Wednesday, February 25, 2026
Page 1
Ninth Circuit:
Judge Erred in Denying ‘Big Law’ Fee Rate to Four-Party Firm
In Case Accusing Brand of Offering Unfair Price Benefits to Costco, Opinion Says Jurist Abused Discretion by Declining to Calculate Award for Plaintiffs’ Counsel Based on Top-Tier Rate Solely Due to Size of Law Office
By Kimber Cooley, associate editor
The Ninth U.S. Circuit Court of Appeals held yesterday that a District Court judge erred in declining to award fees at “big law rates” to a “four-person firm representing mom-and-pop” wholesalers who prevailed on claims that an eye-drop manufacturer violated both federal and California law by giving price advantages to Costco stores, declaring that size alone cannot determine market rate for purposes of lodestar calculation.
Saying that District Court Judge Michael W. Fitzgerald of the Central District of California abused his discretion by opining that, although firm size alone is not determinative of the reasonableness of the hourly rates, the number of attorneys “serves as a proxy” for the law office’s “reputation and actual billing practices,” the court remarked:
“History reminds us that brilliance at the bar is not measured by the number of associates a lawyer commands; Abraham Lincoln, Clarence Darrow, Thurgood Marshall, Ruth Bader Ginsburg, and Gerry Spence are just a few luminaries who perfected their skills and made enduring marks on our profession without joining the ranks of large law firms. We should not reduce fees awards to lawyers simply because of how they have structured their workplaces.”
Competitive Injury
In an opinion by Circuit Judge Salvador Mendoza Jr., joined in by Circuit Judges Anthony D. Johnstone and Kim McLane Wardlaw, the court also held, in a matter of first impression, that “[a] showing of substantial harm is not required to establish competitive injury” under §2(a) of the Robinson Patman Act (“RPA”), found at 15 U.S.C. §13 et seq.
That section bars a seller from discriminating in price between competing purchasers of commodities of “like grade and quality” if the effect of the advantage may be “substantially to lessen competition or tend to create a monopoly…, or to injure, destroy, or prevent competition with any person who…knowingly receives the benefit of such discrimination, or [shares it] with customers.” Pointing to the use of the disjunctive, Mendoza remarked:
“ ‘[S]ubstantially’ modifies ‘to lessen competition’ but does not modify ‘tend to create a monopoly’ or ‘to injure, destroy, or prevent competition.’ ”
Unfair Competition
The questions arose after nine wholesalers—including California-based L.A. International Corp., L.A. Top Distributor, Pitco Foods, U.S. Wholesale Outlet & Distribution Inc., and Value Distributor Inc.—asserted in a 2018 complaint that Prestige Brand Holdings Inc. violated the RPA and California’s Unfair Practices Act by providing the company’s Clear Eyes Redness Relief Eye Drops to Costco and Sam’s Club stores at a reduced rate.
According to the plaintiffs, Prestige offered Costco and Sam’s Club stores a 5% price advantage on the popular eye drops that was unavailable to other wholesalers and additionally provided Costco customers “instant rebate coupons” of $3 per 12-pack as often as four times per year. Based on 2016 costs, they say they would lose $2.77 on each sale if they met Costco’s post-rebate price in selling the products to retailers.
In December 2023, a jury found in favor of all plaintiffs save one on their §2(a) RPA claim and for each of the California entities on their Unfair Practices Act claim. Damages were awarded in amounts ranging between $25,000 and $230,000.
On May 20, 2024, Fitzgerald granted the plaintiffs’ request for a permanent injunction allowing the successful plaintiffs to purchase Clear Eyes on the same price terms as Costco and Sam’s Club.
Fee Request
After judgment was entered the following month, the plaintiffs moved for $7,651,766.80 in attorney fees, requesting hourly rates of $1,314 for the named partners, Randolph Gaw and Mark Poe, of the San Francisco firm Gaw Poe LLP, and $1,001 for their three more junior colleagues who worked on the case.
They submitted an expert declaration opining that the proposed fees reflected the market rate for top litigators in the Los Angeles area based on the 2023 edition of the Real Rate Report, which sets its calculations based on actual law firm invoices. Prestige suggested that an hourly rate of $600 would be more reasonable, pointing to recent fee awards obtained by Gaw Poe LLP in a contract dispute.
In an August 2024 order, Fitzgerald said that “it is simply unreasonable to award big law rates to a four-person firm representing mom-and-pop warehouses” and found that an hourly rate of $1,070 for Gaw and Poe, and $975 for the other attorneys, was reasonable. He awarded the plaintiff $3,142,268.45, less than half of what they requested.
Prestige challenged the judgment, asserting, among other things, that the jury was given a faulty verdict form and was erroneously instructed on the elements of the alleged RPA claim, and the plaintiffs appealed the fee award.
Judgment Affirmed
Mendoza affirmed the judgment in favor of the plaintiffs, saying that “Prestige proposed that the district court require the jury to complete a one-hundred-forty-seven-page novella, disguised as a special verdict form” and that there was no error in Fitzgerald’s decision to “opt[] for a straight line” in providing a shorter document “instead of…Prestige’s scenic route, which would have…wasted jurors’ time and risked them missing the forest for the trees.”
As to the instruction on the RPA claim, he opined:
“Given [the] statutory history and context, which fits together with our construction of Section 2(a)’s disjunctive text, we have no trouble concluding that Wholesalers needed to show only that the effects of Prestige’s discriminatory actions ‘may be…to injure, destroy, or prevent competition.’…So the district court did not err when it instructed the jury that the plaintiff was required to establish ‘a reasonable possibility of harm to competition.’ ”
Addressing the fee award, the jurist noted:
“The district court…declined to base its fees calculation on the prevailing market rate—that is, the rate ‘for similar services by lawyers of reasonably comparable skill, experience, and reputation.’…Instead, the district court set counsel’s rates based on what the attorneys had been awarded for handling a prior contract dispute, with a slight adjustment for the complexity of the case and inflation. In doing so, the district court abused its discretion.”
Prevailing Market Rate
Prestige argued that Fitzgerald did consider the prevailing market rate, pointing out that the judge referenced the Real Rate Report and concluded that the legal fees attributable to Los Angeles-based firms with 50 or fewer lawyers were too low but that those charged by larger firms were too high.
Saying that “[a] firm’s small size should not automatically result in its attorneys receiving a reduced hourly rate,” Mendoza declared:
“A firm’s size does not directly bear on the factors we must consider when awarding fees—the lawyers’ skill, experience, and reputation….Indeed, some of the most skillful, experienced, and reputable attorneys strike out on their own or with several colleagues….[T]he fact that a firm is larger and has a larger overhead should not automatically entitle its attorneys to higher fees.”
He continued:
“With that in mind, the district court abused its discretion when it declined to base its lodestar calculation on the rate in the 2023 Real Rate Report….First-rate attorneys who prevail in litigation are entitled to receive fees commensurate with their skill, experience, and reputation, even if their clients are mom-and-pop businesses that don’t have Fortune 500 budgets to hire big law firms to represent them. We vacate the district court’s award of attorney’s fees to Wholesalers and remand for the district court to recalculate fees consistent with this opinion.”
The case is L.A. International Corp. v. Prestige Brands Holdings Inc., 24-3776.
Copyright 2026, Metropolitan News Company