2021 IL App (2d) 200208
Ill. App. Ct.2021Background
- Plaintiffs (three individual shareholders and Camelot, Inc.) hired Burke Burns & Pinelli under contingent retainer letters: a 20% fee of any recovery in the shareholder litigation with dollar “exclusions” ($650,000 combined for two doctors; $325,000 for the third).
- The 2004 shareholder settlement gave the plaintiffs 100% of Camelot stock and title to ~20 acres; plaintiffs paid cash sums to former shareholders; no party signed the firm’s October 2004 fee statement seeking $1,037,262 based on a $6,576,310 valuation derived from a 1999 appraisal.
- An addendum (2005) acknowledged $300,000 paid toward fees, a promised additional $100,000, and deferred the remaining balance until closing on a sale of the property; plaintiffs paid the $400,000 total but never paid the asserted balance.
- The firm later recorded an attorney’s lien and repeatedly demanded $637,262; plaintiffs sued to quiet title, for declaratory judgment as to fees, and for an accounting.
- After summary judgment quieting title (affirmed on appeal), a 2019 bench trial addressed remaining fee issues; the court considered unobjected-to parol evidence from both sides.
- The trial court held the 20% contingent fee must be calculated when the property is sold, credited plaintiffs one-half the sale price (their pre-settlement interest), credited amounts paid to former shareholders ($415,000 and specifically $206,032), and credited the $400,000 already paid; the firm appealed.
Issues
| Issue | Plaintiff's Argument (Camelot) | Defendant's Argument (Burke) | Held |
|---|---|---|---|
| Whether the court improperly reformed the retainer agreements by relying on parol evidence | Parol evidence (unobjected) may be considered to show the parties intended the 20% to be based on sale price and to clarify exclusions | Court invaded the written contracts and reformed them sua sponte | Court did not reform; it construed contracts and properly considered unobjected-to parol evidence |
| When the 20% contingent fee is to be calculated: at settlement date vs. at the sale of property | Fee should be 20% of sale price when property actually sells (timing uncertain at settlement) | Fee was fixed as of settlement (firm’s valuation yielded $1,037,262) | Fee must be determined at sale; court found valuation evidence (1999 appraisal) too remote and accepted plaintiffs’ position |
| Whether the written dollar exclusions ($650,000/$325,000) control or plaintiffs are entitled to a 50% exclusion of sale price | Plaintiffs should get credit for their 50% preexisting ownership (50% of sale price) rather than the low dollar exclusions | The parties agreed to the specific dollar exclusions in the retainer letters | Court credited plaintiffs with 50% of sale price (found dollar exclusions did not reflect true 50% value and were unsupported) |
| Whether plaintiffs are entitled to credit for $206,032 paid to deRosset (part of settlement) | Payments to deRosset and Martonffy reduce recovery subject to fee; plaintiffs paid $206,032 and should be credited | Firm argued the $206,032 originated from Camelot’s account and should not reduce plaintiffs’ fee obligation | Court excluded $206,032 (plus other specified settlement credits); credited plaintiffs because money was effectively paid out in exchange for shares |
Key Cases Cited
- Vallarta v. Lee Optical of Missouri, Inc., 12 Ill. App. 3d 112 (parol evidence cannot contradict a written contract absent waiver or lack of objection)
- Tolbird v. Howard, 43 Ill. 2d 357 (court may consider parol evidence when not objected to at trial)
- Steinberg v. Keepper-Nagel Real Estate Investments, Inc., 14 Ill. App. 3d 619 (parol evidence may be considered if not objected to)
- In re Spak, 188 Ill. 2d 53 (contingent-fee agreements should clearly state fee method; Rule 1.5 guidance)
- Owens v. McDermott, Will & Emery, 316 Ill. App. 3d 340 (contract interpretation aims to effect parties’ intent; unambiguous terms control)
- Dowd & Dowd, Ltd. v. Gleason, 181 Ill. 2d 460 (ambiguities are construed against the drafter)
- Hapaniewski v. Rustin, 179 Ill. App. 3d 951 (contingent-fee payable on collection; distinguishable where recovery is a sum certain)
- Resolution Trust Corp. v. Holtzman, 248 Ill. App. 3d 105 (trial court may disregard appraisals that are too remote in time)
- Suburban Bank of Hoffman-Schaumburg v. Bousis, 144 Ill. 2d 51 (equity cannot create new contract terms under guise of reformation)
- Achs v. Maddox, 175 Ill. App. 3d 989 (contingent fee agreement can create an equitable lien on recovery)