Kerschner v. Weiss & Co.

• Decision Date: 28 June 1996
• Docket Number: No. 1-94-4012,1-94-4012
• Citation: 282 Ill.App.3d 497,667 N.E.2d 1351
• Parties: , 217 Ill.Dec. 775 Marshall KERSCHNER, Ronald Karlin and Burton Sharpe, Plaintiffs, v. WEISS & COMPANY, a partnership in dissolution, Jerry Weiss, Franklyn E. Lee and Anne Seefor, Defendants. WEISS & COMPANY, Jerry Weiss, Franklyn E. Lee and Anne Seefor, Plaintiffs, v. Marshall KERSCHNER, Ronald Karlin, Burton Sharpe, Diana Nolan, and Paul Karlin, Defendants. Marshall KERSCHNER and Ronald Karlin, Third-party Plaintiffs-Appellants, v. Elliott I. GOODMAN and Gottlieb and Schwartz, Third-party Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 1351

667 N.E.2d 1351

282 Ill.App.3d 497, 217 Ill.Dec. 775

Marshall KERSCHNER, Ronald Karlin and Burton Sharpe, Plaintiffs, v. WEISS & COMPANY, a partnership in dissolution, Jerry Weiss, Franklyn E. Lee and Anne Seefor, Defendants.

WEISS & COMPANY, Jerry Weiss, Franklyn E. Lee and Anne

Seefor, Plaintiffs, v. Marshall KERSCHNER, Ronald Karlin, Burton Sharpe, Diana

Nolan, and Paul Karlin, Defendants.

Marshall KERSCHNER and Ronald Karlin, Third-party Plaintiffs-Appellants, v. Elliott I. GOODMAN and Gottlieb and Schwartz, Third-party

Defendants-Appellees.

No. 1-94-4012.

Appellate Court of Illinois,

First District, Sixth Division.

June 28, 1996.

Abrams & Chapman, Chicago (Sherwin D. Abrams, of counsel), for appellants.

Clausen Miller, P.C., Chicago (James T. Ferrini, James O. Nolan, Richard M. Kaplan, Anne L. Blume and Edward M. Kay, of counsel), for appellees.

Presiding Justice ZWICK delivered the opinion of the court:

This appeal arises out of a dispute over the dissolution of an accounting partnership. At issue is the propriety of the trial court's entry of summary judgment in favor of third-party defendants, Elliot I. Goodman and the law firm of Gottlieb and Schwartz, on the claim for indemnity brought by third-party plaintiffs, Marshall Kerschner and Ronald Karlin.

The record reveals that Marshall Kerschner, Ronald Karlin, Burton Sharpe, Jerry Weiss, Franklyn Lee, and Anne Seefor were partners in an accounting firm known as Weiss & Company. In the summer of 1989, Kerschner, Karlin and Sharpe (KKS) retained Elliott I. Goodman, a partner in the law firm of Gottlieb & Schwartz (Goodman), to provide professional advice relative to their withdrawal from Weiss & Company and to the formation of a new accounting partnership.

After consulting with Goodman and prior to withdrawing from the partnership, KKS informed certain clients of Weiss & Company of their intention to leave that firm and requested those clients direct Weiss & Company to deliver their client files to KKS. They also offered employment with their new firm to certain employees of Weiss & Company. In addition, KKS withdrew $150,000 from the Weiss & Company bank account and deposited those funds in their personal accounts. After announcing their withdrawal from Weiss & Company, KKS accepted payment on accounts receivable due Weiss & Company and deposited such funds in the account held by the new accounting firm. KKS also billed clients in the name of the new firm for services performed while they were still partners in Weiss & Company.

In October 1989, KKS announced their withdrawal from Weiss & Company and demanded that the remaining partners deliver to them the client files for all clients who had signed letters of direction to that effect. The remaining partners refused to comply with these directions, and KKS filed an action in chancery against them, seeking production of those client files.

The trial court entered an agreed order, requiring the partners to deliver the client files to KKS and requiring KKS to return $75,000 to the partners. The furniture and office equipment of the partnership was divided between the parties, and the remaining Weiss partners were ordered to furnish an accounting to KKS, calculating their remaining interest in the firm. This accounting established that KKS were entitled to receive approximately $49,000 in addition to the assets previously distributed. KKS filed objections to the accounting, and the trial court transferred the case to the Law Division for trial on the issues raised by the objections.

In February 1991, the remaining Weiss partners (the plaintiffs) filed a separate action against the KKS, and the two actions were consolidated for trial. Plaintiffs sought an accounting as well as recovery of damages for the allegedly wrongful termination of the Weiss partnership, for alleged breaches of fiduciary duty, and for alleged tortious interference with the contractual relations of the Weiss partnership.

Thereafter, Kerschner and Karlin filed a third-party complaint against Goodman and the law firm of Gottlieb and Schwartz in the 1991 case. Sharpe elected not to join as a third-party plaintiff. In the third-party complaint, Kerschner and Karlin alleged that Goodman had advised them that, prior to announcing their withdrawal from the Weiss partnership, it was lawful and advisable to establish a new accounting firm, to lease office space in the name of the new firm and to obtain insurance and utility service. Kerschner and Karlin claimed that Goodman also advised them that it was lawful and advisable to solicit clients and employees of the Weiss partnership, to withdraw funds from the Weiss partnership for deposit in their personal accounts, to accept payment on accounts receivable due the Weiss partnership, to deposit such funds in the new accounting firm's account and to bill clients in the name of the new accounting firm for services performed while they were still members of the Weiss partnership.

Kerschner and Karlin alleged that Goodman had acted negligently in advising them on their withdrawal from the Weiss partnership and on the creation of their new accounting firm. They also alleged that they would not have performed any of the acts set forth above had they not been advised by Goodman that it was lawful and advisable for them to do so. In the prayer for relief, Kerschner and Karlin sought to recover from Goodman and his law firm only those amounts for which they may be held liable to the plaintiffs as a result of having followed Goodman's allegedly negligent advice.

Plaintiffs subsequently amended their complaint against KKS. The amended complaint added as defendants Diana Nolan and Paul Karlin and alleged that these additional defendants had "conspired" with KKS to remove funds from the Weiss partnership and to solicit clients and employees of the partnership. Kerschner and Karlin did not request leave to amend their third-party complaint.

Goodman and his firm filed an answer, denying the substantive allegations in the third-party complaint. They then filed a motion for summary judgment, asserting that they were entitled to judgment as a matter of law based upon the Joint Tortfeasor Contribution Act (Contribution Act) (740 ILCS 100/0.01 et seq. (West 1993)) and upon the law governing claims for implied indemnity. The motion for summary judgment was predicated upon the assertions contained in the pleadings and was not supported by affidavit, deposition testimony, or any other evidentiary material.

Kerschner and Karlin opposed the motion for summary judgment, claiming that the Contribution Act was inapplicable and that Goodman and his firm were not entitled to judgment as a matter of law. In their reply memorandum, Goodman and his firm argued that Kerschner and Karlin had no cause of action and that the third-party complaint was legally insufficient.

The trial court granted the motion for summary judgment, without hearing oral argument. The court's order included a finding that there was no just reason to delay enforcement or appeal of the order. Kerschner and Karlin have appealed the entry of summary judgment in favor of Goodman and his law firm.

Summary judgment is proper when the pleadings, depositions, affidavits, and admissions on file demonstrate that there is no genuine issue of material fact and that movant is entitled to judgment as a matter of law. See 735 ILCS 5/2--1005(c) (West 1994). In the absence of affidavits, admissions or deposition testimony to support the motion for summary judgment, we look to the allegations contained in the pleadings to determine whether the third-party defendant was entitled to judgment as a matter of law.

The question presented in this appeal is whether individual members of an accounting partnership, who have been sued for wrongful termination of the partnership, can maintain a third-party action for implied indemnity against the lawyers who provided them with professional advice regarding their termination of the partnership and withdrawal from the firm.

Assertion of a third-party claim is the procedural device by which a defendant in a lawsuit is permitted to bring an additional party into the action. The filing of a third-party action is governed by section 2-406 of the Illinois Code of Civil Procedure, which provides as follows "[A] defendant may by third-party complaint bring in as a defendant a person not a party to the action who is or may be liable to him or her for all or part of the plaintiff's claim against him or her." 735 ILCS 5/2-406(b) (West 1994).

The purpose of this procedure is to avoid a multiplicity of litigation and to provide a means of resolving in one action an entire matter arising from a single set of facts. See People v. Brockman, 143 Ill.2d 351, 364, 158 Ill.Dec. 513, 574 N.E.2d 626 (1991). Third-party actions are favored, and trial courts should be liberal in granting such requests. Brockman, 143 Ill.2d at 365, 158 Ill.Dec. 513, 574 N.E.2d 626. In a proper third-party action, the liability of the third-party defendant is dependent upon the liability of the third-party plaintiff to the original plaintiff. Brockman, 143 Ill.2d at 368, 158 Ill.Dec. 513, 574 N.E.2d 626.

Because a third-party claim is premised upon derivative liability, the basis for most such actions has been indemnity or contribution. People v. Fiorini, 143 Ill.2d 318, 342, 158 Ill.Dec. 499, 574 N.E.2d 612 (1991); Brockman, 143 Ill.2d at 365, 158 Ill.Dec. 513, 574 N.E.2d 626. The right of indemnity and the right of contribution are separate and distinct theories of recovery and are mutually exclusive remedies for allocating the plaintiff's damages. See Frazer v. A.F. Munsterman, Inc., 123 Ill.2d 245, 254, 123 Ill.Dec. 473, 527 N.E.2d 1248 (1988). Contribution contemplates the distribution of liability for a loss among joint tortfeasors according to each tortfeasor's percentage of relative fault. Dixon v. Chicago & North Western...