Opinion
No. 02 Civ. 3231 (DFE).
August 31, 2005
OPINION AND ORDER
I will assume that the reader is familiar with my opinion signed on April 26, 2005. RBFC One, LLC v. Zeeks, Inc., 367 F.Supp.2d 604 (S.D.N.Y. 2005). It set forth the factual and procedural background, and granted summary judgment dismissing Plaintiff's remaining claims. The Defendants were still pursuing counterclaims for equitable relief, and I refused to dismiss those.
On May 2, 2005, I held a telephone conference with the attorneys (Farhad Novian for Plaintiff, Bruce Ewing and Helene Freeman for Defendants). They advised me that they were drafting a stipulation for consent judgment on the counterclaims. Mr. Ewing said that Defendants would soon submit an application for attorneys' fees. Mr. Novian said that he would prefer to have the fee application wait until after a decision by the Court of Appeals. I agreed with Mr. Ewing that Defendants could make the application now and supplement it later if the judgment were affirmed.
The imminent fee application was also mentioned in the Final Judgment signed by me on May 20, 2005 and filed on May 23, 2005.
On June 6, 2005, the Defendants served and filed two voluminous motions. The first motion (Docket Items 77-79) cites Rule 54(d) (2), F.R. Civ. P. and seeks an order requiring Plaintiff to pay to Defendants the attorneys' fees and costs. The second motion (Docket Items 80-82) cites Rule 7 of the Federal Rules of Appellate Procedure and seeks an order requiring Plaintiff to furnish a bond or equivalent security for costs, including attorneys' fees, that may be incurred by Defendants on appeal.
On June 29, 2005, Plaintiff faxed, to me and to defense counsel, a 4-page opposition to the first motion and a 7-page opposition to the second motion. It appears that Plaintiff never filed these two oppositions with the Clerk; it should do so as soon as possible.
On July 8, 2005, the Defendants served and filed reply papers (Docket Items 84-87).
I will rule on these motions in two separate opinions. This opinion will rule on defendants' motion for attorneys' fees and costs.
This was a diversity action; Plaintiff is based in California and Nevada, and the Defendants are based in Delaware and Florida. The Second Amended Complaint's first count sought $49,834,000 for alleged breach of contract, namely the Amended Agreement dated as of November 30, 2000 and signed by the parties on or about February 6, 2001.
A copy of the Amended Agreement is Exhibit 1 to Docket Item 79. Paragraph 21 said that the agreement "has been entered into in the State of New York" and "shall be governed by the laws of the State of New York," and that any lawsuit regarding it "will be brought in the courts located within the State of New York and not elsewhere." Paragraph 23(n) said:
(n) Attorneys' Fees
In the event of an action, including court proceeding, arbitration or other forums for alternate dispute resolution, between the parties to this Agreement concerning the terms of this Agreement, its meaning or application, the prevailing party shall be entitled to receive its costs and reasonable attorneys' fees regarding such action from the non-prevailing party."
Plaintiff filed this lawsuit on April 26, 2002. Exhibit 3 to Docket Item 79 is a set of detailed timesheets that were submitted to the corporate defendant (generally on a monthly basis) by the New York office of Dorsey Whitney LLP for services rendered in this lawsuit from May 1, 2002 through April 30, 2005. Ms. Freeman's declaration noted: "The bills, as annexed hereto, have been redacted to eliminate references to time expended for which the client was not charged or for which no payment was expected or for which no recovery [from Plaintiff] is sought. In a few instances, the bill has been redacted to conceal privileged attorney work product. . . . The client [the corporate defendant] has paid these charges or is obligated to pay them." (Docket Item 79, ¶ 7, ¶ 32.) Her declaration also gave a detailed explanation of the hourly rates charged by her and the other attorneys at Dorsey Whitney, and of the other costs of this litigation. She noted that her firm made a partially successful motion for judgment on the pleadings, then worked on 17 depositions, 14 of which took place out of New York, and then made the successful motion for summary judgment, and also did some preparation for trial since I had set a firm trial date of May 9, 2005.
Defendants' reply papers annex a timesheet and costs for May 2005, seeking an additional $3,787.42. (Docket Item 87, ¶ 25, Exh. 5.) They elect not to seek anything for the time expended in making the pending motions. (Docket Item 85, p. 5, n. 1.) In total, Defendants seek to recover attorneys' fees in the amount of $481,748.00 and costs in the amount of $103,367.88. ( Id., p. 6.)
Plaintiff does not object to the costs or to the hourly rates. In any event, I find them to be reasonable. See Auscape Intern. v. National Geographic Society, 2003 WL 21976400, at *3-5 (S.D.N.Y. Aug. 19, 2003) (Pitman, M.J.) (approving hourly rates of $450-$495 for partners, $215-$320 for junior associates and $130 for a paralegal), aff'd, 2003 WL 22244953 (S.D.N.Y. Sept. 29, 2003) (Kaplan, J.); National Distillers Products Co., LLC v. Refreshment Brands, Inc., 2002 WL 1766548, at *2 (S.D.N.Y. July 30, 2002) (Buchwald, J.) (approving Dorsey Whitney's then-existing hourly rates of $350-$405 for partners, $215-$295 for associates, and $170 for paralegals). The Westlaw charges are recoverable as well. See id. at n. 6; see also Davis v. New York City Housing Authority, 2002 WL 31748586, at *13 (S.D.N.Y. Dec. 6, 2002) (Sweet, J.) (discussing two Second Circuit cases).
Plaintiff's 4-page opposition makes only two arguments. First, it argues:
Defendants Cannot Recover Fees, Because They Did Not Counter Claim for Fees, Thus Plaintiff Was Not on Notice of the Claim for Attorneys' Fees. . . . . Plaintiff . . . was deprived of the opportunity to determine whether it would have undertaken a different strategy given this demand. . . . .
At no time prior to the entry of judgment did defendants move to amend their counterclaim to include a claim for attorneys fees.
This argument has no merit. It is undisputed that the parties were on actual notice of their contract's clause about attorneys' fees. If Plaintiff had been the prevailing party, it would have claimed its fees. Yet its Second Amended Complaint did not list such a claim as a separate count. Instead, it included the following language in its demand for judgment:
4. Upon all Counts hereinabove, the costs and taxable disbursements of this action, including reasonable attorneys' fees where permitted by law,. . . .
The Defendants proceeded in the same fashion in their Answer. They did not list such a claim as a separate counterclaim. Instead, they said:
WHEREFORE, defendants demand judgment against plaintiff:
* * *
B. Awarding defendants the attorneys fees and costs incurred in the defense of this action;
* * *
F. Awarding defendants their costs and expenses incurred in prosecuting their counterclaims.
I find it telling that, on November 3, 2004, Plaintiff wrote to Judge Wood:
Finally, Rule 26(a) (1) (C) requires a "computation of any category of damages claimed by the disclosing party." With respect to that, defendants simply state that "defendants seek to recover its attorneys fees and costs in connection with this action . . . and on its counterclaims to the full extent authorized by the agreements or as allowed by law or by court rules." There is absolutely no "computation" of those damages (as required by the Rule), nor is there any statement as to the amount of those damages claimed to date. Moreover, there clearly have to be billing records used to establish the amount of any counterclaim for attorneys' fees, which records are conclusively in the possession of defendants' counsel.
(Docket Item 30, p. 4, Italics in the original.)
That very letter was endorsed by Judge Wood with an order directing Ms. Freeman to appear in court "accompanied by one of her firm's partners, who shall be prepared to ensure that Ms. Freeman complies with Court orders in the future." ( Id, p. 6.) Dorsey Whitney promptly made amends. Ms. Freeman came with a senior partner who told Judge Wood that he had brought in two attorneys to assist Ms. Freeman — senior associate Seth Waxman and partner Mark Sullivan (who later appears to have been largely replaced by partner Bruce Ewing). He also said: "We will reimburse plaintiff's counsel if they provide us with a computation of the time spent in preparing the letter . . . and in appearing in court." Judge Wood said: "Well, that's a complete response. Thank you very much." (Docket Item 32, 11/5/04 Tr. 9-10.) In my review of the timesheets, I saw that Dorsey Whitney has, appropriately, cut out all of the time spent by its four attorneys in attending that November 5 hearing. Other cuts were made for November 4, 10, 11 and 13. The bill for December 2004 has a "Timekeeper Summary" which shows that the firm's attorneys (in that month of heavy discovery) expended hours valued at $84,545 and yet the firm has cut that to $59,018; among other things, it cut all of Mr. Sullivan's time (valued at $9,090 for December).
Nevertheless, Plaintiff makes its second and final argument in opposition to the fee application:
Defendants Are Not Entitled to Recover Fees for Work That Was Necessitated by Their Counsel's Improper Conduct
. . . [D]espite the additional participation of Messrs. Waxman and Ewing, Ms. Freeman continued to participate attending all depositions, whether in state or out,. . . . Such duplication of effort should not be rewarded. . . .
Plaintiff cannot reasonably (the standard of law and the contract relied upon by defendants) be expected to pay for time spent at the above hearings, costs associate[d] therewith, or for the second attorney brought in because of counsel's inappropriate litigation tactics. Adjustments downward should be made for such cumulative and duplicative participation.
Yet Plaintiff does not point to any specific entries on the timesheets. I have reviewed the timesheets, and I see no unreasonably cumulative or duplicative work. This case was litigated intensively, as could be expected in a case where Plaintiff had an expert testifying that its compensatory damages were $49 million. It seems to be undisputed that, for almost each of the depositions, Plaintiff sent three senior attorneys (Mr. Novian sometimes via teleconference). (Docket Item 87, ¶ 8.) Indeed, Plaintiff was fortunate that Ms. Freeman missed a deadline, because Judge Wood then ruled that Defendants could not depose two important witnesses for Plaintiff, Linda Nelson and Alan Spatz, since they were technically non-parties. (Docket Item 34, ¶ 5.)
I find that Dorsey Whitney litigated this case no more expensively than it would have if the contract had contained no fee-shifting clause. Indeed, I believe that Defendants realized all along that Plaintiff (unlike Defendants) is probably judgment proof. (The evidence of this is set forth in the motion for a bond.)
In my review of the timesheets, I discovered one item that I have decided to disallow. On 09/27/04, 09/28/04, 09/30/04, and 10/14/04, Ms. Freeman billed a total of $5,355, part of which involved "Legal research regarding disqualification of F. Novian," "prepare letter to F. Novian regarding discovery and disqualification," and similar entries. I am unconvinced that it would be reasonable to require Plaintiff to pay for work aimed at possibly disqualifying Plaintiff's primary attorney. Instead of attempting to apportion the $5,355, I have decided to disallow all of it.
Accordingly, I order Plaintiff to pay the corporate defendant Zeeks, Inc. $476,393.00 in attorneys' fees and $103,367.88 in costs. Zeeks, Inc. should submit a proposed supplemental judgment on 3 days' notice. If Defendants prevail on appeal, they may apply for additional fees and costs.