Tag: Blackhawk

Court Slashes $25K From $30K Attorneys Fees Request Where Plaintiff Loses Most Claims (ND IL)

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After winning one out of nine claims, the plaintiff – a recently fired loan officer – sued to recover about $30K in attorneys’ fees under the Illinois Wage Payment and Collection Act (IWPCA) from his former employer. 

Awarding the plaintiff just a fraction (just over $5K) of his claimed fees, the Northern District in Palar v. Blackhawk Bancorporation, 2014 WL 4087436 (N.D.Ill. 2014), provides a gloss on the factors a court considers when assessing attorneys’ fees.  The key principles:

 – the lodestar method (hours worked times the hourly rate) is the proper framework for analyzing fees in a IWPCA claim;

– a court may increase or decrease a lodestar figure to reflect multiple factors including (i) the complexity of the legal issues involved, (ii) the degree of success obtained, (iii) the public interest advanced by the suit);

– the key inquiry is whether the fees are reasonable in relation to the difficulty, stakes and outcome of the case;

– a court shouldn’t eyeball a fee request and chop it down based on arbitrary decisions though: the court must provide a clear, concise explanation for any fee reduction;

– an attorneys’ reasonable hourly rate should reflect the market rate: the rate lawyers of similar ability and experience charge in a given community;

– “market rate” is presumably the attorney’s actual billing rate for comparable work;

– if the attorney has no bills for comparable work to show the court, the attorney may instead (a) submit supporting affidavits from similarly experienced attorneys attesting to the rates they charge clients for similar work, or (b) submit evidence of fee awards the attorney has received in similar cases;

– once the fee-seeking attorney makes this market rate showing, the burden shifts to the opponent to demonstrate why the Court should lower the rate;

(**4-5).

The Court then set down the governing rules that apply when a plaintiff wins some claims and loses others; and how that impacts the fee award calculus:

– a party may not recover fees for hours spent on unsuccessful claims;

– where the successful and unsuccessful claims involve a common core of facts and are based on related legal theories, time spent on losing claims may be compensable: litigants should be penalized for pursuing multiple and alternative avenues of relief;

– when reducing a fee award based on certain unsuccessful claims, the court should identify specific hours to be eliminated;

– attorneys can recover fees incurred in litigating the fee award those fee petition fees must not be disproportionate to the fees spent on litigating the merits;

– the Court should consider whether hours spent on the fee request bear a rational relationship to the hours spent on the merits of the case;

– the Seventh Circuit recognizes 15 minutes per hour ratio of fee hours vs. merits hours as excessive (so 1 hour on fee issue for 4 hours on merits would be disproportionate).

(*5).

With these guideposts in mind,  the Court reduced plaintiff’s claimed fees by deducting (a) fees spent on unsuccessful and unrelated (to the IWPCA count) claims; and (b) fees incurred litigating the fees dispute. 

The combined reductions amounted to almost $25K out of the $30K plaintiff claimed in his fee petition.  The Court held that a $5K fee award on final compensation of about $1,500 was justified given the IWPCA’s mandatory fee provision and stated policy of deterring employers from refusing to pay separated employees’ wages.

Afterwords:

There is no precise formula governing fee awards.   The court will consider the amount claimed versus the fees sought and whether they are congruent with those figures. 

This case also illustrates that a court will look at how many claims the plaintiff won and lost in the same case when fashioning a fee award.

Rescission Based On Mistake and Fraud: An IL Case Note

Blackhawk State Bank, Inc. v. Al’s Motorhome and Trailer Sales, Inc., 2013 IL App (2d) 130316-U (2013), illustrates in stark relief the perils of entering high-dollar “handshake” real estate contracts.  

The plaintiff bank sued to foreclose on farm land after a borrower (the “Seller”) defaulted on a multi-million dollar loan.  The loan was used to fund the Seller’s mobile home business. 

But before the bank’s foreclosure suit, the Seller “sold” the property to defendant for $825,000 as part of a handshake agreement.  The Seller never told defendant about the bank’s nearly $7M mortgage on the land and the defendant never asked. 

The defendant also never ordered a title search and didn’t check tax records either.  He took the Seller’s word on all aspects of the deal and no written contract was prepared to document it.

Defendant paid the Seller $825,000 to buy the farm land in two installments.  But instead of crediting defendant’s payments to the purchase price, the Seller – used the funds to pay down the mortgage held by the plaintiff.

When defendant learned of the bank’s mortgage on the property, he sought the return of his first $425,000 payment.  The bank said no and filed a foreclosure suit because the underlying loan was by that time in default. 

The defendant counter-sued for unjust enrichment and rescission based on mistake and fraud.  The trial court dismissed the defendant’s rescission claims on the bank’s motion to dismiss and on the unjust enrichment claim, entered judgment for the bank after a bench trial. Defendant appealed.

The defendant’s unjust enrichment claim failed because he couldn’t show that he had a superior right over the bank to the $425,000 in purchase funds. 

To prove unjust enrichment, a plaintiff must show that the defendant unjustly retained a benefit to plaintiff’s detriment and that defendant’s retention of the benefit violates fundamental principles of justice, equity and good conscience. 

In situations where the benefit flows from a third party, unjust enrichment applies where the plaintiff has a better claim to the benefit than the defendant.  ¶¶ 15-18.

The Court found that the bank had a “better claim” to the sale proceeds than did defendant.  This was because the bank had no knowledge of defendant’s handshake deal with the Seller and the bank was owed millions of dollars from the bankrupt Seller. 

The Court also focused on defendant’s own negligence in not performing any due diligence concerning the property and exhibiting a “lax approach” to a high-dollar transaction with a complete stranger seller.  ¶¶ 30-33.

The court also upheld the dismissal of defendant’s rescission claims.  To state a claim for rescission premised on mistake, a plaintiff must show: (1) a serious and material mistake, (2) the mistake is so important that enforcement of the contract would be unconscionable; (3) the mistake occurred even though the party claiming rescission exercised due care; and (4) rescission can place the parties in the status quo.   ¶ 44.

The Court rejected defendant’s rescission-due-to-mistake arguments because defendant couldn’t establish that he exercised due care in the transaction.

The defendant land buyer failed to perform even rudimentary research on the property that would have shown the bank’s multi-million dollar mortgage lien.  This precluded a finding that defendant made a mistake that merited undoing the contract. ¶¶ 45-47.

The defendant’s fraud-based rescission claim – based on the Seller falsely telling defendant he owned the property free and clear – also failed.  The defendant couldn’t establish that he reasonably relied on the Seller’s statement.  Since defendant entered into a significant real estate transaction with (figuratively) eyes closed, he couldn’t plead or prove the reasonable reliance element for rescission based on fraud. ¶¶ 48-49.

Afterwords: Blackhawk shows how critical the “due care” element is for both a valid unjust enrichment and rescission claim.  If a litigant is unable to show that he exercised reasonable care in a transaction, his chances of undoing a transaction (rescission) or getting monies returned to him (via unjust enrichment) are slim to none.