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Terra Energy & Resources Technologies, Inc. v. Terralinna Pty. Ltd.

United States District Court, S.D. New York

April 7, 2014

TERRA ENERGY & RESOURCES TECHNOLOGIES, INC. and TERRA INSIGHT SERVICES, INC., Plaintiffs,
v.
TERRALINNA PTY. LTD., Defendant.

MEMORANDUM and ORDER

KEVIN NATHANIEL FOX, Magistrate Judge.

INTRODUCTION

Before the Court is defendant Terralinna Pty. Ltd.'s ("Terralinna") motion, made pursuant to Rule 54(d)(2) of the Federal Rules of Civil Procedure, for an order awarding it the attorneys' fees and costs incurred defending against Count Three of the Second Amended Complaint of the plaintiffs Terra Energy and Resources Technologies, Inc. and Terra Insight Services, Inc. The plaintiffs oppose the motion.

BACKGROUND

In this action, the plaintiffs asserted causes of action for breach of fiduciary duties, tortious interference with a contract and breach of contract. The parties engaged in pretrial discovery activities. After the time for completing pretrial discovery activities elapsed, the plaintiffs filed a motion to compel disclosure, pursuant to Rule 37 of the Federal Rules of Civil Procedure. The motion to compel was denied. Thereafter, in accordance with Rule 41(a)(2) of the Federal Rules of Civil Procedure, the plaintiffs moved for an order dismissing, without prejudice, Count Three of the Second Amended Complaint, the breach of contract cause of action asserted against Terralinna by plaintiff Terra Energy and Resources Technologies, Inc. ("TERT"). Through Count Three of the Second Amended Complaint, TERT accused Terralinna of breaching a "Mutual Non-Disclosure & Non-Circumvent Agreement" ("NDNCA"), which is Exhibit B to the Second Amended Complaint, by disclosing confidential information the plaintiffs provided to Terralinna. The plaintiffs' motion to dismiss Count Three of the Second Amended Complaint was not opposed by Terralinna, but it reserved the right to attempt to recover the attorneys' fees and costs it incurred defending against Count Three. The Court granted the plaintiffs' motion to dismiss Count Three, and the action proceeded to trial before the Court without a jury on the two remaining causes of action in the Second Amended Complaint: breach of fiduciary duties and tortious interference with a contract.

After the plaintiffs had been fully heard on the two matters that had been tried to the Court, Terralinna made an oral motion, for a judgment on partial findings, pursuant to Rule 52(c) of the Federal Rules of Civil Procedure. The Court entertained argument from the parties on the motion and granted the motion, and judgment was entered in favor of Terralinna. The instant motion followed, and is predicated on a provision of the NDNCA.

The NDNCA, which was the subject of Count Three of the Second Amended Complaint, contains a fee-shifting provision, allowing the prevailing party in any litigation concerning the performance, enforcement or interpretation of the NDNCA to recover its "reasonable attorneys' fees, costs and other expenses." The relevant contractual provision is reproduced below:

Attorneys' Fees; Prejudgment Interest. If the services of an attorney are required by any party to secure the performance of this Agreement or otherwise upon the breach or default of another party to this Agreement, or if any judicial remedy or arbitration was necessary to enforce or interpret any provision of this Agreement or the rights and duties of any person in relation thereto, the prevailing party shall be entitled to reasonable attorneys' fees, costs and other expenses, in addition to any other relief to which such party may be entitled. Any award of damages, following judicial remedy or arbitration as a result of the breach of this Agreement or any of its provisions, shall include an award of prejudgment interest from the date of the breach at the maximum amount of interest allowed by law.

Exhibit B to the Second Amended Complaint, ¶ 8. By its express terms, the NDNCA is "governed by the law of New York, excluding its conflict of law rules." Exhibit B to the Second Amended Complaint, ¶ 9.

Terralinna maintains that it "is the prevailing party in this instance [and entitled to recover its attorneys' fees and costs, ] due to voluntary dismissal of Count Three of the Second Amended Complaint after Plaintiffs determined that they had no document supporting Plaintiffs' claim. Moreover, after hearing all evidence regarding the Plaintiffs remaining counts, this Court determined that Plaintiffs were also unable to support any of the remaining two (2) counts in the Second Amended Complaint. Therefore, Terralinna should be considered the prevailing party." As the prevailing party, "Terralinna seeks an award of attorneys' fees [pursuant to Fed.R.Civ.P. 54(d)(2)] in the approximate amount of $68, 759.26, which represents one-third of the attorneys' fees and non-taxable costs incurred by Terralinna in defending the claims of Plaintiffs up to the date of the dismissal of Count Three of the Second Amended Complaint." In estimating the amount of attorneys' fees it incurred defending against Count Three of the plaintiffs' Second Amended Complaint, Terralinna explains that, "[d]ue to the interrelatedness of the claims, it was not possible to separate out actions taken in defense of the NDNCA claim by Plaintiffs. As such, the fees request represents one-third of the fees and costs charged through the dismissal of the NDNCA claim on November 1, 2013." Terralinna contends that its request for attorneys' fees is reasonable, "[c]onsidering the time and skill level required in trying a case involving multinational corporate disputes, the novelty of considering Australian Law, the time limitations and differences between the jurisdiction of the Court and the Australian legal system, and that [the fees its counsel charged] are common in this jurisdiction."

Terralinna was represented by two law firms in this action, Stovash, Case & Tingley, P.A. ("SCT"), located in Orlando, Florida, and Nagle Rice LLP ("Nagle Rice "), located in Roseland, New Jersey. Robert L. Case ("Case"), one of the attorneys who represented Terralinna, submitted an affidavit in support of the defendant's motion for attorneys' fees and costs. Case reports that, of the $68, 759.26 Terralinna seeks through this motion, $58, 776.52 are attributable to the legal services provided to the defendant by SCT. Attached to Case's affidavit is Exhibit I, redacted S.Ct. time records germane to the work performed by its personnel defending Terralinna in this action.

Jay J. Rice, Esq. ("Rice"), the managing partner of Nagle Rice, which served as cocounsel with S.Ct. in this action, submitted a declaration in support of the instant motion. According to Rice, Terralinna incurred $9, 982.74, in fees and costs for the legal services Nagle Rice rendered to it, "in regard to Count III [sic] of the Second Amended Complaint." Attached to Rice's declaration is "Exhibit 1'... a record of [Nagle Rice's] Invoices, [sic] which includes time records for services rendered by [Nagle Rice] through the date of the dismissal of Count III [sic] of the Second Amended Complaint regarding the NDNCA claim, as well as the costs incurred by Terralinna."

In opposition to the motion, the plaintiffs filed, inter alia, a memorandum of law. They maintain that Terralinna should not be awarded the attorneys' fees and costs it seeks because it is not the prevailing party with respect to Count Three of the Second Amended Complaint. The plaintiffs contend that this is so because they moved to dismiss Count Three, without prejudice, after: 1) the district judge to whom the case was previously assigned "denied their motion to compel, finding that he would not compel production of documents that Defendant represented do not exist"; and 2) the plaintiffs were unable to obtain, via a subpoena, Skype[1] records of "Defendant's officer and owner, Philip Simpson" and those of his wife. The plaintiffs assert that they "had good reason to believe that" the records they sought via the motion to compel and the subpoena would have "provide[d] evidence or [led] to documents that related to the allegations of Count Three of the Second Amended Complaint, the breach of the NDNCA." Moreover, the plaintiffs maintain that Terralinna has not shown that Count Three was either groundless or frivolous. Therefore, the plaintiffs contend that Terralinna is not the prevailing party with respect to Count Three of the Second Amended Complaint, notwithstanding its success defending against Counts One and Two of that pleading at the bench trial of this action.

The plaintiffs also urge the Court to deny Terralinna's motion because its counsel failed to "keep records separating hours [expended on] the separate Counts of the Second Amended Complaint." The plaintiffs contend that Terralinna should have anticipated making the instant motion because of "the potential for partial or total shifting of attorney fees as to Count Three, " and that Terralinna's counsel was, therefore, obligated to "keep accurate contemporaneous time records... to prove the reasonable hours spent defending the claim." In addition, the plaintiffs assert that Terralinna's request for fees and costs is not reasonable because it chose to retain counsel "located in ...


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