Episcope v. Law Offices of Campbell and Di Vincenzo

Appellate Court of Illinois·Decided May 29, 2007·No. 1-05-2329 Rel·Published

Opinion

FIRST DIVISION

Filed: 5-29-07

No. 1-05-2329

PAUL B. EPISCOPE, Ltd., an Illinois Professional ) Appeal from the Corporation; PAUL B. EPISCOPE, Individually; ) Circuit Court of and JOHN C. ERB, Individually, ) Cook County.

)

Plaintiffs-Appellants, )

)

v. ) No. 97 CH 12492 )

LAW OFFICES OF CAMPBELL AND ) DI VINCENZO, a Partnership; RICHARD P. ) CAMPBELL, Individually; and ANTHONY S. ) DI VINCENZO, Individually, ) Honorable ) Mary Anne Mason,

Defendants-Appellees. ) Judge Presiding.

MODIFIED OPINION UPON DENIAL OF PETITION FOR REHEARING

JUSTICE ROBERT E. GORDON delivered the opinion of the court:

The plaintiffs, attorneys Paul Episcope and John Erb and the Episcope law firm, sued defendant attorneys to recover fees under a fee-splitting agreement. Plaintiffs allege in their complaint that their representation agreement (agreement) with defendants, Anthony Di Vincenzo and Richard Campbell and their law partnership, and the parties’ mutual client, Havoco of America, Ltd. (client), applies to more than one case. The lawyers agreed in writing to represent the client jointly and split fees orally in the client’s federal lawsuit for fraud and conspiracy against Elmer Hill, Hill’s company, Hilco, Inc. (Hilco), and Sumitomo Shoji American, Inc. (Sumitomo), and for breach of contract against Sumitomo. The damages claimed were the loss of a multimillion dollar contract. The parties had substituted for the original attorneys who had filed the action but the defendants actually handled the case.

After a judgment of $15 million against Hill was upheld on appeal, defendants filed a separate lawsuit on behalf of the same client against the original attorneys for legal malpractice.

Plaintiffs were not a party to the new representation agreement with the client as to the legal malpractice suit, which was settled for $8 million prior to trial. Plaintiffs claim that the original representation contract to represent the client (and split fees) extends to the legal malpractice action.

In defendants’ first motion for summary judgment, defendants argued that the legal malpractice case was separate from the parties’ fee agreement in the first case. That motion was

denied. In a second motion for summary judgment, defendants contended that any representation agreement concerning the legal malpractice case is void and unenforceable under the fee-sharing

requirements in Rules 1.5(f)(2) and (3) of the Illinois Code of Professional Conduct. 134 Ill. 2d Rs.1.5(f)(2), (f)(3). The trial court granted this motion. Plaintiffs appeal from the court’s granting of summary judgment. For the reasons set forth below, we affirm. BACKGROUND In June 1988, Barry Vandermeulen, the chairman of the board of Havoco, had concerns about his company’s lawsuit for fraud, conspiracy and breach of contract and contacted his friend, plaintiff Episcope, for consultation. His original attorneys, Freeman, Alkins and Coleman (Freeman Firm), had filed the federal action in 1981 and had withdrawn from the case. Vandermeulen wanted plaintiffs Episcope and Erb to take the case over. Instead, Episcope recommended defendants Campbell and DiVincenzo, who took over the case, and plaintiffs Episcope and Erb also filed their appearance at the direction of the client, but the legal work was performed only by Campbell and DiVincenzo.

The parties and the client, by Vandermeulen, signed a joint representation agreement on July 5, 1988. The document was titled “Representation Agreement.” In the agreement it states: “Paul B. Episcope, Ltd., and Campbell & Di Vincenzo agree to represent Havoco,” and Havoco “agrees to retain” these same lawyers, “this being the complete agreement among them.”

The representation agreement states nothing about how legal fees or the responsibilities

for the performance of the legal services were divided between the lawyers. It provides that, “In the event a monetary recovery is obtained by way of judgment, settlement or otherwise, Paul B. Episcope, Ltd., and Campbell & Di Vincenzo shall receive 33-1/3% of the Net Recovery as a contingent fee. Net recovery is the total recovery, including any award of attorney’s fees or expenses, less all expenses and disbursements that you [Havoco] have paid.”

The caption of the agreement (at the left margin directly underneath the title) lists the

“Client” and, under that, the “Matter.” The “Client” is “Havoco of America, Ltd., a Delaware Corporation.” The “Matter” is Havoco’s federal case against Hill and Hilco: “Havoco of

America, Ltd. a Delaware corporation v. Elmer C. Hill, Hilco, Inc., a Tennessee Corporation,” and Sumitomo. After this follows the case number of the pending federal action, “Civil Action No. 81 C 419.”

Defendants tried the case with a jury. In early 1989, before trial, the federal district court judge dismissed all of Havoco’s tort claims against Sumitomo as barred by the statute of limitations and only the contract claim remained. The Freeman Firm had added Sumitomo as a party defendant in November 1981, which was barred by the statute of limitations. At trial, Hilco was granted a directed verdict in its favor, and the jury found in favor of Sumitomo on the contract claim. The jury did render a verdict for $15 million on the remaining tort claim against Hill personally.

Hill filed for bankruptcy prior to the 7th Circuit affirming the judgment. The client was only able to collect $219,000 on the judgment. Defendants received a third of that amount for fees and paid Episcope a third of what they received under an oral understanding concerning their fee-splitting agreement.

Vandermeulen desired to file a legal malpractice action against the Freeman Firm for its failure to add Sumitomo as a party defendant within the statute of limitations. Initially he asked the parties to do so, but both defendants and plaintiffs declined. Plaintiffs claim they urged

defendants to take the case and delivered them research on the issues. Plaintiffs were unable to show anything more that would indicate that they were representing the interests of the client.

However, defendants did later accept the legal malpractice case. Plaintiffs claim they were “unaware” of the representation agreement in the legal malpractice case signed on February 2, 1993, and the fact that they were not included. Additionally, plaintiffs were unaware of a settlement proposal on September 8, 1993, and of the legal malpractice suit that was filed on

November 10, 1993. On June 4, 1997, Erb telephoned DiVincenzo to obtain an "update" and was told that the case was settled for $8 million in 1996. DiVincenzo refused to discuss fee sharing.

Plaintiffs then brought this action, alleging breach of a fiduciary duty and seeking a third of the fees received from the settlement. Their claim relies on the initial representation agreement. They claim it reflects the parties’ joint undertaking of representation and fee sharing, consistent with an oral agreement. They claim that the legal malpractice case is part of the same representation as that contained in the original representation agreement, only directed against a different defendant and as a result the defendants have a duty to share the fees.

Defendants in their motion for summary judgment argue the representation agreement of February 2, 1993, must be construed as a separate action. They further claim contracts, especially integrated contracts, are confined to their specific terms and point out that the initial agreement was specifically limited to the parties’ representation of the client in Havoco v. Elmer Hill, Hilco, Inc., and Sumitomo, 81 C 419.

The plaintiffs advocate an expansive construction. They claim that the legal malpractice litigation was part of the “legal dispute as a whole.” As Episcope characterized it, the suit was just another way to collect the judgment in the underlying case. Plaintiffs argue the parties’ oral understanding reflected this broader interpretation. The trial court denied the first motion for summary judgment without written comment.

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