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11/01/96 AARON S. WOLFF v. AMPACET CORPORATION

November 1, 1996

AARON S. WOLFF, PLAINTIFF-APPELLANT,
v.
AMPACET CORPORATION, A NEW YORK CORPORATION, DEFENDANT-APPELLEE.



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS, LAW DIVISION. THE HONORABLE JOHN W. GUSTAFSON, JUDGE PRESIDING.

Rehearing Denied November 25, 1996. As Modified on Denial of Rehearing November 27, 1996. Released for Publication December 10, 1996.

The Honorable Justice Scariano delivered the modified opinion of the Court upon denial of rehearing: Hartman, P.j., And DiVITO, J., Concur.

The opinion of the court was delivered by: Scariano

The Honorable Justice SCARIANO delivered the modified opinion of the Court upon denial of rehearing:

Plaintiff Aaron S. Wolff ("Wolff"), an attorney, represented himself and three creditors in a bankruptcy proceeding and obtained a ruling allowing his claims and those of his clients against the bankruptcy estate. Defendant Ampacet Corporation ("Ampacet"), a New York corporation, was also a creditor of the bankrupt. Though he had no attorney-client relationship with Ampacet, and although it was not directly involved in the proceeding, Wolff sought to recover attorneys' fees from Ampacet on a variety of theories, the gist of which is that Ampacet was able to recover on its claim as the result of Wolff's actions, and that it would be inequitable to allow Ampacet to reap that benefit gratuitously.

The circuit court took the case on cross motions for summary judgment and rejected each of Wolff's theories of recovery as a matter of law; it therefore denied his motion for summary judgment and granted Ampacet's. This appeal followed.

Background

The salient facts of the case are undisputed. In September of 1984, Fesco Plastics Corporation ("Fesco") filed for protection under Chapter 11 of the Federal Bankruptcy Code ("the Code"). In its petition, Fesco listed Ampacet, Wolff, and a number of other creditors, all of whom were considered "deemed-filed" under the Code. As such, these creditors were not required to take any further action to present their claims in the bankruptcy court.

In October of 1985, however, the Fesco bankruptcy was converted into a Chapter 7 liquidation proceeding, and a deadline of February 6, 1986, was set for the filing of claims against the bankrupt estate. Many of the deemed-filed creditors took no action, believing that their prior status carried over into the liquidation proceeding. Among this group were Wolff and Ampacet. In April of 1987, the bankruptcy court upheld the trustee's request to bar the claims of all deemed-filed creditors who had missed the February 6 filing date. This decision would have barred Ampacet's claim permanently if no further action were taken.

Ampacet did not appeal the bankruptcy court's determination. Wolff and three other creditors (represented now by Wolff) did opt to appeal, however. Ampacet's claim was valued at $103,450.30; the claims of Wolff and the three creditors he represented ("the Lisk creditors") aggregated approximately $95,000. The Lisk creditors entered into a contingent fee agreement with Wolff, under which his fee would be a percentage of any recovery obtained by his client/creditors if he successfully revived their claims. On July 30, 1990, the U.S. Court of Appeals for the Seventh Circuit reversed the bankruptcy court and the District Court, holding that the Lisk creditors' claims were to be considered timely filed for Chapter 7 purposes ( In Re Fesco Plastics (7th Cir. 1990), 908 F.2d 240). In all of these appellate proceedings, Wolff had no direct contact with Ampacet and did not purport to represent it.

Based on the Seventh Circuit's decision, in August of 1991, the trustee reversed himself, honoring the claims of all the deemed-filed creditors of the estate, including Ampacet, Wolff and the Lisk creditors. Wolff's claim was accordingly paid in conformity with the Code, as were the claims of the Lisk creditors, and Wolff received the negotiated contingent fee from those creditors.

Ampacet had relocated during the period in which Wolff was prosecuting the appeal, however, and did not learn of the results until contacted by him. Ampacet thereafter, through attorneys it had retained, re-instituted its claim and recouped approximately $65,000 of its $103,450 claim. Wolff attempted to collect an attorneys' fee from Ampacet, as well as from other non-Lisk creditors whose claims had been revived. *fn1 Wolff's claims were rebuffed, first by Ampacet and later by the bankruptcy court. Wolff appealed the denial of his fee request through to the U.S. Court of Appeals for the Seventh Circuit, which upheld the decision on a technical ground: because the Code does not confer the power to adjudicate fee disputes between creditors, the bankruptcy court lacked authority over the claim. Wolff then filed this action in the circuit court of Cook County.

Analysis

Wolff maintains that his entitlement to a fee from Ampacet is authorized by the "common fund" doctrine or as a remedy in the nature of ...


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