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Pedersen and Houpt, P.C. v. Summit Real Estate Group

September 28, 2007


Appeal from the Circuit Court of Cook County, Illinois, County Department, Law Division. No. 06 L 8078 Honorable Bill Taylor, Judge Presiding.

The opinion of the court was delivered by: Justice Joseph Gordon

Published opinion

Plaintiff-appellant Pedersen & Houpt, P.C. (P&H), a law firm, brings this interlocutory appeal pursuant to Illinois Supreme Court Rule 306(a)(7)*fn1 from the trial court's order disqualifying it from representing itself in a lawsuit against its former clients for unpaid attorney fees and costs. For the reasons that follow, we reverse the trial court's order.


On August 1, 2006, P&H filed a complaint for recovery of legal fees owed by the defendants for legal services performed on their behalf. The defendants named in the complaint are Summit Real Estate Group, LLC (Summit RE); Summit Development Group, LLC (Summit Development); Main Street Village West-Part 1 (Main Street West); Timothy Tynan (Tynan); Tynan, LLC; Darryl Schulte, Jr. (Schulte); and Schulte, LLC. The underlying facts pertaining to each of the counts, as alleged in the complaint, are as follows.

P&H is an Illinois corporation registered to practice law in the State of Illinois, while Summit RE, Summit Development, Tynan, LLC, and Schulte, LLC, are Illinois limited liability corporations. The members of Summit Development are Tynan, Schulte, and four other individuals not party to this lawsuit. The members of Summit RE are Tynan, LLC (whose only member is Tynan), and Schulte, LLC (whose only member is Schulte). The members of Main Street West are Tynan, LLC, Schulte, LLC, and JP Commercial Investments, LLC; the former two parties collectively own a 50% share in the company.

All of the defendants are real estate developers in the business of purchasing, developing, selling, and/or leasing Illinois property. Both Summit Development and Summit RE were involved in developing a parcel of land located in Orland Park, Illinois, and they retained P&H to provide a variety of corporate and real estate legal services in connection with this enterprise from 2003--04 onward. Furthermore, P&H represented Summit RE in a breach of contract lawsuit in which Summit RE was seeking to enforce an agreement it had made to purchase 12 acres of Orland Park property. Main Street West also hired P&H for what P&H terms "LLC Maintenance." P&H states that it completed all services it was requested to perform by these companies.

The complaint further alleges that, due to the aforementioned litigation services provided by P&H, Summit RE won specific performance of the land sale contract. As a result, it was able to purchase three acres of the Orland Park property on August 22, 2005, and the remaining nine acres on January 25, 2006. As soon as it acquired the property, Summit RE immediately transferred it to Main Street West "for no or inadequate consideration"; as this was its only asset, the company had no further means of paying creditors, including P&H. Summit RE later dissolved on August 28, 2006. Summit Development also dissolved after distributing all its assets to its members.

P&H avers in its complaint that on January 17, 2006, before the Orland Park property had been transferred to Main Street West, P&H had asserted an attorney's lien on the property pursuant to the Attorneys Lien Act (770 ILCS 5/1 (West 2006)) to cover payment of the fees that Summit RE had incurred as a result of P&H's litigation services. The complaint further avers that sometime before January 25, 2006, defendants orally promised to pay all outstanding legal fees that Summit RE owed to P&H; that they also promised that Tynan, Tynan, LLC, Schulte, and Schulte, LLC, would pledge a 50% share in Main Street West to P&H in order to secure payment; that P&H relied on these promises, to its detriment, by not enforcing its attorney's lien on the Orland Park property or preventing the conveyance of the property to Main Street West; but that these promises were never kept. As a result, once Summit RE dissolved, P&H still had not been compensated for the legal services it provided to Summit RE, and despite repeated demands, it was unable to obtain payment of fees, for which purpose it filed the instant suit for recovery.

In counts I through XXXIII, P&H asserts multiple claims for breach of contract, quantum meruit, and account stated against Summit RE, Summit Development, Main Street West, and Tynan for the legal fees incurred during P&H's representation of the companies.*fn2 In count XXXV, P&H then seeks to pierce the corporate veil of Summit RE to hold Tynan, LLC, and Schulte, LLC, liable for the legal debts that Summit RE has accrued to P&H. In support of this claim, P&H alleges that Summit RE is a "mere facade of Tynan LLC and Schulte LLC" and that there is "unity of interest and ownership" between the three parties. Similarly, in counts XXXVI and XXXVII, P&H seeks to pierce the corporate veils of Tynan, LLC, and Schulte, LLC, to hold Tynan and Schulte, respectively, responsible for the legal indebtedness of their companies, which it also alleges are "mere facade[s]." In count XXXIV, it seeks to pierce the corporate veil of Summit Development to hold Tynan and Schulte personally liable for outstanding attorney's fees incurred by Summit Development.

P&H also seeks to enforce the attorney's lien it allegedly placed on the Orland Park property in the amount of its outstanding attorney fees against Summit RE and Main Street West in count XXXIX. Their theory for liability against Main Street West is that the company took the property subject to the lien, with full knowledge of it.

In addition, P&H claims recovery of its legal fees under a theory of unjust enrichment (count XL) and successor liability (count XXXVIII) against Main Street West. P&H avers that Main Street West only acquired the property because of P&H's representation of Summit RE and would therefore be unjustly enriched if it was allowed to keep it without having to pay the attorney's fees incurred by Summit RE. Moreover, Main Street West assumed Summit RE's liability to P&H, since the transfer of the Orland Park property was "intended to fraudulently escape liability to its creditors, including P&H." On a similar note, P&H is also pursuing a claim of fraudulent conveyance (count XLI) against Summit RE and Main Street West, alleging that Summit RE transferred the Orland Park property to Main Street West "with the intent to delay, hinder, or defraud its creditors" in violation of the Uniform Fraudulent Transfer Act (740 ILCS 160/1 et seq. (West 2006)).

Finally, P&H seeks recovery of its legal fees on theories of promissory estoppel (count XLII) and fraudulent misrepresentation (count XLIV) against all defendants except Summit Development, based on defendants' alleged false promises to pay. Pursuant to those alleged promises, in count XLIII, P&H also seeks an equitable lien against the 50% share that Tynan, LLC, and Schulte, LLC, have in Main Street West, for the amount of legal fees owed to P&H by Summit RE.

In response to P&H's complaint, defendants (except for Main Street West) moved to have P&H disqualified from representing itself on grounds that it might improperly use client confidences in violation of Rule 1.6 of the Illinois Supreme Court Rules of Professional Conduct (210 Ill. 2d R. 1.6(a)). Defendants pointed out that P&H had received a wealth of confidential information in the course of its representation of Summit Development and Summit RE that might prove material to the instant lawsuit. P&H opposed the motion, arguing that it was allowed under Rule 1.6(c)(3) to use confidential client information in a lawsuit to collect fees, and that all of its claims were indeed related to fee collection. Defendants conceded that under the provisions of Rule 1.6(c)(3), P&H could utilize such information in pursuit of its claims for breach of contract, quantum meruit, and account stated; however, they argued that P&H's other ...

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