MEABF Participants v. Municipal Employees' Annuity and Benefit Fund of Chicago

2018 IL App (1st) 170732

• Court: Appellate Court of Illinois
• Decided: December 26, 2018
• Docket: 1-17-0732
• Status: Unpublished

Opinion

2018 IL App (1st) 170732 No. 1-17-0732 Opinion filed December 26, 2018 Second Division

IN THE

APPELLATE COURT OF ILLINOIS

FIRST DISTRICT

) MEABF Participants: JEFFREY JOHNSON, and ) Appeal from the Circuit Court LABF Participants: ROBERT ORLICH, TERRY ) of Cook County. T. WHITE, and FRANK T. LOWERY, and ) MUNICIPAL EMPLOYEES SOCIETY, AS ) ASSOCIATIONAL REPRESENTATIVES FOR ) ITS MEMBERS, WHO ARE ALL MEABF AND ) LABF PARTICIPANTS, ) ) Plaintiffs-Appellants, ) No. 14 CH 20668 ) v. ) ) MUNICIPAL EMPLOYEES’ ANNUITY and ) BENEFIT FUND OF CHICAGO and ) LABORERS’ ANNUITY and BENEFIT FUND ) The Honorable OF CHICAGO, ) Rodolfo Garcia, ) Judge, presiding. Defendants-Appellees. ) )

JUSTICE HYMAN delivered the judgment of the court, with opinion. Presiding Justice Mason and Justice Lavin concurred in the judgment and opinion.

OPINION

¶1 After the Illinois Supreme Court ruled that Pension Code amendments violated our

Constitution’s pension protection clause, plaintiffs’ counsel in one of the consolidated cases

petitioned for attorneys’ fees. The firm sought over $200,000 under the Illinois Civil Rights Act, 1-17-0732

and an additional $750,000 from a “common fund.” The trial court denied the fee petition in its

entirety as impermissible under the Illinois Pension Code. We agree, and affirm.

¶2 Background

¶3 As summarized in Jones v. Municipal Employees’ Annuity and Benefit Fund of Chicago,

2016 IL 119618 (2016), Illinois has established public pension systems for public employees of

the City of Chicago, including the Municipal Employees’, Officers’, and Officials’ Annuity and

Benefit Fund (MEABF) (40 ILCS 5/8-101 et seq. (West 2012)), and the Laborers’ and

Retirement Board Employees’ Annuity and Benefit Fund (LABF) (40 ILCS 5/11-101 et seq.

(West 2012)). Jones, 2016 IL 119618, ¶ 3. The benefits under MEABF and LABF come from

three sources, the City, the employees, and investment returns. Id. ¶ 6. Historically, the public

pensions have been underfunded. Id. ¶ 7. Uncertainty associated with deficiencies led to the

adoption of the pension protection clause in the Illinois Constitution. Ill. Const. 1970, art. XIII,

§5. Actuarial valuation of the funds continued to show serious shortfalls, however. Id. ¶ 10.

¶4 The General Assembly adopted legislative strategies to deal with some of the

underfunded pensions. Public Act 98-641, passed in 2014, consisted of a comprehensive set of

provisions designed to reduce annuity benefits for MEABF and LABF members. Id. ¶ 18.

¶5 After Public Act 98-641 became law, MEABF participants challenged its

constitutionality and sought to enjoin enforcement: Jones v. MEABF, No. 2014 CH 20027

(Cir.Ct. Cook Co.), and Johnson v. MEABF, No. 2014 CH 20668 (Cir.Ct. Cook Co.). Both

complaints sought a declaration that Public Act 98-641 violated the pension protection clause by

diminishing pension benefits of the fund’s participants.

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¶6 The Jones plaintiffs included 14 individual participants in the MEABF, including current

employees and retirees receiving an annuity, and four labor unions whose members participated

in the MEABF. The defendants included MEABF and its board of trustees. The law firm of

Freeborn & Peters LLP represented the plaintiffs. Ten days later, Krislov & Associates, Ltd. filed

the Johnson lawsuit on behalf of one current participant in the MEABF, three retired participants

receiving annuities from the LABF, and the Municipal Employees Society of Chicago. The

defendants included MEABF and LABF. The City of Chicago and the State intervened, and the

cases were consolidated. Ultimately, the parties filed cross-motions for summary judgment, with

the State adopting the City’s motion.

¶7 The trial court declared that the Act, by reducing the value of annual annuity increases,

violated the Constitution’s pension protection clause. The City, the State, the MEABF, and the

LABF appealed directly to the Illinois Supreme Court under Rule 302(a). Ill. S. Ct. R. 302(a)

(eff. Oct. 4, 2011). In March 2016, the supreme court affirmed, declaring the entire statute

unconstitutional. Jones v. Municipal Employees’ Annuity & Benefit Fund of Chicago, 2016 IL

119618, ¶ 22.

¶8 Krislov, the Johnson plaintiffs’ counsel, petitioned for attorneys’ fees against the City,

the MEABF, and the LABF under the Civil Rights Act (740 ILCS 23/5 (West 2016)) in the

amount of $219,041 representing the firm’s statutory lodestar fee. In addition, under a common

fund theory, Krislov sought an additional $750,000 from the 3% annual annuity increase for plan

members.

¶9 Deciding as a matter of law that attorneys’ fees were not available under either approach,

the trial court denied with prejudice Krislov’s petition as well as a motion for class certification,

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and a motion to compel production of his opponents’ time records. Krislov requests that we

reverse and remand with directions to award an appropriate fee, considering both statutory

lodestar and common fund sources. Krislov also requests we order production of the time records

and certification of a class for purposes of applying the common fund doctrine.

¶ 10 Standard of Review

¶ 11 This appeal presents a matter of statutory interpretation, a question of law, which we

review de novo. Klaine v. Southern Illinois Hospital Services, 2016 IL 118217, ¶ 13.

¶ 12 Analysis

¶ 13 Fee Entitlement

¶ 14 The Illinois Civil Rights Act of 2003 prohibits discrimination based on a person’s race,

color, national origin, or gender. 740 ILCS 23/5(a) (West 2016). Subsection (b) empowers an

aggrieved party to bring a civil lawsuit in federal district or state circuit court “against the

offending unit of government.” 740 ILCS 23/5(b) (West 2016). Together, subsections 5(a) and

5(b) create a state statutory cause of action for a claim of discrimination based on a suspect class.

¶ 15 The Act includes a provision for attorneys’ fees: “Upon motion, a court shall award

reasonable attorneys’ fees and costs, including expert witness fees and other litigation expenses,

to a plaintiff who is a prevailing party in any action brought: (1) pursuant to subsection (b); or (2)

to enforce a right arising under the Illinois Constitution.” 740 ILCS 23/5(c) (West 2016). This

language recognizes attorneys’ fees when a prevailing party successfully brings a discrimination

claim on statutory or constitutional grounds. Thomann v. Department of State Police, 2016 IL

App (4th) 150936, ¶ 30.

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¶ 16 The trial court denied attorneys’ fees because the issues raised by the lawsuits have no

relation or connection to the Act. We agree.

¶ 17 Krislov argues Grey v. Hasbrouck, 2015 IL App (1st) 130267, controls. Grey has no

bearing. Grey involved whether the doctrine of sovereign immunity barred attorneys’ fees.

Id. ¶ 1. In Grey, unlike here, the claim, which involved transgender individuals, fell squarely

within section 5(a). Id. ¶ 2.

¶ 18 We also reject Krislov’s quarrel with Thomann v. Department of State Police, 2016 IL

App (4th) 150936. Krislov criticizes Thomann’s narrow interpretation of section 5(c) to restrict

attorneys’ fees to discrimination claims based on either section 5(a)(1) or (2) or “race, color,

national origin, or gender” under Illinois Constitution’s equal protection clause (Ill. Const. 1970,

art. I, § 2). 740 ILCS 23/5(c) (West 2014). Section 5(c) makes attorneys’ fees available “only

where the claimant is a prevailing party on a discrimination claim against a governmental body

involving one or more of the identified suspect classes.” Id. ¶ 29. In Thomann, plaintiffs did not

bring a discrimination claim against a governmental body. Id. ¶ 33. Nor have the Johnson

plaintiffs.

¶ 19 Nevertheless, Krislov insists that the text of section 5(c) (2)—“to enforce a right arising

under the Illinois Constitution”—opens the way for fees regardless of the nature of the claim as

long as it arises under the Illinois Constitution. Krislov characterizes the language as

unambiguous, and insists it should be interpreted liberally.

¶ 20 A cardinal rule of statutory construction requires courts ascertain and give effect to the

legislature’s intent, with the plain language offering the best indication of intent. Acme Markets,

Inc. v. Callanan, 236 Ill. 2d 29, 37-38 (2009). In doing so, we read the statute as a whole,

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considering all relevant parts. First American Bank Corp. v. Henry, 239 Ill. 2d 511, 515-16

(2011) (citing Kraft, Inc. v. Edgar, 138 Ill. 2d 178, 189 (1990)). Also, statutes must be construed

to avoid incorporating exceptions, limitations, or conditions contrary to the legislative intent.

Thomann v. Department of State Police, 2016 IL App (4th) 150936, ¶ 30. Krislov’s argument

runs afoul of these tenets.

¶ 21 Thomann got it right in finding an expansive interpretation of the section 5(c)(2) fee-

shifting provision as contrary to the statutory scheme, and refusing to apply the section to a

prevailing party of any claim arising under the Illinois Constitution, regardless of subject matter

or context. In Thomann, plaintiffs alleged the procedures in evaluating objections to concealed

carry license applications violated their due process rights under the Illinois Constitution. After

the dismissal of the complaint as moot, plaintiffs’ attorneys petitioned for fees, asserting that,

section 5(c) of the Civil Rights Act entitled them to fees because they prevailed in a suit “to

enforce a right arising under the Illinois Constitution.” The sole issue was whether the trial court

erroneously dismissed the plaintiffs’ attorneys’ fee petition. Id. ¶ 1. The trial court was affirmed.

Id. ¶ 29.

¶ 22 Krislov asserts that the Civil Rights Act’s first two subsections “say nothing to suggest

the Act as a whole does not extend beyond the context of discrimination.” (Emphasis in original.)

But the absence of any language limiting fees to discrimination claims proves nothing as well.

Indeed, Krislov’s approach puts an unstated and unwritten consequence into unambiguous

language.

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¶ 23 Accordingly, the Civil Rights Act cannot serve as a means for awarding attorneys’ fees as

plaintiffs in Jones were not aggrieved parties suing under the Illinois Constitution on the subject

of discrimination based on race, color, national origin, or gender.

¶ 24 Statutory Exemption

¶ 25 Illinois follows the “American Rule.” That rule makes each party bear its own attorneys’

fees and costs unless statutory authority or a contractual agreement says otherwise. Housing

Authority of Champaign County v. Lyles, 395 Ill. App. 3d 1036, 1038 (2009). Courts strictly

construe statutes in derogation of the common law which authorize fee awards, and “[n]othing is

to be read into such statutes by intendment or implication.” State ex rel. Schad, Diamond &

Shedden, P.C. v. My Pillow, Inc., 2018 IL 122487, ¶ 18. So Krislov looks to the Illinois Pension

Code.

¶ 26 The Pension Code, however, exempts retirement annuities from attachment for the

payment of any debt of an annuitant, which includes attorneys’ fees. 40 ILCS 5/1-101 et seq.

Article 8 of the Illinois Pension Code applies to annuities due MEABF members. See, 40 ILCS

5/8-244(a) (West 2016). Section 8-244(a) exempts annuities, refunds, pensions, and disability

benefits from attachment or garnishment to pay any debt, damage, claim demand, or judgment

against any annuitant, pensioner, participant, refund applicant, or other beneficiary. Id. The

legislature did not include an exception for attorneys’ fees.

¶ 27 Article 11 of the Illinois Pension Code applies to LABF members’ annuities. 40 ILCS

5/11-223(a) (West 2016). Section 11-223(a) mirrors the language in section 8: “[a]ll annuities,

refunds, pensions, and disability benefits granted under this Article shall be exempt from

attachment or garnishment process and shall not be seized, taken, subjected to, detained, or

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levied upon by virtue of any judgment, or any process or proceeding whatsoever issued out of or

by any court in this State, for the payment and satisfaction in whole or in part of any debt,

damage, claim, demand, or judgment against any annuitant, participant, refund applicant, or

other beneficiary hereunder.” Id. Again, no exception for attorneys’ fees.

¶ 28 The Illinois Supreme Court recently considered the constitutionality of changes to the

Pension Code in Rochelle Carmichael v. Laborer’s & Retirement Board Employees’ Annuity &

Benefit Fund of Chicago, 2018 IL 122793. The court reiterated that questions on legislative

intent and clarity of the language in a pension statute be “liberally construed in favor of the rights

of the pensioner,” Id. ¶ 24 (citing Kanerva v. Weems, 2014 IL 115811, ¶ 55, and that pension

benefits “cannot be diminished or impaired.” Id. ¶ 25 (quoting Jones, 2016 IL 119618, ¶ 3,

quoting Kanerva, 2014 IL 115811, ¶¶ 39, 41). Accordingly, the statute bars garnishing the plan

participants’ pension entitlements for any purpose.

¶ 29 Common Fund

¶ 30 Courts have general equity power “to do equity in a particular situation.” Sprague v.

Ticonic National Bank, 307 U.S. 161, 166 (1939). The common fund doctrine touches the power

of equity in doing justice between a party and the beneficiaries of the litigation. Morris B.

Chapman & Associates, Ltd. v. Kitzman, 193 Ill. 2d 560, 575 (2000). But, under the disposition

here, counsel’s efforts did not create a common fund or a quantifiable pool of money from which

fees could be paid.

¶ 31 Krislov proposes creating a common fund through deductions from the amounts paid to

beneficiaries from the pension funds under the jurisdiction of the court (the 3% annual increases)

from LABF or MEABF members’ annuities. In his reply, Krislov suggests a common fund exists

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“because the annuitants have received and will continue to receive actual increases in monetary

payment, thus, there is a fund,” and maintains the City cited factually distinguishable cases.

While that may be, the cases do not support Krislov’s position either.

¶ 32 Each of the cases involves future savings and none created a common fund. In Hamer v.

Kirk, 64 Ill. 2d 434, 438-39 (1976), the supreme court found future savings for taxpayers and

refunds for paid taxes did not constitute a “fund” from which attorneys’ fees could be paid.

Similarly, in Rosemont Building Supply v. Highway Trust Authority, 51 Ill. 2d 126, 130 (1972),

our supreme court deemed it “improper” to expand the recognized rule for the payment of

attorneys’ fees in a typical class action to litigation seeking a declaratory judgment on the

constitutionality of a statute. Finally, the supreme court in Hoffman v. Lehnhausen, 48 Ill. 2d

323, 329 (1971), stated, “We are aware of no authority under which the process of tax collection

and distribution could have been interrupted to divert from the governmental bodies that had

levied the taxes an amount fixed by the court as fees for the attorneys for the plaintiffs.”

¶ 33 Krislov wants us to follow cases involving ERISA, citing Bishop v. Burgard, 198

Ill. 2d 495 (2002), as allowing attorneys’ fees. But Bishop is inapposite both factually and

legally. Bishop was a personal injury lawsuit for a car accident. Id. at 497. The plaintiff retained

an attorney, agreeing to pay a one-third percentage of her recovery as attorneys’ fees and costs.

After the attorney procured a recovery, plaintiff’s employer’s ERISA plan filed a lien against the

proceeds for the medical expenses it had paid. Id. The ERISA Plan agreement provided for

subrogation rights to recover 100% of the benefits paid to the extent of any judgment or

settlement. Id. at 498-99. The validity and amount of the lien were not in dispute, but the ERISA

plan refused to reduce its lien by one-third to reflect the attorneys’ claim for fees. Id. at 497.

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Ultimately, the supreme court concluded that ERISA did not preempt application of the common

fund doctrine in this context and under these facts. Unlike in Bishop, there is no subrogation

agreement here, and Krislov proposes taking money directly from the members’ pension checks,

which our supreme court has repeatedly rebuffed.

¶ 34 Double Recovery

¶ 35 Although we need not decide the appropriateness of a double recovery of fees, we would

be remiss not to mention Krislov’s desire for an award of both statutory fees and common fund

fees, not one or the other. Krislov has asked for statutory fees in excess of $200,000 under the

“fee-shifting” provision of the Illinois Civil Rights Act, section 5(c), along with $750,000 under

the “common fund” doctrine. Defendants label this a double recovery.

¶ 36 Krislov cites no basis for this brazen request. See Pierce v. Visteon Corp., 791 F.3d 782,

788 (7th Cir. 2015) (attorney not entitled to attorneys’ fees from class’s common fund as well as

under fee-shifting statute); Evans v. Evanston, 941 F.2d 473, 479 (7th Cir.1991) (clients should

not be ordered to pay counsel who are compensated under fee-shifting statute). Also, even had

fees been obtainable, Krislov leaves unexplained why recovery of “reasonable attorneys’ fees”

under section 5(c) wouldn’t have afforded sufficient compensation alone.

¶ 37 Given our resolution, we need not address the remaining issues asserted by Krislov.

¶ 38 Affirmed.

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