Hughes Socol Piers Resnick & Dym, Ltd. v. G3 Analytics, LLC
| Decision Date | 28 August 2018 |
| Docket Number | No. 18 C 2114,18 C 2114 |
| Citation | 336 F.Supp.3d 924 |
| Parties | HUGHES SOCOL PIERS RESNICK & DYM, LTD. and Cohen Law Group, P.C., Petitioners, v. G3 ANALYTICS, LLC and Ken Elder, Respondents. |
| Court | U.S. District Court — Northern District of Illinois |
336 F.Supp.3d 924
HUGHES SOCOL PIERS RESNICK & DYM, LTD. and Cohen Law Group, P.C., Petitioners,
v.
G3 ANALYTICS, LLC and Ken Elder, Respondents.
No. 18 C 2114
United States District Court, N.D. Illinois, Eastern Division.
Signed August 28, 2018
Matthew J. Piers, Juliet Vanessa Berger White, Hughes Socol Piers Resnick & Dym Ltd., Chicago, IL, for Petitioners.
Michael A. Steigmann, Law Offices of Michael Steigmann, Chicago, IL, for Respondents.
MEMORANDUM OPINION AND ORDER
MARVIN E. ASPEN, District Judge:
Currently pending is Petitioners Hughes Socol Piers Resnick & Dym, Ltd.
("Hughes") and Cohen Law Group, P.C.'s ("Cohen Law") amended petition pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 9 to confirm an arbitration award entered in their favor regarding unpaid legal fees. (Am. Pet. (Dkt. No. 9); Award (Dkt. No. 9–1).) For the reasons discussed below, we hereby grant Petitioners' amended petition, and enter judgment that Respondents Kenneth Elder and G3 Analytics are liable for $233,597.26 in attorneys' fees to Petitioners Hughes and Cohen Law.
BACKGROUND
I. RELATIONSHIP BETWEEN THE PARTIES
The following facts are uncontested and are generally drawn from the Award and amended petition. Petitioners are law firms with principal places of business in Cook County, Illinois specializing in the prosecution of qui tam litigation, which involves filing claims under state and federal false claims statutes in the hopes of receiving a portion of the recovery. (Award at PageID # :39; Am. Pet. ¶ 1.) See G3 Analytics, LLC v. Hughes Socol Piers Resnick & Dym Ltd. , 2016 IL App (1st) 160369 ¶ 3, 409 Ill.Dec. 485, 67 N.E.3d 940, 942 ; appeal denied , 414 Ill.Dec. 269, 80 N.E.3d 2 (Ill. 2017). At all relevant times, Petitioners have had an agreement to work jointly as "Whistleblower Advocates" in false claims and qui tam cases. (Award at PageID # :39). Beginning in December 2013, Respondent Kenneth Elder engaged in discussions with Petitioners to represent him and G3 Analytics, LLC ("G3"), a limited liability company owned by Elder, to pursue certain qui tam actions related to failure to surrender unclaimed property as required by state law. (Id. ) Respondents are "professional qui tam plaintiffs," also known as relators, who "identify[ ], develop[ ], and fil[e] claims ... using federal and state False Claims statutes." (Am. Pet. ¶ 2.) The parties ultimately entered into an Engagement and Fee Agreement in March 2014 ("the Agreement") governing the terms of Petitioners' representation of Respondents in the contemplated unclaimed property litigation. (Award at PageID # :39, 41; Agreement (Dkt. No. 9–2).)
As relevant here, the Agreement sets forth an Attorneys' Fees and Costs section that generally states that the Petitioners will work on a "contingency fee basis," unless Respondents terminate representation or withdraw as set forth in paragraphs 8 and 9 of the agreement. (Agreement ¶ 4.) Paragraph 9 of the agreement, entitled the Client Withdrawal clause, states:
In the event our Law Firms [Petitioners] are willing to proceed with the Unclaimed Property Litigation and you [Respondents] determine to withdraw, you agree to pay our Law Firms for all costs and expenses we have incurred, plus fees incurred to the date of your withdrawal ....
(Id. ¶ 9.) Finally, the Agreement contains an Alternative Dispute Resolution ("ADR") provision stating:
Any disputes relating to this Agreement ... will be resolved by alternate dispute resolution. Alternative dispute resolution means that you and our Law Firms agree to submit all disputes to an independent mediator mutually agreed upon.... In the event the parties are unable to resolve their disputes through mediation, the parties agree that the mediator shall require the parties to submit their disputes to an independent arbitrator selected by the mediator. The mediator will have the right to appoint himself as arbitrator in that proceeding. The parties shall be bound by the decision of the arbitrator and such decision shall be final and not subject to review
except as to the issue of malfeasance or bias on the part of the arbitrator.
(Id. ¶ 22.)
At all relevant times, Respondents were parties to a consulting agreement with a third party, Total Assets Recovery System ("TARS"), "an organization of attorneys that were relators in qui tam actions regarding unremitted life insurance proceeds." (Award at PageID # :39.) The parties were concerned about the "effect of the TARS consulting agreement on the potential litigation under discussion," and the parties agreed that TARS' involvement in the contemplated unclaimed property filings would cause an "ethical conflict" and would "bankrupt the litigation." (Id. at PageID # :41.) The parties initially agreed that TARS had no claim to the litigation contemplated by the parties. (Id. )
Accordingly, for a number of months in 2014, Petitioners investigated and worked on Respondents' claims and were ready to file lawsuits in Illinois and Delaware by June 2014. (Id. )1 Before filing, however, Petitioners decided to verify that TARS would not assert an interest in the litigation. (Id. ) In July 2014, based on discussions with TARS, Elder informed Petitioners that TARS "insisted on asserting its interest" in the anticipated unclaimed property cases. (Id. at PageID # :42.) Petitioners requested Elder to arrange a meeting with TARS to try to establish a way to advance the qui tam claims; Elder never acted upon the request. (Id. at PageID # :46.) At that time, Steven Cohen "requested a written waiver from TARS before filing the contemplated action." (Id. at PageID # :39, 41.)
Apparently concerned about TARS' interference, Respondents notified Petitioners by email on August 13, 2014 that they were "exercising [their] option to withdraw (item # 9) from our engagement and fee agreement." (Id. ; Resp. (Dkt. No. 12) at 5 ("Elder chose not to pay off TARS or proceed with the litigation.").) On September 14, 2014, Petitioners sent Respondents a bill for $233,597.26 in legal expenses, which remains unpaid. (Id. )
II. PROCEDURAL HISTORY
When Respondents did not pay the $233,597.26 invoice, Petitioners demanded mediation pursuant to the ADR clause of the Agreement. (Id. ) In response, on April 6, 2015, Respondents filed suit in the Circuit Court of Cook County seeking a declaratory judgment that the Agreement was unenforceable. (Id. at PageID # :42.) See also G3 Analytics, LLC , 2016 IL App (1st) 160369 ¶ 5, 409 Ill.Dec. 485, 67 N.E.3d at 943. Respondents contended that (1) the Agreement was not binding because it was negotiated without an "arm's-length bargaining process," (2) the Agreement "became unenforceable" when Respondents "terminated [Petitioners'] representation," (3) the ADR clause in the Agreement "violated public policy," and (4) the ADR clause "became unenforceable by allowing the mediator to appoint him or herself as arbitrator." Id. The trial court ultimately dismissed the complaint and compelled arbitration, and the Appellate Court of Illinois affirmed. Id. , 2016 IL App (1st) 160369 ¶¶ 8–9, 409 Ill.Dec. 485, 67 N.E.3d at 944–45.
The parties then held an unsuccessful mediation pursuant to the terms of the Agreement, and proceeded to arbitration, which occurred on September 19 and 20, 2017 before the Arbitrator, retired Judge Susan Zwick. (Award at PageID # :38.) The arbitration included discovery, two days of evidentiary hearings, and post-hearing briefing. (Id. ) On December 21,
2017, the Arbitrator issued the Award, finding that Petitioners were entitled to recover $233,597.26 in attorneys' fees and costs from Respondents based on paragraph 9 of the Agreement. (Id. at PageID # :46–47.) In issuing the Award, the arbitrator considered and rejected Respondents' arguments that the Agreement was unenforceable based on alleged violations of the Illinois Rules of Professional Conduct. (Id. at Page ID # :42–45 (outlining Respondents' arguments that the Agreement violated Illinois Rules of Professional Conduct 1.5(a), 1.5(e), and 1.8 ).)
On April 19, 2018,2 Petitioners filed an amended petition to confirm the Award pursuant to § 9 of the FAA.3 Petitioners claim that "Respondents have refused to comply with the arbitrator's Award," and request an order confirming the $233,597.26 Award along with a judgment "in conformity with that Order." (Am. Pet. ¶¶ 14, 16.) In response, Respondents argue the Award "is against clear public policy and cannot be enforced," because Petitioners allegedly "coerce[d]" Respondents, their clients, in violation of the Rules of Professional Conduct. (Resp. at 1, 10–14 (citing Ill. R. of Prof'l Conduct 1.2(a), 1.3, 1.5(b)–(c), and 1.8(b) ).) Respondents request we conduct a de novo review to determine "whether the contractual award as interpreted by the arbitrator violates some explicit public policy." (Resp. at 9.) Alternately, Respondents urge us to deny $51,595.00 of the award owed to Cohen Law specifically. Respondents claim Cohen Law engaged in "egregious client...
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