A recent trade secret misappropriation action resulted in an award of compensatory damages of $41,000 and punitive damages of $40,000. Then, the plaintiff asked for more than a million dollars in attorney’s fees and costs. The defendants protested that (a) the fee request was grossly disproportionate to the damages that were recovered, and (b) the plaintiff’s billing was excessive. However, except for reimbursement of the expense of one expert witness the court deemed unnecessary, the entire requested amount was awarded. SKF USA, Inc. v. Bjerkness, Civil Action Nos. 08C 4709 and 09 C 2232 (N.D. Ill., Sept. 27, 2011).

An employee of plaintiff SKF left in order to “set up a competing business, taking with him a handful of other SKF employees and thousands of SKF’s computer files.”

SKF sued and established misappropriation. The court granted injunctive relief plus what it described as “a modest damages award.” SKF proceeded to file a fee request for $1.3 million. While not challenging SKF’s attorneys’ hourly rates, the defendants characterized as “outrageous” the more than 2700 hours billed. The defendants stressed that they had made substantial settlement offers, two of which were in amounts in excess of the damages ultimately recovered, and that SKF had rejected each while declining to make a counter-proposal.

SKF objected to the defendants’ argument based on settlement offers, but case law supports the court’s consideration of such information in adjudicating a fee request.

Case law also indicates that proportionality of the fee request is a relevant factor, but compared to what? Some courts weigh the ultimate result against the amount sought in the complaint and some look at the plaintiff’s reasonable expectations. The Seventh Circuit has declined to adopt a specific rule.

SKF’s success in obtaining injunctive relief -- particularly in light of its claim that the recovery of monetary damages was not its initial primary goal -- was deemed relevant in reducing the significance of the comparison between the judgment amount and the fee request. Three other factors also influenced the court: (a) the extent to which the defendants’ tenacious litigation strategy impacted the amount of SKF’s fees; (b) the fact that shortly before the defendants jumped ship, SKF was acquired and the purchase price “assigned great value to the trade secrets used in the business;” and (c) SKF’s payment of the fees in full.

This decision teaches two lessons. First, it provides a road map for use by a party prevailing on the merits in a fee-shifting case who then seeks reimbursement of a very substantial amount of expenses, especially where the reimbursement request is a high multiple of the damages award. Second, the ruling reminds us that a party who has lost on the merits in a hard-fought fee shifting case, and who then aggressively protests the fee request, is likely to face an incredulous judge.