Reach Music Publishing, Inc et al v. Warner/Chappell Music, Inc. et al
Filing
335
OPINION & ORDER re: 309 MOTION for Damages . filed by Protoons Inc. For the reasons stated above, Protoons's motion for damages is GRANTED. Damages in the amount of $1,397,245 are awarded as set forth above. The Clerk of Court is directed to terminate the motion at docket number 309 and to terminate this matter. (As further set forth in this Order) (Signed by Judge Katherine B. Forrest on 2/19/2016) (lmb)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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PROTOONS INC.,
:
:
Counterclaimant,
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:
-v:
:
REACH MUSIC PUBLISHING, INC. and
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DAVID REEVES,
:
:
Counterclaim Defendants,
:
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-and:
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REACH GLOBAL INC. and MICHAEL
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CLOSTER,
:
:
Additional Counterclaim Defendants. :
:
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KATHERINE B. FORREST, District Judge:
USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: February 19, 2016
09 Civ. 5580 (KBF)
OPINION & ORDER
This action traces its lineage back to an initial suit commenced in 2008.
(ECF No. 1 in 08-cv-7722 (LTS).) At that time, plaintiffs/counterclaim defendants
David Reeves (“Reeves”) and Reach Music Publishing (“Reach”) brought suit against
defendant/counterclaimant Protoons Inc.1 (“Protoons”) seeking damages and a
declaration of copyright ownership of songs Reeves had co-authored for the musical
group Run–D.M.C. in the 1980s. (ECF No. 1.) The lawsuit ignored an obvious
weakness: Reeves had long before assigned all of his rights in the compositions to
an entity called Rush Groove and specifically agreed not to look to Protoons for
payment. Reeves and Reach’s original claims were dismissed with prejudice. (ECF
Reeves and Reach’s complaint also named Warner/Chappell Music, Inc. as a defendant; that party
has not asserted counterclaims.
1
Nos. 60 & 61.) The litigation did not end, however, because by then Protoons had
asserted counterclaims against Reeves for breach of contract and Reach2 for tortious
interference. (ECF Nos. 23 & 68.) The Court granted Protoons summary judgment
on its breach of contract counterclaim, (ECF No. 258) and following a bench trial in
March 2015 found for Protoons on the tortious interference counterclaim as well.
(ECF No. 292.)
Now before the Court is Protoons’s motion for damages, legal fees, and
expenses, which the parties have submitted for a trial on the papers. (ECF Nos.
309 & 334.) As set forth below, Reeves and Reach are jointly and severally liable3
for the attorney’s fees and costs associated with Protoons’s defense of the original
claims and with its prosecution of the breach of contract counterclaim, but not for
those associated solely with prosecuting the tortious interference counterclaim.
I.
FACTUAL BACKGROUND4
In the 1980s David Reeves co-wrote a number of songs that Run–D.M.C. later
recorded. In 1988 and 1989, in exchange for a share of the profits the songs would
generate, Reeves transferred the entirety of his interest in those songs, in
perpetuity, to an entity called Rush Groove, making the compositions “the sole
Although the original complaint only named Reeves and Reach Music Publishing, Inc. as plaintiffs
(see ECF No. 1), for purposes of the counterclaims “Reach” refers to Reach Music Publishing, Inc.,
Reach Global Inc., and Michael Closter. (See ECF No. 23.)
3 Michael Closter has filed a declaration with the Court in which he states that the Reach parties
“will indemnify David Reeves for any damages he is assessed by the Court in this action.” (ECF No.
317 ¶ 2.)
4 The background provided in this opinion is a summary, focusing on the events relevant to
determining the proper measure of damages in this matter. Further details are available in the
Court’s rulings at ECF Nos. 258 and 292, which are adopted and incorporated as part of the instant
findings and conclusions.
2
2
property of [Rush Groove], everywhere and forever, with all copyrights therein and
all renewals thereof, throughout the universe.” (SWA5 ¶ 2.)
The Songwriter Agreements were signed by Reeves, other co-writers of Run–
D.M.C. songs, and Rush Groove. (Id. at p. 6.) Protoons was not a signatory to the
Agreements, but was expressly identified as a third party beneficiary; an
assignment of certain rights from Rush Groove to Protoons was also expressly
anticipated in the contracts.6 (Id. ¶ 9.) Despite these provisions, the Agreements
provided that Reeves “shall look solely to [Rush Groove] for any and all payments
due,” and that “[u]nder no circumstances shall [Reeves] look to … Protoons for any
payments in connection with the use, reproduction or other exploitation of the
Composition.” (Id. ¶ 14.)
One paragraph of the Songwriter Agreement established the procedures that
would govern “any controversies regarding this agreement.” (Id. ¶ 15.) It
established that the contract would be construed according to New York law and
that jurisdiction would lie in state and federal courts in New York. (Id.) It further
provided that “it is agreed that the prevailing party in any finally adjudicated court
References to “SWA” refer to an exemplar Songwriter Agreement filed under seal as ECF No. 318,
Exh. A.
6 Paragraph 9 of the Songwriter Agreement established that “[Reeves] specifically acknowledges that
[Rush Groove] may assign this agreement to Protoons, Inc., including any or all of [Rush Groove’s]
rights and interests hereunder and the benefits of [Reeves’s] warranties, representations,
authorizations, duties, obligations, liabilities and indemnifications hereunder. [Reeves] specifically
acknowledges and agrees that Protoons Inc. and its administrators, successors, licensees and assigns
is and shall be deemed third party beneficiaries hereunder and shall have the right, in its and their
own name(s), to institute any action or proceeding against [Reeves] to enforce all rights, privileges
and benefits directly against [Reeves]. Notwithstanding anything in the foregoing to the contrary, it
is specifically understood and agreed that [Rush Groove] shall not assign nor shall [Rush Groove] be
deemed to have delegated to Protoons Inc., and Protoons Inc. shall not be deemed to have assumed,
any of [Rush Groove’s] warranties, representations, authorizations, duties, obligations, promises,
agreements or liabilities hereunder. [Reeves] is not and shall not be deemed a third party
beneficiary of any agreement or understanding between [Rush Groove] and Protoons Inc.”
5
3
action between the parties shall be entitled to recover the reasonable attorney’s fees
incurred by such party in connection therewith.” (Id.)
Reeves received and accepted payments from Rush Groove until 1990, at
which point he ceased receiving payments in connection with the songs at issue.
In 1998, Rush Groove entered into an agreement with Protoons and other
entities in which Rush Groove confirmed its transfer of rights in the Run–D.M.C.
songs to Protoons. This agreement provided that Protoons would succeed to all
rights, warranties, representations, and indemnifications made to Rush Groove.
Reeves was not a party to this agreement. Rush Groove apparently went out of
business in 1999, although Protoons has alleged that it was never an incorporated
company but instead a business entity run by its principals, Russell Simmons and
Lyor Cohen.
The songs covered by the Songwriter Agreements went on to have a measure
of commercial success; for example, one was the theme song of the MTV show
“Run’s House,” which ran from 2005 to 2009. During the same period Reeves
became indigent; he was homeless in 2006 and 2007.
In 2007, Reeves entered into an agreement with Reach in which Reeves
purported to transfer to Reach a 50% interest in all rights, title, interest, and
ownership of the compositions in exchange for $55,000 and Reach’s promise to
pursue additional payments for the songs on his behalf, including through
litigation. Reeves expressly authorized Reach to pursue litigation to enforce their
now-joint interest in the works. At the time Reach entered into this 2007
4
agreement, it knew that Reeves had already entered into the Songwriter
Agreements and thereby assigned any rights he had in the compositions.7
In May 2008, Reach contacted Protoons, asserting a copyright interest in
Reeves’s Run–D.M.C. works. In June, Protoons responded that Reeves had
previously assigned the entirety of his copyright interests in these works; Protoons
further expressly stated that should Reach pursue litigation it would be
“responsible for costs.”
In September 2008, Reach and Reeves filed suit against Protoons and others
seeking a declaration of their copyright and royalty interests in the compositions
and damages. (ECF No. 1 in 08-cv-7722 (LTS) ¶¶ 23-37.) This complaint alleged
that the federal courts had diversity jurisdiction over the action. (See id. ¶ 2.) After
Judge Swain sua sponte ordered the plaintiffs to provide facts demonstrating a
basis for subject matter jurisdiction, plaintiffs voluntarily dismissed the action
without prejudice pursuant to Rule 41(a)(1)(A)(i) of the Federal Rules of Civil
Procedure. (ECF Nos. 6 & 7 in 08-cv-7722 (LTS).)
In October 2008, Reach and Reeves filed suit against Protoons and other
defendants in the Supreme Court of the State of New York, County of New York.
(Doc. No. 1 in 650360/2008 (Sup. Ct. N.Y.).) Protoons moved to dismiss on the
ground that plaintiffs’ causes of action arose under the Copyright Act, over which
federal district courts have exclusive jurisdiction pursuant to 28 U.S.C. § 1338.
(Doc. Nos. 9 & 12 in 650360/2008 (Sup. Ct. N.Y.).) The state court granted
7
The Court made this determination after a bench trial. (ECF No. 292, 468:14-15, 469:3-6.)
5
Protoons’s motion and dismissed the case. (Doc Nos. 32 & 33 in 650360/2008 (Sup.
Ct. N.Y.).)
In June 2009, Reach and Reeves filed their third attempt at stating a claim,
once again against Protoons and other defendants and once again in the Southern
District. (ECF No. 1.) This lawsuit asserted both federal question and diversity
jurisdiction. (Id. ¶ 2.) In July 2009, shortly after this third suit was filed, Protoons
confirmed to Reeves and Reach that it was in possession of the dispositive
Songwriter Agreements. Reeves and Reach continued to prosecute the suit and, in
November 2009, Protoons answered and filed counterclaims against Reeves for
breach of contract, slander of title, and a declaration regarding duty to defend (ECF
No. 23 ¶¶ 25-35, 42-51), and against Reach for tortious interference with contract.
(Id. ¶¶ 36-41.)
Two months later, in January 2010, Protoons provided Reeves and Reach
with a copy of the Songwriter Agreement. The plaintiffs/counterclaim defendants
continued to prosecute the action. In May 2010 they sought to amend their
complaint. (ECF No. 46.) Protoons both opposed Reeves and Reach’s motion to
amend (ECF No. 53) and moved for summary judgement under Rule 56 as to Reeves
and Reach’s affirmative claims. (ECF No. 49.) In August 2010, Judge Swain denied
the motion to amend as both untimely and futile and dismissed the complaint in its
entirety with prejudice. (ECF Nos. 60 & 61.) Thus, as of August 2010, all that
remained of the action were Protoons’s counterclaims. Those claims were
eventually narrowed to a claim against Reeves for breaching the covenant not to sue
6
in the Songwriter Agreements, and a claim against Reach for tortious interference
in connection with Reeves’s breach of that covenant. (ECF Nos. 95 & 129.)
After several years of continued litigation on the counterclaims, both parties
moved for summary judgment. (ECF Nos. 212 & 216.) In November 2014, the
Court8 granted summary judgment to Protoons on its claim against Reeves. (ECF
No. 258.) Protoons’s tortious interference counterclaim against Reach proceeded to
trial. (Id. at 22-26.)
In March 2015, the Court held a two-day bench trial on the tortious
interference counterclaim. (ECF Nos. 287-92.) At the conclusion of the trial, the
Court ruled for Protoons from the bench, finding by a preponderance of the evidence
that at the time of the 2007 contract between Reach and Reeves, Reach’s principal
“personally knew … that Reeves had signed the 1988 [Songwriter] agreement.”
(ECF No. 292, 468:14-15; see also id. 469:3-6 (“I have no doubt that he knew that an
agreement existed and had existed at one point in time in substantially the form
that it had been signed by the other Run–D.M.C. folks.”).)
Although the Court’s ruling resolved the final issue of liability in the case,
neither the trial nor the summary judgment proceedings had quantified Protoons’s
damages. Thus, following the trial, Protoons moved for damages against both
Reeves and Reach. (ECF No. 309.) That is now before the Court as a trial on the
papers. (ECF No. 334.)
8
This matter was reassigned from Judge Swain to the undersigned in May 2014.
7
II.
LEGAL PRINCIPLES
A.
Breach Of Contract Damages
Under New York law, “[o]ne who violates his contract with another is liable
for all the direct and proximate damages which result from the violation.” Nat’l
Market Share, Inc. v. Sterling Nat’l Bank, 392 F.3d 520, 525 (2d Cir. 2004) (quoting
Wakeman v. Wheeler & Wilson Mfg. Co., 4 N.E. 264 (N.Y. 1886)). As a general
matter, “[u]nder New York law, damages for breach of contract should put the
plaintiff in the same economic position he would have occupied had the breaching
party performed the contract.” Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186,
196 (2d Cir. 2003).
When the breach is of a covenant not to sue, the measure of the successful
party’s damages does not include its litigation expenses unless the offending suit
was “brought in obvious breach or otherwise in bad faith,” or the no suit provision
was drawn “in such terms as to make clear that any breach will entail liability for
damages, including … defendant’s litigation expenses.” Artvale, Inc. v. Rugby
Fabrics Corp., 363 F.2d 1002, 1008 (2d Cir. 1966). This reflects the “American
Rule,” which, as the Second Circuit has explained, dictates that “courts applying
New York law ‘should not infer a party’s intention to provide counsel fees as
damages for a breach of contract unless the intention to do so is unmistakably clear
from the language of the contract.’” Mid-Hudson Catskill Rural Migrant Ministry,
Inc. v. Fine Host Corp., 418 F.3d 168, 177 (2d Cir. 2005) (internal quotation marks
omitted) (quoting Oscar Gruss, 337 F.3d at 199).
8
B.
Tortious Interference Damages
“[U]nder New York law, a plaintiff in a tortious interference with contract
case is entitled to damages in the amount of the full pecuniary loss of the benefits of
the contract, and … ‘the elements of damages, including consequential damages,
[are] those recognized under the more liberal rules applicable to tort actions.’” Int’l
Minerals & Res., S.A. v. Pappas, 96 F.3d 586, 597 (2d Cir. 1996) (final alteration in
original) (quoting Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 406 N.E.2d
445, 452 n.6 (N.Y. 1980)); see also Restatement (Second) of Torts § 774A (1977)
(identifying “consequential losses for which the interference is a legal cause” as one
of the components of damages in tortious interference cases).
C.
Copyright Act Attorney’s Fees
Section 505 of the Copyright Act provides that “[i]n any action under this
title, the court in its discretion may allow the recovery of full costs,” and further
that “the court may also award a reasonable attorney’s fee to the prevailing party as
part of the costs.” 17 U.S.C. § 505. The factors that properly guide the Court’s
discretion include “frivolousness, motivation, objective unreasonableness (both in
the factual and in the legal components of the case) and the need in particular
circumstances to advance considerations of compensation and deterrence.” Fogerty
v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994) (quoting Lieb v. Topstone Indus.,
Inc., 788 F.2d 151, 156 (3d Cir. 1986)); see also 16 Casa Duse, LLC v. Merkin, 791
F.3d 247, 264 (2d Cir. 2015). The “objective reasonableness,” or lack thereof, of a
defeated party’s litigating position “is a factor that should be given substantial
9
weight in determining whether an award of attorneys’ fees is warranted.” Matthew
Bender & Co. v. W. Publ’g Co., 240 F.3d 116, 122 (2d Cir. 2001).
Prevailing plaintiffs and prevailing defendants are subject to the same
standards under § 505. See Fogerty, 510 U.S. at 522-33. Where an unsuccessful
“claim or defense was frivolous and the prevailing party obtained no relief at all, the
case for awarding him attorneys’ fees is compelling.” Assessment Techs. of WI, LLC
v. WIREdata, Inc., 361 F.3d 434, 436-37 (7th Cir. 2004) (Posner, J.). However, an
award under § 505 is never automatic, but is instead committed to the Court’s
discretion. See Fogerty, 510 U.S. at 533.
D.
Punitive Damages
Under New York law, “[p]unitive damages are awarded in tort actions ‘where
the defendant’s wrongdoing has been intentional and deliberate, and has the
character of outrage frequently associated with crime.’” Prozeralik v. Capital Cities
Commc’ns, Inc., 626 N.E.2d 34, 41-42 (N.Y. 1993) (alteration omitted) (quoting
William Lloyd Prosser, et al., Prosser and Keeton on Torts § 2 at 9 (5th ed. 1984)).
“[P]unitive damages [are] recoverable in a contract action only ‘if necessary to
vindicate a public right.’” TVT Records v. Island Def Jam Music Grp., 412 F.3d 82,
94 (2d Cir. 2005) (quoting New York Univ. v. Continental Ins. Co., 662 N.E.2d 763,
767 (N.Y. 1995)); see also id. (“[Punitive] damages [are] recoverable when the
breach … involved a particularly egregious fraud that ‘was aimed at the public
generally.’” (quoting Rocanova v. Equitable Life Assur. Soc. of the U.S., 634 N.E.2d
940, 943 (N.Y. 1994))).
10
III.
DISCUSSION
Determining whether and to what extent Protoons is entitled to damages
requires analyzing Reeves’s and Reach’s liability separately and analyzing liability
for the damages associated with each stage of the proceedings separately. The
Court then turns to the question of punitive damages and to the fact-specific inquiry
by which Protoons’ damages are calculated.
A.
Reeves’s Liability For Breach Of Covenant Not To Sue
As discussed above, Reeves is liable for breaching the covenant not to sue in
the Songwriter Agreement. (ECF No. 258.) He is therefore liable for the litigation
expenses associated with that breach only if it “is unmistakably clear from the
language of the contract” that the parties intended such expenses as damages for
breach of contract. Mid-Hudson Catskill Rural Migrant Ministry, Inc. v. Fine Host
Corp., 418 F.3d 168, 177 (2d Cir. 2005) (internal quotation marks omitted) (quoting
Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186, 199 (2d Cir. 2003)).
The Songwriter Agreement establishes that “the prevailing party in any
finally adjudicated court action between the parties shall be entitled to recover the
reasonable attorney’s fees incurred by such party in connection therewith.” (SWA ¶
15.) It is unmistakably clear from this language that attorney’s fees may be
recovered following certain legal actions. However, it is also unmistakably clear
that fees are only available following legal actions that meet the conditions listed in
the contract. Specifically, the attorney’s fees provision of the Songwriter Agreement
sets out six limitations on the availability of the fees Protoons seeks.
11
First, there must have been a “court action.” Second, that action must have
been “between the parties” to the Agreement. Third, that action must have been
“finally adjudicated.” Fourth, the entity claiming fees must have been “the
prevailing party” in the action. Fifth, the fees claimed must have been “incurred by
[the prevailing] party in connection []with” the action. Finally, the action must
have been a “controvers[y] regarding this agreement.”
The sixth requirement, that only controversies regarding the Songwriter
Agreement will give rise to an obligation to pay attorney’s fees, reflects the
requirement under New York law that clauses indemnifying parties for fees must be
construed strictly. See Mid-Hudson Catskill, 418 F.3d at 179 (citing Hooper
Assocs., Ltd. v. AGS Computs., Inc., 548 N.E.2d 903, 905 (N.Y. 1989)). Paragraph
15 of the Songwriter Agreement, which contains the fee-shifting provision at issue,
addresses the parties’ rights under the Songwriter Agreement specifically: the first
sentence explains who is bound by the agreement, the next establishes that it will
be construed under New York law, the third provides for exclusive jurisdiction in
New York state and federal courts for “any controversies regarding this agreement,”
the fifth establishes the severability of the agreement’s various provisions, and the
sixth explains how the agreement may be executed. The attorney’s fees provision
appears in the midst of these agreement-centered arrangements and thus must be
strictly construed to concern the same set of court actions for which the rest of the
paragraph provides the controlling law, venue, and scope; the indemnity clause
cannot be read to create a free-floating right to attorney’s fees in actions other than
“controversies regarding this agreement.”
12
Applying the six conditions in the Songwriter Agreement’s attorney’s fees
provision to Protoons’ request for damages demonstrates that Reeves is liable for
some, but not all, of the amount Protoons seeks. First, he is not liable for any fees
associated with the complaint he and Reach filed in this court in September 2008.
The plaintiffs voluntarily dismissed that matter without prejudice. (ECF Nos. 6 & 7
in 08-cv-7722 (LTS).) It was therefore not a “finally adjudicated” court action. See
U.S. D.I.D. Corp. v. Windstream Commc’ns, Inc., 775 F.3d 128, 139-40 (2d Cir.
2014) (reversing the district court’s conclusion that a voluntary dismissal can be a
final adjudication on the merits because such a rule “redefine[es] a ‘dismissal
without prejudice’ as its ‘opposite,’ an ‘adjudication upon the merits’” (quoting
Semtek Int’l v. Lockheed Martin Corp., 531 U.S. 497, 505 (2001))); Unite Here v.
Cintas Corp., 500 F. Supp. 2d 332, 337 (S.D.N.Y. 2007) (holding that, under the
Private Securities Litigation Reform Act of 1995, a plaintiff’s voluntary dismissal
without prejudice pursuant to Fed. R. Civ. P. 41(a)(1)(i) does not constitute a ‘final
adjudication’”). The Songwriter Agreement must be strictly construed to limit
Reeves’s obligation to indemnify Protoons for its attorney fees to finally adjudicated
matters, and therefore any fees and expenses associated with the September 2008
federal court filing are not included.
The same result obtains for the fees associated with the October 2008 state
court filing. That matter was resolved when the state court dismissed Reeves and
Reach’s complaint for lack of subject matter jurisdiction. (Doc Nos. 32 & 33 in
650360/2008 (Sup. Ct. N.Y.).) “[A] dismissal for lack of subject matter jurisdiction is
not an adjudication of the merits.” St. Pierre v. Dyer, 208 F.3d 394, 400 (2d Cir.
13
2000); see also Anwar v. Fairfield Greenwich Ltd., No. 09 Civ. 118 (VM), 2015 WL
4610406, at *3 (S.D.N.Y. July 29, 2015) (“Dismissals for lack of subject matter
jurisdiction are necessarily without prejudice, because the alternative—dismissal
with prejudice—would have ‘the effect of a final adjudication on the merits’ with res
judicata effect in both state and federal court.” (quoting Hernandez v. Conriv Realty
Assocs., 182 F.3d 121, 123 (2d Cir. 1999))). Indeed, such a dismissal is in fact a
determination that the dismissing court “lacks the statutory or constitutional power
to adjudicate it.” Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). The
state court action was therefore not a “finally adjudicated” court action, and the
Songwriter Agreement’s attorney’s fees provision does not encompass the fees
Protoons expended litigating that matter.
The instant action, in contrast, has been “finally adjudicated” for liability
purposes, and this opinion and order is the final adjudication of damages. (ECF
Nos. 309 & 334.) The dismissal of plaintiffs’ complaint with prejudice (ECF No. 61),
the grant of summary judgment on Protoons’s breach of contract counterclaim (ECF
No. 258), and the decision on the record following trial on Protoons’s tortious
interference counterclaim (ECF No. 292) were all final decisions disposing of the
merits and subject to appeal. See, e.g., Nemaizer v. Baker, 793 F.2d 58, 60 (2d Cir.
1986) (“A dismissal with prejudice has the effect of a final adjudication on the
merits ….”). They are also all part of a “court action” in which Protoons was “the
prevailing party,” and by definition any claimed fees stemming from the instant
action were “incurred … in connection therewith.”
14
The three components of the instant action (that is, plaintiff’s affirmative
claims and defendant’s counterclaims for breach of contract and tortious
interference) potentially differ from one another in whether they are actions
“between the parties” and whether they are “controversies regarding this
agreement.” For purposes of determining Reeves’s liability, each claim must be
evaluated separately; if this were not the case, then had Protoons asserted a claim
against its co-defendant and prevailed, Reeves would be responsible for Protoons’
fees simply because the claim related to the same action. This would run counter to
the language in the Songwriter Agreements limiting the responsibility for fees to
those incurred in actions “between the parties” and would be an interpretation
inconsistent with the requirement that such provisions be construed strictly.
The fees associated with the first component of the instant action, Reeves and
Reach’s claims against Protoons seeking a declaration of their copyright and royalty
interests in the compositions and damages for the alleged failure to account, fall
squarely within the attorney’s fees provision of the Songwriter Agreement. The
claims were asserted by Reeves directly against Protoons and thus were “between
the parties.” The claims were also based on Reeves’s purported copyright and
royalty interests in the compositions, the precise subject matter of the Songwriter
Agreements. The action Reeves and Reach initiated to establish Reeves’s rights
was thus a “controvers[y] regarding this agreement;” specifically, a controversy over
the agreement’s existence. Therefore all of the conditions in the contract are met
and Reeves is liable for the reasonable attorney’s fees Protoons incurred in
15
connection with defending against Reeves and Reach’s affirmative claims in the
instant action.
The fees associated with the second component of the instant action,
Protoons’s counterclaim against Reeves for breach of contract, are also available
against Reeves as damages. This counterclaim arranged Reeves and Protoons
against one another and thus was “between the parties.” The merits of the claim
turned on whether Reeves had violated the Songwriter Agreement’s requirement
that he not sue Protoons; the meaning and validity of the contract was directly at
issue, and thus the breach of contract counterclaim was a “controvers[y] regarding
this agreement.” Therefore all of the conditions in the contract are met and Reeves
is liable for the reasonable attorney’s fees Protoons incurred in connection with
prosecuting its breach of contract counterclaim in the instant action.
The fees associated with the third component of the instant action, Protoons’s
counterclaim against Reach for tortious interference with contract, are not available
against Reeves as damages. That claim was asserted against Reach, not Reeves.
(See ECF Nos. 95 & 129.) Indeed, under New York law, “a plaintiff bringing a
tortious interference claim must show that the defendants were not parties to the
contract.” Finley v. Giacobbe, 79 F.3d 1285, 1295 (2d Cir. 1996) (some emphasis in
original omitted) (citing Israel v. Wood Dolson Co., 134 N.E.2d 97, 99 (N.Y. 1956)).
The tortious interference counterclaim was therefore not an action “between the
parties” to the Songwriter Agreement, as Reach was not a party to that contract.
The tortious interference counterclaim was also not a “controvers[y]
regarding this agreement” once the breach of contract counterclaim had been
16
decided in Protoons’s favor. When the Court granted summary judgment on the
breach of contract component, it necessarily and explicitly rejected as a matter of
law the arguments that the Songwriter Agreement was unenforceable, invalid for
failure of consideration, invalid because of unilateral mistake, or unconscionable.
(ECF No. 258, at 13-16.) In its decision denying summary judgment on this claim,
the Court identified the sole triable issue as when “Reach gained knowledge of the
covenant not to sue.” (Id. at 25.) Thus, even if the tortious interference
counterclaim was an action “between the parties,” the portion of it that followed the
Court’s decision on summary judgment would still not fall within the attorney’s fees
provision of the Songwriter Agreement and thus would still not be properly charged
to Reeves under that provision.
In sum, Reeves is liable for Protoons’s attorney’s fees as damages for his
breach of the covenant not to sue because the Songwriter Agreement unmistakably
anticipates such liability. However, the same agreement restricts that liability to
actions that meet six criteria, and in this case only the fees stemming from
Protoons’s defense against the affirmative claims in the instant action and
prosecution of its breach of contract counterclaim against Reeves meet those
criteria.
B.
Reach’s Liability For Tortiously Inducing Reeves To Breach The
Covenant Not To Sue
As discussed above, Reach is liable for tortiously interfering with the contract
between Reeves and Protoons. (ECF No. 292.) It is therefore liable for “damages in
the amount of the full pecuniary loss of the benefits of the contract, and … ‘the
elements of damages, including consequential damages, [are] those recognized
17
under the more liberal rules applicable to tort actions.’” Int’l Minerals & Res., S.A.
v. Pappas, 96 F.3d 586, 597 (2d Cir. 1996) (final alteration in original) (quoting
Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 406 N.E.2d 445, 452 n.6 (N.Y.
1980)). Protoons seeks attorney’s fees as consequential damages.
The Court’s summary judgment opinion identified “attorneys’ fees and costs”
as the damages that flowed from Reach’s tortious interference. (ECF No. 258 at 22.)
Courts have differed as to whether such fees and costs are appropriate damages for
a tortious interference claim, in some cases awarding attorney’s fees as
consequential damages and in others refusing to do so. Compare, e.g., Jean v. Auto
& Tire Spot Corp., No. 09–CV–5394 (ARR)(RLM), 2013 WL 2322834, at *6
(E.D.N.Y. May 28, 2013) (awarding attorney’s fees as consequential damages), with
Automotive Elec. Serv. Corp. v. Assoc. of Automotive Aftermarket Distribs., 747 F.
Supp. 1483, 1507-08 (E.D.N.Y. 1990) (rejecting attempt to prove damages element
of a tortious interference claim by reference to attorney’s fees incurred).
In this case, an award of certain attorney’s fees and costs is an appropriate
measure of the damages for which Reach is liable. The nature of Reach’s tortious
interference was to induce Reeves to enter into an agreement to transfer a portion
of his (already transferred) copyright interest to Reach, and then to file a lawsuit
against Protoons. Reach undertook this strategy despite knowing that Reeves had
signed the Songwriter Agreements and, as the Court has found, specifically
knowing that those Agreements contained a covenant not to sue. It was inevitable
that Protoons would be forced to incur attorney’s fees and costs in the ensuing
litigation. Indeed, those fees and costs might even be characterized not as
18
consequential damages but as ‘benefit of the bargain’ damages, as they are exactly
the expenses Reeves promised not to force Protoons to incur when he entered into a
contract with a non-suit provision. However defined, Protoons’s attorney’s fees and
costs defending the suits Reeves and Reach brought are an appropriate component
of damages for Reach’s tortious interference.
Reach is also liable for the attorney’s fees and costs Protoons incurred in
prosecuting its counterclaim for breach of contract against Reeves. Reach’s conduct
had demonstrated its interest in challenging Protoons’s property rights in the
composition. Reeves’s defense to the counterclaim was that the Songwriter
Agreement was unconscionable or otherwise invalid, and had this defense prevailed
Protoons’s copyright interests would have been severely impaired, if not eliminated.
Moreover, such a ruling might have impaired not just Protoons’s interests in the
compositions Reeves co-wrote but also the interests in many other properties that
had been conveyed by similar contracts. It was therefore predictable and
appropriate that Protoons, having been haled into court by Reeves and Reach’s
complaint, would seek to vindicate its contractual rights to the compositions. The
attorney’s fees and costs Protoons incurred in prosecuting the breach of contract
counterclaim are therefore also an appropriate component of Reach’s liability for
tortious interference.
Protoons cannot, however, recover the cost of seeking a liability
determination on its tortious interference counterclaim. “New York case law
repeatedly makes clear … that such fees are recoverable only where a party has
been forced to expend them in some ‘earlier litigation.’” Amusement Indus., Inc. v.
19
Stern, 786 F. Supp. 2d 741, 757 (S.D.N.Y. 2011) (quoting Shindler v. Lamb, 211
N.Y.S.2d 762, 765 (N.Y. Sup. Ct. 1959)). New York law requires those liable for
tortious interference to pay “consequential losses for which the interference is a
legal cause.” Restatement (Second) of Torts § 774A (1977). If the cost of
prosecuting a tortious interference claim was a “consequential loss,” it would mean
that attorney’s fees were available in every successful tortious interference case.
This would make tortious interference an exception to the American Rule, under
which the cost of prosecuting a tort action is borne by the prosecuting party and
does not become a component of damages even if the action succeeds. See Coopers
& Lybrand v. Levitt, 384 N.Y.S.2d 804, 806-07 (N.Y. App. Div. 1976). New York law
is clear, however, that the American Rule applies to tortious interference claims.
See Queenie, Ltd. v. Nygard Int’l, 204 F. Supp. 2d 601, 607 (S.D.N.Y. 2002) (“[W]e
reject the contention that attorneys fees are compensable as actual damages for [a]
tortious interference claim.”); Macy’s, Inc. v. J.C. Penney Corp., 989 N.Y.S.2d 238,
265-66 (N.Y. Sup. Ct. 2014) (applying the American Rule to a tortious interference
claim), aff’d as modified, 6 N.Y.S.3d 7 (N.Y. App. Div. 2015). Therefore, under New
York law Reach’s liability for tortious interference excludes the fees associated with
prosecuting that specific counterclaim.
In sum, Reach is liable for Protoons’s attorney’s fees and costs as damages for
its tortious interference with the contract between Reeves and Protoons. However,
that liability is limited to the fees and costs Protoons incurred in defending itself in
the three actions Reeves and Reach filed and prosecuting its breach of contract
counterclaim against Reeves. The fees and costs associated with prosecuting the
20
tortious interference counterclaim alone are not chargeable to Reach as tortious
interference damages.
C.
Reeves and Reach’s Liability For Attorney’s Fees Under § 505 Of The
Copyright Act
An award of attorney’s fees in this matter is appropriate to promote the
purposes of the Copyright Act. Making Reeves and Reach liable for Protoons’s
attorney’s fees will “encourage the origination of creative works by attaching
enforceable property rights to them.” Matthew Bender & Co. v. W. Publ’g Co., 240
F.3d 116, 122 (2d Cir. 2001) (quoting Diamond v. Am-Law Publ’g Corp., 745 F.2d
142, 147 (2d Cir. 1984)). The fees award will discourage bad faith attempts to
undercut contractual transfers of property rights.
The Court has already determined both that Reeves transferred his copyright
interest in the compositions via the valid, enforceable Songwriter Agreements, in
which he specifically promised not to sue Protoons in connection with those
interests. (ECF No. 258.) The Court has also determined that Reach was aware of
that contractual transfer and even the specific non-suit provision when it initiated
this litigation. (ECF No. 292.) Once Protoons produced the Agreements and
thereby proved that it had not lost the paperwork documenting its interest in the
songs Reeves co-wrote, Reeves and Reach conceded that the contracts transferred
Reeves’s copyright interest. (ECF No. 48.) Thus, Reeves and Reach knew that
Reeves had effectively transferred his copyright interest in the compositions when
they initiated this litigation via a complaint that alleged “that they possess all
rights in and to Reeves’ copyright and royalty interests in the Compositions,
21
including both the so-called publisher’s and writer’s shares therein.” (ECF No. 1 ¶
42.)
“[B]ad faith in the conduct of the litigation is a valid ground for an award of
fees” under § 505. Matthew Bender, 240 F.3d at 125. The initiation of the instant
action was objectively unreasonable in light of the plaintiffs’ knowledge of the
Songwriter Agreements. Protoons did not stand to receive any monetary relief for
prevailing in its defense against plaintiffs’ claims, which makes “the case for
awarding [it] attorneys’ fees … compelling.” Assessment Techs. of WI, LLC v.
WIREdata, Inc., 361 F.3d 434, 436-37 (7th Cir. 2004) (Posner, J.) Congress created
§ 505 to encourage the vindication of enforceable property rights, and when a
rightful copyright owner defends itself from a bad faith claim that it has infringed
the copyright it actually owns, an award of attorney’s fees is appropriate. This is
such a case.
There remains, however, the question of which attorney’s fees are recoverable
under § 505; as discussed above repeatedly, this litigation has unfolded across a
number of years, claims, and courts. The same was true in Twin Peaks
Productions, Inc. v. Publications International, Ltd., 996 F.2d 1366 (2d Cir. 1993).
In that case, an alleged infringing party sought a declaration of its rights by filing
suit in the Northern District of Illinois. Id. at 1371. The copyright owner
successfully moved to dismiss that action for lack of personal jurisdiction and then
filed an action for copyright infringement in the Southern District of New York. Id.
The copyright owner’s suit was successful, and the district court made an award
under § 505 for the copyright owner’s fees in both the Illinois and New York actions.
22
Id. The Second Circuit approved this “somewhat unusual” award because the
copyright owner’s “decision to seek dismissal of the Illinois action on jurisdictional
grounds and to bring the action in New York can be seen as part of a unified course
of action of vindicating its copyrights.” Id. at 1383; see also id. (“Had [the copyright
owner] interposed its copyright claims by way of a counterclaim in a single action, it
would have been allowed recovery of all fees.”). Under Second Circuit precedent,
therefore, the remedies in § 505 of the Copyright Act are not strictly limited to the
instant action.
Applying Twin Peaks to the facts of the instant case, it is clear that § 505
permits an award of fees not only for the instant action but also for the first federal
action and the state action. As in Twin Peaks, both of those actions were dismissed
on jurisdictional grounds and form part of the unified course of action between
Reeves, Reach, and Protoons by which the copyrights in the compositions were
established. The complaints in those cases seek declarations of Reeves and Reach’s
ownership of copyrights and Protoons’s lack thereof. (See ECF No. 1 in 08-cv-7722
(LTS) ¶ 28; Doc. No. 1 in 650360/2008 (Sup. Ct. N.Y.) ¶ 26.) Litigating those
matters was necessary for Protoons to vindicate its property interest, and an award
of attorney’s fees under § 505 is appropriate and advances the purposes of the
Copyright Act.
The same analysis clearly applies to the fees Protoons incurred defending
against Reeves and Reach’s affirmative claims in the instant action. There is no
question that this is a “civil action under [the Copyright Act],” and as discussed
23
above an award of the attorney’s fees incurred defending the initial claims against
Protoons’s copyright interest advances the purposes of that Act.
Protoons’s entitlement to a § 505 award for the fees expended prosecuting its
counterclaims is less certain. In InvesSys, Inc. v. McGraw-Hill Co., 396 F.3d 16 (1st
Cir. 2004), the First Circuit considered “the problem of [§ 505 remedies in] a case
with a mix of claims.” Id. at 19. In that case, the only legal question tried to the
jury was a state-law contract issue; the contract in question purported to transfer
copyright interests. See id. at 18. After the jury answered the state-law question,
the district court entered judgment and included a § 505 award payment. Id. The
First Circuit affirmed, noting that because “the issue actually litigated was
necessary to the assertion of [the copyright] claim,” it would “serve[] Congress’s
purpose to compensate the winning side for attorney’s fees and costs.” Id. at 20.
The First Circuit went on, however, to note that “if, for example, independent issues
were raise and litigated as to fraud that were unnecessary to resolving the
ownership issue,” that would “indicat[e] that significant extra moneys were
expended,” and allocation of fees and costs between the copyright and state law
claims would be “required.” Id.
Courts in this district and circuit have also followed an allocation model
when awarding attorney’s fees under § 505 of the Copyright Act in cases presenting
a mix of claims. In Universal City Studios, Inc. v. Nintendo Co., 615 F. Supp. 838
(S.D.N.Y. 1985), the district court considered a number of counterclaims, including
one for tortious interference, filed by an alleged infringer that had already defeated
the initial infringement claim against it. See id. at 840; 578 F. Supp. 911 (S.D.N.Y.
24
1983) aff’d 746 F.2d 112 (2d Cir. 1984). In a lengthy and well-reasoned opinion, the
district court found that the counterclaim defendant was liable for both vicarious
copyright infringement and tortious interference, but limited its award under § 505
to only those attorney’s fees incurred in establishing the vicarious infringement
counterclaim, not those incurred in connection with the tortious interference
counterclaim. See Universal, 615 F. Supp. at 863-64. The Second Circuit affirmed
this allocation and noted that the award of fees “for the time spent on the vicarious
copyright infringement claim …. was well within the district court’s discretion.”
797 F.2d 70, 78 (2d Cir. 1986).
Under the allocation principle, Protoons is entitled to a § 505 award for its
fees expended prosecuting the breach of contract counterclaim against Reeves but
not for its fees expended prosecuting the tortious interference counterclaim against
Reach. The breach of contract action raised legal issues that went to the heart of
Protoons’s property interests in the compositions, specifically whether the
Songwriter Agreements were unconscionable or otherwise invalid. The litigation of
that counterclaim was necessary to fully vindicate and assert Protoons’s intellectual
property interests, and it raised issues that would have been necessarily litigated if,
for example, Protoons had affirmatively sought a declaration of its copyright
interest in the compositions rather than counterclaiming.
In contrast, the prosecution of the tortious interference counterclaim alone
did not implicate the interests and purposes of the Copyright Act. Although the
validity of the Songwriter Agreements was a threshold issue for the tortious
interference counterclaim, that issue was settled by the Court’s grant of summary
25
judgment on the breach of contract counterclaim. All of the proceedings that
followed were, or could have been, limited to questions about Reach’s knowledge of
the covenant not to sue, an issue that had no bearing on Protoons’s property rights.
Awarding attorney’s fees for such litigation would not advance the purposes of the
Copyright Act and is thus inappropriate under § 505.
D.
Punitive Damages
This case does not meet the demanding punitive damages standard. See TVT
Records v. Island Def Jam Music Grp., 412 F.3d 82, 94 (2d Cir. 2005). Reeves and
Reach brought a lawsuit they were contractually prohibited from bringing, but their
liability for that fact is captured by assessing damages for breach of contract and
tortious interference and awarding attorney’s fees in accordance with the provisions
of the breached Songwriter Agreements. Although this litigation stretched over
several years, that fact is not solely attributable to Reeves and Reach. For example,
after Protoons produced the Songwriter Agreements, Reeves and Reach did not
ignore the plain terms but instead “acknowledge[ed] that those agreements assign
and transfer the copyright ownership interest of Reeves.” (ECF No. 48.) This wellfounded concession was dispositive as to the affirmative claims in their complaint,
which were promptly dismissed following the concession. (ECF No. 60.)
The Court finds that punitive damages are not necessary in this case to deter
violations like the breach of contract and tortious interference for which Reeves and
Reach are liable. Similarly, punitive damages are not necessary in this case to
vindicate any public interest that consequential damages would inadequately
address. Therefore, no punitive damages shall be assessed.
26
E.
Fact-Specific Analysis Of Damages Amounts
In addition to challenging their legal liability for damages, Reeves and Reach
also challenge a number aspects of Protoons’s damages request.
1.
Protoons’s Alleged Failure To Mitigate
Reeves and Reach allege that Protoons failed to mitigate the damages it
suffered from Reeves’s breach of contract and Reach’s tortious interference in two
ways. First, Protoons did not produce a copy of the Songwriter Agreements until
January 2010, more than a year and a half after Reach first contacted Protoons
regarding Reach’s claim to a copyright interest in Reeves’s Run–D.M.C. works.
Second, Protoons did not move for attorney’s fees after Judge Swain dismissed
Reeves and Reach’s affirmative claims. Third, Protoons did not inform the district
court of federal question jurisdiction during the first federal action. All of these
arguments are without merit.
Protoons was under no obligation to produce the contracts before litigation
and it is not clear that doing so would have limited this litigation; after Protoons did
produce the Songwriter Agreements, Reeves and Reach still moved to amend their
complaint to assert new claims. (ECF No. 46.) Moreover, the Court has already
found that in 2007 Reach knew that Reeves had signed the Songwriter Agreements.
(ECF No. 292, 468:14-15, 469:3-6.) The Court further concluded that Protoons was
under no obligation to provide copies of the Agreements before discovery. (Id.,
470:1-9.) Reach and Reeves may have changed their litigation strategy had they
known that Protoons still had the necessary documentation of the contracts, but
Protoons was under no obligation to make plaintiffs’ fishing expedition more
27
efficient. The fact that Protoons did not make a document disclosure until the
appropriate moment in discovery is not a basis on which the Court will limit
Protoons’s recovery.
Protoons was similarly under no obligation to abandon its counterclaims or
move for immediate attorney’s fees upon dismissal of plaintiffs’ affirmative claims.
Nor is it clear that moving for attorney’s fees under § 505 of the Copyright Act or
the fee-shifting provision of the Songwriter Agreement at an earlier stage would
have mitigated any of the damages Protoons seeks. As discussed above, Reeves and
Reach are each liable for the attorney’s fees Protoons expended prosecuting its
breach of contract counterclaim. Thus, Protoons would have been entitled to seek
damages a second time after it earned judgment on its counterclaims, likely leading
to duplicative litigation on attorney’s fees. Protoons’s decision to establish liability
before damages is not, in this case, a proper basis to limit its recovery.
Finally, Protoons was under no obligation to act to prevent Reeves and Reach
from voluntarily dismissing their first-filed federal action. Protoons did not move to
dismiss that action; instead, Judge Swain sua sponte ordered plaintiffs to
demonstrate a basis for subject matter jurisdiction. (ECF No. 6 in 08-cv-7722
(LTS).) Reeves and Reach’s complaint in that matter explicitly raises the question
of their ownership “of each of the copyrights in and to the Compositions.” (ECF No.
1 in 08-cv-7722 (LTS) ¶ 30.) Reeves and Reach voluntarily dismissed their action
rather than substantively respond to Judge Swain’s order, and they did so before
Protoons had ever answered or appeared in the matter. Protoons’s recovery will not
be reduced on the basis of plaintiffs’ litigation decisions.
28
2.
Fees Expended On Levinsohn
Reeves and Reach argue that any fee award should not include the time
charged by Mark Levinsohn. Protoons represents that Levinsohn drafted the
Songwriter Agreements and provided background information about the
transactions at issue. (ECF No. 311, ¶¶ 31-34.) Protoons included $111,856.25 in
Levinsohn’s fees and $49.25 in Levinsohn’s costs in its damages request. (Id. ¶ 34.)
The Court agrees with Reeves and Reach that is not appropriate to include
hours billed by a transactional attorney in this matter. Protoons’s description of
Levinsohn’s contributions indicate that he served as a fact witness. He is not
alleged to have provided legal services in the course of the litigation; indeed,
Protoons’s submissions explicitly identify him as “Protoons’ transactional attorney.”
(Id. ¶ 32.) As Reeves and Reach point out, Protoons could have subpoenaed
Levinsohn and compelled his testimony without incurring a significant hourly rate.
Fed. R. Civ. P. 45. Protoons has not identified any precedential support for its
request that Levinsohn’s fees be bundled into the fees its litigating attorneys
incurred, and the Court finds that doing so would be inappropriate under the facts
of this case. The fees and costs for which Levinsohn was responsible will therefore
not be awarded.
3.
Proportionality Between The Fee Request And The Amount In
Controversy
Reeves and Reach argue that Protoons’s request for more than $ 2 million in
fees is improperly large given the relative absence of evidence as to the economic
value of the particular copyrights at issue. This argument fails for two reasons.
29
First, Congress’s purpose in enacting the fee-shifting rule in § 505 of the
Copyright Act was precisely to incentivize and reward efforts to assert intellectual
property rights. When defendants successfully vindicate their copyright interests
the fees they recover will frequently constitute the full extent of their recovery.
Reeves and Reach have not identified any suggestion that Congress intended to link
the remedies it provided in § 505 to the economic value of the underlying property,
and this Court cannot see any justification for such a rule.
Second, the implications of the legal challenges in this case were wider than
the particular compositions at issue. Protoons’s experts have testified, both by
affidavit and during the tortious interference trial, that non-recourse and feeshifting provisions are found in other industry contracts. A finding that the
Songwriter Agreement was unconscionable or otherwise invalid, as Reeves and
Reach asserted in litigating the breach of contract counterclaim, could well have
called the validity of many similar contracts into question. Under these
circumstances Protoons was dedicated to vindicating its contractual rights, and its
successful efforts to do so will not be reduced based on a comparison with the
uncertain value of the particular compositions in which Reeves and Reach asserted
a copyright interest they knew had been entirely assigned years before.
4.
Protoons’s Litigation Tactics
Reeves and Reach fault Protoons for employing “scorched-earth tactics” in the
process of litigating this case and seek a number of reductions for specific tasks
alleged to have been wasteful. The Court has reviewed those tasks and concludes
that they are not an appropriate basis for an award reduction. None of the
30
allegedly unnecessary or inefficient tasks demonstrate bad faith or other excessive
or redundant litigation practices that should be affirmatively deterred.
5.
Redactions In Billing Records and Block Billing
Reeves and Reach note that the invoices Protoons submitted include
redactions and some block billing. Some entries, totaling $23,294, are redacted
completely. Other entries, totaling $358,229, are partially redacted. In addition to
these, Reeves and Reach highlight examples of circumstances in which Protoons’s
attorneys aggregated a dozen or more tasks into single entries that covered nine or
more hours. This practice of block-billing “can make it difficult for a court to
conduct its reasonableness analysis, because a single billing entry might mix tasks
that are compensable with those that are not.” Hnot v. Willis Grp. Holdings Ltd.,
No. 01 Civ. 6558 (GEL), 2008 WL 1166309, at *6 (S.D.N.Y. April 7, 2008).
The Court has reviewed every invoice submitted in this case, and agrees that
the redactions and block-billing complicate efforts to comprehensively assess the
reasonableness of the fees and expenses in this case. This is particularly so here,
where there must be some delineation of expenses incurred in prosecuting tortious
interference claims, which are not recoverable, from all other legal work, which is.
However, in these invoices the examples of redactions and block-billing are
certainly the exception, rather than the rule. The large majority of the entries are
detailed, specific, and fully disclosed. The Court therefore concludes that the
combined effects of redaction and block-billing in this case are appropriate captured
by reducing the final award by five percent.
31
F.
Results Of The Above
Protoons seeks a total of $1,980,545 in attorney’s fees and $273,545 in costs
for a total of $2,254,090. (ECF No. 311, ¶ 5.) As discussed above, this total includes
$111,905 in fees and costs billed by Mark Levinsohn; that amount will be deducted.
(Id. ¶ 34.) The total also includes $104,017 in fees and costs billed by Nancy
Harkness, an expert on industry customs hired by Protoons. (Id. ¶ 38.) The
Court’s review of her expert report demonstrates that its topic was whether Reach
acted in accordance with industry customs when it entered into the 2007 agreement
with Reeves. (Id. Exh. H.) This was only relevant to the tortious interference
counterclaim, and as such the amounts associated with Harkness will similarly be
deducted. Subtracting the Levinsohn and Harkness costs from Protoons’s total
requested award reduces it to $2,038,168.
As discussed above, the Court granted summary judgment to Protoons on the
breach of contract counterclaim in an opinion issued November 10, 2014. (ECF No.
258.) After that opinion was issued, the only remaining issue in the case was the
tortious interference counterclaim, for which Protoons cannot recover its attorney
fees and costs. Therefore, the fees and costs incurred after November 10, 2014,
which according to Protoons’s records total $352,544, will be deducted. (ECF No.
311, Exhs. B & C.) This reduces the total potential award to $1,685,624.
Accounting for the amounts spent on the tortious interference claim before
November 10, 2014, requires the Court to parse the invoices Protoons has submitted
for review. In some circumstances, the fees attributable to the tortious interference
claim are apparent: Protoons itself has identified at least $41,806 in attorney’s fees
32
that, by its own accounting, were incurred in December 2009 solely relating to the
tortious interference counterclaim. (Id., p. 12.) That amount will be deducted,
bringing the total potential award to $1,643,818.
The Court’s review of Protoons’s records demonstrates that for many other
months it is not possible to precisely delineate what legal expenses would not have
been incurred but for the pursuit of the tortious interference counterclaim. Much of
the pre-November 2014 preparation would no doubt have been required even in the
absence of this claim, because at that time the breach of contract action, for which
Protoons is entitled to recover its fees, remained unresolved. In circumstances such
as these, it is appropriate to reduce a fee award by some percentage after assessing
the state of the case at various points in time and the work that the tortious
interference counterclaim necessitated. See Beastie Boys Monster Energy Co., 112
F. Supp. 3d 31, 58 (S.D.N.Y. 2015). The Court concludes, based on its review of the
descriptions and details in the invoices, that a further ten percent reduction of the
total fee award appropriately reflects the percentage of the effort of Protoons’s
counsel before November 2014 that was dedicated to prosecuting the tortious
interference counterclaim.
This ten percent deduction is combined with the five percent reduction for
block-billing and redactions discussed above. Applying these reductions to
$1,643,818, the operative amount of fees and costs after the appropriate deductions,
reduces the total award to its final amount, $1,397,245.
33
IV.
CONCLUSION
For the reasons stated above, Protoons’s motion for damages is GRANTED.
Damages in the amount of $1,397,245 are awarded as set forth above. The Clerk of
Court is directed to terminate the motion at docket number 309 and to terminate
this matter.
SO ORDERED.
Dated:
New York, New York
February 19, 2016
_______________________________
KATHERINE B. FORREST
United States District Judge
34
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