New Jersey court rules:
Defendants pay legal fees
In trade secret suit

A New Jersey federal court has ruled in favor of Allstate Insurance in a dispute over attorney’s fees in a case involving allegations of employee misuse of company confidential information and trade secrets.

Defendants Stillwell and Francy worked for Allstate from 2008 until September 2015. They both signed independent contractor agreements that included non-compete, non-solicitation, and confidentiality clauses. They left Allstate and began working for Stillwell Financial Advisors (SFA).

Shortly after this, Allstate filed suit, claiming that the defendants had violated the non-compete, non-solicitation, and confidentiality clauses, misusing confidential information and trade secrets such as Allstate customer contact and policy information.

Both sides filed motions for summary judgment, and the court granted partial summary judgment for each side.

The parties also agreed that SLC wouldn’t solicit, sell, or service life insurance policies, annuity contracts, or other businesses in competition with Allstate.

Allstate then sought $519,347.60 in attorneys’ fees because it had prevailed on certain claims for breach of contract, misappropriation of trade secrets, and unfair competition.

The contract between Allstate and its former contractors provided that Allstate was entitled to reasonable attorneys’ fees if it successfully brought an action based on a breach of the agreements’ restrictive covenants.

The defendants argued that the fee petition should be denied because Allstate didn’t prevail on all its claims. Also, they argued that Allstate couldn’t be the prevailing party because it was awarded no damages on summary judgment or otherwise, and thus couldn’t point to any “relief ultimately achieved” as a result of the litigation.

Under New Jersey law,

a party seeking attorneys’ fees must “demonstrate that his lawsuit was causally related to securing the relief obtained; a fee award is justified if [the party’s] efforts are a `necessary and important’ factor in obtaining the relief.”

However,

[t]he party seeking attorneys’ fees need not recover all relief sought, but rather, there must be the settling of some dispute that affected the behavior of the [party asked to pay attorneys’ fees] towards the [party seeking attorneys’ fees].

Also, a “prevailing party” is one that “succeed[s] on any significant issue in litigation which achieves some of the benefits. . . sought in bringing suit.”

As the court noted,

While Plaintiff did not prevail on all of its claims, and although Stillwell was awarded a monetary judgment on one of his counterclaims, Plaintiff maintains that the summary judgment rulings in its favor implicate the agreements between ALIC, Stillwell, and Francy, which contractually provide that ALIC is entitled to reasonable attorneys’ fees in the event that it successfully brings an action premised on breach of the agreements’ restrictive covenants.

The court also found that the rates charged by Allstate’s attorneys – $305 to $615 per hour – were reasonable given their levels of experience and “fall within the median range of hourly rates for lawyers in New Jersey according to The National Law Journal’s 48thAnnual Survey of Law Firm Economics.”

The court also considered whether the 1,248.1 hours of legal work performed was reasonable and concluded that it was.

The court noted that this wasn’t a case in which the plaintiff was denied damages by a jury. Instead, Allstate agreed to give up its pursuit of damages as a condition of the parties’ settlement agreement.

Defendants argued that Allstate showed “poor billing judgment” for “continu[ing] to aggressively prosecute this case for five years” when Allstate should have been aware that it has suffered minimal to no damages after one year.

However, the court said that the defendants were also responsible for the protracted nature of this litigation.

A takeaway here: when entering into a settlement, make sure to also address the issue of attorneys’ fees, to avoid expensive surprises later on.

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