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NORWEST FINANCIAL, INC. v. FERNANDEZ

September 7, 2000

NORWEST FINANCIAL, INC., PLAINTIFF,
V.
JUAN CARLOS FERNANDEZ AND USTAVO CARLOS LANZILLOTTA, DEFENDANTS.



The opinion of the court was delivered by: Shira A. Scheindlin, United States District Judge.

MEMORANDUM OPINION AND ORDER

I. BACKGROUND

In January 1998, Norwest Financial, Inc. ("Norwest") purchased an Argentine consumer finance company, Finvercon S.A. Compania Financiera ("Finvercon") from defendants, who remained employed with the company until they were terminated in September 1998. Norwest then sued the defendants seeking, inter alia, damages for defendants' breach of the Stock Purchase Agreement, a declaratory judgment stating that defendants were properly terminated, and injunctive relief relating to a non-competition clause contained in the Seller's Director Agreements. Defendants filed various counterclaims seeking, inter alia, reimbursement of monies paid to satisfy a tax judgment against Finvercon. Following a nine-day bench trial, I held, in part, that: (1) defendants breached the Stock Purchase Agreement when they failed to pay Norwest for claimed Credit Losses on demand; (2) defendants were properly terminated for failing to satisfy certain requirements of the Stock Purchase Agreement; (3) Norwest was not entitled to injunctive relief for any alleged breach of a non-competition clause; and (4) defendants were entitled to reimbursement from Norwest for any penalties and interest flowing from the tax judgment. See Norwest Fin., Inc. v. Fernandez, 86 F. Supp.2d 212 (S.D.N.Y. 2000).*fn1

Norwest now seeks attorneys' fees and expenses in the amount of $1,514,422.68 pursuant to an attorneys' fee provision in the Stock Purchase Agreement. This request breaks down as follows: $883,780.00 in attorneys' fees to the law firm of Davis Weber & Edwards*fn2 ("DW&E"), attorneys for Norwest; $255,362.68 in costs incurred by DW & E; $284,823.00 in attorneys' fees to the law firm of Cibilis Robirosa & Labougle ("CR&L"), local Argentine counsel for Norwest; and $90,457.00 in costs incurred directly by Norwest, consisting of $57,510.32*fn3 in travel expenses of Norwest's in-house counsel and most of the remainder in expert witness fees. For the following reasons, defendants are liable to Norwest for attorneys' fees and costs in the amount of $884,879.33.

II. DISCUSSION

The Stock Purchase Agreement, which contractually entitles Norwest to the reimbursement of attorneys' fees, states in relevant part:

Sellers, jointly and severally, will indemnify and hold harmless Buyer, the Company, and their respective representatives, stockholders, controlling persons, and affiliates (collectively, the "Indemnified Persons") for, and will pay to the Indemnified Persons the amount of, any loss, liability, claim, damage (including incidental and consequential damages), expense (including costs of investigation and defense and reasonable attorneys' fees) or diminution of value, whether or not involving a third-party claim (collectively, "Damages"), arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by Sellers in this Agreement,
(b) any litigation or regulatory proceeding arising directly or indirectly or from or in connection with any representation, warranty or covenant, or guarantee made by Sellers in this Agreement, including, without limitation, any Proceeding regarding Taxes;
(c) any breach by any Seller or any covenant or obligation of such Seller in this Agreement; . . .

(e) any Credit Loss or Noncredit Loss.

§ 12.2 of the Stock Purchase Agreement, attached as Ex. A to the First Amended Complaint (emphasis added).

This attorneys' fees clause is not a typical "fee-shifting" clause in that it requires defendants to compensate Norwest for attorneys' fees whether or not it prevails. See Krumme v. Westpoint Stevens Inc., 79 F. Supp.2d 297, 300 (S.D.N Y 1999) ("Westpoint must compensate participants for legal expenses regardless of whether the participants prevail on their claims."). There are, however, two requirements before defendants' liability for attorneys' fees attaches: ...


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