DENISE COTE, District Judge.
A September 9, 2016 Order and Judgment granted plaintiff Mary Middleton's ("Middleton's") application for the right to an award of attorneys' fees and expenses pursuant to N.Y. Civ. Prac. L. & R. ("N.Y. C.P.L.R.") § 5251, "with the amount and reasonableness of the fees to be determined by the Court and included in a final judgment." On September 22, Middleton filed the present motion seeking an award of $722,095.80 in attorneys' fees and costs. For the following reasons, Middleton's motion is granted in its entirety.
Over the past two years, Middleton, a resident of Iowa, has struggled to collect a judgment owed to her by the defendant Tal Etshtien ("Etshtien"), a resident of New York. On July 29, 2014, the district court for the Southern District of Iowa entered a default judgment for $1,859,200 against Etshtien and his wholly-owned companies — Green Cycle Housing, Inc. and Green Cycle Housing, LLC. Middleton registered the Iowa judgment in this District on January 29, 2015, and immediately began to pursue enforcement measures in New York. These initial enforcement efforts were led by the law firm of Collier, Halpern, Newberg & Nolletti, LLP ("CHNN").
On March 19, 2015, Middleton served upon Etshtien: (1) a subpoena
On May 28, 2015, Middleton filed a motion for an order pursuant to Rules 45 and 69, Fed. R. Civ. P., and Local Rule 83.6, holding Etshtien in civil contempt of court for failure without adequate excuse to obey the March 19 subpoena. On May 29, 2015, the Honorable Alison J. Nathan, acting as Part I Judge, issued an order to show cause as to why Etshtien should not be held in contempt of court. The return date for the order to show cause was June 30.
Neither Etshtien nor his counsel appeared at the June 30 hearing. Accordingly, on July 8, the Honorable Edgardo Ramos, acting as Part I Judge, issued an order holding Etshtien in civil contempt (the "July 8 Contempt Order"). The July 8 Contempt Order provided that Etshtien could purge his contempt by furnishing the requested documents, appearing for a deposition, and paying Middleton $5,850 in attorneys' fees. The July 8 Contempt Order further provided that in the event Etshtien failed to comply with the March 19 subpoenae within fourteen days, Middleton could make an application for his arrest and Etshtien would be fined $100 for each outstanding day of non-compliance.
Despite the terms of the July 8 Contempt Order, Etshtien did not comply with the March 19 subpoenae within fourteen days. Accordingly, on August 27, the Honorable Analisa Torres, acting as Part I Judge, issued an order to show cause, returnable September 4, directing Etshtien's arrest.
On September 3, with a warrant for his arrest looming, Etshtien filed an opposition to the order to show cause and a cross-motion to vacate the default judgment entered in the Southern District of Iowa for lack of personal jurisdiction and for failure of service. He asserted that both he and Green Cycle Housing lacked sufficient contacts with Iowa to justify the exercise of personal jurisdiction by the Iowa district court. Etshtien also contested service as to himself but not as to Green Cycle Housing. Finally, he sought to quash the March 19 subpoenae on the ground that they were issued pursuant to a void judgment.
At a December 8, 2015 conference, this Court denied Etshtien's cross-motion to vacate the judgment for lack of personal jurisdiction and for failure of service. The Court found that the exercise of jurisdiction was proper in light of Etshtien and his agent's purposeful and knowing contacts with Iowa in connection with the unpaid loan at issue in the case. Furthermore, after extensive questioning and probing from the Court, Etshtien ultimately conceded that service was proper at his New York City apartment.
Despite conceding the issue of service, Etshtien maintained at the December 8 conference that he did not have actual notice of the March 19 subpoenae, the restraining order, and the order to show cause until late August 2015, when he physically returned to his New York apartment after months of travel. Etshtien continued to contest actual notice of the subpoenae and restraining order until July 2016. In a Court-ordered affidavit dated July 5, 2016, Etshtien later admitted that he was in New York between March and August 2015.
Finally, at the conclusion of the December 8, 2015, conference, Middleton requested that the Court order Etshtien to post a $100,000 bond in order to ensure his appearance at a January 14, 2016 deposition. In response to this request, Etshtien's counsel — Mr. Andrew P. Saulitis — made the following representation to the Court:
Subsequently produced bank statements reveal that in fact, between December 10 and December 18, 2015, Etshtien transferred approximately $290,000 to himself, his family members, Mr. Saulitis, and a law firm in Indonesia, all in violation of the March 19 restraining order.
In an Order dated December 9, the Court required Etshtien to produce, by December 18, all documents in response to the March 19 subpoena, and to submit to a deposition on January 14, 2016. While the Court granted Etshtien's application to travel within and outside the United States in the interim, the December 9 Order warned that a warrant for Etshtien's arrest could be issued upon an
As of December 18 — the Court-ordered date for Etshtien's complete production — Etshtien produced only four documents in response to the 41 categories of requests set forth in the March 19 subpoena.
At the deposition, Etshtien testified that he had possession, custody, and control of responsive documents (including several financial documents) that he had previously failed to produce notwithstanding the March 19 subpoena and December 9 Order. Etshtien further revealed at the deposition that he had sole signing authority over at least three bank accounts
Finally, Etshtien testified in Mr. Saulitis' presence that he had not seen a bill from Mr. Saulitis since 2006, that he did not have a written retainer for this action, and that he had not transferred any assets to Mr. Saulitis. Later-produced bank documents reveal that in fact, Etshtien paid Mr. Saulitis $25,000 on December 14, 2015 in violation of the restraining notice. Mr. Saulitis made no effort to correct his client's false statements during the deposition or anytime thereafter.
Following the January 14 deposition, counsel for Middleton sent Etshtien a letter requesting various tax and financial documents in connection with these newly disclosed property interests and bank accounts. The defendant failed to comply with Middleton's production request. Accordingly, on January 27, Middleton filed a second order to show cause seeking to hold Etshtien in civil contempt.
Conferences were held on January 27 and January 28 to address Middleton's application.
On March 7, Etshtien filed a declaration, in which he attested that he had conducted a "diligent search of all records," and that to his knowledge, all existing responsive records had been produced. Accordingly, on March 10, the Court denied without prejudice the plaintiff's January 27 application to hold Etshtien in civil contempt.
Between April and June 2016, Middleton's counsel secured restraints, writs of execution, and charging orders against Etshtien's assets in an effort to prevent any further unlawful transfers and curtail Etshtien's obstructionism. In April 2016, Middleton served twenty-four restraining notices against Etshtien's wholly-owned companies and other companies in which he possessed a property interest. That same month, Middleton sought and obtained an ex parte charging order in the District of Connecticut against Etshtien's property interests in five Connecticut limited liability companies. The plaintiff also registered the judgment in the District of Delaware and, in May 2016, sought and obtained a charging order against Etshtien's interests in four Delaware limited liability companies. In June 2016, Middleton sought seventeen writs of execution in New York and four in Connecticut.
On June 16, Middleton filed a petition for a turnover order pursuant to Rule 69, Fed. R. Civ. P., and N.Y. C.P.L.R. §§ 5225 and 5227 (the "June 16 Petition"). The June 16 Petition sought an order directing ACI 1490, Vitruvian, and 45 Upland Drive to turn over all property in which Etshtien held an interest. The June 16 petition alleged that between March 19, 2015 and March 31, 2016, Etshtien had either personally used or transferred $600,000 from his ACI 1490 and 45 Upland Drive accounts. The June 16 Petition further alleged that Etshtien had withdrawn more than $300,000 in cash from the Vitruvian account, and had used the account to pay for personal expenses such as rent, cable, utility, grocery, and cell phone bills. In response to the June 16 Petition, the Court immediately issued an order prohibiting Etshtien or any of his agents from removing funds from the First Republic bank accounts held by ACI 1490, Vitruvian, and 45 Upland Drive.
The following day, Middleton filed a motion for a turnover order, contempt, and related relief (the "June 17 Contempt Motion"). In addition to renewing the request for a turnover order, the June 17 Contempt Motion sought an order pursuant to N.Y. C.P.L.R. 5222(b)
The June 17 Turnover Motion also sought an order pursuant to N.Y. C.P.L.R. § 5251
A conference was held on June 21 to address the June 16 and 17 motions.
Accordingly, in an Order dated June 21 (the "June 21 Order"), the Court imposed a temporary travel ban on Etshtien and ordered him to pay, by June 29: (1) the $5,850 in legal fees owed to Middleton's counsel per Judge Ramos' July 8 Contempt Order; (2) $19,800 to the Clerk of Court,
At a June 30 conference, the Court learned that Etshtien had only partially complied with the June 21 Order. While Etshtien furnished the $10,000 to Middleton's counsel, he did not pay the $19,800 fine to the Clerk of Court and only paid $1,854.52 of the $5,850 in legal fees. Etshtien's noncompliance with the restraining notice, his blatant disregard of the Court's orders, and his overall lack of candor prompted the Court to state the following:
On July 1, the Court issued an order (the "July 1 Order") requiring, amongst other things, Mr. Saulitis to return the $25,000 he received in December 2015 to Middleton's counsel — to be held in escrow for Middleton. Only after Mr. Saulitis executed this payment would Etshtien be permitted to travel outside the country for work, the July 1 Order explained. The July 1 Order also gave the parties leave to negotiate a payment installation schedule.
Mr. Saulitis' payment was made on July 1. On July 13, the parties reached an interim agreement whereby Etshtien agreed to pay $8,500 per month toward Middleton's judgment. Pursuant to this agreement, the Court issued an order permitting Etshtien to travel.
On August 5, 2016, Middleton filed a status report regarding unresolved requests for relief from her June 16 and 17 motions. In the August 5 report, Middleton requested, amongst other things: (1) the turnover of funds from Etshtien's account at Bank Mandiri and the ACI 1490 and 45 Upland Drive accounts at First Republic Bank;
At the August 30 conference, the Court confirmed that Etshtien had, since entry of the July 8, 2015 Contempt Order, "been in contempt repeatedly." As the Court explained:
The Court also highlighted the willfulness of Etshtien's contemptuous conduct:
Accordingly, in a September 9, 2016 Judgment and Order ("September 9 Judgment"), the Court held Etshtien in contempt of Court pursuant to (1) N.Y. C.P.L.R. §§ 5222 and 5251, for violating the terms of the restraining notice by unlawfully transferring money or other property in which he has an interest; and (2) N.Y. C.P.L.R. § 5251, for false swearing. The September 9 Judgment simultaneously eliminated as bases for contempt Etshtien's failure to pay the $5,850 attorneys' fees award and the $19,800 fine from Judge Ramos' July 8 Contempt Order. Finally, the September 9 Judgment granted the plaintiff's application for the right to an award of attorneys' fees and expenses pursuant to N.Y. C.P.L.R. § 5251, with the amount and reasonableness of the fees to be determined.
The plaintiff filed the present motion to fix attorneys' fees and costs on September 22, 2016. The motion became fully submitted on November 11, 2016. The motion seeks $722,095.80 in attorney's fees incurred as a result of Etshtien's contempt. The motion also seeks payment of the outstanding $3,995.48
Under New York law, a judgment creditor may issue a restraining notice to be served on a judgment debtor pursuant to N.Y. C.P.L.R. § 5222(a). Once the debtor has been served with a restraining notice, the debtor cannot "make or suffer any sale, assignment, transfer or interference with any property in which he or she has an interest, except upon direction of the sheriff or pursuant to an order of the court, until the judgment or order is satisfied or vacated." N.Y. C.P.L.R. § 5222(b). "[R]efusal or willful neglect to obey a restraining notice is punishable as contempt," as is "false swearing upon an examination or in answering written questions." N.Y. C.P.L.R. § 5251.
On September 9, 2016, the Court entered an order pursuant to N.Y. C.P.L.R. 55 5222 and 5251 holding Etshtien in contempt for violating the terms of the restraining notice and for false swearing. The Court simultaneously granted Middleton's application for an award of attorneys' fees and expenses.
"When deciding whether to award fees, courts have focused on the willfulness of the contemnor's misconduct."
"[T]rial courts enjoy considerable discretion in determining the appropriate amount of attorney fees."
"[T]he fee applicant bears the burden of establishing entitlement to an award and documenting the appropriate hours expended and hourly rates."
"Hours that are excessive, redundant, or otherwise unnecessary, are to be excluded" from the tally.
Middleton seeks $722,095.80 in attorneys' fees and costs. For the reasons set forth below, the Court finds this amount to be reasonable given the magnitude and frequency of Etshtien's contemptuous conduct in this case.
Etshtien argues that Middleton's recovery should be restricted to the hours spent drafting the contempt motions. As Etshtien explains, while Middleton may be entitled to seek attorneys' fees and disbursements "in bringing her contempt motions," she is "not entitled to fees and disbursements for the multiple other procedures and proceedings she has undertaken in seeking discovery of assets and enforcement of the judgment." Etshtien's argument is unavailing because it overlooks the compensatory goal of contempt sanctions and underestimates the effort required to uncover Etshtien's contemptuous conduct and ultimately secure his compliance with the March 19 subpoenae and the Court's orders.
Civil contempt sanctions may serve dual purposes, namely "to secure future compliance with court orders and to compensate the party that has been wronged."
Etshtien also argues that much of what Middleton accomplished in this matter was achieved by consent, thereby suggesting that a significant portion of Middleton's legal expenses were avoidable. But the record in this case belies Etshtien's characterization. For example, Etshtien claims that Mr. Saulitis "voluntarily" paid $25,000 to counsel for Middleton on July 1, 2016. Etshtien omits the fact that the $25,000 was originally paid to Mr. Saulitis in violation of the restraining notice, and that this unlawful transfer was detected only after Middleton filed a second contempt motion to secure Etshtien's compliance with the March 19 subpoena. Etshtien also ignores the Court's intervention in this matter; specifically, the July 1, 2016 Order banning Etshtien from traveling abroad unless Mr. Saulitis transferred the $25,000 to Middleton.
Etshtien further contends that the work performed to obtain turnover orders should not be compensated because Etshtien "voluntarily" agreed to a stipulated turnover order of any distributions from Vitruvian, Vitruvian Resources, LLC, or Volyn. But again, Etshtien's account overlooks the months of obstructionism that preceded his compliance. For example, Etshtien omits how he failed in the first instance to produce documents in accordance with the March 19 subpoena that would have revealed his interests in these companies. Etshtien also omits how he lied at the January 2016 deposition about his interests in Vitruvian and Volyn, and how he later transferred his membership interest from ACI 1490 LLC to Volyn in an effort to conceal this interest. Finally, Etshtien omits that he only produced documents revealing his interest in Volyn upon threat of arrest, and further, that he only "agreed" to the stipulated turnover after Middleton filed the turnover petition and motion for contempt with the Court.
In sum, as detailed above, Etshtien's brazen disregard of the March 19 subpoena, the restraining notice, and several court orders converted what could otherwise have been a straightforward collection case into a marathon. Etshtien unlawfully transferred funds to his family members and attorneys in violation of the restraining notice; he moved assets offshore and funneled money through numerous bank accounts to avoid collection; and he was not forthcoming during his deposition or in his representations to the Court. As a result, Middleton was forced to engage in costly motion practice, discovery, asset tracing and analysis, preparation and service of restraining orders and information subpoenas on third parties, and other judgment enforcement measures to protect her rights as a judgment creditor. In sum, the costs incurred by Middleton's counsel were necessitated by Etshtien's persistent attempts to hinder and obstruct Middleton's enforcement efforts.
Etshtien's use of numerous business structures to avoid detection and his unlawful transfer of assets to evade court orders raised complex issues of fact, which, in turn necessitated costly research and enforcement measures. For example, Middleton's attorneys were required to research enforcement methods available in foreign jurisdictions, and other questions of federal and procedural law applicable in each such jurisdiction. Moreover, Etshtien's bad faith challenge to the Iowa judgment and his frivolous argument regarding actual notice of the March 19 subpoenae and the restraining order imposed additional costs on Middleton, including multiple service of process efforts and frivolous motion practice.
Etshtien's attorneys possess decades of experience in the complex field of judgment enforcement, and it is due to their persistence and diligence that Middleton has obtained a favorable result — namely, periodic payments toward satisfaction of her judgment, as well as monthly disclosures from Vitruvian regarding Etshtien's income. Middleton's attorneys' billing rates are also in line with prevailing rates in New York and Iowa for similar services by lawyers of reasonably comparable skill, expertise, and reputation.
Etshtien argues that Middleton's attorneys' reliance on vague descriptions and block-billed time entries demonstrates the unreasonableness of the hours requested. The use of "block billing" here is perfectly reasonable; the specific tasks in each "block" are described with sufficient detail and clarity to confirm "the reasonableness of the work performed."
Etshtien also characterizes Middleton's request as "grossly excessive," "punitive," and "disproportionate." Accordingly, Etshtien seeks, without sufficient justification, a blanket 90% discount. For the reasons outlined above, the Court finds that the number of hours expended by Middleton's attorneys on this case was reasonable in light of Etshtien's evasive and contumacious conduct, and that a blanket discount is not justified under this circumstances.
Middleton is awarded $722,095.80 in attorneys' fees and costs. Middleton is also awarded the $3,995.48 in attorneys' fees outstanding from the July 8, 2015 Contempt Order entered by the Honorable Edgardo Ramos.
