We have for decision an appeal and a cross-appeal from a split decision in a bitter dispute between two former law partners, Gerald Hosier and Barry Sufrin, patent lawyers who between 1984 and 1989 practiced law as Hosier & Sufrin, Ltd. In 1986 the firm was retained to handle a patent claim of Telesonics Systems Inc. on a contingent-fee basis. The following year Hosier, the more senior of the two lawyers and the one who had “landed” Telesonics as a client, negotiated a lucrative settlement that promised Teleso'nics tens of millions of dollars of patent-licensing fees.’ Hosier informed Sufrin that Sufrin would receive 1 percent of the amount of the settlement.
To minimize income tax, the owner’s of Telesonics created a ■ limited partnership, Telesonics Systems, to receive and distribute the proceeds of the settlement.. The limited partnership drew up a written plan of distribution under which the proceeds, as they were received from the patent licensees, would be divided in specified percentages among the partners in the limited partner-, ship and the lawyers. The plan stated .that Sufrin would get 1 percent of the proceeds and Hosier 38.5 percent.. When the law firm broke up, Hosier claimed that Sufrin owed him some $100,000 as his share of the costs incident to the breakup, and when Sufrin refused to pay, Hosier told Telesonics Systems (the limited partnership) to withhold further payment of Sufrin’s 1 percent share of the licensing revenues because Sufrin wasn’t entitled to it. Afraid of taking sides in the dispute, and no doubt reassured by Hosier’s promise to indemnify it should it be sued by Sufrin, Telesonics Systems placed the revenues allocable to Sufrin in escrow. Sufrin’s first claim in this suit is that Hosier’s action constituted tortious interference with Sufrin’s contract with the limited partnership. The jury agreed and awarded Sufrin $419,000 in compensatory damages (the amount in escrow, plus interest) and an equal amount in punitive damages. Hosier’s appeal is from the judgment for Sufrin on this claim.
Before the firm broke up it had been retained by the well-known inventor Lemelson (who has just died) to prosecute, on a contingent-fee basis, claims of patent infringement against a number of major companies. When the firm broke up, Hosier took Lemelson’s business with him. The claims proved to be immensely lucrative, although the lucre did not begin to flow until years after Hosier & Sufrin, Ltd. had dissolved. Sufrin’s second claim against Hosier, based on the written agreement specifying the compensation of the partners (we’ll call this the “partnership agreement”), is to roughly a third of the contingent fees generated by the Lemelson retention. So huge are those fees that if Sufrin prevailed Hosier would owe him more than $70 million. The jury, however, gave judgment for Hosier on this claim, precipitating the cross-appeal.
The two claims are related in the following way: Hosier argues that Sufrin had no contract with Telesonics because Sufrin’s 1 percent interest in the settlement was a “gift” from Hosier because (Hosier contends) the partnership agreement did not entitle Sufrin to any share of the contingent fees that the firm .obtained. We shall see that Hosier is right about the agreement, although, as we *597 are about to see, it doesn’t follow that there was no contract between Sufrin and Telesonics. Still, there is tension between Sufrin’s two claims, the Telesonics claim and the Lemelson claim. For if Sufrin was entitled.to a third of the law firm’s contingent fees (the Lemelson claim), why was he content with a measly 2.5 percent of the contingent fee in the Telesonics matter? (Sufrin’s 1 percent of the licensing fees was approximately 2.5 percent of the total contingent fee to which Hosier & Sufrin, Ltd. was entitled by its contract with the Telesonics corporation.) Sufrin’s answer, which must not have persuaded the jury, is that Hosier may have been retained by Telesonics before the formation of the law firm and that Sufrin accepted a mere 1 percent of the Telesonics settlement to avoid having to litigate the issue whether Telesonics was the firm’s client or Hosier’s.
It may seem curious that Sufrin should have conceded, as he has, that if he had no contract with Telesonics, he cannot prevail on his claim of tortious interference. The tort is not limited to interfering with a contract. As usually formulated, in Illinois (whose law governs the substantive issues in this diversity suit) as elsewhere, the tort consists either of interfering with an existing contract or interfering with a prospective advantage, that is, with the plaintiffs reasonable expectation of entering into a relation formally or informally contractual. See
Fellhauer v. City of Geneva,
Although Sufrin was not in the negotiation or expectancy stage of his relation with Telesonics, the cases protect the expectation of the
continuation
of an advantageous relation even if, as in
Fellhauer,
a case involving employment at will, the victim of the interference has no contractual entitlement to the continuation. And while it is true that if Hosier is right, and Sufrin had no contract with Telesonics, Hosier is probably also right that Telesonics was merely the conduit for a gift from Hosier to Sufrin, the Illinois courts have provided relief against tortious interference with the expectation of a bequest,
In re Estate of Roeseler,
He did. Even if the 1 percent was a pure gift by Hosier to Sufrin, it became a contractual entitlement of Sufrin against Telesonics with which Hosier interfered. The Telesonics corporation had a contractual obligation, running to Hosier & Sufrin, Ltd., to pay the contingent fee that the firm had earned by its-representation of the corporation. The obligation ran to the law firm, whatever arrangements the partners may have had for divvying up the spoils. The firm surrendered its undoubted contractual right in exchange for the agreement of the Telesonics partnership to distribute the contingent fees in a specified manner that included Sufrin’s 1 percent. It was as if Hosier had through sheer love deposited money in a joint bank account in his and Sufrin’s names; the bank would be contractually obligated to Sufrin to honor Sufrin’s draws against the account, regardless of whether Sufrin had given Hosier consideration for opening the joint account.
Landretto v. First Trust & Savings Bank,
Hosier argues that under Illinois law it is impossible to interfere tortiously with a contract to which you are a party, and Hosier was a party to the distribution agreement. He is right that if you break- a contract, you cannot be sued for tortiously interfering with that contract.
Douglas Theater Corp. v. Chicago Title & Trust Co.,
A more difficult question is whether Illinois law allows the award of punitive damages in a ease such as this. The mere fact that interference with contract is an intentional tort does not make an award of punitive damages permissible in Illinois'; the defendant’s misconduct must be worse than the minimum required to be guilty of the tort for an award of punitive damages to be proper. We so held in
Anthony v. Security Pacific Financial Services, Inc.,
*599
Extortion is the use of threats to obtain leverage in a situation in which the victim of the threat has no feasible legal remedy, and the condition that there be “no feasible remedy,” on which see our recent decision in
Oxxford Clothes XX, Inc. v. Expeditors Int’l of Washington, Inc.,
We need not decide exactly how aggravated a defendant’s commission of the tort of intentional interference with contract must be in order to make his conduct “outrageous,” which the Supreme Court of Illinois, following the
Restatement,
says the defendant’s conduct must be to warrant an award of punitive damages.
Loitz v. Remington Arms Co.,
In support of the second claim, Sufrin asks us to delve deeply into the law governing the rights of lawyers when a law firm breaks up. We decline the invitation. The “common law of law firms,” as Sufrin describes it, is a specialized body of contract law designed, as most contract law is, to supply a set of standard terms for eases in which the parties’ contract is incomplete.
Borys v. Rudd,
The agreement has three key terms, “billings,” “overhead,” and “residual profits.” It provides that Sufrin shall be entitled to keep 75 percent of his billings, minus overhead, plus 33 percent of the residual profits. Examples are given based on alternative assumptions about the number of hours that Sufrin bills in a given year. As for Hosier, he is entitled to keep his billings minus overhead plus 25 percent of Sufrin’s billings (after deduction of overhead) plus 67 percent of the residual profits. The contract thus envisages that each lawyer wiH bill his clients separately, with Hosier getting a cut of Sufrin’s billings but Sufrin not getting a cut of Hosier’s billings. When Hosier billed on an hourly basis, therefore, he got to keep his entire billings (less overhead); and we cannot see what difference1 it could make if he billed on some other basis, a contingent-fee basis for example. The contract does not define billings as hourly billings; and it is conceded that when the contract was made, Hosier was hoping to be able to bill on a contingent-fee basis.
On Sufrin’s interpretation, Hosier wasn’t entitled to keep any of his contingent-fee billings, as such; after deduction of overhead they passed directly into residual profits and Sufrin got a third. Suppose that Sufrin billed, after deduction of overhead, $100,000 a year. Suppose that Hosier billed (after deduction of overhead) $240,000 a year, all in contingent fees. Then on Sufrin’s interpretation, Hosier’s income for the year would be $185,000 (two-thirds of $240,000 + 25 percent of $100,000) and Sufrin’s would be $155,-000 ($100,000 - $25,000 + one-third of $240,000), almost as great — and not bad for someone who was to be a orie-third partner after paying a 25 percent “income tax” to his partner. This is such an implausible result that Sufrin, flinching,'says that Hosier would be entitled to keep so much of the contingent fee as represented time put in by Hosier on the case times his hourly rate. But that would not be “billing”; the billing is the contingent fee.
It is true that on this interpretation, Hosier’s contingent-fee billing generated no residual profits. But that does not make the contract’s provision with respect to such profits illusory. To the extent that either Hosier or Sufrin billed the time of associates at a rate in excess of overhead costs (including associates’ salaries), these billings would generate residual profits that would be divided according to the contract. Even if Hosier did no hourly billing, it was expected that Sufrin and any associates working with him would, generating residual profits that the partners would divide.
When a written contract contains no textual clue in support of an interpretation wholly implausible in light of uncontested facts, the interpretation should be rejected as a matter of law.
In re Kazmierczak,
Affirmed.