Court Opinion

ID: 4114867
Source: CourtListenerOpinion
Date Created: 2017-01-11 16:00:42.421471+00
Date Added: 2024-06-11T14:37:21.568116
License: Public Domain

16-139(L)-cv
Thor 725 8th Avenue LLC v. Goonetilleke.

                     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 “SUMMARY ORDER”). A PARTY CITING 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 11th day of January, two thousand seventeen.

    PRESENT: RALPH K. WINTER,
             DENNIS JACOBS,
             ROSEMARY S. POOLER,
                           Circuit Judges.

    - - - - - - - - - - - - - - - - - - - -X
    THOR 725 8TH AVENUE LLC,
             Plaintiff-Counter-Defendant-
             Third-Party-Defendant-
             Appellee-Cross-Appellant,

                 -v.-                                               16-139(L)-cv
                                                                    16-212(XAP)
    SHANTHIOA GOONETILLEKE, AKA MARTIN
    GOONETILLEKE, MARIE GOONETILLEKE.
             Defendants-Counter-
             Claimants-Appellants-Cross-
             Appellees,

                 and

    DVD DEPOT INC.,
             Third-Party Plaintiff.

    - - - - - - - - - - - - - - - - - - - -X

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FOR APPELLANT:             THOMAS HOFFMAN, Law Offices of
                           Thomas Hoffman, PC, New York,
                           NY.

FOR APPELLEES:             JOSEPH LEE MATALON, Matalon
                           Shweky Elman PLLC, New York, NY.

     Appeal from the judgment of the United States District
Court for the Southern District of New York (Engelmayer,
J.).

     UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
AND DECREED that the judgment of the district court be
AFFIRMED.

     Shanthioa and Marie Goonetilleke appeal from the
judgment of the United States District Court for the
Southern District of New York (Engelmayer, J.), enforcing on
summary judgment claims against them as guarantors of a
commercial lease entered into by Thor 725 8th Avenue LLC
(“Thor”) and DVD Depot (“DVD”), a company owned by
Shanthioa. We review de novo a district court’s grant of
summary judgment. Demery v. Extenbank Deferred Compensation
Plan (B), 216 F.3d 283, 286 (2d Cir. 2000). The parties
cross-appeal the award of attorneys’ fees to Thor, in an
amount less than Thor requested. We assume the parties’
familiarity with the underlying facts, the procedural
history, and the issues presented for review.

    This case involves several agreements and undertakings:

    •    Under the “Lease,” DVD (the tenant) promised to
         pay rent and property taxes to DVD’s prior
         landlord. Upon default, the landlord could
         terminate the Lease after five days’ notice.

    •    Simultaneously with the Lease, the Goonetillekes
         jointly and severally guaranteed DVD’s full and
         prompt payment (the “Guaranty”). Another clause
         limited the Guaranty if DVD provided sufficient
         notice of an intent to vacate and if DVD in fact
         timely vacated.

    •    Following DVD’s default, the ensuing state court
         litigation was settled by: a “Stipulation” that
         DVD and the Goonetillekes would continue to be

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         responsible for rent and that DVD would retain
         occupancy; and an “Addendum” that reduced the rent
         and eliminated DVD’s responsibility to pay
         property taxes on condition, however, that if DVD
         defaulted, the higher rent and taxes of the
         original Lease would be reinstated.

    •    After Thor bought the premises in September 2013,
         it agreed in writing with DVD and the
         Goonetillekes that the Lease, the Stipulation, and
         the Addendum constituted the parties’ entire
         agreement, that the Guaranty remained in effect,
         and that the Goonetillekes could escape personal
         liability as guarantors on conditions discussed
         below.

     DVD missed its rent payment in November 2013 and made
only partial payments over the following months. Thor
served default notices on DVD in January and early April
2014, and on April 24, gave written notice of termination,
effective May 7, 2014. By letter on May 8, DVD purported to
exercise its right under the Occupancy Agreement to give
notice that it would vacate within sixty days, setting July
7, 2014 as the date of vacatur. DVD concedes that it did
not vacate until July 14. By then, DVD owed slightly more
than $400,000 in back rent.

     Thor brought this action on July 2, 2014, seeking more
than $2 million from the Goonetillekes as guarantors:
approximately $400,000 in rent arrears plus the difference
between DVD’s original rental rate and the reduced rent
granted to DVD by the Addendum (approximately $750,000) and
nearly $900,000 in tax payments for which DVD was
responsible under the original Lease, but for which the
landlord had conditionally taken responsibility pursuant to
the Addendum. The district court granted summary judgment
for Thor, awarding all of the requested sums.

     1. The Goonetillekes invoke the provision of the
Amendment that absolves them if DVD “actually, voluntarily,
and timely vacate[s] the Premises, without execution of a
warrant or use of self-help, and otherwise in accordance
with the Occupancy Agreement.” App’x, at 236.

     However, as the district court concluded, DVD did not
timely vacate the premises. So Thor may seek recovery

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against the Goonetillekes.1 The Occupancy Agreement
contemplates specific deadlines by which the premises must
be vacated. When a landlord-tenant agreement requires
“timely” vacatur and also sets a deadline by which the
tenant must leave the premises, New York law takes the
position that vacatur is “timely” only if the tenant leaves
the premises prior to the contractual deadline. See, e.g.,
Corona Grill Corp. v. 1029 Sixth, LLC, 11 A.D.3d 282, 283
(1st Dep’t 2004); Fed. Realty Ltd. P’ship v. Choices Women’s
Med. Ctr., 289 A.D.2d 439, 440 (2d Dep’t 2001). Although
the parties dispute whether the deadline was May 7 or July
7, DVD failed to meet either deadline.

     2. The Goonetillekes argue that any breach was of the
“inconsequential” kind that equity should forgive to avoid
an inequitable forfeiture. Appellant’s Opening Br., at 33.
However, it is difficult to see the relief granted as an
extreme “penalty.” Thor sought and received rent arrears at
the original rent rate for the actual period of occupancy
(without acceleration), and the property tax payments that
were conditionally forgone.

     DVD’s breach was not trivial or inconsequential. “A
covenant to pay rent at a specified time . . . is an
essential part of the bargain.” Fifty States Mgt. Corp. v.
Pioneer Auto Parks, 46 N.Y.2d 573, 578 (N.Y. 1979). There
is no inequity in holding DVD to “the contracted-for
financial consequence of the tenant[‘s] own failure to do
that which [it] promised to do.” 1029 Sixth, LLC v. Riniv
Corp., 9 A.D.3d 142, 150 (1st Dep’t 2004).

     Nor is it inequitable to require the Goonetillekes to
pay the debts of their company. The Goonetillekes
originally promised to do so, and they could have escaped
liability if they met certain requirements--such as timely
vacatur--which they failed to satisfy.

     3. The parties dispute various aspects of the
attorneys’ fee award. “We afford a district court
considerable discretion in determining what constitutes
reasonable attorney’s fees in a given case, mindful of the
court’s ‘superior understanding of the litigation and the

    1
       Given this conclusion, we need not reach the
district court’s findings that the Goonetillekes failed to
satisfy additional contractual requirements.
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desirability of avoiding frequent appellate review of what
essentially are factual matters.’” Barfield v. N.Y.C.
Health & Hosps. Corp., 537 F.3d 132, 151 (2d Cir. 2008)
(quoting Hensley v. Eckerhart, 461 U.S. 424, 437 (1983)).

     a. The Goonetillekes argue that the district court
should have declined to award any fees. In New York,
attorneys’ fees should be awarded only when the parties’
agreement manifests an “unmistakably clear” intention to
allow for fee-shifting. Hooper Assocs., Ltd. v. AGS
Computers, 74 N.Y.2d 487, 492 (N.Y. 1989). Here, the
parties’ intention to provide for fee-shifting is
unmistakably clear. The Lease states that “[DVD] shall . .
. pay all costs, expenses and attorneys’ fees which may be
incurred or paid by Landlord in enforcing the covenants and
agreements of this Lease.” App’x, at 207. DVD’s liability
in turn falls upon the Goonetillekes, who promised to make
“full and prompt payment of all amounts payable by [DVD].”
App’x, at 217.

     b. The parties dispute the amount of attorneys’ fees
awarded.

     First, Thor’s cross-appeal challenges the cut in its
hourly rate. Thor argues chiefly that the district court
improperly relied on law firm size. As Thor concedes, a
district court “may consider the size of a firm” in awarding
fees. Appellee’s Reply Br., at 3; see Chambless v. Masters,
Mates & Pilots Pension Plan, 885 F.2d 1053, 1059 (2d Cir.
1989) (suggesting that the fee award properly relied on firm
size). But Thor argues that the district court improperly
used “the single factor of firm size [to] dictate the
compensable rate.” Appellee’s Reply Br., at 3. However,
the district court considered many additional factors,
including the experience of the assigned attorneys and
paralegals, the amount of discovery, and the lawsuit’s
complexity. Regarding the last factor, the court found that
the case “did not implicate exceptionally challenging
questions of law or fact,” and that “this case is not one in
which higher than ordinary rates are warranted.” App’x, at
662-63. We find no abuse of discretion in the billing rate
reduction.

     Thor also argues that the district court should have
granted “fees on fees,” that is, fees for the preparation of
the motion requesting fees. The district court relied on
the principle that, under New York law, “a general contract

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provision for the shifting of attorneys’ fees does not
authorize an award of fees for time spent in seeking the
fees themselves.” F.H. Krear & Co. v. Nineteen Named
Trustees, 810 F.2d 1250, 1266 (2d Cir. 1987). An award of
“fees on fees” requires “specific language to indicate that
time spent in justifying a fee application was to be
included.” Id. at 1267.

     Thor does not identify such “specific language”
allowing “fees on fees.” Instead, Thor argues that F.H.
Krear was wrongly decided and we should decline to follow
it. Panels of this Court are “ordinarily bound by prior
panel decisions.” Zervos v. Verizon N.Y., Inc., 252 F.3d
163, 171 (2d Cir. 2001). Although Thor contends that the
“modern trend” of lower- and intermediate-level New York
state courts is to allow “fees on fees,” Appellee’s Opening
Br., at 62, the only cases cited to illustrate such a trend
are cases dealing with fee-shifting authorized by statute,
rather than by contract. Therefore, there is no basis for
disturbing F.H. Krear. The district court correctly denied
Thor’s request for “fees on fees.”

     For the foregoing reasons, we hereby AFFIRM the
judgment of the district court.

                           FOR THE COURT:
                           CATHERINE O’HAGAN WOLFE, CLERK

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