Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-02690/USCOURTS-caed-2_04-cv-02690-18/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

DANIEL W. FAERFERS and

KATJA FAERFERS, No. 2:04-cv-02690-MCE-EFB 

Plaintiffs,

v. MEMORANDUM AND ORDER

CAVIAR CREATOR, INC., a 

Nevada Corporation,

individually and as

successor to CAVIAR CREATOR,

INC., an Oregon corporation,

Defendants.

___________________________/

AND RELATED COUNTERCLAIMS

___________________________/

----oo0oo----

Presently before the Court is the Bill of Costs filed by

Defendant and Counterclaimant Caviar Creator, Inc. (“Caviar

Creator”) at the time of the December 3, 2007 prove-up hearing to

determine the damages Caviar Creator was entitled from Plaintiffs

and Cross Defendants Daniel W. Faerfers and Katja Faerfers

(“Faerfers”). 

Case 2:04-cv-02690-TLN-EFB Document 287 Filed 05/02/08 Page 1 of 15
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

Also present for resolution are the amount of sanctions requested

by Caviar Creator in accordance with the Court’s May 10, 2007

directive that Faerfers pay, as a sanction, fees and expenses

expended by Caviar Creators as a result of the scheduled May 9,

2007 jury trial in this matter. That trial had to be cancelled,

after a jury was empaneled, because Faerfers failed to disclose

critical new information about the transfer of Caviar Creator

stock which fundamentally changed the complexion of the case and

necessitated a trial continuance. As will be demonstrated,

Caviar Creators is entitled to recover attorney’s fees and costs,

pursuant to the Bill of Costs, in the amount of $465,974.25. 

Additional sanctions of $45,866.39 against Faerfers will also be

imposed.

BACKGROUND

This action arises out of a settlement agreement entered

into between Caviar Creator and Faerfers. Pursuant to the terms

of that settlement, Caviar Creator agreed to make certain

payments and to transfer 442,396 shares in a third company, UFT,

to Faerfers. Faerfers’ original complaint requested the transfer

of that stock along with unpaid settlement monies from Caviar

Creator. By way of counterclaim, Caviar Creators in turn argued

that because of various breaches of the settlement agreement

triggering its right to liquidated damages, Faerfers was entitled

to damages exceeding the amount of any unpaid settlement funds

and the value of the UFT stock.

///

Case 2:04-cv-02690-TLN-EFB Document 287 Filed 05/02/08 Page 2 of 15
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

As indicated above, the case proceeded to trial on May 9,

2007 and a jury was empaneled. Only after jury selection was

complete did counsel for Faerfers advise the Court that he had

discovered that the stock at issue had in fact been improperly

transferred to Faerfers months before. Faerfers’ counsel

indicated for the first time (again, after the jury was

empaneled) he was not prepared to proceed to trial in the wake of

this information. Under the circumstances, on May 10, 2007, the

Court granted the request to continue the trial. The Court also

announced its intent to issue sanctions against Faerfers for its

deliberate failure to timely disclose the critical fact that a

stock transfer had in fact already occurred. Those sanctions

were intended to compensate Caviar Creator for having to incur

needless expense, in the form of trial preparation and witness

costs, due to Faerfers’ nondisclosure. 

On May 15, 2007, counsel for Caviar Creator requested

$98,449.00 in such sanctions, which was increased to $99,132.57

by way of supplemental application for costs filed May 21, 2007. 

By Minute Order dated August 9, 2007, the Court determined that

the sanctions to be awarded in favor of Caviar Creator would be

held in abeyance pending completion of the case in its entirety.

Caviar Creator moved for terminating sanctions on

November 16, 2007, due to Faerfers’ failure to comply with court

orders requiring Faerfers to transfer the UFT stock at issue,

both from this Court and from courts in Germany (Mr. and

Mrs. Faerfers are German residents, and the stock transfer was

initiated by a German trustee). 

///

Case 2:04-cv-02690-TLN-EFB Document 287 Filed 05/02/08 Page 3 of 15
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

Caviar Creator requested both that Faerfers’ Complaint in the

case in chief be stricken, and that an order be issued striking

Faerfers’ Answer to Caviar Creator’s Counterclaim.

On November 16, 2007, Caviar Creator’s Motion for

Terminating Sanctions was granted. Thereafter, because Faerfers’

own action was dismissed and because Faerfers was no longer a

party to Caviar Creator’s Counterclaim, Caviar Creator withdrew

its request for a jury trial and the matter proceeded to an

uncontested “prove-up” hearing to determine the amount of damages

Caviar Creator was entitled. Following submission of the

evidence adduced at the prove-up hearing on December 3, 2007, the

Court announced its intent to award the $477,954.00 in damages

established by Caviar Creator during the course of the hearing. 

Because the Court had only just been presented with Caviar

Creator’s Bill of Costs at the time of the hearing, it took the

disposition of that costs request under submission. This

Memorandum and Order addresses the entirety of Caviar Creator’s

requests for costs, attorney’s fees, and sanctions, and explains

the basis of the Judgment entered concurrently herewith.

STANDARD

A. Costs

Under Federal Rule of Civil Procedure 54(d), the prevailing

party in a lawsuit may recover its costs “unless the court

otherwise directs”. As this language suggests, the ultimate

decision on whether to award costs is a matter within the court’s

discretion. 

Case 2:04-cv-02690-TLN-EFB Document 287 Filed 05/02/08 Page 4 of 15
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

Ass’n of Mexican-American Educators v. State of Calif., 231 F.3d

572, 591-92 (9th Cir. 2000). If the Court declines to award

costs as requested by the prevailing party, however, it should

specify its reasons for doing so. Berkla v. Corel Corp., 302

F.3d 909, 921 (9th Cir. 2002). Claims for cost items not

properly documented will generally not be allowed. English v.

Colorado Dept. Of Corrections, 248 F.3d 1002, 1013 (10th Cir.

2001).

B. Attorney’s Fees

Under the so-called “American Rule”, attorney’s fees are not

generally taxable as costs against the losing party; nor are they

directly recoverable as an element of damages. See Hensley v.

Eckerhart, 461 U.S. 424, 429; Fogerty v. Fantasy, Inc., 410 U.S.

517, 533 (1994). The American Rule gives way, however, where a

party has sued under a contract that includes a valid agreement

for a fee award to the prevailing party. First Nationwide Bank

v. Summer House Joint Venture, 902 F.2d 1197, 1199 (5th Cir.

1990); Linc Finance Corp. v. Onwuteaka, 129 F.3d 917, 924 (7th

Cir. 1997); Crowley Am. Transport, Inc. V. Richard Sewing Machine

Co., 172 F.3d 781, 785 (11th Cir. 1999). The court can still

refuse to enforce a contractual attorney’s fee provision where a

fee award would be “inequitable and unreasonable”. Anderson v.

Melwani, 179 F.3d 763, 766 (9th Cir. 1999). Like a denial of

costs, though, if the court denies fees on that basis it must

explain its reasons for doing so. Id.

///

Case 2:04-cv-02690-TLN-EFB Document 287 Filed 05/02/08 Page 5 of 15
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

C. Sanctions

Courts possess the inherent power to assess a variety of

sanctions, including money damages and dismissal, where necessary

“to impose order, respect, decorum, silence and compliance with

lawful mandates. Hymes v. United States, 993 F.2d 701, 702 (9th

Cir. 1993). 

ANALYSIS

A. Costs

Faerfers does not dispute Caviar Creator’s entitlement to

costs, as the prevailing party in this litigation. Faerfers’

counsel does take issue with certain portions of Caviar Creator’s

cost ledger as not being properly recoverable either under Rule

of Civil Procedure 54(d)(1) or 28 U.S.C. 1920, which specify

specific categories of allowable costs. As counsel for Caviar

Creator points out, however, most of the items Faerfers objects

to, while included within the ledger as a whole, are nonetheless

not claimed as costs. The five areas of costs that are requested

by Caviar Creator (for court fees, fees for service of summons

and subpoena, court reporter fees, witness fees, and fees for

interpreters) are specifically allowable under the applicable

rules.

///

///

///

///

Case 2:04-cv-02690-TLN-EFB Document 287 Filed 05/02/08 Page 6 of 15
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

Having examined the costs sought as well as the underlying

documentation submitted in support thereof, the Court concludes

that the costs requested in the above-enumerated areas are

properly compensable, and accordingly taxes costs in the amount

of $32,151.25 as requested in the Bill of Costs. While it

recognizes that Faerfers contends that certain court reporter

fees were not “reasonably necessary for trial” and hence not

taxable under the reasoning of Evanow v. M/V Neptune, 163 F.3d

1108, 1118 (9th Cir. 1998), it is not persuaded by Faerfers’

argument in that regard given counsel for Caviar Creator’s

representation that all the depositions at issue were in fact

necessary for trial. (Reply, 2:5-7). In addition, the Court

believes that the $495.00 claimed as fees for service of process

has also been properly documented.

B. Attorney’s Fees

In addition to claiming taxable costs as discussed above,

Caviar Creator’s Bill of Costs also includes reimbursement for

its attorney’s fees expended in this action. Although obviously

not synonymous with costs, Caviar Creator requests its legal fees

on grounds that the operative Settlement Agreement between the

parties, the breach of which spawned this lawsuit, specifies that

the prevailing party in any litigation arising from the Agreement

is entitled to both reasonable attorney’s fees and costs.

Paragraph 30 of the Agreement states in pertinent part as

follows:

///

Case 2:04-cv-02690-TLN-EFB Document 287 Filed 05/02/08 Page 7 of 15
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

“If either of the parties institutes or is required to

defend a legal proceeding, action or motion to enforce

or interpret the terms of this Mutual Release and

Settlement Agreement, the prevailing party shall be

entitled to recover all litigation costs and expenses,

specifically including but not limited to, reasonable

attorney’s fees and costs incurred in such legal

proceeding, action or motion.”

September 2004 Mutual Release and Settlement Agreement, Pls.’

Ex. 2 at Prove-Up Hearing of December 3, 2007.

As indicated above, attorney’s fees may properly be awarded

pursuant to a valid agreement for attorney’s fees. While

Faerfers does claim that there is no fee shifting statute that

would allow costs incurred as attorney’s fees, the basis for

imposing attorney’s fees here is contractual as opposed to

statutory, and Faerfers does not attempt to argue that the fee

provision contained in the Settlement Agreement is unenforceable. 

Instead, he simply contends that the hours claimed are excessive

and/or unwarranted and that the billable rate claimed is

unreasonable.

Turning first to the extent of attorney’s fees claimed, the

Court is disinclined in the first instance to second-guess the

amount of time required by Caviar Creator to litigate this case. 

That being said, the Court’s examination of the time records

submitted by counsel for Caviar Creator does not cause it to

conclude that the time expended it out of line for a case of this

complexity and magnitude. 

///

///

///

///

Case 2:04-cv-02690-TLN-EFB Document 287 Filed 05/02/08 Page 8 of 15
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

In addition, while Faerfers argues that fees attributable to a

counterclaim submitted against both Faerfers and Sinclair Wilson

should be reduced as against Faerfers commensurate with Sinclair

Wilson’s involvement, counsel for Caviar Creators argues

convincingly that the issues raised by the Counterclaim were

identical irrespective of Sinclair Wilson’s involvement, and so

inextricably intertwined in any event that apportionment of the

fees would be impossible.

While the Court consequently approves the amount of hours

expended in representing Caviar Creator, in order to establish a

reasonable attorney’s fee an appropriate hourly rate must also be

established. Hensley v. Eckerhart, 461 U.S. 424, 429 (1983). In

determining a reasonable hourly rate, the court considers the

experience, skill, and reputation of the attorney requesting

fees. See Chalmers v. City of Los Angeles, 796 F.2d 1205, 1210

(9th Cir. 1985). The court is also guided by the rate

“prevailing in the community for similar services by lawyers of

reasonably comparable skill, experience and reputation.” Blum v.

Stenson, 465 U.S. 886, 895 (1984). The party seeking recovery

has the burden of proof in establishing such prevailing rate. 

Jordan v. Multnomah Co., 815 F.2d 1258, 1263 (9th Cir. 1987).

Here, the lead attorney representing Caviar Creator, Eileen

Diepenbrock, has charged an increasing hourly rate during her

lengthy involvement in this case, which began in December of

2004. Most recently, she has billed $340.00/hour. 

///

///

///

Case 2:04-cv-02690-TLN-EFB Document 287 Filed 05/02/08 Page 9 of 15
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10

Several other shareholders in the Diepenbrock Harrison firm

(Keith McBride, Gene Cheever and Susan Kirkgaard), who were

consulted on specific issues within their areas of expertise in

this multi-faceted case, billed as much as $365.00/hour.

In addition to the shareholders, a number of associates also

worked on the case, charging hourly rates of between $185.00 and

$300.00. Finally, paralegal and law clerk time was billed at

rates between $105.00 and $130.00 (for paralegals Laurie Birney,

Shannon Cappanelli, Jenna McGuire and Joshua Gillespie) and

$140.00 and $180.00 (for law clerks Adam Arant and Mark

Peterson).

Although counsel for Caviar Creator has correctly pointed

out that this case gave rise to complex procedural and conflict

of laws analyses involving issues of Nevada law, German parties

and documents, and both federal and international procedure in

substantive areas ranging from corporate, contract and tort law,

aside from requesting its prevailing fees counsel has failed to

establish that those fees adequately represent those prevailing

in the Sacramento community. In addition, this Court is unaware

of fee requests in excess of $325.00 being approved as reasonable

within the Sacramento Division of the Eastern District of

California. By Memorandum and Order dated December 14, 2007,

Judge Shubb approved a maximum rate of $325.00/hour in a complex

environmental case involving the Endangered Species Act, 16

U.S.C. §§ 1531-1540. Home Builders Ass’n of N. Cal. v.

Kempthorn, 2007 WL 4374047 (E.D. Cal. 2007). 

///

///

Case 2:04-cv-02690-TLN-EFB Document 287 Filed 05/02/08 Page 10 of 15
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

11

In 2005, this Court approved $300.00 as a reasonable and

appropriate hourly rate in litigation involving farm worker wage

and employment issues. See Velasquez v. Khan, 2005 WL 2397058

(E.D. Cal. 2005).

Given the foregoing, the Court limits the reasonable hourly

rate of the shareholder attorneys at $325.00. Similarly, the

hourly rate for associate attorneys working on the case is

subject to a ceiling of $275.00 per hour, which the Court

believes to be the reasonable hourly rate for such attorneys. In

Home Builders, a junior attorney was found to be entitled to an

hourly rate in that amount. Home Builders, 2007 WL 4374047 at

*4.

As a final matter involving fee recovery in this matter, the

Court looks at the fees claimed by counsel for Caviar Creator for

paralegals and law clerks. Attorney’s fees may properly include

compensation for paralegals. Missouri v. Jenkins, 491 U.S. 274,

285 (1989). Since the Ninth Circuit has extended compensable

time to all those “whose labor contributes to work product for

which an attorney bills her client” (Trustees of the Constr.

Indus. & Laborers Health & Welfare Trust v. Redland Ins. Co.,

460 F.3d 1253, 1256-57 (9th Cir. 2006), the costs of law clerks

may also be included, so long as it is customary to bill such

work separately. Id. at 1257.

Here, Faerfers’ only stated objection to paralegal, and

presumably law clerk charges, are that the hourly rates claimed

are excessive. As indicated above, Caviar Creator includes

charges for paralegal time as much as $130.00 per hour. Law

clerk billing rates, at up to $180.00 hourly, are even higher.

Case 2:04-cv-02690-TLN-EFB Document 287 Filed 05/02/08 Page 11 of 15
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12

These rates cannot be deemed reasonable. In a May 2007

decision, Judge Levi found the paralegal rate “favored in this

district” to be $75.00. Robinson v. Chand, 2007 WL 1300450 at *2

(E.D. Cal. 2007). This Court agrees with that conclusion and

accordingly will limit paralegal fees to $75.00 in this case. 

Because there is reason why a law clerk should be billed at a

higher rate, the Court will limit compensation for time billed by

law clerks to $75.00, as well.

Although the Court concludes that the hours expended by the

Diepenbrock Harrison firm are compensable to the extent

enumerated above, that same conclusion does not hold true for

fees claimed for legal work done by two different German

attorneys, Dr. Hartwig Schroer and George Heinrich Pott. Those

additional fees are attributable to the fact that Caviar Creator

chose to do business with German interests and should properly be

regarded as a cost of doing foreign business rather than

additional fees that can reasonably be levied pursuant to a

Settlement Agreement executed in the United States.

After reducing the attorney’s fees to redact amounts charged

by German counsel and to lessen certain hourly rates as indicated

above, total attorney’s fees will be awarded in the amount of

$433,823.50.

///

///

///

///

///

///

Case 2:04-cv-02690-TLN-EFB Document 287 Filed 05/02/08 Page 12 of 15
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

13

C. Sanctions

As stated above, trial had to be continued in this matter on

May 10, 2007, at a point in time after a jury had already been

empaneled, due to Faerfers’ failure to disclose that the stock

which figured prominently in their Complaint had already in fact

been transferred. The Court made it clear, when granting the

continuance, that sanctions would be imposed against Faerfers in

an amount intended to compensate Caviar Creators for costs

needlessly incurred in connection with the aborted trial. The

$99,132.57 in such costs ultimately requested by Caviar Creator

included some $45,042.50 in attorney’s fees incurred in preparing

for the trial.

The Court has already awarded attorney’s fees in accordance

with the parties’ Settlement Agreement as stated above, and that

amount includes the partial attorney’s fee figure previously

requested as a sanction. That leaves remaining costs sought of

$54,090.07, less translation fees in the amount of $8,223.68

which were ultimately either not billed or included within the

costs taxed by the Court in accordance with Federal Rule of Civil

Procedure 54(d)(1) as enumerated above. Total remaining costs

sought as a sanction by Caviar Creator are therefore $45,866.39.

///

///

///

///

///

///

Case 2:04-cv-02690-TLN-EFB Document 287 Filed 05/02/08 Page 13 of 15
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 The services Esquire provided included, according to 1

paragraph 2 of Eileen Diepenbrock’s December 19, 2007

Declaration, the preparation of exhibits and deposition testimony

in electronic format for trial presentation. 

14

While Faerfers objects to this figure to the extent it

includes witness costs deemed to be excessive, upon examination

of the claimed costs the Court does not agree. Nor does the

Court agree that trial presentation expenses incurred in hiring 1

a consultant, Esquire Litigation Solutions, were unreasonable. 

Similarly, the retention of Trial Science to assist counsel for

Caviar Creators in jury selection for the May 2007 trial was also

a reasonable expense that became useless after the trial had to

be continued after Faerfers’ failure to disclose information

crucial to the scope of the trial. Finally, given Caviar

Creator’s representation that Siegfried Besemer was retained to

provide consulting services related to the anticipated

impeachment of Daniel Faerfers, the cost of his services, which

were ultimately unnecessary given the continuance of the trial,

should also be borne by Faerfers as a sanction. 

Sanctions in accordance with the Court’s May 10, 2007

directive, made at the time trial had to be continued, are

consequently set at $45,866.39.

///

///

///

///

///

///

/// 

Case 2:04-cv-02690-TLN-EFB Document 287 Filed 05/02/08 Page 14 of 15
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

15

CONCLUSION

Based on the foregoing, attorney’s fees and costs in the

amount of $465,974.75 are assessed against Faerfers and in favor

of Caviar Creator. In addition, sanctions are awarded in the

amount of $45,866.39, to be paid by Faerfers to Caviar Creator. 

Along with damages in the amount of $477,954.00, as established

by Caviar Creator at the time of the December 3, 2007 prove-up

hearing, both these amounts will be incorporated within the

Court’s Judgment filed concurrently with this Memorandum and

Order.

IT IS SO ORDERED.

Dated: May 1, 2008

_____________________________

MORRISON C. ENGLAND, JR.

UNITED STATES DISTRICT JUDGE

Case 2:04-cv-02690-TLN-EFB Document 287 Filed 05/02/08 Page 15 of 15