Sullivan v. Ohic
| Decision Date | 27 June 2014 |
| Docket Number | No. 1-12-2395,No. 1-11-1125,1-11-1125,1-12-2395 |
| Citation | 2014 IL App (1st) 111125 |
| Parties | RHONDA SULLIVAN, Individually and As Mother and Next Friend of Beau Sullivan, a Minor, and JASON SULLIVAN, Plaintiffs-Petitioners-Appellees, v. OHIC, f/k/a Ohio Hospital Insurance Company, a Corporation, Defendant (Law Office of Kenneth C. Chessick, M.D., Respondent-Appellant). RHONDA SULLIVAN, Individually, and As Mother and Next Friend of Beau Sullivan, a Minor, and JASON SULLIVAN, Plaintiffs-Petitioners-Appellants, v. OHIC, f/k/a Ohio Hospital Insurance Company, a Corporation, Defendant (Law Office of Kenneth C. Chessick, M.D., Respondent-Appellee). |
| Court | United States Appellate Court of Illinois |
Appeal from the
Circuit Court of
Cook County.
Held: After 30 days, the circuit court lacked subject-matter jurisdiction to vacate the dismissal with prejudice of a bad-faith action based on a settlement, and enter orders asto the distribution of the settlement proceeds and attorney fees pursuant to a local rule relating to minors' settlements. Therefore, the circuit court's orders entered pursuant to a motion for review of the settlement pursuant to the local rule are void and vacated. The appeal based on efforts to enforce those void orders is dismissed as moot.ORDER
¶ 1 Plaintiffs-petitioners-appellees/petitioners-appellants, Rhonda Sullivan, individually and as mother and next friend of Beau Sullivan, a minor, and Jason Sullivan (together, the Sullivans) brought suit in the circuit court of Cook County (circuit court) against OHIC, an insurance company, claiming bad faith relating to the Sullivans' medical-negligence claims against its insured (bad-faith action). The Law Office of Kenneth C. Chessick, M.D. (Chessick), represented the Sullivans in the medical-negligence action which was pursued in the circuit court of Ogle County. Chessick also represented the Sullivans in the bad-faith action. On November 12, 2009, after the bad-faith action was settled, the circuit court entered an order dismissing that suit with prejudice. The Sullivans later discharged Chessick. On March 12, 2010, the Sullivans, through their new attorneys, filed a motion seeking review of the bad-faith settlement pursuant to Cook County Circuit Court Rule 6.4 (Cook Co. Cir. Ct. R. 6.4 (eff. Jan. 2, 2001)) (Rule 6.4). The circuit court, pursuant to this motion, vacated the dismissal, found the settlement was reasonable, determined the distribution of the settlement proceeds, and awarded attorney fees to Chessick.
¶ 2 Chessick appeals (appellate case number 1-11-1125), from the various orders of the circuit court which were entered after the November 12, 2009, dismissal order. Chessick argues, inter alia, that these orders are void because the circuit court lacked subject-matter jurisdiction and personal jurisdiction over the parties. Chessick further argues the circuit court disregarded orders entered by the Ogle County probate court and Rule 6.4 was inapplicable and unconstitutional.
¶ 3 The Sullivans have appealed the circuit court's orders denying their motion for a money judgment and an award of interest against Chessick and declining to rule on their motion to reconsider that order (appellate case number 1-12-2395). The Sullivans filed those motions after Chessick had filed its notice of appeal.
¶ 4 We vacate the circuit court's orders entered after the dismissal of the bad-faith action which are the subject of Chessick's appeal, finding the circuit court lacked subject-matter jurisdiction pursuant to the motion for Rule 6.4 review. Additionally, we dismiss the Sullivans' appeal as moot.
¶ 5 Beau Sullivan (the minor) sustained injuries in connection with his premature birth at Rochelle Community Hospital (hospital) in October 1994. In 1996, the Sullivans pursued a medical-negligence action against the hospital and a doctor seeking recovery on behalf of the minor and his parents in the circuit court of Ogle County. Chessick represented the Sullivans pursuant to a contingency-fee agreement. In 1999, the Sullivans' claims against the doctor were settled for a present cash value of $950,000, an amount within the $1 million limits of the doctor's liability insurance. A guardianship estate for the minor was then opened in the probate division of the Ogle County court. According to the record, the same Ogle County circuit court judge oversaw the medical-negligence case (case number 96 L 23), and the minor's probate case (case number 99 P 33). The Ogle County court approved the Sullivans' settlement with the doctor, and awarded Chessick attorney fees (which were 33.33% of the settlement recovery) and litigation costs.
¶ 6 In 2001, the medical-negligence suit against the hospital proceeded to a jury trial. The jury awarded the Sullivans $10 million in damages, which exceeded the hospital's limits of coverage under its liability policy issued by OHIC. The Sullivans and the hospital reached acompromise of the jury's verdict whereby the Sullivans received the $6 million policy limits and an assignment of the hospital's claims against OHIC for breach of the covenants of good faith and fair dealing. The Ogle County court approved the settlement, Chessick's attorney fees (37% of the recovered amount), and litigation costs. The Ogle County court also approved the withholding of $100,000 for future litigation costs as to the bad-faith action against OHIC. A guardian ad litem (GAL) was charged with effectuating the settlement.
¶ 7 In 2002, the Sullivans, as assignees of the hospital, filed the bad-faith action in the circuit court alleging claims of bad faith and breach of fiduciary duty against OHIC for its failure to settle the medical-negligence action. Chessick again represented the Sullivans pursuant to a contingency-fee agreement. After the case was assigned for trial in November 2009, the parties agreed to settle the matter for $2,750,000. On November 12, 2009, the circuit court entered an agreed order dismissing the bad-faith action with prejudice "pursuant to the settlement." The order stated the circuit court "retain[ed] jurisdiction of [the bad-faith action] to enforce the terms of the settlement" and directed OHIC to pay the settlement by December 11, 2009, "[i]f payment is not received by December 11, 2009, statutory interest shall accrue ***." Beau Sullivan was 15 years old at that time. Chessick did not present to the circuit court a petition to approve the settlement and distribution on behalf of a minor pursuant to Rule 6.4.
¶ 8 On November 30, 2009, Chessick filed a final litigation inventory for the bad-faith action in the Ogle County probate case, listing the distribution of proceeds from the $2,750,000 bad-faith action settlement as: $1,292,500 in attorney fees to Chessick (based on a 47% contingency-fee agreement); a $24,571 balance in the advanced litigation costs of $100,000, and $1,482,071 settlement proceeds due to the Sullivans.
¶ 9 On December 3, 2009, the Ogle County probate court entered an order that "received and approved" the final litigation inventory; ordered Chessick to hold the $1,482,071 settlement proceeds pending further court order as to allocation; appointed a new GAL; and set the cause for further status in February 2010. There is no indication in the record that the Ogle County probate court conducted a review to determine whether the settlement of the bad-faith action on behalf of the minor was fair and reasonable.
¶ 10 On January 5, 2010, the Sullivans, by letter, discharged Chessick. On January 11, 2010, the Ogle County probate court granted Chessick leave to withdraw as counsel and granted the Sullivans' new attorney leave to appear. The Ogle County probate court ordered Chessick to deliver to the Sullivans' new attorney a $700,000 check payable to Rhonda and Jason Sullivan as their share of the settlement proceeds and to transfer to the clerk of the Ogle County circuit court on behalf of the minor the balance of the settlement funds—$782,071.
¶ 11 On March 12, 2010, the Sullivans' new attorney filed in the circuit court a "Motion to Request Presentation of a Petition to Approve Settlement and Distribution on Behalf of Beau Sullivan, a Minor" (motion for Rule 6.4 review). The Sullivans alleged that although the bad-faith action had been dismissed with prejudice pursuant to a settlement, and the Ogle County probate court had entered an order allowing attorney fees and distribution of the settlement, there had been no compliance with the procedure set forth in Rule 6.4. Rule 6.4 provides as follows:
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