Criollo v. NY Fine Interiors Inc., 1:19-cv-05794

Background

Plaintiff Marco Criollo filed FLSA and NYLL wage-and-hour claims against NY Fine Interiors, NY Fine Interiors & Woodwork, and Damian Cejnog after defendants failed to pay overtime, provide statutory wage notices/statements, and allegedly retaliated for complaints about pay.
Defendants were served (corporate defendants via Secretary of State; Cejnog by substituted service) but did not timely answer; plaintiff moved for default judgment and litigated service at a two-day hearing after defendants later appeared and contested service.
Magistrate Judge Pollak found service proper, concluded defendants’ failure to respond was negligent (but not willful), and recommended vacatur of the default in favor of deciding the merits; Judge Komitee adopted that R&R.
Plaintiff nonetheless moved for attorney’s fees and costs incurred defending against defendants’ service arguments and pursuing the default-judgment motion, arguing defendants’ positions were baseless and caused unnecessary expense.
The magistrate concluded the court may use its inherent authority to condition vacatur by awarding fees where defaulting conduct causes unnecessary expense, found defendants’ negligence justified fee shifting, but reduced requested amounts for an excessive preadmission rate and excessive/vague time entries.
Recommended award: $34,287.30 in attorney’s fees (after rate and 10% across-the-board reduction) plus $1,464.11 in costs, totaling $35,751.41.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether fees/costs may be shifted under the court's inherent power for expenses incurred litigating service/default	Plaintiff sought fees for work responding to defendants’ allegedly baseless service defenses and for pursuing default judgment; asks punitive/compensatory fees	Defendants argued they lacked proof of receipt of process, responded promptly upon receipt of the default-judgment motion, and fee-shifting is inappropriate/burdensome relative to damages	Court found inherent power permits fee-shifting where negligence caused unnecessary expense; defendants were negligent and fee-shifting to compensate plaintiff was appropriate
Appropriate hourly rates for counsel and preadmission associate	Counsel requested $450/hr and the preadmission associate $125/hr	Defendants challenged reasonableness	Court approved $450/hr for experienced wage-litigation counsel but reduced preadmission associate rate to $90/hr (typical district rate)
Whether billed hours were excessive or vague and should be trimmed	Plaintiff submitted contemporaneous time records totaling ~159.3 hours and sought full payment	Defendants argued fee amount was exorbitant and some work would benefit future litigation, not attributable to default	Court found some entries excessive or vague, excluded certain non-attributable tasks, and applied a 10% across-the-board reduction to trim excessive time
Recoverable costs and proportionality to damages	Plaintiff sought $1,464.11 in out-of-pocket costs (e.g., photocopies, research, process-server fees) and argued fee awards need not be proportional to damages in FLSA cases	Defendants argued fees disproportionate to claimed damages and some costs avoidable	Court held the listed costs were compensable under §1920 and ancillary authority; rejected proportionality argument for FLSA fee awards and recommended full recovery of the claimed costs

Key Cases Cited

Chambers v. NASCO, Inc., 501 U.S. 32 (1991) (recognizing courts’ inherent powers to manage affairs and sanction bad-faith conduct)
Link v. Wabash R. Co., 370 U.S. 626 (1962) (courts’ control to manage docket and ensure orderly disposition)
Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240 (1975) (fee-shifting is ordinarily inappropriate absent statutory or exceptional circumstances)
Oliveri v. Thompson, 803 F.2d 1265 (2d Cir. 1986) (high standard for awarding fees under inherent power; bad faith and clear-and-convincing proof required)
Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542 (2010) (framework for determining reasonable attorney’s fees)
Hensley v. Eckerhart, 461 U.S. 424 (1983) (lodestar and reduction principles for fee awards)
Powerserve Int'l, Inc. v. Lavi, 239 F.3d 508 (2d Cir. 2001) (courts may condition vacatur of default and balance prejudice vs. resolving cases on the merits)
Enron Oil Corp. v. Diakuhara, 10 F.3d 90 (2d Cir. 1993) (factors for vacating defaults and preference for merits adjudication)
Marfia v. T.C. Ziraat Bankasi, 100 F.3d 243 (2d Cir. 1996) (Second Circuit’s preference for resolving disputes on the merits)
Arbor Hill Concerned Citizens Neighborhood Ass'n v. County of Albany, 522 F.3d 182 (2d Cir. 2008) (determining presumptively reasonable hourly rates in fee awards)