In re MARRIAGE OF HEATHER ALTMAN, Petitioner-Appellee, and JEFFREY BLOCK, Respondent-Appellee (Steven D. Gerage, Contemnor-Appellant).
Docket No. 1-14-3076
Appellate Court of Illinois, First District, Third Division
July 27, 2016
2016 IL App (1st) 143076
Hon. David Haracz, Judge, presiding.
Illinois Official Reports; Decision Under Review:
Judgment: Affirmed in part, reversed in part and remanded with directions.
Counsel on Appeal: Lake Toback, of Chicago (Michael G. DiDomenico and Sean M. Hamann, of counsel), for appellant.
No brief filed for appellees.
Paul L. Feinstein and Grund & Leavitt PC (Jamie R. Fisher and David Adams, of counsel), for amicus curiae.
Panel: PRESIDING JUSTICE MASON delivered the
OPINION
¶ 1 At issue in this appeal are the “leveling of the playing field” provisions of the Illinois Marriage and Dissolution of Marriage Act (Act) (
¶ 2 Petitioner, Heather Altman, and respondent, Jeffrey Block, were married on September 5, 2005. The parties had triplets born of the marriage who were five years old at the time these proceedings were commenced. Altman originally sought an order of protection against Block on May 14, 2013, and, shortly thereafter, filed her petition for dissolution of marriage. The two proceedings were consolidated.
¶ 3 Both parties were represented by counsel. Altman has been represented throughout by the firm of Bradford & Gordon, LLC. Block was originally represented by Scott Tzinberg, who was granted leave to withdraw on October 3, 2013. Steven Gerage was then granted leave to appear as substitute counsel. Gerage was granted leave to withdraw on August 14, 2014, and, since that date, Block has proceeded pro se.
¶ 4 The record indicates that the proceedings have been “extremely contentious” and the parties “overly litigious,” as characterized by the circuit court. There have been numerous pleadings, affidavits, and motions filed by both parties relative to the order of protection filed by Altman. Block also sought his own order of protection and further requested that Altman submit to random drug testing as a result of her alleged abuse of prescription drugs. Additionally, both parties have litigated issues regarding temporary custody, visitation, and parenting time, and several orders have been entered relative thereto, including, due to problems concerning interaction between Altman and Block, an order that pickups and drop-offs of the children occur at a police station. The court eventually had to order Block to leave the police station parking lot within 10 minutes of dropping off or picking up the children as Altman claimed that he would sit in the parking lot for an extended period of time in an attempt to confront her on these occasions, and she was required to wait in the police station—either alone or with the children—until he left. A children‘s representative was ultimately appointed to represent the children and has been required to broker disputes relating to what school and summer camps the children should be enrolled in and parenting time over the summer and holidays.
¶ 6 The financial aspect of the case was further complicated as a result of Block‘s claim that he was laid off from his employment as a principal of a business, where he earned more than $160,000 per year. In August 2013, Altman filed an emergency petition seeking to require Block to contribute to the parties’ household and living expenses. Altman‘s petition represented that at the end of May 2013, Block was terminated from his employment. The record is not clear as to when Altman learned of Block‘s termination. Altman is essentially a full-time mother who earns under $30,000 per year as a rabbi. After a multi-day evidentiary hearing,1 the trial court set temporary child support of $1412.12 per month based on Block‘s representation that he was currently earning roughly $4441 per month.
¶ 7 Included in the record is Altman‘s motion to reconsider that order based on her claim that Block falsified his income and utilized sham entities to hide his true income and assets from Altman and the court. Altman‘s motion attached documents purporting to show that from May 2013 to January 2014, Block earned income of at least $215,000, but paid only $475 in child support. True to form, Block, by then representing himself, filed a counter-motion to reconsider claiming that the court improperly calculated his child support obligation and requesting that it be set at a lower amount. These motions were pending at the time Gerage appealed the contempt finding and so their disposition is not contained in the record.
¶ 8 On February 13, 2014, nine months after Altman first sought an order of protection and after numerous motions and hearings in the consolidated proceedings, some of which are referenced above, Altman filed a petition requesting interim attorney fees in the amount of $36,864.30 for fees already incurred and $25,000 for prospective attorney fees and costs. An amended petition was filed on May 13, 2014. By this time, Altman alleged she had incurred fees of $63,598.68, had paid $9500 and therefore owed her attorneys $54,098.68. Altman requested that Block be ordered to pay the fees or, in the alternative, Gerage be disgorged of the sums that had been previously paid. On June 26, 2014, the children‘s representative likewise sought an award of fees in the amount of $5784 for past services and $2500 in prospective fees.
¶ 9 It was also disclosed that Altman had access to a nonmarital retirement account valued at approximately $100,000. In response to the interim fee petition, Block contended that Altman should be required to access that account to fund her attorney fees. Block‘s response represented that he had paid Gerage $41,500 for services rendered and that he owed his lawyer $17,112.50. Block also represented that he had paid Tzinberg $25,000 and claimed to owe him an additional $18,542.
¶ 11 After Gerage failed to comply with the order, Altman filed a petition for rule to show cause, which ultimately resulted in the contempt order from which Gerage appeals. We granted leave to the Illinois Chapter, American Academy of Matrimonial Lawyers, to appear as amicus curiae.2
ANALYSIS
¶ 12 At the outset, we note that no appellee‘s brief has been filed in this case. This is not surprising, of course, given the trial court‘s determination that both parties lack the financial ability or access to assets or income to pay for reasonable attorney fees and costs. It would stand to reason that they are likewise financially unable to participate in this appeal. Nonetheless, we will address the merits of this appeal under the principles set forth in First Capitol Mortgage Corp. v. Talandis Construction Corp., 63 Ill. 2d 128, 133 (1976) (in the absence of an appellee‘s brief, a reviewing court should address an appeal on the merits where the record is simple and the claimed errors are such that the court may easily decide the issues raised by the appellant); see also In re Marriage of Earlywine, 2013 IL 114779, ¶ 13.
¶ 14 “[A] court order awarding interim attorney fees under section 501(c-1) of the Act is not an appealable interlocutory order.” In re Marriage of Radzik, 2011 IL App (2d) 100374, ¶ 45;
¶ 15 On appeal, Gerage contends that the circuit court erred (1) in determining that both parties lacked access to income or property to pay fees given the existence
¶ 16 The issues Gerage raises regarding the propriety of the order directing him to disgorge $16,000 and pay that amount to Altman‘s lawyers require us to construe the meaning of the Act‘s “leveling of the playing field” provisions. Thus, we review these issues de novo. In re Marriage of Nash, 2012 IL App (1st) 113724, ¶ 15.
¶ 17 In construing a statute, the goal of the court is to effectuate the legislature‘s intent. People v. Pullen, 192 Ill. 2d 36, 42 (2000). To this end, a court may consider the reason and necessity for the statute and the evils it was intended to remedy and will assume the legislature did not intend an absurd or unjust result. Id. Any inquiry into legislative intent, however, must begin with the language of the statute, which is the surest and most reliable indicator of legislative intent. Id. Under the guise of construction, a court may not supply omissions; remedy defects; annex new provisions; substitute different provisions; add exceptions, limitations, or conditions; or otherwise change the law so as to depart from the plain meaning of language employed in the statute. Superior Structures Co. v. City of Sesser, 292 Ill. App. 3d 848, 852 (1997). If the language of the statute is clear, its plain and ordinary meaning must be given effect without resorting to other aids of construction. In re Marriage of Mitchell, 181 Ill. 2d 169, 173 (1998); In re Marriage of Beyer, 324 Ill. App. 3d 305, 309-10 (2001).
¶ 18 Section 501(c-1) of the Act permits predecree assessments of attorney fees in favor of a petitioning party. In re Marriage of Levinson, 2013 IL App (1st) 121696, ¶ 27. The purpose of such interim awards is to “address the problem of the ‘economically disadvantaged spouse,’ where one spouse uses his or her greater control of assets or income as a litigation tool, making it difficult for the disadvantaged spouse to participate adequately in the litigation.” (Internal quotation marks omitted.) In re Marriage of Rosenbaum-Golden, 381 Ill. App. 3d 65, 74 (2008). This provision was enacted as part of the “leveling of the playing field” amendments in 1997, changing the petition methods and court procedures for interim fee awards in dissolution of marriage actions. Id. at 73; see also Levinson, 2013 IL App (1st) 121696, ¶ 27.
¶ 19 Subsection (3) of section 501(c-1) contemplates interim awards where one party is able to pay and the other is not and where both parties are unable to pay:
“In any proceeding under this subsection (c-1), the court *** shall assess an interim award against an opposing party in an amount necessary to enable the petitioning party to participate adequately in the litigation, upon findings that the party from whom attorney‘s
fees and costs are sought has the financial ability to pay reasonable amounts and that the party seeking attorney‘s fees and costs lacks sufficient access to assets or income to pay reasonable amounts. *** If the court finds that both parties lack financial ability or access to assets or income for reasonable attorney‘s fees and costs, the court *** shall enter an order that allocates available funds for each party‘s counsel, including retainers or interim payments, or both, previously paid, in a manner that achieves substantial parity between the parties.” 750 ILCS 5/501(c-1)(3) (West 2012).
Where one spouse has access to assets that enable that party to pay an attorney and the other spouse does not, section 501(c-1) operates to effect “the legislature‘s goal *** to level the playing field by equalizing the parties’ litigation resources.” Beyer, 324 Ill. App. 3d at 315. In that instance, an interim fee order may direct a spouse to pay the other spouse‘s attorney fees. But where both spouses lack the ability to pay attorneys, the statute allows a court to allocate “available funds,” including retainers or interim payments, already paid to a party‘s lawyer.
¶ 20 The first issue raised by Gerage concerns the trial court‘s determination that Altman lacked access to income or property to pay attorney fees. In particular, Gerage maintains that Altman could have utilized her 403(b) retirement account3 to pay her attorneys. In the trial court, Block claimed that the account had a value in excess of $100,000 and, therefore, Altman had access to an asset that could be used to pay her attorney fees. We disagree.
¶ 21 Section 12-1006(a) of the Illinois Code of Civil Procedure exempts retirement plans, including individual retirement accounts, from “judgment, attachment, execution, distress for rent, and seizure for the satisfaction of debts.”
¶ 22 Consistent with Jakubik, we have previously determined that one spouse cannot be ordered to liquidate and distribute the proceeds of an individual retirement account to satisfy an interim attorney fee award. Radzik, 2011 IL App (2d) 100374, ¶ 62. But the question here is somewhat different. Gerage does not contend that Altman could be ordered to liquidate her retirement account to pay her attorneys (or him, for that matter); rather, he contends that Altman‘s retirement account should have been considered an asset that was available to her, thus precluding a
¶ 23 On this point, Gerage cites our supreme court‘s decision in Earlywine, 2013 IL 114779. Both parties in Earlywine represented that they lacked funds to pay their attorneys, but the husband‘s parents had paid $8750 on his behalf to his attorney. (We discuss in more detail below the significance of the case as it pertains to the issue of disgorgement of earned fees.) The attorney to whom the funds had been paid, like counsel here, was held in contempt when he refused to turn over half the funds to the wife‘s counsel. On appeal, he argued that the source of the funds—nonmarital funds advanced by his client‘s parents—was relevant. The supreme court disagreed, stating that “the statute does not distinguish between marital property and nonmarital property for the purpose of disgorgement of attorney fees. The statute contemplates that retainers paid ‘on behalf of’ a spouse may be disgorged.” Id. ¶ 30. Gerage reads Earlywine as making every asset—no matter the source—fair game in assessing a party‘s ability to pay attorney fees.
¶ 24 But context matters and we believe the court‘s analysis in Radzik applies here. In Radzik, prior to the order directing him to turn over the proceeds of his individual retirement account to his wife to satisfy the interim fee award, the husband had not accessed or borrowed against the account to pay his lawyers. Finding this significant, the court commented:
“While the IRA is an asset that will be distributed in the final disposition of the marital estate, respondent was not during the litigation drawing any funds from the IRA. In other words, where the IRA benefitted neither party in the litigation, forcing its liquidation and distribution did not serve to counter respondent‘s use of an asset because, by virtue of the account‘s very nature, respondent could have no expectation of accessing it.” (Emphasis in original.) Radzik, 2011 IL App (2d) 100374, ¶ 63.
¶ 25 Applied here, Radzik‘s reasoning compels us to reject Gerage‘s argument that the existence of Altman‘s nonmarital retirement account was relevant for purposes of assessing her ability to pay fees. First, unlike the IRA in Radzik, Altman‘s retirement account is a nonmarital asset that will not be distributed in the final property disposition in this case. Second, and more importantly, there is no evidence that Altman has accessed the account for any purpose related to the litigation or that she has any ability to do so, at least not without significant financial penalties. See
¶ 26 As support for his position, Gerage points to the trial court‘s order directing Block to liquidate the balance of a marital retirement account and place the funds in escrow subject to further order. But this just illustrates the distinction the Radzik court recognized. Block chose to utilize this asset to fund the litigation, among other things. Because Block elected to access this asset, the trial court rightly exercised control over the proceeds to “level the playing field.” See Radzik, 2011 IL App (2d) 100374, ¶ 64 (“[W]hile the IRA is not currently ‘income’ *** because respondent receives no periodic payment therefrom [citation], that would change if respondent voluntarily and prematurely cashes out the IRA.“). Altman has not accessed her retirement account for any purpose, and there is no evidence that she is receiving periodic payments from that account. Therefore, we reject Gerage‘s claim that the trial court erred in determining that Altman lacked access to assets that would have enabled her to pay attorney fees.
¶ 27 We next address whether funds paid to an attorney for past services rendered are “available” within the meaning of the Act so that a court may order a law firm to disgorge not only unearned funds held in a client trust or an advance payment retainer account but also funds that the firm has already earned and deposited into its operating account or paid to third parties. Gerage contends that the plain language of section 501(c-1)(3) and, in particular, the use of the modifier “available” before “funds” necessarily means that some funds are “unavailable.” Gerage posits that once a fee is earned, title to those funds, as property, has passed to the attorney and the funds are no longer “available” within the meaning of the statute.
¶ 28 Amicus agrees and contends that no reasonable reading of the statute permits a court to order an attorney to disgorge funds earned, received, taxed, and spent and direct him to pay those funds to “legal strangers.” Amicus points to the statute‘s language that defines “available funds” to include “retainers or interim payments, or both, previously paid” and argues that the legislature contemplated that funds held by a lawyer to secure future services are subject to disgorgement, while funds deducted from a retainer or interim payments for services already rendered are not.
¶ 29 Earlywine addressed a related, but not identical, issue. In Earlywine, the trial court found that neither the husband nor wife had the resources to pay their respective attorney fees and ordered the husband‘s attorney to disgorge to the wife‘s attorney half the fees held by him in an advance payment retainer account. The attorney argued that under Dowling v. Chicago Options Associates, Inc., 226 Ill. 2d 277 (2007), and Rule 1.15 of the Illinois Rules of Professional Conduct of 2010 (eff. Jan. 1, 2010), the advance payment retainer became his property upon payment and the funds were placed in his general account. The terms of the advance payment retainer provided that it was specifically designed to override the “leveling of the playing field” provisions of the Act. See Earlywine, 2013 IL 114779, ¶ 6.
¶ 30 Our supreme court concluded that divorce cases were not among the narrow categories of cases where advance payment retainers were necessary and appropriate. “Shielding assets so that one spouse may easily hire an attorney has the direct effect of making it difficult for the other spouse to hire his or her own attorney. This would defeat the purpose and goals of the Act, which is to enable parties to have equitable access to representation.” Id. ¶ 29. Thus, Earlywine stands for the proposition that no matter what form the retainer takes, it is subject to the provisions of section 501(c-1). Because the advance payment retainer had been placed in the lawyer‘s general account, Earlywine did not address any issues relating to whether the lawyer had earned fees by virtue of services rendered.
¶ 32 On appeal, Stogsdill contended that the fees the firm had earned and deposited into its general account were not “available” within the meaning of section 501(c-1)(3). Relying on the statute‘s reference to the use of “retainers or interim payments” to “level the playing field,” the Second District disagreed. The court found that accepting Stogsdill‘s position would frustrate the purposes of the statute in that the attorney holding the retainer “would have a strong incentive to earn the fees at an early stage of the litigation” and “could file voluminous pleadings and motions early in the case, thus ‘earning’ the retainer, while leaving the other spouse to respond to a mountain of paperwork with little chance of obtaining resources to do so properly.” Id. ¶ 21. Relying on Earlywine‘s refusal to recognize a law firm‘s ownership of an advance payment retainer in the context of marriage dissolution proceedings, Squire found that it did not matter that the firm had already deducted earned fees from the retainer. Id. ¶ 22. The court concluded: “it is clear that ‘available’ as used in the statute simply means that the funds exist somewhere.” Id.
¶ 33 We respect our colleague‘s decision in Squire and the dissent‘s adoption of its reasoning, and if “leveling the playing field” was the sole consideration in deciding this issue, we would come to the same conclusion. But the legislature chose the word “available” to define those funds, whether in the form of a retainer or interim payments, that could be subject to disgorgement. If the legislature meant that all funds “paid” to one spouse‘s lawyer were subject to disgorgement when neither spouse was able to pay attorney fees, it could have easily said so. But it seems to us a tortured reading of the statute to say that even though the firm has earned the fees, paid itself (as it was entitled to do), and used that income to pay salaries, overhead, and litigation expenses for items such as experts and court reporters, it can nonetheless be required to refund those fees, not to its client, but to a third party.
¶ 34 Further, Squire does not address, we assume because Stogsdill did not raise, many of the considerations urged by Gerage and amicus. It is not speculation to predict that some lawyers, particularly solo practitioners and those in small law firms, may be unable to comply with orders to disgorge funds that they have earned over several months and that have been transferred into (and out of) their operating accounts, at least not without serious financial hardship. Here, for example, Altman‘s lawyers waited nine months after these proceedings were commenced before they filed their initial interim fee petition. Our review of the record reveals that the activity by both party‘s lawyers during this period of time was intense and, we must assume, time-consuming. It must have been obvious to Bradford that Block, who was at least
¶ 35 Gerage also argues that the trial court‘s interpretation of the statute should have resulted in a disgorgement order against Tzinberg, Block‘s former lawyer. If fees paid to a lawyer are subject to disgorgement, notwithstanding that those fees have been earned, paid, and passed through the lawyer‘s operating account, it is logical to extend section 501(c-1)(3) to all attorneys who have represented the client because, under Squire‘s reasoning, “the funds exist somewhere.” Squire, 2015 IL App (2d) 150271, ¶ 22. Indeed, to enforce the disgorgement provisions of section 501(c-1)(3) only against the party‘s current lawyer could encourage “churning” by the first lawyer, secure in the knowledge that the statute‘s reach will not extend to him or her after withdrawal. But it would be an anomaly, to say the least, that a lawyer, having been granted leave to withdraw from a case, could be called upon months or years later to write a check to the opposing party‘s counsel. It is just such an absurd result that our construction of the statute avoids. Bowman v. Ottney, 2015 IL 119000, ¶ 17.
¶ 36 We recognize that we are addressing only interim fee awards and that, at least in theory, accounts will be “trued up” when a final dissolution order is entered. See In re Marriage of DeLarco, 313 Ill. App. 3d 107, 113 (2000) (interim fees may be deemed to be advances from the parties’ marital estate and a court can order any portion of an interim award constituting an overpayment to be repaid at conclusion of case). But when a disgorgement order is specifically predicated on a trial court‘s finding that both parties lack financial ability or access to assets or income for reasonable attorney fees, we must ask how realistic it is to assume that the attorneys will ever be paid. We simply do not believe the legislature intended through section 501(c-1)(3) that the financial burden of leveling the playing field should be borne, in substantial part, by lawyers who must refund, under pain of contempt, fees they have earned. For these reasons, we conclude that funds earned by and paid to a party‘s lawyer in the normal course of representation for past services rendered are not “available funds” within the meaning of section 501(c-1)(3) and thus reverse the disgorgement order to the extent it required Gerage to disgorge fees he had
¶ 37 Finally, Gerage contends that the trial court erred in failing to allocate the entire retainer account. There is no explanation in the record for the court‘s failure to allocate the remaining $1716 in the account. We recognize that a substantial period of time has elapsed since this issue was addressed by the trial court and circumstances may have rendered the question moot. But, if not, the trial court should on remand allocate this sum between the parties.
¶ 38 Affirmed in part, reversed in part and remanded with directions.
¶ 39 JUSTICE PUCINSKI, concurring in part and dissenting in part.
¶ 40 While I agree with my colleagues that under the circumstances presented, a spouse cannot be required to access a nonmarital retirement account to pay interim attorney fees, I respectfully disagree with the majority‘s statement that it simply does not believe the legislature intended through section 501(c-1)(3) that the financial burden of “leveling the playing field” should be borne, in substantial part, by lawyers who must refund, under pain of contempt, fees they have earned.
¶ 41 The most compelling evidence that the legislature intended section 501(c-1) to allow for allegedly earned fees to be available funds and used for interim fee awards is the express language of section 501 itself, which states that: “If the court finds that both parties lack financial ability or access to assets or income for reasonable attorney‘s fees and costs, the court *** shall enter an order that allocates available funds for each party‘s counsel, including retainers or interim payments, or both, previously paid, in a manner that achieves substantial parity between the parties.”
¶ 42 Further, section 501(c-1) must reasonably be understood in view of the concomitant changes to section 508(a). Section 508(a), when read as an integrated whole, expressly indicates that “interim attorney‘s fees and costs” may be awarded “in accordance with subsection (c-1) of section 501.” This construction further agrees with the amended language of section 102, which defines the goal of interim awards broadly as “substantial parity in parties’ access to funds for litigation costs” both “during and after litigation.” (Internal quotation marks omitted.) Beyer, 324 Ill. App. 3d at 313-14. As amended, section 102 now reads: “This Act shall be liberally construed and applied to promote its underlying purposes, which are to: *** make reasonable provision for spouses and minor children during and after litigation, including provision for timely awards of interim fees to achieve substantial parity in the parties’ access to funds for litigation costs[.]”
¶ 43 The fee shifting that takes place in an interim fee award order is a temporary
¶ 44 In Squire, the trial court, citing Earlywine, held that it did not matter that the fees already belonged to respondent‘s attorney. Squire, 2015 IL App (2d) 150271, ¶ 6 (citing Earlywine, 2013 IL 114779, ¶ 25). The trial court granted the interim fee petition and ordered respondent‘s attorney to pay petitioner‘s attorney. The appellate court affirmed also citing Earlywine and finding that Earlywine did not intend to limit its holding to certain retainers. Id. ¶ 21. The court found that in Earlywine, our supreme court noted that the retainer in question became the law firm‘s property immediately upon payment and was deposited into the firm‘s general account but held that the funds were nevertheless subject to disgorgement. From this, the court in Squire held that it is clear that “available” as used in the statute simply means that the funds exist somewhere. Id. ¶ 22.
¶ 45 In accord with Earlywine and Squire, and in light of the Act‘s public policy of including provisions for timely awards of interim fees to achieve substantial parity in parties’ access to funds for litigation costs and the fact that it is to be liberally construed, I find the inclusion of any fees paid to an attorney to be considered “available funds” whether earned or unearned, as that determination has not yet been made. Earlywine, 2013 IL 114779, ¶¶ 22-23; Squire, 2015 IL App (2d) 150271, ¶ 22. As section 503 allows for a claim to be made for contribution and that a disgorgement order is temporary in nature, the attorney has, by statute, the right to recoup all reasonable fees he or she may be owed.
¶ 46 Under section 508, the court must make a determination of reasonableness and necessity in a final judgment.
¶ 47 The majority found that where the petitioning law firm delays in filing an interim fee petition, the financial risk disgorgement poses for the respondent‘s attorney increases correspondingly. The majority, in a footnote, indicates that if the question here were just a matter of equity, they would be inclined to uphold the disgorgement order given Gerage‘s and Tzinberg‘s conduct in aiding Block‘s “scorched earth” approach to litigating this case. The majority indicates that the summary proceeding envisioned in connection with an interim fee award is not designed to address or resolve such issues. I find that the proceeding is specifically designed for such issues, as the purpose of the statute is to “level the playing field” and would argue that this is a matter of equity.