In re InPhonic, Inc.

• Decision Date: 18 December 2009
• Docket Number: MDL No. 1792.,Misc. Action No. 06-0507 (ESH).
• Citation: In re InPhonic, Inc., 674 F.Supp.2d 273, 2009 WL 4895664 (D. D.C. 2009)
• Parties: In re InPHONIC, INC., Wireless Phone Rebate Litigation. This Document Relates To: All Cases.
• Court: U.S. District Court — District of Columbia

674 F.Supp.2d 273

In re InPHONIC, INC., Wireless Phone Rebate Litigation This Document Relates To: All Cases.

Misc. Action No. 06-0507 (ESH).

MDL No. 1792.

United States District Court, District of Columbia.

December 18, 2009.

COPYRIGHT MATERIAL OMITTED

John Anthony Peca, Keith T. Vernon, Climaco, Lefkowitz, Peca, Wilcox & Garofoli Co., LPA, Washington, DC, Steven A. Hart, Scott Wesley Henry, Segal, McCambridge, Singer & Mahoney, Ltd., Chicago, IL, David P. Meyer, Patrick G. Warner, David P. Meyer & Associates Co., L.P.A Columbus, OH, John R. Climaco, Climaco, Lefkowitz, Peca, Wilcox & Garofoli Co., LPA, Cleveland, OH, Kevin P. Roddy, Wilentz, Goldman & Spitzer, P.A., Woodbridge, NJ, for Plaintiff.

Walter Cover, pro se.

Melinda Roquemore, pro se.

Luis Morales, pro se.

Jonathan Feldman, pro se.

Joshua Pevnick, pro se.

C. Philip Campbell, Jr., Shumaker, Loop & Kendrick, LLP, Tampa, FL, David C. Jacobson, Sonnenschein Nath & Rosenthal, LLP, Chicago, IL, Jennifer L. Sarvadi, Megan Starace Ben'Ary, Leclair Ryan, A Professional Corporation, Alexandria, VA, Richard G. Mark, Briggs & Morgan, P.A., Minneapolis, MN, Joshua P. Wilson, Arnold & Porter, LLP, Ari N. Rothman, David W. Goewey, Venable, LLP, James P. Wehner, Caplin & Drysdale, Chartered, Washington, DC, for Defendant.

MEMORANDUM OPINION AND ORDER

ELLEN SEGAL HUVELLE, District Judge.

Before the Court is the Motion for Payment of Attorneys' Fees and Expenses by plaintiffs Edwin Davis, Walter Cover, Jonathan Feldman, Stanley J. Heller, Barbara McGivney, Luis Morales, Joshua Pevnick, Paul Rock, Melinda Roquemore, Shelly Salzman, Ryan Sutherland, Iona Workman, and Hongyi Yu. Having considered plaintiffs' motion and the opposition filed by defendants Helgeson Enterprises ("Helgeson"), David A. Steinberg, and Brian T. Westrick, the Court will grant the motion in part.

BACKGROUND

In 2006, several of the instant plaintiffs filed putative class actions in this District alleging that InPhonic, Inc. ("InPhonic"), a provider of wireless communication services based in the District, had violated, inter alia, the District of Columbia Consumer Protection and Procedures Act ("DCCPPA"), D.C.Code §§ 28-3901 to -3913, and the Racketeer Influenced and Corrupt Organizations ("RICO") Act, 18 U.S.C. §§ 1961-1968, through InPhonic's allegedly fraudulent consumer rebate practices. Some of these complaints also named as a defendant Continental Promotion Group, Inc. ("CPG"), which served as one of InPhonic's rebate processors. Other plaintiffs filed lawsuits in federal court in Arizona, Illinois, New Jersey, alleging similar causes of action, including claims under their respective states' consumer protection laws, against InPhonic, CPG, and Helgeson, another rebate processor.

On June 8, 2006, the D.C. Attorney General's Office ("DCAGO") sued InPhonic in D.C. Superior Court over its rebate practices. Several weeks later on June 26, InPhonic moved the Judicial Panel on Multidistrict Litigation ("JPML"), pursuant to 28 U.S.C. § 1407, for an order centralizing the multidistrict ("MDL") rebate litigation against it in this District. On October 25, the JPML issued an order consolidating and transferring the MDL litigation to this Court. See In re InPhonic, Inc., Wireless Phone Rebate Litigation ("In re InPhonic"), 460 F.Supp.2d 1380, 1381 (J.P.M.L. 2006).

On January 26, 2007, this Court appointed Steven A. Hart of Segal McCambridge Singer & Mahoney, Ltd. ("the Segal Firm"), Kevin P. Roddy of Wilentz, Goldman & Spitzer, P.A. ("the Wilentz Firm"), and John R. Climaco of Climaco, Lefkowitz, Peca, Wilcox & Garofoli Co., L.P.A. ("the Climaco Firm") as interim co-lead and liaison counsel for plaintiffs pending a decision on class certification. On February 15, the DCAGO announced that it had settled its lawsuit against InPhonic. On February 26, plaintiffs filed their first consolidated amended class action complaint ("FAC"), naming InPhonic, CPG, and Helgeson as defendants. During a March 14 status conference, the Court suggested that the parties engage in mediation, which the parties commenced in April with a private mediator. On April 27, the Federal Trade Commission ("FTC") announced that it had also been investigating InPhonic's rebate practices, and that InPhonic had entered into a consent agreement with the agency. See FTC Agreement Containing Consent Order, In the Matter of InPhonic, Inc., a corporation ("InPhonic"), File No. 062-3066, 2007 WL 1406416 (F.T.C. Apr. 27, 2007) (unpaginated). On June 4, the FTC gave final approval to that consent agreement. See FTC Decision and Order, InPhonic, Dkt. No. C-4192, File No. 62-3066, 2007 WL 1740924 (F.T.C. June 4, 2007) (unpaginated).

On November 26, 2007, InPhonic notified the Court that it had filed for federal bankruptcy protection earlier that month. Thereafter, on March 21, 2008, plaintiffs filed their second consolidated amended class action complaint ("SAC"), naming as defendants Helgeson, CPG, and five former InPhonic corporate officers: Brian J. Curran, George Z. Moratis, David A. Steinberg, Brian T. Westrick, and Andrew B. Zeinfeld. On April 24, Helgeson and CPG moved to dismiss the complaint, and plaintiffs filed their opposition on May 21. On August 15, individual defendants Moratis, Steinberg, Westrick, and Zeinfeld also filed a motion to dismiss, which was opposed by plaintiffs.

On November 14, 2008, CPG filed for bankruptcy and notified the Court of this fact on January 29, 2009, and on February 23, the Clerk of the Court entered a default against defendant Curran, who had failed to respond to the summons and complaint On April 6, after hearing argument on the motions to dismiss, the Court issued an order denying CPG's motion because of the automatic bankruptcy stay; dismissing all claims against Moratis and Zeinfeld; and granting Steinberg and Westrick's motion to dismiss with respect to plaintiffs' claims for breach of contract, unjust enrichment and disgorgement of profits, and equitable relief, but denying their motion with respect to plaintiffs' statutory claims under the DCCPPA, other states' consumer protection laws, and RICO, as well as plaintiffs' common law claims of civil conspiracy and negligent misrepresentation.

On August 6, 2009, the thirteen instant plaintiffs ("the MDL plaintiffs") and five other individual plaintiffs who were not parties to the MDL litigation ("the non-MDL plaintiffs") entered into a settlement agreement with defendants. Under the agreement, the MDL plaintiffs will receive $39,000 ("the Settlement Amount") "in full satisfaction of all claims" against defendants, InPhonic, CPG, Curran, Moratis, Zeinfeld, or any other person or entity who could have been named as a defendant in the rebate litigation. (See Pls.' Mot. for Payment of Attorneys' Fees and Expenses ["Mot."], Ex. A ("Settlement") at 2 ¶ 1.) The agreement also permits plaintiffs to file a petition seeking up to $950,000 in attorney's fees and costs incurred the MDL litigation ("the Fee Award"),¹ and defendants are permitted to oppose that petition. (Id. at 2 ¶ 2.) On September 29, plaintiffs Heller, McGivney, Rock, Salzman, Workman, and Yu filed a stipulation of dismissal with prejudice of all claims against defendants.² [See Dkt. 86-89, 91.] On September 30, plaintiffs filed a motion seeking payment of $950,000 in fees and costs accompanied by three declarations and billing invoices. (See Mot., Ex. B (Decl. of Kevin P. Roddy) ("Roddy Decl.") & Attachment ("Wilentz Invoices"); id., Ex. C (Decl. of Steven A. Hart) ("Hart Decl.") & Attachment ("Segal Invoices"); id., Ex. D (Decl. of James R. Climaco) ("Climaco Decl.") & Attachment ("Climaco Invoices").)

On October 30, 2009, defendants filed an opposition in which they contend that plaintiffs are not entitled to attorney's fees. Defendants argue that the "American rule" disfavors fee awards; that none of the judicially recognized exceptions to that rule "mandate a fee award" in connection with the settlement; and that even if an exception could be applied here, plaintiffs are not "`prevailing part[ies]' who qualify for a fee award." (Defs.' Opp'n to Mot. ["Opp'n"] at 7-8, 12.) In the alternative, defendants contend that if plaintiffs are entitled to some fees, such awards must be reasonable in relation to the "success" achieved, and therefore, any fee award must be de minimis, because plaintiffs did not achieve what they sought when they initiated the litigation as a class action with potentially hundreds of thousands of class members. (Id. at 10, 13; see, e.g., Mot. at 5 (asserting that "hundreds of thousands of consumers nationwide" were affected by defendants' acts).) Defendants also argue that even if plaintiffs are entitled to more than a de minimis fee award, it should not exceed $196,881.07 (defendants' calculation of fees reasonably incurred since the SAC was filed), less "further across-the-board reductions for vague time entries and block billing." (Id. at 23.)³

ANALYSIS

I. THE DCCPPA AUTHORIZES AWARDS OF ATTORNEY'S FEES AND COSTS.

Under what has come to be known as the "American rule," parties must ordinarily "shoulder their own counsel fees and other litigation expenses absent statutory or contractual authority for an alternative allocation." Lipsig v. Nat'l Student Mktg. Corp., 663 F.2d 178, 180 (D.C.Cir.1980) (citing Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247-257, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975)); see also United States v. Wade, 255 F.3d 833, 835 (D.C.Cir.2001) ("[U]nder what is known as the `American Rule,' each party to a lawsuit usually bears its own attorney's fees `unless there is express statutory authorization to the contrary.'" (quoting Hensley v. Eckerhart, 461 U.S. 424, 429, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983))).

The DCCPPA provides that "[a] person, whether acting for the interests of itself, its members, or the general public, may bring an action ... seeking relief from the use by any person of a trade practice...