driven by these cost-reduction assumptions. Had To-Am grown like topsy, yet maintained its historic profit margins, the loss from termination of the dealership would have been less than $ 300,000. Lieber's projected balance sheets impute to To-Am profit-to-revenue ratios exceeding 10%, compared with an industry median of less than 2%. Has any forklift dealer in the history of the United States achieved such a profit ratio? It is hard to believe that MCFA would see its dealers reaping such margins--for dealers' profits are manufacturers' costs--and not raise the price of its forklift trucks to appropriate some of the gain for itself.
The only thing more farfetched than Lieber's projected balance sheets is the fact that Palatnik, MCFA's other witnesses, and MCFA's lawyers, simply ignored their details. Neither at trial nor in the post-trial motions papers has MCFA said one word about Lieber's cost entries. MCFA was fixated at trial on the predictions of gross revenues. It missed, and continues to miss, the fact that the damages calculations are dominated by To-Am's projected net income, not gross income, and that the net income figures were driven by Lieber's cost-reduction assumptions. Lieber did not explain at trial the reasoning behind these assumptions. Perhaps he could have given a reason, but MCFA never called on him to do so, and Palatnik likewise ignored the subject. He did not discuss net income other than to say that margins in the business are low. Doubtless this is true; the MHEDA figures say as much; but Lieber insisted that To-Am would be a special case, and MCFA never tried to grapple with the approach that led to this conclusion.
Other methods of valuation went unexplored. For example, neither side produced evidence about the selling price of comparable dealerships. Lieber's approach--based on Todd's testimony that dealerships of a certain age have developed customers and tend to grow rapidly--implies that the price-earnings ratio of dealerships sold after eight or so years will be especially high (and that dealerships between 9 and 14 years of age grow especially fast); yet no one introduced evidence from comparable sales or the MHEDA data to validate or refute this proposition. If To-Am had grown at the high rate Lieber predicted, then by 2000 To-Am would have made almost all the forklift sales in its area of primary responsibility, wiping out local dealers for other brands. (Todd testified that in 1993 To-Am made between 12% and 14% of all forklift sales in his five-county area.) Does this happen, anywhere in the country? Again the MHEDA data would be telling; again neither side consulted them.
In sum, MCFA tried to persuade the jury that, for To-Am, the future would be like the past, and like the industry norm. When the jury did not agree, there was nothing left to turn to except Lieber's estimates--estimates the questionable details of which were not explored at trial. MCFA played a risky strategy and lost. It is not the proper function of the court to cut down the victor's damages because of beliefs about whether another strategy was available. Empire Gas Corp. v. American Bakeries Co., 840 F.2d 1333, 1342 (7th Cir. 1988). Perhaps Lieber would have had answers to my doubts. Because MCFA did not press him, he never had a chance to respond. On this record, the jury's verdict must stand.
1. To-Am asks me to add more than $ 500,000 in attorneys' fees to the jury's verdict. Its authority is 815 ILCS 705/26 P5: "Every franchisee in whose favor judgment is entered in an action brought under this Section shall be entitled to the costs of the action including, without limitation, reasonable attorney's fees." To-Am's lawyers devoted 1640 hours to the case, which at the rates normally charged by these lawyers comes to $ 234,482. According to To-Am's law firm, the value of these lawyers' services is 20% more than their actual billing rates, producing an appropriate bill of $ 284,058. To reach $ 500,000, To-Am argues alternatively that it should receive a risk multiplier of 2, or that the award should be based on its contingent-fee agreement with counsel, under which it agreed to pay one-third of any judgment obtained at trial (40% of the award, if MCFA should appeal).
Federal law contains many fee-shifting provisions similar to § 705/26, and evaluation of To-Am's request under these provisions would not be difficult. After Burlington v. Dague, 505 U.S. 557, 120 L. Ed. 2d 449, 112 S. Ct. 2638 (1992), multipliers for the risk of nonpayment are never appropriate when calculating the amount of fees to be imposed on the losing litigant (although they may remain appropriate when determining how much a lawyer may collect from his own client, or from a common fund representing the interests of a class). See Barrow v. Falck, 977 F.2d 1100, 1105 (7th Cir. 1992). The risk multiplier of 2 and the contingent-fee agreement (another way of awarding a multiplier for the risk of non-payment) therefore would be inappropriate. Enhancing the lawyers' hourly rates by 20% likewise would be out of the question. The award depends on the market rate for legal services, and that means the price the lawyer actually charges, or at which the client could hire equivalent legal services in the market. Compare Central States Pension Fund v. Central Cartage Co., 76 F.3d 114 (7th Cir. 1996), with Gusman v. Unisys Corp., 986 F.2d 1146 (7th Cir. 1993), and Barrow, 977 F.2d at 1106. See also Cooper v. Casey, 97 F.3d 914 (7th Cir. 1996); Pressley v. Haeger, 977 F.2d 295 (7th Cir. 1992); In re Continental Illinois Securities Litigation, 962 F.2d 566 (7th Cir. 1992). To-Am's law firm originally agreed to represent To-Am at its standard hourly rates. It is these rates, rather than the actual rates plus a 20% premium, that represent the real market for the legal services To-Am received. Every law firm would like to think that its services are worth more than its fees, but if the clients thought that, the lawyers could increase their rates. Awards of fees depend on actual behavior in the market, rather than lawyers' wishful thinking. The award under federal law therefore would be $ 234,482, less any deductions of the kind discussed below.
According to To-Am, Illinois does not follow Dague and permits a court to augment an award for the risk that the litigation will not succeed. The evidence for this, To-Am believes, is that Blankenship --the only appellate decision that has discussed attorneys' fees under § 705/26--stated in passing that "the contractual fee arrangement between attorney and client" is something a court may consider. 568 N.E.2d at 507. Blankenship predated Dague, and it looked to the federal approach for guidance--an approach modified by Dague. No state court has said a word about § 705/26 since Dague. What is more, Blankenship did not require a court to use a contingent-fee contract as the proper measure of the market rate; it was rather more cautious, stating that the agreement is "but one factor" bearing consideration. Only one state decision has cited Dague : the Supreme Court of Illinois, in Brundidge v. Glendale Federal Bank, f.s.b., 168 Ill. 2d 235, 659 N.E.2d 909, 914-15, 213 Ill. Dec. 563 (1995). In an opinion joined by the author of Blankenship (by then serving on the state's highest court), the court distinguished fee-shifting from common-fund cases and held that a court may assess fees at a percentage of the recovery only in the latter--that is, only when the attorney's clients pay, through a diminution of the common fund. The court implied agreement with Dague for fee-shifting cases, but did not make this explicit. Nothing in the text of § 705/26 suggests that Illinois wanted to adopt a rule different from the federal approach to fee-shifting statutes, and the parties have not identified any legislative history that sheds light on the subject. I therefore predict that, when the time comes, the Supreme Court of Illinois will follow the approach used in federal litigation (like that of other nations that require losers to pay) and abjure the use of risk multipliers when assessing fees against losing litigants.
Read most favorably to To-Am, Blankenship means at most that a court may, but need not, consider a contingent-fee contract when determining the appropriate award of fees. Even if this survives Dague (as I think it does not), the contract between To-Am and its law firm lacks significance here. This is not a tort case, in which the contingent-fee contract is the market's normal method of compensation. Ours is commercial litigation, usually conducted on an hourly-fee basis. So this case began. To-Am agreed to pay the law firm at its usual hourly rates. After a year To-Am fell behind in payments. Rather than drop the client, the law firm agreed to continue on contingent fee. As its papers make clear, such an agreement was unusual, contrary to the firm's wishes and normal practice. The law firm effectively became To-Am's lender of last resort. Difficulties unique to a particular plaintiff or case do not justify imposing extra costs on defendants, however, for reasons discussed in Dague and its predecessor Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 483 U.S. 711, 97 L. Ed. 2d 585, 107 S. Ct. 3078 (1987). MCFA's responsibility is not increased by the difficulties To-Am encountered in financing the litigation. So I will use the firm's regular hourly rate, multiplied as the number of hours, as the benchmark (or "lodestar") from which to proceed, just as law firms and clients do in ordinary commercial cases.
To-Am prevailed fully in this litigation; indeed it secured a larger judgment than it had any right to expect (and substantially larger than it sought in a settlement offer sent to MCFA in February 1996). Success justifies a full award of fees. Nonetheless, MCFA wants me to cut down on the allowable hours, because some of To-Am's theories fell by the wayside. It contended, for example, that four kinds of transactions yielded implicit franchise fees, and my order of July 8, 1996, removes three of these theories from the case. Yet under the federal approach to fee shifting statutes, which I think Illinois will follow, the pursuit of multiple legal theories in support of a single claim for relief does not imply a need to win on each legal theory in order to collect a fully compensatory fee. Hensley v. Eckerhart, 461 U.S. 424, 76 L. Ed. 2d 40, 103 S. Ct. 1933 (1983); Lenard v. Argento, 808 F.2d 1242 (7th Cir. 1987). Only failure on a discrete claim for relief justifies paring hours from the lodestar.
On some claims To-Am did fail. Chief Judge Aspen dismissed claims against several defendants, To-Am dismissed its claim against Gilbride, the jury rejected To-Am's claim against Wagner, and To-Am voluntarily dropped some of its theories against MCFA. But as far as I can see, none of these theories affected by one cent the damages To-Am was entitled to, and did, recover. Their abandonment simplified the litigation, and MCFA should give thanks for the reduction in the legal fees it now must bear. Although these were styled "claims" in the complaint, they were more like theories in support of a single, and ultimately successful, claim. Time spent pursuing the individual defendants is not compensable in the suit against MCFA, but it seems unlikely that any significant blocks of time are allocable to the claims against Gilbride, Wagner, and the other defendants dismissed earlier in the case. MCFA conducted a minute survey of the billing records submitted with To-Am's motion and did not attribute any particular time to the inclusion of the individual defendants.
What plainly cannot be assessed against MCFA is time To-Am spent defending against MCFA's counterclaim for the price of trucks and parts it delivered to To-Am, and for which To-Am did not pay until mid-way through this litigation. Chief Judge Aspen entered summary judgment for MCFA on this counterclaim; yet To-Am had the gall to submit a bill under § 705/26 for its legal expenses in attempting to avoid payment. According to MCFA, the billing records show that 124.25 hours of legal time, at the cost of $ 16,139.25, were devoted to To-Am's unsuccessful defense of the counterclaim. (MCFA objects to 39.35 hours by Gary W. Leydig at $ 185 per hour, 83.9 hours by Robin Hoberman at $ 105 per hour, and 1 hour by Steven L. Wiser at $ 50 per hour.) It asks me to require To-Am to bear this expense itself. To-Am replies that MCFA has been rather generous to itself in counting hours. Any block of time with multiple notations was allocated entirely to the defense of the counterclaim. Leydig billed six hours to To-Am on February 16, 1996, with this notation: "Finalize our reply memorandum in support of motion to stay judgment [on the counterclaim]; legal research re: franchise act (fee/marketing plan/damages), prepare for Houston depositions; telephone conferences with Mr. Todd." MCFA allocated all six hours to the defense of the counterclaim, which is absurd.
What to do? MCFA has made an extravagant demand for exclusion, but To-Am has not responded with a breakdown of hours that would enable me to exclude those devoted to the counterclaim. Even the principle that doubts should be resolved against the person bearing the burden of persuasion (on this issue, To-Am, which wants the award) does not help much, because To-Am has established from the billing records that it is entitled to some of the time that MCFA wants me to exclude. For want of a better solution, I shall exclude half of the time to which MCFA objects. My best guess (no more than that, really) is that this is favorable to MCFA. To-Am had no defense to the counterclaim, and it was unlikely to have spent much legal time trying to defend the indefensible. The counterclaim sought approximately $ 76,000; a legal bill to To-Am representing even a small fraction of this would have been unreasonable. If either side thinks that the billing records permit a more precise resolution of this conflict, I will be happy to receive supplemental submissions or arguments. (Because this is the initial decision on To-Am's request for attorneys' fees, either side may file a motion under Rule 59 within 10 days.) For now, however, I subtract $ 8,070 from To-Am's request and award it the balance, $ 226,412, as the legal fees allowed by 815 ILCS 705/26 P5.
One final note: What I have determined here is how much MCFA, the loser in the litigation, must chip in toward To-Am's legal expenses. The contingent-fee contract between To-Am and its law firm is valid and enforceable. The law firm supplied valuable financing and risk-bearing services for which it is entitled to the agreed compensation. Conclusions about the amount of legal fees that may be shifted to one's adversary do not affect the amount the client must pay under its contract.
2. As To-Am sees things, § 705/26 requires the court to award not only legal expenses but also all other outlays-costs "in the typical sense used by lay persons--i.e the money spent (all money spent) to obtain a judgment." Petition for Attorneys Fees and Non-Taxable Expenses at 12. The principal item for which To-Am wants compensation under this heading is the $ 41,393 paid to Lieber, its accounting expert. About $ 2,000 of this amount is taxable as statutory costs or witness fees; To-Am believes that § 705/26 entitles it to the rest.
Although a prevailing franchisee is entitled to "the costs of the action including, without limitation, reasonable attorney's fees", the words "without limitation" do not create any extra entitlement. An award of attorneys' fees does not preclude (= limit) any other item of costs; the statute does not say that there is to be no limitation on what the prevailing party may claim as costs. Experts' fees differ from both traditional "costs" --a closed statutory list, see Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 96 L. Ed. 2d 385, 107 S. Ct. 2494 (1987); Collins v. Gorman, 96 F.3d 1057 (7th Cir. 1996)--and attorneys' fees. So much is clear under federal law. Unless the statute expressly authorizes the shifting of expert-witness fees, the parties must bear their own. West Virginia University Hospitals, Inc. v. Casey, 499 U.S. 83, 113 L. Ed. 2d 68, 111 S. Ct. 1138 (1991); Bankston v. Illinois, 60 F.3d 1249, 1257 (7th Cir. 1995). The franchise law does not mention experts' fees, and I could not find any case holding that, for purposes of Illinois law, a statute similar to § 705/26 authorizes an award of expert-witness fees. Once again, therefore, I anticipate that the Supreme Court of Illinois will construe § 705/26 the same way the Supreme Court of the United States construes federal fee-shifting rules. To-Am must bear Lieber's fees to the extent they exceed the costs and witness fees allowed by 28 U.S.C. §§ 1821 and 1920.
Remaining outlays for which To-Am seeks reimbursement from MCFA are compensable as "attorneys' fees." This term includes not only work performed by members of the bar but also the costs of other inputs into legal services--paralegal time, secretarial work, libraries (and computer-aided legal research), travel expenses, and the like, the sort of things that a lawyer includes on a bill for professional services. Missouri v. Jenkins, 491 U.S. 274, 285-89, 105 L. Ed. 2d 229, 109 S. Ct. 2463 (1989). To-Am wants $ 1,790.25 for temporary legal employees (in lieu of more expensive paralegals or associates), $ 2,963.83 for computer-aided research, $ 475.01 for disbursements to a New York law firm, $ 62.72 for telephone charges, $ 2,520.42 for deposition-related travel expenses, and $ 595.32 for messenger and delivery services. These are ordinary and appropriate elements of the bills lawyers submit to paying clients, and the total of $ 8,407.55 is allowed. (MCFA does not contend that any of these expenses was incurred unreasonably. It complains that the documentation does not establish that each of these expenses was "necessary" or even "indispensable" to success in the litigation, but this is not the legal standard for fee-shifting.)
3. Finally there are statutory costs, including the munificent witness fee of $ 40 per day. MCFA has submitted a fussy response, complaining about the lack of documentation, the different cost per page of deposition transcripts, and so on. To-Am wants compensation for thousands of pages of photocopies; where, MCFA inquires, did each page go? This is not a sound response. It would cost more to document such matters than it costs to assemble and pay the photocopy bill. Does MCFA really want a paralegal to sit down and do this work--given that the paralegal's fee would be shifted back to MCFA under § 705/26? The volume of photocopying seems to me entirely appropriate in light of the nature of the litigation. On another front: Outlays for deposition transcripts are recoverable as costs notwithstanding the fact that not all of the witnesses testified; a cost may be reasonably incurred without leading to live testimony.
MCFA did find some arithmetic problems in the bill of costs. These To-Am corrected in an amended bill of costs. And MCFA is right that To-Am cannot collect the costs it incurred in serving process on defendants ultimately dismissed from the suit. It is entitled to the costs of its suit against MCFA, not of its claims against other persons. The amended bill of costs dated September 19, 1996, is allowed, except for service fees of $ 267.80, for a total of $ 19,893.21 ($ 20,163.01 less $ 267.80).
1. The jury verdict of $ 1,525,000 stands; MCFA's motions for judgment, for a new trial, and for remittitur are denied.
2. MCFA must pay To-Am's attorneys' fees (including the items To-Am calls "non-statutory costs") in the amount of $ 234,819.55. But Lieber's fees are recoverable only as statutory costs; To-Am's request for expert fees is denied.
3. To-Am recovers costs in the amount of $ 19,893.21.
Frank H. Easterbrook
January 24, 1997
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