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Rostolder v. Life Energy and Technology Holdings

September 20, 2006

MILDRED ROSTOLDER, D/B/A NORTH AMERICAN TRANSFER CO., PLAINTIFF,
v.
LIFE ENERGY AND TECHNOLOGY HOLDINGS, INC., NOW KNOWN AS GLOBAL ENVIRONMENTAL ENERGY CORP. (BAHAMAS) AND MEDICAL INDUSTRIES HOLDING, INC., DEFENDANTS.



The opinion of the court was delivered by: Gold, S., United States Magistrate Judge

MEMORANDUM & ORDER

Presently before the Court are plaintiff's two applications for attorneys' fees and costs, each made pursuant to an agreement between plaintiff Rostolder and Life Energy and Technology Holdings, Inc. ("LETH") to pay all of Rostolder's legal fees. Plaintiff seeks a total of $490,315.94 in legal fees and expenses, composed of $172,489.66 in fees and costs for the period covering July through December, 2004 (the "2004 period") and $317,826.28 in fees and costs for the period covering January, 2005 through March, 2006 (the "2005 - 2006 period"). Docket Entries 59, 112. For the reasons that follow, plaintiff's applications are granted in part and denied in part.

Background

Mildred Rostolder was LETH's stock transfer agent and possessor of certain LETH stock certificates at the time she filed her complaint in 2003. Compl. ¶¶ 6, 12. Rostolder brought an interpleader suit in response to adverse claims by LETH and Medical Industries Holding, Inc. ("MIH") concerning who was the rightful owner of a particular stock certificate for 750,000 shares of LETH. Compl. ¶ 4. In its answer, MIH filed a counterclaim against plaintiff, exposing Rostolder to joint and several liability totaling at least $2,000,000. Docket Entry 21.

The case began as a relatively simple contract dispute concerning stock ownership but ultimately developed into a complex conflict requiring legal analysis of corporate successorship. In January, 2005, I granted plaintiff's application for asset discovery of LETH's principal based on her concern that she would be held responsible if a large judgment were entered and LETH was financially unable to pay it. After plaintiff's discovery of LETH's assets, plaintiff filed an application for a Temporary Restraining Order against Global Environmental Energy Corporation, a Bahamian corporation, ("GEEC Bahamas"), arguing that LETH had reincorporated as GEEC Bahamas in order to avoid its creditors. After extensive litigation of the issue, I held that LETH has in fact been succeeded by Global Environmental Energy Corporation (Bahamas), GEEC Bahamas.*fn1 See Docket Entries 80, 84. Upon the substitution of GEEC Bahamas for LETH, GEEC Bahamas failed to appear through counsel as ordered. See Docket Entry 92. Accordingly, LETH's answer was stricken and a default judgment against GEEC Bahamas in favor of MIH was entered on June 23, 2005. Id.

LETH's Indemnification of Rostolder

At the time she filed her complaint, plaintiff, as an interpleader, had no financial interest in the outcome of this case but merely sought to avoid inconsistent judgments concerning the stock certificate. As noted above, however, plaintiff faced multi-million dollar liability jointly and severally with LETH after MIH filed its answer. Accordingly, Rostolder entered into a Stipulation and Order of Indemnity ("Stipulation and Order") with LETH dated November 20, 2003, and signed by the Court on December 2, 2003. Docket Entry 28. The Stipulation and Order provides, among other things, that LETH will pay all of Rostolder's legal fees and disbursements in this action, including fees associated with her defense of the counterclaims, through final judgment. Id. at ¶ 3.

Plaintiff recovered some prior fees from LETH and now seeks counsel's fees for the remainder of the litigation. Pursuant to a stipulation dated April 4, 2004, LETH "agree[d] to the immediate entry of judgment . . . in the sum of $87,034.56" for legal fees calculated through February, 2004. Docket Entry 31, ¶ 3. This sum was in addition to $50,000 in legal fees LETH paid Rostolder the prior month. Id. On September 27, 2004, I entered a consent judgment against LETH in the amount of $60,238.27 for fees from March through June, 2004.*fn2 Docket Entry 45.

The motions now before the court concern fees incurred after June, 2004. On January 20, 2005, plaintiff filed a motion for entry of an interlocutory judgment for legal fees covering the period from July through December, 2004. Docket Entry 59.*fn3 LETH's counsel at the time objected to plaintiff's application, arguing that the fees sought were excessive and unreasonable.

Docket Entry 62. On April 12, 2006, plaintiff filed a motion for default judgment seeking attorneys' fees for the period covering January, 2005 through March, 2006.*fn4 Docket Entry 112.

Discussion

The Stipulation and Order agreed to by Rostolder and LETH specifically provides for indemnification of attorneys' fees incurred by Rostolder in this action. Docket Entry 28. Nevertheless, a court should award only the amount of attorneys' fees that are reasonable, even where an agreement provides for indemnification. F.H. Krear & Co. v. Nineteen Named Trs., 810 F.2d 1250, 1263 (2d Cir. 1987); Toporoff Engineers, P.C. v. Fireman's Fund Ins. Co., 2006 WL 1539341, at *2 (S.D.N.Y. June 5, 2006); Am. Casualty Co. of Reading, Penn. v. Morgan-White Underwriters, Inc., 2003 WL 23374768, at *9 (S.D.N.Y. Sept. 30, 2003).

In the Second Circuit, courts use the lodestar method in determining a reasonable attorneys' fees award. McDonald v. Pension Plan of the NYSA-ILA Pension Trust Fund, 450 F.3d 91, 96 (2d Cir. 2006); Chambless v. Masters, Mates & Pilots Pension Plan, 885 F.2d 1053, 1058 (2d Cir. 1989). The lodestar calculation is the product of the hours reasonably expended multiplied by a reasonable hourly rate. Chambless, 885 F.2d at 1058. In addition, all requests for attorneys' fees in this Circuit must be accompanied by contemporaneous time recordsthat show "for each attorney, the date, the hours expended, and the nature of the work done." New York State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1148 (2d Cir. 1983).

A. Hourly Rates Charged by Plaintiff

During the 2004 period, three attorneys and one paralegal performed the majority of the legal services at issue. Plaintiff seeks reimbursement for these individuals at the following hourly rates: Kurland, an attorney with 35 years of litigation experience and co-chair of the firm's litigation department, $425; Cuddy, an attorney with 25 years of litigation experience, $325; Lackowitz, an attorney, $225; Emeric, a paralegal, $125.*fn5 Docket Entry 59, Ex. 2; Docket Entry 112, Cuddy Affidavit ¶¶ 28-29. In plaintiff's counsel's affidavit in support of the second application for fees, counsel states that Kurland's and Cuddy's rates "are reasonable and consistent with those rates charged for comparable services by attorneys with comparable experience in the New York Metropolitan area." Cuddy Affidavit, Docket Entry 112, ¶ 26. Plaintiff, however, offers no evidence of the current rates for comparable attorneys in this district other than counsel's own conclusory statement.

In determining a reasonable hourly rate, courts consider whether "the requested rates are in line with those prevailing in the community for similar service by lawyers of reasonably comparable skill, experience and reputation." Blum v. Stenson, 465 U.S. 886, 895 n.11, 104 S. Ct. 1541, 1547 (1984). The relevant community is the district in which the action is commenced. Arbor Hill Concerned Citizens Neighborhood Ass'n v. County of Albany, 369 F.3d 91, 97 (2d Cir. 2004). See also Reiter v. MTA New York City Transit Auth., 457 F.3d 224, 232 (2006). Courts in the Eastern District of New York have recognized the "unique circumstances of attorneys in New York City who practice in two federal jurisdictions [the Eastern and Southern Districts of New York] within the same city." New Leadership Comm. v. Davidson, 23 F. Supp. 2d 301, 305 (E.D.N.Y. 1998). See also Nicholson v. Williams, 2004 WL 4780498, at *10-12 (E.D.N.Y. Apr. 5, 2004); Tokyo Electron Ariz., Inc. v. Discreet Indus. Corp., 215 F.R.D. 60, 64 (E.D.N.Y. 2003). The Second Circuit, however, has cautioned that courts must find "exceptional circumstances" to justify deviating from the rule that the relevant community is the district in which the action lies. Arbor Hill, 369 F.3d at 97.

The rates sought by counsel are consistent, albeit at the high end of the spectrum, with those awarded for litigation in the Southern District of New York, where plaintiff's counsel's office is located. See, e.g., Ling v. Cantley & Sedacca, L.L.P., 2006 WL 290477, at *4 (S.D.N.Y. Feb. 8, 2006) (awarding an hourly rate of $450 for partners and a rate of $400 for senior associates with 13 years experience); Martinez v. Port Auth. of New York and New Jersey, 2005 WL 2143333, at *26 (S.D.N.Y. Sept. 2, 2005) (awarding an hourly rate of $325 to $400 for attorneys with 16 to 20 years experience respectively); Ashkinazi v. Sapir, 2005 WL 1123732, at * 3 (S.D.N.Y. May 10, 2005) (awarding an hourly rate of $425 for "an experienced litigator" with 26 years experience). Recent cases awarding fees in the Eastern District of New York, however, indicate that plaintiff's rates are unreasonably high for this district. See, e.g., Atlantic Recording Co. v. Elizabeth Records, Inc., 2006 WL 1027151, at *1-2 (E.D.N.Y. Apr. 14, 2006) (awarding rates of $250 for partners, $150 for associates, and $70 for paralegals); Comm'n Express Nat'l, Inc. v. Rikhy, 2006 WL 385323, at *6 (E.D.N.Y. Feb. 17, 2006) (awarding rates of $300 for partners, $200-250 for senior associates, and $75 for paralegals); Aiello v. Town of Brookhaven, 2005 WL 1397202, at *5-7 (E.D.N.Y. June 13, 2005) (awarding rates of $250-350 for partners and senior associates, $150 for junior associates, and $100 for paralegals); Tokyo Electron, 215 F.R.D. at 64 (awarding an hourly rate of $400 for an experienced senior partner, $280 for senior associates, $180 for junior associates, and $110-115 for paralegals). Indeed, the Court is not aware of any case in the Eastern District of New York awarding rates over $400 an hour. Moreover, plaintiff bears the burden of establishing that the requested rate is reasonable and in line with comparable attorneys of the same skill and experience in the relevant community. See Blum, 465 U.S. at 896 n.11, 104 S.Ct. 1547. Accordingly, the rates sought by plaintiff in this action are reduced as follows: Kurland -- $400, Cuddy -- $300, Lackowitz -- $150, and Emeric -- $100.*fn6 These rates are at the high end of the spectrum for the Eastern District, but they reflect the skill, quality, and experience of the attorneys, as well as the specialization required by the complications of this case. See Aiello, 2005 WL 1397202, at *7.

In addition to the individuals identified above, plaintiff's application for fees for the 2005 - 2006 period charged for work performed by individuals identified only by their initials -- "JB," "MW," "EH," "MJL," and "RSH." Plaintiff billed these individuals' work at hourly rates ranging from $350 to $430. Plaintiff has not proffered any information identifying these individuals or any justification for these high rates. Thus, the rate for these attorneys should be reduced to $150. See Aiello, 2005 WL 1397202, at *7 ...


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