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M.S. DISTRIBUTING CO. v. WEB RECORDS

July 30, 2003

M.S. DISTRIBUTING CO., A CORPORATION, PLAINTIFF, VS. WEB RECORDS, INC., A CORPORATION; ILENE BERNS; AND BRIAN JACKSON, DEFENDANTS.


The opinion of the court was delivered by: Sidney Schenkier, Magistrate Judge

MEMORANDUM OPINION AND ORDER

On March 21, 2001, this Court granted a default judgment for the plaintiffs (collectively referred to herein as "M.S. Distributing") and against the defendant Web Records, Inc. on Count I of the complaint, awarding damages of $650,311.79 for breach of a Distribution Agreement (doc. ## 40-41). The case continued against the other defendants, Brian Jackson and Ilene Berns, on Count II, which claimed that Mr. Jackson and Ms. Berns were guarantors of a portion of the damages due from Web for breach of the Distribution Agreement. On June 13, 2001, the Court granted partial summary judgment in favor of MS. Distributing and against Mr. Jackson and Ms. Berns on the guaranty claim (doc. # 45), holding that they were in Fact guarantors and that the maximum amount of their liability under the guaranty was $438,680.11. However, the Court found that a judgment in that amount could not be entered against Mr. Jackson and Ms. Berns at that time, because of disputed factual issues concerning potential setoffs that they could assert. On June 7, 2002, Mr. Jackson stipulated to the entry of judgment in the amount of $438,680.11 on the guaranty claim (doc. # 67). On May 13, 2003, after the completion of discovery, the Court granted M.S. Distributing summary judgment against Ms. Berns in the amount of $438,680.11 on the guaranty claim (doc. # 95).

Now that judgment has been entered against Mr. Jackson and Ms. Berns on the guaranty, M.S. Distributing has moved for an award of taxable costs pursuant to Fed.R.Civ.P. 54(d)(1) in the amount of $7,733.24 (doc. # 112); for an award of prejudgment interest (doc. # 96); and for an award of attorneys' fees and non-taxable costs (doc. # 110). Our rulings on these requests are set forth below.

I.

We begin with the request for taxable costs in the amount of $7,733.24, which is unopposed and which thus requires little discussion. Plaintiff seeks to recover its filing fee ($150.00); subpoena and witness fees ($48.00), and fees for process servers ($509.00); court reporter fees for transcripts necessarily obtained for use in the case ($5,672.60); fees for duplication of documents necessarily obtained for use in the case ($1,322.19); and Federal express charges ($31.45). Costs are recoverable if they are authorized by statute, and are both reasonable and necessary to the litigation. Cefalu v. Village of Elk Grove, 211 F.3d 416, 427 (7th Cir. 2000). The defendants do not contest the necessity or reasonableness of the costs sought. And, the items of cost sought by M.S. Distributing all are recoverable under 28 U.S.C. § 1920 — with one exception.

Section 1920 does not expressly authorize assessment of costs for federal express or other special delivery services. The Seventh Circuit has allowed recovery for delivery charges in awarding fees and costs as a sanction under Fed.R.Civ.P. 11, citing to Section 1920. Burda v. M. Ecker Co., 2 F.3d 769, 778 (7th Cir. 1993). However, Burda's reference to Section 1920 has been characterized as dicta, see El-Fadl v. Central Bank of Jordan, 163 F.R.D. 389, 390 (D.D.C. 1995), and several decisions within this district after Burda have held that federal express and other special delivery charges are not expressly covered by Section 1920 and thus are not recoverable as taxable costs. Stark, v. PPM America, Inc., No. 01 C 1494. 2003 WL 21223268, at *7 (N.D.Ill. May 23, 2003); Coleman v. ANR-Advance Transportation Co., No. 98 C 7599, 2001 WL 477208, at *2 (N.D. Ill. May 4, 2001); Amati v. City of Woodstock, Nos. 92 C 20347, 94 C 50235, 1998 WL 299362, at *5 (ND. Ill. May 27, 1998). We reach the same conclusion, and thus remove from the bill of costs the $31.45 in federal express charges sought by the plaintiff.

Accordingly, we award M.S. Distributing the $7,701.79 in costs against Ms. Berns. M.S. Distributing asks that only a portion of this amount be awarded jointly and severally against Mr. Jackson, on the ground that the rest was incurred only after he had stipulated to the entry of judgment in June 2002. Neither defendant has quarreled with this allocation, and we therefore will adopt it. Accordingly, Mr. Jackson will be jointly and severally liable for $2,664.57 of the costs awarded against Ms. Berns.

II.

We now turn to M.S. Distributing's motion for an award of prejudgment interest, which in this diversity case is governed by Illinois law. Allen & O'Hara, Inc. v. Barrett Wrecking, Inc., 964 F.2d 694, 695 n. 3 (7th Cir. 1992). M.S. Distributing argues that, at a minimum, it is entitled to receive prejudgment interest in the amount of five percent (simple, not compounded), under the Illinois Interest Act, 815 ILCS 205/2, which governs prejudgment interest "for all moneys after they become due on any bond, bill, promissory note, or other instrument of writing." M.S. Distributing claims that it is entitled to recover prejudgment interest beginning as of June 1999, when the $438,680.11 became due.*fn1 Using the trigger date of June 1999 and a five percent rate of interest (simple, and not compounded), results in a total of $87,736.02 in prejudgment interest.

Ms. Berns concedes that she is liable for prejudgment interest under the Interest Act (Berns' Resp. at ¶ 5); Mr. Jackson has not responded, and we treat his silence on this point as acquiescence. Thus, all parties agree that M.S. Distributing is entitled to an award of at least $87,736.02 in prejudgment interest. The dispute here is whether MS. Distributing is entitled to a higher rate of prejudgment interest, and is entitled to have that interest calculated on a compound basis. M.S. Distributing offers two arguments to support its claim that it is entitled to compound interest at prime market rate: one based on a contractual argument, and the other based on an interpretation of the Illinois version of the Section 2-715 of the Uniform Commercial Code ("U.C.C."), codified at 810 ILCS 5/2-715. For the following reasons, we do not find either of those arguments persuasive.

A.

We begin with the contractual argument, which is based on an interpretation of the Distribution Agreement. Paragraph 16 of the Distribution Agreement states that "[e]ach party indemnifies the other against any damages and costs, including lawyer and litigation costs, resulting from either party's violation of its representations, warranties or obligations hereunder." Citing Medcom Holding Co. v. Baxter Travenol Labs, Inc., 200 F.3d 518, 519-20 (7th Cir. 2000), M.S. Distributing argues that prejudgment interest constitutes "damages or costs" recoverable under this indemnity provision. Relying on Medcom, M.S. Distributing further argues that this contractual agreement allows it to recover prejudgment interest at a rate that is different from that provided in the Interest Act, and that because the contract is silent on the rate of prejudgment interest and how it should be calculated, the Court should apply prime market rate interest on a compounded basis.

In Medcom, the court held that "Illinois does not treat 815 ILCS 205/2 as the sole authority for prejudgment interest. Contracting parties may supply their own rule of decision." 200 F.3d at 519. The court further held that "[p]rejudgment interest is an element of complete compensation." Id. at 520 (quoting West Virginia v. United States, 479 U.S. 305, 310 (1987)). The appeals court explained that because the purpose of an indemnity provision is "to make the wronged party whole to put it in the same position it would have occupied had the other side kept its promise," id. at 519, the way to do that is to "provide prejudgment interest at the market rate." Id. at 520.

However, for Medcom to provide a basis for the increased level of prejudgment interest that MS. Distributing seeks, Mr. Jackson and Ms. Berns must have agreed to the indemnity provision in the Distribution Agreement. Ms. Berns argues that they did not Ms. Berns claims that she and Mr. Jackson signed on only to the guaranty, which appears at Paragraph 8(b)(2) of the Distribution Agreement and which states as follows: "Ilene Berns and Brian Jackson shall jointly and severally guarantee the repayment of any portion of such advance and duplication payments not otherwise recouped by [M.S. Distributing], and they are signing this Distribution Agreement solely to evidence this guarantee." M.S. Distributing asserts that by signing the last page of the Distribution ...


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