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P.C. v. Yusen Logistics (Americas) Inc.

United States District Court, N.D. Illinois, Eastern Division

September 12, 2017

Rodriguez O'Donnell Gonzalez & Williams, P.C. f/k/a Rodriguez O'Donnell Ross, Plaintiff,
v.
Yusen Logistics Americas Inc. f/k/a Yusen Air & Sea Service U.S.A. Incorporated, Defendant. And Yusen Logistics Americas Inc. f/k/a Yusen Air & Sea Service U.S.A. Incorporated, Counter-Plaintiff,
v.
Rodriguez O'Donnell Gonzalez & Williams, P.C. f/k/a Rodriguez O'Donnell Ross, Thomas J. O'Donnell, R. Kevin Williams, Carlos Rodriguez, and Henry Gonzalez, Counter-Defendants.

          MEMORANDUM OPINION AND ORDER

          Manish S. Shah United States District Judge.

         Plaintiff and counter-defendant, Rodriguez O'Donnell Gonzalez & Williams, P.C., and defendant and counter-plaintiff, Yusen Logistics, entered into a contingency fee agreement that governed ROGW's representation of Yusen as a claimant against settlement funds, which arose from a multidistrict civil antitrust class action. Seven years after signing the agreement, Yusen terminated ROGW. Yusen continued to receive payments from the settlement funds after it fired ROGW, which prompted ROGW to file this action to recover its contingency fee from the later-received payments. Yusen counterclaimed against the firm and its lawyers, Thomas J. O'Donnell, R. Kevin Williams, Carlos Rodriguez, and Henry Gonzalez, seeking disgorgement of the fees it had already paid ROGW on the basis of breach of fiduciary duty. Both parties have filed motions for summary judgment. For the following reasons, ROGW's motion is granted and Yusen's motion is denied.

         I. Legal Standards

         Summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A genuine dispute as to any material fact exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party seeking summary judgment has the burden of establishing that there is no genuine dispute as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A court must view all facts and reasonable inferences in the light most favorable to the non-moving party. Apex Digital, Inc. v. Sears, Roebuck & Co., 735 F.3d 962, 965 (7th Cir. 2013). On cross-motions for summary judgment, a court must draw inferences “in favor of the party against whom the motion under consideration was made.” Hess v. Reg-Ellen Mach. Tool Corp., 423 F.3d 653, 658 (7th Cir. 2005).

         II. Background

         Beginning in 1997 or 1998, ROGW represented Yusen in a host of legal matters ranging from tariff classifications and free trade agreements, to foreign trade zone issues, custom penalty claims, and related regulatory matters. [62] ¶ 1.[1]Yusen had ROGW on retainer from approximately 2003 to 2007 for a fixed fee of $3, 000 per month. Id. ¶¶ 2, 5; [70] ¶ 10. Pursuant to the retainer agreement, Yusen could request legal assistance from ROGW in customs-related matters[2] each month for a limited number of hours without being billed at ROGW's hourly rate.[3] [62] ¶ 2.

         In June or July 2007, Mark Hogan, Yusen's Director in International Operations, and his boss, Tony Kitagawa, spoke with Thomas O'Donnell about ROGW representing Yusen in a multidistrict civil antitrust class action. [70] ¶ 10. At that time, it was widely known within the air cargo industry (of which Yusen and ROGW were a part) that the lawsuit existed. Id. ¶ 12. The lawsuit involved antitrust violations committed by airline carriers in the air-cargo shipping industry through fee charges; both Hogan and O'Donnell knew that Yusen, as a frequent purchaser of air-cargo shipping services, was a member of the putative class. Id. ¶ 11; [43-2] at 47:2-20; [59-2] at 21:2-11. After that conversation, ROGW began representing Yusen in connection with the antitrust litigation.[4] [62] ¶¶ 4-5. Initially, O'Donnell treated his discussions with Yusen in June or July 2007 about the antitrust litigation as covered by the 2003 retainer agreement. Id. ¶ 5. A few months later, at a lunch with Hogan and Kitagawa, O'Donnell proposed that ROGW represent Yusen in the antitrust litigation on a twenty-five percent contingency fee basis. Id. ¶ 9, 11. O'Donnell, Hogan, and Kitagawa formalized the contingency fee basis of ROGW's representation of Yusen at that lunch meeting in October 2007. [70] ¶ 16. A letter from O'Donnell to Hogan, dated November 2, 2007, constitutes the written contingency fee agreement; from the face of the document, it appears that Hogan executed it on behalf of Yusen on November 3, 2007.[5] [62] ¶ 13; see also [43-13].

         Before signing the agreement, Hogan: (i) read and understood it; (ii) discussed it with Kitagawa; (iii) expressly told Kitagawa that he understood it and agreed with its terms; (iv) believed Kitagawa agreed to and understood its terms; and (v) believed its terms were straightforward. [70] ¶ 20; [59-2] at 32:21-33:1, 78:17-79:6, 94:23-95:1, 96:12-21. Kitagawa did not comment on the agreement after the lunch meeting; he simply instructed Hogan to sign it on Yusen's behalf. Id. ¶ 18. Hogan did not find Kitagawa's lack of further commentary odd because they had already discussed the details with O'Donnell and he believed that the issues were straightforward.[6] Id. When Hogan signed the agreement, he understood that Yusen was agreeing to hire ROGW on a contingency fee basis to process Yusen's refunds from any settlement in the antitrust litigation. Id. ¶ 17. He knew about the Lufthansa Settlement Fund, which he did not think would yield much money for Yusen, but he did not know there would be other settlements. [70] ¶ 34. Based on the advice Hogan had received from O'Donnell and the information he had at the time, Hogan thought that it seemed fair to agree to a twenty-five percent contingency fee. [59-2] 42:3-20. Hogan did not believe he was coerced into signing the agreement. [70] ¶ 22. One of the reasons Yusen signed the agreement, from Hogan's perspective, was because Yusen knew that it was not capable of filing claims in the antitrust litigation on its own; but that if they hired a firm to submit claims on its behalf, it had a chance of getting some money. [59-2] 42:21-43:6.

         Shortly after Hogan executed the agreement, Yusen assigned Dale Todaro[7]with primary responsibility for collecting the data ROGW needed to submit claims on Yusen's behalf in the antitrust litigation. [70] ¶ 42; [60] at 12:22-13:20. In 2008, Todaro discussed the contingency fee with O'Donnell and O'Donnell represented that he believed the fee was fair and standard in the industry.[8] [60] 84:15-86:6; id. at 82:1-85:6. At the time of that conversation, Todaro did not have (and could not have had) an understanding of how large Yusen's claim would be in the Lufthansa Settlement because the data was not available yet; as such, he relied on O'Donnell's representation. Id. at 85:3-86:19. But, Todaro also was aware that Yusen had received hundreds of solicitations, beginning in November 2007, from third parties seeking to submit claims on Yusen's behalf in the antitrust litigation, and Todaro was not aware of any solicitation that offered to perform services on an hourly basis. Id. at 183:19-185:7, 188:8-18.

         Before filing the first claim for Yusen, ROGW performed many tasks for Yusen. [70] ¶ 44; see, e.g., [62] ¶ 7 (quashing subpoenas); id. ¶ 27 (providing forms for Yusen to distribute to its affiliates in other countries so that they could assign their claims to Yusen for the right to represent them in the antitrust action). In relevant part, ROGW engaged in detailed discussions about Yusen's cost-benefit analysis regarding its participation in the antitrust litigation. From the start, Yusen was concerned about whether its potential recovery was worth spending the time and effort to submit claims against the settlement fund. Yusen's communications with ROGW show that it was continuously seeking ROGW's advice and carefully considering-if not reevaluating-ROGW's recommendations. For example, in response to questions from Kitagawa on July 11, 2008, Rifkin explained that Yusen could claim against the Lufthansa Settlement not only for air cargo shipping purchases from Lufthansa, but also from other air carriers. [43-15] at 2. Hogan asked, “[A]re any other carriers contributing to this fund? How can Lufthansa settle for other carriers? The $85 million after lawyer fees will not cover much from claims worldwide.” Id. at 1-2. Rifkin explained the facts, predictions, and risks:

Lufthansa is not settling for other carriers; the civil litigation against those carriers is still pending. [. . .] There may be additional sources of money available in the future to satisfy claims regarding air freight price fixing defendants other than Lufthansa may settle with the plaintiffs and set up their own funds to satisfy claims and/or the plaintiffs may prevail in the pending litigation and be awarded damages, to be shared with other claimants. At the moment, however, the only source of funds available for claims regarding the alleged air freight price fixing is the Lufthansa Settlement Fund. Therefore, as you correctly point out, the Fund is not going to be sufficient to cover all claims likely to be filed against it. Claimants are instead going to receive proportionate shares; direct claimants will be better off than indirect claimants, as they will have a greater portion of the funds available to them to claim against.[9]

Id. at 1. Similarly, in a memorandum dated July 31, 2008, ROGW acknowledged a concern that Yusen raised concerning whether the volume of Yusen's shipments was worth the effort of filing a claim against the Lufthansa Settlement. [59-4] at 5. ROGW recommended that Yusen gather initial data to come up with a “rough” dollar amount of its shipment purchases, which ROGW could examine and discuss with Yusen in its upcoming meeting. Id. ROGW also outlined the more detailed data it would need from Yusen in order to proceed with filing a claim.[10] Id.

         After ROGW filed the first claim, and throughout the attorney-client relationship, Jessica Rifkin from ROGW frequently communicated with Yusen's Todaro about the status of Yusen's claims, requests for supporting data, updates from the claims administrator and class counsel regarding the settlement funds, and any predictions or risks of which ROGW was aware.[11] See, e.g., [44-22], [44-23], [44-24]. For example, when a second settlement was in its preliminary stages, Rifkin emailed Yusen on July 15, 2010, to request that Yusen continue to preserve data and relevant documents for claiming against the Lufthansa Settlement because “[ROGW] believe[s] that these data and documents will be substantially the same as those which will be needed to file a claim against the [Settlement 2] Fund.” [43-20] at 1. When eight other airlines established their own settlement fund worth $193.43 million, Rifkin emailed Todaro and others on March 31, 2011, to notify them of that fact and that ROGW would send a memorandum describing the requirements for filing claims against Settlement 2 by the deadline of July 26, 2011. [43-26] at 1-2. Finally, when Settlement 3's notice made it “explicitly clear that if you have already filed a claim against [. . .] Settlement 2, you need not file another claim against [. . .] Settlement 3 to recover from this fund, ” Rifkin emailed Todaro on March 20, 2012, to inform Yusen of that fact and that the claims administrator “will use the data that you have already provided in connection with [. . .] Settlement 2 to calculate your recovery from [. . .] Settlement 3.”[12] [44-9] at 1-2.

         ROGW made clear to Yusen that when ROGW was assessing a risk or stating a prediction, that information was not guaranteed to happen; it was uncertain. For example, on January 11, 2013, Rifkin emailed Todaro stating: “While it is impossible to predict the amount which Yusen will receive from Air Cargo Settlement 3 with any certainty at this time, we believe that Yusen's recovery from Air Cargo Settlement 3 is likely to be at least equal to, if not greater than its recovery from Air Cargo Settlement 2.” [44-11] at 1.[13] Significantly, ROGW also described to Yusen what factors it was basing its conclusions on so that Yusen was able to consider the same and decide for themselves. For example, on July 21, 2011, O'Donnell informed Todaro that ROGW believed that Yusen's recovery against Settlement 2 and any subsequent settlement funds “could be substantially higher, given the fact that at the present time the amount to be distributed in [. . .] Settlement 2 is approximately three times that of the Lufthansa Settlement Fund, and that (unlike the Lufthansa Settlement Fund) indirect purchasers may not claim against [. . .] Settlement 2 and other subsequent funds.” [43-31] at 1.

         When Yusen raised an issue, ROGW responded with analysis and action. On December 2, 2011, Todaro raised the issue that Yusen had not notified the court about its ownership interest in an affiliate of one of the antitrust litigation defendants, which could make Yusen ineligible to receive settlement funds. [44-1] at 1. Before Yusen had reached a final decision to abandon the antitrust litigation effort, it gave ROGW permission to look into the affiliate issue.[14] [59-1] at 33:4-34:7. With ROGW's help, Yusen returned the initial payment it had received from the Lufthansa Settlement to the claims administrator pending resolution of the affiliate issue. [70] ¶ 62. On March 16, 2012, ROGW sent a letter to the claims administrator in the antitrust class action, representing that Yusen was not an affiliate of one of the defendants in that action, and arguing that Yusen should not be barred from recovering from the Lufthansa Settlement. [62] ¶ 41; [44-4] at 1-9. In the alternative, if the claims administrator found that Yusen was an affiliate, ROGW noted that Yusen was only an “affiliate” for part of the class period and should be able to participate on a pro rata basis for the time period when it was not an “affiliate” of one of the defendants. [44-4] at 6 n.1. ROGW did not cite any authority to support its argument (and when Rifkin was asked if she was aware of any supporting authority at the time, she said “I don't think so. I don't remember at this point.”). Id.; [43-9] at 176:20-177:14. Ultimately, the claims administrator concluded that Yusen qualified as a class member before the acquisition date, but was excluded from the class definition as an affiliate of a defendant after the acquisition date, and it cited the In Re Records and Tapes Antitrust Litigation case for support.[15] Id. ¶ 42; [43-3] at 21:1-11. Pursuant to class counsel's recommendation to file amended claims consistent with the March 16, 2012 letter, ROGW filed amended claims on behalf of Yusen for the Lufthansa Settlement and for Settlement 2. [62] ¶¶ 43-44.

         By October 2014, Yusen knew that Settlement 4 had been approved. [70] ¶ 77. Around the same time, Yusen requested to proceed with ROGW's services on an hourly basis instead of on a contingency fee basis in that action; but, ROGW rejected that request. [62] ¶ 52. Upon advice from Tom Lewis, Yusen's in-house counsel, Yusen terminated the contingency fee agreement with ROGW on October 13, 2014. [70] ¶¶ 70, 73; [60] at 147:12-20.

         On or before December 30, 2014, Yusen hired the firm Baker & Hosteller LLP to file a claim on its behalf against Settlement 4. [44-14] at 3. Approximately one year later, Baker submitted that claim; it contained data that Yusen had not previously submitted in its claim against Settlement 2.[16] [62] ¶ 54. Yusen received $1, 314, 886.79 for Settlement 4 in May 2016. Id. ¶ 55. Settlement 5, which is worth approximately $387.5 million, has been approved, but the amounts that Yusen and other claimants will be paid have not been determined yet. Id. ¶ 56.

         Yusen received the following from the antitrust litigation: (1) $287, 057.83 from the Lufthansa Settlement; (2) $785, 153.40 from Settlement 2, plus an additional $66, 318.75 in a subsequent distribution in Settlement 2; (3) $776, 605.70 from Settlement 3; (4) $1, 314, 886.79 from Settlement 4; and (5) $1, 606, 043.30 from supplemental funds in Settlements 2, 3, and 4 since filing this action. [62] ¶ 55; [70] ¶¶ 32-33. To date, Yusen has paid ROGW approximately $478, 783.90 pursuant to the contingency fee agreement.[17] [62] ¶ 62. But, Yusen has not made any additional payments to ROGW since Yusen terminated the contingency fee agreement in October 2014. [70] ¶ 94.

         III. Analysis

         A. Timeliness of Yusen's Counterclaim

         Yusen's counterclaim alleges that ROGW breached its fiduciary duty to Yusen by collecting an excessive fee. Yusen's theory of the case is that the contingency fee agreement described a broad range of legal tasks that ROGW would perform for Yusen in the antitrust litigation, but that ROGW only performed perfunctory work to submit claims against the settlement funds, and that as a result, taking twenty-five percent of the moneys Yusen recovered is excessive.

         A plaintiff must bring an action against an attorney that arises out of an act or omission in the performance of professional services within two years from the time the plaintiff knew or reasonably should have known of the injury. 735 ILCS 5/13-214.3(b). According to ROGW, Yusen should have known of its injuries from the alleged minimal work ROGW performed by March 2012, when the claims administrator determined it would use data from Settlement 2 to determine the remaining claims in Settlements 3, 4, and 5. Since Yusen did not file its counterclaim by March 2014, ROGW concludes that § 214.3(b) bars Yusen's breach of fiduciary duty counterclaim.[18] Yusen does not dispute that § 214.3(b) applies, but instead argues that ROGW has not come forward with evidence that would support an accrual date for Yusen's counterclaim that would render it time-barred as a matter of law. Yusen says it could not have known whether ROGW breached its duty not to collect a reasonable fee until after Yusen paid ROGW for Settlement 3 in October 2013, because that is when Yusen was able to assess the total amount of its recovery versus the nature and total amount of work performed by ROGW.

         A cause of action accrues when the facts that authorize bringing the cause of action exist. Henderson Square Condo. Ass'n v. LAB Townhomes, LLC, 399 Ill.Dec. 387, 402, opinion modified on denial of reh'g (Jan. 28, 2016). Based on the undisputed record, Yusen had knowledge of facts that support its theory by March 2012. First, Yusen knew that it would have to pay ROGW twenty-five percent of its recovery in the antitrust litigation as early as November 3, 2007, when it executed the contingency fee agreement. Yusen reaffirmed the contingency fee agreement at least twice during its attorney-client relationship with ROGW. See [70] ¶ 52; [43-26] at 1.

         Second, Yusen knew what tasks ROGW was and was not performing in submitting claims against the settlement funds, and Yusen knew what work it was doing itself, in furtherance of submitting a claim, as of March 20, 2012. By that time, ROGW had already submitted claims for Yusen against two funds, which involved ROGW and Yusen monitoring each other's progress as well as providing each other updates. In a series of emails on June 7 and 8, 2011, about Yusen's status in collecting data for ROGW for Settlement 2, Todaro expressed confusion- Todaro thought that O'Donnell already had the information ROGW needed to file a claim against Settlement 2, [43-28] at 2-3; and Todaro was simultaneously unsure of how ROGW could have had enough data, because Yusen had only given ROGW data for one airline. Id. at 2. This suggests that Yusen was content to have ROGW submit a new claim on its behalf based on previously collected data for one airline, even though it knew that more data existed. Ultimately, it was not until Settlement 3 that previously collected and submitted data would be used to the exclusion of all new data. To file a claim on Yusen's behalf against Settlement 2, ROGW needed additional data from Yusen beyond what Yusen had already provided to claim against the Lufthansa Settlement. See Id. at 1-2.

         ROGW's email in response to Todaro stated, in relevant part, “While I wish that we could simply use the data that Yusen has already provided to us and prepare Yusen's claim against [. . .] Settlement 2, unfortunately, it is impossible for us to do so. Therefore, we will need data from Yusen to file this next claim.” Id. at 1. The message also described the format that Yusen should use to submit data for Settlement 2. Id. at 1-2. Yusen clearly understood ROGW's directive because Yusen's IT department went on to collect additional data, which Todaro later forwarded to Rifkin, thereby allowing ROGW to submit a claim on Yusen's behalf for Settlement 2. [62] ¶ 38. Moreover, on March 20, 2012, ROGW informed Yusen that the data they had used to file a claim against Settlement 2 would be used in Settlement 3, such that no further work would need to be done in order for Yusen to recover from Settlement 3. There is nothing in the record that shows Yusen objecting to that strategy.

         Finally, Yusen argues that its counterclaim is not barred under 735 ILCS 5/13-207. Section 13-207 saves counterclaims from being time-barred if the primary cause of action, to which the counterclaim responds, commences before the counterclaim would have become time-barred. Barragan v. Casco Design Corp., 216 Ill.2d 435, 449 n.4 (2005) (citing 735 ILCS 5/13-207). In this case, Yusen's counterclaim became time-barred as of March 20, 2014, which was before ROGW filed its complaint (the primary cause of action) in DuPage County on March 6, 2015, see [1-1] at 2; thus, § 13-207 cannot save Yusen's counterclaim.[19] The counterclaim is barred by the statute of limitations. The parties have fully briefed the merits of the counterclaim, and I address them in the interests of completeness.

         B. Breach of ...


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