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Spiegel v. Continental Illinois National Bank

May 13, 1986


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division, No. 84 C 8255- Marvin E. Aspen, Judge.

Author: Coffey

Before BAUER and COFFEY, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

COFFEY, Circuit Judge. The district court dismissed Marshall C. Spiegel's ("Spiegel") civil RICO action*fn1 on the grounds of res judicata and for failing to state a claim, Spiegel appealed. We affirm.


Marshall Spiegel, the plaintiff-appellant in the present case, filed three separate lawsuits against the defendants-appellees herein, arising out of a dispute over the defendants' management of a trust established by the grantor Oscar Spiegel for the benefit of his son, Marshall. For convenience, we shall refer to Spiegel's initial action filed against the defendants-appellees in the Circuit Court of Cook County, Illinois as the "state court litigation." Spiegel subsequently filed two lawsuits in the United States District Court for the Northern District of Illinois. Spiegel's federal actions shall hereinafter be referred to as "Spiegel I" and "Spiegel II." the present appeal is from the district court's dismissal of Spiegel II.

State Court Litigation

In 1972, Oscar Spiegel, Marshall Spiegel's father, established a trust naming Marshall as the sole income beneficiary*fn2 and naming an aunt of Marshall's and the continental Illinois National Bank as trustees. Oscar Spiegel died in 1973. The trust agreement provided that Marshall would become a trustee upon reaching the age of 25. Upon turning 25 in 1981, Spiegel, desiring to act as sole trustee, removed his aunt as trustee,*fn3 and also attempted to remove Continental. Continental contested Marshall's removal of it as a trustee, and refused to turn over the trust assets to the plaintiff pursuant to its interpretation of the trust agreement. They contended that the language of the trust required a qualified corporate trustee.*fn4 Spiegel filed a replevin action in the Circuit Court of Cook County requesting the court to order Continental to relinquish its custody of the trust assets. Continental responded with the filing of an interpleader of action in the Cook County Circuit Court seeking a determination of whether the trust agreement required a corporate trustee. The two suits were consolidated in the Circuit Court and Spiegel filed a counterclaim in the consolidated action in the Circuit Court alleging that Continental had breached its fiduciary duty to him. The Circuit Court, after a hearing, ruled that the trust agreement not only required a corporate trustee, specified its duties and further ruled that Marshall Spiegel could not act as the sole trustee. The court went on to direct to continue as corporate trustee until such time as Spiegel selected and a qualified successor corporate trustee agreed to assume the trustee's duties.*fn5 Spiegel appealed the decision of the Circuit Court to the Illinois Appellate Court, who affirmed, and the Illinois Supreme Court denied Spiegel leave to appeal. The record fails to reflect whether Spiegel's counterclaims alleging a breach of fiduciary duty have been adjudicated in the Illinois State Court to date.

Spiegel I

In June of 1983, while Spiegel's appeal was pending in the Illinois State Court system, he filed a complaint in the United States District Court for the Northern District of Illinois individually as beneficiary of the Oscar Spiegel trust and also as trustee of the Oscar Spiegel trust, and as a "representative of a class of persons similarly situated." (Spiegel I) In this complaint (Spiegel I) Spiegel alleged that the defendants, continental Illinois National Bank, Robert Paulsen, Samuel Hunt, Charles R. Hall, and Edward Bottum (Continental employees), had engaged in a pattern of racketeering activity in violation of 18 U.S.C. ยง 1962(c) and were liable for treble damages under RICO. Spiegel's RICO claim alleged that Continental coverted trust funds to its own benefit in failing to invest the trust income promptly (trust income was transferred to principal on a quarterly basis) and in using the trust income for Continental's benefit prior to transferring the trust income to principal. According to Spiegel, the quarterly financial statements Continental mailed to all trust beneficiaries were fraudulent in that they failed to disclose that Continental received profits from its use of the uninvested trust income. The plaintiff also alleged that when he inquired about Continental's policy regarding the investment of trust income, the defendant Robert Paulsen, the Spiegel account executive and a trust officer at Continental, sent a letter to Spiegel dated June 10, 1982, in which he fraudulently misrepresented the applicable regulations of the Comptroller of the Currency and the laws of the State of Illinois in stating, "We have been prohibited from investing income cash by applicable law and regulation, unless it is first transferred to principal by terms of the trust document."

After the filing of Spiegel I in the U.S. District Court, the parties exchanged correspondence dealing with the pending state court litigation. At this time, while Spiegel's appeal was pending in the state court, Spiegel directed Continental to transfer the assets of the trust to the First National Bank of Highland Park ("Bank of Highland Park"), informing Continental that they would act as the qualified corporate successor trustee. Continental agreed to transfer the assets, petitioned the circuit court to be reimbursed from the trust assets for the attorneys' and trustee's fees incurred in litigating the question of the necessity of a corporate trustee. On June 29, 1983 the Cook County Circuit Court denied Continental's petition on the grounds that since the case was on appeal to the Illinois Appellate Court they had lost jurisdiction over the subject matter and were thus unable to decide the question of Continental's entitlement to attorneys' fees. On July 1, 1983, Continental deducted some $40,409.31 of the $61,138.58 it claimed in fees and expenses from the trust assets before the transfer to the Bank of Highland Park. An attorney for Continental, Scott Davis ("Davis"), sent a letter dated July 13, 1983, to Spiegel's lawyer discussing, inter alia, Continental's deduction of the $40,409.31 claimed as fees and expenses. The July 13 letter read in part:

"You asked in your letter about the disposition of the Albuquerque, New Mexico municipal bond due on July 1, 1983. That maturing bond was collected on July 1, 1983 and the proceeds credited to the Trust's account. Continental will shortly send a check or (or checks) to (the Bank of Highland Park) and Marshall Spiegel, for the Trust's cash as of the date the check or checks are mailed. (if any dividends are collected on the Trust's securities (other than municipal bonds) prior to their reregistration and transfer, we will send those dividends as well. We will also send the amount collected for the coupon on the Oregon State bond.) However, much of the Trust's cash was used to pay some of Continental's attorneys; and trustees' fees and expenses. Continental will shortly send to Marshall Spiegel a final cash statement showing the amount so used.

We do not expect you to agree that this payment of fees and expenses was proper. On the other hand, we believe that Continental is (and will in the future be) entitled to receive from the Trust's assets substantially more than the amount already taken for fees and expenses. We intend to promptly file with the Chancery Court a petition covering fees and expenses. This is a matter that ultimately must be decided by (the Cook County Circuit Court)."

Two months later, on September 13, 1983, Davis sent another letter to Spiegel's counsel and William Eifrig, an officer of First National bank of Highland Park that, in addition to discussing various matters regarding the transfer of the trust assets, restated Continental's position on fees:

"As noted in Continental's June 29, 1983 motion for approval of its account and for payment of fees and expenses and its Fee Petition of September 13, 1983, (copies of which are enclosed to Mr. Eifrig), the Trust owes Continental a substantial amount of attorneys' fees and expenses. As of June 6, 1983, the total amount of attorneys' and extraordinary trustees' fees and expenses incurred by Continental was $102,881.65; of this amount, Continental was entitled under Illinois law to receive immediately $61,138.58. On July 1, 1983, Continental deducted from the Trust's assets $40,409.31 for fees and expenses, which was substantially less than the $61,138.58 it was entitled to receive immediately as of June 6, 1983. These deductions were reflected in the cash statements sent by Robert Paulsen to Mr. Eifrig on July 19, 1983.

As the Fee Petition reflects, there has been extensive activity in the state and federal litigation since June 6, 1983. Continental has incurred additional attorneys' fees and expenses of $66,375.60 from my firm alone from the period from June 7, 1983 through August 18, 1983. Continental intends to use every means at its disposal to recover these amounts, as well as the unpaid amount of $62,472.34 that it previously incurred. The total amount of unpaid fees and expenses stands as of August 18, 1983 at $128,847.94.

For the reasons set forth in Continental's June 29 motion and September 13 Fee Petition, Continental is presently entitled to be reimbursed from the Trust for $53,917.07 in fees and expenses and is very likely to be entitled to the remaining $74,930.87 in unpaid fees and expenses at the close of the litigation between Marshall Spiegel and Continental. Continental demands that the $128,847.94 which it has incurred in fees and expenses and for which it has not been paid be ...

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