Damages In Commercial Litigation: Plaintiff's Viewpoint Mark J. Bereyso and Associates, P.C. Attorneys Chicago Illinois

DAMAGES IN COMMERCIAL LITIGATION:
PLAINTIFF'S VIEWPOINT

Chicago, Illinois
July 25, 1996

Mark J. Bereyso

MARK J. BEREYSO is a principal of Mark J. Bereyso and Associates, P.C. of Chicago, Illinois, where he practices in the areas of business torts, real estate litigation, contract disputes, shareholder/partnership issues and professional liability. Mr. Bereyso received his B.A. degree from the University of Minnesota and his J.D. degree, with honors, from William Mitchell College of Law of St. Paul, Minnesota. He is a member of the American Bar Association, Section of Litigation, the Illinois State Bar Association and the Chicago Bar Association. Committee on Professional Responsibility. He is a member of the Trial Bar of the Northern District of Illinois.

I. Introduction

Damages are not always the primary objective of a plaintiff in commercial litigation. When damages are an objective, they must be considered as important as liability when assessing the merits of a case. A trial advocacy professor once emphasized the importance of damages by recommending his students prepare a case commencing with the jury instructions on damages and to work back. Chances are you, like me, have failed to follow this advice on occasion, and perhaps prepared a case for damages for the first time after preparing the complaint. Your opponent loved you for it. Consider the following:

One reason Defendants can win their case on the damage issue is because Plaintiffs are frequently equally guilty of missing the boat on damages - they too give little thought to the viability of their damage theory and get blinded by what I believe is the biggest weakness of Plaintiffs in commercial cases -- THEY TEND TO BE PIGS! They get carried away by greed, asking for inflated damages, probably influenced by the constant news reports of monster verdicts in personal injury cases. They forget that they are not likely to evoke the same kind of emotional reactions in a jury, and certainly not in a judge, that a disabled plaintiff can muster. Damage theories in commercial cases need to be more logical, more precise and more rooted in common sense. Too many Plaintiffs go so far out on the limb in blaming all their business woes on some act of the Defendant that the careful and prepared defendant can saw them off and watch them freefall to the ground with a few quick strokes.

David L. Ross, The Defendant's Approach To Damages - "It Really Didn't Hurt Much, Did It?" (Lorman Educ. Serv., Miami, Florida, March 21, 1996).

As commercial plaintiffs' lawyers, we know two things: one, we prefer to be called "razorbacks," and two, credibility (with the court, the jury, even with one's opponent) is everything. The following is a modest attempt to help you enhance credibility without sacrificing too much of your razorback nature.

II. Terminology

A.   General Rule and Special Damages
General damages are damages that "the law implies and assumes to have accrued from an alleged breach of contract" Olmstead v. Burke, 25 1lI. 74, 76 (1860). General damages are those which are the natural and necessary result of the defendant's act. City of Chicago v. McClean, 133 111. 148, 153,24 N.E. 527,528 (1890). General damages differ depending on the theory alleged. General damages for fraud, for example, will differ from those occurring as a result of a dispossession of personal property. See generally , D. Dobbs, Handbook On The Low of Remedies (1973). It is not necessary to specifically plead general damages. Yaeger v. Chicago City Railway Co. , 166, Ill.App. 506,510 (1st Dist. 1911).
Special (or consequential) damages are the natural, but not the necessary, consequence of the defendant's act. City of Chicago v. McClean, 1333 Ill.148, 153 24 N.E. 527, 528 (1890). They may be seen as peculiar to a particular case and would not be expected to occur all the time. The classic example of special damages is lost profits. Special damages must be specifically pleaded. Fed. R Civ. P. 9(g); Parmelee v. Hearst Publishing Company, 341 1lI.App. 339,347,93 N.E. 512,515 (1st Dist. 1950).
The distinction between general and special damages is significant beyond simple pleading requirements. Restrictions apply to the recovery of special damages that do not apply to the recovery of general damages. The first restriction is foreseeability, or the requirement that the loss was reasonably within the contemplation of the parties at the time the contract was formed. Hadley v. Baxendale, 156 Eng. Rep. 145, 151 (Ex. 1854); Latex Glove Co. v. Gruen, 146 llIApp.3d 868, 874, 497 N.E.2d 466, 469 (1st Dist 1986). The test of foreseeability is objective. 810 ILCS 5/2-715. Foreseeability can be proved by way of actual knowledge of the breaching party (at the time of making the contract) or proof of the general nature of the buyer's business or the particular transaction. See C. Knapp, Commercial Damages, § 5.02 (Matthew Bender 1986).
A second limitation is proximate cause. The plaintiff must show that the special damage was actually caused by the wrong and was the proximate result thereof. Midwest Software. Ltd. v. Willie Washer Mfg. Co., 258 llIApp.3d 1029, 630 N.E.2d 1088 (1st Dist. 1994). In some cases, the loss may not be recoverable if it was avoidable; for example, if a buyer fails to seek cover. 810 ILCS 5/2-715(2)(a).
The third restriction is that the amount of loss is calculable with "reasonable certainty." A distinction is made between the certainty required to show the fact of loss and the reasonable certainty required to show the amount of loss. Hemken v. First National Bank of Lichfield, 76 Ill.App.3d 23, 394 N.E.2d 868 (4th Dist. 1979); ILP Damages, § 14 (1968). Generally, a less stringent standard applies to the proof of amount. See C. Knapp, Commercial Damages, § 5.04 (Matthew Bender 1986).
B.   Nominal, Compensatory and Punitive Damages
Nominal damages are not compensation for loss or injury, but are given in recognition of a violation of a legal right. Nominal damages historically were used for the same purpose declaratory judgments are used today. D. Dobbs, Handbook On The Law of Remedies, § 3.8 (1973). Nominal damages are recoverable in contract and tort. Midwest Software Ltd. v. Willie Washer Mfg. Co., 258 Ill.App.3d 1029,630 N.E.2d 1088 (1st Dist. 1994) (breach of contract); In re Estate of Halas, 209 Ill.App.3d 333, 568 N.E.2d 170 (1st Dist. 1991) (breach of fiduciary duty); Schumacher v. Continental Air Transport Co.. Inc., 204 Ill.App.3d 432, 462 N.E.2d 300 (1st Dist. 1990) (admitted negligence). But see Crosby v. City of Chicago , 11 Ill.App.3d 625,298 N.E.2d 719 (1st Dist. 1973) (nominal damages should be allowed in cases involving intentional torts but not in cases involving negligent torts). The practical use of nominal damages today is as a "fall back" position to "save" a cause of action where equitable remedies are also sought or where damages are not adequately shown but attorneys' fees and costs may still be recovered. That is, they are a recovery of last resort.
Compensatory (or actual) damages are those general damages, plus any special (consequential) damages, which are intended to compensate a plaintiff for her loss. Compensatory damages do not include nominal or punitive damages. Compensatory damages are not limited to pecuniary losses but may be awarded for mental anguish and injury to character and reputation. A plaintiff is not limited to losses previously sustained, but may recover for future losses so long as they are proximate to the wrong alleged and are not speculative.
Punitive or exemplary damages are not awarded to compensate the injured party, but to punish a wrongdoer and deter others from similar conduct. Punitive damages need not bear any relation to the injured party's loss. They are not available in contract cases except where the breach of contract constitutes an independent tort. Morrow v. L. P. Goldschmidt Associates, Inc.. 112 Ill.2d 87,492 N.E.2d 181 (1986). Punitive damages are not allowed in attorney malpractice actions or medical malpractice actions. 735 ILCS 512-1115.
C.   Expectation, Reliance and Restitutionary Damages
These terms refer to different measures of damages awarded in breach of contract cases. Generally, expectancy damages are intended to place the plaintiff in the position she would occupy if both sides to the contract fully performed. Often, but not always, the expectation measure will yield the highest amount of damages in a given case. Other measures (reliance and restitution) may nonetheless yield a higher award (usually, in the case of an unprofitable contract or where recovery upon an express contract is barred by the Statute of Frauds or the inability to prove special damages with reasonable certainty).
Reliance damages refer to those expenses incurred in reliance on a given contract This measure is intended to restore the injured party to his or her position before the contract was formed. Reliance damages may consist of two elements. The first consists of expenses incurred in preparation for and performance under the contract in question. This is what is sometimes referred to as "essential" reliance. E. Farnsworth, Contracts, § 12.01 (2d ed. 1990). Reliance damages may also consist of preparations for collateral transactions that are dependent upon performance of the contract in question. This is "incidental reliance." Farnsworth offers the example of a breached contract to build a store. If the owner repudiates after the builder has spent money on architects, drawings, labor and materials, these expenditures are considered essential reliance. Expenses incurred in purchasing stock and hiring employees are considered incidental reliance. Id.
Restitution refers to the restoration of any benefits which the promisee conferred on the breaching party and does not include the lost benefit of the bargain or the value of reliance expenditures, which may not have benefited the breaching party. See C. Knapp, Commercial Damages, § 1.03 (Matthew Bender 1986). Restitution generally yields the smallest amount of damages in a breach of contract case and is often used in cases where there is no enforceable contract on which to recover expectation damages.
Actual damages refer to those nominal and compensatory damages (general and special) actually caused by a breach of contract.
Liquidated damages are those specified and agreed to by the parties as recoverable damages in the event of future breach of contract If the parties have stipulated to a legitimate liquidated damages amount, that is what will be awarded and neither party has the option to elect to recover actual damages (regardless of whether they are higher or lower than the liquidated amount). The enforceability of a liquidated damages clause dispenses with the need to produce evidence of actual damages. Northern Illinois Gas Co. v. Energy Coop., Inc. , 122 Ill.App.3d 940,461 N.E.2d 1049 (3rd Dist. 1984) ("Proof of liability is all that is required to entitle the injured party to recover the liquidated amount."). The requirements for an enforceable liquidated damages clause were stated by the Illinois Supreme Court in Bauer v. Sawyer, 8 Ill.2d 351, 134 N.E.2d 329 (1956) as follows:
An made in advance of breach, fixing the damages therefore, is not enforceable as a contract and does not affect the damages recoverable for the breach, unless (a) the amount so fixed is a reasonable forecast of just compensation for the harm that is caused by the breach, and (b) the harm that is caused by the breach is one that is incapable or very difficult of accurate estimation.
Id. , citing Restatement of Contracts, § 339. See also , 810 ILCS 5/2-718(1) (liquidated damages must be in an amount which is reasonable in light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or non-feasibility of otherwise obtaining an adequate remedy).
A penalty provision is a contract provision purporting to specify liability for breach but which fails to meet the test of a legitimate liquidated damages clause. Penalties often serve as a means to "secure" performance and discourage what would otherwise be an economically effective breach of contract. Penalty provisions are void and unenforceable. A party seeking to recover under a "liquidated damages" clause which is held to be a "penalty" may nonetheless prove and recover actual damages.

III. Alternative Theories

A.   Equitable Remedies
Sometimes, a plaintiff is threatened by injury that would not be compensable in the way of monetary damages, or the practical effect ofthe injury warrants extraordinary relief preventing the injury's occurrence. These circumstances are presented where there is a continuing or repeated incidences of injury, damage to business reputation, difficulty in proving damages with the reasonable degree of certainty, the involvement of unique property, either real or personal, defendant's insolvency or inability to answer to a large damage award, deadlock, oppression, fraud or breach of fiduciary duties. One or more of these circumstances may cause plaintiffs counsel to seek equitable relief in the form of an injunction (temporary, preliminary or permanent), specific performance (injunctive order directing contractual performance), rescission, reformation, replevin, declaratory judgment, accounting, constructive trust, attachment, ejectment, forcible entry and detainer, detinue, mandamus, judicial foreclosure, judicial dissolution or its alternatives, or partition, to name several. A good resource on the availability of these remedies is Anderson, et. al., Chancery and Special Remedies (IICLE 1992 and Supp. 1994). Whether the plaintiff is entitled to equitable and legal relief will depend on the particular circumstances of the case. Obviously, both should be examined and sought, if possible.
B.   Alternative Measures of Damages
Where damages are sought, alternative measures are usually examined. The difference in recovery between two theories may be significant, and consequently, material to which theory and measure should be pursued.
1.   General vs. Special Damage
A significant element of damage should be sought, if possible, under a theory where it is characterized as "general" damage as opposed to "special" damage. This avoids the restrictions (foreseeability, causation and certainty) on the recovery of special damages. C. Knapp, Commercial Damages, § 1.5 (Matthew Bender 1986).
2.   Contract vs. Tort
A common belief is that a tort theory will yield higher damages than breach of contract. This may not be true in all cases. Contract damages potentially provide the plaintiff with the "benefit of the bargain" or expectation damages. This places the plaintiff in a better position (presuming a profitable contract) than the plaintiffs position before contracting. Tort recovery, in contrast, returns a plaintiff to a position the plaintiff would be in had there been no tort. In other words, it leaves the plaintiff in no better position than he was in prior to accrual of the cause of action.
Nonetheless, tort damages are less restricted by the concepts of foreseeability and certainty that govern contract claims. E.g., AMP AT !Midwest. Inc. v. Illinois Tool Works. Inc., 896 F.2d 1035 (CA7 ill. 1990). A tort claim might also avoid a contract clause limiting consequential damages. In the rare case, punitive damages may be available in tort which would otherwise not be recoverable in contract.
On the other hand, economic damages may not be recoverable under a tort theory that would otherwise be recoverable in contract This is the "economic loss" doctrine named in Illinois by reference to the case Moorman Mfe:. Co. v. National Tank Co., 91 Ill.2d 69,435 N.E.2d 443 (1982). The Moorman doctrine has precluded the recovery of economic losses in cases of professional negligence against architects, 2314 Lincoln Park West Condominium Association v. Mann, 136 Ill.2d 302, 555 N.E.2d 346 (1990), negligence between a contract and subcontractor, Anderson Electric. Inc. v. Ledbetter Erection Corp., supra, negligent construction by a builder, Foxcroft Townhome Owners Association v. Hoffman Rossner Corp. , 96 1ll.2d 150,449 N.E.2d 123 (1983), and professional negligence of engineers, Fireman's Fund Insurance Company v. SEC Donohue. Inc. , 1996 WL 306551 (1st Dist. June 7, 1996).
The scope of Moorman is unclear; at least, it is changing. First, it is important to realize that the doctrine is limited to cases where "economic losses" are sought These are defined as "damages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profit -- without any claim of personal injury or damage to other property." Anderson Electric. Inc. v. Ledbetter Erection Corp., 115 Ill.2d 146, 149,503 N.E.2d 246 (1986) (emphasis added). Economic loss has also been defined as "the diminution in the value of the product because it is inferior in quality and does not work for the general purposes for which it was manufactured and sold." Moorman, supra. What constitutes "other property" is currently under consideration by the Illinois Supreme Court on questions certified from the Seventh Circuit in Trans State Airlines v. Pratt & Whitney Canada. Inc., No. 95-2896 (CA7 Ill. 1996).
Beyond the definitional scope of the doctrine, certain tort causes of action continue to be held exempt from the doctrine. The Trans State Airlines case involves a possible exception where economic loss occurs as the result of "a sudden and dangerous occurrence." Further causes of action which are exempt from the Moorman doctrine are noted below:
a.  Intentional misrepresentation -
Soules v. General Motors Corp, 79 1ll.2d 282, 402 N.E.2d 599 (1980).
b. Negligent misrepresentation by one in the business of supplying information for guidance in business transactions.
Rozny v. Marnel , 43 Ill.2d 54, 250 N.E.2d 656 (1969).
c.  Malpractice actions against attorneys -
Collins v. Reynard , 154 Ill.2d 48, 607 N.E.2d 1185 (1982)
d.  Malpractice actions against accountants -
Congregation of the Passion v. Touch Ross , 159 Ill.2d 137,  637 N.E.2d 503 (1994)
e.  Insurance brokers’ negligence -
Kanter v. Deitelbaum , 27 Ill.App.3d 756, 48 N.E.2d 1137 (1 ^st Dist. 1995).
f.  Interference with economic expectancy -
Werblood v. Columbia College , 180 Ill.App.3d 967, 536 N.E.2d 750 (1st Dist. 189)
g.  Interference with contractual relations -
Santucci Construction Co. v. Baxrwe & Woodman, Inc. , 151 Ill.App.3d 547, 502 N.E.2d 1134 (2d Dist. 1986)
h.  Breach of fiduciary duty -
Federal Deposit Insurance Corp. v. Miller , 781 F. Supp. 1271 (N.D. Ill. 1991)
Consideration has to be given to whether economic losses will be recovered under a particular tort theory, absent physical or property damage.
3. Tax Consideration
Especially in the context of settlement, counsel may consider the income tax implications of recovery for various elements under alternative theories. Lost profits, for example, are taxable as ordinary income. Collins v. Commissioner. 18 T.C.M. 756 (1959). Damage to property may result in a capital gain or a capital loss, or income for lost profits resulting from deprivation of use. Revenue Ruling 75-527, 1975-2 C.B. 30. Recovery for compensation for harm to good will will be treated as a return of capital. Durkee v. Commissioner, 162 F.2d 184 (6th Cir. 1947).
Recovery for personal injuries is not taxable at all. I.R.C. § 104. Punitive damages, on the other hand, have been held not to meet the statutory requirement of being received “on account of personal injuries or sickness.”    Commissioner v. Schleier , 115 S.Ct. 2159 (1995).
Damages received on account of a deprivation of Constitutional rights under 42 V.S.C. § 1983 are considered recovered on account of personal injury. Bent v. Commissioner , 87 T.C. 236 (1986), afff’d, 835 F.2d 67 (3d Cir. 1988).
The tax consequences of an award for injury to reputation often depends on whether personal or professional reputation is involved. The IRS has ruled that damages to personal reputation is personal injury and not taxable. Revenue Ruling 85-98, 1985-2 C.B. 51. Injury to professional reputation has received inconsistent treatment by the IRS, but authority exists for exclusion of these damages from income. Roemer v. Commissioner, 716 F.2d 693 (CA9 1983).
Recovery for a wrongful termination is generally treated as taxable income. Revenue Ruling 75-64, 1975-1 C.B. 16. But see , Redfield v. Insurance Co. of North America, 940 F.2d 542 (9th Cir. 1991).
4.   Alternative Contract Measures
The following is intended to provide a starting point to your research on the measure of recoverable damages under several theories commonly asserted in commercial cases, starting with breach of contract.
a.  Expectation Measure
In re Midway Airlines , 180 B.R. 851 (Bkrtcy N.D. Ill. 1995); Harden v. Playboy Enterprises, Inc. , 261 Ill.App.3d 443, 633 N.E.2d 764 (1st Dist. 1994);
Mercantile Holdings, Inc. v. Keeshin , 261 Ill.App.3d 546, 633 N.E.2d 805 (1st Dist. 1993);
Fieldstein v. Guinan , 148 Ill.App.3d 610, 499 N.E.2d 535 (1st Dist. 1986);
Olliver v. Alden , 262 Ill.App.3d 190, 634 N.E.2d 418 (2d Dist. 1994);
Illinois Pattern Instruction 700.13-700.16 (West 1995).
b. Reliance Measure
Venture Assoc. Corp. v. Zenith Data Systems Corp. , 887 F.Supp. 1014 (N.D. Ill. 1995).
c. Restitution Measure
Ellis v. Photo America Corp. , 113 Ill.App.3d 493, 447 N.E.2d 852 (1st Dist. 1983);
Rohter v. Passarella , 246 Ill.App.3d 860, 617 N.E.2d 46 (1st Dist. 1993);
Brackett v. Sedlacek , 116 Ill.App.3d 978, 452 N.E.2d 837 (1st Dist. 1983).
d. Nominal Damages
Midwest Software, Ltd. v. Willie Washer Mfg. Co. , 258 Ill.App.3d 1029, 630 N.E.2d 1088 (1st Dist. 1994)
e. UCC Article 2 Measures
Where a contract involves a transaction of goods the following measures apply.
(1) Seller's Resale. Section 2-706 provides that a seller may sell goods identified to the contract and recover (I) the difference between the contract price and the sale price, (2) plus incidental damages, (3) less expenses saved as a result of the buyer's breach. The Code requires the seller to conduct the sale in a commercially reasonable manner and to act in good faith. Procedures apply to a private sale (seller to notify the buyer of intention to sell the goods but need not notify the buyer of the time and place of sale), and a public sale (seller must give the buyer reasonable notice at the time and place of the resale except where the goods are perishable or would decline in value rapidly). If a seller fails to comply with the requirements of § 2-706, the seller may still seek a market price remedy under § 2-708. California Air Motor Corp. v. Jones, 415 F.2d 554 (6th Cir. 1969).
(2) Seller's Contract - Market Price. Where a buyer wrongfully rejects or repudiates, the seller may recover as damages the difference between the market price of the goods at the time and place of tender and the unpaid contract price. 805 ILCS 5/2-708. G. Bauknech GmbH v. Electronic Relays. Inc., 569 F. Supp. 404 (N.D. Ill. 1983). Where a buyer fails to pay for goods and the goods have become damaged after the risk of loss passed to the buyer, the seller may recover the contract price plus incidental damages. Section 2-709(1).
Where the market price remedy of § 2-708(1) is inadequate, a seller may recover lost profit under § 2-708(2). This section provides for recovery of profit the seller would have made on the completed contract plus incidental damages, less any credit for payment of proceeds of sale. Profit is determined by reference to list price, less manufacturing costs. Reasonable overhead, including the pro-rata portion of fixed costs, are included in the calculation of overhead. Automated Medical Laboratories. Inc. v. Armour Pharmaceutical Co., 629 F.2d 1118 (5th Cir. 1980).
(3) Seller's Contract Price. The seller may bring an action for the price in four situations: (1) where the goods have been accepted by the buyer; (2) where a commercially reasonable time has passed after the risk of conforming goods has passed to the seller; (3) there the seller is unable to resell at a reasonable price goods identified to the contract or (4) where circumstances reasonably indicate that any effort to sell goods identified to the contract will be unavailable. 805 ILC 5/2-709.
(4) Buyer's Cover . A buyer may purchase or contract to purchase substitute goods for those due from the seller in good faith and without unreasonable delay under § 2-712(1). Recovery under such circumstances is the difference between the cost of cover and the contract price, together with any incidental or consequential damages, less expenses saved as a consequence of seller's breach. 810 ILCS 2-712(2).
(5) Buyer's Damages for Nondelivery or Repudiation. The buyer may recover the difference between the market price at the time when the buyer learned of the breach and the contract price, plus any incidental and consequential damages, less expenses saved in consequence of seller's breach, under § 2-703. Market price is determined as of the place of tender, or in the case of rejection after arrival or revocation of acceptance, the place of arrival. 810 ILCS 5/2-713(1), (2).
(6) Buyer's Damages for Nonconforming Accepted Goods. Where a buyer has accepted goods and given notification (§ 2-607(3)) the buyer may recover for any nonconformity of tender, the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable. 805 ILCS 5/2-714. This section goes on to provide that the measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the good accepted and the value they would have had had they been as warranted, unless special circumstances place damages of a different amount. Incidental and consequential damages may also be recovered under § 2-715.
"Incidental" damages are those resulting from the seller's breach as those expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover, and any other reasonable expense incident to the delay or other breach. 810 ILCS 512-715(i). "Consequential" damages include any loss resulting from general or particular requirements which the seller at the time of contracting had reason to know which could not otherwise be prevented by cover or otherwise and injury to person or property proximately resulting from any breach of warranty. 810 ILCS 5/2-715(2).
(7) Buyer's Right to Goods. The buyer may have a right to specific performance or replevin where the goods are unique or "in other proper circumstances." 810 ILCS 512-716.
5.   Alternative Tort Measures
a.   Damage to Property
(1)   Damage to Personal Property
Toledo Peoria and Western Railway v. Metro Waste Systems. Inc., 59 F.3d 637 (CA 7 III 1995);
Beasley v. Pelmore,  259 lllApp.3d 513, 631 N.E.2d 749, (4th Dist. 1994);
Illinois Pattern Instruction 30.10 to 30.14 (West 1995).
(2)   Conversion or Total Loss
New York, Central and St. Louis Railway Co. v. American Transit Lines , 408 Ill. 336, 97 N.E.2d 264 (1951);
Mercantile Holdings, Inc. v. Keeshin , 261 Ill.App.3d 546, 633 N.E.2d 805 (1st Dist. 1993);
Harris v. Peters , 653 N.E.2d 1274 (1st Dist. 1995);
In re Sumpter , 171 B.R 853 (Bkrtcy. N.D. Ill. 1994);
Illinois Pattern Instruction 30.17-30.20 (West 1995)
b.  Fraud
(1)   Benefit of Bargain Measure
Gerrill Corp. v. Jack L. Hargrove Builders, Inc. , 128 Ill.2d 179, 538 N.E.2d 530 (1989);
Home Savings and Loan Ass’n of Joliet v. Schneider , 108 Ill.2d 277, 483 N.E.2d 1225 (1985);
Giammanco v. Giammanco , 253 Ill.App.3d 750, 625 N.E.2d 990 (2d Dist.), appeal denied, 156 Ill.2d 557 91993);
Application of Bussee , 124 Ill.App.3d 433, 464 N.E.2d 651 (1st Dist. 1984);
Munjal v. Baird & Warner, Inc. , 138 Ill.App.3d 172, 485 N.E.2d 855 (2d Dist. 1985)
(2)   Out of Pocket Measure
General Motors Acceptance Corp. v .Central Nat’l Bank of Mattoon , 733 F.2d 771 (CA Ill. 1985);
Commerce National Bank of Peoria v. Federal Deposit Ins. Corp. , 131 Ill.App.3d 977, 476 N.E.2d 809 (3d Dist. 1985);
Giammanco v. Giammanco , 253 Ill.App.3d 750, 625 N.E.2d 990 (2d Dist.), appeal denied, 156 Ill.2d 557 91993);
(3)   Punitive Damages
Federal Deposit Insurance Corp. v. W.R. Grace & Co. , 877 F.2d 614, (CA7 Ill. 1989);
Europlast Ltd. v. Oak Switch Systems , 10 F.3d 1266 (CA7 Ill. 1993);
Homes Savings and Loan Assoc. of Joliet v. Schneider , 108 Ill.2d 277, 483 N.E.2d 1225 (1985);
Berman v. Dempsey , 257 Ill.App.3d 496, 629 N.E.2d 720 (1st Dist. 1991);
Stafford v. Puro , 63 F.3d 1436 (CA7 Ill. 1995);
Illinois Pattern Instruction 800.06 (West 1995).
c.   Negligent Misrepresentation
Van Gessel v. Folds , 210 Ill.App.3d 403, 569 N.E.2d 141 (1st Dist. 1991);
Zimmeman v. Northfield Real Estate, Inc. , 156 Ill.app.3d 154, 510 N.E.2d 409 (1st Dist. 1986);
Trytko v. Hubbel, Inc. , 28 F.3d 715 (CA7 Inc. 1994).
d.   Interference with Contractual Relations
(1)   Compensatory damages
Stafford v. Puro , 63 F.3d 1436 (CA7 Ill. 1995); Reuben H. Donnelly v. Brauer , 275 Ill.App.3d 300, 655 N.E.2d 1162 (1st Dist. 1992);
Girsberger v. Kresz , 261 Ill.App.3d 398, 633 N.E.2d 781 (1st Dist. 1993);
Delcon Group v. Northern Trust Company , 187 Ill.App.3d 635, 543 N.E.2d 595 (2d Dist. 1989).
(2)   Punitive Damages
Stafford v. Puro , 63 F.3d 1436 (CA7 Ill. 1995);
Cross v. American Country Ins. , 875 F.2d 625 (CA Ill. 1989);
Delcon Group v . Northern Trust Co., 187 Ill.App.3d 635, 543 N.E.2d 595 (2d Dist. 1989).
e.  Interference with Economic Expectancy
(1)   Compensatory Damages
Curt Bullock Building v. H.S.S. Development , 225 Ill.App.3d 9, 586 N.E.2d 1284 (4 ^th  Dist. 1992);
E.J. McKernan Co. v. Gregory, 252 Ill.App.3d 514, 623 N.E.2d 981 (2d Dist. 1989);
Malatesta v. Leicher , 186 Ill.App.3d 602, 542 N.E.2d 768 (1 ^st  Dist. 1989)
f.   Breach of Fiduciary Duty
Martin v. Heinold Commodities, Inc. , 240 Ill.App.3d 536, 608 N.E.2d 449 (1 ^st  Dist. 1992);
Hagshenas v. Gaylord, 199 Ill.App.3d 60, 557 N.E.2d 316 (2 ^nd  Dist. 1990);
Levy v. Markal Sales Corp. , 268 Ill.App.3d 355, 643 N.E.2d 1206 (1 ^st  Dist. 1994).
g.   Defamation and Disparagement
(1)  Compensatory Damages
Tacker v. Delco Remy Div. of General Motors , 937 F.2d 1201 (CA7 Ind. 1991);
Borden, Inc. v. Rios , 850 S.W.2d 821 (Tx. App. 1993), vacated pursuant to settlement, 859 S.W.2d 70 (Tex. 1993);
Crump v. P. & C. Food Markets , 154 Vt. 284, 576 A.2d 441 (1990);
Mich. Microtech v. Fed. Pub., Inc. , 187 Mich.App.179, 466 N.W.2d 717 (1991).
(2)   Presumed Damages
Mittleman v. Witous , 135 Ill.2d 220, 552 N.E.2d 973 (1989);
Winters v. Greeley , 189 Ill.App.3d 590, 545 N.E.2d 422 (1 ^st  Dist. 1989)
(3) Punitive Damages
Baravati v. Josepthal. Lyon & Ross. Inc. , 28 F.3d 704 (CA7 1994);
Girsberger v. Kresz , 261 lllApp.3d 398, 633 N.E.2d 781 (1st Dist. 1993);
Krasinski v. UPS , 208 lllApp.3d 771,566 N.E.2d 998 (3d Dist. 1991);|
Winters v. Greeley , 189 lllApp.3d 590, 545 N.E.2d 422 (1st Dist. 1989).
h.   Trade Secrets
Sokol Crystal Products v. DSC Communications , 15 F.3d 1427 (CA7 Wis. 1994);
Salbury Labs v. Merieux Labs , 908 F.2d 706 (CA11 Ga. 1990);
The Post Office v. Portee. Inc.,  913 F.2d 802 (CA10 Colo. 1990);
Prescott v. Morton Intern. Inc. , 769 F. Supp. 404 (D. Mass. 1990);
Trandes Corp. v. Guy F. Atkinson Co. , 996 F.2d 655 (CA4 Md. 1993).
6.   Selected Statutory Measures
Possible statutory bases and measures of recovery should be considered. A statutory provision for the recovery of damages may not, however, dispense with the need to consider possible limitations on recovery under Moorman and the common law. See In re Illinois Bell Switching Station Lit.. 161 Ill.2d 233, 641 N.E.2d 440 (1994). The following is a list of more commonly invoked Illinois statutes.
Illinois Anti-Trust Act, 740 ILCS 10/71
Treble Damages and Attorneys' Fees § 7(2)
Attorneys' Fees in Wage Actions Act, 705 ILCS 225/1
Attorney's Lien Act, 770 ILCS 5/0.01; 770 ILCS 5/1
Illinois Black List Trade Law, 775 ILCS 15/1
Business Corporation Act, 805 ILCS 5/1.01
Corporate Records - Examination by Shareholders § 7.75
Derivative Actions § 7.70
Removal of Directors § 8.35
Removal of Officers § 8.55
Director Conflict of Interest § 8.60
Liability of Directors § 8.65
Kickbacks, Bribes § 8.70
Indemnification of Officers, Directors, Employees & Agents § 8.75
Redemption § 9.05
Shareholder Distributions § 9.10
Dissenter's Rights § 11.65
Judicial Dissolution § 12.50
Alternative Remedies to Judicial Dissolution § 12.55
Business Opportunity Sales Law of 1995,815 ILCS 602/5-1
Fraudulent Practices § 5-95
Rescission and Attorneys' Fees § 5-120
Commercial Real Estate Broker Lien Act, 770 ILCS 15/1
Condominium Property Act, 765 ILCS 605/1
Lien for Nonpayment § 9
Other Remedies and Attorneys' Fees § 9.2
Construction Contract Indemnification for Negligence Act, 740 ILCS 35/0.01
Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1
Action for Damages and Attorneys' Fees § 10a(a), (c)
Computer Crime Prevention Law, 720 ILCS 5/16D-l
Counterfeit Trademark Act, 765 ILCS 1040/0.01
Private Action § 7
Court of Claims Act, 705 ILCS 505/24
Jurisdiction § 8
Limitations § 22
Deceptive Advertising Act, 720 ILCS 295/la
Employment Record Disclosure Act, P.A. 89-470
Financial Institutions Banking Act, 205 ILCS 110/1
Dissenting Shareholder § 29
Statute of Frauds (Frauds Act), 740 ILCS 80/0.01
Fraudulent Sales Act, 815 ILCS 350/0.01
Fraudulent Transfer Act, 720 ILCS 1601.
Creditor Remedies § 8
Freedom of Information Act, 5 ILCS 140/1
Procedures § 3
Civil Action and Attorneys' Fees § 10
Home Repair Fraud Act, 815 ILCS 515/1
Human Rights Act, 775 ILCS 5/1-101
Relief Including Attorneys' Fees § 8A-I04
Illinois Administrative Procedure Act, 5 ILCS 100/1-1
Illinois Business Broker's Act of 1995, 815 ILCS 307/10-1
Civil Remedy and Attorneys' Fees § 10-60
Illinois Securities Law of 1953,815 ILCS 5/1
Civil Remedies including Attorneys' Fees § 13
Interest Act, 815 ILCS 205/0.01/p>
Joint Tortfeasor Contribution Act, 740 ILCS 100/0.01
Limited Liability Co. Act, 805 ILCS 180/1-1
Member Indemnification § 15-10
Judicial Dissolution § 35-5
Derivative Action § 40-1
Personnel Record Review Act, 820 ILCS 40/0.01
Damages and Attorneys' Fees § 12(d)
Professional Service Corporation Act, 805 ILCS 10/1
Retail Installment Sales Act, 815 ILCS 405/1
Revised Uniform Limited Partnership Act, 805 ILCS 210/100
Sales Representative Act, 820 ILCS 120/3
Exemplary Damages and Attorneys' Fees § 3
Third Party Beneficiary Contract Act, 755 ILCS 30/0.0 I
Trade Secrets Act, 765 ILCS 1065/1
Injunctions § 3
Damages § 4
Attorneys' Fees § 5
Telecommunications Line Tapping Act, 720 ILCS 140/0.01
Uniform Commercial Code, 810 ILCS 5/1-101
Sellers' and Buyers' Remedies §§ 2-701 et seq.
Lessee's Remedies §§ 2A-501 et seq.
Lessor's Remedies §§ 2A-523 et seq.
Liability of Parties on Instrument §§ 3-401 et seq.
Accord and Satisfaction by Instrument § 3-311
Default on Secured Obligation § 9-501 et seq.
Secured Party's Liability § 9-507
Uniform Deceptive Trade Practices Act, 815 ILCS 510/1
Injunctive Relief and Attorneys' Fees § 3
Uniform Enforcement of Foreign Judgments Act, 735 ILCS 5/12-650
Uniform Partnership Act, 805 ILCS 205/1
Wage Payment and Collection Act, 820 ILCS 115/1
Whistle Blower Reward and Protection Act, 740 ILCS 175/a
Private Action § 4(b)
Code of Civil Procedure, 735 ILCS 5/1-101
Declaratory Judgments § 2-701
Civil Action by Crime Victims § 2-2001
Administrative Review § 3-101
Attachment § 4-101
Costs § 5-108
Ejectment § 6-101
Eminent Domain § 7-101
Forcible Entry and Detainer § 9-101
Mortgage Foreclosure § 15-1101
Replevin § 19-101

IV. Prejudgment Interest

Interest is recoverable if a written agreement so provides and the amount of interest does not exceed the maximum lawful rate set forth in the Interest Act (9%). 815 ILCS 205/4. The usury limitation is subject to a number of exceptions including any loan made to a corporation and any business loan to a business association or co partnership or to a person owning and operating a business as a sole proprietor or any persons owning and operating a business as a joint venture, joint tenants or tenants in common. 815 ILCS 205/4(1)(a), (c).

In the event a written contract does not expressly provide for an amount of interest, the rate of interest is five percent (5%). 815 ILCS 205/1.

Where there is no written agreement, there are four instances where prejudgment interest may be allowed: (1) On money lent or advanced for use of another; (2) on money due on the settlement of account from the day of liquidating accounts between the parties and ascertaining the balance; (3) on money received to the use of another and retained without the owner's knowledge; and (4) on money withheld by an unreasonable and vexatious delay of payment. LaBarbera v. LaBarbera, 116 TI1.App.3d 959,452 N.E.2d 684 (1st Dist. 1983). See 815 ILCS 205/2.

V. Attorneys' Fees

Illinois follows the "American Rule" which bars a prevailing party from recovering attorneys' fees or costs in litigation in the absence of a statute or an agreement of the parties. Hamer v. Kirk , 64 TII.2d 434,437, 356 N.E.2d 524 (1976). Once again, there are a number of exceptions which are examined briefly below.

A.   Contract Provisions for Recovery of Attorneys' Fees
Attorneys' fees may be recovered if so provided in the agreement between the parties. Abdul-Karim v. First Federal Savings & wan Assoc. of Champaign, 101 TII.2d 400,411-412,462 N.E.2d 488 (1984); Kaiser v. MEPC American Properties. Inc., 164 Ill.App.3d 978,983,518 N.E.2d 424 (1st Dist. 1987). These provisions will be strictly construed against an award of fees. Jackson v. Hammer. 274 TIlApp.3d 59, 653 N.E.2d 809 (4th Dist. 1995).
Even if a contractual provision allows for the recovery of attorneys' fees, only those fees determined to be "reasonable" by the court will be allowed. The party requesting fees bears the burden of presenting sufficient evidence from which a determination of reasonableness can be made. Harris Trust & Savings Bank v. American National Bank & Trust Co. of Chicago, 230 Ill.App.3d 591,595,594 N.E.2d 1308, 1315 (1st Dist. 1992), appeal den. 146 Ill.2d 627, 602 N.E.2d 542 (1992). The evidence contained in a petition for fees must include detailed records containing facts and a computation upon which the charges are predicated, specifying the services performed, by whom they were performed, the time expended and the hourly rate charged. Harris Trust & Savings Bank, 230 1ll.App.3d at 595, 594 N.E.2d at 1312. Once presented with this evidence, the trial court considers a variety of factors in determining reasonableness, including (I) the skill and standing of the attorneys employed, (2) the nature of the case, (3) the novelty and difficulty of the issues involved, (4) the degree of responsibility required, (5) the usual and customary charge for the same or similar services in the community, and (6) whether there is a reasonable connection between the fees charged and the litigation. Overhead expenses, such as office expenses, photocopying, check processing, newspapers subscriptions, telephone and delivery services usually cannot be separately itemized and charged as costs in a petition for fees. However, expenses incurred or paid to third parties for velo-binding, messenger services, filing fees, special process server fees and title reports are recoverable as costs. Harris Trust & Savings Bank, 230 Ill.App.3d 591, 594 N.E.2d 1308. While expert testimony is proper on the issue of reasonableness, it is not required as a matter of law and a trial judge's experience and knowledge may be relied upon in determining what constitutes a proper expenditure of time. Fitzwilliam v. 1220 Iroquois Venture, 233 Ill.App.3d 221,598 N.E.2d 1003 (2d Dist. 1992).
The determination of a reasonable fee is a matter within the discretion of the trial court, and that determination will not be disturbed on review absent an abuse of discretion. Chicago Title & Trust, 248 lll.App.3d at 1072, 618 N.E.2d at 954.
B.   Frivolous Litigation
Federal and state rules provide for the recovery of attorney's fees incurred as a result of a party's or attorney's violation of a duty to conduct a reasonable investigation into the factual merits and legal basis of pleadings and papers filed with the court. Fed. R. Civ. P. 11; Supreme Court Rule 137. A meaningful analysis of the extensive case law under these rules is beyond the scope of this seminar; however, counsel may note some interesting cases impacting the scope of this potential remedy. First, oral statements may serve as the basis for sanctions as well as those incorporated into a written pleading or motion. Fremarek v. John Hancock Mutual Life Insurance Co., 272 Ill.App.3d 1067,651 N.E.2d 601 (1st Dist. 1995).
Second, a court, in its discretion, is not limited to actual attorney's fees and costs caused by the particular violation of Rule 137. Kennedy v. Miller, 221 lll.App.3d 513, 582 N.E.2d 200 (2d Dist. 1991).
Third, attorneys' fees may be recovered which are incurred in prosecuting a sanctions motion. National Wrecking Co. v. Midwest Terminal Corp., 234 Ill.App.3d 750,601 N.E.2d 999 (1st Dist. 1992).
C.   Common Fund
A court of equity has the power to permit a litigant or attorney who recovers a common fund for the benefit of others to recover the costs and reasonable fees from the fund as a whole. Ryan v. City of Chicago, 274 Ill.App.3d 913,654 N.E.2d 483 (1st Dist. 1995); Baksinski v. Northwestern University, 231 Ill.App.3d 7, 12, 595 N.E.2d 1106 (1st Dist. 1992), appeal den. 146 1lI.2d 622,602 N.E.2d 446 (1992). The doctrine rests upon considerations of quantum meruit and prevents unjust enrichment of those who stand to benefit as a result of the efforts of a class representative and their attorney. Courts have traditionally utilized the loadstar method for calculating these fees. Fiorito v. Jones, 72 Ill.2d 73, 377 N.E.2d 1019 (1978). Recently, the Illinois Supreme Court restored the trial court's discretion to award attorney's fees in class action suits as a percentage of the total award. Brunidge v. Glendale Federal Bank, 1995 WL 694134 (1995).
D.   Statutory Provisions
A reasonable attorney fee will be allowed where so provided by statute. A number of the statutory provisions cited above, and others on the state and federal level, provide for attorneys' fees and should be examined where a common law theory, for example, does not provide for recovery of fees.
E.   Third Party Litigation
Attorneys' fees are recoverable, not as an expense of present litigation, but as an element of damages where the natural and proximate consequences of a wrongful act have been to involve plaintiff in other litigation with third parties. Ritter v. Ritter, 381 1lI. 549, 46 N.E.2d 41 (1943). The First District has recently noted this exception is narrowly construed and limited to situations where (1) the party seeking fees was forced to preserve property rights in real estate due to the wrongful acts of another, which caused litigation expenses against a third party; and (2) the conduct complained of was willful, wanton, malicious, oppressive, or at least of an active tortious nature. In re Estate of Dyniewicz , 271 Ill.App.3d 616, 648 N.E.2d 1076 (1st Dist. 1995). Attorneys' fees expended in a breach of contract action against one defendant can be recovered from another defendant in the same action for related interference with contractual relations. National Wrecking Co. v. Coleman, 139 Ill.App.3d 979,487 N.E.2d 1164 (1st Dist. 1985).
F.   Punitive Damages
Attorneys' fees may be included in a punitive damage award. E. J. McKernan Co. v. Gregory. 252 Ill.App.3d 514,623 N.E.2d 981 (2d Dist. 1993).
G.   Offer of Judgment
The federal rules provide that, anytime more than ten days before trial begins, a party defending any claim may serve upon plaintiff an offer to allow judgment to be taken against the defending party for the money or property or to the effects specified in the offer with costs. In the event the judgment finally obtained by the offeree is not more favorable than the offer, the offeree must pay costs incurred after making the offer. Fed. R. Civ. P. 68. There is no equivalent provision under the state rules.
H.   Enforcement of Orders
Attorneys' fees may be recovered in contempt proceedings seeking enforcement of the court's orders. Village of Lekmoor v. First Bank of Oak Park, 136 Ill.App.3d 35, 482 N.E.2d 1014 (2d Dist. 1985).

VI. Trial

A.   Opening Statement
Identify and talk about damages in opening statement but consider omitting a dollar amount to allow flexibility in modifying figure based on how well evidence is received.
B.   Evidentiary Considerations
1. Defendants love motions in limine, so most major objections to damages evidence will likely be determined (or at least briefed) prior to trial.
2. Do not wait for the motion in limine to buttress legal basis for each item of damages you intend to introduce at trial.
3.  Remember standards for certainty differ between general and special, tort and contract.
4.  Business record foundations:
Supreme Court Rule 236(a), Fed. R. Evid. 803(6); United States v. Franco, 874 F.2d 1136 (CA7 1989).
5.  Computer records:
Grand Liquor Co. v. Dept. of Revenue,  67 m.2d 195, 367 N.E.2d 1238 (1977)
6.  Demonstrative Evidence:
You are a lawyer, not an artist. The following companies, among others, will consult with you and give you ideas to illustrate your damages case.
Trial Graphix, 954 West Washington Boulevard, Chicago, Illinois 60607, (312) 666-1400, (800) 444-6766, Fax (312) 666-9066
Jeman Legal Visuals, 330 South Wells Street, Suite 1102, Chicago, Illinois 60606, (312) 322-7500, Fax (312) 322-7501
C.   Closing Argument
Quantify each item of damage and list them on the expensive poster board you just bought from the graphic artist.

VII. Further References

D. Dobbs, Handbook on the Law of Remedies (West 1973);
E. Farnsworth, Contracts (2d ed. 1990);
C. Knapp, Commercial Damages (Matthew Bender 1986);
P. John, et aI., Commercial Litigation (CBA May 14, 1996);
Losses In Commercial Litigation (Special Section: Commercial Damages) Carroll B. Foster, Robert R. Trout and Patrick A. Gaughan, 6 Journal of Forensic Economics 179196 (Fall 1993);
The Legal Framework for the Calculation of Damages In Commercial Litigation (Special Section: Commercial Damages) Donald H. Manley, Michael D. Reed, 6 Journal of Forensic & Economics 219-230 (Fall 1993);
Econometric Forecasting of Last Profits: Using High Technology to Compute Commercial Damages, Glen A Stankee, 61 Florida Bar Journal 83 (June 1987).