Court Opinion

ID: 1040653
Source: CourtListenerOpinion
Date Created: 2013-09-12 19:47:26.520257+00
Date Added: 2024-06-11T15:27:36.242182
License: Public Domain

NOT PRECEDENTIAL

                     UNITED STATES COURT OF APPEALS
                          FOR THE THIRD CIRCUIT
                             ________________

                              Nos. 12-3135 & 12-3781
                                ________________

                 AMERICAN BOARD OF INTERNAL MEDICINE
                                        Appellee/Cross-Appellant (12-3781)
                                 v.

                          SARAH VON MULLER, M.D.
                                         Appellant (12-3135)/Cross-Appellee
                                    v.

            CHRISTINE K. CASSEL, M.D.; LYNN O. LANGDON, M.S.;
                          ERIC S. HOLMBOE, M.D.
                             ________________

                    Appeal from the United States District Court
                      for the Eastern District of Pennsylvania
                      (D.C. Civil Action No. 2-10-cv-02680)
                     District Judge: Honorable J. Curtis Joyner
                                 ________________

                               Argued April 17, 2013

            Before: AMBRO, HARDIMAN, and COWEN, Circuit Judges

                        (Opinion filed: September 12, 2013)

Glenn A. Ellis, Esquire
Aaron J. Freiwald, Esquire (Argued)
Layser & Freiwald
1500 Walnut Street, 18th Floor
Philadelphia, PA 19102

      Counsel for Appellant/Cross-Appellee

Hara K. Jacobs, Esquire (Argued)
Ballard Spahr
1735 Market Street, 51st Floor
Philadelphia, PA 19103

       Counsel for Appellee/Cross-Appellant

                                      ________________

                                          OPINION
                                      ________________

AMBRO, Circuit Judge

       A jury found Sarah Von Muller, M.D., infringed the copyrighted exam questions

of the American Board of Internal Medicine (―ABIM‖), and granted it, among other

things, copyright damages. ABIM then filed a request for attorneys‘ fees to be paid by

Von Muller. The District Court, concluding that the number of hours expended by

ABIM‘s attorneys was excessive and redundant, refused ABIM‘s requested fee amount

($371,049), and instead ordered Von Muller to pay counsel fees equal to half the amount

awarded by the jury on ABIM‘s copyright claim (the jury awarded $82,446, making the

fee award $41,223). For the reasons that follow, we vacate the District Court‘s fee

decision and remand for redetermination of the attorneys‘ fees to which ABIM is

entitled.1

                                 I.      BACKGROUND

1
  Von Muller appealed from numerous orders of the District Court on the merits, and
ABIM filed a cross-appeal contesting the District Court‘s ruling on its fee petition. We
granted oral argument on the sole issue of attorneys‘ fees; we likewise limit our
discussion herein to the fee award. With respect to Von Muller‘s appeal, we summarily
reject the challenges raised. We grant Von Muller‘s motion to supplement the Joint
Appendix with a copy of ABIM‘s proposed verdict form, although consideration of this
supplemental material does not affect our analysis of the arguments on appeal.

                                             2
       Because we write solely for the parties, we note only those facts relevant to our

decision. ABIM grants board certification in internal medicine and its subspecialties to

physicians. To become board certified in any area of practice, physicians must pass

ABIM‘s certifying exam. Because questions often appear on multiple exams over the

course of several years, ABIM requires physicians taking a certifying exam to agree not

to disclose any questions on it, and copyrights its questions. After seeing test questions it

believed were copied from its board certification exams on the website of test-prep

company Arora Board Review (―Arora‖), ABIM discovered numerous physicians—one

of whom was Von Muller—had compromised its exam questions in some capacity.

ABIM suspended the board certifications of all identified physicians and filed several

lawsuits, including this one against Von Muller.

       ABIM claimed copyright infringement, misappropriation of trade secrets, and

breach of contract against Von Muller for copying and disclosing questions from its

November 2008 subspecialty examination in gastroenterology. The basis of ABIM‘s

claims was that Von Muller had purchased from Arora materials represented as being

from previous gastroenterology exams while preparing for the exam and, after taking the

exam, had sent Arora a document in which she had reproduced substantial portions of

fifty questions that appeared on its gastroenterology exam. Von Muller asserted eleven

counterclaims against ABIM, including, inter alia, commercial disparagement and

defamation. The parties proceeded all the way to trial—the jury found in favor of ABIM,

awarding it $82,446 in copyright damages (and an additional $8,668 on its contract

                                              3
claim), and rejected all of Von Muller‘s counterclaims. Her various post-trial motions

challenging the jury‘s verdict were denied by the District Court.

       ABIM filed a post-verdict fee petition requesting attorneys‘ fees related to its

copyright claim. Although it claimed it expended more than $850,000 in litigation and

post-trial legal fees, ABIM requested a fee award of $371,049. This request was based

on what it purported to be ―a highly conservative approach‖ to calculating a ―lodestar,‖

i.e., the number of hours reasonably expended times a reasonable hourly rate. Von

Muller opposed the fee petition. Although she did not object to the hourly rates charged

by ABIM‘s counsel, she did challenge the number of hours they expended on the

litigation. Von Muller argued that the attorneys‘ time was inadequately documented, and

that much of it was excessive and redundant.

       Although the District Court granted ABIM‘s request for attorneys‘ fees, it awarded

but $41,223. The Court agreed with Von Muller that the number of hours expended by

ABIM‘s attorneys was unreasonable, pointing to several examples of what it deemed to

be excessive and unclearly documented billing entries, and indicating that ―[t]here are

numerous other examples of such . . . entries which are too numerous to mention in this

Memorandum.‖ J.A. at 959–61. It thus found the time spent by ABIM‘s counsel to be

unreasonable and, no surprise, declined the requested fee award of $371,049. The Court

did not specify, however, the total number of hours it found excessive or redundant, nor

did it calculate an adjusted lodestar after excluding such time.

       Instead, to determine the fee amount, the District Court directly moved to

considering the discretionary factors we set out in Lieb v. Topstone Industries, Inc., 788

                                             4
F.2d 151 (3d Cir. 1986): (1) level of litigation complexity; (2) charges assessed to the

client and expenses borne by counsel; (3) relative financial strength of the parties; (4)

damages; and (5) bad faith. Id. at 156 (citations omitted). The Court found several of

these factors weighed in favor of adjusting the fee downward, including the

circumstances of the case and features specific to Von Muller.

       Finally, the Court found that the ―gross disparity‖ between the fees sought by

ABIM and the total damages awarded by the jury on the copyright claim ($82,466, or

approximately 22% of the requested fees) supported a substantially reduced fee award.

J.A. at 963. It concluded ―that an award in the amount of one-half the principal amount

of the judgment is sufficient under these circumstances to both punish this defendant and

send a message of deterrence to potential future violators.‖ Id. Accordingly, it ordered

Von Muller to pay ABIM $41,223 in attorneys‘ fees. The parties filed cross-appeals,

and, as already noted, we heard argument on the sole issue of the District Court‘s fee

determination.

                  II.    JURISDICTION AND SCOPE OF REVIEW

       The District Court had jurisdiction over the claims and counterclaims asserted by

ABIM and Von Muller, respectively, under 28 U.S.C. §§ 1338(a), 1367(a), and 1332.

We have jurisdiction to review the final orders entered by the District Court, including its

ruling on ABIM‘s motion for attorneys‘ fees, pursuant to 28 U.S.C. § 1291.

       We review the reasonableness of an award of attorneys‘ fees for abuse of

discretion, while the legal question of whether a district court applied the proper

standards in making a fee determination is subject to de novo review. See Loughner v.

                                              5
Univ. of Pittsburgh, 260 F.3d 173, 177 (3d Cir. 2001). ―A fee award ‗is within the

district court‘s discretion so long as it employs correct standards and procedures and

makes findings of fact not clearly erroneous.‘‖ Id. (quoting Pa. Envtl. Def. Found. v.

Canon-McMillan Sch. Dist., 152 F.3d 228, 232 (3d Cir. 1998)).

                                    III.   DISCUSSION

       ABIM argues the District Court erred by failing to calculate a lodestar figure (after

excluding unreasonably spent time) and by using a ―proportionality‖ analysis in setting

the fee amount (i.e., a ratio between the fees and the damages awarded). As explained

below, we agree—reluctantly—that the fee award here needs to be reconsidered.

A.     Fee-Shifting Under the Copyright Act

       The Copyright Act is one of many federal statutory schemes that provide an

exception to the general rule that litigants bear their own expenses regardless whether

they win or lose, and allows for the shifting of fees from one party to another. ―In any

civil action under this title, the court in its discretion may allow the recovery of full costs

by or against any party . . . . [T]he court may also award a reasonable attorney‘s fee to

the prevailing party as part of the costs.‖ Copyright Act § 101, 17 U.S.C. § 505. Thus, to

recover attorneys‘ fees under the Copyright Act, parties must be considered ―prevailing,‖

i.e., ―succeed on any significant issue in litigation which achieves some of the benefit the

parties sought in bringing suit.‖ Hensley v. Eckerhart, 461 U.S. 424, 433 (1983).

       Even prevailing parties are not automatically entitled to attorneys‘ fees, however,

as whether to grant a fee request is a discretionary decision left to the district courts. See

Lieb, 788 F.2d at 156. In exercising its discretion to decide whether to award attorneys‘

                                               6
fees, district courts are to consider ―‗frivolousness, motivation, objective

unreasonableness (both in the factual and in the legal components of the case) and the

need in particular circumstances to advance considerations of compensation and

deterrence.‘‖ Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (quoting Lieb, 788 F.2d at

156).

B.      Determining a “Reasonable” Award of Attorneys’ Fees

        Once it has decided that an award of counsel fees is warranted, a court must

determine what amount is ―reasonable,‖ and we recognize that ―reasonable‖ connotes a

range. Here the District Court acknowledged expressly that the lodestar figure was the

starting point for determining a reasonable award. See J.A. at 954. It also acknowledged

that, to calculate the lodestar properly, it was obliged to ―‗‗review the time charged,

decide whether the hours set out were reasonably expended for each of the particular

purposes described and then exclude those that are excessive, redundant or otherwise

unnecessary.‘‖ Id. at 956 (quoting Evans v. Port Auth., 273 F.3d 346, 362 (3d Cir.

2001)).

        It is obvious that the Court expended much time and effort reviewing the massive

number of billing entries submitted by ABIM. And while its decision made clear that it

found the number of hours claimed by ABIM to be unreasonably high, it nonetheless did

not do what it said it would do—i.e., exclude the time it found was unreasonably spent to

arrive at an adjusted lodestar figure as a baseline. Notwithstanding the particular

deference with which appellate courts review district courts‘ fee determinations, see, e.g.,

T-Peg, Inc. v. Vt. Timber Works, Inc., 669 F.3d 59, 61–62 (1st Cir. 2012), this omission

                                              7
compels us to conclude that we cannot determine whether the fee award here is

reasonable.

       In addition, we also note the District Court initially selected the fee amount solely

by reference to the damages awarded by the jury (50% of the jury‘s $82,446 copyright

award). While Lieb designated damages as a relevant factor, we are inclined to conclude

that they are more properly considered as an indication of a litigant‘s degree of success.

Cf. Washington v. Phila. Cnty. Ct. of Common Pleas, 89 F.3d 1031, 1041–42 (3d Cir.

1996) (―[T]he reason why the damage amount is relevant is not because of some ratio

that the court ought to maintain between damages and counsel fees. Rather, the reason

has to do with the settled principle . . . that counsel fees should only be awarded to the

extent that the litigant was successful. The amount of damages awarded, when compared

with the amount of damages requested, may be one measure of how successful the

plaintiff was in his or her action, and therefore may be taken into account when awarding

attorneys‘ fees . . . .‖ (internal citations and quotation marks omitted) (emphases in

original)).

       With these points in mind, a re-do is what will give us the best chance to assess the

reasonableness of the attorneys‘ fees awarded.

C.     Recalculating the Fee Award

       On remand, the District Court should lay out a quantitative basis as to the time it

finds was inadequately documented, excessive, or redundant. In doing so, either ―it may

conduct an hour-by-hour analysis or it may reduce the requested hours with an across-

the-board cut.‖ Bivins v. Wrap It Up, Inc., 548 F.3d 1348, 1350 (11th Cir. 2008) (per

                                              8
curiam); Gates v. Deukmejian, 987 F.2d 1392, 1399 (9th Cir. 1992) (―Despite the

―concise but clear‖ requirement, in cases where a voluminous fee application is filed[,] in

exercising its billing judgment the district court is not required to set forth an hour-by-

hour analysis of the fee request. Rather, . . . when faced with a massive fee application

the district court has the authority to make across-the-board percentage cuts either in the

number of hours claimed or in the final lodestar figure as a practical means of trimming

the fat from a fee application.‖ (internal citations and quotation marks omitted)). While

blanket percentage reductions should not be ordered in a perfunctory fashion, see Daggett

v. Kimmelman, 811 F.2d 793, 797 (3d Cir. 1987), they are permissible so long as the

court ―provide[s] a concise but clear explanation of its reasons for the fee award,‖

Hensley, 461 U.S. at 437. This approach stays true to the fact that ―[t]he essential goal in

shifting fees . . . is to do rough justice, not to achieve auditing perfection.‖ Fox v. Vice,

563 U.S. __, 131 S. Ct. 2205, 2216 (2011).

       Although sufficient reasons for selecting a particular percentage reduction must be

given, we note that a blanket reduction would be particularly appropriate in a case like

this one, where the District Court was faced with hundreds of pages of billing entries and

thousands of hours through which it had to wade to assess the reasonableness of the

amount of time expended on the litigation. After excluding the time unreasonably

expended in calculating the lodestar, the Court remains free to make adjustments based

on its assessment of the Lieb factors (complexity, litigation costs, financial

circumstances, damages, and motive).

                                       *   *   *   *   *

                                               9
       For these reasons, we vacate the District Court‘s fee award and remand for

recalculation of the attorneys‘ fees to which ABIM is entitled for prevailing on its

copyright claim against Von Muller.

                                            10
American Board of Internal Medicine v. Von Muller, Nos. 12-3135/3781
HARDIMAN, Circuit Judge, concurring.

       I write separately to address the majority‟s implication that the District Court erred

because “[w]hile Lieb designated damages as a relevant factor, . . . they are more

properly considered as an indication of a litigant‟s degree of success.” Maj. Typescript at

8. The majority bases this statement on Washington v. Philadelphia Court of Common

Pleas, a civil rights case in which we explained that proportionality between damages and

attorneys‟ fees should not be considered because “success in civil rights litigation „cannot

be valued solely in monetary terms.‟” 89 F.3d at 1042 n.8 (emphasis added). By

contrast, many copyright cases involve no dignitary or constitutional rights, and therefore

can be valued solely in monetary terms. In such cases, damages are the best “indication

of a litigant‟s degree of success” and district courts do not err by awarding attorneys‟ fees

in proportion to such damages.

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