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Phoenix Bond & Indemnity Co., et al v. John Bridge

December 7, 2012


The opinion of the court was delivered by: Matthew F. Kennelly, District Judge:


The plaintiffs in this case asserted claims against a number of defendants under the Racketeer Influenced and Corrupt Organizations Act (RICO) and for tortious interference with prospective advantage under state law. The claims involved an annual sale at which the Cook County Treasurer auctions liens for past due property taxes, a mechanism for collecting back taxes. Plaintiffs alleged that the defendants rigged the sale over a period of several years. The scheme is described in greater detail in the Court's previous decisions in this case.

In this decision, the Court addresses plaintiffs' petition for attorney's fees and expenses.

Procedural history

1. The two cases and the appeals

Plaintiffs filed their original federal suit (Case No. 05 C 4095) in 2005. Judge Holderman dismissed that suit in December 2005, but the Seventh Circuit overturned the dismissal in February 2007. Phoenix Bond & Indem. Co. v. Bridge, 477 F.3d 928 (7th Cir. 2007). The Supreme Court granted certiorari and affirmed in June 2008. Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 629 (2008). Plaintiffs filed a second suit (Case No. 07 C 1367) in March 2007, shortly after the Seventh Circuit's ruling, in which they added new plaintiffs and new defendants. In September 2010, Judge Holderman granted summary judgment in favor of the defendants in both cases. The Seventh Circuit overturned that ruling in March 2011 and remanded the case. BCS Servs., Inc. v. Heartwood 88, LLC, 637 F.3d 750 (7th Cir. 2011). The cases were then reassigned to the undersigned judge's docket.

2. The trial and the jury's verdict

The cases were jointly tried to a jury in October -- November 2011. Plaintiffs settled with a significant number of defendants before and during trial. The cases proceeded to verdict against two groups of defendants, referred to at trial as the "Sass" defendants and the "Gray" defendants. These defendants were first added when the second lawsuit was filed in March 2007.

Plaintiffs' claims that were decided by the jury involved two separate RICO enterprises. The evidence, however, overlapped to a significant extent, and plaintiffs also pursued (with the Court's approval) a theory of damages that took into account the misconduct of all of the defendants.

The jury found for the plaintiffs on one or more RICO claims against all of the Sass defendants and many of the Gray defendants. Consistent with the terminology used at the trial, the Court will refer to the Gray defendants who were found liable as the BG defendants.

On the RICO claims, the jury awarded the plaintiffs (before trebling) a little over $2,100,000 in compensatory damages against the Sass defendants and a little over $667,000 against the BG defendants. The jury also awarded plaintiffs a total of $2,447,800 in punitive damages against various Sass and BG defendants on plaintiffs' state-law claims.

The jury found for defendant Bonnie Gray on all of plaintiffs' claims against her and failed to reach a verdict on plaintiffs' claims against defendants Wheeler-Dealer, Ltd. and Timothy Gray. Plaintiffs later dismissed their claims against Wheeler-Dealer and Timothy Gray. Atlantic Municipal Corp., another one of the BG defendants, filed for bankruptcy after judgment was entered. The present fee petition ruling does not apply to these defendants.

3. Entry of judgment

In January 2012, following extensive briefing, the Court addressed the defendants' contentions that they were entitled to a setoff for the amounts plaintiffs had received from other defendants via settlement. The Court concluded that the BG defendants were not entitled to a setoff because plaintiffs had obtained nothing in settlement from any other defendants who were claimed to have been part of the Gray RICO enterprise. See Phoenix Bond & Indem. Co. v. Bridge, Nos. 05 C 4095 & 07 C 1367, 2012 WL 8706, at *1 (N.D. Ill. Jan. 2, 2012).

The Court concluded that the Sass defendants were entitled to a setoff, "to be applied against the total amount of money to which plaintiffs are entitled to recover from the Sass defendants on the RICO claim, namely, the total damages (including trebling) plus any award of attorney's fees and expenses." Id. at *2. Plaintiffs had obtained a total of $7,075,000 in settlement from other members of the "Sabre" enterprise, in which the Sass defendants were claimed to have participated. The Court then determined that a little over forty-six percent of the settlement payments should be allocated to state-law punitive damages (and thus not subject to setoff) and that the remainder should be allocated to compensatory damages. See Phoenix Bond & Indem. Co. v. Bridge, Nos. 05 C 4095 & 07 C 1367, slip op. at 4-5 (N.D. Ill. Jan. 24, 2012).

On January 25, 2012, the Court directed the entry of judgment against the defendants whom the jury had found liable. Part of the judgment involved punitive damages on plaintiffs' state law claims, which are not at issue here. The judgment regarding the RICO award was as follows:

- Plaintiff Phoenix Bond against Sass defendants: trebled RICO damages of $2,625,000, less a setoff of $1,905,259.71, for a net of $719,740.29.

- Plaintiff BCS Services against Sass defendants: trebled RICO damages of $3,697,500, less a setoff of $1,905,259.71, for a net of $1,792,240.29.

- Plaintiff Phoenix Bond against BG defendants: trebled RICO damages of $913,875.

- Plaintiff BCS Services against BG defendants: trebled RICO damages of $1,089,000.

To put it another way, the total jury award against the Sass defendants, with RICO trebling, was $6,322,500. Due to the effect of the settlement-based setoff, this was reduced to a total of $2,511,980.58. The total jury award against the BG defendants, with RICO trebling, was $2,002,875.

4. Plaintiffs' fee petition

Plaintiffs have now filed a petition under RICO for an award of attorney's fees and expenses. As stated in their reply brief, they request a total of $11,843,042.80 in attorney's fees and $1,067,085.26 in expenses. Plaintiffs represent that before filing the fee petition, they removed a little over $1,900,000 worth of attorney time that was actually put into the case, and in their reply brief they withdrew just under $38,000 more.

Plaintiffs have also filed a supplemental fee petition seeking an additional $287,323.50 in attorney's fees and $4,266.82 in expenses. The supplemental fee petition concerns work done following entry of judgment, preparation of the fee petition and related materials, and work on matters relating to the bankruptcy filings of certain defendants.


The RICO statute provides that a prevailing plaintiff "shall recover . . . the cost of the suit, including a reasonable attorney's fee." 18 U.S.C. § 1964(c). As a starting point, courts rely on the "lodestar" method of calculation: the time reasonably expensed on the litigation multiplied by a reasonable hourly rate. See, e.g., Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). The fee applicant bears the burden on these points. Id. at 437.

The parties have filed an enormous volume of materials with the Court. These include attorney time records, detailed and voluminous spreadsheets listing objections to time entries, a joint statement identifying disputed issues, position papers on those issues, and further briefs. The Court notes that defendants have objected on one basis or another (or multiple bases) to virtually every time entry by plaintiffs' attorneys.

The Court has grouped defendants' objections into the following categories: - "relatedness" issues concerning attorney work that defendants contend is unrelated or insufficiently related to the claims against them and thus not compensable; - "recordkeeping" issues involving the sufficiency of plaintiffs' attorneys' description of their work; - "reasonableness / excessiveness" issues involving the degree of plaintiffs' success, comparison with fees charged by defense counsel, and reasonableness of particular elements of plaintiffs' request; - "apportionment" issues involving whether each group of defendants should be responsible for less than 100 percent of a fee award; - "hourly rate" issues ...

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