Edlong Corp. v. Nadathur , 2013 Ohio 1283 ( 2013 )

[Cite as Edlong Corp. v. Nadathur, 2013-Ohio-1283.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
THE EDLONG CORPORATION, : APPEAL NO. C-120369
TRIAL NO. A-0611031
Plaintiff-Appellee, :
vs. :
O P I N I O N.
SUDARSHAN NADATHUR, :
Defendant-Appellant. :
Civil Appeal From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Reversed and Cause Remanded
Date of Judgment Entry on Appeal: March 22, 2013
Locke Lord LLP and Terrence P. Canade, and Dinsmore & Shohl LLP and Nancy A.
Lawson, for Plaintiff-Appellee,
Denlinger, Rosenthal & Greenberg Co., L.P.A., Gary L. Greenberg, Emily J. Gelhaus and
Daniel G. Rosenthal, for Defendant-Appellant.
Please note: this case has been removed from the accelerated calendar.
OHIO FIRST DISTRICT COURT OF APPEALS
S YLVIA S IEVE H ENDON , Presiding Judge.
{¶1} Defendant-appellant Sudarshan Nadathur, a former employee of plaintiff-
appellee The Edlong Corporation, appeals from the judgment of the trial court awarding
him only half of his attorney fees following his successful defense of an action by Edlong for
breach of his employment contract and for trade-secret violations. Because the
uncontroverted evidence established that Nadathur’s attorney fees attributable to the two
claims were indivisible, we hold that the trial court abused its discretion by arbitrarily
awarding only half of his total attorney fees.
Background Facts
{¶2} During Nadathur’s employment by Edlong, he signed a confidentiality
agreement that allowed him to work for a competitor after termination of his employment
with Edlong, so long as his new employment did not make the disclosure of Edlong trade
secrets “inevitable.” In 2006, Nadathur left his position at Edlong to work for a competitor
named Givaudan Flavors Corporation. In an effort to prevent the “inevitable disclosure” of
Edlong’s trade secrets, Edlong filed suit against Nadathur and Givaudan, alleging violations
of the Ohio Trade Secrets Act and breach of the confidentiality agreement, and requesting
injunctive relief. Givaudan and Nadathur counterclaimed for tortious interference with a
business relationship and for tortious interference with employment relations.
{¶3} Following a trial, the court denied Edlong’s request for injunctive relief. The
court found in favor of Givaudan and Nadathur on Edlong’s breach-of-contract and trade-
secret claims, and denied the counterclaims. On appeal, we affirmed the trial court’s
judgment. See The Edlong Corp. v. Nadathur, 1st Dist. No. C-080176 (Dec. 10, 2008).
{¶4} Givaudan and Nadathur filed a motion in the trial court for attorney fees and
expenses. They relied on a provision in Nadathur’s confidentiality agreement with Edlong
2
OHIO FIRST DISTRICT COURT OF APPEALS
that provided for reasonable attorney fees to the prevailing party in any action to enforce the
agreement.
{¶5} The trial court granted the motion with respect to Nadathur because he had
been the prevailing party on Edlong’s breach-of-contract claim. However, the court held
that Givaudan was not entitled to an award for attorney fees because Givaudan was not a
party to the confidentiality agreement. The court referred the matter to a magistrate for a
determination of reasonable attorney fees and expenses.
{¶6} The magistrate issued a decision finding that Nadathur was entitled only to
fees and expenses stemming from his defense of the breach-of-contract action. Following
Nadathur’s objections to the decision, the trial court held that Nadathur was entitled to
recover fees solely related to Edlong’s contract claim, and that he was not entitled to fees
related to any other claims. The court further held that the burden was on Nadathur to
“parse out” the attorney fees attributable to his defense of the breach-of-contract claim from
attorney fees that he had incurred for any other claims or that Givaudan had incurred in the
action. The court remanded the matter to the magistrate for a determination of the amount
of the attorney fees.
{¶7} The magistrate conducted an evidentiary hearing at which counsel for
Nadathur presented evidence of the legal services and fees he had incurred as a result of his
defense of Edlong’s claims.
{¶8} Gary L. Greenberg testified that his firm represented Nadathur and Givaudan
in the action. According to Greenberg, the defense work for the breach-of-contract and for
the trade-secret claims was indivisible. And in compliance with the trial court’s order,
Greenberg had subtracted from Nadathur’s fee claim any fees that were not strictly
attributable to the defense of the breach-of-contract and trade-secret claims.
{¶9} Jane Garfinkel, general counsel for Givaudan, testified that Givaudan and
Nadathur had agreed to a joint representation because the claims against them and their
defenses to those claims were the same. Moreover, Givaudan had agreed to pay Nadathur’s
3
OHIO FIRST DISTRICT COURT OF APPEALS
legal fees. She stated that Givaudan would have incurred no legal expenses in the matter
but for Edlong’s breach-of-contract claim against Nadathur. According to Garfinkel, each of
Edlong’s claims was rooted in the confidentiality agreement between Edlong and Nadathur,
so that the claims and defenses were inextricably related. As a result, there was no way to
separate the attorney fees because the legal work had been done in connection with
enforcement of the confidentiality agreement.
{¶10} Charles J. Faruki, an attorney specializing in business litigation and
intellectual property cases, testified as an expert for Nadathur. Faruki opined that Edlong’s
trade-secret and breach-of-contract claims were essentially the same in terms of the issue
presented by the claims, the types of discovery necessary, and the proof that needed to be
offered at trial. He testified that the attorney fees were reasonable and necessary for
Nadathur’s defense of Edlong’s breach-of-contract claim.
{¶11} Following the hearing, the magistrate decided that Nadathur had failed to
meet his burden to prove the amount of attorney fees attributable solely to the contract
claim. In his decision, he wrote:
As Nadathur claims that the fees incurred in defending the two counts of the
complaint cannot be separated, the court will not independently examine the
billing records to discover to which claim each billable event belongs. Rather,
the court will simply reduce the amount of claimed fees in half, as attorneys’
fees for only one of the two counts of the complaint have been held
compensable by the trial [c]ourt.
{¶12} The trial court overruled Nadathur’s objections and adopted the magistrate’s
decision.
4
OHIO FIRST DISTRICT COURT OF APPEALS
The Appeal
{¶13} In a single assignment of error, Nadathur argues that the trial court erred by
awarding him only half of his attorney fees where the evidence had established that the fees
for both the breach-of-contract claim and the trade-secret claim were indivisible.
{¶14} In this case, the confidentiality agreement between Nadathur and Edlong
provided that “[t]he prevailing party in any action to enforce this Agreement shall be
entitled to recover reasonable attorney fees, in addition to other available relief.” When a
contract provides for attorney fees but does not specify the amount of fees that are
awardable, a trial court has discretion to determine the amount of fees reasonably necessary
under the circumstances. See Lake Pointe Townhomes Homeowners’ Assn. v. Bruce, 178
Ohio App.3d 756, 2008-Ohio-5264, 900 N.E.2d 636, ¶ 10 (8th Dist.).
{¶15} The Ohio Supreme Court has held that where claims can be separated “into a
claim for which fees are recoverable and a claim for which no fees are recoverable, the trial
court must award fees only for the amount of time spent pursuing the claim for which fees
may be awarded.” Bittner v. Tri-County Toyota, Inc., 58 Ohio St.3d 143, 145, 569 N.E.2d
464 (1991); see also Lambda Research, Inc. v. Jacobs, 1st Dist. No. C-100796, 2013-Ohio-
348; Parker v. I & F Insulation Co., 1st Dist. No. C-960602, 1998 Ohio App. LEXIS 1187,
*20 (Mar. 27, 1998). However, a court should not reduce attorney fees based on a simple
ratio of successful versus unsuccessful claims. Hollingsworth v. Time Warner Cable, 168
Ohio App.3d 658, 2006-Ohio-4903, 861 N.E.2d 580, ¶ 82 (1st Dist.), quoting Thurman v.
Yellow Freight Sys., 90 F.3d 1160, 1169 (6th Cir.1996).
{¶16} But it is not always possible to divide attorney fees for distinct claims. If
claims “involve a common core of facts or will be based on related legal theories,” it may be
“difficult to divide the hours expended on a claim-by-claim basis.” Hensley v. Eckerhart,
461 U.S. 424, 435, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983); see also New Concept Hous., Inc. v.
United Dept. Stores Co., No. 1, Inc., 1st Dist. No. C-080504, 2009-Ohio-2259, ¶ 41. So
5
OHIO FIRST DISTRICT COURT OF APPEALS
where multiple claims are rooted in the same allegations, facts, discovery, and legal
arguments, a trial court does not abuse its discretion in awarding attorney fees for the time
spent on the claims. See I & F Insulation, supra; Lambda Research, supra.
{¶17} Therefore, the inability of a prevailing party to allocate attorney fees for
discrete claims does not necessarily render a fee award for the full amount unreasonable.
See Miller v. Grimsley, 197 Ohio App.3d 167, 2011-Ohio-6049, 966 N.E.2d 932, ¶ 17 (10th
Dist.). So a trial court abuses its discretion to award attorney fees if it arbitrarily excises a
portion of attorney fees in the face of uncontroverted evidence that the attorney fees are
indivisible because the claims involved were so intrinsically intertwined. Id.{¶18} In this case, because the uncontradicted evidence before the trial court
indicated that Edlong’s breach-of-contract and trade-secret claims involved a common core
of facts and intertwined legal theories so that the attorney fees for the claims were
indivisible, we hold that the trial court abused its discretion in arbitrarily reducing
Nadathur’s attorney-fee award.
Conclusion
{¶19} Therefore, we sustain the assignment of error. We reverse the trial court’s
judgment and remand this matter for further proceedings consistent with law and this
opinion.
Judgment reversed and cause remanded.
HILDEBRANDT and DEWINE, JJ., concur.
Please note:
The court has recorded its own entry on the date of the release of this opinion.
6