Commercial Division Blog

Posted: May 14, 2015 / Categories Commercial, Court Rules/Procedures, Attorney Fees

Award of Fees Under CPLR 3220 Available Even if Action is Disposed of on a Motion to Dismiss

On May 1, 2015, Justice Demarest of the Kings County Commercial Division issued a decision in Saul v. Cahan, 2015 NY Slip Op. 30710(U), holding that a defendant who made a conditional offer to liquidate damages under CPLR 3220, prior to the dismissal of the complaint, was entitled to an award of attorneys’ fees, notwithstanding the fact that no trial was commenced.

CPLR 3220 (about which we have previously blogged here) provides:

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 accrued, if the party against whom the claim is asserted fails in his defense. 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 asserted, for 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 jury.

(Emphasis added).

The defendant in Saul v. Cahan (a breach of contract action relating to a purchase of a contemporary artwork) made a conditional offer to liquidate damages under CPLR 3220, which the plaintiff did not accept. The plaintiff never obtained any judgment against the defendant because the court granted a motion to dismiss. At that point, the defendant moved for its attorneys’ fees under CPLR 3220. The plaintiff opposed the motion on the ground that fees were unavailable under CPLR 3220, since the case did not proceed to trial. Justice Demarest acknowledged that "the plain language" of CPLR 3220 – which permits recovery of "expenses necessarily incurred . . . for trying the issue of damages from the time of the offer" – "appears to contemplate at least the commencement of a trial before a party could recover attorney's fees." However, because the only Appellate Division decision to have addressed the issue "granted attorney's fees pursuant to CPLR 3220 where a defendant obtained summary judgment dismissing a case after the joinder of issue," see Morgan v. Kunker, 268 A.D.2d 749, 751 (3d Dep’t 2000), Justice Demarest concluded that the defendant was entitled to an award of fees.

The matter did not end there because the defendant's motion papers did not include the critical evidence supporting the fee application – i.e., a copy of the offer letter and proof of the attorneys' fees. The court rejected counsel's effort to slip in the evidence on reply (which would have deprived the plaintiff the opportunity to challenge the fees), and directed the defendant to file a new motion. One lesson here is: get it right the first time. Give the court the evidence it needs to rule in your favor.