708 F. App'x 21
2d Cir.2017Background
- Anthony Cuti, former CEO of Duane Reade, was ordered to pay restitution for fraud-related victims; district court entered a $6,253,547.52 final restitution award on remand.
- Restitution was claimed under the Victim and Witness Protection Act (VWPA), 18 U.S.C. § 3663(b)(4), for attorneys’ fees and accounting costs Duane Reade incurred during investigations and prosecutions.
- On initial appeal (Cuti I), this Court expressed concern that some law-firm work related to parallel civil arbitration or the private equity owner was not compensable, and warned about redundant/duplicative billing.
- On remand the district court received detailed billing reviews and declarations (including Paul, Weiss attorneys) that excised some charges and substantially reduced claimed fees; the court further reduced or removed entries it found unnecessary or poorly documented.
- The district court awarded most remaining claimed expenses, but included attorneys’ fees for monitoring the criminal trial (attendance, transcript review, summaries, press materials), which Cuti challenged.
- The Second Circuit affirmed in part but vacated and remanded insofar as the award included fees for monitoring the criminal trial, holding that the government failed to prove those monitoring expenses were "necessary" to advance the prosecution.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Duane Reade met burden to show claimed legal/accounting fees were "necessary" for restitution under VWPA | Duane Reade and government: submitted detailed billing records and supervisory declarations; removed clearly arbitration-related items; met preponderance standard | Cuti: records were unclear, block-billed, and government shifted burden to him to segregate compensable from non-compensable time | Held: Court affirmed that, on the record, claimant and government met the burden for most fees; district court did adequate, deferential reasonable-estimate accounting after receiving evidence and opportunity to challenge. |
| Whether fees for work directed to the civil arbitration and private-equity interests are compensable | Government/claimant tried to exclude arbitration-only work and did so for many entries | Cuti argued overlap and duplicative billing rendered many entries non-compensable | Held: Consistent with Cuti I and Maynard, work exclusively for arbitration or private interests is not compensable; district court appropriately excised such items on remand. |
| Whether monitoring the criminal trial (attendance, transcript review, summaries, press releases) is "necessary" to advance the prosecution | Claimant: monitoring helped respond quickly to government requests and keep auditors/public informed; expenditures were modest and reasonable | Cuti: monitoring did not assist the government or advance prosecution; speculative/private-interest monitoring is not compensable | Held: Vacated as to these fees — government failed to show monitoring was necessary to advance investigation/prosecution; such monitoring is not compensable under VWPA. |
| Standard of review and district court’s accounting role | N/A | N/A | Held: Restitution reviewed for abuse of discretion; district court has broad discretion to make reasonable estimates based on record, but cannot exceed statutory authority — must be satisfied by preponderance. |
Key Cases Cited
- United States v. Maynard, 743 F.3d 374 (2d Cir.) (broad view of "necessary" expenses; fees must be required to advance prosecution)
- United States v. Amato, 540 F.3d 153 (2d Cir.) (VWPA restitution principles)
- United States v. Cuti, 778 F.3d 83 (2d Cir.) (Cuti I) (limitations on restitution for arbitration-related work; necessity requirement)
- United States v. Milstein, 481 F.3d 132 (2d Cir.) (district courts may reasonably estimate losses for restitution)
- United States v. Boccagna, 450 F.3d 107 (2d Cir.) (abuse-of-discretion standard for restitution orders)
- United States v. Gushlak, 728 F.3d 184 (2d Cir.) (deferential review of restitution estimates)
- United States v. Reifler, 446 F.3d 65 (2d Cir.) (district court may not exceed statutory authority in awarding restitution)
- United States v. Nosal, 844 F.3d 1024 (9th Cir.) (noncompensable monitoring/review entries in restitution context)
- United States v. Gupta, 925 F. Supp. 2d 581 (S.D.N.Y.) (use of supervising attorneys’ declarations to support billing records)
- United States v. Catoggio, 698 F.3d 64 (2d Cir.) (district-court approximations of losses affirmed where record supports analysis)