Jacobson v. Knepper & Moga, P.C.

SECOND DIVISION
December 9, 1997

No. 1-96-2962

ALAN P. JACOBSON, ) Appeal from the
) Circuit Court of
Plaintiff-Appellee, ) Cook County.
)
v. )
)
KNEPPER and MOGA, P.C., ) Honorable
) Kenneth Gillis,
Defendant-Appellant. ) Judge Presiding.

JUSTICE McNULTY delivered the opinion of the court:

Plaintiff-appellee, Alan P. Jacobson (Jacobson), an attorney
licensed to practice in the State of Illinois, brought this action
against the law firm of Knepper and Moga, P.C. (Knepper), seeking
damages for injuries resulting from his wrongful discharge from the
firm. The one-count complaint sought compensatory and punitive
damages.
Jacobson's complaint alleged that on July 14, 1994, he was
hired as an associate of Knepper, and in August of that year he
discovered the firm was filing consumer debt collection actions in
Cook County, Illinois, in violation of the venue provisions of the
Fair Debt Collection Practices Act, (15 U.S.C. 1692i(a)(2)(B)
(1988)) and the Illinois Collection Agency Act (225 ILCS 425/9(20)
(West 1994)). He further alleged that in August of 1994, he spoke
with James Knepper, one of the law firm's principal partners, about
this problem and was advised it would be corrected.
The complaint further recited that in April of 1995, he was
promoted to the position of office manager, reporting directly to
the firm's partners. In his new position Jacobson was placed in
charge of training and supervising the law firm's collection
department. Additionally, as a licensed attorney, Jacobson was
asked to review all draft complaints filed in consumer debt
collection cases and sign them for filing purposes. Shortly
thereafter, Jacobson learned that the firm was continuing to file
debt collection actions in violation of the venue provisions of the
acts referred to above. He again brought the matter to the
attention of Mr. Knepper, who again told him the matter would be
rectified. Within a short while, Jacobson was relieved of his
responsibility to review and sign complaints in these cases.
About 10 weeks later Jacobson learned that the improper venue
filing practices had not ceased and that complaints he had
previously refused to sign had been filed. For the third time he
brought the matter to Mr. Knepper's attention and was again told
that the matter would be taken care of. About two weeks later
Jacobson was terminated, resulting in this cause of action for
retaliatory discharge, alleging on information and belief that he
had been terminated in retaliation for his insistence that the law
firm cease violating the venue provisions of the Fair Debt
Collection Practices Act.
After Knepper filed an answer to Jacobson's complaint and a
motion to dismiss, the trial court certified the following question
of law pursuant to Supreme Court Rule 308 (134 Ill. 2d R. 308):
"Do the holdings in Herbster v. North American Co.
for Life & Health Insurance, 150 Ill. App. 3d. 21, 501
N.E. 2d. 343 (1st Dist. 1986) and Balla v. Gambro, Inc.,
145 Ill. 2d. 492, 584 N.E. 2d. 104 (1991) prevent an
attorney licensed to practice in the State of Illinois
from maintaining a cause of action for the tort of
retaliatory discharge against his non-client law firm
employer due to the pre-eminence of the Rules of
Professional Conduct?"

Defendant's petition for leave to appeal to the appellate
court pursuant to Rule 308 was denied. Defendant then filed an
affidavit of intent to seek leave to appeal to the Supreme Court of
Illinois pursuant to Supreme Court Rule 315 (134 Ill. 2d R. 315).
The supreme court denied defendant's petition for leave to
appeal, but in so doing issued a supervisory order directing this
court to allow defendant's previously filed petition for leave to
appeal pursuant to Rule 308 and to consider the appeal on its
merits. It is pursuant to that order that we review this matter.
We conclude that neither the holding in Herbster, as
interpreted by the supreme court in Balla, nor the holding in Balla
itself, precludes an action for retaliatory discharge by Jacobson
against his employer, Knepper, on the facts alleged in the
complaint. We therefore affirm the trial court.
Knepper asserts that Balla precludes an attorney from bringing
an action for retaliatory discharge against his law firm employer
for its actions in continuing to file law suits that he alleged
violated the venue provisions of both federal and state debt
collection statutes. Knepper claims that the public interest could
adequately be protected by reporting such practices to the Attorney
Registration and Disciplinary Commission (ARDC) as the Code of
Professional Responsibility (107 Ill. 2d R. 1-103) requires. At
oral argument counsel for Knepper asserted that the in-house
counsel status of the discharged lawyers in Herbster and Balla was
of no legal consequence and that any attorney was precluded from
asserting a claim for retaliatory discharge if the employer's
complained-of conduct was reportable to the ARDC pursuant to the
Code of Professional Responsibility.
The supreme court in Balla agreed with the trial court that
Balla's claim against Gambro should have been dismissed on the
pleadings, but stated "[w]e agree *** that appellee [Balla] does
not have a cause of action against Gambro for retaliatory discharge
under the facts of the case at bar." (Emphasis added.) Balla, 145 Ill. 2d at 498.
In Balla, the complaint alleged that the employer/client,
Gambro, had discharged in-house counsel, Balla, in retaliation for
his advice that Gambro would be in violation of United States Food
and Drug Administration (FDA) regulations if it sold a certain
shipment of kidney dialyzers and, when informed by the corporation
president that they would be sold anyway, said he would do whatever
necessary to stop the sale.
The supreme court agreed that a clear public policy was
implicated as this contemplated action on the part of Gambro would
compromise the effective protection of the lives and property of
citizens. The court, however, made the following observations in
foreclosing the retaliatory discharge claim against the attorney's
employer/client:
"We agree with the conclusion reached in Herbster
that, generally, in-house counsel do not have a claim
under the tort of retaliatory discharge. However, we
base our decision as much on the nature and purpose of
the tort of retaliatory discharge, as on the effect on
the attorney-client relationship that extending the
tort would have. *** [W]e caution that our holding is
confined by the fact the appellee [Balla] is and was at
all times throughout this controversy an attorney
licensed to practice law in the State of Illinois.
Appellee is and was subject to the Illinois Code of
Professional Responsibility ***. ***

In this case, the public policy to be protected,
that of protecting the lives and property of citizens,
is adequately safeguarded without extending the tort of
retaliatory discharge to in-house counsel. Appellee
was required under the Rules of Professional Conduct to
report Gambro's intention to sell the 'mishandled
and/or adulterated' dialyzers." 145 Ill. 2d at 501.

The supreme court in Balla also emphasized the special
relationship that exists between in-house counsel and the
employer/client, and how it might be adversely affected by
extending the reach of a retaliatory discharge claim:
"Generally, a client may discharge his attorney at any
time, with or without cause. [Citation.] *** As stated
in Herbster, 'the attorney is placed in the unique
position of maintaining a close relationship with a
client where the attorney receives secrets, disclosures,
and information that otherwise would not be divulged to
intimate friends.' (Herbster, 150 Ill. App. 3d at 27.)
We believe that if in-house counsel are granted the right
to sue their employers for retaliatory discharge,
employers might be less willing to be forthright and
candid with their in-house counsel." 145 Ill. 2d at 503.

"We also believe that it would be inappropriate for
the employer/client to bear the economic costs and
burdens of their in-house counsel's adhering to their
ethical obligations under the Rules of Professional
Conduct. *** This *** is impermissible for all attorneys
know or should know that at certain times in their
professional career, they will have to forgo economic
gains in order to protect the integrity of the legal
profession." 145 Ill. 2d at 505.

Applying the foregoing observations to the facts pled in this
complaint, we cannot conclude that the attorney's in-house counsel
relationship with the employer/client that he sued for retaliatory
discharge was an unimportant factor in the supreme court's decision
in Balla. The decision of this court in Herbster, cited with
approval in Balla, also involved in-house counsel suing his
employer/client for retaliatory discharge.
In contrast, in the case at bar, Jacobson was not in-house
counsel. He was employed by Knepper, which he claimed discharged
him for objecting to the law firm's practice of filing debt
collection cases in the wrong venue. Jacobson was not questioning
the activities of the client on whose behalf the lawsuits were
filed, but the practices of Knepper which filed them.
Further, no client confidences were compromised by Jacobson's
action againt Knepper. The suits allegedly filed in the wrong venue
had either been disclosed through discovery or had been filed in
court, which placed them in the public domain.
Therefore, we conclude that neither Balla nor Herbster mandates
dismissal of this claim at the pleading stage. In doing so, we note
in passing that two cases decided in the United States District
Court for the Northern District of Illinois also declined to
construe Balla as precluding an attorney from suing an employer for
retaliatory discharge where the relationship of in-house counsel and
employer/client did not exist. See Boynton v. Vallas, No. 92 C 140
(N.D. Ill. 1994); Isaacson v. Keck, Mahin & Cate, 61 Fair Empl.
Prac. Cos. (BNA) 1145, 65 Empl. Prac. Dec (CCH) P 43, 243 (1993).
Affirmed.
TULLY and FROSSARD, JJ., concur.