Horwitz v. Holabird & Root

• Decision Date: 20 May 2004
• Docket Number: No. 89351.,89351.
• Parties: Tem HORWITZ et al., Appellees, v. HOLABIRD & ROOT et al., Appellants.
• Court: Illinois Supreme Court

816 N.E.2d 272

212 Ill.2d 1

287 Ill.Dec. 510

Tem HORWITZ et al., Appellees, v. HOLABIRD & ROOT et al., Appellants.

No. 89351.

Supreme Court of Illinois.

May 20, 2004.

Rehearing Denied October 4, 2004.

Steven M. Tefft, David A. Izzo, of David A. Izzo & Associates, Chicago, for appellants.

Laurie A. Silvestri, David A. Novoselsky, Leslie J. Rosen, Chicago, for appellees.

Justice KILBRIDE delivered the opinion of the court:

Plaintiffs, Tem Horwitz and Horwitz Matthews, Inc. (collectively, Horwitz Matthews), filed a six-count complaint in the circuit court of Cook County against the law firm of Sabo & Zahn (the firm) and its clients, defendants Holabird & Root, Jeffrey Case, Gerald Horn, and James Baird (collectively, Holabird & Root), alleging, inter alia, tortious interference with business relationships. Sabo & Zahn is not involved in this appeal, and only count VI is at issue here. Count VI sought relief against Holabird & Root as a principal who acted by and through its attorneys, Sabo & Zahn.

The trial court granted summary judgment in favor of Holabird & Root, ruling as a matter of law that Holabird & Root could not be liable for its attorneys' actions. Horwitz Matthews appealed and the appellate court reversed and remanded, with one justice dissenting. 312 Ill. App.3d 192, 244 Ill.Dec. 657, 726 N.E.2d 632. We granted Holabird & Root's petition for leave to appeal. 177 Ill.2d R. 315. We now must decide whether, and if so when, a client may be held vicariously liable for an attorney's allegedly intentional tortious conduct.

BACKGROUND

Holabird & Root is a general partnership in the architectural business. Case, Horn, and Baird are its partners. Holabird & Root retained Sabo & Zahn to collect a debt incurred by Horwitz Matthews for architectural services. Horwitz Matthews is an Illinois corporation that develops real estate with private investors. In the course of representing Holabird & Root, Sabo & Zahn obtained a judgment against Horwitz Matthews.

In response to a citation to discover assets, Horwitz Matthews provided Sabo & Zahn with various tax returns. According to uncontradicted deposition testimony, this tax information was the subject of a confidentiality agreement. Specifically, Sabo & Zahn agreed not to disclose the tax information to anyone outside its law firm. Through discovery, Sabo & Zahn also learned the identity of several business associates and investors of Horwitz Matthews. Sabo & Zahn contacted at least 40 of these business associates and investors by letter, informing them that on its tax returns Horwitz Matthews had apportioned itself a greater percentage than it was entitled of the partnership business. The letters also stated that the partnership's tax filing showed the investors' share of the loss was underreported. The letters were on the firm's stationery and stated, "we represent Holabird & Root who have a judgment against Horwitz Matthews."

Horwitz Matthews filed a six-count complaint against Sabo & Zahn and Holabird & Root. The trial court dismissed counts I through IV, sounding in defamation and levied at both Sabo & Zahn and Holabird & Root. Count V sought relief solely against Sabo & Zahn. Count VI sought relief for tortious interference with business relationships solely against Holabird & Root as a principal acting by and through its attorneys, Sabo & Zahn.

The trial court granted Holabird & Root's subsequent motion for summary judgment on count VI and ruled as a matter of law that Holabird & Root could not be held liable for its attorneys' actions. Horwitz Matthews appealed. In reversing the grant of summary judgment in favor of Holabird & Root, the appellate court held that the attorney-client relationship in this case was one governed by the laws of agency with Holabird & Root as the principal and Sabo & Zahn as the agent. 312 Ill.App.3d at 195-96, 244 Ill.Dec. 657, 726 N.E.2d 632. The appellate court reasoned that, although attorneys are independent contractors of their clients regarding their physical activities (Washington v. Caseyville Health Care Ass'n, 284 Ill.App.3d 97, 101, 219 Ill.Dec. 719, 672 N.E.2d 34 (1996)), there were no allegations of "any physical activities undertaken by Sabo & Zahn; therefore, [Sabo & Zahn] would not be an independent contractor in its relationship with the Holabird & Root defendants." 312 Ill.App.3d at 196, 244 Ill.Dec. 657, 726 N.E.2d 632. According to the appellate court, Sabo & Zahn's misconduct could be attributed to Holabird & Root under the law of agency, binding principals by their chosen agents' deeds. 312 Ill. App.3d at 195-96, 244 Ill.Dec. 657, 726 N.E.2d 632; see Diersen v. Chicago Car Exchange, 110 F.3d 481 (7th Cir.1997).

The appellate court also found that a genuine issue of material fact existed concerning whether Sabo & Zahn acted within the scope of its authority in sending the letters to the various business partners of Holabird & Root. 312 Ill.App.3d at 196-97, 244 Ill.Dec. 657, 726 N.E.2d 632. In support of this conclusion, the appellate court relied on the discovery depositions of Werner Sabo and James Zahn. Each stated that the firm was performing a task it had been hired to accomplish. The appellate court also relied on defendant James W. Baird's discovery deposition statement that the letters sent by Sabo & Zahn indicated to him that the law firm was pursuing the fee in an "aggressive way" and that the firm was "serving them as their clients."

Finally, the appellate court held that a genuine issue of material fact existed as to whether Holabird & Root ratified Sabo & Zahn's misconduct. According to the appellate court,

"It is not clear from the record when the Holabird & Root defendants became aware of the letters, and when they did, if they ever disapproved of the letters being mailed or if by their silence and conduct they approved the letters. Whether the Holabird & Root defendants' actions or lack thereof constituted a ratification is a question of fact." 312 Ill.App.3d at 197, 244 Ill.Dec. 657, 726 N.E.2d 632.

Given the appellate court's opinion that there were genuine issues of material fact, the appellate court remanded the cause for further proceedings.

In dissent, Presiding Justice Hoffman stated that the decision was flawed. 312 Ill.App.3d at 198, 244 Ill.Dec. 657, 726 N.E.2d 632 (Hoffman, P.J., dissenting). The dissent concluded that, in cases involving an attorney pursuing a claim without further direction, the attorney should be held to be an independent contractor. 312 Ill.App.3d at 198-99, 244 Ill.Dec. 657, 726 N.E.2d 632 (Hoffman, P.J., dissenting). According to the dissent, since Sabo & Zahn was an independent contractor, Holabird & Root could not be held vicariously liable for its allegedly tortious conduct. The dissent reasoned that there was no vicarious liability primarily because an employer has no "right to control the manner of doing the work" performed by the independent contractor. See Hartley v. Red Ball Transit Co., 344 Ill. 534, 538-39, 176 N.E. 751 (1931).

According to the dissent, even if Sabo & Zahn is deemed to be Holabird & Root's agent, summary judgment was appropriately granted to Holabird & Root because Sabo & Zahn acted outside the scope of its authority. 312 Ill.App.3d at 199, 244 Ill. Dec. 657, 726 N.E.2d 632 (Hoffman, P.J., dissenting). The dissent reasoned:

"[T]he general retention of an attorney to do all things necessary to pursue a claim should, as a matter of law, be interpreted as authorizing the attorney only to do all things legal and proper to pursue the claim and should not be construed, without more, as giving the attorney direction or permission to commit a tortious act. Where there is no evidence that the client expressly or impliedly authorized, directed, knew of, or ratified the alleged tortious conduct of its attorney, it should not be presumed that, merely because the parties stand in the relationship of attorney-client, the client intended or authorized the tortious conduct or that the conduct was within the scope of the attorney's duties." 312 Ill.App.3d at 199-200, 244 Ill.Dec. 657, 726 N.E.2d 632 (Hoffman, P.J., dissenting).

Concerning the propriety of summary judgment, the dissent further stated:

"In this case, there is no evidence that the alleged tortious content of the letters sent to the business associates and investors of Horwitz Matthews was ordered or directed by Holabird & Root, nor do I believe that there is any evidentiary material in the record that creates a genuine issue of fact on the question of whether the Holabird & Root defendants knew of the contents of the letters before they were sent by Sabo & Zahn. [Jeffrey] Case and [James] Baird, both Holabird & Root partners, denied seeing the letters before they were sent. Their testimony constitutes the only competent evidentiary material of record on the issue since, as the appellate court points out, the most that Sabo & Zahn is able to say is that no one at the firm can recall whether the letters were shown to anyone at Holabird & Root before they were sent." 312 Ill.App.3d at 199, 244 Ill.Dec. 657, 726 N.E.2d 632 (Hoffman, P.J., dissenting).

Holabird & Root now appeals.

ANALYSIS

Summary judgment is appropriate when "the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." 735 ILCS 5/2-1005(c) (West 2000); Gilbert v. Sycamore Municipal Hospital, 156 Ill.2d 511, 517-18, 190 Ill.Dec. 758, 622 N.E.2d 788 (1993). Summary judgment should not be granted unless the right of the moving party is clear and free from doubt. Purtill v. Hess, 111 Ill.2d 229, 240, 95 Ill.Dec. 305, 489 N.E.2d 867 (1986). While the nonmoving party in a summary judgment motion is not required to prove his or her case, the nonmovant must present a factual basis arguably entitling that party to a judgment. Michigan Avenue National...