Dowd and Dowd, Ltd. v. Gleason

672 N.E.2d 854, 284 Ill. App. 3d 915, 220 Ill. Dec. 37
CourtAppellate Court of Illinois
DecidedOctober 25, 1996
Docket1-95-2295, 1-95-2507, 1-95-2641 cons.
StatusPublished
Cited by24 cases

This text of 672 N.E.2d 854 (Dowd and Dowd, Ltd. v. Gleason) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dowd and Dowd, Ltd. v. Gleason, 672 N.E.2d 854, 284 Ill. App. 3d 915, 220 Ill. Dec. 37 (Ill. Ct. App. 1996).

Opinion

JUSTICE COUSINS

delivered the opinion of the court:

Defendants, Nancy J. Gleason (Gleason) and Douglas Shreffler (Shreffler), were former officers and directors of the plaintiff law firm, Dowd & Dowd. Gleason and Shreffler left the firm and started their own firm, Gleason, McGuire and Shreffler (GMS). On July 25, 1991, plaintiff filed a suit against Nancy Gleason, Douglas Shreffler and GMS for, inter alia, breach of fiduciary duties, breach of employment contract and conspiracy. Gleason and Shreffler filed a motion for summary judgment and filed a counterclaim for amounts due under a stock purchase agreement and for sanctions pursuant to Supreme Court Rule 137 (134 Ill. 2d R. 137). After transfer of the case from the chancery division to the law division, Judge Kenneth Gillis entered summary judgment in favor of Gleason and Shreffler on the stock purchase count of their counterclaim and granted in part and denied in part their motion for summary judgment against plaintiff’s claims. He also denied the motion by defendants for sanctions. As to count I, breach of fiduciary duty, Judge Gillis certified a question pursuant to Supreme Court Rule 308(a) as to whether plaintiff stated a cause of action against Gleason and Shreffler. On appeal, plaintiff contends that the trial court erred by: (1) considering defendants’ motion for summary judgment because a previous judge had already denied the same motion; (2) making findings of fact in granting the motion for summary judgment; (3) weighing the credibility of the witnesses; (4) dismissing GMS as a party defendant; (5) ruling that Gleason and Shreffler did not breach the terms and conditions of their employment agreements; and (5) ruling that plaintiff was obligated to repurchase the shares of stock owned by Gleason and Shreffler. On cross-appeal, defendants contend that the trial court erred by: (1) denying their motion for summary judgment against count I of plaintiff’s second amended complaint; and (2) denying their Rule 137 motion for sanctions.

BACKGROUND

Dowd & Dowd is a professional legal corporation. Michael Dowd (Dowd) was the senior partner in the firm and controlled 54.1% of the corporation’s stock. When Gleason and Shreffler left Dowd & Dowd on December 31, 1990, ownership of shares in the firm was: Michael Dowd, 35 shares; Nancy Gleason, 10 shares; Kenneth Gurber, 10 shares; Robert Yelton III, 10 shares; Douglas Shreffler, 7 shares. However, Dowd had asked for and received from each of the other shareholders a proxy giving him the power to vote one of that shareholder’s shares. Thus, Dowd could vote 39 shares, while the other partners, combined, could vote 33.

In the late 1970s, Northbrook Excess and Surplus Insurance Company, a subsidiary of Allstate Insurance Company (Allstate), retained plaintiff for advice on insurance coverage for claims that were being made against Allstate’s policyholders for injuries arising from exposure to asbestos products. After Gleason joined Dowd & Dowd in 1977, she worked on the Allstate files, and during the next 13 years, she became the primary person to whom Allstate’s claim executives looked for counsel on asbestos and other environmental insurance coverage matters. By 1990, plaintiff’s revenues from Allstate exceeded $6 million, which represented approximately 58% of the firm’s revenues. At that time, approximately 12 of plaintiff’s 25 attorneys practiced almost exclusively for Allstate.

At a Dowd & Dowd meeting on September 25, 1990, Michael Dowd announced that he was unilaterally making his son, Patrick, a partner, promoting him over Judith Gleason and another associate, Lawrence Szymanski, both of whom were senior to Patrick Dowd. Following Dowd’s appointment of Patrick Dowd, Gleason, Shreffler and Judith Gleason began investigating the possibility of establishing a new, separate law firm, and by early November 1990, they decided to take preliminary steps to form their own law firm.

By December 1990, GMS had located office space, ordered furniture and equipment and initiated a banking relationship with the Harris Bank. On December 31, 1990, Gleason and Shreffler resigned from Dowd & Dowd and, with Philip McGuire and Judith Gleason, started the GMS law firm. On that day, Gleason and Shreffler went to Michael Dowd’s home and informed him of their resignations as officers and directors of Dowd & Dowd.

Plaintiff filed a second amended complaint on June 10, 1993. It contained seven counts: (1) breach of fiduciary duty; (2) breach of employment contract; (3) interference with prospective advantage; (4) interference with contractual relationship with employees; (5) interference with contractual relationships with clients; (6) civil conspiracy; and (7) willful and wanton conduct. Relief sought included compensatory damages (measured by revenue generated by GMS through January 1, 1993, from clients formerly represented by Dowd & Dowd or net profits lost by Dowd & Dowd for those clients, whichever was larger), punitive damages, an accounting, a constructive trust on all revenue received by GMS for two years beginning with the entry of judgment, and recovery of bonuses and salaries paid to Gleason, Shreffler and others who had joined GMS from September through December 1990.

On July 30, 1993, defendants filed a motion for judgment on the pleadings or, alternatively, for summary judgment, pursuant to sections 2 — 615 and 2 — 1005 of the Code of Civil Procedure. 735 ILCS 5/2 — 615, 2 — 1005 (West 1992). On December 10, Judge Foreman denied in part and granted in part defendants’ motion and also ordered that defendants answer the viable counts.

On February 14, 1994, defendants filed their answer, along with a jury demand, affirmative defenses and a verified counterclaim. Counts I, III and IV were directed against both Dowd & Dowd and Michael Dowd personally. Count I alleged Dowd breached his fiduciary duties to the minority shareholders of the firm, count III was for interference with prospective advantage, and count IV was for willful and wanton conduct. Count II sought damages against Dowd & Dowd for failure to repurchase plaintiffs’ shares in accordance with the share purchase agreement.

On June 6, 1994, defendants once again moved for summary judgment, which the trial court denied. On December 2, 1994, Judge Foreman transferred the cause from the chancery division to the law division, and the case was assigned to Judge Kenneth Gillis. After the assignment, the parties filed cross-motions for summary judgment and defendants filed a motion for sanctions.

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Bluebook (online)
672 N.E.2d 854, 284 Ill. App. 3d 915, 220 Ill. Dec. 37, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dowd-and-dowd-ltd-v-gleason-illappct-1996.