• The Unusual Case - Plaintiff Is Stuck With Defendant's Attorney's Fees
  • October 11, 2011 | Author: Michael R. Lied
  • Law Firm: Howard & Howard Attorneys PLLC - Peoria Office
  • Bernadine Matthews worked for Wisconsin Energy Corporation (“WEC”) from 1980 to 1999. When she left WEC—it is not clear from the appellate opinion if this was an involuntary termination—the parties agreed how WEC would respond to reference requests from prospective employers.

    Matthews later sued WEC, alleging that it breached its promises. The parties then entered into a settlement agreement, which had this provision:

    Wisconsin Gas agrees to respond to any request for a reference regarding Matthews in a manner that is consistent with the Wisconsin Gas policy in place regarding reference checks at the time. Wisconsin Gas will not respond to any request for a reference regarding Matthews by indicating that Matthews was terminated or fired from Wisconsin Gas.  

    WEC’s regular policy was “name, rank and serial number.”  WEC would only confirm that a person had worked for WEC, and give dates of employment, salary, and position.

    Matthews hired Howard Schwartz, President and CEO of Career Consulting Services of America (CCSA), a consultant who specializes in helping disabled individuals seek employment through the “Ticket To Work Program.”

    Schwartz faxed a letter to Art Zintek, Vice-President of Human Resources at WEC. The letter indicated that CCSA was contracted by the Social Security Administration to assist Matthews in her job search and requested that WEC confirm Matthews’ work history at WEC and provide comments regarding her work performance. 

    WEC wanted a signed release form.  Schwartz sent Lynne English, in the WEC Legal Department, a release form. WEC then mailed Schwartz a letter verifying Matthews’ employment.

    Matthews filed the lawsuit at issue, alleging that WEC breached the reference-request provision by failing to properly verify her employment twice in 2004.  A jury found that WEC did not breach the agreement.  The trial judge awarded WEC attorney’s fees in an amount exceeding $520,000 and nontaxable costs and expenses of almost $40,500.00.

    On appeal, Matthews first claimed that the district court erred when the judge instructed the jury that it could find Matthews waived enforcement of the agreement by authorizing Schwartz to seek personal information about her.  She argued WEC failed to plead waiver as a defense.

    The court of appeals rejected Matthews’ argument.  The rule that an affirmative defense not pleaded in the answer (or by an earlier motion) is forfeited is not to be applied rigidly.  The failure to plead an affirmative defense in the answer forfeits the defense only if the plaintiff is harmed by the defendant’s delay in asserting it.

    Next, Matthews argued that the judge erred in granting WEC’s motion for attorney’s fees because the request lacked any description of the work performed.  However, this was a contractual fee-shifting case, not a statutory fee-shifting case.

    Fee-shifting contracts allow reimbursement for commercially-reasonable fees, no matter how the bills are stated. Thus, the standard in a contractual fee-shifting case is a “commercially reasonable” standard.  Such a standard does not require the court to engage in a detailed review of a prevailing party’s billing records.

    Matthews next maintained that WEC’s fees were not commercially reasonable. In determining whether they are, a court will look to the aggregate costs in light of the stakes of the case and opposing party’s litigation strategy.

    Matthews’ final settlement demand was $500,000.  According to the court of appeals, “That makes spending the kind of money WEC did to defend the case look a bit more reasonable.”  Additionally, a party’s willingness to pay its attorneys’ fees is an indication of commercial reasonableness. WEC presented evidence that it paid its legal fees before the jury reached a verdict, at a time it could not be sure it would ever recover them.  Accordingly, WEC’s attorney’s fees were deemed commercially reasonable.

    Matthews also contended that the judge should not have granted WEC fees for the second summary judgment motion because WEC was not the prevailing party on that motion. However, a “prevailing party” is not required to win in “all respects.”  WEC prevailed in the action, and under the agreement with Matthews, it was entitled to reasonable attorney’s fees and costs.

    Finally, Matthews maintained that the award of attorney’s fees was inequitable because she made a good faith claim, and could not afford to pay the fees. Even so, the fee-shifting provision of the agreement did not provide an exception for financial hardship or good faith.

    This was not a case where one party had superior bargaining power, and no equitable requirement applied to the attorney’s fee under the agreement.  The district court was affirmed.

    Matthews v. Wisconsin Energy Corporation, Inc., 642 F.3d 565 (7th Cir. 2011)