Opinion ID: 597429
Heading Depth: 2
Heading Rank: 2

Heading: Mar Oil's Cross-Appeal

Text: 48 In its cross-appeal, Mar Oil contends principally that in light of Morrissey's breach of fiduciary duty, the district court erred in allowing Morrissey to retain any fees and disbursements and that, in any event, the $240,000 fee award was unreasonably high. In addition, Mar Oil contends that the court should have awarded it punitive damages, attorneys' fees, sanctions pursuant to Fed.R.Civ.P. 11, and prejudgment interest dating back at least to July 11, 1983. For the reasons below, we vacate the judgment and remand principally for further findings with respect to the number of hours spent by Morrissey in service of Mar Oil after January 26, 1983, and a reasonable hourly rate for his services in that period.
49 Mar Oil contends that, in light of Morrissey's breach of fiduciary duty, the district court should have denied him any fees or disbursements. It also contends that the court erred in finding that Morrissey spent 1,200 hours on Mar Oil's behalf and was entitled to be compensated at the rate of $200 per hour. We agree that the record does not support these findings. 50 First, however, we reject Mar Oil's contention that Morrissey must be denied any fee whatever. The fact that an attorney has breached his fiduciary duty to his client does not necessarily mean that he must forfeit fees for services he had already performed or would thereafter perform. Under New York law, attorneys may be entitled to recover for their services, even if they have breached their fiduciary obligations. See In re Rosenman & Colin, 850 F.2d 57, 63-64 & n. 3 (2d Cir.1988). 51 Further, the fact that there was no complete agreement between the parties does not foreclose all recovery by Morrissey for his services. Generally, a purported contract that leaves the compensation term to be determined by future negotiations is a mere agreement to agree, and under New York law is deemed too indefinite to be enforceable. Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher, 52 N.Y.2d 105, 109, 436 N.Y.S.2d 247, 249, 417 N.E.2d 541, 543 (1981). However, a court should find an agreement too indefinite only as a last resort when it is satisfied that the agreement cannot be rendered reasonably certain by reference to an extrinsic standard that makes its meaning clear. Cobble Hill Nursing Home, Inc. v. Henry & Warren Corp., 74 N.Y.2d 475, 483, 548 N.Y.S.2d 920, 923, 548 N.E.2d 203, 206 (1989), cert. denied, 498 U.S. 816, 111 S.Ct. 58, 112 L.Ed.2d 33 (1990); see 166 Mamaroneck Avenue Corp. v. 151 East Post Road Corp., 78 N.Y.2d 88, 91, 571 N.Y.S.2d 686, 688, 575 N.E.2d 104, 106 (1991). Thus, when the contracting parties manifested an intent to be bound at the time of agreement, the court may supply a compensation term if one can be determined by referring to industry practice. See Cobble Hill Nursing Home, Inc. v. Henry & Warren Corp., 74 N.Y.2d at 483, 548 N.Y.S.2d at 923, 548 N.E.2d at 206. 52 If the fee term of a purported attorney-client contract cannot be inferred by reference to industry practice, making the contract unenforceable, the attorney is nonetheless entitled to recover the reasonable value of his services. See In re Rosenman & Colin, 850 F.2d at 63; Demov, Morris, Levin & Shein v. Glantz, 53 N.Y.2d 553, 557, 444 N.Y.S.2d 55, 57, 428 N.E.2d 387, 389 (1981); In re Jerly Realty Corp., 42 A.D.2d 994, 994, 348 N.Y.S.2d 572, 574 (2d Dep't 1973). That value is to be determined by the court, and 53 [a] variety of factors informs the court's determination of whether a requested amount of attorneys' fees is reasonable or unreasonable, including 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. 54 F.H. Krear & Co. v. Nineteen Named Trustees, 810 F.2d 1250, 1263 (2d Cir.1987) (quoting In re Estate of Schaich, 55 A.D.2d 914, 914, 391 N.Y.S.2d 135, 136 (2d Dep't), appeal denied, 42 N.Y.2d 802, 397 N.Y.S.2d 1026, 366 N.E.2d 293 (1977)). The reference to the amount involved does not imply that the fee is to be awarded on a contingency basis if the parties have not agreed on such a basis; rather it reflects the principle that the fee to be awarded generally cannot exceed the amount recovered. See F.H. Krear & Co. v. Nineteen Named Trustees, 810 F.2d at 1264. 55 In general, in order to determine what fee would be reasonable, the court uses a 'lodestar' method, in which 'the hours reasonably spent by counsel, as determined by the Court, [are] multiplied by the reasonable hourly rate.'  Id. at 1263 (quoting Zauderer v. Barcellona, 130 Misc.2d 234, 236, 495 N.Y.S.2d 881, 882-83 (Civ.Ct.1985)). [W]here adequate contemporaneous [time] records have not been kept, the court should not award the full amount requested. F.H. Krear & Co. v. Nineteen Named Trustees, 810 F.2d at 1265; see also Potts v. Hines, 144 A.D.2d 189, 189-90, 534 N.Y.S.2d 507, 508 (3d Dep't 1988) (refusing to award any attorney compensation on quantum meruit basis because attorney did not produce time records or work product); In re Estate of Jackson, 120 A.D.2d 309, 315-16, 508 N.Y.S.2d 671, 676 (3d Dep't 1986) (noncontemporaneous record that did not specify services performed or time expended was insufficient to support fee demand), appeal denied, 69 N.Y.2d 608, 514 N.Y.S.2d 1026, 507 N.E.2d 322 (1987). 56 In the present case, since the parties' Fee Agreement stated that Morrissey's hourly rate would be agreed upon at a later date, the Fee Agreement was not on its own terms enforceable. Further, the term of that agreement specifying that a new agreement on rates would be reached if new litigation were commenced was itself an agreement to agree, and hence was unenforceable. Because the court found a steadfast rejection by Monzon of any contingent-fee arrangement, and because there was no proof of industry practice from which a compensation level could be inferred, the court was left to try to supply the fee term of the relationship on a quantum meruit hourly-rate basis. 57 The district court, though noting that it was handicapped by the utter failure of the defendant to maintain appropriate time records, found that Morrissey had reasonably and necessarily performed 1200 hours of services for the plaintiff to be reasonably compensated at $200 an hour for the plaintiff, for a total compensation to Morrissey of $240,000. 782 F.Supp. at 912. It stated that in making this determination, it considered 58 the novelty and difficulty of the questions involved and the skill requisite to perform the legal services properly; the likelihood, if apparent to the client, that the acceptance of the particular employment would preclude other employment by the lawyer; the fee customarily charged in the locality for similar legal services rendered on an hourly basis; the amount involved and the results obtained; the time limitations imposed by the client or by the circumstances; the nature and length of the professional relationship with the client; the experience, standing, reputation and ability of the lawyer or lawyers performing the services; and that the fee arrangement was fixed on a time basis and not a contingent basis. 59 Id. Other than this description, the court did not elaborate on how it arrived at 1,200 hours or at a rate of $200 per hour; and in light of the court's other findings, we have three major difficulties with these numbers. 60 First, the finding that Morrissey spent a total of 1,200 hours on Mar Oil's behalf is unsupported. Mar Oil's expert witness estimated that Morrissey had spent a total of 510 hours on Mar Oil matters from October 27, 1980, through January 26, 1983, plus some 95 hours from January 27, 1983, through June 29, 1983, for a total of 605 hours. The trial court was not, of course, required to accept the Mar Oil expert's 605-hour estimate, any more than it was required to accept Morrissey's claim that he had spent 5,205 hours, and in the abstract, a total of 1,200 hours spread over a period of some three years (i.e., an average of about eight hours a week) would not appear to be an unreasonable estimate of the time Morrissey spent. However, the court did accept Mar Oil's expert's estimate that for the period from October 27, 1980, through January 26, 1983, Morrissey had spent 510 hours for Mar Oil's benefit. Given Morrissey's utter lack of time records, the finding that his services consumed no more than 510 hours in that period cannot be clearly erroneous. But this finding, combined with the court's ruling that Morrissey should be paid for a total of 1,200 hours, means that the court implicitly found that Morrissey spent 690 hours on Mar Oil matters after January 26, 1983. The latter finding strikes us as clearly wrong. The New York action, begun in July 1981, had been dismissed on January 17, 1983, and the numerous political and administrative tactics deployed by Morrissey had preceded that litigation. Notwithstanding that Morrissey was involved in settlement negotiations after the notice of appeal was filed and that he became custodian of the settlement funds and made several approved disbursements from those funds, the court's implicit finding that Morrissey spent more time on Mar Oil matters after the New York action was dismissed than he had prior to and during the action is unsupported and seems so improbable that, on the basis of all the evidence, we are left with the firm conviction that a mistake was made. Since the court made no explicit finding of the number of hours Morrissey spent in service of Mar Oil after January 26, 1983, and its implicit finding was clearly erroneous, and since the record provides no clear quantification of those hours, we remand to the district court for a further finding on this question. 61 Second, we have difficulty with the fee award because the court applied its $200/hour rate to all of the time spent by Morrissey. Application of a judicially calculated reasonable rate to Morrissey's earlier services is clearly wrong in light of the court's other findings. They include the findings (a) that Sr. Mon[z]on had never agreed to any specific hourly rates and clearly none that approached or exceeded $200 per hour, 782 F.Supp. at 905; (b) that Morrissey had charged Mar Oil $61,000 for all of his services through January 26, 1983; and (c) that for those services, Morrissey had billed and been paid at an average rate of approximately $120 an hour, id. at 906. The first finding was supported by Monzon's testimony, and all three findings were supported by the bills Morrissey submitted to Mar Oil, which stated that they were [f]or all services for the stated periods. Though with one of those bills, Morrissey sent a letter stating that the bill was not in fact for all services, he is not entitled to collect additional fees based on his contradiction of the representations he made in the bills themselves, on which he knew Mar Oil would rely. Cf. Shaw v. Manufacturers Hanover Trust Co., 68 N.Y.2d at 177, 507 N.Y.S.2d at 612, 499 N.E.2d at 866 (holding that ambiguous agreement between attorney and client must be construed in the client's favor); Jacobson v. Sassower, 66 N.Y.2d at 993, 499 N.Y.S.2d at 382, 489 N.E.2d at 1284 (same). Based on Mar Oil's rejection of the very first bill, sent in January 1981 and asking for $75,000, Morrissey knew that, without specificity as to time spent, Monzon would not allow the bill to be paid. Statements made by an attorney to a client in such circumstances in order to induce payment of the attorney's bills should generally be binding on the attorney. See generally Prager v. New Jersey Fidelity & Plate Glass Insurance Co., 245 N.Y. 1, 4, 156 N.E. 76 (1927) (holding that an attorney's bills are high evidence as to the maximum value of the attorney's services); Finkelstein v. Kins, 124 A.D.2d 92, 95, 511 N.Y.S.2d 285, 288 (1st Dep't) (holding that attorneys could not recover fees in excess of amount billed), appeal dismissed, 69 N.Y.2d 1023, 517 N.Y.S.2d 910, 511 N.E.2d 54, amended on other grounds, 131 A.D.2d 351, 519 N.Y.S.2d 341 (1st Dep't 1987). 62 In sum, the evidence amply supports the court's findings that Morrissey was to be compensated only on a time-spent basis and that for the period through January 26, 1983, he had billed and been paid for all of his time at a rate of approximately $120 per hour; the finding that he should receive $200 per hour for that period is thus clearly wrong. Morrissey was entitled to have the court determine a reasonable rate that might vary from the previously billed and paid $120/hour rate only for his services after January 26, 1983. 63 Finally, we cannot uphold a determination that even Morrissey's post-January 26, 1983 time should be compensated at a rate as high as $200 per hour. We note that Morrissey's expert witness estimated that for an attorney having the skill, expertise, and sophistication of Morrissey, and having responsibility for, inter alia, strategy and tactics, selection and oversight of other attorneys who would work on Mar Oil's case, use of unique political and diplomatic maneuvers, and management of a substantial amount of money for the client, a reasonable rate would be in the range of $225 to $300 per hour. And though Nicholas J. Healy of Healy & Baillie had testified that when a client insisted on hourly billing, his own hourly rate was $150, Morrissey's expert opined that it would not be unusual for an attorney with Morrissey's attributes and responsibilities to be paid at a higher rate than a partner in a small firm specializing in maritime matters. While in general the evaluation of expert testimony is within the province of the factfinder, and the court here appears to have given some weight to the opinion of Morrissey's expert in finding that a reasonable rate for Morrissey's services was $200 per hour, we conclude that the $200/hour rate could not have been reasonable, for it represented a higher rate than Morrissey himself had sought, see Prager v. New Jersey Fidelity & Plate Glass Insurance Co., 245 N.Y. at 4, 156 N.E. 76 (amount demanded by attorney is highly probative of the maximum value of his services). The court found that Morrissey named a fee of $960,000 ..., representing to Sr. Mon[z]on that he had expended 5,205 hours of time under the retainer. 782 F.Supp. at 905. The fee thus demanded (which included the fees already paid), divided by the number of hours claimed, equals a rate of approximately $185 per hour. When, as here, it is established that the client has not agreed to pay at a rate approaching $200 per hour, and that the amount the attorney has demanded is well under $200 per claimed hour, it is clear error for the court to find that a reasonable fee is as much as $200 per hour. The fact that the court discredited Morrissey's claim as to the number of hours he spent is not a valid basis for awarding him an hourly rate higher than that which his own claim would have produced. In the circumstances, we conclude that the court should not have found reasonable any rate for Morrissey's post-January 26, 1983 services that exceeded $185 per hour. 64 On remand, therefore, the district court should (a) determine how many hours Morrissey spent representing Mar Oil after January 26, 1983, with doubts resolved against Morrissey since he failed to keep time records, (b) determine a reasonable rate for those hours, not to exceed $185 per hour, and (c) give Morrissey credit, at the rate thus determined, for only his post-January 26, 1983 hours. The resulting fee for that period should then be deducted from the amount Morrissey improperly retained from the Mar Oil escrow account, in order to arrive at the principal amount of the new judgment to be entered in favor of Mar Oil.
65 Mar Oil's other challenges to the judgment include the contention that the district court should have awarded it punitive damages, attorneys' fees, and Rule 11 sanctions, and that the court should have awarded prejudgment interest for a longer period. We reject most of these challenges. 66 Under New York law, the imposition of punitive damages is left to the sound discretion of the finder of fact. See Racich v. Celotex Corp., 887 F.2d 393, 397 (2d Cir.1989); Loughry v. Lincoln First Bank, N.A., 67 N.Y.2d 369, 378, 502 N.Y.S.2d 965, 969, 494 N.E.2d 70, 74 (1986). Though this Court perhaps would not have disturbed an award of punitive damages had one been made, we also cannot say that the trial court abused its discretion in denying such damages. 67 Similarly, although the court has the power, upon appropriately specific findings, see, e.g., Dow Chemical Pacific Ltd. v. Rascator Maritime S.A., 782 F.2d 329, 344 (2d Cir.1986), to award the prevailing party attorneys' fees where the other party has conducted an action in bad faith, vexatiously, wantonly, or for oppressive reasons, F.D. Rich Co. v. United States ex rel. Industrial Lumber Co., 417 U.S. 116, 129, 94 S.Ct. 2157, 2165, 40 L.Ed.2d 703 (1974) (footnote omitted), such an award is not required. We will not second-guess the district court's refusal to exercise that power. 68 Nor do we believe the district court abused its discretion, see Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S.Ct. 2447, 2460, 110 L.Ed.2d 359 (1990), in refusing to grant sanctions under Fed.R.Civ.P. 11. Mar Oil contended principally that, prior to filing a pleading alleging that Morrissey had spent more than 5,000 hours on Mar Oil matters or that the parties had modified the Fee Agreement to provide for a contingent fee, Morrissey's attorneys should have investigated and deduced that Morrissey's version of the events was false in light of the documentary evidence. We disagree. Morrissey's billing records surely were inconclusive, since, as discussed above, they did not quantify the time spent. Further, Morrissey's contingent-fee contention did not depend on a modification of the Fee Agreement, for the parties arguably agreed therein to negotiate a new agreement--rather than to modify the existing agreement--prior to the commencement of Mar Oil litigation outside of Spain. Though the Fee Agreement provided that a modification must be in writing, it did not specify that a new agreement would have to be in writing. Hence, the absence of a document reflecting the alleged new agreement did not necessarily contradict Morrissey's version. Nor did the fact that the district court, as the trier of fact, rejected Morrissey's description of the events warrant an award of a Rule 11 sanction. An unfavorable credibility assessment is rarely a sufficient basis for such an award. See, e.g., Healey v. Chelsea Resources, Ltd., 947 F.2d at 625-26 (court may not properly award Rule 11 sanctions against attorney solely because client's trial testimony was not credible unless (a) it was incredible as a matter of law, and (b) the attorney signed a posttrial memorandum espousing his client's position). 69 Finally, Mar Oil contends that the district court's award of prejudgment interest, dating back to February 2, 1984, was insufficient. We agree. New York law, which controls this diversity action, provides that prejudgment interest 70 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. 71 CPLR § 5001(a) (McKinney 1992). The purpose of the mandatory award of interest in property actions is to assure complete indemnification to plaintiffs whose property ha[s] been damaged by the wrongful act of another. 5 J. Weinstein, H. Korn & A. Miller, New York Civil Practice, 5001.05, at 50-18 to 50-19 (1991); see Lewis v. S.L. & E., Inc., 831 F.2d 37, 39 (2d Cir.1987); see also Spector v. Mermelstein, 485 F.2d 474, 481-82 & n. 8 (2d Cir.1973) (prejudgment interest mandatory even on property claim based on an equitable theory of breach of fiduciary duty) (dictum). In order to provide the successful claimant with complete indemnification, prejudgment interest must be awarded from the date of the adjudicated deprivation. 72 The main thrust of Mar Oil's complaint was that Morrissey had deprived Mar Oil of $925,675.38 that belonged to it. Though the trial court's findings did not state the precise date on which the deprivation had taken place, that date was not in dispute. Morrissey's answer to the original complaint in this action stated that Morrissey made the disputed payment to himself on July 11, 1983, and the February 2 Letter on which he has relied throughout the litigation likewise stated that the payment was made on that date. Thus, no finding as to the date on which Morrissey paid himself the $925,675.38 was required. The trial court's finding that the withdrawal was improper sufficed, in the circumstances, to establish that Mar Oil was deprived of its property on July 11, 1983. Accordingly, Mar Oil should have been awarded prejudgment interest on its recovery dating back to that date.