Arnold R. Rissman v. Owen Randall Rissman and Robert Dunn Glick

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-2141
Arnold R. Rissman,
Plaintiff-Appellee,
v.
Owen Randall Rissman
and Robert Dunn Glick,
Defendants-Appellants.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 98 C 3656--Blanche M. Manning, Judge.
Submitted September 11, 2000--Decided October 2, 2000
Before Bauer, Easterbrook, and Rovner, Circuit Judges.
Easterbrook, Circuit Judge. Earlier this year we
held that defendants Randall Rissman and Robert
Glick did not defraud Arnold Rissman when Arnold
sold his stock in Tiger Electronics. Rissman v.
Rissman, 213 F.3d 381 (7th Cir. 2000). Arnold’s
claim under the federal securities laws is
foreclosed, we held, by representations and
warranties Arnold made as part of the sale, and
all of his other theories of liability are barred
by a release included in the contract. Arnold
contended that the contract itself (and hence the
warranties and release) is the result of duress
and hence invalid, but this contention too was
unsuccessful.
After prevailing in the district court, Randall
and Glick sought an award of attorneys’ fees
under para.21 of the contract, which provides:
If any dispute among the parties hereto should
result in any legal action or proceeding, the
prevailing party or parties shall be reimbursed
by the losing party or parties for all reasonable
costs and attorneys’ fees incurred in connection
with such action or proceeding, including, but
not limited to, attorneys’ fees incurred in the
course of appeal.
The district court declined to order Arnold to

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pay the defendants’ legal fees, giving two
reasons: first, that defendants’ failure to seek
these fees by filing a counterclaim against
Arnold deprived the district court of
"jurisdiction" to award them; second, that
neither Randall nor Glick is a "party" to
para.21. The first ground relies heavily on
Caremark, Inc. v. Coram Healthcare Corp., 924 F.
Supp. 891 (N.D. Ill. 1996), and Fed. R. Civ. P.
54(d)(2)(A); the second ground relies on the fact
that neither Randall nor Glick signed the full
contract in his individual capacity.
Rule 52(d)(2)(A) says that "[c]laims for
attorneys’ fees and related nontaxable expenses
shall be made by motion unless the substantive
law governing the action provides for the
recovery of such fees as an element of damages to
be proved at trial." The Committee Note to this
language (which was adopted in 1993) states that
attorneys’ fees provided by contract usually are
"an element of damages", from which Caremark
concluded that they should be demanded in an
appropriate pleading--a counterclaim, when the
party seeking fees is the defendant. What lack of
a counterclaim has to do with jurisdiction is a
mystery, however. Jurisdiction in this case
depends on 28 U.S.C. sec.1331, because one of
Arnold’s claims arose under the federal
securities laws, and related state-law claims
(such as a demand for attorneys’ fees under
para.21) are within the supplemental
jurisdiction. 28 U.S.C. sec.1367. If defendants
needed to file a counterclaim, then the district
court had ample authority to permit its filing,
see Fed. R. Civ. P. 13(f), 15(d), or to treat the
issue as if it had been raised in a pleading, see
Rule 15(b).
What Rule 52(d)(2)(A) requires is that a party
seeking legal fees among the items of damages--
for example, fees that were incurred by the
plaintiff before the litigation begins, as often
happens in insurance, defamation, and malicious
prosecution cases--must raise its claim in time
for submission to the trier of fact, which means
before the trial rather than after. Fees for work
done during the case should be sought after
decision, when the prevailing party has been
identified and it is possible to quantify the
award. So Capital Asset Research Corp. v.
Finnegan, 216 F.3d 1268 (11th Cir. 2000), holds,
in the course of disapproving Caremark. The
eleventh circuit added that the proper time to
seek fees is at all events unrelated to the
district court’s jurisdiction. We agree with
Capital Asset Research Corp. and conclude that
the defendants are entitled to a decision on the
merits of their request for attorneys’ fees.

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Glick signed the contract exclusively in his
capacity as trustee of the Tiger Stock Trust; he
was sued exclusively in his individual capacity
and therefore cannot take advantage of para.21.
Randall, however, is a party to the contract.
Most of the contract entails promises by and to
persons other than Randall (for Arnold sold his
Tiger stock to a trust for the benefit of
Randall’s children, rather than directly to
Randall). Still, Randall made and received
promises in para.8(d), which dissolves the
shareholders’ agreement between the brothers, and
para.12, which provides for mutual releases. The
district court recognized that Randall thus is a
party to the contract but held that he is not a
party to para.21 and therefore may not recover
legal fees. This approach is puzzling; no one is
separately a "party to para.21." Paragraph 21
provides reimbursement to parties injured by
disputes involving other portions of the
contract.
This would be clear enough if Randall had been
the one to sue on released claims. Arnold would
have been entitled to collect attorneys’ fees
under para.21 for Randall’s violation of para.12,
even though para.21 speaks of disputes among "the
parties hereto" and Randall is not a "party to
para.21." The best understanding of "parties
hereto" in para.21 is that the phrase means one
who is a party to the promises in the paragraph
sought to be enforced. Randall made and received
promises in para.8(d) and para.12; if he had
broken any of these, Arnold could have recovered
his costs of defense. Just so when Arnold was the
one who broke his promise by suing on released
claims. Arnold invites us to read para.21 with a
beady eye in order to maximize the scope of the
American Rule, under which parties bear their own
legal expenses. But courts do not bend over
backward to make it cheap for parties to renege
on settlements and releases. Cf. Jannotta v.
Subway Sandwich Shops, Inc., No. 99-1975 (7th
Cir. Aug. 29, 2000), slip op. 5-7 (discussing the
application of attorneys’-fees provisions in
contracts under Illinois law). People reach
settlements in large measure to buy peace.
Randall has not enjoyed the repose for which he
bargained in para.12, and this might have been an
appropriate case for an award of legal fees
independent of para.21, had Randall or Glick made
such a request.
Randall is a party to para.12, the paragraph
Arnold violated by suing on released claims, and
thus is a "party hereto" for purposes of para.21.
He is a "prevailing party" in the suit and
therefore "shall be reimbursed by [Arnold] for
all reasonable costs and attorneys’ fees incurred
in" the suit--including both appeals. The

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decision of the district court is vacated, and
the matter is remanded for calculation and award
of Randall’s "reasonable costs and attorneys’
fees".

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