Tyco International v. Walsh

Filing 144

OPINION & ORDER granting in part re: 130 MOTION for Judgment on Consequential Damages, Interest, and Attorneys' Fees filed by Tyco International Ltd. Tycois awarded $495,901.00 in consequential damages; $1,958,082.19 in intere st on the Walsh payment; and attorneys' fees totaling $1,204,920.00 disbursement expenses incurred by Gibson Dunn and those incurred by Bartlit Beck except for those associated with New York hotel lodging expenses and airfare. Tyco shall submit a proposed judgment by June 25,2012. (Signed by Judge Denise L. Cote on 6/20/2012) (cd)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------X
:
TYCO INTERNATIONAL LTD.,
:
Plaintiff,
:
:
:
-v:
:
:
FRANK E. WALSH, JR.,
:
Defendant.
:
:
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Appearances:
For Plaintiff:
Brian Emory Pumphrey
McGuireWoods LLP
One James Center
901 East Cary Street
Richmond, VA 23219
Marshall Beil
McGuireWoods LLP
1345 Avenue of the Americas
7th Floor
New York, NY 10105
Charles William McIntyre
McGuire Woods LLP
2001 K Street N.W. Suite 400
Washington, DC 20006
For Defendant:
Michele L. Pahmer
Monica Hanna
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038

02 Civ. 4633 (DLC)
OPINION & ORDER

DENISE COTE, District Judge:
This action, which arises from a dispute concerning a
corporation’s payment of a so-called “finder’s fee” to its lead
outside director for his role in facilitating a merger, is
before this Court on remand from the United States Court of
Appeals for the Second Circuit.

By Opinion and Order of October

20, 2010 (the “2010 Opinion”), following a bench trial on
October 12-13, 2010, this Court denied the claims of plaintiff
Tyco International, Ltd. (“Tyco”) for restitution, breach of
fiduciary duty, conversion, unjust enrichment, constructive
trust, and inducing breach of fiduciary duty.

Tyco Int'l Ltd.

v. Walsh, 751 F. Supp. 2d 606 (S.D.N.Y. 2010).

On January 11,

2012, the Second Circuit reversed and remanded for further
proceedings.

Tyco Int'l Ltd. v. Walsh, 455 F. App'x 55 (2d Cir.

2012).
By motion of March 26, 2012 (the “March 26 Motion”), Tyco
seeks judgment on consequential damages in the amount of
$495,901.00, interest in the amount of $1,958,082.19, and
attorneys’ fees and costs in the amount of $2,003,497.12.

For

the reasons stated below, Tyco’s March 26 Motion is granted in
part.

2

BACKGROUND
The facts of this case are fully described in the 2010
Opinion, Tyco Int'l, 751 F. Supp. 2d at 608-18, familiarity with
which is presumed.

The facts relevant to the issues remanded

are summarized here.
I.

The Acquisition of CIT and the Walsh Payment
Plaintiff Tyco is a Bermuda corporation engaged in

manufacturing and services.

Defendant Walsh served on Tyco’s

Board of Directors (the “Board”) from 1992 to 2002, and was
appointed Lead Director in January 2001.
After Walsh became aware that Tyco was interested in
acquiring a financial services company in late 2000, Walsh
suggested that Tyco consider acquiring CIT Group, Inc. (“CIT”).
Walsh then arranged for a meeting between Tyco’s then-CEO L.
Dennis Kozlowski (“Kozlowski”) and CIT’s former Chief Executive
Albert Gamper, Jr. (“Gamper”), whom Walsh knew.

After this

meeting, Walsh and Kozlowski discussed the possibility that
Walsh would be paid a “finder’s fee” for his services if Tyco
succeeded in acquiring CIT.
Walsh did not discuss his expectation of a fee during
discussions of the CIT transaction with Tyco’s other directors.
At a March 12, 2001 meeting in Bermuda, the Board unanimously
approved the merger.

During this meeting, Kozlowski did not

3

inform the Board that any compensation was owed or would be paid
to Walsh.

Walsh was not present at the meeting.

On March 29, 2001, Walsh, in his capacity as a director of
Tyco, signed a registration statement on Form S-4 that Tyco
filed with the Securities and Exchange Commission (“SEC”).

This

registration statement incorporated by reference the Agreement
and Plan of Merger for Tyco’s acquisition of CIT, in which Tyco
represented that, with the exception of the investment bankers
Lehman Brothers and Goldman, Sachs & Co., “there is no
investment banker, broker, finder or other intermediary that has
been retained by or is authorized to act on behalf of [Tyco] who
might be entitled to any fee or commission from [Tyco] . . . in
connection with the transactions contemplated by this
Agreement.”
During June and July 2001, after the closing of the CIT
transaction, Walsh and Kozlowski further discussed Walsh’s
finder’s fee.

In July, Kozlowski advised Walsh not to discuss

the fee with anyone other than himself and Tyco’s then-Chief
Financial Officer, Mark Swartz (“Swartz”).

Eventually Walsh and

Kozlowski agreed that $10 million would be paid to Walsh
directly and $10 million would be paid to a charity of Walsh’s
choosing.

Walsh designated the Community Foundation of New

Jersey as the charity (the “Community Foundation”), and later
advised the Community Foundation on its investment and
4

distribution of the payment.

Walsh did not inform the Board of

the fee during its discussions of the CIT transaction at a Board
meeting in October 2001.
On December 21, 2001, Walsh filled out a Directors’ and
Officers’ Questionnaire (“D & O Questionnaire”) in which he
disclosed his receipt of the $10 million fee and Tyco’s
contribution of $10 million to the Community Foundation at his
request.

Walsh’s disclosure of the $20 million payment in the D

& O Questionnaire led, eventually, to the disclosure of the
payment to the Board and to the public.

The Board first

discussed the payment at a January 16, 2002 Board huddle.
During the Board huddle, the Board asked Walsh to return the
payment and told him that if he refused, he would not be
renominated to the Board.

Walsh refused to return the payment

and walked out of the meeting.
II.

Tyco’s Defense of the Walsh Payment
Tyco disclosed to the public the $20 million payment in a

January 28, 2002 proxy statement.

The proxy statement stated

that Walsh “was instrumental in bringing about” the CIT
acquisition, and that Tyco paid him $10 million “[f]or his
services” and contributed $10 million to the Community
Foundation.
Following this disclosure, the press and corporategovernance experts were severely critical of the payment to
5

Walsh.

In a number of public statements, however, Tyco defended

the payment.

In a January 29 article in the Wall Street

Journal, for example, Tyco spokeswoman Maryanne Kane was quoted
as saying that Tyco’s Board had decided the Walsh payment was
“appropriate based on the amount of work” that Walsh had done.
Similarly, a vetted and edited January 29 Tyco statement quoted
Kozlowski as saying that the payment had been “fully disclosed”
in Tyco’s proxy statement, that the payment was made because
Walsh was “instrumental in bringing about” the acquisition of
CIT, and “[t]he Board felt that [the] fee was appropriate in
light of Mr. Walsh’s efforts.”
A number of Board members recall being unhappy with this
press coverage of the Walsh payment.

In a telephone

conversation among former Tyco Chief Counsel Mark Belnick
(“Belnick”) and a number of directors, certain directors
expressed “great displeasure” at Tyco’s press statements.

When

Belnick articulated his understanding that the Board had
“ratified” or “approved” the Walsh payment, however, no director
corrected him.

And when Belnick explained the Board’s options,

Richard Bodman (“Bodman”), a Tyco director, expressed his
feeling that “it was a fait accompli, what else could we do.”
In February, Belnick spoke on the telephone with Joshua
Berman (“Berman”), another Tyco director, regarding the Walsh
payment.

Belnick explained that he thought the only reasonable
6

interpretation of the January 28 proxy statement was that the
Board had in fact approved the payment.

Berman denied that that

was what the disclosure meant, however, and stated that he was
“trying to steer a middle course” in which “the Board just
doesn’t ratify, doesn’t not ratify.”
On February 11, with Tyco’s approval, Walsh released a
statement defending the payment to the Wall Street Journal.

In

a February 11 article in Barron’s, Kozlowski was quoted as
stating that the Walsh payment was “inappropriate,” and noting,
“After the situation arose, the board unanimously voted to
change our bylaws so such a situation would never again arise.”
That same month, Belnick requested that Tyco’s outside
counsel Wilmer Cutler Pickering Hale and Dorr LLP (“Wilmer
Cutler”) prepare a chronology describing Tyco’s handling of the
Walsh payment.

On February 19, Meredith Cross at Wilmer Cutler

sent an email to Belnick attaching the chronology and stating
that the “attached chronology shows that various news sources
and the SEC believe that the Tyco board approved the Walsh
payment.”

Belnick subsequently reviewed and revised the

chronology.
At a February 20 board meeting, the Board discussed a
shareholder demand letter regarding the Walsh payment, referred
the matter to its Corporate Governance Committee, and passed a
resolution amending its Bye-Laws.
7

The amendment disallowed

directors from receiving certain kinds of fees like the Walsh
payment.
During this period, Tyco received a number of letters from
shareholders indicating their disapproval of the Walsh payment.
In his response to one such letter, dated March 19, Swartz did
not indicate that Tyco was seeking to recover the Walsh payment
and instead discussed how Walsh had facilitated the CIT
transaction.
On April 2, Tyco responded to an SEC inquiry requesting
that Tyco address the factors that the Board considered in
arriving at the amount of the Walsh payment.

Tyco’s response

did not indicate whether the Board had taken a position on the
payment, and simply listed the factors that Kozlowski had
considered in determining the amount of the payment.

Tyco also

stated that it did not initially disclose the payment because
“we believe that $20 million is not material to our Consolidated
Financial Statements.”
III. Retention of Boies Schiller
On April 29, the Corporate Governance Committee decided to
recommend to the Board that it take action to recover the Walsh
payment.

Shortly thereafter, the Committee retained the law

firm Boies Schiller & Flexner LLP (“Boies Schiller”) to
investigate the Walsh payment and make appropriate corporate
governance recommendations.

The May 17 Bois Schiller retention
8

letter gave the firm a broad mandate, stating that Tyco retained
the firm “in connection with the Committee's review and analysis
of transactions between and among Tyco and its subsidiaries and
certain of Tyco's directors and officers, and any litigation
arising from or relating to that review and analysis . . . .”
Although Belnick initially advised Boies Schiller that Tyco
did not believe that a lawsuit by Tyco against Walsh “was in the
company’s best interest,” Tyco’s position changed in June, after
the Board and Boies Schiller learned, on June 1, that Kozlowski
was being criminally investigated, and Kozlowski resigned on
June 3.

The Board subsequently asked Boies Schiller to

recommend whether litigation should be pursued to recover the
Walsh payment.
IV.

Criminal Proceedings
On December 17, 2002, Walsh pleaded guilty in New York

State court to a violation of General Business Law § 352(c)(6).
Walsh allocuted that at the time the Board was considering the
acquisition of CIT and preparing to vote on the transaction, he
“intentionally did not disclose to any of the members of the
Board, other than Kozlowski and Swartz, that [he] stood to
receive a substantial fee if the transaction was approved.”
also stated to the court that
following the Board's approval [of the CIT merger], a
securities filing was done by Tyco in which the
company omitted to disclose that I was to get a fee.
9

He

That made the filing false. Thereafter, I reached an
agreement with L. Dennis Kozlowski that I would
receive a ten million dollar fee for my services, and
Tyco would further contribute ten million dollars to a
charity recommended by me.
Pursuant to the terms of a plea agreement, Walsh paid Tyco
restitution of $20 million on December 17, 2002.
V.

Procedural History
Tyco filed its complaint in this action on June 17,

2002, asserting claims for restitution, breach of fiduciary
duty, conversion, unjust enrichment, constructive trust,
and inducing breach of fiduciary duty.

Tyco sought

recovery of interest on the Walsh payment, consequential
and punitive damages, and attorneys’ fees and costs.

The

action was pending for many years before the District Court
for the District of New Hampshire as part of multi-district
litigation.
Court.

On April 1, 2010, it was transferred to this

A bench trial was held October 12-13, 2010,

followed by the 2010 Opinion.
The 2010 Opinion determined, inter alia, that Bermuda
substantive law governs Tyco’s breach of fiduciary duty
claim against Walsh and that, under Bermuda law, Walsh
breached his fiduciary duty to Tyco by failing to disclose
and seek Board approval for the $20 million payment.
Tyco Int’l, 751 F. Supp. 2d at 621.

See

The 2010 Opinion

denied Tyco’s claims, however, on the grounds that Tyco’s
10

Bye-Laws permitted the directors to approve a grant of
special compensation to a director, that failure to secure
board approval in advance of paying such compensation could
be cured by later Board approval, and that the Board had
impliedly ratified the Walsh payment through its press
releases, SEC filings, and initial failure to take action
to recover the $20 million.

See id. at 622-24.

The 2010 Opinion also discussed certain rulings that
“would have been made” on damages “had Tyco prevailed on
any of its claims.”

Id. at 627.

The Opinion concluded

that, had Tyco prevailed, it would have been awarded
interest on the $20 million payment from the time of its
receipt by Walsh on June 19, 2001 to the time of its
repayment to Tyco on December 17, 2002 at a rate of 7%, or
$1,958,082.19, as well as “an award of attorney’s fees
under Bermuda law, subject to the Court’s discretion.”

Id.

at 627.
The 2010 Opinion did not address whether, if Tyco had
prevailed, it would have been entitled to consequential damages
due to its retention of Boies Schiller.

The Opinion noted,

however, that Boies Schiller's representation of Tyco during May
“was entirely related to its investigation into the $20 million
payment to Walsh,” that Boies Schiller expanded the scope of its
representation of Tyco on June 1, and that Boies Schiller
11

estimated its legal fees attributable to the Walsh investigation
for May and June 2002 at $495,901.

This figure represented the

sum of a $250,000 retainer fee, fees of $193,198 for work in
May, and conservatively five percent of the June 2002 fees,
equaling $52,703.
The Second Circuit reversed and remanded on January 11,
2012, concluding in its Summary Order that, “We need not here
decide whether Walsh’s breach of fiduciary duty claim was
capable of ratification because, even if we were to resolve that
issue in Walsh’s favor, we conclude that, under Bermuda law,
Walsh’s breach could be ratified only by Tyco’s shareholders,
not its board of directors.”

Tyco Int’l, 455 Fed. Appx. at 56.

The Summary Order further noted as follows:
The District Court resolved the principal damages
issues in the event that Tyco prevailed on appeal.
Neither party contests the District Court's resolution
of damages, and we need not further address it. The
parties dispute only whether the District Court
determined that it would award consequential damages
to Tyco relating to its retention of Boies, Schiller &
Flexner LLP. We leave this question for the District
Court to address on remand.
Id. at 58.
The mandate issued on February 6 and the case was reopened
before this Court by Order of February 7.

Tyco’s March 26

Motion sought $495,901.00 in consequential damages related to
the retention of Boise Schiller, interest in the amount of
$1,958,082.19, and attorneys’ fees and costs in the amount of
12

$2,003,497.12, representing a total damages award of
4,457,480.31.

The March 26 Motion became fully submitted on May

14.

DISCUSSION
The March 26 Motion is granted in full with respect to
Tyco’s requests for consequential damages and interest; it is
granted in part with respect to Tyco’s request for attorneys’
fees and costs.

Tyco is entitled to consequential damages

because, under Bermuda law, the Boies Schiller fees constituted
consequential damages arising directly as a result of Walsh’s
breach of fiduciary duty.

Tyco is entitled to interest on the

Walsh payment and attorneys’ fees under the terms of the mandate
and the 2010 Opinion.

And as per this Court’s discretion

pursuant to Bermuda law, Tyco will be awarded $1,204,920 in
attorneys’ fees plus certain disbursements.
I.

Consequential Damages
The Second Circuit left open the question of whether this

Court would award consequential damages to Tyco relating to its
retention of Boies Schiller, to be addressed on remand.

Under

Bermuda law, a successful plaintiff in a breach of fiduciary
case “is entitled to be placed in the position he was before the
breach occurred.”

Nationwide Bldg. Soc’y v Balmer Radmore (a

firm) [1999] EWHC 844 (Ch), at 44.
13

The costs of investigating a

defendant’s unlawful behavior may be treated “as part of the
consequential loss caused by the tort.”

Nat’l Grid Elec.

Transmission PLC v McKenzie [2009] EWHC 1817 (Ch), at 39.
Here, there can be no question that the Boies Schiller fees
attributable to its investigation into the circumstances
surrounding the $20 million payment are part of the
consequential loss caused by Walsh’s breach.

The circumstances

surrounding this payment included, in substantial part, Walsh’s
failure timely to disclose his interest in the CIT transaction.
Had Walsh disclosed this interest as he was obliged to do, then
the Board would have known about it prior to voting on the CIT
acquisition, could have evaluated both the acquisition and the
payment itself with Walsh’s disclosures in mind, and could at
the very least have disclosed the payment in its March 29, 2001
registration statement.

Regardless, the Board would have known

substantially more about the circumstances surrounding any
payment to Walsh without an investigation.

In short, it is

axiomatic that had Walsh disclosed his interest in the
acquisition of CIT as he was obliged to do, then an
investigation centered largely on Walsh’s failure to disclose
would have been unnecessary.
Boies Schiller calculated the fees attributable to its
investigation into the circumstances surrounding the Walsh
payment at $495,901.00.

The parties did not contest this
14

estimate on appeal or on remand, and a review of the relevant
documentation reveals it to be well-supported.

Accordingly,

Tyco is entitled to $495,901.00 in consequential damages due to
the retention of Boies Schiller.
Walsh does not contest that Bermuda law permits recovery of
consequential damages for the costs of an investigation into the
circumstances surrounding a breach of fiduciary duty.

Instead,

Walsh argues that the Boies Schiller fees were incurred as a
result of the Walsh payment, not Walsh’s initial non-disclosure.
According to Walsh, Tyco cannot recover these fees because the
Second Circuit did not reverse this Court’s determination that
the Board ratified the Walsh payment, and because Boies Schiller
would not have been retained to investigate the $20 million
payment if Kozlowski had not decided to go forward with the
payment.
Walsh’s argument is misplaced.

First, the Second Circuit

did not reach the question of whether the Board ratified the
Walsh payment because it determined that, regardless, the Board
could not ratify Walsh’s breach of fiduciary duty and Tyco was
therefore entitled to damages.

Second, as discussed above, the

Boies Schiller fees are directly attributable to Walsh’s breach
of fiduciary duty.

This remains true even if the Board ratified

the Walsh payment after the fact.
II.

Interest
15

Tyco is entitled to $1,958,082.19 in interest on the Walsh
payment because this issue was already determined in the 2010
Opinion and is not currently before the Court on remand.

Under

the mandate rule, which governs the relationship between trial
courts and appellate courts, “where issues have been explicitly
or implicitly decided on appeal, the district court is obliged,
on remand, to follow the decision of the appellate court.”
Burrell v. United States, 467 F.3d 160, 165 (2d Cir. 2006)
(citation omitted).

The district court must comply with “the

dictates of the superior court” on remand, and “relitigation of
issues explicitly or impliedly decided by the appellate court”
is foreclosed.

United States v. Ben Zvi, 242 F.3d 89, 95 (2d

Cir. 2001) (citation omitted).

In cases where “an issue was

ripe for review at the time of an initial appeal but was
nonetheless foregone, the mandate rule generally prohibits the
district court from reopening the issue on remand unless the
mandate can reasonably be understood as permitting it to do so.”
Id.

In determining whether an issue may be reconsidered on

remand, “the trial court should look to both the specific
dictates of the remand order as well as the broader spirit of
the mandate.”

Id. (citation omitted).

The 2010 Opinion concluded that Tyco would have been
awarded $1,958,082.19 in interest “had Tyco prevailed on any of
its claims.”

Tyco Int’l, 751 F. Supp. 2d at 627 (emphasis
16

supplied).

After reversing the 2010 Opinion on the issue of

Walsh’s liability, the Second Circuit noted, “The District Court
resolved the principal damages issues in the event that Tyco
prevailed on appeal,” and, “Neither party contests the District
Court’s resolution of damages.”

Tyco Int’l, 455 Fed. Appx. at

58.
The mandate cannot reasonably be construed as permitting
this Court to reopen the issue of Tyco’s entitlement to
$1,958,082.19 in interest on the Walsh payment.

This Court’s

initial determinations on this issue were, at the very least,
confirmed implicitly by the Second Circuit on appeal.
Walsh argues that the mandate left open the question of
Tyco’s entitlement to interest on the Walsh payment because it
addressed only the narrow question of whether Tyco’s Board could
ratify Walsh’s breach of fiduciary duty, and because the Board’s
ratification of the $20 million payment severs any causal
connection between Walsh’s breach of fiduciary duty and his
retention of the funds.

Walsh is incorrect.

The mandate did

not only address the question of ratification of Walsh’s breach.
It also discussed damages, noting explicitly that “[t]he
District Court resolved the principal damages issues in the
event that Tyco prevailed on appeal,” and that “[n]either party
contests the District Court’s resolution of damages.”

Id.

Clearly, this Court’s findings on damages due to interest on the
17

Walsh payment is one of the “principal damages issues” that the
Second Circuit determined had already been decided.
Walsh notes that the Second Circuit stated only that the
“principal” damages issues had been decided, not that all
damages issues had been decided, and argues that the issue of
damages due to interest on the Walsh payment therefore remains
open.

The Second Circuit declined to state that all damages

issues had been decided, however, for the simple reason that the
2010 Opinion did not determine all damages issues.

It left open

the question of whether Tyco was entitled to recover the Boies
Schiller fees, as discussed above, and the amount that Tyco
could recover in attorneys’ fees and costs.

This single

statement by the Second Circuit does not imply that Walsh can
relitigate those damages issues, like the amount Tyco would
recover in interest on the Walsh payment if Tyco prevailed on
its claims, that the 2010 Opinion did decide.
III. Attorneys’ Fees
In accordance with this Court’s discretion to determine
attorneys’ fees under Bermuda law, Tyco is awarded $1,204,920 in
attorneys’ fees and an additional amount in costs.

The 2010

Opinion determined that Bermuda law applies to this issue and
that Tyco “would be entitled to an award of attorneys’ fees”
under Bermuda law if it prevailed on any of its claims.

18

The

Second Circuit remanded only the question of the amount of
attorneys’ fees to which Tyco is entitled.
Bermuda law customarily awards attorneys’ fees to the
prevailing party, but the court retains “wide discretion” in
determining whether such an award is appropriate under the
circumstances of each case.
n.50 (S.D.N.Y. 2010).

Only fees that are both reasonable and

necessary are recoverable.
[2012] SC Bda 2 Com 7.

See In re Tyson, 433 B.R. 68, 96

Golar LNG Ltd. v. World Nordic SE

Although “all the relevant

circumstances” are to be considered as part of a court’s fee
determination, factors of particular relevance include:
1. The complexity of the case and the difficulty or novelty
of the questions involved;
2. The skill of the attorney and the time and labor expended
by him or her;
3. The documents prepared or perused;
4. The place and circumstances in which the relevant
business was transacted;
5. The importance of the matter to the client; and
6. The amount of money at issue.
Francis v. Carruthers [2006] SC Bda L.R. 60, 3.
Tyco’s claimed fees and costs of $2,003,497.12 are
substantial, particularly in comparison to its recovery of
$2,453,983.19 in damages.
firms.

The fees are divided between two law

Bartlit Beck Herman Palenchar & Scott LLP (“Bartlit

19

Beck”) represented Tyco at trial and pursuant to a retainer
agreement charged Tyco $240,000 per month for trial preparation,
$27,500 per day during trial, and $75,000 per quarter
thereafter.

It charged $804,920 for its pretrial and trial

work, and another $300,000 during the appellate phase.
total disbursements amounted to $148,776.15.

Its

Tyco’s appellate

counsel was Gibson, Dunn & Crutcher LLP (“Gibson Dunn”).

It

charged Tyco $751,092.50 in attorneys’ fees and $40,882.47 for
disbursements.

Tyco’s fee expert opines that $42,174 should be

subtracted from the fees, resulting in a proposed award of
$708,918.50 to Tyco for Gibson Dunn’s fees.
The fees must be understood in the appropriate context.
First, Walsh has asserted an indemnification proceeding against
Tyco in New York State court in connection with nationwide
securities class action and opt-out lawsuits.

See Fed. Ins. Co.

v. Tyco Int’l Ltd., No. 600507-03 (N.Y. Sup. Ct.).

The

fiduciary claims at issue in the instant litigation may
substantially impact this pending indemnification proceeding.
The $2,453,983.19 recovery by Tyco in this action therefore does
not reflect its full importance to Tyco.

Second, a figure in

excess of $1 million in fees for two years of complex and
diligent litigation, which included a full bench trial, an
appeal to the Second Circuit, and a motion for damages on
remand, is not surprising.

Third, Tyco hired a distinguished
20

appellate litigator to argue its appeal, which it won.

Finally,

Tyco’s claims on appeal principally involved a complex issue of
English and Bermuda law concerning ratification.

Accordingly,

Tyco is awarded all of the attorneys’ fees it sought for the
pretrial and trial phases of this litigation, totaling $804,920;
an award of $400,000 for its fees on appeal; all disbursements
charged by Gibson Dunn, totaling $40,882.47; and all
disbursements requested by Bartlit Beck, except for those
associated with New York hotel lodging expenses and airfare to
travel to New York.
Tyco is not entitled to recover all of its requested fees
because not all of these fees are reasonable and necessary.
More than half of Tyco’s fees were incurred during the appellate
phase of litigation, after the completion of discovery and a
bench trial.

Whereas trial counsel incurred fees of $804,920,

the fees on appeal totaled $1,051,092.50.

Tyco could have

retained competent, well-respected appellate counsel for this
appeal for roughly $400,000.

Certainly, Tyco had the right to

incur over $1 million in appellate fees, but it is neither fair
nor reasonable to impose upon Walsh the duty to pay that amount.
In light of all the relevant circumstances, these fees on appeal
are not reasonable.

There were no remaining factual disputes

during the appellate phase that might have required a careful,
diligent, and time-consuming analysis of the documentary record.
21

The trial itself consumed two days.

The 2010 Opinion was 54

pages long and explained the Court’s analysis in detail.

And

the core legal question at issue -- whether the Board could
ratify Walsh’s breach of fiduciary duty under Bermuda law -- was
a narrow one.

In addition, given the availability of competent

local counsel in New York City, it was not necessary for Tyco to
retain trial counsel outside of New York and not reasonable for
it to seek payment of costs associated with travel to New York
and hotel lodging expenses in New York from Walsh.
Walsh presents a number of other arguments for why
attorneys’ fees are inappropriate in this case, none of which
have merit.

Walsh argues that the Summary Order did not remand

the issue of attorneys’ fees.

The Summary Order noted that

“[t]he District Court resolved the principal damages issues in
the event that Tyco prevailed on appeal,” and that neither party
contested these determinations on appeal.
App’x at 58.

Tyco Int'l, 455 F.

The 2010 Opinion resolved that Tyco is entitled to

attorneys’ fees but did not specify the amount.

The issue of

whether Tyco is entitled to attorneys fees is therefore not open
to relitigation pursuant to the mandate rule, see United States
v. Ben Zvi, 242 F.3d at 95, but the issue of the amount of fees
to be recovered is properly before this Court.
Walsh maintains that New York law should apply to the
question of attorneys’ fees because it is an issue of court
22

administration and procedure.

This issue was addressed in the

2010 Opinion, see Tyco Int’l, 751 F. Supp. 2d at 627, was not
contested on appeal, see Tyco Int'l, 455 F. App’x at 58, and is
therefore not open to relitigation.
Next, Walsh argues that an award of fees is inappropriate
on remand because Walsh was not awarded fees when he prevailed
in the 2010 Opinion.
attorneys’ fees.

Unlike Tyco, however, Walsh did not seek

His failure to recover fees therefore has no

bearing on whether Tyco is entitled to them.
Finally, Walsh argues that the particular facts of this
case do not warrant an award of fees because Walsh prevailed on
the issue of the Board’s ratification of the $20 million
payment, because Tyco is undeserving of recovery, because Tyco
did not prevail on its claims for punitive damages, and because
Walsh repaid the $20 million ten years ago.

These arguments

ignore the fact that Walsh has been found liable for breach of
fiduciary duty under Bermuda law, and Tyco is therefore the
prevailing party and entitled to attorneys’ fees.
Walsh also argues that Tyco’s attorneys engaged in
overzealous representation and that their fees are therefore not
necessary and reasonable under Bermuda law.

Specifically, Walsh

argues that the fees are disproportionate to Tyco’s recovery,
and that the use of multiple firms, fixed fee billing by trial
counsel, retention of a Bermuda law firm, extensive travel, and
23

certain unsubstantiated expenses were unnecessary and excess
As discussed above, however, a review of Tyco's expenses as
detailed by supporting documentation reveals that most of them
were reasonable and necessarYI although some of them were not.
AccordinglYI Tyco is awarded those fees and costs
those fees and costs

l

l

and only

that were reasonable and necessary.

CONCLUSION

Tyco/s

damages

1

March 26, 2012 motion for judgment on consequent

interest

and attorneys' fees is granted in part.

l

Tyco

is awarded $495 / 901.00 in consequential damages; $1 / 958 / 082.19
in interest on the Walsh payment; and attorneys

1

fees totaling

1 disbursement expenses incurred by Gibson
Dunn and those incurred by Bartlit Beck
associated with New York hotel lodging

for those
and airfare.

Tyco shall submit a proposed judgment by June 25 1 2012.

SO ORDERED:
Dated:

New York New York
June 20 2012
l

1

United

24

Judge