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Austrian Airlines Oesterreichische Luftverkehrs AG v. UT Fin. Corp. - 2008 U.S. Dist. LEXIS 90985 (S.D.N.Y. Nov. 3, 2008)

Rule:

In contractual attorneys' fees situations (as opposed to cases involving a statutory award of attorneys' fees), where there cannot be any enhancement of the fees actually charged the client, there is a strong presumption that the lodestar figure (i.e., the hourly rate times hours expended) represents the "reasonable" fee and the party advocating a reduction in the amount bears the burden of establishing that an adjustment is necessary to the calculation of a reasonable fee.

Facts:

A trial court granted defendant UT Finance Corporation's ("UTF")  motion for judgment of dismissal on partial findings. The trial court found that plaintiff Austrian Airlines Oesterreichische Luftverkehrs AG failed to establish that UTF breached the parties' aircraft purchase agreement ("APA") and UTF, as the prevailing party, was entitled to recover reasonable attorneys' fees and other costs. UTF filed the instant motion for $ 3,939,425 in attorneys' fees, litigation costs, and pre-judgment interest. Austrian filed papers in opposition to UTF's fees motion. UTF contended that Austrian did not take issue with any of the hourly rates that were charged, but rather challenged the appropriateness of certain specific fees and costs. Austrian argued that UTF was not entitled to recover fees for "unnecessary and time-wasting endeavors," including work on its unsuccessful summary judgment motion.

Issue:

Where the parties' purchase agreement clearly and undisputedly provided for reasonable attorneys' fees and other costs, may a court reduce an award of attorneys' fees in order to discourage wasteful motion practice?

Answer:

Yes

Conclusion:

The United States District Court discussed the legal standards for determining attorneys' fees. Traditionally, in determining a fee award, the typical starting point is the so-called lodestar amount, which is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate. The Court noted that the Second Circuit Court of Appeals has recently held that the better course -- and the one most consistent with attorney's fees jurisprudence -- is for the district court, in exercising its considerable discretion, to bear in mind all of the case-specific variables that are relevant to the reasonableness of attorney's fees in setting a reasonable hourly rate. The Court explained that the caselaw tends to involve awards of statutory attorneys' fees. The inquiry is much simpler in contractual attorneys' fees situations--such as this case--where there cannot be any enhancement of the fees actually charged the client. Moreover, particularly in determining contractual attorneys' fees, there is a strong presumption that the lodestar figure, i.e., the hourly rate times hours expended, represents the "reasonable' fee" and the party advocating a reduction in the amount bears the burden of establishing that an adjustment is necessary to the calculation of a reasonable fee. The Court reduced UTF's attorneys' fee award by $ 24,046, one-quarter of UTF's attorneys' fees for work on its unsuccessful summary judgment motion, in order to discourage wasteful motion practice, while at the same time recognizing that much of the work UTF put into the summary judgment motion was ultimately used to prepare for trial. The Court did not reduce UTF's requested amount for costs, which are recoverable as a component of contractual attorneys' fees. Local civil rules did not apply in this case because a contractual attorneys' fee provision clearly -- and undisputedly -- provided for reasonable attorneys' fees "and other costs." The Court found that the APA's prejudgment interest provision must entitle a prevailing party to pre-judgment interest on attorneys' fees or else it is mere surplusage.

The United States District Court held that UTF was entitled to prejudgment interest on attorneys' fees at 9 percent from the date of payment in the amounts of $ 2,951,206 for attorneys' fees and $ 314,464 in costs, for a total of $ 3,265,671.12 (plus prejudgment interest, in an amount to be recalculated by UTF). The Court held that Austrian was correct in saying any prejudgment interest award should be reduced to correspond to the cost and fee reductions the Court has made and that UTF incorrectly calculated pre-judgment interest.

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