Find Laws Find Lawyers Free Legal Forms USA State Laws
Laws-info.com » Cases » Illinois » 1st District Appellate » 2000 » Owens v. McDermott, Will & Emery
Owens v. McDermott, Will & Emery
State: Illinois
Court: 1st District Appellate
Docket No: 1-99-0677 Rel
Case Date: 07/28/2000

                                                                                                           SECOND DIVISION
                                                                                                            August 29, 2000

 

No. 1-99-0677

PERRY B. OWENS,

               Plaintiff-Appellant,

v.

McDERMOTT, WILL & EMERY, and
JON R. LIND,

               Defendants-Appellees.

)
)
)
)
)
)
)
)
)
)
Appeal from the
Circuit Court of
Cook County.





Honorable Lee Preston,
Judge Presiding.

JUSTICE McBRIDE delivered the opinion of the court:

The following appeal arises over the interpretation of a settlement agreement entered intoby plaintiff Perry B. Owens (Owens) and Owens' former company, Utilities Inc. (Utilities). Thesettlement agreement was reached after a dispute arose between Owens and the seniormanagement and directors of Utilities. Prior to his departure Owens was the chief executiveofficer of Utilities, a private water utility company he had formed in 1965. In 1988, Owensdivorced his wife and was represented in the divorce proceedings by Jon Lind of McDermott,Will and Emery. Lind and McDermott, Will and Emery (collectively defendants) are thedefendants in the instant action. As part of the divorce decree and per defendants' advice, Owens'former wife received 32,000 shares of Utilities stock, with the proviso that Owens be allowed theright of first refusal to purchase the stock should his former wife choose to sell it.

In 1996, eight years after his divorce, Owens was forced from his position as chief executive officer of Utilities by the board of directors and the remaining senior management. Toavoid litigation over his departure Owens entered into a series of three agreements whichoutlined his separation from Utilities. Defendants represented Utilities in this matter. One ofthese agreements was a Voting Agreement between Owens and Utilities. It is section 4 of theVoting Agreement that is at issue in the instant appeal. Section 4 of the Voting Agreement statesin pertinent part:

"Acquisition of Securities. During the Restriction Period, except(a) by way of stock dividend, stock split, reorganization,recapitalization, merger, consolidation or other like distributionsmade available to holders of Company Voting Securities generallyor (b) as specifically permitted by the terms of this Agreement, theSeparation Agreement or the Supplemental Share Agreement, theShareholder will not acquire, or agree, offer or seek or propose toacquire, directly or indirectly, alone or in concert with any otherPerson, by purchase or otherwise, or exercise any attribute ofbeneficial ownership (as defined on the date hereof in Rule 13d-3of the Securities and Exchange Commission under Section 13(d) ofthe Act) with respect to, any securities of the Company, or direct orindirect rights or options to acquire (through purchase, exchange,conversion or otherwise) any securities of the Company or any ofthe assets or businesses of the Company. The Shareholderacknowledges and agrees that any securities of the Companyacquired by the Shareholder after the date hereof in accordancewith this Section 4 will be subject to this Agreement and to theProxy."

The agreement was executed on December 23, 1996. In April 1997, Owens assigned hisright of first refusal to his nephew. Later that year, Owens' former wife sought to sell her sharesof Utilities and spoke with defendants about this matter. Defendants, acting on behalf ofUtilities, arranged for the removal of the stock restriction appearing on the stock certificateswhich were originally placed on all of his ex-wife's shares at the time of the divorce. Thesestocks were then sold to someone other than Owens. After learning of the sale of the stock,Owens rescinded the assignment of his right of first refusal to his nephew.

In October 1997, Owens filed a complaint against defendants alleging that they breachedtheir fiduciary duty to him as a former client and tortiously interfered with his right of firstrefusal to purchase his former wife's stock when they facilitated the removal of the restrictivestock legend from the stock certificates. In addition to these two counts, Owens originalcomplaint contained one count of slander against his former wife. The defendants filed a motionto dismiss Owens' complaint pursuant to 735 ILCS 5/2-619(a) (West 1996) and Owens' formerwife filed a motion to dismiss under section 2-615. 735 ILCS 5/2-615 (West 1996). On May 13,1998, defendants' motion to dismiss was granted with respect to counts one and two. Owens' ex-wife's count was also dismissed and is not the subject of this appeal. Owens subsequently filedan amended complaint. Thereafter, the trial court dismissed the amended complaint finding thatonce Owens entered into the Voting Agreement with Utilities, Owens could no longer exercisehis right of first refusal.

On appeal, Owens raises three claims. First, Owens claims that the Voting Agreementunambiguously gives him the right to purchase his former wife's shares of stock. Second, Owensalternatively asserts that the Voting Agreement is ambiguous and thus raised issues of genuinematerial fact that precluded dismissal of counts I and II of his complaint. Third, Owens contendsthat the claim for breach of fiduciary duty can survive independently of the trial court'sdetermination that Owens' right of first refusal ceased to exist after the signing of the VotingAgreement.

A motion to dismiss under 735 ILCS 5/2-619 (West 1996) "allow[s] for a thresholddisposition of questions of law and easily proven issues of fact." Jo Lou Mio v. Alberto-CulverCompany, 306 Ill. App. 3d 822, 824, 715 N.E.2d 309 (1999). Under section 2-619 a motion todismiss should be granted if after construing the pleadings and supporting documents in the lightmost favorable to the nonmoving party, the trial court finds that no set of facts can be provedupon which relief could be granted. Jo Lou Mio, 306 Ill. App. 3d at 825. This process does notrequire the trial court to weigh facts or determine credibility and as a result, this court does notdefer to the trial court's judgment. Jo Lou Mio, 306 Ill. App. 3d at 825. Therefore, upon reviewwe consider whether the existence of a genuine issue of material fact should have precluded thedismissal or, absent such an issue of fact, whether dismissal was proper as a matter of law. JoLou Mio, 306 Ill. App. 3d at 825. Like motions to dismiss under 735 ILCS 5/2-615 (West 1996),we review motions to dismiss under 2-619 de novo. Lykowski v. Bergman, 299 Ill. App. 3d 157,164, 700 N.E.2d 1064 (1998).

Although Owens characterizes the first issue as whether he waived his right of firstrefusal to purchase his former wife's stock, we believe the question is whether the VotingAgreement constituted a contract that once entered into, barred Owens from acquiring any stockin Utilities during the 10-year limitation period set out in that agreement. In construing theprovisions of a contract the court's primary objective is to give effect to the intent of the parties atthe time the contract was made. Pennsylvania Life Insurance Company v. Pavlick, 265 Ill. App.3d 526, 529, 637 N.E.2d 1160 (1994). Such intentions are to be ascertained from the language ofthe contract. Omnitrus Merging Corporation v. Illinois Tool Works, Inc., 256 Ill. App. 3d 31, 34,628 N.E.2d 1165 (1993). If the language in the contract is clear and unambiguous, the judgemust determine the intention of the parties "'solely from the plain language of the contract' andmay not consider extrinsic evidence outside the 'four corners' of the document itself." Omnitrus,256 Ill. App. 3d at 34. See Meyer v. Miglin, Inc., 273 Ill. App. 3d 882, 888, 652 N.E.2d 1233(1995) (stating "[i]f the contract terms are unambiguous, the parties' intent must be ascertainedexclusively from the express language of the contract, as a matter of law"). Moreover, " '[c]learand unambiguous contract terms must be given their ordinary and natural meaning' and contractsmust be interpreted 'as a whole giving meaning and effect to each provision thereof.' " Omnitrus,256 Ill. App. 3d at 34 quoting Srivastava v. Russell's Barbecue Inc., 168 Ill. App. 3d 726, 730,523 N.E.2d 30 (1988).

Owens argues that the failure of Utilities to address his right of first refusal in the VotingAgreement demonstrated that:

"neither [plaintiff] nor Utilities, Inc. intended to compromise,abrogate or limit any existing contractual right to acquire UtilitiesInc. stock that [plaintiff] owned but only intended to preclude[plaintiff] in the future from entering into new contracts oragreements to acquire stock in which he had no then existinginterest or rights."

We disagree and find that this is exactly what section 4 of this agreement sought to do. Specifically, section 4 states in pertinent part that:

"the Shareholder will not acquire, or agree, offer or seek or proposeto acquire, directly or indirectly, alone or in concert with any otherPerson, by purchase or otherwise, or exercise any attribute ofbeneficial ownership *** with respect to, any securities of theCompany, or direct or indirect rights or options to acquire *** anysecurities of the Company or any of the assets or businesses of theCompany."

The language of this section is clear and unambiguous in stating that Owens is absolutelyprohibited from acquiring any securities of any kind with respect to Utilities per his assent to thisagreement. Despite the plain language of this agreement Owens contends that the foregoinglanguage does not prohibit the acquisition of his former wife's shares. This assertion is based, inpart, upon certain correspondence between Owens and defendants. In one particular letter,defendant Jon Lind wrote to Owens and explained that due to his entrance into the VotingAgreement, Utilities was no longer obligated to honor the restrictive stock legend placed on theshares of Owens' former wife after his divorce. Lind accompanied his letter with a pre-draftedwaiver for Owens' signature. The waiver stated that Owens relinquished his right of first refusalto purchase his former wife's shares of Utilities originally granted to him by his divorce decree. Lind also explained that although Utilities was removing the restrictive stock legends, suchaction did not necessarily vitiate his former wife's responsibility to offer Owens a right of firstrefusal to repurchase her shares. Lind followed this letter with another one approximately oneweek later, reaffirming that Utilities did not need to honor the restrictive stock legends placed onthe shares of Owens' former wife. Once again however, Lind wrote separately about theobligation of Owens' former wife to offer Owens a right of first refusal and about Utilities'removal of the restrictive stock legends from these shares. Additionally, Owens attempts to relyon a letter from Utilities President Lawrence Schumacher to Owens' former wife. In that letterSchumacher explains that although the restrictive stock legends have been removed from hershares of Utilities, such action does not necessarily free her from the obligation to offer Owens aright of first refusal to repurchase her shares, per her previous divorce decree.

According to Owens, defendants' correspondence supports his argument that the exerciseof his right of first refusal was not barred by his execution of the Voting Agreement. Instead,Owens argues the foregoing correspondence is evidence that the intent behind the VotingAgreement was to limit his future acquisition of securities in Utilities. This line of argument ismisplaced however, because evidence outside the four corners of a contract will not beconsidered in construing an unambiguous contract. In order for this court to go beyond the fourcorners of a contract we must first find that an ambiguity exists with respect to its construction. Hillenbrand v. Meyer Medical Group, S.C., 288 Ill. App. 3d 871, 876, 682 N.E.2d 101 (1997)(the issue of contract interpretation to be decided initially by the trial court from an examinationof the instrument as a whole before any extrinsic evidence is considered is whether the contract isambiguous). After a review of section 4 of the Voting Agreement we do not find that the VotingAgreement is ambiguous. Furthermore, we note that the instant agreement contains anintegration clause which states:

"This agreement (including the proxy and together with theSeparation Agreement and the Supplemental Share Agreement)contains the entire understanding of the parties hereto with respectto the matters covered hereby and may be amended only by anagreement in writing executed by the Company and theShareholder."

The presence of this clause is significant because it clearly indicates the parties' desire that theagreement be interpreted solely according to its own language. "Moreover, where partiesformally include an integration clause in their contract, they are explicitly manifesting theirintention to protect themselves against misinterpretations which might arise from extrinsicevidence." See Air Safety, Inc. v. Teachers Realty Corp., 185 Ill. 2d 457, 464, 706 N.E.2d 882(1999). Thus, it would seem that this clause was included to prevent the very situation that hasnow arisen, which is the attempt by Owens to acquire further securities of Utilities after hisofficial departure.

As a chief executive officer, Owens was hardly an unsophisticated party in entering thethree agreements dictating his departure. Before entering into the Voting Agreement, Owens wasfree to negotiate the preservation of his right of first refusal in acquiring the 32,000 shares ofstock previously distributed to his wife during his divorce. He did not. Accordingly, we will notconsider extrinsic evidence of Owens' previously granted right of first refusal, hiscorrespondence with Jon Lind or the fact that the right of first refusal did not appear in theVoting Agreement to determine the intent behind this agreement. Such a determination would beclearly contrary to the plain language of the agreement itself. Thus, we look only to the fourcorners of the agreement itself and find that when Owens entered into this agreement hecontracted away the right to purchase his former wife's stock during the proscribed limitationperiod. See Omnitrus, 256 Ill. App. 3d at 34.

In his reply brief, Owens argues that when the Separation and Consulting Agreement areread in conjunction with the Voting Agreement, it is clear that section 4 of the Voting Agreementwas never intended to prohibit Owens' acquisition of Utilities stock through his right to purchaseas articulated in his divorce decree. In support of this argument Owens refers this court tosections 4(e) and (g) which each provide Owens with 10,000 and 6,071 shares of Utilities stockrespectively. Based upon the issuance of this stock Owens further argues that:

"the main purpose of the Voting Agreement was not, contrary tothe McDermott Defendant's assertion, to restrict Perry's acquisitionof shares of stock; it was to control (through a broadly wordedproxy) how he voted all of his shares - hence, the name 'VotingAgreement' and not 'No Acquisition Agreement.' "

Once again, we disagree. Both clause (e) and (g) condition the acquisition of these sharesupon the restrictions outlined in the Voting Agreement. As Owens correctly notes, the VotingAgreement in part seeks to control how Owens will vote his shares of Utilities as part of hissettlement for departing Utilities. Based upon the language of Section 4, however, we also findthat the Voting Agreement also seeks to control Owens' acquisition of securities in Utilities aswell. As we have already discussed, Section 4 specifically states that Owens shall not acquireany securities except as permitted by the terms of the Voting Agreement, Separation Agreementor the Supplemental Share Agreement. Although Utilities did in fact allow Owens to acquirestock in its company, it did so under circumstances it controlled. We reiterate that Section 4unequivocally states that Owens:

"will not acquire or agree, offer or seek or propose to acquire,directly or indirectly, alone or in concert with any other Person, bypurchase or otherwise, or exercise any attribute of beneficialownership with respect to, any securities of the Company, or director indirect rights or options to acquire any securities of theCompany or any of the assets or businesses of the Company."

Therefore, contrary to Owens' assertion, we find that the instant agreement controls not only themanner in which Owens votes his shares of Utilities, but also prohibits the acquisition of anysecurities of Utilities for the 10-year limitation period set out in the agreement.

Alternatively, Owens argues that the Voting Agreement is ambiguous and gives rise togenuine issues of material fact. Generally, a contract is deemed to be ambiguous if it issusceptible to more than one reasonable construction. American States Insurance Company v.A.J. Maggio Company, Incorporated, 229 Ill. App. 3d 422, 426-27, 593 N.E.2d 1083 (1992). If,after considering the language of an agreement, a court determines that the document isambiguous, the court may then look beyond the agreement to ascertain the intent of the parties. Hillenbrand, 288 Ill. App. 3d at 876. It is not ambiguous however, if the court can determine itsmeaning without any guide other than a knowledge of the simple facts on which the meaning ofthe language depends. American States, 229 Ill. App. 3d at 427. The determination of whethera contract is ambiguous is an issue of law for the court. Meyer, 273 Ill. App. 3d at 888. Owensmaintains that the Voting Agreement is susceptible to more than one meaning by virtue of theabove letters subsequent to entering into this agreement. According to Owens, these lettersdemonstrate that the intent in drafting the Voting Agreement did not contemplate a prohibitionagainst Owens from exercising his right of first refusal, since the correspondence from Lindrequested a waiver from Owens with respect to this matter.

Given the import of the letters from both Lind and Schumacher, Owens' interpretation ofwhat Utilities believed it could do and what effect its own actions had on Owens' right of firstrefusal is not unreasonable. Owens, however, has not established the first prong required thatwould allow such extrinsic correspondence to be admitted; that is, establishing that the contract,or in this case, the Voting Agreement, is susceptible to more than one meaning or is obscure inmeaning through indefiniteness of expression. Meyer, 273 Ill. App. 3d at 888 quoting Wald v.Chicago Shippers Association, 175 Ill. App. 3d 607, 529 N.E.2d 1138 (1988). Instead, Owensskips this step and simply moves to the next prong of the analysis by arguing that once this courtlooks beyond the Voting Agreement's four corners, the extrinsic evidence of defendants'correspondence demonstrates an intent contrary to the language in the Voting Agreement. Aswe have previously pointed out, we will not consider extrinsic evidence outside the four cornersof a contract if the terms of that contract are clear and unambiguous. Omnitrus, 256 Ill. App. 3dat 34. Rather, we determine the intent of the parties from the language of their agreement alone. American States, 229 Ill. App. 3d at 427; see Meyer, 273 Ill. App. 3d at 888 (holding that "[i]fthe contract terms are unambiguous, the parties intent must be ascertained exclusively from theexpress language of the contract as a matter of law"). We note that whatever intent Owens mayhave envisioned at the time the contract was executed is immaterial, provided the termscontained therein are unambiguous. American States, 229 Ill. App. 3d at 427. Moreover, acontract is not rendered ambiguous simply because one party does not agree to its currentconstruction. American States, 229 Ill. App. 3d at 426; Meyer, 273 Ill. App. 3d at 888(disagreement between parties regarding how to interpret the terms of a contract does not in itselfrender the contract ambiguous).

Contrary to the four corners rule, Owens argues this court should provisionally considerthe parole evidence of the letters to determine if the Voting Agreement is in fact ambiguous. Therationale behind the provisional admission of parole evidence is that in some cases it may benecessary to admit such evidence to show that an agreement, although clear on its face is actuallyambiguous. See Bank of America National Trust and Savings Association v. Schulson, 305 Ill.App. 3d 941, 950-51, 714 N.E.2d 20 (1999). The provisional admission of parole evidence,however, may only be used to clarify the definition of terms in determining whether a contract isambiguous; and where the terms are clear and unambiguous, parole evidence may not beconsidered to vary the meaning of those terms. Schulson, 305 Ill. App. 3d at 951-52. Moreover,as defendants correctly note, our supreme court in Air Safety expressly rejected the provisionaladmission approach where an agreement contains an explicit integration clause. Air Safety,185Ill. 2d at 464.

We find that the meaning of the Voting Agreement can be gleaned from a simpleknowledge of the facts on which the meaning of the contract language depends. See ForestPreserve District of Du Page County v. Brookwood Land Venture, 229 Ill. App. 3d 978, 982, 595N.E.2d 136 (1992). For example, section 4 of Utilities Voting Agreement clearly states that perOwens' settlement agreement he agrees not to acquire "any securities of the Company." Asdefendants note in their brief "[t]he word 'any' has broad and inclusive connotations." People vex rel. Scott v. Silverstein, 94 Ill. App. 3d 431, 434, 418 N.E.2d 1087 (1981). Although weacknowledge that in Scott the interpretation of the word "any" took place in the context of apreliminary injunction, we nonetheless find its interpretation relevant to the instant case. Wealso note that at least one definition found in Black's Law Dictionary states that the term "any" assynonymous with "either, every or all." Black's Law Dictionary 94 (6th ed. 1990). In instanceswhere the terms of a contract are clear and unambiguous, they must be enforced as written, andno court can rewrite a contract to provide a better bargain to suit one of the parties. Barille v.Sears Roebuck and Co., 289 Ill. App .3d 171, 175, 682 N.E.2d 118 (1997). Such is this casehere. Therefore, we do not find the term "any" to require any clarification. As a result, wedecline Owens' invitation to alter the meaning of this Voting Agreement by construing this termin a fashion that would clearly be contrary to its intent, in addition to its plain and obviousmeaning. Forest Preserve, 229 Ill. App. 3d at 982. Thus, we reject Owens' request toprovisionally admit the extrinsic evidence of these letters.

We next turn to the question of whether section 4 of the Voting Agreement precludedOwens from assigning his right of first refusal to purchase the 32,000 shares of Utilities stock. Inhis brief, Owens argues that, at most, the Voting Agreement prevents him from acquiring stockin Utilities but does not prohibit another from acquiring the same stock if the right to acquire itwas assigned prior to its sale. Additionally, Owens argues that "if Jon Lind had not breached hisfiduciary duties, and if [plaintiff's former wife] had complied with her obligations and offered herstock to [plaintiff], then [plaintiff's] assignee Steve Keefer could have purchased [plaintiff'sformer wife's] stock." We fail to follow this line of reasoning.

"As a general rule, an assignment is a transfer of some identifiable property, claim orright from the assignor to the assignee. [Citation.] The assignment operates to transfer to theassignee all the right, title or interest of the assignor in the thing assigned. [Citation.]" Litwin v.Timbercrest Estates, Inc., 37 Ill. App. 3d 956, 958, 347 N.E.2d 378 (1976). A basic principal oflaw applicable to all assignments is that they are void unless the assignor has either actually orpotentially the thing which he attempts to assign. Litwin, 37 Ill. App. 3d at 958. Moreover, theassignee can obtain no greater right or interest than that possessed by the assignor. Litwin, 37 Ill.App. 3d at 958. The question then becomes what did Owens assign to his nephew. Defendantsmaintain that after Owens entered into the Voting Agreement he was precluded from assigninghis right of first refusal since the Voting Agreement, a valid contract, specifically prohibitedOwens' acquisition of any securities in Utilities. We agree.

Owens entered the Voting Agreement in December 1996. In April 1997, Owensattempted to assign his right of first refusal to his nephew. It is unclear from the facts whetherOwens actually intended to assign this right or intended to assign it and then rescind it in anattempt to circumvent the restrictions outlined in the Voting Agreement. In either event, we findthat the assignment was void since Owens attempted to assign his right of first refusal afterentering into the Voting Agreement. We have already noted that the Voting Agreementcontractually prohibited Owens from acquiring any stock of Utilities. Thus, after the VotingAgreement was executed and for the limitation period, Owens could not exercise his right of firstrefusal to purchase his former wife's stock. As we have just indicated, in order for a validassignment of right to occur the assignor must either actually or potentially have the thing whichhe attempts to assign. In this case Owens had neither. Moreover, an assignee cannot acquire agreater right or interest than the assignor possessed. Reimers v. Honda Motor Co., Ltd., 150 Ill.App. 3d 840, 843, 502 N.E.2d 428 (1986). In light of the foregoing, we reject Owens' contentionthat defendants tortiously interfered with the assignment of his right of first refusal to hisnephew, since Owens failed to possess the right he wished to assign.

Although not articulated clearly, it appears that Owens' next claim asserts both a claim oflegal malpractice as well as a breach of fiduciary duty. Generally, a claim against an attorney forbreach of fiduciary duty falls under the rubric of professional malpractice. Hanumadass v.Coffield, Ungarretti and Harris, 311 Ill. App. 3d 94, 99-100, 724 N.E.2d 14 (1999). To properlystate a cause of action for legal malpractice a plaintiff must allege in his complaint:

"(1) the existence of an attorney-client relationship that establishesa duty on the part of the attorney; (2) a negligent act or omissionconstituting a breach of that duty; (3) proximate cause establishingthat "but for" the attorney's negligence, the plaintiff would haveprevailed in the underlying action; and (4) damages." Serafin v.Seith, 284 Ill. App. 3d 577, 586-87, 672 N.E.2d 302 (1996).

The proximate cause element of this claim requires that the plaintiff must plead factssufficient to show that but for the attorney's malpractice, the client would have been successful inthe undertaking the attorney was retained to perform. Serafin, 284 Ill. App. 3d at 587. Thus,"damages will not be presumed, and the client bears the burden of proving he suffered a loss as aresult of the attorney's alleged negligence." Serafin, 284 Ill. App. 3d at 587.

A fiduciary relationship exists between an attorney and his client as a matter of law. Doev. Roe, 289 Ill. App. 3d 116, 122-23, 681 N.E.2d 640 (1997). Once such a relationship isestablished:

"the attorney-client relationship gives rise to certain duties owed bythe attorney to the client without regard to the specific terms of anycontract of engagement. Among the fiduciary duties imposed uponan attorney are those of fidelity, honesty, and good faith in both thedischarge of contractual obligations to, and professional dealingswith, a client. [Citation.] When, in the course of his professionaldealings with a client, an attorney places personal interests abovethe interests of the client, the attorney is in breach of his fiduciaryduty by reason of the conflict. [Citation.] Breach of fiduciary dutyby an attorney gives rise to an action on behalf of the client forproximately-resulting damages. [Citation.]" Doe, 289 Ill. App. 3dat 122-23; see also Morris v. Margulis, 307 Ill. App. 3d 1024,1033, 718 N.E.2d 709 (1999).

Owens premises his breach of fiduciary duty count on defendants' alleged violation ofRule 1.9 of the Illinois Rules of Professional Conduct. Based upon this claim, Owens believeshe is entitled to disgorgement of defendants' fees with respect to the services rendered inremoving the restrictive stock legend, as well as the attorney fees collected regarding defendants'prior representation of Owens in the divorce proceedings. Rule 1.9 states:

"(a) A lawyer who has formerly represented a client in a matter shall not thereafter:

(1) represent another person in the same or a substantially related matter in whichthat person's interests are materially adverse to the interests of the former client,unless the former client consents after disclosure; or

(2) use information relating to the representation to the disadvantage of the formerclient, unless:

(A) such use is permitted by Rule 1.6; or

(B) the information has become generally known." 134 Ill.2d R. 1.9.

There is no question that defendants previously represented Owens during his divorce. During the divorce proceedings, while represented by defendants, Owens relinquished 32,000shares of Utilities' stock to his wife. Owens was also advised by defendants to include a stockrestriction that provided for Owens to have the right of first refusal in purchasing this stockshould his wife choose to sell it.

Based upon the facts before us, it seems clear that when Owens left Utilities in 1996, itwas under less than amicable circumstances. At that time, defendants represented Utilities whomade it clear through the settlement package and in particular by the terms of the VotingAgreement that it wanted Owens to be able to exert little or no control over its operations. Fromthe defendants allegations it can certainly be argued that the defendants' previous representationof Owens in the divorce proceedings, the creation of the right of first refusal and the placement ofa restrictive stock legend were substantially related to defendants' later representation of Utilitiesin the ouster of Owens and particularly in counseling Utilities to remove the very same restrictivestock legend. Given the foregoing, it can also be argued that Owens' interests were materiallyadverse to Utilities at the time of the removal of the restrictive stock legend. As a result, at leastaccording to the allegations, defendants may have breached Rule 1.9.

The question then becomes whether Owens would be entitled to damages if heestablished that defendants breached Rule 1.9. Without more, we conclude that he is not. SeeDoe, 289 Ill. App. 3d at 129 (discussing that even if an attorney breached his fiduciary duty to hisplaintiff by engaging in a sexual relationship, the plaintiff would still be required to show somecompensable damage). The mere fact that an attorney may have violated professional ethics doesnot, in and of itself, give rise to a cause of action for damages. Doe, 289 Ill. App. 3d at 128. Although the rules of professional conduct do not establish a separate duty or cause of action,they certainly would be relevant in a legal malpractice claim. See Nagy v. Beckley, 218 Ill. App.3d 875, 879, 578 N.E.2d 1134 (1991) (holding "while the rules of legal ethics may be relevant tothe standard of care in a legal malpractice suit [citation], they are not an independent font of tortliability").

Owens' claim for damages alleges that he was denied the opportunity to exercise his rightof first refusal when defendants assisted Utilities in removing the stock restriction from hisformer wife's stock certificates. As a result, Owens alleges that under a theory of disgorgementhe is entitled to the fees defendants collected because of their representation of Utilities as wellthe fees collected from Owens during his previous representation. As we have already discussedin detail, Owens' ability to exercise his right of first refusal was a right that he contracted away bythe terms and conditions of the Voting Agreement. Significantly, Owens' entrance into thisagreement occurred well before defendants took any action to remove the restrictive legend fromthe stock of Owens' ex-wife. Thus, although we do not expressly reject Owens' claim thatdefendants may have violated Rule 1.9, we do not find that these allegations proximately causedOwens' inability to exercise his right of first refusal to purchase his former wife's shares ofUtilities' stock. It was Owens' entry into the Voting Agreement which prohibited him fromexercising the right of first refusal. Therefore, we reject Owens' claim that the breach offiduciary duty count could survive under these facts. Accordingly, the decision of the trial courtto dismiss the amended complaint against defendants is affirmed.

Affirmed.

COUSINS, P.J., and McNULTY, J., concur.

Illinois Law

Illinois State Laws
Illinois Tax
Illinois Court
Illinois Labor Laws
    > Minimum Wage in Illinois
Illinois Agencies
    > Illinois DMV

Comments

Tips