NPS LLC v. Ambac Assurance Corporation

Filing 73

Judge Douglas P. Woodlock: MEMORANDUM AND ORDER entered AWARDING $570,496.14 in attorneys fees and costs to defendant and directing the parties submit on or before June 10, 2016 an agreed upon calculation of prejudgment interest up to June 17, 2016, the anticipated date of final judgment, thereby providing a calculation of the total amount of the final judgment to be entered as of that date. (Woodlock, Douglas)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS

NPS LLC,
Plaintiff,
v.
AMBAC ASSURANCE CORPORATION,
Defendant.

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CIVIL ACTION NO.
08-11281-DPW

MEMORANDUM AND ORDER
June 3, 2016
I have granted summary judgment in favor of defendant Ambac
Assurance Corporation (“Ambac”) on its breach-of-contract
counterclaim against plaintiff NPS LLC (“NPS”).

See NPS LLC v.

Ambac Assurance Corp., 706 F. Supp. 2d 162 (D. Mass. 2010).

The

issues remaining before me now in this matter are those of the
damage amount and the amount of attorneys= fees and costs due
Ambac under the parties= 2006 Insurance Agreement (the
“Agreement”).
The parties are prepared to stipulate to the amount due
Ambac for the breach of the contract I have found and to the
method for calculating pre-judgment interest.

They dispute and

have submitted opposing briefs on the question of attorneys’
fees and costs.

After resolving that attorneys’ fees and costs

question, I will direct the parties to submit an agreed upon
prejudgment interest figure bringing prior calculations up to
the anticipated June 17, 2016 date for entry of final judgment

in an amount certain for Ambac based upon and incorporating the
fee and cost determinations reflected in this Memorandum.
I. BACKGROUND
NPS, an affiliate of the New England Patriots, issued $282
million of long-term bonds in 2000 in order to fund the
construction of Gillette Stadium.

NPS obtained financial

guaranty insurance for its bonds from Ambac.

In 2006, NPS

refinanced the bonds, and issued new thirty-year bonds.

NPS

again sought and obtained financial guaranty insurance from
Ambac.

The 2006 Agreement between the parties included a

Guaranteed Premium provision providing that “if the Offered
Securities are paid in full or the Policy is terminated for any
reason prior to January 1, 2017, the Issuer shall nevertheless
pay to Ambac, upon such final payment date or termination date,
the present value, using a discount rate of 7%, of each of the
Annual Premiums scheduled to be paid from and including such
date until January 1, 2017 . . . .”

(Compl., Ex. B, ' 1.02

[hereinafter “Agreement”].)
Following the crash of the housing market and ensuing
credit crisis in late 2007 and early 2008, national credit
rating agencies placed a negative outlook warning on Ambac=s AAA
or Aaa credit rating.

Within six months, the agencies

downgraded Ambac=s credit rating.
2

In February 2008, NPS=s bonds,

which were auction-rate bonds sold weekly or monthly,
experienced a failed auction, which increased considerably the
interest rate payable on the bonds.

In May 2008, NPS decided to

redeem the bonds in full, thereby triggering the Guaranteed
Premium provision of the Agreement.

NPS subsequently refused to

pay the Guaranteed Premium, and, on July 2, 2008, Ambac sent NPS
a demand letter giving notice of default under the Agreement.
DLA Piper US LLP (“DLA Piper”), which had provided counsel to
Ambac during the 2006 insurance transaction, assisted Ambac in
this attempt to recover the monies owed under the Guaranteed
Premium provision.
NPS filed suit against Ambac in Massachusetts Superior
Court on July 8, 2008, alleging eight counts, including breachof-contract claims, negligent and intentional misrepresentation,
and a violation of Massachusetts=s consumer protection act, Mass.
Gen. Laws ch. 93A.

The crux of NPS=s action was that Ambac had

misrepresented the security of its high credit rating at the
formation of the 2006 Agreement.

Shortly following the filing

of the complaint, Ambac engaged the New York firm of Patterson
Belknap Webb & Tyler LLP (“Patterson Belknap”) to handle the
litigation.

After engaging Patterson Belknap, DLA Piper was

largely inactive in its representation of Ambac in this case.
However, because Patterson Belknap has no presence in this
3

federal judicial district, Ambac also hired the Boston office of
McDermott Will & Emery LLP (“McDermott”) to act as local
counsel.
After Ambac successfully removed the case to this court, it
filed an answer to NPS=s complaint and counterclaimed for breach
of contract, seeking to enforce the Guaranteed Premium
provision.

The parties then embarked on a rocky road of

negotiations and discovery that was both highly contentious and
far-reaching in scope.

In addition to party discovery, Ambac

served subpoenas on related and unrelated third parties,
including Goldman Sachs, Inc., the National Football League, New
England Patriots, L.P., Kraft Family, Inc., Kraft Group LLC, and
Bingham McCutcheon LLP.

The parties clashed as to both the

scope and format of discovery, exchanging a number of letters in
failed attempts to compromise and coordinate.

Following receipt

of NPS=s request for discovery on December 22, 2008, Ambac
decided to move for summary judgment and seek a stay of party
discovery.

NPS refused to agree to any such stay.

Ambac

subsequently filed motions to stay party discovery — but not
third party discovery — and for summary judgment on all counts
including its own counterclaim.

Both motions were granted in

full, and upon granting summary judgment in favor of Ambac on
its counterclaim, I directed the parties to submit a joint
4

statement regarding the amount owed under the Guaranteed Premium
provision and to brief the issue of attorneys= fees and expenses
due to Ambac under the Agreement.
II. ANALYSIS
In a joint statement, the parties have agreed that, based
upon my resolution of the question of liability, the balance due
Ambac under the Guaranteed Premium provision is $2,740,432.18,
plus interest as accrued thereafter under ' 2.03 of the
Agreement.

Accordingly, I will adopt the balance due figure

approved of by the parties and enter judgment for Ambac
incorporating that amount.
However, the parties were unable to come to a similarly
non-contentious resolution on the issue of attorneys= fees due
Ambac.

As a result of its engagement of Patterson Belknap;

McDermott; and DLA Piper, Ambac seeks a total of $683,897.95 in
attorneys= fees and expenses.1

NPS contests this amount as

unreasonable and excessive.
Section 1.03 of the parties= Agreement states that NPS “will
pay all costs and expenses incurred by Ambac in connection with

1

In total, DLA Piper billed Ambac $24,028 for expenses and 32.8
hours of attorneys= time. Patterson Belknap billed Ambac
$548,798.16 for 1162 hours and $57,735.11 in expenses.
McDermott billed Ambac, through Patterson Belknap, $53,039.95
for 91.4 hours and expenses.
5

the enforcement of this Agreement (including, without
limitation, all reasonable fees and disbursements of Ambac=s
counsel).”

Such a contractual provision for attorneys’ fees and

expenses is valid under New York law,2 A.G. Ship Maint. Corp. v.
Lezak, 503 N.E.2d 681, 683 (N.Y. 1986) (per curiam), and neither
party disputes that Ambac is entitled to reasonable attorneys’
fees and costs related to this litigation.

See also Diamond D

Enters. USA, Inc. v. Steinsvaasg, 979 F.2d 14, 18 (2d Cir. 1992)
(finding that a contractual attorneys= fee provision includes
recovery for all reasonable expenses incurred by enforcing the
contract and addressing related counterclaims or affirmative
defenses).
Under New York law, “[a]n award of attorneys’ fees pursuant
to . . . a contractual provision may only be enforced to the
extent that the amount is reasonable and warranted for the
services actually rendered.”

M. Sobol, Inc. v. Wykagyl

Pharmacy, Inc., 723 N.Y.S.2d 88, 89 (N.Y. App. Div. 2001)
(citation and quotation marks omitted).

Consequently, I must

determine whether Ambac=s request for $683,897.95 in attorneys=
fees and expenses is a reasonable award given the circumstances

2

I found in my prior memorandum and order regarding the merits
in this case that New York law governs the interpretation of the
Agreement. See Ambac Assurance Corp., 706 F. Supp. 2d at 168.
6

of the case.

See Diamond D Enters. USA, Inc., 979 F.2d at 19

(“[T]he rule in New York is that when a contract provides that
in the event of litigation the losing party will pay the
attorney=s fees of the prevailing party, the court will order the
losing party to pay whatever amounts have been expended by the
prevailing party, so long as those amounts are not
unreasonable.” (citation and internal quotation marks omitted)).
In making my determination, I must take into account the “value
of legal services” provided, that is, “the nature and extent of
the services, the actual time spent, the necessity therefor, the
nature of the issues involved, the professional standing of
counsel, and the results achieved.”

542 E. 14th Street LLC v.

Lee, 883 N.Y.S.2d 188, 192 (N.Y. App. Div. 2009) (quotation
marks and citation omitted).

Ultimately, the award of

reasonable attorneys= fees under a contractual attorneys= fees
provision is “within the sound discretion of the trial court.”
Ebrahimian v. Long Island R.R., 703 N.Y.S.2d 731, 732 (N.Y. App.
Div. 2000); see also First Nat=l Bank of E. Islip v. Brower, 368
N.E.2d 1240, 1242 (N.Y. 1977) (recognizing that the court=s
authority and discretion in determining attorneys= fee awards
extends to contractual attorneys’ fees provisions).
The parties’ costs of litigating this case were
dramatically different.

Ambac requests $683,897.95 in
7

attorneys’ fees and expenses, while NPS maintains that its own
litigation costs were a comparably modest $357,115.06.

I will

address each of the arguments made by NPS in turn to determine
whether Ambac’s requested amount is reasonable under ' 1.03 of
the Agreement.
A.

Engagement of Multiple Firms
NPS first argues that Ambac unnecessarily engaged three

large law firms, including two expensive, out-of-district firms
from New York.

NPS contends that this seemingly redundant

representation was unreasonable and that any attorneys= fees and
expenses claimed on behalf of the representation by DLA Piper
and McDermott should be excluded.

NPS’s argument presents two

distinct questions: one concerning redundant and repetitive
representation by out-of-district counsel (DLA Piper) and the
other regarding the retention of duplicative representation as
local counsel (McDermott).
1.

DLA Piper

NPS redeemed its bond obligations in full on May 16, 2008,
thereby triggering the Agreement’s Guaranteed Premium provision.
Soon thereafter, NPS refused to honor its obligations under
' 1.02.

Following NPS=s resulting default, Ambac sought DLA

Piper=s assistance in enforcing the Agreement.

DLA Piper had

acted as Ambac=s transaction counsel in the 2006 refinance,
8

including the Agreement.

More than half of DLA Piper=s services

in this matter pre-dated the filing of NPS=s complaint and
related to the demand letter sent by Ambac to NPS on July 2,
2008.

Given NPS=s breach of the Agreement, it is not

unreasonable that Ambac turned first to the law firm that had
represented it during the negotiation of the document in
question.

Furthermore, although DLA Piper=s New York rates are

considerably higher than those common in this district, DLA
Piper=s unique relationship to the Agreement justifies their
retention over equally competent, but less expensive, counsel in
this district, who would have had to expend additional hours
familiarizing themselves with the document on an expedited basis
at the outset of the dispute.

I therefore find the $14,594.75

incurred by Ambac for DLA Piper=s services addressing NPS=s
default prior to formal initiation of this litigation to be
reasonable and reimbursable under § 1.02 of the Agreement.
After NPS filed its complaint, DLA Piper billed a further
12.3 hours in this matter, all but 2.2 hours by partners whose
rates ranged from $700 to $825.

Of those additional hours, 7.8

were recorded in the days directly following NPS=s filing and
included reviewing the complaint, researching removal of the
case, and consulting with Patterson Belknap, Ambac’s litigation
counsel.

DLA Piper=s lead partner, Michael Barz, billed a
9

further 3.7 hours in August 2008 consulting with the lead
partner from Patterson Belknap regarding Ambac=s draft answer and
1.8 hours in October 2008.

Given the nature of the case, this

amount of time transitioning to and consulting with litigation
counsel seems appropriate and not excessive.

Furthermore, the

minimal representation provided by DLA Piper would have been
necessary whether Ambac had transitioned to out-of-district
counsel like Patterson Belknap or to equivalent in-district
counsel in Boston.

I accordingly find that the additional

$9,433.25 billed by DLA Piper in this matter constitutes
reasonable attorneys= fees recoverable under ' 1.02 of the
Agreement.
2.

McDermott

NPS argues that Ambac unnecessarily incurred costs by
hiring out-of-district counsel that in turn required engagement
of an additional, third firm to act as local counsel.

Given

that NPS=s complaint involved relatively straightforward contract
claims and various tort and consumer protection causes of
action, I find NPS=s contention not without force.
There is a presumption in New York law in favor of basing
reasonable attorneys= fees on the rates within the forum
district. See Getty Petroleum Corp. v. G.M. Triple S. Corp., 589
N.Y.S.2d 577, 578 (N.Y. App. Div. 1992) (memorandum decision).
10

Ambac argues that it overcomes this presumption in hiring
Patterson Belknap because that firm is in Ambac’s own district,
has represented Ambac previously, and was representing Ambac on
other similar matters in other fora.

While Ambac made a

business judgment that, in this context, the additional
convenience of engaging Patterson Belknap outweighed the
additional costs associated with hiring local counsel, it is not
necessarily reasonable to make NPS adopt all the extra costs
incurred for Ambac’s own convenience.

See Fed. Land Bank of

Springfield, Mass. v. Ambrosano, 453 N.Y.S.2d 857, 859 (N.Y.
App. Div. 1982) (memorandum decision) (“[W]hile plaintiff may
employ counsel of its own choosing, its recovery of attorneys’
fees under a provision in the agreement . . . is subject to the
traditional power of the court to supervise the charging of fees
for legal services.”).
The invoices and declaration provided by Edward
Leibensperger, lead partner on the matter for McDermott, suggest
that the services McDermott provided were to a significant
degree duplicative and redundant.

McDermott attorneys spent the

overwhelming majority of the 41.7 invoiced hours3 reviewing

3

According to the Leibensperger Declaration, McDermott billed
Patterson Belknap a total of $53,336.68 in fees and expenses
associated with this case. He states that McDermott attorneys
and staff spent 91.4 hours on the matter. However, the invoices
11

documents prepared by Patterson Belknap and emailing or
teleconferencing with Patterson Belknap attorneys.

Thus, had

Ambac hired counsel from within the District of Massachusetts —
or hired out-of-district counsel with a presence in this
district — it could have minimized the significant fees charged
by both McDermott and Patterson Belknap for performing
essentially the same tasks (e.g., reviewing the same pleadings,
participating in conference calls with each other, attending
mediation and oral argument, etc.).

In essence, Ambac seeks to

impose duplicative expenses onto NPS.

Ambac may have considered

such duplicative representation to be useful and may have been
willing to pay for it.
is not automatic.

But under New York law, shifting costs

See, e.g., Daiwa Special Asset Corp. v.

submitted only cover services provided between November 11,
2008, and April 8, 2010, totaling 41.7 hours (less than half of
the requested hours for McDermott). Those detailed invoices
amount to $26,835.50 in attorneys’ fees and $168.73 in costs (a
total of $27,004.23). These invoiced amounts, together with
three prior invoices listed as unpaid on the November 30, 2008
bill, total $53,372.96, or $36.28 less than the amount reported
by Leibensperger in his declaration. Additionally, one page of
the February 13, 2009 invoice was missing. Because Ambac only
undertook to provide a detailed accounting of $27,004.23 in fees
and expenses, I will only consider whether those charges were
reasonable; I will not consider awarding an amount above the
documented fees. M. Sobol, Inc. v. Wykagyl Pharmacy, Inc., 723
N.Y.S.2d 88, 89 (N.Y. App. Div. 2001). As will appear, I will,
however, use the documented fees as a sampling from which to
draw a percentage award for the total of the local services
reported, if not fully documented, by McDermott.
12

Desnick, No. 00 Civ. 3856(SHS), 2002 WL 31767817, at *3
(S.D.N.Y. Dec. 3, 2002) (“The attorneys’ fees are excessive, in
part, because the time spent by so many individuals
familiarizing themselves with the file is considerable.”).
Accordingly, I will allow only 20 percent of the total
claimed fees and costs requested by Ambac for services rendered
by McDermott as reasonable attorneys’ fees recoverable under '
1.03 of the Agreement.

This reduction is meant to estimate an

appropriate level of compensation for local counsel – after all,
local counsel can be a necessity, and in any event McDermott’s
time surely substituted for some amount of work by Patterson
Belknap lawyers even as it duplicated other work – while
substantially discounting for the duplication inherent in
retaining separate law firms for a single matter.

I will also

discount the expenses billed by Patterson Belknap for travel to
and from New York by Patterson Belknap attorneys (including fees
for non-working travel) and for courier service to McDermott,
approximately $13,506.31.4

Finally, I will reduce by two percent

the attorneys’ fees requested for Patterson Belknap for the time

4

The deducted fees for non-working travel were calculated
according to the reasonable hourly rates of the two lawyers
involved, as explained below. See infra Part II.B.1. David
Dykhouse billed 12.8 hours ($8,409.60) and Nivritha Ketty billed
3.5 hours ($1,281). (Am. Ex. A at 22B23, 37, 98.)
13

spent updating and coordinating with McDermott=s attorneys.
B.

Reasonable Rates and Hours
The bulk of the fees and expenses associated with this

litigation and requested by Ambac was billed by Patterson
Belknap, Ambac’s lead litigation counsel.

Excluding costs

incurred from the McDermott and DLA Piper representations, the
cost of this litigation to Ambac was a reported $606,533.27
($548,798.16 in fees and $57,735.11 in expenses).

By contrast,

Bingham McCutcheon LLP, NPS=s sole counsel in this matter, billed
$337,445.70 in fees and $19,669.36 in expenses, for a total
litigation cost of $357,115.06.

NPS argues that the much higher

costs incurred by Ambac were unreasonable and expends a great
deal of effort calculating and identifying the reasons for the
nearly $250,000 difference in costs to the two parties.

In sum,

NPS contends that the out-of-district rates inflated the fees,
that Ambac unreasonably and inefficiently staffed the matter,
and that Ambac engaged in unnecessarily broad discovery.

For

all of these reasons, NPS contends that Ambac=s requested
attorneys= fees should be reduced accordingly.
New York law dictates that “[a]n award of attorneys’ fees
pursuant to . . . a contractual provision may only be enforced
to the extent that the amount is reasonable and warranted for
the services actually rendered.”
14

M. Sobol, Inc., 723 N.Y.S.2d

at 89. Thus, “[a]pplications for fee awards should generally be
documented by contemporaneously created time records that
specify, for each attorney, the date, the hours expended, and
the nature of the work done.”

Disabled Patriots of Am., Inc. v.

Niagara Grp. Hotels, LLC, 688 F. Supp. 2d 216, 226 (W.D.N.Y.
2010) (quoting Kirsch v. Fleet Street, Ltd., 148 F.3d 149, 173
(2d Cir. 1998)).

As recited earlier, in considering whether

Patterson Belknap=s fees and expenses were reasonable, I must
take into consideration “the nature and extent of the services,
the actual time spent, the necessity therefor, the nature of the
issues involved, the professional standing of counsel, and the
results achieved.”

542 E. 14th Street LLC, 883 N.Y.S.2d at 192.

I will use Patterson Belknap=s copious invoices as a baseline and
award attorneys= fees as actually expended unless I find those
fees to be unreasonable.

See Diamond D Enters. USA, Inc., 979

F.3d at 19.
In undertaking this inquiry, “courts have acknowledged that
a judicial determination of what is >reasonable= for purposes of a
fee award to be paid by the losing party to the prevailing party
in a litigation is not the same as the reasonableness of a bill
that a law firm might present to its own paying client.”
Special Asset Corp., 2002 WL 31767817, at *2.

Daiwa

To that end,

“[w]hatever the terms of the private agreement between attorney
15

and client, it is not required that [the losing party] be
required to sign on to that agreement by the virtue of his
guaranty to pay >reasonable= fees and expenses.”
1.

Id.

Reasonable Rates

NPS contends that Patterson Belknap=s fees were excessive
New York-based fees and should be heavily discounted.

Ambac

disagrees and argues that engaging more expensive, out-ofdistrict counsel was appropriate in this case because Patterson
Belknap had a long-term relationship with Ambac and was familiar
with the businesses of Ambac and its affiliates.

However, as I

have already indicated in Part II.A.2 of this memorandum, I am
not entirely convinced that the hiring of out-of-district
counsel was necessary or reasonable in this case.

Although

Ambac correctly points out that its counsel was successful at
every stage of this litigation (in its motions for removal, for
stay of party discovery, and for summary judgment) and is
plainly well-respected and experienced in the field,
equivalently experienced and competent in-district counsel was
available to Ambac, albeit with some – but not disabling inconvenience.

Ambac is also correct that the stakes in this

case were high — both in terms of the millions of dollars in
damages sought by NPS and the potential impact that Ambac=s
failure in this case would have on its business more generally —
16

but, at its essence, this was not a complicated breach-ofcontract case.

Special knowledge of Ambac’s larger business was

not that difficult to develop, nor was Patterson Belknap
particularly familiar with the Agreement itself (as evidenced by
DLA Piper=s initial involvement in this case).

Ambac=s

justifications for hiring Patterson Belknap are therefore not
particularly compelling in this context.
Consequently, I must examine Patterson Belknap=s rates and
determine whether they are reasonable for this district.

See

Getty Petroleum Corp. v. G.M. Triple S. Corp., 589 N.Y.S.2d 577,
578 (N.Y. App. Div. 1992) (memorandum decision) (“[T]he
reasonable hourly rate should be based on the customary fee
charged for similar services by lawyers in the community with
like experience and of comparable reputation to those by whom
the prevailing party was represented.”); DaimlerChrysler Corp.
v. Karman, 782 N.Y.S.2d 343, 346 (N.Y. Sup. Ct. 2004) (“The fact
remains that this proceeding was litigated in Albany County,
which is in the Northern District, and, therefore, the rates for
attorney services that would be charged in this community must
apply.” (citing Arbor Hill Concerned Citizens Neighborhood Ass’n
v. County of Albany, 369 F.3d 91 (2d Cir. 2004))).

17

NPS estimates that Ambac’s counsel charged an average of
$91.79 per hour more than NPS=s in-district counsel.5
calculations are quite different.

My

First, the attorneys from DLA

Piper on average billed at a higher rate than Patterson Belknap,
and McDermott (in-district counsel) charged only minimally lower
rates.

McDermott=s rates were $795 for its senior-most partner,

as opposed to $825 for Patterson Belknap=s, and $470 for a midlevel associate equivalent to Matthew Larsen at Patterson
Belknap, who billed at $474.
It is indisputable, however, that Patterson Belknap=s rates
were higher on average than Bingham McCutcheon=s rates for NPS.
As a caveat, it is unclear to me whether Bingham McCutcheon
charged NPS customary rates or some discounted rate.

Given the

odd numbers quoted by Bingham McCutcheon, I am inclined to
suspect the latter.

In any case, the following summarizes the

average fees of the two firms as charged in this matter,
according to roughly equivalent seniority:

5

Ambac argues that it is improper to use NPS=s costs as a
comparison or an example of “reasonable fees.” I agree that
Bingham McCutcheon=s invoices are not necessarily the touchstone
for measuring Patterson Belknap=s purported excesses. However,
as a well-regarded in-district firm at the time, Bingham
McCutcheon rates provide considerable insight into what the
Boston legal market was bearing for comparable services at the
time.
18

Hourly
Rate6

Bingham
McCutcheon
Attorney7

Hourly
Rate

Forlenza

$825

Bernstein

$720

Dykhouse

$730

Goldberg

$688.50

Solomont

$548.25

Guizzetti
Rowley
Staff

$395.25
$293.25
$196

Patterson
Belknap
Attorney
Partners

Associates
Syme

$546

Larsen
Ketty
Staff

$474
$366
$172

6

These rates represent estimated weighted averages. Patterson
Belknap charged standard hourly rates until January 5, 2009.
Therefore, 672.5 hours were billed at the standard rates, and
480.5 hours at a discounted rate. Additionally, rates for
several of the attorneys increased due to annual promotions. I
have calculated the weighted average wage per hour of each
attorney based on the rate changes over time.
7

It should be noted that the equivalencies of the attorneys
appearing in the same row are not exact. The attorneys are
paired according to approximate years of experience, in
descending order. Attorneys who billed only minimal hours are
not included, with the exception of Mr. Forlenza, who was the
senior-most attorney from Patterson Belknap but billed only 0.9
hours.
19

The average difference here, therefore, is less than the $92.79
quoted by NPS, but still significant at $75.
Given the comparison between the rates reported by
McDermott, Bingham McCutcheon, and Patterson Belknap, I am
satisfied that Patterson Belknap=s rates are unreasonable for
comparable representation in this district.
necessary to reduce the rates.

I therefore find it

This, of course, is not a

statutory attorneys’ fees case in which I must gauge
reasonableness on the least amount necessary to attract
competent counsel.

See Boulet v. Romney, No. Civ.A. 99-10617,

2003 WL 1538374, at *1 (D. Mass. Mar. 24, 2003) (recognizing the
difference between the market rates for commercial and civil
rights litigation, with the former substantially greater than
the latter); 515 Avenue I Corp. v. 515 Avenue I Tenants Corp.,
No. 65/05, 2010 WL 4904671, at *3 (N.Y. Sup. Ct. Dec. 1, 2010)
(“[T]here is a danger in incorporating wholesale into
contractual fee-shifting the methodology developed, at least
initially, in the context of attorneys’ fees awards under the
Federal civil rights laws with the purpose ‘to attract qualified
and competent attorneys without affording any windfall to those
who undertake such representation.’” (citations omitted)).

This

is, by contrast, a contract dispute regarding a sophisticated
20

insurance agreement entered into by sophisticated parties, both
of whom, not surprisingly, hired sophisticated counsel to
resolve the dispute.

The rates should reflect this reality.

Indeed, in its briefing, NPS suggested that Ambac should
have hired McDermott to litigate this matter instead of hiring
expensive New York counsel.8

Of course, had Ambac done so, its

attorneys’ fees request would likely have been significantly
lower than that which it seeks now.

However, Patterson

Belknap’s representation was well above average and, ultimately,
entirely successful.

Accordingly, I will reduce the above-

listed weighted average rates by ten percent to calculate the
reasonable attorneys= fees due Ambac.

I see no reason to reduce

the fees charged for paralegals, IT professionals, and other
support staff.

The reduced fee schedule is:

8

I note that I have already indicated a determination to reduce
the award by eliminating unnecessarily redundant McDermott
charges. I have chosen to do so to honor Ambac’s choice of
principal counsel without at the same time burdening NPS with
redundant fees, albeit at a lower cost.
21

Patterson
Belknap
Attorney

Weighted
Average
Hourly Rate

Reduced
Hourly
Rate

Forlenza

$825

$742.50

Dykhouse

$730

$657

Syme

$546

$491.40

Larsen
Devine
Ketty
Staff

$474
$440
$366
$172

$426.60
$396
$329.40
$172

Partners

Associates

Because NPS also contends that the number of hours expended by
Patterson Belknap=s attorneys is excessive and unreasonable, I
will not calculate the total fees due according to these reduced
rates until I address the issue of reasonable hours.
2.

Reasonable Hours

Comparing the hours billed by Patterson Belknap to those
billed by Bingham McCutcheon results in a difference as
divergent as the comparison of the firms’ respective hourly
rates.

Patterson Belknap billed 1162 hours; Bingham McCutcheon

billed 855.2.

It is not surprising, therefore, that NPS

contests the reasonableness of the hours reported by Patterson
22

Belknap.

NPS’s protest rests on two grounds.

First, NPS claims

that Patterson Belknap staffed the matter inefficiently, relying
too heavily on senior attorneys with high hourly rates.

Second,

NPS argues that Patterson Belknap=s discovery practice caused an
excessive escalation of costs because it was both unnecessary in
light of its summary judgment motion and too broad in scope.

In

total, NPS asks me to exclude $200,000 in unnecessary discovery
costs.

However, after carefully reviewing the invoices provided

by Patterson Belknap, I am satisfied that the hours expended,
while perhaps exceeding the minimum amount required for success,
were not unreasonable in the context of this case.
In determining whether the hours expended on a particular
litigation are reasonable, I must rely upon “contemporaneously
created time records that specify, for each attorney, the date,
the hours expended, and the nature of the work done.”

Disabled

Patriots of Am., Inc., 688 F. Supp. 2d at 226 (quotation marks
and citations omitted).

After reviewing the invoices and

considering the arguments provided by the parties, I may exclude
“excessive, redundant or otherwise unnecessary hours,” Quaratino
v. Tiffany & Co., 166 F.3d 422, 425 (2d Cir. 1999), or make an
across-the-board reduction in the number of hours, see Luciano
v. Olsten Corp., 109 F.3d 111, 117 (2d Cir. 1997).

Such an

examination must not rely on hindsight, but rather should
23

consider 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).
Inefficient or top-heavy staffing of litigation can be
grounds for reducing an attorneys’ fee request.

See Daiwa

Special Asset Corp., 2002 WL 31767817, at *4 (reducing the hours
used to calculate the fee award because the losing party
“inefficiently allocated work among attorneys”); cf. HSH
Nordbank AG N.Y. Branch v. Swerdlow, No. 08 Civ. 6131(DLC), 2010
WL 1141145, at *7 (S.D.N.Y. Mar. 24, 2010) (“The division of
labor among the attorneys was similarly appropriate.

The two

most junior attorneys conducted the bulk of the work, including
overseeing the document review, conducting the legal research,
and writing the initial drafts of pleadings and briefs.
Likewise, the junior partner billed twice the number of hours as
the more senior partner.”).

In general, three Patterson Belknap

attorneys managed this case: David Dykhouse, a partner, billed
233.8 hours; Carrie Syme, a senior associate, billed 290.1
hours; and Nivritha Ketty, a junior associate, billed 565.5
hours.

The senior-most attorney billed only 0.9 hours.

Bingham

McCutcheon=s lead attorney, Charles Solomont, was a more junior
partner than Dykhouse, although he billed a comparable 200.7
24

hours.

The great difference in total hours can be explained by

Patterson Belknap=s decision to expend more hours generally and
to rely more heavily upon the services of a senior associate.
In general, however, the distribution of hours between partner,
senior associate, and junior associate was neither plainly topheavy nor unreasonable.
The question remains whether the fact that Patterson
Belknap billed so many more hours generally was unreasonable.
In arguing that it was, NPS points to Patterson Belknap=s
discovery practice, which included extensive third-party
discovery, and its decision to initiate discovery and belatedly
move for summary judgment instead of moving to dismiss the case
from the outset.

A large expenditure of time on discovery can

be reasonably reflective of an unnecessarily broad discovery
request, as NPS contends was the case here.

See HSH Nordbank AG

N.Y. Branch, 2010 WL 1141145, at *6 (recognizing that inflated
attorneys= fees may result from “broad discovery demands”).
Patterson Belknap did expend a considerable amount of time
and energy in pursuing third-party discovery and sparring with
Bingham McCutcheon regarding the scope and format of party
discovery.

However, NPS is not an innocent victim of this

hostile discovery practice.

As the briefing on the motion to

stay in this case indicates, both parties sought near limitless
25

discovery and contributed substantially to discovery skirmishes.
I will not at this point nit-pick the hours expended in this
process or question the perceived wisdom of engaging in such a
practice in the first place.

I am satisfied that Patterson

Belknap did not spend an unreasonable number of hours on
discovery given the combative nature of the litigation to that
point.
Finally, Patterson Belknap=s strategic decision not to move
for dismissal in response to NPS=s complaint is no basis for
reducing attorneys’ fees.

Bingham McCutcheon rightly points out

that Ambac=s summary judgment motion, in essence, argued that the
complaint failed to state a claim and relied largely on
materials attached to the complaint.

However, Ambac’s motion

also sought summary judgment on its own counterclaim to enforce
the Guaranteed Premium provision in the Agreement.

Pursuing the

strategy suggested by NPS would not directly have achieved
Ambac’s primary goal: the enforcement of the Guaranteed Premium
provision that NPS sought to avoid by bringing this lawsuit.
Furthermore, this action appears to be the first against Ambac
raising the claim of misrepresentation of its creditworthiness.
As NPS notes, other similar cases were filed subsequently and —
had Ambac not successfully reached the merits of NPS’s arguments
— could, in the absence of a merits determination in this case,
26

have posed a heightened challenge to the validity of numerous
insurance agreements integral to Ambac’s business.

While the

ultimate amount recovered under the Guaranteed Premium provision
was not large in comparison to the fees expended, the validity
of that provision and the Agreement in general rendered this
case high stakes litigation for Ambac.

See Amerisource Corp. v.

Rx USA Int=l Inc., No. 02-CV-2514(JMA), 2010 WL 2160017, at *12
(E.D.N.Y. May 26, 2010) (finding that a large expenditure in
attorneys’ fees vis-a-vis the amount recovered was reasonable
where “[i]t is likely that under such circumstances, other
sellers would also hold their ground in order to demonstrate to
their customers that debts cannot be escaped simply by raising
expensive counterclaims and dragging out collection efforts”).
Consequently, I find that the hours expended by Ambac’s
attorneys was not unreasonable and warrant no further reduction.
C.

Mediation Costs
The parties agreed to attempt settlement of this case by

mediation, but the one-day mediation on November 18, 2008 proved
unsuccessful.

NPS now argues that Ambac is not entitled to

recover any attorneys= fees or expenses related to the
unsuccessful mediation.
In arguing that Ambac is not entitled to these fees and
costs, NPS relies heavily upon Janney Montgomery Scott LLC v.
27

Tobin, 692 F. Supp. 2d 192 (D. Mass. 2010).

In Tobin, the court

excluded attorneys’ fees associated with a failed settlement
negotiation because such fees “are not normally considered in
the lodestar calculation” and “[t]o rule otherwise in a fee
shifting regime would discourage parties from engaging in such
negotiations because the losing party would have to pay for the
prevailing party’s fees.”

Id. at 198.

NPS thus argues that

fees for mediation or settlement negotiations are not
recoverable as a matter of policy.
However, Tobin is inapposite because it addresses
attorneys’ fees due under Chapter 93A and Massachusetts law in
the context of a fee-shifting regime inapplicable here.
196, 198.

Id. at

The provision for costs and attorneys’ fees in this

case states that NPS “will pay all costs and expenses incurred
by Ambac in connection with the enforcement of this Agreement
(including, without limitation, all reasonable fees and
disbursements of Ambac’s counsel).”
added).)

(Agreement ' 1.03 (emphasis

This is not a case involving a statutory fee-shifting

provision entitling the prevailing party to attorneys’ fees.
The Agreement clearly states that Ambac is entitled to recover
all expenses incurred in enforcing the Agreement.

Under the

Agreement, NPS would not be entitled to attorneys’ fees even if
it had prevailed in its action.

Therefore, the policy concerns
28

regarding the inducements or disincentives to reach a settlement
outlined in Tobin do not apply.

In fact, denying attorneys’

fees incurred in the reasonable pursuit of mediation or
settlement in contract disputes would provide a significant
disincentive for such alternative dispute resolutions.

The

policy implications relevant to the agreement suggest that
mediation or settlement costs — regardless of success — should
be included in an award of reasonable attorneys’ fees and costs.9
NPS has failed to identify a single court applying New York
law that has held that expenses related to mediation or
settlement negotiations are not recoverable under contractual
attorneys’ fees provisions.

By contrast, research has revealed

that New York courts have permitted just such recovery.

See,

e.g., Thompson v. McQueeney, 868 N.Y.S.2d 443, 448 (N.Y. App.

9

Federal district courts in New York that have rejected the
opposing policy approach regarding settlement fees taken in
Tobin. See Stirrat v. Ace Audio/Visual, Inc., No. 02 CV
2842(SJ), 2007 WL 2229993, at *6 (E.D.N.Y. July 31, 2007)
(permitting reimbursement for “typical pretrial tasks
(pleadings, discovery practice, mediation, and settlement
discussions)” (emphasis added)); Moses v. New York City Transit
Auth., No. 01 Civ. 4280RMBMHD, 2003 WL 22939122, at *3 (S.D.N.Y.
Dec. 12, 2003); Sugarman v. Village of Chester, 213 F. Supp. 2d
304, 311B12 (S.D.N.Y. 2002) (“While we would not expect that a
plaintiff would expend an inordinate amount of time on
unsuccessful settlement negotiations, . . . [we] conclude that
[the plaintiffs] are entitled to reimbursement for their
reasonable settlement efforts.”).
29

Div. 2008) (“[I]nasmuch as the Agreement expressly allows
reimbursement for attorneys’ fees ‘incurred in connection’ with
litigation involving that document, it cannot be said that the
fees incurred in an attempt to settle that litigation were not
in fact a part of that litigation.”); Tige Real Estate Dev. Co.,
Inc. v. Rankin-Smith, 650 N.Y.S.2d 114, 115 (N.Y. App. Div.
1996) (memorandum decision) (“The court also correctly ruled
that fees incurred in settlement negotiations are recoverable.”
(citation omitted)).
Consequently, I find that Ambac is entitled to recover
reasonable attorneys’ fees and expenses related to the mediation
in this case.

See Sugarman v. Village of Chester, 213 F. Supp.

2d 304, 312 (S.D.N.Y. 2002) (“While we would not expect that a
plaintiff would expend an inordinate amount of time on
unsuccessful settlement negotiations, . . . [we] conclude that
[the plaintiffs] are entitled to reimbursement for their
reasonable settlement efforts.”).
Accordingly, with the exception of the travel expenses and
fees discussed above, I am satisfied that the hours and expenses
expended on the mediation are reasonable and recoverable.
D.

Conclusion
In light of the foregoing analysis, I must calculate the

resulting attorneys’ fees and expenses due.
30

Using the reduced

hourly rates for Patterson Belknap=s attorneys, I have calculated
the total reasonable attorneys’ fees and costs to be $584,658.02
($550,022.03 for Patterson Belknap,10 $24,028.00 for DLA Piper,
and $10,607.99 for McDermott).

I further reduce this amount by

the $13,506.31 in travel expenses incurred because Ambac did not
hire in-district counsel and reduce it by a further $655.57 in
expenses for local cab rides and meals billed by Patterson
Belknap.

While Ambac may have been willing to pay such

additional costs, NPS need not shoulder them.

See Daiwa Special

10

The following chart details the base amount for Patterson
Belknap:
Patterson Belknap
Attorney

Reduced
Hourly
Rate

Total
Number
of Hours

Total Fees

Forlenza

$742.50

0.9

$668.25

Dykhouse

$657

233.8

$153,606.60

Syme

$491.40

290.1

$142,555.14

Larsen
Devine
Ketty
Staff
Total

$426.60
$396
$329.40
$172

25.5
1.8
565.5
44.4
1162

$10,878.30
$712.80
$186,275.70
$7,636.80
$502,333.59

I further discount this base amount by two percent to account
for the unnecessary communication and consultation with
McDermott as local counsel. See supra Part II.A.2. After
adding the $57,735.11 in expenses claimed by Patterson Belknap,
the resulting total of Patterson Belkap’s recoverable fees and
expenses is $550,022.03.
31

Asset Corp., 2002 WL 31767817, at *2.

Under my calculations,

therefore, the total amount due to Ambac under ' 1.03 of the
Agreement for attorney fees and costs is $570,496.14.
IV. CONCLUSION
For the reasons laid out more fully above, I will enter
judgment for Ambac including (A) $2,740,432.18 in damages for
its breach-of-contract counterclaim, plus interest accrued
through March 15, 2010 of $290,067.13 and interest as accrued
thereafter calculated under ' 2.03 of the Agreement to the date
of judgment; (B) $570,496.14 in attorneys’ fees and expenses,11
plus interest accrued after March 15, 2010 to the date of
judgment; and (C) any post-judgment interest under the
Agreement.12

11

New York law provides for pre-judgment interest on contractual
attorneys’ fees. CARCO GROUP, Inc. v. Maconachy, 718 F.3d 72,
87-88 (2d Cir. 2013) (per curiam). I conclude such interest is
available and appropriate here under a contract that provides
for interest on all “amounts payable hereunder,” Agreement
§ 2.03, to assure compensation for the time value of money
awarded in a judgment, the entry of which has been deferred.
12

While in a diversity action applying New York law, New York
law governs the award of pre-judgment interest, the award of
post-judgment interest is properly understood as a procedural
matter governed by federal law. FCS Advisors, Inc. v. Fair Fin.
Co., 605 F.3d 144, 146 (2d Cir. 2010) (per curiam); see also
Westinghouse Credit Corp. v. D’Urso, 371 F.3d 96, 102 (2d Cir.
2004). Federal statute provides a default post-judgment
interest rate, 28 U.S.C. § 1961, but parties may contract around
that rate using unequivocal language. Id.; see also Venture
Partners LLC v. River Rim LLC, No. CIV. 07-213-P-H, 2008 WL
32

I direct the parties jointly to submit on or before June
10, 2016 agreed-upon figures bringing prior calculations for the
amount of prejudgment interest up to the anticipated June 17,
2016 date for entry of final judgment, thereby providing a
calculation of the total amount of that final judgment as of
that date.

/s/ Douglas P. Woodlock______
DOUGLAS P. WOODLOCK
UNITED STATES DISTRICT JUDGE

355561, at *1 n.3 (D. Me. Feb. 8, 2008) (citing Second, Seventh
and Fifth Circuits in the absence of clear First Circuit
precedent). The language in the Agreement here unambiguously
provides for interest at the contractual rate “after as well as
before judgment.” Agreement § 2.03. Accordingly, post-judgment
interest will accrue at the contractual rate until the judgment
is fully paid.
33