2020 IL App (5th) 180281
Ill. App. Ct.2020Background
- Plaintiffs (205 individuals) filed bundled state-court Avandia suits in St. Clair County; Steven M. Johnson handled filings and was approved pro hac vice.
- Michael Baum (and Erick Rosemond) — experienced MDL counsel — agreed to serve as trial counsel and to use MDL "trial in a box" work product; MDL participation carried a 7% common benefit fund (CBF) assessment (3% of plaintiff recoveries + 4% of fees).
- Johnson and Baum had an oral/email fee-splitting understanding (75/25 for bellwether fees; 10/90 for non-trial cases) but did not obtain written client consent to Baum’s representation or the fee split as required by Illinois Rule 1.5(e).
- Johnson negotiated an agreement-in-principle with GSK to settle up to $10.5M; disputes arose about allocations, bellwether settlements (notably Troupe and Valerius), fee splits, and whether the MDL CBF applied.
- Trial court ordered disbursements, held $735,000 for the Avandia CBF, awarded Baum $242,130 from registry for non-trial fees, and ordered payment of certain litigation expenses; Johnson appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of fee-splitting between Baum & Johnson | Johnson: fee split unenforceable because clients did not give written consent per Ill. R. Prof. Conduct 1.5(e). | Baum: fee split should stand (joint venture/estoppel/substantial compliance); disallowing would unfairly enrich Johnson. | Fee-splitting unenforceable—Rule 1.5(e) requires written client consent; Baum’s award vacated and those fees revert to Johnson. |
| Liability to Avandia MDL common benefit fund (CBF) | Johnson: he never signed MDL participation; MDL order lacks jurisdiction over him/clients; state court must independently decide. | MDL/PSC & GSK: claims that used MDL work product are "covered" and subject to the 7% CBF; Baum and Rosemond agreed to CBF. | Trial court did not abuse discretion: plaintiffs benefitted from MDL "trial in a box"; $735,000 ordered paid to CBF. |
| Trial-court award of $242,130 to Baum from registry | Johnson: Baum not entitled because fee split unenforceable and Baum disrupted settlements; Johnson seeks those fees. | Baum: previously received fee distributions and arbitration awards; estoppel/rights to portion of non-trial fees. | Award to Baum vacated on Rule 1.5(e) grounds; $242,130 reverted to Johnson. |
| Reduction of Johnson’s contingency fees / allocation of settlement fund | Johnson: court impermissibly reduced his 40% contingency fee, forcing him to fund settlements for clients he did not represent (a "cram-down"). | GSK & others: court-supervised aggregate allocation was fair and within court’s supervisory authority over contingency arrangements. | Court’s allocation and supervision upheld; Johnson failed to show abuse of discretion and no effective relief was available. |
Key Cases Cited
- In re Vrdolyak, 137 Ill. 2d 407 (Ill. 1990) (Supreme Court rules operate with force of law).
- Bright v. Dicke, 166 Ill. 2d 204 (Ill. 1995) (court rules are not aspirational; they must be followed).
- Romanek v. Connelly, 324 Ill. App. 3d 393 (Ill. App. Ct. 2001) (Rule 1.5 protects client rights in fee divisions).
- Thompson v. Hiter, 356 Ill. App. 3d 574 (Ill. App. Ct. 2005) (fee-splitting unenforceable without Rule 1.5 compliance).
- Pocius v. Halvorsen, 30 Ill. 2d 73 (Ill. 1963) (court supervises reasonableness of contingency fees).
- In re Avandia Mktg., Sales Practices & Prod. Liab. Litig., [citation="658 F. App'x 29"] (3d Cir. 2016) (MDL court’s finding that certain state-court settlements were covered by MDL common benefit assessment).
- Foutch v. O’Bryant, 99 Ill. 2d 389 (Ill. 1984) (on appeal, absent a complete record, trial court’s findings are presumed correct).