Posted by Alan J. Brinkmeier

The Illinois Supreme Court in the opinion of Ready v. United/Goedecke Services, Inc. has ruled that apportionment of damages applies only to nonsettling defendants.  This decision answers a question that has been much litigated over the last decade.

The estate of a power plant worker Michael Ready filed this wrongful death lawsuit in Cook County regarding his 1999 death in Joliet. At the construction project, scaffolding fell on the decedent and he died as a result.  The complaint stated causes of action against the employer, the project’s general contactor and the scaffolding subcontractor.  After discovery completed but prior to trial the employer and general contractor settled with the decedent’s estate for a total of $1.113 million.  The settlements were given the circuit court’s approval without objection from the nonsettling subcontractor defendant, United Goedecke Services, Inc. The matter proceeded to trial against the sole remaining nonsettling defendant and the jury returned a verdict of $14.23 million which was reduced for the percentage of the decedent’s negligence found by the jury to be 35%.  Also, the verdict was reduced further by the amount already paid in settlement by the settling defendants which left the scaffolding subcontractor jointly and severally liable for $8.137 million.

The statute applicable to this litigation required that, concerning nonmedical damages, a defendant found less than 25% negligent could only be held severally liable, rather than jointly and severally liable as United/Goedecke Services, Inc. was in this verdict.  2-1117 Illinois Code of Civil Procedure (735 ILCS 5/2-1117).

United/Goedecke Services, Inc. appealed and argued that the verdict form regarding apportionment of fault should have included the settling defendants who were sued by the plaintiff but no longer in the case so that the jury could have made a determination as to the percentage of their fault as well. This might have enabled United/Goedecke Services, Inc. to be found only severally liable under the 25% rule. The appellate court agreed with this position.  It affirmed the damages amount, awarded a new trial and required that the new trial decide the question of apportionment of fault of all defendants including those that had settled with the estate.

In this important Illinois Supreme Court decision, the high court reversed the appellate court and agreed with the decision of the circuit court that tried the case.  The Court ruled the statutory language required apportionment of the defendants at trial at the time of the verdict, and precluded including any settling defendants on the verdict form. Consequently, apportionment of fault regarding nonmedical damages applies only to defendants remaining in the litigation at the time the matter goes to verdict.

In the ongoing saga of this appeal through the courts, yesterday, on June 30, 2009, the First Apellate District has ordered that a new trial be held.  Because of the exclusion of certain evidence about all the settling defendants during the trial, the First Appellate District has ordered that the matter be re-tried. Whether this ruling will be appealed remains to be seen.

If you would like more information about our commercial and municipal law litigation or appellate practice contact Alan Brinkmeier ajb@brinkmeierroth.com or Karl Roth kwr@brinkmeierroth.com at 312.419.9959 or visit our website at www.brinkmeierroth.com .

@ 2009 All Rights Reserved

Posted by Alan J. Brinkmeier 

In the tripartite relationship (the relationship between the insurer, the insured and the attorney retained by the insurer to represent the insured is commonly described as a “tripartite relationship”) the attorney has an attorney-client relationship with the insurer and the insured. In this relationship,  rules of professional conduct that control the lawyer’s conduct apply with respect to both the insured and the insurer. It has long been recognized that any attorney-client relationship encompasses the duty of the attorney to advise the client of progress in a case or controversy, and that duty is not altered by the presence of an insurance carrier to which the lawyer also reports. Rogers v. Robson, Masters, Ryan, Brumend and Belom, 74 Ill. App. 3d 467 (3d Dist. 1979)

While the code of professional responsibility governs the conduct of attorneys in Illinois, there are certain provisions of the code which are particularly relevant in the context of the tripartite relationship. So Rule 1.7(a) says that:

A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:

134 Ill. 2d Rule 1.7(a).

In the same vein, Rule 1.7(b) of the Professional Responsibility Code provides that:

A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer’s responsibilities to

another client or to a third person, or by the lawyer’s own interest, unless:

1) the lawyer reasonably believes the representation will not

be adversely affected, and

2) the client consents after disclosure.

134 Ill. 2d Rule 1.7(b).

In addition, under Rule 1.8(e):

A lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the

clients … unless each client consents after disclosure, including disclosure of the existence in nature of all the claims or pleas

involved and of the participation of each person in the settlement.

134 Ill. 2d Rule 1.8(e).

While not designed specifically to govern the tripartite relationship, the rules of professional conduct referenced above, have clear implications and application to an attorney representing an insured pursuant to an assignment from an insurance carrier. Given the fact that both the insurer and the insured constitute “clients” of the attorney, the provision of Rule 1.7(a) come into play if the interest of an insurer and its insured become adverse during the course of the attorney’s representation. Furthermore, the provisions of Rule 1.7(b) can be triggered in the tripartite relationship as well, in a situation in which the attorney feels constrained or materially limited in his ability to represent one of his clients (either the insurer or the insured) as a result of the lawyer’s responsibilities to his other client in the tripartite relationship. Consequently, in a situation where one course of action that the attorney takes may be favorable to the insurer but have a negative impact on the insured, Rule 1.7(a) would prohibit the attorney from maintaining the multiple client relationship unless the requirements of Rule 1.7(a)(1) and (2) are met. Thus in such a situation the lawyer must reasonably believe that the representation will not adversely affect his relationship with his other client in the tripartite relationship and the attorney must make a full disclosure and obtain consent from each of the clients to continue that representation. The provision of Rule 1.8(e) also lends itself to issues involving the tripartite relationship.

In considering Rule 1.8(e), a lawyer assigned by an insurer to represent it’s policyholder is not to participate in making a settlement of a claim unless both the insurer and insured consent to the settlement, after a full disclosure. Given that settlements will most often be paid by the insurer, there are exceptions to that general rule. It is becoming more and more commonplace in the professional liability claim setting against an attorney or physician for example, for the professional to balk at and even refuse settlement of a claim because of potential adverse affects on that professional’s reputation, or because settlements of medial malpractice claims are reported to the Illinois Department of Professional Regulation. Also, situations arise with some frequency where the size of a claim against an insured represents a potential excess exposure beyond the insured’s policy limit thereby potentially requiring the insured to also participate in funding the settlement. See e.g. Ivy v. Illinois State Police, 263 Ill. App. 3d 12 (1st Dist. 1994), Illinois Municipal League Risk Management Association v. Seibert, 223 Ill App. 3d 864 (4th Dist. 1992) and Illinois Masonic Medical Center v. Turegum Insurance Company, 168 Ill. App. 3d 158 (1st Dist. 1988). These situations give rise to special handling requirements that vary from the general rule, too.

If you have questions please feel free to contact Alan J. Brinkmeier at ajb@brinkmeierroth.com 312.419.9599 about the ethics of the tripartite relationship representation or visit our website www.brinkmeierroth.com.

@ 2009 All Rights Reserved

Brinkmeier Roth Law Group is proud to announce that its co-founder Alan J. Brinkmeier has been recognized as a Leading Lawyer in Illinois.   Distinction as a "Leading Lawyer" is the product of a rigorous selection process that focuses on recommendations from peers in the lawyer's particular practice area followed by extensive discussion with other highly regarded lawyers in the same area of practice.  Less than 5% of all lawyers in the State of Illinois are selected for this distinction.

A court battle involving a City of Chicago contractor that has been paid $140 million over the last decade to build police stations, schools and other public facilities is raising questions about how the city ensures that the businesses it hires keep their promises to subcontract work to companies owned by women and minorities.

By law, the city requires contractors to do so. It's a way to make sure women and minorities get their share of city business.

But it didn't work that way on the construction of a $10 million fire station in Rogers Park, a lawsuit claims -- an allegation that a city official says is being looked into.

A city contractor -- Castle Construction Corp. of Markham -- pulled a bait-and-switch on the construction of the firehouse, according to the lawsuit and other records. Castle promised city officials it would subcontract all of the masonry work on the job to a minority-owned company, for $1.5 million.

Instead, records show Castle hired a white-owned masonry company -- for $550,000 less.

Then, after most of the work was finished, Castle fired the white-owned subcontractor, LCS Construction of Downers Grove.

LCS president Kenneth Littwin Sr. is now suing Castle, saying the company has refused to pay more than $775,000 it owes for labor and materials.

Beside raising questions about city monitoring of contractors, the suit could also lead Mayor Daley's Public Building Commission to seek monetary damages from Castle for failing to live up to its commitment to give minority-owned companies 23 percent of the work on the Rogers Park fire station.

"We're troubled by the circumstances that appear before us right now,'' said Kevin Smith, spokesman for the building commission. "There are sufficient irregularities [that] we intend to look closely at the measures we have in place to make sure that the expectations we have of the general contractor and the use of minority subcontractors are met.''

Castle faces similar allegations involving work for the CTA, which fired the company last October, according to a CTA spokeswoman. Castle owes money to subcontractors it used to build two CTA equipment-washing facilities, including $216,000 to Littwin's company, according to its lawsuit filed by the Roth Law Group.

John Eannace, an attorney representing Castle president Robert Blum of New Lenox, declined to comment.

Castle and Blum could also be facing other legal problems. A federal grand jury recently subpoenaed three Illinois state agencies, seeking records on any contracts Castle and Blum got under ousted former Gov. Rod Blagojevich. Blum is a friend and business associate of former top Blagojevich adviser and campaign fund-raiser Christopher Kelly.

The firehouse deal dates to March 13, 2007. That's when the Chicago Public Building Commission awarded Castle two contracts -- $10 million to build the fire station and another $21 million to build a new 7th District police station in Englewood.

Castle committed to hiring George Anthony Garth Masonry, a minority-owned company, to work on both projects. Castle said it would pay Garth $1.5 million for the fire station and $3.8 million for the police station.

But Garth Masonry, faced with "financial difficulties,'' couldn't handle both projects, according to court records in the Littwin case. So Castle hired Littwin's company to do masonry work on the fire station that began in September 2007, records show.

Castle should have first gotten permission from the Public Building Commission before replacing Garth's company, according to a report last August by Trinal Inc., a minority-owned company the commission uses to monitor minority- and woman-owned business enterprise participation on city jobs.

"Castle never notified the PBC of any difficulties meeting its M/WBE commitments,'' the Trinal report says.

"There was no documentation provided to explain or support Castle's contention that it was impossible for G.A.G. Masonry to perform on the project. Additionally, there was no documentation provided to explain or support the 'numerous deficiencies' that led to terminating LCS Construction and the supposed re-engagement of G.A.G. Masonry as a replacement'' on the fire station project.

Castle maintains that Garth's company was always involved in the firehouse project, providing "quality control services and other construction management services'' while Littwin's workers laid the bricks, according to a letter Blum's son Anthony sent Littwin after Littwin's company was fired in November 2007 -- after nearly all of the masonry work was done.

Garth's attorney Jeff Corso said Garth was surprised to learn that Castle had hired someone else to do the masonry work on the fire station. "Castle had LCS do some of the work, and we complained about that,'' Corso said. "We went in and said, 'We're supposed to be on the job.'"

Littwin sees himself as having been "caught in the middle."

"And I'm still trying to collect my money,'' he said.

Most small business owners understand the importance of shielding themselves against personal liability arising from their corporate activities.  At The Roth Law Group, we counsel our corporate clients to observe recognized corporate formalities to avoid "piercing of the corporate veil" which could leave business owners personally liable for the liabilities of their businesses.

For example, many new business owners are not aware that comingling of personal and business funds can have dire consequences.  In order to avoid this, we suggest that our clients establish and fund business bank accounts before they conduct their first corporate transaction.  Case law has established that business owners who use their business accounts for personal expenses might be liable for comingling.   

Next, it is important that accounting records be well maintained and kept up to date and that the company be adequately capitalized so that it is able to cover its liabilities.  For instance, if a company is ordering on credit without the means of paying its suppliers, the owners might be later found personally liable if the business later defaults.  Also, this helps avoid comingling of accounts between business and personal.   

Insurance is also important and we recommend that our clients obtain a Commercial General Liability Policy as well as Director and Officer insurance prior to beginning operations.  Again, if your business is not adequately insured, the possibility of personal liability is very real.  

Finally, good record keeping and staying up to date with the Secretary of State is an ongoing obligation.  If a business fails to file its annual report, they may lose their "good standing" status, which essentially wipes away thier corporate shield.  

These examples are not intended to provide an exhaustive list of corporate formalities and business owners are encouraged to consult with a corporate attorney to make sure they are in compliance with all formalities recognized by law.     

 

The fundamental question facing creditors is whether or not the potential costs of a collection action are worth the amount they are owed by the debtor, and if they prevail in thier collection action, will they be able to collect?  The reality is that the costs of protracted litigation can sometimes outweigh the amount of the debt. 

The Illinois State Bar Association recently submitted proposed legistlation to the Illinois General Assembly that it hopes will encourage settlement by modifying the Illinois Interest Act and how it treats prejudgment interest.  Presently, the Illinois Interest Act provides interest at a rate of 5% annually on most written agreements prior to the entry of judgment.  Following the entry of judgment, interest accrues at the rate of 9% annually. 

The ISBA proposal is designed to encourage quicker settlements by allowing debtors to avoid incuring prejudgment interest, or alternatively denying recovery by creditors.  First, the proposed legislation would modify the manner in which prejudgment interest accrues by tying it to the average Treasury Bill rate for the year proceeding commencement of the collection action.  Next, within 120 days of answering a complaint, the debtor may make a settlement offer.  If the creditor does not accept the offer withing 30 days and is awarded an amount less than the settlement offer at trial, it will be barred from collecting prejudgment interest.  

We advise all of our clients to implement interest and attorney's fees provisions in their Terms and Conditions.  The reasons for this are two-fold: (1) attorney's fees are only recoverable if provided for by contract or statute; and (2) clearly set forth interest provisions allow them to maximize rates prior to entry of judgment.  Notably, these recomendations cannot insure the recovery of either attorney's fees or interest, becuase in many instances, the court has discretion in these areas.       

The proposed legislation appears below.  

§ 2-1303.1 (a) If a party seeks money damages in an action at law or in arbitration, prejudgment interest must be awarded from the date the party from whom money damages are sought is given written notice of the claim for money damages or the action or arbitration is filed, whichever is earlier, until the award or judgment is entered. Actions at law include counter-claims, third-party actions, and claims for contribution. The written notice of the claim for money damages must reference this Section and be tendered by (1) personal service by the sheriff or private process server; (2) certified mail, return receipt requested; or (3) any method in which delivery is documented and tracked by accepted business practices. The written notice may be tendered by party seeking money damages or his or her attorney and may be tendered to the party from whom money damages are sought, that party’s attorney, or that party’s liability insurer.

(b) The prejudgment interest rate will be calculated by the Comptroller using a rate equal to the average one-year constant maturity United States Treasury bill rate of the preceding calendar year before the cause of action is filed plus two percentage points. The Comptroller must calculate this rate and publish it on his or her official website by January 10th of every year.

(c) Any defendant may avoid paying prejudgment interest by making a written offer of settlement to plaintiff at any time after that defendant has entered an answer to a complaint, petition, or demand for arbitration but no later than 120 days after entering an answer. If the plaintiff does not accept that offer of settlement in writing within 30 days of his or her receipt of it, and the plaintiff’s award or judgment against that defendant is less than or equal to that offer of settlement, no prejudgment interest may be awarded against that defendant. The parties may agree in writing to extend the 120-day period for defendant to make a written offer of settlement.

(d) This Section does not apply to any of these parties or situations:

(1) A unit of local government, as defined Section 1 of Article VII of the Constitution, a school district, a community college district, or any other governmental entity.

(2) Actions in small claims.

(3) Claims for punitive damages.

(4) If the cause of action and its legal dispute are subject to a written contract or agreement between the litigants in which prejudgment interest is authorized by the contract or agreement entered into after January 1, 2010.

(5) If the cause of action and its legal dispute are governed by a more specific statute.

Section 99. This Act takes effect on Jan. 1, 2010 and applies to all actions accrued on or after that date. (Source: P.A. 85-907.)

Litigation is time consuming and expensive.  Well-worded contracts and standardized terms and conditions have proven effective in limiting or even disclaiming liability in certain commercial transactions.  Small business owners can also define venue to avoid trial in a foreign jurisdiction or even limit resolution to arbitration in an effort to avoid the uncertainty of a jury trial.  

One of your first orders of business for 2009 should be to "tune-up" your contracts and implement standardized terms and conditions.  Call us today to discuss these and other important litigation avoidance strategies.   

Suppose you obtain a judgment for money damages, either following trial or by default, what's next?  Most likely, the judgment debtor isn't going to hand you a check on the way out of the courthouse.  And should the debtor claim he/she is unable to pay the judgment, you would be well served to verify this information.  Enter the Citation to Discover Assets.

Creditors must obtain leave of court to issue a Citation to Discover Assets and the judgment debtor needs to be advised of his/her rights.  The Citation is held under oath and usually in the presence of a court reporter.  During the Citation, the judgment debtor will be required to produce copies of documents evidencing their financial condition.  These usually include tax returns, bank statements and any other information regarding assets owned by the debtor.  Once identified, the creditor can move to lien the debtor's property and eventually seek a turnover order from the court, thus effectively taking control of the given assets.  

Harsh penalties are possible for judgment debtors who fail to to comply with court orders setting Citations, so it is a post-judgment tool with teeth.

Contact us today for a free consultation at 312-419-9599 to discuss your collection issues.   

The Clerk of the Circuit Court of Cook County, Illinois has announced that a pilot program implementing electronic filing is to begin March 30, 2009.  Other counties have already implemented similar electronic filing programs and it has been used in federal courts since 2000.  The implications of allowing electronic filing are clear when it comes to the substantial time and cost savings lawyers will realize.   

The Roth Law Group will participate in the E-Filing Advisory/Leadership Committee begining January 8, 2009.  It is hoped that the plan will be approved and gain wide acceptance (or mandatory compliance) in order to move the Clerk's office into the 21st Century.       

Many business owners assume that acquiring a business through an asset purchase - as opposed to a stock purchase - automatically protects them from the pre-sale liabilities of the seller.  In reality, most states have measures in place that allow transfer of outstanding tax liability to the new owner;  regardless of whether the business was acquired through an asset or stock purchase.

In order to try to avoid inheriting the tax liability of the predecessor, business purchasers may wish to provide notice to the state department of revenue to obtain a tax clearance certification.  This is In addition to any bulk-sales notification usually required by the states to notify creditors of the sale.  

The Roth Law Group can help you navigate your business sale or acquisition.  Call us today for a free consultation.