Law Offices of Brendan R. Appel, LLC v. Georgia's Rest. & Pancake House, Inc.
| Decision Date | 16 July 2021 |
| Docket Number | 1-19-2523 |
| Citation | 2021 IL App (1st) 192523,190 N.E.3d 1259 |
| Parties | The LAW OFFICES OF BRENDAN R. APPEL, LLC, Plaintiff-Appellee and Cross-Appellant, v. GEORGIA'S RESTAURANT AND PANCAKE HOUSE, INC., an Illinois Corporation, and Harry Kulubis, Defendants-Appellants and Cross-Appellees. |
| Court | United States Appellate Court of Illinois |
E. Tim Garris, of E. Garris Law Firm, LLC, of Elgin, for appellants.
Brendan R. Appel, of Law Offices of Brendan R. Appel, LLC, of Northfield, for appellee.
¶ 1 Following a hearing on a motion for sanctions pursuant to Illinois Supreme Court Rule 137 (eff. July 1, 2013), the trial court found that plaintiff, the Law Offices of Brendan R. Appel, LLC, was entitled to sanctions in the amount of $5000 against defendants, Georgia's Restaurant and Pancake House, Inc. (Georgia's), and Harry Kulubis (collectively, defendants). The trial court denied plaintiff's request for an additional $14,000.00 and his request to file a fee petition in an effort to prove up the remaining damages and sanctions.
¶ 2 On appeal, plaintiff alleges that the trial court erred in (1) denying its request to file a fee petition for reasonable attorney fees and not issuing additional sanctions and (2) denying sanctions related to the motion to vacate.
¶ 3 On cross appeal, defendants allege that (1) the trial court did not have subject matter jurisdiction to hear plaintiff's Rule 137 motion, (2) the trial court erred in issuing $5000 in sanctions, and (3) sanctions are inappropriate under Rule 137 when they are based on discovery violations. For the following reasons, we reverse and vacate in part the trial court's August 21, 2019, order denying reasonable attorney fees. We affirm all other judgments of the trial court.
¶ 5 On March 2, 2012, Kulubis, the owner of Georgia's, met with Appel, the owner of plaintiff. Plaintiff was hired to represent defendants in litigation against Selected Furniture LLC (Selected). Plaintiff represented defendants in breach of contract litigation from March 2012 to May 2014 in the circuit court of Cook County under Selected Furniture LLC v. Georgia's Restaurant & Pancake House, Inc., No. 2012-M2-000300 (Cir. Ct. Cook County). After the litigation, plaintiff billed defendants on May 1, 2014, for $19,373.12, and Kulubis informed Appel that he did not intend to pay.
¶ 6 Defendants paid each invoice until April 2014. On May 1, 2014, plaintiff issued defendants a bill for work done in the previous month, which was $19,373.12. On May 5, 2014, Kulubis informed plaintiff that he was not going to pay "one dime" of the invoice. On May 6, 2014, plaintiff filed a motion to withdraw representation and terminated its relationship with defendants. Under plaintiff's breach of contract claim, plaintiff sought the $19,373.12, plus a 5% late fee for every month defendants were late.
¶ 7 On May 21, 2014, plaintiff filed a verified complaint against defendants, alleging breach of the terms of its engagement letter, signed by defendants on March 2, 2012, and in the alternative, quantum meruit. The agreement provided that plaintiff's fees would be calculated at an hourly rate, with rates set forth for attorney services and secretarial services, and bills would issue monthly. It included a late fee for invoices not paid within 30 days after invoice and further provided that reasonable attorney fees would be charged if defendants’ failure to pay resulted in litigation.
¶ 8 As an alternative to its breach of contract claim, plaintiff sought the reasonable value of legal services rendered under quantum meruit. Plaintiff alleged that it rendered its services on behalf of defendants and was entitled to be paid the reasonable value of those services because defendants benefitted from and accepted the benefit of those services. Plaintiff sought the reasonable value of $19,373.12 for the services rendered by it through May 1, 2014.
¶ 9 On September 2, 2014, defendants filed a verified answer, affirmative defense, and counterclaim. Defendants alleged that plaintiff misrepresented the agreement, specifically denying that a monthly 5% late fee was included in the agreement, and that it was responsible for reasonable attorney fees in the event a fee dispute arose that resulted in litigation to enforce the agreement. Defendants further alleged that plaintiff mischaracterized the conversation with Kulubis on May 5, 2014. However, defendants alleged that the $19,373.12 in fees was based on an overinflated number of hours spent on litigation. Defendants alleged that Kulubis was informed by another unidentified attorney that the entire cost of litigation should have amounted to $6500 and that he told Appel to keep the litigation costs in that price range. Defendants denied that they breached the contract and denied that plaintiff represented them in litigation through trial and performed its obligations under the agreement. Lastly, defendants denied the entirety of plaintiff's quantum meruit count.
¶ 10 Defendants brought counterclaims for legal malpractice (count I), breach of fiduciary duty (count II), negligence (count III), a declaratory judgment (count IV), and breach of contract (count V).
¶ 11 Defendants’ affirmative defense alleged setoff. Defendants alleged that it had at that point paid plaintiff $16,500, which was three times what it was originally quoted. If the trial court found that the plaintiff was owed any money, defendants contended that they were entitled to a setoff for the overpayment of legal fees and that it should come from that total.
¶ 12 Count I of defendants’ counterclaim alleged legal malpractice when plaintiff's performance fell below the applicable standard of care when (1) plaintiff failed to provide a proper defense in the litigation and failed to allege appropriate counterclaims; (2) plaintiff failed to subpoena key witnesses for trial; (3) throughout the proceedings plaintiff purposefully attempted to prejudice the court against their clients; (4) plaintiff overbilled defendants unconscionable legal fees and expenses; (5) plaintiff failed to properly advise defendants; and (6) plaintiff lacked trial experience and did not tell this to defendants. As a direct and proximate result of the negligence and/or intentional failures, the court entered a judgment against defendants in favor of Selected, while it entered a de minimis judgment in favor of defendants. Defendants sought a total of $102,000 in damages for the following: $16,000 for the legal fees paid to plaintiff, $10,000 for the judgment entered against defendants in favor of Selected, and $76,000 for the lost revenue of net sales tax, labor costs, and costs of goods sold which defendants would have been awarded if plaintiff had handled the litigation properly.
¶ 13 Count II alleged that plaintiff breached its fiduciary duty and obligations. Defendants alleged that this breach occurred when (1) plaintiff mishandled the litigation from the start because he failed to mount a proper defense and appropriate counterclaims, was inexperienced, and overbilled defendants; (2) plaintiff refused to turn over defendants’ file to a substituting attorney after defendants advised plaintiff that they were going to seek an appeal in the initial litigation; (3) plaintiff terminated its representation of defendants and filed a motion to withdraw in order to unduly prejudice the court against defendants; and (4) plaintiff sent defendants harassing invoices with the amount due including a reoccurring 5% monthly interest amount even though the agreement signed stated it would be a one-time 5% penalty. In addition to the $102,000 in compensatory damages, defendants sought exemplary damages in excess of $100,000, attorney fees, cost of suit, and other relief as the trial court sought fit and proper.
¶ 14 Count III alleged plaintiff was negligent by carelessly and negligently (1) failing to plead the appropriate affirmative defenses and counterclaims in the litigation; (2) failing to inform defendants of his lack of trial experience; (3) failing to conduct the trial on litigation; (4) failing to properly introduce evidence of lost revenues during litigation; (5) inflating the hours worked on the litigation; (6) failing to protect defendants’ interests from being severely prejudiced by prematurely entering a motion to withdraw; and (7) otherwise maintaining control and/or handling of their file on litigation. Due to plaintiff's negligence, defendants lost the original underlying case and had a reduced award of lost profits on its counterclaim.
¶ 15 Count IV sought a declaratory judgment and breach of contract. The agreement that the parties signed provided that a 5% late fee would be added to the invoice if payment were not received within 30 days. However, the agreement was silent as to the reoccurring nature of the 5% fee. Plaintiff allegedly breached the agreement by overinflating billable hours, terminating and withdrawing from litigation before the 30 day timeframe provided in the agreement expired, and incorporating the reoccurring 5% late fee into the agreement. Defendants’ prayer for relief asked the court to declare and adjudicate the rights of the parties under the terms and provisions of the agreement. If the trial court found that plaintiff breached the agreement, defendants sought the reimbursement of attorney fees and other costs incurred in the action.
¶ 16 Count V alleged breach of the contract by plaintiff when it over-inflated the billable hours, terminated its representation and withdrew from the litigation, and incorporated an annual interest rate of 60% into the agreement that was signed by the parties but drafted by plaintiff.
¶ 17 On September 8, 2014, plaintiff sent a letter to defendants’ attorney, explaining that the affirmative defense and counterclaim did not satisfy defendants’ obligations pursuant to Rule 137 ( Ill. S. Ct. R. 137 (eff. July...
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