Leonard C. Arnold, Ltd. v. Northern Trust Co.

• Decision Date: 20 February 1987
• Docket Number: No. 62924,62924
• Citation: 116 Ill.2d 157,506 N.E.2d 1279,107 Ill.Dec. 224
• Parties: , 107 Ill.Dec. 224, 55 USLW 2469 LEONARD C. ARNOLD, LTD., et al., Appellants, v. The NORTHERN TRUST COMPANY, Guardian, Appellee.
• Court: Illinois Supreme Court

Page 1279

506 N.E.2d 1279

116 Ill.2d 157, 107 Ill.Dec. 224, 55

USLW 2469

LEONARD C. ARNOLD, LTD., et al., Appellants, v. The NORTHERN TRUST COMPANY, Guardian, Appellee.

No. 62924.

Supreme Court of Illinois.

Feb. 20, 1987.

Rehearing Denied March 30, 1987.

James H. Canel, Ltd., Leonard C. Arnold, Ltd., Chicago, for appellants Leonard C. Arnold, Ltd., James H. Canel, Ltd., and James Franz.

Behanna and Pasquesi, P.C., Highland Park, for appellee.

Justice SIMON delivered the opinion of the court:

Two questions are presented: Is a contingent-fee contract for legal representation entered into on behalf of a minor by his next friend per se unenforceable? Is Rule 9.20(e) of the Nineteenth Judicial Circuit (now Rule 14.21(e)), which places restrictions on the enforcement of some such agreements, a valid exercise of the circuit court's rule-making power?

On November 9, 1981, Glenda Sue Goodman, as mother and next friend of Jason Goodman, and her husband, James M. Goodman, hired attorneys Leonard C. Arnold and James H. Canel to represent them and their son in the prosecution of claims for injuries that Jason sustained at his birth on January 20, 1977. The Goodmans signed a written contingent-fee agreement providing that Arnold and Canel would receive one-third of all sums recovered, along with the costs incurred in the litigation. In the event of a second trial or appeal, the fee was to be 40% of the recovery. If there was no recovery, there would be no obligation to pay any fees. The agreement also recited that attorney James Franz had referred the case and that any fees would be divided on a 60-40 basis with him for his assistance.

Arnold and Canel (hereinafter referred to, along with Franz, as the attorneys) then filed a complaint in the circuit court of Lake County in which Glenda Sue Goodman, as mother and next friend of Jason, and Mr. and Mrs. Goodman, individually, sought recovery of damages against certain doctors and nurses and a hospital. Plaintiffs and defendants eventually reached a proposed settlement of the claims in the amount of $900,000, $75,000 of which was for damages sustained by the parents, with the remainder to go to the minor himself.

The attorneys filed a petition for settlement, requesting the circuit judge to approve the agreement reached among the parties as well as attorney fees in the amount of 33 1/3% of the recovery. The court-appointed guardian ad litem, Leo J. Sullivan III, relying upon Rule 9.20(e) of the Nineteenth Judicial Circuit, objected to the fees requested by the attorneys. The rule restricts an attorney's fee for settlement of a minor's personal injury claim to 25% of the recovery unless the attorney files a sworn statement itemizing his work and hours and demonstrating that greater compensation is warranted. The circuit judge accepted the proposed settlement, including an award to the attorneys of 33 1/3% of the $75,000 recovery by the parents. The judge ruled, however, that in the absence of a petition justifying the contractual fee the attorneys were entitled to a fee of only 25% of the $825,000 awarded to the minor. The court also appointed the Northern Trust Company (the guardian), guardian of the minor's estate.

The attorneys appealed, and the circuit court instructed Northern Trust to defend. The appellate court sustained Rule 9.20(e) as consistent with the court's duty to protect the estates of minors. (139 Ill.App.3d 683, 93 Ill.Dec. 843, 487 N.E.2d 668.) In addition, the appellate court decided that the circuit judge had improperly failed to consider whether even the 25% fee eventually allowed the attorneys for representation of the minor was reasonable, and so reversed the award and remanded the cause to the circuit court to determine "the reasonableness of the fees earned." (139 Ill.App.3d 683, 691, 93 Ill.Dec. 843, 487 N.E.2d 668.) We allowed the attorneys' petition for leave to appeal (103 Ill.2d R. 315).

I. ENFORCEABILITY OF CONTINGENT-FEE

AGREEMENTS FOR REPRESENTATION OF MINORS

The guardian argues first that no contingent-fee agreement can be enforced against a minor or his estate. According to the guardian, the next friend of a minor may secure and employ counsel but is without authority to bind the minor's estate to pay any specified percentage of the recovery as a fee. Instead, says the guardian, the court, in the exercise of its duty to protect minors, must set a fee based on the reasonable value of the attorney's services without regard to the contract. The guardian reads the appellate court decision, reversing the award of 25% and remanding for the trial court to consider the reasonableness of the fees earned, as an application of the principle that the fee contract is unenforceable. The attorneys interpret that decision in the same way.

Courts are imbued with both the power and the duty to protect minors involved in litigation. (Muscarello v. Peterson (1960), 20 Ill.2d 548, 555, 170 N.E.2d 564; Tymony v. Tymony (1928), 331 Ill. 420, 426-27, 163 N.E.2d 393; see also Rosquist v. Soo Line R.R. (7th Cir.1982), 692 F.2d 1107.) The attorneys concede that this duty extends to consideration of the reasonableness of a contingent fee established in a contract between the minor's next friend and his lawyers. It does not follow, though, that a contingent-fee agreement made on behalf of a minor by his next friend is per se unenforceable and that an attorney can be compensated for representing a minor only on a quantum meruit basis. The next friend clearly has the authority, as the guardian admits, to employ legal counsel when necessary (Yellen v. Bloom (1945), 326 Ill.App. 134, 61 N.E.2d 269; Goldberg v. Perlmutter (1941), 308 Ill.App. 84, 31 N.E.2d 333), "and if she could employ counsel, it follows as a matter of course, she could make a contract for the amount of their compensation" (Taylor v. Bemiss (1883), 110 U.S. 42, 44, 3 S.Ct. 441, 443, 28 L.Ed. 64, 65; accord, Southern Shipbuilding Corp. v. Richardson (La.1979), 372 So.2d 1188, 1191).

"Although contingent fee contracts are subject to restrictions, especially if the client is a minor, such agreements have generally been enforced unless the contract is unreasonable." Sneed v. Sneed (Okla.1984), 681 P.2d 754, 756; accord, Southern Shipbuilding Corp. v. Richardson (La.1979), 372 So.2d 1188, 1191 ("[t]he only impediment to the binding nature of [such] a contract * * * would be in the event that the contract were to be unreasonable"); Sanders v. Woodbury (1912), 146 Ky. 153, 155, 142 S.W. 207, 208 ("the next friend of an infant may employ counsel to represent him and agree on the compensation to be paid, subject, however, to the limitation that the fee agreed upon shall be reasonable"); Phillips v. Nationwide Mutual Insurance Co. (Fla.App.1977), 347 So.2d 465; cf. Cappel v. Adams (5th Cir.1970), 434 F.2d 1278 (district court acted within its discretionary powers in reducing the agreed-upon fee).

Significant considerations of public policy underlie the enforcement of reasonable contingent-fee agreements. "Contingent fee contracts are the basic means by which much litigation in tort is conducted in this State." (In re Estate of Harnetiaux (1968), 91 Ill.App.2d 222, 227, 234 N.E.2d 87.) Such agreements are the "poor man's key to the courthouse door": they enable persons who cannot afford to retain an attorney on an hourly or fixed-fee basis to pursue their claims with competent counsel. (In re Teichner (1979), 75 Ill.2d 88, 105, 25 Ill.Dec. 609, 387 N.E.2d 265; Sneed v. Sneed (Okla.1984), 681 P.2d 754.) Contingent fees are thus rooted in our commitment to equal justice for both those of moderate means and the wealthy.

These considerations do not evaporate simply because the party in need of legal assistance is a minor. To the contrary, the court's duty to protect minors is consistent with the policy of promoting access to the courts through reasonable contingent-fee agreements. A court can do nothing for a minor not before it, and injured minors are as likely as adults to require the key to the courthouse which contingent-fee contracts provide. If contingent-fee contracts were uniformly unavailable in cases involving minors and attorneys could only receive fees on a quantum meruit basis, the likely result would be to deprive many minors of quality legal representation.

In certain types of cases, contingent-fee agreements are, of course, unacceptable. Our Code of Professional Responsibility explicitly bars contingent-fee agreements for representation of criminal defendants or to procure a dissolution of marriage. (87 Ill.2d R. 2--106(c)(4).) The rules do not, however, similarly stamp as unethical the making of a contingent-fee arrangement to represent a minor in a personal injury case.

The guardian suggests that counsel may petition the court for approval of the contract prior to filing suit and maintains that the failure to do so renders the agreement unenforceable. While prior court approval may be the more prudent approach, we find nothing in the Probate Act of 1975 (Ill.Rev.Stat.1985, ch. 110 1/2, par. 1--1 et seq.) or the rules or decisions of this court which commands it. (See Southern Shipbuilding Corp. v. Richardson (La.1979), 372 So.2d 1188.) In fact, section 11--13(d) of the Probate Act of 1975 provides that, upon entry of bond for costs, "[a]ny proceeding on behalf of a minor may be commenced and prosecuted by his next friend, without any previous authority or appointment by the court." (Emphasis added.) (Ill.Rev.Stat.1985, ch. 110 1/2, par. 11--13(d).) Since an attorney will invariably be retained prior to the "commencement" of suit, this section strongly suggests that prior approval of the retainer agreement is unnecessary. We therefore hold that a contingent-fee agreement, entered into on behalf of a minor by his next friend, is enforceable unless the terms are unreasonable.

II. VALIDITY OF CIRCUIT RULE 9.20(e)

This brings us to the second question: whether the Nineteenth...