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United States ex rel. Palmer v. C&D Technologies, Inc.

United States Court of Appeals, Third Circuit

July 17, 2018

C&D TECHNOLOGIES, INC. Donald Palmer, Appellant

          Submitted Under Third Circuit L.A.R. 34.1(a) March 13, 2018

          On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civ. Action No. 2:12-cv-00907) District Judge: Honorable Gene E. K. Pratter

          Ross Begelman Marc Orlow Begelman & Orlow James B. Helmer, Jr. Paul B. Martins James A. Tate Helmer, Martins, Rice & Popham Co. Attorneys for Appellant

          Paula C. Cedillo Charles D. Ray Thomas J. Finn McCarter & English Katelyn Gillece Michael J. Glasheen McCarter & English Attorneys for Appellee

          Before: JORDAN, KRAUSE, and GREENBERG, Circuit Judges



         In this action under the False Claims Act, 31 U.S.C. §§ 3729-3733 (2012), Donald Palmer ("Relator") settled his claim with defendant C&D Technologies, Inc. ("C&D"), thereby entitling Relator to reasonable attorneys' fees and costs. Id. § 3730(d)(2).[1] The parties, however, were unable to reach an agreement on attorneys' fees. In contesting the fees, both parties adopted unproductive tactics and strayed from professional etiquette, conduct that ultimately caused the District Court to proclaim that "[i]t is a hellish judicial duty to review and resolve disputed attorneys' fee petitions, particularly in cases, like this one, where the adversaries fan the flames at virtually every opportunity." App. 8. While Relator sought $3, 113, 530.50 in fees, the Court reduced that amount to $1, 794, 427.27.[2] Relator timely appealed from orders that the Court entered on April 25, 2017, and May 24, 2017, awarding fees and costs. We will remand on one narrow ground, but otherwise affirm the Court's orders in all other respects.

         I. FACTS

         A. Background

         In this False Claims Act action, Relator claimed that C&D manufactured and shipped some 349 defective batteries to the United States government for use in intercontinental ballistic missile launch controls. In the summer of 2014, after some four years of litigation, the parties engaged in active mediation. Relator subsequently demanded a settlement of $1.5 million, plus fees and costs, and the negotiations ended without success.

         Then, in the spring of 2015, Relator filed a Second Amended Complaint in which he expanded his demands for alleged damages to $30 million, or twenty times the amount of his initial demand. After the District Court denied cross-motions for summary judgment, the parties settled the case for $1.7 million, representing about six percent of the total amount that the Relator demanded in his Second Amended Complaint.

         B. Attorneys' Fees Dispute

         As a statutory matter, the settlement made Relator a prevailing party under the False Claims Act, entitling him to an award of "reasonable attorneys' fees and costs." 31 U.S.C. § 3730(d)(2) (emphasis added). Although the parties settled the merits of the case, they were not able to agree on the fees that Relator should recover. Initially Relator sought $2, 367, 904.85 in attorneys' fees as of December 31, 2015. As the District Court explained, "C&D responded that the reasonable fee amount should have been no more than about half that amount, arguing essentially that the case had been over-staffed and over-worked by the Relator's various sets of lawyers, and that the fee petition was based on the wrong hourly rates and included duplicative entries, inappropriate submissions such as for travel time, and, finally, that there should be a reduction of the amount awarded for degree of success, or rather, lack of success, given the modest settlement amount." App. 10.

         According to the District Court, both parties' counsel were uncooperative and did not act in good faith:

The Court repeatedly offered certain guidance for possibly bridging the chasm and directed the parties' counsel to exchange various pertinent information in an effort to minimize areas of disagreement. Counsel were equally slow to do so, and the hoped for exercise that the Court intended as a way to persuade counsel of the benefits of good faith and good sense achieved very little - other than to lead to an exchange [of] dueling briefs, innuendo and insults.

App. 10.

         Relator responded to C&D's objections by increasing his fee demand to $3, 278, 115.99, or, as the District Court observed, "almost $1 million more than the fees [he] sought a year ago and almost twice the dollar amount of the settlement [he] reached." App. 11. Notably, Relator opted to apply hourly rates that he "extrapolated" from actual Community Legal Services ("CLS") rates and which were higher than those that he originally used to calculate his fee demand. App. 11.

         C. The District Court's Rulings

         In its decision, the District Court emphasized that it "was at all times well aware of who was doing what, to what possible end and [had] been entirely attentive to the at times puzzling performance of the professional duties of the lawyers." App. 11. The Court noted that its resolution of the fee award reflected its "hands-on contemporaneous evaluation (and necessary attendant factual findings) of the services performed and for which payment is sought." App. 11. It found that, "[i]n the main, . . . C&D's opposition to the fee petition adopts most of the Court's guidance as to, for lack of a better term, 'lawyer hours' and acceptable rates for various tasks undertaken." App. 11 n.6. It then proceeded to resolve the areas in dispute.

         i. Hourly Rates

         The parties and the District Court agreed that the rate issue was "best resolved by using primarily - if not exclusively - the rates promulgated by the Philadelphia office of Community Legal Services." App. 15 (citing Maldonado v. Houstoun, 256 F.3d 181, 187-88 (3d Cir. 2001) ("The fee schedule established by [CLS] has been approvingly cited by the Third Circuit as being well developed and has been found by [the Eastern District of Pennsylvania] to be a fair reflection of the prevailing market rates in Philadelphia." (second alteration in original) (quotation marks and citation omitted)). The Court rejected Relator's "extrapolated" rates that were higher than the CLS rates because "the CLS rates promulgated in 2014 remain the actual current rates; neither CLS nor any court in any reported opinions that this Court has been able to locate have resorted to the 'extrapolation' technique now used by [Relator's] counsel." App. 16. Because the CLS rates provided a range-rather than a specific dollar amount-for reasonable hourly rates, the Court elected "to take an equitable approach" and "direct[ed] counsel to use for each time-keeper for whom a fee is sought and permitted an hourly rate at the mid-point of the applicable range." [3] App. 16.

         ii. Reasonableness of Hours Claimed

         The District Court reduced Relator's recoverable attorney hours for, inter alia, depositions, document review, summary judgment motions, a motion for reconsideration, Daubert motions, and travel time expenses.

         1. Depositions

         In regard to depositions, C&D objected both to the number of hours involved in taking and preparing for depositions, as well as the number of attorneys attending some of those depositions on behalf of Relator. In its decision, the District Court remarked that during its various meetings regarding the fee dispute, it had "frequently addressed the matter of the crowd of counsel at the depositions and in preparation sessions for them." App. 17.

         Based on previous guidance that it had issued to the parties, the District Court permitted Relator to receive fees for the twelve depositions that C&D specifically challenged, but limited those fees in each deposition to those generated by the Relator lawyer who actually did the questioning and one other Relator lawyer actually in attendance. The Court also allowed "[p]rep time compensation" for each deposition of one lawyer per deposition (i.e., the lawyer who actually logged preparation time for the deposition), "up to a maximum of 1.75 preparation hours per hour of documented deposition time." App. 17. If less than 1.75 hours/deposition hour was recorded, then the lesser time value had to be used.[4]

         2. Summary Judgment and ...

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