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601 WEST ASSOCIATES LLC v. KLEISER-WALCZAK CONSTRUCTION

May 17, 2004.

601 WEST ASSOCIATES LLC, Plaintiff, -against- KLEISER-WALCZAK CONSTRUCTION CO., d/b/a KLEISER-WALCZAK, Defendant


The opinion of the court was delivered by: DOUGLAS EATON, Magistrate Judge

OPINION AND ORDER

Plaintiff 601 West Associates LLC ("601 West" or "plaintiff") is the owner of the Starrett Lehigh Building at 601 West 26th Street. (Compl. Exh. 1A.) Defendant Kleiser-Walczak Construction Co. is a California corporation that "specializes in the production of computer-generated animation, visual effects and live action for feature films, special venue attractions, television, advertising and interactive projects." (2/13/04 Galano Aff. ¶ 3.) On May 1, 1999, defendant entered into an 8-year lease with plaintiff for part of the 17th floor of 601 West 26th Street. (Compl. ¶ 5.) In February 2000, defendant stopped paying its rent because of an economic downturn in its industry; eventually it laid off its entire New York based staff and ceased occupying the premises. (Compl. ¶ 6; 2/13/04 Galano Aff. ¶ 3.) In July 2002, plaintiff re-rented the premises. (Compl. Exh. E.) After numerous attempts to collect the outstanding rental arrears, plaintiff brought this action in our Court. (Compl. ¶¶ 10-13.)

In December 2003, the parties consented to have the case assigned to me for all purposes. On January 27, 2004, I held a settlement conference, but the parties did not settle.

  On February 5, 2004, plaintiff moved for summary judgment, alleging that defendant owes it $172,037.65 in unpaid rent, plus interest at 9% per annum from November 1, 2000, plus attorneys' fees of $57,333.00. It characterizes the $57,333.00 as "33.33% of the principal sum due." (2/4/04 Merlis Aff. ¶ 8.) By my arithmetic, the figure would be a few dollars higher.

  On February 13, 2004, defendant served its opposition papers. In its attorney's affidavit, defendant concedes that it owes plaintiff $172,037.65 plus interest at 9% per annum starting from November 1, 2000. (The November 1, 2000 start date is not explained to me, but it is undisputed.) Defendant says that the only disputed issue is whether plaintiff's claim for $57,333.00 in attorneys' fees is reasonable. Defendant says that the claimed amount "is an unreasonable and excessive fee based on . . . the non-complexity of this case." Mr. Galano's affidavit noted that the moving papers had submitted no time entries from plaintiff's two attorneys (Mitchell Merlis and Vincent Lentini), and no explanation of what work they had performed.

  On February 23, 2004, Mr. Lentini submitted a 5-page reply affirmation, which estimated that he and Mr. Merlis had worked a total of 100 hours, and he described that work.

  For the reasons discussed below, I award plaintiff $172,037.65, plus interest at 9% per annum, starting from November 1, 2000, plus attorneys' fees in the amount of $11,250.00.

  DISCUSSION

  Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment will be granted only when there are no genuine issues of material fact and the moving party is entitled to a judgment as a matter of law. The Court will construe the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in its favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The moving party bears the burden of demonstrating that no genuine issues of material fact exist, and all inferences and ambiguities will be resolved in favor of the non-moving party. Once the moving party has provided sufficient evidence to support a motion for summary judgment, the non-moving party must set forth specific facts that show that there is a genuine issue for trial. Jones v. New York City Housing Authority, 2001 WL 406180, at *5 (S.D.N.Y. Apr. 20, 2001) (Kaplan, J.)(Eaton, M.J.); Winkfield v. City of New York, 1999 WL 1191544, at *2 (S.D.N.Y. Dec. 15, 1999) (Baer, J.).

  As noted above, the defendant concedes that the only disputed issue is whether plaintiff's claim for $57,333.00 in attorneys' fees is reasonable. I find that it is not.

  Plaintiff's Notice of Motion annexes an affirmation from a Manhattan attorney, Mitchell Merlis, and an affirmation from Vincent Lentini, a Garden City attorney who says he was of counsel to Mr. Merlis. Mr. Merlis's affirmation, at ¶ 4, says: The Plaintiff purchased the Building in 1998. Since that time, my firm has handled all legal matters for the Plaintiff regarding the Building and its tenants which matters can be delineated in two categories: (1) landlord-tenant and dispossess actions for which my firm has billed the Plaintiff at an hourly rate of between $250.00 to $300.00 per hour, and (2) collection matters regarding collection of past due rents and/or damages for breach of lease for which my firm has been retained by the Plaintiff on a 33.33% contingency fee basis plus costs and disbursements.

 Annexed as Exhibit 6 is a June 4, 2003 retainer agreement that says:
This letter is to confirm that 601 West Associates, LLC has retained the undersigned Attorney [Mr. Merlis] to represent the Limited Liability Company, Landlord/Owner with respect to the outstanding rental arrears/collection matter involving the above referenced Tenant. As you know, I have been involved in this matter since November of 2000 and have issued previous written Demands and have had other correspondence and contact with the Tenant and its representatives.
* * *
The Retainer in this matter is agreed upon in the amount of a one third (33%) contingency collection fee of the amount collected similar to the ones we have had in the past for the other collection cases in the building which I have handled over the past four or five years.
* * *
Please be advised that in the event of litigation which could result in an Appeal, that my hourly billing rate will be $300 per hour for Appellate work. . .
(Notice of Motion, Exh. 6.)
  To support its argument that defendant is responsible for paying plaintiff's legal fees, plaintiff refers to the lease's paragraphs 19, 57 and 70. Paragraph 57 merely discusses late fees. Paragraph 19 says (with my emphasis underlined) :
If Owner, . . . in connection with any default by Tenant: in the covenant to pay rent hereunder, makes any expenditures or incurs any obligations for the payment of money, including but not limited to reasonable attorney's fees, in instituting, prosecuting or defending any action or proceedings, and prevails in any such action or proceeding, then Tenant will reimburse Owner for such sums so paid or obligations incurred with interest and costs.
Paragraph 70.1 says (with my emphasis underlined) that in the event of a legal action brought by the plaintiff against the defendant where plaintiff prevails, the defendant:
hereby agrees to pay, as Additional Rental, all reasonable attorneys' fees and disbursements (and all other court costs or expenses of legal proceedings) which Landlord may incur. . .
Plaintiff claims that:
. . . [W]here an attorney is retained by a party on a one third contingency fee basis, an award of attorneys['] fees based on 33.33% of the amount which the Defendant owes the Plaintiff is not unreasonable and is in fact in "line with the kind of fee that plaintiff would normally anticipate paying for collecting a defaulted account". See, Lake Steel Inc. v. Imperial Linen Supply Co., Inc.[,] 60 A.D.2d 994 (4th Dept. 1978) [, appeal denied 44 N.Y.2d 643, 405 N.Y.S.2d 1027 (N.Y. 1978)]. See, also A.S.L. Enterprises, Inc. v. Venus Laboratories, Inc.[,] 298 A.D.2d 337 (2nd Dept. 2002).
(2/23/04 Lentini Reply Aff. ¶ 7.)

  Since this is a diversity case, I will apply New York law concerning attorney's fees, but it is very similar to federal law. The Appellate Division decisions in Lake Steel and A.S.L. Enterprises do not support plaintiff's argument that a fee of one-third is "reasonable" regardless of the amount of work performed. In those cases, a substantial amount of work had been performed, because both cases were tried to verdict. In both cases, the court read in a requirement of reasonableness, even though the equipment lease in Lake Steel said "all its expenses, including attorney's fees" (with no mention ...


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