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Blagrave v. Nutrition Management Services Co.

February 20, 2009

RICHARD BLAGRAVE
v.
NUTRITION MANAGEMENT SERVICES CO., ET AL.



The opinion of the court was delivered by: Harvey Bartle III C.J.

MEMORANDUM

Bartle, C.J.

Following a five-day jury trial, judgment was entered in favor of the plaintiff, Richard Blagrave, and against his former employer, Nutrition Management Services Co. ("Nutrition Management"), and its officers, Joseph Roberts, and Kathleen Hill, in the amount of $2,598.38 under Pennsylvania's Wage Payment and Collection Law ("WPCL"), 43 Pa. Stat. Ann. § 260.1 et seq. The jury, however, found the plaintiff had failed to meet his burden of proof with respect to his claim for unlawful retaliation in violation of the Sarbanes-Oxley Act ("SOX"), 18 U.S.C. §1514A, et seq. Now pending before the court is the motion of Richard Blagrave for attorneys' fees in the amount of $147,065.65 and costs in the amount of $9,705.13 pursuant to § 9a(f) of Pennsylvania's WPCL.

I.

The plaintiff filed a five-count complaint alleging violations of SOX and Pennsylvania's WPCL, as well as several common law causes of actions. After the plaintiff withdrew his claim for intentional infliction of emotional distress, the court granted summary judgment with respect to the plaintiff's claims for fraudulent misrepresentation and "piercing the corporate veil" and with respect to a portion of his SOX claim.

Blagrave's focus at trial was his SOX claim for unlawful retaliation, which involved attempting to prove he suffered an unfavorable personnel action for providing information about allegedly fraudulent acts committed by defendants. The alleged fraudulent acts in this case included a scheme by Nutrition Management to defraud its customers by, among other things, misrepresenting to clients the personnel it staffed to its accounts, misrepresenting its payroll expenses, failing to disclose vendor rebates, fraudulently mischarging clients for various expenses, and overstating its accounts receivables and payables.*fn1 In contrast, the WPCL claim, which centered on whether Blagrave and Nutrition Management entered into an oral agreement for the payment of his COBRA and business related expenses, played a minor role at trial.

The damages portion of the trial included testimony from plaintiff's vocational expert who opined that his loss of earning capacity ranged between approximately $482,000 and $562,000. This would have been compensable under the SOX claim. The jury, as noted above, rejected plaintiff's SOX claim for unlawful retaliation and awarded him only $2,598.38 in damages under the WPCL.

II.

Section 260.9a(f) of Pennsylvania's WPCL states: The court in any action brought under this section shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow costs for reasonable attorneys' fees of any nature to be paid by the defendant.

43 Pa. Stat. Ann. § 260.9a(f).

In statutory fee-shifting cases, we apply the "lodestar" method of calculating attorneys' fees, which requires us to multiply the number of hours reasonably expended by a reasonable hourly rate. Loughner v. Univ. of Pittsburgh, 260 F.3d 173, 177 (3d Cir. 2001). If and when the party seeking fees carries his burden "of showing that the claimed rates and number of hours are reasonable, the resulting product is presumed to be the reasonable fee to which counsel is entitled." Maldonado v. Houstoun, 256 F.3d 181, 184 (3d Cir. 2001). Nonetheless, the court retains the discretion to modify the lodestar and may adjust it downward if it is unreasonable in light of the results obtained. Rode v. Dellarciprete, 892 F.2d 1177, 1183 (3d Cir. 1990). One reason for such a reduction can be "for time spent litigating wholly or partially unsuccessful claims that are related to the litigation of the successful claims." Id.

A. Hours Expended

A court calculating the hours reasonably expended must "review the time charged, decide whether the hours set out were reasonably expended for each of the particular purposes described and then exclude those that are 'excessive, redundant, or otherwise unnecessary.'" Public Int. Research Group of N.J., Inc. v. Windall, 51 F.3d 1179, 1188 (3d Cir. 1995); Maldonado, 256 F.3d at 184. Our Court of Appeals has stressed that the court has "a positive and affirmative function in the fee fixing process, not merely a passive role." Id.; Loughner, 260 F.3d at 178. It has further explained that we should "reduce the hours claimed by the number of hours spent litigating claims on which the party did not succeed, that were distinct from the claims on which the party did succeed, and for which the fee petition inadequately documents the hours claimed." Id. Furthermore, the party opposing the motion for fees has the burden "to challenge 'by affidavit or brief with sufficient specificity to give fee applicants notice, the reasonableness of the requested fee.'"

Id. (citing Rode v. Dellarciprete, 892 F.2d 1177, 1183 (3d Cir. 1990).

Blagrave contends that he actually expended over $248,000 in attorneys' fees for the successful prosecution of his relatively simple WPCL claim, on which he recovered $2,598.38. He asserts this claim required a team of 4 attorneys, 2 law clerks, and 2 paralegals and the expenditure of over 720 billable hours. However, in apparent recognition of the incredulity of such a request, he seeks to recover only $147,065.65 of those fees under the WPCL statute providing for the recovery of a reasonable attorney fee. Despite plaintiff's protests to the contrary, these reduced figures are likewise incredulous. They defy common sense and are palpably excessive.

In order to analyze Blagrave's request, we must understand the formula he used to arrive at these figures. With respect to hours expended, Blagrave reached the 723 hour figure by eliminating from the total of 1,521 hours billed for the entire litigation, a portion of those hours spent prosecuting his unsuccessful claim under the Sarbanes-Oxley Act, and all hours spent prosecuting his state law claims for fraud and to pierce the corporate veil. According to plaintiff, this reduced his total attorneys' fees from $527,347.15 to his initial lodestar value of $248,014.15.

He then reduced the hours spent on pretrial discovery, summary judgment briefing, trial preparation and trial by 50% as a means of isolating time spent on "the WPCL claim and the time spent on his SOX claim that were inextricably intertwined with the factual proof necessary to establish Blagrave's WPCL claims." Pl.'s Mot. for Att'y Fees & Costs, p. 12. Thus, Blagrave asserts he should recover for a portion of the time spent litigating his unsuccessful SOX claim because it derived from a "common core of facts" with his WPCL claim. The alleged common core of facts that Blagrave argues is relevant to both his WPCL and SOX claims involves the issue whether he entered into a written Management Agreement providing for payment of his COBRA expenses.

With respect to his SOX claim, Blagrave asserted Nutrition Management unlawfully retaliated against him for providing information about allegedly fraudulent acts committed by it. Under SOX, a publicly traded corporation such as Nutrition Management may not discharge, demote, suspend, threaten, harass or otherwise retaliate against an employee when that employee provides information to his employer that the employer is engaging in wire fraud, mail fraud, or securities fraud, among other things. To prevail on his claim of retaliation under SOX, Blagrave had to prove, among other things, that he suffered an unfavorable personnel action as a result of providing such information. Nutrition Management denied the allegations and countered that Blagrave's employment ended because he refused to sign the Management Agreement presented to him.

Blagrave's WPCL claim required that he prove that he entered into an oral contract with Nutrition Management under which Nutrition Management was required to pay for his COBRA and business expenses. Nutrition Management argued that it did not enter into an oral agreement to pay for Blagrave's COBRA expenses. It maintained that any COBRA benefit would have been included in the written Management Agreement which he never signed.

We must initially determine whether Blagrave's SOX claim and his WPCL claim derive from a common core of facts such that he is entitled to recover for a portion of the time spent litigating his unsuccessful SOX claim. In Hensley v. Eckerhart, 461 U.S. 424 (1983), the Supreme Court explained:

In other cases the plaintiff's claims for relief will involve a common core of facts or will be based on related legal theories. Much of counsel's time will be devoted generally to the litigation as a whole, making it difficult to divide the hours expended on a claim-by-claim basis. Such a lawsuit cannot be viewed as a series of discrete claims. Instead the district court should focus on the significance of the ...


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