Kleinberg v. Radian Group, Inc.
| Decision Date | 24 October 2003 |
| Docket Number | No. 01 Civ. 9295 (RMB)(GWG).,01 Civ. 9295 (RMB)(GWG). |
| Parties | BRIAN KLEINBERG, Plaintiff, v. RADIAN GROUP, INC. and ENHANCE FINANCIAL SERVICES GROUP, INC., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Kenneth W. Taber, Mary K. Pelz Tomback, Pillsbury Winthrop LLP, One Battery Park Plaza, New York.
John J. Kuster, D.A. Jeremy Telman, Sidley, Austin, Brown & Wood LLP, New York.
REPORT AND RECOMMENDATION
On October 30, 2002, this Court issued a Report and Recommendation recommending that the defendants' motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) be granted in part and denied in part. See Kleinberg v. Radian Group, Inc., 2002 WL 31422884 (S.D.N.Y. Oct. 29, 2002) ("R&R"). The Report and Recommendation was thereafter adopted by the District Court in Kleinberg v. Radian Group, Inc., 240 F. Supp. 2d 260 (S.D.N.Y 2002).
Plaintiff Brian Kleinberg has now made an application for attorney's fees. Defendants Radian Group, Inc. and Enhance Financial Services Group, Inc. ("Enhance") have opposed the application. For the reasons stated below, plaintiff's motion for fees should be denied.
The facts underlying this dispute are fully set forth in the two Kleinberg decisions. In brief, Kleinberg was hired in January 1999 to serve as Executive Vice President of Enhance and as Chief Executive Officer of Singer Asset Finance Company, LLC ("Singer"), a wholly owned subsidiary of Enhance. See Second Amended Complaint, filed June 21, 2002 (Docket #23) ("Complaint"), ¶¶ 12, 18. The specific terms of his employment were embodied in a letter agreement, which provided, inter alia, that his compensation would include an "annual target bonus for calendar periods of not less than 50% of then base salary." Letter from Elaine Eisenman to Brian Kleinberg, dated January 4, 1999 ("Employment Letter") (annexed as Ex. B to Complaint), at 1.
Thereafter, Kleinberg and Enhance entered into a "golden parachute" agreement in order to provide Kleinberg with certain severance benefits in the event of a change-in-control at Enhance. Complaint ¶¶ 19-21; see Second Amended and Restated Change-in-Control Protection Agreement, dated March 23, 2000 ("Agreement") . In relevant part, the Agreement provided that if a "Termination Event" occurred within two years after a change-in-control at Enhance, Kleinberg would be entitled to a lump-sum payment that included three times his "Annual Cash Compensation" plus a pro-rated bonus. The bonus was to be calculated as follows:
[T]he greater of (i) the Adjusted Bonus paid [Kleinberg] in respect of the calendar year immediately preceding the Date of Termination, [or] (ii) the Adjusted Bonus paid [Kleinberg] in the year preceding the calendar year in which the Change in Control Date occurs . . . pro-rated over the period beginning January 1 in the year in which the Notice of Termination is given and ending on the Date of Termination.
Id. § I.1. The "Adjusted Bonus" was defined as Kleinberg's "actually paid or actual target bonus (as applicable) for the relevant prior period." Id. § X.2.
On its face, the Agreement contemplated only a change-in-control at Enhance and not a change-in-control at Enhance's subsidiary, Singer. Because Kleinberg wanted the Agreement to apply to a change-in-control at either entity, Kleinberg allegedly sought and received verbal assurances from the then-President of Enhance that Kleinberg would be protected "in the event of a change-in-control at Singer, in the same manner, and to the same extent, as if there were a change-in-control at Enhance." Complaint ¶¶ 23-24.
Kleinberg resigned from Enhance and Singer in December 2000. See Letter from Brian Kleinberg to Elaine Eisenman, dated December 29, 2000 (annexed as Ex. E to Complaint). It was undisputed that his resignation constituted a "Termination Event" under the Agreement. Agreement § X.12, 17. Following the terms of the Agreement, the defendants calculated the bonus based not on Kleinberg's bonus in the year preceding the change-in-control at Singer, which took place in 2000, but rather on his bonus in the year preceding the change-in-control at Enhance, which took place in 2001. Complaint ¶ 55. Kleinberg's severance compensation package totaled more than $2.7 million. See Withholding Statement, dated April 2, 2001 (annexed as Ex. C to Complaint). Kleinberg's attorney contacted defendants in July 2001 and told them of the claimed "miscalculation of the monies due Mr. Kleinberg pursuant to the Agreement, [which resulted] in an underpayment . . . of approximately $437,500." Letter from Kenneth W. Taber to C. Robert Quint, dated July 5, 2001 (annexed as Ex B. to Affidavit of Kenneth W. Taber, dated March 10, 2003 (Docket #45)). The alleged miscalculation is based on Kleinberg's contention that the date of the change-in-control at Singer — not Enhance — should have been used to calculate his severance bonus. Id.; see Complaint ¶ 55.
In addition to the bonus just discussed, the Agreement separately required the defendants to make certain "Tax Reimbursement Payments" either directly to Kleinberg or into a "rabbi trust" for his benefit. Agreement § 1.5; see Complaint ¶ 57.
In this action, Kleinberg advanced three main causes of action. First, he alleged breach of the Agreement by claiming that defendants improperly used the change-in-control at Enhance as opposed to the change-in-control at Singer to calculate his bonus and failed to make the tax reimbursement payments into the "rabbi trust." See Complaint ¶¶ 62-67. Next, Kleinberg claimed that defendants breached the Employment Letter by, inter alia, failing to set a target bonus, see Employment Letter at 1. See Complaint ¶¶ 68-73. Third, he advanced a claim for promissory estoppel based on the alleged oral promises that the Agreement would apply to a change-in-control at Singer, not just at Enhance. See id. ¶¶ 74-80.
As reflected in the R&R and the Opinion subsequently adopting it, the Court granted the defendants' motion to dismiss all three of these claims. It held that Kleinberg's claim for the breach of the Agreement had to fail because the Agreement was clear on its face that it applied to a change-in-control at Enhance and not to a change-in-control at Singer. R&R at *4-*5. The Court rejected any effort to introduce parol evidence to alter the explicit terms of the Agreement. Id. at *5. The Court held that there was no basis for requiring the defendants to set a "target bonus" since it would make no difference to the calculation of his severance. Id. at *5-*6. The Court also held that Kleinberg was not entitled to any additional payments with respect to the tax reimbursement payment provision. Id. at *6-*8.
Next, the Court rejected Kleinberg's second claim alleging breach of the Employment Letter. The Court held that the only breach claimed by Kleinberg in his opposition to the motion to dismiss — the failure to set a "target bonus," see Pl. 12(b)(6) Opp. at 19-21 — would afford him no relief anyway because even if it were set now, his bonus would remain unchanged under the Agreement. Id. at *9.
With respect to the claim for promissory estoppel, the Court held that, assuming arguendo that such a claim was permissible under New York law, Kleinberg could not have reasonably relied on any extra-contractual promises due to the existence of the written Agreement that contained a clause stating unequivocally that the Agreement could not be modified except in writing. Id. at *9-*11.
Kleinberg's complaint also sought a declaratory judgment that he was, inter alia, entitled to his attorney's fees as provided by Section V of the Agreement. Complaint ¶¶ 81-84. The pertinent portion of Section V provides:
The Company shall pay all reasonable attorney fees and expenses incurred by the Executive in connection with, but not limited to, a bona fide dispute regarding the application of any and all the provisions under this Agreement, [or] the Executive's seeking to obtain or enforce any right or benefit provided under this Agreement. . . . Payment under this Section V shall be made within ten business days after delivery of the Executive's written request for payment accompanied by such evidence of fees and expenses incurred as the Company reasonably may require.
Agreement § V. The Court denied the defendants' motion to dismiss this portion of the complaint on the ground that Kleinberg's claims were not "bona fide" or "reasonable." R&R at *11; see also Kleinberg, 240 F. Supp. 2d at 263 ().
Discovery on this claim has concluded and Kleinberg has now filed an "application" for attorney's fees. He filed his application on March 10, 2003. See Memorandum in Support of Plaintiff Brian Kleinberg's Application for Attorneys' Fees, filed March 10, 2003 (Docket #44). Defendants filed their opposition on April 7, 2003. See Defendants' Memorandum of Law in Opposition to the Plaintiff's Application for Attorneys' Fees, filed April 7, 2003 (Docket #46) ("Def. Opp."). After Kleinberg replied to defendants' opposition, see Reply Memorandum in Further Support of Plaintiff's Application for Attorneys' Fees, filed April 29, 2003 (Docket #49) ("Reply Mem."), the matter was referred to the undersigned for a Report and Recommendation. By order dated July 23, 2003, the Court sought and received supplemental submissions from the parties further describing the nature of the fees being sought.
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