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Court Awards Damages and Attorneys' Fees for Wrongful Seizure in Couterfeiting Case

In a February 28, 2014 ruling, Magistrate Judge Frank Maas issued a Report and Recommendation recommending that the Court award defendant Top Quality Food Market, LLC and the other defendants $22,535 in attorneys’ fees and damages for the wrongful ex parte seizure of allegedly counterfeit goods. Plaintiff Prince of Peace Enterprises, Inc. obtained the seizure order, which Judge Howell later vacated. The defendants then asserted a counterclaim seeking damages for the wrongful seizure. After the plaintiff defaulted in responding to the defendants’ motion to dismiss, Judge Howell granted the motion and ordered that the defendants’ counterclaim be decided in their favor. The Court then referred the matter to Judge Maas for an inquest on damages arising from the unwarranted seizure.

Judge Maas began his analysis by noting that because the plaintiff never answered the counterclaim, “the well-pleaded factual allegations therein must be accepted as true,” but the plaintiffs “nevertheless still must submit proof sufficient to enable this Court to determine their losses since a default ‘is not an admission of damages.’” Judge Maas also wrote that the amount of damages recoverable is governed by 15 U.S.C. § 1116(d)(11), which provides that a victim of a wrongful seizure is entitled to recover “lost profits, cost of materials, loss of good will, and punitive damages in instances where the seizure was sought in bad faith, and unless the court finds extenuating circumstances, to recover a reasonable attorneys’ fee.”

The plaintiffs sought $192 for seized goods that were never returned, $2,000 for goods that spoiled while the seizure was in effect, $2,064 in wages, $4,577.60 in lost profits and $29,721.95 in attorneys’ fees. Judge Maas awarded the $192 for the seized goods even though they were inadequately documented because the amount is de minimis. The Court examined the documentation with regard to the other non-attorneys’ fees items of damages, and concluded that the defendants had not carried their burden of showing them with reasonable certainty.

With regard to defendants’ request for attorneys’ fees, Judge Maas used the well-accepted “lodestar” method in which a “presumptively reasonable fee is calculated by multiplying the number of hours reasonably expended by the reasonable hourly rate.” The plaintiffs did not dispute the hourly rate charged by defendants’ counsel, and the Court accepted it as reasonable. As to the “hours reasonably expended,” Judge Maas noted that the party seeking the award “must submit contemporaneous time records indicating the number of hours expended and the nature of the work done.” Because the defendants submitted evidence showing that counsel’s invoices were paid by the defendants, Judge Maas was satisfied that “the time records submitted reflect contemporaneous time charges, not the sort of post-hoc cobbling together of notes, emails and calendars that courts have disapproved in the past.”

Judge Maas did, however, criticize the time records as containing many overly-vague entries, block billing in which a single amount of time is billed for a group of tasks, excessive time spent on various tasks such as reviewing simple documents, drafting and reviewing memoranda, telephone conferences, etc., and billing for administrative tasks. Noting that courts are permitted to mete out “rough justice” by reducing the overall fees by a fixed percentage, Judge Maas reduced the defendants’ fee request by 25% to account for these deficiencies.

The Court declined to award punitive damages, finding the bare allegation of bad faith in the counterclaims too conclusory to establish the bad faith necessary for punitive damages under 15 U.S.C. § 1116(d)(11). Judge Mass did award prejudgment interest under 15 U.S.C. § 1117(b)(2).
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