Free Reply in Support of Motion - District Court of Arizona - Arizona

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
FENNEMORE CRAIG , P.C.
P HOENIX

FENNEMORE CRAIG, P.C. William L. Thorpe (No. 005641) Sal J. Rivera (No. 016728) 3003 North Central Avenue Suite 2600 Phoenix, Arizona 85012-2913 Telephone: (602) 916-5000 [email protected] [email protected] Attorneys for BNSF

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Steven Schrum, Plaintiff, v. The Burlington Northern Santa Fe Railway Company, Defendant. The Burlington Northern Santa Fe Railway Company, a corporation, Third Party Plaintiff v. Chemical Lime Company of Arizona, a corporation; ABC Corporations I-IV, fictitious corporations, Third Party Defendants No. CIV04-619-PHX-RCB BNSF'S REPLY IN SUPPORT OF ITS MOTION FOR ATTORNEYS' FEES

Chemical Lime's technical and frivolous objections to BNSF's application for attorneys' fees emphasize form over substance and do not provide a valid basis for denying BNSF's application for fees. In fact, Chemical Lime's objections are little more than an insurance company's continuing ploy to avoid the reasonable and necessary defense costs it should have paid years ago. The Court should reject these efforts and order Chemical Lime to reimburse all the fees set forth in BNSF's Application for
Case 2:04-cv-00619-RCB Document 144 Filed 07/30/2007 Page 1 of 12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

Attorneys' Fees and supporting materials (the "Fee Application"). I. Introduction This 2004 federal district court lawsuit is actually two separate lawsuits in one. In the first lawsuit, BNSF was forced to defend itself from the alleged toxic inhalation Federal Employers Liability Act claims of a relatively young railroad worker who claims that his damages exceeded a million dollars.1 The Court's Order confirms that Chemical Lime, rather than BNSF, should have paid the fees and costs associated with defending this lawsuit from the beginning of this litigation. In the second lawsuit, BNSF was forced to sue Chemical Lime to compel Chemical Lime (and its insurer) to accept Chemical Lime's clear contractual obligation to defend and indemnify BNSF. Simultaneously

defending plaintiff's claims, and prosecuting its own claims against Chemical Lime in Federal Court, took significant time, skill and resources. Significantly, BNSF prevailed in both lawsuits. Equally significantly, both losing parties (plaintiff and Chemical Lime) have not given up and have appealed and cross-appealed to the Ninth Circuit. And now, rather than complying with the Court's clear mandate that Chemical Lime pay all the costs associated with defending this lawsuit, Chemical Lime continues to bombard the Court and BNSF with new meaningless objections, which is resulting in further fees and costs for BNSF. Given the tactics employed by Chemical Lime, it should not surprise the Court that BNSF has incurred relatively significant fees and costs in this litigation. Chemical Lime's most recent criticisms of BNSF's fees are consistent with Chemical Lime's strategy of cost-avoidance and should be seen for what they are: An insurance Company's effort to chisel down what it must know is a past due and bona fide debt. The Court should reject such efforts and order Chemical Lime and its insurer to pay all of BNSF attorneys' fees, costs and expenses as it should have paid years ago.

1

28
FENNEMORE CRAIG , P.C.
P HOENIX

BNSF does not agree that plaintiff is entitled to recover any damages, let alone millions of dollars in damages. Nevertheless, it was obviously required to defend this case accordingly.
1939624.1

Case 2:04-cv-00619-RCB

Document 144 - 2 -Filed 07/30/2007

Page 2 of 12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
FENNEMORE CRAIG , P.C.
P HOENIX

II.

BNSF filed a proper application for fees. Chemical Lime first makes much of the fact that BNSF called its request for fees

an "application," rather than a "motion." Chemical Lime also boldly suggests that it should not be required to pay any of BNSF's fees and costs because BNSF did not use the proper "headers" in its Fee Application. Obviously, these form over substance objections must be rejected. First, Chemical Lime's argument ignores the detailed and substantive information BNSF provided with its Fee Application. This argument also ignores the Court's detailed and explicit 24 page order (attached to the Fee Application as an exhibit) that painstakingly describes why BNSF is entitled to recover its fees and costs. In fact, all the substantive information required by the Rules is included in BNSF's Fee Application. For example, Chemical Lime contends that BNSF's Fee Application does not include information required by LRCiv 54.2(c). While BNSF's Fee Application may not have the headers "Eligibility," "Entitlement," and "Reasonableness of Requested Award," there is no doubt that BNSF's Fee Application and supporting materials include all of this information. First, BNSF's Fee Application specifies the statutory and contractual

authority upon which it seeks its fees. It also describes the nature of the case and identifies the claims on which BNSF prevailed. BNSF also included a copy of the Court's Order, which details the reasons Chemical Lime must defend and indemnify BNSF. This information more than satisfies the substantive requirements set forth in LRCiv 54.2(c)(1) and (2). Nevertheless, to eliminate Chemical Lime's objection to the form of BNSF's Fee Application, BNSF has attached a Supplement to its Fee Application as Exhibit A. The comprehensive six page affidavit of William Thorpe attached to the Fee Application (the "Thorpe Affidavit") satisfies the requirements of LRCiv 54.2(c)(3). There, Mr. Thorpe addressed all relevant and applicable factors set forth in the "Reasonableness of Requested Award" section of the rule. Indeed, the Thorpe Affidavit addressed the time and labor required of counsel, the hourly rate for all attorneys, the qualifications of all attorneys involved in the case, the manner in which the time was recorded and billed to BNSF, the customary fee charged in matters of the type involved
1939624.1

Case 2:04-cv-00619-RCB

Document 144 - 3 -Filed 07/30/2007

Page 3 of 12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
FENNEMORE CRAIG , P.C.
P HOENIX

and a good number of other factors. This more than satisfies the rule and Chemical Lime has not explained what, if any, information it needed to respond to BNSF's Fee Application. Instead, Chemical Lime simply offers a generic and conclusory objection that BNSF's did not technically comply with certain parts of the rule. Chemical Lime's reliance on Local Rule 54.2 does not provide a basis for denying BNSF's application for fees.2 Chemical Lime's reference to LRCiv 54.2(d) is also misplaced. Local Rule

54(d)(1) calls for a statement indicating that after consultation and good faith efforts, the parties have been unable to satisfactorily resolve disputed issues relating to attorneys' fees. Chemical Lime's objection on this topic is completely disingenuous. Chemical Lime's attorneys (and the Court) know that BNSF made numerous formal and informal attempts to have Chemical Lime pay BNSF's attorneys' fees and costs and that Chemical Lime rejected all of these efforts.3 In fact, BNSF has spent the better part of the last three years trying to get Chemical Lime to pay its fees and those efforts are well-documented. Chemical Lime and BNSF also had conversations with the Ninth Circuit mediator regarding payment of these fees and costs. Additionally, the day before BNSF filed its Fee Application, BNSF provided the amount of its attorneys' fees to Chemical Lime's attorneys and invited Chemical Lime's attorneys to discuss this issue further. Chemical Lime repeatedly rejected all these efforts and its suggestion that it should be relieved of its duty to defend BNSF because BNSF did not attach yet another statement documenting Chemical Lime's refusal to pay BNSF's fees (the very issue that has been briefed and rebriefed) is nonsense.4 Again, however, BNSF's separate statement to eliminate

Chemical Lime's technical objections to BNSF's Fee Application is attached to BNSF's Supplement to its Application for Attorneys' Fees.
2

Again, however, the attached supplement to BNSF's Application addresses the specific form issues set forth in Chemical Lime's response. 3 Significantly, Chemical Lime does not contend that BNSF did not engage in good faith consultations to resolve the attorneys' fees issues. It simply complains that BNSF did not provide a separate statement regarding BNSF's consultation. For the reasons stated herein, this is a hollow objection. 4 Indeed, given the nature of Chemical Lime's objections one wonders if Chemical Lime would have complained about the time associated with drafting such a statement if BNSF had prepared one.
1939624.1

Case 2:04-cv-00619-RCB

Document 144 - 4 -Filed 07/30/2007

Page 4 of 12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
FENNEMORE CRAIG , P.C.
P HOENIX

Similarly, Chemical Lime's implication that BNSF did not provide a task-based itemized statement of fees and an affidavit supporting BNSF's Fee Application is startling. BNSF provided a 151 page task-based itemized statement of fees that includes all the information required by LRCiv 54.2(d)(3). Additionally, as set forth above,

BNSF's Fee Application is supported by the Thorpe Affidavit, which provides all the information required by LRCiv 54.2(d)(4). Chemical Lime's suggestion that the Court should not award any of BNSF's attorneys' fees and costs because BNSF did not provide a copy of its fee agreement with Fennemore Craig is also unavailing. As a preliminary matter, BNSF and Fennemore Craig do not have a formal "fee agreement" for this matter so there is nothing to attach. Additionally, all the information regarding BNSF and Fennemore Craig's billing arrangements are set forth in the Thorpe Affidavit. In short, Chemical Lime's objections to the form of BNSF's Fee Application are not well-grounded in law or fact and should be rejected by the Court. III. BNSF is entitled to the fees incurred before March 15, 2005. Chemical Lime next offers a two sentence objection that BNSF should not be permitted to recover time billed for legal services provided before March 15, 2005 because Chemical Lime contends that BNSF did not tender its defense to Chemical Lime's attorneys until then. Again, Chemical Lime's objection fails for a number of reasons. BNSF's claims agent first tendered its defense to Chemical Lime on September 24, 2003. Of course, Chemical Lime did not accept BNSF's tender at that time. If it had done so, BNSF would not have incurred any fees and would not be seeking to recover its fees now. In any event, on April 29, 2004, BNSF's attorneys received a call from a CNA Insurance adjuster acknowledging that CNA had been placed on notice of the lawsuit. See transcript of voice mail message attached as Exhibit B. On February 7, 2005 BNSF mailed the amended answer and third party complaint to Chemical Lime's Plant Manager and on February 11, 2005, Chemical Lime's attorneys sent BNSF's attorney their representation letter. All of these things happened before March 15, 2005 and it is
1939624.1

Case 2:04-cv-00619-RCB

Document 144 - 5 -Filed 07/30/2007

Page 5 of 12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
FENNEMORE CRAIG , P.C.
P HOENIX

incredible that Chemical Lime would now suggest that BNSF did not tender its defense before March 15, 2005. Additionally, the Track Agreement provides that Chemical Lime must "hold [BNSF] harmless" and pay "all the costs incident to such defense including, but not limited to, attorneys' fees, investigators' fees litigation expenses." The Track Agreement does not say that Chemical Lime is only required to pay post tender defense costs. Thus, even if Chemical Lime's argument were factually accurate (and it is not), it would still fail because it is not supported by the Track Agreement. Finally, this argument is another meaningless diversion. Chemical Lime's

argument might make sense if it immediately accepted BNSF's tender of defense as soon as BNSF's attorneys sent the March 15, 2005 letter to Chemical Lime's attorneys. As the Court knows, however, BNSF tendered its defense to Chemical Lime on numerous occasions and Chemical Lime rejected all of these efforts. Thus, Chemical Lime's

eleventh hour contention that it would have acted differently if counsel's letter had been received earlier is nonsensical. IV. Chemical Lime's objections to BNSF's redactions and entries are not persuasive. Chemical Lime next asks the Court to deny all time that BNSF redacted or improperly described. Again, this request must fail. As a preliminary matter, BNSF provided 151 pages of descriptions that set forth in great detail the legal services that Fennemore Craig provided for BNSF. BNSF's descriptions even break down the time into the increments of time spent on each task. In short, the Court need only review BNSF's task-based itemization to determine that BNSF's descriptions adequately explain and describe the work to be done and counsel's descriptions comply with the rule. In terms of the redactions, LRCiv 54.2(e)(2) specifically provides that in describing the legal services provided, counsel should be sensitive to matters giving rise to issues associated with the attorney-client privilege and attorney work-product doctrine. This consideration is especially important in this case. Both plaintiff and Chemical Lime have
1939624.1

Case 2:04-cv-00619-RCB

Document 144 - 6 -Filed 07/30/2007

Page 6 of 12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
FENNEMORE CRAIG , P.C.
P HOENIX

appealed this Court's rulings. Even more than the ordinary case, BNSF is concerned about the use of any privileged information at the appellate level. Additionally, plaintiff's counsel regularly sues BNSF. privileged communications. Thus, it is especially important to protect BNSF's

Having said this, BNSF is confident that its time is

appropriate and reasonable and therefore will provide an unredacted itemization for the Court's in camera inspection or provide the itemization under seal as permitted by the Rule. See BNSF's separately filed motion to submit unredacted task based itemization under seal and for in camera inspection by the Court. V. BNSF is entitled to recover the time billed tendering the defense to Chemical Lime and fees required to get Chemical Lime to accept BNSF's tender. Chemical Lime next challenges the fees associated with tendering the defense to Chemical Lime ($446) and fees BNSF was forced to spend to compel Chemical Lime to defend and indemnify BNSF. BNSF believes these fees are clearly contemplated by the Court's Order and the Track Agreement. Even if they were not, however, they would be recoverable pursuant to A.R.S. § 12-341.01, which gives the prevailing party in a contract action (BNSF) the right to recover its fees.5 If Chemical Lime were not required to pay these fees, it would encourage parties to avoid their duties to defend and indemnify because they could do so without consequence. Indeed, a party such as Chemical Lime or its insurance company could challenge its duty to defend and postpone payment for years, without fear of having to pay the costs associated with doing so. This would clearly be an unintended and bad result. VI. BNSF is entitled to recover the fees investigating plaintiff's return to work. Chemical Lime next objects to $530 in fees that Chemical Lime contends are related to plaintiff returning to work. Plaintiff's failure to mitigate his damages and seek alternate employment was a significant issue in the underlying case. Investigation and
5

Just because the Court ruled that BNSF's request for indemnification was moot, does not mean BNSF is not the prevailing party against Chemical Lime. Indeed, the Court only ruled that this part of the claim was moot because BNSF prevailed on its motion for summary judgment against plaintiff. Furthermore, given the Court's clear mandate on Chemical Lime's duty to defend BNSF, BNSF believes it would have prevailed on its demand for indemnification if the Court had not granted summary judgment on plaintiff's claims.
1939624.1

Case 2:04-cv-00619-RCB

Document 144 - 7 -Filed 07/30/2007

Page 7 of 12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

analysis of these issues were very much part of the case. VII. BNSF's fees are reasonable. Chemical Lime next challenges the reasonableness of BNSF's fees. This objection fails for the simple reason that BNSF's fees are reasonable and appropriate for this case. As set forth above, BNSF actually investigated, researched and conducted discovery for both plaintiff's claims and BNSF's claims against Chemical Lime. These lawsuits were litigated in federal district court and the litigation took place over three years. BNSF also had to deal with the ever-changing claims and defenses of plaintiff and Chemical Lime. Ultimately, BNSF prevailed on summary judgment motions against both parties. It also filed a motion for reconsideration which was contested by Chemical Lime and further briefing was conducted there. Both Chemical Lime and plaintiff have appealed their adverse decisions to the Ninth Circuit and BNSF is defending the Court's judgments and Orders there. In short, when considering the issues involved in this case it is clear that BNSF's fees and costs are reasonable. Notwithstanding the reasonableness of BNSF's fees, Chemical Lime takes potshots at isolated examples in BNSF's fee statement. For example, Chemical Lime contends that BNSF's fees were excessive because Chemical Lime's attorneys incurred approximately $37,000 in fees. This argument fails for several reasons. First, Chemical Lime's

attorneys concede that BNSF's attorneys were lead counsel in the case. Second, BNSF's attorneys are aware that Chemical Lime's attorneys are subject to draconian fee and billing limitations imposed by Chemical Lime's insurance company. Consequently,

Chemical Lime's fees are not an accurate indicator of the fees needed to successfully defend this case.6 Third, BNSF is the prevailing party in both actions ­ it is hard for Chemical Lime to criticize the fees BNSF incurred considering the result in this case. And finally, if Chemical Lime's insurer wanted to impose its own draconian fee structure in this case and control the fees in the case, it should have accepted BNSF's tender of
6

28
FENNEMORE CRAIG , P.C.
P HOENIX

Indeed, the Court should ask counsel about the limitations placed on counsel in terms of the amount of time Chemical Lime's insurer will pay for various tasks.
1939624.1

Case 2:04-cv-00619-RCB

Document 144 - 8 -Filed 07/30/2007

Page 8 of 12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

defense long ago. Similarly, with all due respect to Mr. Kloss, his opinions offer very little to this analysis. While it may be easy for Mr. Kloss to Monday morning quarterback this file, he was not involved in the case. Additionally, he offers only general comments about what he would expect to budget for such a case. He does not claim, however, to have any special knowledge relating to the defense of FELA claims, the interpretation of Railroad Industrial Track Agreements or the special concerns of railroads involved in litigating such issues. Indeed, it is not clear that Mr. Kloss has any experience defending Federal Employers' Liability Act cases or representing railroads.7 In contrast, Mr. Thorpe has substantial knowledge and experience in these areas and has specific and personal knowledge regarding this case. Thus, it is not clear what Chemical Lime believes Mr. Kloss's opinions bring to this case, especially considering that Bill Thorpe, the attorney who actually was responsible for this case, was the billing attorney and has personal and extensive knowledge regarding the matters included in his affidavit to this Court. There are other reasons that Mr. Kloss's criticisms are unpersuasive. First, it is important to note that Mr. Kloss was specifically hired to find problems with the bill and even with that charge only criticized fees that make up about ten percent of the total fees. Second, while Mr. Kloss criticizes the number of attorneys who worked on this case since March 2004 through the present, he does not claim that the case was inappropriately staffed at any particular point in time. To the contrary, Mr. Thorpe provided appropriate supervision and Mr. Rivera was responsible for the bulk of the day to day management and work on the case. Mr. Thorpe and Mr. Rivera also used associate and paralegal time appropriately and efficiently.8 While BNSF does not feel compelled to respond to each of Mr. Kloss's criticisms,
7

26 27 28
FENNEMORE CRAIG , P.C.
P HOENIX

Mr. Kloss's firm website appears to list his primary practice area as "Construction." Mr. Thorpe has been handling FELA lawsuits and representing railroads for most of his nearly 30 years of practice. He, along with Sal Rivera, are two of the handful of Arizona lawyers with extensive experience in this area. 8 The only reason a number of attorneys worked on the file is because Charles Houston left the Firm and was replaced on the file by Melissa Rawlinson. Mr. Thorpe was careful to ensure that BNSF was not charged for inappropriate time spent learning the case.
1939624.1

Case 2:04-cv-00619-RCB

Document 144 - 9 -Filed 07/30/2007

Page 9 of 12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
FENNEMORE CRAIG , P.C.
P HOENIX

it is important to note that Mr. Kloss was only able to identify a few examples that he considered excessive. Furthermore, Mr. Kloss's isolated "specific examples of

excessiveness" reflect his lack of knowledge regarding the file. For example, Mr. Kloss criticizes the fact that Fennemore Craig spent approximately 40 hours on the initial disclosure statement. Mr. Kloss does not, however, describe what he believes should go into drafting an FELA disclosure statement, nor does he acknowledge or attempt to define the amount of time necessary to evaluate all the claims file materials, personnel files, medical records, vocational rehabilitation materials, investigative reports and issues analysis related to plaintiff's toxic inhalation claims and investigate issues related to contractual indemnification claims. In short, Mr. Kloss tries to apply some undescribed generic formula for setting the fee, when in reality, the case had unique and complicated factual and legal issues. Similarly, Chemical Lime criticizes the fact that it took 38 hours on BNSF's Reply in support of BNSF's summary judgment motion on indemnity. Considering the amount of work that went into this reply, and the nature of Chemical Lime's ever changing defenses, the amount of time was perfectly appropriate and warranted.9 And again, BNSF would reemphasize the fact that it was the prevailing party, which confirms that the work was appropriate.10 In short, BNSF's fees are reasonable and appropriate and should be awarded by the Court. VIII. BNSF is entitled to its fees incurred defending itself in the Ninth Circuit. Finally, Chemical Lime contends that BNSF is not entitled to recover the fees on appeal. As set forth in BNSF's reply in support of its costs on appeal, BNSF believes the Court has the authority to require Chemical Lime to reimburse BNSF's fees on appeal. Again, the fees on appeal were incurred solely because BNSF was required to defend itself and because Chemical Lime continues to shirk its responsibility to do so. Chemical Lime is absolutely wrong that this Court does not have the authority to award BNSF these
9

Indeed, in its effort to avoid its contractual duty to defend BNSF, Chemical Lime pursued the strategy of throwing up every defense it could conceive (whether viable or not), which required BNSF to research, investigate and respond to each of these defenses. 10 BNSF would also like to note that its attorneys take proceedings in Federal Court very seriously and gave all its written materials the research, writing and analysis it believes such proceedings deserve.
1939624.1

Case 2:04-cv-00619-RCB

Document 144 - 10Filed 07/30/2007

Page 10 of 12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
FENNEMORE CRAIG , P.C.
P HOENIX

fees. This Court has concluded that Chemical Lime has a duty to defend BNSF. BNSF was required to incur the fees associated with plaintiff's appeal because Chemical Lime refused to accept its responsibility to defend BNSF in the Ninth Circuit. These are fees that should have been paid by Chemical Lime rather than BNSF. Consequently, these fees are covered by the Court's Order and included in the fees that Chemical Lime must reimburse to BNSF. X. Conclusion BNSF filed a proper application for attorneys' fees. Fennemore Craig has worked for BNSF and its predecessors in interest for over one hundred years, which confirms that it trusts counsel's work and the fairness and accuracy of Fennemore Craig's billings. In reality, Chemical Lime's ongoing objections are simply an abuse of the Court's time and a waste of further resources. BNSF asks the Court to award all the fees and costs requested in BNSF's Fee Application. DATED this 30th day of July, 2007. FENNEMORE CRAIG, P.C.

By s/Sal J. Rivera Sal J. Rivera William L. Thorpe Attorneys for BNSF

1939624.1

Case 2:04-cv-00619-RCB

Document 144 - 11Filed 07/30/2007

Page 11 of 12

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
FENNEMORE CRAIG , P.C.
P HOENIX

CERTIFICATE OF SERVICE I hereby certify that on July 30, 2007, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: George T. Brugess Hoey & Farina, P.C. 542 S. Dearborn, Suite 200 Chicago, IL 60605 Attorneys for Plaintiff Charles D. Onofry ReNae A. Nachman Schneider & Onofry, P.C. 3101 N. Central Ave., Ste. 600 Phoenix, AZ 85012 Attorneys for Third-Party Defendant Chemical Lime I hereby certify that on July 30, 2007, I served the attached document by facsimile and U.S. mail on the following, who are not registered participants of the CM/ECF System: William D. Black One East Camelback Road Suite 630 Phoenix, Arizona 85012-1658

s/Mary Boston

1939624.1

Case 2:04-cv-00619-RCB

Document 144 - 12Filed 07/30/2007

Page 12 of 12