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LLC v. Astra Tech, Inc.

Superior Court of Massachusetts, Suffolk, Business Litigation Session

June 9, 2016

ABV Holding Company 3, LLC et al. [1]
v.
Astra Tech, Inc. Other Parties ABV Holding Company 3, LLC et al.
v.
CID Equity Capital VIII LP et al. No. 134716

          MEMORANDUM OF DECISION AND ORDER ON: (1) ASTRA TECH'S MOTION FOR ENTRY OF FINAL JUDGMENT; AND (2) CERTAIN THIRD-PARTY DEFENDANTS MOTION FOR AN AWARD OF ATTORNEYS FEES AND COSTS

          Mitchell H. Kaplan, Justice

         1. The Motion for Entry of Final Judgment

         The court refers the parties to its Memorandum of Decision and Order dated January 13, 2016 (the Decision) for a description of the all of the prior proceedings, decisions, and orders that bring this unique litigation to its present posture and final moment (subject, of course, to rights of appeal). Defined terms in the Decision shall have the same meaning in this memorandum of decision. The court must now determine the amount of the final judgment to enter against the plaintiffs on Counts I and II of Astra Tech's counterclaim.

         With respect to Count I, the only contested issue is the date from which interest is to accrue on the damages awarded for the period after " the effective date of the Settlement Agreement." The plaintiffs argue that the " effective date" is the date that their appeal of the Settlement Agreement was finally decided adverse to them, because, until then, under the terms of the Escrow Agreement the Escrow Agent could not disburse funds and that prevented the releases provided in the Settlement Agreement from becoming binding. The court disagrees. The effective date of the Settlement Agreement was the date it became effective under its express terms, i.e., February 7, 2011. Briefly stated, that was the date on which the Settling Shareholders entered into their separate peace with Astra Tech. Thereafter, the Settling Shareholders ceased to participate in prosecuting or defending any claims against Astra Tech. They could neither suffer loss nor receive gain as a result of the Nonsettling Defendants' conduct.

         The plaintiffs' vigorous, but entirely unsuccessful, litigation seeking to invalidate the Settlement Agreement prevented the Escrow Agent from making distributions from the Escrow Fund for more than three years, but that did not, and should not, delay the effective date. In consequence, all the additional legal fees and delays in the payment of damages incurred thereafter were incurred solely as a result of the plaintiffs' actions prolonging this litigation. As the plaintiffs do not argue that, other than with respect to the " effective date, " the damages requested by Astra Tech under Count I were not calculated in accordance with the Decision, final judgment under Count I shall enter in the amount requested by Astra Tech, i.e., $3, 122, 331.83 ($80, 589.14 (plaintiff's share of excess damages) plus $3, 041, 742.69 (prejudgment interest)).

         With respect to Count II, the court refers the court to Judge Billings' December 16, 2013 decision on the motion for the entry of final judgment in Bailey I, which contains an excellent review of the standards to be applied by a court in determining the reasonableness of legal fees to be awarded in favor of a party other than the party who received the legal services. The court will apply these same standards in its consideration of the legal fees incurred by Astra Tech's counsel, Ropes & Gray, in defending and prosecuting Bailey II .

         Astra Tech seeks $954, 264 for legal fees (and related expenses) and $146, 367.51 in interest accrued on those fees, calculated from the time that each invoice was paid. These fees were incurred during the period January 2, 2013 through April 2016. According to Astra Tech, fees associated with Counts III through VI of its counterclaim, which were dismissed, have been eliminated.

         During this three-year period no discovery or further factual development of the issues raised by this case was required. The case was resolved on motions for judgment on the pleadings as to Count I and summary judgment as to Count II; although, the latter was styled as a motion for summary judgment only because damages, i.e., the legal fees that are the subject of this motion, required factual support. While the memoranda of law filed on behalf of Astra Tech and its counsel's oral argument were all excellent, that is an extraordinary sum for a case in which there was no evidence to be mustered and no disputed issues of fact to be resolved. While some of the expense was necessarily incurred in response to the novel arguments asserted on behalf of the plaintiffs, the costs seem beyond what is reasonable.

         The court is simply unable to review all of the fees billed over this three-year period and correlate them with each of the pleadings filed by the plaintiffs, especially because the majority of those fees relate to motions decided by another judge. Instead the court has focused on the fees requested for work done in March and April 2016. The fees billed during that period appear to apply to only two discreet tasks: preparing a reply to the plaintiffs' limited opposition to this motion for entry for judgment, and reviewing the Settling Shareholders' motion for fees. As to the first task, the reply brief is ten pages in length. It does not address any new issues of law and cites very few cases, nor should it. It is essentially practical argument that relies on prior decisions issued in Bailey I and Bailey II and logic. The court calculates the fees incurred in writing these persuasive ten pages of thoughtful, but largely common-sense, argument at approximately $55, 000 or $5, 500 a page. There was also a charge of $1, 300 for reviewing the Settling Shareholders' request for attorneys fees under G.L.c. 231, § 6F and Mass.R.Civ.P. 11(a); a request that may have generally interested Astra Tech's counsel, but in which Astra Tech had no monetary interest. The court does not find either of those amounts reasonable in relation to the product. From this the court extrapolates that expenses incurred in preparing other briefs went beyond what is " reasonable" under the circumstances, which led to aggregate fees of one million dollars.

         Additionally, in its Decision, the court rejected Astra Tech's position that the plaintiffs were responsible for interest accrued on the Settling Shareholders' share of damages up to the date of settlement. While the court ruled in favor of Astra Tech on other claims with substantially greater monetary value, the plaintiffs should be afforded some discount for defense of a discrete claim for damages that failed; in the same way that the court did not allow recovery for fees incurred with respect to counts that were dismissed.

         Having reviewed all of the submissions in support of and opposition to the request for fees under Count II, the court concludes that the request should be reduced by $200, 000, which is approximately 20% of the total requested, to arrive at a figure for reasonable attorneys fees. Distributing this sum in a weighted average over the period in which the fees were incurred, the court has also reduced the accrued interest by one fifth. Accordingly, judgment shall enter under Count II of the counterclaim in the amount of $871, 358 ($754, 264 (fees) plus $117, 064 (interest)).

         2. The Third-Party Defendants' Request for Fees

         The Third-Party Defendants have moved that they be awarded the fees that they incurred in defending the third-party complaint under both G.L.c. 231, § 6F and Mass.R.Civ.P. 11(a). The court denies their motion.

         The plaintiffs' third-party complaint was filed on October 14, 2014 and asserted a single-count for declaratory relief. In effect, it asked the court to declare that if Astra Tech was awarded damages in excess of the plaintiffs' interest in the Escrow Fund, the court declare that the Settling Shareholders are liable to the plaintiffs' for their aliquot share of those excess damages under the Contribution Agreement. The Settling Shareholders filed a motion to ...


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