Horwitz v. Sonnenschein Nath & Rosenthal

• Citation: 430 Ill.Dec. 275,126 N.E.3d 1,2018 IL App (1st) 161909
• Decision Date: 29 June 2018
• Docket Number: No. 1–16–1909,1–16–1909
• Parties: Donald P. HORWITZ, Plaintiff–Appellant/Cross–Appellee, v. SONNENSCHEIN NATH & ROSENTHAL, Defendant–Appellee/Cross–Appellant.
• Court: United States Appellate Court of Illinois

2018 IL App (1st) 161909
126 N.E.3d 1
430 Ill.Dec. 275

Donald P. HORWITZ, Plaintiff–Appellant/Cross–Appellee,
v.
SONNENSCHEIN NATH & ROSENTHAL, Defendant–Appellee/Cross–Appellant.

No. 1–16–1909

Appellate Court of Illinois, First District, FOURTH DIVISION.

Filed June 29, 2018
Rehearing denied July 26, 2018

Steven H. Gistenson and Jennifer Warner, of Dykema Gossett PLLC, of Chicago, for appellant.

Walter Jones Jr. and Jorge Cazares, of Pugh, Jones & Johnson, P.C., of Chicago, for appellee.

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

430 Ill.Dec. 276

¶ 1 This case involves the intersection of law and equity, and whether a legal remedy was adequate, such that equitable relief was inappropriate.

¶ 2 Donald Horwitz was an equity partner at the law firm of Sonnenschein Nath & Rosenthal (SNR). In November 2000, he and SNR entered into a "special partnership agreement," whereby Horwitz would surrender his equity stake in exchange for a new deal that compensated him differently for his continued, but less frequent, work for the firm. In Horwitz's view, SNR began breaching this new agreement almost immediately by failing to adequately compensate him based on his contributions to the firm. Finally, after six years of alleged breaches by SNR, Horwitz sued SNR for breach of contract and for rescission.

126 N.E.3d 3

430 Ill.Dec. 277

¶ 3 SNR demanded a jury trial on the breach-of-contract claim, so the chancery judge assigned that trial to the law division. The jury awarded Horwitz $125,000 in damages—the difference, in the jury's eyes, between what Horwitz should have received under the special partnership agreement and what he actually received. At that point, said SNR, Horwitz had been made whole; he had obtained an adequate legal remedy, thus barring his equitable claim of rescission as a matter of law.

¶ 4 The chancery judge disagreed, and the rescission case proceeded to a bench trial. After trial, the chancery judge ruled that Horwitz had waited too long to bring his rescission claim, and that Horwitz's claimed damages were too speculative to warrant recovery.

¶ 5 We agree with SNR that Horwitz obtained an adequate legal remedy on his breach-of-contract action, and thus he was barred, as a matter of law, from pursuing his equitable claim of rescission. We thus affirm the circuit court's dismissal of the rescission claim, albeit on a different ground.

¶ 6 BACKGROUND

¶ 7 On August 18, 2006, Horwitz filed a three-count complaint against SNR in the chancery division of the circuit court of cook county. Count I was an equitable claim seeking to rescind the written agreement Horwitz and SNR entered into in November 2000, pursuant to which Horwitz agreed to relinquish his equity stake in SNR and become a "special partner." Count II was a legal claim seeking damages for SNR's breach of the special partner agreement. Count III sought damages for unjust enrichment.

¶ 8 The chancery judge dismissed the complaint. Horwitz amended the complaint, and the court ultimately dismissed it again. In 2010, this court reversed that dismissal and remanded the matter for further proceedings. See Horwitz v. Sonnenschein Nath & Rosenthal LLP , 399 Ill. App. 3d 965, 979, 339 Ill.Dec. 459, 926 N.E.2d 934 (2010).

¶ 9 After three years of discovery in the circuit court, in March 2013, SNR demanded a jury trial on the breach-of-contract claim in advance of a bench trial on the rescission claim. SNR's reasoning was that a judge sitting in chancery might make findings of fact that could be binding on a jury; to ensure that the jury's role as factfinder was not encroached upon, it was necessary to first try Horwitz's legal claims to a jury. Ultimately, in October 2013, the circuit court, over vigorous opposition from Horwitz, granted SNR's request and transferred the breach-of-contract action to the law division for a jury trial.

¶ 10 In April 2014, a judge sitting in the law division conducted a jury trial on Horwitz's breach-of-contract claim. During closing arguments, Horwitz's attorney asked the jury to award him an amount of damages that "would fairly compensate Mr. Horwitz for the production he had." The verdict form used by the jury asked it to assess damages by determining (1) "The amount of money Mr. Horwitz should have received in addition to his retirement benefits if [SNR] had not breached the Contract[,]" and (2) "The amount of money Mr. Horwitz actually received from [SNR]."

¶ 11 The jury determined that (1) SNR should have paid Horwitz $373,000 and (2) SNR actually paid Horwitz $248,000. The jury thus awarded Horwitz the difference, or $125,000 in damages. The law division judge later entered judgment on the jury's verdict and transferred the case back to the chancery division.

126 N.E.3d 4

430 Ill.Dec. 278

¶ 12 When the case returned to the chancery division, SNR filed a motion opposing Horwitz's ability to further pursue his equitable rescission claim in light of the legal remedy he obtained in the law-division portion of the case. SNR maintained that the damages Horwitz was awarded in the breach of contract trial were an adequate remedy at law, and thus negated his ability to seek equitable remedies. In September 2014, the chancery judge denied SNR's motion.

¶ 13 Undaunted, SNR then filed a "motion for a specific finding whether Horwitz received an adequate remedy at law." That motion requested exactly what its name suggested: a finding by the circuit court that the recovery Horwitz obtained in the law division trial was an adequate remedy at law, and a corresponding finding that Horwitz was therefore barred from seeking equitable remedies. Simultaneously, SNR also filed a motion to dismiss pursuant to section 2619 of the Code of Civil Procedure ( 735 ILCS 5/2–619 (West 2014) ), arguing that the circuit court lacked subject-matter jurisdiction over Horwitz's equitable claims, because he did not file a posttrial motion after the law division judge entered judgment against Horwitz in the breach of contract trial. Both motions were summarily denied.

¶ 14 The case then proceeded to a bench trial on Horwitz's rescission claim. We summarize the evidence at trial as follows.

¶ 15 In 1990, Horwitz began working at SNR and soon became an equity partner. In 1997, a man named Duane Quaini became SNR's chairman. At trial, Quaini testified that when he became chairman, SNR's financial condition was "not good." He explained that SNR had "fallen behind" other Chicago law firms based on revenue metrics and partner income. That was problematic for SNR, according to Quaini, because it posed the "danger" that "partners * * * will begin to leave because they can make more money" at other firms.

¶ 16 To correct course, in 1997, Quaini concluded that it was necessary for SNR to implement two changes. First, SNR decided to ask 17 equity partners, who were selected "based on their long-term lack of production," to either leave the firm or become special partners. And second, between 1997 and 1999, SNR, with some limited exceptions, began to require its partners to book 1800 billable hours annually. Quaini explained that the 1800–hour requirement was deemed necessary because SNR "had too many partners who were not working hard enough and we wanted to * * * motivate them to work at acceptable levels." Horwitz, who during his tenure as equity partner never booked more than 1,272 billable hours in a single year, was one of the equity partners that SNR asked to transition to the role of "special partner."

¶ 17 In November 2000, Horwitz and SNR entered into a letter agreement, pursuant to which Horwitz agreed to relinquish his equity stake in SNR and become, effective January 1, 2001, a special partner. In turn, SNR agreed to compensate Horwitz based on, among other things, Horwitz's "then-current contribution to the Firm and the Firm's current practice with regard to compensating Special Partners." At trial, Horwitz testified that: (1) SNR's obligation to compensate him based on his contributions to SNR was the "heart" of the special partner agreement, (2) he would not have entered into the agreement unless it contained that term, and (3) SNR could have not complied with the agreement by paying him a fixed salary.

¶ 18 Cracks soon appeared in the Horwitz/SNR relationship. In September 2001, Horwitz sent SNR a memorandum claiming responsibility for $945,000 in billings

126 N.E.3d 5

430 Ill.Dec. 279

and stipulating that his 2001 billings could end up as high as $1.4 million. Yet to Horwitz's dismay, in January 2002, he was informed that his 2001 contribution-based bonus would be $71,000—a pittance compared to what he expected to receive. Horwitz protested, which prompted SNR to supplement his 2001 bonus with an additional $10,000 payment. Unsatisfied, Horwitz sent a memorandum to one of SNR's managers, again protesting that his 2001 contribution-based bonus was too low. Horwitz concluded by stating, "It appears I made a grave mistake in agreeing to retire five years early without a firm...