Opinion
Index No. 653024/2013
04-04-2016
NAVIGATORS INSURANCE COMPANY Plaintiff, v. STERLING INFOSYSTEMS, INC. STERLING INFOSYSTEMS-OHIO, INC., Defendants.
Appearances For Plaintiff: Mound Cotton Wollan & Greengrass LLP By Mark S. Katz, Esq. Sanjit Shah, Esq. Andrew H. Rice, Esq. One New York Plaza New York, New York 10004 212-804-4200 For Defendants: Lowenstein Sandler LLP By Lynda A. Bennett, Esq. Eric Jesse, Esq. 1251 Avenue of the Americas New York, New York 10020 212-262-6700
Motion Date: Jan. 6, 2016
Mot. Seq.: 004
DECISION AND ORDER
Appearances For Plaintiff:
Mound Cotton Wollan & Greengrass LLP
By Mark S. Katz, Esq.
Sanjit Shah, Esq.
Andrew H. Rice, Esq.
One New York Plaza
New York, New York 10004
212-804-4200 For Defendants:
Lowenstein Sandler LLP
By Lynda A. Bennett, Esq.
Eric Jesse, Esq.
1251 Avenue of the Americas
New York, New York 10020
212-262-6700
Papers submitted on this motion for an award of attorney's fees:
| Notice of Motion. Brief in Support with Exhibits and Affirmations | 1 |
| Memorandum of Law in Opposition | 2 |
| Affirmation with Supporting Exhibits in Opposition | 3 |
| Reply Brief in Further Support | 4 |
Following successful summary judgment awards, defendant Sterling Infosystems, Inc. (hereinafter Sterling) moves to recoup its attorney's fees as a prevailing party pursuant to the Court of Appeals decision in Mighty Midgets, Inc. v Centennial Ins. Co. (47 NY2d 12, 21 -22 [1979]). In opposition, Navigators Insurance Company (hereinafter Navigators) attacks the requested amount of $222,802.00 as excessive. Specifically, Navigators disputes the reasonableness of defense counsel's hourly rates and the appropriateness of the number of hours expended on motion practice,.
"[A]n insured who prevails in an action brought by an insurance company seeking a declaratory judgment that it has no duty to defend or indemnify the insured may recover attorney's fees regardless of whether the insurer provided a defense to the insured" (U.S. Underwriters Ins. Co. v City Club Hotel, LLC, 3 NY3d 592, 598 [2004], citing Mighty Midgets, Inc. v Centennial Ins. Co., 47 NY2d 12, 21-22 [1979]). In such circumstances, "[the insured]'s recovery of attorney's fees is incidental to the insurer's contractual duty to defend" (id.).
Navigators implicitly concedes that in principle it is responsible for Sterling's attorney's fees incurred in defense of this action, in view of the Court's disposition of motion sequences 001 and 002. However, Navigators first argues that Sterling may recoup only so much of the legal fees as Sterling actually paid, citing Danaher Corp. v Travelers Indem. Co. (2015 US Dist Lexis 14159 at *33, 2015 WL 409525 at *10 [SDNY Jan. 16, 2015], report and recommendation adopted 2015 US Dist Lexis 48769, 2015 WL 1647435 [SDNY Apr. 13, 2015]). Reliance on Danaher is appropriate, as the case is on point on many issues determinative of this motion, but Navigators misreads the language of the decision to suggest the requirement of pre-payment as a condition of recovering attorney's fees. Danaher emphasized the relevance of the actual payment of legal fees by the client as an indication of the fees' reasonableness, not as a condition to their award (id., 2015 US Dist Lexis 14159 at 11). Once the fees have been incurred, the claim for their recovery accrues upon determination of prevailing status (cf. Solow Mgt. Corp. v Tanger, 19 AD3d 225, 227 [1st Dept 2005] [prejudgment interest on attorney's fees owed to prevailing party runs from date of determination of prevailing status]). Rare exceptions apply when a claim for attorney's fees is based on contractual language providing for reimbursement (F.H. Krear & Co. v Nineteen Named Trustees, 810 F2d 1250, 1269 [2d Cir 1987], citing Columbia Corrugated Container Corp. v Skyway Container Corp., 32 NY2d 818, 819 [1973]) or where a discount was negotiated on the billed fees and a lesser amount actually paid by the client (Moses Prod. Inc. v Sweetland Films, B.V., 2006 NY Misc LEXIS 2394, *9 [Sup Ct, New York County 2006]). At any rate, the issue is moot, as Sterling has established that it paid the subject fees (Bennett Aff., dated October 8, 2015, ¶ 3 and Ex. A thereto).
As to the reasonableness of Sterling's fee request, Navigators argues that the hourly rates of $625 to $685 for partner Lynda A. Bennett, Esq., $470 for associate Ryan Cooper, $390 to $435 for associate Eric Jesse and $310 for associate Craig Dashiell are excessive and that Danaher is not a helpful reference ". . . because of the complexity of that litigation, which involved the insurer's duty to defend 'certain underlying actions filed in courts around the country regarding asbestos and silica exposure. . .'" (Plaintiff's Memorandum of Law, dated October 2, 2015, at 6). This action, in contrast, plaintiff argues, concerns the issue of whether FCRA statutory damages could be considered fines or penalties excludable from coverage. In the Court's view, this proposed distinction is not meaningful.
The following criteria have long defined the inquiry into the reasonableness of legal fees: the difficulty of the issues raised; the skill required to resolve'them; the attorney's experience, ability and reputation; the time and labor expended; the amount and the benefit resulting to the client from the services; and the customary fee charged for similar services (Matter of Freeman, 34 NY2d 1, 9 [1974]).
Determining a reasonable hourly rate involves a case-specific inquiry into the prevailing market rates for counsel of similar experience and skill to the fee applicant's counsel which may include judicial notice of the rates awarded in prior cases and the court's own familiarity with the rates prevailing in the district. The hourly rates must be in line with those rates prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation. There is a presumption that the appropriate hourly fee to be applied in calculating an award of attorneys' fees is the prevailing rate in the district in which the suit is litigated. The party requesting fees must produce satisfactory evidence that the requested rates are in line with those prevailing in the community. While the court has some responsibility to discipline the market, especially in cases subject to statutory or contractual fee-shifting, an attorney's customary rate is a significant factor in determining a reasonable rate. Indeed, as a logical matter, the amount actually paid to counsel by paying clients is compelling evidence of a reasonable market rate(Danaher Corp., 2015 US Dist Lexis 14159 at *11 [internal quotation marks and citations omitted]).
Sterling's moving papers sufficiently support each factor. The reasonableness of the hourly rates charged and the number of hours expended are supported by the affirmations of Steven J. Pudell and Sherilyn Pastor, insurance recovery practitioners at firms in the New York metropolitan area of comparable size to that of Sterling's counsel. The National Law Journal surveys of the high, low and average hourly rates charged by the largest national law firms support this determination. Indeed, the amount sought here is comparable to an award approved in Danaher supra (2015 US Dist Lexis 14159 at *29, [$234,490.45 for work performed in about two to three years of litigation at comparable hourly rate]). Navigators' contention that Danaher, which involved an underlying asbestos litigation, was more complex than the instant case is negated by the fact that the Danaher court separately awarded legal fees and costs of $234,490.45 for the defense of the declaratory judgment action, in addition to the fees for the underlying asbestos litigation defense in the amount of $8,840,391.31.
Navigators relies on Cohen v Narragansett Ins. Co. (2014 U.S. Dist. LEXIS 164085 at *8, 2014 WL 6673846 [EDNY, Nov. 24, 2014]) and Travelers Prop. Cas. Co. of America v USA Container Co., Inc. (2014 US Dist Lexis 99635 at *18, 2014 WL 3644505 at *6 [DNJ, July 21, 2014]), cases which are inapposite. Although the Cohen court reduced a partner hourly rate from $450 to $350, there the award of legal fees was only for a procedural motion seeking to remand the case from federal to state court. Moreover, the quantum of the award in Cohen actually supports Sterling's position, as there the court awarded $6,550 in legal fees for one motion in an action seeking $38,000 in total damages. While the Travelers court found a $425 hourly rate for a partner in insurance litigation to be reasonable, within an acceptable range of prevailing hourly rates, it did not set that rate as ceiling. The Travelers court arrived at the legal fee award in the amount of $256,512.95 for the duration of a litigation only slightly longer than the one at bar, placing it within range of Sterling's request.
Navigators further cites Arbor Hill Concerned Citizens Neighborhood Assocs. v County of Albany (522 F3d 182 [2d Cir 2008]) for the proposition that the court should look beyond the boundaries of the district in which it sits to determine the appropriate hourly rate in a given case. Navigators argues that "[w]hile the hourly rates for which Sterling seeks approval may be appropriate for cases that are litigated in the Commercial Division, they are not appropriate for a garden-variety contract dispute such as this, and should be reduced accordingly" (Pl. Memo, at 8). This argument, however, falls of its own weight. First, in Arbor Hill, the Second Circuit awarded lower legal fees prevailing in the Albany metropolitan area, while acknowledging that practitioners in less expensive legal markets may, when appropriate, look to markets not far down south for guidance on what fees may reasonably be billed. Here, in contrast, Navigators commenced this action in New York County, one of the costliest legal markets in the country. As a commercially sophisticated actor, Navigators may be presumed to have appreciated the scale of the legal expenses involved. Secondly, the Commercial Division is located in the same court as Part 63, a General Individual Assignment (IAS) Part, which has handled this action since its inception.
Indeed, this action qualified for assignment to the Commercial Division under 22 NYCRR § 202.70 (a), (b)(10), as it satisfied the then-prevalent minimum monetary threshold and concerned commercial insurance coverage. Although Navigators' counsel filed an RJI with a Commercial Division Addendum on March 21, 2014 (NYSCEF Docket No. 10), assignment to the Commercial Division was not approved, apparently because the RJI was filed past the 90-day deadline from the time of service of the complaint. Thus, contrary to its present position, at commencement Navigators, too, viewed this litigation as significant.
Turning to the remaining factors, the benefit to Sterling here is substantial. An expenditure of a little over two hundred thousand dollars in legal fees is appropriate to secure insurance coverage within the remaining policy limits of $3.8 million. Moreover, the novelty of the legal issues entailed in this litigation further justifies the extensive effort required of Sterling's counsel and the resulting expenditure of billable time. Navigators' reliance on New Earthshell Corp. v Jobookil Holdings Ltd. in arguing that 140 hours that Sterling's counsel spent on briefing is facially excessive is misplaced as well. (2015 US Dist Lexis 60137, 2015 WL 2152681 [SDNY May 7, 2015]). Navigators overlooks that the cited case, in fact, endorses as reasonable the range of hourly rates approximating the ones sought here ("$595 for partners and $395 for an associate") (id. at *4). Navigators relies instead on that court's conclusion that "130 hours, including 90 hours spent researching and writing the motions to dismiss" was facially excessive, while glossing over the statement's qualification that it is based on "the nature and complexity of the issues involved in this case" and is therefore limited to the facts of that case. (id. at *5). Further, New Earthshell involved preliminary motions to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6), as opposed to motions for summary judgment, which are based not on pleadings alone, but upon a fully developed record. Finally, New Earthshell's grant of dismissal was eventually reversed on appeal to the Second Circuit, with the award of attorney's fees vacated (2015 US App Lexis 22809, 2015 WL 9487876 [2d Cir 2015]).
Navigator's citation to See Spray Holdings, Ltd. v Pali Fin . Group, Inc. is also inapposite (277 F Supp 2d 323, 325 [SDNY 2003]). In Sea Spray Holdings, the Court faulted prevailing counsel for expending 123.75 hours on a motion to dismiss, billed by "six different attorneys and two legal assistants," whose work amounted to "a mere ten pages of legal argument" (id. at 325). Sterling's work, in contrast, was performed by one partner and no more than two associates at a time and involved highly sophisticated legal analysis of issues of first impression in this jurisdiction. While the Court need not revisit all the arguments addressed in prior motion practice, Navigators' current characterization of the simplicity and clarity of the law directing the Court's July 28, 2015 decision is overstated.
The Court will thus grant Sterling's motion for an award of attorney's fees as a prevailing party, except for the amount billed after the January 28, 2015 oral argument date. This amount is $1,986.50, for the services billed in March through May 2015. Legal work performed after the date of oral argument of the two motions and prior to the Court's issuance of its decision and order on July 28, 2015 was not performed in defense of this action. Sterling, however, may submit additional requests for legal expenses occasioned by motion sequence 003.
In accordance with the foregoing, it is hereby
ORDERED that the motion of defendant Sterling Infosystems, Inc. to recover attorney's fees expended in defense of this action is granted in part, and the moving defendant shall recover from plaintiff Navigators Insurance Company an award of attorney's fees in the amount of $220,815.50, and the motion is otherwise denied; and it is further
ORDERED that the Clerk of Court shall sever and enter judgment accordingly. This constitutes the Decision and Order of the Court. Date: April 4, 2016
ENTER:
/s/_________
Ellen M.Coin, A.J.S.C.