Sleepy's LLC v. Select Comfort Wholesale Corp.

• Decision Date: 30 September 2016
• Docket Number: 07–CV–4018(JS)(ARL)
• Citation: 222 F.Supp.3d 169
• Parties: SLEEPY'S LLC, Plaintiff, v. SELECT COMFORT WHOLESALE CORPORATION, Select Comfort Retail Corporation, and Select Comfort Corporation, Defendants.
• Court: U.S. District Court — Eastern District of New York

222 F.Supp.3d 169

SLEEPY'S LLC, Plaintiff,

v.SELECT COMFORT WHOLESALE CORPORATION, Select Comfort Retail Corporation, and Select Comfort Corporation, Defendants.

07–CV–4018(JS)(ARL)

United States District Court, E.D. New York.

Signed September 30, 2016

For Plaintiff: Andrew W. Singer, Esq., David J. Kanfer, Esq., Lewis Donald Prutzman, Esq., Paul D. Sarkozi, Esq., Vincent J. Syracuse, Esq., George Foulke Du Pont, Esq., Stefanie Marie Ramirez, Esq., Tannenbaum Helpern Syracuse & Hirschtritt LLP, 900 Third Avenue, New York, NY 10022

For Defendants: Heidi A.O. Fisher, Esq., Andrew S. Hansen, Esq., Fox Rothschild LLP, Campbell Mithun Tower–Suite 2000, 222 South Ninth Street, Minneapolis, MN 55402, Joseph S. Miller, Esq., Michael J. Bleck, Esq., Michael K. Gravink, Esq., Michelle R. Schjodt, Esq., Oppenheimer Wolff & Donnelly LLP, 45 South 7th Street, Suite 3300, Minneapolis, MN 55402, Joshua S. Androphy, Esq., Michael Faillace & Associates, P.C., 60 East 42nd Street, Suite 2540, New York, NY 10165

MEMORANDUM & ORDER

SEYBERT, District Judge:

Currently pending before the Court is Magistrate Judge Arlene R. Lindsay's Report and Recommendation dated August 8, 2016 (the "R & R") with respect to defendants Select Comfort Corporation, Select Comfort Retail Corporation, and Select Comfort Wholesale Corporation's¹ motion for attorneys' fees. (Docket Entries 871 and 883.) Judge Lindsay recommends that Select Comfort be awarded attorneys' fees and costs totaling $3,507,388.65. (R & R, Docket Entry 883.) Plaintiff Sleepy's LLC ("Plaintiff" or "Sleepy's") has filed objections, which are presently before the Court ("Plaintiff's Objections"). (Pl.'s Obj., Docket Entry 884.) For the reasons set forth below, Plaintiff's Objections are OVERRULED IN PART and SUSTAINED IN PART, and the R & R is ADOPTED IN PART and REJECTED IN PART.

BACKGROUND

The Court presumes familiarity with the facts of this matter, which are set forth in detail in its Memorandum and Order dated September 22, 2015.

Sleepy's LLC v. Select Comfort Wholesale Corp. ("Sleepy's I") , 133 F.Supp.3d 483 (E.D.N.Y. 2015). Briefly, Sleepy's commenced this action against Select Comfort asserting the following claims: breach of contract (causes of action one and two), fraudulent inducement, slander per se (causes of action four through seven), breach of the implied covenant of good faith and fair dealing, unfair competition, and violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). (See generally Am. Compl., Docket Entry 326, ¶¶ 52–94.) Sleepy's claims arise out of, inter alia : (1) a sales agreement with Select Comfort that made Sleepy's an authorized retailer of Select Comfort's Sleep Number beds (the "Agreement"), and (2) information obtained through "secret shops," where Sleepy's employees were instructed to pose as potential customers at Select Comfort stores and observe whether Select Comfort employees made disparaging comments about Sleepy's. Sleepy's I , 133 F.Supp.3d at 488–91.

Following a bench trial on liability before Judge Thomas C. Platt, Select Comfort moved for judgment as a matter of law. (Sept. 2012 Order, Docket Entry 825.) Judge Platt granted Select Comfort's motion on all claims. (See Sept. 2012 Order.) Sleepy's filed a partial appeal of Judge Platt's Order and the Second Circuit affirmed in part and vacated in part. Sleepy's LLC v. Select Comfort Wholesale Corp. ("Sleepy's II") , 779 F.3d 191, 193 (2d Cir. 2015). Four claims remained following remand. Id. On September 22, 2015, this Court dismissed Sleepy's remaining claims. Sleepy's I , 133 F.Supp.3d at 487.

I. Motion for Attorneys' Fees

On November 5, 2015, Defendant moved for attorneys' fees under the Lanham Act pursuant to 15 U.S.C. § 1117(a) (" Section 1117(a)"). (Def.'s Nov. 2015 Mot., Docket Entry 862.)² On January 11, 2016, the Court granted Defendant's motion, holding that this matter constituted an "exceptional case" warranting an award of attorneys' fees. See generally Sleepy's LLC v. Select Comfort Wholesale Corporation , No. 07-CV-4018, 2016 WL 126377 (E.D.N.Y. Jan. 11, 2016). The Court did not determine the amount of attorneys' fees to be awarded and directed the parties to submit a proposed briefing schedule for Defendant's separate application for reasonable attorneys' fees. Id. at *6.

On February 19, 2016, Defendant filed its pending motion for attorneys' fees. (Def.'s Mot., Docket Entry 871.) Defendant requested a total of $4,483,755.57 in attorneys' fees and costs. (Def.'s Aff., Docket Entry 872, ¶ 39.) Plaintiff opposed Defendant's motion, arguing, inter alia , that Defendant's fees should be limited to "work fairly allocable to the Lanham Act claim" and subject to additional reductions. (Pl.'s Br., Docket Entry 874, at 18.)

On April 12, 2016, the Court referred Defendant's motion to Judge Lindsay for a report and recommendation on whether the motion should be granted, as well as a determination of the appropriate amount of damages, costs, and/or fees to be awarded. (Docket Entry 879.)

II. The R & R

On August 8, 2016, Judge Lindsay issued her R & R recommending that Defendant's motion be granted with a reduction of its requested attorneys' fees and costs. (See generally R & R.) The R & R notes that Defendant was represented by Oppenheimer Wolff & Donnelly ("Oppenheimer"), a Minneapolis firm that later merged with Fox Rothschild LLP and assumed that firm's name. (R & R at 5 n.3.)

Additionally, Defendant retained Olshan Frome Wolosky LLP ("Olshon Frome") as local counsel and later retained Bryan Cave LLP as local counsel. (R & R at 5; Def.'s Aff. ¶ 5.) Judge Lindsay concluded that Oppenheimer's billing rates should not be reduced, but Select Comfort should not be awarded the time billed by Thomas Marek and Sally Tange based on the absence of any information regarding their positions or hourly rates. (R & R at 8 n.5.) Judge Lindsay also recommended that the Court decline to award fees for the time billed by Olshon Frome or Bryan Cave based on a lack of information regarding their attorneys' qualifications. (R & R at 17 n.9.)

Judge Lindsay rejected Plaintiff's argument that Defendant should only be awarded attorneys' fees for work related to the Lanham Act claim and concluded that the claims were so intertwined as to render it impossible to isolate the time devoted to the Lanham Act claim. (R & R at 14.) Judge Lindsay noted that Plaintiff's ten causes of action were "based on a single set of facts and an overarching theory, namely, that Select Comfort had engaged in an unfair business scheme [ ] to deprive [Sleepy's] of profits through a pattern of disparagement." (R & R at 14.) However, Judge Lindsay recommended that Defendant not be awarded fees incurred after the Lanham Act claim was dismissed on September 25, 2012. (R & R at 15.)

Additionally, Judge Lindsay recommended a ten percent reduction of Oppenheimer's overall hours incurred before Sept. 26, 2012 to account for duplicative work. (R & R at 19.) Similarly, Judge Lindsay recommended that Defendant be awarded fees for the time spent preparing its motion for attorneys' fees with a ten percent reduction of its time. (R & R at 21.) With respect to costs, Judge Lindsay recommended that Oppenheimer be awarded travel and meal costs with a fifty percent reduction of its time. (R & R at 20.) Judge Lindsay further recommended that Defendant be awarded online research costs. (R & R at 21.)

After the previously noted adjustments, Judge Lindsay recommended attorneys' fees and costs totaling $3,507,388.05. (R & R at 22.)

III. Plaintiff's Objections

Plaintiff argues that Judge Lindsay erred in concluding that its claims were sufficiently intertwined to support an award of attorneys' fees to Defendant for its defense of all claims. (Pl.'s Obj. at 4–5.) Plaintiff avers that each of its ten claims "involved a distinct sub-set of facts and issues" and were based on distinct legal theories. (Pl.'s Obj. at 6, 8–11.) As a result, Plaintiff argues that Defendant's requested fees should be apportioned to exclude the non–Lanham Act claims. (Pl.'s Obj. at 15–18.)

Plaintiff also argues that work performed regarding five motions should be excluded from Defendant's application, as these motions were unrelated to the Lanham Act claim. (Pl.'s Obj. at 12–15.) Plaintiff alleges that a "reasonable approximation" of the fees attributable to work performed regarding "the types of identifiable exclusively non–Lanham Act–related motions and projects, including the[se] five motions ... would be at least $250,000." (Pl.'s Obj. at 18.) Plaintiff alleges that an exact allocation of the remaining fees is impossible because Oppenheimer's billing records provide daily entries describing the tasks performed each day without specifying the time spent on each individual task. (Pl.'s Obj. at 15.) As a result, Plaintiff proposes that after the approximately $250,000 of fees for exclusively non–Lanham Act tasks are subtracted from Defendant's requested fees, the Court should utilize an "even allocation" and award Defendant ten percent of $3,257,388.55, or $325,738.86. (R & R at 17–18.)

IV. Defendant's Response

Defendant argues that Plaintiff has inappropriately rehashed its initial arguments and attempted to expand its arguments to include "new analysis, evidentiary material, and case law that it could have, but did not, present in its original briefing." (Def.'s Resp., Docket Entry 885, at 2.) As a result, Defendant avers that Plaintiff's new arguments should be rejected and the Court should review the R & R for clear error. (Def.'s Resp. at 12.)

Defendant alleges that Plaintiff's Objections are meritless. First , Defendant avers that Judge Lindsay properly declined to recommend apportioning its requested fees, as Plaintiff's claims involved a "common core of facts" or "related legal theories." (Def.'s Resp. at 3–4 (internal quotation marks and citation omitted).) Defendant argues that Plaintiff has created an unsupported, heightened standard by taking the position that claims are only "...