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American Realty Capital Properties Incorporated v. Holland

United States District Court, D. Arizona

July 24, 2014

American Realty Capital Properties Incorporated, Plaintiff,
v.
Jeffrey C. Holland, et al., Defendants.

ORDER

DAVID G. CAMPBELL, District Judge.

Defendants Jeffery C. Holland ("Holland") and The Carlyle Group, LP ("Carlyle") have moved for an award of attorneys' fees pursuant to Federal Rule of Civil Procedure 54(d)(2) and Local Rule 54.2(b). Doc. 28. The motion is fully briefed. The Court will grant the motion in part and award $46, 140 in attorneys' fees.[1]

I. Background.

A. The Complaint and Underlying Dispute.

In its complaint, Plaintiff American Realty Capital Properties Incorporated ("ARCP") alleged that from December 2010 until February 5, 2014, Holland was employed as a senior executive with Cole Real Estate Investments, Inc. ("Cole"). Doc. 1, ¶ 21. Holland's primary responsibility at Cole was to build a "distribution network" for shares in real estate investment trusts sponsored and managed by Cole. Id., ¶¶ 21-22. On February 7, 2014, Cole was acquired by ARCP. Id., ¶ 19. At that time, Holland represented to ARCP that he had decided to "take some time off" rather than join ARCP and had no intention of joining another company in the foreseeable future. Id., ¶ 32. Holland thereby induced ARCP to treat his departure as a termination without cause in the wake of a change of control, which entitled him to $5.4 million in severance pay. Id. ARCP also signed a written Consulting/Covenants Agreement with Holland, which ARCP alleged in its complaint was governed by Arizona law, pursuant to which Holland agreed to serve as a part-time consultant for six months for an additional $100, 000. Id., ¶¶ 32-34.

As a condition of Holland's employment at Cole, he was required to execute a written Employment Agreement containing two restrictive covenants. Id., ¶ 27. First, Holland agreed that he would not solicit any of the financial advisors whose clients had invested in Cole or ARCP funds for 12 months after terminating his employment. Id. Second, Holland committed not to use or disclose any confidential information he learned through his relationship with Cole and ARCP. Id.

In January 2014, ARCP received word that Holland had joined Carlyle as a senior executive with duties substantially identical to the duties he had performed at Cole. Id., ¶¶ 37-40. ARCP alleged that "given the breadth of distribution networks of ARCP and Cole, Holland will inevitably exploit both the goodwill that he developed with independent financial advisors across the country at ARCP's expense, and Confidential Information about which independent financial advisory firms, and which individual financial advisors, are most likely to sell alternative investments' such as those offered by ARCP or Carlyle." Doc. 1 at 3.

ARCP instituted this action on April 1, 2014 asserting three claims, including breach of contract ( id., ¶¶ 47-52), tortious interference with contractual relations ( id., ¶¶ 53-57), and fraud in the inducement ( id., ¶¶ 58-63).

B. The Application for TRO and Aftermath.

On April 2, 2014, ARCP moved for entry of a four-pronged TRO that enjoined (1) Holland from soliciting any investors in ARCP or any of the funds that it manages, (2) Holland from using or disclosing any "Confidential Information" as defined in the June 18, 2013 Employment Agreement between Holland and Cole and in the February 7, 2014 Consulting/Covenants Agreement between Holland and ARCP, (3) Carlyle from tortiously interfering with Holland's contract with ARCP, and (4) Carlyle from using or disclosing any of ARCP or Cole's Confidential Information as the term is defined in Holland's employment contracts. Doc. 9.

On April 3, 2013, the Court entered a minute entry refusing to enter a TRO without notice and directing ARCP to notify Defendants of the TRO hearing that was re-scheduled for April 8, 2014. Doc. 12. On April 7, 2013, Defendants filed their opposition to ARCP's motion for a TRO. Doc. 16. On April 8, 2013, both parties appeared at a TRO hearing. Doc. 22. The Court entered an order denying the TRO, finding that ARCP had not shown that it was likely to succeed on the merits. Doc. 23. The Court reasoned that the non-solicitation and confidentiality provisions in the Employment Agreement and Consulting/Covenants Agreement were unreasonably broad and unenforceable. Doc. 23 at 2.

ARCP voluntarily dismissed the case two days after the Court entered its order denying ARCP's motion for a TRO. Doc. 24.

II. Legal Standard.

Pursuant to Local Rule 54.2(b), a party seeking to recover attorney fees must file and serve a motion and a supporting memorandum of points and authorities "within fourteen (14) days of the entry of judgment." LRCiv 54.2(b)(2).[2] Pursuant to Rule 54.2(c), the supporting memorandum "shall include a discussion of the following matters with appropriate headings and in the [following] order: (1) Eligibility[;] (2) Entitlement[;] [and] (3) Reasonableness of Requested Award." LRCiv 54.2(c)(1)-(3). Local rule 54.2(c) sets forth in detail the issues, factors, and legal authority that must be addressed in the memorandum's separate Eligibility and Entitlement sections. LRCiv 54.2(c)(1)-(2). The memorandum's separate Reasonableness of Requested Award section "should ...


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