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Anheuser-Busch, Inc., et al v. Stephen B. Schnorf

March 29, 2012

ANHEUSER-BUSCH, INC., ET AL., PLAINTIFFS,
v.
STEPHEN B. SCHNORF, ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

Pursuant to 42 U.S.C. § 1988 and Local Rule 54.3, Plaintiffs Anheuser-Busch, Inc. ("AB Inc.") and Wholesaler Equity Development Corporation ("WEDCO") have moved for their attorneys' fees incurred in this litigation. In support of their motion, Plaintiffs rely on the Court's September 3, 2010 order granting Plaintiffs' partial motion for summary judgment on their Commerce Clause claim. AB Inc. and WEDCO seek the sum of $1,605,154.22 in attorneys' fees from Defendants, plus pre-judgment interest.

In response, Defendants*fn1 (hereinafter referred to as the Illinois Liquor Control Commission, "ILCC," or the "Commission") contend that Plaintiffs failed to achieve their stated goal in bringing the lawsuit and, in any event, that Plaintiffs' request for $1.6 million in attorneys' fees far exceeds what is reasonable or appropriate in a case which Plaintiffs dubbed "straightforward" and "clear cut." Having considered all of the arguments presented as well as the relevant Supreme Court and Seventh Circuit case law, the Court concludes that Plaintiffs did not achieve their objective in bringing this lawsuit and thus have failed to demonstrate that they are entitled to an award of attorneys' fees. Accordingly, Plaintiffs' motion for attorneys' fees [167] is denied.

I. Background

On March 10, 2010, the Illinois Liquor Control Commission ruled that the State's Liquor Control Act precludes beer producer Anheuser-Busch, Inc. from acquiring, through its affiliate WEDCO, a 100% ownership interest in distributor CITY Beverage.*fn2 The Commission explained that "[p]reserving Illinois' three-tier distribution system of alcoholic liquor is a fundamental objective of the Liquor Control Act and the Illinois legislature for reasons of public policy." Plaintiffs Anheuser-Busch, WEDCO, and CITY Beverage filed this lawsuit on the same day challenging the Commission's interpretation on various federal constitutional grounds. They alleged that the Commission's ruling "threaten[ed] to scuttle a unique and important acquisition," denied them "the benefits of the transaction and its synergies," and prevented them from "compet[ing] on equal footing" with two small, in-state beer producers (Argus and Big Muddy) that exercised self-distribution rights.*fn3 In addition to requesting a declaration that the Commission's interpretation was unconstitutional, Plaintiffs asked the Court to use its discretion in fashioning a remedy that would extend self-distribution rights to all beer producers regardless of their location, so that Anheuser-Busch could proceed with its acquisition of WEDCO.

On September 3, 2010, after three months of expedited proceedings following the filing of the complaint in this case and two and a half additional months in which the Court crafted its opinion, the Court granted Plaintiffs' motion for partial summary judgment, holding that Defendants' enforcement of the Illinois Liquor Control Act of 1934 (the "Liquor Control Act") violated the Commerce Clause of the United States Constitution insofar as it permits in-state, but not out-of-state, producers to self-distribute. However, the Court declined Plaintiffs' request to remedy the unconstitutionality of Illinois' system by extending the self-distribution privilege to out-of-state brewers, concluding that Plaintiffs' proposed remedy would be more disruptive to the existing statutory and regulatory scheme than the alternative remedy of withdrawing the self-distribution privilege from in-state brewers. The Court stayed its order until March 31, 2011, to give the Illinois General Assembly an opportunity to amend the Liquor Control Act if it chose to do so and then extended the stay at the parties' request [see 162, 187]. The General Assembly did in fact enact remedial legislation, and on June 1, 2011, Governor Quinn signed into law SB 754. The new law creates a "craft brewer's license" for in-state and out-of-state beer producers whose annual production is less than 15,000 barrels (465,000 gallons) and who may then obtain approval from the ILCC to self-distribute up to 7,500 barrels of that production in Illinois.

On October 29, 2010, after Plaintiffs dismissed their other remaining claims, the Court entered final judgment against Defendants and in favor of Plaintiffs. On November 3, 2010, AB Inc. and WEDCO filed a notice of appeal from this Court's September 3 opinion and October 29 final judgment on the sole issue of the proper remedy for Defendants' violation of the Commerce Clause. Defendants did not cross-appeal. Thus, the only issue on appeal was whether the Court's determination that nullification, rather than extension, of the self-distribution right utilized by a few small, in-state brewers was the proper remedy for Defendants' constitutional violation. Once Governor Quinn signed SB 754 into law, the Seventh Circuit dismissed Plaintiffs' appeal as moot, noting that the new law "eliminates the geographically disparate treatment of beer distributors." See Anheuser Busch Co., Inc. v. Schnorf, et al., Nos. 10-3298 & 10-3570, Order (7th Cir. July 8, 2011).

II. Analysis

This case presents an interesting question on the issue of attorneys' fees. As the Court previously noted in addressing Defendants' stay motion, Plaintiffs' clearly won on the issue of whether Defendants' were violating the Commerce Clause, and Defendants' did not appeal. Defendants took the position that Granholm did not supply the relevant standard for this case- Defendants argued that the per se invalidity standard did not apply-and also maintained that the Twenty-first Amendment permits states "virtually complete control" over how to structure a distribution system. The Court, following Granholm and its progeny, disagreed and found that Defendants failed to articulate a legitimate local purpose that justified their discrimination against out-of-state brewers.

As Defendants note, the constitutional claim was resolved on summary judgment without discovery and turned on a straightforward application of Granholm and its progeny to the Commission's construction of state law. Plaintiffs themselves characterized the case as "straightforward" and "clear cut," noting that it turned on a "a single, well-defined question of law" calling for a "simple" application of a single case (Granholm). See DE 18 at 2, 4; DE 53 at 18. Defendants admitted "all of Plaintiffs' material facts and [did] not set out additional facts showing a genuine issue for trial." The focus was solely on a legal issue for which recent Supreme Court precedent paved a clear path. If that were the sum and substance of the case, Defendants would not have a leg to stand on in opposing a reasonable fee request and the reasonable fee would be a tiny fraction of the $1.6 million sum sought by Plaintiffs in their fee petition.

However, it was (and is) readily apparent that Plaintiffs did not retain counsel (and pay them handsomely) to establish Commerce Clause precedent. Rather, as the timing of this lawsuit and the content of most, if not all, of the court filings confirm, Plaintiffs' "ultimate goal" was to pave the way for their acquisition of the remaining 70% interest in distributor City Beverage- or, as Plaintiffs themselves put it, to close "an extremely important business transaction for Plaintiffs." Pl. S.J. Reply at 23. And in this respect, Plaintiffs' failed. Their transaction cannot proceed, and their "opportunity for profit maximization" will not follow on the heels of this lawsuit. Furthermore, despite their victory on the constitutional issue, the end result of Plaintiffs' litigation strategy has left them worse-off. Plaintiffs sought an extension of self-distribution rights to all producers, but the Court's ruling (which was stayed to give the General Assembly time to act) would have barred any producers from self-distributing, which not only precluded Plaintiffs' from acquiring the remaining 70% interest in City Beverage, but also put Plaintiffs' existing 30% interest in jeopardy. The General Assembly acted while the stay was in place, and its amendment was even less favorable to Plaintiffs than the Court's ruling would have been-the new statute not only barred Plaintiffs from self-distributing (and hence blocked Plaintiffs' acquisition of City Beverage), but the General Assembly also extended self-distribution rights to small brewers across the nation, creating more competition for Plaintiffs beyond the two small, in-state brewers who self-distributed prior to this lawsuit.

The battle lines are well defined: Plaintiffs contend that they are entitled to all of their reasonable fees because they won a complete victory on the constitutional claim (in that the Court granted partial summary judgment to Plaintiffs on its commerce clause claim); Defendants counter that Plaintiffs are entitled to little or no attorneys' fees because they achieved, at best, a very modest (and "Pyrrhic") victory that fell well short of their aim in bringing the litigation. That leaves the Court with the interesting question of whether (or how) to award fees to a party that wins on a straightforward, threshold issue, but gains little or nothing (and eventually loses ground) as a result of the litigation. With this background, the Court turns to the issue at hand.

A. General standards

In order to entice competent attorneys to prosecute civil rights cases, Congress enacted 42 U.S.C. § 1988, pursuant to which a "prevailing party" in a § 1983 action is entitled to "reasonable" attorneys' fees. See Hensley v. Eckerhart, 461 U.S. 424, 429 (1983). Under the Supreme Court's self-termed "generous formulation" of the phrase, a civil rights plaintiff is considered to be a "prevailing party" if he or she succeeds on "any significant issue in the litigation which achieves some of the benefit the parties sought in bringing suit." Farrar v. Hobby, 506 U.S. ...


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