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A man who breached a contract by suing on claims released under that contract must pay attorney fees pursuant to a fee provision in the contract or at least under the Federal Rules of Civil Procedure, the 7th U.S. Circuit Court of Appeals held Oct. 2 ( Arnold R. Rissman v. Owen Randall Rissman, et al., No. 00-2141, 7th Cir.). The court held that the U.S. District Court for the Northern District of Illinois erred in denying fees to either defendant based on their failure to seek them in a counterclaim. Fees provided under a contract are part of “an element of damages” and should be sought after trial when the prevailing party has been determined, as governed by the Federal Rules of Civil Procedure, the appeals court said. Pursuant to Rule 52(d)(2)(A), “[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 District Court also failed to recognize either defendant as a party to the attorney fee provision of the contract. REIMBURSEMENT Paragraph 21 of the contract provides for reimbursement of attorney fees to parties injured by disputes concerning other portions of the contract. Both Randall Rissman and his brother, Arnold Rissman, made and received promises under a contract whereby Randall was to purchase from his brother certain shares of stock in Tiger Electronics. Arnold breached the contract by suing Randall and the stock trustee on claims mutually released under the contract. Arnold asserted fraud claims under federal securities laws. “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,” the court said. FURTHER ERROR The District Court further erred in determining Randall to be a party to that part of the contract involving mutual releases but not to the fee provision. “Arnold invites us to read para.21 with a beady eye in order to maximize the scope of the American Rule, under which the parties bear their own legal expenses. But courts do not bend backwards to make it cheap for parties to renege on settlements and releases,” the court explained. However, the trustee to the stock fund was not a party to the contract because he signed the contract in his capacity as the trustee, but was sued individually. Therefore, he “cannot take advantage of para.21,” the court said. The court remanded the matter for calculation of an award of reasonable costs and attorney fees. � Copyright 2000 Mealey Publications, Inc.

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