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CISG CASE PRESENTATION

United States 13 March 2002 Federal District Court [Illinois] (Zapata Hermanos v. Hearthside Baking)
[Cite as: http://cisgw3.law.pace.edu/cases/020313u1.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISION: 20020313 (13 March 2002)

JURISDICTION: United States [federal court]

TRIBUNAL: U.S. District Court, Northern District of Illinois, Eastern Division [federal court of 1st instance]

JUDGE(S): Milton I. Shadur

CASE NUMBER/DOCKET NUMBER: 99 C 4040

CASE NAME: Zapata Hermanos Sucesores, S.A. v. Hearthside Baking Co., Inc. d/b/a Maurice Lenell Cooky Company

CASE HISTORY: We publish nine parts of the record of these proceedings:
-      8 December 2000, Ruling on pre-trial motions
-      18 July 2001, Memorandum opinion and judgment order [Court's ruling on buyer's motions for judgment as a matter of law and for a new trial]
-      19 July 2001, Supplement to Memorandum opinion and judgment order [Supplement to Court's opinion dated 18 July 2001]
-      15 August 2001, Memorandum opinion and order [Ruling on second motion by buyer attacking the judgment]
-      22 August 2001, Memorandum opinion and order [Ruling on seller's motion for an award of attorney's fees: ruling on seller's motion advanced against buyer's litigation counsel]
-      28 August 2001, Memorandum opinion and order [Ruling on seller's motion for an award of attorney's fees: ruling on seller's motion advanced against buyer]
-      12 February 2002, Memorandum opinion and order [Ruling related to amount of attorney's fees]
-      13 March 2002, Memorandum opinion and order [Ruling on amount of attorneys' fees] [Text presented below

The most recent proceeding in this case is an appellate ruling by the U.S. 7th Circuit Court of Appeals handed down on 19 November 2002. The Circuit Court of Appeals reversed and remanded the District Court's ruling on attorneys' fees. A petition for certiorari was filed with the U.S. Supreme Court and denied.

SELLER'S COUNTRY: Mexico (plaintiff)

BUYER'S COUNTRY: United States (defendant)

GOODS INVOLVED: Cookie tins


Classification of issues present

APPLICATION OF CISG: Yes [Sole specific reference to the CISG in this opinion is in footnote 3 where the court refers to the liability of the losing party (buyer) for attorneys' fees as "a liability supported both by the Convention on the International Sale of Goods and, secondarily and alternatively, by application of the inherent power doctrine."]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 74

Classification of issues using UNCITRAL classification code numbers:

74B [Outer limits of damages: foreseeability of loss, as a possible consequence of breach (application to attorneys' fees]

Descriptors: Damages ; Attorneys fees

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Editorial remarks

See companion proceedings dated 28 August 2001 for related editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (English): Text presented below; see also 2002 U.S. Dist. LEXIS 4187

Translation: Unavailable

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text

Zapata Hermanos Sucesores, S.A. v. Hearthside Baking Co., Inc., etc.

No. 99 C 4040

United States District Court, Northern District of Illinois, Eastern Division

Decided: 13 March 2002

MEMORANDUM OPINION AND ORDER

Since the issuance of this Court's February 12, 2002 memorandum opinion and order ("Opinion") dealing with one aspect of the award to Zapata Hermanos Sucesores, S.A. ("Zapata") of certain attorneys' fees and expenses that it has paid and incurred in connection with its completed litigation against Hearthside Baking Co., Inc. d/b/a Maurice Lenell Cooky Co. ("Lenell"), the parties have completed their evidentiary presentations on that subject. At this point the matter is ripe for disposition.

To a greater extent than was the case as to the underlying merits of the litigation (in which a very minor part of Lenell's opposition to Zapata's claim proved to be viable), Lenell has come up empty -- in this instance, totally empty -- on the issue of fees and expenses. Just as Lenell succeeded in dragging out what should have been a relatively simple collection case for goods sold and delivered by interposing a host of unwarranted roadblocks that unjustifiably converted the litigation into an enormously time-consuming and expensive lawsuit, so its efforts to attack the fee request by Mayer Brown & Platt (now Mayer Brown Rowe & Maw, but referred to here for convenience simply as "Mayer Brown") has done nothing more than to roil the waters without impeaching that request in any respect whatever.

To begin with, Lenell's purported expert -- a lawyer of some 25 years' standing, on whose opinions Lenell seeks to bottom the bulk (though not all) of its opposition -- appears from his resume to be an experienced litigator. But as his Fed. R. Civ. P. ("Rule") 26(a)(2)(B) report and his hearing testimony have made abundantly clear, and as this opinion will explain in some detail, he has shown himself to be entirely unqualified to render a credible opinion on the issues posed by this case. Whether or not he might have placed himself in a position to do so by striving to build on his existing foundation as a practitioner, through the extensive amount of further analysis, further research and further work that would have been required to that end is a moot issue -- for what controls instead is that he did -- not engage in that major building project.[1] And as for Lenell's lawyer handling the fee litigation itself,[2] he frittered away his, opposing counsel's and this Court's time in attempted challenges that also cannot survive any reasoned scrutiny.

To return to Lenell's claimed "expert," some idea of the real absurdity of his opinions may be gleaned from his repeated emphasis that this was a collection case -- a simple case of goods sold and delivered -- so that the hourly rates charged by Mayer Brown were assertedly excessive. As the "expert" said at the outset of his statement in that respect in his Rule 26(a)(2)(B) report:

"This case did not involve a technical or novel area of law, but was a collection case for monies owed for goods supplied."

And given that skewed view (more of this later), what did the "expert" tender as assertedly comparable litigation? Two lawsuits that his law firm had brought in the Municipal Department of the Circuit Court of Cook County on behalf of Ameritech against lessees that were in default under equipment leases, one of those lawsuits asserting damages of less than $3,000 and the other claiming damages of less than $4,000. Total attorneys' fees sought in each case were $1,000, at an hourly rate of $160. For the claimed "expert" to suggest that those lawsuits could be the source of probative evidence as to this case -- a case involving a claim of some $1.3 million for a very large number of deliveries of cookie tins, hopelessly complicated as the case was made by Lenell by creating the need to investigate, prepare for and successfully oppose Lenell's late-advanced, convoluted, multifarious and (regrettably) baseless defenses and counterclaims, might have been thought of as a bad joke had it not been for the "expert's" having advanced his argument with a straight face.[3]

That same oversimplistic (and insupportable) approach marked what the "expert" labeled as his "survey" of relevant market hourly rates in the Chicago area. First, to characterize what was done as a survey at all is wholly at odds with the methodology required of any valid survey. All that the "expert" did was to self-select a small sample of a handful of small law firms (about a dozen in number) that he knew to be involved in the handling of such collection cases as he mischaracterized this litigation to have been.[4] Even apart from that wholly unscientific approach to the conduct of any survey properly understood, the effort was doomed to failure because it proceeded from the "expert's" commitment to a totally false premise about the nature of the litigation. In the computer field such efforts, proceeding from a mistaken assumption to a necessarily mistaken conclusion, long ago earned the sobriquet "GIGO": "Garbage in, garbage out."

It would be possible to dissect the "expert's" opinions on the subject of the appropriate hourly rates strand by strand, repeatedly exposing the groundlessness of those opinions, but it is scarcely necessary to do so. Perhaps the most graphic demonstration of what has to be viewed as a worthless opinion on the subject came in the witness' response to the final question posed to him during his examination on the stand, one posed by this Court: When asked whether he was even aware of the two critically important decisions by our Court of Appeals that were cited and quoted in Opinion at 4-6 (the Balcor and Medcom cases), the "expert " was candid enough to say "no."[5] For anyone who holds himself out as qualified to render an opinion on fees in a case such as this one not to have done the necessary homework to learn (let alone to know in advance) about such highly relevant authorities; so that the witness might at least attempt to explain why they are not persuasive (let alone controlling) authorities here, is to confirm that witness' total lack of qualification.

It is also frankly unnecessary to go through the step by step analysis marked out by Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) as refined by Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999) -- and as both of those seminal authorities have been reinforced by the recently revised Fed. R. Evid. ("Evid. R.") 702 and its accompanying Committee Note -- to confirm the inadmissibility of opinion evidence such as that proffered by Lenell here. What has already been said really torpedoes that opinion both in terms of its utter lack of reliability (Daubert, 509 U.S. at 589-90) and "fit" (id. at 591) -- in the latter respect, the opinion's total failure to fit "the particular circumstances of the particular case at issue" (Kumho, 526 U.S. at 150).[6] And those deficiencies in turn support the outright rejection as inadmissible of the entire aspect of the "expert's" opinion dealing with hourly rates. But even were that testimony to be found technically admissible, it is so flawed as to compel its rejection on grounds of weightlessness. Instead the evidence squarely supports the reasonableness of the rates that were charged by the Mayer Brown lawyers and were then vetted and approved by Zapata's general counsel -- not only under the principles set out in Balcor and Medcom, but independently of those decisions as well.

To shift to consideration of the reasonableness of the time spent by the Mayer Brown attorneys in the litigation, the just-explained total unreliability of the Lenell "expert's" opinion as to hourly rates points to the discrediting of his views on the subject of time expenditure as well. On that score, this is one case that merits application of the principle "falsus in uno, falsus in omnibus," for once again the reliability of the "expert's" opinion as to time spent is fatally distorted by his misperception of the underlying litigation as a straightforward collection matter. That negates any degree of credence to be ascribed to the "expert's" notion of what time budget should be attributed to the case. Instead this Court finds totally credible the testimony of Zapata's attorneys -- most particularly the thorough explanation given by Mayer Brown's Javier Rubinstein in his rebuttal testimony -- as to (1) the reasons for the use of three lawyers in the case (with no duplication of effort being involved) as well as to (2) the reasonableness of the numbers of hours devoted to the litigation.

While the discussion to this point has shown how the exposure of the opinions of Lenell's purported "expert" to the sunlight of analysis has shriveled those opinions into nothingness, the balance of this opinion will address how the efforts by Lenell's hearing counsel to impugn the time charges by the Mayer Brown lawyers were even worse -- were downright bogus. Thus, for example, the protracted interrogation by Lenell's counsel about a claimed lack of detail reflected in the time entries (most extensively by criticizing the entries' listing of "trial preparation" without particularization as to the specific tasks involved) was totally bootless as a challenge to those entries. That bootlessness is twofold.

First, all of the Mayer Brown time entries were prepared solely for consideration by its client Zapata, not in contemplation of court review. This was not a situation involving a fee-shifting statute (see the rejection of that claimed analogy in Medcom, 200 F.3d at 520-21). Not only were the bills prepared for Zapata's consumption alone, but its house counsel vetted and approved all of those bills (as stressed in Balcor, 73 F.3d at 153).

Second and just as importantly, Mayer Brown expressly invited Lenell's counsel to pose any questions at all having to do with providing more detailed descriptions of any time entries, so that the Mayer Brown lawyers could then go back if necessary to reconstruct just what particular work was being done at any given time. Here is the last paragraph of the November 16, 2001 letter from Mayer Brown's Thomas Lidbury to Lenell's counsel Timothy Touhy (Zapata Fee Ex. 2):

"If you have any other questions please let me know. In particular, if any of your objections are based upon a lack of detail, or hinge in some way on additional information about an entry, please let me know. We should deal with that sort of thing before we both brief the issue."

No response whatever came back from Lenell's counsel during the ensuing months before the evidentiary hearing. For attorney Touhy now to challenge and cavil at any claimed lack of detail, as he did by repeated questioning of the Mayer Brown lawyer witnesses during the hearing, can only be viewed as the bad faith pursuit of this fee litigation.

That was equally true of the attempt by Lenell's counsel Touhy to charge Mayer Brown with the expenditure of excessive time -- an effort that took the form of contrasting the recorded 234 hours of "T1" trial preparation entries (time that was spent in getting ready for an anticipated, but then postponed, February 2001 trial date) with the 336 hours of "T2" trial preparation entries (reflecting time spent thereafter in getting ready for the actual June 2001 trial). Lenell's counsel sought to portray that as the needless expenditure of nearly another 150% of the original time to "get ready" for a case that had already been trial-ready.

Not so: Cancellation of the first (February) trial date came with 11 days left to go before the anticipated D Day of February 19 -- time that would have involved the most concentrated activity of what Mayer Brown's Rubenstein described as an expected ten hours per day for each lawyer on a seven-day-work-week basis. When that time, which would have been required (and spent) if the February date had been adhered to (a subject on which this Court finds the testimony of attorney Rubenstein entirely credible), is properly moved from the T2 to the T1 category, it can be seen that no padding or excessiveness was involved. Any modest amount of work that had to be redone to prepare for the June trial was the natural consequence of the Mayer Brown attorneys' having to get the trial engine revved up again (including any necessary refresher work) after the ignition had been turned off in February.

Still another aspect of Lenell's attack that can be perceived only as advanced in bad faith is its counsel's attempt to question and stress the fact that about $150,000 of the $440,000-plus of fees (exclusive of interest) that are sought to be recovered in this proceeding has not yet been paid by Zapata. In that respect, Zapata's trial counsel explained that was the result of insufficient cash flow being sustained by Zapata -- scarcely surprising in light of the still-continued failure by Lenell to pay even $1 toward its obligations, even though its own records have always shown that it owed Zapata far, far in excess of a half million dollars. In fact, Zapata acknowledges that it is firmly obligated to Mayer Brown for the entire amount billed by the law firm, and Zapata continues to make further payments on account as its cash flow permits. For Lenell to dispute any part of the fees claim because such fees have not yet been paid by Zapata -- a factor due entirely to the manner in which Lenell has dishonored its own acknowledged obligations to Zapata -- has (as this Court has previously said) exactly the same degree of merit as the plea of the defendant who, having been found guilty of murdering both his parents, asks the court for mercy because he is an orphan.

This opinion has sought to deal in terms only with the highlights (or more accurately the lowlights) of Lenell's attempted onslaught on the Zapata request. Suffice it to say that this Court has examined and has carefully considered every other argument presented by Lenell and has found them all equally wanting (so that any absence of express treatment in this opinion should be viewed as without significance). On the other side of the coin, Zapata's evidentiary presentation has been wholly credible and entirely persuasive.

Accordingly the Zapata motion is granted in its entirety. Its Fee Ex. 6 has calculated compound interest through various dates, and the one applicable to this opinion (projecting one more day for docketing) calls for $43,357.64 in compound interest in addition to the principal sum of $441,708.69, or a total of $485,066.33. Judgment is therefore ordered to be entered in favor of Zapata and against Lenell in that aggregate sum of $485,066.33.[7]

________________________
Milton I. Shadur
Senior United States District Judge

Date: March 13, 2002


FOOTNOTES

1. For that reason this opinion will consistently place the word "expert" in quotation marks.Without that cautionary usage -- because to label someone unqualifiedly as an "expert" tends to lend credence to whatever that person has said -- the attribution of that presumed badge of credibility might have blunted the force of the criticisms voiced here. As is demonstrated in spades in this opinion, there is no way in which the opinions voiced by Lenell's witness can be characterized as exhibiting any quality of expertise in terms of the situation presented by this case.

2. This is framed in the singular because, although a second lawyer also filed an appearance on Lenell's behalf, he really played no active role in the fee proceeding.

3. To obtain a further demonstration of why no legitimate claimant to the mantle of an expert could characterize the underlying litigation here as a simple and straightforward collection matter (or as a simple breach of contract lawsuit), one need only review the trial transcript, as well as the series of opinions that this Court was called upon to render to resolve a host of hotly-disputed aspects of the case -- e.g., this Court's December 8, 2000 opinion ruling on the parties' respective motions in limine; its lengthy July 18, 2001 opinion and judgment order rejecting, as to all but two minor adjustments, Lenell's post-verdict Rule 50 and Rule 59 motion ("all of it of the type that attempts to fling gobs of mud toward a wall or ceiling, hoping that as much as possible will stick"); its brief July 19 opinion rejecting still another Lenell "dog-in-the-manger approach" in the form of a second Rule 59 motion; its August 22 opinion (155 F.Supp.2d 969) holding Lenell's counsel liable for Zapata's incremental lawyers' fees attributable to the Lenell lawyers' violation of 28 U.S.C. 1927; and its August 28 opinion holding Lenell itself liable for the fees that are ultimately dealt with in this opinion, a liability supported both by the Convention on the International Sale of Goods and, secondarily and alternatively, by application of the inherent power doctrine.

4. That process was further skewed by the "expert's" additionally mistaken perception that what was called for here was equivalent to obtaining Bankruptcy Court approval of a claim for fees based on the known need for such approval from the outset, as contrasted with the substantively different situation explained and discussed in the Opinion and the precedents relied upon there. Indeed, all too much of the "expert's" direct testimony was taken up with that nonanalogous subject.

5. As the Opinion pointed out, those decisions conclusively show the wrongheadedness of the approach voiced in the "expert's" Rule 26(a)(2)(8) report (which was repeated at length in his testimony):

"The hourly rates charged by the plaintiff's counsel exceed the market rate in the Chicagoland area for comparable services by attorneys with equal or greater experience. The rates charged by plaintiff's counsel's firm do not accurately reflect the actual Chicagoland market rate for attorneys in the area of commercial litigation or international business litigation. The rates set by Mayer, Brown and Platt are not based upon the actual market for legal services in the Chicago area, but are arbitrarily set and raised. The rates charged for a case of this nature are excessive."

But even if the "expert's" just-stated view of the market were somehow to be accepted, his unreliable methodology referred to in the preceding paragraph of the text saps his opinions of any force.

6. As chance would have it, the writer of this opinion (who now chairs the Judicial Conference's Advisory Committee on the Rules of Evidence) was, at the time that the December 1, 2000 amendment to Evid. R. 702 and its accompanying Committee Note were in the lengthy gestation process leading to adoption, the chair of the Advisory Committee's subcommittee assigned to the project of addressing Evid. R. 701 through 703. In that capacity, the writer had the primary responsibility for reviewing and for placing into their ultimate form the versions of Evid. R. 702 and the Committee Note originally drafted for Committee consideration by its outstanding reporter, Professor Dan Capra of Fordham Law School. And as a reading of the extensive Committee Note will disclose, it (like Daubert and Kumho) fully anticipated the type of unreliable and ill-fitting opinions that have been proffered here -- and it too teaches the flat-out rejection of such opinions.

7. This opinion has not taken account of the possibility of awarding fees for services rendered by Mayer Brown in this fee proceeding itself, a type of award that our Court of Appeals has approved from time to time despite the prospect described by Jonathan Swift's lines of doggerel:

"So, naturalists observe, a flea
Hath smaller fleas that on him prey;
And these have smaller still to bite 'em;
And so proceed ad infinitum."

In that respect, it would of course be possible to avoid Zeno's Paradox (another expression of the same ad infinitum proposition) by estimating the amount of time and therefore the fees attributable to the final increment of fees-on-fees work.

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Pace Law School Institute of International Commercial Law - Last updated December 15, 2003
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