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09/06/95 CITY CHICAGO v. MARSHALL KORSHACK

September 6, 1995

CITY OF CHICAGO, A MUNICIPAL CORPORATION, PLAINTIFF-COUNTERDEFENDANT-APPELLEE,
v.
MARSHALL KORSHACK, ET AL., DEFENDANTS-COUNTERPLAINTIFFS-APPELLEES, V. MARTIN RYAN, BERNARD MCKAY, JOSEPH COGLIANESE, LOUIS EISEN, BERNARD HOGAN, PATRICIA DARCY, SYLVIA WALSH AND KATHERINE DOYLE, CLASS REPRESENTATIVES OF THE PARTICIPANTS IN THE CITY'S ANNUITANT HEALTHCARE PROGRAM, INTERVENORS-APPELLANTS-MOVANTS.



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. HONORABLE ALBERT GREEN, JUDGE PRESIDING.

The Honorable Justice Rizzi delivered the opinion of the court: Tully, J., and Cerda, J., concur.

The opinion of the court was delivered by: Rizzi

The Honorable Justice RIZZI delivered the opinion of the court:

This is an appeal by attorney Clinton Krislov from a judgment denying his petition for attorney fees as attorney for a class of intervenors, Martin Ryan, et al. (Intervenors), in a suit brought by plaintiff City of Chicago (City) against defendants Marshall Korshak, et al., as trustees of four City pension funds. We affirm.

This litigation began in 1987 when the City sued the trustees (Trustees) of its four pension funds: (1) Policemen's Annuity and Benefit Fund; (2) Firemen's Annuity and Benefit Fund; (3) Municipal Employees', Officers' and Officials' Annuity and Benefit Fund; and (4) the Laborers' and Retirement Board Employees' Annuity and Benefit Fund. In its complaint, the City alleged that State law specified the monthly amounts that the City was to raise through its tax levy for the cost of the annuitants' health care and the rest of the cost was to be borne by the annuitants who wanted coverage. The City sought both an order declaring how much the City was required to pay, and the City also sought a recovery of the large overpayments already made.

The Trustees filed counterclaims alleging that the City was obligated to continue to absorb the increasing costs of health care despite the limitations on its legal obligations as contained in the relevant statutes. The trial court dismissed the City's suit to the extent it sought a refund, but the case proceeded to adjudicate the City's prospective obligations, if any, over and above what is specified by statute. Intervenors, a group of annuitants who retired before 1987, joined the Trustees in opposing the City in the suit. The intervenors were represented by Krislov.

In June 1988, the City and the Trustees reached a settlement of the suit. The settlement provided that the City and the Trustees agreed to sponsor legislation requiring the City to absorb at least 50% of the health care costs of the annuitants. The settlement and the implementing legislation required the City to bear that obligation through 1997. At that time, if the parties have not reached a permanent agreement, the settlement terminates, but the settlement does not affect any obligations otherwise imposed by law on the City. The settlement allowed the City to increase the rates it charged most annuitants for health care coverage because the settlement increased the share of annuitants' health care costs to be borne by the annuitants themselves. Shortly after the settlement was reached, the legislature enacted legislation to implement its terms.

In the meantime, both before and after the legislature acted, the Intervenors and Krislov objected to the settlement and requested the trial court to conduct a fairness hearing to determine whether the Trustees had properly agreed to the settlement. They also sought to enjoin any increase in contributions that the annuitants were required to make toward the cost of health care. The trial court certified the Intervenors as a class, and ordered the fairness hearing requested by the Intervenors.

At the fairness hearing, Krislov presented evidence opposing the settlement, and renewed his request for an injunction of its implementation. Following the fairness hearing, Krislov again sought an injunction and moved for summary judgment against any change in the terms of annuitants' health care coverage. In his opposition to the settlement, Krislov told the trial court that the settlement would have "devastating" results and that the "Court should not allow this."

Despite Krislov's protestations and opposition, on December 12, 1989, the trial court entered an order approving the settlement, finding that the settlement was fair and reasonable and in the best interest of the class members, given the risk to the annuitants that they could lose coverage if the City prevailed in the litigation. On December 15, 1989, the trial court entered orders implementing the settlement and dismissing the Intervenors' claims.

The Intervenors appealed the trial court's approval of the settlement. On January 12, 1990, Krislov filed a motion in the appellate court for a stay of the trial court's orders pending appeal. Krislov argued that if the settlement was not stayed it would place a "substantial number of retirees either in financial hardship, on welfare or the like." He also argued that if the settlement was not enjoined it would impose "potentially ruinous increases" in the annuitants' health care costs, and that the Trustees had breached their fiduciary duties to the annuitants by endorsing the settlement. In addition, Krislov contended that the settlement was the product of a "collusion" between the City and the Trustees.

The City objected to a stay of the settlement. On February 14, 1990, however, the appellate court stayed enforcement of the trial court's orders approving the settlement and its implementation. As a result of the stay by the appellate court the City did not raise the rates that it charged the annuitants for health care coverage during the pendency of the appeal. On November 28, 1990, the appellate court affirmed the judgment of the trial court in all respects and held that the settlement should be implemented. City of Chicago v. Korshak (1990), 206 Ill. App. 3d. 968, 565 N.E.2d 68, 151 Ill. Dec. 797. The intervenors filed a petition for rehearing, a petition for leave to appeal and a petition for certiorari to the United States Supreme Court, all of which were denied.

In the interim, on January 16, 1990, Krislov filed a petition for attorney fees in the trial court for his role in the proceedings. He asked for $221,000 in fees and costs. The trial court took the matter under advisement. On January 24, 1990, however, Krislov filed two class action suits in the federal district court seeking to block the implementation of the settlement. Both of Krislov suits were dismissed, and he appealed.

After all his attempts to block and nullify the settlement failed, in May 1992, Krislov renewed and supplemented his petition for attorney fees in the circuit court. The renewed and supplemented petition (fee petition) seeks $622,000 in fees and costs. The fee petition sought fees for what Krislov did prior to the trial court's approval of the settlement and fees for Krislov's failure to nullify the settlement by appeals.

The City opposed the fee petition on the basis that Krislov is not entitled to any fee under the circumstances. The trial court entered a judgment denying Krislov's fee petition. The trial court found that there was no common fund created under which attorney fees could be charged and that the Intervenors were not prevailing parties. In addition, the trial court stated: "This court finds no logic in awarding attorney's fees to a class that on the one hand contends its efforts improved the settlement, ...


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