MORGAN v. The City of East CHICAGO

• Decision Date: 28 May 2010
• Docket Number: No. 1-09-2549.,1-09-2549.
• Citation: 343 Ill.Dec. 23,934 N.E.2d 23,401 Ill.App.3d 947
• Parties: MORGAN, LEWIS and BOCKIUS LLP, Plaintiff-Appellee, v. The CITY OF EAST CHICAGO, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

401 Ill.App.3d 947

934 N.E.2d 23

343 Ill.Dec. 23

MORGAN, LEWIS and BOCKIUS LLP, Plaintiff-Appellee,

v.The CITY OF EAST CHICAGO, Defendant-Appellant.

No. 1-09-2549.

Appellate Court of Illinois,First District, Sixth Division.

May 28, 2010.

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F. Thomas Hecht, Tina B. Solis, Seth A. Horvath, Ungaretti & Harris LLP, Chicago, IL, for Plaintiff-Appellee.

Michael J. Kralovec, Sara R. McClain, Kralovec Meenan LLP, Chicago, IL, for Defendant-Appellant.

Justice McBRIDE delivered the opinion of the court:

Defendant City of East Chicago (the City) brings this appeal under Supreme Court Rule 306(a)(3) from an order of the circuit court of Cook County denying its motion to dismiss plaintiff Morgan, Lewis & Bockius LLP's complaint for lack of personal jurisdiction. 166 Ill.2d R. 306(a)(3). Plaintiff filed a complaint against the City in the circuit court of Cook County seeking relief for unpaid legal fees related to plaintiff's representation of the City in several lawsuits pending in Indiana state and federal courts. On appeal, the City argues that the trial court erred in denying its motion because the City is a nonresident municipal corporation with virtually no contacts with the State of Illinois.

In April 2008, plaintiff filed its initial complaint against the City. The City responded by filing a motion to dismiss for lack of personal jurisdiction in October 2008. In December 2008, plaintiff filed its amended complaint against the City for its “refusal to pay the agreed legal fees charged and disbursements advanced” by plaintiff in connection with plaintiff's representation of the City “in approximately 40 matters including cases alleging civil rights violations, breaches of contract, and various other matters.” The complaint stated that the City is “a municipality and city of the second class under Indiana law (I.C. § 36-4-5-2 et seq.)” and that it may be sued in Illinois “for its failure to abide by contracts and other misconduct.” The following facts were alleged in plaintiff's amended complaint.

In 2005, the City retained plaintiff to represent it and numerous individuals with respect to various matters brought against the City in federal and state courts, or in connection with legal advice sought by the City. The City's retention of plaintiff was pursuant to an overall agreement that included the hourly rates for services plus disbursements incurred in connection with any particular matter. This agreement was “reflected in each of the individual retention agreements the parties executed for each matter.” Plaintiff provided services to the City from April 2005 to December 2007, but the City's payments became sporadic beginning in the spring and summer of 2006. The complaint alleged that plaintiff is owed approximately $3.2 million in unpaid legal fees and disbursements from the City. Count I alleged a breach of contract and the duty to perform in good faith because the City “repeatedly disregarded and breached its obligations by failing to pay [plaintiff] the sums due” and engaged in “duplicitous dealings” with plaintiff which breached an implied covenant of good faith. In count II, plaintiff pled a breach of an oral promise to pay based on assurances made by the City's corporation counsel. Count III sought an action for account stated based on the City's receipt of sums due, assurances that sums were proper, and the failure to timely object to billing rates, staffing or services provided, or amount at issue. Count IV alleged a claim of quantum meruit based on plaintiff's assertions that it billed the City at the disclosed rates, provided invoices and summaries of work performed to the City, and the City failed to protest plaintiff's work or direct it to “cease to perform services or alter its billing rates or practices or modify its staffing of the cases.”

In January 2009, the City filed a motion to dismiss plaintiff's amended complaint for lack of personal jurisdiction. In its motion, the City stated that it “lacks the necessary contacts with Illinois for personal jurisdiction” because it “did not purposefully avail itself of the privilege of conducting business in Illinois, nor could it reasonably foresee being haled into an Illinois court because the agreement called for the Plaintiff to represent [the City] in Indiana concerning Indiana legal matters as Indiana attorneys.” The City further contended that the exercise of personal jurisdiction would violate due process under both the United States and Illinois Constitutions and that its actions did not satisfy any provision of the Illinois long-arm statute (735 ILCS 5/2-209 (West 2008)). The City included a memorandum in support of its motion and an affidavit of Carmen Fernandez, the City's corporation counsel.

In response to the City's motion to dismiss, plaintiff asserted that personal jurisdiction existed under three different subsections of the Illinois long-arm statute: (1) the City entered into or performed a contract “ substantially connected” with Illinois pursuant to section 2-209(a)(7) of the Code of Civil Procedure (735 ILCS 5/2-209(a)(7) (West 2008)); (2) the City was “doing business” in Illinois based on multiple invoices and purchase orders executed between the City and various Illinois vendors pursuant to section 2-209(b)(4) (735 ILCS 5/2-209(b)(4) (West 2008)); and (3) the City has sufficient contacts with Illinois to satisfy due process under the United States and Illinois Constitutions pursuant to section 2-209(c) (735 ILCS 5/2-209(c) (West 2008)). Plaintiff included the affidavits of Charles Jackson, a partner in plaintiff's Chicago office, and Steffany Hreno, an attorney representing plaintiff in the instant case. Numerous exhibits to the affidavits were filed with the trial court. The City filed numerous affidavits as exhibits with its reply to its motion to dismiss.

According to the parties' filings in regard to the City's motion, the following facts were established. In April 2005, the City decided to seek counsel to represent it in multiple pending actions. The City sought representation from a law firm that was removed from Indiana politics. Christine Vasquez, a representative of the City, contacted the secretary of Charles Jackson, a partner employed by plaintiff. Vasquez knew Jackson from their previous employment together at another law firm. Vasquez submitted some of the complaints filed against the City for Jackson to review and to consider if he wished to pursue representation of the City. The next day, Jackson spoke Carmen Fernandez, the City's corporation counsel, about the possibility of plaintiff representing the City. Jackson later sent an e-mail to Fernandez outlining three different pricing options. In May 2005, Fernandez responded to Jackson's e-mail and indicated which fee option the City would like to choose. The City selected a fee structure based on hourly rates of Jackson at $540; another partner at $475; associates ranging from $235 to $285. During May and June 2005, the parties continued to negotiate plaintiff's representation of the City with meetings in East Chicago and communications sent from plaintiff in Illinois to the City's representative's in Indiana. In June 2005, plaintiff's standard retention letter was hand-delivered to the City and signed by George Pabey, the City's mayor, and Charles Pacurar, the City's city controller. The retention agreement included the previously agreed-upon legal fees that plaintiff would bill the City for its work. Additionally, the parties agreed that plaintiff's attorneys would be admitted pro hac vice as attorneys practicing in Indiana.

During plaintiff's representation of the City, plaintiff's attorneys continued to work on the City's cases from its Chicago office. However, all court appearances occurred in Indiana. Documents were passed between Illinois and Indiana for review and approval and depositions were held in Illinois. The parties communicated via telephone calls, e-mails, faxes, and meetings. Some of the meetings took place at plaintiff's Chicago office. Further, plaintiff's attorneys prepared a database of information on the pending lawsuits in its Chicago office, which was accessible over the internet by the City's representatives in East Chicago. Payments were made by the City in East Chicago and submitted to plaintiff's Chicago office.

In August 2009, the trial court conducted a hearing on the City's motion to dismiss. In September 2009, the trial court issued its written order denying the City's motion to dismiss for lack of personal jurisdiction “after considering the briefs, affidavits, and exhibits submitted” by the City and plaintiff and “after hearing oral arguments from the parties.” Specifically, the court found:

“[P]ersonal jurisdiction exists over Defendant pursuant to 735 ILCS 5/2-209(c). The Court further finds that personal jurisdiction does not exist over Defendant pursuant to 735 ILCS 5/2-209(b). The Court makes no finding as to whether personal jurisdiction exists over Defendant solely pursuant to 735 ILCS 5/2-209(a) in light of its finding that personal jurisdiction exists over Defendant pursuant to 735 ILCS 5/2-209(c).”

In September 2009, the City's filed a petition for leave to appeal pursuant to Supreme Court Rule 306(a)(3), seeking leave from this court to appeal the denial of the motion to dismiss, which this court granted in October 2009.

On appeal, the City argues that the trial court erred in finding that the City, an Indiana municipal corporation, had sufficient contacts to subject it to personal jurisdiction under the Illinois long-arm statute. The City contends that the undisputed facts establish that it did not maintain sufficient contacts to satisfy the due process requirements under the United States and Illinois Constitutions and section 2-209(c) of the Illinois long-arm statute. Plaintiff maintains that the trial court...