Sept. 21, 2015
2015 WL 7118246
United States District Court,
E.D. New York.
SILVERMAN & SILVERMAN, LLP, Plaintiff,
PACIFICA FOUNDATION, Defendant.
No. 11 CV 1894(FB)(RML).
Signed Sept. 21, 2015.Filed Sept. 22, 2015.
Attorneys and Law Firms
Pacifica Foundation, pro se.
REPORT AND RECOMMENDATION
LEVY, United States Magistrate Judge.
*1 By order dated July 25, 2014, the Honorable Frederic Block, Senior United States District Judge, granted the motions of plaintiff Silverman & Silverman, LLP (“plaintiff”) to strike the counterclaims and strike the answer of defendant Pacifica Foundation (“defendant” or “Pacifica”), as a sanction for failure to comply with the court’s discovery orders. (Order, dated July 25, 2014.) Judge Block directed Pacifica to pay the attorney’s fees and costs incurred by plaintiff in bringing the discovery motion (see Motion for Discovery Order, dated May 9, 2014, Dkt. No. 44), the motion to strike counterclaims (see Motion to Strike Defendant’s Counterclaims, dated May 28, 2014, Dkt. No. 46), and the motion to strike defendant’s answer (see Motion to Strike Answer to Complaint, Counterclaim, dated May 29, 2014, Dkt. No. 47) (collectively, “the Motions”). As a consequence, defendant is in default. I therefore recommend that the Clerk of the Court be directed to note Pacifica’s default.
Judge Block has recommitted this matter to me to conduct an inquest and issue a Report and Recommendation. For the reasons stated below, I respectfully recommend that plaintiff be awarded $65,076 in damages, as well as prejudgment interest at the rate of nine percent per annum, amounting to $5,856.84 per year for the five years from April 20, 2010 to April 20, 2015, and $16.05 per day thereafter until the date of entry of judgment. I further recommend that plaintiff’s request for attorney’s fees and costs be denied with leave to file appropriate documentation within thirty (30) days of the date of this Report and Recommendation.
BACKGROUND AND FACTS
Plaintiff is a New York limited liability partnership law firm. (Complaint, dated Apr. 14, 2011 (“Compl.”), ¶ 3.) Pacifica is a California not-for-profit corporation. (Id. ¶ 4.) According to the complaint, on or about November 25, 2007, defendant retained plaintiff to provide legal services at the rates of $275 per hour and $225 per hour, respectively, for the work of two of plaintiff’s attorneys. (Id. ¶ 5.) Plaintiff contends that it performed legal work as directed and presented regular invoices to Pacifica. (Id. ¶¶ 6–7.) According to the complaint, “[a]t no time did defendant object to payment.” (Id. ¶ 8.) Instead, plaintiff’s invoices were “paid, regularly, though defendant’s payments often were made as payments on account.” (Id.¶ 7.) On an indeterminate date, defendant’s payments ceased entirely. (Id. ¶¶ 7–9; see also Declaration of Daniel Silverman, Esq., dated Oct. 10, 2014 (“Silverman Decl.”), ¶ 4; Silverman Decl., Ex. B.) On February 22, 2011, plaintiff’s counsel wrote to defendant to demand payment of a balance due of $76,474.75, and to offer an opportunity to arbitrate the claim. (Id. ¶ 9.)
Plaintiff brought this action in April 2011 to recover allegedly unpaid legal fees. (Compl.) On May 25, 2011, defendant answered the complaint and asserted counterclaims against plaintiff for malpractice and breach of contract. (Answer, Counterclaims, dated May 25, 2011.) Plaintiff sought to move to dismiss defendant’s counterclaims. (See Letter Motion for Pre-motion Conference, dated June 2, 2011; Order, dated June 2, 2011; Minute Entry, dated July 6, 2011.) Defendant then moved to amend its answer and counterclaims, and plaintiff’s counsel consented to the motion. (Defendant’s Motion to Amend Answer, dated Jan. 27, 2012; Letter of Arthur Schwartz, Esq., dated Feb. 22, 2012; Order, dated Feb. 23, 2012.) Plaintiff answered the counterclaims, denying defendant’s allegations. (Answer to Defendant’s Counterclaims, dated Apr. 27, 2012.)
*2 The parties then entered into lengthy settlement negotiations. When those negotiations broke down, discovery resumed, and on September 12, 2013, plaintiff moved to compel defendant to provide discovery regarding dates for depositions of four Pacifica witnesses. (Letter Motion for Discovery, dated Sept. 12, 2013.) At a conference held on September 17, 2013, I granted plaintiff’s motion, instructed defendant to provide dates for the depositions no later than October 1, 2013, and warned defendant that failure to comply would result in sanctions. (Minute Entry, dated Sept. 17, 2013.) On October 2, 2013, plaintiff moved again to compel discovery and sought sanctions against defendant. (Letter Motion for Sanctions, dated Oct. 2, 2013.) Plaintiff reported that defendant had not complied with my order to provide dates for the depositions. (Id.) On October 4, 2013, plaintiff moved to strike defendant’s answer and counterclaims. (Motion to Strike Answer and Counterclaims, dated Oct. 4, 2013.) At a motion hearing on October 15, 2013, I granted plaintiff’s motion for sanctions, and deferred determination of the amount pending the outcome of the parties’ settlement discussions. (Minute Entry, dated Oct. 15, 2013.)
The parties resumed settlement discussions, but on March 26, 2014, plaintiff’s counsel informed the court that they were unable to finalize a settlement because they had received no response from defendant after providing Pacifica’s counsel with the final draft of the settlement agreement. (Letter of Scott E. Kossove, Esq., dated Mar. 26, 2014.) On May 9, 2014, plaintiff moved again to compel defendant to provide dates for depositions, and set deadlines for the remainder of discovery. (Motion for Discovery Order, dated May 9, 2014, Dkt. No. 44.) Plaintiff informed the court that it had received no communication from Pacifica or its counsel since the last status report. (Id. at 1.) On May 9, 2014, I issued an Order to Show Cause, directing defendant to explain by May 16, 2014 why the court should not enter plaintiff’s proposed discovery order. Defendant did not respond to the Order to Show Cause. By letters dated May 28, 2014, and May 29, 2014, respectively, plaintiff moved to strike defendant’s counterclaims (Motion to Strike Defendant’s Counterclaims, dated May 28, 2014, Dkt. No. 46) and its answer (Motion to Strike Answer to Complaint, Counterclaim, dated May 29, 2014, Dkt. No. 47). Defendant did not respond.
By order dated July 25, 2014, Judge Block granted plaintiff’s motions to strike defendant’s counterclaims and defendant’s answer. (Order, dated July 25, 2014.) Judge Block directed Pacifica to pay the fees and costs plaintiff incurred in bringing the Motions (Dkt.Nos.44, 46, 47). Accordingly, defendant is in default.
Judge Block has recommitted this matter to me to conduct an inquest and issue a Report and Recommendation. By order dated September 10, 2014, I directed the parties to serve and file written inquest submissions. (Order, dated Sept. 10, 2014.) Plaintiff filed inquest submissions dated October 10, 2014 (see Declaration of Arthur Z. Schwartz, Esq., dated Oct. 10, 2014 (“Schwartz Decl.”), and Silverman Decl.). Defendant did not respond.
*3 “Once found to be in default, a defendant is deemed to have admitted all well-pleaded factual allegations in the complaint pertaining to liability.” Jarvis v. N. Am. Globex Fund, L.P., 823 F.Supp.2d 161, 164 (E.D.N.Y.2011) (citing Car–Freshener Corp. v. Excellent Deals, Inc., No. 10 CV 1391, 2011 WL 3846520, at *1 (E.D.N.Y. Aug. 1, 2011)). “Even after a defendant has defaulted, a ‘plaintiff must establish that on the law it is entitled to the relief it seeks, given the facts as established by the default.’ “ Id. (citing Car–Freshener Corp., 2011 WL 3846520, at *1). Thus, the court must “review the allegations in the complaint to determine if the elements of each claim have been adequately pleaded.” Trs. of the 1199 SEIU Health Care Emps. Pension Fund v. Traymore Chemists, Inc., No. 13 CV 4070, 2014 WL 4207589, at *3 (E.D.N.Y. June 25, 2014) (citing Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir.1981)); see also City of N.Y. v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 137 (2d Cir.2011).
Plaintiff’s complaint sets forth what is, in essence, an account stated claim.1 Under New York law,2 “[a]n account stated is ‘an agreement between the parties to an account based upon prior transactions between them with respect to the correctness of the separate items composing the account and the balance due, if any, in favor of one party or the other.’ ” Kramer, Levin, Nessen, Kamin & Frankel v. Aronof, 638 F.Supp. 714, 719 (S.D.N.Y.1986) (quoting Chisholm–Ryder Co. v. Sommer & Sommer, 70 A.D.2d 429, 421 N.Y.S.2d 455, 457 (4th Dep’t 1979)). “To state a claim for an account stated, the plaintiff must plead that: ‘(1) an account was presented; (2) it was accepted as correct; and (3) debtor promised to pay the amount stated.’ ” IMG Fragrance Brands, LLC v. Houbigant, Inc., 679 F.Supp.2d 395, 411 (S.D.N.Y.2009) (quoting Haskell Co. v. Radiant Energy Corp., No. 05 CV 4403, 2007 WL 2746903, at *12 (E.D.N.Y. Sept.19, 2007)). “The second and third requirements (acceptance of the account as correct and a promise to pay the amount stated) may be implied if ‘a party receiving a statement of account keeps it without objecting to it within a reasonable time or if the debtor makes partial payments.’ ” IMG Fragrance Brands, LLC, 679 F.Supp.2d at 411 (quoting LeBoeuf, Lamb, Greene & MacRae, L.L.P. v. Worsham, 185 F.3d 61, 64 (2d Cir.1999)); see also Ritz v. Mike Rory Corp., No. 12 CV 367, 2014 WL 7010661, at *2 (E.D.N.Y. Aug. 28, 2014); Banker v. Esperanza Health Sys., Ltd., No. 05 CV 4115, 2011 WL 838909, at *4 (S.D.N.Y. Feb. 2, 2011).
Plaintiff’s complaint sufficiently alleges each of these elements and presents a viable claim for an account stated. Plaintiff alleges that it “presented invoices [to Pacifica] on a regular basis … setting forth legal services actually provided and expenses incurred in the course of such representation.” (Compl.¶ 7.) “At no time did defendant object to payment” (id . ¶ 8) and the “invoices were paid, regularly, though defendant’s payments were often made as payments on account.” (Id. ¶ 7.) Additionally, defendant’s “representatives promised a continuing program to pay off the plaintiff’s invoices.” (Id. ¶ 8.) Thus, I respectfully recommend that defendant be found liable for an account stated.
*4 “While a party’s default is deemed to constitute a concession of all well pleaded allegations of liability, it is not considered an admission of damages.” Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir.1992). “The court must ensure that there is a reasonable basis for the damages specified in a default judgment. The court has the discretion to require an evidentiary hearing or to rely on detailed affidavits or documentary evidence in making this determination.” Chopen v. Olive Vine, Inc ., No. 12 CV 2269, 2015 WL 1514390, at *2 (E.D.N.Y. Mar. 13, 2015) (citing Action S.A. v. Marc Rich & Co., 951 F.2d 504, 508 (2d Cir.1991)). “The moving party is entitled to all reasonable inferences from the evidence it offers.” F.D.I.C. v. Drysdale, No. 10 CV 4778, 2013 WL 5965723, at *3 (E.D.N.Y. Nov.7, 2013) (citing Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir.2009)).
1. Unpaid Invoices
Plaintiff requests $76,474.75 in damages. Plaintiff specifically contends that “[a]s of January 19, 2010, we were due $76,474.75 from Pacifica. No payment was received after this date.” (Silverman Decl. ¶ 4.) However, the invoices provided to the court3 contradict this time line. Plaintiff has submitted billing records and invoices documenting approximately 650 hours worked on behalf of Pacifica, from November 2007 to March 2010. (Silverman Decl., Ex. B.) The January 19, 2010 invoice clearly indicates an amount due of $76,474.75. (Id. at 2.)
Nonetheless, plaintiff’s submissions include invoices from dates after January 19, 2010. (Silverman Decl., Ex. B.) These indicate at times a lesser and at times a greater amount owed. The January 20, 2010 invoice shows an amount received of $15,000 and a balance due of $78,752.25. (Id. at 6.) The February 16, 2010 invoice indicates a balance due of $73,752.25, and states that a $5,000 payment was received on January 21, 2010. (Id.at 7.) The April 20, 2010 invoice indicates that a $15,000 payment was received on an indeterminate date and shows a “balance due @ $5,000 per month” of $65,076. (Id. at 8.)
Obviously, these submissions belie plaintiff’s contention that no payment was received after January 19, 2010, and call into question the amount owed by Pacifica. Plaintiff has offered no explanation for these inconsistencies.4
Under these circumstances, I respectfully recommend that the court award plaintiff $65,076, as plaintiff’s submissions demonstrate that plaintiff is owed at least this amount, but not necessarily more.5 See Keefe, Bruyette & Woods, Inc. v. Atl. S. Cap. Grp., No. 11 CV 810, 2012 WL 2551966, at *4 (S.D.N.Y. June 27, 2012) (recommending declining to award damages because, inter alia, “it is not clear from the … exhibit[ ] how the plaintiff arrived at the amount claimed to be owed on its account stated cause of action”).
Plaintiff also seeks to recover prejudgment interest. N.Y. C.P.L .R. § 5001(a) provides that “interest shall be recovered upon a sum awarded because of a breach of performance of a contract, or because of an act or omission depriving or otherwise interfering with title to, or possession or enjoyment of, property, except that in an action of an equitable nature, interest and the rate and date from which it shall be computed shall be in the court’s discretion.” N.Y. C.P.L.R. § 5001(a). “Actions for account stated are generally considered equitable in nature.” Samara v. Gangemi & Gangemi, No. 02 CV 1407, 2005 WL 1076320, at *3 (E.D.N.Y. May 3, 2005) (citing EMI Music Mktg. v. Avatar Records, Inc., 364 F.Supp.2d 337, 345 (S.D.N.Y.2005)). Here, I find that equity supports an award of prejudgment interest in order to provide full compensation to plaintiff.
*5 Prejudgment interest is “computed from the earliest ascertainable date the cause of action existed, except that interest upon damages incurred thereafter shall be computed from the date incurred. Where such damages were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date.” N.Y. C.P.L.R. § 5001(b).
Plaintiff asks the court to award prejudgment interest from January 19, 2010. (Silverman Decl. at 1.) Based on the inquest submissions provided to the court, the date of the most recent entirely unpaid invoice is April 20, 2010. Therefore, I respectfully recommend that pre-judgment interest be calculated from April 20, 2010 at the statutory rate of nine percent per annum. See Todtman, Nachamie, Spizz & Johns, P.C. v. Ashraf, 24 F.R.D. 451, 457 (S.D.N.Y.2007) (awarding prejudgment interest on an account stated claim from the date of plaintiff’s unpaid invoice); N .Y. C.P.L.R. § 5004.
3. Fees and Costs
Finally, plaintiff seeks attorney’s fees and costs. Plaintiff “requests that the damages (including interest) be increased by one-third as an award of fees.” (Schwartz Decl.) However, plaintiff has not provided the court with a reason for departing from the usual rule that each party pay its own legal fees, and I respectfully recommend that the court decline to award such fees with respect to the entirety of the work performed by plaintiff’s counsel during the course of this litigation.
This is not to disregard the fact that, by order dated July 25, 2014, Judge Block directed defendant to pay the attorney’s fees plaintiff incurred in bringing the Motions (Dkt.Nos.44, 46, 47). (Order, dated July 25, 2014.) A fee applicant “bears the burden of supporting its claim of hours expended by accurate, detailed and contemporaneous time records.” Santillan v. Henao, 822 F.Supp.2d 284, 299 (E.D.N.Y. Sept.30, 2011) (citing N.Y. State Ass’n for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1147–48 (2d Cir.1983)). In calculating a fee award, the court must first establish a reasonable hourly rate, which is “what a reasonable, paying client would be willing to pay.” Arbor Hill Concerned Citizens Neighborhood Ass’n v. Cnty. of Albany, 522 F.3d 182, 184 (2d Cir.2008). “After determining the reasonable hourly rate [ ] … the court must examine the hours expended by counsel to determine their reasonableness.” Staples, Inc. v. W.J.R. Assocs., No. 04 CV 904, 2007 WL 2572175, at *5 (E.D.N.Y. Sept. 4, 2007) (quoting Heng Chan v. Sung Yue Yung Corp., No. 03 CV 6048, 2007 WL 1373118, at *5 (S.D.N.Y. May 8, 2007)).
Plaintiff’s counsel requests generally that “damages (including interest) be increased by one-third” pursuant to the firm’s contingency fee arrangement with plaintiff but has submitted no records documenting the time expended on the Motions. (Schwartz Decl.) It is not uncommon for courts to award fees pursuant to contingency fee arrangements. See, e.g., Weiwei Gao v. Sidhu, No. 11 CV 2711, 2013 WL 2896995, at *5 (E.D.N.Y. June 13, 2013); 3H Enters., Inc. v. Murray, 994 F.Supp. 403, 405 (N.D.N.Y.1998). However, in such cases, a court must still consider the reasonableness of the fee sought. Weiwei Gao, 2013 WL 2896995, at *5; Prof’l Merch. Advance Cap., LLC v. C Care Servs., LLC, No. 13 CV 6562, 2015 WL 4392081, at *7 (S.D.N.Y. July 15, 2015); 3H Enters., 994 F.Supp. at 405. Relevant factors in this analysis include “the difficulty of the questions involved; the skill required to handle the problem; the time and labor required; the lawyer’s experience, ability and reputation; the customary fee charged by the Bar for similar services; and the amount involved.” Weiwei Gao, 2013 WL 2896995, at *5 (quoting F.H. Krear & Co. v. Nineteen Named Trs., 810 F.2d 1250, 1266 (2d Cir.1987)).
*6 Here, plaintiff’s only submission bearing on attorney’s fees is a three-sentence declaration from plaintiff’s counsel, asking the court to award his contingency fee. (See Schwartz Decl.) This is not a sufficient basis for a determination that the attorney’s fees sought are reasonable, as Judge Block’s order awards plaintiff only those fees and costs incurred in bringing the Motions (Dkt.Nos.44, 46, 47). I therefore recommend that the request for fees be denied, with leave to file contemporaneous time records within thirty days.
For the foregoing reasons, I respectfully recommend that plaintiff be awarded $65,076 in damages, as well as prejudgment interest at the rate of nine percent per annum, amounting to $5,856.84 per year for the five years from April 20, 2010 to April 20, 2015, totaling $29,284.20, and $16.05 per day thereafter until the date of entry of judgment. I further recommend that plaintiff’s request for attorney’s fees and costs be denied, with leave to file a supplementary submission in support of the request within thirty days of the date of this Report and Recommendation.
Plaintiff’s counsel is directed to serve copies of this Report and Recommendation on defendant. Any objections to this Report and Recommendation must be filed with the Clerk of Court, with courtesy copies to Judge Block and to my chambers, within fourteen (14) business days. Failure to file objections within the specified time waives the right to appeal the district court’s order. See 28 U .S.C. § 636(b)(1); FED. R. CIV. P. 72, 6(a), 6(e).
Not Reported in F.Supp.3d, 2015 WL 7118246
Although the explicit cause of action in plaintiff’s complaint is breach of contract, the content and sequence of plaintiff’s allegations make it apparent that plaintiff intends to plead an account stated claim.
“A federal court exercising diversity jurisdiction must apply the choice of law analysis of the forum state.” Chia Huey Chou v. Remington Tai Che, No. 09 CV 4121, 2010 WL 6546831, at *2 (E.D.N.Y. Aug.24, 2010) (citing GlobalNet Financial.com., Inc. v. Frank Crystal & Co., 449 F.3d 377, 382 (2d Cir.2006)). Thus, New York law applies for the purposes of determining which state’s substantive law governs plaintiff’s claims. “The New York Court of Appeals has held that ‘the first step in any case presenting a potential choice of law issue is to determine whether there is an actual conflict between the laws of the jurisdictions involved.’ “ Id.(quoting In re Allstate Ins. (Stolarz), 81 N.Y.2d 219, 597 N.Y.S.2d 904, 613 N.E.2d 936, 937 (1993)); see also Alitalia Linee Aeree Italiane, S.P.A. v. Airline Tariff Pub. Co., 580 F.Supp.2d 285, 290 (S.D.N.Y.2008). “If no conflict is found between the law of the forum and any other jurisdiction whose law is invoked, then the Court should apply the law of the forum.” Alitalia Linee Aeree Italiane, S.P.A., 580 F.Supp.2d at 290. Here, the elements of an account stated claim in New York (the forum state) and California (the state in which defendant resides) are substantively identical. Compare IMG Fragrance Brands, LLC v. Houbigant, Inc., 679 F.Supp.2d 395, 411 (S.D.N.Y.2009) with Prime Media Grp. LLC v. Acer Am. Corp., No. 12 CV 5020, 2013 WL 621529, at *2 (N.D.Cal. Dec. 16, 2014).
The invoices indicate the following:
Date of Invoice
Current Invoice Amount
Stated Total Amount Due
“Billed on March 25, 2008 … $41,600.70”
“Billed on April 21, 2008 … $54,814.84”
Plaintiff has submitted a copy of the demand letter it sent to Pacifica on February 22, 2011, less than two months before it filed suit. (Silverman Decl., Ex. D.) The letter states that “[t]he amount due as of the most recent invoice … is $76,474.75.” (Id.) However, the most recent invoice in the court’s possession clearly shows a “balance due @ $5,000 per month” of $65,076. (Silverman Decl., Ex. B at 8.) Additionally, plaintiff has submitted a one-page schedule of payments received from Pacifica. (Silverman Decl., Ex. C.) According to this schedule, plaintiff received its last payment from Pacifica on January 27, 2009 and is owed a total balance of $94,492.04. (Id.) This contradicts plaintiff’s assertion that it is owed $76,474.75 (Silverman Decl. ¶ 4). Moreover, invoices provided to the court show payments received after those that appear on the schedule.
Although plaintiff’s invoices contain calculation errors (see, e.g., Silverman Decl., Ex. B at 16), these do not affect the damage award. Pacifica implicitly accepted the amount stated upon each invoice it received as correct and implicitly promised to pay that amount by retaining the invoice and failing to object to it or making a partial payment toward the amount stated. See IMG Fragrance Brands, LLC, 679 F.Supp.2d at 411.