Opinion
19-CV-09736 (RA)(SN)
07-11-2024
SEAGRAPE INVESTORS, LLC, Plaintiff, v. TUZMAN, et al., Defendants.
REPORT AND RECOMMENDATION
SARAH NETBURN, United States Magistrate Judge.
TO THE HONORABLE RONNIE ABRAMS:
Plaintiff Seagrape Investors LLC (“Seagrape”) sued Defendants Kaleil Isaza Tuzman (“Tuzman”), KIT Capital Ltd. (“KIT Capital”), KIT Capital (Nevis) LLC (“KIT Nevis”), Obra Pia Ltd. (“OP BVI”), Obra Pia (U.S.) Feeder, LP (“OP Feeder”), Obra Pia Management, GP, Ltd. (“OP Manager”), and Obra Pia Ltd., Surcusal Colombia (“OP Colombia,” and collectively, the “OP Defendants”) for, inter alia, breach of contract. After granting Seagrape's motion for summary judgment, Judge Abrams referred this matter to me for a report and recommendation on attorneys' fees and costs owed to Seagrape.
Plaintiff also sued Amanda Blaurock. Rosario Davi. Joseph Garland, and Kenneth Elan.
I recommend that the Seagrape's motion be GRANTED in part and DENIED in part. Specifically, I recommend that Seagrape be awarded S292,804.51 in attorneys' fees and costs with applicable prejudgment interest starting July 26, 2023.
BACKGROUND
The Court assumes the reader's familiarity with the underlying facts and claims and will summarize only the facts relevant to this motion. This action arises from Seagrape's investment in the development of a luxury hotel project in Cartegena, Colombia known as the Convento Obra Pia Hotel & Resort (the “Project”). Seagrape's principal, Edward Mullen, and Defendant Tuzman entered into an Investment Agreement in 2013 (the “Investment Agreement”). Tuzman was designated the “Guarantor” in the Investment Agreement, and the “Recipient” was defined as his entity, KIT Media. In 2014, the parties signed an Addendum to the Investment Agreement (the “Addendum”) in which KIT Media was replaced by OP Feeder as the “Recipient”; KIT Capital and OP BVI were added as “Guarantors”; and Mullen was replaced by Seagrape as the “Investor.”
In 2016, Seagrape signed a Credit and Security Acknowledgement (the “CSA”) with some of the OP Defendants to facilitate the sale of the Project to GACP Latin American Partners LLC (“GACP”) after a series of setbacks with the Project. The CSA incorporated the Investment Agreement and the Addendum, and functioned as a promissory note in which Seagrape promised to not foreclose on the collateral until January 2, 2017, if the debtors paid Seagrape $4,694,806.00 it owed (the “Cash Amount Due”). The CSA provided that if the debtors paid Seagrape $1 million by January 1, 2017, then the foreclosure date would be extended to March 31, 2017. Although the debtors paid $1 million to Seagrape by January 2, 2017, they did not pay in full by March 31, 2017. On April 27, 2017, Seagrape provided notice to GACP of its intent to foreclose on the collateral. Because the OP Defendants did not perform their obligations, the district court found that they were in breach of the CSA. ECF No. 170 (“MSJ Hearing Transcript”).
Also in 2016, GACP entered into a subordination agreement (the “Subordination Agreement”) to lend OP BVI a $1.5 million “bridge loan.” The Subordination Agreement identified GACP as the “Senior Lender” and Seagrape, OP Feeder, Obra Pia (Non-U.S.) Feeder, and Kit Capital as “Subordinated Lender[s].” In exchange for the bridge loan, the Subordinated Lenders agreed to subordinate “all debt owed by [OP BVI]” to the “prior payment in full of the Senior Loan” to GACP. Three years later, GACP assigned the Senior Loan to Innocreative Capital, LLC, a nonparty to this action. The parties signed a First Amendment to the Senior Loan Documents, requiring OP BVI to deliver its outstanding debts to Innocreative, consolidated into a Credit Line Note.
As discussed more fully below, Seagrape pursued multiple fronts to collect on its debt. This included, among other things, litigation in the courts of Colombia and the British Virgin Islands before ultimately successfully obtaining a judgment against the OP Defendants in this Court.
Here, Seagrape sued the OP Defendants for breach of contract, federal securities fraud, common law fraud, breach of fiduciary duty, and violations of the Judiciary Law § 487. The district court granted the defendants' motion to dismiss all claims except the breach of contract claim. ECF No. 78. Following discovery, the district court ruled that Seagrape is entitled to the Cash Amount Due under the CSA and, after supplemental briefing, it held that Seagrape subordinated its right to payment only from Defendant OP BVI. ECF Nos. 170, 180. The district court found that the Investment Agreement and the Addendum were incorporated by reference into the CSA, and that Seagrape is entitled to attorneys' fees and costs from certain of the OP Defendants in connection to the debt owed under the CSA. ECF No. 180. Judge Abrams referred to me the question of attorneys' fees and costs owed to Seagrape.
DISCUSSION
Seagrape seeks $497,061.76 in attorneys' fees and costs plus prejudgment interest. Specifically, it seeks: (1) $30,000.00 in attorneys' fees for services provided by Keith Stein of Beys Stein & Mobargha LLP (“BSM”) and Stein Law PLLC; (2) $24,493.00 in attorneys' fees for services provided by Nason Yeager Gerson White & Lioce P.A.; (3) $11,512.00 in attorneys' fees for services provided by Hogan Lovells U.S. LLP; (4) $60,178.00 in attorneys' fees for services provided by Federico Escobar and Alvaro Galindo (“Colombian Counsel”); (5) $43,045.00 in attorneys' fees for services provided by Walkers Global; and (6) $315,149.91 in attorneys' fees for services provided by Press Koral LLP. Seagrape also seeks $12,683.85 in costs. The OP Defendants argue that the fees and costs should not exceed $155,474.91.
I. Scope of the Contractual Fee Provision
“Under New York law, a contract that provides for an award of reasonable attorneys' fees to the prevailing party in an action to enforce the contract is enforceable if the contractual language is sufficiently clear.” NetJets Aviation, Inc. v. LHC Commc'ns, LLC, 537 F.3d 168, 175 (2d Cir. 2008) (collecting cases). “[A] written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.” Schron v. Troutman Saunders LLP, 20 N.Y.3d 430, 436 (2013) (citation omitted). Parties are free to “agree by contract to permit recovery of attorneys' fees, and a federal court will enforce contractual rights to attorneys' fees if the contract is valid under applicable state law.” McGuire v. Russell Miller, Inc., 1 F.3d 1306, 1313 (2d Cir. 1993).
The district court determined that the OP Defendants breached the CSA, and that Seagrape is entitled to recover attorneys' fees pursuant to Section 12 of the Investment Agreement (the “Fee Provision”), as incorporated into the CSA. The Fee Provision provides:
If, and as often as, this Agreement is referred to any attorney by necessity in order to collect any sum payable hereunder or to defend or enforce any of Investor's rights hereunder, or to commence any action or claim by [Seagrape] against Recipient, Guarantor or the Holding Company relating to this Investment Agreement, Recipient and/or Guarantor shall reimburse Investor for all costs incurred in connection therewith including attorneys' fees (including such fees incurred in appellate, bankruptcy or insolvency proceedings), with or without the institution of any action or proceeding, and in addition to all costs, disbursements and allowances provided by law.ECF No. 190-4, Press Dec., Investment Agreement § 12. Thus, under the plain terms of the Fee Provision, Seagrape is due any fees and costs incurred to “collect” its debt, “enforce” its rights, or “commence” any action, although the “institution of any action” is not required.
The OP Defendants argue that Seagrape can recover under the Fee Provision only where it was the prevailing party or where its actions were necessary to its success in the federal district court. “Under New York law, written agreements are construed in accordance with the parties' intent and ‘[t]he best evidence of what parties to a written agreement intend is what they say in their writing.'” Schron, 20 N.Y.3d at 436 (quoting Greenfield v. Philles Records, 98 N.Y.2d 562 569 (2002)). Thus, “if the parties have agreed by contract to permit recovery of attorneys' fees, a federal court will enforce that right provided the contract is valid under applicable state law.” McKinley Assocs. LLC v. McKesson HBOC, Inc., 110 F.Supp.2d 169, 193 (W.D.N.Y. 2000), affd, 8 Fed.Appx. 31 (2d Cir. 2001). See also Mid-Hudson Catskill Rural Migrant Ministry, Inc. v. Fine Host Corp., 418 F.3d 168, 177 (2d Cir. 2005) (“We apply New York substantive law to resolve the dispute regarding plaintiff's entitlement to attorney's fees.”).
First, the OP Defendants argue that Seagrape can recover fees only if it prevailed. The Fee Provision does not include a prevailing party requirement and applies only to one side (that is, it favors only Seagrape). Generally, New York law permits unilateral fee provisions. See, e.g., Internet Law Library, Inc. v. Southridge Cap. Mgmt. LLC, Nos. 01-cv-6600 (JSR), 01-cv-0877 (JSR), 02-cv-0138 (JSR), 2010 WL 3290965, *3 (S.D.N.Y. Aug. 11, 2010); In re Arbitration between UBS Warburg, 294 A.D.2d 245, 246 (1st Dep't 2002). Citing to landlord-tenant cases, the OP Defendants argue that it is unconscionable and against public policy to allow a fee recovery by a non-prevailing party. The Court declines to adopt this principle without any legal authority outside of the landlord-tenant context. See also N.Y. Real Prop. L. § 282 (implying mutuality in fee provisions in mortgage foreclosure proceedings). That is particularly appropriate here, where sophisticated parties negotiated a unilateral fee provision and did not include a prevailing party provision that is otherwise ubiquitous in such agreements.
Consistent with New York law, however, the Court implies a reasonableness requirement for any fee award. Under New York law, fees awarded under contractual fee provisions will be awarded “so long as those amounts are not unreasonable.” Antidote Int'l Films, Inc. v. Bloomsbury Publ'g, PLC, 496 F.Supp.2d 362, 364 (S.D.N.Y. 2007); Pino v. Locascio, 101 F.3d 235, 237 (2d Cir. 1996) (a party's fee request “must also be reasonable”). Accordingly, the Court will analyze the fee requests under a reasonableness standard.
Second, the OP Defendants argue that Seagrape is entitled to fees only that were necessary to achieve the result obtained in this Court. The Fee Provision permits a fee award “[i]f, and as often as, this Agreement is referred to any attorney by necessity in order to” collect on the debt, enforce rights, or commence an action. The OP Defendants interpret the “by necessity” clause as essentially requiring but-for causation: that is, but-for the action of the attorney, success in the Southern District of New York would not have been achieved. Def. Br. at 7 (suggesting that, to be compensable, the attorney action would have to be “an essential step or prerequisite” “to the vindication of the claims in this action”). To support this reading, the OP Defendants cite Lundin v. Mecham, 980 F.2d 1450 (D.C. Cir. 1992), and Stryker Corp. v. Intermedics Orthopedics, Inc., 898 F.Supp. 124 (E.D.N.Y. 1995). Both cases involved a fee award pursuant to a statute. In Lundin, the court declined to award fees under the Equal Access to Justice Act for fees incurred as intervenors and amici curiae in separate but related actions, 980 F.2d at 1461-62, and in Stryker, the court declined to award fees under patent law, 35 U.S.C. § 285, for work performed in a declaratory judgment action in a different court, 898 F.Supp. at 124. Neither of these cases interprets a contractual provision like this one, establishes a broad rule that all fees awarded by one court must be for work performed in that court, or otherwise assists the Court in defining the scope of the “by necessity” clause.
The Court, therefore, interprets the “by necessity” clause by reading it in the context of the agreement as a whole. The Fee Provision is a unilateral fee provision, negotiated by sophisticated parties, that does not include a prevailing party requirement. Viewed in that context, the Court concludes that the “by necessity” clause limits the scope of fees to efforts necessitated by the OP Defendants' failure to honor its contractual obligations. Once the OP Defendants have breached the agreement and “by necessity” Seagrape must enforce its rights, its fees are fully recoverable. As discussed further below, this interpretation would exclude fees incurred negotiating the underlying agreements - because, at that time, there was no “necessity” for Seagrape to hire a lawyer to “collect” its debt, “enforce” its rights, or “commence” any action - but would include reasonable efforts to achieve this result regardless of whether one such effort was a “prerequisite” to the ultimate success in this Court. This interpretation is consistent with the absence of a prevailing party requirement (which would have limited a fee application to the forum in which the party prevailed) and makes sense when read in the context of the Fee Provision's expansive “as often as” clause. Here, the Provision permits fees “[i]f” the Agreement is referred to an attorney “by necessity” of the breach, “and as often as” it is referred “by necessity” of the breach. The “as often as” clause implies that Seagrape may need to retain an attorney more than once (or, “often”) to enforce its rights. Accordingly, the Court interprets the “by necessity” clause as requiring the triggering event of the OP Defendants' breach and not as a limiting principle requiring a but-for relationship between the legal work performed and the ultimate success.
II. Application
A. BSM and Stein Law PLLC
Seagrape seeks $30,000.00 in attorneys' fees for services provided by BSM and Stein Law PLLC in connection with work performed on the Loan Agreement, Investment Agreement, Addendum to the Investment Agreement, CSA, and Subordination Agreement. This work was performed between 2012 and 2016. Stein Decl., ¶ 5.
The OP Defendants argue that Seagrape is not entitled to recover fees incurred while negotiating and drafting “the very agreements Seagrape is suing upon” because these fees were not incurred to enforce any of Seagrape's rights and, therefore, fall outside the scope of the Fee Provision. In response, Seagrape claims that the Investment Agreement does not limit Seagrape's recovery to litigation matters, instead entitling it to “any sum payable . . . with or without the institution of any action or proceeding.” Seagrape argues that after the OP Defendants breached the Investment Agreement, “it was forced to negotiate and paper a succession of new agreements to protect its rights” with the use of Mr. Stein's services.
Mr. Stein, while at BSM and Stein Law, negotiated the at-issue agreements on behalf of Seagrape. Stein Decl., ¶¶ 5-7. While this work was important to protect Seagrape's interests, it was not performed to “collect” on Seagrape's debt, “enforce” its rights, or “commence” any action. Accordingly, Seagrape is not entitled to reimbursement for these fees under the plain terms of the Fee Provision.
Seagrape should be denied attorneys' fees for services provided by BSM and Stein Law for the additional reason that it did not provide detailed, contemporaneous time records to support its request. See Flatiron Acquisition Vehicle, LLC v. CSE Mortg. LLC, No. 17-cv-8987 (GHW), 2022 WL 413229, at *7 (S.D.N.Y. Feb. 9, 2022) (“Second Circuit precedent requires a party seeking an award of attorneys' fees to support its request with contemporaneous time records that show ‘for each attorney, the date, the hours expended, and the nature of the work done.'”) (internal citations omitted). Seagrape does not cite any authority entitling it to these fees without appropriate documentation.
B. Colombian Litigation: Nason Yeager Gerson White & Lioce P.A., Hogan Lovells U.S. LLP, and Colombian Counsel
Seagrape seeks (1) $24,493.00 in attorneys' fees for services provided by Nason Yeager Gerson White & Lioce P.A. in connection with Seagrape's attempts to collect the Cash Amount Due under the CSA with counsel in Colombia; (2) $11,512.00 in attorneys' fees for services provided by Hogan Lovells U.S. LLP in connection with Seagrape's efforts to enforce the CSA in Colombia; (3) $60,178.00 in attorneys' fees for services provided by Federico Escobar and Alvaro Galindo (“Colombian Counsel”). Thus, Seagrape seeks $96,183.00 for work performed in the Colombian litigation.
Seagrape requests $35,700 in attorneys' fees for services provided by Federico Escobar, even though Seagrape paid only a flat fee of $30,000.
Seagrape retained American and foreign attorneys to enforce the CSA in Colombia. For example, Seagrape retained Brian Hickey, an attorney at Nason Yeager, in February 2017 when the defendants failed to pay the Cash Amount Due. Hickey Decl., ¶ 5. Following a period of forbearance, Hickey served defendants with a notice of an intent to litigate. Id. Hickey reports that he was involved in “negotiations” to “salvage the deal” for Seagrape, and later supported and “cooperate[d]” with Colombian Counsel. Id. at ¶ 6. In its reply brief in support of the fee motion, Seagrape concedes that “only a small portion of [Hickey's] work had anything to do with enforcement efforts in Colombia,” suggesting most of the work was “devoted to obtaining the Cash Amount Due.” Pl. Rply. Br. at 5, n.3.
Hickey's efforts were supported by counsel from Hogan Lovells, who helped develop a Colombian litigation strategy. Mullen Decl., ¶ 7. Finally, with Colombian Counsel, on November 9, 2019, Seagrape filed a complaint with the Colombian Superintendencia de Sociedades (“SDS”) seeking an investigation and liquidation of the OP BVI Colombian subsidiary, Defendant Obra Pia, Ltd., Surcusal Colombia, (the “Branch”). Mullen Decl., ¶ 8. The SDS did not find “substantial malfeasance” and declined to liquidate the subsidiary but required it to implement certain financial reforms after finding various irregularities in its accounting and management, including reflecting the Cash Amount Due to Seagrape on the Branch's balance sheet. See Colombian Resolution, attached to Press Reply Decl. Seagrape argues that the Colombia litigation efforts forced the Branch to acknowledge its debt for the Cash Amount Due.
The OP Defendants argue that Seagrape is not entitled to fees related to litigation in Colombia because (1) Seagrape was not a prevailing party in that action; and (2) the Colombian litigation was not necessary to achieve the results obtained in this court.
First, the Court has already found that the Fee Provision does not include a prevailing party requirement but must be interpreted, under New York law, to include a reasonableness requirement. Second, the Court has interpreted the “by necessity” clause as requiring the triggering event of a breach by the OP Defendants, which had occurred when Seagrape engaged counsel to pursue a litigation strategy in Colombia.
I find that the Colombian litigation strategy was “referred to” these attorneys “by necessity” of the OP Defendants' breach and was an effort to “collect” the debt due and “enforce” Seagrape's rights. But Seagrape was ultimately not successful, and it would be unreasonable to require the OP Defendants to pay nearly $100,000 for Seagrape's failed Colombian litigation strategy. Accordingly, I recommend that the Court reduce these fees by 75% and award Seagrape $24,045.75. See United States Football League v. National Football League, 887 F.2d 408, 415 (2d Cir. 1989) (approving a percentage reduction of total fee award). Such award is particularly appropriate given Seagrape's argument that a substantial part of Hickey's work was negotiating with GACP in attempts to salvage the deal and allow Seagrape to obtain the Cash Amount Due.
C. British Virgin Islands Litigation: Walkers Global
Seagrape seeks $43,045.00 in attorneys' fees for services provided by Iain Tucker, a partner at Walkers Global, in connection with its efforts to enforce the CSA in the British Virgin Islands (BVI). In January 2019, Seagrape filed a formal demand for payment of its debt against OP BVI in the British Virgin Islands (the “BVI Proceeding”). Tucker Decl., ¶ 4. Under BVI law, upon notice of a Statutory Demand under § 155 of the Insolvency Act, 2003, payment of the Cash Amount Due had to be made within 21 days. Id. Instead, OP BVI moved to set aside the Demand, raising defenses under New York law. After months of litigation, the BVI court conditionally set aside the Statutory Demand but only upon the condition that the defendant pursue its claims under New York law in New York within 30 days; if it failed to do so, the OP BVI debt would be “payable immediately.” Id., ¶ 6. OP BVI elected to litigate and brought an action against Seagrape in New York - the First Action.
The OP Defendants argue that Seagrape is not entitled to any fees because it did not prevail in the BVI Proceeding, and because the BVI Proceeding was not necessary to the successful results achieved in this Court. If any fee award is granted to Seagrape, the OP Defendants argue that it should be offset by the fee award OP BVI obtained from the BVI High Court of Justice.
There is no legitimate dispute that the BVI Proceeding was “referred to” an attorney “by necessity” of the OP Defendants' breach, “in order to collect” on the debt due. Because there is no prevailing party requirement, the Court considers whether $43,045.00 in attorneys' fees is reasonable for the BVI Proceeding. When considering the reasonableness, the Court recognizes that the First Action was dismissed in its entirety by this Court on September 25, 2020, and the motion to vacate the dismissal was denied nine months later. The Court ultimately granted Seagrape the Cash Amount Due, which was originally sought in the BVI Proceeding and would have been “payable immediately” if the defendants had not pursued their meritless First Action. Had the OP Defendants paid their debt when the BVI Proceeding was initiated, years of litigation and hundreds of thousands of dollars in attorney time would have been avoided. Accordingly, I recommend that the Court find that $43,045.00 in attorneys' fees was reasonable for the BVI Proceeding, and the OP Defendants should pay that amount.
The OP Defendants request that any attorneys' fees awarded in this action be offset by $40,200.00 to reflect the award ordered by the BVI High Court of Justice for the cost incurred by OP BVI in bringing the application to set aside the Statutory Demand. This Court has already rejected the defendants' efforts to enforce this order. In September 2020, the Court denied the defendants' attempt to domesticate the foreign country money judgment because the attempt was not brought as an action, a motion for summary judgment, or by counterclaim, cross-claim or affirmative defense. See Obra Pia Ltd. v. Seagrape Invs. LLC, No. 19-cv-7840 (RA), 2020 WL 5751195, at *18 (S.D.N.Y. Sept. 25, 2020) (citing N.Y. CPLR § 5303). For the same reasons previously held, the OP Defendants' request for an offset, made this time in an opposition brief for a motion for attorneys' fees, is procedurally improper and should be rejected.
D. Press Koral LLP
Seagrape seeks $315,149.91 in attorneys' fees for services provided by Press Koral LLP from 2019 to August 2023. The OP Defendants do not dispute the reasonableness of Press Koral's hourly rates, and the Court finds that $500.00 is a reasonable hourly rate for attorneys at a New York City law firm involved in commercial litigation. See Tessemae's LLC v. Atlantis Capital LLC, No. 18-cv-4902 (KHP), 2019 WL 2635956, at *4 (S.D.N.Y. June 27, 2019) (collecting cases supporting the reasonableness of “hourly rates ranging from $250 to $1260 per hour[ ] for attorneys' work on a commercial litigation matter”). The OP Defendants also do not explicitly dispute fees related to Press Koral's services in defending the First Action.
Instead, they argue that Seagrape is not entitled to fees related to the four dismissed claims that were “based on different facts and different theories” and “unconnected to the debt owed under the CSA.” Def. Br. 10. Further, the OP Defendants argue that Seagrape is not entitled to fees incurred in a separate and still pending action, Seagrape Investors LLC v. Tuzman, et al., No. 21-cv-7517 (“Seagrape II”).
1. Unsuccessful claims
In addition to the breach of contract claim, Seagrape sued the OP Defendants for federal securities fraud, common law fraud, breach of fiduciary duty, and violations of the Judiciary Law § 487. The district court dismissed all but the breach of contract claim. See Seagrape Investors LLC v. Tuzman, et al., No. 19-cv-9736 (RA), 2020 WL 5751232 (S.D.N.Y. Sept. 25, 2020). Seagrape argues that the breach of contract claim was the gravamen of the action and because it “was successful in the case as a whole . . . it is entitled to an award of all of its fees and costs.” Pl. Rply 1.
“[T]he extent of a plaintiff[']s success is a crucial factor in determining the proper amount of an award of attorney's fees.” Hensley v. Eckerhart, 461 U.S. 424, 440 (1983).Attorneys' fees are appropriate for time spent on unsuccessful claims so long as those claims are not “wholly unrelated to the claims on which the prevailing party succeeded.” Union Cent. Life Ins. Co. v. Berger, No. 10-cv-8408 (PGG), 2013 WL 6571079, at *3 (S.D.N.Y. Dec. 13, 2013) (quoting Lunday v. City of Albany, 42 F.3d 131, 134 (2d Cir.1994) (internal citations and quotations omitted)). A downward fee adjustment may be appropriate if the party was successful on only some, but not all, claims for relief. Id. (citing Hensley, 461 U.S. at 434). “Where the plaintiff has failed to prevail on a claim that is distinct in all respects from his successful claims, the hours spent on the unsuccessful claim should be excluded in considering the amount of a reasonable fee.” Hensley, 461 U.S. at 440. But, where the claims “involve a common core of facts or [are] based on related legal theories,” the “lawsuit cannot be viewed as a series of discrete claims. Instead, the district court should focus on the significance of the overall relief obtained . . . in relation to the hours reasonably expended on the litigation.” Id. at 435.
Although Hensley concerns attorneys' fees under 42 U.S.C. § 1988, courts in this Circuit have applied its reasoning when resolving motions for attorneys' fees provided by contract. See LG Cap. Funding, LLC v. Protext Pharma, Inc., 771 Fed.Appx. 52, 53 (2d Cir. 2019) (citing Hensley when affirming an award of contractual attorneys' fees associated with only the successful claim); Austrian Airlines Oesterreichische Luftverkehrs AG v. UT Fin. Corp., 2008 WL 4833025, at *2 n. 12 (S.D.N.Y. Nov. 3, 2008) (quoting Hensley in a footnote of its fee analysis for recovery for successful claims).
Although the dismissed claims are connected to the successful claim in that they are related to the same underlying Project and involve mostly the same parties, each claim is based on different material facts. Seagrape's securities fraud and common law fraud claims asserted that the OP Defendants made materially false representations in connection with Seagrape's purchase of limited partnership units in Obra Pia (U.S.) Feeder, LP in the Addendum. Seagrape's breach of fiduciary claim was based on the OP Defendants' alleged breach of fiduciary duties of care and loyalty because of Seagrape's investment in the limited partnership units in Obra Pia (U.S.) Feeder, LP. Lastly, Seagrape's claim for violations of the Judiciary Law § 487 was brought against only Joseph Garland and Kenneth Elan, alleging that they engaged in deceit and collusion in connection with the BVI proceeding.
These claims were not inextricably intertwined, and they did not involve a common core of facts with the breach of contract claim. Further, the unsuccessful claims were not brought in connection to the debt owed under the CSA, as required. Seagrape's success in its breach of contract claim in its motion for summary judgment rested on the district court's analysis of the parties' obligations pursuant to the CSA and evaluation of the parties' course of conduct, neither of which were relevant to the four unsuccessful claims. Therefore, Seagrape is not entitled to recover fees related to its unsuccessful claims.
The four claims were dismissed in the early stages of litigation, and it is evident that counsel spent far more time litigating the breach of contract claim than the dismissed claims through summary judgment. “The option not to attempt to disentangle work performed on claims that are inextricably intertwined with others is one tool, among others, that a district court may use in its discretion to streamline the process of evaluating a request for an award of fees. It permits the court to avoid parsing lawyers' billing records on a claim-by-claim basis-at best, a time-consuming task; at worst, an impossible one.” Flatiron Acquisition Vehicle, LLC v. CSE Mortg. LLC, No. 17-cv-8987 (GHW), 2022 WL 413229, at *12 (S.D.N.Y. Feb. 9, 2022). That said, the Court can identify the following: (1) from July 2019 to August 2019, Press Koral billed 71.4 hours exclusively to the First Action; (2) from September 2019 to February 2020, Press Koral billed approximately 180.3 hours on the motion to dismiss the First Action, the drafting of the complaint in this action, and the opposition to the motion to dismiss this action; and (3) from March 2020 to September 2020, when the Court dismissed the four claims, the parties were engaged in discovery and Press Koral billed approximately 58 hours. Thus, the total number of hours billed through a decision on the motion to dismiss is 309.7, of which 71.4 are related exclusively to the First Action, leaving 238.3 billed to both the First Action and this action.
The OP Defendants do not challenge Press Koral's $500 hourly rate or the number of hours worked, and the Court declines to so on their behalf. Instead, the OP Defendants seek a percentage reduction. First, they ask that the Court reduce the 238.3 hours of work performed from September 2019 to September 2020 by 80% to reflect that four of the five claims raised in Seagrape's complaint were dismissed. The OP Defendants acknowledge that these hours included work performed successfully dismissing the First Action, but assert that it is reasonable because of the “vagueness of the record keeping and overlapping and redundant work performed on these matters.” Def. Br. at 12, n.4.
The billing records do not identify to which claims each entry was directed, nor does the Court expect them to. See Flatiron Acquisition Vehicle, LLC, 2022 WL 413229, at *13 (“[T]he Court does not expect that counsel would, as a regular matter, allocate their work on a litigation matter to a particular claim. Oftentimes that would not be possible because work would relate to more than one claim.”). A district court may exercise discretion and use a percentage reduction to reduce attorneys' fees applications. See Id. (“[a district court may]‘exercise its discretion and use a percentage deduction as a practical means of trimming fat.' . . . Using this form of ‘rough justice,' district courts in our Circuit regularly employ percentage reductions as an efficient means of reducing excessive fee applications.” (internal citations omitted)).
The OP Defendants' proposed 80% reduction in hours is excessive. First, as they concede, this does not reflect work performed successfully dismissing the First Action. Second, at least 58 hours were incurred in discovery after the motions were fully briefed, and the OP Defendants do not suggest that the discovery was limited to the dismissed four claims. Accordingly, the Court considers 180.3 hours of work for pleading drafting and motion practice and recommends reducing that number by 40%. That reduction more reasonably reflects the total success in dismissing the First Action and Seagrape's success on its core breach of contract claim. Thus, the Court should reduce the overall award through September 2020 by 72.12 hours, or $36,060.00 at $500 per hour.
2. Seagrape II
Seagrape's request for attorneys' fees includes fees for services performed in connection with Seagrape II. On September 8, 2021, Seagrape filed a separate action against the OP Defendants and certain other defendants. The Seagrape II defendants moved to dismiss that action in November 2021, and on the consent of the parties, the motion was stayed pending a decision in this case on the motion for summary judgment. Seagrape II, ECF No. 41. Following a decision on the motion for summary judgment, the Seagrape II defendants renewed their motion to dismiss on October 13, 2023, Seagrape filed an amended complaint, and the Seagrape II defendants filed a motion to dismiss the amended complaint. ECF Nos. 54, 59, 61. Seagrape filed its opposition brief on December 20, 2023, and that motion is pending.
The OP Defendants urge the Court to reduce all fees incurred as of August 2021 - when billing entries for Seagrape II begin - by 50% because Seagrape has not prevailed in Seagrape II. Seagrape argues that the Fee Provision does not include a prevailing party provision and that Seagrape II is necessary to collect on the Cash Amount Due because Tuzman is judgment proof and it is difficult to enforce its rights in Colombia. At a minimum, Seagrape urges a reduction of only $10,000, or 20 hours.
The billing invoices reflect that from August 2021 through November 2021, Press Koral billed 50 hours primarily drafting, filing, and serving the Seagrape II complaint. From December 2021 to August 2023, Press Koral billed an additional 46.3 hours for work that appears related to the motion for summary judgment in this case and settlement negotiations. As the Seagrape II docket reflects, very little action occurred in Seagrape II from November 2021 until the amended complaint was filed in October 2023. Seagrape's final invoice in this fee motion is for work performed on August 24, 2023.
Although the Fee Provision does not include a prevailing party, the Court must interpret any fee award to be reasonable. Because the motion to dismiss in Seagrape II is pending, the Court declines to recommend any award that can be attributed to work performed in Seagrape II. Any denial, however, should be without prejudice to renewal, if appropriate. Accordingly, I recommend that the Court reduce the Press Koral fees by 50 hours, to reflect the work performed on Seagrape II from August 2021 to November 2021.
The Court recommends that Press Koral's hours be reduced by 122.12 hours (with 50 hours potentially recoverable in the future for work performed in Seagrape II). At a rate of $500.00 per hour, the total amount of recovery should be reduced by $61,060.00.
In sum, Seagrape should be awarded $218,029.91 for work performed by Press Koral.
E. Costs
Seagrape seeks $12,683.85 in costs including $7,683.85 “spent on extraction of historical emails from Seagrape's email storage system, ‘Goldmine,' and $5,000.00 in consulting fees paid to Seagrape's accounting firm, [the] Klein Group.” Pl. Br. 14.
Seagrape requests $6,748.00 charged by Avidly consultants for extraction of historical emails from Goldmine and migration to HubSpot, $450.00 for Compliance software for Goldmine purchased from Castell Computers, $485.85 for data extraction scripts and views provided by Canonbury Service. Mullen Dec. ¶ 18 & Ex. 9.
Rule 54(d) provides that, “[u]nless a federal statute, these rules, or a court order provides otherwise, costs - other than attorney's fees - should be allowed to the prevailing party.” Thus, “such an award against the losing party is the normal rule obtaining in civil litigation, not an exception.” Altvater Gessler-J.A. Baczewski Int'l (USA) Inc. v. Sobieski Destylarnia S.A., No. 06-cv-06510 (HB), 2011 WL 2893087, at *6 (S.D.N.Y. July 14, 2011) (citing Whitfield v. Scully, 241 F.3d 264, 270 (2d Cir. 2001)). “Due to the strong presumption that costs are awarded to the prevailing party, the losing party bears the burden of convincing the district court to exercise its discretion in denying an award of costs.” Id. In exercising its discretion, “a district court is free to consider a variety of equitable factors, including ‘misconduct by the prevailing party, the public importance of the case, the difficulty of the issues, or the losing party's limited financial resources,' but if the district court chooses to exercise its discretion by refusing to tax costs in favor of the prevailing party, it must articulate reasons for doing so.” Id. at *6, n.27 (citing Whitfield, 241 F.3d at 270).
The OP Defendants argue that Seagrape's costs recovery must be limited to “all costs, disbursements and allowances provided by law.” Meaning, Seagrape is not entitled to any costs that are not enumerated in 28 U.S.C. § 1920, Rule 54(d), and Local Rule 54.1. These rules and statute, however, “provide a framework for determining the proper award of statutory court costs, available to the prevailing party in all cases, but do not apply if a contractual provision or statute authorizes, as part of an attorneys' fee award, costs and ‘related non-taxable expenses.'” Austrian Airlines Oesterreichische Luftverkehrs AG, 2008 WL 4833025, at *8 (citations omitted); accord Sherman Street Assocs., LLC v. JTH Tax, Inc., No. 03-cv-01874 (CFD), 2011 WL 5925063, at *4 (D. Conn. Nov. 21, 2011); see Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 445 (1987) (“[A]bsent explicit statutory or contractual authorization for the taxation of the expenses of a litigant's witness as costs, federal courts are bound by the limitations set out in 28 U.S.C. § 1821 and § 1920.”) Seagrape, therefore, is entitled to reasonable costs associated with this action.
Because the CSA plainly covers the underlying litigation, the existence of the Fee Provision in the CSA renders the statutes cited inapposite. See Austrian Airlines Oesterreichische Luftverkehrs AG, 2008 WL 4833025, at *8. “Costs include reasonable out-ofpocket expenses incurred by attorneys and ordinarily charged to their clients.” Id. (internal citation omitted). The Fee Provision provides for “all costs incurred in connection” with work done “in order to collect any sum payable hereunder or to defend or enforce any of [Seagrape's] rights hereunder, or to commence any action or claim by [Seagrape] against [the OP Defendants] relating to this Investment Agreement.” The Mullen Declaration states that the fees requested relate to services that were necessary to prosecute or defend Seagrape in connection with its efforts to enforce the CSA in the First Action and in this action. Mullen Dec. ¶ 18.
The OP Defendants further argue that Seagrape did not provide any invoices substantiating the $5,000 paid to its accounting firm, the Klein Group. Because the costs for services from the Klein Group are not adequately supported or sufficiently documented, the Court recommends that Seagrape's requested amount for costs is reduced by $5,000.00. See, e.g., Vista Outdoor Inc. v. Reeves Fam. Tr., No. 16-cv-5766 (JSR), 2018 WL 3104631, at *12 (S.D.N.Y. May 24, 2018) (applying a reduction because records did not provide the detail necessary for the court to evaluate the reasonableness of the costs); United States for Use and Benefit of Evergreen Pipeline Const. Co. v. Merritt-Meridian Const. Corp., 95 F.3d 153, 173 (2d Cir. 1996) (affirming reduction in photocopying costs for lack of documentation of what was copied and why the copies were necessary). Seagrape does not cite any authority entitling it to these costs despite the lack of documentation. Therefore, I recommend that Seagrape be awarded $7,683.85 in costs.
F. Interest
The parties agree that Seagrape is entitled to prejudgment interest calculated from July 26, 2023, when the district court awarded Seagrape summary judgment. “Courts in this Circuit regularly award pre-judgment interest on attorneys' fees.” Austrian Airlines Oesterreichische Luftverkehrs AG, 2008 WL 4833025, at *10 (internal citations omitted). Commonly, courts grant interest at a rate of nine percent per annum, under “New York State law, N.Y. C.P.L.R. §§ 5001-5004-from the time of the award to the date of the judgment confirming the award.'” Seaport Glob. Holdings LLC v. Petaquilla Mins. Ltd., No. 19-cv-9347 (ER), 2020 WL 3428151, at *2 (S.D.N.Y. June 23, 2020) (citing 1199/SEIU United Healthcare Workers E. v. S. Bronx Mental Health Council Inc., No. 13-cv-2608 (JKG), 2014 WL 840965, at *8 (S.D.N.Y. Mar. 4, 2014)). I recommend that Seagrape be awarded prejudgment interest at a rate of nine percent per annum from July 26, 2023.
CONCLUSION
I recommend GRANTING in part and DENYING in part Seagrape's motion. I recommend that Seagrape be awarded $292,804.51 in attorneys' fees and costs with applicable prejudgment interest. The recommended award of attorneys' fees and costs may be summarized as follows: Seagrape should be awarded (1) $24,045.75 for fees incurred in the Colombian litigation; (2) $43,045.00 for fees incurred in the British Virgin Islands litigation; and (3) $218,029.91 for fees incurred in the U.S. litigations for work performed by Press Koral. Seagrape should be denied fees for services provided by Keith Stein of BSM and Stein Law. Accordingly, the total fee award should be $285,120.66. Seagrape should also be awarded $7,683.85 in reasonable costs. Prejudgment interest at a rate of nine percent per annum should accrue as of July 26, 2023.
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have 14 days from the service of this Report and Recommendation to file written objections under 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See Fed.R.Civ.P. 6(a), 6(d). A party may respond to another party's objections within 14 days after being served with a copy. Fed.R.Civ.P. 72(b)(2); see Fed.R.Civ.P. 6(a), 6(d). These objections shall be filed with the Court and served on any opposing parties. See Fed.R.Civ.P. 72(b)(2). Courtesy copies shall be delivered to the Honorable Ronnie Abrams if required by that judge's Individual Rules and Practices. Any requests for an extension of time for filing objections must be addressed to Judge Abrams. See Fed.R.Civ.P. 6(b). The failure to file timely objections will waive those objections for purposes of appeal. See Thomas v. Arn, 474 U.S. 140 (1985); United States v. James, 712 F.3d 79, 105 (2d Cir. 2013).