Photo: David Handschuh/NYLJ

A Manhattan-based New York Supreme Court Commercial Division justice has ordered that the men who lost a 2017 trial over intellectual property associated with The Palm Restaurant owe $4.5 million in fees to the plaintiffs attorneys at Hoguet Newman Regal & Kenney, according to an order filed Thursday.

The suit, which involved the descendants of the two Italian immigrants who founded the first Palm on Manhattan's Second Avenue in 1926, led Justice Andrea Masley to award more than $120 million to the plaintiffs in November 2018. Much of that award has been set to go to Claire Breen and Gary Ganzi, members of the Ganzi family whose cousin, Walter Ganzi Jr., is a defendant.

Masley's 2018 ruling was likely the first time a U.S. court has endorsed the typical percentage-of-sales method for licensing intellectual property, at least for restaurants. An appeal is pending in New York's First Appellate Department.

But Walter Ganzi Jr., his co-defendant Bruce Bozzi Sr. and two holding companies associated with the Palm have all filed for bankruptcy in Florida.

In court papers filed in October, each man reported that his assets are likely worth between $10 million and $50 million, while his liabilities are between $100 million and $500 million.

Claire Breen and Gary Ganzi are listed as creditors in the bankruptcy paperwork, as is their lawyer Fred Newman. The two law firms that represented the men in the Palm IP case—Kasowitz Benson Torres and Cooley—are also listed.

Representatives for Kasowitz and the Florida bankruptcy lawyer representing Bozzi and Walter Ganzi Jr. did not respond to requests for comment. According to the transcript of a February hearing, Kasowitz lawyers objected to certain billing practices at Hoguet Newman and asked whether junior lawyers could have done more of the work at lower cost.

Masley praised Hoguet Newman's work in her Thursday order, writing that the trial skills she observed from Newman and his colleagues were "extraordinary."

She noted that the $4.5 million requested for legal fees was 3.5% of the total judgment, which she described as a reasonable proportion.

While the three lawyers who did the bulk of the work for the plaintiffs in the case billed between $575 and $675 per hour, Masley wrote that that's a reasonable rate based on Wolters Kluwer's 2018 Real Rate Report, which was submitted by the defendants.

She criticized the defendants for cherry-picking data from the Real Rate Report, noting that the report dealt with about 20 counties in New York, New Jersey and Pennsylvania. Fees in Manhattan commercial cases are different, Masley wrote.

According to that report, partners at firms of all sizes averaged $953 per hour for commercial litigation in the New York area, while associates had an average hourly rate of $631, Masley wrote.

"Both these rates are higher than the rates sought in this case," she wrote. "By any measure, the hourly rates here are standard for New York County and reasonable."

In an interview Thursday, Newman said he appreciated the recognition from Masley.

"This is not the end of the road, but we believe the end is in sight," he said.

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