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ZACHARIAS v. SHELL OIL CO.

March 1, 1984

Michael ZACHARIAS, Plaintiff,
v.
SHELL OIL COMPANY, Defendant.



The opinion of the court was delivered by: PLATT

MEMORANDUM & ORDER

PLATT, District Judge.

 By an opinion dated September 21, 1983, this Court concluded that, under § 105(d)(3) of the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. § 2805(d)(3), defendant Shell Oil Company (Shell) was entitled to recover reasonable attorneys' fees and the costs and expenses incurred by it in connection with this action. At an evidentiary hearing on December 2, 1983, defendant claimed $38,400.00 in attorneys' fees for Solin & Breindel, P.C., a New York law firm (Exhibit Q) and $8,287.50 for James L. Michalak, an attorney employed as defendant's in-house counsel (Exhibit T). Defendant also claimed $7,701.62 in disbursements incurred by Solin & Breindel, P.C. during the months July 1983 -- November 1983 (Exhibit S) and $2,712.77 in expenses incurred by Mr. Michalak (Exhibit U). For breach of contract, defendant claimed damages in the sum of $11,217.61 (Exhibit P). In addition to the testimony given at the hearing, defendant Shell submitted records and affidavits detailing the services rendered by its attorneys and the number of hours spent providing those services. These materials comply with the stringent record keeping requirement mandated in City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir.1974).

 In opposition to defendant's request for attorneys' fees, plaintiff Michael Zacharias contends, inter alia, that defendant cannot recover fees for both in-house and outside counsel, that defendant improperly includes fees for paralegals and law clerks, and that defendant's claimed legal fees are not reasonable. Mr. Zacharias also argues that Solin & Breindel, P.C.'s claimed expenses are not reasonable, and that Mr. Michalak's claimed expenses should be disallowed in their entirety. In addition, plaintiff seeks to exclude much of defendant's breach of contract damage claims and to offset the recoverable damages against plaintiff's equipment that remains affixed to the gas station premises.

 For the reasons stated below, this Court awards defendant $46,687.50 in attorneys' fees and $10,414.39 in disbursements. The defendant is also awarded damages for breach of contract.

 ATTORNEYS' FEES

 In this Circuit, courts have consistently used the two step analysis formulated by the Third Circuit in its two decisions in Lindy Bros. Builders v. American Radiator & Standard Sanitary Corp., 487 F.2d 161 (3d Cir.1973) and 540 F.2d 102 (3d Cir.1976), to determine an award of reasonable attorneys' fees. Under this approach, a "lodestar" figure is obtained by multiplying the number of compensable hours spent by the successful attorney on the litigation by the reasonable hourly billing rate for the attorney's services. 487 F.2d at 167-68. If necessary, a court may adjust this figure by considering two additional factors -- the contingent nature of success and the quality of the services provided. 540 F.2d at 117-18. This is the method that this Court will use in evaluating the defendant's claim for attorneys' fees. But first, we must address the plaintiff's arguments in opposition to the defendant's claim.

 The plaintiff seeks to reduce the amount of the requested attorneys' fees on many grounds. First, Mr. Zacharias contends that fees may not be assessed for both outside and in-house counsel. The plaintiff argues that not only was the use of multiple attorneys duplicative and unnecessary in this action, but as a salaried employee, Mr. Michalak's time should not be billed at an hourly rate.

 It is clear that in constructing a fee award, courts may reduce the number of compensable hours to compensate for overstaffing or the unnecessary duplication of attorneys' efforts. See, e.g., Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717 (5th Cir.1974); Steinberg v. Carey, 470 F. Supp. 471, 478-79 & n. 35 (S.D.N.Y.1979). However, where the alleged duplication of attorney time is the result of the division of responsibility for substantive tasks, it is inappropriate to reduce the fee in the absence of clear and unnecessary duplicative efforts. Ross v. Saltmarsh, 521 F. Supp. 753, 762 (S.D.N.Y.1981). Mr. Michalak, as a member of Shell's in-house counsel located in Texas, has expertise and familiarity with the PMPA and functioned as lead counsel in this litigation based in New York. Mr. Michalak and Solin & Breindel divided their responsibilities in this case. There has been no showing of unnecessary overstaffing or duplication of efforts.

 The plaintiff also suggests that Mr. Michalak's efforts should not be billed at an hourly rate because he is in-house counsel to defendant and a salaried employee. Compensating in-house or salaried employees by using an hourly rate is commonly used by courts in awarding attorneys' fees. See, e.g., Pittsburgh Plate Glass Co. v. Fidelity & Casualty Co., 281 F.2d 538, 542 (3d Cir.1960); Brisbane v. The Port Authority of New York & New Jersey, 550 F. Supp. 222, 224 (S.D.N.Y.1982). As the United States Court of Appeals for the Third Circuit recognized in Pittsburgh Plate Glass Co. v. Fidelity & Casualty Co., 281 F.2d 538 (3d Cir.1960), work performed by in-house counsel reduces the workload and, consequently, the fee of the retained counsel and "[t]here is no reason in law or in equity why the [plaintiff] should benefit from [defendant Shell's] choice to proceed with some of the work through its own legal department." Id. at 542. We agree and conclude that the use of an hourly rate is a reasonable method to compensate the defendant for the efforts expended by its in-house counsel.

 Mr. Zacharias further argues that defendant improperly and without legal justification included fees for paralegals and law clerks in its request for attorneys' fees. This Court has previously recognized the propriety of including the time spent by such non-lawyers in a fee award. Selzer v. Berkowitz, 477 F. Supp. 686, 690 n. 3 (E.D.N.Y.1979). As we noted in the Selzer case, "[t]o the extent that such work is done by non-lawyers at lower time rates than would have been the case had the work been done by lawyers, the losing party benefits and has little cause to complain." Id. See also City of New York v. Darling-Delaware, 440 F. Supp. 1132, 1136 (S.D.N.Y.1977) (awarding compensation for paralegal's time). For the same reason, we include the time spent by paralegals and law clerks in the fee award. *fn1"

 Mr. Zacharias maintains that the legal fees sought by the defendant are not reasonable. We assume that the plaintiff is challenging both the total number of hours spent by Shell in defending the action and the various hourly billing rates submitted by the defendant. Since these issues raise the same questions as those involved in the "lodestar" determination, we will proceed with that analysis which requires us to determine and multiply the number of hours reasonably expended by a reasonable hourly rate.

 Mr. Michalak has submitted an affidavit stating that 110.50 hours were expended on this matter and the Solin & Breindel, P.C. firm claims 412.25 hours of time expended by various attorneys and paralegals. *fn2" These amounts appear to be wholly reasonable. As indicated above, the efforts of Mr. Michalak and Solin & Breindel, P.C. were not unnecessary or duplicative and the hours expended were adequately substantiated. The plaintiff suggests that the number of compensable hours submitted by the defendant should be reduced because litigation was not protracted and little effort was necessary to fend off the plaintiff's claim. The plaintiff's concession, at the completion of this lawsuit, that his claim was easily defeatable, does not present new information to this Court. The defendant repeatedly argued that plaintiff's claim was frivolous and without merit and this Court agreed. However, a decision made at the conclusion of litigation that questions the merits of an action does not affect a defendant's right to zealously defend an action against it. In this case, Shell properly sought to protect its interests and to defend itself from the serious charges levied against it by the plaintiff in this Court. The fact that the defendant successfully demonstrated that the plaintiff's claims were without merit may not be used by the plaintiff at this point in the proceeding to support an argument that little effort was necessary to defeat the plaintiff's claim. Therefore, we will not adjust the number of hours submitted by the defendant.

 Having concluded that the number of hours claimed by the defendant is reasonable, the next step in the "lodestar" analysis is a determination of whether the various hourly rates submitted by Shell are reasonable. *fn3" The Lindy court suggested using an attorney's normal hourly rate because it is indicative of his or her legal reputation and status. 487 F.2d at 167-68. See also Grinnell, 495 F.2d at 473. With the exception of billing rates lowered by the Solin & Breindel, P.C. firm for the purposes of litigation involving Shell, the submitted rates are the ones normally billed by the firm. As explained at the hearing, Mr. Michalak's hourly billing rate was carefully calculated by determining the value of his service in Shell's in-house legal department. This Court finds the varying rates reasonable and appropriate, reflecting customary charges of law firms and well within the range of hourly rates awarded in other attorneys' fees cases. See New York State Teamsters Conference Pension v. Hoh, 561 F. Supp. 687, 690 (N.D.N.Y.1983) (citing Miles v. New York State Teamsters Conference Pension & Retirement Fund, Civ. 77-432, 3 BNA Employee Benefit Cases 1513 (W.D.N.Y.1982) (hourly rates for attorneys of unspecified years of experience ranging from $70 to $125 found to be generally reasonable); Vulcan Society of Westchester Co., Inc. v. Fire Dep't of the City of White Plains, 533 F. Supp. 1054 (S.D.N.Y.1982) ...


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