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SCHWARTZ v. CHAN

May 7, 2001

HOWARD SCHWARTZ, PLAINTIFF,
v.
ALEX CHAN, DEFENDANT. ALEX CHAN, THIRD-PARTY PLAINTIFF, V. MIDLANTIC PROCESS, INC., THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Spatt, District Judge.

  MEMORANDUM OF DECISION AND ORDER

I. BACKGROUND

On May 19, 1997, Howard Schwartz ("Schwartz" or the "plaintiff") initiated this action by filing a complaint, in which he alleged, among other things, deceptive trade practices and negligent and intentional infliction of emotional distress by FCC National Bank, Midlantic Process, Inc., Alex Chan, and Upton, Cohen & Slamowitz. On March 8, 1998, Schwartz withdrew the action against defendants FCC National Bank, Midlantic Process, Inc., and Upton, Cohen & Slamowitz, pursuant to a settlement agreement he reached with those parties. Alex Chan ("Chan" or the "defendant") became the only remaining defendant. Chan failed to appear in the action, and on April 1, 1998, a default judgment was entered against him in the amount of $490,665.50.

On October 9, 1998, this Court vacated the default judgment against Chan, crediting the defendant's statement that he had not been properly served with the summons and complaint. On August 13, 1999, during his sworn deposition, Chan testified that he actually had been served with a copy of the summons and complaint five days after the action had been filed with this Court. Accordingly, on October 6, 1999, the Court reinstated the default judgment against Chan, holding that he had committed a "fraud upon the Court and in fact willfully defaulted" in this action (see Order, dated October 6, 1999). The Court referred this matter to United States Magistrate Judge Arlene Rosario Lindsay for a report recommending the appropriate amount of damages and attorney's fees to be awarded to Schwartz.

On July 7, 2000, Judge Lindsay issued a Report and Recommendation, advising that the Court award the plaintiff: (1) the sum of $7,500 in compensatory damages for the emotional distress he allegedly suffered; (2) the sum of $50 in actual damages pursuant to section 349 of the New York General Business Law ("G.B.L."); (3) the sum of $3,500 in attorney's fees for the services of Michael V. Devine, Esq. ("Devine"); (4) the sum of $3,375 in attorney's fees for the plaintiff's representation of himself; and (5) the sum of $10,000 in punitive damages.

On July 25, 2000, Schwartz, a non-practicing attorney who represented himself during part of the litigation, filed objections to the report and recommendation that are presently before the Court. Schwartz argues that Judge Lindsay erred in finding that Devine entered the case after the first default was vacated, because Devine began his representation of Schwartz "shortly after the first default was entered" (see Schwartz's Objections, p. 1). The plaintiff further asserts that the report and recommendation fail to account for the hours Devine spent: (1) trying to establish that Chan lived in New York and only maintained a post office box in New Jersey; (2) placing liens on the defendant's assets; (3) writing the affirmation and memorandum of law in opposition to Chan's motion to vacate the default judgment; (4) appearing in court; (5) and conferring with the plaintiff. Schwartz also contends that the amount of attorney's fees recommended by Judge Lindsay do not reflect the bad faith of Chan, who purposely lied to the Court. The plaintiff further maintains that the magistrate's report punishes Devine for not keeping contemporaneous time records. Lastly, the plaintiff argues that the law of the case should apply to the vacated judgment, and that this Court should therefore reject Judge Lindsay's recommendation on damages.

Devine filed his objections to the report and recommendation on July 28, 2000, and those objections are presently being considered by the Court as well. Counsel only objects to the amount of attorney's fees Judge Lindsay recommends awarding for his representation of the plaintiff. Devine states that he has represented Schwartz since May 1998, when he was initially retained to assist the plaintiff in enforcing the judgment he had secured against Chan. Devine alleges that he spent time perfecting the judgment and serving restraining notices on the banks that held Chan's assets. Counsel further contends that he prepared papers in opposition to Chan's motion to vacate the default judgment, and that preparation allegedly required "considerable time, research, conversations and consultations with the Plaintiff" (Devine's Objections ¶ 4).

Devine also claims that after the Court vacated the default judgment, he participated in negotiations, conferences, court appearances, and depositions. Counsel argues that this Court should award him fees that are equal to the fees Chan paid his own attorneys. In support of this request, Devine claims that Judge Lindsay's recommended award rewards Chan's perjury. Devine alleges that after the first default judgment was awarded and prior to Chan's perjury, Schwartz had been awarded a judgment in excess of the sum of $490,000. Devine argues that now, after the second default judgment has been entered, and after Chan lied to the Court, Judge Lindsay recommends awarding the plaintiff a total sum of $24,425. Devine contends that the Court should not permit this disparity to exist and, therefore, should award attorney's fees that are equal to the fees Chan paid his own attorneys.

Devine also supports his objection to the amount of attorney's fees recommended by Judge Lindsay by referring to a comment allegedly made by this Court during a conference, namely the statement, "`We will get you paid'" (Objections ¶ 6). Devine further explains that he was not billing Schwartz hourly, but rather based on a contingent retainer. As such, Devine argues that his records "do not conform to what the Court would like, relative to billable time" (Objections ¶ 8). Devine contends that Chan should not benefit from the billing arrangement between Devine and Schwartz, when Chan perpetrated a fraud on the Court.

On July 20, 2000, the Court granted Chan an extension to August 1, 2000, to file his objections. On August 7, 2000, Chan requested a second extension, which the Court denied. Presently before the Court are the report and recommendation by Judge Lindsay and objections thereto filed only by the plaintiff and his attorney.

II. DISCUSSION

Rule 72 of the Federal Rules of Civil Procedure and the Federal Magistrates Act, 28 U.S.C. § 636(b)(1)(A), provides the standard for district court review of a federal magistrate judge's order. For dispositive matters, the district court "may accept, reject or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b). The court shall make a de novo determination of those portions of the report to which objections are made. See 28 U.S.C. § 636(b)(1); United States v. Male Juvenile, 121 F.3d 34, 38 (2d Cir. 1997). The plaintiff and his attorney have timely filed objections to the following portions of the report: (1) the amount of compensatory and statutory damages; and (2) the amount of attorneys fees awarded to Devine. The Court will review those portions de novo.

A. As to the Compensatory and Statutory Damages Award

Schwartz objects to Judge Lindsay's compensatory damages award, arguing that the magistrate judge should have applied the doctrine of "the law of the case" and recommended awarding the sum of $490,665.50, which is the sum awarded to the plaintiff pursuant to the initial default judgment. Judge Lindsay rejected this argument in her report and recommendation, finding that the doctrine of law ...


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