United States District Court, District of Colorado
R. BROOKE JACKSON UNITED STATES DISTRICT JUDGE
The case is before the Court on defendant’s application for an award of attorney’s fees. ECF No. 212. Plaintiff responded [ECF No. 225], and defendant replied [ECF No. 228]. The Court directed counsel and the parties to make another serious effort to resolve the matter, taking into account plaintiff’s litigation practices and the ultimate lack of merit of its claims but also a realistic assessment of plaintiff’s ability to pay. ECF No. 231. The parties did not resolve anything, and the Court held an evidentiary hearing on March 5, 2015. The Court now grants the motion and awards attorney’s fees and costs to the defendant in the amount of $775, 090.35.
Dish Network Services, LLC sells and leases satellite systems, stand-alone satellite receivers and related accessories. From 2004 through July 2011 PDX was a Dish contractor, providing satellite dish installation, repair and related services to Dish customers in parts of Oregon and Washington. The parties’ relationship was defined by a series of three Installation Services Agreements or “ISA’s and Dish’s “Business Rules.”
So far as I am aware, PDX’s services were competently performed. However, PDX’s bookkeeping and compliance procedures were in disarray. PDX’s President Michael Paxton admitted in a deposition that, at times, PDX’s accounting system was something of a “black hole.” Dish’s Business Rules provided details as to when and how contractors such as PDX would submit documentation of their claims for payment. On numerous occasions PDX failed to submit claims for payment within the timeframe required. PDX eventually requested that Dish make an exception to the Business Rules so that it could submit claims out of time.
Realizing that PDX probably had not been fully paid for its work, Dish did grant an exception and extended the deadline for submitting claims. Dish also undertook a “reconciliation” process that began in 2006 and was intended to rectify disparities between work performed and payments made. This process did result in additional amounts being paid to PDX, but PDX continued to experience difficulty documenting its claims. PDX was still trying to pull together more documentation when Dish, on March 24, 2011, put an April 4, 2011 deadline on the exception and reconciliation process. That date came and went, and when Dish finally terminated the last ISA on July 11, 2011, PDX believed that there still were more than 20, 000 transactions for which it had not been properly paid.
PDX filed this lawsuit on June 29, 2012 seeking additional compensation. It later filed First, Second and Third Amended Complaints, perhaps in part because during the course of the case PDX was represented by six different lawyers. In its Third Amended Complaint PDX asserted seven claims for relief: (1) breach of the ISA(s) and their implied covenant of good faith and fair dealing; (2) promissory estoppel; (3) quantum meruit; (4) unjust enrichment; (5) civil conspiracy; (6) declaratory judgment; and (7) negligent misrepresentation.
Multiple complaints and multiple claims inevitably generate substantial motion practice. Dish filed motions to dismiss various claims asserted in each complaint after the first one and, later, a motion for summary judgment. To an extent they were successful. In an order issued on July 1, 2013 the Court dismissed the civil conspiracy and declaratory judgment claims. ECF No. 77. On March 5, 2014 the Court granted partial summary judgment dismissing the quantum meruit and negligent misrepresentation claims. ECF No. 185. The motions and briefing naturally escalated litigation costs.
Recurrent discovery disputes also escalated the litigation costs. Much of the problem centered on Dish’s “Interrogatory 4, ” included in a set of interrogatories served on December 14, 2012. In this interrogatory Dish asked PDX to identify each transaction for which it was seeking compensation and provide details such as the work order number, account number, reconciliation type, amount requested, and supporting documentation. ECF No. 88-1 at 2. In other words, show us what you think we owe you and why we owe it. Ultimately PDX filed eight responses to this interrogatory. In its first and second responses PDX did not identify the number of transactions at issue. In its third response PDX claimed to have been underpaid for 21, 632 transactions. Subsequent responses decreased the number of transactions to 18, 079, then to 16, 910, then to 11, 481, then to 3, 451. Even with the decreasing number of disputed transactions, PDX was largely unable to provide the additional information about the claims that Interrogatory 4 requested.
Interspersed with the supplements to Interrogatory 4 were repeated hearings on unresolved discovery disputes – one before this Court and seven times before Magistrate Judge Shaffer. Dish filed its first motion for sanctions based upon discovery violations on October 3, 2013. ECF No. 87. The magistrate judge did not award sanctions, but he ordered further production and warned PDX and its counsel that they could face sanctions, and that plaintiff’s recoverable damages could “drop precipitously, ” if PDX did not produce evidence to support its underpayment claims. See Transcript of October 17, 2013 hearing [ECF No. 107] at 62-63, 88, 109.
The problems were not resolved. PDX continued to have difficulty producing evidence supporting its claims. Dish again moved for sanctions on December 16, 2013. ECF No. 123. Dish requested either dismissal of the case or “issue sanctions” plus attorney’s fees and costs. Id. at 35. The motion became ripe upon the filing of Dish’s reply brief on January 23, 2014, and it was heard by Magistrate Judge Shaffer on February 26, 2014. At the conclusion of the hearing Judge Shaffer issued a recommendation that this Court impose certain evidentiary sanctions at trial, namely (1) that PDX be precluded from asserting any transaction other than 3, 541 transactions listed on a spreadsheet produced on the previous day (PDX’s latest response to Interrogatory 4); (2) that PDX be barred from referring to or offering into evidence any document not referenced on the spreadsheet; and (3) that PDX and its witnesses be precluded from arguing or insinuating to the jury that its inability or failure to produce additional documentary evidence in support of its damages claims was attributable to any fault or inaction by Dish. ECF No. 181. Id.
Judge Shaffer also indicated that he considered PDX’s conduct to be unreasonable and vexatious, and that after Dish submitted a bill of costs and PDX responded, he would issue a written order imposing monetary sanctions against PDX, counsel, or both. Transcript [ECF No. 184] at 91-93. At PDX’s request, the magistrate judge postponed the deadline for Dish to submit a “bill of costs” relating to the monetary sanction until after the trial. Dish ultimately sought a monetary sanction of a little over $127, 000. ECF No. 207. There has been no ruling on the monetary sanction and as discussed below, the present order moots the sanctions issue.
Both parties objected to the magistrate judge’s sanction order, PDX because it went too far, Dish because it didn’t go far enough. ECF Nos. 188 and 190. This Court held a final trial preparation conference on March 26, 2014 – five days before trial -- and at that time advised counsel that it would likely affirm the magistrate judge’s sanction order. PDX’s counsel then indicated that, due to the recommended evidentiary sanction (which this Court formally approved on March 27, 2014) PDX would not be able to present any evidence of the amount of their claimed damages, even with respect to the 3, 541 transactions. Therefore, while the PDX’s President, Michael Paxton, still believed that he was owed between one and two million dollars, PDX would only be able to present evidence of liability and hope to obtain nominal damages and an award of attorney’s fees as the prevailing party under the ISA contracts. Transcript [ECF No. 230] at 8-16. The Court expressed doubt that it would award a substantial amount of attorney’s fees to PDX in that situation. Id. at 8. Even then the parties were unable to settle the case.
The case went to trial to a jury on March 31, 2014. By the time the jury was instructed the case boiled down to PDX’s claim under Colorado law that Dish breached the implied covenant of good faith and fair dealing. Specifically, PDX contended that the ISA’s had been orally modified by the exception/reconciliation process; that the modified ISA’s granted Dish discretion with respect to the timing of submission of late claims; that Dish exercised its discretion in bad faith when it imposed the April 4, 2011 deadline on 11 days’ notice; and that Dish thereby deprived PDX of its reasonable expectation that it would be allowed sufficient time to complete the process of pulling its documentation together. The jury found that the ISA’s were not orally modified by the exception process, thus resulting in a verdict and judgment for Dish.
The ISA’s provided for an award of attorney’s fees to the prevailing party. Dish now seeks an award of attorney’s fees under the 2009 ISA which provides, “In the event of any suit or action to enforce or interpret this Agreement or any provision thereof, the prevailing party shall be entitled to recover its costs, expenses and reasonable attorney fees, both at trial and on appeal, in addition to all sums allowed by law.” ECF No. 212-1 at 8, ¶22. Plaintiff does not dispute Dish’s entitlement to an award of costs and attorney’s fees under the contract, but it does dispute the amount.
A. Applicable Legal Standard.