Opinion
19-CV-00209 (RA)(SN)
02-24-2023
INFINITY TRANSPORTATION MSN 6651, LLC Plaintiff, v. SYNERGY AEROSPACE CORP., Defendant.
REPORT AND RECOMMENDATION
SARAH NETBURN, UNITED STATES MAGISTRATE JUDGE.
TO THE HONORABLE RONNIE ABRAMS:
Plaintiff Infinity Transportation MSN 6651, LLC (“Infinity Transportation”) purchased an aircraft that was subject to a lease agreement (the “Lease Agreement”) guaranteed by Defendant Synergy Aerospace Corporation (“Guarantor” or “Defendant”). After the nonparty lessee, Vermillion Aviation (Four) Limited (“Vermillion”), failed to make rent payments, Plaintiff sued Defendant for Vermillion's breach of the Lease Agreement and to enforce the parties' Guarantee and Indemnity Agreement (“Replacement Guarantee”). Compl. ¶ 1. Plaintiff seeks lease-related damages, additional out-of-pocket costs, and attorneys' fees, as permitted by the parties' contract. After Defendant's counsel withdrew and Defendant subsequently failed to appear, the Honorable Ronnie Abrams entered a default in Plaintiff's favor and referred this matter to my docket to conduct an inquest on damages. I recommend the Plaintiff be awarded $17,716,013.04.
PROCEDURAL BACKGROUND
Infinity Transportation sued Defendant, alleging a breach of the Replacement Guarantee between the two parties. ECF No. 78 at ¶ 24. Through this action, Plaintiff sought to recoup lease-related damages, out-of-pocket costs, and attorneys' fees incurred from Vermillion's default. Compl. at ¶¶ 35-38. Defendant answered the Complaint and raised an affirmative defense, which it subsequently withdrew. ECF No. 78 at ¶¶ 25-26. At the close of fact and expert discovery, Defendant's counsel moved to withdraw. ECF No. 51. The Court directed Defendant to file a letter indicating whether it opposed the motion and ordered Defendant to appear though new counsel. ECF No. 58. Defendant did not respond to counsel's motion to withdraw or appear through new counsel, so Plaintiff filed a motion for default judgment, and the Clerk of Court issued a Certificate of Default. ECF Nos. 59 & 63. Judge Abrams granted both Plaintiff's Motion for Default and counsel's Motion to Withdraw and referred this matter to me for an inquest on damages. ECF No. 72. Thereafter, Plaintiff filed a Proposed Findings of Fact and Conclusions of Law in support of damages. ECF No. 78. To date, Defendant has failed to respond or appear through counsel.
DISCUSSION
I. Legal Standard
The Court of Appeals set forth the procedural rules applicable to the entry of a default judgment in City of New York v. Mickalis Pawn Shop, LLC:
“Federal Rule of Civil Procedure 55 is the basic procedure to be followed when there is a default in the course of litigation.” Vt. Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004). Rule 55 provides a “two-step process” for the entry ofjudgment against a party who fails to defend: first, the entry of a default, and second, the entry of a default judgment. New York v. Green, 420 F.3d 99, 104 (2d Cir. 2005). The first step, entry of a default, formalizes a judicial recognition that a defendant has, through its failure to defend the action, admitted liability to the plaintiff.... The second step, entry of a default judgment, converts the defendant's admission of liability into a final judgment that terminates the litigation
and awards the plaintiff any relief to which the court decides it is entitled, to the extent permitted by Rule 54(c).645 F.3d 114, 128 (2d Cir. 2011).
Where default has been entered against a defendant, courts accept as true all the well-pleaded facts alleged in the complaint, except those concerning the amount of damages. See In re Indus. Diamonds Antitrust Litig., 119 F.Supp.2d 418, 420 (S.D.N.Y. 2000).
In an inquest for damages where the plaintiff has sufficiently pleaded a claim on which relief can be granted, the only remaining issue is to determine the amount of damages owed. See Gucci Am., Inc. v. Tyrrell-Miller, 678 F.Supp.2d 117, 119 (S.D.N.Y. 2008) (citing Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)). The plaintiff must provide adequate support for the requested relief. Id.; see also Malletier v. Carducci Leather Fashions, Inc., 648 F.Supp.2d. 501, 503 (S.D.N.Y. 2009) (“[A] plaintiff seeking to recover damages against a defaulting defendant must prove its claim th[r]ough the submission of evidence ....”). A court may determine the amount a plaintiff is entitled to recover without a hearing, so long as: (1) the court determines the proper rule for calculating damages, and (2) the evidence submitted by the plaintiff establishes “with reasonable certainty” the basis for the damages. Id.
II. Liability
Courts evaluating damages in a default context first look to the complaint to determine whether the plaintiff has established aprimafacie case for recovery. See Lenard v. Design Studio, 889 F.Supp.2d 518, 528 (S.D.N.Y. 2012) (the court must first determine whether the allegations in the complaint were sufficiently pleaded to establish liability); Eurosteel Corp. v. M/V Koggegracht, No. 01-cv-7731 (DLC), 2003 WL 1872652, at *1 (S.D.N.Y Apr. 11, 2003) (finding that a report and recommendation correctly concluded that plaintiff had established a prima facie case for recovery). In light of Defendant's default, Plaintiff's properly-pleaded allegations are accepted as true, except those relating to damages. See Cotton v. Slone, 4 F.3d 176, 181 (2d. Cir. 1993).
Nonparty Oceanair Linhas Aereas S/A d/b/a Avianca Brasil (“Oceanair”) leased an aircraft to Vermillion pursuant to a June 22, 2015 lease. ECF No. 78 at ¶ 1. That Lease Agreement was guaranteed by Defendant and set to expire on June 22, 2025. Id. at ¶ 36. Subsequently, Oceanair sold the aircraft to Plaintiff subject to the Lease Agreement. Id. at ¶ 4. Through an Assignment, Assumption, and Amendment Agreement, Oceanair assigned its rights and interests under the Lease Agreement to Plaintiff, and Defendant entered into a Guarantee and Indemnity Agreement (the “Replacement Guarantee”) to remain Vermillion's guarantor. Id. at ¶ 5. Under the Replacement Guarantee, Defendant:
absolutely, unconditionally and irrevocably as primary obligor . . . (a) guarantees to Lessor the due and punctual payment, performance and observance by Obligor of the Guaranteed Obligations in accordance with the terms of the Lease Agreement and the other Lessee's documents; (B) undertakes with Lessor to pay and perform, as the case may be, the Guaranteed Obligations on demand . . . within five (5) days of such demand, made by Lessor; (C) shall be liable under this Guarantee as if it were a principal and independent debtor and accordingly he shall pay the amounts not so paid upon first written demand by Lessor; and (D) agrees as a primary obligation to indemnify Lessor . . . as a result of or in connection with .... (4) the early termination of the Term by Lessor pursuant to Clause 16.2 of the Lease Agreement including without limitation .... (b) any loss, premium, penalty or expense which may be incurred in unwinding any swap or forward interest rate agreement relating to Aircraft.ECF No. 1, Ex. 3 at ¶ 2.1. The parties agreed that the Replacement Guarantee would be governed by New York law and “[a]ny amount . . . owed by Guarantor under [the] Guarantee . . . shall bear interest at the Default Rate from the due date until the date on which such amount is . . . discharged in full.” Replacement Guarantee at ¶ 2.2; see also ECF No. 78 at ¶ 9.
When Vermillion failed to make payments in accordance with the Lease Agreement, Plaintiff and Vermillion entered into a Forbearance Agreement. Defendant acknowledged “that all of its prior guarantee obligations remained in full force and effect and that its guarantee obligations extended to . . . the Forbearance Agreement.” ECF No. 78 at ¶¶ 11-12. Vermillion defaulted again and both parties agree that Vermillion failed to make payments under the Lease Agreement after October 2, 2018. Id. at ¶ 14. After providing Defendant and Vermillion with an opportunity to remedy these defaults, Plaintiff successfully terminated the lease on November 13, 2018, and repossessed the aircraft through the Brazilian court system. Id. at ¶¶ 15-16. Upon repossession, Plaintiff leased the aircraft to another nonparty entity, EasyJet Airlines Co. Ltd. (“EasyJet”), through February 26, 2027. Id. at ¶¶ 19 & 35. At no point during this period has Defendant made any payments to Plaintiff pursuant to its obligations under the Replacement Guarantee.
As the Court previously found when granting Plaintiff's Motion for Default Judgment, Plaintiff “plainly established Defendant's liability.” ECF No. 72 at 4. To state a claim for breach of contract under New York law, a “complaint need only allege (1) the existence of an agreement, (2) adequate performance of the contract by the plaintiff, (3) breach of contract by the defendant, and (4) damages.” Eternity Glob. Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 177 (2d Cir. 2004) (internal quotation marks omitted). The Guarantee Agreement is a “valid and enforceable agreement that was executed by Plaintiff and Defendant” and “Defendant's failure to pay Plaintiff its obligations under the Guarantee upon demand from Plaintiff breached that contract.” Id. Accordingly, Plaintiff is entitled to damages in the amount determined below.
III. Damages
Once liability is established, the sole remaining issue before the court is whether the plaintiff has provided adequate support for the relief it seeks. Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., Div. of Ace Young Inc., 109 F.3d 105, 111 (2d Cir. 1997); see also Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d, 155, 158 (2d Cir. 1992) (“While a party's default is deemed to constitute a concession of all well pleaded allegations of liability, it is not considered an admission of damages.”)
On an inquest for damages, the plaintiff bears the burden of proof and must introduce sufficient evidence to establish the amount of damages with “reasonable certainty.” Transatlantic Marine, 109 F.3d at 111. See also Lenard v. Design Studio, 889 F.Supp.2d 518, 538 (S.D.N.Y. 2012) (awarding no damages because plaintiff failed to demonstrate the amount of fines incurred that were attributable to defendant). A court may determine the appropriate damages on the basis of affidavits and other documentary evidence “as long as [the court has] ensured that there [is] a basis for the damages specified in the default judgment.” Transatlantic Marine, 109 F.3d at 111 (quoting Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d. Cir. 1989)); see also Action S.A. v. Marc Rich & Co., 951 F.2d 504, 508 (2d Cir. 1991) (leaving the decision of whether a hearing is necessary for determining damages to the discretion of the district court); Fed.R.Civ.P. 55(b)(2).
A plaintiff in a breach of contract action is entitled to damages in the “amount necessary to put the plaintiff in the same economic position he would have been in had the defendant fulfilled his contract.” Indu Craft, Inc. v. Bank of Baroda, 47 F.3d 490, 495 (2d Cir. 1995) (citations omitted). Under New York law, parties have the right to “specify within a contract the damages to be paid in the event of a breach.” Rattigan v. Commodore Int'l Ltd., 739 F.Supp. 167, 169 (S.D.N.Y. 1990). If the clause “is intended by the parties to operate in lieu of performance, it will be deemed a liquidated damages clause and may be enforced by the courts.” Brecher v. Laikin, 430 F.Supp. 103, 106 (S.D.N.Y. 1977)); accord Trustees of Columbia Univ. in City of New York v. D'Agostino Supermarkets, Inc., 36 N.Y.3d 69, 75 (2020). If a court determines that a liquidated damages provision is legally enforceable, “actual damages are not at issue” and the liquidated damages provision “must be exclusively followed.” X.L.O. Concrete Corp. v. John T. Brady & Co., 104 A.D.2d 181, 184 (1st Dep't 1984) (quotations omitted).
New York has adopted Article 2A of the Uniform Commercial Code, which “applies to any transaction.. .that creates a lease.” N.Y. U.C.C. § 2A-102. Under the U.C.C., liquidated damages are enforceable when they are “an amount or by a formula that is reasonable in light of the then anticipated harm caused by the default.” N.Y. U.C.C. § 2A-504(1). When evaluating the reasonableness of liquidated damages in a lease agreement, courts have continued to apply common law to determine whether these clauses are enforceable. In re Republic Airways Holdings Inc., 598 B.R. 118, 131 (Bankr. S.D.N.Y. 2019) (“In sum, the reasonableness requirement was part of the common law test predating Article 2A and remains part of the test today.”) (collecting cases).
A liquidated damages clause is legally enforceable if it “is neither unconscionable nor contrary to public policy,” Rattigan, 739 F.Supp. at 169, could not have been anticipated at the time the parties entered into the lease, and the amount is not “plainly or grossly disproportionate to the probable loss.” Parsons & Whittemore, Inc. v. 405 Lexington LLC, 299 A.D.2d 156, 157 (1st Dep't 2002). Liquidated damages provisions “must ‘clearly and unambiguously' set forth ‘the amount of compensation the parties agreed ‘should be paid in order to satisfy any loss or injury flowing from a breach of [the parties'] contract.'” Deer Park Enter., LLC v. Ail Sys. Inc., 57 A.D.3d 711, 712 (2d Dep't 2008) (quoting Fed. Realty Ltd. P'ship v. Choices Women's Med. Ctr., 289 A.D.2d 439, 441 (2d Dep't 2001)). “Whether the sum stipulated represents a liquidation of the anticipated damages or a penalty is a question of law, with due consideration for the nature of the contract and the attendant circumstances.” J.R. Stevenson Corp. v. County of Westchester, 113 A.D.2d 918, 920-21 (2d Dep't 1985).
A. Lease-Related Damages
Under Plaintiff's Lease Agreement with Vermillion, it is entitled to recover, “as liquidated damages for loss of a bargain and not as a penalty,” any accrued unpaid rent through the date of reletting plus the difference, discounted to present value, between the amount of rent it would have recovered under the original lease with Vermillion and the amount of rent it anticipates receiving from EasyJet through June 22, 2025, the expiration date of the Lease Agreement. Compl., Ex. 1 (“Lease Agreement”) at ¶ 17.1(b)(ii). Per the Lease Agreement, the annual discount rate is set by the current market yield of the U.S. Treasury securities having a remaining maturity closest to but not later than the expiry date. Id. And as provided in Schedules 7 and 10 of the Lease Agreement, monthly rent includes routine maintenance and maintenance adjustment payments that were determined, in part, by the number of flight hours utilized by Vermillion. Id. at 126 & 151.
Under both a plain reading of the U.C.C. and an analysis of common law, the parties' liquidated damages provision is enforceable. As a preliminary matter, the calculation of liquidated damages prescribed in the Lease Agreement is the same calculation prescribed in § 2A-527(2)(i)-(ii) of the U.C.C., which constitutes the default provision of a lessor's rights to dispose of goods when not otherwise contemplated in a lease agreement. A provision permitted by the U.C.C. can hardly be interpreted as “unreasonable.” Even if the U.C.C. did not already permit this calculation of damages, the lease-related damages are still enforceable because they are not “grossly disproportionate” to Plaintiff's probable loss and were not foreseeable at the time the parties entered the Agreement. A lessor can recover unpaid rent adjusted for “the physical condition of the equipment and the market condition . . . [b]ecause these values are of such an uncertain nature and any calculation of damages would depend on these figures.” PacifiCorp Cap., Inc. v. Tano, Inc., 877 F.Supp. 180, 184 (S.D.N.Y. 1995) (enforcing a liquidated damages provision that allowed lessor to recover “unpaid rentals to the date of the declaration of default, plus the stipulated loss value of the equipment as set out in the Lease Schedules); see also Leasing Serv. Corp. v. Justice, 673 F.2d 70, 74 (2d Cir. 1982) (upholding a lease agreement's provision allowing lessor to recover 15% of the total rent for trucks and heavy machinery). Further, a liquidated damages clause allowing a lessor to recover the difference between the original contract price and the price for which they were eventually able to re-lease the product is enforceable because this formula accounts for opportunity costs, which “can be unpredictable and run high.” AXA Inv. Managers UK Ltd. v. Endeavor Cap. Mgmt. LLC, 890 F.Supp.2d 373, 388 (S.D.N.Y. 2012) (citing cases). The maintenance related payments and annual discount rate incorporated into the damages calculations permissibly account for unknown opportunity costs, market conditions, and the condition of the aircraft. Even if these adjustments may have put Plaintiff in a better position than if Vermillion had performed under the lease, the damages cannot be said to be “grossly disproportionate.” PacifiCorp Cap., Inc., 877 F.Supp. at 184 (finding unpersuasive defendant's argument that market and equipment adjustments rendered liquidated damages greater than actual damages and thus unenforceable). Additionally, when liquidated damages are “agreed upon by two sophisticated and experienced parties of similar bargaining power,” courts are even more inclined to enforce these provisions. Id. Accordingly, the lease-related liquidated damages in the Lease Agreement are enforceable.
Upon a lessee's default and if not otherwise provided by a lease agreement, the U.C.C. allows a lessor to recover as damages “(i) accrued and unpaid rent as of the date of the commencement of the term of the new lease agreement, (ii) the present value, as of the same date, of the total rent for the then remaining lease term of the original lease agreement minus the present value, as of the same date, of the rent under the new lease agreement applicable to that period of the new lease term which is comparable to the then remaining term of the original lease agreement, and (iii) any incidental damages allowed under Section 2A-530, less expenses saved in consequence of the lessee's default.” N.Y. U.C.C. § 2A-527 (2).
Because the parties did contemplate and articulate these rights, the liquidated damages provision in the Lease Agreement controls and the Court does not need to determine, as required by § 2A-527(2), whether the lease agreement with EasyJet is substantially similar to the original agreement or was made in good faith and in a commercially similar manner.
Plaintiff asserts that had Vermillion not defaulted, it could have expected a total cash flow of $33,652,936.00 through June 22, 2025. ECF No. 78, Ex. 12 at 14. To determine the maintenance cashflow Vermillion would have owed beyond the base rent, Plaintiff submitted an expert report by John J. Mowry who estimated what Vermillion's aircraft and engine utilization would have been, the amount Vermillion would have expended on maintenance, and the difference of this total with the maintenance reserves. ECF No. 78, Ex. 12, at 45. Under the EasyJet lease, Plaintiff anticipates receiving $20,619,491.00 through the same date. Id. Without discounting for present value, the difference between these two sets of cash flow is $13,033,445.00. Id. When discounting for present value, at a rate of 2.2% per annum, Plaintiff asserts that the difference between the two cash flows is $12,567,527.00. Id. Because Plaintiff has accounted for these damages with reasonable certainty, Plaintiff is entitled to $12,567,527.00 in lease-related damages.
B. Out-of-Pocket Damages
Under the Lease Agreement,
If Lessee fails to perform or comply with any of its obligations hereunder, Lessor shall have the right, but shall not be obligated to effect such performance on Lessee's behalf, and the amount of any reasonable out-of-pocket expenses and other reasonable expenses of Lessor incurred in connection with such performance . . . shall be payable by Lessee upon demand.Lease Agreement ¶ 20.10.
This damages provision is also enforceable. In the event of a lessee's default, N.Y. U.C.C. § 2A-523(1)(f) permits a lessor to “exercise any other rights or pursue any other remedies provided in the lease contract.” As articulated in § 2A-523(1), a default can include a failure to make a payment, or “certain acts or omissions” identified as defaults under the lease contract. § 2A-523:15 Modification by agreement-Other contractual defaults, 5 Anderson U.C.C. § 2A-523:15 (3d. ed.). In the Lease Agreement, failure to maintain insurance and redeliver the aircraft pursuant to the maintenance specifications in Clause 18 constitutes a default. Lease Agreement at ¶ 16.1(d). Vermillion's multiple defaults permit Plaintiff to pursue the remedy under Clause 20.10, as part of or in addition to the Lease Agreement's liquidated damages provision. “Whether, in a particular case, one remedy bars another, is a function of whether lessor has been put in as good a position as if the lessee had fully performed the lease contract. § 2A-523:1 Official Code Comment, 5 Anderson U.C.C. § 2A-523:1 (3d. ed.) (citing §§ 2A-103(4) and 2A-501(4)). “Multiple remedies are barred only if the effect is to put the lessor in a better position than it would have been in had the lessee fully performed under the lease.” Id. To the extent Plaintiff seeks these out-of-pocket damages as an additional remedy, Plaintiff is not barred from doing so. And to the extent the parties intended for this provision “to operate in lieu of performance,” Clause 20.10 of the Lease Agreement is still enforceable as a liquidated damage. These costs cannot be said to be “grossly disproportionate” to the probable loss incurred because of Vermillion's default and the total amount of damages was unforeseeable at the time the parties entered the Agreement.
Through the remedy in Clause 20.10, Plaintiff seeks $3,734,577.36 for damages incurred repossessing, remarketing, and re-leasing the aircraft, effectively effecting performance on Vermillion's behalf. These damages also include legal fees and amounts incurred repairing the significant damage caused by Vermillion's failure to comply with the maintenance requirements and return conditions specified in the Lease Agreement. Vermillion had an obligation to pay for these expenses. In the event of default, Vermillion had a duty to:
(ii) pay and indemnify Lessor against all losses, fees, costs, and expenses (including legal, professional, inspection and other out-of-pocket expenses . . .) payable or incurred by Lessor in connection with such Event of Default . . . or the enforcement of, or the preservation of any of Lessor's rights under, this Agreement or in respect of recovering possession of the Aircraft or carrying out any works or modifications required to place the Aircraft in the condition specified in Clause 18; and
(iii) pay and indemnify Lessor against . . . (D) any loss, cost, expense, or liability sustained or incurred . . . owing to Lessee's failure to redeliver the Aircraft in the condition required by this Agreement.Lease Agreement ¶17.1 (a)(ii)-(iii). In support of its claimed damages, Plaintiff has submitted a sworn declaration of Jerrold Rosen, the President of the Aviation Division at the Global Atlantic Financial Group, an affiliate and manager of Plaintiff. ECF No. 78, Ex. 13. Rosen's declaration includes a summary of damages that he asserts is “true and correct.” Id. at ¶ 24. Plaintiff has also provided invoices to substantiate each expense.
The declaration and the invoices attached to the Proposed Findings of Fact and Conclusions of Law reflect that Plaintiff spent a total of $236,843.00 in legal fees incurred in the repossession and re-leasing of the aircraft. Id. at ¶ 22(a); ECF No. 78, Exs. 15-19. This amount is properly awarded because Vermillion was explicitly made liable for legal fees incurred for this purpose. Lease Agreement ¶ 17.1 (a)(ii). Because, however, Plaintiff failed to submit a proper invoice for Dr. Veronika Kozak's legal fees, the Court declines to award Plaintiff the $32,996.00 it seeks for her services and the total calculation of legal fees above reflects this deduction. See ECF No. 78, Ex. 18.
Plaintiff should also be awarded $9,317.88 in Brazilian court fees, $10,796.75 for accounting services, and $8,438.42 in aircraft security because Vermillion was explicitly made liable for these professional and out-of-pocket costs in the event of a default. Lease Agreement ¶ 17.1 (a)(ii); see also ECF No. 78, Exs. 20-22. Similarly, Plaintiff should be awarded $33,287.50 in demo flight fees and $7,171.06 in airport fees presumably incurred to re-market and re-lease the aircraft to potential new lessees. ECF No. 78, Exs. 28-29.
Because Vermillion was also made explicitly liable for professional and inspection costs incurred to redeliver the aircraft in accordance with the maintenance requirements in Clause 18 and Schedule 4 of the Lease Agreement, Plaintiff is also entitled to $31,100.61 for continued airworthiness maintenance, $247,710.64 in fees and expenses for technical services conducted by SGI Aviation Services B.V., $149,446.67 in ferry flight fees, $1,949,529.71 in maintenance, repair and overhaul fees performed by Jobair Technic, and the $974,119.07 in various repair and registry costs identified in ¶ 22(1)-(p) of Rosen's Declaration. Lease Agreement ¶ 17.1 (a)(iii); see also ECF No. 78, Exs. 23, 26, 27, 30-36.
Plaintiff asserts that it is entitled to $43,435.17 in fees for continued airworthiness maintenance. Because, however, it has only provided three invoices for these fees, totaling €27,154.64, or $31,100.61 when adjusted at the then-applicable rate, the Court finds this amount more appropriate. See ECF No. 78, Ex. 23 at 23, 29, & 39.
Plaintiff asserts that it is entitled to $240,387.54 in fees for technical services provided by SGI Aviation Services. Because, however, the invoices it provided for these fees total €218,556.35, or $247,710.64 when adjusted at the then-applicable rate, the Court finds this amount more appropriate. See ECF No. 78, Ex. 26 at 2, 6, 7, 26, 83, 115, 128, 148, & 163
Plaintiff asserts that it is entitled to $121,622.71 in ferry flight fees. Because, however, the invoices for these fees total €127,500, or $149,446.67 when adjusted at the then-applicable rate, the Court finds this amount more appropriate. See ECF No. 78, Ex. 27 at 9-13.
In ¶ 22 (m) of Rosen's Declaration, Plaintiff seeks $89,664.05 in painting fees. Because, however, the invoices it provided for these fees total €86,760, or $102,127.72 when adjusted at the then-applicable rate, the Court finds this amount more appropriate and the total amount the Court recommends be awarded for the costs stated in ¶ 22(1)-(p) of Rosen's Declaration reflects this figure. See ECF No. 78, Ex. 33 at 5-7.
Finally, Plaintiff should be awarded $63,090.63 in insurance fees because Vermillion was obligated to insure the aircraft “until.. .earlier termination of the Term and redelivery.” Lease Agreement ¶14.1. see also ECF No. 78, Exs. 24-25.
As Plaintiff has accounted for these damages with reasonable certainty, Plaintiff should be awarded a total of $3,720,851.94 in out-of-pocket damages.
IV. Attorneys' Fees and Costs
“Under New York law, ‘generally, attorney's fees are not recoverable as damages in an action for breach of contract . . ., unless expressly agreed to by the parties.'” McGraw-Hill Companies, Inc. v. Vanguard Index Trust, 139 F.Supp.2d 544, 556 n.6 (S.D.N.Y. 2001) (quoting Equitable Lumber Corp. v. IPAL and Development Corp., 38 N.Y.2d 516, 519 (1976)) (cleaned up). A “court should not infer a party's intention to waive the benefit of the rule unless the intention to do so is unmistakably clear from the language of the promise.” Hooper Assocs., Ltd. v. AGS Computers, Inc., 74 N.Y.2d 487, 492 (1989). Because attorneys' fees and costs are recoverable under the Lease Agreement and Defendant “shall indemnify . . . Lessor . . . from and against. all Expenses which Lessor may incur as a result of the exercise by Lessor of any of its rights.. .under this Guarantee or by law,” Plaintiff is entitled to attorneys' fees in conjunction to the costs of bringing this litigation. Replacement Guarantee ¶ 8.3; see also Lease Agreement ¶ 20.10.
Courts determine the “presumptively reasonable fee” for an attorney's services by looking to “what a reasonable, paying client would be willing to pay . . . who wishes to pay the least amount necessary to litigate the case effectively.” Arbor Hill Concerned Citizens Neighborhood Ass'n v. Cnty. of Albany, 522 F.3d 182, 184 (2d Cir. 2007). “The rate that the client actually agreed to pay, while not dispositive, is persuasive evidence of ‘the rate a paying client would be willing to pay.'” Sery v. Medina, No. 13-cv-165 (RLE), 2016 WL 3282491, at *4 (S.D.N.Y. June 10, 2016) (quoting Arbor Hill, 522 F.3d at 190). The “presumptively reasonable fee” equals the product of a reasonable hourly rate and a reasonable number of hours engaged in litigating the matter. See Millea v. Metro-North R.R. Co., 658 F.3d 154, 166 (2d Cir. 2011). Requested fees must be supported “with contemporaneous time records establishing for each attorney for whom fees are sought, the date on which work was performed, the hours expended, and the nature of the work done.” Annuity, Welfare & Apprenticeship Skill Imp. & Safety Funds of Int'l Union of Operating Eng'rs, Local 15, 15A, 15C, 15D, AFL-CIO v. Integrated Structures Corp., No. 12-cv-436 (LGS)(KNF), 2013 WL 2649644, at *7 (June 13, 2013), report and recommendation adopted by, 2013 WL 3684933 (S.D.N.Y. July 12, 2013) (quoting NY State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1154 (2d Cir. 1983)) (internal quotations and punctuation omitted).
Plaintiff requests $250,334.22 in attorneys' fees and costs, which reflects a 7.5% discount. ECF No. 78, Ex. 1, Declaration of Daniel C. Green, Esq. (“Green Decl”) ¶ 17. Mr. Green's declaration and the contemporaneous attorney time records detail Vedder Price's work on the case from February 2018 to February 2021 and show the firm worked a total of 414.80 hours. Id.; see also ECF No. 78, Ex. 10 at 23.
A. Reasonable Rate
In determining the reasonable fee for a particular case, courts rely on reasonable hourly rates prevailing in the district for similar services provided by attorneys with comparable skill and experience. See Annuity, 2013 WL 2649644, at *7 (citing Blum v. Stenson, 465 U.S. 886, 896 n.11 (1984)); Sub-Zero, Inc. v. Sub Zero NY Refrigeration & Appliances Servs., Inc., No. 13-cv-2548 (KMW)(JLC), 2014 WL 1303434, at *8 (S.D.N.Y. Apr. 1, 2014). Courts should also consider, inter alia:
(1) The time and labor required; (2) the novelty and difficulty of the questions; (3) the level of skill required to perform the legal service properly; (4) the preclusion of employment by the attorney due to acceptance of the case; (5) the attorney's customary hourly rate; (6) whether the fee is fixed or contingent; (7) the time limitations imposed by the client or the circumstances; (8) the amount involved in the case and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the “undesirability” of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases.Arbor Hill, 493 F.3d 114 n.3. “It is the fee movant's burden to establish the prevailing market rate.” Sub-Zero, Inc., 2014 WL 1303434, at *8.
Plaintiff submitted attorney time records indicating that four Shareholders-James V. Garvey, Adam R. Beringer, Dean N. Gerber, and Michael J. Edelman worked on this litigation. Mr. Garvey earned a law degree from the University of Notre Dame Law School in 1994 and has over 20 years of experience in complex commercial litigation. Plaintiff seeks an hourly rate of $690 for Mr. Garvey's work from February 2018 through October 2018, $800 from November 2018 through December 2018, $725 in 2019, $765 in 2020, and $675 in 2021. Mr. Beringer is a member of the Vedder Price's Global Transportation Finance Practice Group and earned a law degree from Georgetown University Law Center in 1999. Plaintiff seeks an hourly rate of $750 for the work he performed in 2018. Mr. Gerber was a member of the firm's Global Transportation Finance Practice Group and earned his law degree from the University of Illinois College of Law Center in 1985. For the work he performed in 2018, Plaintiff seeks an hourly rate of $860. Finally, Mr. Edelman is a member of the firm's Bankruptcy and Creditor Rights Practice Group and earned his law degree from New York University School of Law in 1990. For the work he performed in 2019, Plaintiff seeks an hourly rate of $980.
While some of these rates are high, the Court recognizes that these are actual costs, as Plaintiff represents that it has paid all invoices. The fact that a sophisticated client has represented that it would and did pay these rates is strong evidence that they are reasonable. See Carrington v. Graden, No. 18-cv-4609 (KPF), 2020 WL 5758916, at *9 (S.D.N.Y. Sept. 28, 2020) (an “attorney's customary billing rate for fee-paying clients is ordinarily the best evidence of' a reasonable hourly rate). And because the Court has approved hourly rates exceeding $600 for partners and experienced litigators, I find these rates to be reasonable. See, e.g., Asare v. Change Grp. of New York, Inc., No. 12-cv-3371 (CM), 2013 WL 6144764, at *19 (S.D.N.Y. Nov. 18, 2013) (awarding partners an hourly rate of $750); In re Nissan Radiator/Transmission Cooler Litig., No. 10-cv-7493 (VB), 2013 WL 4080946, at *17 (S.D.N.Y. May 30, 2013) (awarding partners $795 an hour); In re Telik, Inc. Sec. Litig., 576 F.Supp.2d 570, 589 (S.D.N.Y. 2008) (awarding partners between $700 to $750 an hour.)
Five associates-Daniel C. Green, Haley Tynes, Michael D. Lefiman, Ashley Huddleston, and Fleming L. Ware-also worked on this case. See ECF Nos. 83 & 78, Ex. 10. Mr. Green earned his law degree at Columbia Law School in 2003 and concentrates his practice on complex commercial litigation. Plaintiff seeks an hourly rate of $650 for the work he performed in 2018, $670 in 2019, $705 in 2020 and $730 in 2021. Ms. Tynes worked at Vedder Price from approximately September 2017 through March 2020 and earned her law degree from Brooklyn Law School in 2017. Plaintiff seeks an hourly rate of $450 for the work she performed in 2019. Mr. Leifman is a member of the firm's Bankruptcy and Creditor Rights Practice Group and earned his law degree from DePaul University College of Law in 2016. Plaintiff seeks an hourly billing rate of $450 for the work he performed in 2021. Ms. Huddleston was an associate at Vedder Price from approximately September 2015 to late 2019 and earned her law degree from Brooklyn Law School in 2015. Plaintiff seeks an hourly billing rate of $490 for the work she performed in 2019. Finally, Ms. Ware is a member of the firm's Bankruptcy and Creditor Rights Practice Group and earned her law degree from Villanova University School of Law in 2010. For the work she performed in 2020, Plaintiff seeks an hourly billing rate of $655.
Once again, these rates are high but within the range of rates courts have found reasonable for experienced litigators and associates. See, e.g., Asare, 2013 WL 6144764, at *19 (awarding an hourly rate of $500 for senior associates); In re Nissan Radiator/Transmission Cooler Litig., 2013 WL 4080946, at *17 (awarding associates $675 an hour). And because Plaintiff represents that it has paid these rates, I find them to be reasonable.
Lastly, Plaintiff seeks fees for the work performed by four paralegals and two project staff members. Napoleon A. Zapata was a litigation paralegal at Vedder Price from approximately May 2019 through August 2022. Plaintiff seeks hourly rates of $260 and $230 for the work he performed in 2019 and 2020. Christina Colocotronis was a litigation and intellectual property paralegal from approximately November 2015 through May 2020. Plaintiff seeks an hourly rate of $280 for the work she performed in 2019. Christina DiBenedetto is a paralegal at Vedder Price, and Plaintiff seeks hourly rates of $180, $215, and $200 for the work she performed in 2019, 2020, and 2021, respectively. Robert S. Rivera was a litigation paralegal at Vedder Price from approximately June 2014 through March 2022. Plaintiff seeks an hourly rate of $390 for the work he performed in 2020. Leah C. Waxell was an eDiscovery Project Manager at Vedder Price from approximately May 2016 through July 2021, and Plaintiff seeks an hourly rate of $305 for the work she performed in 2019. Finally, Sylvia Waghorne was a Project Assistant at Vedder Price from approximately June 2017 through July 2019, and Plaintiff seeks an hourly rate of $170 and $190 for the work she performed in 2018 and 2019.
The rates sought for these assistants and paralegals are within or slightly exceed the high end of rates awarded by courts. See Sprint Communications Co. L.P. v. Chong, 13-cv-3846 (RA)(SN), 2014 WL 6611484, at *8 (finding paralegal hourly rates of $180-$205 reasonable); Sub-Zero, Inc., 2014 WL 1303434, at *9 (finding $200 per hour to be a reasonable rate for a paralegal). And because Plaintiff has paid them, the Court finds them to be reasonable.
B. Reasonable Hours
“[A]ny attorney ... who applies for court-ordered compensation in this Circuit ... must document the application with contemporaneous time records.... specifying], for each attorney, the date, the hours expended, and the nature of the work done.” Carey, 711 F.2d at 1148. The court's task is to make “a conscientious and detailed inquiry into the validity of the representations that a certain number of hours were usefully and reasonably expended.” Lunday v. City of Albany, 42 F.3d 131, 134 (2d Cir. 1994). In making this determination, “court[s] should exclude excessive, redundant or otherwise unnecessary hours.” Quaratino v. Tiffany & Co., 166 F.3d 422, 425 (2d Cir. 1999). In doing so, the court may make specific reductions or an across the board reduction where the number of billing entries is voluminous. See In re Agent Orange Prod. Liab. Litig., 818 F.2d 226, 237 (2d Cir. 1987). The critical inquiry is “whether, at the time the work was performed, a reasonable attorney would have engaged in similar time expenditures.” Grant v. Martinez, 973 F.2d 96, 99 (2d Cir. 1992) (citation omitted).
The Court has reviewed the submitted time records and finds that the tasks were reasonably necessary to prosecute this action, performed within an acceptable amount of time, and are the type of work in which a reasonable attorney would engage. Moreover, having defaulted, the Court declines to act as Defendant's counsel and overly scrutinize the fee application. See Garcia v. Pawar Bros Corp., No. 18-cv-2656 (BMC), 2018 WL 4100482, at *2 (E.D.N.Y. Aug. 28, 2018) (declining to “act as the defaulting defendants' lawyer by scrutinizing . . . overly severely” a fee rate within the high end of reasonable) (citing Greathouse v. JHS Sec. Inc., 784 F.3d 105, 120 (2d Cir. 2015) (Korman, D.J., concurring)).
In total, the Court recommends awarding a total of $248,974.85. This amount represents $27,955 for Mr. Garvey, $4,425 for Mr. Beringer, $602 for Mr. Gerber, $588 for Mr. Edelman, $233,158 for Mr. Green, $3,600 for Ms. Tynes, $1,458 for Mr. Leifman, $1,029 for Ms. Huddleston, $262 for Ms. Ware, and $6,0855 for paralegals and other staff-all discounted by 7.5%. See ECF No. 78 ¶ 45.
C. Costs
Plaintiff seeks $1,500.89 in costs. This number represents shipping costs, filing fees, long distance telephone costs, and Public Access to Court Electronic Records (“PACER”) fees. “These are the types of routine costs typically awarded when a defendant defaults.” Malletier v. Artex Creative Int'l Corp., 687 F.Supp.2d 347, 365 (S.D.N.Y. 2009) (citing Arbor Hill, 369 F.3d at 98). “Identifiable, out-of-pocket disbursements for items such as photocopying, travel, and telephone costs” are compensable. Kuzma v. Internal Revenue Serv., 821 F.2d 930, 933-34 (2d Cir. 1987.) Because Plaintiff has provided adequate documentation of its out-of-pocket expenses, and because these expenses were reasonable to prosecute this case, the Court recommends awarding Plaintiff $1,500.89 in costs.
V. Prejudgment Interest
Under New York law, “a plaintiff who prevails on a claim for breach of contract is entitled to prejudgment interest as a matter of right.” U.S. Naval Inst. v. Charter Comm'ns, Inc., 936 F.2d 692, 698 (2d Cir. 1991); see N.Y. CPLR § 5001. The court is required to award prejudgment interest at the statutory rate of nine percent per annum, unless the parties contracted for a different rate. See E*Trade Fin. Corp. v. Deutsche Bank AG, 374 F. App'x. 119, 123 (2d Cir. 2010) (citing NYCTL 1998-2 Trust v. Wagner, 61 A.D.3d 728, 729 (2d Dep't 2009)). Prejudgment interest is computed from “the earliest ascertainable date the cause of action existed.” N.Y. CPLR §§ 5001(b). If damages were incurred at various times, “interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date.” Id.
Under the Replacement Guarantee, any amount owed by Guarantor “shall bear interest at the Default Rate from the due date until the date on which such amount is unconditionally and irrevocably paid and discharged in full and such interest shall accrue from day to day (after as well as before judgment).” Replacement Guarantee ¶ 2.2. The Default Rate is defined as 4% per annum plus the London Inter-Bank Offer Rate “for such period as Lessor shall specify.” Lease Agreement ¶ 1.1. While the Forbearance Agreement also entitles Plaintiff to collect interest at 13% per annum on any past due amounts following a default, Plaintiff has waived its claim to prejudgment interest above 4%. Forbearance Agreement ¶ 3.2; ECF No. 78 at ¶ 58. The proper prejudgment interest rate is therefore 4% per annum.
Vermillion failed to make rent payments on September 27, 2018, and October 27, 2018, and Plaintiff repossessed the aircraft on November 13, 2018. Compl. at ¶¶ 29 & 31. Although Plaintiff's claims accrued when Vermillion's payments were due, Plaintiff has identified November 13, 2018, the date of repossession and default, as the single reasonable intermediate date upon which all damages were incurred. ECF No. 78 at ¶ 58. Further, because the Lease Agreement permits Plaintiff to specify the period of time for the Default Rate to apply, Plaintiff has identified November 13, 2018, through March 5, 2021, as the period prejudgment interest shall accrue at the Default Rate. Accordingly, the Court recommends calculating prejudgment interest from the November 13, 2018 date of default through March 5, 2021, on the lease-related damages at a rate of 4% per annum.
CONCLUSION
For the foregoing reasons, I recommend that the Plaintiff be awarded $17,716,013.04 as follows:
(1) $12,567,527.00 in lease-related damages;
(2) $3,720,851.94 in out-of-pocket damages;
(3) $248,947.85 in attorneys' fees;
(4) $1,500.89 in costs; and
(5) $1,177,158.36, reflecting 4% prejudgment interest on lease-related damages, calculated from November 13, 2018, through March 5, 2021.
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen days from the service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. A party may respond to another party's objections within fourteen days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Such objections shall be filed with the Clerk of the Court, with courtesy copies delivered to the chambers of the Honorable Ronnie Abrams at the United States Courthouse, 40 Foley Square, New York, New York 10007, and to any opposing parties. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Abrams. The failure to file these timely objections will result in a waiver of those objections for purposes of appeal. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).