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Shapo v. Tires 'n Tracks

December 18, 2002

NATHANIEL S. SHAPO, PLAINTIFF-APPELLEE,
v.
TIRES 'N TRACKS, INC., DEFENDANT-APPELLANT,



Appeal from the Circuit Court of Cook County. Honorable John G. Laurie, Judge Presiding.

The opinion of the court was delivered by: Presiding Justice South

Unpublished

The underlying lawsuit arises out of a self-insured workers' compensation fund, Back of the Yards Neighborhood Council Risk Management Association, Inc. (BYRMA), which became insolvent. The Director of Insurance of the State of Illinois was affirmed by the circuit court as statutory liquidator. Defendant, Tires 'N Tracks, became a part of the self-insured pool beginning in 1997. Plaintiff, Nathaniel Shapo, the Director of Insurance of the State of Illinois, acting solely in his capacity as statutory and court-affirmed liquidator of BYRMA, assessed all members of the pool, including defendant, additional premiums necessary to pay the outstanding workers' compensation claims. Defendant failed to pay the additional premium, and plaintiff subsequently filed suit against it.

Defendant retained the law firm of Lord, Bissell & Brook to represent it in the underlying litigation. During the course of the litigation, the parties engaged in ongoing settlement negotiations. On May 24, 2001, the circuit court entered an order dismissing the underlying lawsuit, with prejudice, pursuant to a settlement agreement signed by defendant's attorney, David Seghetti, retaining jurisdiction to enforce the terms of the settlement agreement.

On May 24, 2001, Aaron Cohen, vice president of Tires 'N Tracks, and son of Charles Cohen, the president of Tires 'N Tracks, made various modifications to the settlement agreement and faxed it to Kevin McJessy, an attorney at Lord, Bissell & Brook. Upon receiving the fax, an attorney at Lord, Bissell & Brook called Aaron Cohen and informed him that the settlement agreement had already been agreed to by his father.

On July 16, 2001, plaintiff filed a motion to enforce the terms of the settlement agreement after failing to receive premiums from defendant. Defendant discharged Lord, Bissell & Brook and retained new counsel with the firm of Stern, Holstein, Zimmerman & Hanson. The trial court entered an order allowing defendant to retain new counsel but refused to allow the former counsel to withdraw its appearance. The court also gave plaintiff leave to file an amended motion to enforce the terms of the settlement agreement.

Plaintiff filed an amended motion to enforce the terms of the settlement agreement. Thomas Zimmerman filed his appearance as attorney for defendant and its combined response to plaintiff's amended motion to enforce the terms of the settlement agreement and a motion to vacate the court order entered on May 24, 2001. In its motion to vacate, defendant argued that the settlement agreement was void and unenforceable because its counsel lacked authority to enter into it.

Plaintiff issued subpoenas to defendant's former counsel with Lord, Bissell & Brook, Kevin McJessy and David Seghetti. The subpoenas were served on August 14, 2001, with the amount paid for witness and mileage fees.

Defendant filed a motion to quash the subpoenas. In its motion, defendant asserted that plaintiff failed to provide copies of the subpoenas to defense counsel; that the subpoenas failed to comply with Illinois Supreme Court Rule 237 (166 Ill. 2d R. 237); and that the testimony and documents sought in the subpoenas were work product and violated defendant's attorney-client privilege.

Alternatively, defendant moved to conduct discovery concerning the testimony and documents to be expected from McJessy and Seghetti, its former counsel, and to restrict the scope of the information and documents sought in the subpoenas on the basis of the work-product doctrine and attorney-client privilege.

The trial court denied defendant's motion to quash the subpoenas and to conduct discovery and ruled that the attorney-client privilege had been waived. The court further ordered that it would limit the testimony of the subpoenaed attorneys as narrowly as possible to the specific issue with respect to the attorneys' authorization, or lack thereof, to settle the case. The court then permitted defendant's former attorneys to testify at the hearing.

McJessy testified that in the underlying case the parties exchanged settlement agreements which contained various terms and general releases. The plaintiff in the underlying case refused to agree to release certain claims that it had as a matter of statutory right under Illinois law. The parties continued to negotiate until the arbitration date neared. According to McJessy, on or about May 22, 2001, defendant eventually agreed to the provision during a telephone conversation, which included him, Seghetti and Aaron and Charles Cohen. Based upon that conversation wherein the Cohens agreed to the terms of the settlement, a formal agreement was drafted incorporating the terms of that agreement, and a copy was sent to the defendant for signature.

McJessy further testified that he waited for the Cohens to return the signed agreement to him, but he never received it. McJessy's notes of the telephone conversation wherein the Cohens agreed to the terms of the settlement were submitted as an exhibit. When the case came up for hearing on May 24, McJessy still had not received a signed copy of the agreement, so Seghetti signed on behalf of the client, defendant, and the case was dismissed. He received a fax from Aaron Cohen either later on the afternoon on May 24 or the next day. After receiving that fax, he spoke with Seghetti about it and asked him to call the Cohens. On or about May 30, he forwarded a copy of the agreement to Tire's 'N Tracks for its signature so that it would have one on file.

Seghetti testified that he had several telephone conversations with Charles Cohen concerning the contents of the settlement agreement, specifically the issue of the waiver of plaintiff's statutory rights. He informed Charles Cohen that either they would settle the case or proceed to arbitration. Seghetti testified that Cohen stated to him that the language in the proposed agreement was acceptable and to proceed with settlement.

Seghetti clarified that the telephone conversation between the lawyers and the Cohens which McJessy referred to in his earlier testimony occurred prior to his conversation with Charles Cohen. When McJessy informed him of the fax from Aaron Cohen, he called Aaron Cohen and informed him that the language he struck on the faxed copy of the settlement had already been agreed to by his father. Seghetti testified that Aaron Cohen told him that he would speak with his father and get back to him, but he never did. He never spoke with either Aaron or Charles Cohen again.

Charles Cohen testified that he never gave authority to either Seghetti or McJessy to enter into the settlement agreement.

Aaron Cohen testified that he never gave Seghetti or McJessy authorization to enter into a settlement agreement with plaintiff even though he had the authority to participate in and ...


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