Phoenix Bond & Indemnity Co. et al v. Bridge et al

Filing 921

MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 1/2/2012. (mk)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

PHOENIX BOND & INDEM. CO., et al.,

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Plaintiffs,
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vs.
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JOHN BRIDGE, et al.,
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Defendants.
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------------------------------------------------------------- )
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BCS SERVS., INC., et al.,
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Plaintiffs,
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vs.
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HEARTWOOD 88, LLC, et al.,
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Defendants.
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Case No. 05 C 4095
consolidated with
Case No. 07 C 1367

MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
The Court has considered the parties’ submissions regarding the judgment to be
entered based on the claims decided by the jury at trial. The issues before the Court
are: (1) whether and to what extent the defendants who lost at trial should get a setoff
based on amounts plaintiffs received from other defendants in settlement; (2) whether
the judgment should include the punitive damages plaintiffs were awarded on their
state-law claims, in light of the fact that their compensatory damages awards under

RICO are subject to trebling; (3) whether the Court should make a finding under Rule
54(b) permitting an appeal even though the claims against the Wheeler-Dealer
defendants remain to be adjudicated; and (4) whether and when post-judgment interest
begins to accrue.
Discussion
1.

The “one satisfaction” rule applies to plaintiffs’ federal RICO claims.

Under this rule, a plaintiff is entitled to only one satisfaction for a single injury. This rule
“operates to prevent double recovery, or the overcompensation of a plaintiff for a single
injury.” BUC Int’l Corp. v. Int’l Yacht Council Ltd., 517 F.3d 1271, 1277 (11th Cir. 2008).
Under the one-satisfaction rule, amounts received in settlement from an alleged
tortfeasor are credited against judgments for the same injury against non-settling
tortfeasors. Id. at 1276; Singer v. Olympia Brewing Co., 878 F.2d 596, 600 (2d Cir.
1989). Non-settling defendants “are entitled to a reduction in the judgment against them
by the amounts received by [plaintiff] in settlement of claims for the same injury.” BUC
Int’l Corp., 517 F.3d at 1278; Singer, 878 F.2d at 600 (under the one-satisfaction rule,
“when a plaintiff receives a settlement from one defendant, a nonsettling defendant is
entitled to a credit of the settlement amount against any judgment obtained by the
plaintiff against the nonsettling defendant as long as both the settlement and judgment
represent common damages.”).
Plaintiffs’ RICO claims involved three distinct “enterprises.” The damages that
plaintiffs were awarded based on injury they sustained at the hands of a defendant that
participated in a particular enterprise do not represent the same injury as that caused by

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any other enterprise.1 On the other hand, as to multiple defendants that were claimed
to have participated in the same RICO enterprise, there was a single compensatory
damages award that covered both the RICO claims and the state-law claims against
those defendants. These compensatory damages all arose from the same course of
conduct and thus arise from the same injury.
The BG defendants were claimed to be part of the “Gray Enterprise.” Because it
does not appear that plaintiffs received any amounts in settlement from any other
defendants who were claimed to have participated in that enterprise, the BG defendants
are not entitled to any setoff based on any settlements obtained by plaintiffs.
By contrast, the injury represented by the RICO damage award against the Sass
defendants is the same injury as that caused by other settling defendants in the “Sabre
Enterprise,” the enterprise in which the Sass defendants were claimed to have
participated. Thus the one satisfaction rule entitles the Sass defendants to a setoff
relating to amounts paid in settlement by the other Sabre Enterprise defendants.
Plaintiffs contend that there should be no setoff because the settlements with the
other defendants covered matters beyond RICO compensatory damages, specifically,
the state-law tortious interference claims, punitive damages, and RICO attorney’s fees.
Because plaintiffs suffered a single injury at the hands of the Sabre Enterprise, the fact
that the settlements with those defendants may have involved both the RICO and statelaw claims is not a basis to decline a setoff.
1

The Court rejects the defendants’ contention that the damages awarded against
them in effect hold a given defendant liable for the conduct of others. The Court
previously rejected this (or an indistinguishable) argument when defendants raised it
before and during the trial and need not repeat here its basis for doing so.
3

With regard to attorney’s fees, it is true that the settling defendants may well
have settled based in whole or in part on their potential exposure to a statutory fee
award. But this is not a separate injury; it stems from the same RICO violation.
Because any attorney’s fee award after a trial would not have been individualized on a
defendant-by-defendant basis among the Sabre defendants, this factor affects only the
amount against which any setoff should be made. Specifically, the setoff should be
applied against the total amount of money to which plaintiffs are entitled to recover from
the Sass defendants on the RICO claim, namely, the total damages (including trebling)
plus any award of attorney’s fees and expenses. Determining the setoff in this way
furthers the one satisfaction rule’s policy of preventing double payment.
The fact that the settling defendants were also resolving their exposure to
punitive damages requires somewhat different treatment. Unlike compensatory
damages, which were essentially determined on an enterprise-by-enterprise basis,
punitive damages are individualized on a defendant-by-defendant basis. It is
reasonable to assume that if the settling defendants had gone to trial, the overall
amount of punitive damages assessed by the jury would have been greater than the
overall amount that it assessed against the defendants who actually went to trial. In
addition, any given settling defendant’s punitive damages exposure might have been
greater or lesser than that of the defendants who proceeded to trial.
Determining how to factor the punitive damages issue into the amount of setoff is
no simple matter. Plaintiffs contend that because the settlements covered all types of
exposure, there should be no setoff. Defendants contend that because the settlements
did not specify what proportions of a settlement payment covered what aspects of the
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settling defendant’s exposure, then the entire settlement payment should be set off.
The Court is unpersuaded that this is simply a matter of the allocation of the burden of
proof, as each side essentially argues.2 Rather, it involves adherence to the principles
underlying the one satisfaction rule, which is a rule of equity. See BG Defs.’ Resp. at 4
(citing authorities). Though it is equitable to give the Sass defendants a setoff for
amounts paid to settle exposure for which they would have been jointly liable –
compensatory damages and attorney’s fees – equity does not entitle them to a setoff of
amounts paid to settle punitive damages exposure, for which each defendant would
have been separately liable. In addition, punitive damages do not represent “common
damages,” Singer, 878 F.2d at 600, given their assessment on a defendant-bydefendant basis.
Neither plaintiffs nor the Sass defendants has offered a proposal for how the
settlements should be allocated if the Court did not adopt the all-or-nothing approach.
The Court will direct them to do so (separately if necessary) in a joint submission to be
filed by no later than January 9, 2012. Each side’s proposal should take the Court’s
rulings in this order as a given and should address how the setoff should be performed
in light of those rulings. The Court also expects each side to provide a reasoned
justification for its particular proposal regarding how to take account of the punitive

2

Defendants make the point that they did not have the opportunity to review the other
defendants’ settlement agreements before they were concluded, but the fact is that no
legal rule entitled them to do so (nor did they ask the Court to order this). Federal law
provides no common law right of contribution, and the Illinois Contribution Act, which
gives a non-settling defendant an opportunity to object to a settling defendant’s request
for a “good faith” finding insulating it from further liability, see 140 ILCS 100/2(c) & (d),
does not apply to intentional torts. See Gerill Corp. v. Jack L. Hargrove Builders, Inc.,
128 Ill. 2d 179, 206, 538 N.E.2d 530, 542 (1989).
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damages issue as addressed in this decision.
The Court’s conclusion that the setoff should be applied against a total that
includes not-yet-assessed attorney’s fees gives rise to a logistical problem, because it
will be some time before the Court makes a fee award (assuming the judgment survives
defendants’ post-trial motions). Plaintiffs are entitled to a judgment now due to the fact
that the amount the jury awarded declines in value every day that interest is not
accruing – and both sides appear to agree that interest is not yet accruing. The Court
directs plaintiffs and the Sass defendants to make proposals regarding how to handle
this. Their respective proposals should be included in the January 9 submission.
2.

Defendants argue that plaintiffs are not entitled to a judgment that

cumulates their trebled damages under RICO and the punitive damages awarded on
their tortious interference claim. The Court disagrees.
Defendants contend that trebling under RICO is a form of punitive damages,
citing a Third Circuit case and Liquid Air Corp. v. Rogers, 834 F.2d 1297 (7th Cir. 1987).
They do not cite Liquid Air correctly on this point.
The Seventh Circuit has drawn a distinction between “punitive damages” and “a
statutory penalty such as treble damages under the antitrust laws.” Jackson v.
Resolution GGF Oy, 136 F.3d 1130, 1133 (7th Cir. 1998). Congress modeled RICO’s
civil action provision on the civil action provision of the antitrust laws. Holmes v.
Securities Investor Protection Corp., 503 U.S. 258, 267 (1992). In Liquid Air, the
Seventh Circuit stated that “[a]lthough there is some sense in which RICO treble
damages are punitive, they are largely compensatory in the special sense that they
ensure that wrongs will be redressed in light of the recognized difficulties of itemizing
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damages.” Liquid Air Corp., 834 F.2d at 1310 n.8.
Statutory trebling sometimes is considered the equivalent of punitive damages
and sometimes is not; the question is statute-dependent.3 The Supreme Court has
consistently characterized RICO’s treble damages provision (and the parallel treble
damages provision in the Clayton Act, on which RICO’s damage provision was
modeled) as remedial rather than punitive. See Agency Holding Corp. v. Malley-Duff &
Assocs., Inc., 483 U.S. 143, 151 (“Both RICO and the Clayton Act are designed to
remedy economic injury by providing for the recovery of treble damages, costs, and
attorney's fees.”), Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 240(1987)
(referring to the “remedial role of the treble-damages provision” in RICO), Am. Soc'y of
Mech. Eng'rs, Inc. v. Hydrolevel Corp., 456 U.S. 556, 575 (1982) (stating that the
provision for treble damages in private antitrust cases “make[s] the remedy meaningful
by counter-balancing the difficulty of maintaining a private suit under the antitrust laws”
(internal quotation marks and citation omitted)), Brunswick Corp. v. Pueblo
Bowl–O–Mat, Inc., 429 U.S. 477, 485–86 (1977) (characterizing the antitrust statutes’
treble damages provision as “in essence a remedial provision”). See also PacifiCare
Health Sys., Inc. v. Book, 538 U.S. 401, 406 (2003) (stating that the application of an
arbitration agreement’s punitive damages prohibition to RICO’s provision for treble
damages “is, to say the least, in doubt” given the Court’s characterization of RICO
trebling as remedial).
3

See, e.g., Estate of Parsons v. Palestinian Authority, 651 F.3d 118, 148-49 & n.9 (D.C.
Cir. 2011) (Brown, J., concurring in part and dissenting in part); Alea London Ltd. v.
American Home Servs., Inc., 638 F.3d 768, 777-78 (11th Cir. 2011); Bateman v.
American Multi-Cinema, Inc., 623 F.3d 708, 715-16 (9th Cir. 2010); In re Seagate
Technology, LLC, 497 F.3d 1360, 1382-83 (Fed. Cir. 2007).
7

For this reason, the Seventh Circuit’s decision in Perez v. Z Frank Oldsmobile,
Inc., 223 F.3d 617 (7th Cir. 2000), cited by defendants, is not controlling in the present
situation. In Perez, the court said that a plaintiff could not get both statutory trebling
under the Federal Odometer Act and an additional multiplier under the parallel Illinois
statute. Given the Supreme Court’s characterization of RICO’s trebling provision as
remedial, trebling under RICO does not constitute double payment of the same
damages assessed by the jury in its punitive damages awards on the tortious
interference claim. The latter damages, unlike RICO trebling, are unquestionably
punitive in nature. Thus they are not parallel to RICO trebling, in contrast to the two
parallel statutes at issue in Perez.
For these reasons, the Court rejects defendants’ proposal to vacate the state-law
punitive damages awards and concludes that plaintiffs are entitled to recover both the
state-law punitive damages and RICO damage as trebled under that statute.
3 & 4. Plaintiffs request a Rule 54(b) finding. Defendants object and have
requested a further opportunity to brief the point. Defendants likewise appear to
contend that interest will not begin to accrue on the judgment unless and until the Court
makes a Rule 54(b) finding. Were the Court to accept both defendants’ position that
there should be no Rule 54(b) finding and their position that interest will not accrue until
there is a Rule 54(b) finding, it would give rise to an unfair situation in which plaintiffs’
judgment continues to decline in value while everyone awaits adjudication of the claims
against the Wheeler-Dealer defendants.
The Court questions whether it is true, as defendants suggest, that postjudgment interest does not accrue in this situation until there is either a complete
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judgment involving all parties or a partial judgment with a Rule 54(b) finding. It may be
that post-judgment interest will begin to accrue once a judgment is entered against the
defendants who lost at trial, even though that judgment would be non-appealable
absent a Rule 54(b) finding.
The parties’ joint submission that is due on January 9 should include their
respective positions on these issues – both the issue of when post-judgment interest
begins to accrue and the issue of whether the Court should make a Rule 54(b) finding.
5.

The Sass defendants did not provide the Court with the settlement

amounts that they argued should be offset against the amounts to which plaintiffs
otherwise would be entitled. Plaintiffs and the Sass defendants are directed to provide
these amounts in the same January 9 joint submission. Although the settlements may
have been subject to confidentiality agreements, the Court will be using them as the
basis for an offset of a judgment that must be entered in the public record. The joint
submission therefore should be filed in the public record as well.4
The parties likewise have not addressed how the Court should account via the
setoff for the fact that there are two separate plaintiffs with two separate sets of damage
awards. This, too, should be addressed in the parties’ joint submission due on January
9.
Finally, the Court requests further input regarding whether, in view of the Court’s
ruling regarding the Sass defendants’ entitlement to a setoff, the judgment as it relates
to those defendants should be in the full amount awarded by the jury; whether it should
4

The Court notes that by virtue of electronic service as accomplished by the federal
courts’ electronic docketing system, the settling parties, whose attorneys’ appearances
are still on the docket, will receive notice of the present order.
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state that amount and then reduce it via the setoff; whether it should state only the net
amount after the setoff; or whether some other method is appropriate. The parties
should address this in their January 9 joint submission.
Conclusion
The Court rules on the defendants’ request for a setoff as described in this
decision. A joint submission addressing the points identified in the submission is to be
filed by January 9, 2011. The Court acknowledges that this is a short time frame, but at
this point plaintiffs have been awaiting entry of a judgment of some sort (final or
otherwise) for nearly two months, and they should not have to wait much longer. The
case is set for a status hearing on January 12, 2011 at 9:30 a.m.

s/ Matthew F. Kennelly
MATTHEW F. KENNELLY
United States District Judge
Date: January 2, 2012

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