Bloomfield Investment Resources Corp v. Daniloff

Filing 124

DECISION AND ORDER denying 114 Motion for Attorney Fees. For the reasons stated above, the Court DENIES the motion of plaintiff Bloomfield Investment Resources Corp. for an award of attorneys' fees and costs against defendant Elliot Daniloff under Federal Rule of Civil Procedure 54(d). The Clerk of the Court is respectfully directed to close the pending motion at Dkt. No. 114. SO ORDERED. (Signed by Judge Victor Marrero on 2/21/24) (yv)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

2/21/2024

BLOOMFIELD INVESTMENT RESOURCES CORP.,

17 Civ. 4181 (VM)

Plaintiff,

DECISION AND ORDER

- against ELLIOT DANILOFF,
Defendant.
VICTOR MARRERO, United States District Judge.

Now before the Court is Plaintiff Bloomfield Investment
Resources Corporation’s (“Bloomfield”) Motion for Attorneys’
Fees and Costs Under Rule 54(d) (see Dkt. No. 114) against
Defendant Elliot Daniloff (“Daniloff”), requesting an award
of reasonable attorneys’ fees and costs in the amount of
$5,180,660.25. For the reasons stated below, Bloomfield’s Fee
Application is hereby DENIED.
I.

BACKGROUND1

Bloomfield brought the instant action against Daniloff
for

fraud,

breach

of

contract,

promissory

estoppel,

and

unjust enrichment. (See Dkt. No. 51.) In short, Bloomfield
alleged that it loaned $25 million to a company owned by two
investment

funds

(the

“Synergy

Hybrid

Funds”)

that

were

1 The reader is presumed to be familiar with the background and context
of this litigation. A fuller description of the case’s factual background
can be found in the Court’s May 23, 2023 Decision and Order. (See Dkt.
No. 108.) As such, the Court does not recount this factual background in
full here.

managed

by

entities

entirely

owned

and

controlled

by

Daniloff. Bloomfield alleged that it had loaned this money in
reliance on Daniloff’s fraudulent promises and that it had
not been repaid in violation of the parties’ oral agreement.
In defense, Daniloff maintained that Bloomfield’s transfer of
$25

million

to

Daniloff’s

company

constituted

an

equity

investment into the investment funds, with no guarantee of
repayment.
After conducting a four-day bench trial in October 2022,
the Court entered its findings of fact and conclusions of law
pursuant

to

Rule

52(a)

of

the

Federal

Rules

of

Civil

Procedure. (See Dkt. No. 108 [hereinafter the “Decision”].)
The

Court

found

that

Bloomfield

had

produced

sufficient

evidence to establish that Daniloff was liable to Bloomfield
for

fraudulent

inducement

and

breach

of

the

oral

loan

agreement. As a result, the Court concluded that Bloomfield
was entitled to compensatory and punitive damages on those
claims.
After

the

Court

entered

judgment

for

Bloomfield,

Bloomfield filed its Motion for Attorneys’ Fees and Costs
under Rule 54(d)on June 27, 2023 (see Dkt. No. 114), along
with a memorandum of law in support of this motion (see Dkt.
No.

115

[hereinafter

Bloomfield

also

“Fee

submitted

Application”
a
2

or

Declaration

“Fee

App.”].)

attesting

to

Bloomfield’s
litigation.

legal
(See

fees
Dkt.

throughout
No.

116.)

the

course

Daniloff

of

submitted

the
a

memorandum of law in opposition to the Fee Application on
July 11, 2023 (see Dkt. No. 117 [hereinafter “Opp.”]), and
Bloomfield submitted its reply memorandum of law in further
support of its Fee Application on July 21, 2023 (see Dkt. No.
118 [hereinafter “Reply”]).2
II.
Bloomfield

contends

DISCUSSION
that

the

Court

should

award

it

attorneys’ fees and costs pursuant to the Court’s inherent
equitable

power.

(See

Fee

App.

at

5.)

Specifically,

Bloomfield argues that the Court should apply the “bad faith
exception” and award attorneys’ fees here because “Daniloff’s
fundamental theory of the case was factually baseless” and
because “he litigated that theory for vexatious and improper
purposes.” (Fee App. at 6.) For the reasons stated below, the
Court

concludes

that

Bloomfield

is

not

entitled

to

fee

shifting.
A. Legal Standard
While prevailing parties are permitted to apply for an
award of attorneys’ fees and costs under Federal Rule of Civil

Also on July 21, 2023, Daniloff filed a Notice of Appeal of the Court’s
Decision (see Dkt. No. 113), only to withdraw the appeal (see Dkt. No.
122) before timely reinstating the Notice of Appeal on September 29, 2023
(see Dkt. No. 123).
2

3

Procedure 54(d), they are ordinarily not entitled to recover
attorneys’ fees under the “American Rule,” absent statutory
authority or by contract. See Sierra Club v. Army Corps of
Eng’rs, 776 F.2d 383, 390 (2d Cir. 1985). However, the Supreme
Court has recognized that courts may exercise their inherent
equitable

powers

to

shift

attorneys’

fees

in

limited

circumstances. See Alyeska Pipeline Serv. Co. v. Wilderness
Soc’y, 421 U.S. 240, 258-60 (1991). One such circumstance is
the

“bad

faith

exception,”

which

applies

when

the

non-

prevailing party “has commenced or conducted an action ‘in
bad

faith,

vexatiously,

wantonly,

or

for

oppressive

reasons.’” Dow Chem. Pac. Ltd. v. Rascator Mar. S.A., 782
F.2d 329, 344 (2d Cir. 1986) (quoting F.D. Rich Co. v. United
States ex rel. Indus. Lumber Co., 417 U.S. 116, 129 (1974));
see Eisemann v. Greene, 204 F.3d 393, 395 (2d Cir. 2000).
To prevail on a motion to shift fees, the moving party
must provide “clear evidence” that the losing party’s claims
were (1) “entirely without color,” and (2) “were made in bad
faith.” Mali v. Fed. Ins. Co., 720 F.3d 387, 394 (2d Cir.
2013). “[A] claim is ‘entirely without color’ when it lacks
any legal or factual basis.” Sierra Club, 776 F.2d at 390
(citation omitted). A bad faith claim is one “motivated by
improper purposes such as harassment or delay.” Schlaifer
Nance & Co., Inc. v. Est. of Warhol, 194 F.3d 323, 336 (2d
4

Cir. 1999). A party seeking fees must satisfy both elements
to prevail. See Sierra Club, 776 F.2d at 390 (“The test is
conjunctive

and

neither

meritlessness

alone

nor

improper

purpose alone will suffice.”).
Finally,

the

Second

Circuit

has

cautioned

that

the

inherent power to award attorneys’ fees “must be applied with
caution to make sure that [litigants] are not deterred from
. . . enforc[ing] their rights.” Nemeroff v. Abelson, 704
F.2d 652, 654 (2d Cir. 1983); see ED Cap., LLC v. Bloomfield
Inv. Res. Corp., 316 F.R.D. 77, 83 (S.D.N.Y. 2016) (“[T]he
Court may only award attorneys’ fees under its inherent
authority

in

exceedingly

limited

circumstances.”).

Accordingly, the Second Circuit requires “a high degree of
specificity in the factual findings of lower courts when
attorneys’ fees are awarded on the basis of bad faith.”
Kanematsu-Gosho Ltd. v. M/T Messiniaki Aigli, 814 F.2d 115,
119 (2d Cir. 1987) (quoting Weinberger v. Kendrick, 698 F.2d
61, 80 (2d Cir. 1982)). “Such an award is restricted to
circumstances where there is clear evidence that a party
commenced an action with the sole aim of harassment or delay
or for another improper purpose.” ED Cap., LLC, 316 F.R.D. at
83 (emphasis added). Thus, courts “will only uphold [fee
shifting]

under

the

bad

faith

exception

when

‘serious

misconduct clearly appears on the record.’” Id. (quoting
5

Milltex Indux. Corp. v. Jacquard Lace Co., 55 F.3d 34, 41 (2d
Cir. 1995)).
B. Analysis
Under

this

exacting

standard,

the

Court

holds

that

although Bloomfield’s application satisfies the first element
of the bad faith test, it fails to meet the second element
and thus Bloomfield is not entitled to fee shifting. The Court
finds

that

Bloomfield

has

not

established

that

Daniloff

engaged in the sort of dilatory and vexatious litigation
tactics

that

satisfy

the

standard

for

the

“bad

bad

faith

faith”

exception in this Circuit.
On

the

first

element

of

the

exception,

Bloomfield has carried its burden. The Court found after trial
that

Daniloff’s

conduct

made

him

liable

for

fraudulent

inducement and breach of contract, that Daniloff’s legal
defenses were meritless, and that Daniloff lacked credibility
in his testimony, which ran counter to the evidence admitted
at trial. See Sierra Club, 776 F.2d at 790 (“[A] claim is
‘entirely without color’ when it lacks any legal or factual
basis.” (citation omitted)).
Daniloff’s “theory of the case” was that he “never
misrepresented that Bloomfield made an investment in the
Synergy Hybrid Fund[s] as an investor and that the $25 million
did

not

represent

a

loan.”

Decision
6

at

30.

But,

after

reviewing the parties’ extensive proposed findings of fact
and conclusions of law, deposition designations, and pretrial
briefs, and following a four-day bench trial where the Court
heard testimony from seven live fact witnesses, the Court
concluded

that

Daniloff’s

arguments

were

legally

and

factually baseless. The Court found that the overwhelming
evidence

adduced

at

trial

established

that

both

parties

always understood that the $25 million would be a loan, not
an equity investment in the Synergy Hybrid Funds as Daniloff
maintained.

See

id.

(stating

that

testimony

and

email

evidence contradicted Daniloff’s theory of the case). The
Court concluded that “neither the testimony nor the evidence
presented at trial support Daniloff’s contentions,” id. at
42, and the Court “did not find that the testimony or evidence
Daniloff presented was credible,” id. at 26. Indeed, the Court
found that none of the testimony or other evidence Daniloff
offered

even

“plausibly

supported

a

finding

embodying

Daniloff’s version of the material facts in dispute.” Id.
(emphasis added).
In its Decision, the Court emphasized Daniloff’s lack of
credibility and factual support at trial. The Court found
that Daniloff persisted in making baseless arguments without
support and in conflict with the clear evidence showing that

7

he (and Bloomfield) always understood the $25 million would
be a loan and not an equity investment:
The Court found throughout the trial that Daniloff was
not a credible witness. His testimony was often
inconsistent or contradictory and his explanations
unpersuasive. He maintained that the $25 million was
never a loan even when confronted with emails in which
he confirmed an obligation to repay Bloomfield, and
either affirmed or failed to deny the terms of the [oral
agreement]. He frequently claimed he was not able to
remember salient events that occurred throughout this
saga, and that were vital to the parties’ agreement. For
example, he claimed he did not remember that the $25
million was to be kept in a restricted bank account over
which Bloomfield would have signatory control -- details
of which were manifestly critical to the underlying
transaction and had been memorialized in multiple email
correspondences over the course of several years between
the parties.
Further, at trial, Daniloff was confronted with clear
evidence demonstrating that despite his purported
disagreement, he failed to dispute any of Bloomfield’s
recitation of the [oral agreement] in the emails
introduced
into
the
record.
Daniloff
incredibly
rationalized his failure to correct the parties’
supposedly erroneous understanding by asserting that he
“had no obligation to respond because everything that
was sent in the emails was absolutely incorrect.”
Decision

at

25-26

(citations,

alterations,

and

omission

omitted).
For

example,

one

witness

testifying

for

Bloomfield

stated “that Daniloff expressly indicated to him that the $25
million needed to be shown as equity via the Synergy Hybrid
Fund[s] in order to borrow against it, even though the money
was

to

be

given

as

a

loan.”

Id.

at

30.

And

“email

correspondences between the parties starting in 2011 through
8

2015 reveal that the parties, including Daniloff, always
operated

with

the

understanding

that

the

$25

million

constituted a loan, subject to full repayment and consistent
with the [oral agreement], and not an investment.” Id. at 33.
Yet “[a]t no point until he retained counsel in 2015 did
Daniloff assert that the funds” were an investment and not a
loan. Id. The Court’s findings here are more than sufficient
to establish that Daniloff’s arguments in this litigation
were entirely without color, satisfying the first element of
the bad faith exception. See Sierra Club, 776 F.2d at 390.
Nevertheless,
“entirely

without

a

finding

color”

is

that

a

party’s

not

enough

to

claims
entitle

were
the

prevailing party to recover attorneys’ fees. A party seeking
legal fees must also satisfy the second element of the bad
faith exception by showing with “clear evidence” that the
opposing party acted with an “improper purpose” such as to
harass or delay an opposing party. Id. Improper purpose “may
be evidenced by conduct occurring either before or during
trial.” Id.; see Oliveri v. Thompson, 803 F.2d 1265, 1272 (2d
Cir. 1986) (“Bad faith may be found, not only in the actions
that led to the lawsuit, but also in the conduct of the
litigation.” (quoting Hall v. Cole, 412 U.S. 1, 15 (1973)
(quotation marks and alteration omitted)). The Second Circuit
has “interpreted the bad faith standard restrictively,” and
9

courts awarding attorneys’ fees must provide “a high degree
of specificity in the[ir] factual findings.” Eisemann, 204
F.3d at 396 (emphasis in original) (quoting Dow Chem. Pacific
Ltd. v. Rascator Maritime S.A., 782 F.2d 329, 344 (2d Cir.
1986)); see Oliveri, 803 F.2d at 1272.
Under this standard, the Court finds that Bloomfield has
not

established

specificity

with

that

the

Daniloff

required
litigated

degree
this

of

case

factual
with

an

improper purpose of harassment or delay. Bloomfield argues
that

Daniloff

“defended

this

action

with

an

improper

purpose,” in part, because “Daniloff intentionally caused the
parties to litigate for the better part of a decade on the
basis of ‘facts’ that he knew were false.” (Fee App. at 9.)
But “[a]lthough a frivolous position will often signal an
improper purpose,” the Second Circuit has “never held that a
frivolous position may be equated with an improper purpose.”
Sierra Club, 776 F.2d at 391; see China Shipping Container
Lines Co. Ltd. v. Big Port Serv. DMCC, No. 15 Civ. 2006, 2020
WL 3966014, at *8-9 (S.D.N.Y. May 15, 2020) (holding that
“repeatedly present[ing] unsupported arguments to the Court”
was insufficient to establish improper motive); Mahoney v.
Yamaha Motor Corp., U.S.A., 290 F.R.D. 363, 369-80 (E.D.N.Y.
2013) (denying request for legal fees even if plaintiff’s
counsel “had knowledge that [plaintiff's] claims . . . were
10

meritless” because it is “improper to determine that a party
acted

in

bad

faith”

merely

meritless

claim”).

So,

arguments

unsupported

because

while
and

the

“that

Court

contradicted

party

found
by

filed

a

Daniloff’s

the

evidence

adduced at trial (see Fee App. at 7-8), colorless arguments,
alone, cannot establish improper purpose. See Sierra Club,
776 F.2d at 391 (observing this “would turn the two-part
standard into a one-part standard”).
In

addition

to

pointing

out

the

baselessness

of

Daniloff’s legal defense, Bloomfield argues that Daniloff’s
litigation tactics were undertaken with the improper purpose
of harassing Bloomfield and delaying recovery of the money it
had loaned him. Bloomfield claims that Daniloff “deliberately
planned to refuse repayment and eventually interpose a legal
defense that was unmoored from reality.” (Fee App. at 8.) But
the only dilatory tactic during litigation that Bloomfield
identifies
Bloomfield

is

the

alleges

parties’

that

settlement

Daniloff

induced

negotiations.
Bloomfield

into

participating in “numerous purported settlement meetings,” as
well as a formal mediation, “under false pretenses” in order
to delay resolution of this litigation. (Id.) Bloomfield
accuses Daniloff of raising “false promises and hopes” by
engaging

in

these

settlement

intention

of

following

through.
11

negotiations
According

to

without

any

Bloomfield,

these settlement talks “simply strung out matters and caused
Bloomfield to incur even more attorneys’ fees [and] costs,”
even though Daniloff “subjectively knew” that his position
was meritless. (Id.) Indeed, when the settlement negotiations
reached “an agreement in principle,” the parties jointly
requested a stay of the litigation that lasted over a year,
until the proposed settlement agreement fell apart. (Id.)
Though these settlement negotiations undoubtedly had the
effect of delaying the ultimate resolution of this case, the
Court is not persuaded that Daniloff’s settlement tactics
rise to the level of establishing bad faith. “[D]elay alone,
without ‘clear evidence’ of bad faith, does not rise to the
level of sanctionable conduct contemplated by the case law.”
Thai Lao Lignite (Thailand) Co., Ltd. v. Gov’t of the Lao
People’s Democratic Republic, No. 10 Civ. 5256, 2011 WL
4111504, at *11 (S.D.N.Y. Sept. 13, 2011). And although it
advances a conclusory assertion that Daniloff “made serial
false intimations of repayment and settlement” in order to
cause further delay (Reply at 5), Bloomfield does not offer
any direct evidence that Daniloff pursued settlement talks
under false pretenses, such as evidence showing that Daniloff
never intended to finalize a settlement agreement but feigned
interest in settling in order to delay the proceedings. See
Hopson v. Riverbay Corp., 190 F.R.D. 114, 123 (S.D.N.Y. 1999)
12

(declining

to

sanction

attorney

who

made

a

series

of

misrepresentations because these errors may have been “the
result of negligent preparation” rather than for the “sole[]”
purpose of delay or harassment).3
Without such evidence, the Court cannot conclude that
Daniloff’s actions were taken with an improper motive. Courts
in

this

Circuit

attorneys’

fees

have

simply

consistently
on

the

basis

declined

to

that

defendant

the

award

improperly delayed the proceedings, even when the delay was
accompanied (or even caused) by meritless legal positions.
For example, in Thai Lao Lignite, the court declined to award
fees against a party who raised meritless arguments and
improperly delayed the litigation by first failing to meet a
court-ordered deadline to produce discovery and then filing
objections to the court’s production order. See 2011 WL
4111504, at *11. While the court “acknowledge[d] that” the
respondent’s

actions

“caused

undue

delay,”

the

court

explained that the delay itself was not evidence of bad faith.
Id.

So

though

“[t]the

record

[wa]s

unclear

as

to

why

Respondent ultimately failed to comply with the April 4 Order
after representing that it would do so,” id. at 9 n.7, the
Petitioner

failed

to

“offer[]

‘clear

evidence’

that

See also Hopson, 190 F.R.D. at 123 (noting that “the same standard
applies to the court’s power to sanction” under 28 U.S.C. § 1927 as
applies to the court’s inherent power to award attorneys’ fees).
3

13

Respondent’s failure to produce (and subsequent filing of the
objections) was motivated by harassment, delay, or other
improper purpose,” id. at 11.
Similarly, in Herzlinger v. Nichter, the court declined
to award fees even though the plaintiff had improperly delayed
the proceedings by filing an application for a temporary
restraining order (“TRO”) even though injunctive relief was
not available to private parties pursuant to the statute under
which plaintiff brought her claims. See No. 09 Civ. 0192,
2011 WL 4585251, at *5 (S.D.N.Y. Sept. 8, 2011). This delay
was

compounded

“advise[d]”

by

the

plaintiff’s

fact

that,

counsel

even

about

after
“the

the

court

deficiencies

underlying his TRO application . . . in an effort to dissuade
him from continuing to pursue that application,” plaintiff’s
counsel nevertheless insisted on proceeding to oral argument.
Id.

Even

if

this

baseless

TRO

application

delayed

and

unnecessarily multiplied the proceedings, the court concluded
that there was no evidence that plaintiff’s counsel’s actions
(however misguided) were taken for the purpose of delay or
harassment

rather

than

to

vindicate

plaintiff’s

legal

positions. See id.
There is even less evidence of “improper motive” here,
where the “long delays” Bloomfield attributes to Daniloff
were the result of legitimate litigation tactics –- such as
14

settlement negotiations and formal mediation –- that are
ordinarily encouraged by courts. See Gambale v. Deutsche Bank
AG, 377 F.3d 133, 143 (2d Cir. 2004) (observing that “courts
are bound to encourage . . . and facilitate settlements”
(citing United States v. Glens Falls Newspapers, Inc., 160
F.3d 853, 857 (2d Cir. 1998)); Wellman v. Dickinson, 497 F.
Supp. 824, 830 (S.D.N.Y. 1980) (“Voluntary out of court
settlement

of

disputes

is

highly

favored

in

the

law.”

(quotation marks omitted)), aff’d, 647 F.2d 163 (2d Cir.
1981);

Bilello

v.

Abbott

Labs.,

825

F.

Supp.

475,

479

(E.D.N.Y. 1993) (“Mediation is particularly encouraged.”);
cf.

Fed.

R.

settlement”

Civ.
as

one

P.

16(a)(5)
of

the

(listing
objectives

“facilitating
of

pretrial

conferences).
Absent clear evidence of abusive conduct or improper
motive, the bad faith rule should not be used in a manner
that

could

dissuade

parties

from

engaging

in

settlement

talks. See Nemeroff, 704 F.2d at 654 (warning that the bad
faith rule should “must be applied with caution”). If merely
engaging in failed settlement talks could support a finding
of bad faith, one consequence could be to discourage future
litigants from coming to the settlement table. Similarly, a
party engaged in settlement talks should not be afraid that,
if the settlement negotiations ultimately fail to result in
15

a final agreement, engaging in these negotiations at all or
taking too long to reject a settlement offer could be used
against it later for an award of attorneys’ fees. Shifting
fees

on

this

basis

might

encourage

parties

to

reject

settlement offers, out of fear that they will be accused of
dilatory

tactics

later.

Moreover,

any

concern

that

Bloomfield’s suit was delayed is ameliorated by the fact that
Bloomfield voluntarily participated in these settlement talks
of

its

own

litigation

accord
while

and

the

jointly
parties

requested
sought

to

a

stay

finalize

of

the

their

settlement agreement. Cf. In re A.T. Reynolds Sons, Inc., 452
B.R. 374, 381 (S.D.N.Y. 2011) (“Mediation is typically a
voluntary process.”).
Instead, courts in this Circuit typically reserve a
finding of bad faith for those cases where a litigant has
engaged in blatantly vexatious and illegitimate litigation
tactics. The Supreme Court has explained that an award of
attorneys’ fees is generally directed at the “full range of
litigation abuses” and “conduct which abuses the judicial
process.” Chambers v. NASCO, Inc., 501 U.S. 32, 46 (1991)
(emphasis added). Attorneys’ fees may therefore be awarded
“if a court finds ‘that fraud has been practiced upon it, or
that the very temple of justice has been defiled.’” Id.
(quoting Universal Oil Products Co. v. Root Refining Co., 328
16

U.S.

575,

580

(1946)).

Consistent

with

this

heightened

standard, courts in this Circuit have found the following
abusive litigation tactics to merit an award of attorneys’
fees under the “bad faith” standard:
[R]esubmitting a motion that had previously been denied;
bringing a motion based on ‘facts' the opposite of which
were previously found by the court; making several
insupportable bias recusal motions and repeated motions
to reargue; continually engaging in obfuscation of the
issues, hyperbolism and groundless presumptions in
addition to insinuating that the court was biased; and
waiting until the eve of trial before making a jury
demand.
Keller v. Mobile Corp., 55 F.3d 94, 99 (2d Cir. 1995) (quoting
Hudson Motors P’ship v. Crest Leasing Enters., 845 F. Supp.
969, 982 (E.D.N.Y. 1994) (quotation marks omitted)). For
instance, in Chambers, the defendant’s abusive and improper
conduct was beyond dispute, and included
•

filing a series of “false and frivolous pleadings,”
motions, and delaying actions;

•

bringing a parallel action before the Federal
Communications Commission in an attempt to nullify
the underlying purchase agreement and in “direct
contravention” of the court’s “orders to maintain
the status quo pending the outcome of the
litigation”;

•

forcing the court to enjoin the defendant’s removal
of necessary equipment from the property at issue;

•

“attempt[ing] to deprive the Court of jurisdiction
by acts of fraud”;

•

delaying the scheduled trial date by filing a
frivolous “motion to recuse the judge” and, when
17

the motion was denied, filing a subsequent “writ of
mandamus” in the Court of Appeals; and
repeatedly “misleading and lying to the Court.”

•
501

U.S.

at

38

n.2,

39,

41-42,

57;

see

id.

at

56-57

(describing these as “frequen[t] and sever[e] . . . abuses of
the

judicial

system”

and

“part

of

a

sordid

scheme

of

deliberate misuse of the judicial process designed to defeat
[petitioner’s]

claim

by

harassment,

repeated

and

endless

delay, mountainous expense and waste of financial resources”
(quotation marks omitted)). Similarly, in Kane v. City of New
York, 468 F. Supp. 586 (S.D.N.Y. 1979), the court awarded
attorneys’ fees to the defendants where the plaintiff was a
serial litigator who filed twelve lawsuits over a claim that
had been dismissed on the merits at least three times already.
Id.

at

action

592
upon

(holding
action

that
based

plaintiff’s
on

the

same

“[c]ommencement
facts

dressed

of
in

different garb, after thrice being rejected on the merits and
having been repeatedly warned that the claims were barred by
res judicata, can only be explained as malicious conduct”
(footnote omitted)).
By contrast, here Bloomfield has not demonstrated that
Daniloff engaged in the degree of extreme misconduct that
warranted an award of attorneys’ fees in those cases. Daniloff
did not perpetrate a fraud on the Court, nor did he engage in
18

any conduct that approximated the abusive litigation tactics
referenced

in

colorless

the

claims

cases
cannot

above.

That

support

a

Daniloff
finding

relied

of

on

improper

purpose, and Daniloff’s participation in settlement talks is
plainly

distinguishable

from

the

sort

of

vexatious

and

abusive litigation tactics identified by the Second Circuit
in Keller. See 55 F.3d at 99.
Lastly, Bloomfield argues that the Court may infer an
improper motive here because Daniloff’s collective actions
were “a component” in his overall “bad faith plan” to “exploit
Bloomfield’s money for as long as possible, force litigation,
and leverage a discount on amounts he knew he owed.” (Reply
at 5.) The mere fact that a party litigated with an intent to
leverage

a

favorable

settlement,

without

more,

is

insufficient to conclude that the party litigated in bad
faith.

See

Thai

Lao

Lignite,

2011

WL

4111504,

at

*11

(requiring “clear evidence” that respondent’s actions were
“motivated by harassment, delay, or other improper purpose”).
In support of its contention, Bloomfield offers several
out-of-circuit decisions, mostly from the Delaware Court of
Chancery (see Fee App. at 9), that found bad faith where
defendants “purposefully stiffed” plaintiffs and forced them
to litigate in order to pressure plaintiffs to “settle for
pennies on the dollar.” RGC Int’l Inv’rs, LDC v. Greka Energy
19

Corp., 2001 WL 984689, at *19 (Del. Ch. Aug. 22, 2001)
(holding

bad

faith

can

be

found

where

the

losing

party

“resort[s] to burdensome and protracted litigation in hopes
of

discouraging

contractual

the

rights

plaintiffs

despite

the

from

enforcing

indefensibility

their
of

the

defendant’s legal position”). However, the Court finds these
out-of-circuit
rigorous

decisions

standard

(analyzing

the

inconsistent

employed

Delaware

in

this

Court

of

with

the

Circuit.

much

more

E.g.,

Chancery’s

id.

“equitable

discretion to award attorneys’ fees as costs under 10 Del C.
§ 5106 and Court of Chancery Rule 54(d)”).4 Compare id. at 19
n.111

(finding

bad

faith

because

defendant

had

advanced

arguments that, “to be charitable, had minimal grounding in
fact or law” and “made this litigation more expensive than it
should have been”), and Auriga Cap’l Corp. v. Gatz Props., 40
A.3d 839, 881 (Del. Ch. 2012) (finding bad faith because
“[t]he

record

[defendant]
expensive

and
for

is

regrettably

his
the

counsel

replete
that

[plaintiff]

made
to

with

behavior

this

case

pursue,”

by

unduly

including

The Court notes that the Delaware Court of Chancery’s decision in RGC
International Investments was expressly overturned by the Delaware
Supreme Court in Scion Breckenridge Managing Member, LLC v. ASB Allegiance
Real Estate Fund, 68 A.3d 665 (Del. 2013), which held that the use of the
word “costs” in the Delaware statute governing fee shifting (10 Del C.
§ 5106) was a “term of art that does not include attorneys’ fees.” Id. at
685, n.94 (emphasis added). This further illustrates how the fee shifting
standard employed in the Delaware Court of Chancery, which arises from
statute, differs from the standard employed in this Circuit, which arises
from the court’s inherent powers.
4

20

defendant’s reliance on “legally and factually implausible
assertions” and “frivolous arguments,” which led the court to
conclude “my sense is that this was part of [defendant’s]
strategy . . . to exhaust the [plaintiffs] and hope they would
settle on the cheap”), with Sierra Club, 776 F.2d at 391
(emphasizing that the Second Circuit “ha[s] never held that
a frivolous position may be equated with an improper purpose”
because doing so “would turn the two-part standard into a
one-part standard”), Mahoney, 290 F.R.D. at 369-70 (holding
that it is “improper to determine that a party acted in bad
faith” merely because “that party filed a meritless claim”),
and Thai Lao Lignite, 2011 WL 4111504, at *11 (holding that
“delay alone, without ‘clear evidence’ of bad faith, does
not” establish that respondent was “motivated by . . . [an]
improper purpose”). Thus, to the extent the Delaware Court of
Chancery permits an inference of bad faith when a defendant’s
reliance

on

meritless

arguments

drives

up

the

cost

of

litigation or induces a plaintiff to settle, that standard
cannot be squared with the exacting standard employed in this
Circuit.
Other than these decisions from the Delaware Court of
Chancery, Bloomfield relies on Torah Soft Ltd. v. Drosnin,
No. 00 Civ. 5650, 2001 WL 1506013 (S.D.N.Y. Nov. 27, 2001).
However, Torah Soft Ltd. did not address the “bad faith”
21

exception to the American Rule at all, but rather involved
the standard for awarding attorneys’ fees by statute. See id.
at

*3

(applying

17

U.S.C.

§

505,

which

states

that

in

copyright actions the court “may . . . award a reasonable
attorneys’ fee to the prevailing party as part of the costs”).
The Court therefore concludes that Bloomfield has not
offered “the clear evidence of bad faith necessary to invoke
the Court’s inherent power to deviate from the general rule
against fee-shifting in the absence of any specific rule or
statutory authority.” Sherman, LLC v. DCI Telecomms., Inc.,
No. 03 Civ. 0855, 2003 WL 21692763, at *5 (S.D.N.Y. July 21,
2003); see Thai Lao Lignite, 2011 WL 4111504, at *11.5
III. CONCLUSION
For the reasons stated above, the Court DENIES the motion
of plaintiff Bloomfield Investment Resources Corp. for an
award of attorneys’ fees and costs against defendant Elliot
Daniloff under Federal Rule of Civil Procedure 54(d). The
Clerk of the Court is respectfully directed to close the
pending motion at Dkt. No. 114.

5 Because the Court decides that Bloomfield is not entitled to an award
of attorneys’ fees under the “bad faith” exception, the Court does not
decide whether Bloomfield’s calculation for attorneys’ fees is
reasonable. (See Fee App. at 10-12; Opp. at 13-14; Reply 7-8.)

22

SO ORDERED.
Dated:

21 February 2024
New York, New York
_________________________
Victor Marrero
U.S.D.J.

23