CAFC affirms exceptional case designation, but not fees awarded, in Rembrandt case

The outcome:


Rembrandt appeals both the district court’s exceptional-case
determination and its fee award. We conclude
that the district court did not abuse its discretion in
deeming this case exceptional, but that the court erred by
failing to analyze fully the connection between the fees
awarded and Rembrandt’s misconduct. We thus affirm
the district court’s exceptional-case determination, vacate
the district court’s fee award, and remand for further
proceedings.



As to fees:



Rembrandt also takes issue with the district court’s
award of $51 million in attorney fees. Rembrandt raises
no specific objections to Appellees’ tabulations of the
hours they expended; nor does Rembrandt contend that
Appellees should have calculated fees using a lower
hourly rate. Rembrandt instead argues that the fee
award is excessive and unreasonable because the district
court failed to establish a causal connection between the
claimed misconduct and the fees awarded. We agree.

(...)

But, critically, the amount of
the award must bear some relation to the extent of the
misconduct. Rambus, 318 F.3d at 1106. The district
court must explain that relationship, at least to the extent
practicable.

(...)

The district court, by and large, did not even attempt
to assess which issues the claimed misconduct affected. It
specifically addressed the fees Appellees incurred relating
to the ’627 patent, which Appellees had listed separately
in their proposed orders. Second Fees Order, at 2 n.1.
But the district court did not establish a causal connection
between the misconduct and those fees, and it did not
offer any other reason for its fee award. Id. And, even
though the district court explained why it awarded the
attorney fees that Adelphia incurred defending against
Rembrandt in bankruptcy court, it again failed to connect
the misconduct with Adelphia’s fees. Nowhere did the
district court address the requisite “causal connection” it
was required to find between the misconduct and the fees
it awarded. Goodyear, 137 S. Ct. at 1187.

(...)

The most appropriate course, therefore, is to remand
for the district court to determine in the first instance
how much of the claimed fees Rembrandt should pay.
This does not require a tedious, line-by-line investigation
of the hours Appellees expended. As the Supreme Court
recently explained in Goodyear, “‘[t]he essential goal’ in
shifting fees’ is ‘to do rough justice, not to achieve auditing
perfection.’” Id. (quoting Fox v. Vice, 563 U.S. 826,
838 (2011)). “The court may decide, for example, that all
(or a set percentage) of a particular category of expenses—
say, for expert discovery—were incurred solely because of
a litigant’s bad-faith conduct.” Id. “And such judgments,
in light of the trial court’s ‘superior understanding of the
litigation,’ are entitled to substantial deference on appeal.”
Id. (quoting Hensley, 461 U.S. at 437).