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Laff v. Chapman Performance Products





APPEAL from the Circuit Court of Cook County; the Hon. JOHN J. KELLY, JR., Judge, presiding.


Plaintiffs, attorneys at law, filed a two-count amended complaint against defendants, Chapman Performance Products, Inc. (hereinafter referred to as Chapman, Inc.), and Robert Chapman and David Arlasky, two officers of defendant corporation. Count I alleged that defendants owed plaintiffs $13,629.68 due on an account stated for legal services and out-of-pocket expenses. Count II alleged that defendants embarked on a plan to defraud plaintiffs and obtain legal services without intending to pay for them and sought $27,259.36 in punitive damages. Defendants answered denying the material allegations of the amended complaint. In addition, Chapman, Inc. filed a counterclaim in two counts. Count I alleged that plaintiffs agreed to handle the litigation in question for $6,000; that under plaintiffs' threat to withdraw as counsel, defendant corporation paid the plaintiffs $10,000; that in violation of their agreement, plaintiffs withdrew as counsel before completing their services; and that as a result defendant was entitled to a $10,000 refund of fees already paid. Count II of the counterclaim alleged that plaintiffs' actions were wilful and wanton and prayed for punitive damages. Plaintiffs answered the counterclaim admitting the receipt of $10,000 in fees but denied the remaining material allegations. The cause then proceeded to trial before a jury. During that trial, the trial court directed verdicts as to both count II of the amended complaint and count II of the counterclaim. The trial court also denied a motion by the plaintiffs pursuant to section 41 of the Civil Practice Act (Ill. Rev. Stat. 1975, ch. 110, par. 41) praying for costs as to count II of the counterclaim. Count I of the amended complaint and count I of the counterclaim were submitted to the jury which returned verdicts in favor of the plaintiffs on both counts. The jury returned a verdict against both the corporation and individual defendants on count I of the amended complaint in the amount of $20,629.68, $7,000 more than requested in the amended complaint. After granting plaintiffs leave to amend their ad damnum to $20,629.68, the trial court entered judgment on the jury verdict. Defendants now appeal from that judgment. Plaintiffs cross-appeal from the trial court's order denying their motion for costs as to count II of the counterclaim.

Defendants make the following contentions on appeal: (1) that the plaintiffs failed to sustain their burden of proof that the account rendered to the defendants was fair and reasonable; (2) that the trial court erred in failing to direct a verdict in favor of the individual defendants David Arlasky and Robert Chapman, and in failing to submit separate verdict forms as to these defendants; (3) that the jury's verdict in excess of the ad damnum was the result of the jury's passion and prejudice and warrants the granting of a new trial, or in the alternative, a remittitur; and (4) that the trial court erred in refusing to receive into evidence defendants' group exhibit no. 2 because said exhibit, defendants argue, denoted that much of the time spent by plaintiffs was unnecessary and unreasonable. Plaintiffs in their cross-appeal raise the sole contention that the trial court abused its discretion in not awarding them costs as to count II of the counterclaim.

We affirm in part and reverse in part.

The instant lawsuit arose out of services performed by the plaintiffs in connection with three lawsuits concerning the ownership of the trademark Kar-Lok and patent rights for the use of the patent on a hood and ignition lock system manufactured and sold by the defendant, Chapman, Inc. On October 29, 1973, Chapman, Inc., filed a complaint in Federal court against Ramm Industries Co. (hereinafter referred to as Ramm) alleging patent infringement on a "Hood Locking Device." On March 20, 1974, Ramm filed a complaint in the same court naming as defendants Chapman, Inc., David F. Arlasky, Robert W. Chapman and Joyce E. Arlasky and alleged unfair competition and infringement of the trademark Kar-Lok. After initiating the trademark suit, Ramm mailed about 500 letters to Chapman's present and prospective customers threatening an infringement suit if they sold Chapman, Inc.'s product under the name Kar-Lok. Chapman, Inc.'s business immediately dropped by one-half.

Charles Laff, an attorney specializing in patent and trademark law and a member of the plaintiffs' law firm, testified that he first met in his offices with David Arlasky and Jay Frank, then counsel for Chapman, Inc., on March 29, 1974. They informed him of the trademark and patent cases and asked Laff to represent the defendants in the trademark case and to take over representation in the patent case. Laff agreed to represent the defendants in both cases. According to Laff, Arlasky wanted immediate action to prevent Ramm from mailing further letters to Chapman, Inc.'s customers and wanted to establish Chapman, Inc.'s exclusive ownership of the name Kar-Lok. Laff also testified that he told Arlasky that his firm charged fees on an hourly basis. Laff's time was billed at $60 per hour and the others in the firm scaled down to $25 per hour. Laff also informed Arlasky that clients were billed for out-of-pocket expenses. Laff told Arlasky it would be difficult to estimate the amount of fees but that the cost per month could go as high as $10,000. Laff testified that he also informed Arlasky that the average patent suit cost $50,000 to try and a trademark suit could cost as much. Received into evidence at trial were yellow and blue index cards indicating the services performed by each attorney, the amount of time expended in performing these services, and plaintiffs' out-of-pocket expenses. The yellow cards reflected that plaintiffs had expended a total of 606.83 hours working on the cases.

During the course of their work relating to the patent and trademark cases, plaintiffs sent defendants periodic invoices billing them for legal services and out-of-pocket expenses. A total of nine invoices were sent defendants covering the period March 24, 1974, to May 14, 1975. Each invoice provided a detailed description of plaintiffs' work, itemized the charges and disbursements made by plaintiffs, and credited amounts already paid. The final invoice reflected that defendants had paid plaintiffs a total of $10,000 and still owed $13,629.68.

Approximately one month after receiving the second invoice dated June 20, 1975, Arlasky sent plaintiffs a letter requesting an itemized accounting of plaintiffs' hours and the charge per hour. Laff testified that he telephoned Arlasky, invited him to plaintiffs' offices to check their billing records, and that Arlasky never attempted to make such an examination.

Laff also testified concerning the legal services plaintiffs performed for defendants. Laff initiated his work by studying extensive files provided by Arlasky pertaining to the patent case and a previous, related case, Chapman v. Producers Sales. Laff then prepared indemnity agreements for Chapman to send to its customers who had received Ramm's threatening letter. In April of 1974, Laff, with assistance from other attorneys in plaintiffs' firm, prepared and filed an answer and counterclaim in the trademark lawsuit and a motion for a preliminary injunction, together with supporting affidavits and a memorandum of legal authorities. Laff appeared in court on three separate occasions for hearings on this motion. Pursuant to the motion, an order was entered enjoining Ramm from further disseminating information to the trade concerning the lawsuit and requiring Ramm to furnish Chapman, Inc., with a list of persons who had received a copy of Ramm's threatening letter. In addition, Laff studied the contract and other documents under which defendants claim title to the trademark Kar-Lok, conducted interviews with Chapman, Inc.'s customers and their attorneys regarding the problems Ramm had created with its threatening letters, and added as third party defendants to the trademark case Charles Barcik and Major Motor Supply Company. It was from Barcik that Ramm claimed its title to the name Kar-Lok. Plaintiffs also prepared and filed a request for production of documents and appeared in court and filed a legal memorandum successfully opposing Ramm's motion to delay discovery.

On April 26, 29 and 30, and on June 5 Laff took the deposition of Joseph J. Gagliardo, president of Ramm Industries. Laff testified that Mr. Gagliardo's testimony was especially important because as president of Ramm he was principally responsible for Ramm's activities and also because he was claiming the rights to the name Kar-Lok under both a written assignment from Barcik and an alleged oral assignment from Louis Guenther, who at one time was Barcik's partner and who was deceased. It was this same Louis Guenther from whom defendants claimed to have obtained their rights to use the name Kar-Lok.

In early May of 1974, Laff also took the deposition of Charles Barcik, counterdefendant in the trademark suit, and later attended depositions of Arlasky and Robert Chapman. Each of these depositions took one half of a day.

In April, Laff also prepared a motion to dismiss the complaint and quash service of process as to the individual defendant Robert Chapman. Accompanying the motion were affidavits and a memorandum in support of the motion.

Plaintiffs also began preparing answers to interrogatories served on defendants by Barcik, a counterdefendant in the trademark case. In connection with the patent case, plaintiffs analyzed the patent involved, the prior art, Ramm's allegedly infringing device, and prepared answers to interrogatories served by Ramm.

During May, plaintiffs also conducted legal research regarding the purported oral assignment of the name Kar-Lok to Ramm. Laff also took part in successful settlement negotiations with the lawyers for the Estate of Louis Guenther pertaining to the earlier mentioned state court proceedings. From this settlement, defendants obtained an assignment of all of Louis Guenther's estate's rights to the name Kar-Lok, and the Federal registration thereof.

On June 7, 1974, another hearing was held in connection with the motion for a preliminary injunction. Laff worked with Jay Frank and Arlasky until 11:30 p.m. the evening of June 6, 1974, in preparation for this hearing. The hearing took the entire day and after testimony of witnesses and oral argument, Ramm gave its assurance to the court that it would not use the name Kar-Lok and that it had no intention of proceeding against defendants' customers for their purchase or sale of Kar-Lok devices. After the above hearing, Laff prepared a letter to be sent to Chapman's customers informing them of the above assurances of Ramm. After appearing in court several times to obtain approval of this letter, Laff sent the letter to Chapman, Inc.'s present and prospective customers. Laff went on to testify that during July, plaintiffs conferred with opposing counsel concerning discovery in the trademark case and performed extensive legal research concerning title to the name Kar-Lok and further objections by Ramm to the preliminary injunction. Laff also indicated that in August he was in frequent contact with one of Chapman, Inc.'s major customers in New York and further prepared and filed a legal memorandum in response to a memorandum by Ramm seeking to dissolve the preliminary injunction.

On September 20, Laff again appeared in court for a further decision on the preliminary injunction. An order was entered reaffirming the earlier order of April 17 which restrained Ramm from sending out further notices to Chapman's customers regarding the lawsuit and authorized Chapman to contact persons who had received Ramm's letter that they would not be sued for the purchase or sale of Chapman's Kar-Lok device.

From October 1974 to May 1975 the bulk of plaintiffs' work consisted of planning future steps to be taken in the two cases and conferring with the defendants regarding the status of their cases. Plaintiffs also studied possible infringement of defendants' patent by others besides Ramm. In April 1975, plaintiffs prepared and filed answers to a second set of interrogatories served on defendants by counterdefendant Barcik.

Laff went on to testify that during the month of August he spoke with Arlasky twice about the large outstanding balance owed to plaintiffs. Arlasky indicated that defendants' business had slowed down and asked to pay the outstanding balance due in installments. In the same month Robert Chapman told Laff that if he had problems with Arlasky concerning payment that Laff should contact Chapman. During a later conversation, Chapman told Laff that defendants were expecting a large sum of money within a week and would pay the entire outstanding amount at that time. However, after two payments of $1,000 each in August, no further payments from defendants were received until February 1975, when another payment of $1,000 was made.

Shortly after an invoice dated October 1, 1974, was mailed to defendants, Laff telephoned Arlasky about the outstanding balance of $13,278.22 then owed by defendants. Laff explained that defendants could wait for Ramm to make the next move in the trademark suit since the preliminary injunction against Ramm was in force. Laff also explained that other than the hiring of an expert witness, they were in good shape for trial in the ...

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