Darling Capital, LLC v. Empire Global Corp. et al
Filing
131
OPINION AND ORDER ON ATTORNEYS' FEES re: 117 MOTION for Attorney Fees filed by Darling Capital, LLC: Darling's motion for attorneys' fees is GRANTED as to attorneys' fees incurred in connection with its letter-motion of August 2, 2017 but denied in all other respects. Reasonable attorneys' fees are awarded in the amount of $1,612.50. The Clerk is directed to terminate the motion. (Docket # 117.) (Signed by Judge P. Kevin Castel on 11/9/2018) (jwh)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------------------------------x
DARLING CAPITAL LLC,
Plaintiff,
16-cv-8943 (PKC)
-againstOPINION AND ORDER
ON ATTORNEYS’ FEES
NEWGIOCO GROUP, INC., formerly known as
EMPIRE GLOBAL CORP., and MICHELE
CIAVARELLA,
Defendants.
-----------------------------------------------------------x
CASTEL, U.S.D.J.
This is a motion for attorneys’ fees under a settlement agreement between the
parties that resolved the claims asserted in this action (the “Settlement Agreement”). For the
reasons that will be explained, the motion is granted as to $1,612.50 in reasonable attorneys’ fees
and is otherwise denied.
BACKGROUND.
The Settlement Agreement, executed on May 15, 2017, provided a schedule of
payments to be made by defendants. (Docket # 115-1.) When the first two scheduled payments
were missed, plaintiff Darling Capital LLC (“Darling”) filed a fully executed stipulated
judgment, which was an exhibit to the Settlement Agreement, and the contemplated remedy in
the event of a breach. The Court entered the stipulated judgment (the “Judgment”) on June 30,
2017. (Docket # 46.) The Judgment required defendants Newgioco Group, Inc. and Michele
Ciavarella to jointly and severally pay Darling $1 million, plus interest at the rate of 22%, until
the amount was paid in full.
Paragraph 6(G) of the Settlement Agreement provides for an award of reasonable
attorneys’ fees to any prevailing party who brings an action or other proceeding for the
enforcement of the Settlement Agreement:
Attorney’s Fees for Future Action: In the event that any party should
bring an action or other proceeding against any other party for the
enforcement of, or seek a declaration as to, or assert by way of
defense, any terms or provision of this Agreement, there shall be an
award of reasonable attorney’s fees and costs to the prevailing party
or parties as the case may be.
(Settlement Agrm’t § 6(G).) The Judgment also provides: “This Court reserves jurisdiction to
enforce the terms of the Settlement Agreement and to adjudicate any and all claims and disputes
thereunder, including to enforce the attorneys’ fee provision in favor of the prevailing party.”
(Docket # 46.)
After the Judgment was filed, Darling brought various applications related to its
enforcement. On August 2, 2017, it filed a letter-motion seeking an Order to compel defendants
to supplement their written responses to a post-judgment information subpoena, and the Court
granted the motion. (Docket # 49, 50.) Darling then filed a motion for the appointment of a
receiver pursuant to Rule 69, Fed. R. Civ. P., and CPLR 5228(a). (Docket # 60.) When
defendants failed to respond by the deadline set by the Court, Darling asserted in a letter that
defendants had defaulted on the motion, and submitted a proposed Order for appointment of the
receiver. (Docket # 71.) Defendants filed response papers the following day, and Darling’s
proposed Order was not entered. (Docket # 73.)
A hearing on Darling’s motion for the appointment of a receiver commenced on
January 3, 2018. (See Transcript, Docket # 83.) Defendant Ciavarella was the only witness. He
testified that Newgioco is a publicly-traded company whose shares traded on an over-the-counter
market. (Tr. 17.)
-2-
Ciavarella testified that in June 2017, Newgioco filed an application to list its
shares on a public exchange, had retained two brokerage firms to raise money for an initial
public offering, and that it intended to file a prospectus with the Ontario Securities Commission
later that week. (Tr. 48-49.) He testified that “at least two million Canadian dollars” were
committed in writing to Newgioco. (Tr. 49.) He testified that he had drafted a registration
statement with two colleagues and that Newgioco’s counsel had reviewed the draft and provided
comments. (Tr. 51-52.) The Court admitted as Court Exhibit G a draft prospectus for Newgioco
that was to be filed with the Ontario Securities Commission on the following Friday. (Tr. 5961.) Page 14 of the prospectus listed “Repayment of high interest note due to Darling Capital
LLC,” page 35 listed Darling as a material creditor, and page 81 described the procedural history
of the dispute. (Tr. 61-64.) Page 113 stated that Newgioco owed $1 million to Darling, subject
to an annual interest rate of 22 percent. (Tr. 64-65.) Ciavarella testified that if a receiver were
appointed to oversee enforcement of the Judgment and Settlement Agreement, the consequences
would include disqualification for listing by the Ontario Securities Commission. (Tr. 67.) The
Court reserved decision on Darling’s motion. (Tr. 76-77.)
The hearing continued on January 30, 2018. (Transcript, Docket # 98.)
Defendants’ counsel represented that defendants had paid $300,000 against the judgment since
the proceeding of January 3. (1/30 Tr. 23.) Defendants’ counsel also represented that Newgioco
filed its preliminary prospectus to the Ontario Securities Commission on January 5, 2018. (1/30
Tr. 2-3.) Ciavarella testified that a public offering would take place on March 31, 2018, and that
he expected Darling to receive the balance owed on the judgment on or about that date. (1/30 Tr.
20-21.)
-3-
Darling urged that defendants’ actions were insufficient and that a receiver
remained necessary. (1/30 Tr. 4.) It suggested that, alternatively, the Court could issue an Order
requiring defendants to turn over cash, cash equivalents and non-tangible assets to satisfy
judgment, and also urged that defendants had made a fraudulent conveyance of assets. (1/30 Tr.
11-15.) But Darling also acknowledged that such relief would be beyond the scope of its
motion:
THE COURT: Look, you didn’t buy a ticket to have the judge
preside over how your judgment is going to be paid. You made an
application for the appointment of a receiver. Right?
MR. FLEISCHMANN: Correct, your Honor. I’m not arguing the
fraudulent conveyance merits by itself. I’m saying it is a factor to
consider. That’s what I’m trying to say.
(1/30 Tr. 15.)
At the conclusion of the January 30 proceeding, the Court denied without
prejudice Darling’s motion for the appointment of a receiver. It observed that in “in the course
of responding to discovery, Newgioco was not forthright, was evasive, did not act in good faith,
and made no serious effort to pay the judgment until after the Court’s hearing on January 3,
2018, after which it has paid $300,000.” (1/30 Tr. 35.) The Court explained, however, that New
York law weighs the extent to which a receivership will increase the likelihood of satisfaction of
judgment, and concluded:
I am convinced that the appointment of a receiver will not
accomplish that in a timely fashion. The fact that a representation
was made that the offering documents would be filed by January 25,
the testimony today is that they were so filed, that there is a
commitment letter which is Exhibit J to the most recent submission
by the defendants. And this is the supplemental declaration of
Ciavarella. And that commitment dated January 15 by Echelon
Wealth Partners will result in financing which would enable
Newgioco to pay the judgment. And as Newgioco and its CEO have
represented, it intends to pay the judgment with the proceeds of the
-4-
offering. It is the Court's view that this is the best avenue to have
the judgment paid.
(1/30 Tr. 35-36.) The Court set a conference date for April 20, 2018, and stated that the denial of
the motion to appoint a receiver was made without prejudice to renewal. (1/30 Tr. 36.)
On April 20, 2018, Darling informed the Court in a letter that defendants had
satisfied the judgment in full. (Docket # 111.) At that day’s proceeding, both parties confirmed
on the record “that the money judgment has been paid . . . .” (4/20 Transcript, Docket # 112, at
2-3.) The remainder of the conference involved a briefing schedule for the present motion.
(4/20 Tr. at 3-4.)
DISCUSSION.
A. Construction of the Attorneys’ Fees Provision.
“Under New York law, a contract that provides for an award of reasonable
attorneys’ fees to the prevailing party in an action to enforce the contract is enforceable if the
contractual language is sufficiently clear.” NetJets Aviation, Inc. v. LHC Commc’ns, LLC, 537
F.3d 168, 175 (2d Cir. 2008); see also Town House Stock LLC v. Coby Hous. Corp., 49 A.D.3d
456, 457 (1st Dep’t 2008) (affirming attorneys’ fees award under premised on breach of the
underlying settlement agreement). “[A]greements providing for payment of attorneys’ fees
should be construed strictly” and consistent with the parties’ reasonable expectations. Andrews
44 Coffee Shops Inc. v. TST/TMW 405 Lexington, L.P., 40 A.D.3d 544, 545 (1st Dep’t 2007).
No party has urged that the attorneys’ fees provision is ambiguous. It awards
reasonable attorneys’ fees to the “prevailing party” in any action or proceeding “for the
enforcement of . . . any terms or provision of this Agreement . . . .” (Settlement Agrm’t § 6(G).)
This provision does not award attorneys’ fees for all legal work incurred in connection with
enforcement of the Judgment. An award is available only to the prevailing party in an action or
-5-
proceeding to enforce the Settlement Agreement. The parties had the sophistication and
resources to bargain for a broader fees provision, and the Settlement Agreement contains a
merger clause that included language representing and warranting that the parties had the
opportunity to consult with the legal counsel of their choosing. 1 (Settlement Agrm’t ¶ 6(E).)
New York courts have described what it means to be a “prevailing party” under a
contractual attorneys’ fees provision. “To determine whether a party has ‘prevailed’ for the
purpose of awarding attorneys’ fees, the court must consider the ‘true scope’ of the dispute
litigated and what was achieved within that scope.” Sykes v. RFD Third Ave. I Assocs., LLC,
39 A.D.3d 279, 279 (1st Dep’t 2007). “To be considered a ‘prevailing party,’ one must simply
prevail on the central claims advanced, and receive substantial relief in consequence thereof.”
Id. In contrast to certain federal statutes that provide for attorneys’ fees only if the prevailing
party’s success is a product of “judicial imprimatur,” Roberson v. Giuliani, 346 F.3d 75, 81 (2d
Cir. 2003), New York has no such requirement for an attorneys’ fees award provided by contract.
See, e.g., Sykes, 39 A.D.3d at 280 (“Although [plaintiffs] received the funds they sought through
stipulation rather than through a judicial determination, they sufficiently prevailed on their
claim.”).
Thus, the Settlement Agreement provides for an attorneys’ fees award only to the
prevailing party in a proceeding or an action to enforce a term or provision of the Settlement
Agreement. A party prevails only if it receives substantial relief as a consequence of its claim.
1
The merger clause states in full: “The parties to this Agreement and each of them, acknowledge that (1) this
Agreement and its reduction to final form is a result of extensive good faith negotiations between the parties; (2)
said parties have carefully reviewed and examined this Agreement for execution by said parties, or any of them; and
(3) any statute or rule of construction that ambiguities are to be resolved against the drafting parties shall not be
employed in the interpretation of this Agreement. Each party has had the opportunity to consult with independent
legal counsel of their own choosing, and has done so, or by executing this Agreement, knowingly waives the
opportunity of advice and representation by such counsel.” (Settlement Agrm’t ¶ 6(E).)
-6-
B. Darling’s Motions Qualify as Proceedings.
Defendants urge that paragraph 6(G) of the Settlement Agreement does not allow
for an award of attorneys’ fees because Darling’s efforts to collect on the judgment were not
brought as “an action or other proceeding against any other party for the enforcement of . . . this
Agreement . . . .” Defendants emphasize that at a conference of January 30, 2018, the
undersigned referred to the parties’ post-judgment disputes as “proceedings ancillary to the
enforcement of the federal judgment[.]” (1/30 Tr. at 24.) It appears to be defendants’ position
that because the Court used the word “ancillary” in connection with describing its jurisdiction
over the dispute, the dispute cannot constitute a “proceeding.” In defendants’ own words:
Merriam Webster’s dictionary defines “ancillary” as “subordinate,
subsidiary” and “auxiliary or supplementary.” More importantly,
all of these definitions make clear that the definition of “ancillary”
necessarily relates to something, i.e., an object, thereby making the
word incapable of meaning something “other” as contemplated in
the Settlement Agreement.
(Def. Mem. at 9.)
Defendants’ argument is without merit. Their emphasis on the Court’s use of the
word’s “ancillary” when describing its jurisdiction to enforce the judgment and Settlement
Agreement does not make the parties’ dispute something other than a proceeding. Black’s Law
Dictionary includes the following definitions of the word “proceeding”:
1. The regular and orderly progression of a lawsuit, including all acts
and events between the time of commencement and the entry of
judgment. 2. Any procedural means for seeking redress from a
tribunal or agency. 3. An act or step that is part of a larger action.
4. The business conducted by a court or other official body; a
hearing.
Black’s Law Dictionary at 1398 (10th ed. 2014). A proceeding includes “‘all ancillary or
provisional steps’” that are “‘done by the authority or direction of the court,’” including “‘the
-7-
enforcement of the judgment . . . .’” Id. (quoting Edwin E. Bryant, The Law of Pleading Under
the Codes of Civil Procedure, 3-4 (2d ed. 1899)).
The parties could have bargained for a narrower or specialized meaning of the
word “proceeding” but did not do so. Under the express language of the Settlement Agreement,
which defendants acknowledge is unambiguous, the parties’ post-judgment dispute constitutes a
“proceeding.”
C. Darling Is Awarded Fees on Its Motion to Compel Supplemental Interrogatory
Responses.
Darling’s motion for attorneys’ fees is granted as to its letter-motion to compel
supplemental responses to questions 1, 3, 4, 5, 8 and 9 of its information subpoena. (Docket #
50.) Its application was part of a proceeding to enforce the Settlement Agreement, and because
Darling received substantial relief on its motion, it is the prevailing party.
The Court has reviewed the billing invoices attached to the Declaration of Jeffrey
Fleischmann and concludes that 4.3 hours of attorney time was expended on preparing the lettermotion to the Court and reviewing defendants’ responses. 2 Fleischmann bills at a rate of $375
per hour, and the total fees award on the letter-motion is $1,612.50.
Darling’s motion for attorneys’ fees is therefore granted as to $1,612.50 in
reasonable fees attributable to the letter-motion seeking to compel supplemental responses.
D. Because Darling Was Not the Prevailing Party on Its Motion to Appoint a
Receiver, Its Application Is Denied as to Fees Incurred Thereto.
As noted, “[t]o be considered a ‘prevailing party,’ one must simply prevail on the
central claims advanced, and receive substantial relief in consequence thereof.” Sykes, 39
A.D.3d at 279.
2
This work is reflected in the billing entries of July 27 and 31, 2017; August 2 and 4, 2017; and September 5 and
14, 2017. (Fleischmann Dec. Ex. A.)
-8-
Darling urges that it is the prevailing party because its motion to appoint a
receiver was brought in order to ensure that defendants paid the Judgment, and the proceedings
concluded with the Judgment’s satisfaction. (Reply Mem. at 2-4.) It is undisputed that
defendants ultimately satisfied the Judgment, but the record does not support Darling’s assertion
that this was because of the possible appointment of a receiver. Ciavarella testified that
Newgioco filed its application to list its shares on a public exchange in June 2017, long before
the motion to appoint a receiver. At the hearing of January 3, Ciavarella described a plan to
secure financing to satisfy the judgment. Had the Court granted Darling’s motion, it is more
likely than not that the funding committed toward the Judgment would have been withdrawn and
that satisfaction of Judgment would have been frustrated. Darling cannot reasonably claim to
have prevailed on a motion that the Court denied on that basis.
Further, the relief sought on the motion was specifically directed to the
appointment of a receiver, and not satisfaction of the Judgment by other means. (1/30 Tr. 15.)
Darling cannot reasonably urge that it is the “prevailing party” when the only relief sought on its
motion was denied.
To the extent that Darling seeks reimbursement for fees and expenses incurred in
connection with its motion to appoint a receiver, the motion is denied.
E. Darling’s Motion Is Denied as to All Other Fees and Expenses.
Darling also seeks fees and expenses for work performed by attorneys in Los
Angeles, Canada and Italy. The supporting attorney declarations do not describe work
performed in connection with a proceeding in which Darling was the prevailing party. Each
states that the attorneys’ fees were “expended in connection with Darling’s efforts to collect on
the judgment entered by the Court . . . .” (Corrigan Dec. ¶ 1; Fenig Dec. ¶ 1; Ponzanelli Dec. ¶
-9-
1.) A member of Darling similarly states that these attorneys were retained “to enforce the
Judgment.” (Levin Dec. ¶ 2.)
As discussed, the attorneys’ fees provision expressly provides for fees only to the
prevailing party in a proceeding to enforce the Settlement Agreement. It does not grant fees
more broadly toward any attorney work performed in connection with enforcement of the
Judgment. Darling’s motion is therefore denied as to these fees.
CONCLUSION.
Darling’s motion for attorneys’ fees is GRANTED as to attorneys’ fees incurred
in connection with its letter-motion of August 2, 2017 but denied in all other respects.
Reasonable attorneys’ fees are awarded in the amount of $1,612.50. The Clerk is directed to
terminate the motion. (Docket # 117.)
SO ORDERED.
Dated: New York, New York
November 9, 2018
- 10 -
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?