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Rai v. WB Imico Lexington Fee, LLC

United States District Court, S.D. New York

March 31, 2017

AVIRAL RAI and SANGEETA RAI, Plaintiffs and Counter-Defendants,
v.
WB IMICO LEXINGTON FEE, LLC and GARY BARNETT, Defendants and Counter-Claimants.

          MEMORANDUM OPINION & ORDER

          PAUL G. GARDEPHE, U.S.D.J.

         Plaintiffs Aviral Rai and Sangeeta Rai (the "Rais" or the "Rai Plaintiffs") are purchasers of a condominium unit in "The Lucida, " a condominium development in Manhattan sponsored and developed by Defendant WB Imico Lexington Fee, LLC ("WB Imico") and its principal, Gary Barnett. Having fully prevailed against the Rais in this litigation, WB Imico has moved for an award of attorneys' fees and costs pursuant to a fee-shifting provision in the Rais' purchase agreement.[1] (Dkt. No. 113)[2] WB Imico seeks $444, 059.79 in attorneys' fees and costs incurred over six years of litigation against the Rais and four other condominium purchasers.

         For the reasons stated below, WB Imico's motion for an award of attorneys' fees and costs will be granted.

         BACKGROUND

         I. FACTS [3]

         The Lucida is a condominium development located at 151 East 85th Street, New York, New York. (Am. Cmplt. (Dkt. No. 7) ¶ 1) On November 12, 2007, the Rai Plaintiffs executed a purchase agreement for a condominium unit in The Lucida (the "Purchase Agreement") and paid WB Imico a deposit of $643, 119.90 - constituting 15% of the purchase price of the unit - pursuant to that agreement. (Id ¶¶ 20-21)

         On November 10, 2009, within two years of executing the Purchase Agreement, the Rai Plaintiffs sent a notice to WB Imico seeking to rescind the Purchase Agreement due to WB Imico's alleged violations of the interstate Land Sales Full Disclosure Act, 15 U.S.C. §§ 1701-1720 ("ILSA"). (See id ¶¶ 46, 50-79) In addition to the rescission of the Purchase Agreement, the Rai Plaintiffs sought the return of their deposit. (Id. ¶¶ 48-49, 55, 67, 77)

         II. PROCEDURAL HISTORY

         The procedural history of this matter and related cases is long and complex.

         On November 18, 2009, the Rai Plaintiffs commenced this action, alleging that WB Imico failed to provide them with a printed property report in advance of signing the Purchase Agreement, in violation of Section 1703(a)(1)(B) of the ILSA. (Cmplt. (Dkt. No. 1) ¶¶ 30-34) On the basis of this violation, the Rai Plaintiffs sought to rescind the Purchase Agreement and recover their $643, 119.90 deposit. (Id ¶¶ 48-49, 55, 67, 77) That same day, four other actions were filed in this District against WB Imico by other purchasers of condominiums at The Lucida (the "Other Plaintiffs").[4] In all four actions, plaintiffs alleged that their purchase agreements violated (1) Section 1703(d)(1) of the ILSA, because the purchase agreements did not include a tax lot number for the purchased unit, and (2) Section 1703(d)(3) of the ILSA, because the purchase agreements did not clearly communicate certain purchaser rights in the event of the purchaser's default. (See 09 Civ. 9609 (Dkt. No. 1); 09 Civ. 9610 (Dkt. No. 1); 09 Civ. 9611 (Dkt. No. 1); 09 Civ. 9612 (Dkt. No. 1)) Like the Rai Plaintiffs, the Other Plaintiffs sought to rescind their purchase agreements and recover their deposits based on the alleged violations of the ILSA. (See id.)

         On January 28, 2010, the Rais filed an Amended Complaint that repeated their ILSA, Section 1703(a)(1)(B) claim concerning the property report (Am. Cmplt. (Dkt. No. 7) ¶¶ 50-57), but added claims for violations of ILSA, Sections 1703(d)(1) (tax lot number) and 1703(d)(3) (rights in event of default). (Id ¶¶ 58-79 ("Counts II and III")). The Rais' new claims mirrored those asserted by the Other Plaintiffs in their respective complaints. (Compare id, with 09 Civ. 9609 (Dkt. No. 1) ¶¶ 43-64; 09 Civ. 9610 (Dkt. No. 1) ¶¶ 43-64; 09 Civ. 9611 (Dkt. No. 1) ¶¶ 43-64; 09 Civ. 9612 (Dkt. No. 1) ¶¶ 43-64)) Because the Rai Plaintiffs' Amended Complaint now repeated both claims presented in the Other Plaintiffs' complaints -thereby raising common issues of law and fact - this Court's subsequent orders and opinions addressed all five cases together throughout the litigation.

         On May 7, 2010, the Rai Plaintiffs moved for partial summary judgment on Counts II and III of their Amended Complaint, which addressed the ILSA claims founded on the failure to provide a tax lot number and to disclose rights in the event of default. (Dkt. Nos. 12, 13) The Other Plaintiffs jointly moved for summary judgment on these same claims, asserted in their own complaints. (See 09 Civ. 9609 (Dkt. Nos. 13, 19); 09 Civ. 9610 (Dkt. Nos. 12, 18); 09 Civ. 9611 (Dkt. Nos. 11, 17); 09 Civ. 9612 (Dkt. Nos. 14, 20)) The Rai Plaintiffs and Other Plaintiffs "submitted virtually identical briefs in support of their separate motions for summary judgment." (See Apr. 30, 2010 Rai Pltfs. Partial Sum. J. Reply Br. (Dkt. No. 25) at 5) The briefs raised the same legal arguments - that the condominiums were subject to the ILSA, that the purchase agreements violated Sections 1703(d)(1) and 1703(d)(3) of the ILSA, and that WB Imico's defense relating to the ILSA's "100-Lot Exemption" did not apply - and did so using largely identical language and citing the same case law. (See Rai Dkt. No. 13; see also 09 Civ. 9609 (Dkt. No. 19); 09 Civ. 9610 (Dkt. No. 18); 09 Civ. 9611 (Dkt. No. 17); 09 Civ. 9612 (Dkt. No. 20)) WB Imico cross-moved for summary judgment against all plaintiffs, as to all claims. Although WB Imico filed two sets of briefs - one set addressed to the Rai Plaintiffs and another set addressed to the Other Plaintiffs - the briefs were substantially the same, except that in Rai WB Imico also addressed Count I of the Rai Plaintiffs' Amended Complaint (failure to provide property report). (Compare Dkt. Nos. 19, 23, with 09 Civ. 9612 (Dkt. Nos. 25, 29))

         On December 29, 2010, this Court denied the parties' cross-motions for summary judgment without prejudice. (Dkt. No. 33) The Court determined that the applicability of the ILSA's "100-Lot Exemption" was a key issue because - if the exemption applied - the ILSA did not cover plaintiffs' units. (Id. at 3-4) Because there were factual disputes about the number of units sold at The Lucida, summary judgment was not appropriate, and this Court directed the parties to conduct additional discovery. (Id. at 5-8) Moreover, on March 2, 2011, the Second Circuit issued Bodanskv v. Fifth on the Park LLC. 635 F.3d 75 (2d Cir. 2011), which addressed the applicability of the "100-Lot Exemption." On May 23, 2011, the parties filed renewed cross-motions for summary judgment. As before, the Other Plaintiffs filed a joint brief, and the Rai Plaintiffs separately moved for partial summary judgment on their Amended Complaint's Count II (tax lot number) and Count III (rights in the event of default) - the same claims set forth in the Other Plaintiffs' complaints. (Dkt. Nos. 38, 43; see also 09 Civ. 9612 (Dkt. No. 57, 63)) In their Notice of Motion, the Rai Plaintiffs stated that they were "rely[ing] upon the Memorandum of Law filed by [the Other] Plaintiffs in 09-cv-9609, 09-cv-9610, 09-cv-9611, and 09-cv-9612." (Notice of Motion (Dkt. No. 38) at 1-2) WB Imico again cross-moved for summary judgment on all of plaintiffs' claims, including Count I of the Rai Plaintiffs' Amended Complaint (failure to provide property report). (Dkt. No. 49) WB Imico filed two substantially similar sets of moving briefs, which differed only to the extent that one set addressed the Rai Plaintiffs' separate claim under Count I (compare Dkt. No. 49, with 09 Civ. 9612 (Dkt. No. 48)). WB Imico filed a single reply brief-on the dockets of the Other Plaintiffs, not the Rai Plaintiffs - addressing together all of plaintiffs' joint arguments concerning the tax lot number and disclosure of default rights issues. (See 09 Civ. 9612 (Dkt. No. 54))

         On March 19, 2012 - in a single order - this Court granted the motions of the Rai Plaintiffs and the Other Plaintiffs for summary judgment, and denied WB Imico's cross-motions for summary judgment. The Court concluded that the

ILSA applies to condominium units, that the [ILSA's] "100-Lot Exemption" is not applicable [here], and that WB Imico's failure to include tax lot numbers in the purchase agreements constitutes a violation of [the] ILSA that permits Plaintiffs to rescind the purchase agreements and recover their deposits.

(Mar. 19, 2012 Order (Dkt. No. 52) at 3) The Court directed the parties to submit briefing concerning the plaintiffs' joint application for an award of attorneys' fees, costs, and prejudgment interest under the ILSA. (Id at 24 n.9; see also May 15, 2012 Pltfs. Joint Motion for Attorneys' Fees (Dkt. Nos. 55, 56))

         On July 27, 2012, while the plaintiffs' joint motion for an award of attorneys' fees, costs, and interest was still pending, WB Imico filed a notice of appeal concerning the Court's March 19, 2012 Order. (See Dkt. No. 61; 09 Civ. 9612 (Dkt. No. 72))

         On December 12, 2012, the Second Circuit issued Bacolitsas v. 86th & 3rd Owner, LLC, 702 F.3d 673 (2d Cir. 2013), in which purchasers of a condominium sought to revoke their purchase agreement under Section 1703(d)(1) of the ILSA, because it did not contain a "unit description clause." Bacolitsas, 702 F.3d at 681. The district court had granted the purchasers' motion for summary judgment, employing reasoning similar to that used in this Court's March 19, 2012 Order. See Id. at 679. The Second Circuit rejected that analysis, however. Given the Second Circuit's ruling in Bacolitsas, this Court set a briefing schedule for WB Imico's anticipated motion to vacate the March 19, 2012 Order. (Dkt. No. 69; see also 09 Civ. 9612 (Dkt. No. 74)) In support of its motion to vacate, WB Imico filed one set of briefs applicable to both the Rai Plaintiffs and the Other Plaintiffs. (Compare Dkt. Nos. 63, 65, 66, with 09 Civ. 9612 (Dkt. Nos. 75, 77, 78)) The Rai Plaintiffs and Other Plaintiffs filed a joint brief opposing WB Imico's motion to vacate. (Dkt. No. 67)

         On September 27, 2013, this Court granted WB Imico's motion to vacate "to the extent that this Court's March 2012 decision holds that the purchase agreements at issue violate [Section] 1703(d)(1) [of the ILSA], " and to the extent that this Court had held "that [the Other Plaintiffs] are entitled to summary judgment." (Sept. 27, 2013 Order (Dkt. No. 69) at 2-3) The Court further granted WB Imico's cross-motion for summary judgment as to its counterclaims against the Other Plaintiffs. (Id.) However, the Court denied WB Imico's cross-motion for summary judgment as to the Rai Plaintiffs, and held that the Rai Plaintiffs were "entitled to summary judgment [on Count I of their Amended Complaint], because they were not provided with a copy of the property report for [their] condominium, in violation of [Section] 1703(a)(l)(B)" of the ILSA. (Id. at 3) The Rais thus - temporarily - prevailed on the one claim in their Amended Complaint that differed from the claims set forth in the Other Plaintiffs' complaints. This Court subsequently set briefing schedules for the Rais' application for attorneys' fees, costs, and pre-judgment interest under the ILSA, and for WB Imico's application for an award of attorneys' fees and costs against the Other Plaintiffs pursuant to their purchase agreements. (Id. at 23) As a result of the Court's resolution of WB Imico's motion to vacate, the still-pending appeal of this Court's March 19, 2012 Order was withdrawn as moot. (See Dkt. No. 72; 09 Civ. 9612 (Dkt. No. 83))

         On November 4, 2013 - prior to submitting a brief in support of its application for an attorneys' fee award against the Other Plaintiffs - WB Imico entered into settlement agreements with each of the Other Plaintiffs. (See 09 Civ. 9609 (Dkt. No. 89); 09 Civ. 9610 (Dkt. No. 83); 09 Civ. 9611 (Dkt. No. 86); 09 Civ. 9612 (Dkt. No. 86)) In each settlement agreement, the parties agreed to the dismissal of the complaint and counterclaims, and "waive[d] any right either party may have, in law, equity or contract, to an award of costs or attorneys' fees in [the] action." (Id. ¶¶ 1, 3) Pursuant to the settlement agreements, WB Imico retained the Other Plaintiffs' deposits on the condominiums at issue (id. ¶ 2), but "did not recover any of the attorneys' fees it incurred in litigating" against the Other Plaintiffs. (Dolan Decl. (Dkt. No. 115) ¶ 16)

         On January 17, 2014, while the Rai Plaintiffs' motion for an award of attorneys' fees was pending, WB Imico filed a notice of appeal from this Court's September 27, 2013 Order. (Dkt. No. 89) The Rai Plaintiffs filed a notice of cross-appeal on February 6, 2014. (Dkt. No. 90) The Second Circuit dismissed both appeals for lack of jurisdiction, because a final judgment had not been entered and no exception to the final judgment rule applied. (Dkt. No. 97)

         On May 12, 2014, this Court denied the Rai Plaintiffs' motion for attorneys' fees and costs, but granted them pre-judgment interest on their deposit at the post-judgment statutory rate. (Dkt. No. 92) Judgment was entered on May 14, 2014. (Dkt. No. 93) WB Imico filed a notice of appeal, and the Rai Plaintiffs cross-appealed. (Dkt. Nos. 95, 96)

         On September 21, 2015, the Second Circuit issued an opinion that (1) affirmed the judgment of this Court that WB Imico did not violate Section 1703(d)(1) of the ILSA (failure to provide tax lot number); (2) reversed the judgment of this Court that WB Imico violated Section 1703(a)(1)(B) by not delivering a property report to the Rais directly; and (3) held that WB Imico was entitled to retain the Rais' deposit on the condominium unit, as well as any interest accrued thereon, as a result of the Rais' breach of the Purchase Agreement. Rai v. WB Imico Lexington Fee, LLC, 802 F.3d 353, 370 (2d Cir. 2015). The Second Circuit remanded the case for further proceedings.

         III. WB IMICO'S APPLICATION FOR AN AWARD OF ATTORNEYS' FEES AND COSTS

         On March 17, 2016, WB Imico moved for an award of $444, 059.79 in attorneys' fees and costs pursuant to a fee-shifting provision in the Rai Plaintiffs' Purchase Agreement. (Dkt. No. 113; Def. Moving Br. (Dkt. No. 114) at 5-6) This figure represents attorneys' fees and costs WB Imico incurred in defending against the claims of all five sets of plaintiffs - both the Rai Plaintiffs and the Other Plaintiffs. (Id. at 15-16)

         The Rai Plaintiffs oppose WB Imico's motion, contending that it cannot recover attorneys' fees and costs "allegedly incurred in defending against five separate matters, involving five separate contracts, and five separate plaintiffs." (Pltf. Opp. Br. (Dkt. No. 119) at 5) The Rai Plaintiffs further contend that WB Imico's application should be denied because the fee-shifting provision in the Rais' Purchase Agreement (1) 'does not make the Rai Plaintiffs jointly and severally liab[le] for all fees incurred ... on any and all related agreements, " and (2) makes the Rai Plaintiffs "only responsible for their distinct, identifiable, and unique attorneys' fees, " which WB Imico cannot now specify, because defense counsel commingled the billing records applicable to work against the Rai Plaintiffs and work against the Other Plaintiffs. (Id. at 5-6, 14-16) The Rai Plaintiffs argue that the fee application also fails because WB Imico has not "submit[ted] any evidence that the work described in th[e] fee application was reasonable or necessary, or that the rates charged are reasonable." (Id. at 5, 16-24)

         DISCUSSION

         I. WB IMICO IS ENTITLED TO AN AWARD OF REASONABLE ATTORNEYS' FEES

         WB Imico's application for an award of attorneys' fees and costs is premised on a fee-shifting provision in the Rai Plaintiffs' Purchase Agreement. (Def. Moving Br. (Dkt. No. 114) at 5-6; Dolan Decl. (Dkt. No. 115) ¶¶ 2-3) Paragraph 32 of the Rai Plaintiffs' Purchase Agreement provides that

[the purchaser] shall be obligated to reimburse [WB Imico] for any legal fees and disbursements incurred by [WB Imico] in defending [its] rights under this Agreement or, in the event [the purchaser] defaults under this Agreement beyond any applicable grace period, in canceling this Agreement or otherwise enforcing [the purchaser's] obligations hereunder.

(Dolan Decl. (Dkt. No. 115) ¶ 3)

         The Rai Plaintiffs argue that "the express language of the fee shifting [provision] in the Rai Plaintiffs' [Purchase] Agreement does not.. . make the Rai Plaintiffs responsible for fees [related to the] [O]ther [P]laintiffs." (Ptlf. Opp. Br. (Dkt. No. 119) at 10) The Rai Plaintiffs further argue that, "[a]s a matter of contract, . . . [they] are only responsible for their distinct, identifiable and unique attorneys' fees[, which] ... WB Imico has failed to identify." (Id at 16)

         A. Attorneys' Fee Awards Based on Contract

         "Under the 'American Rule, ' it is axiomatic that 'attorneys' fees are not ordinarily recoverable in the absence of a statute or enforceable contract providing therefor.'" Matsumura v. Benihana Nat. Corp.. No. 06 Civ. 7609 (NRB), 2014 WL 1553638, at *3 (S.D.N.Y. Apr. 17, 2014) (quoting Summit Valley Indus., Inc. v. United Bd. of Carpenters & Joiners, 456 U.S. 717, 721 (1982)). "Parties may override the presumption by contractually agreeing to permit recovery of attorneys' fees, [however, ] in which case 'a federal court will enforce contractual rights to attorneys' fees if the contract is valid under applicable state law.'" Id. (quoting McGuire v. Russell Miller, Inc.. 1 F.3d 1306, 1313 (2d Cir. 1993)). In New York, "a contract that provides for an award of reasonable attorneys' fees to the prevailing party in an action to enforce the contract is enforceable if the contractual language is sufficiently clear." NetJets Aviation, Inc. v. LHC Commc'ns. LLC. 537 F.3d 168, 175 (2d Cir. 2008). Indeed, the Second Circuit has stated that "where a contract authorizes an award of attorneys' fees, such an award becomes the rule rather than the exception." McGuire, 1 F.3d at 1313.

         Here, the Rai Plaintiffs' Purchase Agreement plainly provides that they "shall be obligated to reimburse [WB Imico] for any legal fees and disbursements incurred by [WB Imico] in defending [its] rights under th[e] [Purchase] Agreement." (Dolan Decl. (Dkt. No. 115) ¶ 3) This language is "sufficiently clear" to permit WB Imico to recover attorneys' fees and costs it incurred in litigating against the Rai Plaintiffs. See NetJets Aviation. 537 F.3d at 175.

         The Rai Plaintiffs do not challenge the validity of the fee-shifting provision, but instead dispute whether this provision permits recovery of fees and costs WB Imico incurred in litigating against the Other Plaintiffs, who each sued WB Imico under separate purchase agreements. (See Pltf. Opp. Br. (Dkt. No. 119) at 10, 16) Accepting the Rai Plaintiffs' assertion that the fee-shifting provision in their Purchase Agreement only permits the reimbursement of fees and costs "incurred by [WB Imico] in defending ...


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