Smith v. Smith, III

UNITED STATES DISTRICT COURT                                              
SOUTHERN DISTRICT OF NEW YORK                                             


JUDITH SMITH, derivatively on behalf of 50 East 69th                      
Street Corporation; DAVID EZEKIEL FAIRBANK,                               
derivatively on behalf of 50 East 69th Street Corporation;   17 Civ. 6648 (PAE) 
and JUDITH SMITH as CO-TRUSTEE OF THE NANCY                               
A. FAIRBANK, JOHN TAYLOR FAIRBANK AND        OPINION & ORDER              
NATHANIEL DAVID FAIRBANK TRUSTS, derivatively                             
on behalf of 50 East 69th Street Corporation,                             

                    Plaintiffs,                                      
          -v-                                                        

JAMES W. SMITH, III; NANCY K. SMITH; LUCINDA                              
SMITH HAY; and CENTER FOR SPECIALTY CARE,                                 
INC.,                                                                     

                    Defendants,                                      

          -and-                                                      

50 EAST 69th STREET CORPORATION,                                          

                    Nominal Defendant.                               


PAUL A. ENGELMAYER, District Judge:                                       
This decision resolves plaintiffs’ motion for attorneys’ fees and costs incurred in this 
shareholder derivative action.                                            
I.   Background                                                           
The Court assumes familiarity with the facts and procedural history of this case, including 
as set forth in its April 19, 2019 summary judgment decision, which supplied a detailed history 
of this litigation and the parties’ underlying disputes.  See Dkt. 72 (“MSJ Op.”).  Relevant here, 
that decision granted summary judgment to defendant Center for Specialty Care (“CSC”), and to 
the individual defendants on plaintiff-shareholders’ claim that defendants had breached their 
fiduciary duty to 50 East 69th Street Corporation (“50 East”) by amending retroactively the 
terms of 50 East’s lease agreement with CSC so as to charge reduced, and allegedly below-
market, annual rents.  The Court denied, however, the individual defendants’ bid for summary 
judgment on plaintiffs’ separate claim that these defendants had breached their fiduciary duty to 
50 East and its shareholders by causing 50 East to make a $3.73 million “lease termination 
payment” to CSC.  As plaintiffs noted, because CSC had already breached the terms of its lease 

with 50 East so as to justify 50 East’s terminating it, there was no need for 50 East to pay CSC to 
induce it to terminate the lease early.  Plaintiffs argued that the payment was instead motivated 
by the individual defendants’ desire to fund CSC so that it could repay debts that it owed to some 
of them.  Recognizing that this claim was supported by formidable evidence, the Court permitted 
it to stand and reach a jury.                                             
Following the summary judgment decision, CSC voluntarily paid 50 East $4,245,727.40, 
representing the $3.73 million lease termination payment plus “interest at a rate of 5%.”  See Dkt. 83.  
The parties then filed a joint letter setting forth their views on the issues that the Court’s 
summary judgment ruling and CSC’s payment had left unresolved.  Dkt. 85.  In response, the 

Court issued an order stating that “[a]lthough plaintiffs identify other ostensible open issues, the 
only one identified that appears to the Court to be within the scope of this case concerns plaintiffs’ 
entitlement to attorneys’ fees.”  Dkt. 86.  The Court set a briefing schedule “to address and 
resolve the issue of plaintiffs’ entitlement to attorneys’ fees.”  Id.    
On September 24, 2019, plaintiffs filed a motion for fees and a supporting memorandum 
of law and exhibits.  Dkt. 87 (“Pl. Mem.”).  On October 7, 2019, defendants filed a memorandum 
of law in opposition.  Dkt. 88 (“Def. Mem.”).  On October 14, 2019, plaintiffs filed a reply.  
Dkt. 89 (“Pl. Reply”).                                                    
II.  Discussion                                                           
The Court first resolves plaintiffs’ request for attorneys’ fees.  The Court then addresses 
plaintiffs’ request for prejudgment interest.  Finally, the Court addresses plaintiffs’ request for a 
declaratory judgment.                                                     
A.   Attorneys’ Fees                                                 
     1.   Entitlement to Fees                                        
Plaintiffs seek attorneys’ fees for having obtained a benefit for 50 East—the repayment to 

50 East of the $3.73 million plus interest—through their derivative suit.  See Mills v. Elec. 
Auto-Lite Co., 

396 U.S. 375

, 390–93, 396–97 (1970).  Defendants concede that a fee award is 
appropriate in light of plaintiffs having catalyzed this beneficial outcome for 50 East, but dispute 
the amount that plaintiffs are due given that a substantial portion of plaintiffs’ claims (those 
relating to the lease renegotiations) were rejected at summary judgment.  Def. Mem. at 5–6.   
The Court agrees with all parties that plaintiffs are clearly entitled to attorneys’ fees 
under the common-benefit doctrine, which “often applies ‘in shareholder derivative actions, to 
award fees indirectly against other shareholders benefitting from the law suit by taxing the 
nominal corporate defendant.’”  In re Citigroup S’holder Derivative Litig., No. 12 Civ. 3114 

(JPO), 

2013 WL 4441511

, at *3 (S.D.N.Y. Aug. 19, 2013) (quoting Christensen v. Kiewit-Murdock 
Inv. Corp., 

815 F.2d 206

, 211 (2d Cir. 1987)), aff’d sub nom. Moskal v. Pandit, 

576 F. App’x 33

 
(2d Cir. 2014); see also Mills, 396 U.S. at 396–97; Koppel v. Wien, 

743 F.2d 129

, 134–35 
(2d Cir. 1984); Brautigam v. Bratt, No. 98 Civ. 9060 (JSM), 

2000 WL 1264289

, at *1 
(S.D.N.Y. Sept. 5, 2000).  The issue is the proper amount of the fee award. 
     2.   Plaintiffs’ Reasonable Fees                                
 “The district court retains discretion to determine . . . what constitutes a ‘reasonable’ 
fee.”  LeBlanc-Sternberg v. Fletcher, 

143 F.3d 748, 758

 (2d Cir. 1998).  The starting point for 
this analysis is the “presumptively reasonable fee,” or lodestar, which is calculated by 
multiplying a reasonable hourly rate by the reasonable number of hours required by the case.  
Millea v. Metro-N. R.R. Co., 

658 F.3d 154, 166

 (2d Cir. 2011); Arbor Hill Concerned Citizens 
Neighborhood Ass’n v. County of Albany, 

522 F.3d 182, 183

 (2d Cir. 2008); see also Perdue v. 
Kenny A. ex rel. Winn, 

559 U.S. 542

, 551–52 (2010); Hensley v. Eckerhart, 

461 U.S. 424, 433

 

(1983).  This calculation provides an “initial estimate” or “rough approximation” of the 
reasonable fee.  See Perdue, 

559 U.S. at 556

; Hensley, 

461 U.S. at 433

.   
“In determining what fee is reasonable, the court takes account of claimed hours that it 
views as excessive, redundant, or otherwise unnecessary.”  Bliven v. Hunt, 

579 F.3d 204, 213

 
(2d Cir. 2009) (internal quotation marks omitted).  In doing so, a court may properly draw on its 
“first-hand knowledge of [the] litigation and its extensive contact with the parties.”  Luciano v. 
Olsten Corp., 

109 F.3d 111, 117

 (2d Cir. 1997).  Where the Court finds the number of hours 
stated disproportionate to the work performed, the Court should reduce the stated hours accordingly.  
See Hensley, 

461 U.S. at 434

; Seitzman v. Sun Life Assurance Co. of Can., 

311 F.3d 477, 487

 

(2d Cir. 2002).                                                           
“‘[T]he most critical factor’ in a district court’s determination of what constitutes 
reasonable attorney[s]’ fees in a given case ‘is the degree of success obtained’ by the plaintiff.”  
Barfield v. N.Y.C. Health & Hosps. Corp., 

537 F.3d 132, 152

 (2d Cir. 2008) (quoting Farrar v. 
Hobby, 

506 U.S. 103, 114

 (1992)) (citing Kassim v. City of Schenectady, 

415 F.3d 246, 254

 
(2d Cir. 2005); Pino v. Locascio, 

101 F.3d 235

, 237–38 (2d Cir. 1996)).  “Where ‘a plaintiff has 
achieved only partial or limited success, the product of hours reasonably expended on the litigation 
as a whole times a reasonable hourly rate may be an excessive amount,’ even if plaintiff’s 
‘claims were interrelated, nonfrivolous, and raised in good faith.’”  Williams v. Epic Sec. Corp., 

368 F. Supp. 3d 651, 656

 (S.D.N.Y. 2019) (quoting Hensley, 

461 U.S. at 436

).  But see 
Mugavero v. Arms Acres, Inc., No. 03 Civ. 5724 (PGG), 

2010 WL 451045

, at *3 
(S.D.N.Y. Feb. 9,2010) (“Work on ultimately unsuccessful claims is compensable as long as 
those claims are not ‘wholly unrelated’ to the claims plaintiff succeeded on at trial,” although 
“[a] downward adjustment may still be appropriate . . . when a plaintiff succeeded on only some 

of his claims for relief.” (quoting Lunday v. City of Albany, 

42 F.3d 131, 134

 (2d Cir. 1994) 
(internal quotation marks and citations omitted)).  However, “[t]here is no precise rule or 
formula” for assessing the reasonableness of fees.  Hensley, 

461 U.S. at 436

.   
Where the lines between time spent on successful versus unsuccessful claims are 
“blurry[,] a court need not become enmeshed in a meticulous analysis of every detailed facet of 
the professional representation to determine the proper award, nor should a request for attorney[s]’ 
fees result in a second major litigation.”  Mugavero, 

2010 WL 451045

, at *3 (internal quotation 
marks, citations, and alterations omitted).  Rather, “the court has discretion simply to deduct a 
reasonable percentage of the number of hours claimed as a practical means of trimming fat from 

a fee application.”  Rodriguez ex rel. Kelly v. McLoughlin, 

84 F. Supp. 2d 417, 425

 (S.D.N.Y. 1999) 
(quoting Kirsch v. Fleet St., Ltd., 

148 F.3d 149

, 173 (2d Cir. 1998) (internal quotation marks 
omitted)); see also Marion S. Mishkin Law Office v. Lopalo, 

767 F.3d 144, 150

 (2d Cir. 2014); 
McDonald ex rel. Prendergast v. Pension Plan of the NYSA-ILA Pension Tr. Fund, 

450 F.3d 91, 96

 (2d Cir. 2006); COR, LLC v. First Standard Fin. Co., LLC, No. 17 Civ. 2190 (PAE), 

2019 WL 1090480

, at *3 (S.D.N.Y. Mar. 8, 2019).  That is because “it is less important that 
judges attain exactitude, than that they use their experience with the case, as well as their 
experience with the practice of law, to assess the reasonableness of the hours spent.”  Amato v. 
City of Saratoga Springs, 

991 F. Supp. 62, 66

 (N.D.N.Y. 1998) (citing Clarke v. Franke, 

960 F.2d 1146

, 1153 (2d Cir. 1992)); see also Luciano, 

109 F.3d at 117

.   
Here, plaintiffs’ counsel seek a total of $146,809 in attorneys’ fees, reflecting 423.25 
hours of legal work, plus $9,723.20 in costs, for a total of $156,532.20.1  This sum reflects the 
entire amount paid by their clients.2  Defendants do not contest “the reasonableness of the hourly 

rates charged by [p]laintiffs’ counsel,” Def. Mem. at 9, but argue that the Court should award 
only 25% of the requested fees because only one of plaintiffs’ claims—regarding the ostensible 
“lease termination payment” that 50 East chose to pay to CSC—survived summary judgment, id. 
at 10.                                                                    
Defendants are correct that plaintiffs advanced multiple, distinct claims and, on these 
claims, originally sought to recover a total of $27 million in damages.  Defendants are also correct 
that on summary judgment, the Court dismissed the set of claims that stood to secure the majority 
of these damages: for 50 East’s repeated, and allegedly improper, reductions of CSC’s rent.  
Plaintiffs had sought approximately $14 million in damages on these claims.  Instead, the Court 

held that only one of plaintiffs’ claims could reach a jury: their claim that 50 East had elected 
needlessly to pay the $3.73 million “lease termination payment” to tenant CSC, which was 
owned by family members of the majority owners of 50 East.  On this claim, the Court held, 
factual disputes, “as to which a jury’s assessment of witness credibility may prove decisive,” 

1 “[Attorney] Anthony Cannatella worked as counsel for 196 hours at a rate varying from $395 to 
$415 per hour for a total of $79,675 . . . [attorney] Christine Wallace worked as counsel for 219 
hours at a rate varying from $295 to $305 per hour for a total of $64,790.00 . . . [and] Kaitlin 
Zask worked as legal assistant for 8.25 hours at a rate of $155 per hour plus expenses for a total 
of $2,344.”  Pl. Mem. at 10.                                              

2 In response to defendants’ contention that not all of these fees were in fact billed to plaintiffs, 
Def. Mem. at 9–10, plaintiffs explain that $7,171.41 in costs were invoiced directly by third 
party providers, Pl. Reply at 3.                                          
precluded entry of summary judgment.  See MSJ Op. at 31.  Reasoning that the $3.73 million 
ultimately returned to 50 East represents 13% of the total damages sought by plaintiffs, and 21% 
“of the two claims . . . analyzed in depth” in the Court’s summary judgment opinion, defendants 
argue that “an award of no more than 25% of the amount [plaintiffs’] counsel billed is more than 
commensurate with any claimed benefit to 50 East.”  Def. Mem. at 10.      

The Court agrees with defendants that, given plaintiffs’ mixed record in this litigation, 
some reduction is warranted from plaintiffs’ bid to recoup all their fees.  The Court, however, 
does not agree that a reduction nearly as drastic as defendants urge is in order.  That is so for two 
reasons.                                                                  
First, plaintiffs’ recovery of nearly $4.25 million for 50 East was a consequential 
achievement.  It is undisputed that this money would not have been repaid to 50 East absent 
plaintiffs’ counsel’s vigorous prosecution of this lawsuit.  And while the Court found that issues 
of credibility required that the determination of liability on this claim be resolved by a jury, the 
evidentiary record put plaintiffs in a strong position to prevail on this claim.  Plaintiffs’ counsel 

developed solid, if not compelling, evidence of self-dealing by 50 East’s majority owners.  This 
evidence would have permitted a jury easily to find that, for personal reasons as opposed to the 
pursuit of the best interests of 50 East, these majority owners had chosen to pay 50 East’s tenant 
CSC, owned by their family members, a multi-million dollar “lease termination payment” that 
was arguably unnecessary given CSC’s material breach (for non-payment of rent) of its lease 
with 50 East.  In the face of this evidence, it is little surprise that defendants wholly capitulated 
on this claim following the summary judgment decision.  Plaintiffs’ counsel achieved this outcome 
in the face of this vigorous, and high-quality, lawyering by estimable defense counsel. 
Second, the Court’s judgment—drawing on its detailed familiarity with this longstanding 
litigation—is that the various claims that plaintiffs pursued were interwoven, and inextricably so.  
The two claims arose from the same broad narrative involving the rental history of 50 East 69th 
Street involving tenant CSC.  Further, deposition witnesses, and to some degree documents, were 
common to both plaintiffs’ unsuccessful rent renegotiation claims and plaintiffs’ viable 

lease-termination-payment claim.  Defendants’ implicit thesis that the work that plaintiffs’ 
counsel performed on the two claims was hermetically separate is incorrect.  To be sure, some 
evidence related uniquely to the unsuccessful claims, and significant hours were devoted to 
unsuccessful advocacy in support of those claims.  In the end, though, a significant amount of the 
total time plaintiffs’ counsel spent on this matter would have been necessary even had counsel, 
from the get-go, pursued only the one viable claim.  And there is no indication—and defendants 
have not so argued—that any of the litigation in this matter was brought in bad faith.   
All factors considered, and viewing the reasonable fee holistically and not by a line-item-
by-line-item assessment of plaintiffs’ counsel’s time entries, the Court’s judgment is that a 

reasonable fee award in this case would compensate plaintiffs’ counsel for 75% of the hours 
worked and costs incurred, for a total award of $117,399.15.  The Court awards that sum to 
plaintiffs.                                                               
B.   Prejudgment Interest                                            
Plaintiffs next seek an additional payment of 4% interest on the $3.73 million paid to 
50 East, which would bring the total amount of interest paid by defendants to 9%.  Plaintiffs 
contend that this is appropriate because New York, by statute, sets the rate for prejudgment 
interest at 9%.  Pl. Mem. at 11–13 (citing 

N.Y. CPLR § 5001

).  This claim is easily set aside. 
New York’s Civil Practice Laws and Rules (“CPLR”) § 5001, entitled “[i]nterest to 
verdict, report or decision,” provides that:                              
Interest  shall  be  recovered  upon  a  sum  awarded  because  of  a  breach  of 
performance of a contract, or because of an act or omission depriving or otherwise 
interfering with title to, or possession or enjoyment of, property, except that in an 
action of an equitable nature, interest and the rate and date from which it shall be 
computed shall be in the court’s discretion.                         
CPLR § 5001(a) (emphasis added).  In this case, prejudgment interest is not available to 
plaintiffs for the simple reason that there has been no “sum awarded” by the Court.  The Court 
did not resolve liability on any claim in plaintiffs’ favor.  Rather, following the Court’s summary 
judgment decision, defendants chose to moot the sole unresolved claim by repaying 50 East the 
full $3.73 million lease termination payment that plaintiffs challenged on behalf of 50 East.  
Because there has been no judgment for plaintiffs, there is no statutory charter for an award of 
prejudgment interest.  The Court therefore denies this request.           
C.   Declaratory Relief                                              
Finally, the Court considers plaintiffs’ request for a declaratory judgment.  In their 
motion for attorneys’ fees, plaintiffs request, without elaboration, “a declaratory judgment on 
whether the balance of the issues have been deemed moot as a result of the repayment, whether 
the interest on the payment acknowledged by this Court is prejudgment interest for the breach of 
fiduciary duty, and whether the Lease Termination Agreement is void.”  Pl. Mem. at 5.  
Defendants object that this request seeks a procedurally improper advisory opinion.  Def. Mem. 
at 12–13.  In their reply, plaintiffs argue that “[e]very final judgment should, ‘grant the relief to 
which each party is entitled, even if the party has not demanded that relief in its pleadings,’” 
Pl. Reply at 5 (quoting Fed. R. Civ. P. 54), and that “[d]eclaratory relief may be granted if doing 
so serves a useful purpose,” id.                                          
The Court does not find the entry of declaratory relief warranted here.  Rule 54 is 
inapposite because the Court has not rendered a “final judgment” as to the merits of the sole 
remaining claim in this case.  See Fed. R. Civ. P. 54(a) (“‘Judgment’ as used in these rules 
includes a decree and any order from which an appeal lies.”).  Defendants mooted that issue by 
paying 50 East the entire sum at issue—the $3.73 million that 50 East had previously paid to 

CSC as an ostensible lease termination payment.  Defendants’ action disposed of plaintiffs’ 
surviving derivative claim, which sought solely money damages.  And having now resolved the 
question of attorneys’ fees, the litigation of this matter is complete.3   
Plaintiffs nevertheless contend that “many issues” remain “unresolved.”  Pl. Reply at 5.  
In the lay sense, that is surely so.  But the Court’s role is not to answer abstract questions but to 
resolve cases and controversies.  Defendants’ payment of the entire sum sought here has mooted 
any controversy, along with any need for the Court to resolve the now-abstract questions that 
plaintiffs wish answered about the propriety of defendants’ historical conduct.  See Nike, Inc. v. 
Already, LLC, 

663 F.3d 89, 95

 (2d Cir. 2011) (“The Declaratory Judgment Act does not expand 

the subject matter jurisdiction of the federal courts . . . the Supreme Court [has] explained that 
the phrase ‘[in a] case of actual controversy’ in the Act refers to the type of Cases and 
Controversies that are justiciable under Article III.” (internal quotation marks omitted) (citing 
MedImmune, Inc. v. Genentech, Inc., 

549 U.S. 118, 127

 (2007))), aff’d, 

568 U.S. 85, 133

 (2013).  
With the payment of the $3.73 million plus interest, and the later sale of the building, the Court 
is confident that defendants have met their “formidable burden” of showing that their “voluntary 


3 Plaintiffs raise for the first time in their motion for attorneys’ fees the question of “whether the 
Lease Termination Agreement is void.”  Pl. Mem. at 5.  It is far too late to ask the Court to 
address this question, which was neither raised in plaintiffs’ complaint nor addressed in the 
summary judgment litigation.                                              
compliance moots [this] case” because “it is absolutely clear the allegedly wrongful behavior 
could not reasonably be expected to recur.”  Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. 
(TOC), Inc., 

528 U.S. 167, 190

 (2000).  Finally, because this litigation solely raised backward-
looking questions about defendants’ stewardship of 50 East, there are no issues fairly raised 
about plaintiffs’ or defendants’ rights or responsibilities going forward.  Plaintiffs’ request for a 

declaratory judgment is therefore denied.                                 
                      CONCLUSION                                     
For the reasons stated above, the Court awards plaintiffs $117,399.15 in reasonable 
attorneys’ fees, denies plaintiffs’ request for an award of prejudgment interest, and declines to 
issue a declaratory judgment.  The Clerk of Court is respectfully directed to terminate the motion 
pending at docket 87 and to close this case.                              

SO ORDERED.                                                          
                                   ____________________________      
                                   Paul A. Engelmayer                
                                   United States District Judge      

Dated: April 22, 2020                                                     
New York, New York