Alpha Capital Anstalt v. Shiftpixy, Inc.

Background

Alpha Capital Anstalt purchased from ShiftPixy, Inc. a senior convertible note with a principal amount of $310,000. The note gave Alpha the option to convert the principal into one million ShiftPixy shares. After Alpha submitted a conversion request on June 20, 2019, ShiftPixy did not honor it. ShiftPixy had publicly announced that it would voluntarily default on certain conversion requests.

Alpha sued to enforce the note and initially sought a preliminary injunction requiring ShiftPixy to deliver the shares and honor future conversion requests. Judge Paul G. Gardephe denied that request, finding that Alpha had not shown the required immediate, irreparable harm. Alpha later amended its complaint to seek damages as an alternative to injunctive relief.

Alpha moved for summary judgment, seeking either permanent injunctive relief or $500,000 plus interest, representing the value of the shares when they should have been delivered. The magistrate judge recommended granting summary judgment, awarding the damages, and denying the requested mandatory injunction. Judge Gardephe adopted that recommendation in full. Alpha received the $500,000 damages award plus interest.

Fee motion and arguments

The note included a provision allowing Alpha to recover attorneys’ fees when the note was placed with an attorney for collection or enforcement, or when Alpha took legal action to collect amounts due or enforce the note. The note was governed by New York law. The court explained that New York law requires contractual fee awards to be reasonable.

Alpha requested $95,486.45 in fees and expenses. Its counsel charged hourly rates of $700 and $350. Counsel recorded 52.25 hours through the preliminary-injunction proceedings, 67 hours after that point, and 17.82 hours for the research associate. The court found the rates and hours reasonable and found no duplicative work, unnecessary charges, or other billing problems. ShiftPixy did not challenge the rates or time directly.

ShiftPixy’s only objection was that Alpha had achieved limited success because it failed to obtain injunctive relief. ShiftPixy argued that Alpha should recover only fees connected to its successful damages claim. Alpha argued that its request for injunctive relief was reasonable, that the note did not limit fees based on the degree of success, and that all of its requested relief arose from the same facts.

Court’s analysis

The court rejected ShiftPixy’s limited-success argument. Alpha had succeeded on liability and obtained a substantial damages award. The court also found that pursuing injunctive relief was not unreasonable merely because Alpha ultimately failed to obtain it. Alpha had previously obtained injunctive relief in stock-conversion cases involving financially troubled defendants, although the court found that Alpha had not shown the required irreparable harm in this case.

The court further explained that the note’s fee provision did not make recovery depend on the degree of success or the results obtained. The unsuccessful request for injunctive relief was closely related to the successful claim because all the requested relief arose from the same set of facts. The court therefore found no basis to reduce the lodestar, a calculation generally based on reasonable hours multiplied by a reasonable hourly rate.

Disposition

Judge Robert W. Lehrburger granted Alpha’s motion in full. He awarded Alpha total fees and expenses of $95,486.45, consisting of $94,712 in attorneys’ fees and $774.45 in expenses. The opinion states that Judge Gardephe referred this non-dispositive fee motion to Judge Lehrburger.