Herman v. Prudence Mut. Cas. Co.

• Citation: 92 Ill.App.2d 222,235 N.E.2d 346
• Decision Date: 19 February 1968
• Docket Number: Gen. No. 52644
• Parties: Alvin P. HERMAN, Theodore Tannebaum, Emanuel Acino, Janice Lindsey, Madeline Amato and Tony Paras, on behalf of themselves and other clients of Alvin P. Herman and Theodore Tannebaum, who have claims pending against assureds of Prudence Mutual Casualty Company and Alex Cason, Plaintiffs-Appellants, v. PRUDENCE MUTUAL CASUALTY COMPANY, George F. Barrett, Urban Service Bureau,Inc., and William Warren, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 346

235 N.E.2d 346

92 Ill.App.2d 222

Alvin P. HERMAN, Theodore Tannebaum, Emanuel Acino, Janice Lindsey, Madeline Amato and Tony Paras, on behalf of themselves and other clients of Alvin P. Herman and Theodore Tannebaum, who have claims pending against assureds of Prudence Mutual Casualty Company and Alex Cason, Plaintiffs-Appellants, v. PRUDENCE MUTUAL CASUALTY COMPANY, George F. Barrett, Urban Service Bureau,Inc., and William Warren Defendants-Appellees.

Gen. No. 52644.

Appellate Court of Illinois, First District, First Division.

Feb. 19, 1968.

Rehearing Denied March 18, 1968.

Ronald L. Cohen, Chicago, for plaintiffs-appellants.

Terence F. MacCarthy, Chicago, of counsel.

Carey, Filter, Murray & White, Chicago, for Prudence Mutual Casualty co.

Schaller, Reilly & Cassidy, Chicago, for George F. Barrett; James C. Murray, Robert P. Freeman, Chicago, of counsel.

MURPHY, Justice.

In a three count complaint seeking injunctive relief and damages, plaintiffs alleged that defendants conspired to induce breaches of 92 of plaintiffs' attorney-client relationships and procure fraudulent settlements in personal injury claims pending against assureds of defendant insurance company. The trial court sustained defendants' motion to strike and dismissed the complaint.

Plaintiffs, asserting a substantial constitutional questional question, appealed directly to the Supreme Court, which found it had no jurisdiction on the direct appeal and transferred the cause to this court. From this we presume the Supreme Court determined either that no constitutional questions were involved or that they were not material to the disposition of the appeal. City of Chicago v. Berg, 48 Ill.App.2d 251, 254, 199 N.E.2d 49 (1964).

Substantially, the issue on appeal is whether the complaint states a cause of action to show that defendants entered into a conspiracy among themselves to interfere wrongfully and maliciously with contractual rights and fraudulently induce clients of plaintiffs, Herman and Tannebaum, lawyers, to breach their contracts.

In sum, the allegations of the complaint show that plaintiffs, Herman and Tannebaum, are lawyers, and the other plaintiffs are their clients who have pending claims against assureds of defendant Prudence Mutual Casualty Company.

Defendant Barrett, a lawyer and a director of Prudence, is primarily engaged in defending claims asserted against persons insured by Prudence. Defendant Urban Service Bureau, Inc., is an Illinois corporation engaged in the adjustment and settlement of claims for insurance companies and attorneys. Defendant Warren, not a lawyer, is employed by Prudence, Barrett and Urban to adjust, settle and investigate accident claims.

Count I of the complaint is brought by Herman and Tannebaum. It alleges the undertaking by these plaintiffs, under attorney-retainer employment contracts, to represent some 92 persons with claims against the assureds of Prudence, and the filing of lawsuits in 43 of these cases. In each of these claims, Herman and Tannebaum 'sent or caused to be sent to each of the respective defendants, in all cases Prudence's assureds, a Notice of Attorneys' Lien * * *. All said Notices of Attorneys' Liens were forwarded to Prudence and Barrett,' and in all these claims, Herman and Tannebaum, 'as attorneys for the claimants and plaintiffs, (have) discussed and attempted to negotiate settlements of said claims with Prudence and Barrett.' Paragraph 25 of the complaint alleges that following the entry of a verdict against an assured of Prudence in a suit in which the plaintiff was represented by Herman and Tannebaum, 'Prudence and Barrett have conspired and are presently conspiring among themselves and with Urban and Warren to maliciously, unethically and illegally defraud Herman's clients into prematurely releasing their claims against Prudence's assured without advice of counsel and the opportunity of a trial.'

Paragraph 26 alleges:

'Urban and Warren have made and are presently making attempts to contact, and have contacted, either personally, by letter, telephone or other means of communication, all of Herman's clients who are party plaintiffs to this suit.'

Paragraph 27 alleges:

'In furtherance of this conspiracy, Prudence and Barrett have furnished and made available to Urban and Warren the names and addresses of Herman's clients and the nature of the claims involved.'

Paragraph 30 alleges:

'At the time of and since contacting Herman's clients, Prudence, Barrett, Urban and Warren, prusuant to and in furtherance of their conspiracy, have:

(a) Maliciously and fraudulently attempted to induce, are presently inducing or have induced or otherwise purposely caused Herman's clients to discontinue their business relationships with Herman;

(b) * * * caused Herman's clients to breach or terminate their respective contracts with Herman;

(c) * * * interfered with Herman's occupation and business expectancies and Herman's clients' claim expectancies;

(d) Participated in the unauthorized practice of law in violation of Chapter 13, Section 1, Illinois Revised Statutes (1965);

(e) Violated the Canons of Professional Ethics of the Illinois State Bar Association, specifically Canon 9 thereof, which reads as follows:

'A lawyer should not in any way communicate upon the subject of controversy with a party represented by counsel; much less should he undertake to negotiate or compromise the matter with him, but should deal only with his counsel. It is incumbent upon the lawyer most particularly to avoid everything that may tend to mislead a party not represented by counsel, and he should not undertake to advise him as to the law."

In Count II, plaintiffs Acino and Lindsey, individually and as representatives of 92 persons who have contractually employed and retained Herman to prosecute or settle their claims against assureds of Prudence, adopt the allegations of Count I as a class action.

In Count III, plaintiff Cason alleges that he had a claim against an assured of Prudence and employed Herman to prosecute the claim, and that Warren made contact with him and, relying on the false representations of Warren, Cason accepted the sum of $100.00 and signed a release tendered to him by Warren. The date and the details of the transaction are set forth.

The prayer of the complaint is that the court declare malice to be the gist of the action, that a temporary writ of injunction issue against the defendants, and that they be enjoined 'from contacting, writing to, speaking with or in any way communicating with clients of Attorneys, Alvin P. Herman and Theodore Tannebaum,' and that 'plaintiffs be awarded and have judgment as actual damages any and all sums lost or expended by said plaintiffs as a result of defendants' conduct as alleged in this Complaint, which sums are presently unknown to all plaintiffs or not yet ascertained, but which sum in the aggregate exceeds $2,000.00,' and also that plaintiffs be awarded 'punitive or exemplary damages against defendants in the amount of $250,000.00.'

Exhibits attached to the complaint and made a part thereof include copies of letters plaintiffs Acino and Lindsey received from defendant Warren in regard to the settlement of their claims, and a list of the members of the class of persons suing as plaintiffs in Count II.

On appeal, defendants concede 'that a trial court can grant relief for fraudulent and malicious conduct resulting in the interference with contractual and other rights without violating constitutional guarantees of freedom of speech.' However, defendants maintain that their motion to strike and dismiss the complaint was sustained for the following reasons: (1) the complaint is insufficient to state a cause of action; (2) the complaint seeks to enjoin the excercise of constitutional rights; (3) the complaint is multifarious and improperly joins parties plaintiff; and (4) the plaintiffs have an adequate remedy at law.

Defendants contend that a cause of action based upon the tort of malicious interference with contractual relationship must contain four essential elements: (1) defendant's knowledge of the existing contract; (2) the inducement; (3) the breach by the third party; and (4) damage to the plaintiff. (Northern Ins. Co. of New York v. Doctor, 23 Ill.App.2d 225, 161 N.E.2d 867 (1959).) Defendants maintain that three of the essential elements, (1) inducement, (2) breach, and (3) damage, are missing in the instant complaint. Defendants state that the complaint does not contain any allegation 'that either of the instant defendants induced any client, either named as plaintiff or unnamed, of the plaintiff attorneys to terminate the attorney-client relationship or breach any contract. Rather than constituting an inducement to breach of contract, the acts of these defendants complained of in the complaint appear to have solidified the lawyer-client relationship.'

Defendants also assert that neither the plaintiff attorneys nor their clients have been damaged, either by the nonpayment of fees or otherwise, by any alleged acts of the instant defendants, and, 'stripped of its rhetoric and citations and despite protestations to the contrary, the sole gravamen of this complaint is to enjoin an insurance company from talking to claimants after receipt of a notice of attorney's lien. This is not the law, nor can it be the law.'

Actions for malicious and fraudulent inference with contractual rights and business expectancies have long been recognized, commencing with Lumley v. Gye, 2 E. & B. 216, and in Illinois, commencing with Doremus v. Hennessy, 176 Ill. 608, 52 N.E. 924 (1898). In Doremus, it is said (p. 614, 52 N.E. p. 925):

'The common law seeks to protect every person against the wrongful acts of others, whether committed alone or by combination, and an action may be had for injuries done which cause another loss in the enjoyment of any right or privilege or property. No persons, individually or by combination, have...