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In Re Receivership of Kenneth A. Grnacek v. Jerome Larkin

January 5, 2012


Appeal from the Circuit Court of the 12th Judicial Circuit, Will County, Illinois, Circuit No. 10-MR-759 Honorable Gerald R. Kinney, Judge, Presiding.

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

PRESIDING JUSTICE SCHMIDT delivered the judgment of the court, with opinion. Justices Carter and Lytton concurred in the judgment and opinion.


¶ 1 Jerome Larkin, Administrator of the Attorney Registration and Disciplinary Commission (ARDC), appeals the trial court's order requiring the ARDC to pay attorney Daniel Kallan $33,750 for legal services rendered to the clients of Kenneth A. Grnacek. Kallan concedes that representing Grnacek's clients was not one of his enumerated duties as a receiver under Supreme Court Rule 776 (eff. Mar. 25, 1991). We hold that Rule 776 does not authorize a trial court to order reimbursement to a receiver for legal services provided to the clients of an attorney whose practice is in receivership. We reverse.


¶ 3 As of 2009, attorney Kenneth A. Grnacek had practiced law in Will County for approximately 35 years. Grnacek's law practice was primarily concentrated in representing defendants in recidivist driving under the influence cases before the circuit courts and statutory summary driver's license suspension cases before the Secretary of State. Grnacek generally obtained a flat fee for his legal services upon retention.

¶ 4 Grnacek began to experience physical and mental health problems four to five years prior to 2009, including a mental and physical breakdown, fatigue, a collapsed lung and the inability to swallow. During 2008 and 2009, attorneys Kevin Cummings and Kallan covered court cases for Grnacek when his health did not allow him to appear for scheduled hearings. Kallan and Grnacek were friends; Kallan had been Grnacek's law partner from 1988 to 1996. Cummings had been a friend of Grnacek since 1989.

¶ 5 Both Cummings and Kallan appeared on behalf of Grnacek and requested continuances in his scheduled matters. Trial judges were becoming impatient due to the lack of progress being made in Grnacek's cases, many of which had been pending for several years. Grnacek's clients expressed their frustration to Cummings and Kallan when they appeared for court hearings, only to learn that there would be a continuance due to Grnacek's unavailability. Something had to give.

¶ 6 On or about April 22, 2009, Grnacek was admitted to Loyola Medical Center. He remained in the hospital for approximately one month. On or before May 1, 2009, attorney Ira Goldstein filed a petition in the Will County circuit court to bring Grnacek's medical disability to the court's attention. On May 1, 2009, Kallan volunteered to serve as a receiver for Grnacek's law practice.

¶ 7 The same day, the chief judge of the circuit court of the Twelfth Judicial Circuit entered Administrative Order No. 09-16 for the appointment of a receiver on behalf of Grnacek. The order stated that it had been brought to the court's attention that Grnacek was unable to properly discharge his responsibilities to his clients due to a disability and that there were no partners, associates, executors or other responsible parties capable of conducting Grnacek's affairs. The court appointed Kallan as receiver "to take custody of and make an inventory of the files of the said Kenneth A. Grnacek, notify the lawyer's clients in all pending cases as to his disability and take appropriate steps to sequester client funds of the said Kenneth Grnacek, as well as to take whatever other action that may be necessary to protect the interest of said attorney, his clients or other affected parties."

¶ 8 Grnacek appointed Kallan as his power of attorney from May 1, 2009, to May 1, 2010. Kallan assisted Grnacek with financial matters and applying for Social Security disability due to Grnacek's medical condition. Kallan told the court, at the September 2, 2010, hearing on his petition for attorney fees, that Grnacek was "not able to ever practice law again" as a result of his medical condition.

¶ 9 Kallan's appointment as receiver for Grnacek's law practice was in effect from May 1, 2009, until Kallan filed a final report and petition for attorney fees on July 30, 2010. Kallan testified at the hearing on his petition for attorney fees that he volunteered to serve as receiver out of friendship for Grnacek. Kallan was familiar with Grnacek's law practice of defending clients on alcohol-related driving offenses, as Kallan also handles such matters as part of his law practice.

¶ 10 Due to Grnacek's illness, Kallan was not able to communicate with him to obtain assistance in performing his duties as a receiver. However, Grnacek's secretary was helpful to Kallan. She boxed up all of Grnacek's files and put them in alphabetical order in preparation for storage. Grnacek's office remained open for approximately one month. Kallan gave the keys to the landlord around Memorial Day.

¶ 11 Kallan made an inventory of Grnacek's open files and notified Grnacek's clients of his disability. On May 8, 2009, he sent notices to 65 clients regarding Grnacek's disability.

¶ 12 There were approximately nine statutory summary suspension matters pending before the Secretary of State, which Kallan was able to refer to other attorneys. Kallan did not know the fee arrangement those attorneys made with Grnacek's clients. He was able to find substitute counsel for a criminal battery case. In one client matter, involving a pending felony driving under the influence of intoxicants, the client retained co-counsel to assist Kallan in the representation. Kallan filed his appearance as substitute counsel in 31 of Grnacek's remaining open files, which consisted mostly of cases of driving under the influence of intoxicants.

¶ 13 Kallan did not seek additional attorney fees from any of Grnacek's clients. He testified that he knew that these clients had already paid Grnacek. The fees had been spent prior to Grnacek's completion of the cases; he took on their representation with the intention of finishing up the cases for Grnacek so that his clients did not have to hire and pay substitute counsel. Kallan stated in the affidavit he filed with his motion to supplement the record that Grnacek's clients would have had to obtain substitute counsel at their expense had he not represented them.

¶ 14 Two of Grnacek's cases were pending in the appellate court and Kallan prepared reply briefs and presented oral argument in those matters. Kallan received a total $4,450 from those two clients for attorney fees owed to Grnacek for work Grnacek had previously done on the appeals. Kallan gave one-half of the collected fees to Grnacek and he kept the other half for himself. The propriety of this action is not before this court.

¶ 15 Kallan testified that he decided to take over the representation of Grnacek's clients himself as it was easier than trying to find other attorneys to take the cases. Both Kallan and Cummings indicated that Grnacek had lost the good will of the bench and that most attorneys did not want to take over Grnacek's cases because trial dates had already been continued numerous times on Grnacek's motions.

ΒΆ 16 There was approximately $8,000 in Grnacek's client trust account at the time that Kallan was appointed as receiver. In addition, there was approximately $2,000 in Grnacek's operating account. Kallan used a portion of the funds to pay expenses, including the salary of ...

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