New York State Court of Claims

New York State Court of Claims
MY RYAN v. STATE OF NEW YORK, # 2021-061-102, Claim No. 126279, Motion No. M-97007

Synopsis

Case information

UID: 2021-061-102
Claimant(s): MY RYAN, LLC
Claimant short name: MY RYAN
Footnote (claimant name) :
Defendant(s): STATE OF NEW YORK
Footnote (defendant name) :
Third-party claimant(s):
Third-party defendant(s):
Claim number(s): 126279
Motion number(s): M-97007
Cross-motion number(s):
Judge: RAMÓN E. RIVERA
Claimant's attorney: HARRIS BEACH, LLC
By: Philip G. Spellane, Esquire
Thomas P. Smith, Esquire
Defendant's attorney: LETITIA JAMES
Attorney General of the State of New York
By: Kevin A. Grossman, Esquire
Assistant Attorney General
Third-party defendant's attorney:
Signature date: November 1, 2021
City: Syracuse
Comments:
Official citation:
Appellate results:
See also (multicaptioned case) 2021-061-103

Decision

Claimants jointly seek an additional allowance pursuant to Eminent Domain and Procedure Law (EDPL) section 701 for reimbursement of actual and necessary costs and disbursements incurred in bringing appropriation claims to judgment for the State's taking of a portion of the two parcels that are the subject of these claims. Defendant opposes the requested relief.

My Ryan, LLC, Claim No. 126279

On November 20, 2014 the State appropriated 6,372 square feet of Claimant, My Ryan, LLC's (Claim No 126279) fee interest in land located at 1081 New York State Route 222, in the Town of Cortlandville, Cortland County, which is at the northeast corner where Route 222 intersects with New York State Route 281. The property is improved and operated as a Squeaky Clean Car Wash. The appropriated land is shown on the appropriation map filed in the Cortland County Clerk's Office on November 20, 2014, identified as Map No. 185, Parcel No. 212 [fee interest] and Map No. 207, Parcel No. 245 [temporary easement], Town of Cortlandville, Cortland County, New York. Claimant personally served the Attorney General with a claim seeking just compensation for the taking on June 11, 2015. The claim was tried before the Honorable Nicholas V. Midey, Jr. on June 12, 2018, and a Decision was rendered by the Honorable Renée Forgensi Minarik on December 3, 2019. In the Decision, Claimant was awarded $47,800 in direct damages for the land, $178,500 for site improvements and $10,925 for the temporary easement, for a total award of $237,225. No indirect damages were awarded.

Washing Technologies, LLC. Claim No. 126280

On October 30, 2014 the State appropriated 1,448 square feet of Claimant's, Washing Technologies, LLC's (Claim No 126280), fee interest in land located at 1087 New York State Route 222, in the Town of Cortlandville, Cortland County, which is near the northeast corner where Route 222 intersects with New York State Route 281. The property is improved and formerly operated as a Kentucky Fried Chicken fast food restaurant. The appropriated land is shown on the appropriation map filed in the Cortland County Clerk's Office on October 30, 2014, identified as Map No. 186, Parcel Nos. 213 and 214 [fee interest] and Map No. 208, Parcel No. 246 [temporary easement], Town of Cortlandville, Cortland County, New York. The claim was tried before the Honorable Nicholas V. Midey, Jr. on June 13, 2018, and a Decision was rendered by the Honorable Renée Forgensi Minarik on January 16, 2020. In the Decision, Claimant was awarded direct damages of $9,425 for the land, $23,487 for site improvements and $1,700 for a temporary easement, for a total award of $34,612. No indirect damages were awarded.

Claimants now bring a joint application for additional compensation for attorney's fees, disbursements, appraiser and engineering fees for each claim. Claimant, My Ryan, LLC seeks an additional award of $79,597.01 and Claimant Washing Technologies, LLC seeks an additional award of $22,614.30. Claimant also seeks an award of $14,114.19 for appraisal and engineering fees for My Ryan, LLC. In support of the application, Claimants have submitted the affirmation and reply affirmation of Philip G. Spellane, Esquire of the firm Harris Beach, PLLC, with exhibits; the affidavit of Gary Sloan, the managing member of both My Ryan, LLC and Washing Technologies, LLC; and the affidavit of John S. Miller of J. S. Miller Appraisal Associates, LLC, the appraiser used for both claims. Claimants argue that these expenses were necessarily incurred in order to receive just and adequate compensation. The State's initial offer for the appropriation for My Ryan, LLC was $127,925 and for Washing Technologies, LLC it was $15,075.

In opposition to the motion Defendant argues that for both claims the differences between the initial offers from the State and the Court awards are not substantial. Defendant points to Judge Minarik's trial decision for My Ryan, LLC in which she "wholly rejected" the appraiser's only valuation approach, the Income Capitalization Approach, because it valued the business, an approach she held was not recognized under New York law. For both claims the Court also rejected the appraiser's assessment of indirect damages and did not award any indirect damages. Defendant also notes that attorney's fees were calculated based upon an hourly fee, rather than on a contingency basis which is the commonly used and accepted basis for determining a reasonable fee.

In reply Claimants' counsel argues that the Courts' awards were substantially in excess of the State's initial offers. Counsel indicates that Courts have uniformly held that where the difference between the condemnor's offer and the Court's award was more than 85%, as in these cases, the difference was found to be substantial. With the substantial difference here the inadequacy of the State's initial offer is clear and, counsel argues, the appraisal and counsel fees incurred were absolutely required for Claimants' to receive just compensation. Finally, Claimants' counsel calculates that the hourly fee incurred for the firm's representation of the Claimants was less than the firm would have been entitled to based upon the standard one-third contingency on the award and accrued interest.

EDPL section 701 permits the Court in its discretion to make an additional award for actual and necessary expenses incurred in order for the Claimant to receive just and adequate compensation. The statute provides:

"In instances where the order or award is substantially in excess of the amount of the condemnor's proof and where deemed necessary by the court for the condemnee to achieve just and adequate compensation, the court, upon application, notice and an opportunity for hearing, may in its discretion, award to the condemnee an additional amount, separately computed and stated, for actual and necessary costs, disbursements and expenses, including reasonable attorney, appraiser and engineer fees actually incurred by such condemnee."

The statute provides an opportunity for a Claimant whose property has been "substantially undervalued to recover the costs of litigation establishing the inadequacy of the condemnor's offer" (Hakes v State of New York, 81 NY2d 392, 397 [1992]). "The statute requires two determinations: first, whether the award is 'substantially in excess of the amount of the condemner's proof' and second, whether the Court deems the award necessary 'for the condemnee to achieve just and adequate compensation.' Where both tests are satisfied, the Court may award reasonable fees." (id, quoting EDPL section 701, [italics in original])

The appropriate measure of whether the award is "substantially in excess" of the initial offer is the "difference between the initial offer and the amount ultimately awarded" (EDPL section 701; Matter of County of Tompkins, 298 AD2d 825, 826 [3d Dept 2002], quoting Matter of Village of Johnson City [Waldo's, Inc.], 277 AD2d 773, 774 [3d Dept 2000]). Although the statute does not set forth any metric to determine what is a sufficient difference, case law reflects that 'more than a modest increase in value' is necessary (Malin v State of New York, 183 AD2d 899, 900 [2d Dept 1992] quoting Governor's Mem., L.1987, ch.771, 1987 McKinney's Session Laws of N.Y., p. 2724; see, Matter of County of Tompkins, 298 AD2d at 826). A review of case law reflects that differences of more than 35% have been found to be substantial. So, for instance, in Scuderi v State of New York, 184 AD2d 1073 [4th Dept 1992] a 41.4% difference between the initial offer of $48,600 and the award of $68,700, the key comparison according to the Court, was found to be substantial. In Matter of Metropolitan Transp. Auth., 86 AD3d 314 [1st Dept 2011] an award 44% higher than the initial offer constituted a "substantial" increase. In Matter of Gelsomino v City of New Rochelle, 25 AD3d 554 [2d Dept 2006] the additional allowance was allowed where the difference was 35.5% higher than the award and the condemner's offer. Also in Matter of E. D. J. Quality Realty Corp. v. Village of Massapequa Park, 204 AD2d 321 [2d Dept 1994] a 58% difference between initial offer of $96,000 and the award of $151,734 was substantial. However in Matter of Village of Johnson City [Waldo's Inc.], 277 AD2d 773, where the condemner offered $429,801 and the court awarded $511,500, a difference of $81,700 or 19% was not found to be substantial.

In My Ryan, LLC, the difference between the State's initial offer of $127,925 and the Court's award of $237,225 is $109,300. This amounts to a 85.44% difference, which this Court finds is substantial. In Washing Technologies, LLC , the State's initial offer was $15,075 and the Court's award was $34,612, for a difference of $19,537; this is a 129.59% difference, which is also substantial. The first condition has been met. However this alone does not warrant an award of an additional allowance (First Bank & Trust Co. Of Corning v State of New York, 184 AD2d 1034 [4th Dept 1992]). Attorney's fees and the costs associated with pursuing a claim are "'mere [ ] incidences of litigation' and are not embraced in the constitutional right" to receive just compensation when property is taken by the State (Hakes, 81 NY2d at 398 [empty brackets in original]). There is no presumption to award additional costs to achieve just and adequate compensation, Claimant must show that the additional expenses were necessary (See, General Crushed Stone Co. v State of New York, 93 NY2d 23, 28 [1999]).

Claimants seek an award of $70, 648.95 for attorney's fees for My Ryan, LLC and $18, 614.50 in attorney's fees for Washing Technologies. Claimants also seek $8,948.06 in disbursements for My Ryan, LLC and $3,762.80 for Washing Technologies, LLC. Counsel asserts that Claimants and the firm of Harris Beach, PLLC agreed to an hourly rate of $225 for representation on these claims, with two skilled attorneys primarily working on the claims. Counsel has attached joint billing records, billed under My Ryan, LLC, for the work performed on both of these claims. The billing includes work on another claim Squeaky Clean v State of New York, Claim No. 126281 that was dismissed in October 2016, after Squeaky Clean, the tenant of My Ryan, LLC, assigned its rights as a result of the appropriation to My Ryan, LLC. Despite the assignment, Claimant opposed the State's motion to dismiss. There is also work performed related to a conflict of interest that has not been shown to be necessary for just compensation on these claims.

It is clear that legal representation was necessary for these Claimants to obtain just compensation. The determination that must be made is what amount of attorney's fees were reasonably incurred to achieve just compensation. Contingency fees are typical and considered an acceptable means of determining reasonable attorney's fees (Matter of Hoffman v Town of Malta, 189 AD2d 968, 969 [3d Dept 1983]). Here Claimants agreed to pay attorney's fees based on an hourly basis. The Court however is not bound to accept the payment arrangement agreed to by Claimant and counsel; the focus for the Court must be on what is reasonable (Matter of City of Long Beach v Sun NLF, Ltd.Partnership,172 AD3d 1061, 1062 [2d Dept 2019]; Dufel v State of New York, UID No. 2013-009-016 [Ct Cl, Midey J., July 3, 2013]). A fee sought under section 701 "is one to be paid by the condemnor from public funds without any input into the terms of the retainer. Condemnees may not set the standard of reasonableness" (Matter of New York State Urban Dev. Corp, 183 Misc 2d 900, 904 [Sup Ct , NY County 2000]; Matter of City of New York v Jamaica Arms Hotel, Inc., 44 AD3d 1040 [2d Dept 2007]).

Claimants' counsel argues that since a contingency fee in these matters is typically calculated based upon both the award and accrued interest, in this case a contingency fee would result in a higher fee than the hourly fee being sought. Counsel's argument neglects the fact that in calculating the contingency fee, the advance payment is deducted. For My Ryan, LLC, fees based upon a one-third contingency would be $58,343.64 ($237, 225 [the Court's award], plus $65,906.11 [accrued interest on award] minus $127,925 [advance payment] = $175,206.11 X 33.3% = $58,343.64) and fees for Washing Technologies, LLC would be $9,845.75 ($34,612 [court award] and $10,029.82 [accrued interest on award] minus $15,075.00 [advance payment] = $29,566.82 X 33.3% = $9,845.75). Although in this case counsel was retained before the advance payment was made and had conferences with Mr. Sloan and the Department of Transportation (DOT) and provided some documentation, expending 9.2 hours, Claimant has not shown that the amount of the advance payment was impacted by counsel's efforts.

Contingency fees are inherently reasonable because this calculation method compensates counsel based upon the legal work that directly contributed to the award of just compensation, (Matter of Village of Haverstraw, 180 AD3d 791 [2d Dept 2020]; Matter of City of Long Beach v Sun NLF, L.P.,146 AD3d 775, 777 [2d Dept 2017]; Matter of Estate of Haynes v County of Monroe, 278 AD2d 823 [4th Dept 2000]). Although hourly fees, at a customary rate, can be a reasonable means to award the cost of experienced counsel, here the billing records make it impossible to clearly assess what work was performed for which claim(1) , what work was performed based upon the theories rejected by Judge Minarik in her trial decision, and the bills include work for a conflict of interest issue which has not been explained as contributing to obtaining just compensation (See, Becker v Empire of Am. Fed. Sav. Bank, 177 AD2d 958, 959 [4th Dept 1991]; Dodge v State of New York, UID No. 2019-040-010 [ Ct Cl, Weinstein, J. March 29, 2019]). It seems based upon the evidence presented at trial that a significant amount of both counsel and the appraiser's time was spent pursuing a more than $500,000 indirect loss of market value that was completely rejected by Judge Minarik. It is clear that this encompassed much of the time incurred, because other issues were not disputed; Claimant, My Ryan, LLC did not contest the direct damages for the fee taking or the temporary easement, and the Court made no award for indirect damages. As a result the Court finds that a contingency basis, in addition to avoiding the difficulty to determine exactly what legal work is attributable to each claim, and speculating as to what work was performed for unrelated or non-contributing work, compensates Claimants for the work of counsel on issues that Judge Minarik relied upon in reaching her decisions. Counsel's efforts in relation to the advance payment were not sufficiently documented to warrant the addition of the advance payment in the contingency fee calculation, given that the State has a statutory obligation to make an advance payment. For all of these reasons the Court awards Claimant My Ryan, LLC the sum of $58,343.64 and $9,815.70 for Washing Technologies, LLC for attorney's fees as necessary for just compensation.

Claimants also seek an award for disbursements which the Court awards Claimant with deductions for the reimbursed filing fees, and the lunch on November 17, 2015. Accordingly, Claimant, My Ryan, LLC is awarded $3,523.17(2) and Washing Technologies, LLC is awarded

$235.82(3) for disbursements.

The cost for expert fees for the appraiser, John S. Miller and SRF Associates, the engineering expert, are also sought as part of the additional allowance. The Court will not award the fees for SRF Associates in the amount of $2,396.76. No affidavit was submitted supporting the engineering fee and it is not clear how the engineer contributed to the award of just compensation, since Judge Minarik found that the evidence did not support a loss of "stacking" of vehicles sufficient to warrant an award of indirect damages.

In almost any appropriation case, an appraiser is necessary. An affidavit for John S. Miller was provided indicating that he was paid the total amount of $19,017.43 on the two claims. No statements were provided detailing the work performed in relation to the fees charged. Mr. Miller indicates that $7,800 was paid out directly on these two claims ($4575 for My Ryan, LLC and $3225 for Washing Technologies, LLC) There are three additional payments in the payment schedule attached to Mr. Sloan's affidavit and noted in Mr. Miller's affidavit as made by "Squeaky Clean" (December 2015- $3,100.00; July 2017- $3,500.00; July 2018- $4617.43) Claimants have not established the breakdown for these fees. At the time the December 2015 payment was made, there was a separate claim for Squeaky Clean pending, and the Court questions whether there was any duplication of efforts with the appraisal work for My Ryan, LLC. Judge Minarik rejected Mr. Miller's valuation of indirect damages, for My Ryan, LLC, and this was the primary area of dispute. Mr. Miller opined that Claimant, My Ryan, LLC suffered a $510,000 loss for indirect damages. This was more than double the award Judge Minarik made for only direct damages. Yet, Judge Minarik indicated that although she rejected Mr. Miller's method of assessing valuation for My Ryan, LLC and the indirect damages he assessed for both claims, she did rely on information related to Claimant's business operations, and Mr. Miller's supporting pictures and diagrams. She also gave some reliance upon the valuation and quotes for the value of loss of site improvements. It is reasonable to conclude based upon the timing of the payments made on July 2, 2018, after Mr. Miller testified in the trial of My Ryan on June 12, 2018 and Washing Technologies on June 13, 2018, that the $4,617.43 payment was for his trial testimony. Mr. Miller's trial testimony was necessary for both claims. Without any other means to account, the Court has evenly divided this sum between the two claims. The Court awards My Ryan, LLC, the sum of $6,883.72(4) for appraisal fees. An award for appraisal fees is made to Washing Technologies, LLC in the amount of $5,533.65 which the Court finds were necessarily incurred for just compensation.

Accordingly, Claimants' motion is GRANTED in part. An additional allowance is made for My Ryan, LLC in the total amount of $68,750.53 which includes $58,343.64 for attorney's fees, $3523.17 for disbursements, and $6,883.72 for appraisal fees, without interest. The Court awards Washing Technologies, LLC the total amount of $15,585.17 which includes $9815.70 for attorney's fees, $235.82 for disbursements, and $5533.65 for appraiser fees, without interest.

LET JUDGMENTS BE ENTERED ACCORDINGLY.

November 1, 2021

Syracuse, New York

RAMÓN E. RIVERA

Judge of the Court of Claims

The Court has considered the following in deciding this motion:

1) Notice of Motion

2) Affirmation of Philip G. Spellane, Esquire, in support, with exhibits attached thereto.

3) Affidavit of John S. Miller; sworn to on April 22, 2021.

4) Affidavit of Gary Sloan, sworn to on April 8, 2021, with exhibits attached thereto.

5) Claimants' Memorandum of Law in support, dated April 20, 2021.

6) Affirmation of Kevin A. Grossman, Esquire, Assistant Attorney General, in opposition thereto.

7) Answering Affirmation of Philip G. Spellane, Esquire, in support.


1. Although the records attribute some work to the claim for Washing Technologies, LLC, it does not amount to $18,614.50 and there is no identification or breakdown of that total from the billing records.

2. The costs of transcription of the trial testimony and the trial transcript have been attributed to My Ryan, LLC, as the only trial date noted for the transcript was June 12, 2018, the date of My Ryan, LLC's trial. (Billing records from September 2018) Other unspecified costs attributed to, as billed to, My Ryan, LLC.

3. It is unclear how Claimants arrived at the disbursement requests.

4. This included one-half of the $4617.43 fee ($2308.72), which presumably was for trial testimony.