Opinion
111425/04.
Decided April 13, 2009.
The only attorneys who appeared on the motions were:
London Fischer (Daniel Mevorach and Daniel Zemann, of counsel), attorneys for General Electric International, Inc.
Maroney O'Connor (Steven Bundschuh, of counsel), attorneys for Timbil Chiller Maintenance Corp.
The central issue before me on the pending motions to confirm and disaffirm the report of Special Referee Howard G. Leventhal is whether the indemnitee, General Electric International, Inc. ("GE"), is entitled to recover from the indemnitor, Timbil Chiller Maintenance Corp. ("Timbil"), for fees incurred in the defense of this action prior to the date when GE tendered its defense to Timbil.
GE and Timbil were two of the defendants sued in this action commenced in August 2004 to recover for property damage of over $4,000,000 resulting from the explosion of a steam turbine and compressor, which Timbil had contracted to service and maintain and GE had contracted to repair. In its amended answer dated February 3, 2005 filed by the law firm of London Fischer LLP ("Fischer"), GE asserted in a cross-claim that it was "entitled pursuant to contract to be defended, indemnified and held harmless by Timbil for any and all claims advanced" in the action in excess of $10,000.
However, notwithstanding such contention in its answer, GE made no demand upon Timbil for defense until that contained in the letter of Fischer to Timbil's attorneys dated March 10, 2006, where it was stated that GE was:
"willing to tender $10,000 to Timbil and waive any past attorneys' fees incurred if Timbil will honor the purchase order at issue and fully defend and indemnify GE for any expense on this case. If this tender of $10,000 in accordance with the contract is not accepted by Timbil, we will have no choice but to pursue recovery of attorneys' fees incurred in continuing to defend this action."
By letter dated August 17, 2006 Fischer again demanded that Timbil assume the defense of GE, and concluded:
"Our costs continue to mount and we are reminding you that we reserve the right to seek recovery for all of our attorneys' fees from March 10, 2006 forward." (Emphasis supplied).
In January 2007 GE settled the claim of the plaintiff for $20,000, and then moved for summary judgment against Timbil based upon the indemnity provision of their agreement. That motion was granted by order dated July 24, 2008, and I directed the entry of judgment in favor of GE against Timbil for the aforesaid $20,000, with interest from the date of payment. I also held that pursuant to contract, GE was entitled "to recover the reasonable attorneys' fees incurred in connection with the defense" of the action, and directed a hearing before a special referee on such issue. No controversy was raised on that motion with respect to the date from which such fees were payable. Nor on the hearing before Referee Leventhal was that issue raised. At that hearing, counsel from Fischer's office stated that the defense of GE "was given at the outset of the case to Timbil" (p. 7). However, that statement is accurate only in the sense that the claim was asserted in the answer, GE acknowledging that no other demand for defense was asserted by it until Fischer's letter of March 10, 2006.
At the conclusion of the hearing, Referee Leventhal found that "the fair and reasonable value of legal services rendered by London Fischer to be in the sum of $95,917.15." He further stated that "the award of prejudgment interest on attorneys fees is discretionary with the court," and recommended "that there be no award of prejudgment interest" (pp. 15-16).
On this motion Timbil contends that in light of the fact that the Referee was not informed that the first tender of defense by GE was not until March 10, 2006, the amount of fees to be awarded should be limited to those incurred after said date. Timbil's counsel asserts that he did put forth this contention at the hearing due to his "mistake, inadvertence and inexperience" (¶ 15 of affirmation of Steven M. Bundschuh dated January 20, 2009). GE maintains that since the contract with Timbil required it to defend and indemnify GE, there was no requirement of a demand on the indemnitor in order for GE to recover for fees paid to the attorneys it retained to defend this action.
While, on a motion addressed to a referee's report, CPLR 4403 permits a court to take additional testimony and make new findings, and fairness may perhaps dictate that GE should have promptly put Timbil on notice that GE wished to have counsel assigned to represent it, the First Department has ruled in Hexcel Corporation v. Hercules Incorporated, 291 AD2d 222 (2002), lv. to ap. den. 98 NY2d 607 (2002), that the failure to raise a defense before a referee results in a waiver of the claim. There, the defendant asserted that the plaintiff's claim was subject to a $2,000,000 deductible, but the court held that defendant, "by not raising its claim of a $2 million deductible before the Special Referee, has waived the claim" (p. 223). The asserted inadvertence of counsel to raise the issue does not warrant a contrary result.
Nor does the fact that GE did not send a tender demand until March 10, 2006, or that in its letter of August 17, 2006 it stated that it only sought fees from the said date of tender, bar it from later seeking to enforce its entire contractual indemnity rights. In Grimes v. Pyramid Companies of Onondaga, 237 AD2d 940, 941 (4th Dept. 1997), it was held that the lower court "erred in limiting Pyramid's entitlement to recovery of attorney's fees . . . to those fees incurred 'from the time Pyramid tendered its defense' . . . (and that) Pyramid is entitled to recover all reasonable attorney's fees incurred in defense of plaintiff's action" (emphasis in original).
Thus, in light of the foregoing, the motion of GE to conform the report of the referee is granted with respect to the amount of attorney's fees to which it is entitled, and the cross-motion of Timbil to disaffirm is denied. Since I find that, pursuant to CPLR 5001(b), plaintiff is entitled to interest from April 1, 2006 (a reasonable intermediate date), the Clerk shall enter judgment in favor of GE and against Timbil for $95,917.15, plus interest thereon from said date.