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Hess v. Kanoski & Associates

United States District Court, C.D. Illinois, Rock Island Division

March 28, 2014

LAWRENCE J. HESS, Plaintiff,
KANOSKI & ASSOCIATES, a Professional Corporation, Defendant.


SARA DARROW, District Judge.

Plaintiff Lawrence Hess has sued Defendant Kanoski & Associates ["K&A"] for bonus compensation based on cases resolved after K&A fired him. In Hess v. Kanoski & Assocs., 668 F.3d 446 (7th Cir. 2012) (" Hess I "), the Seventh Circuit affirmed summary judgment against Hess on all but two counts of his claim-for breach of contract and violation of the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq. -and remanded with instructions to (1) "interpret the contract" between Hess and K&A and (2) "consider the merits of Hess's theories" on the two remaining counts. Id. at 454.

Before the Court are K&A's Motion for Summary Judgment, ECF No. 92, on both counts and Hess's Motion for Partial Summary Judgment, ECF No. 95, on the breach of contract claim. Because the briefings and exhibits exhaustively present the issues, the Court finds that a hearing would be unnecessary, and DENIES K&A's Request for Oral Argument on its Motion for Summary Judgment, ECF No. 93. For the following reasons, Hess's Partial Motion for Summary Judgment is DENIED, and K&A's Motion for Summary Judgment is GRANTED.


K&A - which in 2013 became "Kanoski Bresney"-is a personal injury law firm serving Central Illinois. Pl.'s Mot. Summ. J., ECF No. 95, Ex. A. During the period relevant to this case, Ronald Kanoski was K&A's president, responsible for administration of the firm. Id., Ex. D at 13-15. In 2001, after deciding to branch out into medical malpractice suits, Kanoski hired Hess. Def.'s Mot. Summ. J., Ex. D at 17-19. Under a May 9, 2001 written Employment Agreement, Hess became an associate attorney for K&A.

In addition to a starting salary of $60, 000, section 4 of the Employment Agreement provides that Hess would receive bonus pay as follows: "15% of all fees generated over the base salary (or $5, 000 per month) with a guarantee of One Hundred and Twenty-Five Thousand ($125, 000). Bonus pay shall increase to 25% on all fees received annually in excess of $750, 000." Pl.'s Mot. Summ. J., Ex. B at 2-3. The Agreement states that Hess had no proprietary right or interest in the clients on whose cases he worked while at K&A. Id. at 4. The Agreement also gives Hess the right to 30-day written notice before termination. Id. at 2. Should he be discharged, Hess promises not to contact K&A's clients, and if any client obtained through K&A should choose to retain Hess instead of K&A, Hess covenants to compensate K&A. Id. at 4-5. To that end, section 8(d) of the Agreement provides:

(ii) If client originally hired the corporation or the contact for the claim came to the Employee while the Employee was employed by the Corporation, the parties agree and covenant that the Corporation shall always receive Thirty-three and One-third (33 1/3) percent of any fee received by Employee under such circumstances. (iii) The remaining Sixty-six and Two-thirds (66 2/3) percent of the fee shall be divided in the following manner. The parties agree to divide the fees by determining the time from which the file was opened until its disposition is final, with the fee being divided pro rata between the Corporation and the Employee based upon the actual time each represented the client....

Id. at 5. Section 8(d)(iv) covers the scenario where the client remains with K&A following Hess's departure, and provides: "Employee acknowledges that... Employee has no proprietary interest in fees to be earned since the Employee is to be fully compensated through his salary and/or bonus for all work done while an Employee of the Corporation." Id.

Hess started his career at K&A on these terms, but the following year, after obtaining a large jury verdict in a medical malpractice case, he renegotiated his compensation. Pl.'s Mot. Summ. J. 21.; see also Def.'s Reply 6, ECF No. 100. A June 21, 2002 letter to Hess from Ronald Kanoski, entitled "Terms of Employment, " states that it "confirm[s] our recent salary and bonus negotiations." Pl.'s Mot. Summ. J., Ex. C. Hess's annual salary was raised to $100, 000. Regarding the bonus, the letter states that Hess "will be eligible to receive as a bonus 40% of all fee revenue generated except as follows: a) no bonus will be paid on the first $100, 000 of annual fee revenue generated; and, b) if it is otherwise eligible, only a 10% bonus will be paid for fees generated on the Robert Thompson file." Id.

On February 14, 2007, Kanoski fired Hess without 30-day notice. Hess I, 668 F.3d at 453. Pl.'s Mot. Summ. J. 22. Kanoski characterized the decision as economic, claiming it was based on Hess's failure to generate sufficient revenue for the firm. Def.'s Mot. Summ. J., Ex. D at 56-59, ECF No. 92. K&A transferred many of Hess's cases to an independently-contracting lawyer, Kennith Blan, Jr., who settled a number of them over the subsequent year and a half. Hess I, 668 F.3d at 450. At the time of his termination, K&A had paid Hess bonuses on all cases that were resolved during his employment. Pl.'s Mot. Summ. J. 5-6; Def.'s Mem. in Supp. Summ. J. 5, ECF No. 92. Hess claims he is also entitled to bonuses on his cases that settled after his termination. See Hess, 668 F.3d at 451.

Hess believed K&A fired him because it did not want to pay him a bonus on these settlements, and in May 2008 letter, unsuccessfully demanded that K&A pay him $316, 616.21 in unpaid bonuses. Id. at 450. He also filed attorney's liens in Illinois state court in two of his former cases at K&A: Thompson v. Skeffington, 988 N.E.2d 1131 (Table) (Ill.App.Ct. May 26, 2010) and Loyd v. Billiter, 993 N.E.2d 156 (Table) (Ill.App.Ct. Oct. 15, 2010) (" Loyd I "). Def.'s Mot. Summ J., Ex. F ( Thompson ) & G ( Loyd I ), ECF No. 92. The Illinois courts rejected the liens on the grounds that Hess no longer had an attorney-client relationship with Thompson or the Loyds. See Hess, 668 F.3d at 450; Def.'s Mot. Summ. J., Ex. F at 14, Ex. G at 4.[1]

After preliminary failures in state court, Hess filed an 11-count complaint against K&A, Kanoski, and Blan in this Court on December 23, 2009, based on diversity of citizenship under 28 U.S.C. ยง 1332. The Court rejected Hess's IWPCA claim after finding that Hess had admitted in a deposition that K&A paid him all he was due, and held that collateral estoppel barred Hess from seeking bonus compensation based on the Loyd I finding that Hess's contract with K&A "would bar any claim he has for further compensation." Opinion of March 14, 2011 at 8-9, 11, ECF No. 50.

Hess appealed. The Seventh Circuit reversed on Hess's IWPCA and breach of contract claims, holding that Hess only admitted to receiving already-earned bonuses in his deposition, not those based on fees received by K&A following his discharge. Hess, 668 F.3d at 450-51. The Court further held that neither Thompson nor Loyd I serves as a basis for issue preclusion because the state courts only determined Hess's right to compensation from his former clients, not from his former employer. See id. at 452.[2]

At issue on remand are Hess's IWPCA (Count I) and breach of contract (Count II) claims against K&A. See Am. Compl., ECF No. 71. Hess moves for summary judgment on the issue of liability for breach of contract, arguing that the parties' agreement unambiguously grants him a right to post-termination bonus compensation. Pl.'s Mot. Summ. J. 1. K&A claims it is entitled to summary judgment on Count I because Hess's contractual bonus compensation is of a type not protected by the IWPCA, and on Count II because: (1) the contract language unambiguously defeats Hess's theory for compensation; (2) res judicata bars Hess's ...

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