Advanced Analytics, Inc. v. Citigroup Global Markets, Inc.

Background

Advanced Analytics, Inc. (AAI) alleged that Citigroup Global Markets, Inc. and Yield Book, Inc. misappropriated AAI’s numerical sequences used to help price mortgage-backed securities and incorporated them into, or used them to create new sequences for, the Yield Book software.

In 2012, Magistrate Judge Henry B. Pitman set deadlines for AAI’s expert disclosures and completion of discovery and instructed the parties to raise discovery disputes promptly. AAI later submitted a late reply expert report from Dr. Jinqing Fan. The defendants moved to strike it, and the court granted that motion. AAI objected, but District Judge Laura T. Swain overruled the objections.

AAI later relied on the previously stricken material in a Fourth Fan Declaration filed while opposing the defendants’ motions for summary judgment and to exclude expert testimony. In a March 26, 2014 order, Magistrate Judge Pitman ruled that AAI could not use the declaration for merits issues because it was untimely and violated the expert-disclosure rule. He allowed limited use of part of the declaration in responding to the motion to exclude expert testimony, but not in support of AAI’s proposed sanctions motion. He also ruled that the defendants were entitled to recover some attorney’s fees and costs from AAI and its counsel, limited to half of the fees and costs resulting from the scheduling-order and expert-disclosure violations.

The defendants submitted an application seeking $91,246.55. Their application included fees and costs for preparing the motion to strike and reply, communications and work concerning the motion, reviewing and redacting the Fourth Fan Declaration, and preparing the fee application. AAI asked the court to deduct $12,663.59 related to reviewing and analyzing the declaration.

Legal standard

Federal Rules of Civil Procedure 16(f)(2) and 37(c)(1) allow a court to award reasonable expenses, including attorney’s fees, caused by a party’s failure to follow a scheduling order or required expert-disclosure rules, unless the failure was substantially justified or an award would otherwise be unjust.

The court used the lodestar approach, which generally calculates a reasonable fee by multiplying a reasonable hourly rate by a reasonable number of hours. The court may reduce fees for excessive, redundant, unnecessary, or inadequately described work. It also may rely on its familiarity with the case and the parties’ submissions.

Court’s analysis

The court rejected AAI’s argument that the defendants’ review and redaction expenses should be deducted simply because part of the declaration could be used for the expert-testimony motion. The court explained that the award was a sanction for AAI’s failure to comply with its obligations, rather than compensation for ordinary legal services.

The court nevertheless interpreted Magistrate Judge Pitman’s earlier order as limiting recovery to fees and costs associated with the defendants’ motion to strike and the related fee application. It therefore used as starting points one-half of $103,759.88 for the motion to strike and reply, and one-half of $11,542.58 for preparing the fee application.

The court found the defendants’ attorneys’ hourly rates reasonable. Those rates ranged from $725 to $940 for partners, $425 to $605 for other attorneys, and $141.35 to $205.42 for paralegals and other non-legal personnel. The court also found the recorded hours and number of timekeepers reasonable given the case’s complexity and lengthy history.

For the motion to strike and reply, however, the court could not award $522.50 for a 1.1-hour entry whose entire description was redacted. It also declined to award $238.14 for document duplication because the defendants did not explain why that expense was reasonable. After those deductions, the court awarded $51,499.62 for the motion to strike and reply. It awarded $5,771.29 for preparing the fee application.

Disposition

Judge Sarah L. Cave granted in part and denied in part the defendants’ application. The court awarded $57,270.91 in attorney’s fees under Rules 16(f)(2) and 37(c)(1). In accordance with Magistrate Judge Pitman’s earlier order, AAI and its counsel were required to pay the defendants by Monday, January 6, 2020. The Clerk was directed to close the fee-application docket entry.