Defendant Not "Prevailing Party" under Fee-Shifting Agreement for Claim Dismissed for Lack of Proper Service

On September 4, 2015, Justice Scarpulla of the New York County Commercial Division issued a decision in American Guard Services, Inc. v. Griffin Security Services, Inc., 2015 NY Slip Op. 31709(U), granting in part and denying in part a request for attorneys' fees pursuant to a fee shifting agreement in the parties' stock purchase agreement. The court granted defendant's motion for attorneys' fees with respect to those claims that were dismissed for failure to state a cause of action, and ordered a hearing before a Special Referee to determine the amount of the fees and expenses attributable to the defense of those claims. However, Justice Scarpulla held that defendant did not qualify as a "prevailing party" – and therefore was not entitled to an award of attorneys' fees – with respect to a claims that was dismissed for lack of service, explaining:

To determine whether a party has prevailed, the court must consider the true scope of the dispute litigated and what was achieved within that scope. A party is considered to be a prevailing party when it is successful with respect to the central relief sought. . . .

[Defendant] is a prevailing party with respect to the [causes of action dismissed under CPLR 3211(a)(7)], which claims may not be re-commenced by Plaintiff in the same form. [Defendant] is not a prevailing party with respect to [those claims that] were dismissed solely on the basis of improper service.

(Citations omitted).