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Cripe v. Thomas E.Leiter

October 22, 1998

ROBERTA L. CRIPE, GUARDIAN OF THE ADULT AND CONSERVATOR OF THE ESTATE OF ROBERTA A. SCHMITZ, APPELLEE, V. THOMAS E.LEITER ET AL., APPELLANTS.


The opinion of the court was delivered by: Justice Bilandic

Agenda 20-May 1998.

The question presented in this appeal is whether a client may state a cause of action against an attorney under the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act or Act) (815 ILCS 505/1 et seq. (West 1992)) based upon alleged overbilling by the attorney. The plaintiff, Roberta L. Cripe, filed an action in the circuit court of Peoria County against the defendants, Thomas Leiter and The Leiter Group, charging the defendants with, inter alia, violations of the Consumer Fraud Act. The circuit court dismissed the Consumer Fraud Act counts. The appellate court reversed. 291 Ill. App. 3d 161. We hold that the Consumer Fraud Act is not applicable to the plaintiff's claim that the defendants charged excessive fees for legal services. We therefore reverse the appellate court and affirm the circuit court's dismissal of the plaintiff's Consumer Fraud Act counts.

FACTS

The plaintiff's complaint alleges the following. August H. Schmitz, the husband of Roberta Schmitz, died on January 6, 1992, leaving two irrevocable trusts valued at approximately $583,000. Mrs. Schmitz was the sole beneficiary of the trusts and the First National Bank of Peoria was named as trustee. On February 12, 1992, Mrs. Schmitz discharged the attorney who had been their family attorney and who had drafted the trusts. Thereafter, attorney Thomas E. Leiter of The Leiter Group began representing Mrs. Schmitz in an attempt to transfer the trusts from First National Bank to South Side Trust and Savings Bank of Peoria (South Side Bank). On or about April 27, 1992, South Side Bank was appointed as successor trustee of the trusts. South Side Bank subsequently appointed attorney Leiter as the attorney for the trusts. On March 12, 1992, the plaintiff, Mrs. Schmitz's daughter and present guardian, filed a petition for appointment of guardian for disabled person in Tazewell County probate court, alleging that Mrs. Schmitz lacked sufficient capacity to make responsible decisions about her own care and the management of her estate. Mrs. Schmitz retained Leiter to defend her in the Tazewell County guardianship proceeding. This guardianship petition was ultimately dismissed on Mrs. Schmitz's motion. In December 1992, Mrs. Schmitz moved to Michigan and began living with the plaintiff. On March 22, 1993, the probate court of Midland County, Michigan, found Mrs. Schmitz to be legally incapacitated based upon the report of a physician that her condition was consistent with a progressive dementing illness such as Alzheimer's disease. A public guardian was appointed as Mrs. Schmitz's guardian and conservator. The plaintiff was subsequently appointed as successor guardian of Mrs. Schmitz by the Michigan probate court.

The plaintiff, in her capacity as Mrs. Schmitz's guardian, filed this action against Thomas Leiter and The Leiter Group in the circuit court of Peoria County on October 24, 1994. The complaint alleged that, between February 12, 1992, and June 1, 1994, South Side Bank paid $65,933.50 out of the Schmitz trusts to the defendants as fees for legal services. The complaint charged that the defendants' fees for legal services were "outrageously excessive and unreasonable and bear no relationship to the actual time spent by Attorney Leiter in allegedly representing Mrs. Schmitz as her personal attorney and as her trust attorney." As ultimately amended, the plaintiff's complaint charged the defendants with: (1) violation of the Consumer Fraud Act; (2) common law fraud; (3) breach of fiduciary duty; (4) legal malpractice; and (5) constructive fraud. Each of the counts was premised on the allegation that the defendants charged excessive and unreasonable legal fees. The complaint alleged that the defendants' overbilling caused the Schmitz trust accounts to be depleted in excess of $40,000 in order to pay the defendants' excessive legal fees.

Only counts I and VI, the Consumer Fraud Act counts, are at issue in this appeal. Count I alleged that attorney Leiter charged excessive and unreasonable fees that bore no relationship to the actual time spent by Leiter in representing Mrs. Schmitz, and listed numerous examples of allegedly excessive charges. Count I alleged that Leiter owed Mrs. Schmitz a fiduciary duty both as her personal attorney and as the attorney for the trusts. As a result of that duty, Leiter was required to charge Mrs. Schmitz "reasonable attorney's fees representing the actual time, effort, and skill required to serve as legal counsel for the Schmitz trust accounts." Count I charged that Leiter engaged in the deceptive business practice of mailing out monthly invoices which contained outrageously excessive charges for the legal services performed by Leiter and which represented charges for time not spent by Leiter in representing Mrs. Schmitz. In addition to compensatory damages, count I sought recovery of attorney fees and punitive damages. Count VI reiterated the allegations of count I against The Leiter Group, the law firm in which Leiter was a partner.

The defendants moved to dismiss the plaintiff's complaint. The circuit court granted the motion to dismiss the Consumer Fraud Act count against each defendant, pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 1992)), on the ground that the Act does not apply to legal services or the billing of those services. The plaintiff's counts alleging fraud, constructive fraud, legal malpractice and breach of fiduciary duty against each defendant remain pending in the circuit court.

The plaintiff appealed the dismissal of the Consumer Fraud Act counts to the appellate court. The appellate court determined that the Consumer Fraud Act, although not applicable to the actual practice of law, is nonetheless applicable to the "commercial aspects" of a law practice, which include billing for legal services. The appellate court therefore reversed the dismissal of the plaintiff's Consumer Fraud Act counts. 291 Ill. App. 3d 161. We allowed the defendants' petition for leave to appeal. 166 Ill. 2d R. 315.

ANALYSIS

The defendants contend that the appellate court erred in reversing the dismissal of the plaintiff's Consumer Fraud Act claims. They assert that the Act does not apply to claims arising out of the provision of legal services and that billing is a part of the provision of legal services. The plaintiff argues, on the other hand, that only claims arising out of the "actual practice of law" are exempt from the Act. She asserts that the appellate court correctly held that billing for legal services falls within the "business" aspect of the legal profession and is therefore subject to application of the Act.

The Consumer Fraud Act is a regulatory and remedial statute intended to protect consumers, borrowers and business persons against fraud, unfair methods of competition, and other unfair and deceptive business practices. Scott v. Association for Childbirth at Home, International, 88 Ill. 2d 279, 288 (1981). The Act is to be liberally construed to effectuate its purpose. Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 503 (1996). Section 2 of the Act declares unlawful the following conduct:

"Unfair *** or deceptive acts or practices, including but not limited to the use or employment of any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or omission of such material fact *** in the conduct of any trade or commerce ***." 815 ILCS 505/2 (West 1992).

Section 10a(a) of the Act provides that "[a]ny person who suffers damage as a result of a violation of this Act committed by any other person may bring an action against such person." 815 ILCS 505/10a(a) (West 1992). The elements of a claim under the Act are: (1) a deceptive act or practice by the defendant; (2) the defendant's intent that the plaintiff rely on the deception; and (3) that the deception occurred in the course of conduct involving trade or commerce. Connick, 174 Ill. 2d at 501. The plaintiff need not establish any intent to deceive on the part of the defendant because even an innocent misrepresentation may be actionable under the Act. Smith v. Prime Cable, 276 Ill. App. 3d 843, 856 (1995). The Act allows for the imposition of punitive damages and for the award of attorney fees to the prevailing party. 815 ILCS 505/10a(a), (c) (West 1992).

This court has not previously addressed the applicability of the Act to the legal profession. Our appellate court has considered this question in several cases. In Frahm v. Urkovich, 113 Ill. App. 3d 580 (1983), the plaintiffs brought a claim against their attorney under the Consumer Fraud Act claiming that the attorney's misrepresentations caused them to lose their entire investment in a real estate deal. The circuit court dismissed the consumer ...


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