Engle v. Foley and Lardner, LLP

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State: Illinois

Court: 1st District Appellate

Docket No: 1-08-2761 & 1-08

Case Date: 07/10/2009

Preview:FIFTH DIVISION July 10, 2009

Nos. 1-08-2761 & 1-08-2762 (consolidated)

CLYDE ENGLE, Plaintiff-Appellant, v. FOLEY AND LARDNER, LLP, Defendant-Appellee (Siobhan Engle, Intervenor-Appellant).

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Appeal from the Circuit Court of Cook County. No. 07 CH 17266

The Honorable Mary Anne Mason, Judge Presiding.

PRESIDING JUSTICE FITZGERALD SMITH delivered the opinion of the court: Plaintiff-appellant Clyde Engle (Engle) sought declaratory, injunctive and other relief against defendant-appellee Foley & Lardner, LLP (Foley), with respect to contractual agreements made between the parties regarding attorney fees. Intervenor-appellant Siobhan Engle (Siobhan), Clyde's wife and owner of stock at issue, intervened. Although Engle and Siobhan initially received a temporary restraining order to prevent Foley from foreclosing on certain assets, the trial court, following a hearing, denied their motion for preliminary injunction and dissolved the temporary restraining order.

Nos. 1-08-2761 & 1-08-2762 (cons.) Engle and Siobhan appeal, making several contentions of trial court error, including a failure to consider evidence that showed Foley breached its obligation and held their interest "hostage," a failure to order an accounting, a misunderstanding of the presumption of undue influence, a disregard of evidence that showed an unenforceable contract, and a failure to apply the proper standard on a motion for preliminary injunction. They ask that we reverse the trial court's decision and find that their motion for preliminary injunction should be granted "pending a decision on the merits," plus any costs or additional relief we deem proper. For the following reasons, we affirm and dismiss the instant appeal. BACKGROUND Engle hired Foley to represent him in a cause of action filed in the United States District Court for the Northern District of Illinois by the Illinois Insurance Commissioner (liquidator action), regarding an insurance company in which Engle held an interest. Initial damages in this suit were sought in the amount of $60 million; as the cause progressed, damages were estimated into the hundreds of millions of dollars. Engle and Foley's agreement was memorialized in a letter dated November 12, 1999, wherein Engle promised to pay Foley's invoices within 30 days. Later, Foley also began representing Engle in a separate action occurring in Delaware. By June 2000, Engle and Foley devised a new payment schedule, which resulted in discounted rates of service to Engle. However, even with these new rates, Engle fell behind in his payments of Foley's fees. In September 2001, Foley sent Engle a letter suggesting payment arrangements, including the possibility that Engle sell some of his assets to pay the charges in arrears. The letter also

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Nos. 1-08-2761 & 1-08-2762 (cons.) stated that Engle would pay reasonable costs of collection, including attorney fees, if Foley sued Engle for collection, and noted that if Engle failed to make payment, he would not object to Foley withdrawing from the pending liquidator action and the Delaware suit. Engle signed and returned the letter without any objection. By February 28, 2002, Engle had still not yet paid the outstanding balance he owed to Foley, nor any of the newly incurred fees for services performed between September 2001 and February 2002. On that date, Foley sent Engle another letter informing him of this and that the amount owed was now $1,014,147.25. Foley proposed another amended fee agreement, wherein Engle would agree to a plan to pay this principal amount owed by April 5, 2002 via "mutually acceptable instruments to enforce the payment schedule," and Engle would not object to Foley's withdrawal from the pending liquidator action if he did not make the payments.1 Again, Engle agreed and signed this letter without objection. Engle failed to make any payment by April 5, 2002. On May 2, 2002, Foley sent Engle a notice of Foley's intent to withdraw as counsel of record in the liquidator action and suggested that Engle retain new counsel within the next two weeks, with Foley facilitating the transition. Foley sent a copy of this notice to Gerald Tierney, an attorney who was in-house counsel to various Engle-related entities, kept an office at the Bank of Lincolnwood (which Engle and Siobhan own), and had filed an appearance in the liquidator action on behalf of several Engleowned entities involved. Soon thereafter, Foley sent Engle a letter stating that Engle had told Foley he would call to discuss payment arrangements, but that no call was ever received by

1

By this time, the Delaware suit had been resolved and was no longer pending. 3

Nos. 1-08-2761 & 1-08-2762 (cons.) anyone at Foley, and Foley's attempts to contact him had been unsuccessful. This letter also again advised Engle that if he was not going to make payment, he needed to arrange for new counsel. Foley sent a copy of this letter to Tierney. Later, Foley sent Engle, and again copied Tierney, a draft promissory note for the unpaid fee amount of $1,014,147.25, as well as a detailed copy of its billing statements for September 2001 through April 2002. Engle did not object to the amount of fees Foley charged or the quality of the work Foley performed. By July 2002, the liquidator action had been set for mediation. Foley sent Engle a letter reminding him that invoices for its work were unpaid and that Engle had yet to comment on the draft promissory note. Foley advised Engle that unless payment arrangements were in place by July 8, 2002, Foley would inform the mediator that it could not go forward with the mediation and would ask to withdraw from the liquidator action. Ultimately, Foley and Engle entered into several agreements regarding Engle's outstanding fees; these agreements were dated August 8, 2002. In them, Engle, acknowledging his indebtedness to Foley and that he had an opportunity to consult with independent counsel about his situation and the agreements, executed a promissory note in the amount of $1,126,861.14, as well as a general security agreement granting Foley a security interest in various assets. The note stated that Engle would make regular payments, with a maturity date of July 2005. At this time, Foley and Engle understood that some of the assets in which Foley was granted a security interest by Engle might be needed to settle the liquidator action. It was therefore agreed between the parties that, should this occur, Foley would release its security to the extent necessary to effectuate a settlement. Following these agreements, Foley continued to

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Nos. 1-08-2761 & 1-08-2762 (cons.) represent Engle in the mediation. The mediation continued through September 2002 but produced no result; the liquidator action proceeded and settlement discussions began in November 2002. In February 2003, the liquidator action was transferred by District Court Judge Amy St. Eve to Magistrate Judge Arlander Keys for settlement conference. On March 6 and 7, 2003, the parties, including Engle himself, appeared and presented the terms of settlement; Foley agreed that it would release its interest in certain of Engle's assets to effectuate the settlement, as promised. The parties were to finalize the settlement and return to court for status in April 2003. However, finalization of the settlement did not take place as anticipated, and Judge St. Eve set the cause for trial to begin in February 2004. In the summer of 2003, Foley discussed internally via a memorandum "possible actions relative to" Engle, who, according to the memorandum, had paid about $2.5 million over the course of Foley's representation but still owed over $1.5 million in unpaid fees. The memorandum noted that Foley's need to release some of its security interest provided "a basis for exerting some pressure on Engle" and, since Judge Keys had set a deadline of August 18, 2003 for completion of the settlement in the liquidator action, Foley's "maximum leverage point" would present itself in the next few weeks. The memorandum also recognized that Engle had signed an agreement allowing Foley to withdraw without objection and concluded by recommending that Foley "[e]xert as much pressure" as it could on Engle to retrieve its fees. The settlement was not completed according to Judge Keys' deadline; rather, the parties continued to appear for status hearings before Judge St. Eve. At one such hearing in early

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Nos. 1-08-2761 & 1-08-2762 (cons.) December 2003, it was discovered that Engle, who had previously disclosed for mediation purposes a 50% stock ownership interest in the Bank of Lincolnwood, really only had a 22% interest; during the pendency of the liquidator action, Engle had transferred the bulk of his stock interest to Siobhan.2 Judge St. Eve ordered Engle to personally appear before her in midDecember 2003. At this hearing, Judge St. Eve admonished Engle that the various parties to the liquidator action had been trying to settle the case for some time before her as well as Magistrate Keys, and that if the cause did not settle by February 2004, it would go to trial. Judge St. Eve also reminded Engle that Foley intended to file a motion to withdraw if the case did not settle and stated that she would most likely grant it. Engle acknowledged Foley's intent, but told the court that he could not be ready by February 2004. The court instructed him that he had two months to find new attorneys and that it would not continue the cause absent some emergency. On the same day, Foley presented the court with its motion to withdraw; Judge St. Eve continued it, stating that she would grant it at some point, but not while Foley was "this deep in settlement" and when she believed finalization of the settlement was so close. At a January 2004 status hearing, Foley moved the court to withdraw from its representation of Engle insofar as it related to preparation for trial in the liquidator action, but would remain as counsel for purposes of attempting settlement. The court granted Foley's motion. Thereafter, Engle and Foley discussed Foley taking an interest in Engle's stock in the

2

By the time the settlement agreement in the liquidator action was finalized, Engle's

ownership dwindled even more, to 6.2%. 6

Nos. 1-08-2761 & 1-08-2762 (cons.) Bank of Lincolnwood as substitute security for the interest Foley was releasing in order to effectuate settlement in the liquidator action. By February 2004, the parties returned before Judge St. Eve and told her that settlement in the liquidator action had been reached, with only a few minor points to be negotiated. Foley also informed the court that one of the fee issues had been resolved between it and Engle, with Foley taking the interest in the bank as discussed. Judge St. Eve then vacated the February trial date and retained jurisdiction over the matter until June 2004 to conduct a due diligence examination of Engle and obtain various orders of settlement. Once again, however, the parties were unable to meet the court's deadline for finalization of the settlement, partly because Engle owned less of the bank stock than he represented and partly because problems arose in connection with the fee/stock interest agreement between Foley and Engle. Judge St. Eve agreed to mediate the dispute between Foley and Engle and, thus, the court extended its period of retention of jurisdiction over the liquidator action. At this point, Engle was represented by attorney Howard Friedman, Siobhan was represented by attorney John McGinnis, and Foley was represented by attorney James Clark. In September 2004, to begin the mediation sessions with Judge St. Eve, which were attended by all the attorneys just mentioned, Clark wrote a letter to the court discussing Foley's position, which essentially noted that Foley was left unsecured by the current fees proposal because, following sale and distribution of profits to the main lienholders, Foley's share would amount to only $700,000. Clark's letter suggested that Engle waive his right to assert a setoff or counterclaim against Foley regarding the reasonableness of its fees or quality of its services, and proposed that

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Nos. 1-08-2761 & 1-08-2762 (cons.) Engle sign a waiver that he was aware of any conflicts in Foley continuing to represent him, that he waived these, and that he hired independent counsel (Friedman) to advise him. Neither Engle nor Friedman objected to any of these points, and Engle signed the conflict waiver. By the end of 2004, various agreements between Engle, Siobhan, the liquidator, Engle's creditors and Foley were finalized, thereby settling the liquidator action.3 As to Foley, Engle signed and executed a master payment agreement (MPA), two stock pledge agreements (one from Engle and the other from Siobhan), and a new promissory note. According to the MPA, Engle was to make a payment to Foley of $266,666.66 on a set "exchange date," a second payment of $133,333.33 on January 5, 2005, and then payments of $100,000 every three months over 3

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