DEFENDANT'S MEMORANDUM OF LAW IN OPPOSITION
TO PLAINTIFF'S MOTION FOR ATTORNEYS' FEES AND INJUNCTIVE RELIEF

PRELIMINARY STATEMENT

          In this application, Plaintiff, Bleecker Charles Company, (the "Sponsor") seeks to recover $338,097.43 for services performed in a matter that was resolved by a single motion for summary judgement made without discovery or a hearing, and predicated upon an agreed statement of facts. As is shown below, and in the accompanying affidavits of Allen H. Brill and Robert N. Fass, these fees are grossly excessive and should be substantially reduced because:

          The Sponsor also seeks injunctive relief prohibiting the Cooperative from passing through any of the legal fees to the Sponsor in this matter. The Sponsor's request ignores its dual relationship with the Cooperative. First it is the holder of a lease for the garage space that was the subject of this lawsuit. Second, and independently, the Sponsor is a shareholder in the Cooperative corporation. As such, the Sponsor enjoys the same benefits and has the same obligations as any other shareholder. Those rights are established as a matter of contract in the Cooperative's By-laws, Proprietary Lease and Offering Plan. The Sponsor, as a shareholder, would have enjoyed the benefit of a successful litigation. By the same token, the Sponsor, as a shareholder, must bear the cost of an unsuccessful case. There is no principle of law or equity which would allow the rights of the Sponsor as commercial lessee to void the Sponsor's obligations as a shareholder. Indeed, there is law to the contrary. (See Fass Aff. at ¶¶ 19-22 and Point VI below.)

ARGUMENT

POINT I

THE LODESTAR TEST

          We are in agreement with the Sponsor that the calculation of the fee to be awarded here is governed by the lodestar approach. That amount determined by multiplying the number of hours claimed to have been spent on the matter by a reasonable hourly fee. See Hensley v. Eckerhart , 461 U.S. 424, 433, 103 S. Ct. 1933, 76 L.Ed.2d 40 (1983). When determining the proper hourly fee, the courts look to the prevailing market rate that would be charged for similar work by attorneys of like skill in the area. Cohen v. West Haven Board of Police Commissioners, 638 F.2d 496, 506 (2d Cir.1980). The District Court must exclude "excessive, redundant or otherwise unnecessary hours . . . ." Hensley, 461 U.S. at 440.

          The court must consider several other factors when making its award including: (1) the time and labor required; (2) the novelty and difficulty of the question presented; (3) the skill required to perform the legal service properly; (4) the preclusion of employment by the attorney due to the acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the "undesirability" of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases. Hensley, 461 U.S. at 430 n. 3, 103 S.Ct. 1933, quoting Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir.1974).

POINT II

THE FEES REQUESTED BY THE SPONSOR ARE FAR IN
EXCESS OF THOSE AWARDED IN PRIOR ABUSE RELIEF ACT CASES

          The cases cited in the Sponsor's's own submission show that the fees sought here are excessive. Sponsor relies first on 305 E. 24th Owners Corp. v. Parman, 799 F. Supp 353 (S.D.N.Y. 1992). In that case, the prevailing party's counsel billed $231,427.16 in fees and disbursements. 799 F. Supp at 359. The Court also awarded $21,832.00 for work by a resident of the subject cooperative who was a lawyer. Parman, however, was a "lengthy and bitter litigation," 799 F. Supp. at 354, that extended over a period of seven years from 1985 to 1992. It involved not only cross-motions for summary judgment but also briefing and oral argument on the method for calculating damages, discovery, and a trial on the damages issue. 799 F. Supp. at 354-55. Moreover, as the Sponsor itself points out, the Parman case : "Both substantively and procedurally . . . involved a number of novel and complex issues under a statute enacted in 1980 on which virtually no body of law existed." 799 F. Supp. at 361. (See Sponsor's Memorandum of Law at pp. 10-11.)

          In vivid contrast to Parman, this involved no discovery, oral argument or trial. It was procedurally simple. The case here was neither lengthy nor bitter. It was short and was treated objectively by both counsel. Importantly, unlike the Parmanlitigation, which was concluded a decade ago, the law is now well developed, but for a single issue - the count of units. Current case law now sets standards for resolution of all remaining issues in the case. (See Point III below.) Even when adjusted for inflation, the fees sought in this case are in excess of those awarded in Parman. Given the relative length and complexity of the two cases, the award here should be substantially less than that in Parman.

          Plaintiff next cites Darnet Realty Assocs., LLC v. 136 E. 56th St. Owners, Inc, 1999 WL 269960 (S.D.N.Y. May 3, 1999), aff'd, 214 F.3d 79 (2d Cir. 2000). The sums awarded in Darnet also support the Cooperative's position. Again, unlike the case here, Darnet, involved a procedurally complex series of four actions and related appeals, where both parties prevailed in one set of the actions. Despite the complexity of the case, however, Darnet was awarded a total of only $66,101.50 in attorney's fees and $12,337.50 in appraisal fees, and the cooperative was awarded a total of only $98,849.13. 1999 WL 269960 at *6-7. An extensive analysis of the Darnet case is contained in the accompanying affidavit of expert witness Allen H. Brill, Esq. whose firm was engaged in that matter. That analysis shows that the Darnet litigation was far more procedurally complex, involved far more issues and was far more time consuming than the action here. The total of both the awards in the Darnet was, however, approximately one half of that sought by the Sponsor here.

POINT III

EXTENSIVE RESEARCH AND WRITING WAS NOT REQUIRED
BECAUSE ALL BUT ONE ISSUE HAD CLEAR PRIOR PRECEDENT

          As stated, the only previously unresolved issue in this case was how the number of units should be counted for purposes of the Abuse Relief Act's two year window. (See Brill Aff. at ¶ 21.) The remaining issues litigated by the Sponsor had established precedent. Those issues and the cases resolving them are the following:

          Given the professed experience of Sponsor's counsel regarding the Abuse Relief Act, and the small number of cases under the Act, one must assume that counsel was familiar with these issues even before the case was started. Therefore, there is no justification for the large number of hours spent on research and writing. (See Brill Aff. at ¶ 21).

POINT IV

THE HOURLY RATES CHARGED BY SPONSOR'S
COUNSEL EXCEED COMPARABLE MARKET RATES

          The "lodestar" figure should be "in line with those [rates] prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation." Blum v. Stenson, 465 U.S. 886, 896 n. 11, 104 S.Ct. 1541, 1547 n. 11, 79 L.Ed.2d 891 n. 11 (1984). It is well-established that the "prevailing community" the district court should consider to determine the "lodestar" figure is "the district in which the court sits." Polk v. New York State Dep't of Correctional Servs., 722 F.2d 23, 25 (2d Cir.1983). As shown by the Brill Aff. at 22-26, the hourly rate charged by Sponsor's counsel substantially exceeds the prevailing rates charged by attorneys in this district having comparable skill and experience in real estate and Abuse Relief Act litigation. This fact is also illustrated by the lower rates charged for work on this case by the Cooperative's counsel, Friedman Krauss and Zlotolow. (See Fass Aff. at ¶ 5). For this reason as well, Sponsor's fee application is excessive.

POINT V

ANY FEE AWARD SHOULD EXCLUDE COMPUTER RESEARCH CHARGES

          Sponsor also seeks to recover $9,865.91 for computerized research (Lexis and Westlaw). (See Brill Aff. ¶ 16.) The authorities are conflicting in this Circuit as to whether computer research charges are compensable as attorney's fees. We respectfully submit that the better reasoned position is that they are not. In this regard, we ask the Court to adopt the holding made in BD v. DeBuono, 177 F. Supp.2d 201, 09 (S.D.N.Y. 2001):

(Citations omitted.)

POINT VI

THE ABUSE RELIEF ACT DOES NOT EXTEND TO THE GRANTING OF
INJUNCTIVE RELIEF PROHIBITING THE COOPERATIVE
FROM PASSING THROUGH ITS LEGAL FEES TO THE SPONSOR

          Not only does Sponsor, as the lessee of the garage, seek excessive legal fees, but it seeks to increase the crushing burden on the Cooperative by exempting itself, as a shareholder in the Cooperative, from payment of any portion of the fees. Sponsor argues that this result is justified because it would run contrary to the intent of the legal fees provision of the Abuse Relief Act to impose fees upon him as the prevailing party lessee of the commercial space.

          Sponsor's argument fails to distinguish between Sponsor's two relationships with the Cooperative. Not only is the Sponsor a lessee of commercial space, but, independently, he is a shareholder of the Cooperative by reason of his ownership of residential units. The Sponsor's status as a shareholder constitutes an entirely different legal relationship with the Cooperative than does Sponsor's status as a lessee of commercial space. To argue that Sponsor's right, as lessee, to recover legal fees vitiates its obligations as a shareholder is contrary to the provisions of the Cooperative documents and applicable law.

          The Sponsor's rights and obligations as a shareholder, of the same class as the other owners in the Cooperative, are established by the Cooperative Proprietary Lease, By-laws and the Offering Plan. Those documents provide that, as a shareholder, the Sponsor must pay his pro rata share of the corporate expenses on the same basis as any other shareholder. (See Proprietary Lease at paragraph 1(a), and Offering Plan at p. 56, copies attached hereto as Exhibits B and C.) Under the Cooperative's By-laws, the Board of Directors has the power to set the budget and fix the amount of rent to be paid by the unit owners under their proprietary leases. (By-laws, Article 2, section 6, copy attached as Exhibit D.)

          Similarly, well established principles of corporate common law prohibit discrimination among shareholders of the same class with regard to their financial rights and obligations. See Schwartz v. Marien, 37 N.Y.2d 487, 492, 373 N.Y.S.2d 122, 127 (1975); see also Smolinsky v. 46 Rampasture Owners, Inc., 230 A.D.2d 620, 646 N.Y.S.2d 110 (1st Dep't 1996). This principle has been codified in New York in Section 501(c) of the Business Corporation Law. Section 501(c) of the Business Corporation Law provides, in pertinent part:

          As originally enacted, the statute prohibited the imposition of any unequal fees on shareholders. See Fe Bland v. Two Trees Management Co., 66 N.Y.2d 556, 498 N.Y.S.2d 336 (1985). In 1986 in reaction to the Fe Bland decision, the statute was amended to allow unequal payments to cooperative apartment corporations upon sale or transfer of shares and appurtenant proprietary leases ("Flip Taxes"). The amendment, however, permits a disparate obligations among shareholders of the same class only as to Flip Taxes, and does not apply to other charges. See generally, Wapnick v. Seven Park Avenue Corporation, 240 A.D.2d 245, 658 N.Y.S.2d 604, 606 (1st Dep't 1997).

          It is also the rule under New York law that a sponsor, as shareholder, must pay its portion of a cooperative's legal expenses arising from litigations between the cooperative and the sponsor. This is true even where the sponsor has prevailed. See 3060 Ocean Avenue Owners, Inc. v. Bistricer, 247 A.D.2d 275, 667 N.Y.S.2d 909 (1st Dep't 1998).

          It is well established that the Abuse Relief Act does not extend to terminate or destroy rights, contractual or otherwise, except as expressly allowed. In that regard, the Act is limited to the termination of specified contracts between a cooperative or condominium and a sponsor regarding property serving the unit owners in that cooperative or condominium. Charles House Condominium v. Infinity Corp. 21 F.3d 528 2d Cir. 1994). The Court in Charles House held that the Abuse Relief Act did not apply to invalidate a condominium offering plan, declaration, by-laws, building lease or a related option plan, because none of those documents were contracts covered by the Act. The Court refused to "broaden the relief provided by the Act beyond its literal terms . . ." 21 F.3d at 532-33, despite arguments that the termination would further the policies of the Act. For the same reason, the Abuse Relief Act may not be extended to destroy the Sponsor's independent obligations as a cooperative shareholder here.

          Finally, the Abuse Relief Act is a consumer protection statute intended to protect cooperative and condominium owners from abuses arising from self sealing contracts with sponsors. 181 East 73rd Street Co. v. 181 East 73rd Tenants Corp., 954 F.2d 45, 47 -8 (2d Cir. 1992) Although the law allows a prevailing lessee or other contract holder to recover legal fees, there is no policy inherent in the Act that would justify the destruction of separate and independent legal relationships which happen to exist between the parties. To hold to the contrary would be to impose upon the very party sought to be protected a burden neither contemplated by the statute nor otherwise justified in law or equity.

CONCLUSION

          For the foregoing reasons it is respectfully requested that Plaintiff's be granted substantially less than the full amount of fees and expenses applied for and that Plaintiff's application for injunctive relief be denied.

Dated: New York, New York
            February 1, 2002

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