Phoenix Fashion, Inc. v. Saadia Group LLC

Background

Phoenix Fashion sued the defendants over their alleged failure to pay for apparel goods. The claims concerned a forbearance agreement, which addressed the parties’ payment arrangement, and a related guaranty. After the defendants failed to answer, the court entered a default judgment in part in an earlier order. That order found damages of $4,346,289.99, plus statutory interest at 9% from December 20, 2022.

The defendants had previously sought to set aside the defaults. The court agreed to vacate the defaults against certain defendants on the condition that they post a $3,022,209 bond by September 27, 2024. No bond was posted, and the court later granted Phoenix Fashion’s motion for default judgment.

Fee and Cost Request

Phoenix Fashion moved for attorney’s fees of $183,652 and costs of $4,842.93, for a total of $188,494.93. The agreements provided for recovery of fees and costs incurred to enforce the agreements. The forbearance agreement awarded fees and costs to the prevailing party in a legal action to enforce it. The guaranty required payment of reasonable attorney’s fees, collection fees, and other reasonable out-of-pocket costs incurred to enforce the guaranty or collect the guaranteed obligations.

The defendants argued that this case was not an action to enforce the agreements because the judgment was based on their default and Phoenix Fashion’s efforts to obtain it were allegedly minimal. The court rejected that argument, explaining that Phoenix Fashion filed a lawsuit seeking to enforce the agreements and obtained a default judgment for the full amount of damages alleged.

Court’s Analysis

The court applied New York law’s rule that a clear contractual promise to award reasonable attorney’s fees to the prevailing party is enforceable. It also considered the reasonableness of the requested fees, including the difficulty of the issues, the time and labor required, the attorneys’ experience, customary rates, and the amount involved.

The fee application included records showing attorney and paralegal hours and billed costs. The court found the hourly rates of Betty J. Levine and Stephen Z. Starr reasonable for attorneys with their experience handling a commercial matter in the Southern District of New York. After reviewing the entries challenged by the defendants, the court found the fees and costs reasonable and adequately supported.

Ruling

The court granted Phoenix Fashion’s motion for attorney’s fees and costs in the amount of $188,494.93. It directed the Clerk of Court to enter judgment for Phoenix Fashion for $4,346,289.99 in damages, plus 9% statutory interest from December 20, 2022, and the additional $188,494.93 in attorney’s fees and costs. The court did not decide whether interest could be awarded on the fees and costs because Phoenix Fashion did not request it.