Ozbakir v. Scotti

906 F. Supp. 2d 188, 2012 WL 5949098, 2012 U.S. Dist. LEXIS 169310
CourtDistrict Court, W.D. New York
DecidedNovember 28, 2012
DocketNo. 09-CV-6460L
StatusPublished
Cited by1 cases

This text of 906 F. Supp. 2d 188 (Ozbakir v. Scotti) is published on Counsel Stack Legal Research, covering District Court, W.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ozbakir v. Scotti, 906 F. Supp. 2d 188, 2012 WL 5949098, 2012 U.S. Dist. LEXIS 169310 (W.D.N.Y. 2012).

Opinion

DECISION AND ORDER

DAVID G. LARIMER, District Judge.

This action was commenced in New York Supreme Court, Monroe County, by plaintiffs Rosemarie Ozbakir and Ali Demir, against sixteen defendants, alleging various claims arising out of the sale of certain commercial real property (“premises” or “property”) in East Rochester, New York. The action was removed to this Court by one of the defendants, Sovereign JF, SPE Manager, Inc., on the basis of federal question jurisdiction under 28 U.S.C. § 1331, because plaintiffs had asserted a claim under the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq. The RICO claims, and the other state law claims, were generally based on plaintiffs’ allegations that defendants engaged in a scheme to defraud plaintiffs in connection with the sale of the property to them.

On February 10, 2011, the Court issued a Decision and Order, familiarity with which is assumed, granting motions to dismiss by the defendants, and granting plaintiffs leave to file an amended complaint within thirty days. 764 F.Supp.2d 556. On March 9, 2011, however, plaintiffs’ counsel informed the Court by letter that plaintiffs had elected not to file an amended complaint. Dkt. # 130. The Court therefore entered judgment in favor of defendants, and closed the case. Dkt. #131.

Six of the defendants — Marcus & Millichap Real Estate Investment Brokerage Company (“M & M”), Daniel J. Scotti, Jr., Glen Kunofsky, Andrew R. Dorf, Scott Dragos, and Chris Zorbas (“moving defendants”) — now move for an order awarding them attorney’s fees, based on a fee-shifting provision in the purchase agreement for the property (“Purchase Agreement”). That agreement provided, in part, that

[i]n any litigation, arbitration or other legal proceeding, which may arise between any of the parties hereto, including Agent, the prevailing party shall be entitled to recover its costs, including costs of arbitration, and reasonable attorney’s fees in addition to any other relief to which such party may be entitled.

Complaint ¶ 99 and Ex. Q ¶ 27.

While that provision might seem obviously to provide for an award of attorney’s fees in this ease, plaintiffs contend that things are not quite so simple. First, plaintiffs contend that the fee-shifting provision in the Purchase Agreement should not be read to provide for fees in a suit like this one, asserting claims for RICO violations, negligent misrepresentation, fraud, unjust enrichment, and other torts; rather, according to plaintiffs, the provision should be interpreted as limiting the availability of fees to actions based upon an alleged breach of the Purchase Agreement itself.1

[191]*191Plaintiffs argue that at the very least, the Court cannot find an “unmistakably clear” intention on the part of the parties that fees should be awarded in this action, and that therefore defendants’ motion should be denied. See Hooper Assoc. v. AGS Computers, 74 N.Y.2d 487, 492, 549 N.Y.S.2d 365, 548 N.E.2d 903 (1989) (“Inasmuch as a promise by one party to a contract to indemnify the other for attorney’s fees incurred in litigation between them is contrary to the well-understood rule that parties are responsible for their own attorney’s fees, the court should not infer a party’s intention to waive the benefit of the rule unless the intention to do so is unmistakably clear from the language of the promise”); accord Mid-Hudson Catskill Rural Migrant Ministry, Inc. v. Fine Host Corp., 418 F.3d 168, 177 (2d Cir.2005) (citing Hooper).

Second, plaintiffs argue that even if the Court were to give effect to the fee-shifting provision, the Court should find that only defendant Scotti is entitled to its benefits. Plaintiffs note that the only parties to the Purchase Agreement were themselves and defendant Scotti; none of the other defendants are signatories to the agreement.

Finally, plaintiffs assert that fees should not be awarded here because in general, different standards apply to cases involving prevailing defendants than to those involving prevailing plaintiffs. Plaintiffs maintain that attorney’s fees should generally not be awarded against losing plaintiffs unless the plaintiffs’ claims were frivolous or groundless, or the plaintiffs continued to litigate their claims after it became clear that their claims were meritless.

DISCUSSION

I. Defendants’ Entitlement to Fees

As explained by the Court of Appeals for the Second Circuit, in an action arising under state law, a federal court applies the law of the relevant state in determining whether to award attorney’s fees. Mid-Hudson, 418 F.3d at 177. In the case at bar, jurisdiction was premised on the existence of a federal question, due to plaintiffs’ assertion of a RICO claim, but plaintiffs’ other claims were brought under New York law, and the Purchase Agreement was expressly governed by New York law. See Purchase Agreement ¶ 33.

In my prior decision, I found it unnecessary to address defendants’ arguments concerning the merits of plaintiffs claims under state law. The Court stated that although defendants’ various arguments as to why those claims should be dismissed “appear[ed] to have some merit, ... [a]ll the state law claims ultimately suffer[ed] from the same basic defect as the RICO claims, which [wa]s that the underlying factual allegations [wejre insufficient under federal pleading standards,” specifically Rule 9(b). 764 F.Supp.2d at 575. Having dismissed plaintiffs’ RICO claims without prejudice, the Court stated that “[plaintiffs’ claims under state law are therefore dismissed as well, again without prejudice to plaintiffs’ filing of an amended complaint setting forth those claims in a manner that complies with the pleading requirements of the Federal Rules of Civil Procedure.” Id. at 575-76. As stated, plaintiffs declined to do so.

As a threshold question, then, the Court must determine whether state or federal law controls the issue of defen[192]*192dants’ entitlement to attorney’s fees. The Second Circuit has stated that in a diversity action, “[sjtate law creates the substantive right to attorney’s fees.” Mid-Hudson, 418 F.3d at 177. While jurisdiction in this action was premised on the existence of a federal question rather than diversity of citizenship, see Notice of Removal (Dkt. #1) ¶ 1, the same principle applies. See Equals Int'l., Ltd. v. Scenic Airlines, 35 Fed.Appx. 532, 534 (9th Cir.2002) (stating that “[f]ederal courts are required to apply state law in diversity actions with regard to the allowance or disallowance of attorney fees,” and that “[ajlthough Equals originally brought this case as a federal question copyright case, not as a diversity action, the same Erie doctrine principles apply”). In addition, “[ajlthough the RICO statute only permits prevailing plaintiffs to recover attorney’s fees, prevailing defendants may also recover attorney’s fees when specified in an agreement of the parties.” Bonner v. Redwood Mortgage Corp., No.

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906 F. Supp. 2d 188, 2012 WL 5949098, 2012 U.S. Dist. LEXIS 169310, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ozbakir-v-scotti-nywd-2012.