I’ve previously criticized the unrealistic notions judges have of the expense of litigation. (For example: Budget Rent A Car (7th Cir. 2005).) As I said, “[T]he mistake of thinking that legal practice is so frictionless is what encourages so many judges to deny motions to dismiss and deny motions for summary judgment and fail to restrain discovery.” The Spalding Labs v. ARBICO case, No. CV 06-1157 ODW (SHx), 2008 WL 2227501 (C.D. Cal., May 29, 2008) (via Tushnet) provides another example.

Spalding sued its competitor for false advertising, but by the time of trial had its theory of the case completely obliterated; nevertheless, it proceeded with a ten-day federal trial before the judge granted judgment as a matter of law. (We’ll assume arguendo that the court was correct that Spalding brought the suit in good faith, though we still have to wonder why it wasted everyone’s time with the trial, rather than issuing judgment if its rulings were that devastating. Of course, good faith is not supposed to be full protection under the Lanham Act, which makes fees available if the suit is groundless or brought in bad faith.)

ARBICO showed $220,000 for billing in that period–which is low for a ten-day trial in Los Angeles, though it of course does not include all the trial preparation ARBICO needed to do. (Too, ARBICO’s firm is Severson & Werson, which probably doesn’t have the billing rates that a Latham & Watkins does.)

But the judge didn’t even give ARBICO the full $220,000. It deducted $71,684 from the fees because it found it problematic that two attorneys regularly billed 13-19 hours a day and a paralegal billed nearly 17 hours a day during trial. “Considering trial never exceeded six hours per day, the Court finds that billing, in some instances over 15 hours in one day, shows commendable industry but is nonetheless unreasonable”–though that short-staffed trial team also drafted a mid-trial motion for judgment as a matter of law (and because the judge denied the motion without prejudice and allowed the plaintiffs to reopen their case, the trial went on for an extra day). The judge also objected that three attorneys spent a total of 70 hours drafting the victorious Rule 50 motion. Tens of thousands more were deducted for questionable but defensible reasons; ARBICO got a fee award of $95,579.80 out of $819 thousand spent defending against a lawsuit the judge called “doomed” and where the plaintiff’s attorneys made “empty promises” to the court about its evidence.

Young associates, wouldn’t it be nice to tell a partner that billing a 15-hour day “shows commendable industry but is nonetheless unreasonable”? (I once billed a 23-hour day as a junior associate at a trial organizing thousands of exhibits coming in from innumerable attorneys who weren’t talking to each other, swallowing the expense of tickets to a concert I missed, and that felt like I was underbilling when I went home at 3 am the second night after I left my apartment.)

So, because Judge Otis Wright is entirely out of touch of what a modern trial litigation looks like, and because he failed to organize his calendar so that he could eliminate a meritless case before it had gone through ten days of trial (how on earth did Spalding Labs survive a summary judgment motion with “empty promises”?), ARBICO collects a fraction of its attorneys’ fees, and Spalding Labs is able to use a bogus Lanham Act claim to inflict additional expenses of attrition on a competitor, who is out over $700 thousand.

Plaintiffs have appealed, which will add further costs to ARBICO; ARBICO has another couple of weeks to decide whether to appeal the fees determination.

Filed under: competition through litigation, judges, loser pays