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06/30/95 GEORGE J. MURGES AND GEORGE J. MURGES AND

June 30, 1995

GEORGE J. MURGES AND GEORGE J. MURGES AND ASSOCIATES, LTD., AN ILLINOIS PROFESSIONAL CORPORATION, PLAINTIFFS-APPELLEES, CROSS-APPELLANTS,
v.
JOHN T. BOWMAN AND LANE ALLAN CORDAY, DEFENDANTS-APPELLANTS, CROSS-APPELLEES.



Appeal from the Circuit Court of Cook County. Honorable Thomas J. O'Brien, Judge Presiding.

Rehearing Denied September 29, 1995. Petition for Leave to Appeal Denied January 31, 1996.

The Honorable Justice McCORMICK delivered the opinion of the court: Scariano, P.j., and Hartman, J., concur.

The opinion of the court was delivered by: Mccormick

The Honorable Justice McCORMICK delivered the opinion of the court:

Defendants John T. Bowman and Lane Allan Corday appeal from a preliminary injunction entered against them in this lawsuit which arose out of the breakup of the law firm of Murges, Bowman & Corday (MBC) (now nown as plaintiff, George J. Murges and Associates, Ltd.). We affirm.

Defendants removed client files from MBC's offices when they quit the firm in December 1991. In February 1992, the trial court imposed a temporary restraining order (TRO), which required defendants to deposit all fees earned on the disputed files into an escrow account. On July 23, 1992, the court appointed a receiver to administer the escrow and modified the TRO to permit distribution of some of the fees. The trial court also indicated that it would enter a preliminary injunction delineating the responsibilities of the receiver. Before it could do so, defendants appealed, and we affirmed the modification of the TRO and the appointment of the receiver. ( Murges v. Bowman (1993), 254 Ill. App. 3d 1071, 627 N.E.2d 330, 194 Ill. Dec. 214 (Murges I).) After our mandate issued, the trial court entered the preliminary injunction spelling out the duties of the receiver and, again, modifying the terms of the escrow. Defendants have filed another interlocutory appeal. Plaintiffs have cross-appealed.

From 1984 until 1992, plaintiff George J. Murges and defendants worked together as MBC, a professional corporation of which Murges was the owner. MBC specialized in workers' compensation claims and practiced primarily before the Illinois Industrial Commission. On December 30, 1988, Murges suffered a stroke. Murges returned to work part-time in the fall of 1989. Defendants handled almost all of MBC's work during Murges' absence and after his return. By late 1991, defendants became dissatisfied with their situation at MBC and told Murges that they wanted to buy MBC from him. However, no agreement on a purchase price could be reached.

On December 30, 1991, defendants decided to leave MBC. They did not tell Murges, who had left for a Florida vacation on January 3, 1992. During Murges' absence, defendants made arrangements to set up a new firm and they prepared a form letter to send to clients of MBC informing the clients of the dissolution of the firm.

On January 18, 1992, Bowman called Murges in Florida and informed him that defendants had resigned as officers, directors, and employees of MBC. They left letters of resignation on Murges' desk. On the following Saturday, defendants took the files of all 660 MBC clients to their new offices. The new firm sent letters to all 660 clients requesting a designation of attorney. Most of the clients signed the forms designating defendants as their attorneys. On January 20, 1992, Murges returned to MBC's now empty offices.

On January 23, 1992, Murges and MBC filed a complaint seeking an injunction directing defendants to return the files and precluding defendants from soliciting MBC's clients. Murges and MBC also sought recovery of legal fees earned for work on the files and tort damages for conversion, tortious interference with business relationships, and breach of fiduciary duty. At defendants' request, Murges changed the name of MBC to George J. Murges and Associates, Ltd., which substituted as co-plaintiff.

Following a contested hearing the trial court entered a TRO, ordering defendants to deposit, in a special bank account, all settlement amounts and awards received for work on files taken from MBC's offices. Only client awards, costs, and attorney referral fees were to be distributed from the account. No one was entitled to withdraw attorney fees.

On February 10, 1992, the court modified the TRO pursuant to an agreement between the parties. Under the agreement, defendants retained the files of MBC's former clients who had sent letters designating defendants as their new attorneys. There were more than 400 such files. Defendants delivered to Murges all remaining files, but Murges agreed not to solicit the clients who had made no designation of attorney in response to defendants' letter. By order dated June 24, 1992, the court again modified the TRO to permit defendants and plaintiffs each to withdraw 25% of the special fund, while the fund retained the remaining 50%. The court also directed the parties to distribute future receipts in the same proportion.

The trial court held a hearing on the request for a preliminary injunction on May 19, 1992. At that time, the parties stipulated that MBC was a corporation properly registered with the Secretary of State; that Murges was designated as president of the corporation; that Bowman was secretary; and that Corday was treasurer. The parties further stipulated that Murges owned 100% of the outstanding stock. However, Murges later admitted during his testimony that no MBC stock had ever been issued. Murges also admitted that he had presented defendants to clients as his "partners."

On July 23, 1992, the trial court issued its findings in a "Memorandum of Opinion." The trial court found that MBC was formally a professional corporation in which the parties conducted themselves, to some extent, as partners. The court found that defendants had breached their fiduciary duties to the corporation by removing the client files when they left MBC and by sending notices to the clients (including the designation of representation forms) regarding their withdrawal from the firm and the firm's dissolution. The court appointed a receiver to administer the previously established escrow account. The court enjoined the distribution of any funds from the escrow because it concluded that "based on Defendants' past [i.e., fraudulent] conduct, *** [this court] cannot assure itself that the monies collected from the settlements or awards of ...


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