Strong Presumption of Reasonableness Attaches to Thoroughly Assessed Awards of Fees and Costs

In Best Med. Int'l, Inc. v. Eckert & Ziegler Nuclitec GmbH (4th Cir. Apr. 8, 2014), the United States Court of Appeals for the Fourth Circuit affirmed the United States District Court for the Eastern District of Virginia’s award of attorneys’ fees and costs to Eckert & Ziegler Nuclitec GmbH (“Defendant EZN”) against the plaintiffs, Best Medical International, Inc. and Best Vascular, Inc. (collectively “Plaintiff Best”).  The Fourth Circuit held that the district court’s award of fees was appropriate because of its thorough analysis in calculating the lodestar figure, which was attached with a strong presumption of reasonableness on appeal.

The conflict giving rise to this appeal originated when Defendant EZN’s predecessor in interest sued Plaintiff Best, seeking to enforce agreed-upon contractual covenants.  Defendant EZN’s lawsuit concluded in a 2008 settlement agreement that provided, in pertinent part, that “the prevailing party [would] be entitled to recover ... reasonable attorneys' fees and costs incurred” in “any litigation… brought for breach” of the settlement agreement.  Soon thereafter, the settlement agreement unraveled, resulting in the parties filing claims and counterclaims against each other under various theories of breach of the settlement agreement.  Following cross motion for summary judgment from the parties, the district court found in favor of Defendant EZN and awarded $584,735.08 in attorneys’ fees and $32,892.61 in costs.

After an initial appeal, the Fourth Circuit affirmed all of the decisions of the district court except for its calculation of attorneys’ fees and costs, holding that the award “might be unreasonably excessive” due to the district court’s “conclusory” examination and application of the analysis required under Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974).  On remand, the district court issued an amended order (accompanied by a thorough opinion) that awarded $871,414.49 in attorneys' fees and $55,249.76 in costs to Defendant EZN.  Plaintiff Best appealed.

Applying the “exceptionally deferential” abuse-of-discretion standard of review, the United States Court of Appeals for the Fourth Circuit upheld the district court’s award of attorneys’ fees and costs to Defendant EZN.  The Fourth Circuit discussed the appropriate three-step process for determining the fee award.  The process first requires that the district court must ascertained the lodestar figure by considering the twelve Johnson factors, which include: (1) the time and labor expended; (2) the novelty and difficulty of the questions raised; (3) the skill required to properly perform the legal services rendered; (4) the attorney's opportunity costs in pressing the instant litigation; (5) the customary fee for like work; (6) the attorney's expectations at the outset of the litigation; (7) the time limitations imposed by the client or circumstances; (8) the amount in controversy and the results obtained; (9) the experience, reputation, and ability of the attorney; (10) the undesirability of the case within the legal community in which the suit arose; (11) the nature and length of the professional relationship between attorney and client; and (12) attorneys' fees awards in similar cases.  Second, the district court must subtract fees spent pursuing unsuccessful claims unrelated to successful ones.  Finally, a percentage of the remaining amount should then be awarded contingent on the degree of success enjoyed by the prevailing party.

The Fourth Circuit found that the district court applied the correct legal and factual criteria at each step of the process.  Plaintiff Best argued that Defendant EZN’s claimed hours were unreasonable.  The Fourth Circuit was unpersuaded, stating that the district court’s well-supported lodestar calculations were strongly presumed to be reasonable.  Plaintiff Best also contended that the district court did not adequately account for the relief obtained by Defendant EZN.  The Fourth Circuit noted that such a contention failed to afford a basis for recovery because the amount in controversy was substantial and Defendant EZN had succeeded on the merits throughout the litigation.  Furthermore, the award to Defendant EZN was predicated more on its successful defense of all of Plaintiff Best’s claims, which was united by a common core of facts to Defendant EZN’s unsuccessful compulsory counterclaims.

Finding no abuse of discretion by the district court, the United States Court of Appeals for the Fourth Circuit affirmed the award of attorneys’ fees and costs to Defendant EZN.  This decision reflects the court’s policy of discouraging litigants from transforming “attorneys’ fees cases into standalone pieces of major appellate litigation,” which would needlessly “result in a second major litigation.”