United States District Court, S.D. New York
April 26, 2004.
LEE N. KOEHLER, Plaintiff, -against- THE BANK OF BERMUDA LIMITED, Defendant
The opinion of the court was delivered by: CHARLES HAIGHT, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff Lee N. Koehler objects in part to the Report and
Recommendation of Magistrate Judge Michael H. Dolinger dated January 12,
2004 (the "January 12th Report"). Specifically, Koehler objects to
Judge Dolinger's use of historical billing rates in calculating
attorneys' fees to be awarded plaintiff against defendant The Bank of
Bermuda ("BBL"). For the reasons stated below, Koehler's objection is
sustained, and the fee award recommended by Judge Dolinger will be
This application for attorneys' fees arises out of a long-standing
post-judgment garnishment proceeding between Koehler and the Bank of
Bermuda, Ltd. ("BBL"). See Koehler v. Bank of Bermuda, Ltd., No.
M18-302, 2004 WL 444101 (S.D.N.Y. Mar. 10, 2004). The facts of that case
need not be recited here. It is sufficient for present purposes to note
that one of the many speed bumps along the road of this tangled
litigation stemmed from a lengthy discovery dispute between the parties.
As Judge Dolinger has held, BBL's "multiple defaults" and a "pattern of
inactivity" with respect to compliance with discovery orders had
"probably impacted adversely . . . the ability of Koehler to unearth all
reasonably pertinent information about the extent of the Bank's contacts
with New York in or about 1992 and 1993." Koehler v. Bank of Bermuda, Ltd., No. M18-302, 931745, 2003 WL 289640, at *3, *12 (S.D.N.Y.
Feb. 11, 2003). As a result of these failings, Judge Dolinger required
BBL to pay "the reasonable expenses arising out of Koehler's motions to
compel and for sanctions and his supplemental motion for sanctions." Id.
at *16. The amount of the award was to be determined at a future date.
That date came on January 12, 2004, when Judge Dolinger recommended an
award to Koehler of $33,025.57 in fees and expenses. January 12th
Report at 18. Koehler now objects to only one part of Judge Dolinger's
decision, in which in the course of determining attorneys' fees, he
calculated the hourly rate of Koehler's outside counsel based on historic
rather than current rates, which are materially higher. Koehler submits
that attorneys' fees should have been calculated based on the current
rate of $250 an hour, which would increase his total award to
As I have previously recognized, Judge Dolinger's rulings on fee awards
are nondispositive orders under Rule 72(a), Fed.R. Civ. P., which, as
specified by the Rule, may be modified or set aside only if "clearly
erroneous or contrary to law." Order of Aug. 11, 2003 at 4. They should
only be reversed upon a finding of abuse of discretion. See Nikkal
Indus., Ltd. v. Salton, Inc., 689 F. Supp. 187, 189 (S.D.N.Y. 1988).
Judge Dolinger's award of attorneys' fees involved the calculation of
the "lodestar" figure, a conventional method by which the number of hours
reasonably expended on the litigation is multiplied by a reasonable
hourly rate for attorneys and paraprofessionals. January 12th Report at
5. In his initial affidavit in support of legal fees and expenses,
Koheler, who is an attorney, requested that Judge Dolinger determine the
award based upon the following hourly rates for Koehler and his law
partners, Paul L. Newhouse and Brian G. West:
Lee N. Koehler $175.00 per hour Paul F. Newhouse
$100.00 per hour Brian G. West $150.00 per hour (1997 rate)
165.00 per hour (1998 rate)
175.00 per hour (2001 rate)
195.00 per hour (2003 rate)
Aff. of Lee N. Koehler, Paul F. Newhouse and Brian G. West in Supp.
of Submission of Legal Fees and Expenses per Order of Feb. 10, 2003 at
¶ 5 (Mar. 19, 2003) (the "Koehler Affidavit").
Plaintiff averred that the rates reflected hourly rates charged to
other clients at the time the legal services in this case were actually
rendered (hence the term "historic rates"), or, with respect to
Newhouse, were well below hourly rates charged to other of his clients.
Id. at ¶ 6.
BBL disputed that portion of Koehler's application of attorneys fees
arising out of his own activities. BBL argued that since a pro se party
may not obtain an award of attorney's fees, legal services performed by
Koehler on his own behalf should be excluded from the calculation of the
award. See Mem. of Resp't, the Bank of Bermuda Ltd., in Resp. to Pet'r
Submission Regarding Legal Fees and Expenses at 2-3 (Mar. 27, 2003)
("Mar. 27 Response Brief").*fn1
However, as a partial response to BBL's argument, Koehler changed his
position with respect to the hourly rates used. Abandoning the position
that historic rates should be used, Koehler revised his request and asked
that Newhouse's and West's time should be compensated at a current rate
of $250.00 per hour, in order to reflect both a delay in payment as well
as an adjustment for the relevant market area. Mem. in Reply to Resp't
Resp. to Pet'r Submission at 8-10 (Apr. 30, 2003).
In his Report and Recommendation, Judge Dolinger calculated Koehler's
award based on historic rather than current rates. See January 12th
Report at 14 ("[D]espite the fact that rates used in calculating a fee
award should be current rather than historic, Mr. West has requested compensation at the rates actually billed to other clients at the
time the relevant work was performed." (citations omitted)). I must now
decide whether this decision was an abuse of discretion.
The party seeking a fee award bears the burden of demonstrating that
the hourly rates they seek are "in line with those prevailing in the
community for similar services by lawyers of reasonably comparable
skill, experience, and reputation." Blum v. Stenson, 564 U.S. 886, 896
n.11 (1984). The relevant "community" is "the district in which the court
sits," which in this case is the Southern District of New York. Polk v.
New York State Dep't of Corr. Servs., 722 F.2d 23, 25 (2d Cir. 1983),
Here, plaintiff has demonstrated that $250 per hour is a reasonable
current rate for attorney's fees.
Plaintiff cites several cases which indicate that $250 per hour is well
in line with hourly rates allowed for attorneys with similar years of
experience in small law firms within the S.D.N.Y. market. See Pet'r
Objection to Report and Recommendations of Mag. Judge at 3-4 (Jan. 19,
2004). In fact, Judge Dolinger notes that Mr. West's request for
historical fees (ranging from $150 to $195 per hour) "are well below the
current hourly fees that have been awarded to solo practitioners and
small-firm attorneys of comparable experience in this district." January
12th Report at 14-15. Based on the foregoing, I find that $250 per hour
is a reasonable hourly rate based on current fees.
However, that does not end the inquiry. What remains to be determined
is whether Judge Dolinger application of historical rather than current
rates in calculating attorneys' fees was an abuse of discretion.
Prior to 1989, the practice in this circuit in calculating the lodestar
figure had been to apply the historic rate or, in the case or protracted
litigation, to divide the litigation into two separate periods and apply the current rate to the more recent period and
the historic rate to the former. See Grant v. Martinez, 973 F.2d 96, 100
(2d Cir. 1992) (describing the prior practice). However, in 1989 the
Supreme Court held in Missouri v. Jenkins, 491 U.S. 274 (1989) that "an
appropriate adjustment for delay in payment whether by the application
of current rather than historic hourly rates or otherwise is within the
contemplation of the statute." Id. at 284. In accordance with that
important decision, this circuit no longer mandated the two-phase
approach to rate calculation and instead allowed courts the discretion to
"calculate all hours at whatever rate is necessary to compensate counsel
for delay." Grant, 973 F.2d at 100.
Following Missouri, the practice of providing lower courts broad
discretion to fashion attorneys fee awards based on either current or
historic rates, depending on what the court deemed most reasonable, was
followed for several years. Thus in Cabrera v. Jakobovitz, 24 F.3d 327
(2d Cir. 1994), the Second Circuit upheld the District Court's decision
to set an hourly fee rate for partners at $200 per hour and associates at
$135 per hour, based on the "prevailing marketplace rates for the type of
work performed and the experience of the attorneys." Id. at 393. But no
part of that opinion mandated that the lower court use market rates in
calculating fee awards. See also Association for Retarded Citizens v.
Thorne, 68 F.3d 547, 554 (2d Cir. 1995) ("A district court has discretion
in determining the amount of a fee award, and appellate review of the
district court's decision regarding attorney's fees is narrow.")
This approach changed perceptibly in LeBlanc-Seternberg v. Fletcher,
143 F.3d 748 (2d Cir. 1998). In that case, in which the Second Circuit
reversed the District Court's fee award, the Court of Appeals held that
"[t]he lodestar should be based on `prevailing market rates' . . . and
current rates, rather than historical rates, should be applied in order
to compensate for the delay in payment." Id. at 764 (citations omitted)
(emphasis added). Therefore, at least in cases in which there has been a significant delay, the prevailing view of
this circuit now seems to be that district courts should apply current
rates rather than historic rates.
That view was reaffirmed in Gierlinger v. Gleason, 160 F.3d 858 (2d
Cir. 1998), in which the Second Circuit said that "in order to provide
adequate compensation where the services were performed many years before
the award is made, the rates used by the court to calculate the lodestar
should be `current rather than historic hourly rates.'" Id. at 882
(citing Missouri, 491 at 284) (emphasis added). Gierlinger added one
exception to this rule. A district court "is not necessarily required,
however, to award attorneys' fees based on current hourly rates when the
delay is due in whole or in substantial part to the fault of the party
seeking fees." 160 F.3d at 882. This exception does not apply in this
case, since as the prior opinions in the case amply demonstrate, it was
BBL rather than Koehler which was primarily responsible for the delay in
Thus, there has been a shift in the rule of the Second Circuit from one
in which the use of current market rates was encouraged to one where they
were, at least in some circumstances, mandated. Koehler's request for
fees is clearly a case in which the use of current rates is mandated by
governing Second Circuit authority. It follows that Judge Dolinger abused
his discretion in failing to use current rates to determine the
appropriate fee award to be given Koehler.
BBL contends that current rates should not be used since Koehler
himself, in his initial memorandum to Judge Dolinger, requested that
historic rates be used, and subsequently made his request for current
rates for the first time in an "unauthorized reply brief." Mar. 27 Resp.
Brief at 2. Two arguments are intertwined in that contention: first, that
Koehler's reply brief was unauthorized; and second, that an argument raised for the first time in a
reply brief should not be considered. Neither argument persuades.
By memorandum and order dated February 10, 2003, Judge Dolinger set a
briefing schedule wherein, in an effort to determine the amount of
reasonable attorneys' fees and expenses, "Koehler's counsel [was] to
serve and file an affidavit with contemporaneous time records within ten
days" and BBL was permitted to "serve and file responding papers within
one week thereafter." Mem. and Order of Magistrate Judge Dolinger, Feb.
10, 2003, at 41. No reference was made in that Order to a reply brief on
behalf of either party.
Nevertheless, on April 30, 2003, more than one month after the close of
briefing, *fn2 Koehler filed a reply brief where, for the first time, he
made the argument that current rather than historic rates be used to
determine fee awards. In response to this brief, BBL, through its
counsel, wrote a letter to Judge Dolinger on May 6, 2003, stating that it
was rejecting service of the purported reply and asking that the Court
similarly disregard it. BBL now argues that Judge Dolinger should not
have given any credence to the reply brief, which was not authorized in
the initial scheduling order.
It is clear from the January 12th Report that, notwithstanding his
initial scheduling order or BBL's letter of May 6, 2003, Judge Dolinger
acknowledged and accepted Koehler's reply brief. Several times throughout
the report, the judge acknowledged the brief by name and even responded
to some of its arguments (though never specifically acknowledging
Koehler's request for current rates). See January 12th Report at 10
("Arguing against application of the pro se rule, petitioner cites 7
Moore's Federal Practice 3D. . . . (See Memorandum in Reply (`Reply
Memo') at p. 1)."), 11 ("See Reply Memo at p. 2."), and 15-16
("Petitioner responds that these challenged hours . . . were necessary in order to determine, and to be
able to articulate to the court, what documents BBL had wrongfully
withheld. (See Reply Memo at p. 7)."). Whatever allowances or
non-allowances Judge Dolinger had made at the outset with respect to a
reply brief, it is clear from his report that he at least implicitly
authorized its final submission.
There is perhaps more substance to BBL's argument based upon the
correct assertion that Koehler failed to raise his request for use of
current market rates until the reply memorandum itself. Circuit and
district courts have noted on numerous occasions that arguments raised
for the first time in a reply memorandum would not be considered. See
U.S. v. Yousef, 327 F.3d 56, 115 (2d Cir. 2003) ("We will not consider an
argument raised for the first time in a reply brief."); U.S. v. Greer,
285 F.3d 158, 170 n. 3 (2d Cir. 2002); Estate of Morris Ex Rel. Morris
v. Dapolito, 297 F. Supp.2d 680, 689 n. 7 (S.D.N.Y. 2004); Irish Lesbian
& Gay Org. v. Giuliani, 918 F. Supp. 728, 731 (S.D.N.Y. 1996).
The reason that courts generally do not consider contentions raised for
the first time in reply briefs is not out of rigid adherence to
technicality but because such conduct denies opposing parties any
opportunity to respond. As a compromise solution, courts have, on
occasion, allowed parties further opportunities to respond to arguments
raised for the first time in reply briefs, rather than dismissing those
arguments out of hand. See Brazier v. Hasbro, Inc., No. 99 Civ. 11258,
2004 WL 515536, at *10 (S.D.N.Y. Mar. 16, 2004) ("Because defendants
raised all of these arguments for the first time in their reply, Brazier
has not yet had an opportunity to respond with his own arguments and
supplementary affidavits. Accordingly, Brazier has until April 28, 2004,
to submit a response to defendants' attacks on his experts."). In the case at bar, I have likewise provided BBL ample opportunity to
respond to Koehler's dilatory request for current fee rates. Accordingly
the danger of unfairness to BBL does not arise.*fn3
For the foregoing reasons, I sustain Koehler's objection to Magistrate
Judge Dolinger's January 12th Report and Recommendation. The Court
adopts that Report and Recommendation, except that the hourly rates for
attorneys' fees for the claimed time spent by Newhouse and West will be
$250 in respect of each attorney. That adjustment would appear to
increase the award from $33, 025.57 to $50, 636.07.
Counsel for plaintiff are directed to serve and file a Judgment
consistent with this Opinion on five (5) days' notice, such service and
filing to be effected not later than May 3, 2004.
It is SO ORDERED.