Danaher Corporation v. The Travelers Indemnity Company et al

Filing 245

MEMORANDUM AND ORDER re: 225 MOTION for Attorney Fees and Pre-Judgment Interest filed by Danaher Corporation, 230 MOTION for Attorney Fees filed by Atlas Copco North America, Inc.: Within 30 days of the date of th is order, Danaher and Atlas Copco shall submit supplemental memoranda (one for each fee application at issue) addressing the deficiencies identified above. Travelers shall have 14 days to respond, and Danaher and Atlas Copco shall submit replies, if any, within seven days of those responses. (Signed by Magistrate Judge James C. Francis on 9/30/2014) Copies Mailed By Chambers. (tn)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - -:
DANAHER CORPORATION,
:
:
Plaintiff,
:
:
- against :
:
THE TRAVELERS INDEMNITY COMPANY,
:
et al.,
:
:
Defendants.
:
- - - - - - - - - - - - - - - - - -:
JAMES C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE
In

this

insurance

coverage

10 Civ. 0121 (JPO) (JCF)
MEMORANDUM
AND ORDER

action,

it

has

already

been

determined that defendants and third-party plaintiffs The Travelers
Indemnity

Company

and

Travelers

Casualty

and

Surety

Company

(collectively, “Travelers”) have a duty to defend third-party
defendant

Atlas

Copco

North

America,

LLC

(“Atlas

Copco”)

in

underlying actions related to asbestos and silica exposure filed in
courts around the country (the “underlying actions”), as well as to
pay certain attorneys’ fees expended in this action.

Two motions

are

Defend

currently

before

me.

In

one

(the

“Duty

to

Fee

Application”), Atlas Copco asks for an order calculating the
attorneys’ fees and costs Travelers must pay in this action in
connection with the ruling that Travelers has a duty to defend the
underlying actions.

In the other (the “Underlying Actions Fee

Application”), plaintiff Danaher Corporation (“Danaher”) and Atlas
Copco seek an order calculating the costs and attorneys’ fees that
Travelers owes for the defense of the underlying actions.

Because

I cannot resolve these disputes on the current briefing, the
parties shall submit supplemental briefs on both motions.
1

See

Scott v. City of New York, 643 F.3d 56, 59 (2d Cir. 2011)
(remanding to district court for fee applicant to submit new
application for attorneys’ fees where original application was
deficient).
Background
The factual background of this dispute is set out in a number
of earlier opinions. See Danaher Corp. v. Travelers Indemnity Co.,
No. 10 Civ. 0121, 2014 WL 1133472, at *1 (S.D.N.Y. March 21, 2014)
(“Danaher III”); Danaher Corp. v. Travelers Indemnity Co., No. 10
Civ. 0121, 2013 WL 364734, at *1 (S.D.N.Y. Jan. 31, 2013) (“Danaher
I”); Danaher Corp. v. Travelers Indemnity Co., No. 10 Civ. 0121,
2013 WL 150027, at *1 (S.D.N.Y. Jan. 10, 2013).

But it is the

procedural history that is particularly relevant here.
In September 2012, the Honorable J. Paul Oetken, U.S.D.J.,
granted a motion for partial summary judgment brought by Atlas
Copco and Danaher, ruling that Travelers had a duty to defend Atlas
Copco

in

asbestos

the
and

aforementioned
silica

underlying

exposure.

(Order

litigation
dated

concerning

Sept.

6,

2012

(“September 6 Order”); Transcript of Oral Argument dated Sept. 6,
2012, attached as Exh. 1 to Certification of Brian J. Osias dated
Aug. 1, 2014, at 57-59).
that

under

the

rule

Atlas Copco then made a motion, arguing

explicated

in

Mighty

Midgets,

Inc.

v.

Centennial Insurance Co., 47 N.Y.2d 12, 416 N.Y.S.2d 559 (1979),
and U.S. Underwriters Insurance Co. v. City Club Hotel, LLC, 3
N.Y.3d 592, 789 N.Y.S.2d 470 (2004) (“City Club Hotel”), Travelers
was obligated to reimburse it for attorneys’ fees and expenses
Atlas Copco incurred in securing that favorable decision.
2

Danaher

I, 2013 WL 364734, at *2.

I recommended granting the motion, id.

at *6, and Judge Oetken agreed, holding that “Atlas Copco is
entitled to the attorney’s fees it has incurred in procuring the
ruling that Travelers had a duty to defend,” Danaher Corp. v.
Travelers Indemnity Co., No. 10 Civ. 0121, 2013 WL 1387017, at *3
(S.D.N.Y. April 5, 2013) (“Danaher II” or the “April 5 Order”).
Meanwhile, Danaher and Atlas Copco filed a motion to hold
Travelers in contempt for violating the September 6 Order by
failing to pay all of the verified defense costs in the underlying
actions plus pre-judgment interest.

Atlas Copco later filed a

motion to hold Travelers in contempt for violating Danaher II by
failing to pay attorneys’ fees Atlas Copco expended in litigating
the duty-to-defend issue.
motions,

noting

that

Judge Oetken denied both contempt

neither

prior

order

addressed

the

reasonableness of any claimed costs and attorneys’ fees and that
the September 6 Order had not addressed whether pre-judgment
interest should be awarded, and referred those issues to me.
Danaher III, 2014 WL 1133472, at *7-9.
Discussion
A.

Legal Standard on Fee Applications

“Where, as here, an insured is forced to defend an action
because the insurer wrongfully refused to provide a defense, the
insured is entitled to recover its reasonable defense costs,
including attorney’s fees.”

U.S. Underwriters Insurance Co. v.

Weatherization, Inc., 21 F. Supp. 2d 318, 326 (S.D.N.Y. 1998)
(“Weatherization”).

The fee applicant must “adequately document[]

the request” so that the court can fulfill its “duty to determine
3

the reasonableness of the amount.”

Id.

The fee award must be based on the court’s determination of a
“presumptively reasonable fee.”

Sandoval v. Materia Bros. Inc.,

No. 11 Civ. 4250, 2013 WL 1767748, at *3 (S.D.N.Y. March 5, 2013)
(quoting Arbor Hill Concerned Citizens Neighborhood Association v.
County of Albany, 522 F.3d 182, 189 (2d Cir. 2008)).
calculated

by

multiplying

“a

reasonable

hourly

reasonable number of hours expended on the case.”

This fee is
rate

by

the

Sandoval, 2013

WL 1767748, at *3; see Millea v. Metro–North Railroad Co., 658 F.3d
154, 166 (2d Cir. 2011).
Determining a reasonable hourly rate involves “a case-specific
inquiry into the prevailing market rates for counsel of similar
experience and skill to the fee applicant’s counsel,” which may
include “judicial notice of the rates awarded in prior cases and
the court’s own familiarity with the rates prevailing in the
district.”
2005).

Farbotko v. Clinton County, 433 F.3d 204, 209 (2d Cir.

The hourly rates must be “in line with those [rates]

prevailing in the community for similar services by lawyers of
reasonably comparable skill, experience, and reputation.”

Reiter

v. MTA New York City Transit Authority, 457 F.3d 224, 232 (2d Cir.
2006) (alteration in original) (internal quotation marks omitted);
see also Simmons v. New York City Transit Authority, 575 F.3d 170,
174 (2d Cir. 2009).

The party requesting fees must “produc[e]

satisfactory evidence that the requested rates are in line with
those

prevailing

in

the

community.”

Reiter

v.

Metropolitan

Transportation Authority of New York, No. 01 Civ. 2762, 2004 WL
2072369, at *4 (S.D.N.Y. Sept. 10, 2004).
4

“[A]n attorney’s

customary rate is a significant factor in determining a reasonable
rate.

Indeed, as a logical matter, the amount actually paid to

counsel by paying clients is compelling evidence of a reasonable
market rate.”

Id. at *5 (internal citations omitted).

However,

the court nevertheless has some responsibility to “disciplin[e] the
market.”

Arbor Hill, 522 F.3d at 184.

There is a presumption that “[t]he appropriate hourly fee to
be applied in calculating an award of attorneys’ fees is the
prevailing rate in the district in which the suit is litigated
. . . .”

Atlantic States Legal Foundation, Inc. v. Onondaga

Department of Drainage & Sanitation, 899 F. Supp. 84, 90 (N.D.N.Y.
1995).

However, a court may approve rates higher than those

typical of the litigation forum if the fee applicant makes a
“particularized showing,” based on “experienced-based, objective
factors,”

that

out-of-forum

counsel

“would

likely

(not

just

possibly) produce a substantially better net result.” Simmons, 575
F.3d at 175-76.
After establishing the appropriate hourly rate, a court must
determine how much time was reasonably expended in order to arrive
at the presumptively reasonable fee. “The relevant issue [] is not
whether hindsight vindicates an attorney’s time expenditures, but
whether, at the time the work was performed, a reasonable attorney
would have engaged in similar time expenditures.”

Grant v.

Martinez, 973 F.2d 96, 99 (2d Cir. 1992); accord Mugavero v. Arms
Acres, Inc., No. 03 Civ. 5724, 2010 WL 451045, at *6 (S.D.N.Y. Feb.
9, 2010). A court should exclude from this calculation “excessive,
redundant or otherwise unnecessary hours.”
5

Quaratino v. Tiffany &

Co., 166 F.3d 422, 425 (2d Cir. 1997); accord Luciano v. Olsten
Corp., 109 F.3d 111, 116 (2d Cir. 1997) (“If the district court
concludes that any expenditure of time was unreasonable, it should
exclude these hours from the lodestar calculation.”). It can do so
by making specific deductions or “by making an across-the-board
reduction in the amount of hours.”

Luciano, 109 F.3d at 117;

accord Vorcom Internet Services, Inc. v. L & H Engineering & Design
LLC, No. 12 Civ. 2049, 2014 WL 116130, at *5 (S.D.N.Y. Jan. 13,
2014).
B.

Duty to Defend Fee Application
1.

Scope of Danaher II

Before discussing why supplemental briefing is needed on the
Duty to Defend Fee Application, I will, for the sake of efficiency,
correct Atlas Copco’s misunderstanding of the scope of Danaher II.
Atlas Copco contends that it is entitled to “ALL of [its]
reasonable fees incurred in defending this action through [the date
of the present motion] and on an ongoing forward [basis].”

(Atlas

Copco North America Inc.’s Memorandum of Law in Support of its
Motion for Reimbursement of Legal Fees and Costs Incurred to Defend
the Declaratory Judgment Action Brought Against Atlas Copco by
Travelers Indemnity Company and Travelers Casualty and Surety
Company (“Atlas Copco Memo.”) at 3).
In its original motion regarding the costs and attorneys’ fees
expended in this action, Atlas Copco sought a ruling “that . . .
Travelers Indemnity Company [] must pay Atlas Copco’s attorney’s
fees and expenses incurred in securing this Court’s decision
granting Atlas Copco’s Motion for Partial Summary Judgment on the
6

Duty to Defend.”

(Brief of Atlas Copco North America Inc. in

Support of its Motion for Partial Summary Judgment that Travelers
Indemnity Company Must Pay Atlas Copco’s Attorney’s Fees Incurred
in Securing the Decision Granting Atlas Copco’s Motion for Partial
Summary Judgment on the Duty to Defend at 1).
what it got.

That is precisely

In Danaher I, I recommended that Atlas Copco receive

from Travelers “the attorneys’ fees it expended in procuring the
ruling that Travelers has a duty to defend.”
*6.

2013 WL 364734, at

Judge Oetken accepted the recommendation regarding fees Atlas

Copco previously incurred, while noting that “attorney’s fees it
will

expend

in

defending

the

action”

were

recommendation and, consequently, his order.
1387017, at *3 & n.2.

excluded

from

my

Danaher II, 2013 WL

Judge Oetken thereafter referred to me the

issues raised in Atlas Copco’s motion to hold Travelers in contempt
of that order, Danaher III, 2014 WL 1133472, at *9 -- a motion in
which Atlas Copco asserted:
The April 5 Order granted Atlas Copco[’s] motion for
partial summary judgment that Travelers was required to
pay Atlas Copco’s attorney’s fees incurred in procuring
a duty to defend underlying silica and asbestos claims.
The April 5 Order specifically noted that “Atlas Copco is
entitled to attorney’s fees it has incurred in procuring
the ruling that Travelers had a duty to defend.” This
Order unambiguously required Travelers to pay . . .
[those] fees . . . .
(Brief of Atlas Copco North America, LLC in Support of its Motion
to

Hold

Defendants

Travelers

Indemnity

Company

and

Travelers

Casualty and Surety Company, f/k/a Aetna Casualty & Surety Company
in Contempt of this Court’s April 5, 2013 Order at 6 (internal
citation omitted)).

Thus, it appears that, up until the present

fee application, all interested parties (and judges) have agreed
7

that Danaher II unambiguously ordered Travelers to pay only the
expenses

connected

with

procuring

the

September

6

Order.

Therefore, the only fees that are properly at issue in the Duty to
Defend Fee Application are fees incurred up to and including
September 6, 2012, and subsequent briefing on this motion should
not address fees incurred after that date.
2.

Attorneys’ Hourly Rates

Atlas Copco claims the following hourly rates for seven
attorneys from the law firm Reed Smith LLP:
Paul Breene, a partner -- $550/hour and
depending on when the work was performed;

$500/hour,

Jean Farrell, a partner -- $610/hour and $400/hour,
depending on when the work was performed;
John Berringer, a partner -- $670/hour;
Ann Kramer, a partner -- $730/hour;
Michael DiCanio, an associate -- $440/hour;
Whitney Clymer, an associate -- $385/hour, $400/hour, and
$470/hour, depending on when the work was performed;
Ruth Thomas, an associate -- $340/hour.
(Reed Smith Invoices, attached to letter of Paul E. Breene dated
May 31, 2013, attached as Exh. A to Affirmation of Paul E. Breene
dated August 1, 2014 (“Breene Aff.”)).

Rates for three paralegals

range between $200/hour and $275/hour, and rates for three members
of the support staff range between $125/hour and $140/hour.

(Reed

Smith Invoices; Brief of the Travelers Indemnity Company and
Travelers Casualty and Surety Company in Opposition to Atlas Copco
North America Inc.’s Motion for Reimbursement of All Legal Fees and
Costs Incurred in this Action (“Travelers Duty to Defend Memo.”) at

8

15).
Inexplicably, Atlas Copco has not provided any information
regarding the experience of these attorneys and staff members.
Such information is required if I am to engage in the necessary
“case-specific inquiry into the prevailing market rates for counsel
of similar experience and skill to the fee applicant’s counsel.”
Farbotko, 433 F.3d at 209. Nor has Atlas Copco bothered to compare
the rates its counsel has charged to rates charged by counsel in
similar cases in this district.

Atlas Copco has thus failed to

“adequately document[] the request” such that I cannot fulfill my
“duty to determine the reasonableness” of the requested amount.
Weatherization, 21 F. Supp. 2d at 327.
3.

Compensable Hours

Travelers appears to argue that Danaher II entitles Atlas
Copco to only those fees and costs expended on the motion for
partial summary judgment on the duty to defend. (Travelers Duty to
Defend Memo. at 10, 15; Letter of Robert W. Mauriello dated June
12, 2014, attached as Exh. B to Breene Aff., at 8 (“[W]e deducted
attorney time for tasks that were related to all issues in this
case rather than the motion for summary judgment.”).

For example,

it complains that such tasks such as drafting pleadings and
participating in discovery “should not be included in the amount of
defense costs Atlas Copco is seeking from Travelers for securing
the September 6 Decision.” (Travelers Duty to Defend Memo. at 10).
There is no support in logic or law for this position.

It is

unclear how the ruling that Travelers had a duty to defend could
have

been

procured

without,

for
9

example,

Atlas

Copco’s

participation in discovery in this action.

No language in Danaher

I or Danaher II indicates that Atlas Copco’s right to reimbursement
extends

only

to

expenses

incurred

in

producing

the

motion.

Finally, the cases upon which Danaher I and Danaher II rely are
plain that relief is not so limited.

See, e.g., U.S. Underwriters

Insurance Co. v. City Club Hotel, 369 F.3d 102, 110 (2d Cir. 2004)
(“[A]n insured who prevails in a declaratory action brought by an
insurance company seeking to deny a duty to defend and indemnify is
allowed

to

recover

fees

expended

in

defending

against

that

action.”), cited in Danaher II, 2013 WL 1387017, at *2; City Club
Hotel, 3 N.Y.3d at 597-98, 789 N.Y.S.2d at 473 (“The reasoning
behind [this rule] is that an insurer’s duty to defend an insured
extends to the defense of any action arising out of the occurrence,
including a defense against an insurer’s declaratory judgment
action.”), cited in Danaher I, 2013 WL 364734, at *3.
Travelers’ responsibility to pay attorneys’ fees in this case
grows out of its duty to defend.
*3.

See Danaher I, 2013 WL 364734, at

The relevant inquiry is whether an insurer that honored its

duty to defend would be responsible for paying for time expended
performing a particular task.

See Chase Manhattan Bank v. Each

Individual Underwriter Bound to Lloyd’s Policy No. 790/004A89005,
258 A.D.2d 1, 5, 690 N.Y.S.2d 570, 573 (1st Dep’t 1999) (“[D]efense
expenses are recoverable by the insured, even if incurred in
defending against an insurer seeking to avoid coverage for a
particular claim.

Recovery of attorneys’ fees in such a case . .

. is incidental to the insurer’s duty to defend, and the right to
such recovery arises from that contractual duty.”).
10

The parties,

however, have not briefed the issue in this way.

Atlas Copco

insists Danaher II necessarily entitles it to everything it has
expended in this action; Travelers contends it must pay only for
costs and fees directly related to the motion for partial summary
judgment. Because neither view is correct, the parties have failed
to address pertinent issues: for example, if any of the time
expenditures

claimed

are

traceable

only

to

Atlas

Copco’s

counterclaims or cross-claims against other insurance companies,
and, if so, whether Travelers’ duty to defend requires payment for
such time.

See, e.g., Weatherization, 21 F. Supp. 2d at 328

(distinguishing costs incurred in connection with affirmative
claims from those incurred in defending action against insurer);
Smart Style Industries, Inc. v. Pennsylvania General Insurance Co.,
930 F. Supp. 159, 165 (S.D.N.Y. 1996) (“[The insured] is entitled
to recover costs incurred in connection with its claims for
declaratory relief that were or would have been incurred in any
event in connection with its defense of the counterclaims.”).
Supplemental briefing should therefore address the fees and costs
that Atlas Copco may recover pursuant to Travelers’ duty to
defend.1
C.

Underlying Claims Fee Application

Danaher and Atlas Copco seek approximately $8.8 million in
defense fees and costs incurred in the defense of the underlying
claims, plus pre-judgment interest.

(Brief in Support of Danaher

Corporation’s and Atlas Copco North America LLC’s Motion for

1

This is not an invitation for Travelers to re-argue issues
presented and decided in Danaher I and Danaher II.
11

Reimbursement of Legal Fees and Costs Incurred as a Result of
Travelers’ Breach of its Duty to Defend and for Pre-Judgment
Interest

(“Danaher

Memo.”),

at

1-2).

In

support

of

the

application, they submit, among other things, a ledger reflecting
the

defense

cost

information

for

each

of

the

claims2

and

a

declaration providing an opinion on the fees charged by the firms
litigating those claims (Declaration of Teresa Bohne-Huddleston in
Support of Danaher Corporation’s and Atlas Copco North America
LLC’s Motion for Reimbursement of Legal Fees and Costs Incurred as
a Result of Travelers’ Breach of its Duty to Defend and for PreJudgment Interest dated July 31, 2014 (“Bohne-Huddleston Decl.”)).3
The ledger includes almost 9,000 entries reflecting invoices issued
in connection with attorneys’ fees and costs in the underlying
actions.

It includes information such as the claimant’s name,

payee, amount due (including the total amount, as well as the
amount for services and for expenses), and the forum court.
Travelers has received the ledger as well as all of the underlying
invoices.

(Travelers Underlying Claims Memo. at 12 n.4).

Focusing on approximately 20 of the costliest underlying
claims, Travelers challenges the fees on a number of grounds,
arguing

that

some

firms

charged

unreasonable

hourly

rates,

2

Because of its size, this ledger was provided to the Court
on a CD. (Danaher Memo. at 4 n.1).
3

Travelers argues that this declaration should be excluded.
(Brief of the Travelers Indemnity Company and Travelers Casualty
and Surety Company in Opposition to Danaher Corporation’s and Atlas
Copco North America, LLC’s Motion for Legal Fees and Costs Incurred
in Defense of the Underlying Claims (“Travelers Underlying Claims
Memo.”) at 19-22). I reserve decision on that issue at this time.
12

overstaffed their cases, and block-billed an unreasonably high
proportion of invoice entries.
at 6-10).

(Travelers Underlying Claims Memo.

Danaher and Atlas Copco contend that the hourly rates

are reasonable, comparing them to hourly rates approved in actions
litigated in this district.

(Danaher Memo. at 7).

They further

argue that Travelers should not compare the charged hourly rates to
rates that Travelers has approved in other cases, pointing to Ms.
Bohne-Huddleston’s

opinion

that

insurance

companies

are

able

“obtain volume discounts on rates for time that is charged from law
firms on their approved defense counsel list.”

(Danaher Memo. at

8-9; Bohne-Huddleston Decl., ¶ 14). According to Danaher and Atlas
Copco, the fact that they actually paid the hourly rates charged
makes such rates “presumptively reasonable, and Travelers has
failed to rebut this presumption. (Danaher Memo. at 6; Reply Brief
in Further Support of Danaher Corporation’s and Atlas Copco North
America LLC’s Motion for Reimbursement of Legal Fees and Costs
Incurred as a Result of Travelers’ Breach of its Duty to Defend and
for Pre-Judgment Interest at 2-3).
However, even where a client has actually paid counsel’s
hourly rates after its insurer breaches its duty to defend, the
court must still determine whether such rates are reasonable. See,
e.g., Weatherization, 21 F. Supp. 2d at 326-27.

Danaher and Atlas

Copco have not attempted to show that the rates charged are in line
with rates charged in similar cases in the forums in which they
were litigated.

Moreover, the submissions indicate that, in some

of the actions identified by Travelers, out-of-district counsel was
retained.

(Travelers Underlying Claims Memo. at 7).
13

But there is

no discussion of whether out-of-district counsel charged higher
rates than counsel within the district would have and,
those

rates

are

Both of

reasonable.

these

issues

if so, why
should

be

addressed in supplemental briefing.
Conclusion
Within 30 days of the date of this order, Danaher and Atlas
Copco

shall

submit

supplemental

memoranda

(one

for

each

fee

application at issue) addressing the deficiencies identified above.
Travelers shall have 14 days to respond,
Copco shall submit replies,

if any,

and Danaher and Atlas

within seven days of those

responses.

SO ORDERED.

~c.~~~~uh
~~~;~D

STATES MAGISTRATE JUDGE

Dated:

New York, New York
September 30, 2014

Copies mailed this date:
Brian J. Osias, Esq.
Gita F. Rothschild, Esq.
Mccarter & English LLP
245 Park Avenue, 27th Floor
New York, New York 10167
Stephen V. Gamigliano, Esq.
Robert w. Mauriello, Jr., Esq.
Graham Curtin PA
4 Headquarters Plaza
P.O.

Box l99l

Morristown, New Jersey 07962

14

Paul E. Breene, Esq.
Jean M. Farrell, Esq.
Reed Smith LLP
599 Lexington Avenue, 22nd Floor
New York, New York 10022

15