Court Opinion

ID: 815749
Source: CourtListenerOpinion
Date Created: 2013-01-22 20:34:17+00
Date Added: 2024-06-11T15:13:27.785290
License: Public Domain

UNPUBLISHED

                UNITED STATES COURT OF APPEALS
                    FOR THE FOURTH CIRCUIT

                          No. 11-2089

BEST MEDICAL INTERNATIONAL, INC., a Virginia corporation;
BEST VASCULAR, INC., a Delaware corporation,

              Plaintiffs - Appellants,

         v.

ECKERT & ZIEGLER NUCLITEC GMBH,        a   German   corporation,
successor to QSA Global GmbH,

              Defendant - Appellee.

                          No. 11-2141

BEST MEDICAL INTERNATIONAL, INC., a Virginia corporation;
BEST VASCULAR, INC., a Delaware corporation,

              Plaintiffs - Appellees,

         v.

ECKERT & ZIEGLER NUCLITEC GMBH,        a   German   corporation,
successor to QSA Global GmbH,

              Defendant - Appellant.

                          No. 12-1121

BEST MEDICAL INTERNATIONAL, INC., a Virginia corporation;
BEST VASCULAR, INC., a Delaware corporation,

              Plaintiffs - Appellants,
           v.

ECKERT & ZIEGLER NUCLITEC GMBH,         a   German   corporation,
successor to QSA Global GmbH,

                Defendant - Appellee.

Appeals from the United States District Court for the Eastern
District of Virginia, at Alexandria.    Claude M. Hilton, Senior
District Judge. (1:10-cv-00617-CMH-IDD)

Argued:   October 23, 2012                  Decided: January 22, 2013

Before NIEMEYER, KING, and AGEE, Circuit Judges.

Affirmed in part, vacated in part, and remanded          for   further
proceedings by unpublished per curiam opinion.

ARGUED:   James Michael Brady, BEST MEDICAL INTERNATIONAL, INC.,
Springfield, Virginia, for appellants.      Carl Dewayne Lonas,
MORAN, REEVES & CONN, PC, Richmond, Virginia, for appellee. ON
BRIEF: Matthew J. Hundley, MORAN, REEVES & CONN, PC, Richmond,
Virginia, for appellee.

Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

            In 1999, a predecessor of Eckert & Ziegler Nuclitec

GmbH (referred to hereinafter, together with Eckert & Ziegler,

as   “EZN”)      entered    into    a     Manufacturing       Agreement     with    the

predecessor       of    Best    Medical         International,      Inc.   and     Best

Vascular,       Inc.    (referred    to    hereinafter,       together     with    Best

Medical and Best Vascular, as “Best”), under which EZN agreed to

manufacture       for    Best   strontium        90   “sources.”         Sources    are

enclosed capsules of strontium 90 used -- individually or in a

“train”    of    sources    welded      together      --   for   medical    radiation

therapy.      Under the Manufacturing Agreement, EZN constructed a

production line at its facility in Braunschweig, Germany, with

which to manufacture sources.                   Best agreed to buy the sources

and, at the conclusion of the manufacturing contract, to pay to

dismantle       and    decommission       the    production      line.     Best    also

agreed to purchase a specified amount of remaining inventory.

            The Manufacturing Agreement, however, broke down and

ended up in litigation between the parties.                      The litigation was

ultimately resolved by a Settlement Agreement, entered into on

April 16, 2008, under which the parties agreed to decontaminate

and dismantle the production line and dispose of the inventory.

But again, the Settlement Agreement broke down, resulting in the

current litigation.

                                            3
            Under      the     Settlement         Agreement,       Best    agreed      to

“decontaminate and decommission” the production line by April

16, 2009, and EZN agreed to fully cooperate in that effort.

Best also agreed to provide a performance bond in the amount of

€200,000.        If Best were to become delayed in its performance

because of EZN’s “willful and intentional failure to cooperate,”

Best would be entitled to an extension of performance, provided

that it followed certain procedures.                     If, however, Best were

delayed for other reasons, it was entitled to cure, but only if

it paid an extension fee of €50,000 per month, for a maximum of

four months.       If Best did not cure, then EZN would itself have

the right to decontaminate and decommission the production line,

using commercially reasonable efforts.                       In that event, it was

entitled    to    recover     its   costs       from   the    performance   bond      and

excess   costs     from      Best   directly.          The    Settlement    Agreement

provided that any disputes about EZN’s costs in decontaminating

and decommissioning the production line were to be submitted to

binding arbitration.

            The Settlement Agreement also provided that Best would

pay €100,000 for the purchase of source trains containing 500

sources that EZN had produced under the Manufacturing Agreement,

and EZN agreed to accept from Best sources and source trains

that   needed     to   be    disposed   of,      so    long   as   Best   was   not   in

                                            4
default of its obligation to decontaminate and decommission the

production line.

              Finally, the parties agreed that disputes not covered

by the arbitration clause would be governed by Virginia law and

that “the prevailing party [would] be entitled to recover, in

addition to any damages proven at trial, reasonable attorneys’

fees and costs incurred in any such action.”

              After the parties executed the Settlement Agreement,

EZN agreed to allow Best to substitute a letter of credit for

the performance bond.          The parties disagree, however, on whether

Best   ever    submitted      the   original        letter    of    credit     or   even

whether the letter of credit that Best had obtained was in an

acceptable form.

              In the performance of the Settlement Agreement, Best

paid   for    four    extensions    with      respect    to    its    obligation      to

decontaminate        and   decommission       the   production       line,    but   even

with the extensions, it never performed the task.                            In January

2010, EZN told Best that it was undertaking the task, as it was

authorized to do by the Settlement Agreement.                      In addition, even

though Best paid the required €100,000 for source trains and EZN

offered to ship Best the source trains it had in stock, Best

refused to accept those source trains, claiming that they did

not    meet    the     specifications         set     forth    in     the      original

Manufacturing Agreement.

                                          5
             Best commenced this action in June 2010, relying on

diversity jurisdiction, for injunctive relief and damages.                                  It

alleged:     (1) that EZN was equitably estopped from conducting

the decontamination and decommission task and from disposing of

the    production        line    in     the    course     of      decontaminating           and

decommissioning the production line; (2) that EZN breached the

Settlement Agreement by not cooperating with Best; and (3) that

EZN breached the Settlement Agreement by not providing Best with

source trains and sources that met the specifications of the

original Manufacturing Agreement.

             In addition to filing its answer to Best’s complaint,

EZN filed a counterclaim in which it alleged:                               (1) that Best

breached     the     Settlement         Agreement        by       failing      to    post    a

performance        bond;    (2)        that    Best      breached        the    Settlement

Agreement     by    failing       to    decontaminate          and     decommission         the

production line; (3) that Best fraudulently induced EZN to enter

into   the   Settlement         Agreement;        and    (4)      that   EZN    should      be

awarded declaratory relief stating that Best had defaulted under

the Settlement Agreement and that its default relieved EZN from

any obligation to dispose of sources.

             On    the    parties’      cross-motions          for    summary       judgment,

the    district     court       entered       judgment       on     September       7,   2011,

dismissing all claims, as stated in both the complaint and the

counterclaim.            Best    Med.    Int’l,       Inc.     v.    Eckert     &    Ziegler

                                              6
Nuclitec GmbH, No. 1:10-cv-617, 2011 WL 3951675 (E.D. Va. Sept.

7, 2011).     In dismissing Best’s complaint the court concluded,

among other things:           (1) that Best did not make “the necessary

showing on the representation element of any possible equitable

estoppel claim”; (2) that Best did not demonstrate that EZN had

willfully and intentionally failed to cooperate; and (3) that

the    Settlement      Agreement     only       required    EZN    “to   attempt    to

satisfy     the     Source      manufacturing         requirements        based     on

availability      of    the   current   inventory.”          Id.    at   *2-5.      In

dismissing EZN’s counterclaim the court concluded, among other

things:     (1) that EZN did not establish that it had suffered

damages from Best’s failure to provide a performance bond; (2)

that   “although       Best   did   default      on   its   [decontamination       and

decommissioning] obligation, the arbitration provisions of the

contract [were] still in effect”; (3) that EZN had no evidence

that supported a claim of fraudulent inducement; and (4) that

the claim for a declaratory judgment requested in the fourth

count was moot.        Id. at *5-7.

            EZN and Best then each moved for attorneys’ fees and

costs, claiming to be the “prevailing party” entitled to that

award under the Settlement Agreement.                 In an order dated January

6, 2012, the district court found EZN to be the prevailing party

and therefore entitled to its attorneys’ fees and costs.                           EZN

sought $584,735.08 in fees, $32,892.61 in nontaxable costs, and

                                            7
$14,845.70       in     costs    taxable     under       Federal     Rule      of    Civil

Procedure    54(d)(1).            EZN   explained         that     its     fee      request

incorporated a 10% reduction to the lodestar to account for the

unsuccessful aspects of its counterclaim and that it had also

reduced    its    fees    by     $38,255.60    to     account      for   prelitigation

activities, non-core timekeepers, the fraud claim, a motion to

compel    that    the    court    had   denied      as    untimely,      and     duplicate

timekeepers.          The district court awarded EZN its full claim,

concluding that the hours and rates were reasonable; that EZN’s

10% discount to its lodestar was reasonable; and that there was

no need to further discount because of EZN’s “failure to prevail

on its counterclaim as there was no duplication involved over

and above the effort to defend itself.”

            This      appeal     followed,     with      both    parties    challenging

the district court’s rulings. *

            After carefully considering the arguments presented by

the parties and reviewing the record, we affirm the district

court’s summary judgment on the merits, substantially for the

reasons given by the court in its opinion.                       We also affirm the

district court’s conclusion that EZN was the prevailing party.

But, as to the amount of EZN’s attorneys’ fees and costs, which

we conclude might be unreasonably excessive in the absence of an

     *
       The amount of the costs taxable under Rule 54(d)(1) has
not, however, been challenged on appeal.

                                           8
analysis based on the applicable factors identified in Johnson

v. City of Aiken, 278 F.3d 333 (4th Cir. 2002), we remand for a

further analysis that takes into account the applicable Johnson

factors.      While     the   district       court    did    generally      recognize

the Johnson factors, it applied the factors in only the most

conclusory    manner,    stating,    “Taking         the    Johnson   factors     into

account, the Court finds the hours expended and the rates billed

to be reasonable.”

           Accordingly,       we   affirm     the    district    court’s     summary

judgment     on   the   merits     and   its     ruling       that    EZN   was   the

prevailing party; we vacate its award of attorneys’ fees and

costs; and we remand with respect to its award of attorneys’

fees and costs to allow the court to reevaluate EZN’s claim in

light of the Johnson factors.

                                              AFFIRMED IN PART, VACATED
                                              IN PART, AND REMANDED FOR
                                              FURTHER PROCEEDINGS

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