Bank of Amer NA v. Klein

Filing 228

ORDER: Plaintiff's Motion 184 for Summary Judgment is GRANTED; the Recommended Ruling 223 is ADOPTED in full. The Clerk is directed to enter judgment and to close this case. Signed by Judge Janet Bond Arterton on 3/27/2013. (Bonneau, J)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
BANK OF AMERICA, N.A.,
Plaintiff,
v.
SAMUEL KLEIN,
Defendant.

Civil No. 3:10cv987 (JBA)

March 27, 2013

RULING ON MOTION FOR SUMMARY JUDGMENT AS TO DAMAGES AND ON
OBJECTION TO RECOMMENDED RULING
On February 14, 2013, Magistrate Judge Garfinkel issued a Recommended Ruling
[Doc. # 223] (“Rec. Ruling”), granting Plaintiff Bank of America, N.A.’s (“Bank of
America”) Motion [Doc. # 184] for Summary Judgment as to Damages. On February 28,
2013, Defendant Samuel Klein filed a timely objection [Doc. # 244] to the Recommended
Ruling, claiming that: (1) Magistrate Judge Garfinkel failed to make a finding that all the
claimed attorneys’ fees were incurred in connection with the enforcement of the
guaranty; (2) there is insufficient evidence in the record to support such a finding; and (3)
Defendant is entitled to an evidentiary hearing on the reasonableness of the attorneys’
fees under New York Law. (See Def.’s Obj. at 1.) For the reasons that follow, Defendant’s
objection is overruled, and the Recommended Ruling will be adopted in full.
I.

Background
The factual and procedural background of this actions are presented in detail on

pages two through four of Magistrate Judge Garfinkel’s October 22, 2012 Order [Doc.
# 203], which are incorporated by reference herein. Briefly, Plaintiff brought this suit for
breach of contract against Defendant to recover for Defendant’s alleged default under a
Consumer Guaranty (“the Agrippa Guaranty”) Plaintiff executed in favor of Defendant’s
predecessor in interest in connection with financing received by Agrippa, LLC

(“Agrippa”). Defendant’s liability under the Agrippa Guaranty has been previously
determined, and the only issue currently pending before the Court is Plaintiff’s motion
for summary judgment as to damages, including reasonable attorneys’ fees. On October
22, 2012, Magistrate Judge Garfinkel issued an Order informing the parties that he
intended to grant summary judgment in favor of Plaintiff, and provided the parties an
opportunity to supplement the record regarding the reasonableness of Plaintiff’s
requested billing rates. (See Oct. 22, 2012 Order at 13–14.) After such supplementation
was completed, on February 14, 2013, Magistrate Judge Garfinkel issued a Recommended
Ruling finding there were “no genuine issues of material fact as to the reasonableness of
the number of hours expended by [Plaintiff’s] counsel as well as to the reasonableness of
the rates requested.”

(Rec. Ruling at 2.)

Magistrate Judge Garfinkel further

recommended that damages in the amount of $1,060,192.401 be entered in favor of
Plaintiff. (Id. at 3.)
II.

Discussion
Defendant objects to the Recommended Ruling on three grounds:

1) that

Magistrate Judge Garfinkel failed to make a finding that all the claimed attorneys’ fees
were incurred in connection with the enforcement of the guaranty; (2) that there is
insufficient evidence in the record to support such a finding; and (3) that Defendant is

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This amount reflects (a) $256,365.28 for the Agrippa debt less the sale proceeds
of the collateral; (b) $120,904.67 in interest; (c) $22,756.00 in costs for the placement of
forced insurance; and (d) $660,166.51 in attorneys’ fees incurred in connection with the
enforcement of the Agrippa Guaranty. Plaintiff conceded that there was a six–cent
discrepancy in the amount of recovery it initially sought, and has stated that it has waived
recovery of the additional six cents. (See Oct. 22, 2012 Order at 4 n.3.)
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entitled to an evidentiary hearing on the reasonableness of the attorneys’ fees under New
York Law. (See Def.’s Obj. at 1.)2
A.

Magistrate Judge Garfinkel’s Findings

Defendant’s first objection to the Recommended Ruling is that Magistrate Judge
Garfinkel failed to make a finding that the fees requested by Plaintiff were incurred “in
connection with” the enforcement of the Agrippa Guaranty. In so arguing, Defendant
cites to one sentence from Magistrate Judge Garfinkel’s October 22, 2012 order:
“Accordingly, if any of the complained of ‘different matters’ relate to, or are otherwise
associated with the enforcement of the [Agrippa] Guaranty, then [Plaintiff] may recover
its attorneys’ fees incurred for such matters.” (Oct. 22, 2012 Order at 12.) However,
Defendant’s focus on this sentence misconstrues Magistrate Judge Garfinkel’s reasoning
in the October 22, 2012 Order and ignores his findings in the Recommended Ruling,
which is the relevant order for the purposes of Defendant’s objections.

In the

Recommended Ruling, Magistrate Judge Garfinkel expressly found that the Plaintiff’s
attorneys’ fees were recoverable under the terms of the Agrippa Guaranty: “The Court
finds that attorneys’ fees, costs, and expenses requested by [Plaintiff] in the amount of
$660,166.51 are reasonable and were incurred in connection with the enforcement of the
[Agrippa] Guaranty.” (Rec. Ruling at 2.) Furthermore, in the October 22, 2012 Ruling,
Magistrate Judge Garfinkel stated:
Mr. Klein argues that the attorneys’ fees [Plaintiff] seeks to recover were
not all incurred in connection with the enforcement of the [Agrippa]
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Defendant does not object to Magistrate Judge Garfinkel’s finding that Plaintiff
is entitled to the following damages: (a) $256,365 for the Agrippa Debt less the Sale
Proceeds; (b) interest in the total amount of $120,904.67; and (c) costs in the amount of
$22,756.00 for the placement of forced insurance. Thus, the Court adopts Magistrate
Judge Garfinkel’s findings as to these amounts.
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Guaranty. For this reason, Mr. Klein maintains that an issue of material
fact exists to prevent summary judgment in favor of [Plaintiff].
Specifically, Mr. Klein takes issue with attorneys’ fees [Plaintiff] seeks for,
inter alia, tasks relating to discovery and to Mr. Klein’s counterclaim. Mr.
Klein additionally asserts that [Plaintiff] seeks attorneys’ fees for “different
matters” involving “different parties,” which are not recoverable under the
language of the [Agrippa] Guaranty. The Court disagrees with Mr. Klein
that an issue of material fact exists in this regard. . . . Moreover, Mr. Klein’s
argument that attorneys’ fees incurred by [Plaintiff] for “different matters”
involving “different parties” are not recoverable under the language of the
[Agrippa] Guaranty is misplaced.
(Rec. Ruling at 11 (internal citations omitted).) The sentence that Defendant quotes
merely illustrates Magistrate Judge Garfinkel’s reasoning in rejecting Defendant’s claim
that the fees sought to be recovered were not incurred in connection with the
enforcement of the Agrippa Guaranty. As the language of the Recommended Ruling
clearly establishes, Magistrate Judge Garfinkel did make an express finding that the fees
are recoverable under the Agrippa Guaranty (see id. at 2), and therefore Defendant’s
objection on the ground that the Recommended Ruling lacked such a finding is
overruled.
B.

Reasonable Fees Incurred

Defendant also objects to the Recommended Ruling on the basis that there
remains a genuine issue of material fact as to whether the fees Plaintiff seeks to recover
were reasonable in that they were recoverable under the terms of the Agrippa Guaranty.
Specifically, Defendant asserts that Defendant’s fees that were incurred defending against
his counterclaims in this suit, or in recovering the underlying debt that the Agrippa
Guaranty secured in separate suits are not recoverable in this action. Based on a de novo

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review of the record,3 however, the Court concludes that all of the fees sought by Plaintiff
were incurred “in connection with” the enforcement of the Agrippa Guaranty, and that
there is no genuine question of material fact as to the reasonableness of the attorneys’ fees
requested by Plaintiff.
Under the Agrippa Guaranty, Defendant agreed to pay all of Plaintiff’s reasonable
attorneys’ fees. The Agrippa Guaranty provides:
I agree to pay all of Lender’s costs and expenses, including Lender’s
reasonable attorneys’ fees and Lender’s legal expenses, incurred in
connection with the enforcement of this Guaranty. Lender may hire or pay
someone else to help enforce this Guaranty, and I shall pay the costs and
expenses of such enforcement. Costs and expenses include Lender’s
reasonable attorneys’ fees and legal expenses whether or not there is a
lawsuit, including reasonable attorneys’ fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post–judgment
collection services. I shall also pay all court costs, in addition to all other
sums provided by law. This Guaranty also secures all of these amounts.

3

Pursuant to Federal Rule of Civil Procedure 72(b) and Local Rule 72.2(b), the
portions of the Magistrate Judge’s decision objected to by Defendant are reviewed de
novo, and any part or the entirety of the Recommended Ruling may be adopted, rejected,
or modified.
“Summary judgment is appropriate where, “resolv[ing] all ambiguities and
draw[ing] all permissible factual inferences in favor of the party against whom summary
judgment is sought,” Holcomb v. Iona Coll., 521 F.3d 130, 137 (2d Cir. 2008), “the movant
shows that there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “A dispute regarding a material fact
is genuine if the evidence is such that a reasonable jury could return a verdict for the
nonmoving party.” Williams v. Utica Coll. of Syracuse Univ., 453 F.3d 112, 116 (2d Cir.
2006) (quotation marks omitted). “The substantive law governing the case will identify
those facts that are material, and ‘[o]nly disputes over facts that might affect the outcome
of the suit under the governing law will properly preclude the entry of summary
judgment.’” Bouboulis v. Transp. Workers Union of Am., 442 F.3d 55, 59 (2d Cir. 2006)
(quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). When considering a
motion for summary judgment, the Court may consider depositions, documents,
affidavits, interrogatory answers, and other exhibits in the record. Fed. R. Civ. P. 56(c).
5

(Agrippa Guaranty, Ex. B to Compl. [Doc. # 1] at 2 (emphasis added).)

Defendant

disputes that the fees sought to be recovered in this action were incurred “in connection
with” the enforcement of the Agrippa Guaranty. Under New York law,4 a court must give
force to the clear and unambiguous terms of a contract, and the question of “[w]hether an
ambiguity exists in a written agreement is a question of law for a court to decide after
reading the document as a whole to determine its purpose and intent.” Zinter Handling,
Inc. v. General Elec. Co., 956 N.Y.S.2d 626, 629 (N.Y. App. Div. 2012) (internal quotations
and citation omitted). “An ambiguity will be found only where reasonable minds could
differ as to what was intended by the parties.” Id.
New York courts have noted that the terms “related to” and “in connection with”
are equivalent and have a broad meaning. See Allied Irish Banks, p.l.c. v. Bank of America,
N.A., 875 F. Supp. 2d 352, 356–57 (S.D.N.Y. 2012) (citing Tufino v. N.Y. Hotel & Motel
Trades Council & Hotel Ass’ns of the N.Y.C. AFL–CIO Local 6, 646 N.Y.S.2d 799 (N.Y.
App. Div. 1996); see also Coregis Ins. Co. v. American Health Foundation, 241 F.3d 123,
128–29 (2d. Cir. 2001) (noting that “related to” and “in connection with” are equivalent
and have a broader meaning than “arise from”). While Defendant points to the later
language in the Agrippa Guaranty defining “costs and expenses” as somehow limiting the

4

The Agrippa Guaranty contains a New York choice–of–law clause. (See Agrippa
Guaranty at 2 (“This Guaranty will be governed by federal law applicable to Lender and,
to the extent not preempted by federal law, the laws of the State of New York without
regard to its conflicts of law provisions. This Guaranty has been accepted by the Lender
in the State of New York.”).) “A federal court sitting in diversity jurisdiction applies the
choice of law rules of the forum state.” Forest Park Pictures v. Universal Television
Network, Inc., 683 F.3d 424, 433 (2d Cir. 2012). “Contracts clauses which require the
application of the laws of other states upon breach or dispute are recognized as proper in
Connecticut.” Zenon v. R.E. Yeagher Management Corp., 57 Conn. App. 316, 322 (2000).
Thus, the Court applies New York law in considering Defendant’s objections.
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earlier sentence which states that Defendant is responsible for all “costs and expenses,
including Lender’s reasonable attorneys’ fees and Lender’s legal expenses, incurred in
connection with the enforcement of this Guaranty” (Agrippa Guaranty at 2), under New
York law the term “in connection with” is meant to have a broad meaning. Thus, the
Court finds that the meaning of the term “in connection with” is unambiguous and that if
any of the matters for which Plaintiff seeks to recover attorneys’ fees was somehow
related to or connected with the enforcement of the Agrippa Guaranty, such fees are
properly recoverable in this action.
In his opposition to Plaintiff’s motion for summary judgment, his supplemental
response to the October 22, 2012 Order and his objection to the Recommended Ruling,
Defendant has argued generally that the fees incurred to defend his counterclaims and to
establish the underlying debt on the Agrippa Note were not incurred “in connection
with” the enforcement of the Guaranty.

Defendant’s counterclaims all related to

allegations regarding Plaintiff’s actions in declaring the PLC Note, the Agrippa Note, and
the Agrippa Guaranty in default. (See Counterclaim [Doc. # 19].) Because the note
defaults formed the basis for Plaintiff’s breach of guaranty claim, the defense of these
counterclaims necessarily impacted Plaintiff’s efforts to enforce the Agrippa Guaranty,
and thus any fees incurred defending these counterclaims were incurred “in connection
with” the enforcement of the Guaranty. See Resolution Trust Corp. v. Feldman, 3 F.3d 5,
10–11 (1st Cir. 1993) (holding that attorneys’ fees incurred in defense of counterclaims in
a suit to enforce a guaranty were incurred “in connection with” that guaranty). Cf.
Phoenixcor, Inc. v. Pnini, 2005 WL 2063829, at *3 (S.D.N.Y. Aug. 26, 2005) (awarding fees
incurred litigating dismissed claims under a guaranty providing for all attorneys’ fees
incurred in connection with enforcement of the guaranty based on the reasoning that
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“none of the fees would have been incurred had [defendant] complied with his
contractual obligations in the first instance”).
Similarly, the fees Plaintiff incurred to establish the default on the Agrippa Note
and to recover the collateral securing that note and the Agrippa Guaranty were incurred
“in connection with” the enforcement of the Agrippa Guaranty.

Defendant has

repeatedly argued that Plaintiff’s claimed fees are facially unreasonable because Plaintiff is
requesting nearly $700,000 to recover a roughly $250,000 deficiency judgment. (Def.’s
Obj. to Rec. Ruling at 11.) However, this mischaracterizes the nature of the action.
Pursuant to the Agrippa Guaranty, Defendant guaranteed the $3,200,000 Agrippa Note,
and the parties eventually stipulated that as of the filing of Agrippa’s bankruptcy petition
Agrippa owed $3,156,365.28 on that note. Through the various New York actions,
Plaintiffs were able to recover $2,900,000 in collateral that secured the note, thereby
substantially reducing the deficiency at issue in this action. Thus, Plaintiff incurred
$700,000 in fees to establish Defendant’s default on a $3,200,000 guaranty and to recover
$2,900,000 in collateral and the roughly $250,000 in principal outstanding after the
disposition of that collateral. These fees are not as wildly disproportionate as Defendant
attempts to portray them. The note default formed the basis for Defendant’s default
under the Agrippa Guaranty and therefore actions to pursue collateral securing the
Agrippa Note were related to the enforcement of the Agrippa Guaranty. Thus the fees
incurred in the New York State Proceedings, the New York Federal Proceedings and the
New York Bankruptcy proceedings were incurred “in connection with” the enforcement
of the Agrippa Guaranty and are recoverable in this action.5

5

The Agrippa Guaranty also states that “[i]f [Agrippa] is in default under any
agreement between [Agrippa] and Lender, Lender may collect the amounts owed by
8

To the extent that Defendant objected to specific entries in his supplemental
response to the October 22, 2012 Order and in his objection to the Recommended Ruling,
Plaintiff has sufficiently addressed each of these objections in the Frechette Declaration
attached to its response to Defendant’s objection. (See Frechette Decl. [Doc. # 255-3].)
The majority of the entries to which Defendant objects were incurred in the New York
actions to recover the collateral securing the Agrippa Note (see id. ¶ 13), and therefore
were incurred “in connection with” the enforcement of the Agrippa Guaranty. The three
entries referring to litigation in Wyoming represent coordination by counsel across
several districts to ensure the proper timing in declaring default on the various notes and
guarantees at issue in the litigation between Agrippa, PLC, Klein and Bank of America.
(See id. ¶¶ 9–12.) The remaining entries to which Defendant objects, including the
Sentient Flight v. Klein, New Alliance, and Choice Hotels v. PLC matters, arose out of
Plaintiff’s investigations of alternate theories of default under the Agrippa Guaranty. (See
id. ¶¶ 14–15.)
Defendant relies on the Cassone Declaration to rebut Plaintiff’s characterization
of these fees, arguing that because Defendant was not in default under the Agrippa
Guaranty at the time these fees were incurred, and because theoretically he may never
have been in default under these theories, the attorneys’ fee provision in the Agrippa
Guaranty could not have been triggered. (See Cassone Decl. [Doc. # 227] ¶¶ 6–7.)
However, Defendant’s counterfactual is to no avail—the default on the underlying notes
[Agrippa] directly from me.” (Id. at 1.) Under the terms of the Agrippa Note, which was
backed by the Agrippa Guaranty, Agrippa was obligated to pay “all costs and expenses
Lender incurs to collect this Note . . . includ[ing] . . . Lender’s reasonable attorneys’ fees
and Lender’s legal expenses.” (Agrippa Note, Ex. A to Compl. at 2.) Because these fees
were also incurred to collect on the Agrippa Note, they are recoverable under the terms of
the Agrippa Note and by extension, under the terms of the Agrippa Guaranty as well.
9

was the predicate to Defendant’s default under the Agrippa Guaranty and actions taken to
coordinate litigation across multiple fora to establish that default are necessarily related to
the enforcement of the Agrippa Guaranty. Similarly research conducted to establish
alternate theories of default, in support of an action for breach of guaranty would also be
related to enforcement of a guaranty. Therefore, the Court concludes that these fees were
incurred “in connection with” the enforcement of the Agrippa Guaranty.
Defendant’s objection to the Recommended Ruling on the basis that the attorneys’
fees sought to be recovered were not incurred “in connection with” the enforcement of
the Agrippa Guaranty is overruled.
C.

Evidentiary Hearing

The sole basis for Defendant’s objection to the Recommended Ruling is that the
requested fees were not incurred “in connection with” the enforcement of the Agrippa
Declaration. Defendant has renewed this argument three times during the proceedings,
in his opposition to Plaintiff’s Motion for Summary Judgment, in his supplemental
response to the October 22, 2012 Order, and in his objection to the Recommended
Ruling. Furthermore, Defendant had a fourth opportunity to raise an issue of fact with
the Court pursuant to the March 20, 2013 Order [Doc. # 226], which informed the parties
that the Court would consider the Frechette Declaration and afforded Defendant a
chance to rebut Plaintiff’s supplemental evidence as to the reasonableness of the
attorneys’ fees requested. However, at each stage of this action, Defendant has failed to
offer evidence that rebuts Plaintiff’s evidence of the value of the requested fees and that
would raise a genuine issue of material fact as to whether Plaintiff’s requested attorneys’
fees are reasonable and were incurred in connection with the enforcement of the Agrippa
Guaranty.
10

Under New York law, “[w]hile a hearing is not required in all circumstances, ‘the
court must possess sufficient information upon which to make an informed assessment of
the reasonable value of the legal services rendered.’” SO/Bluestar, LLC v. Canarsie Hotel
Corp., 825 N.Y.S.2d 80, 82 (N.Y. App. Div. 2006) (quoting Bankers Fed. Sav. Bank v. Off
W. Broadway Developers, 638 N.Y.S.2d 72 (N.Y. App. Div. 1996)). Here, Plaintiff has
submitted contemporaneous billing records for the legal work performed, with
descriptions of the work performed, the time to complete each task, and the hourly rate at
which each task was performed, in addition to a declaration from Donald E. Frechette in
support of these records. (See June 4, 2012 Frechette Decl. and Exhibits [Doc. # 184-5].)
Plaintiff has further submitted multiple affidavits in support of the reasonableness of the
hourly rate charged (see, e.g., Baldwin Decl. [Doc. # 218-1]; Byrne Decl. [Doc. #218-11];
D. Brown Decl. [Doc. # 218-6]; S. Brown Decl. [Doc. # 218-16]; Kurzweil Decl. [Doc.
# 218-20]), to which Defendant does not object (see Klein Decl. [Doc. # 221-1] at 1 (“I am
not specifically claiming that the billing rates of the individual attorneys are not
customary or are unusual.”)).

The Court thus has sufficient evidence before it to

determine the reasonable value of the claimed fees. Because Defendant has had multiple
opportunities at several different stages in the proceeding to advance his arguments and
to supplement the record, and because the Court concludes that there are no outstanding
genuine issues of material fact as to the reasonableness of the fees requested, a hearing is
not required.
III.

Conclusion
For the foregoing reasons, Plaintiff’s Motion [Doc. # 184] for Summary Judgment

as to Damages is GRANTED, and the Recommended Ruling [Doc. # 223] is ADOPTED

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in full. The Clerk is directed to enter judgment in favor of Defendant in the amount of
$1,060,192.40 and to close this case.
IT IS SO ORDERED.
/s/
Janet Bond Arterton, U.S.D.J.

Dated at New Haven, Connecticut this 27th day of March, 2013.

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