The opinion of the court was delivered by: Hurley, Senior District Judge:
This Memorandum and Order addresses two matters pending before the Court: (1) the Report and Recommendation of Magistrate Judge A. Kathleen Tomlinson, which recommends that the Court deny plaintiffs' motion for approximately $4.3 million in attorney's fees (see docket no. 382), and (2) plaintiffs' motion for reconsideration of the Court's September 30, 2011 Order adopting a separate Report and Recommendation in which plaintiffs' motion to amend was granted in part and denied in part, (see docket nos. 381, 391). For the reasons stated below, the Court adopts the Report and Recommendation and denies plaintiffs' motion for reconsideration.
As the details of the dispute underlying this case are recounted in numerous Orders and Reports issued throughout the course of this litigation, familiarity with the factual and procedural history of this action is assumed for present purposes.
I.APPLICATION FOR ATTORNEY'S FEES
Plaintiffs' underlying motion seeks $4.3 million in attorney's fees arising from what plaintiffs characterize as defendants' "contumacious conduct" manifested in the form of the "outright, knowing and sworn falsehoods" of defendants. (Ps' Obj. at 9.)
In her Report and Recommendation (hereinafter "Fees Report"), Judge Tomlinson took care to determine first whether plaintiffs' motion implicated federal procedural law or substantive state law. (See Fees Report at 5-9.) As this case is premised on diversity jurisdiction, the Court applies New York state law to substantive matters and federal law to procedural matters. See Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938); see also Alyeska Pipeline Serv. Co. v. Wilderness Soc., 421 U.S. 240, 259 n.31 (1975)("[W]hen a federal court sits in a diversity case, . . . state law denying the right to attorney's fees or giving a right thereto, which reflects a substantial policy of the state, should be followed.")(internal quotes omitted).
Judge Tomlinson ultimately determined that plaintiffs' application should be evaluated "solely pursuant to the inherent powers afforded to federal courts." (Fees Report at 5.) This conclusion was reached for two reasons. First, the Report concludes that the "difference between federal and New York practice in awarding attorney's fees as a sanction against litigation in bad faith is not substantial." (Fees Report at 8 (quoting Republic of Cape Verde v. A&A Partners, 89 F.R.D. 14, 21 n.12 (S.D.N.Y. 1980).) Therefore, the policy concerns underlying the Erie Doctrine fall away because, "[i]nsubstantial or trivial variations between state and federal practice are not likely to raise the sort of equal protection problems which troubled the [Supreme Court] in Eerie." (Report at 8 (quoting Republic of Cape Verde v. A&A Partners, 89 F.R.D. 14, 21 n.12 (S.D.N.Y. 1980)); see Chambers v. Nasco, Inc., 501 U.S. 32, 52 (1991)(The Erie Doctrine applies "[o]nly when there is a conflict between state and federal substantive law.").
Second, Judge Tomlinson examined the New York state cases cited by plaintiffs in support of their position that state law should apply, and determined that the cases did not evince a substantive state policy that should trump a federal court's inherent power to impose attorney's fees. (Fees Report at 7.) These New York cases, primarily Park S. Assocs. v. Essebag, 451 N.Y.S.2d 345 (N.Y. Civ. Ct. 1982) and Check-Mate Industries, Inc. v. Say Assocs., 104 A.D.2d 392 (2d Dep't 1984),*fn1 recognize an exception to the American Rule on attorney's fees where a party acts "contumaciously" or in bad faith. In her analysis of these cases, Judge Tomlinson examined the cited authorities and rationale for this exception, and concluded that both "involved the vindication of 'judicial authority.'" (Fees Report at 9); see, e.g., Chambers, 501 U.S. at 55("[F]ee-shifting here is not a matter of substantive remedy, but of vindicating judicial authority."); Revson v. Cinque & Cinque, P.C., 221 F.3d 71, 78 (2d Cir. 2000)("The Court has inherent power to sanction parties and their attorneys, a power born of the practical necessity that courts be able to manage their own affairs so as to achieve the orderly and expeditious disposition of cases.")(internal quotation marks omitted).
Plaintiffs argue in their objection to the Fees Report that Judge Tomlinson erred in determining that the Court should apply federal procedural law to their application. They state that by doing so, and by subsequently recommending a total denial of their motion, the Court deprived them of the opportunity to present evidence of a substantial damages remedy "at trial." (Pls. Obj., docket no. 382, at 3.) In essence, plaintiffs urge that it is error to conclude that the state law remedy advanced here is analogous to a federal district court's inherent power to award attorney's fees to maintain discipline and decorum among litigants. They contend that the former is a substantive "element of  damages," whereas the latter is a federal procedural remedy. (Id. at 4.) Therefore, plaintiffs argue, the Court is obligated under the Erie Doctrine to recognize and apply this purportedly substantive state law.
a.Substantive v. Procedural Matters
Application of the Erie Doctrine requires that courts distinguish between what constitutes a substantive matter and what constitutes a procedural one. Where such a delineation is not self-evident, courts often employ the "outcome determinative" test. See, e.g., Chambers, 501 U.S. at 52; Hanna v. Plumer, 380 U.S. 460, 468 (1965). The operative question under this test is whether the disposition of an issue is "tied to the outcome of litigation." See Chambers, 501 U.S. at 53. The outcome-determinative test should be applied with "reference to the twin aims of the Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the laws." Hanna, 380 U.S. at 468. In essence, a court should question "whether application of the [state] rule would make so important a difference to the character or result of the litigation that failure to enforce it would unfairly discriminate against the citizens of the forum State, or whether application of the rule would have so important an effect upon the fortunes of one or both of the litigants that failure to enforce it would be likely to cause a plaintiff to choose the federal court." Id. at 468 n.9.
Generally, "[t]he awarding of attorneys' fees in diversity cases . . . is governed by state law." Grand Union Co. v. Cord Meyer Dev. Co., 761 F.2d 141, 147 (2d Cir. 1985). Therefore, as noted above, "in an ordinary diversity case where the state law does not run counter to a valid federal statute or rule of court, and usually it will not, state law denying the right to attorney's fees or giving a right thereto, which reflects a substantial policy of the state, should be followed." Alyeska, 421 U.S. at 260, n.31 (citation omitted). In New York, attorney fees are largely denied in the absence of an agreement between the parties or a statute authorizing such an award. See, e.g., Buffalo v. J. W. Clement Co., 28 N.Y.2d 241, 262-63, 269 N.E.2d 895 (1971).
Here, plaintiffs do not cite to an intra-party agreement or a state statute that would entitle them to fees in this case. Rather, they argue that state decisional law establishes a substantive state policy favoring the award of attorney fees in this instance. In support, they rely primarily on two New York cases cited above: Check-Mate, 104 A.D.2d 392, and Park South,451 N.Y.S.2d 345. Plaintiffs further argue that this right to attorney's fees is "an element of delay damages," (Ps' Mot. at 3), presumably implying that the award of attorney's fees is necessarily tied to the outcome of the litigation and therefore substantive.
However, the argument that the subject remedy is substantive is not supported by either case. In the first of these two cases, Park South, 451 N.Y.S.2d 345, the court found that the landlord's holdover petition had "been undertaken in bad faith" on the basis of a "clearly insufficient and improper notice [to cure]." Park South, 451 N.Y.S.2d at 347. Notably, while the prevailing tenant was held not to be entitled to attorney's fees under the fee-shifting statute that would normally apply in such proceedings, see N.Y. Real Prop. Law § 234, she was nevertheless entitled to fees pursuant to "certain limited exceptions" to the American Rule "for example . . . where his opponent has acted in bad faith." Id. at 346 (citing Hall v. Cole, 412 U.S. 1 (1973)).
As examples of conduct warranting such an award, the Park South court listed the "filing of an unwarranted motion to hold an opponent in contempt," the "vexatious seeking of a preliminary injunction without cause," and the "use of dilatory tactics to stall litigation." Id. at 346-47 (citations omitted). Each of these examples of a party acting in "bad faith" implicates abuses of the litigation process itself. None are inherent to the underlying claim, nor are they necessarily tied to the outcome of the litigation. As the Supreme Court held in Chambers, "the imposition of sanctions under the bad-faith exception depends not on which party wins the lawsuit, but on how the parties conduct themselves during the litigation. 501 U.S. at 53. "Erie guarantees a litigant that if he takes his state law cause of action to federal court, and abides by the rules of that court, the result in his case will be the same as if he had brought it in state court. It does not allow him to waste the court's time and resources with cantankerous conduct, even in the unlikely event a state court would allow him to do so." Id. at 53. Given that the rule invoked in Park South addresses the behavior of litigants during the course of litigation, it is difficult to credit plaintiffs' assertion here that it is borne of a substantive right independent of a court's inherent power to sanction parties for such in-court conduct, a decidedly procedural remedy.
In the second case, Check-Mate, the court held that attorney's fees "may be awarded as part of [plaintiff's] damages only upon a finding that defendant has contumaciously deprived plaintiff of a clear legal entitlement, forcing the latter in to the expense of rescuing itself through legal action." 104 A.D.2d at 393 (citing Park South, 451 N.Y.S.2d at 346). Plaintiffs appear to have seized upon the reference in Check-Mate to attorney's fees as a "part of damages," to advance their argument that the imposition of sanctions for certain "contumacious" conduct by a party embodies a substantial state policy. (Pls.' Obj. at 7.)
Although the Check-Mate case does refer to attorney's fees as part of the parties' "damages," plaintiffs provide no authority requiring the Court to equate damages with substantive remedies. Plaintiffs claim that the authority to award attorney's fees in this instance "was expressly formulated in service of the court's equitable power to award appropriate damages to make an injured party whole for breach of contract." (Pls.' Obj. at 7.) This is a rather peculiar argument considering that generally in New York "in a breach of contract case, a prevailing party may not collect attorneys' fees from the non-prevailing party unless such award is authorized by agreement between the parties, statute or court rule." TAG 380, LLC v. ComMet 380, Inc., 10 N.Y.3d 507, 515, 890 N.E.2d 195 (2008)
The facts set forth in the Check-Mate case are too sparse to allow this Court to draw helpful analogies to the present case. However, Check-Mate cites and quotes Park South as the legal basis in state law for such an award. The behavior found so reprehensible in Park South was the filing of a petition based on a patently deficient notice to cure. As a matter of comparison, prosecuting a claim under such a frivolous pleading would clearly be sanctionable in federal court under Rule 11, see Fed. R. Civ. P. 11(b)(2) -- a remedy that is unquestionably procedural in nature.
As plaintiffs point out, however, Check-Mate also relies on Vaughn v. Atkinson, 369 U.S. 527 (1962), a maritime case. There, the Court awarded attorney's fees where the defendant's "recalcitrance" in addressing plaintiff's claims, forced him "to hire a lawyer and go to court to get what was plainly owed to him under laws that are centuries old." Id. at 531. The facts of this case do offer some inferences regarding the substantive nature of the award of attorney's fees that may favor plaintiffs' arguments. However, the Supreme Court, in a case decided before Check-Mate, definitively characterized the award in Vaughn as premised on the well-established exception to the American Rule where there is evidence of "bad faith or oppressive ...