Hess v. Bresney

• Citation: 784 F.3d 1154
• Decision Date: 04 May 2015
• Docket Number: No. 14–1921.,14–1921.
• Parties: Lawrence J. HESS, Plaintiff–Appellant, v. Kanoski BRESNEY, Defendant–Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

784 F.3d 1154

Lawrence J. HESS, Plaintiff–Appellant

v.Kanoski BRESNEY, Defendant–Appellee.

No. 14–1921.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 5, 2014.

Decided May 4, 2015.

Rex Carr, Attorney, Rex Carr Law Firm, LLC, East St. Louis, IL, for Plaintiff–Appellant.

Lawrence Joseph Hess, East St. Louis, IL, pro se.

Kirk W. Laudeman, Attorney, Drake, Narup & Mead, Springfield, IL, James Joseph Sipchen, Attorney, Donald Patrick Eckler, Attorney, Pretzel & Stouffer, Chartered, Chicago, IL, for Defendant–Appellee.

Before FLAUM, EASTERBROOK, and KANNE, Circuit Judges.

Opinion

KANNE, Circuit Judge.

This breach of contract action is before this court—pursuant to our diversity jurisdiction—a second time. As a refresher, Lawrence J. Hess, an attorney, had worked on a number of medical-malpractice cases before his law firm, Kanoski & Associates, P.C. (“K & A”),¹ terminated his employment. Many of these cases settled after Hess's termination, and Hess did not see a penny from the settlements. Hess felt cheated.

So he sued under his employment agreement and under the Illinois Wage Payment and Collection Act (“IWPCA”) to remedy the perceived wrong. He also advanced claims of tortious interference, wrongful discharge, unjust enrichment, and quantum meruit, among others. In 2011, the district court dismissed each of Hess's claims on summary judgment. Hess v. Kanoski & Assocs., No. 09–3334, 2011 WL 924843, at *13, 2011 U.S. Dist. LEXIS 25672, at *35 (C.D.Ill. Mar. 11, 2011) (“Hess I ”). The following year, we affirmed in part and reversed in part. Hess v. Kanoski & Assocs., 668 F.3d 446, 456 (7th Cir.2012) (remanding IWPCA and breach of contract claims) (“Hess II ”). We remanded because the issue that is now squarely before us—whether Hess is entitled to compensation for post-termination settlements under either his employment agreement or the IWPCA—was “not fully briefed” at that stage of the case. Id. at 454.

On remand, and with the benefit of additional briefing, the district court held that Hess was not entitled to compensation for the post-termination settlements. As a result, the district court once again granted summary judgment in favor of K & A. Hess v. Kanoski & Assocs., No. 3:09–cv–03334, 2014 WL 1282572, at *8, 2014 U.S. Dist. LEXIS 42584, at *25 (C.D.Ill. Mar. 28, 2014) (“Hess III ”). Hess appealed, and on December 5, 2014, argued his case on his own behalf.

After carefully considering the parties' oral arguments and briefing, we affirm the judgment of the district court.

I. Background

Lawrence J. Hess is an attorney who is licensed to practice law in Illinois and Missouri. K & A is a personal-injury law firm with offices in central Illinois. On May 9, 2001, K & A hired Hess to handle medical-malpractice cases—Hess's specialty. And for nearly six years, Hess did just that. He even won a significant jury verdict, which triggered a healthy, renegotiated salary. Then the bottom fell out. On February 14, 2007, the firm terminated Hess. Ronald Kanoski, K & A's president and administrator during Hess's employment, testified that he based this decision on “economic reasons.”

If you ask Hess, the “economic reasons” included the firm's desire to reap a disproportionate share of the fees earned from the 170 breast-implant cases that Hess had worked on prior to his termination. These breast-implant cases stemmed from a nationwide settlement with Dow–Corning for its silicone-based breast implants. The number of cases, coupled with the estimated cost of remedies, induced Dow Corning into bankruptcy. Cf. Editorial, Seeking Shelter from a Legal Storm, Chicago Tribune, May 22, 1995, at 1:10. Hess also seeks to recover fees from five non-breast-implant cases on which he had worked before his termination.

Hess theorizes that K & A terminated him to avoid paying him the fees due on those cases. He asserts that he “successfully completed all the work necessary for the firm to be paid fees” on these matters. “Nothing remained to be done,” Hess maintains, “except to wait for the receipt of the checks.”

As an initial matter, the record lends some support to Hess's theory of motive. K & A abruptly terminated Hess without any notice, which suggests it was in a rush to get rid of him. K & A concedes that this swift termination breached the thirty-day-notice provision of their employment agreement. But that breach is of no moment to this appeal. For even if the breach gave rise to some sort of equitable, constructive employment lasting thirty days after his actual date of termination, that constructive employment would not have captured any of the settlements or their resultant bonuses; the subject cases settled outside the thirty-day window.² As a result, Hess still would have been out of luck.

But Hess offers a backstop. Because K & A breached the notice provision of his employment agreement, he was never actually terminated—or so the theory goes. Under this theory, all the income that K & A received for his cases was received while he was still an employee at the firm. So he should have been paid the fees. K & A quickly responds with waiver. K & A contends that Hess waived this argument because he did not raise it before the district court. We address these arguments below.

Before we do, our focus turns to two provisions of the employment agreement. These provisions—one found in the original employment agreement and one found in a subsequent modification letter—are ultimately dispositive. They address matters related to compensation, and we introduce them now.

Section 4 of the employment agreement is titled “Compensation.” It states that Hess will receive bonus pay in the amount of fifteen percent of all fees “generated over the base salary (or $5,000 per month)....” It further states that the “[b]onus shall increase” to twenty-five percent “on all fees received annually in excess of $750,000.00.” We emphasize the words “generated” and “received” because the parties spend much of their time debating their meaning.

According to K & A, the words “generated” and “received” are used interchangeably. Under this view, they are synonymous. “Years of work can go into a case,” K & A contends, “and yet, there is no fee generated unless or until there is a recovery for the client....” Hess disagrees. He argues that one can generate —i.e. create—something without ever receiving it. Under that common-usage view, the terms are not synonymous, and Hess would be entitled to bonuses or fees for his work that generated the fees, regardless of when the firm received them.

In Hess II, we flagged this issue for remand. 668 F.3d at 453. Noting the utility of extrinsic evidence in determining the meaning of the term “generate,” we offered Hess a second path to recovery: production of extrinsic evidence to prove his definition is the correct one. Hess supplied no extrinsic evidence. To be sure, he submitted his deposition testimony that detailed his performance at the firm. But that deposition testimony provided no extrinsic evidence on the meaning of the term “generate.” No evidence did, in fact. In failing to supply extrinsic evidence on this key point, Hess abandoned a second path to recovery offered by our mandate.

Left with no extrinsic evidence, and understanding that no cases settled thirty days after his termination, the district court resorted to the parties' briefs and the terms of the contract. It sided with K & A. Those terms, coupled with the contingency-fee nature of the cases at K & A, informed its analysis:

[Hess's] interpretation of “generated” ignores fundamental principles underlying these arrangements. An attorney is not contractually entitled to a fee unless and until her client wins, and, therefore, always bears the risk of loss.... When Hess was terminated by K & A, there was no guarantee that any of his efforts would result in contingency fees accruing in the cases at issue. Therefore, the fees could not yet have been generated.

Hess III, 2014 WL 1282572, at *4–5, 2014 U.S. Dist. LEXIS 42584, at *13–14. Impliedly, then, the district court read the terms “generate” and “received” synonymously, which it believed “accords with the basic structure of contingency fee arrangements....” Id. at *5, 2014 U.S. Dist. LEXIS 42584 at *14. Different meanings of the terms would have resulted in two “messy” bonus schemes, it held, depending on how much money the firm received in a given year. Id. The district court further observed that Hess offered no evidence that the parties intended different meanings of the relevant terms. Id. at *5, 2014 U.S. Dist. LEXIS 42584 at *14–15. And Hess conceded as much at oral argument on appeal.

Hess nevertheless takes issue with the district court's analysis. He points to the modification letter of June 21, 2002, wherein Ronald Kanoski confirmed to Hess the result of their “recent salary and bonus negotiations....” Although Hess did not sign this letter, he treats it as a binding amendment to the employment agreement. Given that the terms of the letter governed his compensation from 2002 until 2007, we accept Hess's treatment. Cf. Hess II, 668 F.3d at 452–53 (“The critical signature is that of the party against whom the contract is being enforced, and that signature was present.”).

“[E]ffectively immediately,” Kanoski wrote, “you will be eligible to receive as a bonus” forty percent “of all fee revenue generated ....” (emphasis added). Hess places significant weight on the fact that this modification foregoes usage of the term “received.” Because the modification does not use that word, it follows that a fee need not be “received” before a “generated” bonus “can be allotted to the employee,” or so his argument goes. We discuss both the original provision and its modification in our analysis section below.

Before we do, a third provision is worth mentioning. Section 8 of the employment agreement, entitled “Covenant Limiting Competition,” addresses competition and client relationships. It provides that, “where the Corporation...