Opinion
03-CV-6006 CJS
June 6, 2003
Warren B. Rosenbaum, Esq., Shapiro, Rosenbaum, Liebschutz Nelson, LLP, Rochester, NY, For Plaintiff.
Jeffrey F. Baase, Esq., Rupp, Baase, Pfalzgraf Cunningham, Buffalo, NY, For Defendants.
AMENDED DECISION AND ORDER
INTRODUCTION
Siragusa, J. This case is before the Court on the motion of counsel for plaintiff seeking (1) imposition of a sanction for contempt with regard to defendant Mark Clement ("Clement"), and (2) an award of an attorney's fee pursuant to the parties' contract. Plaintiff prevailed on its motion to find Clement in contempt of this Court's previously issued temporary restraining order. For the reasons stated below, the Court grants plaintiff's motion, in part.
LEGAL STANDARDS Sanctions for Contempt
The objective of civil contempt sanctions is to serve either or both of two purposes: (1) to coerce the contemnor into future compliance with the court's order, or (2) to compensate the complainant for losses resulting from the contemnor's past non-compliance. United States of America v. United Mine Workers, 330 U.S. 258, 303-04 (1947); King v. Allied Vision, Ltd., 65 F.3d 1051, 1062 (2d Cir. 1995); N.Y. State Nat. Org. for Women v. Terry, 886 F.2d 1339, 1352-53 (2d Cir. 1989). Compensatory sanctions should reimburse an injured party for its actual damages and may not be imposed absent some proof of actual loss. United Mine Workers, 330 U.S. at 304; Terry, 886 F.2d at 1353. Moreover, "the [compensatory] sanction should correspond at least to some degree with the amount of damages." King, 65 F.3d at 1062.
Attorney's Fee Award
In federal practice the general rule — known as the "American Rule" — is that each party bears its own attorneys' fees. See, e.g., Chambers v. NASCO, Inc., 501 U.S. 32, 45 (1991). However, parties may agree by contract to permit recovery of attorneys' fees, and a federal court will enforce contractual rights to attorneys' fees if the contract is valid under applicable state law. See Alland v. Consumers Credit Corp., 476 F.2d 951, 956 (2d Cir. 1973); United States v. Carter, 217 U.S. 286, 322 (1910). Where a contract authorizes an award of an attorney fee, such an award becomes the rule rather than the exception. McGuire v. Russell Miller, Inc., 1 F.3d 1306, 1313 (2d Cir. 1993) (citation omitted). Since the fees in this matter arise out of an two equitable actions, one for a temporary restraining order, the other for a finding of contempt, the Court need not submit the issue whether to award an attorney's fee to a jury. McGuire, 1 F.3d at 1314.
Moreover, defendant has consented to the award of an attorney's fee, at least in the case of counsel for plaintiff here in the Western District of New York. Therefore, it remains the Court's duty to determine a reasonable attorney's fee.
The starting point for the determination of a reasonable fee is the calculation of the lodestar amount. See Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). In determining the number of hours reasonably expended for purposes of calculating the lodestar, the district court should exclude excessive, redundant or otherwise unnecessary hours, as well as hours dedicated to severable unsuccessful claims. See id. at 433-35, 440. Attorney's fee may be awarded for unsuccessful claims as well as successful ones, however, where they are "`inextricably intertwined' and `involve a common core of facts or are based on related legal theories.'" Reed v. A.W. Lawrence Co., 95 F.3d 1170, 1183 (2d Cir. 1996) (quoting Dominic v. Consolidated Edison Co. of New York, 822 F.2d 1249, 1259 (2d Cir. 1987)) (alteration omitted). The lodestar may be adjusted based on several factors, including, in particular, the "results obtained." Hensley, 461 U.S. at 434. There is, however, a "strong presumption" that the lodestar figure represents a reasonable fee. See Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 478 U.S. 546, 565 (1986); Orchano v. Advanced Recovery, Inc., 107 F.3d 94, 99 (2d Cir. 1997); see also Quaratino v. Tiffany Co., 166 F.3d 422, 425 (1999). The fees awarded may exceed the amount recovered by the suit. Orchano v. Advanced Recovery, Inc., 107 F.3d 94, 98 (2d Cir. 1997). In fact, the reduction of attorney's fee merely because the damages recovery was small would be error, "unless the size of the award is the result of the quality of representation." Id. (quoting DiFilippo v. Morizio, 759 F.2d 231, 235 (2d Cir. 1985) (internal quotation marks omitted)). This is so even though the damages awarded are significantly less than those sought, for a "judgment for damages in any amount . . . modifies the defendant's behavior for the plaintiff's benefit by forcing the defendant to pay an amount of money he otherwise would not pay." Raishevich v. Foster, 247 F.3d 337, 345 (2d Cir. 2001) (quoting Farrar v. Hobby, 506 U.S. 103, 113 (1992)). The Court of Appeals for this Circuit has explicitly rejected tying attorney's fee to the degree of success as measured by the verdict amount awarded. See Quaratino v. Tiffany Co., 166 F.3d 422 (2d Cir. 1999); see also Bridges v. Eastman Kodak Co., 102 F.3d 56 (2d Cir. 1996) (plaintiff who won Title VII judgment, but no damages, entitled to attorney's fee).
BACKGROUND
This diversity case involves a contract dispute between the parties. Plaintiff is in the business of selling theatre concession merchandise including candy, popcorn and sundries, at various movie theatres throughout the United States. Its primary business method is to enter into concession lease agreements with the operator of a theatre in which plaintiff rents the concession area from the theatre owner, and provides all the concession merchandise and, in some cases, the concession equipment and improvements. In return, the theatre operators, as landlords, are obliged to staff the concession stand and assume the obligation to treat the revenues of the concession stand as a trust fund, to be fully deposited into plaintiff's bank accounts no less than twice weekly. Plaintiff then is obligated to pay a percentage of the revenues back to the landlord as rent.
Plaintiff entered into a number of these concession lease agreements with defendant theatres in Florida. In addition to the concession lease agreements with each defendant theatre, Clement personally guaranteed the obligations of each of the theatres. Beginning in mid-December 2002, the theatres failed to make the required payments, though most continued to operate their concession stands.
Paragraph 25 of the Concession Lease Agreement between plaintiff and Sunstar Theatres LLC, reads, in pertinent part:
In the event of any breach or threatened breach by any of the parties of any of the covenants, agreements, terms or conditions contained in this Lease, the other party or parties shall also be entitled to enjoin such breach or threatened breach, the parties acknowledging that their remedy at law will be inadequate, and shall have the further right in [sic.] invoke any right and remedy allowed by law or in equity, by [sic.] statute or otherwise. It is further agreed that in the event any lawsuit is instituted by or between the parties hereto to enforce rights hereunder, Landlord shall indemnify Tenant for all actual legal fees and all court and process charged incurred by Tenant.
Concession Lease Agreement ¶ 25 (Sep. 28, 2000) (Ex. A to Complaint (Jan. 3, 2003) and Proposed Amended Complaint (Apr. 7, 2003)).
Plaintiff sought a temporary restraining order ("TRO") and the Court issued one on January 3, 2003, after a hearing during which the Court contacted Bruce Silver, Esq., an attorney in Florida who was thought by plaintiff's counsel to represent Clement. Though the Court also sought to contact Clement, he was unavailable according to his office staff. The TRO stated, in pertinent part,
ORDERED, that defendants Sunstar Theatres Coral Springs, LLC, Sunstar Theatres Altamonte Springs, LLC, Sunstar Theatres Naples, LLC, Sunstar Theatres Ocala, LLC, Sunstar Theatres Fort Pierce, LLC and Mark Clement, jointly and severally, be and the same hereby are enjoined, restrained and directed until further order of this Court as follows:
1. To forthwith account to plaintiff for all of the gross theatre concession receipts collected by them, and any other agents, servants, employees or affiliates to the date of the service of this order; . . .
3. To hereafter deposit to plaintiff's accounts an amount equivalent to all gross concession receipts collected with respect to each such theatre on a daily basis by causing the same to be deposited into plaintiff's dedicated bank accounts as required by the Concession Lease Agreements. . . .
Order Granting TRO (document # 3). Shortly after the issuance and service of the TRO, each of the theatre defendants filed for bankruptcy protection in Florida. Clement, however, has not.
Following a hearing on February 26, 2003, the Court found Clement in contempt of the Court's conditions one and three. In the pending motion before the Court, the parties agree that the proper amount of the shortfall between the gross concession revenue collected during the period the TRO was in effect until the automatic bankruptcy stay became effective, and the moneys actually deposited pursuant to the contracts, is $13,625.52. The parties also agree that plaintiff's counsel's attorney's fee of $3,195 is reasonable.
Defendant Clement argues in his opposing papers that the imposition of a financial sanction, matching the shortfall of $13,625.52, on defendant Clement for contempt would have the effect of violating the automatic bankruptcy stay, and, in any event, should be reduced by fifty-five percent to reflect the amount of money owed to defendants as rent.
ANALYSIS Sanctions for Contempt
Defendant characterizes the financial sanction the Court would impose on Clement as a "fine." Since the Court intends to order that Clement pay any financial sanction to plaintiff's, and not to the United States Treasury, it will not use the term "fine."See, e.g., 18 U.S.C. § 3571 (Sentence of fine). Since the purpose of any sanction imposed in this case is to compensate the complainant for losses resulting from the contemnor's past non-compliance, and since the amount of the shortfall is not in dispute, the Court will order that Clement deposit into plaintiff's account the full amount of the shortfall.
With regard to the setoff argued for by Clement in his opposition papers, that issue is not part of the present controversy before the Court. Clement was found by the Court to be in contempt based on his failure to abide by the Court's order that he deposit "all gross concession receipts collected with respect to each such theatre on a daily basis. . . ." In the contract between the parties, that money clearly belongs to plaintiff. Plaintiff does not, as argued by defendant, obtain a fifty-five percent windfall as a result of the TRO. Rather, defendant is merely required to comply with what was his duty all along: deposit the gross concession receipts. His failure to do so when he was in control of the theatres prior to their bankruptcy protection, violated this Court's TRO. Now, as guarantor, Clement must make plaintiff whole by depositing his, not the debtor's, money into plaintiff's account in the amount that both parties agree is the amount lost by plaintiff as a result of Clement's contempt.
The Court disagrees with Clement's arguments that any imposition of a financial sanction against him would be in violation of the bankruptcy stay. The Court is ordering Clement, as guarantor, to make the required payment. The Court is not ordering the contemnor to return the money from the debtor's assets, but, instead, to make plaintiff whole from his own resources. Thus, the Court need not address the effect, if any, of the bankruptcy stay in this action at this time.
Attorney's Fee
The only issue before the Court is whether the inclusion of an attorney's fee for work done on plaintiff's behalf, but in the bankruptcy court, should be included in the award here. After carefully reading the contract provision, quoted above, the Court determines that the work in bankruptcy was not "instituted . . . to enforce rights . . ." under the contract. Clearly the bankruptcy action was instituted to protect defendants and the action for which plaintiff seeks reimbursement in the action before this Court is one which was instituted by Clement, who has not filed for bankruptcy protection, to expand the protection of the automatic bankruptcy stay to Clement. The legal fees plaintiff incurred were to defend against that expansion, not as the result of a lawsuit instituted to enforce the contract. Therefore, the Court will not award to plaintiff the Adorno and Yoss firm fees of $3,475.
CONCLUSION
Accordingly, it is hereby
ORDERED, that plaintiff' motion for an attorney's fee (document # 19) is awarded an attorney's fee in the amount of $3,195 and it is further
ORDERED, that defendant Mark Clement shall deposit the amount of $13,625.52 to plaintiff's account as a sanction for his contempt of this Court's TRO.
The Court notes that "interest on any money judgment in a civil case recovered in a district court . . . shall be calculated from the date of the entry of the judgment, at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding the date of the judgment." 28 U.S.C. § 1961(a) (footnote omitted).Thus, the Court will order that interest apply pursuant to the provisions of this statute, rather than set a deadline by which payment is due and subjecting defendant to the sanction of contempt for failure to meet that deadline. Plaintiff may fully enforce the Court's judgment as provided by law. See, e.g., 10 Moore's Federal Practice, § 54.158[2] (3d. ed.) ("Because a judgment for attorney's fee is a money judgment, it may be collected or executed in the same manner as any other money judgment").