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Andes Industries Inc. v. EZconn Corp.

United States District Court, D. Arizona

April 5, 2018

Andes Industries, Inc., and PCT International, Inc., Plaintiffs,
v.
EZconn Corporation and eGtran Corporation, Defendants.

          ORDER

          NEIL V. WAKE, SENIOR UNITED STATES DISTRICT JUDGE

         Before the Court is eGtran Corporation's Motion for an Award of Attorneys' Fees (Doc. 46). This Motion seeks an award based on attorney fees invoiced to eGtran Corporation during September 2013 through March 2016 by its counsel Ruttenberg IP Law, PC, in CV-14-00400-APG-GWF, which was transferred to this Court as CV-15-02549-PHX-NVW, and related involvement in other cases. It does not seek reimbursement for any of the attorney fees invoiced to EZconn Corporation during January 2016 through October 2017 by its counsel Hagens Berman Sobol Shapiro LLC in CV-15-01810-PHX-NVW and CV-15-02549-PHX-NVW, which are the subject of a separate fee application (Doc. 42) and order.

         I. BACKGROUND

         Andes Industries, Inc., owns PCT International, Inc., which develops, manufactures, and sells products for broadband telecommunications networks. Andes and PCT are Nevada corporations and have their principal place of business in Mesa, Arizona. eGtran Corporation is a British Virgin Islands corporation with its principal place of business in Taiwan. EZconn Corporation is a Taiwanese corporation with places of business in Taiwan and the People's Republic of China. At relevant times, eGtran Corporation held an ownership interest in EZconn and owned 100 percent of Gtran, Inc., which has its corporate headquarters in California. For a number of years, EZconn manufactured broadband telecommunications products for PCT and also for its competitor Holland Electronics, LLC.

         On August 21, 2012, PCT sued Holland Electronics for patent infringement in the United States District Court for the District of Arizona (CV-12-01797-PHX-JAT). On June 6, 2013, upon stipulation of the parties, a protective order was issued restricting disclosure of designated confidential information. On June 17, 2013, PCT issued a subpoena duces tecum to “eGtran, Inc., ” at a California address (not eGtran Corporation in the British Virgin Islands or Gtran, Inc., at the California address). On September 3, 2013, eGtran Corporation engaged Ruttenberg IP Law to respond to the subpoena.

         On October 4, 2013, PCT moved to enforce the subpoena in the United States District Court for the Central District of California (CV-13-07374-JFW-CW). As explained in more detail below, Gtran, Inc. (the company to which the subpoena was delivered) opposed PCT's motion, and the extended proceedings continued until the action was dismissed as moot on September 4, 2015.

         On March 18, 2014, Andes and PCT sued eGtran Corporation, EZconn, Cheng-Sun Lan, Polar Star Management Ltd., Chi-Jen (Dennis) Lan, and Kun-Te Yang in the United States District Court for the District of Nevada (CV-14-00400-APG-GWF). Andes and PCT pled twelve claims, alleging a conspiracy among all Defendants and seeking a judgment holding the Defendants jointly and severally liable. Among other things, Andes and PCT alleged that EZconn breached its contracts with PCT by disclosing PCT's confidential and proprietary information to Holland Electronics. Ruttenberg IP Law began billing eGtran Corporation for legal services related to CV-14-00400-APG-GWF on March 18, 2014.

         On April 2, 2014, in the Holland Electronics patent infringement case (CV-12-01797-PHX-JAT), PCT moved to modify the protective order to permit PCT to use Holland Electronics' confidential documents against eGtran Corporation, EZconn, and the other defendants in the Nevada case (CV-14-00400-APG-GWF). Holland Electronics opposed PCT's motion. Although eGtran Corporation and EZconn were not parties in CV-12-01797-PHX-JAT, they filed a response in opposition to PCT's motion without seeking leave to intervene under Rule 24 of the Federal Rules of Civil Procedure. On June 4, 2014, the court struck eGtran Corporation and EZconn's response for failure to comply with Rule 24. The court denied PCT's motion to modify the protective order because Holland Electronics had a strong reliance interest in the documents remaining confidential and because modifying the protective order would not avoid a substantial amount of duplicative discovery.

         Ruttenberg IP Law began billing eGtran Corporation for services related to the protective order in the Holland Electronics case (CV-12-01797-PHX-JAT) on April 1, 2014. On August 14, 2014, eGtran Corporation executed an agreement with Ruttenberg IP Law for representation in the Nevada case and to oppose modification of the protective order in the Holland Electronics case.

         On August 25, 2014, eGtran Corporation moved to dismiss Andes and PCT's claims in the Nevada case (CV-14-00400-APG-GWF). On December 11, 2014, eGtran Corporation, EZconn, Cheng-Sun Lan, Polar Star Management Ltd., Chi-Jen (Dennis) Lan, and Kun-Te Yang executed an engagement agreement with Ruttenberg IP Law for representation in the Nevada case. On January 12, 2015, EZconn moved to dismiss Andes and PCT's claims in the Nevada case. On March 25, 2015, the Nevada district court dismissed Andes and PCT's claims against EZconn and eGtran Corporation for lack of personal jurisdiction. On September 25, 2015, EZconn and eGtran Corporation moved for entry of final judgment. On November 30, 2015, final judgment in favor of EZconn and eGtran Corporation was entered due to lack of personal jurisdiction.

         On September 10, 2015, Andes and PCT sued EZconn and eGtran Corporation in this court (CV-15-01810-PHX-NVW), alleging the same twelve claims that the Nevada district court had dismissed for lack of personal jurisdiction. On December 14, 2015, the Nevada district court granted Andes and PCT's motion to transfer the remainder of the case to the District of Arizona. On December 15, 2015, the remainder of CV-14-00400-APG-GWF was opened by this Court as CV-15-02549-PHX-NVW. In CV-15-02549-PHX-NVW, Ruttenberg IP Law represented only Polar Star Management Ltd. and Cheng-Sun Lan.

         On December 14, 2015, eGtran Corporation filed a motion for attorney fees in the District of Nevada, seeking a total award of $264, 283.78.[1] The Nevada district court retained jurisdiction to decide the fee motion. On February 22, 2016, the Nevada district court ordered that eGtran Corporation was entitled to recover only reasonable fees and costs incurred in connection with its motion to dismiss for lack of jurisdiction because the parties' dispute was still to be litigated in Arizona, and it was inappropriate to presume that defendants would prevail in the entire litigation. The court concluded that recovery of fees for services related to issues other than jurisdiction should be addressed by the judge who addresses those claims. On February 28, 2016, eGtran Corporation terminated its engagement of Ruttenberg IP Law.

         On March 2, 2016, Ruttenberg IP Law withdrew as counsel for Cheng-Sun Lan and Polar Star Management Ltd. in CV-15-02549-PHX-NVW. On March 4, 2016, Ruttenberg IP Law withdrew as counsel in the Nevada case (CV-14-00400-APG-GWF). On March 7, 2016, through its local counsel, eGtran Corporation supplemented its fee request in the Nevada case to seek $204, 495.55 for the five motions the court had identified as related to jurisdictional issues. In addition, eGtran Corporation's supplement requested $54, 575.00 for fees incurred in preparation of the fee motion.

         On April 4, 2016, the Nevada district court found that eGtran Corporation's amended request for $259, 070.60 in fees and $9, 924.93 in costs was “grossly excessive.” Although the April 4, 2016 order did not explicitly rule on the $54, 575.00 requested for fees (plus $1, 656.54 for non-taxable costs) incurred in preparation of the fee motion, the order includes the $54, 575.00 in its total of the amount eGtran Corporation sought. Further, in a paragraph beginning with “Defendants' fee request is not reasonable, ” the April 4, 2016 order states, “Defendants also seek over $56, 000 in connection with their motion to recover fees and costs.” The court did not take issue with the hourly rates charged by the lawyers, but found that the amounts of time spent on various motions and the amount of overall fees incurred were excessive. In addition, the court found that the attorney fee request impermissibly included time spent on ministerial or secretarial tasks. Therefore, the Nevada district court awarded eGtran Corporation a total of $50, 000.00 in fees and costs related to the dismissal of claims against eGtran Corporation and EZconn for lack of jurisdiction.

         On June 24, 2016, this Court dismissed with prejudice all claims by Andes and PCT against eGtran Corporation, Polar Star Management Ltd., and Cheng-Sun Lan and all claims by Andes and PCT against EZconn except for the claims for breach of contract and breach of the implied duty of good faith and fair dealing. On September 14, 2017, the Court granted summary judgment in EZconn's favor, and judgment was entered. On September 28, 2017, judgment was entered in favor of eGtran Corporation and against Andes and PCT. The judgments awarded EZconn and eGtran Corporation all of the relief they sought.

         eGtran Corporation seeks award of attorney fees under A.R.S. § 12-341.01(A) in the amount of $342, 937.38, which has been paid in full to Ruttenberg IP Law by eGtran Corporation, for four categories of legal services:

(1) responding to PCT's subpoena in CV-12-01797-PHX-JAT and opposing enforcement of that subpoena in CV-13-07374-JFW-CW ($136, 457.00);
(2) defending eGtran Corporation, EZconn, Polar Star Management Ltd., Kun-Te Yang, Chi-Jen (Dennis) Lan, and Cheng-Sun Lan in CV-14-00400-APG-GWF ($140, 461.55)[2];
(3) opposing PCT's motion in CV-12-01797-PHX-JAT to modify the protective order so that PCT could use Holland confidential documents in CV-14-00400-APG-GWF ($37, 105.83); and
(4) defending Cheng-Sun Lan and Polar Star Management Ltd. in CV-15-02549-PHX-NVW for the period January 5, 2016, through February 9, 2016 ($28, 913.00)[3].

         II. ANALYSIS

         A. A.R.S. ยง 12-341.01(A) Permits Award of Attorney Fees Related to All of Andes and PCT's Claims Against EZconn, eGtran Corporation, Polar Star Management Ltd., and Cheng-Sun Lan in CV-14-00400-APG-GWF and CV-15-02549-PHX-NVW, but ...


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