Safeco Insurance Company of America v. M.E.S., Inc et al
Filing
535
ORDER granting 503 Motion for Attorneys' Fees: The Court directs that Safeco's fee application is granted in its entirety and Defendants' oppositions to the application are denied in their entirety. The Court finds that the MES Def endants are liable for $5,570,500.62 in attorneys' fees and costs, that the Hirani Defendants are jointly and severally liable for $4,352,639.56 of that amount, and that Defendants are not entitled to any offset against the constructio n completion and related costs established by Safeco in this matter. In light of Defendants' history of re-litigating every issue in this case, the Court cautions them against filing reconsideration motions that are not well-considered. Al l parties are warned that the filing of a reconsideration motion that the Court finds to be frivolous, e.g., merely restating arguments already rejected by the Court, could result in the imposition of sanctions. See Caisse Nationale de Cre dit Agricole-CNCA, N.Y. Branch v. Valcorp, Inc., 28 F.3d 259, 264 (2d Cir. 1994) (affirming imposition of Rule 11 sanction for a frivolous reconsideration motion and stating that Rule 11 permits sanctions against a litigant who submits a motion t hat, evaluated "under an objective standard of reasonableness... [has] no chance of success and [makes] no reasonable argument to extend, modify or reverse the law as it stands."). Finally, the Court directs Safeco to identify by 7/3/18 the total amount of damages that it is owed under the surety agreements, including amounts owed by Defendants, the MES Defendants, and the Hirani Defendants. Ordered by Judge Pamela K. Chen on 6/8/2018. (Rediker, Ezekiel)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-------------------------------------------------------x
SAFECO INSURANCE COMPANY OF
AMERICA,
Plaintiff,
MEMORANDUM & ORDER
09-CV-3312 (PKC) (VMS)
- against M.E.S., INC., M.C.E.S., INC., HIRANI
ENGINEERING & LAND SURVEYING, P.C.,
HIRANI/MES, JV, GEORGE MAKHOUL,
JITENDRA S. HIRANI, and SARITA
HIRANI,
Defendants.
-------------------------------------------------------x
PAMELA K. CHEN, United States District Judge:
Plaintiff Safeco Insurance Company of America (“Safeco”) seeks to recover its legal fees
and costs related to performance and payment bonds that Safeco issued for three construction
projects with the United States Army Corps of Engineers (the “Corps”) in New Jersey: (1) the
Pyrotechnics Research Technology Facility (“Pyro”) project, undertaken by Defendant M.E.S.,
Inc. (“MES”) and M.C.E.S., Inc. (“MCES”), of which Defendant George Makhoul is the President,
sole officer, and shareholder (“Makhoul”) (collectively, the “MES Defendants”); (2) the
Explosives Research and Development Loading Facility (“ERDLF”) project, undertaken by the
MES Defendants; and (3) the High Energy Propellant Formulation Facility (“HEPFF”) project,
undertaken by the MES Defendants and Defendant Hirani Engineering & Land Surveying, P.C.
(“Hirani”), which is owned by Defendants Jitendra Hirani and Sarita Hirani, as well as a joint
venture, Defendant Hirani/MES, JV (“Hirani/MES”) (collectively the “Hirani Defendants”)1.
1
The MES Defendants and Hirani Defendants will be referred to collectively as
“Defendants”.
1
Safeco’s attorneys’ fee application2 seeks a judgment against the MES Defendants in the amount
of $5,570,500.62. Of this amount, Safeco seeks to hold the Hirani Defendants jointly and severally
liable with the MES Defendants for $4,352,639.56.3
Safeco’s attorneys are: (1) Watt, Tieder, Hoffar & Fitzgerald, LLP (“Watt Tieder”), which
seeks $5,222,213.67; (2) Farber Brocks & Zane LLP (“Farber Brocks”), which seeks $255,710.59;
and (3) Torre, Lentz, Gamell, Gary & Rittmaster, LLP (“Torre Lentz”), which seeks $92,683.36.
(Safeco Fee App., Dkt. 503, at 6.)4
Defendants contest the amount of fees sought by Safeco. Makhoul contends that Safeco
should not be awarded any fees and expenses, or, alternatively, that Safeco’s claim for legal fees
and expenses should be reduced by $2,137,575.92 to a total of $3,433,031.70.5 The Hirani
2
The Court permitted Safeco to file its Fee Application under seal because it discusses
specific legal invoices. (See ECF Entry 10/5/17). Since the Court does not discuss specific legal
invoices in this Order, the Court is not filing the Order under seal.
3
In its reply, Safeco made two downward adjustments to the amount originally sought in
its fee application. Safeco requested that the MES Defendants pay $107 less than the originally
requested fee of $5,570,607.62 and that the Hirani Defendants pay $65,186.31 less than the
originally requested fee of $4,417,932.87. (Safeco Reply, Dkt. 510, at 52.) As a result, Safeco
seeks entry of a judgment awarding its attorneys’ fees and costs against the MES Defendants for
$5,570,500.62; and awarding its attorneys’ fees and costs against the Hirani Defendants, jointly
and severally liable with the MES Defendants, for $4,352,639.56. Considering that Safeco does
not break out these costs for each individual Matter, the Court does not do so either and utilizes
the original amounts requested by Safeco for the purposes of its analysis.
4
Page numbers refer to the pagination generated by the CM/ECF system, and not the
document’s internal pagination.
The MES Defendants’ original attorney, Geoffrey Johnson, Esq., withdrew in April 2017.
(See ECF Entry 4/3/17.) However, at the hearing on attorneys’ fees and damages, MES, but not
Makhoul, was represented by a new attorney, Rachel Schulman, Esq. (Dkt. 530 (Notice of
Appearance of Rachel Schulman, Esq. on behalf of MES).) Since Mr. Johnson’s withdrawal,
Makhoul has represented himself and did so at the hearing. As an unrepresented corporate entity,
MCES defaulted as of April 3, 2017. Given the late and limited appearance of Ms. Schulman in
this case, it is unclear whether MES shares Makhoul’s position regarding the elimination or
reduction of Safeco’s attorneys’ fees.
5
2
Defendants similarly argue that Safeco’s claim for legal fees and expenses as to them should be
reduced by $3,299,453.92 to a total of $1,118,478.95.
For the reasons set forth below, the Court finds that the MES and Hirani Defendants are
liable for the full amount sought by Safeco. As a result, the Court finds that the MES Defendants
are liable for Safeco’s attorneys’ fees and costs in the amount of $5,570,500.62 and that the MES
Defendants and the Hirani Defendants are jointly and severally liable for $4,352,639.56 of that
amount.
I.
Facts and the Course of Litigation
A.
Relevant Facts
In July 2009, Safeco sought to recover losses arising from its issuance of performance and
payment bonds required to secure three government contracts, including two that the MES
Defendants entered into, and one that the Hirani/MES joint venture entered into, with the Corps
(collectively, the “bonded projects”). Safeco issued performance and payment bonds in the
amounts of $10,628,832.00 for the Pyro project, $8,253,975.00 for the ERDLF project, and
$16,549,000.00 for the HEPFF project. (Pl. 56.1 Statement, Dkt. 410-1, at ¶¶ 30-33.) As
consideration and inducement for Safeco to issue the bonds, Defendants, as indemnitors, executed
one or both of two virtually identical Indemnity Agreements (collectively “the Agreements”).
Defendants (i) agreed to fully indemnify Safeco for all loss and expense, of any kind or nature
whatsoever, incurred in connection with the bonds; and (ii) agreed to a number of additional terms
designed to protect Safeco’s interests and to insulate it from loss. (Id. at ¶¶ 8-29.)
Specifically, the Agreements provide that Defendants agree to pay to Surety “upon demand
. . . [a]ll loss, costs and expenses of whatsoever kind and nature, including court costs, reasonable
attorney fees . . . consultant fees, investigative costs and any other losses, costs or expenses
3
incurred by Surety by reason of having executed any Bond, or incurred by it on account of any
Default under this agreement by any of the [MES or Hirani],” as well as, “interest on all
disbursements made by Surety in connection with such loss, costs and expenses . . . at the
maximum rate permitted by law calculated from the date of each disbursement” and “[a]n amount
sufficient to discharge any claim made against Surety on any Bond,” either to “pay such claim or
[to] be held by Surety as collateral security against loss on any bond.” (Id. at ¶ 16.)
The Agreements were intended to cover Safeco’s losses and expenses in the event of a
default—including reasonable attorneys’ fees—arising out of the investigation of, defense against,
and payment of claims for the bonded projects. The Agreements enabled Safeco to “incur such
expenses, including reasonable attorneys’ fees, as deemed necessary or advisable in the
investigation, defense and payment of such claims.” (Id.) Notably, the Agreements stated, “[a]n
itemized statement of loss and expense incurred by [Safeco], sworn to by an officer of [Safeco],
shall be prima facie evidence of the fact and extent of the liability of [MES and Hirani] to [Safeco]
in any claim or suit by [Safeco] against [MES and Hirani].” (Id.)
The Pyro, ERDLF, and HEPFF projects all failed in 2008. On March 5, 2008, the Corps
terminated the Pyro contract for default, and 12 days later, on March 17, 2008, the Corps made a
bond demand on Safeco to complete the remaining work on the Pyro contract. (Id. at ¶¶ 36–37.)
The Corps terminated the HEPFF contract on November 4, 2008 for default and made a
performance bond demand on Safeco to complete the project. (Id. at ¶ 39.) On December 22,
2008, the Corps terminated the ERDLF contract for default and made a performance bond demand
to complete the ERDLF contract. (Id. at ¶ 41.)
Safeco retained outside counsel, Watt Tieder, to provide legal advice and assistance to
Safeco in responding to the Pyro, ERDLF, and HEPFF bond demands and to provide legal services
4
in connection with the defaults and Safeco’s completion of the contracts. (Id. at ¶¶ 45, 51–52, 56–
58.) Highly contentious litigation involving Safeco and Defendants ensued. During the litigation,
Farber Brocks served as local counsel for Safeco in the indemnity action against Defendants. Torre
Lentz served as counsel for Safeco, who was a third-party defendant in the matter of M.E.S., Inc.
v. M.J. Favorito Electric, Inc., et al., No. 1:08-CV-183 (JG) (JMA) (E.D.N.Y.) (the “M.J. Favorito
Action”).
B.
Litigation History
1.
Safeco v. MES, et al., 09-CV-3312
On July 30, 2009, Safeco filed this action, alleging various claims for relief, including
breach of contract and indemnification as to both the MES and Hirani Defendants. (Dkt. 1.) On
March 24, 2010, Safeco filed a motion for partial summary judgment, arguing that Defendants had
breached the parties’ indemnity agreements and seeking to enforce Safeco’s alleged rights to
collateral security, including assignment of Defendants’ affirmative claims against third parties.
(Dkt. 64.) On May 19, 2010, the Honorable Allyne Ross granted that motion in part and denied it
in part. (Dkt. 80.)
The MES Defendants appealed Judge Ross’s May 19, 2010 summary judgment order to
the U.S. Court of Appeals for the Second Circuit. (Dkt. 84.) The appeal was ultimately dismissed
for lack of jurisdiction (Dkt. 101), but while the appeal was pending, the MES Defendants sought
reconsideration of the May 19, 2010 order, (Dkt. 91). On October 4, 2010, Judge Ross issued an
order on the reconsideration motion, as well as on Safeco’s motion renewing its collateral security
demand in which Safeco sought an order establishing the amount of the collateral, setting a
payment deadline, and providing for a formal assignment of Defendants’ claims against third
parties in the event Defendants failed to post collateral by the set deadline. (Dkt. 107.) Judge Ross
5
directed Safeco to provide the Court with the demand for collateral security served on Defendants
seeking an amount of collateral security and subtract from that demand any claims that had already
been paid, and denied Safeco’s motion for a formal assignment of Defendants’ affirmative claims.
(Id. at 11.)
Safeco then filed a renewed demand for collateral, which Judge Ross addressed in an order
issued on November 22, 2010. Judge Ross ordered that Defendants provide Safeco with collateral
by December 1, 2010. (Dkt. 121.) The MES Defendants sought reconsideration of that order, a
request in which the Hirani Defendants joined. Judge Ross denied that request. (Dkt. 125.)
Protracted litigation followed over Defendants’ failure to pay any collateral security and
their failure to provide all required discovery. On July 23, 2014, the Court adopted the Report and
Recommendation of the Honorable Vera M. Scanlon recommending that the Court hold
Defendants in civil contempt for failing to pay the Court-ordered collateral security and for failing
to meet their obligations to produce relevant books and records regarding their finances.
On April 17, 2016, the parties filed cross-summary judgment motions. The Court held oral
argument on the motions on July 11, 2016, and requested supplemental filings from the parties as
to the extent of Safeco’s loss. On September 2, 2016, Safeco submitted supplemental briefing,
(Dkt. 438), and on September 30, 2016, Defendants filed a response, (Dkt. 441).
On March 30, 2017, the Court found that Safeco was entitled to summary judgment on
liability and that Defendants must indemnify Safeco for its attorneys’ fees and costs arising from
the bonds issued for the Pyro, ERDLF and HEPFF projects. (Dkt. 442.) On October 6, 2017,
Safeco filed its attorneys’ fees application, which included an itemized statement of the fees and
costs Safeco had incurred, contemporaneously created time records—specifying for each attorney
the date, hours expended, and nature of the work done—and support for the reasonableness of the
6
hourly rate sought and the hours expended. (Dkt. 503.) Defendants filed responses challenging
Safeco’s fee application. (Dkts. 506, 508.) The Court held a two-day hearing in January 2018,
regarding Safeco’s attorneys’ fees application, as well as certain damage amounts challenged by
Makhoul. The Court also allowed Makhoul to file a supplemental affidavit following the hearing,
which he did on January 12, 2018. (Dkt. 531.) Safeco responded on January 18, 2018. (Dkt. 533.)
2.
MES v. Safeco, et al., 10-CV-2798 (“MES Action”)
On August 24, 2009, a little over a month after this action was filed, the MES Defendants
filed a lawsuit in federal district court in New Jersey against Safeco, the MES/Hirani JV, S.A.
Comunale Co,, Inc. (“Comunale”), one of MES’s subcontractors on the HEPFF project, and
Liberty Mutual Insurance Company, which had provided a surety bond relating to Comunale’s
work on the HEPFF project. The case was transferred to this Court on June 18, 2010. (M.E.S.,
Inc. v. Safeco Ins. Co. of Am., et al., No. 10-CV-2798, Dkt. 54.) MES eventually filed a Second
Amended Complaint—the operative complaint in that action—that dropped the MES/Hirani JV as
a defendant and added three Safeco representatives, Caryn Mohan-Maxfield, David Pikulin, and
Ron Goetsch, as defendants. (MES Action, Dkt. 111 (filed 1/7/14).) In the MES Action, MES
alleged an array of claims, including bad faith, tortious interference with contract, breach of
contract, tortious interference with prospective economic advantage, fraudulent misrepresentation
and concealment, and civil conspiracy, all in connection with the three bonded projects. (Id.) The
claims in the MES Action overlapped substantially with the defense in this action. On March 30,
2017, the Court granted Safeco’s motion for summary judgment in the MES Action in its entirety.
(MES Action, Dkt. 227.)6
Although not included in Safeco’s fee application, the Court notes that Watt Tieder
incurred its own attorneys’ fees and expenses in defending itself in yet another lawsuit brought by
the MES Defendants in connection with the bonded projects; in that one, the MES Defendants
6
7
C.
Plaintiff’s Fee Application
Safeco’s fee application seeks a judgment against the MES Defendants in the amount of
$5,570,500.62 (adjusted downward from $5,570,607.62) in attorneys’ fees and costs, and seeks to
have the Hirani Defendants held jointly and severally for $4,352,639.56 (adjusted downward from
$4,417,932.87) of the total amount. Safeco seeks attorneys’ fees for work performed by three law
firms: Watt Tieder, Farber Brocks, and Torre Lentz.
The MES Defendants7 contend that Safeco should be awarded none of these fees and
expenses, nor any of Safeco’s other, non-legal damages. Alternatively, relying upon the expert
report of Steven Tasher, they assert that Safeco’s total claim for legal fees and expenses should be
reduced by $2,837,605.92. (See Expert Report of Steven Tasher (“Tasher Report”), Dkt. 504-2,
at 29-30.) The Hirani Defendants, relying on their expert, Laura Johnson, contend that the legal
fees and expenses Safeco is seeking as to them should be reduced by $3,299,453.92. (See Report
of Expert Laura Johnson, (“Johnson Report”), Dkt. 504-1, at 23.)
With respect to Watt Tieder’s fees—which were billed to, and paid by, Safeco—the firm
has broken them down into eight separate “matters” and amounts, for purposes of its fee
application:
Matter One: $282,757.50 relating to the Pyro bond;
alleged that Watt Tieder had breached a duty of representation as to the MES Defendants in the
negotiations with the Corps over the defaulted projects. (MES Action, Dkt. 111.) The Court
granted summary judgment in favor of Watt Tieder in that matter on March 30, 2017. (Safeco
Action, Dkt. 442.)
7
At the time Defendants’ filed their responses to Safeco’s Fee Application, Makhoul
purported to represent himself and the MES corporate Defendants, even though, as a non-attorney,
he could not do so. Jones v. Niagara Frontier Transp. Auth., 722 F.2d 20, 22 (2d Cir. 1983) (“it
is settled law that a corporation cannot appear other than by its attorney”) (citing Shapiro,
Bernstein & Co. v. Continental Record Co., 386 F.2d 426, 427 (2d Cir. 1967)). However, because
Ms. Schulman, who later appeared on behalf of the MES corporate Defendants, essentially adopted
Makhoul’s positions, the Court attributes Makhoul’s arguments to the MES Defendants as a whole.
8
Matter Two: $315,748.50 relating to the HEPFF bond;
Matter Three: $241,341.00 relating to the ERDLF bond;
Matter Four: $3,773,553.50 relating to the litigation arising out of the three bonded
projects, including the instant lawsuit and the MES Action;
Matter Five: $34,230 in connection with a litigation against a subcontractor, Power
With Prestige, in the District of New Jersey, relating to the Pyro and ERDLF
projects;
Matter Six: $277,216 in connection with Safeco’s development and pursuit of the
Indemnitor’s assigned claims;
Matter Seven: $255,968.50 in connection with Safeco’s claims against the Corps;
and
Matter Eight: $36,697.50, in connection with defending Safeco’s corporate
executives in the MES Action8.
Safeco also seeks $318,254.67 related to Watt Tieder’s out-of-pocket expenses and costs.
Lastly, as summarized above, Safeco seeks $255,710.59 for fees it paid to its local counsel,
Farber Brocks, and $92,683.36 paid to the firm Torre Lentz, which served as counsel for Safeco
when it was a third-party defendant in the M.J. Favorito Action, a dispute between MES and one
of its subcontractors.
D.
Defendants’ Objections
Defendants have lodged numerous objections to Safeco’s fee application.9 Both the MES
and Hirani Defendants argue that the attorneys’ fees are excessive in terms of the number of hours
expended and that Safeco’s Fee Application failed to provide a clear articulation and allocation of
8
The costs included in Matter Eight are separate from those included in Matter Four, which
also reflects fees and costs Safeco incurred in connection with the MES Action.
9
As discussed infra, Defendants do not contest the reasonableness of partner billing rates
for Watt Tieder, Farber Brocks, and Torre Lentz, or the fees that Safeco’s attorneys have already
written off for a portion of fully redacted billing entries, totaling $63,524.
9
the amount of fees being sought. (Hirani Opposition to Safeco’s Fee Application (“Hirani
Opp’n”), Dkt. 506, at 6-7; MES Opposition to Safeco’s Fee Application (“MES Opp’n”), Dkt.
508, at 6, 24.) The Hirani Defendants further argue that Safeco should not hold them jointly and
severally liable for nearly all of the fees and costs associated with Safeco’s pursuit of this litigation
and its defense of the MES Action against Safeco. (Hirani Opp’n, at 6-7.) The MES Defendants
similarly argue that Watt Tieder has arbitrarily allocated fees between the MES and Hirani
Defendants without supporting documentation. (MES Opp’n, at 24.) The MES Defendants further
argue that Watt Tieder has failed to demonstrate that it was contractually entitled to any attorneys’
fees and that there are outstanding construction costs that should be used to offset any award of
attorneys’ fees. (Id. at 10.)
The MES and Hirani Defendants both argue that Farber Brocks is not entitled to fees
because the firm has played almost no role in the litigation and engaged only in procedural,
repetitive, or duplicative tasks. The Hirani Defendants note that “Farber Brocks has been little
more than a spectator in the Actions” and has not performed substantive work of any kind. (Hirani
Opp’n, at 7.) The MES Defendants also contest Torre Lentz’s fees on the grounds that they are
excessive and that this Court has no jurisdiction to order fees on Torre Lentz’s behalf. (MES
Opp’n, at 21-22.)
The MES and Hirani Defendants both hired experts to opine on the reasonableness of
Safeco’s legal fees. The Hirani Defendants hired Laura Johnson, the lead attorney at Sterling
Analytics Group, who reviewed each of Watt Tieder’s over 10,000 billing entries and categorized
them according to deficiencies. (Transcript of Hearing on Attorney’s Fees on January 4 and 5,
2018 (“Hr’g. Tr.”), at 493:25 (stating that she reviewed “each and every line of each and every
bill”).) Johnson opined that Safeco’s application was deficient on multiple grounds, including:
10
vague billing entries; block-billing10; excessive clerical tasks; attorneys who were overqualified
for the task at hand; clerical tasks; excessive overhead expenses; multiple attendance, i.e., too
many attorneys at one hearing; overstaffing; billing for getting up to speed; duplicate billing
entries; billing entries for non-HEPFF related claims; too many redactions; and non-party fees and
costs. (See Dkts. 505-3-11.) Johnson did not contest the partner rates in Safeco’s fee application,
but did note that some of the rates for associates were “slightly higher” than prevailing market
rates. (Johnson Report, at 22.) Based on Johnson’s analysis, the Hirani Defendants contend that
the portion of Safeco’s total claim for legal fees and expenses charged against Hirani should be
reduced by $3,299,453.92.
The MES Defendants hired Steven Tasher, founder of Wyatt Partners, who conducted a
review of Safeco’s bills, but did not review each of the over 10,000 entries. Tasher opined that
Safeco has failed to meet its burden to demonstrate the reasonableness of those fees/expenses that
have been redacted, and has also failed to comply with this Court’s directive to provide
documentation of the hours incurred and nature of the work performed by each attorney. (Tasher
Report, at 14.)
Tasher more specifically opined that Watt Tieder’s billing practices were
unreasonable, including top-heavy administration of the workload, billing for excessive clerical
and administrative work, having too many ancillary billers, block-billing, and billing for other
undocumented expenses. (Id. at 19-24.) Tasher noted that there were “thousands” of block-billed
entries included in the fee application.
(Hr’g. Tr. at 452:8-21). Tasher also opined that Watt
Tieder could have pushed more of the work down from partners to junior associates in order to
save Safeco money on attorneys’ fees, stating “if [Safeco] had such experienced lawyers at a lower
Block-billing is the practice “of aggregating multiple tasks into one billing entry”. Molefi
v. Oppenheimer Trust, No. 03-CV-5631, 2007 WL 538547, at *7 (E.D.N.Y. Feb. 15, 2007).
10
11
rate, that’s one of the things Mr. O’Donnell11 could have said[,] [‘]why don’t you use some of
these lower-priced people and it could have saved me[’]” (Id. at 454:1-454:10.) Tasher also
explained that Farber Brocks failed to show what substantive role it played as counsel and failed
to demonstrate that its billing entries were not duplicative or overlapping. (Tasher Report, at 2526.) Similarly, Tasher criticized Torre Lentz for not providing a “specific and precise” articulation
of the rationale in support of its entitlement to fees. (Id. at 26.) Tasher concluded that Safeco’s
total claim for legal fees and expenses should be reduced by 2,837,605.92. (Id. at 29-30.)
E.
January 4-5, 2018 Hearing
During the two-day hearing held by the Court on Safeco’s fee application and Makhoul’s
challenge to Safeco’s damages claim, the parties presented the testimony of Watt Tieder attorneys
Vivan Katsontonis and Christopher Harris, Safeco Senior Surety Counsel O’Donnell, defense
experts Johnson and Tasher, and Defendant Makhoul. The parties also introduced voluminous
documentary evidence.
II.
Discussion
A.
Legal Standards
In adjudicating a motion for attorneys’ fees, both the Second Circuit and the Supreme Court
have held that “the lodestar—the product of a reasonable hourly rate and the reasonable number
of hours required by the case—creates a ‘presumptively reasonable fee.’” Millea v. Metro–North
R.R. Co., 658 F.3d 154, 166 (2d Cir. 2011) (quoting Arbor Hill Concerned Citizens Neighborhood
Ass’n v. Cnty. of Albany, 522 F.3d 182, 183 (2d Cir. 2007)). The Court should determine the
John O’Donnell is Safeco’s Senior Surety Counsel, who oversaw, managed, and
approved the billing for the work performed by Watt Tieder and other outside counsel relating to
the bonded projects.
11
12
“presumptively reasonable fee” by looking to “what a reasonable paying client would be willing
to pay.” Arbor Hill, 522 F.3d at 183–84.
“[W]hether the calculation is referred to as the lodestar or the presumptively reasonable
fee, courts will take into account case-specific factors to help determine the reasonableness of the
hourly rates and the number of hours expended.” Pinzon v. Paul Lent Mechanical Sys., No. 11CV-3384, 2012 WL 4174725, at *5 (E.D.N.Y. Aug. 21, 2012), adopted by 2012 WL 4174410
(E.D.N.Y. Sept. 19, 2012). These factors include:
[T]he complexity and difficulty of the case, the available expertise and capacity of
the client’s other counsel (if any), the resources required to prosecute the case
effectively (taking account of the resources being marshaled on the other side but
not endorsing scorched earth tactics), the timing demands of the case, whether an
attorney might have an interest (independent of that of his client) in achieving the
ends of the litigation or might initiate the representation himself, whether an
attorney might have initially acted pro bono (such that a client might be aware that
the attorney expected low or non-existent remuneration), and other returns (such as
reputation, etc.) that an attorney might expect from the representation.
Arbor Hill, 522 F.3d at 184.
“The party seeking reimbursement of attorneys’ fees must
demonstrate the reasonableness and necessity of hours spent and rates charged.” Finkel v. Omega
Comm’n Svcs., Inc., 543 F. Supp. 2d 156, 164 (E.D.N.Y. 2008) (citation omitted).
A district court should generally use the prevailing hourly rates in the district where it sits.
See Simmons v. N.Y. City Transit Auth., 575 F.3d 170, 173 (2d. Cir. 2009). Prevailing rates for
experienced attorneys in the Eastern District of New York range from approximately $300 to $400
per hour. See Am. Fire & Cas. Co. v. Scott Elec. Servs., LLC, No. 15-CV-3111, 2017 WL 395207,
at *2 (E.D.N.Y. Jan. 9, 2017), report and recommendation adopted, 2017 WL 374728 (E.D.N.Y.
Jan. 25, 2017). Some judges “have recognized slightly higher ranges in this district of $300–$450
per hour for partners, $200–$300 per hour for senior associates, and $100–$200 per hour for junior
13
associates.” Small v. New York City Transit Auth., No. CV 2003-2139, 2014 WL 1236619, at *5
(E.D.N.Y. Mar. 25, 2014) (citation omitted).
To determine whether the number of hours spent by counsel was reasonable, the Court
must “use [its] experience with the case, as well as [its] experience with the practice of law, to
assess the reasonableness of the hours spent . . . in a given case.” Fox Indus., Inc. v. Gurovich,
No. 03-CV-5166, 2005 WL 2305002, at *2 (E.D.N.Y. Sept. 21, 2005) (quotation omitted). A court
should “exclude hours that were ‘excessive, redundant, or otherwise unnecessary’ to the litigation”
Cho v. Koam Medical Servs. P.C., 524 F. Supp. 2d 202, 209 (E.D.N.Y. 2007) (citation omitted).
Likewise, where counsel relies on vague and/or excessive entries or block-billing practices that
make it difficult for a court to assess reasonableness, an across-the-board fee reduction can be
justified. Anderson v. Cnty. of Suffolk, No. 09-CV-1913, 2016 WL 1444594, at *6 (E.D.N.Y. Apr.
11, 2016). The party seeking an award of attorneys’ fees bears the burden to document “the hours
reasonably spent by counsel, and thus must support its request by providing contemporaneous time
records reflecting, for each attorney and legal assistant, the date, the hours expended, and the nature
of the work done.” Cho, 524 F. Supp. 2d at 209 (internal citations and quotations omitted).
When reviewing the overall reasonableness of a fee application, “a district court is not
required to ‘set forth item-by-item findings concerning what may be countless objections to
individual billing items[.]’” Reiter v. Metro. Transp. Auth. of State of N.Y., No. 01-CV-2762G,
2007 WL 2775144, at *13 (S.D.N.Y. Sept. 25, 2007).12
Rather, if upon review of the
The Court previously noted at the attorneys’ fees hearing that it was not going to seek
the disclosure of any of Safeco’s redacted billing records to view in camera. (Hr’g. Tr. 7:25-8:16)
(“I have a very good sense of what the issues are that have been briefed throughout the last five or
four-and-a-half years of this case, so I don’t need to see that level of detail.”). Given that the
Second Circuit has held that a reviewing Court need not review every line of every entry in making
a determination on attorneys’ fees, Lunday v. City of Albany, 42 F.3d 131, 134 (2d Cir. 1994), the
Court declines to review Safeco’s unredacted entries.
12
14
contemporaneous time records the court “determines that the number of hours expended was
excessive, redundant or otherwise unnecessary, the court [in its discretion] may . . . account for
such over-billing in an across-the-board percentage deduction.” Manzo v. Sovereign Motor Cars,
Ltd., No. 08-CV-1229, 2010 WL 1930237, at *8 (E.D.N.Y. May 11, 2010).
B.
The Agreements Require Payment of Reasonable Attorneys’ Fees
Before addressing the reasonableness of Safeco’s specific fee requests, the Court notes that
the Agreements plainly entitle Safeco to reasonable attorneys’ fees, including those incurred in
enforcing the Agreements. (Dkt. 64-5 at 2, Dkt. 64-6 at 2 (providing that the MES and Hirani
Defendants “agree to pay to Surety upon demand . . . [a]ll loss, costs and expenses of whatsoever
kind and nature, including court costs, reasonable attorney fees . . . , consultant fees, investigative
costs and any other losses, costs or expenses incurred by [Safeco] by reason of having executed
any Bond, or incurred by it on account of any Default under this agreement by any of the [MES or
Hirani Defendants]”).13
13
Judge Ross also held in her November 22, 2010 order that Safeco was entitled to
collateral security from the MES Defendants for its projected legal and consulting fees because
the provision in the Agreements entitling Safeco to collateral security was “sufficient to cover all
exposure” under the bonds, and reaffirmed her previous order holding that “the term ‘exposure’ .
. . unambiguously refers to the risk of loss or future loss faced by Safeco.” (Dkt. 121 at 25.)
Similarly, the Second Circuit, in affirming Judge Ross’s orders, “conclude[d] that the term
‘exposure,’ as used in the [A]greements, [was] sufficiently broad to include attorneys’ fees”, and
thus held that Judge Ross had not abused her discretion in including attorneys’ fees in the collateral
security award. Safeco Ins. Co. of Am. v. Hirani/MES, JV, 480 Fed. App’x 606, 609 (2d Cir. 2012)
(summary order).
Other courts have found that attorneys’ fees are covered by similar language in indemnity
agreements. In First Nat’l Ins. Co. Am. v. Joseph R. Wunderlich Inc., 358 F. Supp. 2d 44
(N.D.N.Y. 2004), the indemnification agreement issued by an affiliate of Safeco contained a very
similar clause stating that Defendants would pay the surety “[a]ll loss, costs and expenses . . .
including . . . reasonable attorney fees. . . .” Id. at 48. The court in First Nat’l Ins. Co. Am. held
that “there does not exist an issue of fact that the Plaintiff cannot collect reasonable attorney fees
. . . under the Agreement”, and explained that “[t]hese types of costs are expected when a surety
exercises its exclusive right to seek indemnification.” Id. at 57. The court awarded the surety “all
15
Under the terms of the Agreements, Safeco’s itemized statements of loss meet its prima
facie burden of establishing its entitlement to attorneys’ fees and costs. The Court must now
determine whether the fees requested by Safeco are reasonable. General Elec. Co. v. Compagnie
Euralair, S.A., No. 96-CV-0884, 1997 WL 397627, at *4 (S.D.N.Y. July 3, 1997) (“[Plaintiff], as
the fee applicant, bears the burden of documenting the hours reasonably spent by counsel, and the
reasonableness of the hourly rates claimed.”)
C.
Reasonableness of Attorneys’ Fees Claimed by Safeco
1.
Billing Rates
The billing rates applied by Watt Tieder in Safeco’s fee application are as follows:
Title
Senior Partner
Partner
Counsel
Associates 9th Year
Rate
$315
$315
$300
$300
th
Associates 8 Year
Associates 7 Year
$300
$300
Associates 6th Year
$300
th
th
Associates 5 Year
$300
th
Associates 4 Year
$270
rd
Associates 3 Year
$270
nd
Associates 2 Year
$270
Associates 1st Year
$270
Law Clerks
$185
of the attorney fees [sic], including the fees, to prepare, submit, and defend this Motion.” Id. See
also Berkley Regional Ins. Co. v. Weir Bros. Inc., No. 13-CV-3227(CM)(FM), 2013 WL 6020785,
at *7, 12 (S.D.N.Y. Nov. 6, 2013) (holding that indemnity agreement “plainly cover[ed] [plaintiff
surety’s] attorneys’ fees” where agreement stated that defendants would indemnify surety “from
and against any and all liability arising from any cause of action, claim, cost, damage, debt,
demand, expenditure, liability, loss, payment, obligation, or penalty of any kind whatsoever,
including without limitation, interest, costs, court costs, costs to compromise or settle any claim,
expert fees, investigative costs and the fees and expenses of attorneys . . .”).
16
Paralegals
$180
Project Assistants
$120
The rates charged by Farber Brocks are $275 per hour for named partners, like William
Brocks and Braden Farber, $225 for associates, and $75 for paralegals. (Safeco Fee App., at 16.)
Torre Lentz charged $250 per hour for partners and of-counsel attorneys, $180-$210 for associates,
and $115 for paralegals. (Id. at 17.)
Defendants do not dispute the rates charged by Watt Tieder, Farber Brocks, or Torre Lentz
in Safeco’s fee application. The Court finds that these rates are appropriate and in line with
prevailing rates in this district. Small, 2014 WL 1236619, at *5 (recognizing rates of $200-$300
for senior associates and $300-$450 for partners). Although the rates charged by the Safeco law
firms for junior associates are slightly more than the commonly recognized rate of $100-$200, the
Court nonetheless finds the billing rates reasonable.
2.
Billed Hours
In seeking reimbursement of attorneys’ fees, Safeco must demonstrate that the number of
hours its attorneys billed was reasonable. Finkel, 543 F. Supp. 2d at 164.
The parties tenaciously litigated their disputes in this and multiple related matters for over
eight years.
Much of the litigation was driven by Defendants, including a motion for
reconsideration (Dkt. 122), appeals to the Second Circuit (Dkts. 134, 135, 147), a motion for stay
of enforcement of the November 2010 Order pending the appeal (Dkts. 127, 128), motions for
reconsideration on the grounds that Defendants allegedly could not pay the amount of the appeal
security (Dkt. 140), motions to compel the production of documents (Dkts. 175, 202), and multiple
motions for contempt and sanctions against Defendants (Dkts. 241, 242, 325). Safeco was also
required to litigate a motion over the restraint and monitoring of the MES and Hirani Defendants’
respective assets to enforce the terms of the Court’s numerous orders. (Dkts. 313, 314.) Indeed,
17
both the MES and Hirani Defendants were held in willful contempt of Court. (Dkt. 314, at 14
(“Based on their actions, the court questions whether [the] Hirani defendants take their obligations
to this court seriously.”).) In its order granting Safeco’s motion for summary judgment, the Court
noted that it was “deeply troubled” by the MES Defendants’ practice of making serious allegations
“without proper evidentiary support” and further stated, “[w]ere the Court not finding that the MES
Defendants are required to indemnify Safeco for its attorneys’ fees, including those spent
defending against unsupported and misleading allegations, the Court would consider imposing
additional sanctions.” (Dkt. 442, at 54 n. 31.)
During the January 2018 hearing, the Court repeatedly heard testimony that this litigation
was “extraordinary” in scope and aggressiveness. Safeco Senior Surety Counsel O’Donnell, who
handles 100-150 claims matters at any given time (Hr’g. Tr. at 205:8-205:11), stated that he found
this litigation “extraordinary,” due to the “length of the indemnity litigation, which has been
pending since [approximately] 2009 . . . ; the amount of work that has had to go into this case; the
numerous orders that have been entered that haven’t been complied with; the extensive briefing,
rebriefing, sometimes two, three, four times arguing and rearguing points; [and] the number of
times in which we have had to make submissions”, (id. at 206:5-206:20). Similarly, Watt Tieder
partner Vivian Katsantonis noted that in her career, she has never been involved in a case that was
as “contentious” and “involved,” and that “dragged on the way this did.” (Id. at 259:18-260:4.)
She explained, “[t]he motions practice, the [defendant’s] failure to adhere to any orders, the
relitigating every issue 10 times over, you know, it was extraordinary.”14 (Id. at 261:7-261:9.)
14
Katsantonis further explained that Watt Tieder had to do the same litigation work
pertaining to the MES and Hirani Defendants – researching choice of law, drafting summary
judgment motions, etc. – and that that was a major reason why the bills were consolidated and
applied to all Defendants for the HEPFF project. (Hr’g. Tr. 254:3-255:10.)
18
The protracted litigation history relating to the three bonded projects—including two
separate lawsuits, one of which was initiated by the MES Defendants—is a key factor in the
Court’s assessment of the reasonableness of the approximately five million dollars being claimed
by Safeco in attorneys’ fees.
Another factor the Court has considered is that, despite the
extraordinarily protracted nature of the litigation and the massive amounts of billing records
generated as a result, Safeco has not even requested attorneys’ fees or costs in connection with the
preparation of its fee application, even though this Circuit permits it to do so. See Baird v. Boies,
Schiller & Flexner LLP, 219 F. Supp. 2d 510, 525 (S.D.N.Y.2002) (“[T]he fee application is a
necessary part of the award of attorneys’ fees.”) (internal quotation marks and citation omitted).
Watt Tieder has also made discretionary adjustments to reduce its total fee request by $115,951.97,
by lowering the rates of paralegals and project assistants. (Safeco Fee App., at 6, 13-14.) Farber
Brocks similarly reduced its fees by $3,248.00. (Id. at 6.)
As previously discussed, for purposes of its fee application, Safeco has parsed over 10,000
billing entries and categorized them into eight “matters”. The Court addresses each of these billing
matters in turn.
3.
Matters One, Two, and Three: Pyro Bond Demand (MES Only), HEPFF
Bond Demand (MES and Hirani Defendants), and ERDLF Bond Demand
(MES Only)
a)
The Pyro Project (MES Defendants Only)15
On March 5, 2008, the Corps terminated MES on the Pyro Project and shortly thereafter
made a performance bond demand against Safeco. Safeco retained Watt Tieder to provide advice
and assistance in responding to the Pyro bond demand and “to protect and preserve Safeco’s rights
References to “(MES Defendants Only)” indicate that Safeco is not seeking to hold the
Hirani Defendants jointly and severally liable for these fees.
15
19
as against both the Corps and the MES Indemnitors.” (Id. at 21.) Watt Tieder evaluated project
records, analyzed alternative takeover proposals and options, prepared multiple drafts of the
Takeover Agreement, negotiated Perini’s completion contract, and investigated possible claims
against the Corps, among other tasks. (Id. at 21-22.) Watt Tieder expended 1001.5 hours in legal
services with respect to the Pyro matter, with total billings of $282,757.50, and seeks this amount
from MES. (Id. at 22.)
b)
The HEPFF Project (MES and Hirani Defendants)
On November 4, 2008, the Corps terminated MES and Hirani on the HEPFF project and,
on the same day, made a demand on Safeco’s performance bond. In response, Watt Tieder
unsuccessfully attempted to negotiate a Memorandum of Understanding between Safeco, the
Corps, MES, and Hirani. Watt Tieder also evaluated project records, negotiated takeover
agreements, hired experts on project completion, and negotiated ratification agreements. (Id. at
23.) Watt Tieder expended 977.2 hours in legal services with respect to the HEPFF matter with
total billings of $315,748.50, and seeks this amount from MES and Hirani Defendants. (Id.)
c)
The ERDLF Project (MES Defendants Only)
On December 22, 2008, the Corps terminated MES on the ERDLF project and on the same
day made a demand on Safeco’s performance bond. Watt Tieder analyzed the grounds for the
default, reviewed and produced documents, and negotiated a settlement with the Corps. (Id. at 2425.).
Watt Tieder prepared a report to Safeco detailing its bond defenses, the risks of
nonperformance, and recommendations for an overall strategy in response to MES’s default. Watt
Tieder expended 848.2 hours in legal services with respect to the ERDLF matter, with total billings
of $241,341, and seeks this amount from MES. (Id. at 25.)
20
d)
Safeco’s Fee Request for the Bonded Projects
The Hirani Defendants argue that they should have to pay significantly fewer fees in Matter
Two (relating to the HEPFF project), because Safeco did not itemize its fees, so as to permit the
segregation of fees generated solely in connection with the HEPFF project from those generated
by the Pyro and ERDLF projects—an argument they repeat throughout their response to the fee
application. (See, e.g., Hirani Opp’n, at 12 (“If Watt Tieder could figure out which specific charges
related to the HEPFF Project, those figures would have been provided in the Fee Application.”).)
For their part, the MES Defendants argue that Safeco “made no specific and precise articulation”
to show that its fees relating to the bonded projects were reasonable. (MES Opp’n, at 10.) The
Court rejects these arguments for two reasons.
First, in Matters One, Two, and Three, Safeco does exactly what the Hirani Defendants
accuses Safeco of not doing, i.e., breaking down the fees by project and only assessing those fees
generated in connection with the HEPFF project (Matter Two) to the Hirani Defendants. Indeed,
Watt Tieder made a good faith effort to open new matter numbers to segregate the HEPFF billings,
which pertained to both Hirani and MES, from those on the Pyro and ERDLF projects, which
pertained only to MES.16
Second, the fees Safeco seeks relating to the termination of the Hirani Defendants on the
HEPFF project and MES on all three projects, as well as the resulting performance bond demands
on Safeco, are reasonable. At the January 2018 hearing, Ms. Katsantonis testified that most of
these fees had to do “specifically related to the default terminations of those contracts” of these
multiple-million-dollar projects. (Hr’g. Tr, at 241:6-241:17.) Watt Tieder performed an extensive
16
In this regard, the Court notes that Watt Tieder reallocated fees overall by project post
hoc, reducing the amount owed by the Hirani Defendants from $7 million to $3.7 million. (Hr’g.
Tr, at 38:6-13; 163:5-16.)
21
array of services for Safeco in connection with the terminations, including negotiating agreements
between Safeco and the Corps, hiring consultants, developing alternative takeover options, and
preparing for litigation. (See Safeco App., at 21-25.)
Given the scope, complexity, and time
pressures of the work necessitated by the defaults on each of the three performance bonds, the
Court does not find that the amounts billed by Watt Tieder for these services are unreasonable.
See Reiter, 2007 WL 2775144, at *13 (court need not “set forth item-by-item findings concerning
what may be countless objections to individual billing items”).
4.
Matter Four: Indemnity Litigation (MES and Hirani Defendants)
As explained by Safeco in its fee application and at the hearing, and as reflected in the
billing records provided to the Court, the “overwhelming majority” of legal fees and costs in
Safeco’s fee application relate to Matter Four—the indemnity litigation. (Safeco Fee App., at 26.)
Watt Tieder billed Safeco a total of $3,460,000 for services provided under Matter Four, which
contained over 7,000 invoices. In total, Watt Tieder invoiced 13,048.30 hours of attorney,
paralegal, and project assistant time, over the course of more than eight years, in connection with
these litigation services.
At the January 2018 hearing, MES Defendants’ expert Steven Tasher testified that Safeco’s
surety counsel, John O’Donnell, could have taken “a number of measures” to deal with escalating
fees resulting from the contentious litigation, but did not do so. (Hr’g. Tr. at 440:9-440:15.) Tasher
explained that although his ability to assess the invoices was “compromised” because of redactions
(Id. at 449:9-14), he was still able to identify significant problems, including vague billing, blockbilling, top heavy administration, and other unnecessary expenses. (Id. at 450:9-453:8.) Similarly,
Hirani Defendants’ expert Laura Johnson identified a number of billing categories that she deemed
problematic, including vague entries and block-billing. She testified that Watt Tieders’ block-
22
billing mixes “potentially not billable” entries with billable ones. (Id. at 508:3-508:10.) Johnson
also opined that the billing descriptions were vague and that they unfairly lumped Hirani in with
MES, noting that there was no reduction to “matter four by Watt, Tieder for non-HEPFF related
work, even though there were specific entries within those bills that mentioned other projects, and
entries that also made no mentions to HEPFF.” (Id. at 523:20-523:24.) Johnson concluded that
the lack of segregation between projects should result in a fee reduction because Watt Tieder “was
aware at the outset that this was an indemnity lawsuit and that they would be seeking legal fees
from two separate parties on three projects, two separate indemnity agreements . . . knowing that
down the line they were going to be seeking legal fees from separate parties. So here . . . that
wasn’t done.” (Id. at 524:13-524:25.)
In response, Safeco makes three primary arguments. First, Safeco maintains that the large
amount of attorneys’ fees was the direct result of the extraordinarily protracted nature of the
indemnity litigation. Safeco states that this indemnity action, “over its eight-year history involved
two separate lawsuits, before two different federal district courts, no less than four separate
appellate actions before the Second Circuit, and over 1,200 docket entries, including numerous
dispositive motions, contempt proceedings and evidentiary hearings.” (Safeco Reply, Dkt. 510, at
41.)
Second, Safeco argues that nearly all of the issues litigated as part of the indemnity lawsuits
were common to the three bonded projects, such that, even if there had only been litigation over
the HEPFF project, the same work would have been necessary. (Hr’g. Tr. at 244:12-244:17.) And
because both MES and Hirani are responsible under the Agreements for all expenses, including
attorneys’ fees, arising out of the issuance of the performance bond, if an indemnity-related issue
was, or would had to have been litigated, in connection with the HEPFF bond, both the MES and
23
Hirani Defendants are equally and fully responsible for the fees incurred in connection with
litigating all of those issues. Relatedly, Safeco argues that because the MES Action challenged
Safeco’s execution of the three performance bonds, including the one for HEPFF project, and
mirrored the defense in this action, the work that Watt Tieder performed in defending the MES
Action was indistinguishable from the work it performed in pursuing the instant action.
Third, Safeco argues that the HEPFF project, which involved both MES and Hirani, was
the “largest, most disputed and most costly to Safeco of the three Projects.” (Safeco Reply, at 19.)
MES and Hirani Defendants each had separate counsel and “submitted separate pleadings,
motions, arguments, appeals and discovery requests and responses.” (Id. at 20.) Watt Tieder was
required to respond to all of these motions, as well as “defend[] two sets of
counterclaims/affirmative defenses, respond[] to two sets of document requests, tak[e] depositions
of representatives of two joint venture partners, and litigat[e] two separate summary judgment
motions.” (Id.). Safeco argues that, as a result, it was unable to distinguish its billing practices to
reflect time spent dealing with specific Defendants or projects. At the January 2018 hearing, Ms.
Katsantonis testified: “If you actually look at the billings, there was much work that you couldn’t
segregate. . . . If I was preparing a motion to dismiss those claims, you can’t segregate it into each.
But if I was doing the affidavit of Ron Getsch or preparing an affidavit for Dave Pikulin, then you
could segregate those costs. So, to the best of our abilities, we tried to do that.” (Hr’g. Tr. at
244:12-244:17.)
As a general matter, the Court finds that the fees requested by Safeco are reasonable for
the three reasons it articulates. First, the indemnity litigation was long and extraordinarily
contentious, spanning over eight years. The docket entries in this action alone number over 1,200.
Second, as to the Hirani Defendants, the Court agrees with Safeco that due to the identity of issues
24
being litigated in this case and the MES Action, it was reasonable for Safeco’s counsel not to
separate the fees as to the MES and Hirani Defendants or as to the different projects for work it
performed on issues common to both cases. The Court also finds that Safeco’s counsel made a
good faith effort to segregate fees that were not common to the two cases. Third, the HEPFF
project was the largest of the three projects and its failure spurred an enormous amount of
litigation, much of it driven by Defendants’ litigation strategy and repeated non-compliance with
court orders, which, inter alia, resulted in findings of contempt and the imposition of sanctions.
In addition, the Court rejects the defense experts’ conclusions that a fee reduction is
warranted based on the allegedly deficient billing practices of Safeco’s counsel, such as vague
entries, billing for simple clerical tasks, general overstaffing, duplicative billing, and block-billing,
or on Safeco’s alleged failure to contain its litigation expenses. To the extent Safeco’s counsel’s
fee records were not perfectly maintained, the Court does not find that the deficient entries were
excessive or that they impair the Court’s ability to assess the reasonableness of the fees and hours
billed by Safeco’s counsel, especially given the Court’s extensive familiarity with the indemnity
litigation. See Reiter, 2007 WL 2775144, at *13 (“[A] district court is not required to set forth
item-by-item findings concerning what may be countless objections to individual billing
items[.]”); Molefi, 2007 WL 538547, at *7 (noting that, as a general rule, block-billing is “not
prohibited”).
Indeed, this is a case where the defense’s approach of poring over 10,000 billing entries to
identify inconsequential instances of deficient record-keeping, and pointing out Safeco’s less than
ideal outside counsel management practices, misses the proverbial forest for the trees.17 (See e.g.,
17
The Court notes that Laura Johnson has spent her entire career reviewing legal billing,
but has not handled a case of this magnitude as a trial lawyer. (Hr’g. Tr. 528:14-529:23.) The
Court, therefore, finds that Johnson lacks a sufficient base of knowledge, experience, or expertise
25
Johnson Report, at 3.) (“The block billing entries obscure the time spent on each discrete task
making it impossible to determine if the time spent was reasonable. I recommend that these entries
be reduced by 20%.”).) In sum and for the reasons discussed in sections (a)-(i) below, the Court
finds that the approximately three million dollars in attorneys’ fees sought by Safeco in connection
with the exceedingly prolonged and contentious multi-million-dollar indemnity litigation—fueled
in large measure by Defendants’ tactics and recalcitrance—are reasonable.
In its fee application, Safeco itemizes its indemnity litigation fees by nine subcategories,
which the Court discusses individually in sections (a) through (i) below.
a)
Complaint-Related Services
Safeco states that Watt Tieder billed $40,000 for time spent drafting the complaint, as well
as reviewing contractual agreements, project correspondence, and possible litigation strategies.
Moreover, Watt Tieder prepared for Defendants to sue, which Defendants had been “threatening”
to do for more than a year before Safeco initiated the lawsuit. (Safeco Reply, at 43.) Defendants
argue that “there is no discernible reason” why a complaint in a “straightforward indemnity action”
should have taken over 130 hours to prepare. (See, e.g., Hirani Opp’n, at 16.) Yet the Court
observes that Defendants do not seem to appreciate that when a complaint is filed, attorneys have
more to do than drafting. The complicated and time-consuming litigation that ensued was much
more than a straight-forward indemnity action. As previously discussed, it involved suing over
the execution of performance bonds for three separate multi-million-dollar construction projects.
In its fee application and at the hearing, Safeco offered a detailed description of the work
performed by Watt Tieder in preparation for filing the lawsuit, which went beyond simply drafting
with respect to the amount of time reasonably required to carry out certain functions arising in
complex litigation, such as preparing and drafting complicated motions, hearings, or oral
argument.
26
the complaint. (Safeco Fee App., at 27-28.) The Court finds that the $40,000 in complaint-related
fees sought by Safeco is reasonable.
b)
Summary Judgment Motion Regarding Collateral Security
Safeco incurred fees of approximately $100,000, for 345 hours billed, in connection with
its summary judgment motion regarding the requirement that Defendants post collateral security.
Safeco justified its fees by explaining that the litigation involved “two sets of extremely litigious
defendants.” (Safeco Reply, at 43.) Safeco alleged that summary judgment involved multiple
rounds of pre-motion and full motion briefings. (Id.) Defendants argue that these briefings
“involved no complex issues” and the subject matter “was right in Watt Tieder’s wheelhouse.”
(Hirani Opp’n, at 17.) The Court finds that Defendants over-simplify the amount of work that
Watt Tieder put into their summary judgment briefing. As recognized throughout this Order, this
litigation was hotly contested and lasted more than eight years. Safeco filed a motion for partial
summary judgment, which Judge Ross granted in a twenty-nine page order (see Dkt. 80), and then
filed a collateral security motion for summary judgment to further brief the amount of collateral
that Defendants should be required to post. (Safeco Fee App., at 28.) This briefing involved
responding to Defendants’ pre-motion letters, researching and drafting the motions for summary
judgment, compiling affidavits and exhibits, replying to oppositions, and responding to requests
for oral argument. (Id.) These motions and their related submissions totaled hundreds of pages
(See e.g., Dkt. 64.) The Court finds Safeco’s fee reasonable.
c)
Enforcement of Collateral Security Orders
Safeco incurred $1,490,000 in fees related to its attempts to enforce the Court’s collateral
security orders. Safeco argues that obtaining Defendants’ compliance with their Court-ordered
obligation to provide collateral security was difficult and drove up litigation costs: “Defendants
27
could have easily avoided all of the costs in this category simply by complying with the Court’s
orders back in 2010.” (Safeco Reply, at 44.) Instead, an additional seven years of litigation ensued
after Defendants were ordered, but refused, to post collateral security, during which time Watt
Tieder was required to continuously pursue Safeco for its collateral security. Defendants counter
that this fee is excessive because Watt Tieder was dealing with matters with which it had no
experience, and that this lack of experience merits a fee reduction. (See Hirani Opp’n, at 18.)
The Court notes that all of the fees in this category were driven by Defendants’ decisions
and actions. Defendants have made hundreds of filings with this Court and others, including
counter-claims, motions for reconsideration, and appeals, all relating to the requirement that they
post collateral security as ordered by Judge Ross in 2010. At the same time, Defendants have not
paid any money, to date, to satisfy their obligation to provide collateral, despite numerous court
orders requiring them to do so. Safeco incurred substantial legal fees in enforcing the collateral
security orders, including Defendants’ continuous refusal to comply with Court-ordered
obligations. In cases like these, courts have found large fees reasonable where one party refuses
to comply with court orders. See Telenor Mobile Comm’s. AS v. Storm LLC, No. 07-CV-6929,
2009 WL 585968 at *1 (S.D.N.Y. Mar. 9, 2009) (granting a fee application for $2,487,853.24
incurred from litigation involving a contempt proceeding and noting defendant’s “determined
effort . . . to frustrate their contractual obligations to [plaintiff] by willful noncompliance”). The
Court agrees with Safeco that “Defendants’ continuing contumacy, alone, caused such fees.”
(Safeco Reply, at 44.)
In its fee application, Safeco breaks down the fees it incurred relating to enforcement of
the collateral security against Defendants into five sub-categories. The Court discusses these subcategories individually.
28
Appeals to Second Circuit: Safeco incurred approximately $300,000 in fees related to two
separate appeals filed by Defendants. Defendants’ first appeal, Safeco Insurance Co. v. M.E.S.
Inc., No. 10-2269, challenged Judge Ross’s May 19, 2010 order granting Safeco’s right to
collateral security. (Dkt. 80, at 29.)
A second appeal relating to Safeco’s collateral security,
Safeco Insurance Co. v. M.E.S. Inc., No. 10-5203, followed the Court’s determination of the
collateral security amount. Defendants appealed Judge Ross’s November 22, 2010 Order finding
that Safeco was entitled to $6,614,634.41 in collateral security from the MES Defendants and
$4,960,067.44 in collateral security from the Hirani Defendants. (Dkt. 121.) While Defendants’
first appeal was dismissed on jurisdictional grounds, their second one required extensive briefing
on the merits. (Safeco Fee App., at 30.) Defendants then sought reconsideration of the Circuit’s
denial of the second appeal, which was, in turn, denied. In addition to briefing-related fees, Safeco
requests fees for several status conferences during the pendency of the appeal. (Id. at 31.)
The Hirani Defendants contend that the appeals were not complex in nature and that Watt
Tieder’s fees are, therefore, excessive. (Hirani Opp’n, at 19.) The Court disagrees, and finds that
the fees billed by Watt Tieder to litigate the two appeals are not excessive when compared to other
awards in this Circuit for fees incurred on appeal. See, e.g., Litton Systems, Inc. v. American Tel.
& Tel. Co., 613 F.Supp. 824, 833 (S.D.N.Y. 1985) (approving $1,496,564 in fees reasonably
incurred on appeal in a civil case with partners’ rates of $125–$220, associates’ rates of $75–$115,
and paralegals’ rates of $18 to $59).
In both appeals, Safeco reviewed and analyzed the
Defendants’ grounds for appeals, researched issues related to Safeco’s defense, drafted the
appellate briefs, and participated in status conferences during the appeal process. In Safeco
Insurance Co. v. M.E.S. Inc., No. 10-2269, Safeco filed numerous motions, including a motion to
dismiss Defendant MES’s appeal for lack of appellate jurisdiction; Safeco eventually prevailed on
29
this motion and the Second Circuit dismissed the case. Similarly, in Safeco Insurance Co. v.
M.E.S. Inc., No. 10-5203, Safeco filed multiple briefs and won their appeal. The Second Circuit
also denied MES’s request for rehearing and rehearing en banc.
Indeed, if anything, the appeal-
related fees being claimed by Safeco seem relatively low, given the complexity of the factual
record and legal issues.
Collateral Security Discovery & Contempt: Safeco incurred approximately $790,000 in
fees related to collateral security discovery and contempt motions. Safeco explains that the fees
were driven entirely by Defendants’ actions, including their refusal to post collateral security as
ordered by Judge Ross in November 22, 2010 and their efforts to conceal, shield, and dissipate
assets that should have been used to post the court-ordered security. (Safeco Fee App., at 34.) The
Hirani Defendants argue that this fee request is excessive because “Watt Tieder billed more than
twice the dollar amount and at least quadruple the number of hours that competent firms spend on
the entirety of litigations that go to trial.” (Hirani Opp’n, at 20.) In support of this argument, the
Hirani Defendants assert that Watt Tieder “clearly lacked experience” and “had no apparent
background” in debt collection or creditors’ rights, and that this lack of expertise resulted in
unnecessary and excessive work and fees. (Id. at 20.) The Court strongly disagrees for two
reasons.
First, the Hirani Defendants submit no evidence to support their assertion that Watt Tieder,
a firm with over fifty lawyers and offices in multiple cities, lacked the necessary expertise in debt
collection, especially in the context of enforcing a collateral security order. For example, they do
not identify any tasks that Watt Tieder could have performed more efficiently or in less time as a
result of its purported inexperience.
30
Second, the Hirani Defendants completely ignore Defendants’ role in ratcheting up the fees
that were necessarily incurred to enforce the collateral security and address Defendants’ noncompliance. This was not a run-of-the-mill debt collection action; rather, Defendants turned it into
a seven-year cat-and-mouse pursuit, with Defendants thwarting Safeco’s efforts to compel
Defendants’ compliance with court orders at every turn through vexatious litigation. That this
endeavor took seven years and hundreds of thousands of dollars is not due to Watt Tieder’s lack
of experience, but to Defendants’ contumacious refusal to obey lawful court orders. (See, e.g.,
Report and Recommendation re Motion for Contempt Sanctions Against MES Defendants, Dkt.
313; Report and Recommendation re Motion for Contempt Sanctions Against Hirani Defendants,
Dkt. 314; Minute Order from 7/23/14, Dkt. 321 (adopting Magistrate Judge Scanlon’s R&R
finding MES and Hirani Defendants in contempt and discussing their non-compliance)).
Had
Defendants complied with any of their obligations to post collateral security, Safeco would not
have incurred any of the fees that Defendants now complain about.
The Court, therefore, finds that the fees claimed by Safeco in connection with collateral
security discovery and contempt motions are reasonable.
Post-Contempt Hearing Briefing: Safeco incurred approximately $50,000 in fees related
to the post-contempt hearing briefing. Safeco explains that these fees were incurred in response
to the Court seeking briefing on the supplemental materials submitted by Defendants and the scope
of sanctions against Defendants. (Safeco Fee App., at 34-35.) The Hirani Defendants object to
these fees, arguing that Watt Tieder billed an excessive amount for “four (4) legal briefs (dual
initial briefs and replies) that, in large part, simply regurgitated arguments that had been made to
Magistrate Judge Scanlon when the contempt motions were first filed.” (Hirani Opp’n, at 21.)
The Court again notes that the only reason the parties had to file contempt motions was because
31
Defendants flouted their responsibility to pay collateral security. Furthermore, a comparison of
Safeco’s initial filings to Judge Scanlon and the subsequent briefs and replies demonstrates that
Watt Tieder did more than “regurgitate” its original arguments. (Compare Dkts. 327, 328 to Dkts.
333, 334.) The Court, therefore, finds the fees incurred by Safeco in connection with postcontempt hearing briefing are reasonable.
Continued Efforts to Enforce Court’s Orders: Safeco incurred $75,000 in fees relating to
its continued efforts to enforce the Court’s orders. Safeco explains that these fees resulted from
the need to investigate Defendants’ compliance with the collateral security orders, including
“potentially improper or fraudulent transfers of their assets.” (Safeco Fee App., at 35.) Defendants
argue that this category is “duplicative of the very same document review purportedly undertaken
by Watt Tieder in connection with the contempt proceedings.” (Hirani Opp’n, at 21.) The Court
disagrees. Investigation and litigation over Defendants’ efforts to conceal or dissipate assets that
should be, or should have been, used toward obtaining collateral security constituted a discreet
subset of work performed by Watt Tieder. (See, e.g., Dkt. 465, at 4) (noting that “in addition to
the monthly loans from his mother, Makhoul has been receiving near-monthly deposits of between
$2,500 to $6,000 since August 2016 from an account purportedly held by Makhoul’s brother, but
as to which Makhoul appears to have an interest”).) Following the Court’s contempt rulings and
again after the Court’s restraint of Defendants’ assets, Safeco was forced to litigate further over
Defendants excessive personal expenditures and dissipation of funds that they should have been
using to pay collateral. (See, e.g., Dkts. 470, 471, 472, ECF Entry 7/11/2017, ECF Entry
7/13/2017.) The Court, therefore, finds that the fees incurred by Safeco in connection with its
continuing efforts to enforce the rulings of this Court are reasonable.
32
Third Party Discovery Efforts (MES Defendants Only): Safeco incurred $275,000 in fees
relating to third-party discovery efforts in litigating against MES. Safeco notes that it was
necessary to depose third parties, including the indemnitors of the Defendants. Safeco stated that
it sought discovery from individuals and limited liability companies related to at least eleven MES
Indemnitors, including but not limited to: Anthony Dalleggio; Lea Dalleggio; Johnny Makhoul;
Fidelity Seal, LLC; Cherry Hill Acquisitions, LLC; Defined Alliance, LLC; Mark Zawinsy; Marta
Zawinsy; Bernard Khadra; Lew Saling, Jr.; and Largime Duka. (Safeco Fee App., at 36.) MES,
in response, sought its own discovery, and filed multiple motions to compel. Despite MES’s own
role in driving up litigation costs, the MES Defendants argue that these fees are excessive. The
Court rejects this argument, finding instead that, as Safeco argues, Defendants created a “long and
protracted battle.” (Id.) Defendants fought Watt Tieder at every turn, refusing to produce
documents and forcing Watt Tieder to prepare for hearings on motions for sanctions. (Id. at 3637.) Seemingly simple questions of discovery became complicated and expensive endeavors
requiring many hours of motions practice. The Court, therefore, finds that the fees incurred by
Safeco in connection with third-party discovery relating to the MES Defendants’ indemnitors are
reasonable.
d)
Response to Defendants’ Bad Faith Allegations
As part of the indemnity litigation, Matter Four, Safeco requests $460,000 in attorneys’
fees relating to its responses to Defendants’ allegations of bad faith by Safeco in connection with
the Agreements. The Hirani Defendants contend that Watt Tieder billed far too much in this subcategory. (Hirani Opp’n, at 22-23.) However, the fees in this sub-category are well-documented
in Safeco’s Fee Application and show work in connection with nearly sixty separate pleadings, as
well as conferences, hearings, research issues, dispositive motions, and other legal services, all
33
relating to responding to Defendants’ $43-million bad faith claim. (Safeco Fee App., at 37-39.)
Based on the detailed billing records and affidavits regarding these fees, the Court finds them to
be reasonable. See Reiter, 2007 WL 2775144, at *13.
e)
General Discovery Efforts
As part of the indemnity litigation, Safeco also requests $960,000 for 3,048 hours spent on
general discovery in this case. Defendants oppose this request, noting that “[e]ven in cases far
more complex than this, the time spent on discovery is often far less than what is alleged here.”
(Hirani Opp’n, at 23-24.) However, as discussed, this case was litigated over the course of eight
years, involved the contentious execution of multi-million dollar performance bonds, and required
an enormous amount of discovery. Safeco issued interrogatories and document requests to each
of the Defendants, took or defended over a dozen depositions, responded to interrogatories and
document requests, and responded to pre-motion letters. (Safeco Fee App., at 40.) Most of this
discovery focused on the investigations of Defendants’ allegations of bad faith and preserving
privilege for Safeco’s non-testifying experts, Cashin, Spinelli, and Ferretti LLC and Perini
Corporation. (Id.) Safeco reviewed and analyzed documents from both experts and prepared nonprivileged documents for production. (Id.) The final privilege logs contained a total of 1,103
privilege entries, each of which had to be supported by an affidavit from a Safeco executive
explaining why the material was privileged.18 (Id.)
The Court finds that the hours and fees sought by Safeco for this extensive amount of
general discovery are reasonable. Rand-Whitney Containerboard v. Town of Montville, No. 3:96-
To the extent that the Hirani Defendants argue that Safeco’s discovery review and
privilege log preparation involved unnecessarily duplicative work by Watt Tieder partners and
associates, the Court disagrees. These tasks inherently require layers of review, especially where
the partners are the ones primarily communicating with the Court. The Court further notes that
much of the discovery related tasks stemmed from the HEPFF project.
18
34
CV-412, 2006 WL 2839236 at *2, 28 (D.Conn. Sept. 5, 2006) (approving attorneys’ fees of
$2,668,690 from litigation lasting over ten years and involving “voluminous” discovery).
f)
Cross-Motions for Summary Judgment
As part of the indemnity litigation, Safeco requests $300,000 for its work on cross-motions
for summary judgment.19 Defendants state that the amount of time spent on these motions is
“absolutely unheard of in this Circuit.” (Hirani Opp’n, at 24.) Yet, even Defendants admit that
these were substantive motions addressing complex issues. (Id.) Safeco notes that it spent time
on numerous tasks, including writing and responding to pre-motion letters, drafting Safeco’s
motion for summary judgment and compiling supporting exhibits, researching and responding to
the Hirani Defendants’ and MES Defendants’ motions and statements of fact, and filing necessary
replies. Safeco notes that at summary judgment, Defendants “submitted two sets of lengthy initial
briefings, accompanied by hundreds of pages of affidavits and approximately 300 documentary
exhibits.” (Safeco Reply, at 47 (citing Dkt. Nos. 399, 422, 424, 425).) Defendants also raised new
factual issues in the cross-summary judgment briefing, which necessitated even more briefing. (Id.
at 47.) The time and effort required to address all of these papers was significant. Furthermore,
these motions formed the core of the liability finding in this matter. The Court’s decision on the
parties’ cross-motions was 76 pages in length. (See Dkt. 442.)
The Court, therefore, finds that the fees sought in this sub-category are reasonable.
These cross-summary judgment motions were different from, and came after, Safeco’s
summary judgment motion relating to collateral security, discussed supra, filed before Judge Ross
in 2010. These cross-summary judgment motions, which were filed in April 2016, related to
Safeco’s entitlement to damages under the Agreements.
19
35
g)
General Case Management and Strategy
Safeco requests $60,000 in attorneys’ fees that related to status conferences, pro hac vice
motions, and other miscellaneous matters. Defendants argue that these fees should be written off
because they amount to nothing more than “amorphous internal correspondence and conferences.”
(Hirani Opp’n, at 24-25.) However, the Court finds that during the eight-plus years of litigation
in this case, Watt Tieder undoubtedly worked on miscellaneous matters that did not easily fit into
the other categories. Tasks like preparing for and attending status conferences and filing pro hac
vice motions are necessary during litigation. The Court finds that these fees to be justified and
reasonable.
h)
Settlement Efforts
Safeco requests $35,000 for previous efforts to settle the case. Safeco notes that
Defendants’ “obligation to indemnify Safeco for all loss incurred does not distinguish between
successful and unsuccessful efforts.” (Safeco Reply, at 48.) Defendants argue that the settlement
hours are excessive, even allowing for a one-day mediation to settle part of the case. (Hirani
Opp’n, at 25.) The Hirani Defendants argue that partners billed too many hours, noting that “Watt
Tieder is claiming to have spent the billing equivalent of about 111 partner hours attempting to
settle this case.” (Id.) MES Defendants’ expert Steven Tasher also argues that Watt Tieder
engaged in “task-inappropriate work performed by partners that should have been delegated to
lower-billing attorneys,” which resulted in a “top-heavy administration of the workload.” (Tasher
Report, at 17.) Tasher claimed that 77% of Watt Tieder’s total fees were performed by senior
attorneys, i.e., fifth year associates to senior partners. (Id. at 28.) The Court does not agree that
Watt Tieder used its partners to do associate-level work, especially as it relates to settlement.
Indeed, settlement is one area where the work of associates is no substitute for the experience and
36
knowledge of the partners. Furthermore, the Court finds that the expenditure of 111 partner hours,
in total, to attempt to reach settlement in a multimillion dollar litigation involving three separate
large-scale construction projects was reasonable. Safeco got good value from its attorneys given
the long history of this case and the partners’ artificially suppressed hourly rate.
The Court, therefore, finds that the fees being claimed in connection with settlement efforts
are reasonable.
i)
Damages Hearing Preparation in April 2017
Safeco incurred $15,000 in fees in preparing for the damages hearing in April 2017.
(Safeco Fee App., at 44.) The Hirani Defendants “do not find such fees to be unreasonable in
amount.” (Hirani Opp’n, at 25.) The Court agrees and finds these fees reasonable.
5.
Matter Five: Power with Prestige Sub-Contract (MES Defendants Only)
Safeco requests $34,230 in fees relating to the Power with Prestige sub-contract. Subcontractor Power with Prestige sought payment under Safeco’s performance bond for the Pyro and
ERDLF projects. The MES Defendants do not address the Power with Prestige Contract, or any
of Matters Five through Eight, in their opposition papers.
Power with Prestige sued Safeco and MES seeking payment under Safeco’s performance
bond under both projects in the District of New Jersey. Safeco filed a motion to dismiss, which
was granted with prejudice. (Safeco Fee App., at 45.) Watt Tieder spent 118.5 hours divided
between partners and associates in briefing and arguing the motion. The Court finds the amount
of time spent on this task and the resulting fees reasonable.
6.
Matter Six: Development and Pursuit of Indemnitors’ Assigned Claims
(MES and Hirani Defendants)
Safeco requests $277,216 in fees relating to the development and pursuit of MES and
Hirani’s assigned claims from the bonded projects. Safeco explains that the MES and Hirani
37
Defendants raised dozens of claims against the Corps related to the three projects: “M.E.S. filed
thirty-five appeals to the Armed Services Board of Contract Appeals (“ASBCA”) relating to the
Pyro Contract (the “Pyro Claims”); Hirani/MES filed nine appeals relating to the HEPFF contract;
and MES filed twenty-two appeals to the ASBCA relating to the ERDLF Contract.” (Id. at 4546.) Ms. Katsantonis testified that she opened a new matter related to these claims, but had to hire
outside consultants to help Watt Tieder “review and analyze these claims and determine what
claims to recertify and include before the ASBCA.” (Hr’g. Tr. 242:16-242:18.) Watt Tieder billed
536.5 hours of partner, associate, and consultant time for this Matter. The Hirani Defendants
object to the fact that Safeco “did not contemporaneously break down its billings by Project for
Matter Nos. 6 and 7.” (Hirani Opp’n, at 12 n. 5.) However, given the number of claims and appeals
that Safeco’s counsel was required to handle and the overlapping nature of this work as between
the three projects, the Court finds the requested fees, including the hiring of the consultant, to be
reasonable.
7.
Matter Seven: Development and Pursuit of Safeco’s Claims against the
Corps (MES and Hirani Defendants)
Safeco incurred $255,968.50 in fees relating to the development and pursuit of its claims
against the Corps. Safeco reached a settlement with the Corps regarding Safeco’s own claims and
the numerous assigned claims relating to the Pyro and HEPFF projects. Safeco had two of its own
claims against the Corps relating to the Pyro and HEPFF projects: one for $8,919,776.77 in excess
completion costs for the HEPFF Project, and a claim in the amount of $2,143,049.98 in excess
completion costs for the Pyro Project. (Safeco Fee App., at 46-47.) Ms. Katsantonis testified that
the settlement resulted in a significant reduction in the indemnity owed by Defendants, some of
which Defendants arguably were not entitled to. (Hr’g. Tr. 243:17-243:23 (“When we ended up
settling with the Corps, it encompassed all of these claims, not MES or Hirani claims. They’re our
38
claims as well. We’ve, nonetheless, in this lawsuit, credited them with every penny we received
from the Corps. But it encompassed all of our claims.”).) Watt Tieder spent 738.8 hours on settling
the multitude of claims against the Corps. The Hirani Defendants again object to the fact that
Safeco “did not contemporaneously break down its billings by Project for Matter Nos. 6 and 7.”
(Hirani Opp’n, at 12, n. 5.) However, as Safeco contends, its successful settlement of the matter
saved all parties, including Defendants, substantial funds. Furthermore, there was undoubtedly
overlap between the work done to settle claims from one project and the work done to settle the
claims for the other two projects, such as preparing for and participating in meetings and telephone
conferences with the Corps. The Court also finds that the number of hours and fees expended on
these efforts was reasonable, especially given the result. Lastly, under the Agreements, Safeco is
allowed to be compensated for what it took to complete the projects.
8.
Matter Eight: Defense of Conspiracy and Bad Faith Claims against Safeco
Executives (MES Defendants Only)
Safeco incurred $36,697.50 in fees in connection with the defense of conspiracy and bad
faith claims against Safeco’s corporate executives in the MES Action. The MES Defendants
brought claims against David Pikulin, Caryn Mohan-Maxfield, and Ron Goetsch, alleging that
these executives tricked MES into relying on Watt Tieder as personal counsel, and otherwise
conspired to precipitate the Indemnitors’ default termination on the bonded projects. (Safeco Fee
App., at 48.) Safeco was successful in defending against these claims. (Id.) Safeco’s counsel
billed 117 hours for this work. The MES Defendants do not address these fees in its opposition
papers. The Court finds that them to be reasonable.
9.
Watt Tieder Out-of-Pocket Expenses (MES and Hirani Defendants)
Watt Tieder incurred $318,254.67 in out-of-pocket expenses, which were paid by Safeco,
in connection with this litigation. According to Safeco’s Fee Application, these expenses include
39
“(i) travel and lodging costs relating to hearings and depositions; (ii) costs in connection with court
reporters and deposition transcripts; (iii) document production and e-discovery costs; (iv) costs in
retaining experts (billed through Watt Tieder) to assist counsel with calculating damages and in
evaluating potential Americans with Disabilities Act violations; and (v) other expenses incidental
and necessary to counsel’s representation of Safeco.”
(Safeco Fee App., at 50.)
Hirani
Defendants’ expert Laura Johnson contests Watt Tieder’s travel costs and billing for administrative
tasks, such as photocopying and clerical work, which should not have been done by attorneys.20
(Johnson Report, at 3-4.) The Court is not persuaded that the occasional billing by attorneys for
administrative tasks renders the claimed expenses unreasonable. The Court, therefore, finds that
Safeco is entitled to recover the full amount of its request for out-of-pocket expenses. Reichman
v. Bonsignore, Brignati & Mazzotta, P.C., 818 F.2d 278, 283 (2d Cir. 1987) (noting that courts
typically award “those reasonable out-of-pocket expenses incurred by the attorney and which are
normally charged fee-paying clients.”).
10.
Farber Brocks Counsel Fees (MES and Hirani Defendants)
Safeco requests $255,710.59 on behalf of its local counsel Farber Brocks. Safeco explains
that Farber Brocks performed important services relating to the litigation between the parties that
took place in the this Court, including providing guidance on local rules and practices, interfacing
with the Court, and dealing with Defendants’ attorneys and Makhoul, in his pro se capacity, who
“often reached out directly to William Brocks, rather than Watt Tieder.” (Safeco Reply, at 49.)
The Hirani Defendants contest this fee, noting that Farber Brock attorneys “have essentially
For example, Johnson recommends multiple reductions on the grounds of “clerical
tasks” ($184 for Matter Two, $78,644.50 for Matter Four, $1,575 for Matter Six, and $5,050.50
for Matter Seven) and “attorney overqualified for task” ($4,797 for Matter Four and $544 for
Matter Six). (Dkt. 505-11, at 3-5.)
20
40
functioned as paralegals or administrative assistants for at least the last 6-7 years of litigation in
the Safeco and MES Actions” and have performed no substantive services. (Hirani Opp’n, at 26.)
The MES Defendants similarly opposed Farber Brocks’s fee, explaining that Farber Brocks did
not show what role it played aside from reviewing documents and engaging in correspondence.
The MES Defendants also argue that there are overlapping fees for the same tasks between Watt
Tieder and Farber Brocks. (MES Opp’n, at 21-22.)
The Court disagrees with Defendants’ characterization and minimization of Farber
Brocks’s role in the litigation. Farber Brocks played a key role as local counsel in a multi-milliondollar lawsuit for out-of-state counsel, who, while experts in surety, were unfamiliar with the
judges and practices in this district. Farber Brocks’s attorneys attended a number of proceedings,
including at critical points in the litigation. At the January 2018 hearing, William Brocks testified,
“I was always there to try to lend my expertise. We’d discuss whatever was being dealt with at the
conference, whether it was contempt hearings that I attended, or something of that nature.” (Hr’g.
Tr. 237:2-237:7.) He was asked to give guidance and advice about local practice in the Eastern
District, including knowledge about the different judges. (Id. at 237:16-237:19.) Furthermore, the
significant amount of time spent by Farber Brocks on some tasks, as with the other fees Safeco
incurred, was necessitated by Defendants’ aggressive litigation posture, which resulted in
unnecessarily protracted litigation. Farber Brocks served as local counsel for almost the entirety
of this litigation and billed $255,710.59 as a result. The Court finds that the hours and fees billed
by Farber Brocks are reasonable.
11.
Torre Lentz Counsel Fees (MES and Hirani Defendants)
Safeco requests $92,683.36 on behalf of Torre Lentz, which served as counsel for Safeco
when it was a third-party defendant in the M.J. Favorito Action. That case arose out of the HEPFF
41
project. Safeco was drawn into the litigation between MES, Hirani, and the subcontractor through
third-party complaints and cross-claims. (Safeco Fee App., at 57-58.) The MES Defendants argue
that the Court has no jurisdiction to allow Torre Lentz to collect in this case since the Court did
not preside over the M.J. Favorito Action, which was filed in the District of New Jersey. (MES
Opp’n, at 23.) The Court disagrees.
The Agreements provide that Defendants will pay reasonable legal fees in connection with
all litigation matters relating to the bonded projects, and the Court in this action has found that
Defendants are liable to Safeco for attorneys’ fees under the Agreements for all such litigation.
The Court also finds that the $92,683.36 billed by Torre Lentz representing Safeco in the M.J.
Favorito Action are reasonable. Because both the MES and Hirani Defendants were involved with
the HEPFF project, they are jointly and severally liable for the legal fees that resulted from the
M.J. Favorito Action.
III.
Damages: Safeco’s Construction Completion Costs
In the Court’s decision granting summary judgment to Safeco on its indemnity claims, the
Court left open one area for further fact-finding based on Defendant Makhoul’s challenge to certain
construction completion costs. (Dkt. 442, at 45 (“[T]he MES Defendants, in their supplemental
briefing, have demonstrated some dispute about the exact amounts of Safeco’s damages—which
will need to be resolved at the upcoming evidentiary hearing on the amount of fees and costs to be
awarded”).) Makhoul, therefore, was permitted to submit supplemental briefing, and present
argument and testify at the January 2018 hearing, about the disputed damages amounts. As set
forth below, the Court does not find that Defendants are entitled to any reduction in the
construction completion costs claimed by Safeco.
42
A.
Defendant Makhoul’s Objections to Safeco’s Damages Claim
Defendant Makhoul contests the amount of construction completion costs being claimed
by Safeco pursuant to the Agreements. For the Pyro project, the MES Defendants point to Perini’s
“exorbitant and unreasonable charges” to complete the project. (Supplemental Affidavit of George
Makhoul (“Makhoul Aff.”), Dkt. 531, at 2.) For the HEPFF project, Makhoul cites Safeco’s
unwillingness to engage the lowest qualified bidder approved and recommended by the Corps to
complete the project, along with “payments for certain subcontractors’ payment bond claims.” (Id.
at 3-4.) For the ERDLF project, Makhoul argues that Safeco made unreasonable payments for
subcontractors’ payment bond claims and failed to credit MES for the value of all work that MES
performed. According to Makhoul, Safeco also unfairly paid Watt Tieder for tasks that the law
firm should not have performed, thereby “demonstrating further Safeco’s unreasonable and
inappropriate conduct.” (Id. at 9.)
As to both the Pyro and HEPFF projects, Makhoul argues that Safeco incurred
unreasonable construction costs attributable to the Corps’s lack of funds (as opposed to MES’s or
Hirani/MES’s deficient performance), along with unnecessary consultants to deal with the delays
corresponding to the lack of funding. (Id. at 4-5.) Makhoul also cites Safeco’s refusal to turn over
subcontractors’ documents that allegedly show excessive construction costs for the Pyro and
HEPFF projects.
(Id. at 6.)
According to Makhoul, Safeco allegedly embarked on “an
unreasonable expenditure spree after entering into disallowed and unreasonable takeover
agreements to complete the Pyro and HEPFF projects.” (Id. at 10.) Makhoul further argues that
“Safeco incurred unreasonable cost [sic] that originated from its decision to voluntarily complete
the two construction projects” even though “no valid Government contracts existed.” (Id.)
Makhoul maintains that Safeco profited from its completion efforts on the projects. (Id. at 8.)
43
Safeco counters that Makhoul’s affidavit, which was submitted by the MES Defendants in
support of these contentions, contains argumentative statements, “expert” opinions already ruled
out by the court, speculation without foundation, and hearsay. (Safeco Response to Makhoul
Affidavit (“Safeco Res.”), Dkt. 533 at 1-2.) Safeco argues that Makhoul also seeks to “re-argue
positions and evidence already submitted in opposition to Safeco’s motion for summary judgment
on entitlement[,]” which the Court has already resolved or rejected. (Id. at 2, 5 (noting that
Makhoul makes “essentially the same arguments” that the Court already ruled would not be heard
at the damages hearing).)
Safeco argues that Makhoul ignores the fact that the Agreements
required Safeco to complete the work under its defaulted contracts and that the Agreements
authorized Safeco to determine the settlement amounts of payment bonds. Furthermore, Safeco
contends that, although the Agreements required Safeco to use the lowest qualified bidder to
complete the work under the defaulted contracts, they do not require Safeco to submit an itemized
statement of loss “in the manner specified by MES.” (Id. at 5.) Safeco also maintains that, despite
Makhoul’s insistence otherwise, Safeco has provided Defendants all of the necessary discovery
material, including subcontractor files and change orders, as detailed in affidavits, summary
judgment papers, and its fee application. (Id. at 8-9; see, e.g., Dkt. No. 438.)
Putting aside Safeco’s arguments about the validity of the affidavit, the Court finds that
there are several problems with Makhoul’s arguments on this topic. First, Makhoul makes
arguments that even his co-Defendants do not share. At the January 2018 hearing, Ms. Katsantonis
noted that Hirani did not contest “at all” the costs under the bonds “as far as the construction costs.”
(Hr’g. Tr., at 22:3-22:8.) Second, as Safeco argues, Makhoul is not entitled to contest the terms
of the Agreements, which expressly give Safeco considerable latitude in making decisions about
project management, construction completion, and legal expenditures, once a project is in default.
44
Third, Makhoul offers nothing more than conclusory statements about Safeco’s completion costs
being unauthorized or excessive. (Id. at 22:24-23:5 (Court noting that Makhoul presented no
substantive discussion about construction costs “other than . . . just saying they shouldn’t get any
of it because it was all done in bad faith.”).) Finally and perhaps most problematically, Makhoul
makes many of the same arguments that he made on summary judgment, which the Court has
already rejected. For example, Makhoul argues that Safeco unfairly realized a profit on the bonded
projects—an argument that the Court dispensed with in its summary judgment decision. (S.J.
Order, Dkt. 442, at 54 (“The MES Defendants argue that Safeco’s bad faith in acting upon the
bonds on the three construction projects at issue can be demonstrated through its alleged pursuit
of profits on each of those contracts. . . . There is no evidence to support this otherwise specious
accusation.”).)
Accordingly, the Court finds that Makhoul has failed to show that any offset to the
approximately $9 million in construction completion and related costs that Safeco incurred as a
result of Defendants’ defaults on the bonded projects is warranted.
B.
Amount of Safeco’s Damages
Safeco has not yet identified the aggregate amount of damages it is owed or seeking. In
connection with summary judgment briefing, Safeco noted that it had sent letters to both MES and
Hirani requesting $13,325,000 in collateral from the MES Defendants and $8,800,000 from the
Hirani Defendants. (Safeco’s 56.1, Dkt. 410-1, at ¶ 74). Safeco later stated in its 56.1 Statement
that its “total unreimbursed out-of-pocket losses resulting from its having issued the Bonds exceed
$14,000,000.00, of which not less than $11,000,000 is attributable to the HEPFF Bonds.” (Id. at
¶ 85.) Safeco also noted that, of this amount, it expected a settlement payment of $6,015,000 from
45
the Corps that had not been paid as of the time it filed its 56.1 statement in February of 2016. (Id.
at ¶ 85 n. 16.)
Accordingly, the Court directs Safeco to identify in writing, by July 3, 2018, the amount
of damages that it is claiming under the surety agreements, including, but not limited to, a
breakdown of specific amounts owed by Defendants, the MES Defendants, and the Hirani
Defendants.
CONCLUSION
For the reasons stated herein, Safeco’s fee application is granted in its entirety and
Defendants’ oppositions to the application are denied in their entirety. The Court finds that the MES
Defendants are liable for $5,570,500.62 in attorneys’ fees and costs, that the Hirani Defendants
are jointly and severally liable for $4,352,639.56 of that amount, and that Defendants are not
entitled to any offset against the construction completion and related costs established by Safeco
in this matter. In light of Defendants’ history of re-litigating every issue in this case, the Court
cautions them against filing reconsideration motions that are not well-considered. All parties are
warned that the filing of a reconsideration motion that the Court finds to be frivolous, e.g., merely
restating arguments already rejected by the Court, could result in the imposition of sanctions. See
Caisse Nationale de Credit Agricole–CNCA, N.Y. Branch v. Valcorp, Inc., 28 F.3d 259, 264 (2d
Cir. 1994)) (affirming imposition of Rule 11 sanction for a frivolous reconsideration motion and
stating that Rule 11 permits sanctions against a litigant who submits a motion that, evaluated
“under an objective standard of reasonableness . . . [has] no chance of success and [makes] no
reasonable argument to extend, modify or reverse the law as it stands.”). Finally, the Court directs
Safeco to identify, by July 3, 2018 the total amount of damages that it is owed under the surety
46
agreements, including amounts owed by Defendants, the MES Defendants, and the Hirani
Defendants.
SO ORDERED.
/s/ Pamela K. Chen
Pamela K. Chen
United States District Judge
Dated: June 8, 2018
Brooklyn, New York
47
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?