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Current Developments in the Commercial Divisions of the
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Posted: December 7, 2017

Court Awards Fees to Prevailing Party But Refuses to Award Fees on Fees

On November 22, 2017, Justice Scarpulla of the New York County Commercial Division issued a decision in Park Union Condominium v. 910 Union St., LLC, 2017 NY Slip Op. 32487(U), awarding attorneys’ fees, plus interest on the fees, but refusing to award fees on fees.

In Park Union Condominium, the plaintiff sought an award of fees, interest and fees on fees. The court granted the first two claims but denied the last, explaining:

In general, a party must pay his or her own attorney’s fees unless an award is authorized by an agreement between the parties, or by statute or court rule. . . . .

According to the Condominium and Board, they are entitled to an ·award of their costs, expenses and attorneys’ fees pursuant to Section 16 of the Agreement. Section 16, entitled “Costs and Attorneys’ Fees in Event of Breach,” provides that

Should it be necessary for any Party to commence legal action to enforce the terms of this Agreement, the prevailing party in such action shall be entitled to recover all costs and expenses, including the costs of· investigation, expert fees, court costs, and reasonable attorneys’ fees and disbursements, incurred in connection with the prosecution or defense of such action, as fixed by a court of competent jurisdiction.

To determine if a party has prevailed for the purpose of awarding attorneys’ fees, the court must consider the true scope of the dispute litigated and what was achieved within that scope. A party may be deemed a prevailing party when it was successful on the central claims advanced..

Here, in the First Department Decision, the Board’s and Condominium’s motion for summary judgment in lieu of complaint was granted. In its decision, the First Department determined that: (1) the parties’ Agreement was “an instrument for the payment of money only,” and (2) the Sponsor defaulted by failing to make payment under the terms of the Agreement.

Hence, the Condominium and Board are the prevailing parties with respect to this action because they succeeded on their appeal on June 30, 2016 and were granted summary judgment on the central claim advanced – that the Sponsor breached the Agreement. And, pursuant to Section 16 of the Agreement, the Condominium and Board are therefore entitled to reasonable attorneys’ fees and expenses incurred with respect to this action.

. . .

The Condominium and Board contend that they are entitled to recover statutory interest on the principal contract amount as well as interest on their attorneys’ fee award. In opposition, the Sponsor argues that because interest is not mentioned as recoverable in the Agreement, it is not recoverable.

Despite the Sponsor’s contention, the Agreement’s lack of reference to interest does not prohibit the Condominium and Board from recovering interest as CPLR § 5001 confers the right to interest in cases involving breach of contract. Under CPLR § 5004, such interest shall be at the rate of nine per centum per annum. A settlement agreement is a contract, so I grant the Condominium’s and Board’s request for statutory interest, at the rate of nine per centum per annum, on the principal contract amount.

Further, New York courts have held that CPLR § 5001 enables parties to recover interest on attorneys’ fees and that such interest accrues from the date that the moving party is deemed the prevailing party. Thus, I find that the Condominium and Board may recover interest on their attorneys’ fees award at the statutory rate of 9% from the date they prevailed, June 30, 2016.

Lastly, the Condominium and Board request an award of fees on fees as reimbursement for expenses incurred from efforts to collect their contractual costs and expenses and their statutory interest. Under New York law, an award of fees on fees must be based on a statute or on an agreement. Here, the Agreement does not explicitly provide for an award of fees on fees. I therefore deny the Condominium’s and Board’s request for an award of fees on fees.

(Internal quotations and citations omitted) (emphasis added).

Litigating for fees can be hard–both because of the high burden you sometimes must meet to be entitled to fees and because it is important to avoid the pitfall of getting an award of fees that is less than what it cost to move for fees. As this decision shows, the general rule is that even if you are entitled to an award of attorneys’ fees, you cannot get fees on fees. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you are litigating an attorney fee award.

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