Terra Energy & Resource Technologies, Inc et al v. Terralinna Pty. Ltd.

Filing 126

MEMORANDUM AND ORDER. For the reasons set forth above, Terralinna's Fed. R. Civ. P. 54(d)(2) motion, Docket Entry No. 97, is granted. The plaintiffs must pay Terralinna $47,266.32 for the reasonable attorneys' fees, costs and expenses Terralinna incurred defending against Count Three of the plaintiffs' Second Amended Complaint. re: 97 NOTICE of Notice of Motion for Attorneys' Fees and Costs as to Count III of the Second Amended Complaint. Document filed by Terralinna Pty. Ltd. (Signed by Magistrate Judge Kevin Nathaniel Fox on 11/19/2014) (rjm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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TERRA ENERGY & RESOURCES
TECHNOLOGIES, INC. and TERRA INSIGHT
:
SERVICES, INC.,
:
Plaintiffs,
:
MEMORANDUM and ORDER
-against:
12-CV-1337 (KNF)
TERRALINNA PTY. LTD.,
:
Defendant.
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KEVIN NATHANIEL FOX
UNITED STATES MAGISTRATE JUDGE
INTRODUCTION
Before the Court is defendant Terralinna Pty. Ltd.’s (“Terralinna”) motion made pursuant
to Rule 54 of the Federal Rules of Civil Procedure, seeking attorneys’ fees, costs and expenses,
under a contractual fee-shifting provision. The plaintiffs oppose the motion.
BACKGROUND
Terralinna made a motion, pursuant to Rule 54(d)(2) of the Federal Rules of Civil
Procedure following the conclusion of the bench trial conducted for this action, to recover
attorneys’ fees, costs, and other expenses it incurred defending against a breach of contract cause
of action asserted against it by plaintiff Terra Energy, & Resources Technologies, Inc. The
Court dismissed that cause of action, which was contained in Count Three of the plaintiffs’
Second Amended Complaint, based on an unopposed dismissal motion made by the plaintiffs,
pretrial. Although Terralinna did not oppose the plaintiffs’ motion to dismiss Count Three, it
reserved the right to seek attorneys’ fees and related expenses under paragraph eight of the
Mutual Non-Disclosure and Non-Circumvent Agreement (“NDNCA”); the alleged breach of that

agreement was the subject of Count Three of the Second Amended Complaint. NDNCA
paragraph eight provides the following:
Attorneys’ Fees; Prejudgment Interest. If the services of an attorney are
required by any party to secure the performance of this Agreement or otherwise
upon the breach or default of another party to this Agreement, or if any judicial
remedy or arbitration was necessary to enforce or interpret any provision of this
Agreement or the rights and duties of any person in relation thereto, the
prevailing party shall be entitled to reasonable attorneys’ fees, costs and other
expenses, in addition to any other relief to which such party may be entitled. Any
award of damages, following judicial remedy or arbitration as a result of the
breach of this Agreement or any of its provisions, shall include an award of
prejudgment interest from the date of the breach at the maximum amount of
interest allowed by law.
Terralinna’s Rule 54(d)(2) motion was denied by the Court, through a Memorandum and
Order dated April 7, 2014. Thereafter, Terralinna requested that the Court reconsider that
determination. The Court granted Terralinna’s request, reconsidered its determination on the
motion and concluded that the determination to deny the Rule 54(d)(2) motion was erroneous.
See Docket Entry No. 124. Accordingly, Terralinna’s Rule 54(d)(2) motion is analyzed anew
below.
Originally, Terralinna sought an award from the Court “in the approximate amount of
$68,759.26, which represents one-third of the attorneys’ fees and nontaxable costs incurred by
Terralinna in defending the claims of plaintiffs up to the date of dismissal of Count Three of the
Second Amended Complaint.” This amount reflects the expenditures for legal services provided
to Terralinna by two law firms: Stovash, Case & Tingley P.A. (“SCT”), located in Orlando,
Florida, and Nagle Rice LLP (“Nagle Rice”), located in Roseland, New Jersey. Terralinna has
modified its request to exclude an award of $5,737.50, in attorneys’ fees made by the Honorable
William H. Pauley III, to whom this case was previously assigned, and now seeks an award of
$63,021.76. Judge Pauley made the award because Terralinna defended successfully against a
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Fed. R. Civ. P. 37 motion made by the plaintiffs to Judge Pauley. The modified amount
requested by Terralinna will prevent it from receiving a double recovery, as the expenses
associated with defending against the Rule 37 motion are reflected in submissions Terralinna
made to the Court in support of the instant motion.
Terralinna’s submissions, in support of its Rule 54 motion, include: (1) the affidavit of
Robert L. Case (“Case”), a “[s]hareholder with [SCT]”; and (2) the declaration of Jay J. Rice
(“Rice”), “the Managing Partner . . . of Nagle Rice.” Of the $68,759.26 Terralinna sought
originally, Case maintains that $58,776.52, or 85.48% of that amount, are the fees and costs SCT
generated and $9,982.74, or 14.52% of the total, are the fees and costs generated by Nagle Rice.
When the relevant percentages are applied to Terralinna’s modified request for $63,021.76, in
attorneys’ fees, costs and expenses, $53,871.00 would be allocated to SCT and $9,150.76 would
be allocated to Nagle Rice.
Case explains, through the affidavit he submitted in support of Terralinna’s motion, that
he has “been licensed to practice law in the state of Florida since 1998 . . . [and] routinely
[practices] in the area of complex civil litigation, including contract disputes, related torts,
shareholder disputes, and collections.” Case was admitted to practice pro hac vice in this court
to represent Terralinna. Case billed Terralinna at the hourly rates of $350-$375. Attached to
Case’s affidavit is “Composite Exhibit I,” which, according to Case, is “a record of my firm’s
Affidavit Exhibit, which includes services rendered by my firm in this matter through the date of
dismissal of the count regarding the NDNCA.” Composite Exhibit I contains many redacted
billing entries and reflects that, in addition to Case, the following seven SCT attorneys
represented Terralinna in this action and billed it for their professional services at the hourly
rates noted: 1) Robert J. Stovash (“Stovash”), a partner in the law firm, who has been licensed to
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practice law in the state of Florida since 1988 ($375); 2) Scott A. Livingston (“Livingston”), an
SCT shareholder, who has been licensed to practice law in the state of Florida since 1997 ($350);
3) M. Kathryn Smith (“Smith”), a senior associate, who has been licensed to practice law since
1992 and to practice law in Florida since 1996 ($225); 4) Rachel E. Scherwin (“Scherwin”), a
senior associate, who has been licensed to practice law in the state of Florida since 2001 ($275);
5) Corey B. Suter (“Suter”), an associate, who has been licensed to practice law in Florida since
2012 ($200); 6) Matthew J. Pearce (“Pearce”), an associate, who has been licensed to practice
law in Georgia since 2002 ($275); and 7) Tara S. Pelligrino (“Pelligrino”), who has been
licensed to practice law in Florida since 2006, and was an SCT associate until June 2012 ($275).
Except as indicated above, no other information about the SCT attorneys who represented
Terralinna was provided to the Court.
As noted above, Rice submitted a declaration in support of Terralinna’s request for its
attorneys’ fees, and expenses. Through his declaration, Rice explains that, in addition to his
“admission to the New Jersey Bar, [he has] been admitted to practice before the courts of the
State of New York, the United States District Court for the Southern District of New York, the
United States Court of Appeals for the Second Circuit, and the United States Supreme Court.
[He has] regularly appeared before courts in the Southern District of New York.” Rice reports
that he oversaw “the handling of all matters related to this case by my firm [and] . . . delegated
certain actions to other members of the firm in an effort to conserve attorneys’ fees and costs in
the defense of the instant law suit.”
Attached to Rice’s declaration is “Exhibit 1,” “a record of [Nagle Rice’s] Invoices [sic],
which includes time records for services rendered . . . through the date of the dismissal of Count
III of the Second Amended Complaint regarding the NDNCA, as well as the costs incurred by
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Terralinna.” Rice contends that the “attorneys’ fees and costs for [Nagle Rice’s] Services [sic]
in regard to Count III of the Second Amended Complaint are $9,982.74.”1 The invoices that are
attached to Rice’s declaration identify the names of the four Nagle Rice attorneys who, along
with Rice, provided legal services to Terralinna. However, neither Rice’s declaration nor the
invoices indicate the position each attorney – other than Rice – held with Nagle Rice, or the
professional experience possessed by the Nagle Rice attorneys. The invoices indicate that Rice
billed Terralinna at the hourly rate of $450, and that his colleagues, Randee M. Matloff, Diane E.
Sammons, Bruce H. Nagle and Lou I. Mayer, billed Terralinna at the following hourly rates
respectively: $400; $400; $375; and $400.
The plaintiffs contend that the attorneys’ fees sought by Terralinna are unreasonable,
because Terralinna elected to engage counsel based in Florida to represent it in this judicial
district and Terralinna’s Florida counsel determined to enlist the aid of local counsel based in
New Jersey. While the plaintiffs acknowledge Terralinna’s freedom to engage counsel of its
choice, they maintain that retaining counsel not located in this judicial district generated travel
expenses for Florida counsel that could have been avoided had Terralinna retained counsel based
in the Southern District of New York. In addition, the plaintiffs maintain that, inasmuch as the
prospect of partial or total fee-shifting existed, Terralinna should have kept accurate
contemporaneous time records for the legal services provided by its counsel, in anticipation of
having to prove that the hours spent defending against the NDNCA breach of contract cause of
action were reasonable. The plaintiffs assert that Terralinna’s determination to: (1) redact text

1

This amount does not reflect the modification made to Terralinna’s request occasioned
by Judge Pauley’s attorneys’ fees award, discussed supra, which was made after Terralinna’s
Rule 54(d)(2) motion was made.
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from entries in SCT’s billing statements, without explanation; and (2) permit SCT to use block
billing on its billing statements, make it hard to decipher what amount of time SCT spent on
each activity reported in the entries on the SCT billing statements.
In reply, Terralinna asserts that the reasonableness of the attorneys’ fees it seeks “is not
determined by asking whether opposing counsel is from a different state”; rather, reasonableness
of the attorneys’ fees “is determined by the Lodestar method,” which requires that the number of
hours reasonably expended providing legal services be multiplied by a reasonable hourly rate of
compensation. Terralinna asserts that applying that method here results “in a Lodestar
calculation of $321.92 per hour for the attorneys’ fees charged by [SCT] and $448.43 per hour
for the attorneys’ fees charged by Nagle Rice.” According to Terralinna, these hourly rates are
within the range of legal services fee rates found reasonable in this judicial district “for a
sophisticated small firm.” Moreover, Terralinna asserts that the “[p]laintiffs have not alleged
that these hourly rates are unreasonable in this District for the type of matter presented to this
Court.” In addition, Terralinna maintains that “the billing records [it submitted to the Court] are
sufficiently detailed to identify what action was taken, the length of time taken for each action
. . . and the amount charged for each entry.”
DISCUSSION
The NDNCA, by its express terms, is “governed by the law of New York, excluding its
conflict of law rules.” NDNCA, ¶ 9. “As a general matter of New York law, . . . when a
contract provides that in the event of litigation, the losing party will pay the attorneys’ fees of the
prevailing party, the court will order the losing party to pay whatever amounts have been
expended by the prevailing party, so long as those amounts are not unreasonable.” F.H. Krear &
Co. v. Nineteen Named Trustees, 810 F.2d 1250, 1263 (2d Cir. 1987). However, notwithstand-6-

ing the general proposition set forth above, the amount to be awarded as “an attorney’s fee is
within the discretion of the court.” Gamache v. Steinhaus, 7 A.D.3d 525, 527, 776 N.Y.S.2d
310, 311 (App. Div. 2d Dept. 2004).
In New York, courts consider several factors when determining whether the amount of
attorneys’ fees requested is reasonable; among the factors considered are: “[the] time and labor
required, the difficulty of the questions involved, and the skill required to handle the problems
presented; the lawyer’s experience, ability and reputation; the amount involved and benefit
resulting to the client from the services; the customary fee charged by the Bar for similar
services; the contingency or certainty of compensation; the results obtained; and the
responsibility involved.” In re Freeman’s Estate, 34 N.Y.2d 1, 9, 355 N.Y.S.2d 336, 341 (1974).
When a prevailing party to a litigation seeks an award of attorneys’ fees, it has the burden of
providing the court evidence proving that the hourly rate its counsel charged is reasonable, based
on “the customary fee charged for similar services by lawyers in the community with like
experience and of comparable reputation to those by whom the prevailing party was
represented.” Gamache, 7 A.D.3d at 527, 776 N.Y.S.2d at 312; see Friedman v. Miale, 69
A.D.3d 789, 791-92, 892 N.Y.S.2d 545, 547-48 (App. Div. 2d Dept. 2010); Matakov v. KelTech Constr. Inc., 84 A.D.3d 677, 678, 924 N.Y.S.2d 344, 346 (App. Div. 1st Dept. 2011).
Attorney time records that have vague entries and thus do “not contain sufficient detail to reveal
what proportion of [an attorney’s] time was spent” on a particular task, warrant a court’s
reducing the amount of requested attorneys’ fees. F.H. Krear & Co., 810 F.2d at 1265.
Similarly, attorney time records that describe the work performed in a block-billing format,
whereby several tasks performed on a certain date by an attorney are grouped together and the
amount of time spent, in the aggregate, performing the tasks is reported, may render the time
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record entries vague. This is so because block billing, although permitted, prevents a reviewer
of the records from determining exactly what portion of an attorney’s time was spent on a
distinct task.
As noted above, under New York law, when a contract provides that the prevailing party
be awarded its attorneys’ fees and attendant expenses, “whatever amounts have been expended
by the prevailing party [should be awarded] so long as those amounts are not unreasonable.”
F.H. Krear & Co., 810 F.2d at 1263. The Court has reviewed Terralinna’s submissions carefully
in assessing whether the amount of attorneys’ fees, costs and expenses it seeks to recover from
the plaintiffs, as the prevailing party with respect to Count Three of the Second Amended
Complaint, is reasonable. That review revealed that Composite Exhibit I to Case’s affidavit,
SCT’s billing statements, contains many redacted entries, which render the respective entry’s
description of the work performed by SCT vague. As a consequence, the Court was unable to
determine whether certain work, identified as having been performed by SCT personnel, had any
relationship to the instant case. Examples of Composite Exhibit I’s redacted entries follow:
“Review case law regarding [redacted text],” “Attended the deposition of [redacted text],”
“Research [redacted text],” “Investigative [redacted text],” “Conference call with [redacted
text].” Terralinna did not explain why redactions were made to the Composite Exhibit I entries.
In addition to the redactions appearing in the SCT billing statements, the Court observed
that many of the entries found in Composite Exhibit I are block-billing entries, where multiple
tasks were grouped together in a single billing entry and only the total time expended on all the
tasks in the group was reported. Terralinna’s use of this billing format prevented the Court from
discerning what amount of time was expended on a discrete task by the SCT employee who
performed the task. The use of the block-billing format in billing records has prompted some
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courts in New York to reduce the amount of attorneys’ fees requested by a litigant because of the
obfuscating effect that block billing has on a court’s ability to ascertain precisely how counsel
used counsel’s time providing legal services to the client. See, e.g., Silverstein v. Goodman,
113 A.D.3d 539, 540, 979 N.Y.S.2d 308, 310 (App. Div. 1st Dept. 2014).
The Court also observed that many of the Nagel Rice invoice entries contain vague
descriptions of the activities performed by personnel affiliated with that law firm. Examples of
Nagel Rice’s vague invoice entries follow: “Review pretrial issues,” “Telephone Conference
with counsel,” “Review efiling” and “Review email.” Invoice entries of this ilk, devoid of even
a modicum of information detailing precisely the activities performed by counsel, made it
impossible for the Court to determine the relevance, if any, of those activities to this action, or
whether the time spent on the particular activity(ies) was reasonable. Terralinna also failed to
submit competent evidence to the Court establishing that the fees which Terralinna’s attorneys
charged for the legal services they provided are in line with the fees customarily charged for
similar services by attorneys in this judicial district who have professional experiences
equivalent to and enjoy reputations comparable to those possessed by the attorneys at SCT and
Nagel Rice who represented Terralinna in this action. Under New York law, the party seeking
an award of attorneys’ fees has the burden of presenting the court with such evidence.2 See
Gamache, 7 A.D.3d at 527, 776 N.Y.S.2d at 312; Matakov, 84 A.D.3d at 678, 924 N.Y.S.2d at
346; Friedman, 69 A.D.3d at 791-92, 892 N.Y.S.2d at 547-48. Moreover, Terralinna did not
explain why 12 attorneys were needed to defend it in a commercial dispute such as this one,

2

The Court is mindful that Terralinna’s Memorandum of Law in support of its Rule 54
motion references rates for legal services charged by attorneys in this judicial district. However,
a memorandum of law is not evidence. See Giannullo v. City of New York, 322 F.3d 139, 142
(2d Cir. 2003).
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which was lacking in complexity. Thus, the level of staffing devoted to this action by
Terralinna’s counsel, which appears to the Court to have been excessive, makes suspect the
reasonableness of the amount of attorneys’ fees, costs and expenses Terralinna seeks.
The Court’s scrutiny of Terralinna’s submissions revealed that the amounts requested,
via the motion, and the amounts reflected in the billing records of its counsel do not jibe. For
example, of the $68,759.26 Terralinna sought to recoup originally, through its Rule 54 motion,
$58,776.52 was allocated to SCT for the legal services it rendered to Terralinna. According to
Terralinna, the $58,776.52 represents one-third of the attorneys’ fees SCT generated through the
date Count Three of the Second Amended Complaint was dismissed. That would mean that the
full amount of attorneys’ fees Terralinna incurred for SCT’s legal services, by that juncture in
the litigation, was $176,529.56. However, when the SCT attorneys’ fees that are recorded on
Composite Exhibit I are totaled, the sum of the attorneys’ fees generated, until the dismissal of
Count Three, is $168,750.02, which, when divided by three, to account solely for the work
performed by SCT defending against Count Three of the Second Amended Complaint, yields
attorneys’ fees of $56,250.
Based on the Court’s analysis of Terralinna’s submissions in support of its Rule 54
motion, the Court finds that the: 1) unexplained redactions from SCT’s billing statements;
2) vague entries recorded in the SCT and Nagel Rice billing records; 3) use of block billing in
SCT’s billing statements; 4) absence, from the motion record, of evidence reflecting the
backgrounds, professional experiences and reputations of all attorneys who provided legal
services to Terralinna in connection with this action; 5) absence from the motion record of
evidence establishing the customary fee(s) charged for similar services by attorneys in this
judicial district who have professional experience and reputations comparable to those of
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Terralinna's counsel; 6) assignment of 12 attorneys to represent Terralinna in a commercial
dispute that was not complex; and 7) computational errors respecting the attorneys' fees
Terralinna incurred, make awarding Terralinna $63,021.76, the full amount of attorneys' fees,
costs and expenses it now seeks through its Rule 54 motion, owing to its status as the prevailing
party with respect to Count Three of the plaintiffs' Second Amended Complaint, unreasonable.
See F.H. Krear & Co., 810 F.2d at 1263. Therefore, inasmuch as the Court has discretion, under
New York law, to determine what reasonable attorneys' fees are, see Thomas B. v. Lydia D.,
120 A.D.3d 446, 991N.Y.S.2d512 (App. Div. l51 Dept. 2014), and may reduce the amount of
the fees requested by a party, see In re Ury, 108 A.D.2d 816, 817, 485 N.Y.S.2d 329, 330 (App.
Div. 2d Dept. 1985), in the circumstance of the instant case, the Court has determined to reduce,
by 25%, the amount of attorneys' fees, costs and expenses requested by Terralinna.

CONCLUSION
For the reasons set forth above, Terralinna's Fed. R. Civ. P. 54(d)(2) motion, Docket
Entry No. 97, is granted. The plaintiffs must pay Terralinna $47,266.32 for the reasonable
attorneys' fees, costs and expenses Terralinna incurred defending against Count Three of the
plaintiffs' Second Amended Complaint.
SO ORDERED:

Dated: New York, New York
November 19, 2014

KEVIN NATHANIEL FOX
UNITED STATES MAGISTRATE JUDGE

terralinna6.mo

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