Goldfrank v. NexImmune, Inc.

Filing 45

MEMORANDUM re 35 MOTION for Recovery of Collection Costs Pursuant to Promissory Notes, and Directing Payment of Approved Collection Costs. Signed by Judge Richard G. Andrews on 8/4/2017. (ksr, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
LIONEL GOLDFRANK, III,
Plaintiff,
v.

Civil Action No. 1:17-cv-0166-RGA

NEXIMMUNE, INC.,
Defendant.

MEMORANDUM
Plaintiff moves for attorneys' fees and costs totaling $121,353.70 and for financial
advisory fees totaling $46,248.95 after winning on its claim that Defendant breached two
promissory notes. (D.I. 35). Plaintiff contends that the promissory notes provide for reasonable
fees and costs. (D.I. 35-3 Ex. 1 ii 12, Ex. 2 ii 12). Defendant concedes that it owes something,
suggesting in its brief that Plaintiff should be awarded $36,973. (D.I. 40, p.9). Defendant cites
as support for that a chart which shows the figure as $28,507.80. (D.I. 40-3, Exh. 3, p.2). Go
figure! In any event, Defendant contests much of Plaintiffs request.
There are no heroes in this dispute. Defendant indisputably had obligations to Plaintiff,
which it refused to meet, instead making multiple offers that would have given him cents on the
dollar (albeit cents much closer to 100 than to zero). Defendant could have kept the costs of both
sides down by simply paying up. For reasons that are unexplained, it did not, instead extending
the litigation by making offers attempting to compromise undisputed amounts owed. Thus,
Defendant's complaint about Plaintiffs aggressive litigation rings hollow, when by contract
Defendant had agreed to pay 100% of Plaintiffs reasonable costs and gave every indication of
trying to weasel out of its full obligations. Plaintiff, who had the moral high ground, has ceded

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some of it with inexplicably excessive and unexplained billing. Thus, for the reasons that follow,

IT IS HEREBY ORDERED that the Court GRANTS in part and DENIES in part Plaintiff's
motion.
The promissory notes at issue are subject to Delaware state law. (D.I. 35-3 Ex. 1 ifl3, Ex.
2 ifl3). Under Delaware law, "clear and unambiguous terms are interpreted according to their
ordinary and usual meaning." Paul v. Deloitte & Touche, LLC, 974 A.2d 140, 145 (Del. 2009).
The promissory notes state, "If an action is instituted by the Purchaser [i.e., Plaintiff] to collect
any amounts owed to such Purchaser under this Note, the Company [i.e., Defendant] shall pay all
costs and expenses of the Purchaser, including, without limitation, reasonable attorneys' fees and
costs, incurred in connection with such action." (D.I. 35-3 Ex. 1 if12, Ex. 2 if12).
The plaintiff bears the burden of proof for most contract claims. Pharmathene, Inc. v.
Siga Techs., Inc., 2011 WL 4390726, at *13 (Del. Ch. Sept. 22, 2011). Since the fee shifting
provision arises under the promissory notes, Plaintiff will bear the burden of demonstrating that
the requested fees are reasonable. (D.I. 35-3 Ex. 1, Ex. 2).
Since the language of the promissory notes stipulates to reasonable attorneys' fees, I must
determine whether the fees Plaintiff requested are reasonable. In determining the reasonability
of the requested fees, the Court may consider "the time and labor required, the novelty and
difficulty of the questions involved, the skill requisite to perform the legal services properly, the
fee customarily charged in the locality for similar legal services, the nature and length of the
professional relationship with the client, and the experience, reputation, and ability of the lawyer
or lawyers perfom1ing the services." Richmont Capital Partners 1. L.P. v. J.R. Jnvs. C01p., 2004
WL 1152295, at *3 (Del. Ch. May 20, 2004). The Court should also consider ifthe number of
hours devoted to the matter was "excessive, redundant, duplicative or otherwise unnecessary."

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Shoppes ofMount Pleasant, LLC v. J.ML., Inc., 2015 WL 4755491, at *2 (Del. Com. Pl. Aug. 4,
2015).
Plaintiff requests $5,740.50 for work done by Plaintiff's attorneys before filing the
complaint to examine the viability of the claim. (D.I. 40-3 Ex. 3 at 2). Defendant contends that
Plaintiff should not be compensated for work done before the filing of the complaint because it is
not "in connection with this Action." (D.I. 40 at p. 4). I disagree. An action does not start when
the plaintiff begins writing the Complaint, but instead begins when the plaintiff starts to
investigate the claim. In fact, Rule 11 requires attorneys to do pre-complaint work.

FED.

R. Crv.

PRO. 1 l(b). Thus, Plaintiff is entitled to attorneys' fees for the pre-complaint work.
Plaintiff seeks $4,958.00 for work associated with this request for fees and costs. (D.I.
40-3 Ex. 3 at 2). Defendant suggests that these fees should not be awarded without explanation.
(Id.) The promissory notes state that Defendant will pay all costs incurred in connection with an

action for collection. (D.I. 35-3 Ex. 1 if12, Ex. 2 if12). This provision of the notes is sufficiently
broad to encompass motions for attorneys' fees. Thus, I will award Plaintiff's request for
$4,958.00 in connection with this request for fees and costs.
Plaintiff requests $2,659.00 for fees regarding the Analysis of Warrants. (D.I. 40-3 Ex. 3
at 2). Defendant argues that the warrants analyzed arose out of a separate agreement, not the

promissory notes. (D.I. 40 at p. 5). Plaintiff does not address the warrants directly in his reply,
but notes that the warrants became an issue in the settlement offers made by Defendant. (D.I. 42
at p. 8). 1 Under the settlement offers, Plaintiff would have waived some of his rights to these

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Elsewhere, Plaintiff advises that in January, Plaintiff "and his professional advisors attempted to discover,
informally, the nature of [Defendant's) corporate transactions that potentially affected [Plaintiff's) rights both as a
creditor and warrant holder." (D.I. 42, p ..4). The warrant rights appear, at the earliest, to have been interjected
into the contract action when Defendant made a settlement offer on February 22, 2017, which included waiver of
warrant rights.

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warrants. (Id.). However, the analysis of the warrants performed by Plaintiffs attorney may not
have been related to collecting on the promissory notes. Defendant asserts that Plaintiffs
attorney analyzed the warrants in conjunction with an offer to purchase the warrants, not in
connection with the settlement agreements, which requested Plaintiff to waive the rights to the
warrants. (Id.). I have reviewed the billing records cited by Defendant. (D.I. 40-3, Exh. 3; D.I.
40-1, Exh. 1). Only one of the entries seems to be connected with looking at the warrants as part
of a settlement. (D.I. 40-1, Exh. 1, 4/9/17 @ $222). There is an absence of evidence otherwise
to support time spent on analyzing the warrants. Plaintiff will only be awarded $222 for the
analysis of the warrants.
Plaintiff requests $46,248.95 to pay for the fees of his financial adviser, Mr. Lucchese.
(D.I. 40-3 Ex. 3 at 2). Mr. Lucchese is not a lawyer. Suit was filed on February 16, 2017. Mr.
Lucchese had already billed $11,437.50 by the end of January. In February, he spent five hours
reviewing and commenting on the complaint before it was filed. Defendant argues that Mr.
Lucchese did not perform any legal work and that his work was unnecessary such that it should
not be considered work in connection with this action. (D.I. 40 at p. 5). Since Mr. Lucchese is
not a lawyer, he did not perform any legal work. And while his work may have been of benefit
to Plaintiff generally, it was unnecessary to the litigation of this case. An adversary should not
bear the burden of a party's decision to voluntarily hire an expert or adviser, especially when that
expert or adviser is unnecessary to the action. In re SS&C Techs., 2008 WL 3271242, at *4 n. 24
(Del. Ch. Aug. 8, 2008). I cannot see how providing information about Defendant's financial
situation could possibly have taken the nearly 100 hours that Mr. Lucchese billed. It is clear to
me that Plaintiffs request for the great bulk of Mr. Lucchese's fees is extremely unreasonable.
Analysis of Defendant's financial situation (which was unnecessary) and the calculation of

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interest (which was necessary) could not have reasonably taken very long. In the absence of any
proof, I will allow one hour for the calculation of interest. It is possible that a few hours more of
Mr. Lucchese's time could be justified, but Plaintiff has not provided a basis for making that
determination. Thus, I will award one hour's worth of financial advising fees at Mr. Lucchese's
hourly rate of$375.00.
Plaintiff requested $24,158.50 worth of fees for communications between Mr. Lucchese
and Plaintiff's attorneys. (D.1. 40-3 Ex. 3 at 2). IfMr. Lucchese's compensable work could not
have taken more than one hour, it could not reasonably have taken more than an hour to
communicate that work to Plaintiff's counsel. Thus, I will award one hour's worth of fees at the
hourly rate for Plaintiff's counsel, Mr. Goldberger, which is $740.00.
Plaintiff has requested $36,073.00 for fees in connections with the various motions filed,
such as the Motion for Preliminary Injunction (D.I. 4) and the Motion for Expedited Discovery
(D.1. 9). (D.I. 40-3 Ex. 3 at 2). Defendant argues that these motions were "frivolous and
unnecessary." (D.1. 40 at p. 6). "The party who seeks to benefit from the shifting of fees must
itself act reasonably in the litigation." Seibold v. Camolus Ptnrs. L.P., 2012 WL 4076182 at *30
(Del. Ch. Sept. 17, 2012). When a party incurs legal fees that are not necessary or made for
strategic reasons, such fees are not allowed. Richmont, 2004 WL 1152294, at *4. Defendant
asserts that Plaintiff should not receive fees for these motions because the motions were denied,
and thus, were unnecessary. (D.1. 40 at p. 6). Defendant is applying hindsight bias to the
question of whether the motions were necessary in concluding that the motions were frivolous
merely because they were denied. As Plaintiff points out, the motions helped propel the matter
towards resolution. (D.I. 42 at p. 8). Furthermore, at the time, the motions probably seemed
reasonable and necessary to protect Plaintiff's rights. I think this is the hardest issue raised by

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Defendant. As I hinted at in denying the preliminary injunction, this was a collection case, and
thus unsuitable for a preliminary injunction. On the other hand, Defendant could have prevented
questionable tactics by not adopting questionable tactics itself. Thus, while I think some judges
might well decline to award these fees, I will award them, as a motion does not have to be a
winner to be reasonable, and I think Defendant's conduct justified Plaintiffs approach on the
motions.
Plaintiff requested $18,654.00 for drafting the Complaint (D.I. 2). (D.I. 40-3 Ex. 3 at 3).
Defendant argues that this is an unreasonable amount. (D.I. 40 at p. 7). Plaintiff billed over
thirty hours, most of which were billed at Mr. Goldberger's rate of $740.00 per hour. (Id.; D.I.
40-1 Ex. 1). Defendant also points out that the Complaint is for a simple breach of contract
claim. (D.I. 40 at p. 7). I agree with Defendant that it is unreasonable that it should have taken a
senior partner thirty hours to write a complaint that is only nine pages long and alleges a simple
breach of contract claim. Defendant requests instead that Plaintiff be awarded $7,600.00, which
was reached using a "blended" rate similar to that used in Shoppes ofMount Pleasant. (D.I. 40
at p. 8). Using the blended rate, Plaintiffs requested 30.8 hours were reduced by 30%, and 80%
of those hours were assigned to an associate billing at $280.00 per hour. The remaining 20% of
the hours were assigned to a senior partner billing at $740.00 per hour. Thus, Defendant arrived
at the suggested $7,600.00. I will award the $7,600.00, but if Defendant had suggested less, I
would have been inclined to award a smaller amount. 2

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It should not have taken a senior partner more than eight hours to draft a Complaint in a "collection action" (see
D.I. 40-1, Exh. 1, p.3, entries for 1111/17 and 1/18/17) that was only nine substantive pages and alleged only a
simple contract claim. To bill anything more than eight hours' worth of work is unreasonable. A senior partner
billing at $740.00 per hour for eight hours would have requested $5,920.00, which would have been a reasonable
amount to award for the drafting of the Complaint.

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Finally, Plaintiff requests $11,801.00 for analysis of the scheduling order and settlement
order. (D.I. 40-3 Ex. 3 at 3). Defendant argues that it was unreasonable for Plaintiff's counsel to
bill over eighteen hours for this work, which was minimal and not particularly difficult. (D.I. 40
at p. 8). Plaintiff's bills demonstrate that Plaintiff was discussing the scheduling and settlement
orders with Defendant. (D.I 40-1 Ex. 1). It is prima facie reasonable that Plaintiff would have
needed to prepare for these discussions and that Plaintiff would have had to review documents
associated with these orders. Thus, I will award Plaintiff the requested fees for the analysis of
the scheduling order and settlement order.
I do not address the amounts that are not contested, as Defendant concedes they are
reasonable.
For the reasons stated herein, IT IS HEREBY ORDERED that Plaintiff's Motion for
Fees and Costs is GRANTED in part and DENIED in part. Plaintiff is awarded a total of
$84,819.20 in attorneys' fees and costs. 3
A separate order will be entered.
Entered

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this~ day of August, 2017.

It is difficult to follow Defendant's math. In order to calculate the total amount, I took the amount claimed in the
bills submitted, which is $167,602.65, and deducted the amounts I am not allowing ((2659 - 222) + (46248.95 375) + (24158.5 - 740) + (18654 - 7600)) or $82,783.45, which results in a total of $84,819.20.

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