Bobrow Palumbo Sales, Inc. v. Broan-Nutone, LLC

Citation549 F.Supp.2d 274
Decision Date30 April 2008
Docket NumberNo. CV 04-5334(ETB).,CV 04-5334(ETB).
PartiesBOBROW PALUMBO SALES, INCORPORATED, Plaintiff, v. BROAN-NUTONE, LLC, Defendant.
CourtUnited States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)

Bernard H. Vogel, Seavey Vogel & Associates, LLP, Jericho, NY, for Plaintiff.

Patrick Joseph Perrone, Kirkpatrick & Lockhart, Newark, NJ, Stephen T. Jacobs, Reinhart Boerner Van Deuren, S.C., Milwaukee, WI, for Defendant.

MEMORANDUM OPINION, ORDER

E. THOMAS BOYLE, United States Magistrate Judge.

Before the Court is the application of defendant, Broan-Nutone, LLC ("Broan"), for attorney's fees and costs in the amount of $151,992.28. Plaintiff, Bobrow Palumbo Sales, Inc. ("Bobrow Palumbo"), opposes defendant's application, asserting that the requested fee award should be reduced, in an amount determined by the Court, on the grounds that the attorney's fees submitted by defendant are excessive, the billing entries are vague and duplicative, and the costs are unwarranted. For the reasons that follow, defendant is awarded attorney's fees and costs in the amount of $114,905.02.

FACTS

Familiarity with the facts of this action is presumed. Following a bench trial held on June 12 and 13, 2007, by Memorandum Opinion and Order, dated January 4, 2008, I found in favor of defendant, dismissing plaintiffs complaint in its entirety. I further found that, pursuant to the indemnification clause contained in the parties' written Manufacturer's Representative Agreement, dated February 8, 1999 (the "Agreement"), Broan is entitled to reimbursement of the attorney's fees and costs it incurred in this action, the amount of which is determined below.

DISCUSSION
I. The Indemnification Agreement

Article IX, Section 9.5 of the Agreement between the parties, which is entitled "Indemnification," states as follows:

Representative [Bobrow Palumbo] agrees to hold harmless and indemnify Broan and assume all liability, including but not limited to all actual attorney fees, actual costs, disbursements, damages, penalties and any other expense associated with actual or threatening litigation, arising directly or indirectly, either from Representative's breach of any obligation imposed or sought to be imposed by or pursuant to this Agreement.

(Ex. 2, Art. IX, § 9.5.)

As stated in the Memorandum Opinion and Order of January 4, 2008, 2008 WL 1902115, the Agreement at issue in the within action specifies that it is to be governed by Wisconsin law. (Mem. Opin. & Order, Boyle J., dated Jan. 4, 2008, 26.) When applying the terms of a contract, Wisconsin courts attempt to "ascertain the true intention of the parties," Kraemer Bros., Inc. v. United States Fire Ins. Co., 89 Wis.2d 555, 278 N.W.2d 857, 860 (1979), and interpret the contract according to the plain meaning of its terms, so long as it is unambiguous. Id. Under Wisconsin law, "a contract is ambiguous when its terms are reasonably or fairly susceptible of more than one construction." Borchardt v. Wilk, 156 Wis.2d 420, 456 N.W.2d 653, 656 (Ct.App.1990) (citing Just v. Land Reclamation, Ltd., 151 Wis.2d 593, 445 N.W.2d 683, 686 (Ct.App.1989)).

Here, the indemnification provision of the Agreement specifically provides that plaintiff reimburse Broan for "all actual attorney fees" as well as all "actual costs [and] disbursements." (Ex. 2, Art. IX, § 9.5.) Construing the plain meaning of the terms used in the Agreement, it appears that Broan is entitled to the full amount of attorney's fees and costs it incurred during the course of the within litigation — $151,992.28. Plaintiff, however, challenges such an award on the grounds of reasonableness and requests that the Court reduce the award accordingly.1

A review of Wisconsin case law offers little guidance concerning indemnification provisions that specify the reimbursement of actual attorney's fees as opposed to reasonable fees. In HK Systems, Inc. v. Admiral Insurance Company, No. 03-C-0795, 2005 WL 1563340, at *1, *3, *17, 2005 U.S. Dist. LEXIS 39939, at *1, *8, *52 (E.D. Wis. June 24, 2005), the Eastern District of Wisconsin determined whether an insurer, who was obligated to defend its insured and "pay those sums that the insured becomes legally obligated to pay," pursuant to the policy in place between the parties, was required to pay all of the legal fees charged to the insured by its chosen attorney or whether there was instead a "`reasonableness' cap" in place. Noting that there was no Wisconsin case directly on point, the court relied on a Wisconsin Court of Appeals case in which an insurer breached its duty to defend and the court therein "stated in passing that the insured was `entitled to actual attorney's fees,' ... but nevertheless reviewed the attorney's fees for reasonableness." Id. (citing Patrick v. Head of the Lakes Coop. Elec. Ass'n, 98 Wis.2d 66, 72-73, 295 N.W.2d 205 (Ct.App.1980)). Relying on the Wisconsin Court of Appeals case as well as secondary sources, the court in HK Systems went on to hold that insurers who are obligated to indemnify their insured "should be required to pay only reasonable fees incurred." HK Sys., 2005 WL 1563340, at *17-18, 2005 U.S. Dist. LEXIS 39939, at *53.

Although not directly on point, an analogy can be drawn between HK Systems and the within action because both involve indemnification agreements for actual costs incurred. Accordingly, it appears that under Wisconsin law, although the indemnification agreement provides for the recovery of actual attorney's fees, such fees are also reviewed by the Court for reasonableness.2

Moreover, under New York law, where "a contract provides for shifting of the actual attorney[']s fees expended by the prevailing party, `the court will order the losing party to pay whatever amounts have been expended ... so long as those amounts are not unreasonable.'" Wells Fargo Bank N.W., N.A. v. Taca Int'l Airlines, S.A, 315 F.Supp.2d 347, 353 (S.D.N.Y.2003) (quoting F.H. Krear & Co. v. Nineteen Named Trustees, 810 F.2d 1250, 1263 (2d Cir.1987)). This rule applies to contracts for indemnification as well. See, e.g., Rostolder v. Life Energy & Tech. Holdings, Inc., No. 03-CV-3375, 2006 U.S. Dist. LEXIS 67649, at *6-7 (E.D.N.Y. Sept. 20, 2006) ("Nevertheless, a court should award only the amount of attorneys' fees that are reasonable, even where an agreement provides for indemnification.") (citing cases); Toporoff Eng'rs, P.C. v. Fireman's Fund Ins. Co., No. 00-CIV-5963, 2006 WL 1539341, at *2, 2006 U.S. Dist. LEXIS 36330, at *7 (S.D.N.Y. June 5, 2006) ("Although the Indemnity Agreement clearly states that the Indemnitors are liable for [all] `attorneys fees and other expenses' those fees must be reasonable in nature."); Clarendon Nat'l Ins. Co. v. GWTA Ins. Servs., Inc., No. 00 Civ. 5620, 2002 U.S. Dist. LEXIS 18817, at *16-17 (S.D.N.Y. Aug. 1, 2002) (finding that where the parties' agreement provided for indemnification of "all ... costs or expenses, including without limitation, attorneys' fees," the court "must order the losing party to pay the amounts actually incurred by the prevailing party, `so long as those amounts are not unreasonable.'") (quoting F.H. Krear & Co., 810 F.2d at 1263); Am. Motorists Ins. Co. v. United Furnace Co., Inc., No. 88 Civ. 1238, 1990 WL 9321, at *1, *2, 1990 U.S. Dist. LEXIS 768, at *3, *5 (S.D.N.Y. Jan. 29, 1990) (addressing the reasonableness of the attorney's fees sought where indemnity agreement provided for the indemnification of "any and all liability ... expense, cost and attorneys' fees" and stating that "[t]he Court cannot simply accept [a party's] fee application without review"). The rationale behind this rule is that "[b]ecause a fee-shifting clause can produce perverse incentives for a litigant ... courts must scrutinize fee requests to ascertain whether they are reasonable." Diamond D. Enters. USA Inc. v. Steinsvaag, 979 F.2d 14, 19 (2d Cir.1992) (citations omitted); see also Kleinberg v. Radian Group, Inc., No. 01 Civ. 9295, 2003 WL 22420501, at *4, 2003 U.S. Dist. LEXIS 18902, at *10-11 (S.D.N.Y. Oct. 24, 2003) (stating that "a provision for attorney's fees that requires a victorious party to pay the attorney's fees of the losing party" must be "strictly construed" because "such an arrangement creates an incentive to engage in litigation that might not have otherwise been brought — or that might have been conducted differently — had the losing party been forced to bear the risk of paying its own fees").

When determining the amount of reasonable attorney's fees to be awarded, Wisconsin courts, like the Second Circuit employ the "lodestar method." See Anderson v. MSI Preferred Ins. Co., 281 Wis.2d 66, 697 N.W.2d 73, 85 (2005) (stating that the Wisconsin Supreme Court has "adopted the lodestar approach for determining reasonable attorney fees") (citation omitted); Kolupar v. Wilde Pontiac Cadillac, Inc., 275 Wis.2d 1, 683 N.W.2d 58, 67 (2004) (adopting the "lodestar methodology" set forth in Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983) and "direct[ing] the circuit courts [of Wisconsin] to follow its logic when explaining how a fee award has been determined"). Under Wisconsin law, "the burden of proof is upon the attorney submitting the fees to prove the reasonableness of a fee when it is questioned." Standard Theatres, Inc. v. DOT, 118 Wis.2d 730, 349 N.W.2d 661, 671 (1984) (citation omitted).

II. The Lodestar Method

"The most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate." Hensley v. Eckerhart, 461 U.S. 424, 435, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983). This calculation is commonly referred to as the "lodestar" figure,3 see, e.g., Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 478 U.S. 546, 563, 106 S.Ct. 3088, 92 L.Ed.2d 439 (1986); LeBlanc-Sternberg v. Fletcher, 143 F.3d 748, 764 (2d Cir.1998), and "provides an objective basis on...

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