Riley v. Quantumscape Corp.

Background

Gilbert Riley initiated arbitration against QuantumScape after QuantumScape terminated his employment. Riley sought shares or the value of shares that he claimed he had been deprived of after the termination. The arbitrator issued a final award that included fees and costs for QuantumScape.

Riley later petitioned the court to vacate, or overturn, the arbitration award. He raised several arguments under the Federal Arbitration Act and California law, including alleged arbitrator bias and a claim that the award disregarded the law. QuantumScape opposed the petition and asked the court to confirm the award. The court denied Riley’s petition and granted QuantumScape’s cross-motion to confirm the award.

QuantumScape then moved for attorneys’ fees and costs for its work opposing Riley’s petition and seeking confirmation of the award. It also requested post-judgment interest under 28 U.S.C. § 1961. Riley opposed the motion and asked the court to delay enforcement of the earlier judgment.

Entitlement to Fees

QuantumScape relied on attorneys’ fee provisions in the parties’ Separation Agreement and Consulting Agreement. Those provisions allowed the prevailing party to recover qualifying costs and reasonable attorneys’ fees.

Riley argued that equitable principles should prevent a fee award because QuantumScape allegedly had unclean hands, the contract lacked mutuality, and the Separation Agreement was unenforceable under McLaren Macomb. The court rejected these arguments. It found that Riley had not shown unconscionable, bad-faith, or inequitable conduct supporting an unclean-hands defense. It also found that Riley had not adequately developed his mutuality argument and that the arbitrator and court had already rejected related arguments about consideration and legality. Finally, the court found Riley’s reliance on McLaren Macomb unpersuasive because he did not analyze the agreement’s specific terms or explain why that decision invalidated the fee provisions.

The court held that QuantumScape had established its entitlement to fees as the prevailing party under the agreements.

Reasonableness of Fees

The court applied California’s lodestar method, which generally calculates fees by multiplying reasonable hours by reasonable hourly rates. The court found that QuantumScape had not adequately shown that its requested rates matched rates prevailing in the Northern District of California. It therefore reduced the rates for QuantumScape’s attorneys and support staff, using comparable rates discussed in another Northern District of California case. The applied rates were $1,050 per hour for Marina Tsatalis, $600 for Matthew Gorman and Alison Renner, $350 for Neil Gulyako and Heather Diles, and $240 for support staff.

The court generally found the hours spent on the petition-to-vacate opposition and cross-motion to confirm reasonable and declined Riley’s request for a blanket 50-percent reduction. However, it reduced Tsatalis’s hours for that work from 38.7 to 25, excluded 8.9 hours billed by Renner and 1.6 hours billed by Tsatalis shortly after oral argument because QuantumScape had not shown those hours were reasonable and necessary, and denied 3.5 hours billed by Tsatalis and 0.9 hours billed by Anthony Geritano for preparing for a case-management conference that the court vacated.

After these reductions, the court awarded QuantumScape $92,101 in attorneys’ fees.

Costs and Interest

QuantumScape requested $2,309.95 for legal-research databases, shipping, copying and printing, filing, and court-reporter charges. The court found that QuantumScape sought only nontaxable costs and therefore had not waived them by failing to file a bill of costs required for taxable costs under the local rule. The court awarded the requested $2,309.95.

Riley did not oppose QuantumScape’s request for post-judgment interest. The court granted interest on the awarded attorneys’ fees and costs through the date of payment.

Disposition

The court granted in part QuantumScape’s motion for attorneys’ fees and costs and post-judgment interest. It awarded QuantumScape $92,101 in attorneys’ fees, $2,309.95 in costs, and post-judgment interest on those amounts through payment. The court also denied Riley’s request to stay enforcement of the February 13, 2023 order.