Opinion
Civil Action 22 Civ. 4629 (LGS) (SLC)
12-21-2023
MATCH GROUP, LLC, Plaintiff, v. BEAZLEY UNDERWRITING LIMITED, Defendant.
REPORT AND RECOMMENDATION
SARAH L. CAVE, United States Magistrate Judge.
TO THE HONORABLE LORNA G. SCHOFIELD, United States District Judge:
I. INTRODUCTION
Plaintiff Match Group, LLC (“Match”) brought this insurance coverage action against Beazley Underwriting Limited (“Beazley”) asserting breach of contract and other claims to recover damages for Beazley's refusal to defend Match pursuant to an insurance policy (the “Policy”) in a litigation in California Superior Court (the “Lawsuit”). (ECF No. 1 (the “Complaint”); see ECF No. 26 (first amended complaint (the “FAC”))). The Honorable Lorna G. Schofield denied Beazley's motion to dismiss the breach of contract claim in the FAC (the “Contract Claim”), but dismissed Match's other claims, and thereafter entered judgment awarding Match $3,619,797.48 on the Contract Claim, plus pre and postjudgment interest. (ECF Nos. 48 (the “MTD Decision”); 55 (the “Judgment”)). See Match Grp., LLC v. Beazley Under. Ltd., No. 22 Civ. 4629 (LGS), 2023 WL 3647370 (S.D.N.Y. May 25, 2023).
Unless otherwise indicated, all internal citations and quotation marks are omitted from case citations.
Before the Court is Match's motion for attorneys' fees and expenses pursuant to Federal Rule of Civil Procedure 54(d)(2) (ECF No. 57 (the “Fee Motion”)), which Beazley has opposed (ECF No. 67 (the “Opposition”)). For the reasons set forth below, I respectfully recommend that the Fee Motion be DENIED. Should the reviewing court, however, be inclined to award attorneys' fees and costs, I respectfully recommend that Match be awarded $343,872.00 in attorneys' fees and $22,316.83 in costs.
II. BACKGROUND
A. Factual Background
The factual background concerning the Policy, the California Litigation, and the parties' prior dealings is set forth in the MTD Decision and is incorporated by reference. See Match Grp., 2023 WL 3647370, at *1-3. Defined terms are also used consistently with the MTD Decision.
B. Procedural Background
On April 29, 2022, Match's outside counsel sent a letter to Beazley's outside counsel attaching a draft complaint, which Match stood “ready to file in the Southern District of New York if the parties [we]re unable to resolve this Claim.” (ECF Nos. 59 ¶ 11; 59-8 (referencing the “Draft Complaint”)). Match stated that, if Beazley was not interested in resolving the claim and did not respond by May 27, 2022, Match intended to file the Draft Complaint. (ECF Nos. 59 ¶ 11; 59-8). On June 2, 2022, Beazley responded by email, stating that:
Beazley is amenable to litigating this matter in federal court, but would prefer to do so in an efficient manner that avoids any jurisdictional impediments or disputes. The best path forward is for Match Group to file suit against the UK corporation Beazley Underwriting Limited [which] .... is a corporation organized under the laws of the UK and is therefore a UK citizen for purposes of diversity jurisdiction.(ECF No. 59-9 at 1 (the “Email”)). Beazley also “reaffirm[ed] [] the commitment that all Underwriters in Syndicates 2623 and 623 will abide by any judgment in a lawsuit filed by Match Group against Beazley [].” (Id.)
The Policy was underwritten by Syndicates 2623 and 623 at Lloyd's. (ECF No. 26 ¶ 11). The Policy's Service of Suit Clause provides that, “in any suit instituted against any one of the Underwriters upon this Policy, the Underwriters will abide by the final decision of such court or of any appellate court in the event of an appeal.” (Id. ¶ 15; ECF No. 26-1 at 64).
On June 3, 2022, Match filed the Complaint, which asserted the Contract Claim as well as claims for waiver (the “Waiver Claim”) and equitable estoppel (the “Estoppel Claim”). (ECF No. 1). In a letter to Judge Schofield dated June 30, 2022, Beazley sought leave to file a motion to dismiss (the “MTD”), asserting that Match failed to report the Lawsuit “as soon as practicable” and before “the end of the Policy Period” as was required to trigger coverage under the Policy, and that none of Match's theories remedied its untimely reporting of the Lawsuit. (ECF No. 15 at 1). Beazley also requested a stay of discovery while the MTD was pending. (Id.) In response, Match disputed Beazley's arguments but “anticipate[d] amending its complaint ‘as a matter of course' to further support those allegations that Beazley” claimed were deficient. (ECF No. 19 at 1 (quoting Fed.R.Civ.P. 15(a)(1)(B)). Judge Schofield entered a scheduling order, which permitted Match to amend the Complaint, set a briefing schedule for the MTD, and denied Beazley's request for a discovery stay, stating, “it is not the Court's practice to stay discovery pending resolution of a motion to dismiss.” (ECF No. 20).
On July 25, 2022, Match filed the FAC, which reasserted the Contract and Equitable Estoppel Claims, but not the Waiver Claim, and added a claim for breach of the implied covenant of good faith and fair dealing (the “Implied Covenant Claim”). (ECF No. 26). On August 4, 2022, Judge Schofield entered a civil case management plan and scheduling order, which, inter alia, set a fact discovery deadline of December 8, 2022. (ECF No. 30 (the “CMP”)). On September 2, 2022, Beazley filed the MTD, which Match opposed and in further support of which Beazley filed a reply. (ECF Nos. 33; 36; 38). On October 17, 2022, Judge Schofield granted the parties' application to stay depositions and expert discovery pending resolution of the MTD. (ECF No. 40).
On May 25, 2023, Judge Schofield issued the MTD Decision. (ECF No. 48). See Match Grp., 2023 WL 3647370. In denying the MTD as to the Contract Claim, Judge Schofield held that the first “Claim” under the Policy did not arise until “the demand for money in the complaint filed to commence the Lawsuit,” and Match “gave timely notice of that claim” to Beazley. Id. at *5. In the alternative, Judge Schofield held that the Contract Claim survived “because the [FAC] sufficiently alleges facts to show that the parties' agreement was modified by their course of dealing-specifically, that minor matters did not constitute ‘Claims' unless and until they appeared likely to ripen into significant legal proceedings.” Id. As to the Estoppel and Implied Covenant Claims, which were based on the theory that, had Beazley disclaimed coverage earlier, Match would have purchased an Optional Extension Period to cover the Lawsuit, Judge Schofield found that the Optional Extension Period “would have had no effect” whether Match asserted a claim based on the Lawsuit on February 16, 2016, when it first received the Letter threatening the claim, or on August 18, 2016, when Match received notice of the Lawsuit. Id. at *7. Accordingly, Judge Schofield denied the MTD as to the Contract Claim but granted it as to the Estoppel and Implied Covenant Claims and ordered Beazley to show cause why summary judgment for Match on the Contract Claim should not be entered. Id.
On June 7, 2023, Beazley submitted a letter stating that, while it disagreed with the holdings in the MTD Decision, it agreed that a motion for summary judgment on the Contract Claim “would have to be granted.” (ECF No. 50 at 1). Beazley also stated that the parties agreed that Match's damages as of June 9, 2023 were $3,619,797.48 plus interest, and that it opposed any application by Match for attorneys' fees. (Id. at 1). At Judge Schofield's direction, Match responded, setting forth the grounds on which it believed it was entitled to attorneys' fees. (ECF Nos. 51-52). Judge Schofield then directed the parties to submit a mutually agreeable form of judgment and set a briefing schedule for the Fee Motion. (ECF No. 53).
On June 22, 2023, Judge Schofield entered the Judgment, which awarded Match $3,628,670.64 on the Contract Claim, plus prejudgment interest at a rate of $739.43 per day from June 21, 2023 and post judgment interest from June 22, 2023. (ECF No. 55).
On June 30, 2023, Match filed the Fee Motion. (ECF Nos. 57-60). On July 19, 2023, Beazley filed the Opposition (ECF Nos. 67-68), and a notice of appeal from the Judgment. (ECF No. 69). On July 28, 2023, Match filed a reply. (ECF Nos. 72-73). Judge Schofield has referred the Fee Motion to the undersigned. (ECF No. 64).
III. DISCUSSION
A. Match's Entitlement to Attorneys' Fees
1. Legal Standard
Under New York law,a “successful party in litigation may not recover attorneys' fees, except where authorized by the parties' agreement, statutory provision or court rule.” Chase Manhattan Bank, N.A. v. Each Indiv. Underwriter Bound to Lloyd's Policy No. 790/004A89005, 258 A.D.2d 1, 4 (1st Dep't 1999). Although an insured may recover its legal fees in an action brought by the insurer “to free itself from its policy obligations,” the insured may not recover its fees “in an affirmative action brought by [the insured] to settle its rights” under the policy. Mighty Midgets v. Centennial Ins. Co., 47 N.Y.2d 12, 21 (1979); accord Wentworth Grp. Inc. v. Evanston Ins. Co., No. 20 Civ. 6711 (GBD) (JLC), 2022 WL 336456, at *3 (S.D.N.Y. Feb. 4, 2022) (“Wentworth I”), adopted by, 2022 WL 909794 (S.D.N.Y. Mar. 29, 2022) (“Wentworth II”); Fishberg v. State Farm Fire and Cas. Co., No. 20 Civ. 6664 (LJL), 2021 WL 3077478, at *7 (S.D.N.Y. July 20, 2021); Stiler v. Great N. Ins. Co., No. 07 Civ. 2236 (MDF), 2008 WL 11517681, at *4 (S.D.N.Y. Jan. 2, 2008). In Mighty Midgets, the New York Court of Appeals distinguished “the circumstances presented when an insurer compels its [insured] to defend against its attempts to obtain a declaration of its right to disclaim”-in which the insured may recover attorneys' fees- from circumstances where “the insured itself [] has taken the offensive”-in which the insured may not recover attorneys' fees. 47 N.Y.2d at 22.
The Policy provides that it “shall be interpreted in accordance with New York state law.” (ECF No. 26-1 at 65).
In the insurance context, however, New York law recognizes “a narrow exception to the general American rule that a prevailing party cannot recover attorneys' fees.” U.S. Underwriters Ins. Co. v. City Club Hotel, LLC, 369 F.3d 102, 110 (2d Cir. 2004) (“City Club I”). Under this exception, “an insured who is ‘cast in a defensive posture by the legal steps an insurer takes in an effort to free itself from its policy obligations,' and who prevails on the merits, may recover attorneys' fees incurred in defending against the insurer's action.” U.S. Underwriters Ins. Co. v. City Club Hotel, LLC, 3 N.Y.3d 592, 597 (2004) (“City Club II”) (quoting Mighty Midgets, 47 N.Y.2d at 21); accord Danaher Corp. v. Travelers Indem. Co., No. 10 Civ. 121 (JPO) (JCF), 2013 WL 364734, at *3 (S.D.N.Y. Jan. 31, 2013), adopted by, 2013 WL 1387017 (S.D.N.Y. Apr. 5, 2013). “The reasoning behind [this rule] is that an insurer's duty to defend an insured extends to the defense of any action arising out of the occurrence, including a defense against an insurer's declaratory judgment action.” City Club II, 3 N.Y.3d at 597-98. “Thus, it is not so much an exception to the American rule that litigants pay their own fees and expenses, as it is a right that ‘arises from th[e] contractual duty' to defend.” Danaher, 2013 WL 364734, at *3 (quoting Chase Manhattan, 258 A.D.2d at 5). From this exception follow “[t]wo corollaries[:] (1) the exception applies only in cases where the insurer has a duty to defend and (2) ‘recovery of counsel fees may not be had in an affirmative action by [the insured] to settle its rights.'” Id. at *3 (quoting Chase Manhattan, 258 A.D.2d at 4); see also VR Optics, LLC v. Peloton Interactive, Inc., No. 16 Civ. 6392 (JPO), 2021 WL 1198930, at *3 (S.D.N.Y. Mar. 30, 2021) (holding that successful party was not entitled to recover attorneys' fees for affirmative claims seeking to enforce duty to defend).
In considering whether the insured has been placed in a defensive posture, courts have noted that it is “anomalous for the entitlement of fees to turn on the fortuity of whether a party to an insurance contract is cast as the plaintiff or defendant.” Cowan v. Ernest Codelia, P.C., No. 98 Civ. 5548 (JGK) (JCF), 2001 WL 30501, at *3 (S.D.N.Y. Jan. 12, 2001); accord Wentworth I, 2022 WL 336456, at *3 (quoting Cowan, 2001 WL 30501, at *3). Thus, “courts have made clear that in certain cases the rule need not be quite so mechanically applied.” Danaher, 2013 WL 364734, at *3. For example, in City of New York v. Zurich-Am. Ins. Grp., the City-the insured-filed an action seeking a declaration that its insurer-Zurich-was obligated to defend and indemnify the City in a tort action. 27 A.D.3d 609, 610 (2d Dep't 2006). After the trial court struck the City's answer for noncompliance with discovery obligations in the tort action, Zurich moved to amend its answer and for summary judgment in the coverage action, asserting that the City's bad faith noncompliance with its discovery obligations in the tort action relieved Zurich of the duty to defend and indemnify, which the trial court denied. Id. Although the City initiated the coverage action, the court affirmed the award of attorneys' fees to the City because “Zurich's motions, filed after the court had already awarded summary judgment in favor of the City, put the City in a defensive posture, and the City therefore was entitled to recover its attorney[s'] fees.” Id. at 611. Similarly, in Hurney v. Mattson, the insureds were awarded their attorneys' fees where the insurer filed a counterclaim in the insureds' third-party action seeking defense and indemnity in a negligence action. 59 A.D.2d 934, 934 (2d Dep't 1977). And, more recently, another court in this district awarded attorneys' fees to insured where the insurer “from the jump . . . persistently and seemingly reflexively denied [its] duty” to defend “despite the texts of the [policies], which each made this duty plain.” Houston Cas. Co. v. Prosight Spec. Ins. Co., 462 F.Supp.3d 443, 452 (S.D.N.Y. 2020). From these cases, courts have discerned the understanding “that, in unusual circumstances, a court may look beyond the labels ‘plaintiff' and ‘defendant' to determine whether an insured is in an offensive or defensive position vis a vis its insurer in a dispute over the duty to defend.” Danaher, 2013 WL 364734, at *4; accord Wentworth I, 2022 WL 336456, at *3; see also Fishberg, 2021 WL 3077478, at *7 (noting “limited authority” recognizing the “defensive posture” exception).
The Court is aware of two decisions from district courts within this District that have followed Houston. See LM Ins. Corp. v. Safety Nat'l Cas. Corp., No. 21 Civ. 1802 (KAM) (RML), 2023 WL 6307760, at *22-23 (E.D.N.Y. Sept. 28, 2023) (determining that insurers who successfully brought declaratory judgment action to enforce a third insurer's duty to defend and indemnify their insured could recover attorneys' fees and costs, citing Houston); City of N.Y. v. Harleysville Ins. Co., No. 22 Civ. 3306 (RA), 2023 WL 4548715, at *5 (S.D.N.Y. July 14, 2023) (permitting insured to recover attorneys' fees in successful declaratory judgment action to enforce insurer's duty to defend, citing Houston).
To determine whether the Mighty Midgets exception applies, courts “consider[] what kind of ‘legal step' is sufficient to put an insured in a defensive posture and justify an attorneys' fees award.” Wentworth I, 2022 WL 336456, at *3. “Courts in this district have consistently, and unsurprisingly, held that filing an action constitutes a ‘legal step' in this context.” Hervochon v. Iona Coll., No. 14 Civ. 6017 (CS) (PED), 2019 WL 2451431, at *5 (S.D.N.Y. Feb. 15, 2019) (collecting cases), adopted in relevant part by, 2019 WL 1375359 (S.D.N.Y. Mar. 27, 2019). For example, the insurer places the insured in a “defensive posture” by “filing [an] action[ ]to free itself from its policy obligations to defend and indemnify [the insured] in [] the underlying suits.” Specialty Nat'l Ins. Co. v. English Bros. Funeral Home, 606 F.Supp.2d 466, 473 (S.D.N.Y. 2009) (awarding attorneys' fees to insured). For the insured to be in a defensive posture such that it is entitled to attorneys' fees, the insurer must have “take affirmative action that is tantamount to a lawsuit.” Estee Lauder, Inc. v. OneBeacon Ins. Grp., LLC, 31 Misc.3d 379, 390 (N.Y. Sup. Ct. 2011) (declining to award attorneys' fees to insured because insurer's motion to dismiss insured's complaint on notice grounds “was not tantamount to an affirmative action, i.e., counterclaim, but essentially a defense against [the insured's] prima facie case”); see Stein v. N. Assur. Co. of Am., No. 09 Civ. 1029 (TCP) (AKT), 2012 WL 1605365, at *12 (E.D.N.Y. May 7, 2012) (declining to award attorneys' fees to insured because insurer's “abandon[ment of] defense” of insured “simply does not amount to ‘legal steps' taken by the insurer to free itself from the policy obligations”).
On the other hand, “other [c]ourts have held that actions short of affirmatively filing an action can constitute a ‘legal step.'” Hervochon, 2019 WL 2451431, at *6. For example, in Hervochon, an insured “took the initial ‘legal step'” by requesting leave of court to file a third-party action against the insurer, and, therefore, was not entitled to recover its attorneys' fees. Id. at *8. Similarly, in Wentworth I, the court held that the insurer's letter “disclaiming coverage and withdrawing its defense” was “not tantamount to a lawsuit or an action brought by the insurer seeking to free itself from its policy obligations.” 2022 WL 336356, at *4. Rather, “courts applying New York law have consistently found that an insurer's disclaimer of coverage, without more, is an insufficient legal step to place the insured in a defensive posture such that an attorneys' fees award is warranted.” Id. (collecting cases).
2. Application
In this case, Match, the insured, brought this affirmative action asserting that Beazley breached the Policy by failing to defend Match in the Lawsuit (ECF Nos. 1; 26), and prevailed, having been awarded damages on the Contract Claim in the Judgment. (ECF No. 55). Despite Match's success in bringing this action, the Court starts from the premise of the American Rule that Match “would ordinarily not be entitled to recover attorneys' fees.” Wentworth I, 2022 WL 336456, at *4; see N.Y. Univ. v. Cont'l Ins. Co., 87 N.Y.2d 308, 324 (1995) (explaining that “an insured may not recover the expenses incurred in bringing an affirmative action against its insurer to settle its rights under the policy”). Here, however, Match argues that it is entitled to attorneys' fees because:
Beazley cast Match in a defensive posture by immediately retaining outside counsel upon receiving notice of the underlying lawsuit, resisting its duty to defend six times, putting the burden on Match to change Beazley's mind, encouraging litigation, filing a motion to dismiss, and, more recently, by indicating that it will appeal the [MTD] [D]ecision.(ECF No. 58 at 13). Beazley responds that the Mighty Midgets exception “does not apply where an insured is the plaintiff because, in those circumstances, the insured is not defending an action.” (ECF No. 67 at 12). Beazley asks the Court to deny the Fee Motion because “controlling New York Court of Appeals precedent precludes an award of attorneys' fees where, as here, an insured commences and prevails in an action against its insurer.” (Id. at 16).
Match's Fee Motion should be denied because Match has failed to identify a “legal step” by Beazley that placed Match in a defensive posture. Match leans heavily on Beazley's repeated denials of the duty to defend Match in the Lawsuit (ECF Nos. 58 at 13; 72 at 8), but as one other court in this District has explained, “that is not the end of the inquiry.” Wentworth I, 2022 WL 336456, at *4. The Court must assess “which party took the first legal step, and while a legal step need not be the commencement of an action, it must be tantamount to an action brought by the insurer seeking to free itself from its policy obligations.” Id.
The Court notes that, in its opening brief, Match says that Beazley “resist[ed] its duty to defend six times,” while in its reply, states that Beazley denied coverage “no less than three times.” (Compare ECF No. 58 at 13 with ECF No. 72 at 8).
None of the items on the list of “steps” by Beazley quoted above is “tantamount to a lawsuit” initiated by Beazley. Lauder, 31 Misc.3d at 390. Neither retaining outside counsel nor providing written denials of the duty to defend constitute “legal steps” by Beazley. See Wentworth I, 2022 WL 336456, at *4 (finding that disclaimer and withdrawal of defense were not “legal steps” by insurer); Ruiz v. Liberty Mut. Fire Ins. Co., No. 19 Civ. 4399 (VB), 2019 WL 7293377, at *4 (S.D.N.Y. 2019) (finding that insurer's rejection of insured's claims for coverage, following which insured commenced breach of contract action, did not place insured “in a defensive posture”); Hervochon, 2019 WL 2451431, at *2, 8 (finding that insurer's letter denying duties to defend and indemnify was not a “legal step”); Stein v. N. Assur. Co. of Am., No. 09 Civ. 1029 (TCP) (AKT), 2012 WL 1605365, at *12 (finding that insurer's “abandon[ment]” of defense of insured did not “amount to ‘legal steps' taken by the insurer to free itself from its policy obligations”). Nor was Beazley's filing of the MTD in this action, which would not have occurred had Match not first taken the affirmative step of filing this action. See Lauder, 31 Misc.3d at 390 (finding that insurer's motion to dismiss for lack of notice was “a defense against an element of [insured's] prima facie case,” and “was not tantamount to an affirmative action” by the insurer). Match provides no authority to support the conclusion that Beazley, by sending the Email in response to the Draft Complaint, or responding to Match's demands for coverage rose to the level of a “legal step” by Beazley to initiate a proceeding to disclaim the duty to defend. Finally, Beazley's appeal of the MTD Decision is consistent with its defense against Match's Contract Claim in this action and comes only because Match filed this action. Accordingly, Match has failed to demonstrate the “unusual circumstances” that would permit the Court to “look beyond the labels ‘plaintiff' and ‘defendant'” to conclude that Beazley, rather than Match, was in the offensive position over the duty to defend. Danaher, 2013 WL 364734, at *4.
Furthermore, the cases on which Match relies to support its Fee Motion are distinguishable. (ECF No. 58 at 13 & n.4). See Hervochon, 2019 WL 2451431, at *5-8 (awarding fees to insured against whom insurer filed first action, but denying fees to insured that “took the initial legal step” by requesting leave to file third-party action against insurer); Louisiana Generating LLC v. Ill. Union Ins. Co., No. 10 Civ. 516 (JJB), 2014 WL 1270049, at *2 (M.D. La. Mar. 27, 2014) (awarding fees to insured where insurer's filing declaratory judgment action, although without effecting service, was a sufficient legal step to place insured in defensive posture); Am. Motorists Ins. Co. v. GTE Corp., No. 99 Civ. 512 (RCC), 2000 WL 1459813, at *6 (S.D.N.Y. Sept. 29, 2000) (awarding fees to insured against whom insurer initiated declaratory judgment action regarding duty to indemnify); Zurich-Am., 27 A.D.3d at 611 (awarding fees to insured where insurer's motions, “filed after the court had already awarded summary judgment in favor of” the insured thereby putting insured “in a defensive posture”) (emphasis added). Match heavily relies on the decision by another court in this District awarding fees to an insured “notwithstanding its formal status as a plaintiff vis-a-vis” the insurers who had denied coverage. Houston Cas. Co., 462 F.Supp.3d at 453. The Houston court, however, expressly distinguished cases-like Match's affirmative Contract Claim here-“involv[ing] affirmative claims for relief by insureds that were distinct from the underlying liability.” Id. Furthermore, other courts in this District have subsequently distinguished Houston as one turning on “unusual circumstances” including the insurer's (1) denial of the duty to defend in its answer to the insured's third-party complaint, (2) filing of a counterclaim against the insured, and (3) denying the duty to defend in the litigation before the court, “even though the texts of the relevant insurance policies ‘made [that] duty plain.'” Wentworth I, 2022 WL 336456, at *5 (quoting Houston, 462 F.Supp.3d at 452). While this case bears some similarity to Houston-in part in that Beazley disclaimed coverage from Match's first request, see Match Grp., 2023 WL 3647370, at *2-it is dissimilar insofar as Beazley's disclaimer “was not based on an unreasonable interpretation of the [P]olicy,” Wentworth II, 2022 WL 909794, at *3 (distinguishing Houston), as evidenced by Judge Schofield's rejection of Match's Implied Covenant and Estoppel Claims in the MTD Decision. Match Grp., 2023 WL 3647370, at *7. Notwithstanding the decision in Houston, the greater weight of authority supports the conclusion here that, by taking the first cognizable “legal step” of filing this action, Match was not in a “defensive posture” and therefore does not fall within the “narrow exception to the general American rule that a prevailing party cannot recover attorneys' fees.” Danaher, 2013 WL 364734, at *3; accord, Hervochon, 2019 WL 2451431, at *8. Accordingly, the Court respectfully recommends that the Fee Motion be DENIED.
B. Reasonableness of Attorneys' Fees and Costs
Should the reviewing court disagree and be inclined to award attorneys' fees and costs, however, I will briefly analyze the reasonableness of the fees and costs that Match requests. See Wentworth I, 2022 WL 336456, at *6 (recommending denial of insured's motion for attorneys' fees and costs but analyzing reasonableness in the alternative). Here, Match requests $553,393.19 in attorneys' fees (the “Requested Fees”) and $22,653.13 in costs (the “Requested Costs”). (ECF Nos. 58 at 25-26; 60 ¶¶ 14-15, 32).
1. Legal Standard
In Arbor Hill Concerned Citizens Neighborhood Ass'n. v. Cnty. of Albany, 522 F.3d 182 (2d Cir. 2008), the Second Circuit articulated the method for calculating reasonable attorney's fees: a reasonable hourly rate multiplied by a reasonable number of hours extended on the work constitutes the “presumptively reasonable fee,” also known as the “lodestar.” See, e.g., Tatum v. City of New York, No. 06 Civ. 4290 (PGG) (GWG), 2010 WL 334975, at *3 (S.D.N.Y. Jan. 28, 2010). A court using the lodestar method sets the lodestar, then considers “whether, in light of variables such as the difficulty of the case, it should adjust the lodestar before settling on the reasonable fee.” Arbor Hill, 522 F.3d at 187. While “the lodestar is not always conclusive, its presumptive reasonability means that” district courts must “calculate it as a starting point” to determine attorneys' fees, Millea v. Metro-North R.R., 658 F.3d 154, 166 (2d Cir. 2011), and depart from it if necessary “to reflect consideration of any case-specific circumstances.” Laboratorios Rivas, SRL v. Ugly & Beauty, Inc., No. 11 Civ. 5980 (RA) (JLC), 2013 WL 5977440, at *13 (S.D.N.Y. Nov. 12, 2023), adopted by, 2014 WL 112397 (S.D.N.Y. Jan. 8, 2014).
To aid in the court's analysis, a fee application should be supported by “contemporaneous time records” relaying the rates charged and hours worked by each attorney. N.Y. State Ass'n for Retarded Child., Inc. v. Carey, 711 F.2d 1136, 1154 (2d Cir. 1983). The attorneys “should maintain billing time records in a manner that will enable a reviewing court to identify distinct claims.” Hensley v. Eckerhart, 461 U.S. 424, 437 (1983); see Themis Cap. v. Democratic Republic of Congo, No. 09 Civ. 1652 (PAE), 2014 WL 4379100, at *7 (S.D.N.Y. Sept. 4, 2014) (reducing hours by twenty percent for “impermissibly broad” block billing). A court should look at the “nature of the legal matter and context of the fee award in considering the reasonable rate and reasonable time spent on a matter.” Tessemae's LLC v. Atlantis Capital LLC, No. 18 Civ. 4902 (KHP), 2019 WL 2635956, at *3 (S.D.N.Y. June 27, 2019).
2. Application
a. Reasonable Hourly Rate
To determine the hourly rate, a court considers “what a reasonable, paying client would be willing to pay, given that such a party wishes to spend the minimum necessary to litigate the case effectively.” Bergerson v. N.Y. State Off. of Mental Health, Cent. N.Y. Psychiatric Ctr., 652 F.3d 277, 289 (2d Cir. 2011). In addition, the Second Circuit has a “forum rule” requiring the use of “hourly rates employed in the district in which the reviewing court sits in calculating the presumptively reasonable fee.” Id. at 290. A court's determination of the reasonable hourly rate is aided by the rate “prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation.” Blum v. Stenson, 465 U.S. 886, 895 n.11 (1984).
The court may adjust base hourly rates to account for case specific variables such as the complexity of the issues and attorneys' experiences. See Jean-Louis v. City of New York, 342 F.Supp.3d 436, 441-42 (S.D.N.Y. 2018) (referring to factors set forth in Johnson v. Ga. Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974), abrogated on other grounds by Blanchard v. Bergeron, 489 U.S. 87, 92-93 (1989)); Williams v. Metro-North R.R. Co., No. 17 Civ. 03847 (JGK), 2018 WL 3370678, at *5 (S.D.N.Y. June 28, 2018) (listing the Johnson factors), adopted by, 2018 WL 3368713 (S.D.N.Y. July 10, 2018).
Match was represented by the following attorneys at the law firm Haynes and Boone, LLP (the “Firm”): partner Ernest Martin, Jr. ($995 - $1075 per hour); senior associate Greg Van Houten ($650 - $775 per hour); junior associates Rebecca Schwarz ($650 - $675.75 per hour), Storm Lineberger ($374 - $467.50 per hour), Joe Pinto ($374 - $467.50 per hour), and Rae Guyse ($450 - $550 per hour); ESI consultants DiAnna Gaeta and Patti Zerwas ($403.75 per hour); paralegals Pandeli Mano and Alecia Tipton ($340 - $382.50 per hour); and librarian Stacie Schmidt ($270 per hour). (ECF No. 60 ¶¶ 23-24, 27).
The Court “recognizes that there has not been perfect consistency in assessing the reasonableness of attorneys' rates” in actions in this District. Carrington v. Graden, No. 18 Civ. 4609 (KPF), 2020 WL 5758916, at *12 (S.D.N.Y. Sept. 28, 2020); see Tessemae's, 2019 WL 2635956, at *4 (“Courts in this District have determined that hourly rates ranging from $250 to $1,260 per hour, for attorneys' work on a commercial litigation, were reasonable.”). Here, the Court considers each attorney's expertise, “both in terms of years in the profession and relevant experience,” as well as, “albeit to a lesser extent, the substantial overhead costs that are built into the rates of attorneys at larger law firms,” such as the Firm. Carrington, 2020 WL 5758916, at *12. The Court also appropriately considers as “solid evidence” of reasonableness, Bleecker Charles Co. v. 350 Bleecker St. Apt. Corp., 212 F.Supp.2d 226, 230-31 (S.D.N.Y. 2002), the fact that Match paid the rates at which the Firm billed, which represented a 15% discount off the Firm's normal rates, with an additional 20% discount for document review. (ECF No. 60 ¶¶ 17, 29). See Flatiron Acquisition Veh., LLC v. CSE Mortg. LLC, No. 17 Civ. 8987 (GHW), 2022 WL 413229, at *14 (S.D.N.Y. Feb. 9, 2022) (noting that approved rates of $742 to $990 for partners and $405 to $660 for associates at large New York firm were rates “client was willing to pay”). Finally, the Court “must still exercise its discretion and look to the prevailing rates within this District.” Carrington, 2020 WL 5758916, at *12; see Crescent Publ'g Grp., Inc. v. Playboy Enter., Inc., 246 F.3d 142, 151 (2d Cir. 2001) (“the actual billing arrangement is a significant, although not necessarily controlling, factor in determining what fee is ‘reasonable.'”).
Keeping these factors in mind, the Court concludes that a rate of $975, rather than the requested rate of $995 to $1,075, is appropriate for Martin, who has over 30 years of insurance litigation experience. (ECF No. 60 ¶¶ 3-7). See Wentworth I, 2022 WL 336456, at *7 (awarding hourly rate of $885 to experienced partners at large New York firm in insurance coverage action); Carrington, 2020 WL 5758916, at *12 (awarding hourly rates of $900 and $850 to experienced partners at large New York firm in commercial litigation). The Court concludes that a rate of $500, rather than the requested rate of $650 - $770, is appropriate for senior associate Van Houten, who has approximately seven years of litigation experience and at least five years of insurance litigation experience. (ECF No. 60 ¶ 23). See Carrington, 2020 WL 5758916, at *13 (in 2020, awarding $425 hourly rate to seventh-year associate at large New York firm). With respect to junior associates Guyse, Lineberger, Pinto, and Schwarz, the Court notes that “recent decisions from this district have awarded junior associates at large law firms an hourly rate of between $275 and $450.” Wentworth I, 2022 WL 336456, at *7. Given Schwarz's approximately five years of experience and Guyse's three years of experience (ECF No. 60 ¶ 23), the Court recommends hourly rates of $500 and $450, respectively. See Wentworth I, 2022 WL 336456, at *7 (recommending $450 hourly rate for third-year associate at large New York firm). For Lineberger and Pinto, both of whom have approximately one year of experience (ECF No. 60 ¶ 23), the Court recommends an hourly rate of $300. See Carrington, 2020 WL 5758916, at *13 (in 2020, awarding $275 to junior associate with “minimal experience in complex commercial litigation”).
The Court notes that the Colorado District Court recently awarded Martin an hourly rate of $940. See Curtis Park Grp., LLC v. Allied World Specialty Ins. Co., No. 20 Civ. 552 (CNS) (NRN), 2023 WL 5624981, at *6 (D. Colo. Aug. 31, 2023).
The Colorado District Court awarded Guyse an hourly rate of $400. See Curtis Park Grp., 2023 WL 5624981, at *6.
The requested rates of $340 and $370 - $382.50 for paralegals Tipton and Mano, respectively, exceed “the high end of the range that courts in this District have ordinarily found reasonable.” Carrington, 2020 WL 5758916, at *14; see Wentworth I, 2022 WL 336456, at *7 (noting that “courts have generally capped hourly rates at $200, even for senior paralegals with extensive experience”). Match does not supply any information about their seniority, and therefore the Court recommends an hourly rate of $150. See Wells Fargo Bank v. 5615 N. LLC, No. 20 Civ. 2048 (VSB) (KHP), 2023 WL 7394340, at *8 (S.D.N.Y. May 4, 2023) (recommending $150 hourly rate for paralegals), adopted by, 2023 WL 7384632 (S.D.N.Y. Nov. 8, 2023). For ESI staff Gaeta and Zerwas, about whose experience Match also has not supplied detail, the Court recommends an hourly rate of $200. Abraham v. Leigh, No. 17 Civ. 5429 (KPF), 2020 WL 5512718, at *11 (S.D.N.Y. Sept. 14, 2020) (noting that e-discovery experts “are generally analogized to paralegals and awarded comparable hourly rates” and awarding hourly rate of $200). Finally, for librarian Schmidt, whose seniority is not provided, the Court recommends an hourly rate of $150. See Samsonite IP Holdings S.ar.l. v. Shenzhen Liangyiyou E-Commerce Co., Ltd., No. 19 Civ. 2564 (PGG) (DF), 2021 WL 9036273, at *15 (S.D.N.Y. Apr. 27, 2021) (awarding hourly rate of $180 to “senior” librarian).
b. Hours Reasonably Expended
To determine the reasonable number of hours worked, the court should strike a balance “between principles of thoroughness and efficiency.” LCS Grp. LLC v. Shire LLC, 383 F.Supp.3d 274, 280 (S.D.N.Y. 2019). The Court must examine the amount of time spent on each task and decide “how much of that time was reasonably expended given the scope and complexity of the particular litigation.” Pichardo v. C.R. Bard, Inc., No. 09 Civ. 7653 (SHS), 2015 WL 13784565, at *4 (S.D.N.Y. Jan. 26, 2015). The court should also consider the number of attorneys involved. Tessemae's LLC, 2019 WL 2635956, at *5. The court can rely on “its own familiarity with the case, as well as its experience with the parties' evidentiary submissions and arguments.” Kreisler v. Second Ave. Diner Corp., No. 10 Civ. 7592 (RJS), 2013 WL 3965247, at *3 (S.D.N.Y. July 31, 2013). Time spent preparing a fee application may be awarded. See Dorchester Fin. Holdings Corp. v. Banco BRJ, S.A., No. 11 Civ. 1529 (KMW) (KNF), 2015 WL 1062327, at *2-3 (S.D.N.Y. Mar. 3, 2015).
The court may reduce the hours spent on the litigation to exclude excessive, redundant, or otherwise unnecessary time. Kirsch v. Fleet St., Ltd., 148 F.3d 149, 173 (2d Cir. 1998) (citing Hensley, 461 U.S. at 434); Tatum, 2010 WL 334975, at *6 (a court will exclude hours that were not “reasonably expended”) (quoting Hensley, 461 U.S. at 434). “A court may apply an across-the-board reduction to effectuate the reasonable imposition of fees.” LCS Grp. LLC, 383 F.Supp.3d at 281; accord Wentworth I, 2022 WL 336456, at *8. “District courts have ‘considerable discretion' in determining what constitutes a reasonable award of attorneys' fees.” Wentworth I, 2022 WL 336456, at *7 (quoting Filo Promotions, Inc. v. Bathtub Gins, Inc., 311 F.Supp.3d 645, 650 (S.D.N.Y. 2018)). Ultimately, “[t]he essential goal in shifting fess (to either party) is to do rough justice, not to achieve auditing perfection.” Fox v. Vice, 563 U.S. 826, 838 (2011).
Beazley contends that Match's number of hours expended “significantly reduce[d]” because Match's attorneys: (1) expended considerable time “developing and litigating unavailing legal theories”; (2) engaged in “unnecessary discovery”; (3) recorded their time using block billing, vague entries, excessive redactions, and entries for unrelated matters; and (4) engaged in excessive staffing. (ECF No. 67 at 24-30). Beazley asks the Court to apply a 30% reduction to the Requested Fees. (Id. at 30). Match responds that it obtained all the relief it had sought, it engaged in discovery because Judge Schofield denied a stay, and its staffing decisions and time entries are proper. (ECF No. 72 at 14-15). Match also notes that it has paid the amount of fees it requests-$553,393.19-which reflects a reduction of $32,503.78 the Firm already applied. (ECF Nos. 60 ¶¶ 13-14; 72 at 14).
After reviewing all the invoices and the entire record on the Fee Motion, the Court respectfully recommends a 20% reduction of the 958.9 hours of time (ECF No. 60 ¶ 14) the Firm's personnel recorded. First, as Beazley notes, most of the Firm's time entries reflect block billing, i.e., “the clustering of various tasks into a single time entry without indicating how much time was spent on each individual task.” Wentworth I, 2022 WL 336456, at *8. Although block billing is “not prohibited in this Circuit,” the timekeepers' use of block billing has significantly “hindered this Court's ability to understand how much time was devoted to particular tasks, so as to determine whether that time was reasonably spent.” H.B. Auto. Grp., Inc. v. Kia Motors Am., Inc, No. 13 Civ. 4441 (VEC) (DF), 2018 W 4017698, at *11 (S.D.N.Y. July 25, 2018), adopted by, 2018 WL 4007636 (S.D.N.Y. Aug. 22, 2018). Here, the associates billed the most time to the Match matter and almost exclusively block billed their time entries. (See generally ECF Nos. 63-1 - 63-4). For example, on August 4, 2021, Van Houten recorded 2.6 hours, totaling $1,690.00, for the following:
Review and analyze client's comments and questions on draft letter to Beazley; revise letter consistent with Client's comments and questions; draft comprehensive email to client summarizing changes and to Mr. Martin regarding the same; finalize draft letter and send to Mr. Martin.(ECF No. 63-1 at 9). Similarly, on January 12, 2022, Guyse recorded 2.5 hours, totaling $1,375.00, for the following:
Complete draft of complaint and circulate to Mr. Van Houton [sic] for review; review comments from Mr. Van Houton [sic] on complaint draft; perform additional research to support contentions made in complaint; incorporate edits and feedback into Complaint draft.(Id. at 21). These entries do not specify how much time the attorneys spent on each task, preventing the Court from assessing the reasonableness of the time spent. See Wentworth I, 2022 WL 336456, at *8-9. They also have the effect of “mixing together tasks that were not all compensable, or not all compensable at the same rate.” Hnot v. Willis Grp. Holdings Ltd., No. 01 Civ. 6558 (GEL), 2008 WL 1166309, at *8 (S.D.N.Y. Apr. 7, 2008); see Molefi v. Oppenheimer Trust, No. 03 Civ. 5631 (FB) (VVP), 2007 WL 538547, at *7 (E.D.N.Y. Feb. 15, 2007) (applying 15% reduction where block billing made it a “near impossibility for the court to assess the reasonableness” of the time recorded). The Court therefore agrees that the Firm's block billing practice warrants a reduction in the final award.
The Court reaches a different conclusion, however, as to Beazley's other arguments. Match is correct that it “obtained all its sought-after relief” on the Contract Claim asserted in the FAC, which arose out of the same core of operative facts as the theories alleged in the Complaint. (ECF No. 72 at 14). Furthermore, because Judge Schofield denied a stay of discovery (ECF No. 20), Match did not engage in “unnecessary discovery,” (ECF No. 67 at 27), and applied a substantial discount-20%-to the rates at which it billed for document review. (ECF No. 60 ¶ 29). Finally, the across-the-board reduction the Court recommends already factors in any inefficiencies that resulted from overlapping staffing at the junior associate level. See Mason Tenders Dist. Council Welfare Fund v. Gibraltar Contracting, Inc., No. 18 Civ. 3668 (MKV) (JLC), 2020 WL 5904357, at *5 (S.D.N.Y. Oct. 6, 2020) (applying 20% reduction to hours expended to reflect, inter alia, inefficient staffing of discovery tasks), adopted by, 2020 WL 6363960 (S.D.N.Y. Oct. 29, 2020); Hnot, 2008 WL 1166309, at *7 (reducing fee award due to duplicative staffing).
For these reasons, the Court finds that a 20% reduction to the Firms' hours expended is reasonable and is in line with the reductions that courts in this District typically apply to account for block billing and other timekeeping practices that “impede the [C]ourt's ability to assess the reasonableness of counsel's hours.” Wentworth I, 2022 WL 336456, at *9 (applying 20% reduction); see H.B. Auto. Grp., 2018 WL 4017698, at *12 (collecting cases applying 15% - 30% fee reductions). Accordingly, should the reviewing Court be inclined to award attorneys' fees, the Court respectfully recommends awarding attorneys' fees at the rates discussed above applied to the hours discounted by 20%, as follows:
Requested Rate
Awarded Rate
Requested Hours
Awarded Hours (20% reduction)
Total
Martin
$995 - $1,075
$975
57
45.6
$44,460.00
Van Houten
$650 - $775
$500
340.4
272.32
$136,160.00
Guyse
$450 - $550
$450
94.4
75.52
$33,984.00
Lineberger
$374 - $467.50
$300
126.4
101.12
$30,336.00
Pinto
$374 - $467.50
$300
129
103.2
$30,960.00
Schwarz
$650 - $675.75
$500
152.3
121.84
$60,920.00
Gaeta
$403.75
$200
2.5
2
$400.00
Mano
$370 - $382.50
$150
6.2
4.96
$744.00
Tipton
$340
$150
18.3
14.64
$2,196.00
Zerwas
$403.75
$200
23.2
18.56
$3,712.00
TOTAL
$343,872.00
Although Martin discusses Schmidt, the librarian, in his Declaration (ECF No. 60 ¶¶ 24, 27), the invoices do not reflect that she recorded any time (see ECF Nos. 63-1 - 63-4), and, accordingly, the Court excludes her from the recommended award of attorneys' fees.
c. Costs
Match seeks costs of $22,653.13 paid to its e-discovery vendors “to facilitate storage, review, organization, tagging, production, and redaction of thousands of documents collected and/or produced in this action in first- and third-party discovery.” (ECF Nos. 60 ¶ 18; 60-9). Beazley does not separately address the reasonableness of these costs. (See generally ECF No. 67).
A party's request for costs must “be supported by appropriate documentation.” Greenburger v. Roundtree, No. 17 Civ. 3295 (PGG) (SLC), 2020 WL 6561598, at *14 (S.D.N.Y. Jan. 16, 2020), adopted by, 2020 WL 4746460 (S.D.N.Y. Aug. 16, 2020). Several courts in this District have deemed e-discovery vendor costs recoverable. See Aquavit Pharm., Inc. v. U-Bio Med, Inc., No. 19 Civ. 3351 (VEC) (RWL), 2023 WL 2396511, at *25 (S.D.N.Y. Feb. 17, 2023) (awarding $13,184 costs for e-discovery vendor, Consilio), adopted by, 2023 WL 2584198 (S.D.N.Y. Mar. 21, 2023); 28th Highline Assocs., LLC v. Roache, No. 18 Civ. 1468 (VSB) (KHP), 2019 WL 10632851, at *6 (S.D.N.Y. July 29, 2019) (awarding $40,000 for e-discovery costs as reasonable), adopted by, 2020 WL 5659465 (S.D.N.Y. Sept. 23, 2020); ComLab, Corp. v. Kal Tire, No. 17 Civ. 2019 (PKC) (OTW), 2019 WL 2144307, at *6 (S.D.N.Y. Apr. 18, 2019) (awarding costs for, inter alia, e-discovery vendor), adopted by, 2019 WL 2137135 (S.D.N.Y. May 16, 2019), aff'd 815 Fed.Appx. 597 (2d Cir. 2020) (summary order); see also Vista Outdoor Inc. v. Reeves Family Trust, No. 16 Civ. 5766 (JSR), 2018 WL 3104631, at *11 (S.D.N.Y. May 24, 2018) (awarding reduced e-discovery vendor costs). The Court finds that Match has substantiated costs in the amount of $22,316.83, the sum of the invoices Match paid to its e-discovery vendors, Disco and Consilio (ECF No. 60-9), and that the amount is reasonably consistent with the Court's experience and knowledge of the costs of e-discovery vendors. See Roache, 2019 WL 10632851, at *6 (awarding $40,000 for e-discovery costs as reasonable). Accordingly, should the reviewing Court be inclined to award costs, the Court respectfully recommends that Match be awarded costs in the amount of $22,316.83.
The recommended amount, which is computed from the invoices (ECF No. 60-9), is $336.30 less than the Requested Costs of $22,653.13.
IV.CONCLUSION
For the reasons set forth above, I respectfully recommend that the Fee Motion be DENIED. In the alternative, should the Court decide to award Match attorneys' fees and costs, I respectfully recommend an award of $343,872.00 in attorneys' fees and $22,316.83 in costs.
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen (14) days (including weekends and holidays) from 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. See also Fed.R.Civ.P. 6(a), (d) (adding three additional days when service is made under Fed.R.Civ.P. 5(b)(2)(C), (D) or (F)). A party may respond to another party's objections within fourteen (14) days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Such objections, and any response to objections, shall be filed with the Clerk of the Court. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), (d), 72(b). Any request for an extension of time for filing objections must be addressed to Judge Schofield.
FAILURE TO OBJECT WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), (d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).