REXAM BEVERAGE CAN CO. v. BOLGER

---

---

334 Ill.Dec. 824, 917 N.E.2d 899, 906 (2009); People v. Cardamone, 232 Ill.2d 504, 328 Ill.Dec. 917, 905 N.E.2d 806, 811-12 (2009). In addition to the language of the statute, the Court also considers "the purpose behind the law and the evils sought to be remedied, as well as the consequences that would result from construing the law one way or the other." County of DuPage v. III. Labor Relations Bd., 231 Ill.2d 593, 326 Ill.Dec. 848, 900 N.E.2d 1095, 1101 (2008). It assumes that the legislature did not intend "absurdity, inconvenience or injustice," People v. Glisson, 202 Ill.2d 499, 270 Ill.Dec. 57, 782 N.E.2d 251, 255 (2002), and looks to legislative history if the need arises, see County of DuPage, 326 Ill.Dec. 848, 900 N.E.2d at 1101.

The critical portion of the Hold-over Statute provides: "[T]he person so holding over, shall, for the time the land-lord or rightful owner is so kept out of possession, pay to the person so kept out of possession, . . . at the rate of double the yearly value of the lands. . . ." 735 Ill. Comp. Stat. 5/9-202 (emphasis added). On its face, the italicized language seems to refer to the lands and the lands alone; the Holdover Statute by its terms awards landlords double the yearly value of the lands, not the value of the lands plus utilities, insurance, and taxes. Indeed, from an economic standpoint, taxes and other expenses are perceived as detractions from the value of a parcel of land.

This interpretation is consonant with the dictionary definition of "annual value": "[t]he net yearly income derivable from a given piece of property," or "[o]ne year's rental value of property, less the costs and expenses of maintaining the property." Black's Law Dictionary 1690-91 (9th ed. 2009). In a gross rent situation, a landlord needs to use some of the rent payments (or other funds under his control) to cover utilities, insurance, taxes, and other "costs and expenses of maintaining the property." Thus, the "net yearly income" he actually receives from the property is more akin, if not equivalent, to the net rental value of the property rather than the gross rental value. Our plain reading of the language is also in accordance with the definition of "land," which includes with the property itself only "everything growing on or permanently affixed to it," id. at 955, and does not reach expenses associated with it.

We also look to the purposes and aims underlying the Holdover Statute. See County of DuPage, 326 Ill.Dec. 848, 900 N.E.2d at 1101. In 1857, the Illinois Supreme Court noted that it was enacted "for protection of, and compensation to, landlords who are kept out of their possession." Granger, 18 Ill. 443. Those are not its only purposes, however; it has also been consistently recognized as "penal," see Chapman v. Wright, 20 Ill. 120 (1858) ("This action is, in its nature, highly penal. . . ."); J.M. Beals, 207 Ill.Dec. 793, 648 N.E.2d at 253 ("An action to recover double rent under the statute is highly penal. . . . "), which of course means that it is intended to punish or penalize, see Black's Law Dictionary 1246 (9th ed. 2009).

At first blush, all three purposes — landlord protection and compensation and tenant punishment — would seem best served by a determination that "double the yearly value of the lands" may be calculated using gross rent. After all, the landlord would be more highly compensated and the tenant would be more severely punished (and more deterred from overstaying its welcome). Yet reading the language this way adds an element of injustice, see Glisson, 270 Ill.Dec. 57, 782 N.E.2d at 255, and unduly minimizes the consequences that could result, see County of DuPage, 326 Ill.Dec. 848, 900 N.E.2d at 1101. A landlord could receive windfalls above and beyond her due "compensation," particularly where, as here, the lease that has been held over is by its terms a net lease, and a tenant could be overly deterred from holding over even in situations in which doing so is "bona fide" or "colorably justifiable." J.M. Beals, 207 Ill.Dec. 793, 648 N.E.2d at 252. When the damages are calculated using net rent, the Holdover Statute's purposes are served in a more efficient manner.

In light of the plain language of the Holdover Statute and our examination of the purposes underlying it, we conclude that the intent of the legislature would be better effected if damages were calculated using net rather than gross rent. Simply reversing the district court on this issue would leave us at an impasse, however. The district court heard conflicting testimony as to the fair market net rental value of the Loves Park warehouse, but the only finding it made was that the gross rental value was $4.38 per square foot. Bolger conceded at oral argument that doubling the amount of Rexam's setoff for utilities paid during its holdover — to roughly $203,-000 — would be appropriate if we upheld the district court's usage of the gross rental rate. But because we have determined that the net rental rate is the proper one to use, this remedy is inadequate: if the district court were to credit Hall's testimony regarding the net value of the property, Rexam's penalty would drop by nearly $400,000, and it might drop further (or less) if the district court were to credit Clancy's testimony or some other estimation of value.

We therefore vacate Bolger's award of $1,257,703.83 and Rexam's setoff of $101,471.59 and remand this issue to the district court so that the fair net rental value of the property can be determined and the correct penalty assessed Rexam.

C. The Attorneys' Fees

Illinois follows the "American Rule" of litigation, under which successful parties are generally responsible for their own attorneys' fees unless a statute or contract provides otherwise. In re Weinschneider, 395 F.3d 401, 404 (7th Cir. 2005); Taylor v. Pekin Ins. Co., 231 Ill.2d 390, 326 Ill.Dec. 34, 899 N.E.2d 251, 256 (2008). Its courts strictly construe contractual provisions permitting the award of attorneys' fees, but the decision to award costs and fees pursuant to such provisions lies within trial courts' sound discretion. Pa. Truck Lines, Inc. v. Solar Equity Corp., 882 F.2d 221, 227 (7th Cir. 1989); Mountbatten Sur. Co. v. Szabo Contracting, Inc., 349 Ill.App.3d 857, 285 Ill.Dec. 501, 812 N.E.2d 90, 104 (2004); Powers v. Rockford Stop-N-Go, Inc., 326 Ill.App.3d 511, 260 Ill.Dec. 393, 761 N.E.2d 237, 241 (2001). In this case, the district court concluded that the lease provided for attorneys' fees, at least those related to some of Bolger's counterclaims, and awarded him $744,726.87 in fees and expenses and $5338.42 in taxable costs. It later awarded him $70,000 in supplemental attorneys' fees.

Rexam raises two arguments against the fee award. First, it asserts that the district court interpreted the lease incorrectly — in Rexam's view, neither of the two provisions the court found to permit fee shifting actually does. Second, assuming the district court properly interpreted the lease, Rexam asserts that the court awarded Bolger more fees than he was entitled to because he failed to specifically allocate them among (covered) claims arising out of the lease and (uncovered) claims relating to Rexam's holdover tenancy. In a closely related argument, Rexam asserts that Bolger should have only been awarded attorneys' fees for his successful contract claims and not his unsuccessful ones. We take up these challenges in turn, reviewing the district court's interpretation of the lease de novo, Int'l Prod. Specialists, 580 F.3d at 594, its interpretation of Illinois law likewise, Salve Regina, 499 U.S. at 239, 111 S.Ct. 1217, and its fee award using our abuse of discretion standard, Cintas Corp. v. Perry, 517 F.3d 459, 469 (7th Cir. 2008).

1. Lease Provisions

The district court determined that two lease provisions authorized the award of fees to Bolger. The first, an exceptionally long sentence denoted Article 9(a), reads:

Indemnification by Lessee. Lessee agrees to indemnify and save harmless Lessor, its successors and assigns, against and from any and all liabilities, losses, damages, costs, expenses, causes of action, suits, judgments and claims by or in behalf of any person, firm, corporation or governmental authority arising from the occupation, use, possession, conduct or management of or from any work, improvement, demolition or thing whatsoever done in or about the Premises or any building or structure thereon or the equipment thereof during any term of this Lease, or arising during said term from any condition of the Premises or of any street, parking lot or sidewalk adjoining thereto or of any vaults, passageways or space therein or appurtenant thereto, or arising from any act of negligence of Lessee, or any of the agents, contractors, or employees of Lessee, or arising from any accident, injury or damage whatsoever, however caused, to any person or to the property of any person or corporation, occurring during said term on, in or about the Premises, or upon or under the sidewalks or streets adjoining thereto, and from and against all costs, reasonable counsel fees, expenses and liabilities incurred in or about any such claim or any action or proceeding brought thereon, and against all liabilities, losses, damages, costs, expenses, causes of action, suits, judgments and claims arising from any failure by Lessee to perform any of the agreements, terms, covenants or conditions of this Lease on Lessee's part to be performed, other than those occasioned by any tortious or negligent act on the part of Lessor, its agents or employees (in no event shall Lessee, its agents, contractors or employees be considered agents or employees of Lessor).

Rexam reads this language to require only that it indemnify Bolger against claims by third parties. For support, it relies not on case law but rather on Articles 9(b) and 10 of the lease, in light of which we must interpret Article 9(a). See Gallagher, 314 Ill.Dec. 133, 874 N.E.2d at 58. Rexam asserts that Article 9(b), "Liability Insurance," confirms the third-party orientation of Article 9(a) with its language requiring Rexam to "maintain as to the Premises general liability insurance insuring Lessee, Lessor, and Lessor's mortgagee as their interests shall appear. . . ." And it claims that if Article 9(a) were to reach "breach of lease" claims by Bolger, Article 10, "Defaults by Lessee," would be rendered "redundant."

We fail to see any language in Article 9(a) that restricts its application to claims by third parties. See Balcor Real Estate Holdings, Inc. v. Walentas-Phoenix Corp., 73 F.3d 150, 153 (7th Cir. 1996) (interpreting a similarly prolix indemnity provision). Under Illinois law, we give clear and unambiguous contract terms their plain meaning, Kallman, 315 F.3d at 736, and "indemnify" means "[t]o reimburse (another) for a loss suffered because of a third party's or one's own act or default," Black's Law Dictionary 837 (9th ed. 2009) (emphasis added); see also Balcor, 73 F.3d at 153 (discussing and defining indemnify). Article 9(a) plainly requires Rexam to reimburse Bolger for "reasonable counsel fees" he incurs in pursuit of "any such claim or any action or proceeding" he brings in relation to "any condition of the Premises." Even construing the language strictly, as we must do, see Downs v. Rosenthal Collins Group, LLC, 385 Ill.App.3d 47, 324 Ill.Dec. 342, 895 N.E.2d 1057, 1059 (2008) ("Illinois cases have established that attorney fees are only recoverable pursuant to an indemnity contract if such terms are specifically provided for within the contract."); Powers, 260 Ill.Dec. 393, 761 N.E.2d at 241, there is no doubt that Bolger may seek attorneys' fees incurred in disputes over property conditions like the ill repair of the roof. Indeed, we have noted, in a diversity case applying Illinois law, that indemnity clauses are "designed to make the wronged party whole — to put it in the same position it would have occupied had the other side kept its promise." Medcom Holding Co. v. Baxter Travenol Labs., Inc., 200 F.3d 518, 519 (7th Cir. 1999). Here, if Rexam had repaired the roof and other items it agreed to repair, Bolger would not have had to incur attorneys' fees and legal costs associated with pursuing the breach of contract (counter)claim.

It is also true that if Rexam had not held over, Bolger would not have had to incur legal costs associated with getting Rexam to leave and seeking a penalty against it under the Holdover Statute. Yet Article 9(a) does not stretch so far as to require Rexam to reimburse Bolger for those attorneys' fees as well. The provision protects Bolger from attorneys' fees he incurs resulting from "occupation . . . of . . . the Premises," but only "during any term of this Lease." The occupation he challenged occurred after the expiration of the lease, not while it was in force; it was for that reason that the Holdover Statute was relevant and a forcible entry action was arguably needed. The final portion of Article 9(a) is no more helpful to Bolger in this respect. It conditions Rexam's indemnification liability on its failure "to perform any of the agreements, terms, covenants or conditions of this Lease." The lease does not require Rexam to vacate the premises upon its expiration. Lessees have a common law duty to timely vacate premises after a lease has terminated, see Perry v. Evanston Young Men's Christian Ass'n, 92 Ill.App.3d 820, 48 Ill. Dec. 309, 416 N.E.2d 340, 345 (1981), but a common law duty is not synonymous with a contractual one. Thus, we conclude that Article 9(a) permits Bolger to recover attorneys' fees associated with his repair claims but not his claims related to Rexam's holdover.

The other contractual articles to which Rexam points do not change our view. Article 9(b) does nothing more that outline Rexam's obligation to insure the premises, to deliver the policies to Bolger, and to ensure that the policies cannot be changed without Bolger's written consent. It operates to shield both Bolger and Rexam against claims by third parties, but does not remove from Rexam the extensive indemnity obligations of Article 9(a). Article 10, which governs the consequences of any "Events of Default" by Rexam and in its view is the only article that "plainly address[es] lessor-lessee disputes," is not rendered redundant in light of our reading of Article 9(a). There are no conditions precedent to the application of Article 9(a). But Article 10 is only invoked if Rexam engages in one of six specified "Events of Default" during the term of the lease. The provisions may overlap in some cases, but they complement rather than displace one another. Cf. Outboard Marine Corp., v. Liberty Mut. Ins. Co., 154 Ill.2d 90, 180 Ill.Dec. 691, 607 N.E.2d 1204, 1220 (1992) (noting that "insurance policies are filled with words which overlap and complement one another," and that such words "add contours" to "general concepts" in the policy).

Indeed, a portion of Article 10-10(d), "Performance by Lessor" — is the second provision under which the district court found Rexam liable for Bolger's attorneys' fees. It provides:

Performance by Lessor. In the event of the happening of an Event of Default other than the nonpayment of rent, Lessor shall have the right at its election, after not less than 30 days' written notice to Lessee, to perform the same for the account of and at the expense of Lessee and if Lessor at any time is required to pay, or elects to pay, any sum of money, by reason of such Event of Default, or if Lessor is required or elects to incur any expense, including reasonable counsel fees, in instituting, prosecuting or defending any action or proceeding instituted by reason thereof, the sum or sums so paid or incurred by Lessor, together with interest at the rate of 6% per annum shall be due and payable by Lessee to Lessor as additional rent (in addition to other rents specified in this Lease) upon demand.

Rexam, after acknowledging that Article 10(d) is the only part of Article 10 that mentions attorneys' fees, asserts that it is inapplicable here because Bolger failed to establish that Rexam engaged in one of the six "Events of Default." It also claims that Bolger did not demonstrate his compliance with Article 10(d)'s written notice requirement.

The "Events of Default" are defined in Article 10(a) of the lease. Rexam is correct that most of the "Events" did not happen here. Rexam did not file for bankruptcy, Article 10(a)(i), it did not have a receiver appointed, Article 10(a)(ii), it did not sell its interest in the premises, Article 10(a)(iv), it paid its rent without fail even after expiration of the lease, Article 10(a)(v), and no liquidation or reorganization of it was proposed, Article 10(a)(iii). The catchall "Event," Article 10(a)(vi), which reaches any failure "to perform or observe any other requirement, or breach any other covenant or agreement of this Lease" for thirty days after notice of it, however, could reach at least some of Bulger's repair claims. It is undisputed that Bolger notified Rexam that some repairs were needed in February 2006. Additionally, on July 27, 2007, Bolger sent a fax to Rexam's Clancy, noting that "the roof was leaking" as of June 2007 and expressing hope that "Rexam has cured of [sic] all the repairs and maintenance issues." When Rexam vacated the property on August 31, 2007 — more than thirty days after the July 2007 letter and well over a year after the February 2006 letters — the repairs remained undone. "By reason thereof these incomplete repairs, Bolger "elect[ed] to incur . . . counsel fees," placing him within the parameters of Article 10(d). Again, however, costs Bolger incurred in contesting Rexam's holdover are not reimbursable; the catchall "Event of Default" cannot reach them because Rexam was not required to vacate by any terms of the lease itself.

We affirm the district court's conclusion that Articles 9(a) and 10(d) of the lease provide a basis for Bolger to recover reasonable attorneys' fees and costs associated with litigating the repair issues.

2. Award and Allocation of Fees

The district court awarded Bolger over $800,000 in attorneys' fees. In light of its interpretation of the lease, and its recognition of Illinois's "strict construction" rule concerning contractual fee-shifting provisions, the court stated explicitly that Bolger was "not entitled to any of his fees and costs directly attributable" to his reentry and wrongful possession claims "because they were not covered by any of the fee-shifting provisions contained in the lease." Rexam Beverage Can Co. v. Bolger, No. 06 C 2234, 2008 WL 5068824, at *6 (N.D.Ill. Nov. 25, 2008). Yet it also determined that "it [was] not practical for [it] to attempt to determine which fees were devoted to which claims" because, after Bolger tossed his breach of repair claims into the ring on October 11, 2007, "the two sets of claims were intertwined." Id. The court declined Rexam's invitation to engage in a "detailed, hour-by-hour review" of Bolger's costs, id. (quoting Medcom, 200 F.3d at 521), observed in a footnote that Rexam had similarly declined its own invitation, and attempted to split the difference by awarding Bolger all reasonable fees incurred after October 11, 2007, when he amended his counterclaim to include a claim based on Rexam's duty to repair, id. The court reiterated that it would exclude costs that were "on their face related only to Bolger's claims for double rent." Id.

Rexam takes issue with the district court's failure to divide Bolger's attorneys' fees into two categories: compensable ones relating to its repair claims, and noncompensable ones relating to all the other issues in the case. It also asserts that the fees in the former category should have been further subdivided into successful and unsuccessful claims, and that only fees associated with the successful claims should have been awarded. We review the fee award for abuse of discretion. That is, we examine the award for reasonableness and reverse only if we are persuaded that it is not at least arguably correct. See United States v. Thouvenot, Wade Moerschen, Inc., 596 F.3d 378, 386 (7th Cir. 2010).

In light of the indemnity provisions in Article 9(a) of the lease, we conclude that Rexam's second argument, that Bolger should only receive fees for the repair claims on which he was successful, is a nonstarter. Rexam may be correct that Bolger's unsuccessful repair claims, those for the rail spur, Bradley sink, and pipes, were in no way factually related to his successful repair claims for the dock levelers and roof. The accuracy of that assertion is irrelevant here, though, because all of Bolger's repair claims arose out of the lease. Article 9(a) provides "reasonable counsel fees" for "any . . . claim or any action or proceeding" he brings in relation to "any condition of the Premises" not just those claims on which he prevails. Illinois law is clear that "[w]hen a contract calls for the shifting of attorney fees, a trial court should award all reasonable fees." J.B. Esker Sons, Inc. v. ClePa's P'ship, 325 Ill.App.3d 276, 259 Ill.Dec. 136, 757 N.E.2d 1271, 1277 (2001). The trial court found it reasonable to award Bolger all its fees related to its repair claims, and that decision stands, notwithstanding Rexam's observation that the fees amount to nearly double the amount Bolger successfully recovered on the claims. See id. ("[A]ttorney fees may be reasonable even if the fees are disproportionate to the monetary amount of an award.").

We are more troubled by the potential entanglement of attorneys' fees relating to the repair clams and those not authorized by the lease. In Illinois, it is "incumbent upon the petitioner to present detailed records maintained during the course of the litigation containing facts and computations upon which the charges are predicated." Kaiser v. MEPC Am. Props., Inc., 164 Ill.App.3d 978, 115 Ill.Dec. 899, 518 N.E.2d 424, 427-28 (1987). In our view, many of the entries in Bolger's attorneys' bills leave much to be desired in this respect. Entries such as "[r]eviewing case law" and "[r]eviewing correspondence, deposition transcripts, and pleadings," while perhaps adequate to inform Bolger of his attorneys' progress, see Mountbatten, 285 Ill.Dec. 501, 812 N.E.2d at 105, were insufficiently detailed for the district court to determine to which cause of action the efforts were directed.

That said, however, we recognize Illinois courts' determination that even "terse, and concise" attorneys' bills can be "adequate." Id. Despite their flaws, the bills clearly indicate which attorney or paralegal performed each task and how long he or she took to complete it. See Kaiser, 115 Ill. Dec. 899, 518 N.E.2d at 427 (requiring only a specification of "the services performed, by whom they were performed, the time expended thereon and the hourly rate charged therefor"). And moreover, Bolger paid all the bills; that is a strong indication that the charges they contained were reasonable. See Medcom, 200 F.3d at 520. The district court was not obligated to conduct a line-by-line review of the bills to assess the charges for reasonableness.

This does not get us out of the entanglement quagmire, however. For what Rexam fundamentally challenges is the reasonableness of the district court's "split the difference" approach of dividing the bills into pre- and post-October 11, 2007 categories. While we do not go so far as to endorse the district court's fee award methodology or its application in future cases, we hold that the district court did not abuse its discretion in employing a "practical solution" to the fee division problem posed here. The district court carefully restricted the award to exclude items clearly attributable to the extracontractual claims, and it expressly excluded expenses associated with an expert who testified only as to the market value of the facility. It attempted to ensure that Rexam's liability for fees did not attach until there was a fair possibility that the work being billed was related to Bolger's contract claims; removing the roughly one-third of the fees accrued prior to October 11, 2007 was a reasonable step toward that end. Asking the court to do more here would place any resultant fee award much further into the realm of conjecture, see In re Estate of Bitoy, 395 Ill.App.3d 262, 334 Ill.Dec. 477, 917 N.E.2d 74, 85 (2009), and would undermine its broad discretionary authority to fashion appropriate attorneys' fees.

Under the deferential abuse of discretion standard, the district court's award of attorneys' fees to Bolger should stand.

III. Conclusion

The judgment of the district court is AFFIRMED except on the issues of the fair market rental value of the Loves Park warehouse and the calculation of damages under the Holdover Statute. With respect to those issues, we VACATE Bolger's Hold-over Statute award of $1,156,232.24 (which includes the $101,471.59 setoff) and REMAND for a determination of the fair market net rental value of the property and the assessment of a penalty equal to double that value for the duration of Rexam's holdover. Because this remand simply requires a redetermination of the damages award and not a new trial, Circuit Rule 36 does not apply.