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Skf Usa Inc v. Dale H. Bjerkness

September 27, 2011

SKF USA INC., PLAINTIFF,
v.
DALE H. BJERKNESS, KEVIN KOCH, JOSEPH J. SEVER, AND WALTER REMICK, JR., DEFENDANTS. SKF USA INC., PLAINTIFF,
v.
EQUIPMENT RELIABILITY SERVICES, INC., DEFENDANT.



The opinion of the court was delivered by: Judge Rebecca R. Pallmeyer

Judge Rebecca R. Pallmeyer

MEMORANDUM OPINION AND ORDER

Defendant Dale Bjerkness worked for Preventive Maintenance Company, Inc., which was acquired by Plaintiff SKF USA Inc., in January 2007. The following year, Bjerkness left SKF and set up a competing business, taking with him a handful of other SKF employees and thousands of SKF's computer files. The decision to appropriate SKF's data is one that, the court suspects, Defendants have come to regret. Bjerkness testified that he and his colleagues did not need the information and could have competed just as effectively without it. SKF does not share that view, however; it sued the former employees and the competing business they established for misappropriation of trade secrets. In this dismayingly contentious litigation, SKF ultimately prevailed, winning an injunction and a modest damages award. See SKF USA, Inc. v. Bjerkness ("SKF I"), 636 F. Supp. 2d 696 (N.D. Ill. 2009)(entering preliminary injunction); SKF USA, Inc. v. Bjerkness ("SKF II"), No. 08 C 4709, 2010 WL 3155981 (N.D. Ill. Aug. 9, 2010) (awarding damages). In granting the motion for a preliminary injunction, the court observed that if SKF's computer files were truly unnecessary to Defendants, their decision to take those files "was a colossally expensive, foolish mistake." (Prelim. Hr'g Tr., Dec. 11, 2008, at 1172.) Indeed, having prevailed, SKF now seeks a colossal award of attorneys' fees and costs. For the reasons explained here, that relief is granted in part and denied in part.

Defendants have made two general objections to Plaintiff's fee petition: that the fee request is disproportionate to the damages recovered, and that the petition seeks recovery for excessive billing. With respect to the proportionality concern, Defendants emphasize the very modest recovery: At the conclusion of a bench trial, the court awarded SKF just $81,068.00, consisting of damages in the amount of $41,068.00 and $40,000 in exemplary damages. Yet SKF now seeks attorneys fees in an amount that dwarfs the damages award: $1.3 million. Such a substantial award would improperly reward SKF's litigation strategy, Defendants argue; they assert that they offered several times prior to trial to settle the case for a much greater amount than Plaintiff ultimately recovered. The only logical conclusion, Defendants suggest, is that Plaintiff sought to run up the litigation expense in this case in order to bankrupt Defendants' business and squelch competition. In Defendants' view, an appropriate award can be no greater than three times the amount of damages recovered, or $243,205.

For the reasons explained here, the court overrules Defendants' "proportionality" objection. Although Defendants have offered no specifics regarding their claim of excessive billing, the court sustains that objection in part, and orders Plaintiff to reduce its attorneys' fees request to reflect its lack of success on its damages claim.

DISCUSSION

The court begins its analysis of an attorneys' fees petition by making a "lodestar" calculation, multiplying the number of hours reasonably spent on the litigation by the attorneys' reasonable hourly billing rate. RKI, Inc. v. Grimes, 233 F. Supp. 2d 1018, 1020 (N.D. Ill. 2002) (awarding fees under the Illinois Trade Secrets Act). The lodestar figure is presumed to be reasonable. See JCW Invs., Inc. v. Novelty, Inc., 482 F.3d 910, 920 (7th Cir. 2007); Eddleman v. Switchcraft, Inc., 927 F.2d 316, 318 (7th Cir. 1991). Defendants have not challenged the hourly billing rates charged by Plaintiff's counsel, which range from $420.75 to $535.50 for law partners and from $238.00 to $375.00 for associates. Defendants do, however, argue that the number of hours charged to this litigation is excessive. Case authority directs the court to reduce the lodestar figure, where appropriate, in light of the parties' settlement history; the proportionality of the award as compared to the damages sought; and any excessive or unnecessary billing. See Moriarty v. Svec ("Moriarty II"), 233 F.3d 955, 967 (7th Cir. 2000); Cole v. Wodziak, 169 F.3d 486');">169 F. 3d 486, 487-89 (7th Cir. 1999). The court addresses those factors below.

Settlement History

As explained in Moriarty II, the court should consider any "substantial settlement offer" as a factor in a fee award because fees incurred after rejection of such an offer generate little benefit to the prevailing party. 233 F.3d at 967. Defendants assert that they made substantial offers at various points in the litigation ($173,247 in November 2008, $75,000 in January 2010, and $250,000 in September 2010), but Plaintiff rejected those offers and, Defendants assert, declined to make any counterproposals.

Plaintiff objects to any consideration of the parties' settlement exchanges on the ground that Magistrate Judge Denlow, who supervised the settlement efforts, has ordered that the discussions remain confidential. (Reply in Supp. of Fee Pet. (hereinafter "Pl.'s Reply"), at 2-3.) FED. R. CIV. P. 68 explicitly contemplates that a formal offer of judgment can be a bar to recovery of costs, however. Moreover, the case law on attorneys' fees awards explicitly calls for consideration of the parties' settlement history. The court concludes the magistrate judge's standing order does not prohibit consideration of that history in ruling on Plaintiff's fee petition.

Assuming that such consideration is appropriate, Plaintiff points out that the materials Defendants themselves have submitted demonstrate that as of November 2008, Plaintiff was willing to negotiate a deal that would have saved both parties litigation expense. Among the materials Defendants have submitted in opposition to the fee petition is the affidavit of Defendant Dale Bjerkness, in which Bjerkness acknowledges that Plaintiff proposed a settlement in the amount of $200,000, plus certain lost profits, in November 2008. (Pl.'s Reply at 1.) As Defendant calculates the lost profits, Plaintiff's total demand, as of November 2008, was for $455,000. (Bjerkness Aff. ¶ 4, Ex. H to Defs.' Objections to Pl.'s Fee Pet. Pursuant to L.R. 54.3 (hereinafter "Defs.' Resp.").)*fn1

Although that sum substantially exceeds the ultimate damages award, the court has no basis for concluding that the calculations were so inflated as to suggest the demand was made in bad faith. Plaintiff contends that as of November 2008, it had already incurred attorneys fees in excess of its own demand. (Pl. Fee Pet. at 14.) Plaintiff notes, further, that the amount Defendants claim to have offered in November 2008--$173,247--is less than the total of the damages award plus the fees and costs that Defendants have now conceded are properly recoverable. (Pl.'s Reply at 4-5.)

In any event, the court is reluctant to limit the recovery of attorneys fees in this case based on a post-hoc conclusion that Plaintiff should have accepted Defendant's settlement offers. As Plaintiff points out, the genuine likelihood that the court would award attorneys fees justified Plaintiff's refusal to accept an offer that wholly discounted such an award. Id. at 6, citing United Auto. Workers Local 259 Social Sec. Dep't v. Metro Auto Ctr., 501 F.3d 283, 291 (3d Cir. 2007); Needham v. Innerpac, Inc., No. 1:040 CV 393, 2008 WL 5411638, at *5 (N.D. Ind. Dec. 24, 2008). Moreover, at least one of the settlement proposals Defendants cite preceded the court's preliminary injunction ruling in which it granted substantial non-monetary relief: the court directed Defendants "immediately to destroy any and all proprietary information brought with them from SKF" and to submit to an ...


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