Skokie Gold Standard Liquors v. Joseph E. Seagram & Sons, Inc.

• Decision Date: 05 August 1983
• Docket Number: No. 82-2335,82-2335
• Citation: 452 N.E.2d 804,72 Ill.Dec. 551,116 Ill.App.3d 1043
• Parties: , 72 Ill.Dec. 551 SKOKIE GOLD STANDARD LIQUORS, INC., Fred Greenfield, and Harold Binstein, Plaintiffs-Appellants, v. JOSEPH E. SEAGRAM & SONS, INC., and Federated Distributors, Inc., Defendants- Appellees.
• Court: United States Appellate Court of Illinois

Page 804

452 N.E.2d 804

116 Ill.App.3d 1043, 72 Ill.Dec. 551

SKOKIE GOLD STANDARD LIQUORS, INC., Fred Greenfield, and Harold Binstein, Plaintiffs-Appellants, v. JOSEPH E. SEAGRAM & SONS, INC., and Federated Distributors Inc., Defendants- Appellees.

No. 82-2335.

Appellate Court of Illinois,

First District, Fifth Division.

Aug. 5, 1983.

Jay L. Schultz Chicago (Schultz & Schultz, Chicago, of counsel), for plaintiffs-appellants.

Stanley D. Robinson, Kaye, Scholer, Fierman, Hays & Handler, New York City, Louis L. Biro (Louis L. Biro, P.C.), Chicago, and Patrick W. O'Brien and P. Terrence Buehler, Mayer, Brown & Platt, Chicago, for defendant-appellee Joseph E. Seagram & Sons, Inc.

Harvey M. Silets and Shelly B. Kulwin (Silets & Martin, Ltd.), Chicago, for defendant-appellee Federated Distributors, Inc.

SULLIVAN, Justice:

This appeal is from an order of the trial court disqualifying plaintiffs' counsel in an action to enjoin violations of section 104a of the Illinois Business Corporation Act (Ill.Rev.Stat.1981, ch. 32, par. 157.104a), section 220 of "An Act to revise the law in relation to criminal jurisprudence" (Ill.Rev.Stat.1981, ch. 32, par. 211.1), section 4 of "An Act in relation to the use of an assumed name * * * " (Ill.Rev.Stat.1981, ch. 96, par. 7), and section 2 of the Uniform Deceptive Trade Practices Act (Ill.Rev.Stat. 1981, ch.

[72 Ill.Dec. 554] 121 1/2, par. 312). The sole issue on review is the propriety of that disqualification.

Joseph E. Seagram & Sons, Inc. (Seagram) is an Indiana corporation authorized to transact business in Illinois. Operating through six divisions, it is engaged in the manufacture and sale of distilled spirits and wines. Federated Distributors, Inc. (Federated), an Illinois corporation, purchases and sells alcoholic beverages at wholesale through four divisions. On October 16, 1981, plaintiffs filed a complaint alleging in separate counts that Seagram and Federated were operating in violation of several statutes relating to the use of assumed corporate names. Seagram moved to disqualify plaintiffs' attorney, Allen H. Schultz (Schultz) and the law firm of Schultz & Schultz for violations of Canons 4 and 9 of the Illinois Code of Professional Responsibility. (79 Ill.2d Canons 4 and 9.) It alleged that the firm of Schultz, Biro & Karmel, predecessor of Schultz & Schultz, was retained by Seagram in 1969 to perform work with respect to the reorganization of its corporate structure in Illinois. As a part of that work, Seagram maintained, Schultz, Biro & Karmel completed and filed in its behalf applications to do business under various assumed names.

In support of its motion, Seagram presented the affidavit of M. Jacqueline McCurdy, a vice president of Seagram, attesting that a search of Seagram's corporate records showed that it retained Schultz, Biro & Karmel in 1969. Four letters from this period relating to the legal work performed were also filed as exhibits. Each is signed:

"Schultz, Biro & Karmel

(Signature)

Louis L. Biro." ¹

One letter is on letterhead stationery with the legend "Law Offices of Schultz, Biro & Karmel" at the top, and in the upper left corner the names Allen H. Schultz, Louis L. Biro, Robert Karmel, and Neal D. Rosenfeld. That letter is written in the singular and refers to "my client." The other three letters are carbon copies which do not show any letterhead, but they refer to "our client" and are written in the plural, including one directed to an officer of Seagram which states in pertinent part:

"On September 8, 1969 we filed with the Illinois Liquor Control Commission the new territory registrations at both the Chicago office and by mail to the Springfield office. * * * Enclosed is a copy of our covering letter * * * regarding the registrations that were mailed to the Springfield office. * * * We are also enclosing our statement for professional services rendered. If I can be of any further assistance to you in this matter, please do not hesitate to contact me."

An affidavit of Louis L. Biro states that he was associated with Schultz in the practice of law from 1954 to 1970 under the various firm names Schultz & Biro, Schultz, Lippman & Biro, and Schultz, Biro & Karmel. During the relevant years, the firm of Schultz, Biro & Karmel was listed in Sullivan's Law Directory, Martindale-Hubbell Law Directory, and the Chicago Telephone Directory. The three attorneys referred to each other as partners in their relationships with clients and other members of the legal profession, and the name Schultz, Biro & Karmel appeared on stationery and billing invoices sent to clients. When he first joined Schultz in 1954, it was agreed that he (Biro) would receive at least $6,500 annually. In return for office space and a secretary, Schultz was to receive the first $5,000 of fees generated by clients brought in by him (Biro) as well as a percentage of all fees over $5,000. Billings sent to clients contained the legend "Schultz, Biro & Karmel," and clients made their payments to Schultz, Biro & Karmel. Schultz received all fee payments and deposited them in either his or the firm's account; the share of the fees Biro generated was computed at least annually. Seagram retained the firm in 1969 and was billed in accordance with the above procedure. He and Schultz shared the fee for this work. While they In a supplemental affidavit, Biro stated that:

[72 Ill.Dec. 555] were associated, he and Schultz worked closely together on a variety of legal matters for their respective clients, and Schultz was aware of his (Biro's) clients and the work he was doing because they shared the fees generated.

"1. In 1969, Joseph E. Seagram & Sons, Inc. retained Schultz, Biro & Karmel to assist the Corporation with various corporate reorganization matters, including but not limited to: discussions regarding the territorial and label registrations required in the State of Illinois pursuant to the corporate reorganization, the requirements for licensing or not licensing the Corporation in its various divisions and complete compliance with the Illinois corporation statutes, including the Assumed Name statutes. The professional services rendered by the Firm of Schultz, Biro & Karmel included conferences which I had with the General Counsel of Joseph E. Seagram & Sons, Inc., the exchange of written materials and numerous telephone conversations.

2. During the period from 1954 to 1970, while I was associated with the law firm of Schultz, Biro & Karmel, it was my regular practice to discuss with Mr. Schultz all client matters which I was handling and that he was handling. It was the normal practice in our three person office to discuss all new clients and matters. Because the work performed by [sic] Seagram, which is the subject of this controversy, was completed approximately 12 years ago, I cannot recall a specific conversation about Seagram matters with Mr. Allen H. Schultz, but do unequivocally state that it was our normal practice to discuss client matters during the entire 16 year period when Mr. Allen H. Schultz and I practiced law together."

Seagram also presented a letter dated November 12, 1970, written on behalf of a client other than Seagram, which is signed:

"Schultz, Biro, Karmel & Rosenfeld

(Signature)

Allen H. Schultz."

The letter is on stationery bearing the name Schultz, Biro, Karmel & Rosenfeld and is written in the plural, i.e., "[w]e are writing you," "[p]lease advise us," "please forward them to us," and "[w]e are enclosing."

An affidavit of Robert Karmel states in part that, in 1969 and for several years prior and subsequent thereto, he practiced law in association with Schultz and Biro under the name Schultz, Biro & Karmel, and that they held themselves out to the public as a partnership. During that time he performed services under that name for his own clients as well as for Schultz's clients, and the name Schultz, Biro & Karmel appeared on all stationery and billing invoices sent to clients.

Plaintiffs' verified answer denied the above allegations, and in an affidavit in support thereof Schultz states that Schultz, Biro & Karmel was not an actual law firm nor a legal partnership; the firm did not have a partnership agreement, file an income tax return, or possess an employer's taxpayers account number. Each attorney was a sole proprietor, retained all fees generated by him, and filed his own income tax return. Biro and Karmel did perform selective legal services for him in return for office space, secretarial services, stationery (letterheads and billheads), access to a law library, and various peripheral services. Biro also received a monthly salary, but he (Schultz) was never privy to the legal problems of any of Biro's or Karmel's clients. Seagram retained Biro in 1969, not the law firm of Schultz, Biro & Karmel, and he (Schultz) never spoke with any representatives of Seagram, never performed any professional services for it, and never received any part of the fee paid by it. Biro did not share any confidential information with him which he (Biro) may have received from any client, including Seagram. He employed Biro and Karmel from 1954 to 1970 to assist him in the practice of law. In order to enhance their standing in the legal community, he agreed, at their request, to use the assumed name of Schultz, Biro & Karmel to identify the relationship. However, he never referred to them as his partners A hearing on the motion to disqualify was held on March 3, 1982. No witnesses were presented by either side, but Schultz, in arguing the motion, repeated his assertions that there was no partnership, that he had no knowledge of Biro's prior representation of Seagram, and that the only work performed in 1969 was the filing of public documents. During that hearing, the trial court expressed its desire to have a "complete hearing" on the motion to disqualify, to which Schultz responded "What do you mean by a 'complete hearing'? I understand this to...