In re Marriage of Goesel , 102 N.E.3d 230 ( 2017 )

2017 IL 122046
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket No. 122046)
In re MARRIAGE OF CHRISTINE GOESEL, Appellant, and
ANDREW GOESEL (Laura A. Holwell, Appellee).
Opinion filed November 30, 2017.
JUSTICE THOMAS delivered the judgment of the court, with opinion.
Chief Justice Karmeier and Justices Freeman, Kilbride, Garman, Burke, and
Theis concurred in the judgment and opinion.
OPINION
¶1 At issue is whether fees that have already been earned by an attorney in a
dissolution of marriage proceeding are considered “available funds,” such that they
may be disgorged under section 501(c-1)(3) of the Illinois Marriage and
Dissolution of Marriage Act (Act) (750 ILCS 5/501(c-1)(3) (West 2014)). We hold
that earned fees are not subject to disgorgement.
¶2 BACKGROUND
¶3 The facts of this case are set forth fully in the appellate court’s opinion. 2017 IL
App (3d) 150101, ¶¶ 3-10. We set forth here only those facts necessary to an
understanding of the specific question of law that we decide today. On January 18,
2013, petitioner, Christine Goesel, filed a petition for dissolution of marriage from
respondent, Andrew Goesel. Christine was originally represented by Goldstine,
Skrodzki, Russian, Nemec and Hoff, Ltd. (Goldstine), and Andrew was represented
by Janice Boback of Anderson & Boback, LLC. On October 10, 2013, contemnor
Laura Holwell filed her appearance as Andrew’s counsel, and the trial court granted
Boback leave to withdraw. Before withdrawing, Boback had moved to disqualify
Goldstine. The disqualification motion alleged that Goldstine had improperly
ordered Christine to provide it with Andrew’s mail that arrived at the marital home
and that Goldstine had opened and viewed the mail. The trial court ultimately
disqualified Goldstine, and Holwell billed Andrew $37,094.49 for her work on the
disqualification matter.
¶4 On March 10, 2014, the Law Offices of Edward R. Jaquays (Jaquays) appeared
on behalf of Christine, and on June 6, 2014, Howard LeVine of LeVine,
Wittenberg, Shugan, and Schatz, Ltd., appeared on behalf of Andrew. On June 12,
2014, Christine filed a petition for interim attorney fees, which she amended on
June 20, 2014. In the amended petition, Christine stated that she had paid Jaquays
an initial retainer of $5000 and had an outstanding balance with him of $27,142.60.
She argued that she lacked sufficient funds to pay any additional fees beyond the
retainer, and she requested that the court, pursuant to the “leveling of the playing
field” rules of the Act, order Andrew to pay her fees. Alternatively, if the court
determined that Andrew lacked the ability to pay her attorney fees, Christine
requested that the court order disgorgement of the necessary amount from the
money that Andrew had already paid to Holwell. Andrew also filed a petition for
prospective attorney fees, contending that, although he was employed, he did not
have sufficient funds to pay his attorney fees. On June 20, 2014, Holwell moved to
withdraw as Andrew’s counsel. The court granted the motion but retained
jurisdiction over Holwell pending resolution of the disgorgement issue.
¶5 At the hearing on the petition for interim attorney fees, the parties stipulated to
the attorneys’ rates and that the work performed by the attorneys was reasonable
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and necessary. Copies of invoices entered into evidence at the hearing showed that
all of the money Holwell had received was for work already performed. Andrew
still owed $17,500.38 to Holwell and $26,000 to LeVine. Additionally, Holwell
testified that she was holding $13,000 that Andrew had previously paid to Boback
and that Boback had then paid to Holwell, as there was a dispute as to who owned
the money.
¶6 On September 29, 2014, the court entered an order finding that both parties
lacked an ability to pay reasonable attorney fees. The court found that the total
attorney fees paid by Andrew were $100,022.27, with $66,382.28 going to
Holwell, $10,000 to LeVine, and $23,639.99 to Boback. Christine had paid her
attorneys $18,117.04, with $5000 going to Jaquays and $13,117.04 going to
Goldstine. The court thus found that $118,139.31 had been paid to date, and to
“level the playing field,” each party should have $59,069.65 for attorney fees. In
order to achieve parity, the court found that it was necessary to order Holwell to
disgorge $40,952.61. Accordingly, the court ordered Holwell to tender $40,952.61
in fees to Jaquays with 14 days.
¶7 After more than 14 days had passed and Holwell had not turned over the funds,
Christine moved to have Holwell held in indirect civil contempt. Holwell requested
to be held in friendly contempt of court so that she could appeal pursuant to Illinois
Supreme Court Rule 304(b)(5) (eff. Feb. 26, 2010). On December 18, 2014, the
court entered an order finding Holwell in friendly contempt of court. Christine later
filed a motion to clarify the court’s contempt finding. Christine pointed out that,
pursuant to Rule 304(b)(5), only contempt orders that impose a penalty are
immediately appealable. Accordingly, Christine asked the court to impose a
monetary or other penalty on Holwell. At the hearing on Christine’s motion,
Holwell explained to the court that she was not willfully disobeying its order but
that she did not have $40,000 to turn over. The court subsequently vacated its
December 18, 2014, finding of friendly contempt, held Holwell in indirect civil
contempt, charged her with a $10 per day penalty for each day that she did not pay
the disgorgement, and sentenced her to an indeterminate amount of time in the Will
County adult detention facility, not to exceed 179 days. The court stayed Holwell’s
sentence for 30 days to give her time to file an appeal. The court stated that Holwell
could purge herself of the contempt order by paying $40,952.61 to Jaquays by
January 21, 2015. At a hearing on January 21, 2015, Holwell reiterated to the court
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that she did not have the money but explained that she was making arrangements to
borrow it. The court reaffirmed its contempt finding and penalty, and Holwell
appealed to the Appellate Court, Third District.
¶8 Holwell raised several issues on appeal. Holwell argued that the trial court erred
in (1) ordering disgorgement without making a specific finding that Christine
lacked the ability to pay, (2) finding that the disgorgement order was a judgment
because disgorgement orders are temporary advances against the marital estate, and
(3) holding Holwell in indirect civil contempt without notice and a hearing and
without inquiring into Holwell’s ability to pay. After the Appellate Court, First
District, issued its opinion in In re Marriage of Altman, 2016 IL App (1st) 143076,
which held that earned fees are not subject to disgorgement, Holwell filed a
supplemental brief arguing that the court’s disgorgement order was in error because
the entirety of the $40,952.61 ordered disgorged was for fees that had already been
earned.
¶9 The appellate court reversed the disgorgement order. The court first held that,
contrary to Holwell’s claim, the trial court had made a specific finding that neither
party had the ability to pay attorney fees. 2017 IL App (3d) 150101, ¶ 15. The court
then reviewed the evidence from the hearing on attorney fees and concluded that
the court had not abused its discretion in determining that neither party had the
ability to pay. Id. ¶¶ 18-21. The court agreed with Holwell, however, that the court
had erred in ordering disgorgement of fees that were paid to Holwell for services
already rendered. The court determined that the relevant question is what the word
“available” means in section 501(c-1)(3), when it states that trial courts may “enter
an order that allocates available funds for each party’s counsel, including retainers
or interim payments, or both, previously paid” (750 ILCS 5/501(c-1)(3) (West
2014)). 2017 IL App (3d) 150101, ¶ 25. The court noted that there was a split in the
appellate court on this issue. Id. ¶ 31. In In re Marriage of Squire, 2015 IL App (2d)
150271, the Second District held that retainers or interim payments may be
disgorged whether or not they had been earned by the attorney. According to the
Second District, “available” in section 501(c-1)(3) simply means that the funds
“exist somewhere.” Id. ¶ 22. The First District rejected this view in Altman, 2016
IL App (1st) 143076. According to the First District, “available” should be
construed to mean those funds that have not yet been earned. Id. ¶ 36. In the case
before us, the Third District determined that Altman expressed the correct
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interpretation of section 501(c-1)(3). 2017 IL App (3d) 150101, ¶ 31. Accordingly,
since the parties had stipulated that Holwell’s fees were reasonable and necessary,
and there was no question that the fees that the court ordered disgorged had all been
earned by Holwell, the appellate court held that the trial court’s disgorgement order
must be reversed. Id. ¶ 34. Because it held the disgorgement order invalid, the court
reversed the contempt finding against Holwell. Id. ¶ 36.
¶ 10 This court allowed Christine’s petition for leave to appeal. Ill. S. Ct. R. 315 (eff.
Mar. 15, 2016). This court also allowed the Illinois State Bar Association and the
Illinois Chapter of the American Academy of Matrimonial Lawyers to file a joint
brief amici curiae in support of Holwell.
¶ 11 ANALYSIS
¶ 12 Christine raises two issues on appeal. First, Christine argues that the appellate
court erred in holding that earned fees are not available for disgorgement under the
Act. Second, Christine contends that the appellate court erred in vacating the
contempt finding against Holwell. According to Christine, Holwell was not
engaging in a good-faith attempt to appeal the trial court’s contempt finding. The
second issue was not raised in Christine’s petition for leave to appeal and is thus
forfeited. See Crossroads Ford Truck Sales, Inc. v. Sterling Truck Corp., 2011 IL
111611, ¶ 62. Accordingly, we will confine our analysis to whether the
disgorgement order was proper. 1
¶ 13 The issue before us is one of statutory construction, and the principles guiding
our review are familiar. The primary goal of statutory construction, to which all
other rules are subordinate, is to ascertain and give effect to the intention of the
legislature. Jackson v. Board of Election Commissioners, 2012 IL 111928, ¶ 48.
The best indication of legislative intent is the statutory language, which must be
given its plain and ordinary meaning. Metropolitan Life Insurance Co. v. Hamer,
1
As an alternative basis for affirming the appellate court’s judgment, Holwell argues that the
trial court abused its discretion in finding that neither party had the ability to pay attorney fees.
However, given that we allowed the petition for leave to appeal to resolve the conflict in the
appellate court over whether earned fees are subject to disgorgement, and we agree with Holwell
that her earned fees were not subject to disgorgement, we see no need to address this issue.
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2013 IL 114234, ¶ 18. It is improper for a court to depart from the plain statutory
language by reading into the statute exceptions, limitations, or conditions that
conflict with the clearly expressed legislative intent. Id. Words and phrases should
not be viewed in isolation but should be considered in light of other relevant
provisions of the statute. Midstate Siding & Window Co. v. Rogers, 204 Ill. 2d 314,
320 (2003). Further, each word, clause, and sentence of a statute must be given a
reasonable construction, if possible, and should not be rendered superfluous.
Prazen v. Shoop, 2013 IL 115035, ¶ 21. Where statutory language is clear and
unambiguous, it will be given effect without resort to other aids of construction.
Kunkel v. Walton, 179 Ill. 2d 519, 534 (1997). If the meaning of an enactment is
unclear from the statutory language, the court may consider the purpose behind the
law and the evils the law was designed to remedy. Gruszeczka v. Illinois Workers’
Compensation Comm’n, 2013 IL 114212, ¶ 12. A statute is ambiguous when it is
capable of being understood by reasonably well-informed persons in two or more
different senses. Solon v. Midwest Medical Records Ass’n, 236 Ill. 2d 433, 440
(2010). In determining legislative intent, we may also consider the consequences
that would result from construing the statute one way or the other, and in doing so,
we presume that the legislature did not intend absurd, inconvenient, or unjust
consequences. Id. at 441. Our review is de novo. In re Marriage of Heroy, 2017 IL
120205, ¶ 13.
¶ 14 The relevant statute—section 501(c-1)(3) of the Marriage and Dissolution of
Marriage Act—was enacted as part of the “leveling of the playing field
amendments,” which became effective on June 1, 1997. See In re Marriage of
Earlywine, 2013 IL 114779, ¶ 21. This section provides as follows:
“In any proceeding under this subsection (c-1), the court (or hearing officer)
shall assess an interim award against an opposing party in an amount necessary
to enable the petitioning party to participate adequately in the litigation, upon
findings that the party from whom attorney’s fees and costs are sought has the
financial ability to pay reasonable amounts and that the party seeking attorney’s
fees and costs lacks sufficient access to assets or income to pay reasonable
amounts. In determining an award, the court shall consider whether adequate
participation in the litigation requires expenditure of more fees and costs for a
party that is not in control of assets or relevant information. Except for good
cause shown, an interim award shall not be less than payments made or
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reasonably expected to be made to the counsel for the other party. If the court
finds that both parties lack financial ability or access to assets or income for
reasonable attorney’s fees and costs, the court (or hearing officer) shall enter an
order that allocates available funds for each party’s counsel, including retainers
or interim payments, or both, previously paid, in a manner that achieves
substantial parity between the parties.” 750 ILCS 5/501(c-1)(3) (West 2014).
The statute does not use the term “disgorgement.” The term was adopted by courts
to describe the process whereby a court orders an attorney to turn over previously
paid interim fees or retainers. As this court explained in Earlywine, the purpose of
the “leveling of the playing field” amendments was to “ ‘equaliz[e] the parties’
litigation resources where it is shown that one party can pay and the other cannot.’ ”
Earlywine, 2013 IL 114779, ¶ 26 (quoting In re Marriage of Beyer, 324 Ill. App. 3d
305, 315 (2001)). The legislature was addressing the problem of one party using his
or her greater control of assets as a tool, making it more difficult for the
disadvantaged spouse to participate equally in the litigation. Id.
¶ 15 We discuss first this court’s decision in Earlywine. The Second District in
Squire believed that Earlywine settles the question before the court, while the First
and Third Districts did not believe that Earlywine spoke to it. Thus, we will first
consider whether Earlywine settles this question because, if so, we need go no
further. In Earlywine, this court considered whether an advance payment retainer
was subject to disgorgement under section 501(c-1)(3). In that case, the petitioner
husband had paid his attorney by way of an advance payment retainer. Upon
finding that neither party had the ability to pay attorney fees, the trial court ordered
that $4000 be disgorged from the husband’s attorney, Thomas James. Id. ¶ 5. James
then asked to be held in friendly contempt. Id. ¶ 9. The court agreed, held James in
friendly contempt, and fined him $50. Id. James appealed, contending that advance
payment retainers are not subject to disgorgement because they become the
property of the attorney upon payment. The appellate court affirmed, explaining
that (1) section 501(c-1)(3) simply used the term “retainers” and did not limit the
type of retainers to which it applied and (2) allowing a party to avoid disgorgement
through the use of an advance payment retainer would defeat the purpose of the
leveling of the playing field amendments. Id. ¶ 10. This court affirmed the appellate
court.
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¶ 16 This court first discussed the different types of retainers that are allowed in
Illinois. The first is the “general” retainer, which is paid to secure a lawyer’s
availability during a specified time or for a specified matter. It becomes the
lawyer’s property upon payment. Id. ¶ 15. The second type is the security retainer.
A security retainer is held in a client trust account and remains the property of the
client until the attorney applies it to charges for services rendered. Id. The third type
of retainer is the advance payment retainer, which was first recognized by this court
in Dowling v. Chicago Options Associates, Inc., 226 Ill. 2d 277 (2007). Earlywine,
2013 IL 114779, ¶ 15. This type of retainer is a present payment for a commitment
to provide legal services in the future. Id. ¶ 16. Unlike a security retainer, the funds
become the attorney’s property immediately upon payment and must be deposited
in the lawyer’s general account. Id. As with a security retainer, however, the lawyer
has an ethical obligation to refund to the client any portion of the retainer that is
neither earned nor required for expenses. Ill. R. Prof’l Conduct (2010) R. 1.15(c)(4)
(eff. Jan. 1, 2010). Earlywine noted that Dowling had explained that advance
payment retainers should be used sparingly and only to accomplish a purpose that
cannot be accomplished with a security retainer. Earlywine, 2013 IL 114779, ¶ 17.
Dowling had explained that examples of the appropriate use of an advance payment
retainer are those situations in which a client may have trouble hiring counsel
unless he can shield the attorney fees from claims by his or her creditors. Id. ¶ 18. A
security retainer leaves funds in the client’s name, thus subjecting them to claims
by creditors. Examples of appropriate situations for an advance payment retainer
would be those of “a debtor [who] hired counsel to represent him in proceedings
against a judgment creditor; a criminal defendant whose property remains subject
to forfeiture; and a debtor in a bankruptcy case.” Id. In Earlywine, James argued
that similar policy concerns should allow parties in dissolution proceedings to
shield attorney fees from being turned over to opposing counsel. Id. ¶ 20. This court
disagreed.
¶ 17 First, this court noted that section 501(c-1) used the general word “retainers”
and did not place any qualifications on the types of retainers that could be
disgorged. Id. ¶ 25. This court then considered the policy underlying the leveling of
the playing field amendments. This court explained that allowing advance payment
retainers to be used in the manner suggested by James would undermine the
purpose of the amendments. Id. ¶ 27. It was obvious that the retainer in Earlywine
was set up specifically to circumvent the leveling of the playing field rules. Id.
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Accepting James’s argument would have meant that avoiding the application of the
rules was as simple as putting the funds in an advance payment retainer. Id. Thus,
the rules would no longer prevent an economically advantaged spouse from gaining
an unfair advantage over the other spouse. Id. The policy concerns expressed in
Dowling are simply not present in dissolution cases. Id. ¶ 28. Thus, this court held
that advance payment retainers must be subject to disgorgement in order to avoid
“defeat[ing] the express purpose of the Act and render[ing] the ‘leveling of the
playing field’ provisions powerless.” Id. ¶ 29.
¶ 18 As noted, the Second District in Squire believed that Earlywine largely settled
the question before the court by holding that advance payment retainers are subject
to disgorgement. Squire, 2015 IL App (2d) 150271, ¶ 22. Advance payment
retainers become the property of the attorney upon payment, and therefore a trial
court can order an attorney to disgorge funds that belong to him or her. Id. Earned
fees are also the property of the attorney, and therefore, pursuant to Earlywine, they
may also be disgorged. Id. We do not believe that the issue is that simple. First, the
main takeaway from Earlywine is that advance payment retainers should not be
used in dissolution cases when the purpose of the retainer is to block the other
spouse’s access to funds for attorney fees. As this court explained, advance
payment retainers are appropriate only in special circumstances, and circumventing
the leveling of the playing field rules and blocking the other spouse’s access to
funds for attorney fees are not the special circumstances that this court had in mind.
Earlywine, 2013 IL 114779, ¶¶ 27-29. Second, although Earlywine stands for the
general proposition that an advance payment retainer is subject to disgorgement,
there was no argument or discussion in that case about what portion of the retainer
had been earned. As the appellate court pointed out, although an advance payment
retainer becomes the property of the attorney upon payment, the attorney still has to
earn the retainer and must refund any unearned portion to the client. 2017 IL App
(3d) 150101, ¶¶ 28-30. No issue was raised in Earlywine regarding what portion of
the advance payment retainer was earned. Rather, Earlywine merely addressed the
general question of whether section 501(c-1)(3)’s reference to retainers includes
advance payment retainers. Thus, we do not believe that Earlywine answers the
question before the court today.
¶ 19 The first court to consider the precise issue of whether earned fees are subject to
disgorgement was the Second District in Squire, 2015 IL App (2d) 150271. In that
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case, the petitioner husband filed a petition for dissolution of marriage in 2013 and,
in June 2014, petitioned for interim and prospective attorney fees. Id. ¶ 2. The
petitioner alleged that he lacked funds to pay his attorney fees, while the respondent
had access to significant funds to pay her lawyers. Id. By the time of the hearing on
contribution, the petitioner had paid his attorneys $2500, but owed them
approximately $53,000. Id. ¶ 3. The respondent was unemployed but had borrowed
approximately $130,000 from her mother to pay her attorneys. Approximately
$10,000 of this amount went to her previous attorney, and the rest was paid to her
current attorneys (the Stogsdill Law Firm (Stogsdill)) as a retainer. Id. ¶ 4. Stogsdill
argued that it had already earned the entire retainer and deposited it in its general
account and thus it was not subject to disgorgement. Id. ¶ 5. The court granted the
interim fee petition. The court ordered Stogsdill to pay petitioner’s counsel $60,000
within 14 days. Id. ¶ 6. The court explained that, pursuant to this court’s decision in
Earlywine, 2013 IL 114779, it did not matter that the retainer had already become
Stogsdill’s property. Squire, 2015 IL App (2d) 150271, ¶ 6. The trial court held
Stogsdill in friendly contempt of court, ordered it to pay the $60,000 by March 19,
2015, and imposed a fine of $100 per day for each day that Stogsdill refused to pay.
Id. ¶ 7.
¶ 20 On appeal, Stogsdill argued that it could not be required to turn over fees that it
had already earned. Section 501(c-1)(3) refers to “available” funds being subject to
disgorgement, and Stogsdill argued that funds that have been earned by the attorney
and have become the attorney’s property are no longer “available.” Id. ¶ 9. The
appellate court rejected Stogsdill’s argument. The court’s decision was based
largely on this court’s decision in Earlywine, which held that advance payment
retainers are subject to disgorgement. The court noted that an advance payment
retainer, in contrast to a security retainer, becomes the attorney’s property upon
payment and is to be deposited in the attorney’s general account. Id. ¶¶ 17, 22.
Thus, it could not be correct that funds that are the property of the attorney are not
subject to disgorgement. Id. ¶ 22. The court also believed that Stogsdill’s position
would frustrate the purposes of the statute because an attorney could block the other
side’s access to fees by filing voluminous pleadings and motions early in the case,
thus earning the retainer, while leaving the other spouse with insufficient funds to
respond properly. Id. ¶ 21. Accordingly, the Second District concluded that the
word “available” in section 501(c-1)(3) must simply mean that the funds “exist
somewhere.” Id. ¶ 22.
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¶ 21 In Altman, the First District rejected the Second District’s interpretation. In that
case, the wife petitioned for a dissolution of marriage. Altman, 2016 IL App (1st)
143076, ¶ 2. She was represented by Bradford & Gordon, LLC (Bradford). Id. ¶ 3.
The respondent husband was initially represented by Scott Tzinberg, who was
eventually granted leave to withdraw. Id. Tzinberg was replaced by Stephen
Gerage, who also later withdrew from the case. Id. Following Gerage’s withdrawal,
the respondent proceeded pro se. Id. Nine months into the litigation, the petitioner
sought interim attorney fees of $36,864.30 for fees already incurred and $25,000
for prospective fees and costs. Id. ¶ 8. By the time that the petitioner later filed an
amended petition for fees, she alleged that she had incurred fees of $63,598.68 and
had paid only $9500. Id. Thus, she still owed her attorneys $54,098.68. Id. The
petitioner requested that the respondent pay her fees or, in the alternative, that the
court order Gerage to disgorge sums that he had been previously paid. Id.
¶ 22 Following a hearing, the trial court determined that neither party had sufficient
access to assets or income to pay attorney fees and that the leveling of the playing
field provisions of the Act should be applied. Id. ¶ 10. As part of its order allocating
funds for attorney fees, the court found that it would be necessary to order Gerage
to disgorge $16,000 in fees that he had earned and that this amount needed to be
turned over to Bradford within seven days. Id. Gerage failed to turn the money
over, was held in contempt of court, and appealed. Id. ¶ 11.
¶ 23 On appeal, Gerage argued, inter alia, that the disgorgement order was improper
because he had earned the funds and deposited them into his general operating
account. Gerage argued that the legislature’s use of the term “available” in section
501(c-1)(3) must mean that some funds are “unavailable” and this should include
funds that an attorney has earned. Id. ¶ 27. The First District reviewed the Second
District’s decision in Squire and stated that, if “leveling the playing field” were the
only consideration, it would be inclined to agree with Squire. Id. ¶ 33.
Nevertheless, the court held that it could not ignore the legislature’s use of the word
“available” and that it would be a “tortured reading of the statute to say that even
though the firm has earned the fees, paid itself (as it was entitled to do), and used
that income to pay salaries, overhead, and litigation expenses for items such as
experts and court reporters, it can nonetheless be required to refund those fees, not
to its client, but to a third party.” Id. The court noted that Squire had not discussed
the significant policy concerns in holding that earned fees are subject to
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disgorgement. Id. ¶ 34. The court believed that small firms and solo practitioners
could face significant financial hardships when attempting to comply with
disgorgement orders, particularly when the fees have been earned over several
months and transferred in and out of their operating accounts. Id. The court noted
that such concerns were exacerbated in cases such as the one before it where a party
delays filing the fee petition. Id. The court further noted that, logically, the Squire
interpretation means that a lawyer who had withdrawn from the case could be
called upon months or even years later to write a check to the opposing party’s
counsel, as the funds still “exist somewhere.” Id. ¶ 35. The court stated that it
would not construe the statute as allowing such absurd results. Id. The court
acknowledged that it was addressing interim fee awards and that accounts may be
“trued up” when a final dissolution judgment is entered. Id. ¶ 36. However, the
court explained that, because disgorgement is ordered upon a finding that neither
party is able to pay attorney fees, it is not realistic to assume that the attorneys will
ever be paid. Id. The court did not believe that the legislature intended that the
“financial burden of leveling the playing field should be borne, in substantial part,
by lawyers who must refund, under pain of contempt, fees they have earned.” Id.
The court thus reversed both the trial court’s order and the contempt order. Id.
¶ 24 In the present case, the Third District considered the interpretations set forth in
Squire and Altman and determined that Altman was correct. 2017 IL App (3d)
150101, ¶ 31. The court held that “the most reasonable interpretation of the term
‘available funds,’ as that term relates to previously paid ‘retainers or interim
payments’ to an attorney as used in section 501(c-1)(3) of the Act, are those funds
that are currently being held for a client that have not yet been earned by the
attorney at the time the attorney is given notice of the petition for interim attorney
fees and would be ‘available’ to be returned to the client if the attorney were to
immediately cease services.” Id. ¶ 25. The court did not believe that this court’s
decision in Earlywine, which held that advance payment retainers are subject to
disgorgement, answered the question before the court. The court explained that,
even though an advance payment retainer becomes the property of the attorney
upon receipt, the attorney still has an obligation to refund to the client any unearned
portion of the retainer. Id. ¶ 28. The court noted that the Squire court had failed to
discuss an attorney’s obligation to refund any unearned portion of an advance
payment retainer to the client. Id. ¶ 32. As noted in the quoted passage above,
however, the Third District added a wrinkle to the test adopted by Altman. Altman
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held that earned fees were not subject to disgorgement, whereas here the Third
District held that only fees that had been earned prior to the filing of the petition for
interim fees were exempt from disgorgement. Id. ¶¶ 23, 25, 34. The court adopted
this position by analogy to section 510(a) of the Act (750 ILCS 5/510(a) (West
2014)), which provides that judgments regarding maintenance or support
obligations may be modified only as to “installments accruing subsequent to due
notice by the moving party of the filing of the motion for modification.” (Internal
quotation marks omitted.) 2017 IL App (3d) 150101, ¶ 23. The court ultimately
determined that, because all of Holwell’s fees were earned prior to her receiving
notice of the petition for interim fees, there were no funds available to be disgorged.
Id. ¶ 34. Accordingly, the court reversed both the trial court’s disgorgement order
and its contempt order. Id. ¶¶ 34, 36.
¶ 25 We agree with the appellate court that the relevant question is what it means for
funds to be “available” under section 501(c-1)(3). The legislature did not merely
say that retainers and interim payments were subject to disgorgement. Rather, it
stated that those funds must also be “available.” As the appellate court has noted,
this implies that some funds are “unavailable.” Id. ¶ 25; Altman, 2016 IL App (1st)
143076, ¶ 33. We must give each word in the statute a reasonable construction, if
possible, and no word should be rendered superfluous. Prazen, 2013 IL 115035,
¶ 21. The legislature could have easily said that all funds that had been paid to an
attorney are subject to disgorgement, but the legislature instead chose to use the
modifier “available.”
¶ 26 “Available” means “such as may be availed of: capable of use for the
accomplishment of a purpose: immediately utilizable” or “that is accessible or may
be obtained: personally obtainable.” Webster’s Third New International Dictionary
150 (1993). As used in section 501(c-1)(3), the appellate court has defined
“available funds” three different ways. In Squire, the Second District determined
that it meant simply that the funds “exist somewhere.” Squire, 2015 IL App (2d)
150271, ¶ 22. In Altman, the First District concluded that only funds that have not
yet been earned by the attorney are “available”: “funds earned by and paid to a
party’s lawyer in the normal course of representation for past services rendered are
not ‘available funds’ within the meaning of section 501(c-1)(3).” Altman, 2016 IL
App (1st) 143076, ¶ 36. Finally, in the present case, the Third District held that
“available funds” are “those funds that are currently being held for a client that
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have not yet been earned by the attorney at the time the attorney is given notice of
the petition for interim attorney fees and would be ‘available’ to be returned to the
client if the attorney were to immediately cease services.” 2017 IL App (3d)
150101, ¶ 25.
¶ 27 For several reasons, we believe that Altman represents the correct
interpretation. For one thing, it is consistent with the plain meaning of the term
“available.” It is difficult to see how an interim payment or retainer that has been
earned by the attorney is nevertheless “available.” Once an attorney has used up a
retainer, there is clearly no longer an available retainer. Indeed, there is no longer
even a retainer. If there is no retainer “available” as between the attorney and the
client, it is difficult to see how one can be available to third parties. Christine relies
on the statute’s inclusion of “interim payments,” and Christine contends that a
“payment” is the discharge of a debt or liability by the delivery or money or other
value. Thus, Christine suggests that an “interim payment” will always be for an
amount that the lawyer has already earned. “Payment,” however, can also mean
more generally “the act of paying or giving compensation.” Webster’s Third New
International Dictionary 1659 (1993). The statute defines “interim attorney’s fees
and costs” as including “reasonable fees and costs either already incurred or to be
incurred.” (Emphasis added.) 750 ILCS 5/501(c-1) (West 2014). Moreover, the
phrase “previously paid” in section 501(c-1)(3) also modifies the term “retainers,”
which means that the legislature is clearly using the term “paid” as including sums
that the attorney has not yet earned.
¶ 28 We acknowledge that, when the meaning of a legislative enactment is unclear,
the court may consider the purpose behind the law and the evils the law was
designed to remedy. Gruszeczka, 2013 IL 114212, ¶ 12. As we set forth above, the
purpose of the “leveling of the playing field” amendments was to “ ‘equaliz[e] the
parties’ litigation resources where it is shown that one party can pay and the other
cannot.’ ” Earlywine, 2013 IL 114779, ¶ 26 (quoting Beyer, 324 Ill. App. 3d at
315). If this were the only consideration, we would be inclined to hold that all
retainers and interim payments were subject to disgorgement, regardless of whether
they had been earned by the attorney. It will obviously be much easier for the trial
court to equalize the parties’ position if the entire amount of all interim payments
and retainers is considered available.
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¶ 29 Nevertheless, we must also consider the consequences that would result from
construing the statute one way or the other, and in doing so, we presume that the
legislature did not intend absurd, inconvenient, or unjust consequences. Solon, 236
Ill. 2d at 441. As the First and Third Districts have noted, the consequences of
holding that earned fees are subject to disgorgement can be severe, and such a
holding could very easily lead to absurd, inconvenient, and unjust consequences.
We must presume that this was not the legislature’s intent. As the appellate court
explained in Altman:
“It is not speculation to predict that some lawyers, particularly solo
practitioners and those in small law firms, may be unable to comply with orders
to disgorge funds that they have earned over several months and that have been
transferred into (and out of) their operating accounts, at least not without
serious financial hardship.” Altman, 2016 IL App (1st) 143076, ¶ 34.
The court further noted that lawyers who have already been granted leave to
withdraw from the case could be called upon months or years later to write a check
to opposing party’s counsel. Id. ¶ 35. In the present case, the Third District cited
with approval Altman’s statement that it was not the legislature’s intent that “ ‘the
financial burden of leveling the playing field should be borne, in substantial part, by
lawyers who must refund, under pain of contempt, fees they have earned.’ ” 2017
IL App (3d) 150101, ¶ 33 (quoting Altman, 2016 IL App (1st) 143076, ¶ 36). As
Holwell has argued, if this court were to hold that earned fees are subject to
disgorgement, then “Illinois attorneys must question whether they should utilize
the fees they have rightfully earned to run their businesses, or hoard the funds for
fear of disgorgement and place their businesses at risk.”
¶ 30 Amici have identified further policy concerns that would arise if earned fees
were subject to disgorgement. First, it would mean that Illinois divorce lawyers pay
themselves at their own risk. Illinois Rule of Professional Conduct 1.15(c) (eff. July
1, 2015) allows attorneys to withdraw money from a client trust account as fees are
earned and expenses incurred. If an attorney used this money as he or she was
entitled to do, then he or she would have to have a backup plan—either sufficient
cash reserves or a line of credit—if later ordered to comply with a disgorgement
order. Attorneys practicing in other areas do not act at their own risk when they pay
themselves fees they have rightfully earned. Second, the Act does not state what
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defenses an attorney has to a disgorgement order. Here, Holwell told the trial court
that she did not have the money, and no hearing was held on the matter. Rather,
Christine’s attorney proceeded immediately with a citation to discover assets and
froze Holwell’s bank accounts. 2 These concerns are serious, especially given that
the Act contemplates that proceedings relating to interim attorney fees and costs be
conducted in summary fashion. 750 ILCS 5/501(c-1)(1) (West 2014). Third, most
people’s wealth is typically concentrated in their homes and retirement accounts.
The appellate court held that a party cannot be required to sell real estate to pay
attorney fees (2017 IL App (3d) 150101, ¶ 20), and both the Third District in the
present case and the First District in Altman held that retirement accounts cannot be
considered when assessing a party’s ability to pay fees. Id. ¶ 19; Altman, 2016 IL
App (1st) 143076, ¶¶ 22-25. This would mean that the parties are able to maintain
their wealth, while attorneys must forfeit their own property to allow the parties to
keep litigating. Fourth, construing section 501(c-1)(3) to mean that lawyers must
forfeit their own property raises due process concerns. 3
¶ 31 We agree with the appellate court, amici, and Holwell that these concerns are
substantial. Picture the case of a solo practitioner who earns $60,000 during the first
year of representing a party in a contentious dissolution proceeding and applies
those funds to overhead and operating expenses in the normal course of business.
Holding that such funds are available for disgorgement would mean that the
attorney could be ordered to pay all of that money in a lump sum to another party’s
counsel years later, despite the fact that the funds belonged to the attorney and he or
she had used them in a way that he or she had every legal right to do. And if the
attorney does not comply, he or she can be held in contempt and jailed. The present
case shows that such concerns are not merely theoretical. Holwell represented
Andrew for eight months and then was granted leave to withdraw. During this
2
The parties disagreed over whether a disgorgement order is an enforceable judgment, and the
trial court ruled that it was.
3
Although this court has not had occasion to address the due process implications of section
501(c-1)(3)’s disgorgement provisions, the appellate court upheld this section under facial
substantive and procedural due process challenges in Kaufman, Litwin & Feinstein v. Edgar, 301 Ill.
App. 3d 826, 835-37 (1998). That court cautioned, however, that its rejection of a facial challenge
did not preclude a finding that, in certain circumstances, the statute was being unconstitutionally
applied. Id. at 836.
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period, Holwell earned over $50,000. The trial court later ordered her to turn over
$40,952.61 to Christine’s counsel. Holwell did not turn the money over, and she
explained to the court that she was not willfully disobeying its order but that she did
not have the money. The court held her in indirect civil contempt, fined her, and
sentenced her to jail. Moreover, Christine’s attorney immediately put a freeze on
Holwell’s bank accounts and issued a citation to discover assets against her. If this
was the way that the legislature intended the statute to work, and if this is the type
of result that the legislature intended, then the legislature needs to say so explicitly
in the statute. We are not going to construe the statute in a way that leads to absurd,
unjust, or inconvenient results. See Solon, 236 Ill. 2d at 441.
¶ 32 Christine points out that construing the statute the other way could also lead to
inequities and absurd results. Christine points out that one spouse may engage in a
“scorched earth” campaign of liquidating the marital assets and using the money to
pay his or her attorney. While this is indeed a concern, Holwell points out that the
disadvantaged spouse has some remedies available, including (1) filing the petition
for interim attorney fees at the beginning of the case and (2) seeking a preliminary
injunction or temporary restraining order under section 501(a)(2)(i) (750 ILCS
5/501(a)(2)(i) (West 2014)) (allowing parties to seek a temporary restraining order
or preliminary injunction “restraining any person from transferring, encumbering,
concealing or otherwise disposing of any property except in the usual course of
business or for the necessities of life”). By contrast, the Act provides no remedy for
an attorney who is ordered to turn over money that the attorney no longer has.
¶ 33 The other interpretation of “available” was that set forth by the Second District
in Squire. The Second District defined “available” as meaning that the funds “exist
somewhere.” Squire, 2015 IL App (2d) 150271, ¶ 22. It is impossible to know what
Squire even meant with this definition. Altman assumed that the Second District
meant that it does not matter whether the attorney has already spent the funds
because, even then, the funds “exist somewhere.” See Altman, 2016 IL App (1st)
143076, ¶ 33. Amici read Squire the same way and argue that it would be unfair to
say that funds that “exist” in the hands of third parties they have been paid to are
nevertheless “available” to Holwell to turn over to other attorneys. This is certainly
a fair and reasonable reading of Squire, given that the Second District put no limit
on the term “somewhere.” This definition would seem directly contrary to the plain
meaning of “available,” as the funds would no longer be accessible, obtainable, or
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immediately utilizable. In fairness to the Second District, however, it is possible
that by “exist somewhere” it meant that the funds existed somewhere within the
attorney’s control. But this is problematic too, as once the funds are deposited in the
lawyer’s general account and comingled with fees from other cases, it would not be
possible to say which funds are from which fees. The Squire court might also have
meant that “exist somewhere” simply means that the lawyer has the financial
ability to turn over the amount ordered disgorged, but this would impose a much
greater burden on small firms and solo practitioners. Whatever Squire meant by
“exist somewhere,” the court’s interpretation was driven largely by its belief that
Earlywine settled this question. We have determined that Earlywine did not speak
to the question before the court today, and thus Squire’s analysis is of limited
relevance. We disagree with the Squire court’s interpretation, and we hereby
overrule that decision.
¶ 34 As we noted above, the appellate court in the present case modified Altman’s
rule that earned fees are not subject to disgorgement. The Third District held that
available funds are those funds that are being held for a client and that have not yet
been earned by the attorney at the time the attorney receives notice of the petition
for interim fees. 2017 IL App (3d) 150101, ¶ 25. The Third District adopted this
test by analogy to section 510(a) of the Act (750 ILCS 5/510(a) (West 2014)),
which provides that judgments for maintenance or support obligations may be
modified only as to “installments accruing subsequent to due notice by the moving
party of the filing of the motion for modification.” (Internal quotation marks
omitted.) 2017 IL App (3d) 150101, ¶ 23. The policy reasons for the Third
District’s holding are obvious: once an attorney receives notice of a fee petition, the
attorney will have an incentive to earn his or her fees as quickly as possible, thus
rendering them unavailable to be disgorged. Nevertheless, we must keep in mind
that the primary goal of statutory construction is to ascertain and give effect to the
intention of the legislature. Jackson, 2012 IL 111928, ¶ 48. It is impossible to
believe that, if the legislature meant something as technical and specific as that
“available funds” means “fees that have not been earned by an attorney prior to
receiving due notice of a petition for interim attorney fees,” it would not have said
this in the statute. Moreover, section 510(a) shows that when the legislature means
something like this, it says so explicitly. We stated above that we believe that the
legislature needs to take another look at this statute. If the Third District’s
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interpretation was the legislature’s intent, then the legislature should amend the
statute to make its intention clear.
¶ 35 For all of the above reasons, we believe that Altman’s interpretation is correct.
“[F]unds earned by and paid to a party’s lawyer in the normal course of
representation for past services rendered are not ‘available funds’ within the
meaning of section 501(c-1)(3).” Altman, 2016 IL App (1st) 143076, ¶ 36. This is a
difficult question, and the policy concerns on both sides are substantial. It is not
possible to construe the statute in such a way that will not lead to unfairness and
inequitable results in some situations. We therefore proceed today with an
abundance of caution. We believe that the legislature needs to take another look at
section 501(c-1)(3) and make its intentions absolutely clear. Specifically, the
legislature should define what it means by “available funds” and explain whether
this includes fees that the attorney has already earned, whether attorneys who are
no longer in the case may also be ordered to disgorge fees, and whether it is a
defense to disgorgement that the attorney no longer has the money. Absent such an
explanation from the legislature, we hold that fees that have been earned by an
attorney are not subject to disgorgement. Here, there is no dispute that the amount
that the trial court ordered disgorged from Holwell represented earned fees, and the
parties stipulated that Holwell’s fees were reasonable and necessary. Accordingly,
we affirm the appellate court’s judgment, which reversed both the disgorgement
order and the finding of contempt. We likewise agree with the appellate court that
there is not sufficient certainty and clarity in the record regarding the $13,000 in
fees that had been paid to Boback but were being held by Holwell. 2017 IL App
(3d) 150101, ¶ 34 n.1. The ownership of these funds was disputed, and we do not
address them here.
¶ 36 Affirmed.
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