13-397
Shukla v. Sharma
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January 1, 2007,
is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this court’s Local Rule 32.1.1. When citing
a summary order in a document filed with this court, a party must cite either the Federal Appendix or an electronic
database (with the notation “summary order”). A party citing a summary order must serve a copy of it on any party not
represented by counsel.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
7th day of October, two thousand and fourteen.
PRESENT:
DEBRA ANN LIVINGSTON,
GERARD E. LYNCH,
CHRISTOPHER F. DRONEY,
Circuit Judges.
_______________________________________________
DEVENDRA SHUKLA,
Plaintiff-Counter-Defendant,
- v. - No. 13-397
SAT PRAKASH SHARMA, Individually and as Director of
VISHVA SEVA ASHRAM OF NEW YORK, GEETA SHARMA,
Individually and as Director of VISHVA SEVA ASHRAM OF
NEW YORK, VISHVA SEVA ASHRAM OF NEW YORK DBA
SARVA DEV MANDIR,
Defendants-Counter-Claimants-Appellants,
CHITTUR & ASSOCIATES P.C.,
Non-Party Appellee.
_______________________________________________
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DANIEL H. RICHLAND, Paykin, Richland & Falkowski, P.C.,
New York, NY, for Defendants-Counter-Claimants-
Appellants.
KRISHNAN S. CHITTUR, Chittur & Associates, P.C., Ossining,
NY, for Non-Party Appellee.
UPON DUE CONSIDERATION, it is hereby ORDERED, ADJUDGED, and DECREED
that the judgment of the district court is AFFIRMED in part and VACATED AND REMANDED
in part.
Defendants-appellants Sat Prakash Sharma, Geeta Sharma, and Vishva Seva Ashram of New
York (“defendants-appellants”) appeal from a judgment of the United States District Court for the
Eastern District of New York (Amon, C.J.) awarding non-party appellee Chittur & Associates P.C.
(“Chittur”) $179,615.82 in attorney’s fees as well as $16,080 in additional fees for time spent
litigating its fee application. Chittur withdrew as counsel for defendants-appellants on the basis of
their failure to pay outstanding fees following a jury trial at which defendants-appellants were found
liable to plaintiff Devendra Shukla (“Shukla”) for violating the Trafficking Victims Protection Act.
See Shukla v. Sharma, No. 07-cv-2972 (CBA) (CLP), 2012 WL 481796 (E.D.N.Y. Feb. 14, 2012).
This appeal exclusively concerns the fee dispute between defendants-appellants and Chittur, and not
the underlying litigation between Shukla and defendants-appellants. We assume the parties’
familiarity with the underlying facts and procedural history of the case, and with the issues on appeal.
Defendants-appellants argued below that the district court lacked subject matter jurisdiction
over the fee dispute, and they renewed this argument in their opening brief on appeal, although their
current counsel (who appeared after that brief was filed) no longer presses it. Regardless, the district
court correctly found that it had jurisdiction. For a district court to exercise supplemental
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jurisdiction over a fee dispute, the dispute must form part of the same “case or controversy” as a
dispute over which the district court has original jurisdiction. 28 U.S.C. § 1367(a). That standard
is satisfied when the two disputes “derive from a common nucleus of operative fact.” Achtman v.
Kirby, McInerney & Squire, LLP, 464 F.3d 328, 335 (2d Cir. 2006) (quoting Promisel v. First Am.
Artificial Flowers, Inc., 943 F.2d 251, 254 (2d Cir. 1991)) (internal quotation marks omitted). We
have held, in an “unbroken line of cases,” that a fee dispute between a party and its attorneys shares
a common nucleus of operative fact with the underlying action. Id. at 336; see, e.g., Alderman v.
Pan Am World Airways, 169 F.3d 99, 101-02 (2d Cir. 1999); Itar-Tass Russian News Agency v.
Russian Kurier, Inc., 140 F.3d 442, 445-48 (2d Cir. 1998); Cluett, Peabody & Co. v. CPC
Acquisition Co., 863 F.2d 251, 256-57 (2d Cir. 1988). Because the district court indisputably had
jurisdiction over the underlying litigation pursuant to 28 U.S.C. § 1331, it properly exercised
supplemental jurisdiction over the fee dispute.
Turning to the merits, defendants-appellants argue that the district court erred in awarding
fees to Chittur on an account stated theory because their retainer agreement with Chittur was
unenforceable, and under New York law, an account stated cannot be based on an unenforceable
contract. See Rimberg & Assocs., P.C. v. Jamaica Chamber of Commerce, Inc., 837 N.Y.S.2d 259,
260 (App. Div. 2007); see also Gurney, Becker & Bourne, Inc. v. Benderson Dev. Co., 394 N.E.2d
282, 283 (N.Y. 1979) (“[A]n account stated cannot be made the instrument to create liability when
none exists . . . .”). Defendants-appellants argue that the retainer agreement was unenforceable (1)
because it contained a non-mutual fee shifting clause providing that Chittur was entitled to fees
incurred in litigating a fee dispute, and (2) because it charged two percent monthly interest on past-
due amounts in violation of New York’s prohibition on usury. See N.Y. Gen. Oblig. Law § 5-501;
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N.Y. Banking Law § 14-a(1).
As defendants-appellants concede, they did not present their two enforceability arguments
to the district court. As a general matter, “a federal appellate court does not consider an issue not
passed upon below.” Singleton v. Wulff, 428 U.S. 106, 120 (1976). However, “the rule against
considering claims for the first time on appeal ‘is prudential, not jurisdictional’ and the Court has
‘discretion to consider waived arguments.’” Commack Self-Serv. Kosher Meats, Inc. v. Hooker, 680
F.3d 194, 208 n.11 (2d Cir. 2012) (quoting Sniado v. Bank Austria AG, 378 F.3d 210, 213 (2d Cir.
2004)). A waived argument may properly be considered on appeal as a matter of discretion under
two circumstances: (1) when consideration of the argument is necessary to avoid “manifest
injustice,” or (2) when the waived argument presents a pure question of law and there is “no need
for additional fact-finding.” Id.; see Baker v. Dorfman, 239 F.3d 415, 420 (2d Cir. 2000); Readco,
Inc. v. Marine Midland Bank, 81 F.3d 295, 302 (2d Cir. 1996).
Here, we are able to discern without great difficulty—and indeed, Chittur conceded at
argument—that the non-mutual fee-shifting provision in the retainer agreement was unenforceable
under New York law, and that the district court therefore erred when it granted Chittur $16,080 in
fees associated with litigating the fee dispute. See Ween v. Dow, 822 N.Y.S.2d 257, 261 (App. Div.
2006) (“[W]e find . . . the very nature of the provision, which permits the recovery of attorneys’ fees
by the attorney should he prevail in a collection action, without a reciprocal allowance for attorneys’
fees should the client prevail, to be fundamentally unfair and unreasonable.”); see also In re Ernst,
382 B.R. 194, 198 (S.D.N.Y. 2008) (relying on Ween); Arfa v. Zamir, 869 N.Y.S.2d 390, 391 (App.
Div. 2008) (same). The district court, without the benefit of briefing on the issue, looked to cases
indicating that while “[a] general agreement for the payment of counsel fees does not generally
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include counsel fees in the suit to collect those fees,” parties can contract around that rule by using
“specific language.” F.H. Krear & Co. v. Nineteen Named Trs., 810 F.2d 1250, 1266-67 (2d Cir.
1987) (quoting Swiss Credit Bank v. Int’l Bank, Ltd., 200 N.Y.S.2d 828, 830-31 (Sup. Ct. 1960)).
Those cases, however, involve two-sided fee-shifting provisions, as opposed to one-sided ones, and
ordinary commercial contracts, as opposed to retainer agreements. In New York, “[f]ee
arrangements between an attorney and [a] client are scrutinized with particular care.” Revson v.
Cinque & Cinque, P.C., 221 F.3d 59, 67 (2d Cir. 2000). For these reasons, we vacate the portion
of the district court’s award granting $16,080 to Chittur based on the non-mutual fee-shifting
provision.1
Defendants-appellants would have us further hold that the non-mutual fee-shifting provision
renders the entire retainer agreement unenforceable and thus undermines the basis for Chittur’s
account stated claim. This argument, however, is contrary to the principle that unenforceable
contract provisions are severable. See Restatement (Second) of Contracts § 184(1). Indeed, in the
leading New York case on non-mutual fee-shifting provisions, the court invalidated such a provision
and held that the plaintiff attorney could not recover for time spent litigating his fee application. But
it also assumed that the attorney could recover on an account stated claim predicated on the same
retainer agreement. See Ween, 822 N.Y.S.2d at 260. Accordingly, the invalid fee-shifting provision
does not provide a reason for disturbing the district court’s conclusion that Chittur had established
1
Chittur argues that we should nonetheless award it fees incurred while litigating the fee
dispute, pointing to cases holding that time spent on a fee application is compensable. E.g., Gagne
v. Maher, 594 F.2d 336, 343-44 (2d Cir. 1979). Given that we have denied Chittur these fees on the
basis of the retainer agreement, we will not address, in the first instance, its entitlement to them on
some other basis. On remand, Chittur is free to argue to the district court that it should receive these
fees, although as Chittur recognized at argument, the cases on which it relies were federal question
cases involving statutes that provide for fee-shifting.
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an account stated in the amount of $179,615.82.
Finally, we exercise our discretion and deem defendants-appellants’ argument based on New
York’s usury statute waived. In arguing that their retainer agreement with Chittur is a “loan” or
“forbearance” subject to the usury statute, see N.Y. Gen. Oblig. Law § 5-501(2), defendants-
appellants cite only one appellate decision, Eikenberry v. Adirondack Spring Water Co., 480 N.E.2d
70 (N.Y. 1985). Eikenberry involved an independent repayment agreement for delinquent amounts
already owed by an attorney’s client, not a retainer agreement charging interest on past-due amounts
as they arose. See id. at 72. Defendants-appellants concede that applying the usury statute to retainer
agreements like Chittur’s would require an extension of Eikenberry. We decline to address this state
law claim with potentially significant ramifications for attorney-client relations in New York, given
that the argument was not raised or passed upon below, and that defendants-appellants have not
shown a need to do so to avoid manifest injustice.2
We have reviewed defendants-appellants’ remaining contentions and find them to be without
merit. For the foregoing reasons, the district court’s judgment is VACATED AND REMANDED
with respect to the portion of its award predicated on the unenforceable fee-shifting provision. In
all other respects, the judgment is AFFIRMED.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
2
Defendants-appellants’ opening brief lodged a number of conclusory procedural objections
to the district court’s approach to the fee dispute. These arguments, too, were not raised below, and
we deem them waived as well.
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