2.

We also are unpersuaded by Kempner’s argument that the aggregate trial result should be
measured against the aggregate settlement offer by Cingular. Kempner bases this argument, and its
claim under Paragraph 35(b) for fees incurred on the complaint and counterclaims, on the premise
that Kempner was the only “aggrieved” party for purposes of Paragraph 35. Kempner argues that
because Cingular admittedly never provided Kempner with proper notice of its claims under
Paragraph 35(a), and Kempner never waived Cingular’s compliance with the notice requirement,
Kempner is the only “aggrieved” party. That argument simply is not supported by the language of
Paragraph 35(b).

Kempner cannot be the aggrieved party as to Cingular’s counterclaims. The August 28, 2002
letter combines two elements: a valuation of Kempner claims and an offer to pay $38,000.00 on
them, and a demand by Cingular that Kempner pay $130,000.00 on counterclaims that Cingular
would assert absent settlement, with the offer and demand netting out as a $92,000.00 payment by
Kempner to settle all claims. Kempner was not the aggrieved party on counterclaims that Cingular
threatened to file absent settlement; it was the accused party. The fact that Cingular did not satisfy
Paragraph 35(a)’s notice requirements with respect to its counterclaims deprives Cingular of the right
to invoke Paragraph 35(b) with respect to those counterclaims; but, it does not transform Kempner
into the “aggrieved” party on claims Cingular asserted and for which it sought recovery. Thus,
Kempner cannot — in the role of an “aggrieved” party under Paragraph 35(b) — measure the entire
litigation result against the entire settlement proposal, because both the entire litigation result and

the entire settlement proposal include items on which Kempner plainly was not the aggrieved party.

13



condition precedent to instituting any judicial, quasi-judicial and/or
regulatory proceeding.

(id, at $35).

There is no dispute that Paragraph 24 provides for fees to be awarded to prevailing parties
onclaims that arise directly under the Agreement: for example, claims for breach of the Agreement.
However, Paragraph 35 uses a different measuring stick for deciding when to shift attorneys’ fees.
It is not enough that a party prevail. Rather, a party must obtain a recovery that exceeds what was
offered in settlement under Paragraph 35(a); if a party obtains a recovery that is less than or equal
to what was offered in settlement under Paragraph 35(a), then the party who “prevailed” on the
judgment nonetheless must pay the “losing” side’s fees.’

These differences in Paragraphs 24 and 35 raise a threshold question: when does each
respective fee-shifting provision apply? By their terms, each provision covers certain types of claims
that are not within the scope of the other. Paragraph 35 does not cover disputes involving Paragraph
20 of the Agreement, which sets forth various covenants not to compete, whereas Paragraph 24
extends to any suit to enforce, declare or recover damages for a default or breach of any obligation
under the Agreement — which includes obligations under Paragraph 20. On the other hand,

Paragraph 24 does not extend to tort claims (as the parties agree), whereas Paragraph 35 permits fee

We also note that Paragraphs 24 and 35 define differently the “fees” that are shifted in (for example, Paragraph
24 shifts fees for in-house counsel and experts, while Paragraph 35 does not).

4


CONCLUSION

For the reasons set forth above, the Court finds that Kempner cannot claim fees under
Paragraph 35(b); and both parties are limited to the fee shifting provided in Paragraph 24 on the
claims arising under the Agreement which they each prevailed. The Court reserves ruling on what
recovery Kempner may have, if any, on the Agreement claims on which it obtained judgment
(Counts V and VI of the complaint and Count I of the counterclaim), and what recovery Cingular
may have, if any, in the Agreement claims on which it obtained a judgment (Counts III and IV of the
complaint). A status is set for November 30, 2004 at 9:00 a.m.

ENTER:

Md pL

SIDNEY I. SCHENKIER
United eat Magistrate Judge

Dated: November 15, 2004

17


pending action, and execute an appropriate settlement agreement and mutual release with Kempner,
including a confidentiality provision.

Please advise me, or my colleagues . . . , as soon as possible whether you accept this offer.

(Kempner’s Mem., Ex. C).

Cingular’s letter combined a valuation and offer on Kempner’s claims asserted in the
complaint ($38,000.00), with a notice of counterclaims that Cingular would file absent settlement
and a demand that would settle those yet-to-be asserted counterclaims ($130,000.00). Kempner
never responded to Cingular’s letter. Thereafter, the mediation proceeded under Paragraph 35(d),
without success.

B.

There is no dispute that Kempner failed to comply with Paragraph 35(a) in two ways. First,
Kempner failed to provide the Paragraph 35(a) notice prior to suit. Second, Kempner failed to
include in the notice the information required by Paragraph 35(a) ~ such as, the amount of damages
sought, including attorneys’ fees, and copies of the documents that supported Kempner’s claims.
Cingular asserts that this non-compliance with Paragraph 35(a) bars Kempner from invoking
Paragraph 35(b). Kempner concedes that its notice did not satisfy Paragraph 35(a), but argues that
Cingular waived any non-compliance with Paragraph 35(a) by sending the August 28, 2002 letter
and by participating in the Paragraph 35(d) mediation. We reject the waiver argument for the
following reasons.

First, notice under Paragraph 35(a) is a prerequisite for both an award of fees under
Paragraph 35(b) and the mediation process under Paragraph 35(d). By its August 8, 2002 order
requiring the parties to mediate under Paragraph 35, the Court necessarily required that Cingular

send the August 28, 2002 letter. Since Cingular asked for the mediation process under Paragraph



meaning to both Paragraphs 24 and 35, and to the caveat in Paragraph 24 that fees are awarded to
a prevailing party “except as otherwise provided in Paragraph 35.”
iil.
With this basic interpretation of Paragraphs 24 and 35 in mind, we now address the parties’
threshold dispute about their application here. In doing so, we begin by setting forth below, in table
form, the outcome of the respective claims asserted by each side in the case:

Kempner’s Amended Complaint

Count I Declaratory Judgment Claim Voluntarily Dismissed

(contract-based)
Count II Injunction Claim Voluntarily Dismissed

(contract-based)
Count III Contract Claim Summary Judgment for Cingular
Count IV Contract Claim Summary Judgment for Cingular
Count V Contract Claim Jury Verdict for Kempner ~ ($550.00

stipulated award)

Count VI Contract Claim Jury Verdict for Kempner — ($4,413.21

stipulated award)
Count VIE Common Law Fraud Claim Jury Verdict for Kempner — ( $1.00)
Count VIII Statutory Fraud Claim Summary Judgment for Cingular
Count IX Franchise Act Claim Summary Judgment for Cingular

Count X Tortious Interference Claim Jury Verdict for Kempner — ($21,125.00
stipulated award)

‘Cingular contends that Paragraph 35 is merely a “Rule 68-type of ‘safe harbor’” for non-providing parties on
claims covered by Paragraph 24, in cases where the procedures of Paragraph 35 have been invoked (Cingular’s Mem.
at 4). We agree that can be one use of Paragraph 35. But an interpretation that ascribes that as the only use of
Paragraph 35 ignores that in addition to covering some of the same subject matter (most contract claims), Paragraph 24
and 35 each also cover independent subject matter that the other does not — breach of the covenant not to compete claim
(covered by Paragraph 24 but not by Paragraph 35) and tort claims (covered by Paragraph 35 and not by Paragraph 24).
For this reason, we also reject Cingular’s assertion that interpreting Paragraph 35 to permit recovery of fees as an
independent source of rights renders Paragraph 24 “mere surplusage” (Cingular’s Mem. at 7).

6



shifting for tort claims or statutory claims (if the requirements of Paragraph 35(a) and (b) are met)
that are “disputes relating to this Agreement.’”?

But, what about breach of contract claims that might fall under either Paragraph 24 or 35?
That is where the phrase in Paragraph 24, stating that a prevailing party shall recover fees “except
as otherwise provided in Paragraph 35,” comes into play. The fee shifting provision in Paragraph
35() is not mandatory: that is, a party who “may” invoke Paragraph 35(a), but it is not required to
do so. That is the common-sense meaning we draw from the fact that Paragraph 35(b) uses the
permissive word “may” rather than the mandatory word “shall” — in contrast to (1) Paragraph 35(a),
which uses the word “shall” in describing the pre-suit notice and settlement offer that must be given
as a precondition to recovery of fees under Paragraph 35(a), and (2) Paragraph 35(d), which uses the
word “shall” in describing recourse to the mediation process that is a precondition to suit. As we
read the Agreement, what that means is that a party who is entitled to invoke Paragraph 35(b), and

who successfully does so, cannot then recover fees under Paragraph 24. This interpretation gives

*Cingular disputes this latter reading of Paragraph 35. However, case law from Illinois and the Seventh Circuit
indicate that a phrase such as “all disputes relating to this Agreement” is very broad. In the arbitration context, Illinois
courts have held that the parties are obligated to arbitrate any dispute that arguably arises under the agreement containing
that broad, generic provision. See Bass v. SMG, Inc., 328 Ill.App.3d 492, 498 (1° Dist. 2002); Reed v. Doctor’s
Associates, Inc., 331 Ill.App.3d 618, 626 (5" Dist. 2002). Moreover, the Seventh Circuit has held that tort and fraud
claims related to the contractual relation between the parties are covered by such a phrase. See Kroll v. Doctor’s
Associates, Inc., 3 F.3d 1167, 1170 (7 Cir. 1993) (“[t]he touchstone of arbitrability in such situations is the relationship
of the tort alleged to the subject matter of the arbitration clause.”). See also In re Oil Spill By the “Amoco Cadiz” Off
the Coast of France v. Bugsier Reederei and Bergungs, A.G., 659 F.2d 789, 794 (7 Cir. 1981) (tort claims fall under
clause stating “any dispute or difference arising out of or relating to this contract”); Person v. Dean, Witter, Reynolds,
Inc., 742 F.24334, 338 (7" Cir. 1984) (claims of fraud fall under broadly worded phrase such as any controversy “arising
out of or relating to the contract” especially where there is no express provision to exclude a particular claim from its
coverage).



to compel mediation, on the ground that Kempner had jumped the gun by filing suit without
complying with the mandatory, contractual pre-suit notice (Paragraph 35(a)) and mediation
procedures (Paragraph 35(d)) in the Agreement (doc. #3). On August 8, 2002, Cingular’s motion
was granted in part: Kempner was allowed to proceed with its request for a preliminary injunction
with respect to the covenant not to compete (a category of dispute not subject to Paragraph 35), but
all other aspects of the case were stayed pending, completion of the Paragraph 35 mediation process
(doc. # 4).

The parties then went through the contractual mediation process. As the parties made clear
at the oral argument, Kempner did not provide any notice~—as the “aggrieved” party under Paragraph
35(a) regarding the claims in its complaint — other than by serving the complaint on Cingular. As
its settlement offer, required under Paragraph 35(a), Cingular sent the following letter dated August
28, 2002:

Dear Counsel:

Pursuant to paragraph 35 of the Authorized Agency Agreement between the parties in the above-
referenced matter, the following is Cingular Wireless’s offer of settlement in response to the claims
asserted in the Amended Complaint filed by Kempner Mobile Electronics, Inc.

To compromise and resolve the claims between the parties, Cingular Wireless is willing to agree to
the following terms.

Kempner pays Cingular Wireless $92,000, representing the balance of approximately $130,000 for
equipment purchases owed by Kempner to Cingular Wireless (of which more than $100,000 is past
due), less approximately $38,000 Cingular Wireless will agree to credit Kempner for accrued
commissions and residuals (notwithstanding that that amount has not been fully documented by
Kempner).

In addition, in exchange for this payment, as well as to avoid the expenses of litigation, Cingular
Wireless will agree to waive half the term of Kempner’s non-compete agreement. Accordingly,
Kempner would agree to be bound not to compete with Cingular Wireless, as defined in paragraph 20
of the Agreement, for six months from July 21, 2002, the date of Kempner’s termination.

In consideration for this compromise, Cingular Wireless will also agree to forego its available
counterclaims, drop its claim for preliminary injunction, agree to dismissal with prejudice of the



Minute Order Form (06/97)

United States District Court, Northern District of Illinois

Name of Assigned Judge
or Magistrate Judge

Sidney I. Schenkier

Sitting Judge if Other
than Assigned Judge

CASE NUMBER 02 C 5403 DATE 11/15/2004
CASE Kempner Mobile vs. Southwestern Bell Mobile
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.)
DOCKET ENTRY:
(ly a Filed motion of [ use listing in “Motion” box above.]
(2) a Brief in support of motion due
(3) o Answer brief to motiondue___. Reply to answer briefdue___.
(4) oO Ruling/Hearing on____set for at
(5) ag Status hearing[held/continued to] [set for/re-set forlon____—sset for at,
(6) a Pretrial conference[held/continued to] (set for/re-set for] on set for at
(e) a Trial{set for/re-set for] on at
(8) im [Bench/Jury trial} [Hearing] held/continued to__at
(9) im This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
QFRCP4(m) O Local Rule 41.1 OOFRCP41(a)(1) OO FRCP41(a)(2).

(10) Ml [Other docket entry] Enter Memorandum Opinion and Order. For the reasons stated in the attached

Memorandum Opinion and Order, the Court finds that Kempner cannot claim fees under Paragraph 35(b); and
both parties are limited to the fee shifting provided in Paragraph 24 on the claims arising under the agreement
which they each prevailed. The Court reserves ruling on what recovery Kempner may have, if any, on the
agreement claims on which it obtained judgment (Counts V and VI of the complaint and Count I of the
counterclaim), and what recovery Cingular may have, if any, in the agreement claims on which it obtained
judgment (Counts II and IV of the me we is set foyfl 1/39/04 at 9:00 a.m.

ql) of

No notices required, advised in open court.

(For further detail see order attached to‘the origirfal minute otder.]

No notices required. .
umber of notices

NOV.1.6.2004

KA |

mailing deputy initials

Notices mailed by judge’s staff.

Notified counsel by telephone.

Docketing to mail notices.

asa

Mail AO 450 form.

Copy to judge/magistrate judge.

Cl trernqay
seh ALTE 902
courtroom
deputy's
initials

Date/time received in
central Clerk's Office



a low-ball offer that the aggrieved party beat at trial). The measuring stick that Paragraph 35(b)
employs for fee shifting, which is to compare the litigation result with the offer made during the
Paragraph 35(a) process, cannot be properly used if the quality of the offer may have been affected
by inadequacies in the notice. Thus, if an aggrieved party, such as Kempner, fails to serve the
accused party with proper notice of the damages and attorneys’ fees sought and the documents
supporting the claim, then the aggrieved party has breached not only the technical requirements of
Paragraph 35(a), but also the substantive purposes underlying those technical requirements.

Of course, in this case, we can never know whether a notice that complied with
Paragraph 35(a) would have altered the course of events. Kempner no doubt would argue that a
better notice would not have caused a better mediation result. But, we should not have to guess
about that question — Kempner could have avoided this problem by complying with Paragraph 35(a).
Nor do we find that strict compliance with Paragraph 35(a) creates a “draconian” result by depriving
Kempner of the ability to invoke Paragraph 35(b); rather, that is a result of Kempner’s own making,
by failing to comply with Paragraph 35(a).

B.

That said, even if Cingular’s August 28, 2002 letter served as a waiver of Kempner’s notice
obligations under Paragraph 35(a), Kempner would still not be able to recover fees under Paragraph
35(b). Kempner’s argument that it qualifies for fee shifting under Paragraph 35(b) rests on two
arguments. First, Kempner argues that the litigation outcome and the settlement offer must be
compared in the aggregate: that is, without regard to what claims Kempner and Cingular each
asserted as the “aggrieved” party. Second, Kempner argues that it is entitled to fee shifting under

Paragraph 35(b), even though it obtained no net positive recovery at trial, because the net amount

11



35(d) to take place, and did not demand a better Paragraph 35(a) notice from Kempner before doing
so, Cingular fairly may be deemed to have waived strict compliance with Paragraph 35(a) as a
precondition to mediation. But, neither Cingular’s motion nor the Court’s order requiring mediation
addressed the parties’ rights under Paragraph 35(b). Thus, Cingular’s “waiver” of Kempner’s failure
to provide the notice required by Paragraph 35(a) was limited to the adequacy of the notice for
purposes of the Paragraph 35(d) mediation; it did not extend to Paragraph 35(b) fee shifting.
Geldermann, Inc. v. Stathis, 532 N.E.2d 366, 369 (Ill. App.1* Dist. 1988) (arbitration context) (citing
Dickinson y. Hanhad Securities, Inc., 661 F.2d 638, 641 (7" Cir. 1981)).

Second, it is this Court’s view that strict compliance with Paragraph 35(a) was intended by
the parties when they drafted the Agreement. As Kempner recognizes in its brief: “[i]t is presumed
that the terms and provisions of a contract are purposely inserted and that the language was not idly
employed” (Kempner’s Mem. at 3 (citing Kimball Hill Management Co. v. Roper, 733 N.E.2d 458,
462-63 (Ill. App. 2d Dist. 2000)). “When interpreting contracts, contractual provisions for attorneys’
fees must be strictly construed and the [CJourt must determine the intention of the parties with
respect to the payment of fees” (Kempner’s Mem. at 3 (quoting, Grossinger Motorcorp., 607N.E.2d
at 1348)).

And, indeed, strict compliance with Paragraph 35(a) is essential to the purpose of the fee-
shifting mechanism in Paragraph 35(b). An “aggrieved” party is required to give pre-litigation
Paragraph 35(a) notice to the other party, so that the possibility of early settlement of an aggrieved’s
claims is maximized. The predicate of fee shifting under Paragraph 35(b) is that a party unwisely
failed to settle through the Paragraph 35(a) notice and offer process (either by an aggrieved party

turning down an offer that the aggrieved party did not beat at trial, or by an accused party making

10


Cingular’s Counterclaim

Count I Contract Claim Jury Verdict for Kempner
Count II Contract Claim Stipulated Judgment for Cingular ($94,235.38)
Count III Abuse of Process Claim Dismissed on Kempner’s Motion

The net result of the litigation was that Kempner was required to pay Cingular $68,146.17
(the difference between the $94,235.38 awarded to Cingular on the one contract counterclaim on
which it prevailed, and the $26,089.21 awarded to Kempner on all claims on which it prevailed).
Based on that net result, Kempner seeks recovery of fees under Paragraph 35(b), on the argument
that that outcome of the litigation on the claims and counterclaims was more favorable — or, more
accurately, less unfavorable — to Kempner than was Cingular’s offer under Paragraph 35(a) to settle
all claims and counterclaims for a net payment from Kempner to Cingular of $92,000.00 (a
$130,000.00 demand by Cingular on its counterclaims, less a $38,000.00 payment ~ or credit — to
Kempner on its claims). Cingular argues that Kempner is entitled to no recovery under Paragraph
35(b), and that the only fee recovery either side may obtain is under Paragraph 24 for those contract
claims on which a party prevailed.

A.

To analyze Kempner’s right, vel non, to invoke Paragraph 35(b), we begin with a brief
recitation of relevant factual history. On July 31, 2002, Cingular removed Kempner’s amended
complaint from state court to this Court. That complaint contained declaratory and injunctive claims
(Count I-II) that were not within the scope of Paragraph 35, but also included contract, tort and
statutory claims that were. One week after removal, Kempner moved for a preliminary injunction

(doc. #2), That motion was followed the next day with a motion by Cingular to stay the case and



breach of any of the representations and warranties herein contained or otherwise
pursuant to this Agreement, then except as otherwise provided in Paragraph 35, the
party not prevailing in such suit or action shall be liable to the prevailing party for the
prevailing party’s costs and expenses, including, without limitation, court costs and
reasonable attorneys’ and expert witnesses’ fees (including, without limitation, the
value of time spent by in-house personnel), the amount of which shall be fixed by the
court and shall be made a part of any judgment rendered. The parties agree that any
such suit or action must be brought, if at all, within one (1) year after the underlying
cause of action accrues,

(Kempner’s Mem. Ex. A, 424) (emphasis added). Paragraph 35 provides in relevant part:

35. DISPUTE RESOLUTION AND MEDIATION

For all disputes relating to this Agreement except those relating to Paragraph 20,
Covenants Not to Compete, prior to instituting litigation in connection with this
Agreement in any forum, including but not limited to, state, federal, or regulatory
proceedings, each party agrees to the following procedures:

(a) The aggrieved party shall give detailed written notice to the other party of its
specific complaint, including the amount of actual damages and expenses,
including attorney’s fees, claimed by the aggrieved party. The aggrieved
party shall include copies of all documents that support its claims. Within
thirty (30) days after receipt of the notice, the party receiving the notice shall
tender to the aggrieved party a written offer of settlement. Any offer of
settlement not accepted within thirty (30) days of receipt by the aggrieved
party shall be deemed to have been rejected.

(b) _—_ Inthe event of litigation, a settlement offer made pursuant to Paragraph 35(a)
above, if rejected by the aggrieved party, may be filed with the court together
with an affidavit certifying its rejection. If the court finds that the amount
tendered in the settlement offer is greater than or equal to the actual damages
found by the trier of fact, the aggrieved party shall incur the costs of its own
attorney’s fees and shall reimburse the other party for its reasonable
attorney’s fees incurred. If recovery is more [than] the amount tendered in
the settlement offer, then the accused party will reimburse the aggrieved party
for its reasonable attorneys’ fees.

(d) Ifthe parties are unable to settle their disputes through the above procedure,
the parties agree to submit their dispute to mediation as described in this
paragraph within 90 days after rejection of the settlement offer. Compliance
with these procedures on dispute resolution and mediation shall be a



To measure Kempner’s “recovery” against the settlement in the aggregate (as to all claims,
including those of Cingular) would do violence to the language of Paragraph 35(b). Paragraph 35
is careful to distinguish the aggrieved from the accused, and the claims and recovery of each from
the other. The formula set forth in Paragraph 35(b) requires the Court to compare the claims of an
aggrieved with the “actual damages found by the trier of fact” on those claims. Paragraph 35(b) does
not contemplate or permit aggregation of claims filed by both an aggrieved and an accused to
determine whether, when everything shakes out, the aggrieved is “better off” having gone to trial
than settling the case. Consequently, even if Kempner could invoke Paragraph 35(b), at most
Kempner could recover attorneys’ fees on Kempner’s own claims on which it was aggrieved, and
not on the claims of Cingular.

3.

However, even under that scenario, Kempner could not shift fees under Paragraph 35(b). To
apply only the Paragraph 35(b) formula in the context of this case, we would have to break down the
August 28, 2002 letter into its major component parts: (a) the settlement offer that Cingular made
on Kempner’s claims ($38,000.00), and the settlement offer/demand that Cingular made on its own
potential counterclaims ($130,000.00). This exercise is necessary because the formula set forth in
Paragraph 35(b) requires the Court to identify the aggrieved and the accused parties. Separating out
the claims on which Kempner was the aggrieved reveals that the amount Kempner recovered on all
of his claims, $26,089.21, is less than the amount that Cingular offered to Kempner in settlement of
its claims, $38,000.00. Thus, if we apply the formula in Paragraph 35(b) as it is written, to compare
the trial result and settlement offer as the claims on which Kempner was “aggrieved,” Kempner

would still not be able to shift fees under Paragraph 35(b), because Kempner did not do better at

14



Kempner’s Amended Complaint

Count I Declaratory Judgement Claim Voluntarily Dismissed

Count II Injunction Claim Voluntarily Dismissed

Count III Contract Claim Summary Judgment for Cingular

Count IV Contract Claim Summary Judgment for Cingular

Count V Contract Claim Jury Verdict for Kempner ($550.00 stipulated award)
Count VI Contract Claim Jury Verdict for Kempner ($4,413.21 stipulated award)

Cingular’s Counterclaim

Count I Contract Claim Jury Verdict for Kempner’

Kempner thus may be able to claim prevailing party status under Paragraph 24 on two of its
contract claims — Counts V (for commissions) and VI (for residuals) — and on Count I of Cingular’s
counterclaims (breach of the non-compete provision). Cingular, on the other hand, may claim
prevailing party status on two of Kempner’s contract claims — Counts III and IV.’ We say “may”
because each side has reserved its arguments on the issue of whether the other is a “prevailing party”

on these claims, an if so, the fees that should be awarded.

7Cingular obtained a stipulated judgment of $94,235.38 on Count II of its counterclaim. But that counterclaim
involves a contract claim that does not arise under the Agreement, and thus Cingular concedes that it may not seek fees
under Paragraph 24 on that claim.

‘Neither party may claim status as the prevailing party on Counts I and II of the amended complaint. The
preliminary injunction ruling was a “split decision,” affirming parts of each side’s positions; and, in any event, a
preliminary injunction ruling is not an adjudication on the merits (see Keefe-Shea Joint Venture v. City of Evanston, 773
N.E.2d 1155, 1160 (Ill. App. 1* 2002) (“the purpose of a preliminary injunction is to preserve the status quo pending
a decision on the merits”)). Thereafter, the declaratory and injunctive claims were voluntarily dismissed. Neither side
prevailed and neither side lost on those claims; and, thus, any fees generated in filing the claims cannot be claimed
because the parties never tested their merits by a summary judgment motion or trial. Any fees spent defending those
claims cannot be recovered either because Kempner, by dismissing those claims voluntarily, left Cingular without the
opportunity to prevail on them. See Jackson v. Hammer, 653 N.E.2d 809, 817 (Ill. App. 4" Dist. 1995) (“A party can
be considered a ‘prevailing party’ for the purposes of awarding fees when he is successful on any significant issue in the
action and achieves some benefit in bringing suit, receives a judgment in his favor, or by obtaining an affirmative
recovery”) (citing Grossinger Motor Corp., 607 N.E.2d at 1348).

16



2004. After reviewing the relevant contractual provisions and the parties’ arguments concerning the
interpretation of them, the Court finds as follows.
I.

By its express terms, the Agreement at issue is governed by Illinois law (Kempner’s Mem.
Ex. A, J 24), a point which the parties do not dispute. Therefore, the contract interpretation issues
that the parties raise require the Court to apply the following well-established principles of Illinois
law.

The interpretation of a contract is a question of law. A court cannot give the contract a
construction that would render any phrase or term superfluous or meaningless; we must give it some
reasonable meaning. Gray v. Nat’l Restoration Systems, Inc.,___N.E.2d__, No. 1-01-4062, 2004
WL 834724, * 20 (Ill. App. 1* Dist. Apr. 16, 2004). “[C]ontractual provisions for attorney fees must
be strictly construed and the court must determine the intention of the parties with respect to the
payment of fees.” Grossinger Motorcorp. Inc. v. American National Bank & Trust Co., 607 N.E.2d
1337, 1348 (Ill. App. 1* Dist. 1993) (citing Helland v. Helland, 573 N.E.2d 357 (Ill. App. 2d Dist.
1991)).

Il.

We begin our analysis with a recitation of the contractual fee provisions at issue, which are

set forth at paragraphs 24 and 35 of the Agreement. Paragraph 24 provides in relevant part:

24, GOVERNING LAW

If any suit or action shall be brought to enforce or declare any of the terms of this
Agreement, to terminate this Agreement or to recover any damages sustained as a
result of a default in the performance of any obligations under this Agreement, or a


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

DOCKETED

KEMPNER MOBILE ELECTRONICS, __) Nov 1 6 2004
INC., )
)
Plaintiff, )
)
vs. ) No. 02 C 5403
) Magistrate Judge Sidney I. Schenkier
SOUTHWESTERN BELL MOBILE SYS., )
LLC, d/b/a CINGULAR WIRELESS, )
)
Defendant. )

MEMORANDUM OPINION AND ORDER

This hard-fought litigation has spawned a preliminary injunction hearing, two trials, three
extensive memorandum opinions,' and cross-appeals from the final judgments entered in the case.
These opinions lay out the details of the parties’ underlying disputes and the claims they have raised;
we will repeat those details here only insofar as necessary to understanding and resolving the current
dispute that once again brings the matter before the Court.

Kempner Mobile Electronics, Inc. (“Kempner”) and Southwestern Bell Mobile Systems,
LLC, d/b/a Cingular Wireless (“Cingular”), have jointly filed a request for the Court to interpret the
attorneys’ fee provisions contained in the parties’ Agency Agreement (“Agreement”) for purposes
of helping them resolve their post-trial fee disputes. The Court granted that request on October 1,

2004; the parties briefed the issues; and the Court held oral argument on the matter on October 27,

'See Kempner Mobile Electronics Inc. v. Southwestern Bell Mobile Sys. LLC, 02 C 5403, 2003 WL 1057929
(N.D. Ill. March 10, 2003) (preliminary injunction ruling); Kempner Mobile Electronics, Inc. v. Southwestern Bell
Mobile Sys., LLC, 02 C 5403, 2003 WL 22595263 (N.D. Ill. November 7, 2003) (summary judgment ruling); Kempner
Mobile Electronics, Inc. v. Southwestern Bell Mobile Sys., LLC, 02 C 5403, 2004 WL 434213 (N.D. Ill. March 4, 2004)

(ruling on post-trial motions).



it owes as a result of the jury verdict ($68,146.17) is less than the net amount for which Cingular
offered to settle all claims and counterclaims ($92,000.00). As we explain below, we do not accept
either argument.

1.

We begin with the question of what constitutes a “recovery” under Paragraph 35(b). The
term “recover,” as used in its ordinary sense in the English language, connotes a result that is
measured by winning positive sums of money. See M. WEBSTER’S COLLEGIATE DICTIONARY at 977
(10" Ed.) (defining “recover” as “to obtain a final judgment in one’s favor”). We do not believe that
word was given a different meaning by the parties in Paragraph 35(b).

We also note that the word “recovery” in the last sentence of Paragraph 35(b) refers back to
the prior sentence in that paragraph, which shifts fees from the “accused” to the “aggrieved” party
if “the amount tendered in the settlement offer is greater than or equal to the actual damages found
by the trier of fact’ (Kempner’s Mem., Ex. A, § 35(b)) (emphasis added). That sentence further
confirms that Paragraph 35(b) contemplates that, in order to shift fees to the accused party, the
aggrieved party must recover “actual damages.” When viewing the overall litigation outcomes and
the settlement offer in the aggregate, as Kempner asks us to do, Kempner had no recovery of “actual
damages” ~ rather, Kempner had to pay Cingular. We do not interpret the word “recovery” in
Paragraph 35(b) as simply doing better than one would have done had the settlement offer been

accepted, as Kempner argues (Kempner Mem. at 4).

12



trial in terms of money damages than the $38,000.00 that Cingular offered in the August 28, 2002
letter on Kempner’s claims as the aggrieved. Thus, Kempner cannot recover fees under Paragraph
35(b), even if we were to deem Cingular as having waived Kempner’s failure to comply with
Paragraph 35(a).°

Iv.

That brings us to Paragraph 24. Cingular seeks recovery only under Paragraph 24; and both
parties agree that if Kempner cannot seek fees under Paragraph 35, it nonetheless may do so under
Paragraph 24.° As stated, Paragraph 24 provides fee recovery for a prevailing party on all claims
arising under the Agreement. In this case, the agency contract claims alleged by each party, and the

results that were obtained, are as follows:

‘We note that Cingular’s August 28, 2002 proposal is not substantively different than it would have been had
Cingular written two letters to Kempner: one proposing settlement of Kempner’s claims for $38,000 and one demanding
$130,000 in payment for Cingular’s proposed counterclaims. In this situation, Kempner would not be able to measure
recovery in the aggregate on all claims, including those of Cingular, but would, in fact, have to measure its own recovery
against the amount that Cingular offered to Kempner in settlement. In other words, Kempner would have to measure
the $26,089.21 Kempner “recovered” through the judgment on its claims as the aggrieved, against the $38,000.00 that
Cingular offered in settlement of those claims. In that scenario, Kempner would not be able to recover fees under
Paragraph 35(b), because it would have recovered less than what had been proposed.

We see no material difference between the single letter Cingular sent, and two discrete letters for purposes of
applying Paragraph 35(b) here. The fact that Cingular chose to combine those proposals in one letter does not eliminate
the need to separately assess the offers and trial outcome on Kempner’s claims as the aggrieved.

°As an aside, it strikes the Court that an argument could have been made, by either party, that the other party’s
breach of Paragraph 35(a)’s obligations, in the strict sense, deprived that party of a meaningful opportunity to settle the
case early, which is the purpose underlying that Paragraph 35. Although Paragraph 35 establishes its own consequence
for such a breach when it makes Paragraph 35(a) a pre-requisite to claiming fees under Paragraph 35(b), there is an
argument that a breaching party should not be able to recover any fees on its own claims under either Paragraph 24 or
Paragraph 35 if it did not give the other party an opportunity to settle the case and mitigate the fee award. In other words,
as indicated, a party cannot shift fees under Paragraph 24 if it did not comply with Paragraph 35(a). This argument,
however, was not raised by the parties. And, neither party argues that the failure of the other party to comply with
Paragraph 35(a) should have any consequences outside Paragraph 35. Thus, the Court will not pursue that point further.

15