LG Capital Funding, LLC v. ProText Mobility, Inc.
Filing
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MEMORANDUM OPINION AND ORDER....The March 28 motion by LG for an award of attorneys fees is granted to the following extent. It is awarded costs associated with the filing of this action and reasonable fees through July 21, 2017. A scheduling order for the determination of those amounts accompanies this Opinion. (Signed by Judge Denise L. Cote on 6/12/2018) (gr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
LG CAPITAL FUNDING, LLC,
:
:
Plaintiff,
:
:
-v:
:
PROTEXT MOBILITY, INC.,
:
:
Defendant.
:
:
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17cv3841(DLC)
MEMORANDUM OPINION
AND ORDER
DENISE COTE, District Judge:
LG Capital Funding, LLC (“LG”) has moved for an award of
attorneys’ fees following trial despite the fact that it did not
prevail on the sole issue in dispute at trial.
For the
following reasons, the terms of its agreements with defendant
Protext Mobility, Inc. (“Protext”) entitle LG to an award only
of the fees and costs associated with the filing of this action
through to the initial pretrial conference.
LG had lent money to Protext and was partially repaid for
those loans by selling in the open market shares of Protext
stock that Protext issued to LG.
These shares were issued
pursuant to LG’s requests to convert portions of the principal
balance and interest due on the loans, as reflected in the Notes
that governed the transactions, into stock.
As of the time this
action was filed on February 22, 2017, it was undisputed that
certain principal and accrued interest due to LG under three
Notes remained outstanding.
LG Capital Funding, LLC v Protext
Mobility, Inc., 17cv3841 (DLC), 2018 WL 1116571, at *4 (S.D.N.Y.
Feb. 28, 2018) (the “Trial Opinion”).
As the parties explained
at the initial pretrial conference with the Court on July 21,
however, they disagreed whether LG had provided effective notice
on November 17, 2014 (“November 17 Notice”) to Protext for what
would have been a ninth conversion of debt into shares.
A bench trial was held on February 26, 2018 to resolve
whether LG had given effective notice for the ninth conversion.
Id. at *1 (“the instant dispute concerns a ninth request to
convert debt into stock”).
The Trial Opinion found that
“plaintiff failed to effectuate a proper Notice of Conversion
and is therefore not entitled to the lost income of the shares
requested in the November 17 Notice, nor to the damages it
claims it is due because of defendant’s alleged failure to
perform on that Notice.”
Id. at *6.
Now, LG seeks to recover $30,275 in attorneys’ fees and
$475 in costs pursuant to the terms of the Notes which govern
the parties’ transactions.
This represents the entire amount of
attorneys’ fees for this litigation, including the trial and the
filing of the motion for these fees.
The motion for attorneys’
fees became fully submitted on April 25, 2018.
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The fee-shifting provision on which LG relies is contained
in Section 7 of each of the three Notes, and in Note 1’s Events
of Default provision.
Section 7 provides:
The Company [Protext] agrees to pay all costs and expenses,
including reasonable attorneys’ fees and expenses, which
may be incurred by the Holder [LG] in collecting any amount
due under this Note.
Note 1’s Events of Default provision provides:
If the Holder [LG] shall commence an action or proceeding
to enforce any provisions of this Note, including without
limitation engaging an attorney, then the Holder shall be
reimbursed by the Company for its attorneys' fees and other
costs and expenses incurred in the investigation,
preparation and prosecution of such action or proceeding.
LG acknowledges that it was not a prevailing party at
trial, and therefore does not rely on those provisions of the
Notes which give prevailing parties a right to recover
attorneys’ fees.
Those provisions are contained in the Events
of Default provisions in Notes 2 and 3 and provide:
If the Holder shall commence an action or proceeding to
enforce any provisions of this Note, including, without
limitation, engaging an attorney, then if the Holder
prevails in such action, the Holder shall be reimbursed by
the Company for its attorneys’ fees and other costs and
expenses incurred in the investigation, preparation and
prosecution of such action or proceeding.
(emphasis added).
The Trial Opinion held “[t]here was no Event
of Default related to the November 17 Notice.”
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Id. at *6.
DISCUSSION
New York law governs this dispute.
“[P]arties may agree by
contract to permit recovery of attorneys' fees, and a federal
court will enforce contractual rights to attorneys' fees if the
contract is valid under applicable state law.”
United States
Fidelity and Guar. Co. v. Braspetro Oil Services Co., 369 F.3d
34, 74 (2d Cir. 2004) (citation omitted).
“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
Communications, LLC, 537 F.3d 168, 175 (2d Cir. 2008) (citation
omitted).
“When applying New York law, a court “should not
infer a party's intention to provide counsel fees as damages for
a breach of contract unless the intention to do so is
unmistakably clear from the language of the contract.”
Mid-
Hudson Catskill Rural Migrant Ministry, Inc. v. Fine Host Corp.,
418 F.3d 168, 177 (2d Cir. 2005) (citation omitted).
LG Capital is entitled to only limited attorneys’ fees and
costs.
LG Capital is not a prevailing party in this litigation
with respect to the only disputed issue and therefore cannot
recover any fees and costs associated with claims of a default
on the November 17 Notice.
While the November 17 Notice was the
center of the dispute between the parties before the Court, it
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is also undisputed that Protext has not repaid the principal and
accrued interest due under all three Notes.
The filing of this
litigation allows LG to obtain a judgment as to those amounts.
But, since at least the time of the initial conference on July
21, 2017, it was clear that Protext did not dispute that it owed
that debt or the amount of that debt.
LG Capital is therefore
entitled to attorneys’ fees and costs associated with filing
this action and with litigating this action up to and through
July 21, 2017.
LG argues that it was not until Protext responded to LG’s
proposed stipulated facts on the eve of trial that it made clear
to LG that it would not contest its obligation to pay the
outstanding principal and interest on the Notes.
LG argues that
this delay required LG to brief the breach of contract claim for
the failure to repay the Notes.
To the contrary, the contours
of the dispute between the parties was clear by the time of the
July 21 conference.
There is no reason to find that further
litigation would have been required but for the dispute over the
November 17 Notice.
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CONCLUSION
The March 28 motion by LG for an award of attorneys’ fees
is granted to the following extent.
It is awarded costs
associated with the filing of this action and reasonable fees
through July 21, 2017.
A scheduling order for the determination
of those amounts accompanies this Opinion.
Dated:
New York, New York
June 12, 2018
______________________________
DENISE COTE
United States District Judge
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