Opinion
No. 01 Civ. 1290 (CSH)
September 17, 2002
MEMORANDUM OPINION AND ORDER
Defendant United Bank of Kuwait PLC ("UBK") moves for reconsideration of the Court's unreported Memorandum and Order dated July 23, 2002 (" RLS III") granting attorney's fees and expenses to plaintiff RLS Associates, LLC ("RLS"). Familiarity with that opinion is assumed, together with the Court's two prior opinions, reported at 2002 WL 122927 (S.D.N.Y., Jan. 29, 2002) (" RLS I") and 2002 WL 1285359 (S.D.N.Y., June 10, 2002) (" RLS II").
RLS I granted UBK's motion to vacate the default judgment previously entered in favor of RLS, on condition that UBK "bear the attorney's fees and costs incurred by [RLS] because of the default." 2002 WL 122927 at *9. RLS II directed counsel for RLS to clarify whether the time records submitted in support of the resulting claim for fees and expenses were contemporaneous, as required by circuit authority. 2002 WL 1285359 at *2. RLS III held that the contemporaneous nature of the time records had been sufficiently demonstrated, rejected UBK's objections to the amounts demanded, and directed that UBK pay to RLS $34,088.75 in attorney's fees and $1,710.47 in costs, for a total of $35,799.22. Slip op. at 4. UBK moves for reconsideration under Local Civil Rule 6.3. RLS opposes the motion.
Rule 6.3 requires a motion for reconsideration to be supported by "a memorandum setting forth concisely the matters or controlling decisions which counsel believes the court has overlooked." UBK satisfies this requirement. In RLS III, I said that "defendant asserts that it should not have to pay plaintiff any attorney's fees because the complaint contained a `baseless, even reckless accusation, which a simple review of Federal banking laws would have shown to be impossible,'" slip op. at 3 (emphasis added). My statement was incorrect. The accusation in question was not included by RLS in its complaint; rather, RLS urged the theory as a ground for opposing UBK's motion to vacate the default.
Specifically, RLS argued that because UBK was in the process of surrendering its New York federal branch bank license, a process which brought it in contact with the United States Comptroller of the Currency, UBK "had the motivation to put this case on a back burner because it did not want to bring its existence to the attention of the Comptroller of the Currency," Plaintiff's Memorandum in Opposition to Motion to Vacate Default Judgment at 2. RLS's theory was that UBK was "certifying to the United States Comptroller of the Currency that there were no claims against UBK in the United States which would prohibit the withdrawal and surrender of its branch license on February 28, 2001 (and thereby free up the monies held in the account of UBK by Banker's Trust Company in New York)," id. at 3, and that "[w]hat appears to have occurred is that UBK embarked on a strategy calculated to secure the release of monies held in New York by Banker's Trust by not telling the Comptroller of the Currency that it had been sued in this Court," id. at 5. In supporting its motion to vacate the default, UBK submitted an affidavit by a bank officer and a brief arguing that there was no factual basis for RLS's conspiracy theory, and reiterated that argument in opposing RLS's motion for attorney's fees and expenses caused by the default. In RLS III, I also said: "The merits of the complaint's allegations, as to which I intimate no present opinion, have nothing to do with plaintiff's entitlement to attorney's fees incurred in relation to the default, which was caused by defendant's careless conduct in failing to answer the complaint." Slip op. at 3 (emphasis added). That language reiterates my mistaken belief that the complaint contained RLS's assertions related to the Comptroller of the Currency and the closing of UBK's New York federal branch. I overlooked the material fact that those assertions appeared in RLS's opposition to UBK's motion to vacate the default. Accordingly UBK has demonstrated a sufficient predicate to move for reconsideration under Rule 6.3.
UBK has paid RLS fees for obtaining the default ($2,958.75) and preparing proposed findings of fact and conclusions of law for the scheduled inquest ($8,402.50), together with costs ($1,710.47), but continues to resist paying the balance of $22,077.50 in fees, asking "that it not be required to pay RLS for the crafting of a demonstrably false and gratuitous allegation against the Bank that had nothing to do with the Complaint or the dispute between the parties." Memorandum in Support of Motion for Reconsideration and Partial Stay at 3.
While UBK has made the requisite threshold showing on its motion for reconsideration, it does not follow that the motion must be granted; and the two cases upon which UBK places principal reliance are based upon fee-shifting statutes which do not apply to the case at bar. Mikes v. Straus, 274 F.3d 687 (2d Cir. 2001), construed a provision in the False Claims Act, 31 U.S.C. § 3729 et seq., that "the court may award to the defendant its reasonable attorney's fees and expenses if the defendant prevails in the action and the court finds that the claim of the person bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment." 31 U.S.C. § 3730 (d)(4). Hensley v. Eckerhart, 461 U.S. 424 (1983), construed the provision in the civil rights laws that "the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs." 42 U.S.C. § 1988. The policy considerations underlying statutes such as these are not implicated when a plaintiff such as RLS incurs legal expense as the result of defendant's carelessness in defaulting on its answer. For comparable reasons, it is of no moment that RLS's asserted Comptroller of the Currency motivation theory is not pleaded in the complaint and does not relate to the underlying disputes. of course that is so; RLS had no occasion to suggest a theory for UBK's default in answering until UBK defaulted.
UBK is thus confined to arguing that RLS's Comptroller of the Currency theory, advanced as a motive for UBK's failing to answer the complaint in this action, was so tenuous as to evidence bad faith. The Court's supervisory powers enable me to form such a judgment and, if formed, to impose an appropriate sanction, in these circumstances a reduction of RLS's fee claim. Moreover, there is force to UBK's contention that the Comptroller of the Currency motivation theory was insufficiently researched and factually implausible. RLS furnishes no persuasive response to the arguments UBK made in its Memorandum in Opposition to Application for Fees and Costs at 4 and n. I, which are supported by the affidavit of Daniel Volpe, Jr., UBK's former employee at its federal branch in New York, verified August 9, 2001.
In addition to these considerations, RLS's response to UBK's present motion for reconsideration is problematic. Seeking to play down the significance of its previously asserted motivation theory, RLS says in its Memorandum in Opposition to Motion to Reargue at 2 n. 1:
The Court will look in vain in any of plaintiff's papers for any reference to the word "fraud" or "fraudulent" intent. The affidavit in opposition to the motion to vacate the default does not even allude to any improprieties vis-a-vis the Comptroller of the Currency. Plaintiff's memorandum contains one line suggesting that one motive for failing to answer the complaint might be the status of the application to withdraw the foreign branch license, which application was then pending, but that was the extent of any reference to the Comptroller of the Currency or the pendency of the application by defendant with the Comptroller to withdraw from the United States.
These minimalist efforts are startling. I have quoted supra some of the repeated references to the Comptroller of the Currency and the pending withdrawal application that RLS included in its original brief, and they were illustrative only; there were more. RLS's present reference to "one line" in that brief would seem to reflect counsel's hope that I had forgotten its contents or would not refresh my recollection if asked to do so (as in fact UBK requested). While the initial affidavit in opposition did not explicitly use the words "fraud" or "fraudulent," the affidavit sets forth a detailed description of UBK's relations with the Comptroller of the Currency in a manner implying an improper failure to disclose. See, e.g., affidavit of Ronald J. Offenkrantz, verified August 3, 2001, at ¶ 7 (It was Mr. Volpe to whom the Comptroller of the Currency wrote on March 1, 2001 acknowledging receipt of the Bank's New York "Federal Branch's Final Report of Liquidation, certifying that all claims of the federal branch have been fully paid or settled, return of the federal branch's license and notification that the federal branch has ceased operations effective February 28, 2001' six days after service of the Summons and Complete herein was made on Mr. Volpe.") (emphasis in original).
I conclude that these circumstances combine to require a reduction in the attorney's fees claimed by RLS. But there is no justification for UBK's ascribing all counsel's efforts to the Comptroller of the Currency theory except for those services specifically related to obtaining the default judgment and preparing findings and conclusions for the aborted inquest on damages. As the Court's opinion in RLS I reflects, counsel for RLS had to respond to a number of issues, quite unrelated to the Comptroller, which were raised by UBK's motion to vacate the default. UBK could have avoided any liability for RLS's attorney's fees and costs by acting sensibly in response to the complaint.
In the exercise of what I now conceive to be a fully informed discretion, I reduce RLS's fee application by $10,000. Failing prompt payment, RLS may settle a judgment in the amount of $12,077.50 on five (5) days' notice.
It is SO ORDERED.