Robinson v. Ryan, 1-06-1813.

• Decision Date: 29 March 2007
• Docket Number: No. 1-06-1813.,1-06-1813.
• Citation: 865 N.E.2d 400
• Parties: Charles ROBINSON, Plaintiff-Appellee, v. Patrick J. RYAN, Individually and as agent of Cohn, Lambert, Ryan, Schneider and Gray, Ltd., an Illinois Corporation, Cohn, Lambert, Ryan, Schneider and Gray, Ltd., an Illinois Corporation, Defendants (North American Elite Insurance Company, Intervenor-Appellant).
• Court: United States Appellate Court of Illinois

865 N.E.2d 400

Charles ROBINSON, Plaintiff-Appellee, v. Patrick J. RYAN, Individually and as agent of Cohn, Lambert, Ryan, Schneider and Gray, Ltd., an Illinois Corporation, Cohn, Lambert, Ryan, Schneider and Gray, Ltd., an Illinois Corporation, Defendants (North American Elite Insurance Company, Intervenor-Appellant).

No. 1-06-1813.

Appellate Court of Illinois, First District, Fourth Division.

March 29, 2007.

Bates & Carey, LLP, Chicago (Joseph P. Pozen, of counsel), for Appellant.

Reibman, Hoffman, Baum, Hirsch & O'Toole, Chicago (Paul G. O'Toole, David Baum, of counsel), and Collins & Bargione, Chicago (George B. Collins, of counsel), for Appellees.

Presiding Justice QUINN delivered the opinion of the court:

North American Elite Insurance Company (North American) appeals from an order of the circuit court of Cook County denying its petition seeking relief from a judgment entered in favor of plaintiff Charles Robinson, pursuant to section 2-1401 of the Code of Civil Procedure (Code) (735 ILCS 5/2-1401 (West 2002)). On appeal, North American contends that the circuit court abused its discretion by denying its petition where North American asserted a meritorious defense to the validity of the judgment and exercised due diligence in presenting its defense. For the following reasons, we reverse.

I. Background

On February 6, 2003, plaintiff filed a complaint against defendants Patrick J. Ryan, and the law firm of Cohn, Lambert, Ryan Schneider & Gray, Ltd. (Cohn Lambert). According to the complaint, on June 14, 1996, plaintiff sustained injuries while performing work as a plumber. Plaintiff retained defendants to represent him in a worker's compensation claim for the injuries he sustained. The complaint alleged that defendants failed to file a complaint for damages against third parties, other than plaintiff's employer, within the applicable statute of limitations period and failed to advise plaintiff that he had a claim against third parties. Defendants answered plaintiff's complaint and denied negligence and injury to plaintiff.

On July 7, 2005, Circuit Court Judge Richard J. Elrod held a pretrial conference. At the conclusion of the pretrial conference, R. Connor Heist, attorney for defendants, drafted an order that was entered by Judge Elrod dismissing plaintiff's claims with prejudice and reflecting a commitment by defendants to settle the case for $825,000. The order stated that "[d]efendants agree to a settlement offer of $825,000 and [p]laintiff agrees to accept a settlement payment of $825,000 upon resolution of an internal accounting issue with the insurance company." The order also provided that the court would retain jurisdiction and directed the parties to appear on July 26, 2005, to "execute settlement documents and resolve lien issues."

On July 26, 2005, the parties appeared and the circuit court entered an order finding that "all liens have been resolved" and that the court's July 7, 2005, order remained in effect. The court ordered defendants to pay the agreed-upon settlement amount of $825,000, as reflected in the July 7, 2005, order, on or before August 9, 2005. This order was entered over plaintiff's objection, as settlement documents and payment were due on July 26, 2005. The court also retained jurisdiction to enforce payment.

On August 5, 2005, defendants retained new counsel, who filed a motion to appear as additional counsel and a verified petition to vacate the orders entered on July 7, 2005, and July 26, 2005. In the motion to vacate, defendants asserted that they had learned that their insurance company, North American, had refused to settle the claim with plaintiff and had directed defendants' previous attorney R. Connor Heist not to enter into a settlement agreement. Defendants maintained that they did not execute any settlement documents in this case and would not have agreed to any settlement without the prior approval of their insurance company, North American. On August 10, 2005, plaintiff filed a motion for judgment requesting that the court enter judgment against defendants in the amount of $825,000.

On August 12, 2005, Judge Elrod conducted a hearing to address these motions. At that hearing, R. Connor Heist was granted leave to withdraw as counsel for defendants. Dominic Saviano and the law firm of Clausen Miller, P.C., were granted leave to appear as substitute counsel retained for defendants by North American. Jerome Crotty of the law firm Rieck and Crotty, P.C., was permitted to appear as additional counsel, retained independently by defendants due to potential conflicts that could arise between defendants and North American. Judge Elrod gave both counsels representing defendants leave to file a single amended motion to reconsider vacating the previous orders. Judge Elrod also ordered that judgment be entered in favor of plaintiff and against defendants in the amount of $825,000, but that the execution of judgment be stayed for 60 days.

On September 8, 2005, North American filed a motion for leave to intervene, seeking to intervene in order to protect the insurance company's rights with respect to whether the judgment should be vacated. On the same date, North American also filed its petition to vacate the orders entered on July 7, 2005, July 26, 2005, and August 12, 2005, pursuant to section 2-1401 of the Code (735 ILCS 5/2-1401 (West 2002)). In its section 2-1401 petition, North American stated that defendants Cohen Lambert and Ryan made a claim under the professional liability insurance policy issued by North American regarding the suit filed by plaintiff. North American provided defense counsel, Heist, to defendants. Les Czerepak, a senior claims manager at NAS Insurance Group, which includes North American, was the representative for the oversight of the handling of the suit filed by plaintiff. Aon Technical Insurance Services (ATIS) served as a third-party administrator and handled certain legal malpractice claims for NAS Insurance Group. ATIS had limited authority to settle claims up to an amount of $25,000. Payment of any settlement above $25,000 was required to be approved in advance by NAS Insurance Group.

In its petition, North American also asserted that at the conclusion of the July 7, 2005, pretrial conference, Heist drafted an order that was entered by the circuit court dismissing plaintiff's claims with prejudice and reflecting a commitment by defendants to settle the case for $825,000 "upon resolution of an internal accounting issue with the insurance company." North American stated that Grace Leppin of ATIS attended the pretrial conference but was no longer present when Heist drafted the order and Leppin did not see the order until after the July 26, 2005, hearing. On July 26, 2005, the circuit court ordered defendants to pay $825,000 to plaintiff on or before August 9, 2005. North American asserted that following the July 26, 2005, hearing, Czerepak received a letter that Heist wrote to Leppin, with both circuit court orders attached, in which Heist stated that he felt compelled to resign as counsel for Cohen Lambert. North American stated that Czerepak immediately informed the Cohen Lambert firm's new counsel that NAS had not authorized settlement by payment of $825,000.

North American attached to its petition the affidavit of Les Czerepak, who attested that he was a senior claims manager for NAS Insurance Group, which includes North American. Czerepak stated that he was responsible for the oversight of the handling of the suit filed by plaintiff. Czerepak attested that ATIS serves as a third-party administrator for NAS Insurance Group handling certain legal malpractice claims. ATIS had limited authority to settle claims up to an amount of $25,000, and settlement above that amount was to be approved in advance by NAS Insurance Group. Czerepak attested that Leppin from ATIS informed him that she would attend the July 7, 2005, pretrial hearing in this matter as the third-party administrator for NAS with limited settlement authority. Czerepak was also aware that Heist would attend the July 7, 2005, hearing, as the attorney hired to represent defendant.

Czerepak attested that during the July 7, 2005, hearing, he received a telephone call from Heist, who stated that he was with Leppin and defendant Ryan. Heist informed Czerepak that in the course of the pretrial hearing, the circuit court had recommended settlement for $825,000. Czerepak attested that he told Heist that NAS would not agree to settle for that amount because $825,000 was significantly more than NAS was prepared to pay based on information it had received about the case. Czerepak also informed Heist that the $825,000 amount exceeded his personal authority to settle claims for NAS, and that Czerepak's supervisor would have to review the claim and join him in approving a settlement of that size. Czerepak attested that he instructed Heist to ask the circuit court for time for North American to review the claim information again, and requested that Heist send him a report of the discussion and developments at the pretrial hearing. Czerepak stated that during the telephone call, he expressly told Heist that North American did not agree to the proposed settlement and did not authorize settlement for $825,000. Czerepak also stated that he did not speak directly to Leppin and never gave her authority to settle the claim for $825,000.

Czerepak attested that after the July 7, 2005, hearing, he continued to have discussions and correspondence with Heist regarding the recommended settlement and discussed with Leppin whether NAS should agree to the recommendation. Czerepak stated that he never saw a copy of the July 7, 2005, order until after the July 26, 2005 hearing and was not aware of any verbal or written statement that could be construed as an agreement by NAS to pay $825,000 to settle this case. After the July 26, 2005, hearing, Czerepak received a copy of a letter that Heist...