Seventh Circuit Summary Judgment Practice: the ‘Production’ and ‘Persuasion’ Burdens

The Seventh Circuit remarked that parties who respond to a summary judgment motion “often misconceive what is required of them” in Modrowski v. Pigatto, 2013 WL 1395696 (7th Cir. 2013).  The case amply illustrates that summary judgment misconceptions can have unfortunate consequences.

In Modrowski, a former employee sued two property management firms under the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030, after he was fired and  locked out of his personal Yahoo email account.

The defendants moved for summary judgment, arguing that plaintiff produced no evidence that he sustained at least $5,000 in monetary loss as required by the CFAA.  18 U.S.C. § 1030(c)(4)A)(i)(I); (g).  The District court agreed and granted defendants’ summary judgment motion.

The Seventh Circuit rejected plaintiff’s argument that the defendants failed to meet their summary judgment burden of production.  The Court noted that Federal Rule of Civil Procedure 56 imposes an initial burden of production on the summary judgment movant (here, defendants) to show the court why a trial isn’t necessary. 

The (summary judgment) moving party can meet the initial burden by either (1) producing affirmative evidence that negates an essential element of the plaintiff’s claim; or (2) asserting that the plaintiff failed to produce sufficient evidence to establish an essential element of his claim.  

The defendants opted for the latter, “trickier” path – pointing out a lack of evidence in support of plaintiff’s CFAA minimum monetary loss ($5,000) element.  Once the defendants made this initial showing, the burden shifted back to the plaintiff to point to admissible record evidence that established the $5,000 loss threshold.

Question: How does a summary judgment respondent do this? 

Answer:  The nonmovant doesn’t have to depose her own witnesses or produce evidence in a form that would be admissible at trial, but she must at least produce affidavits, deposition excerpts, interrogatory answers, or record admissions to demonstrate that there is evidence upon which a jury could potentially find in the nonmovant’s favor on the challenged element. 

The plaintiff in Modrowski miscalculated his summary judgment burden.  Instead of citing evidence to support his claim that he suffered at least $5,000 in monetary loss, plaintiff opted to attack perceived flaws in defendants’ summary judgment motion.  Plaintiff argued that defendants failed to file a Local Rule 56.1 Statement, failed to cite to the evidentiary record in support of their factual statements and didn’t support their arguments with supporting case law.  (p. 4). 

Plaintiff claimed that these motion defects were so major, his burden to produce evidence on his CFAA loss element didn’t trigger.

The Seventh Circuit disagreed.  On the defendants’ failure to file a Local Rule 56.1 Statement, the Court said that while a failure to provide the Statement can result in the denial of a summary judgment motion, the district court has wide discretion whether to require strict compliance with local court rules and can freely overlook a rules violation.

Substantively, the Court emphasized that the plaintiff bore the burden of persuasion on the $5,000 damages element of a colorable CFAA claim.  Because of this, the plaintiff had to produce admissible evidence in support of this element to survive summary judgment. 

The court even gave examples of the type of evidence plaintiff could have offered such as (1) affidavits from prospective business partners who were unable to contact plaintiff after defendants hijacked his Yahoo account, (2) receipts and expense documents relating to amounts paid by plaintiff to replicate the lost emails and billing records, or an (3) affidavit signed by plaintiff attesting to the number of hours he spent trying to recover his erased emails.  

On this last point, the Court noted that self-serving affidavits in response to summary judgment are proper if they are fact-specific and based on personal knowledge. 

Take-aways: Summary judgment is the “put up or shut up” moment of the lawsuit and the time in which the respondent must marshal admissible evidence to prove his case.  

Modrowski‘s clear lessons are that if you have the burden of proof on an issue at trial and you’re served a summary judgment motion, you must do more than point out facial defects in your opponent’s motion (like a failure to file a LR 56.1(a) statement).  You must also do more than simply rely on your pleadings.  Instead, you should comb the record for evidence in support of each element of your cause of action.  

 

 

Collateral Estoppel, Law Of the Case and Section 2-1401 Petitions: Illinois Basics

1600 Museum Park, LLC v. Williams, 2012 WL 6955718, chronicles an aborted condominium purchase and its ensuing litigation.  A condo owner and two purchasers signed a contract (Contract) and an approx. $25K promissory note in connection with a condo sale.  But only one of the buyers signed the contract and note.  The deal fell through and the defendants sent a written termination notice to the plaintiff.

Plaintiff sued to confess judgment against both defendants and the trial court entered judgment against both defendants jointly and severally for over $30K.  Defendants appealed. 

The First District affirmed the money judgment against the defendant that signed the contract and note but reversed as to the buyer that didn’t sign either document. 

Collateral Estoppel and Law of the Case Doctrines

The Appellate Court found that the trial court erred in its application of collateral estoppel. 

Collateral estoppel is designed to prevent the relitigation of issues that have already been resolved in earlier actions and specifically contemplates two separate, and consecutive cases.  ¶¶ 13-14. 

Collateral estoppel applies where (1) there is a final, valid judgment on the merits in a prior suit; (2) the issue in the prior suit is identical to the issue in the current case; and (3) the party against whom estoppel is asserted was a party to, or in privity with a party to the prior lawsuit.  ¶ 15. 

The Court held that since there was no prior lawsuit – there is only one case involved – collateral estoppel didn’t apply.  In addition, the Court found that the  ex parte confession of judgment entered against defendants was, by its nature, not a final judgment on the merits.  Id., ¶ 17. 

The First District also rejected plaintiff’s law-of-the-case (“LOC”) argument. 

LOC “bars relitigation of an issue previously decided in the same case.”  The rule applies where an appellate court decides an issue of law and then remands the case to the trial court and is designed to prevent a second appeals court from contradicting the first appellate court on an issue of law. 

The Court found that since this case did not involve a prior appellate ruling and there was no remand to a trial court, the law-of-the-case rule didn’t apply.  

Section 2-1401 Petitions

Code Section 2-1401 petition (735 ILCS 5/2-1401), which governs motions to vacate a judgment older than 30 days.  ¶ 20.

A Section 2-1401 petition establishes (1) a meritorious defense; (2) due diligence in discovering the defense; and (3) due diligence in bringing the petition. (¶¶ 19-20)

Promissory Note Liability and Contract Cancellation

The purchasers argued that since only one of them signed the Note, it wasn’t enforceable on either of them.  The First District disagreed and held the Note’s text didn’t require both purchasers’ signatures for the Note’s enforceability. ¶¶ 23-24. 

The defendants other argument was that since they cancelled the Contract, the Note was also necessarily cancelled.  The Court dismissed this noting that the Contract gave defendants only seven days to terminate the contract.  Since the defendants’ sent their termination letter more than four months after the Contract was signed, the termination was untimely.  As a result, the Contract was never cancelled and the Note was enforceable (but only as to the signing defendant).  (¶¶ 26-27).   

Take-aways:

– Real estate contract termination deadlines will be enforced as written;

– Collateral estoppel and law-of-the-case are construed narrowly and only apply where there are at least two separate, successive cases (for collateral estoppel) or where there is an appeals court decision on a legal issue and subsequent remand to a trial court (for law-of-the-case);

– A promissory note will be enforced to the letter and the court will not engraft conditions onto a clearly drafted note.  

Recovering Litigation Costs in Illinois State Court – What About Westlaw Research?

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In a small dollar case, a plaintiff’s recoverable “costs” typically include filing fees and service fees. See Household Int’l v. Liberty Mutual, 195 Ill. 2d 578 (2001).  This amount is usually negligible (usually less than $500) and not worth fighting over. However, where a fee-shifting provision in a contract provides for prevailing party “litigation expenses” or “costs of collection” (as many commercial contracts do) and the case drags on one or more years, the litigation costs can be substantial.

In Illinois, “[c]osts are allowances in the nature of incidental damages awarded by law to reimburse the prevailing party, to some extent at least, for the expenses necessarily incurred in the assertion of his rights in court.” Galowich v. Beech Aircraft Corp., 92 Ill. 2d 157, 165-66 (1982).

Code sections 5-108 and 5-109 – allow the a winning party to recover costs. The First District, in  analyzing a Federal Truth in Lending claim, held that any expenses paid to a third party including expert witness expenses, special process server expenses, deposition expenses, filing and messenger fees and computerized legal research costs can all be recovered by the prevailing plaintiff. Johnson v. Thomas, 342 Ill.App.3d 382, 401-402 (1st Dist. 2003).

By contrast, “overhead expenses” – costs a lawyer incurs independent of a specific case – are generally not recoverable.  Overhead costs include: telephone charges, in-house delivery charges, in-house photocopying, check processing, newspaper subscriptions, and in-house paralegal and secretarial assistance. Id. at 401-402.

The reason: overhead costs, at least in theory, are already reflected in an attorney’s hourly rate. See Harris Trust & Savings Bank, 230 Ill. App. 3d 591, 599 (1st Dist. 1992).

Whether a prevailing party can recover for computerized legal research expenses will turn on the winning side’s billing method.  Where the attorney’s fee is contingent or fixed – computer research expenses are not allowed.  The theory being that the computer research benefitted the contingent fee lawyer by reducing his research time and increasing his efficiency.  Because of this, the contingent lawyer should not be able to shift the computer research costs to a losing party. 

In contrast, for an attorney charging by the hour, the saved time resulting from computer research actually works against him – he will bill for fewer hours than if he researched the “old fashioned way” (does anyone remember Shepardizing?). 

With hourly billing, “the attorney should not be required to absorb the additional expense engendered by computer research fees in light of the diminished billable hours that result from such computer assistance”. Id.

Johnson does caution that computer research expenses are properly denominated “fees”; not costs. This is because computer research is part of the attorney’s overall effort in prosecuting or defending his client’s case. Id. So, if the statute or contract allows for recovery of fees and costs, computerized research expenses will be recoverable.  Conversely, if the contract only provides for winning party “costs”, computer research charges can’t be recovered under Johnson‘s rationale.

The take-away: I’ve been involved in more than a few multi-year cases where the litigation expenses (aside from the attorneys’ fees) exceeded $10,000.  As a consequence, a working knowledge of what litigation expenses an Illinois court will and will not permit is essential for practitioners engaged in protracted commercial litigation.