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December 23, 1997


Appeal from the Circuit Court of Cook County. Honorable Kenneth L. Gillis, Judge Presiding.

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

The opinion of the court was delivered by: Rakowski

The Honorable Justice RAKOWSKI delivered the opinion of the court:

Defendant, Joseph Serfecz, owned certain real estate in Elk Grove Village (Village), upon which the Village commenced a condemnation action. As a result of other problems involving the property, defendant filed a federal civil rights suit (federal suit) against the Village and others. Defendant hired plaintiff, Lynda Khan, to prosecute the federal suit. He entered into a contingent fee agreement with plaintiff that provided she would receive 25% of any recovery in the federal suit. The contract provided, however, that if defendant dismissed the federal suit, plaintiff would not receive the contingent fee. Likewise, it provided that if defendant settled any other suit, plaintiff was not entitled to the contingent fee. Defendant settled the condemnation action for $6,150,000. As part of the settlement, defendant agreed to dismiss the federal suit. Plaintiff filed the instant suit, contending she was entitled to a contingent fee. Defendant filed a motion for judgment on the pleadings pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 1996)). The trial court granted defendant's motion and plaintiff appeals.

The issue is whether the condemnation settlement also constituted a settlement of the federal suit. We reverse and remand because we find that a question of fact exists as to whether the settlement of the condemnation action constituted a settlement of the federal suit.


Defendant was the owner of a shopping center in Elk Grove Village. In 1994, as a result of problems with a tenant, Jewel Foods, defendant filed an antitrust action against Jewel Foods and others. The Village threatened to condemn defendant's property if he did not drop the suit. At defendant's request, plaintiff filed a civil rights suit in the federal district court against the Village and various officials of the Village based on their acts of interfering with defendant's right to seek redress for Jewel Foods' violations. When the Village agreed not to condemn defendant's property, he voluntarily dismissed the federal suit. Nonetheless, in January of 1995, the Village instituted condemnation proceedings. After eight months of unsuccessful negotiations with the Village, defendant asked plaintiff to refile the federal civil rights suit against the Village. At this time, defendant signed a "retainer and contingency contract for legal services" that provided:

"(a) Fixed Fee: $70,000.00 total. ***

(b) Contingency: Lynda J. Khan & Associates will receive twenty-five per-cent (25%) of amounts recovered, after deducting $70,000.00 to be returned to the client. This applies solely to the settlement of this case; settlement of any other litigation does not apply to this contingency agreement.

The undersigned agrees not to make any settlement of this case except through said attorney and with the same distributed in accordance herewith.

The settlement of this case and the continued prosecution of this case is to be determined by the undersigned. If the undersigned decides to dismiss this case all that will be owed to the Law Offices of Lynda J. Khan & Associates is the amount paid by the undersigned to the date that this litigation is dismissed."

Plaintiff refiled the federal suit. According to plaintiff, at all times, defendant encouraged her to proceed with the suit and denied there was to be any settlement of it. However, in March of 1996, the Village attorneys advised plaintiff that settlement negotiations were underway in the condemnation action that involved defendant's agreement to dismiss the federal suit.

On May 1, 1996, a final order was entered in the condemnation action. The settlement was for $6,150,000. As part of that settlement, the order provided that: (1) prior to deposit of the compensation, defendant was to provide the Village with a signed stipulation for dismissal of the federal suit; (2) within 24 hours of the deposit of the compensation, defendant would dismiss the federal suit; and (3) the stipulation and dismissal order were not to be entered prior to disbursement. Defendant also signed a release and covenant not to sue. It provided that, for good consideration, defendant agreed not to pursue further litigation against the Village and various other individuals and entities, and he further agreed to dismiss the pending federal suit. Plaintiff received no additional attorney fees as a result of the condemnation settlement and filed the instant suit against defendant. In count I of her complaint, plaintiff alleges breach of contract based on the fact that defendant settled the federal suit as part of the condemnation proceeding and, therefore, she avers she is entitled to 25%. In count II, plaintiff alleges fraud based on the fact defendant misrepresented his intent to prosecute the federal suit where he in fact only hired her to obtain a more favorable settlement in the condemnation proceeding. She also avers that defendant negotiated a settlement of the federal suit without her knowledge or involvement, contrary to the provisions of the contingency agreement.

Plaintiff attached to her complaint, inter alia, a copy of the contingency agreement, a copy of the order entered in the condemnation proceeding, and a copy of the release and covenant not to sue signed in the condemnation action. ...

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