Clear Blue Specialty Insurance Company v. OZY MEDIA, INC.

Background

Clear Blue sought to rescind a Directors & Officers Employment Practices Liability and Fiduciary Liability Policy issued to OZY MEDIA, INC. and had been ordered to advance Carlos Watson’s defense costs in a related criminal action. Clear Blue had advanced $1,045,160.42, and the policy limit for Watson’s defense costs was $2,000,000.

Ford O’Brien Landy LLP represented OZY Media in several underlying proceedings from approximately October 25, 2021, through November 15, 2022. It reported $1,255,871.87 in unpaid invoices to OZY Media. The court had previously allowed Ford O’Brien to intervene to enforce a charging lien under New York Judiciary Law § 475 and had found that the lien was valid, while requesting further information to determine its value.

Parties’ Positions

Ford O’Brien argued that its lien should include the full amount owed by OZY Media, or at least the value of its work in all four underlying proceedings. It also sought payment for its work intervening in this case. Ford O’Brien stated that it was willing to forgo 24% of its total fees and seek payment only from the undistributed insurance balance.

Defendants argued that the lien did not apply because the preliminary injunction requiring Clear Blue to advance defense costs was not final. They also argued that unpaid invoices submitted to Clear Blue should not be treated as available funds, that Ford O’Brien could recover at most the reasonable value of work connected to obtaining the insurance advance, and that the remaining funds should go to Watson’s criminal-defense counsel.

Court’s Analysis

The court treated Defendants’ argument about the preliminary injunction’s finality as an implicit motion to reconsider the earlier ruling recognizing the charging lien. Because Defendants had not requested permission to file that motion, had not shown reasonable diligence, and had not shown any recognized basis for reconsideration, the court denied the implicit motion for reconsideration and did not consider the finality argument properly raised.

Applying New York law, the court explained that a charging lien protects an attorney’s right to payment from a recovery obtained through the attorney’s services. The relevant recovery here was Clear Blue’s advance of defense costs to Watson. The court therefore limited the lien to Ford O’Brien’s work in this action that helped obtain the preliminary injunction requiring Clear Blue to make that advance, rather than all of Ford O’Brien’s outstanding bills or work in every underlying proceeding.

Ford O’Brien calculated the time value of that work as $233,945. After reviewing its billing records and considering the importance, complexity, urgency, and results of the work, including the $2,000,000 recovery, the court found $233,945 reasonable. The court also awarded $26,550 for 29.8 hours spent responding to an unrequested and improperly submitted email argument. The total value of the charging lien was therefore $260,495.

Order

The court ordered that the value of Ford O’Brien’s charging lien on the insurance proceeds Clear Blue paid for Watson’s defense was $260,495. It ordered Clear Blue to distribute $260,495 from the Directors & Officers policy proceeds to Ford O’Brien.

Disposition

The court denied Defendants’ implicit motion for reconsideration and ordered distribution of $260,495 in insurance proceeds to Ford O’Brien. The opinion did not state that either ruling was with or without prejudice.