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Holwell v. Zenith Electronics Corp.

November 6, 2002

JOSEPH HOLWELL, A MINOR, BY AND THROUGH HIS MOTHER AND NEXT FRIEND, DIANE HOLWELL, PLAINTIFF,
v.
ZENITH ELECTRONICS CORPORATION, DEFENDANT (ESTATE OF JOSEPH HOLWELL, A MINOR, APPELLEE; JOHN PETRULIS, PETITIONER; AND SUSAN E. LOGGANS & ASSOCIATES, P.C., RESPONDENT-APPELLANT).



Appeal from the Circuit Court of Cook County Honorable Paddy H. McNamara, Judge Presiding.

The opinion of the court was delivered by: Justice Hoffman

Upon the settlement of this case, the circuit court of Cook County entered an order which provided, in part, that attorney fees in the sum of $500,000 were to be paid to the law firm of Susan E. Loggans & Associates, P.C. (hereinafter referred to as the Loggans Firm). In a subsequent order, the circuit court directed that one-third of the fees previously awarded to the Loggans Firm be paid to the Estate of Joseph Holwell, a minor. After its motion to reconsider was denied, the Loggans Firm instituted the instant appeal.

The facts giving rise to this appeal are not in dispute. On December 28, 1988, a fire broke out in the home of Diane Holwell which seriously injured her minor son, Joseph Holwell. On January 22, 1989, Diane Holwell executed a retainer agreement, engaging John B. Petrulis, who at that time was licensed to practice law in Illinois, to represent her and her minor son in the prosecution of any claims they might have against Zenith Electronics Corporation (Zenith) and others for damages resulting from the fire. Pursuant to the terms of the retainer agreement, Holwell agreed to pay a contingency fee equal to one-third of any sums recovered. The retainer agreement also provided that the Loggans Firm would participate in representing Holwell and her son without additional fee and that Petrulis and the Loggans Firm would divide any fee earned. In a letter dated February 23, 1989, the Loggans Firm acknowledged that Petrulis would receive "one-third of the gross fee to be realized in this matter".

On February 17, 1989, the Loggans Firm filed an action in the circuit court of Cook County against Zenith on behalf of Holwell in her capacity as mother and next friend of Joseph Holwell, a minor (hereinafter referred to as the plaintiff). This action was docketed in the circuit court as case number 89 L 2143. The Loggans Firm represented the plaintiff for the next six and one-half years. During the course of a pretrial conference in June 1995, Zenith offered to settle the action for $1.5 million. Although the Loggans Firm recommended to the plaintiff that she accept Zenith's settlement offer, the plaintiff rejected the offer on the advice of Petrulis. Shortly thereafter, she discharged the Loggans Firm.

After the plaintiff discharged the Loggans Firm, Petrulis referred her to the law firm of Hofeld and Schaffner (hereinafter referred to as the Hofeld Firm). The referral agreement between Petrulis and the Hofeld Firm provided that Petrulis would receive one-third of the fee earned. On August 10, 1995, the trial court granted the Hofeld Firm leave to file its appearance on behalf of the plaintiff.

On January 7, 1997, the trial court granted the plaintiff's motion pursuant to section 2-1009 of the Code of Civil Procedure (735 ILCS 5/ 2-1009 (West 1996)), thereby allowing her to voluntarily dismiss the case docketed as number 89 L 2143. Subsequently, on January 5, 1998, the plaintiff, represented by the Hofeld Firm, filed the instant action against Zenith, which was docketed as case number 98 L 79 in the circuit court of Cook County.

On June 30, 2000, the Illinois Supreme Court suspended Petrulis from the practice of law for a period of three years.

In early December 2000, the plaintiff agreed to settle her son's claim against Zenith for $5 million, consisting of a cash payment of $3,326,188 and a guaranteed annuity with a cash value of $1,673,812. In a December 5, 2000, letter to the Hofeld Firm, the Loggans Firm claimed entitlement to "a fee in the amount of $500,000, one third of the original settlement offer of $1,500,000." On December 6, 2000, the plaintiff filed a petition seeking an order approving the settlement of her son's claim against Zenith. In that petition, the plaintiff asserted that the only distributions to be made for attorney's fees from the settlement proceeds were a $1,166,666.66 distribution to the Hofeld Firm and a $500,000 distribution to the Loggans Firm.

On December 14, 2000, the circuit court of Cook County entered an order approving the settlement reached by the plaintiff and Zenith and authorizing the plaintiff to execute releases to effectuate that settlement. In that same order, the circuit court found that legal fees in the amount of $1,666,666.66 were "fair and reasonable" and approved the distribution of those legal fees as follows: $1,166,666.66 to the Hofeld Firm and $500,000 to the Loggans Firm. Although the December 14, 2000, order stated that the action was dismissed "with prejudice," the order also provided that it would be "effective only after the entry in the probate division or circuit court of an order approving the bond or other security required to administer the settlement and distribution".

Following the entry of the December 14, 2000, order in the instant case, Diane Holwell filed a petition in the circuit court of Will County, the county in which Joseph Holwell was a resident, seeking the appointment of a guardian for the minor. In her petition, Holwell also sought the entry of an order authorizing the settlement of her son's action against Zenith and the distribution of the settlement proceeds. On February 9, 2001, the circuit court of Will County entered an order appointing Diane Holwell and the Harris Trust and Savings Bank as co-guardians of the Estate of Joseph Holwell (hereinafter referred to as the Estate) and waiving any requirement for a bond. That same day, the circuit court of Will County also entered an order approving the settlement of Joseph Holwell's claim against Zenith on the terms set forth in the circuit court of Cook County's December 14, 2000, order. The Will County order also directed certain distributions from the settlement proceeds, including the payment of $500,000 to the Loggans Firm for legal fees and the payment of $1,334,079.83 to the Hofeld Firm for legal fees and costs. The circuit court of Will County was not asked to and did not approve the payment of any attorney's fees to Petrulis on that date.

On February 23, 2001, the Hofeld Firm forwarded to the Loggans Firm a $500,000 check issued by Zenith and made payable to the Loggans Firm and Petrulis. The letter accompanying the check states that, pursuant to its referral agreement with Petrulis, the Hofeld Firm paid him one-third of the fee awarded to it. Subsequently, the Loggans Firm unsuccessfully attempted to cause the issuance of a $500,000 check payable solely to itself. Zenith did, however, issue a check in the sum of $333,333.33, payable solely to the Loggans Firm, and place the remaining $166,666.67 in an account with Virginia Surety Company.

On April 25, 2001, the Loggans Firm filed a motion in the circuit court of Cook County, asserting that it had not been paid the entire amount of fees which had been awarded to it and requesting an order directing Zenith to pay it the remaining $166,666.67. On May 14, 2001, Petrulis filed a petition in the circuit court of Cook County requesting that he be awarded the sum of $166,666.67 from the $500,000 fee awarded to the Loggans Firm for legal services he rendered to the plaintiff prior to his suspension. Petrulis amended his petition for fees twice before it came on for hearing on August 9, 2001.

Petrulis and Diane Holwell were the only witnesses at the evidentiary hearing on Petrulis' second amended petition for fees. Petrulis testified as to the time that he allegedly spent representing the plaintiff in her original and refiled actions. He acknowledged that he had filed a petition in the circuit court of Will County seeking a portion of the fees which had been awarded to the Hofeld Firm and that the circuit court of Will County granted that petition on July 11, 2001, awarding him $388,088.88 in fees. *fn1 Petrulis further acknowledged that, although he was requesting fees on the basis of quantum meruit, the fees that he sought in the circuit court of Will County and those he was seeking in the circuit court of Cook County equaled one-third of the fees awarded to the Hofeld Firm and the Loggans Firm, respectively. For her part, Holwell testified in general terms to Petrulis' involvement in the litigation and stated that she had no objection to him being awarded the fees he was seeking.

In a written order entered on September 14, 2001, the circuit court of Cook County denied Petrulis' petition for fees, finding that Petrulis had been "vastly overcompensated" for his work on the instant case as a result of the fees that the circuit court of Will County had awarded to him. The trial court also found that the petitions Petrulis filed in the circuit court of Cook County were "unquestionably over-inflated" and inconsistent and that a comparison of those petitions with the petition Petrulis filed in the circuit court of Will County revealed that he "padded his time in the Will County petition." Although the trial court found that Petrulis was not entitled to any additional fees, it went on to hold that there was "no reason to provide Susan E. Loggans & Associates with the remaining ...


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