WILLIAM F. KUNTZ, II, District Judge.
On July 18, 2013, United States Magistrate Judge Kathleen Tomlinson issued a report and recommendation recommending that this Court deny a motion by Plaintiffs' counsel to enforce a charging lien upon
The facts in this action are meticulously detailed in Magistrate Judge Tomlinson's report and recommendation, and will not be restated here. See id. Neither party has objected to the report and recommendation.
A district court reviewing a report and recommendation "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1)(C); see also McGrigs v. Killian, No. 08 Civ. 6238, 2009 WL 3762201, at *2 (S.D.N.Y. Nov. 10, 2009) (Berman, J.). Under 28 U.S.C. § 636(b)(1) and Rule 72(b)(2) of the Federal Rules of Civil Procedure, parties may object to a magistrate judge's report and recommendation. The objections must be "specific" and "written," and they must be made "[w]ithin 14 days after being served with a copy of the recommended disposition." Fed.R.Civ.P. 72(b)(2); see also 28 U.S.C. § 636(b)(1).
Where, as here, a party does not object to a report and recommendation, "a district court need only satisfy itself that there is no clear error on the face of the record." Reyes v. Mantello, No. 00 Civ. 8936, 2003 WL 76997, at *1 (S.D.N.Y. Jan. 9, 2003) (Cote, J.); see also Eisenberg v. New England Motor Freight, Inc., 564 F.Supp.2d 224, 226 (S.D.N.Y.2008) (Marrero, J.) ("A district court evaluating a Magistrate Judge's report and recommendation may adopt those portions of the ... report to which no `specific written objection' is made, as long as the factual and legal bases supporting the findings and conclusions set forth in those sections are not clearly erroneous or contrary to law.") (quoting Fed.R.Civ.P. 72(b)(2)). In addition, a party's "failure to object timely to a magistrate's report operates as a waiver of any further judicial review of the magistrate's decision." F.D.I.C. v. Hillcrest Assocs., 66 F.3d 566, 569 (2d Cir.1995). Moreover, in this case, the report and recommendation explicitly stated that "[p]ursuant to 28 U.S.C. § 636(b)(1)(C) and Rule 72 of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days from service of this Report and Recommendation to file written objections," and that "[f]ailure to file objections will result in a waiver of those objections for purposes of appeal." Dkt. No. 42 at 629-30.
No objections to Magistrate Tomlinson's report and recommendation have been filed. Accordingly, this Court has reviewed the report and recommendation for clear error only.
Magistrate Judge Tomlinson's report thoroughly reviewed existing case law on the right of an attorney to enforce a charging lien pursuant to New York Judiciary Law § 475. See id. at 623-30. That statute provides:
N.Y. Judiciary Law § 475. Based on a close review of the language of this statute and relevant case law, Magistrate Judge Tomlinson concluded the following factors require denial of counsel's request in this case: (1) the parties in this action and the related New York State Department of Labor ("NYDOL") action are not identical; (2) counsel for Plaintiffs in this action did not appear as attorney of record in the NYSDOL action, nor do any of the limited exceptions to that requirement apply here; (3) counsel for Plaintiffs was aware of the risk that the NYSDOL could obtain a recovery prior to any judgment in the instant action; (4) New York Judiciary Law § 475 does not apply to NYSDOL proceedings; and (5) counsel for Plaintiffs failed to demonstrate the NYSDOL settlement was obtained as a result of their efforts. Dkt. No. 42 at 624-29. This Court finds no clear error in this analysis, or in the report and recommendation overall.
For the foregoing reasons, this Court ADOPTS Magistrate Judge Tomlinson's report and recommendation in its entirety, and therefore DENIES the motion by Plaintiffs' counsel to enforce a charging lien pursuant to New York Judiciary Law § 475.
A. KATHLEEN TOMLINSON, United States Magistrate Judge:
Plaintiffs Jose Galvez, Eligio Hernandez, Douglas Lund, Donald A. Morris, and William Schafer ("Plaintiffs") initiated this action on October 20, 2009. The Complaint alleges violations of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 207 et seq. on the part of Defendants Aspen Corporation, Aspen Irrigation Inc., Management Consulting Laborers ("Aspen") and Donald and Ronald Adkins (the "Adkins" and, together with Aspen, the "Employers"). Plaintiffs have also asserted claims against the Employers' surety, Defendant Cincinnati Insurance Company ("Cincinnati Insurance" and, together with the Employers, the "Defendants"). Virginia & Ambinder, LLP ("V & A"), Plaintiffs' counsel, now seeks to enforce a charging lien upon Defendants pursuant to New York Judiciary Law § 475 based upon a settlement reached by the Defendants with the New York State Department of Labor ("NYSDOL") in a separate proceeding [DE 35] concerning the Plaintiffs' wages. For the reasons that follow, the Court recommends that V & A's motion be DENIED.
The Plaintiffs were employed to perform construction-related work for Aspen from October 2008 until January 2009. Compl. ¶¶ 6-10. Plaintiffs allege that Defendants failed to pay them overtime at the prevailing wage rate in connection with a Public Works Project at the Bellport Golf Course in Bellport, New York (the "Project") during the relevant period. Id. ¶¶ 2-3. Defendants' contract for the Project required payment to laborers at the prevailing wage rate, including supplements. Id. ¶¶ 20-22. Defendant Cincinnati Insurance issued a labor and materials payment bond (the "Bond") in connection with the Project, pursuant to the terms of which Cincinnati Insurance assumed joint and several liability with the Employers for payment of wages due. Id. ¶¶ 16, 26. Based on these allegations, Plaintiffs sought overtime compensation from the Employers pursuant to the FLSA, id. ¶¶ 32-33, and prevailing wages and supplements from Cincinnati Insurance pursuant to the Bond and New York Labor Law § 220-g, id. ¶¶ 41-50.
At the June 8, 2010 Discovery Status Conference, Defendants' counsel advised the Court that a related criminal action was pending against the Defendants in state court. DE 10.
On October 4, 2010, at Defendants' request, the discovery deadlines were extended and the Court entered an Amended Case Management and Scheduling Order. DE 15. Defendants sought another extension on November 19, 2010 because the criminal proceedings in state court remained pending. DE 16. That request was granted and the Court entered a Second Amended Case Management and Scheduling Order. See DE 17.
On March 11, 2011, Defendants requested a further extension. DE 18. In that request, Defendants advised the Court that settlement discussions in the criminal matter had ceased and the matter was likely to proceed to trial. Id. The Court granted Defendants' requests and held all deadlines in abeyance pending a status conference set for July 8, 2011. See Electronic Order dated March 14, 2011. At the July 8 status conference, Defendants' counsel advised the Court that settlement discussions in the criminal proceeding had resumed and that a resolution was expected in the next 60 to 90 days. DE 20. In light of the impact of the criminal proceeding on this case, the Court continued to stay discovery; however, the Court advised the parties that this case could not "remain in limbo for an extended period" and directed the parties to be prepared to proceed with discovery at the next status conference scheduled for October 6, 2011. Id. At the October 6, 2011 conference, the Court was advised that complications in the criminal matter were still preventing the depositions of both Adkins Defendants although the Plaintiffs had been deposed. DE 21.
At the January 12, 2012 Status Conference, Defendants' counsel reported that the state criminal proceeding had been resolved with the entry of a plea and that the NYSDOL proceeding was being handled
On February 14, 2012, Defendants' counsel filed a letter on ECF requesting an adjournment of the status conference scheduled for the next day. DE 23. In that letter, counsel stated:
Id. The next conference ultimately went forward on March 2, 2012 at which time Defendants' counsel advised the Court that the New York DOL proceeding had been resolved. In the Civil Conference Minute Order posted as a result of that conference, the Court noted the following information:
DE 25.
When the Court spoke with the parties again on March 27, 2012, counsel represented that they had not yet settled the case but that they had continued to make progress. DE 28. The Court reiterated that this matter had been complicated by the related criminal proceeding and the NYSDOL action which had apparently reached its own resolution with the Defendants, which, as the Court noted, was "not known to plaintiffs' counsel until recently." Id.
On April 16, 2012, counsel for the Plaintiffs reported that the parties had not reached a settlement and that only three of the five named Plaintiffs were interested in pursuing this litigation in the aftermath of the NYSDOL settlement. DE 29. Since the last conference, a settlement proposal was made and rejected and a subsequent proposal had been made by the Plaintiffs just prior to the conference and Defendants' counsel asked for some additional
On June 12, 2012, Plaintiffs' counsel filed a letter request to Judge Kuntz seeking a pre-motion conference for the purpose of filing a motion to enforce a lien on the action for the reasonable value of attorneys' fees pursuant to New York Judiciary Law § 475 — a request which Defendants opposed. See DE 32 and 33. Judge Kuntz held a pre-motion conference on V & A's anticipated motion to enforce a lien and stayed all proceedings pending resolution of the motion. See Electronic Orders dated July 18, 2012 & July 20, 2012. Thereafter, in accordance with the briefing schedule set by Judge Kuntz, V & A filed the instant motion. DE 35.
At the outset, the Court notes that it has been unable to find any case in the Second Circuit which is on all fours with this action, notwithstanding the plethora of FLSA cases. The motion brought by Plaintiffs' counsel requires the Court to answer the following question: When defendants in a private multi-plaintiff FLSA action settle a related NYSDOL proceeding involving the same/similar claims brought by some (if not all) of the plaintiffs in the pending private FLSA action, can the plaintiffs' attorney hold the defendants liable for attorneys' fees by asserting a charging lien under New York Judiciary Law § 475? The Court concludes that Plaintiffs' attorneys here cannot assert such a lien against the Defendants.
V & A seeks compensation for the "time, expertise and effort expended on behalf of the plaintiffs throughout this protracted litigation." V & A Memorandum of Law in Support of Motion to Enforce a Charging Lien ("V & A Mem.") [DE 36] at 1. Counsel argues that Defendants utilized the fruits of V & A's substantial discovery efforts in this case over a two-year period to obtain a settlement with the NYSDOL. Id. at 2. According to counsel, the majority of the discovery was requested by the Defendants, including depositions of all five named Plaintiffs, who had to travel to Suffolk County from different regions of the country for that purpose — the expense of which was borne by V & A, including JetBlue airline tickets for Plaintiffs Douglas Lund and William Schafer. Id.; see Declaration of Lloyd R. Ambinder, attached as Ex. 1 to the V & A Mem. ("Ambinder Decl."), ¶¶ 6-7. Plaintiffs' counsel also cites the multiple days spent preparing the Plaintiffs for their depositions as well as those spent defending the depositions. V & A Mem. at 2.
Once all this time was spent by Defendants taking discovery for the benefit of their clients, Plaintiffs' counsel argues, the Defendants then moved for a protective order — granted by the Court — which prevented Plaintiffs from taking depositions of the Defendants for several months. Id.; Ambinder Decl. ¶ 9. According to Attorney Ambinder, Defendants sought this protection "due to a criminal investigation undertaken
Id.
Some time after the Project at the Bellport Country Club was completed, some of the Plaintiffs contacted the NYSDOL to file a complaint, according to the Defendants, claiming that they were paid less than the prevailing wage and that they were not paid overtime. See Defendants' Memorandum of Law in Opposition to Plaintiffs' Request for a Charging Lien [DE 38] ("Defs.' Mem.") at 2. Defendants maintain that Plaintiffs' contact with the DOL occurred prior to the commencement of this lawsuit. Id. at 1. Defendants further assert, albeit upon information and belief, that sometime after submitting a claim to the NYSDOL, Plaintiffs "contacted and retained the firm of V & A" and that the firm was referred to the Plaintiffs "by an employee of the DOL, after Plaintiffs filed their DOL claims." Id. at 2. According to the Defendants, V & A "did not make a single appearance on behalf of its clients before the DOL" and, instead, "[e]mployees of the DOL fully represented the plaintiffs' interests in the matter before the New York State Department of Labor." Id. at 1. Defendants' counsel goes on to note that:
Id.
When the parties did not reach a settlement in this action, Defendants' counsel points out the Court's directive that the existing scheduling order was in effect and that the depositions of all defendants were to be completed by May 22, 2012, with a final discovery deadline of May 31, 2012. Id. at 1-2. The parties were directed to file their proposed Joint Pre-Trial Order on ECF by July 13, 2012. According to Defendants' counsel, "Defendants were ready and willing to move forward and were advised by Plaintiffs' counsel that
The Defendants' version of communications with Plaintiffs during the ongoing NYSDOL investigation differs markedly from the Plaintiffs'. In the opposition papers, Defendants' counsel specifically addresses those communications:
Declaration of Jeltje DeJong, Esq. in Opposition to Plaintiffs' Application for a Charging Lien ("DeJong Decl.") [DE 37] ¶¶ 4-5. According to Defendants' counsel, the settlement was reached primarily when, "as a result of Defendants' criminal counsel's thorough investigation, Defendants became aware that some of the Plaintiffs herein had given false information to the DOL and quite probably to the District Attorney's Office." Defs.' Mem. at 3. Defendants point out that the individuals who certified the payroll for Aspen with regard to the Project in Bellport were Plaintiffs William Schafer and Donald Morris. Id. at 2. Counsel added that Aspen "was able to show the DOL and the District Attorney that Plaintiffs Shafer and Morris fraudulently submitted certified payroll records for days that they were not on site." Id. at 3; DeJong Decl. ¶ 7. Ultimately, Defendants argue that V & A is not entitled to fees in this federal case since the Plaintiffs "have not prevailed and have basically abandoned their claims." DeJong Decl. ¶ 6.
With this background in mind, the Court now turns to an analysis of the law relied upon by the parties and as applied from its own independent research.
The legal theory under which V & A asserts entitlement to compensation is New York Judiciary Law § 475. The Court begins its analysis with the text of the provision under which V & A asserts its right to payment. The statute provides, in pertinent part, as follows:
New York Judiciary Law § 475 (emphasis supplied). "A lien created by Section 475 is fully enforceable in federal court `in accordance with its interpretation by New York Courts.'" Louima v. City of New York, No. 98-CV-5083, 2004 WL 2359943, at *57 (E.D.N.Y. Oct. 18, 2004) (quoting Itar-Tass Russian News Agency v. Russian Kurier, Inc., 140 F.3d 442, 449 (2d Cir.1998)). The parties focus on various phrases within the wording of § 475. The Court now considers each portion of the statutory language at issue.
Plaintiffs' counsel argues that the Defendants' settlement with the Plaintiffs through the NYSDOL fails to recognize V & A's charging lien on the action for the reasonable value of services rendered. V & A Mem. at 3. Further, Plaintiffs' counsel maintains that pursuant to § 475, such lien "cannot be affected by any settlement between the parties before or after judgment, final order or determination." Id. at 3 (quoting New York Judiciary Law § 475).
In opposition, Defendants argue that V & A is not entitled to a charging lien on the settlement proceeds in the NYSDOL proceeding since V & A did not represent any of the Plaintiffs in that proceeding. Defs.' Mem. at 4-5.
The Court notes an immediate distinction here, namely, the "parties" to the settlement. In the instant litigation, the Plaintiffs are five former employees of Aspen. The Defendants are the corporate entities including Aspen, as well as the Adkins brothers and Cincinnati Insurance. However, in the NYSDOL administrative proceeding, the parties were the Department of Labor (representing all Aspen employees on site at the Project) and only some of the Defendants. According to the Defendants, Cincinnati Insurance was not a party to that proceeding. Id. at 3 n. 2. In addition, V & A did not appear as attorney of record in the NYSDOL proceeding, nor is there any evidence that V & A asserted any lien in that action or ever communicated with the NYSDOL while the action was pending.
As the Defendants point out, a charging lien under § 475 is for the benefit of an "attorney of record" only. Defs.' Mem. at 4 (citing Rodriguez v. City of New York, 66 N.Y.2d 825, 827, 498 N.Y.S.2d 351, 489 N.E.2d 238 (1985)). V & A's failure to appear in the NYSDOL proceeding is grounds for denying the motion here. An attorney is only entitled to a charging lien where "there has been an appearance by that attorney in the action which creates or is the source of funds against which the lien is asserted." Chevron Corp. v. Donziger, No. 11 Civ. 0691, 2011 WL 2150450, at *3 (S.D.N.Y. May 31, 2011) (quoting Weg and Myers, P.C. v. Banesto Banking Corp., 175 A.D.2d 65, 66, 572 N.Y.S.2d 321 (1st Dep't 1991)); see Haser v. Haser, 271 A.D.2d 253, 255, 707 N.Y.S.2d 47 (1st Dep't 2000) ("... Judiciary
An attorney's representation of a client in one proceeding does not entitle the attorney to a charging lien over proceeds in a separate case or proceeding where the attorney did not appear as counsel. See Chevron Corp., 2011 WL 2150450, at *2-3 (holding that attorney did not have a lien over Ecuadorian judgments despite his contingency fee agreement with the plaintiffs in those lawsuits since he did not appear as counsel in the actions in which the judgments were entered); Cabukyuksel v. Ascot Properties, LLC, 99 A.D.3d 405, 406, 952 N.Y.S.2d 3 (1st Dep't 2012) (holding that law firm was not entitled to a charging lien on settlement funds obtained in one action even though it represented the plaintiff in a related action); Chadbourne & Parke, LLP v. AB Recur Finans et al., 18 A.D.3d 222, 223, 794 N.Y.S.2d 349 (1st Dep't 2005) (holding that law firm was not entitled to charging lien over proceeds obtained in a distinct action); Surdam v. Marine Midland Bank N.A., 198 A.D.2d 578, 578, 603 N.Y.S.2d 233 (3d Dep't 1993).
As V & A points out, courts have made exceptions to the rule that the attorney must appear in the action which creates the source of funds against which a lien is sought, but those cases involved circumstances different from the situation presented here. For example, in Cohen v. Grainger, Tesoriero & Bell, 81 N.Y.2d 655, 657, 602 N.Y.S.2d 788, 622 N.E.2d 288 (1993), the court permitted an attorney to assert a charging lien where a plaintiff discharged the attorney who represented him in state court and then hired new attorneys who filed a separate action on the same claim in federal court. The court explained that if it were to rule otherwise "the client and the successor attorney could easily frustrate the remedial purposes of the statute by the simple expedient of instituting a new action, thereby extinguishing the prior action, and leaving the discharged attorney without security...." Id. at 658, 602 N.Y.S.2d 788, 622 N.E.2d 288; see also Neimark v. Martin, 7 A.D.2d 934, 935, 183 N.Y.S.2d 812 (2d Dep't 1959) (allowing attorney to assert lien in action in which he did not appear where action was a "logical" extension of
Reply Declaration of Lloyd R. Ambinder [DE 39], Ex. J (emphasis supplied).
Plaintiffs' counsel goes on to argue that the Defendants did not inform V & A that they were entering into the settlement until after the settlement was completed. Defendants' counsel, on the other hand, although not refuting this assertion, states that Plaintiffs' counsel wanted no part of the NYSDOL proceeding and unequivocally took the position that each matter should be resolved separately — notwithstanding the desire of Defendants to effect a global settlement. In his reply papers, Plaintiffs counsel ultimately asserts that "when and whether V & A was informed of the potential NYSDOL settlement is irrelevant" because the larger picture is that V & A's expertise and efforts were what caused the favorable settlement in the first instance. Pls.' Reply Mem. at 2. In attempting to minimize Defendants'"counsel of record" argument, V & A further asserts that the Defendants fail to recognize the "unambiguous language of Section 475" that the lien "attaches to the client's `cause of action' instead of just the action." Id. In that instance, Plaintiffs' counsel states, the "proceeds, wherever found, are subject to" the lien. Cohen v. Grainger, 81 N.Y.2d at 658, 602 N.Y.S.2d 788, 622 N.E.2d 288. V & A's reliance on Cohen v. Grainger is misplaced because, as discussed, the facts in that case are distinguishable. There, the original attorney was discharged by the client. Id. at 657, 602 N.Y.S.2d 788, 622 N.E.2d 288. In addition, the actions occurred in state and federal courts, the parties were the same
V & A maintains that it is entitled to a lien, not because of the settlement in the NYSDOL, but because of the efforts expended in the instant case, which efforts V & A believes directly caused the settlement. Not having appeared in the NYSDOL proceeding, however, V & A is not entitled to a lien on the settlement proceeds obtained in that proceeding. Likewise, Plaintiffs have not been awarded damages under the FLSA in the current action, there is no settlement, no judgment has been entered and the case remains open. Given the fact that the services rendered by V & A in this action have not created any "proceeds," there is nothing to which a lien can attach. See Surdam, 198 A.D.2d at 578, 603 N.Y.S.2d 233.
New York Judiciary Law § 475 applies to "an action, special or other proceeding in any court or before any state, municipal or federal department,
Although V & A acknowledges that NYSDOL proceedings are exempt from the charging lien statute, the firm nevertheless argues that it may assert a lien because it seeks fees for work performed in
There are additional grounds for denying V & A's motion. V & A has failed to demonstrate that the settlement was obtained as a result of V & A's efforts. A charging lien is "enforceable only against the portion of the fund created ... as a result of the attorney's efforts...." Rothfeder v. City of New York, 48 A.D.3d 234, 235, 851 N.Y.S.2d 430 (1st Dep't 2008); accord Queller, Fisher, Washor, Fuchs & Kool, LLP v. Law Offices of Lawrence P. Biondi, 94 A.D.3d 1127, 942 N.Y.S.2d 793 (2d Dep't 2012) (refusing to impose lien where proceeds were not created as a result of law firm's efforts); Chadbourne & Parke, LLP, 18 A.D.3d at 223, 794 N.Y.S.2d 349 (same). V & A makes several conclusory statements regarding its contribution to the NYSDOL settlement. For example, V & A states the following:
V & A Mem. at 6 (emphasis supplied).
V & A Reply Mem. at 2 (emphasis supplied).
Id. at 4.
Id. at 9 (emphasis supplied).
There is no indication
Finally, there may be some misunderstanding or confusion on V & A's part concerning the source of its entitlement to legal fees. V & A seeks an award of attorney's fees and costs in the amount of the hours it expended in this matter pursuant to the fee-shifting provision of the FLSA, 29 U.S.C. § 216(b)
In light of the hours, fees and expenses vested in this case by V & A — an issue not in itself in dispute — a determination here which results in V & A walking away from this case with no reimbursement is admittedly a less than satisfying outcome for Plaintiffs' counsel. However, the Court finds that the appropriate source from which to seek these funds is not the Defendants. Rather, V & A's recourse is in the retainer agreement the firm signed with
Based on the foregoing information, this Court respectfully recommends to Judge Kuntz that V & A's motion to enforce a charging lien be DENIED.
Pursuant to 28 U.S.C. § 636(b)(1)(C) and Rule 72 of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days from service of this Report and Recommendation to file written objections. Such objections shall be filed with the Clerk of the Court via ECF. A courtesy copy of any objections filed is to be sent to the Chambers of the Honorable William F. Kuntz, II, and to the Chambers of the undersigned. Any requests for an extension of time for filing objections must be directed to Judge Kuntz prior to the expiration of the fourteen (14) day period for filing objections. Failure to file objections will result in a waiver of those objections for purposes of appeal. Thomas v. Arn, 474 U.S. 140, 155, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985); Beverly v. Walker, 118 F.3d 900, 901 (2d Cir.1997), cert. denied, 522 U.S. 883, 118 S.Ct. 211, 139 L.Ed.2d 147 (1997); Savoie v. Merchants Bank, 84 F.3d 52, 60 (2d Cir.1996).
July 18, 2013.