Second Division January 24, 2006
No. 1-04-3512
In re ESTATE OF Lois E. KLEHM, ) Appeal from the Deceased (Kathleen Klehm-Marinangel, ) Circuit Court of Executor of the Estate of ) Cook County Lois E. Klehm, Petitioner-Appellant, ) v. Arnold J. Klehm, Roy G. Klehm, and ) No. 99 P 119 Susan Klehm, individually and as ) Executor of the Estate of ) Honorable Carl H. Klehm, Respondents-Appellees). ) James W. Kennedy ) Judge Presiding.
JUSTICE HALL delivered the opinion of the court:
The central issue for review is whether the trial court
abused its discretion in granting a motion disqualifying
attorneys Frederick C. Cappetta (Cappetta) and Ronald E. Shadle
(Shadle) and their respective law firms from further representing
executor Kathleen Klehm-Marinangel in a citation proceeding she
initiated against certain family members and their business
entities for the purpose of discovering information and
recovering monies and assets allegedly belonging to the estate of
her deceased mother, Lois E. Klehm.
Kathleen petitioned this court for review pursuant to
Supreme Court Rule 306(a)(7) (166 Ill. 2d R. 306(a)(7)). For the
reasons that follow, we find that the trial court abused its
discretion in this case and therefore we reverse.
While the parties disagree regarding certain specific facts,
those that follow are uncontroverted. Lois E. Klehm (Mrs. Klehm)
died testate on December 8, 1998. In addition to a number of
grandchildren, she was survived by three adult children, Roy G. 1-04-3512
Klehm, Arnold J. Klehm, and Kathleen Klehm-Marinangel; another
son, Carl H. Klehm (Chuck), predeceased her and was survived by
his wife Susan Klehm, who is a party to these proceedings.
In January 1999, Kathleen filed a petition to probate her
mother's last will and for letters testamentary. The will was
drafted by attorneys from the law firm of Sidley & Austin. At
the time she filed the petition, Kathleen was represented by the
law firm of Cappetta & Shadle, Ltd. On February 4, 1999, the
circuit court entered an order admitting the will to probate and
appointing Kathleen as executor of her mother's estate.
Mrs. Klehm's will had nominated Roy, Arnold, and Kathleen as
coexecutors. The sons, however, declined to act as coexecutors
under the will and in August 1999, filed a petition contesting
the will based on undue influence.
From January 1999 through 2003, Cappetta and Shadle
represented Kathleen in the will contest and in numerous out-of-
court negotiations concerning the estate's claims against the
sons and their business entities. On August 15, 2003, after
negotiations stalled, Kathleen filed a three-count citation
petition against Roy, Susan (individually and as administrator of
Chuck's estate), Arnold, and their business entities
(collectively Klehm movants), for the purpose of discovering and
recovering monies and assets allegedly belonging to the estate.
On September 30, 2003, the Klehm movants filed a motion to
disqualify Cappetta and Shadle from representing Kathleen in the
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citation proceedings or, in the alternative, in any estate
proceedings other than the will contest. The Klehm movants
contended that Cappetta and Shadle had previously represented
them in various transactions at issue in the pending citation
proceedings and therefore the attorneys' representation of
Kathleen in her capacity as executor of their mother's estate
violated Rule 1.9 of the Rules of Professional Conduct 1 because
1 Rule 1.9 of the Code of Professional Responsibility
provides, in pertinent part:
"Conflict of Interest: Former Client
(a) A lawyer who has formerly represented a client in a
matter shall not thereafter:
(1) represent another person in the same or a
substantially related matter in which that person's
interests are materially adverse to the interests of
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it constituted involvement in litigation adverse to a former
client's interest in a matter substantially related to the former
representation. The Klehm movants also filed a motion requesting the trial
court to strike the citation petition on the grounds that: all
requested documents and information had already been provided and
therefore the citation was moot; the petition was not a proper
petition for citation to discover assets because it did not
actually seek issuance of a citation but rather attacked the
validity of the transfers themselves; and the petition was
unsupported by either current law or facts and was therefore
sanctionable.
On November 4, 2004, following five days of hearings, the
trial court entered an order disqualifying Cappetta and Shadle
from further representing Kathleen in the citation proceedings,
but not as to any other supplemental proceedings in the estate.
Kathleen filed a timely petition for leave to appeal the order on
the former client, unless the former client consents
after disclosure[.]" 134 Ill. 2d R. 1.9.
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December 6, 2004. On February 3, 2005, the trial court granted
Kathleen's petition for leave to appeal.
ANALYSIS
I. Waiver of Right to Seek Disqualification of Counsel
Kathleen first contends that the trial court abused its
discretion by failing to find that the Klehm movants waived their
right to seek disqualification of attorneys Cappetta and Shadle
and their respective law firms, where the movants waited
approximately four years before raising the issue. We agree.
Courts have vital interests in "protecting the attorney-
client relationship, maintaining public confidence in the legal
profession and ensuring the integrity of judicial proceedings."
S K Handtool Corp. v. Dresser Industries, Inc., 246 Ill. App. 3d
979, 989, 619 N.E.2d 1282 (1993). To protect these vital
interests, courts have the authority to disqualify an attorney
from representing a particular client. See, e.g., LaSalle
National Bank v. Triumvera Homeowners Ass'n, 109 Ill. App. 3d
654, 664, 440 N.E.2d 1073 (1982) (rationale for disqualification
"is to enforce the attorney's duty of absolute fidelity and to
guard against the danger of inadvertent use of confidential
information").
At the same time, however, it is well settled that since
disqualification serves to destroy the attorney-client
relationship by preventing a party from freely retaining counsel
of his choice, it is regarded as a drastic measure that courts
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should apply only when absolutely necessary. S K Handtool Corp.,
246 Ill. App. 3d at 989; Schwartz v. Cortelloni, 177 Ill. 2d 166,
178, 685 N.E.2d 871 (1997). In addition, motions to disqualify
are generally viewed with caution since they can be used as a
tool to harass opposing counsel. Chemical Waste Management, Inc.
v. Sims, 875 F. Supp. 501, 505 (N.D. Ill. 1995).
In an effort to discourage tactical gamesmanship, courts
have determined that motions to "disqualify should be made with
reasonable promptness after a party discovers the facts which
[led] to the motion." Kafka v. Truck Insurance Exchange, 19 F.3d
383, 386 (7th Cir. 1994), quoting Central Milk Producers
Cooperative v. Sentry Food Stores, Inc., 573 F.2d 988, 992 (8th
Cir. 1978). Consequently, waiver is a valid basis for denying a
motion to disqualify. See, e.g., International Insurance Co. v.
City of Chicago Heights, 268 Ill. App. 3d 289, 302-03, 643 N.E.2d
1305 (1994) ("[a] party waives any objection to an alleged
attorney conflict of interest if it fails to assert that conflict
promptly").
In determining whether a moving party has waived its right
to object to an attorney's representation of an adverse party on
conflict of interest grounds in civil cases, courts have
considered such factors as the length of the delay in bringing
the motion to disqualify; when the movant learned of the
conflict; whether the movant was represented by counsel during
the delay; why the delay occurred; and whether disqualification
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would result in prejudice to the nonmoving party. See Chemical
Waste Management, Inc., 875 F. Supp. at 505.
In this case, the record indicates that the Klehm movants
and their counsel knew or should have known of a potential
conflict and adverse representation since at least August 1999,
when the sons declined to act as coexecutors under their mother's
will and instead hired lawyers to contest the will. The Klehm
movants, contested, among other things, deletion of the
"forgiveness of debt" provision that was contained in Mrs.
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Klehm's 1984 will 2 and reiterated in her 1994 will.
2 The forgiveness of debt provision contained in the 1984
will stated as follows:
"D. Forgiveness of Debt:
1. all indebtedness of any kind and nature due to
LEK [Lois E. Klehm] from sons, KPI [Klehm Properties,
Inc.], KBP [Klehm Boys' Partnership], CKSN [Charles
Klehm & Son Nursery], or their other entities
2. all indebtedness of any kind and nature due to
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LEK from KKM [Kathleen Klehm-Marinangel]."
The forgiveness of debt provision contained in the 1994 will
stated as follows:
"G. Forgiveness of Debt:
1. 'I forgive all indebtedness of every kind and
nature due me from my sons, Klehm Properties, Inc.,
Klehm Boys' Partnership, Klehm Nursery Development,
Inc., and Charles Klehm & Son Nursery.'"
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In the 1996 will, the "forgiveness of debt" provision was
deleted, and the will that was admitted to probate in February
1999 contained section 5.2, which stated:
"Most of my estate consists of investments made in
businesses conducted by my sons and loans made in connection
with said businesses. Since these businesses are currently
invested in real estate which may be difficult to liquidate,
I direct my Executors to grant these businesses sufficient
time to raise the cash necessary to meet the obligations to
pay the bequests contained in Article 2, so that the value
of such businesses will not be unduly sacrificed."
In light of the language contained in section 5.2 directing
the executor to recover money/debt from business entities owned
by the sons, and the fact that the "forgiveness of debt"
provision was deleted from the 1996 will, the Klehm movants
evidently realized that their interests were potentially adverse
to the estate when they contested the will.
The Klehm movants placed themselves in a potentially
conflicting position with the estate when they initiated
adversarial proceedings contesting the will. Cappetta and
Shadle's defense of the terms of the will resulted in a
potentially adversarial relationship between the attorneys and
the Klehm movants and their attorneys. See Jewish Hospital of St.
Louis, Missouri v. Boatmen's National Bank of Belleville, 261
Ill. App. 3d 750, 763, 633 N.E.2d 1267 (1994) (noting that
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defending the terms of the will often results in an adversarial
relationship between the estate and a beneficiary of the estate);
In re Estate of Kirk, 292 Ill. App. 3d 914, 919, 686 N.E.2d 1246
(1997) (same); Neal v. Baker, 194 Ill. App. 3d 485, 488, 551
N.E.2d 704 (1990) (adversarial relationship resulted between
attorney for the estate and income beneficiary where beneficiary
contested attorney's contention that she, rather than the estate,
should pay inheritance tax).
The Klehm movants and their attorneys knew or should have
known of the potential conflict and adverse representation at the
time they filed their will contest in August 1999. Nonetheless,
they permitted the probate case to proceed for approximately four
years before filing their motion to disqualify Cappetta and
Shadle on September 30, 2003. Courts have denied motions to
disqualify brought after comparable and even shorter periods of
delay. See, e.g., Tanner v. Board of Trustees, 121 Ill. App. 3d
139, 146-47, 459 N.E.2d 324 (1984) (nine months); First National
Bank of Elgin v. St. Charles National Bank, 152 Ill. App. 3d 923,
932-33, 504 N.E.2d 1257 (1987) (16 months); Roth v. Roth, 84 Ill.
App. 3d 240, 244-45, 405 N.E.2d 851 (1980) (two years); In re
Estate of Kirk, 292 Ill. App. 3d at 922 (3.5 years).
The Klehm movants maintain that the conflict did not arise
until August 15, 2003, when Kathleen filed her citation petition.
The Klehm movants contend that it was only when Kathleen filed
the citation petition that they became aware that certain
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transactions were being challenged and that their interests were
adverse to the estate. The evidence does not support the Klehm
movants' argument.
As previously discussed, the Klehm movants and their
attorneys knew or should have known of the potential conflict and
adverse representation when they filed their will contest in
August 1999. Contrary to the Klehm movants' contention, the
potential conflict did not arise on the date the citation
petition was filed. Rather, the potential conflict and adverse
representation arose when the sons declined to act as coexecutors
under their mother's will and immediately hired lawyers to
contest the will and strike the citation petition.
It is noteworthy that the Klehm movants were represented by
counsel during the entire four-year delay. Moreover,
disqualifying Cappetta and Shadle at this stage of the
proceedings would unfairly prejudice the estate because it would
deprive the estate of lawyers with substantial knowledge of the
proceedings and require substitute counsel to perform work that
most likely would duplicate the work already performed by
Cappetta and Shadle.
II. Substantial Relationship
Even if the Klehm movants had not waived their right to seek
disqualification of attorneys Cappetta and Shadle, the attorneys
still should not have been disqualified from representing
Kathleen in the citation proceedings, because the record shows
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that the movants failed to meet their burden of establishing a
"substantial relationship" between the attorneys' earlier
representation of the movants and their subsequent representation
of Kathleen. Under Rule 1.9 of the Illinois Rules of
Professional Conduct, an attorney's subsequent representation of
a party with interests adverse to a former client is prohibited
if the matters involved in the two representations are
substantially related. Schwartz, 177 Ill. 2d at 177. A party
seeking disqualification of counsel under Rule 1.9 bears the
burden of proving that the former and subsequent representations
are substantially related. Schwartz, 177 Ill. 2d at 177-78.
A trial court's decision on whether to disqualify counsel
will not be disturbed absent an abuse of discretion.
International Insurance Company, 268 Ill. App. 3d at 302. An
abuse of discretion occurs where a trial court's decision is
arbitrary, fanciful, or unreasonable, or where no reasonable
person would adopt the court's view. Agnew v. Shaw, 355 Ill. App.
3d 981, 990, 823 N.E.2d 1046 (2005). Moreover, in cases such as
this one, where the question on appeal involves the resolution of
factual issues, the trial court's determination will not be
disturbed unless it is unsupported by the evidence. Schwartz, 177
Ill. 2d at 176.
A party seeking disqualification based on prior
representation must establish the existence of a prior attorney-
client relationship and then establish that the prior and
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subsequent representations are substantially related. Gagliardo
v. Caffrey, 344 Ill. App. 3d 219, 226, 800 N.E.2d 489 (2003).
Our supreme court adopted the three-part test set forth in
LaSalle National Bank v. County of Lake, 703 F.2d 252 (7th Cir.
1983), as a means of determining whether prior and subsequent
representations are substantially related. See Schwartz, 177 Ill.
2d at 180; Hasco, Inc. v. Roche, 299 Ill. App. 3d 118, 127, 700
N.E.2d 768 (1998).
Under the "substantial relationship" test, the court first
makes a factual reconstruction of the scope of the prior legal
representation; second, the court determines whether it is
reasonable to infer that the confidential information allegedly
given would have been given to a lawyer representing a client in
those matters; and third, the court determines whether the
information is relevant to issues raised in the pending
litigation against the former client. See Schwartz, 177 Ill. 2d
at 178; Franzoni v. Hart Schaffner & Marx, 312 Ill. App. 3d 394,
400, 726 N.E.2d 719 (2000).
If the court finds a substantial relationship between the
prior and subsequent representations, then the court is entitled
to assume that client confidences, relevant to the subsequent
litigation, were revealed during the course of the prior
representation. LaSalle National Bank, 703 F.2d at 256. The
primary concern under the substantial relationship test is
whether "'confidential information that might have been gained in
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the first representation [may be] used to the detriment of the
former client in the subsequent action.'" INA Underwriters
Insurance Co. v. Nalibotsky, 594 F. Supp. 1199, 1206 (E.D. Pa.
1984), quoting Realco Services, Inc. v. Holt, 479 F. Supp. 867,
871 (E.D. Pa. 1979).
In answering the first question regarding the scope of the
prior representation, the court should focus on the reasons why
counsel was retained and the tasks which counsel was employed to
perform. INA Underwriters Insurance Co., 594 F. Supp. at 1206.
"Once the purposes for which the attorney was employed are clear,
it is then possible to consider the type of information which a
client would impart to an attorney performing such services for
him." INA Underwriters Insurance Co., 594 F. Supp. at 1206.
The Klehm movants contend that Cappetta's and Shadle's prior
representation of the movants in various real estate and loan
transactions in the 1970s constitutes grounds for disqualifying
the two attorneys from representing Kathleen in the citation
proceedings. The Klehm movants maintain that there is a
substantial relationship between issues encompassed in the prior
representation and those of the citation proceeding, because both
representations concern the same transactions. The Klehm movants
also contend that the attorneys' representation of the movants as
beneficiaries of the estate of their father, Mr. Klehm, provides
additional grounds for disqualifying the attorneys. We must
reject the Klehm movants' contentions.
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Cappetta's and Shadle's representation of the coexecutors of
Mr. Klehm's estate does not constitute prior representation of
the Klehm movants justifying disqualification of the attorneys
under the rules of professional conduct, because under the facts
in this case, such representation did not create an attorney-
client relationship between the movants and the attorneys. See
Jewish Hospital of St. Louis, Missouri, 261 Ill. App. 3d at 763
("[e]ven though beneficiaries of a decedent's estate are intended
to benefit from the estate, an attorney for an estate cannot be
held to a duty to a beneficiary of an estate, due to the
potentially adversarial relationship between the estate's
interest in administering the estate and the interests of the
beneficiaries of the estate"). Without an attorney-client
relationship, there is no basis for disqualification under the
rules of professional conduct. See Schwartz, 177 Ill. 2d at 174.
In regard to a factual reconstruction of the nature and
scope of Cappetta's and Shadle's prior legal representation of
the Klehm movants, the record shows the following. Cappetta
represented the Klehm sons (Roy, Arnold, and Chuck) from 1972 to
1975, performing such services as representing Roy and his wife
Sara in preparing their estate planning documents; creating the
Klehm Boys Partnership (Roy, Arnold, and Chuck) and the Klehm
Children's Partnership (Roy, Arnold, Chuck, and Kathleen) for the
purpose of holding title to certain real estate; representing
Arnold in the purchase of two parcels of real estate;
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representing Chuck in acquiring 16 parcels of real estate
(Corridor purchases); representing Klehm family members in regard
to Klehm Properties, Inc., and maintaining the corporate minute
books for this business entity until sometime after 1975; and
representing the Klehm family, their business entities, and the
estate of Mr. Klehm in negotiating and closing the equitable loan
transactions.
Mrs. Klehm terminated Cappetta's representation of her,
individually, in March 1975, after which he no longer represented
the Klehm family. Cappetta, however, continued to represent Mrs.
Klehm and the Continental Illinois National Bank, as coexecutors
of the estate of Mr. Klehm, until November 1981.
Shadle started working for Cappetta in 1974 as an unlicensed
law clerk. After he received his license to practice law in
1976, Shadle joined Cappetta, and from 1976 to 1981, he served as
attorney for the coexecutors of the estate of Mr. Klehm,
participating in various real estate transactions.
The Klehm movants maintain that this evidence establishes
the existence of a substantial relationship between Cappetta's
and Shadle's prior representation of the movants and the
attorneys' subsequent representation of Kathleen in the citation
proceedings. We disagree.
The evidence establishes that the nature and scope of
Cappetta's and Shadle's former representation of the Klehm
movants in the various real estate and loan transactions does not
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entail disclosure of confidential information relevant to the
citation proceedings. "The mere disclosure of confidential
information to counsel in the course of the prior representation
is not, itself, sufficient grounds for disqualification of that
counsel when he later represents an adverse party. The
confidential information must be of the type which one would
expect to be related to the issues in the present litigation."
INA Underwriters Insurance Co., 594 F. Supp. at 1207.
Relevance is gauged by the violations alleged in the
complaint and an assessment of the evidence useful in
establishing those allegations. Westinghouse Electric Corp. v.
Gulf Oil Corp., 588 F.2d 221, 226 (7th Cir. 1978). The complaint
in this case is in the form of a three-count citation petition to
discover and recover assets.
The purpose of a citation proceeding is to "obtain the
return of personal property belonging to the estate but in the
possession of or being concealed by others, or to obtain
information needed to recover estate property." Lombardi v.
Lepkowicz, 28 Ill. App. 3d 79, 81, 328 N.E.2d 328 (1975). In the
instant case, any confidential information Cappetta and Shadle
obtained during their representation of the Klehm movants in real
estate and loan transactions in the 1970s has little relevance to
the current citation proceeding.
Count I of the citation alleges as follows: the Klehm
movants have information and knowledge concerning the existence,
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ownership, and location of common stock of Klehm Properties, Inc.
(KPI), belonging to the estate of Mrs. Klehm and withheld by the
movants from the executor (Kathleen); the Klehm movants have in
their possession or control evidence of title to stock belonging
to the estate of Mrs. Klehm, which movants wrongfully refuse to
deliver to the executor; corporate records and documents do not
reflect certain stock transfers; and, since the alleged or
claimed transfers were purportedly gifts, gift tax returns should
have been filed regarding this stock.
Count II alleges that the Klehm movants and certain other
family members have in their possession or control, or have
converted, KPI stock belonging to the estate of Mrs. Klehm, which
movants wrongfully refuse to deliver or account for the value
thereof; and corporate records and documents do not reflect
certain stock transfers.
The issues presented in counts I and II concern allegations
of conversion of estate assets and whether purported transfers of
KPI stock by Mrs. Klehm during the period of 1980 through 1995
constituted valid gifts or transfers. It is undisputed that
neither Cappetta or Shadle nor their respective law firms
represented Mrs. Klehm or the Klehm movants in connection with
the purported transfers during this period.
The record shows that Shadle served as attorney for the
coexecutors of the estate of Mr. Klehm and that he never directly
represented the Klehm movants. Cappetta was fired in 1975, five
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years before the transfers at issue occurred. Consequently, any
confidential information Cappetta and Shadle obtained during
their representation of the Klehm movants in real estate and loan
transactions in the mid 1970s has little relevance in regard to
allegations concerning the conversion of estate assets or the
validity of gifts made in 1980 through 1995. See, e.g., Moniuszko
v. Moniuszko, 238 Ill. App. 3d 523, 529, 606 N.E.2d 468 (1992)
("elements of a valid gift are donative intent, the donor's
parting with the exclusive dominion and control over the subject
of the gift, and delivery to the donee"); IOS Capital, Inc. v.
Phoenix Printing, Inc., 348 Ill. App. 3d 366, 370, 808 N.E.2d 606
(2004) (party claiming conversion must establish a right to the
property, a right to immediate possession, wrongful control by
the defendant, and a demand for possession).
Count III alleges that a fiduciary relationship existed
between Mrs. Klehm and certain Klehm movants, and as a result of
an alleged breach of that fiduciary duty, asks for an accounting
and recovery of assets. With respect to the issues raised in
count III, the record indicates that neither Cappetta or Shadle
nor their respective law firms represented the Klehm movants in
any actions that could result in a court finding that the movants
breached their fiduciary duty to Mrs. Klehm. The prior
representation was not related to the commission or omission of
actions of the Klehm movants resulting in a breach of their
fiduciary duty to Mrs. Klehm during the 1980s and 1990s. See,
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e.g., Neade v. Portes, 193 Ill. 2d 433, 444, 739 N.E.2d 496
(2000) (to state a claim for breach of fiduciary duty, a party
must establish that a duty exists, that the fiduciary duty was
breached, and that such breach proximately caused the injury).
In conclusion, the evidence establishes that no substantial
relationship existed between Cappetta's and Shadle's prior
representation of the Klehm movants and the attorneys' subsequent
representation of Kathleen in the citation proceedings.
Moreover, even if the Klehm movants had established a substantial
relationship between the prior and subsequent representations,
Cappetta and Shadle still should not have been disqualified,
because the movants waived their right to seek disqualification
of the attorneys by waiting approximately four years before
raising the issue.
Accordingly, for the reasons set forth above, we reverse the
order of the circuit court of Cook County disqualifying attorneys
Cappetta and Shadle from representing Kathleen in the citation
proceedings.
Reversed.
WOLFSON and SOUTH, JJ., concur.
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