Carlson v. Michael Best & Friedrich LLP

Decision Date15 July 2021
Docket Number1-19-1961
Parties William CARLSON and Willis Capital, LLC, Plaintiffs-Appellants, v. MICHAEL BEST & FRIEDRICH LLP, Thomas Cronin, Aaron L. Davis, Leland W. Hutchinson Jr., Daniel J. Kelley, and Cronin & Company Ltd., Defendants, (Michael Best & Friedrich LLP, Defendant-Appellee).
CourtUnited States Appellate Court of Illinois

2021 IL App (1st) 191961
186 N.E.3d 478
452 Ill.Dec.
754

William CARLSON and Willis Capital, LLC, Plaintiffs-Appellants,
v.
MICHAEL BEST & FRIEDRICH LLP, Thomas Cronin, Aaron L. Davis, Leland W. Hutchinson Jr., Daniel J. Kelley, and Cronin & Company Ltd., Defendants,

(Michael Best & Friedrich LLP, Defendant-Appellee).

No. 1-19-1961

Appellate Court of Illinois, First District, Fourth Division.

Filed July 15, 2021
Rehearing denied August 26, 2021


Joseph T. Gentleman, of Chicago, for appellants.

Michael L. Shakman, Zachary J. Freeman, and William J. Katt, of Miller Shakman Levine & Feldman LLP, of Chicago, for appellee.

JUSTICE MARTIN delivered the judgment of the court, with opinion.

452 Ill.Dec. 759

¶ 1 I. BACKGROUND

¶ 2 The following background facts and procedural history are taken from the

186 N.E.3d 484
452 Ill.Dec. 760

common law record, the parties’ briefs, and the related opinions of Carlson v. Fish , 2015 IL App (1st) 140526, 391 Ill.Dec. 728, 31 N.E.3d 404, and Willis Capital LLC v. Belvedere Trading LLC , 2015 IL App (1st) 132183, 390 Ill.Dec. 808, 29 N.E.3d 1078.1

¶ 3 In 2002, William Carlson, the sole owner and member of Willis Capital, LLC (Willis), founded Belvedere Trading, LLC (Belvedere), with an initial investment of $405,000.2 Belvedere was created to trade S&P 500 equity index options. Thomas Hutchinson and Owen O'Neill eventually joined Belvedere as partners, with Hutchinson investing $85,000 and O'Neill investing $160,000. Willis Capital LLC , 2015 IL App (1st) 132183, ¶ 5, 390 Ill.Dec. 808, 29 N.E.3d 1078. "Carlson was the sole managing member and held about a 62% membership interest; O'Neill held about a 25% interest and Hutchinson held the remaining 13% interest." Carlson , 2015 IL App (1st) 140526, ¶ 6, 391 Ill.Dec. 728, 31 N.E.3d 404. However, by 2004, O'Neill and Hutchinson were managing members and owned an equal 33.3% interest along with Carlson. Id.

¶ 4 In 2005, Carlson took a leave of absence from actively managing Belvedere due to health reasons. When Carlson returned to the company in 2006, "he had a falling out with O'Neill and Hutchinson over numerous issues, including profit distribution and management." Id. ¶ 7.

¶ 5 In March 2007, Carlson retained attorneys Shawn M. Collins and David J. Fish of the Collins Law Firm, P.C., to represent him in his dispute with O'Neill and Hutchinson. Fish later formed the Fish Law Firm while continuing to represent Carlson; the two law firms will collectively be referred to as "Collins." Id.

¶ 6 In May 2007, Collins filed a request for arbitration on Carlson's behalf with the Chicago Board of Options Exchange (CBOE), as provided for in Belvedere's operating agreement. Id. ; Willis Capital LLC , 2015 IL App (1st) 132183, ¶ 6, 390 Ill.Dec. 808, 29 N.E.3d 1078. Collins also filed a complaint for injunctive relief in the circuit court of Cook County in October 2007, seeking to dissolve Belvedere and compel it to buy Carlson's interest in the company for fair value in accordance with section 35-60 of the Limited Liability Company Act ( 805 ILCS 180/35-60 (West 2006) (repealed by Pub. Act 99-637 (eff. July 1, 2017))). Willis Capital LLC , 2015 IL App (1st) 132183, ¶ 6, 390 Ill.Dec. 808, 29 N.E.3d 1078 ; Carlson , 2015 IL App (1st) 140526, ¶ 7, 391 Ill.Dec. 728, 31 N.E.3d 404. During this time, Carlson asked O'Neill and Hutchinson to obtain an appraisal of Belvedere, but they refused. Willis Capital LLC , 2015 IL App (1st) 132183, ¶ 6, 390 Ill.Dec. 808, 29 N.E.3d 1078. O'Neill and Hutchinson also denied Carlson's request for access to Belvedere's books and records. The circuit court subsequently entered an order compelling arbitration. Id.

¶ 7 In February 2008, the parties agreed to mediate their dispute. The parties "agreed that the mediation would be principals only, would be nonbinding, and would be supervised by mediator Douglas Gerrard." Carlson , 2015 IL App (1st) 140526, ¶ 8, 391 Ill.Dec. 728, 31 N.E.3d 404. Prior to the mediation, Carlson did not obtain an independent appraisal of his interest in Belvedere, but in an e-mail to Collins, he estimated that, by the end of

186 N.E.3d 485
452 Ill.Dec. 761

2009, the company could be sold for $100 million. Id. Unbeknownst to Carlson, prior to the mediation, O'Neill and Hutchinson employed the accounting firm of Horwich, Coleman, and Levin (HCL) to conduct an appraisal of Belvedere and determine a market value of Carlson's one-third interest in the company. Willis Capital LLC , 2015 IL App (1st) 132183, ¶ 8, 390 Ill.Dec. 808, 29 N.E.3d 1078. HCL developed statistical models to estimate this value and presented these models to O'Neill and Hutchinson. After receiving the statistical models, O'Neill and Hutchinson directed HCL not to prepare a written report and to stop further work on the appraisal. Id. None of this was disclosed to Carlson.

¶ 8 At the February mediation, Carlson again asked for an appraisal of Belvedere, but O'Neill and Hutchinson responded that an appraisal was unnecessary because they did not want to sell their interests in the company. Id. ¶ 9. The mediation resulted in Carlson agreeing to sell his interest in Belvedere for $17.5 million.

¶ 9 After the mediation, but before he signed the proposed settlement agreement that would memorialize the terms of the sale, Carlson met with his accountant, John Flaherty, to discuss the tax consequences resulting from the settlement agreement. According to Carlson, Flaherty stated in jest that Carlson did not get enough money out of the settlement because of the large amount of taxes he would owe as a result of the settlement agreement. Nevertheless, Carlson ultimately signed the settlement agreement. Carlson and his two former partners signed a term sheet delineating the terms of the sale, which were memorialized in a settlement agreement signed by the parties on March 4 and 6, 2008. Carlson , 2015 IL App (1st) 140526, ¶ 8, 391 Ill.Dec. 728, 31 N.E.3d 404.

¶ 10 The settlement agreement provided in part that it represented "a complete compromise of the controversy between the parties involving disputed issues of law and fact, and that each party fully assumes the risk that the facts or law may be other than they believe." The agreement also provided that the parties agree "that they are not fiduciaries to each other with respect to the negotiations, preparation and execution of" the agreement. The agreement went on to provide that the parties were advised by their respective attorneys and advisors as to the merits of the agreement and that no party was relying on any promise, representation or disclosure of any other party. In addition, the agreement contained a fee-shifting provision that provided that attorney fees and expenses could be awarded to a prevailing party in "an action brought by any party to enforce the terms" of the agreement.

¶ 11 Beginning in September 2008, and continuing through November 2008, Carlson exchanged e-mails with Shawn Collins concerning his belief that O'Neill and Hutchinson had fraudulently tricked him into selling his interest in Belvedere for less than the company's true value. Id. ¶¶ 9-15. Carlson and Shawn Collins discussed the possibility of having the circuit court set aside the settlement agreement and of Shawn Collins obtaining co-counsel in a possible fraud action against Carlson's former partners.

¶ 12 The record reveals that from November 2008 to the early part of December 2008, Carlson consulted with Chris Parker, a college friend and an attorney at the law firm of Michael Best & Friedrich, LLP (Michael Best). Carlson asked Parker to review the settlement agreement and evaluate whether Carlson may have any viable fraud claims against his former partners. Carlson also began to express dissatisfaction

452 Ill.Dec. 762
186 N.E.3d 486

with the legal representation provided by Collins.

¶ 13 On November 19, 2008, Carlson met with attorneys from the law firm of Drinker, Biddle & Reath, LLP (Drinker), to review the settlement agreement. According to Carlson, attorneys at Drinker raised questions about whether the legal services Collins rendered to him in connection with the settlement agreement had been substandard. Id. ¶ 16. Carlson claimed this was the first time he became aware of a possible legal malpractice claim against Collins. Id.

¶ 14 Carlson officially engaged Michael Best from August 18, 2010, through September 16, 2010, for consultation regarding a potential legal malpractice action against Collins. During this time, Parker advised Carlson that a legal malpractice action against Collins "may be tough in the face of the statute of limitations." Parker told Carlson that the applicable statute of limitations for a legal malpractice claim was two years from the date he should have learned of the malpractice.

¶ 15 On November 11, 2010, Carlson engaged the law firm of Cronin & Co., Ltd (Cronin). Carlson and counsel from Cronin eventually contacted HCL, the accounting firm which, unbeknownst to Carlson, had conducted the pre-settlement appraisal of...

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