Tag: affirmative defense

‘Winning’ Failure To Mitigate Defense Doesn’t Confer ‘Prevailing Party’ Status On Restaurant Tenant In Lease Dispute Att’y Fee Hearing Dispute

Alecta v. BAB Operations, Inc., 2015 IL App (1st) 132916-U, a case I spotlighted earlier for its analysis of lease assignment liability rules, also provides a valuable discussion of contractual attorneys’ fees provisions basics. (See case’s bullet-points on lease assignment issues here: http://paulporvaznik.com/bagel-shop-successor-tenant-hit-for-rent-damages-and-attorneys-fees-in-commercial-lease-case-il-first-dist/8491)

The court affirmed a $70k-plus fee award for the landlord even though its damages were reduced by $20k for failing to mitigate damages. Code Section 9-213.1 (of the Illinois eviction or forcible statute) obligates a suing lessor to mitigate  its damages.  This means the landlord can’t sit back while rent payments become due and pile up without making measurable efforts to re-rent the premises.

On the attorneys’ fees issue, the law in Illinois is that the unsuccessful party usually has to pay his own fees unless there is a contract provision regarding attorneys’ fees or an applicable statute allows for fees.  In addition, a clearly worded fee-shifting clause should be enforced as written in favor of the prevailing party.

Q1: Who Is A Prevailing Party?

A: The one who is successful on a significant issue and achieves some benefit in bringing suit.  But, a litigant doesn’t have to succeed on all claims to be considered a prevailing party.

Where a case involves multiple claims and both parties win and lose on different claims, it may be that neither side is the prevailing party.

Q2: What Does Fee Petitioner Have To Show?

A:  The party petitioning for attorneys’ fees has the burden of presenting sufficient evidence to the trial court and a fee petition must specify (i) services performed, (ii) who performed them, (iii) time expended on the services, and (iv) the hourly rate charged by counsel;

Other fees factors for the trial court to consider include (a) skill and standing of attorneys, (b) nature of the case, (c) complexity of the issues, (d) importance of the case, and (e) degree of responsibility required to prosecute or defend a case.

A court considering a fee petition can also rely on its own experience.

¶¶ 72-74.

Here, the defendant lease assignee only prevailed on part of its failure to mitigate defense and didn’t file or win any counterclaims.  An affirmative defense differs from a counterclaim in that the former seeks to defeat a plaintiff’s claim while the latter (counterclaim) seeks affirmative relief from the plaintiff.  See ,e.g. Nadhir v. Salomon, 2011 IL App (1st) 110851, ¶¶34 – 38 (A “set-off” is a counterclaim; not an affirmative defense since the set-off defendant/counter-plaintiff seeks affirmative monetary relief against the plaintiff/counter-defendant.)

The court held that a $20,000 reduction off an over $80k  money damage verdict isn’t enough of a damages cut to make the defendant a prevailing party on the mitigation issue.  As a result, the trial court was within its discretion in awarding 80% of the plaintiff’s claimed fees.  Since the trial court found that the plaintiff prevailed on approximately 80% of its case (based on the partial reduction for failure to mitigate), the court’s fee award of over $70K was upheld.

Afterwords:

The case gives a good refresher on fee-shifting factors an Illinois court considers as well as further refinement of who is/who isn’t a prevailing party in litigation.

An interesting question is what would have happened if the tenant filed a counterclaim (as opposed to affirmative defense) and was able to obtain a $20K damages reduction on a set-off theory.  I don’t know if it would have made a difference here since $20K off a $80K money award likely isn’t big enough to merit “prevailing party” status.

 

Square Footage Discrepancy Not Material Term in Chicago Office Lease Dispute

smart-office-furniture-image-2(photo credit: www.smartofficefurniture.ca)

 123 Madison Street Corp. v. Power & Dixon, 2013 IL App (1st) 122795-U examines a commercial lease dispute involving a law firm tenant.

The facts: in 2002, plaintiff’s predecessor (the former office building owner) entered into lease with defendant law firm. Over the next few years, the Lease was amended three times to cover three different office suites – each bigger than the last and each requiring increased rent payments. Tenant defaulted and the building’s management company filed suit. Tenant vacated and the parties went to trial on money damages. Over the course of several hearings, and after the court substituted in the current building owner as the plaintiff, the trial court entered judgment for landlord, awarding nearly $70,000 in back rent plus attorneys’ fees over over $12,000. The Tenant law firm appealed.

Held: Judgment for landlord affirmed.

Reasoning: The appeals court rejected the law firms three key arguments: (1) that there was no privity of contract between plaintiff and tenant; (2) plaintiff materially breached the lease by renting less space than called for in the lease and over-charging the tenant; and (3) the trial court erroneously found that tenant was leasing the office suite for a “flat-rate” instead of leasing for a specific square footage amount. (¶¶ 45-56).

On the privity issue (privity doctrine basically requires that a party have some contractual relationship with the party being sued), the Court noted that the plaintiff wasn’t the lessor.  

The original plaintiff was the former owner’s management company and the substituted plaintiff was the building’s current owner.

The Court held that privity was a question of standing (only a party to a contract has standing to sue on it) and an affirmative defense that had to be pled and proved by the tenant.  Since the tenant failed to raise the privity/lack of standing defense by affirmative defense or motion to dismiss, the tenant didn’t meet his burden of proving the plaintiff’s lack of standing to sue. (¶¶ 50-51).

Tenant also argued that the landlord’s material breach precluded it from suing to enforce the lease.  The tenant claimed that while the lease provided for nearly 4,000 square feet of rentable space, the landlord was only leasing under 3,000 square feet.  The tenant claimed it overpaid the landlord nearly $100,000 for the shortened space.

The court rejected this argument stating that there was no evidence that the precise number of square feet of rentable space was a material term.  One of the law firm’s principals even testified that the square footage wasn’t a make-or-break issue:  the firm simply wanted “more space” than the prior suite.

 The Court also affirmed the trial court’s finding that the tenant was agreeing to pay a “flat rate” rather than a specific price per square foot.  (¶¶ 52-55).

 Take-aways: I’ve represented commercial landlords where the lease will have changed hands multiple times from lease signing to the date of trial.  When representing a property manager whose name differs from the one on the lease, I move to admit in evidence any management agreement between the owner/lessor and the property manager.

Another case lesson is that a lease square footage discrepancy will only be considered a material term if the lease says so.