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Even With A Jury Finding Of Bad Faith On Behalf Of The Losing Party, Attorneys Fees May Not Be Recoverable

July 1, 2022

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<p style="text-align: justify;">In<em> <a href="https://www.wcmlaw.com/wp-content/uploads/2022/07/Elmagin-Capital-LLC-v.-Chao-Chen.pdf">Elmagin Capital, LLC v. Chao Chen</a>, et al.</em>, Judge Stephanos Bibas declined to award attorneys fees to prevailing defendants, despite the fact that the jury found that the plaintiff acted in bad faith by filing the suit in the first place.</p>
<p style="text-align: justify;">Elmagin Capital originally sued multiple defendants for trade-secret misappropriation and breach of contract. Elmagin lost on all issues at trial and the jury found that it had brought its trade secret claims in bad faith. The defendants then sought attorneys’ fees under federal and state law.</p>
<p style="text-align: justify;">Under federal law, the court may award reasonable attorneys’ fees if the claims “completely lack evidence” and the plaintiff knew or was reckless in not knowing that its claims lacked merit. Based on the evidence presented, the jury found that Elmagin’s claims were brought in bad faith. Judge Bibas, however, found that the jury’s finding was merely advisory, and therefore rejected it.</p>
<p style="text-align: justify;">Judge Bibas reasoned that because attorneys’ fees are generally an equitable remedy, the defendants had no right to a jury verdict on the issue. Judge Bibas found that there was more than some basis for Elmagin’s claims, which entitled him to treat the jury’s decision as advisory. He ultimately determined that the jury’s verdict on bad faith was mistaken, and exercised judicial discretion to deny attorneys’ fees.</p>
<p style="text-align: justify;">Thanks to John Lang for his contribution to this post.  Should you have any questions, please do not hesitate to contact <a href="mailto:tbracken@wcmlaw.com">Tom Bracken</a>.</p>

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