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NORTHWESTERN NAT. LIFE INS. CO. v. LUTZ

July 19, 1996

NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY OF MILWAUKEE, WISCONSIN, PLAINTIFF,
v.
JERRY LUTZ, DEFENDANT.



The opinion of the court was delivered by: Richard Mills, District Judge:

OPINION

Sadly, brawls over attorneys' fees have become a cottage industry.

I. THE FACTS

This case started in 1988 when Northwestern National Insurance Company (Northwestern) sued Jerry Lutz over a guarantee bond.

In 1986, Lutz invested in a partnership that owned an apartment complex in Texas by making a note to European American Bank. Northwestern issued a bond to guarantee the note. Lutz defaulted on his obligation to the bank and Northwestern had to pay $248,832 on the bond. Northwestern then sued Lutz to make up for the loss.

After a bench trial, the Court concluded that Lutz had only bought one unit of the partnership, but because the note had been altered, Northwestern issued a bond equal to the value of three units of the partnership. After concluding that the note had been altered without Lutz's authorization, the Court awarded Northwestern damages of $129,750.23, the value of one partnership unit plus interest.

In addition to the $129,750.23, Northwestern was entitled to attorneys' fees under its agreement with Lutz. Northwestern submitted bills for over $133,000 from its attorneys. The Court reduced the amount of attorneys' fees to $44,462.78 (one-third of the amount requested) because Northwestern's suit had only been one-third successful (it only recovered for one partnership unit, not the three it claimed).

Both sides appealed. The Court of Appeals affirmed both the judgment and the attorneys' fees. Northwestern National Insurance Co. of Milwaukee, Wisconsin v. Lutz, 71 F.3d 671 (7th Cir. 1995). Northwestern then returned to this Court to seek attorneys' fees for the appeal. E.g., Sunds Defibrator AB v. Beloit Corp., 930 F.2d 564, 567 (7th Cir. 1991). Northwestern also sought to recover the attorneys' fees it had incurred when Lutz filed for bankruptcy after this Court entered judgment.

Unfortunately, nothing seems to generate as much incensed emotion and trauma as the question of attorneys' fees. From the start, the attorneys' fee battles in this case have been no exception. But see Hensley v. Eckerhart, 461 U.S. 424, 437, 103 S.Ct. 1933, 1941, 76 L.Ed.2d 40 (1983) ("A request for attorney's fees should not result in a second major litigation.").

Northwestern initiated the second attorneys' fee proceeding by filing a two-page motion, which estimated its attorneys' fees and asked for a hearing. Shocked at the amount of attorneys' fees Northwestern claimed, Lutz filed a motion for sanctions under Fed.R.Civ.P. 11 and 28 U.S.C. § 1927, asserting that the attorneys' fee claim could not possibly be based in fact, and he asked the Court to vacate the earlier judgment in favor of Northwestern to punish it for its frivolous request. The Court denied Lutz's request for relief from the judgment and ordered Northwestern to submit detailed records of its attorneys' fees.

Northwestern complied and submitted records of its attorneys' fees. Northwestern stated that it incurred $84,374 in attorneys' fees for the appeal and $13,645 in the bankruptcy proceedings. In the accompanying memorandum, Northwestern stated that it "does not now claim that it is entitled to all of its appeal fees. Instead, it suggests that the Court apply the same equation that it used at the trial level and award to Northwestern National one-third of its attorney fees on appeal."

Lutz's first attack on the fee request was insufficient.*fn1 Courts may not arbitrarily cut the number of requested hours, but must instead reduce the number in a reasoned manner. Hutchison v. Amateur Electronic Supply, Inc., 42 F.3d 1037, 1048 (7th Cir. 1994) ("Counsel who oppose fees have a `responsibility to state objections with particularity and clarity.'") (quoting Ohio — Sealy Mattress Manufacturing Co. v. Sealy Inc., 776 F.2d 646, 664 (7th Cir. 1985)). If a defendant fails to specifically object to the requested attorneys' fees, the Court will generally award the requested fees. The Court afforded Lutz an opportunity to make specific objections, which he did. Many of his objections, however, were too vague to support rulings in his favor. The Court found that Northwestern's attorneys' hourly rates were reasonable but reduced the number of hours billed for the appeal by 31.75 hours.*fn2 Based on these conclusions, the Court awarded Northwestern $39,645.75 in attorneys' fees ($26,000.75 for the appeal and $13,645 for the bankruptcy matter).

Now Northwestern moves for more attorneys' fees: the fees incurred preparing its request for its appellate and bankruptcy fees. Northwestern says that it incurred ...


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