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U.S. Securities and Exchange Commission

Washington, D.C.

Rel. No. 42121 / November 10, 1999

Admin. Proc. File No. 3-8573-EAJ

       In the Matter of          :
        128 Sand Lane            :
   Staten Island, New York 10305 :



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.


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


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.


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

Washington, D.C.

Rel. No. 42121 / November 10, 1999
Admin. Proc. File No. 3-8573-EAJ

       In the Matter of          :
        128 Sand Lane            :
   Staten Island, New York 10305 :


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


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.