Sing for Serv. v. DOWC Admin. Servs.
| Decision Date | 05 May 2023 |
| Docket Number | 1:20-cv-5617-GHW |
| Parties | SING FOR SERVICE, LLC D/B/A MEPCO, Plaintiff, v. DOWC ADMINISTRATION SERVICES, LLC, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Everybody loves a winner. And usually, it isn't that hard to tell who the victor is. In sports, there are championships; in the arts, awards shows-at the end of the day, one person wins the other person loses, and everybody goes home with certainty (if not satisfaction).
If only law were so easy. After years of litigation, Plaintiff SING for Service, LLC d/b/a Mepco (“Mepco”) and Defendant DOWC Administration Services, LLC's (“DOWC”) still cannot answer the most fundamental of legal questions: who won? Mepco says it did, because the Court found in its favor on multiple issues earlier in the case, and because the parties entered a stipulation favorable to Mepco's position in the litigation. But DOWC disagrees: on its telling, because neither of those events changed the legal relationship of the parties, Mepco cannot be considered the prevailing party. And because Mepco stands to recover significant fees if deemed the victor, declaring a winner is far from academic.
Called upon to referee, the Court concludes that because Mepco won the central disputed claims in this litigation, it is the prevailing party under the applicable law interpreting the parties' contract. It is therefore entitled to reasonable attorneys' fees and costs, though the Court will reduce them as detailed below. In sum, Mepco's motion for attorney's fees is GRANTED IN PART.
This litigation began in July 2020. At that time, Mepco-an LLC that provides funding to sellers and administrators of vehicle service contracts-filed a declaratory judgment action in this court against DOWC, an administrator of those vehicle service contracts. Specifically, Mepco sought a determination that DOWC has no right under its “Administrator Agreement” with Mepco to cancel “payment plan agreements” between Mepco and third parties. See Dkt. No. 1. After years of litigation, the parties entered a stipulation, endorsed by the Court, adopting Mepco's view of DOWC's (lack of) cancelation rights under the Administrator Agreement. Dkt. No. 134. As a result, the only issues left in the case are whether Mepco is the “prevailing party” in the case and, if so, the amount of legal fees the Court should award to it.
The factual background of this case is presented more comprehensively in the Court's prior Memorandum and Order issued January 3, 2022. See SING for Service, LLC d/b/a Mepco v. DOWC Administration Services, LLC, No. 20-cv-5617, 2022 WL 36478 (S.D.N.Y. Jan. 3, 2022). A brief summary of the relevant history necessary to understand this decision follows.
DOWC administrates vehicle service contracts, which are contracts between DOWC and vehicle owners seeking extended warranties on their vehicles. Id. at *2. Through the vehicle service contracts, DOWC acts as the administrator of extended warranties sold by third-party sellers. Id. When DOWC and a third-party seller issue an extended warranty, they may offer a payment plan service to the customer, though they “have complete discretion whether to offer payment plan services to their customers and,” if they do so, “whether to rely on a third-party vendor for collecting monthly payments from customers.” Id. (internal quotation marks omitted).
In 2019, DOWC engaged Mepco to provide payment plan services for the vehicle services contracts though an “Administrator Agreement.” Id. After that time, DOWC began to offer payment plan services through “payment plan agreements” entered into by Mepco and the purchaser. Id. at *3. Under the payment plan agreements, Mepco provides financing for the purchases of vehicle service contracts administered by DOWC. Id. at *2. In this role, Mepco essentially acts as a lender, paying a lump sum to both DOWC as warranty administrator and the relevant third-party seller for the vehicle service contracts it finances. Id. In return, the vehicle service contract purchaser pays regular installments to Mepco. Id. A payment plan agreement gives the purchaser the right to cancel it at any time and gives Mepco cancellation rights under certain circumstances. Id. at *3. But no language from the payment plan agreements allows DOWC “the right to terminate the agreement or to replace Mepco as a party to it.” Id.
18W Holdings, Inc. d/b/a 1-800 Warranty (“18W”) was one of the sellers of DOWC vehicle service contracts. Id. Mepco entered into a “Dealer Agreement” with 18W, under which “18W can offer installment payment plans to its purchasers, using the payment plan agreement forms provided to it by Mepco.” Id. at *4. In the event a payment plan agreement was canceled, the Dealer Agreement required 18W to make a refund payment to Mepco. Id.
After Mepco purportedly provided subpar service under the Dealer Agreement with 18W, DOWC attempted to terminate unilaterally the payment plan agreements between Mepco and 18W. Id. at *8. DOWC acknowledged that the Administrator Agreement was “silent regarding DOWC's right to cancel Mepco's services in connection with existing Service Agreements.” Id. (internal quotation marks omitted). But DOWC argued that cancellation rights were implicit in the Administrator Agreement, because DOWC had engaged Mepco as its agent to provide payment plan services. Id.
After refusing to comply with DOWC's attempted termination of the payment plan agreements, see id., Mepco commenced this action on July 21, 2020, seeking a declaratory judgment that DOWC did not have the right to unilaterally cancel the payment plan agreements. See Dkt. No. 1. Mepco also asserted that DOWC had tortiously interfered with the payment plan agreements “by procuring or soliciting purchasers to cancel their Payment Plan Agreements with Mepco and/or by billing those purchasers directly for amounts that were due to Mepco under the Payment Plan Agreements.” Id. ¶ 45. It filed its first amended complaint two days later realleging both claims against DOWC; that complaint was active complaint through the remainder of the litigation. Dkt. No. 8 (“FAC”).
On November 4, 2020, DOWC filed its answer and counterclaims against Mepco. Dkt. No. 29. DOWC's primary counterclaim was a mirror-image of Mepco's lead claim, seeking declaratory judgment that it did have the right to unilaterally terminate the payment plan agreements. Id. ¶¶ 78- 85. DOWC's counterclaims also alleged that Mepco had breached the implied covenant of good faith and fair dealing, that Mepco had tortiously interfered with the vehicle service contracts, and that Mepco was unjustly enriched at DOWC's expense. Id. ¶¶ 86-101. On January 30, 2021, DOWC amended its counterclaims, reasserting all but its unjust enrichment claim against Mepco. Dkt. No. 48.
On March 2, 2021, Mepco filed a motion to dismiss DOWC's counterclaims under Federal Rule of Civil Procedure 12(b)(6), arguing that DOWC had failed to state a claim for relief. Dkt. No. 53 at 13-14. In a decision issued on January 3, 2022, the Court ruled for Mepco and dismissed DOWC's counterclaims. See generally Mepco, 2022 WL 36478. Regarding the request for declaratory judgment in DOWC's counterclaims, the Court held that Id. at *19. It also dismissed with prejudice DOWC's claims that Mepco (a) had breached the implied covenant of good faith and fair dealing and (b) had tortiously interfered with the contract between the parties. Id. at *19-24.
On October 26, 2022, the parties jointly submitted a proposed stipulation and order. Dkt. No. 130. They agreed that DOWC “has no contractual right to cancel or terminate a payment plan agreement,” and that when a payment plan agreement is cancelled, DOWC owes Mepco a refund pursuant to the terms of the Administrator Agreement. Id. ¶¶ 1-2. After a joint request by the parties that it do so, the Court entered that stipulation as an order of the Court on October 31, 2022. See Dkt. No. 134. The parties further stipulated that the only remaining issues to be decided were whether Mepco is the prevailing party and, if so, “the quantum of legal fees and costs that may be awarded to Mepco.” Dkt. No. 130 ¶¶ (a)-(b).
On November 21, 2022, Mepco moved for attorneys' fees and costs. Dkt. No. 136 (motion); Dkt. No. 137 (accompanying memorandum, or “Pl's Mem.”). Mepco seeks $247,855.37 in attorneys' fees and $1,014.87 in costs. Pl's Mem. at 2. On December 20, 2022, DOWC filed its opposition to Mepco's motion. Dkt. No. 138 (“Def's Opp.”). On December 30, 2022, Mepco filed a reply to DOWC's opposition. Dkt. No. 139 (“Reply”). It also filed, upon the Court's request, supplemental declarations and documentation to support its fee request. Dkt. No. 141; Dkt. No. 142.
Because Mepco succeeded on the central claim advanced in this litigation, it was the prevailing party, and the Court will award it reasonable attorneys' fees and costs. But based on the Court's review of the relevant records, those costs will be reduced as detailed below.
Mepco is the prevailing party here and is accordingly entitled to collect costs incurred from this litigation. The baseline “American Rule” proscribes fee-shifting between attorneys “unless a statute or contract provides otherwise.” Marx v. Gen. Revenue Corp., 568 U.S. 371, 382 (2013) (quoting Hardt v. Reliance Std. Life Ins. Co., 560 U.S. 242,...
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