Knutson v. Daily Review, Inc.

• Citation: 479 F. Supp. 1263
• Decision Date: 18 October 1979
• Docket Number: No. C-73-1354-CBR.,C-73-1354-CBR.
• Court: U.S. District Court — Northern District of California
• Parties: Douglas K. KNUTSON, Arlen N. Benham, Geoffrey Beaty, Laura Duarte, Evan Francis Williams, Joseph W. Berthiaume, Kenneth W. Jackson, Jean E. Nyland, Daniel A. Dutra, Willard B. Kittredge, Robert A. Dutra, Gayle C. Ely, Plaintiffs, v. The DAILY REVIEW, INC., a corporation, Bay Area Publishing Co., a corporation, Floyd L. Sparks, an Individual, William Chilcote, an Individual, Dallas Cleland, an Individual, John Clark, an Individual, Carl Felder, Individually and doing business as Felder Enterprises, Defendants.

479 F. Supp. 1263

Douglas K. KNUTSON, Arlen N. Benham, Geoffrey Beaty, Laura Duarte, Evan Francis Williams, Joseph W. Berthiaume, Kenneth W. Jackson, Jean E. Nyland, Daniel A. Dutra, Willard B. Kittredge, Robert A. Dutra, Gayle C. Ely, Plaintiffs, v. The DAILY REVIEW, INC., a corporation, Bay Area Publishing Co., a corporation, Floyd L. Sparks, an Individual, William Chilcote, an Individual, Dallas Cleland, an Individual, John Clark, an Individual, Carl Felder, Individually and doing business as Felder Enterprises, Defendants.

No. C-73-1354-CBR.

United States District Court, N. D. California.

October 18, 1979.

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Timothy H. Fine, Patrick J. Carter, G. Joseph Bertain, Jr., Edward M. Stadum, San Francisco, Cal., for plaintiffs.

Broad, Khourie & Schulz, Michael N. Khourie, Thomas Paine, San Francisco, Cal., for defendants.

ORDER AWARDING ATTORNEYS' FEES

RENFREW, District Judge.

In this action, plaintiffs move for an award of attorneys' fees in the amount of approximately $200,000 following a series of proceedings before this Court and the Court of Appeals for the Ninth Circuit. The underlying action was initiated in August, 1973. Plaintiffs, independent newspaper dealers, brought suit against defendant publishers and certain officers of the newspapers they distributed alleging various violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. At the conclusion of the liability portion of a bifurcated trial on September 23, 1974, this Court rejected three of the plaintiffs' claims¹ but found that defendants had imposed an illegal vertical price restraint in violation of Section 1 of the Sherman Act. Knutson v. Daily Review, Inc., 383 F.Supp. 1346, 1357 (N.D. Cal.1974). However, following the damages trial, the Court concluded that plaintiffs failed to prove either the fact or measure of their injury inasmuch as the Court was not persuaded that plaintiffs would have raised their prices and thus obtained greater profits in the absence of the restraint and thus declined to award any damages despite the finding on § 1 liability. 383 F.Supp. at 1384. The Court did award, however, $7,500 in attorneys' fees to plaintiffs based upon the court's inherent equitable powers in compensation for plaintiffs' proof of the illegal price restraint and for obtaining equitable relief of preserving employment offers extended to plaintiffs by defendants.

On appeal, the Court of Appeals for the Ninth Circuit affirmed in part and reversed this Court's conclusion on the issue of damages in connection with the price-fixing violation. The Court of Appeals held that plaintiffs need only prove some damages to establish the fact of damage, and that once shown, the amount of damage could be established according to a relaxed standard of proof. Knutson v. Daily Review, Inc., 548 F.2d 795, 813 (9 Cir.), cert. denied, 433 U.S. 910, 97 S.Ct. 2977, 53 L.Ed.2d 1094 (1977). The court concluded that the Daily Review plaintiffs had met their burden of establishing the fact of damages and that the evidentiary infirmities cited by this Court related only to the amount of damages. But the court also held that the Argus plaintiffs had completely failed to prove even the fact of damages. 548 F.2d at 812-813. In remanding the case of the Daily Review plaintiffs back to the district court, the court established a novel rule governing the burden of proof on the damage issue. In order to ease the nearly "insurmountable barrier" created by this Court's original analysis, the majority established a presumption that the dealers' pricing policies would have been guided by the principle of informed profit-maximization in the absence of the price restrictions illegally imposed by defendants. 548 F.2d at 812. The opinion, however, left defendants the opportunity to "show plaintiffs would have kept their prices beneath a maximizing point despite their violative behavior." Ibid.

Following a second trial on damages upon remand, this Court concluded that plaintiffs were entitled only to nominal damages. Knutson v. Daily Review, Inc., 468 F.Supp. 226, 228 (N.D.Cal.1979). Although the Court concluded that the law of the case mandated a finding of the fact of damages, id. at 232, the Court found that defendants successfully rebutted the presumption that plaintiffs would have raised their prices in pursuit of profit-maximization with two arguments: First, the evidence indicates that plaintiffs would have delayed for a substantial period reaction to rising market prices; and second, plaintiffs were aware that if they had raised their prices, the publisher would have been forced to take some action jeopardizing plaintiff dealers' independent status, and thus voluntarily would have kept their retail prices below the profit-maximizing price. 468 F.Supp. at 236-239. Thus plaintiff failed to prove the amount of damages. Id. at 240. Accordingly, each of the six Daily Review plaintiffs was awarded nominal damages of one dollar trebled to three dollars. Id. at 240-241.

Following that most recent proceeding and decision, plaintiffs moved for an award of attorneys' fees pursuant to Section 4 of the Clayton Act, 15 U.S.C. § 15, which provides:

"Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee."

Defendants do not dispute that while damages recovered may be insubstantial, plaintiffs are nevertheless entitled to "reasonable attorney's fees" under the Act. Any argument to the contrary would be without merit. The Court's finding of liability and award of nominal damages clearly implies that plaintiffs were in fact "injured in their business or property by reason of anything forbidden in the antitrust laws" within the meaning of Section 4, thereby entitling them to "a reasonable attorney's fee." Also, the award of reasonable attorney's fees is necessarily concomitant with this Court's decision that plaintiff's establishment of liability and the fact of damages entitled them to treble damages under 15 U.S.C. § 15 since that statute makes no distinction between the applicability of the treble damages and attorney's fees provisions therein. Thus, although recovery of damages is a prerequisite to an award of attorney's fees, see Koratron Co. v. Lion Uniform, Inc., 409 F.Supp. 1019, 1029 (N.D. Cal.1976); Locklin v. Day-Glo Color Corp., 378 F.Supp. 423, 428 (N.D.Ill.1974), once treble damages are recovered, the award of reasonable attorney's fees is mandatory. Baughman v. Cooper-Jarrett, Inc., 530 F.2d 529, 531 n.2 (3 Cir. 1976), cert. denied, 429 U.S. 825, 97 S.Ct. 78, 50 L.Ed.2d 87 (1976). Such fee awards obviously comport with the underlying purpose of Section 4 of facilitating the private enforcement of substantive antitrust policies, which is the "bulwark of antitrust enforcement." Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 139, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968). See Hammond, Stringent New Standards for Awards of Attorney's Fees, 32 Bus.Law. 523, 524-525 (1977); Comment, 60 Cal.L.Rev. 1656, 1656 (1972). Thus courts have awarded such fees where plaintiffs have recovered only nominal damages. See Morning Pioneer, Inc. v. Bismarck Tribune Co., 493 F.2d 383, 390 (8 Cir. 1974), cert. denied, 419 U.S. 836, 95 S.Ct. 64, 42 L.Ed.2d 63 (1974); Osborn v. Sinclair Refining Co., 207 F.Supp. 856, 864 (D.Md.1962), rev'd on other grounds, 324 F.2d 566, 575 (4 Cir. 1963).²See also Newberry v. The Washington Post Co., 1977-2 CCH Trade Cases 73,131, 73,133 (D.D.C.1977), 438 F.Supp. 470, 483 (D.D.C.1977) ($140,000 in fees awarded where 7 of the 10 plaintiffs recovered only nominal damages); Finley v. Music Corp. of America, 66 F.Supp. 569, 571-572 (S.D.Cal. 1946) (reasonable attorney's fee awarded where no damages were recovered);³cf. Burt v. Abel, 585 F.2d 613, 617-618 (4 Cir. 1978) (fact of nominal damage recovery does not diminish plaintiff's eligibility for attorney's fees in civil rights action); Perez v. University of Puerto Rico, 600 F.2d 1, 2 (1 Cir. 1979) (same).

The issue then is not whether plaintiffs are entitled to fees, but what amount constitutes "reasonable attorney's fees" in the instant case.

I. APPLICABLE LAW

Traditionally, in determining the amount of attorney's fees to be awarded in antitrust cases, the courts have placed substantial emphasis on the size of the recovery; indeed, some have apparently applied a straight percentage approach. See, e. g., Webster Motor Car Co. v. Packard Motor Car Co., 166 F.Supp. 865 (D.D.C.1955), rev'd and cross appeal concerning attorney's fees dismissed as moot, 100 U.S.App.D.C. 161, 243 F.2d 418 (1957), cert. denied, 355 U.S. 822, 78 S.Ct. 29, 2 L.Ed.2d 38 (1957). However, the percentage fee approach has increasingly come under criticism, given its insensitivity to individual differences in antitrust suits and the professional skill and complexity of work involved in a particular case. See City of Detroit v. Grinnell Corp., 495 F.2d 448, 469 (2 Cir. 1974); In re Gypsum Cases, 386 F.Supp. 959, 962 (N.D.Cal. 1974), aff'd 565 F.2d 1123 (9 Cir. 1977); Trans World Airlines, Inc. v. Hughes, 312 F.Supp. 478, 484 (S.D.N.Y.1970, aff'd and modified on other grounds, 449 F.2d 51, 79 (2 Cir. 1971), rev'd on other grounds, sub nom. Hughes Tool Co. v. Trans World Airlines, Inc., 409 U.S. 363, 93 S.Ct. 647, 34 L.Ed.2d 577, 1973); Illinois v. Harper & Row Publishers, 55 F.R.D. 221, 224 (N.D.Ill. 1972). Moreover, the percentage approach may not comport with the legislative purpose underlying Section 4 of the Clayton Act of encouraging the private vindication and enforcement of the antitrust laws. See Phillips...