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.  

 

Recovering Litigation Costs in Federal Court (Northern District of Illinois)

Federal court litigants in Illinois should be versed in 28 U.S.C. §1920, FRCP 54 and Northern District Local Rule 54.1 – both of which govern recoverable costs and the procedures for recovering those costs in Federal court.  Broadly, the prevailing party has 30 days from date of judgment to file a Bill of Costs.  Failing that, all of his costs – except for “clerk” costs (28 U.S.C. § 1920) – are waived. LR 54.1(a).

FRCP 54 creates a strong presumption that the prevailing party may recover reasonable and necessary litigation costs from the losing party.  Huerta v. Village of Carol Stream, 2013 WL 427140 (N.D.Ill. 2013).  28 U.S.C. §1920 provides that a winning party can recover: (1) clerk and marshal fees [filing and service fees, e.g.]; (2) fees for transcripts necessarily obtained for use in a case; (3) printing and witness fees; (4) exemplification/certification costs for materials necessarily used in a case; (5) docket fees; and (6) court-appointed experts and interpreters’ fees.  Id.  The prevailing party has the burden of showing that the requested costs are necessary and reasonable and once that burden is met, the losing party must show that the costs are not appropriate.  Beamon v. Marshall & Isley Trust Co., 411 F.3d 854 (7th Cir. 2005). 

A prevailing Federal court party’s private process server fees are also recoverable, so long as they don’t exceed the applicable marshall’s fees ($55/hour pursuant to 28 C.F.R. § 0.0114(a)(3); see Huerta, 2013 WL 427140, *3.  As for deposition costs, whether transcript costs are allowed depends on whether it was reasonably and necessarily “related to an issue that was present in the case at the time the deposition was taken.”  Independence Tube Corp. v. Copperweld Corp., 543 F.Supp. 706, 718 (N.D.Ill. 1982).  If so, the victor gets the cost of the original transcript, one copy and an additional copy – so long as the additional copy is tendered to the court.  LR 54.1(b).  The prevailing party can recover up to $3.65 per deposition page.  Huerta, at *3; citing Maximum Transcript Rates, http://www.ilnd.uscourts.gov/home/clerksoffice/CLERKS_OFFICE/CrtReporter/trnscrpt.htm

 However, shipping and handling costs are “ordinary business expenses” and not recoverable.  Bogan v. City of Chi., 2010 U.S.Dist. LEXIS 64187 (N.D.Ill. 2010).

The take-away:  If litigating in Federal court, the recent Huerta case provides a lucid and detailed treatment of allowable and dis-allowable litigation costs.  If presenting or opposing a Bill of Costs, this case and the applicable rules it references should prove useful in supporting your arguments.  Also, effective, May 23, 2013, LR 54.1(b) was amended to provide that court reporter appearance fees may be awarded but those rates shall not exceed the rates published on the Court website.  

References:

Huerta opinion: http://www.abisoft.org/opinions/2013/1_09-cv-01492_20130204.pdf

Local Rule 54.1http://www.ilnd.uscourts.gov/legal/newrules/New00039.htm

Local Rule 54 (amendment May 23, 2013) http://www.ilnd.uscourts.gov/home/clerksoffice/rules/admin/pdf-orders/General%20Order%2013-0011%20-%20Local%20Rule%2054.1.pdf

FRCP 54: http://www.law.cornell.edu/rules/frcp/rule_54

28 U.S.C. §1920: http://www.law.cornell.edu/uscode/text/28/1920