Sklarov et al v. BMO Harris, N.A. as Successor in Interest to Amcore Bank, N.A. et al

Filing 47

MEMORANDUM Opinion and Order written by the Honorable Rebecca R. Pallmeyer on 9/26/2017: BMO's petition for attorneys' fees 33 is granted. Fees are awarded in the amount of $50,257.50 and costs in the amount of $659.35 as outlined in this order. Mailed notice. (pjg, ) Modified text on 9/26/2017 (pjg, ).

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
VAL a/k/a VLADIMIR SKLAROV, ATG TRUST )

COMPANY AS SUCCESSOR TRUSTEE TO
NORTHERN TRUST COMPANY AS
TRUSTEE UNDER TRUST AGREEMENT
DATED FEBRUARY 15, 2001 AND
KNOWN AS TRUST NUMBER 9810,
Plaintiffs,
v.
BMO HARRIS, N.A., AS SUCCESSOR
IN INTEREST TO AMCORE BANK, N.A.,
BANK OF MONTREAL, AND FEDERAL
DEPOSIT INSURANCE CORPORATION,
Defendants.

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

No. 15 C 2991
Judge Rebecca R. Pallmeyer

MEMORANDUM OPINION AND ORDER
Plaintiffs Vladimir and Sharon Sklarov sued the holder of their mortgage, BMO Harris
Bank, N.A. (“BMO”), alleging that BMO’s involvement in the manipulation of the LIBOR rate
violated the Sherman Antitrust Act and violated the Sklarovs’ rights under state law.

The

Sklarovs had attempted to assert identical theories in another federal court case and two state
proceedings, all of which had been rejected or dismissed. Sklarov raised the issue yet again in
this case, but failed to obtain proper service on BMO. After dismissing the amended complaint,
the court granted BMO’s motion for sanctions for the fees and costs incurred in defending this
action.

BMO’s petition is now before the court.

BMO requests a total of $55,918.50 in

attorneys’ fees and expenses in the amount of $694.75. For the reasons below, the court
awards costs in the amount requested but reduces BMO’s fee award to $50,257.50.
BACKGROUND
The facts of this case, presented in detail in the court’s previous opinion granting the
motion for sanctions (Order (Sept. 1, 2016) [31]), are briefly summarized here. Sklarov was, at
one time, the beneficiary of a trust which owned a multi-unit commercial property in Bensenville,

Illinois. (Am. Compl. [9], at ¶¶ 1–3.) 1 The trust owned the property subject to a mortgage held
by Amcore Bank. (Am. Compl. ¶ 4.) BMO Harris Bank, N.A. eventually acquired the mortgage
after Amcore failed in 2010.

(See id.; see also Federal Deposit Ins. Co., Failed Bank

Information:

Amcore

Information

for

Bank,

Nat’l

Ass’n,

Rockford,

IL,

FDIC.GOV,

https://www.fdic.gov/bank/individual/failed/amcore.html (last visited September 21, 2017).)
The interest rate on the promissory note is tied to the “LIBOR” rate. (Am. Compl. ¶ 8.)
LIBOR—short for the “London Interbank Offered Rate”—is the rate at which major Londonbased banks expect to pay to borrow money at a given time, and, more importantly, is “a
benchmark for short term interest rates in the global money market.”

(Am. Compl. ¶ 12.)

According to Sklarov’s complaint, many banks use LIBOR to set rates on various types of loans,
including Sklarov’s promissory note, which, the court infers, had a variable rate. (Am. Compl. ¶¶
12–13.)
In September 2007, news broke that certain major banks—not including BMO—were
artificially suppressing the LIBOR rate, keeping it lower than the market would support in order
to benefit their portfolios. (Am. Compl. ¶¶ 16–20.) Sklarov alleges that BMO, as a major
financial institution, knew that the LIBOR rate was being manipulated after the media began
reporting and investigating the story. (Am. Compl. ¶ 20.) Nevertheless, BMO continued to
charge Sklarov a variable rate based on LIBOR. (Am. Compl. ¶¶ 8–10.) Eventually, Sklarov fell
behind on payments and BMO filed an action for foreclosure on the Bensenville property in July
2012. (Am. Compl. ¶¶ 7.) When BMO moved for summary judgment in the foreclosure action,
Sklarov attempted to raise arguments related to the LIBOR manipulation, but the state court

1

Plaintiff’s complaint restarts the numbering of paragraphs in the “Background”
section, which itself begins on page 4 of the amended complaint. The cited paragraph numbers
come from the background section. Because Sharon Sklarov was removed as a plaintiff from
the suit with the filing of the amended complaint (see Am. Compl. [9]), the court here refers only
to Vladimir Sklarov.
2

granted BMO’s motion and denied Sklarov’s request for leave to file a counterclaim. (See Am.
Compl. ¶¶ 8–16.)
There were a number of defects with Sklarov’s theory. The primary issue, of course, is
that Sklarov paid less on the loan as a result of the banks’ suppression of the LIBOR rate, and
thus, he was not injured and had no claim based on the manipulation of LIBOR. That is what
Judge Gibson of the Circuit Court of DuPage County found, when Sklarov raised this claim as a
defense in the foreclosure action, see Report of Proc’s at 7–8, BMO Harris v. Vladimir Sklarov,
No. 12 CH 3822 (Ill. Cir. Ct. May 13, 2014), Ex. 4 to Defs.’ Mot. to Dismiss [14-4], at 7–8, and
what Judge Buchwald of the Southern District of New York found, when she denied the
Sklarov’s petition to intervene in the FDIC’s case against several of the culpable banks, see In
re LIBOR-Based Fin. Instruments Litig., Nos. 11 MD 2262 & 14 Civ. 1757, 2014 WL 6603417
(S.D.N.Y. Nov. 14, 2014). Finally, Sklarov attempted to invoke the alleged LIBOR manipulation
against BMO in a state court complaint in Cook County. This action, too, was unsuccessful; the
court granted BMO’s motion to dismiss the complaint with prejudice. Sklarov v. BMO Harris
Bank, N.A., Nos. 13 CH 959 & 13 CH 9378 (Ill. Cir. Ct. Oct. 23, 2014), Ex. 8 to Defs.’ Mot. to
Dismiss [14-8]. Sklarov did not appeal. Instead, he filed this action against BMO in this court in
April 2015 with the trustee of the trust that held the property, ATG Trust Company, and Sharon
Sklarov, another trust beneficiary, as co-plaintiffs. In this action, Sklarov named as defendants
BMO, the Bank of Montreal—the parent company of BMO’s sole shareholder—and the Federal
Deposit Insurance Corporation (“FDIC”) as defendants, alleging violations of the Sherman
Antitrust Act, fraud, and several contract claims. (See generally Am. Compl.)
BMO (and the Bank of Montreal, jointly represented and referred to solely as “BMO”)
moved to dismiss the action against it in this court, as well. The court promptly granted the
motion. (Minute Order (Nov. 19, 2015) [24].) Sklarov not only had failed to allege an injury, but
his claim was barred by res judicata, and there was a procedural defect: Sklarov had made no
legitimate attempt to serve BMO. (Id.) Instead, he had sent BMO a purported “summons form”
3

not signed by the clerk, without the court’s seal, and listing an incorrect return date. (Order
(Sept. 1, 2016), at 2.) Sklarov’s counsel failed to appear at the presentment date for the motion
to dismiss or at the hearing, and, though his attorneys did file a response to BMO’s motion, the
response failed to engage with Sklarov’s lack of an injury or meaningfully respond to the res
judicata issue. (Id. at 2–3.)
After the court granted the motion to dismiss, BMO moved for sanctions under Rule 11.
(See Mot. for Sanctions [25].) The court granted this motion as well. (Order (Sept. 1, 2016).)
BMO had warned Sklarov—and his counsel—by serving an unfiled Rule 11 motion on Sklarov’s
counsel (the same attorneys who represented him in both the Illinois state court action and the
New York attempted intervention) after he filed his initial complaint. (Id. at 2.) Nevertheless,
Sklarov not only failed to take advantage of Rule 11’s 21-day “safe harbor” to withdraw his
allegations, but further pursued the action by filing an amended complaint.

See Corley v.

Rosewood Care Ctr., 142 F.3d 1041, 1058 (7th Cir. 1998). The amended complaint had no
merit for the reasons explained above, and, after a full round of briefing, the court granted
BMO’s motion and directed BMO to petition for fees pursuant to Local Rule 54.3. (See Order
(Sept. 1, 2016).)
BMO has requested the following fees that it paid its attorneys for work prior to the filing
of the fee petition, less what BMO refers to as a “courtesy” credit that the law firm, Reed Smith,
LLP, deducted from the charges:
Timekeeper
Diane Green-Kelly
John A. Cullis
Leonard E. Hudson
Aleksandra Chernin
(Librarian)
Mark A. Fishback
(Docket Clerk)
Subtotal

Hours
6.4
22.2
58.1
.2

Rate
$770.00
$550.00
$500.00
$245.00

Total
$4,928.00 2
$12,210.00
$29,050.00
$49.00

.3

$205.00

$61.50
$49,298.50

2

The Joint Statement totals Ms. Green-Kelly’s pre-petition time as $4,949.00, but
that appears to be a mathematical error.
4

“Courtesy” Deduction
Total

($2,281.00)
$44,017.50

(Joint Statement Regarding Atty’s Fees [32], at ¶1; Decl. of John Cullis [35], at 2 n.1.) BMO
requests $659.35 in various costs as well. (Joint Statement at ¶ 2.) Finally, BMO requests fees
associated with preparing the fee petition as follows:
Timekeeper
Diane Green-Kelly
John A. Cullis
Leonard E. Hudson
Rosede A. Olson
(Paralegal)
Total

Hours
.5
3.6
5.7
19.00

Rate
$800.00
$550.00
$500.00
$350.00

Total
$400.00
$1,980.00
$2,850.00
$6,650.00
$11,880.00

DISCUSSION
Rule 11 of the Federal Rules of Civil Procedure establishes a baseline standard of
conduct for attorneys involved in any case in federal court. See FED. R. CIV. P. 11. Under Rule
11, a party that brings a frivolous claim may be required to pay the attorneys’ fees that the
opposing party incurred in defending that claim. See FED. R. CIV. P. 11(c)(4); Wade v. Soo Line
R.R. Corp., 500 F.3d 559, 562 (7th Cir. 2007). A party may recover only those attorneys’ fees
that directly flow from the sanctionable conduct. Divane v. Krull Elec. Co., Inc., 200 F.3d 1020,
1030–31 (7th Cir. 1999); Wade, 500 F.3d at 563. BMO here seeks fees incurred in defending
the motion to dismiss, the motion for sanctions, and preparing the fee petition, all of which
followed directly from fending off Sklarov’s complaint. Sklarov does not argue otherwise.
Sklarov does, however, argue that the hourly rates sought and the hours expended by
defense counsel in performing those tasks are excessive. A court must, in awarding sanctions,
consider both (1) whether the rate requested by a prevailing party is reasonable, and (2)
whether a reasonable amount of time was expended on the tasks to be compensated. Szopa v.
United States, 460 F.3d 884, 886 (7th Cir. 2006); Budget Rent-A-Car Sys., Inc. v. Consolidated
Equity LLC, 428 F.3d 717, 718 (7th Cir. 2005). The party seeking the fee must establish the
reasonableness of the requested award. See Montanez v. Simon, 755 F.3d 547, 553 (7th Cir.
5

2014) (allocating burden of proof to prevailing party in 42 U.S.C. § 1988 cases). The court finds
that BMO has carried its burden to demonstrate that the rates charged and the hours expended
were reasonable, and Sklarov has produced no contradictory evidence.
I.

Rate Charged
A rate is reasonable if it is consistent with the market rate for comparable legal work

performed in the local legal market. Montanez, 755 F.3d at 543. The Seventh Circuit has
consistently held that “the best evidence of whether attorney's fees are reasonable is whether a
party has paid them.” Cintas Corp. v. Perry, 517 F.3d 459, 469 (7th Cir. 2008). John Cullis, the
Reed Smith partner who “manag[ed] the client relationship for this matter,” attested based on
his personal knowledge that BMO had paid the requested rates. (Decl. of John Cullis [35], at
¶ 12.) Furthermore, each attorney represented that the rates charged were consistent with
those of other attorneys in the Chicago area. (Decl. of Diane Green-Kelly [34], at ¶ 10; Cullis
Decl. ¶ 7; Decl. of Leonard Hudson [36], at ¶ 7.) The court finds this unsurprising; BMO, a large
institutional client, presumably commands leverage with its lawyers to achieve a fair market
rate.
Sklarov contends that this evidence is insufficient to meet BMO’s burden to establish
that defense counsel charged reasonable market rates.

The cases that Sklarov relies on,

however, deal with the unique task of setting a market rate in § 1988 civil rights cases. In one
case cited by Sklarov, the Supreme Court noted that determining the rates charged by attorneys
hired in the fee-for-service private market is a straightforward exercise because those rates are
“discussed with the client, may be negotiated, and it is the client who pays whether he wins or
loses.” Blum v. Stenson, 465 U.S. 886, 895 n.11 (1984). In the context of civil rights feeshifting, in contrast, the “fee determination is made by the court in an entirely different setting:
there is no negotiation or even discussion with the prevailing client, as the fee—found to be
reasonable by the court—is paid by the losing party.” Id. Sklarov cites to several cases where
the court relied on third-party affidavits of other attorneys in the legal community to establish a
6

prevailing market rate, but each of those concerned setting rates in civil rights cases, where no
negotiated rate was charged to—or paid by—the client. See Glover v. Johnson, 934 F.2d 703,
705, 715 (6th Cir. 1991) (prisoner rights litigation compensated under 42 U.S.C. § 1988);
Norman v. Hous. Auth. of City of Montgomery, 836 F.2d 1292, 1299 (11th Cir. 1988) (in public
housing tenants rights litigation, observing that establishing market rate in civil rights context
requires “more than the affidavit of the attorney performing the work”).
The final case cited by Sklarov, Columbus Mills, Inc. v. Freeland, throws no real shade
on the claims made by BMO’s counsel. In Columbus Mills, the Eleventh Circuit affirmed an
award of fees to a corporation for defense of a vexatious shareholder suit under Georgia law.
918 F.2d 1575, 1577 (11th Cir. 1990). The court also affirmed the district court’s finding that the
fee rate charged to and paid by the corporation was reasonable. Id. at 1580. True, the court
observed that the Eleventh Circuit generally requires “more than an affidavit from the attorney
performing the work” to establish a reasonable fee rate, but gave the matter only glancing
attention, noting merely that defendant corporation had “produced another affidavit which
established that the rates were reasonable.” Id. The court instead focused on the fact that, as
in this case, the corporation paid its attorneys’ fees throughout the litigation. Id. The court
observed that “evidence of a fee structure arrived at by private parties negotiating at arms
length is highly persuasive,” and affirmed the rates charged and paid by the client. Id. Whatever
the vitality of the “more than an affidavit” rule in the Eleventh Circuit where a client has paid the
fee in question, it has no purchase in the Seventh: as this Circuit has noted, a client’s
willingness to pay a rate is not “‘evidence’ about market value; it is market value.” Balcor Real
Estate Holdings, Inc. v. Walentas-Phoenix Corp., 73 F.3d 150, 153 (7th Cir. 1996). BMO has
carried its burden to prove that the rate requested is reasonable, as evidenced by the attorneys’
affidavits and by the fact that BMO paid them.
Indeed, Sklarov himself initially found no cause to object to these rates; in his Local Rule
54.3 submission, Sklarov did not contest defense counsel’s rates, and those rates have not
7

changed in the petition before the court. (Joint Statement ¶ 2.) Only now, in response to the
petition, does Sklarov contend that BMO’s evidence of reasonable market rate is insufficient. If
Sklarov’s objection to the hourly rates is not waived by his failure to address it in the Rule 54.3
process, the court now overrules it.
II.

Hours Expended
A court awarding attorneys’ fees as a sanction must ensure that the time devoted to the

litigation was reasonable. Szopa, 460 F.3d at 886. “In determining the reasonable number of
hours, the court should exclude hours that are ‘excessive, redundant or otherwise
unnecessary,’” Small v. Richard Wolf Med. Instruments Corp., 264 F.3d 702, 708 (7th Cir. 2001)
(quoting Hensley v. Eckerhart, 461 U.S. 424, 434 (1983)), and a court may expect a petitioner
for fees to have exercised good “billing judgment” in eliminating duplicative hours from a
request, Hensley, 461 U.S. at 434.
Sklarov contends that the time spent by BMO’s counsel on the pre-petition aspects of
the case, 87.2 hours in total, is excessive. He broadly asserts that (1) the case was not “overly
complicated,” (2) the case was resolved relatively quickly without discovery, and (3) the use of
multiple attorneys was “unnecessary and redundant.” (Pl.’s Resp. Br. [40], at 3.) Sklarov also
objects to the 28.8 hours spent in preparing the fee petition, which he characterizes as punitive.
(Id.) Though BMO provided detailed billing records, identifying each attorney’s time spent on
the case (see Reed Smith LLP Invoices, Group Ex. 1 to Mot. for Att’y Fees [33-1] (invoices sent
to BMO broken into .1 hour increments); see also Reed Smith LLP Invoices, Group Ex. B to
Mot. for Att’y Fees [33-2] (same)), Sklarov has not pointed to any specific time entries as
objectionable.
The court finds 87.2 hours a significant but ultimately reasonable amount of time to
spend on defense of this case. Defense counsel were obliged to research the case history
(which required examination of the three other court actions filed by Sklarov), prepare a Rule 11
sanctions letter, file opening and reply briefs in support of a motion to dismiss, and fully brief a
8

motion for sanctions as well. Though the case terminated short of discovery, the matter was
pending for a year and a half and required two motions to fully dispose of it. The court sees no
unreasonable expenditures in the detailed invoices submitted to BMO during that time. (See
Reed Smith LLP Invoices, Group Ex. 1.)
Sklarov’s objection to the use of multiple attorneys is baseless.

It is common and

appropriate for law firms to allocate work among less experienced—and lower cost—lawyers
and more experienced supervisors; indeed, the court suspects that failure to do so could itself
be grounds for finding a request unreasonable. Cf. Spegon v. Catholic Bishop of Chi., 175 F.3d
544, 553 (7th Cir. 1999) (disallowing time where firm had not properly allocated work between
paralegals and clerks). The substantial majority of the casework was performed by the least
expensive attorney on the matter, Mr. Hudson, while the attorney with the highest hourly rate,
Ms. Green-Kelly, devoted just six and a half hours to supervisory oversight.

(See Joint

Statement ¶ 1.) The court does not find the number of attorneys involved objectionable.
Sklarov similarly raises few substantive objections to the time expended on the fee
petition.

Though he attached an affidavit from an experienced paralegal, Cate Saville,

concerning the appropriate amount of time to spend on fee petitions, Sklarov did not discuss or
even mention the affidavit in his brief. The court has nevertheless examined the affidavit.
Saville states that she has more than twenty years of experience as a paralegal and has drafted
at least fifty fee petitions. (Aff. of Cate Saville, Ex. 1 to Pl.’s Resp. Br. [40-1], at ¶¶ 2–3.) The
preparation of a fee petition has never taken Saville more than 1.5 hours to complete. (Id. ¶ 4.)
BMO’s three attorneys and paralegal spent a total of 28.8 hours preparing the Local Rule 54.3
joint submission, communicating with opposing counsel, and drafting the petition. (See Cullis
Aff. ¶ 11.)
The court does not agree that fee petitions should never require more than an hour and
a half of time to prepare, but concludes that the nearly 30 hours dedicated to this petition is
more time than reasonably should have been expended.
9

Particularly, the paralegal who

completed most of the work on the petition, Rosede A. Olson, spent 19 hours assembling
timesheets, drafting affidavits, locating “back-up” for costs, and preparing the Local Rule 54.3
statement. (See generally Fee Petition Invoices.) This was no doubt a significant undertaking,
but not one that should have absorbed more than two full workdays, particularly where the firm
had already submitted invoices to BMO for these fees and costs. (See Cullis Aff. ¶ 12.) For this
litigation, the court finds that time in excess of ten hours on these tasks was unreasonable.
Attorney oversight was necessary in preparing the petition, as well. In this case, all
three attorneys worked on the fee petition and together spent 9.8 hours overseeing this project.
Involvement of the three attorneys in this case may have resulted in duplicative time; for
example, several conferences between Cullis and Hudson likely could have been avoided for
this relatively straightforward task. (E.g., ReedSmith Invoice # 2869555 (Nov. 9, 2016) [33-2 at
p. 7], at 1.) Even if supervision of this task required the involvement of all three attorneys, the
court believes the task could have been completed in no more than five hours. Ms. Green-Kelly
devoted only half an hour to the petition, and this is a reasonable amount of time to provide
ultimate guidance on tasks related to the petition. Accordingly, the court will proportionally
reduce Mr. Cullis’s hours by 1.8 and Mr. Hudson’s hours by 3.0. Mr. Cullis will be compensated
for 1.8 hours, Mr. Hudson for 2.7 hours, and Ms. Green-Kelly for .5 hours.
III.

Costs
BMO requests $659.35 in costs, as well. Sklarov did not object to these costs in the

Joint Statement, nor does he identify any objections in his brief. The court will award those
costs.
CONCLUSION
BMO’s petition for attorneys’ fees [33] is granted. Fees are awarded in the amount of
$50,257.50 and costs in the amount of $659.35. Sklarov’s attorneys are jointly and severally
liable for payment of these fees. See FED. R. CIV. P. 11 advisory committee’s notes to 1983
amendment (“If the duty imposed by the rule is violated, the court should have the discretion to
10

impose sanctions on either the attorney, the party the signing attorney represents, or both . . . .”)
Pre-petition fees are calculated as follows:
Timekeeper
Diane Green-Kelly
John A. Cullis
Leonard E. Hudson
Aleksandra Chernin
(Librarian)
Mark A. Fishback
(Docket Clerk)
Subtotal
“Courtesy” Deduction
Total

Hours
6.4
22.2
58.1
.2

Rate
$770.00
$550.00
$500.00
$245.00

Total
$4,928.00 3
$12,210.00
$29,050.00
$49.00

.3

$205.00

$61.50
$49,298.50
($2,281.00)
$44,017.50

Fees incurred in preparing the petition are calculated as follows:
Timekeeper
Diane Green-Kelly
John A. Cullis
Leonard E. Hudson
Rosede A. Olson
(Paralegal)
Total

Hours
.5
1.8
2.7
10.00

Rate
$800.00
$550.00
$500.00
$350.00

Total
$400.00
$990.00
$1,350.00
$3,500.00
$6,240.00

ENTER:

Dated: September 26, 2017

_________________________________________
REBECCA R. PALLMEYER
United States District Judge

3

The Joint Statement totals Ms. Green-Kelly’s pre-petition time as $4,949.00,
though these are the hours and rate noted there. This appears to be in error, the amount above
is correct.
11