United States District Court, S.D. New York
OPINION AND ORDER
JESSE M. FURMAN, District Judge.
Petitioner Mishcon de Reya LLP ("Mishcon"), a law firm, initiated this action by seeking attachment of Respondent Grail Semiconductor Inc.'s ("Grail") sole asset, Patent Number 6, 642, 552 (the "552 Patent"), in aid of arbitration. (Docket No. 1). The Court ordered and confirmed the attachment (Docket Nos. 5, 29), and, in April 2013, the 552 Patent was sold in Court-ordered receivership proceedings to Mishcon itself. Presently before the Court are applications for fees and expenses of the receiver, Andrew L. Reibman (the "Receiver"), and K&L Gates LLP ("K&L Gates"), the Receiver's counsel. (Docket Nos. 144, 148). In addition, Mishcon cross moves seeking a declaration of invalidity of a lien on the 552 Patent purportedly held by the law firm Niro Haller & Niro ("Niro"), plus attorney's fees and expenses. (Docket No. 150). For the reasons explained below, the applications of the Receiver and K&L Gates for fees and costs are GRANTED; Mishcon's cross-motion for a declaration of invalidity is GRANTED; and its cross-motion for fees and costs is DENIED.
This case has a long and somewhat tortured history and has been the subject of several prior opinions by this Court, familiarity with which is assumed. See Mishcon de Reya N.Y. LLP v. Grail Semiconductor, Inc., No. 11 Civ. 4971 (JMF), 2012 WL 5512240 (S.D.N.Y. Nov. 13, 2012) (" Mishcon II "); Mishcon de Reya N.Y. LLP v. Grail Semiconductor, Inc., No. 11 Civ. 4971 (RJH), 2011 WL 6957595 (S.D.N.Y. Dec. 28, 2011) (" Mishcon I "). The Court recites here only those facts relevant to the instant motions.
The lawsuit arises out of a prior dispute between Mishcon and Grail over unpaid attorney's fees relating to Mishcon's representation of Grail in a California state-court action. See Mishcon I, 2011 WL 6957595, at *1. The parties were unable to resolve their fee dispute, and, on July 19, 2011, Mishcon filed for arbitration. See id. at *2. The same day, Mishcon filed an order to show cause before this Court seeking an ex parte order of attachment of the 552 Patent, on the ground that Grail was insolvent and likely to transfer the 552 Patent. See id. The Honorable Richard J. Holwell - to whom the case was then assigned - ordered the attachment on July 22, 2011, and confirmed the attachment on December 28, 2011. See id.
Mishcon and Grail subsequently entered into a settlement agreement, and the Court entered judgment in favor of Mishcon and against Grail for $2, 111, 000 (the "Judgment") on July 11, 2012. (Docket No. 48). Thereafter, on Mishcon's motion (Docket No. 50), the Court ordered the appointment of a receiver to sell the 552 Patent by auction, see Mishcon II, 2012 WL 5512240, at *3-4, and appointed the Receiver, at an hourly rate of $695, to serve in that role. (Docket No. 79). The Court authorized Mishcon to credit bid up to the amount of the Judgment, and ordered Grail to "take all necessary steps to turn over and assign all of its rights, title, and interest in the 552 Patent to the Receiver." ( Id. ).
In the meantime, Grail was involved in a separate patent action relating to the 552 Patent in the Northern District of California, Grail Semiconductor, Inc. v. Renesas Electronics America, Inc., No. 11 Civ. 3847 (the "Infringement Action"). In that case, Grail - represented by Niro - had sued Renesas Electronics America for alleged infringement of the 552 Patent. (Decl. of Andrew L. Reibman as Court-Appointed Receiver ("Rebiman Decl.") (Docket No. 145) ¶ 37; Intervenor Niro, Haller & Niro's Objection To Mishcon's Cross-Motion To Invalidate the Niro Firm's Security Interest ("Niro Mem.") (Docket No. 156) 1). After this Court appointed the Receiver, it authorized him to appear in the Infringement Action "to the extent necessary to preserve or protect the value of the 552 Patent" (Docket No. 96, at 1), which he did after Grail assigned its interests in the 552 Patent to him. (Reibman Decl. ¶ 43).
Ultimately, the Receiver held an auction to sell the 552 Patent in April 2013. Although Niro had represented to the Receiver that the anticipated value of the 552 Patent was at least $100, 000, 000 (Reibman Decl. ¶ 5; id., Ex. A) (and the parties had previously led the Court to believe that its value was significant), Mishcon was the only bidder at the auction, and it acquired the 552 Patent for a credit bid of $500, 000. (Decl. of James J. McGuire, Esq. (Docket No. 152) ("McGuire Decl.") ¶ 9). Prior to the auction, on July 18, 2013, Niro filed with the United States Patent and Trademark Office a Patent Security Agreement (the "Security Interest") between it and Grail, dated July 13, 2012, which purported to grant it a "first priority security interest in all of [Grail's] right, title and interest in" the patent. (McGuire Decl., Ex. A, at 2).
Currently before the Court are applications for fees and expenses by the Receiver and the Receiver's counsel (Docket Nos. 144, 146), and a cross-motion by Mishcon to invalidate Niro's Security Interest and for attorney's fees and costs (Docket No. 150). The Court first addresses the applications for fees and expenses, and then turns to Mishcon's cross-motion.
A. Applications for Fees and Expenses
The Receiver seeks $93, 164.75 in fees, and K&L Gates seeks $224, 135.75 in fees and $2, 318.20 in expenses. (Corrected Application of Andrew L. Reibman, as Court-Appointed Receiver, for Allowance of Fees ("Receiver Application") (Docket No. 148) 1; Application of K&L Gates for Allowance of Its Fees & Reimbursement of Its Expenses as Counsel to the Receiver ("K&L Gates Application") (Docket No. 144) 1). The basis for those requests is Rule 8004 of the New York Civil Practice Law and Rules, which provides for the commissions that a court-appointed receiver and his attorneys may receive for their services. N.Y. C.P.L.R. 8004.
1. The Receiver's Fees
Mishcon does not dispute that the Receiver is entitled to some fees and that it is responsible for paying those fees. (Petitioner-J. Creditor's Mem. Law ("Petitioner's Mem.") (Docket No. 151) 7-8). Instead, Mishcon challenges the Receiver's request on the ground that it exceeds the maximum allowable receiver's fees under C.P.L.R. Rule 8004(a). ( Id. ). Under that Rule, a receiver's commission is generally limited to the maximum of five percent of the "sums received and disbursed by him" or $100, whichever is higher. N.Y. C.P.L.R. 8004(a). Thus, Mishcon ...