Vital Pharmaceuticals, Inc. v. Pepsico, Inc.

USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 1 of 17
[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-13167
Non-Argument Calendar
____________________
VITAL PHARMACEUTICALS, INC.,
d.b.a. VPX Sports,
Plaintiff-Appellant,
versus
PEPSICO, INC.,
Defendant-Appellee.
____________________
Appeal from the United States District Court
for the Southern District of Florida
D.C. Docket No. 0:20-cv-62415-RAR
____________________
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 2 of 17
2 Opinion of the Court 21-13167
Before WILSON, ROSENBAUM, and ANDERSON, Circuit Judges.
PER CURIAM:
Vital Pharmaceuticals, Inc. (“VPX”), appeals the district
court’s decision to award Pepsico, Inc. (“Pepsi”), $116,684.81 in
contractual attorney’s fees, in connection with Pepsi’s obtaining
court confirmation of an interim arbitration award that granted
preliminary injunctive relief against VPX. On appeal, VPX con-
tends that the contract did not authorize recovery of attorney’s fees
for seeking confirmation of an arbitration award, and that the court
abused its discretion in calculating the number of hours Pepsi’s at-
torneys reasonably expended and in awarding them non-local
rates. After careful review, we conclude that Pepsi was entitled to
recover attorney’s fees in connection with confirming the arbitra-
tion award, but we vacate and remand for further proceedings as
to the amount of its recovery.
I.
In March 2020, VPX and Pepsi executed a contract making
Pepsi the exclusive distributor of VPX’s BANG-branded energy
drinks. VPX soon became dissatisfied with the arrangement, and it
elected to terminate the agreement without cause in October 2020
and attempt self-distribution. In response, Pepsi initiated arbitra-
tion under the contract in New York, the state whose law governed
the contract. It also moved for emergency relief to enjoin VPX
from breaching the distribution agreement’s terms, which it said
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 3 of 17
21-13167 Opinion of the Court 3
required three years’ notice before a termination without cause
took effect. Soon after, VPX sued Pepsi in federal court in the
Southern District of Florida, seeking injunctive relief.
After expedited briefing and a hearing, an emergency arbi-
trator issued an award granting in part Pepsi’s request for injunc-
tive relief. This “Interim Award,” issued on December 7, 2020, pre-
liminarily enjoined VPX from attempting to self-distribute and re-
quired it to honor Pepsi’s contractual distribution rights, which
likely extended through October 2023, according to the arbitrator,
pending a resolution of the matter by a full arbitration panel.
One day later, on December 8, 2020, Pepsi filed an expedited
motion to confirm the Interim Award in VPX’s federal case in the
Southern District of Florida. Pepsi contended that the award of
injunctive relief was sufficiently final to be confirmable under the
Federal Arbitration Act (“FAA”) and that there were no grounds to
vacate or modify the award. VPX responded in opposition, assert-
ing, among other things, that the Interim Award was not final or
confirmable. Pepsi filed a reply responding to VPX’s arguments in
detail.
On December 21, 2020, the district court granted Pepsi’s
motion and confirmed the Interim Award. VPX did not appeal at
that time, although immediate review was available. See 9 U.S.C.
§ 16(a)(1)(D) (“An appeal may be taken from an order confirming
or denying confirmation of an award or partial award.”). Later, the
court dismissed VPX’s complaint without prejudice, concluding
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 4 of 17
4 Opinion of the Court 21-13167
that VPX was collaterally estopped from seeking injunctive relief
inconsistent with the confirmed Interim Award.
II.
Having obtained confirmation of the Interim Award, Pepsi
sought attorney’s fees for that work under the distribution agree-
ment. The relevant provision of the agreement states,
[I]f the [arbitration] award is confirmed by a court of
competent jurisdiction, a Party challenging the award
or resisting enforcement of a judgment entered upon
the award will pay, to the extent permitted by law, all
costs, attorneys’ fees and expenses incurred by the
other Party in defending the award or seeking en-
forcement of the judgment.
Pepsi sought fees for a total of 182.4 hours for four Gibson Dunn
attorneys in connection with confirming the Interim Award, at
hourly rates ranging from $734 to $1,313, for a total of $159,441.90.
Pepsi asserted that the hourly rates charged by Gibson Dunn were
“comparable to prevailing market rates for national law firms
across the country” and “nearly identical to the prevailing market
rates in New York,” where Pepsi would have moved to confirm the
award had VPX not already filed suit in Florida.
VPX objected to Pepsi’s request on several grounds. First, it
claimed that the distribution agreement authorized the recovery of
attorney’s fees incurred post-confirmation only, not fees incurred
seeking confirmation of an arbitration award. Second, it asserted
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 5 of 17
21-13167 Opinion of the Court 5
that the court should defer any fee award until the litigation had
run its course. Finally, it contended that both the hourly rates and
the number of hours requested were excessive. Pepsi replied.
In March 2021, a magistrate judge recommended that
Pepsi’s motion for attorney’s fees be granted in part and denied in
part. The magistrate judge rejected VPX’s interpretation of the
agreement as authorizing fees incurred post-confirmation only,
stating that Pepsi could recover the fees it “incurred in defending
the Award” from VPX’s challenge to confirmation. The magistrate
judge also recommended declining to defer the fee award, finding
VPX’s caselaw inapposite and pointing to the court’s prior deter-
mination that the Interim Award was sufficiently final to be con-
firmable. Finally, the magistrate judge applied small reductions to
the requested hours and hourly rates, arriving at a lodestar amount
of $111,684.81.
In determining a reasonable hourly rate, the magistrate
judge first stated that it was “reasonable to award New York mar-
ket rates for Pepsi’s attorneys rather than limiting their rates to
those that are reasonable in the South Florida market.” Although
Pepsi did not “establish[] a lack of attorneys in South Florida who
are willing and able to handle this case,” the magistrate judge
stated, “it would have made little sense for Pepsi to proceed with
any other attorneys in this case.” The judge noted that the attor-
neys had extensive prior experience with the factual situation, hav-
ing obtained the Interim Award, that the dispute first arose in New
York, where Pepsi commenced the arbitration proceeding, and that
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 6 of 17
6 Opinion of the Court 21-13167
Pepsi sought confirmation in the Florida case only “for the sake of
efficiency and to avoid inconsistent results” and to defend its arbi-
tration award.
So in the magistrate judge’s view, “[e]ven if New York is not
technically the relevant market, it is reasonable to award New York
rates to Pepsi based upon the circumstances of this case.” Ulti-
mately, the magistrate judge recommended that the court approve
the partner’s hourly rate of $1,313 and slightly reduce the associ-
ates’ hourly rates from $857 to $750 for one attorney and from $734
to $650 for two other attorneys. 1
As for the number of hours, the magistrate judge agreed
“with VPX that the hours incurred by Pepsi are excessive, but not
nearly to the degree espoused by VPX.” The judge first rejected
VPX’s focus on page length, noting that complexity was a better
measure and that the “briefing in this case [wa]s of a more complex
nature.” But he found that a “small reduction” was warranted to
account for Pepsi’s work on the confirmation motion “before the
Interim Award was even issued.” He observed that, while Pepsi
appropriately completed work in advance, it was “unlikely that
Pepsi would have spent the same amount of time if it did not begin
addressing confirmation until it had an arbitration award in hand,”
since Pepsi likely “spent at least a small amount of time addressing
issues before receiving the Award that it may not have otherwise
1 The magistrate judge advised that, if he had limited Pepsi to South Florida
rates, he would have recommended hourly rates ranging from $425 to $725.
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 7 of 17
21-13167 Opinion of the Court 7
had to address.” But he could not “ascertain every issue Pepsi spent
time addressing” because “some entries contain[ed] very limited
descriptions regarding the tasks completed.” “Nevertheless,” he
opined, “it does appear likely that Pepsi would have incurred the
substantial majority of the hours it did incur had it waited to work
on the confirmation motion.” Accordingly, the magistrate judge
recommended a “small reduction (of approximately 10 hours).”
Finally, the magistrate judge found that the hours requested
by Pepsi were still “somewhat excessive” by approximately 25 to
30 additional hours. In that regard, the magistrate judge cited ex-
cess billing related to a motion to seal and conferences, and a minor
block-billing issue. Ultimately, the magistrate judge recommended
an across-the-board reduction of 23% in hours for each attorney
(roughly 40 total hours), for a total of 140.44 hours. That resulted
in a total fee award recommendation of $111,684.81.
VPX submitted objections to the magistrate judge’s report
and recommendation. VPX first reiterated its argument that the
distribution agreement did not authorize fees “where a party exer-
cises its right to oppose the confirmation of the award.” Second,
VPX maintained that Pepsi was not entitled to non-local rates for
its attorneys because it failed to show a lack of local attorneys who
were able and willing to handle the case, as required by this Court’s
decision in American Civil Liberties Union of Georgia v. Barnes,
168 F.3d 423, 427 (11th Cir. 1999). VPX further asserted that a po-
tential exception discussed in Barnes did not apply because, in
VPX’s view, Pepsi’s use of non-local attorneys did not result in
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 8 of 17
8 Opinion of the Court 21-13167
substantial cost-saving efficiencies that would justify the higher
non-local rates.
In fact, according to VPX, Pepsi’s attorneys logged excessive
hours by doing so much work before the Interim Award even is-
sued—that is, “they had no idea what, if anything, the Interim
Award would say and were undoubtedly researching issues and
drafting arguments that were never used.” VPX found no support
in the time entries for the magistrate judge’s claim that Pepsi would
have incurred most of the requested hours had it waited for the
Interim Award, noting the magistrate judge’s own observation that
the time entries contained “very limited descriptions” regarding
the tasks completed. It also contended more broadly that the mo-
tion to confirm and reply brief were not particularly lengthy or
complex and that Pepsi’s requested hours were plainly excessive,
particularly given its supposed expertise and familiarity with the
case facts. VPX did not object to the recommendation not to defer
consideration of fees.
After Pepsi replied, the district court entered a short order
adopting the magistrate judge’s recommendations. The court said
it had “conducted a de novo review” of the magistrate judge’s find-
ings in response to VPX’s timely objections, but it did not other-
wise address the objections. VPX now appeals.
III.
“We review awards of attorney’s fees and costs for abuse of
discretion, reviewing questions of law de novo and reviewing
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 9 of 17
21-13167 Opinion of the Court 9
factual findings for clear error.” Kahane v. UNUM Life Ins. Co. of
Am., 563 F.3d 1210, 1213 (11th Cir. 2009). The interpretation of a
contractual provision authorizing attorney’s fees is a question of
law, which we review de novo. Johnson Enters. of Jacksonville,
Inc. v. FPL Grp., Inc., 162 F.3d 1290, 1329 (11th Cir. 1998).
A. Pepsi’s Entitlement to Attorney’s Fees
VPX first claims that the district court misapplied § 9.11(b)
of the distribution agreement, the relevant attorney’s fees provi-
sion. As a reminder, that section states,
[I]f the [arbitration] award is confirmed by a court of
competent jurisdiction, a Party challenging the award
or resisting enforcement of a judgment entered upon
the award will pay, to the extent permit-ted by law,
all costs, attorneys’ fees and expenses incurred by the
other Party in defending the award or seeking en-
forcement of the judgment.
In VPX’s view, this provision does not permit recovery for costs
incurred in confirming the Interim Award, because the phrase
“confirmed by a court of competent jurisdiction” shows an intent
to “limit attorneys’ fees to those incurred in challenges to the
award or resistance to enforcement after confirmation.” In other
words, according to VPX, the provision applies to only those “fees
incurred in the course of post-confirmation defense of the award.”
The district court correctly rejected VPX’s interpretation of
the distribution agreement. The plain terms of the agreement
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 10 of 17
10 Opinion of the Court 21-13167
require “a Party challenging the award” to pay attorney’s fees “in-
curred by the other Party in defending the award” “if the award is
confirmed by a court of competent jurisdiction.” Although confir-
mation by a court is required to obtain attorney’s fees, nothing in
this language purports to require that the “challenging” or “defend-
ing” occur after confirmation. And we will not add unnecessary
language to the provision. As written, the provision disincentivizes
litigation against or resistance to arbitration awards, making attor-
ney’s fees available to the defender of the award unless the chal-
lenge is successful.
VPX’s proposed interpretation also renders other language
in the provision superfluous. Under the distribution agreement,
recovery for attorney’s fees may be triggered by either “challenging
the award or resisting enforcement of a judgment entered upon the
award” (emphasis added), plus corresponding conduct by the other
party. And as VPX itself points out, “[a]n arbitration award does
not become a ‘judgment’ until a court confirms the award.” So
“resisting enforcement of a judgment” already seems to cover the
scenario where a party challenges an arbitration award after court
confirmation, rendering the language “challenging the award” su-
perfluous. VPX fails to explain how, in its understanding, “chal-
lenging the award” is distinct from “resisting enforcement of a
judgment upon the award” in the post-confirmation context, or
why the parties would draw that distinction. In our view, the more
natural reading of this provision is that it permits recovery of attor-
ney’s fees by a party who prevails in confirming an arbitration
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 11 of 17
21-13167 Opinion of the Court 11
award in court over the other party’s opposition. That’s the case
here.
Nor are we persuaded by VPX’s argument that the distribu-
tion agreement did not authorize fees for “preliminary” or “in-
terim” awards. In its December 2020 ruling, which VPX did not
appeal, the district court determined that the Interim Order “grant-
ing equitable relief to Pepsi is sufficiently final to be confirmed un-
der the FAA.” The court noted that the Interim Award had com-
pelled VPX to perform the contract pending arbitration, and it rea-
soned that “[d]istrict courts must have the power to confirm and
enforce such injunctive relief as ‘final’ for it to have teeth.” It also
rejected VPX’s arguments that the award was not final because it
was subject to vacatur or reversal by the full arbitration panel.
VPX could have sought immediate review of that ruling
with this Court, but it did not. See 9 U.S.C. § 16(a)(1)(D) (“An ap-
peal may be taken from an order confirming or denying confirma-
tion of an award or partial award.”). The case then moved on to
what was effectively a post-judgment motion for attorney’s fees,
which is what this appeal concerns. This appeal is not an oppor-
tunity for VPX to make arguments it could have presented though
a timely appeal of the December 2020 order.
And if, as the December 2020 order concluded, the Interim
Award was a sufficiently final “award” to be confirmed under the
FAA, see 9 U.S.C. § 9, it follows that it is likewise an “award” for
purposes of the distribution agreement. VPX offers no reason why
we should not read the two uses of “award” in harmony. We also
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 12 of 17
12 Opinion of the Court 21-13167
reject VPX’s assertion that Pepsi was not “defending” the award by
seeking confirmation in VPX’s federal case. Though it filed suit
before the Interim Award, VPX sought relief directly contrary to
that award and then opposed Pepsi’s efforts to confirm the award.
In our view, the attorney’s fees provision plainly applies to the cir-
cumstances here. Thus, Pepsi was entitled to recover attorney’s
fees under the distribution agreement.
B. Whether the Fee Award Should Have Been Deferred
The district court also did not abuse its discretion by refusing
to defer consideration of attorney’s fees pending resolution of the
arbitration. The magistrate judge addressed and rejected VPX’s ar-
guments on this point, finding its proffered caselaw distinguishable
and observing that “any decision to defer the fee award would be
inconsistent with the Court’s earlier determination that the Award
is sufficiently final to be confirmed under the FAA.” Because VPX
did not object to this determination before the district court, de-
spite being warned of the consequences, it waived review of that
determination on appeal, except for plain error. See 11th Cir. R. 3-
1. 2
2 Eleventh Circuit Rule 3-1 states,
A party failing to object to a magistrate judge's findings or rec-
ommendations contained in a report and recommendation in
accordance with the provisions of 28 U.S.C. § 636(b)(1) waives
the right to challenge on appeal the district court's order based
on unobjected-to factual and legal conclusions if the party was
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 13 of 17
21-13167 Opinion of the Court 13
Nothing in the record suggests that plain-error review is ap-
propriate here. See Evans v. Ga. Reg’l Hosp., 850 F.3d 1248, 1257
(11th Cir. 2017), abrogated on other grounds by Bostock v. Clayton
Cty., Ga., 140 S. Ct. 1731 (2020). As the magistrate judge stated, in
this case, in contrast to the cases VPX cited, nothing was left to re-
solve in federal district court apart from attorney’s fees. The court
had confirmed the arbitration award and dismissed VPX’s claims,
leaving nothing but the issue of whether Pepsi was entitled to fees
in relation to confirming that award. In these circumstances, the
court reasonably decided not to defer ruling on this discrete issue
pending the final resolution of the arbitration.
C. The Amount of Pepsi’s Recovery
Having concluded that Pepsi was entitled to recover attor-
ney’s fees under the distribution agreement, we turn to the amount
of its recovery. VPX maintains that the number of hours awarded
was plainly excessive, and that Pepsi’s attorneys cannot receive
non-local rates without showing that local attorneys were unable
or unwilling to do the work or that cost-saving efficiencies resulted
from Pepsi’s use of non-local counsel.
At bottom, a reasonable attorney’s fees award is determined
by multiplying hours reasonably expended by a reasonable hourly
rate. Norman v. Hous. Auth. of City of Montgomery, 836 F.2d
1292, 1299 (11th Cir. 1988). A district court has “wide discretion in
informed of the time period for objecting and the conse-
quences on appeal for failing to object.
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 14 of 17
14 Opinion of the Court 21-13167
performing these calculations.” Am. Civil Liberties Union of Ga.
v. Barnes, 168 F.3d 423, 427 (11th Cir. 1999) (quotation marks omit-
ted). Still, its order “must allow meaningful review—the district
court must articulate the decisions it made, give principled reasons
for those decisions, and show its calculation.” Id. (quotation marks
omitted).
1. Hours Reasonably Expended
By adopting the magistrate judge’s report and recommenda-
tion, the district court found that Pepsi reasonably expended ap-
proximately 140 hours defending the award. That included a “mi-
nor reduction” of 10 hours to account for Pepsi’s incurring a sub-
stantial number of hours—by our rough count, approximately half
of the 182.4 hours requested—before the Interim Award issued on
December 7. While the court recognized that Pepsi may have done
unnecessary work, it said it was “likely that Pepsi would have in-
curred the substantial majority of the hours it did incur had it
waited to work on the confirmation motion.”
We are unable to conduct meaningful review. The district
court itself recognized that some of Pepsi’s time entries contained
“very limited descriptions regarding the tasks completed,” which
made it impossible “to ascertain every issue Pepsi spent time ad-
dressing” and whether each issue was relevant to defending the
award or not. For example, Pepsi’s time records show roughly 30
hours billed for “revis[ing] [the] motion to confirm”—not including
hours “research[ing],” draft[ing],” “analyz[ing],” or “con-
fer[ring]”—before the Interim Award issued, without further
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 15 of 17
21-13167 Opinion of the Court 15
detail. Without more, we cannot tell the court’s basis for conclud-
ing that Pepsi still would have incurred substantially all this time
“had it waited to work on the confirmation motion,” or that the
time could otherwise be considered time expended in defending
the award. Cf. Barnes, 168 F.3d at 436 (stating that, with proper
proof, preliminary or pre-litigation time may properly be consid-
ered time “reasonably expended on the litigation” for purposes of
awarding fees under 42 U.S.C. § 1988). We therefore vacate and
remand for further proceedings on this issue.
2. Reasonable Hourly Rate
“A reasonable hourly rate is the prevailing market rate in the
relevant legal community for similar services by lawyers of reason-
ably comparable skills, experience, and reputation.” Barnes, 168
F.3d at 436 (quotation marks omitted). “The general rule is that
the relevant market for purposes of determining the reasonable
hourly rate for an attorney’s services is the place where the case is
filed.” Id. at 437 (quotation marks omitted).
In Barnes, we stated that a fee applicant seeking non-local
rates generally “must show a lack of attorneys practicing in that
place who are willing and able to handle his claims.” Id. But we
did not “rule out the possibility” of a case “where use of an attorney
from a higher-rate market who had extensive prior experience with
a particular factual situation could be justified because of efficien-
cies resulting from that prior experience.” Id. On the facts of
Barnes, though, we concluded that “any finding that savings or ef-
ficiencies resulted from the use of non-local counsel . . . would be
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 16 of 17
16 Opinion of the Court 21-13167
clearly erroneous” because of excessive billing by the plaintiff’s
non-local counsel. Id. at 438.
Applying Barnes, the district court awarded New York rates
for Pepsi’s four attorneys, who were based in Washington, D.C.,
or Dallas, Texas. The court reasoned that, although local attorneys
were able and willing to handle the matter, non-local rates were
justified under Barnes by the need to act with haste, counsel’s ex-
tensive prior experience with the particular factual situation, and
the peculiar circumstances of the case, which involved Pepsi’s de-
fense of its New York arbitration award from VPX’s Florida law-
suit. Pepsi adds that it saved the parties substantial costs by seeking
confirmation of the Interim Award in the Florida action, instead of
pursuing a separate confirmation proceeding in New York, and
that it should not be punished for promoting efficiency and judicial
economy.
However, the reasonableness of awarding non-local rates
also depends in part on whether non-local counsel exercised billing
judgment. See Barnes, 168 F.3d at 437–38 (“[I]n light of the fact
that the plaintiffs’ attorneys billed 1072.95 hours for this case, many
of which . . . were excessive, redundant, or otherwise unnecessary,
any finding that savings or efficiencies resulted from the use of non-
local counsel . . . would be clearly erroneous.”). Here, the district
court recognized that Pepsi’s requested fees were “excessive” to
some degree. And the court’s assessment of that factor may—
though by no means “must”—change, given our remand regarding
the number of hours reasonably expended defending the award.
USCA11 Case: 21-13167 Date Filed: 06/08/2022 Page: 17 of 17
21-13167 Opinion of the Court 17
Accordingly, we decline to resolve the issue of non-local rates at
this time.
IV.
In sum, the district court properly awarded attorney’s fees
to Pepsi in connection with its efforts to obtain confirmation of the
Interim Award, so we affirm that portion of the judgment. But we
vacate and remand for further proceedings related to the amount
of Pepsi’s award, with the caution that it “should not result in a
second major litigation.” Barnes, 168 F.3d at 423 (quotation marks
omitted).
AFFIRMED in part; VACATED and REMANDED in part.