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03/29/96 WINSTON & STRAWN v. CHESTER W. NOSAL

March 29, 1996

WINSTON & STRAWN, AN ILLINOIS PARTNERSHIP, PLAINTIFF/COUNTERDEFENDANT-APPELLEE,
v.
CHESTER W. NOSAL, DEFENDANT/COUNTERPLAINTIFF-APPELLANT.



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. HONORABLE LESTER D. FOREMAN, JUDGE PRESIDING.

The Honorable Justice Hoffman delivered the opinion of the court: Cahill and Theis, JJ., concur.

The opinion of the court was delivered by: Hoffman

The Honorable Justice HOFFMAN delivered the opinion of the court:

This case arose from the expulsion of the defendant-counterplaintiff, Chester W. Nosal, from the partnership of the plaintiff-counterdefendant, Winston and Strawn (hereinafter "Winston" or "the firm"). Winston filed suit seeking a declaration that Nosal's expulsion was effectuated validly under the partnership agreement and that it did not result in a dissolution of the partnership. Nosal counterclaimed for, inter alia, a declaration that his expulsion was invalid under the partnership agreement and that it operated to dissolve the partnership (count I).* The trial court granted summary judgment in favor of Winston on both its complaint and count I of Nosal's counterclaim. Nosal now appeals under Supreme Court Rule 304(a) (134 Ill. 2d R. 304(a)), contending that his expulsion (1) was effectuated under an invalidly-enacted partnership agreement; (2) was void as a breach of the partners' fiduciary duties to one another; and (3) operated to dissolve the partnership.

Winston is a large general practice law firm headquartered in Chicago. Since 1978, it has had a two-tiered partnership structure consisting of capital partners, who are compensated based upon a percentage of the firm's profits, and non-capital "income" partners who are salaried.

Nosal began as an associate with Winston in 1970, was promoted to a non-capital partner in 1977, and became a capital partner in 1984. His practice specialized in taxation and international law, and in 1982, he moved to the firm's branch office in the District of Columbia to assist in the international practice and office management there.

In March 1992, about 19 of Winston's partners received written notice from the firm's then-managing partner, Gary Fairchild, that they were being "outplaced", or discharged, from the firm, essentially for economic reasons. On April 2, 1992, Nosal received the same notice informing him of his own outplacement. One month later, when Nosal refused to leave the firm, 55 of 71 of the firm's capital partners voted to expel him from the partnership. Shortly thereafter, Nosal brought suit against Winston in the Superior Court of the District of Columbia, seeking declaratory relief and damages resulting from the expulsion. Winston then filed the instant action requesting a declaration that (1) its partnership agreement effective August 28, 1987 (1987 agreement), including the provision authorizing Nosal's expulsion, was properly enacted by the firm; (2) Nosal's expulsion was in accordance with the 1987 agreement; and (3) the expulsion did not cause a liquidation of the partnership. Nosal's District of Columbia suit was dismissed based on forum non conveniens, and he then filed a counterclaim in the instant case. Count I of the counterclaim alleged that the expulsion provision in the 1987 agreement had never been validly adopted by the firm, and that his expulsion breached the partners' fiduciary duty to him. Nosal requested a declaration that his expulsion resulted in a dissolution of the partnership.

Winston moved for summary judgment on its complaint and on count I of Nosal's counterclaim, supporting its motion in part by the depositions of partners Fairchild, Thomas A. Reynolds, and J. Michael McGarry, III. Nosal's response was supported primarily by his own deposition testimony and affidavit, and the deposition testimony of Winston partner Gary Goodman and former Winston partner Richard William Austin. Following a hearing, the trial court granted summary judgment in favor of Winston on both its complaint and on count I of Nosal's counterclaim. The court found that the 1987 partnership agreement was validly adopted, that Nosal's expulsion complied with the agreement, and that it did not contravene any duty of good faith. The court also determined based upon the 1987 partnership agreement that Nosal's expulsion did not effect a dissolution of the partnership.

On appeal, Nosal first argues that his expulsion was invalid because it was done under the 1987 partnership agreement, which was never properly adopted by the firm. Nosal maintains that the firm was still bound under the agreement as effective July 1, 1984 (1984 agreement), and that his expulsion was carried out in violation of that agreement's voting requirement.

Winston made several amendments to its partnership agreement over the years. Under the 1984 agreement, the firm was managed by the capital partners generally. All firm activity required approval by a simple majority of the capital partners, with several exceptions; one exception was for the expulsion of a partner, which necessitated a majority vote of all partners, but with the votes of capital partners entitled to greater weight than those of non-capital partners. Another exception was that any amendment to the agreement's partner-expulsion provision could only be accomplished by a two-thirds majority of all capital partners plus a majority vote of all non-capital partners. The agreement did not provide for "cause" or a hearing prior to the discharge of a partner. Finally, the 1984 agreement stated that all partners were to be permitted access to partnership books and records.

The 1987 agreement contained several changes from the 1984 agreement. Among them was the creation of an executive committee that was to have primary governing responsibility over the firm, including setting attorney compensation. The committee was to be comprised of nine capital partners, including Fairchild and Reynolds. Additionally, while most firm activity still required a majority vote by the capital partners, the partner-expulsion provision now required merely a 2/3-majority of the capital partners with no additional vote of non-capital partners. As with the 1984 agreement, the discharge of a partner required no showing of cause. Finally, the agreement provided that the "withdrawal, expulsion or death of any partner" would not terminate the partnership or the partnership accounting period.

On appeal, Nosal does not dispute that his expulsion was approved by 55 of 71 capital partners, well over the 2/3-majority required for expulsion under the 1987 agreement. However, he maintains that the firm never validly adopted the 1987 agreement and was still bound under the 1984 procedure, which required a vote of both capital and non-capital partners prior to expulsion; thus, he maintains his expulsion was invalid because it was never put to a vote of the non-capital partners. In response, Winston contends that the 1987 provision was validly enacted, but that even if it was not, there were sufficient votes to terminate Nosal even under the 1984 agreement.

Summary judgment is appropriate where the pleadings, depositions, and admissions, together with any affidavits, demonstrate that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005 (West 1992); Purtill v. Hess, 111 Ill. 2d 229, 240, 489 N.E.2d 867, 95 Ill. Dec. 305 (1986). In considering a summary judgment motion, the court's function is simply to determine whether a factual controversy exists, and if not, whether the movant is entitled to judgment as a matter of law; the court must not resolve any disputed factual matters or make any credibility determinations. Hansen v. Demarakis, 259 Ill. App. 3d 166, 168, 630 N.E.2d 1202, 197 Ill. Dec. 78 (1994). The party opposing the motion need not conclusively disprove the facts presented by the movant, but must merely show that a contrary version of events exists, thereby creating a disputed issue for trial. Yusuf v. Village of Villa Park, 120 Ill. App. 3d 533, 540-41, 458 N.E.2d 575, 76 Ill. Dec. 175 (1983). This court's review of an order granting summary judgment is de novo. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 607 N.E.2d 1204, 180 Ill. Dec. 691 (1992).

We note initially that in ruling on this issue, the trial court accepted certain of Winston's evidence as "veritable" and "credible." These are factual determinations clearly inappropriate on a motion for summary judgment. See ...


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