Court Opinion

ID: 770750
Source: CourtListenerOpinion
Date Created: 2012-04-18 10:39:28+00
Date Added: 2024-06-11T17:55:52.802331
License: Public Domain

229 F.3d 586 (7th Cir. 2000)
Arnold R. Rissman, Plaintiff-Appellee,v.Owen Randall Rissman  and Robert Dunn Glick, Defendants-Appellants.
No. 00-2141
In the  United States Court of Appeals  For the Seventh Circuit
Submitted September 11, 2000Decided October 2, 2000

Appeal from the United States District Court  for the Northern District of Illinois, Eastern Division.  No. 98 C 3656--Blanche M. Manning, Judge.
Before Bauer, Easterbrook, and Rovner, Circuit Judges.
Easterbrook, Circuit Judge.

1
Earlier this year we  held that defendants Randall Rissman and Robert  Glick did not defraud Arnold Rissman when Arnold  sold his stock in Tiger Electronics. Rissman v.  Rissman, 213 F.3d 381 (7th Cir. 2000). Arnold's  claim under the federal securities laws is  foreclosed, we held, by representations and  warranties Arnold made as part of the sale, and  all of his other theories of liability are barred  by a release included in the contract. Arnold  contended that the contract itself (and hence the  warranties and release) is the result of duress  and hence invalid, but this contention too was  unsuccessful.

2
After prevailing in the district court, Randall  and Glick sought an award of attorneys' fees  under para.21 of the contract, which provides

3
If any dispute among the parties hereto should  result in any legal action or proceeding, the  prevailing party or parties shall be reimbursed  by the losing party or parties for all reasonable  costs and attorneys' fees incurred in connection  with such action or proceeding, including, but  not limited to, attorneys' fees incurred in the  course of appeal.

4
The district court declined to order Arnold to  pay the defendants' legal fees, giving two  reasons: first, that defendants' failure to seek  these fees by filing a counterclaim against  Arnold deprived the district court of  "jurisdiction" to award them; second, that  neither Randall nor Glick is a "party" to  para.21. The first ground relies heavily on  Caremark, Inc. v. Coram Healthcare Corp., 924 F.  Supp. 891 (N.D. Ill. 1996), and Fed. R. Civ. P.  54(d)(2)(A); the second ground relies on the fact  that neither Randall nor Glick signed the full  contract in his individual capacity.

5
Rule 52(d)(2)(A) says that "[c]laims for  attorneys' fees and related nontaxable expenses  shall be made by motion unless the substantive  law governing the action provides for the  recovery of such fees as an element of damages to  be proved at trial." The Committee Note to this  language (which was adopted in 1993) states that  attorneys' fees provided by contract usually are  "an element of damages", from which Caremark  concluded that they should be demanded in an  appropriate pleading--a counterclaim, when the  party seeking fees is the defendant. What lack of  a counterclaim has to do with jurisdiction is a  mystery, however. Jurisdiction in this case  depends on 28 U.S.C. sec.1331, because one of  Arnold's claims arose under the federal  securities laws, and related state-law claims  (such as a demand for attorneys' fees under  para.21) are within the supplemental  jurisdiction. 28 U.S.C. sec.1367. If defendants  needed to file a counterclaim, then the district  court had ample authority to permit its filing,  see Fed. R. Civ. P. 13(f), 15(d), or to treat the  issue as if it had been raised in a pleading, see  Rule 15(b).

6
What Rule 52(d)(2)(A) requires is that a party  seeking legal fees among the items of damages--  for example, fees that were incurred by the  plaintiff before the litigation begins, as often  happens in insurance, defamation, and malicious  prosecution cases--must raise its claim in time  for submission to the trier of fact, which means  before the trial rather than after. Fees for work  done during the case should be sought after  decision, when the prevailing party has been  identified and it is possible to quantify the  award. So Capital Asset Research Corp. v.  Finnegan, 216 F.3d 1268 (11th Cir. 2000), holds,  in the course of disapproving Caremark. The  eleventh circuit added that the proper time to  seek fees is at all events unrelated to the  district court's jurisdiction. We agree with  Capital Asset Research Corp. and conclude that  the defendants are entitled to a decision on the  merits of their request for attorneys' fees.

7
Glick signed the contract exclusively in his  capacity as trustee of the Tiger Stock Trust; he  was sued exclusively in his individual capacity  and therefore cannot take advantage of para.21.  Randall, however, is a party to the contract.  Most of the contract entails promises by and to  persons other than Randall (for Arnold sold his  Tiger stock to a trust for the benefit of  Randall's children, rather than directly to  Randall). Still, Randall made and received  promises in para.8(d), which dissolves the  shareholders' agreement between the brothers, and  para.12, which provides for mutual releases. The  district court recognized that Randall thus is a  party to the contract but held that he is not a  party to para.21 and therefore may not recover  legal fees. This approach is puzzling; no one is  separately a "party to para.21." Paragraph 21  provides reimbursement to parties injured by  disputes involving other portions of the  contract.

8
This would be clear enough if Randall had been  the one to sue on released claims. Arnold would  have been entitled to collect attorneys' fees  under para.21 for Randall's violation of para.12,  even though para.21 speaks of disputes among "the  parties hereto" and Randall is not a "party to  para.21." The best understanding of "parties  hereto" in para.21 is that the phrase means one  who is a party to the promises in the paragraph  sought to be enforced. Randall made and received  promises in para.8(d) and para.12; if he had  broken any of these, Arnold could have recovered  his costs of defense. Just so when Arnold was the  one who broke his promise by suing on released  claims. Arnold invites us to read para.21 with a  beady eye in order to maximize the scope of the  American Rule, under which parties bear their own  legal expenses. But courts do not bend over  backward to make it cheap for parties to renege  on settlements and releases. Cf. Jannotta v.  Subway Sandwich Shops, Inc., No. 99-1975 (7th  Cir. Aug. 29, 2000), (discussing the  application of attorneys'-fees provisions in  contracts under Illinois law). People reach  settlements in large measure to buy peace.  Randall has not enjoyed the repose for which he  bargained in para.12, and this might have been an  appropriate case for an award of legal fees  independent of para.21, had Randall or Glick made  such a request.

9
Randall is a party to para.12, the paragraph  Arnold violated by suing on released claims, and  thus is a "party hereto" for purposes of para.21.  He is a "prevailing party" in the suit and  therefore "shall be reimbursed by [Arnold] for  all reasonable costs and attorneys' fees incurred  in" the suit--including both appeals. The  decision of the district court is vacated, and  the matter is remanded for calculation and award  of Randall's "reasonable costs and attorneys'  fees".