Opinion
22-CV-6160 (AS) (JLC)
10-16-2023
JTH TAX LLC d/b/a LIBERTY TAX SERVICE, Plaintiff, v. JOSUE SANCHEZ d/b/a TRIPLE J, et al., Defendants.
HONORABLE ARUN SUBRAMANIAN, UNITED STATES DISTRICT JUDGE
REPORT AND RECOMMENDATION
JAMES L. COTT UNITED STATES MAGISTRATE JUDGE
Plaintiff JTH Tax LLC d/b/a Liberty Tax Service (“Liberty” or “Plaintiff”) brought this action against defendants Josue Sanchez d/b/a Triple J (“Sanchez”), RedHills Corp. (“RedHills”), Don Varghese (“Varghese”), and Merrick Henry (“Henry”) seeking, inter alia, monetary relief for claims regarding a breach of a franchise agreement, promissory note, and guarantee. All defendants other than Varghese have resolved their claims with Liberty. On February 6, 2023, the Court entered a default judgment against Varghese. The case was subsequently referred to me to conduct an inquest into damages. For the reasons set forth below, Liberty should be awarded $515,974.21 in damages, pre- and post- judgment interest, and $25,549.51 in attorneys' fees and costs against Varghese.
A stipulation of dismissal was entered on March 15, 2023, with RedHills and Henry (Dkt. No. 66), and a stipulated injunction was entered with Sanchez on April 17, 2023 (Dkt. No. 68).
I. BACKGROUND
A. Factual Background
The following facts, which are drawn from a review of plaintiff's pleadings and submissions related to this inquest, “are deemed established for the purpose of determining the damages to which [it is] entitled.” Salazar v. 203 Lena Inc., No. 16-CV-7743 (VB) (JLC), 2020 WL 5627118, at *1 (S.D.N.Y. Sept. 18, 2020) (citing City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011)), adopted by 2020 WL 6257158 (Oct. 23, 2020).
Liberty is a Delaware limited liability company with its principal place of business in Virginia. Complaint (“Compl.”) ¶ 1, Dkt. No. 1. It is the franchisor of income tax preparation service centers throughout the United States. Plaintiff's Proposed Findings of Fact and Conclusions of Law (“PFOF”) ¶ 9, Dkt. No. 63; Compl. ¶¶ 11, 13. To that end, it “grants licenses to franchisees to use its trademarks, learn its trade secrets, and participate in its confidential and proprietary system pursuant to written franchise agreements.” PFOF ¶ 10; Compl. ¶¶ 13-14.
On August 18, 2016, Sanchez became a Liberty franchisee, after purchasing two Liberty franchises from RedHills for $324,000 through an “Agreement of Purchase and Sale” on June 30, 2016. Compl. ¶ 16; PFOF ¶ 11. This agreement was for two franchises in the Bronx, for five years each, which had been owned and operated by RedHills. Compl. ¶¶ 17-18. The same day, RedHills, Varghese, and Henry entered into an Accounts and Notes Receivable Guaranty Agreement with Liberty in which they “unconditionally, absolutely, and irrevocably guarantee[d] the performance of [Sanchez]” for the previously signed purchase agreement. Id. ¶ 19 (quotation marks omitted) (quoting Accounts and Notes Receivable Guaranty Agreement (“Guaranty Agreement”), at 1, Compl. Ex. C, Dkt. No. 1-3). Sanchez also executed a promissory note in favor of Liberty for $315,023.28 for “the principal amount” with interest accruing “at a rate of 12% per annum.” PFOF ¶ 12; Compl. ¶¶ 31-32. Thus, in the event of default, RedHills, Varghese, and Henry would be liable for all costs and fees associated with the agreement. Compl. ¶ 34.
At some unidentified date, Sanchez began operating a Liberty location in the Bronx. Id. ¶ 35. Liberty subsequently provided notice to Sanchez on or about May 2, 2019, for breaches of the franchise agreement, PFOF ¶ 16; Compl. ¶ 38, to which both parties agreed to a Mutual Termination on July 18, 2019. PFOF ¶ 17; Compl. ¶¶ 40-44. Sanchez then “defaulted on his obligations under the Promissory Note and the Mutual Termination Agreement, rending [sic] all amounts immediately due and owing.” PFOF ¶ 19; Compl. ¶ 45. In July 2020, Sanchez filed for bankruptcy, which discharged him of any debt owed to Liberty. PFOF ¶ 30.
B. Procedural History
On July 20, 2022, Liberty filed its complaint alleging Sanchez's (1) “[b]reach of the [f]ranchise [a]greements,” id. ¶¶ 48-54; (2) “[b]reach of the [m]utual [t]ermination,” id. ¶¶ 55-60; (3) “[b]reach of the [p]romissory [n]ote by Sanchez,” id. ¶¶ 61-66; as well as (4) RedHills, Varghese and Henry's “[b]reach of the [g]uaranty” id. ¶¶ 67-72; (5) “[v]iolation of the Defend Trade Secrets Act [a]gainst Sanchez,” id. ¶¶ 73-86; and (6) “[c]ommon [l]aw [c]onversion [a]gainst [S]anchez.” Id. ¶¶ 87-93. Thus, there is only one claim pending against Varghese-count four of the complaint.
As Varghese failed to appear, the Court entered a default judgment against him on February 6, 2023, as to liability on count four (breach of guaranty). Dkt. No. 53. On February 7, 2023, this case was referred to me for an inquest into damages as to Varghese. Dkt. Nos. 55-56. On March 6, 2023, Liberty submitted its proposed findings of fact and conclusions of law. Dkt. No. 63.
Liberty seeks a total of $554,834.41 from Varghese. Specifically, Liberty requests $515,974.21 in damages: $252,105.72 for “the remaining principal” owed on the Sanchez promissory note; $183,424.87 in “interest . . . calculated at 12 percent per annum[]”; and $80,443.62 in accounts receivable under the Guaranty Agreement; plus, pre-judgment and post-judgment interest. Id. at 7. Liberty further seeks an award of attorneys' fees and costs in the amount of $38,860.20. Id.
The pagination in the Proposed Findings of Facts and Conclusion of Law refers to the automated page numbers developed by the Electronic Case Filing System (“ECF”) in the top header of the document, as the document is not otherwise paginated.
II. DISCUSSION
A. Legal Standards
“[A]lthough a ‘default judgment entered on well-pleaded allegations in a complaint establishes a defendant's liability,' it does not reach the issue of damages.” Bolivar v. FIT Int'l Grp. Corp., No. 12-CV-781 (PGG) (DF), 2017 WL 11473766, at *13 (S.D.N.Y. Mar. 16, 2017) (first quoting Bambu Sales, Inc. v. Ozak Trading, Inc., 58 F.3d 849, 854 (2d Cir. 1995); then citing Ferri v. Berkowitz, 561 Fed.Appx. 64, 65 (2d Cir. 2014)), adopted by 2019 WL 4565067 (Sept. 20, 2019). “A plaintiff must therefore substantiate its claims for damages with admissible evidence to prove the extent of those damages.” Id. (citing Hounddog Prod., L.L.C. v. Empire Film Grp., Inc., 826 F.Supp.2d 619, 627 (S.D.N.Y. 2011)). A plaintiff may support claimed damages through “a sworn affidavit by a person with knowledge of the relevant facts, or by documentary evidence duly authenticated by a person with knowledge.” Related Cos. L.P. v. Ruthling, No. 17-CV-4175 (JSR) (DF), 2019 WL 10947100, at *3 (S.D.N.Y. July 23, 2019) (citations omitted). “Alternatively, evidence may be provided by a declaration made under penalty of perjury, in accordance with the requirements of 28 U.S.C. § 1746.” Id. (citing Local Civ. R. 1.9(a)).
“The plaintiff bears the burden to ‘introduce sufficient evidence to establish the amount of damages with reasonable certainty.'” Bolivar, 2017 WL 11473766, at *13 (quoting RGI Brands LLC v. Cognac Brisset-Aurige, S.A.R.L., No. 12-CV-1369 (LGS) (AJP), 2013 WL 1668206, at *6 (S.D.N.Y. Apr. 18, 2013)), adopted by 2013 WL 4505255 (Aug. 23, 2013). “While a plaintiff is entitled to all reasonable inferences in its favor based upon the evidence submitted, if a plaintiff fails to demonstrate its damages to a reasonable certainty, then the court should decline to award any damages, even where liability has been established through default.” Id. (first citing U.S. ex rel. Nat. Dev. & Const. Corp. v. U.S. Envtl. Universal Servs., Inc., No. 11-CV-730 (CS), 2014 WL 4652712, at *3 (S.D.N.Y. Sept. 2, 2014); then citing Lenard v. Design Studio, 889 F.Supp.2d 518, 538 (S.D.N.Y. 2012)).
“While the Court must ‘take the necessary steps to establish damages with reasonable certainty,' the Court need not hold a hearing ‘as long as it ensures that there is a basis for the damages specified in the default judgment.'” Idir v. La Calle TV, LLC, No. 19-CV-6251 (JGK), 2020 WL 4016425, at *2 (S.D.N.Y. July 15, 2020) (alteration omitted) (first quoting Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997); then quoting Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989)). Because Liberty's submissions have not been contested and “they provide all the information necessary to determine [its] damages,” a hearing is unnecessary, and none has been requested. Id.
B. Analysis
1. Damages for Breach
Liberty seeks $515,974.21 for Varghese's breach of the guaranty. PFOF at 7. However, since Liberty has settled with Sanchez, RedHills, and Henry for an undisclosed amount, id. ¶¶ 32, 35, the Court must address whether any damages assessed against Varghese should be subject to a set-off.
“Under New York law, a successful plaintiff in a breach of contract action is entitled to damages in the ‘amount necessary to put the plaintiff in the same economic position he would have been in had the defendant fulfilled his contract.'” Am. Jewish Comm. v. Berman, No. 15-CV-5983 (LAK) (JLC), 2016 WL 3365313, at *5 (S.D.N.Y. June 15, 2016) (quotation omitted), adopted by 2016 WL 4532201 (Aug. 29, 2016). “New York law provides that a plaintiff who settles its claim against fewer than all defendants in an action may still pursue its claim against the nonsettling defendants[] but may not seek to recover twice for the same harm.” Godfrey v. Soto, No. 06-CV-428 (NG) (JO), 2007 WL 2693652, at *6 (E.D.N.Y. Sept. 10, 2007) (first citing N.Y. Gen. Oblig. Law § 15-108(a); then citing Williams v. Niske, 81 N.Y.2d 437, 442-43 (1993)). “The non-settling defendant bears the burden, however, of establishing the extent to which a recovery against it would be duplicative of the plaintiff's recovery from the settling defendants.” RLI Ins. Co. v. King Sha Grp., 598 F.Supp.2d 438, 447 (S.D.N.Y. 2009). Indeed, “New York courts confronted with a non-settling defendant who has defaulted have decided that the windfall should not accrue to the benefit of the party who has refused to participate in litigation.” Id. (quoting Godfrey, 2007 WL 2693652, at *7). While New York law generally protects non-settling tortfeasors from paying more than their equitable share, such protection must be pled as an affirmative defense, and if not, it is forfeited. See id. at 446 (citing Schipani v. McLeod, 541 F.3d 158, 164 (2d Cir. 2008)).
a. Liberty Has Established Damages With Reasonable Certainty
As a threshold matter, Liberty has sufficiently “established the amount of damages [owed] with reasonable certainty.'” Bolivar, 2017 WL 11473766, at *13. To support its claim, Liberty provides a copy of the Guaranty Agreement with Varghese's signature and the terms he agreed to such that “[u]pon default by [Sanchez], [Varghese] hereby agrees to assume all obligations and responsibilities for repayment to [Liberty]” with the principal amount being $315,023.28 as of the date the agreement was signed. Guaranty Agreement at 3, Dkt. No. 1-3. Liberty also provided the promissory note signed by Sanchez confirming he agreed to an interest rate of 12 percent per annum. Dkt. No. 1-4. To confirm the amount it is entitled to for Sanchez's breach, Liberty provided a declaration from Clifford Birnbaum, one of its Regional Directors, affirming that there existed an “unpaid principal” balance of $252,105.72, $183,424.87 in interest, and the amount of $80,443.62 in accounts receivable for a combined amount of $515,974.21. Declaration of Clifford Birnbaum dated March 3, 2023, at ¶¶ 5-7, Dkt. No. 63-3.
References to page numbers in the Guaranty Agreement (as opposed to paragraph numbers) refer to the automated ECF page numbers.
b. Varghese Should Not Receive a Set-Off
Moreover, Varghese should not benefit from any set-off because of Liberty's settlement agreement with RedHills and Henry. As Liberty points out, for Varghese to benefit from the “set-off” of the settlement with the two settled defendants, he “must plead it as an affirmative defense; otherwise[,] it is forfeited.” PFOF ¶ 33 (citations omitted); RLI Ins. Co., 598 F.Supp.2d at 446-47. Liberty further argues that since Varghese did not provide such a defense, he “is not entitled to a set-off when a settlement is reached with the co-defendants” and it is thus entitled to the full amount in question from him. Id. ¶ 34 (citing Chloe v. Zarafshan, No. 06-CV-3140 (RJH) (MHD), 2009 WL 2956827, at *7 (S.D.N.Y. Sept. 15, 2009)).
The Court agrees. In principle, since Varghese chose “to not participate in this litigation,” he should not be awarded a setoff as that would incentivize others to “ignore suits brought against them, in direct contravention of the policy interests underlying New York's law.” Godfrey, 2007 WL 2693652, at *7. Since Varghese has defaulted and prevented the fact finder in this case from measuring the “equitable share of fault,” the settlement agreed to by RedHills and Henry will not be considered. RLIIns. Co., 598 F.Supp.2d at 446-47. Thus, Liberty should be awarded $515,974.21 in damages for Varghese's breach of the Guaranty Agreement.
2. Pre-Judgment and Post-Judgment Interest
In addition to damages, Liberty should receive prejudgment interest on its breach of contract damages as a matter of right. See N.Y. C.P.L.R. § 5001(a) (“Interest shall be recovered upon a sum awarded because of a breach of performance of a contract.” (emphasis added)). “Under New York law, ‘a plaintiff who prevails on a claim for breach of contract is entitled to prejudgment interest as a matter of right.'” Midwood Junction v. Puerto del Sol Int' Inv., S.A., No. 15-CV-5181 (RA) (SN), 2016 WL 8905357, at *4 (S.D.N.Y. Dec. 5, 2016) (quoting U.S. Naval Inst. v. Charter Comm'ns, Inc., 936 F.2d 692, 698 (2d Cir. 1991)), adopted as modified by 2017 WL 1857248 (May 4, 2017). The applicable statutory interest rate is nine percent per annum, N.Y.C.P.L.R. § 5004, and this statutory interest may be “computed from the earliest ascertainable date the cause of action existed.” Id. (quoting N.Y. C.P.L.R. § 5001(b)). In this case, the complaint was filed on July 20,2022. See Dkt. No. 1. Therefore, the Court should award prejudgment interest from July 20, 2022, through the date judgment is entered.
Liberty does not propose a different date (or any date) from which the prejudgment interest should run.
Liberty's request for post-judgment interest should also be granted. Id. at 7. Post-judgment “[i]nterest shall be allowed on any money judgment in a civil case recovered in a district court.” 28 U.S.C. § 1961(a); see, e.g., Back Nine Indoor Golf Ltd. v. Infinity Golf & Sports Simulators LLC, No. 19-CV-1395 (VB) (PED), 2019 WL 5722382, at *7 (S.D.N.Y. Aug. 16, 2019), adopted by 2019 WL 4386018 (Sept. 13, 2019); Capstone Capital Grp., LLC v. Hahn, No. 21-CV-1636 (PGG) (KHP), 2022 WL 2532449, at *5 (S.D.N.Y. Mar. 15, 2022). Thus, Liberty should be granted postjudgment interest as of “the date of the entry of [this] judgment at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding” until the date of payment from Varghese. Id.
3. Attorneys' Fees and Costs
Lastly, Liberty seeks $38,860.20 in attorneys' fees and costs, consisting of $38,176.20 in attorneys' fees (which allegedly includes a discount of $10,911.50) and $684.00 in costs. PFOF ¶ 37; Declaration of Keith E. Sharkin dated March 6, 2023 (“Sharkin Decl.”) ¶¶ 7-8, Dkt. No. 63-1; Sharkin Decl. Ex. A at 12, Dkt. No. 63-2. Such requests are in alignment with the Guaranty Agreement, to which Varghese agreed, that “[i]n the event of default by [Varghese], all reasonable legal fees, collection and enforcement charges to the extent permissible by law, in addition to other amounts due, shall be payable by [Varghese].” Guaranty Agreement at 4, Dkt. No. 1-3. To support its fee request, Liberty provided a declaration from Keith Sharkin, who is a partner at Gordon Rees Scully Mansukhani LLP (“Gordon Rees”) and counsel for Liberty. Sharkin Deci. ¶ 1. Exhibit A to the declaration lists the number of hours worked by employee, the employee's hourly rate, and a description of the work performed. Sharkin Deci. Ex. A. The individual hourly rate and hours worked by individual are displayed in the table below. The table also includes the total hours and total fee amount requested for attorneys' fees, including the discount the firm provided to Liberty. Id.
Page numbers for Exhibit A of the Sharkin Declaration are based on ECF numbering.
Requested Fee Summary
Timekeeper
Title
Rate
Totals
Keith Sharkin
Partner
$279
6.8
$ 1,897.20
Keith Sharkin
Partner
$310
118.3
$ 36,673.00
JoAnna Doherty
Partner
$310
5.3
$ 1,643.00
Irma Katsman
Associate
$245
35.1
$ 8,599.50
Carla Tankel
Paralegal
$125
2.2
$275.00
Subtotal
N/A
167.7
$ 49,087.70
(Client Discount)
$ 10,911.50
Total after Client. Discount.
$ 38,176.20
It would have been helpful if plaintiff's counsel had calculated the number of hours assigned to each Gordon Rees employee's billing and provided them to the Court.
Federal courts will enforce contractual provisions requiring one party to pay another's legal fees and costs in the event of a breach so long as they are reasonable. See, e.g., CARCO GRP., Inc. v. Maconachy, 718 F.3d 72, 86 (2d Cir. 2013) (citing F.H. Krear & Co. v. Nineteen Named Trs., 810 F.2d 1250, 1264 (2d Cir. 1987)); Sidley Holding Corp. v. Ruderman, No. 08-CV-2513 (WHP), 2010 WL 963416, at *1 (S.D.N.Y. Mar. 15, 2010). The inquiry into reasonableness in the context of attorneys' fees centers on the lodestar, or “the product of a reasonable hourly rate and the reasonable number of hours required by the case.” Millea v. Metro-N. R.R. Co., 658 F.3d 154, 166 (2d Cir. 2011) (lodestar “creates a ‘presumptively reasonable fee'”) (quoting Arbor Hill Concerned Citizens Neighborhood Ass'n v. County of Albany, 522 F.3d 182, 183 (2d Cir. 2008)); see also Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 552-53 (2010). “While the lodestar is not always conclusive, its presumptive reasonability means that” district courts must “calculate it as a starting point” in determining attorneys' fees, Millea, 658 F.3d at 166, departing from it if necessary “to reflect consideration of any case-specific circumstances.” Laboratorios Rivas, SRL v. Ugly & Beauty, Inc., No. 11-CV-5980 (RA) (JLC), 2013 WL 5977440, at *13 (S.D.N.Y. Nov. 12, 2013), adopted by 2014 WL 112397 (Jan. 8, 2014).
a. Attorneys' Fees
Although Liberty seeks $38,176.20 in fees (reduced from just over $49,000), I recommend that Liberty be awarded $24,865.51 for its attorneys' fees for the following reasons.
i. Hourly Rates
Liberty seeks a billing rate of $310 “after January 31, 2022” and $279 for work done “prior to February 1, 2022” for Sharkin, a firm partner who has been practicing for more than 30 years. Sharkin Decl. ¶ 9. Liberty also seeks a billing rate of $310 for JoAnna Doherty, a partner who has been practicing for more than 12 years; $245 for Irma Katsman, an associate; and $125 for Carla Tankel, a paralegal. Id. ¶¶ 10-12.
The Sharkin Declaration does not contain any further information about the experience of the firm's associate attorneys and paralegals.
“The reasonable hourly rate is the rate a paying client would be willing to pay” and “a reasonable, paying client wishes to spend the minimum necessary to litigate the case effectively.” Arbor Hill, 522 F.3d at 190. Determining whether an hourly rate is reasonable involves comparison to prevailing market rates “for similar services by lawyers of reasonably comparable skill, experience and reputation.” Gierlinger v. Gleason, 160 F.3d 858, 882 (2d Cir. 1998) (quoting Blum v. Stenson, 465 U.S. 886, 896 n.11 (1984)). The court looks to the prevailing community rates in the district in which it sits. Reiter v. MTA N.Y.C. Transit Auth., 457 F.3d 224, 232 (2d Cir. 2006). At all times, “the burden is on the fee applicant to produce satisfactory evidence-in addition to the attorney's own affidavits-that the requested rates are in line with those prevailing in the community for similar services.” Blum, 465 U.S. at 896 n.11. However, “[t]he Court may also rely on its own familiarity with prevailing rates in its district to determine a reasonable rate.” Laboratorios Rivas, 2013 WL 5977440, at *14 (citing Townsend v. Benjamin Enters., 679 F.3d 41, 59 (2d Cir. 2012)). “[C]ourts are generally more skeptical of requested hourly rates when the applicant fails to provide information about the backgrounds of the relevant attorneys and paralegals.” Gonzalez v. Scalinatella, Inc., 112 F.Supp.3d 5, 28 (S.D.N.Y. 2015).
Given that Sharkin is a partner at the firm and has been practicing for more than 30 years, his hourly rates of $279 and $310 are well within the range of accepted rates in this District. See, e.g., King Fook Jewellry [sic] Grp. Ltd. v. Jacob & Co. Watches, Inc., No. 14-CV-742 (ER) (JLC), 2019 WL 2535928, at *4 (S.D.N.Y. June 20, 2019) (breach of contract case where partners practicing at large law firms were given rates of $500 to $700 (citation omitted)), adopted sub nom. by King Fook Jewellery [sic] Grp. Ltd. v. Jacob & Co. Watches Inc., 2019 WL 4879212 (Oct. 3, 2019); Euro Pac. Capital Inc. v. Bohai Pharm. Grp., Inc., No. 15-CV-4410 (VM) (JLC), 2018 WL 1596192, at *9 (S.D.N.Y. Mar. 28, 2018) (“rate of $375” approved “for attorneys with 30 to 40 years' experience”) (collecting cases). Additionally, Doherty's hourly rate of $310 is reasonable and aligns with the reasonable rates awarded in this District given her 12-plus years of experience. See e.g., Bank of Am., N.A. v. Brooklyn Carpet Exch., Inc., No. 15-CV-5981 (LGS) (DF), 2016 WL 8674686, at *7-8 (S.D.N.Y. May 13, 2016) ($310 per hour approved for firm partner with more than 12 years of experience in breach of contract case), adopted by 2016 WL 3566237 (June 27, 2016); Parallax Health Scis., Inc. v. EMA Fin., LLC, No. 20-CV-2375 (LGS) (RWL), 2022 WL 2442338, at *16 (S.D.N.Y. June 13, 2022) ($400 per hour approved for attorney with 12 years of experience in breach of contract case), adopted by 2022 WL 2354546 (June 30, 2022).
Because the Court only has information regarding the experience of two of the firm's employees (Sharkin and Doherty), see Sharkin Decl. ¶¶ 9-12, and as plaintiff did not provide any additional background on Katsman and Tankel, the Court is “in no position to determine whether, and to what degree, the unique skills or experiences of an attorney or paralegal weighs in favor of deviating from the norms governing reasonable rates.” Gonzalez v. Scalinatella, Inc., 112 F.Supp.3d 5, 29 (S.D.N.Y. 2015). Despite the lack of detail provided, Katsman's $245 hourly rate is reasonable. See e.g., Plus Enters. LLC v. Sun Trading Int'l, LLC, No. 16-CV-8987 (VB) (PED), 2017 WL 6492117, at *9 (S.D.N.Y. Nov. 29, 2017) (granting associates hourly rates between $230 and $260), adopted by 2017 WL 6496541 (Dec. 15, 2017). Tankel's rate of $125 per hour is also reasonable. See, e.g., Infinity Transportation MSN 6651, LLC v. Synergy Aerospace Corp., No. 19-CV-209 (RA) (SN), 2023 WL 2789516 (S.D.N.Y. Feb. 24, 2023) (approving rates of $180 and above for paralegals), adopted by 2023 WL 2787994 (Apr. 5, 2023); see also Rubenstein v. Advanced Equities, Inc., No. 13-CV-1502 (PGG), 2015 WL 585561, at *7 (S.D.N.Y. Feb. 10, 2015) (collecting cases and awarding reduced paralegal rate of $140 per hour).
Accordingly, all requested hourly rates are reasonable.
ii. Hours Expended
“After determining appropriate hourly rates, courts must calculate the reasonable number of hours billed in order to determine the presumptively reasonable fee.” Rubenstein, 2015 WL 585561, at *8 (citing Arbor Hill, 522 F.3d at 190); Deng v. Gramercy Park Grp. LLC, No. 12-CV-7803 (DLC) (JLC), 2014 WL 1016853, at *12 (S.D.N.Y. Mar. 24, 2014) (court must consider “whether, at the time the work was performed, a reasonable attorney would have engaged in similar time expenditures” (quoting Grant v. Martinez, 973 F.2d 96, 99 (2d Cir. 1992)), adopted by 2014 WL 4996255 (Oct. 07, 2014). Claimed hours that are “excessive, redundant or otherwise unnecessary” may be reduced. Hensley v. Eckerhart, 461 U.S. 424, 434 (1983); accord Quaratino v. Tiffany & Co., 166 F.3d 422, 426 n.6 (2d Cir. 1999).
An attorney “who applies for court-ordered compensation in this Circuit . . . must document the application with contemporaneous time records . . . specif[ying], for each attorney, the date, the hours expended, and the nature of the work done.” N.Y. State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1148 (2d Cir. 1983). Ultimately, the court's discretion to set a fee award is broad. See Hensley, 461 U.S. at 437; Matusick v. Erie Cty. Water Auth., 757 F.3d 31, 64 (2d Cir. 2014) (“We afford a district court considerable discretion in determining what constitutes reasonable attorney's fees in a given case, mindful of the court's ‘superior understanding of the litigation and . . . what essentially are factual matters.'” (quoting Barfield v. N.Y.C. Health & Hosps. Corp., 537 F.3d 132, 151 (2d Cir. 2008))). In assessing the number of hours for which compensation should be awarded, the court is not to determine “whether the number of hours worked by [plaintiff's] attorney[] represents the most efficient use of resources, but rather whether the number is reasonable.” Antetokounmpo v. Searcy, No. 20-CV-5055 (JGK) (KHP), 2021 WL 3233417, at *6 (S.D.N.Y. May 20, 2021) (quoting In re Arbitration Between P.M.I. Trading Ltd. v. Farstad Oil, 160 F.Supp.2d 613, 616 (S.D.N.Y. 2001)), adopted by 2021 WL 3233005 (June 23, 2021).
Here, Liberty has submitted records showing the extent of the work performed on this case: 167.7 hours, Sharkin Decl. Ex. A, which began on January 24, 2022. Id. at 2. Accordingly, and given the agreement signed by Varghese, Liberty “is entitled to recover legal fees for the collection activity that preceded the commencement of this lawsuit, as well as the fees incurred in the lawsuit's prosecution.” HTV Indus., Inc. v. Agarwal, 317 F.Supp.3d 707, 722-23 (S.D.N.Y. 2018). However, in conducting inquests, this Court and others have reduced or excluded attorneys' hours spent on matters related to non-defaulting defendants, finding them to be unreasonable, and have reduced fees relating to both nondefaulting and defaulting defendants by a percentage. See, e.g., Bumble & Bumble, LLC v. Pro's Choice Beauty Care, Inc., No. 14-CV-6911 (VEC) (JLC), 2016 WL 658310, at *9-10 (S.D.N.Y. Feb. 17, 2016) (collecting cases), adopted by 2016 WL 1717215 (Apr. 27, 2016); Tamel Dixon v. Correction Officer Richard Agbai, 15-CV-850 (AT) (AJP), 2016 WL 3702749 (S.D.N.Y. July 8, 2016) (reducing attorney's fees by 40 percent across-the-board where billing entries involved services related to non-defaulting defendants who had settled and “the settlement reached . . . was inclusive of attorney's fees”); Laboratorios Rivas, 2013 WL 5977440, at *17 (awarding 10 percent of fees claimed for tasks that related to defaulting defendants only in part, such as investigations, drafting amended complaint, and serving various defendants); Lucerne Textiles v. H.C.T. Textiles Co., No. 11-CV-5456 (KMW)(AJP), 2013 WL 174226, at *9 (S.D.N.Y. Jan. 17, 2013) (defaulting defendants “not responsible for fees related to [plaintiff's] claims against other parties,” and therefore not awarding attorney's fees for hours spent “discuss[ing] settlement'” with other defendants) (collecting cases). Attorneys' fees have also been decreased for the use of block billing. See, e.g., HTV Indus., Inc., 317 F.Supp.3d at 723; see also Green v. City of New York, 403 Fed.Appx. 626, 630 (2d Cir. 2010).
Given that the bulk of counsel's time records do not identify any defendant, such that the hours could be specifically attributed to work done related to the claim against Varghese, and that counsel has engaged in block billing, the Court recommends awarding Liberty the full amount for time spent on the motion for default judgment and for the three Varghese-specific entries, but otherwise reducing all other entries by two-thirds. A summary of the hours spent on Varghese and the motion for default judgment, as calculated by the Court, is outlined below:
The time records include a few Varghese-specific entries. See, e.g., Sharkin Decl. Ex. A. at 7, Dkt. No. 63-2 (Doherty: 2.2 hours “[r]eview[ing] email from process server regarding service on Defendant Varghese; and attention to case management”); id. (Sharkin: 1.4 hours “[d]raft[ing] letter to Defendant Varghese regarding pretrial court conference and court rules . . .”); id. at 12 (Sharkin: 0.3 hours “[r]eview[ing] notice on status of service (default) on Defendant Varghese). Besides these entries, none of the remaining 163.8 hours billed on this matter is exclusive to Varghese.
Even though Gordon Rees voluntarily offered Liberty a discount of $10,911.50, the award of attorneys' fees should still be reduced by two thirds, as the Court may reduce it beyond any voluntary reductions. See, e.g., Rosso v. Pi Mgmt. Assocs., LLC, No. 02-CV-1702 (KNF), 2006 WL 1227671, at *4 (S.D.N.Y. May 3, 2006) (acknowledging voluntary reductions but calling for further across-the-board reductions of fee award); see also Sidley Holding Corp. v. Ruderman, No. 08-CV-2513 (WHP), 2010 WL 963416 (S.D.N.Y. Mar. 15, 2010).
Accordingly, the remaining $19,866.70 in fees-i.e., the $38,176.20 requested minus $18,309.50-should be reduced by two thirds to $6,556.01. Liberty should therefore be awarded a total of $24,865.51 ($18,309.50 + $6,556.01) in attorneys' fees as to Varghese.
Fee Summary for Hours Spent on Varghese and/or Default Judgment
Timekeeper
Title
Rate
Hours
Totals
Keith Sharkin
Partner
$310
27.2
$ 8,432.36
JoAnna Doherty
Partner
$310
3.8
$ 1,178.00
Irma Katsman
Associate
$245
14
$ 8,599.50
Carla Tankel
Paralegal
$125
0.8
$100.00
Total Fees
$ 18,309.50
b. Costs
Liberty further seeks $684.00 in costs. PFOF ¶ 8. Specifically, the costs are for “court filing fees, . . . [three] process server fee[s] for service of Complaint,” “court filings,” and “default documents” “onto . . . Varghese.” PFOF, Ex. A at 12. Liberty has provided a receipt of the exact amount for each cost sought . Id. “Costs are defined as ‘those reasonable out-of-pocket expenses incurred by attorneys and ordinarily charged to their clients.'” Plus Enters. LLC, 2017 WL 6492117, at *10 (quoting Leblanc-Sternberg v. Fletcher, 143 F.3d 748, 763 (2d Cir. 1998)). As in Plus Enters. LLC, the costs for filing and service fees “are reasonable out-of-pocket expenses incurred by attorneys and ordinarily charged to clients.” Id.; see also, Rubenstein, 2015 WL 585561, at *9 (same). Therefore, the costs requested are reasonable and should be granted in full.
III. CONCLUSION
For all of the foregoing reasons, Liberty should be awarded $515,974.21 in contract damages, plus prejudgment interest on that award at a rate of nine percent per annum and post-judgment interest. Additionally, Liberty should be awarded $25,549.51 ($24,865.51 + $684.00) for its attorneys' fees and costs, respectively.
PROCEDURE FOR FILING OBJECTIONS
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days from service of this Report to file written objections. See also Fed.R.Civ.P. 6. Such objections, and any responses to such objections, shall be filed with the Clerk of Court, with courtesy copies delivered to the chambers of the Honorable Arun Subramanian, United States Courthouse, 500 Pearl Street, New York, NY 10007. Any requests for an extension of time for filing objections must be directed to Judge Subramanian.
FAILURE TO FILE OBJECTIONS WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72. See Thomas v. Arn, 474 U.S. 140 (1985); Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010).