Ital Assoc. v Axon

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Ital Assoc. v Axon 2016 NY Slip Op 32410(U) December 9, 2016 Supreme Court, New York County Docket Number: 650163/2014 Judge: O. Peter Sherwood Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [* 1] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 49 --------------~----------------------~-----X ITAL ASSOCIATES, ANTHONY LEPORE, LOUISE . LEPORE, GABRIELLE LEPORE and ELENORE LEPORE individually and on behalf of HARRISON STREET ' DEVELOPMENT ASSOCIATES a/k/a 18 HARRISON DEVELOPMENT ASSOCIATES, a New York limited . partnership, Plaintiffs, DECISION AND ORDER Index No.: 6501~3/2014 Mot. Seq. No.: 005 -againstTHOMAS AXON, 18 HARRISON STREET CORP., HARRISON STREET REALTY CORP., RMTS LLC, and AXON ASSOCIATES, INC., Defendants,· -andLORAINE BUETTI, STEPHEN J. LOVELL, and JAYNJ<: SPIELMAN, Additional Defcndants. -------------------------------------------X O. PETER SHERWOOD; J.: '· In motion sequence number005, plaintiffs' counsel Samuel Goldman & Associates ("SGA'') moves for an award of $1,225,771.91 in attorney's foes plus $43,264.41 in expens~s out of the purported "$3,502,205 .47 common fund" payout SGA claims it recovered on behalf of eight of nine limited partners in the Harrison Street Partnership ("Partnership"). Alternatively, SGA seeks payment for the value ofSGA's services and a pro rata share of expenses on quantum ~eruit/unjust enrichment theories against three limited partners, Stephen Lovell ("Lovell"), The Spielman Group ("Spielman") (together "Lovell/Spielman") and Lorraine Buetti ("Buetti) (collectively, ''.'Additional 1 Defondants"), who, SGA argues, obtained the benefit of SGA 's services without paying for them. SGA asserts that under quantum meruit!unjust enrichment, it is entitled to $334,30L44 in attorney's fees plus $11,799.38 in expenses against Lovell and Buetti each, as well as $222,867.62 in attorney's fe.es plus $7,866.24 in expenses against Spielman, for an aggregate fee 1 of $891,470.50 and $31,465.00 in expenses. 2 of 17 [* 2] Lovell/Spielman (represented by Jeffrey N. Levy, Esq.) oppose the motion, along 'with Buetti (represented by Steven D. Feinstein, Esq.) atguing, inter alia, that in May 2016 Justice Goin rejected simi iar arguments in a related matter and that there was zero risk to SGA when it decid~d to take on . 1: this case because the defendants had already agreed to sell the subject property before SGA filed the complaint. They argue that the lawsuit has been a pretext to allow SGA to make .a claim for attorney's fees. I. Background a. The Action The Partnership's sole asset was a fully occupied commercial property located at 18 Harrison Street in a Manhattan neighborhood commonly referred to as Tribecca (" 18 Harrison Street Property"). The Partnership acquired the property in 1985 for $500,000 (see NYSCEF Doc. No. 24, ii 7). Defendant 18 Harrison Street Corp. ("18 Corp.") was the general partner. It is owned and controlled by defendant Thomas Axon ("Axon"). In October 2013, Goldman drailed a tem1ination letter to Axon and requested books and records (Buetti A.ff., ii 9). The letter was drafted for Lovell's signature but Lovell did not sign it The letter was.sent on October 3 l, 2013 by ITALAs.sociatcs. On November 5, 2013, morcthari two months before SGA filed this lawsuit, Axon agreed to sell both the 18 Harrison Property and commercial property located at l 85 Franklin Street in the same neighborhood (" i 85 Franklin Property"), which is the subject of another action discussed below (Italiano Aff., ii 17). On January 17, 2014, SGA brought this action, naming Buetti, Lovell and Spielman as "Additional Defendants." The complaint asserts eight (8) causes of action, two of which are derivative claims, on behalf of the Partnership ..The two derivative claims sought an accounting of money allegedly taken by Axon and a declaratory judgment nl1llifying certain transactions undertaken by Axon, inclllding an allegedly fraudulent million dollar mortgage the Partnership issued to Axon. On March 7, 2014 Lovell/Spielman filed their answer in which they admitted all material allegations in the complaint, joined plaintiffs as to all eight causes of action, and added a crossclaim against the defendants seeking appointtnent of a receiver (NYSCEF, Doc. No. J 7). Thereafter, plaintiffs and defendant conducted limited discovery ahdplaintifts continued to challenge alleged "looting" of the Partnership by the general partner (see NYSCEF Doc. No. 65). At the same 2 3 of 17 [* 3] ( time, 18 Corp. considered a number offors that did not get past the due diligence period 2 ( affirmation of Samuel Goldman if125, 29-30). On February 3, 2015, the Partnership entered into a Contract of Sale of the Harrison Street Property, with a closing scheduled for April 3, 2015 (id)~ 29). The closing was delayed as the limited partners negotiated their claims against Axon. On July 2 7, 2015 the Purchaser commenced a lawsuit against the 18 Harri son Street Property seeking specific performance of the Contract of Sale (Eighteen Harrison Management LLC v 18 Harrison Street Development Associates, LP, Index No. 157640/2015) ("Related Action"). That case was transferred to this court on October 9, 2015 a<> it related to this action, althou~h this court had been managing the matter informally prior to that time. On July 30, 2015, SGA filed a proposed order to show cause in-this action that sought to allow the sale to dose and to escrow al I of the funds from the sale (affirmation of Jay A. Gayoso; exhibit4). Asimilar order to show cause was filed on August 3, 2015. Both motions were withdrawn (NYSCEF. Doc. No. 49). b. The Parties For this action, in July and November of2013, SGA signed retainer agreemer1ts 3 with two families (Italiano and Lepore) who made up five of the limited partners of the Partnership. These families are not affiliated with either the Partnership's general partner, defendant 18 Harrison Street Corp., or its principal, defendant Axon.* In aggregate, plaintiffs owned 14.85% of the Partnership, 18 Harrison Street Corp. owned I% and other Axon companies owned limited partnership interests aggregating to 44.55%. The remaining three limited partners- Love!, ,Spielman and Buetti c;wned 14.85%, 9.90% and 14.85% of the Partnership, respectively, aggregating 39.60%. The)1 too are not affiliated with the Axon defendants. ' 2 Buetti never responded to the complaint but on October 12, 2015 Steven Feinstein put in an appearance on her behaif in which he also acknowledged receipt of the summons and complaint (see NYSCEF Doc. No. 64). Despite her default, the court permitted Buetti to participate in the proceedings, including settlement negotiations. 3 Under the retainer, SGA receives 30% of any recovery if collection or settlement occurs within 75 days of the filing of the Complaint, 35% ifit occurs between 75 days after filing of the, Complaint and 90 days before trial and 40% if it occurs afterwards (affirmation of Samuel Goldman, exhibit A [Plaintiffs' Legal Services Contingent Fee Agreement]). 4 SGA's individual plaintiff.clients are Ital Associates ("Ital"), Anthony Lepore, Louise Lepore, Gabrielle Lepore, and Elenore Lepore. 3 4 of 17 [* 4] c. The 185 Franklin Case SGA previously pursued another case agai~st Axon and a different limited partnership where Italiano and Lepore were limited partners and Axon controlled the general partner (Ital v Axon, Index No. 153449/2014 [Sup Ct New York County] [Coin, J.] ["185 Franklin Case"]). Lovell and Spielman were not limited partners in that partnership, although Lovell's mother-in-law was. After settling the 185 Franklin Case, SGA made a f~e application against the limited partneis who <lid not sign its contingency agreement. In that application, SGA made substantially similar arguments to those being made oh this motion. In a Decision and Order dated May 6, 2016, Justice Ellen M. Coin denied the fee application (affirmation of JeffreyN. Levy, exhibit 1), holding, inter alia, that New York Partnership Law§ 115-a (5) is not applicable to recoveries by individual partners, that SGA had a conflict of interest, that there was no common fund, that there was no agreement to pay fees or be bound by the'retainet agreement, and that there was no unjust enrichment. Notably, SGA was paid $I. 7 million in fees by the 26 clients that had signed contingency fee retainers. d. SGA's Interactions with the Add.itional Defendants Buetti first becan1e involved with SGA in July 2013 (aff. of Loraine Buetti Ti 9) when her son, Jarret Buetti, began to Investigate her options with respect to the Franklin Street arid Harrison Street partnerships (id ii 5). Buetti had a 2. 75% ownership iiltetest in the Franklin Street Partnership . ' compared to a 14.85% interest in the Harrison Street Partnership (id. ·ii 3). Jn2013, Jayne Italiano ofltal Associates, a limited partner in both the Franklin Street and Harrison Street partnerships, told Buetti that her friend, Samuel Goldstein, was trying to get all of the 28 non-Axon affiliated limited partners in the Franklin Street Partnership to sign a contingency retainer with SGA (id. ii 6). On July 10, 2013, Buetti signed (id. ~ 9). She claims Goldman pressured her to sign a separate retainer agreement in connection with the Harrison Street Partnership, after Axon had already taken steps to sell the properties (id. Tiil 13-16). Buetti alleges that Goldman told her that whether she signed an . abrreement with him or not, SGA was entit!ed to 30 to 45 percent of the money Buetti would receive from a sale Of the 18 Harrison Street Property (id.). She told Goldman that she would not under any circumstances allow him to represent her in the Harrison Street Partnership matter (id ~ 16). In fall 2013, SGA contacted Lovell and Spielman and requested that they sign the SGA contingency retainer. Initially, Lovell and Spielman retained Mark Mermel, Esq. to review the 4 5 of 17 [* 5] retainer and advise them. SGA claims this resulted in SGA sending a revised retainer on December 11, 2013 setting forth hourly rates (affirmation of Samuel Goldman ii 44). In February 2014, after being served the complaint, Lovell and Spielman hired the Tashlik Goldwyn Crandell Levy LLP ("Tashlik") to represent them. · c. The Settlement On November 18, 2015, this case was settled in principle at a conference before this Court. Pursuant to the settlement, the eight (8) non-Axon related limited partners. are to 'receive $4.5 million. A settlement agreement was not submitted to the court and approved until March 28, 2016 due to a dispute between SGA and Tashlik over handling of SGA's claim for an awa~<l of attorney fees from the payout to Lovell, Spielman and Buetti. In the end, the court directed that $600,000 allocable to Lovell,' Spielman and Buetti be placed in escrow pending the court's determination of SGA's fee application (affirmation of Jeffrey N. Levy ~ 51) and that the remainder of the se.ttlement funds be released promptly. As a result of the settlement, $955,828. 77 was allocated to each of Buetti and Lovell and. $637,219 .18 went. to Spielman. f. SGA Efforts in this Litigation SGA and theAdditional Defendants offer starkly different characterizations ofSGA 's efforts in this action. Buetti alleges thatSGA submitted two Orders to ShowCause, which it later withdrew, but made no effortto get a judicial determination ofwhether any of the allegations in its complaint were valid. SGA took ~o depositions and did no further discovery. Love11/Spielman say that after filing the complaint, SGA did nothing more than await sale of the building to collect its fee. The record before the Court reveals that SGAdid much more (see, e.g., NYSCEF Doc. No. 65). SGA states it ~xpendcd 1,528. 1 hours for a total of$768, 744.46 of attorney time and spent $43,264.41 in expenses but submitted no time records. Buelti replies that this number of hours is incredible as there were no depositions, complicated motion practice, nor a trial. She emphasizes that the amount of hours claimed approximates what a single attorney bills working almost full time for a year. On April 27, 2016, Buetti' s attorney scheduled a meeting at SGA' s office to review SGA' s filed (affirmation of Jay A. Gayoso ·-,i 4). SGA refused to turn over its time sheets or files (id ~ 3). SGA received (or will receive) over $330,000 in fees from plaintiffs. 5 6 of 17 [* 6] U. Argumen~s a. Plaintiffs' Arguments SGA argues that a fee recovery is warranted tmdcr the "common fund" doctrine, which provides "a litigant or a lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney's fee from the fund as a whole" (Boeing Co. v Van Gernert; 444 US 4 72, 4 78 [ 1980J). "To .allow the others to obtain full benefit from the plaintiff's efforts without contributing equally to the litigation expenses would be to enrich the others unjustly at the plaintiff's expense" (Mills v Elec. Auto-Lite Co., 396 US 375, 392 f 1970]} The "common fund'' doctrine is characterized not by the application of rigid rules and formulas, but rather by the great flexibility with which if is applied to promote its two underlying purposes . (Seinfeldv Robinson, 246AD2d 291 [1st Dept 1998]). SGA argues that it created a $3,502,205.47 . common fund through '"a comprehensive investigatory process and negotiations, rather than protracted litigation" (affirmation of Samuel Goldman iJ 3, NYSCEF Doc. No. 104). SGA also maintains that New York P,artnership Law § 115-"a (5) permits the Court to award reasonable attorney's fees if, as in the case here, there is a recovery by settlement. As to the size of its fees request, SGA argues that fees equal to 35% of the recovery are reasonable under the percentage of the recovery method. The fee arrangement provides for a sliding scale contingency fee, which increases as the matter progresses. SGA asserts that this fee arrangement reflects the market rate because the limited partners in this case and lhe I 85 Frariklin case had attempted for years to locate a law firm that would take the cases on a contingency fee basis, which only SGA agreed to do (aff. of Lawrence Italiano iii! 7-8). TI1is fee arrangement wa5 accepted by 26 of the 28 limited partners in the 185 Franklin case and five of the eight limited partners in this case. SGA asserts that courts routinely approve attorney's foes of 113 of the settlement (see e.g.,. Lopez v Dinex Grp., LLC, 201.S NY Misc LEXIS 3657 [Sup Ct Oct. 6,.2015]). . ' . Courts have also approved higher fees (see, e.g._, Hart v RC! Hospitality Holdings, 2015 US Dist. LEXIS 126934 [SDNY Sept.22, 2015] [approving attorney;s fees and expenses equa1to36.7% of a $15 million settlement fond]). 6 7 of 17 [* 7] SGA maintains that the fee requested is also reasonable when the Lodestarmeth~? is applied. The total value of the time claimed by plaintiff's counsel is $7 68, 744 .46 and the fee requested is 1.59 times this amount. SGA offers to provide the court with documentation if requested, including complete time charge records. SGA adds that the requested fee is reasonable under other factors courts consider. SGA asserts it took significant risk when if took on lhe case without any guarantee or compensation, there were no prior judgments, the firm is highly experienced, the matter was highly complex and required a detailed line-by-line analysis of 15 years of Partriership financial data. SGA also argues that counsel for the Additional Defendants entered the case only after SGA had conducted its initial investigatory work. SGA also argues that it is ·entitled to fees based on quantum meruit and unjust enrichment - ·' ' . . t. j concepts. A party may not accept the benefits oflegal work knowingly performed without paying the reasonable value ofsuch services (see Reingold & Tucker v Golia, 2013 NY Slip Op 50103[U] [Sup Ct 2013 ]). In Golia, a law firm defend~d Golia in three cases. While the fim1 received retainer agreements in two cases; Golia delayed signing the third and hired new counsel instead. The court held that the firm was entitled to fees from the third case under quantum meruit. The Court held that to obtain fees this way, an attorney must show (I) performance of services in good faith, (2) acceptance of the services, (3) an expectation of compensation, and ( 4) reasonable value for the services. SGA argues that these four elements have been met. SGA asserts that Lovell and Buetti agreed to a similar retainer in the 185 Franklin Case. Further, Buetti discussed the Harrison Partnership case with SGA for two years without signing the agreement (affirmation of Samuel Goldman iJ 55). Lovell's mother-in-law, Mrs. Calick, was a partner in both partnerships. In August 2013, Lovell agreed to the retainer on behalf o'f Mrs. Calick in the 185 Franklin case, but failed to sign for himself when requested in connection with the 18 Harrison case. Lovell and Spielman retained Tashlik as their counsel in this matter after a ~ settlement in principle had been reached •. SGA asserts that Tash! ik did not monitor the sales process, analyze the financial records, or retain.a forensic accountant (unlike SGA). Moreover, Tashlik ~ever acted to request appointment of a receiver as it urged be dohc in its crossclaim. SGA argues that 7 8 of 17 [* 8] Buetti was not separately represented in this matter until October 12, 2015 and filed.'only limited papers in this action. Regarding unjust enrichment, SGAasserts that the Additional Defendants obtained a benefit from it without compensation. Finally, SGA argues that the $43,264.4 l in expenses were reasonably incurred and necessary. They include charges for research, photocopying, long distance telephone, fax charges, postage, and delivery expenses. b. AdditionalDefenda~ts' Oppositions Additional Defendants argue that SGA represented only 14.85% of the Partnership and 27.3% of the no.n-Axon li1nited partnership interests. Although SGA states it represents five of the eight non-Axon Limited Partners, four of them are members of the same family and only account for a 9. 90% interest. The Additional Defendants also assert that they declined SGA' s representation (repeatedly) because they did not feel comfortable with SGA's abilities. Lovell and Spielman appeared by their own counsel in February 2014, shortly after being· served with the Complaint. Buetti who claims she was never served with the complaint (see Buetti Aff. 'if 20, NYSCEF Doc. No . 120) appeared by her own counsel in October 2014.5 Additional Defondants argue that .having violated several of the New York Rules of Professional Conduct, no fees should be awarded SGA. Specifically, SGA violated Rule 1.7 which concerns conflicts of interest, by attempting to represent plaintiffs and the Additional Defendants . ' at the same time. Additionally, each affected client did not give informed consent, confirmed in writing as required by Ruic 1. 7[b ][b]. SGA also did not advise the Additional J?efendants of any of the actual or potential conflicts of interest (aff. of Loraine Buetti 'if'TI 13-16; see generally affirmation of Samuel Goldmah). SGA knew that.the Harrison Street Property was going to be sold beforefiling the complaint and had. a duty to give Additional Defendants an informed choice about what was in their best interests. Theyargue that some may have wanted cash How instead ofa sa!C. SGA did not ' regularly inform them or give them advice. Rathe1; the Additional Defendants retained their own counsel and paid their own significant fees; In the 185 Franklin case, SGA sued Sommella and Karol (who were limited patiners ·in the Franklin Street Partnership), again, as "additional. defendants." 5 Buetti 's counsel acknowledged receipt of the summons and complaint in his Notice of Appearance(see NYSCEF Doc. No. 64). 8 9 of 17 [* 9] Judge Coin found that by naming Sommella and Karol as defendants, SGA created an irreconcilable conflict ofintcrcst in violation of Rules 1.7 (a) and 1. 7 (b) (3 ). They claim that SGA contacted not I to protect their best interests, but to protect its fee. Regarding the fee request based on New York Partnership Law § 115-(a) (5), Additional Defendants point out that the statute applies to derivative claims only and that only two of the eight causes of action here are d~rivative (the Fifth Cause of Action for accounting and Sixth seeking to nullify an alleged fraudulent mortgage transaction).· Additional Defendants argue the action was settled and characterize the d~rivativc claims as "abandoned." They argue that a "common fund" was not created because the payments satisfied individual claims. In any event, recovery in a common-fund case is limited to "exceptional cases" in which ..dominating reasons of justice" reqoire the allowance of counsel fees (Kantrowitz, Goldhamer & Graijin£in, P. C. v New York State Elec. & Gas Corp., 27 AD3d 872, 875 [3d Dept 2006]). Additional Defendants emphasize that Justice Coin denied the identical "commpn fund" and Partnership Law arguments thatSGA makes here (affirmation of Jeffrey N. Levy, exhibit l at 1I°, 14). The money received from the sale was from an asset already owned by the partners. This was not, as in a class action, a recovery of damages.Additional Defendants note that the court in Shlomchik v Rich1riond 103 EquWes Co. (763 F Supp 732, 745.[SDNY 1991]) held that NY Partnership Law §115-a (5) cannot be used to recover fees from individual parties, but rather, isapplicable only for a recovery of fees from the partnership itself - and here, the Partnership did not recover anything (see id. [the fee application "ignores the requirement of New York Partnership Law, § 115-a (5) that expenses and fees be paid out ofthe award to the partnership"]). Additional Defendants also assert that in her denial of SGA' s fee application'. Justice Coin noted that "while the complaint. .. asserted both individual ... as well as ,derivative claims ... the monetary settlement satisfied cmly plaintiffs' ·individual claims" (affirmation of Jeffrey N. Levy, exhibit 1, at 10, NYSCEF Doc. No. 117). Both matters were settled bya sale of the partnership's real estate. In this action, Lovell and Spielman specifically refused representation by SGA and retained separate counsel shortly after commeuccmcnt of this litigation. Buetti retained counsel much later, in October 2015. Additional Defendants .distinguish the cases cited by SGA as being cla~s actions which apply a different construct for attorney's fees awards. In a class action, Additional Defendants 9 10 of 17 [* 10] would have had an opportunity fo opt out of the "class." Here, they were not. Finally, SGA is being paid. It stands to receive $.330,000 from its dients. 6 Regarding the amount of foes being sought; Additional Defendants argue that SGA' s request is not reasonable and that SGA's failure to provide time records is fatal. Courts require substantiation of the effort expanded where fees are being sought (Goldberger v Integrated Resources. Inc., 209 F3d 43, 46 [2d Cir 2000] ["[f]ollowing an exhaus~ive review of counsel's billed hours"]). They maintain that SGA's affirmation that itincurred over $768,000 in time charges seems excessive for only drafting a complaint, two Orders t.o Show Cause that were withdrawn, participating in settlement discussions and drafting an application to approve the settlement. They conte~d that SGA did not submit detailed time records, but argue that SGA improperly aggregated the time spent in this case with that spent on the 185 Franklin case. They also assert that SGA delayed settlement negotiations to position the matter more favorably for this fee application .. J Concerning a lodestar analysis, a reasonable hourly rate and reasonable. number of hours creates a "presumptively reasonable fee" (Milli av Metro-North Railroad Co., 658F3d154, 166-167 [2d Cir 2011 ]). Additional Defendants argue thatthe analysis fails here because SGA did not provide a breakdown of its time and did not justify its hourly rate. SGA claims, without support, that the va,lue of its time is $768,744.46 and requests 1.59 times that amount. An enhancement, such as the oneSGArequests, may be awarded only in"rare''·and "exceptional" circumstances (Millea; 658 F3d at 167). Such circumstances are absent in this case. ln response to the Quantum MeruitAJnjust Enrichment basis for an award, Additional Defendants argue there was no unjust enrichment. Additional Defendants hired and paid their own counsel. SGA cannot show that the work was done at the Additional Defendants' request. Instead, SGA sought to interpose itself as the attorney despiterepeated express refusals of its services. SGA cannot establish even a quasi-attorney-client relationship, .specifically because of the ethical considerations discussed above. Again, Judge Coin denied a similar argument in the 185 Franklin 6 See Kantrowitz, Doldhamer & Gra[fman, P.C., 27 AD3d at 875 ("Petitioners do not dispute that they have received remuneration for their efforts pursuant to the one-third contingency fee arrangement ... this fact alone militates against a finding that this case constitutes one in which 'overriding considerations' require the ·equitable allowance of more fees to petitioners") (citations omitted). -~' 10 11 of 17 [* 11] / Case (affirmation ofJeffreyN. Levy, exhibit I, a(16). Additional Defendants also argue that SGA cannot collect expenses and _forensic tee expenses either, because SGA did not have an attorney-client relationship with them. SGA has also refused to provide a copy ofits accountant's bill and has not proven that U1ose expenses were necessarily and properly undertaken. b. Piaintiffs' Reply In repiy, SGA points out t~at Justice Coin's decision in the 185 Franklin Case is on appeal. 7 SGA argues that there was no "conflict." According to SGA, the Additional Defendants were necessary parties to the lawsuit and were named to give them notice of the proceedings. No,claims were asserted against them and Paragraph 17 of the Complaint states that they are narhcd as Additional Defendants solely because their interests may be affected by the out<;ome (NYSCEF Doc. No. 1, if 17). Loyell and Spielman filed an Answer and Crossclaim which states that a receiver should be appointed to manage the proposed sale but never filed a motion for such relief. Thus, SGA ' argues that Tashlikagrced with SGA 's strategy that there should be a sale, as evidenced by its failure to file papers suggesting an alternative course of action. Tashlik could have asserted derivative claims and soughtto remove SGA as counsel for plaintiffs. It did none of Uiat SGA also asserts that but for the "common fund" doctrine,, the limited partn,ers could not have obtained counsel to take their case. SGA argues, based on public policy, that the goal of incentivizing counsel to take cases such as this one would be entirely undermined if potential beneficiaries could avoid paying plaintifr s counsel by retaining their own counsel merely to shadow the litigation. SGA also cites Koppel v Wien, 743 F2dl29 (2d Cir 1984), whichheld that a separate fund need not be contcmporan~ot1sly created- the "fund" is a fee sharing mechanism for those who share in a benefit by the plaintiff's action. SCiA argues that the Additional Defendants could have "opted-out," as in a class ~ction, by simply opposing the sale. SGA argues that New York I'artnership Law:§ 115-a (5) ,applies even though there '1s no recovery on specifically derivative claims. The law should not penalize counsel if the settlement of a derivative cause Of action results in awards t<'> the plaintifls indevidually. Cases arc usually settled for omnibus amounts settling all claims, The settlement here included settlement of all the claims, 7 The appeal from th May 6, 2016 decision has not been perfected. ' 11 12 of 17 [* 12] Sept. 22, 20 t 5] ["The Second Circuit has authorized District Courts to employ a percentagc-of-the1 fund method when awarding fees in conitnon fund ·cases"]). III. DISCUSSION The court became engaged overseeing the settlement negotiations not long after plaintifffiled the request for judicial intervention and, as a result, is uniquely positioned to assess the facts that are relevant to this motion. Of necessity, SGA represented the interests of all of the non-Axon afliliated limitec;l partners · against the general partner. since early 2013, long before it filed this case. Through its efforts both the Franklin Street and Harrison Street prqperties were sold, ·with the limited partners receiving multiples of the initial buyout offer Axon.had made to them for the Franklin Street Property before SGA became involved. Further, sale proceeds to the Partnership were not discounted by the substantial sums Axon sought to in1pose on it The complaint alleges that although the Harrison Street Property has been "extremely profitable," the limited partners have received no distributions since 2000 or earlier and that-"Axonhas been systematically and continually looting the Partnership and misappropriating all of the Partnership's net cash flow since at least the year 2000" (NYSCEF Doc. No. I, il49). In these, as in all material allegations in the. complaint_, Additional Defendants were fully aligned with plaintiffs (see NYSCEF Doc. No. i 7, ~2 as tq Lovcll/Spiclman)- 8 Like plaintiffs, Additional Defendants received rio .benefits from Partnership assets for fifteen years or more prior to SGA's involvement. Investigations and analyses of Partnership books and records ' covering many years enabled SGA to negotiate payouts tothe limited partners undiluted by improper credits, including an alleged fabricated million dC:,llar mortgage Axon sought to charge against the 8 Having failed to file an answer, Buetti is deemed to have admitted all material allegations . . 12 13 of 17 [* 13] proceeds of the sale~ As a result ofSGA's efforts, a substantially larger pool of funds was available for distribution to the limited partners. Incontra:st lo the demonstrated efforts of SGA, the record and,the court's experience with the parties fail to reveal any significant expenditure of effort by the 9 respective counsel of the Additional Defendants add to the value of Partnership assets. Although Additional Defendants faultSGA forfailingtoservetheir best interests and assert that the Additional Defendants may have preferred to receive cash tlo'\V instead of a sale, none ofthcm suggested that alternative before the court but instead supported sale of the Property. Additional Defendants Buetti and Lovell received close to $1 million each and Spielinan w~s paid over $600,0'00 as their respective shares of the proceeds from sale of the 18 Harrison Street Property. SGA made a number of attempts to obtain retainers from all of the I imited partners prior to filing the case. As of the 'tiine Of commencement of this litigation in January 2014, SGA had retainers to represent only 14.85% of the 18 Harrison Street Partnership interests and 27.3% ofthe non-Axon limited partner interests. Additional Defendants Lovell, Spielman and Buetti owned 14.85%, 9.90% and 14.85% of the partnership respectively. The Complaint named the Additional Defendants as necessary parties thereby giving them notice of pendency of the suit. Love I Land Spielman hired separate counsel in February 2014. Buetti retained her counsel in October 2014. Before hiring separate counsel, all three communicated repeatedly with SGA in connection with progress of their claims against the general partner. Despite the substantial benefits the Additional Defendants are enjoying due primarily to the efforts of counsel for plaintiffs, the court is constrained to deny SGA 's request for an award of attorney fees based on New York Partnership Law§ 115-(a) (5) or the common fund theory for the reasons stated in the decision of Justice Coin except as to the additional one million dollars SGA was 9 Counsel for_ Lovell anq Spielman, takes· credit for obtaining .. all additional $100,000 for the non-Axon partners at the Court in the settlement conference when SGA was willing to fold its tent and collect its contingency fee" (Aff'm of Jeffrey Levy,~ 31, NYSCEF Doc. No. 123). In fact, early in the settlement c:iiscussions and before these counsel assumed art active role, the court obtained a commitment from plaintiff in the Related Action who was the prospective purchaser of the 18 Harrison Stn~et Property to make that sum available should the Court require it in order to conclude a settlement. Jn any event, this enhancement of settlement funds amounts to 2.2% of the settlement amount. 13 14 of 17 [* 14] able to prevent Axon from taking for himself out of proceeds of the sale. The court will make an award based on an unjust enrichment analysis: It is undisputed that the Additional Defendants declined to hire SGA, despite their acceptance of the fruits of the firm's labors. As a result, SGA was required to name Lovell, Spielman <md Buetti as necessary parties and thereby creating an apparent conflict of interest. In this case however, the ; Additional Defendants interests in the litigation are al.igned with those of the plaintiffs as is evidenced by LovelliSpielman's answcrto·the complaint and Buetti's default in which they admit all material allegations. As Justice Coinheld,New York Partnership Law§ 115-(a) (5) applies only when there is a derivative recovery on behalf of the partnership and fees are paid from a common fund. Here the ·' Partnership terminated by the terms of the Partnership Agreement in February 2014 although it continued to exist fora time as apartnership-at~will (see NYSCEF Doc. No. 1, if 38). 'Fhe settlement payments were made to satisfy individual claims but.the size of those payments were higher due to recoveries to the Partnership procured through the efforts of SGA, SGA cannot recover under the terms of this provision, except to the extent noted above. As to the i imited common fund available here, no payment wi Ube made at this point because SO A has not made the required lodestar showing to support a claim for an award of reasonable attorney fees Uee Schlomchik v Richmond 103 Equities Co., 763 F Supp 732, 744-45 [SDNY 1991]). As to the claim based on a Quan/Wit Meruit/Unjust Enrichment theory, SGA has;made out a primafacie case by showing that (1) it performed valuable services in good faith, (2) Additional Defendants accepted the services rendered as is reflected in the Lovell/Spielman answer to the complaint and Buetti default, (3) SGA madeclear throughout that.it expected to be compensated for its services,, and (4) SGA claims a reasonable value for .its services. Approximately 73% of the proceed paid to the. limited partners wen~ to the Additional Pcfendants. In her decision in the Franklin Street case, Jodge Coin rejected SGA's unjust enrichment claim because of the irreconcilable conflict of interest resulting from the naming of Sommella and Karol as additional defendants. However, it does not appear _that the additional defendants had aligned themselveswith plaintiffs in an answer thereby reconciling any conflict ofintcrest tha_t might otherwise be presumed. 14 15 of 17 [* 15] In their opposition to the motion, Lovell/Spielman argue that they paid "six figures to represent their interests, They were not unjustlyenriched by SGA" (affirmation of Jeffrey N. Levy ii 16, NYSCEF Doc. No.123). Whether LoveU/Spielman paid other counsel for similar services has no bearing on whether they were unjustly enriched as a result of the services provided by SGA. Lovell/Spielmah also argue that the daimfor fees on a quasi-contract basis shotild be denied for failure of SGA to provide the required documentation. The court agrees that while adequate documentation has not been provided, detailed proof of the time and effort SGA devoted to this matter may be presented before a Special Referee to whom this matter will be referred to hear and recommend on the issue of the reasonable fees that should be awarded SGA. In reviewing the evidence andmaking its recommendations, the Special Referee shall excise any time not re1ated to the Harrison Street Property and may take intoaccountthe recovery of Partnership assets from Axon . I discussed above. Finally, SGA shall be reimbursed for reasonable. expenses incurred in the prosecution of the case upon submission of proper proof before the Special Referee. In referring the matter for trial, the court is not intending spawn a new round of litigation. Accordingly, the parties are encouraged to meet and confer iii an effort to reach agreement on the issue of attorney fees. It is hereby · ORDERED that a Special Referee shall be designated to hear and report on the amount of attorney's fees and costs to be awarded and the is.sue is hereby submitted to the .I HO/Special Referee I \., for such purpose; and it is further ORDERED that the powers of theJHO/Special Referee shall not be limited further than as set forth in the CPLR; and. it is further • ORDERED that this matter is hereby referred to the Special Referee Clerk (~oorn 119 M, 646-386-3028 or spref@nycourts.gov) for ~lacement at the earliest possible date upori the calendar of the Special Referees Part (Part SRP), which, i!1 accordance.with the Rules of that Part (which are posted on the website of this Court atwww.nycourts.gov/supctmanh at the ·.References· link under "Courthouse Procedures"), shall assign this matterto an available JHO/Special Referee to hear beard and recomment as specified above; and itis further 15 16 of 17 [* 16] ORDERED that. counsel shall, Within 10 days from the date ofthis Order, submit to the Special Referee Clerk by fax{2 l 2-401-9186) or e-mail an Information Sheet (which can be accessed at the "References" link on the court's website) containing all the information called for therein ai1d that, as soon as practical thereafter, the Special Referee Clerk shall advise counsel for the parties of the date fixed for the appearance of the matter upon the calendar of the Special Referee~ Part; and it is further ORDERED that the parties shall appear for the reference hearing, including with all witnesses and evidence they seek to present, and shall be ready to proceed, on the date first fo•ed by the Special Refer~e Clerk subject only to any adjournment that may be authorized by the Special Reforees Part in accordance with the Rules ofthat Part; and it is further ORDERED that the hearing willbe cOnducted in thesame manner as a trial before a Justice without a jury (CPLR 4320 [a]) (tlie proceeding will be recorded by a court reporter, the rules of evidence apply, etc.) and, except as otherwise directed by the assigned .II-IO/Special Referee for good cause shown, the trial of the issue(s) specified above shall proceed from day to day until completion; and it is further ORDERED that any motion to confirm ordisaffirm the Report of the JHO/Special Referee shall be made within the, time and in the manner specified in CPLR 4403 and Section 202A4 of the Uniform Rules for the Trial Courts; and itis further ORDERED that, within fourteen (l4) days of entry, plaintiffs shall serve a copy of this order with notice of entry upon counsel for' defendants and Additional Defendants. This constitutes the decision and order of the court. DATED: December 9, 2016 16 17 of 17

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