Strojnik v. Driftwood Hospitality Management LLC ( 2021 )

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Peter Strojnik, No. CV-20-01532-PHX-DJH 10 Plaintiff, ORDER 11 v. 12 Driftwood Hospitality Management LLC, et al., 13 Defendants. 14 15 Pending before the Court in this consolidated action is Defendants Xenia Hotels and 16 Resorts, Inc.; XHR Phoenix Palms, LLC; and XHR Scottsdale Ranch, LLC’s (collectively 17 “Xenia”) Motion for Award of Attorneys’ Fees and Costs (Doc. 79). The Motion seeks a 18 total of $247,404.00 in attorney fees and $970.78 in costs. Pro se Plaintiff has not filed a 19 response directly to the Motion. Instead, Plaintiff filed a Renewed Motion for Leave to 20 Conduct Discovery (Doc. 82) on how Xenia came to this amount.1 For the following 21 reasons, the Court grants Xenia’s Motion in part. 22 I. Background 23 Previously, the Court dismissed Plaintiff’s claims against Xenia and declared 24 Plaintiff a vexatious litigant for his frivolous and harassing litigation tactics. 25 (Doc. 49 at 17). Because Plaintiff’s original Complaint alleged Xenia violated the 26 Securities Exchange Act of 1934, Xenia sought to impose a mandatory sanction against 27 Plaintiff for frivolous conduct under the Private Securities Litigation Reform Act 28 1 Plaintiff’s Motion was granted in part and denied in part. (Doc. 92). 1 (“PSLRA”) and Federal Rule of Civil Procedure 11(b). (Doc. 56 at 2). Because the 2 standard PSLRA sanction is attorney fees, the Court Ordered Plaintiff “to show cause why 3 the Court should not impose sanctions above an award of attorney fees and costs, which 4 the Court already finds Defendants are entitled to.” (Doc. 77 at 7). In response, Plaintiff 5 represents he “has unsuccessfully searched his memory to determine what actions on his 6 part would merit sanctions.” (Doc. 78 at 2). He also argues this Court and others in the 7 District of Arizona have breached the Code of Conduct for United States Judges. (Id.) 8 Xenia then filed its Motion for Attorney Fees, in response to which Plaintiff filed 9 an original Motion for Leave to Conduct Discovery (Doc. 80). This Motion was denied 10 for lacking a certification that Plaintiff had conferred with Xenia as required by Local Rule 11 of Civil Procedure 7.2(j). In his renewed Motion, Plaintiff represents that Xenia’s counsel 12 “declined to engage.” (Doc. 82 at 1). 13 Noting deficiencies in Xenia’s Motion, the Court ordered Xenia to supplement its 14 Motion for Attorney Fees for failing to comply with the Local Rules. Specifically, Xenia 15 did not provide a copy of a written fee agreement, nor did it explain how its requested fees 16 were reasonable. (Doc. 83 at 2) (citing LRCiv 54.2(c)(3), (d)(2)). Xenia supplemented its 17 Motion as ordered. (See Docs. 84; 90). Subsequently, the Court granted Plaintiff’s 18 Renewed Motion for Leave to Conduct Discovery in part and ordered Xenia to supplement 19 its Motion by providing a statement of the amount it has actually paid its attorneys, as 20 required by the Local Rules. (Doc. 92 at 2) (citing LRCiv 54.2(d)(4)(b)). Xenia then filed 21 a supplement representing that as of August 11, 2021, it had paid its attorneys $248,374.78. 22 (Doc. 93 at 2). This figure, Xenia represents, does not include the fees or costs Xenia has 23 incurred litigating Plaintiff’s appeal. (Id.) 24 The Court first addresses whether Plaintiff should be sanctioned under the PSLRA 25 for an amount that is greater than Xenia’s attorney fees. 26 II. Presumed Award of Attorney Fees 27 The PSLRA requires the Court to review the record and find whether any party has 28 violated Federal Rule of Civil Procedure 11(b). 15 U.S.C. § 78u-4(c)(1). The Court has 1 already done so and found “that Plaintiff has harassed Defendants and needlessly increased 2 the cost of litigation.” (Doc. 77 at 7). For substantial failures to comply with Rule 11(b), 3 the presumed award under the PSLRA is an award of “reasonable attorneys’ fees and other 4 expenses incurred in the action.” 15 U.S.C. § 78u-4(c)(3)(A). Plaintiff’s defense, that he 5 does not remember any violations of Rule 11(b), fails to rebut this presumption, and fails 6 to show why an award in excess of reasonable attorney fees should not be granted. 7 (Doc. 78 at 2). 8 Rule 11(b) requires that sanctions be limited to only that which deters a party from 9 repeating the sanctionable conduct. The Court, in crafting its Order that declared Plaintiff 10 a vexatious litigant, was also tasked with crafting narrowly tailored order so as to prevent 11 Plaintiff’s vexatious behavior. (Doc. 49 at 18). It may be debated whether its efforts were 12 successful. Xenia notes that after the Court’s previous Order awarding Defendant New 13 Crescent Investments, LLC (“New Crescent”) attorney fees, Plaintiff filed suit in Maricopa 14 County Court arguing that New Crescent “abused process” by removing the action to 15 federal court and obtaining an Order declaring Plaintiff a vexatious litigant. (Doc. 79-3) 16 (containing a copy of the order granting New Crescent’s motion to dismiss in Strojnik v. 17 Leavitt, CV 2020-06297 (May 11, 2021)). That action was dismissed, and the court found 18 that New Crescent was entitled to another award of attorney fees because the complaint 19 “was brought without substantial justification . . . .” (Id. at 5). 20 As will be discussed below, Xenia’s requested award is significantly higher than 21 other awards granted against Mr. Strojnik, and the Court will consider Plaintiff’s history 22 as a vexatious litigant and the surrounding circumstances of Xenia’s Motion to determine 23 what constitutes a reasonable award of attorney fees. However, because the requested fees 24 are so great, the Court sees no reason to impose additional sanctions beyond an award of 25 attorney fees and costs under Rule 11(b). 26 III. Reasonable Attorney Fees 27 Xenia seeks $247,404.00 in attorney fees. This amount, if granted, would be 28 divided between two firms that represented Xenia in this matter, “$110,068.00 to go to 1 Buchalter, a Professional Corporation [‘Buchalter’], and $137,336.00 to go to Latham & 2 Watkins, LLP [‘Latham’].” (Doc. 79 at 4). 3 To receive an award of fees, a party must show that it is eligible and entitled to an 4 award, and that the requested award is reasonable. LRCiv 54.2(c). The Court has already 5 found Xenia is eligible and entitled to an award of fees. (Doc. 77 at 6). Therefore, the 6 question is whether Xenia’s request of $247,404.00 in attorney fees is reasonable. 7 To determine whether an award is reasonable, the Court then uses the lodestar 8 method by multiplying “the number of hours the prevailing party reasonably expended on 9 the litigation by a reasonable hourly rate.” Morales v. City of San Rafael, 96 F.3d 359, 363 10 (9th Cir. 1996). Reasonableness is assessed with the following factors: 11 (1) the time and labor required, (2) the novelty and difficulty of the questions involved, (3) the skill requisite to perform the legal service properly, (4) the 12 preclusion of other employment by the attorney due to acceptance of the case, 13 (5) the customary fee, (6) whether the fee is fixed or contingent, (7) time limitations imposed by the client or the circumstances, (8) the amount 14 involved and the results obtained, (9) the experience, reputation, and ability 15 of the attorneys, (10) the ‘undesirability’ of the case, (11) the nature and length of the professional relationship with the client, and (12) awards in 16 similar cases. 17 Kerr v. Screen Extras Guild, Inc., 526 F.2d 67, 70 (9th Cir. 1975), cert. denied, 425 U.S. 18 951 (1976); see also LRCiv 54.2(c)(3). The Court proceeds to evaluate each of the Kerr 19 factors in turn. 20 a. Evaluation of the Kerr Factors 21 1. Time and Labor Required 22 Both Buchalter and Latham attach copies of itemized statements of legal services 23 rendered. (Docs. 79-1; 79-2). Buchalter represents in its time sheets that its firm spent a 24 total of 279 hours on this matter. (Doc. 79-1 at 33). Although Latham nowhere states how 25 much time it spent on this matter, the Court calculates its firm spent a total of 149.7 hours 26 on this matter. Xenia represents its counsel “left no stone unturned in insuring the right 27 outcome in this case.” (Doc. 84 at 4). In total, Xenia seeks attorney fees for 428.7 hours 28 of labor. 1 Surveying the record, Xenia’s involvement in this matter consisted of removing this 2 case to this Court, filing a Motion to Dismiss, filing a Motion to Declare Plaintiff a 3 Vexatious Litigant, filing a Motion for Sanctions under the PSLRA, as well as a Response 4 to Plaintiff’s Motion for New Trial, and the reply briefs to Xenia’s own motions. This 5 course of action is substantially similar to the other Defendants, who represent that they 6 spent substantially less time on this matter. Defendants Driftwood Hospitality 7 Management, LLC; United Hotels and Resorts, LLC; and CGD Tempe Pl, represent that 8 their counsel spent, by the Court’s calculation, 85.1 hours on this matter. (Doc. 52-1 at 7– 9 13). Likewise, New Crescent represents that its counsel spent 139.1 hours on this matter. 10 (Doc. 54-1 at 21). 11 The Court recognizes Xenia’s position is somewhat different because, unlike with 12 the other Defendants, Plaintiff alleged that Xenia had committed securities fraud. (See 13 Doc. 49 at 5). 14 2. Novelty and Difficulty of Questions 15 As was previously noted, “[w]hile Plaintiff’s frivolous filings are common, motions 16 to declare him a vexatious litigant are not. Accordingly, the Court finds this was a 17 relatively difficult matter to pursue.” (Doc. 77 at 4). 18 3. Requisite Skill 19 The Court previously found “ADA litigation is a niche practice area that requires 20 specialized knowledge, especially when dealing with serial litigants like Plaintiff.” (Doc. 21 77 at 4). Given the benefit of hindsight, the Court recognizes that securities law played a 22 minor role in this matter. However, this too is a specialized area of the law. 23 4. Preclusion of Other Employment 24 Xenia’s counsel represent they were not precluded from other employment. 25 (Doc. 84 at 5). 26 5. Customary Fee 27 Counsel for Buchalter represents that his billing rate is $460 per hour. (Doc. 79-1 28 at 4). Counsel for Lathan represents that his customary rate was $1,295 per hour in 2020 1 and $1,360 in 2021. (Doc. 79-2 at 3). Here, the Court notes that Buchalter is based in San 2 Diego, California, and Latham is based in Washington, D.C., and nowhere does Xenia 3 attempt to show what the customary fee for an attorney’s services in Phoenix, Arizona. 4 Previously, the Court found that the rates charged by other Defendants’ Arizona 5 counsel, of $430 per hour and $325 per hour, were reasonable amounts. (Doc. 77 at 4). 6 6. Fixed or Contingent Fee 7 Xenia’s counsel operated on a fixed fee agreement. (Doc. 90). The Court notes that 8 the time sheets provided by Latham indicate that Xenia was sent a monthly invoice for 9 legal fees. (Doc. 79-2 at 4). 10 7. Time Constraints 11 Xenia’s counsel represents that its client did not impose time constraints. 12 (Doc. 84 at 6). 13 8. Involvement and Results Obtained 14 Xenia’s involvement, as discussed earlier, is substantially similar to the other 15 Defendants’ involvement. The results obtained were an Order declaring Plaintiff a 16 Vexatious Litigant and dismissal of the claims against Xenia. (Doc. 49). This is a 17 successful result, especially considering Plaintiff’s history of harassing and frivolous 18 litigation. 19 9. Experience, Reputation, and Ability of Attorneys 20 Xenia’s counsel represents they are well-regarded in their community and experts 21 in their respective fields. (Doc. 84 at 7). Plaintiff has made no showing to rebut this 22 representation, and so the Court accepts Xenia’s representations. 23 10. Undesirability of Case 24 The Court previously noted that most parties settle with Plaintiff and that those “who 25 choose to bear the costs of defeating Mr. Strojnik’s frivolous claims in court are too few 26 and far between.” (Doc. 49 at 19). To maintain this action for so long is certainly 27 undesirable. 28 / / / 1 11. Nature of Relationship with Client 2 Xenia represents it has “an established relationship with Buchalter,” but it says 3 nothing about its relationship with Latham. (Doc. 84 at 8). The Court infers from a 2015 4 engagement letter with Latham that Xenia has had a relationship with that firm for nearly 5 seven years. (Doc. 90-1 at 5). 6 12. Awards in Similar Cases 7 The Court need only go back to its prior Order granting attorney fees for other 8 Defendants in the amount of $28,583.80 and $40,366.50. (Doc. 77 at 7). Other courts have 9 found awards of $31,473.50 and $21,995 to be reasonable. See Advocs. for Individuals 10 with Disabilities, LLC v. MidFirst Bank, 2018 WL 3545291, at *20 (D. Ariz. July 24, 11 2018); Strojnik v. 1017 Coronado, Inc., 2021 WL 120899, at *4 (S.D. Cal. Jan. 13, 2021). 12 b. Lodestar Calculation 13 The Court will now conduct its lodestar calculation, starting with a determination 14 of what a reasonable time expended is. Courts should exclude hours that were not 15 reasonably expended. Hensley v. Eckerhart, 461 U.S. 424, 434 (1983). Counsel seeking 16 an award of fees should exercise “billing judgment” even though they do not expect the 17 client to pay the fees. Id. The 279 hours that Buchalter claims is a significantly greater 18 amount of time than other firms, conducting comparable work, have claimed. Therefore, 19 the Court finds that a reasonable amount of time for Buchalter to have spent on this matter 20 is 150 hours. As discussed above, this amount of time aligns with the upper end of what 21 other counsel spent in this matter conducting substantially similar work. By the same 22 measure, the Court finds the 149.7 hours Latham spent on the matter is a reasonable amount 23 of time. 24 Next the Court will determine what a reasonable rate is. In Kerr, the Ninth Circuit 25 adopted the Fifth Circuit’s factors to determine reasonableness. 526 F.2d at 69 (citing 26 Johnson v. Georgia Highway Exp., Inc., 488 F.2d 714, 718 (5th Cir. 1974)). These factors 27 included a consideration of customary fees “for similar work in the community,” not, as 28 Xenia suggests, customary fees for the attorney in question. Johnson, 488 F.2d at 718 1 || (emphasis added). Bearing this in mind, the Court finds the rates charged by Buchalter of || $460 per hour is reasonable and comparable to the amount charged by Arizona counsel. 3|| (See Doc. 77 at 4). The rate charged by Latham, far exceeds what is reasonably expected 4|| in Arizona. Therefore, the Court sets a reasonable rate for Latham at $600 per hour. 5 By the lodestar calculation, Buchalter’s reasonable fees amount to $69,000.00, and 6|| Latham’s fees amount to $89,820.00. This sums to $158,820.00, which is a figure that the 7 || Court sees no reason to modify further. IV. Conclusion 9 The Court will grant Xenia an award in the amount of $158,820.00 in attorney fees. The Court will also grant Xenia an award of costs in the amount of $970.78. 11 Accordingly, 12 IT IS HEREBY ORDERED that Defendant’s Motion for Award of Attorneys’ 13 |) Fees and Costs (Doc. 79) is granted in part. The Court awards Xenia $158,820.00 in 14|| attorney fees and $970.78 in costs, for which Plaintiff is liable. 15 Dated this 16th day of December, 2021. 16 17 □ fe □ 18 norable'Diang4. Huretewa 19 United States District Judge 20 21 22 23 24 25 26 27 28 -8-