18‐2672
Safeco Insurance Co. v. M.E.S., Inc.
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 ASUMMARY ORDER@). A PARTY CITING TO 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 30th day of October, two thousand nineteen.
PRESENT: BARRINGTON D. PARKER,
RAYMOND J. LOHIER, JR.,
RICHARD J. SULLIVAN,
Circuit Judges.
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SAFECO INSURANCE COMPANY
OF AMERICA,
Plaintiff‐Counter‐Defendant‐Appellee,
v. No. 18‐2672‐cv
M.E.S., INC., M.C.E.S., INC., GEORGE
MAKHOUL,
Defendants‐Counter‐Claimants‐Appellants.
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The Clerk of Court is directed to amend the caption as set forth above.
FOR APPELLANTS: MICHAEL CONFUSIONE,
Hegge & Confusione, LLC,
Mullica Hill, NJ.
FOR APPELLEE: VIVIAN KATSANTONIS,
Watt Tieder Hoffar &
Fitzgerald, LLP, McLean, VA.
Appeal from a judgment of the United States District Court for the Eastern
District of New York (Pamela K. Chen, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is
AFFIRMED.
M.E.S., Inc., M.C.E.S., Inc., and George Makhoul (collectively, “MES”)
appeal from a judgment of the district court (Chen, J.) awarding Safeco Insurance
Company of America (“Safeco”) $13,887,076.64 in damages under two Indemnity
Agreements. On appeal, MES argues that the district court (1) clearly erred in
awarding Safeco $3,376,387.02 for construction completion damages; and
(2) clearly erred and abused its discretion in awarding Safeco $5,570,500.62 in legal
costs and fees. Because MES is unable to establish that the court erred – let alone
clearly erred – in calculating the amount of damages awarded to Safeco, we affirm.
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We assume the parties’ familiarity with the underlying facts, procedural history,
and issues on appeal, to which we refer only as necessary to explain our decision
to affirm.
I.
MES contends that the construction completion costs awarded by the
district court “were not ‘reasonable in amount’ as required by New York
indemnity law,” and that the court committed “clear error by disregarding the
evidence presented” by MES. Appellant’s Opening Br. at 9.
“The question of ‘the amount of recoverable damages is a question of fact’”
that we review for clear error. Bessemer Tr. Co., N.A. v. Branin, 618 F.3d 76, 85 (2d
Cir. 2010) (quoting Lucente v. IBM Corp., 310 F.3d 243, 261 (2d Cir. 2002)). In
performing a clear error analysis, “[w]e will not upset a factual finding unless we
are left with the definite and firm conviction that a mistake has been committed.”
Id. (quoting White v. White Rose Food, 237 F.3d 174, 178 (2d Cir. 2001)).
“New York courts have held that pursuant to an indemnity
agreement . . . ‘the surety is entitled to indemnification upon proof of payment,
unless payment was . . . unreasonable in amount . . . .’” Lee v. T.F. DeMilo Corp., 29
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A.D.3d 867, 868 (N.Y. App. Div. 2006) (quoting Frontier Ins. Co. v. Renewal Arts
Contracting Corp., 12 A.D.3d 891, 892 (N.Y. App. Div. 2004)).
MES repeatedly asserts that “[t]he only evidence that was presented”
regarding the reasonableness of construction completion costs “came
from . . . MES’ principal, Mr. Makhoul.” E.g., Appellant’s Opening Br. at 15, 18. It
charges that Makhoul’s testimony – which consisted of audits detailing MES’s
costs and statements by MES informing Safeco of its belief that the replacement
construction company’s costs were exorbitant and its profit margin too high –
demonstrates that the fees Safeco paid to complete two of the construction projects
were “exorbitant.” Id. at 14. We disagree.
First, the district court appropriately determined that MES failed to present
competent evidence to establish that Safeco’s expenditures were unreasonable.
Safeco Ins. Co. of Am. v. M.E.S., Inc., No. 09‐cv‐3312, 2018 WL 2766139, at *21
(E.D.N.Y. June 8, 2018). Instead, the court found MES to have relied upon pure
speculation, including Makhoul’s unsubstantiated, conclusory assertions
regarding the reasonableness of Safeco’s expenditures. Id.
Second, MES is incorrect that Safeco presented no evidence to establish the
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reasonableness of its expenditures. Safeco proffered multiple sworn itemized
statements of loss. Under the terms of the Indemnity Agreements, these, by
themselves, constitute prima facie evidence establishing MES’s liability. In
addition, the court heard testimony at the quantum hearing from Safeco’s claim
representative, John O’Donnell, regarding the reasonableness of Safeco’s itemized
expenditures. MES, by relying on speculative and conclusory assertions, failed to
rebut this prima facie evidence or raise a triable issue of fact as to the
reasonableness of Safeco’s expenditures.
Accordingly, MES fails to establish that the district court clearly erred in
calculating the amount of construction completion damages to award Safeco. We
affirm the district court’s award to Safeco of $3,376,387.02 in construction
completion damages.
II.
MES next maintains that the district court’s legal costs and fees award was
clear error and an abuse of discretion because the court disregarded MES’s
objections to the reasonableness of Safeco’s fees and refused to credit the testimony
of MES’s experts.
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“Our review of an award of attorneys’ fees is highly deferential to the
district court and we will reverse such an award only for an abuse of discretion.”
Townsend v. Benjamin Enters., Inc., 679 F.3d 41, 58 (2d Cir. 2012) (internal quotation
marks and citation omitted). “Where a district court has awarded attorneys’ fees
under a valid contractual authorization, we recognize that it has broad discretion
in doing so . . . .” U.S. Fid. & Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d 34, 74 (2d
Cir. 2004).
The party seeking reimbursement of attorneys’ fees “bears the burden of
establishing entitlement to an award and documenting the appropriate hours
expended and hourly rates.” Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). The
party “must document the application with contemporaneous time
records . . . specify[ing], for each attorney [and legal assistant], the date, the hours
expended, and the nature of the work done.” N.Y. State Ass’n for Retarded Children,
Inc. v. Carey, 711 F.2d 1136, 1148 (2d Cir. 1983).
“[T]he lodestar – the product of a reasonable hourly rate and the reasonable
number of hours required by the case – creates a ‘presumptively reasonable fee.’”
Millea v. Metro‐North R.R. Co., 658 F.3d 154, 166 (2d Cir. 2011) (quoting Arbor Hill
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Concerned Citizens Neighborhood Ass’n v. County of Albany, 522 F.3d 182, 193 (2d Cir.
2008)). The district court must then adjust the lodestar amount – “determining
what a reasonable, paying client would be willing to pay” – “based on case‐specific
considerations.” Arbor Hill, 522 F.3d at 184, 186.
“We do not require that the court set forth item‐by‐item findings concerning
what may be countless objections to individual billing items.” Lunday v. City of
Albany, 42 F.3d 131, 134 (2d Cir. 1994). Though vague descriptions of work and
block billing may impede a district court’s ability to meaningfully assess the
reasonableness of hours spent and costs incurred, thereby justifying an across‐the‐
board reduction, these billing practices are “permissible so long as the records
allow the court to conduct” that meaningful review. Restivo v. Hessemann, 846 F.3d
547, 591 (2d Cir. 2017).
Here, the district court determined that “the [Indemnity] Agreements
plainly entitle[d] Safeco to reasonable attorneys’ fees, including those incurred in
enforcing the Agreements,” resulting from Safeco’s issuance of the payment surety
bonds to MES. Safeco Ins. Co., 2018 WL 2766139, at *8. Furthermore, the court
found that “[u]nder the terms of the Agreements, Safeco’s itemized statements of
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loss me[t] its prima facie burden of establishing its entitlement to attorneys’ fees
and costs.” Id. at *9. The court held a two‐day quantum hearing to determine the
amount of attorneys’ fees Safeco was entitled to recover and issued a
comprehensive memorandum and order justifying its award to Safeco of
$5,570,500.62.
MES attacks the district court’s award of legal costs to Safeco, but each of
MES’s claims suffers from the same fatal defect. None of the supposed billing
deficiencies prevented the court from meaningfully assessing the reasonableness
of the fees and hours Safeco’s counsel billed. The court “reject[ed] the defense
experts’ conclusions that a fee reduction [was] warranted based on . . . allegedly
deficient billing practices . . . , such as vague entries, billing for simple clerical
tasks, general overstaffing, duplicative billing, and block‐billing, or on Safeco’s
alleged failure to contain its litigation expenses.” Id. at *13. The court also
explained that “[t]o the extent Safeco’s counsel’s fee records were not perfectly
maintained, the Court does not find that the deficient entries were excessive or
that they impair[ed] the Court’s ability to assess the reasonableness of the fees and
hours billed by Safeco’s counsel, especially given the Court’s extensive familiarity
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with the indemnity litigation.” Id.
Although MES relies extensively on the testimony of Defendants’ expert
witnesses, Tasher and Johnson, the district court explicitly rejected and discredited
that testimony. MES essentially asks the Court to reassess the experts’ credibility
and to analyze the evidence de novo, rejecting the district court’s factual findings
in favor of MES’s contrary interpretation of the evidence. However, MES’s mere
disagreement with the district court’s credibility determinations and factual
findings provides no basis for this Court to disturb the district court’s decision.
See Diesel Props S.r.l. v. Greystone Bus. Credit II LLC, 631 F.3d 42, 52 (2d Cir. 2011).
Accordingly, MES fails to demonstrate that the district court clearly erred or
abused its discretion, and therefore we affirm the district court’s award to Safeco
of $5,570,500.62 in legal costs and fees damages.
III.
We have considered MES’s remaining contentions and conclude that they
are without merit. For the foregoing reasons, the judgment of the district court is
AFFIRMED.
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Safeco’s motion for monetary sanctions – “specifically attorneys’ fees and
double costs incurred in defense of this . . . appeal,” Doc. No. 88 at 1 – is DENIED.
Though we affirm the district court, which properly noted that “Defendants’
contumacious refusal to object lawful court orders” and “history of re‐litigating
every issue in this case” “ratchet[ed] up the fees that were necessarily incurred” in
the litigation, Safeco Ins. Co., 2018 WL 2766139, at *15, *22, we do not conclude that
MES’s appeal “is totally lacking in merit, framed with no relevant supporting law,
conclusory in nature, and utterly unsupported by the evidence.” United States v.
Potamkin Cadillac Corp., 689 F.2d 379, 381 (2d Cir. 1982).
FOR THE COURT:
Catherine O=Hagan Wolfe, Clerk of Court
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