“[N]o court of appeals has held that disclosure of the general subject matter of a billing statement under fee-shifting statutes violates attorney-client privilege.”
How later courts described this case
- “[N]o court of appeals has held that disclosure of the general subject matter of a billing statement under fee-shifting statutes violates attorney-client privilege.”
- “[T]he best evidence of whether attorney’s fees are reasonable is whether a party has paid them.”
- “[S]ome distinctly ‘national’ litigation, such as multi-district litigation under 28 U.S.C. § 1407, may justify the use of essentially ‘national’ rates because the location of the forum court is fortuitous.”
- “Although ‘block billing’ does not provide the best possible description of attorneys’ fees, it is not a prohibited practice.”
Written by the judges who cited it.
The opinion
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
IN RE: METHOD OF PROCESSING )
ETHANOL BYPRODUCTS AND ) CASE NO. 1:10-ML-2181 RLM-DML
RELATED SUBSYSTEMS (‘858) )
PATENT LITIGATION )
: )
)
1:10-cv-0180-RLM-DML )
1:10-cv-8000-RLM-DML )
1:10-cv-8001-RLM-DML )
1:10-cv-8002-RLM-DML )
1:10-cv-8003-RLM-DML )
1:10-cv-8004-RLM-DML )
1:10-cv-8005-RLM-DML )
1:10-cv-8006-RLM-DML )
1:10-cv-8007-RLM-DML )
1:10-cv-8008-RLM-DML )
1:10-cv-8009-RLM-DML )
1:10-cv-8010-RLM-DML )
1:13-cv-8012-RLM-DML )
1:13-cv-8013-RLM-DML )
1:13-cv-8014-RLM-DML )
1:13-cv-8015-RLM-DML )
1:13-cv-8016-RLM-DML )
1:13-cv-8017-RKM-DML )
1:13-cv-8018-RLM-DML )
1:14-cv-8019-RLM-DML )
1:14-cv-8020-RLM-DML )
OPINION AND ORDER
The defendants’ motions for attorneys’ fees and expenses and their joint
motion to strike the affidavit of the plaintiff’s expert, David McMahon, are before
the court. For the reasons that follow, the court grants the motion to strike
and grants the motions for fees in part.
As a preliminary but necessary matter, the court apologizes to the parties
for the length of time it has taken to resolve these motions. The original transferee
judge, Larry McKinney, did nearly all the heavy lifting in this case, and then
passed. The successor judge had a lot of catching up to do. Recognizing the magnitude
of the record to be reviewed, the court appointed a special master to recommend
resolution of the motions, but health problems during the pandemic kept him from
accomplishing his task, so court took matters back into chambers. At long last,
the court rules.
I. STANDARD OF REVIEW
“[A] district court may award fees in the rare case in which a party’s
unreasonable conduct – while not necessarily independently sanctionable – is
nevertheless so ‘exceptional’ as to justify an award of fees.” Octane Fitness,
LLC v. Icon Health & Fitness, Inc., 572 U.S. 545, 555 (2014); Kilopass Techy.,
Inc. v. Sidense Corp., 738 F.3d 1302, 1313 (Fed. Cir. 2013) (“[T]he aim of 285
is to compensate a defendant for attorneys’ fees it should not have been forced
to incur.”). A prevailing party that obtains “excellent results . . . should recover
a fully compensatory fee” that normally “will encompass all hours reasonably
2
expended on the litigation.” Hensley v. Eckerhart, 461 U.S. 424, 435 (1983); Mathis
v. Spears, 857 F.2d 749, 755 (Fed. Cir. 1988).
Hensley sets the standard for determining whether a fee request is
reasonable, and provides that “[t]he most useful starting point is the number
of hours reasonably expended on the litigation multiplied by a reasonable hourly
rate,” commonly known as the lodestar. Id. at 433; Divane v. Krull Elec.
Co., 319 F.3d 307, 317 (7th Cir. 2003); Spegon v. Cath. Bishop of Chi., 175 F.3d
544, 550 (7th Cir. 1999); Eli Lilly & Co. v. Zenith Goldline Pharms., Inc., 264
F. Supp. 2d 573 (S.D. Ind. 2003) (standard method for determining reasonable
attorney fees in “exceptional” patent cases is the “lodestar” method). A lodestar
containing reasonable hours and reasonable hourly rates is presumptively, but
not irrebuttably, reasonable. Hensley v. Eckerhart, 461 U.S. at 433–434.
“The party seeking the fee award bears the burden of proving the
reasonableness of the hours worked and the hourly rates claimed.” Spegon v. Cath.
Bishop of Chi., 175 F.3d at 550 (citing Hensley v. Eckerhart, 461 U.S. at 433).
If the hours were not reasonably expended, or the documentation of hours is
inadequate, the court must exclude them from its fee calculation. Hensley v.
Eckerhart, 461 U.S. at 434; Spegon v. Cath. Bishop of Chi., 175 F.3d at 550. The
court may adjust the modified lodestar based on a “variety of factors, the most
3
important of which is the ‘degree of success obtained.’” Spegon v. Cath. Bishop
of Chi., 175 F.3d at 550 (citing Hensley v. Eckerhart, 461 U.S. at 434–436).
A reasonable hourly rate is derived from the “market rate” for the services
rendered. Montanez v. Simon, 755 F.3d 547, 553 (7th Cir. 2014); Spegon v. Cath.
Bishop of Chi., 175 F.3d at 554; People Who Care v. Rockford Bd. of Educ., 90
F.3d 1307, 1310 (7th Cir. 1996). The “market rate is the rate that lawyers of
similar ability and experience in the community normally charge their paying
clients for the type of work in question.” Spegon v. Cath. Bishop of Chi., 175
F.3d at 555 (citations omitted). “The attorney’s actual billing rate for comparable
work is ‘presumptively appropriate’ to use as the market rate.” People Who Care
v. Rockford Bd. of Educ., 90 F.3d at 1310. So too, evidence that clients paid
the fees that were billed is sufficient to show reasonableness. Cintas Corp. v.
Perry, 517 F.3d 459, 469 (7th Cir. 2008) (“[T]he best evidence of whether attorney’s
fees are reasonable is whether a party has paid them.”); In re Synthroid Mktg.
Litig., 264 F.3d 712, 722 (7th Cir. 2001) (“If counsel submit bills with the level
of detail that paying clients find satisfactory, a federal court should not require
more.”); Balcor Real Estate Holdings, Inc. v. Walentas-Phoenix Corp., 73 F.3d
150, 153 (7th Cir. 1996) (“[T]he best evidence of the market value of legal services
is what people pay for it. Indeed, this is not ‘evidence’ about market value; it
market value.”).
4
“[O]nce the attorney provides evidence of the market rate, the burden shifts
to the opposing party to show why a lower rate should be awarded.” Vega v. Chi.
Park Dist., 12 F.4th 696, 705 (7th Cir. 2021) (quoting Stark v. PPM Am. Inc.,
354 F.3d 666, 675 (7th Cir. 2004)).
II. BACKGROUND
The facts in this case were set out in great detail in GS Cleantech Corp
v. Adkins Energy LLC, 951 F.3d 1310, 1316–1324 (Fed. Cir. 2020), and only a skeletal
recounting is needed for today’s purposes. Between 2009 and 2014, GS CleanTech
Corporation filed suit against a number of defendants in various states alleging
that they violated its patented method for extracting corn oil from ethanol
byproducts. In 2010, The Judicial Panel on Multi-District Litigation consolidated
the cases in the Southern District of Indiana for pretrial proceedings in MDL
No. 2181, Cause No. 1:10-ML-2181, which culminated in an overwhelming victory
for the defendants, who prevailed on summary judgment, when Judge McKinney
invalidated CleanTech’s patents and ruled them unenforceable, In re Method of
Processing Ethanol Byproducts & Related Subsytems (‘858') Patent Litig., 303 F.
Supp. 3d 791 (S.D. Ind. 2014), at trial on their inequitable conduct claim. In
re Method of Processing Ethanol Byproducts & Related Substems (‘858') Patent
Litig., No. 1:10-ml-2181 LJM-DML, 2016 WL 4919980 (S.D. Ind. Sep. 15, 2016). The
ruling was affirmed on appeal, GS CleanTech Corp. v. Adkins Energy LLC, 951 F.3d
5
1310 (Fed. Cir. 2020), , 141 S. Ct. 1377 (2021), and enforced on on
the motion for an exceptional case declaration and award of fees under 35 U.S.C.
§ 285 [Doc. No. 1908]. The amount of that award remains to be determined.
Fifteen law firms and more than 200 attorneys, paralegals, technical
assistants, and support staff provided services to the defendants over the
protracted course of this litigation. The defendants seek in excess of $16 million
for those services, related non-taxable expenses, and the expert fees they incurred
between 2010 and January 30, 2018, as well as prejudgment interest. They also
seek leave to file supplemental motions for fees incurred on appeal. This is a
summary of what they have asked for1:
GEA Mechanical Patterson Belknapp Webb Attys Fees: $3,753,548.32
Equipment US & Tyler LLP (New York)
Expenses: 150,561.20
and
Experts: 160,627.06
Ace Ethanol, LLC
TOTAL: $4,064,736.58
[Doc. No. 1792]
(Binder No. 4)
ICM and its Dicke, Billig & Czaja Attys Fees: $3,186,945.21
customers (Minneapolis, MN) Expenses: 144,739.14
Experts:
[Doc. Nos. 1759 and Patterson Belknapp 176,034.56
1760-1] (New York, NY)
(Binder No. 5) TOTAL: $3,507,718.91
1 The attorney fees have been adjusted to reflect credits for the Cantor Colburn
settlement.
6
Fleeson, Gooing, Coulson
& Kitch (Wichita, KS)
Baker & Daniels
(Indianapolis, IN)
(Chicago, IL)
Cozen O’Connor
(New York, NY)
Brian Burris/Hinkle Law
Firm
Schwegman, Lundberg,
Woessner, P.A.
(Minneapolis, MN)
Woodard Emhardt
(Indianapolis, IN)
Bushmills Ethanol Michael Best & Friedrich Attys Fees: $2,669,311.262
(Madison, WI) Expenses: 73,223.11
Chippewa Valley Experts:
Ethanol Co. 98,214.83
Heartland Corn TOTAL: $2,840,749.20
Products
United Wisconsin
Grain Producers
[Doc. No. 1786-1]
2 The attorneys’ fees Chippewa Valley and Heartland requested in their motion [Doc.
No. 1786-1] differ significantly from the amounts identified in attorney Michael Best’s
supporting affidavit [Doc. No. 1781-2 at pp. 9 and 11–12], and include “unbilled” and
undocumented fees for services provided after January 31, 2018. Those discrepancies
are addressed later in this opinion.
7
(Binder No. 9)
Iroquois Bio-Energy Woodard, Emhardt, Attys Fees: $1,375,400.50
Moriarty, McNett & Henry Expenses: 52,695.71
[Doc. No. 1777-1] (Indianapolis, IN) Experts:
(Binder No. 6) 20,957.10
TOTAL: $ 1,449,053.31
Blue Flint Ethanol Stinson Leonard Street, Attys Fees: $ 899,413.57
LLP (Minneapolis, MN) Jt Def Fund: 50,000.00
[Doc. No. 1789] Expenses: 69,913.06
(Binder No. 3) Experts:
23,137.39
TOTAL: $1,042,464.02
Al-Corn Clean Fuel Stoel Rives LLP Attys Fees: $ 755,803.55
(Minneapolis, MN) Jt Def Fund: 50,000.00
[Doc. No. 1746-1] Expenses: 26,137.32
(Binder No. 2) Experts: 170,555.94
TOTAL: $1,002,496.813
Lincolnway Energy Nyemaster Goode, PC Attys Fees: $ 938,996.84
(Iowa) Expenses: 30,802.41
[Doc. No. 1787] Experts:
(Binder No. 7) 30,007.65
TOTAL: $ 999,806.90
Aemetis and Brown, Winick, Graves, Attys Fees: $ 399,941.69
Aemetis Advanced Gross, Baskerville & Expenses:
Fuels Keyes Schoenebaum -0-
Experts:
3 Al-Corn’s motion contained a mathematical error. The total amount requested should
have been $1,002,496.81, not $1,003,496.81.
8
[Doc. No. 1765-1] (Des Moines, Iowa) -0-
(Binder No. 8)
TOTAL: $ 399,941.69
Homeland Energy Brown, Winick, Graves, Attys Fees: $ 246,598.75
Solutions Gross, Baskerville & Expenses:
Schoenebaum -0-
[Doc. No. 1771-1] Experts:
(Binder No. 8) -0-
TOTAL: $ 246,598.75
Pacific Ethanol LLC Brown, Winick, Graves, Attys Fees: $ 400,720.66
Gross, Baskerville & Expenses:
[Doc. No. 1774-1] Schoenebaum -0-
(Binder No. 8) Experts:
-0-
TOTAL: $ 400,720.66
Pacific Ethanol Brown, Winick, Graves, Attys Fees: $ 245,983.45
Stockton Gross, Baskerville & Expenses:
Schoenebaum -0-
[Doc. No. 1768-1] Experts:
(Binder No. 8) -0-
TOTAL: $ 245,983.45
Flottweg Separation Wood, Herron & Evans LLP Attys Fees: $ 70,052.50
Technologies (Cincinnati, OH) Expenses: 1,654.87
Experts:
[Doc. No. 1762] -0-
(Binder No. 5)
TOTAL: $ 71,707.37
TOTAL $16,271,977.60
9
The moving defendants submitted affidavits attesting to the complexity of
the litigation and their potential exposure (which ranged from an estimated $12
million to well in excess of $25 million for each defendant); verifying that they
had reviewed and paid the invoices submitted for the services provided; providing
biographical information for the primary billers, the rates and hours billed by
the law firms that represented them, and economic surveys by the American
Intellectual Property Law Association (AIPLA); showing the rates charged by similar
individuals doing similar work in their communities and/or geographic regions,
and the national median cost of defending a single patent infringement claim from
2009–2017 (which ranged from $2 million to $3.325 million when damages were between
$10 million and $25 million, and from $3 million to $5.5 million when damages
exceeded $25 million, as they potentially did in GEA’s case). The defendants
provided invoices and billing summaries from their various law firms covering
more than nine years of services in support of their motions.
CleanTech responds that the requested rates, hours, and expenses are
excessive, unreasonable, unnecessary, and/or insufficiently documented, and asks
the court to deny the defendants’ motions in their entirety or, alternatively,
to reduce the total amount awarded to $4,378,513.62 (a 73 percent reduction).4
4 Clean Tech also argued that an award of fees isn’t mandatory under 35 U.S.C.
§ 285, J.P. Stevens Co. v. LexTex, Ltd., 822 F.2d 1047, 1052 (Fed. Cir. 1987), and that
it would be “grossly unjust” and an “undeserved windfall” to award fees to the defendants
10
CleanTech cites the expert declaration of attorney David J. McMahon, [Doc. No.
1863-1], Exhibits A–E attached thereto, [Doc. Nos. 1983-2 through 1983-6], and
a supplemental affidavit regarding Mr. McMahon’s experience [Doc. No. 1902].
Mr. McMahon attests in his supplemental affidavit that Clean Tech paid him
$500.00 an hour to provide an independent evaluation of the defendants’ requested
fees and costs, at a total cost of $54,825.00. His analysis of the defendants’
fee petitions and supporting documentation is contained in a 123-page declaration
and a number of charts summarizing his findings and conclusions. (Exhibits A–E).
More than half of Mr. McMahon’s declaration is devoted to a restatement of the
facts contained in Judge McKinney’s September 15, 2016 opinion and order and an
analysis of the law governing attorneys’ fees. Mr. McMahon voiced “concerns” about
many things throughout his affidavit, speculating that the cases might have been
overstaffed and that there might have been duplication of efforts and
mismanagement, but it was difficult to nail down exactly what his expert opinions
were and the parties’ briefs provided little guidance. Briefly summarized, Mr.
McMahon opined that:
because there’s no evidence it engaged in improper tactics or acted in bad faith.
Frank’s Casing Crew & Rental Tools, Inc. v. Weatherford Int’l, Inc., 389 F.3d 1370, 1379
(Fed. Cir. 2004). The record demonstrates otherwise.
11
(1) “[M]ost standard billing guidelines utilized by corporations, insurance
companies and sophisticated consumers of legal service provide rules
concerning these topics:
· Staffing of Cases – Unless prior approval is obtained, hearings and
depositions should be limited to one attorney. Cases should be staffed
in a cost-effective manner.
· Written Budgets – Budgets should be prepared so the company can monitor
and manage legal fees and exposure.
· Vague Billing – Each billing entry should provide a sufficiently
detailed billing description so that the specific nature of the legal
service provided can be clearly understood. Overly generalized and
vague billing entries are typically not paid.
· Overhead and Computer Research Costs – Costs like this are determined
to be overhead and most clients won’t pay them.
· Clerical Work – Companies won’t pay for either attorney or paralegal
services that are clerical in nature such as file organization or
Bates stamping.
· No Block Billing – A full description of item of services provided
should be provided including the timekeeper’s name, the date performed
and the on that service (recorded in
increments).
· Minimum Billing Increments – Time should be recorded in one-tenth
of an hour increments. Billing in .25 increments is an outdated and
unacceptable billing technique.”
(2) There’s “little evidence” that the defendant had billing guidelines
in place, provided guidelines to counsel, and reviewed and paid the law
firms’ invoices.
12
(3) The rates of several of the non-Indiana lawyers should be reduced
because they’re significantly higher than rates charged by Indiana lawyers
with comparable experience, performing similar services, and therefore
excessive and unreasonable.
(4) The defendants’ lawyers used “unreasonable billing practices” that
inflated their bills and made it difficult to determine the reasonableness
and necessity of the tasks performed, including billing for individuals
who worked less than 60 hours on the case (“transient billers”), using block
billing that included vague descriptions of the tasks performed and
non-compensable clerical and administrative tasks, billing in minimum
quarter-hour billing increments, and redacting entries.
(5) Some or all of the defendants failed to meet their burden of proof with
respect to the following:
(a) : The defendants generally, and ICM specifically,
haven’t shown that the rates and hours billed by their lawyers were
reasonable or necessary. ( Exs. A–E [Doc. Nos. 1863-2 through
1863-6])
(b) : Other than the Stoel Rives, Patterson, and Stinson firms,
defendants failed to provide any “back up” documentation ( ,
receipts) to support their requests for expenses, provided inadequate
13
and vague descriptions of those expenses, and/or improperly billed
for administrative or clerical work and overhead expenses generally
associated with maintaining, staffing, and equipping a law firms,
so expenses should be excluded for those defendants. ( Ex. A (“Costs
Deduction[s]”/” Deduction[s] of Other Costs”) [Doc. No. 1863-2]).
(c) : The defendants haven’t shown
that CleanTech litigated in “bad faith” or engaged in fraud, and didn’t
state the rate or amount of prejudgment interest they seek, so their
requests for expert fees and prejudgment interest should be denied.
( Ex. A (“Deduction[s] for Expert Fees”) [Doc. No. 1863-2]).
(d) “[T]he case could have been better managed and
staffed.”
(e) ’ “There
was no reasonable possibility of inequitable conduct until . . .
September 21, 2011" (when the inventor was deposed and the parties
learned that statement in his original declaration to the PTO regarding
the “delivery date” were “incorrect”), and no need to puruse a “totally
redundant” inequitable conduct defense that “offered [defendants]
no relief beyond what they had aleady obtained”, after Judge McKinney
granted summary judgment for the defendants on October 23, 2014, so
14
fees should be awarded, if at all, only for services proved to the
defendants between September 21, 2011 and October 23, 2014.
[Doc. No. 1863-1].
CleanTech and Mr. McMahon ask the court to apply these reductions to the
defendants’ fee requests: (1) a rate reduction based on Mr. McMahon’s assessment
of what constitutes a “reasonable rate”; (2) a 100 percent reduction for amounts
billed by “transient billers”; (3) a 25 percent across-the-board reduction for
using block billing and/or quarter hour billing increments; (4) a 30 percent
across-the-board reduction based on Mr. McMahon’s assessment of the factors set
forth in Rule 1.5 of the Indiana Rules of Professional Conduct; (5) a 100 percent
reduction for undocumented expenses; and (6) a 100 percent reduction for expert
fees and prejudgment interest. [Doc. Nos. 1863 and 1863-1 to 1863-6].
The defendants moved to strike Mr. McMahon’s affidavit, contending that
it’s unnecessary, unreliable, and inadmissible under Federal Rules of Evidence
702 and 703 and Daubert v. Merrill Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993).
They contend that Mr. McMahon doesn’t have the background and experience needed
to qualify as an expert in the area of complex patent litigation, so his opinions
on the reasonableness and necessity of the rates, hours, and expenses incurred
in this case and the defendants’ litigation strategy and case management practices,
won’t be helpful to the court; his opinions aren’t based on a reliable methodology
15
and lack foundation; and his declaration contains inadmissible legal opinions.
Jimenez v. City of Chi., 732 F.3d 710, 721 (7th Cir. 2013) (“As a general
rule . . . an expert may not offer legal opinions.”). CleanTech responds that
Mr. McMahon is offered as an expert on billing and case management practices and
attorneys’ fees issues, not patent litigation, is qualified to render opinions
on those subjects, and has provided a sufficient basis for his opinions.
III. ANALYSIS
A. THE MOTION TO STRIKE
Federal Rule of Evidence 702 and the Supreme Court's opinion in Daubert
v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), govern the admissibility
of expert testimony. Krik v. Exxon Mobil Corp., 870 F.3d 669, 673 (7th Cir. 2017).
"The proponent of the expert bears the burden of demonstrating that the expert's
testimony would satisfy the Daubert standard." Lewis v. CITGO Petroleum Corp.,
561 F.3d 698, 705 (7th Cir. 2009) (citing Fed. R. Evid. 702, Advisory Committee
Notes to the 2000 amendments).
Rule 702 provides:
A witness who is qualified as an expert by knowledge, skill,
experience training, or education may testify in the form of an opinion
or otherwise if:
16
(a) the expert’s scientific, technical, or other specialized
knowledge will help the trier of fact to understand the evidence or
to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and
methods; and
(d) the expert has reliably applied the principles and methods
to the facts of the case.
Fed. R. Evid. 702. A court should consider a proposed expert's full range of
practical experience, as well as academic or technical training, when determining
whether that expert is qualified to render an opinion in a given area. Smith v.
Ford Motor Co., 215 F.3d 713, 718 (7th Cir. 2000).
The court acts as a gatekeeper in screening the admissibility of expert
testimony by determining whether the proffered testimony is reliable and relevant.
Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 147 (1999). The court “must
make a preliminary assessment that the testimony's underlying reasoning or
methodology is scientifically valid and properly applied to the facts at issue.”
Krik v. Exxon Mobil Corp., 870 F.3d at 673. The standard in Rule 702 applies to
all expert testimony or evidence, whether it relates to areas of traditional
scientific competence, engineering principles, or other technical or specialized
expertise. Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. at 147.
The Supreme Court “has given courts the following guidance to determine
the reliability of a qualified expert's testimony under Daubert, stating that
17
they are to consider, among other things: ‘(1) whether the proffered theory can
be and has been tested; (2) whether the theory has been subjected to peer review;
(3) whether the theory has been evaluated in light of potential rates of error;
and (4) whether the theory has been accepted in the relevant scientific community.’”
Krik v. Exxon Mobil Corp., 870 F.3d at 674 (quoting Baugh v. Cuprum S.A. de C.V.,
845 F.3d 838, 844 (7th Cir. 2017)); Bielskis v. Louisville Ladder, Inc., 663 F.3d
887, 894 (7th Cir. 2011). But the reliability inquiry is a flexible one and “the
factors identified in [Daubert] may or may not be pertinent in assessing
reliability, depending on the nature of the issue, the expert's particular
expertise, and the subject of his testimony.” Kumho Tire Co. v. Carmichael, 526
U.S. at 150. The court’s inquiry doesn’t focus on “the ultimate correctness of
the expert’s conclusions,” but rather on “the soundness and care with which the
expert arrived at h[is] opinion.” Schultz v. Akzo Nobel Paints, LLC, 721 F.3d
426, 431 (7th Cir. 2013) (citing Daubert, 509 U.S. at 595).
Mr. McMahon’s testimony must be “based on sufficient facts or data,”
Stuhlmacher v. Home Depot U.S.A., Inc., 774 F.3d 405, 509 (7th Cir. 2014), to
be admissible. “Rule 702's reliability elements require the court to determine
only that the expert is providing testimony that is based on a correct application
of a reliable methodology and that the expert considered sufficient data to employ
18
the methodology.” Stollings v. Ryobi Techs., Inc., 725 F.3d 753, 766 (7th Cir.
2013).
Mr. McMahon is licensed to practice in California, New York, and Indiana,
and has more than 32 years of litigation and trial experience in the areas of
admiralty and maritime law, construction litigation, personal injury,
environmental law, and insurance law. He has been retained as an attorney,
consultant, and expert regarding the rules of ethics and the necessity and
reasonableness of attorneys’ fee in numerous cases, has been involved in at least
one MDL case, and has published several articles on the internet and has lectured
on the subject of insurance law, litigation management, and auditing billing
practices. His methodology in evaluating the defendants’ fee requests included:
· reviewing law firm websites, LinkedIn profiles, and State Bar records
to determine the qualifications of the attorneys who billed for their
services;
· conducting a rate survey and reviewing the rates published in the
Altman & Weil’s Surveys of Law Firm Economics, TyMetrix Real Rate
Reports, and AIPLA for attorneys with comparable positions, years
of experience, and or area of expertise to evaluate the reasonableness
of the rates billed by defense counsel;
19
· examining the bills to ascertain rates, locate abnormalities, and
determine whether any of the entries appear to violate applicable
billing practices (e.g. billing for prohibited tasks and activities
or for vague, nonspecific activities);
· reviewing the fees in light of the factors identified in Indiana
Professional Conduct Rule 1.5;
· reviewing orders issued in this case, the docket sheet, and other
documents; and
· making adjustments to the rates and hours billed based on the foregoing
and calculating the lodestar.
Expert testimony about the reasonableness of an attorney fee request is
generally admissible, but not conclusive, even though the court is itself an expert
in the area. Mr. McMahon has plenty of qualifications to give an opinion on that
topic in most cases. But he isn’t a patent attorney and doesn’t have the special
experience or knowledge about complex patent litigation needed to give reliable
opinions about patent litigation. CleanTech says that Mr. McMahon isn’t offered
for that purpose. Accepting that as true, the court finds that Mr. McMahon lacks
the relevant knowledge and expertise necessary to render opinions about the defense
counsel’s strategies, the need for the inequitable conduct trial, the number of
20
attorneys, paralegals, support staff, and hours required to litigate this case
and the related cases, and what fees are allowed in exceptional patent cases.
An who expert relies on experience as the basis for his opinions must explain
“how that experience leads to the conclusion reached, why that experience is a
sufficient basis for the opinion, and how that experience is reliably applied
to the facts.” Fed. R. Evid. 702 (Advisory Committee Notes to the 2000 amendments).
Mr. McMahon hasn’t met that burden.
Mr. McMahon’s opinions about what the law is, or should be, aren’t helpful
in understanding the evidence or determining the issues before the court. The
court is well aware of the legal principles that govern this case.
Mr. McMahon seems well qualified to give an opinion about generally accepted
billing practices “utilized by corporations, insurance companies and sophisticated
consumers” and the reasonableness of attorneys’ fees that aren’t necessarily
dependent on the nature of the litigation, but he hasn’t identified the source
of the corporate “standard billing guidelines” to which he refers or shown that
the same guidelines or practices apply in complex patent cases.
The absence of complex patent cases from Mr. McMahon’s training, education,
and experience opinions makes his opinions on what a “reasonable rate” is in this
case neither reliable nor helpful to the trier of fact. Rule 702 and Daubert preclude
expert opinion testimony in situation where the opinion “is connected to existing
21
data only by the of the expert.” Gen. Elec. Co. v. Joiner, 522 136,
146 (1997).
Accordingly, the court grants the joint motion to strike [Doc. No. 1891].
B. RATES
Clean Tech contends that the court should apply prevailing Indiana rates
in determining what a reasonable rate would be because it’s where the MDL court
is located. But the location of the MDL was “fortuitous.” Eli Lilly & Co. V. Zenith
Goldline Pharms., Inc., 264 F. Supp. 2d at 764. The Judicial Panel on Multidistrict
Litigation centralized cases that had been filed in multiple jurisdictions,
including Kansas, New York, Indiana, Illinois, Connecticut, Minnesota, Iowa and
Idaho. Neither the parties’ conduct nor the whereabouts of the parties and their
attorneys were completely responsible for the cases’ association with Indiana.5
Given the highly specialized nature of the litigation and the multiple forums
involved, the defendants retention of experienced counsel from other states and
at higher rates was both reasonable and appropriate. Jeffboat, L.L.C. v. Dir.,
OWCP, 553 F.3d 487 (7th Cir. 2009) (holding that the “community” whose prevailing
5 The prevailing rates charged by Indiana attorneys is relevant, if at all, only
in determining whether the rates charged by Woodard Emhardt, the one Indianapolis-based
firm involved in this litigation, were reasonable.
22
hourly rate must be used can be read as referring to a “community of practitioners,”
rather than a local market area, particularly when the subject matter of the
litigation is highly specialized and the market for legal services within that
subject matter is a national market); Eli Lilly & Co. v. Zenith Goldline Pharms.,
Inc., 264 F. Supp. 2d 753, 764 (S.D. Ind. 2003) (“[S]ome distinctly ‘national’
litigation, such as multi-district litigation under 28 U.S.C. § 1407, may justify
the use of essentially ‘national’ rates because the location of the forum court
is fortuitous.”); Alba Conte, 1 Attorney Fee Awards § 4:13 (3d ed. 2010) (courts
have recognized that a local forum rate is an inappropriate and illogical standard
for antitrust and securities plaintiffs' lawyers, in contrast to their customary
billing rates or the growing adoption by courts of national rate standards).
The defendants submitted affidavits identifying the educational background,
experience, and rates charged by some, but not all, of the attorneys and support
staff that provided services during the course of this litigation, and establishing
the market rate for those services. That evidence is only presumptive, Spegon
v. Cath. Bishop of Chi., 175 F.3d 544, 555 (7th Cir. 1999); People Who Care v.
Rockford Bd. of Educ., 90 F.3d 1307, 1310 (7th Cir. 1996), but GS Clean Tech hasn’t
presented any reliable evidence to rebut that presumption. It simply, and
incorrectly, asserts that Indiana rates set the standard. They do not. Nothing
requires a lawyer hired to appear in a case to reduce her regular hourly rate
23
to match the rates common to the community in which the case pends; there would
be even less reason to require her to adjust it again when the MDL Panel centralizes
the case in still another legal billing community.
The court overrules CleanTech’s objections to the rates billed by defense
counsel.
C. HOURS
A fee request should reflect the hours reasonably required "to see the case
through trial, to appeal, and for the collection of fees," with recovery for hours
that are "excessive, redundant, or otherwise unnecessary" being excluded. Johnson
v. GDF, Inc., 668 F.3d 927, 931, 933 (7th Cir. 2012). When a fee petition is vague
or inadequately documented, the court may either strike the problematic entries
or (in recognition of the impracticalities of requiring courts to do an item-by-item
accounting) reduce the proposed fee by a reasonable percentage. Harper v. City
of Chi. Heights, 223 F.3d 593, 605 (7th Cir. 2000).
CleanTech raises several objections to the number of hours defense counsel
spent on this litigation, but seeks a reduction for only three categories: the
defendants’ inclusion of time expended by “transient billers”; their use of block
billing and/or quarter hour billing increments; and what Mr. McMahon referred
24
to as a “Rule 1.5 Deduction,” which was based on his assessment of the factors
identified in Rule 1.5 of the Indiana Rules of Professional Conduct.
1. “ ”
CleanTech defines a “transient biller” as any individual who billed less
than 60 hours over the course of the litigation, and contends that their sporadic
participation, the nature of some of the work performed, and/or the absence of
information regarding their education, experience, or position indicates that
the hours expended by these individuals were unnecessary and/or unreasonable.
It asks the court to reduce the defendants’ fee request by the amounts billed
for their services.
CleanTech provided a list of the “transient billers,” their positions, and
a summary of the rates, and total number of hours and amounts billed for each
over the course of the litigation (Exhibit C to Mr. McMahon’s affidavit [Doc.
No. 1863-4]), but it didn’t identify the dates the services were provided or the
tasks that were performed, and the court won’t scour the record in search of the
missing information. The court can’t determine whether CleanTech’s objections have
any merit without those details, and so overrules those objections.
2.
25
Most of CleanTech’s objections to the hours billed fall within its proposed
deductions for block billing. It says that all of the defendants used block billing
that contained vague entries making it difficult to determine the reasonableness
of the hours expended, and proposes a 25 percent across-the-board reduction of
the defendants’ fee request. But the “essential goal in shifting fees . . . is
to do rough justice, not achieve auditing perfection,” Fox v. Vice, 563 U.S.826,
838 (2011), and the court isn’t required to “undertake a line-by-line inquiry
of a voluminous fee petition.” Vega v. Chi. Park Dist., 12 F.4th 696, 705 (7th
Cir. 2021).
Courts discourage the use of block billing because of the challenges it
creates in trying to decide what time is compensable and what is not, but the
law doesn’t prohibit block billing. Farfaras v. Citizens Bank & Tr. of Chi.,
433 F.3d 558, 569 (7th Cir. 2006) (“Although ‘block billing’ does not provide the
best possible description of attorneys’ fees, it is not a prohibited practice.”).
CleanTech cited a few examples of entries they found objectionable [Doc. No. 1863-2
at pp. 31–46], and ask the court to assume that all block entries are deficient
and reduce all of the defendants’ fee requests by 25 percent. But the descriptions
of the tasks performed in the examples cited were detailed enough to ascertain
whether they were related to this litigation and were reasonable and necessary.
The defendants provided affidavits attesting that they were reasonable and
26
necessary, and CleanTech hasn’t shown that the time expended for the tasks described
was excessive or unreasonable apart from the way they were billed, given the nature
of the litigation and the issues presented, or that there was any unnecessary
duplication of effort. Accordingly, the court overrules CleanTech’s block billing
objection.
CleanTech also objects to the apparent use of quarter-hour billing increments
by several of the defendants’ law firms (Dicke, Fleeson, Wood, Brown, Best, Stinson
and Patterson), but its objection is speculative. CleanTech hasn’t shown that
any of defendants’ attorneys didn’t actually bill clients by the quarter hour or
that the practice is prohibited, “unreasonable” and/or “archaic” in complex patent
litigation (as Mr. McMahon opined). The court overrules CleanTech’s billing
increment objection.
All but one of the defendants’ law firms provided unredacted invoices to
the court under seal. Michael Best & Friedrich was the lone exception. Michael
Best & Friedrich heavily redacted all of its invoices, contending that they included
attorney-client privilege, and didn’t file unredacted copies under seal. CleanTech
objects, contending that the redactions made it impossible to determine whether
the time expended and amounts billed for the redacted entries were necessary or
reasonable. The court agrees.
27
A court isn’t required to “‘undertake a line-by-line inquiry’ of a voluminous
fee petition,” and can take a ‘lump-sum approach as a practical means of trimming
fat from a fee application.’” Vega v. Chi. Park Dist., 12 F.4th at 705 (quoting
Tomazzoli v. Sheedy, 804 F.2d 93, 98 (7th Cir. 1986); Nichols v. Dep’t of Transp.,
4 F.4th 437, 444 (7th Cir. 2021)). While it’s not altogether clear, it appears
that CleanTech included its objection to the redactions in its proposed reduction
for block billing. A 25 percent reduction to the fees requested by Bushmills
Ethanol, Chippewa Valley Ethanol, Heartland Corn Products, and United Wisconsin
Grain Producers for services provided by Michael Best & Friedrich is both reasonable
and appropriate under the circumstances. Harper v. City of Chi. Heights, 223
F.3d 593, 605 (7th Cir.2000) (“[W]hen a fee petition is vague or inadequately
documented, a district court may either strike the problematic entries or (in
recognition of the impracticalities of requiring courts to do an item-by-item
accounting) reduce the proposed fee by a reasonable percentage.”).
Avgoustis v. Shinseki, 639 F.3d 1340, 1344 (Fed. Cir. 2011) ( “[N]o court of appeals
has held that disclosure of the general subject matter of a billing statement
under fee-shifting statutes violates attorney-client privilege.”).
3.
28
The attorneys involved in this case were governed by the rules of this court
and by the rules of professional conduct in the states in which they admitted
to practice law. Except with respect to the attorneys admitted to practice in
Indiana — as to whom CleanTech makes no individual arguments — the factors set
forth in Indiana Professional Conduct Rule 1.5 aren’t relevant to the determination
of whether the hours billed were reasonable or necessary. The court overrules
CleanTech’s Rule 1.5 objection.
4.
CleanTech contends that Dicke Billig and Fleeson Gooing (attorneys for ICM)
didn’t provide their billing rates or the time actually expended in their invoices,
so ICM’s fees should be reduced by $2,966,039.61 for services provided by Dicke
Billig and by $22,695.50 for services provided by Fleeson Gooing. ( Exhibit
A to Mr. McMahon’s affidavit [Doc. No. 1863-2]). CleanTech is mistaken. The
affidavit submitted by attorney John Weyrauch, a partner at Dicke Billig, provided
a summary of the total hours and amounts billed by each of the individuals who
worked on the case for Dicke Billig and their average hourly rates, and the hours,
amounts, and average hourly rates billed by Fleeson Gooing. [Doc. No. 1760-2 at
29
pp. 2–3]. As was already explained, CleanTech hasn’t shown that those rates and
hours were excessive or unreasonable.
With the exception of the Stoel Rives (Al-Corn Fuel), Patterson (GEA), and
Stinson (Blue Flint Ethanol) firms, Clean Tech asserts that the defendants’
attorneys failed to provide any “back up” documentation ( , receipts) to support
their requests for expenses, provided inadequate and vague descriptions of those
expenses, and/or improperly billed for administrative or clerical work and overhead
expenses generally associated with maintaining, staffing, and equipping a law
firms, and asks the court to exclude those undocumented expenses in their entirety.
Those objections are well-taken and the record supports them.
Most of the defendants provided no details about the expenses they seek,
didn’t explain why they were necessary or reasonable, and included expenses that
generally would have been considered office overhead. The same can’t be said for
Lincolnway Energy, which submitted a detailed summary of the travel expenses it
incurred ( Exhibit C to Suzanne Koch Affidavit [Doc. No. 729-3 in Cause No.
1:10-CV-8001).
30
Accordingly, CleanTech’s objection to an award of attorney expenses is
sustained, except with respect to the expenses requested by Al-Corn Fuel, GEA,
Blue Flint Ethanol, and Lincolnway Energy.
Unlike other fee-shifting statutes like 42 U.S.C. § 1988(b) and (c), the
Patent Act doesn’t authorize an award of expert witness fees, which generally
fall under 28 U.S.C. § 1920 and are subject to the limitations in 28 U.S.C. §
1821. Amsted Indus., Inc. v. Buckeye Steel Castings Co., 23 F.3d 374, 377 (Fed.
Cir. 1994). While the court may exercise its inherent equitable powers to impose
sanctions for bad faith and vexatious conduct, it “must use caution” in doing
so. Chambers v. NASCO, Inc., 501 U.S. 32, 45–46 (1991); Amsted Indus., Inc. v.
Buckeye Steel Castings Co., 23 F.3d at 378. “When statutes or rules provide an
adequate sanction for bad faith, a trial court should ordinarily rely on those
express authorities for sanctions.” Amsted Indus., Inc. v. Buckeye Steel Castings
Co., 23 F.3d at 378.
Clean Tech doesn’t challenge the reasonableness of the requested expert
fees, but contends that the defendants haven’t shown that CleanTech litigated
in “bad faith” or engaged in fraud, so their requests for expert fees should be
denied. The record demonstrates otherwise.
31
In a related case, Judge Pallmeyer found that:
GS CleanTech made affirmative, false representation to the PTO about
the date on which its process was patentable and about the date in
which it had offered the patented invention to a potential customer.
Both the District Court and the Court of Appeals found that CleanTech’s
agents knew the statements were false when they were made. Plaintiff
failed to correct the false statements with the PTO, and after
obtaining the patents at issue, proceeded to sue more than two dozen
purported infringers, seeking enforcement of patents obtained on the
strength of representations that CleanTech principles and their lawyer
knew to be false.
GS Cleantech Corp. v. Adkins Energy, LLC., No. 10C3291 (N.D. Ill. Mar. 30, 2022).
The court agrees with those findings. But for CleanTech’s conduct, the defendants
wouldn’t have had to hire and pay for experts and shouldn’t be required to absorb
the cost of those experts. Accordingly, CleanTech’s objection to an award of expert
fees is overruled.
An inequitable conduct finding requires “specific intent” to deceive and
“but-for” materiality, Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1286,
1289 (Fed. Cir. 2011), and Judge McKinney found both in his September 15, 2016
corrected memorandum.
While it is within the court’s power to award prejudgment interest in this
case, the attorneys’ fees and expert expenses awarded to the defendants
sufficiently serve the purposes of 35 U.S.C. § 285. Accordingly, the court, in
32
the exercise of its discretion, declines to award prejudgment interest on the
attorney fee award.
III. CONCLUSION
For the foregoing reasons:
(1) The joint motion to strike that was filed in 1:10-ML-2181 [Doc. No.
1891] and in each of the individual member cases [Doc. No. 673 in 1:10cv8000]
[Doc. No. 775 in 1:10cv8001] [Doc. No. 748 in 1:10cv8002] [Doc. No. 724 in
1:10cv8003] [Doc. No. 818 in 1:10cv8004] [Doc. No. 717 in 1:10cv8005] [Doc. No.
621 in 1:10cv8006] [Doc. No. 890 in 1:10cv8007] [Doc. No. 742 in 1:10cv8008] [Doc.
No. 791 in 1:10cv8009] [Doc. No. 661 in 1:10cv8010] [Doc. No. 662 in 1:10cv8011]
[Doc. No.461 in 1:13cv8012] [Doc. No. 472 in 1:13cv8013] [Doc. No. 450 in
1:13cv8014] [Doc. No. 458 in 1:13cv8015] [Doc. No. 448 in 1:13cv8016] [Doc. No.
434 in 1:13cv8018] [Doc. No. 406 in 1:14cv8019] and [Doc. No. 410 in 1:14cv8020]
is GRANTED; and
(2) the defendants’ motions for attorneys’ fees and expenses [Doc. Nos.
1746-1, 1760-1, 1762, 1765-1, 1768-1, 1771-1, 1774-1, 1777-1, 1781-1, 1787, 1789
and 1792] are GRANTED in part, and DENIED in part.
The following charts summarize the amounts awarded to each defendant based
33
on the analysis in this opinion:6
GEA Mechanical Represented by: Fees: $ 3,753,548.32
Equipment US, Inc. and Patterson Belknapp Webb & Tyler Expenses:150,561.20
Ace Ethanol, LLC LLP Experts: 160,627.06
Total: $ 4,064,736.58
ICM Represented by: Fees: $ 3,186,945.21
Dicki, Billig & Czaja and others Experts: 176,034.56
Total: $3,362,979.77
Bushmills Ethanol, Represented by Fees: $ 475,561.907
Inc. Michael Best & Friedrich Experts: 24,553.71
Total: $ 500,115.61
Chippewa Valley Represented by: Fees: $ 456,432.328
Michael Best & Friedrich Experts: 24,553.70
6 The charts reflect the net amount of fees requested by each defendant (actual
amount minus any payment received from the Cantor Colburn settlement). The settlement
amounts are confidential, and will remain so.
7 The amount awarded reflects the 25 percent reduction for the redacted entries
($160,908.33) and a $7,163.12 deduction for “unbilled” and undocumented attorneys’ fees
for services Michael Best & Friedrich reportedly provided after January 31, 2018.
8 In its motion, Chippewa requested $675,157.92 in attorneys’ fees and $43,510.52
in expenses and expert fees, for a total of $718,668.44 [Doc. No. 1781-1], but the
computation of attorneys’ fees is significantly less in the affidavit submitted in support
of its motion. Attorney J. Donald Best attests in his affidavit that Chippewa paid his
firm $608,576.42 in attorneys’ fees (after subtracting the Cantor Colburn settlement),
and that it incurred an additional $7,163.12 in “unbilled” fees for services provided
since February 1, 2018 [Doc. No. 1781-2]. The invoices submitted in support of Chippawa’s
fee request ended on January 30, 2018 [Doc. No. 1781-4], and no information has been
provided regarding the services provided after that date. Accordingly, the court has
reduced the amounts requested to reflect the amount of attorneys’ fees billed to and
paid by Chippewa through January 30, 2018 ($608,576.42), minus the 25 percent reduction
for redacted entries ($152,144.10).
34
Ethanol Company, LLP
Total: $ 480,986.02
Heartland Corn Represented by: Fees: $ 487,021.799
Products Michael Best & Friedrich Experts: 24,553.71
Total: $ 511,575,50
United Wisconsin Represented by: Fees: $ 488,929.4910
Grain Producers, LLC Michael Best & Friedrich Experts: 24,553.71
(UWGP)
Total: $ 513,483.20
Iroquois Bio-Energy Represented by: Fees: $1,375,400.50
Woodard Emhardt Experts: 20,957.10
Total: $1,396,357.60
Blue Flint Ethanol Represented by: Fees: $ 949,413.57
Stinson Leonard Street Expenses: 69,913.06
Experts: 23,137.39
Total: $ 1,042,464.02
Al-Corn Clean Fuel Represented by: Fees: $ 805,803.55
9 In its motion, Heartland requested $698,614.00 in attorneys’ fees and $43,718.06
in expenses and expert fees, for a total of $742,332.06 [Doc. No. 1781-1], but the
computation of attorneys’ fees is significantly less in the affidavit submitted in support
of its motion. Attorney Michael Best attests in his affidavit that Heartland paid his
firm approximately $639,165.89 in attorneys’ fees (after subtracting the Cantor Colburn
settlement) and incurred an additional $7,163.12 in “unbilled” fees for services provided
after February 1, 2018, for a total of $646,329.01 [Doc. No. 1781-2]. The invoices submitted
in support of Heartland’s fee request ended on January 30, 2018 [Doc. No. 1781-5], and
no information has been provided regarding the services provided after that date.
Accordingly, the court has reduced the amounts requested to reflect the amount of
attorneys’ fees billed to and paid by Heartland through January 30, 2018 ($639,165.89),
minus the 25 percent reduction for redacted entries ($152,144.10).
10 The amount awarded reflects the 25 percent reduction for the redacted entries
($162,976.50).
35
Stoel Rives Expenses: 26,137.32
Experts: 170,555.94
Total: $1,002,496.81
Lincolnway Energy Represented by: Fees: $ 938,996.84
Nyemaster Goode Exps: 30,802.41
Experts: 30,007.65
Total: 999,806.90
Aemetis and Aemetis Represented by: Fees: $ 399,941.69
Advanced Fuels Keyes Brown Winick
Total: $ 399,941.69
Homeland Energy Represented by: Fees: $ 246,598.75
Brown Winick
Total: $ 246,598.75
Pacific Ethanol, LLC Represented by: Fees: $ 400,720.66
Brown Winick
Total: $ 400,720.66
Pacific Ethanol Represented by: Fees: $ 245,983.45
Stockton Brown Winick
Total: $ 245,983.45
Flottweg Separation Represented by: Fees: $ 70,052.50
Technologies Wood, Herron & Evans
Total: $ 70,052.50
(3) The parties are ordered to meet and confer within the next 60 days
regarding any additional fees for services rendered on appeal in an attempt to
resolve those issues. If they are unable to reach an agreement, the defendants
shall have to and including July 1, 2022 to file supplemental motions for appellate
fees and supporting documentation, together with a certification that they have
36
complied with the meet-and-confer directive. The district rules shall govern the
briefing of any supplemental motion.
SO ORDERED.
ENTERED: May 3, 2022
/s/ Robert L. Miller, Jr.
Judge, United States District Court
Distribution: All electronically registered counsel of record
37