Westport Insurance v. Hamilton Wharton Group Inc.
483 F. App'x 599
2d Cir.
2012
Check Treatment
Docket

SUMMARY ORDER

Appellant Westport Insurance Corporation (‘Westport”) appeals from the February 23, 2011 Decision and Order of the United States District Court for the Southern District of New York (Berman, J.), grаnting summary judgment to the appellees and dismissing Westport’s declaratory judgment action (the “DJ Order”). West-port sought a declaratory judgment that a professional liability insurance policy (the “Policy”) issued by Westport to Appellee Hamilton Wharton Group, Inc. (“Hamilton Wharton”) does not impose upon Westport either a duty to defend or a duty to indemnify Hamilton Whаrton in four lawsuits filed in New York State Supreme Court (the “State Actions”) against Hamilton Wharton and its owner, Walter B. Taylor (“Taylor,” together with Hamilton Wharton, the “Defendants”). In the DJ Order, the district cоurt found that (i) Westport had a duty to defend the Defendants and (ii) the complaint should be dismissed as “premature” with respect to the Defendants’ duty to indemnify because “issues of fact on which the insurance coverage de*603pends” have yet to be adjudicated in the State Actions. On March 31, 2011, the district court awarded the Defendants’ counsel attorneys’ fees in the аmount of $159,477.50 and costs of $26,817.91 (the “Attorneys’ Fees Award”). Both Westport and the Defendants also appeal from the Attorneys’ Fees Award. We assume the parties’ familiarity with the facts, procedural history, and issues presented for review.

We review de novo the district court’s grant of summary judgment, “construing the evidence in the light most favorable to the non-moving party and drawing all reasonable infеrences in its favor.” Costello v. City of Burlington, 632 F.3d 41, 45 (2d Cir.2011); see Fed.R.Civ.P. 56(a).

The district court did not err in concluding that the State Actions trigger Westport’s duty to defend. Under New York law — which the parties agree applies in this case — an insurer’s duty to defend is broader than its duty to indemnify and has been described by the New York Court of Appeals as “exceedingly broad.” Colon v. Aetna Life & Cas. Ins. Co., 66 N.Y.2d 6, 8, 494 N.Y.S.2d 688, 484 N.E.2d 1040 (1985). Indeed, “[s]o long as the claims [asserted against the insured] may rationally be said to fall within policy coverage, whatever may later prove to be the limits of the insurer’s responsibility to pay, there is no doubt that it is obligated to defend.” Seaboard Sur. Co. v. Gillette Co., 64 N.Y.2d 304, 310-11, 486 N.Y.S.2d 873, 476 N.E.2d 272 (1984) (alterations in original) (internal quotation marks omitted).

Here, the claims asserted against West-port may rationally be said to fall within the ‍​‌​‌‌​‌​‌​​​‌​​​‌‌‌‌​​‌‌‌​​​​​‌‌​‌​​​​​​​‌​​‌‌​‌‍Policy’s coverage. The “professional services” сontemplated by the Policy encompass at least some of the activities alleged in the State Actions, which included, inter alia, allegations that the Defendants were negligent in handling their funds by: continuing to sign up new participants to join the trust; failing to hire an accountant; offering unwarranted discounts to trust members; failing to implement safety audits; and failing to conduct payroll audits.

Westport contends that the Policy’s Insolvency Exclusion bars coverage for the underlying complaints and that the district court erred because it failed to analyze this exclusion. The district court did not address the applicability of the Insolvency Exclusion for good reason. To the extent the issue was raised below at all, Westport offered only conclusory assertiоns that the Insolvency Exclusion barred coverage even though Westport bore the “heavy burden” of establishing the applicability of the exclusion. Commercial Union Assurance Co. v. Oak Park Marina, Inc., 198 F.3d 55, 61 (2d Cir.1999). Westport’s con-clusory assеrtions, rather than argument, were insufficient to preserve this issue for appellate review. See Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 154 (2d Cir.1999). “‘It is a well-established general rule that an appellate court will not consider аn issue raised for the first time on appeal.’ ” Allianz Ins. Co. v. Lerner, 416 F.3d 109, 114 (2d Cir. 2005) (quoting Greene v. United States, 13 F.3d 577, 586 (2d Cir.1994)). While we have the discretion to relax this rule to consider a purely legal issue or to avoid manifest injustice, we see no reasоn to exercise such discretion under the circumstances of this case. Id. Moreover, we are not persuaded that all of the claims against Hamilton Wharton and Taylor in the underlying complaints would fall ‍​‌​‌‌​‌​‌​​​‌​​​‌‌‌‌​​‌‌‌​​​​​‌‌​‌​​​​​​​‌​​‌‌​‌‍within the scope of the Insolvency Exclusion. Notably, the Niagara complaint lacks any *604allegations referring to the trust’s insolvency or financial inability to pay.

Next, Westport contends that the district court erred in dismissing as premature Westport’s action as to its duty to indemnify. We review a district court’s decision to refuse to exercise jurisdiction over a declaratory judgment action “dеferentially, for abuse of discretion.” Dow Jones & Co. v. Harrods Ltd., 346 F.3d 357, 359 (2d Cir.2003). Where, as here, “another suit is pending in a state court presenting the same issues, not governed by federal law, between the same partiеs,” it is entirely appropriate for a district court to dismiss a declaratory judgment action. Wilton v. Seven Falls Co., 515 U.S. 277, 282, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995) (internal quotation marks omitted). As the district court noted, the declaratory judgment actiоn and the State Actions have numerous unresolved issues in common, including whether the Defendants were negligent or breached fiduciary or contractual obligations. As a result, the district court did not abuse its discretion in dismissing as premature the indemnification portion of Westport’s declaratory judgment action.

We also reject Westport’s contention that it was prejudiced because the district court denied its request for discovery in response to the Defendants’ motion for summary judgment. See Fed.R.Civ.P. 56(d); see also Gualandi v. Adams, 385 F.3d 236, 244-45 (2d Cir.2004). In assessing whether Westport had a duty to defend and indemnify, the district court was required to “compare the allegations of the complaint to the terms of the policy.” A. Meyers & Sons Corp. v. Zurich Am. Ins. Grp., 74 N.Y.2d 298, 302, 546 N.Y.S.2d 818, 545 N.E.2d 1206 (1989). It was not required to consider the additional materials submitted by the Defendants, and there is no evidence that it actually ‍​‌​‌‌​‌​‌​​​‌​​​‌‌‌‌​​‌‌‌​​​​​‌‌​‌​​​​​​​‌​​‌‌​‌‍did so. Accordingly, the district court did not abuse its discretion in precluding Westport from conducting additional discovery.

Next, we address the parties’ objections to the Attorneys’ Fees Award. The scope of our review in this regard is “circumscribed.” Chambless v. Masters, Mates & Pilots Pension Plan, 885 F.2d 1053, 1057 (2d Cir.1989). The district court has “the best vantage point from which to assess the skill of the аttorneys and the amount of time reasonably needed to litigate a case.” Id. at 1057-58. Moreover, “attorney’s fees are to be awarded with an eye to moderation, seеking to avoid either the reality or the appearance of awarding windfall fees.” N.Y. State Ass’n for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1139 (2d Cir.1983) (citation and internal quotation marks omitted). Thus, the district court’s calculation of attorneys’ fees will not be disturbed absent a clear abuse of discretion. Chambless, 885 F.2d at 1058.

The district court did not abuse its discretion by reducing the Defendants’ counsel’s hourly rates. The district court relied on severаl valid considerations in making its determination, including: the limited time and labor required, the relatively straightforward nature of the case, the absence of severe time demands, and the rates awarded in similar cases. See, e.g., U.S. Football League v. Nat’l Football League, 887 F.2d 408, 415 (2d Cir.1989) (citing Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974)).

The Defendants counter that the district court relied on “historic rates that no longer apply, as well as the rates of opposing *605counsel.” We disagree. The Defendants have not demonstrated that any of the rates relied on by the district court no longer prevail in the Southern District of New York. It was also not error for the district court to consider the rates charged to Westport’s counsel. This ‍​‌​‌‌​‌​‌​​​‌​​​‌‌‌‌​​‌‌‌​​​​​‌‌​‌​​​​​​​‌​​‌‌​‌‍was one of several factors relied on by the district court, and it was certainly not an unreasonable consideration given that the Defendants’ counsel requested fees were approximately four times greater than the fees Westport paid to its own counsel for the same work.

We also decline Westport’s invitation to further reduce the Attorneys’ Fees Award. Westport’s reliance on the hourly rates of other appellees, as well as the hourly rates awarded in GuideOne Specialty Mutual Insurance Co. v. Congregation Adas Yereim, No. 1:04-cv-5300 (ENV)(JO), 2009 WL 3241757, at *3 (E.D.N.Y. Sept. 30, 2009), is misplaced. Counsel for the other appellees are located in Buffalo or in Lake Success, New York and thus, do not represent the “prevailing community a district court should consider to determine” the reasonable hourly rate. Reiter v. MTA N.Y. City Transit Auth., 457 F.3d 224, 232 (2d Cir.2006). Similarly, GuideOne involved an award tо attorneys in the Eastern District of New York, and the GuideOne court noted that Manhattan attorneys’ rates are higher than those in Brooklyn. Id. at *3.

In addition, Westport’s contention that the proposed time entries were unreasonable is unavailing. The district court reduced the number of hours credited to the Defendants’ counsel by 35% from 772.8 hours to approximately 502.3 hours. Westport admitted that its own counsel devoted just over 400 hours to this litigation. The district court did not abuse its discretion in reducing the number of hours by 35%.

Finally, the district court did not abuse its discretion in awarding costs. The costs sоught by the Defendants’ counsel reflected, among other things, in-house duplication costs, telephone charges, meals, overtime, local transportation, ‍​‌​‌‌​‌​‌​​​‌​​​‌‌‌‌​​‌‌‌​​​​​‌‌​‌​​​​​​​‌​​‌‌​‌‍postage, еlectronic legal research, and messenger service. All of these categories of costs are “the sort of expenses that may ordinarily be recovered” as part of a fee award, and are not treated as “overhead expenses.” LeBlanc-Sternberg v. Fletcher, 143 F.3d 748, 763 (2d Cir.1998); see also Kuzma v. Internal Revenue Serv., 821 F.2d 930, 933-34 (2d Cir.1987); Aston v. Sec. of Health and Human Servs., 808 F.2d 9, 12 (2d Cir.1986). Accordingly, it was not error for the district court to compensate the Defendants’ counsеl for a portion of these costs.

We have considered all of the parties’ remaining arguments and, after a thorough review of the record, find them to be without merit.

For the foregoing reasons, the judgment of the district court is hereby AFFIRMED. As a result, the Third-Party Defendants’ motion to strike the Defendants’ request for leave to re-file the Third-Party Complaint is denied as MOOT.

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