The opinion of the court was delivered by: WILLIAM HART, Senior District Judge
Appeals from the United States Bankruptcy Court.
MEMORANDUM OPINION AND ORDER
Before the court are appeals from the denial of attorney fees
and costs in a bankruptcy adversary proceeding. Debtor/adversary
defendant/appellee Telegraph Properties, L.P., owned a building
located on Randolph Street in downtown Chicago (the "Randolph
Building"). Adversary plaintiff/appellant Geier Enterprises, Inc.
rented four plus floors of the Randolph Building. Geier
Enterprises owned the Randolph Athletic Club, which it operated at that location. Geier contracted to sell the
Athletic Club to Phillips Randolph Enterprises, LLC ("PRE").
Doran Phillips is the sole member of PRE. A condition of the sale
was that Geier Enterprises assign its lease to PRE. The lease
between Geier Enterprises and Telegraph contained an assignment
provision which required that Telegraph consent to any
assignment. Under the terms of the assignment provision, Geier
Enterprises was to provide certain information to Telegraph and
Telegraph could decline the assignment if certain issues were not
satisfied. Initially, Telegraph rejected the assignment, but did
not explain why. Geier Enterprises then brought the adversary
proceeding. Geier Enterprises prevailed on the merits with the
Bankruptcy Court entering a declaration that Telegraph's refusal
to consent was unreasonable and that Telegraph was compelled to
consent to the lease assignment. The bankruptcy court further
ordered that each party bear its own fees and costs. Telegraph
appealed the ruling on the merits, but subsequently withdrew that
appeal when it had a buyer for the Randolph Building. Geier
Enterprises appealed from the denial of fees and costs. Geier
Enterprises' appeals are still pending.
An issue exists as to whether Geier Enterprises adequately
requested fees in the bankruptcy court and whether it properly preserved its appeal. Therefore, it is necessary to
first provide a more detailed description of some of the
procedures that occurred below. Geier Enterprises' Amended
Adversary Complaint is titled as a complaint for declaratory
judgment. It contains one count that is denominated as being
pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201. The
requested relief is for both a declaration that Telegraph has
unreasonably refused to consent to the lease assignment and that
Telegraph be compelled to consent to the assignment.
Additionally, there is a request for an award of costs and
attorney fees. Nothing in the Amended Complaint identifies the
basis for awarding attorney fees.
Before the bankruptcy court, Geier Enterprises submitted
proposed findings of fact and proposed conclusions of law.
Neither of those documents made any mention of attorney fees.
There was no proposed finding of fact that the lease contained an
attorney fees provision nor was there any proposed legal
conclusion that Geier Enterprises was entitled to fees. At the
end of its posttrial brief, Geier Enterprises conclusorily
requested costs and attorney fees. The posttrial brief did not
contain any arguments regarding attorney fees. There was no
reference to the lease containing a fee provision. The Bankruptcy Court's judgment is dated September 15, 2004 and
was entered on the docket the next day. The judgment reads as
Following trial, the Court being fully advised in the
premises, and for the reasons stated in open court,
JUDGMENT IS ENTERED in favor of the plaintiff and
against the defendant. IT IS HEREBY DECLARED THAT:
1. The defendant, Telegraph Properties, LP,
unreasonably refused to consent to the assignment of
the LEASE to PRE LLC; and
2. The defendant, Telegraph Properties, LP, is
compelled to consent to the assignment of the Lease
to PRE LLC.
IT IS FURTHER ORDERED that both parties will be
responsible for their own costs and fees.
On September 24, 2004, Telegraph filed its notice of appeal. On
September 27, 2004, Geier Enterprises filed its motion for an
award of attorney fees and costs and noticed it for presentation
on September 30. In the motion, Geier Enterprises contended it
was entitled to be awarded attorney fees as part of costs
pursuant to Fed.R.Bankr.P. 7054(b). It also contended that it
was entitled to attorney fees under § 31 of the parties' lease.
Geier Enterprises contended it would have been premature to have
requested fees prior to the entry of judgment. It contended that,
under Bankruptcy Court Local Rule 7054-1, it had 30 days to file
its motion for fees and costs.*fn1
Geier Enterprises further contended that, under the Declaratory
Judgment Act, 28 U.S.C. § 2202, a motion for attorney fees would
be an appropriate ancillary proceeding that could be considered
while the merits were on appeal. The prayer for relief in the
motion requests an award of fees and costs, but, in the body of
the motion, it is requested that the court clarify whether it has
made a final ruling on fees or whether it will entertain a
separate post-judgment motion for fees. When the motion was
presented on September 30, Geier Enterprises clarified that it
did not believe the bankruptcy court had actually ruled on
attorney fees because that issue had not yet been addressed by
the parties, but to the extent the bankruptcy court had actually
ruled on attorney fees, Geier Enterprises was seeking to amend
the judgment pursuant to Fed.R.Bankr.P. 9023 and
Fed.R.Civ.P. 59(e). In order to give Telegraph an opportunity to respond in
writing, the bankruptcy court continued the motion to October 7.
On October 1, before the fee motion was ruled upon, Geier
Enterprises filed its cross appeal on the issue of costs and
fees. Prior to October 7, Telegraph filed its opposition to the
fee motion and Geier Enterprises filed a reply. Telegraph
contended the bankruptcy court lacked jurisdiction to consider
the fee issue because the case was already on appeal. On October
7, the bankruptcy court denied the motion for costs and fees. At the hearing the bankruptcy court stated the following
Regarding the motion itself to take up the issue of
attorney's fees, that motion is denied on either of
two bases, either on the jurisdictional issue this
is now in the hands of the District Court, and I
think that's probably right. But even if it is, I
want to alternatively deny it on the merits so that
the record is clear regarding my decision on
requiring both sides to pay their own attorney's fees
and court costs.
I did consider that at the end of the trial. I typed
the order that was signed on September 15th, and it
wasn't a form order. I typed that because I thought
that was the appropriate ruling under all the
circumstances and all these facts.
One of the reasons that I felt strongly that both
sides should pay their own attorney's fees was that
my view of the case is that it should have been a
fairly simple job representing Mr. Phillips and Mr.
Geier to make sure that all of the financial
information for Mr. Phillips personally and the LLC
was available to the debtor. And I thought that had
the legal representation been better at the earlier
stages of this proceeding, we never would have had a
trial. And as I indicated when I decided the case,
much of this is a failure to communicate. And I think
that a substantial part of that failure was Mr.
Zimmerman's [Geier Enterprises' counsel]. So I don't
think it was appropriate for either side to pay for
the other side's attorney.
Oct. 7, 2004 Tr. at 17-18.
On October 14, 2004, Geier Enterprises filed another notice of
appeal stating that it was appealing both the October 7 and
September 15 ruling as to attorney fees and costs. The September 15 judgment expressly states that each party is
to bear its own costs and attorney fees. This is clearly a ruling
on the issue of costs and fees. Moreover, on October 7, the
bankruptcy court expressly stated that it intentionally ruled on
the costs and fee issue; it did not merely leave form language on
a judgment form. Since a judgment had already been entered
denying fees and costs, any subsequent request for fees and costs
would have to be a request for reconsideration seeking to amend
the judgment that had already been entered denying fees and
costs. Although the written motion does not expressly label
itself as one for reconsideration, to amend the judgment, as
being pursuant to Bankruptcy Rules 9023 or 9024, or as being
pursuant to Fed.R.Civ.P. 59 or 60, it is implicit that Geier
Enterprises is seeking reconsideration to the extent costs and
fees had already been denied. Additionally, that was expressly
stated in court when the motion was presented on September 30,
2004. In any event, any substantive motion brought within 10 days
of the entry of judgment is treated as being a motion to alter or
amend the judgment under Fed.R.Civ.P. 59(e), which is
incorporated in the Bankruptcy Rules through Fed.R.Bankr.P.
9023. Curry v. United States, 307 F.3d 664, 666 (7th Cir.
2002), cert. denied, 538 U.S. 989 (2003); Charles v. Daley,
799 F.2d 343, 347 (7th Cir. 1986); Opara v. United States, 2005
WL 1653902 *3 (N.D. Ind. July 8, 2005); In re Wiley, 237 B.R. 677, 682 (Bankr. N.D. Ill. 1999); Linton v.
Grow, 183 B.R. 838, 840 (S.D. Ind. 1995). This includes a motion
for costs or attorney fees filed within 10 days of the entry of a
judgment denying costs or attorney fees. Hastert v. Illinois
State Board of Election Commissioners, 28 F.3d 1430, 1438 n. 8
(7th Cir. 1993), cert. denied, 513 U.S. 964 (1994).
Fed.R.Civ.P. 59(e) provides that the motion must be "filed"
within 10 days of the "entry of the judgment." Unlike the Federal
Rules of Civil Procedure, see Fed.R.Civ.P. 6(a),
intermediate Saturdays, Sundays, and holidays are counted when
computing periods of 10 days, see Fed.R.Bankr.P. 9006(a).
Here, the September 15, 2004 judgment was entered on the docket
on September 16. Ten days thereafter would expire on September
26, but that was a Sunday, so a Fed.R.Bankr.P. 9023 motion
would have had to have been filed by Monday, September 27, 2004.
See Fed.R.Bankr.P. 9006(a). Geier Enterprises' motion was
timely filed on September 27. The motion Geier Enterprises
labeled as a motion for attorney fees is properly characterized
as a motion pursuant to Fed.R.Bankr.P. 9023, which
incorporates Fed.R.Civ.P. 59(e).
The time for appealing a bankruptcy judgment to the district
court generally is measured from the entry of judgment. See
Fed.R.Bankr.P. 8002(a). Where a timely Fed.R.Bankr.P. 9023
motion is filed, the time for appeal is measured from the entry of the order disposing of that motion. Id. 8002(b). A
notice of appeal filed after the entry of judgment, but before
disposition of a timely Fed.R.Bankr.P. 9023 motion, is
ineffective until after the entry of the order disposing of the
Rule 9023 motion. Thus, both Telegraph's notice of appeal and
Geier Enterprises' October 1 notice of appeal became effective
when the denial of Geier Enterprises's costs and fees motion was
entered on the docket on October 7, 2004. The bankruptcy court
had jurisdiction to rule on Geier Enterprises' Rule 9023 motion.
At the October 7 hearing, the bankruptcy court stated its grounds
for having each party bear its own costs and attorney fees. Geier
Enterprises' request for costs and fees was denied on its merits
and will be reviewed on its merits, subject to the discretionary
standard of review applicable to such issues.
Under Fed.R.Bankr.P. 7054(b), the bankruptcy court may award
costs to the prevailing party. There is a strong presumption that
a prevailing party is entitled to costs. Mungo v. Taylor,
355 F.3d 969, 978 (7th Cir. 2004); Contreras v. City of Chicago,
119 F.3d 1286, 1295 (7th Cir. 1997). "Generally only misconduct
by the prevailing party worthy of a penalty (for example, calling
unnecessary witnesses, raising unnecessary issues, or otherwise
unnecessarily prolonging the proceedings), or the losing party's
inability to pay will suffice to justify denying costs."
Congregation of the Passion, Holy Cross Province v. Touche, Ross & Co., 854 F.2d 219, 222 (7th Cir.
1988). Accord Mungo, 355 F.3d at 978; Contreras,
119 F.3d at 1295. The bankruptcy court's decision as to costs will only be
overturned if it constitutes an abuse of discretion. Mungo,
355 F.3d at 978. However, "[t]his `discretion is narrowly confined
because of the strong presumption created by [this rule] that the
prevailing party will recover costs.'" Id. (quoting
Contreras, 119 F.3d at 1295).
Any factual findings that are a basis for the ruling on costs
and fees must be accepted unless clearly erroneous.
. . . "[f]indings of fact . . . shall not be set
aside unless clearly erroneous, and due regard shall
be given to the opportunity of the bankruptcy court
to judge the credibility of the witnesses."
Fed.R.Bankr.P. 8013. Thus, a bankruptcy court's factual
findings cannot be disturbed "simply because [the
district court] is convinced it would have decided
the case differently." In re Weber, 892 F.2d 534,
538 (7th Cir. 1989) (quoting Anderson v. City of
Bessemer City, 470 U.S. 564, 573 (1985)). Both
questions of law and mixed questions of law and fact,
however, are reviewed de novo. See In re Ebbler
Furniture and Appliances, Inc., 804 F.2d 87, 89 (7th
Mungo, 355 F.3d at 974.
Section 31 of the parties' lease provides in part: "If Landlord
or Tenant shall at any time be in default other than [under §
23.1.1 or 23.1.6 pertaining to payment of rent], and if Landlord
or Tenant shall deem it necessary to engage attorneys to enforce their rights hereunder, the nonprevailing party shall
reimburse the other for reasonable expenses, including but not
limited to court costs and reasonable attorney's fees." This
section has three principal requirements for awarding costs and
fees: (1) one party is in default, (2) the other party engages
attorneys to enforce rights under the lease, and (3) the party
seeking costs and fees has prevailed in the dispute. Neither
party contends that § 31 is ambiguous or that any extrinsic
evidence need be considered in construing the meaning of this
section. The parties agree that Illinois law applies to this
dispute. Under Illinois law, the terms of a contractual fee
provision are strictly construed. Erlenbush v. Largent,
353 Ill. App. 3d 949, 819 N.E.2d 1186, 1189 (4th Dist. 2004);
Kempner Mobile Electronics, Inc. v. Southwestern Bell Mobile
Systems, LLC, 2005 WL 948790 *2 (N.D. Ill. April 19, 2005). The
bankruptcy court's decision as to whether to award fees under §
31 of the lease is reviewed for abuse of discretion. Hartor v.
Iowa Grain Co., 220 F.3d 544, 549 (7th Cir. 2000); Raffel v.
Medallion Kitchens of Minnesota, Inc., 139 F.3d 1142, 1147 (7th
Geier Enterprises contends that the bankruptcy court's finding
that its attorney prolonged this matter is not supported by the
record and contrary to factual findings that the bankruptcy court
made on the merits. It contends it was the prevailing party in litigation to enforce the lease and no basis
exists for not awarding it costs and attorney fees. Telegraph
contends that the bankruptcy court's factual basis for denying
costs and fees is adequately supported by the record. It also
contends that Geier Enterprises was not the prevailing party
under either Fed.R.Bankr.P. 7054(b) or § 31 of the lease
because Geier Enterprises only obtained a declaration that PRE
was a commercially reasonable assignee. Telegraph contends ...