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Asta Funding, Inc. v. Neal

United States District Court, D. New Jersey

September 29, 2017

ASTA FUNDING, INC., Petitioner,
v.
DAVID SHAUN NEAL, et al., Respondents.

          OPINION

          MICHAEL A. HAMMER UNITED STATES MAGISTRATE JUDGE.

         I. Introduction

         This matter comes before the Court by way of a motion for fees and costs filed by Petitioner's attorneys (collectively “Counsel”) [D.E. 57], and David Shaun Neal's (“Mr. Neal”) motion to strike Petitioner's motion for fees [D.E. 61].[1] Pursuant to Fed.R.Civ.P. 78 and Local Civil Rule 78.1, the Court decided this motion without oral argument. For the reasons set forth below, the Court grants Counsel's motion [D.E. 57], awards Counsel $694, 174.07 in fees and $63, 183.14 in costs, and denies Respondent's motion to strike [D.E. 61].

         II. Background

         A. Relevant Facts

         The District Court's June 30, 2016 Opinion addressing the parties' cross-motions for summary judgment thoroughly set forth the factual background and legal issues in this matter and the related actions. D.E. 24. Because the Court writes for the parties' benefit, it sets forth only the facts relevant to the current motions. Mr. Neal provided information technology services to Asta Funding Inc. (“Asta”). Opinion of U.S. District Judge Kevin McNulty, June 30, 2016, D.E. 24, at 2 (“McNulty Opin.”). When this relationship began, Mr. Neal provided these services through Bach Consulting, an entity owned by Robert F. Coyne (“Mr. Coyne”). Id. In 2007, Mr. Coyne discontinued use of Bach Consulting and formed NWS with Mr. Neal. Id. Mr. Neal continued to provide information technology services for Asta through NWS, pursuant to an agreement between NWS and Asta that contained an arbitration provision. Id. There are six interrelated actions arising from these business relationships, which are the subject of Petitioner's instant motion for attorneys' fees.[2] Id.

         In its initial action, Asta Funding, Inc. v. New World Solutions, Inc., David Shaun Neal, and Robert F. Coyne, Esq. (the “Arbitration”), Asta sought arbitration against NWS, the consulting company owned by Mr. Neal and Mr. Coyne, for breach of contract and unjust enrichment pursuant to an arbitration clause in the Information Technology Services Agreement between Asta and NWS. On August 7, 2013, Asta filed an additional Supplemental Statement of Claim against NWS, adding claims for fraud, conversion, trespass and violations of the New Jersey Consumer Fraud Act (“CFA”), the Federal Computer Fraud and Abuse Act (“CFAA”) and the New Jersey Computer Related Offenses Act (“NJCROA”). Asta also moved to join Mr.Coyne and Mr. Neal based on the claims asserted in the Supplemental Statement of Claim. Id. However, the arbitrator denied Asta's request to join both Mr. Neal and Mr. Coyne. Asta then initiated a second arbitration action against Mr. Coyne and Mr. Neal. The arbitrator consolidated the two arbitrations on October 16, 2013, upon determining that Mr. Coyne and Mr. Neal were both personally bound by the arbitration provision.

         On November 18, 2013, Mr. Neal initiated a Declaratory Judgment action (“DJ Action”), Neal v. Asta Funding, Inc., Civil Action No. 13-6981 (KM), requesting a judgment that he was not personally bound by the arbitration provision at issue. The Arbitration and DJ actions continued in tandem. Id. On June 26, 2013, the arbitrator issued Prehearing Order 13 (Protective Order I), which enjoined NWS and Mr. Neal from disclosing Asta business information, pursuant to the Confidentiality Covenant contained in the Information Technology Services Agreement. Mr. Neal stated he would not respect Protective Order I. On August 6, 2013, the arbitrator issued Prehearing Order 15 (Protective Order II), again ordering that Mr. Neal not disclose Asta business information and deliver all relevant information to Asta within five days of the order. Again, Mr. Neal refused to comply with the order. After the arbitration hearing from January 7, 2014 to January 24, 2014, the arbitrator issued Hearing Order 3, which enjoined all parties from disclosing confidential information. The arbitrator concluded that Respondents had Asta's electronic information and directed Respondents to give their computers to the Court for forensic inspection and imaging. On March 14, 2014, Judge McNulty adopted the protections set forth by the arbitrator's protective order.

         On April 2, 2014, the arbitrator issued the Non-Confidential Summary Award (“Summary Award”) and Confidential Final Award (“Confidential Award”). Certification of Steven Adler, Feb. 1, 2017, Ex. 1, D.E. 57-3. In pertinent part, the arbitrator ruled as follows:

10. ORDERED, that ASTA is entitled to an award of reasonable attorneys' fees and costs on its confidentiality, CFA [New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 et seq.], CFAA [Computer Fraud and Abuse Act, 18 U.S.C. § 1030 et seq., ] and NJCROA [New Jersey Computer Related Offenses Act, N.J.S.A. 2A:38-1A et seq.] claims against all Respondents jointly, severally and/or in the alternative, in the amount of $552, 897.00 not including fees associated with the federal actions referenced in the Confidential Final Award, through January 31, 2014; and it is further
11. ORDERED, that ASTA is entitled to an award of the costs to date incurred by ASTA, plus $10, 000 in investigation costs, but excluding the fees of the Arbitration (which are dealt with below), totaling $25, 370.60, against all Respondents jointly, severally and/or in the alternative; and it is further
12. ORDERED, that ASTA is entitled to an award against all Respondents, jointly, severally and/or in the alternative, of reasonable attorneys' fees and costs, incurred in this arbitration after January 31, 2014 in connection with its efforts to enforce the Hearing Orders, and to confirm this Award and to collect any judgment; and such amounts may be determined by a Court of competent jurisdiction. . . .

Id. ¶¶10-12.

         In December 2013, Mr. Coyne filed a complaint in the United States District Court for the Central District of California, seeking both a declaratory judgment that he was not personally bound by the arbitration provision, and an order enjoining the arbitration. Asta successfully moved to transfer venue from the Central District of California to this Court. Coyne v. Asta Funding, Civil Action No. 14-2475 (KM), D.E 30, Dec. 20, 2013 (“Coyne I”). The District Court dismissed this litigation on July 21, 2016.

         On April 21, 2014, Mr. Coyne filed another complaint in the United States District Court for the Central District of California. This complaint demanded that the District Court vacate the arbitrator's Jurisdiction Award, which had determined that the arbitrator could extend his jurisdiction to Mr. Neal and Mr. Coyne. Again, Asta successfully moved to transfer the action to this Court. Coyne v. ASTA Funding, Civil Action No. 14-3932 (KM), D.E 1, Apr. 21, 2014 (“Coyne II”). The District Court dismissed this action on June 30, 2016 in accordance with the Opinion and Order that Judge McNulty entered in the DJ Action, the Instant Action, Coyne II and the Vacate Action, confirming the arbitrator's award.

         In June 2014, Mr. Neal filed Coyne v. Asta Funding, Civil Action No. 14-3550 (KM) (“Vacate Action”), in which he requested that the arbitrator's award be vacated. Asta moved to dismiss the action. The Vacate Action was later dismissed on June 30, 2016.

         On April 17, 2014, Asta filed the instant action by way of a Petition to Confirm the Arbitration Award. Asta filed the petition in accordance with Judge McNulty's April 10, 2014 Order in the DJ Action, which had directed the parties to file any applications to confirmation of the arbitration award, or to vacate or modify it, in a new action, which would be consolidated for discovery with the DJ Action. In the petition, Asta sought entry of an order: (1) entering a judgment in its favor for the amount set forth in the Summary Award; (2) compelling Respondents to comply with Section 14 of the Summary Award, which required Respondents to return Asta's documents and property; (3) awarding Asta costs and fees, including reasonable attorneys' fees; and (4) providing for such other relief as the court may deem just and proper. The District Court granted the petition on June 30, 2016, when the Court confirmed the arbitrator's award.

         The District Court's June 30, 2016 Opinion and Order confirmed the Summary Award and Confidential Award, as well as the Partial Final Award (“Jurisdiction Award”) dated March 5, 2014. Opinion and Order, June 30, 2016, D.E. 24-25. The District Court granted summary judgment in Asta's favor in the Instant Action and dismissed the DJ Action, Coyne II, and the Vacate Action.[3] McNulty's Opin. and Order, D.E. 24, 25. The Court also granted Asta's motion for summary judgment and denied Mr. Neal's and Mr. Coyne's cross-motion for summary judgment in the DJ Action. Id. Accordingly, the District Court entered Judgment in Petitioner's favor for “$3, 243, 860.83, comprising (1) $2, 971, 234.99 as against all Respondents, (2) $230, 485 as against Mr. Neal and NWS only, and (3) $42, 140.94 for administrator and arbitrator fees as against all Respondents . . . .” Judgment, June 30, 2016, D.E. 26.Thereafter, on July 21, 2016, the Court issued an Order dismissing Coyne I. Civil Action No. 14-2475 (KM), D.E 47, July 21, 2016.

         On February 1, 2017, Asta filed a motion seeking attorneys' fees and costs.[4] Pet'r's Br., D.E. 57, at 1. Respondent Mr. Neal initially opposed Asta's motion solely by filing a motion to strike on February 21, 2017.[5] Resp't Mot., D.E.61, at 1. However, in order to ensure that Respondents were afforded a full and fair opportunity to be heard on Petitioner's application, this Court, on August 3, 2017, entered an Order providing Mr. Neal the opportunity to submit any additional opposition to Petitioner's motion for attorneys' fees. Order, Aug. 3, 2017, D.E. 73. Mr. Neal submitted a brief in further opposition to Petitioner's motion.[6] Brief in Opposition, Aug. 25, 2017, D.E. 80. Petitioner filed a reply in further support of its fee application. Pet'r's Additional Reply Br., Aug. 25, 2017, D.E. 74. The Court has considered all of those submissions.

         III. Arguments

         A. Petitioner's Motion for Attorneys' Fees

         Asta seeks a lodestar award of $741, 201.57 in fees and $63, 183.14 in costs that were incurred during the latter part of the arbitration and in the five related actions, set forth above in footnote 1, from the inception of each action until December 31, 2016.[7] Pet'r's Br. at 3. Asta asserts that it is entitled to this award pursuant to the CFA, the CFAA, and the NJCROA, which include a cost shifting provision that allows injured parties to recover costs and fees against a wrongdoer. Id. at 1. Pursuant to the arbitration clause signed by the Respondents, Asta initiated arbitration against NWS in 2012. Id. The arbitrator found in favor of Asta and thus awarded Asta more than $3 million in damages against NWS, Mr. Neal and Mr. Coyne. Summary Award, Apr. 2, 2014. Judge McNulty confirmed the award issued by the arbitrator in his June 30, 2016 Opinion and Order. McNulty Opin. and Order, D.E. 24 & 25, June 30, 2016. Asta contends that pursuant to Judge McNulty's Opinion and Order in the Instant Action, which confirmed the arbitrator's award, it is entitled to costs and fees, including reasonable attorneys' fees. Pet'r's Br. at 3.

         B. Declarations in Support of Fee Application

         Asta seeks to recover costs related to expert fees, transcription and court reporting services, and Westlaw legal research. Certification of Steven I. Adler, Esq (“Adler Cert.”), D.E. 57-2, Feb. 1, 2017, ¶ 42. The fees requested consist of $715, 086.07 for services provided by Mandelbaum Salsburg, P.C.[8] (“Mandelbaum”) and $26, 160.50 for services provided by Greenberg Glusker Fields Claman & Machtinger LLP[9] (“GGFCM”). Id. ¶ 44. Mandelbaum expended 1, 793.20 hours during the course of the litigation which is the subject of the motion for attorneys' fees, through December 30, 2016.[10] GGFCM expended 68.9 hours. Id.

         During litigation, Asta hired Palisades Compliance, LLC (“Palisades”) and The Sylint Group, LLC (“Sylint”) as expert witnesses. Id. ¶¶ 52-55. Palisades was hired to review evidence and to testify regarding the fraudulent conduct committed by the Respondents related to the sale of counterfeit Oracle software and support services. Id.52. For their services Palisades was paid $7, 875. Id. ¶ 54. Further, Sylint was hired to help establish Respondents' abuses of the CFA, CFAA and NJCROA. Id. ¶ 53. Sylint was paid $30, 458 for its services and was reimbursed $1, 776.27 in travel costs. Id. ¶ 54. In total, Asta paid $40, 109.27 in expert costs. Id. ¶ 55.

         Vertitext Legal Solutions (“Veritext”) provided court reporting and transcription services during the arbitration hearing days. Id. ¶ 56. In total Asta paid $9, 115.78 for Vertiext's services during the litigation. Id.

         In preparation of and during litigation, Westlaw was used to do necessary legal research. Certification of Lauren X. Topelsohn (“Topelsohn Cert.”), D.E. 57-4, Feb. 1, 2017, ¶ 16. Two accounts were used to bill for the research performed. Id. Ms. Topelsohn, co-lead counsel for Asta in this case, used her own Westlaw account and was later reimbursed. Id. Ms. Topelsohn pays a flat monthly fee to Westlaw, which she allocates among all her clients according to the research required for each litigation. Id. ¶ 17. The other Westlaw fees relate to the use of Mandelbaum's Westlaw license. Id. Similarly, this account pays a flat monthly rate and is then allocated among clients based on the amount of research done for their litigation. Id. The cost of legal research performed in all six related actions amounts to $13, 958.09. Id.

         C. Respondent's Opposition

         As noted above, Mr. Neal opposes Asta's motion for fees and costs in both his motion to strike and in the opposition that he filed on August 25, 2017. In the motion to strike, Mr. Neal does not challenge the amount of fees and costs Petitioner seeks. Instead, his opposition alleges procedural defects in Petitioner's motion. First, Mr. Neal argues that he was not properly served with the Petitioner's motion for fees and costs under Local Civil Rule 54.1, because Asta submitted documents only via ECF and Respondent had not consented to ECF service. Resp't Mot. at 3. Relatedly, Mr. Neal alleges that Asta falsely swore that service had been accomplished in accordance with the Court's Order. Id. Second, Mr. Neal contends that Asta did not comply with Local Civil Rule 54.1 because Asta did not file a notice of motion within thirty days of entry of judgment. Id. at 4. Third, Mr. Neal argues that Neil Deutsch, a lawyer who provided a letter to Asta on prevailing attorneys' fees rates, breached his fiduciary duty to Mr. Neal, who was his former client on the same matter. Id. at 5. Taking this letter as void, Mr. Neal then contends that Asta did not adequately comply with the Court's Order to provide letters from three attorneys relating to the attorney fee rates. Id.

         In the opposition filed on August 25, 2017, Mr. Neal offers four reasons why the Court should generally deny Asta's motion. Resp't Opp. at 2-3. First, Mr. Neal argues that the arbitrator exceeded his authority in awarding fees because the contract between Asta and NWS did not provide for an award of fees, and under New Jersey law, “each party bears their own attorney fees.” Id. at 2. Second, Mr. Neal contends that Asta seeks an award of fees in other unrelated actions where fees have not been awarded, although Mr. Neal does not specify the unrelated actions to which he refers. Id. Third, Mr. Neal contends that Asta has committed fraud upon the Court by furnishing testimony that Asta knew to be false. Id. at 2-3. Specifically, Respondent argues that while Asta maintained it received no valuable service from Sun Interactive Systems (“Sun”), there are many emails demonstrating that Asta and Sun worked closely together. Id. at 2. Additionally, Mr. Neal asserts that Asta's contention that he stole emails was false because Asta's own emails show that Asta directed Mr. Neal to forward his work emails to his personal email address so that he could render assistance around the clock. Id. at 3. Fourth, Mr. Neal contends that Asta consistently delayed proceedings by filing baseless motions and failing to adhere to the Federal Rules of Civil Procedure or the Local Civil Rules, and that Asta should not be compensated for those derelictions. Id. However, like his assertion that Asta seeks fees and costs for unrelated actions, Mr. Neal provides little specific information to identify the baseless motions and rules violations.

         D. Petitioner's Reply Papers

         In response to Mr. Neal's motion to strike, Asta asserts that it made numerous efforts to serve the Respondents. Resp't Opp. at 6. Regarding Neil Deutsch's submission on prevailing rates, Asta represents that it did not know of Neil Deutsch's previous relationship with the ...


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