531 Kosciusko Partners, LLC v Montesdeoca
Annotate this CaseDecided on September 10, 2018
Supreme Court, Kings County
531 Kosciusko Partners, LLC, Plaintiff,
against
Erika Montesdeoca, ERAM PROPERTIES LLC, et. al., Defendants.
500521/2013
Plaintiff was represented by Kilpatrick Townsend & Stockton LLP, New York, NY; Defendant was represented by Angelyn Johnson, Esq., Brooklyn, NY.
Sylvia G. Ash, J.
The following papers numbered 1 to 9 read herein:
Papers Numbered
Notice of Motion/Order to Show Cause/Petition/Cross Motion and Affidavits (Affirmations) Annexed 1-6
Opposing Affidavits (Affirmations) 7, 8
Reply Affidavits (Affirmations) 9
Before the Court are two motions brought by Defendant Borrower, Erika Montesdeoca ("Montesdeoca"), related to the determination of the reasonableness of Plaintiff's attorney's fees sought in this foreclosure case.
On February 1, 2013, Plaintiff's predecessor-in-interest, 650 Brooklyn LLC, commenced this action against, among others, Montesdeoca and ERAM Properties, LLC ("ERAM"[FN1] and together with Montesdeoca referred to as "Defendant Borrowers"), for Montesdeoca's default on the loan on February 2012 and every month thereafter. By Decision and Order dated August 17, 2017, this Court granted Plaintiff summary judgment and the appointment of a receiver ("SJ/Receiver Decision"). Less than a month later, Defendant Borrowers moved, by emergency order to show cause, to stay the SJ/Receiver Decision on the basis that, among other things, Defendant Borrowers would quickly refinance the subject property and pay off Plaintiff's loan so long as Plaintiff provided a detailed pay-off statement and submitted to an attorney's fee hearing.
By short form order dated September 13, 2017, the parties resolved Defendant Borrowers' application on consent and agreed to stay the receivership, refer the issue of Plaintiff's attorney's fees and costs to a judicial hearing officer, and include the hearing officer's determination of attorney's fees in the pay-off amount.
On or around November 8, 2017, Defendant Borrowers moved by emergency order to show cause to, among other things, stay the receivership and the attorney's fee hearing scheduled for November 28, 2017 on the basis that Plaintiff's counsel refused to provide discovery pertaining to its attorney's fees including its retainer agreement with Plaintiff, the identities and positions of every attorney billing their time to Defendant Borrowers, and unredacted legal invoices. Defendant Borrowers also sought to preclude recovery of attorney's fees for Michael J. Greenberg, Esq. ("Greenberg"), the principal member of Plaintiff, on the grounds that Greenberg neither resided nor maintained an office in New York.
On or around January 2, 2018, Defendant Borrowers moved to quash the subpoena duces tecum dated December 21, 2017, served upon them and for a protective order denying Plaintiff discovery related to Defendant Borrowers' legal bills, payments, and legal fee retainers. According to Defendant Borrowers, the information sought by the subpoena is utterly irrelevant in determining whether Plaintiff's legal fees are reasonable. Defendant Borrowers also seek sanctions against Plaintiff for what they view as harassing conduct towards them.
In response, Plaintiff argues that Defendant Borrower's legal fees are relevant to the determination of the reasonableness of its legal fees insofar as Plaintiff believes that same will corroborate Plaintiff's position that its fees are reasonable. That because Defendant Borrowers challenge Plaintiff's legal fees as "excessive" on the grounds that the instant action is a "simple" foreclosure case, the information sought by the subpoena is relevant because the sought-after documents will undoubtedly show that Defendant Borrowers paid comparable legal fees to their own counsel.
In response to Defendant Borrowers' motion seeking a stay of the legal fee hearing, Plaintiff argues that a stay is unwarranted, that Defendant Borrowers are not entitled to unredacted legal invoices because the redactions relate to information that is protected by the attorney-client privilege, that Plaintiff previously provided the identities and hourly rates charged by each person employed by Plaintiff's counsel but that, in any case, a fee schedule is attached to its opposition, and, finally, that it has provided its legal fee retainer agreement since the filing of the instant motions.
Based upon the issues presented in the foregoing papers, this Court directed Plaintiff's counsel to submit its invoices, unredacted, for in camera review. In lieu of referring the determination of Plaintiff's reasonable legal fees to a special referee or judicial hearing officer, this Court shall determine same based upon the papers before the Court, Plaintiff's counsel's unredacted legal invoices, a review of the case's procedural history and this Court's familiarity with the case having actively presided over this matter since the beginning of 2016.
There is no dispute that Plaintiff is entitled to attorney's fees pursuant to the relevant loan documents.[FN2] Nevertheless, an award of an attorney's fee pursuant to a contractual provision may only be enforced to the extent that the amount is reasonable and warranted for the services actually rendered (see Kamco Supply Corp. v Annex Contr. Inc., 261 AD2d 363, 365 [2d Dept 1999]). "In determining reasonable compensation for an attorney, the court must consider such factors as the time, effort, and skill required; the difficulty of the questions presented; counsel's experience, ability, and reputation; the fee customarily charged in the locality; and the contingency or certainty of compensation" (Vigo v 501 Second St. Holding Corp., 121 AD3d [*2]778, 780 [2d Dept 2014]). In determining reasonable attorney's fees for a mortgage foreclosure, the Second Department has looked to whether they were expressly provided for in the mortgage, whether they bore a reasonable relationship to the unrecovered principal, and to the time and effort expended in prosecuting the foreclosure action (see Kenneth Pregno Agency, Ltd. v Letterese, 112 AD2d 1032, 1033 [2d Dept 1985]).
Although no single method of determining fees is mandated, two acceptable options are the percentage approach and the lodestar method, the latter having originated in federal class action litigation (Flemming v Barnwell Nursing Home & Health Facilities, Inc., 56 AD3d 162, 165 [3d Dept 2008][citing Goldberger v Integrated Resources, Inc., 209 F3d 43, 50 [2d Cir 2000]). Under the lodestar method, the court determines the reasonable hourly rate and multiplies it by the reasonable number of hours expended, then adjusts the fee based upon certain subjective criteria (Id.). In assessing the reasonable hours worked, the following factors are considered: the extent to which the hours reflect inefficiency or duplicative work; legal work versus non-legal work, investigations, and other work performed by non-lawyers; time spent in court differentiated from out-of-court efforts; and the court's own knowledge, experience and expertise as to the time required to complete a similar task (Rahmey v Blum, 95 AD2d 294, 301 [2d Dept 1983]; see also In re Appointment of a Guardian of Spingarn, 164 Misc 2d 891, 894, 626 NYS2d 650 [Sup Ct, NY County 1995]). The court need not accept inadequately documented hours or those hours which reflect "padding, i.e., hours that are excessive or otherwise unnecessary" (Rahmey v Blum, supra).
In addition to using the lodestar method, state courts frequently determine reasonable attorney's fees on a quantum meruit basis in a multitude of contexts under its inherent authority (see First Nat'l Bank v Brower, 42 NY2d 471[1977]). "Black's Legal Dictionary (5th Ed., 1979, p. 1119) defines "quantum meruit" to be "as much as he deserved"" (Nawaz v Boryczka, 34 Misc 3d 1234[A], 2012 NY Slip Op 50367[U][Sup Ct, Kings County 2012]).
A hearing is not required in all circumstances, so long as the court possesses sufficient information upon which to make an informed assessment of the reasonable value of the legal services rendered (see Bankers Fed. Sav. Bank FSB v Off W. Broadway Developers, 224 AD2d 376, 378 [1st Dept 1996]).
Here, Plaintiff is seeking to recover $584,733.15 in legal fees. According to Plaintiff, the amount of its legal fees are directly attributable to Defendant Borrowers' "scorched-earth" litigation tactics over a period of five years and spread out over three different courts. Plaintiff states that this far-from-basic foreclosure action required over 23 appearances, some of which Defendant Borrowers' counsel failed to appear for or which Montesdeoca appeared pro se after being instructed by the Court to retain counsel;[FN3] 12 motions, most of which were decided in Plaintiff's favor; and securing remand or dismissal of the following federal court actions: (1) removal to the Eastern District of New York ("EDNY"); (2) an appeal of the remand by EDNY with the Second Circuit; and (3) removal to the District Court for the District of Columbia and, as part of said removal, a consumer enforcement and compliance action against, among others, Plaintiff, Judges Sylvia G. Ash and Carolyn B. Demarest, and the Kings County Recorder's Office. Plaintiff also states that, pursuant to its retainer agreement with counsel, the hourly fees for Keith M. Brandofino, Esq., a firm partner, are capped at $390 per hour while fees for the associates are capped at $370 per hour, which, given Defendant Borrower's counsel's own hourly rate of $375, constitute reasonable hourly rates.
Upon review of the relevant records, and contrary to Defendant Borrower's position that a full hearing is necessary, the Court finds that it possesses sufficient information to award Plaintiff [*3]reasonable attorney's fees in the amount of $216,410.00, inclusive of incidental disbursements.[FN4] A spreadsheet reflecting the work credited by the Court as well as the description, hours and associated fee is attached to this Decision as Schedule A.
First, the Court finds that the hourly rate of $370 or $390 [FN5] constitutes a reasonable rate charged for this commercial mortgage foreclosure action. The fact that Defendant Borrowers' counsel charges nearly the same hourly rate substantiates the claim that the hourly rate is reasonable for this type of case.[FN6] Secondly, having presided over numerous foreclosure matters, the Court finds that the instant matter was far from a straightforward judicial foreclosure. Defendant Borrowers aggressively litigated and defended against Plaintiff's suit starting from their timely appearance, making strategic choices that drove up Plaintiff's attorney's fees and which ultimately proved unsuccessful. In addition, Defendant Borrowers have changed legal counsel multiple times resulting in numerous court appearances where the matter was simply adjourned, after appearances by Plaintiff's counsel and Montesdeoca, to allow Defendant Borrowers more time to retain counsel. There is no doubt that counsel on both sides have logged hundreds of hours litigating this contentious foreclosure action.
Notwithstanding the foregoing, the Court has reduced Plaintiff's attorney's fees to $216,410.00 upon a review of Plaintiff's legal invoices. The Court has omitted line items reflecting duplication of work, excessive billing, or billing which was unwarranted given the type of service, i.e, administrative or secretarial work.[FN7] In addition, the Court has disallowed the recovery of attorney's fees for work performed by Greenberg. Plaintiff fails to provide support for the proposition that Plaintiff itself may charge attorney's fees because its principal member is an attorney, especially given the fact that Greenberg retained the firm of Kilpatrick Townsend to represent Plaintiff in this matter from the beginning. The Court also, for the most part, did not consider the time spent by Plaintiff's counsel in substantiating its fee (see Hempstead General Hosp. v National Grange Mut. Ins. Co., 179 AD2d 645, 646 [2d Dept 1992][the Court previously held it improper to award a "fee upon a fee" when the counsel fee award was based on time spent by counsel substantiating his fee]).
Having determined Plaintiff's reasonable attorney's fees, this matter shall be referred to a Referee pursuant to this Court's Order of Reference dated October 19, 2017 to ascertain and compute the amount due to the Plaintiff herein for principal, interest, and other disbursements advanced, as provided for by statute and in the note and mortgage upon which this action was brought.
Based upon the foregoing, the Court deems Defendant Borrowers' motions either moot or resolved by this Decision and Order. Any court-imposed stays are hereby lifted.
This constitutes the Decision and Order of the Court.
E N T E R,
_________________________
Sylvia G. Ash, J.S.C. Footnotes
Footnote 1:Montesdeoca transferred the Property to ERAM sometime in February 2011.
Footnote 2:Defendant Borrowers, however, assert that Plaintiff should not be deemed the "prevailing party" because several of its motions have been denied or withdrawn in the past. The Court deems this argument to be without merit as Plaintiff was awarded summary judgment by Decision dated August 17, 2017.
Footnote 3:Plaintiff contends that Defendant Borrowers repeatedly frustrated Plaintiff's prosecution effort by going through multiple changes of counsel.
Footnote 4:The Court views incidental disbursements to include items such as photocopying, mailing, courier charges, travel expenses, and similar expenses.
Footnote 5:The Court notes that most of the credited work was billed at $370 per hour as most of the billable work was performed by attorneys other than Keith M. Brandofino, Esq.
Footnote 6:Both parties' counsel practice real estate law, among other areas.
Footnote 7:In selecting which line items to give credit to (or not to give credit to), the Court has inevitably engaged in a quantum meruit analysis as well.
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