Camelot, Inc. v. Burke Burns & Pinelli, Ltd.
| Decision Date | 20 May 2021 |
| Docket Number | 2-20-0208 |
| Citation | 2021 IL App (2d) 200208,184 N.E.3d 384,451 Ill.Dec. 797 |
| Parties | CAMELOT, INC.; Taek Kim, M.D. ; Youk Lee, M.D.; and Sang Ik Kim, M.D., Plaintiffs-Appellees, v. BURKE BURNS & PINELLI, LTD., Defendant-Appellant. |
| Court | United States Appellate Court of Illinois |
Edward J. Burke, Vincent D. Pinelli, and Christopher J. Hales, of Burke Burns & Pinelli, Ltd., of Chicago, for appellant.
Patrick J. Williams and Tracy L. Stanker, of Ekl, Williams & Provenzale LLC, of Lisle, for appellees.
¶ 1 Defendant law firm, Burke Burns & Pinelli, Ltd. (the firm), appeals an order of the circuit court of Du Page County granting a declaratory judgment in favor of plaintiffs, Camelot, Inc. (Camelot), Taek Kim, M.D., Youk Lee, M.D., and Sang Ik Kim, M.D. (Ik Kim) (the clients),1 in this dispute concerning legal fees arising out of the firm's representation of the clients in an underlying lawsuit. We affirm.
¶ 4 The following pertinent facts are taken from pleadings and trial exhibits in the record.
¶ 6 Beginning in the 1970s, and continuing into the 1990s, attorney Robert Wayt, and then Wayt and his partner, Patricia deRosset, provided legal and financial services to the clients, who were, among other things, seeking tax shelters. Relying on the advice of Wayt and deRosset, the clients became partners in a horse breeding and boarding operation in Du Page County called Fairlane Farms. Again, relying on the advice of Wayt and deRosset, the clients incorporated Fairlane Farms into Camelot, which owned approximately 20 acres of land (the property) and continued the horse breeding and boarding operation.
¶ 7 According to the clients’ fourth amended complaint in the underlying shareholder litigation, the other shareholders in Camelot were Wayt, deRosset, Denes Martonffy, and Luis Yarzagaray.2 The clients ran their respective medical practices while leaving the operation of Camelot to Wayt and deRosset. A dispute arose when Wayt, deRosset, Martonffy, and Yarzagaray allegedly stole Camelot's assets.
¶ 9 The firm and the clients entered into three retainer agreements related to the shareholder litigation. The first agreement, dated June 20, 1996, provided that Taek Kim and Youk Lee would pay (1) a nonrefundable $30,000 retainer, against which the firm would bill $200 per hour, (2) 20% of "any recovery by settlement or judgment excluding the sum of $650,000, which represents the combined value of the Camelot shares of stock currently in the names of [their] spouses," and (3) costs. That agreement also provided for a cap on attorney fees of $75,000, "exclusive of the 20% recovery."
¶ 10 The second retainer agreement was with Ik Kim, but it was replaced with the third agreement, also with Ik Kim, dated March 23, 2004. This third agreement provided that Ik Kim would pay the firm (1) 20% of "any recovery by settlement or judgment excluding the sum of $325,000, which represents the agreed upon value of the Camelot shares of stock currently in the name of [Ik] Kim," and (2) costs.
¶ 12 On October 19, 2004, the clients entered into a written settlement agreement (shareholder settlement) disposing of the shareholder litigation. In pertinent part, the shareholder settlement resulted in the clients owning 100% of Camelot's stock and Camelot obtaining fee simple title to the property, free of liens and encumbrances. In addition, according to the terms of the shareholder settlement, plaintiffs paid a combined $596,032 to deRosset for her shares in Camelot, her corporate resignation, and the delivery of all corporate records in her possession. Plaintiffs also paid $25,000 to Martonffy for his shares in Camelot.
¶ 14 On October 21, 2004, the firm sent the clients a "Final Settlement Statement" (fee statement) seeking $1,037,262 in attorney fees. The document listed the "gross settlement recovery" as "20.2348 acres @ $325,000," for a total of $6,576,310. The fee statement then subtracted from the gross total the following amounts: $390,000 (credit for "corporate cash infusion to enable deRosset stock redemption settlement"), $25,000 (credit for "corporation cash infusion to enable Martonffy cash settlement"), $325,000 ("Taek Kim's cash exclusion"), $325,000 ("Youk Lee's cash exclusion"), and $325,000 ("Ik Kim's cash exclusion"). From the net settlement recovery of $5,186,310, the firm deducted 20%, or $1,037,262, as its fee.
¶ 15 Edward J. Burke, the firm's partner who was primarily responsible for the shareholder litigation, calculated the total gross recovery of $6,576,310 as being the value of the property on October 19, 2004, the date the parties settled the shareholder litigation. Burke arrived at that value using an appraisal done in August 1999 as part of the shareholder litigation and certain alleged comparable sales.
¶ 16 The clients never signed the fee statement. Then, on September 27, 2005, the parties (including Camelot) entered into an "addendum" to the retainer agreements. In that addendum, the firm (1) acknowledged payment of $300,000 toward the "outstanding attorneys fees due this firm," (2) recited that, if the property was not sold and closed on by October 15, 2005, plaintiffs would pay an additional $100,000 toward the "outstanding attorneys fees due the firm," and (3) provided that the "remaining balance of attorneys fees due and owing this firm" were to be paid on the closing date of the sale of the property.
The clients paid the additional $100,000 when the property had not sold by October 15, 2005. The record shows that the clients placed the property on the market with no success. Although they obtained a buyer at a purchase price of approximately $6 million, that sale did not materialize.
¶ 17 On February 9, 2011, Burke sent clients a letter (20% demand) stating: Taek Kim did not respond. However, in March 2011, Taek Kim wrote to Burke explaining why the clients disagreed with the fee statement. Taek Kim set forth three reasons: (1) the agreement was for 20% of the recovery in the shareholder litigation, there was never a set dollar amount agreed to, and the presumption was that the 20% would be paid when the property was sold; (2) the clients paid $400,000 upon request even though the property had not sold; and (3) the remainder of the fee cannot be known until the property is sold.
¶ 18 From April through July 2013, the firm sent the clients "reminder notices" that the balance of the fee immediately due was $637,262. In October and November 2013, the firm sent identical reminder notices. Then, on December 5, 2013, Burke sent another 20% demand to the clients. On December 18, 2013, the firm sent the clients another reminder notice that $637,262 was due immediately.
¶ 19 In October 2014, when the firm learned that the clients mortgaged the property, the firm recorded an attorney's lien against the property in the amount of $637,262. On November 21, 2014, Burke sent the clients a letter advising them that the firm had placed the lien and was billing them $637,262. From January to July 15, 2014, the firm again sent the clients reminder notices that they owed $637,262. Then, on July 17, 2014, Burke sent the clients another 20% demand. In August 2014, the firm resumed sending the clients monthly reminder notices that the fee immediately owed was $637,262. It is undisputed that the clients have not paid the fee.
¶ 21 On June 24, 2015, plaintiffs sued the firm. They filed an amended complaint (1) to quiet title to the property, (2) for a declaratory judgment as to the amount of attorney fees owed, and (3) for an accounting. The trial court granted plaintiffs summary judgment on the quiet title count and ordered the firm to release its lien. This court affirmed that judgment in Camelot, Inc. v. Burke Burns & Pinelli , 2017 IL App (2d) 170038-U, ¶ 36, 2017 WL 4570471 ( Camelot I ). On December 17, 2019, the parties proceeded to a bench trial on the remaining counts of the amended complaint. Burke and Taek Kim were the only witnesses who testified. Both witnesses testified, without objection , to parol evidence surrounding the making of the retainer agreements and the addendum.
¶ 23 Burke testified that he usually dealt with Taek Kim, who acted as the "point person" for the clients. In Burke's view, when the shareholder dispute arose, the clients collectively owned 50% of Camelot's stock. According to Burke, as a result of the shareholder settlement, the clients obtained 100% of Camelot's stock, and Camelot gained title to the property. Burke testified that the $390,000 cash payment to deRosset and the $25,000 cash payment to Martonffy for their shares of stock, as reflected on the fee statement, were part of the shareholder settlement. Burke testified that the clients agreed to the firm's fee of $1,037,262, although he acknowledged that they never paid it.
¶ 24 Regarding Taek Kim and Youk Lee's retainer agreement, Burke testified that the $650,000 exclusion from the 20% attorney fee was an arbitrary number proposed by the two doctors, to which the firm agreed, that reflected moneys that Taek Kim and Youk Lee had already invested in Camelot or had paid in prior legal fees. According to Burke, the same was true of the $325,000 exclusion from the 20% fee in Ik Kim's retainer agreement.
¶ 25 Burke testified that he did not discuss with the clients his valuation of the property for purposes of calculating the firm's 20% fee...
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