Brandon Apparel Group v. Kirkland & Ellis ( 2008 )

FIRST DIVISION
April 21, 2008
No. 1-06-1432
BRANDON APPAREL GROUP, ERIC P. ) Appeal from the
LEFKOFSKY and BRADLEY A. KEYWELL, ) Circuit Court of
) Cook County.
Plaintiffs-Appellants )
Cross-Appellees, )
) No. 00 CH 16669
v. )
)
KIRKLAND AND ELLIS, ) The Honorable
)David R. Donnersberger,
Defendant-Appellee ) Judge Presiding.
Cross-Appellant. )
JUSTICE GARCIA delivered the opinion of the court.
The plaintiffs, Brandon Apparel Group (Brandon), Bradley A.
Keywell, and Eric P. Lefkofsky, retained the defendant law firm
Kirkland & Ellis (Kirkland) to represent them in a dispute over
certain loans. After a default judgement was entered against
Brandon, Keywell, and Lefkofsky in that litigation, they filed
the instant legal malpractice action against Kirkland.
The trial court granted Kirkland's amended motion for
summary judgment, finding the plaintiffs had improperly assigned
their legal malpractice claim. The court denied Kirkland's
motion for partial summary judgment as to the plaintiffs'
damages.
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The trial court entered an order pursuant to Supreme Court
Rule 304(a) (210 Ill. 2d R 304(a)), finding there was "no just
reason for delaying either enforcement or appeal or both" of its
grant of summary judgment. The trial court also stayed
proceedings on Kirkland's counterclaim pending appeal. For the
reasons that follow, we reverse and remand.
BACKGROUND
The alleged legal malpractice at issue in this case stems
from the defendant law firm's representation of Brandon, Keywell,
and Lefkofsky in Johnson Bank v. Brandon Apparel Group, Inc., No.
00-CV256 (August 9, 2000), filed in the circuit court of Rock
County, Wisconsin, in 2000 (the underlying litigation).
I. The Underlying Litigation
In 1997, Brandon, a company specializing in the manufacture
and sale of athletic apparel, obtained two loans from Johnson
Bank. The loans included a $5 million term loan and a $4 million
revolving credit loan. These loans were secured by Brandon's
assets. Keywell and Lefkofsky, Brandon's principals, were
guarantors of the loans.
In May 1999, Brandon entered into the "First Amendment to
Term Loan Agreement" and the "First Amendment to Revolving Credit
Loan Agreement" with Johnson Bank. As part of these amendments,
Brandon acknowledged the total principal of its loans was
approximately $10.1 million. Brandon also agreed to release
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Johnson Bank from "all claims, demands or causes of action of any
kind." Although Lefkofsky expressed concern about the release's
"broad-based waiver" as to "all *** legal rights" with regard to
the loans, he and Keywell signed the amendments. Keywell and
Lefkofsky also signed an "Acknowledgment and Agreement of
Guarantors" for each loan. The acknowledgments released Johnson
Bank from all "defenses, claims, offsets and counterclaims ***
accrued to date."
Soon after, Johnson Bank determined Brandon was in default
of the loans. Brandon and Johnson Bank attempted to resolve the
matter. On September 1, 1999, Brandon entered into the
"Moratorium Agreement" with Johnson Bank. Keywell and Lefkofsky
signed the agreement as guarantors. As part of this agreement,
Brandon acknowledged $6.5 million was due and owing on the
revolving credit loan and approximately $3.8 million was due and
owing on the term loan.
Brandon retained Kirkland after the execution of the
Moratorium Agreement. Kirkland represented Brandon in connection
with the negotiation of the "Second Moratorium Agreement" with
Johnson Bank. Pursuant to this agreement, Brandon, Keywell, and
Lefkofsky acknowledged approximately $6.4 million plus interest
due and owing on the revolving credit loan and $3.8 million plus
interest due and owing on the term loan. As part of the
agreement, Brandon, Keywell, and Lefkofsky released Johnson Bank
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from all "claims, demands or causes of action of any kind."
On March 8, 2000, counsel for Johnson Bank filed a complaint
against Brandon, Keywell, and Lefkofsky in the circuit court of
Rock County, Wisconsin. The complaint alleged Brandon was in
default of the Second Moratorium Agreement. The complaint also
alleged Keywell and Lefkofsky, as guarantors, were liable
pursuant to their guarantees. The complaint asked for relief of
approximately $10.7 million.
Kirkland attorney James Stempel entered into an agreement
with Johnson Bank's counsel to answer or otherwise plead in the
underlying litigation by April 14, 2000. This agreement was
memorialized in a March 31, 2000, letter. When an answer was not
filed by the agreed-to deadline, Johnson Bank filed a motion for
a default judgment.
On May 18, 2000, Kirkland filed a motion in opposition to
the entry of a default judgment. The motion (1) requested the
court "enlarge" the time to answer or otherwise plead, (2) asked
the court for leave to file an answer instanter, and (3) opposed
the motion for a default judgment. In support of the motion,
Kirkland attorney Stempel submitted an affidavit alleging the
existence of an oral agreement with Johnson Banks's counsel,
Albert Solochek, that further extended the time to answer the
complaint.
Brandon's answer, which Kirkland sought leave to file
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instanter, denied the complaint's allegations of money due and
owing and asserted affirmative defenses.
On August 9, 2000, the Wisconsin circuit court granted
Johnson Bank's motion for a default judgment. In September 2000,
a judgment of approximately $11 million was entered against
Brandon, Keywell, and Lefkofsky. A timely appeal was filed.1
The Wisconsin appellate court reversed the entry of default
judgment and remanded the case to the circuit court for an
evidentiary hearing to determine whether the alleged oral
agreement to extend the time to answer existed.
On January 4, 2002, the Wisconsin circuit court conducted an
evidentiary hearing. Following the hearing, the circuit court
concluded there was no oral agreement to extend the time to
answer. The circuit court held that the entry of a default
judgment was appropriate. On February 14, 2002, the circuit
court entered a default judgment in the amount of $12,353,784
against Brandon, Keywell, and Lefkofsky. This amount included
interest due and owing on the loans through January 14, 2002.
Costs of approximately $37,000 were also entered against Brandon,
1
Shortly after the appeal was filed in the underlying
litigation, Brandon, Keywell, and Lefkofsky filed this
malpractice action against Kirkland in the circuit court of Cook
County. The parties agreed to stay the malpractice action
pending the outcome of the underlying litigation.
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Keywell, and Lefkofsky, with attorney fees to be determined at a
later date.
On May 22, 2002, a Johnson Bank executive was appointed as a
supplemental receiver of Brandon's property pursuant to a
receivership order entered by the Wisconsin circuit court (the
receivership order). The receivership order defined "property"
to include "any and all proceeds from any actions, claims or
interests by or of [Brandon, Keywell, and Lefkofsky] against or
as to Kirkland & Ellis."
The receivership order also required Brandon, Keywell,
Lefkofsky, and their attorneys to confer with the receiver
regarding the course of any malpractice claim against Kirkland.
Should the two sides disagree as to litigation decisions, either
party could seek a judicial remedy in the Wisconsin circuit
court. Pursuant to the receivership order, Brandon, Keywell, and
Lefkofsky could not "settle, compromise, dismiss, or
substantially impair [the malpractice litigation] without the
express written consent" of the receiver or of the Wisconsin
circuit court after notice and a hearing.
II. The Malpractice Litigation
On November 17, 2000, Brandon, Keywell, and Lefkofsky (the
plaintiffs) filed a declaratory judgment action against Kirkland
in the circuit court of Cook County. The plaintiffs alleged
Kirkland's failure to file a timely answer in the underlying
No. 1-06-1432
litigation led to the entry of a $12 million default judgment.
Kirkland's answer denied the legal malpractice and asserted a
counterclaim for unpaid attorney fees and costs.
In September 2002, the plaintiffs filed a five-count first-
amended complaint. Count I sought a judicial declaration that
the Wisconsin circuit court had made no determination denying
Brandon's affirmative defenses against Johnson Bank and, as a
result, Kirkland may be held liable for damages proximately
caused by Kirkland's negligence. Count II sought a judicial
declaration that (1) Kirkland breached its duty to the
plaintiffs, (2) the plaintiffs had no further obligations to
Kirkland, and (3) Kirkland must reimburse the plaintiffs for all
sums previously paid to the firm. Count III alleged fraud, count
IV alleged professional negligence, and count V alleged breach of
contract. On February 18, 2003, the trial court entered an order
dismissing counts I and III.
After the filing of the first-amended complaint, the
plaintiffs wished to retain new counsel. Johnson Bank disagreed
with the plaintiffs' initial decision to retain counsel based on
a continency fee arrangement. Johnson Bank preferred the
plaintiffs retain a firm based on an hourly billing arrangement.
Johnson Bank's counsel stated Johnson Bank and the receiver
"would consider the [contingency] fee arrangement *** provid[ed]
[Keywell and Lefkofsky] deposit[ed] sufficient sums *** to cover
No. 1-06-1432
and protect the Bank and the Receiver" from any additional amount
that would be taken from the recovery because of a contingency
fee arrangement as opposed to an hourly fee arrangement. Johnson
Bank's counsel reminded Keywell, "you *** have acknowledged on
many occasions, the Bank is the real and only beneficiary in the
Kirkland case." Johnson Bank's counsel suggested the plaintiffs
seek a judicial determination of the dispute in the Wisconsin
circuit court pursuant to the receivership order. The plaintiffs
did not seek a judicial remedy, instead retaining a firm pursuant
to an agreement that included aspects of both billing
arrangements.
The firm currently representing the plaintiffs, Connelly
Roberts & McGinvey, was retained in 2004. In the engagement
letter, plaintiffs' current counsel, Michael Connelly,
acknowledged that any recovery in the malpractice litigation was
the property of the receiver and that Johnson Bank would be
paying his firm's invoices. The engagement letter also
recognized that Johnson Bank could discontinue paying the
plaintiffs' legal fees at any time. While the letter stated the
firm would advance Brandon, Keywell and Lefkofsky's interests, it
also acknowledged the firm could be discharged by Brandon,
Keywell, Lefkofsky, or Johnson Bank.
Johnson Bank's counsel and Connelly corresponded during the
instant litigation regarding litigation strategy and
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expenditures. After receiving a litigation budget in the fall of
2004, Johnson Bank's counsel suggested that Connelly "temper the
time *** put in this case." Counsel also "suggest[ed] that
[Connelly] defer what [he could,] for now." Should plaintiffs'
counsel have "any questions as to whether a particular task
should be undertaken," he was invited to discuss the matter with
Johnson Bank's counsel. Johnson Bank's counsel also corresponded
with Connelly regarding the cost, preparation, and filing of a
potential motion for summary judgement.
While the malpractice litigation was pending, Brandon,
Keywell, and Lefkofsky entered into the "Common Interest
Agreement" with the receiver and Johnson Bank. In this
agreement, the parties determined it was in their "best interest"
to consult regarding the malpractice litigation and such
"consultations" would be "subject to the attorney-client
privilege."
The trial court recognized this privilege in a February 4,
2005, order. In that order, the trial court denied Kirkland's
motion to compel the production of documents and testimony
regarding all communications between Johnson Bank, the receiver
or its counsel, and the plaintiffs and their attorney. The trial
court found the documents at issue were protected subject to the
"common interest doctrine" because the documents were prepared in
order to further the parties' "joint litigation strategy."
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On March 17, 2005, Kirkland filed a motion for summary
judgment which alleged the plaintiffs had improperly assigned
their legal malpractice claim to Johnson Bank.
In their response to Kirkland's motion for summary judgment,
the plaintiffs attached an affidavit from their attorney, Michael
Connelly. Connelly stated that while he had "consulted" with
counsel for Johnson Bank regarding litigation strategy, he had
not yielded control over decision making in the malpractice
litigation to Johnson Bank or its counsel.
Kirkland moved for and was granted discovery regarding
communications between Johnson Bank's counsel, Connelly, and the
plaintiffs regarding the direction and control of the malpractice
litigation.
During this discovery, Kirkland deposed Connelly. Connelly
testified in his deposition that when he was retained, he
understood that while Johnson Bank would receive the proceeds of
the malpractice litigation, Brandon, Keywell, and Lefkofsky were
his clients. Connelly believed he had some "fiduciary
obligations" to Johnson Bank because the bank was entitled to any
recovery in the malpractice litigation. Because of this interest
in the recovery, he consulted with Johnson Bank's counsel
regarding progress in the malpractice litigation. Connelly
further testified that when he was retained "the one thing that
was made clear was that [he] could not settle the case without
No. 1-06-1432
consulting" Johnson Bank's counsel.
Connelly testified that when he was told by Johnson Bank's
counsel to defer work, he responded that he would do what was
necessary to effectively represent his clients, Brandon, Keywell,
and Lefkofsky. Connelly also testified he filed pleadings and
conducted depositions, including the depositions of Kirkland
attorneys involved in the underlying litigation, without
receiving Johnson Bank's counsel's approval in advance.
After the conclusion of the discovery regarding the
communications between the plaintiffs, Connelly, and Johnson
Bank, Kirkland filed an amended motion for summary judgment on
January 11, 2006. The amended motion argued that summary
judgment was appropriate because Johnson Bank, a third-party
judgment creditor, was the "real" beneficiary of the malpractice
litigation and the malpractice claim had been improperly assigned
to Johnson Bank. Kirkland argued the documentary evidence
attached to its amended motion for summary judgment, including
the deposition transcripts of Connelly and Johnson Bank's
counsel, the receivership order, and correspondence between
Johnson Bank, the plaintiffs, and Connelly, established that
Johnson Bank controlled the malpractice litigation. In the
alternative, Kirkland argued it was entitled to partial summary
judgment on the issue of damages. According to Kirkland, it
could not be held responsible for the $10.1 million Kirkland
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contended the plaintiffs owed Johnson Bank before Kirkland was
retained.
In their response, the plaintiffs argued they remained the
beneficiaries of the malpractice litigation and they had not
assigned their legal malpractice claim to Johnson Bank.
Attached to the plaintiffs' response to the amended motion
for summary judgment was a copy of the "Settlement Agreement and
Release" executed between Johnson Bank, Brandon, Keywell and
Lefkofsky. The settlement agreement released and resolved all
claims and obligations between Johnson Bank, Keywell and
Lefkofsky, "as well as any claims Brandon Apparel Group *** may
have against [Johnson] Bank." Keywell and Lefkofsky agreed to
pay Johnson Bank $1.125 million and in turn were released from
the judgment entered in the underlying litigation and dismissed
from all other litigation between Johnson Bank and Brandon.
Additionally, Keywell and Lefkofsky executed the "Agreement
of Cooperation" as an addendum to the Settlement Agreement and
Release. Pursuant to the Agreement of Cooperation, if Johnson
Bank continued to fund the malpractice litigation, Keywell and
Lefkofsky
"each [agreed] to provide a minimum of 100
hours to assist the law firm of Connelly
Roberts & McGivney, LLC (or any other firm
that is acting on behalf of the Plaintiffs)
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in case and trial preparation, such
assistance to be provided at the request and
direction of the law firm. The 100 hours
would include any deposition time in the
case, but would not include time at trial.
If necessary, in the opinion of trial
counsel, *** Keywell and Lefkofsky would
agree to attend each day of the trial
proceedings in the case."
As a condition of the agreement, Keywell and Lefkofsky
agreed to take no action that was inconsistent with the best
interests of the malpractice litigation. If either Keywell or
Lefkofsky breached the agreement, Johnson Bank was entitled to
$400,000 in damages.
The cooperation agreement addressed how any potential
recovery in the malpractice litigation would be divided. If
Johnson Bank continued to fund the malpractice litigation, any
recovery would first be used to reimburse Johnson Bank for
amounts expended on attorney fees and costs. From any funds
remaining after the payment of attorney fees and costs, Johnson
Bank would receive the first $1 million. Any amount in excess of
$1 million, but less than $2 million would be apportioned 95% to
Johnson Bank and 5% to Keywell and Lefkofsky. Any recovery more
than $2 million would be apportioned 90% to Johnson Bank and 10%
No. 1-06-1432
to Keywell and Lefkofsky.
If Johnson Bank discontinued funding the malpractice
litigation, Keywell and Lefkofsky could, but were not required
to, pursue the litigation at their own expense. Should a
recovery be made under those circumstances, it would be
apportioned 90% to Keywell and Lefkofsky and 10% to Johnson Bank.
On March 29, 2006, the trial court granted Kirkland's
amended motion for summary judgment as to the assignment of the
legal malpractice claim but denied Kirkland's alternative motion
for partial summary judgment as to damages. The court found that
although the plaintiffs had not formally assigned the legal
malpractice claim to Johnson Bank, in effect, an assignment had
occurred. The court concluded that with the entry of the
receivership order on May 22, 2002, Johnson Bank became the party
entitled to any recovery in the malpractice litigation, as well
as the party in control of the malpractice litigation. Thus, the
court found a de facto assignment of the malpractice litigation
had occurred.
The court also relied on the cooperation agreement entered
into between Keywell, Lefkofsky, and Johnson Bank to determine
that a de facto assignment had occurred. The court reasoned that
if Keywell and Lefkofsky were still the "real parties in
interest" to the malpractice litigation, there would be no reason
to require their cooperation with routine case matters and trial
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preparation.
The trial court entered an order pursuant to Supreme Court
Rule 304(a) (210 Ill. 2d R 304(a)), finding there was "no just
reason for delaying either enforcement or appeal or both" of the
March 29, 2006, order. The plaintiffs filed a notice of appeal
from the trial court's grant of summary judgment. Kirkland filed
a notice of cross-appeal from the trial court's denial of its
motion for partial summary judgment.
ANALYSIS
The plaintiffs assert the trial court erred in granting
summary judgment in favor of Kirkland. The plaintiffs contend no
assignment to Johnson Bank of their legal malpractice claim
occurred because the receivership order entered by the Wisconsin
circuit court was not an assignment.
In its cross-appeal, Kirkland contends it was entitled to
partial summary judgment as to the amount of damages actually
suffered by the plaintiffs as a result of Kirkland's alleged
negligence. Kirkland contends that $10.1 million of the judgment
entered against the plaintiffs in the underlying litigation was
based on loan documents signed between the plaintiffs and Johnson
Bank before Kirkland was retained and therefore not subject to
challenge as a matter of law. Kirkland asks this court to
consider its cross-appeal only if we reverse the trial court's
entry of summary judgment.
No. 1-06-1432
"Summary judgment is appropriate only where 'the pleadings,
depositions, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment
as a matter of law.' " Governmental Interinsurance Exchange v.
Judge, 221 Ill. 2d 195, 214-15, 850 N.E.2d 183 (2006), quoting
735 ILCS 5/2-1005(c) (West 2004). The court "must construe all
evidence strictly against the movant and liberally in favor of
the nonmoving party." Larry Karchmar, Ltd. v. Nevoral, 302 Ill.
App. 3d 951, 956, 707 N.E.2d 223 (1999).
"On appeal from a grant of summary judgment, a reviewing
court's function is to determine whether the trial court properly
concluded that there was no genuine issue of material fact, and
if there was not, whether the judgment was correct as a matter of
law." People ex rel. Burris v. Memorial Consultants, Inc., 224
Ill. App. 3d 653, 656, 587 N.E.2d 34 (1992). This court reviews
the grant of summary judgment de novo. Governmental
Interinsurance Exchange, 221 Ill. 2d at 215.
I. The Legal Malpractice Claim
Legal malpractice claims are not assignable in Illinois.
Wilson v. Coronet Insurance Co., 293 Ill. App. 3d 992, 995, 689
N.E.2d 1157 (1997). This court has held that "sound public
policy prohibits the assignment of [legal malpractice claims]
since an assignee would be a stranger to the attorney-client
No. 1-06-1432
relationship, who was owed no duty by the attorney and who
suffered no injury from the attorney's actions." Clement v.
Prestwich, 114 Ill. App. 3d 479, 480-81, 448 N.E.2d 1039 (1983).
Here, the plaintiffs contend they have not assigned their
legal malpractice claim to Johnson Bank. The plaintiffs contend
the receivership order did "not constitute or effect an
assignment of the plaintiffs' malpractice claim." Rather, it
merely gave "Johnson Bank a lien upon the proceeds" of the
malpractice litigation. Additionally, the plaintiffs argue that
even if they had improperly assigned their legal malpractice
claim to Johnson Bank, the trial court erred by entering summary
judgment rather than merely voiding the assignment and allowing
the plaintiffs to continue the malpractice litigation.
A. The Receivership Order
The receivership order entered by the Wisconsin circuit
court appointed an executive at Johnson Bank as the supplemental
receiver of Brandon's property. The receivership order defined
property to include, "any and all proceeds from any actions,
claims or interests by or of [Brandon, Keywell, and Lefkofsky]
against or as to Kirkland & Ellis." It is undisputed that the
receivership order made Johnson Bank the party entitled to the
recovery in the malpractice litigation. The dispute between the
parties centers on whether the receivership order, in light of
the other circumstances present in this case, also effectively
No. 1-06-1432
assigned the legal malpractice claim to Johnson Bank.
The receivership order required Brandon, Keywell, Lefkofsky,
and their attorneys to consult with the receiver regarding
litigation strategy and settlement. The order provided for
resolution by the Wisconsin circuit court of any litigation
disputes between the parties. The Agreement of Cooperation
entered into between plaintiffs Keywell and Lefkofsky and Johnson
Bank, at the time of their settlement agreement, provided a
formula for the division of any recovery in the malpractice
litigation. The trial court below concluded that the combination
of the receivership order and the cooperation agreement gave
Johnson Bank such control over the malpractice litigation that a
de facto assignment occurred. Consistent with the trial court's
ruling, Kirkland contends "the undisputed facts demonstrate that
Johnson Bank has used its rights under the Receivership Order,
and its funding of this litigation, to direct major decisions
regarding the prosecution of this lawsuit." According to
Kirkland, Johnson Bank's priority claim to any recovery from the
malpractice suit and its control "over virtually all major
litigation decisions establishes a de facto assignment."
Neither our research nor that of either of the parties has
disclosed a case addressing the precise question before us: when
is de facto assignment of a legal malpractice claim established
as a matter of law? We look to cases involving the assignments
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in other areas of the law for guidance.
The legal landscape regarding what constitutes an assignment
is fairly clear. An assignment occurs when "there is a transfer
of some identifiable interest from the assignor to the assignee."
Klehm v. Grecian Chalet, Ltd., 164 Ill. App. 3d 610, 616, 518
N.E.2d 187 (1987). "Generally, no particular form of assignment
is required; any document which sufficiently evidences the intent
of the assignor to vest ownership of the subject matter of the
assignment in the assignee is sufficient to effect an
assignment." Stoller v. Exchange National Bank of Chicago, 199
Ill. App. 3d 674, 681, 557 N.E.2d 438 (1990). A valid assignment
"needs only to assign or transfer the whole or a part of some
particular thing, debt, or chose in action and it must describe
the subject matter of the assignment with sufficient
particularity to render it capable of identification." Klehm,
164 Ill. App. 3d at 616. The assignment transfers to the
assignee all the " 'right, title or interest of the assignor in
the thing assigned.' " Owens v. McDermott, Will & Emery, 316
Ill. App. 3d 340, 350, 736 N.E.2d 145 (2000), quoting Litwin v.
Timbercrest Estates, Inc., 37 Ill. App. 3d 956, 958, 347 N.E.2d
378 (1976). Thus, the assignee stands in the "shoes" of the
assignor. City of Chicago in Trust for the Use of Schools v.
Fischer, 52 Ill. App. 2d 55, 61, 201 N.E.2d 660 (1964).
More difficult is determining whether a de facto, rather
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than a formal, assignment has occurred. The "creation and
existence of an assignment is to be determined according to the
intention of the parties, and that intention is a question of
fact to be derived not only from the instruments executed by
them, but from the surrounding circumstances." Rivan Die Mold
Corp. v. Stewart Warner Corp., 26 Ill. App. 3d 637, 642, 325
N.E.2d 357 (1975); Northwest Diversified, Inc. v. Desai, 353 Ill.
App. 3d 378, 387, 818 N.E.2d 753 (2004). "Whether an assignment
has occurred 'is dependent upon proof of intent to make an
assignment and that intent must be manifested.'" Northwest
Diversified, Inc. v. Desai, 353 Ill. App. 3d 378, 387, 818 N.E.2d
753 (2004), quoting Strosberg v. Brauvin Realty Services, Inc.,
295 Ill. App. 3d 17, 30, 691 N.E.2d 834 (1998).
The language of the agreement between the plaintiffs and
Johnson Bank as set out in the receivership order and the
cooperation agreement is not disputed; however, the parties to
the agreement itself reject that an assignment occurred. It is
Kirkland, a stranger to the agreement, that contends the
agreement constituted a de facto assignment of the plaintiffs'
legal malpractice claim. Kirkland contends the receivership
order effectively assigned the legal malpractice claim to Johnson
Bank because the plaintiffs acknowledged that Johnson Bank was
the "real and only beneficiary" of the litigation, and under the
extant circumstances, the plaintiffs ceded control to Johnson
No. 1-06-1432
Bank over the litigation.
The plaintiffs contend to the contrary; the receivership
order provided no more than "a right to be heard" to the
lienholder, Johnson Bank, regarding the subject of the lien.
Brandon, Keywell, and Lefkofsky deny they ever intended to assign
their legal malpractice claim to Johnson Bank.
There are strong arguments on both sides of the issue.
The Wisconsin circuit court entered the receivership order
on May 22, 2002. At that time, the malpractice litigation had
been pending in Cook County for almost two years. If, as the
plaintiffs contend, this litigation was their most valuable
asset, they would presumably not enter into an agreement that
created an assignment void under Illinois law, thereby possibly
undoing the litigation the plaintiffs had filed two years prior.
If the receivership order were an assignment of the legal
malpractice claim, there would be no point in requiring Brandon,
Keywell, and Lefkofsky to consult with the receiver regarding
litigation strategy and settlement because the receiver, as
assignee, would presumably be entitled to make those decisions.
Although Connelly consulted with Johnson Bank's counsel and
recognized a fiduciary duty to Johnson Bank as the recipient of
any recovery in the malpractice litigation, he also acknowledged
that Brandon, Keywell, and Lefkofsky were his clients and it was
their interests that he sought to advance in this litigation.
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While the plaintiffs and their counsel admitted Johnson Bank's
counsel was vocal regarding the malpractice litigation, the
plaintiffs' counsel characterized the comments as suggestions.
In his deposition and again at oral argument, the plaintiffs'
counsel denied surrendering control of the malpractice litigation
to Johnson Bank or its counsel. Viewing the receivership order
in the light most favorable to the plaintiffs, it may only have
given Johnson Bank, through the receiver, the ability to delay
litigation decisions or settlement, as there was no guarantee the
Wisconsin circuit court would agree with Johnson Bank's position
on a particular issue should judicial intervention be required.
The receivership order, itself, did not give Johnson Bank the
final word in the case of a disagreement with the plaintiffs.
On the other hand, Kirkland focuses on the exchange between
Johnson Bank's counsel and the plaintiffs regarding the retention
of new counsel as evidence of Johnson Bank's control of the
litigation. While it is true Johnson Bank's counsel did not
forbid the hiring of the plaintiffs' initial candidate as
counsel, it is also clear Johnson Bank swayed the decision.
Indeed, Johnson Bank's counsel suggested the plaintiffs take the
disagreement before the Wisconsin circuit court. Of course, had
the legal malpractice claim been truly assigned to Johnson Bank,
it could have ended the discussion with a refusal rather than
suggest presenting the dispute to the Wisconsin circuit court.
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The record does not reveal whether Johnson Bank went before the
Wisconsin circuit court for a judicial determination of this
matter. The fact that Johnson Bank could not unilaterally decide
who to retain as new counsel indicates the receivership order did
not transfer all rights in the malpractice litigation from
Brandon, Keywell, and Lefkofsky to Johnson Bank.
The determination of the extent of the consultation with
Johnson Bank and whether that consultation became control is a
factual question that needs further development. The creation of
an assignment is determined according to the parties' intentions.
These intentions are a question of fact derived from the
instruments executed and the surrounding circumstances. Rivan
Die Mold Corp., 26 Ill. App. 3d at 642. The intent to make an
assignment must be manifest. Northwest Diversified, Inc. v.
Desai, 353 Ill. App. 3d at 387. Where the agreement at issue is
capable of being understood in more than one sense, "evidence of
extrinsic facts and circumstances" is necessary to determine the
intent and agreement of the parties. Rivan Die Mold Corp., 26
Ill. App. 3d at 642.
Viewing the receivership order in the light most favorable
to the plaintiffs, whether the receivership order created a de
facto assignment of the instant legal malpractice claim is a
question of fact not properly determined pursuant to a motion for
summary judgment on the state of the record before us.
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B. Remedy for an Improper Assignment
The parties have presented two lines of cases that provide
opposing consequences of an improper assignment.
The plaintiffs contend the proper remedy of an improper
assignment would be to void the assignment and allow them to
continue with the malpractice litigation. The plaintiffs rely on
Mallios v. Baker, 11 S.W.3d 157, 159 (Tex. 2000), and Weston v.
Dowty, 163 Mich. App. 238, 241, 414 N.W.2d 165, 167 (1987), for
the proposition that a former client's right to bring his own
cause of action for malpractice is not extinguished by the
invalid assignment of a legal malpractice claim.
Kirkland, on the other hand, argues nothing "could remove
the taint resulting from years of litigating under an
impermissible assignment" and that the proper remedy would be the
entry of a judgment against the plaintiffs. Kirkland relies on
Gurski v. Rosenblum & Filan, LLC, 276 Conn. 257, 278-79, 885 A.2d
163, 174 (2005), for the proposition that the proper remedy for
an improper assignment of a legal malpractice claim is to
terminate the litigation in the defendant's favor.
Because we conclude a question of fact remains whether the
plaintiffs' intentions underlying the receivership order and the
surrounding circumstances was to create an assignment of the
plaintiffs' legal malpractice claim, which must be determined
upon remand below, we do not express an opinion as to which of
No. 1-06-1432
the opposing lines of cases Illinois would follow.
II. Kirkland's Cross-Appeal
Kirkland contends the trial court erred by denying its
motion for partial summary judgment as to $10.1 million of the
judgment entered in the Wisconsin litigation based on loan
documents signed between the plaintiffs and Johnson Bank before
Kirkland was retained.
Ordinarily, a trial court's order denying a summary judgment
motion is not appealable as such an order is interlocutory.
Arangold Corp. v. Zehnder, 187 Ill. 2d 341, 357, 718 N.E.2d 191(1999). There are circumstances under which such an order may
warrant review; for instance, when the trial court has ruled on
cross-motions for summary judgment "on the same claim."
(Emphasis omitted.) Arangold, 187 Ill. 2d at 358.
The plaintiffs here did not file a cross-motion for summary
judgment on the partial damages issue. Also, the trial court
determined that the release as part of the loan documents signed
between the plaintiffs and Johnson Bank before Kirkland was
retained "was silent as to the waiver of any defenses in the
event the Plaintiffs were sued by Johnson Bank." Consistent with
the trial court's ruling, we find Kirkland's attempt to apportion
the default judgment amount between the damages proximately
caused by any negligence by Kirkland and the indebtedness of
plaintiffs to Johnson Bank flowing from the loan documents to be
No. 1-06-1432
unamenable to resolution by summary judgment. Finally, we are
remanding for further proceedings regarding whether a de facto
assignment occurred. Consequently, we see no purpose in further
addressing Kirkland's cross-appeal and we decline to do so. See
Price v. Hickory Point Bank & Trust, 362 Ill. App. 3d 1211, 1222,
841 N.E.2d 1084 (2006).
CONCLUSION
For the reasons stated above, we reverse the trial court's
judgment and remand for further proceedings consistent with this
decision.
Reversed and remanded.
WOLFSON and R. GORDON, JJ., concur.
REPORTER OF DECISIONS - ILLINOIS APPELLATE COURT
_________________________________________________________________
BRANDON APPAREL GROUP, INC., et al.,
Plaintiffs-Appellants-Cross-Appellees,
v.
KIRKLAND & ELLIS,
Defendant-Appellee-Cross-Appellant.
________________________________________________________________
No. 1-06-1432
Appellate Court of Illinois
First District, First Division
Filed: April 21, 2008
_________________________________________________________________
JUSTICE GARCIA delivered the opinion of the court.
WOLFSON and R. GORDON, JJ., concur.
_________________________________________________________________
Appeal from the Circuit Court of Cook County
Honorable David R. Donnersberger, Judge Presiding
_________________________________________________________________
For DEFENDANT - Michael L. Shakman
APPELLEE- Thomas M. Staunton
CROSS-APPELLANT Miller Shakman & Beem, LLP
180 North LaSalle Street, Suite 3600
Chicago, Illinois 60601
For PLAINTIFF - Michael P. Connelly
APPELLANT- William E. Snyder
CROSS-APPELLEE Connelly Roberts & McGiveny, LLC
One North Franklin Street, Suite 1200
Chicago, Illinois 60606