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Crossman Communities of North Carolina, Inc. v. Harleysville Mutual Insurance Co.

United States District Court, D. South Carolina, Florence Division

May 23, 2014

Crossman Communities of North Carolina, Inc.; Crossmann Communities, Inc.; Beazer Homes Investment Corp.; Beazer Homes Corp., Inc., Plaintiffs,
v.
Harleysville Mutual Insurance Company, Defendant.

ORDER

R. BRYAN HARWELL, District Judge.

Before the Court is [358] Motion for Attorney's Fees in this action by the plaintiffs, hereinafter referred to as "Beazer". The defendant "Harleysville" filed a response in opposition to the motion, and Beazer filed a Reply. The motion is ripe for disposition.[1]

The parties filed motions to seal Beazer's memorandum in support of the motion for attorney's fees, Harleysville's objection to the motion for attorney's fees; the affidavits of Martin M. McNerney, Brett A. Steele, Robert M. Horkovich, and Eric J. Tidd; all King & Spalding invoices in the True Blue Coverage Case, attached as Exhibit A to the affidavit of Martin M. McNerney; and all Elmore, Goldsmith, P.A. and Elmore Wall, P.A. invoices in the True Blue Coverage Case, attached as Exhibit A to the affidavit of L. Franklin Elmore, on the basis that they contain confidential and proprietary information regarding hourly rates, fee structures, and discounts negotiated. The Court granted the motions on a temporary basis in order to allow interested parties to object to the motions to seal. No objections have been received by the Court. Therefore, the motions to seal [ECF No. 357 and 361] are granted on a permanent basis. However, this order will not be sealed. The parties have furnished the sealed documents to the Court in camera, and the Court has reviewed them before ruling on the motion. Counsel for the parties shall file under seal on the docket the documents which were submitted to the Court in camera. These include Beazer's Memorandum in Support of its Motion for Attorney's Fees; the affidavit of Martin M. McNerney with attached exhibits; the affidavit of Brett A. Steele; the affidavit of Robert M. Horkovich; the affidavit of Eric J. Tidd; all invoices attached as Exhibit A to the affidavit of L. Franklin Elmore; and Harleysville's Objection to Beazer's Motion for Attorney's Fees.

The Court must now turn to the reasonableness of the Beazer request for attorneys' fees and costs. Beazer requests the Court to award $1, 110, 483.32 in attorney's fees and costs for this action. (The total amount of costs requested is $119, 330.27.[2] The total amount of fees requested is $991, 153.05.) Beazer also requests the Court to award it reasonable attorney's fees and costs for responding to Harleysville's post-judgment motion and attorney's fees and costs for the appeal to the Fourth Circuit Court of Appeals.

In McAfee v. Boczar, 738 F.3d 81, 88 (4th Cir. 2013), the Fourth Circuit recently summarized the proper procedure and standard for making an attorney's fee award as follows:

The proper calculation of an attorney's fee award involves a three-step process. First, the court must "determine the lodestar figure by multiplying the number of reasonable hours expended times a reasonable rate." Robinson v. Equifax Info. Servs., LLC, 560 F.3d 235, 243 (4th Cir. 2009). To ascertain what is reasonable in terms of hours expended and the rate charged, the court is bound to apply the factors set forth in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974)... Next the court must "subtract fees for hours spent on unsuccessful claims unrelated to successful ones." Id. at 244. Finally, the court should award "some percentage of the remaining amount, depending on the degree of success enjoyed by the plaintiff." Id.

To determine the reasonable number of hours and the reasonable rate to use in calculating the lodestar, the Court is guided by twelve non-exclusive factors. These factors, which have been approved by the Supreme Court and embraced by the Fourth Circuit are:

(1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the level of skill required to perform the legal service properly; (4) the preclusion of employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) the time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the "undesirability" of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases.

Rum Creek Coal Sales, Inc. v. Caperton, 31 F.3d 169, 175 (4th Cir. 1994) (citing Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974)); see Blanchard v. Bergeron, 489 U.S. 87, 91 n.5 (1989). These factors were first adopted by the Fourth Circuit in Barber v. Kimbrell's, Inc., 577 F.2d 216, 226 (4th Cir. 1978).[3] In more recent cases, some courts restate the sixth factor as relating to counsel's expectations at the outset of the litigation. See Brodziak v. Runyon, 145 F.3d 194, 196 (4th Cir. 1998) (quoting EEOC v. Service News, Co., 898 F.2d 958, 965 (4th Cir. 1990)). Although the Court considers all of the factors, they need not be strictly applied in every case inasmuch as all of the factors are not always applicable. Service News, 898 F.2d at 965.

Step One: Reasonable Number of Hours and Reasonable Hourly Rate

To establish the number of hours reasonably expended, the attorney "should submit evidence supporting the hours worked..." Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). The number of hours should be reduced to exclude "hours that are excessive, redundant, or otherwise unnecessary" in order to reflect the number of hours that would properly be billed to the client. Id. at 434.

The hourly rates included in a request for attorneys' fees must also be reasonable. Hensley, 461 U.S. at 433. A reasonable hourly rate is defined as "the prevailing market rate[] in the relevant community.'" Rum Creek Coal Sales, 31 F.3d at 175. The relevant community for determining the prevailing market rate is generally the community in which the court where the action is prosecuted sits. Id. "In circumstances where it is reasonable to retain attorneys from other communities, however, the rates in those communities may also be considered." Id. This determination is fact intensive and the Court may look to what attorneys earn from paying clients for similar services in similar circumstances. See Blum v. Stenson, 465 U.S. 886, 895 n.11 (1984). "While evidence of fees paid to attorneys of comparable skill in similar circumstances is relevant, so too is the rate actually charged by the petitioning attorneys when it is shown that they have collected those rates in the past from the client." Rum Creek Coal Sales, 31 F.3d at 175 (citing Gusman v. Unisys Corp., 986 F.2d 1146 (7th Cir. 1993)).

In this case, South Carolina counsel for Beazer, the Elmore Goldsmith law firm, presented billing records showing that they spent 350.3 hours of attorney time and 353.55 hours of paralegal time on this coverage case. Pro hac counsel King & Spalding of Washington, DC, presented billing records showing that King & Spalding, spent 1627.70 hours of attorney time working on this case and 439.1 hours of paralegal and support staff time. Beazer's claimed attorney time was therefore 1978 hours of total attorney time and 792.65 of paralegal and support staff time. In evaluating whether these hours were reasonably expended and whether the hourly rates were reasonable, the Court addresses the relevant factors below.

1. Time and Labor Required

This lawsuit was initiated in 2009 by Cincinnati Insurance Company against Beazer and its related entities. In October of 2009, Beazer filed a third party complaint against Harleysville. Harleysville then filed fourth party complaints for contribution against eight (8) insurance companies with whom Beazer had previously settled. The case was stayed from May 4, 2011 to October 12, 2011 due to the pendency of Crossmann Communities of North Carolina, Inc. v. Harleysville Mutual Insurance Co., 717 S.E.2d 589 (S.C. 2011) and from September 20, 2012 to December 5, 2012, pending mediation of the underlying state court action. Motions for summary judgment were filed, and this Court issued an order granting in part and denying in part Beazer's motion and denying Harleysville's motion. The court also granted the motions for summary judgment by the fourth party defendants.

Beazer indicates that it is not asking for an attorney's fee award for Elmore Goldsmith's time before November 2, 2009 because a separate billing file was not opened for this case until then. The first time entry for which King & Spalding seeks an award is August 20, 2009. The last time entry submitted by Elmore Goldsmith was September 30, 2013; the last time entry submitted by King & Spalding was August 27, 2013. The trial in this case was held on August 12 and 13, 2013. The Court entered its judgment on September 27, 2013. A post trial motion was filed by Harleysville on October 25, 2013. Beazer filed a response in opposition on November 12, 2013. Beazer also filed an appeal of this court's judgment. This court entered an order on January 8, 2014, granting in part and denying in part Harleysville's post trial motion. In that order, the Court reduced the indemnity award and further elaborated on its findings regarding the attorney's fees in the underlying action.

The time and labor required to litigate this case have been substantial due to the nature of this litigation. Further, this has been a long, complex case. The record contains many motions, pretrial and post trial, each of which has been fully briefed. The bench trial of the case took two days.

Harleysville asserts that the lawyers and legal professionals at Elmore Goldsmith and King & Spalding expended more hours than reasonably necessary to litigate the duty to defend issues. It contends that twenty-five (25) different timekeepers from King & Spalding and fourteen (14) timekeepers from Elmore Goldsmith billed time on this case. Beazer responds that it only seeks to recover for the time of eleven (11) timekeepers at King & Spalding and nine (9) timekeepers at Elmore Goldsmith. The Court does not find this to be unreasonable, as the work on the case was complex and spanned some four years.

Harleysville also contends generally that many bills contain duplicative billing and vague entries. However, Harleysville does not point to any specific instances of this. Therefore, no reductions will be made on this basis.

Beazer indicates that the request for attorneys' fees does not include time entries related to Cincinnati. Further, Elmore states in his affidavit that "time entries on the invoices depicting work on the coverage case that was not expressly limited to either Cincinnati or Harleysville issues have been reduced by 50 percent to account for the possibility that a portion of those tasks could be related to enforcing Cincinnati's duties to Beazer." (ECF No. 358-1, p. 4, ΒΆ 8) The Court finds that this is a fair method of ensuring that Harleysville does not pay Beazer's costs relating to Cincinnati.

Harleysville also argues that the fee award should not include the time spent on preparing motions in limine and other motions that it describes as unsuccessful. When a movant has pursued both successful and unsuccessful claims, "the most critical factor... is the degree of success obtained." because when a movant has achieved only partial or limited success, the product of hours reasonably expended on the litigation as a whole may be an excessive amount." Brodziak, 145 F.3d at 196-97 (quoting Hensley, 461 U.S. at 436). In determining whether to reduce the compensable hours, the Court must first identify the relationship between the successful and unsuccessful claims. If the claims are based on different facts and legal theories, the movant should not be compensated for time spent pursuing the unsuccessful claims because that effort was not "expended in pursuit of the ultimate result achieved." Hensley, 461 U.S. at 435. However, "[i]n [some] cases, the [movant's] claims for relief will involve a common core of facts or will be based on related legal theories. Much of counsel's time will be devoted generally to the litigation as a whole, making it difficult to divide the hours expended on a claim-by-claim basis." Id. In such a case, "the district court should focus on the significance of the overall relief obtained by the [movant] in relation to the hours reasonably expended on the litigation." Id. Here, the motions referenced by Harleysville do not deal with unsuccessful claims but rather arguably unsuccessful motions. Therefore, the Court will not reduce the hours claimed by the time spent on those motions.

Harleysville also contends that the fees and costs being sought improperly include time spent in preparing pleadings filed on behalf of some of the Fourth Party Defendants.[4] Beazer responds that the confidential settlement agreements between Beazer and the Fourth Party defendants obligated Beazer to reimburse the Fourth Party defendants for the costs associated with Harleysville's Fourth Party Complaint. It appears that Beazer has ignored the Court's previous ruling in this regard. In its Findings of Fact and Conclusions of Law (ECF No. 350), this Court already found that "this action did not just involve the dispute between Beazer and Harleysville. It was initiated by Cincinnati and also involved several other carriers. Therefore, any award of attorney's fees for this action should only include work performed in relation to the dispute between Beazer and Harleysville." (ECF No. 350, p. 53, note 16) The Court reiterates this ruling here.

In addition, as noted by Harleysville, it was not a party to the agreements between Beazer and the other insurance companies and should not be required to pay Beazer's attorney's fees in connection with those agreements. Neither party has segregated for the court the specific billings for time spent on the fourth party claims. However, Beazer has the burden of proof, and Harleysville has challenged the charges. It is not the court's duty to comb the record to determine the exact number of hours spent by Beazer on the fourth party claims. Therefore, with no help from the parties, the court is forced to concoct a method of formulating the number of hours that should be deducted.

In reviewing the invoices, it appears that roughly two-thirds (2/3) of the bills were for time after March of 2013, when the fourth party defendants were dismissed and no longer parties and that onethird (1/3) was for time while the fourth party defendants were parties. Regardless, the Court believes that this is a fair estimation of the time that was or reasonably should have been spent. Again, Beazer has the burden of proof and its failure to segregate the time spent on the fourth party claims leaves this Court with a difficult task. In fairness, some portion of the time spent before March, 2013 when the fourth party defendants were still parties was spent on other aspects of the case that did involve Harleysville. The Court notes that this case was actually three cases in one: Cincinnati vs. Beazer (for which deductions were already made by Beazer); Beazer vs. Harleysville; and Harleysville vs. the fourth party defendants. The Court considered reducing the total time by one-third to account for the time spent while the fourth party claims were pending. However, because equitably ...


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