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Rival Company to Fight Lockheed's Legal Fee Request
L-3 Comm lawyer: $16 million fee request includes redundancies, should be cut to $3 million
Fulton County Daily Report
September 16, 2009
Lockheed Martin Corp., which last spring won a $37 million trade secrets verdict against a competitor, has asked a federal judge in Atlanta for more than $16 million as reimbursement for fees and expenses it paid to the Kilpatrick Stockton and Venable law firms to pursue the case.
L-3 Communications Integrated Systems, which a jury found had deliberately misappropriated Lockheed's trade secrets regarding an antisubmarine bomber, has countered that the fee request is excessive. L-3 Comm claims, among other things, that Kilpatrick Stockton rotated associates in and out of the case, racking up additional hourly fees as newly assigned lawyers logged "unreasonable hours to recreate knowledge obtained by other associates."
L-3 Comm's lead counsel, Martin E. Rose of Rose Walker in Dallas, argued that Lockheed's request should be slashed by about 80 percent to no more than $3 million.
Along with awarding Lockheed $37 million in damages, the jury in May found that L-3 Comm's actions that prompted the litigation constituted bad faith, so Lockheed was entitled to "reasonable" attorney fees and expenses.
U.S. District Judge Charles A. Pannell Jr. will decide how much L-3 Comm should reimburse Lockheed, which has a 900-acre aircraft plant in Marietta, Ga., and a second plant in Warner Robins, Ga.
Lockheed has also asked the judge for a permanent injunction that would bar L-3 Comm from using or disclosing Lockheed's proprietary data to secure contracts to repair "any non-United States government owned and operated aircraft" -- an issue at the center of the litigation. Lockheed's pleadings place the value of future business opportunities to work on its aircraft at as much as $5 billion.
FIGHT OVER A WORKHORSE
After a two-week trial in May, a jury found that L-3 Comm improperly used proprietary information associated with Lockheed's P-3 series of aircraft -- a military workhorse surveillance plane used by navies around the world. The aircraft was used in surveilling Somali pirates who tried to hijack an American freighter last April and held its captain hostage.
Lockheed claimed that L-3 Comm had used Lockheed trade secrets (specifically proprietary engineering drawings and technical engineering manuals associated with the aircraft's design) to secure a $427 million contract with the government of South Korea to refurbish eight Lockheed planes that the Korean government had purchased as military surplus.
Lockheed had competed unsuccessfully against L-3 Comm for that contract.
The jury also found that L-3 Comm had breached its licensing contracts with Lockheed, which from the 1960s to the 1990s had provided some of the proprietary information at the heart of the suit to L-3 Comm's predecessor firms to maintain planes that Lockheed built.
The Atlanta litigation is one piece of a high-stakes feud between the two defense contractors over a growing international market: the refurbishment of military aircraft, much of it designed and built by Lockheed, that are owned by governments around the world.
In Dallas, L-3 Comm has sued Lockheed, contending that Lockheed filed the Atlanta litigation in an attempt "to stifle competition." Both Lockheed and L-3 Comm compete in the international aircraft modification and refurbishment market, which can pull in as much as $75 million to $80 million a plane, according to L-3 Comm's Texas complaint.
The issue is complicated by a long-standing corporate relationship between Lockheed and L-3 Comm and its predecessor firms which, for decades, with Lockheed's consent, serviced Lockheed's P-3 planes for the U.S. military and the CIA.
L-3 Communications Integrated Systems is a subsidiary of L-3 Communications Corp., the sixth-largest defense firm in the country.
A GLIMPSE INTO COMPLEX LITIGATION
Lockheed's lead counsel, Kilpatrick Stockton partner William H. Boice and Venable partner Brock R. Landry, a member of Venable's executive committee, both of whom filed affidavits with the court concerning Lockheed's fee petition, could not be reached for comment.
Citing the complexities of the litigation, which included exploring the extent to which the U.S. government could share proprietary data among its contractors and the conditions, in turn, that were attached to those contractors' use of such information, Boice said that Lockheed hired Kilpatrick to handle the trade secret questions and Venable for its expertise in government contracting and procurement.
The dispute over how much Lockheed should be reimbursed in legal fees provides a rare glimpse at how large firms allocate their resources and bill their clients for work on massive litigation.
Lockheed paid $11.2 million to Kilpatrick and $2.8 million to Venable in fees. The company's lawyers also spent an additional $2.5 million in expenses, including nearly $2 million in expert and consulting fees and more than $70,000 in trial graphics.
Together, the two firms assigned at least 21 partners, 28 associates and 77 paralegals to the case, according to court pleadings.
Bills submitted to the court show that during the four-year litigation, the hourly rates of partners, associates and paralegals assigned to the Lockheed case at Kilpatrick and Venable rose annually.
The hourly rate of Boice, lead counsel and co-chair of Kilpatrick's patent litigation team rose from $545 to $625. The hourly rate of partner James F. Bogan III, chairman of the firm's technology litigation team, rose from $445 to $495.
Four other Kilpatrick partners also billed increasing hourly rates as the litigation progressed. The rate for Audra A. Dial, an associate who was made partner during the litigation, jumped from $285 an hour to $425 an hour. Partner C. Allen Garrett's hourly rate rose from $400 to $425. Partner Ronald L. Raider's hourly billings increased from $350 to $515. Partner Richard S. Gottlieb's rate grew from $345 to $375 an hour.
The hourly rates of Lockheed's Venable lawyers followed the same trajectory. At Venable, partner Terry L. Elling's hourly rate increased from $330 to $460 an hour. Partner Thomas J. Madden's hourly rate rose from $445.50 to $625 an hour, and partner Paul A. DeBolt's hourly rate climbed from $410 to $475 an hour during the four-year span of the case.
Venable later discounted its hourly billings by at least 10 percent, according to Venable affidavits in the case.
'UNREASONABLE EXHIBITS'
In challenging Lockheed's legal bills, Rose argued for L-3 Comm that his opponents were billing for unnecessary and duplicative legal work.
Among his observations:
• 18 partners, associates and paralegals spent 1,269 hours -- or 75 minutes per entry -- drafting and revising Lockheed's privilege log of slightly more than 1,100 entries, many of which were identical.
• 21 partners and paralegals billed 1,524 hours preparing witness files and assembling documents for depositions -- about 34 hours per file.
• Nine partners and associates spent more than 1,600 hours drafting outlines for the direct examination of Lockheed's eight trial witnesses -- about 201 hours per witness.
• 11 partners and associates billed more than 2,200 hours drafting cross-examination outlines and conducting mock cross-examinations of Lockheed wintesses, including three witnesses who never appeared at trial.
• 13 partners, associates and paralegals spent nearly 820 hours, and billed more than $235,000, to prepare a 1 million-page pretrial exhibit list that the court found was "unreasonable."
• Six attorneys spent more than 775 hours reviewing depositions to prepare an outline for a summary judgment motion. Kilpatrick alone enlisted 13 partners and associates to research, draft and respond to L-3 Comm's motion for summary judgment.
• Seven attorneys together spent eight hours per page drafting a motion to compel.
• Five paralegals billed 73 hours to gather 15 exhibits for a second motion to compel.
• 14 paralegals and partners spent nearly 1,300 hours reviewing allegedly proprietary drawings that Lockheed had known for nearly a decade were being sold on the open market and that, according to Rose, were not trade secrets "and not part of this case."
Rose also argued that the jury's verdict was based on a finding "that just 20 percent of the information that Lockheed claimed was trade secret really is a trade secret." He noted that the jury found that two categories of Lockheed blueprints and drawings, which constituted about 80 percent of the drawings Lockheed had claimed were proprietary, were no longer trade secrets.
Rose used that finding to suggest that the legal fees and litigation expenses awarded to Lockheed be reduced by 80 percent. That would mean that Lockheed could recover no more than $1.8 million of more than $11 million it has paid to Kilpatrick and, at most, an estimated $500,000 of $2.5 million in additional expenses. Rose also suggested that Venable's fees should be excluded from any legal fees awarded by the court or, in the alternative, reduced by 80 percent to about $570,000.
Rose also noted in pleadings that the jury awarded Lockheed just 3.2 percent of nearly $689 million in actual and punitive damages that the defense contractor had originally sought.
Kilpatrick partner Audra Dial explained after the verdict that while the jury did not award Lockheed punitive damages, which were included in the $689 million request, the verdict will force L-3 Comm to disgorge the maximum possible profits it earned through its Korean contract. Those profits were projected to fall between $9 million and $30 million, Dial has said.
The case in the Northern District of Georgia is Lockheed Martin Corp. v. L-3 Communications Integrated Systems, No. 1:05-cv-0902.
