Opinion
24-cv-3728 (LJL)
07-24-2024
ASHLEY HUNTER and VIVEK SETHIA, as SELLER REPRESENTATIVE, Petitioners, v. AZENTIO SOFTWARE PRIVATE LIMITED, Respondent.
MEMORANDUM AND ORDER
LEWIS J. LIMAN, UNITED STATES DISTRICT JUDGE:
Petitioners Ashley Hunter and Vivek Sethia (“Petitioners”), as Seller Representatives, move, pursuant to Federal Rule of Civil Procedure 54, for an order granting them attorney's fees and costs. Dkt. No. 20. Respondent Azentio Software Private Limited (“Respondent”) opposes that motion. Dkt. No. 24.
“Petitioners request that the Court first determine the issue of entitlement to fees and defer evidentiary submissions as to the total amount of fees to a later date.” Dkt. No. 21 at 3 (citing Fed.R.Civ.P. 54(d)(2)(C)). Respondent notes: “To the extent the Court grants the Motion, [Respondent] intends to challenge the reasonableness of Petitioners' fees, which is not at issue in the Motion.” Dkt. No. 24 at 3 n.3.
Petitioners are parties and party representatives to an Equity Shares Purchase Agreement (“ESPA”) with Respondent, entered into as of June 30, 2021 and amended on November 23, 2021. Dkt. No. 1 at 3; Dkt. No. 1-2. On or about April 5, 2023, Petitioners initiated an arbitration before the International Centre for Dispute Resolution (“ICDR”) against Respondent arising from a dispute between the parties under the ESPA. Dkt. No. 1 at 5. On April 11, 2024, the arbitral panel issued an arbitration award (the “Award”) in favor of Petitioners, awarding them a sum of $7,000,000.00 plus $560,000.00 in interest. Id. at 6; Dkt. No. 1-1 at 12. The panel also awarded Respondent a sum of $750,000.00 plus $83,671.00 in interest. Dkt. No. 1-1 at 12. The panel required the parties to pay those amounts within thirty days of the Award's date of transmittal. Id. After offsetting the two awards, Respondent owed Petitioners $6,726,329.00 pursuant to the Award. Dkt. No. 1 at 6.
When Respondent failed to pay the Award within thirty days, Petitioners filed this action as a petition to confirm an arbitral award, pursuant to Section 9 of the Federal Arbitration Act and Article IV of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, on May 15, 2024. Dkt. No. 1. Petitioners also sought expedited relief pursuant to Federal Rule of Civil Procedure 64 and New York Civil Practice Law and Rules (“C.P.L.R.”) 5229. See Dkt. No. 7. Respondent subsequently paid $2,500,000.00 of the Award and filed a letter explaining that it did not oppose confirmation of the Award. Dkt. No. 11. On June 14, 2024, the Court entered an agreed-upon final judgment in favor of Petitioners for: the remaining principal amount of the Award of $4,226,329.00; prejudgment interest of $89,693.93 through June 12, 2024; and interest at the rate of 9% per annum on the remaining unpaid balances of $4,226,329.00 from June 12, 2024 until paid in full and $89,693.93 from the date of entry of judgment until paid in full. Dkt. No. 18.
On June 28, 2024, Petitioners filed this motion pursuant to Rule 54(d) for attorney's fees and costs. Dkt. No. 20. Petitioners rely on Section 12.17 of the ESPA. Dkt. No. 21 at 3. That section states:
12.17 Prevailing Party. In the event of any Suit in connection with this Agreement or any Ancillary Document, the prevailing party in any such Suit shall be entitled to recover from the other party its costs and expenses, including, without limitation, reasonable legal fees and expenses.Dkt. No. 32-1 at ECF p.79; see also id. at ECF p.18 (“‘Suit' means any suit, litigation, arbitration or other dispute resolution proceeding.”).
Respondent opposes the motion for attorney's fees and costs. Dkt. No. 24. It argues that Petitioners are not the prevailing parties because the Court did not issue a ruling in their favor before the parties agreed to a stipulated form of judgment. Id. at 2. Respondent also relies on Section 12.6 of the ESPA. Id. That section provides:
12.6 Dispute Resolution. . . . Unless otherwise adjudicated by an arbitration proceeding in accordance with this Section 12.6, each Party shall be responsible for its own costs incurred by it in connection with arbitration or litigation, including its attorney's fees (which attorney's fees shall not be awarded in favor of the prevailing party), hereunder and agrees to waive any right to refer any question of law and any right of appeal on the law and/or the merits to any national court.Dkt. No. 32-1 at ECF p.75. Respondent argues that Section 12.6 rather than Section 12.17 governs Petitioners' application for fees because “[t]he specific . . . controls over the general,” Dkt. No. 24 at 2, and Petitioners are not entitled to recover fees under Section 12.6 because the arbitral panel decided not to award fees, id. at 3; see Dkt. No. 1-1 at 11-12.
Federal Rule of Civil Procedure 54(d)(2) provides that “[a] claim for attorneys' fees and related nontaxable expenses” may be made by motion unless substantive law requires those fees to be proved at trial as an element of damages and permits such motion to be made no later than fourteen days after entry of judgment. Fed.R.Civ.P. 54(d)(2); see Jones v. UNUM Life Ins. Co. of Am., 223 F.3d 130, 137 (2d Cir. 2000); Zero Carbon Holdings, LLC v. Aspiration Partners, Inc., 2024 WL 3409278, at *2 (S.D.N.Y. July 15, 2024).
The ESPA is governed by Delaware law. Dkt. No. 32-1 at ECF p.75. “Delaware generally follows the American Rule, under which litigants are responsible for their own attorneys' fees, regardless of the outcome of the lawsuit.” Bako Pathology LP v. Bakotic, 288 A.3d 252, 280 (Del. 2022) (quoting Alaska Elec. Pension Fund v. Brown, 988 A.2d 412, 417 (Del. 2010)). “One exception to the American Rule ‘is found in contract litigation that involves a fee[-]shifting provision.'” Id. (quoting Mahani v. Edix Media Grp., Inc., 925 A.2d 242, 245 (Del. 2007)). Where “the contract contains a fee-shifting provision, [the courts] enforce that provision.” SIGA Techs., Inc. v. PharmAthene, Inc., 67 A.3d 330, 352 (Del. 2013).
Delaware follows “well-established” rules of contract interpretation. Manti Holdings, LLC v. Authentix Acquisition Co., Inc., 261 A.3d 1199, 1208 (Del. 2021). “When the contract is clear and unambiguous, [the court] will give effect to the plain-meaning of the contract's terms and provisions.” In re Shorenstein Hays-Nederlander Theatres LLC Appeals, 213 A.3d 39, 5657 (Del. 2019) (quoting Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159-60 (Del. 2010)). “In doing so, [the court must] endeavor ‘to give each provision and term effect' and not render any terms ‘meaningless or illusory.'” Weinberg v. Waystar, Inc., 294 A.3d 1039, 1044 (Del. 2023) (quoting Manti Holdings, 261 A.3d at 1208).
Under those principles, the ESPA entitles Petitioners to recover the reasonable fees and costs they incurred in connection with the petition to confirm the arbitral award and the motion for expedited relief. Respondent argues that Sections 12.6 and 12.17 contradict each other and that the Court should therefore apply the interpretive canon that “where specific and general provisions conflict, the specific provision ordinarily qualifies the meaning of the general one.” Dkt. No. 24 at 2-3 (quoting DCV Holdings, Inc. v. ConAgra, Inc., 889 A.2d 954, 961 (Del. 2005)). But “a contract must be read as a whole and in a manner that will avoid any internal inconsistencies, if possible.” Bank of N.Y. Mellon v. Commerzbank Cap. Funding Tr. II, 65 A.3d 539, 550 (Del. 2013). And Sections 12.6 and 12.17 are easily reconciled under an interpretation that gives both provisions independent meaning.
Section 12.6 is the ESPA's “arbitration clause.” Dkt. No. 1-1 at 11. It requires the parties to submit “[a]ny controversy or claim arising out of or relating to this contract, or the breach thereof,” to “arbitration administered by the [ICDR].” Dkt. No. 32-1 at ECF p.75. However, Section 12.6 clarifies: “Each Party retains the right to apply to any court of competent jurisdiction for provisional and/or conservatory relief, including pre-arbitral attachments or injunctions, and any such request shall not be deemed incompatible with the agreement to arbitrate or a waiver of the right to arbitrate.” Id. Section 12.6 then concludes with the language upon which Respondent relies:
Unless otherwise adjudicated by an arbitration proceeding in accordance with this Section 12.6, each Party shall be responsible for its own costs incurred by it in connection with arbitration or litigation, including its attorney's fees (which attorney's fees shall not be awarded in favor of the prevailing party), hereunder and agrees to waive any right to refer any question of law and any right of appeal on the law and/or the merits to any national court.Id. (emphasis added). Accordingly, the critical question is whether “hereunder” refers to any suit in connection with the ESPA or only those actions for provisional or conservatory relief described in Section 12.6.
Section 12.14, entitled “Interpretation,” states:
For the purposes of this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires: . . . the terms “hereof,” “herein,” “hereunder,” “hereby” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement.Id. at ECF p.77 (emphasis added). Although Section 12.14 provides some support for the conclusion that 12.6 governs any litigation brought pursuant to the ESPA, Section 12.14 is ultimately not dispositive because “context dictates otherwise.” United States v. Harris, 838 F.3d 98, 105 (2d Cir. 2016) (quoting Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979)). Reading Section 12.6 as prohibiting the recovery of attorney's fees incurred in any litigation under the ESPA would create a direct conflict with Section 12.17's statement that the prevailing party in “any Suit in connection with this Agreement” is entitled to recover attorney's fees. Dkt. No. 32-1 at ECF p.79. As a result, no matter which provision the Court were to apply, the other would be left entirely without effect, thereby “violat[ing] a fundamental principle of Delaware contract law by making the words of [either Section 12.6 or 12.17] surplusage.” Simons v. Brookfield Asset Mgmt. Inc., 2022 WL 223464, at *6 (Del. Ch. Jan. 21, 2022); see Kuhn Const., Inc. v. Diamond State Port Corp., 990 A.2d 393, 397 (Del. 2010) (explaining a court must avoid interpretations that “render any part of the contract mere surplusage”).
Thus, understood in the context of the agreement as a whole, “hereunder” in Section 12.6 does not refer to any litigation brought under the ESPA. Instead, the term “hereunder” and the prohibition on recovering attorney's fees absent an arbitral order otherwise in Section 12.6 governs only lawsuits brought under that section-namely, those for pre-arbitral provisional or conservatory relief such as attachments or injunctions. Dkt. No. 32-1 at ECF p.75. The section provides that, where a party incurs attorney's fees in connection with an arbitration or litigation seeking provisional or conservatory relief in connection with the arbitration, the arbitrators and only the arbitrators will determine whether the fees should be shifted and, if they do not order fee shifting, each party will bear its own costs. See id. (forbidding fee shifting “[u]nless otherwise adjudicated by an arbitration proceeding in accordance with this Section 12.6”). After all, the arbitrators are in the best position to make the judgment of which party should bear the cost of the fees in connection with an arbitration the arbitrators preside over and litigation in support of that arbitration. Section 12.17 also has independent meaning, as it entitles a prevailing party to attorney's fees in any other suits in connection with the ESPA or an ancillary document. As to those actions, in which the arbitrators are not necessarily in a position to determine whether fees should be shifted or the amount of fees that would be reasonable, fee shifting under Delaware contract law applies.
In that more limited sense, the specific indeed controls the general in the ESPA. See In re Shorenstein Hays-Nederlander Theatres LLC Appeals, 213 A.3d at 62.
The fees sought by Petitioners are covered by Section 12.17. This action is a “Suit in connection with” the ESPA. Id. at ECF p.75. And Petitioners do not seek to recover expenses incurred in the arbitration or in pursuing any provisional or conservatory relief in connection with the arbitration. See Dkt. No. 28 at 3. Rather, the fees they seek to recover were all incurred in an action commenced after the arbitration concluded.
Petitioners are also “the prevailing party.” Id. They initiated this suit after Respondent failed to pay the entirety of the sum that was due under the Award. Dkt. No. 1 at 6. Consequently, at the time Petitioners filed the action, they also moved for expedited relief pursuant to Federal Rule of Civil Procedure 64 and C.P.L.R. 5229. See Dkt. No. 7. The Court scheduled a hearing on the motion for expedited relief for June 17, 2024. Dkt. No. 16. After the Court scheduled that hearing, but before it was held, the parties submitted an agreed-upon proposed judgment, Dkt. No. 17-1, so the Court entered judgment in favor of Petitioners and awarded them over $4 million, Dkt. No. 18, thereby mooting the motion for expedited relief. As a matter of plain meaning, a “prevailing party” is one “in whose favor a judgment is rendered, regardless of the amount of damages awarded.” Nassau Gallery Inc. v. Nationwide Mut. Fire Ins. Co., 2003 WL 22852242, at *3 (Del. Super. Ct. Nov. 18, 2003) (quoting Prevailing Party, Black's Law Dictionary (7th ed. 1999)); see also Graham v. Keene Corp., 616 A.2d 827, 828 (Del. 1992) (“[T]he term ‘prevailing party' . . . refers to a party for whom final judgment has been entered in any civil action.”). Petitioners are therefore prevailing parties under Section 12.17 of the ESPA.
Thus, under Delaware law, Section 12.17 entitles Petitioners “to recover from [Respondent] costs and expenses, including . . . reasonable legal fees and expenses” incurred in this action. Dkt. No. 32-1 at ECF p.79.
CONCLUSION
Petitioners' motion for attorney's fees and costs, Dkt. No. 20, is GRANTED. Petitioners shall submit evidentiary materials supporting a specific award of fees and costs pursuant to this Memorandum and Order by August 14, 2024. Respondent's opposition, if any, shall be due August 28, 2024. Petitioners may then submit a reply by September 4, 2024.
The Clerk of Court is respectfully directed to close Dkt. No. 20.
SO ORDERED.