UBS AG, London Branch v. Greka Integrated, Inc.

Background

UBS AG, London Branch sued Greka Integrated, Inc. under credit agreements and guaranties. The assigned district judge had previously granted UBS’s summary-judgment motion and motion to dismiss Greka’s counterclaims. The district judge determined that Greka was liable for the borrowers’ obligations and later directed entry of a Rule 54(b) judgment for $100 million in unpaid principal, with interest, fees, and costs to be calculated separately. The district judge referred the calculation of those amounts to Magistrate Judge Kevin Nathaniel Fox.

The earlier orders determined that Greka was liable for performance payments and for legal and advisory or collateral-management fees connected with enforcing or protecting UBS’s rights. They also determined that Greka was not liable for amounts UBS had advanced as working capital to trustees for Rincon Island Limited Partnership and HVI Cat Canyon, Inc.

Issues Before Judge Fox

Judge Fox considered UBS’s evidence supporting its calculations of unpaid interest, administrative-agent fees, deferred closing fees, performance payments, advisory and collateral-management fees, and attorney fees and costs. Greka continued to challenge its underlying liability, arguing that bankruptcy filings were not actionable defaults and that UBS’s default notices were invalid. Greka also argued that UBS had not submitted adequate records to establish the reasonableness of its attorney and consulting fees.

Judge Fox declined to reconsider liability because the district judge had already decided that issue. The remaining task was to calculate the amounts owed and assess the support for the requested fees and costs.

Rulings

Judge Fox found UBS’s interest calculations well explained, accurate, and unrebutted. The court awarded:

- $11,427,656.27 in interest on the First Lien Credit Agreement principal; - $19,446,933.45 in interest on the Second Lien Credit Agreement principal; - $394,071.81 in administrative-agent fees; - $1,817,488.34 in deferred closing fees; - $1,742,987.12 in performance payments, including interest; and - $2,138,513.11 in advisory and collateral-management fees.

The performance-payment award was based on two 2018 fiscal quarters in which the quarterly West Texas Intermediate crude-oil price exceeded $65 per barrel. Each quarter required a $750,000 payment, producing $1.5 million in principal performance payments before interest.

Judge Fox did not award UBS’s requested $8,755,662.40 in attorney fees and costs. Applying New York law, the court explained that contractual attorney fees must be reasonable and supported by evidence such as time records, hourly rates, the attorneys involved, and information relevant to the reasonableness factors. UBS submitted invoices showing amounts billed but did not submit attorney affidavits, time records, hourly rates, or other evidence sufficient to allow the court to evaluate reasonableness. The court therefore found that an award of attorney fees and costs was not warranted.

Disposition

The opinion awarded the six categories listed above and did not award attorney fees and costs. It did not revisit the previously entered $100 million judgment for unpaid principal or the earlier determination that Greka was not liable for the trustee-loan advances.