Summary
upholding jury verdict of $2,000 in actual damages on fraud and other claims (prior to trebling under relevant statute), and awarding $4,000 in punitive damages
Summary of this case from Koch v. RodenstockOpinion
99 Civ. 9570 (GEL)
November 15, 2001
OPINION AND ORDER
Plaintiff Rainn Wilson brought this action against defendants Merab Katsobashvili and Car Land Diagnostic Center, Inc. ("Car Land") for common law fraud, deceptive business practices in violation of § 349 of New York's General Business Law ("GBL § 349"), and violation of the federal odometer tampering statute, 49 U.S.C. § 32710. Car Land defaulted, and judgment was granted against it on all causes of action. On July 25, 2001, a jury found in favor of the plaintiff on the deceptive business practices claim, and awarded the plaintiff $2,000 in damages.
In March 2000, Chief Judge Mukasey, to whom the case was then assigned, permitted counsel for the defendants to withdraw from representation for non-payment. The complaint was subsequently amended, and defendants served an answer signed only by Katsobashvili. Chief Judge Mukasey ordered Car Land to secure representation and answer through counsel or face default. See Order of March 24, 2000. When Car Land failed to do so, it was held in default. The Court deferred determination of the amount of default judgment to be entered against Car Land, pending trial.
At trial, the plaintiff produced overwhelming evidence of outrageously misleading statements made by the defendant Katsobashvili in selling him a defective used car for $3,500. Based on this evidence, the jury found that the defendant had intentionally misled the plaintiff and found the defendant liable under GBL § 349. However, the jury also returned a verdict for the defendant on the common law fraud claim, evidently finding that, on the evidence presented at trial, the plaintiff could not have reasonably relied on the defendant's representations — the one additional element distinguishing common law fraud from the claim under GBL § 349. The jury also found for the defendant on the charge of odometer tampering, apparently unpersuaded that the defendant was responsible for the rollback of the vehicle's odometer.
Two matters remain for resolution. First, plaintiff has moved for attorney's fees and costs, and defendant has vigorously contested that demand. Second, the Court deferred determination of the amount of the default judgment against Car Land pending trial, in effect treating the trial as an inquest on damages.
Discussion
A. Attorney's Fees and Costs
Plaintiff seeks attorney's fees and costs in the amount of $45,394.24. The application is predicated upon GBL § 349, since this was the only claim on which he prevailed against the defendant at trial. Fee awards under GBL § 349 are not granted automatically, as a matter of right, but are committed to the sound discretion of the trial court. Riordan v. Nationwide Mutual Fire Ins. Co., 977 F.2d 47, 53 (2d Cir. 1992). An initial determination of fee awards under GBL § 349 may be made using the "lodestar" method, which determines an appropriate fee award by multiplying the number of hours reasonably expended on the litigation by a reasonable hourly rate. See, e.g., Independent Living Aids, Inc. v. Maxi-Aids, Inc., 25 F. Supp.2d 127, 131-32 (E.D.N.Y. 1998). The lodestar may then be adjusted by taking "into account the factors ordinarily considered by New York courts when evaluating requests for attorney's fees, including time and skill required in litigating the case, the complexity of the issues, the customary fee for the work, and the results achieved." Riordan, 977 F.2d at 53.
In this case, the nature of the case and the results achieved justify a substantial reduction in the lodestar amount of $43,871.47 claimed by the plaintiff Although the case undoubtedly involved issues of consumer significance of the sort intended to be covered by the statute, it presented neither complex facts nor novel issues of law, and thus prosecuting plaintiff's claim required no special skill. Indeed, defendant, an immigrant with limited command of English and no legal training, represented himself at trial with considerable effectiveness.
More importantly, the plaintiff was not particularly successful in this litigation. Plaintiff sued on three causes of action and sought $30,000 in actual damages, as well as punitive damages. He was only successful on one of these claims, and received less than 10% of the compensatory damages originally sought, and no punitive damages. Thus, while plaintiff must be considered a prevailing party for the purposes of a statutory award of fees, the limited success calls for a reduction in the fees sought. See Riordan, 977 F.2d at 54 ("In setting this relationship between the amount recovered and the fee award [under GBL § 349], the district court merely exercised its discretion with respect to one factor considered in arriving at an appropriate fee award: the result obtained."). Rather than the amount sought by the plaintiff, this Court finds that a fee award of $10,000 is appropriate given the nature of the case and the results secured by the plaintiff. See Hensley v. Eckerhart, 461 U.S. 424, 435 (1983) ("The district court may attempt to identify specific hours that should be eliminated, or it may simply reduce the award to account for the limited success.").
The plaintiff argues against this conclusion by citing a line of Second Circuit cases rejecting a requirement of proportionality between fee awards and damages won. See Quarantino v. Tiffany Co., 166 F.3d 422 (2d Cir. 1999); DeFilippo v. Morizio, 759 F.2d 231, 235-6 2d 1985). But those cases are plainly inapposite here. First, the cited cases involved fee awards under federal civil rights statutes, and do not govern claims under GBL § 349. Such claims are governed by state law, and the Second Circuit has upheld as consistent with New York state law an attorney's fee award under that very statute that was expressly limited to a fraction of the damages awarded. Riordan, 977 F.2d at 53-54.
This distinction is not merely a difference between New York and federal policies, but soundly rooted in the different purposes of the statutes in question. In Quarantino and DeFilippo, as is often the case in civil rights cases, the extent of the plaintiff's success at trial was not filly captured in the damages award, since the intangible value of the rights vindicated was far greater than the actual physical injuries sustained. For example, in Quarantino, the plaintiff received only minor physical injuries from police brutality, and thus the low damage award did not fully reflect the importance of the constitutional violation established at trial. See 166 F.3d at 426. Similarly, in DeFilippo, the Second Circuit overturned the district court's reduction of the lodestar amount as improper where the plaintiff, despite the low amount of damages, had secured an "unambiguous victory." 759 F.2d at 236. In the present case, in contrast, the rights involved are consumer rights in commercial cases, which are directly measured by the financial damages imposed.
Even if the rule of Quarantino and DeFilippo applies here, moreover, the reduction of the plaintiff's lodestar amount does not violate that rule. Unlike the district courts in those cases, or, for that matter, inRiordan, this Court is not limiting the award to a fixed percentage of the damages obtained. The reduction in plaintiff's fee award is based not on the modest nature of the damages awarded to plaintiff, but on plaintiff's limited success in this litigation. Here, plaintiff was only minimally successful on his claims. Not only did the jury find for the plaintiff on only one of three claims, but the jury also awarded only modest damages for the claim on which the plaintiff was successful, in comparison to the amount sought. Thus, this is hardly a case where the plaintiff achieved an "unambiguous victory" despite only receiving limited damages. Cf. DeFilippo, 759 F.2d at 236. Rather, the plaintiff's limited success was fully reflected by the limited damages he received. A reduced fee award is thus consistent with the general proposition that an award of attorney's fees should reflect the results achieved.
Plaintiff cites Hensley in support of the proposition that "where the successful and unsuccessful claims are related, no reduction is possible." (P. Mem. at 3.) However, Hensley undercuts rather than supports his argument. In that case the Supreme Court held that where a plaintiff achieves "excellent results" a fee award should not be reduced merely because plaintiff failed to prevail on every contention in the lawsuit. It went on to state, however, that if "a plaintiff has achieved only partial or limited success" the lodestar may be reduced "even where the plaintiff's claims were interrelated." Id. at 435-36. "The results are what matters." Id. at 435.
While the limited results obtained require a substantial reduction in the lodestar amount, the Court emphatically rejects defendant's claim that the award should be reduced to one-third the recovery achieved, or $666.67. New York has specifically provided for attorney's fees in this consumer protection statute, in order to encourage and enable consumers to bring lawsuits to vindicate their rights. As this case exemplifies, the amount in controversy in such suits will often be small, and a strictly proportionate fee award would often be insufficient to attract competent counsel. It is undoubtedly for this reason that the New York courts do not apply such a rule, but apply a multi-factor test that gives weight to a number of factors, including the time required in litigating the case and customary fees of the attorney. Here, while defendant with some justice quibbles over certain of the time charges documented by plaintiffs counsel, a $10,000 fee award is quite modest in light of the time required to try even a simple case such as this one, and a reasonable hourly fee for an attorney of the level of experience of plaintiff's counsel.
Moreover, the Court recognizes that defendant Katsobashvili was a wily and persistent adversary, and that the purposes of GBL § 349 are well served by an attorney's fee award here. Faced with a resistant defendant, with a long and well documented record of consumer complaints and defiance of state administrators charged with protecting the public from fraud, an unrepresented plaintiff with a small claim would likely give up before achieving the recovery to which he was entitled. An award of attorney's fees that is substantially larger than the verdict may be unusual, but in this case it is certainly not excessive.
Documentary evidence at trial demonstrated that the New York Department of Motor Vehicles had repeatedly found that the defendant had engaged in fraudulent and deceptive business practices against other customers with respect to his automobile repair business. The evidence also established that his license to operate was revoked on at least three occasions, and amply supported an inference that defendant had engaged in delaying tactics to forestall paying fines and avoid adjudication of these cases to the maximum extent possible.
Plaintiff also moves for an award of costs. Although defendant is correct that GBL § 349 does not itself explicitly provide for costs, Fed.R.Civ.P. 54(d) provides for the routine allowance of costs to the prevailing party unless the court otherwise directs. District courts have the discretion to deny an award of costs under Rule 54(d). Bekiaris v. United States, 1998 WL 734362, 96 Civ. 302 (S.D.N.Y. Oct. 20, 1998). Among the factors which may be considered in determining whether an award of costs would be inequitable are defendant's indigence or financial hardship and plaintiff's good faith in bringing the action. Id.
The defendant does not, nor could he, argue that plaintiff brought this action in bad faith or merely to harass him. Plaintiff suffered inconvenience and financial loss because of defendant's unlawful and fraudulent conduct, and was entitled to pursue his legal remedies. Moreover, although the defendant has stated that he appeared pro se in this action because he could not afford representation, he has failed to make an adequate showing of indigence, through documentary or other evidence establishing financial hardship, that might warrant a denial of costs to the plaintiff Accordingly, plaintiff's request for costs in the amount of $1,522.77 will be granted.
B. Default Judgment
Defendant Car Land has defaulted, and plaintiff accordingly seeks judgment for the the full amount demanded against it, plus the fill amount of attorney's fees demanded. But that it not the law. While a default establishes liability on the claims asserted against the defaulting party, in the case of unliquidated claims the Court is required to conduct an inquest to determine the amount of damages appropriate. See Fed.R.Civ.P. 55(b)(2). Evidence introduced at trial provides a sufficient basis to make such a determination. Fustok v. Conticommunity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989).
Here, the jury's verdict of $2,000 was based on the apparent conclusion reasonably founded in the evidence, that although sold for $3,500, the car had at most an actual value of $1,500. The Court adopts that conclusion and finds damages of $2,000 appropriate. However, because Car Land defaulted on the federal odometer tampering count, which requires an award of treble damages, the award against it should be increased to $6,000. Moreover, Car Land has also defaulted on the common-law fraud claim, which permits an award of punitive damages. Based on Car Land's history of consumer fraud, and the deliberate misconduct in this case, the Court finds punitive damages of $4,000 appropriate. Finally, as discussed above, an award of $10,000 in attorney's fees and $1,522.77 of costs is also required. Accordingly, judgment in the amount of $21,522.77 should be entered against defendant Car Land.
Conclusion
Plaintiff's motion for attorney's fees and costs is granted in an amount of $10,000 for attorney's fees and $1,522.77 for costs. The clerk is directed to enter final judgment against defendant Katsobashvili for those amounts, in addition to the $2,000 awarded by the jury and embodied in the previous judgment entered on August 16, 2001. The clerk is further directed to enter judgment by default against defendant Car Land Diagnostics, Inc., for a total of $21,522.77.
SO ORDERED: