Opinion
M18-302 (CSH)
April 26, 2004
MEMORANDUM OPINION AND ORDER
Plaintiff Lee N. Koehler objects in part to the Report and Recommendation of Magistrate Judge Michael H. Dolinger dated January 12, 2004 (the "January 12th Report"). Specifically, Koehler objects to Judge Dolinger's use of historical billing rates in calculating attorneys' fees to be awarded plaintiff against defendant The Bank of Bermuda ("BBL"). For the reasons stated below, Koehler's objection is sustained, and the fee award recommended by Judge Dolinger will be increased.
This application for attorneys' fees arises out of a long-standing post-judgment garnishment proceeding between Koehler and the Bank of Bermuda, Ltd. ("BBL"). See Koehler v. Bank of Bermuda, Ltd., No. M18-302, 2004 WL 444101 (S.D.N.Y. Mar. 10, 2004). The facts of that case need not be recited here. It is sufficient for present purposes to note that one of the many speed bumps along the road of this tangled litigation stemmed from a lengthy discovery dispute between the parties. As Judge Dolinger has held, BBL's "multiple defaults" and a "pattern of inactivity" with respect to compliance with discovery orders had "probably impacted adversely . . . the ability of Koehler to unearth all reasonably pertinent information about the extent of the Bank's contacts with New York in or about 1992 and 1993." Koehler v. Bank of Bermuda, Ltd., No. M18-302, 931745, 2003 WL 289640, at *3, *12 (S.D.N.Y. Feb. 11, 2003). As a result of these failings, Judge Dolinger required BBL to pay "the reasonable expenses arising out of Koehler's motions to compel and for sanctions and his supplemental motion for sanctions." Id. at *16. The amount of the award was to be determined at a future date.
That date came on January 12, 2004, when Judge Dolinger recommended an award to Koehler of $33,025.57 in fees and expenses. January 12th Report at 18. Koehler now objects to only one part of Judge Dolinger's decision, in which in the course of determining attorneys' fees, he calculated the hourly rate of Koehler's outside counsel based on historic rather than current rates, which are materially higher. Koehler submits that attorneys' fees should have been calculated based on the current rate of $250 an hour, which would increase his total award to $50,636.07.
As I have previously recognized, Judge Dolinger's rulings on fee awards are nondispositive orders under Rule 72(a), Fed.R.Civ.P., which, as specified by the Rule, may be modified or set aside only if "clearly erroneous or contrary to law." Order of Aug. 11, 2003 at 4. They should only be reversed upon a finding of abuse of discretion. See Nikkal Indus., Ltd. v. Salton, Inc., 689 F. Supp. 187, 189 (S.D.N.Y. 1988).
Judge Dolinger's award of attorneys' fees involved the calculation of the "lodestar" figure, a conventional method by which the number of hours reasonably expended on the litigation is multiplied by a reasonable hourly rate for attorneys and paraprofessionals. January 12th Report at 5. In his initial affidavit in support of legal fees and expenses, Koheler, who is an attorney, requested that Judge Dolinger determine the award based upon the following hourly rates for Koehler and his law partners, Paul L. Newhouse and Brian G. West:
Lee N. Koehler $175.00 per hour Paul F. Newhouse $100.00 per hour Brian G. West $150.00 per hour (1997 rate) 165.00 per hour (1998 rate) 175.00 per hour (2001 rate) 195.00 per hour (2003 rate)
Aff. of Lee N. Koehler, Paul F. Newhouse and Brian G. West in Supp. of Submission of Legal Fees and Expenses per Order of Feb. 10, 2003 at ¶ 5 (Mar. 19, 2003) (the "Koehler Affidavit").
Plaintiff averred that the rates reflected hourly rates charged to other clients at the time the legal services in this case were actually rendered (hence the term "historic rates"), or, with respect to Newhouse, were well below hourly rates charged to other of his clients. Id. at ¶ 6.
BBL disputed that portion of Koehler's application of attorneys fees arising out of his own activities. BBL argued that since a pro se party may not obtain an award of attorney's fees, legal services performed by Koehler on his own behalf should be excluded from the calculation of the award. See Mem. of Resp't, the Bank of Bermuda Ltd., in Resp. to Pet'r Submission Regarding Legal Fees and Expenses at 2-3 (Mar. 27, 2003) ("Mar. 27 Response Brief").
Ultimately, Judge Dolinger agreed with BBL's position and excluded from the portion of his award the portion accounting for legal services performed by Koehler himself. See January 12th Report at 11-12.
However, as a partial response to BBL's argument, Koehler changed his position with respect to the hourly rates used. Abandoning the position that historic rates should be used, Koehler revised his request and asked that Newhouse's and West's time should be compensated at a current rate of $250.00 per hour, in order to reflect both a delay in payment as well as an adjustment for the relevant market area. Mem. in Reply to Resp't Resp. to Pet'r Submission at 8-10 (Apr. 30, 2003).
In his Report and Recommendation, Judge Dolinger calculated Koehler's award based on historic rather than current rates. See January 12th Report at 14 ("[D]espite the fact that rates used in calculating a fee award should be current rather than historic, Mr. West has requested compensation at the rates actually billed to other clients at the time the relevant work was performed." (citations omitted)). I must now decide whether this decision was an abuse of discretion.
The party seeking a fee award bears the burden of demonstrating that the hourly rates they seek are "in line with those prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation." Blum v. Stenson, 564 U.S. 886, 896 n. 11 (1984). The relevant "community" is "the district in which the court sits," which in this case is the Southern District of New York. Polk v. New York State Dep't of Corr. Servs., 722 F.2d 23, 25 (2d Cir. 1983), Here, plaintiff has demonstrated that $250 per hour is a reasonable current rate for attorney's fees.
Plaintiff cites several cases which indicate that $250 per hour is well in line with hourly rates allowed for attorneys with similar years of experience in small law firms within the S.D.N.Y. market. See Pet'r Objection to Report and Recommendations of Mag. Judge at 3-4 (Jan. 19, 2004). In fact, Judge Dolinger notes that Mr. West's request for historical fees (ranging from $150 to $195 per hour) "are well below the current hourly fees that have been awarded to solo practitioners and small-firm attorneys of comparable experience in this district." January 12th Report at 14-15. Based on the foregoing, I find that $250 per hour is a reasonable hourly rate based on current fees.
However, that does not end the inquiry. What remains to be determined is whether Judge Dolinger application of historical rather than current rates in calculating attorneys' fees was an abuse of discretion.
Prior to 1989, the practice in this circuit in calculating the lodestar figure had been to apply the historic rate or, in the case or protracted litigation, to divide the litigation into two separate periods and apply the current rate to the more recent period and the historic rate to the former. See Grant v. Martinez, 973 F.2d 96, 100 (2d Cir. 1992) (describing the prior practice). However, in 1989 the Supreme Court held in Missouri v. Jenkins, 491 U.S. 274 (1989) that "an appropriate adjustment for delay in payment — whether by the application of current rather than historic hourly rates or otherwise — is within the contemplation of the statute." Id. at 284. In accordance with that important decision, this circuit no longer mandated the two-phase approach to rate calculation and instead allowed courts the discretion to "calculate all hours at whatever rate is necessary to compensate counsel for delay." Grant, 973 F.2d at 100.
Following Missouri, the practice of providing lower courts broad discretion to fashion attorneys fee awards based on either current or historic rates, depending on what the court deemed most reasonable, was followed for several years. Thus in Cabrera v. Jakobovitz, 24 F.3d 327 (2d Cir. 1994), the Second Circuit upheld the District Court's decision to set an hourly fee rate for partners at $200 per hour and associates at $135 per hour, based on the "prevailing marketplace rates for the type of work performed and the experience of the attorneys." Id. at 393. But no part of that opinion mandated that the lower court use market rates in calculating fee awards. See also Association for Retarded Citizens v. Thorne, 68 F.3d 547, 554 (2d Cir. 1995) ("A district court has discretion in determining the amount of a fee award, and appellate review of the district court's decision regarding attorney's fees is narrow.") (citations omitted).
This approach changed perceptibly in LeBlanc-Seternberg v. Fletcher, 143 F.3d 748 (2d Cir. 1998). In that case, in which the Second Circuit reversed the District Court's fee award, the Court of Appeals held that "[t]he lodestar should be based on `prevailing market rates' . . . and current rates, rather than historical rates, should be applied in order to compensate for the delay in payment." Id. at 764 (citations omitted) (emphasis added). Therefore, at least in cases in which there has been a significant delay, the prevailing view of this circuit now seems to be that district courts should apply current rates rather than historic rates.
That view was reaffirmed in Gierlinger v. Gleason, 160 F.3d 858 (2d Cir. 1998), in which the Second Circuit said that "in order to provide adequate compensation where the services were performed many years before the award is made, the rates used by the court to calculate the lodestar should be `current rather than historic hourly rates.'" Id. at 882 (citing Missouri, 491 at 284) (emphasis added). Gierlinger added one exception to this rule. A district court "is not necessarily required, however, to award attorneys' fees based on current hourly rates when the delay is due in whole or in substantial part to the fault of the party seeking fees." 160 F.3d at 882. This exception does not apply in this case, since as the prior opinions in the case amply demonstrate, it was BBL rather than Koehler which was primarily responsible for the delay in question.
Thus, there has been a shift in the rule of the Second Circuit from one in which the use of current market rates was encouraged to one where they were, at least in some circumstances, mandated. Koehler's request for fees is clearly a case in which the use of current rates is mandated by governing Second Circuit authority. It follows that Judge Dolinger abused his discretion in failing to use current rates to determine the appropriate fee award to be given Koehler.
BBL contends that current rates should not be used since Koehler himself, in his initial memorandum to Judge Dolinger, requested that historic rates be used, and subsequently made his request for current rates for the first time in an "unauthorized reply brief." Mar. 27 Resp. Brief at 2. Two arguments are intertwined in that contention: first, that Koehler's reply brief was unauthorized; and second, that an argument raised for the first time in a reply brief should not be considered. Neither argument persuades.
By memorandum and order dated February 10, 2003, Judge Dolinger set a briefing schedule wherein, in an effort to determine the amount of reasonable attorneys' fees and expenses, "Koehler's counsel [was] to serve and file an affidavit with contemporaneous time records within ten days" and BBL was permitted to "serve and file responding papers within one week thereafter." Mem. and Order of Magistrate Judge Dolinger, Feb. 10, 2003, at 41. No reference was made in that Order to a reply brief on behalf of either party.
Nevertheless, on April 30, 2003, more than one month after the close of briefing, Koehler filed a reply brief where, for the first time, he made the argument that current rather than historic rates be used to determine fee awards. In response to this brief, BBL, through its counsel, wrote a letter to Judge Dolinger on May 6, 2003, stating that it was rejecting service of the purported reply and asking that the Court similarly disregard it. BBL now argues that Judge Dolinger should not have given any credence to the reply brief, which was not authorized in the initial scheduling order.
Notwithstanding the initial dates set forth in the Memorandum and Order, after several extensions of time, Koehler timely filed his fee application affidavit on March 19, 2003, and BBL filed a timely response on March 27, 2003.
It is clear from the January 12th Report that, notwithstanding his initial scheduling order or BBL's letter of May 6, 2003, Judge Dolinger acknowledged and accepted Koehler's reply brief. Several times throughout the report, the judge acknowledged the brief by name and even responded to some of its arguments (though never specifically acknowledging Koehler's request for current rates). See January 12th Report at 10 ("Arguing against application of the pro se rule, petitioner cites 7 Moore's Federal Practice 3D. . . . (See Memorandum in Reply (`Reply Memo') at p. 1)."), 11 ("See Reply Memo at p. 2."), and 15-16 ("Petitioner responds that these challenged hours . . . were necessary in order to determine, and to be able to articulate to the court, what documents BBL had wrongfully withheld. (See Reply Memo at p. 7)."). Whatever allowances or non-allowances Judge Dolinger had made at the outset with respect to a reply brief, it is clear from his report that he at least implicitly authorized its final submission.
There is perhaps more substance to BBL's argument based upon the correct assertion that Koehler failed to raise his request for use of current market rates until the reply memorandum itself. Circuit and district courts have noted on numerous occasions that arguments raised for the first time in a reply memorandum would not be considered. See U.S. v. Yousef, 327 F.3d 56, 115 (2d Cir. 2003) ("We will not consider an argument raised for the first time in a reply brief."); U.S. v. Greer, 285 F.3d 158, 170 n. 3 (2d Cir. 2002); Estate of Morris Ex Rel. Morris v. Dapolito, 297 F. Supp.2d 680, 689 n. 7 (S.D.N.Y. 2004); Irish Lesbian Gay Org. v. Giuliani, 918 F. Supp. 728, 731 (S.D.N.Y. 1996).
The reason that courts generally do not consider contentions raised for the first time in reply briefs is not out of rigid adherence to technicality but because such conduct denies opposing parties any opportunity to respond. As a compromise solution, courts have, on occasion, allowed parties further opportunities to respond to arguments raised for the first time in reply briefs, rather than dismissing those arguments out of hand. See Brazier v. Hasbro, Inc., No. 99 Civ. 11258, 2004 WL 515536, at *10 (S.D.N.Y. Mar. 16, 2004) ("Because defendants raised all of these arguments for the first time in their reply, Brazier has not yet had an opportunity to respond with his own arguments and supplementary affidavits. Accordingly, Brazier has until April 28, 2004, to submit a response to defendants' attacks on his experts.").
In the case at bar, I have likewise provided BBL ample opportunity to respond to Koehler's dilatory request for current fee rates. Accordingly the danger of unfairness to BBL does not arise.
Concededly, affording BBL a chance to respond does not wipe away all potential prejudice from the table, namely because I review Judge Dolinger's Report and Recommendation for abuse of discretion. Had BBL been afforded an opportunity to respond by Judge Dolinger himself, the merits of BBL's case would have been examined de novo. However, this is a moot concern here since I find that this aspect of Judge Dolinger's Report (that is, that Koehler's fees should be calculated using historic rates) should be overturned even under the higher abuse of discretion standard. It follows, therefore, that under a de novo standard of review, the outcome would have been the same.
For the foregoing reasons, I sustain Koehler's objection to Magistrate Judge Dolinger's January 12th Report and Recommendation. The Court adopts that Report and Recommendation, except that the hourly rates for attorneys' fees for the claimed time spent by Newhouse and West will be $250 in respect of each attorney. That adjustment would appear to increase the award from $33, 025.57 to $50, 636.07.
Counsel for plaintiff are directed to serve and file a Judgment consistent with this Opinion on five (5) days' notice, such service and filing to be effected not later than May 3, 2004.
It is SO ORDERED.