Landlord & Tenant

AppDiv, Second Dept.

(memorandum opinion)

In an action to recover damages for breach of a lease, tenant appealed from Supreme Court's confirmation of an award of attorneys' fees in the amount of $648,857.86. The Appellate Division reversed and remanded, holding that landlord was not entitled to recover a fee on a fee.

R.H. Macy, as landlord, initially leased the property to tenant's predecessor in 1948. The lease included renewal periods, and provided that if the lease were renewed, the rent would be set through an appraisal process. When tenant did not participate in the required process, the current landlord brought this action for breach of the lease, which ultimately resulted in an Appellate Division order requiring appraisal but deferring a final determination of amounts owed until after the appraisal process was completed. After completion of the appraisal process, Supreme Court submitted the issue of attorneys' fees to a referee, who recommended an award that included fees landlord incurred in its application for fees. Supreme Court confirmed the report and awarded an attorneys' fee based on the referee's recommendation.

In reversing, the Appellate Division emphasized that the lease itself did not expressly provide for an award of fees on fees, and did not refer to fees incurred to recover attorneys' fees. The court would not imply a right to recover fees on fees, and therefore remitted to Supreme Court for a new hearing on the amount of a reasonable attorneys fee.

COMMENT

Although there are few landlord-tenant cases that deal with the rights of a party to receive “fees on fees,” courts generally permit awards of fees on fees when a contract or statute explicitly authorizes them. In Posner v S. Paul Posner 1976 Irrevocable Family Trust, 1 2 AD3d 177, the court awarded fees on fees to a trust's creditor who successfully challenged the trust's confession of judgment to its lender. The court relied on section 276-a of the Debtor and Creditor Law ' 276-a, which provides expressly that an award of attorneys fees could include fees incurred by the creditor in proving the value of its attorneys' services. Hayes v Ontario Plastics, Inc., 6 AD3d 1122, 1123 dealt with the issue of fees on fees in the context of a contractual provision providing for reasonable attorneys ' fees upon collection under a promissory note. In that case, the court remitted the matter for consideration of additional “attorneys' fees and litigation expenses incurred in connection with the original application for attorneys' fees” to allow for a calculation of fees on fees.

Where the statutory or contract language is less explicit, courts do not award fees on fees. For instance, in Baker v Health Mgt. Sys., Inc., 98 NY2d 80, the Court of Appeals held that Business Corporation Law ' 722(a), which authorizes recovery of “attorneys' fees actually and necessarily incurred,” did not authorize fees on fees. As a result, the court did not permit a corporate officer who successfully defended securities fraud claims, and who was entitled to indemnification from his company for attorneys ' fees expended to defend against the claims, to obtain the fees incurred in seeking that indemnification. Similarly, in David Z. Inc. v Timur on Fifth Ave., Inc., 7 AD3d 257 , a landlord-tenant case involving rent arrears, the court denied fees on fees where a stipulation of settlement authorized tenant's attorneys to recover fees, but did not explicitly mention fees on fees.. Since the right to fees arose out of the stipulation of settlement and not from the parties' lease or statutory authority, tenant was not entitled to fees on fees.

Landlord Not Entitled to Recover Fees

IG Second Generation Partners, L.P. v. Kaygreen Realty Co.

2014 WL 444009

AppDiv, Second Dept.

(memorandum opinion)

In an action to recover damages for breach of a lease, tenant appealed from Supreme Court's confirmation of an award of attorneys' fees in the amount of $648,857.86. The Appellate Division reversed and remanded, holding that landlord was not entitled to recover a fee on a fee.

R.H. Macy, as landlord, initially leased the property to tenant's predecessor in 1948. The lease included renewal periods, and provided that if the lease were renewed, the rent would be set through an appraisal process. When tenant did not participate in the required process, the current landlord brought this action for breach of the lease, which ultimately resulted in an Appellate Division order requiring appraisal but deferring a final determination of amounts owed until after the appraisal process was completed. After completion of the appraisal process, Supreme Court submitted the issue of attorneys' fees to a referee, who recommended an award that included fees landlord incurred in its application for fees. Supreme Court confirmed the report and awarded an attorneys' fee based on the referee's recommendation.

In reversing, the Appellate Division emphasized that the lease itself did not expressly provide for an award of fees on fees, and did not refer to fees incurred to recover attorneys' fees. The court would not imply a right to recover fees on fees, and therefore remitted to Supreme Court for a new hearing on the amount of a reasonable attorneys fee.

COMMENT

Although there are few landlord-tenant cases that deal with the rights of a party to receive “fees on fees,” courts generally permit awards of fees on fees when a contract or statute explicitly authorizes them. In Posner v S. Paul Posner 1976 Irrevocable Family Trust, 1 2 AD3d 177, the court awarded fees on fees to a trust's creditor who successfully challenged the trust's confession of judgment to its lender. The court relied on section 276-a of the Debtor and Creditor Law ' 276-a, which provides expressly that an award of attorneys fees could include fees incurred by the creditor in proving the value of its attorneys' services. Hayes v Ontario Plastics, Inc., 6 AD3d 1122, 1123 dealt with the issue of fees on fees in the context of a contractual provision providing for reasonable attorneys ' fees upon collection under a promissory note. In that case, the court remitted the matter for consideration of additional “attorneys' fees and litigation expenses incurred in connection with the original application for attorneys' fees” to allow for a calculation of fees on fees.

Where the statutory or contract language is less explicit, courts do not award fees on fees. For instance, in Baker v Health Mgt. Sys., Inc., 98 NY2d 80, the Court of Appeals held that Business Corporation Law ' 722(a), which authorizes recovery of “attorneys' fees actually and necessarily incurred,” did not authorize fees on fees. As a result, the court did not permit a corporate officer who successfully defended securities fraud claims, and who was entitled to indemnification from his company for attorneys ' fees expended to defend against the claims, to obtain the fees incurred in seeking that indemnification. Similarly, in David Z. Inc. v Timur on Fifth Ave., Inc., 7 AD3d 257 , a landlord-tenant case involving rent arrears, the court denied fees on fees where a stipulation of settlement authorized tenant's attorneys to recover fees, but did not explicitly mention fees on fees.. Since the right to fees arose out of the stipulation of settlement and not from the parties' lease or statutory authority, tenant was not entitled to fees on fees.