Johnson v. Municipal Employees', Officers', & Officials' Annuity & Benefit Fund of Chicago , 2018 IL App (1st) 170732 ( 2019 )

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Appellate Court Date: 2019.04.11
14:42:23 -05'00'
Johnson v. Municipal Employees’, Officers’ & Officials’ Annuity & Benefit Fund,
2018 IL App (1st) 170732Appellate Court JEFFREY JOHNSON, ROBERT ORLICH, TERRY T. WHITE,
Caption FRANK T. LOWERY, and MUNICIPAL EMPLOYEES SOCIETY,
as Associational Representatives for Its Members, Plaintiffs-
Appellants, v. THE MUNICIPAL EMPLOYEES’, OFFICERS’ AND
OFFICIALS’ ANNUITY AND BENEFIT FUND OF CHICAGO and
THE LABORERS’ AND RETIREMENT BOARD EMPLOYEES’
ANNUITY AND BENEFIT FUND OF CHICAGO, Defendants-
Appellees (The City of Chicago, Intervenor-Appellee).
District & No. First District, Second Division
Docket No. 1-17-0732
Filed December 26, 2018
Modified upon
denial of rehearing February 19, 2019
Decision Under Appeal from the Circuit Court of Cook County, No. 14-CH-20668; the
Review Hon. Rodolfo Garcia, Judge, presiding.
Judgment Affirmed.
Counsel on Mary Patricia Burns and Vincent D. Pinelli, of Burke Burns & Pinelli,
Appeal Ltd., of Chicago, for appellee Municipal Employees’, Officers’ and
Officials’ Annuity and Benefit Fund of Chicago.
John F. Kennedy, Cary E. Donham, and Graham C. Grady, of Taft
Stettinius & Hollister LLP, of Chicago, for appellee Laborers’ and
Retirement Board Employees’ Annuity and Benefit Fund of Chicago.
Michael D. Freeborn, John T. Shapiro, and Dylan Smith, of Freeborn
& Peters LLP, of Chicago, for other appellees.
Edward N. Siskel, Corporation Counsel (Benna Ruth Solomon and
Jane Elinor Notz, Assistant Corporation Counsel, of counsel), Michael
B. Slade, R. Chris Heck, and Douglas Smith, of Kirkland & Ellis LLP,
and Richard Prendergast and Michael Layden, of Richard J.
Prendergast, Ltd., all of Chicago, for intervenor-appellee City of
Chicago.
Panel JUSTICE HYMAN delivered the judgment of the court, with opinion.
Presiding Justice Mason and Justice Lavin concurred in the judgment
and opinion.
OPINION
¶1 After the Illinois Supreme Court ruled that Illinois Pension Code amendments violated our
constitution’s pension protection clause, plaintiffs’ counsel in one of the consolidated cases
petitioned for attorney fees. The firm sought over $200,000 under the Illinois Civil Rights Act
and an additional $750,000 from a “common fund.” The trial court denied the fee petition in its
entirety as impermissible under the Illinois Pension Code. We agree and affirm.
¶2 Background
¶3 As summarized in Jones v. Municipal Employees’ Annuity & Benefit Fund, 2016 IL
119618, Illinois has established public pension systems for public employees of the City of
Chicago, including the Municipal Employees’, Officers’ and Officials’ Annuity and Benefit
Fund (MEABF) (40 ILCS 5/8-101 et seq. (West 2012)), and the Laborers’ and Retirement
Board Employees’ Annuity and Benefit Fund (LABF) (40 ILCS 5/11-101 et seq. (West
2012)). Jones, 2016 IL 119618, ¶ 3. The benefits under MEABF and LABF come from three
sources: the City, the employees, and investment returns. Id. ¶ 6. Historically, the public
pensions have been underfunded. Id. ¶ 7. Uncertainty associated with deficiencies led to the
adoption of the pension protection clause in the Illinois Constitution (Ill. Const. 1970, art. XIII,
§ 5). Actuarial valuation of the funds continued to show serious shortfalls, however. Jones,
2016 IL 119618, ¶ 10.
¶4 The General Assembly adopted legislative strategies to deal with some of the underfunded
pensions. Public Act 98-641, passed in 2014, consisted of a comprehensive set of provisions
designed to reduce annuity benefits for MEABF and LABF members. Id. ¶ 18.
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¶5 After Public Act 98-641 became law, MEABF participants challenged its constitutionality
and sought to enjoin enforcement: Jones v. Municipal Employees’, Officers’ & Officials’
Annuity & Benefit Fund, No. 2014-CH-20027 (Cir. Ct. Cook County) (Jones v. MEABF), and
Johnson v. Municipal Employees’, Officers’ & Officials’ Annuity & Benefit Fund, No.
2014-CH-20668 (Cir. Ct. Cook County) (Johnson v. MEABF). Both complaints sought a
declaration that Public Act 98-641 violated the pension protection clause by diminishing
pension benefits of the fund’s participants.
¶6 The Jones v. MEABF plaintiffs included 14 individual participants in the MEABF,
including current employees and retirees receiving an annuity, and four labor unions whose
members participated in the MEABF. The defendants included MEABF and its board of
trustees. The law firm of Freeborn & Peters LLP represented the plaintiffs. Ten days later,
Krislov & Associates, Ltd. filed the Johnson v. MEABF lawsuit on behalf of one current
participant in the MEABF, three retired participants receiving annuities from the LABF, and
the Municipal Employees Society of Chicago. The defendants included MEABF and LABF.
The City of Chicago and the State intervened, and the cases were consolidated. Ultimately, the
parties filed cross-motions for summary judgment, with the State adopting the City’s motion.
¶7 The trial court declared that Public Act 98-641, by reducing the value of annual annuity
increases, violated the constitution’s pension protection clause. The City, the State, MEABF,
and LABF appealed directly to the Illinois Supreme Court under Rule 302(a). Ill. S. Ct. R.
302(a) (eff. Oct. 4, 2011). In March 2016, the supreme court affirmed, declaring the entire
statute unconstitutional. Jones, 2016 IL 119618, ¶ 61.
¶8 Krislov, the Johnson v. MEABF plaintiffs’ counsel, petitioned for attorney fees against the
City, MEABF, and LABF under the Civil Rights Act (740 ILCS 23/5(c) (West 2016)) in the
amount of $219,041 representing the firm’s statutory lodestar fee. In addition, under a
common fund theory, Krislov sought an additional $750,000 from the 3% annual annuity
increase for plan members.
¶9 Deciding as a matter of law that attorney fees were not available under either approach, the
trial court denied with prejudice Krislov’s petition, as well as a motion for class certification
and a motion to compel production of his opponents’ time records. Krislov requests that we
reverse and remand with directions to award an appropriate fee, considering both statutory
lodestar and common fund sources. Krislov also requests we order production of the time
records and certification of a class for purposes of applying the common fund doctrine.
¶ 10 Standard of Review
¶ 11 This appeal presents a matter of statutory interpretation, a question of law, which we
review de novo. Klaine v. Southern Illinois Hospital Services, 2016 IL 118217, ¶ 13.
¶ 12 Analysis
¶ 13 Fee Entitlement
¶ 14 The Illinois Civil Rights Act of 2003 (Civil Rights Act) prohibits discrimination based on a
person’s race, color, national origin, or gender. 740 ILCS 23/5(a) (West 2016). Subsection (b)
empowers an aggrieved party to bring a civil lawsuit in federal district or state circuit court
“against the offending unit of government.” Id. § 5(b). Together, subsections 5(a) and 5(b)
create a state statutory cause of action for a claim of discrimination based on a suspect class.
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¶ 15 The Civil Rights Act includes a provision for attorney fees: “Upon motion, a court shall
award reasonable attorneys’ fees and costs, including expert witness fees and other litigation
expenses, to a plaintiff who is a prevailing party in any action brought: (1) pursuant to
subsection (b); or (2) to enforce a right arising under the Illinois Constitution.” Id. § 5(c). This
language recognizes attorney fees when a prevailing party successfully brings a discrimination
claim on statutory or constitutional grounds. Thomann v. Department of State Police, 2016 IL
App (4th) 150936, ¶ 30.
¶ 16 The trial court denied attorney fees because the issues raised by the lawsuits have no
relation or connection to the Civil Rights Act. We agree.
¶ 17 Krislov argues Grey v. Hasbrouck, 2015 IL App (1st) 130267, controls. Grey has no
bearing. Grey involved whether the doctrine of sovereign immunity barred attorney fees.
Id. ¶ 1. In Grey, unlike here, the claim, which involved transgender individuals, fell squarely
within section 5(a). Id. ¶¶ 2-3, 20.
¶ 18 We also reject Krislov’s quarrel with Thomann, 2016 IL App (4th) 150936. Krislov
criticizes Thomann’s narrow interpretation of section 5(c) to restrict attorney fees to
discrimination claims based on either section 5(a)(1) or 5(a)(2) or “race, color, national origin,
or gender” under the Illinois Constitution’s equal protection clause (Ill. Const. 1970, art. I,
§ 2). Thomann, 2016 IL App (4th) 150936, ¶¶ 29-30; see also 740 ILCS 23/5(a), (c) (West
2016). Section 5(c) makes attorney fees available “only where the claimant is a prevailing
party on a discrimination claim against a governmental body involving one or more of the
identified suspect classes.” Thomann, 2016 IL App (4th) 150936, ¶ 29. In Thomann, plaintiffs
did not bring a discrimination claim against a governmental body. Id. ¶ 33. Nor have the
Johnson v. MEABF plaintiffs.
¶ 19 Nevertheless, Krislov insists that the text of section 5(c)(2)—“to enforce a right arising
under the Illinois Constitution” (740 ILCS 23/5(c)(2) (West 2016))—opens the way for fees
regardless of the nature of the claim as long as it arises under the Illinois Constitution. Krislov
characterizes the language as unambiguous and insists it should be interpreted liberally.
¶ 20 A cardinal rule of statutory construction requires that courts ascertain and give effect to the
legislature’s intent, with the plain language offering the best indication of intent. Acme
Markets, Inc. v. Callanan, 236 Ill. 2d 29, 37-38 (2009). In doing so, we read the statute as a
whole, considering all relevant parts. First American Bank Corp. v. Henry, 239 Ill. 2d 511, 516
(2011) (citing Kraft, Inc. v. Edgar, 138 Ill. 2d 178, 189 (1990)). Also, statutes must be
construed to avoid incorporating exceptions, limitations, or conditions contrary to the
legislative intent. Thomann, 2016 IL App (4th) 150936, ¶ 30. Krislov’s argument runs afoul of
these tenets.
¶ 21 Thomann got it right in finding an expansive interpretation of the section 5(c)(2)
fee-shifting provision as contrary to the statutory scheme, and refusing to apply the section to a
prevailing party of any claim arising under the Illinois Constitution, regardless of subject
matter or context. In Thomann, plaintiffs alleged the procedures in evaluating objections to
concealed carry license applications violated their due process rights under the Illinois
Constitution. Id. ¶ 4. After the dismissal of the complaint as moot, plaintiffs’ attorneys
petitioned for fees, asserting that section 5(c) of the Civil Rights Act entitled them to fees
because they prevailed in a suit “ ‘to enforce a right arising under the Illinois Constitution.’ ”
Id. ¶ 11 (quoting 740 ILCS 23/5(c)(2) (West 2014)). The sole issue was whether the trial court
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erroneously dismissed the plaintiffs’ attorney fee petition. Id. ¶ 1. The trial court was affirmed.
Id. ¶ 33.
¶ 22 Krislov asserts that the Civil Rights Act’s first two subsections “say nothing to suggest the
Act as a whole does not extend beyond the context of discrimination.” (Emphasis in original.)
But the absence of any language limiting fees to discrimination claims proves nothing as well.
Indeed, Krislov’s approach puts an unstated and unwritten consequence into unambiguous
language.
¶ 23 Accordingly, the Civil Rights Act cannot serve as a means for awarding attorney fees, as
plaintiffs in Jones v. MEABF were not aggrieved parties suing under the Illinois Constitution
on the subject of discrimination based on race, color, national origin, or gender.
¶ 24 Statutory Exemption
¶ 25 Illinois follows the “American Rule.” That rule makes each party bear its own attorney fees
and costs unless statutory authority or a contractual agreement says otherwise. Housing
Authority of Champaign County v. Lyles, 395 Ill. App. 3d 1036, 1038-39 (2009). Courts
strictly construe statutes in derogation of the common law that authorize fee awards, and
“[n]othing is to be read into such statutes by intendment or implication.” State ex rel. Schad,
Diamond & Shedden, P.C. v. My Pillow, Inc., 2018 IL 122487, ¶ 18. So Krislov looks to the
Illinois Pension Code.
¶ 26 The Pension Code, however, exempts retirement annuities from attachment for the
payment of any debt of an annuitant, which includes attorney fees. See 40 ILCS 5/1-101 et seq.
(West 2016). Article 8 of the Illinois Pension Code applies to annuities due MEABF members.
See id. § 8-244(a). Section 8-244(a) exempts annuities, refunds, pensions, and disability
benefits from attachment or garnishment to pay any debt, damage, claim demand, or judgment
against any annuitant, pensioner, participant, refund applicant, or other beneficiary. Id. The
legislature did not include an exception for attorney fees.
¶ 27 Article 11 of the Illinois Pension Code applies to LABF members’ annuities. See id.
§ 11-223(a). Section 11-223(a) mirrors the language in section 8: “[a]ll annuities, refunds,
pensions, and disability benefits granted under this Article shall be exempt from attachment or
garnishment process and shall not be seized, taken, subjected to, detained, or levied upon by
virtue of any judgment, or any process or proceeding whatsoever issued out of or by any court
in this State, for the payment and satisfaction in whole or in part of any debt, damage, claim,
demand, or judgment against any annuitant, participant, refund applicant, or other beneficiary
hereunder.” Id. Again, there is no exception for attorney fees.
¶ 28 The Illinois Supreme Court recently considered the constitutionality of changes to the
Pension Code in Carmichael v. Laborers’ & Retirement Board Employees’ Annuity & Benefit
Fund of Chicago, 2018 IL 122793. The court reiterated that questions on legislative intent and
clarity of the language in a pension statute be “liberally construed in favor of the rights of the
pensioner” (id. ¶ 24 (citing Kanerva v. Weems, 2014 IL 115811, ¶ 55)), and that pension
benefits “ ‘ “cannot be diminished or impaired” ’ ” (id. ¶ 25 (quoting In re Pension Reform
Litigation, 2015 IL 118585, ¶ 45, quoting Kanerva, 2014 IL 115811, ¶ 38)). Accordingly, the
statute bars garnishing the plan participants’ pension entitlements for any purpose.
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¶ 29 Common Fund
¶ 30 Courts have general equity power “to do equity in a particular situation.” Sprague v.
Ticonic National Bank, 307 U.S. 161, 166 (1939). The common fund doctrine touches the
power of equity in doing justice between a party and the beneficiaries of the litigation. Morris
B. Chapman & Associates, Ltd. v. Kitzman, 193 Ill. 2d 560, 575 (2000). But, under the
disposition here, counsel’s efforts did not create a common fund or a quantifiable pool of
money from which fees could be paid.
¶ 31 Krislov proposes creating a common fund through deductions from the amounts paid to
beneficiaries from the pension funds under the jurisdiction of the court (the 3% annual
increases) from LABF or MEABF members’ annuities. In his reply, Krislov suggests a
common fund exists “because the annuitants have received and will continue to receive actual
increases in monetary payment, thus, there is a fund,” and maintains the City cited factually
distinguishable cases. While that may be, the cases do not support Krislov’s position either.
¶ 32 Each of the cases involves future savings, and none created a common fund. In Hamer v.
Kirk, 64 Ill. 2d 434, 438-40 (1976), the supreme court found future savings for taxpayers and
refunds for paid taxes did not constitute a “fund” from which attorney fees could be paid.
Similarly, in Rosemont Building Supply, Inc. v. Illinois Highway Trust Authority, 51 Ill. 2d
126, 130 (1972), our supreme court deemed it “improper” to expand the recognized rule for the
payment of attorney fees in a typical class action to litigation seeking a declaratory judgment
on the constitutionality of a statute. Finally, the supreme court in Hoffman v. Lehnhausen, 48
Ill. 2d 323, 329 (1971), stated, “We are aware of no authority under which the process of tax
collection and distribution could have been interrupted to divert from the governmental bodies
that had levied the taxes an amount fixed by the court as fees for the attorneys for the
plaintiffs.”
¶ 33 Krislov wants us to follow cases involving the Employment Retirement Income Security
Act of 1974 (ERISA) (29 U.S.C. § 1001 et seq. (1994)), citing Bishop v. Burgard, 198 Ill. 2d
495 (2002), as allowing attorney fees. But Bishop is inapposite both factually and legally.
Bishop was a personal injury lawsuit for a car accident. Bishop, 198 Ill. 2d at 497. The plaintiff
retained an attorney, agreeing to pay a one-third percentage of her recovery as attorney fees
and costs. After the attorney procured a recovery, plaintiff’s employer’s ERISA plan filed a
lien against the proceeds for the medical expenses it had paid. Id. The ERISA plan agreement
provided for subrogation rights to recover 100% of the benefits paid to the extent of any
judgment or settlement. Id. at 498-99. The validity and amount of the lien were not in dispute,
but the ERISA plan refused to reduce its lien by one-third to reflect the attorneys’ claim for
fees. Id. at 497. Ultimately, the supreme court concluded that ERISA did not preempt
application of the common fund doctrine in this context and under these facts. Id. at 507.
Unlike in Bishop, there is no subrogation agreement here, and Krislov proposes taking money
directly from the members’ pension checks, which our supreme court has repeatedly rebuffed.
¶ 34 Double Recovery
¶ 35 Although we need not decide the appropriateness of a double recovery of fees, we would
be remiss not to mention Krislov’s desire for an award of both statutory fees and common fund
fees, not one or the other. Krislov has asked for statutory fees in excess of $200,000 under the
“fee-shifting” provision of the Civil Rights Act, section 5(c), along with $750,000 under the
“common fund” doctrine. Defendants label this a double recovery.
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¶ 36 Krislov cites no basis for this request. See Pierce v. Visteon Corp., 791 F.3d 782, 787-88
(7th Cir. 2015) (attorney not entitled to attorney fees from class’s common fund as well as
under fee-shifting statute); Evans v. City of Evanston, 941 F.2d 473, 479 (7th Cir. 1991)
(clients should not be ordered to pay counsel who are compensated under fee-shifting statute).
Also, even had fees been obtainable, Krislov leaves unexplained why recovery of “reasonable
attorneys’ fees” under section 5(c) wouldn’t have afforded sufficient compensation alone.
¶ 37 Given our resolution, we need not address the remaining issues asserted by Krislov.
¶ 38 Affirmed.
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