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Ninth Circuit Questions Reduced Attorney Fees After IP Trials

September 10, 2018 | Posted in : Fee Award, Fee Award Factors, Fee Issues on Appeal, Fee Reduction, Prevailing Party Issues

A recent Law 360 story by Cara Bayles, “9th Circ. Questions Halved Attys’ Fees After IP Trials,” reports that two Ninth Circuit judges questioned a lower court’s decision to halve the attorneys’ fees awarded to a sculptor who successfully sued a Hoover Dam cafe for copyright infringement and breach of contract, noting that even though the suit had to be retried, preparation for the first trial was used for its successor.

Last year, U.S. Magistrate Judge George Foley Jr. ordered the cafe’s owner, Bert Hansen, to pay the artist, Steven Liguori, a total award of $409,353 — less than half of the $900,000 in fees Liguori had sought.  The judge had found that during closing arguments in the first trial, Liguori’s counsel presented “an unreasonable interpretation” of a licensing agreement between the sculptor and the cafe.

During oral arguments in San Francisco, the Ninth Circuit panel questioned Judge Foley’s conclusion that because the second trial was necessitated by Liguori’s counsel’s improper conduct in the first trial, he could only award attorneys’ fees for work done after the first trial ended.  U.S. Circuit Judge Marsha Berzon noted that “people [can] lose a lot of things over the course of litigation” and still win the case.

“There must have been things done before the end of the first trial that lessened the amount of work that had to be done at the second trial because there was overlap.  That's one question,” she said.  “The other is whether it was proper to preclude everything in the first trial because the judge thought that they had a stupid theory.  Was this theory that was ultimately disallowed, is there some way it should have been handled so it got thrown out earlier?  And who was at fault for not doing that?”

A jury initially awarded Liguori more than $1.3 million in May 2015 after it found that Hansen breached a contract he inked with the artist governing payments for his use of images of the sculpture on souvenir items.  Liguori’s monument, called the “High Scaler,” is a large-scale statue of a Hoover Dam worker.  The jury awarded Liguori $1.2 million for breach of contract from Hansen’s unpaid licensing fees.  It also found that Hansen had used the image for branding and products not covered under their limited licensing agreement and owed an additional $150,000 for copyright infringement.

But Judge Foley in September 2015 ruled that the $1.2 million portion of the award was too high, saying the jury’s breach of contract and copyright infringement verdicts were irreconcilable.  He set aside the verdict and judgment and granted Hansen’s motion for a new trial.

In an order trimming Liguori’s attorneys' fees award, the judge said he’d granted Hansen’s bid for a second trial because Liguori and his counsel engaged in improper conduct via "overreaching and invalid arguments" related to their breach of contract claim.

But Liguori’s attorney, Michael Wall of Hutchison & Steffen LLC, told the Ninth Circuit panel that the ruling was the first his client had heard of any misconduct.  “We didn't do anything wrong in that first trial.  In fact, when the judge construed the contract and gave a new trial, he never suggested there had been any misconduct,” he said.  “The decision itself denying the damages was the first time we hear from Judge Foley that trial counsel during the first trial had engaged in improper conduct. ... It was argued the way it was presented. The theory was never questioned.”  He added, “All of the work and most of the discovery that had to do with the entire case was done before the first trial.”

In the second trial in June 2016, the jury said Hansen must pay Liguori a little less than $178,000, just a fraction of the seven-figure sum the previous jury awarded in the suit’s first trial.  The second jury awarded Liguori $130,000 on its finding that Hansen willfully breached the contract and $47,817 on its finding that Hansen willfully infringed Liguori's copyright.  At the hearing, Hansen’s attorney, Jeffrey J. Whitehead of Whitehead & Burnett, argued that his client had prevailed, since Liguori had sought millions of dollars from the litigation and ended up with thousands.

But U.S. Circuit Judge Michelle Friedland asked him to assume he hadn’t prevailed in the overall case.  “If we assume by the end of the second trial that they're the prevailing party, then why shouldn't they get reimbursed for at least some of the work they did leading up to and during the first trial?”

Whitehead countered that he didn’t think Liguori should be rewarded for “promoting a theory that was ultimately rejected.”  But he also said that even at the end of the second trial, Liguori didn’t prevail on all his claims and that the judge likely cut the fees in half “for simplicity’s sake,” rather than apportioning it out.