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06/30/97 CHICAGO FLOOD LITIGATION (CLASS PLAINTIFFS

June 30, 1997

IN RE CHICAGO FLOOD LITIGATION (CLASS PLAINTIFFS AND CLASS COUNSEL, APPELLANTS,
v.
STANDARD MUTUAL INSURANCE COMPANY, AS SUBROGEE OF I AND M ENTERPRISES, ET AL., APPELLEES).



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

Released for Publication August 5, 1997.

The Honorable Justice Rakowski delivered the opinion of the court. DiVITO, P.j., and Tully, J., concur.

The opinion of the court was delivered by: Rakowski

The Honorable Justice RAKOWSKI delivered the opinion of the court:

This case arises out of the Chicago flood litigation in which class plaintiffs and certain opt-out plaintiffs brought an action in the circuit court of Cook County against the City of Chicago (City) and Great Lakes Dredge and Dock Company (Great Lakes) for injuries suffered as a result of the flood. See In re Chicago Flood Litigation, 176 Ill. 2d 179, 223 Ill. Dec. 532, 680 N.E.2d 265 (1997). The question in this case involves solely the issue of whether class counsel are entitled to attorney fees from the opt-out plaintiffs (appellees). Class counsel contend they are entitled to fees pursuant to the Attorneys Lien Act (770 ILCS 5/1 (West 1994)) for work performed to benefit appellees. They also contend they are entitled to attorney fees under the doctrine of quantum meruit.

The circuit court held that no attorney's lien existed and class counsel were not entitled to fees under quantum meruit. Class counsel filed a motion to reconsider, which the circuit court denied. We affirm.

I. FACTS

In April 1992, the underground freight tunnel system in the central business district of Chicago flooded. The circuit court of Cook County certified a class action against the City on November 24, 1992, and against Great Lakes on April 13, 1993, for damages and economic loss to class plaintiffs as a result of the flood. The circuit court also appointed class counsel (appellants) on November 24, 1992. At various times after class certification, the circuit court authorized some plaintiffs to opt out of the certified class. The opt-out plaintiffs are comprised mostly of insurance companies that became subrogated to the claims of class members and obtained their interests or assignments by payments of insurance claims to those class members.

On the date of the flood and soon thereafter, various plaintiffs retained their own counsel. They subsequently opted out of the class by filing notices of exclusion from the class pursuant to section 2-804(b) of the Illinois Code of Civil Procedure (Code) (735 ILCS 5/2-804(b) (West 1994)). These opt-out plaintiffs also filed their own separate complaints against the City and Great Lakes. It is not apparent from the briefs or the record when exactly all of the named appellees opted out of the class. The opt-out deadline was sometime in June or July 1995. Class counsel alleged at oral argument that some appellees opted out up to two years after class certification and that some of the opt outs were untimely. However, this argument is not substantiated by the record, class counsel has offered no specific facts in support thereof, and the issue was not raised below. Accordingly, any argument as to the propriety of the opt outs is deemed waived, and for purposes of this disposition, we assume that all appellees opted out within the set time frame. In fairness to class counsel, we also assume that class counsel conferred some benefit upon both class plaintiffs and the opt-out plaintiffs (appellees). This assumption is supported by the circuit court's comment that class counsel had conferred substantial benefits on the opt-out plaintiffs.

After appellees filed notices of exclusion but before the circuit court entered orders approving the opt outs, class counsel served notice of an attorney's lien on the City and Great Lakes claiming a lien on the interests of the opt-out plaintiffs. The City and Great Lakes then entered into settlement agreements with appellees. Beginning on November 27, 1995, appellees filed motions or petitions to adjudicate the purported attorney's lien that class counsel served on the City and Great Lakes. On January 23, 1996, class counsel filed a petition for attorney fees under the doctrine of quantum meruit.

The circuit court ruled that class counsel had no lien under the Attorneys Lien Act. The court found that class counsel did not have a written retainer agreement with the opt-out plaintiffs and, therefore, no attorney-client relationship existed. The court also ruled that class counsel were not entitled to attorney fees under quantum meruit because no common fund was created by class counsel. Rather, the fund was created solely for the opt-out plaintiffs by their independent counsel. Also, because there was no attorney-client relationship between the opt-out plaintiffs and class counsel, no recovery could be had under quantum meruit. To hold otherwise would subject the opt-out plaintiffs to paying attorney fees to both their own attorneys and class counsel and would create somewhat of an unjust enrichment in favor of class counsel.

II. ANALYSIS

A. Nature of the Attorney-Client Relationship

The issue on appeal involves the nature and extent of the attorney-client relationship between class counsel and the opt-out plaintiffs. Class counsel contend they are entitled to fees from the opt-out plaintiffs because the court's certification of the class and appointment of class counsel created an ...


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