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Carco Group, Inc. and Ponjeb V, L.L.C v. Drew Maconachy

December 1, 2011

CARCO GROUP, INC. AND PONJEB V, L.L.C., PLAINTIFFS,
v.
DREW MACONACHY, DEFENDANT.



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

MEMORANDUM AND ORDER

This action arose out of the breach of an employment agreement and asset purchase agreement between plaintiffs, Carco Group, Inc.("Carco") and Ponjeb V, L.L.C ("Ponjeb") (collectively "Carco" or "plaintiffs") and defendant Drew Maconachy ("Maconachy") concerning Carco's purchase of a private investigation firm of which Maconachy was a principal. On April 29, 2009, following a bench trial, the undersigned found in favor of plaintiffs on their breach of contract and faithless servant claims and entered judgment against Maconachy in the amount of $901,645 under Carco's breach of contract claims and $889,711 under Carco's breach of fiduciary duty claims, for a total award of $1,791,356, plus attorneys' fees, prejudgment interest and a declaratory judgment. By decision dated July 6, 2010, the Second Circuit affirmed the judgment as to the breach of contract and faithless servant claims, but vacated the judgment as to the breach of contract damages award and remanded the case solely to recalculate damages awarded, if any, under Carco's breach of contract claims. On remand, by Memorandum and Order dated July 19, 2011, the undersigned awarded Carco damages in the amount of $571,506.85 under its breach of contract claims, directed Carco to submit an affidavit(s) detailing its attorneys' fees and directed Maconachy to submit any objections to the calculation of attorneys' fees. Carco now requests an award of legal fees, costs, and disbursements in the amount of $4,048,324.24 as well as prejudgment interest on the award. Maconachy opposes the application in its entirety.

For the reasons set forth below, the court awards Carco attorneys' fees in the amount of $1,499,613.41 and costs in the amount of $327,044.76, for a total award of $1,826,658.17.

BACKGROUND

The factual background to this action is set forth in the undersigned's Opinion and Order, dated April 21, 2009, Carco Group, Inc. v. Maconachy, 644 F. Supp. 2d 218 (E.D.N.Y. 2009); the Second Circuit's July 10, 2010 Amended Summary Order, Carco Group, Inc. v. Maconachy, 383 Fed. Appx. 73 (2d Cir. 2010); and the undersigned's Memorandum and Order, dated July 19, 2011, familiarity with which is assumed. The Circuit did not disturb the factual findings in the underlying Opinion and Order dated April 21, 2009 and accordingly the court incorporates them in the within decision. See In re M/V DG Harmony, No. 98 Civ. 8394 (DC), 2009 WL 3170301, at *1 (S.D.N.Y. Sept. 30, 2009).

The procedural history with respect to the application is as follows. On April 21, 2009, the court found in favor of Carco on its breach of fiduciary duties and breach of contract claims and awarded damages. In addition, the court determined that Carco was entitled to an award of attorneys' fees and costs under the terms of the asset purchase agreement and directed Carco to submit an affidavit detailing its attorneys' fees no later than May 5, 2009. Carco timely submitted the requisite proof in support of its fee award. On May 6, 2009, the court stayed further briefing on the issue of attorneys' fees until resolution of Maconachy's anticipated appeal to the United States Court of Appeals for the Second Circuit. Following Maconachy's appeal, on July 2, 2010, the Second Circuit affirmed this court's findings against Maconachy on liability and remanded for a recalculation of damages on the breach of contract claims. On July 19, 2011, the court awarded Carco damages on the breach of contract claims and directed Carco to submit an affidavit(s) detailing its attorneys' fees no later than August 3, 2011. Carco timely submitted the requisite proof in support of its fee award.*fn1 Maconachy sought a stay of further briefing on the issue of attorneys' fees pending his anticipated appeal to the Second Circuit, or in the alternative an extension of time to oppose plaintiffs' fee application. By Order dated August 15, 2011, the court denied the motion for a stay and directed Maconachy to file his objections to plaintiffs' motion for attorneys' fees on or before September 19, 2011. Maconachy timely filed his objections to Carco's fee application.

DISCUSSION

Carco seeks reimbursement of legal fees, costs and disbursements in the amount of $4,048,324.24 plus pre-judgment interest on its legal fees, costs and disbursements in the amount of $1,150,565.83 for a total amount of $5,198,890.07.*fn2 Maconachy opposes the application asserting that Carco is not entitled to any attorneys' fees and, in the alternative, plaintiffs' fee requests must be severely discounted for its lack of success and failure to comply with proper billing and fee petition standards.

(A) Attorneys' Fees

Under New York*fn3 law, "when a contract provides for attorneys' fees, the court must order the losing party to pay the amount actually incurred, so long as those amounts are reasonable." Chinatrust Bank (U.S.A.) v. Pinter, No. 04-CV-5331 (SLT)(KAM), 2008 WL 2987152, at *2 (E.D.N.Y. July 31, 2008). "Thus, in addressing a contractual claim for attorneys' fees a court must determine what constitutes a reasonable amount of fees." (internal quotation marks and citation omitted). Courts in this Circuit employ a "presumptively reasonable fee" standard to determine the amount to award as attorneys' fees, Arbor Hill Concerned Citizens Neighborhood Ass'n v. County of Albany, 522 F.3d 182,184 (2d Cir. 2008), which "boils down to what a reasonable, paying client would be willing to pay, given that such a party wishes to spend the minimum necessary to litigate the case effectively," Simmons v. New York City Transit Auth., 575 F.3d 170, 174 (2d Cir. 2009) (internal quotation marks omitted). In "asking what a reasonable, paying client would do, a district court best approximates the workings of today's market for legal services." Arbor Hill, 522 F.3d at 192; see McDaniel v. County of Schenectady, 595 F.3d 411, 420 (2d Cir. 2010) (a presumptively reasonable fee represents an approximation of "what a competitive market would bear"). In order to reach the presumptively reasonable fee, the court assesses "case-specific considerations at the outset, factoring them into its determination of a reasonable hourly rate for the attorneys' work," which is then multiplied by a reasonable number of hours expended by counsel. McDaniel, 595 F.3d at 420. Case-specific considerations include, among others, the factors set forth in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974)*fn4 . See Arbor Hill, 522 F.3d at 192. In considering these case-specific factors, the court approximates the market rates "prevailing in the community for similar services of lawyers of reasonably comparable skill, experience, and reputation." Cruz v. Local Union No. 3 of IBEW, 34 F.3d 1148, 1159 (2d Cir. 1994) (internal quotation marks and citation omitted); see 1st Bridge, LLC v. 682 Jamaica Avenue, LLC, No. 08-CV-3401 (NGG) (MDG), 2010 WL 4608326, at *5 (E.D.N.Y. July 13, 2010). In the context of a contractual claim, "[i]t is appropriate for a court to consider the amount of fees requested in relation to the amount of damages at stake in the litigation," unless "the benefits of the litigation reached far beyond the amount sought in the immediate suit, such as in cases where there are transcending principles involved." Regan v. Conway, 768 F. Supp. 2d 412, 417-19 (E.D.N.Y. Mar. 14, 2011) (internal quotation marks and citations omitted). That being said, however, "[a]n appropriate award of attorneys' fees is not a science, of course, and is not susceptible to exacting precision." Concrete Flotation Sys., Inc. v. Tadco Const. Corp, No. 07-CV-319 (ARR)(VVP), 2010 WL 2539771, at *8 (E.D.N.Y. Mar. 15, 2010). "Judges should use their experience with the case, as well their experience with the practice of law, to assess the reasonableness of the hours spent and rates charged in a given case." Fox Indus., Inc. v. Gurovich, No. CV 03-5166 (TCP) (WDW), 2005 WL 2305002, at *2 (E.D.N.Y. Sept. 21, 2005) (internal quotation marks and citation omitted).

(1) Hourly Rates

The "presumptively reasonable fee" standard uses the hourly rates employed in the district in which the reviewing court sits, unless the party seeking fees "persuasively establish[es] that a reasonable client would have selected out-of-district counsel because doing so would likely (not just possibly) produce a substantially better net result." Simmons v. New York City Transit Auth., 575 F.3d 170, 174-75 (2d Cir. 2009) (internal quotation omitted). Moreover, the fee application must be determined using current rates. The Supreme Court held in Missouri v. Jenkins, 491 U.S. 274 (1989), that "[a]n adjustment for delay in payment is . . . an appropriate factor in the determination of what constitutes a reasonable attorney's fee," because "compensation received several years after the services were rendered -- as it frequently is in complex civil rights litigation -- is not equivalent to the same dollar amount received reasonably promptly as the legal services are preformed." Id. at 283-84. Citing to the language above, the Second Circuit held that to "adjust[] for delay," the "rates used by the court should be 'current rather than historic hourly rates.'" Lochren v. County of Suffolk, 344 Fed. Appx. 706 (2d Cir. Sept. 3, 2009). In recent years, courts in this district have approved hourly fee rates in the range of $200 to $450 for partners, $100 to $300 for associates and $70 to $100 for paralegal assistants. See Szczepanek v. Dabek, No. 10 CV 2459 (SJF)(ARL), 2011 WL 846193, at *8 (E.D.N.Y. Mar. 7, 2011) (surveying cases and stating recent prevailing hourly rates in the Eastern District are between $200 and $400 for partners, $100 and $295 for associates, and $70 and $80 for legal assistants); Pennacchio v. Powers, No. 05 CV 985 (RRM)(RML), 2011 WL 2945825, at *1 (E.D.N.Y. July 21, 2011) (same); Toussi v. County of Suffolk, No. CV 01-6716 (JS)(ARL), 2011 WL 2173870, at *2 (E.D.N.Y. May 31, 2011) (awarding $450 for partner with 34 years of experience, $400 for partner with 17 years of experience, $350 for attorney with 14 years of experience, and $300 for attorney with 6 years of experience); Thorsen v. County of Nassau, No. CV 03-1022 (ARL), 2011 WL 1004862, at *6-7 (E.D.N.Y. Mar. 17, 2011); see also Pita v. Tulcingo Car Service, Inc., No. 10-CV-0481 (DLI) (JO), 2011 WL 1790833, at *9 (E.D.N.Y. Apr. 7, 2011) (reviewing cases and observing fee awards in this district in recent years have approved hourly rates of $200 to $400 for partners and $100 to $295 for associates). As the instant case did not pose a particularly novel or complex question of law warranting a heightened hourly fee award, but involved a straight forward breach of an asset purchase agreement and an accompanying employment agreement wherein the seller continued on as an employee of the purchaser, the court is guided by the prevailing hourly rates set forth in these decisions.

Carco seeks an award of fees from (a) Paul, Hastings, Janofsky & Walker LLP ("Paul Hastings"); (b) Edward F. Cunningham, Esq.; (c) Carter Ledyard & Milburn, LLP ("Carter Ledyard"); (d) Farrell Fritz, P.C. ("Farrell Fritz"); (e) DOAR Litigation Consulting, (f) Tina Coles , and (g) MSG Accountants, Consultants and Business Valuators. Each fee request will be addressed in turn.

(a) Paul, Hastings, Janofsky & Walker LLP

Carco seeks an award of fees of $206,927.99 for Samuel D. Rosen and George L. Graff of Paul Hastings, each billing at an hourly rate of $575 to $590. The fees were incurred in 2001 and 2002, three to four years prior to the commencement of this lawsuit. Carco cites no cases in support of the request, see Cruz, 34 F.3d at 1160 (burden is on the moving party to show the requested fees are reasonable), states that it attempted to contact Mr. Rosen for preparation of an affidavit in connection with this application but was unable to determine his current whereabouts, and asserts that the proposed rates of the firm Paul Hastings for legal services provided to plaintiffs in connection with Maconachy's performance issues prior to the commencement of the within action are reasonable. (Tannenbaum Decl., filed May 5, 2009, ¶¶ 5-11.) The invoice entries for Paul Hastings, however, are vague, do not sufficiently describe the nature of the task performed, and fail to indicate how any of the fees generated relate to the success of plaintiffs in the instant action. Accordingly, finding the activities performed in 2001 and 2002 to be too remote in time from the date on which this action was commenced to be included in the award for attorneys' fees, Carco's application for an award of fees (and/or costs) for services rendered by Paul Hastings is denied. Cf. National Ass'n for Specialty Food Trade, Inc. v. Construct Data Verlag AG, No. 04 Civ. 2983 (DLC)(KNF), 2006 WL 5804603, at *5 (S.D.N.Y. Dec. 11, 2006).

(b) Edward F. Cunningham, Esq.

Carco seeks an award of fees of $225,101.46 for Edward F. Cunningham, billing at an hourly rate of $100. Mr. Cunningham was admitted to practice law in the State of New York in 1978, was a former Supervisory Special Agent for the Federal Bureau of Investigation, and has been in private practice since 1993. (Cunningham Decl., filed August 3, 2011, ¶¶ 1-12; Cunningham Decl., filed May 5, 2009, ¶¶ 1-7.) The court finds the hourly fee sought to be reasonable and awards an hourly fee of $100 for Mr. Cunningham.

(c) Carter Ledyard & Milburn, LLP

Carco seeks an award of fees for the services of Carter Ledyard, former counsel of record for plaintiffs, based on the hourly rate of $515 to $535 for partner Gary D. Sesser. Although Carter Ledyard is a Manhattan-based firm, Carco has failed to show why out-of-district counsel would have produced a substantially better result. Moreover, although Gary D. Sesser has submitted a declaration and states that he was a partner at the firm, (Sesser Decl., filed May 5, 2009, ¶¶ 1-8), Carco has provided no information concerning the his professional background, expertise or experience to justify the rates it seeks. See, e.g., Artemide Inc. v. Spero Elec. Corp., No. CV 09-1110 (DRH)(ARL), 2010 WL 5452075, at *4 (E.D.N.Y.Nov. 23, 2010) (where plaintiffs failed to provide any biographical information concerning attorney except for one sentence stating attorney is shareholder in firm and primary attorney in the case, court reduced attorney's requested rate); Protection One Alarm Monitoring, Inc. v. Executive Prot. One Sec. Serv., LLC, 553 F. Supp. 2d 201, 209 (E.D.N.Y. 2008) ("Where the moving party fails to provide information on the attorneys' and paralegals' backgrounds and experience, courts have used their discretion to award fees at a rate lower than requested"). In short, Carco has failed to provide sufficient information to show that its requested hourly rate for Mr. Sesser, constitutes the rate a reasonable client would be willing to pay in a competitive market under all of the relevant circumstances. In the absence of sufficient background information, the court looks for guidance to similar cases in this district. For actions in this district involving contractual matters, attorneys' fees have been approved in the range of $200 to $250 for partners. See Bank of America v. Viders, No. CV 10-0025 (DRH)(ARL), 2011 WL 4527419, at *3 (E.D.N.Y. July 26, 2011); see BH99 Realty, LLC v. Qian Wen Li, No. 10-CV-0693 (FB) (JO), 2011 WL 1841530, at *6 (E.D.N.Y. Mar. 16, 2011) (reducing claimed hourly rates to $250 for partner). Based on this precedent as well as the prevailing hourly rates in this district in other contexts the court awards an hourly rate of $250 for partner Gary D. Sesser.

Carco also seeks an award of fees for the services of Carter Ledyard based on the following hourly rates: (i) $475 for Judith A. Lockhart; (ii) $300 to $350 for Kenneth S. Levine; (iii) $260 for Michele Abraham; (iv) $160 for Anthony Malaspina; (v) $185 for Dennis J. Murphy; (vi) $575 for James E. Abbott; (vii) $425 for Richard Horne; (viii) $190 for Joseph E. Mulvihill and Laura A. Reeds; (ix) $575 for Lawrence F. Carnevale; and (x) $600 for John J. Walsh. It is impossible to determine whether these rates are reasonable when Carco has not provided any information concerning these individuals' positions at Carter Ledyard, their professional backgrounds, expertise, or experience. Given the deficiencies in the application and the lack of a declaration or affidavit concerning these individuals, the court, in its discretion, declines to award attorneys' fees for these individuals. See Lochren v. County of Suffolk, No. CV 01-3925 (ARL), 2010 WL 1207418, at *3 (E.D.N.Y. Mar. 23, ...


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