IN RE: NAVIDEA BIOPHARMACEUTICALS LITIGATION
19-CV-1578 (VEC)
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
8/24/2020
VALERIE CAPRONI, United States District Judge
OPINION AND ORDER
OPINION AND ORDER
VALERIE CAPRONI, United States District Judge:
Plаintiff Navidea Biopharmaceuticals, Inc. (“Navidea“) sued Michael Goldberg (“Goldberg“) for breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, and for a declaratory judgment establishing the contractual rights and obligations of the parties. See Am. Compl., Dkt. 15. Goldberg asserted counterclaims against Navidea and third-party claims against Macrophage Therapeutics, Inc. (“Macrophage“), a subsidiary of Navidea. Dkt. 31. Goldberg also moved to dismiss Plaintiff‘s breach of fiduciary duty claim and sоught advancement of attorneys’ fees in connection with defending against that claim. Dkt. 32. On December 26, 2019, the Undersigned granted Goldberg‘s motion to dismiss the breach of fiduciary duty claim and determined that he was entitled to attorneys’ fees with respect to the defense of that claim. Dkt. 61. The Court directed the parties to meet and confer regarding an appropriate amount of attorneys’ fees; on February 20, 2020, Goldberg informed the Court that the parties were unable to reach an agreement on an amount. Dkt. 78. Goldberg also filed a seрarate motion for advancement of attorneys’ fees incurred in defending against Navidea‘s remaining claims in the instant case as well as against Macrophage‘s claims in an entirely separate action pending in the Delaware Chancery Court, Macrophage Therapeutics, Inc. v. Goldberg, C.A. No. 2019-0137-JRS. See Dkt. 64.
DISCUSSION
In reviewing a report and recommendation, a district court “may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.”
A. The Court Will Not Exercise Ancillary Jurisdiction Over Goldberg‘s Application for Advancement of Legal Fees Incurred in the Delaware Action
It is within this Court‘s discretion whether to exercise ancillary jurisdiction over collateral matters, including fee disputes. See Tancredi v. Metro. Life Ins. Co., 378 F.3d 220, 225 (2d Cir. 2004); Chesley v. Union Carbide Corp., 927 F.2d 60, 66 (2d Cir. 1991). In determining whether to exercise ancillary jurisdiction over Goldberg‘s application for advancement of attorneys’ fees incurred in defending against Macrophage‘s claims in the Delaware Action, the Court considers: (i) whether the dispute is “sufficiently related” to the
The Court agrees with Magistrate Judge Freeman‘s recommendation and declines to exercise ancillary jurisdiction. At the outset, the Court is not convinced that the two actions are “sufficiently related” so that the Court may exercise jurisdiction. Not only is Navidea not а party to the Delaware Action,1 but the two cases present different types of claims stemming from different conduct. In this case, Navidea asserts contract-related claims against Goldberg stemming from the alleged breach of the August Agreement, whereas in the Delaware action, Macrophage asserts conversion and breach of fiduciary duty claims against Goldberg based on Goldberg‘s purportedly unilateral transfer of Macrophage‘s intellectual property rights to a new corporation. See Dkt. 82-1. In other words, contrаry to Goldberg‘s contention, the claims asserted against him in the Delaware Action are not “identical to those that this Court” has already reviewed. See Goldberg Obj., Dkt. 124 at 7.
Even if the two actions were “sufficiently related” for this Court to exercise ancillary jurisdiction, doing so would serve neither judicial economy nor the interests of convenience. The Court is entirely unfamiliar with the procedural history and posture of the Delaware Action as well as the nature, extent, and quality of the work performed by Goldberg‘s counsel in that
In short, even if the Court could exercise ancillary jurisdiction over this claim, the Court agrees with the Magistrate Judge that it should not do so.
B. Goldberg is Entitled to Indemnification for Attorneys’ Fees Reasonably Incurred in Defending Against the Breach of Fiduciary Duty Claim
The Court agrees with Magistrate Judge Freeman that Goldberg is entitled to indemnification for attorneys’ fees and costs he actually and reasonably incurred in connection with his successful defense of the breach of fiduciary duty claim. See R&R at 30-31. Navidea does not object to the Court making this finding. See Navidea Obj., Dkt. 122 at 8 n.2. Nevertheless, the Court will not award Goldberg any fees or costs at this time. The Court will give him one (and only one) more opportunity to make a properly supported fee application. If he fails to do so, the Court will likely deem his motion for indemnification to have been withdrawn with prejudice.
In assessing requests for attorneys’ fees, courts routinely use the “lodestar method” to calculate a “presumptively reasonable fee.” Millea v. Metro-N. R. Co., 658 F.3d 154, 166 (2d Cir. 2011) (citation omitted). The lodestar is “the product of a reasonable hourly rate and the reasonable number of hours required by the case.” Id. The party seeking attorneys’ fees bears the burden of demonstrating that his requested fees are reasonable. See Blum v. Stenson, 465 U.S. 886, 897-98 (1984). To meet this burden, the party must provide the Court with contemporaneous time records that “specify, for each attorney, the date, the hours expended, and the nature of the work done.” N.Y. State Ass‘n for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1148 (2d Cir. 1983).
Here, Goldberg has twice been ordered to provide his attorneys’ time records and to explain specifically which of the entries relate to the defense of the breach of fiduciary duty claim and which relate either to the defense of Navidea‘s other claims or to the litigation of Goldberg‘s own counterclaims and third-party claims.3 Although Gоldberg has finally produced copies of his attorneys’ billing records, he provided no explanation of which time entries relate to the defense of which claims.4 See Dkt. 117. Without this information, the Court is entirely unable to assess the reasonableness of Goldberg‘s requested attorneys’ fees.5 Goldberg‘s
No later than September 30, 2020, Goldberg is ordered to make a properly supported fee application in support of his indemnification claim. Goldberg must submit copies of his attorneys’ billing records that specifically detail the time each attorney spent defending the breach of fiduciary duty claim and explaining the nature of the work done. The Court warns Goldberg that failure to comply with this order will likely result in the Court finding that Goldberg has withdrawn with prejudice his request for indemnification as a sanction for his failure to comply with this and previous court orders. See Rice v. NBCUniversal Media LLC, No. 19-CV-447, 2019 WL 3000808, at *3 (S.D.N.Y. July 10, 2019)
C. Goldberg is Entitled to Advancement of the Attorneys’ Fees and Costs Reasonably Incurred in Defending Against Plaintiff‘s Remaining Claims
The Court agrees that Goldberg is entitled to advancement of attorneys’ fees and costs incurred to date in defending against Navidea‘s remaining claims, provided that Goldberg tenders the necessary undertaking to repay the advancement if it is ultimately determined that he is not entitled to indemnification under the Navidea bylaws. See Navidea Bylaws, Dkt. 66 Ex. B, Art. V, § 3; R&R at 31-38. The undertaking does not need to be secured; nothing in the advancement provision requires that the undertaking be secured, and there is no reason to believe that Goldberg will be unable to repay Navidea if he is ultimately found not to be entitled to indemnification. See id.; R&R at 37-38.
The advancement provision of the Navidea Bylaws states that:
expenses (including attorneys’ fees) incurred by an officer or director in defending any civil . . . action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this Article V.
As applicable to this case, the Navidea Bylaws provide that Goldberg will be entitled to indemnification if Navidea is seeking to “procure a judgment in [Navidea‘s] favor by reason of the fact that [Goldberg] is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of [Navidea] as a director or officer, еmployee or agent of another corporation . . .” Navidea Bylaws, Art. V. § 1(b). Navidea argues that its contract-related claims against Goldberg do not arise “by reason of the fact” that Goldberg was formerly an officer and director of Navidea but, rather, stem from actions taken by Goldberg in his individual capacity. See Navidea Obj. at 10-13. Even assuming that is true, the Court agrees with Judge Freeman that Navidea‘s claims could be read to arise, at least in part, “by reason of the fact” that Goldberg was
Nevertheless, for the reasons explained supra, the Court will not award Goldberg advancement of any attorneys’ fees incurred to date absent a properly supported fee application. Despite Goldberg‘s nonsensical suggestion that there is no need for this Court to assess whether the fees incurred in defending this action have been “reasonable” before ordering advancement, see R&R at 19-21 39-40, courts in this district consistently examine the reasonableness of any proposed advancement of attorneys’ fees, even in the absence of an express requirement that the
No later than September 30, 2020, Goldberg is directed to make a properly supported fee application in support of his claim for advancement. Goldberg must submit copies of his attorneys’ billing records specifically detailing the amount of time spent defending against each of Navidea‘s remaining claims in this case to date.10 As with the fees associated with the breach
D. The Court Adopts the Proposed Protocol for the Advancement of Fees
The Court adopts Magistrate Judge Freeman‘s prоposed protocol regarding the future advancement of attorneys’ fees and adds one additional requirement; the parties must meet-and-confer for at least one hour regarding any disputed amounts for the relevant period. The Court disagrees with Goldberg‘s argument that Judge Freeman‘s proposed protocol will “cause unfair delay” and “incentivize[] Navidea to raise improper objections.” Goldberg Obj. at 8-9. It is Goldberg himself who has caused significant delay by failing to comply with Judge Freeman‘s orders regarding production of his attorneys’ billing records. See R&R аt 3, 16, 21-22, 41. Moreover, Goldberg‘s suggestion that he be “permitted to make applications to the Court monthly,” Goldberg Obj. at 9, would only cause additional delay and needless expense. Finally, Goldberg‘s proposed modifications that: (i) he be allowed to remove any undisputed amount “from any escrowed funds resulting from provision 2, with any balance owed to be paid immediately“; and (ii) Navidea be required to pay Goldberg “interest at the statutory rate on any and all amounts awarded to [him] as a result of his having to make an application to the Court
CONCLUSION
For the foregoing reasons, the Court adopts Magistrate Judge Freeman‘s R&R in its entirety. Defendant‘s various applications for advancement or indemnification of attorneys’ fees and expenses, see Dkts. 64, 107, 117, are granted in part and denied in part. As noted supra, no later than September 30, 2020, Defendant is directed to make properly supported fee appliсations to support his requests for indemnification and advancement. These fee applications are referred to Magistrate Judge Freeman for a report and recommendation consistent with the referral order at docket entry 80.
The Clerk of Court is respectfully directed to terminate the motion at docket entry 64.
SO ORDERED.
Date: August 24, 2020
New York, NY
VALERIE CAPRONI
United States District Judge
