Sterling National Bank v. Bernard N. Block et al
Filing
193
MEMORANDUM Opinion and Order: For the reasons stated herein, the Court rules as follows: The Sellers' Motion for Pre- and Post-Judgment Interest (Dkt. No. 177) is denied. The Court approves the Seller's Bill of Costs (Dkt. No. 176) in part, for a total cost award of $17,150.65. Signed by the Honorable Harry D. Leinenweber on 10/10/2019: Mailed notice(maf)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
STERLING NATIONAL BANK,
Plaintiff and
Counterclaim Defendant,
v.
Case No. 16 C 9009
Judge Harry D. Leinenweber
BERNARD N. BLOCK, Trustee,
et al.,
Defendants and
Counterclaim Plaintiffs.
MEMORANDUM OPINION AND ORDER
Defendants Bernard N. Block, et al.’s Motion for Pre- and
Post-Judgment Interest (Dkt. No. 177) is denied and Defendants’
Motion for Costs (Dkt. No. 176) is granted in part and denied in
part.
I.
BACKGROUND
In addition to briefly reciting the relevant facts here, the
Court incorporates the facts set forth in its earlier ruling,
Sterling Nat’l Bank v. Block, No. 16 C 9009, 2019 WL 2491642, at
*1 (N.D. Ill. June 14, 2019). Defendants (the “Sellers”) sold their
company, Damian, to Sterling National Bank (“Sterling”) pursuant
to a stock purchase agreement (SPA). Sterling agreed to pay $25
million to purchase Damian, $2 million of which Sterling would
place into an escrow account for future indemnification claims
under the SPA. In the SPA, the Sellers represented to Sterling
that they were providing a full and accurate picture of Damian’s
finances, liabilities, and obligations.
After the Damian acquisition closed, Sterling discovered an
allegedly improper scheme in which Damian overcharged its clients
for years. Sterling then invoked the SPA’s indemnification clause
and requested that the Sellers use the money in escrow to indemnify
Sterling for its losses resulting from the alleged scheme. The
Sellers refused to indemnify Sterling, and Sterling sued, arguing
that the Sellers’ failure to disclose this scheme and to indemnify
constituted a breach the SPA. The parties cross-moved for summary
judgment, and in June of 2019, this Court entered summary judgment
for the Sellers. The Court held that it need not resolve whether
the Sellers breached the SPA by making false representations and
warranties, because Sterling failed to give timely notice of its
indemnification claim, forfeiting its rights to indemnification,
its sole remedy for claims arising under the SPA. See Sterling,
2019 WL 2491642, at *5. The Court entered final judgment on
liability on June 14, 2019, before reaching a conclusion on the
appropriate remedy or damages for the Sellers. The Sellers now
move for pre- and post-judgment interest under Federal Rule of
Civil Procedure 59(e), and for costs under Rule 54(d).
- 2 -
II.
PREJUDGMENT INTEREST
A.
Timeliness
A motion for prejudgment interest filed after entry of final
judgment is considered under Federal Rule of Civil Procedure 59(e)
as a motion to alter or amend judgment.
Whinney, 489
U.S.
169,
175–78
(1989);
Osterneck v. Ernst &
First
State
Bank
of
Monticello v. Ohio Cas. Ins. Co., 555 F.3d 564, 572 (7th Cir.
2009). The Supreme Court reasoned that prejudgment interest “is an
element of [the plaintiff’s] complete compensation,” and that it
is therefore “intertwined in a significant way with the merits of
the plaintiff’s primary case as well as the extent of his damages.”
Osterneck, 489 U.S. at 176. However, Rule 59(e) motions are “not
appropriately used to advance arguments or theories that could and
should
have
been
made
before
the
district
court
rendered
a
judgment.” Miller v. Safeco Ins. Co. of Am., 683 F.3d 805, 813
(7th Cir. 2012) (noting that district courts should use their
discretion under Rule 59(e) to award pre-judgment interest when
such an award would “fix[] an error that… slipped into the case”).
Sterling argues that the Sellers’ request for prejudgment
interest is untimely because they failed to request such relief in
their motion for summary judgment. Sterling claims that the Sellers
“moved
for
summary
judgment,
but
never
sought
pre-judgment
interest,” nor “request[ed] pre-judgment interest as part of their
- 3 -
defense in their Answer.” (Pl.’s Resp. at 3, Dkt. No. 183.)
Contrary to Sterling’s assertion, a brief review of the record in
this case reveals that the Sellers clearly stated their intent to
seek pre-judgment interest. Counts I, II, and IV of the Sellers’
counterclaims stated that the Sellers are seeking pre- and postjudgment interest. (See Answer ¶¶ 32, 39, 53, Dkt. No. 20.)
Soon
after the Sellers filed their counterclaims, counsel for Sterling
raised this issue in court:
[T]here is a counterclaim filed in the case. … The
response we got back was, “Well, we think you owe us the
money plus interest at 12 percent.” There’s a debate
over the interest rate. … If they give us the wiring
instructions, at the very least, the principal can be
paid. We can fight about the interest rate at a later
time…
(Tr. Dec. 7, 2016.) The Sellers raised their intent to seek
interest again in a motion that was later argued in court. (Mot.
for Add. Dep. ¶ 1, Dkt. No. 55 (“Sellers filed a counterclaim and
are seeking damages in the amount of $2,000,000… plus interest.”).)
This is not a case where the prevailing party raised the issue of
prejudgment interest “for the first time in a Rule 59(e) motion,
after summary judgment was entered.” First State Bank of Monticello
v. Ohio Cas. Ins. Co., 555 F.3d 564, 572 (7th Cir. 2009).
Additionally,
prejudgment
the
interest
Court
in
briefly
its
summary
addressed
judgment
the
matter
opinion.
of
See
Sterling, 2019 WL 2491642, at *6-7. After denying summary judgment
- 4 -
to Sterling on all counts in its Complaint because it is not
entitled to indemnification, the Court noted that the Sellers had
asserted four counterclaims in their Answer. The Court found that
the Sellers had only clearly moved for summary judgment on their
request for a judgment declaring that: (a) Sterling is not entitled
to indemnification from the escrow; (b) Sterling’s December 11,
2015, letter to the escrow agent in which Sterling invoked the
indemnity clause is void; (c) Sellers are entitled to the money
held in escrow; and (d) the Sellers are entitled to prejudgment
and post-judgment interest at the rate of 12% annum. Id. at *7.
The Court held that a declaration regarding (a), that Sterling is
not entitled to indemnification, would be redundant given that the
Court had already granted summary judgment in the Sellers’ favor
on this issue. Because the Sellers’ summary judgment motion and
briefing only argued the substance of (a), the Court declined to
enter a declaratory judgment on issues (b), (c), and (d). Id.
Ideally the Sellers would have more explicitly re-stated
their request for prejudgment interest in their motion for summary
judgment, rather than incorporating it by reference to their
request for “summary judgment on their Counterclaim.” (Defs.’ Mot.
for Summary J. at 2, Dkt. No. 128.) However, even if they had, a
full briefing of pre-judgment interest at that point would have
been premature. See Chicago Imp., Inc. v. Am. States Ins. Co., No.
- 5 -
09 CV 2885, 2016 WL 4366494, at *2 (N.D. Ill. Aug. 16, 2016)
(“While arguments presented for the first time in a Rule 59(e)
motion ordinarily are deemed forfeited, the grant or denial of
prejudgment interest is an exception to this general rule because
elsewise parties would be required to put the cart before the horse
and argue about prejudgment interest before the underlying issues
of liability and damages have been resolved.”). Therefore, the
Court finds the Sellers’ motion for prejudgment interest timely.
Under Rule 59(e), the Court has reconsidered its decision to treat
the Sellers’ arguments for prejudgment interest as waived, and
will now assess whether, and to what extent, prejudgment interest
is appropriate.
B.
Exclusive Remedy under the SPA
Illinois law governs the parties’ dispute over whether the
Sellers are entitled to prejudgment interest. See Travelers Ins.
Co. v. Transp. Ins. Co., 846 F.2d 1048, 1053 (7th Cir. 1988)
(courts apply state law to an award of prejudgment interest in
diversity suits). Under Illinois law, “the general rule is that
prejudgment
interest
cannot
be
awarded
unless
by
statute
or
agreement of the parties.” In re Air Crash Disaster Near Chicago,
Illinois, on May 25, 1979, 644 F.2d 633, 638 (7th Cir. 1981). The
relevant statute is the Illinois Prejudgment Interest Act (the
“Act”), which grants interest of 5% per year for all moneys after
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they become due on any… instrument of writing… and on money
withheld by an unreasonable and vexatious delay of payment.” W.
Bend Mut. Ins. Co. v. Procaccio Painting & Drywall Co., 794 F.3d
666, 680 (7th Cir. 2015) (citing 815 ILCS 205/2).
Sterling argues that the Sellers cannot recover prejudgment
interest under the Act because they waived the right to pursue
statutory prejudgment interest by entering into the SPA. Sterling
derives this argument from Section 8.09 of the SPA, which contains
two relevant portions. The first identifies indemnification as the
sole remedy for claims arising out of the SPA:
[The] sole and exclusive remedy with respect to any and
all claims… for any breach of any representation,
warranty, covenant, agreement or obligation set forth
herein or otherwise relating to the subject matter of
this Agreement, shall be pursuant to the indemnification
provisions…
(SPA § 8.09 (the “exclusive remedy provision”), Ex. A to Pl.’s
Resp., Dkt. No. 183-1.) Section 8.09 also includes a broad waiver
of
any
rights
parties
may
have
had
outside
the
SPA’s
indemnification procedures:
[E]ach party waives, to the fullest extent permitted under
Law, any and all rights… for any breach of any representation,
warranty, covenant, agreement, or obligation set forth herein
or otherwise relating to the subject matter of this Agreement
it may have against the other parties hereto… arising under
or based upon any Law except pursuant to the indemnification
provisions…
(Id. (the “waiver provision”).)
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Contract interpretation “starts with the language of the
agreement, which must not be interpreted in a way contrary to
the plain, obvious, and generally accepted meaning of its terms.”
Asta, L.L.C. v. Telezygology, Inc., 629 F. Supp. 2d 837, 843 (N.D.
Ill.
2009)
(citing
Illinois
law).
Courts
interpret
written
contracts “according to the conventional meaning of their terms,
that is, literally.” Bank of Am., N.A. v. Moglia, 330 F.3d 942,
946 (7th Cir. 2003). This is “especially appropriate in the case
of a negotiated contract involving substantial stakes between
commercially sophisticated parties… who know how to say what they
mean and have an incentive to draft their agreement carefully.”
Id.
According
mention
to
the
pre-judgment
“improperly
block[s]
section
too
is
vague
Sellers,
interest,
because
or
disbursement
to
what
of
constitute
Section 8.09
to
the
a
do
when
escrow”
waiver
of
does
one
funds,
not
party
that
pre-judgment
interest in this context. (Defs.’ Reply at 7, Dkt. No. 188.) The
Sellers
are
correct
in
that
the
SPA
does
not
specifically
contemplate what to do if the buyer makes an indemnification claim
on the escrow amount, preventing release of the escrow amount to
the seller, and then the buyer’s indemnification claim fails in
litigation because it was untimely. However, the SPA need not
predict every scenario to which § 8.09 might apply. It is clearly
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written to apply to every legal dispute arising out of the contract
other than circumstances involving fraud, criminal activity, or
intentional misconduct. (See SPA § 8.09.)
The Sellers argue that “prejudgment interest could not have
been
waived
because
there
is
no
evidence
that
the
parties
anticipated this kind of claim.” (Defs.’ Reply at 7.) The Seventh
Circuit
has
noted
that
Illinois
courts
consistently
enforce
waivers “[w]hen they are clear and unambiguous.” Chrysler Credit
Corp. v. Marino, 63 F.3d 574, 577 (7th Cir. 1995). Before a party
is deemed to have “waived or relinquished a right or remedy
available to it under law, a clear and distinct manifestation of
such an intent must be found.” Am. Nat. Bank & Tr. Co. of Chicago
v. K-Mart Corp., 717 F.2d 394, 398 (7th Cir. 1983). However, in
this case, Section 8.09 explicitly states that indemnification is
the exclusive remedy available to the parties. See id. (holding,
in landlord-tenant dispute, that the lease did not provide the
exclusive remedies available to the tenant because the lease did
not
“state
that
remedies
provided
in
the
contract
are
mandatory, nor does it indicate, expressly or impliedly, that
those
remedies
are
to
be
exclusive”).
Section
8.09
clearly
forecloses all remedies for breach of contract if the Sellers do
not follow the SPA’s indemnification procedures. This is the
standard the Sellers urged the Court to hold Sterling to in ruling
- 9 -
on liability, despite the fact that the SPA does not specify what
the available remedies are if Sterling discovers that Damian
overcharged its customers. The Sellers must be held to the same
standard now. The “breadth of a contractual provision need not
detract from the clarity of its meaning.” Chicago Tribune Co. v.
N.L.R.B., 974 F.2d 933, 937 (7th Cir. 1992).
A further indication that the parties anticipated “this kind
of claim”—in which the Sellers seek prejudgment interest from
Sterling—is
SPA
§ 8.03.
Section
8.03
specifies
that
Sterling
“shall indemnify” the Sellers and “shall pay and reimburse each of
them for any and all Losses incurred or sustained by, or imposed
upon, the [Sellers] based upon, arising out of, with respect to or
by reason of: any breach or non-fulfillment any covenant, agreement
or obligation to be performed by [Sterling] under the SPA.” (SPA
§ 8.03 (emphasis added).) The SPA defines “losses” as “all losses,
damages, liabilities, deficiencies, Actions, judgments, interest,
awards, penalties, fines, or out of pocket third party costs or
expenses of whatever kind… ” (SPA at 6 (emphasis added).) Because
prejudgment interest is a “loss” within the meaning of § 8.03, the
Sellers would have been able to seek prejudgment interest had they
followed the SPA’s indemnification procedures.
To preserve their ability to seek prejudgment interest, the
Sellers
would
have
had
to
give
- 10 -
Sterling
notice
of
their
indemnification claim either “reasonably promptly” or no later
than 10 days after the Sellers became aware of their claim. (See
SPA § 8.05(c).) The first $1 million from escrow was due to the
Sellers on December 31, 2015, and the second $1 million was due 18
months after closing (which occurred on February 27, 2015). (See
SPA
§ 2.02(b).)
By
making
an
indemnification
claim,
Sterling
prevented the release of the funds from the escrow account to the
Sellers. (Id.) Sterling invoked the indemnity clause for the full
$2 million in escrow on December 11, 2015. The Sellers began to
experience loss of interest on December 31, 2015, the day they
would have otherwise received their first $1 million. To avoid
forfeiting their ability to recover lost interest, the Sellers
would have had to notify Sterling of their indemnification claim
by December 21, 2015—ten days after they became aware that Sterling
made
an
indemnification
claim.
(See
SPA
§ 8.05(c).)
This
interpretation does not render an absurd result. See Bank of Am.,
N.A.
v.
Moglia,
330
F.3d
942,
946
(7th
Cir.
2003)
(“Even
sophisticated lawyers and businessmen sometimes stumble in their
use of language… or fail to anticipate contingencies that may make
the language of the contract yield absurd results if it is read
literally, and if these circumstances are evident to the court the
contract
will
obligation
to
not
make
be
an
interpreted
literally.”).
indemnification
- 11 -
claim
in
The
Sellers’
response
to
Sterling’s indemnification claim is onerous, but it is not absurd.
Section 8.09 is clear that following the SPA’s indemnification
procedures is the only way to pursue remedies under the SPA, and
the parties explicitly waived any remaining statutory right to
prejudgment interest that they may have had.
The Sellers point to a similar case from the Southern District
of New York, in which the parties entered into a merger agreement,
which stated that indemnification rights under the agreement were
the “sole and exclusive remedies.” See Katzman v. Helen of Troy
Texas Corp., No. 12 CIV. 4220, 2013 WL 1496952, at *4 (S.D.N.Y.
Apr. 11, 2013). Seventeen months after closing, the acquirer
“improperly block[ed] release of nearly $9.4 million in escrow
funds.” The court observed that because the escrow fund “was
designed for a distinct purpose[:]… to compensate [acquirer] for
later-discovered breaches by [the seller] of its representations
in the Merger Agreement,” a claim for prejudgment interest by the
seller
against
the
buyer
was
in
“waters
uncharted
by
[the]
agreement.” Id. at *5-6. As there was “no indication in the
[agreement]… that the parties ever anticipated a controversy of
this nature,” the Court found that the exclusive remedies provision
in the agreement did not prevent the seller from seeking statutory
prejudgment interest. Id.
- 12 -
However, unlike the agreement at issue in Katzman, the SPA
does indicate that the parties anticipated a controversy in which
the buyer, Sterling, would have to indemnify the Sellers. SPA
§ 8.03, titled “Indemnification by Buyer,” clearly contemplates
the possibility. Additionally, SPA § 8.06, which concerns the
accumulation of interest once an indemnifying party fails to pay
for losses in certain circumstances, reinforces the notion that
either Sterling or the Sellers could ultimately be liable for
payments
under
the
indemnification
provisions.
Section
8.06
states, “[o]nce a Loss is agreed to… or finally adjudicated to be
payable… the Indemnifying Party shall satisfy its obligations… by
wire transfer of immediately available funds from the Sellers or
the Buyer, as the case may be.” (SPA § 8.06 (emphasis added).)
Two other contractual provisions support the conclusion that
the SPA does not allow parties to seek statutory prejudgment
interest independent of making an indemnification claim. First,
the parties’ Escrow Agreement provides a mechanism for the money
in escrow to gain interest. (See Escrow Agreement at 1, 13, Ex. B
to Pl.’s Resp., Dkt. No. 183-2.) The Escrow Agreement authorizes
the escrow agent to invest the escrow amount “pursuant to joint
written instructions signed by” the Sellers and Sterling. (Id. at
13.) Sterling contends, and the Sellers do not dispute, that the
Sellers never made any effort to instruct the escrow agent to
- 13 -
invest the escrow amount. Allowing the Sellers to obtain statutory
prejudgment interest on the escrow amount now would render both
SPA § 8.09 and the Escrow Agreement superfluous. Second, SPA § 8.06
specifies that the indemnifying party must pay a 12% interest rate
on a loss that (1) the indemnifying party “agrees to,” or (2) is
“finally
adjudicated
to
be
payable”
in
a
“non-appealable
adjudication.” (See SPA § 8.06.) The fact that the SPA provides a
process for the parties to recover post-judgment interest while
being
silent
on
prejudgment
interest
indicates
that
the
SPA
blocks
the
precludes recovery of statutory prejudgment interest.
The
Sellers
also
contend
that
SPA
§
10.09
application of SPA § 8.09 to their prejudgment interest claim,
because Section 10.09 requires waivers to “expressly identify”
what is being waived. But Section 10.09, titled “Amendment and
Modification; Waiver,” is not related to Section 8.09. Section
10.09 outlines the parties’ ability to waive provisions of the
SPA. It states that no waiver of any SPA provision shall be
effective “unless explicitly set forth in writing and signed by
[the parties].” (SPA § 10.09.) A waiver of one SPA provision will
not operate to waive any other SPA provision unless such other
provision is “expressly identified.” (Id.) Section 10.09 does not
modify or add additional requirements to Section 8.09, in which
- 14 -
parties waive all remedies and rights other than indemnification.
This argument fails.
Finally, the Sellers argue that SPA § 8.09’s exceptions for
intentional misconduct apply to this case. The SPA provides that
indemnification is the “sole and exclusive remedy” for all claims
“other
than
claims
arising
from
fraud,
criminal
activity
or
intentional misconduct.” (SPA § 8.09.) The parties’ waiver of “any
and all rights, claims and causes of action” does not apply to
“any remedy on account of any party’s fraudulent, criminal or
intentional misconduct.” (Id.) The Sellers contend that Sterling’s
December 11, 2015 letter, in which it gave notice to the escrow
agent that it was making an indemnification claim for the full $2
million in escrow, was intentional misconduct because “Sterling
knew or should have known that it had no claim to the funds in the
escrow.” (Defs.’ Reply at 6.) This Court held that Sterling’s
notice was untimely under SPA § 8.05, freeing the Sellers of their
obligation to indemnify. Sterling, 2019 WL 2491642, at *6. However,
late notice is different from intentional misconduct. The Sellers
have not established any facts that would indicate Sterling’s late
notice was anything other than a faulty reading of its obligations
under the SPA. And the fact that Sterling made a claim for the
full $2 million in escrow, when the Sellers contend that in fact
Sterling
would
only
have
been
able
- 15 -
to
recover
approximately
$700,000, is insufficient to establish intentional misconduct.
Thus, this argument fails. The Sellers cannot recover prejudgment
interest.
III.
POST-JUDGMENT INTEREST
The Sellers urge that they are entitled to post-judgment
interest on the $2 million in escrow beginning on June 14, 2019,
the date of the Court’s summary judgment opinion. Civil litigants
who win money judgments in district courts are entitled to post
judgment interest. Pace Commc’ns, Inc. v. Moonlight Design, Inc.,
31 F.3d 587, 591 (7th Cir. 1994). 28 U.S.C. § 1961 provides that
“[i]nterest shall be allowed on any money judgment in a civil case
recovered in a district court.” 28 U.S.C. § 1961. The statutory
rate for post-judgment interest is the weekly average one-year
constant maturity Treasury Yield for the calendar week preceding
the date of the judgment. Id. Parties can contract around the
statutory post-judgment interest rate. See Cent. States, Se. & Sw.
Areas Pension Fund v. Bomar Nat., Inc., 253 F.3d 1011, 1020 (7th
Cir. 2001) (“It is well established that parties can agree to an
interest rate other than the standard one contained in 28 U.S.C.
§ 1961.”). Sterling argues that SPA § 8.06 displaces the statutory
post-judgment interest regime. Section 8.06 specifies that the
indemnifying party must pay a 12% interest rate on a loss that (1)
the indemnifying party “agrees to,” or (2) is “finally adjudicated
- 16 -
to
be
payable”
§ 8.06.)
in
Interest
a
“non-appealable
begins
to
adjudication.”
accumulate
five
days
(See
SPA
after
the
indemnifying party fails to pay after either agreeing to pay or
receiving a non-appealable adjudication. (Id.)
The parties dispute whether SPA § 8.06 displaces 28 U.S.C.
§ 1961, and if so, whether a “non-appealable decision” has taken
place. The answer to this problem can be simplified into two
conclusions: the Sellers are not entitled to either statutory or
contractual post-judgment interest because (1) 28 U.S.C. § 1961
requires a “money judgment,” and (2) Section 8.06 of the SPA
requires a “non-appealable adjudication,” neither of which the
Sellers have.
First, the Court’s June 14, 2019 summary judgment opinion is
not a money judgment. The Seventh Circuit has not defined “money
judgment.”
The
Ninth
and
Third
Circuit
have
defined
“money
judgment” in the 28 U.S.C. § 1961 context as requiring: (1) “an
identification of the parties for and against whom judgment is
being entered,” and (2) “a definite and certain designation of the
amount which plaintiff is owed by defendant.” Ministry of Def. &
Support for the Armed Forces of the Islamic Republic of Iran v.
Cubic Def. Sys., Inc., 665 F.3d 1091, 1101 (9th Cir. 2011) (citing
Eaves v. Cty. of Cape May, 239 F.3d 527, 534 (3d Cir. 2001)). This
definition accords with prior Seventh Circuit interpretations of
- 17 -
the meaning of “money judgment” in § 1961. In EEOC v. Gurnee Inns,
Inc., 956 F.2d 146 (7th Cir.1992), the Seventh Circuit considered
a § 1961 post-judgment interest award pegged to a district court
order
that
the
defendant
pay
specified
sums
to
a
number
of
employees, “less appropriate payroll deductions.” Id. at 147. The
court concluded that this order was a “money judgment,” stating,
“the awards did not lose their character as sums certain simply
because they were subject to the mechanical task of computing the
payroll deductions.” Id. at 149. In Disney v. Pritzker, 411 F.2d
658 (7th Cir. 1969), the Seventh Circuit found a § 1961 interest
award was properly based on a “money judgment” when the judgment
stated: “‘It Is Further Ordered and Decreed that defendants pay or
cause to be paid to plaintiffs the sum of $56,953.56.” Id. at 659.
The judgment gave the defendants two options: (1) pay plaintiffs
that sum directly, or (2) let the Treasurer of the United States,
which was holding that sum for defendants pending proceedings in
a different tribunal, release the money to plaintiffs. Id. The
court held that such an order is a “money judgment” because
“regardless of the route taken by defendants, plaintiffs were
recovering on the money judgment awarded in the decree.” Id at
660.
Thus,
Seventh
Circuit
precedent
indicates
that
a
money
judgment must contain a definite designation of the amount that
the prevailing party is owed.
- 18 -
Count VIII of Sterling’s Complaint asserted that the Sellers
breached the SPA by not indemnifying Sterling for the losses it
incurred due to the alleged overcharging scheme. The Court’s June
14, 2019 opinion entered summary judgment in the Sellers’ favor on
Count VIII. Sterling, 2019 WL 2491642, at *6. The Court held that
Sterling failed to give prompt notice of its indemnification claim
as
required
by
the
SPA,
relieving
the
Sellers
of
their
indemnification obligations. Id. Because indemnification is the
sole and exclusive remedy under the SPA, the Court denied summary
judgment on the remainder of Sterling’s claims. Id. The Court noted
that though the Sellers had included several counterclaims in their
Answer, they did not present affirmative arguments for summary
judgment
on
their
counterclaims
in
their
Motion
for
Summary
Judgment. For that reason, and because the Court had already
established that the Sellers were not liable for Sterling’s losses,
the
Court
denied
summary
judgment
for
the
Sellers
on
their
counterclaims as moot and redundant. The Court did not determine
a
certain
amount
of
money
that
Sterling
owes
the
Sellers.
Therefore, the Court’s opinion was not a money judgment. See Merk
v. Jewel Food Div., Jewel Companies, Inc., No. 85 C 7876, 1994 WL
247119, at *2 (N.D. Ill. June 6, 1994) (holding that the Court’s
opinion granting “plaintiffs’ motion for entry of judgment on all
issues of liability” was not a money judgment under 28 U.S.C.
- 19 -
§ 1961 because there had been no decision on the issue of damages
and the amount of damages were not “sufficiently ascertainable” at
the time of the judgment).
Second, the Court’s summary judgment order is not “nonappealable” per SPA § 8.06. Indeed, Sterling has already appealed
that order to the Seventh Circuit. The Sellers have not identified,
and the Court cannot conceive of, any reason why the Court should
not enforce SPA § 8.06 according to its unambiguous terms. Thus,
the Sellers are not eligible for post-judgment interest either
under 28 U.S.C. § 1961 or the SPA.
IV.
COSTS
Pursuant to Federal Rule of Civil Procedure Rule 54(d)(1),
costs
other
than
attorneys’
fees
“should
be
allowed
to
the
prevailing party.” FED. R. CIV. P. 54(d)(1). A court awarding costs
asks first “whether the cost imposed on the losing party is
recoverable” and if so, “whether the amount assessed for that item
was reasonable.” Majeske v. City of Chicago, 218 F.3d 816, 824
(7th Cir. 2000). Recoverable costs include fees of the clerk and
marshal, fees for transcripts, witness fees and expenses, fees for
copies of papers necessarily obtained for use in the case, and
docket fees. See 28 U.S.C. § 1920. Although a district court has
discretion
when
awarding
costs,
the
“discretion
is
narrowly
confined because of the strong presumption created by Rule 54(d)(1)
- 20 -
that the prevailing party will recover costs.” Graham v. AT&T
Mobility, LLC, 247 F. App’x 26, 31 (7th Cir. 2007).
The Sellers seek costs in five categories: (1) $3,058.78 for
service of summons and subpoena; (2) $11,461.65 for printed or
electronically recorded transcripts; (3) $3,724.50 for copies of
materials necessarily obtained for use in this case; (4) $334.50
for rental of two conference rooms for depositions; and (5) $20 in
docket
fees
under
28
U.S.C.
§ 1923.
The
$20
docket
fee
is
statutory, requires no supporting documentation, and is approved.
The Court will consider the remaining four categories in turn.
A.
Service
The Sellers seek costs for service on 18 individuals and
entities. Sterling raises a variety of objections to costs of
service, including that the Sellers seek to recover excessive
rates. 28 U.S.C. § 1920(1) permits the Court to assess costs for
clerk and marshal fees, a category that includes costs associated
with the service of subpoenas. Williams v. Fico, No. 11 C 1105,
2015 WL 3759753, at *3 (N.D. Ill. June 15, 2015). The Sellers used
private process servers instead of the U.S. Marshals Service. The
Seventh Circuit has indicated that a prevailing party can recover
the costs of using a private process server if those costs do not
exceed what the U.S. Marshals Service would charge. Collins v.
Gorman, 96 F.3d 1057, 1060 (7th Cir. 1996). The Marshals’ current
- 21 -
rate is $65 per hour for personal service of process, as well as
any
travel
costs
or
out-of-pocket
expenses.
See
28
C.F.R.
§ 0.114(a)(3). The invoices that Sellers submitted do not indicate
how long service took, or the miles traveled. As such, the Court
cannot calculate the hourly cost or mileage breakdown. Therefore,
the Court will award only the $65 minimum charged by the U.S.
Marshal’s Service for each service attempt. Fees for unsuccessful
and repeated attempts at service are recoverable pursuant to 28
C.F.R. § 0.114(f). See Ayala v. Rosales, No. 13-CV-04425, 2016 WL
2659553, at *4 (N.D. Ill. May 9, 2016). Additionally, 28 U.S.C.
§ 1920(3) allows recovery of witness fees. The prevailing party
can recover the statutory amounts prescribed in 28 U.S.C. § 1821.
See Chicago Coll. of Osteopathic Med. v. George A. Fuller Co., 801
F.2d 908, 910 (7th Cir. 1986). 28 U.S.C. § 1821 currently limits
witness fees to $40 per day in addition to normal travel expenses.
Because
the
invoices
that
Sellers
submitted
to
not
indicate
witness’s travel expenses, the Court will award only the $40 daily
witness fee where Sellers seek witness fees in excess of $40.
Sterling argues that the Sellers cannot recover for service
of Tango and Flores because the Sellers did not ultimately depose
those individuals. However, whether a cost is necessary must be
made in light of the facts known at the time of the deposition.
Dual-Temp of Illinois, Inc. v. Hench Control Corp., No. 09 CV
- 22 -
00595, 2015 WL 3896928, at *3 (N.D. Ill. June 23, 2015). At the
time the Sellers issued subpoenas to Tango and Flores, the Sellers
reasonably
believed
their
depositions
would
be
necessary,
as
Sterling had listed both individuals as potential witnesses under
Rule
26.
Thus,
the
cost
of
serving
these
individuals
is
recoverable. Finally, Sterling correctly notes that the invoices
for service on Voss and Power Temp contain no indication of who
was served, and what case such service was connected to. (See
Sellers 000011, 000019, Ex. A to Bill of Costs, Dkt. No. 176.)
This documentation, along with the itemized bill that Sellers’
counsel submitted to its client, is insufficient. The Court will
not award costs of service on Voss and Power Temp.
Accordingly,
the
Court
awards
$1,610
broken down as follows:
Briscoe: $65
Molex: $65 + $65 + $40 ($170)
Menkes: $65 + $40 ($105)
WLRK: $65
Leavenworth: $50
Bavone: $65 + $40 ($105)
Tango: $65 + $40 ($105)
Flores: $65 + $65 ($130)
Gamboa: $65
Andriacchi: $65 + $65 + $65 + $65 ($260)
Bavone: $65
Hoque (Reassent): $65
Reassent Minnesota: $35
Wolf Retail: $65 + $65 + $65 ($195)
Professional Personnel: $65
Flexible Staffing: $65
- 23 -
total
for
service,
B.
Transcripts
28 U.S.C. § 1920(2) allows the prevailing party to recover
costs
for
“printed
or
electronically
recorded
transcripts
necessarily obtained for use in the case.” 28 U.S.C. § 1920(2).
Sterling objects to $4,206.45 of the $11,461.65 in transcript costs
that the Sellers seek. Sterling argues that the transcripts for
the depositions of Himel, Block, Andriacchi, Briscoe, Bavone,
Zalewski, and Sweet-Anglim are not recoverable costs because the
Sellers did not use any of these transcripts in their summary
judgment briefing. However, as the Seventh Circuit has explained,
the “determination of necessity under 28 U.S.C. § 1920… must be
made in light of the facts known at the time of the deposition,
without
regard
to
intervening
developments
that
render
the
deposition unneeded for further use.” Mother & Father v. Cassidy,
338 F.3d 704, 712 (7th Cir. 2003). The Sellers have explained the
necessity of obtaining transcripts as follows: the Sellers needed
a
record
of
Sterling’s
deposition
of
Block,
the
lead
named
defendant in this case; the Sellers cited to the Himel, Andriacchi,
Briscoe, and Bavone depositions in their response to Sterling’s
Statement of Facts; and Sterling listed Sweet-Anglim and Zalewski
as Rule 26 potential witnesses. These explanations are sufficient
to satisfy the Court that the transcripts were necessary in light
of the facts known to the Sellers at the time. Additionally, the
- 24 -
Sellers seek per-page rates permitted under the local rules. (See
N.D.
Ill.
Local
Rule
54.1
(limiting
the
per-page
cost
for
deposition transcript originals at $3.65). Accordingly, the Court
awards $11,461.65 in transcript costs.
C.
Copies
The $3,724.50 that Sellers seek for “costs of making copies
of any materials where the copies are necessarily obtained for use
in the case,” see 28 U.S.C. § 1920(4), represents two categories
of costs: (1) $162 in costs of the court reporter to scan and copy
exhibits
used
at
depositions,
and
(2)
$3,562.50
in
costs
of
converting electronically stored information (ESI) into a readable
format. The first category is unopposed, and the Court approves
it. As for the second, the Seventh Circuit has held that the costs
of “converting computer data into a readable format” in response
to the opposing party’s discovery request are recoverable under
§ 1920. Hecker v. Deere & Co., 556 F.3d 575, 591 (7th Cir. 2009).
The Seventh Circuit has not otherwise ruled on the extent to which
such costs can be taxed against a non-prevailing party under
section 1920. See In re Text Messaging Antitrust Litig., No. 08 C
7082, 2014 WL 4343286, at *2 (N.D. Ill. Sept. 2, 2014). However,
courts in this district have observed the following distinction:
ESI discovery costs associated with the conversion of
ESI into a readable format, such as scanning or otherwise
converting a paper version to an electronic version or
converting native files to TIFF (if agreed upon by the
- 25 -
parties to be the production format), are compensable
under § 1920(4). But costs related to the gathering,
preserving,
processing,
searching,
culling
and
extracting of ESI simply do not amount to “making copies”
and thus are non-taxable.
Massuda v. Panda Express, Inc., No. 12 CV 9683, 2014 WL 148723, at
*6 (N.D. Ill. Jan. 15, 2014) (collecting cases).
Sterling
argues
that
the
Sellers
have
not
sufficiently
demonstrated that their e-discovery invoices reflect the cost of
converting
format.
electronically
To
support
this
stored
information
argument,
into
Sterling
a
points
readable
to
one
technically complex description and asserts that it does not
sufficiently
demonstrate
that
Sellers
incurred
this
cost
in
connection with conversion. (See Sellers 000050, Ex. C to Bill of
Costs (“Create complex field map direct load documents and images
to workspace; update DT index.”).) However, the Sellers cannot
reasonably be expected to require their ESI vendors to provide
invoices that perfectly track the language of § 1920(4). Moreover,
a prevailing party is not required to submit a bill of costs
containing a description “so detailed as to make it impossible
economically
to
recover”
copying
costs.
Northbrook
Excess
&
Surplus Ins. Co. v. Procter & Gamble Co., 924 F.2d 633, 643 (7th
Cir. 1991). Instead, the Sellers were required to provide “the
best breakdown obtainable from retained records.” Id. Sellers’
counsel reviewed the invoices of its ESI vendor and highlighted
- 26 -
those costs associated with loading native images into a database
and converting them into a readable format. This is sufficient.
The Court awards $3,724.50 in copy costs.
D.
Conference Rooms
Finally, Sterling objects to the $334.50 that the Sellers
seek for the rental of two conference rooms for two depositions.
The Seventh Circuit has held that district courts may exercise
their
discretion
in
awarding
costs
“incidental”
to
taking
depositions. Finchum v. Ford Motor Co., 57 F.3d 526, 534 (7th Cir.
1995) (upholding per diem costs and court reporter’s delivery
charges as incidental to depositions). Here, the Sellers have
provided invoices that show they rented the two conference rooms
for depositions in this case. (See Sellers 000029, 000033, Ex. B
to Bill of Costs.) The Sellers rented these conference rooms to
conduct depositions near the homes of witnesses who reside in
Carrol, Illinois and in Virginia—both locations that are quite far
from Sellers’ counsel’s office in Chicago. Compare Freeman v. Blue
Ridge Paper Prod., Inc., 624 F. App'x 934, 943 (6th Cir. 2015)
(unreported) (approving conference room rental costs when the
prevailing
sufficiently
party
“provided
connected
the
an
room
adequate
rental
explanation
cost
to
the
that
actual
depositions, rather than general business overhead—specifically,
the convenience to the witnesses and the reduction of otherwise
- 27 -
taxable travel costs”), with Intercontinental Great Brands LLC v.
Kellogg N. Am. Co., No. 13 C 321, 2016 WL 316865, at *8 (N.D. Ill.
Jan.
26,
2016)
(holding
that
the
prevailing
party
did
not
sufficiently explain why it was reasonable and necessary to rent
conference rooms for deposition prep). Therefore, the Sellers’
request for $334.50 in conference room rental costs is granted.
V.
CONCLUSION
For the reasons stated herein, the Court rules as follows:
1.
The Sellers’ Motion for Pre- and Post-Judgment Interest
(Dkt. No. 177) is denied.
2.
The Court approves the Seller’s Bill of Costs (Dkt.
No. 176) in part, for a total cost award of $17,150.65.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
Dated: 10/10/2019
- 28 -
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