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Margules v. Beckstedt

Court of Appeals of Illinois, First District, Second Division

June 4, 2019

MICHAEL MARGULES, EDWARD AMARAL, and MOSHOLU, INC., Plaintiffs-Appellees,
v.
JOHN BECKSTEDT and WHEN 2 TRADE GROUP, LLC., Defendants (Richard Steck, Citation Respondent and Contemnor-Appellant).

          Appeal from the Circuit Court of Cook County. No. 17 L 50107. Honorable Michael F. Otto, Judge, presiding.

          JUSTICE HYMAN delivered the judgment of the court, with opinion. Justices Lavin and Pucinski concurred in the judgment and opinion.

          OPINION

          HYMAN JUSTICE.

         ¶ 1 Plaintiffs registered in Cook County a judgment of $1.675 million against John Beckstedt and When 2 Trade Group, LLC (together, debtors), and filed citations to discover assets on them. Unsatisfied with the responses to the citations, plaintiffs issued a third-party citation to discover assets against the debtors' lawyer, Richard Steck. Plaintiffs wanted to know about the source of payments for Steck's representation. During Steck's citation examination, he explained that a third party, also his client, had asked him to represent the debtors. When pressed about the identity of the third-party client, he declined to answer, citing attorney-client privilege and the Illinois Rules of Professional Conduct.

         ¶ 2 Plaintiffs moved to compel Steck to reveal the identity of his third-party client. The trial court granted the motion and held Steck in contempt, fining him $25 per day until he complied with the trial court's ruling. After Steck moved to reconsider, the trial court stayed its contempt order pending Steck's anticipated appeal. Steck now challenges the trial court's contempt finding.

         ¶ 3 We conclude that neither attorney-client privilege nor the Rules of Professional Conduct shield the identity of Steck's third-party client, so affirm the judgment of the trial court and remand for further proceedings.

         ¶ 4 Background

         ¶ 5 On January 19, 2017, the Superior Court of California entered a $1.675 million judgment in favor of plaintiffs. After registering the judgment in Cook County, plaintiffs initiated supplementary proceedings to discover assets to satisfy the judgment. Plaintiffs issued citations to discover assets against the debtors directly. Then, in June 2017, skeptical of and unsatisfied with the debtors' responses to the citations, plaintiffs filed a third-party citation to discover assets against the debtors' lawyer, Richard Steck.

         ¶ 6 Relevant here, the citation requested "[a]ll documents evidencing any payments received by [Steck] or any others employed by [him] with respect to any representation of John Beckstedt [or When 2 Trade Group LLC] or by any other individual or entity acting on [their] behalf." In addition, the citation requested "[a]ll documents evidencing any retainer received or held by [Steck] or any others employed by or in partnership with [him] with respect to any representation of John Beckstedt [or When 2 Trade Group LLC] whether paid by [them] or by any other individual or entity acting on [their] behalf." Steck, while noting and reserving some objections, denied having been paid by the debtors or anyone purporting to act on their behalf.

         ¶ 7 What happened over the next year is not apparent from the record, but in April 2018 Steck and plaintiffs' lawyers exchanged a series of e-mails. One of plaintiffs' lawyers explained to Steck that they had made "multiple attempts to gather information from Mr. Beckstedt." Based on their conclusion that Beckstedt "either cannot answer [their] questions or is choosing not to," plaintiffs' lawyers requested that Steck sit for a citation examination. Steck responded that he had "no invoices, evidence of payment or other like records" because he had never billed or issued statements to Beckstedt or When 2 Trade. It was in this series of e-mails that Steck first asserted that "any information [he] ha[d] about [his] clients other than When 2 Trade and Beckstedt is privileged, including their identity."

         ¶ 8 Unsatisfied with that answer, plaintiffs' lawyers sent Steck an e-mail explaining they believed a third party was "paying [j]udgment [d]ebtors' tab" and that they had a right to "both [Steck's] requests for payment in the form of invoices/bills and evidence of [his] receipt of payment for [his] work on their behalf." Steck continued asserting the privilege, and though his e-mails deteriorated in civility, ultimately he agreed to sit for an examination.

         ¶ 9 At his examination, Steck provided greater detail about the involvement of his third-party client:

"Q. So since 2012, you have received no payments from either John Beckstedt or When 2 Trade Group for legal services?
A. I don't believe that I have. I did a search of my records and did not find any.
Q. Have you been paid by anyone for legal services you provided to John Beckstedt from ...

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