Charlestown Capital Advisors, LLC v. Acero Junction, Inc.

Background

Charlestown filed a motion seeking sanctions against the Acero Defendants for failing to preserve the business email account of Jateen S. Kapoor, whose signature appeared on the engagement agreement at issue in the breach-of-contract case. In an earlier order, the court found that the Acero Defendants had a duty to preserve the account, caused its destruction through a series of missteps, and did not adequately restore or replace the missing information through emails later produced from Kapoor’s laptop. The court found that Charlestown was prejudiced and awarded corrective sanctions under Federal Rule of Civil Procedure 37(e)(1). Those sanctions included payment of expenses, attorneys’ fees, and out-of-pocket costs reasonably incurred because of the failure to preserve the emails.

Charlestown then sought $134,805.50 for 162.4 hours worked by four attorneys at Arnold & Porter Kaye Scholer LLP. The requested hourly rates ranged from $500 to $1,065. Charlestown did not seek paralegal fees or out-of-pocket costs. The Acero Defendants argued that some requested work was not caused by the email loss, that the fee-application work was not compensable, and that the hourly rates were unreasonable. They proposed an award of $35,000.

Hourly rates

The court used the standard two-step approach for calculating a reasonable fee: determining reasonable hourly rates and multiplying those rates by the reasonable hours worked. The party seeking fees had to provide satisfactory evidence that its rates matched those charged in the relevant market for lawyers with reasonably comparable skill, experience, and reputation.

The court rejected Charlestown’s requested rates because the attorneys’ declarations did not state that Charlestown was charged or paid those rates. The court also found that the declarations’ general statements about comparable New York City rates were not adequately supported. The attached National Law Journal data showed average rates of $562 for partners and $414 for associates, and Charlestown did not compare its rates with rates approved in similar cases in the district or provide sufficient information about the attorneys’ skills and experience.

The court therefore awarded rates of $600 per hour for Samuel Lonergan and Robert Grass and $450 per hour for Susan Hu and Ryan Holmes. It also considered the discovery dispute relatively straightforward when setting reasonable compensation.

Hours and reductions

The court required reductions to the hours claimed. Lonergan and Hu did not submit their actual contemporaneous time records. Instead, they submitted tables based on their best approximations of compensable time. Although the court found that the approximations generally did not appear unreasonable and recognized that both attorneys performed valuable work, it reduced their hours by 50 percent rather than disallowing them entirely.

The court also reduced Hu’s pre-November 25, 2019 hours by an additional 10 percent because some of her work concerned documents produced by JSM International Limited and communications with JSM’s counsel, which fell outside the scope of the earlier sanctions order.

The court reduced Grass’s hours by 25 percent because assigning two highly compensated senior attorneys to the sanctions motion created inefficiency, even though the court did not find that their work duplicated one another. The court concluded that Charlestown reasonably needed substantial work to address the Acero Defendants’ argument that the laptop production had restored or replaced the missing information. The court also concluded that Charlestown was entitled to reasonable fees for preparing the fee application because the application was necessary to document the expenses covered by the earlier sanctions order.

Disposition

After applying the reductions and rounding the hours to the nearest tenth, the court awarded $55,230: $6,660 for Lonergan, $16,620 for Grass, $13,095 for Hu, and $18,855 for Holmes. The court ordered Acero Junction, Inc. and Acero Junction Holdings, Inc. to pay Charlestown Capital Advisors, LLC $55,230 within 30 days. The defendants’ liability was joint and several, meaning each could be required to pay the full amount, subject to the defendants’ rights between themselves. Judge Barbara Moses directed the Clerk of Court to close the fee motion.