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

United States District Court, S.D. New York

November 24, 2014

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

AMENDED 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 of the Federal Rules of Civil Procedure, seeking attorneys' fees, costs and expenses, under a contractual fee-shifting provision. The plaintiffs oppose the motion.

BACKGROUND

Terralinna made a motion, pursuant to Rule 54(d)(2) of the Federal Rules of Civil Procedure following the conclusion of the bench trial conducted for this action, to recover attorneys' fees, costs, and other expenses it incurred defending against a breach of contract cause of action asserted against it by plaintiff Terra Energy, & Resources Technologies, Inc. The Court dismissed that cause of action, which was contained in Count Three of the plaintiffs' Second Amended Complaint, based on an unopposed dismissal motion made by the plaintiffs, pretrial. Although Terralinna did not oppose the plaintiffs' motion to dismiss Count Three, it reserved the right to seek attorneys' fees and related expenses under paragraph eight of the Mutual Non-Disclosure and Non-Circumvent Agreement ("NDNCA"); the alleged breach of that agreement was the subject of Count Three of the Second Amended Complaint. NDNCA paragraph eight provides the following:

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.

Terralinna's Rule 54(d)(2) motion was denied by the Court, through a Memorandum and Order dated April 7, 2014. Thereafter, Terralinna requested that the Court reconsider that determination. The Court granted Terralinna's request, reconsidered its determination on the motion and concluded that the determination to deny the Rule 54(d)(2) motion was erroneous. See Docket Entry No. 124. Accordingly, Terralinna's Rule 54(d)(2) motion is analyzed anew below.

Originally, Terralinna sought an award from the Court "in the approximate amount of $68, 759.26, which represents one-third of the attorneys' fees and nontaxable costs incurred by Terralinna in defending the claims of plaintiffs up to the date of dismissal of Count Three of the Second Amended Complaint." This amount reflects the expenditures for legal services provided to Terralinna by two law firms: Stovash, Case & Tingley P.A. ("SCT"), located in Orlando, Florida, and Nagle Rice LLP ("Nagle Rice"), located in Roseland, New Jersey. Terralinna has modified its request to exclude an award of $5, 737.50, in attorneys' fees made by the Honorable William H. Pauley III, to whom this case was previously assigned, and now seeks an award of $63, 021.76. Judge Pauley made the award because Terralinna defended successfully against a Fed.R.Civ.P. 37 motion made by the plaintiffs to Judge Pauley. The modified amount requested by Terralinna will prevent it from receiving a double recovery, as the expenses associated with defending against the Rule 37 motion are reflected in submissions Terralinna made to the Court in support of the instant motion.

Terralinna's submissions, in support of its Rule 54 motion, include: (1) the affidavit of Robert L. Case ("Case"), a "[s]hareholder with [SCT]"; and (2) the declaration of Jay J. Rice ("Rice"), "the Managing Partner... of Nagle Rice." Of the $68, 759.26 Terralinna sought originally, Case maintains that $58, 776.52, or 85.48% of that amount, are the fees and costs S.Ct. generated and $9, 982.74, or 14.52% of the total, are the fees and costs generated by Nagle Rice. When the relevant percentages are applied to Terralinna's modified request for $63, 021.76, in attorneys' fees, costs and expenses, $53, 871.00 would be allocated to S.Ct. and $9, 150.76 would be allocated to Nagle Rice.

Case explains, through the affidavit he submitted in support of Terralinna's motion, that he has "been licensed to practice law in the state of Florida since 1998... [and] routinely [practices] in the area of complex civil litigation, including contract disputes, related torts, shareholder disputes, and collections." Case was admitted to practice pro hac vice in this court to represent Terralinna. Case billed Terralinna at the hourly rates of $350-$375. Attached to Case's affidavit is "Composite Exhibit I, " which, according to Case, is "a record of my firm's Affidavit Exhibit, which includes services rendered by my firm in this matter through the date of dismissal of the count regarding the NDNCA." Composite Exhibit I contains many redacted billing entries and reflects that, in addition to Case, the following seven S.Ct. attorneys represented Terralinna in this action and billed it for their professional services at the hourly rates noted: 1) Robert J. Stovash ("Stovash"), a partner in the law firm, who has been licensed to practice law in the state of Florida since 1988 ($375); 2) Scott A. Livingston ("Livingston"), an S.Ct. shareholder, who has been licensed to practice law in the state of Florida since 1997 ($350); 3) M. Kathryn Smith ("Smith"), a senior associate, who has been licensed to practice law since 1992 and to practice law in Florida since 1996 ($225); 4) Rachel E. Scherwin ("Scherwin"), a senior associate, who has been licensed to practice law in the state of Florida since 2001 ($275); 5) Corey B. Suter ("Suter"), an associate, who has been licensed to practice law in Florida since 2012 ($200); 6) Matthew J. Pearce ("Pearce"), an associate, who has been licensed to practice law in Georgia since 2002 ($275); and 7) Tara S. Pelligrino ("Pelligrino"), who has been licensed to practice law in Florida since 2006, and was an S.Ct. associate until June 2012 ($275). Except as indicated above, no other information about the S.Ct. attorneys who represented Terralinna was provided to the Court.

As noted above, Rice submitted a declaration in support of Terralinna's request for its attorneys' fees, and expenses. Through his declaration, Rice explains that, in addition to his "admission to the New Jersey Bar, [he has] been admitted to practice before the courts of the State of New York, the United States District Court for the Southern District of New York, the United States Court of Appeals for the Second Circuit, and the United States Supreme Court. [He has] regularly appeared before courts in the Southern District of New York." Rice reports that he oversaw "the handling of all matters related to this case by my firm [and]... delegated certain actions to other members of the firm in an effort to conserve attorneys' fees and costs in the defense of the instant law suit."

Attached to Rice's declaration is "Exhibit 1, " "a record of [Nagle Rice's] Invoices [sic], which includes time records for services rendered... through the date of the dismissal of Count III of the Second Amended Complaint regarding the NDNCA, as well as the costs incurred by Terralinna." Rice contends that the "attorneys' fees and costs for [Nagle Rice's] Services [sic] in regard to Count III of the Second Amended Complaint are $9, 982.74."[1] The invoices that are attached to Rice's declaration identify the names of the four Nagle Rice attorneys who, along with Rice, provided legal services to Terralinna. However, neither Rice's declaration nor the invoices indicate the position each attorney - other than Rice - held with Nagle Rice, or the professional experience possessed by the Nagle Rice attorneys. The invoices indicate that Rice billed Terralinna at the hourly rate of $450, and that his colleagues, Randee M. Matloff, Diane E. Sammons, Bruce H. Nagle and Lou I. Mayer, billed Terralinna at the following hourly rates respectively: $400; $400; $375; and $400.

The plaintiffs contend that the attorneys' fees sought by Terralinna are unreasonable, because Terralinna elected to engage counsel based in Florida to represent it in this judicial district and Terralinna's Florida counsel determined to enlist the aid of local counsel based in New Jersey. While the plaintiffs acknowledge Terralinna's freedom to engage counsel of its choice, they maintain that retaining counsel not located in this judicial district generated travel expenses for Florida counsel that could have been avoided had Terralinna retained counsel based in the Southern District of New York. In addition, the plaintiffs maintain that, inasmuch as the prospect of partial or total fee-shifting existed, Terralinna should have kept accurate contemporaneous time records for the legal services provided by its counsel, in anticipation of having to prove that the hours spent defending against the NDNCA breach of contract cause of action were reasonable. The plaintiffs assert that Terralinna's determination to: (1) redact text from entries in SCT's billing statements, without explanation; and (2) permit S.Ct. to use block billing on its billing statements, make it hard to decipher what amount of time S.Ct. spent on each activity reported in the entries on the S.Ct. billing statements.

In reply, Terralinna asserts that the reasonableness of the attorneys' fees it seeks "is not determined by asking whether opposing counsel is from a different state"; rather, reasonableness of the attorneys' fees "is determined by the Lodestar method, " which requires that the number of hours reasonably expended providing legal services be multiplied by a reasonable hourly rate of compensation. Terralinna asserts that applying that method here results "in a Lodestar calculation of $321.92 per hour for the attorneys' fees charged by [SCT] and $448.43 per hour for the attorneys' fees charged by Nagle Rice." According to Terralinna, these hourly rates are within the range of legal services fee rates found reasonable in this judicial district "for a sophisticated small firm." Moreover, Terralinna asserts that the "[p]laintiffs have not alleged that these hourly rates are unreasonable in this District for the type of matter presented to this ...


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