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O'Connor v. Asperger Caraher LLC

November 6, 2006

COZEN O'CONNOR, P.C., PLAINTIFF,
v.
ASPERGER CARAHER LLC, DEFENDANT.



The opinion of the court was delivered by: Milton I. Shadur Senior United States District Judge

MEMORANDUM OPINION AND ORDER

Cozen O'Connor, P.C. ("Cozen") brought this diversity action seeking a declaratory judgment as to its rights vis-a-vis defendant Asperger Caraher, LLC ("Aspcar") to legal fees arising from matters that various clients have transferred to Cozen from Aspcar after the latter firm's dissolution ("Transferred Matters"). To streamline this litigation, Cozen has filed a motion under Fed. R. Civ. P. ("Rule") 16 for resolution of certain issues as a matter of law.

More specifically, Cozen seeks a ruling that either according to the terms of the dissolution agreement between Aspcar's partners ("Agreement") or under quantum meruit principles Aspcar is entitled to fees from the Transferred Matters only for Aspcar's reasonable hours and expenses invested before the transfers. In response Aspcar (1) asserts multiple defenses against the enforcement of the Agreement and (2) argues for a more expansive measurement of quantum meruit fees.

For the reasons stated in this memorandum opinion and order, Cozen's motion is granted. This Court holds that Aspcar's compensation for the Transferred Matters is limited to the amounts provided for in the Agreement.

Standard of Review

Resolution of issues as a matter of law under Rule 16 is directly analogous to a Rule 56(d) proceeding in the summary judgment area--but only as to those issues, not as to the entire case (see 6A Charles Wright, Arthur Miller & Mary Kay Kane, Federal Practice and Procedure: Civil 2d §1529, at 299-301 (2d ed. 1990)). For that reason the parties' filings have conformed to this District Court's procedures as to Rule 56 motions,*fn1 and this opinion will apply the familiar Rule 56 principles to frame the legal analysis.

Those principles impose on the movant the burden of establishing a lack of a genuine issue of material fact (Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986)). For that purpose courts consider evidentiary records in the light most favorable to nonmovants and draw all reasonable inferences in their favor (Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471 (7th Cir. 2002)). But to avoid summary judgment a non-movant "must produce more than a scintilla of evidence to support his position" that a genuine issue of material fact exists (Pugh v. City of Attica, 259 F.3d 619, 625 (7th Cir. 2001)). Ultimately summary judgment is appropriate only if a reasonable jury could not return a verdict for the non-movant (Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).

Finally, as a federal court sitting in diversity this Court is charged with applying state law--in this instance Illinois law, as the parties agree--to resolve all substantive questions (M.T. Bonk Co. v. Milton Bradley Co., 945 F.2d 1404, 1407 (7th Cir. 1991)). What follows, then, is (1) a summary of the facts as viewed in the light most favorable to Aspcar, but only so far as those facts are supported by record evidence, followed by (2) an application of Illinois substantive law to those facts.

Background

Aspcar's sole shareholders have been Jeffrey Asperger ("Asperger") and Kevin Caraher ("Caraher") (C. St. ¶4). Aspcar's "Operating Agreement" confirms that Asperger was at all times the majority partner with the tie-breaking vote in all firm matters (C. St. ¶¶7-9).*fn2 In mid-October 2004 Asperger notified Caraher that he was dissolving Aspcar, and the two partners engaged in negotiations as to the terms of their severance--a negotiation that culminated in the execution of the Agreement on November 11, 2004 (A. Add'l St. ¶¶8, 10, 11; C. St. ¶6). Agreement ¶¶7 and 8 dealt with the allocation of fees from Aspcar's former client matters, including the Transferred Matters, as between Aspcar and any successor firms (C. St. ¶6):

7) ...any attorney fees recovered in a pure contingent fee (fixed or sliding scale) file shall be distributed quantum meruit in accordance with the reasonable time and hourly rates in effect on said file while the matter was being handled by Aspcar. Any future fees and expenses incurred or recovered after all hourly time and expenses invested by Aspcar have been brought current shall accrue to the firm handling the file after the date of dissolution.

8) ...any additional fees recovered on the Craig I/S files (e.g. Malkin or Sudler) shall be for the account of Aspcar until all of the hourly time and expenses incurred by Aspcar as of the date of dissolution are fully paid. Any future fees and expenses recovered after all hourly time and expenses invested by Aspcar have been brought current shall accrue to the firm handling the file after the date of dissolution.

After Aspcar's dissolution Caraher obtained employment with Cozen, and several clients who had been with Aspcar chose to bring to Cozen the Transferred Matters for which Caraher had been responsible (A. Add'l St. ¶3; C. St. ¶5). Cozen then brought this action to determine how the fees from those Transferred Matters should be allocated between itself and Aspcar (C. St. ¶5). Cozen avers that as the successor firm on the Transferred Matters it is a third-party beneficiary of the Agreement, so that the fees should be allocated between Aspcar and itself as Agreement ¶¶7 and 8 specify.

For its part Aspcar counters that the Agreement should not be enforced because in the course of negotiations Caraher made several material misrepresentations of fact about the status and value of the Transferred Matters, fraudulently inducing Asperger to enter into the Agreement (A. Add'l St. ¶¶8, 15-22, 30-32, 38). Aspcar also advances a duress argument based on Caraher's presentation of the final draft of the Agreement for Asperger's signature sometime after 9 p.m. on November 11 (A. Add'l St. ¶11). According to Aspcar, Caraher took advantage of Asperger's exhaustion from the effects of chemotherapy and trial preparation by presenting him with the Agreement when Asperger was not able to review the Agreement properly and to represent his own interests (A. Add'l St. ¶11; A. Mem. 10-12). As Aspcar has it, Caraher was motivated to misinform Asperger about the recovery value of the Transferred Matters and to take advantage of Asperger's compromised position so that he could entice Cozen to bring him on with a cherry-picked book of valuable business (A. Add'l St. ¶¶3, 4, 5, 12).*fn3

Fiduciary Relationship

Throughout its submissions Aspcar seeks to hold Caraher to a higher standard of conduct by adverting to fiduciary duties that Caraher assertedly owed to Asperger. That effort fails as a matter of law.

While all partners are each other's fiduciaries in an active partnership, Hamilton v. Williams, 214 Ill.App.3d 230, 247-48, 573 N.E.2d 1276, 1288 (2d Dist. 1991)(citations omitted) has succinctly summarized Illinois law as ...


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