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Category: Prevailing Party Issues

Ninth Circuit Affirms $46M Fee Award in NCAA Antitrust Class Action

July 5, 2018

A recent Metropolitan News story, “Ninth Circuit Affirms $46 Million Award Against NCAA,” reports that the Ninth U.S. Circuit Court of Appeals has affirmed a $41 million attorney fee award against the National Collegiate Athletic Association, plus $5.1 million in costs, in connection with an action in which former and current college football and basketball players established that the ban on them receiving money for publicity rights was an unlawful restraint of trade.  That award was made by District Court Judge Claudia Wilken of the Northern District of California pursuant to the Clayton Act, which provides—in 15 U.S.C. §26—that in an action to enjoin antitrust violations “in which the plaintiff substantially prevails, the court shall award the cost of suit, including a reasonable attorney’s fee, to such plaintiff.”

The class action was brought in 2009 by Ed O’Bannon, who had been an All-American basketball player at UCLA (later a professional, now a car salesman in Nevada).  He was spurred to sue the NCAA after seeing his likeness, which he did not authorize, in a videogame.  NCAA and its member schools licensed “names, images and likenesses” (“NILs”) of its players to commercial outfits, for fees, but the players were not allowed to share in the proceeds because compensation to college athletes was viewed, under NCAA rules, as incompatible with their amateur statuses.

O’Bannon claimed that barring college athletes from receiving pay for their NILs was violative of §1 of the Sherman Antitrust Act which forbids “[e]very contract, combination..., or conspiracy, in restraint of trade or commerce.”  He won in the District Court on Aug. 8, 2014, and Wilken’s decision was, for the most part, affirmed by the Ninth Circuit on Sept. 30, 2015.  The U.S. Supreme Court denied certiorari on Oct. 3, 2016.

Friday’s memorandum opinion declares:  “The district court entered judgment against the NCAA for violating the Sherman Act and permanently enjoined it from prohibiting its member schools from compensating the plaintiff class for the use of their NILs by awarding grants-in-aid up to the full cost of attendance.  The plaintiffs did not prevail on every issue, but their enforceable judgment materially altered the legal relationship of the parties and clearly demonstrates success on a significant issue.  The prospective injunctive relief obtained in this class action directly benefits the certified class and can be enforced by the class.  Neither the named plaintiffs nor any other individual class member must prove they will personally receive a direct or material benefit for plaintiffs to be entitled to attorneys’ fees.  The plaintiffs substantially prevailed in their antitrust action seeking injunctive relief, and accordingly are entitled to attorneys’ fees under §26.”

Wilken not only held that athletes could receive scholarships that included cost-of-living expenses, not normally a part of scholarships—which was affirmed by the Ninth Circuit—but also that colleges could, instead, place $5,000-a-year in trust for their athletes.  The latter proviso, the Ninth Circuit ordered, was to be vacated.  Judge Jay Bybee said in the circuit’s 2015 opinion that Wilken “clearly erred in finding it a viable alterative to allow students to receive NIL cash payments untethered to their education expenses.”

In contesting the attorney-fee award, the NCAA stressed that O’Bannon’s action was not wholly successful.  In oral argument in Pasadena on Feb. 15, its counsel, Michigan attorney Gregory L. Curtner, maintained that it is established by case law that “[i]f you seek a bundle, and you get a pittance, that must be reflected in a subsequent fee award.”  He asserted that while Wilken’s decision was “reversed in substantial part,” Wilken improperly made an “all-or-nothing, winner-take-all” award giving the plaintiffs nearly all that they sought.

The opinion points out that where there is partial success, time spend on unsuccessful claims must be disregarded, and was, and the level of success must be assessed.  It quotes Wilken as saying that even with the partial reversal, “the finding of liability and the remaining injunctive relief are together an excellent result."  The opinion rejects the contention that Wilken took an “all or nothing” approach, saying she weighed the factors and “simply reached a conclusion the NCAA docs not like: that the award of injunctive relief against the NCAA in an antitrust action brought by private parties is an ‘excellent result.’ ”

It adds:  “The district court’s focus on the plaintiffs’ success in achieving injunctive relief, as opposed to their failure to win damages, was entirely appropriate, as the basis for the fee request was §26.  Under §26, attorneys’ fees are mandatory in antitrust cases achieving injunctive relief under a private attorney general theory.”

The precise award was $40,794,245.89 in attorney fees and $1,540,195.58 in costs.  The case is O’Bannon v. NCAA, No. 16-15803.

$13M Fee Award in Medical Device Patent Infringement Case

May 25, 2018

A recent New Jersey Law Journal story by Michael Riccardi, “Medical Device Makers’ Patent Infringement Battle Yields $13M Fee Award” reports that a Newark, New Jersey, federal judge has awarded $13.8 million in fee and costs to Zimmer Inc. after it came out the victor in a 13-year patent infringement battle with Howmedica Osteonics Corp.

U.S. District Judge William Walls made the award to Zimmer as the prevailing party after four patents that Howmedica claimed were infringed were found to be invalid. The patents, all carrying the title “non-oxidizing medical implant,” concern irradiating and heating polymers used in medical implants in order to extend the usable life of those implants. The suit said Zimmer sold products that infringed on Howmedica’s patents.

Walls granted Zimmer $13,296,559 in fees, which is nearly all the $13.5 million it sought, and granted the entire $513,258 in costs that the company  sought. But he rejected outright Zimmer’s request for $1.01 million in expert fees and for $5.8 million in prejudgment interest.

Walls awarded fees and costs after finding the litigation met the standard for an “exceptional case.” The judge said that standard was met for a variety of reasons. Among them was that an individual who testified before a patent examiner in the case on behalf of Howmedica, Aiguo Wang, failed to disclose at trial that he was an employee of that company. Walls also found that the case was exceptional because Howmedica failed to withdraw its infringement claims once it knew they were baseless, and the judge cited “selective disclosure of data and evasive responses” to a patent examiner by Howmedica.

Howmedica, for its part, argued that is had simply lost “11 years of hard-fought litigation between sophisticated competitors” over groundbreaking medical implants.

Walls ruled in 2007 that three of the patents were invalid, and the U.S. Court of Appeals for the Federal Circuit affirmed his ruling in 2010.  In 2009, Zimmer sought a re-examination of claims in the fourth patent, and the U.S. Patent and Trademark Office rejected the claims in that patent.

Howmedica, a maker of orthopedic devices, was acquired in 1998 by Stryker Corp. of Kalamazoo, Michigan. It claimed in the suit that Zimmer infringed its process for irradiating and heat-treating medical implant materials. Although this process was not novel, Howmedica claimed that its process of heating the materials at 50 degrees celsius for 144 hours was superior to similar methods. But Howmedica withheld key information from federal patent examiners during the course of the litigation, prompting their patents to be invalidated, according to court documents.

Zimmer, a maker of medical devices now known as Zimmer Bionet, is based in Warsaw, Indiana.

Howmedica has indicated that it will appeal the final judgment to the U.S. Court of Appeals for the Federal Circuit, according to court documents.

Zimmer was represented by lawyers from Kirkland & Ellis, Latham & Watkins and Tompkins, McGuire, Wachenfeld & Barry of Roseland, New Jersey. Walls said the Am Law 50 average was an appropriate basis for evaluating the hourly rates claimed by counsel from Kirkland & Ellis and Latham & Watkins, citing the highly specialized area of law, the expertise required and what he termed the “exorbitant” $2 billion in damages sought by Howmedica in the case. Some Kirkland & Ellis lawyers charged as much as $1,295 per hour, but Walls said, “The court also finds any billing rate over $900 to be unreasonable,” and he cut three lawyers down to that rate—Mark Pals, Bryan Hales and David Callahan.

Walls issued an order in the case announcing his ruling on April 24, but the reasons for his ruling were unknown until he unsealed a 39-page opinion on Wednesday.

Lawyers representing Zimmer did not return calls about the fee award. Nor did lawyers at Gibbons in Newark and at McAndrews, Held & Malloy in Chicago, who represented Howmedica. Representatives at Howmedica and at Zimmer also did not return calls about the case.

California Litigant Not Prevailing Party Based on Securing Undeserved Benefit

April 16, 2018

A recent Metropolitan News story, “Litigant Not Prevailing Party Based on Securing Undeserved Benefit,” reports that the Court of Appeal for this district held yesterday that a litigant cannot be deemed a prevailing party based on obtaining a benefit to which there is no entitlement.

Although the ruling came in a case brought under the Song-Beverly Consumer Warranty Act—state “Lemon Law,”—the reasoning would appear to have applicability to offers of compromise pursuant to Code of Civil Procedure §998.

Justice Brian Hoffstadt of Div. Two wrote the opinion. It affirms the decision of Los Angeles Superior Court Judge Mel Red Recana denying attorney fees to plaintiff Efigenia Garcia, but modifying the judgment to award $750 in costs.

The defendant was Mercedes-Benz USA, LLC. Prior to the lawsuit being filed, it agreed to purchase from Garcia, for $43,503.97, an automobile it manufactured and which she purchased.  A month after the purchase, the engine died.

However, the car-maker declined to pay Garcia the $3,090 she paid for dealer add-ons, and she sued. A confidential settlement was reached, leaving it to the court to determine attorney fees and costs, if any.

The statute provides for attorney fees for a prevailing plaintiff, and Garcia sought an award of $8,430 under that provision. Recana declined to make an award on the ground that the confidentiality of the settlement precluded a determination as to whether Garcia was any better off by virtue of having sued.

Hoffstadt noted that the act does not define “prevailing.” He said a “handful of courts” have applied Code of Civil Procedure §1032, which provides for costs to a party with “a net monetary recovery,” in determining if attorney fees are to be awarded.

In light of that statute, he said, Garcia is entitled to ordinary costs, but under the prevailing view—which he said is more “pragmatic” and preferable—the question in determining the attorney-fee question is the extent to which the litigation goals were achieved.

“Because Mercedes-Benz is not legally responsible to pay Garcia for the dealer add-ons,” Hoffstadt wrote, “Garcia’s success in getting Mercedes-Benz to pay more than the statute requires does not count as a cognizable litigation benefit.”  He explained:

“The trial court did not abuse its discretion in declining to find Garcia to be a prevailing party just because she pursued litigation to obtain the dealer add-ons from Mercedes-Benz. That is because she is not legally entitled, under the Act, to obtain a refund of those dealer add-ons from the manufacturer….Garcia purchased the add-ons from the dealer, not Mercedes-Benz. Except as to foodstuffs, a plaintiff seeking to recover for breach of an implied warranty of merchantability must prove privity with the breaching party….As to the dealer add-ons, Garcia’s privity is with the dealer—not Mercedes-Benz.”

The jurist pointed out that the act expressly provides that manufacturers are not obliged to make refunds for “nonmanufacturer items installed by a dealer” when the purchaser sues under an express warranty. He said that provision would be “nullified” if a plaintiff could skirt it by suing, as Garcia did, for breach of the implied warranty of merchantability.  He declared:

“[A] buyer is not a prevailing party under the Act just because she incurs attorney’s fees to obtain relief beyond that to which she is entitled. In such a case, the manufacturer or retail seller is paying more than it is legally required to pay just to end the litigation. Were the buyer who extracts such a ‘nuisance value’ as part of a settlement to be rewarded with attorney’s fees (by being declared a prevailing party), we would be acting in derogation of the true purpose of the Act’s attorney’s fees provision (which…is to remove the disincentive buyers might face when deciding whether to hire a lawyer to enforce their rights under the Act…as well as creating a perverse incentive for buyers to continue litigating in the hopes of obtaining a nuisance value that would entitle them to attorney’s fees as well.”  Hoffstadt commented:

“We are cognizant that our conclusion that a buyer is not a prevailing party under the Act’s attorney’s fees provision just because she convinces the manufacturer to pay for products and services supplied by the retail seller means that a buyer will not have a right to obtain a full refund for all outlay associated with her new defective car from a single party. And we recognize that a ‘one-stop’ remedy for buyers may make good sense, especially when the buyer in most cases purchased the car as part of a ‘one-stop’ shopping experience with the dealer. However, we are not free to disregard the Act’s plain language to implement what might be otherwise good public policy; that task lies solely with our Legislature.”

The case is Garcia v. Mercedes-Benz USA, LLC, 18 S.O.S. 1625.

New Florida Appellate Ruling Unpacks Nuances of Prevailing Party

April 5, 2018

A recent Daily Business Review story by Samantha Joseph, “In Fight for Attorney Fees ‘Prevailing Party’ Becomes Slippery Notion,” reports that foreclosure defense attorney Jeffrey H. Papell thought it was a done deal.  He’d convinced Miami-Dade Circuit Judge Monica Gordo to dismiss a bank’s case against homeowner Katherine Radosevich and had an order entitling him to attorney fees for that work.  But a new appellate court ruling unpacking the nuances of “prevailing party” means Papell will have to return to the trial court to fight for his fees.

The decision from the Third District Court of Appeal remanded the case to Gordo to determine whether Radosevich was really the winner, or had “substantially prevailed,” in light of a post-trial deal that gave the bank the litigation spoils.

The ruling turned on whether it was the homeowner or the bank who emerged victorious after Radosevich agreed to a short sale that left her with no home or proceeds.

“The appellate court is saying you can win the case on the merits, but if someone takes an appeal …. you’ve possibly lost your ability to collect fees,” Papell said.

Papell and his firm, Legal Save, represented Radosevich in a residential foreclosure suit by the Bank of New York Mellon.

The bank’s two-count complaint in June 2009 sought to foreclose on a promissory note and mortgage and reclaim a lost note. It included an attachment — a copy of an unendorsed note that listed Countrywide Home Loans Inc. as the lender, according to details in the appellate ruling.

More than a year later, the bank filed another copy of the original note — this time with documentation showing the bank had ownership of the loan prior to filing the suit. That filing included an undated blank endorsement that showed a July 21, 2009, assignment, but a May 19, 2009, effective date.

At trial, Papell challenged the credibility of a bank witness, who testified the lender lost the note. He turned the case in Radosevich’s favor by pointing out discrepancies in the two copies of the note and then succeeded on a motion for involuntary dismissal of the bank’s lawsuit.

The Bank of New York Mellon appealed to the Third DCA. While that challenge was pending, Papell filed to collect attorney fees and costs as the prevailing party under Section 57.105(7) of the Florida Statutes, and under a provision in the note and mortgage.

Before the appellate court decided the case, the bank and Radosevich agreed to sell the multimillion property through a short sale. Papell said he was not part of the arrangement, and never saw any agreement.

Karin L. Posser, N. Mark New II and William L. Grimsley of McGlinchey Stafford in Jacksonville represented the bank. They did not respond to requests for comment by press time.

The sale prompted the bank to dismiss its case before the Third DCA.

But that deal would later come back to haunt Radosevich’s lawyer, who now found the bank objecting to his fees.

The question for Gordo: Who prevailed? Was it the bank, which received about $1 million from the sale, or Radosevich, who got nothing?

Papell claimed victory.

“No matter how you slice this cake, my client won,” he said. “She was released from (debt of) $1.5 million, had the use of a multimillion-dollar home for seven years and paid no mortgage, no taxes, no insurance. … I think that’s a win.”

But the trial judge ruled for the bank.

“[BNY Mellon] received considerable proceeds in exchange for the satisfaction of the underlying mortgage and note, and Radosevich lost her home and received no proceeds from the sale,” the trial court found.

But the Third DCA called for a deeper analysis, reversing the lower court and remanding the case for an evidentiary hearing.

“While we hold that the trial court had the authority to reconsider its earlier entitlement order, and to consider whether actions and events occurring during the pendency of the prior appeal affected that earlier determination, the fact remains that the court must make such a determination based upon the record before it,” Judge Kevin Emas wrote in a unanimous decision with Judges Ivan F. Fernandez and Robert J. Luck. “In this case, the record was simply inadequate for the trial court to make such a determination.”

NCAA Appeals $40M Fee Award to Ninth Circuit

February 16, 2018

A recent Courthouse News story by Nathan Solis, “NCAA Asks 9th Circuit to Strip $40M Fee Award From Student-Athletes” reports that the National Collegiate Athletic Association fought a $40 million attorney fee award at the Ninth Circuit in an antitrust class action by former student-athletes who said the organization forced students to sign their rights away while reaping the benefits of licensing and merchandise agreements.  The federal case played out in court for six years as the student-athletes challenged the makers of sports video games, a college licensing company and the NCAA.

Former UCLA basketball star Edward O’Bannon claimed in the 2009 federal class action that students were forced to sign away the rights to their own images if they wanted to play NCAA sports.  Like many other former athletes, O’Bannon’s collegiate career is archived in video footage, photographs and that content is sold through merchandising deals.

In their class action, the former athletes said NCAA’s backlog of archived footage is estimated to be valued in the billions of dollars.  Additional defendants included video game publisher Electronic Arts and Collegiate Licensing Company.

In 2015, a Ninth Circuit upheld U.S. District Judge Claudia Wilken’s finding that the NCAA violated antitrust laws with rules that were more restrictive than necessary.  But the Ninth Circuit did not agree with Wilken’s order awarding college athletes $5,000 for each year they played in college.  The appeals court instead said NCAA schools could cover the cost of tuition, but the student-athletes were not entitled to additional cash.

In 2016, Wilken ordered the NCAA to pay about $42.3 million in attorneys’ fees and other costs – later lowered to just over $40 million – and the NCAA made a failed bid to bring the case the Supreme Court.  Fighting the fee award at the Ninth Circuit, NCAA attorney Gregory Curtner from Riley Safer Holmes & Cancila said plaintiffs adopted a winner-take-all approach in their antitrust class action before the three-judge panel.

“A Game of Thrones approach.  There was no middle ground,” said Curtner, who noted the student-athletes sought to revolutionize intercollegiate sports, failed, and aren’t entitled to a fee award.  “They’re entitled to nothing,” Curtner said bluntly.

The student-athletes’ attorney Jonathan Massey from Massey & Gail said the case was a hard-fought class action that didn’t just end with “a narrow injunction.”  When analyzing the degree of success in the for a fee award, Massey said the Ninth Circuit panel should keep in mind that not all claims need to be successful.  “We think this court has established that it’s OK to lose sometimes,” said Massey. “You don’t have to win every single claim in order to be entitled fees for all of the claims.”