Opinion ID: 1037493
Heading Depth: 2
Heading Rank: 3

Heading: Attorney Fees Award

Text: As noted above, the bulk of the $8,419,429 attorney fees award was for discovery-related expenses incurred in the ITC investigation. The district court allowed recovery for these expenses based on the parties’ agreement to take MONOLITHIC POWER SYSTEMS, INC. v. O2 MICRO 15 INTERNATIONAL LTD. discovery for “dual use” in the parallel ITC and district court proceedings. See Exceptional Case Order, at –24. O2 Micro argues that it was an abuse of discretion for the district court to award fees that are not traceable solely to O2 Micro’s “exceptional” behavior in the litigation. O2 Micro relies on Fox v. Vice, 131 S. Ct. 2205 (2011), to support its contention that an award of attorney fees must be limited to those fees that would not have been incurred “but for” its acts of misconduct. See id. at 2215. Although O2 Micro concedes that discovery taken in the ITC proceeding was used by the parties in the district court case, it argues that these fees do not satisfy the “but for” test because they would have been incurred even if the district court case had not been filed. According to O2 Micro, the ITC-related fees 3 are especially problematic because, unlike district courts, the ITC imposes no limits on discovery. O2 Micro also relies on Highmark, Inc. v. Allcare Health Management Systems for its position that where there is a fee award based on litigation misconduct, the amount should be that which is necessary to compensate a party for the “extra legal effort to counteract” the misconduct. 687 F.3d 1300, 1316 (Fed. Cir. 2012). O2 Micro explains that because the district court had not found its actions in the ITC investigation to constitute misconduct, fees incurred in investigation should not be part of the award. 3 To clarify, the fee award does not include fees for work related solely to the ITC proceeding, such as expenses incurred in connection with efforts to prove the existence of a domestic industry. The only ITC-related fees that were awarded were for expenses relating to discovery, which the parties agreed would be taken for “dual use” in both the ITC and the district court proceedings. 16 MONOLITHIC POWER SYSTEMS, INC. v. O2 MICRO INTERNATIONAL LTD. MPS and ASUSTeK contend that O2 Micro has waived the “but for” argument on appeal by failing to raise it below. The appellees acknowledge that O2 Micro objected to the recovery of any fees related to the ITC investigation in the proceedings below, but assert that the objection did not encompass its current “but for” theory. MPS and ASUSTeK also argue that even if O2 Micro’s “but for” argument is not waived, Fox is inapposite to this case because its application is limited to civil rights suits, brought under 42 U.S.C. § 1988(b), that involve both frivolous and nonfrivolous claims. Lastly, MPS and ASUSTeK assert that the district court’s finding that O2 Micro’s misconduct was “pervasive throughout the entire case” justified its discretionary award of fees for the entire case. At the outset, we find that O2 Micro has not waived its “but for” argument. O2 Micro had previously urged the same argument in its papers filed in opposition to the motion for fees. Moreover, O2 Micro had submitted the Fox opinion to the district court in a notice of supplemental authority that was filed after the attorney fees briefing was complete but before the district court ruled on the matter. Indeed, the district court, in the Fees and Costs Order, addressed—and rejected—O2 Micro’s “but for” argument, at –15, and had found Fox to be inapplicable to a case that did not contain a frivolous claim, at  n.4. We would be hard pressed to find a waiver in these circumstances. On the merits, we find that Fox is not applicable to this case. The issue in Fox was the allocation of fees between frivolous and nonfrivolous claims in a single lawsuit. See Fox, 131 S. Ct. at 2211. In contrast, the situation here concerns the allocation of fees incurred in separate, but parallel, proceedings—neither of which involved a frivolous claim. O2 Micro is, however, correct to point out the observation in Highmark that an exceptional case finding based on litigation misconduct “usually does not support a full MONOLITHIC POWER SYSTEMS, INC. v. O2 MICRO 17 INTERNATIONAL LTD. award of attorney’s fees.” Highmark, 687 F.3d at 1316 (citing Beckman Instruments, 892 F.2d at 1553). Instead, a fee award “must bear some relation to the extent of the misconduct, and compensate a party for the extra legal effort to counteract the misconduct.” Id. (citations omitted) (internal quotation marks omitted). However, as evident in the district court’s Exceptional Case Order and in the record before us, this case was anything but usual and the extent of O2 Micro’s misconduct was anything but limited. Indeed, the litigation misconduct finding by the district court was not of isolated instances of unprofessional behavior by O2 Micro. Rather, O2 Micro’s extensive misconduct was enough to comprise an abusive “pattern” or a vexatious “strategy” that was “pervasive” enough to infect the entire litigation. Exceptional Case Order, at –21; Fees and Costs Order, at . The district court found that O2 Micro’s “exceptional” conduct began before it was even served with MPS’s complaint, when it filed a complaint in the ITC against MPS and MPS’s customers in retaliation for the declaratory judgment action MPS had filed against it. O2 Micro’s antics surrounding the date of the schematics also took on many forms throughout the litigation, affecting several rounds of written discovery, deposition testimony, and baseless motions including at the summary judgment stage. Finally, O2 Micro employed its usual tactic of granting covenants not to sue only after substantial work had been completed in this case. Based on the examples of unprofessional behavior provided by the district court and the many more instances of it we were able to glean from the record, we agree with the district court that O2 Micro’s rampant misconduct so severely affected every stage of the litigation that a full award of attorney fees was proper here. Under the unique circumstances, the district court’s award of ITC-related expenses is also not an abuse of discretion, especially in view of the 18 MONOLITHIC POWER SYSTEMS, INC. v. O2 MICRO INTERNATIONAL LTD. discovery’s application in the district court and the parties’ agreement to its dual use. Further, we note that the district court clarified that the award discounted by ten percent all attorney fees incurred and included only twenty-five percent of the requested fees from block-billed time entries, resulting in a significant reduction in the amount. Final Order on Fees, at –4. This demonstrates to us a careful exercise of discretion by the district court, and not an abuse of it. More than a decade ago, the Beckman Instruments court foretold, “we can certainly imagine a case in which litigation misconduct would justify an award of attorney fees for the entire litigation.” Beckman Instruments, 892 F.2d at 1553. We are quite confident that this was the kind of case it had in mind.