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Themis Capital and Des Moines Investments Ltd. v. Democratic Republic of Congo

United States District Court, S.D. New York

September 4, 2014

THEMIS CAPITAL and DES MOINES INVESTMENTS LTD., Plaintiffs,
v.
DEMOCRATIC REPUBLIC OF CONGO and CENTRAL BANK OF THE DEMOCRATIC REPUBLIC OF CONGO, Defendants.

OPINION & ORDER

PAUL A. ENGELMAYER, District Judge.

On July 9, 2014, the Court entered judgment in favor of Themis Capital, LLC ("Themis") and Des Moines Investments, Ltd. ("Des Moines") (collectively, "plaintiffs" or "Themis") in their breach-of-contract lawsuit against the Democratic Republic of the Congo (the "DRC") and the Central Bank of the Democratic Republic of the Congo ("Central Bank of the DRC") (collectively, "defendants"). Dkt. 213; Themis Capital, LLC v. Democratic Republic of Congo, No. 09 Civ. 1652 (PAE), 2014 WL 3360709 (S.D.N.Y. July 9, 2014) ("July 9, 2014 Opinion"). The Court held that plaintiffs were entitled to recover the principal, interest, and compound interest on debt that had been restructured-pursuant to a Restructuring Credit Agreement ("Credit Agreement")-in 1980, and which had gone unpaid since 1990.

The Court, however, reserved judgment on plaintiffs' application for the reimbursement of attorneys' fees and costs. The Court directed the parties to brief those issues. On August 8, 2014, plaintiffs submitted a motion for such fees and costs, Dkt. 218, an accompanying memorandum of law, Dkt. 219 ("Themis Br."), and a declaration in support, Dkt. 220 ("Hranitzky Decl."). On August 15, 2014, defendants filed a memorandum of law in opposition. Dkt. 223 ("DRC Br.").

For the reasons that follow, the Court approves an award to plaintiffs from defendant DRC, representing attorneys' fees and costs. However, as described in this decision, the Court has reduced the size of, and excluded discrete items from, plaintiffs' application. The Court also holds that the award of fees and costs runs solely against the DRC, and not against co-defendant the Central Bank of the DRC.

I. Defendant Responsible for Paying Fees and Costs

At the outset, defendants seek a ruling that plaintiffs may recover an award for attorneys' fees and costs solely from the DRC-and not the Central Bank of the DRC. The basis for this argument is that under the Credit Agreement, only the "Obligor" is responsible for paying such fees and costs, and the DRC alone is defined as the "Obligor."

The Court agrees with defendants. The relevant provision of the Credit Agreement states that:

The Obligor agrees to pay, in the currency in which incurred:
...
(iv) to each Bank and Agent upon its demand all out-of-pocket expenses (including, without limitation, all counsel fees and court costs, stamp taxes, duties and fees) incurred in connection with investigating any Event of Default or enforcing this Agreement or suing for or collecting any overdue amount payable by the Obligor hereunder or otherwise protecting its rights in the event of any failure by the Obligor or Bank of Zaire to comply with the provisions [of the Credit Agreement.]

Credit Agreement § 12.05(a) (emphasis added). The Credit Agreement defines the Republic of Zaire as the "Obligor, " see Credit Agreement at R-1; it is undisputed that the DRC is the successor-in-interest to the Republic of Zaire. Accordingly, any award for attorneys' fees and costs is binding solely on the DRC, not the Central Bank of the DRC.

This ruling is consistent with the Court's July 9, 2014 Opinion, which held, inter alia, that the DRC and the Central Bank of the DRC are jointly and severally liable for all damages awarded to plaintiffs. See 2014 WL 3360709, at *30-31. The basis of that ruling was that two provisions in the Credit Agreement2014§ 9.01 and § 8.03-expressly make "the Central Bank of the DRC legally responsible for paying plaintiffs the principal and interest owed them." Id. at *30. By contrast, here, no provision in the Credit Agreement analogously obliges the Central Bank of the DRC to pay the fees and costs that plaintiffs incurred in enforcing the agreement. Accordingly, plaintiffs may recover the award for attorneys' fees and costs only from the DRC, and not from the Central Bank of the DRC.

II. Assessment of Plaintiffs' Fee Application

In their application for fees and costs, plaintiffs request a total of $4, 197, 131.54, broken down as follows:

• $3, 793, 121.35 in fees for attorneys and support staff;
• $273, 371.63 in costs for expert witnesses, translators, and interpreters; and
• $130, 638.56 in other litigation costs.

Defendants object to plaintiffs' request on three grounds: that (1) certain categories of fees should be excluded from the fee award ("category objections"); (2) the amount requested in attorneys' and support staff fees is unreasonable ("fee reasonableness objections"); and (3) the amount requested for experts and other litigation costs is unreasonable ("cost reasonableness objections"). The Court addresses each objection in turn.

A. Category Objections

1. Work Between October 3 and November 12, 2013

Defendants first argue that fees should not be granted for the "entire period between October 3 and November 12, 2013." DRC Br. at 3. As defendants note, the original deadline set by the Court for the parties' joint pretrial order ("JPTO") was October 22, 2013. Dkt. 159. On October 3, 2013, plaintiffs' counsel, Dechert LLP ("Dechert"), informed counsel for defendants, DLA Piper LLP ("DLA Piper"), that plaintiffs agreed to waive the issue of actual authority and to submit the case on the papers without a live trial. The parties then worked together on the JPTO based on this shared understanding. On October 22, 2013, however, Dechert informed DLA Piper that plaintiffs had changed course, that plaintiffs would no longer waive the actual authority argument, and that a live trial was therefore necessary on that point. The same day, the Court held a telephone conference with the parties to address this issue. The Court permitted plaintiffs to pursue the claim of actual authority and granted plaintiffs' request for an extension of time, until November 12, 2013, to submit the JPTO. Dkt. 162. However, in recognition that plaintiffs' change of course had potentially inconvenienced defense counsel, the Court directed plaintiffs to "reimburse defendants for reasonable out-of-pocket costs (not fees), which defendants and defendants' counsel expended due to their reliance on plaintiffs' statement, on October 3, 2013, but now repudiated, that it was waiving the issue of actual authority." Id.

Based on this sequence of events, defendants argue that, because plaintiffs' change of strategy was responsible for the extra work that each side did preparing the JPTO, plaintiffs ought not be reimbursed for the fees or costs that plaintiffs incurred between October 3 and November 12, 2013. This, defendants represent, would reduce plaintiffs' reimbursable fees by $450, 326.50. DRC Br. at 3.

The Court agrees with defendants that plaintiffs' fee application should be reduced to reflect this circumstance, but does not agree as to the scope of the proposed remedy. Plaintiffs ought not be reimbursed for any fees or costs incurred during the period when the parties were working under the assumption that actual authority had been waived and would not be an issue in the case- i.e., the period beginning on October 3, 2013 and extending up to and including October 22, 2013. In the interest of clarity, the Court categorically excludes all fees and costs incurred by plaintiffs' counsel during this period, even though some work during this period assuredly related to projects or issues unaffected by plaintiffs' change of position as to actual authority, and even though some of plaintiffs' counsel's work on October 22, 2013 likely postdated counsels' call with the Court, in which the Court authorized plaintiffs to litigate the issue of actual authority. This order applies to the fees and costs both of Dechert, plaintiffs' lead counsel, and Miller & Wrubel P.C. ("Miller & Wrubel"), which also represented plaintiffs. However, there is no charter for excluding, from the sum to be reimbursed, fees and costs incurred after October 22, 2013, by which point plaintiffs' position as to actual authority had come to rest. The DRC properly is responsible for reimbursing plaintiffs for fees and costs incurred after October 22, 2013.

As discussed below, the Court is not equipped itself to tabulate the sum of fees and costs incurred by plaintiffs between October 2 and October 22, 2013. The Court will therefore leave it to the parties to tabulate that figure.

2. "Second Generation" Compound Interest

Defendants next argue that plaintiffs are not entitled to fees related to their claim for "second generation" compound interest. DRC Br. at 3. Defendants argue that plaintiffs are entitled to fees and costs only to the extent they were the "prevailing party" in this litigation. Because plaintiffs did not prevail on their claim for "second generation" compound interest, see July 9, 2014 Opinion, 2014 WL 3360709, at *1 ("plaintiffs are not entitled to recover any compound interest on such compound interest"), defendants argue that plaintiffs may not recover fees or costs incurred in pursuit of that claim.

The Court rejects this argument, for a number of independent reasons. First, defendants, relying on Green v. Torres, 361 F.3d 96 (2d Cir. 2004), wrongly depict it as a hard and fast rule that reimbursement may not be had for fees and costs associated with a failed claim. Green states only that a district court " may exclude any hours spent on severable unsuccessful claims." 361 F.3d at 98 (emphasis added). It does not require a district court to do so. See Rozell v. Ross-Holst, 576 F.Supp.2d 527, 538 (S.D.N.Y. 2008) ("Reasonable paying clients may reject bills for time spent on entirely fruitless strategies while at the same time paying their lawyers for advancing plausible though ultimately unsuccessful arguments."). Moreover, Green arose in the context of awarding fees to a successful plaintiff in a case brought under 42 U.S.C. § 1983, under which the payment of fees is, by statute, expressly limited to the "prevailing party." See 42 U.S.C. § 1988(b) ("[T]he court, in its discretion, may allow the prevailing party... a reasonable attorney's fee."). But the Credit Agreement here is not cast in those terms, but in broader ones: It commits the Obligor to pay "without limitation, all counsel fees and [costs]... incurred in connection with investigating any Event of Default or enforcing this Agreement or suing for or collecting any overdue amount payable by the Obligor hereunder or otherwise protecting its rights in the event of any failure by the Obligor or Bank of Zaire to comply with the provisions [of the Credit Agreement.]"

In any event, on the facts of this litigation, plaintiffs' claim for compound interest does not afford a basis for reducing the fees and costs for which plaintiffs are to be reimbursed. Plaintiffs clearly prevailed not only in their effort to enforce the Credit Agreement so as to recoup the principal amount of their loans to the DRC, but also in their effort to receive interest on that principal sum, and indeed also compound interest on interest on principal. The only recovery which plaintiffs sought but failed to receive was for "second generation" compound interest. This aspect of the case, however, was a far cry from the "central relief sought." Indeed, it was not briefed with any distinctness: The briefs for both sides barely referenced the issue of "second generation" compound interest, treating it instead as bound up in plaintiffs' broader bid for compound interest (which defendants resisted, but on which, as noted, plaintiffs largely prevailed). Instead, the line drawn between first- and second-generation compound interest was drawn largely by the Court itself, based on its independent analysis of the Credit Agreement.

For these reasons, the Court declines to reduce the award of fees and costs to reflect plaintiffs' unsuccessful attempt to ...


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