Court Opinion

ID: 4451421
Source: CourtListenerOpinion
Date Created: 2019-10-30 15:00:18.944383+00
Date Added: 2024-06-11T14:53:18.624350
License: Public Domain

18‐2672
Safeco Insurance Co. v. M.E.S., Inc.
                              UNITED STATES COURT OF APPEALS
                                  FOR THE SECOND CIRCUIT

                                         SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT.
CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS
PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A
SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE
(WITH THE NOTATION ASUMMARY ORDER@). A PARTY CITING TO A
SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT
REPRESENTED BY COUNSEL.

      At a stated term of the United States Court of Appeals for the Second Circuit,
held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the
City of New York, on the 30th day of October, two thousand nineteen.

         PRESENT: BARRINGTON D. PARKER,
                          RAYMOND J. LOHIER, JR.,
                          RICHARD J. SULLIVAN,
                                  Circuit Judges.
         ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐
         SAFECO INSURANCE COMPANY
         OF AMERICA,

                          Plaintiff‐Counter‐Defendant‐Appellee,

                    v.                                                        No. 18‐2672‐cv

         M.E.S., INC., M.C.E.S., INC., GEORGE
         MAKHOUL,

                          Defendants‐Counter‐Claimants‐Appellants.

         ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐


    The Clerk of Court is directed to amend the caption as set forth above.
      FOR APPELLANTS:                                 MICHAEL CONFUSIONE,
                                                      Hegge & Confusione, LLC,
                                                      Mullica Hill, NJ.

      FOR APPELLEE:                                   VIVIAN KATSANTONIS,
                                                      Watt Tieder Hoffar &
                                                      Fitzgerald, LLP, McLean, VA.

      Appeal from a judgment of the United States District Court for the Eastern

District of New York (Pamela K. Chen, Judge).

      UPON      DUE     CONSIDERATION,           IT     IS   HEREBY     ORDERED,

ADJUDGED, AND DECREED that the judgment of the district court is

AFFIRMED.

      M.E.S., Inc., M.C.E.S., Inc., and George Makhoul (collectively, “MES”)

appeal from a judgment of the district court (Chen, J.) awarding Safeco Insurance

Company of America (“Safeco”) $13,887,076.64 in damages under two Indemnity

Agreements. On appeal, MES argues that the district court (1) clearly erred in

awarding Safeco $3,376,387.02 for construction completion damages; and

(2) clearly erred and abused its discretion in awarding Safeco $5,570,500.62 in legal

costs and fees. Because MES is unable to establish that the court erred – let alone

clearly erred – in calculating the amount of damages awarded to Safeco, we affirm.

                                         2
We assume the parties’ familiarity with the underlying facts, procedural history,

and issues on appeal, to which we refer only as necessary to explain our decision

to affirm.

                                          I.

      MES contends that the construction completion costs awarded by the

district court “were not ‘reasonable in amount’ as required by New York

indemnity law,” and that the court committed “clear error by disregarding the

evidence presented” by MES. Appellant’s Opening Br. at 9.

      “The question of ‘the amount of recoverable damages is a question of fact’”

that we review for clear error. Bessemer Tr. Co., N.A. v. Branin, 618 F.3d 76, 85 (2d

Cir. 2010) (quoting Lucente v. IBM Corp., 310 F.3d 243, 261 (2d Cir. 2002)). In

performing a clear error analysis, “[w]e will not upset a factual finding unless we

are left with the definite and firm conviction that a mistake has been committed.”

Id. (quoting White v. White Rose Food, 237 F.3d 174, 178 (2d Cir. 2001)).

      “New     York    courts   have   held    that   pursuant   to   an    indemnity

agreement . . . ‘the surety is entitled to indemnification upon proof of payment,

unless payment was . . . unreasonable in amount . . . .’” Lee v. T.F. DeMilo Corp., 29

                                          3
A.D.3d 867, 868 (N.Y. App. Div. 2006) (quoting Frontier Ins. Co. v. Renewal Arts

Contracting Corp., 12 A.D.3d 891, 892 (N.Y. App. Div. 2004)).

       MES repeatedly asserts that “[t]he only evidence that was presented”

regarding      the   reasonableness   of   construction   completion   costs   “came

from . . . MES’ principal, Mr. Makhoul.” E.g., Appellant’s Opening Br. at 15, 18. It

charges that Makhoul’s testimony – which consisted of audits detailing MES’s

costs and statements by MES informing Safeco of its belief that the replacement

construction company’s costs were exorbitant and its profit margin too high –

demonstrates that the fees Safeco paid to complete two of the construction projects

were “exorbitant.” Id. at 14. We disagree.

      First, the district court appropriately determined that MES failed to present

competent evidence to establish that Safeco’s expenditures were unreasonable.

Safeco Ins. Co. of Am. v. M.E.S., Inc., No. 09‐cv‐3312, 2018 WL 2766139, at *21

(E.D.N.Y. June 8, 2018). Instead, the court found MES to have relied upon pure

speculation,     including   Makhoul’s     unsubstantiated,   conclusory   assertions

regarding the reasonableness of Safeco’s expenditures. Id.

      Second, MES is incorrect that Safeco presented no evidence to establish the

                                           4
reasonableness of its expenditures. Safeco proffered multiple sworn itemized

statements of loss. Under the terms of the Indemnity Agreements, these, by

themselves, constitute prima facie evidence establishing MES’s liability.         In

addition, the court heard testimony at the quantum hearing from Safeco’s claim

representative, John O’Donnell, regarding the reasonableness of Safeco’s itemized

expenditures. MES, by relying on speculative and conclusory assertions, failed to

rebut this prima facie evidence or raise a triable issue of fact as to the

reasonableness of Safeco’s expenditures.

      Accordingly, MES fails to establish that the district court clearly erred in

calculating the amount of construction completion damages to award Safeco. We

affirm the district court’s award to Safeco of $3,376,387.02 in construction

completion damages.

                                         II.

      MES next maintains that the district court’s legal costs and fees award was

clear error and an abuse of discretion because the court disregarded MES’s

objections to the reasonableness of Safeco’s fees and refused to credit the testimony

of MES’s experts.

                                         5
        “Our review of an award of attorneys’ fees is highly deferential to the

district court and we will reverse such an award only for an abuse of discretion.”

Townsend v. Benjamin Enters., Inc., 679 F.3d 41, 58 (2d Cir. 2012) (internal quotation

marks and citation omitted). “Where a district court has awarded attorneys’ fees

under a valid contractual authorization, we recognize that it has broad discretion

in doing so . . . .” U.S. Fid. & Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d 34, 74 (2d

Cir. 2004).

        The party seeking reimbursement of attorneys’ fees “bears the burden of

establishing entitlement to an award and documenting the appropriate hours

expended and hourly rates.” Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). The

party    “must    document       the   application    with    contemporaneous        time

records . . . specify[ing], for each attorney [and legal assistant], the date, the hours

expended, and the nature of the work done.” N.Y. State Ass’n for Retarded Children,

Inc. v. Carey, 711 F.2d 1136, 1148 (2d Cir. 1983).

        “[T]he lodestar – the product of a reasonable hourly rate and the reasonable

number of hours required by the case – creates a ‘presumptively reasonable fee.’”

Millea v. Metro‐North R.R. Co., 658 F.3d 154, 166 (2d Cir. 2011) (quoting Arbor Hill

                                            6
Concerned Citizens Neighborhood Ass’n v. County of Albany, 522 F.3d 182, 193 (2d Cir.

2008)). The district court must then adjust the lodestar amount – “determining

what a reasonable, paying client would be willing to pay” – “based on case‐specific

considerations.” Arbor Hill, 522 F.3d at 184, 186.

      “We do not require that the court set forth item‐by‐item findings concerning

what may be countless objections to individual billing items.” Lunday v. City of

Albany, 42 F.3d 131, 134 (2d Cir. 1994). Though vague descriptions of work and

block billing may impede a district court’s ability to meaningfully assess the

reasonableness of hours spent and costs incurred, thereby justifying an across‐the‐

board reduction, these billing practices are “permissible so long as the records

allow the court to conduct” that meaningful review. Restivo v. Hessemann, 846 F.3d
547, 591 (2d Cir. 2017).

      Here, the district court determined that “the [Indemnity] Agreements

plainly entitle[d] Safeco to reasonable attorneys’ fees, including those incurred in

enforcing the Agreements,” resulting from Safeco’s issuance of the payment surety

bonds to MES. Safeco Ins. Co., 2018 WL 2766139, at *8. Furthermore, the court

found that “[u]nder the terms of the Agreements, Safeco’s itemized statements of

                                         7
loss me[t] its prima facie burden of establishing its entitlement to attorneys’ fees

and costs.” Id. at *9. The court held a two‐day quantum hearing to determine the

amount of attorneys’ fees Safeco was entitled to recover and issued a

comprehensive memorandum and order justifying its award to Safeco of

$5,570,500.62.

      MES attacks the district court’s award of legal costs to Safeco, but each of

MES’s claims suffers from the same fatal defect. None of the supposed billing

deficiencies prevented the court from meaningfully assessing the reasonableness

of the fees and hours Safeco’s counsel billed. The court “reject[ed] the defense

experts’ conclusions that a fee reduction [was] warranted based on . . . allegedly

deficient billing practices . . . , such as vague entries, billing for simple clerical

tasks, general overstaffing, duplicative billing, and block‐billing, or on Safeco’s

alleged failure to contain its litigation expenses.” Id. at *13. The court also

explained that “[t]o the extent Safeco’s counsel’s fee records were not perfectly

maintained, the Court does not find that the deficient entries were excessive or

that they impair[ed] the Court’s ability to assess the reasonableness of the fees and

hours billed by Safeco’s counsel, especially given the Court’s extensive familiarity

                                          8
with the indemnity litigation.” Id.

      Although MES relies extensively on the testimony of Defendants’ expert

witnesses, Tasher and Johnson, the district court explicitly rejected and discredited

that testimony. MES essentially asks the Court to reassess the experts’ credibility

and to analyze the evidence de novo, rejecting the district court’s factual findings

in favor of MES’s contrary interpretation of the evidence. However, MES’s mere

disagreement with the district court’s credibility determinations and factual

findings provides no basis for this Court to disturb the district court’s decision.

See Diesel Props S.r.l. v. Greystone Bus. Credit II LLC, 631 F.3d 42, 52 (2d Cir. 2011).

      Accordingly, MES fails to demonstrate that the district court clearly erred or

abused its discretion, and therefore we affirm the district court’s award to Safeco

of $5,570,500.62 in legal costs and fees damages.

                                           III.

      We have considered MES’s remaining contentions and conclude that they

are without merit. For the foregoing reasons, the judgment of the district court is

AFFIRMED.

                                            9
      Safeco’s motion for monetary sanctions – “specifically attorneys’ fees and

double costs incurred in defense of this . . . appeal,” Doc. No. 88 at 1 – is DENIED.

Though we affirm the district court, which properly noted that “Defendants’

contumacious refusal to object lawful court orders” and “history of re‐litigating

every issue in this case” “ratchet[ed] up the fees that were necessarily incurred” in

the litigation, Safeco Ins. Co., 2018 WL 2766139, at *15, *22, we do not conclude that

MES’s appeal “is totally lacking in merit, framed with no relevant supporting law,

conclusory in nature, and utterly unsupported by the evidence.” United States v.

Potamkin Cadillac Corp., 689 F.2d 379, 381 (2d Cir. 1982).

                                       FOR THE COURT:
                                       Catherine O=Hagan Wolfe, Clerk of Court

                                         10