Reduction in Attorney’s Fees and Costs Without Sound Basis Was Error

The Eleventh Circuit Court of Appeals has held that an award of attorney’s fees by the district court was reversible error because the lower court failed to account for the contractually bargained for attorneys fees clause in the copyright and breach of contract action. In Yellow Pages Photos, Inc. v. Ziplocal, LP, 846 F.3d 1159 (11th Cir. 2017) (Available Here), the 11th Circuit reversed the district court’s award of attorney’s fees finding that the district court’s failure to award full costs without a sound basis was error.

The district court awarded $69,354 in attorney’s fees and $20,211 in non-taxable costs against Ziplocal. These amounts were about 5% of the fees and 7% of the costs that Yellow Pages Photos, Inc. (“YPPI”) requested. The underlying dispute involved a series of stock photographic images YPPI grouped for sale under subject matter headings specifically designed for use by the phonebook industry. Ziplocal signed a contract with YPPI, where Ziplocal agreed to purchase a license to use all of YPPI’s current photographic content. The contract also required Ziplocal to prevent unauthorized users from accessing YPPI’s photos and forbade Ziplocal from transferring any images to any outside parties unless authorized by YPPI. Also, the agreement contained a prevailing party attorneys fees provision to collect fees and costs in any legal action enforcing the contract or in conjunction with the use of YPPI’s licensed photos.

Ziplocal transferred the photos to another company to update its books and YPPI brought suit alleging Ziplocal breached its licensing contract with YPPI and infringed YPPI’s copyrights. The jury found Ziplocal breached the contract, but YPPI suffered no damages from the breach. The jury awarded $123,000 in statutory damages for copyright infringement and $100,000 in actual damages.

After trial, YPPI filed several motions seeking fees and costs totaling $1,422,661 in attorney’s fees and $269,484 in costs. The district court initially found that some reduction of attorney’s fees was appropriate based on block billing practices, the contentiousness of the litigation and the belief that copyright claims were not recoverable pursuant to the licensing agreement providing the basis for the fee award. Accordingly, the district court order provided for a 35% reduction in attorney’s fees and set the lodestar amount at $924,730.

The district court then reduced the award by an additional nearly 93% to reflect YPPI’s relative degree of success in the litigation. The district court explained that YPPI’s recovery was 10% of the lowest amount Plaintiff sought and 5% of the top range of damages sought.

The 11th Circuit reversed the district court, finding that the district court erred. First the district court erred in refusing to count hours expended in pursuit of YPPI’s copyright claims against Ziplocal in its initial lodestar calculation. The copyright claims arose directly out of the contract with Ziplocal. The contract clearly covered litigation in conjunction with the use of the product. YPPI was entitled to reasonable attorney’s fees for hours expended on copyright claims. Second, the district court erred by further reducing the reasonable lodestar amount. The contract explicitly entitled the winning party to recover its attorney’s fees and costs. By reducing the attorney’s fees, the district court denied YPPI the benefit of its bargain and effectively rendered the contractual fees provision meaningless. Likewise, the district court abused its discretion by reducing the costs.

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