“Excess” 285 Award Triggers Attorney Lien

Posted on | May 31, 2008 | 1 Comment

2008-1386 Climax Molybdenum v. Molychem
D/CO 02-cv-00311

Molychem’s co-counsel Ramon Pizarro appeals from Judge Matsch’s order giving him approximately $77,000 of the attorney’s fees award rather than the $215,000 he demanded.

Background:  Climax and Molychem engaged in a protracted battle at the ITC and in district court over Climax’s claims of patent infringement and Molychem’s Walker Process antitrust counterclaims.  Climax lost its patent case at the ITC.  Following a bench trial, the court ruled against Climax on its patent claims and against Molychem on its antitrust counterclaim.  However, the district court did find Climax’s 5,985,236 invalid and unenforceable by inequitable conduct before the PTO.  Judge Matsch further found that Climax’s prosecution and litigation conduct sufficiently egregious to be an "exception case," and he awarded Molychem its reasonable attorney’s fees under § 285:

The litigation conduct in the prosecution of the claim of infringement also supports that finding. After initiating this civil action, Climax pursued Molychem before the ITC, requiring it to defend that claim in administrative proceedings and delaying the adjudication of this action. What is most egregious is the refusal of Climax to accept the ITC decision or to submit the case to this court on that administrative record, insisting that the dispute be tried again because the ITC did not have all of the available evidence. What additional evidence was produced at this trial not only confirmed the ITC decision, it proved invalidity, unenforceability by inequitable conduct and fraudulent deception of the PTO. Molychem is entitled to recover its attorneys’ fees in defending this civil action and the ITC proceedings.

Legal Fees:  Molychem had entered into a retention and contingency fee arrangement with its two counsel, Pizarro and Donald Trinen.  The agreement basically provided that the lawyers would bill Molychem at $100/hour, and Molychem would pay that amount plus costs, expenses, etc.  If Molychem recovered anything of value from Climax, it would first recoup its actual litigation costs–the remainder would be split 75% to Molychem, 12.5% to Pizarro, and 12.5% to Trinen.

Per the § 285 award, Judge Matsch gave Molychem attorney’s fees based on its counsel’s actual hours at $350/hour (Trinen) and $300/hour (Pizarro), for a total of $1.2 million, plus $350,000 in expenses.  But Molychem only paid $922,000 in fees and expenses, and thus received an award about $600,000 greater than it actually expended.

When Climax announced its intent to pay the fee award, Pizarro filed an attorney’s charging lien with the court.  He argued that the agreement wasn’t meant to cover this award and that the agreement was unenforceable because it didn’t comport with Colorado’s Rules Governing Contingent Fees.  Pizarro claimed he should receive $215,400 as the reasonable value for his services. 

The court rejected his arguments and his request, concluding that:

• the fee split applied to the "Gross Amount Collected" by Molychem, the language of which was general enough to implicitly include an award of attorney’s fees; and

• any lack of compliance with the state’s contingent fees rules reflected more Pizarro’s "professional shortcomings" rather than providing him a way to collect more for fees than he bargained.

Notes and Comments: Climax initially appealed Judge Matsch’s order on invalidity and inequitable conduct (2008-1134), but it was dismissed because that order was not "final."  It does not appear that it has re-filed that appeal.

More reading:

Order on Division of Attorney’s Fees

Order Calculating Reasonable Attorney’s Fees

Order on Invalidity, Inequitable Conduct and Exceptional Case

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