U.S. District Judge Andrew S. Hanen has decided the lawyers who represented International Business Machines in a contentious dispute with Houston-based software company BMC are entitled to about $29.1 million in fees and $12.4 million in litigation costs for work done on the case.
IBM, which was awarded a total of $41.5 million, had asked the court to award $46.5 million in fees and $12.7 million in costs, which totals about $59.2 million. The case that pitted BMC against IBM was closely watched by many at trial and on appeal, and garnered significant amicus attention, too. U.S. District Judge Gray Miller, who presided over a bench trial, determined in May 2022 that IBM committed fraud when it removed BMC’s mainframe software products from their largest mutual client, AT&T, during an outsourcing project several years ago.
In a 32-page order issued Saturday, Judge Hanen determined that IBM should be considered the prevailing party in the litigation that had resulted in a massive, $1.6 billion final judgment for BMC after a jury trial. The Fifth Circuit in April 2024 reversed that judgment, and the U.S. Supreme Court declined to hear an appeal in March.
BMC had argued that in this case — where it lost on a $1.6 billion claim and IBM lost on its $100 million claim — no one is the prevailing party because “[n]o money exchanged hands and … everyone lost.”
“IBM clearly received substantial relief on those claims when the Fifth Circuit rendered judgment in IBM’s favor,” Judge Hanen wrote. “The fact that IBM was unsuccessful on its counterclaim — where it sought an amount roughly 6 percent of BMC’s claim — does not negate the fact that it was successful on what even BMC defined as the central claim. The court finds that IBM is the prevailing party.”
At the trial level, IBM hired lawyers from Quinn Emanuel Urquhart & Sullivan and Yetter Coleman, and on appeal, the company hired Paul Clement of Clement & Murphy to give oral arguments at the Fifth Circuit as well as lawyers from Beck Redden and Jones Day.
BMC argued that the fees charged by all of those firms, except Quinn Emanuel, were reasonable. BMC told the court Quinn Emanuel’s rates, starting in 2021, were unreasonable. The highest billing rate charged by a lawyer at that firm was $1,925 an hour, according to the order.
Judge Hanen agreed, writing that “IBM has not demonstrated that Quinn Emanuel’s post-2020 rates are reasonable in this district” and elaborated in a footnote that IBM’s pointing to cases in the Southern District of Texas where courts found a rate of $915 an hour reasonable in support of their argument “is a far cry from finding a rate of over $1,900 per hour reasonable.”
Quinn Emanuel’s rates were capped by Judge Hanen at a maximum of $935 for partners, which reduced Quinn Emanuel’s total amount billed by $3.1 million, according to the order.
Judge Hanen agreed with BMC that the more than 80,000 hours IBM was attempting to recover attorney fees on was “unreasonable” and reduced the number by 20 percent. He reduced that number by a further 10 percent, agreeing with BMC that the hours billed were to some degree a result of “overstaffing.”
Quinn Emanuel had also billed for more than $1 million for work done on appeal, but Judge Hanen wrote he agreed with BMC that the firm’s attempt to recover that amount “for an appeal ultimately handled by another firm is excessive” and reduced the amount by half.
In assessing reasonable costs, Judge Hanen reduced the hourly rate of an IBM expert from $1,400 an hour to $1,000 an hour.
BMC did get a win in challenging two meals billed to IBM ahead of oral argument in New Orleans: a $162 bill from Brennan’s and a $1,017 bill from Commander’s Palace. Judge Hanen deducted those from the total amount requested by IBM, and also agreed with BMC that there were “instances of excess regarding IBM’s attorneys’ choice of lodging” at the Four Seasons and the Ritz Carlton.
“While, of course, the attorneys do not need to stay at a motel along the interstate, BMC should not be required to pay for these establishments for a large number of attorneys who were peripherally involved,” Judge Hanen wrote. “The court finds a 1 percent reduction in costs warranted to correct for these excessive charges.”
IBM is represented by Erin E. Murphy, Andrew C. Lawrence and Joseph J. DeMott of Clement & Murphy and Paul Yetter, Constance H. Pfeiffer and Reagan W. Simpson of Yetter Coleman.
BMC is also represented by Warren W. Harris and Walter A. Simons of Bracewell, Sean Gorman and Christopher L. Dodson of White & Case, Jeffrey B. Wall, Morgan L. Ratner and Daniel J. Richardson of Sullivan & Cromwell and Harriet O’Neill of Austin.
The case number is 22-20463.