Opinion
01 Civ. 7701 (MBM)
March 15, 2002
SUSAN F. DICICCO, ESQ. JEFFREY Q. SMITH, ESQ. (Attorneys for Plaintiff) King Spalding New York, N Y 10036
DAVID SPEARS, ESQ. BRIAN S. FRASER, ESQ. H. ROWAN GAITHER IV, ESQ. CHRISTOPHER W. DYSARD, ESQ. (Attorneys for Defendants) Richards Spears Kibbe Orbe New York, N Y 10005
OPINION AND ORDER
Now before the court is defendants' motion for more than $125,000 in damages, fees and costs pursuant to Fed.R.Civ.P. 64 and N.Y.C.P.L.R. §§ 6313 and 6315 (McKinney 1980 Supp. 2001) following vacatur of a temporary restraining order and refusal to confirm an attachment. For the reasons set forth below, defendants will recover $65,617.89 in costs and fees.
The underlying action is one for damages that allegedly resulted from defendants' failure to deliver shares of Alcatel, S.A., a French telecommunications equipment manufacturer, that were the subject of certain transactions between the parties. Plaintiff claims that defendants breached a contractual obligation to deliver such shares in connection with a hedge transaction known as a prepaid-variable-forward-share-purchase contract, and that as a result plaintiff sold short and suffered damages of approximately $2.6 million (Cohen Aff. of 8/10/01 ¶ 26), exclusive of costs and fees. Plaintiff commenced this case in Supreme Court, New York County, and defendant removed to this court on August 17, 2001 with a TRO in place that plaintiff used to attach money and property of defendants in the hands of certain New York investment banks. The TRO was obtained ex parte pursuant to N.Y.C.P.L.R. 6201 (McKinney 1980 Supp. 2001), which provides in relevant part that an order of attachment "may be granted" in any action for money damages when "the defendant is a nondomiciliary residing without the state, or is a foreign corporation not qualified to do business in the state[.]"
Plaintiff is a New York entity; defendants are natural persons who are domiciliaries of California, and entities formed pursuant to the laws of California; defendants apparently are not qualified to do business in New York. Jurisdiction is based on diversity of citizenship. Defendants have conceded in Personam jurisdiction, such that plaintiffs had no need to rely upon any attached assets for the purpose of establishing quasi in rem jurisdiction.
The TRO, and the resulting attachment, were vacated in an opinion and order dated August 31, 2001, familiarity with which is assumed for current purposes.
Defendants now seek more than $125,000 to compensate what they claim are the damages, costs and fees that resulted from entry of the TRO.
Denial of the attachment and vacatur of the TRO "constituted a final determination that [plaintiff] was not entitled to the temporary restraining order." See Globex Int'l Inc. v. Commercial Bank of Namibia, No. 99 Civ. 4789 (JSM), 1999 WL 1211827 (S.D.N.Y. Dec. 17, 1999), at *2. As a result, defendants are entitled to recover damages, costs and fees caused by the TRO. See id. and cases cited therein. However, the amounts defendants seek are excessive, as set forth below.
Defendants rely also on the text of a stipulation between the parties, and an order, regarding the undertaking posted by plaintiff, in the amount of $150,000, signed by me on September 28, 2001. They cite language obligating plaintiff to pay up to $150,000 "to the extent this Court shall finally determine that defendants have sustained damages and costs by reason of the TRO," and argue that they should not even have to show that plaintiff was not entitled to the TRO. However, defendants overlook a "WHEREAS" clause preceding the quoted language, which provides that plaintiff's undertaking was fixed at $150,000 "if it is finally determined by the Court that plaintiff was not entitled to a temporary restraining order." Further, defendants' argument proves far too much. By their reading of the stipulation and order in question, they would have been entitled to compensation even if the TRO had ripened into a preliminary injunction and the attachment had been confirmed — a nonsensical result that could not have been intended by the parties. Whatever the vagaries of draftsmanship surrounding the stipulation and order, defendants may recover only upon a showing that plaintiff was not entitled to the TRO.
First, defendants would recover $55,530 in fees of their Los Angeles counsel, Irell Manella LLP, who had represented them in earlier dealings with plaintiff and who retained New York counsel — Richards, Spears, Kibbe Orbe ("Richards, Spears") — and then continued to consult and review papers in connection with defendants' ultimately successful Opposition to plaintiff's attempt to attach funds. Although a partner of that firm avers, and I have no reason to doubt, that all of the time billed was spent in connection with the New York litigation, his affidavit describes many tasks that begin with the word "review" and signal simply inspection of work that New York counsel had performed. (Ikari Aff. ¶ 3) There is no description of what that review accomplished, nor is there any breakdown of how many hours were spent doing it. I recognize that when a new firm must prepare papers on an emergency basis in connection with a matter in which other counsel provided earlier representation, the new firm requires help from its predecessor, and I will award fees in an amount consistent with compensating for such help. However, $55,530 frankly seems a bit rich. Defendants will recover $20,000 for the time spent by Irell Manella. That firm's costs, totaling $1,211.31, seem entirely reasonable and will be recovered in full, for a total of $21,211.31.
Next, defendants would recover $47,346.25 in fees for Richards, Spears. Plaintiff argues that some of that time would have been spent regardless of the existence of the TRO simply in connection with undertaking representation in a new matter, and so it would. However, the attorneys at Richards, Spears appear to have worked efficiently, with most of the time and the resulting fees attributable to associates who worked at a relatively modest billing rate. Because some portion of the time spent by Richards, Spears attorneys must have involved activity necessary in connection with any new litigation, defendants will recover $40,000 of the fees charged by Richards, Spears. Here too, the disbursements of $1,221.58 appear entirely reasonable, and will be recovered in full, for a total of $41,221.58.
Defendants would recover also $17,600 in interest costs incurred by an entity called Exigen Group that will allegedly be billed to Grigory Shenkman, who is a defendant in this case, and Alec Miloslavsky, who is not. (Veshnyakova Aff. ¶ 4) The theory here is that this entity depended on Messrs. Shenkman and Miloslavsky for financing (id. at ¶ 2), and that they could not provide it for a two-week period because their funds were attached. In connection with this expense, there is no showing that there were no sources of revenue available to Shenkman and Miloslavsky other than those in frozen accounts, nor is there a showing that they are in fact obligated to pay the costs in question. In any event, Miloslavsky is not individually a defendant this action, and thus no sums could be recovered for expenses to him. The amount sought is denied.
Finally, a representative of Arthur Andersen LLP avers that that firm billed Shenkman $3,185 for services in connection with opposing the attachment. That expense appears legitimate and will be allowed.
For the above reasons, defendants will recover of plaintiff costs and fees totaling $65,617.89. Settle order on ten days' notice.