Attorneys’ Fees, Costs, Statutory Interest, and Remittitur in Trade Secrets Cases: Covidien LP v Esch

This seems to be the month for unicorns. In the past 30 days, we have had three.

First, there was the trademark case – literally about unicorns. Then, the First Circuit gave us rare insight into its approach to the enforceability of forum selection clauses in restrictive covenants. And now we’ve been given rare insight into attorneys’ fees, costs, statutory interest, and remittitur in the Massachusetts federal courts following a jury trial in a trade secrets case (cast as a breach of confidentiality provisions in a contract).

The case is Covidien LP v. Esch and it involves a familiar theme: An employee working for a company has access to valuable confidential information, leaves the company, takes the information, and uses it at a new company.

The jury awarded nearly $800,000 in damages.

The court then took up the question of attorneys’ fees, costs, interest, and remittitur.

On the issue of attorneys’ fees, the court provided six reminders / takeaways:

1. Courts in the First Circuit follow the lodestar method. “That method begins with a calculation of total hours worked, which is derived from authenticated billing records, reduced by any hours that are duplicative, unproductive or excessive. The total hours worked is then multiplied by a reasonable hourly rate. Courts may also consider a variety of other factors in determining the reasonableness of a fee award, including prevailing rates in the community, the qualifications, experience and specialized competence of the attorneys involved and the quantum of success achieved in the litigation.” (Citations and internal quotations omitted.)
2. Block billing (i.e., time entries where tasks are not separately itemized) will generally be reduced “across the board.” While the court cited examples of reductions in the range of 15 to 20 percent, the court reduced the fees in this case by 25 percent because so many time entries were in “increments of one-hour or more.”
3.  Unwarranted and/or duplicative fees will be cut. The court found in that the bills in this case reflected “overstaffing of both local and out of town attorneys, duplicative entries, inefficient use of junior attorneys, vague work descriptions and unreasonable hourly rates of support staff.”
4. A fee award will be reduced to reflect the degree of the party’s success in the case, which the court described as a “bedrock principle.”
5. A court may also reduce an award if the fees are not commensurate with the damages.
6. Though perhaps too obvious to mention, lawyers, time billers, and anyone else involved in the reviewing and proofing of invoices need to be extremely careful to make sure that the time is charged to the correct client, and more importantly, not charged to the wrong client. Billing mistakes – particularly ones involving time entires appearing on the wrong client’s invoice – can undermine the integrity of the bill.

On the issue of costs, the court provided five reminders / takeaways:

1. Courts have broad discretion to award costs, even where the results in the case were mixed.
2. “As with attorneys’ fees, [courts have] a duty to ensure that costs sought to be reimbursed are reasonable.”
3. Travel and lodging expenses for out-of-state attorneys face an uphill battle for recovery (as the court may view them as unreasonable or unnecessary).
4. Copying and printing costs associated with a party’s own deposition transcripts are unrecoverable.
5. Courts may reduce an award of costs to account for a “partial success.” In this case, the court reduced the approved costs by 50 percent.

On the issue of interest, the court provided two reminders / takeaways:

1. If parties to a contract want something other than statutory simple interest at 12 percent (such as compound interest), they can and must include it in their agreement.
2. In a jury trial, only the jury can determine the date of the breach or demand (and therefore the date interest starts to accrue). If the jury does not expressly find that date (inferences are insufficient), the court must use the commencement of the action as the start date, and the plaintiff will not receive prejudgment interest.

On the issue of remittitur, the court provided the following two reminders / takeaways:

1. To overturn jury’s award of damages “[t]he Court must conclude that, when viewed in the light most favorable to the prevailing party, the award exceeds any rational appraisal or estimate of the damages that could be based upon the evidence before it. In other words, the party seeking remittitur must show that the award is grossly excessive, inordinate, shocking to the conscience, or so high that it would be a denial of justice to permit it to stand.” (Citations and internal quotations omitted.)
2. The valuation of a defendant’s use of the plaintiff’s confidential information in a breach of contract case is an appropriate remedy (assuming they can be calculated with reasonable certainty).

Between this decision and the First Circuit’s decision in NuVasive v. Day, Massachusetts trade secrets and restrictive covenants practitioners have received some very helpful guidance this past month. Stay tuned to see if there’s any more coming!