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United States District Court, Northern District of Illinois, Eastern Division

January 29, 2003


The opinion of the court was delivered by: Joan B. Gottschall, United States District Judge



Plaintiff has moved for costs and fees incurred as result of defendant's failure to comply with plaintiff's request that defendant waive service of process. Defendant does not dispute that it unjustifiably declined to waive service and accordingly is liable for the $98 in costs of service allowed by Federal Rule of Civil Procedure 4(d)(5), but it objects to plaintiff's request for $2247 in attorneys' fees incurred in briefing its entitlement to costs and fees. For the reasons stated, the court agrees with defendant and orders it to pay (if it has not done so) $98 for the costs of service. The motion is otherwise denied. It is therefore granted in part and denied in part.

Rule 4(d)(2) imposes a duty on a defendant subject to service to avoid unnecessary costs in serving the summons by agreeing to waive service when requested by a plaintiff. If a defendant fails to comply with such a request, "the court shall impose the costs subsequently incurred in effecting service on the defendant unless good cause for the failure be shown." Fed.R.Civ.P. 4(d)(2). The Rule further specifies that "[t]he costs to be imposed on a defendant under paragraph (2) for failure to comply with a request to waive service of a summons shall include the costs subsequently incurred in effecting service . . . together with the costs, including a reasonable attorney's fee, of any motion required to collect the costs of service." Fed.R.Civ.P. 4(d)(5).

On August 9, 2002, plaintiff brought its motion for costs and fees seeking $98 for costs incurred in serving the complaint; $1397 in attorneys' fees incurred in connection with effecting service; and its costs of bringing its motion which the motion stated "are not yet determined." On August 13, counsel for defendant wrote to counsel for plaintiff offering to pay the $98 service costs but pointing out that under the plain language of Rule 4 and a number of cases, attorneys' fees are recoverable only in connection with the motion to collect the costs of service, not for time spent arranging for service. Moreover, defense counsel asserted that plaintiff's counsel had failed to follow LR 54.3(b) by filing a motion for attorneys' fees without attempting to resolve the matter informally. Plaintiff's counsel responded in a letter date August 14, agreeing to withdraw plaintiff's claim for $1397 but denying the applicability of LR 54.3(b) and insisting on recovering all its fees incurred in prosecuting its motion. Defendant's counsel has represented to the court that he called plaintiff's counsel on August 26, reiterated his client's willingness to pay the costs of service and suggested that counsel try to resolve informally the issue of attorneys' fees in bringing the motion. He asserts that plaintiff's counsel informed him, for the first time, that it had already incurred approximately $1500 in fees in preparing its motion. Defense counsel asserts that he requested billing statements to support this amount, but his request was refused. On October 2, plaintiff filed its reply brief, seeking a total of $2,247 for attorneys' fees incurred in the preparation of its opening and reply briefs.

Plaintiff asserts that defendant is attempting "to rewrite Rule 4 to impose a new procedural burden" and advises the court to view "with a great deal of skepticism" defendant's assertion that, if asked, it would have reimbursed the $98 cost of service. Plaintiff attaches a decision by Judge Hart, United States v. First Midwest Bank, 1995 WL 447762 (N.D.Ill. July 21, 1995), for the principle that no requirement of contacting opposing counsel is required before filing a motion for the costs of service. The court has read that decision, however, and finds nothing in it supporting that proposition or addressing the issue of the applicability of LR 54.3(b).

Rule 4 authorizes reimbursement of fees incurred in a motion "required" to collect the costs of service. Despite plaintiff's counsel's suspiciousness about defendant's willingness to pay the modest $98 cost of service in this case, the court is persuaded that defense counsel understood that payment of the costs is mandatory and would have convinced his client to comply. Plaintiff's counsel was by this time dealing with another member of the bar, not the defendant,*fn1 and it is hard to believe that any lawyer able to read Rule 4 would not readily have his client pay the cost of service rather than risk incurring even an hour's worth of attorneys' fees.

Considering the clear language of Rule 4(d), the modest costs involved in effecting service in this case and the cost of lawyers' time, there is a powerful argument that, having failed to make any informal request for reimbursement of service costs, plaintiff has not shown that a motion was "required" to obtain reimbursement. Rather, what was "required" was probably nothing more than a telephone call. While the numbering of LR 54.3 suggests that it was drafted to apply to the determination of fees and costs upon entry of a final judgment, the rule explicitly states that it applies to "a motion, complaint, or any other pleading seeking any award of attorney's fees." Local Rule 54.3 (emphasis added). The court is unaware of any rule of construction that would allow a rule's placement in a series of rules to trump its clear language.

Besides the "required" language in Rule 4, and the "any award of attorney's fees" language of LR 54.3, the policy behind LR 54.3, as well as public policy more generally, overwhelmingly favors defendant's argument. This court is incredibly overtaxed with large numbers of matters of enormous significance to human beings, businesses and institutions in this community. The public interest demands that attorneys, as officers of the court, make some minimal effort to avoid filing motions over matters that can easily be informally resolved. And in a matter like service of process costs, that in this case and as a general matter are unlikely to involve a very substantial amount of money, no attorney's fees can be incurred in making a motion without completely overwhelming the cost of service. To expect a lawyer to extend the courtesy of a phone call or a brief letter advising his or her opponent of the cost of service is a way of preventing burdening the defendant with legal fees grossly disproportionate to its fault. This was unquestionably the reason that LR 54.3 was promulgated in the first place, albeit with another context specifically in mind. To hold that LR 54.3 does not apply in this instance would frustrate the local rule's manifest purpose, as well as justice and fairness.

Plaintiff's attorneys might counter that they did not consider the applicability of LR 54.3, and that their client should not have to bear these fees, given that they were occasioned by defendant's breach of its Rule 4 duty. But even were the court to conclude that LR 54.3 does not apply, it would be unwilling to shift to defendant more than a tiny fraction of what plaintiff seeks here. A motion seeking $98 for the costs of service should take a competent attorney no more than an hour to draft and file. Plaintiff's motion was 2 pages long, omitting the caption, and merely described the sequence of events. Moreover, the motion's request for $1397 in attorneys' fees incurred in effectuating service was not warranted by existing law. Plaintiff's counsel's failure to realize this unjustifiably shifted that effort to defense counsel, who presumably had to spend time collecting material to convince plaintiff's counsel that this portion of plaintiff's motion was unfounded. And plaintiff's expenditure of $700 in fees to prepare a reply brief after defense counsel indicated a willingness to pay the cost of service is itself questionable.*fn2

The court concludes that LR 54.3 applies to this dispute and that, in failing to make any attempt to meet and confer before filing its motion, plaintiff has failed to show that the fees it incurred in making its motion were "required" under Rule 4(d)(5).

Plaintiff has moved to strike defendant's affirmative defenses as "insufficient, duplicative and otherwise improper" and to dismiss defendant's amended counterclaim both for failure to set forth the essential elements of a claim of breach of contract and because its claim is barred by the statute of frauds. The parties inform the court that the motion to strike the affirmative defenses is moot because the defenses have since been amended. Accordingly, the motion to strike the affirmative defenses is denied as moot without prejudice to any subsequent affirmative defenses that may be or have been filed. For the reasons which follow, the motion to dismiss the amended counterclaim is granted.

In its counterclaim for breach of contract, defendant Hawaii Baking ("Hawaii") alleges that after years of placing orders directly with plaintiff, the Long Company ("Long"), Long and Hawaii orally agreed that Hawaii would order directly from Long's vendors and pay them directly. It is alleged that Long further agreed that if Hawaii made certain payments to its vendor Printpack, Inc. ("Printpack"), a company which prints wrappers for baking goods, Long would consent to Printpack's shipping packaging materials to Hawaii. Hawaii alleges that it placed orders with Long's vendors, including Printpack, and in breach of its contract with Hawaii, Long prevented Printpack from delivering wrapping materials to Hawaii. Hawaii alleges that it has performed all of its obligations under the contract and has been damaged by Long's breach.

The first prong of Long's attack is its contention that the alleged contract is barred by the Statute of Frauds because it was not capable of full performance within one year. As the Seventh Circuit has observed, "[t]here is considerable ambiguity in the decisions of the Illinois Appellate Courts concerning which oral promises . . . for an indefinite duration are capable of performance in one year. Taylor v. Canteen Corp., 69 F.3d 773, 784-85 (7th Cir. 1995). Finding most persuasive an approach taken by Judge Moran of this court in Lamaster v. Chicago & N.E. Ill. D.C. of Carpenters, 766 F. Supp. 1497 (N.D.Ill. 1991), the Seventh Circuit has instructed that "a court must examine the precise terms of the promise to determine whether the occurrence of a stated contingency would complete performance of the contract, in which case the promise would be outside the Statute of Frauds, or whether such occurrence would frustrate the performance of the contract, in which case the promise would be within the statute's one-year provision." Id. at 785. While the Seventh Circuit announced this principle in an employment case, it appears that the cases apply the same analysis in other contexts. See, e.g., Electronic Replacement Service, Inc. v. ITT Hartford Ins. Co., No. 95C1469, 1995 U.S. Dist. LEXIS 13662, *7 (N.D.Ill. Sept.15, 1995).*fn3

In Lamaster, the court noted that Illinois law holds that as long as an agreement is capable of being performed within a year, regardless of the likelihood of that contingency, it is not subject to the Statute of Frauds. 766 F. Supp. at 1509. In dealing with contracts of indefinite duration, which are to last until the occurrence of some stated contingency, the dispositive issue is whether the occurrence of the contingency frustrates the contract's completion or represents the full service contemplated by the agreement, that is, "[w]hether the occurrence of [the] contingency would complete performance or frustrate it." Id. Where occurrence of the contingency represents complete performance, and the contingency is capable of occurring within a year, the contract is not barred by the Statute of Frauds.

In this case, the alleged agreement was that Long and its vendors would supply packing materials to Hawaii "so long as Hawaii Baking continued to make certain payments to [Long's] vendors." Amended Counterclaim, ¶ 4. The contingency was Hawaii Baking's failure to continue to make payments. But, as is true in most cases where a purchaser ceases to make payment and as a result the supplier ceases to supply, this did not represent a failure of the contract but merely the completion of the performance desired by Hawaii Baking. Consistent with the allegations of the counterclaim, Hawaii Baking could prove that under its alleged contract, as long as Hawaii Baking, the purchaser, continued to desire to purchase by making payments, Long would continue supplying. The occurrence of the contingency meant simply that Hawaii Baking had received all the benefits of the agreement-all the performance-it desired. This appears to be a contract where the occurrence of the contingency, which could easily occur within one year, meant that full performance-as much as desired-had occurred, and the alleged agreement is not barred by the Statute of Frauds. Long further argues that the alleged contract was an at will agreement and therefore unenforceable. Under Illinois law, a contract containing no specific term of duration may be terminated at will. First Commodity Traders, Inc. v. Heinold Commodities, Inc., 766 F.2d 1007, 1012 (7th Cir. 1985). A contract containing no specific term of duration is to be distinguished from a contract terminable upon the occurrence of a specific contingency, id., which is not terminable at will but only when the specified contingency occurs. The contract alleged in the counterclaim was terminable upon the occurrence of a specific event-the decision by Hawaii Baking to stop paying. However, the nature of this alleged contingency raises another issue: Where, as here, a contract is terminable by a specific event, but that event is totally at the discretion of one of the parties to the contract, is the contract enforceable or is it an unenforceable contract at will? The parties deal with this issue only superficially, discussing only the readily distinguishable case of First Commodity Traders, involving a contract explicitly terminable "for a breach." 766 F.2d at 1012. As the Seventh Circuit held, an agreement terminable for breach is terminable only upon the occurrence of a breach, not at will. Id. The more relevant case is R.J.N. Corp. v. Connelly Food Products, Inc., 529 N.E.2d 1184 (Ill.App.Ct. 1988). RJN Corp. ("RJN") and Connelly Food Products, Inc. ("CFP") entered into an oral agreement whereby CFP agreed to make ice cream deliveries to RJN's customers, paying a percentage to RJN, to remain in effect for as long as CFP served RJN's customers. At some point, RJN informed CFP that it would no longer use CFP to provide ice cream to its customers but would give the business back to its previous supplier, Jack's. Despite this, CFP continued to make deliveries to some of RJN's customers and pay the agreed-upon percentage to RJN. Eventually, however, CFP terminated the contract, and RJN sued for breach.

The trial court granted summary judgment against RJN and the appellate court affirmed. The court held that the provision that the contract would remain in effect for as long as CFP served RJN's customers meant the contract would remain in effect until CFP decided no longer to serve RJN's customers. Since the timing of that contingency could not be objectively ascertained, the alleged agreement had no definite duration and was therefore terminable at will. The lack of an objectively ascertainable event upon which the contract would terminate meant that the contract's duration was indefinite and terminable at will. RJN, 529 N.E.2d at 1187.

The contract as pleaded in the counterclaim is indistinguishable from that in RJN.*fn4 Hawaii Baking alleges that the parties' agreement was to continue until Hawaii Baking stopped paying, an event not objectively ascertainable and hence not sufficient to give specific duration to the agreement. Under Illinois law, the agreement as described in the counterclaim was terminable at will. The counterclaim must therefore be dismissed.

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