United States District Court, N.D. Illinois, Eastern Division
September 28, 2004.
TRUSERV CORPORATION f/k/a COTTER & COMPANY, Plaintiff,
FLEGLES INC, d/b/a FLEGLES TRUE VALUE HOME CENTER and ALICE MAE FLEGLE, Defendants.
The opinion of the court was delivered by: SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on Plaintiff TruServ
Corporation's ("TruServ") request for damages from defendants
Flegles, Inc. and Ms. Alice Mae Flegles (collectively
"Defendants"). For the reasons stated below, we rule in favor of
TruServ against Defendants and award $77,149.27 in damages,
$5,143.28 in prejudgment interest, $50,374.50 in attorney's fees,
and $10,879.72 in costs, totaling $143,546.77.
On or about January 20, 2000, TruServ, as a company, and
Flegles, Inc. ("Flegles"), as a retail member, entered into a written agreement
entitled "Retail Member Agreement with TruServ Corporation an
Independent Retailer Cooperative" ("Member Agreement"). The
Member Agreement governed the relationship between TruServ and
Flegles and allowed Flegles, as a retail member, to purchase
merchandise and services from TruServ for amounts stated in the
member's statements of accounts ("Members Statements") for
Flegles. According to the terms of the Member Agreement, it was
agreed to by TruServ and Flegles that Illinois law would govern
the Member Agreement. On February 18, 2003, pursuant to the
Member Agreement TruServ terminated Flegles as a member for
nonpayment of outstanding debt owed to TruServ.
On May 16, 2003, TruServ filed a three count complaint against
Defendants in this court. In Count I, TruServ contended that
Flegles breached the Member Agreement. In Count II, TruServ
contended that Flegles was liable pursuant to the Member
Agreement for an account stated claim. In Count III, TruServ
contended that Ms. Alice Mae Flegle ("Ms. Flegle") breached three
separate guaranty agreements ("Guaranty Agreements") that she
executed which guaranteed to TruServ the payment "of any
indebtedness or balance of any past, present, or future
indebtedness. . . ." that Flegles owed to TruServ. TruServ moved
for summary judgment on all counts. On July 21, 2004, in a memorandum opinion, we granted TruServ's
motion for summary judgment on Counts I and III. In addition, we
denied TruServ's motion for summary judgment as to Count II and
dismissed Count II as moot. Because at summary judgment the
parties had not sufficiently briefed the damages issue, including
any applicable set-offs, attorney's fees, and costs, we ordered
the parties to submit briefing on damages.
I. Contract Damages
On May 16, 2003, TruServ requested damages from Defendants for
breach of contract in the amount of $78,627.04, exclusive of
interest, costs, and attorney's fees. The $78,627.04 amount was
based on a May 1, 2003 TruServ Members Statement for Flegles.
Pl.'s Ex. A. Since that time, TruServ, in accordance with the
Member Agreement, has applied amounts owed to Flegles. These
amounts include credits for merchandise applied to Flegles'
account balance and services, as well as notes payable by TruServ
to Flegles which have now become due since Flegles' termination
as a member. On March 1, 2004, TruServ issued a new Members
Statement for Flegles that reflected these new amounts applied,
with a reduced balance of $78,174.81 owed to TruServ. Pl.'s Ex.
A. Additionally, the Members Statement dated March 1, 2004 contained a detailed list of the
transactions between TruServ and Flegles, along with a clearly
itemized account of the amount owed to TruServ by Flegles for any
and all of the merchandise, advances, and services that TruServ
provided or caused to be provided for Flegles.
Defendants argue that the $78,174.81 stated in the March 1,
2004 Members Statement should also credit Flegles with a
$1,025.54 patronage dividend check ("Dividend Check") that
TruServ sent to Flegles, but that Flegles returned to TruServ
without cashing. There is no dispute that the $1,025.54 reflected
in the Dividend Check belongs to Flegles. The court notes that
TruServ has already applied other amounts and credits owed to
Flegles which have become due since Flegles termination as a
member. TruServ did not exercise its right under the Member
Agreement to place a lien on the patronage dividend, but instead
mailed the dividend check to Flegles which was then returned to
TruServ. Under these facts, there is no reason whatsoever that
the $1,025.54 should not also be applied as a credit. Therefore,
we find that as a result of Flegles' breach of the Member
Agreement, TruServ has been damaged in the amount of $77,149.27.
II. Prejudgment Interest, Attorney's Fees, and Costs
TruServ maintains that pursuant to the Member Agreement, it is
entitled to prejudgment interest, attorney's fees, and costs. We agree. The
Member Agreement provides:
"In the event that the Company initiates proceedings
to recover amounts due it by Member or for any
breach of this agreement to seek equitable or
injunctive relief against the Member, the Company
shall be entitled to the recovery of all associated
costs, interest, and reasonable attorney's fees."
Pl.'s Ex. A.
A. Prejudgment Interest
TruServ and Flegles agree that under Illinois law, prejudgment
interest applies at the rate of 5% per annum as prescribed by the
Illinois Interest Act. 815 ILCS 205/2. Specifically,
815 ILCS 205/2 provides:
Creditors shall be allowed to receive at the rate of
five (5) per centum per annum for all moneys after
they become due on any bond, bill, promissory note,
or other instrument of writing; on money lent or
advanced for the use of another; on money due on the
settlement of account from the day of liquidating
accounts between the parties and ascertaining the
balance; on money received to the use of another and
retained without the owner's knowledge; and on money
withheld by an unreasonable and vexatious delay of
payment. In the absence of an agreement between the
creditor and debtor governing interest charges, upon
30 days' written notice to the debtor, an assignee or
agent of the creditor may charge and collect interest
as provided in this Section on behalf of a creditor.
815 ILCS 205/2.
Further, under Illinois law, in order for a court to award
prejudgment interest, the actual amount due must be a "liquidated
amount or subject to easy computation." Ameritech Information Systems, Inc. v. Bar Code Resources,
Inc., 331 F.3d 571, 575 (7th Cir. 2003).
We have found that the actual amount of damages as a result of
Flegles' breach is $77,149.27. TruServ terminated Flegles as a
member on February 18, 2003 for breach of the Member Agreement.
Defendants argue that TruServ has already charged Flegles
interest as a "service charge" on the amount due from the date
Flegles was terminated up to and including March 14, 2003.
TruServ has not disputed this contention. Accordingly, Flegles
should not be charged prejudgment interest for that period prior
to March 14, 2003. As such, TruServ is entitled to prejudgment
interest on the amount of $77,149.27 from March 14, 2003 until
July 21, 2004, the date of entry of judgment in this action. See
Ameritech, 331 F.3d at 575 (stating that statutory interest,
under Illinois law, "can be recovered at the discretion of the
court"). Therefore, in applying the rate of 5% to $77,149.27, we
find that TruServ is entitled to $5,143.28 in prejudgment
B. Attorney's Fees
In its request for attorney's fees, TruServ has submitted
exhibits and a detailed affidavit which set forth the hours spent
and rates the attorneys charged in this litigation. Pl.'s Ex. B.
Based on these exhibits, TruServ contends that the appropriate amount of attorney's fees that it should be awarded
totals $58,339.50. Defendants maintain that TruServ's request is
unreasonable and that TruServ is entitled to attorney's fees of
no more than $16,000.
The Seventh Circuit Court of Appeals has stated that a request
for attorney's fees "can turn a simple civil case into two or
even more cases the case on the merits, the case for fees, the
case for fees on appeal, the case for fees proving fees, and so
on ad infinitum, or at least ad nauseam." See Divane v. Krull
Electric Co., 319 F.3d 307, 314, (7th Cir. 2003) (quoting
Ustrak v. Fairman, 851 F.2d 983, 987 (7th Cir. 1988). In
determining whether to grant a request for attorney's fees to a
prevailing party, Illinois Courts have applied the factors set
forth by the United States Supreme Court in Hensley v.
Eckerhart, 461 U.S. 424, 434-37 (1983). Cannon v. William
Chevrolet/GEO, INC., 794 N.E.2d 843, 852-855, (2003); Cress v.
Recreation Services, 795 N.E.2d 817, 855-56, (2003). In
Hensley, the Supreme Court instructs a court to determine the
"number of hours reasonably expended on the litigation multiplied
by a reasonable hourly rate." 461 U.S. at 433. In addition, a
court must decide whether the prevailing party's claims were
separate and unrelated or whether they involved a "common core of
facts" that were based on "related legal theories." Id. at
434-35. Ultimately, a court must examine the success of the
litigation by considering the "results obtained," and where it is
established that a prevailing party has obtained "excellent results, his attorney
should recover a fully compensatory fee." Id.
In the instant case, the claims of TruServ all involved the
same common core of facts and are based on the same legal
theories. Namely, that Flegles breached the Member Agreement and
that Flegles and Ms. Flegle were liable to TruServ as a result of
that breach. Additionally, TruServ's litigation was successful
inasmuch as TruServ established its claims for breach of contract
and breach of personal guaranties. Further, we find that based on
the nature of this case and the experience of the attorneys
involved, the hourly attorney rates that TruServ was charged, as
manifested in the affidavit of attorney David J. Chizewer, are
We note that when TruServ filed its motion for summary judgment
on March 22, 2004, TruServ's Rule 56.1 Statements reflected that
its request for attorney's fees was $43,922.00. Pl.'s Ex. A.
TruServ's latest request maintains that its attorney's fees have
increased to $58,339.50. The increased request of attorney's fees
by TruServ appears to be based on hours related to the filing of
TruServ's reply brief in support of its motion for summary
judgment and for the additional briefing on damages. However, the
court notes that the additional briefing relating to damages was
ordered by the court due to the insufficient briefing on that
issue by the parties at the summary judgment motion stage. Given
the above facts, a request for an increase in attorney's fees with respect to the additional
briefing on damages would not be reasonable. Accordingly, we find
that TruServ's earlier request of $43,922.00 should only increase
by $6,452.50 to account for the attorney's fees charged after
March 22, 2004 that relate to the hours spent preparing for the
filing of TruServ's reply brief in support of its motion for
summary judgment. Therefore, TruServ is entitled to $50,374.50 in
attorney's fees which we find to be reasonable.
In its request for costs, TruServ has submitted exhibits and a
detailed affidavit which itemizes all of the costs and expenses
TruServ has incurred in this litigation. TruServ contends that
the appropriate amount of costs totals $10,879.72. Defendants
contend that TruServ's request is unreasonable and that their own
counsel has incurred a legal cost for less than that requested by
TruServ. We disagree. Based upon the facts and the costs TruServ
has incurred, we cannot find that TruServ's request is
unreasonable. Therefore, this court finds that TruServ is
entitled to $10,879.72 in costs.
Defendants argue that Flegles is entitled to a set-off for any
TruServ stock it owns. Specifically, Defendants request that a specific amount in
TruServ stock that Flegles owns be set-off and deducted from the
amount of judgment entered by this court. However, Defendants'
request is without merit. Defendants have failed to establish
how, under the terms of the Member Agreement, they are entitled
to an immediate set-off in this judgment of any TruServ stock it
owns. The Member Agreement provides that TruServ:
". . . shall have a lien on and a right of setoff
against any stocks or notes . . ."
Pl.'s Ex. A. In addition, we note that Defendants themselves have
attached to their Memorandum in Opposition to TruServ's Request
for Damages ("Opposition") a document dated August 12, 2004 from
TruServ to Flegles, which provides in part:
"Upon redemption of Flegles' stock, TruServ will
issue a five-year note payable in the amount of
$20,153.34. Flegles will receive notice of issuance
of that note by August 31, 2004, with the first
payment of principal and interest on December 31,
Opposition at Ex. 2. TruServ has indicated that it will issue
Flegles a five-year note payable in the amount of $20,153.34
based on Flegles current Securities Account with TruServ. Id.
Therefore, we find that Defendants have failed to establish that
Flegles is entitled to any set-off in this litigation for any
TruServ stock it owns.
Therefore, based on the forgoing, we rule in favor of TruServ
against Defendants and award $77,149.27 in damages, $5,143.28 in
prejudgment interest, $50,374.50 in attorney's fees, and
$10,879.72 in costs, totaling $143,546.77.
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