KGK Jewelry LLC v. ESDNetwork et al
Filing
109
OPINION AND ORDER: For the foregoing reasons, KGK's fee application is GRANTED in the amount of $10,334.98 and ESDN's motion to strike is DENIED. KGK and its former counsel Adam Engel will be jointly and severally responsible for paying the fees herein awarded. (Signed by Magistrate Judge Ronald L. Ellis on 3/2/2015) (kko)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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KGK JEWELRY LLC,
Plaintiff,
OPINION AND
ORDER
- against 11-CV-9236 (LTS)(RLE)
ESDNETWORK, et al.,
Defendants.
RONALD L. ELLIS, United States Magistrate Judge:
I.
INTRODUCTION
Plaintiff KGK Jewelry LLC ("KGK") brings this action for breach of contract, tortious
interference of a contract, and unfair competition against Defendants Electronic Sales Dealer
Network, Inc. and Steve Yeko, its Chief Executive Officer (collectively, "ESDN"). Defendants
issued subpoenas duces tecum to four non-party corporations. KGK moved to quash these nonparty subpoenas pursuant to Rule 45 of the Federal Rules of Civil Procedure and for sanctions
pursuant to Rule 45, 28 U.S.C. § 1927, and the Court's inherent power. (Doc. No. 40) The Court
denied KGK's motion to quash, but granted its motion for sanctions. (Doc. No. 69) KGK now
seeks an order granting fees of $51,734.83. (Doc. No. 72) For the reasons set forth below,
KGK's application is GRANTED in the amount of $10,334.98.
II.
BACKGROUND
In an Order issued on March 21, 2013, the Court held that ESDN' s actions in issuing
subpoenas to Kay, Jared, Le Vian, and JBT were taken: (1) entirely without merit; and (2) for the
improper purpose of harassment. (Doc. No. 69) The Court determined that the reasons proffered
by ESDN in support of the subpoenas did not withstand scrutiny and did not demonstrate
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relevance to the current action. (Id) The Court granted KGK's motion for sanctions and
directed it to submit an affidavit detailing reasonable hours and rates associated with its motion
for sanctions. (Id)
On April 9, 2014, new counsel for ESDN asked the Court for a conference to address the
March 21 Order granting KGK's motion for sanctions. (Doc. No. 73) In that letter, ESDN asked
for a briefing schedule to file a motion under Fed. R. Civ. P. 60(b) for "relief from any
responsibility for paying attorneys' fees ("Rule 60(b) Motion") and, alternatively, to address the
amount of fees sought by counsel for KGK." (Id.) KGK responded on April 11, 2014, asking the
Court not to entertain ESDN's Rule 60(b) motion and to deny its request to more formally
challenge KGK's fee request. On July 21, 2014, in response to the Parties' letters, the Court gave
ESDN leave to respond to the reasonableness of the hourly rates and hours claimed by KGK.
ESDN filed its response on September 4, 2014. (Doc. No. 96)
III.
A.
DISCUSSION
KGK's Requested Attorneys' Fees
A Court may impose sanctions against counsel and against a party and counsel pursuant
to the Court's inherent authority to manage the cases before it. 28 U.S.C. § 1927 ("§ 1927"); see
Revson v. Cinque & Cinque, P.C., 221 F.3d 71, 78 (2d Cir. 2000); accord Chambers v. NASCO,
Inc., 501 U.S. 32, 43 (1991) (holding that a court's inherent power to sanction is "governed not
by rule or statute but by the control necessarily vested in courts to manage their own affairs so as
to achieve orderly and disposition of cases"). Under§ 1927, any attorney "who so multiplies the
proceedings in any case unreasonably and vexatiously may be required by the court to satisfy
personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such
conduct." 28 U.S.C. § 1927. ESDN's counsel does not challenge KGK's entitlement to
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attorneys' fees at this stage, but instead focuses on the reasonableness of the request.
In determining the appropriate amount of attorneys' fees to award, the Court must
calculate the "presumptively reasonable fee" by multiplying a reasonable hourly rate by the
reasonable number of hours worked. Arbor Hill Concerned Citizens Neighborhood Ass 'n v.
County ofAlbany, 493 F.3d 110, 117-18 (2d Cir. 2007), amended on other grounds, 522 F.3d
182 (2d Cir. 2008). A "reasonable hourly rate is the rate a paying client would be willing to
pay." McDaniel v. County ofSchnectady, 595 F.3d 411, 414 (2d Cir. 2010). The factors relevant
to this determination include: "(1) the time and labor required; (2) the novelty and difficulty of
the questions; (3) the level of skill required to perform the legal service properly; (4) the
preclusion of employment due to acceptance of the case; (5) the attorney's customary hourly
rate; (6) whether the fee is fixed or contingent (7) the time limitations imposed by the client or
the circumstances; (8) the amount involved in the case and the results obtained; (9) the
experience, reputation, and ability of the attorneys; (10) the undesirability of the case; (11) the
nature and length of the professional relationship with the client; and (12) awards in similar
cases." Arbor Hill, 493 F.3d at 114 n.3 (internal quotation marks omitted). Furthermore, this
Circuit has affirmed the "forum rule," whereby a district court will award fees at the going rate
in the district in which the court sits. Simmons, 575 F.3d at 174. The burden is on the party
seeking attorneys' fees to submit sufficient evidence to support the hours worked and the rates
claimed. See Blum v. Stenson, 465 U.S. 886, 895 n.11 (1984).
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1. KGK's Counsel's Hourly Rates
KGK's counsel requests an award of fees based on the following hourly rates:
Peter Raymond
Partner, 30 Years of Experience
$675.00
Geoffrey Young
Associate, 7 Years of Experience
$437.00
Lina Zhou
Associate, 3 Years of Experience
$255.00
These rates are reasonable in light of the prominence of counsel's firm, Reed Smith LLP,
as well as the attorneys' respective credentials and years of experience. (Doc. No. 72, Ex. B.)
Furthermore, as demonstrated by the National Law Journal's survey of New York City law firm
billing rates in 2013, provided by KGK in its fee application, these rates are on the lower end of
range of attorneys' fees charged by large law firms in the local area. (Id, Ex. C. ).
ESDN argues that KGK's proffering of New York law firm ranges does not establish that
an actual client would pay the fees it requested. This argument fails for two reasons. First, KGK
specifically states that the fees it requests are not hypothetical or pending, but are based upon
invoices it has already paid. (Doc. No. 72 at 6.) Second, the Arbor Hill standard does not enable
or require a court to arbitrarily reduce the rate charged by counsel simply because other firms in
the relevant practice-area happen to charge less per hour. See 493 F.3d at 114 n.3. The proper
inquiry is not whether the work could have been done by a firm with lower rates, but whether the
rates charged by the firm in question are reasonable in light of the Arbor Hill factors. Id The
rates charged by KGK's counsel are within the ranges charged by comparable firms and are in
line with rates that have been approved and awarded in this District. 1 The respective hourly rates
See Amaprop Ltd. v. Indiabulls Fin. Servs. Ltd., No. 10 Civ. !853(PGG), 2011WL1002439, at *5-6 (S.D.N.Y.
Mar. 16, 2011) (approving a rate of $761 per hour for partner at Orrick, Herrington & Sutcliffe LLP with 35 years of
experience); Union of Orthodox Jewish Congregations of Am. v. Royal Food Distribs .Ltd., 665 F. Supp. 2d 434,
437 (S.D.N.Y. 2009) (approving a rate of $735 an hour for a partner at Bingham McCutchen LLP with over 30 years
of experience); Union of Orthodox Jewish Congregations, 665 F. Supp. at 437 (approving a rate of$445 an hour for
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of $675, $437, and $255 are reasonable.
2. Hours Expended by KGK's Counsel
KGK's counsel requests an award of fees based on records indicating that a total of 111.6
hours of attorney time were spent addressing ESDN's improper subpoenas: Peter Raymond
billed 36.45 of these hours, Geoffrey Young billed 43.45, and Lina Zhou billed 31.70.
"Applications for fee awards should generally be documented by contemporaneously
created time records that specify, for each attorney, the date, the hours expended, and the nature
of the work done." Kirsch v. Fleet St., Ltd, 148 F.3d 149, 173 (2d Cir. 1998). If the court
determines that the number of hours expended is excessive, redundant, or otherwise unnecessary,
the court may make reductions to individual entries, or elect to account for such over-billing in
an across-the-board percentage deduction. See Luciano v. Olsten Corp., 109 F .3d 111, 117 (2d
Cir. 1997)(citation omitted). In calculating the numbers ofreasonable hours, the court looks to
"its own familiarity with the case and its experience with the case as well as to the evidentiary
submissions and arguments of the parties." Clarke v. Frank, 960 F.2d 1146, 1153 (2d Cir. 1992).
KGK's counsel worked in opposition to ESDN's improper subpoenas over the course of
approximately seven months: from late-December 2012, until mid-July of 2013. (Doc. No. 98I.) ESDN argues that KGK's fee application should be limited to work completed in furtherance
ofKGK's motion to quash and motion for sanctions because only these fees were incurred as a
result of ESDN's purported bad faith conduct. (Doc. No. 96 at 4.) This Court's March 21 Order
an associate at Bingham McCutchen LLP); Therapy Prods., Inc. v. Bissoon, No. 07-civ-8696, 2010 WL 2404317 at
*5 (S.D.N.Y. Mar. 31, 2010) (accepting rate of$430 an hour for a fourth year associate at Fish & Richardson P.C.as
"commensurate with the rates charged by attorneys in New York"); Therapy Prods., 2010 WL 2404317 at *5
(approving a rate of $295 for a second-year associate at Fish & Richardson P .C.); LV v. New York City Dept. of
Educ., 700 F. Supp. 2d 51 O, 520 (S.D.N.Y. 2010) (awarding $225-300 per hour for first, second, and third-year
associates at Milbank, Tweed, Hadley & McC!oy LLP).
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determined that the subpoenas issued by ESDN were meritless and were issued for the purpose
of harassing KGK. (Doc. No. 69) KGK's counsel made good faith efforts to avoid needless fees
and motions on this matter by contacting ESDN shortly after it issued the four subpoenas in
question, but ESDN chose to move forward. (Doc. No. 98 at 2.) KGK's recoverable legal
expenses include the reasonable actions taken by KGK in addressing ESDN's bad faith
"conduct," not simply the expenses related to making a motion to quash. See Walker v. Smith,
277 F. Supp. 2d 297, 301 (S.D.N.Y. 2003) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 50
(1991)); In re Spectee Group Inc., 185 B.r. 146, 160, 162 (Bankr. S.D.N.Y. 1995) (ruling that
attorneys' fees incurred attributable to investigating, researching and fighting" the sanctionable
conduct may be awarded under 28 U.S.C. §1927 and the court's inherent powers). Thus, the
temporal scope of KGK' s fee application will not be limited to the briefing of its motion to
quash and motion for sanctions, but will include all work reasonably performed in opposition to
ESDN' s improper subpoenas.
The question remains, however, whether the hours devoted by KGK's counsel over this
time period were reasonable. A careful review of counsel's billing records indicates that the
hours KGK's counsel expended in opposition to ESDN's improper subpoenas were excessive.
This fee application stems from a fairly simple discovery dispute concerning four improper nonparty subpoenas. Although KGK properly highlights that the legal issues involved in the
subpoena dispute were complicated by a recent change to Rule 45 of the Federal Rules of Civil
Procedure, this complication alone cannot explain the inordinate number of hours contributed to
standard letter motions, legal research, and supporting memoranda, nor can it explain why three
attorneys' time was necessary. (Doc. No. 98 at 4.) Moreover, the Parties did not argue with each
other about the meaning of Rule 45 in their briefs. An expenditure of $51, 734.83 in attorneys'
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fees to address four improperly issued subpoenas, however recalcitrant ESDN may have been in
rectifying its prior counsel's conduct, is exorbitant.
Where an applicants' time is "not reasonably necessary to the outcome," the Court
should "reduce the time for which compensation is awarded." Tucker v. City of New York, 2010
U.S. Dist. LEXIS 30270, *12-13 (S.D.N.Y. Mar. 9, 2010)(citing Carey, 711F.2d1136, 1142-43,
1147 (2d Cir. 1983)). The Second Circuit has held that across-the-board percentage reductions
are appropriate where a case is overstaffed, "resulting in needless duplication of work and
retention of unnecessary personnel." See Lochren v. County ofSuffolk, 344 Fed. Appx. 706, 709
(2d Cir. 2009). Given the relative simplicity of the underlying dispute and the brief period during
which this dispute was ongoing, an across-the-board 80% reduction in the hours expended is fair
and reasonable. Accordingly, the following hours will be applied towards the fee award:
Raymond: 7.29; Young: 8.69; Zhou: 6.34.
3. Adjusted Fee Award
Recalculated using the rates and reduction in hours described above, KGK's motion for
an award of attorneys' fees is granted in the amount of $10,334.98.
4. Liability for KGK's Attorneys' Fees
Plaintiff KOK Jewelry was formerly represented by Adam Engel of AE Engel &
Associates, LLC. Engel was terminated as counsel from this case on April 2, 2014, and
Bloomberg, Steinberg & Bader ("Bader") entered the case as new counsel. ESDN now seeks
relief from any responsibility to pay attorneys' fees awarded as a result of former counsel's
conduct. ESDN contends that it was not aware of Engel's issuance of the improper subpoenas
here at issue and that it has not exhibited the "bad faith" required for sanctions to be imposed.
As a matter of law, ESDN cannot distance itself from the actions of its freely-chosen
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counsel. See Duffett v. LaHood, 331 Fed. Appx. 763, 765 (2d Cir. 2009) ("civil litigants are 'held
accountable for the acts and omissions of their chosen counsel"')( quoting Pioneer Inv. Servs.
Co. V BrunswickAssocs. Ltd P'ship, 507 U.S. 380, 397 (1993)). In the absence of some
indication that ESDN was not aware of or did not authorize Engel's behavior, the presumption
that litigants are responsible for the behavior of their counsel stands. Here, ESDN has provided
no such evidence. The only documentation the Court has received concerning ESDN' s
knowledge of the subpoenas comes from KGK and suggests that ESDN did know and approve of
their issuance. (Doc. No. 74) ESDN has made no attempts to clarify or challenge the import of
KGK's submission. ESDN will thus be subject to the sanctions imposed by the Court's March
2014 order and will be held jointly and severally responsible with former counsel Adam Engel
for paying the fees herein awarded.
5. Defendant's Motion to Strike
ESDN seeks to strike from the record a letter KGK filed with the Court on September 11,
2014, that included as an exhibit a detailed chart with contemporaneous billing narratives which
KGK had not previously provided the Court. (Doc. No. 99) ESDN argues that this letter,
together with its exhibits, violates this Court's Individual Practice Rules limiting letters to fifteen
pages in length. It further argues that the Court should not consider the detailed chart because it
was first submitted in a reply letter and therefore was "outside the scope" of the Court's
scheduling order. The page limits in the Court's Individual Practices do not apply to exhibits
which are required in order for the Court to make a determination. In a fee application case, a
strict page limit would be inconsistent with the requirement that the moving party itemize its
expenses and demonstrate those expenses to the Court. Furthermore, there is no basis under the
Federal Rules for disregarding the chart provided by KGK in its September 11 letter simply
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because it was first included in a reply letter. ESDN' s motion to strike is denied.
IV.
CONCLUSION
For the foregoing reasons, KGK's fee application is GRANTED in the amount of
$10,334.98 and ESDN's motion to strike is DENIED. KGK and its former counsel Adam Engel
will be jointly and severally responsible for paying the fees herein awarded.
SO ORDERED this 2nd day of March 2015
New York, New York
The Honorable Ronald L. Ellis
United States Magistrate Judge
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