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Pochopien v. O'Toole

June 30, 2000

DONALD J. POCHOPIEN, PLAINTIFF-APPELLANT,
v.
MARSHALL, O'TOOLE, GERSTEIN, MURRAY & BORUN, AN ILLINOIS PARTNERSHIP, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County. No. 98 CH 14889 Honorable Ronald Riley, Judge Presiding.

The opinion of the court was delivered by: Justice Hartman

Plaintiff Donald J. Pochopien appeals from the circuit court's order granting defendant Marshall, O'Toole, Gerstein, Murray & Borun's (Marshall) motion to dismiss with prejudice his verified complaint for declaratory judgment and other relief against Marshall, an Illinois law firm, involving alleged violations of Marshall's partnership agreement (Agreement).

Pochopien raises as issues on appeal whether the circuit court erred in granting Marshall's section 2-619 motion and dismissing (1) count I of Pochopien's verified complaint with prejudice because: (a) section 8-5 of the Agreement allegedly imposes a financial disincentive for Pochopien to practice law at any firm other than Marshall; and (b) Marshall selectively enforced paragraph 8-5 against Pochopien; and (2) dismissing count II of Pochopien's verified complaint with prejudice where Marshall allegedly waived its right to enforce paragraph 8-5 against Pochopien.

Pochopien's two-count verified complaint alleged facts which follow. Pochopien is an attorney licensed to practice law in Illinois. Marshall is an Illinois partnership with its principal place of business in Chicago, Illinois. On January 1, 1995, Pochopien and Marshall entered into a written contract entitled "Partnership Agreement of Marshall, O'Toole, Gerstein, Murray & Borun," a copy of which was attached to the complaint. Pochopien performed legal services for Marshall's clients pursuant to the terms of the Agreement. During that time Pochopien made various contributions totaling some $71,477 to the capital partnership account, as defined in Article VII, paragraph 7-2 of the Agreement. *fn1

On July 2, 1997, Pochopien gave Marshall 30 days' notice in writing of his intended withdrawal from the Marshall partnership in accordance with paragraph 8-2 of the Agreement.

After Pochopien's withdrawal from the partnership, Marshall withheld from him about $47,680, for the year following his departure. This amount represented a deduction for Pochopien's share of Marshall's lease obligation, which Marshall continues to withhold, on the basis that paragraph 8-5 of the Agreement allows this reduction in the amounts owed to Pochopien from his capital account. Pochopien made a demand upon Marshall to pay him the full amount of his capital account, which Marshall refused. Pochopien received distributions from Marshall on August 12, 1997 and September 12, 1997. No deduction for his proportionate share of the lease for Marshall's office space for the month of August 1997 was made. Pochopien alleges that paragraph 8-5 is void because it contravenes Rule 5.6 of the Illinois Code of Professional Conduct (Rule 5.6), as well as the public policy underlying Rule 5.6. *fn2

Pochopien further alleged that Marshall selectively enforced paragraph 8-5 against attorneys withdrawing to practice law at other law firms, but not against attorneys moving to corporations (i.e., prospective clients), using paragraph 8-5 as a restriction in fact of an attorney's right to practice law, and as a disincentive for Pochopien to practice law at any firm other than Marshall. Pochopien also alleged that in about February 1994, Marshall waived enforcement of paragraph 8-5 against departing partner, Lewis Gruber, who joined Hyseq, Inc., and in February or March 1998, Marshall allegedly waived enforcement of paragraph 8-5 against departing partner, Kevin Hogg, who joined Proctor and Gamble. Also, in about 1998, Marshall allegedly waived enforcement of paragraph 8-5 against departing partner, Cynthia Schaller, who ceased practicing law in order to enter divinity school.

In count I of his complaint, Pochopien requested that the circuit court declare his and Marshall's rights and liabilities pursuant to the Agreement; enter a finding that paragraph 8-5 of the Agreement violates Rule 5.6 and is void and unenforceable; enter an award of money damages in his favor against Marshall in an amount equal to the amount of his entire capital account without any deduction or reductions; enter an award of interest on any judgment entered in his favor against Marshall pursuant to section 2-1303 of the Code of Civil Procedure (Code) (735 ILCS 5/2-1303 (West 1996)); enter an award of costs in his favor against Marshall pursuant to section 2-701 of the Code (735 ILCS 5/2-701 (West 1996)) and any further relief deemed just and proper.

In count II, Pochopien claimed that Marshall has waived any claim to deduct any amounts under paragraph 8-5, through its actions in waiving enforcement of Agreement paragraph 8-5 against departing partners, Lewis Gruber, Kevin Hogg, and Cynthia Schaller, and through its making distributions to him for August and September without deducting any monies for his proportionate share of the lease for office space for the month of August 1997. Count II sought the same relief requested in count I, except that instead of seeking a finding that Agreement paragraph 8-5 violates Rule 5.6 and is void and unenforceable, Pochopien prayed that the circuit court enter a finding that defendant has waived enforcement of paragraph 8-5.

On January 6, 1999, Marshall moved to dismiss Pochopien's verified complaint for declaratory judgment and other relief pursuant to sections 2-615 and 2-619 of the Code (735 ILCS 5/2-615, 2-619 (West 1996) (sections 2-615, 2-619)) with a supporting memorandum. Marshall contended that Agreement paragraph 8-5 of the does not restrict Pochopien's right to practice law and therefore does not violate Rule 5.6, and affirmative matter establishes that Marshall had not waived or discriminatorily enforced paragraph 8-5 as to Pochopien.

Marshall's motion to dismiss was further supported by the affidavit of Carl Moore, Chairman of Marshall's management committee, who expressly averred: lease payments were withheld from a distribution made to Pochopien on September 17, 1997, and from subsequent monthly distributions; the reason for not deducting Pochopien's proportionate share of the firm's lease obligations from his August 1997 and September 12, 1997 distributions is that Marshall was in the process of determining the amount of those obligations and wanted to ensure that he received all amounts to which he was entitled; even after the August 1997 and September 12, 1997 distributions, Marshall retained sufficient amounts in Pochopien's capital account, plus future collections to which he would be entitled, to meet his lease obligations for one year; and, by making the August and September 12, 1997 distributions, Marshall did not intend to waive or believe it was waiving its right to enforce the lease payment obligations of paragraph 8-5.

Moore averred also that Hogg withdrew from the Marshall partnership in 1998 and became an in-house counsel for Proctor and Gamble, a Marshall client; Schaller withdrew from the Marshall partnership in 1998 and entered divinity school; Marshall did not waive paragraph 8-5 with respect to Hogg or Schaller as both Hogg and Schaller each fulfilled their one-year lease payment obligations in full, with Marshall assuming any liability of Hogg and Schaller lease obligations after the year; before Pochopien withdrew from the Marshall partnership, only one other partner had withdrawn from the partnership, Jeffrey Smith, who withdrew on June 1, 1997, who also fulfilled his lease obligations in full. Marshall assumed any liability of Smith for lease obligations after the one year.

Moore further averred that Marshall did not waive enforcement of Agreement paragraph 8-5 when another partner, Lewis Gruber, withdrew from Marshall prior to Pochopien's departure from Marshall; Gruber was a party to an earlier partnership agreement containing language substantially similar to that of paragraph 8-5; Gruber withdrew from partnership with Marshall in 1994 to become president of Hyseq, Inc., a Marshall client; in an effort to retain Hyseq, Inc. as a client and to obtain additional legal work, Marshall "made the legitimate and sound business decision not to require Gruber to make any lease payments after he withdrew from the partnership;" however, Marshall never assumed any of Gruber's liability for future lease obligations.

In his deposition, Moore testified that Marshall chose not to enforce the forfeiture provision of paragraph 8-5 against Gruber because the latter left Marshall to become president and chief executive officer of Hyseq, Inc., a "significant firm client," the arrangement with Gruber being "a quid pro quo," whereby he received his post-withdrawal distributions without a pro-rata deduction for rent but, in exchange, he remained liable subsequently as a guarantor on Marshall's office lease. According to Moore, the firm felt it had no alternative but to grant Gruber's request as to the rent obligation in light of his position with their client. On July 9, 1999, following a hearing, ...


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