Monday, October 17, 2011

Attorneys Fees In Competition Disputes Often Disproportionate to Harm (SKF USA v. Bjerkness)

One of the inescapable truths about non-compete and trade secrets cases is the expense associated with litigating them. In many, if not most, cases, the actual legal fees necessary to pursue a claim and mount a defense are disproportionate to actual quantifiable loss.

This is particularly true where injunctive relief has successfully been obtained, and a defendant may have started competing but where he or she has not been able to pirate away key accounts.

On the one hand, the most practical remedy has been obtained, but going the extra mile and obtaining damages would be exceedingly difficult. This is why many disputes settle at or around the time of an injunction hearing.

For cases where injunctive relief is not pursued or obtained, trying to obtain an actual remedy is quite difficult and may be an exercise in futility. This is particularly true when a plaintiff cannot point to actual accounts it lost.

A recent federal district court case in Illinois demonstated just how out of hand attorneys fees can get in competition cases. In SKF USA v. Bjerkness, the plaintiff prevailed on a trade secret misappropriation claim and obtained a judgment of only $81,068. Prior opinions in the case suggested the plaintiff's damages presentation was not very convincing.

But the plaintiff obtained a key finding - that misappropriation was "willful." That finding allowed them to obtain attorneys' fees under the Illinois Trade Secrets Act. The fee petition sought $1.3 million, representing 2,700 billable hours of time (or about a year and a half worth of work for a normal Chicago attorney to bill). The bulk of that fee petition was granted.
Such a result is not that uncommon. Fees generally are high in unfair competition cases for several reasons.

First, there normally a number of legal issues to address, from enforceability arguments to proper trade secrets identification.

Second, these cases ordinarily are document intensive, both from parties and non-parties (such as customers).

Third, they are hotly contested, and sometimes provoke irrational litigation behavior among attorneys. It is a truism that non-compete and trade secrets cases often are fought just to be fought, and to obtain a greater competitive advantage outside the actual scope of litigation.

Any case assessment must begin with planning for these contingencies and advising clients on what other similar disputes actually can cost.


Court: United States District Court for the Northern District of Illinois
Opinion Date: 9/27/11
Cite: SKF USA Inc. v. Bjerkness, 2011 U.S. Dist. LEXIS 110275 (N.D. Ill. Sept. 27, 2011)
Favors: Employer
Law: Illinois

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