United States District Court, S.D. New York
June 23, 2004.
SOUTHERN INDUSTRIES OF CLOVER, LTD., Plaintiff,
ZENEV TEXTILES S.A., VENEZ TEXTILES USA INC., RAMI KATTAN, and ABE KATTAN d/b/a ABRAHAM KATTAN, Defendants.
The opinion of the court was delivered by: HAROLD BAER, JR.[fn1], District Judge [fn1] Sonia Wadhwa, a Summer 2004 intern in my Chambers and second-year law student at the George Washington University Law School, provided substantive assistance in the research and drafting of this opinion.
OPINION & ORDER
Following a bench trial held on January 6, 2004, the Court held
that pursuant to a guaranty agreement between the parties,
defendants Venez Textiles USA, Inc. ("Venez USA"), Rami and his
brother Abe Kattan (collectively, "the Kattans") were liable for
$276,472.97 plus interest and reasonable attorneys' fees.
Thereafter, the defendants moved for reconsideration pursuant to
the Federal Rules of Civil Procedure ("Fed.R. Civ. P.") 54(e)
and 60 and Local Rule 6.3 of the Local Rules of the United States
District Courts for the Southern and Eastern Districts of New
York ("Local Rules"). After a review, this motion was denied on
April 15, 2004. Southern Industries of Clover, Ltd. ("Southern")
now applies for an award of attorneys' fees and disbursements in
the amount of $29,463.65 plus interest, which defendants oppose.
Fee shifting motions, for one reason or another, appear on the
increase, and because some of the more frequent arguments are
presented here, it seems valuable to explore these issues. In the
case at bar, Southern's application is granted in part and denied
in part and the defendants are ordered to pay Southern $27,561.85
in attorneys' fees and disbursements.
The facts are set out in the Court's January 20, 2004 Opinion &
Order, S. Indus. of Clover, Ltd. v. Zenev Textiles S.A., 02
Civ. 8022, 2004 WL 193176 (S.D.N.Y. Feb. 2, 2004), familiarity with which is presumed. Briefly, Southern is a
wholesaler of yarn. Southern's president, Lawrence Kryger, had a
20-year business relationship with the Kattans. The Kattan
brothers have been in the textile industry for more than 33
years, during which time they owned and operated several
companies in the industry, including Tropical Textiles, Sunlight
Trading Company, Inc. ("Sunlight"), Venez USA and Zenev Textiles,
S.A. ("Zenev").*fn2 Southern and Sunlight transacted some
$30 to $40 million in business over the course of 15 years.
Towards the end of that period, Sunlight went into debt and
Southern experienced difficulty in its collections. Partly
because of this history, Southern refused to do business with
Zenev without a "Cross Corporate Customer Guaranty" from the
Kattans which included a clause specifying that in the event of a
default and the retention of lawyers, defendants would be liable
for attorneys' fees.*fn3 Southern began selling yarn to
Zenev in late 1999. Eventually, Zenev fell behind in its account
and failed to pay eight invoices, which totaled $276,472.97.
Southern then brought suit to recover these monies from Zenev,
Venez USA, and the Kattans.
Following the January 6, 2004 bench trial, I concluded that on
its face, the guaranty was ambiguous as to whether it provided
for both corporate and individual guaranties. However, the
parties' course of dealings, including letters sent by Southern's
president to the Kattans and the testimony of Abe Kattan himself,
demonstrated that the guaranty was intended to bind both Venez
USA and the Kattans individually. Accordingly, the Kattans and
Venez USA were held liable to Southern for Zenev's debt of
$276,472.97, interest, and reasonable attorneys' fees. Following
denial of the defendants' motion for reconsideration, Southern's
attorney, Walter F. Ciacci ("Ciacci"), submitted a proposed
judgment reflecting the amount of damages, attorneys' fees, and
disbursements, as well as his timesheets and a sworn statement
detailing his attorneys' fees and disbursement application. II. DISCUSSION
Defendants oppose the award of attorneys' fees on four grounds:
(1) Southern did not plead attorneys' fees in its complaint; (2)
Ciacci's timesheets lack the requisite degree of specificity; (3)
Ciacci's timesheets contain inappropriate and excessive entries;
and (4) Southern's conduct during the course of the litigation
warrants a reduction in the amount of attorneys' fees awarded. In
addition, defendants argue that Southern is not entitled to
disbursements because it did not affirm that the disbursements
were necessarily incurred. I address defendants' objections
A. Failure to Plead Attorneys' Fees
Defendants first argue that Southern did not specifically seek
attorneys' fees in its complaint and therefore it is not entitled
to an award of attorneys' fees. Defendants rely on a line of
cases from other Circuits that hold that attorneys' fees are
special damages that must be specifically pled under Fed.R. Civ.
P. 9(g). E.g., Maidmore Realty Co., Inc. v. Maidmore Realty
Co., Inc., 474 F.2d 840, 843 (3d Cir. 1973); W. Cas. & Sur. Co.
v. Southwestern Bell Tel Co., 396 F.2d 351, 356 (8th Cir. 1968);
see also Bensen v. Am. Ultramar Ltd., No. 92 Civ. 4420, 1997
WL 317343, at *11 (S.D.N.Y. June 12, 1997) ("Attorney's fees have
been deemed special damages by numerous Circuits, including the
Third, Fourth, Fifth, Sixth, and Eighth."). This, however, is not
the law of this Circuit. Some courts in this District have
similarly classified attorneys' fees as special damages. E.g.,
id.; Marshall v. New Kids on the Block P'ship, No. 91 Civ.
3905, 1993 WL 350063, at *1 (S.D.N.Y. Sept. 8, 1993). These
decisions turn on whether the opposing party had notice or would
be prejudiced by a tardy claim for attorneys' fees, not whether
such relief was pled in the complaint. The Bensen court, for
example, based its decision largely on the fact that defendants'
English law counterclaim on which it sought attorneys' fees was
"completely novel . . . and . . . had never been brought in any
American jurisdiction." 1997 WL 317343, at *11. This, together
with the fact that defendants previously moved to prohibit
plaintiff from recovering attorneys' fees, resulted in a complete
lack of notice to plaintiff of defendants' attorneys' fees claim.
Id. Likewise, in Marshall, the court held that plaintiff was
entitled to recover attorneys' fees even though the request was
raised for the first time in a post-trial motion because
defendants were not prejudiced. 1993 WL 350063, at *1-2. In so
holding, the court noted that defendants were well aware of a
potential claim for attorneys' fees because its own counterclaim
was premised on a licensing agreement that contained an attorneys'
fee provision. Id. The cases on which the defendants rely only
further support the fact that notice, not pleading, is the
critical inquiry. For example, in United Indus., Inc. v.
Simon-Hartley, Ltd., 91 F.3d 762, 765 (5th Cir. 1996), the Fifth
Circuit explained that, "as a general rule . . . we find nothing
inappropriate with requiring a party to put its adversaries on
notice that attorneys' fees are at issue in a timely fashion or
waive that claim." Id. (emphasis supplied).
The defendants cannot seriously argue that they did not have
notice of plaintiff's attorneys' fees claim. First, both parties
were on notice that attorneys' fees were included should a
dispute arise by virtue of the language, clear and unambiguous,
in the guaranty. Second, the pleadings, motion practice, and
prior proceedings in this case raised the issue of attorneys'
fees on a number of occasions. The complaint explicitly mentions
attorneys' fees in the background facts section, which reads, in
pertinent part: "The Guaranty also provided that the guarantors
would be liable to SOUTHERN for attorneys' fees and related
charges if there was a default in payment." Compl. ¶ 20. While
attorneys' fees were not explicitly sought in Southern's demand
for judgment, subsection (b) demanded, inter alia. "costs of
this action." Moreover, the issue of attorneys' fees was
addressed in both the January 20, 2004 Opinion & Order and the
parties' submissions on the defendants' motion for
reconsideration. Third, courts in this District have permitted
the issue of attorneys' fees to be raised for the first time in
post-trial submissions under Fed.R.Civ.P. 54(c). which
provides, in pertinent part, that "every final judgment shall
grant the relief to which the party in whose favor it is rendered
is entitled, even if the party has not demanded such relief in
the party's pleadings." (emphasis supplied); see also
Morse/Diesel, Inc. v. Trinity Indus., Inc., 875 F. Supp. 165,
178 (S.D.N.Y. 1994) (ruling that where the agreement between the
parties provided for recovery of attorneys' fees and costs and
where defendant was not prejudiced, plaintiff was entitled to
recover even though it had not plead for such relief in its
complaint). Finally, it is appropriate to award Southern
reasonable attorneys' fees because "[a]s a general matter of New
York law . . . when a contract provides that in the event of
litigation the losing party will pay the attorneys' fees of the
prevailing party, the court will order the losing party to pay
whatever amounts have been expended by the prevailing party, so
long as those amounts are not unreasonable." F.H. Krear & Co. v.
Nineteen Named Trs., 810 F.2d 1250, 1263 (2d Cir. 1987). Therefore, the defendants' first objection is without merit.
B. Vague Timesheets
Defendants further contend that Ciacci's timesheets are too
vague to meet the Second Circuit standard for court-ordered
compensation. "Applications for fee awards should generally be
documented by contemporaneously created time records that
specify, for each attorney, the date, the hours expended, and the
nature of the work done." Kirsch v. Fleet St., Ltd.,
148 F.3d 149, 173 (2d Cir. 1998). While defendants argue that Ciacci's
timesheets are insufficiently detailed and specific, Ciacci has
some 31 entries for the work he completed in connection with this
case. Affirmation in Support of Counsel Fee Application ("Pl.
Aff."), Exhibit ("Ex.") A. These entries are broken down into as
small as one-tenth hour increments. E.g., Pl. Aff. Ex. A at 1
("Sign Stipulation extending time to Answer to 12/18/03;
Correspondence to Defense Counsel Re: Same.2 hour"). In addition
to identifying the specific topic of his correspondence,
conferences, and telephone calls, Ciacci references specific
motions on which he worked and topics of research. Id. This
degree of detail of tasks performed over the course of litigation
is sufficient. See Hensley v. Eckerhart, 461 U.S. 424, 437 n.
12 (1983) ("Plaintiff's counsel, of course, is not required to
record in great detail how each minute of his time was expended.
But at least counsel should identify the general subject matter
of his time expenditures."). While the defendants may object to
Ciacci's grouping of several activities in one line item, such
grouping has not created an impermissibly vague timesheet,
although complete itemization is certainly the better practice.
C. Inappropriate and Excessive Entries
The defendants argue that Ciacci's timesheets include
inappropriate entries in that Ciacci has billed for clerical
tasks, such as filing papers and the preparation of two
deposition notices, and that his travel time was billed at the
fully hourly rate. The defendants further contend that the time
Ciacci spent on certain items was excessive, such as the 30 hours
he expended on the preparation of the Joint Pre-Trial Order and
the Pre-Trial Memorandum of Law. The defendants' arguments are
not persuasive. For example, defendants argue that the 3.5 hours
Ciacci spent to prepare his attorneys' fees application was
excessive because his timesheets, which must be prepared
contemporaneously, should have already been prepared. The
defendants overlook the fact that in addition to preparation of
the fee application, this entry also includes "Review all time
sheets; Correspondence to Court and Client." Pl. Aff. Ex. A at 4. Given
these additional tasks, the time spent by Ciacci is reasonable.
The defendants also call attention to the fact that Ciacci did
not specifically itemize travel time and billed it at the full
hourly rate. It appears from Ciacci's time sheets, however, that
he has not billed defendants for travel time, or if he has, the
time expended on travel was minor. Of the 31 entries, Ciacci's
timesheets contain only three court appearances other than trial.
The time billed for two of these three entries seem entirely
reasonable give that Ciacci listed additional tasks. E.g., Pl.
Aff. Ex. A at 1 ("Review file; Meet with client, prepare Summons
& Complaint; Appear U.S. District Court for the Southern District
of NY; File Summons & Complaint; Correspondence to Client Re:
Same; Correspondence to Process Server Disbursement: $150.00
Civil Action Number Fee; 6.5 Hours"). Only one entry, wherein
Ciacci bills 2.5 hours for filing his opposition to defendants'
motion to dismiss, Pl. Aff. Ex. A at 2, seems excessive and it
will therefore be deducted from Ciacci's fee award. As for
clerical or paralegal type of tasks, Mr. Ciacci's timesheets do
reflect a small amount of time expended on such tasks, however,
the Court finds the amount of time to be relatively minor and
D. Southern's Conduct
The defendants argue that Southern's conduct during the course
of this case warrants a reduction in attorneys' fees. The
defendant's main contention here is that Southern did not
produce, until the day before trial, the original guaranty and
cover letter from Abraham Kattan indicating that the Cross
Corporate Guarantee had been signed by Venez USA and guaranteed
by the Kattans. While Southern's failure to produce these
documents during discovery created an inconvenience for
defendants and the Court, this conduct does not warrant a
reduction in the attorneys' fees award. Southern's questionable
conduct related to discovery only. Moreover, this issue was
extensively reviewed and resolved prior to trial. Much to the
defendants' chagrin, I decided that no sanctions would issue,
although the defendants were allowed to cross-examine Southern's
witnesses at length regarding these events. As the defendants
note, the Court has broad discretion to sanction misconduct.
See Chambers v. Nasco, 501 U.S. 32, 43-46 (1991) (discussing
courts' inherent power to punish contempt and sanction
misconduct). I decline to exercise such discretion. E. Disbursements
Finally, the defendants argue that Southern is not entitled to
disbursements because its submission contravenes 28 U.S.C. § 1924
and Local Rule 54.1 in that it does not state that the
disbursements were necessarily incurred. 28 U.S.C. § 1924, in
pertinent part, provides that "the party claiming any item of
cost or disbursement shall attach thereto an affidavit . . . that
such item . . . has been necessarily incurred in the case and
that the services for which fees have been charged were actually
and necessarily performed." A similar requirement exists under
Local Rule 54.1(a), which provides, in pertinent part, that any
"bill of costs shall include an affidavit that the costs . . .
were necessary incurred." Ciacci has complied with the other
requirements of his supporting affidavit, but the defendants are
correct that his failure to affirm that the disbursements
incurred were necessary to the case precludes the award of nearly
all of the disbursements sought.
Southern seeks a total of $2,383.65 in disbursements. Of this
$437.50 may properly be taxed because it is evident that the
$150.00 filing fee and $287.50 expended upon a process server
were necessary to the case. The same, however, cannot be said of
the entirety of the remaining $1946.15, particularly since these
disbursements are associated with court reporter and transcript
fees, which are only recoverable under limited circumstances. For
example, Local Rule 54.1(c)(1) provides that "[t]he cost of a
transcript of court proceedings prior to or subsequent to trial
is taxable only when authorized in advance or ordered by court."
Here $1111.30 was expended on transcripts of a pre-trial motion
and trial, but Ciacci has not proffered a reason for the
transcript's necessity. The remaining disbursements were incurred
in deposition transcripts, which Local Rule 54.1(c)(2) provides
may only be taxed when the transcript was received in evidence at
trial or used by the Court in ruling on a motion for summary
judgment or other dispositive motion. Here, the Court received
the transcripts of the Kattans' depositions into evidence and
relied upon them in issuing the bench trial opinion. Thus, the
$544.35 expended to obtain the Kattans' depositions is
recoverable. However, the $290.50 incurred for other depositions,
however, is not compensable, as Local Rule 54.1(c)(2) provides
that costs for depositions taken solely for discovery are not
taxable. Therefore, Southern is entitled to only $981.85, which
represents disbursements for the filing fee, process server, and
depositions of Rami and Abe Kattan. F. Calculation of Attorneys' Fees
For attorneys' fees matters, the Court applies the lodestar
method to calculate the amount of attorneys' fees. Luciano v.
Olsten Corp., 109 F.3d 111, 115 (2d Cir. 1997). This method
takes "the number of hours reasonably expended by counsel on the
litigation multiplied by a reasonable hourly rate." Id. The
hourly rate is determined by the rates "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 (1984).
Southern requests a total of $27,080.00 in attorneys' fees,
which consists of 135.4 hours of attorney time at $200.00 per
hour. As discussed, the number of hours will be reduced by 2.5
hours for an inappropriate and excessive timesheet entry, which
reduces the total number of hours to 132.9 hours. Ciacci's
affirmation states that he has been practicing law since 1982.
Based on his years of experience, Ciacci's requested rate of $200
per hour seems more than fair. Stratton v. Dep't for the Aging
for City of N.Y., No. 91 Civ. 6623, 1996 WL 352909, at *2
(S.D.N.Y. June 25, 1996) (holding that rates of $200/hour for an
experienced attorney with more than 10 years of experience and a
rate of $250/hour for a "seasoned litigator with nearly 30 years
of experience" were "perfectly reasonable"), and these fees were
probably incurred 10 years ago or more. Therefore, under the
lodestar calculation, Southern is entitled to $26,580 in
For the foregoing reasons, plaintiff's application for
attorneys' fees is granted in part and denied in part. The
defendants are ordered to pay Southern $26,580 in attorneys' fees
and $981.85 in disbursements, for a total of $27,561.85.
THIS CONSITUTES THE DECISION AND ORDER OF THE COURT.