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`IND EX NO.
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`53406/2017
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`To commence the statutory time for appeals asliof right
`(CPLR 5513[a]), you are advised to serve a copy -
`of this order, with notice'of entry, upon all parties.
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`SUPREME COURT OF THE STATE OFNEWTORK '
`,-
`COUNTY OF WESTCHESTER.
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`_
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`""""‘"'"""'""'""'"""""'"‘"""“‘"‘"‘"""f"“'"'"";'?""——————————T ———————x
`DAVID BRUCE McMAHAN.
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`Plaintiff,» ’
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`-against-
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`ELENA McMAHAN,
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`Defendant.
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`"“""'"‘""""“‘"‘“""‘“""“‘“"*"""";""""""" ‘""""""."""".-"T’X
`RUDERMANJ.
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`g
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`‘
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`2 DECISION AND ORDER
`Sequence Nos. 40,41,42 ‘
`Index NO. 1.4070/2007 .
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`The following papers were lconsidere’din cminéction with Motion Sequence Nos. 40, 41, and 42:
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`Sequence No.40
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`Defendant’s Order to Show Cause, Affinnation,Exs. A DD
`Affirmafionin opposition, Exs. A— J
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`Reply, Exs EE— HH
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`A
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`Sequence No. 41
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`Plaintiff’s Order to Show Cause, Cunningham Affirmation, Exs. A—C,
`Belowich Affirmation, Exs. AC, Wallack Affirmation, Ex A, Ransom '
`Affidavit, Ex. A
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`Affirmation1n Opposition, Affidavit, Exs A DD
`2
`Affirmation1n further support, Exs. A—p D
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`L 3
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`23
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`\)
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`Sequence No. 42
`Pla1nt1ff’s Not1ce of motion Affirmatidn, Exs. A D _
`Affirmation1n Opposition, Exs. A— X ~
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`Reply, Ex A, Exs. A E
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`L
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`‘
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`The plaintiff brought this action in August, 2007, against hisforiner‘ wife for damages as
`a result of a breach of a confidentiality agreement containedm a March 20, 2005‘‘-SOordered”
`stipulation of settlement of a matrimonial actiOn.*(MOtion Seq. No.1 40, Ex. A.) The stipulation
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`of settlement provided that in-the event Of a “material breach” of the confidentiality agreement,
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`the party committing the breach would be liable for “actual damages” to the other party. Further,
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`should a party be found to have committed a- material breach, that party would be additionally
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`, liable for “all expenses, costs and reasonable attorney’s fees .
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`.
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`. .” (Motion Seq. No. 40, Ex. A,
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`Article III, par. 7.)
`In 2006, the Village Voice published an article alleging that the plaintiff had committed
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`incest with his adult daughter from a relationship prior to his marriage with the defendant.
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`Similar articles appeared in the New York Post. Subsequently, in 2007, the Village Voice
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`published a follow—up article entitled Daddy ’5 Dog, in which the defendant was interviewed, and
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`confirmed her understanding of the truth 'of the allegations of incest (hereinafter, “Daddy ’s Dog”
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`or “Daddy ’s Dog article”). The allegations made by the defendant in the 2007 Daddy’s Dog
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`article formed the basis of the present action for breach of the confidentiality agreement.
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`On November 19, 2009, thedefendant made a written offergto liquidate damages under
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`CPLR 3220, agreeing to judgment in the amount of $250,000 “with costs accrued thus far in this
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`action as defined in CPLR Section 3220, if the Defendant’s Defenses fail.” (Motion Seq. No. 40,
`Ex. B.) The offer was.not accepted by the plaintiff.
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`After nine years of litigation, the case was assigned to this court for trial. At the
`commencement of the trial, after the jury hadfbeen selected,'the defendant conceded liability on
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`the record.
`(Motion Seq. No. 40, Ex. L.) Defense counsel stipulated that the defendant had
`“materially breached” Article III of the stipulation of settlement, “entitling Mr. McMahan to
`counsel fees, which is $1,000,000.00 as of today’s date .....’l (Motion Seq. No. 40, Ex. L, at
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`2.) Further, defendant agreed to liability for additional attorney’s fees, stating, “And we’re
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`consenting to $1 million as of today. Going fbrward, he [plaintiff] will incur future counsel fees
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`under that particular paragraph, which will be dealt with when he produces invoices, and when
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`2
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`we go forward on the issue of damages.” (Motion Seq. No. 40, Ex. L, at 3.) Defense counsel
`clarified that he had consented to fees under ‘tParagraph 7,” and that he would withdraw certain
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`appeals that were pending concerning attorney’s fees.
`(Motion Seq. No. 40, Ex. L, at 4.)
`Neither party mentioned the existence ofthe offer under CPLR 3220.
`I
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`At trial, plaintiff sought to establish that the» Daddy ’5 Dog article damaged the plaintiff,
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`who was a general partner and Chief Executive Officer of McMahan Securities, and the
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`President and Chief Executive Officer of Argent Funds Group (“Argent”). Plaintiff contended
`that an entity known as Access International Advisors (AIA) stopped marketing. the plaintiff’s
`investment funds after the publication ofDaddy’s'Dog, resulting in the loss ofmillions ofdollars
`in fees.
`(Trial Transcript, Motion Seq. No. 42, Ex A, at 40 — 43.)
`In his opening statement,
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`plaintiff‘s counsel conceded that the allegatitins‘ of incest had surfaced and been published in
`2006, but nevertheless argued that these articles were “different” because they did not contain
`pictures of the defendant or statements attribtitedto her. (Trial Transcript, Motion Seq. No. 42,
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`EX. A, at 43.) Defendant’s counsel countered in his opening that the plaintiffwould not be able
`to establish that the Daddy ’s Dog article alone, as opposed to the other numerous publications
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`which contained (allegations of incest, caused plaintiffs alleged damages.
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`(Trial Transcript,
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`Motion Seq. No. 42, Ex. A, at 47 — 49.)
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`_
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`At trial, defendant admitted into evidence :New York Post articles dated September 28,
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`September 29, and October 1, 2006, which contained numerous photographs and detailed.
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`allegations of the alleged incestuous relationship between the plaintiff and his daughter. (Motion
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`Seq. 42, Affirmation in opposition, Ex. A.)l
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`None of these articles contain any statements by the defendant, and there is no allegation that the defendant contributed to these
`articles.
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`The jury rejected plaintiff‘s argumentsithat the 2007 Daddy ’s Dog article had caused him
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`to incur actual damages in the amount of $6,173,162 relating to McMahon Securities, and
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`$3,672,000 relating to Argent Funds.
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`Instead', the jury found that the plaintiff had not sustained
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`any damages.
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`Defendant is Motion for Attorney ’s Fees and Other Expenses (Motion Sequence No. 40)
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`Defendant moves to preclude legal fees on the ground that this action was baseless, and
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`to recover legal fees as “expenses” under CPDR 3220. The court rejects defendant’s arguments
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`that plaintiff is not entitled to any additionallattorney’s fees because no actual damages were
`awarded! While the actual results may be considered in determining the amount of reasonable
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`attorney’s fees, this action was not frivolous, or so lacking in merit as to suggest that no award of
`fees is warranted.
`lndeed,-the defendant freely stipulated to pay attomey’s fees in the amount of
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`$1 million to the extent that fees had accrued in the action, up to the time of the commencement
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`ofthe trial. Nor did defendant suggest at that time that additional fees were not warranted.
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`Defendant made a written offer to liquidate damages under CPLR 3220, agreeing to the
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`entry of judgment against her in the amount of $250,000. This offer was rejected. Defendant
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`accordingly argues that the plaintiff-is liable fOr the defendant’s expenses .“necessarily incurred .
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`for trying the issue of damages from the 2time of the offer.” (CPLR 3220; see, Weinstez'n,
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`Korn & Miller, New York Civil Practice, § 3220.03; Abreu v. Barkin & Assoc. Realty, Inc, 115
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`A.D.3d 624 [lst Dept. 2014] [granting a hearing on attomey’s fees where plaintiff failed to
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`obtain a more favorable judgment than the offer].) Plaintiff maintains that because plaintiff
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`recovered at
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`least $1,000,000.00 in attorney’s fees, which Will eventually be reduced to a
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`judgment, the plaintiff in fact recovered more: than the amount which was offered under CPLR
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`3220.
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`CPLR 3220, entitled “Offer to Liquidate Damages Conditionally,” provides as follows:
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`“At any time not later than ten days before trial, any party against whom a
`cause of action based upon contract, express or implied, is asserted may serve
`upon the claimant a written offer to allow judgment to be taken against him for
`a sum therein specified, with costs then accrtred, if the party against whom the
`claim13 asserted fails1n hisidefense If within ten days thereafter the claimant
`serves a written notice that he accepts the offer, and damages are awarded to
`him on the trial, they shall be assessed in the sum specified in the offer. If the
`offer is not so accepted and the claimant fails to obtain a more favorable
`judgment, he shall pay the expenses necessarily incurred by the party against
`whom the claim is assertedfifor trying the issue of damages from the time of
`the offer. The expenses shall be ascertained by the judge or referee before
`whom the case is tried. An offer under this rule shall not be made known to the
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`jury.”
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`Defendant’s offer included “costs then accrued,” but was silent as to whether attomey’s
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`fees were included. The statute itself does not indicate whether attorney’s fees are included
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`within “costs.” The First Department has held that the “expenses” to be recovered by the
`defendant, where plaintiff does not obtain a more favorable judgment, includes attorney’s fees,
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`but this holding does not address the issue of whether “costs” include attorney’s fees.
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`(Abreu v.
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`Barkin & Assoc. Realty, Inc, 115 A.D.3d 624;»[lst Dept. 2014].) This court has not located any
`New York case indicating whether the initial offer under CPLR 3220 should be deemed to
`include attorney’s fees.
`.
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`“It is well settled in New York that a. prevailing party may not recover attorneys‘ fees
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`from the losing party except where authorized by statute, agreement or court rule.” (U.S.
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`Underwriters Ins. Co. v. City Club Hotel, LLC, 3 N.Y.3d 592, 597 [2004] [citations omitted];
`3’
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`RMP Capital Corp. v. Victory Jet, LLC, 139 A.D.3d 836 [2d Dept. 2016].) Here, the “damages
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`which plaintiff sought to recover were the alleged “actual damages” resulting from the “material
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`(Motion Seq. No. 40, Ex. A, Article III, par. 6.)
`breach” of the matrimonial agreement.
`Additionally, attomey’s fees were recoverable under the agreement. (Motion Seq. No. 40, Ex. A,
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`Article III, par. 6.) ‘
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`While New York law is unclear as to whether an offer to liquidate damages includes
`attorney’s fees, federal court proceedings provide, some guidance as to (1) whether costSnclude
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`attorney’s fees, and (2) the proper mechanism for assessing whether the plaintiff’s recovery is
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`more favorable than the offer.
`(Marek v. Chesny (473 US.
`1
`[1985]; LaPz’erre v. City of
`Lawrence, 819 P.3d 558, 562, fi. 7 [lst Cir. Mass. 2016] [offers ofjudgment under Fed. R. Civ.
`P. 68, attorney’s fees are treated as a subset of “costs”])
`I
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`In the seminal case of Marek v. Chesny (supra), the United States Supreme Court
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`interpreted Fed. R. Civ. P. 68, which, as then written, allowed a defendant, up to 10 days before
`the trial began, to "serve upon the adverse party an offer to allow judgment to be taken against
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`him for the money or property or to the effeet specified in his offer, with costs then accrued."
`Fed. R. Civ. P. 68 further provided that if the offer was rejected and "the judgment finally
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`obtained by the offeree [was] not more favorable than the offer, the offeree must pay the costs
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`incurred after the making of the offer.”
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`._
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`.
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`In Marek .v. Chesny (supra), the United States Supreme Court reasoned that the term
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`"costs" in Rule 68 was intended to refer to all costs properly awardable under the relevant
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`substantive statute or other authority, and that all costs properly awardable in an action are to be
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`considered within the scope of Rule 68 "costs."‘ Pursuant to the Civil Rights Attorney's Fees
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`Awards Act of 1976, a prevailing party in a 42 U.S.C. § 1983: action maybe awarded attorney'sE
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`fees "as part of the costs." Since Congress expressly included attorney's fees as "costs" available
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`to a plaintiff in a § 1983 suit, attorney’sfees were therefore Subject to the cost—shifting provision
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`7
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`of Rule 68.
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`Here, by analogy, attorney’s fees are recoverable, not by statute, but by agreement. Just
`as the United States Supreme Court reasoned that» the term "costsrin Rule 68 was intended to
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`refer to all costs properly awardable under the'irelevant substantive statute or other authority, this
`Court finds that the term “costs” in CPLR 3220 includes attorney’s fees which are properly
`recoverable in the action by agreement ofthe parties.
`-
`In Marek, an offer was made to settle, the plaintiff‘s civil rights suit under 42 U.S.C. §
`1983 inclusive of attorney’s fees in an unallocated amount of $100,000. The plaintiff refused that
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`offer. After trial, the plaintiff recovered the following sums — $60,000 in damages; $32,000 in
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`preoffer costs; and,’$139,692.47 in claimed po‘Stoffer costs.
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`.With respect to the mechanism by which the plaintiffs success or lack of success is to be
`calculated, in Marek, the United States Supreme Court rejected the argument that the plaintiff’s
`recovery after trial of $231,692.47 exceeded the $100,000 offer. The Court so held because the
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`bulk of the recovery was post-offer attorney’s fees. The court reasoned that “postoffer costs
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`merely offset part of the expense of continuing the litigation to trial, and should not be included
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`in the calculus.” (Id at 7.) ‘ Thus, the Court compared (1) the amount of actual damages (i.e.,
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`$60,000) plus costs inclusive of attorney’s fees at the time of the offer ($32,000), making a total
`of $92,000, with (2) the amount of the offer (i.e., $100,000); and concluded that the final
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`judgment was not more favorable than the offer ($92,000 > $100,000).
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`The calculus applied in Marek v. Chesny provides guidance in the instant case. Here, the
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`defendant consented to judgment in the unallOcated amount of $250,000, inclusive of costs. As
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`attorney’s fees are recoverable in this contract action, the Offer must be deemed to have included
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`an amount for attorney’s fees then accrued, as an element of costs. Here, the plaintiff recovered
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`7
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`only attorney’s fees (in an amount of $1,000,000, plus additional amounts to be determined),
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`plus nominal damages, and failed to recover any actual damages.
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`l’laintiff argues that the
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`recovery of $1,000,000 in attorney’s fees exceeds the offer of $250,000. But as in Marek v.
`Chesny, post-offer costs, inclusive of attorney’s fees, are not properlypart of the calculation.
`Following the logic of Marek, the offer of judgment under CPLR 3220 included all damages,
`costs, and attorney’s fees which had accrued at the time of the offer, and would not have
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`included attorney’s fees which would accruefrom the timefof the offer until the time of the
`ultimate judgment This construction accordswith CPLR 3220’s specific mandate that the offer
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`includes “costs then accrued.” (CPLR 3220 [emphasis added].)
`This Court accordingly holds that wheri attorney’sfees are recoverable by agreement, and
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`the offer ofjudgment is silent as to the treatment of attorney’s fees, the offer must be deemed to
`include such fees, as an element ofcosts. Further, whether the plaintiffobtains a more favorable
`judgment must be determined by comparing the total amount of the offer with the total amount
`ofthe recovery, plus costs (inclusive of attorney’s fees) l‘then accrued,” meaning, as calculated at
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`the time of the offer. Thus, the offer — here, in an amount of $250,000 -— must be compared with
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`~
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`the nominal damages ultimately recovered, plus “costs then accrued,” plus attorney’s fees “then
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`accrued.”
`In order to determine whether plaintiff obtained a more favorabldjudgment, the court will
`need to determine the amount of costs and attorney’s fees accrued at the time ofthe offer;
`Ifthe
`fees and costs, plus $1 in nominal damages, accrued at the time of theoffer, do not exceed
`$250,000, then the plaintiff failed to obtain a more favorable judgment.
`,In that event, plaintiff is
`obligated to pay the “the expenses necessarily‘incurred by [the defendant] for trying the issue of
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`damages from the time of the offer.” (CPLR 3220.) If the fees and costs as of the time of the
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`' 8
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`offer, plus $1 in nominal damages, exceed $250,000, then the plaintiff is considered to have
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`obtained a “more favorable judgment.”
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`The parties shall present evidence on this issue at a hearing.
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`(See the discussion, infra, in
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`connection with Motion Sequence No. 41.)
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`PlaintiffsMotionforAttorney’3Fees (MotionSequenceNo. 41)
`Plaintiff’s attorneys seek $255, 428.75 in attorney’s fees subsequent to the stipulation at
`the commencement of the trial. They concede that ten entries totaling $12,330 relate to other
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`.
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`.
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`.
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`actions and are not properly recoverable in this action. (Motion Sequence No. 41, Affirmation in
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`further support, par. 16.)
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`As noted in Degregorio v. Richmond Italian Pavillion, Inc. (90 A.D.3d 807, 809 [2d
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`Dept. 2011]):
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`'
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`g
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`is a prevailing party, "the
`“However, even where a party establishes that it
`requested fee must also be réasonable" (Pino v Locascz’o, 101 F3d 235, 237
`[19961) A court is vested With "discretion" in determining the appropriate
`amount of fees (42 USC § 2000a—3 [a]; see Administrative Code of City of NY §
`8-502 [1]; see Hensley v Eckerliort, 461 US 424, 453-454, 103 S Ct 1933, 76 L Ed
`2d 40 [1983]).
`‘The most impdrtant factor in determining the reasonableness of a
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`fee is the degree of success obtained" (Pino v Locascio, 101 F3d at 237; see
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`Farrar v Hobby, 506 US at 114). The United States Supreme Court has noted that
`“ "{i]n some circumstances, even a plaintiff who formally prevails‘
`should
`receive no attorney's fees at all": (Farrar v Hobby, 506 US at 115). Moreover, ‘fee
`awards are not appropriate where, having failed to capture compensatory or
`punitive damages, a plaintiff Wins only 'the moral satisfaction of knowing that a
`court concluded that [their]; rights had been violated'“ (Pino v Locascio, 101
`F3d at 238, quoting Farrar v Hobby, 506 US at 114). Under the circumstances of
`this case, the Supreme Court providently exercised its discretion in denying the
`plaintiffs motion for an award {of an attorney's fee (see Farrar v Hobby, 506 US
`at 115; Pino v Locascz'o, 101 E3d at 238; Jian Ren Chen v City of New York, 64
`AD3d 542, 543, 881 NYSZd 332 [2009]; Matter ofShah v DeBuono, 257 AD2d
`256, 260, 694 NYSZd 88 [1999])”
`,
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`In the instant case, a determination {cannot be made based merely on the submitted
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`invoices. (See RMP Capital Corp. v. Victor]; Jet, LLC, 139 A.D.3d 836 [2d Dept. 2016] [in
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`contract action, Supreme Court's across—theéboa'rd 25% reduction in the hours expended by the
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`plaintiff‘s attorneys on the case, due to the use of block billing, including vague and nonspecific
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`billing entries, and the nature of this lawsuit, was a provident exercise of discretion].) A hearing
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`is required to consider evidence on all of the foregoing factors in order to determine the necessity
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`and reasonableness of the fee sought.
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`Plaintiff s motion also seeks an award of $1 as nominal damages. Since this is a contract
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`action, and the fact of a] material breach was admitted by stipulation, nominal damages are
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`awarded in the amount of $1. (Ross v. Sherman, 95 A.D.3d 1100 [2d Dept. 2012] [Supreme
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`Court properly awarded the plaintiffs nominal damages on their cause of action alleging breach
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`of contract].)
`
`Plaintifl's Motion to Set Aside the Verdict (Motion Sequence No. 42)
`"A jury
`Plaintiff seeks to set aside the verdict as against the weight of the evidence.
`verdict in favor of a defendant may not be set; aside as being against the weight of the evidence
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`unless the jury could not have reached the verdict on any fair interpretation of the evidence."
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`(Landau v Rappaport, 306 A.D.2d 446, 446-447 [2d Dept. 2003]; Serrano v. Rachel’s Car
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`Service, 2016 NY Slip Op 05801 [2d Dept. 2016]; Ahmed v. Port Auth. ofN.Y. & N.J., 131
`A.D.3d 493, 495 [2d Dept. 2015].) “It is for the jury to make determinations as to the credibility
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`of the witnesses, and great deference in this regard is accorded to. the jury, which had the
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`opportunity to see and hear the witnesses.“ (Ezrarhouleas v Green 31 7 Madison, LLC, 46 A.D.3d
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`854, 855 [2d Dept. 2007].)
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`“The jury's resolution of the credibility of conflicting expert
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`witnesses is entitled to great weight, as it is the jury that had the opportunity to observe and hear
`the experts (see Mancusz’ v Setzen, 23 A.D.3d at 993).”
`(Reitael v: Hale, 128 A.D.3d 1045 [2d
`Dept. 2015].)
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`In the present case, plaintiff relies heavily on the testimony of Patricia Ransom, an
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`employee of McMahan Securities and Argent, who received an email dated July 22, 2008, from
`Vasillis Mouratoff, also an employee of one of plaintiff’s ‘ companies,
`that
`investment
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`opportunities were being lost due to “Argent’s PR problems.” (Motion Seq. 42, Affirmation in -
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`opposition, Ex. C.) Contrary to plaintiff‘s arguments,the jury. was free to reject this testimony as
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`supporting plaintiff’s theory that the Daddy ’3 Dog article, but not the other numerous intemet
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`posts and publications concerning the allegations of incest, caused plaintiff‘s losses. The email
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`did not even mention the defendant or the Daddy ’5 Dog article.
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`Further, the jury was free to reject the testimony of plaintiff’s expert, Bruce Mumford, to
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`the extent that he attributed withdrawal of business to the Daddy ’3 Dog article and disclosures.
`Plaintiffs expert relied heavily on the deposition testimony of Michael Pochna, an employee of
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`AIA.
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`In this regard, Mumford stated,
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`in essence,
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`that AIA decided to stop marketing the
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`plaintiffs funds due to the Daddy ’3 Dog article. ' (Trial Transcript, Motion Seq. No. 42, Ex. A, at
`352.) This conclusion was based on Pochnais deposition testimony. V Pochna in fact explained
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`that he was an employee, and that all business decisions at AIA were made by Thierry de la
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`Villehuchet, who committed suicide due to his involvement in the Madoff scandal. Pochna
`testified that while de la Villehuchet stated “We have a problem,” in the summer of 2007, with
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`respect to plaintiff and his reputation, de la Viilehuchet did not actually identify the Daddy’s Dog
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`11
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`V'.
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`article as the source of the problem.
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`(Motion Seq. No. 42, Ex. D, Ex. C [EBT of Michael
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`Pochna] at 20 — 23.) The jury was not required to credit this vague and conclusory testimony, or
`the expert’s opinions to the extent that they were based on this and other anecdotal evidence that
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`the Daddy '3 Dog article alone was responsible for the business losses.
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`In addition, Mumford testified that the plaintiffs businesses began to suffer in June,
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`2007, following the Daddy’s Girl article. HoWever, he was not aware of, and could not identify,
`how many investors had I read the Daddy is Girl article. His testimony was, in essence, that
`because the plaintiff’s business began losing revenue in June, 2007, the other numerous articles
`detailing the alleged incest were not the cause of the business losses.
`(Trial Transcript, Motion
`Seq. No. 42, Ex. A, at 384.) The jury may well have rejected this theory of causation, which was
`based on a mere alleged correlation between the time ofpublication ofDaddy 19 Dog and the loss
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`of hedge fund business. Plaintiffs expert" did not eliminate other potential causes of the
`plaintiff’5 loss ofbusiness. In particular, he did not account for financial factors which may have
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`affected hedge funds in 2007, at a time when a credit liquidity crisis presaged a stock market
`collapse, nor did he rule out other causes particular to the plaintiff’s businesses or the hedge fund
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`market.
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`Based upon the foregoing, it is hereby,
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`Conclusion
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`ORDERED that Motion Sequence Nos, 40 and 4l are granted to the extent of directing a
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`hearing in accordance with the foregoing, except that nominal damages are awarded on Motion
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`Sequence No. 41 in the amount of $1; and it is further,
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`ORDERED that Motion Sequence No. 42 is denied; and it is further
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`ORDERED that the pahies are directed to appear for a hearing on October 13, 2016.
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`This cortstitutes the Decision and Order (if the Court.
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`Dated: White Plains, New York
`September
`[5 , 2016
`
`
`
`
`JANE RUDERMAN, J.S.C.
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`,13.
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`