U.S. v. Guess
| Decision Date | 23 February 2006 |
| Docket Number | No. 04CV2184-LAB(AJB).,04CV2184-LAB(AJB). |
| Citation | 425 F.Supp.2d 1143 |
| Court | U.S. District Court — Southern District of California |
| Parties | UNITED STATES of America, Plaintiff, v. L. Donald GUESS, et al., Defendants. |
Stuart D. Gibson, United States Department of Justice, Tax Division, Washington, DC, U.S. Attorney CV, U.S. Attorneys Office, Southern District of California, Civil Division, San Diego, CA, for Plaintiff.
Darrell D. Hallett, John M. Colvin, Chicoine and Hallett, C. James Frush, Gordon Thomas Honeywell Malanca Peterson and Daheim, Seattle, WA, Miriam L. Fisher, Morgan Lewis and Bockius, Bruce Zagaris, Berliner Corcoran and Rowe, Washington, DC, James N. Mastracchio, Martina Bernstein, Morgan Lewis and Bockius, S. Thomas Pollack, Irell and Manella, Los Angeles, CA, Frank T. Vecchione, Law Office of Frank T. Vecchione, Michael L. Lipman, Coughlan Semmer and Lipman, San Diego, CA, for Defendants.
FEE AWARD CALCULATION ORDER
This matter is before the court following supplemental briefing to substantiate defendant xélan Foundation, Inc.'s ("Foundation") claim for attorneys' fees and costs incurred to defend this litigation, from the time plaintiff the United States obtained its unnoticed TRO on November 3, 2004 through the hearing of plaintiffs unsuccessful motion for preliminary injunction on December 3, 2004 and for expenses incurred to prepare its fees and costs application. The Court took the matter under submission for decision on the papers and without oral argument, pursuant to Civil Local Rule 7.1(d)(1). For the reasons discussed below, all claimed costs are approved as unopposed and facially reasonable. The Foundation's application for attorneys' under 26 U.S.C. § 7430 of the Internal Revenue Code ("Section 7430") is GRANTED IN PART and DENIED IN PART, as modified herein.1
By Order entered July 5, 2005, the court conditionally granted the Foundation's application to recover its reasonable attorneys' fees incurred to defend this action, claimed then to be in the actual amount of $232,176.30 or, alternatively, in the statutory amount of $101,008.05, and its costs, claimed then to be in the actual amount of $5,443.05. The court determined an award of the Foundation's undisputed claimed costs and an award of reasonable attorneys' fees was warranted under Section 7430. Dkt No. 148. The court instructed the Foundation to provide supporting documentation to substantiate the attorney tasks, time, qualifications, and billing rates. The court solicited briefing from both sides to assist in its determination whether deviation from the statutory hourly rate cap may be warranted. The Foundation has incorporated the costs of its fees substantiation and supplemental briefing, raising its request for attorneys' fees to the new billed amount of $312,049.75 (an increase of an additional $79,873.45), claiming a new total of 325 hours incurred by ten attorneys to prepare the application and substantiation. Its total litigation costs claim is $6,817.83. Dkt No. 150 16:1-2.
The government argues no deviation from the statutory hourly rate cap is warranted for any of the activities of the Foundation's attorneys and disputes the reasonableness of the claimed time to prepare the fee application. The issues presented are: (1) whether the Foundation justifies a fee recovery at a rate in excess of the statutory maximum based on the "special factor" that it required counsel with expertise in tax and complex litigation; (2) the meaning of the availability of competent counsel as a consideration for waiver of the hourly rate cap in determining a Section 7430 fee award; (3) if the Foundation is entitled to recover fees at a rate in excess of the statutory cap for some of its attorneys, whether the Foundation is entitled to recover fees for all 21 of its attorneys at their normal billing rates, all of which are in excess of the statutory maximum; (4) if the Court determines that some of the Foundation's attorneys are entitled to compensation at a rate higher than the statutory maximum, whether the Foundation is entitled to recover at the billed rate; (5) whether all time spent on all billed activities, in particular the preparation of the application to recover fees and costs, should be reimbursed by the government at a rate above the statutory maximum; and (6) whether the claimed hours of attorney time is reasonable, "especially the 325 hours claimed for the work of ten lawyers pursuing its motion for fees and costs" (Opp.3:1-3).
The Foundation provided the declarations of nineteen professionals it contends "demonstrate that each attorney representing the Foundation in this litigation has the `special expertise' required" for waiver of the Section 7430 cap on hourly rates, and that "such expertise was essential in order for the Foundation to be adequately represented in this case." Appl. 6:14-21 (emphasis added). All participating counsel emphasize the short time period the Foundation had to prepare a defense against entry of a preliminary injunction and the "monumental task" it faced while access to its own records was restricted. See, e.g., Johnson Decl. ¶ 2. As a general principle, such a timing circumstance can justify a large number of billed hours, but does not necessarily advance the issue of reasonable hourly compensation under Section 7430. The government objects:
According to the Foundation's affidavits, every single one of their attorneys, and one paralegal, should be compensated for every hour devoted to every task in this case—from reading e-mails, to drafting press releases, to participating in conference calls, or preparing the fee application—at a rate exceeding the statutory cap, with some attorneys allegedly entitled to rates more than quadruple that cap.
Nine Sheppard Mullin attorneys billed a total of $98,273.00 in fees for 225.90 hours at claimed hourly rates ranging from $240.00 to $530.00, for the firm's role in defending the Foundation in this action, plus $1,167.79 in costs. Naughton Decl., Lodg. Ex. 1, 2:12-22. The Naughton Declaration emphasizes: the complexity of the tax and mail fraud allegations involving hundreds of transactions, the onerous time constraints; the need to use "tax planning and tax litigation counsel" to research corporate records, audit records, accounting records; the need to provide "declarations and legal background materials and drafts;" the need to engage "an excellent trial lawyer" to handle "the interviewing of the Foundation employees, the auditor, donors" and to handle "document requests to the Receiver" to procure the exhibits in support of the Foundation's opposition to entry of a preliminary injunction. Naughton Decl. ¶¶ 5, 6.
1. Ms. Naughton is described as a partner in her law firm with 25 years of experience as an attorney specialized in fraud cases, having tried one tax case to a jury and having defended numerous actions against the government's efforts to seize assets. She prepared "successive drafts of the brief" in opposition to the government's motion for a preliminary injunction and presented oral argument at the motion hearing. She billed 87.2 hours at an hourly rate of $530.00;
2. Roscoe C. Howard, Esq. is described only as a former United States Attorney for the District of Columbia. He "assisted in the outline and strategy of the brief." He billed 6.80 hours at an hourly rate of $525.00;
3. Daniel S. Seikaly, Esq. is described as a former Chief of the Criminal Division of the United States Attorney's Office for the District of Columbia. He also "assisted in the outline and strategy of the brief." He billed 4.10 hours at an hourly rate of $450.00;
4. Mark E. Nagle, Esq. is described as a former Chief of the Civil Division of the United States Attorney's Office for the District of Columbia who has handled similar Tax Division injunctive relief actions under the same statutes as in this case. He wrote the "first drafts of the brief." He billed 36 hours at an hourly rate of $450.00;
5. Andre P. Barlow, Esq. is described only as Mr. Nagle's associate. He "did the bulk of the legal research" for the brief, and billed 55.5 hours at an hourly rate of $345.00;
6. Elizabeth A. Balfour, Esq. is described only as a former law clerk to United States District Judge Huff. She performed "final edits" and "compilation" of the brief. She billed 20 hours at an hourly rate of $305.00;
7. Rebecca A. Shults, Esq. is described only as a former law clerk to United States District Judge Moskowitz who performed "research for oral argument." She billed 8.8 hours at an hourly rate of $240.00;
8. Eileen M. Gorman's qualifications are not described. She billed 1.8 hours at an hourly rate of $240.00; and
9. Matthew Richardson, Esq. is described as "a tax attorney who specializes in advising charitable entities." He "provided assistance in preparation for oral argument." He billed 5.7 hours at an hourly rate of $465.00.
Attorney Frank J. Johnson (formerly of Sheppard Mullin) and his firm became the Foundation's co-counsel of record beginning November 10, 2004 to prepare the Foundation's opposition to entry of a preliminary injunction. Johnson Decl. ¶ 2, Lodg. Exh. 2. He recites his firm's contributions as primarily "gathering the facts and evidence (interviewing witnesses, obtaining declarations, working with the receiver, meeting with the auditor, etc.)" and participating in the December 3, 2004 oral argument. Id. ¶ 3. Mr. Johnson recites his particular relevant qualifications as having represented "numerous clients involved in complex civil litigation, including securities fraud class actions, consumer class actions, and tax fraud cases raising similar issues to those raised in this matter." Id. ¶ 9 (emphasis added).
Mr. Johnson billed 160.7 hours...
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