Naxos Art Inc v. Zoullas

Filing 22

OPINION & ORDER: Because Zoullas lacked an objectively reasonable basis for removing the case from New York state court, Naxos' motion for costs and attorney fees is GRANTED in the amount of $11,635. The Clerk of the Court is respectively directed to enter judgment in favor of Naxos, and to close this case and remove it from the docket of this Court, and as further set forth in this order. (Signed by Judge John F. Keenan on 7/7/2017) (ap)

Case 1:09-md-02013-PAC Document 57

Filed 09/30/10 Page 1 of 45
USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: 07/07/2017

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
UNITED STATES DISTRICT COURT
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NAXOS SOUTHERN DISTRICT OF NEW YORK
ART, INC.,
:
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:
In re FANNIEPlaintiff,
MAE 2008 SECURITIES
:
08 Civ. 7831 (PAC)
:
LITIGATION
:
09 MD 2013 (PAC)
:
No. 16 Civ. 7269 (JFK)
:
-against:
: OPINION & ORDER
OPINION & ORDER
:
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NICHOLAS S. ZOULLAS,
:
:
Defendant.
:
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HONORABLE PAUL A. CROTTY, United States District Judge:
JOHN F. KEENAN, United States District Judge:

Before the Court is Plaintiff Naxos Art 1Inc.’s (“Naxos”)
BACKGROUND
motion, pursuant to 28of this decade saw a boom in home financing which was fueled, among
The early years U.S.C. § 1447(c), for costs and attorney
fees. other things, by low interest rates and lax credit conditions. New lending instruments, such as
Naxos makes its motion in connection with the Court’s
remand subprime mortgages (high credit risk loans) and Alt-A the State of New
of the case to the Supreme Court of mortgages (low-documentation loans)
York, New the boom going. Borrowers played a role too; they took onNicholas
kept York County after removal by Defendant unmanageable risks on the
Zoullas (“Zoullas”).market would continue to rise and that refinancing options would always be
For the reasons stated below, the Court
assumption that the
grants available inmotion for costs and expenses, including attorney
Naxos’ the future. Lending discipline was lacking in the system. Mortgage originators did
fees, in hold these high-risk mortgage loans. Rather than carry the rising risk on their books, the
not the amount of $11,635.
I. Background
originators sold their loans into the secondary mortgage market, often as securitized packages
On June 17, 2016, Naxos filed a complaint in grew almost exponentially.
known as mortgage-backed securities (“MBSs”). MBS markets the Supreme
Court of the State of New bubble burst. In 2006, County against Zoullas.
But then the housing York, New York the demand for housing dropped abruptly
(Decl. of Dean R. Nicyper in Supp. of Order to Show Cause for
and home prices began to fall. In light of the changing housing market, banks modified their
Remand & for Costs & Att’ys’ Fees Ex. D, ECF No. 12-4 (filed
lending practices and became unwilling to refinance home mortgages without refinancing.
Sept. 21, 2016).)

The gist of the complaint is that Zoullas

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improperly took and refused to cited as “(¶ _)” or to the “Complaint” are to the Amended Complaint,
Unless otherwise indicated, all references return many works of art owned by

dated June 22, 2009. For purposes of this Motion, all allegations in the Amended Complaint are taken as true.

Naxos and worth millions of dollars.
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After the proceedings in
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New York state court resulted in a temporary restraining order
and a preliminary injunction being entered against Zoullas,
Naxos moved to hold Zoullas in contempt. (Id. ¶ 3.)
hearing was held on September 15, 2016. (Id.)

A contempt

On September 17,

2016, Zoullas filed a notice of removal to this Court. (See
Notice of Removal, ECF No. 1 (filed Sept. 17, 2016).1)

Naxos

contends that Zoullas’ removal was a “frivolous procedural
maneuver solely to avoid being held in contempt.” (Pl.’s
Supplemental Mem. of L. in Supp. of Mot. for Costs & Att’ys’
Fees at 1 [hereinafter “Pl.’s Supplemental Mem. of L.”], ECF No.
14 (filed Sept. 30, 2016).)
Both the original and amended notice of removal premised
federal jurisdiction on complete diversity under 28 U.S.C. §
1332. (See Notice of Removal ¶¶ 1, 13, 14-18, ECF No. 1; Amended
Notice of Removal ¶¶ 1, 13, 14-18, ECF No. 6 (filed Sept. 20,
2016).)

After reviewing the notices, the Court determined that

removal was improper under 28 U.S.C. § 1441(b)(2), which
provides:

“A civil action otherwise removable solely on the

basis of the jurisdiction under section 1332(a) . . . may not be
removed if any of the parties in interest properly joined and

Zoullas re-filed the notice of removal on September 18, 2016
and filed an amended notice of removal on September 20, 2016.
(See Notice of Removal, ECF No. 4 (filed Sept. 18, 2016);
Amended Notice of Removal, ECF No. 6 (filed Sept. 20, 2016).)
The amended notice is substantially similar to the originally
filed notice.
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served as defendants is a citizen of the State in which such
action is brought.”

The Court granted Naxos’ motion to remand

the case to New York state court because:

(1) Zoullas’ sole

basis for removal was § 1332(a); (2) Zoullas is a citizen of New
York, where the action was brought; and (3) Zoullas was properly
served with the complaint on June 23, 2016. (Order at 2, ECF No.
13 (filed Sept. 26, 2016).)

The Court retained jurisdiction

over Naxos’ application for fees and costs. (Id.)
On September 30, 2016, Naxos made the instant motion for
costs and attorney fees under 28 U.S.C. § 1447(c), which
authorizes a remanding court to “require payment of just costs
and any actual expenses, including attorney fees, incurred as a
result of the removal.”

Naxos argues that it is entitled to

fees because Zoullas lacked an objectively reasonable basis for
removing and was merely deploying a tactic to avoid the state
court contempt hearing. (Pl.’s Supplemental Mem. of L. at 4-5.)
In response, Zoullas argues that fees are not warranted because
he believed removal was “in good faith” and “justified” based on
complete diversity under § 1332. (Decl. of Thomas A. Farinella
in Opp’n of Pl.’s Appl. for Costs & Att’ys’ Fees at 4
[hereinafter “Farinella Decl.”], ECF No. 21 (filed Oct. 21,
2016).)

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II. Legal Standard
“An order remanding [a] case may require payment of just
costs and any actual expenses, including attorney fees, incurred
as a result of the removal.” 28 U.S.C. § 1447(c).

In Martin v.

Franklin Capital Corp., the U.S. Supreme Court held that “the
standard for awarding fees [under § 1447(c)] should turn on the
reasonableness of the removal.” 546 U.S. 132, 141 (2005).

A

court may award attorney fees “only where the removing party
lacked an objectively reasonable basis for seeking removal.” Id.
“Objective reasonableness is evaluated based on the
circumstances as of the time that the case was removed.”
Williams v. Int’l Gun-A-Rama, 416 F. App’x 97, 99 (2d Cir.
2011).

“[W]hen an objectively reasonable basis exists,”

however, “fees should be denied.” Martin, 546 U.S. at 141.
“The amount of costs to be awarded—or whether to award
costs at all—is entirely in the discretion of the court.”
Arabesque v. Capacity LLC, No. 07 Civ.2042(TPG), 2008 WL 681459,
at *2 (S.D.N.Y. Mar. 10, 2008).

Should the Court determine that

an award is appropriate, Naxos “may recover fees at a reasonable
rate for a reasonable number of hours spent in connection with
the remand motion.” MB Fin. Bank, N.A. v. 56 Walker, LLC, No. 11
Civ. 5538(JGK), 2011 WL 6338808, at *3 (S.D.N.Y. Dec. 19, 2011)
(internal quotation marks omitted).

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III. Discussion
That Zoullas’ removal was improper under § 1441(b)(2) does
not necessarily mean that he lacked an objectively reasonable
basis for attempting to remove.

“The question of whether the

removing defendants were objectively reasonable to remove is an
independent question from whether the removal itself was
procedurally proper.” Williams, 416 F. App’x at 101 n.3.
Several courts in this District have found that a removing
defendant lacked an objectively reasonable basis for removing a
case on the stated basis of diversity of citizenship when, as
here, the defendant was a citizen of the state in which the
action was brought. See Prescia v. U.S. Life Ins. Co. in City of
New York, No. 10cv2518 (KMW), 2010 WL 4344561, at *3 (S.D.N.Y.
Nov. 1, 2010) (“Here, the Court is authorized to award costs and
attorney’s fees against the Defendant [under § 1447(c)] because
removal was predicated upon a diversity of citizenship that
clearly does not exist.

Defendant is a citizen of the state in

which this action is brought.

Even the most basic of research

would have revealed that this Court does not have jurisdiction
over this action.” (internal quotation marks and citation
omitted)); Dela Rosa v. 610-620 W. 141 LLC, No. 08 Civ.
8080(PKL), 2009 WL 1809467, at *3-4 (S.D.N.Y. June 24, 2009);
see also Syms, Inc. v. IBI Sec. Serv., Inc., 586 F. Supp. 53,
56-57 (S.D.N.Y. 1984).
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In concluding that Zoullas lacked an objectively reasonable
basis for removal, the Court finds the reasoning of other courts
in this District persuasive.

Zoullas is a citizen of New York,

where the action was originally brought. (See Order at 2.)
Thus, federal jurisdiction was plainly lacking under §
1441(b)(2) for purposes of removal.

An award under § 1447(c),

therefore, is appropriate because “removal was predicated upon a
diversity of citizenship that clearly does not exist.” Prescia,
2010 WL 4344561, at *3 (internal quotation marks omitted).
Zoullas’ arguments in opposition are without merit.
Zoullas emphasizes his “good faith” beliefs regarding the
propriety of removal, (Farinella Decl. at 4-6), ignoring that
the question of good or bad faith has no bearing on an award of
attorney fees under § 1447(c). See Arabesque, 2008 WL 681459, at
*2 (“Bad faith on the part of the removing party is not
necessary in order for the non-removing party to recover
fees.”).

Instead, the standard for an award of attorney fees is

whether “the removing party lacked an objectively reasonable
basis for seeking removal.” Martin, 546 U.S. at 141.

That

standard is met here and an award of attorney fees is
appropriate.
The remaining issue, then, is the proper amount of the
award.

Naxos seeks an award of $17,365.50, which it contends

represents a reasonable rate for a reasonable number of hours
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spent working on the motion to remand. (Pl.’s Supplemental Mem.
of L. at 7-8.)

According to Naxos, its attorneys and a

paralegal spent 35.3 hours litigating the remand motion:
partner Dean Nicyper (8.1 hours at a rate of $750 per hour);
counsel Chaya Weinberg-Brodt (8 hours at a rate of $630 per
hour); associate Joseph Gallo (9.3 hours at a rate of $390 per
hour); and paralegal Lalindra Sanichar (9.9 hours at a rate of
$265 per hour). (See Supplemental Decl. of Dean R. Nicyper in
Supp. of Mot. for Costs & Att’ys’ Fees Ex. B, ECF No. 18-2
(filed Oct. 12, 2016).)
“A reasonable rate is one in-line with those prevailing in
the community for similar services by lawyers of reasonably
comparable skill, experience[,] and reputation.” MB Fin. Bank,
2011 WL 6338808, at *3 (internal quotation marks omitted).
Although some of the rates charged in connection with Naxos’
remand motion are relatively high, they generally fall within
the range of reasonable. See id. at *3-4 (finding rates of $645
per hour for litigation partners and $545 per hour for senior
litigation associate reasonable); In re AOL Time Warner S’holder
Derivative Litig., No. 02 Civ. 6302(CM), 2010 WL 363113, at *13
(S.D.N.Y. Feb. 1, 2010) (finding that rates ranging from $90 to
$250 for paralegals, $175 to $550 for associates and other nonpartner level attorneys, and $300 to $850 for partners “fall
within the range of those commanded by leading lawyers in the
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Southern District”); see also Axelrod v. Klein, 16-cv-07183
(ALC), 2016 WL 6330433, at *2 (S.D.N.Y. Oct. 28, 2016)
(collecting cases considering reasonable rates for paralegals
and noting that “$210 per hour is a high rate” but nevertheless
finding it reasonable).
Although Zoullas does not challenge the rates set forth in
Naxos’ application, the Court finds that an award of $17,365.50
would be excessive in light of the “length and quality of
[Naxos’] motion papers, the fact that removal was improper on
the face of [Zoullas’] notice, and other awards of attorneys’
fees issued in this District under § 1447(c)[.]” Dela Rosa, 2009
WL 1809467, at *4 (collecting cases that determine the amount of
an award of attorney fees); see also MB Fin. Bank, 2011 WL
6338808, at *4 (“[T]he number of hours expended in connection
with the remand motion is excessive, given that the removal was
plainly improper[.]”).

Accordingly, the Court sees fit to apply

an across-the-board reduction of approximately 33 percent to
Naxos’ request. See MB Fin. Bank, 2011 WL 6338808, at *4
(applying “across-the-board reduction of 40% to the plaintiff’s
attorneys’ hours”).

The Court finds an award of $11,635 to be

more reasonable.

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CONCLUSION

Because Zoullas lacked an objectively reasonable basis for
removing the case from New York state court, Naxos' motion for
costs and attorney fees is GRANTED in the amount of $11,635.
The Clerk of the Court is respectively directed to enter
judgment in favor of Naxos, and to close this case and remove it
from the docket of this Court.
SO ORDERED.

Dated:

New York, New York
July
2017

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~:f-~
'

John F. Keenan
United States District Judge

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