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RESOLUTION TRUST CORP. v. HEINHOLD COMMODITIES

September 29, 1992

RESOLUTION TRUST CORPORATION, as Receiver for Commonwealth Federal Savings and Loan Association, and RESOLUTION TRUST CORPORATION, as conservator for Commonwealth Federal Savings and Loan Association, Plaintiffs/Counter-defendants,
v.
HEINHOLD COMMODITIES, INC., and GELDERMANN, INC., Defendants/Counter-plaintiffs.


PLUNKETT


The opinion of the court was delivered by: PAUL E. PLUNKETT

MEMORANDUM OPINION AND ORDER

 The regulators pursued the association's suit against the trading firm. The suit eventually went to trial before a jury. The jury found in favor of the trading firm. The firm has now filed a motion for attorneys' fees and costs, essentially seeking to have us enter a judgment in its favor on its counterclaim. It also seeks, by way of a second motion, to have this court set the priority for its claim, namely where the firm will stand in respect to the other creditors of the now-insolvent association. For the reasons that follow, we grant in part the firm's motion for attorneys' fees and costs and grant its motion to determine priority.

 Background

 The case before us today is the amalgamation of three lawsuits arising out of a single commodity trading arrangement. The essentials of the arrangement are as follows. In December 1984 Florida-based Commonwealth Federal Savings and Loan Association ("Commonwealth") entered into a customer agreement with Heinhold Commodities Inc. ("Heinhold"), a futures commission merchant. The agreement was signed by Jason Chapnick, vice-president of Commonwealth. The agreement was ostensibly designed to provide Commonwealth with a hedge to protect it against fluctuations in interest rates. One of the provisions of this agreement was that if Commonwealth ever brought a suit against Heinhold and Heinhold substantially prevailed in the action, Commonwealth would be liable for Heinhold's costs of defending the suit (its attorneys' fees and costs).

 Commonwealth did not prosper as a result of its agreement with Heinhold; indeed, it eventually lost in excess of ten million dollars as a result of its trades. Commonwealth decided to sue its trading firm. On May 26, 1989, it filed suit against Heinhold, its parent corporation Geldermann Inc. ("Geldermann"), and others *fn1" in this Court. *fn2" The suit alleged fraud under the Commodity Exchange Act, negligence, breach of contract, breach of fiduciary duty, and violations of the Illinois' Consumer Fraud and Deceptive Business Practices Act. On June 15, 1989, Heinhold asserted a counterclaim against the plaintiff for attorneys' fees and costs.

 On July 29, 1989, Commonwealth was declared insolvent and the Federal Savings and Loan Insurance Corporation ("FSLIC") became its receiver. One of the assets that passed was the accounts receivable represented by the rights of action owned by Commonwealth, including the claims asserted against the defendants in this lawsuit, which also contained the counterclaim as noted above. (Final Pretrial Order, Attachment B at 2.) On July 30, 1989, the Federal Home Loan Bank Board chartered Commonwealth Federal Savings and Loan Association ("Commonwealth Federal"), and the FSLIC was appointed conservator of Commonwealth Federal.

 The Financial Institutions Recovery, Reform and Enforcement Act of 1989 ("FIRREA"), which was enacted on August 9, 1989, abolished the FSLIC. Pursuant to that law the Resolution Trust Corporation ("RTC") became Commonwealth Federal's conservator. On March 7, 1991, RTC became Commonwealth Federal's receiver.

 FIRREA specifies that claims against a receivership must be filed within 90 days after notice is given to the failed institution's creditors. *fn3" Fearing that this statute might bar it from asserting its claim for fees and costs if it eventually did win the suit brought by Commonwealth, Heinhold filed an unliquidated, indeterminate claim with the RTC. When the RTC denied this claim, Heinhold filed suit in federal district court for the District of Columbia. That district transferred the case to this district, and the case (91 C 7977) has now been consolidated with this action for all purposes.

 As conservator and later as receiver for Commonwealth Federal, the RTC decided to pursue the savings and loan association's action against Heinhold and Geldermann. The case eventually went to trial before a jury. The jury returned a verdict against the RTC in favor of Heinhold. Heinhold *fn4" has filed a motion to recover the attorneys' fees and costs that it expended in defending itself in this action. *fn5" Heinhold has also filed a motion to determine the priority of its claim. *fn6"

 I

 Heinhold's Motion for Attorneys' Fees and Costs

 Heinhold submits two bases upon which we could award attorneys' fees and costs: pursuant to contract or pursuant to the Equal Access to Justice Act. We begin with the first. The contractual provision relied on by Heinhold is Paragraph 3 of the Customer Agreement ("Paragraph 3") that it entered with Commonwealth. This paragraph states, in pertinent part:

 Customer shall pay Heinhold . . . Heinhold's costs and attorneys' fees incurred in defending against any claim brought by Customer in any suit, arbitration or reparations proceeding in which Heinhold is the substantially prevailing party.

 Commonwealth was the "Customer" referred to in the Agreement. Since Commonwealth did file suit against Heinhold and lost -- exactly the eventuality addressed in the provision -- this portion of the Customer Agreement, if enforceable, ...


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