UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
August 6, 2008
ASHLEY MATEO, ET AL., PLAINTIFFS,
UNITED STATES OF AMERICA, DEFENDANT.
The opinion of the court was delivered by: Kevin Nathaniel Fox, United States Magistrate Judge
MEMORANDUM AND ORDER
Ashley Mateo ("Mateo"), an infant, and her mother and natural guardian, Albairis Gonzales ("Gonzales"), commenced this action on April 4, 2006, alleging negligence in the provision of professional medical services, against the United States of America, pursuant to the Federal Tort Claims Act ("FTCA"). See 28 U.S.C. § 2678. The parties have negotiated a disposition, through which Mateo's claims would be compromised and settled, and Gonzales would forgo prosecuting the claim she asserted individually. The parties seek the Court's approval of the terms and conditions under which Mateo's claims will be resolved, as well as an order awarding costs and reasonable attorneys' fees to counsel to the plaintiffs.
The instant claims arose from the alleged negligence of medical personnel who, in April 2004, rendered prenatal and obstetric care to the plaintiffs at the Bronx-Lebanon Hospital Center, a federally assisted health-care facility. According to the plaintiffs, while being delivered, Mateo suffered trauma to her right arm and shoulder, which led to nerve damage at Mateo's brachial plexus, resulting in a disabled right arm, due to a neurological condition known as "Erb's palsy."
Gonzales submitted an affidavit to the Court dated March 21, 2008, in which she declared: "There are no open medical bills due and owing and I have not been notified of or been served with any notice of any [Medicaid] liens." She also estimated that the costs for: (a) services rendered to the plaintiffs at Bronx-Lebanon Hospital Center totaled $2,686.00; (b) services rendered subsequent to Mateo's birth at Montefiore Hospital totaled $3,500.00; and (c) physical therapy services and related treatment for Mateo were, in the aggregate, $30,000.00, resulting in a combined estimated total for health-care costs of $36,186.00. According to Gonzales, these costs "have [ ] been paid by Medicaid." Gonzales' March 21, 2008 affidavit did not identify the treating, attending and consulting physician(s), nor did it specify the charges incurred by any identified health-care provider(s) for particularized services rendered.
Gonzales' March 21, 2008 affidavit had numerous medical records attached as exhibits. They detailed treatment received by Gonzales and Mateo in or about 2004, as well as narrative medical reports regarding pediatric neurological examinations of Mateo and related diagnostic and prognostic opinions. The record before the Court shows that Leon I. Charash, M.D., examined Mateo on August 5, 2005, and June 6, 2006; while In-grid P. Taff, M.D., examined her on November 15, 2006, on behalf of the defendant. Medical bills related to these examinations were not submitted to the Court, and no charges associated with these examinations were identified for the Court.
Thomas P. Markovits ("Markovits"), an attorney for the plaintiffs, submitted an affirmation to the Court, dated March 20, 2008, in support of the parties' proposed settlement. It failed to provide the names of the plaintiffs' treating, attending and consulting physicians. Included in Markovits' affirmation is a recitation of the same medical costs identified in Gonzales' March 21, 2008 affidavit. However, no corroborating medical insurance billing records accompanied Markovits' affirmation and none has been included in any other submission made by the plaintiffs to the Court.
The parties participated in three settlement conferences, between September 2007 and January 2008, conducted by the Honorable Henry B. Pitman. Based on the discussions had during those conferences, the parties agreed that: (i) the defendant would pay Mateo $600,000.00 to resolve her claims; (ii) the money received by Mateo would be deposited with various financial institutions, for her benefit; and (iii) Gonzales would relinquish the claim she made against the defendant. Thereafter, the parties submitted a proposed stipulation of settlement and dismissal to the Court for its review and approval. The parties' proposed stipulation provided, inter alia, that "attorneys' fees pursuant to the [FTCA] . . . inclusive of $24,524.00 in costs and disbursements," should be paid to the plaintiffs' counsel via a "check in the amount of $168,393.00."
No allocation of funds for discrete categories of damages was made in the parties' proposed stipulation of settlement and dismissal. According to the parties' stipulation, the $600,000.00 to be paid to Mateo are in "full settlement of any and all claims for personal injury, or any other damages that [p]laintiffs now have or may hereafter acquire against the [defendant] . . . on account of the alleged events, circumstances, or incidents giving rise to the Action herein." In accordance with Local Civil Rule 83.2 of this court and relevant state law, a hearing was held concerning the proposed stipulation and Gonzales' understanding of the terms and conditions under which Mateo's claims will be compromised.
Infant Compromise Hearing and Determination
In this judicial district a proposed settlement involving a claim made by an infant (or incompetent) must be reviewed by a judicial officer, who must determine whether: (1) the best interests of the infant (or incompetent) are protected by the terms and conditions of the proposed settlement; and (2) the proposed settlement, including any legal fees and expenses to be paid as part of the proposal are fair and reasonable. See Local Civ. R. 83.2(a); New York Judiciary Law ("NY Jud. Law") § 474; New York Civil Practice Law and Rules ("CPLR") §§ 1205-08. Specifically, a court must evaluate whether the proposed settlement is "'fair, reasonable and adequate' by comparing 'the terms of the compromise with the likely rewards of litigation.'" Neilson v. Colgate-Palmolive Co., 199 F.3d 642, 654 (2d Cir. 1999) (citation omitted). In doing so, a court must "form an educated estimate of the complexity, expense, and likely duration of such litigation . . . and all other factors relevant to a full and fair assessment of the wisdom of the proposed compromise." See Newman v. Stein, 464 F.2d 689, 692 (2d Cir. 1972), cert. denied, 409 U.S. 1039, 93 S.Ct. 521 (1972).
In support of the proposed settlement terms and conditions, the plaintiffs submitted an affidavit by Gonzales in her capacity as the infant's representative and an affirmation by an attorney for the plaintiffs. Applicable CPLR provisions require that several documents be submitted to a court prior to an infant compromise hearing. They include: (i) an affidavit of the infant's representative; (ii) an affidavit of the attorney representing the infant; and, when the proposed settlement contemplates personal injury claims, as in the case at bar, (iii) medical or hospital reports. See CPLR §1208(a)-(c).
As noted above, Gonzales and Markovits submitted an affidavit and affirmation, respectively. However, the plaintiffs neither submitted an affidavit, nor adduced any other evidence, to establish the precise amount(s) that health-care providers charged for medical services rendered to them. The plaintiffs also failed to submit competent evidence of the amounts paid subsequently by Medicaid for those services. See New York Uniform Civil Rules for the Supreme Court and the County Court § 202.67(b).*fn1 The failure to provide such detailed information to the Court may later result in uncertainty should Medicaid seek to recover, from the settlement proceeds, funds it paid for Mateo's medical bills, irrespective of the fact that, as of the date of the hearing, no lien notice had been served on the plaintiffs. See, generally, Arkansas Dept. of Health and Human Servs. v. Ahlborn, 547 U.S. 268, 269, 126 S.Ct. 1752, 1754 (2006) (medical costs paid by Medicaid may be recovered from the portion of a settlement intended to compensate for the costs of past medical treatment); see also Lugo v. Beth Israel Med. Ctr., 13 Misc.3d 681, 682-85, 819 N.Y.S.2d 892, 893-95 (Sup. Ct., N.Y. Cty. 2006) (application of Ahlborn within the context of an infant compromise in New York). While no mention was made within the parties' proposed stipulation of settlement and dismissal about allocating the settlement proceeds for, inter alia, medical costs incurred, the Court must remain mindful of this issue as it evaluates the fairness of the proposed settlement.
At the infant compromise hearing, and in the supporting papers described above, the parties contemplated a gross payment of $600,000.00 ("Settlement Amount"), to be distributed as follows: 1) $431,607.00*fn2 to the plaintiffs; 2) $143,689.00*fn3 to the law firm of Mirman, Markovits & Landau, P.C., for legal services rendered to the plaintiffs; and 3) $24,524.00*fn4 to the plaintiffs' counsel for taxable costs.
In April 2008, counsel to the plaintiffs submitted a proposed order to the Court, in which the categories of fees and costs were consolidated into one figure: $168,393.00, that was denominated "compensation." According to correspondence signed by Markovits, accompanying the proposed order, this designation "more accurately reflects the manner of payment by the government to the plaintiffs. . . ." The defendant took no position before the Court, with respect either to the above designation or the proposed distribution of the Settlement Amount.
The United States Supreme Court has stated that "[t]he party seeking an award of fees should submit evidence supporting the hours worked and rates claimed." Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 1939 (1983). During the infant compromise hearing, the Court reminded the plaintiffs' counsel in attendance, Ronald Landau ("Landau"), that when an order awarding legal fees is sought in this judicial circuit, contemporaneous time records must be provided to the Court in support of such an application, see New York State Ass'n for Retarded Children v. Carey, 711 F.2d 1136, 1147-48 (2d Cir. 1993), and, further, in the instant case, no such records had been provided to the Court. The Court also reminded counsel to the plaintiffs that, pursuant to FTCA, in an action such as this, legal fees are capped statutorily at one-fourth (25%) of the settlement proceeds (net of allowed taxable costs).
The Court noted that without contemporaneous time records, generated by counsel to the plaintiffs, no accurate determination could be made on the appropriateness of the amount of time expended by counsel on particular litigation tasks, and the Court would be unable to evaluate properly whether the settlement proposed is reasonable and serves Mateo's best interests. At that juncture in the proceeding, counsel to the plaintiffs advised the Court orally of various litigation tasks he maintained had been performed by his law firm, such as: (1) investigating the facts pertinent to Mateo's claim(s); (2) drafting pleadings; (3) evaluating medical records; and (4) attending three settlement conferences. Landau also suggested that no contemporaneous time records of the legal services rendered to the plaintiffs exist, owing to the fee arrangements personal injury law firms typically make with their clients.*fn5 To date, no contemporaneous time records have been provided to the Court, although the Court gave counsel at least four opportunities to do so.
An attorney for an infant plaintiff must establish that a proposed settlement for the infant is fair and reasonable, and that includes, necessarily, any proposed attorney compensation. See CPLR § 1208(b); NY Jud. Law § 474. "'[T]he burden is on counsel to keep and present records from which the court may determine the nature of the work done, the need for it, and the amount of time reasonably required; where adequate contemporaneous records have not been kept the court should not award the full amount requested.'" Monaghan v. SZS 33 Assocs., L.P., 154 F.R.D. 78, 83-84 (S.D.N.Y. 1994) (quoting F.H. Krear & Co. v. Nineteen Named Trs., 810 F.2d 1250, 1265 [2d Cir. 1987]). This is so even in a circumstance where, like here, the infant's mother has agreed to the amount requested for legal fees and costs, since such agreements when made by guardians are only advisory. It remains the fact that a court must determine and fix the amount of the attorney's fee. See Everett v. Bazilme, No. CV 06-0269, 2007 WL 1876591, at *3 (E.D.N.Y. June 28, 2007).
Under New York law, an attorney who has represented an infant in compromising the infant's claim must set forth in writing, typically via an affidavit, the legal services that were rendered to the infant client. See NY Jud. Law § 474; CPLR § 1208(b). The Court must, after due inquiry as to all charges against the fund to be dispersed to the infant, "determine the value of the services of said attorney . . . and make an order determining the suitable compensation for the attorney for his services . . . ." NY Jud. Law § 474.
In order to determine whether a proposed attorney fee is reasonable, a court should evaluate "'what a reasonable paying client would be willing to pay' for the legal services, in other words, the appropriate market rate for counsel over the course of the number of hours appropriately worked." Moreno v. Empire City Subway Co., No. 05 Civ. 7768, 2008 WL 793605, at *2 (S.D.N.Y. Mar. 26, 2008) (citing Torres v. City of New York, No. 07 Civ. 3473, 2008 WL 419306, at *1 [S.D.N.Y. Feb. 14, 2008]) (quoting Arbor Hill Concerned Citizens Neighborhood Ass'n v. County of Albany, 493 F.3d 110, 112 [2d Cir.2007]). When records providing, at a minimum, detailed descriptions of the litigation-related tasks performed, the legal personnel involved, as well as the dates and hours worked are absent, the Court can neither assess the reasonableness of proposed attorney fees accurately, nor determine what a reasonable client might be willing to pay. See Cruz v. Local Union No. 3 of Int'l Bhd. of Electrical Workers, 34 F.3d 1148, 1160 (2d Cir. 1994) (citing DiFilippo v. Morizio, 759 F.2d 231, 235 [2d Cir.1985]).
While an attorney who represents a client on a contingency fee basis may not maintain contemporaneous time records, the absence of such records frustrates a court in its effort to evaluate the fairness and reasonableness of a proposed settlement, including legal fees, when an infant's claim is compromised. See Monaghan, supra. In such a circumstance, reducing the amount sought for attorneys' fees is appropriate. Id. Counsel to the plaintiffs requested that their "compensation" be set at the maximum allowable rate, 25%.*fn6 Counsel to the plaintiffs seek "compensation" in the amount of $168,393.00, which is one-fourth of the Settlement Amount, after subtracting $24,524.00, the proposed taxable costs.*fn7 Mateo, through her representative, entered into what is, on its face, a sliding-scale retainer arrangement.*fn8 That document, titled "Retainer Agreement," was submitted to the Court by Markovits, via facsimile, after the infant compromise hearing was concluded, to supplement the hearing record. In pertinent part, it states: ". . . in the case of a person under eighteen (18) years of age, the Court shall determine the attorneys fees."
Since no contemporaneous time records were provided to the Court by the plaintiffs' counsel, from which the Court may evaluate the reasonableness of the attorneys' fees sought, the proposed legal fee of $143,689.00 shall be reduced by 30% to $100,582.00. See Monaghan, 154 F.R.D. at 84. This sum shall be deducted from the Settlement Amount and paid to plaintiff's counsel.
Recovery of Taxable Costs
As discussed earlier, the Court issued three orders to prompt the plaintiffs to submit appropriate documentation supporting the proposed settlement and, thereafter, at the infant compromise hearing, provided the plaintiffs an opportunity to submit documentation, post-hearing, to supplement the hearing record. On April 17, 2008, Markovits submitted an affidavit to the Court which included a summary of the costs incurred by the plaintiffs in prosecuting this action. However, no invoices, receipts or other corroborating data, documenting the plaintiffs' costs, were provided.
The Court finds that the summary of costs submitted by Markovits is an insufficient basis upon which to rely in evaluating the reasonableness of the proposed taxable costs. Local Civil Rule 54.1, which explains how requests to tax costs are typically handled, requires that "[t]he bill of costs shall include an affidavit that the costs claimed are allowable by law, are correctly stated and were necessarily incurred. Bills for the claimed costs shall be attached as exhibits." Local Civ. R. 54.1(a). Markovits' April 17, 2008 affirmation did not include such a recitation. Additionally, the proposed items of costs cited in that affirmation are not among the categories of allowable "Items Taxable as Costs," identified in this court's Local Civil Rules. See Local Civ. R. 54.1(c). Where an attorney fails to provide suitable documentation to substantiate the costs incurred, a court may decline to award any costs. See Lide v. Abbott House, No. 05 Civ. 3790, 2008 WL 495304, at *2 (S.D.N.Y. Feb. 25, 2008). Accordingly, granting the request for an order that costs be recovered, in the circumstance of the case at bar, is inappropriate and, therefore, is denied.
Based on the record, as a whole, the Court finds that the Settlement Amount proposed by the parties, is fair, reasonable and in the best interests of Mateo. However, to address deficiencies in the plaintiffs' submissions, respecting attorneys' fees and costs, the Settlement Amount shall be reallocated, as described above: I) $100,582.00 to Mirman, Markovits & Landau, P.C., counsel to the plaintiffs, as suitable compensation for the legal services it provided to the plaintiffs on behalf of Mateo; and ii) $499,418.00 to Mateo as compensatory damages. The Court finds further that the determination to deposit the portion of the Settlement Amount for Mateo in interest-bearing accounts, at various financial institutions, is also fair, reasonable and in Mateo's best interests.
Therefore, IT IS HEREBY ORDERED that:
1) Mateo's parent and natural guardian, Gonzales, is authorized and empowered, in the interest of her infant child, Mateo, born on April 10, 2004, to settle and compromise Mateo's claims, as described and set forth in this litigation, and to waive the claim that she, Gonzales, brought as an individual, for a lump sum cash settlement payment to be held in trust, for the credit and benefit of Mateo, at an aggregate cost to the defendant in the sum of Six Hundred Thousand dollars exactly ($600,000.00), in full satisfaction of all claims for damages, attorneys' fees and interest;
2) the sum of One Hundred Thousand Five Hundred Eighty-Two dollars exactly ($100,582.00) is to be deducted from the Settlement Amount and paid by the defendant, via a check, to Mirman, Markovits & Landau, P.C., as reimbursement for attorneys' fees, in consideration of the discussion above regarding the absence, from the record, of any contemporaneous time records respecting the legal services rendered to the plaintiffs;
3) the sum of Four Hundred and Ninety-Nine Thousand Four Hundred Eighteen dollars exactly ($499,418.00) is to be paid by the defendant to Gonzales, on behalf of her infant child, Mateo, as compensatory damages. This payment shall be made to ALBAIRIS GONZALES, AS TRUSTEE FOR THE INFANT, ASHLEY MATEO;
4) the sum of Four Hundred and Ninety Nine Thousand Four Hundred Eighteen dollars exactly ($499,418.00), shall be paid by defendant to ALBAIRIS GONZALES, AS TRUSTEE FOR THE INFANT, ASHLEY MATEO, to the credit and benefit of Mateo, in five (5) concurrent payments, via checks, each of the equal sum of Ninety-Nine Thousand Eight Hundred Eighty-Three dollars and Sixty cents exactly ($99,883.60), made payable to ALBAIRIS GONZALES, AS TRUSTEE FOR THE INFANT, ASHLEY MATEO, jointly with a bank officer of each of the respective banks noted below, and subject to the further order of the Court, shall be deposited in five separate interest-bearing, federally insured savings accounts, each in the name of ALBAIRIS GONZALES, AS TRUSTEE FOR THE INFANT, ASHLEY MATEO, at the following banks: a) Apple Bank for Savings, 44 East 161st Street Bronx, New York 10451; b) Commerce Bank, 1864 Williamsbridge Road, Bronx, New York 10461; c) JP Morgan Chase Bank, 128 East Fordham Road, Bronx, New York 10468; d) Citibank, 234 East 198th Street Bronx, New York 10458; and e) Washington Mutual Bank, 257 East Fordham Road Bronx, New York 10468;
5) upon making all the payments directed above, in compliance with this order, the defendant shall then be discharged from any and all responsibility as to the causes of action set forth in this action;
6) upon presentment of proper proof of age to the depositories that Mateo has reached the age of eighteen (18) years, the said depositories shall, upon demand, pay all the monies in the accounts to Mateo;
7) beginning with the 2008 tax year, and continuing until Mateo reaches the age of eighteen (18) years, the JP Morgan Chase Bank branch located at 128 East Fordham Road, Bronx, New York 10468, shall pay over to Mateo's parent, ALBAIRIS GONZALES, AS TRUSTEE FOR THE INFANT, ASHLEY MATEO, upon presentment to said depository of the tax returns showing income tax due and owing by Mateo, to the federal, state, and/or local taxation authorities, sufficient sums to pay the tax due to such taxation authorities, and in addition a sum not to exceed One-Hundred dollars ($100.00) annually, for the preparation of tax returns without further order from the Court;
8) except as noted immediately above, there shall be no partial withdrawals of any of the deposited funds by ALBAIRIS GONZALES, AS TRUSTEE FOR THE INFANT, ASHLEY MATEO, prior to Mateo attaining the age of eighteen (18) years, without a further order from the Court; and
9) the Court retains jurisdiction of this action for enforcing this infant compromise order and for enforcing the terms of the underlying settlement agreement, and for entering this infant compromise order. The Clerk of the Court is directed to close this case.