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Top Tobacco, L.P. v. North Atlantic Operating Company

September 6, 2007

TOP TOBACCO, L.P. AND REPUBLIC TOBACCO L.P., PLAINTIFFS,
v.
NORTH ATLANTIC OPERATING COMPANY, INC. AND NATIONAL TOBACCO COMPANY L.P., DEFENDANTS.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

Top Tobacco, L.P. and Republic Tobacco L.P. (together, Top Tobacco), owners of the trademark TOP for tobacco products, sued North Atlantic Operating Company, Inc. and National Tobacco Company L.P. (together, North Atlantic) for trademark infringement, unfair competition, and dilution under the Lanham Act, and related state law claims arising out of North Atlantic's use of the phrase "Fresh-Top Canister" on one of its tobacco products. The Court granted North Atlantic's motion for summary judgment and thereafter granted its motion for attorneys' fees pursuant to the Lanham Act, 15 U.S.C. § 1117(a), which allows the imposition of reasonable attorneys' fees to the prevailing party in "exceptional cases." Top Tobacco, L.P. v. North Atlantic Operating Co., Inc., No. 06 C 950, 2007 WL 118527 (N.D. Ill. Jan. 4, 2007); Top Tobacco, L.P. v. North Atlantic Operating Co., Inc., No. 06 C 950, 2007 WL 1149220 (N.D. Ill. Apr. 17, 2007). North Atlantic has submitted a fee petition seeking $1,432,813.35.*fn1 Top Tobacco objects to the petition, claiming that North Atlantic is not entitled to any fees or, in the alternative, is entitled to a substantially reduced award. For the following reasons, the Court awards North Atlantic attorneys' fees in the amount of $1,042,484.60

Background

The facts of this case are fully set forth in the Court's January 4, 2007 Memorandum Opinion and Order. Top Tobacco, L.P. v. North Atlantic Operating Co., Inc., No. 06 C 950, 2006 WL 118527 (N.D. Ill. Jan. 4, 2007). Top Tobacco and North Atlantic both manufacture and sell roll-your-own (RYO) cigarette tobacco and rolling papers. Top Tobacco sells its products under the TOP brand, and North Atlantic sells it products under the ZIG-ZAG brand. Top Tobacco brought five claims based on North Atlantic's use of the term "Fresh-Top Canister": a claim under the Lanham Act for infringement of a registered trademark (Count 1), a federal dilution claim (Count 2), a Lanham Act unfair competition claim (Count 3), a claim for violation of the Illinois Consumer Fraud and Deceptive Trade Practices Act (ICFA) (Count 4), and a state law unfair competition claim (Count 5). The Court granted summary judgment in favor of North Atlantic on all counts.

Under the Lanham Act and ICFA, a court may award reasonable attorneys' fees to a prevailing party if the losing party's conduct can be regarded as oppressive. 15 U.S.C. § 1117(a); 815 ILCS 505/10a(c); Door Sys., Inc. v. Pro-Line Sys., Inc., 126 F.3d 1028, 1029-30, 1032 (7th Cir. 1997) (citations omitted). The Seventh Circuit has held that a suit is oppressive if "it lacked merit, had elements of an abuse of process claim, and plaintiff's conduct unreasonably increased the cost of defending against the suit." S Indus., Inc. v. Centra 2000, Inc., 249 F.3d 625, 627 (7th Cir. 2001). The Court determined that Top Tobacco's conduct was oppressive and an award of attorneys' fees was warranted because of the sheer weakness of Top Tobacco's case, its inconsistent positions in the USPTO and before the Court, and its baseless litigation positions that needlessly increased the time and expense needed to defend the case. Top Tobacco, L.P. v. North Atlantic Operating Co., Inc., No. 06 C 950, 2007 WL 1149220 (N.D. Ill. Apr. 17, 2007).

In granting the motion for attorneys' fees, the Court admonished North Atlantic that its fee petition must be reasonable and reflect the exercise of "billing judgment." See Hensley v. Eckerhart, 461 U.S. 424, 434 (1983). The Court also opted out of the provisions of Local Rule 54.3 to a significant extent, as they are quite cumbersome and, in some cases, lead to undue delay in a court's consideration of a fee request. On June 12, 2007, the Court ordered North Atlantic to produce unredacted billing records, which North Atlantic provided on June 28, 2007. Top Tobacco filed a supplemental brief regarding the unredacted billing records that the Court has considered as a surreply. North Atlantic filed a response to Top Tobacco's surreply, which the Court has also considered.

Discussion

1. Billing Rates

a. Attorneys

The reasonable hourly rate for an attorney is the market rate for his services. See Fogle v. William Chevrolet/Geo, Inc., 275 F.3d 613, 615 (7th Cir. 2001). "An attorney's market rate is the rate that lawyers of similar ability and experience in the community normally charge their paying clients for the type of work in question." Spegon v. Catholic Bishop of Chic., 175 F.3d 544, 555 (7th Cir. 1999) (citations omitted). There is a presumption that an attorney's actual billing rate is the best measure of the market rate for his services. See People Who Care v. Rockford Bd. of Educ., 90 F.3d 1307, 1310 (7th Cir. 1996). An attorney seeking fees has the burden of proving his market rate, but once he does, the opposing party bears the burden of showing why the hourly rate should be lower. Spegon, 175 F.3d at 554-55.

Top Tobacco does not contest that the rates cited by North Atlantic are the rates actually charged by its attorneys at Kirkland & Ellis (K&E). Moreover, North Atlantic has submitted invoices demonstrating that these are the rates it was charged. Top Tobacco objects, however, to K&E's rates, contending that they are excessive at every level. North Atlantic does not deny that its attorneys' rates are at the very high end of the Chicago market. Indeed, they are likely higher than those charged by most Chicago intellectual property attorneys with the same number of years of experience as K&E's counsel. The rates are also significantly higher, across all attorney levels, than those charged by Top Tobacco's attorneys. By itself, however, this is insufficient to rebut the presumption that an attorney's actual billing rate is the best measure of the market rate for his services. As the Seventh Circuit has said, a court cannot depart from the presumptive rate merely because it can identify a different average rate in the community. Gusman v. Unisys Corp., 986 F.2d 1146, 1151 (7th Cir. 1993).

The Seventh Circuit has also stated, however, that in determining whether an attorney's higher-than-average regular rate is appropriate, a court may take into account whether the attorneys "did not display the excellence or achieve the time savings, implied by their higher rate." Id. There is no question that K&E's work in this case reflected a level of skill commensurate with its attorneys' high rates. It is equally apparent, however, that K&E did not achieve the time savings implied in its well-above-average hourly rates. As Top Tobacco points out, K&E out billed Top Tobacco's attorneys by a sizeable margin. K&E spent significantly more time on virtually every aspect of the case than did Top Tobacco's attorneys, who billed at much lower hourly rates. Overall, K&E billed 3,679.25 hours compared to 2,574.1 hours by Top Tobacco's counsel. In other words, K&E billed 30% more time to this case than its counterparts at Neal Gerber and Grippo & Elden. Some variation in this regard is to be expected, and some may be attributable to the degree of thoroughness of the work of the K&E attorneys (though the Court does not intend to suggest that Top Tobacco's attorneys did a less than thorough job). But even taking those factors into account, the Court is constrained to conclude that Top Tobacco has rebutted the presumption that K&E's regular rates are the market rate for purposes of the present inquiry. The Court will therefore adopt the hourly rates charged by Top Tobacco's attorneys, which are in line with those charged by other large law firms in similar types of cases in Chicago.

b. Paralegals

The reasonable hourly rates for paralegals are also the market rates for their services. Spegon, 175 F.3d at 556. North Atlantic seeks fees for its paralegals' time at rates of between $135 and $175 per hour. Top Tobacco argues that these rights are not reasonable, and ...


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