Lightbox Ventures, LLC v. 3rd Home Limited
Filing
252
MEMORANDUM OPINION & ORDER.....Lightbox is awarded $100,000 as a reasonable attorneys fee under the Agreement. (Signed by Judge Denise L. Cote on 6/12/2018) (gr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
LIGHTBOX VENTURES, LLC,
:
:
Plaintiff,
:
:
-v:
:
3RD HOME LIMITED and WADE SHEALY,
:
:
Defendants.
:
:
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16cv2379(DLC)
MEMORANDUM OPINION
& ORDER
APPEARANCES
For the plaintiff:
Jonathan R. Miller
The Law Firm of Jonathan R. Miller
100 Overlook Drive, 2nd Floor
Princeton, New Jersey 08540
For the defendants:
Phillip Byron Jones
Evans, Jones & Reynolds, P.C.
401 Commerce Street, Suite 710
Nashville, Tennessee 37219
DENISE COTE, District Judge:
On May 3, 2018, plaintiff Lightbox Ventures, LLC
(“Lightbox”) moved for attorneys’ fees and expenses incurred
litigating this action for the roughly eight-month period
preceding October 28, 2016.
For the following reasons, Lightbox
is awarded $100,000.
Background
This case involves a failed joint venture (the “Joint
Venture”) between the parties to earn commissions and fees from
the sale of vacation homes on a real estate listing website (the
“Website”).
Lightbox was to create and operate the Website, and
defendant 3RD Home Limited (“Third Home”) was to maintain a link
to the Website on Third Home’s website.
The parties entered a
joint venture agreement (the “Agreement”) on July 13, 2015.
Website became operational in January 2016.
The
Third Home,
however, never activated the link to the Website, and had
instead begun pursuing exclusive broker agreements with other
real estate listing companies (the “Exclusive Brokers”), in
breach of its fiduciary duty to Lightbox.
The Agreement contains a provision shifting attorneys’ fees
in the event of a dispute:
If either party employs attorneys to enforce any
rights arising out of or relating to this agreement,
the losing party shall reimburse the prevailing party
for its reasonable attorneys’ fees and costs.
The Agreement provides in Paragraph 4(a) that New York law
governs.
Lightbox sued Third Home and its CEO, Wade Shealy, in March
2016 for breach of contract and breach of fiduciary duty arising
out of Third Home’s decision to terminate the Joint Venture and
pursue relationships with the Exclusive Brokers.
Third Home
later filed counterclaims against Lightbox and its CEO Andrew
Ellner arising out of Ellner’s use of Third Home trademarks
2
after this lawsuit was filed.
On July 13, 2016, Lightbox filed a motion for a preliminary
injunction to prevent Third Home from entering brokerage
agreements or promoting brokerage services other than with
Lightbox.
A hearing was held on October 21, and the motion was
denied on October 28.
See Lightbox Ventures, LLC v. 3RD Home
Ltd., No. 16cv2379(DLC) 2016 WL 6562107, at *1 (S.D.N.Y. Oct.
28, 2016) (the “Preliminary Injunction Opinion”).
The
Preliminary Injunction Opinion explained that Lightbox was
likely to succeed at proving at trial that Third Home breached
the Agreement by, inter alia, failing to activate the link to
the Website, and also breached its fiduciary duty to Lightbox as
its partner in the Joint Venture by entering agreements with the
Exclusive Brokers.
See id. at *8, *10.
The Preliminary
Injunction Opinion denied a preliminary injunction, however, on
the ground that Lightbox failed to show that it would be
irreparably harmed without preliminary relief.
See id. at *10.
The Preliminary Injunction Opinion explained that the Joint
Venture had “never got[ten] off the ground” and that Lightbox
had not shown that “a viable, profitable business was about to
launch” before Third Home breached the Agreement.
11.
Id. at *10-
The Opinion specifically noted that “Lightbox’s argument
that the Joint Venture was poised to capture a large share of
the vacation homes sales business is speculative.”
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Id. at *11.
The parties then cross-moved for summary judgment, and each
motion was granted in part on November 13, 2017 (the “Summary
Judgment Opinion”).
See Lightbox Ventures, LLC v. 3RD Home Ltd.,
No. 16cv2379(DLC), 2017 WL 5312187 (S.D.N.Y. Nov. 13, 2017).
Later, the parties consented to trial on the remaining issues on
submission to the Court.
In a Trial Opinion issued April 13,
2018, the Court held Third Home and Shealy liable to Lightbox on
its breach of contract and breach of fiduciary duty claims,
awarding Lightbox $67,088.19 on the breach of contract claim and
$26,250 on the breach of fiduciary duty claim.
See Lightbox
Ventures, LLC v. 3RD Home Ltd., No. 16cv2379(DLC), 2018 WL
1779346, at *10, *12 (S.D.N.Y. Apr. 13, 2018).
The Trial
Opinion denied Lightbox’s request for specific performance and
found Ellner liable to Third Home on one of Third Home’s
trademark counterclaims, awarding Third Home $10,000 for this
counterclaim.
See id. at *13, *14-15.
The Trial Opinion also held that Lightbox was entitled to a
reasonable attorneys’ fee under the fee-shifting provision of
the Agreement.
See id. at *17.
The Trial Opinion, however,
limited this award to fees incurred up to the date on which the
Preliminary Injunction Opinion was issued.
Id.
Lightbox moved
for fees on April 27, and the motion became fully submitted on
May 15.
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Discussion
Lightbox moves for an award of fees and expenses for
litigating this matter between March 2016 and October 28, 2016
without naming a precise sum.
During that time, Lightbox was
represented by Scarola, Malone & Zubatov LLP (“Scarola”).1
Two
named partners performed the bulk of the work of this matter and
issued invoices amounting to $467,622.00 in fees and expenses.
Ellner paid over $300,000 of this amount.2
Current counsel for
Lightbox asks this Court to review the Scarola invoices and
award the amount the Court determines is reasonable.
Third Home
contends that Lightbox should receive nothing.
“[I]n addressing a contractual claim for attorneys’ fees, a
court must determine what constitutes a reasonable amount of
fees.”
HSH Nordbank AG N.Y. Branch v. Swerdlow, No.
08cv6131(DLC), 2010 WL 1141145, at *5 (S.D.N.Y. Mar. 24, 2010)
(citation omitted).
The “amount involved in a litigation”
provides a “general ceiling” on attorneys’ fees, but is “only a
rule of thumb” and a “starting point in the process of
ultimately determining whether a fee [request] is reasonable.”
CARCO Grp. v. Maconachy, 718 F.3d 72, 86 (2d Cir. 2013)
(citation and emphasis omitted).
“[A] variety of factors inform
The Scarola firm is now known as Scarola, Zubatov & Schaffzin
PLLC.
1
Scarola has sued Ellner and Lightbox in state court for payment
of additional fees.
2
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the court’s determination of whether a requested amount of
attorneys’ fees is reasonable or unreasonable, including the
difficulty of the questions involved; the skill required to
handle the problem; the time and labor required; the lawyer’s
experience, ability and reputation; the customary fee charged by
the Bar for similar services; and the amount involved.”
Healey
v. Leavitt, 485 F.3d 63, 70 n.5 (2d Cir. 2007) (citation
omitted).
“[A] request for attorneys’ fees should not turn into
a second major litigation,” however, and a court is not required
“to evaluate and rule on every entry in an application” for
fees.
Marion S. Mishkin Law Office v. Lopalo, 767 F.3d 144, 149
(2d Cir. 2014) (citation omitted).
An award of anything near the amount invoiced by Scarola
would be excessive.
The legal issues implicated by the
preliminary injunction motion were straightforward, and the
scope of the factual disputes was relatively small.
The skill
and time required to litigate this matter before the hearing and
to prepare for and conduct the preliminary injunction hearing
should not have been great.
Moreover, the amount involved in the litigation would not
justify spending anything close to $450,000 during this eightmonth period.
Lightbox was unable, at any point in this
litigation, to provide a reliable estimate of the future profits
of a Joint Venture which never got off the ground.
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See
Preliminary Injunction Opinion, 2016 WL 6562107, at *11; Summary
Judgment Opinion, 2017 WL 5312187, at *8-11, *13.
Lightbox knew
that it spent less than $70,000 to build the Website, and
through discovery learned that Third Home had received only
$52,500 from the Exclusive Brokers.
After learning how much
Third Home received from the Exclusive Brokers, Lightbox could
swiftly and realistically assess the amount involved in the
litigation at less than $123,000.
speculative.
Anything more was
It would have been foolhardy for a litigant to
spend more than this on the entire lawsuit, but Scarola
presented invoices asserting it had expended over three times
that amount in just this brief period.
In light of the Court’s broad discretion to set awards of
attorneys’ fees, the Court finds that $100,000 is at the upper
range of a reasonable attorneys’ fee for litigating this matter
through the date of the Preliminary Injunction Opinion.
This
amount is also more proportionate to the $93,338.19 that
Lightbox was awarded on the merits of its claims in the Trial
Opinion.
Although the fee award is greater than the recovery on
the merits, it is still less than the “amount involved” in the
litigation.
Healey, 485 F.3d at 70 n.5 (citation omitted).
$100,000 is also in line with the Court’s estimation of what a
reasonable litigant would have spent in filing these claims
against its Joint Venture partner and pursuing this action
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through the trial of its preliminary injunction motion.
Finally, it reflects the risks of litigation and the
uncertainties involved in proving the future profits of a
business that never began operations.3
Conclusion
Lightbox is awarded $100,000 as a reasonable attorneys’ fee
under the Agreement.
Dated:
New York, New York
June 12, 2018
__________________________________
DENISE COTE
United States District Judge
It is not clear whether New York courts apply the lodestar
method routinely used for federal fee-shifting statutes.
Compare F.H. Krear & Co. v. Nineteen Named Trs., 810 F.2d 1250,
1263 (2d Cir. 1987) (“In general, the court uses a lodestar
method, in which the hours reasonably spent by counsel, as
determined by the Court, are multiplied by the reasonable hourly
rate.” (citation omitted)) with CARCO Grp., 718 F.3d at 85 (not
applying lodestar method). Applying this method would produce
the same result. A reasonable blended fee for legal work of
this complexity is no more than $400 per hour. It would be
unreasonable to spend more than 250 hours litigating the issues
addressed in the eight-month period. This yields a total fee
award of $100,000.
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