United States District Court, Southern District of New York
July 2, 2003
RONALD SCHRUEFER, PLAINTIFF,
WINTHORPE GRANT, INC., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Andrew Peck, Magistrate Judge
REPORT AND RECOMMENDATION
By Order dated May 15, 2003, Judge Daniels granted plaintiff summary judgment against defendants and referred the matter to me for an "inquest on damages, interests, costs and disbursements as to plaintiff, as well as a report and recommendation on [plaintiff's] attorney Robert J. Poulson, Jr.'s motion for attorney's fees." (Dkt. No. 38: 5/16/03 Judgment; see also Dkt. No. 35: Judge Daniels' Summary Judgment Decision.)
For the reasons set forth below, the Court recommends that Judgment be entered for plaintiff Ronald Schruefer for damages of $409,000, interest of $100,205, attorney's fees of $74,550, and disbursements of $2,472, for a total of $586,227.
"Where, as here, `the court determines that defendant is in default, the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.'" Chen v. Jenna Lane, Inc., 30 F. Supp.2d 622, 623 (S.D.N.Y. 1998) (Carter, D.J. & Peck, M.J.) (quoting 10A C. Wright, A. Miller & M. Kane, Federal Practice & Procedure: Civil 3d § 2688 at 58-59 (3d ed. 1998)).*fn1
The complaint alleges that defendants defrauded plaintiff Schruefer, a resident of the State of Alaska, into investing $420,000 in securities/commodities/currency transactions in violation of the Alaska Securities Act. (E.g., Dkt. No. 1: Compl. ¶¶ 6, 38-50, 54-59.)
In his summary judgment affidavit, Mr. Schruefer states that he wire transferred $420,000 to defendants (Schruefer Aff. ¶ 28; see also id. ¶¶ 12, 19, 21-22), and was refunded $11,000 in May 1999, for a loss of $409,000. (See id. ¶ 42.)
By Opinion dated March 12, 2003, Judge Daniels granted plaintiff summary judgment on the Alaska Securities Act, conversion and breach of fiduciary duty causes of action in the complaint. (Dkt. No. 35: 3/12/03 Summary Judgment Decision.)
The Second Circuit has approved the holding of an inquest by affidavit, without an in-person court hearing, "`as long as [the Court has] ensured that there was a basis for the damages specified in the default judgment.'" Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 1 11 (2d Cir. 1997) (quoting Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989)).*fn2
By Order dated June 5, 2003, I directed plaintiff's attorney, Mr. Poulson, to submit additional information as to attorney's fees and disbursements, and further ordered that "[d]efendants are to provide any response on this inquest as to amount of damages and/or attorneys fees, by June 17, 2003." (Dkt. No. 40: 6/5/03 Order.) Defendants have not responded to that Order, and the deadline has passed.
Mr. Schruefer's affidavit supports an award of damages of $409,000.
At the time relevant to Schruefer's action, the Alaska Securities Act provided for payment of interest at six percent a year. Alaska Securities Act § 45.55.930(a) (1998).*fn3
Interest of 6% from June 1, 1999 through June 1, 2003 is four years of interest, or $98,160. Interest from June 1 to June 30, 2003, one month, is $2,045 additional. Thus plaintiff Schruefer is entitled to interest of $100,205.
The Alaska Securities Act also provides for the award of "reasonable attorney fees." Alaska Securities Act § 45.55.930(a). Plaintiff's counsel, Mr. Poulson, has sought recovery of a one-third contingent fee. (See, e.g., Poulson 3/26/03 Aff. in Support of Attorney's Fee Award ¶¶ 3, 5; Dkt. No. 42: Plfs Br. re Attorney Fees at 4; Dkt. No. 44: Poulson 6/9/03 Aff. ¶¶ 14-15, 17-19; Dkt. No. 43: Schruefer 6/6/03 Aff. ¶¶ 1-2.)
Where a statute (or the parties' agreement) provides for the award of attorney's fees to the prevailing party, traditionally "[f]ee awards in the Second Circuit are computed under the lodestar method, which multiplies hours reasonably spent by counsel times a reasonable hourly rate." General Elec. Co. v. Compagnie Euralair, S.A., 96 Civ. 0884, 1997 WL 397627 at *4 (S.D.N.Y. July 3, 1997) (Scheindlin, D.J. & Peck, M.J.); accord, e.g., City of Burlington v. Dague, 505 U.S. 557, 562, 112 S.Ct. 2638, 2641 (1992) ("The `lodestar' figure has, as its name suggests, become the guiding light of our fee-shifting jurisprudence. We have established a `strong presumption' that the lodestar represents the `reasonable' fee, . . . and have placed upon the fee applicant who seeks more than that the burden of showing that `such an adjustment is necessary to the determination of a reasonable fee.'"); LeBlanc-Stemberg v. Fletcher, 143 F.3d 748, 764 (2nd Cir. 1998) (there is a "strong presumption that the lodestar figure . . . represents a `reasonable' fee") (citation omitted); Luciano v. Olsten Corp., 109 F.3d 111, 116 (2d Cir. 1997) (affirming lodestar based fee award in Title VII action); City of Detroit v. Grinnell Corp., 495 F.2d 448, 470 (2d Cir. 1974); N.S.N. Int'l Indus. N.V. v. E. I. DuPont de Nemours & Co., 89 Civ. 1692, 1996 WL 154182 at *2 (S.D.N.Y. Apr. 3, 1996) (Peck, M.J.).
As the fee applicant, plaintiff Schruefer (and his attorney, Poulson) "bears the burden of documenting the hours reasonably spent by counsel, and the reasonableness of the hourly rates claimed." General Elec. Co. v. Compagnie Euralair, S.A., 1997 WL 397627 at *4; accord, e.g., Sowemimo v. D.A.O.R. Sec., Inc., 97 Civ. 1083, 2000 WL 890229 at *3 (S.D.N.Y. June 30, 2000), aff'd, 1 Fed.Appx. 82 (2d Cir. 2001); Lavin-McEleney v. Marist College, 96 Civ. 4081, 1999 WL 33500070 at *3 (S.D.N.Y. Sep. 28, 1999), aff'd, 239 F.3d 476 (2d Cir. 2001); N.S.N. Int'l Indus. N.V. v. E. I. DuPont de Nemours & Co., 1996 WL 154182 at *2; see, e.g., Hensley v. Eckerhart, 461 U.S. 424, 437, 103 S.Ct. 1933, 1941 (1983).
As noted above, plaintiff has sought as reasonable fees a one-third contingent fee. Despite the Court's direction to Mr. Poulson to provide "case law justification for awarding fees on a contingent fee basis" (Dkt. No. 40: 6/5/03 Order), Mr. Poulson did not do so. Nor has the Court found any case awarding attorney's fees on a contingent fee basis to a prevailing plaintiff under the Alaska Securities Act. Indeed, the Court has not found any case awarding a purely contingent fee award under any of the federal statutes allowing attorney's fees to the prevailing party, and the Supreme Court in 1992 rejected the notion of even adjusting the lodestar amount upward because of the contingent nature of the case. City of Burlington v. Dague, 505 U.S. at 562-67, 112 S.Ct. at 2641-43 (rejecting contingency fee enhancement to lodestar figure in federal fee-shifting statutes); see, e.g., Luciano v. Olsten Corp., 109 F.3d at 116 (affirming award of lodestar in Title VII action; "the district court did not abuse its discretion in determining that the additional factors [prevailing plaintiff] argues should be considered, such as . . . the contingent nature of the lawsuit . . . were subsumed within this lodestar calculation"); Lewis v. Triborough Bridge & Tunnel Auth., 97 Civ. 0607, 2001 WL 1898318 at *9-10 (S.D.N.Y. Aug. 6, 2001) (refusing to enhance lodestar based on contingent nature of suit in Title VII case, citing Dague); U.S. Media Corp. v. Edde Entm't, Inc., 94 Civ. 4849, 1999 WL 498216 at *4 (S.D.N.Y. July 14, 1999) (rejecting contingency fee agreement as basis for adjusting lodestar in Copyright Act case); Losciale v. The Port Auth. of N.Y. & N.J., 97 Civ. 704, 1999 WL 587928 at *8-9 (S.D.N.Y. 1999) (refusing to award plaintiff's counsel requested one-third contingency fee and further refusing lodestar enhancement based on contingency agreement, as the calculated lodestar "adequately reflects all of the relevant considerations"). Accordingly, the Court recommends that plaintiff not be awarded attorney's fees on a one-third contingent fee basis.
The Court therefore turns to the lodestar method. Mr. Poulson has asserted that he spent 237 hours on this case through May 27, 2003. (Dkt. No. 45: "Chronological Log of Robert J. Poulson, Jr.") The Court has reviewed Mr. Poulson's time entries. Those entries are not a model of preciseness (e.g., entries for "various phone conferences," "review file," "legal research," "case administration"). Accordingly, the Court will reduce the hours by 10%, resulting in 213 hours. See, e.g., N.S.N. Int'l Indus. N.V. v. E. I. DuPont de Nemours & Co., 1996 WL 154182 at *4 (15% reduction for attorney conferences and vagueness of billing entries); General Elec. Co. v. Compagnie Euralair, S.A., 1997 WL 397627 at *4-6 ("Based on all of these factors — inadequate proof of the reasonableness of the hourly rate charged, over-staffing, excessive `office conference' time, and excessive hours spent on certain tasks — the Court believes an across-the-board 50% reduction is appropriate.") (& cases cited therein).
As to the hourly rate, Mr. Poulson is a 1970 law school graduate with extensive experience in securities broker/dealer litigation. (See Dkt. No. 44: Poulson 6/9/03 Aff. ¶¶ 4-11.) Mr. Poulson submits "that a rate of $350 per hour is the current prevailing rate for an attorney with [his] experience in a case such as this." (Id. ¶ 16.)
When determining a reasonable hourly rate, the Court is required to set a rate that is "in line with those prevailing in the community for similar services by lawyers of reasonably comparable skill, experience and reputation." Blum v. Stenson, 465 U.S. 886, 895 n. 11, 104 S.Ct. 1541, 1547 n. 11 (1984). For purposes of this determination, the community is the "district in which the court sits." Polk v. New York State Dep't of Corr. Servs., 722 F.2d 23, 25 (2d Cir. 1983). A judge may "rely in part on [his] own knowledge of private firm hourly rates in the community." Miele v. New York State Teamsters Conference Pension & Ret. Fund, 831 F.2d 407, 409 (2d Cir. 1987).
Based on the Court's review of other decisions in this District as well as the Court's own knowledge of prevailing hourly rates, $350 is a fair rate in this District for a solo practitioner with over thirty years of experience in securities-related practice. See, e.g., M.L. ex rel. M.P. v. Board of Educ., 02 Civ. 4288, 2003 WL 1057476 at *3 (S.D.N.Y. Mar. 10, 2003) ($350 hourly rate for lawyer with 18 years experience); M.S. v. New York City Bd. of Educ., 01 Civ. 4015, 01 Civ. 10871, 01 Civ. 10872, 2002 WL 31556385 at *4-5 (S.D.N.Y. Nov. 18, 2002) ($350 for lawyers with 24 and 35 years experience); McDonald v. Pension Plan of NYSA-ILA Pension Trust Fund, 99 Civ. 9054, 2002 WL 1974054 at *4 (S.D.N.Y. Aug. 27, 2002) ($325 for solo practitioner who graduated law school in 1963); General Motors Corp. v. Villa Marin Chevrolet, Inc., 240 F. Supp.2d 182, 188 (E.D.N.Y. July 30, 2002) ($315-$375 for law firm partners).
Accordingly, attorney's fees should be awarded to the plaintiff in the amount of $74,550 (213 hours times $350 per hour).
Plaintiff has submitted a list of disbursements totaling $2,822.62, mostly for online legal research, postage, fax and copying. (Dkt. No. 46: Dolhum Aff.) The Court, however, is unable to determine from the submission what was mailed (or faxed), what was photocopied, and the photocopying and fax rates employed. See, e., In re Towers Fin. Corp. Noteholders Litig., 93 Civ. 0810, 1997 WL 5904 at * 1-2 (S.D.N.Y. Jan. 8, 1997) (Peck, M.J.) (reducing award for photocopying charges from the 20-25¢ requested to 10¢ per page; "This Opinion also alerts counsel of the need, in future cases, to keep contemporaneous records of what was photocopied, similar to the longstanding requirement in this Circuit to submit contemporaneous time records when seeking attorney's fees."). Accordingly, of the approximately $700 for "postage, facsimile, copying," the Court will disallow half, or $350. Thus, plaintiff is entitled to reimbursement of disbursement costs of $2,472.
For the reasons stated above, the Court should enter judgment for plaintiff for $586,227, as follows:
Attorney's Fees 74,550
FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have ten (10) days from service of this Report to file written objections. See also Fed.R.Civ.P. 6. Such objections (and any responses to objections) shall be filed with the Clerk of the Court, with courtesy copies delivered to the chambers of the Honorable George B. Daniels, 40 Centre Street, Room 410, and to my chambers, 500 Pearl Street, Room 1370. Any requests for an extension of time for filing objections must be directed to Judge Daniels. Failure to file objections will result in a waiver of those objections for purposes of appeal. Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466 (1985); IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir. 1993), cert. denied, 513 U.S. 822, 115 S.Ct. 86 (1994); Roldan v. Racette, 984 F.2d 85, 89 (2d Cir. 1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir.), cert. denied, 506 U.S. 1038, 113 S.Ct. 825 (1992); Small v. Secretary of Health & Human Servs., 892 F.2d 15,16 (2d Cir. 1989); Wesolek v. Canadair Ltd., 838 F.2d 55, 57-59 (2d Cir. 1988); McCarthy v. Manson, 714 F.2d 234,237-38 (2d Cir. 1983); 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72, 6(a), 6(e).