American Board of Internal Medicine v. Von Muller , 540 F. App'x 103 ( 2013 )


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  •                                                               NOT PRECEDENTIAL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.
    1