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Illinois National Insurance v. Wyndham Worldwide Operations

June 7, 2011


The opinion of the court was delivered by: Hon. Garrett E. Brown, Jr.



BROWN, Chief Judge

This matter comes before the Court for a determination of reasonable attorneys' fees and costs. By Order of March 21, 2011, this Court granted Wyndham Worldwide Operations, Inc.'s ("Wyndham") motion for attorneys' fees pursuant to New Jersey Rule 4:42-9(a)(6), and the Court ordered supplemental documentation regarding reasonable hourly rates. Wyndham and Plaintiff Illinois National Insurance Co. ("Illinois National") timely responded to the Court's order. Wyndham submits that defense counsel from the firm Coughlin Duffy billed $117,613.88 in fees and costs for 637.90 hours performed, and that defense counsel from the firm Lowenstein Sandler PC billed another $608,078.31 in fees and costs for 1,956.70 hours performed. Of these fees and costs, Wyndham seeks reimbursement for $725,151.69. (Lictenstein Decl. ¶¶ 47--48, 66.) Illinois National objects to the reasonableness of the rates charged by the Lowenstein Sandler attorneys,*fn1 and makes specific objections to the reasonableness of the hours billed by defense counsel.

The Court reviews Wyndham's fees request within the framework of the "lodestar" method, by which the Court assesses reasonable fees by multiplying the number of hours reasonably expended by counsel by a reasonable hourly rate. See, e.g., Washington v. Phila. County Court of Common Pleas, 89 F.3d 1031, 1035 (3d Cir. 1996). "[F]ee requests [must] be subjected to a thorough and searching analysis" to ensure that time expended by counsel was reasonable and not duplicative or excessive. Evans v. Port Auth. of N.Y. & N.J., 273 F.3d 346, 362 (3d Cir. 2001). The court may not base its fees determination on a "generalized sense of what is usual and proper but 'must rely upon the record.'" Id. at 361 (quoting Smith v. City of Phila. Housing Auth., 107 F.3d 223, 225 (3d Cir. 1997)). The party seeking attorneys' fees bears the burden to prove the reasonableness of the fee request. Rode v. Dellarsciprete, 892 F.2d 1177, 1183 (3d Cir. 1990).

Reasonableness of Hourly Rates

"The general rule is that a reasonable hourly rate is calculated according to the prevailing market rates in the community." Washington, 89 F.3d at 1035 (3d Cir. 1996) (citing Blum v. Stenson, 465 U.S. 886, 895--96 & n.11 (1984)). Defendants, as the parties seeking attorneys' fees, "bear[] the burden of producing sufficient evidence of what constitutes a reasonable market rate for the essential character and complexity of the legal services rendered in order to make out a prima facie case." Smith, 107 F.3d at 225. "The fee applicant's burden may be satisfied by the submission of affidavits of non-party attorneys with personal knowledge of the hourly rates customarily charged in the relevant community." Apple Corps Ltd. v. Int'l Collectors Soc'y, 25 F. Supp. 2d 480, 492 (D.N.J. 1998) (citing Washington, 89 F.3d at 1036). Once this burden has been met, "[t]he burden then shifts to the party opposing the fee application to produce affidavits or other submissions which create an issue as to the reasonableness of the requested hourly rate." Apple Corps, 25 F. Supp. at 492 (citing Washington, 89 F.3d at 1036). In the absence of contrary evidence, the fee applicant's requested rate will be applied. Smith, 107 F.3d at 225 (citations omitted).

Wyndham's supplemental submissions included the declarations of New Jersey attorneys Kevin J. Bruno, Jeffrey M. Pollock, and Steven J. Pudell, who have experience representing policyholders in complex insurance coverage disputes. Each of these attorneys has reviewed the rates charged by the Lowenstein attorneys and determined them to be reasonable according to the prevailing market rates in the New Jersey legal community for attorneys of similar experience and skill. The Court is satisfied from these declarations that Wyndham has satisfied the burden of establishing a prima facie case for the hourly rates portion of its fees request. Illinois National does not present any additional evidence to contest these rates, but contends that it was unreasonable for Wyndham to replace Coughlin Duffy with Lowenstein, whose attorneys charged approximately twice the hourly rate of the Coughlin Duffy attorneys. In response to Illinois National's argument, Wyndham submits the declaration of Marcus Banks, the Group Vice President for Wyndham's legal department, who states that Wyndham decided to substitute Lowenstein for Coughlin Duffy because of Lowenstein's relative expertise in litigating against insurers to obtain coverage. (Banks Decl. ¶¶ 5--6 (explaining that Coughlin Duffy "primarily focused on representing insurance carriers who deny coverage to their insureds").) Wyndham also submits the declaration of Sherilyn Pastor, a partner at the firm McCarter & English, who states from her experience with insurance disputes that the difference in rates charged by Coughlin Duffy and Lowenstein can be explained by the different business models of insurance defense law firms (Coughlin Duffy) and law firms who represent the interests of corporate policyholders (Lowenstein). (Pastor Decl. ¶¶ 9--10.) Ms. Pastor also represents that McCarter & English's insurance practice group (and she in particular) charges higher hourly rates (up to $640) than Lowenstein Sandler's highest rate billed in this case. (See id. ¶ 6.)

This Court finds nothing inherently unreasonable about Wyndham's decision to select different legal counsel that specialized in seeking insurance coverage on behalf of insureds. The fact of the matter is that the Lowenstein attorneys provided the legal strategy that prevailed before this Court. The Court further notes that Illinois National has not submitted any evidence that indicates that the rates charged by Lowenstein were unreasonably high for a law firm specializing in complex insurance litigation in the New Jersey legal community. The hourly rates charged by Lowenstein partners ranged from $450--$540, associates ranged from $210--$360, and paralegal and litigation support staff ranged from $135--$162. According to counsel, these rates reflect discounts ranging from 7.62%--9.6% less than their normal billing rates. (Porrino Decl. ¶ 4.) The Court has reviewed the credentials of these individuals and finds the rates billed to be reasonably commensurate to their training and experience. As noted above, the senior partners in the insurance practice group at McCarter & English, a competitor firm, charge higher rates than those billed by Lowenstein Sandler in this case. (See Pastor Decl. ¶ 6.) Courts in this District have found similar rates to be reasonable. See, e.g., Titan Stone, Tile & Masonry, Inc. v. Hunt Constr. Group, Inc., Civ. No. 05-3362, 2008 WL 687263, at *7 (D.N.J. Mar. 10, 2008) (finding reasonable partner rates ranging from $425--$510, associate rates ranging from $280--$370, and paralegal rates ranging from $90--$220). In light of Wyndham's evidence, and in the absence of contrary evidence from Illinois National, this Court concludes that the hourly rates charged by the Lowenstein attorneys are reasonable.

Reasonableness of Hours Billed

Having determined the reasonableness of the attorneys' rates, this Court must now determine whether the number of hours billed by defense counsel are reasonable. The party requesting fees bears the burden to provide evidence supporting the time claimed. See, e.g., Public Interest Research Group of N.J., Inc. v. Windall, 51 F.3d 1179, 1188 (3d Cir.1995); Apple Corps, 25 F. Supp. 2d at 485. "Hours are not reasonably expended if they are excessive, redundant, or otherwise unnecessary." Rode, 892 F.2d at 1183.

Illinois National submits the following objections to the hours billed by Wyndham's counsel: (1) Lowenstein's use of block billing; (2) time relating to counsel's representation of third-parties in responding to Illinois National's subpoenas; (3) time relating to Wyndham's contingent claim against Jet Aviation; (4) time relating to counsel's communications with defense counsel in underlying claims; (5) time relating to interviews of two witnesses; (6) time relating to preparation and performance of two depositions; (7) excessive time relating to Wyndham's motions for summary judgment and dismissal; (8) time relating to discovery motions; (9) time relating to Wyndham's internal document handling; (10) time relating to Wyndham's review of documents for production; (11) time billed by Lowenstein that was duplicative of work performed by Coughlin Duffy; (12) time relating to communications with Berkley and/or Kern Wooley LLP; (13) costs for which Wyndham failed to provide receipts; and (14) redacted billing entries that are vague and/or missing descriptions. The Court considers each objection in turn.

1. Block Billing

Illinois National initially objects that the Lowenstein attorneys utilized a "block-billing" methodology, rather than a task-based time-tracking system. Considering that this fees award compensates all aspects of this litigation, and not just a narrow subset of legal services performed as is the case with some sanctions-based fee awards, this Court sees nothing fundamentally wrong with Lowenstein's use of block-billing in this case. On the whole, this Court is satisfied that Lowenstein's billing records are sufficiently detailed to enable meaningful review of the fees request. See Rode, 892 F.2d at 1190 ("A fee petition is required to be specific enough to allow the district court 'to determine if the hours claimed are unreasonable for the work performed.'") (quoting Pawlak v. Greenawalt, 713 F.2d 972, 979 (3d Cir. 1983)). Where a particular block entry prevents meaningful review of that line item, the Court will reduce that entry accordingly. See, e.g., United States v. NCH Corp., Civil Nos. 98-5268, 05-881, 2010 WL 3703756, at *4 (D.N.J. Sept. 10, 2010) ("While a substantial number of vague entries may be a reason to exclude hours, it is not a reason to exclude the entire entry. This Court believes the more appropriate approach would be to look at the entire block, comparing the listed activities and the time spent, and determining whether the hours reasonably correlate to all of the activities performed.").

The Court notes that Wyndham generally contests Illinois National's estimates of the allocation of services among block entries. However, Wyndham does not provide specific billing information for discrete tasks to rebut Illinois National's estimates. Because Wyndham bears the burden of establishing the reasonableness of its fees request, this oversight will redound to Wyndham's detriment. See, e.g., Estate of Schultz v. Potter, Civ. No. 05-1169, 2010 WL 883710, at *5 n.9 (W.D. Pa. Mar. 5, 2010) (recognizing that "[a] [party] block bills at his own peril"). ...

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