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Wegner v. Arnold

June 30, 1999

SHARON F. WEGNER, ADMINISTRATOR OF THE ESTATE OF BRUCE E. WEGNER, DECEASED, PLAINTIFF-APPELLEE,
v.
BRIAN M. ARNOLD, DEFENDANT (JAMES A. HAGSTROM, PETITIONER-APPELLANT).



Appeal from the Circuit Court of McHenry County. No. 96--LA--288 Honorable James C. Franz, Judge, Presiding.

The opinion of the court was delivered by: Justice Thomas

JUSTICE THOMAS delivered the opinion of the court:

The petitioner, James A. Hagstrom, filed a petition for attorney fees after the settlement of a wrongful death case filed by the plaintiff, Sharon F. Wegner (Mrs. Wegner), as administrator of the estate of the decedent, Bruce E. Wegner, against the defendant, Brian M. Arnold. The trial court awarded Hagstrom $7,000 in attorney fees, which covered his hourly fee for the time he spent working on the case up to the date of his discharge on August 28, 1997, by the client, Mrs. Wegner. Hagstrom appeals, contending that the trial court should have awarded him one-third of the $100,000 settlement as his quantum meruit under Rhodes v. Norfolk & Western Ry. Co., 78 Ill. 2d 217 (1979), because he was discharged two days after defense counsel recommended to the defendant's insurance company that the case be settled for the policy limit of $100,000.

The record reveals that on January 13, 1993, at approximately 10:30 p.m., the decedent was walking along a roadway when he was struck from behind by an automobile and fatally injured. Shortly after the accident, the decedent's wife, Mrs. Wegner, contacted attorney Hagstrom, who agreed to represent her in opening a probate estate and in investigating the accident. Mrs. Wegner agreed to pay Hagstrom a $1,800 retainer fee and an hourly fee of $140 per hour in connection with those services. On September 16, 1996, Mrs. Wegner entered into a contingent fee agreement with Hagstrom in connection with the filing of a wrongful death and survival action against the driver of the vehicle that struck her husband.

That agreement provided in part:

"In consideration of all legal services to be rendered in this cause, claimant agrees to pay and does hereby assign as a lien to the attorney, the sum of one-third (1/3) of the gross amount recovered through settlement, suit or trial."

By letter dated August 28, 1997, Mrs. Wegner terminated Hagstrom as her attorney and notified him that the law firm of Pappas, Power, and Marcus (the successor attorneys) would be representing her in her lawsuit. She also requested that Hagstrom send her file to her new attorneys. On August 29, 1997, Hagstrom sent Mrs. Wegner a letter stating that he had a lien on the file and a right of quantum meruit in the event of discharge. Accompanying the letter, he sent an itemized statement in the amount of $6,355, showing that he spent 53 hours on the case from February 2, 1996, through March 29, 1997. The statement also itemized the various costs advanced and showed a credit for the previously paid $1,800 retainer. Thereafter, the amount requested was not paid by Mrs. Wegner.

On September 30, 1997, the successor attorneys filed a motion for substitution of counsel and to compel the transfer of client materials. In response, Hagstrom filed a response to the motion to compel and a counterclaim for attorney fees sounding in quantum meruit, asserting that he had retained a lien. Thereafter, the matter was continued, and on January 6, 1998, Hagstrom filed a verified motion asserting that he had an equitable lien and that he was entitled to an award of attorney fees in quantum meruit in the amount of one-third of the funds tendered to the plaintiff by the defendant in settlement of the case. In his amended petition, Hagstrom alleged that, two days before Mrs. Wegner terminated Hagstrom, the defendant's attorney, Jeffrey T. Zucci, recommended to the defendant's insurer, Allstate Insurance Company, that it offer the $100,000 policy limit in settlement of the case. The amended petition further alleged that Hagstrom had no knowledge of defense counsel's settlement recommendation until the court call on September 30, 1997, when Zucci informed him that the recommendation had been made right after the first scheduled depositions were taken on August 25, 1997, and that the actual offer of settlement would be forthcoming shortly. In support of his amended petition, Hagstrom attached the affidavit of attorney Zucci, which stated that on November 17, 1997, he made a formal offer of $100,000 to Mrs. Wegner's successor attorneys to settle the case. He further stated in his affidavit that his offer to settle was predicated on the pleadings, investigation, discovery, and depositions occurring in the case on or prior to August 25, 1997. Zucci noted that after he made the recommendation to settle on August 26, 1997, the following steps were taken: he prepared deposition summaries, which he completed on October 1, 1997; Allstate reviewed the summaries in light of Zucci's recommendation; and, finally, Allstate conveyed the authority to Zucci to make the settlement offer.

On February 6, 1998, the successor attorneys filed a response to Hagstrom's verified amended petition. The response and accompanying affidavits of Mrs. Wegner and her attorneys indicated that Mrs. Wegner terminated Hagstrom because she had lost trust in his ability in that attorney Hagstrom did not know the policy limit of the insurance coverage at issue, that he fell asleep during her deposition, and that he failed to object when the opposing attorney asked her questions at the deposition that she considered to be of a private nature.

On February 25, 1998, Hagstrom filed a verified reply to the successor attorneys' response to the fee petition. Therein, he explained that he knew the policy limits, and, although the actual policy was not produced at the time of Mrs. Wegner's deposition, there was no question that it would be available. In his verified reply, attorney Hagstrom either rebutted or gave adequate explanations for the allegations in Mrs. Wegner's response, noting that the real reason for his termination was due to a misunderstanding over Mrs. Wegner's deposition testimony. Hagstrom attached a second affidavit from attorney Zucci to his reply. That affidavit stated that Zucci had canceled future depositions in the case that had been scheduled for November 6, 1997, because he already had recommended that the policy limit of $100,000 be paid. Zucci further stated that he first became personally aware on September 22, 1997, that Mrs. Wegner had retained new counsel. Zucci also stated in his second affidavit that from the inception of the case and at all times thereafter attorney Hagstrom knew that the applicable policy limits in the case were $100,000 per person and $300,000 per occurrence.

Following a hearing, the trial court awarded attorney Hagstrom $7,000 in attorney fees and costs. In so doing, the court found that Rhoades v. Norfolk & Western Ry. Co., 78 Ill. 2d 217 (1979), was inapplicable and therefore Hagstrom was not entitled to a one-third percentage of the settlement proceeds.

On appeal, Hagstrom first argues that the trial court abused its discretion in not awarding him one-third of the settlement proceeds under a quantum meruit theory of recovery.

Under Illinois law, a client may discharge his attorney at any time, with or without cause. Rhoades, 78 Ill. 2d at 227-28. When a client terminates an attorney working under a contingent-fee contract, the contract ceases to exist and the contingency term, whether the attorney wins, is no longer operative. In re Estate of Callahan, 144 Ill. 2d 32, 40 (1991). A discharged attorney is entitled to be paid on a quantum meruit basis a reasonable fee for services rendered before discharge. Rhoades, 78 Ill. 2d at 230. Under the theory of quantum meruit, the trial court is literally to award the attorney " 'as much as he deserves.' " Kannewurf v. Johns, 260 Ill. App. 3d 66, 74 (1994), quoting Lee v. Ingalls Memorial Hospital, 232 Ill. App. 3d 475, 478 (1992). The trial Judge has broad discretion in matters of attorney fees due to the advantage of close observation of the attorney's work and the trial Judge's deeper understanding of the skill and time required in the case. Kannewurf, 260 Ill. App. 3d at 74. In making its determination, the trial court should assess all of the relevant factors, including the time and labor required, the attorney's skill and standing, the nature of the cause, the novelty and difficulty of the subject matter, the attorney's degree of responsibility in managing the case, the usual and customary charge for that type of work in the community, and the benefits resulting to the client. Kannewurf, 260 Ill. App. 3d at 74. In cases in which an attorney who has done much work is fired immediately before settlement is reached, the factors involved in determining a reasonable fee would justify a finding that the entire contract fee is the reasonable value of services rendered. Rhoades, 78 Ill. 2d at 230.

In the present case, attorney Hagstrom argues that he did "much work" in this case, he was fired immediately before settlement, and the result obtained was entirely due to his efforts. He maintains that under these circumstances Rhoades indicates that the one-third contract amount was the reasonable value of the services he rendered for his client. In response, Mrs. Wegner's successor attorneys define the phrase "much work" from Rhoades as meaning more than 200 hours of work and argue that the language relied upon by Hagstrom from Rhoades means only that, if Hagstrom had done more than 200 hours of work and the client ...


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