In re Larocque

• Citation: 2018 IL App (2d) 160973,107 N.E.3d 349
• Decision Date: 31 May 2018
• Docket Number: Nos. 2–16–0973 & 2–16–0987 cons.,s. 2–16–0973 & 2–16–0987 cons.
• Parties: IN RE MARRIAGE OF Janet LAROCQUE, Petitioner and Counterrespondent–Appellant, and John LaRocque, Respondent and Counterpetitioner–Appellee (Howard Rosenfeld, Appellant).
• Court: United States Appellate Court of Illinois

2018 IL App (2d) 160973
107 N.E.3d 349

IN RE MARRIAGE OF Janet LAROCQUE, Petitioner and Counterrespondent–Appellant,
and
John LaRocque, Respondent and Counterpetitioner–Appellee

(Howard Rosenfeld, Appellant).

Nos. 2–16–0973 & 2–16–0987 cons.

Appellate Court of Illinois, Second District.

Opinion filed May 31, 2018

Law Offices of Robert G. Black, P.C., of Naperville (Robert G. Black, of counsel), and Howard H. Rosenfeld and Shaska R. Dice, of Rosenfeld, Hafron, Shapiro & Farmer, of Chicago, for appellants.

Michael J. Berger, Jennifer Cantrell, and Eric J. Schwab, of Berger Schatz, of Chicago, for appellee.

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

¶ 1 Following a trial in the circuit court of Du Page County, the court entered a

107 N.E.3d 353

judgment dissolving the marriage of John and Janet LaRocque. As part of that order, the court sanctioned one of Janet's attorneys, Howard Rosenfeld, in the form of a $50,000 judgment against him and in favor of John. Janet appeals, challenging the court's factual findings as well as numerous rulings both prior to and during trial. Rosenfeld separately appeals the sanctions entered against him. For the reasons that follow, we affirm.

¶ 2 I. BACKGROUND

¶ 3 John and Janet married in 1985. During the marriage, John amassed substantial wealth for the family through his efforts as a trader and investor. Janet was a stay-at-home mother to the parties' four children, the eldest of whom has since passed away. The remaining children are all emancipated. In May 2014, Janet filed a petition for dissolution of the marriage. John filed a counterpetition the following month. Janet subsequently dismissed her petition, and the case proceeded on John's counterpetition.

¶ 4 John and Janet had a large marital estate, ultimately valued by the trial court at more than $21 million. However, the parties disputed whether the assets held in certain irrevocable trusts were also part of their marital estate. The court granted John's motion for summary judgment with respect to those trusts, ruling that the assets therein were not part of the marital estate. The matter subsequently proceeded to trial on the issues of maintenance, distribution of property, and the date the marriage began its irretrievable breakdown. We will summarize these proceedings more fully below.

¶ 5 A. John's Motion for Summary Judgment

¶ 6 In the mid–2000s, John retained counsel for the purpose of creating a comprehensive family estate plan. Over the ensuing years, he and Janet established and funded numerous irrevocable trusts. Although Janet signed documents relating to the trusts, she denied knowing any of the details of the estate plan or being involved in the planning process. It is undisputed that the parties' children and further descendants will ultimately reap substantial tax benefits from this estate plan. The problem from Janet's perspective, however, was that John's estate-planning techniques substantially reduced the size of their marital estate for purposes of these divorce proceedings. Janet thus accused John of "divorce planning."

¶ 7 Prior to trial, John filed a motion for summary judgment pertaining to the trusts. He argued that all of the property that was contributed to the trusts over the years was transferred by him and/or Janet irrevocably and with donative intent. Relying primarily on In re Marriage of Romano , 2012 IL App (2d) 091339, 360 Ill.Dec. 36, 968 N.E.2d 115, and Johnson v. La Grange State Bank , 73 Ill. 2d 342, 22 Ill.Dec. 709, 383 N.E.2d 185 (1978), John claimed that the trusts and their assets were outside of the marital estate and could not be divided in these divorce proceedings. He supported his motion with six affidavits, which are detailed below. Those affidavits, in turn, incorporated by reference more than 300 exhibits comprising thousands of pages.

¶ 8 Michael Hartz, a partner at the law firm of Katten Muchin Rosenman, LLP (Katten Muchin), submitted an affidavit in which he averred the following. In December 2004, he was retained to represent John and Janet with regard to their estate planning. Although he was the "principal attorney for the LaRocque estate planning," his associate, Jonathan Graber, drafted documents and dealt with the clients. Over time, Graber assumed primary responsibility for the matter. According

107 N.E.3d 354

to Hartz, "[i]n addition to creating a plan to meet the LaRocque's [sic ] objective of providing an orderly disposition of property upon death, a significant emphasis of the estate planning was to minimize federal and state estate taxes." Hartz attached to his affidavit an engagement letter wherein he agreed to represent John and his family. That letter was directed to, and signed by, John, not Janet.

¶ 9 Graber, a former employee of Katten Muchin and a current partner at Drinker Biddle & Reath LLP (Drinker Biddle), also submitted an affidavit. He averred that, in 2005, he began preparing estate-planning documents for John and Janet under Hartz's supervision. A significant emphasis of this plan, Graber explained, was to minimize estate taxation while providing an orderly disposition of property upon death. He asserted that, because of the tax planning that had been implemented, the majority of the property currently owned by the various trusts should not be subject to estate taxation upon the death of John or Janet. The ultimate beneficiaries of the tax planning are the parties' children and their further descendants. Graber identified the myriad trusts that John and Janet established, and he explained the estate-planning advantages that those trusts provided. Graber also asserted in his affidavit that John engaged in loan transactions with many of the trusts. According to Graber, those transactions were authorized by the provisions of the trust documents. Furthermore, Graber attested that most of the trusts contained provisions designed to ensure that they would be taxed as "grantor trusts." Among those provisions were the power of the trustees to lend money to the grantor without adequate security and the power of the grantor to substitute property of equivalent value. According to Graber, "[t]his is beneficial from an overall family tax perspective, since property owned by John or Janet, which would ultimately be subject to estate taxes, is being used to pay the income tax obligations of trusts that will not be subject to estate taxes."

¶ 10 John also attached his own affidavit in support of his motion for summary judgment. He averred as follows. In December 2004, he retained Katten Muchin to prepare an estate plan for himself and Janet. The purposes of the estate plan were to provide for an orderly disposition of property upon his and Janet's deaths and to minimize estate taxation in the process of transferring wealth to their children. Pursuant to that plan, between 2005 and 2012, he and/or Janet established dozens of trusts, many of which were grantor retained annuity trusts (GRATs). During that same time period, he and/or Janet gifted and sold assets to the trusts. In doing so, he intended to irrevocably divest himself of ownership of those assets. To the best of his knowledge, he, as grantor, acted consistently with the terms of the trust agreements. He undertook loan transactions with "virtually all of the trusts" by borrowing principal pursuant to a series of revolving loan agreements and promissory notes. He also made loans to the trusts and sold assets to them, the latter event being an exercise of his right as grantor to substitute assets of equivalent value. The gift-tax returns that he and Janet filed from 2005 to 2012 reflected the assets that they transferred to the trusts. John identified in his affidavit the various trusts that were established. He also indicated when and how each trust was funded and, in the case of the GRATs, provided the date that each trust either had terminated or was expected to mature. He further documented his numerous loan transactions, some of which occurred almost immediately after the initial funding of the trusts.

107 N.E.3d 355

¶ 11 Michael LaRocque, John's brother, submitted an affidavit in support of John's motion for summary judgment. He averred the following. He served as either the trustee or the trust protector of numerous trusts established by John and Janet. He understood that the purposes of the trusts were to provide an orderly distribution of property upon John's and Janet's deaths and to transfer wealth to their children while minimizing estate taxation. Michael consulted with Graber on an ongoing basis regarding the trust transactions to ensure adherence to the purposes of the trusts.

¶ 12 Daniel Asher signed an affidavit, averring as follows. He had known John since 1980, and they had been friends and business partners for more than 20 years. Asher was the trustee and investment advisor of some of the trusts at issue. In those capacities, he executed numerous documents, including purchase agreements, promissory notes, assignments, and loan agreements between John and the trusts. To the best of Asher's knowledge, all such loan and purchase transactions were in accordance with both his own fiduciary duties and the express provisions of the trust agreements.

¶ 13 The final affidavit that John submitted in support of his motion for...