there remains for consideration the Cohens' specific charges as
a) The Necessity of a Hearing
In some of the above cases in which the note fixed attorney's
fees at a certain percentage, courts have remanded the
proceedings for a hearing on reasonableness. Barclays Bank,
517 F. Supp. 403, 412 n. 15; Marine Midland Bank, 554 N.Y.S.2d 541;
Federal Deposit Ins. Corp., 72 A.D.2d at 787, 421 N.Y.S.2d at
609. Those cases are, however, distinguishable in that the
notes at issue fixed attorneys' fees in advance of litigation
at a certain percentage of the note's value, and consequently
contained no breakdown of the factors which determined the
amount of fees claimed. Where BSI's application contains such a
breakdown, no further hearing is required.
b) Standards of Reasonableness
The New York Court of Appeals has not yet enunciated the
standards for determining the reasonableness of attorney's fees
resulting from the collection of a promissory note. Lower
courts have considered such factors as the time expended, the
nature of the services performed, the expertise of the lawyers,
and the benefits achieved for the client. Nat'l Commercial Bank
& Trust Co., 406 N.Y.S.2d at 980, 95 Misc.2d at 285. On the
other hand, New York courts have deemed attorney's fees
reasonable when the plaintiff has made no specific proof of the
work involved. Mohawk-Schoharie Production Credit Asso. v.
Wilber, 419 N.Y.S.2d 762, 71 A.D.2d 720 (Third Dep't 1979),
aff'd, 50 N.Y.2d 983, 431 N.Y.S.2d 529, 409 N.E.2d 1001 (1980)
(awarding attorney's fees on note that provides for payment of
"reasonable attorney's fees" on the basis of the preparation
and filing of the complaint, even though record "devoid of
specific proof of the work involved and its value").
In the context of a sales contract, the Court of Appeals has
held that, to be acceptable, a fee must be "reasonably related
to the normal fee an attorney would charge for the collection
of plaintiff's claim." Equitable Lumber, 38 N.Y.2d 516, 521,
381 N.Y.S.2d 459, 463, 344 N.E.2d 391, 395 (1976). See People's
Westchester Sav. Bank v. Ganc, 715 F. Supp. 610 (S.D.N.Y. 1989)
(applying Equitable Lumber to diversity action in which
plaintiff sought pursuant to a promissory note "reasonable
Under the above standards, there is nothing in BSI's
application which would disqualify it on the grounds of
reasonableness. BSI in its affidavit stated that the attorneys'
hourly rates for which it seeks compensation are Sidley &
Austin's standard rates. Moreover, BSI's attorneys sufficiently
documented their hours by setting forth an account of all the
hours billed and a summary description of how those hours were
spent, thereby exceeding the standards of
Mohawk-Schoharie, 419 N.Y.S.2d at 196.
2. Contemporaneousness of Records
The Cohens also seek to attack BSI's fee application on the
grounds that the attorney time records submitted are not
contemporaneous, although no facts are submitted to
substantiate this charge. They cite New York State Ass'n for
Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1147 (2d Cir.
1983) for the proposition that attorneys must submit
contemporaneous records of their time. BSI's attorneys have in
their affidavits and in their reply brief stated that the
records are contemporaneous. Even assuming the absence of a
factual dispute, there remains the threshold question of
whether New York State Ass'n for Retarded Children applies to
the instant case.
In New York State Ass'n for Retarded Children, plaintiffs'
attorneys sought fees pursuant to 42 U.S.C. § 1988 authorizing
the award of reasonable attorney's fees in civil rights cases.
The Second Circuit apparently based its decision in New York
State Ass'n for Retarded Children on a line of cases awarding
attorney's fees pursuant to federal statute as well as on
considerations such as the purpose of the statute and the ease
of judicial administration. As the instant case is based on
and the award sought is based on contract and not pursuant to
federal statute, the requirements set forth in New York State
Ass'n for Retarded Children are not relevant here. See F.H.
Krear & Co. v. Nineteen Named Trustees, 810 F.2d 1250, 1265 (2d
Cir. 1987) (diversity action for breach of contract in which
attorney's fees sought citing, but not following, New York
State Ass'n for Retarded Children).
3. Elements of Compensation
BSI seeks compensation for the time its attorneys spent a)
negotiating in the expectation of a settlement; (b) preparing
and filing the complaint, the default motion, and the summary
judgment motion; and (c) responding to the Cohens' motion
regarding fees that is currently in front of the court.
a) Time Spent on Negotiation
From approximately July 11, 1990 until approximately August
16, 1990 with the resumption of the default judgment
proceedings, BSI suspended litigation in hope of working out a
settlement. BSI is now seeking compensation for this time spent
Contractual provisions for the payment of attorney's fees
will be strictly construed. Krear, 810 F.2d at 1263; M/A-COM
Security Corp. v. Galesi, 752 F. Supp. 176 (S.D.N.Y. 1990).
General language will not be sufficient to warrant an award for
a type of expense that is not customarily reimbursed. Swiss
Credit Bank v. Internat'l Bank, 23 Misc.2d 572, 200 N.Y.S.2d
828 (Sup.Ct. 1960).
There are no cases that indicate that provisions shifting
attorney's fees in the collection of a promissory note
customarily include time spent in negotiation of a settlement
of that action. Moreover, the attorney's fees provision on the
Note covers "expenses . . . incurred in the
enforcement of the note . . ." (emphasis added). Negotiations
in pursuit of a settlement whereby the parties agree to a
restructuring of the payments are not so much the enforcement
of the original rights as a reformulation of those rights in a
new agreement. Therefore, that part of the fee application
which seeks compensation for time spent negotiating and
drafting a settlement agreement from July 12, 1990 to the
drafting of the default judgment on August 16, 1990 will be
disallowed. The time spent during that same period relating to
the then pending enforcement action, including matters related
to the pre-trial conference, will be allowed.
b) Time Spent in the Collection of the Note
As the records submitted in support of fees for time spent in
the litigation relating to the collection of the Note meet the
reasonableness standards as set forth above, the fees sought
for the period May 29, 1990-July 11, 1990 will be allowed.
c) Time Spent Defending the Fee Application
A general contract provision for the shifting of attorney's
fees does not authorize an award for time spent justifying
those fees. Krear, 810 F.2d at 1266-67 (holding district court
erred when, pursuant to a general contract for attorney's fees,
it awarded reimbursement for time spent justifying fee
application in reasonableness hearing), citing Doyle v.
Allstate Ins. Co., 1 N.Y.2d 439, 444, 154 N.Y.S.2d 10, 14,
136 N.E.2d 484, 487 (1956) (fees sought in separate lawsuit); Swiss
Credit Bank, 23 Misc.2d at 573-574, 200 N.Y.S.2d at 830-31
(disallowing fees pursuant to indemnity agreement sought in
separate lawsuit); Zauderer v. Barcellona, 130 Misc.2d 234,
237, 495 N.Y.S.2d 881, 883 (1985) ("[a]ttorney's fees incurred
in proceedings to collect attorney's fees are not recoverable")
(fees sought in latter stages of litigation in which original
fee expenses incurred).
While parties may specifically contract for the defendant in
a collection action to assume such an expense, the court cannot
read such an intention into the language of the Note, which
states that the Cohens are to pay "all losses, costs and
expenses (including, without limitation, counsel fees and
expenses) incurred by the Lender in
connection with the enforcement of this note." Swiss Credit
Bank, 23 Misc.2d at 573-74, 200 N.Y.S.2d at 830-31 ("[o]f
course it is possible to contract for such an allowance but, as
it is an agreement contrary to what is usual, specific language
would be needed to show such an agreement."). Therefore, the
fees sought for time spent defending the application for
attorney's fees after the grant of the summary judgement
motion, i.e., time billed from November 8, 1990 on will be
For the reasons set forth above, the Cohens' motion for a
hearing on the reasonableness of the fee application is denied.
BSI fee application is granted only with respect to the hours
spent on litigation of the collection action, which ended with
the preparation of the judgment papers after the court's grant
of summary judgment in the collection action on October 29,
It is so ordered.