Much Shelist Freed Denenberg & Ament PC v. Lison

FOURTH DIVISION
JUNE 11, 1998

1--97--2792

MUCH SHELIST FREED DENENBERG ) Appeal from the
AND AMENT, P.C., ) Circuit Court of
) Cook County
Plaintiff-Appellant, )
)
v. )
) Honorable John W.
JOHN M. LISON, an Individual, ) Gustafson, Judge
and LISON AND GRIFFIN, )
a Partnership, ) Honorable Sheldon
) Gardner, Judge
Defendants-Appellees. ) Presiding.

PRESIDING JUSTICE CERDA delivered the opinion of the court:

Plaintiff, Much Shelist Freed Denenberg & Ament, P.C., a law
firm, appeals from the entry of summary judgment by the circuit
court of Cook County on its complaint in favor of defendants,
attorney John M. Lison and Lison & Griffin, a law firm
partnership (L&G), for the quantum meruit value of plaintiff's
legal services representing L&G as the class representative in a
class-action lawsuit that defendants abandoned.
The issue is whether, under a contingency-fee agreement,
plaintiff law firm can recover the quantum meruit value for its
services rendered before the client discharged it, although there
was no recovery. Defendants believed there was no likelihood of
success because the complaint had been dismissed once on a
section 2--615 motion (735 ILCS 5/2--615 (West 1996)). L&G
withdrew as class plaintiff and refused to pay for legal services
because the plaintiff had not obtained any recovery in the class-
action lawsuit. We reverse.
FACTS
In June 1992, Regent Advisory Corporation filed a class-
action lawsuit in the circuit court of Cook County against
Equitec, which was Regent's landlord at the building located at
200 West Adams Street in Chicago. The original class-action
complaint is not in the record, but the parties agree that it
alleged the landlord billed its tenants for an amount of real
estate taxes that the landlord did not pay. Plaintiff and L&G
were both attorneys representing Regent, but L&G withdrew as
attorney after the trial court suggested that L&G could not act
as a class member and as co-counsel. Because Regent withdrew as
plaintiff, in September 1992 the action was dismissed with
prejudice only with respect to Regent but without prejudice to
the other potential class members.
In September 1992, the class action was refiled with L&G,
which was also a tenant in Equitec's building, now as the
plaintiff. Plaintiff had signed a written contingency-fee
agreement with Regent, but plaintiff failed to obtain L&G's
signature on a contingency-fee agreement for plaintiff's
representation of L&G. The parties on appeal agree that there
was a contingent-fee agreement between them.
On October 14, 1992, Equitec filed a motion to dismiss the
second class action pursuant to section 2--615 of the Code of
Civil Procedure (735 ILCS 5/2--615(a)(West 1996)). The trial
court granted the motion on January 21, 1993. The trial court
first stated that the motion would be granted with prejudice
because it was doubtful that plaintiff could file an amended
complaint that could withstand a motion to dismiss but, after
argument of counsel, the court changed its mind and granted the
motion without prejudice. The complaint was amended a third time
on February 26, 1993.
On July 14, 1993, L&G signed a general release of its claims
with the class-action defendants for consideration of entering
into a new lease. Because L&G withdrew as class plaintiff, on
July 23, 1993, Equitec moved to dismiss the class action. On
September 15, 1993, the trial court granted the motion to dismiss
the action with prejudice to L&G and without prejudice to other
potential class members.
On September 16, 1993, plaintiff filed a complaint against
defendants for attorney fees. Count I of plaintiff's complaint
was for breach of contract; count II was for quantum meruit; and
count III was for unjust enrichment. Count I was dismissed on
July 13, 1994.
On August 13, 1996, defendants filed a motion for summary
judgment, arguing in part that (1) plaintiff was not entitled to
any compensation on a contingent-fee matter because there was no
evidence that the underlying case had any reasonable prospect of
success and no reasonable chance of success on appeal; (2)
plaintiff could not recover under quantum meruit because
plaintiff's services were not of any value to L&G where no cause
of action could be stated in the class action; and (3) L&G did
not receive any recovery or economic advantage as a result of
plaintiff's activities and merely negotiated a new lease with the
new management, who executed leases with other tenants at about
the same rent or lower than L&G's rent.
On January 17, 1997, the trial court granted summary
judgment on the quantum meruit count in favor of defendants and
denied summary judgment on the unjust-enrichment count.
On July 1, 1997, count III, the unjust-enrichment count was
voluntarily dismissed without prejudice; plaintiff's motion to
reconsider the ruling with respect to the quantum meruit count
was denied. On July 10, 1997, the order was amended to find that
there was no just reason for delaying enforcement or appeal of
the order granting defendants' motion for summary judgment on the
quantum meruit count and of the order denying plaintiff's motion
to reconsider.
On July 14, 1997, plaintiff appealed from the entry of
summary judgment.

DISCUSSION
Plaintiff argues on appeal that it was entitled to be paid
on a quantum meruit basis for the legal services it rendered to
defendants because L&G abandoned the class-action lawsuit before
plaintiff could file another amended complaint that could
withstand a motion to dismiss. Defendants argue that plaintiff
is barred from recovery because the class action had no
reasonable prospect of success and because there was no value to
L&G of the legal services provided by plaintiff.
A motion for summary judgment is to be granted if "the
pleadings, depositions, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment
as a matter of law." 735 ILCS 5/2--1005(a) (West 1996). The
pleadings, depositions, admissions, and affidavits on file must
be construed against the movant and in favor of the opponent of
the motion. Jackson Jordan, Inc. v. Leydig, Voit & Mayer, 158 Ill. 2d 240, 249, 633 N.E.2d 627 (1994). Summary judgment is a
drastic means of disposing of litigation, and the right of the
moving party to obtain summary judgment must be clear and free of
doubt. Jackson, 158 Ill. 2d at 249. The reviewing court's
function is to determine de novo whether the judgment entered was
correct as a matter of law. Cates v. Cates, 156 Ill. 2d 76, 78,
619 N.E.2d 715 (1993).
A client may discharge her attorney at any time, with or
without cause. Rhodes v. Norfolk & Western Ry. Co., 78 Ill. 2d 217, 227-28, 399 N.E.2d 969 (1979). When a client terminates her
attorney, the contingent-fee contract ceases to exist, and the
contingency term is no longer operative. In re Estate of
Callahan, 144 Ill. 2d 32, 40, 578 N.E.2d 985 (1991).
A discharged attorney may be compensated for the services
rendered before the discharge on a quantum meruit basis. Rhodes,
78 Ill. 2d at 230. Quantum meruit literally means "as much as he
deserves." First National Bank v. Malpractice Research, Inc.,
179 Ill. 2d 353, 365, 688 N.E.2d 1179 (1997). In quantum meruit
recovery, the former client is liable for the reasonable value of
the services received during the attorney's employment.
Callahan, 144 Ill. 2d at 41. Quantum meruit is based on the
implied promise of a recipient of services to pay for valuable
services because otherwise the recipient would be unjustly
enriched. Callahan, 144 Ill. 2d at 40.
In Illinois, the attorney's action for a quantum meruit fee
accrues immediately after discharge, in comparison to some other
jurisdictions, which hold that an attorney's cause of action for
fees does not accrue until the recovery in the lawsuit, which is
the contingency stated in the fee agreement. Callahan, 144 Ill. 2d at 38-39. Under the reasoning of these other jurisdictions,
where a contingent-fee agreement was entered into, the attorney
who is discharged before recovery cannot recover fees. E.g.,
Life Care Centers of America, Inc. v. Chiles, 674 So. 2d 873, 874
(Fla. Dist. Ct. App. 1996)(recovery was denied to a class-action
attorney, after the client withdrew, on the basis that the
contingency of recovery in the class action never occurred).
In Illinois a discharged attorney may recover on a quantum-
meruit basis a reasonable fee for services rendered before
discharge. Rhodes v. Norfolk & Western Ry. Co., 78 Ill. 2d 217,
230 (1979). The Callahan court stated that even though a
contingency fee is generally paid out of the recovery for the
client, when a client terminates a contract, the contract ceases
to exist between the parties. Therefore, the contingency term,
whether the attorney wins, is no longer operative. Callahan, 144 Ill. 2d at 40. The client cannot terminate the agreement and
then resurrect the contingency term when the discharged attorney
files a fee claim. Leoris & Cohen v. McNiece, 226 Ill. App. 3d
591, 596 (1986). Quantum meruit is based on the implied promise
of the recipient of services to pay for those services that are
of value to him. Ashton v. County of Cook, 384 Ill. 287, 301
(1943).
In some cases, it is possible for a client to receive
services and yet not be enriched in a tangible way. D. Dobbs,
Handbook on the Law of Remedies 4.2, at 237 (1973). That may
have occurred in this case.
In the case of Ashby v. Price, 112 Ill. App. 3d 114, 445 N.E.2d 438 (1983), the client discharged his attorney and argued
that he should not have to pay the quantum meruit value of his
attorney's services because no benefit was received. The court
held that the lack of benefit should not prevent the attorney
from recovery for the legal services rendered. Ashby, 112 Ill.
App. 3d at 122-23. We agree with the Ashby court. The lack of
any value or benefit received by L&G from the legal services
rendered by the plaintiff does not prevent the plaintiff from
obtaining attorney fees on a quantum meruit basis.
We reject defendants' argument that whether there was a
reasonable expectation that the class-action lawsuit would ever
succeed is relevant to whether plaintiff can obtain attorney
fees. Plaintiff's action accrued at the time of discharge, and
the probable outcome of the litigation is not an indispensable
element that must be considered in calculating the value of the
discharged attorney's services. Callahan, 144 Ill. 2d at 41.
Plaintiff was entitled to quantum meruit recovery. The
trial court erred in granting summary judgment in favor of
defendants, and we now enter summary judgment in favor of
plaintiff.
Defendants argue in the alternative that plaintiff's
recovery is barred because plaintiff violated Rule of
Professional Conduct 1.5(c) (134 Ill. 2d R. 1.5(c)), which
requires that a contingent-fee agreement be in writing.
Defendants rely upon two cases that denied quantum meruit
recovery for attorneys who were not allowed to recover fees under
contracts that violated ethical canons. Leoris v. Dicks, 150
Ill. App. 3d 350, 354, 501 N.E.2d 901 (1986); Licciardi v.
Collins, 180 Ill. App. 3d 1051, 1062-63, 536 N.E.2d 840 (1989).
These cases were decided under the Code of Professional
Responsibility, which was repealed effective August 1, 1990, and
which was replaced with the Illinois Rules of Professional
Conduct (Lee v. Ingalls Memorial Hospital, 232 Ill. App. 3d 475,
477-78, 579 N.E.2d 747 (1992)).
In Leoris, 150 Ill. App. 3d at 354, the attorney who entered
into an unethical fee-splitting agreement, which violated public
policy, was foreclosed from quantum meruit recovery because
entering into the agreement also violated stated canons of
ethics. The court relied on the principle that, where
enforcement of an illegal contract is sought, the courts will aid
neither party but will leave them where they have placed
themselves so that the parties can recover nothing under the
contract. Leoris, 150 Ill. App. 3d at 354.
Licciardi, 180 Ill. App. 3d at 1062-63, followed Leoris to
bar quantum meruit recovery to an attorney who entered into an
unethical contingent-fee contract for a dissolution-of-marriage
action. The court rejected the argument that Leoris barred
quantum meruit recovery only in fee-splitting cases. Licciardi,
180 Ill. App. 3d at 1062. The court explained that the public
policy behind Disciplinary Rule 2--106(c)(4) is so important
that, as long as an attorney's services are employed with respect
to the division of marital property, the rule bars contingent
fees therefor. Licciardi, 180 Ill. App. 3d at 1061.
Licciardi and Leoris are distinguishable because in those
cases it was prohibited for the attorneys to enter into the
agreements at issue; the fee agreements themselves violated
public policy. See Lee, 232 Ill. App. 3d at 478 (reliance on
Leoris is misplaced if an agreement between a client and an
attorney does not violate public policy).
The cases involving unenforceable agreements, including
Leoris and Licciardi, do not bar quantum meruit recovery whenever
an ethical rule is not followed unless it involves public policy.
The contingency-fee agreement to represent defendants in a class-
action lawsuit against a lessor for excess billing of real estate
taxes does not violate any public policy and is enforceable.
Other cases that have also denied quantum meruit recovery
for attorney fees or other fees have also involved unenforceable
agreements. E.g., First National Bank v. Malpractice Research,
Inc., 179 Ill. 2d 353, 366, 688 N.E.2d 1179 (1997) (a
contingency-fee agreement with an expert-search firm was
unenforceable); American Home Assurance Co. v. Golomb, 239 Ill.
App. 3d 37, 44, 606 N.E.2d 793 (1992) (a contingency-fee
agreement was valid for the type of case but contained an illegal
contingent-fee percentage because the attorney engaged in
intentional and deceptive behavior).
There have been cases that have permitted quantum meruit
recovery even where the attorneys violated statutes concerning
the attorney-client agreement or concerning fees. Valenti v.
Swanson, 294 Ill. App. 3d 492 (1998) (attorney failed to comply
with the Personal Injury Representation Agreement Act (815 ILCS
640/0.01 et seq. (West 1996)) by not giving the clients a copy of
the Act); Anderson v. Anchor Organization for Health Maintenance,
274 Ill. App. 3d 1001, 1006, 654 N.E.2d 675 (1995) (a contingent-
fee agreement contained an attorney fee provision in excess of
the maximum percentage an attorney could receive without court
approval, in violation of section 2--1114 of the Code of Civil
Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 2--1114)).
Whether quantum meruit recovery is barred should depend on
the egregiousness of the particular conduct involved. See
Anderson, 274 Ill. App. 3d at 1006 (whether a violation of
section 2--1114 of the Code of Civil Procedure is sufficiently
egregious to render the contract wholly unenforceable must be
decided in the context of the particular facts). Whether an
attorney acted egregiously should be a matter for the trial court
to determine in its discretion. See Anderson, 274 Ill. App. 3d
at 1007 (whether a discharged attorney who contracted for a
contingent fee in excess of the rate set forth in section 2--1114
of the Code of Civil Procedure may recover in quantum meruit is a
matter committed to the discretion of the trial court). We find
that plaintiff's lapse in not obtaining the signature of L&G,
which was a law firm and therefore knowledgeable of its right to
get a written agreement, was not sufficiently serious to taint
plaintiff's lawsuit for quantum meruit recovery.
Defendants also argue that plaintiff's action is barred by
res judicata because the trial court ruled in the class action
that plaintiff had no attorney lien and because plaintiff could
have sought attorney fees in the class-action lawsuit.
The doctrine of res judicata provides that a final judgment
on the merits rendered by a court of competent jurisdiction bars
a subsequent action involving the same claims or demands by the
same parties. People ex rel. Burris v. Progressive Land
Developers, Inc., 151 Ill. 2d 285, 294, 602 N.E.2d 820 (1992).
Res judicata also applies to matters that could have been decided
in the prior action. Progressive, 151 Ill. 2d at 294.
We reject defendants' claim of res judicata because the
present lawsuit does not have the same parties and the same cause
of action as the class-action lawsuit.
When L&G withdrew as class plaintiff in the lawsuit in July
of 1993, it terminated the contingency-fee agreement with the
plaintiff law firm. The contingency-fee contract ceased to
exist, and L&G became liable to the plaintiff for the quantum
meruit value of plaintiff's legal services up to and including
the date of termination. Plaintiff's right to recover on a
quantum meruit basis accrued immediately upon L&G's settlement of
the case and dismissal of its cause of action. Even though there
was no recovery, no economic advantage was obtained, and the
underlying case may have had no reasonable prospect of success,
L&G must pay a reasonable fee for the legal services rendered.
It is not a defense for defendants to argue that there was no
value to the legal services provided and therefore they do not
have to pay anything. L&G terminated the contract.
The judgment of the trial court is reversed; summary
judgment is entered in favor of plaintiff against defendants on
the issue of liability; and the cause is remanded for a
determination of the amount of attorney fees to be awarded to
plaintiff on a quantum meruit basis.
Reversed and remanded.
WOLFSON and SOUTH, JJ., concur.