Weil, Freiburg & Thomas, P.C. v. Sara Lee Corp.

• Decision Date: 12 August 1991
• Docket Number: No. 1-89-3163,1-89-3163
• Citation: 160 Ill.Dec. 773,577 N.E.2d 1344,218 Ill.App.3d 383
• Parties: , 160 Ill.Dec. 773 WEIL, FREIBURG & THOMAS, P.C., Plaintiff-Appellant, v. SARA LEE CORPORATION, and Twin Rivers Transportation Company, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 1344

577 N.E.2d 1344

218 Ill.App.3d 383, 160 Ill.Dec. 773

WEIL, FREIBURG & THOMAS, P.C., Plaintiff-Appellant, v. SARA LEE CORPORATION, and Twin Rivers Transportation

Company, Defendants-Appellees.

No. 1-89-3163.

Appellate Court of Illinois,

First District, First Division.

Aug. 12, 1991.

Weil, Freiburg, Thomas & Petersen, P.C., Chicago (Charles P. Fox, of counsel), for plaintiff-appellant.

Jenner & Block, Chicago (Marguerite M. Tompkins and Christopher D. Liguori, of counsel), for defendants-appellees.

Justice CAMPBELL delivered the opinion of the court:

Plaintiff Weil, Freiburg & Thomas, P.C. ("WF & T"), a law firm, appeals orders of the circuit court of Cook County dismissing two counts of its amended complaint, dismissing its motion to disqualify defense counsel and entering summary judgment in favor of defendants Sara Lee Corporation ("Sara Lee") and Twin Rivers Transportation Company ("Twin Rivers") on WF & T's second amended complaint.

The record on appeal indicates the following. In 1987 and 1988, Lyle Braun, Linda Karvunis and Robert Fischer ("the Braun group") were employed as the general manager, office manager and operations manager, respectively, of Twin Rivers. In August 1987, Sara Lee and the Braun group began discussing a management buy-out of Twin Rivers. On October 26, 1987, Braun drafted a memorandum on Twin Rivers letterhead to William Doane, Braun's supervisor at Sara Lee. This memorandum sought to confirm various understandings and agreements regarding the proposed sale of Twin Rivers. One of the numbered items in the memorandum reads as follows:

"4) You have given us authority to secure legal assistance as required to develop our business plan and complete the transaction. Again, this expense will be born [sic] by Twin Rivers as the costs are incurred."

Doane allegedly made handwritten comments on the memorandum and returned it to Braun. Copies of this memorandum in the record contain a handwritten comment next to paragraph number four reading "Yes if within reason." The memorandum was returned with a cover sheet on Sara Lee letterhead dated October 31, 1987. This cover sheet purports to be from William Doane to Lyle Braun and is signed "Bill Doane." The cover sheet states in part:

"Thanks for the memo regarding TRTC [Twin Rivers] and KOSL [Kitchens of Sara Lee]. I have indicated my comments on the attached copy. I think the on-going relationship is accurately described by your memo, tempered with my comments.

According to Linda and Bob Fischer, it sounds like business is doing well. We have a 9:00 a.m. appointment with Jim Carlson to discuss the TRTC buy-out proposal."

The memorandum and cover sheet will be referred to collectively hereinafter as "the Doane-Braun memoranda."

On or about November 7, 1987, the Braun group approached Jeffery Taylor, then a member of plaintiff WF & T, regarding the possibility of representing them in the transaction. Taylor was shown a copy of the Doane-Braun memoranda. WF & T then agreed to represent the Braun group at the firm's customary hourly rates.

From November 1987 through April 1988, the Braun group and Sara Lee engaged in negotiations regarding the proposed sale of Twin Rivers. The Braun group was represented by WF & T; Sara Lee was represented by in-house counsel. Numerous negotiation sessions were held and various proposals were exchanged. The parties discussed the issue of professional fees. Sara Lee offered to pay $5,000, which was to include legal fees, bank fees and accounting fees. During this negotiating period, WF & T allegedly sent monthly invoices to Twin Rivers or Sara Lee. Twin Rivers paid WF & T $15,906.61 in a timely manner.

The management buy-out of Twin Rivers was never completed. On April 5th, Sara Lee came to believe that the Braun group had spent substantial amounts of Twin Rivers funds for the sole benefit of Twin Rivers in anticipation of the sale. Twin Rivers previously had an average monthly profit of $10,000; Sara Lee believed that expenditures for trucking equipment, supplies, marketing materials, computer equipment and season tickets for the Chicago Bears 1988 season, among other items, would result in a one-month loss of $180,000.

In May 1988, WF & T submitted invoices totalling $2,943.96 to Twin Rivers. In June 1988, WF & T received a letter from defendants' outside counsel, which states in part:

"You were retained by Lyle Braun, Linda Karvunis and Robert Fischer to represent them in connection with their proposed acquisition of Twin Rivers Transportation Company ("TRTC"). My clients agreed only to pay your clients' reasonable attorneys' fees incurred in connection with the acquisition. The expenses that your clients incurred exceeded any reasonable amount. Indeed, that issue was the subject of negotiations between the parties on April 5, when my clients first learned of the legal expenses that your clients had incurred. Accordingly, you should look to your clients for payment of your most recent statement.

[In-house counsel's] letter of April 7, 1988 does not acknowledge any obligation by Sara Lee or Twin Rivers to pay legal expenses incurred prior to that date. It merely placed you on notice that under no circumstances would Sara Lee or Twin Rivers pay any further expenses incurred by your clients."

On August 11, 1988, WF & T filed a complaint against Twin Rivers and Sara Lee seeking the unpaid charges. Defendants moved to dismiss the complaint pursuant to section 2-615 of the Illinois Code of Civil Procedure (Ill.Rev.Stat.1987, ch 110, par. 2-615). The trial court denied the motion, but dismissed the complaint sua sponte pursuant to section 2-612 of the Illinois Code of Civil Procedure (Ill.Rev.Stat.1987, ch. 110, par. 2-612) and granted WF & T leave to file an amended complaint.

WF & T filed an amended complaint on January 5, 1989, alleging: (I) Twin Rivers breached an oral contract with WF & T; (II) Sara Lee and Twin Rivers were estopped from asserting that Twin Rivers was not bound to pay legal fees to WF & T; and (III) WF & T was a third party beneficiary of an agreement between Sara Lee or Twin Rivers and the Braun group to pay WF & T's legal fees. Defendants moved to dismiss all three counts of the amended complaint pursuant to section 2-615; on March 31, 1989, the trial court dismissed counts II and III with prejudice. The court also struck Count I of the complaint, but granted WF & T leave to replead an oral contract or estoppel theory against Twin Rivers. All claims against Sara Lee were dismissed at this point.

WF & T timely filed a two-count second amended complaint against Twin Rivers, alleging breach of oral contract and estoppel. In response, Twin Rivers filed a motion for summary judgment on both counts pursuant to section 2-1005 of the Illinois Code of Civil Procedure (Ill.Rev.Stat.1987, ch. 110, par. 2-1005), attaching excerpts of depositions and trial testimony taken in a separate action in which the Braun group unsuccessfully attempted to compel the sale of Twin Rivers. The trial court ordered Twin Rivers to file an answer to the second amended complaint in order to frame the issues. WF & T filed its memorandum in opposition to summary judgment, attaching an affidavit of Taylor concerning the circumstances under which WF & T was hired.

In the interim, WF & T moved to disqualify Twin Rivers' outside counsel pursuant to section 5-101(b) of the Illinois Code of Professional Responsibility (Ill.Rev.Stat.1987, ch. 110A, Rule 5-101(b), repealed and superseded by new rules effective August 1, 1990), which prohibited an attorney from participating as an advocate in cases where she ought to be called as a witness. WF & T argued that in the June 1988 letter to WF & T, one of the attorneys in the outside firm admitted having knowledge of a contract; hence, WF & T would be required to depose her and call her as a witness at trial. On September 29, 1989, the trial court denied this motion, but stated that WF & T could reassert the motion if the case should go to trial.

On October 26, 1989, the trial court granted Twin Rivers' motion for summary judgment on both counts and dismissed WF & T's second amended complaint with prejudice.

I.

On appeal, plaintiff WF & T first challenges the dismissal of counts II and III of its first amended complaint. A trial court should dismiss a cause of action on the pleadings only if it is clearly apparent that no set of facts can be proven which will entitle a plaintiff to recover. (Burdinie v. Village of Glendale Heights (1990), 139 Ill.2d 501, 504, 152 Ill.Dec. 121, 124, 565 N.E.2d 654, 657.) Although a motion to dismiss does not admit conclusions of law or fact unsupported by the specific factual allegations in the complaint, all well-pleaded facts in the attacked portions of the complaint are taken as true; on appeal, this court must decide whether the allegations in the first amended complaint, interpreted in the light most favorable to the plaintiff, are sufficient to state a cause of action upon which relief may be granted. Burdinie, 139 Ill.2d at 505, 152 Ill.Dec. at 124, 565 N.E.2d at 657.

Count II of the first amended complaint sounds in estoppel. "Apparent authority," or "authority by estoppel," flows from the acts of a principal and thus differs from "implied authority," which flows from circumstantial evidence. (Northern Trust Co. v. Saint Francis Hospital (1988), 168 Ill.App.3d 270, 278, 119 Ill.Dec. 37, 42, 522 N.E.2d 699, 704.) Apparent authority arises when a principal creates, by its words or conduct, the reasonable impression in a third party that the agent has the authority to perform a certain act on its behalf. A principal that places an agent in a situation where the agent may be presumed to have authority to act is estopped as against a third party from denying the agent's apparent authority. (Crawford Savings & Loan Association v. Dvorak (1976), 40 Ill.App.3d 288, 292-93, 352 N.E.2d 261, 264.) The elements of...