Dowd & Dowd, Ltd. v. Gleason

693 N.E.2d 358, 181 Ill. 2d 460, 230 Ill. Dec. 229, 1998 Ill. LEXIS 357
CourtIllinois Supreme Court
DecidedMarch 19, 1998
Docket82347
StatusPublished
Cited by363 cases

This text of 693 N.E.2d 358 (Dowd & Dowd, Ltd. v. Gleason) is published on Counsel Stack Legal Research, covering Illinois Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dowd & Dowd, Ltd. v. Gleason, 693 N.E.2d 358, 181 Ill. 2d 460, 230 Ill. Dec. 229, 1998 Ill. LEXIS 357 (Ill. 1998).

Opinion

JUSTICE MILLER

delivered the opinion of the court:

The plaintiff, Dowd & Dowd, Ltd., a law firm, brought this action against two of its former members, Nancy J. Gleason and Douglas G. Shreffler, and the law firm that they formed, Gleason, McGuire & Shreffler, following their departure from Dowd & Dowd. The plaintiff sought imposition of a constructive trust on the new firm’s fee income, an accounting, and compensatory and punitive damages for breach of fiduciary duty, breach of contract, and other theories of recovery. Gleason and Shreffler filed a counterclaim, seeking amounts due under a stock repurchase agreement and sanctions. The parties submitted cross-motions for summary judgment. The trial judge denied the defendants’ request for sanctions and denied the defendants’ motion for summary judgment on the part of the plaintiff’s second-amended complaint that sought recovery for breach of fiduciary duty; with regard to that count, the trial judge certified a question of law. The trial judge otherwise ruled in favor of the defendants on the issues then contested. The plaintiff appealed, and the appellate, court affirmed in part and reversed in part. 284 Ill. App. 3d 915. We allowed the defendants’ petition for leave to appeal (166 Ill. 2d R. 315(a)), and the plaintiff additionally raises here several issues decided adversely to it by the appellate court (155 Ill. 2d R. 318(a)).

Because of the procedural posture of this case, the summary of relevant facts must be derived from the pleadings, depositions, and affidavits on file. These facts are fully summarized in the appellate court opinion and will receive only brief restatement here.

The law firm of Dowd & Dowd was organized as a professional corporation. Ownership of the firm consisted of 72 shares, which were divided in the following manner: Michael Dowd, 35 shares; Nancy Gleason, 10 shares; Kenneth Gurber, 10 shares; Robert Yelton III, 10 shares; and Douglas Shreffler, 7 shares. Dowd, however, had obtained from each of the other owners a proxy giving him the right to vote one of that person’s shares, and therefore Dowd effectively controlled a total of 39 shares, while the four other owners together controlled a total of 33 shares.

The firm’s principal client prior to the split up was Northbrook Excess and Surplus Insurance Company, a subsidiary of the Allstate Insurance Company. Billings to that client were more than $6 million in 1990, representing about 58% of Dowd & Dowd’s total revenue for that year. The work for Allstate mainly involved environmental coverage.

By November or December 1990, the members who were planning to leave the Dowd firm had obtained office space, furniture, telephones, and other equipment preparatory to their departure. They had also presented their business plan to Harris Bank, which had approved a line of credit for the new firm, to be known as Gleason, McGuire & Shreffler.

On December 31, Gleason and Shreffler resigned from Dowd & Dowd, delivering the news to Dowd in person at his home. Later that day they went to Allstate’s offices, and there they talked to two executives, Lynn Grim and George Riley; Grim was vice-president of Allstate’s claims department, and Riley was director of the company’s environmental claims department. Grim and Riley had authority to choose counsel to represent Allstate, and at the meeting on December 31 Gleason and Shreffler obtained from them responsibility for handling Allstate’s cases that were currently with Dowd & Dowd. In the weeks that followed, the new firm of Gleason, McGuire & Shreffler hired a number of persons previously employed at Dowd & Dowd, including associate lawyers and office personnel.

The plaintiff sought recovery from the defendants on a variety of theories, and the defendants filed a counterclaim. The plaintiffs second-amended complaint comprised seven counts. Count I was against Gleason and Shreffler individually for breach of fiduciary duty. Count II was against Gleason and Shreffler for breach of contract — the employment agreements signed by Gleason and Shreffler. Count II alleged several distinct breaches by the defendants, including their failure to provide 90 days’ notice of their departure, as required by the agreement, their subsequent solicitation of Dowd & Dowd clients, prohibited by the noncompetition provision in the agreement, and their subsequent solicitation of Dowd & Dowd personnel, also prohibited by the agreement. Count III was against Gleason, Shreffler, and their new firm, Gleason, McGuire & Shreffler, and alleged tortious interference with contractual relations, based on their subsequently obtaining Allstate as a client. Counts IV and V, which are not at issue in this appeal, sought recovery from Gleason, Shreffler, and their new firm on theories of tortious interference with contractual relations for hiring Dowd personnel and obtaining Dowd clients. Count VI, brought against Gleason, Shreffler, and their new firm, alleged civil conspiracy. Count VII, not at issue in this appeal, sought recovery from Gleason, Shreffler, and their new firm on a theory of willful and wanton misconduct. The defendants answered the second-amended complaint, alleged a number of affirmative defenses, and filed a five-count counterclaim.

The parties later filed cross-motions for summary judgment. The parties submitted extensive evidence in support of their respective motions, including affidavits, transcripts of depositions, and other documents. The plaintiffs attempted to show that the defendants, prior to their departure from the Dowd firm, had engaged in extensive preparations for establishing their new firm. We have already noted some of the steps taken by the defendants. The plaintiff also submitted evidence to show that the defendants, while still employed by the Dowd firm, had obtained a federal employer identificatian number and had discussed their new venture with members of the Dowd & Dowd staff.

After protracted proceedings, the trial judge entered an order that granted the following relief: summary judgment in favor of the firm Gleason, McGuire & Shreffler on counts III (interference with prospective advantage), VI (civil conspiracy), and VII (willful and wanton conduct) of the plaintiffs second-amended complaint; summary judgment in favor of Gleason and Shreffler on counts II (breach of contract) and III (tortious interference with prospective economic advantage) of the second-amended complaint; and denial of defendants’ motion for sanctions. The judge denied Gleason and Shreffler’s motion for summary judgment on count I (breach of fiduciary duty) and certified a question of law, pursuant to Supreme Court Rule 308(a) (155 Ill. 2d R. 308(a)), regarding that count. The judge also entered judgment in favor of Gleason for $100,000 and in favor of Shreffler for $70,000 on the part of the defendants’ counterclaim seeking compensation for a breach of a share repurchase agreement in their employment contracts.

The appellate court accepted the question of law certified by the trial court. Separately, the plaintiff appealed the portions of the judgment adverse to it, and the defendant appealed the denial of sanctions. As to the certified question, the appellate court concluded that the plaintiff had stated a cause of action for breach of fiduciary duty, based on evidence of the defendants’ pretermination activities.

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Bluebook (online)
693 N.E.2d 358, 181 Ill. 2d 460, 230 Ill. Dec. 229, 1998 Ill. LEXIS 357, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dowd-dowd-ltd-v-gleason-ill-1998.