Phx. Lighting Grp., L.L.C. v. Genlyte Thomas Grp., L.L.C.

• Decision Date: 25 March 2020
• Docket Number: No. 2018-1076,2018-1076
• Citation: 160 Ohio St.3d 32,2020 Ohio 1056,153 N.E.3d 30
• Parties: PHOENIX LIGHTING GROUP, L.L.C., et al., Appellees, v. GENLYTE THOMAS GROUP, L.L.C., Appellant, et al.
• Court: Ohio Supreme Court

160 Ohio St.3d 32

153 N.E.3d 30

2020 Ohio 1056

PHOENIX LIGHTING GROUP, L.L.C., et al., Appellees,

v.GENLYTE THOMAS GROUP, L.L.C., Appellant, et al.

No. 2018-1076

Supreme Court of Ohio.

Submitted September 10, 2019

Decided March 25, 2020

Witschey, Witschey & Firestine Co., L.P.A., Jeffrey T. Witschey, and Betsy L.B. Hartschuh, Akron, for appellees.

Tucker Ellis, L.L.P., Benjamin C. Sassé, and Michael J. Ruttinger, Cleveland; and Taft, Stettinius & Hollister, L.L.P., W. Stuart Dornette, Aaron M. Herzig, Cincinnati, Bruce J.L. Lowe, and Julie A. Crocker, Cleveland, for appellant.

The Chandra Law Firm, L.L.C., Subodh Chandra, and Donald P. Screen, Cleveland, urging affirmance for amicus curiae, Ohio Employment Lawyers Association.

Stewart, J. {¶ 1} Appellees, Phoenix Lighting Group, L.L.C., and Jack Duffy and Associates, Inc. (collectively, "Phoenix"), were awarded a jury verdict against appellant, Genlyte Thomas Group, L.L.C., a.k.a. Daybrite, Capri, Omega ("DCO"), for compensatory and punitive damages, prejudgment interest, treble damages, and litigation costs and expenses that totaled $5,518,335. When a party is awarded punitive damages, a trial court has the discretion to order the losing party to pay the prevailing party's attorney fees. The beginning point for determining the award of attorney fees is the reasonable hourly rate multiplied by the number of hours worked, a calculation that is sometimes referred to as the "lodestar." The trial court established a lodestar of $1,991,507. The trial court then doubled the attorney fees because of the complexity and length of the case and the success achieved. The enhancement resulted in an award of $3,983,014 in attorney fees. The court of appeals affirmed the award.

{¶ 2} We accepted jurisdiction over this appeal to consider the circumstances that warrant enhancement to the lodestar. We reaffirm our holding in Bittner v. Tri-County Toyota, Inc. , 58 Ohio St.3d 143, 569 N.E.2d 464 (1991), syllabus, to the extent that it held that a lodestar can be modified, but we hold, consistent with the decision of the United States Supreme Court in Perdue v. Kenny A. , 559 U.S. 542, 130 S.Ct. 1662, 176 L.Ed.2d 494 (2010), that the lodestar is presumptively reasonable and that enhancements to the lodestar should be rarely granted and allowed only when the prevailing party has presented evidence that enhancement is necessary to provide reasonable compensation, that is, if the lodestar does not take into consideration any factor that may be properly considered in determining a reasonable fee.

{¶ 3} Because the lodestar reflected a reasonable fee based on the prevailing market rate for the services rendered by Phoenix's attorneys, we reverse the judgment of the court of appeals as to the award of attorney fees, and we remand this cause to the trial court to enter judgment awarding attorney fees in the amount of the calculated lodestar.

FACTS

{¶ 4} Phoenix, an agency owned by Patrick Duffy, sold lighting products manufactured by Acuity Brand Lighting. Two Phoenix employees, Jason Brown and Guy Day, began negotiations with Duffy to buy Phoenix. At the same time that the employees were negotiating with Duffy, they approached DCO—a direct competitor of the Acuity Brand Lighting products sold by Phoenix—about starting their own sales agency and representing DCO products. Using information they received from their employment at Phoenix, along with financial assistance from DCO, the two employees formed Intelligent Illumination, a sales agency that would represent products manufactured by DCO. Intelligent Illumination hired several Phoenix employees. Phoenix eventually went out of business.

{¶ 5} Phoenix filed a lawsuit stating causes of action against DCO for, among other things, tortious interference with business relationships, tortious interference with contractual relationships, misappropriation of trade secrets, unfair competition, civil conspiracy, and frivolous conduct. Brown and Day were also named as defendants, but they settled during trial. A jury returned a verdict finding DCO liable for tortious interference with a business relationship, misappropriating trade secrets, and engaging in a civil conspiracy with Brown and Day. In a separate proceeding, the jury awarded Phoenix punitive damages and reasonable attorney fees. In total, Phoenix was awarded $1,680,970 in compensatory damages and $3,661,940 in punitive damages.

{¶ 6} In a posttrial hearing on attorney fees, the trial court established a lodestar figure of $1,991,507, finding that that amount "accurately represents the amount of attorney fees * * * that would have been charged to Phoenix under a standard hourly rate agreement." It then considered whether an enhancement of that amount was warranted. It determined that the case was "quite complex, both factually and legally," that the case took up so much of counsel's time that they were hindered "from accepting and pursuing other cases and clients," that Phoenix's attorneys "obtained a highly favorable outcome," that the hybrid hourly fee and contingent nature of the compensation "forced Phoenix's counsel to assume a great financial risk," and that all of the attorneys involved in this case were "of high caliber," were "highly experienced, and maintained excellent reputations." Based on these determinations, the trial court applied a multiplier of two and awarded a total of $3,983,014 in attorney fees.

{¶ 7} The Ninth District Court of Appeals affirmed the verdict and compensatory-damages award but concluded that the damages relating to the claim for conspiracy to misappropriate trade secrets were subject to the punitive-damages cap in R.C. 1333.63. On the issue of attorney fees, the court of appeals noted that after a court has calculated the lodestar, the court next should consider whether to adjust the lodestar. 2018-Ohio-2393, 2018 WL 3096587, ¶ 69. After considering the factors that the trial court relied upon as a basis for enhancing the lodestar, the court of appeals concluded that it could not say that the "trial court abused its discretion in applying a multiplier of two to the lodestar amount in this case." Id . at ¶ 71.

{¶ 8} We accepted jurisdiction over the following proposition of law:

Because there is a strong presumption that the lodestar method yields a sufficient attorney fee, enhancements should be granted rarely and only where the applicant seeking the enhancement can produce objective and specific evidence that an enhancement is necessary to compensate for a factor not already subsumed within the Court's lodestar calculation.

ANALYSIS

{¶ 9} Ohio courts generally follow the "American rule" with respect to attorney fees: each party is responsible for its own attorney fees. Wilborn v. Bank One Corp ., 121 Ohio St.3d 546, 2009-Ohio-306, 906 N.E.2d 396, ¶ 7. An exception to the American rule allows an award of attorney fees to the prevailing party as an element of compensatory damages when the jury finds that punitive damages are warranted. Zoppo v. Homestead Ins. Co ., 71 Ohio St.3d 552, 558, 644 N.E.2d 397 (1994) ; New York, Chicago & St. Louis RR. Co. v. Grodek , 127 Ohio St. 22, 24-25, 186 N.E. 733 (1933) ("facts which justify the infliction of exemplary damages will also justify the jury in adding the amount of counsel fees to the verdict, not as a part of exemplary damages, but as compensatory damages"). See Galmish v. Cicchini , 90 Ohio St.3d 22, 35, 734 N.E.2d 782 (2000).

{¶ 10} Our decisions determining what are reasonable attorney fees have been guided by decisions issued by the United States Supreme Court. For example, in Bittner , we quoted Hensley v. Eckerhart , 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), for the proposition that the starting point for determining attorney fees is the lodestar: " ‘the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate.’ " Bittner , 58 Ohio St.3d at 145, 569 N.E.2d 464, quoting Hensley at 433, 103 S.Ct. 1933. We agreed with the Supreme Court that this calculation " ‘provides an objective basis on which to make an initial estimate of the value of the lawyer's services.’ " Id ., quoting Hensley at 433, 103 S.Ct. 1933.

{¶ 11} "A reasonable hourly rate is the prevailing market rate in the relevant community, Blum v. Stenson , 465 U.S. 886, 895, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984), given the complexity of the issues and the experiences of the attorney * * *." State ex rel. Harris v. Rubino , 156 Ohio St.3d 296, 2018-Ohio-5109, 126 N.E.3d 1068, ¶ 4. "[T]he prevailing market rate can often be calculated based on a firm's normal billing rate because, in most cases, billing rates reflect market rates, and they provide an efficient and fair short cut for determining the market rate." Gulfstream III Assocs., Inc. v. Gulfstream Aerospace Corp. , 995 F.2d 414, 422 (3d Cir.1993).

{¶ 12} When the Supreme Court considered the calculation, it stated that "[t]he product of reasonable hours times a reasonable rate does not end the inquiry. There remain other considerations that may lead the * * * court to adjust the fee upward or downward, including the important factor of the ‘results obtained.’ " Hensley at 434, 103 S.Ct. 1933. We followed this principle in Bittner and held that for an award of attorney fees made under R.C. 1345.09(F)(2) of the Consumer Sales Practices Act, R.C. 1345.04 et seq., "the trial court should first calculate the number of hours reasonably expended on the case times an hourly fee, and then may modify that calculation by application of the factors listed in DR 2-106(B) [now Prof.Cond.R. 1.5(a) ]." Bittner at syllabus. (Prof.Cond.R. 1.5(a) superseded former DR 2-106, but the two rules are substantially the same.) Prof.Cond.R. 1.5(a) lists various factors to be considered in determining the reasonableness of a fee charged by a lawyer:

(1) The time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the

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