Corey Steel Company v. SA Industries 2, Inc.
Filing
16
MEMORANDUM OPINION Signed by the Honorable John F. Grady on February 12, 2014. Mailed notice(cdh, )
13-6210.141
February 12, 2014
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
THE COREY STEEL COMPANY,
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
SA INDUSTRIES 2, INC.,
Defendant.
No. 13 C 6210
MEMORANDUM OPINION
This opinion addresses a fee petition filed by plaintiff’s
attorneys, David G. Jorgensen and Stephen C. Carlson of the firm of
Sidley Austin LLP.
The attorneys filed a two-count diversity complaint on August
30, 2013.
It consisted of six and one-half pages of text and three
exhibits.1
The gist of the action is that, pursuant to the written
contract attached as an exhibit to the complaint, the plaintiff
sold and delivered steel products to the defendant in a series of
shipments between August 28, 2012 and October 29, 2012.
for
each
1/
shipment
was
due
thirty
days
after
Payment
delivery.
The
Two of the exhibits are copies of one-page letters written by the
plaintiff or its attorneys demanding payment from the defendant.
The third
exhibit is a copy of the one page “Customer Credit Application” alleged to be the
contract between the parties. The “Application” provides that each shipment will
be accompanied by an invoice that would be considered a separate contract
pursuant to the Application. The unusual structure of the contract has nothing
to do with the fee petition.
defendant made some payments, but, as of July 26, 2013, $79,302.92
was overdue.
The contract provides that plaintiff will be entitled to
attorneys’ fees and interest in the event a collection action is
needed.
Count I of the complaint is a straight breach of contract
claim and is so labeled.
It alleges that “valid and enforceable
contracts were formed between Corey Steel and Defendant on each of
the dates listed above.” (Compl. ¶ 22.)
Count II is a curiosity.
It is labeled “Quantum Meruit (in
the alternative to Breach of Contract)”.
It alleges that it would
be unjust “for Defendant to retain the goods without compensating
Corey Steel.”
(Id. ¶ 30.)
The plaintiff is alleged to be entitled
to the fair market value of the goods, and “[t]he fair market value
is best identified by the price two parties bargained for at arms
length; such prices are listed in the invoices.
value of the goods is $79,302.92.” (Id. ¶ 31.)
The fair market
Count II concludes
by relying on the contract language providing for attorneys’ fees
and interest in the event a collection action is needed, and states
that “[i]n the alternative to breach of contract, Corey Steel seeks
recovery in quantum meruit for its services provided to Defendant,
as well as attorneys’ fees, interest and costs.”
- 2 -
(Id.
¶¶ 32, 33.)
There is nothing wrong with pleading quantum meruit in the
alternative to breach of contract when for some reason the contract
claim might fail and it would be unjust to allow the defendant to
retain the benefit of the transaction without paying the value of
it.
But here there is no suggestion of any reason the contract
action might fail and there would be a need to resort to quantum
meruit.
Moreover, far from being a quantum meruit claim for the value
received by the defendant, Count II simply realleges the contract
claim, seeking to recover the contract price, which would include
plaintiff’s profit.
claiming
attorney’s
entitlement
to
It also involves the contract language in
fees.
(Id.
attorney’s
¶
33.)
fees
in
There
quantum
would
meruit,
be
no
because
plaintiff’s fees would not be a benefit to the defendant.
Count II is simply makeweight.
DISCUSSION OF THE FEE PETITION
Although properly served at its office in Michigan, the
defendant has not appeared or pleaded to the complaint.
On
September 30, 2013, plaintiff’s attorneys filed a motion for entry
of default judgment.
A $7,251.59 payment had been received from
the defendant on September 4, 2013, reducing the claim, with
interest, to $77,910.94.
The motion was later supported by the
affidavit of Mr. Jorgensen stating that “Sidley Austin LLP has
billed
or
will
bill
Corey
Steel
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a
total
sum
of
$32,789.48
($31,017.77 in legal fees and $1,771.71 in expenses) for its
services rendered in connection with seeking collection of the debt
owed by Defendant to Corey Steel.”
(Jorgensen Aff. ¶ 5.)
In
explanation, the affidavit stated:
I have drafted a complaint, drafted various affidavits,
attended
court
hearings,
engaged
in
ultimately
unsuccessful settlement negotiations with opposing
counsel, conducted legal research and discussed case
strategy with multiple attorneys at my firm.
(Id. ¶ 4.)
The motion for the default judgment was presented by Mr.
Jorgensen in open court on October 9, 2013.
We discussed his
motion. He informed us that the parties were attempting to resolve
the dispute.
The motion for default judgment was continued for
hearing to December 4, 2013.
On December 3, 2013, Mr. Jorgensen filed his affidavit.
On
December 4, 2013, Mr. Jorgensen appeared again, and we discussed
his motion.
We were struck by the fact that the fees requested
comprise such a large percentage of the amount claimed in this
apparently simple case as well as by the paucity of specific
information about the work that the attorneys had done.2
We asked
Mr. Jorgensen to provide a supplemental affidavit describing the
work done, the hours spent on it, the requested hourly rates of the
attorneys involved and a breakdown of the expenses.
2/
Although the contract provides for reimbursement of “any and all
collection/attorney fees,” reasonableness is implied as a matter of law. Kaiser
v. MEPC Am. Props., 518 N.E.2d 424, 427 (Ill. App. Ct. 1987).
- 4 -
On December 10, 2013, the “Second Affidavit of David G.
Jorgensen” was filed.
Mr. Jorgensen states in the affidavit that
Sidley Austin LLP “has billed or will bill Corey Steel a total sum
of $33,104.61 ($32,029.90 in legal fees and $1,074.71 in expenses)
for its services,” of which $24,095.38 has been paid.
(Second
Jorgensen Aff. ¶¶ 4-5.)
Attached to the affidavit are copies of the bills sent to
Corey Steel from July through November 2013.
In addition to the
copies of the bills there are, for each month, “time summaries”
showing the hours billed by each attorney, the attorney’s hourly
rate and the dollar amount billed by the attorneys for that month.
Mr. Carlson billed a total of 18.75 hours from July through
November 2013 at an hourly rate of $765.00 for a total billing of
$14,343.75.
Mr. Jorgensen charged a total of 43.5 hours at a rate of
$333.00, for a total billing of $14,485.50.
The work described in the bills to the clients is almost
entirely lacking in the specific details we requested of Mr.
Jorgensen on December 4.
Mr. Carlson’s time entry for August 27,
2013, is an example – he claims two hours’ time (which comes to
$1,530.00) for the following:
Review litigation hold; review complaint; edit litigation
hold; edit complaint; office conferences with D.
Jorgensen; emails to and from D. Jorgensen; emails
regarding e-discovery; memo to D. Jorgensen regarding ediscovery.
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(Second Jorgensen Aff., Ex. B, at 1.)
A “litigation hold” notice
is simply a notice to a party in prospective or existing litigation
to preserve materials, such as e-mails, that would be material to
the litigation.
It should not have taken very long to draft an
appropriate notice in regard to this case.
We can’t tell how much
time Mr. Carlson spent on it, or what his “review” or “editing”
consisted of. Neither can we tell what the office conferences with
Mr. Jorgensen were about, and “emails to and from D. Jorgensen” is
similarly uninformative. E-mails to Mr. Jorgensen, and the purpose
of a memorandum to him, “regarding e-discovery” on August 27 is
unclear in view of the then-apparent likelihood of a default by the
defendant.
The same can be said for Mr. Carlson’s hour spent the
following day, August 28, on the following:
Emails to and from D. Jorgensen; review & re-review
complaint; research re: e-discovery; edit complaint
(Second Jorgensen Aff., Ex. B, at 1.)
Examining the bills from July to the end of November, we count
at least 31 e-mails that Mr. Carlson sent, mostly to Mr. Jorgensen.
There is usually no indication of the specific content of the emails, so we have no way of determining whether any of them were
necessary or useful.
The time charged is substantial, because for
each e-mail sent by Mr. Carlson to Mr. Jorgensen, Mr. Jorgensen
charges time for reading it, as the invoices show.
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The time spent drafting, reviewing and revising the complaint
is difficult to believe.
Consider the following charges by Mr.
Jorgensen for August 26-28, 2013:
08/26/13
DG Jorgensen
Email with J. DeLette;3 research
breach of contract, quantum
merit, complaint requirements and ESI;
draft, review and revise complaint
08/27/13
DG Jorgensen
Research, draft, review and revise
4.25
litigation hold letter; calls
with S. Carlson regarding litigation
hold letter; call with J. DeLette regarding
litigation hold letter; review and revise
complaint.
08/28/13
DG Jorgensen
Email correspondence with S. Carlson
regarding e-discovery and complaint;
email correspondence with J. DeLette;
review and revise complaint
(Id.)
5.50
3.25
This is a total of 13 hours at $333.00 per hour, which comes
to $4,329.00.
The time is not broken down, so we do not know how
much time was spent on each of the listed tasks.
How much time did
Mr. Jorgensen spend researching quantum meruit?
How much time
could possibly have been productively spent further reviewing and
revising the simple complaint?
regarding
breach
of
contract?
What legal research was needed
What
more
was
needed
on
the
“litigation hold?”
We are not persuaded that any of the 13 hours billed by Mr.
Jorgensen on August 26, 2013 was necessary or productive.
On page
two of Mr. Jorgensen’s Second Affidavit, paragraph 8, he offers the
following explanation:
8.
The
correspondence
between
Stephen
Carlson
(“Carlson”) and myself on August 27, 2013 related to the
litigation hold letter and complaint that I drafted. We
3/
Mr. DeLette is a credit analyst employed by the plaintiff.
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concluded that the breadth of the litigation hold letter
was appropriate given the nature of the case, and Carlson
provided me with suggestions on the complaint. Carlson
also informed me of our e-discovery obligations
generally, and suggested ways to research our specific
obligations.
The explanation simply reinforces our view that Messrs. Carlson and
Jorgensen billed their client for a substantial amount of excessive
time.
Other examples are at paragraphs 10, 12 and 13 on page two
of the Second Affidavit:
10. On September 9, 2013, I spoke with my client and
Carlson to determine whether it was appropriate to accept
opposing counsel’s request to delay entering judgment
against Defendant. After speaking with two bankruptcy
experts at my firm – Matthew Martinez and Michael
Gustafson – who advised me that bankruptcy of the
Defendant during such a delay would not materially impair
my client’s ability to collect, we decided that the
benefits of delaying the entry of judgment outweighed the
possible costs.
*
*
*
*
12. On October 2, 2013, Carlson and I met to discuss
service of process. We concluded that the summons and
complaint were effectively served on Defendant at the
beginning of the case.
13. On October 21, 2013, Carlson and I discussed opposing
counsel’s promise that Stan Aldridge, the owner of
Defendant, will personally guarantee Defendant’s debt to
Corey Steel. We determined that while such a promise was
given, our best course of action was to pursue collection
from Defendant before purs[u]ing collection from Stan
Aldridge personally.
If there was anything about these matters discussed on September 9
or October 21 that was not self-evident, we do not see it.
As far
as the discussion about service of process on October 2, 2013, Mr.
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Jorgensen gives no indication that there was any problem regarding
service.4
*
*
*
*
This case could have been handled by a first-year associate
with an hour or so of oversight by a more experienced attorney.
Ten hours’ time would have been more than sufficient to confer with
the client concerning the debt, negotiate with the debtor to
determine whether a lawsuit would be necessary, draft a litigation
hold letter, draft a simple one-count breach of contract complaint,
supervise service of process and prepare a motion for default
judgment when the defendant failed to appear.
It would also have been appropriate for Mr. Jorgensen to do
all of the work himself and to charge his $333.00 hourly rate for
it.
Mr. Carlson’s rate of $765.00 is patently inappropriate for
the simple tasks involved.
Moreover, it was not necessary for two
attorneys to be spending time on the case.
Messrs. Carlson and
Jorgensen not only individually spent time that was unnecessary,
they duplicated each other’s unnecessary time. Their combined time
comes to 62.25 hours (18.75 for Carlson and 43.5 for Jorgensen).
An honest and diligent attorney does well to find eight genuinely
billable hours in a day, regardless of how many hours he or she may
spend at the office.
The total of 62.25 hours claimed by Messrs.
4/
See Exhibit 1 to Plaintiff’s Motion for Default Judgment, at 2 (return
of special process server showing personal service on defendant’s agent at
defendant’s corporate headquarters).
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Carlson and Jorgensen, at 8 chargeable hours a day, would represent
about 7.8 lawyer-days.
To suggest that the necessary work in this
case would have taken a diligent lawyer almost eight days to
perform is absurd.
Conclusion
We find that the maximum amount of time that was necessary for
plaintiff’s attorneys to spend on this case to date was twelve
hours.
The appropriate hourly rate for the work is $333.00.
We
will therefore award plaintiff its attorneys’ fees in the amount of
$4,000.00.
Plaintiff also seeks costs in the amount of $1,074.71.
amount includes $474.61 in Westlaw research costs.
This
However, the
attorneys have not indicated what research was done, and we have no
basis for finding that it was necessary.
Accordingly, we deduct
$474.61 from the requested costs, and award costs in the amount of
$600.10.
We will enter a default judgment granting plaintiff $77,910.94
in principal and interest owing as of September 30, 2013, together
with attorneys’ fees in the amount of $4,000.00 and costs in the
amount of $600.10.
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DATE:
February 12, 2014
ENTER:
_______________________________________________
John F. Grady, United States District Judge
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