SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
SECURITIES EXCHANGE ACT OF 1934
Rel. No. 42121 / November 10, 1999
Admin. Proc. File No. 3-8573-EAJ
:
In the Matter of :
:
RUSSO SECURITIES, INC. :
128 Sand Lane :
Staten Island, New York 10305 :
:
:
OPINION OF THE COMMISSION
EQUAL ACCESS TO JUSTICE ACT PROCEEDINGS
Registered broker-dealer, who had prevailed in Commission disciplinary
proceedings, sought an award of attorneys' fees and expenses under the Equal
Access to Justice Act. Held, the application is granted in the amount of
$32,781.90.
APPEARANCES:
Charles B. Manuel, Jr., for Russo Securities, Inc.
Christian J. Mixter, for the Division of Enforcement
Appeal filed: March 30, 1998
Briefing completed: October 9, 1998
I.
Russo Securities, Inc. ("RSI" or "the firm"), a
registered broker-dealer, appeals from the decision of an administrative law
judge rejecting its claim for attorneys' fees and expenses under the Equal
Access to Justice Act ("EAJA").1
In the underlying action, we dismissed charges that RSI aided and abetted and
was a cause of a fraudulent scheme by the Cooper Companies, Inc. 2
The EAJA provides that eligible respondents who prevail over an agency in an
adversary adjudication may recover reasonable attorneys' fees and expenses,
unless the agency's position in the underlying action was "substantially
justified" or "special circumstances make an award unjust." 3
The law judge concluded that the Division of Enforcement failed to show that
this agency's position was substantially justified, or that there were any such
special circumstances. 4 We
summarily affirmed these conclusions of the law judge. 5
The law judge nevertheless denied RSI's EAJA request because, among other
things, RSI failed to show that it was eligible for an EAJA award under the
statutory criteria. 6 On
appeal, we determined, as had the law judge, that RSI had not shown that it was
eligible for an EAJA award. However, in the exercise of our discretion, we gave
the firm another opportunity to demonstrate its eligibility. 7
RSI has now filed a sworn affidavit of its chief financial officer, Kimberly
Kent, together with supporting exhibits. These documents establish that, as of
December 12, 1994, the date the underlying proceeding was instituted, RSI did
not have a net worth exceeding seven million dollars, and had fewer than 500
employees. As the Division acknowledges in its response, these documents moot
its earlier argument that RSI failed to establish its eligibility for an EAJA
award. Accordingly, we now turn to the specifics of RSI's claim. Our findings
are based on an independent review of the record.
II.
A. Legal Fees
1. Simon S. Kogan
Simon S. Kogan was the sole counsel who appeared for RSI in the underlying
administrative proceeding. Kogan filed two declarations in support of RSI's EAJA
application, the first of which claimed that RSI should be reimbursed $65,825
for his professional services based on his working 526.6 hours at the asserted
statutory maximum of $125 per hour.
Rule 43 of our EAJA regulations 8
requires that an application "be accompanied by full documentation of the
fees and expenses...for which an award is sought." The only documentation
submitted by Kogan consisted of copies of a series of bills to RSI for services
rendered during the period from January 20, 1995, shortly after the institution
of proceedings against RSI, to October 1, 1997, the date of our final decision
in the matter. However, the bills do not come close to documenting the 526.6
hours for which Kogan sought recompense. Indeed, RSI's petition for review of
the law judge's initial decision indicates that the claimed amount includes time
spent by Kogan representing RSI in a prior injunctive action brought by this
Commission.
In an effort to determine the number of hours that Kogan actually worked on
the proceedings at issue, the Division divided the total amount of his billings,
$53,673.40, by the $150 hourly rate that he charged RSI, and arrived at a total
of 358 hours. However, as the law judge pointed out, this was not an accurate
figure since Kogan's billings included expense items as well as charges for his
professional services.
After filing RSI's petition for review in this matter, Kogan withdrew as
counsel. New counsel scaled back RSI's total claim for fees and expenses to
$44,065.63. However, counsel continues to insist that the 358-hour figure for
Kogan's work, which the law judge rejected, is an accurate reflection of the
time Kogan spent working on this matter.
We do not agree. We have reviewed the billing records submitted by Kogan and,
after eliminating the expense items to which the law judge referred, we find
that Kogan worked a total of 321.42 hours on the underlying proceeding. 9
New counsel does not dispute that $75 per hour is the maximum permissible hourly
rate. 10 We conclude that RSI
is entitled to reimbursement of $24,106.50 (321.42 x $75) for Kogan's
professional services.
2. Alan M. Berkun
RSI seeks reimbursement of $10,815 (144.2 hours at $75 per hour) for the
services of a second attorney, Alan M. Berkun. Berkun made no appearance in the
underlying proceeding. As stated in Kogan's initial declaration in support of
RSI's claim, Kogan "wrote all the pleadings and motions, represented the
parties at trial, prepared all witnesses in connection with the trial, wrote the
briefs, and conducted oral argument on the appeal." Nevertheless, in his
supplemental declaration, Kogan requested that RSI be reimbursed for the
services of Berkun "who also reviewed this case for respondents."
It appears that RSI consulted Berkun wholly independently of Kogan. The law
judge rejected RSI's claim to be reimbursed for Berkun's services as
unreasonable, concluding that Berkun's work appeared to be duplicative of that
performed by Kogan. RSI argues that it was not inappropriate to have engaged a
second attorney. However, a review of the invoices submitted to RSI by Berkun
supports the law judge's conclusion. Many of the items merely reflect
generalized discussions of the case with RSI, and some consist of Berkun's
charges for reviewing briefs and other submissions prepared by Kogan and
Division counsel.
RSI is entitled to reimbursement for "all hours reasonably expended [by
its attorneys]" 11 Hours
are not reasonably expended, however, if one attorney simply duplicates the work
of another. 12 RSI had the
burden of establishing that the time spent by its attorneys was reasonable, and
necessary to achieve the results obtained. 13
That burden was not met with respect to Berkun. We accordingly deny RSI's claim
seeking reimbursement for his services.
3. EAJA Application
RSI requests reimbursement of $2,325 for legal fees incurred in connection
with its EAJA application. This sum covers charges of $1,725 by Kogan (23 hours
spent by an associate preparing the fee application and a supporting memorandum
at $75 per hour), and charges of $600 by new counsel (8 hours spent preparing
RSI's appeal brief at $75 per hour). Reasonable attorneys' fees in an EAJA
proceeding encompass the time spent by counsel in litigating the fee issue. 14
We deem it appropriate to award RSI the amount it seeks in this regard. 15
B. Expenses
1. As noted above, Kogan filed two declarations in support of RSI's
application, both requesting that the firm be reimbursed for various legal fees
and expenses. In his initial declaration, Kogan requested that RSI be reimbursed
for expenses in the amount of $8,320.13. However, the documentation he attached
in the form of a series of bills to RSI reflects expenses in the total amount of
only $5,138. The Division objects to certain of these items as follows.
(a) RSI seeks reimbursement of $2,160.63, the fee paid to an expert witness
who testified in the underlying proceeding. Rule 36(a) of our EAJA regulations 16
provides that "awards will be based on rates customarily charged, in the
locale of the hearing, by persons engaged in the business of acting as"
such witnesses. The Division points out that RSI has not shown that the fee in
question meets that standard. The Division does not claim, however, that the fee
was not in line with the pertinent rates. Under the circumstances, and in
light of its relatively modest amount, we have determined to reimburse RSI for
this item.
(b) The Division also objects to other items included in the $5,138 total
such as printing and duplication charges. It argues that Section 27 of the
Securities Exchange Act 17
bars recovery of these items since they are "costs" as defined in 28
U.S.C. ? 1920 that cannot be assessed against the Commission. 18
We do not agree. Section 27 deals with federal court jurisdiction over actions
under the Exchange Act. It provides that costs may not be assessed against this
Commission in any proceeding under the Act "brought by or against [the
Commission] in the Supreme Court or such other courts." (emphasis
supplied). Thus it has no application here.
We shall accordingly reimburse RSI in the amount of $5,138 for the expenses
documented in Kogan's initial declaration.
2. Kogan's supplemental declaration requested reimbursement for expenditures
in the amount of $4,075.63. While this claim ostensibly covered items that were
not included in Kogan's initial declaration, reimbursement was again sought for
the $2,160.63 expert witness fee already dealt with above. Deducting that fee
reduces the supplemental claim to $1,915 of additional documented expenses, as
detailed below.
(a) Reimbursement is sought for a round trip plane ticket from New York to
Washington, D.C. on December 1, 1995, and associated travel expenses in the
total amount of $201. The only explanation offered for this item is that the
expenses were incurred in connection with filing a brief with this Commission.
No reason is advanced as to why a plane trip was necessary to file a brief, or
why the ticket was issued not to Kogan but to Ferdinand Russo ("F.
Russo"), an RSI principal who was a respondent in the underlying
proceeding. 19 In our
view, RSI has not demonstrated that these expenses were legitimate and
reasonable litigation costs. Accordingly, this claim is denied.
(b) RSI also seeks reimbursement of $1,400 to cover the travel expenses from
New York to Washington, D.C. of F. Russo, Richard Russo, who was also a
principal of RSI, and one Karlton Zamost to attend the oral argument held before
this Commission on July 29, 1997. We deem it appropriate to reimburse RSI for
the expenses incurred by the Russos. However, the record does not identify
Zamost, and no showing has been made that his presence at the argument was in
any way necessary. We shall therefore award RSI two-thirds of its claim in the
amount of $938.
(c) RSI's final claims arise from its reimbursement of local transportation
costs incurred by F. Russo. At the time of the hearings in the underlying
proceeding in August and September 1995, F. Russo made six trips from his office
in Staten Island to Manhattan in order to consult with Kogan and attend the
hearings. F. Russo also traveled to Manhattan in February 1996 to obtain and
review a copy of the brief filed by the Division in support of its appeal of the
law judge's initial decision. We have determined to grant most of these claims
in the amount of $274.40. 20
In light of the foregoing, we deem it appropriate to award RSI a total of
$32,781.90; $26,431.50 as reimbursement for legal fees and $6,350.40 for other
litigation expenses. 21
An appropriate order will issue. 22
By the Commission (Chairman LEVITT and Commissioners JOHNSON,
HUNT, CAREY and UNGER).
Jonathan G. Katz
Secretary
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
SECURITIES EXCHANGE ACT OF 1934
Rel. No. 42121 / November 10, 1999
Admin. Proc. File No. 3-8573-EAJ
:
In the Matter of :
:
RUSSO SECURITIES, INC. :
128 Sand Lane :
Staten Island, New York 10305 :
:
:
ORDER AWARDING COMPENSATION UNDER THE EQUAL ACCESS TO JUSTICE ACT
On the basis of the Commission's opinion issued this day, it is
ORDERED that Russo Securities, Inc. be, and it hereby is, awarded the sum of
$32,781.90 on its application under the Equal Access to Justice Act.
By the Commission.
Jonathan G. Katz
Secretary
Footnotes
15 U.S.C. ? 504.
2 Russo Securities, Inc.,
Securities Exchange Act Release No. 39181 (October 1, 1997), 65 SEC Docket 1990.
35 U.S.C. ? 504(a)(1).
4The Division had the burden of proof
on these issues. See Rule 35 of our EAJA regulations, 17 C.F.R. ? 201.35.
5 Russo Securities, Inc.,
Securities Exchange Act Release No. 39979 (May 8, 1998), 67 SEC Docket 396.
6In order to be eligible for an EAJA
award, a corporation's net worth must not have exceeded $7,000,000, and the
number of its employees must not have exceeded 500, at the time the underlying
action was instituted. See 5 U.S.C. ? 504(b)(1)(B).
7 Russo Securities, Inc.,
Securities Exchange Act Release No. 41420 (May 18, 1999), 69 SEC Docket 2427. We
further determined that Ferdinand Russo, an RSI principal who was a respondent
in the underlying action and had also applied for an EAJA award, had likewise
failed to demonstrate his eligibility. However, we declined to give Russo
another opportunity to do so, and denied his EAJA application.
817 C.F.R. ? 201.43.
9Kogan did in fact include the total
number of his hours on each bill. In two instances, where Kogan's bills included
services unrelated to the underlying proceeding, we have adjusted the specified
hours accordingly.
10In 1996, the EAJA (5 U.S.C. ? 504
(b)(1)(A)(ii)) was amended to raise the $75 maximum hourly rate to $125 per hour
(unless further increased by agency regulation). However, the old rate still
applies to actions commenced before March 29, 1996, the date of the amendment. See
Johnson v. Callahan, 1997 U.S. Dist. Lexis 17547 (D.Ala. September 30,
1997). Moreover, Rule 36(b) of our EAJA regulations (17 C.F.R. ? 201.36(b))
still imposes a ceiling of $75 per hour on attorneys' fees.
11 Hensley v. Eckerhart, 461
U.S. 424, 435 (1983).
12 Action on Smoking and Health v.
CAB, 724 F.2d 211, 220 (D.C. Cir. 1984).
13 Tomallo v. Heckler, 623
F.Supp. 1046, 1049 (W.D. Pa. 1985).
14 Trichilo v. Secretary of HHS,
823 F.2d 702, 707 (2d Cir. 1987). See also Commissioner, INS v. Jean,
496 U.S. 154 (1990).
15Kogan initially stated that he
would seek to supplement the application when bills became available to verify
the fees and expenses of another attorney, Simone Palazallo. No such supplement
was ever filed, and RSI makes no claim with respect to Palazallo's services.
1617 C.F.R. ? 201.36(a).
1715 U.S.C. ? 78 aa.
18 See SEC v. Kaufman,
835 F. Supp. 157, 159 (S.D.N.Y. 1993), aff'd sub nom. SEC v.
Price Waterhouse, 41 F.3d 805 (2d Cir. 1994).
19 See n. 7, supra.
20One claim lumps together travel
expenses in the total amount of $198.00 for four trips to Manhattan and one trip
to consult Berkun on Long Island. Since we have denied reimbursement for
Berkun's services, and the expenses in this claim are not broken down by
individual trip, we have disallowed 1/5 of the claim in the amount of $39.60.
21The $6,350.40 figure is the
total of (1) $5,138, the expenses documented in Kogan's initial declaration
which include the expert witness fee of $2,160.63; (2) $938, the Russos' travel
expenses to attend the oral argument; and (3) $274.40, the local transportation
expenses incurred by F. Russo.
22We have considered all of the
contentions made by the parties. We reject or sustain their arguments to the
extent that they are inconsistent or in accord with the views expressed in this
opinion.
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