Aerogroup Intern., Inc. v. Ozburn-Hessey Logistics, LLC, Not Reported in F.Supp.2d...

 © 2012 Thomson Reuters. No claim to original U.S. Government Works. 1

2011 WL 1599618

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United States District Court,

D. New Jersey.

AEROGROUP INTERNATIONAL, INC., Plaintiff,

v.

OZBURN–HESSEY LOGISTICS, LLC,

Ozburn–Hessey Holding Company,

LLC, Defendants/Third–Party Plaintiffs,

v.

Distribution Management Group,

Inc., Third–Party Defendant.

Civil Action No. 08–4217 (SDW)

(MCA). | April 27, 2011.

Attorneys and Law Firms

Gary J. Ruckelshaus, Reed Smith, LLP, Princeton, NJ, Sara

Kennedy Kornbluh, Reed Smith LLP, New York, NY, for

Plaintiff.

David L. Harris, Samuel B. Santo, Jr., Thomas Steven Dolan,

Lowenstein Sandler PC, Roseland, NJ, for Defendant.

Opinion

OPINION & ORDER

WIGENTON, District Judge.

*1 Before the Court are Plaintiff Aerogroup International,

Inc. (“Plaintiff” or “Aerogroup”) and Third–Party Defendant

Distribution Management Group, Inc.'s (“DMG”) appeals

of an nondispositive order entered by United States

Magistrate Judge Madeline Arleo on August 12, 2010

granting Defendants/Third–Party Plaintiffs Ozburn–Hessey

Logistics, LLC and Ozburn–Hessey Holding Company,

LLC's (collectively “OHL”) application for attorneys' fees

and costs and OHL's cross-appeal of Magistrate Judge Arleo's

order 1 denying its request for an order to show cause and a

hearing to further explore the reasons behind Aerogroup and

DMG's failure to produce the documents in question. Oral

argument for these appeals and the cross-appeal was heard

on April 4, 2011. For the reasons discussed below, this Court

grants Aerogroup and DMG's appeals and reverses Magistrate

Judge Arleo's Order in part. However, this Court denies

OHL's cross-appeal and affirms Magistrate Judge Arleo's

Order.

1 This is Docket Entry No. 177.

PROCEDURAL HISTORY 2

2 Magistrate Jude Arleo's thorough November 15, 2010

Opinion, Docket Entry No. 198, provides a detailed

factual background; therefore, this Opinion will not

repeat the facts pertaining to the present appeals and

cross-appeal.

On June 29, 2010, Magistrate Judge Arleo held a hearing

on OHL's motion to compel discovery and application to

impose sanctions on Aerogroup and DMG. On that same

day, Magistrate Judge Arleo issued a ruling from the bench

and granted OHL's motion to compel and application for

sanctions. The Court awarded OHL reasonable attorneys' fees

and costs related to: (1) OHL's efforts to obtain discovery

in a New York state action between Freight Brokers Global

Services, Inc. and D MG; (2) OHL's motion to compel that

discovery against Aerogroup and D MG; and (3) OHL's

discovery of an investigation into the kickback scheme

involving Sam Nysembaum, Aerogroup's former employee.

Additionally, the Court ordered that OHL's attorneys' fees

and costs be split evenly between Aerogroup and DMG.

Docket Entry No. 198 at 2. Although OHL submitted a

fee application requesting attorneys' fees and costs in the

amount of $817,657.06, Judge Arleo reduced that amount and

awarded $246,211.61. Id. at 29. The Court's decision was

memorialized in the August 12, 2010 Order.

Subsequently, on August 26, 2010 Aerogroup and DMG

sought reconsideration of the Court's August 12, 2010 Order

imposing sanctions against them because of newly available

evidence and to prevent manifest injustice. Docket Entry Nos.

180 and 181. Magistrate Judge Arleo denied Aerogroup and

DMG's motions for reconsideration. Docket Entry No. 198 at

4–5.

DISCUSSION

A. Legal Standard

A United States Magistrate Judge may hear non-dispositive

motions under 28 U.S.C. § 636(b)(1)(A), Federal Rule of

Civil Procedure 72(a), and Local Civil Rule 72.1(a). Pursuant

to Federal Rule of Civil Procedure 72(a) and Local Civil

Rule 72. 1(c)(1)(A), a magistrate judge's disposition on a nondispositive motion may be modified or set aside if the ruling

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was “clearly erroneous or is contrary to law.” See also 28

U.S.C. § 636(b)(1)(A); Haines v. Liggett Grp. Inc., 975 F.2d

81, 91 (3d Cir.1992). A ruling is clearly erroneous “when

although there is evidence to support it, the reviewing court on

the entire evidence is left with the definite and firm conviction

that a mistake has been committed.” Dome Petroleum Ltd. v.

Emp'rs Mut. Liab. Ins. Co., 131 F.R.D. 63, 65 (D.N.J.1990)

(quoting United States v. Gypsum Co., 333 U.S. 364, 395, 68

S.Ct. 525, 92 L.Ed. 746 (1948)) (internal quotations omitted).

“A district judge's simple disagreement with the magistrate

judge's findings is insufficient to meet the clearly erroneous

standard of review.” Andrews v. Goodyear Tire & Rubber

Co., Inc., 191 F.R.D. 59, 68 (D.N.J.2000). On the other

hand, an order is contrary to law “when the magistrate judge

has misinterpreted or misapplied the applicable law.” Doe

v. Hartford Life & Accident Ins. Co., 237 F.R.D. 545, 548

(D.N.J.2006).

B. Analysis

a. Aerogroup an d DMG's Appeals

*2 Federal Rule of Civil Procedure 16(f) authorizes

sanctions for violations of pretrial orders. The Rule provides

in relevant part that “the court may issue any just orders,

including those authorized by Rule 37(b)(2)(A)(ii)-(vii), if a

party or its attorney fails to obey a scheduling or other pretrial

order.” Fed.R.Civ.P. 16(f)(1)(C). Additionally, “[i]nstead

of or in addition to any other sanction, the court must

order the party, its attorney, or both to pay the reasonable

expenses—including attorney's fees—incurred because of

any noncompliance with this rule, unless the noncompliance

was substantially justified or other circumstances make an

award of expenses unjust.” Fed.R.Civ.P. 16(f)(2).

Here, the Court is satisfied that Judge Arleo appropriately

imposed sanctions against Aerogroup and DMG. At the

argument before Judge Arleo, counsel for DMG conceded

that the documents were relevant and should have been

produced. Therefore, attorneys' fees, expenses and the

waste of judicial resources could have been easily avoided.

However, the Court finds the $246,211.61 award of attorneys'

fees and costs excessive under the circumstances. While

the Court appreciates that Judge Arleo's award is a drastic

reduction from what OHL sought initially, that does not

change the fact the award of $246,211.61 is still unreasonable.

Although the calculation of attorneys' fees and costs is “an

inexact science,” Bowne of New York City, Inc. v. AmBase

Corp., 161 F.R.D. 258, 267 (S.D.N.Y.1995), the amount

awarded must still be reasonable. Mosaid Techs. Inc. v.

Samsung Elecs. Co., 224 F.R.D. 595, 597 (D.N.J.2004).

In support of its application OHL provided the following as

the hourly rates for its counsel and support staff:

1. Lowenstein 3 attorneys David Harris, Esq.[,]—$625,

Samuel Santo, Esq.[,]—$500, and Thomas Dolan, Esq.

[,]—$340; Lowenstein paraprofessionals Odin Medina

—$160, Keith Campbell—$175, Aneela Suhail—

$135, Christy Duff—$160, Marjorie Cross—$160 and

Kathryn Taggart—$125;

3 Lowenstein is OHL's current local counsel. Bressler

Amery previously served as OHL's local counsel, and

Bass Berry is OHL's out of state counsel.

2. Bressler Amery attorney David Libow sky, Esq.[,]—

$425;

3. Bass Berry attorneys Michael Dagley, Esq.

[,]—$405 and $450, Joshua Denton, Esq.[,]—

$283.50 and $315, Erica Vick, Esq.[,]—$265,

Erin Everitt, Esq.[,]—$235, Lucas Smith, Esq.,

—$211.50 and $235, Brian Iverson, Esq. [,]—

$180, Charles Jarboe, Esq.,—$180, Emoke Pulay,

Esq.[,]—$180, J. Andrew Goddard, Esq.[,]—$430,

John Dawson, Esq.[,]—$162 and $180, Sarah

Bogni, Esq. [,]—$ 180; Bass Berry paralegals and

litigation technology staff Barry Willms—$160.39,

Beth McCaskill—$77.50, Barry Williams—

$92.50, Callie Woosley—$92.50, Kerri Williams

—$72.50, Karl Bridgers—$95, R. Matthew Gibson

—$117.50, Sandra Ward—$130, Stephen Krell—

$112.50, and Susan Bible—$77.50.

Docket Entry No. 198 at 12–13 (footnotes omitted). OHL

also submitted evidence on the hours its attorneys

expended on the issuance of the subpoenas and

attempting to obtain compliance. According to OHL,

“Bass Berry expended 162.7 hours in attorney time

amounting to $45,956.55; 7.5 hours of paralegal time

amounting to $581.25; and 6.5 hours of a litigation

technology specialist's time amounting to $1,042.55. Id.

at 20.

*3 Although Magistrate Judge Arleo found that OHL's

attorneys' rates were reasonable, Id. at 15, she concluded

the number of hours spent Bass Berry and Bressler Amery

spent from February 6, 2009 through June 22, 2009, was

unreasonable and excessive. Id. at 19. For example, she

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found that “the work performed by ... [Bressler Amery and

Bass Berry] were duplicative, the hours spent on obtaining

this particular third party discovery was excessive, and the

work could have been accomplished with fewer attorneys and

support staff.” Id. Judge Arleo determined that Bass Berry had

performed most of the work and Libowsky merely assisted the

Bass Berry attorneys. Consequently, Judge Arleo reduced his

fees by sixty percent and awarded him $1,312.40 in fees and

$642.47 in costs. Id. at 28. Additionally, Judge Arleo found

that “Bass Berry expended an unreasonable number of hours

and work performed by too many attorneys.” (Id. at 20.) Judge

Arleo specifically noted that “the legal issues related to the

subpoenas were [neither] complex [n]or novel.” Id.; see also

id. at 23. As a result, she reduced Bass Berry's fees by fifty

percent. Id. at 20, 28.

As to the hours Lowenstein and Bass Berry expended

beginning June 24, 2009, Judge Arleo found that “a legal

team of twenty-three to uncover, organize and analyze

the discovery withheld by Aerogroup and DMG ... [wa]s

excessive,” id. at 21, and there were “countless examples of

needless duplication of efforts.” Id. at 22–23. For instance,

Judge Arleo noted that “[t]ogether, these two firms incredibly

billed over 2,100 hours of work.” Id. at 22. Judge Arleo

provided a detailed breakdown of the work performed by

Bass Berry and Lowenstein and how it was either excessive

or unnecessary. Id. at 21–27. Judge Arleo then reduced

Bass Berry and Lowenstein's total hours by half, disallowed

reimbursement for certain expenditures and fees and awarded

Bass Berry $144,133.17 in fees and $3,987.88 in costs and

awarded Lowenstein $87,529.60 in fees and $8,606.38 in

costs. Id. at 24–28.

As stated previously, the Court recognizes that Judge Arleo's

award is a significant reduction of what OHL sought.

However, the fees and costs submitted by OHL were

extremely unreasonable. Thus, a reduction in the amount

sought, if not significant enough, may still be unreasonable.

As the Third Circuit has emphasized, the “principal concern

is whether the time claimed is reasonable for the services

performed.” Maldonado v. Houstoun, 256 F.3d 181, 185 (3d

Cir.2001).

Importantly, as Judge Arleo noted, this was merely a

discovery matter and the legal issues involved were neither

“complex [n]or novel.” Docket Entry No. 198 at 23. O HL

has not suffered any prejudice as a result of Aerogroup and

DMG's actions. This case is still in discovery and Aerogroup

and DMG did not wait until the eve of trial to produce the

documents. See Tracinda Corp. v. DaimlerChrysler AG, 502

F.3d 212, 242 (3d Cir.2006) (affirming district court's award

of $556,061 in attorneys' fees and costs because defendant

did not produce the documents in a timely fashion and

plaintiff was prejudiced by defendant's conduct). Moreover,

Aerogroup and DMG's conduct has not substantially affected

OHL's “trial preparation strategy” or impacted OHL's “ability

to develop its case.” Tracinda Corp., 502 F.3d at 242

(internal quotations omitted). There was no prior order on

the documents OHL sought, and neither Aerogroup nor DMG

had committed a prior infraction. The docket in this case

reflects that all parties have had numerous discovery issues

which have required an inordinate amount of involvement

with the Court. Consequently, the Court finds that Judge

Arleo's award of $246,211.61 under the circumstances was

clearly erroneous. The Court concludes that $10,000 is a

reasonable award for attorneys' fees and costs in this matter.

*4 Moreover, the record indicates that the documents OHL

sought were primarily in DMG's possession. Hence, most

of OHL's attorneys' fees and cost were expended on DMG.

Therefore, it was clearly erroneous for Judge Arleo to split

the fees and costs evenly between Aerogroup and DMG. The

Court finds that DMG is responsible for eighty percent (80%)

of the award and Aerogroup is responsible for twenty percent

(20%) of the award.

b. OHL's Cross–Appeal

OHL contends that Magistrate Judge Arleo erred in denying

its request for an order to show cause and a hearing

to explore further into the reasons and circumstances

surrounding Aerogroup and DMG's failure to provide the

subject documents. This Court finds that Judge Ar leo's

decision was neither clearly erroneous nor contrary to law and

the request was appropriately denied. As previously noted,

this case is still in discovery. Any relevant inquiries may be

addressed therein.

IT IS on this 27th Day of April, 2011,

ORDERED that Aerogroup and DMG's appeals of

Magistrate Judge Arleo's August 12, 2010 Order are

GRANTED in part; it is further

ORDERED that Magistrate Judge Arleo's August 12, 2010

Order is hereby REVERSED in part; it is further

ORDERED that OHL's cross-appeal of Magistrate Judge

Arleo's August 12, 2010 Order is DENIED; and it is further

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ORDERED that Magistrate Judge Arleo's August 12, 2010

Order is AFFIRMED in part.

End of Document © 2012 Thomson Reuters. No claim to original U.S. Government Works.

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