Cross v. American Country Ins. Co.

• Decision Date: 23 May 1989
• Docket Number: No. 88-2318,88-2318
• Citation: 875 F.2d 625
• Parties: Danny Clark CROSS, Plaintiff-Appellee, v. AMERICAN COUNTRY INSURANCE CO., Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 625

875 F.2d 625

58 USLW 2011

Danny Clark CROSS, Plaintiff-Appellee, v. AMERICAN COUNTRY INSURANCE CO., Defendant-Appellant.

No. 88-2318.

United States Court of Appeals Seventh Circuit.

Argued Jan. 18, 1989.

Decided May 23, 1989.

Allen L. Wiederer, Jesmer & Harris, Chicago, Ill., for defendant-appellant.

Danny C. Cross, Detroit, Mich., for plaintiff-appellee.

Before WOOD, Jr., and RIPPLE, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

ESCHBACH, Senior Circuit Judge.

Defendant-appellant American Country Insurance Company ("company") appeals from the jury's award of compensatory and punitive damages in favor of plaintiff-appellee Danny Clark Cross in a diversity action for intentional interference with a contractual relationship. Plaintiff, a Missouri citizen, who is licensed to practice law in Illinois, filed this diversity action in federal district court claiming that the company, an Illinois corporation, tortiously interfered with a contingent-fee contract he had with a personal injury claimant. The company settled the claim directly with the claimant, without contacting Cross. At the conclusion of plaintiff's case and again at the end of defendant's case, the company moved for directed verdict. The jury returned a verdict against the defendant and awarded plaintiff compensatory and punitive damages. The defendant renewed its challenge in a motion for judgment notwithstanding the verdict, which the district court denied.

Appellant raises three issues on appeal. First, it argues that we should reverse the judgment in favor of plaintiff because the contingent-fee contract was unenforceable since it violates the Illinois Code of Professional Responsibility. Second, the company argues that we should grant judgment notwithstanding the verdict because there is not sufficient evidence to establish that it committed the tort of intentional interference with a contract. Finally, it argues that we should grant judgment notwithstanding the verdict because its actions were not of a wanton or malicious nature to support an award of punitive damages and because the plaintiff failed to establish any complicity by the company. We affirm.

I.

On June 7, 1982, Preston Patterson, Jr. was involved in an automobile accident with a Checker taxi as he was driving his father's car. The Checker Taxi Company was insured at that time by Calumet Insurance Company, which is now known as American Country Insurance Company. On or about June 23, 1982, Patterson contacted Cross to represent him in his personal injury claim against the insurance company. In connection with his claim, Patterson signed a retainer agreement with the plaintiff. The agreement stated that plaintiff would receive one-third of any settlement reached, but it did not state when expenses would be deducted nor was it signed by the plaintiff. Along with the contingent-fee agreement, Patterson also signed and returned a waiver of medical information and a confidential client information form.

On June 29, 1983, the plaintiff sent a letter, on his attorney letterhead, to the claims department of Checker Taxi informing it that he would like to contact its insurance company about his client, Patterson's accident. Cross neither contacted the company directly nor sent it an attorney's lien. On July 7, 1983, Patrick Lynch, the company's assistant claims manager, wrote a note to Roosevelt Douglas, the company's claims adjusting supervisor, asking "Who is Preston Patterson?" Tr. at 200. Douglas attempted, albeit unsuccessfully, to contact Cross at the telephone number on his letterhead. On July 21, 1983, Cross returned Douglas' calls and told him that he represented Patterson in his personal injury claim against the company.

On July 27, 1983, Douglas wrote a note to Ricky Guyton, a claims adjuster for the company, telling him to "Go see this man [Patterson] right away." Id. at 79. Douglas also wrote a memorandum, on July 28, 1983, stating that Patterson came down to the office, but they were unable to reach a settlement. He further noted that Patterson needed to talk to someone first and Douglas told him to bring his bills if he came back. On July 29, 1983, Douglas wrote another memorandum for the files stating that Patterson called him and asked a few questions about paying his attorney. Douglas told him that the company would pay the fee, and Patterson responded that he would return to the office.

Cross testified that on July 30 or 31, 1983, Patterson called him to say that he "was being solicited by the company to come to its office." Id. at 70-71. Cross further testified that Patterson informed him that representatives from the company had come to his home. Patterson's father corroborated Cross' testimony by saying that someone from the company visited his home looking for his son and that he received telephone calls from the company for his son.

Cross testified that Patterson sounded inebriated over the telephone, and Cross was afraid that the company was taking advantage of his client. He told Patterson that he would call the company and instruct them not to contact Patterson directly. Cross then testified that he called the company and spoke with Patrick Lynch. He told Lynch that representatives from Lynch's office had come to his client's home and were asking his client to go to their office to discuss a settlement. Cross explained to Lynch that the company's agents had told Patterson that he did not need a lawyer and that litigation takes a long time. Cross ordered Lynch to stop contacting his client directly about the settlement. On cross-examination, Douglas denied contacting Patterson and stated that he did not consider Cross to be Patterson's attorney because Cross had not sent him a valid attorney's lien.

In October 1983, Patterson called Cross to tell him that he had settled his claim with the company for $650 and that the company would pay his attorney fee. The check and the release of liability were signed by Patrick Lynch.

Cross never received any payment from the company or from Patterson and subsequently filed this suit against the company in federal district court for intentional interference with a contractual relationship. At the conclusion of plaintiff's case and again at the conclusion of defendant's case, the defendant filed a motion for directed verdict. On February 24, 1988, the jury returned a verdict against defendant and awarded plaintiff $216.66 in compensatory damages and $15,000 in punitive damages. The defendant renewed its challenge by moving for judgment notwithstanding the verdict or, in the alternative, for a new trial. The district court denied the motion. The district court, without objection, applied Illinois law, and we agree that this is the proper substantive law to apply.

Appellant raises three issues on appeal. In essence, appellant argues that Cross failed to establish a prima facie case of intentional interference with a contractual relationship. Two of appellant's three issues on appeal specifically contest Cross' failure to establish the elements of this tort. In Illinois, a plaintiff must demonstrate sufficient proof of the five elements of the tort of intentional interference with a contract. These five elements are: "(1) The existence of a valid and enforceable contract, (2) The defendant's knowledge of the existing contract, (3) Intentional and malicious inducement of the breach, (4) The subsequent breach by the third person due to defendant's wrongful conduct, and (5) Damage to the plaintiff." Zamouski v. Gerrard, 1 Ill.App.3d 890, 275 N.E.2d 429, 433 (1971); accord Swager v. Couri, 60 Ill.App.3d 192, 17 Ill.Dec. 457, 460, 376 N.E.2d 456, 459 (1978), aff'd, 77 Ill.2d 173, 32 Ill.Dec. 540, 395 N.E.2d 921 (1979). Appellant claims that Cross failed to prove three of these elements. We will discuss each element separately.

II.

Appellant first argues that the contingent-fee agreement is not a valid and enforceable contract because it violates Rule 2-106(c)(2) of the Illinois Code of Professional Responsibility. The question of whether a contract is enforceable under considerations of public policy is a conclusion of law. See Zeigler v. Illinois Trust & Sav. Bank, 245 Ill. 180, 91 N.E. 1041, 1045 (1910). Thus, we review it de novo. LaSalle Nat'l Bank v. Service Merchandise Co., 827 F.2d 74, 78 (7th Cir.1987).

The Illinois Supreme Court officially adopted the Illinois Code of Professional Responsibility on June 3, 1980, and it became effective on July 1, 1980. The current version of Rule 2-106, the rule at issue in this appeal, became effective on August 1, 1981. Section (c)(2) of this rule provides:

Any contingent-fee agreement shall be in writing. The original and each copy shall be signed by the lawyer and by each client. One signed copy shall be provided to each client at the time of making the agreement, and one shall be retained by the lawyer. Any contingent-fee agreement shall set forth the precise method by which the fee is to be determined, including the percentage, or percentages, if any, to be applied in the event of settlement, trial or appeal, whether expenses are to be deducted before or after the contingent fee is calculated and any other factors relevant to the fee arrangement.

ILL.ANN.STAT. ch. 110A, foll. p 774 (Smith-Hurd 1985) (Canon 2). Both parties agree that the contract was not signed by Cross and that it did not state when expenses were to be deducted. Defendant contends that since the contract fails to comply with the requirements of the disciplinary rule, the contract is unenforceable as contrary to public policy. Defendant properly preserved this issue for appeal by objecting to the court's instruction to the jury, which was overruled, that a valid and enforceable contract existed between Cross and Patterson. Tr. at 252, 305.

However, contrary to defendant's contention, the Code of Professional Responsibility is not binding on the courts. In re Yamaguchi, 118 Ill.2d...