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CONTINENTAL BANK N.A. v. EVERETT

March 29, 1993

CONTINENTAL BANK N.A., Plaintiff,
v.
ROBINSON EVERETT, KATHRINE EVERETT, and J. H. FROELICH, Defendants.



The opinion of the court was delivered by: ELAINE E. BUCKLO

REPORT AND RECOMMENDATION

 Continental Bank filed a petition for costs, fees and expenses incurred in collecting guaranties by Robinson Everett, Kathrine Everett and J. H. Froelich of a debt owed the bank by Guilford Telecasters, Inc. The district court previously entered summary judgment in favor of the bank, 760 F. Supp. 713 (N.D. Ill. 1991) and 768 F. Supp. 246 (N.D. Ill. 1991), which judgment was affirmed by the Seventh Circuit, 964 F.2d 701 (7th Cir. 1992). The only issue remaining is the amount of the costs and fees. Id. at 706.

 Continental seeks fees pursuant to two fee petitions. The first, filed before the Seventh Circuit's opinion affirming Judge Bua's prior decisions, seeks $ 7,557.26 in costs, $ 416,981.86 fees and expenses in enforcing the guaranties, and $ 219,797.78 in expenses of enforcing Guilford's and non-defendant guarantors' obligations. Continental's supplemental fee petition seeks $ 208,279.51 in additional collection expenses as well as $ 11,518.27 in additional expenses enforcing the obligations of Guilford or other guarantors.

 In response to Continental's fee petition, defendants have raised numerous objections. I will consider only those that have not been previously ruled upon; see the opinions cited above as well as Judge Nordberg's opinion dated June 17, 1992.

 Defendants first argue that Continental is limited to a judgment for fees incurred in pursuing the defendants' guaranties in this litigation. Continental asks not only for fees and expenses incurred in pursuing these guarantors but for a ruling that defendants are liable for fees and expenses in enforcing the obligations of Guilford or non-defendant guarantors in the amount of $ 219,797.78 (plus $ 11,518.27 in Continental's supplementary petition). The guaranties signed by the defendants provide that they are liable for "all expenses (including attorneys' fees . . .) paid or incurred by the Bank . . . in endeavoring to collect the Liabilities, or any part thereof and in enforcing this Guaranty." Guaranty, § 1. The Guaranties further define Liabilities to include all obligations of Guilford to the bank. Id. The Loan Agreement between Guilford and the Bank provides that Guilford's obligations include "all reasonable expenses . . . incurred by the Bank in connection with . . . (iii) the enforcement of the Company's and the Principals' respective obligations under the Loan Document." Agreement, § 12.3. Each of the guarantors, including the non-defendant guarantors, is a "Principal." Id., § 1.1. Under their contracts, therefore, defendants are liable for the fees and expenses reasonably incurred by Continental in enforcing Guilford's obligations and the enforcement of the obligations of other guarantors.

 Defendants argue, however, that the Seventh Circuit's opinion, in which it stated that the "sum of approximately $ 75,000.00, plus the legal fees the Bank has incurred pursuing the guarantors, are the remaining stakes," precludes any expenses, pre- or post-judgment for any fees other than those the Bank has spent pursuing them. Judge Bua had entered judgment against defendants in the amounts recoverable under the caps in their guaranties, finding that there was no genuine issue of material fact with respect to the principal and interest due under the loan. 768 F. Supp. 246, 247 (N.D. Ill. 1991). In its reply memorandum in support of summary judgment on damages, Continental had argued that the issue of expenses relating to the bankruptcy proceeding, or any other fee issues, was not before the court and would be addressed in a post-judgment fee petition. Judge Bua did not specifically address the question of fees or expenses apart from those incurred by Continental pursuing the guarantors, which he noted was properly addressed at a later time. Id. at 247-48. He did not, however, hold that any expenses in pursuing Guilford were encompassed in the judgment, and Continental's fee request has not been ruled upon up to the present time. Thus, it could not have been before the Seventh Circuit, and indeed, is not mentioned in any brief filed by the parties in the appeal to the Seventh Circuit. I conclude that the Seventh Circuit's opinion in this case does not prevent Continental from pursuing the fees and expenses it seeks in the two petitions before me.

 Defendants also argue that they are entitled to a jury trial on the issue of attorneys' fees. That argument has been rejected in various decisions. E.g., Medcom Holding company v. Baxter Travenol Laboratories, Inc., 1990 U.S. Dist. LEXIS 11647 (N.D. Ill. 1990); A. G. Becker-Kipnis & Co. v. Letterman Commodities, Inc., 553 F. Supp. 118 (N.D. Ill. 1982); Boatmen's Bank of Mt. Vernon v. Dowell, 208 Ill. App. 3d 994, 567 N.E.2d 739, 153 Ill.Dec. 781 (5th Dist. 1991). The courts in Medcom Holding Company and A. G. Becker-Kipnis, considering contract provisions allowing fees, concluded that the parties did not have a right under the Seventh Amendment to a jury trial both because attorneys' fees traditionally were decided by the court and not the jury and because of the fact that attorneys' fees may be on-going (as in the present case), as a practical matter they should not be given to a jury to decide.

 Defendants argue that at least the fees and costs associated with Guilford's obligations (as opposed to the enforcement of defendants' guaranties) should be decided by a jury. They find support in cases such as Beckwith Machinery Co. v. Travelers Indemnity Co., 815 F.2d 286 (3d Cir. 1987). The court in that case held that a jury should decide the issue of attorneys' fees. As Judge Conlon noted in Medcom Holding Company, supra, however, the Third Circuit did not analyze the issue in terms of the Seventh Amendment analysis adopted by the Supreme Court in Ross v. Bernhard, 396 U.S. 531 (1970).

 Defendants have also not pointed to any issue of fact that would be tried to a jury (or to the court, as they suggested would be their alternative right in argument before me on March 26, 1993). In their various memoranda they disagreed with various claims for fees or expenses, but most of the disagreement centers on Continental's legal right to specific items of expense. Affidavits filed by defendants do not raise an issue of material fact as to any of the fees sought by Continental and supported by its affidavits. Defendants do say the contract terms are ambiguous but I have concluded that they are not. They also say they did not attempt in their responses to the two fee petitions submitted by Continental to point out every item with which they disagreed. Their obligation, however, was to do just that.

 Defendants also argue that Continental may not collect any fees incurred in the North Carolina bankruptcy proceeding because it was not a collection proceeding. However, it is clear that expenses incurred in collecting a debt in a bankruptcy proceeding may be collected under the terms of a contract in a separate proceeding. First Bank Southeast v. Predco, Inc., 951 F.2d 842, 852 (7th Cir. 1992). Accord, Candlewick Lake Assocs. v. Continental Illinois National Bank & Trust Co., 1987 WL 9004 (N.D. Ill. 1987). Furthermore, the bankruptcy court expressly held that its order would not affect the rights of the parties to the present case "or any other of Continental's past, present or future collection activities or efforts against any guarantor of the indebtedness to Continental and shall not affect any obligations that any such guarantor might have to Continental." Amended Order Confirming Plan, June 13, 1991.

 Defendants also argue that Local Rule 46 prohibits the collection of expenses incurred after final judgment was entered in this case on July 22, 1991. However, in this case, Continental filed its initial fee petition within the 90-day period and stated at the time that it would seek to file a supplemental petition following the appeal. The district court granted permission to file the supplemental petition in June, 1992. Accord, Chesser v. Illinois, 1990 WL 114645 (N.D. Ill. 1990) (allowing supplemental fee petition following appeal). See also Townsend Engineering Company v. Hitec Co., Ltd., 117 F.R.D. 612 (N.D. Ill. 1987).

 Turning to specific items, defendants have not contested any part of the $ 7,557.26 in statutory costs. They should be awarded without reduction.

 Continental's fee petition includes $ 13,035.00 for fees and expenses of the Bank's in-house counsel in overseeing this litigation. Defendants argue that these fees are not collectible. However, the express language of the loan agreement signed by defendants permits collection of such fees. See Loan Agreement, § 12.3. The objection should be overruled.

 Continental's fee petition includes amounts spent by Walter Rand, a bankruptcy attorney in North Carolina, and his law firm, Carruthers & Roth. Defendants object that the amounts sought include attorneys' fees for Mr. Rand's attendance at his own deposition. I agree that under 28 U.S.C. § 1821, Continental is limited to the statutory witness fee (plus statutory expenses) for the attendance of an attorney at his own deposition. The amount of time Mr. Rand spent in his deposition is therefore not recoverable as attorney time. Defendants further object to some 80 hours of time Mr. Rand spent attending depositions in connection with this litigation. Defendants argue that Mayer, Brown & Platt charged for two attorneys to attend these same depositions, and that if they are required to pay for Mr. Rand's time in addition, they will be charged for three attorneys' time in attending a single deposition. Continental says Mr. Rand ...


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