How much will failure to produce documents and/or forgery of document cost in legal fee shifting?

How Generous Can a Court Be in Rewarding Legal Fees As a Result of Violation of Discovery Rules?

When a party’s violation of discovery rules causes added legal expenses to its adversarial, courts appear to be very generous in approving fee applications. An application only needs to provide itemized ledger entries of attorney/paralegal hours with simple explanation of the relation of the corresponding work to the discovery violation. Courts are going to exercise broad discretion and place the burden on the violating party to show with particularity why each logged hour is unreasonable. It appears that courts will only disprove hours that are obviously excessive or clearly redundant on the face of the ledger.

In Tangible Value v. Town Sports International, Inc., Tangible Value (“TV”) sued the defendants for not paying for services provided according to an oral contract, which the defendants denied. The bulk of its claim was reflected in an invoice stating an unpaid balance of about $800,000. Upon discovery request by the defendant, TV, refused to produce metadata and other documents related to the invoice. The court then ordered such production. During the course of the discovery, TV repeatedly provided insufficient documentation as requested and the defendant had to examine the documents and determine their sufficiency, converse with counsels of TV, and initiate court conferences multiple times to compel additional documents. It was later discovered that the invoice was not real but was created by TV after the fact to justify a damage claim. At that point, the defendant filed a motion for contempt and sanction. The court granted the motion. The defendants then filed their fee application seeking to recoup legal expenses as a result of TV’s discovery violation, which  totaled 423.2 hours at rates varying between $180-$562 for attorneys (associates and partners) and $95-$153 for paralegals.

The Magistrate Judge of the District Court for the District of New Jersey generously awarded the defendants 384 hours. Several observations can be made on how the court dealt with various legal charges. First, court deemed all charging rates reasonable by comparing the proposed rates to the rates approved previously by the court in other matters. Second, the court automatically approved any hours that were not objected to by TV. Third, once specific objections of hours were made, the court used a great deal of discretion and required particular showing why the hours objected were unreasonable. Fourth, the court approved internal attorney conferences without much hesitation. Fifth, hours logged for preparation for court conference were approved 100%. Sixth, the court was only willing to consider obviously excessive or unnecessarily redundant work as unreasonable. Seventh and most astonishingly, the court was extremely generous in allowing hours associated with legal research and drafting of Motion for Sanction and Fee application, approving a whopping 250 hours, or over 6 weeks’ worth of work for a single attorney! For my fellow law students, that is half of one entire law school semester.

Thus, for executives and legal counsels in similar situations, make a good faith effort to obey the discovery request. Otherwise, the other side will surely take full advantage of the generosity of the court and obtain a humongous reimbursement in legal fees.

For easy reference, the table below summarizes the court’s disposition of all hours included in defendants’ fee application in the Tangible Value case. Note: DP stands for Document Production.

Fee Items

Hours Applied

Court Comments

Reduction of Hours by Court

Assessment of deficiencies in initial DP

8.3

none

Communications with TV Re deficiencies in initial DP

9.8

2

Court conference/preparation Re deficiencies in initial DP

1.8

none

Communications with TV Re deficiencies in its 2nd DP

5.8

none

Court conference/preparation Re deficiencies in 2nd DP

3.1

none

Investigation of the invoice and assessment of documents related to the derivation of the invoice

19.2

Multiple paralegals on same task.

4.9

Communications with TV Re deficiencies in its DP concerning the invoice

10.7

Two entries on similar work.

4.4

Court conference Re the deficiencies in DP concerning the invoice

0.8

none

Assessment of deficiencies in the 3rd DP

2.2

none

Communications with TV Re the deficiencies in 3rd DP

2.4

none

Assessment of the 4th DP

1.5

none

Assessment of the 5th DP

7

Ledger is unclear.

0.5

Communications with TV Re deficiencies in the 5th DP

1

none

Assessment of 6th DP and accuracy of TV certifications

5.9

none

Communications Re deficiencies in 6th DP and accuracy of certifications

7.7

none

Communication with TV Re deficiencies in 7th DP

1.3

none

Communication with TV Re deficiencies in 8th DP

0.5

none

Letter to Court summarizing DP deficiencies and seeking permission to move to compel

3.9

none

Motion to Compel, including drafting, legal research.

23.5

none

Oral argument Re Motion to Compel and Status Conference with court.

4.4

none

Revision of Scheduling Orders throughout litigation due to discovery delays

4.2

none

Letter request for permission to move for sanction, including review and legal research

9.8

Two attorneys repeated same task.

2

Review of TV response to the letter above

8.2

none

Motion for Sanction, including legal research and drafting

80.8

none

Review of TV response for the Motion for Sanction, preparation of reply, and review of Magistrate Report and Recommendations.

28.1

The 4 hours for reviewing Court Report excessive.

1

Fee application including review of records and case law research

89.9

Excessive only by 12.2 hours

12.2

Review of TV’s opposition to the Fee Application and draft reply

77.7

Excessive  only  by 12.2 hours

12.2

Gang Chen is a Senior Segment Manager in the Intellectual Property Business Group of Alcatel-Lucent, and a4th year evening student at Seton Hall University School of Law focusing on patent law.

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