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In Re the Marriage of David Newton v. Hadley Newton

June 30, 2011

IN RE THE MARRIAGE OF DAVID NEWTON, PETITIONER-APPELLEE,
v.
HADLEY NEWTON,
RESPONDENT
DAVID J. GRUND, MARVIN J. LEAVITT, AND GRUND & LEAVITT, P.C., CONTEMNORS-APPELLANTS.



Appeal from the Circuit Court of and Cook County. 06 D 5136 The HonorableEdward R. Jordan, Judge Presiding.

The opinion of the court was delivered by: Justice Pucinski

JUSTICE PUCINSKI delivered the judgment of the court, with opinion. Justices Salone and Sterba concurred in the judgment and opinion.

OPINION

Contemnors-appellants, David Grund, Marvin Leavitt, and Grund & Leavitt, P.C. (collectively Grund and Leavitt), appeal the court's entry of a contempt order against them based on their refusal to comply with the court's order to step aside following an earlier court order that disqualified Grund and Leavitt due to a conflict of interest and denied their petition for attorney fees seeking $250,000 in interim and prospective fees in the divorce of David Newton (David) and Hadley Newton (Hadley).

After a full hearing on David's motion to disqualify, the circuit court determined thatthere was a conflictof interest in violation of Rule 1.9 of the Illinois Rules of Professional Conduct (Ill. S. Ct. Rs. Of Prof. Conduct R. 1.9 (eff. Aug. 1, 1990)), and that Grund and the firm of Grund & Leavitt were disqualified from representing Hadley. At a hearing on the petition for fees, the court determined Grund and Leavitt were not entitled to any fees based on their disqualification due to the conflict of interest. Grund and Leavitt refused to comply with the court's order denying them fees and ordering them to step away from the bench, and the court found them in contempt and ordered Grund to pay $100 to purge the contempt. Grund and Leavitt appeal only the contempt order.

The issue before us is discrete and limited: did the court err in entering the contempt order? We clarify from the outset that Grund and Leavitt appeal only the contempt order and seek corollary review of the underlying denial of their fee petition because of the disqualification order, not their disqualification. A contempt order is final and appealable and generally also brings the propriety of the underlying disqualification order and subsequent denial of attorney fees before us. See SK Handtool Corp.v.Dresser Industries, Inc., 246 Ill. App. 3d 979, 986 (1993).

We find that the circuit court did not err in finding Grund and Leavitt in contempt based on their unwillingness to step aside, thus continuing their unwillingness to comply with Grund's disqualification due to a conflict of interest and the resulting denial of attorney fees. Grund and Leavitt violated Rule 1.9, and under section 508(c)(3) of the Illinois Marriage and Dissolution of Marriage Act (the Act), the retainer agreement with Hadley was not enforceable because it was in violation of a court rule. 750 ILCS 5/508(c)(3) (West 2008). Further, as the court correctly noted, even without section 508, ordinary contract law requires fees only for valid contracts and here the contract with Hadley was void ab initio because Grund was not allowed by Rule 1.9 to enter into it.

JURISDICTION

At the time of the instant appeal, March 18, 2009, the underlying divorce proceedings were still pending and judgment was not entered until nearly a year later, on March 8, 2010. Disqualification orders are not immediately appealable (In re Estate of French, 166 Ill. 2d 95, 100 (1995)), but Grund and Leavitt here are not appealing the disqualification order. Following the disqualification order the court denied attorney fees going back in time to the first meeting with Hadley. Grund and Leavitt are not directly appealing the denial of attorney fees. Grund and Leavitt argue that they are entitled to fees up to the time of their disqualification. The court disagreed and denied all fees. Grund and Leavitt are appealing the contempt order and fine of $100 imposed by the court for not stepping aside, thereby disregarding the disqualification order and challenging the courts denial of all fees from either David or Hadley.

Contempt judgments that impose a penalty are final, appealable orders. In re Marriage of Gutman, 232 Ill. 2d 145, 153(2008). See also Ill. S. Ct. R. 304(b)(5) (eff. Jan. 1, 2006). " ' " Where an unappealable interlocutory order results in a judgment of contempt including a fine or imprisonment, such a judgment is a final and appealable judgment and presents to the court for review the propriety of the order of the court claimed to have been violated." ' " Index Futures Group, Inc. v. Street, 163 Ill. App. 3d 654, 657(1987) (quoting People v. Verdone, 107 Ill. 2d 25, 30 (1985), quoting People ex rel. Scott v. Silverstein, 87 Ill. 2d 167, 174 (1981)).

Here, the court imposed a fine of $100, and therefore the contempt was a final judgment which was immediately appealable.

STANDARD OF REVIEW

The parties dispute the standard of review. Grund and Leavitt assert the issue must be reviewed de novo, as it presents a question of law, while David maintains that the proper standard of review is abuse of discretion. When the facts of a contempt finding are not in dispute, their legal effect may be a question of law, which we review de novo. Busey Bank v. Salyards, 304 Ill. App. 3d 214, 217 (1999). See also Skokie Gold Standard Liquors, Inc. v. Joseph E. Seagram & Sons, Inc., 116 Ill. App. 3d 1043, 1054 (1983) (this court conducts an independent review of questions of law presented by the disqualification order). "As a general rule, a trial court's decision to award fees is a matter of discretion and will not be disturbed on appeal absent an abuse of discretion." In re Marriage of Nesbitt, 377 Ill. App. 3d 649, 656 (2007) (citing In re Marriage of Schneider, 214 Ill. 2d 152, 174 (2005)). Here, however, the circuit court indicated its belief that it could not award attorney fees once Grund and Leavitt were disqualified. Meanwhile, Grund and Leavitt argue that, although they were disqualified, they are still entitled to their fees accrued for work performed for Hadley under section 508 of the Act before the disqualification and assert that nothing in the ethical rules explicitly states that no fees are allowed if an attorney is disqualified. The legal question is thus whether the circuit court properly denied attorney fees from the beginning of Grund's representation of Hadley. Whether a court or administrative agency has the authority to award attorney fees is a question of law that we review de novo. Grate v. Grzetich, 373 Ill. App. 3d 228, 231 (2007) (citing Alvarado v.Industrial Comm'n, 216 Ill. 2d 547 (2005)). "Furthermore, whether a party may recover attorney fees and costs pursuant to any specific act is a question of law." Grate, 373 Ill. App. 3d at 231 (citing Johnson v. Thomas, 342 Ill. App. 3d 382 (2003)). Thus, since the facts of the contempt are not in dispute and since Grund and Leavitt are not appealing the disqualification, we are presented with a question of law and we review this issue de novo.

BACKGROUND

Petitioner, David Newton, and Respondent Hadley Newton, were divorced pursuant to a judgment for dissolution of marriage entered on March 8, 2010. In the underlying divorce proceedings, David filed an emergency motion to disqualify Hadley's attorney, Grund, and the law firm of Grund & Leavitt, pursuant to Rule 1.9 (Ill. S. Ct. Rs. Of Prof. Conduct, R. 1.9 (eff. Aug. 1, 1990)), due to Grund's former representation of David in the same proceeding. On August 9, 2007, the circuit court entered a preliminary injunction order prohibiting Grund and Leavitt from representing Hadley while the motion to disqualify was pending. Hadley filed her response to the motion to disqualify on July 27, 2007. A hearing was held on September 4, 2007. The court heard testimony by David, Grund, and Hadley. However, upon questioning of Grund regarding his conversation with David, David's counsel objected based on attorney-client privilege. Although there was an offer of proof, the circuit court barred Grund's testimony on the basis of the attorney-client privilege. David testified that he met alone with Grund in Grund's office for between 1 1/2 and 2 hours. They discussed information and issues related to his marriage and impending divorce from Hadley, including issues regarding the children and his financial situation, and Grund took notes.

Hadley testified, upon questioning by Grund, that she learned that there was a conflict with Grund representing her because Grund himself told her there was a conflict when she came in to see him. However, he entered into a retainer agreement with her and represented her. The court found that Grund and Leavitt were disqualified from representing Hadley.

On September 18, 2007, Hadley sought interlocutory review of the court's order and filed a petition for leave to appeal (first appeal) under Supreme Court Rule 306 (Ill. S. Ct. R. 306 (eff. Sept. 1, 2006)). On October 17, 2007, we granted leave to appeal, thus staying proceedings below. On June 13, 2008, we rendered our decision pursuant to Illinois Supreme Court Rule 23 (Ill. S. Ct. R. 23 (eff. May 30, 2008)), in which we held that the circuit court erred in barring Grund's testimony at the hearing on the motion to disqualify. In re Marriage of Newton, No. 1-07-2590 (2008) (unpublished order under Supreme Court Rule 23). We reversed and remanded for a full and fair hearing including Grund's testimony to resolve the question of whether there was an attorney-client relationship between David and Grund. In re Marriage of Newton, No. 1-07-2590 (2008) (unpublished order under Supreme Court Rule 23).

David filed a petition for rehearing. On July 15, 2008, we entered an order denying the petition for rehearing and further ordered that Arthur Berman, who had joined Grund & Leavitt, was allowed to represent Hadley while the disqualification motion was pending. On November 26, 2008, the Illinois Supreme Court denied David's petition for leave to appeal, and on January 8, 2009, we returned the mandate to the circuit court. David also filed a motion seeking review of a certified question (second appeal) on July 16, 2008, pursuant to Illinois Supreme Court Rule 308 (Ill. S. Ct. R. 308 (eff. Feb. 1, 1994)). However, we dismissed that appeal.

On January 22, 2009, Grund and Leavitt filed a petition for attorney fees on behalf of Hadley pursuant to sections 501 and 508 of the Act (750 ILCS 5/501, 508 (West 2008)), seeking prospective and interim fees and costs from David in the amount of $250,000, including amounts incurred during both appeals. The court conducted a hearing as directed on February 25, 2009, and Grund testified that he told David that representation would not begin until David actually signed a contract, that no attorney-client privilege would attach during their meeting, and that David should not disclose anything to Grund that could not appear in answers to interrogatories or in the public record. Grund testified that David "volunteered some information," but Grund did not recall anything specifically. Grund denied taking any notes. Grund believed David never intended to actually hire him. Grund also denied giving David a business card with his private cellular telephone number, but was impeached by the production by David of Grund's business card with his cellular telephone number written on the back of the card. In rebuttal, David testified that Grund assured him everything they discussed was confidential.

On March 3, 2009, the circuit court entered its memorandum opinion and order finding that there was an attorney-client relationship between David and Grund and disqualifying Grund and Leavitt from representing Hadley. The court specifically found that, "[c]learly, from Mr. Grund's own interrogation of Hadley it is obvious that he believed there to be a conflict and that he so informed Hadley, yet he knowingly entered into a retainer agreement with her."

The court also specifically found that "Mr. Grund's credibility *** was diminished by his impeachment and general demeanor. His attitude on the stand was sarcastic, evasive, cavalier and argumentative ***."On March 10, 2009, the matter was before the court on Grund and Leavitt's fee petition. Since Grund and Leavitt were disqualified, the parties and the court discussed whether the petition should be treated as a section 501, 508 or 503(j) petition, but ultimately the court concluded that it could not award attorney fees in any event because of counsel's disqualification. Grund and Leavitt argued strenuously for fees under section 508, and the court offered to find them in contempt so that they could immediately appeal. The court asked counsel to step away from the bench, but counsel did not do so, and the court found them in contempt. In its order, the court stated:

"The court informed Grund and Leavitt that it would not and could not hold a hearing with regard to the fees they incurred by virtue of their representation of Hadley Newton and would deny their fee petition. The court also ordered Grund and Leavitt to step away from the bench. They refused to do so and therefore it is ordered as follows:

1. The Grund & Leavitt fee petition is denied.

2. Mr. Grund and Mr. Leavitt are found to be in direct contempt of this court for their failure to obey the court's disqualification order.

3. Grund & Leavitt shall pay a fine of $100 to purge said contempt."

Thereafter, Grund and Leavitt appealed both the disqualification order and the contempt order. On June 2, 2009, we entered an order granting David's motion to dismiss the appeal of the disqualification order, but denied his motion to dismiss the appeal of the contempt order.

ANALYSIS

David asserts that the appeal is moot since the judgment for dissolution of marriage has been entered. However, there is no authority for David's proposition that pending attorney fee petitions are rendered moot by the entry of judgment of dissolution. Rather, as section 508(c)(2) provides, awarding fees under a petition is a distinct cause of action from a proceeding for dissolution of marriage. We therefore proceed to address the issues presented in the instant appeal.

We now address David's argument that Grund and Leavitt's appeal should be dismissed because they lack standing. According to David, once Grund and Leavitt were disqualified, they had no standing to seek attorney fees incurred on behalf of Hadley because their petition was brought under section 501 of the Act, and section 501 makes provision only for the ...


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