Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-09-04070/USCOURTS-ca7-09-04070-0/pdf.json

Parties Involved:
Childress Duffy Goldblatt
Appellee
Gas Technology Institute
Not Party
Anil Goyal
Appellant

Document Text:

*

After examining the briefs and the record, we have concluded that oral argument is

unnecessary.  Thus, the appeal is submitted on the briefs and the record.  See FED. R. APP. P.

34(a)(2)(C).

United States Court of Appeals

For the Seventh Circuit

Chicago, Illinois 60604

Submitted August 3, 2010*

Decided August 3, 2010

Before

ILANA DIAMOND ROVNER, Circuit Judge

DIANE S. SYKES, Circuit Judge

JOHN DANIEL TINDER, Circuit Judge

No. 09‐4070

ANIL GOYAL,

Plaintiff‐Appellant,

v.

GAS TECHNOLOGY INSTITUTE,

Defendant‐Appellee.

Appeal from the United States District

Court for the Northern District of Illinois,

Eastern Division.

05 C 5069

Rebecca R. Pallmeyer,

Judge.

O R D E R

Anil Goyal appeals the district court’s order enforcing an attorney’s lien in favor of

Childress Duffy Goldblatt, Ltd. (“CDG”).  CDG had represented Goyal in a suit against his

former employer, Gas Technology Institute (“GTI”) before it withdrew, purportedly

because of Goyal’s recalcitrance in negotiating a settlement.  Shortly after CDG’s

withdrawal, Goyal settled with GTI.  CDG moved to enforce an attorney’s lien for the

NONPRECEDENTIAL DISPOSITION

To be cited only in accordance with

Fed. R. App. P. 32.1

Case: 09-4070 Document: 39 Filed: 08/03/2010 Pages: 6
No. 09‐4070 Page 2

reasonable value of its services, and the district court granted the motion.  We affirm in part

and vacate and remand in part.

I.

In September 2005 Goyal sued GTI under the False Claims Act, 31 U.S.C. § 3730(h),

and Illinois common law, alleging that he was fired in retaliation for reporting a fraud

committed by his superiors.  In March 2006 Goyal retained CDG to represent him.  In the

retainer agreement, CDG agreed to represent Goyal on a contingency fee basis, with Goyal

to pay CDG 25% of any amounts recovered, through settlement or otherwise, plus costs.  As

relevant here, that agreement instructed Goyal that “[o]ne of your most important

obligations under this contract is not to unreasonably withhold your consent to a

settlement.”  If, by his conduct, CDG were required to withdraw, the agreement further

provided that CDG would be reimbursed for attorneys’ fees and costs and granted a lien on

the case in that amount:

Should it become necessary for us to withdraw as a result of your conduct, you

agree to reimburse all expenses and costs we have advanced or obligated our

firm to pay on your behalf, and to pay for the reasonable value of our legal

services up to the time of the withdrawal, and you hearby grant us a lien on your

case in that amount.     

The case was initially handled by CDG attorneys Roy Brandys and Ryan Haas, but after

both men left the firm, Christopher Mammel and Victor Jacobellis were assigned to the case.

In December 2007, after nearly two years of discovery, GTI moved for summary

judgment and the parties began their first round of settlement negotiations.  In preparation,

Mammel sent Goyal an e‐mail outlining his estimates as to Goyal’s possible recovery were

the case to proceed to trial.  Mammel estimated that under the worst‐case scenario, Goyal

would be awarded nothing and found liable on GTI’s counterclaim; under the “most likely”

scenario, he would be awarded approximately $2.25 million or more; and under the “best

case” scenario, he would receive $4.14 million or more.  Mammel further explained that the

best‐case scenario was “not likely” and that the uncertainty of the most likely scenario was

“still troubling.”  Mammel recommended that Goyal offer to settle for $1 million, noting

that the likelihood that Goyal would net $2 million was “very low.”  Goyal immediately

rejected this amount, responding that he wanted to net $2.25 million after attorneys’ fees.

Mammel objected to Goyal’s approach, stating, “I do not believe the financial results you

hope to achieve are reasonable under the circumstances of this case.”  Nevertheless,

Mammel sent GTI a demand letter for $4 million.

Case: 09-4070 Document: 39 Filed: 08/03/2010 Pages: 6
No. 09‐4070 Page 3

At the parties’ first settlement conference in March 2008, GTI responded with an

offer of $91,000.  The magistrate judge at one point addressed the possible outcomes at trial,

and noted that a jury in a best‐case whistleblower action could award as much as

$10 million, though such an award was unlikely and could be remitted by the court.  Goyal

rejected GTI’s offer.

In September 2008 the district judge denied GTI’s motion for summary judgment,

and discussions grew more strained between Goyal and Mammel regarding settlement.

Goyal informed Mammel that, based on the summary judgment outcome and a recent

favorable deposition, he wished to increase his demand.  Mammel tried to dissuade Goyal

from such a stance, stating that his initial demand of $4 million was more than double his

actual damages.  Believing that Goyal’s settlement expectations were unreasonable,

Mammel offered to modify CDG’s retainer agreement—reducing CDG’s attorneys’ fees to

$250,000—if Goyal reduced his settlement demand to $2.6 million.  Goyal rejected the

proposal, in part because CDG would not agree to modify his liability for attorneys’ fees if

CDG withdrew.  Instead he instructed Mammel to demand $4.6 million, noting that this

figure was “still less than 50% of what the Magistrate Judge stated that I could potentially

get.”  Mammel responded that Goyal’s increased demand was unreasonable, and advised

that “given the circumstances and risks of this case that exist, it is unreasonable to fail to

make a good faith effort to settle.”  

One week later Goyal e‐mailed Mammel, instructing him to relay immediately a new

settlement demand of $5.5 million.  Mammel initially balked, responding that the proposed

amount did not reflect the merits of his claims and represented an “extortion value.”  Goyal

met with Mammel the next day, and the two discussed the possibility of CDG’s withdrawal.

Goyal justified his increased amount, stating that his initial proposal of $4.6 million had not

included possible punitive damages or lost royalty income.  Mammel sent GTI a

$5.5 million settlement demand, to which GTI counteroffered $750,000.

At a second settlement conference in December 2008, the magistrate judge

recommended a $1.6 million settlement amount, which both parties rejected.  The next day,

GTI offered Goyal $1 million.  Mammel suggested that Goyal make a counteroffer, and

Goyal reiterated that he wanted $3 million “in my pocket.”  

Goyal and Mammel attempted to discuss a possible counteroffer, but their

communications continued to deteriorate.  Mammel informed Goyal that he could not

recommend a settlement counteroffer because Goyal was no longer consulting with him

about his settlement strategy or goals.  Goyal accused Mammel of simply wanting to “get

out of trial” and complained that Mammel’s handling of the case was deficient and had

Case: 09-4070 Document: 39 Filed: 08/03/2010 Pages: 6
No. 09‐4070 Page 4

weakened his bargaining position.  On December 15, 2008, Mammel moved to withdraw.

The district judge granted his request.  

In April 2009 Goyal and GTI reached a tentative settlement agreement for

$1.3 million.  CDG then notified Goyal that it claimed an attorney’s lien against any

settlement.  Goyal and GTI jointly moved to quash CDG’s lien.  The district judge denied

the motion, determining that the language of CDG’s retainer agreement with Goyal gave

rise to an equitable attorney’s lien under Illinois law.  

CDG moved to enforce the lien, arguing that its withdrawal had been justified

because Goyal had unreasonably refused to settle.  Under the terms of the retainer

agreement, CDG contended that Goyal owed it the full 25% of the settlement amount or the

reasonable value of its services.  The district judge referred the matter to the magistrate

judge, who granted the motion on the basis that CDG was entitled to the reasonable value

of its services worth $215,550.  Under Illinois law, the magistrate judge explained, an

attorney is entitled to reasonable compensation on a quantum meruit basis for services

provided before his justifiable withdrawal.  Citing Kannewurf v. Johns, 632 N.E.2d 711, 714

(Ill. App. Ct. 1994), the magistrate judge noted that an attorney’s withdrawal from a

contingent fee case is justified if a client unreasonably refuses to negotiate toward

settlement, causing a “complete breakdown” in the attorney‐client relationship.  The

magistrate judge found that Goyal had ignored CDG’s advice and that a simple review of

Goyal’s escalating settlement demands suggested unreasonableness.  Goyal, the magistrate

judge added, also misconstrued his comment that a jury “could award $10 million,” as his

statement was only “meant to emphasize the dramatic gamble parties take when they try a

case to a jury.”  Finally, the magistrate judge concluded, Goyal’s complaints that CDG had

mismanaged the case were irrelevant and unfounded.  In December 2009 the district judge

adopted the magistrate judge’s order in full.

II.

Before discussing the merits of Goyal’s appeal, we first address three threshold

arguments posed by CDG.  First, CDG argues that we lack jurisdiction because Goyal

appeals not a final decision of the district court but an order of the magistrate judge, and the

parties never consented to a magistrate judge presiding over the case.  See 28 U.S.C. § 636(c).

However, the final judgment in this case was entered not by the magistrate judge, but by the

district judge in her December 2009 order.  When a party proceeds pro se, as Goyal does

here, we liberally construe his filings to find the requirements of a notice of appeal satisfied,

Smith v. Barry, 502 U.S. 244, 248 (1992); Smith v. Grams, 565 F.3d 1037, 1041‐42 (7th Cir. 2009).

Because Goyal specified in his notice that he was appealing “from an order granting the

equitable lien,” we find no jurisdictional defect.

Case: 09-4070 Document: 39 Filed: 08/03/2010 Pages: 6
No. 09‐4070 Page 5

CDG next argues that Goyal waived any challenge to the magistrate judge’s

enforcement order because he did not file an objection to it as required under Federal Rule

of Civil Procedure 72(b).  CDG is correct that Goyal did not object to the magistrate judge’s

order, and we would normally conclude that such an omission waives the right to appeal.

See United States v. Hall, 462 F.3d 684, 688‐89 (7th Cir. 2006); United States v. Brown, 79 F.3d

1499, 1503‐04 (7th Cir. 1996); Video Views, Inc. v. Studio 21, Ltd., 797 F.2d 538, 539 (7th Cir.

1986).  But the magistrate judge’s order did not warn Goyal of the consequences of failing to

object, and thus we cannot treat his right to appeal as waived. See Provident Bank v. Manor

Steel Corp., 882 F.2d 258, 261 (7th Cir. 1989); United States v. Young, 585 F.3d 199, 201 (5th Cir.

2009); see also Hall, 462 F.3d at 688‐89; Brown, 79 F.3d at 1505; Ross v. United States, 910 F.2d

1422, 1432 (7th Cir. 1990).

Third, CDG contends that Goyal’s appeal must be dismissed for a failure to meet the

requirements for an appellate brief under Federal Rule of Appellate Procedure 28(a)(9).  We

disagree; Goyal’s pro se brief provides much more than a “generalized assertion of error.”

Anderson v. Hardman, 241 F.3d 544, 545 (7th Cir. 2001).  As required by Rule 28(a)(9), Goyal’s

brief takes issue with the magistrate judge’s findings on several issues and contains citations

to the record and cases as support for his contentions.  See FED. R. APP. P. 28(a)(9); Anderson

v. Litscher, 281 F.3d 672, 675 (7th Cir. 2002).

We turn next to Goyal’s arguments.  He contends first that the magistrate judge

clearly erred in finding that he unreasonably refused to settle, thereby justifying CDG’s

withdrawal.  See FED. R. CIV. P. 52(a); Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573

(1985); Allstate Ins. Co. v. Sunbeam Corp., 53 F.3d 804, 806 (7th Cir. 1995).  He asserts that the

magistrate judge failed to consider his settlement demands within the context of CDG’s

estimate that a jury award of $2.25 million was “most likely” and ignored evidence of

Mammel’s purported missteps, which he believes weakened his ultimate bargaining

position.  Based upon our review of the record, we cannot conclude that the magistrate

judge clearly erred in finding that Goyal’s actions justified CDG’s withdrawal.  An attorney

is entitled to compensation, “if his sole reason for withdrawing is because his clients do not

want to negotiate a case in the manner he thinks best,” causing a “complete breakdown” in

the attorney‐client relationship. Kannewurf, 632 N.E.2d at 714‐16.  First, the magistrate judge

adequately considered Goyal’s complaints about the quality of Mammel’s representation

but deemed those assertions unfounded, given Mammel’s success in fending off GTI’s

motion for summary judgment and obtaining increased settlement offers from the

company.  Furthermore, as the magistrate judge noted, Goyal repeatedly spurned

Mammel’s suggested demand proposals, which had the effect of fracturing the attorney‐

client relationship, making it unreasonably difficult for CDG to carry out its representation.

See McGill v. Garza, 881 N.E.2d 419, 422 (Ill. App. Ct. 2007); Kannewurf, 632 N.E.2d at 714‐16;

Leoris & Cohen, P.C. v. McNiece, 589 N.E.2d 1060, 1064‐65 (Ill. App. Ct. 1992); Reed Yates

Case: 09-4070 Document: 39 Filed: 08/03/2010 Pages: 6
No. 09‐4070 Page 6

Farms, Inc. v. Yates, 526 N.E.2d 1115, 1124‐25 (Ill. App. Ct. 1988).  Goyal tries to distinguish

his case from Kannewurf on grounds that his likelihood of winning at trial was substantially

higher and that he did not refuse to participate in negotiations.  But Goyal misses

Kannewurf’s broader holding, which is that an attorney may withdraw from a contingent fee

case and seek reasonable compensation for his services when a client’s actions in rejecting

his attorney’s professional judgment result in a complete breakdown of the attorney‐client

relationship.  See Kannewurf, 632 N.E.2d at 716; Leoris & Cohen, P.C., 589 N.E.2d at 1064‐65;

Reed Yates Farms, Inc., 526 N.E.2d at 1124‐25.  

Goyal also challenges the magistrate judge’s calculation of the reasonable attorney’s

fees due.  Goyal contends that the magistrate judge abused his discretion by accepting

CDG’s inflated hourly billing rate for attorney Victor Jacobellis.  Even though CDG invoiced

Jacobellis’s hourly rate at $300, it had billed an insurance company for Jacobellis’s work in a

related case at only $225.  The fees for Jacobellis’s services were substantial, given that he

had billed 138 hours to Goyal’s case.    

The magistrate judge erroneously relied on the parties’ retainer agreement to support

Jacobellis’s increased rate.  In his order, the magistrate judge broadly stated that the

attorneys’ billing rates were consistent with the rates mentioned in the retainer agreement.

But as Goyal notes, the retainer agreement did not include an hourly rate for Jacobellis, and

thus the magistrate judge’s reasoning is contrary to the record evidence and was an abuse of

discretion.  See id. at 716; see also Gastineau v. Wright, 592 F.3d 747, 748 (7th Cir. 2010).  We

therefore remand the case to the district court to consider the reasonable hourly rate for

Jacobellis in the first instance.  

Finally, Goyal also contends that the final invoice provided by CDG included a

number of charges for work unrelated to this case.  But Goyal raised this argument for the

first time in his reply brief, and thus we will not consider it.  See Bodenstab v. County of Cook,

569 F.3d 651, 658 (7th Cir. 2009).  

Accordingly, we AFFIRM the judgment of the district court with regard to the

enforcement of CDG’s attorneys’ lien and VACATE and REMAND for consideration of the

reasonable value of Jacobellis’s services.

Case: 09-4070 Document: 39 Filed: 08/03/2010 Pages: 6