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McDermott v. Great American Alliance Insurance Co.

July 18, 2006

WILLIAM H. MCDERMOTT, PLAINTIFF,
v.
GREAT AMERICAN ALLIANCE INSURANCE CO., DEFENDANT.



The opinion of the court was delivered by: David E. Peebles U.S. Magistrate Judge

DECISION AND ORDER

This is an action brought by plaintiff William H. McDermott seeking reimbursement for losses claimed by McDermott to be covered by a policy issued by defendant Great American Alliance Insurance Co. ("GAA"). The parties have requested the court's assistance in the action, which has tentatively been settled, in order to permit implementation of their agreement. The dispute currently before me centers upon the assertion by plaintiff's counsel of a statutory charging lien upon the proceeds to be paid to his client under the terms of the settlement.

Having reviewed the matter carefully and, with their agreement, having determined that the exercise of ancillary jurisdiction to address the parties' fee dispute is appropriate, I find that plaintiff's counsel is entitled to a charging lien in the amount of $9,800.44, to be impressed as against the settlement proceeds.

I. BACKGROUND

This action, commenced by McDermott in New York State Supreme Court but subsequently removed by GAA to this court on May 2, 2002, was initiated to recover for losses incurred in connection with a fire on August 11, 2001 which heavily damaged property owned by McDermott, and rented to and occupied by a chapter of the Pi Kappa Phi fraternity. In his complaint plaintiff asserts his entitlement to reimbursement for those losses based upon the issuance by GAA, through an authorized agent, of a policy insuring the premises and its contents.*fn1 Plaintiff's complaint sought recovery of $792,641.11, representing unpaid claims for building damage, loss of contents, lost income, and debris removal, subject to adjustment for an applicable deductible, and to reflect a partial payment made under the policy.

After a period of pretrial discovery, GAA moved for summary judgment seeking a court determination of the applicable policy limits governing the plaintiff's claim. Dkt. No. 19. That motion resulted in the issuance on September 30, 2005 by now-Chief District Judge Norman A. Mordue of a decision and order affixing the limits of the policy. Dkt. No. 31. The matter was thereafter set down for trial, and ultimately was to have been heard by me on consent of the parties pursuant to 28 U.S.C. § 636(c). See Dkt. No. 50.

Shortly before the trial was to have commenced, the parties advised the court that they had entered into a settlement resolving the remaining issues in the case. See Dkt. Entry dated 5/4/06. The parties later reported, however, that a controversy had arisen regarding the settlement, and in particular the payment to be made by GAA pursuant to its terms. At the center of the dispute is a claim by plaintiff's attorney to entitlement to earned but unpaid fees and incurred disbursements totaling $9,765.09 and the contemplated issuance by defendant of a proceeds check made payable jointly to McDermott and his counsel. See Text Entry dated 6/23/06.

During a telephone conference conducted by the court and involving, as participants, both attorneys of record as well as the plaintiff, it was reported that McDermott objected to having his attorney listed as a joint payee on the settlement check, and additionally disputed the remaining balance claimed by his counsel to be owing. I therefore ordered briefing of the issue and, with consent of the parties, agreed to exercise the court's ancillary jurisdiction and decide the outstanding fee dispute.*fn2 Plaintiff and his counsel have both submitted briefing to the court regarding the issue, which is now ripe for determination.*fn3

II. DISCUSSION

A. Jurisdiction

Before turning to the merits of the dispute now before me, I must first determine whether the court has jurisdiction to entertain the parties' joint request for its resolution.

It is well-established that as the forum in which this action is pending this court, in its discretion, may exercise ancillary jurisdiction to hear and resolve a fee dispute which relates directly to the action. Joseph Brenner Assocs., Inc. v. Starmaker Entertainment, Inc.,82 F.3d 55, 58 (2d Cir. 1996) (citations omitted); Casper v. Lew Lieberbaum & Co., Inc.,No. 97CIV.3016, 1999 WL 335334, at *8 (S.D.N.Y. May 26, 1999) (citing, inter alia, Misek-Falkoff v. International Bus. Machs. Corp.,829 F. Supp. 660, 663 (S.D.N.Y. 1993)). The exercise of ancillary jurisdiction to address matters incidental to a case or controversy before it is, in part, the product of a need for a court "to function successfully, that is, to manage its proceedings, vindicate its authority, and effectuate its decrees[.]" Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 379-80, 114 S.Ct. 1673, 1676 (1994); see Garcia v. Teitler, 443 F.3d 202, 208 (2d Cir. 2006) ("At its heart, ancillary jurisdiction is aimed at enabling a court to administer 'justice within the scope of its jurisdiction.'") (citing and quoting Morrow v. District of Columbia,417 F.2d 728, 737 (D.C. Cir. 1969)). The exercise of this inherent power is particularly appropriate in a case such as this, where resolution of the fee parties' dispute impacts upon distribution of settlement proceedings. Grimes v. Chrysler Motors Corp., 565 F.2d 841, 843-44 (2d Cir. 1977).

In this instance, particularly in view of the court's familiarity with the case and the steps taken by plaintiff's counsel to pursue his client's claims, I find that my discretion should be exercised in favor of finding ...


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