Preview
FILED: NEW YORK COUNTY CLERK 01/29/2019 08:38 PM INDEX NO. 154466/2018
NYSCEF DOC. NO. 127 RECEIVED NYSCEF: 01/29/2019
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 (Hon. Barry R. Ostrager)
New York corporation,
Petitioner,
and
NANCY ARZANIPOUR, et al.,
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.
SUPPLEMENTAL MEMORANDUM OF LAW
IN SUPPORT OF AWARD OF ATTORNEYS FEES AND EXPENSES
Respondents submit this Supplemental Memorandum of Law and accompanying
Affirmation of Lee Squitieri dated January 28, 2019 in order to respond to a request by counsel
for Gurney’s for supplemental information regarding Respondents fee and expense application
pursuant to New York Business Corporation Law 623(g). See Affirmation of Lee Squitieri dated
January 29, 2019, Exhibit A. Gurney’s raised the issues in emails attached to Squitieri
Affirmation as Exhibit B. In response, Respondents submit the documents and materials in the
Squitieri Affirmation to Petitioner and the Court. Squitieri Affirmation Exhibits C-F.
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ARGUMENT
RESPONDENTS’ ATTORNEYS FEES, COST AND APPRAISAL
FEES MEET THE “INCURRED” REQUIREMENTS OF BCL 623(H)(7)
Gurney’s counsel has implied that unless Respondents’ actually paid this firm for legal
services, then attorney’s fees have not been “incurred” as required by the BCL and therefore
cannot be awarded by the Court.
New York Business Corporation Law § 623(H)(7) provides, in pertinent part:
The Court may in its discretion, apportion and assess all or any
part of the costs, expenses and fees incurred by any or all of the
dissenting shareholders who are parties to the proceeding against
the corporation if the court finds any of the following: (A) that the
fair value of the shares as determined materially exceeds the
amount which the corporation offered to pay.
BCL 623 uses the word “incurred.” The BCL does not define the word “incurred.”
Dictionary.com defines “incurred” as “to become liable or subject to . . .” See attachment hereto.
There is no requirement or condition precedent that mandates a client to have paid attorney’s
fees to be eligible for the BCL 623(h)(7) fees, costs and expense award.
Although the word “incurred” is not defined in Section 623 nor anywhere in the BCL, in
Rubin v. Empire Mutual Ins. Co., 25 N.Y. 2d 426, 306 N.Y.S. 2d 914 (1969) the New York
Court of Appeals held that the “common and well-understood” definition of “incurred” as “to
become liable or subject to.” Supra at 427. The Court of Appeals in Empire reversed the
Appellate Division, First Department which had held that an insured had not “incurred” expenses
for purposes of the insurance policy because a public health program was available to pay for the
services. The Court of Appeals disagreed and reversed, holding that because he received the
services and was liable, they had been “incurred” even though the insured was never required to
pay for the services. The Second Department in Matter of Shore, 67 A.D. 2d 526, 415 N.Y.S. 2d
2
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878, (2d Dept. 1979) , app dismissed, 48 N.Y. 2d 634 (1980), has similarly interpreted 623(h)(7)
to require Parklane Hosiery to pay dissenters’ appraisal expert fees despite the fact that the
expert worked on a contingent basis and expressly agreed to look only to the court award, if any,
for his fees. According to Matter of Shore, the expert’s retainer agreement read, in part, “. . . the
receipt of any fee by you is contingent upon a favorable result.” The Second Department
interpreted the retainer agreement with that expert to be “. . . essentially they would have to look
to whatever fee was awarded by the Court.” Id. at 533. Notwithstanding the contingent nature,
the Second Department affirmed the award to the expert despite the fact that his fees were
contingent and despite the fact that the expert agreed to look only to the court awarded fee for
payment, not the client.
Federal precedent interpreting and applying statutory fee provisions which include
“incurred” as part of the provision also hold that fees greater than a contingent fee are considered
“incurred” when services are provided even where the client is only liable for the contingent fee.
The interpretation of the phrases “incurred” and “actually incurred” in attorney’s fees statutes
was the subject of Circuit Court of Appeals rulings in Bess v. Bess, 929 F.2d 1332, 1335 n.7 (8th
Cir. 1991) and Shelden v. United States, 41 Fed. Ct. 347 (U.S. Court Federal Claims 1998),
respectively. In Bess v. Bess, the attorneys’ fees statute involved was 18 U.S.C. 2520(b)(3)
which made a defendant liable for “a reasonable attorney’s fees and other litigation costs
reasonably incurred.” (Emphasis supplied). The Eighth Circuit held that the plaintiffs’
attorneys’ fees could be recovered in full even though the plaintiffs’ attorney had only a
contingent fee agreement with counsel. In Shelden, the Court of Claims held that the “actually
incurred” language of the fee shifting provision in the Uniform Relocation Assistance and Real
Property Acquisitions Policies Act, 42 U.S.C. 4654(c) (1977) did not bar the recovery of
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attorney’s fees where the only agreement between plaintiff and counsel was a contingent
agreement. The court rejected the defendants’ arguments that under the statute the only costs
“actually incurred” were the contingent fees amount which were considerably less than the
attorney’s hourly billings.
Here, the retainer agreement provides in pertinent part:
We will not charge you for legal services until we obtain payment
of an award or settlement . . . .
We propose to seek a contingent fee in the appraisal proceeding . .
. or any other amount that the Court approves together with
reimbursement of our reasonable expenses . . . We intend to ask
the Court to award us attorney’s fees under BCL 623.
See Squitieri Affirmation Exhibit C. Respondents’ attorneys’ contingent fee provision does not
conflict with, or negate in any way, clients’ agreement to allow their counsel to seek a statutory
fee award. In fact, in 1990 the United States Supreme Court held that contingent fee agreements
and court awarded attorney’s fees may co-exist independently of one another. Venegas v.
Mitchell, 495 U.S. 82, 88, 110 S. Ct. 1679 (1990). Nor does the contingent fee agreement
constitute a ceiling on fees. In Albunio v. The City of New York, 16 N.Y. 3d 472, 922 N.Y. S. 2d
244 (2014), New York’s Court of Appeals decided the question of “the appropriate treatment of
statutory counsel fees awarded under the New York City Human Rights Law where the
contingency fee agreement does not explicitly mention statutory fees.” The Court of Appeals
held that an attorney is entitled to the greater of either the contingency fee or the statutory award
where the retainer did not mention the statutory fees. In so holding, the Court of Appeals noted
“a majority of the federal cases . . . follows the rule that, absent an explicit agreement to the
contrary, . . . counsel is entitled generally to the greater of the two” i.e., statutory fee or
contingent fee.” (Citations omitted). The Court of Appeals cited several state high courts
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following a similar rule: Cambridge Trust Co. v. Hanify King Professional Corp., 430 Mass
472, 480, 721 N.E. 2d 1(1999) (“the better approach . . simply permits the attorney to recover the
amount set by the contingent fee agreement or the court awarded fee whichever is greater.”) See
also Wheatley v. Ford, 679 F.2d 1037, 1041 (2d Cir. 1982); Sullivan v. Crown Paper Board Co.,
Inc., 719 F.2d 667, 669-670 3d Cir. 1983 (holding attorney only entitled to “recovery of the
contingency amount fee amount or the statutory fee whichever is greater” where fee agreement
silent or statutory fee); Venegas v. Mitchell, 496 U.S. 82, 88, 110 S. Ct. 1679 (1990) (attorney
entitled to greater of contingent fee or court awarded fees); Sargeant v. Sharp, 579 F.2d 645, 649
(1st Cir. 1978); State ex rel. Okla. Bar Ass’n v. Weeks, 969 F.2d 347, 356 (Okla.), cert denied,
525 U.S. 1042, 142 L.Ed. 2d 535 (1998); Luna v. Gillingham,, 57 Wash. App. 574, 581, 89 P.2d
801 (1990).
The policy behind allowing attorney’s fees to dissenter was explained by the Appellate
Division. According to the Second Department’s decision in Matter of Shore (Parklane Hosiery
Co.), 67 A.D. 2d 526, 532, 415 N.Y.S 2d 878 (2d Dept. 1979) “the expenses incurred in
litigating an appraisal proceeding can act as a deterrent to the individual shareholder particularly
if he does not own a large number of shares . . . [citations omitted] the appraisal statute seeks to
deal with these practical impediments to full enjoyment of the remedy by providing . . . that the
cost and expenses of the proceeding shall be assessed against the corporation.” Thus, the same
policy that animates other fee shifting statutes to be “liberally construed” (Locher v. Union Life
Insurance Co. of America, 389 F.3d 288, 298 (2d Cir. 2004)) also guides BCL 623(h)(7).
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CONCLUSION
For all the foregoing reasons, the Court should award Respondents’ counsel fees, costs
and expenses in full.
Dated: New York, New York
January 29, 2019
Respectfully submitted,
SQUITIERI & FEARON, LLP
/s/Lee Squitieri
Lee Squitieri
32 East 57th Street
12th Floor
New York, New York 10022
Tel: (212) 421-6492
Fax: (212) 421-6553
lee@sfclasslaw.com
Attorneys for Answering Respondents
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Preview
FILED: NEW YORK COUNTY CLERK 01/29/2019 08:38 PM INDEX NO. 154466/2018 NYSCEF DOC. NO. 127 RECEIVED NYSCEF: 01/29/2019 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 (Hon. Barry R. Ostrager) New York corporation, Petitioner, and NANCY ARZANIPOUR, et al., 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. SUPPLEMENTAL MEMORANDUM OF LAW IN SUPPORT OF AWARD OF ATTORNEYS FEES AND EXPENSES Respondents submit this Supplemental Memorandum of Law and accompanying Affirmation of Lee Squitieri dated January 28, 2019 in order to respond to a request by counsel for Gurney’s for supplemental information regarding Respondents fee and expense application pursuant to New York Business Corporation Law 623(g). See Affirmation of Lee Squitieri dated January 29, 2019, Exhibit A. Gurney’s raised the issues in emails attached to Squitieri Affirmation as Exhibit B. In response, Respondents submit the documents and materials in the Squitieri Affirmation to Petitioner and the Court. Squitieri Affirmation Exhibits C-F. 1 of 6 FILED: NEW YORK COUNTY CLERK 01/29/2019 08:38 PM INDEX NO. 154466/2018 NYSCEF DOC. NO. 127 RECEIVED NYSCEF: 01/29/2019 ARGUMENT RESPONDENTS’ ATTORNEYS FEES, COST AND APPRAISAL FEES MEET THE “INCURRED” REQUIREMENTS OF BCL 623(H)(7) Gurney’s counsel has implied that unless Respondents’ actually paid this firm for legal services, then attorney’s fees have not been “incurred” as required by the BCL and therefore cannot be awarded by the Court. New York Business Corporation Law § 623(H)(7) provides, in pertinent part: The Court may in its discretion, apportion and assess all or any part of the costs, expenses and fees incurred by any or all of the dissenting shareholders who are parties to the proceeding against the corporation if the court finds any of the following: (A) that the fair value of the shares as determined materially exceeds the amount which the corporation offered to pay. BCL 623 uses the word “incurred.” The BCL does not define the word “incurred.” Dictionary.com defines “incurred” as “to become liable or subject to . . .” See attachment hereto. There is no requirement or condition precedent that mandates a client to have paid attorney’s fees to be eligible for the BCL 623(h)(7) fees, costs and expense award. Although the word “incurred” is not defined in Section 623 nor anywhere in the BCL, in Rubin v. Empire Mutual Ins. Co., 25 N.Y. 2d 426, 306 N.Y.S. 2d 914 (1969) the New York Court of Appeals held that the “common and well-understood” definition of “incurred” as “to become liable or subject to.” Supra at 427. The Court of Appeals in Empire reversed the Appellate Division, First Department which had held that an insured had not “incurred” expenses for purposes of the insurance policy because a public health program was available to pay for the services. The Court of Appeals disagreed and reversed, holding that because he received the services and was liable, they had been “incurred” even though the insured was never required to pay for the services. The Second Department in Matter of Shore, 67 A.D. 2d 526, 415 N.Y.S. 2d 2 2 of 6 FILED: NEW YORK COUNTY CLERK 01/29/2019 08:38 PM INDEX NO. 154466/2018 NYSCEF DOC. NO. 127 RECEIVED NYSCEF: 01/29/2019 878, (2d Dept. 1979) , app dismissed, 48 N.Y. 2d 634 (1980), has similarly interpreted 623(h)(7) to require Parklane Hosiery to pay dissenters’ appraisal expert fees despite the fact that the expert worked on a contingent basis and expressly agreed to look only to the court award, if any, for his fees. According to Matter of Shore, the expert’s retainer agreement read, in part, “. . . the receipt of any fee by you is contingent upon a favorable result.” The Second Department interpreted the retainer agreement with that expert to be “. . . essentially they would have to look to whatever fee was awarded by the Court.” Id. at 533. Notwithstanding the contingent nature, the Second Department affirmed the award to the expert despite the fact that his fees were contingent and despite the fact that the expert agreed to look only to the court awarded fee for payment, not the client. Federal precedent interpreting and applying statutory fee provisions which include “incurred” as part of the provision also hold that fees greater than a contingent fee are considered “incurred” when services are provided even where the client is only liable for the contingent fee. The interpretation of the phrases “incurred” and “actually incurred” in attorney’s fees statutes was the subject of Circuit Court of Appeals rulings in Bess v. Bess, 929 F.2d 1332, 1335 n.7 (8th Cir. 1991) and Shelden v. United States, 41 Fed. Ct. 347 (U.S. Court Federal Claims 1998), respectively. In Bess v. Bess, the attorneys’ fees statute involved was 18 U.S.C. 2520(b)(3) which made a defendant liable for “a reasonable attorney’s fees and other litigation costs reasonably incurred.” (Emphasis supplied). The Eighth Circuit held that the plaintiffs’ attorneys’ fees could be recovered in full even though the plaintiffs’ attorney had only a contingent fee agreement with counsel. In Shelden, the Court of Claims held that the “actually incurred” language of the fee shifting provision in the Uniform Relocation Assistance and Real Property Acquisitions Policies Act, 42 U.S.C. 4654(c) (1977) did not bar the recovery of 3 3 of 6 FILED: NEW YORK COUNTY CLERK 01/29/2019 08:38 PM INDEX NO. 154466/2018 NYSCEF DOC. NO. 127 RECEIVED NYSCEF: 01/29/2019 attorney’s fees where the only agreement between plaintiff and counsel was a contingent agreement. The court rejected the defendants’ arguments that under the statute the only costs “actually incurred” were the contingent fees amount which were considerably less than the attorney’s hourly billings. Here, the retainer agreement provides in pertinent part: We will not charge you for legal services until we obtain payment of an award or settlement . . . . We propose to seek a contingent fee in the appraisal proceeding . . . or any other amount that the Court approves together with reimbursement of our reasonable expenses . . . We intend to ask the Court to award us attorney’s fees under BCL 623. See Squitieri Affirmation Exhibit C. Respondents’ attorneys’ contingent fee provision does not conflict with, or negate in any way, clients’ agreement to allow their counsel to seek a statutory fee award. In fact, in 1990 the United States Supreme Court held that contingent fee agreements and court awarded attorney’s fees may co-exist independently of one another. Venegas v. Mitchell, 495 U.S. 82, 88, 110 S. Ct. 1679 (1990). Nor does the contingent fee agreement constitute a ceiling on fees. In Albunio v. The City of New York, 16 N.Y. 3d 472, 922 N.Y. S. 2d 244 (2014), New York’s Court of Appeals decided the question of “the appropriate treatment of statutory counsel fees awarded under the New York City Human Rights Law where the contingency fee agreement does not explicitly mention statutory fees.” The Court of Appeals held that an attorney is entitled to the greater of either the contingency fee or the statutory award where the retainer did not mention the statutory fees. In so holding, the Court of Appeals noted “a majority of the federal cases . . . follows the rule that, absent an explicit agreement to the contrary, . . . counsel is entitled generally to the greater of the two” i.e., statutory fee or contingent fee.” (Citations omitted). The Court of Appeals cited several state high courts 4 4 of 6 FILED: NEW YORK COUNTY CLERK 01/29/2019 08:38 PM INDEX NO. 154466/2018 NYSCEF DOC. NO. 127 RECEIVED NYSCEF: 01/29/2019 following a similar rule: Cambridge Trust Co. v. Hanify King Professional Corp., 430 Mass 472, 480, 721 N.E. 2d 1(1999) (“the better approach . . simply permits the attorney to recover the amount set by the contingent fee agreement or the court awarded fee whichever is greater.”) See also Wheatley v. Ford, 679 F.2d 1037, 1041 (2d Cir. 1982); Sullivan v. Crown Paper Board Co., Inc., 719 F.2d 667, 669-670 3d Cir. 1983 (holding attorney only entitled to “recovery of the contingency amount fee amount or the statutory fee whichever is greater” where fee agreement silent or statutory fee); Venegas v. Mitchell, 496 U.S. 82, 88, 110 S. Ct. 1679 (1990) (attorney entitled to greater of contingent fee or court awarded fees); Sargeant v. Sharp, 579 F.2d 645, 649 (1st Cir. 1978); State ex rel. Okla. Bar Ass’n v. Weeks, 969 F.2d 347, 356 (Okla.), cert denied, 525 U.S. 1042, 142 L.Ed. 2d 535 (1998); Luna v. Gillingham,, 57 Wash. App. 574, 581, 89 P.2d 801 (1990). The policy behind allowing attorney’s fees to dissenter was explained by the Appellate Division. According to the Second Department’s decision in Matter of Shore (Parklane Hosiery Co.), 67 A.D. 2d 526, 532, 415 N.Y.S 2d 878 (2d Dept. 1979) “the expenses incurred in litigating an appraisal proceeding can act as a deterrent to the individual shareholder particularly if he does not own a large number of shares . . . [citations omitted] the appraisal statute seeks to deal with these practical impediments to full enjoyment of the remedy by providing . . . that the cost and expenses of the proceeding shall be assessed against the corporation.” Thus, the same policy that animates other fee shifting statutes to be “liberally construed” (Locher v. Union Life Insurance Co. of America, 389 F.3d 288, 298 (2d Cir. 2004)) also guides BCL 623(h)(7). 5 5 of 6 FILED: NEW YORK COUNTY CLERK 01/29/2019 08:38 PM INDEX NO. 154466/2018 NYSCEF DOC. NO. 127 RECEIVED NYSCEF: 01/29/2019 CONCLUSION For all the foregoing reasons, the Court should award Respondents’ counsel fees, costs and expenses in full. Dated: New York, New York January 29, 2019 Respectfully submitted, SQUITIERI & FEARON, LLP /s/Lee Squitieri Lee Squitieri 32 East 57th Street 12th Floor New York, New York 10022 Tel: (212) 421-6492 Fax: (212) 421-6553 lee@sfclasslaw.com Attorneys for Answering Respondents 6 6 of 6