SJA CONSULTING LLC v. BP 32 LLC LLC NYC LLC 2013A LLC (2022)

On this court's prior order in this action, entered on March 31, 2022, the court granted plaintiff's unopposed summary-judgment motion for recovery of attorney fees incurred in a separate action to enforce the terms of a promissory note and guarantees (Index No. 654485/2020), or $17,859.76. (See NYSCEF No. 20.) This court also directed plaintiff to file a motion within 30 days of notice of entry that would enable the court to determine the appropriate amount of plaintiff's attorney fees incurred in collection efforts in this action. (Id.)

Plaintiff served notice of entry on April 4, 2022. (NYSCEF No. 21.) 30 days later, on May 4, plaintiff filed its motion seeking attorney fees incurred in this action (mot seq 002). (NYSCEF No. 22.) Five days after that, on May 9, several of the defendants moved to vacate this court's March 31 order under CPLR 5015 (mot seq 003). (NYSCEF No. 22.) Motion sequences 002 and 003 are consolidated here for disposition. This court addresses the motion to vacate first.

DISCUSSION

1. To obtain vacatur under CPLR 5015 (a) (1), a defendant must establish both a reasonable excuse for its default and a potentially meritorious defense. Defendants, through an affirmation of counsel, offer the reasonable excuse of law-office failure, namely, “inadvertently fail[ing] to schedule the deadline for our opposition to Plaintiff's summary judgment motion.” (NYSCEF No. 27 at ¶ 16.) This court is somewhat skeptical that this oversight constitutes a reasonable excuse under the circumstances of this case. As plaintiff points out, although failure to calendar a motion might explain the initial failure to oppose the motion, it would not explain the lack of a response by defendants to this court's decision on that motion or service of notice of entry—nor defendants remaining silent until five days after plaintiff filed its attorney-fee motion.

Even if this court were to conclude that defendants’ explanation were a reasonable excuse, though, defendants have not shown that they have a potentially meritorious defense.

Defendants’ principal argument is that plaintiff's attorney-fee claim in this action is barred as claim-splitting, because plaintiff did not, seek attorney fees in the prior action.¹ (See NYSCEF No. 27 at ¶ 26.) But the bar on claim-splitting is an aspect of the doctrine of claim preclusion. (See Sannon-Stamm Assoc., Inc. v Keefe, Bruyette & Woods, Inc., 68 AD3d 678, 678 [1st Dept 2009], citing Stoner v Culligan, Inc., 32 AD2d 170, 171-172 [3d Dept 1969].) Claim and issue preclusion “have as their prerequisites the entry of a judgment.” (Peterson v Forkey, 50 AD2d 774, 774 [1st Dept 1975].) A judgment entered in an action but later vacated is therefore not entitled to preclusive effect, because the status of the case post-vacatur is equivalent to one in which no judgment was ever entered. (See Ruben v American & Foreign Ins. Co., 185 AD2d 63, 65 [4th Dept 1992]; accord Citrin v Baratta & Goldstein, 62 AD3d 405, 406 [1st Dept 2009].) And it is undisputed that here, defendants’ motion in the prior action to vacate the judgment initially granted to plaintiff was granted without opposition. (Index No. 654485/2020, NYSCEF No. 23.) Absent a prior judgment, there is no basis for preclusion and no claim-splitting bar.²

2. Given this court's conclusion that the March 2022 order should not be vacated, the question is the amount of the reasonable attorney fees incurred in this action to which plaintiff is entitled under that order. Plaintiff argues that it should be awarded $22,206.66 in fees. (NYSCEF No. 23 at ¶¶ 7, 30.) This court disagrees.

The invoices submitted by plaintiff reflect a total of only $15,902.47 in fees and costs, not $22,206.66.³ Of that sum, $3,530 was incurred in preparing and submitting the current fee motion. But “amounts for legal fees and costs incurred ․ in prosecuting [a] claim for an award of an attorney's fee, or so called ‘fees on fees,’ ” may not be recovered absent “unmistakably clear intent” expressed in the underlying contract regarding their recovery. (IG Second Generation Partners, L.P. v Kaygreen Realty Co., 114 AD3d 641, 643 [2d Dept 2014].) The contractual fee provision on which plaintiffs rely does not express the necessary intent to allow plaintiffs to obtain fees on fees.⁴ Plaintiff therefore is entitled only to $12,372.47.

Accordingly, it is

ORDERED that defendants’ motion to vacate this court's March 31, 2022, order (mot seq 003) is denied; and it is further

ORDERED that plaintiff's motion for an award of attorney fees (mot seq 002) is granted only to the extent that plaintiff is awarded $12,372.47 in fees, and otherwise denied; and it is further

ORDERED that plaintiff serve a copy of this order with notice of its entry on all parties and on the office of the County Clerk, which shall enter judgment accordingly.

FOOTNOTES

1.   Defendants also contend that this court's fee award in the March 2022 order was insufficiently supported. (See NYSCEF No. 27 at ¶ 27.) This court is not persuaded that defendants have raised sufficient doubts about the validity and reasonableness of plaintiff's claimed fees incurred in the prior action (as awarded in the March 2022 order) to establish a potentially meritorious defense on this ground.

2.   Although plaintiff has not raised this argument, it is also possible that the language of defendants’ guarantees bars them from raising a claim-splitting defense in this action. The guarantees provide that the obligations of the guarantors are “irrevocable, absolute, and unconditional, irrespective of ․ any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a ․ guarantor.” (NYSCEF No. 17 at 26 ¶ 1.2.) Similar language has been held by the Appellate Division, First Department, to “waive[ ] the defense of res judicata.” (Nexbank, SSB v Soffer, 129 AD3d 485, 486 [1st Dept 2015].) Given its conclusion that claim-splitting/claim-preclusion would not bar plaintiff's attorney-fee claim here regardless, this court need not and does not reach this issue.

3.   Plaintiff's papers break the total claimed into three increments, based on the stage of the action in which the fees were incurred. (See NYSCEF No. 23 at ¶ 7.) Those increments add up to $18,102.47—not $15,902.47 or $22,206.66. (See id.) Plaintiff does not explain this discrepancy beyond stating that $574.19 was discounted from the invoices sent by counsel to plaintiff. (Id. at 3 n 3.)

4.   See NYSCEF No. 17 at 17 § 4.1 (note) (providing that the borrower “hereby agrees, upon any such Event of Default, to pay all costs of collecting or attempting to collect amounts due and payable under this Note, including, without limitation, reasonable attorneys’ fees and expenses”); id. at 26 § 1.1 (guarantee) (providing that the guarantors’ obligations may include, “if applicable, with all interest thereon, late interest, late charges, default interest, collection costs, attorneys’ fees, court costs,” and other costs and expenses incurred by plaintiff in enforcing the obligations arising from the underlying note).

Gerald Lebovits, J.