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L.I. Head Start Child Development Services, Inc., Paul v. Economic Opportunity Commission of Nassau County

April 24, 2012

L.I. HEAD START CHILD DEVELOPMENT SERVICES, INC., PAUL ADAMS, DERIVATIVELYON BEHALF OF COMMUNITY ACTION AGENCIES INSURANCE GROUP AND AS CLASS REPRESENTATIVE OF ALL OTHER PERSONS SIMILARLY SITUATED, PLAINTIFFS,
v.
ECONOMIC OPPORTUNITY COMMISSION OF NASSAU COUNTY, INC., ECONOMIC OPPORTUNITY COUNCIL OF SUFFOLK, INC., YONKERS COMMUNITY ACTION PROGRAM, INC., AND STELLA B. KEARSE AS REPRESENTATIVE OF THE ESTATE OF JOHN L. KEARSE, DECEASED. DEFENDANTS.



The opinion of the court was delivered by: Spatt, District Judge.

MEMORANDUM OF DECISION AND ORDER

In a prior decision in this case, L.I. Head Start Child Development Services, Inc. v. Economic Opportunity Commission of Nassau County, Inc., et al., 634 F. Supp. 2d 290 (E.D.N.Y. 2009), the Court determined that defendants Economic Opportunity Commission of Nassau County, Inc. ("EOC Nassau"), Economic Opportunity Council of Suffolk County, Inc. ("EOC Suffolk"), Yonkers Community Action Program, Inc. ("Yonkers CAP") (collectively the "agencies"), and John L Kearse ("Kearse") violated their fiduciary duties under the provisions of the Employee Retirement Income Security Act ("ERISA") by failing to make and ensure the necessary contributions to adequately fund the Community Action Agencies Insurance Group ("CAAIG") welfare plan ("Plan"). The CAAIG is essentially a health insurance plan for employees of anti-poverty agencies.

Following this liability determination, the Court directed the parties to appear for a damages hearing. In another decision dated and filed on October 20, 2011, the Court rendered a decision as to the damages awarded to the plaintiffs. In that decision, the Court directed the parties to respond in writing "As to the issues of prevailing party reasonable attorneys fees."

The attorneys for the parties did respond to the issue of the "prevailing party's reasonable attorney fees."This decision is now rendered on that issue.

I. The Parties Contentions

A. As to the Plaintiffs

In his initial "Memorandum of Law", the plaintiffs' counsel proposed a billing rate of $400 per hour for his services. Alexander A. Miuccio, Esq. ("Miuccio"), who has been plaintiffs' counsel throughout this long and complicated litigation, has expertise in ERISA matters and more than 50 years of experience as a lawyer, mostly in the area of labor and employment law. Miuccio reviewed his lengthy efforts in this extended litigation, including "twenty-one trial sessions over a period of nineteen years."

According to Miuccio, "Recent case law establishes that rates of $400 per hour for partners are considered reasonable in the Eastern District". (Pltfs' Memorandum at 3). In addition, Miuccio states that during the course of this protracted litigation, eight associate attorneys and six paralegals/law clerks rendered legal services to the plaintiffs. The proposed hourly rates for the associates range from $165 per hour to $320 per hour. The proposed hourly rates for the paralegal/law clerks range from $35 per hour to $95 per hour.

Miuccio also contends that his services conform to the Johnson factors as set forth in the seminal case of Arbor Hill Concerned Citizens Neighborhood Ass'n v. County of Albany, 522 F.3d 182 (2d Cir. 2008), citing to Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974). In this regard, Miuccio reviewed the Johnson factors, and contends that his services were in accord with each one of the factors, and that "applying the Johnson factors, plaintiffs should be awarded the fees requested." (Pltfs' Memorandum at 9).

In addition, Miuccio contends that he should be fully compensated even though the plaintiffs were unsuccessful on some of their claims. He bases this contention on the ground that the plaintiffs have now achieved the full benefit of what they sought in bringing this lawsuit; namely the plaintiffs have obtained monetary relief in a damages award of $832,945, which actually exceeded the relief sought by the plaintiffs in their complaint. Therefore, says Miuccio, "as the plaintiffs have achieved the maximum degree of success in this lawsuit, their counsel should recover a fully compensated fee, which encompasses all hours reasonably expended in the litigation, including the hours spend on unsuccessful claims." (Pltfs' Memorandum at 11).

Here, according to Miuccio it is evident that the plaintiffs showed a high degree of success on their two victorious claims; namely, the recovery achieved will cover the amount sought in the complaint. Miuccio concludes by saying that, "where a case results in an overall success for plaintiffs, their counsel is entitled to substantial, if not full, compensation for time spent on both successful and unsuccessful issues." (Pltfs' Memorandum at 12).

B. As to the Defendants

Initially, the defendants contend that the plaintiffs are not entitled to an award of attorney's fees. To start with, say the defendants, "the award of attorney's fees is discretionary." (Dfts' Joint Memorandum at 3). The relevant statute provides: "In any action under this sub-chapter . . . by a participant beneficiary or fiduciary the Court in its discretion may allow a reasonable attorney fee and costs of action to either party". (Emphasis added). 29 U.S.C. § 1132 (g)(1). The defendants contend that the plaintiffs do not qualify as "participants, beneficiaries or fiduciaries" and are therefore not entitled to an award of attorneys fees.

The defendants also take issue with the Court's decision of October 20, 2011, in which the Court held that the Supreme Court in Hardt v. Reliance Standard Life Insurance Co., ___ U.S. ___, 130 S.Ct. 2149, 176 L.Ed 2d 998 (2010) overruled the five factor test set forth in Chambless v. Masters, Matest Pilot Pension Plan, 815 F.2d 869, 871 (2d Cir. 1987). The defendants contend that notwithstanding the rule in Hardt it may still be appropriate to utilize the five factor test. In this regard, the defendants cited Toussaint v. J J Weiser Inc., 648 F.3d 108, 110-111 (2d Cir. 2011), which held that, "a court may apply -- but is not required to apply -- the Chambless factors in channeling its discretion when awarding fees under § 1132 (g)(1)."

The five Chambless factors are as follows:

(1) the degree of the offending party's culpability or bad faith, (2) the ability of the offending party to satisfy an award of attorney's fees, (3) whether an award of fees would deter other persons from acting similarly under like circumstances, (4) the relative merits of the parties' positions, and (5) whether the action conferred a common benefit on a group of pension plan participants.

Chambless, 815 F.2d at 871.

However, in Hardt, the Supreme Court held that these five factors "bear no obvious relation to § 1132 (g)(1)'s text [and therefore] are not required for channeling a Court's discretion when awarding fees." Instead, the new test enunciated by the Supreme Court is to show that the prevailing plaintiff has achieved "some degree of success on the merits." Hardt at 2156, 2159. In this case, the Court has determined that the plaintiffs have achieved more than some degree of success and their counsel is entitled to prevailing party counsel fees.

Next, the defendants contend that if the Court does award an attorney's fee to the plaintiffs, the amount should be determined by the rule in the Arbor Hill case. See Arbor Hill Concerned Citizens Neighborhood Ass'n v. Cty of Albany, 522 F.3d 182, 184 (2d Cir 2008). Also, as set forth in Blum v. Stenson, 465 U.S. 886, 895-96, n.11, 104 S.Ct. 1541, 79 L. Ed. 2d 891 (1984), "the burden is on the fee applicant to produce satisfactory evidence -- in addition to the attorney's own affidavits -- that the requested rates are in line with those prevailing in the community for similar services by lawyers of reasonably comparable skill, experience and reputation." The term relevant "community" is "the district in which the Court sits." Luciano v. Olsten Corp., 109 F.3d 111, 115 (2d Cir. 1997). Here, the relevant "community" is the Long Island area in the Eastern District of New York.

The defendants complain that the plaintiffs offer only the Miuccio affirmation and memoranda and the voluminous time records and no additional evidence. There are no affidavits from other attorneys in support of the Miuccio application. Counsel for the plaintiffs responds to this contention by citing to cases that state that "a judge may rely in part on (his or her) own knowledge of private firm hourly rates in the community." Ass'n For Retarded Citizens of Connecticut v. Thorne, 685 F.3d 547, 554 (2d Cir. 1995) (quoting from Miele v. New York State Teamsters Conference Pension and Ret. Fund, 831 F.2d 407, 409 [2d Cir 1987]). The Court agrees. There need not be any corroborating affidavits from other attorneys in order to present a viable prevailing party attorney's fee application.

As to the hourly rate for the associates, the defendants complain that the plaintiffs "offer nothing from which the Court can determine the experience or expertise of any associate," so that no hourly rate can be determined for the associates. The Court disagrees and certainly can properly determine the reasonable hourly rates for the associates and law clerks.

The defendants also point to this Court's prior decision in L.I. Head Start v. Kearse, 96 F. Supp 2d 209, 215 (E.D.N.Y. 2000) in which the Court determined that the appropriate hourly rate for attorney Miuccio was $200 per hour. For the many reasons set forth in their memorandum, the defendants contend that the factors in Johnson support an hourly rate of $200 per hour in this case. In response, Miuccio states that the prior L.I. Head Start fee-fixing decision was rendered in the year 2000, eleven years before and "is not even remotely indicative of prevailing rates in this district eleven years later." (Pltfs' Reply Memorandum at 4).

In addition, the defendants contend that the fee application by the plaintiffs' counsel is "grossly excessive . . . (and) replete with duplication and unnecessary efforts." (Dfts' Joint Memorandum at 11). In their major point, the defendants contend that a reduction must be imposed because of the plaintiffs' partial success. The defendants assert the Court must "exclude any hours dedicated to severable unsuccessful claims," citing to Klimbach v. Spheron Corp., 407F. Supp 2d 323, 331 (W.D.N.Y. 2006). The defendants emphasize that this Court expressly reserved decision with regard to the determination of whether "plaintiffs partial success require a reduction in this fee . . . [T]his issue will be confronted in the Court's determination in the amount of attorneys' fees. L.I. Head Start Child Development Services, Inc. v. Economic Opportunity Commission of Nassau County, Inc., 820 F. Supp. 2d 410, 428 (E.D.N.Y. 2011).

The defendants assert that throughout the trial until the liability determination, the plaintiffs primarily claimed that the defendants breached their fiduciary duties by "diverting" the Head Start reserves and using these reserves to pay for claims of CAAIG beneficiaries and the administrative costs. After the Court's determination against the plaintiffs on this "diversion" claim, the plaintiffs instead successfully shifted their sights to the failure to make the necessary contributions to adequately fund the CAAIG. The defendants further contend that this "underfunded claim" bears no relationship and is wholly severable from the unsuccessful "diversion of Head Start reserves" claim. Therefore, the time and legal services devoted to the "diversion" claim and the other unsuccessful claims must be deducted.

In this regard, the defendants contend that there was "extraordinary waste" resulting from the plaintiffs' prosecution of the "diversion" claim, which constituted most of the trial time. Further, the defendants assert that additional wasted time -- which should not incur counsel fees -- was spent on (1) incorrectly proceeding on defendants liability under ERISA § 515 (29 U.S.C. § 1145), an inapplicable statute initially adopted by the Court and then vacated; (2) seeking to amend the complaint with time-barred theories of recovery; (3) extensive litigation regarding the statute of limitations, an issue decided by the Court in favor of the defendants; and (4) the resolution of the issue that the plaintiffs should not be charged with the knowledge of their attorney in a class action case.

The defendants also contend that the time entries annexed to the plaintiffs' fee application demonstrate that there was "grossly exaggerated and/or excessive . . . (and) wholly unnecessary" work. The defendants occupy more than two pages of their Joint Memorandum in opposition to demonstrate the alleged excessive and unnecessary and "shocking" time entries. (See pp. 14, 15 and 16). For example, the plaintiffs' counsel describes his trial preparation alone as "staggering" and having totaled 198 hours. Further, the defendants also complain that plaintiffs' counsel charged for clerical tasks such as filing papers; travel time; duplication work; vague and generalized time entries; and "Block Billing".

As a result of all the claimed improper billing, for excessive, redundant and unnecessary time charges, the defendants conclude that the Court should impose an across-the-board percentage reduction, citing cases of percentage reductions of 35%. See McDonald v. Pension Plan, 450 F.3d 91, 96-97 (S.D.N.Y. 2006); 40% (Cho v. Koam Med. Supply Serv., 524 F. Supp. 2d 202, 207-208 (E.D.N.Y. 2007)); 45% (LaBarbera v, D & R Materials, Inc., 588 F.Supp 2d 342, 349 (E.D.N.Y. 2008); and 75% (Days Inn Worldwide, Inc. v. Amar Hotels, Inc., No. 05-Civ-10100, 2008 WL 2485407, at *10 (S.D.N.Y. June 18, 2008). In this case, the defendants contend that a reduction of at least 75% is appropriate.

In response, counsel for the plaintiffs assert that attorneys' fees may be awarded for unsuccessful claims when they are interrelated with successful ones. In Lundy v. City of Albany, 42 F.3d 131, 134 (2d Cir. 1994) the Court held:

So long as the plaintiffs unsuccessful claims are not wholly unrelated to the plaintiffs successful claims, hours spend on the unsuccessful claims need not be excluded from the lodestar amount.

In this regard, while plaintiffs' counsel concedes that the successful and unsuccessful claims do not have a common core of facts, he asserts that, "they are based on related legal theories of fiduciary misconduct . . ." (Pltfs' Reply Memorandum at 5). Also, considerable time was spent in establishing personal liability on the part of the defendant John L. Kearse. Therefore, the plaintiffs' counsel concludes that the time spent on the unsuccessful claims should not be excluded. Further, the plaintiffs' counsel also contends that the time consumed on the unsuccessful unjust enrichment claim, presented for the first time during the trial, required no trial work by plaintiffs' counsel.

The plaintiffs' counsel also recognized that it is difficult to divide the hours expended on a "claim by claim" basis. He concludes that if "the time spend on the unsuccessful unpleaded claim and the unjust enrichment claim is to be excluded from the fees, plaintiffs respectfully suggest a 5% reduction in fees . . .." (Pltfs' Reply Memorandum at 6). In addition, plaintiffs' counsel consents to exclude a total of 55.2 hours from the period from February 1, 2001 to March 13, ...


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