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Waters v. City of Chicago





APPEAL from the Circuit Court of Cook County; the Hon. REGINALD J. HOLZER, Judge, presiding.


Rehearing denied May 21, 1981.

This matter is now before the appellate court for the second time. In 1975, John Nebel filed a class action lawsuit against the city of Chicago, seeking relief from the defendant city's practice of postponing the payment of tort judgments. The trial court dismissed the complaint, and this court reversed. (Nebel v. City of Chicago (1977), 53 Ill. App.3d 890, 369 N.E.2d 74.) On remand, Nebel's class action was consolidated with Effie Waters' similar class action. On October 30, 1979, the class of plaintiffs was certified. *fn1 On November 16, 1979, the parties filed with the court a proposed compromise and settlement of the action. Subsequently, a number of class members appeared and entered their objections to the proposed settlement. Dorothy Epstein objected and also sought leave to intervene as a party plaintiff. The trial court denied the objections, denied the petition to intervene, and approved the settlement. Epstein and three other objectors have appealed.

Before considering the merits of the settlement, we must first describe the city of Chicago's past practices. Prior to 1980, the city budgeted no more than $4.5 million per year to satisfy tort judgments rendered against the city. It was the practice of the city to pay judgments in the order in which they were entered, so, as the $4.5 million judgment fund became increasingly inadequate, delays in the satisfaction of tort judgments increased. Plaintiff Nebel's 1975 complaint alleged a 2 1/2-year delay in paying judgments; by late 1979, when the lawsuit was settled, delays in satisfying judgments had increased to over 4 years. This period of delay did not affect judgment amounts of $1000 or less. The city paid these judgments in the order in which judgment creditors presented them for payment, and delay in satisfying these judgments was relatively minor, as most such awards were paid in the year entered.

Under the terms of the settlement, the city was required to budget $9 million for payment of tort judgments for each of the next 3 years (1980, 1981, and 1982). By January 1, 1983, the city was to budget an amount sufficient to pay all outstanding tort judgments. Under the agreement, the city would pay judgment creditors in the order in which the judgments were obtained. An exception was made for judgments of $1000 or less; the city could continue to pay these judgments promptly and prior to larger judgments. On December 10, 1979, the settlement agreement was modified to provide for judgment creditors excluded from the class (i.e., those who had opted out of the class action). The city was required to give priority to class members, but when an excluded judgment creditor's judgment became 52 months old, that creditor was to receive priority. The settlement also provided for fees for the plaintiffs' attorneys and the trustee. These sums were to be assessed against the amounts due the members of the class; the final computation provided that each class member's judgment would be reduced by 1.30887%. A judgment creditor could escape this 1.3% assessment by opting out of the class, but he then lost priority of payment.

A class member holding a judgment for more than $1000 would, like all class members, accept a 1.3% reduction in his judgment. Plaintiffs argue that this reduction is more than offset by the benefit of remaining in the class: the judgment will be paid sooner because the city has doubled its budget for satisfaction of tort judgments. *fn2 If this class member elects to opt out of the class, the amount of his judgment will not be reduced. He will, however, be paid later than class members whose judgments are more recent. Fifty-two months after the entry of his judgment, he regains priority. By this time, his judgment is older than that of any unpaid class member, so the opting-out judgment creditor then has first priority for payment. The 52-month figure is apparently based on the waiting time as of November 1979, the time of the settlement, when judgment creditors were waiting about 4 1/3 years for satisfaction. Plaintiffs argue that a judgment creditor who opts out of the class is therefore in the same position he would be in had no action been brought: his judgment is satisfied approximately 52 months after entry.

Under the city's previous practice, persons holding judgments of $1000 or less were paid promptly. Under the settlement, these persons continue to receive the same priority. They are also subject to the 1.3% assessment for attorneys' fees. If, however, these small judgment creditors opt out of the class, they are not subject to the 52-month waiting period. Paragraph 7a of the settlement agreement (requiring that class members be paid before those excluded from the class) does not change the order of payment provided in paragraph 7, which is the section referring to judgments of $1000 or less.

The 1.3% assessment for attorneys' and trustee's fees was arrived at by dividing the total fee award ($220,000) by the aggregate amount of unpaid tort judgments held by members of the class ($16,808,309). *fn3 The $220,000 amount includes $20,000 for the trustee and $100,000 for the attorneys for each of the two plaintiffs. Plaintiff Nebel is represented by Byron D. Knight of the firm of Judge, Drew, Cipolla and Kurnik, Ltd. Plaintiff Waters is represented by Larry D. Drury. Attorney Knight's petition for fees contains a fully detailed listing of the time spent on the litigation, from December 1974 through December 1979. The 14-page listing shows 656 hours of work, and quotes an hourly rate of $75, for a total of $49,200. The petition also lists $126.66 in costs. Knight requests that the hourly total be multiplied by 3, and seeks a total fee award of $147,726.66. Attorney Drury's fee petition, lacking the specificity of Attorney Knight's, lists 526 hours of work performed between May 1, 1979, and December 10, 1979. The petition adds 125 hours for "Completion of litigation, anticipated time to close case and make refunds over a three year interval," for a total of 651 hours. Drury asks $100 per hour ($65,100), and asks that this figure be trebled ($195,300). A thorough review of the record does not reveal what factors were considered by the trial court in awarding each attorney $100,000.

On November 19, 1979, the trial court appointed a trustee to administer the settlement. The trustee petitioned the trial court for fees on February 8, 1980. The petition contains the trustee's estimate that he will expend 400 hours over a 3-year period, and asks $40,000. As noted above, the trial court made an award of $20,000.

• 1 The objectors first contend that the denial of Epstein's petition to intervene was error. Section 57.5 of the Civil Practice Act states that,

"Any class member seeking to intervene or otherwise appear in the action may do so with leave of court and said leave shall be liberally granted except when the court finds that said intervention will disrupt the conduct of the action or otherwise prejudice the rights of the parties or the class." (Ill. Rev. Stat. 1979, ch. 110, par. 57.5(a).)

The Historical and Practice Notes to section 57.5 refer to section 26.1 of the Civil Practice Act, and state that the procedure for intervention and the status of intervenors is controlled by that section. (Ill. Ann. Stat., ch. 110, par. 57.5, Supplement to Historical and Practice Notes, at 116 (Smith-Hurd 1979 Supp.).) Section 26.1 provides for intervention as of right in certain cases; generally, however, intervention is allowed at the discretion of the trial court, and denial of intervention will not be reversed on appeal absent a clear abuse of that discretion. (See Ill. Rev. Stat. 1979, ch. 110, par. 26.1(2); United Steelworkers of America v. Bailey (1975), 29 Ill. App.3d 392, 393, 329 N.E.2d 867.) Epstein's petition to intervene was presented on February 14, 1980. The objectors have not demonstrated that the trial court's denial of the eleventh hour petition was an abuse of discretion. The objectors' assignment of error, therefore, can only be upheld if Epstein's status was that of an intervenor as of right.

• 2 Intervention is permitted as of right,

"(a) when a statute confers an unconditional right to intervene; or (b) when the representation of the applicant's interest by existing parties is or may be inadequate and the applicant will or may be bound by an order or judgment in the action; or (c) when the applicant is so situated as to be adversely affected by a distribution or other disposition of property in the custody or subject to the ...

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