b)(1)(A), FED. R. CIV. P. 72, and Rule 1(c) of Appendix C of the Local Rules. The Court held a hearing on the motion on August 13, 2018.
Plaintiffs Bunnett & Co., Inc. and Energy Feeds International, LLC (collectively Bunnett) originally filed this suit in state court against Frank Dores, alleging claims for breach of fiduciary duty and theft of trade secrets. Bunnett's dispute with Dores was only a small part of a larger story, involving Bunnett's relationship with two of its primary suppliers, Wawasan Agrolipids and Natural Soda. Though these related disputes are (or were) in litigation in other courts, their background is necessary to understand issues raised by Bunnett's fee request. Dores began working for Bunnett in 2008, eventually becoming the chief operating officer of both Bunnett entities. He abruptly resigned in October 2015, claiming he was experiencing severe emotional distress that made it impossible to continue performing his duties. In fact, Dores was in the process of incorporating a new entity that he planned to use to compete against Bunnett. Additionally, Dores allegedly was in discussions with both Natural Soda and Wawasan to cement future relationships with both entities, in lieu of those companies' relationships with Bunnett. At this same time, Wawasan and Bunnett had a dispute that led to Wawasan ceasing being Bunnett's primary supplier and terminating its distribution relationship with Bunnett, which led to Bunnett being unable to fill customer orders. Also contemporaneously with these events a new Wawasan distributor—Agrofin—appeared on the market, offering to distribute Wawasan products to United States purchasers, the very business Bunnett had been engaged in. Ray Gearheart, a former Bunnett sales representative who terminated his relationship with Bunnett within days of Dores claiming he was disabled, became an independent sales agent for Agrofin, and emails show that Dores was also introducing potential customers to Agrofin. As a result of these events, Bunnett filed lawsuits against Dores, Wawasan, and Natural Soda, seeking injunctive relief and damages for its losses during this period.
In this case, on November 24, 2015, while the lawsuit was still pending in Texas state court, Bunnett obtained a temporary restraining order against Dores. Just before the preliminary injunction hearing was to take place in state court, Dores removed the case to this court. Bunnett thus once again requested a TRO, which Judge Yeakel granted on January 13, 2016. Dkt. No. 47. On January 22, 2016, Bunnett followed up with a motion for a preliminary injunction, but before a hearing was even scheduled Dores filed for protection in the United States Bankruptcy Court for the Eastern District of California. Dkt. Nos. 52. The claims against Dores were thus stayed. After months of discovery and motion practice in that court, Dores' petition was dismissed with prejudice on June7, 2017, based on findings that Dores had engaged in "numerous instances of egregious conduct coupled with bad faith." Dkt. No. 157-3 at 29.
While the bankruptcy proceedings were underway, Bunnett filed a motion for order to show cause in this case, alleging that Wawasan and its Executive Director Gareth Cheong, Bunnett's former sales representative Ray Gearheart, his son Todd Gearheart (and their respective companies) all participated in a scheme in which Wawasan—with the help of the others and Dores's family members—sent money to Dores in violation of the TRO. Dkt. No. 65.1 After the bankruptcy proceeding was dismissed, Bunnett added Dores to the motion. The Court set this matter for a three-day evidentiary hearing in July 2017. Shortly before the hearing, Bunnett filed a motion to voluntarily dismiss Wawasan and Cheong as Bunnett had reached a settlement with those parties—both as to this case and as to other litigation between them. The hearing thus proceeded against the Gearhearts, their related entities, and Frank Dores.
In March 2018, the Court issued its Report and Recommendation on the motion, Dkt. No. 216, which Judge Yeakel subsequently adopted, Dkt No. 221. The Court found that the Gearhearts and Dores violated the January TRO when the Gearhearts assisted Wawasan in sending Dores $20,000. Specifically, the Court found that the funds were transferred to Dores in payment of services he rendered Wawasan by soliciting customers for Agrofin and providing advice to Cheong. The Court awarded Bunnett $20,000 in damages, as well as attorney's fees and costs.
Bunnett has now filed its request for attorney's fees and costs. In its motion, it requests the following:
Description Category Amount Schiff Hardin Attorneys' Fees Contempt 1 $397,359.00 Schiff Hardin Attorneys' Fees Suppl. Declaration 1 $46,425.50 Reduction in Schiff Hardin Attorneys' Fees Contempt,discussed above at Part II.A. 1 ($9,784.50) Boulette Golden & Marin L.L.P.'s Attorneys' FeesContempt 1 $13,702.50 Contempt Expenses 1 $32,008.25 Revised Total for Category 1 1 $479,710.75 Schiff Hardin Attorneys' Fees Related Depositions 2 $63,802.00 Related Deposition Expenses 2 $22,428.31 Revised Total for Category 2 $86,230.31 Schiff Hardin Attorneys' Fees Dores's Bankruptcy Case 3 $407,084.50 Reduction in Schiff Hardin Attorneys' Fees Dores'sBankruptcy Case, discussed above at page 7, n.4 3 ($152,915.50) Bankruptcy Case Expenses, including local co-counselattorneys' fees and expenses 3 $72,313.51 Reduction in Bankruptcy Case Expenses, discussed aboveat page 7, n.4 ($16,807.27) Revised Total for Category 3 $309,675.24 Management Travel Expenses N/A $9,665.19 Revised Total $885,281.49
Dkt. No. 249 at 23. Bunnett breaks this request into three categories: (1) attorney's fees incurred during the contempt proceeding, (2) fees incurred in Dores' bankruptcy proceeding in order to achieve the dismissal, and (3) depositions taken during the Dores bankruptcy proceeding and used in these proceedings. The Contemnors object on a number of grounds, each of will be discussed in more detail below.
"The interests of orderly government demand that respect and compliance be given to orders issued by courts possessed of jurisdiction of persons and subject matter." United States v. United Mine Workers, 330 U.S. 258, 303 (1947) (criminal case). Therefore, a court "possess[es] theinherent authority to enforce [its] own injunctive decrees." Travelhost, Inc. v. Blandford, 68 F.3d 958, 961 (5th Cir. 1995); see also McComb v. Jacksonville Paper Co., 336 U.S. 187, 191 (1949) (). "Civil contempt . . . can be used to compensate a party who has suffered unnecessary injuries or costs because of contumacious conduct." Id. at 961-62. Contempt law thus grants a court the "discretion to award reasonable attorney's fees and other expenses necessary to make an innocent party whole." Dow Chem. Co. v. Chem. Cleaning, Inc., 434 F.2d 1212, 1215 (5th Cir. 1970). "Essentially, the sanction restores the . . . parties to where they were before they incurred attorney's fees in an attempt to ensure compliance with the injunction." Matter of Skyport Glob. Commc'ns, Inc., 661 F. App'x 835, 841 (5th Cir. 2016).2
Bunnett seeks $885,281.49 in attorney's fees and costs, jointly and severally against the three Contemnors. The Fifth Circuit uses a two-step process to calculate attorney's fees. Heidtman v. Cnty. of El Paso, 171 F.3d 1038, 1043 (5th Cir. 1999). First, a court calculates a "lodestar" figure of the number of hours reasonably expended multiplied by an appropriate hourly rate for that area. Id. After making that calculation, the district court may adjust the lodestar based on the factors set forth in Johnson v. Georgia Highway Express, Inc.488 F.2d 714, 717-19 (5th Cir. 1974). Id.3Ultimately, however, there is a "strong presumption that the lodestar award is the reasonable fee." Id. at 1044.
First, Bunnett seeks to recover $479,710.75 in fees and costs directly incurred in the proceedings in this Court.4 Based on its review of the materials submitted, and considering the lodestar amount and the Johnson factors, the Court agrees that the hours and rates requested by Bunnett's attorneys are reasonable. However, this is not the end of the analysis. In their briefing, T. and R. Gearheart argue that the attorney's fees should be "offset" by the amount paid by Wawasan in its settlement agreement. The Gearhearts requested production of this settlement agreement, but this was opposed by Bunnett and Wawasan. The Court declined to order production of this document for the reasons previously articulated (Dkt. No. 244), taking the attorneys at their word that the agreement resolved a number of different disputes, of which the contempt dispute was only a small part, and the consideration paid by Wawasan in exchange for its dismissal from this matter was not segregated from the overall consideration paid to resolve the parties' many disputes. At the hearing, Bunnett elaborated that a significant portion of the consideration paid in the settlement was not in dollars and cents, but instead was comprised of a number of non-monetary agreements, including Wawasan's agreement that Bunnett would once again be Wawasan's distributor in the U.S.
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