A federal judge has rejected a “breathtaking” $3.1 million fee request submitted by Kramer Levin Naftalis & Frankel, awarding the firm only a fraction of the money it sought for winning a fight over a downpayment on a luxury apartment co-operative.

Southern District Judge William Pauley said he had conducted a “mind-numbing review” of Kramer Levin’s billing records in Campbell v. Mark Hotel Sponsor, 09 Civ. 9644, but declined “to recapitulate that review” in his opinion to “avoid undue embarrassment to a fine law firm like Kramer Levin” in his opinion.

“Suffice it to note that it is highly unlikely that anyone at Kramer Levin actually reviewed the time records before hitting the print button and compiling them as exhibits,” he said. “Such a review would have uncovered, among other things, several problematic entries.”

Kramer Levin represented defendant Mark Hotel Sponsor LLP in the effort of Roberta Campbell to recover a $4.68 million downpayment she made on an $18.75 million co-op apartment at the Mark Hotel on East 77th Street between Madison and Fifth avenues.

Pauley conducted a bench trial and, on Aug. 20, issued an opinion finding that the parties’ contract entitled Mark Hotel Sponsor to keep the downpayment and recover its reasonable legal fees and expenses.

“Despite judicial encouragement to resolve the fee issue informally,” he said, Mark Hotel moved for an order asking for $3,164,828 in fees and $177, 317 in expenses, the latter “including roughly $75,000 in Westlaw research charges for pedestrian legal issues arising from the breach of a real estate contract.”

On Sept. 13, Pauley allowed only a total award of $475,000 in legal fees and expenses.

“Astonishingly, Kramer Levin attorneys, paralegals, and staff amassed 5536.4 billable hours on this matter, employing four partners, three special counsel, ten associates, eight paralegals and a summer associate,” he said, with partners billing in a range of $680 per hour to $1025 per hour, associates from $440 per hour to $745 per hour, paralegals from $250 per hour to $295 per hour, and “last but not least,” a summer associate for $335 per hour.

Paul Pearlman, managing partner of Kramer Levin Naftalis & Frankel, issued a statement.

“We have great respect for Judge Pauley, but we disagree with his decision concerning our legal fees and expenses,” Pearlman said. “The matter involved a dispute over millions of dollars, and the series of factual and legal issues raised by the plaintiff throughout the matter required extensive defense work. As a result, the litigation lasted almost three years and required a trial to resolve the dispute. Accordingly, we believe that our staffing and our services were both necessary and reasonable to ensure the outcome received, which was a complete victory for our client.”

In their memorandum in support of the award of fees and expenses Jeffrey L. Braun and Natan Hammerman of Kramer Levin said the “presumptively reasonable fee” methodology supported the award. Also, read the plaintiff’s meorandum in opposition of the fee request.

Braun and Hammerman also argued that Mark Hotel Sponsor didn’t choose the forum.

“To the contrary, pursuant to the Purchase Agreement and regulations of the New York State Attorney General, if Sponsor had initiated a proceeding to determine who was entitled to the deposit, it would have been contractually obligated to do so in a quasi-arbitration proceeding before the Attorney General,” they state.

The attorneys also contend that the fee calculation was reasonable given the similarity between the issues raised here and those in litigation with other defaulting purchasers.

“Had those issues been decided against Sponsor here, the consequences for Sponsor could have far exceeded the amounts at stake in this litigation, taking into account the potential applicability of the principles of res judicata and/or collateral estoppel in those other litigations,” they state.

But Pauley said the billed hours “are far beyond what was commercially reasonable or appropriate.”

He said a Kramer Levin staffer billed $230 for delivering a letter to Judge Richard Holwell (See Profile), “But Judge Holwell had nothing to do with this case,” and a partner “billed $390 for work described in its entirety as ‘Misc items.’”

“The Court could go on,” he said. “Vague or mistaken time entries militate strongly against awarding Sponsor the entirety of the fee award it seeks.”

And Pauley noted “Just as disturbingly, two Kramer Levin partners billed more than $22,000 preparing for and sitting for their depositions.”

“But that is more than enough detail,” Pauley said. “As a concession to the mortality of judges, the law does not require a line-item review.”

Mark Hotel Sponsor had cited Prospect Capital v Enmon, 08 Civ. 3721 (S.D.N.Y. June 22 2010), for the prospect that “the negotiation and payment of fees by sophisticated clients are solid evidence of their reasonableness in the market.”

Pauley was not impressed.

“And Sponsor contends that it has ‘been willing to pay’ Kramer Levin’s fees,” Pauley said. “But nothing in the record suggests that Kramer Levin even sent Sponsor a bill or that Sponsor paid any legal fees in connection with this case.”

Amos Alter represented the plaintiff. He declined comment.