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FILED: NEW YORK COUNTY CLERK 02/05/2019 03:58 PM INDEX NO. 154466/2018
NYSCEF DOC. NO. 143 RECEIVED NYSCEF: 02/05/2019
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
In the Matter of the Application of: : Index No.: 154466/2018
:
GURNEY'S INN RESORT & SPA, LTD., a New York : (Hon. Barry R. Ostrager)
corporation, :
Petitioner, AFFIRMATION OF DANIEL R.
MILSTEIN IN RESPONSE TO
and RESPONDENTS'
REQUEST FOR AN
ATTORNEYS'
AWARD OF FEES AND
NANCY ARZANIPOUR, PAUL ARZANIPOUR, OTHER EXPENSES
ANTHONY CARBONE, NEIL CARBONE, KEVIN
COTTER, DOLLY WANDER IRREVOCABLE
TRUST, LORRAINE FERRETTI, PATRICIA
FRANK-JANEWICZ, GEORGE ROSENFELD INC.,
MICHAEL GIORDANO, JANICE KATZ, CHRISTINE
LAURIA, NEIL CARBONE REVOCABLE TRUST,
MARCIA RUSKIN, JAY SCANSAROLI, JANICE
SCANSAROLI, JOSEPH SCOGNAMIGLIO, ALAN
SPARKS, SYSTEMATIC CONTROL CORP. and
VITO VITRANO
Respondents,
To Determine the Fair Value of the Common Shares of
Gurney's Inn Resort & Spa, Ltd. Held by Respondents
Pursuant to Section 623 of the New York Business
Corporation Law.
DANIEL R. MILSTEIN, an attorney duly admitted to practice in the courts of the State
of New York, affirms the following under penalties of perjury pursuant to CPLR 2106:
1. I am of counsel with Greenberg Traurig, LLP ("GT"), attorneys for Petitioner
Gurney's Inn Resort & Spa, Ltd. ("Gurney's"). I submit this affirmation in response to the
attorneys'
application by Lee Squitieri, Esq. for an award of $323,000 in fees, expert fees,
interest and litigation costs on behalf of his clients, respondents Alan Sparks, Joseph
Scognamiglio, Marcia Ruskin, Patricia Frank-Janewicz, Jay Scansaroli, Janice Scansaroli, Janice
Katz Perry, Michael Giordano, Christine Lauria, Lorrain Ferretti, Nancy Arzanipour and Paul
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Arzanipour, George Rosenfeld Inc. and Vito Vitrano (collectively, the "Applicants"). I have
personal knowledge of the facts set forth herein based on my personal participation in the events
described.
2. On October 18, 2018, Mr. Squitieri sent a written demand indicating that
Applicants would be willing to settle the valuation proceeding only (without settling the related
action"
"class brought by Sparks on behalf of all former Gurney's shareholders) if they were
share.1
paid a total of $393 per A true and correct copy of Mr. Squitieri's letter is annexed hereto
as Exhibit 1. The next day, Mr. Squitieri produced the HVS appraisal, indicating that HVS
placed a value of $115 million on Gurney's.
3. Given the total amount of money at stake and the anticipated cost of establishing a
value through litigation, in a good faith effort to settle all the claims arising from the merger, on
October 24, 2018, Gurney's, through GT, made a written offer of compromise by paying all
dissenters (not just Applicants) a total of $160 per share. A true and correct copy the October 23,
2018 settlement offer is annexed hereto as Exhibit 2.
4. The next day, Mr. Squitieri sent a letter demanding $368 per share to settle only
the valuation proceeding. A true and correct copy of Mr. Squitieiri's October 25, 2018 letter is
annexed hereto as Exhibit 3.
5. By letter dated November 28, 2018, we informed Mr. Squitieri of some of the
flaws in his efforts to justify his $368 per share demand, including (a) he had included interest on
the entire amount, not just the unpaid portion of the asserted value and(b) he had applied the
MOU's allocation formula to the asserted value of Gurney's. A true and correct copy of GT's
November 28, 2018 letter is annexed hereto as Exhibit 4.
action"
By thisdate, Gurney's had moved to dismiss the "class complaint,and Mr. Squitieriwas therefore aware of
allthe legalimpediments to such claims (including the statuteof the
limitations, exclusive nature of theBCL
valuation remedy and the other infirmitiesidentifiedin Gurney's moving papers).
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6. Also on November 28, 2018, Mr. Squitieri sent another settlement demand,
money"
proposing that Gurney's pay "$200 per share new for a total of $318.81 per share. A
true and correct copy of Mr. Squitieri's November 28, 2018 letter is annexed hereto as Exhibit 5.
7. On December 3, 2018, before the start of the hearing later that morning, the Court
reiterated what ithad told the parties at the outset of the case: that itwas likely that the fair value
parties'
of Gurney's lay somewhere between the respective valuations and the parties should be
able to come to terms on a settlement. In good faith, before the hearing began, Gurney's offered
to pay $145 per share to settle the valuation proceeding.
8. In response to that offer, Mr. Squitieri insisted that his clients would not settle for
less than $190 per share and required an additional payment of $60 per share for their litigation
expenses.
9. On December 18, 2018, the Court asked counsel for each of the parties to
dissenters"
calculate the "price per share for the assuming a total value of $115 million and
award."
"excluding any additional sums the Court might Ignoring the parameters set by the
Court, Mr. Squitieri again asserted that his clients should receive $320.34 per share (which
implied a value exceeding $232 million). A true and correct copy of Mr. Squitieri's response to
the Court's December 18, 2018 request is annexed hereto as Exhibit 6. Gurney's, through GT,
calculated that a $115 million valuation yielded a per-share value of $142.05 for each of the
657,900 Class A shares. A true and correct copy of GT's response to the Court's request is
annexed hereto as Exhibit 7.
10. On December 21, 2018, the Court entered its Order adopting (a) the $115 million
HVS appraisal as the fair value of Gurney's and Gurney's calculation of $142.05 as the per-
(b)
share value of all Class A shares. The Order also gave counsel for respondents leave to "submit
2019" attorneys'
an affirmation and invoices by January 15, in support of a request for fees.
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11. Counsel's January 15 submission did not (a) disclose the existence of a retainer
agreement, nor (b) include copies of any invoices for legal services or other admissible business
records documenting the legal fees actually incurred by respondents in this case. Rather, Mr.
Squitieri submitted only a spreadsheet (Exhibit A to his affirmation) clearly prepared for this fee
application, listing tasks performed and time spent performing them. To such task, Mr. Squitieri
assigned an hourly rate based on fees charged to some other client, ten years earlier, and grown
at the rate of 3% per year.
12. Similarly, (a) the submission included no agreement by which respondents agreed
to pay Sparks or Scansaroli for their time or to reimburse any of their expenses, and (b) the
respondents'
documentation of these fees and expenses, like that of counsel, was created solely
for this fee application.
13. The first 64 time entries on Mr. Squitieri's spreadsheet, accounting for 62.8 hours
of Mr. Squitieri's time and $31,086 in fees, all predate the May 11, 2018 commencement of this
proceeding. Moreover, Mr. Squitieri has plainly included time spent on matters wholly unrelated
to this proceeding. For example, in the several days leading up to the March 27, 2018
Sparks'
commencement of Mr. federal action, Mr. Squitieri billed for preparing the complaint
and motion papers in that action. Also included are charges on March 29, 2018 for time spent
traveling to and attending a shareholder meeting.
14. More than 70 of the time entries on Mr. Squitieri's spreadsheet indicate only that
Mr. Squitieri reviewed and responded to client emails, without any description of the subject of
the communications or their relationship to the valuation proceeding. It is impossible to
determine if the communications were reasonable or necessary to this proceeding.
15. Other entries mention telephone conferences or interviews with unnamed
"witnesses"
about unspecified subjects. (See, e.g. entries for May 17, 2018, May 22, 2018, June
2, 2018, June 4, 2018, June 6, 2018, June 13, 2018, June 15, 2018, and July 11, 2018.) Insofar as
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only one witness (the appraiser) testified at the hearing, the relevance or necessity for these
conferences is highly questionable.
16. Many entries relate to the settlement communications, including preparation of
outrageously high settlement demands, responding to Gurney's offers and discussing settlement
with the Applicants. (See, e.g., entries for August 12, 2018, August 13, 2018, August 14, 2018,
August 15, 2018, August 17, 2018, October 10, 2018, and October 16, 2018.)
Prep" Trial,"
17. Eight (8) of the entries say nothing other than "Trial or "Prep for
without any indication of what that preparation entailed or whether it was reasonable to have a
senior attorney billing at $815 and $975 per hour for such preparation. Each of these vague
entries accounts for a minimum of 9 hours, and one accounts for 14.5 hours. That day,
prep"
December 3, 2018, was an actual trial date, and thus the indication of "trial accounting for
prep"
14.5 hours cannot possibly be correct. Similarly, the 14 hours spent in "trial on December
5, 2018 cannot be correct, as this was the second day of the trial, and the 9 hours spent in trial on
December 6, 2018 cannot be correct, as the trialended on December 5th.
18. Mr. Sweeny's time entries also failto provide the detail necessary to determine if
his time was spent in reasonable and necessary tasks related to this case, and what little
information they provide indicate that unreasonable charges are included. For example, several
thousand dollars are charged for Mr. Sweeny's review of pleadings, without any indication of the
discovery"
purpose for such review. Entries such as "reviewed case file and are similarly
cryptic. Finally, Mr. Sweeny appears to have charged for preparation of the fee application
attorneys'
itself,as he listed five days (and approximately $9,000) spent researching recovery of
fees and interest.
Applicants'
19. Upon receiving initial submission, GT wrote to Mr. Squitieri and
requested that he promptly provide us with his retainer agreement(s), all invoices and other
contemporaneous time records related to this case, all evidence of any payments his clients
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made, and all agreements by which Applicants agreed to pay Sparks and Scansaroli for their
assistance. (See Squitieri Supplemental Affirmation dated January 29, 2019, Exhibit. A.) There
ensued an exchange of emails, culminating in Mr. Squitieri's refusal to provide any of the
requested documentation unless legal authority justifying the request was provided to him.
20. On the evening of January 29, 2019, without prior
warning or permission from the
"supplemental"
Court, Mr. Squitieri e-filed papers in support of the fee application. Mr.
Squitieri did not provide any actual invoices or contemporaneous time records. But he did
provide a heavily
redacted retainer agreement purportedly governing his firm's retention for this
case.
21. Only on January 31, 2019, after we demanded production of the unredacted
retainer agreement and provided legal authority for that demand did Mr. Squitieri send it to us.
A true and correct copy of the unredacted retainer agreement is annexed hereto as Exhibit 8.
22. For the reasons set forth in the accompanying memorandum of law, (a) the
circumstances do not justify
fee or expense shifting under BCL 623 and (b) the fee application
attorneys'
should be deemed insufficient to demonstrate the reasonable fees and other expenses
incurred by Applicants in this case.
Dated: New York, New York
February 5, 2019
Daniel R. Milstein
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FILED: NEW YORK COUNTY CLERK 02/05/2019 03:58 PM INDEX NO. 154466/2018 NYSCEF DOC. NO. 143 RECEIVED NYSCEF: 02/05/2019 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK In the Matter of the Application of: : Index No.: 154466/2018 : GURNEY'S INN RESORT & SPA, LTD., a New York : (Hon. Barry R. Ostrager) corporation, : Petitioner, AFFIRMATION OF DANIEL R. MILSTEIN IN RESPONSE TO and RESPONDENTS' REQUEST FOR AN ATTORNEYS' AWARD OF FEES AND NANCY ARZANIPOUR, PAUL ARZANIPOUR, OTHER EXPENSES ANTHONY CARBONE, NEIL CARBONE, KEVIN COTTER, DOLLY WANDER IRREVOCABLE TRUST, LORRAINE FERRETTI, PATRICIA FRANK-JANEWICZ, GEORGE ROSENFELD INC., MICHAEL GIORDANO, JANICE KATZ, CHRISTINE LAURIA, NEIL CARBONE REVOCABLE TRUST, MARCIA RUSKIN, JAY SCANSAROLI, JANICE SCANSAROLI, JOSEPH SCOGNAMIGLIO, ALAN SPARKS, SYSTEMATIC CONTROL CORP. and VITO VITRANO Respondents, To Determine the Fair Value of the Common Shares of Gurney's Inn Resort & Spa, Ltd. Held by Respondents Pursuant to Section 623 of the New York Business Corporation Law. DANIEL R. MILSTEIN, an attorney duly admitted to practice in the courts of the State of New York, affirms the following under penalties of perjury pursuant to CPLR 2106: 1. I am of counsel with Greenberg Traurig, LLP ("GT"), attorneys for Petitioner Gurney's Inn Resort & Spa, Ltd. ("Gurney's"). I submit this affirmation in response to the attorneys' application by Lee Squitieri, Esq. for an award of $323,000 in fees, expert fees, interest and litigation costs on behalf of his clients, respondents Alan Sparks, Joseph Scognamiglio, Marcia Ruskin, Patricia Frank-Janewicz, Jay Scansaroli, Janice Scansaroli, Janice Katz Perry, Michael Giordano, Christine Lauria, Lorrain Ferretti, Nancy Arzanipour and Paul 1 NY 247881191v1 1 of 6 FILED: NEW YORK COUNTY CLERK 02/05/2019 03:58 PM INDEX NO. 154466/2018 NYSCEF DOC. NO. 143 RECEIVED NYSCEF: 02/05/2019 Arzanipour, George Rosenfeld Inc. and Vito Vitrano (collectively, the "Applicants"). I have personal knowledge of the facts set forth herein based on my personal participation in the events described. 2. On October 18, 2018, Mr. Squitieri sent a written demand indicating that Applicants would be willing to settle the valuation proceeding only (without settling the related action" "class brought by Sparks on behalf of all former Gurney's shareholders) if they were share.1 paid a total of $393 per A true and correct copy of Mr. Squitieri's letter is annexed hereto as Exhibit 1. The next day, Mr. Squitieri produced the HVS appraisal, indicating that HVS placed a value of $115 million on Gurney's. 3. Given the total amount of money at stake and the anticipated cost of establishing a value through litigation, in a good faith effort to settle all the claims arising from the merger, on October 24, 2018, Gurney's, through GT, made a written offer of compromise by paying all dissenters (not just Applicants) a total of $160 per share. A true and correct copy the October 23, 2018 settlement offer is annexed hereto as Exhibit 2. 4. The next day, Mr. Squitieri sent a letter demanding $368 per share to settle only the valuation proceeding. A true and correct copy of Mr. Squitieiri's October 25, 2018 letter is annexed hereto as Exhibit 3. 5. By letter dated November 28, 2018, we informed Mr. Squitieri of some of the flaws in his efforts to justify his $368 per share demand, including (a) he had included interest on the entire amount, not just the unpaid portion of the asserted value and(b) he had applied the MOU's allocation formula to the asserted value of Gurney's. A true and correct copy of GT's November 28, 2018 letter is annexed hereto as Exhibit 4. action" By thisdate, Gurney's had moved to dismiss the "class complaint,and Mr. Squitieriwas therefore aware of allthe legalimpediments to such claims (including the statuteof the limitations, exclusive nature of theBCL valuation remedy and the other infirmitiesidentifiedin Gurney's moving papers). 2 NY 247881191v1 2 of 6 FILED: NEW YORK COUNTY CLERK 02/05/2019 03:58 PM INDEX NO. 154466/2018 NYSCEF DOC. NO. 143 RECEIVED NYSCEF: 02/05/2019 6. Also on November 28, 2018, Mr. Squitieri sent another settlement demand, money" proposing that Gurney's pay "$200 per share new for a total of $318.81 per share. A true and correct copy of Mr. Squitieri's November 28, 2018 letter is annexed hereto as Exhibit 5. 7. On December 3, 2018, before the start of the hearing later that morning, the Court reiterated what ithad told the parties at the outset of the case: that itwas likely that the fair value parties' of Gurney's lay somewhere between the respective valuations and the parties should be able to come to terms on a settlement. In good faith, before the hearing began, Gurney's offered to pay $145 per share to settle the valuation proceeding. 8. In response to that offer, Mr. Squitieri insisted that his clients would not settle for less than $190 per share and required an additional payment of $60 per share for their litigation expenses. 9. On December 18, 2018, the Court asked counsel for each of the parties to dissenters" calculate the "price per share for the assuming a total value of $115 million and award." "excluding any additional sums the Court might Ignoring the parameters set by the Court, Mr. Squitieri again asserted that his clients should receive $320.34 per share (which implied a value exceeding $232 million). A true and correct copy of Mr. Squitieri's response to the Court's December 18, 2018 request is annexed hereto as Exhibit 6. Gurney's, through GT, calculated that a $115 million valuation yielded a per-share value of $142.05 for each of the 657,900 Class A shares. A true and correct copy of GT's response to the Court's request is annexed hereto as Exhibit 7. 10. On December 21, 2018, the Court entered its Order adopting (a) the $115 million HVS appraisal as the fair value of Gurney's and Gurney's calculation of $142.05 as the per- (b) share value of all Class A shares. The Order also gave counsel for respondents leave to "submit 2019" attorneys' an affirmation and invoices by January 15, in support of a request for fees. 3 NY 247881191v1 3 of 6 FILED: NEW YORK COUNTY CLERK 02/05/2019 03:58 PM INDEX NO. 154466/2018 NYSCEF DOC. NO. 143 RECEIVED NYSCEF: 02/05/2019 11. Counsel's January 15 submission did not (a) disclose the existence of a retainer agreement, nor (b) include copies of any invoices for legal services or other admissible business records documenting the legal fees actually incurred by respondents in this case. Rather, Mr. Squitieri submitted only a spreadsheet (Exhibit A to his affirmation) clearly prepared for this fee application, listing tasks performed and time spent performing them. To such task, Mr. Squitieri assigned an hourly rate based on fees charged to some other client, ten years earlier, and grown at the rate of 3% per year. 12. Similarly, (a) the submission included no agreement by which respondents agreed to pay Sparks or Scansaroli for their time or to reimburse any of their expenses, and (b) the respondents' documentation of these fees and expenses, like that of counsel, was created solely for this fee application. 13. The first 64 time entries on Mr. Squitieri's spreadsheet, accounting for 62.8 hours of Mr. Squitieri's time and $31,086 in fees, all predate the May 11, 2018 commencement of this proceeding. Moreover, Mr. Squitieri has plainly included time spent on matters wholly unrelated to this proceeding. For example, in the several days leading up to the March 27, 2018 Sparks' commencement of Mr. federal action, Mr. Squitieri billed for preparing the complaint and motion papers in that action. Also included are charges on March 29, 2018 for time spent traveling to and attending a shareholder meeting. 14. More than 70 of the time entries on Mr. Squitieri's spreadsheet indicate only that Mr. Squitieri reviewed and responded to client emails, without any description of the subject of the communications or their relationship to the valuation proceeding. It is impossible to determine if the communications were reasonable or necessary to this proceeding. 15. Other entries mention telephone conferences or interviews with unnamed "witnesses" about unspecified subjects. (See, e.g. entries for May 17, 2018, May 22, 2018, June 2, 2018, June 4, 2018, June 6, 2018, June 13, 2018, June 15, 2018, and July 11, 2018.) Insofar as 4 NY 247881191v1 4 of 6 FILED: NEW YORK COUNTY CLERK 02/05/2019 03:58 PM INDEX NO. 154466/2018 NYSCEF DOC. NO. 143 RECEIVED NYSCEF: 02/05/2019 only one witness (the appraiser) testified at the hearing, the relevance or necessity for these conferences is highly questionable. 16. Many entries relate to the settlement communications, including preparation of outrageously high settlement demands, responding to Gurney's offers and discussing settlement with the Applicants. (See, e.g., entries for August 12, 2018, August 13, 2018, August 14, 2018, August 15, 2018, August 17, 2018, October 10, 2018, and October 16, 2018.) Prep" Trial," 17. Eight (8) of the entries say nothing other than "Trial or "Prep for without any indication of what that preparation entailed or whether it was reasonable to have a senior attorney billing at $815 and $975 per hour for such preparation. Each of these vague entries accounts for a minimum of 9 hours, and one accounts for 14.5 hours. That day, prep" December 3, 2018, was an actual trial date, and thus the indication of "trial accounting for prep" 14.5 hours cannot possibly be correct. Similarly, the 14 hours spent in "trial on December 5, 2018 cannot be correct, as this was the second day of the trial, and the 9 hours spent in trial on December 6, 2018 cannot be correct, as the trialended on December 5th. 18. Mr. Sweeny's time entries also failto provide the detail necessary to determine if his time was spent in reasonable and necessary tasks related to this case, and what little information they provide indicate that unreasonable charges are included. For example, several thousand dollars are charged for Mr. Sweeny's review of pleadings, without any indication of the discovery" purpose for such review. Entries such as "reviewed case file and are similarly cryptic. Finally, Mr. Sweeny appears to have charged for preparation of the fee application attorneys' itself,as he listed five days (and approximately $9,000) spent researching recovery of fees and interest. Applicants' 19. Upon receiving initial submission, GT wrote to Mr. Squitieri and requested that he promptly provide us with his retainer agreement(s), all invoices and other contemporaneous time records related to this case, all evidence of any payments his clients 5 NY 247881191v1 5 of 6 FILED: NEW YORK COUNTY CLERK 02/05/2019 03:58 PM INDEX NO. 154466/2018 NYSCEF DOC. NO. 143 RECEIVED NYSCEF: 02/05/2019 made, and all agreements by which Applicants agreed to pay Sparks and Scansaroli for their assistance. (See Squitieri Supplemental Affirmation dated January 29, 2019, Exhibit. A.) There ensued an exchange of emails, culminating in Mr. Squitieri's refusal to provide any of the requested documentation unless legal authority justifying the request was provided to him. 20. On the evening of January 29, 2019, without prior warning or permission from the "supplemental" Court, Mr. Squitieri e-filed papers in support of the fee application. Mr. Squitieri did not provide any actual invoices or contemporaneous time records. But he did provide a heavily redacted retainer agreement purportedly governing his firm's retention for this case. 21. Only on January 31, 2019, after we demanded production of the unredacted retainer agreement and provided legal authority for that demand did Mr. Squitieri send it to us. A true and correct copy of the unredacted retainer agreement is annexed hereto as Exhibit 8. 22. For the reasons set forth in the accompanying memorandum of law, (a) the circumstances do not justify fee or expense shifting under BCL 623 and (b) the fee application attorneys' should be deemed insufficient to demonstrate the reasonable fees and other expenses incurred by Applicants in this case. Dated: New York, New York February 5, 2019 Daniel R. Milstein 6 NY 247881191v1 6 of 6