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Ellipso, Inc. v. Mann

January 29, 2009

ELLIPSO, INC., PLAINTIFF,
v.
JOHN B. MANN, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Royce C. Lamberth Chief Judge

MEMORANDUM OPINION

On September 30, 2008, the Court entered final judgment in this case. (Docket entry [220]). Now before the Court comes defendants John B. Mann and Mann Technologies' motion [221] for attorneys' fees and expenses. Upon consideration of the motion [221], the opposition [228], the reply [231], applicable law, and the entire record herein, the defendants' motion will be GRANTED.

I. BACKGROUND

In October 2002, plaintiff Ellipso was a struggling telecommunications company. Ellipso, Inc. v. Mann, 541 F. Supp. 2d 365, 369 (D.D.C. 2008) (Lamberth, J.). At that time, David Castiel, in his capacity as Ellipso president and chief executive officer, hired defendant Robert Patterson to secure financing from investors. Id. Patterson structured a deal wherein defendant Mann Technologies, L.L.C. ("Mann Tech") loaned Ellipso $90,000, secured by 492,611 shares of ICO Global Communications Holding Ltd. Stock ("ICOHA Shares") that Ellipso held. Id. Patterson, however, the Harvard-trained lawyer who was securing financing for Ellipso, also had an interest in Mann Technologies. Id. Accordingly, he stood to benefit from the loan.

The loan agreement was executed on January 30, 2004, at which time the ICOHA shares were valued at $180,000. Id. The loan agreement provided that in the event of a default by Ellipso, Mann Tech could take possession of the collateral. See id. The loan agreement was also "non-recourse," meaning that Ellipso could stop performing on the loan contract, walk away, and owe Mann Tech nothing more than the ICOHA Shares securing the loan.

Ellipso was in default from the very beginning and never made loan payments to Mann Tech. As a result, Mann Tech foreclosed on the collateral. Ellipso filed suit against Mann Tech on June 14, 2005. Ellipso argued that because Patterson allegedly concealed his dual role as both an Ellipso consultant and a part owner of Mann Tech, the loan documents contained terms and conditions extremely favorable to Mann Tech, and onerous and unconscionable to Ellipso. Mann Tech, on the other hand, contended that Castiel, the Ellipso president and chief executive officer, learned of Patterson's role in Mann Tech and ratified the loan agreement anyway.

This Court granted Ellipso's motion for preliminary injunction on November 2, 2005, which prohibited Mann Tech from selling the shares of stock that it was holding as collateral. Ellipso, Inc., v. Mann, No. 05-cv-1186, at *3, 2005 WL 5298646 (D.D.C. Nov. 2, 2005). The Court determined that Ellipso had shown a likelihood of success on the merits of its fraud claim because Patterson had not disclosed his dual role to Ellipso. Id. The Court of Appeals affirmed this Court's preliminary injunction on March 23, 2007. Ellipso, Inc. v. Mann, 480 F.3d 1153 (D.C. Cir. 2007).

On April 1, 2008, the Court considered a newly presented email dated November 16, 2004 from Ellipso president and chief executive officer David Castiel to defendant Robert Patterson. The Court concluded, on the basis of the newly presented e-mail,*fn1 that Ellipso had knowledge of Mr. Patterson's stake in Mann Tech no later than June 2004. Ellipso, 541 F. Supp. 2d at 371. Subsequent to that date, Ellipso performed several acts in affirmation of the loan agreement, including negotiating and executing an amendment to the loan agreement, accepting a check pursuant to the loan agreement amendment, and transferring collateral to Mann Tech. Id. at 371--72. Accordingly, the Court determined that Ellipso could no longer assert that it had an equitable claim to the collateral and granted summary judgment to Mann Tech on many of Ellipso's claims. Id. at 372. The Court also dissolved the preliminary injunction as to all defendants. The Court later awarded the Mann Defendants' damages suffered as a result of the preliminary injunction. (Mem. Op. [215] at 9.)

As for Ellipso's claims that remained following the summary judgment stage, the Court held a seven day jury trial. Ultimately, the Court granted both parties' motions for judgment as a matter law and dismissed all claims and counterclaims.*fn2 Final judgment was entered on September 30, 2008. (Docket entry [220]).

The Mann Defendants now request attorneys' fees.

II. APPLICABLE LAW

Absent a statute to the contrary, federal courts in this country operate under the 'American rule' that the prevailing party may not recover attorneys' fees as costs or otherwise. Alyeska Pipeline Servs. Co. v. Wilderness Society, 421 U.S. 240, 245 (1975). However, there are a couple of exceptions to this general rule. First, a court may assess attorneys' fees "when the losing party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons." Id. at 258; See also American Hosp. Ass'n v. Sullivan, 938 F.2d 216, 220 (D.C. Cir 1991) (stating that bad faith may be found where a "party is forced to undertake otherwise unnecessary litigation to vindicate plain legal rights"). Second, of course, parties can contract around the American rule through an attorney fee-shifting provision in a contract. See Liberty Mut. Ins. Co. v. Lumbermen's Mut. Cas. Co., 172 F.3d 919, slip op. at *1 (D.C. Cir. Jan. 20, 1999) (unpublished).

If attorneys' fees are to be awarded, the court must multiply the "number of hours reasonably expended on the litigation" by a "reasonable hourly rate." Harrison Music Corp. v. Tesfaye, 293 F. Supp. 2d 80, 85 (D.D.C. 2003) (Leon, J.). In this Circuit, "an attorney's usual billing rate is presumptively the reasonable rate, provided that this rate is in line with those prevailing in the community for similar services by lawyers of reasonably ...


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