East West Bank v. Shanker

Background

East West Bank sued Sukeert Shanker, a former employee, and Aeldra Financial, Inc. over alleged misuse of East West Bank’s trade secrets and related claims. The court initially entered a preliminary injunction restricting the defendants’ use, disclosure, distribution, or retention of East West Bank’s confidential, proprietary, or trade-secret information.

Shanker and Aeldra later moved to compel arbitration. The court found that an arbitration agreement in East West Bank’s Employee Handbook controlled because it superseded an earlier arbitration agreement Shanker had signed. The court also found that Aeldra, although it had not signed the Handbook, could compel arbitration of the claims against it. The court dissolved the preliminary injunction, granted the motions to compel arbitration, and stayed the case.

The Handbook’s arbitration provision stated that a party forced to incur fees or costs to compel the other party’s participation in arbitration was entitled to recover reasonable fees, costs, and other reasonable expenses of that action.

Fee Entitlement

Shanker sought fees under the Handbook. East West Bank argued that Shanker was not forced to incur fees because East West Bank had voluntarily agreed to arbitrate and because the two arbitration agreements had materially similar terms. The court rejected that argument. It found that East West Bank had acted inconsistently with arbitration by filing the federal lawsuit, seeking damages and a jury trial, pursuing discovery, and delaying before arguing that the case belonged in arbitration. The court also noted that East West Bank agreed to arbitrate under the earlier agreement rather than under the Handbook. The court held that Shanker had been forced to incur fees and costs to compel arbitration as provided in the Handbook.

Aeldra was not a signatory to the Handbook. The court nevertheless held that equitable estoppel—a fairness rule that can prevent a party from claiming a contract’s benefits while avoiding its burdens—allowed Aeldra to invoke the Handbook’s arbitration and fee provisions. East West Bank had relied on the Handbook in pursuing claims against Aeldra while disputing the applicability of the Handbook’s arbitration provision. The court concluded that East West Bank could not hold Aeldra liable under the Handbook while avoiding the arbitration-related fee obligation. The court therefore held that Aeldra could recover fees under the Handbook. Because of that ruling, the court did not address Aeldra’s alternative argument for fees under California Civil Code section 3426.4.

Amount of the Award

The defendants requested $427,742.98 for work on the motions to compel arbitration and dissolve the injunction, plus $171,394.52 for work on the fee motion, for a total request of $599,137.50.

The court used the lodestar method, which generally calculates fees by multiplying reasonable hours by a reasonable hourly rate. It found the requested amount excessive because the issues were not particularly complex, the defendants used a litigation team consisting of two partners, three associates, and one paralegal, and the billing records included excessive entries and duplication.

The court reduced the fees for compelling arbitration and dissolving the injunction by 10 percent. For the seven-minute hearing, conducted by video without travel, it awarded $15,000. For the fee motion, it reduced the request to $109,593.98, representing the amount billed by the senior associate and paralegal. The court reduced the total request by $132,124.10.

Disposition

Judge Orrick granted Shanker and Aeldra’s motion for attorneys’ fees and awarded them $467,013.40. The order concerned fees and costs connected with the arbitration-related motions and the fee motion; it did not decide whether the defendants would ultimately succeed in the arbitration.