In re Chicago Flood Litigation

                                             Second Division












Nos. 1-96-2155, 1-96-2156, 1-96-2157, 1-96-2158, 1-96-2159, 1-96-
2160, 1-96-2162, 1-96-2163, 1-96-2164, 1-96-2165, 1-96-2167, 1-
96-2168, 1-96-2170, 1-96-2171, 1-96-2172, 1-96-2173, 1-96-2175,
1-96-2176, 1-96-2177, 1-96-2179, 1-96-2180, 1-96-2181 (Cons.)


In re CHICAGO FLOOD LITIGATION          )    Appeal from the
                                        )    Circuit Court of
(Class Plaintiffs and Class Counsel,    )    Cook County.
     Appellants,                        )
                                        )
     v.                                 )
                                        )
Standard Mutual Insurance Company       )    Honorable
a/s/o I & M Enterprises et al.,         )    Donald J. O'Brien,
     Appellees).                        )    Judge Presiding.

     JUSTICE RAKOWSKI delivered the opinion of the court:
     This case arises out of the Chicago Flood litigation in
which class plaintiffs and certain opt-out plaintiffs brought an
action in the circuit court of Cook County against the City of
Chicago (City) and Great Lakes Dredge and Dock Company (Great
Lakes) for injuries suffered as a result of the flood.  See In re
Chicago Flood Litigation, Nos. 80460, 80535 (Cons.), 1997 WL
68574 (1997).  The question in this case involves solely the
issue of whether class counsel are entitled to attorney fees from
the opt-out plaintiffs (appellees).  Class counsel contend they
are entitled to fees pursuant to the Attorneys Lien Act (770 ILCS
5/1 (West 1994)) for work performed to benefit appellees.  They
also contend they are entitled to attorney fees under the
doctrine of quantum meruit.
     The circuit court held that no attorney's lien existed and
class counsel were not entitled to fees under quantum meruit. 
Class counsel filed a motion to reconsider, which the circuit
court denied.  We affirm.
                                 I.  FACTS
     In April 1992, the underground freight tunnel system in the
central business district of Chicago flooded.  The circuit court
of Cook County certified a class action against the City on
November 24, 1992, and against Great Lakes on April 13, 1993, for
damages and economic loss to class plaintiffs as a result of the
flood.  The circuit court also appointed class counsel
(appellants) on November 24, 1992.  At various times after class
certification, the circuit court authorized some plaintiffs to
opt out of the certified class.  The opt-out plaintiffs are
comprised mostly of insurance companies who became subrogated to
the claims of class members and obtained their interests or
assignments by payments of insurance claims to those class
members.
     On the date of the flood and soon thereafter, various
plaintiffs retained their own counsel.  They subsequently opted
out of the class by filing notices of exclusion from the class
pursuant to section 2-804(b) of the Illinois Code of Civil
Procedure (Code) (735 ILCS 5/2-804(b) (West 1994)).  These opt-
out plaintiffs also filed their own separate complaints against
the City and Great Lakes.  It is not apparent from the briefs or
the record when exactly all of the named appellees opted out of
the class.  The opt out deadline was sometime in June or July
1995.  Class counsel alleged at oral argument that some appellees
opted out up to two years after class certification and that some
of the opt outs were untimely.  However, this argument is not
substantiated by the record, class counsel has offered no
specific facts in support thereof, and the issue was not raised
below.  Accordingly, any argument as to the propriety of the opt
outs is deemed waived and for purposes of this disposition, we
assume that all appellees opted out within the set time frame. 
In fairness to class counsel, we also assume that class counsel
conferred some benefit upon both class plaintiffs and the opt-out
plaintiffs (appellees).  This assumption is supported by the
circuit court's comment that class counsel had conferred
substantial benefits on the opt-out plaintiffs.
     After appellees filed notices of exclusion but before the
circuit court entered orders approving the opt outs, class
counsel served notice of an attorney's lien on the City and Great
Lakes claiming a lien on the interests of the opt-out plaintiffs. 
The City and Great Lakes then entered into settlement agreements
with appellees.  Beginning on November 27, 1995, appellees filed
motions or petitions to adjudicate the purported attorney's lien
that class counsel served on the City and Great Lakes.  On
January 23, 1996, class counsel filed a petition for attorney
fees under the doctrine of quantum meruit.
     The circuit court ruled that class counsel had no lien under
the Attorneys Lien Act.  The court found that class counsel did
not have a written retainer agreement with the opt-out plaintiffs
and, therefore, no attorney-client relationship existed.  The
court also ruled that class counsel were not entitled to attorney
fees under quantum meruit because no common fund was created by
class counsel.  Rather, the fund was created solely for the opt-
out plaintiffs by their independent counsel.  Also, because there
was no attorney-client relationship between the opt-out
plaintiffs and class counsel, no recovery could be had under
quantum meruit.  To hold otherwise would subject the opt-out
plaintiffs to paying attorney fees to both their own attorneys
and class counsel and would create somewhat of an unjust
enrichment in favor of class counsel.
                               II.  ANALYSIS
              A.  Nature of the Attorney-Client Relationship
     The issue on appeal involves the nature and extent of the
attorney-client relationship between class counsel and the opt-
out plaintiffs.  Class counsel contend they are entitled to fees
from the opt-out plaintiffs because the court's certification of
the class and appointment of class counsel created an attorney-
client relationship between class counsel and all class
plaintiffs.
     The attorney-client relationship is a voluntary, contractual
relationship that requires the consent of both the attorney and
client.  Corti v. Fleisher, 93 Ill. App. 3d 517, 521 (1981); York
v. Stiefel, 109 Ill. App. 3d 342, 348 (1982).  The relationship
cannot be created by an attorney alone and generally the duty
falls upon a potential client to initiate contact with the
attorney.  Holstein v. Grossman, 246 Ill. App. 3d 719, 743
(1993); Corti, 93 Ill. App. 3d at 521; J. Kennedy, Class Actions: 
The Right to Opt Out, 25 Ariz. L. Rev. 3, 25 (1983).
     Contrary to these basic tenets, the class action permits a
representative party, a lawyer, and a court to initiate a mass
action on behalf of similarly situated class members without
their consent.  In certifying a class action, the court confers
the status of litigant upon class plaintiffs and creates an
attorney-client relationship between those plaintiffs and a
court-designated lawyer.   Amos v. Board of School Directors, 408 F. Supp. 765, 774 (E.D. Wis. 1976), aff'd sub nom. Armstrong v.
Brennan, 539 F.2d 625 (7th Cir. 1976) (issue not discussed on
appeal), vacated and remanded on other grounds, 433 U.S. 672, 53 L. Ed. 2d 1044, 97 S. Ct. 2907 (1977).  This attorney-client
relationship is limited, however, and is different in the class
context than it is in a traditional, non-class situation.  In re
Potash Antitrust Litigation, 162 F.R.D. 559, 561-62 n. 3 (D.
Minn. 1995); Tedesco v. Mishkin, 629 F. Supp. 1474, 1482 (S.D.
N.Y. 1986); Kleiner v. First National Bank of Atlanta, 102 F.R.D. 754, 769 (N.D. Ga. 1983).
     The attorney-client relationship in the class context also
differs among plaintiffs.  The relationship between the class
representative plaintiff and class counsel is one of private
contract, whereas the relationship between absent class members
and class counsel is one of court creation.  Amos, 408 F. Supp. 
at 775, aff'd sub nom. Armstrong, 539 F.2d 625 (issue not
discussed on appeal), vacated and remanded on other grounds, 433 U.S. 672, 53 L. Ed. 2d 1044, 97 S. Ct. 2907.  Accordingly, class
counsel will be deemed to fully represent all class members only
after a court has certified the class and the opt-out time period
has expired, giving putative class members time to decide whether
to participate in the class.  Resnick v. American Dental Ass'n,
95 F.D.R. 372, 377 (N.D. Ill. 1982); In re Potash Antitrust
Litigation, 162 F.R.D.  at 561-62 n. 3; Tedesco, 629 F. Supp. at
1482-83; Kleiner, 102 F.R.D.  at 769.  During the opt-out period,
the status of class members is amorphus because the putative
class may contain members who will be excluded from the class. 
Accordingly, the actual scope of the class cannot be determined
until after the exclusion period has expired.
     Where class counsel has a fee agreement with the class
representative, that agreement does not entitle class counsel to
attorney fees from the rest of the class who have no agreement
with counsel or who have opted out of the class.  H. Newberg,
Newberg on Class Actions 13.55, at 13-140 (3d ed. 1992); see
Shelton v. Simpson, 441 S.W.2d 421, 423 (Ky. Ct. App. 1969). 
Class actions are representative lawsuits to which absent class
members are passive parties.  American Pipe & Construction Co. v.
Utah, 414 U.S. 538, 551-53, 38 L. Ed. 2d 713, ____, 94 S. Ct. 756, 765-66 (1974).  Absent class members did not authorize or
rely on the class representative and class counsel to commence
and maintain the class action.  As such, they do not occupy any
direct attorney-client relationship with class counsel and should
not be required to pay fees automatically.  See H. Newberg,
Newberg on Class Actions 14.02 (3d ed. 1992); Winfield v. St.
Joe Paper Co., 20 F.R.D. Cas. (BNA) 1093, 1094 (N.D. Fla. Sept.
19, 1977) (class members did not retain class counsel and are
relatively passive beneficiaries of the efforts in their behalf);
American Pipe & Construction Co., 414 U.S.  at 552, 38 L. Ed. 2d
at ____, 94 S. Ct.  at 765 (class members do not have a duty to
counsel until the existence and limits of the class are
established).
     To be sure, class representatives and class counsel are not
entitled to charge absent class members for reimbursement of
attorney fees or costs if the class action is unsuccessful. 
Deposit Guaranty National Bank v. Roper, 445 U.S. 326, 343 n. 1
(Stevens, concurring), 63 L. Ed. 2d 427, ____, 100 S. Ct. 1166,
1176 (1980).  In turn, absent class members of a successful class
suit are required to pay proportional fees and litigation costs
only to the extent they shared in class recovery and elected to
accept the benefits of the class litigation.  Wright v. Schock,
742 F.2d 541, 545 (9th Cir. 1984); Lamb v. United Security Life
Co., 59 F.R.D. 44, 48-49 (S.D. Iowa 1973).
                          B.  Attorneys Lien Act
     Class counsel first contend they are entitled to fees from
the opt-out plaintiffs under the Attorneys Lien Act (770 ILCS 5/1
(West 1994)), which allows for an attorney's lien on a client's
recovery provided that the lien is perfected as required by the
Attorneys Lien Act.  To enforce such lien, an attorney shall
serve written notice upon his client claiming the lien and
stating his interest.  The Attorneys Lien Act is a derogation of
common law and must be strictly construed.  Coyle v. Velie Motors
Corp, 305 Ill. 135 (1940); Kannewurf v. Johns, 260 Ill. App. 3d
66, 76 (1994).  In order to create an effective lien there must
be an attorney-client relationship and notice of the lien must be
served during that relationship.  Rhoades v. Norfolk & Western
Ry. Co., 78 Ill. 2d 217, 221-22 (1979).  The ministerial act of
filing a notice of lien is insufficient to create a lien under
the Attorneys Lien Act where there is no attorney-client
relationship.  Marlowe v. Edward R. Vrdolyak, Ltd., No. 1-95-0673
(March 31, 1997).
     Although a limited attorney-client relationship existed
between class counsel and the opt-out plaintiffs upon
certification of the class action, the relationship was
terminated when appellees elected to opt out of the class.  In
exercising the inherent right to be excluded from the class and
retain independent counsel, the opt-out plaintiffs merely made a
decision that they were entitled to make as a matter of law.
     The right of exclusion essentially gives class members a
veto power over participation in a class.  To restrict the right
to opt out would result in individual class members losing
control over their claims and being forced to accept court-
appointed counsel without regard to their independent choice of
counsel.  We believe the right to opt out should remain
unrestricted and that individuals who opt out of class actions
within the proper time frame should not be penalized for
exercising this right by requiring them to pay fees to class
counsel and their individual attorneys.
     Unlike the federal statute, the Illinois statute does not
provide for a mandatory class in which class members cannot seek
exclusion.  Thus, in Illinois, persons who have elected to be
excluded from the class pursuant to section 2-805 of the Code
(735 ILCS 5/2-805 (West 1994)) are not bound by a judgment or
settlement in a class action.  Fisher v. Capesius, 369 Ill. 598,
604-05 (1938).  These opt out plaintiffs are left in the same
position that they were in before the class action was filed and
their substantive rights are not affected.  They still have the
right to sue individually and retain their own counsel.  G.
Rutherglen, Better Late than Never:  Notice and Opt Out at the
Settlement Stage of Class Actions, 71 N.Y.U. L. Rev. 258, 286-87
(1996).
     In the instant case, appellees opted out of the class and
retained their own attorneys with approval of the circuit court. 
To require these opt outs to pay class counsel under the
Attorneys Lien Act would be contrary to the above case law and
would substantially impair the right to opt out.  Further, such a
holding would contradict the consensual nature of an attorney-
client relationship in that it would require all putative class
members to be obligated to class counsel even though they timely
exercised their right of exclusion and retained their own
counsel.  Therefore, we hold that under the Attorneys Lien Act,
opt-out plaintiffs are not required to pay attorney fees to class
counsel for counsel's unsolicited representation where such
persons properly excluded themselves from the class.  See Client
Follow-Up Co. v. Hynes, 105 Ill. App. 3d 619, 626-27 (1982).
                            C.  Quantum Meruit
     Class counsel also contend they are entitled to a hearing on
the issue of fees under the doctrine of quantum meruit.  We
disagree.
     In a quantum meruit action, the individual seeking
compensation has benefited another through his or her actions and
seeks payment for the value of the service performed.  The right
to attorney fees based on quantum meruit does not exist unless
there is an underlying attorney-client relationship where the
client expressly or impliedly agrees to pay fees.  In re Estate
of Callahan, 144 Ill. 2d 32, 40 (1991); Wolff v. Ampacet Corp.,
284 Ill. App. 3d 824, 829-30 (1996); Estate of Healy v. Tierney,
137 Ill. App. 3d 406, 409 (1985).
     The case of In re Folding Carton Antitrust Litigation, 1982-
1 Trade Cas. (CCH) par. 64,689 (N.D. Ill. Oct. 14, 1980), is
instructive.  In that case, class counsel argued that it was
unjust to allow the opt-out plaintiffs to freely use the fruit of
class counsel's effort and coattail for evidence and discovery
without having to pay class counsel attorney fees.  The court
rejected that argument, noting it is unlikely that coattailing
will be such a cheap, effective, and complete method of trial
preparation that potential class members will be tempted to opt
out and proceed alone, except where the amount of potential
damages justifies opting out without regard to the use of class
evidence.  In re Folding Carton Antitrust Litigation, 1982-1
Trade Cas. (CCH) at 73,753.  In addition, the court held that it
would be unfair to exclude relevant evidence so as to punish
those who exercised their right to opt out, particularly where
the opt-out plaintiffs were not simply coattailing but had
participated in every stage of discovery in the class action.  In
re Folding Carton Antitrust Litigation, 1982-1 Trade Cas. (CCH)
at 73,753.
     In the instant case, the opt-out plaintiffs retained their
own attorneys on the date of the flood and soon thereafter. 
Their counsel participated in the early stages of litigation and
obtained a settlement on behalf of their clients before the class
action had resulted in a judgment or settlement.  Undeniably, the
Chicago Flood litigation involved numerous parties and complex
issues and it is very unlikely that coattailing would have been
an effective or complete method of trial preparation.  We do not
mean to suggest that class counsel did not confer some benefit on
appellees, however, that alone does not automatically entitle
counsel to fees.  See Hamer v. Kirk, 64 Ill. 2d 434, 442 (1976);
Process Color Plate Co. v. Chicago Urban Transportation District,
125 Ill. App. 3d 885, 891 (1984).  Therefore, we reject class
counsel's argument that there will be little incentive for
potential class members to remain in the class if they are
allowed to use segments of discovery and public documents of the
class action case to prepare their own claims.
     Class counsel were not without recourse, however, earlier in
the proceedings.  They could have asked the circuit court to
impose shorter deadlines for class members to opt out or objected
to the propriety of the opt outs.  Time limits can be imposed on
the right to opt out, but not in a way that effectively denies
class members the right to opt out.  Class members must be given
a reasonable period of time to opt out and pursue litigation
separately if they object to representation by class counsel.
     The cases cited by class counsel in support of the quantum
meruit theory are unpersuasive.  Most deal with an individual
client and his attorney; they are not class action cases.  Amos
v. Board of School Directors, 408 F. Supp. 765, 774-75 (E.D. Wis.
1976), aff'd sub nom. Armstrong v. Brennan, 539 F.2d 625 (7th
Cir. 1976), vacated and remanded on other grounds, 433 U.S. 672,
53 L. Ed. 2d 1044, 97 S. Ct. 2907 (1977), is a class action case
relied on by class counsel for the proposition that in certifying
a class action, the court creates an attorney-client relationship
between class members and class counsel.
     In Amos, the court addresses the adequacy of appointed class
counsel and the propriety of appointing class counsel to
represent the interests of absent class members.  The court did
not address the present situation where putative class members
are present during the litigation and elect to opt out of the
class and retain their own counsel.  The Amos court, rather,
focused on protection of the rights of absent class members and
on the court's selection of adequate class counsel.  The issue of
the attorney-client relationship was not discussed on appeal. 
Armstrong, 539 F.2d 625, vacated and remanded, 433 U.S. 672, 53 L. Ed. 2d 1044, 97 S. Ct. 2907.  Accordingly, we are unpersuaded
by class counsel's reliance on Amos.
                              D.  Common Fund
     Finally, we address whether the common fund doctrine is a
proper basis for awarding class counsel attorney fees.  We hold
it is not.
     "The common fund doctrine allows one who 'creates,
preserves, or increases the value of a fund in which others have
an ownership interest to be reimbursed from that fund for
litigation expenses incurred, including counsel fees.' " 
Brundidge v. Glendale Federal Bank, 168 Ill. 2d 235, 238 (1995),
quoting Swedish Hospital Corp. v. Shalala, 1 F.3d 1261, 1265
(D.C. Cir. 1993).  This doctrine requires courts to exercise
their inherent powers of equity and is designed to prevent unjust
enrichment.  Brundidge, 168 Ill. 2d  at 238.  "By awarding fees
payable from the common fund created for the benefit of the
entire class, the court spreads the costs of litigation
proportionately among those who will benefit from the fund." 
Brundidge, 168 Ill. 2d  at 238.  However, in the absence of a
common fund, a plaintiff's attorney is not entitled to fees
merely because he or she has conferred a benefit on members of a
class.  Hamer, 64 Ill. 2d  at 442; Process Color Plate Co., 125
Ill. App. 3d at 891.
     The common fund doctrine contemplates that a common fund be
created by class counsel for the benefit of the class and that
the fund is within the control of the court.  In the instant
case, the fund set up by the City and Great Lakes was for the
benefit of the opt-out plaintiffs only, not for similarly
situated class members.  The fund was not within the court's
control, it was not for the benefit of all class members, and it
was not procured by class counsel but rather by the opt-out
plaintiffs' independently retained attorneys.  It is axiomatic
that class counsel can only receive fees when they successfully
recover a fund for the benefit of the class.  However, since the
class action did not create a fund, nor did the class members
benefit from the fund created, class counsel are not entitled to
fees under the common fund doctrine.
                             III.  CONCLUSION
     In conclusion, we find that class counsel are not entitled
to fees from the opt-out plaintiffs.  Once the opt-out plaintiffs
exercised their right of exclusion, all of the hallmarks of the
attorney-client relationship were destroyed.  To require opt outs
to pay fees to both class counsel and their independently
retained counsel would penalize them for exercising their
inherent right of exclusion.  We believe this right should remain
unrestricted.  Accordingly, we affirm the judgment of the circuit
court holding that class counsel are not entitled to recover fees
from the opt-out plaintiffs under either the Attorneys Lien Act
or equitable principles.
     Affirmed.
     DiVITO, P.J., and TULLY, J., concur.