The opinion of the court was delivered by: Kugler , United States District Judge:
NOT FOR PUBLICATION (Doc. Nos. 275, 299)
This case is about whether a party that wins a pyrrhic victory in litigation is entitled to collect the reasonable attorneys' fees and costs for their largely unsuccessful efforts. The matter comes before the Court upon the motion by Plaintiffs to modify the judgment entered on August 13, 2010 (Doc. No. 275), and the motion by Plaintiffs for attorneys' fees and expenses (Doc. No. 299). For the reasons expressed below, Plaintiffs' motion to modify the judgment is GRANTED. With respect to Plaintiffs' motion for attorneys' fees and expenses, the Court holds that although Plaintiffs are technically entitled to reasonable attorneys' fees for their New Jersey Practices Act ("Practices Act") claims as a matter of law, due to the overall outcome of the litigation, Plaintiffs' award is reduced by one hundred percent.
The events which gave rise to this litigation are outlined in the Court's opinion in Warren Distrib. Co. v. InBev USA LLC, No. 07-1053, 2010 WL 2326168, at *1-3 (D.N.J. June 7, 2010). In that case, the Court dismissed a number of Plaintiffs' claims, but allowed the following claims to proceed: (1) Plaintiffs' claims against Defendants for the alleged violations of the Practices Act; (2) Defendants' state law counterclaims for unjust enrichment and tortious interference for Plaintiffs' post-termination beer sales, and (3) Defendants' tortious interference claim against Plaintiffs for post-termination tap switching.
Before trial, Defendants offered to pay each Plaintiff a fair market value of 3.3 times the gross profits of the European brands. (Am. Compl. Exs. D-G). After Plaintiffs refused to accept that offer, Defendants reduced the offer to 3.25 times the fair market value of the European brands. (Am. Compl. Exs. J-M).
The thirteen-day jury trial began on July 19, 2010 and concluded on August 4, 2010. Each party presented evidence to prove the fair market value of the distribution rights. Plaintiffs used the cash flow method for valuing the distribution rights, and Defendants used the market multiples approach. Based upon the cash flow method, Plaintiffs' attorney, Mr. William Hangley, told the jury that the fair market value of the distribution rights was approximately $66 million dollars. Specifically, Mr. Hangley stated: "And I want you to understand these are people who have already been paid, my clients, the 25 million dollars. . . . The evidence will show that they should have been paid 66 million dollars. . . . The under payments total some 41 million dollars. That's what we will show you to be the fair market value of these . . . rights." (Trial Tr., July 19, 2010, at 27). During trial, the jury expressly rejected the cash flow method offered by Plaintiffs and validated the market multiples approach. *fn1
On August 13, 2010, the Court entered judgment. (Doc. No. 270). With respect to Plaintiffs' claim that Defendants failed to pay them the fair market value of the distribution rights pursuant to the Practices Act, the jury made the following determinations. First, the jury found in favor of Plaintiff Warren Distributing Company ("Warren") and against Defendants in the amount of $96,409.00. Second, the jury found in favor of Plaintiff Peerless Beverage Company ("Peerless") and against Defendants in the amount of $215,571.40. Third, the jury found in favor of Plaintiff Shore Point Distributing Company ("Shore Point") and against Defendants in the amount of $78,027.10.
With respect to Defendants' common law counterclaims, the jury made the following determinations. First, regarding Defendants' counterclaim of unjust enrichment for alleged post-termination beer sales, the jury rendered a verdict: (1) in favor of Defendants and against Warren for damages in the amount of $217,591.00; (2) in favor of Defendants and against Peerless for damages in the amount of $278,850.00; and (3) in favor of Defendants and against Shore Point for damages in the amount of $141,704.00. Second, with respect to Defendants' counterclaim for tortious interference for post-termination beer sales, the jury found for Plaintiffs. Third, regarding Defendants' counterclaim of tortious interference for alleged post-termination "tap switching," the jury rendered a verdict in favor of Peerless and against Defendant Anheuser Busch. The sum of the judgments in favor of Plaintiffs was $390,007.50, and the sum of the judgments in favor of Defendants was $638.145.00. Thus, at the conclusion of the litigation, Plaintiffs owed Defendants a total of $248,186.50.
On the last line of the judgment entered by the Court appear the words "NO COSTS."
The judgment does not specify whether this determination applies to Defendants' counterclaims for unjust enrichment and tortious interference, or Plaintiffs' Practices Act claims. Plaintiffs now ask the Court to modify the judgment to make clear that the Court's determination that neither party should receive costs is inapplicable to Plaintiffs' Practices Act claims. Plaintiffs also seek reasonable counsel fees and other litigation expenses.
Pursuant to Federal Rule of Civil Procedure 59(e) a party may petition the court to alter or amend a judgment no later than twenty-eight days after the court enters judgment. Generally, there are four basic grounds upon which a Rule 59(e) motion may be granted: (1) to correct manifest errors of law or fact upon which the judgment was based; (2) to present newly-discovered or previously unavailable evidence; (3) to prevent manifest injustice; and (4) an intervening change in prevailing law. See Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985) (purpose of motion for reconsideration is to correct manifest errors of law or fact or to present newly discovered evidence).
A. The Malt Alcoholic Beverage Practices Act
One purpose of the Practices Act is to "regulate the business relationship between brewers and wholesalers of malt alcoholic beverages . . . and protect beer wholesalers from unreasonable demands and requirements by brewers." N.J. Stat. Ann. § 33:1-93.13(c). The Practices Act prohibits a brewer from "terminat[ing] . . . a contract . . . with a wholesaler . . . except where the brewer establishes that it has acted for good cause and in good faith." N.J. Stat. Ann. § 33:1-93.15(c)(1).
It shall not be a violation . . . for a successor brewer to . .. terminate, in whole or in part, its contract, agreement or relationship with a wholesaler, or the contract, agreement or relationship with a wholesaler of the brewer it succeeded, for the purpose of transferring the distribution rights in the wholesaler's territory for the malt alcoholic beverage brands to which the successor brewer succeeded . . . provided that the successor brewer or the second wholesaler or wholesalers first pays to the first wholesaler the fair market value of the first wholesaler's business with respect to the terminated brand or brands[.]
N.J. Stat. Ann. § 33:1-93.15(d)(1) (emphasis added).
The Act creates a cause of action for any brewer or
wholesaler to sue "a brewer for violation of [the] act, or . . . a
successor brewer in connection with a termination pursuant to [section
33:1-93.15(d)(1)]." N.J. Stat. Ann. § 33:1-93.18(a). The Act provides
that "[t]he wholesaler or brewer who sues alleging a violation of [the
Practices Act] shall, if successful, also be entitled to the costs of
the action, including, but not limited to, reasonable attorney's
fees." N.J. Stat. Ann. § 33:1-93.18(a) (emphasis added).
Plaintiffs argue that the Court's determination that the parties are entitled to "NO COSTS" is clearly erroneous because the Act provides "for a mandatory award of . . . costs . . . to a successful wholesaler." (Pl.'s Mot., at ¶ 2). In response, Defendants argue that Plaintiffs are not entitled to costs because: (1) they failed to allege any of the four grounds upon which this Court may grant a Rule 59(e) motion; and (2) they failed to prove that they are the "prevailing party" under Federal Rule of Civil Procedure 54(d)(1). Furthermore, Defendants argue that Plaintiffs are not the prevailing party in this litigation because the sum of the damages awarded to Defendants for their state law counterclaims is larger than the sum of the damages awarded to Plaintiffs for their Practices Act claims. Therefore, Defendants argue, because Plaintiffs suffered a net loss in the litigation, Defendants are the "prevailing party."
1. Costs Under Rule 54(d)(1)
The award of costs in federal courts is governed by Rule 54(d)(1). See Abrams v. Lightolier Inc., 50 F.3d 1204, 1221 (3d Cir. 1995) (providing that "[u]nder the rules of Erie and Hanna v. Plummer, Rule 54(d)(1) will . . . trump a state cost shifting provision with which it conflicts."); Chaparral Res., Inc. v. Monsanto, Co., 849 F.2d 1286, 1291 (10th Cir. 1988) ("In a diversity case, federal law controls in regard to the assessment of costs."); In re Merrill Lynch Relocation Mgmt., Inc., 812 F.2d 1116, 1120 n.2 (9th Cir. 1987) ("As a general proposition, the award of costs is governed by federal law under Rule 54(d)."); see also 10 Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure § 2669, at 251 (3d ed. 1998) ("The award of costs is governed by federal law."). This rule applies to all costs specifically enumerated in 28 U.S.C. § 1920. Abrams, 50 F.3d at 1223. Because the Third Circuit has held that Rule 54(d)(1) only governs costs listed in 28 U.S.C. § 1920, the Court will first analyze whether Plaintiffs are entitled to the costs listed under 28 U.S.C. § 1920, and then whether Plaintiffs are entitled to costs that are not listed in 28 U.S.C. § 1920.
Rule 54(d)(1) provides that "[u]nless a federal statute, [the Federal Rules of Civil Procedure], or a court order provides otherwise, costs--other than attorney's fees--should be allowed to the prevailing party." Fed. R. Civ. P. 54(d)(1) (emphasis added). *fn2 Thus, under Rule 54(d), the court has the discretion to tax costs to the prevailing party as it deems appropriate.
Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 441 (1987) (finding that "[s]section 1920 enumerates expenses that a federal court may tax as a cost under the discretionary authority found in Rule 54(d)"); Mathews v. Crosby, 480 F.3d 1265, 1276 (11th Cir. 2007) ("[Rule 54(d)(1)] provides that '[e]xcept when express provision therefore is made either in a statute of the United States or in these rules, costs other than attorneys' fees shall be allowed as of course to the prevailing party unless the court otherwise directs . . . .'"); Thompson v. Wal-Mart Stores, Inc., 472 F.3d 515, 517 (8th Cir. 2006) ("Rule 54(d)(1) provides 'costs other than attorneys' fees shall be allowed as of course to the prevailing party unless the court otherwise directs.'"). There is a strong presumption, however, that the court should award costs to the prevailing party. In re Paoli R.R. Yard PCB Litig., 221 F.3d 449, 462 (3d Cir. 2000). If the Court determines that the prevailing party is not entitled to costs, it should provide a basis for its decision. Id. at 468 ("Only if . . . the district court can articulate reasons within the bounds of its equitable power, should costs be reduced or denied to the prevailing party."). The rationale for this rule is that the "denial of costs to the prevailing party . . . is in the nature of a penalty . . . ." ADM Corp. v. Speedmaster Packaging Corp., 525 F.2d 662, 665 (3d Cir. 1975) (quoting Chicago Sugar Co. v. Am. Sugar Ref. Co., 176 F.2d 1, 11 (7th Cir. 1949), cert. denied, 338 U.S. 948 (1950)).
The pivotal issue in a court's decision whether to award costs is the determination of who qualifies as the prevailing party. Generally, the "prevailing party" is the party who succeeds on "any significant issue in litigation which achieve[d] some of the benefit the parties sought in bringing the suit . . . ." Texas State Teachers Ass'n v. Garland Indep. Sch. Dist., 489 U.S. 782, 791 (1989) (quoting Nadeau v. Helgemoe, 581 F.2d 275, 278-79 (1st Cir. 1978), overruled on other grounds by Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health and Human Res., 532 U.S. 598 (2001) (defining "prevailing party" in the civil rights context)). Thus, to be considered the "prevailing party," at minimum, a party must "be able to point to a resolution of the dispute which changes the legal relationship between itself and the [opposing party]." Id. at 792 (defining "prevailing party" in the context of civil rights litigation under 42 U.S.C. § 1988). Importantly, however, a party need not succeed on every claim to qualify as the prevailing party. See Fireman's Fund Ins. Co. v. Tropical Shipping & Const. Co., 254 F.3d 987, 1012-13 (11th Cir. 2001) (acknowledging precedent establishing that a "party need not prevail on all issues to justify the full award of costs") (quoting Head v. Medford, 62 F.3d 351, 354 (11th Cir. 1995)).
When multiple parties file claims in one lawsuit (i.e. counterclaims, cross-claims, etc.), the "prevailing party" is less clear. Generally, the court may identify the prevailing party under Rule 54(d) by comparing the amount of damages awarded to the complainant to the amount awarded to the counterclaimant. See Hillside Enter. v. Carlisle Corp., 69 F.3d 1410, 1416 (8th Cir. 1995) (finding that district court did not abuse its discretion by awarding costs to successful plaintiff who won judgment larger than the judgment awarded to counterclaimant); see also 10 Wright, Miller & Kane, Federal Practice and Procedure § 2667, at 225 (3d ed. 1998) ("a successful counterclaimant generally will be considered the prevailing party when plaintiff fails to recover or is awarded less than defendant receives on the counterclaim."); see also OptiStreams, Inc. v. Gahan, No. 05-0117, 2006 WL 829113, at *10 n.3 (E.D. Cal. 2006) (noting that "the success of a counterclaim is considered along with the success of a complaint in determining which is the prevailing party."); Imgarten v. Bellboy Corp., 383 F. Supp. 2d 825, 842 (D. Md. 2005) (awarding costs to claimant because jury verdict in favor of counterclaimant was "dwarfed" by award in favor of claimant); In re Omeprazole Patent Litig., No. M-21-81, 2004 WL 1782547, at *2 (S.D.N.Y. Aug. 09, 2004) ("[W]here a plaintiff's victory substantially outweighs the defendants' victory, the plaintiff is considered the prevailing party as that term is used in Rule 54 (d)(1).") (citing Hillside, 69 F.3d at 1416); cf. Goldman v. Burch, 780 F. Supp. 1441, 1445-46 (S.D.N.Y. 1992) (finding that defendant was entitled to counsel fees when "defendant . . . overwhelmingly succeeded under its counterclaims and to a substantially greater extent than did plaintiffs on their complaint.").
This Court finds that Defendants are the prevailing party in this litigation under Rule 54(d)(1). Defendants "achieve[d] some of the benefit [they] sought in bringing the suit," and the outcome of the litigation changed the legal relationship between the parties. Garland, 489 U.S. at 791, 792. Defendants sought to recover for Plaintiffs' alleged violation of state law prohibitions against unjust enrichment and tortious interference. The jury verdict awarded Defendants $638,145.00 in damages. Thus, it is clear that Defendants achieved the benefit of everything they sought in bringing their counterclaims. Additionally, the outcome of the litigation changes the legal relationship between the parties because the jury found that Plaintiffs were unjustly enriched by their wrongful acts and Plaintiffs tortiously interfered with Defendants' contracts with other distributors.
Moreover, Defendants are the prevailing party because the total amount of damages they received for their state law counterclaims far exceeds the amount of damages Plaintiffs received for their statutory claims. As previously mentioned, when an action involves multiple parties and multiple claims, a court may award costs to the party whose damages award exceeds the award to the opposing party. Here, the jury determined that Peerless, Warren, and Shore Point were entitled to the following amounts of damages respectively: $215,522.40; $96,409.00; and $78,027.10. (Pl.'s Br. Ex. A). Thus, the total amount the jury awarded to Plaintiffs equals $390,007.50. The jury determined that Peerless, Warren, and Shore Point were liable for the following amounts of damages for Defendants' counterclaims respectively: $278,850.00;$217,591.00; and $141,704.00. Thus, the jury awarded Defendants a total of $638,145.00 in damages. Defendants recovered $248,186.50 more in damages than Plaintiffs. Accordingly, Plaintiffs can hardly consider themselves the "prevailing party" in this litigation.
In sum, because Defendants are the prevailing party in this action under Rule 54(d)(1), and there is a strong presumption that the prevailing party is entitled to costs, this Court finds that Defendants are entitled to the costs listed in Section 1920.
2. Costs Under the Practices Act
As previously mentioned, although a plaintiff who is not the "prevailing party" cannot recover costs under Rule 54(d)(1), this limitation applies only to costs enumerated in 28 U.S.C. § 1920. *fn3 Recoverability of costs that are not enumerated in Section 1920, is determined by state law. See Abrams, 50 F.3d at 1223 ("Rule 54(d)(1) of the Federal Rules of Civil Procedure requires the clerk to award certain litigation expenses to the prevailing party as a matter of course. . . . There is, however, no federal statute or rule providing the rule of decision when a federal court is asked to award litigation expenses other than those enumerated as section 1920 costs.").
Plaintiffs seek costs under the Practices Act. *fn4
Under N.J. Stat. Ann. § 22A:2-8, "a party
to whom costs [is] awarded by law or otherwise in any action,
motion or other proceeding," may collect the following costs:
The legal fees of witnesses, including mileage for each attendance, masters, commissioners and other officers;
The costs of taking depositions when taxable, by order of the court;
The legal fees for publication where publication is required;
The legal fees paid for a certified copy of a deposition or other paper or document, or map, recorded or filed in any public office, necessarily used or obtained for use in the trial of an issue of fact or the argument of an issue of law, or upon appeal, or otherwise; ...