Summary
reducing fee award by 50% due in part to excessive billing
Summary of this case from Sheet Metal Workers' Nat'l Pension Fund v. U.S. Roofing Co.Opinion
00 Civ. 3856 (SHS)
December 3, 2002
OPINION AND ORDER
Daiwa Special Asset Corp. brought this action to enforce a guaranty executed by defendant James H. Desnick to recover losses Daiwa sustained in connection with a healthcare receivables securitization transaction. Following the conclusion of discovery proceedings, Daiwa moved for summary judgment pursuant to Fed.R.Civ.P. 56. This Court granted Daiwa's motion for summary judgment in its entirety and judgment was subsequently entered in Daiwa's favor in the amount of $6,333,072. See Daiwa Special Asset Corp. v. Desnick, No. 00 Civ. 3856, 2002 WL 1997922 (S.D.N.Y. Aug. 29, 2002). Daiwa now moves for costs and attorneys' fees pursuant to Section 1 of the guaranty, in which Desnick "agrees to pay any and all reasonable costs and expenses (including reasonable counsel fees and expenses) paid or incurred in enforcing any rights under this Guaranty." (Isakoff Aff., Ex. 1, p. 1 § 1(a).)
The facts underlying this litigation are set forth in full in that Opinion and shall not be repeated here.
Daiwa contends that in seeking enforcement of Desnick's obligations under the guaranty, it incurred legal fees and expenses in the amount of $1,292,079.91, and expert witness and litigation consultant fees and expenses in the amount of $862,262.00. Daiwa also contends that it is entitled to $134,147.29 in attorneys' fees, disbursements, and expenses it expended in litigation with the State of Illinois over that state's claimed setoff against Medicaid payments due with respect to receivables transferred pursuant to the healthcare Receivables Contribution Agreement, which served as collateral for Daiwa's loan to Doctors Hospital of Hyde Park, Inc. Thus, Daiwa claims that it is entitled to a total amount of $2,288,489.20 in attorneys' fees, expert and consultant fees, expenses, costs, and disbursements.
Desnick opposes Daiwa's application on the ground that the total amount requested by Daiwa is excessive. Specifically, Desnick contends that the fees charged by Daiwa's counsel are unreasonable due to the excessiveness of the hours billed, the overstaffing of meetings and depositions, duplication of attorney efforts, costly travel time and travel expenses, and the improper allocation of work among attorneys and other law firm employees. Desnick further maintains that the attorneys' hourly rates are excessive and that Daiwa is not entitled to compensation for the time expended by its consultants and experts.
This Court finds that Daiwa is entitled to reasonable costs and attorneys' fees pursuant to the terms of the guaranty, including compensation for Daiwa's litigation consultants and experts. However, for the reasons set forth below, the total amount requested by Daiwa in its present application is excessive. Accordingly, the Court awards Daiwa costs and attorneys' fees in the amount of $1.1 million.
DISCUSSION
Where a contract provides for the payment of attorneys' fees to the prevailing party in the event of litigation, the court shall only award fees that are reasonable. F.H. Krear Co. v. Nineteen Names Trustees, 810 F.2d 1250, 1263 (2d Cir. 1987). The district court must examine a variety of factors to determine whether the amount of attorneys' fees requested is reasonable, including "the difficulty of the questions involved; the skill required to handle the problem; the time and labor required; the lawyer's experience, ability and reputation; the customary fee charged . . . for similar services; and the amount involved." Id. However, no calculus for this fee determination has ever been specified. Indeed, the United States Court of Appeals for the Second Circuit has noted explicitly that it "has never decided what procedure a district judge should follow in deciding a contractual claim for attorneys' fees." McGuire v. Russell Miller, Inc., 1 F.3d 1306, 1313 (2d Cir. 1993).
With respect to the evaluation of time sheets and expense records, "it is less important that judges attain exactitude, than that they use their experience with the case, as well as their experience with the practice of law, to assess the reasonableness of the hours spent." Amato v. City of Saratoga Springs, 991 F. Supp. 62, 65 (N.D.N.Y. 1998) (citing Clarke v. Frank, 960 F.2d 1146, 1153 (2d Cir. 1992)). Moreover, the Second Circuit has stated that the district court is not required to "set forth item-by-item findings concerning what may be countless objections to individual billing items" Lunday v. City of Albany, 42 F.3d 131, 134 (2d Cir. 1994) (per curiam), particularly when the billing records are voluminous, as they are in this action.
Ultimately, "[w]hat constitutes a reasonable fee is properly committed to the sound discretion of the district court, and will not be overturned absent an abuse of discretion, such as a mistake of law or a clearly erroneous factual finding." Goldberger v. Integrated Resources, Inc. 209 F.3d 43, 47 (2d Cir. 2000) (citations omitted). Having presided over the bulk of the litigation, the district court is considered to have "the best vantage point from which to assess the skill of the attorneys and the amount of time reasonably needed to litigate a case." Chambless v. Masters, Mates Pilots Pension Plan, 885 F.2d 1053 (2d Cir. 1989).
It is important to note at the outset that the fees and expenses ordered pursuant to a contractual obligation that a losing party pay the prevailing party "reasonable" counsel fees and expenses is not identical to the prices charged large, sophisticated commercial clients by large, sophisticated commercial law firms. Indeed, courts have acknowledged that a judicial determination of what is "reasonable" for purposes of a fee award to be paid by the losing party to the prevailing party in a litigation is not the same as the reasonableness of a bill that a law firm might present to its own paying client. See, e.g., Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 478 U.S. 546, 565 (1986) (fee-shifting arrangements "were not . . . intended to replicate exactly the fee an attorney could earn through a private fee arrangement with his client"); Hensley v. Eckerhart, 461 U.S. 424, 441 (1983) (Burger, C.J., concurring) ("A claim for legal services presented by the prevailing party to the losing party . . . presents quite a different situation from a bill that a lawyer presents to his own client"); Daggett v. Kimmelman, 811 F.2d 793, 800-801 (3d Cir. 1987) (judicial determination of reasonable attorneys' fees is different from the amount that might be charged to a paying client by his or her attorney). Whatever the terms of the private agreement between attorney and client, it is not required that Desnick be required to sign on to that agreement by virtue of his guaranty to pay "reasonable" fees and expenses.
1. Duplication of Attorney Efforts
A review of the billing statements and time records maintained by plaintiffs counsel and submitted as part of the moving papers reveals that a certain amount of time and effort for which compensation is sought is duplicative.
For instance, in the approximately 27 months from the filing of the complaint to the entry of summary judgment, no fewer than 17 different lawyers and summer associates worked on this action for Daiwa, including four partners, ten associates, and three summer associates. While this action required some specialized knowledge of health care industry law and made normal demands on attorneys engaged in litigation of this type, this action did not require a trial and was ultimately litigated and decided on the basis of written agreements.
The attorneys' fees are excessive, in part, because the time spent by so many individuals familiarizing themselves with the file is considerable. Additionally, a review of the time sheets indicates that meetings, conferences, and depositions were often overstaffed, at least from the standpoint of what an adversary should be required to pay. To note only one example, on October 5, 2001, four different attorneys (including three partners) prepared for and participated in the same conference call. (Isakoff Aff., Ex. 9, p. 21.)
There were also 21 depositions of fact and expert witnesses taken in this action. (Id. at p. 5 ¶ 9.) For each of these depositions, at least two of Daiwa's attorneys billed time both to prepare for the depositions and to attend them. (Id. at Ex. 8, Ex. 9.) While having a minimum of two attorneys attend each deposition may arguably accord with custom in large firms, it is not clear that such a multiplicity of attorneys was necessary. Excessive and duplicative hours were also billed for the review of deposition transcripts. For instance, one partner billed 10.7 hours and an associate billed 34.8 hours to reviewing the transcript of Dr. Desnick's deposition, which they both in fact attended. (Id. at Ex. 8, pp. 31-32.)
The excessiveness of the fees in connection with depositions was compounded by the time Daiwa's counsel billed for travel to and from depositions, which took place in Chicago and New York. Plaintiffs attorneys conducted this Southern District of New York litigation from their Washington, D.C. office, necessitating extensive travel from Washington to New York and Chicago. While a multi-office firm is certainly free to allocate its work force as it sees fit, that does not mean an adversary should be required to pay for those staffing decisions. For instance, for the deposition of Dr. Desnick in Chicago, two attorneys billed a total of nearly $10,000 in a twenty-four hour period, approximately one-third of which was travel time. (Id., at Ex. 8, p. 30.)) See infra.
Contrary to Desnick's assertions, this Court does not find plaintiffs firm's hourly rates to be excessive. The hourly rates for both partners and associates are in line with those prevailing in the community for similar services of lawyers of comparable skill, experience, and reputation. See Blum v. Stenson, 465 U.S. 886, 895 n. 11 (1984). However, the significant duplication of attorney efforts in connection with such matters as the preparation and taking of depositions and attendance at meetings and conference calls warrants a substantial reduction in the number of hours of attorneys' fees for which Daiwa should be compensated.
2. Daiwa's Billed Time and Expenses for Travel
Plaintiffs attorneys billed travel time at their full hourly rates and, as noted, traveled frequently to New York and Chicago for matters related to the litigation from the firm's Washington, D.C. office. See, e.g. Ex. 8, pp. 16, 30-32. However, when determining attorneys' fees, courts in the Southern District of New York generally do not credit travel time at the attorney's full hourly rate and customarily reduce the amount awarded for travel to at least 50% of that rate. See, e.g., Broome v. Biondi, 17 F. Supp.2d 211, 234-35 (S.D.N.Y. 1997); Wilder v. Bernstein, 975 F. Supp. 276, 283-84 (S.D.N.Y. 1997); Lilly v. County of Orange, 910 F. Supp. 945, 951 (S.D.N.Y. 1996). Travel time is widely recognized as less productive than regular time. Pascuiti v. New York Yankees, 108 F. Supp.2d 258, 271 (S.D.N.Y. 2000).
In addition, Daiwa seeks $134,728.40 in expenses. (Isakoff Aff., Ex. 5.) The duplication of attorney efforts in connection with depositions, as described above, is compounded by the duplicative expenses thereby incurred for travel to and from Chicago and New York, where depositions took place. The Court therefore finds that the amount requested for expenses is excessive.
3. Allocation of Work
This Court also found instances where plaintiffs firm inefficiently allocated work among attorneys, paralegals, and other law firm employees. The use of highly skilled and highly priced legal talent for matters easily delegable to nonprofessionals is not compensable at the attorney hourly rates reflected in the time sheets. See Microsoft Co. v. United Computer Resources of New Jersey, Inc., 216 F. Supp.2d 383, 392 (D.N.J. 2002). One associate who bills at a rate of $305-$355 per hour billed approximately 10.5 hours for filing papers with the Court and coordinating the service of papers with other attorneys. Id. Ex. 7, pp. 5, 8; Ex. 8, pp. 4, 5, 31. Another associate, whose rate is $265-310 per hour, billed approximately 115 hours to such paralegal and clerical tasks as proof-reading, bates labeling, and assembling documents and exhibits for use at depositions. Id. at Ex. 8, pp. 31, 33, 36, 41, 44, 45, 47, 53; Ex. 9, pp. 15, 21; Ex. 10, pp. 6, 7. Such fees are not recoverable by Daiwa. See Society for Good Will to Retarded Children v. Cuomo, 574 F. Supp. 994, 999 (E.D.N.Y. 1983), vacated on other grounds, 737 F.2d 1253 (2d Cir. 1984) (quotations omitted) (filing, delivery, and service of papers are not compensable at an attorney's hourly rates).
The Court also found that paralegals sometimes billed the client (at rates of $120 per hour) for totally non-legal tasks that involved purely physical skills — such as moving boxes — and that required a minimum of sentience. Id. Ex. 8, pp. 32-40. Such services are part of overhead and should not be imposed on Desnick. See Marisol A. v. Giuliani, 111 F. Supp.2d 381, 390 (S.D.N.Y. 2000) (citations omitted);Bridges v. Eastman Kodak Co., No. 91 Civ. 7985, 1996 WL 47304, at *7 (S.D.N.Y. Feb. 6, 1996).
CONCLUSION
For the reasons stated above, this Court finds that Daiwa's request for costs and attorneys' fees in an amount totaling over $2.2 million is excessive, at least in the context of a court shifting the cost of a litigation pursuant to a contractual provision. It follows proportionally from such matters as duplication of attorney efforts, the overstaffing of meetings and depositions, and the inefficient allocation of human resources that Daiwa's award should be reduced. In light of this Court's experience presiding over this action and a review of the attorneys' billing records as submitted on this application, Daiwa is awarded $1.1 million as "reasonable costs and expenses (including reasonable counsel fees and expenses)" pursuant to Section 1 of the guaranty.