In re Outsidewall Tire Litig.
| Decision Date | 29 September 2014 |
| Docket Number | Civil Action No. 1:09cv1217. |
| Court | U.S. District Court — Eastern District of Virginia |
| Parties | In re OUTSIDEWALL TIRE LITIGATION. |
William Edgar Copley, Weisbrod Matteis & Copley PLLC, Washington, DC, for Outsidewall Tire Litigation.
At issue post-judgment in this copyright infringement and conversion case is a dispute between (1) plaintiffs, who won a final and now-affirmed $26 million judgment against various foreign corporations and (2) Gilbert LLP, plaintiffs' former counsel, over the value of the latter's lien for fees and expenses, filed pursuant to Va.Code § 54.1–3932. This is, in essence, a fee dispute between a law firm and the firm's former clients. It arises because post-judgment, but prior to completion of the appeal, the two former Gilbert LLP attorneys who led the effort to win the judgment—August Matteis and William Copley—left Gilbert LLP to form their own law firm, Weisbrod, Matteis & Copley PLLC (“WMC”). When this occurred, plaintiff, Jordan Fishman, elected to discharge the Gilbert law firm as plaintiffs' counsel and to retain instead WMC as plaintiffs' counsel. Thereafter, the Gilbert law firm, based on its fee contract with plaintiffs and the work it had performed on the case, filed a lien in this district for fees and expenses under Va.Code § 54.1–3932, claiming more than $4.5 million in fees plus a share of the moneys received from the currently underway judgment collection efforts, and more than $1.8 million in expenses. Plaintiffs do not contest the validity of the lien, but reject the amounts claimed as excessive, unreasonable, and contrary to settled and controlling Virginia law, which allows the discharged Gilbert law firm a reasonable fee based not on the fee contract between plaintiffs and the Gilbert law firm, but solely on the basis of quantum meruit.
This memorandum opinion resolves this dispute and concludes, for the reasons that follow, that the appropriate, fair, and reasonable value of the Gilbert law firm's lien is $1,958,341.67.
Plaintiffs in the underlying case are (i) Jordan Fishman, a Florida citizen, and three companies he owns and controls, namely (ii) Tire Engineering and Distribution, LLC, a Florida company, (iii) Bearcat Tire ARL LLC, also a Florida company, and (iv) Bcatco A.R.L., Inc., which is incorporated under the laws of the Jersey Channel Islands. During times relevant to this litigation, plaintiffs were in the business of designing, manufacturing and selling highly specialized tires for use on underground mining vehicles.
There were two sets of defendants in the underlying litigation. The first set, collectively referred to as the “Al Dobowi defendants,” consisted of (i) Al Dobowi Tyre Co. LLC, (ii) Al Dobowi Ltd., (iii) TyreX International, Ltd., and (iv) TyreX International Rubber Co., Ltd., all of which were headquartered in the United Arab Emirates and owned by Surender Kandhari, a Dubai citizen. The second set of defendants, collectively referred to as the “Linglong defendants,” were (i) Shandong Linglong Rubber Co., Ltd. and (ii) Shandong Linglong Tire Co., Ltd., both of which were incorporated and based in China. At all relevant times, the Al Dobowi and Linglong defendants were engaged in the business of designing, manufacturing, and selling rubber tires, including underground mining tires.
By 2009, Jordan Fishman had become convinced that his head of sales had conspired with plaintiffs' competitors, the Al Dobowi and Linglong defendants, to steal plaintiffs' copyrighted underground mining tire blueprints and designs and then to sell knock-off copies of plaintiffs' tires around the world, thereby damaging plaintiffs. Accordingly, Fishman sought counsel to vindicate plaintiffs' rights. In the end, he chose the Gilbert law firm and on August 4, 2009, he signed a contingent fee letter agreement with the Gilbert law firm. This letter agreement, drafted by the Gilbert law firm, provides in essence that plaintiffs would pay the Gilbert law firm a contingency fee equal to 40 % of the gross amount of any sum recovered in attorney's fees. The agreement also notes that plaintiffs would reimburse the Gilbert law firm for “all costs and expenses related to this matter from the gross amount received by it.” The letter concludes with a termination provision that provided that in the event Fishman terminated the firm's representation, the Gilbert law firm “will be entitled to a fee based upon the hours expended by the Firm on this representation at the hourly rates normally charged by the involved personnel for the type of work rendered.” Id.1
From the date of plaintiffs' retention of the Gilbert law firm until plaintiffs' discharge of the firm in or around October 2011, plaintiffs' case was handled chiefly by Matteis, as lead counsel, and Copley. Other Gilbert law firm lawyers assisted Matteis and Copley in litigating the case, but played less substantial roles in the case.
On October 28, 2009, plaintiffs, by counsel, filed two complaints in this district, one against the Al Dobowi defendants and one against the Linglong defendants. The two suits were promptly consolidated after which the parties briefed and argued various Rule 12 threshold motions and then proceeded to conduct discovery. The discovery period was marked by a number of disputes, which the record reflects were fully briefed and argued. After completion of discovery, defendants sought summary judgment on all nine counts and succeeded on four counts. Plaintiffs then proceeded to trial on the remaining counts: (1) violation of the Copyright Act, 17 U.S.C. § 101 et seq., (2) violation of the Lanham Act, 15 U.S.C. § 1051 et seq., as to registered marks, (3) violation of the Lanham Act as to unregistered marks, (4) common law conversion, and (5) common law civil conspiracy.
During the six-day trial, the parties presented live and videotaped testimony from a number of witnesses, substantial documentary evidence, and competing expert testimony on the issues of infringement and damages. In the end, the jury returned a verdict in favor of plaintiffs, awarding plaintiffs $26 million in damages jointly and severally against all defendants. Defendants' post-verdict Rule 50 motion met with only limited success; the registered trademark claim was dismissed for lack of evidence and the claim based on all but two of the unregistered marks suffered the same fate. Defendants' new trial motion failed as the record plainly supported the remaining verdicts and dismissal of some claims did not undermine the jury's damages award, as the measure of damages was the same for all counts. Also post-trial, plaintiffs sought and obtained a $632,377.50 attorney's fee award against the Al Dobowi defendants on the ground that the Al Dobowi defendants' malicious, willful, and deliberate infringing conduct made this an “exceptional” case warranting a fee award pursuant to 15 U.S.C. § 1117(a). See In re: Outsidewall Tire Litigation, 748 F.Supp.2d 557 (E.D.Va.2010).
Defendants appealed and on June 6, 2012, the Court of Appeals for the Fourth Circuit reversed the remaining trademark and conspiracy verdicts, but nonetheless upheld the $26 million judgment against defendants based on the jury's verdicts on the conversion and copyright violation claims. See Tire Eng'g and Distrib., LLC v. Shandong Linglong Rubber Company, Ltd., 682 F.3d 292, 298 (4th Cir.2012). Further, the Court of Appeals vacated the fee award inasmuch as the court had reversed the verdict on the remaining trademark claims, which were the sole basis for the award. Id. Importantly, in vacating the § 1117(a) fee award, the Court of Appeals did not reach, review, or decide the merits of the methodology and judgments made in connection with the award.
Prior to the December 2011 oral argument in the Court of Appeals, Messrs. Matteis and Copley, in October 2011, elected to leave the Gilbert law firm and establish their own firm, WMC. Both firms offered to continue to represent plaintiffs. After consulting with both firms, plaintiffs chose to stay with Matteis and Copley and accordingly discharged the Gilbert law firm and retained WMC to represent plaintiffs in this case. Shortly thereafter, the Gilbert law firm, in January 2012, filed a Notice of Former Counsel's Lien under Virginia Code § 54.1–3932.
Once the $26 million judgment against both defendants became final and defendants declined to pay, WMC, on plaintiffs' behalf, commenced a vigorous and wide-ranging collection effort. This effort has included initiating lawsuits to compel banks to turn over defendants' assets in the banks' possession2 and proceedings to enforce subpoenas and garnishments in courts across the country.3 As of November 2013, approximately $546,000 had been recovered in garnishment proceedings. Significantly, these collections efforts have led to an agreement by the Linglong defendants to pay plaintiffs $15.5 million to settle and resolve the Linglong defendants' liability in this case. This event makes more immediate the need to resolve the instant fee dispute and assess the value of the Gilbert law firm lien.
It is necessary at the outset to address two issues: (1) jurisdiction and (2) choice and content of governing law. This necessity arises because the Gilbert law firm has filed suit in the District of Columbia (D.C.) against defendants claiming that the firm is entitled to a fee and costs in this case as provided for in the contingent fee agreement Fishman and the firm signed in D.C. Although the Gilbert law firm is plainly entitled to recover an appropriate fee and costs in this case, this district, not the D.C. court, is the appropriate forum to adjudicate this claim and Virginia law, not the contingent fee agreement, provides the proper measure by which to determine the proper fee and costs to which the Gilbert law firm is entitled.
There can be no substantial doubt that this court has ancillary or...
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