Court Opinion

ID: 9402955
Source: CourtListenerOpinion
Date Created: 2023-06-19 18:00:31.072213+00
Date Added: 2024-06-11T17:20:03.647165
License: Public Domain

Case: 22-50254        Document: 00516791257             Page: 1      Date Filed: 06/19/2023

             United States Court of Appeals
                  for the Fifth Circuit                                          United States Court of Appeals
                                                                                          Fifth Circuit

                                                                                        FILED
                                                                                     June 19, 2023
                                       No. 22-50254
                                                                                     Lyle W. Cayce
                                                                                          Clerk

   Transverse, L.L.C.,

                                                                     Plaintiff—Appellee,

                                            versus

   Iowa Wireless Services, L.L.C., doing business as i
   wireless,

                                                                 Defendant—Appellant.

                     Appeal from the United States District Court
                          for the Western District of Texas
                             USDC No. 1:10-CV-517-LY

   Before Jones, Willett, and Douglas, Circuit Judges.
   Per Curiam:*
         In this appeal we address whether the district court properly awarded
   $431,608.05 in attorneys’ fees to Iowa Wireless Services, LLC (“IWS”).
   IWS contends that the district court contravened our mandate and abused its
   discretion by rejecting IWS’s lodestar calculation. IWS also contends that

         *
             This opinion is not designated for publication. See 5th Cir. R. 47.5.
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                                         No. 22-50254

   the district court committed multiple errors when calculating the lodestar.
   We REVERSE in part and REMAND.
                                               I.
           This case has come before us on three previous occasions.1 IWS, a
   wireless telephone service provider, hired Transverse, a software company,
   to develop customized billing software.              The parties’ relationship was
   formalized in a Supply Contract and a Mutual Non-Disclosure Agreement
   (“NDA”). When IWS realized that Transverse could not deliver the
   software on schedule, it sought the services of a competitor and terminated
   the Supply Contract. Transverse then sued IWS under the Supply Contract,
   the NDA, the Texas Theft Liability Act (“TTLA”), and tort theories of
   conversion and misappropriation. IWS counterclaimed for breach of the
   Supply Contract.
           In Transverse II, our court determined that IWS was the prevailing
   party on the TTLA claim and remanded the case for further consideration
   of the district court order denying fees to IWS on that claim. We found that
   IWS was entitled to a mandatory award of costs and attorneys’ fees on this
   claim. The district court referred the motion for attorneys’ fees to the
   magistrate judge.
           The magistrate judge concluded that IWS failed to show that the fees
   attributable to the TTLA claim could not be segregated from the
   unrecoverable claims and, consequently, IWS was requesting fees for claims

           1
             See Transverse, L.L.C. v. Iowa Wireless Servs., L.L.C. (“Transverse I”), 617 F.
   App’x 272 (5th Cir. 2015) (per curiam); Transverse, L.L.C. v. Iowa Wireless Servs., L.L.C.
   (“Transverse II”), 753 F. App’x 184 (5th Cir. 2018) (per curiam); Transverse, L.L.C. v. Iowa
   Wireless Servs., L.L.C. (“Transverse III”) 992 F.3d 336 (5th Cir. 2021). The facts of this
   case have been well summarized in our prior opinions, so the facts herein are only those
   relevant to the appeal at issue.

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   on which it was not entitled to recover. 2 The magistrate judge recommended
   denying IWS’s motion for fees without prejudice and directing IWS to
   submit documentation to the court supporting its claim for attorneys’ fees
   for the TTLA claim only. The district court adopted the magistrate’s report
   and recommendations.
           IWS filed an amended fee application with an affidavit and a series of
   supporting exhibits, requesting the same amount of fees as it had previously
   sought. IWS contended that the magistrate judge had applied an overly
   stringent segregation standard at odds with Texas law by requiring IWS to
   isolate work performed solely on the TTLA claims. On second referral, the
   magistrate judge characterized IWS’s amended application as “defiant,”
   because it sought the same fee award as the original and recommended denial
   because IWS affirmatively refused to carry its burden to segregate. The
   district court adopted the recommendations.
           In Transverse III, we held that the district court erred when it
   concluded that it had discretion to deny completely IWS’s application for
   fees on the TTLA claim. When the statutory requirements under the TTLA
   are met, an award of attorneys’ fees is mandatory. Transverse III, 992 F.3d at
   345 (citing Raytheon Co. v. Indigo Sys. Corp., 895 F.3d 1333, 1344-45 (Fed. Cir.
   2018)). Because IWS was entitled to some fee award on the TTLA claim,
   we remanded for a determination of the proper amount. Importantly, we
   held:

           2
             The magistrate judge correctly held that Texas law applies. Spear Mktg., Inc. v.
   BankcorpSouth Bank, 844 F.3d 464, 472 (5th Cir. 2016) (The Texas Theft and Liability Act
   supplied the rule of decision and state law controls the award of fees where state law
   supplies the rule of decision); Automation Support, Inc. v. Humble Design, L.L.C., 734 F.
   App’x 211, 213 (5th Cir. 2018) (“Texas law controls attorney’s fee award with regard to
   Texas Theft and Liability Act claims.” (citing Spear, 844 F.3d at 473)).

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          We do not hold that IWS is entitled to the full fee amount
          requested in its latest two petitions. Within the principles set
          forth here, we entrust to the district court the task of looking at
          the fee application anew. But we clarify that the mandate
          of Transverse II did not depart from Texas law governing fee
          segregation, and fees incurred defending the TTLA claim do
          not become unrecoverable simply because they may have
          furthered another non-recoverable claim as well. IWS “did not
          have to keep separate time records” by claim, and Texas’s
          standard for fee segregation “does not require more precise
          proof for attorney’s fees than for any other claims or
          expenses.” To the extent the district court is inclined to
          reduce fees on work that did “double duty,” it can simply
          “allocat[e] as a percentage of total fees the amount that likely
          would have been incurred even if the unrecoverable claims
          were not in the case,” “instead of requiring burdensome
          retrospective itemizations by claim.”
   Transverse III, 992 F.3d at 346-47 (internal citations omitted).
          On remand, IWS submitted an amended fee application that provided
   two alternative methods for calculating attorneys’ fees: a retrospective-
   itemization method and a percentage-allocation method. The magistrate
   judge rejected both calculations and undertook his own lodestar calculation.
   In calculating the lodestar, the magistrate judge found that a reasonable
   hourly rate was $300 and multiplied this by the total number of hours
   requested, 6,122.10, to arrive at a total of $1,836,630 for IWS’s total fees.
   The magistrate judge then found that IWS should be allowed a maximum of
   23.5% of its fees, resulting in a total of $431,608.05. The district court
   conducted a de novo review of IWS’s application and adopted the report and

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   recommendation.3 IWS appealed, challenging the district court’s award of
   $431,608.05 in attorneys’ fees.
                                           II.
          We review the district court’s award of attorneys’ fees for abuse of
   discretion. Torres v. SGE Mgmt., L.L.C., 945 F.3d 347, 352 (5th Cir. 2019).
   This deferential standard of review is “appropriate in view of the district
   court’s superior understanding of the litigation and the desirability of
   avoiding frequent appellate review of what essentially are factual matters.”
   Associated Builders & Contractors of La., Inc. v. Orleans Par. Sch. Bd., 919 F.2d
   374, 379 (5th Cir. 1990) (quoting Hensley v. Eckerhart, 461 U.S. 424, 437
   (1983)). “To constitute an abuse of discretion, the district court’s decision
   must be either premised on an erroneous application of the law, or on an
   assessment of the evidence that is clearly erroneous.” Torres, 945 F.3d at 352
   (quoting In re High Sulfur Content Gasoline Prods. Liab. Litig., 517 F.3d 220,
   227 (5th Cir. 2008)).
                                          III.
          IWS contends that the district court contravened our mandate in
   Transverse III and abused its discretion by rejecting IWS’s lodestar
   calculation.
          Our mandate in Transverse III required the district court to issue a fee
   award to IWS on the TTLA claim. The district court did just that.
   Moreover, the district court had no obligation to accept the lodestar
   calculation put forth by IWS and did not abuse its discretion in calculating its
   own. The district court has broad discretion in determining the amount of a

          3
             Throughout this opinion, the magistrate judge’s Report and Recommendation
   and the district court judge’s Order on the Report and Recommendation is collectively
   referred to as “the district court.”

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   fee award. Associated Builders, 919 F.2d at 379. Further, the Texas Supreme
   Court has made clear that “the court must determine the reasonable hours
   spent by counsel in the case and a reasonable hourly rate for such work” and
   “[t]he court then multiplies the number of such hours by the applicable rate,
   the product of which is the base fee or lodestar.” Berry v. Bay, Ltd., 643
   S.W.3d 424, 434 (Tex. App. —Corpus Christi 2022, no pet.) (emphasis in
   original).
                                         IV.
          IWS next contends that the district court committed multiple errors
   in its lodestar calculation.    “[T]he proper first step in determining a
   reasonable attorney’s fee is to multiply ‘the number of hours reasonably
   expended on the litigation times a reasonable hourly rate.’” Rohrmoos
   Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 492 (Tex. 2019).
   The second step of the lodestar calculation allows for the base figure to be
   adjusted upward or downward after considerations not accounted for in the
   first step establish that the base lodestar figure is unreasonably low or high.
   Id. at 502.
          Here, the district court took the total number of hours requested,
   6,122.10, and multiplied that number by its determined reasonable rate of
   $300. The district court then found that IWS should be allowed a maximum
   of 23.5% of its fees, arriving at $431,608.05. IWS asserts that the district court
   erred in the hourly rate, the total number of hours, and the percentage
   allocation reduction. We address each challenge in order.
                                          A.
          IWS first contends that the district court erred by finding that $300
   per hour is a reasonable hourly rate. The district court looked to the 2015
   Hourly Rate Fact Sheet (“Fact Sheet”) published by the State Bar of Texas
   and found that the median hourly rate for an attorney in Austin in 2015 was

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   $300.4 IWS asserts that, according to the Fact Sheet, the median hourly rate
   for attorneys at large firms, such as the firm employed by IWS, is $425 per
   hour. Under Texas law, region, not firm size, determines the relevant
   market. Tollett v. City of Kemah, 285 F.3d 357, 368 (5th Cir. 2002) (holding
   the relevant legal market is the community in which the district court sits).
   Accordingly, the district court’s determination of the reasonable hourly rate
   using the Fact Sheet based on region rather than firm size was not clearly
   erroneous.
                                                B.
           IWS next contends that the district court erred by using the total
   number of segregated hours (6,122.10) rather than the total number of
   unsegregated hours in the base lodestar calculation. IWS asserts that this error
   resulted in a double deduction. We agree.
           Under Texas law, “an enhancement or reduction of the base lodestar
   figure cannot be based on a consideration that is subsumed in the first step of
   the lodestar method.” Rohrmoos Venture, 578 S.W.3d at 500. Here, the
   district court chose to reduce the base lodestar by a percentage allocation to

           4
             Since this case began in 2010 and continued through 2019, the district court found
   that picking 2015 as a midway point was a fair way to assess the proper fee. As the district
   court notes, courts in its district regularly consider the Fact Sheet as evidence of a
   reasonable rate. See, e.g., Rodriguez v. Mech Tech. Servs., Inc., No. 1:12-CV-710-DAE, 2015
   WL 8362931, at *6 (W.D. Tex. Dec. 8, 2015) (“Judges in the San Antonio Division
   regularly take judicial notice of the Rate Report.”); City of San Antonio, Tex. v. Hotels.com,
   L.P., No. 5:06-CV-381-OLG, 2017 WL 1382553, at *9 (W.D. Tex. Apr. 17, 2017) (same).
   “[The Fact Sheet] contains “data collected on the hourly rates of 4,260 licensed and
   practicing, full-time private practitioners who provided hourly rate information for the
   calendar year 2015,” clarifying the “prevailing market rates in the relevant legal market,”
   according to which “[h]ourly rates are to be computed.” Alvarez v. McCarthy, No. 20-
   50465, 2022 WL 822178, at *3 (5th Cir. Mar. 18, 2022).

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   segregate fees, but the base lodestar contained a figure that already
   segregated the recoverable hours, resulting in a double deduction.
          Accordingly, the district court clearly erred by including the total
   number of segregated hours in its initial calculation of the lodestar. We reverse
   and remand to input the total number of unsegregated hours in the lodestar
   calculation. We entrust to the district court the task of calculating the total
   number of unsegregated hours.
                                          C.
          IWS also contends that the district court erred by finding that IWS
   was only entitled to 23.5% of its total fees.
          The district court was permitted to “allocate[e] as a percentage of
   total fees the amount that likely would have been incurred even if the
   unrecoverable claims were not in the case.” See Transverse III, 992 F.3d at
   346-47 (citing Bear Ranch, LLC v. Heartbrand Beef, Inc., No. 6:12-CV-14,
   2016 WL 1588312, at *4 (S.D. Tex. Apr. 20, 2016)).
          Both parties presented evidence of what that percentage should be.
   IWS submitted a sworn declaration by counsel who, based on personal
   knowledge of the litigation and her review of the record and the invoices,
   estimated that 58% of the total fees would have been incurred even if the
   unrecoverable claims were not in the case. Transverse reviewed IWS’s
   complete legal output, divided by tasks such as discovery, depositions, trial
   time and exhibits, appellate briefs, opinions, and remand issues, and found
   that 23.5% of IWS’s total fees would have been incurred.
          The district court had sufficient evidence with which to decide what
   percentage of total fees would have been incurred even if the unrecoverable
   claims were not in the case. See Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.
   3d 299, 314 (Tex. 2006); Kinsel v. Lindsey, 526 S.W. 3d 411, 428 (Tex. 2017).

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   Accordingly, the district court’s finding that IWS was entitled to 23.5% of its
   total fees was not clearly erroneous.
                                CONCLUSION
          We REVERSE the attorneys’ fee award and REMAND for the sole
   purpose of inputting the total number of unsegregated hours into the lodestar
   calculation.

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