United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
HONORABLE EDMOND E. CHANG, UNITED STATES DISTRICT JUDGE
Tsai brought this action under the Racketeer Influenced and
Corrupt Organizations Act, 18 U.S.C. § 1961 et
seq., alleging that the Defendants fraudulently induced
her into investing $1.5 million dollars in a phony real
estate development project. R. 107, First Am.
Compl. After Tsai voluntarily dismissed her case,
see R. 119, Pl.'s Sur-Reply to Defs.' Mot.
to Dismiss; R. 120, 10/13/15 Minute Entry; R. 127, 11/17/15
Order, the Defendants moved for attorneys' fees and
expenses based on an indemnification provision in the
parties' investment agreement, see R. 134,
Defs.' Mot. for Fees; R. 134-1, Exh. A, Subscription
Agreement; see also Fed. R. Civ. P. 54(d)(2). For
the reasons explained below, the motion is granted.
case arises from a failed business venture. In 2006, Tsai
invested $1.5 million dollars in the 15th Street Blue Island
LLC project. First Am. Compl. ¶ 2. Tsai gave the funds
to the Defendants, who in turn promised to “purchase
… real estate … develop the property and
construct a multi-unit … condominium building”
in southwest Chicago. Id. Instead of actually
investing this money in the project, however, Tsai contends
that the Defendants looted the funds to line their own
pockets. Id. ¶ 4. (Remember, though, that she
voluntarily dismissed these claims.)
return for her $1.5 million investment, Tsai received a 25%
stake in 15th Street Blue Island, LLC, a company set up by
two of the Defendants (Jerry Karlik and Keith Giles) to fund
the condominium project. First Am. Compl. ¶¶ 2, 20,
37; Subscription Agreement at 1. Tsai executed a Subscription
Agreement with the LLC under those terms in September 2006.
See Subscription Agreement at 1, 8. By signing that
Agreement, Tsai consented to a broad indemnification
provision which also operated as a fee-shifting provision if
Tsai unsuccessfully sued the LLC or its agents. Id.
at 6. (The full text of the provision is quoted later in the
2014, Tsai brought this action alleging that the Defendants
operated as a “criminal enterprise” and
“misappropriate[d], loot[ed], and embezzle[d] the
assets of 15th Street Blue Island, LLC” in violation of
18 U.S.C. § 1962(c). First Am. Compl. ¶¶ 4, 5;
see also R. 1, Compl. After the Defendants moved to
dismiss the Amended Complaint, R. 108, Defs.' Mot. to
Dismiss, Tsai “consent[ed] to the …
Motion” and “request[ed] that this Court dismiss
her First Amended Complaint in its entirety, ”
Pl.'s Sur-Reply to Defs.' Mot. to Dismiss. The Court
thereafter dismissed the case without prejudice, concluding
that “[Tsai] ha[d] essentially file[d] a notice of
voluntary dismissal of the case.” 10/13/15 Minute
Defendants move under Federal Rule of Civil Procedure
54(d)(2) to recover attorneys' fees and expenses from
this litigation. Defs.' Mot. for Fees; see also
Fed. R. Civ. P. 54(d)(2). The Defendants rely on the
fee-shifting provision in the Subscription Agreement to
support the request for fees. See Defs.' Mot.
for Fees; Subscription Agreement at 6. Tsai opposes the
motion on the grounds that the provision is unenforceable. R.
135, Pl.'s Resp. Br.
follows the American Rule, which presumes that “the
prevailing party in a lawsuit must bear the costs of
litigation … .” Brundidge v. Glendale Fed.
Bank, F.S.B., 659 N.E.2d 909, 911 (Ill. 1995);
accord Rissman v. Rissman, 229 F.3d 586, 588 (7th
Cir. 2000) (applying Illinois law and noting that under the
American Rule, the presumption is that “parties bear
their own legal expenses.”). That presumption, however,
may be overcome where “an agreement between the parties
allows the successful litigant to recover attorney fees and
the expenses of suit.” Brundidge, 659 N.E.2d
at 911; see also Grossinger Motor Corp., Inc. v. Am.
Nat'l Bank and Trust Co., 607 N.E.2d 1337, 1347
(Ill.App.Ct. 1992) (“An exception … is when a
contract provides for the award of such fees …
.”). This type of agreement (referred to as an
indemnification or fee-shifting provision) is
“generally regarded as valid and enforceable.”
Hader v. St. Louis Sw. Ry. Co., 566 N.E.2d 736, 742
said, indemnification provisions are disfavored in Illinois
and are strictly construed against the indemnitee.
Blackshare v. Banfield, 857 N.E.2d 743, 746
(Ill.App.Ct. 2006) (reasoning that “indemnity contracts
are to be strictly construed, and any ambiguity in the
agreement is to be construed most strongly against the
indemnitee.”); see also Grossinger, 607 N.E.2d
at 753 (“[C]ontractual provisions for attorney fees
must be strictly construed … .”). Strictly
construing these provisions not only “provides
certainty in the law, ” but also gives parties
“notice to include precise language on attorney fees
when negotiating a contract.” Downs v. Rosenthal
Collins Grp., LLC, 895 N.E.2d 1057, 1061 (Ill.App.Ct.
2008). Thus, Illinois courts will only permit fee-shifting
where “specific language” in the agreement
provides that “‘attorney fees' are
recoverable.” Negro Nest, LLC v. Mid-N. Mgmt.,
Inc., 839 N.E.2d 1083, 1085 (Ill.App.Ct. 2005); see
also Qazi v. Ismail, 364 N.E.2d 595, 597 (Ill.App.Ct.
1977) (“[A] court may not award attorney's fees as
a matter of contractual construction in the absence of
specific language.”); accord JPMorgan
Chase Bank, N.A. v. Asia Pulp & Paper Co., 707 F.3d
853, 867 (7th Cir. 2013) (“Illinois requires that
contractual fee-shifting provisions be clear and
specific.”). Finally, because fee-shifting so often
“depends upon the particular language used and the
factual setting of the case, ” courts routinely find
that “it serve[s] no useful purpose to attempt to
analyze or reconcile the numerous cases interpreting
indemnity clauses.” Zadak v. Cannon, 319
N.E.2d 469, 471 (Ill. 1974); see also Buenz v. Frontline
Transp. Co., 882 N.E.2d 525, 530 (Ill. 2008).
Defendants move under Rule 54(d)(2) to recover attorneys'
fees and expenses based on the indemnification provision in
the Subscription Agreement. See Defs.' Mot. for
Fees; Subscription Agreement at 6; see also Fed. R.
Civ. P. 54(d)(2). This dispute over fees, they contend, is
nothing but “a straightforward matter of contract
interpretation.” Defs.' Mot. for Fees at 3. They assert
that the provision's plain language clearly and
unambiguously supports shifting their attorneys' fees and
expenses onto Tsai. Id.; see also R. 136,
Defs.' Reply Br. at 1, 4. To support their argument, the
Defendants point to this language in the indemnification
The undersigned [Tsai] hereby agrees to indemnify and hold
harmless the Company and the Manager, and their respective
employees and agents and their respective successors and
assigns (the “Indemnified Parties”) …
in any action, suit or proceeding brought by the
undersigned against any Indemnified Parties in which the
undersigned does not prevail.
Agreement at 6 (emphasis added); see also Defs.'
Mot. for Fees at 2-3; Defs.' Reply Br. at 4, 7. They
maintain that language encompasses Tsai's voluntarily
dismissed RICO action. Defs.' Mot. for Fees at 3;
Defs.' Reply Br. at 4, 7.
does not challenge this plain language interpretation;
instead, she asserts that the Defendants are not entitled to
attorneys' fees and expenses for three other reasons:
first, the indemnification provision is void as against
public policy. Pl.'s Resp. Br. at 1, 4-6. Second, the
indemnification provision is illogical and overbroad.
Id. at 1, 6-7. And finally, four of the nine
defendants are not actually “Indemnified