Anheuser-Busch, Inc. et al v. Schnorf et al

Filing 198

MEMORANDUM Opinion and Order Signed by the Honorable Robert M. Dow, Jr on 3/29/2012. Mailed notice(tbk, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ANHEUSER-BUSCH, INC., ET AL.,
Plaintiffs,
v.
STEPHEN B. SCHNORF, ET AL.,
Defendants.

)
)
)
)
)
)
)
)
)

Case No.: 10-cv-1601
Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER
Pursuant to 42 U.S.C. § 1988 and Local Rule 54.3, Plaintiffs Anheuser-Busch, Inc. (“AB
Inc.”) and Wholesaler Equity Development Corporation (“WEDCO”) have moved for their
attorneys’ fees incurred in this litigation. In support of their motion, Plaintiffs rely on the
Court’s September 3, 2010 order granting Plaintiffs’ partial motion for summary judgment on
their Commerce Clause claim.

AB Inc. and WEDCO seek the sum of $1,605,154.22 in

attorneys’ fees from Defendants, plus pre-judgment interest.
In response, Defendants1 (hereinafter referred to as the Illinois Liquor Control
Commission, “ILCC,” or the “Commission”) contend that Plaintiffs failed to achieve their stated
goal in bringing the lawsuit and, in any event, that Plaintiffs’ request for $1.6 million in
attorneys’ fees far exceeds what is reasonable or appropriate in a case which Plaintiffs dubbed
“straightforward” and “clear cut.” Having considered all of the arguments presented as well as
the relevant Supreme Court and Seventh Circuit case law, the Court concludes that Plaintiffs did
1

Defendants in this case are affiliated with the Commission. Stephen Schnorf is the Acting Chair and a
Commissioner of the ILCC and Defendants John Aguilar, Daniel Downes, Sam Esteban, Michael
McMahon, Martin Mulcahey, and Donald O’Connell are Commissioners of the ILCC. Defendant
Richard Haymaker is Chief Legal Counsel of the ILCC. Defendants were named in this suit in their
official capacities. See Ex parte Young, 209 U.S. 123, 157-60 (1908); Entertainment Software Ass’n v.
Blagojevich, 469 F.3d 641, 644-45 (7th Cir. 2006).

not achieve their objective in bringing this lawsuit and thus have failed to demonstrate that they
are entitled to an award of attorneys’ fees. Accordingly, Plaintiffs’ motion for attorneys’ fees
[167] is denied.
I.

Background
On March 10, 2010, the Illinois Liquor Control Commission ruled that the State’s Liquor

Control Act precludes beer producer Anheuser-Busch, Inc. from acquiring, through its affiliate
WEDCO, a 100% ownership interest in distributor CITY Beverage.2 The Commission explained
that “[p]reserving Illinois’ three-tier distribution system of alcoholic liquor is a fundamental
objective of the Liquor Control Act and the Illinois legislature for reasons of public policy.”
Plaintiffs Anheuser-Busch, WEDCO, and CITY Beverage filed this lawsuit on the same day
challenging the Commission’s interpretation on various federal constitutional grounds. They
alleged that the Commission’s ruling “threaten[ed] to scuttle a unique and important
acquisition,” denied them “the benefits of the transaction and its synergies,” and prevented them
from “compet[ing] on equal footing” with two small, in-state beer producers (Argus and Big
Muddy) that exercised self-distribution rights.3 In addition to requesting a declaration that the
Commission’s interpretation was unconstitutional, Plaintiffs asked the Court to use its discretion
in fashioning a remedy that would extend self-distribution rights to all beer producers regardless
of their location, so that Anheuser-Busch could proceed with its acquisition of WEDCO.
2

The ILCC issued a two-part declaratory ruling. First, the Commission unanimously ruled that the Act
“prohibits an Illinois license Non-resident dealer from possessing an ownership interest in a licensed
Illinois distributor,” and that Anheuser-Busch would be in violation of the Act if it or any affiliate
“purchased any additional interest in CITY.” Second, the Commission ruled, in a four-to-three decision,
that in light of the “history and facts surrounding this case,” including WEDCO’s ownership of a 30%
interest in CITY since 2005, the Commission would renew CITY’s distributor’s licenses “as currently
owned,” “absent any other disqualifying factors.”

3

The third in-state brewer that held a distributor’s license, but did not self-distribute at the time of the
summary judgment briefing, was Goose Island Beer Co. During summary judgment briefing, Plaintiff
Anheuser-Busch held a small ownership interest in Goose Island and subsequently acquired the remaining
interest in Goose Island.

2

On September 3, 2010, after three months of expedited proceedings following the filing
of the complaint in this case and two and a half additional months in which the Court crafted its
opinion, the Court granted Plaintiffs’ motion for partial summary judgment, holding that
Defendants’ enforcement of the Illinois Liquor Control Act of 1934 (the “Liquor Control Act”)
violated the Commerce Clause of the United States Constitution insofar as it permits in-state, but
not out-of-state, producers to self-distribute. However, the Court declined Plaintiffs’ request to
remedy the unconstitutionality of Illinois’ system by extending the self-distribution privilege to
out-of-state brewers, concluding that Plaintiffs’ proposed remedy would be more disruptive to
the existing statutory and regulatory scheme than the alternative remedy of withdrawing the selfdistribution privilege from in-state brewers. The Court stayed its order until March 31, 2011, to
give the Illinois General Assembly an opportunity to amend the Liquor Control Act if it chose to
do so and then extended the stay at the parties’ request [see 162, 187]. The General Assembly
did in fact enact remedial legislation, and on June 1, 2011, Governor Quinn signed into law SB
754. The new law creates a “craft brewer’s license” for in-state and out-of-state beer producers
whose annual production is less than 15,000 barrels (465,000 gallons) and who may then obtain
approval from the ILCC to self-distribute up to 7,500 barrels of that production in Illinois.
On October 29, 2010, after Plaintiffs dismissed their other remaining claims, the Court
entered final judgment against Defendants and in favor of Plaintiffs. On November 3, 2010, AB
Inc. and WEDCO filed a notice of appeal from this Court’s September 3 opinion and October 29
final judgment on the sole issue of the proper remedy for Defendants’ violation of the Commerce
Clause. Defendants did not cross-appeal. Thus, the only issue on appeal was whether the
Court’s determination that nullification, rather than extension, of the self-distribution right
utilized by a few small, in-state brewers was the proper remedy for Defendants’ constitutional

3

violation.

Once Governor Quinn signed SB 754 into law, the Seventh Circuit dismissed

Plaintiffs’ appeal as moot, noting that the new law “eliminates the geographically disparate
treatment of beer distributors.” See Anheuser Busch Co., Inc. v. Schnorf, et al., Nos. 10-3298 &
10-3570, Order (7th Cir. July 8, 2011).
II.

Analysis
This case presents an interesting question on the issue of attorneys’ fees. As the Court

previously noted in addressing Defendants’ stay motion, Plaintiffs’ clearly won on the issue of
whether Defendants’ were violating the Commerce Clause, and Defendants’ did not appeal.
Defendants took the position that Granholm did not supply the relevant standard for this case—
Defendants argued that the per se invalidity standard did not apply—and also maintained that the
Twenty-first Amendment permits states “virtually complete control” over how to structure a
distribution system. The Court, following Granholm and its progeny, disagreed and found that
Defendants failed to articulate a legitimate local purpose that justified their discrimination
against out-of-state brewers.
As Defendants note, the constitutional claim was resolved on summary judgment without
discovery and turned on a straightforward application of Granholm and its progeny to the
Commission’s construction of state law.

Plaintiffs themselves characterized the case as

“straightforward” and “clear cut,” noting that it turned on a “a single, well-defined question of
law” calling for a “simple” application of a single case (Granholm). See DE 18 at 2, 4; DE 53 at
18. Defendants admitted “all of Plaintiffs’ material facts and [did] not set out additional facts
showing a genuine issue for trial.” The focus was solely on a legal issue for which recent
Supreme Court precedent paved a clear path. If that were the sum and substance of the case,
Defendants would not have a leg to stand on in opposing a reasonable fee request and the

4

reasonable fee would be a tiny fraction of the $1.6 million sum sought by Plaintiffs in their fee
petition.
However, it was (and is) readily apparent that Plaintiffs did not retain counsel (and pay
them handsomely) to establish Commerce Clause precedent. Rather, as the timing of this lawsuit
and the content of most, if not all, of the court filings confirm, Plaintiffs’ “ultimate goal” was to
pave the way for their acquisition of the remaining 70% interest in distributor City Beverage—
or, as Plaintiffs themselves put it, to close “an extremely important business transaction for
Plaintiffs.” Pl. S.J. Reply at 23. And in this respect, Plaintiffs’ failed. Their transaction cannot
proceed, and their “opportunity for profit maximization” will not follow on the heels of this
lawsuit.

Furthermore, despite their victory on the constitutional issue, the end result of

Plaintiffs’ litigation strategy has left them worse-off. Plaintiffs sought an extension of selfdistribution rights to all producers, but the Court’s ruling (which was stayed to give the General
Assembly time to act) would have barred any producers from self-distributing, which not only
precluded Plaintiffs’ from acquiring the remaining 70% interest in City Beverage, but also put
Plaintiffs’ existing 30% interest in jeopardy. The General Assembly acted while the stay was in
place, and its amendment was even less favorable to Plaintiffs than the Court’s ruling would
have been—the new statute not only barred Plaintiffs from self-distributing (and hence blocked
Plaintiffs’ acquisition of City Beverage), but the General Assembly also extended selfdistribution rights to small brewers across the nation, creating more competition for Plaintiffs
beyond the two small, in-state brewers who self-distributed prior to this lawsuit.
The battle lines are well defined: Plaintiffs contend that they are entitled to all of their
reasonable fees because they won a complete victory on the constitutional claim (in that the
Court granted partial summary judgment to Plaintiffs on its commerce clause claim); Defendants

5

counter that Plaintiffs are entitled to little or no attorneys’ fees because they achieved, at best, a
very modest (and “Pyrrhic”) victory that fell well short of their aim in bringing the litigation.
That leaves the Court with the interesting question of whether (or how) to award fees to a party
that wins on a straightforward, threshold issue, but gains little or nothing (and eventually loses
ground) as a result of the litigation. With this background, the Court turns to the issue at hand.
A.

General standards

In order to entice competent attorneys to prosecute civil rights cases, Congress enacted 42
U.S.C. § 1988, pursuant to which a “prevailing party” in a § 1983 action is entitled to
“reasonable” attorneys’ fees. See Hensley v. Eckerhart, 461 U.S. 424, 429 (1983). Under the
Supreme Court’s self-termed “generous formulation” of the phrase, a civil rights plaintiff is
considered to be a “prevailing party” if he or she succeeds on “any significant issue in the
litigation which achieves some of the benefit the parties sought in bringing suit.” Farrar v.
Hobby, 506 U.S. 103, 109 (1992) (citing Hensley, 461 U.S. at 429); see also Texas State
Teachers Ass’n v. Garland Indep. Sch. Dist., 489 U.S. 782, 791-92 (1989).
The Supreme Court elaborated on the definition of prevailing party in three cases in the
late 1980s, and then synthesized those rulings in Farrar v. Hobby. See Hewitt v. Helms, 482
U.S. 755, 761 (1987) (observing that “[r]espect for ordinary language requires that a plaintiff
receive at least some relief on the merits of his claim before he can be said to prevail” and
requiring the plaintiff to prove “the settling of some dispute which affects the behavior of the
defendant towards the plaintiff”); Rhodes v. Stewart, 488 U.S. 1, 3 (1988) (explained that
“nothing in [Hewitt] suggested that the entry of [a declaratory] judgment in a party’s favor
automatically renders that party prevailing under § 1988” and reaffirming that a judgment—
declaratory or otherwise—“will constitute relief, for purposes of § 1988, if, and only if, it affects

6

the behavior of the defendant toward the plaintiff”); Texas State Teachers Assn., 489 U.S. at 792
(emphasizing that “[t]he touchstone of the prevailing party inquiry must be the material
alteration of the legal relationship of the parties”). In Farrar, the Supreme Court summed it up
by stating that a plaintiff “prevails” when “actual relief on the merits of his claim materially
alters the legal relationship between the parties by modifying the defendant’s behavior in a way
that directly benefits the plaintiff.” 506 U.S. at 111-12.
In deciding the specific amount that is reasonable in the circumstances, the Supreme
Court has directed district courts to consider as a “starting point” (or “lodestar”) the number of
hours expended in the litigation multiplied by a reasonable hourly rate. Hensley, 461 U.S. at
433. The Court has stressed that the “most critical factor” in determining the reasonableness of a
fee award is “the degree of success obtained” by the prevailing party. Id. at 436. As both parties
here acknowledge, courts frequently attempt to measure success by viewing three factors: (i) the
difference between the actual judgment and the recovery sought, (ii) the significance of the legal
issues on which the plaintiff prevailed, and (iii) the public interest at stake in the litigation. See,
e.g., Connolly v. Nat’l Sch. Bus. Serv., Inc., 177 F.3d 593, 597 (7th Cir. 1999).
The Supreme Court expressly has stated that when litigation of a § 1983 case leads to
“excellent results” for the prevailing party, the plaintiff’s attorney “should recover a fully
compensatory fee.” Hensley, 461 U.S. at 435. As the Court further explained, “[n]ormally this
will encompass all hours reasonably expended on the litigation, and indeed in some cases of
exceptional success an enhanced award may be justified.” Id. Both the Supreme Court and the
Seventh Circuit have stressed that a fee award “should not be reduced simply because the
plaintiff failed to prevail on every contention raised in the lawsuit.” Hensley, 461 U.S. at 435;
see also Dunning v. Simmons Airlines, Inc., 62 F.3d 863, 873 (7th Cir. 1995). As the court of

7

appeals summarized, “Hensley makes clear that when claims are interrelated, as is often the case
in civil rights litigation, time spent pursuant to an unsuccessful claim may be compensable if it
also contributed to the success of other claims.” Jaffee v. Redmond, 142 F.3d 409, 413 (7th Cir.
1998).
B.

Prevailing Party

As set forth above, “a plaintiff ‘prevails’ when actual relief on the merits of his claim
materially alters the legal relationship between the parties by modifying the defendant’s behavior
in a way that directly benefits the plaintiff.” Farrar, 506 U.S. at 111-12. The Seventh Circuit
has identified the “‘key inquiry’ as whether [plaintiff] attained his objective in bring the suit, or
stated differently, whether the [defendant’s conduct] redressed [plaintiff’s] grievances and
directed benefitted him.” Cady v. City of Chicago, 43 F.3d 326, 329 (7th Cir. 1994). Whether
Plaintiffs obtained their objective in bringing this lawsuit is a factual determination. Id. (“This is
a factual determination which we review only for clear error.”).4
Plaintiffs advanced a tripartite objective in this lawsuit.

First, Plaintiffs sought

“declaratory and injunctive relief to remedy the irreparable and substantial harm that will
continue to result from Defendants’ violation of the Commerce and Contracts Clauses of the
United States Constitution.” Compl. at ¶ 1. Without proving that Defendants were violating the
4

There is no “rule or principle that will unerringly distinguish a factual finding from a legal
conclusion.” Pullman-Standard v. Swint, 456 U.S. 273, 288 (1982); See also Gekas v. Attorney
Registration and Disciplinary Com'n of Supreme Court of Illinois, 793 F.2d 846, 849-50 (7th Cir. 1986).
Nevertheless, “the decision to label an issue a ‘question of law,’ a ‘question of fact,’ or a ‘mixed question
of law and fact’ is sometimes as much a matter of allocation [of authority between the primary and the
secondary decision-makers] as it is of analysis.” Miller v. Fenton, 474 U.S. 104 (1985). In Gekas, the
Seventh Circuit concluded that, “[i]n the context of fee disputes, the district court, given its familiarity
with the parties and the proceedings, is better positioned than the court of appeals to decide whether a
plaintiff’s lawsuit is causally linked to the relief obtained.” Gekas, 793 F.2d at 849-50; see also Ekanem
v. Health and Hospital Corp. of Marion County, 778 F.2d 1254, 1258 (7th Cir. 1985) (clearly erroneous
standard of review applied). It seems to follow that determining whether Plaintiffs obtained their
objective is a factual determination, while determining whether a party meets the definition of a
“prevailing party” remains a legal question. See Dupuy v. Samuels, 423 F.3d 714, 718 (7th Cir. 2005).

8

Commerce Clause, Plaintiffs could not upset the ILCC’s ruling that Plaintiffs’ acquisition of City
Beverage was contrary to Illinois law.

Second, Plaintiffs asked the Court to remedy the

constitutional violations by allowing all brewers (out-of-state and in-state) to self-distribute—in
Plaintiffs’ words, they sought a remedy which would allow them “to compete on equal footing
with the in-state producers who are permitted to distribute beer to retailers.” Id. at ¶ 2. Plaintiffs
did not seek to reaffirm the rigid three-tier distribution system, but rather sought to weaken, or
collapse, the distribution system such that all manufacturers – in-state or out-of-state – could sell
directly to retailers. And finally, Plaintiffs made clear throughout the lawsuit that their ultimate
goal was to close “an extremely important business transaction for Plaintiffs.” Pl. S.J. Reply at
23. Plaintiffs, beginning with paragraph 3 of their complaint, repeatedly stressed the urgency of
this lawsuit in the face of an impending business transaction:
Defendants’ actions threaten to scuttle a unique and important acquisition by
WEDCO of the remaining 70 percent of CITY Beverage. Prior to Defendants’
unconstitutional actions, WEDCO and CITY Beverage’s majority owners had
agreed to this transaction. The parties now face a State-decreed prohibition to
closing this sale. Unless Plaintiffs receive immediate injunctive and declaratory
relief, the prospect of WEDCO purchasing the remaining 70 percent ownership of
CITY Beverage could vanish, which would cause extreme economic harm to
Plaintiffs.
Compl. at ¶ 3.
A “fair inference” from Plaintiffs’ complaint is that Plaintiffs were not concerned that
two small in-state brewers (one of which had produced, at the time of summary judgment
briefing, only 2,211.2 gallons of beer compared to AB’s 77.6 million reported gallons in fiscal
year 2010) were cutting into AB’s market share. See Cady, 43 F.3d at 329 (“It is useful to look
to the relief requested in Cady’s complaint as a starting point”). Rather, Plaintiffs were upfront
about their ultimate objective—they wanted to clear the path to closing on the City Beverage
transaction. See Compl. at ¶¶ 3, 32; Pls.’ Mot. to Schedule Decl. Judg. Hearing at ¶¶ 3-10, 19

9

(describing how WEDCO’s attempts to purchase the remaining interest in City Beverage were
thwarted by the ILCC’s declaratory ruling); (“A substantial transaction involving a large
business with hundreds of employees already has been put on hold because of Defendants’
Declaratory Ruling regarding Liquor Control Act and, thus, is at great risk.”); (discussing how
the ILCC’s ruling denies AB “the same opportunity for profit maximization and the ability to
leverage the competitiveness of their brands through their control and focus of distribution
function”). And the only way to even begin to achieve that objective in this litigation was to
obtain the declaratory judgment that they requested in their proposed order:
Upon Plaintiffs’ motion for summary judgment on Count I of Plaintiffs’
complaint, that Defendants’ actions violate the Commerce Clause, it is hereby
adjudged and ordered that:
Declaratory Judgment
Defendants violate the Commerce Clause of the United States Constitution by
prohibiting out-of-state brewer AB Inc. from holding or acquiring Illinois
Distributor’s or Importing Distributor’s Licenses or from holding, acquiring an
interest in, or being affiliated with an entity that holds Illinois Distributor’s or
Importing Distributor’s Licenses.
See Plaintiffs’ Text of Proposed Order at 1, Ex. A to Pls.’ S.J. Mot. The requested “Injunctive
Relief” hewed to the same line, asking that Defendants be permanently enjoined from the
following:
1.

Denying, refusing to issue, refusing to renew, or revoking a license, or
taking any other action against AB Inc. or any other entity, on the grounds
that AB Inc. or its affiliates holds or acquires, or is affiliated with an entity
that holds or acquires, Illinois Distributor’s or Importing Distributor’s
Licenses.

2.

Denying, refusing to issue, refusing to renew, or revoking the Distributor’s
or Importing Distributor’s Licenses requested by or held by AB Inc.,
CITY Beverage – Illinois, L.L.C., CITY Beverage L.L.C., CITY Beverage
– Markham L.L.C., Chicago Distributing L.L.C., or any of their affiliates
on the grounds of AB Inc.’s affiliation with an entity that holds a
Distributor’s or Importing Distributor’s License.

10

3.

Denying, refusing to issue, refusing to renew, or revoking AB Inc.’s NonResident Dealer’s license on the grounds that it holds a Distributor’s or
Importing Distributor’s License or is affiliated with an entity that holds a
Distributor's or Importing Distributor's License

4.

Taking any other action against AB Inc., CITY Beverage – Illinois,
L.L.C., CITY Beverage L.L.C., CITY Beverage – Markham L.L.C.,
Chicago Distributing L.L.C., or any of their affiliates based on any
affiliation between AB Inc. and the CITY Beverage entities.

Id. at 2.
Turning to the ruling, the Court determined that the Commission’s interpretation of the
Act was unconstitutional insofar as it permitted in-state, but not out-of-state, producers to selfdistribute.

The Court then concluded, from a judicial standpoint, that withdrawing self-

distribution rights from in-state producers was the more appropriate remedy than the ruling
requested by Plaintiffs because it would eliminate the constitutional infirmity “while keeping
intact most of the current three-tier system.” The Court recognized that its remedy would “not
materially advance Plaintiffs’ ultimate goal in this litigation—clearing the path to closing on the
City Beverage transaction” but later explained that its decision on the remedy “tracked both the
governing principles and the actual dispositions of the only closely analogous cases cited by the
parties.” See Docket Entry 150 at 6-7. The Court also stayed enforcement of the order to give
the General Assembly time to act on the matter if it so desired. In support of its decision to stay
enforcement, the Court noted that the regulation of the distribution of liquor is a matter of public
policy and a quintessential legislative function, and that state regulation of the alcoholic beverage
industry involves legislative judgments with respect to temperance, public safety, taxation,
licensing, and consumer protection, which courts are not as well equipped to make.
The circumstances in this case closely resemble those found in Cady v. City of Chicago.
Cady sought a declaration that the manner in which defendants regulated access to a literature

11

rack “amount[ed] to an unconstitutional prior restraint and content-based censorship of the rights
to freedom of religion and expression as guaranteed to Cady and others by the first and
fourteenth amendments.”

43 F.3d at 329.

He also asked the court to temporarily and

permanently enjoin the defendants from refusing to allow Cady to (i) display religious literature
on the O’Hare Chapel literature rack and (ii) gratuitously distribute such literature, without
insisting upon prior review or approval of that literature. Id. The Seventh Circuit noted that a
“fair inference” from the complaint was that Cady wanted unfettered use of the literature rack
and thus the district court, in assessing whether attorneys’ fees were warranted, did not clearly
err in finding that Cady’s goal was to obtain “the ability to exercise his own First Amendment
rights-to get an uncensored forum for distribution of his own religious literature.” Id.
In Cady, the City removed the forum (the rack) to which Cady sought access, and thus
Cady’s actual grievances were not redressed—he still had no access to the rack in order to
exercise his First Amendment rights. The fact that Defendants’ behavior changed and no one
else had access to the forum did not persuade the Seventh Circuit to award fees. Plaintiffs’
situation here is similar to Cady’s and distinguishable from those cases where the plaintiffs
became “prevailing parties” when the defendants, either unilaterally, through settlement, or by
court order, ceased the precise conduct that the plaintiffs sought to enjoin. Cf. Foremaster v.
City of St. George, 882 F.2d 1485 (10th Cir. 1989); Gekas, 793 F.2d 846; Lovell v. City of
Kankakee, 783 F.2d 95 (7th Cir. 1986). Here, Plaintiffs wanted everyone to be allowed to selfdistribute, but the Court’s order foreclosed that relief, at least until the General Assembly chose
to act. And when the legislature acted, Plaintiffs were left in an even worse position—they still
could not self-distribute or close their transaction, yet small brewers across the nation could sell
directly to retailers.

12

To be sure, to have prevailed for purposes of § 1988, a party “‘need not obtain relief
identical to the relief [that it] specifically demanded, as long as the relief obtained is of the same
general type,’” such as may occur when the result of the litigation shifts the status quo toward
that which the plaintiff hoped to obtain. Cady, 43 F.3d at 329 (internal quotations omitted). But
before they may be deemed prevailing parties, Plaintiffs must show that the litigation in some
way redressed their grievances and directly benefitted them. Hewitt, 482 U.S. at 760-61; Farrar,
506 U.S. at 111-12. Here, the relief ordered (but stayed) by the Court and ultimately imposed by
the General Assembly’s new law was the opposite of what Plaintiffs wanted: Plaintiffs wanted
direct access to the retailers, but the Court’s ruling and the General Assembly’s actions closed
that avenue to Plaintiffs. Thus, while Defendants’ conduct changed, it did not do so in a way
that benefited Plaintiffs. In other words, based on the reasoning in Cady, 43 F.3d at 329, it is
hard to see how Plaintiffs “attained [their] objective” in this litigation.
Plaintiffs maintain that they won a “significant constitutional victory” and that they
“caus[ed] an injunction to be entered against enforcement of the discriminatory law,
establish[ed] meaningful precedent, and vindicate[ed] important federal rights and interests
through declaratory and injunctive relief.” Much like the Seventh Circuit’s assessment in Cady,
when the Court compares the relief requested by Plaintiffs in their complaint and proposed order
with Plaintiffs’ current posture, Plaintiffs’ emphasis on the vindication of important federal
rights appears to be “a post-hoc attempt to re-characterize [their] claims.” Cady, 43 F.3d at 330.
Plaintiffs have never been shy about what they sought to achieve in this lawsuit and why they
wanted to litigate on an expedited basis. This lawsuit was filed on the same day that the ILCC
issued its declaratory ruling, which in essence barred Plaintiffs’ acquisition of City Beverage,
and proceeded on an expedited basis to accommodate Plaintiffs’ economic interests.

13

The

litigation never supplied a strong flavor of vindicating constitutional rights or establishing
“meaningful precedent”; rather, it always has been about saving an important commercial
transaction.
Further, to the extent that the Court may have misread Plaintiffs’ objectives in this
litigation, “moral satisfaction” alone would not bestow “prevailing party” status on Plaintiffs in
any event. See Farrar, 506 U.S. at 112; Hewitt, 482 U.S. at 762 (noting that “the moral
satisfaction [that] results from any favorable statement of law” cannot bestow prevailing party
status); Cady, 43 F.3d at 329. Where a plaintiff obtains a declaratory judgment but is not
benefitted by any change in the defendants’ behavior toward him, he normally does not qualify
as a prevailing party. See Farrar, 506 U.S. at 111-12; see also Martinez v. Wilson, 32 F.3d 1415,
1422 (9th Cir. 1994) (where plaintiffs’ injunctive relief vindicated only a “generalized interest in
having the government obey the law” and plaintiffs “derived no direct benefit,” they were not
“prevailing parties”). If Plaintiffs had brought this lawsuit solely to minimize competition from
the in-state brewers who were given distributor’s licenses—in other words, to level the playing
field for all brewers such that none could act as distributors—then arguably the Court’s ruling
(had it gone into effect prior to the legislature’s actions) would have given them nominal relief,
as it would have prevented the two small in-state brewers from utilizing their distributor’s
licenses (and precluded additional licenses from being granted to in-state distributors). However,
throughout this litigation and specifically in their proposed order, Plaintiffs made clear that they
wanted all brewers to be able to act as distributors. That relief was never accorded, either in
court or through the legislature. Moreover, the Court’s judgment, to the extent it gave Plaintiffs
some nominal relief pending legislative action, was stayed—and the General Assembly’s action
mooted even that small “victory.”

14

The Court does not wish to minimize the constitutional infirmity created by Defendants’
interpretation of the prior law, or Plaintiffs’ role in bringing it to light. But an honest assessment
of Plaintiffs’ complaint and litigation strategy makes clear that they failed to attain the only thing
they actually wanted in this litigation—to be able to acquire the remaining interest in City
Beverage. Plaintiffs’ post-ruling actions support this view in several respects.
First, Plaintiffs, not Defendants, appealed the Court’s ruling on the Commerce Clause
issue. See Notice of Appeal (seeking to appeal that portion of the order “denying plaintiffs’
request to enter an injunction that would have permitted AB Inc. and its affiliates to distribute
beer and to continue owning and be affiliated with an entity that distributes beer in Illinois, and
that instead enjoins enforcement of certain provisions under the Illinois Liquor Control Act of
1934, such that no brewer may distribute beer in Illinois”). Shortly after the Notice of Appeal
was filed, Plaintiffs stipulated to the dismissal with prejudice of their two remaining counts,
which alleged violations of the Due Process Clause of the Fourteenth Amendment and the
Contracts Clause. The Court then entered final judgment on all of Plaintiffs’ claims.5 On
appeal, Plaintiffs sought reversal of “the court’s imposition of the nullification remedy and
extend (‘reinstate’) to out-of-state brewers the same right to own or operate an Illinois beer

5

The Court notes that the issues presented by Buckhannon Board & Care Home, Inc. v. West Virginia
Department of Health & Human Resources, 532 U.S. 598 (2001), and Zessar v. Keith, 536 F.3d 788 (7th
Cir. 2008), do not figure heavily into the Court’s analysis. Buckhannon holds that a suit’s role as a
catalyst in inducing the defendant to change its policies does not support an award of attorneys’ fees; “a
plaintiff ‘prevails’ only by obtaining a judicial order altering its legal status vis-à-vis its adversary.”
National Rifle Ass’n of America, Inc. v. City of Chicago, Ill., 646 F.3d 992, 993 (7th Cir. 2011). Zessar
applies Buckhannon to a case that became moot when the statute being contested was materially amended
between a district court’s opinion and its judgment. Here, although the Court stayed its order to give the
legislature time to act, the Court entered judgment on Count I and the parties stipulated to the dismissal of
the remaining counts in order to facilitate Plaintiffs’ appeal. Because there was a final judgment on the
merits, resolution of the attorneys’ fees issue turns on whether Plaintiffs are prevailing parties because
they achieved their objectives in bringing the lawsuit, not on whether they received a decision which
bears “the necessary judicial imprimatur.” Buckhannon, 532 U.S. at 605.

15

distributor afforded to in-state brewers under the Liquor Control Act.” In short, Plaintiffs were
wholly unsatisfied with the consequences of their “significant constitutional victory.”
The Seventh Circuit has cautioned courts to examine “the practical impact of the
judgment.” Peterson v. Gibson, 372 F.3d 862, 865 (7th Cir. 2004). Here, the practical impact of
the judgment, which was stayed to give the General Assembly time to act, is that Plaintiffs are
worse off than when they started. Plaintiffs wanted all brewers to be able to hold distributor’s
licenses so that Plaintiffs in turn could acquire the remaining interest in City Beverage. Instead,
Plaintiffs received a stayed judgment that did not allow them to close their transaction, and
eventually the legislature passed a new law, creating a “craft brewer’s license” for in-state and
out-of-state beer producers whose annual production is less than 15,000 barrels (465,000 gallons)
and who may then obtain approval the ILCC to self distribute up to 7,500 barrels of that
production in Illinois. While the law eliminates any offending distinction between the
distribution rights of in-state and out-of-state beer producers, it also allows all small brewers to
self distribute – and not just the few who were self-distributing at the time that Plaintiffs filed
this lawsuit.. The Court cannot discern any direct benefit to Plaintiff from this result, nor do
Plaintiffs claim a benefit beyond a “significant constitutional victory” and the vindication of
important federal rights.
But even if the constitutional victory alone were enough to convey prevailing party status
despite Plaintiffs’ failure to (1) secure the remedy they wanted or (2) close their commercial
transaction, the nominal success resulting from the constitutional victory amounts to a “Pyrrhic
victory.” Plaintiffs aimed to acquire 100% of a distributor and effectively collapse Illinois’
three-tier system, and instead the 30% interest that they already own is in jeopardy and the
marketplace is now more hospitable to their smaller competitors. In the Seventh Circuit’s words,

16

Plaintiffs aimed “high and fell far short.” Hyde v. Small, 123 F.3d 583, 585 (7th Cir. 1997).
This is particularly true here, where in all of the factually similar cases that were decided prior to
this litigation, the district courts nullified the offending portion of the statute rather than
extending it, as urged by Plaintiffs. In a sense, Plaintiffs took a calculated risk that the facts of
this case would cause the Court to depart from the weight of authority holding that nullification,
rather than extension, was appropriate in these circumstances. The facts presented did not move
the Court in that direction, and Plaintiffs did not receive the result they hoped for, yet Plaintiffs
seek to shift on to Defendants—and ultimately Illinois tax payers—the $1.6 million bill for their
expedited litigation. Compare id. at 585 (“When the civil rights plaintiff aims small, and obtains
an amount that is significant in relation to that aim (it need not reach the target), he is prima facie
entitled to an award of fees even if the case establishes no precedent.”). Simply put, under
pertinent Supreme Court and Seventh Circuit authorities, there is no basis for fee shifting on the
facts of this case.
In sum, the Court concludes that this case presents one of those relatively rare instances
in which a party “formally prevails” on at least a portion of its lawsuit, but “should receive no
attorney’s fees at all.” Farrar, 506 U.S. at 115. The Seventh Circuit’s decision in Cady provides
the best guidance, and under that decision, having fallen short of achieving their tripartite
objective, Plaintiffs are not prevailing parties. Moreover, even if Plaintiffs could be termed
“prevailing parties,” they obtained, at best, a “technical victory [that is] so insignificant * * * as
to be insufficient” to support an award of attorney’s fees, especially when viewed in light of
Plaintiffs’ stated objectives. Texas State Teachers Ass’n v. Garland Indep. Sch. Dist., 489 U.S.
782, 792 (1989); see also Farrar v. Hobby, 506 U.S. at 117 (noting that the reasonable fee award
for a prevailing plaintiff who obtains only a “Pyrrhic victory” is zero); Linda T. ex rel. William

17

A. v. Rick Lake Area School Dist., 417 F.3d 704, 708 (7th Cir. 2005). Or, put another way, even
if the litigation could be said to have “alter[ed] the legal relationship between the parties” in a
way that (briefly and marginally) benefited Plaintiffs (see Farrar, 506 U.S. at 111-12), Plaintiffs’
overall lack of success in achieving their stated goal was so apparent that the only reasonable fee
is zero.
III.

Conclusion
For these reasons, Plaintiffs’ motion for attorneys’ fees [167] is denied.

Dated: March 29, 2012

____________________________________
Robert M. Dow, Jr.
United States District Judge

18