1 UNITED STAT ES DIS TRICT COURT F OR THE D ISTRIC T OF CO LU M BIA

____________________________________) ELL IP SO, INC., ) ) P la in t if f, ) ) v. ) Ci vilAc ti on N o. 05 -1 18 6 ( RC L) ) JOHN B. MANN, et al., ) ) De fend ant s. ) ____________________________________) M EM OR

AN DU M OP IN ION O nS e p t e mb e r

3 0 , 2 0 0 8 , th e C o urte n t e r e d f i n a l j u d g m e n ti nth i s c a s e . ( D o c k e te n tr y [220] ). Now be fore the Court comes de fenda nts J ohn B. Ma

nn and Mann Te chnolog ies’ motion [ 221] for attorney s’ fe es and e x penses. Upon c onsideration of the motion [ 221], t he op po sit ion

[228 ], th e re ply

[231 ], a pp lic a ble law, and

the e nti re re c or d h e re in, the de fe nd ants ’ motion will be GRANTE D.

I. BACK GR OUND In October

2002, plaintiff Ellipso was a strug g ling tele communications company
. Ellipso, Inc. v. Mann , 541 F. Supp. 2d 365, 369 (D.D .C. 2008) (L amber th, J .). At that time, David Castiel, in his capa city as Ellipso president and c hief e x ecutive of fice r, hired de fenda

nt Robert Patterson to sec ure f inancingfrom investors. Id . Patte rs on str uc tur e d a de a l w he re in defe ndant Mann Te chnolog ies, L .L .C. (“Mann Te ch”) loaned Ellipso $90,000, secur ed by 492,611 share s of I CO Global Communications Holding Ltd. Stock (“I COHA Share s”) that2

Ellipso held. Id . Patterson, howeve r, the Ha rvar d-traine d lawy er who was sec uringfinanc ing f or Ellipso, also had an intere st in Mann Technolog ies. Id . Acc ording ly , he stood to benef it from the loan. The loan a g ree ment was e x ecute d on J anuar y 30, 2004, at which time the I COHA shar es
wer e value d at $180,000. Id . The loan a g ree ment provided that in the e vent of a defa ult by Ellipso, Mann Tech c ould take possession of the c ollatera l. Se e id . T he loa n a g re e me nt w a s a lso “non-r ecour se,” me aningthat Ellipso could stop performingon the loan contr act, wa lk away , and owe Ma nn Tec h nothing more than the I COHA Share s secur ing the loan. Ellipso was in default fr om the very beg inning a

nd never made loan pa

y ments to Mann Tec h. As a re sult, Mann Tech f orec losed on the collate ral. Ellipso filed suit ag ainst Mann Tec h
on June 14 , 2 00 5. El lip so argue d th at be c a us e Patte rs on

a lle g e dly c on c e a le d h is d

ua l r ole a s b oth an Ellipso consultant and a pa rt owner of Mann Te ch, the loan doc uments contained te rms and conditions ex tremely

favor able to Mann Te ch, and one rous and unc onscionable to Ellipso. Mann Tec h, on the other ha

nd, contende d that Castiel, the Ellipso president and chie f executive off icer , lear ned of Patter son’s role in Mann Te ch and r atified the loa n ag ree ment any

way . This Court gr anted Ellipso’s motion for pre liminary injunction on November 2, 2005, which prohibited Mann T ech f rom selling the share s of stock that it was holdingas collate ral. Ellipso, Inc. , v. Mann , No. 05-c v-1186, at *3, 2005 WL5298646 (D.D.C. Nov. 2, 2005) . The Court de te rm ine d th at E lli ps o h a d s ho wn a lik e lih oo d o f s uc c e ss o n th e me ri ts o f i ts f ra ud c la im beca use Patterson ha d not disclosed his dual role to Ellipso. Id . The Court of Appe als aff irmed this Court’s preliminary

injunction on March 23, 2007. Ellipso, Inc. v. Mann, 480 F.3d 1153 (D.C. Cir. 2007).The e -mail by Castiel states: “In particula r I never knew until May

/J une 2004 that you 1 wer e the 50% owner

of Mann Te ch and you had a stake in the upside of the [I COHA] stock.” ( See Email from Castiel to Patterson (Nov. 16, 2004, Ex. 21 to Mot. [ 144] for Summ . J .)). 3 On April 1, 2008, the Court consider ed a ne wly prese nted email date d November 16, 2004 from Ellipso president and c hief e x ecutive of fice r David Castiel to defenda nt Robert Patterson. The Court c oncluded, on the ba sis of the newly prese nted e- mail, that Ellipso had 1 knowledg e of Mr . Patterson’s stake in Mann Tec h no later tha n J une 2004. Ellipso, 541 F. Supp. 2d at 371. Subsequent to that date, Ellipso perf ormed seve ral a cts in aff

irmation of the loan agr ee m en t , i n cl u d i n g n ego t i at i n g an d ex ec u t i n g an am en dm en tt o th e l o an agr ee m en t , ac ce p t i n g a chec k pursuant to the loan a g ree ment amendment, a nd transfe rringcollater al to Mann Tec h. Id
. at 371–72. Acc ording ly , the Court deter mined that Ellipso could no longer asser t that it had an equitable c laim to the collatera l and g rante d summary judgme nt to Mann Tech on ma ny of Ellipso’s claims. Id . at 37 2. Th e Court a lso dis so lve d th e pr e lim ina ry inj un c tio n a s to a ll defe ndants. The Court later awa rded the Mann De fenda

nts’ damag es suffe red a s a re sult of the preliminary

injunction. (Mem. Op. [215] at 9.) As for Ellipso’s cla ims that remained f ollowing the summar

y judgme nt stag e, the Court he ld a se ve n d ay

jur y tr ia l. U lti mate ly , th e Court g ra nte d b oth pa rt ie s’ mot ion s f

or jud g me nt a s aIn th e Court ’s Au g us t 5, 20 08 or a l r uli ng s g ra nti ngthe pa

rt ie s’ mot ion s f

or jud g me nt a s a 2 matter of la

w, the Court stated seve ral ke y fac ts that emerg ed fr om the trial: (1) the loa n ag ree ment g ener ated ove r $100,000 for Ellipso; (2) Ellipso knew of Patterson’s Mann T ech participation no later than June 2004 and subsequently aff irmed the loan a g ree ment; (3) at the tim e of fo rf e iture , th e va lue of

the c oll ate ra l se c ur ingEl lip so ’s loa n h a d d ipp e d s ig nif

ic antl y be low the outst and ingloa

n amou nt; (4 ) t he loa n w a s “ no n- re c ours e ,” me anin gthat E lli ps o c ou ld stop perfor

ming on the loa

n contra ct, walk a

way , and owe Mann Tec h nothing more than the I COHA shar es sec uringthe loan; (5) E llipso was in default fr om the moment Mr. Castiel signe d the agree ment; (6) Ellipso chose to wa lk away from the loan a g ree ment; and (7) Ma nn Tec h exercised its rig ht to forec lose on the collate ral. 4 matter lawand dismissed all claims and counte rcla ims. Final judg ment was e ntere d on 2 September 30, 2008. ( Docke t entry [220] ). The Mann D efe ndants now re quest attorney s’ fe es.

II. AP P LICABLE LAW Absent a statute to the c ontrary , fede ral c ourts in this country operate under

the ‘Amer ican r

ule’ that the pr evailingparty may not rec over attorney s’ fe es as c osts or otherwise. Al y esk a P ipe lin e Se rv

s. Co. v . W

ild e rn ess S oc ie ty , 421 U.S. 240, 245 (1975). Howe ver, the re a re a couple of exceptions to this gene ral rule . First, a c ourt may assess attorne y s’ fe es “when the losing pa rty has ac ted in bad fa ith, vex atiously , wantonly , or for oppressive r easons.” Id . at 258; See also Ame rican Hosp. Ass’n v. Sullivan , 938 F.2d 216, 220 ( D.C. Cir 1991) (statingthat bad fa ithmay be fo un d whe re a

“ pa rt y is f or c e d to un de rt ake oth e rw ise unne c e ssa ry lit ig atio n to vin dic ate pla in l e g a l r ig hts ” ). Se c on d, of c ours e , p art ie s c an c on tr a c t aro un d th e Am e ri c an r ule throug h an attorne y

fee -shifting provision in a contra ct. See Liberty M ut. Ins. Co. v. Lumbermen’

s Mut. Cas. Co. , 172 F.3d 919, slip op. at *1 (D.C. Cir. Jan. 20, 1999) (unpublished).See e .g. , Ellipso’s Responses to Mann Defe ndants’ Reque st for Admissions (Mann 3 Def .’s Mot. [221] for Atty .’s fe es, Ex. 7, at ¶ 5, 6, 8, 34) (Ellipso repe atedly denying that it knew of Rob e rt Patte rs on ’s int e re st i n M ann Te c h a s o f Augus t 2, 20 04 ); (M ot. [4] f or Pr e lim ina

ry Inj. 7) (statingthat Ellipso would st ill have the I COHA stock if it knew of Patterson’s dual- role). The c ritical e- mail was produc ed by Robert Patterson, not by

Ellipso. Ell ipso states that 4 it did not produce the c ritical e- mail, and many other e -mails that wer e re levant to the ca se, beca use of c omputer fa ilures. (Pl.’s Opp’n to Mot. for A tty .’s Fe es at 5.) 5 I f attorne y s’ fe es ar e to be a war ded, the c ourt must mult iply the “number

of hours
rea sonably

expended on the litigation” by a “r easona

ble hourly

rate .” Harrison Music Corp. v. Tesfaye , 293 F. Supp. 2d 80, 85 (D.D .C. 2003) (L eon, J.). I n this Ci rcuit, “a n attorney ’s usual bil lin grate is p re sumpt ive ly the re a so na

ble rate , p ro vid e d th at th is r ate is i n li ne wi th t ho se pr e va ili ngin t

he c omm un ity fo r s imi lar s e rv ic e s b y

lawye rs of

re a so na bly c omp ara ble sk ill , experience and re putation.” Kat tan by Tho ma s v . D ist

ric t of Colum bia , 9 95 F .2 d 2 74 , 2 78 (D .C. Cir. 1993).

III . AN AL YSI S A . Mann Tech is E ntitled to Att orneys’ F ees The c entra l alleg ation that g ave r ise to the plaintiff’s c laims was that Castiel did not know of Patte rs on ’s du a l r ole wh ile ne g oti atin gand re a ff ir min gthe loa

n a g re e me nt. El lip so re pe ate dly made this alleg ation in pleading s and duringdiscovery
. Howeve r, as a result of a

n e-ma il that 3
wa s p ro du c e d w e ll i nto the lit ig atio n, the Court le arn e d th at th is a lle g atio n w a s untr ue . E lli ps o 4 did know of Patterson’s r ole in Mann Tec h in J une 2004 at the latest, y et still ratified the loan ag ree ment. In other wor ds, the key “fa ct” that Ellipso used to instigate this li tigation was patently false. E llipso repeate dly made this false alleg ation and it was the c ritical fa ct uponSee e .g. , Ellipso, Inc. v. Mann , 4 80 F .3 d 1 15 3, 11 59 (D .C. Cir . 2 00 7) (a ff ir min gthi s 5 Court’s preliminary

injunction because Mann Tec h had not shown that Ellipso knew of Patterson’s dual- roles bef ore Ellipso aff

irmed the loan a g ree ment). 6 wh ic h th e lit ig atio n tu

rn e d; thi s le a ds the Court to c on c lud e that E lli ps o inte nti on a lly ma de thi s 5 false a lleg ation. Ellipso argues that eve n if Castiel did know of Patterson’s inter est in Mann Tec h in J une of 2004, there is no evidence that he knew of Patterson’s inter est from January to J une of 2004. There fore , Ellipso argues, Castiel did not know of Patterson’s inter est when the orig inal loan ag ree ment was e x ecute d and wa s not operatingin bad fa ith by filing a lawsuit. (Def

.’s Opp’n at 4–5.) Ind e e d, wi th r e sp e c t to the c la ims that surv ive d s umm ary jud g me nt, the Court

or ig ina lly ag ree d with the plaintiff. “[W] here a par ty to an executed c ontrac t discovers a materia l mis re pr e se ntatio n ma de in t he e xec uti on

of a c on tr a c t, t

hat pa rt y may e le c t on e of

tw o mutua lly exclusive remedies. H e may either a ffirm the c ontrac t and sue for damag es, or r epudiate the contra ct and r ecove r that with which he or she ha s parted.” El lip so , Inc. v . Mann, 480 F.3d 1153, 1158 (D.C. Cir. 2007). Ac cording ly , it appear ed that some of E llipso’s claims may have ha d merit eve n though it ratified the contra ct af ter it lear ned of Patter son’s dual-r ole. Afte r conductingthe seve n day jury trial, howeve r, it beca

me appa rent that whe n Mann Tec h fore closed on the c ollatera l the share s were worth consider ably less than the $100,000 that Ellipso obtained from the loan. Ac cording ly , Ellipso suffere d no provable damag es and a ppear s to have pur sued the law suit merely to hara ss Mann Tec h. Reg ardle ss, Ellipso’s argument is a red he rring . I t fails to expl ain its conduct with reg ard to the claims that did not survive summary judgme nt, in which Ellipso st ated that it was e ntitledSee, e .g. , Br ief of A ppellee, 2006 WL

3146834 (D.C. Cir. 2006) (statingthat the District 6 Court’s fac tual finding that “Patterson a cted a s an undisclosed dua l ag ent when he neg otiated the L oan Agree ment on behalf of Ellipso and later a dvised Ellipso to t ransf er title to and possession of the I CO HAsh are s to Mann Te c h” sh ou ld b e a ff

ir me d) . O f c ours e , E lli ps o d id n ot t ra ns fe r t itl e and possession of the I COHA shar es to Mann Te ch until Aug ust of 2004, which we now know was a fter Ca stiel knew about Patterson’ s dual-role
. 7 to a re scission of the contra ct bec ause it wa s unawa re of Patterson’s intere st in Mann Tech pr ior to Aug ust of 2004. After examining the Nove mber 16, 2004 e -mail from Castiel, the Court deter mined that Ellipso’s prior submissi ons about when Castiel possesse d the re levant knowledg e of Patter son’s role in Mann Te ch wa s false. I n other wor ds, Castiel misreprese nted the cr itical fac t upon which the litigation turned. This misreprese ntation alone constitutes bad faith. Se e Sc ott-B lan ton v . U niv e rsa l Cit

yStu dio s Pro du c tio ns LLLP , N o . 0 7
- 0 0 9 8 , 2 0 0 9 WL 97254 at *3 (D.D .C. J anuar y 15, 2009) (Ur

bina, J .) (statingthat attorney s’ fe es ca n be aw arde d when a plaintiff per sists i n pursuinga cla im that it knows from the outset is false and w astes
c ouns e l and

the c ourt ’s re so ur c e s) . T his fa lse and mis le a din gargume nt n ot o nly oc c ur re d in dis c ov e ry , b ut a lso be fo re thi s c ourt and in t he Court of Ap pe a ls. 6 Mann Tec h is also entitled to attorney s’ fe es on the indepe ndent g round that a f ee- shifting provision was included in the loa n contra ct betwe en Ellipso and Mann Te ch. The Collateralized L oa n A g re e me nt, signe d o n Jan ua ry 30 th 2 00 4, state s th at: “[I ]n t he eve nt this L oan Agree ment shall be succ essfully enfor ced by

suit or otherwise, B orrowe r will reimburse the L ender or holder or

holders of the Obligations, upon demand, for a ll reasona ble expenses incurr ed in conne ction there with, including, without limitation, reasonable attorney s’ fe es and e x penses.” (Compl. Ex . 2, Collateralized L oan Agree ment, ¶ 8.14.) Of c ourse, ther e is some question as to whethe r Mann Te ch “suc cessf ully enfor ced” the L oan Agree ment since it did not file suit on the basis of the loan agree ment (it was the de fenda nt8

in this case), a

nd it did not prevail on its countercla ims. However , beca use the languag e in the loa n a g re e me nt s tate s “ su c c e ssf ull y e nf or c e d b y su it or oth e rwi se ” (e mphasis added) , the Court conclude s that the contra ct contemplate d Mann Tec h enfor cingthe L oan Agree ment by de fe nd ingits ri g ht t o f

or e c los e on

the c oll ate ra l. S inc e the Court c on c lud e d, fo llo wi ngthe tr ia l, that the terms of the loan allowed Ma nn Tec h to forec lose on the collate ral, whic h it did, and then Mann Tec h succe ssfully

defe nded itself in a law suit by Ellipso dis puting that r ight, the feesh if tin gpr ov isi on

a pp lie s. El lip so a lso argue s th at Ma nn Te c h’ s mo tio n f

or atto rn e y s’ fe e s w a s unti me ly be c a us e it did not raise the c laim that it was entitled to attorney s’ fe es on the ba sis of bad fa ith or the Collateralized L oan Agree ment at trial. As this Court stated when it g rante d Mann Tec h’s mot ion fo r r e c on sid e ratio n, it c ou ld n ot h ave ru le d o n whe the r o r n ot M ann Te c h w a s e nti tle d to attorney s’ fe es at trial be cause it was unclea r which pa

rty would preva il. (Docke t entry [218] at 2.) As a r esult, it is no s urprise that Mann Tec h prese nted ar g ument in support of its request for attorney s’ fe es followingtrial, afte r it was cle ar that it was the preva iling par ty . Mann Tec h’s mot ion fo r r e c on sid e ratio n o f t

he atto rn e y s’ fe e s is su e on the ba sis that it

wa s th e pr e va ili ngpa

rt y
w a s m a d e w i th i n1 0 d ays o f th e e n tr y o f j u d g m e n tan d

th e r e f o r e w a s t i m e l y.

B. Awa r d Am ount 1. Attor neys’ F ees Mann Tec h reque sts $283,382.28 in attorney s’ fe es. Of that reque st, $8,584 are attributable to the pre paration, filing, and de fense of the c ounterc laims. Mann Tec h cannot
rec over the amount of fe es attributable to its counter claims bec ause it wa s not successf ul onMann Tec h actua lly sustained $110,420.76 in damag es as a result of the pr eliminary 7 injunction. However , the Court felt that it was limited in awar ding da mag es to the amount of the injunction bond, which was $100,000. The Court stated at the time that it was aw ardingthe $26,515.76 in monetary

damag es and the rema inder of the $100,000 in attorney s’ fe es. The Court also stated that with reg ard to the pr eliminary injunction it was obligate d to cap the damag es aw ard at $100,000, but that in the event that Mann Te ch wa s entitled to attorney s’ fe es in the case as a whole, it could rec over the rema ining $10,420.76. ( Docke t entry [215] at 5, 9 n.9.) That amount is i ncluded in the $201,314.04 a war d. 9 those claims. See Cope land v . M ar sh all , 6 4 1 F
. 2 d

8 8 0 , 8 9 1

– 9 2 ( D
. C. Ci r . 1 9 8 0 ) ( “ [N ]o compensation should be paid for time spent litigating c laims upon which the par ty seekingthe fe e did no t ul tim ate ly

pr e va il. ” ). Th at amou

nt a lso inc lud e s th e atto rn e y s’ fe e s in c ur re d in conjunction with the pre liminary injunction that was issued in this case. The Court has alre ady
awa rded $73,484.24 w orth of attorne y s’ fe es that we re billed in conjunc tion with the preliminary injunction. There fore , the plaintiffs ca nnot ge t double rec overy

for that amount. Taking the 7 $283,382.28 and subtrac ting the $8,584 ( fee s relate d to counterc laim) and 73,484.24 (f ees alre ady awa rded) , leave s $201,314.04. Th e Court

ha s a lso sc rutin ize d th at f igur e fo r r e a so na

ble ne ss. Mo st o f t

he le g a l w or

k in thi s c a se wa s b ill e d at $2 50 or $3 00 an h our. F or

e xamp le , Chri sto ph e r H og e , who ha s b e e n in prac tice since 1975, was billing Ma nn Tec h at $300 an hour

duringtrial. The Court finds that this is a reasona

ble rate for a

n attorney with his ex perie nce a

nd competenc e in the Washing ton, D.C. are a. The other leg al bills in t he ca se appe ar to be simil arly rea sonable. The total fig ure of $201,314.04 is reasona

ble and a ppropriate in this case. Ellipso makes no specific objections to the attorney s’ fe es, but mere ly argues that Mann Te c h d id n ot m e e t it s b ur de n o f s ho wi ng : ( 1) the atto rn e y s’ bil lin gpr a c tic e s; ( 2) the atto rn e y s’ skill, ex perie nce, a

nd reputation; and (3) the pr evailingmarke t rates in the r eleva nt community
.The Collatera liz ed L oan Agree ment likewise does not provide relief for these costs. 8 T h ata g r e e m e n tl i m i t s th e am o un to f r e c o v e r y t o “ r e a s o n a

b l e e x p e n s e s . ” B e c a

u s e t i m e s p e n tb y a party at trial is g ener ally

not awar ded by

courts as a

part of the “re asonable expenses” of litigation, the Court will not do so in t his case. T here is no indication that the parties’ feeshifting a g ree ment was intende d to expand the ordinary meaningof attorne y s’ fe es and e x penses in t he wa y that Ma nn Te c h a rgue s. 10 Cov ing ton v . D ist

ric t of Colum bia , 57 F.3d 1101, 1107 ( D.C. Cir. 1995). To the contra ry , Mann Te c h h a s me t it s b ur de n. I t ha s atta c he d it s le g a l bi lls a s e xhibi ts t o it s mo tio n, re fl e c tin gits at t o rn ey s ’ b i l l i n g p ra ct i ce s . T h e C o urth as o b s erv ed th e a t t o rn ey s ’ p er fo rm an ce s i np l ea d i n gs and duringtrial, and the bulk of the trial work wa s billed by Christoper Hog e, who ha s over 30 y ear s of leg al experienc e. F inally , the Court can take judicial notice that $300 an hour is indeed a fair r ate f or leg al work a ccor ding to the pr evailingmarke t rates in the Washing ton D.C. area
. Ellipso makes no specific objections to the amount of hours billed or the hours ca lculation, the number of e mploy ees that were workingon the ca se, or the a mount that Mann Tech spe nt on the counter claim compar ed to the amount it spent defe nding itself a g ainst the primary claim. 2. Other Cost s Mann Tec h also reque sts $75,862 in ex penses f or the time John M ann spent at de po sit ion s, tr ia l, a

nd c on su lti nghis atto rn e y s. He a lso re qu e sts an a dd iti on a l $7 2, 00 0 b e c a us e JohnMann

c ou ld h ave sp e nt t

hat ti me bil lin gc lie nts a s a c on su lta nt. Ma nn Te c h c ite s n o c a se law for the proposition that a par ty is entitled to fees for

his tim e spent pa

rticipatingin liti g ation as par t of an attorney s’ fe e aw ard, nor is the Court awar e of a

ny . In addition, Mann Tec h does 8 not listthese e x penses with the spe cificity require d, stating only

that his presenc e wa s “nec essar y to assist in t he def

ense a g ainst Ellipso’s lawsuit.” Accor dingly , Mann Tec h will not be awar ded the a dd iti on a l c os ts i t r e qu e sts .11

IV . CO NC LU SION Mann Tec h is entitled to attorney s’ fe es of $201,314.04 on two indepe ndent g rounds: (1) Ellipso ins tituted its lawsuit in bad faith, misrepr esente d the cr itical fac t upon which the litigation turned, a nd continued to pursue ve x atious claims even in the a bsence of any

damag es; and (2) Mann Tec h succe ssfully

enfor ced the loan agree ment and ther efor e is entitled to attorney s’ fe es pursuant to the par

ties’ fe e-shiftingag ree ment. Mann Tec h’s motion for attorne y s’ fe es will be GRANTED. A sepa rate order shall issue this date. SO ORDERED.
Signed by Chief J udg e Roy ce C. L amber th on J anuar

y 29, 2009.