KCG Holdings, Inc. v. Khandekar

Background

The court had previously granted the plaintiffs summary judgment on their breach-of-contract claim and their federal and state trade-secret misappropriation claims, and had rejected the defendant’s counterclaims. The court also barred the defendant from using trade-secret information he had improperly acquired and ordered him to pay the plaintiffs’ attorney’s fees and costs under the parties’ employment contract.

The plaintiffs later sought $3,238,493.53 in attorney’s fees and $336,640.51 in costs, totaling $3,575,134.04. The court referred the request to Magistrate Judge Gorenstein. He recommended $344,018.00 in attorney’s fees and $57,458.80 in costs, for a total of $401,476.80. Both parties filed objections.

Plaintiffs’ objections

The plaintiffs argued that the recommended attorney billing rates were too low and that the court should use rates charged by several highly specialized New York law firms. The court agreed with the magistrate judge that a reasonable hourly rate is based on what an adequately experienced lawyer of average skill and ordinary competence would charge, not what the most successful or specialized lawyers charge. The court also upheld the rates used for paralegals and electronic-discovery specialists because the plaintiffs had not timely provided evidence justifying higher rates.

The court upheld the reduction in billed hours based on the plaintiffs’ limited success. Although the plaintiffs defeated the counterclaims, the injunction they obtained was narrower than the relief they originally sought. The court also upheld reductions based on the parties’ financial circumstances, the exclusion of hours connected to a Financial Industry Regulatory Authority investigation, an 80% reduction in the Mandiant investigation costs, and a 50% reduction in expert costs. The court declined to consider certain arguments and evidence raised for the first time in the objections.

Defendant’s objections

Khandekar argued that the plaintiffs were not prevailing parties and had obtained nothing of value at judgment. The court rejected that argument because the plaintiffs won summary judgment on three of their four claims, defeated all counterclaims, and obtained an injunction based on the court’s determination that Khandekar had misappropriated trade secrets. The court held that the plaintiffs’ success was limited, but sufficient to support a fee award.

The court also held that fees related to defending the counterclaims could be recovered because that defense required proving Khandekar’s breach of the employment agreement and therefore arose from that breach. It rejected requests for larger reductions based on the amount Khandekar spent on his defense, the lack of detail in some time entries, and his financial condition. The court concluded that the reductions already recommended adequately addressed those concerns.

Ruling

Judge Alison J. Nathan denied all of both parties’ objections and adopted the Report and Recommendation in full. The court awarded the plaintiffs $401,476.80 in attorney’s fees and costs, directed the Clerk to enter judgment, and closed the case.