Relativity Fashion, LLC

1
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
RELATIVITY FASHION, LLC, et al.,
Reorganized Debtors.
FOR PUBLICATION
Chapter 11
Case No. 15-11989 (MEW)
(Jointly Administered)
MEMORANDUM OPINION REGARDING MOTION FOR AWARDS
OF ATTORNEYS’ FEES AND EXPENSES AGAINST NETFLIX, INC.
A P P E A R A N C E S:
JONES DAY
Attorneys for Debtors
222 East 41st Street
New York, NY 10017
By: Richard L. Wynne, Esq.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Attorneys for Ryan Kavanaugh
300 South Grand Avenue
Suite 3400
Los Angeles, CA 90071
By: Van C. Durrer II, Esq.
BARNES & THORNBURG LLP
Attorneys for Netflix
2029 Century Park East, Suite 300
Los Angeles, CA 90067
By: Stephen R. Mick, Esq.
MICHAEL E. WILES
UNITED STATES BANKRUPTCY JUDGE
Relativity (defined below) and Mr. Ryan Kavanaugh have filed a motion seeking
reimbursement of attorneys’ fees and expenses they incurred during litigation against Netflix,
Inc. [Docket No. 1963]. The litigation resulted in an Order and Injunction [Docket No. 1932]
that was issued for the reasons set forth in a written bench decision dated June 1, 2016. [Docket
No. 1948]. The Court holds that Relativity is entitled to an award of attorneys’ fees and
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 1 of 39

2
expenses as to Relativity’s own counsel, but that Mr. Kavanaugh and Relativity are not entitled
to reimbursement of fees and expenses incurred by Mr. Kavanaugh’s counsel. The Court also
holds that the amount that Netflix is obligated to pay to Relativity is $818,547.48, consisting of
$795,732.50 in reasonable attorneys’ fees and $22,814.98 in litigation expenses. This award is
without prejudice to further applications to recover fees and expenses incurred in connection
with Netflix’s appeals from this Court’s Order and Injunction.
Background
Relativity Media, LLC entered into a License Agreement with Netflix dated June 1, 2010.
The License Agreement described terms under which first run, theatrically released films would
later be made available for distribution by Netflix. In exchange, Netflix agreed to pay license
fees that were tied to the theatrical box office receipts. Amendments to the License Agreement
assigned the licensor’s rights to RML Distribution Domestic, LLC (“RML”) and granted certain
rights to affiliates of RML as to films in which they had interests. Those affiliates include
Armored Car Productions, LLC and DR Productions, LLC, who own rights regarding the films
Masterminds and The Disappointments Room. RML, Armored Car Productions, LLC and DR
Productions, LLC were debtors in these cases, and for ease of reference these three debtors will
be referred to here as “Relativity.”1
Relativity and Netflix executed “Notices of Assignment” under which certain of
Relativity’s rights regarding license fees for Masterminds and The Disappointments Room were
assigned to secured creditors. In the Notices of Assignment, Netflix agreed that minimum
1 	Papers were filed during the relevant litigation against Netflix, and in connection with the
fee motions, on behalf of the “Reorganized Debtors,” as if all of the debtors in these cases
were parties to all of these matters. In fact, the entities who are parties with respect to the
relevant matters are the three debtors identified above. See Bench Decision at 3.
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 2 of 39

3
license payments would be made to the secured lenders by no later than a specified date,
regardless of whether a theatrical release of the films had occurred by that date. After the plan of
reorganization in these cases became effective Relativity asked Netflix to execute “Date
Extension Amendments” to these Notices of Assignment. The amendments were based on the
revised agreements with the secured creditors that had been incorporated in the confirmed plan,
and they postponed the dates when Netflix was required to make payments to the secured
creditors in light of the new planned theatrical release dates for the two films. However, Netflix
refused to execute the proposed amendments. Netflix took the position that it had the contractual
right to make payments to the secured lenders in June 2016 and then immediately to distribute
Masterminds and The Disappointments Room through Netflix’s own delivery services, without
waiting for prior theatrical releases of the films.
After a trial, this Court held that Netflix’s claimed contractual rights were inconsistent
with positions that Netflix had taken during prior hearings and with findings the Court previously
made. The Court therefore held that Netflix was barred by res judicata and by judicial estoppel
from asserting that Netflix had the contractual rights to distribute the films before they had been
theatrically released. The Court also held that Netflix’s asserted contract rights were not
consistent with the terms of the parties’ written agreements and with the evidence at trial, which
made clear that Netflix had no right to distribute licensed films without a prior theatrical release.
Paragraph 10.2 of the License Agreement provides that the “prevailing party” in any
litigation “arising out of or relating to” the agreement is entitled to reimbursement of its
reasonable costs and expenses, including reasonable outside attorneys’ fees. Relativity contends
that it was a “prevailing party” in the litigation against Netflix. Mr. Kavanaugh (Relativity’s
CEO and a plan proponent) contends that he, too, was a party to the litigation and that his own
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 3 of 39

4
attorneys’ fees and expenses should be paid by Netflix. Alternatively, Mr. Kavanaugh and
Relativity contend that Relativity was obligated to reimburse Mr. Kavanaugh for his fees and
expenses and that Mr. Kavanaugh’s legal expenses therefore are “expenses” of Relativity that
Netflix is contractually obligated to pay. Relativity seeks $795,732.50 in fees and $22,814.98 in
expense reimbursements for periods ending May 27, 2016. Mr. Kavanaugh seeks $427,727.50 in
fees and $17,775.63 in expense reimbursements for the same period. Relativity and Mr.
Kavanaugh also have reserved their rights to seek additional awards of fees and expenses
incurred after May 27, 2016 as a result of continuing litigation, including Netflix’s appeals from
the Order and Injunction. See Transcript, September 15, 2016 [Docket No. 2075] at 19.
Netflix contends that the underlying litigation was an effort to enforce the confirmed plan
of reorganization and was not an action “on a contract,” and that Netflix has no obligation to pay
its opponents’ fees and expenses. Netflix further argues that Mr. Kavanaugh was not a moving
party or a prevailing party in the underlying litigation; that Mr. Kavanaugh is not a party to the
License Agreement and therefore has no rights to seek fees or expense reimbursements under
that agreement; and that Relativity’s obligation to reimburse Mr. Kavanaugh for his expenses as
plan proponent does not entitle Relativity to seek those amounts from Netflix. Netflix also
asserts that the fee requests are excessive, and that Relativity is barred from seeking litigation
“expenses” (other than taxable costs) through a post-trial motion.
The Submitted Record
Rule 54 of the Federal Rules of Civil Procedure applies to the motion for awards of
attorneys’ fees. See Fed. R. Bankr. P. 7054, 9014; Fed. R. Civ. P. 54. The parties have
submitted numerous exhibits, declarations and briefs, and for the most part they have agreed that
the Court should resolve the motions based on the submitted materials and the arguments of
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 4 of 39

5
counsel, without the need for oral testimony or cross-examination. See Transcript, August 18,
2016 [Docket No. 2045] at 12-13 (confirming parties’ agreement as to the procedure); 10-54
Moore’s Federal Practice - Civil § 54.157[3] (confirming that requests for attorneys’ fees may
be resolved by motion and based on briefs and evidentiary submissions and without the need for
a trial). The exceptions are as to the requests to recover “expenses” other than taxable court
costs. As noted above, Netflix contends that a request to recover nontaxable expenses is a
contractual damage claim that cannot be made through a post-trial motion.
Section 1717 of the California Civil Code
The License Agreement is governed by California Law. Section 1717 of the California
Civil Code provides in relevant part:
(a) In any action on a contract, where the contract specifically provides
that attorney’s fees and costs, which are incurred to enforce that contract,
shall be awarded either to one of the parties or to the prevailing party, then
the party who is determined to be the party prevailing on the contract,
whether he or she is the party specified in the contract or not, shall be entitled
to reasonable attorney’s fees in addition to other costs.
* 	* 	* 	*
Reasonable attorney’s fees shall be fixed by the court, and shall be an
element of the costs of suit.
* 	* 	* 	*
(b) (1) The court, upon notice and motion by a party, shall determine
who is the party prevailing on the contract for purposes of this section,
whether or not the suit proceeds to final judgment. Except as provided in
paragraph (2), the party prevailing on the contract shall be the party who
recovered a greater relief in the action on the contract. The court may also
determine that there is no party prevailing on the contract for purposes of this
section.
(2) Where an action has been voluntarily dismissed or dismissed
pursuant to a settlement of the case, there shall be no prevailing party for
purposes of this section.
Cal. Civ. Code § 1717.
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 5 of 39

6
Section 1717 “was originally enacted to establish mutuality of remedy when a contract
makes recovery of attorney fees available only for one party and to prevent the oppressive use of
one-sided attorney fees provisions.” PCLM Group, Inc. v. Drexler, 22 Cal.4th 1084, 1090-91
(Cal. 2000). Section 1717 entitled a contracting party to attorneys’ fees in an action “on a
contract” whenever the other contracting party would have had a contractual right to such fees if
it had prevailed. “Unilateral” contractual rights to recover fees were automatically made mutual.
Section 1717 has engendered much litigation over the years, and two principles have
emerged from the California court decisions that are relevant to the motion before this Court.
First, the California courts have ruled that section 1717 is applicable to all requests for
awards of attorneys’ fees that arise in actions “on a contract.” Accordingly, for example, the
rules in section 1717 regarding the identification of a “prevailing party” – including the rule that
there is no prevailing party in an action that is voluntarily dismissed or that is settled – apply to
all actions “on a contract” in which parties seek to recover attorneys’ fees, no matter what the
parties’ contract says. Santisas v. Goodin, 17 Cal. 4th 599, 616-17 (Cal. 1998). In this regard
section 1717 may expand some rights under a contract (by conferring a right to fees upon a party
who otherwise does not have them) while restricting other contractual rights (by barring fee
awards in cases that are settled).
Second, section 1717 applies only to actions that are “on a contract.” Parties may agree,
in a contract, to be liable for fees and expenses that are incurred in other kinds of actions.
Accordingly, the California Supreme Court confirmed in Santisas that section 1717 does not
limit in any way the enforcement of a contractual right to attorneys’ fees in litigations that are
not “actions on a contract.” Id. at 615, 617. If a litigation is not an “action on a contract,” then a
party’s contractual right to recover fees is determined solely by the contract itself. Id.
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 6 of 39

7
Discussion
I. 	Relativity May Recover its Own Reasonable Fees and Expenses
Netflix contends that Relativity may not recover fees and expenses because the litigation
was not an action “on a contract” for purposes of section 1717, but instead was a request for
relief under section 1142 of the Bankruptcy Code. Netflix similarly contends that Relativity did
not prevail on a contract claim, but instead prevailed only on a claim under section 1142. In this
respect Netflix urges the Court to adopt a highly restrictive interpretation of what constitutes an
action “on a contract” for purposes of section 1717. Netflix argues that it is not enough that
Netflix asserted contract rights and that the litigation involved contract issues; instead, in
Netflix’s view, “[e]ven if there were ancillary issues relating to the contract, it is the
characterization of the moving parties’ action that controls” in deciding whether 1717 is
applicable. See Netflix Opposition [Docket No. 1997] at 21 (emphasis in original). Netflix
believes that Relativity’s invocation of section 1142 of the Bankruptcy Code as a basis for relief
requires this Court to conclude that the underlying dispute was not an action “on a contract.”
Netflix’s argument is a curious one in at least one respect. By its terms, Civil Code
section 1717 only applies if the underlying action was an “action on a contract.” If Netflix were
right – if the invocation of section 1142 meant as a technical matter that the dispute before this
Court was not an action “on a contract” for purposes of section 1717 – that would just mean that
section 1717 does not apply at all. In that case, Relativity would still have rights to recover fees
and expenses on its section 1142 motion so long as its contract with Netflix provided for such
fees and expenses. See Santisas v. Goodin, supra, 17 Cal. 4th at 615, 617. During argument,
Netflix’s counsel acknowledged that section 1717 would not limit any contractual right to fees
that Relativity might have to the extent the parties’ dispute was not a dispute “on a contract.”
See Transcript, July 21, 2016 [Docket No. 2012] at 33.
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 7 of 39

8
Here, section 10.2 of the License Agreement provides that the prevailing party is entitled
to recover fees and expenses “in any litigation or other proceeding arising out of or relating to”
the License Agreement. Netflix argues that the mere fact that a dispute is “related” to a contract,
or “involves” contract issues, does not make it an “action on a contract” for purposes of section
1717. But Netflix itself has consistently argued that the parties’ disputes did “arise out of” and
“relate to” the parties’ License Agreement. See, e.g., Netflix Opposition [Docket No. 1868] at ¶¶
10, 20-21, 34, 60-73; Netflix’s Motion to Compel Arbitration [Docket No. 1892] at ¶¶ 1, 13, 18-
19; and Netflix’s Motion In Limine to Exclude Extrinsic Evidence [Docket No. 1906] at ¶ 1. So
even if Netflix were right in its restrictive interpretation of the words “on a contract,” that would
just mean that section 1717 is not relevant, and Netflix’s own repeated admissions that the
parties’ disputes arose out of and related to the License Agreement would still entitle Relativity
to recover its fees and expenses.
In any event, Netflix also is wrong in its contentions about what constitutes an action “on
a contract” for purposes of section 1717, and as to whether Relativity was a “prevailing party.”
A. 	The Dispute between Relativity and Netflix Was “On a
Contract” for Purposes of Section 1717
The question of whether an action is “on a contract” is liberally construed by the
California courts. Turner v. Schultz, 175 Cal. App. 4th 974, 979 (Cal. Ct. App. 1st Dist. 2009).
So long as a dispute “involves” a contract, or “arises out of, is based upon, or relates to an
agreement by seeking to define or interpret its terms or to determine or enforce a party’s rights or
duties under the agreement,” the dispute is an action “on a contract” for purposes of section
1717. Douglas E. Barnhart, 211 Cal. App. 4th 230, 241-42 (Cal. Ct. App. 4th Dist. 2012); see
also Hjelm v. Prometheus Real Estate Group, Inc., 3 Cal. App. 5th 1155, 1169-70 (Cal. Ct. App.
1st Dist. 2016).
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 8 of 39

9
In addition, under section 1717 a party “prevails” on a contract claim if the party
successfully resists an assertion of contract rights, even if the party does so by arguing “the
inapplicability, invalidity, unenforceability, or nonexistence of the same contract.” Santisas v.
Goodin, supra, 17 Cal. 4th at 611 (quoting N. Associates v. Bell, 184 Cal.App.3d 860, 865 (Cal.
Ct. App. 1st Dist. 1986)). In other words, a party does not even have to acknowledge that a
contract exists in order to be a prevailing party in an action “on a contract.” Prevailing in a
dispute over the claimed application of a contract, where such contract contains a fee provision,
is sufficient. This is because the party who unsuccessfully asserted contract rights would have
been entitled to fees if it had prevailed in establishing such rights, and under section 1717 that
right must be mutual. Id.; see also Turner v. Schultz, 175 Cal. App. 4th at 980; Shadoan v.
World Sav. & Loan Ass’n, 219 Cal. App. 3d 97, 107 (Cal. Ct. App. 1st Dist. 1990); IMO Dev.
Corp. v. Dow Corning Corp., 135 Cal. App. 3d 451, 464 (Cal. Ct. App. 4th Dist. 1982).
Netflix nevertheless argues that the mere invocation of section 1142 is enough to take the
parties’ dispute outside the ambit of section 1717. It contends that “courts applying California
law have consistently held that a party has no right to contractual attorneys’ fees in a proceeding
seeking relief under the Bankruptcy Code, as opposed to relief on a contract.” See Netflix
Opposition [Docket No. 1997] at 3, 19-22. In other words, Netflix suggests that the Court should
look only at the name of the motion and the statute or rule under which it was filed, and that the
Court should ignore the nature of the defenses that Netflix raised and the source of the rights that
Netflix claimed. Netflix’s argument is not consistent with the California authorities cited above.
It is also a misstatement of what prior federal court decisions have held.
Federal courts in the Ninth Circuit have held that an action is not “on a contract” for
purposes of section 1717 if the issue decided by a bankruptcy court did not involve litigation
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 9 of 39

10
over a contract’s meaning or enforceability. In Bos v. Board of Trustees, 818 F.3d 486 (9th Cir.
2016), for example, a chapter 7 creditor argued that a debtor should not be discharged from a
judgment because the debt allegedly had been incurred through “fraud or defalcation while
acting in a fiduciary capacity, embezzlement or larceny.” Id. at 488. The debtor prevailed, and
then sought to recover attorneys’ fees under the parties’ contract. The Court of Appeals held that
the dischargeability action was not itself an “action on a contract” because the proceeding “in no
way required the bankruptcy court to determine whether or to what extent the Trust Agreements
or the Note were enforceable against Bos, or whether Bos had violated their terms.” Id. at 190.
The Ninth Circuit Court of Appeals distinguished Bos from its decision just one year
earlier in Penrod v. AmeriCredit Financial Services, Inc., 802 F.3d 1084 (9th Cir. 2015), while
affirming the continued validity of the Penrod decision. In Penrod, a creditor argued that a
proposed chapter 13 plan was not consistent with the creditor’s contractual rights and therefore
could not be confirmed. The debtor ultimately prevailed, and then sought reimbursements of
attorneys’ fees under the parties’ contract. The Court of Appeals held that the underlying
litigation was an “action on a contract” because the creditor had sought to enforce a claimed
contractual right when it objected to confirmation of the chapter 13 plan. Id. at 1088. Since
“[t]he only possible source of [AmeriCredit’s] asserted right was the contract,” and since the
only issue in the litigation was whether the relevant contract provision was in fact enforceable
under its own terms or was made partially inapplicable in bankruptcy, the debtor had prevailed
on a claim “on a contract” for the purposes of § 1717. Id. This was true even though the
bankruptcy court had not resolved any dispute over the interpretation of the contract.
The decision in Penrod makes clear that Relativity’s dispute with Netflix qualifies as an
action “on a contract” for purposes of section 1717. The License Agreement, and the Notices of
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 10 of 39

11
Assignment, were the sole source of Netflix’s contentions: (1) that Netflix did not have to
execute the Date Extension Amendments; (2) that Netflix could distribute Masterminds and The
Disappointments Room on its own networks in June 2016; and (3) that Relativity was not entitled
to relief. The parties’ contracts were also the sole source of Netflix’s contention that the dispute
should be arbitrated. It is true that Relativity sought relief under section 1142 of the Bankruptcy
Code, but Netflix did not challenge the application of section 1142 on any ground other than
Netflix’s claimed contractual rights. The Court held that Netflix was barred from asserting the
contractual rights that it claimed, that arbitration was not required, and also that Netflix’s
contractual claims were wrong on the merits. Under California and Ninth Circuit precedents,
that judgment resolved a dispute “on a contract” for purposes of section 1717.
B. 	Relativity Was the Prevailing Party
Netflix argues that Relativity only obtained relief under section 1142 of the Bankruptcy
Code and not under the contract, and therefore Relativity was not a “prevailing party” for
purposes of section 1717. Netflix’s argument cannot be squared with the Penrod decision, which
confirmed that a debtor who obtained confirmation of a chapter 13 plan nevertheless was the
prevailing party in a dispute “on a contract” because contract issues were the only grounds for a
creditor’s objection to the proposed plan. Netflix’s argument also cannot be squared with the
Santisas decision, which confirmed that a party “prevails” in a dispute “on a contract” if the
party successfully defeats the assertion of a claimed contractual right. Santisas v. Goodin, supra,
17 Cal. 4th at 611. See also In re Branford Partners, LLC, 2008 WL 8444795, at *8 (B.A.P. 9th
Cir. 2008) (action was “on a contract” and fees were awarded after asserted equitable liens were
dismissed based on their avoidability under the Bankruptcy Code); In re Martin, 491 B.R. 122,
127-30 (Bankr. E.D. Cal. 2013) (action was “on a contract” and fees were awarded after a deed
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 11 of 39

12
of trust was found to be unenforceable based on the operation of the Bankruptcy Code); Weber v.
Langholz, 39 Cal. App. 4th 1578, 1585-86 (Cal. Ct. App. 2d Dist. 1995) (action was “on a
contract” where defendant sought rescission of a loan under the Federal Truth in Lending Act).
In this case, Netflix never quarreled with the proposition that section 1142 of the
Bankruptcy Code allows the Court to compel parties to execute instruments necessary to
implement a confirmed plan of reorganization. Netflix’s asserted contractual defenses were the
sole ground on which it resisted the requested relief under section 1142. Relativity prevailed in
the litigation over those claimed contractual defenses. More particularly, Relativity prevailed on
the res judicata, judicial estoppel and substantive contract issues, as well as on Netflix’s
contention that the contract required arbitration of the dispute. The Court did not compel Netflix
to execute the specific Date Extension Amendments that Relativity had proffered, because
further proceedings in another court would be needed to determine the appropriate new “outside
date” to be included in such amendments. In all important respects, however, the Court granted
Relativity the relief that it sought. See Merced Production Credit Ass’n v. Sparkman (In re
Sparkman), 703 F.2d 1097, 1100 (9th Cir. 1983) (“the party who obtains a favorable judgment is
deemed to be the prevailing party even though he did not successfully obtain all the relief which
he sought in the action”); see also Hsu v. Abbara, 9 Cal.4th 863, 877 (Cal. 1995) (party can be
the prevailing party even if some relief is denied, so long as the party has “achieved its main
litigation objective”).
C. 	No Apportionment of Fees and Expenses Is Proper or Necessary
Netflix argues that the request for relief under section 1142 was the equivalent of a
“cause of action” that was separate from contract issues and that Relativity’s attorneys’ fees and
expenses should be “apportioned” so as to eliminate those attributable to the section 1142 issues.
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 12 of 39

13
But in this case, as noted many times above, Netflix never opposed relief under section 1142 on
any grounds other than contractual grounds. Netflix’s contention that there was a “separate”
litigation over the application of section 1142 is therefore unfounded. In addition, no
apportionment would be proper even if the motion for relief under section 1142 were viewed as a
separate or parallel cause of action. The California Supreme Court has made clear that attorneys’
fees need not be apportioned when incurred in the litigation of an issue that is common to both a
contractual cause of action and another cause of action. Reynolds Metals Co. v. Alperson, 25
Cal. 3d 124, 129-30 (Cal. 1979). The California courts similarly have held that apportionment is
not required when claims are so intertwined that it would be impracticable, if not impossible, to
separate the attorneys’ time into compensable and noncompensable units. Hjelm v. Prometheus
Real Estate Group, Inc., 3 Cal. App. 5th at 1178. Since contractual defenses were the only
issues raised in opposition to the requested relief under section 1142, there is no “apportionment”
that is required or that would be practicable.
II. 	Mr. Kavanaugh Has No Right to Reimbursement Under Section 1717
Mr. Kavanaugh contends that under Civil Code Section 1717 the presence of an
attorneys’ fee provision in the License Agreement entitles him to attorneys’ fees based on his
participation in the litigation against Netflix, even though he is not a party to the License
Agreement. The Court disagrees.
A. 	Mr. Kavanaugh Was a Moving Party
Netflix contends that Mr. Kavanaugh was not a “moving party” and thus could not have
been a “prevailing party” in the litigation. The record on this point is far more muddled that it
should have been. The name and address of Mr. Kavanaugh’s counsel appear on the cover page
and the signature page of the initial motion for relief under section 1142 of the Bankruptcy Code
and on many other supporting papers. See Reorganized Debtors’ Motion for Relief [Docket No.
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 13 of 39

14
1859]; Reorganized Debtors’ Motion to Shorten Time [Docket No. 1860]; Reorganized Debtors’
Reply to Netflix Opposition [Docket No. 1877]; Reorganized Debtors’ Prehearing Brief [Docket
No. 1904]. However, the text of each of those documents identifies the “Reorganized Debtors”
as the moving parties, and each document describes relief that the “Reorganized Debtors”
sought. The cover pages and signature pages, in which counsel are identified, are the only places
in which Mr. Kavanaugh’s name even appears in these documents.
Netflix, in at least some of its opposition papers, treated the motion for relief as having
been filed by Relativity and also by Mr. Kavanaugh. See Netflix Opposition [Docket No. 1868]
at 1; see also Declaration of Scott McNutt Regarding Availability of Witnesses [Docket 1870] at
2; Netflix’s Trial Brief [Docket No. 1910] at 1. In other filings, however, Netflix referred to the
pending motion as though it had been filed only by Relativity. See Netflix’s Motion to Compel
Arbitration [Docket No. 1892] at 1; Netflix’s Further Objection to Improper Forum and Demand
for Trial by Jury [Docket No. 1905] at 1; Netflix’s Motion In Limine to Exclude Extrinsic
Evidence [Docket No. 1906] at 1-2.
The issue arose at trial on two occasions. At the opening of the trial, Netflix asked for
clarification as to who claimed contract rights as against Netflix. See Transcript, May 19, 2016
[Docket No. 1921] at 8-9. At that point the parties confirmed that the three entities defined in
this Memorandum Opinion as “Relativity” were the contracting parties, though Relativity’s
counsel added that “we think that Relativity Media, the parent, also has an interest, because of
the plan issues.” Id. On the next day, however – after Mr. Kavanaugh’s counsel raised an issue
during the examination of a witness – Netflix’s counsel objected that Mr. Kavanaugh’s counsel
should not be heard because Mr. Kavanaugh was not a party to the contracts. Relativity’s
counsel responded that Mr. Kavanaugh was “a party to the motion,” and Mr. Kavanaugh’s
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 14 of 39

15
counsel confirmed that “[w]e did join in the motion, Your Honor, and obviously we’re a very
key party-in-interest.” See Transcript, May 20, 2016 [Docket No. 1938] at 18.
While the moving parties certainly should have been clearer, in context it was clear that
Mr. Kavanaugh, in his capacity as a plan proponent, was a “moving party” with respect to the
motion seeking relief under section 1142 of the Bankruptcy Code, though he did not contend that
he personally was a party to any of the contracts with Netflix or that he had rights thereunder.
B. 	Mr. Kavanaugh Is Not Entitled To Reimbursement of Fees and Expenses
A contractual right to attorneys’ fees normally benefits only the parties to the contract,
and this is true under section 1717 as well. See Super 7 Motel Assoc. v. Wang, 16 Cal. App. 4th
541, 544-45 (Cal. Ct. App. 4th Dist. 1993). The California courts have recognized exceptions to
this rule where (1) the non-signatory stands in the shoes of a party to the contract, or (2) the non-
signatory party is a third party beneficiary of the contract. See generally Cargill, Inc. v. Souza,
201 Cal. App. 4th 962, 966 (Cal. Ct. App. 5th Dist. 2011); Exarhos v. Exarhos, 159 Cal. App.
4th 898, 903-07 (Cal. Ct. App. 4th Dist. 2008) (non-signatory sued as successor in interest);
Wholesale Material Supply, Inc. v. Norm Wilson & Sons, Inc., 96 Cal. App. 4th 598, 601 (Cal.
Ct. App. 2d Dist. 2002) (suit by assignee of contract rights). Neither of these exceptions applies
here.
Mr. Kavanaugh had good reasons to want Relativity to succeed in the litigation before
this Court, but he did not “stand in the shoes” of Relativity for that purpose. He was not an
assignee of Relativity’s rights, and he was not a successor, by operation of law, to any of those
rights. Similarly, no party alleged that Mr. Kavanaugh was a “third party beneficiary” of the
License Agreement. He is not mentioned in the License Agreement, and made no effort to show
that he satisfied any of the tests that would need to be met in order to make him a third party
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 15 of 39

16
beneficiary. In fact, the License Agreement states clearly that there are no third party
beneficiaries, actual or intended. Docket No. 1997, at 5 (citing Hearing Ex. 43-A, at § 10.13);
see also Sessions Payroll Management v. Noble Const. Co., 84 Cal. App. 4th. 671, 680-81 (Cal.
Ct. App. 2d Dist. 2000) (disclaimer of creation of third party beneficiary rights precluded third
party from recovering attorneys’ fees under a contract).
The California courts have also applied section 1717 in cases where a non-party has
defeated a contention that he or she is bound by a contract. They have done so on the theory that
the other party would have been entitled to recover fees if it had succeeded in its claim that the
party was bound by the contract, and that right must be mutual under section 1717. In Reynolds
Metals Co. v. Alperson, 25 Cal.3d 124 (Cal. 1979), for example, a creditor alleged that the
shareholders of a company should be held liable, on alter ego theories, for the promissory note
obligations of the company they owned. Those promissory notes included attorneys’ fees
provisions. The defendants prevailed, and then were awarded fees. The court reasoned that
since the defendant shareholders were sued as though they were liable under the notes as alter
egos of the corporation, the defendants would have had to reimburse the plaintiff’s fees and
expenses if the plaintiff had succeeded. Id. at 129. “Since [defendants] would have been liable
for attorney’s fees pursuant to the fees provision had plaintiff prevailed, they may recover
attorney’s fees pursuant to section 1717 now that they have prevailed.” Id.
Mr. Kavanaugh seeks to fit himself into the rule announced in Reynolds. He argues that
if Netflix had prevailed in the litigation it would have sought fees from Mr. Kavanaugh, and so
Mr. Kavanaugh should be allowed to do the same. See Motion [Docket No. 1963] at 18-19.
However, the baldly stated premise of this argument – that Netflix could and would have claimed
fees from Mr. Kavanaugh if Netflix had prevailed – is offered without any explanation or
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 16 of 39

17
support, and it is simply wrong. Netflix never contended that Mr. Kavanaugh was a party to the
License Agreement, or that he had any rights under that contract, or that Netflix had any
contractual rights against Mr. Kavanaugh. To the contrary: Netflix made clear that it believed
that only Relativity had contractual rights and obligations. See, e.g., Transcript, May 19, 2016
[Docket No. 1921] at 9; Transcript, May 20, 2016 [Docket No. 1938] at 18.
Mr. Kavanaugh never entered into a contract with Netflix. He never claimed that he had
rights under the License Agreement, and he was never accused of owing obligations under that
contract. Under the prevailing American rule Netflix would have had no right to collect fees
from him if Netflix had prevailed. Travelers Casualty & Surety Co. of America v. Pacific Gas &
Electric Co., 549 U.S. 443, 448 (2007). Since Netflix would not have had a right to a fee award,
Mr. Kavanaugh cannot claim “mutual” rights under section 1717. See, e.g., Hsu, 9 Cal.4th at
870-71 (section 1717 applies to a non-contracting party if “that party would have been liable
under the contract for attorney fees had the other party prevailed”); Real Property Svcs. Corp. v.
City of Pasadena, 25 Cal.App.4th 375, 377-78, 383-84 (Cal. Ct. App. 2d Dist. 1994) (same).
III. 	Relativity’s Obligation to Indemnify Mr. Kavanaugh Does Not Make His Fees A
Recoverable Litigation Expense of Relativity Itself
Relativity also argues that it has indemnified Mr. Kavanaugh for his attorneys’ fees and
expenses and that those items are litigation “expenses” of Relativity that Netflix must reimburse.
A. 	Netflix’s Procedural Objection
Netflix argues that with the exception of fees and taxable court costs a party may not
recover “expenses” through a post-trial motion, but instead must seek recovery of such amounts
through a plenary proceeding. See, e.g., Hsu v. Semiconductor Systems, Inc., 126 Cal. App. 4th
1330, 1341 (Cal. Ct. App. 1st Dist. 2005) (holding that a party who sought to recover expert
witness fees needed to plead and prove its entitlement to such fees at trial rather than through a
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 17 of 39

18
post-trial motion). In Hsu, the court explained that although section 1717 permits attorneys’ fees
and taxable “costs” to be awarded in a post-trial motion, a dispute over the right to recover
nontaxable “expenses” may raise issues of contract interpretation and must be submitted to a trier
of fact “pursuant to a prejudgment evidentiary proceeding, not a summary post-judgment
motion.” 126 Cal. App. 4th at 1341-42 (citations omitted).
Most of the California appellate courts have adopted a rule similar to that followed in the
Hsu decision, and have held that in the California courts a request to recover “nontaxable”
expenses may not be made through a post-trial motion. See, e.g., Steiner v. Thexton, 2016 Cal.
App. Unpub. LEXIS 6039 (Cal. Ct. App. 3d Dist. 2016), at *41-42; Harbison-Mahony-Higgins
Builders, Inc. v. Argonaut Constructors, 2012 Cal. App. Unpub. LEXIS 741 (Cal. Ct. App. 1st
Dist. 2012); Unzipped Apparel, LLC v. Apparel Distrib. Servs., LLC, 2010 Cal. App. Unpub.
LEXIS 5121 (Cal. Ct. App. 2d Dist. 2010); Jones v. Union Bank of Cal., 127 Cal. App. 4th 542,
551 (Cal. Ct. App. 2d Dist. 2005); Carwash of America-PO LLC v. Windswept Ventures No. I,
LLC, 97 Cal. App. 4th 540, 544 (Cal. Ct. App. 3d Dist. 2002); First Nationwide Bank v.
Mountain Cascade, Inc., 77 Cal. App. 4th 871 (Cal. Ct. App. 1st Dist. 2000). However, one
California appellate court has held that a nontaxable “expense” may be sought in a post-trial
motion, at least where the contract explicitly authorizes the recovery of that expense. Thrifty
Payless, Inc. v. Mariners Mile Gateway, LLC, 185 Cal. App. 4th 1050 (2010) (holding that a
post-trial motion is sufficient for the recovery of expert witness fees in cases where the parties’
agreement authorized the recovery of such witness fees).
A separate question (which the parties have not addressed) is whether the rule set forth in
Hsu is a procedural rule that is not applicable here. Section 1717 of the California Civil Code
provides a post-trial procedure for the recovery of attorneys’ fees and “costs,” but as noted in the
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 18 of 39

19
Hsu decision section 1717 does not provide for the recovery of “nontaxable” expenses through a
post-trial motion. By contrast, Rule 54(d) of the Federal Rules of Civil Procedure, which applies
in this Court, states that attorneys’ fees as well as “nontaxable” expenses “must” be sought
through a post-trial motion. The only exception is where “the substantive law requires those fees
to be proved at trial as an element of damages.” Fed. R. Civ. P. 54(d).
Five Circuit Courts of Appeal have held that a request to recover fees and expenses under
a “prevailing party” provision in a contract is not an “element of damages” for purposes of Rule
54(d) and that fees and expenses therefore are properly sought in a post-trial motion. See
Richardson v. Wells Fargo Bank, N.A., 740 F.3d 1035, 1039-40 (5th Cir. 2014); Heavy
Petroleum Partners, LLC v. Atkins, 457 Fed. Appx. 735, 748 (10th Cir. 2012); Wiley v. Mitchell,
106 Fed. Appx. 517, 522-23 (8th Cir. 2004); Rissman v. Rissman, 229 F.3d 586, 588 (7th Cir.
2000); Capital Asset Research Corp. v. Finnegan, 216 F.3d 1268, 1271 (11th Cir. 2000). As the
Court explained in Rissman:
What Rule 52(d)(2)(A) [sic] requires is that a party seeking legal fees among
the items of damages – for example, fees that were incurred by the plaintiff
before the litigation begins, as often happens in insurance, defamation, and
malicious prosecution cases – must raise its claim in time for submission to
the trier of fact, which means before the trial rather than after. Fees for work
done during the case should be sought after decision, when the prevailing
party has been identified and it is possible to quantify the award.
229 F.3d at 588. We have found no reported decisions on this question in the Second Circuit.
However, lower courts in other Circuits have followed the reasoning in Rissman. 2
2 	See, e.g., E. Roofing Sys. v. Simon Prop. Grp., 2016 U.S. Dist. LEXIS 45910, at *17 (M.D.
Pa. April 5, 2016); Lehman Bros. Holdings, Inc. v. Gateway Funding Diversified Mtge.
Servs., 2015 U.S. Dist. LEXIS 143532, at *7 (E.D. Pa. October 22, 2015); Rockland Trust
Co. v. Computer Associated Int’l, Inc., 2008 U.S. Dist. LEXIS 61687, at *16 (D. Mass.
August 1, 2008); Telecom s. Am., Inc. v. Presto Telcoms, Inc., 2003 U.S. Dist. LEXIS
19650, 	at *9-10 (E.D. Pa. October 28, 2003).
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 19 of 39

20
Does the decision in Hsu mean that the California courts disagree with the Rissman
decision and with the reasoning of the federal Courts of Appeals in the cases cited above? Do
the California courts believe that contractual “expense” claims inherently are “damage” claims,
no matter what the procedural rules say? Or does Hsu merely stand for the proposition that
section 1717 only allows a post-trial motion to recover attorneys’ fees and taxable costs, so that
procedurally the only way to seek nontaxable expenses in a California court is to do so through a
plenary case? The Hsu decision could be read either way. If one traces back through the
decisions cited in Hsu one will find decisions that predate the enactment of section 1717 and that
held that requests to recover fees and expenses under a contract are items of “special damages”
that must be proved at trial. See, e.g., Cirimele v. Shinazy, 124 Cal. App. 2d 46, 52 (Cal. Ct.
App. 1st Dist. 1954). The more recent Thrifty decision, on the other hand, states quite
emphatically that there is nothing about a contractual request to recover nontaxable expenses that
makes it inherently a “damage” claim that can only be litigated at trial and that cannot be raised
after trial. The court held, in Thrifty, that there is “no reason” why a contractual claim to recover
nontaxable expenses must be presented “at trial” rather than through a post-trial motion, at least
where the contract provides for the recovery of those expenses. 185 Cal. App. 4th at 1066-67.
Federal court decisions in the Ninth Circuit that have awarded fees and expenses under
section 1717 do not help in resolving this issue. We have found numerous decisions by courts in
the Ninth Circuit that have applied section 1717 and that have approved awards of nontaxable
“expenses” that have been sought through post-trial motions. However, most of these decisions
do not discuss the procedural issues, and many do not even mention the Hsu decision. See, e.g.,
Dollar Leasing, Inc. v. Thornwood Lease Plan, Inc., 1992 U.S. App. LEXIS 3986, at *12-13 (9th
Cir. 1992) (approving district court’s allowance of photocopying, word processing, messenger
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 20 of 39

21
and clerical overtime costs pursuant to section 1717); NuVasive, Inc. v. Madsen Med., Inc., 2016
U.S. Dist. LEXIS 86870, at *23 (S.D. Cal. July 1, 2016) (district court awarded some nontaxable
items as expenses reasonably incurred in connection with the litigation, including travel
expenses, and did so in ruling on a post-trial motion); Genesis Merch. Partners, LP v. Nery’s
USA, Inc., 2013 U.S. Dist. LEXIS 190983, at *38 (S.D. Cal. Dec. 6, 2013) (district court
awarded nontaxable costs through post-trial motion in a matter governed by section 1717).
At least one federal court in California has followed the rule in Hsu and has refused to
consider a post-trial motion to recover nontaxable costs that had not been sought at trial. See RD
Legal Funding, LLC v. Erwin & Balingit, LLP, 2011 U.S. Dist. LEXIS 2137, at *14 (S.D. Cal.
January 10, 2011). However, at least one other federal court in California has declined to follow
the holding in Hsu. See Cataphora Inc. v. Parker, 2012 U.S. Dist. LEXIS 6449 (N.D. Cal. Jan.
20, 2012). The court held, in Cataphora, that it would “waste judicial resources and inject
confusion” to require each party to plead and prove its ongoing litigation expenses at trial, before
a prevailing party had even been determined. Id., at *8.
There is considerable merit to the reasoning of the decisions in Rissman, Cataphora and
Thrifty. The contractual right to recover fees and expenses is triggered only when a party
becomes a “prevailing party,” and the “prevailing party” is not identified until after the trial is
concluded. See also Rockland Trust, 2008 U.S. Dist. LEXIS 61687, at *16-17. If parties were
required to prove their litigation expenses at trial, then in this case both Netflix and Relativity
would have needed to do so in order to preserve their rights, which would have been inefficient
and wasteful. Furthermore, the amounts of fees and expenses that are incurred during a trial
change as the trial progresses. Forcing parties to quantify their fees or expenses as “damages”
would create a litigation example of the Heisenberg uncertainty principle: the very effort to
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 21 of 39

22
quantify the damages would cause the damages to change. It therefore would be highly peculiar
to require, notwithstanding the procedures authorized under Rule 54(d), that the fees or expenses
incurred during a trial must be quantified during the trial itself.
The procedural issue discussed above may be more troublesome in cases where juries are
impaneled. Here, the underlying dispute was tried to the court, and the request for an award of
expenses is being presented to the same court. There is no risk of inconsistent decisions.
Instead, there is only a timing issue. The same outcome (from a timing perspective) could just as
easily have been accomplished by a bifurcation of the trial so that “expense” reimbursement
issues would be determined only after the consideration of other issues and after a prevailing
party had been identified. In fact, that is certainly the procedure the Court would have required
if the parties had attempted to prove their respective fees and expenses during the prior trial.
In addition, although Rule 54(b) permits fees and expenses to be awarded without an
evidentiary hearing, it does not prohibit the Court from holding such a hearing if the
circumstances warrant one. In this case, the Court made clear to the parties that it would hold an
evidentiary hearing and would take testimony and other evidence on any issues that the parties
believed required such a hearing. See Transcript, July 21, 2016 [Docket No. 2012] at 35-37.
The current procedure, then, has presented the issues to the Court in exactly the same order that
the Court would have considered them if the expenses had been treated as “damage” claims and
with the same procedural rights to an evidentiary hearing if one was needed.
Accordingly, in this case the Court believes that it is fully consistent with the federal
procedures and the Rissman, Thrifty and Cataphora decisions, and does no violence to the
substantive law of California, for this Court to consider the claim for “expense” reimbursements
after the prior trial.
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 22 of 39

23
B. 	This Court Has Power to Decide the Motion
Under Stern v. Marshall
Netflix argues that requests for reimbursement of nontaxable expenses raise contract
issues that needed to be raised can only be decided in a separate litigation and that this Court
lacks jurisdiction and power to decide them under Stern v. Marshall, 564 U.S. 462 (2011). The
applicable federal rules make clear that Relativity’s motion for an award of attorneys’ fees and
expenses incurred in the underlying litigation is a proceeding that is collateral to the underlying
litigation, and is to be decided by the Court that entered the relevant judgment. See Fed. R. Civ.
P. 54; Fed. R. Bankr. P. 7054, 9014. This Court has the Constitutional power to resolve the
collateral issues regarding attorneys’ fees for the same reasons that it had the Constitutional
power to resolve the underlying litigation. See Bench Decision at 33-34.
C. 	The Merits of the Claim to Recover Indemnification Payments
Although the Court believes that Relativity is entitled to seek nontaxable “expenses” in a
post-trial motion, the Court also believes that Relativity’s request to recover its indemnification
payments, on the theory that they are litigation expenses covered by the License Agreement, is
unfounded. The License Agreement provides that in the event of litigation the prevailing party
shall be entitled to recover “its” reasonable costs and expenses, including reasonable outside
attorneys’ fees. In context that language must be interpreted as referring to the prevailing party’s
own litigation expenses, not someone else’s.
Relativity argues that the prevailing party provision in the License Agreement entitles
Relativity to recover any “fees” for which Relativity is or becomes liable, including those for
which it is liable by way of indemnity. In support Relativity cites the decision in Trope v. Katz,
11 Cal.4th 274 (Cal. 1995). However, Trope does not stand for the proposition for which it is
cited. In Trope, the court held that an attorney litigating in propria persona was not entitled to
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 23 of 39

24
receive attorneys’ fees under section 1717 because those costs were incurred in his
representation of himself. In explaining its decision, the Supreme Court of California noted that
section 1717:
. . . applies only to contracts specifically providing that attorney fees ‘which
are incurred to enforce that contract’ shall be awarded to one of the parties or
to the prevailing party . . . To ‘incur’ a fee, of course, is to ‘become liable’ for
it, i.e., to become obligated to pay it.
Trope, 11 Cal.4th at 280 (emphasis original, internal citations omitted). Trope merely stands for
the proposition that there is no right to recover an attorney’s fee if the client has no obligation to
pay an attorney, because in that context the client has not “incurred” a fee. Relativity has taken
language out of context in urging that Trope stands for the proposition that a party may treat, as
its own attorneys’ fees, any fee incurred by another party that is subject to an indemnification
provision. No such issue was present in Trope.
Relativity has not offered any applicable precedent, or any evidence, in support of its
contention that an indemnity agreement between Relativity and Mr. Kavanaugh is sufficient to
make Netflix liable for Mr. Kavanaugh’s fees and expenses. If the reference to “expenses” in the
License Agreement were to be interpreted this broadly, it would have the effect of unilaterally
making Mr. Kavanaugh a third party beneficiary of the attorneys’ fee provision in the License
Agreement, without any agreement by Netflix that Mr. Kavanaugh would have such rights. It
would also reach many other parties whose fees Relativity is obligated to pay, including the
secured lenders and the Official Committee of Unsecured Creditors, who monitored the Netflix
dispute and submitted papers in connection with it. It strains credulity to think that the parties
contemplated such a result when they agreed that litigation “expenses” would be reimbursed.
The general rule is that a party is not entitled to recover attorneys’ fees from an adverse
party. A contract may vary that rule, but under California law, as explained above, it does so
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 24 of 39

25
only as to the parties to the contract. Non-parties may not recover fees except in specific
circumstances that are not applicable here. Allowing Relativity to expand Netflix’s obligations
through an indemnity agreement, without Netflix’s consent or approval, would do violence to
this ordinary principle. The attorneys’ fee provision in the License agreement authorizes a
prevailing party to recover “its” own reasonable fees and litigation expenses, but that is all. It
does not reach other parties whom Relativity has indemnified.
IV. 	Amount of Reasonable Fees to be Awarded
The parties have agreed that under California law, New York State law and federal law
courts used the same “lodestar” method to determine the reasonableness of fees. See Transcript,
September 15, 2016 [Docket No. 2075] at 30-31, 37-38; see also Nisselson v. Empyrean
Investment Fund, L.P. (In re MarketXT Holdings Corp.), 2006 WL 2583644, at *4 (Bankr.
S.D.N.Y. 2006); Gorman v. Tassajara Development Corp., 178 Cal. App. 4th 44, 63-64 (Cal. Ct.
App. 6th Dist. 2009).3 The lodestar method evaluates the reasonableness of an attorney fee by
3 	Notwithstanding the parties’ agreement on this point, along with numerous California
decisions that confirm the use of a “lodestar” approach, there are some California decisions
that hold that a lodestar analysis may not be required when calculating an award of
reasonable attorney’s fees pursuant to a contractual fee-shifting provision, and that the trial
court instead has broad discretion to award what it believes is reasonable. See, e.g., Chan v.
Chase Aircraft Fin. Co., 1991 U.S. App. LEXIS 16199, at *16-17 (9th Cir. 1991)
(“California courts awarding attorney’s fees pursuant to section 1717 do not apply the
lodestar approach . . . Rather, California affords its trial courts broad discretion, in section
1717 cases, to consider a wide number of factors.”); Flannery v. Cal. Hwy. Patrol, 61 Cal.
App. 4th 629, 641 n.5, 644, 647 (Cal. Ct. App. 1st Dist. 1998) (in a case awarding attorney
fees pursuant to statute, court acknowledges disagreement among California courts as to
whether the lodestar method must apply in cases which implicate Cal. Civ. Code § 1717);
Yenidunya Invs. Ltd. v. Magnum Seeds, Inc., 2012 U.S. Dist. LEXIS 20421, at *17-18 (E.D.
Cal. 2012) (while courts begin their analysis of reasonable attorney’s fees in section 1717
cases with the lodestar figure, courts are given “broad authority to determine the amount of a
reasonable fee” in such cases). The factors considered in the lodestar analysis and discussed
in this Opinion are the same factors that this Court would consider if left to its own
discretion, so the use of a different standard would not change the outcome in this case.
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 25 of 39

26
considering “the number of hours reasonably expended on the litigation multiplied by a
reasonable hourly rate.” In re MarketXT Holdings, 2006 WL 2583644, at *4; see also Cruz v.
Local Union No. 3 of Intern. Broth. Of Elec. Workers, 34 F.3d 1148, 1159 (2d Cir. 1994). The
reasonableness of an hourly rate, in turn, is established through comparison with prevailing rates
in the legal community “for similar services by lawyers of reasonably comparable skill,
experience, and reputation.” Id.; see also Ingram v. Oroudjian, 647 F.3d 925, 927-28 (9th Cir.
2011).
Netflix initially challenged the reasonableness of the claimed fees on many grounds, but
in later submissions Netflix agreed to narrow its challenges to the following items.
A. 	Use of Premium Counsel
Netflix argues that Relativity was entitled to hire expensive counsel at Relativity’s own
expense if that is what Relativity wished, but that under the License Agreement Relativity should
only be allowed to recover the fees that less expensive attorneys might have charged. As Netflix
was fond of putting it, Relativity should not be allowed to recover the cost of a Cadillac (or a
Ferrari) if a Honda Civic would have done the job. See Netflix Supplemental Opposition
[Docket No. 2049] at ¶¶ 5, 7; Transcript, September 15, 2016 [Docket No. 2075] at 29, 48. The
Court finds that Netflix’s arguments about the reasonableness of Relativity’s use of the Jones
Day firm, and of the reasonableness of the fees that it incurred as a result, are without merit.
The License Agreement requires Netflix to reimburse Relativity for its “reasonable”
attorneys’ fees. The reasonableness of a party’s choice of counsel, and the reasonableness of the
attorneys’ fees that are thereby incurred, depends on the complexity and importance of the matter
being handled. A complicated, fast-paced, “bet the company” litigation requires counsel of
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 26 of 39

27
higher caliber (and expense) than a routine case that has little at stake. A party may not need a
Ferrari to go to the corner grocery store, but winning a Grand Prix race is a different matter.
In this case, the issues that needed to be litigated were of the utmost importance to
Relativity. Netflix itself made clear, at confirmation, that it understood that the planned revenues
from the distributions of Masterminds and The Disappointments Room, and future payments
under the Netflix License Agreement generally, were essential to Relativity’s financial forecasts
and the feasibility of its reorganization plan. Netflix’s actions threatened to cut the legs out from
under those financial forecasts and from the reorganization itself. The matter also had to be
litigated at a fast pace and under great pressure. The litigation required sophisticated counsel
who could devote a great amount of specialized resources to the task on short notice.
In addition, Relativity was represented by the Jones Day firm during the confirmation
hearing. It would not have made sense for Relativity to hire different counsel to handle the post-
confirmation dispute with Netflix. Familiarity with the prior confirmation proceedings was
essential to the litigation of the post-confirmation dispute. Bringing in new counsel would only
have hampered the litigation effort. In making a “reasonable” choice of counsel (and in
reasonably incurring the associated attorneys’ fees) Relativity surely was not obliged to hamper
its own litigation efforts. In fact, it is dubious that any substantial savings would have been
obtained even if Relativity had retained counsel with lower hourly rates, because such new
counsel would have had to spend the additional time needed to become familiar with the entire
prior record of the confirmation hearing and with all of the information, evidence and legal
research relevant to the License Agreement that Jones Day had already developed.
Furthermore, this Court has previously found that Netflix did not make its post-
confirmation contractual arguments in good faith. Bench Decision at 24. Instead, Netflix
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 27 of 39

28
completely reversed course in its interpretation of the parties’ agreement, in the hopes that by
doing so Netflix could exert so much financial pressure on Relativity that it might coerce a
modification of the License Agreement. Netflix is hardly in a position to criticize the
“reasonableness” of the litigation response that Netflix’s own conduct made necessary.
Netflix is wrong when it suggests that the “lodestar” calculation requires the court to
ignore these factors and instead to compute the “average” fees that all attorneys in the
community charge for all kinds of cases. See, e.g., Netflix Supplemental Opposition [Docket
No. 2049] at ¶ 10. Billing rates differ widely among firms, and differ widely for different types
of matters. Clients regularly (and reasonably) retain large firms, at high billing rates, to handle
important and complex cases. As the Supreme Court held in Blum v. Stenson, 465 U.S. 886, 895
n.11 (1984):
Market prices of commodities and most services are determined by supply
and demand. In this traditional sense there is no such thing as a prevailing
market rate for the service of lawyers in a particular community. The type of
services rendered by lawyers, as well as its experience, skill, and reputation,
varies extensively -- even within a law firm. Accordingly, the hourly rates of
lawyers in private practice also vary widely. The fees charged often are
based on the product of hours devoted to the representation multiplied by the
lawyer's customary rate.
A reasonable fee cannot be calculated except in reference to the importance of the issues raised
by the case and the fees normally charged by the firm that was retained and by firms of similar
caliber and size, and that is precisely what the “lodestar” calculation contemplates. See Farbotko
v. Clinton County, 433 F.3d 204 (2d Cir. 2005) (reasonable hourly rate determination
“contemplates a case-specific inquiry into the prevailing market rates for counsel of similar
experience and skill to the applicant’s counsel.”); Syers Properties III, Inc. v. Rankin, 226 Cal.
App. 4th 691, 700 (Cal. Ct. App. 1st Dist. 2014) (in California, courts generally look to “equally
difficult or complex types of litigation to determine which market rates to apply”).
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 28 of 39

29
Netflix is also wrong in suggesting that as a matter of law Relativity’s own reasonable
choice of high-priced counsel should be disregarded in computing a reasonable fee. A
“reasonable” attorney’s fee “means a fee that would have been deemed reasonable if billed to
affluent plaintiffs by their own attorneys.” Missouri v. Jenkins, 491 U.S. 274, 286 (1989)
(quoting City of Riverside v. Rivera, 477 U.S. 561, 591 (1986) (Rehnquist, J., dissenting)); see
also In Time Products, Ltd. v. Toy Biz, Inc., 38 F.3d 660, 667 (2d Cir. 1994) (“A district court’s
award of attorneys’ fees pursuant to a contractual fee-shifting provision must be reasonably
related to the fee arrangement that the prevailing party would have made with counsel absent a
fee-shifting agreement.”). Many courts have held that the client’s own willingness to pay an
attorney at a particular rate is strong evidence of the reasonableness of the attorney’s fees. See,
e.g., U.S. Bank N.A. v. Dexia Real Estate Capital Mkts., 2016 U.S. Dist. LEXIS 165268, at *26-
27 (S.D.N.Y. Nov. 30, 2016) (approving hourly rates that ranges from $250 to $1055 per hour in
part by noting that the client had agree to pay those rates); Tomazzali v. Sheedy, 804 F.2d 93, 98
(7th Cir. 1986) (“For private counsel with fee-paying clients, the best evidence is the hourly rate
customarily charged by counsel or by her law firm.”).
Netflix’s contention – that “reasonable” attorneys’ fees never cover “premium” counsel,
and can never cover fees that outside of the middle of the spectrum – would effectively amount
to a determination that as a matter of law it is never “reasonable” to retain large firms who
charge high billing rates. Such a rule would be arbitrary, and contrary to market practice.
B. 	Billing Rates
It was appropriate for Relativity to retain the Jones Day firm to handle the dispute with
Netflix, for each of the reasons stated above. The applicable case law plainly calls for the Court
to determine the reasonable hourly rates for counsel of similar experience and quality to the
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 29 of 39

30
counsel that Relativity actually and reasonably employed in this case. See Kirsch v. Fleet Street,
Ltd., 148 F.3d 149, 172 (2d. Cir. 1998) (rates used for lodestar calculation should be based on
prevailing market rates “for comparable attorneys of comparable skill and standing in the
pertinent legal community”); see also Kerin v. USPS, 218 F.3d 185, 190 (2d Cir. 2000) (same
when suing under a statute which provides for attorney’s fees for the prevailing party); Gesualdi
v. J.H. Reid, 2016 U.S. Dist. LEXIS 87705, at *17-18 (E.D.N.Y. June 29, 2016) (same); Savoie
v. Merchants Bank, 166 F.3d 456, 463 (2d Cir. 1999) (same when suit confers a benefit upon a
class of people); Popal v. Slovis, 646 Fed. Appx. 35, 36-37 (2d Cir. 2016) (same when parties
were unable to present a written legal services agreement, basing rate on what the attorney had
previously charged clients in similar cases). California courts similarly look to the rates charged
by comparable firms for similar types of work. Cabral v. Martins, 177 Cal. App. 4th 471, 491
(Cal. Ct. App. 1st Dist. 2009) (when awarding attorney’s fees pursuant to a statutory fee-shifting
provision, lodestar determination in California requires consideration of prevailing hourly rates
“for similar work.”).
Many courts have held that the best evidence of the reasonableness of the “market” value
of a particular law firm’s services (and therefore the reasonableness of its fees) are the fees that
the law firm normally charges its clients in other matters. Rozell v. Courtney Ross-Holst, 576 F.
Supp. 2d 527, 544 (S.D.N.Y. 2008) (rates that attorneys actually charge their clients is
“obviously strong evidence of what the market will bear”); In re Stock Exchanges Options
Trading Antitrust Litigation, 2006 U.S. Dist. LEXIS 87825, at *31 (S.D.N.Y. Dec. 4, 2006) (“the
applicant attorney’s customary billing rate for fee-paying clients is ordinarily the best evidence
of the market rate”); Anderson v. YARP Rest., 1997 U.S. Dist. LEXIS 1106, at *8 (S.D.N.Y. Feb.
4, 1997) (same). The Court is also entitled to rely on its own experience and knowledge of
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 30 of 39

31
prevailing rates, In re MarketXT Holdings Corp., 2006 WL 2583644, at *5 (Bankr. S.D.N.Y.
July 21, 2006), and may take judicial notice of hourly rates approved in other cases involving
matters of similar complexity. Townsend v. Benjamin Enters., 679 F.3d 41, 59 (2d. Cir. 2012).
Here, the hourly rates charged by Relativity’s counsel were the rates that the Jones Day
firm normally charges, and Netflix has not contended otherwise. In addition, this Court has
previously approved Relativity’s retention of the Jones Day firm as counsel and has approved the
fee applications made by the Jones Day firm. Sections 327 and 328 of the Bankruptcy Code only
permit a debtor to retain counsel on “reasonable” terms (including reasonable hourly rates), and
the approval of compensation under section 330 of the Bankruptcy Code requires the Court to
consider whether fees are reasonable in light of the “rates charged” and “the customary
compensation charged by comparably skilled practitioners in cases other than cases under this
title.” 11 U.S.C. §§ 327, 328, 330(a)(3)(B) and (F). The Court of Appeals has emphasized that
in making these “reasonableness” determinations a bankruptcy court is supposed to be guided by
prevailing market practices. In re Ames Dep’t Stores, Inc., 76 F.3d 66, 71 (2d Cir. 1996)
(explaining that in section 330 Congress took “the position that ‘compensation in bankruptcy
matters be commensurate with the fees awarded for comparable services in non-bankruptcy
cases’”); see also In re United Artists Theatre Co., 315 F.3d 217, 229 (3d Cir. 2003). There is no
substantive difference between the market-based determinations that this Court has made under
sections 327 through 330 of the Bankruptcy Code and the assessment of a market-based
“prevailing” rate for purposes of a lodestar calculation. See In re Northwest Airlines Corp., 382
B.R. 632, 645 (S.D.N.Y. 2008), rev’d on other grounds sub nom. Lazard Freres & Co. LLC v.
Adams (In re Northwest Airlines Corp.), 399 B.R. 124 (S.D.N.Y. 2008) (“Section 330 of the
Bankruptcy Code incorporates the lodestar analysis . . .”). The Court’s prior approvals of the
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 31 of 39

32
Jones Day billing rates (both at the time of the firm’s initial retention and in the approval of fee
applications) were based on determinations that those rates were consistent with market rates.
This Court is also well aware of fees that have been approved for comparable counsel in
other bankruptcy cases. Relativity offered examples of bankruptcy court approvals of hourly
rates charged by other firms that are comparable with those charged by Jones Day. Countless
similar examples can easily be found through a review the fees that the judges of this district
have approved in other bankruptcy cases. See, e.g., In re MF Global Holdings Ltd., Case No.
11-15059 (MG) (approving retention of Jones Day with partner billing rates ranging from $675
to $1,000 per hour); In re Fairway Group Holdings Corp., Case No. 16-11241 (MEW)
(approving retention of Weil, Gotshal & Manges LLP with partner billing rates ranging from
$910 to $1,350 per hour); In re SunEdison, Inc., Case No. 16-10992 (SMB) (approving retention
of the Skadden firm with partner billing rates ranging from $935 to $1,425 per hour); In re
Sabine Oil & Gas Corp., Case No. 15-11835 (SCC) (approving retention of Kirkland & Ellis
LLP with partner billing rates ranging from $665 to $1,375 per hour). As noted above, these
billing rates could not have been approved except upon findings that they were consistent with
prevailing rates, in the market, for firms of similar capacity and quality for similar matters.
The only material cited in support of Netflix’s contrary contentions about “prevailing”
rates are its citations to some prior decisions in intellectual property cases in which parties
sought reimbursement for lower fees and such requests were approved. See, e.g., TufAmerica
Inc. v. Diamond, 2016 WL 1029553, at *5 (S.D.N.Y. Mar. 9, 2016) (considering a statutory fee
request in a copyright infringement suit and noting that New York district courts had approved
“rates for experienced partners in the range of $500 to $800 per hour”); River Light V, L.P. v. Lin
& J Int’l, Inc., 2015 WL 3916271, at *12 (S.D.N.Y. June 25, 2015) (observing, in a Lanham Act
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 32 of 39

33
case, that courts in this District have observed that rates of $390 to $470 fall at the very top of
the spectrum of reasonable hourly rates for associates “in a trademark action”). But neither of
these decisions purported to rule on the “prevailing” rates charged by firms for bet-the-company
litigations of the kind involved here. Netflix surely must know that the hourly rates involved in
TufAmerica and River Light are not the “peak” of the rates that clients ordinarily are willing to
pay in cases that threaten the clients’ very survival, or that clients ordinarily are willing to pay
for the services of the Jones Day firm and firms of similar stature.
Netflix also contends that “based on Netflix’s research” the highest partner billing rate
that has been approved in this District is $870 per hour. See Netflix Supplemental Opposition
[Docket No. 2049] at 28. More recently, however, the District Court has approved an award of
fees based on higher billing rates. See U.S. Bank N.A. v. Dexia Real Estate Capital Mkts., 2016
U.S. Dist. LEXIS 165268, at *26 (S.D.N.Y. Nov. 30, 2016) (approving hourly rates that ranged
from $250 to $1,055 per hour); see also Themis Capital v. Democratic Republic of Congo, 2014
U.S. Dist. LEXIS 124208, at *23 (S.D.N.Y. Sep. 4, 2014) (observing that partner billing rates “in
excess of $1,000 an hour” are “not uncommon in the context of complex commercial
litigation.”). Furthermore, Netflix’s observation about the billing rates that have been approved
in other cases in this District can only be true if Netflix’s researchers elected to limit themselves
to District Court decisions, and to ignore the legions of cases in which the bankruptcy courts in
this district have approved higher billing rates.
The Court in TufAmerica made clear that the determination of a “prevailing” rate must be
made with reference to “lawyers of comparable skill, experience, and reputation” and also varies
depending on the complexity and difficulty of the case, the resources needed to prosecute the
case effectively, and the timing demands of the case. 2016 WL 1029553, at *5 (quoting
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 33 of 39

34
Miroglio S.P.A. v. Conway Stores, Inc., 629 F. Supp. 2d 307, 314 (S.D.N.Y. 2009)). The Court
in River Light similarly held that a reasonable hourly rate is “what a reasonable, paying client
would be willing to pay, given that such a party wishes to spend the minimum necessary to
litigate the case effectively.” 2015 WL 3916271, at *11 (quoting Bergerson v. N.Y. State Office
of Mental Health, Cent. N.Y. Psychiatric Ctr., 652 F.3d 377, 389 (2d Cir. 2001)). Here,
Relativity reasonably was willing to pay the hourly rates charged by Jones Day throughout the
bankruptcy case and in the critical post-confirmation battle with Netflix.
C. 	Time Spent and Assignments of Tasks to Senior Attorneys
Netflix initially criticized the overall staffing of the litigation but ultimately reduced its
criticisms to those involving the tasks performed by specific attorneys. Many of the criticisms
involved the work of lawyers from the Skadden firm who acted as counsel to Mr. Kavanaugh. In
light of the Court’s rulings above those issues are moot. Netflix asserted only two criticisms as
to the time spent by the Jones Day attorneys and as to the assignments of tasks among those
attorneys. First, Netflix argues that Ms. Lindberg (an associate) took notes and tracked exhibits,
and that “[t]hese tasks appear to be ones that would generally be proper for a paralegal, not an
associate billing at $450 per hour.” See Netflix Supplemental Opposition [Docket No. 2049] at
12. Second, Netflix contends that Ms. Wiener (a Counsel with the firm) performed tasks that
“appear largely duplicative of those performed by Ms. Lindberg, and again appear more
appropriate for a paralegal than an attorney billing at $825 per hour.” Id. Netflix also contends
that Ms. Lindberg and Ms. Wiener did not both “reasonably” need to attend the trial. Id.
The evidence before the Court includes the daily time records of Ms. Lindberg and Ms.
Wiener, plus declarations that describe the work they did. It is plain from those materials that
Netflix has understated the nature and importance of the work that these attorneys did.
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 34 of 39

35
Ms. Lindberg’s work did not just include her attendance at trial. Prior to trial, she drafted
witness declarations, helped to prepare witness outlines, and helped to identify documents that
would be useful as exhibits during witness examinations. See Declaration of Christina Lindberg
[Docket No. 2044] at 2-3. She attended the trial to provide continued assistance with the witness
examinations and with the ongoing task of identifying exhibits – which, as anyone who has been
a trial lawyer knows, can very much be a “moving target” as a witness testifies, particularly in a
fast-moving dispute like this one that has not been preceded by extensive discovery or by any
depositions. It is true that Ms. Lindberg took notes, but she did so for the purpose of assisting in
cross-examinations and redirect examinations. Notes were essential because the trial was
recorded on an audio system and daily transcripts were not available. The tasks that Ms.
Lindberg performed required judgment and legal training and were not matters that should have
been assigned to paralegals, as Netflix wrongly contends.
Ms. Wiener had previously been involved in the litigation (during confirmation
proceedings) of issues relating to the Netflix License Agreement. It was only natural, and an
efficient use of personnel, for her to be involved in the post-confirmation dispute. She
researched and drafted the initial motion papers that Relativity filed; researched and assisted in
drafting papers in opposition to Netflix’s arbitration demands; and drafted other briefs and
submissions on behalf of Relativity. She had principal responsibility for the preparation of
Relativity’s pre-hearing brief. She assisted in outlining the closing argument to be presented by
Relativity’s lead attorney, and supervised many other attorneys (not only Ms. Lindberg but also
many attorneys from the Skadden firm) in the hectic work of gathering exhibits for use during
witness examinations and ensuring that required materials were in evidence. It is unfair for
Netflix to treat her participation as if she merely prepared a passive chronicle of the events that
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 35 of 39

36
were occurring. It is obvious from the daily time entries, and her declaration, that Ms. Wiener
did far more than that.
Trials can be a chaotic experience even under good circumstances. Trials that occur on
an accelerated schedule, with no discovery and with far less than the normal amount of time to
get organized, are particularly challenging. Handling multiple witnesses properly in such
circumstances requires multiple attorneys to prepare examination outlines and to make a careful
review and selection of potential exhibits. Those are tasks that require judgment, experience and
skill. They are not merely clerical tasks. Under the circumstances the Court finds nothing in the
time entries of Ms. Lindberg and Ms. Wiener, or in the nature of the tasks that they were asked to
perform, that requires a reduction to the fees sought by Relativity.
Furthermore, in considering the reasonableness of the time spent and the allocation of
tasks in this case, the Court is mindful of Justice Kagan’s advice that “trial courts need not, and
indeed should not, become green-eyeshade accountants.” Fox v. Vice, 563 U.S. 826, 838 (2011).
Instead, “[t]he essential goal in shifting fees (to either party) is to do rough justice, not to achieve
auditing perfection. So trial courts may take into account their overall sense of a suit, and may
use estimates in calculating and allocating an attorney’s time.” Id. Netflix, in fact, has urged the
Court to dispense with a meticulous ruling on individual time entries and instead to apply a
general percentage reduction to the requested fees, based on the Court’s sense of how the
litigation was conducted. See Netflix, Inc.’s Supplemental Opposition [Docket No. 2049] at ¶¶
17-19. But the Court does not believe that any such reduction is appropriate. In fact, in
considering the efficiency with which the proceedings were handled it should be remembered
that a very large part of the work that the Jones Day firm would have been justified in doing was
instead allocated to the Skadden firm. This Court has determined that Mr. Kavanaugh is not
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 36 of 39

37
entitled to a fee award, and so the Skadden firm’s time has already been excluded from the
computation of fees that Netflix must pay. See Transcript, September 15, 2016 [Docket No.
2075] at 37 (“[i]f I were to not allow the Skadden time . . . that would be a little more than the
thirty percent [reduction] you’ve asked for”). Further reductions would not be called for, either
based on the Court’s review of the time records or based on a consideration of the overall
efficiency of the trial effort.
V. 	Costs and Other Expenses
Finally, Relativity seeks reimbursement of the following expenses that it incurred in
connection with the Netflix litigation:
Air Fare 	$ 6,147.40
Court reporter fees 	$ 	454.80
Duplication charges 	$ 3,100.40
Meals and beverages 	$ 	669.58
Hotel charges 	$10,349.31
Late work meals 	$ 	97.64
Late work taxi 	$ 	24.83
Mileage expenses 	$ 	17.28
Parking 	$ 	233.00
Taxis 	$ 1,457.74
Car services 	$ 	263.00
Total 	$22,814.98
Most of the expenses are travel-related costs that were incurred due to the fact that the Jones Day
attorneys who represented Relativity in these cases were mostly based in Los Angeles, and the
trial was held in New York. The backup information shows that meal expenses were capped at
$20 per person per meal, so that the above charges reflect a lower figure than the amounts
actually incurred. Hotel expenses also were capped at $500 per night, which in some instances
means that the requested compensation is less than the amounts actually incurred.
Netflix has opposed the requests for an award of these expenses on the ground that they
exceed the items that would normally be taxable as costs. However, the License Agreement is
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 37 of 39

38
not limited to the reimbursement of “taxable costs.” Instead, it covers “expenses” incurred,
including reasonable attorneys’ fees.
Netflix also contends that to the extent the requested “expenses” cover matters other than
taxable costs, they needed to be pleaded and litigated at the trial on the merits, and not raised in a
post-trial motion. The Court has already addressed this argument in part III.A. above.
The question remains, however, whether a prevailing party fee provision in a contract
covers travel costs that are incurred when out-of-state counsel are asked to handle a New York
case. The parties have paid little attention to this issue in their papers and have offered no
citations to case law.
Here, as noted above, Netflix did not act in good faith when it adopted a new contract
interpretation after confirmation of the plan, and Netflix had to expect that the Los Angeles
attorneys who had handled the confirmation hearing would handle the post-confirmation
litigation as well. It is reasonable under these circumstances to provide compensation for the
travel expenses. See Genesis Merch. Partners, LP v. Nery’s USA, Inc., 2013 U.S. Dist. LEXIS
190983, at *38 (S.D. Cal. Dec. 6, 2013) (awarding compensation for lodging, travel and meal
expenses for an attorney’s attendance at trial “where reasonably necessary to conduct litigation”
and citing other cases in which similar compensation had been allowed); see also Northcross v.
Board of Ed. Of Memphis City Schools, 611 F.2d 624, 639 (6th Cir. 1979) (authority to award a
reasonable attorneys’ fee includes the authority to aware “those reasonable out-of-pocket
expenses incurred by the attorney which are normally charged to a fee-paying client,” including
photocopying and travel costs). Similar expenses are regularly charged to (and paid by) clients,
and in the underlying bankruptcy case the Court has regularly approved compensation for similar
out-of-pocket expenses. A party might quibble over some items (such as the mileage charge for
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 38 of 39

39
weekend work), but a great number of voluntary deductions have already been taken and on the
whole the requested expense reimbursements are reasonable.4
The Court will enter a separate Order that reflects the rulings in this Opinion.
Dated: New York, New York
March 22, 2017
s/Michael E. Wiles
The Honorable Michael E. Wiles
United States Bankruptcy Judge
4 	As noted above, the parties agreed that an evidentiary hearing was not necessary. If Netflix
contends that it decided to forego an evidentiary hearing on the expense issues only because
it believed that the expense claims should have been barred in their entirety, and if Netflix
believes it has evidence that the Court should consider as to whether the “expense”
provision of the License Agreement covers the expenses discussed in this section, then the
Court will permit Netflix, by motion made no later than fourteen days after the issuance of
this decision and the accompanying Order, to seek to reopen the matter for the presentation
of such evidence.
15-11989-mew Doc 2211 Filed 03/22/17 Entered 03/22/17 15:42:27 Main Document
Pg 39 of 39