Dowd and Dowd, Ltd. v. Gleason
Decision Date | 13 September 2004 |
Docket Number | No. 1-01-1002.,1-01-1002. |
Citation | 352 Ill. App.3d 365,816 N.E.2d 754,287 Ill.Dec. 787 |
Parties | DOWD and DOWD, LTD., Plaintiff-Appellee, v. Nancy J. GLEASON, Douglas G. Shreffler, and Gleason, McGuire and Shreffler, Defendants-Appellants. |
Court | United States Appellate Court of Illinois |
Jeffrey M. Marks, Chicago (Frank K. Heap, of counsel), for Appellant.
Michael W. Rathsack, Chicago (Patrick C. Dowd, Patrick J. Ruberry and Michael W. Rathsack, of counsel), for Appellees.
Plaintiff, Dowd & Dowd, Ltd. (Dowd), filed suit against Nancy J. Gleason and Douglas G. Shreffler (defendants), after they resigned as shareholders (partners) of Dowd and opened a new law firm, Gleason, McGuire and Shreffler (GMS). While working at Dowd, Nancy Gleason managed the Allstate Insurance Company (Allstate) account. When the new firm was formed, Allstate moved its business to the new law firm. Dowd filed suit against defendants, alleging breach of fiduciary duty, breach of employment contract, tortious interference with prospective economic advantage and civil conspiracy.
The case was heard in a bench trial. In February 2001, the court entered a judgment in favor of Dowd and denied defendants' mistrial motion. In March 2001, the court found that there was no reason to delay enforcement or appeal. Defendants now appeal.
The following issues are presented for review by defendants:
Dowd & Dowd is a law firm. In 1975 or 1976, Northbrook Excess and Surplus Insurance Company, a subsidiary of Allstate, retained Dowd for advice on insurance coverage of claims that were being made against Allstate's policyholders for injuries arising from exposure to asbestos products. Nancy Gleason, one of the defendants here, joined Dowd in 1977 as an attorney and for the next 13 years became the primary person handling the Allstate account. Lynn Crim was the head of Allstate's claims department and supervisor to George Riley, a manager in the claims department. Between 1987 and December 1990, Crim spoke with Nancy Gleason on a daily basis and spoke with Mike Dowd, the senior partner, "[r]arely."
On August 7, 1990, Dowd paralegal Leslie Henkels met with Judy Gleason (an attorney at Dowd and wife of Douglas Shreffler), Nancy Gleason (an attorney and niece of principal partner Mike Dowd), and Maureen Henegan (a Dowd secretary). During that meeting, Judy Gleason indicated that Patrick Dowd (son of Mike Dowd2) was being promoted to partnership status and that she and the others were leaving the firm. On or about September 25, there was a partners meeting and Patrick's appointment was announced. Following the appointment of Patrick Dowd to partner, Nancy Gleason, Douglas Shreffler and Judith Gleason began investigating the possibility of establishing a new, separate law firm. They decided to take preliminary steps to form that firm and by December 1990, GMS had located office space, ordered furniture and equipment and initiated a banking relationship with the Harris Bank.
On December 31, 1990, Nancy Gleason and Shreffler resigned from Dowd and with Philip McGuire and Judith Gleason, started the GMS law firm. On December 31, 1990, Nancy Gleason and Shreffler went to Mike Dowd's home "in the late morning" to inform him of their resignations as officers and directors of Dowd. Crim of Allstate gave Gleason the charge of moving Allstate's cases that were currently with Dowd to the new firm. Crim testified that he learned of Gleason's new firm on December 31, 1990, "first thing in the morning."
Dowd brought this action against Gleason, Shreffler and GMS, seeking imposition of a constructive trust on the new firm's fee income, an accounting, compensatory and punitive damages for breach of fiduciary duty, breach of contract, and other theories of recovery. Gleason and Shreffler filed a counterclaim, seeking amounts due under a stock repurchase agreement and sanctions. The parties submitted cross-motions for summary judgment. The trial judge denied the defendants' motion for sanctions and denied their motion for summary judgment as to Dowd's breach of a fiduciary duty count, which it certified as a question of law. The trial judge otherwise ruled in favor of the defendants on the issues.
Dowd appealed, and the appellate court affirmed in part and reversed in part. Dowd & Dowd v. Gleason, 284 Ill.App.3d 915, 220 Ill.Dec. 37, 672 N.E.2d 854 (1996). The appellate court held that: the trial court had authority to consider defendants' motions for summary judgment; the trial court failed to make proper findings of fact; the trial court's error in weighing the credibility of witnesses in ruling on motion for summary judgment was harmless error; complaint stated a cause of action for breach of fiduciary duty; the trial court properly dismissed the civil conspiracy claim as duplicative; the trial court properly dismissed allegations of wilful and wanton conduct as duplicative; there existed a sufficient business expectancy to support its claim for tortious interference with prospective economic advantage; defendants were not required to give 90 days' notice prior to resignation; employment contract provision prohibiting the solicitation of firm clients was void; defendants' right to have the firm buy their partnership shares upon termination was not subject to offset; and the trial court properly denied defendants' motion for sanctions.
The defendants were granted leave to appeal by the Illinois Supreme Court. The supreme court held that: there remained unresolved factual issues on the breach of fiduciary duty count; factual questions remained as to the tortious interference with prospective economic advantage count; defendants did not breach their employment contract; noncompetition covenants in the employment agreements were unenforceable as violations of Rule 5.6 of the Rules of Professional Conduct (134 Ill.2d R. 5.6); the civil conspiracy claim was improperly dismissed as duplicative and Dowd may plead and attempt to prove the separate elements of civil conspiracy; and no sanctions would be imposed upon Dowd for violations of the pleadings rules.
A bench trial was had on the matters remaining. After the close of evidence, Dowd moved to reopen its case to submit more evidence. Over defendants' objection, the court granted the motion and heard additional evidence alleging illegal tax document alterations and bank fraud. Defendants moved for a mistrial in November 2000.
On February 26, 2001, the trial court entered a judgment order, finding in favor of Dowd on the following counts: count I, breach of fiduciary duty; and count III, tortious interference with prospective economic advantage. The trial court found that Dowd failed in its burden of proof as to count VII, wilful and wanton conduct. Further, the trial court stated "[a]s the Supreme Court held that [the] Conspiracy count simply represented an alternative theory of liability3, the Court enters no judgment nor awards any damages on this Count VI."
The trial court's amended order, dated March 12, 2001, noted that the wilful and wanton conduct count was "mooted by the Appellate Court's ruling." There was consequently no ruling on that count and the court allowed Rule 304(a) (134 Ill.2d R. 304(a)) language to be included in its order. On March 13, 2001, defendants filed a notice of appeal. On April 10, 2001, Dowd filed a notice of cross-appeal requesting that this court reverse certain portions of the amended order dated March 12, 2001, by entering judgment in favor of plaintiff on the civil conspiracy count or granting a new trial on that count.
Defendants' initial contention is that the trial court's reasoning in the breach of fiduciary duty section of its order essentially reduces the status of clients to chattel and the decision deprives clients of their choice of counsel by prohibiting the mobility of lawyers. A full reading of the court's written order shows that defendants' assertion is an overstatement of the court's findings and an exaggeration of the impact of those findings.
In its written order, the trial court discussed the broad guidelines regarding the standards and obligations used to determine whether a departing partner's actions prior to leaving a firm constitute a breach of fiduciary duty. In citing an article from the Michigan Bar Journal (A. Goetz, Break Away Lawyers, 77 Mich. B.J. 1078 (1998)), the trial court noted that when attorneys leave a law firm to establish their own firm, it is appropriate to consider the clients as property of the firm and not property of the individual members of the firm. The trial court went on to explain that, accordingly, the lawyers may not solicit the firm's clients on company time nor may they use the firm's resources to establish their own, competing firm, particularly until proper notice has been given. While defendants were free to set up a new law firm, the question became whether any of the steps taken in connection with such action breached the fiduciary duty that the defendants owed to Dowd. On the other hand, the current firm has a duty not to interfere with the departing attorneys' continued right to practice law. The trial court noted that it is not improper for the lawyer to notify the client of his impending departure provided that he makes it clear that legal representation is the client's choice. In...
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