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Stern v. Westerman Ball Ederer Miller & Sharfstein, LLP

United States District Court, N.D. New York

July 24, 2017



          ROSENBLUM & PARTNERS, LLPSANFORD ROSENBLUM, ESQ. Attorneys for Plaintiffs

          WESTERMAN BALL EDERER MILLER ZUCKER & SHARFSTEIN, LLP LAURA A. GILLEN, ESQ JEFFREY A. MILLER, ESQ. Attorneys for Defendant Westerman Ball Ederer Miller Zucker & Sharfstein, LLP

          MINTZ LEVIN COHN FERRIS GLOVSKY AND POPEO, P.C. Attorneys for Defendants Mintz Levin, LLP and Mintz Levin Cohn Ferris Glovsky and Popeo, P.C.

          THE BERKMAN LAW OFFICE, LLC ROBERT J. TOLCHIN, ESQ. Attorneys for Defendant Robert Tolchin


          Frederick J. Scullin, Jr. Senior United States District Judge


         Pending before the Court is Magistrate Judge Peebles' Report and Recommendation, in which he recommended that the Court grant Plaintiffs' motion to remand, see Dkt. No. 12, and deny Defendant Tolchin's motion to transfer venue, see Dkt. No. 5, as moot, see Dkt. No. 37. Only Defendant Tolchin submitted objections to these recommendations. See Dkt. No. 38.


         Plaintiffs in this action seek guidance regarding entitlement to attorney's fees related to various lawyers' efforts to litigate and enforce a judgment against the Republic of Iran for damages, pursuant to the Foreign Sovereign Immunities Act, ("FSIA") of 1976, 28 U.S.C. §§ 1602-1611, resulting from the death of Leah Stern in 1997 during a terrorist attack. Largely due to a recently enacted statute, Plaintiffs have now recovered more than $1, 000, 000 from a fund established to compensate victims of terrorist acts. See Justice for United States Victims of State Sponsored Terrorism Act ("VSST"), 42 U.S.C. § 10609. Under the VSST, attorneys representing victims eligible for compensation from the fund are entitled to charge a fee of up to twenty-five percent of the amount recovered. It is the recovery of this attorney's fee that forms the basis for the instant dispute.

         The tragic event giving rise to this lawsuit occurred nearly 20 years ago when Leah Stern was killed in a terrorist bombing in a market in Jerusalem, Israel on July 30, 1997. In response, Plaintiffs[1] filed a wrongful death and personal injury action against the Republic of Iran. See Stern v. Islamic Republic of Iran, 271 F.Supp.2d 286 (D.D.C. 2003). To that end, Plaintiffs retained a law firm, Westerman Ball Ederer Miller & Sharfstein, LLP ("Westerman"), which engaged Nitsana Darshan-Leitner & Associates ("Darshan-Leitner"), an Israeli law firm, to help it litigate Plaintiffs' claim. See Dkt. No. 12-5 at ¶ 9. In the underlying lawsuit, the Republic of Iran and the other defendants "failed to answer or enter an appearance"; and, thus, "the Court on February 13, 2002, pursuant to 28 U.S.C. § 1608(e) and Fed.R.Civ.P. 55(a)" entered default in Plaintiffs' favor. Stern, 271 F.Supp.2d at 288.

         Despite the defendants' apparent willful default, to prevail, Plaintiffs had to "establish [their] claim or right to relief by evidence that is satisfactory to the Court." 28 U.S.C. § 1608(e). Therefore, Plaintiffs submitted affidavits and evidence that compelled the court to award Plaintiffs $13, 000, 000 in compensatory damages and $300, 000, 000 in punitive damages. See Stern, 271 F.Supp.2d at 302. (hereinafter referred to as the "FSIA judgement")

         In or around November 2003, Defendant Westerman withdrew from representation of Plaintiffs after certain conflicts of interest between Defendants Darshan-Leitner and Westerman surfaced and could not be resolved. See Dkt. No. 2 at ¶¶ 39-41. Thereafter, the FSIA judgment languished for a period of nearly five years. See id. at ¶ 45.

         Then, in May 2008, Plaintiffs retained Defendant Darshan-Leitner and the law firm Jaroslawicz and Jaros, to provide legal services to enforce their unsatisfied judgment against UBS AG, a multinational bank that purportedly provided funds to Iran and Saddam Hussein. See id. at ¶¶ 45, 46; see also Rothstein v. UBS AG, 708 F.3d 82 (2d Cir. 2013). Defendant Tolchin signed the retainer agreement on behalf of Jaroslawicz and Jaros. See Dkt. No. 2 at ¶ 47. Ultimately, Defendants Darshan-Leitner and Tolchin's attempt to collect the debt was unsuccessful. See id. at ¶ 51.

         According to Plaintiffs, the only activity they authorized Defendant Tolchin to complete on their behalf was to litigate the above-mentioned case against UBS AG. See id. at ¶ 49. Nonetheless, Plaintiffs contend that Defendant Tolchin attempted to serve the FSIA judgment on the Republic of Iran pursuant to 28 U.S.C. § 1608(e). See Id. at ¶ 54. However, Plaintiffs assert that Defendant Tolchin did so incorrectly. See id.

         Thereafter, on April 2, 2015, Plaintiffs retained Kreindler & Kreindler, LLP and Silverman Law Firm as their attorneys to help them collect on the FSIA judgment. See id. at ¶ 52. These firms then engaged the Perles Firm to assist them.[2] See Id. at ¶ 53. The Perles Firm "then re-served the 2003 judgment upon the judgment-debtor Republic of Iran and related defendants in that action, given that the prior service of same by [Defendant Tolchin] had been done incorrectly." See id. at ¶ 54. Plaintiffs subsequently discharged Kreindler & Kreindler, LLP and Silverman Law Firm in June 2016. See Id. at ¶ 61. Plaintiffs, then retained the Plaintiff law firms, Law Office of Richard B. Ancowitz ("Ancowitz") and Rosenblum & Partners, LLP ("Rosenblum"), to represent them. See Id. at ¶ 57.

         In the meantime, the VSST was enacted into law on December 18, 2015, "which set up a special fund designed to compensate the victims of State Sponsored (i.e., Iranian) terrorism." See Id. at ¶ 67 (citing 42 U.S.C. § 10609). On October 6, 2016, Plaintiffs, through their newly retained counsel, applied for compensation through the VSST. See Id. at ¶ 85. Plaintiffs have recovered more than $1, 000, 000 from the fund. See Dkt. No. 37 at 2.

         As recounted above, the VSST allows attorneys to charge up to twenty-five percent of the amount recovered as a fee. Plaintiffs initiated this action in New York Supreme Court, Albany County, on December 14, 2016, to determine to whom that fee should be distributed. Generally, Plaintiffs argue that the Court should bar their previous attorneys, Defendants in this action, from receiving any fee in connection with their work. In that regard, Plaintiffs make various arguments for why Defendants should not prevail, each of which is animated in large part by New York Judiciary Law § 475, because the fundamental issue in this case is whether Defendants have a valid lien on Plaintiffs' recovery.

         Defendant Tolchin removed the matter to this District on January 10, 2017. See Dkt. No. 1. Thereafter, on January 12, 2017, Defendant Tolchin filed a motion seeking to transfer this action to the United States District Court for the District of Colombia. See Dkt. No. 5. On January 18, 2017, Plaintiffs moved for an order remanding the action to New York Supreme Court. See Dkt. No. 12.

         The Court referred the motion to remand to Magistrate Judge Peebles, who also considered the motion to change venue. See Dkt. No. 37. Magistrate Judge Peebles recommended that the Court grant Plaintiffs' motion to remand on the ground that the parties' dispute did not present a federal question and consequently recommended that the Court deny Defendant's motion to transfer venue as moot. See Dkt. No. 37. Defendant Tolchin filed objections only with respect to Magistrate Judge Peebles' recommendation that this Court remand the case to state court for lack of subject matter jurisdiction. See Dkt. No. 38.


         A. Standard of review

         When a party submits a timely objection to a report and recommendation, the court will review the parts of the report and recommendation to which the party objects under a de novo standard of review. See 28 U.S.C. § 636(b)(1)(C) (stating that "[a] judge of the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made"); see also Fed. R. Civ. P. 72(b)(3) (stating that "[t]he district judge must determine de novo any part of the magistrate judge's disposition that has been properly objected to"). In reviewing a report and recommendation, the court "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1)(C).

         On the other hand, where none of the parties have filed a timely objection, a district court need only find that "there is no clear error on the face of the record" to accept a magistrate judge's report and recommendation. Nelson v. Smith, 618 F.Supp. 1186, 1189 (S.D.N.Y. 1985) (citation omitted); see also Mario v. P & C Food Mkts., Inc., 313 F.3d 758, 766 (2d Cir. 2002) (stating that, "[w]here parties receive clear notice of the consequences, failure timely to object to a magistrate's report and recommendation operates as a waiver of further judicial review of the magistrate's decision" (citing Small v. Sec'y of Health & Human Servs., 892 F.2d 15, 16 (2d Cir. 1989) (per curiam)).

         B. Plaintiffs' motion to remand

          1. Removal was procedurally proper

         Magistrate Judge Peebles initially found that Defendant Tolchin properly removed this case to federal court despite lacking Defendant Dashan-Leitner's consent because Defendant Darshan-Leitner was not properly served. See generally Dkt. No. 37 at 11-15. The parties do not object to Magistrate Judge Peebles' recommendation, and the Court has not identified an error in his analysis. Therefore, the Court accepts Magistrate Judge Peebles' recommendation that removal was procedurally proper.

         2. Federal question ...

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