Venture Group Enterprises v. Vonage Business Inc. f/k/a Vonage Business Ltd.

Background

Venture moved for expenses under New York Civil Practice Law and Rules § 3220. The motion followed earlier rulings in which the court granted summary judgment to Vonage on Vonage’s counterclaim and Venture’s breach-of-contract claims. After a bench trial on damages, the court awarded Vonage $1 in nominal damages.

Before trial, Venture had offered to allow judgment against it for $9.99 on Vonage’s breach-of-contract counterclaim, including costs already accrued. Vonage rejected the offer. Venture then sought approximately $1.6 million in fees and costs, arguing that Vonage’s $1 damages award was less favorable than the $9.99 offer.

Magistrate Judge Gary Stein recommended denying the motion. He reasoned that Vonage was likely to receive a final judgment exceeding $9.99 because it would include the $1 nominal-damages award and at least approximately $15,000 in costs for deposition transcripts. Venture objected to the recommendation.

Court’s Analysis

The court reviewed Venture’s specific objections independently and adopted Judge Stein’s recommendation in full.

First, the court rejected Venture’s argument that costs could be included only if a contract between the parties authorized them. Section 3220 refers to an offer made with “costs then accrued,” and the court found no basis to add a contract-authorization requirement. Because Venture’s offer expressly included accrued costs, the court held that an apples-to-apples comparison required comparing that offer with Vonage’s judgment, including applicable costs.

Second, the court rejected Venture’s argument that the $1 post-trial damages decision was the relevant judgment. The court explained that the final judgment had not yet been entered and that costs, if awarded, would be part of the final judgment. Using only the nominal-damages decision would therefore prevent the statutory comparison from accounting for costs.

Third, the court overruled Venture’s arguments about whether New York or federal law governed the calculation of costs. The court found that some of those arguments had been forfeited because Venture raised them for the first time in its objections. Even if considered, the court found them unpersuasive. It stated that federal law ordinarily controls the award of costs in a diversity case, absent an important state interest, and that Vonage would likely qualify for at least some costs even under the state-law approach Venture proposed.

Finally, the court considered Venture’s argument that the deposition-transcript costs had not accrued when the offer was made. Although the court found this argument had also been forfeited, it addressed the merits and concluded that Vonage was likely entitled to at least some of those costs because the transcripts had been used in the court’s earlier summary-judgment ruling.

Disposition

The court overruled Venture’s objections and adopted Judge Stein’s Report and Recommendation. It denied Venture’s motion under Section 3220 without prejudice. The court stated that Venture may renew the motion if Vonage does not receive a final judgment exceeding $9.99. The court did not reach Vonage’s alternative arguments for ruling in its favor.