Collateral fee issues under Law 75 litigated in post-default judgment proceedings

This is a follow up of the Law 75 case that I reported previously in this blog. See November 18, 2018. After entry of a default judgment on the counterclaim resulting from the distributor Skytec’s misconduct in discovery and the lifting of the distributor’s bankruptcy stay, the district court in Skytec, Inc. v. Logistic Systems, Inc., 2019 WL 1271459 (D.P.R. 2019)(BJM) held a post-default hearing to determine the award of damages due Logistic. Logistic, a Montana company, contracted to develop and implement various dispatch, geographic information, and records systems for public safety agencies in Puerto Rico, which were Skytec’s local clients. The court awarded Logistic $3.2 million in program installations, license fees, service charges and assessed pre-judgment interest at the rate of 6% under the Civil Code.

Logistic, the purported principal, moved for an award of expert witness and attorney’s fees under Law 75. In the absence of any objection, the court awarded recovery of expert witness fees of $32,847. The court did not address the legal issue, because it was waived, that Law 75 tracks the intent of Section 1988 of the federal Civil Rights Act, and under federal law, a prevailing defendant can recover fees only upon a showing of temerity or contumacy. Not unsurprisingly, Logistic grounded the request for attorney’s fees on temerity under Rule 44, Law 75, and the subcontract agreements which made an award of reasonable fees mandatory to the prevailing party in an action.

Interestingly, and citing Section 278e of Law 75, the court found that plain statutory language does not require an award of attorney’s fees to be reasonable (quaere, if or because the Civil Rights Act upon which Section 278e rests does). “In every action filed pursuant to the provisions of this chapter, the court may allow the granting of attorney’s fees to the prevailing party, as well as a reasonable reimbursement of the expert’s fees.” Logistic proposed its attorney’s fees be calculated using the lodestar method, which is the First Circuit’s “method of choice for calculating fee awards.” The court believed that the attorneys had failed to present itemized billing statements to enable the court to scrutinize the entries and the services performed.

As to fees, the court’s assessment was that “attorney’s fees awarded in the District of Puerto Rico indicates hourly rates hovering around $250 to $300 for experienced attorneys, $150 to $200 for associates, and $100 for law clerks and paralegals.” The court reduced Logistic’s local lead counsel’s hourly rate from $325 to $275 “in light of his [thirty-five] years of experience.” Other less experienced attorney’s hourly rates were reduced to $150-$130.

As to an out-of-state law firm of Logistic requesting fees, the court determined that “Puerto Rico must serve as the relevant community to determine fees, rather than the law firm or lawyers’ community in the United States, i.e. Seattle, because there are local lawyers more than able to handle the civil litigation at issue in this case.” The court reduced the hourly fees of the stateside attorneys from a top of $570 to $300 and associates from $260-$335 billed per hour to $150 and paralegals and contract attorneys to $75 an hour. Based on the record and without a finding of temerity, the court awarded Logistic $758,915 in fees and $101,047 in expenses.