Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions

Touch N' Go
, the DeskTop In-and-Out Board makes your office run smoother.


You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Nautilus Marine Enterprises, Inc. v. Exxon Mobil Corporation & Exxon Shipping Co. (8/22/2014) sp-6942

Nautilus Marine Enterprises, Inc. v. Exxon Mobil Corporation & Exxon Shipping Co. (8/22/2014) sp-6942

         Notice:  This opinion is subject to correction before publication in the PACIFIC  REPORTER .  

         Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,  

         303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, e-mail  


NAUTILUS MARINE ENTERPRISES,                             )  

INC.,                                                    )                                                     

                                                         )    Supreme Court No. S-14736  

                           Appellant,                    )  

                                                         )    Superior Court No. 3AN-07-10901 CI  

                                                         )    and 3AN-09-07869 CI (Consolidated)  

         v.                                              )  

                                                         )    O P I N I O N  

EXXON MOBIL CORPORATION and                              )  

EXXON SHIPPING COMPANY,                                  )  

                                                         )    No. 6942 - August 22, 2014  

                           Appellees.                    )  


                  Appeal from the Superior Court of the State of Alaska, Third  


                  Judicial District, Anchorage, Sen K. Tan, Judge.  

                  Appearances:  Charles  W.  Coe,  Law  Office  of  Charles  W.  

                  Coe, Anchorage, for Appellant.  John Clough III, Clough &  


                  Associates, P.C., Auke Bay, and Carla J. Christofferson and  


                  Dawn  Sesito,  O'Melveny  &  Myers  LLP,  Los  Angeles,  

                  California,      for    Appellee       Exxon       Mobil      Corporation.  

                  Douglas J. Serdahely and Barat LaPorte, Patton Boggs LLP,  


                  Anchorage,  for  Appellees  Exxon  Mobil  Corporation  and  

                  Exxon Shipping Company.   

                  Before:  Fabe, Chief Justice, Stowers, Maassen, and Bolger,  


                  Justices.   [Winfree, Justice, not participating.]  


                  MAASSEN, Justice.  

----------------------- Page 2-----------------------


                    The superior court issued a declaratory judgment interpreting a settlement  




agreement between Nautilus Marine Enterprises (Nautilus) and Exxon,  then decided that 


Exxon was the prevailing party.  Nautilus appeals the ensuing awards of attorney fees and  


costs as excessive.  It focuses particularly on the out-of-state hourly billing rates that the  

superior court accepted, the number of hours billed, and the court's imposition of a fee  

enhancement and sanction. Nautilus also contests the court's determination of prevailing  


party status, its award of costs, and its failure to apportion fees and costs.  We reverse and  


remand for the superior court to recalculate the attorney fees award based on Alaska rates  


and for apportionment of fees and costs; we affirm on all other issues.  


                    Exxon entered into a settlement agreement in 2006 with Nautilus and Cook  

Inlet Processing, resolving a lawsuit related to the 1989 Exxon Valdez oil spill.  The  

settlement agreement reserved the question of the rate of prejudgment interest for the  


federal district court.  U.S. District Judge H. Russel Holland ruled that interest should be  


10.5% compounded annually, but the Ninth Circuit reversed, holding that Judge Holland  


had erroneously failed to consider extrinsic evidence of whether the parties had agreed  

to compound interest.  

                    In 2009, Exxon filed a complaint against Nautilus and Cook Inlet Processing  

in Alaska state court, and further federal proceedings were stayed pending resolution of  


the  state  case.    Exxon's  complaint  asked  that  the  superior  court  either  reform  the  

settlement agreement to comply with what Exxon alleged to be the parties' intent (that  

           1         Exxon Mobil Corporation and Exxon Shipping Company were both parties  


 to the settlement agreement and the lawsuit.  We refer to them collectively as "Exxon"  


 throughout this opinion.  

                                                              -2-                                                           6942  

----------------------- Page 3-----------------------


interest not be compounded) or issue a declaratory judgment that the contract did not  


require compound interest.  Exxon was represented by lawyers from two law firms:  the  

Anchorage office of Patton Boggs LLP and the Los Angeles office of O'Melveny &  

Myers LLP.  

                    Cook Inlet Processing settled with Exxon in early fall 2010.2  

                                                                                                                 A three-day  


trial of the remaining claims took place in November 2011.  After trial the superior court  


found that the settlement agreement did not require Exxon to pay compound interest in  


all circumstances; instead, it found, "the parties intended that Judge Holland of the U.S.  

District Court determine both the correct rate of interest and the method of computing that  

interest under federal or state law."  The court also found that Exxon was the prevailing  


party and addressed alleged misconduct by Nautilus's president, Thomas Waterer.  

                    During his deposition, Waterer had refreshed his memory by reviewing  

personal telephone logs.  Exxon hired a forensic expert who concluded that the logs had  


been altered by the addition of references to compound interest and the excision of several  


pages covering the period of the settlement negotiations.  Exxon filed a motion shortly  


before trial alleging spoliation of evidence; the court deferred a ruling until after trial.  


The court then denied the spoliation motion on grounds that Waterer's testimony had not  


proven to be relevant anyway,3 but it found that Waterer had "intentionally altered his  

notebooks to support [Nautilus's] position," justifying sanctions.  

           2         The exact date of the settlement is unclear from the record.  Counsel for  

 Nautilus was aware by September 17, 2010, that Cook Inlet Processing was settling with  


 Exxon, but Exxon's billing records show that the settlement was still being finalized in  


 early October.  



                     See Estate of Day v. Willis, 897 P.2d 78, 81 (Alaska 1995) ("An action  


 based  on  the  tort  of  spoliation  is  meritless  unless  it  can  be  shown  that  a  party's  

 underlying cause of action has been prejudiced by the spoliation.").  

                                                                -3-                                                         6942

----------------------- Page 4-----------------------

                    Exxon moved for attorney fees and submitted a cost bill.  The court began  

its analysis under Alaska Civil Rule 82(b)(2) with the standard 30% of reasonable actual  

fees for a case that goes to trial and does not result in a money judgment; it then adjusted  


this amount upward by 5% in order to account for the time Exxon's attorneys had spent  


responding to Waterer's bad-faith conduct.  The court found that Exxon's retention of  


O'Melveny & Myers was reasonable, and it awarded fees for that firm's work based on  

its Los Angeles billing rates.  The total attorney fees awarded were $725,873.  The court  


also  awarded  60%  of  the  fees  of  Exxon's  forensic  expert  as  a  sanction  under  Civil  


Rule 37.   

                    The clerk of court approved the cost bill in April 2012, including costs for  


computer research, copying, travel, and depositions.  Nautilus moved for superior court  


review, which resulted in the apportionment of some of the deposition and travel costs to  


Cook Inlet Processing.  The court entered a revised final judgment on October 12, 2012,  


incorporating its findings on the settlement agreement, its award of attorney fees, and its  


award of costs.  We affirmed the merits of the court's underlying decision on Nautilus's  



              This second appeal involves the remaining issues of attorney fees and costs.  



                    We review for abuse of discretion both the determination of prevailing party  



status and the award of attorney fees.   "An award constitutes an abuse of discretion only  

           4         Nautilus Marine Enters., Inc. v. Exxon Mobil Corp. , 305 P.3d 309 (Alaska  


           5          Wooten v. Hinton, 202 P.3d 1148, 1151 (Alaska 2009) (citing Olivit v. City  

 & Borough of Juneau, 171 P.3d 1137, 1142 (Alaska 2007)).  

                                                                -4-                                                            6942  

----------------------- Page 5-----------------------


when it is manifestly unreasonable."   But "[i]f the award of attorney's fees requires  


                                                                                                                      We also  

interpretation of Alaska Civil Rule 82, we perform an independent review."  


                                                                                                   and the imposition of  

review for abuse of discretion the superior court's award of costs 


sanctions for discovery violations.    

IV.	      DISCUSSION10  


          A.	       An Award Of Attorney Fees Under Rule 82 Should Be Based On Local  

                    Rates Absent Extraordinary Circumstances.  


                    Nautilus contends that the superior court abused its discretion because its  


award of fees was based in part on billings of O'Melveny & Myers, Exxon's Los Angeles  



lawyers, at hourly rates significantly higher than those prevailing in Anchorage. 

           6         Thorstenson v. ARCO Alaska, Inc., 780 P.2d 371, 376 (Alaska 1989) (citing  

 Haskins v. Shelden , 558 P.2d 487, 495 (Alaska 1976)).  

           7	        Alderman v. Iditarod Props., Inc. , 32 P.3d 373, 380 (Alaska 2001).  

           8	        Kaps Transp., Inc. v. Henry , 572 P.2d 72, 77 (Alaska 1977).  

           9         Khalsa v. Chose , 261 P.3d 367, 372 (Alaska 2011) (citing                             Underwriters at  

 Lloyd's London v. The Narrows , 846 P.2d 118, 119 (Alaska 1993)).  

           10        The first issue Nautilus raises is the superior court's determination that  

 Exxon was the prevailing party.  But Nautilus challenged this finding in its earlier appeal  

 of the merits, in which we held that the superior court did not err in its prevailing party  


 determination.  Nautilus Marine Enters., Inc. v. Exxon Mobil Corp. , 305 P.3d 309, 320  


 (Alaska 2013).  We decline to consider the issue again.  



                     For example, two of Exxon's Los Angeles-based lawyers billed at hourly  


 rates  of  $795  and  $730,  whereas  two  of  its  Anchorage-based  lawyers  with  similar  


 experience and responsibility billed at hourly rates of $375 and $325.  In discussing the  


 contrast in regional rates, the superior court made note of the higher "cost of doing  


 business and the overhead in Los Angeles."  Nautilus does not dispute that the California  

 lawyers' rates were reasonable for the Los Angeles market, and for purposes of our  

 discussion we assume that they were.  

                                                                -5-	                                                       6942

----------------------- Page 6-----------------------


have not yet addressed the  issue  of whether fee awards can be based on out-of-state  

billing rates that are out of sync with Alaska's market.  Nautilus urges us to adopt what  

it calls the "locality" or "forum" rule:  that "the trial court is required to award fees based  


on market rates in the community in which it sits, i.e., where  the action is brought."  

Nautilus contends that unless competent local counsel are unavailable, it is unfair to  


subject the non-prevailing party to a higher fee award simply because the prevailing party  


elected to look outside the state for representation.  We find merit in Nautilus's argument.  

                      Civil  Rule  82(b)(2)  requires  that  an  award  of  fees  be  based  on  "the  


prevailing party's reasonable actual attorney's fees which were necessarily incurred."  As  


the superior court correctly observed, this court has never expressly "deal[t] with the issue  

of locality in setting reasonable hourly rates" for purposes of a Rule 82 award.  The  



superior court cited Ihler v. Chisholm                            for the proposition that there are essentially two  


different tests for setting reasonable rates in cases involving out-of-state counsel:  (1) the  


test urged by Nautilus here, which looks to the "fees customarily charged in the locality  

of the case" unless in-forum counsel was unavailable,13 and (2) "a less stringent test of  


'reasonableness,'  "  which  asks  only  whether  the  choice  of  out-of-state  counsel  was  

             12         995 P.2d 439, 446 (Mont. 2000).  

             13         See, e.g., Barjon v. Dalton , 132 F.3d 496, 501 (9th Cir. 1997) (attorney fee   

  award based on local counsel's rates was reasonable where plaintiffs failed to show local     

  counsel was unavailable); Gates v. Deukmejian, 987 F.2d 1392, 1405 (9th Cir. 1992)  

  (out-of-forum rates may be used where local counsel is unavailable); Davis v. Hollins  


 Law , ___ F. Supp.2d ___, 2014 WL 2619651, at *5 (E.D. Cal. 2014) (citing Barjon , 132  


  F.3d at 500); In re South Dakota Microsoft Antitrust Litigation , 707 N.W.2d 85, 104  


  (S.D. 2005) (placing the burden on the plaintiffs to show "a good faith effort was made  


 to hire local . . . counsel, and that no qualified counsel was available").  

                                                                       -6-                                                               6942

----------------------- Page 7-----------------------



reasonable under the circumstances.                        The Montana Supreme Court in Ihler held that the  


                                                                                                                         and "the  

"reasonableness" test best reflected both the language of the relevant fee statute 



primary concern in an attorney fee case[, which] is that the fee awarded be reasonable." 

The superior court here reached the same conclusion.   


                    As the superior court also recognized, we observed in  Valdez Fisheries  



Development Association v. Froines                        that fixing an hourly rate for purposes of a Rule 82  


award may be aided by reference to Alaska Rule of Professional Conduct 1.5, which lists  

"[t]he factors to be considered in determining the reasonableness of a fee."  One of the  

eight  listed  factors  is  "the  fee  customarily  charged  in  the  locality  for  similar  legal  

            14        See, e.g., Arbor Hill Concerned Citizens Neighborhood Ass'n v. Cnty. of  

 Albany Bd. of Elections , 522 F.3d 182, 191 (2d Cir. 2008) (holding that a party wishing  


 to  use a higher out-of-district rate must show that the retention of an out-of-district  

  attorney  was  reasonable  under  the  circumstances);  Rum  Creek  Coal  Sales,  Inc.  v.  


  Caperton, 31 F.3d 169, 175 (4th Cir. 1994) ("In circumstances where it is reasonable to  


 retain attorneys from other communities . . . the rates in those communities may also be  


  considered."); Chrapliwy v. Uniroyal, Inc., 670 F.2d 760, 769 (7th Cir. 1982) (holding  


 that the relevant inquiry is the reasonableness of the choice of out-of-forum counsel, but  


  questioning the reasonableness of that choice where there was "reason to believe that  


  services of equal quality were readily available at a lower charge"); Standard Theatres,  


 Inc. v. State, Dep't of Transp., Div. of Highways , 349 N.W.2d 661,  669 (Wis. 1984)  


  (holding that statute providing "reasonable attorneys fees" did not require local counsel,  


 but only that choice of counsel was reasonable).  

            15        Ihler was a class action civil rights suit brought under 42 U.S.C.  1983 by  


 patients  against  state  mental  health  facilities,  and  fees  were  governed  by  42  U.S.C.  


   1988.  Ihler , 995 P.2d at 442-44.  "Under  1988, a district court may 'allow the  

 prevailing party . . . a reasonable attorney's fee.' "  (emphasis added in Ihler).   

            16        Id . (quoting Hadix v. Johnson , 65 F.3d 532, 535 (6th Cir. 1995)).  

            17        217 P.3d 830, 833-34 (Alaska 2009).  

                                                                 -7-                                                         6942

----------------------- Page 8-----------------------



services."        We noted in  Valdez Fisheries that "[w]e have never adopted Professional  

Conduct Rule 1.5 as the test for calculating attorney's fee awards,"19 as it and Rule 82  


have different purposes:  "The purpose of Rule 82 is to partially compensate a prevailing  


                                                                          whereas "the purpose of Professional  

party for the expenses incurred in winning a case," 


Conduct Rule 1.5 . . . is to aid attorneys in determining an appropriate rate to charge their  

            21  But we recognized that when the list of factors in Rule 1.5 does "have a place  


           18       Alaska R. Prof. Conduct 1.5(a)(3).  The eight "factors to be considered in  

 determining the reasonableness of a fee" under Professional Conduct Rule 1.5(a) are:  

                     (1) the time and labor required, the novelty and difficulty of  


                    the questions involved, and the skill requisite to perform the  

                     legal service properly; (2) the likelihood[] that the acceptance  


                     of the particular employment will preclude other employment  

                    by the lawyer; (3) the fee customarily charged in the locality  


                     for similar legal services; (4) the amount involved and the  

                    results obtained; (5) the time limitations imposed by the client  


                     or  by  the  circumstances;  (6)  the  nature  and  length  of  the  

                    professional relationship with the client; (7) the experience,  

                    reputation, and ability of the lawyer or lawyers performing  

                    the services; and (8) whether the fee is fixed or contingent.  

                      The same eight factors are listed in the "near-identical parallel" Alaska Bar  


 Rule 35(a), which we have also recognized "may be helpful to assess the reasonableness  


 of counsel's requested hourly rate."   Valdez Fisheries, 217 P.3d at 833 n.17.  

           19        Valdez Fisheries, 217 P.3d at 833-34.  

           20       David S. v. Jared H. , 308 P.3d 862, 874 (Alaska 2013) (citing Tobeluk v.  

 Lind , 589 P.2d 873, 876 (Alaska 1979)).  

           21        Valdez Fisheries, 217 P.3d at 834.  

                                                              -8-                                                      6942

----------------------- Page 9-----------------------

in a court's calculation of reasonable actual fees, it is most likely in determining whether  


the hourly rate charged is reasonable."                       

                    In evaluating Exxon's fee request, the superior court in this case began by  


observing that Exxon would not be entitled to an award based on the higher out-of-state  


rates "[h]ad the test been whether in-forum counsel was available, . . . as it is clear that  


Alaska  counsel was more than adequate to the task of litigating a matter of contract  


interpretation or reformation of a contract."  The superior court then summarized Exxon's  

rationale for employing out-of-state counsel:  

                    Although   Patton   Boggs[,   Exxon's   local   counsel,]   was  


                    involved  in  the  Valdez  litigation,  O'Melveny  was  the  lead  

                    counsel in the underlying Exxon Valdez litigation for over  

                    twenty  years.    O'Melveny  was  litigation  counsel  in  the  

                    underlying  case  with  [Nautilus]  as  well.    It  was  also  Mr.  


                    [John] Daum[, an O'Melveny lawyer,] who was the lead in  


                    negotiation of the settlement with [Nautilus] and in dealing  

                    with [Nautilus's lead negotiator].  Given the circumstances  

                    and the history of this case, it was reasonable for Exxon to  


                    continue the same association and to have retained O'Melveny  

                    to litigate this case.  

In essence, applying a reasonableness test, the superior court found that Exxon's retention  


of Los Angeles counsel was justified based on one factor in the Rule 1.5(a) list of eight  


factors - "the nature and length of the professional relationship with the client" - and  


that the out-of-state rates could therefore be used as the basis for an award of fees under  


Rule 82.  

                    We conclude that this was error.  Parties are free to choose the lawyers who  


will  represent  them  and  to  enter  into  any  fee  agreements  consistent  with  the  law  of  

           22        Id.  

                                                                -9-                                                        6942

----------------------- Page 10-----------------------


contracts and the rules of professional responsibility.  But as for the partial reimbursement  

of fees under Rule 82, we hold that "the fee customarily charged in the locality for similar  


legal services"            is the basis on which awards should ordinarily be calculated, and an  

award based on out-of-state rates should be made only in extraordinary circumstances.24  


Especially since attorney fee awards are a usual part of any judgment in Alaska, the  

prospect of having to pay a Rule 82 award based on fees well in excess of those that  


would have been billed by in-state lawyers may deter Alaskans from seeking redress in  


the courts for their bona fide disputes.                      An extraordinary circumstance that may justify  


departure from this general rule is the one suggested by Nautilus here:  that counsel with  


the  necessary  expertise,  or  the  necessary  willingness  to  take  the  case,  is  not  locally  




                    Extraordinary circumstances are not apparent in this case.  As explained by  

the superior court, the circumstances that justified Exxon's retention of O'Melveny &  

            23        Alaska R. Prof. Conduct 1.5(a)(3).  

            24        See   Bywaters  v.  United  States ,   670  F.3d  1221,   1233  (Fed.  Cir.  2012)  

 ("[W]hen  plaintiffs  elect  to  retain   counsel  who  are  located  outside  the  forum  in  a  

 jurisdiction that charges higher rates than the forum rates . . . [,] the forum rate applies             

 absent some unusual justification for departing from it.");  Arbor Hill Concerned Citizens  

 Neighborhood Ass'n v. Cnty. of Albany & Albany Cnty. Bd. of Elections , 522 F.3d 182,  


  183-84 (2d Cir. 2008) (holding that the prevailing hourly rate in the district where the  


 court sits is the "presumptively reasonable fee," but the court may adjust this hourly rate  


 "to account for other case-specific variables").  



                      See Bozarth v. Atl. Richfield Oil Co., 833 P.2d  2, 4  n.3 (Alaska 1992)  


 (recognizing that the "costs of litigation" in Alaska may "have increased to such an  

 extent that the prospect of having to pay Rule 82 fees deters a broad spectrum of our  

 populace from the voluntary use of our courts").  



                      See Gates v. Deukmejian, 987 F.2d 1392, 1405 (9th Cir. 1992); In re South  

 Dakota Microsoft Antitrust Litigation , 707 N.W.2d 85, 104 (S.D. 2005).  

                                                                 -10-                                                         6942

----------------------- Page 11-----------------------


Myers for the litigation with Nautilus were that "O'Melveny was the lead counsel in the  


underlying Exxon Valdez litigation for over twenty years"; "O'Melveny was litigation  


counsel in the underlying case with [Nautilus] as well"; and it was O'Melveny & Myers  


lawyer "Mr. Daum who was the lead in negotiation of the settlement with [Nautilus] and  

in dealing with [Nautilus's lead negotiator]."  But as the superior court also found, the  


issues in this case were the general ones of contract interpretation and reformation.  It is  

not apparent that O'Melveny & Myers's involvement in the underlying Exxon Valdez  


litigation was important enough to the issues in this case that it necessitated going outside  


the Alaska legal market.  To the extent such experience mattered, Exxon's local counsel  


had it as well; Douglas Serdahely of Patton Boggs had a leadership position for the same  


client in the same underlying litigation.  And the role of O'Melveny lawyer John Daum  


as lead negotiator in the settlement negotiations with Nautilus made him more obviously  


a witness in the trial of this case - as he was - than a preferred choice for counsel when  

                                                     27   In fact, it appears that Daum billed no time to this  


it came to litigating the settlement.  

case  after  its  initial  stages;  a  departure  from  the  locality  rule  cannot  be  justified  by  

Exxon's desire to retain an out-of-state lawyer who ultimately did no significant work on  

the case as counsel.   

                    In sum, we conclude that, on the facts as found by the superior court, no  

extraordinary circumstances - such as the unavailability of competent and willing local  


counsel - exist to justify a departure from the locality rule.  We remand this issue to the  




                      See Alaska R. Prof. Conduct Rule 3.7 (setting out limited circumstances in  


 which a lawyer may "act as an advocate at a trial in which the lawyer is likely to be a  

 necessary witness").  

                                                                 -11-                                                             6942  

----------------------- Page 12-----------------------


superior court for a recalculation of the attorney fees award based on "the fee customarily  


charged in the locality for similar legal services."                           


          B.	       The Superior Court Did Not Abuse Its Discretion In Deciding That The  

                    Hours Billed By Exxon's Attorneys Were Reasonable.  


                    In addition to challenging their hourly rates, Nautilus argues that the number  


of  hours  billed  by  Exxon's  attorneys  was  excessive  because  it  included  misspent,  


misreported, and duplicative time.  Civil Rule 82(b)(2) provides that the attorney fees on  

which  an  award  is  based  must  be  both  reasonable  and  necessarily  incurred.    "[T]he  

[superior] court's assessment of fees . . . begins with the prevailing party's actual fees, but  


it does not end there.  The reasonableness of the actual number of hours billed . . . must  



be separately evaluated by the court."                     "Hours billed for activities that are not reasonably  


intended to advance the litigation, or hours billed for completing a task in excess of those  

                                                                                                      30  The trial court has  

that ought to be required to complete it, are not reasonably incurred." 

broad discretion in this area.31  


                    Nautilus contends that Exxon's attorneys billed far more time to the case  


than  its  own  attorneys  did  and  argues  that the  superior  court should  have  taken  this  

           28	        Alaska R. Prof. Conduct 1.5(a)(3).  

           29	        Valdez Fisheries Dev. Ass'n v. Froines,, 217 P.3d  830, 834 Alaska 2009).   

           30        Id. at 833;  see also Demoski v. New , 737 P.2d 780, 787 (Alaska 1987)  

 (affirming  a  reduction  in  fees  where  the  trial  court  found  that  an  attorney  had  


 overcharged, that billings were duplicative, that much of the  fees related to a claim  


 against  another  party,  and  that  counsel's  failure  to  follow  the  civil  rules  generated  


 excessive costs).  

           31         Valdez Fisheries, 217 P.3d at 833.  

                                                                -12-	                                                        6942

----------------------- Page 13-----------------------



disparity as proof that Exxon's fees were unreasonable.                                "A large discrepancy between  

the  fees  incurred  by  each  side  may  be  evidence  of  unreasonableness,  but  it  is  not  


conclusive."           This is because "[t]he burdens assumed by opposite sides of litigation are  


not necessarily equal, and it is a judgment call as to whether such a discrepancy reflects  

over-preparation and over-billing by one set of attorneys, or under-preparation and under- 


billing by the other set of attorneys."                   In Gamble v. Northstore Partnership, we held that  


the trial court did not abuse its discretion in finding attorney fees to be reasonable even  


though they were double the amount billed by the other side.    We noted the substantial  


discovery  practice,  the  five-day  trial,  and  the  fact  that  the  trial  court  had  reviewed  


itemized billing statements and "was personally aware of the quality and quantity of the  


                                    The  superior  court  in  this  case  did  not  directly  address  the  

[attorneys']  work."                                                                                              

discrepancy in fees.  It did have access to attorneys' itemized billing statements, as in  

Gamble; and it was "left with the impression that Exxon's attorneys . . . thoroughly  


investigated, researched, and followed up on every lead."  It further found that Exxon's  


attorneys "produced high quality products and were always prepared for hearings and at  

           32        Nautilus claims that Exxon's fees were approximately five times its own  

 fees;  but  the  part  of  the  record  Nautilus  cites  provides  no  indication  of  the  fees  it  



           33        N. Pac. Processors, Inc. v. City & Borough of Yakutat, Alaska , 113 P.3d  


 575, 589 (Alaska 2005) (citing Gamble v. Northstore P'ship, 28 P.3d 286, 289 (Alaska  




                      Gamble, 28 P.3d  at 290; see also Kenai Lumber Co., Inc. v. LeResche , 646  


 P.2d 215, 222 (Alaska 1982) (holding that a discrepancy in the parties' attorney fees did  

 not by itself demonstrate that the higher fees were unreasonable).  

           35        28 P.3d at 289-90.  

           36        Id. at 290.  

                                                                -13-                                                        6942

----------------------- Page 14-----------------------


trial."  It observed that this was "not the more economical or frugal style of litigation, but  

a well-funded effort" that led to success, and that "[i]t is hard to determine after the fact  


what contributed to the success and what might not have mattered."  The court took some  

reassurance from the fact that Exxon, as "a large corporation," had in-house counsel  


monitoring  the  reasonableness  of  the  litigation  expenses  as  they  were  incurred.    It  

concluded that the number of hours billed by Exxon's attorneys, "although on the high  


side, [fell] within the range of reasonable."  This is just the sort of analysis that the trial  



court is "uniquely suited" to make because of its "greater knowledge of the case," 

we do not see an abuse of discretion.  


                     Nautilus also argues that the number of attorneys who worked on Exxon's  


case was excessive, noting that 15 of them billed time to the case, that there were several  

lawyers at every deposition, at trial, and working on the same motions, and that they  


billed for team meetings and conference calls.  The superior court acknowledged that "it  

could be argued that there is a certain redundancy to the efforts," but it also observed that  


"it is often advantageous to have more than one attorney present, to assist, to consult, and  


to monitor the progress of the deposition or trial."  Here again, "[i]t is . . .  for the trial  

judge to determine . . . whether too many attorneys were employed," 38 and we see no  


abuse  of  discretion  in  the  superior  court's  conclusion  that  the  number  was  not  



                     Nautilus argues further that the fees are excessive in part because Exxon's  


California lawyers had to learn about Alaska law and procedure.  Nautilus cites Exxon's  

            37        Valdez Fisheries Dev. Ass'n v. Froines, 217 P.3d 830, 833 (Alaska 2009).     



                      Integrated Res. Equity Corp. v. Fairbanks N. Star Borough , 799 P.2d 295,  


  304 (Alaska 1990).  See also Valdez Fisheries, 217 P.3d at 833 (argument that prevailing  


  party  "seeks  payment  for  two  attorneys'  presence  at  trial,  when  one  would  have  

  sufficed," is left to the trial court's discretion).  

                                                                 -14-                                                         6942

----------------------- Page 15-----------------------

itemized billings, highlighting in particular the time spent researching and drafting the  


reformation complaint and researching spoliation.  But these records do not show that  

Exxon's lawyers had to spend additional time on these issues because they were from   

outside the state.  Nautilus also provides no clear support for its contention that Exxon's   

counsel carried out redundant research on issues such as contract interpretation that had     

already been researched exhaustively in the federal case.  


                         Finally, Nautilus argues that Exxon failed to prove that all the time listed  


was in fact billable.  Noting that much time during the day is lost due to breaks and  

interruptions, Nautilus asserts that "[a] ten hour day should not yield a bill for 10 hours  

of billable time except in limited situations such as trial or extended depositions."  But  


one of Exxon's attorneys submitted an affidavit specifically controverting this argument,  

stating that "O'Melveny['s] attorneys are well aware of the difference between billable  


time and the actual number of hours that an attorney spends in the office; personal time  

was  not  billed  to  Exxon  and  accordingly  was  not  included  in  the  billing  summary  


submitted in support of Exxon's motion."  We cannot say that the superior court abused  

its discretion when it accepted this assurance that the submitted billings were prepared  

conscientiously and in good faith.  

             C.	         The Superior Court Did Not Abuse Its Discretion When It Enhanced  

                         Attorney Fees And Awarded Expert Fees As A Sanction.  


                         In its order on attorney fees, the superior court took into account Waterer's  


alteration of his telephone logs and his testimonial reliance on those alterations.  The court  

increased attorney fees by 5% to compensate Exxon for the time spent addressing this  


misconduct, raising the award from the presumptively reasonable 30% to 35% of actual  


reasonable attorney fees.  It also awarded Exxon 60% of the expert witness fees charged  

                                                                               -15-	                                                                      6942

----------------------- Page 16-----------------------



by its forensic expert as a sanction under Civil Rule 37(c)(1).                               Nautilus challenges these  

awards on several grounds, but none of them has merit.  


                    Nautilus first argues that the superior court erred in enhancing fees absent  



a finding of bad faith or vexatiousness.                      But the superior court did find bad faith, and it  


did so explicitly:  "Mr. Waterer's actions do amount to bad faith."  Nautilus's claim that  


"[t]he court did not find that there was bad faith or vexatious conduct in this case" is flatly  

contradicted by the court's order.  


                    Second, Nautilus argues that the court's enhancement of both attorney fees  

and expert witness fees constitutes a "double sanction" or "double dipping."  But the  


misconduct at issue required Exxon to incur both additional attorney time and the expense  


of a forensic expert; it was not an abuse of discretion for the court to compensate Exxon  

for both additional costs.  Civil Rule 37(c)(1) explicitly contemplates this, authorizing  

sanctions "[i]n addition to requiring payment of reasonable expenses, including attorney's  

fees, caused by the failure [to disclose]."  


                    Third, Nautilus argues that the court should not have awarded enhanced fees  


and expert costs after having found that Waterer's deposition testimony was not relevant  

           39        Alaska Administrative Rule 7(c) generally limits the recovery of expert  

 witness costs to "the time when the expert is employed and testifying," not to exceed  


 $150.00  per  hour.    But  Alaska  Civil  Rule  37(c)(1)  allows  the  court  to  impose  

 "appropriate sanctions" in addition to attorney fees and other "reasonable expenses"  


 caused by a party's failure to disclose information without substantial justification or its  


 false or misleading disclosure of information during discovery.  

           40        Alaska Civil Rule 82(b)(3)(F) and (G) allows the court to vary a fee award  


 based on "the reasonableness of the claims and defenses pursued by each side" and  


 "vexatious or bad faith conduct."   See also  Johnson v. Johnson , 239 P.3d 393, 400  

 (Alaska  2010)  (holding  that  "enhanced  fees  may  be  awarded  under  any  of  the  

 subparagraphs of Rule 82(b)(3)").  

                                                               -16-                                                         6942

----------------------- Page 17-----------------------

to its decision of the case and that therefore no spoliation  occurred.  But there is no  


question that Waterer's evidence was relevant for purposes of discovery; it was simply  


not relevant to the court's final decision because Waterer was not a primary negotiator of  


the settlement agreement, and that is what ultimately mattered.  This does not mean that  


Waterer's bad faith during discovery cannot be sanctioned.  The superior court was right  

to expect the parties to act honestly in discovery regardless of whether their evidence  


would prove to be necessary to the judgment.  The court did not abuse its discretion by  

enhancing both attorney fees and expert costs because of Waterer's misconduct.  

           D.	       It  Was  An  Abuse  Of  Discretion  Not  To  Apportion  Fees  And  Costs  

                     Between Nautilus And Cook Inlet Processing.  


                     Nautilus argues that the superior court abused its discretion when it failed  


to apportion attorney fees and costs between Nautilus and Cook Inlet Processing for work  


that related to both.  The superior court did exclude billing entries related only to Cook  


Inlet Processing, but it declined to exclude entries for work that clearly involved both  


                                                                                                                 The effect of the  

defendants, such as "[w]here there is discovery that applies to both." 

superior court's order, thus, is to make Nautilus solely responsible for the attorney fees  


and costs that Exxon incurred in pursuing its claims against both Nautilus and Cook Inlet  



                     Exxon counters that some apportionment occurred indirectly, in that Exxon,  


and the superior court, excluded $366,429.50 in block-billing (that is, billing entries that  

do not specify the time taken for each listed task but only give a total) where the entries  



included work related only to Cook Inlet Processing.                                       But excluding the time that is  

            41         Apparently Cook Inlet Processing responded to discovery on behalf of both  


            42         This number is derived from an Exxon attorney's affidavit, stating that the                   


                                                                   -17-	                                                               6942  

----------------------- Page 18-----------------------

clearly devoted to one defendant, no matter how rigorously done, will not accomplish the  


goal of apportioning the time devoted to both defendants - time that in this case included  


such major efforts as drafting the complaint and summary judgment pleadings.  


                   In  Thorstenson  v.  ARCO  Alaska,  Inc.,  we  held  that  it  was  an  abuse  of  


discretion for the superior court to allocate 75% of the defendant's fees to its case against  

the one plaintiff who stayed with the case through trial, where the superior court found  


that  the  defendant  would  still  have  incurred  75%  of  its  attorney  fees  had  it  litigated  

                                                 43   We held that "[t]o charge the last remaining plaintiff  

against just one plaintiff all along.                             

with a grossly disproportionate share of a defendant's attorney fees . . . creates perverse  


                 44   Instead, "[e]ach plaintiff should be charged with his proportional share of  


fees incurred prior to the resolution of his claim."45  

                   In Cizek v. Concerned Citizens of Eagle River Valley, Inc., we clarified that  


Thorstenson "did not hold that attorney's fees must always be equally apportioned, but  


rather that a remaining party may not be asked to bear an unreasonably heavier burden  

                                                                                    46   The superior court in Cizek  

of the cost of litigation than a party who chooses to settle."  


had apportioned 15% more in fees against the Cizeks than against their co-defendant, who  


 billings submitted to the court excluded block-billing totaling over $350,000, and the  

 superior court's subtraction of another $16,429.50 based on Nautilus's objections.  

           43        780 P.2d 371, 376-77 (Alaska 1989).  

           44       Id. at 377.  

           45       Id.  

           46        71 P.3d 845, 853 (Alaska 2003) (emphasis added) (citing                          Thorstenson, 780  

 P.2d at 376-77).  

                                                             -18-                                                       6942

----------------------- Page 19-----------------------

had settled before trial.47  We found no abuse of discretion, however, as the superior court  



had made specific findings that justified an unequal apportionment.                                       These findings  

included the facts that the settling co-defendant had made only small "active efforts" in  


the litigation and that " 'the bulk of active litigation efforts' were directed against the  


                    Exxon makes a number of arguments why an unequal apportionment is  


appropriate in this case, but we do not find them persuasive. First, Exxon argues that fees  

need not be apportioned if they would still have been necessary absent the other party.  

Exxon asserts that "there was no indication in Thorstenson that, as in this case, nearly all  


pre-settlement activity . . . would have been exactly the same even if the settling plaintiff  


had never been a party to the case."  Yet in Thorstenson, contrary to Exxon's suggestion,  


the fees in dispute concerned the overlap "in the work performed  in defense of each  


plaintiff's claim" - in other words, work that would have been exactly the same even if  


the settling party had never been a party to the case.                           Following  Thorstenson, the fact  


that much of the pre-settlement fees would have been incurred even if there were only one  

defendant supports apportionment between Nautilus and Cook Inlet Processing.51  

           47        Id. at 853-54.

           48        Id.

           49        Id. at 853.

           50        Thorstenson, 780 P.2d at 376.  

           51        Id.   See also Cizek, 71 P.3d at 853 ("The first reason for the court's unequal  

 apportionment - that the Cizeks and Dike litigated as a unit against Concerned Citizens  

 - actually supports an equal apportionment of fees.").  

                                                              -19-                                                       6942

----------------------- Page 20-----------------------

                    Exxon also argues that further apportionment is not required because "[a]s  


in Cizek, and in contrast to Thorstenson, the work in this case was back-loaded, occurring  

after  one  of  the  defendants  (here  [Cook  Inlet  Processing])  settled."    But  there  is  no  

indication that the work in  Cizek was "back-loaded"; the Cizeks' co-defendant settled  


                                                The superior court's determination in Cizek that most of  

"[i]mmediately before trial." 

the active litigation efforts were directed against the Cizeks refers to efforts made before  



the settlement.           Exxon does not argue here that most of its pre-settlement efforts were  


directed against Nautilus.  That Exxon had to expend significant efforts litigating against  

Nautilus after Cook Inlet Processing settled does not mean that the pre-settlement fees  

should not be apportioned.  



                    Exxon finally relies on Tenala, Ltd. v. Fowler                           for the proposition that "a  


party can recover fees from one defendant for work relating to another defendant so long  


as  the  work was necessary  to  prosecute  the  claims  against  the  first  defendant."    We  


consider Tenala inapposite.  The issue in that case was whether the attorney fees incurred  

by the plaintiff in preparing a claim she later abandoned could be included in an award  


against the defendant; we found no abuse of discretion in the superior court's inclusion  

of those fees.  We noted that the abandoned claim was actually "an important component  


of"  the  quiet  title  action  in  which  the  plaintiff  ultimately  prevailed  and  cited  Gold  


Bondholders Protective Council v. Atchison, Topeka and Santa Fe Railroad Co. for the  


proposition  that  attorney  fees  do  not  have  to  be  apportioned  "with  reference  to  the  

           52         Cizek, 71 P.3d at 848.  

           53        See id. at 853.  

           54         993 P.2d 447 (Alaska 1999).  

                                                                -20-                                                            6942  

----------------------- Page 21-----------------------


disposition of individual issues."     The question here is not whether fees should have  

been apportioned by issue; they clearly were not.  The question, rather, is whether fees  

should  have  been  apportioned  among  the  non-prevailing  parties  so  as  to  be  roughly  


proportionate to their active involvement in the case.  The answer  to  this question is  

controlled by Thorstensen and Cizek.  

                        Given  that  Exxon  incurred  substantial  attorney  fees  and  costs  for  work  


against both defendants before Cook Inlet Processing settled, and that the superior court  


assessed  these  fees  against  Nautilus  without  providing  a  reason  for  an  unequal  

apportionment,56 we reverse the awards of attorney fees and costs and remand to the  

superior court for its further consideration of this issue.57  


            F.	         Other Than The Lack Of Apportionment, The Superior Court Did Not  

                        Err In Its Award Of Costs.  


                        Nautilus contests several more specific aspects of the superior court's award  


of costs.           Nautilus argues that Exxon provided inadequate itemization of its costs for  

              55	        Id. at 450 (quoting Gold Bondholders, 658 P.2d 776, 779 (Alaska 1983)).  

              56          Compare Thorstenson.,  780 P.2d at 377 (holding that there was an abuse                           

  of  discretion   where  the  superior  court  made  one  plaintiff  responsible  for  the  entire  

  overlap in fees), with  James v. State , 815 P.2d 352, 360 (Alaska 1991) (holding that there     

  was no abuse of discretion where "appellants were made to bear less than 2% more than           

  their proportional share of the state's fees").  

              57          The superior court did apportion the cost of one deposition between the two  


  defendants, since it occurred before Cook Inlet Processing's settlement and the court  


  found  that  the  "deposition  was  for  the  benefit  of  both  [Nautilus]  and  [Cook  Inlet  


  Processing]."  It is not apparent, however, that this same rationale was extended to the  

  other costs incurred prior to the settlement, and it should have been.  



                          Exxon argues that Nautilus did not properly appeal the court's award of  


  costs, thereby waiving this issue.  Nautilus filed its notice of appeal on May 10, 2012,  


  including the assertion that "the trial court erred in its award of costs."  The appeal was  


                                                                            -21-	                                                                    6942

----------------------- Page 22-----------------------


copying and computerized research.  Alaska Civil Rule 79(b) requires an itemized and  


verified  cost  bill  that  shows  the  date  costs  were  incurred.                           For  its  copying,  Exxon  

provided a breakdown of costs that included date, rate, and quantity; for computerized  

research costs, Exxon provided a breakdown by date.  Civil Rule 79 does not require any  

more detail than that.  


                    Nautilus also argues that the amounts spent on copying and research were  


excessive.  It contends that Exxon's claim for $42,326.96 in computerized research costs  


is extraordinary given that "computer data and research companies typically charge law  


firms fixed monthly rates," a factual assertion that it does not support.  In Sever v. Alaska  


Pulp Corp. , we held that the superior court did not abuse its discretion in awarding over  

$18,000 in costs for computerized research, where the appellant "failed to demonstrate  

                                                                                                               59  In this case,  


that this research was not reasonably necessary to defend against the suit." 

too, it was within the superior court's discretion to award these research and copying  



                    Nautilus also challenges as unnecessary the costs for out-of-state counsel to  


travel to depositions.  Exxon sought travel costs for one attorney for each deposition, as  


allowed by Civil Rule 79(g)(1)(B).  While Rule 79(g)(1)(A) limits travel expenses for  


non-local attorneys attending court proceedings to circumstances when local counsel are  


not present, there is no correlative limitation on travel for depositions.  And we have held  


 filed  after  the  clerk  had  ruled  on  costs  but  before  the  superior  court  had  ruled  on  


 Nautilus's motion for further review.  But the usual remedy for a premature appeal is to  


 hold it in abeyance until it is timely or dismiss it and allow it to be later refiled.  See  

  Garrison  v. Dixon, 19 P.3d 1229, 1232 (Alaska 2001).  Nautilus's appeal remained  


 pending and became timely as to the cost issue once the superior court had ruled.  

           59         931 P.2d 354, 363 (Alaska 1996).  

                                                                -22-                                                        6942

----------------------- Page 23-----------------------


that an attorney's actual travel expenses may be recovered under Civil Rule 79(b) if they  



are necessarily incurred.                We conclude that it was not an abuse of discretion for the  

superior court to find that Exxon's travel costs were recoverable.  

V.        CONCLUSION  

                    We REVERSE the awards of attorney fees and costs and REMAND for a  


recalculation of the fees award based on local rates and for the apportionment of fees and  

costs.  We AFFIRM on all other issues.  



                     Atl. Richfield Co. v. State , 723 P.2d 1249, 1253 (Alaska 1986); Eagle Air,  


 Inc. v. Corroon & Black/Dawson & Co. of Alaska, Inc. , 648 P.2d 1000, 1006-07 (Alaska  


  1982)  ("Certainly  the  trial  judge  was  in  a  better  position  than  we  are  to  determine  

 whether Dawson's Washington attorneys were 'necessary' to the proceeding.").  

                                                              -23-                                                           6942  

Case Law
Statutes, Regs & Rules

IT Advice, Support, Data Recovery & Computer Forensics.
(907) 338-8188

Please help us support these and other worthy organizations:
Law Project for Psychiatraic Rights