ORDER
For the reasons stated above, the court resolves the Gallaghers’ motion to adjudicate and

void CMG’s charging lien [#246] and awards CMG a quantum meruit recovery of $946,078.16.

Specie be Kilo

Entered: August 21, 2006 7) Joan Humphreytefkow
United States District Judge

14


to CMG’s substitution. And since Daryl Brown (“Brown”), CMG’s principal, had been
intimately involved in Vance’s representation while a member of CMG’s predecessor, he, and by
extension CMG, would have been thoroughly familiar with that work from the start of CMG’s
representation without any additional expenditure of ils time or resources. As such, the work
performed by the Clark DeMay firm prior to August 17, 2004 is properly excluded from the
consideration of the services rendered by CMG and any work performed thereafter by CMG must
be discounted lo reflect that the Clark DeMay firm developed the factual and legal foundation of
Vance’s claims.

The declaration of Michael Morgan further establishes that CMG’s contribution to
Vance’s representation, while not trivial, was not substantial enough to warrant a multi-million
dollar fee award. Morgan’s declaration shows that, following CMG’s termination, his firm,
Michael L. Morgan, P.A., as well as his co-counsel, the Foley & Lardner firm, had to invest
significant amounts of time and resources finalizing Vance’s case for the arbitration hearing.
CMG dismisses Morgan’s declaration, arguing that Morgan did not have the experience or
knowledge to prepare Vance’s case for the arbitration and that Foley & Lardner only could have
reviewed CMG’s work product. The former assertion is belied by Morgan’s intimate
involvement in Vance’s representation over the course of several years. The latter asscrtion is
undermined by Morgan’s further declaration that experts retained by Vance, Merle Erickson,
C.P.A. and Mary Anne Reilly, C.P.A., billed Vance in excess of $182,316.49 for services
performed subsequent to CMG's discharge. That fact amply demonstrates that a substantial
amount of work to prepare Vance’s case for the arbitration hearing awaited completion at the

time of CMG’s termination. Thus, CMG cannot credibly maintain that it was fired on the eve of



they are based on a superficial review of the record, For instance, neither Schifino nor Cherry
acknowledge the express terms of the contingency fee agreement entered into between Vance and
CMG, which provides that “if the client discharges the attorney, the client agrees to compensate
the attorney for its services rendered to the date of discharge, based upon a flat hourly rate.”
While the terms of the agrccment are not controlling, they are an important factor that should
have been considered by Schifino and Cherry in their assessment of the reasonable value of
services rendered by CMG prior to its discharge. Similarly, while both Schifino and Cherry
opine about the complexity of the underlying lawsuit, neither attomey examined the federal court
record, the AAA record, the discovery, the deposition testimony, the expert witness reports, or
performed an independent examination of the legal issues involved in the casc. Moreover,
neither altorney accounted for the significant work performed by the Clark DeMay firm before
CMG’s substitution as counsel. In yet another cxample of the attorneys’ cursory review of the
facts, Schilino and Cherry opine about the benefit received by Vance as a result of CMG’s
services without attempting to quantify the respective contributions of CMG’s predecessors and
successors, reviewing the partnership agreements and Vance’s siblings’ settlements documents,
or acknowledging the scttlement offers made by the Gallaghers from the outset of the underlying
lawsuit. In these and many other instances, the attomeys’ opinions are simply based on too little
information to be accorded any weight.

While CMG’s position is extreme, so too is the Gallaghers’, The record indicates that
Vance believed that litigation was necessary to effect a buyout of her interest in the Gallagher
entities, and the fact that her siblings similarly resorted 1o litigation when they withdrew and

retired from the trusts lends credence to that belief. Even now, though Vance disputes that CMG

10


Vance received at most a marginal benefit from CMG’s services, While Vance of course

ultimately received a lucrative buyout of her interest in the Gallagher entities, that result was
guaranteed, The Gallaghers maintained throughout the underlying litigation that Vance was
entitled to redeem her interest in the various trusts according to the terms of the partnership
agreements. Since the settlement agreement entered into between Vance and the Gallaghers
provided for a buyout of her interest according to those terms, CMG cannot be credited with
obtaining for Vance anything above or beyond that which the Gallaghers have always conceded
she deserved.

CMG contends that the value of its services is shown by the fact that the settlement
received by Vance was “many times greater than the settlement achieved by Ms. Vance’s siblings
in prior litigation.” CMG’s comparison of Vance’s settlement with those obtained by her
siblings is misleading. The amount of both her and her siblings’ buyouts was based in large part
on the value of all of the real cstate holdings of the Gallagher entities as of the last day of the
fiscal year preceding the date of their respective retirements. The valuation date for Vance’s
siblings was November 30, 1994 or November 30, 1995, while the valuation datc for Vance was
December 31, 2001. In the years following Vance’s siblings’ redemption of their interest in the
Gallagher entities, the real estate owned by the Gallagher entities greatly appreciated. Asa
consequence, Vance’s interest in the Gallagher entities was considerably more valuable at the
time of her redemption than her siblings’ interests at the time of theirs.

CMG’s comparison of Vance’s scttlement with her siblings’ settlements is also
misleading because CMG includes as part of Vance’s settlement the separate and distinct

transaction wherein Vance sold to the Gallaghers certain bank stock she owned directly and


settlement.

CMG?’s claimed entitlement to a multi-million dollar recovery is further weakened by the
fact that Vance terminated CMG for cause. Vance testified at her deposition on October 26,
2005 that she terminated CMG because 1) Brown had been suspended from the practice of law
for six months by the Florida Bar; 2) Brown had failed to inform her of the suspension and of his
decision to appeal the suspension; and 3) Brown had become increasingly unavailable, failing to
accept or return her phone calls on multiple occasions. CMG argues that Vance knew about the
complaint filed by the Florida Bar against Brown before she retained CMG and thus could not
have terminated CMG for that reason. CMG’s argument misunderstands Vance’s explanation
for her termination decision. Vance represents that she did not terminate CMG because the
Florida Bar had initiated a proceeding against Brown; rather, she was willing to trust him so long
as the allegations of misconduct in the complaint were unproven. Vance terminated CMG when
she learned that Brown had been hiding the outcome of those proceedings: the referee’s decision
that Brown’s conduct had been contrary to “honesty and justice” and recommendation that
Brown be found guilty and sentenced to a six-month suspension. CMG further argues that Vance
only became dissatisficd with Brown’s lack of availability and responsiveness because Morgan
misrepresented to Vance that Brown was on vacation in Florida when in fact he was caring for
his hospitalized son. CMGQ’s accusation, however, is unsupported by the record. While Vance
testified that she learned of Brown's absences from Morgan, she stated that she concluded on her
own that he was on vacation because she knew that he had a yacht in Key West and often
traveled there on vacation.

The court also finds that an award of the contract fee is inappropriate in this case because


would have likely been unable to take on additional clients. To the extent capacity remained,
CMG would have known that its excess capacity had to be reserved for Vance since at the time
Brown allegedly made his decision to limit his practice the arbitration hearing was only a few
months away. As a consequence, Brown’s intimation that he sacrificed his practice on Vance’s
behalf is implausible.

It becomes only morc so when considered in light of the (act that at that time Brown was
subject to the complaint filed by the Florida Bar, which alleged violations of Rules Regulating
the Florida Bar 3-4.3 (misconduct and minor misconduct) and 4-8.3 (misconduct involving
dishonesty, fraud, deceit, or misrepresentation). See The Florida Bar v. Brown, 905 $o.2d 76
(Fla. 2005). To say the least, it is more likely that Brown’s own difficulties motivated CMG to
focus exclusively on Vance’s case.

Even if the court were inclined to accept Brown’s declaration that CMG terminated
former and declined future representations to focus solely on Vance’s case, the court would not
consider that fact evidence of CMG’s sacrifice and devotion. Rather, the court would consider
that fact further ovidence that CMG was certain that Vance would receive a multi-million dollar
buyout of her interest in the Gallagher entities and that it would reap a substantial portion of that
buyout under the terms of its contingent fee agreement.

Tn sum, the circumstances of this case are simply not the sort contemplated by the Illinois
Supreme Court in Rhoades when it speculated that the (actors involved in determining a
reasonable fee may justify a finding that the entire contract fee is the reasonable value of services
rendered by a discharged attorney. ‘he declarations of attorneys William J. Schifine

(“‘Schifino”) and Myron M. Cherry, Esq. (“Cherry”) to the contrary are unpersuasive because


UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

MARIA HENRY VANCE,
Plaintiff,
v. No. 02 C 8249
Judge Joan H. Lefkow

ROBERT E. GALLAGHER, SR.,
Individually and as Trustee of the Maria
Henry Trusts Numbers |, 2 and 3, and
SHIRLEY GALLAGHER, as Successor
Trustee of the Maria Henry Trusts
Numbers 1, 2 and 3,

Defendants.

MEMORANDUM OPINION AND ORDER

This case is before the court on the motion of Robert E, Gallagher, Sr., individually and
as Trustee of the Maria Henry Trusts Numbers 1, 2, and 3, and Shirley Gallagher, as Successor
Trustee of the Maria Henry Trusts (together, “the Gallaghers”) to adjudicate and void the
attomey lien of Commercial Mediation Group, P.A. (“CMG”) f/k/a Brown & Morgan, P.A. For
the reasons stated below, the court awards CMG a quantum meruit award of $946,078.16.

On May 5, 2006, this court found that CMG’s attorney lien pursuant to the Illinois
Attomey’s Lien Act was void because CMG failed to timely perfect its interest in the settlement
reached between Maria Henry Vance (“Vance”) and the Gallaghers, See May 5, 2006 Order,
Docket #271. This court further found that CMG is entitled to assert an equitable lien for the
reasonable valuc of the services rendered before its discharge against the escrow fund created as

part of Vance’s scttlement of the underlying lawsuit. /d. Since the parties had not specifically


complaint when CMG substituted as counsel.

CMG’s billing statements indicate that between May 14, 2004, the date on which Vance
retained CMG by exccuting the contingency fee agreement, and May 16, 2005, the date on which
CMG completed its transfer of the case to its successor following its discharge, CMG billed
Vance for 2573.3 hours of attorney and non-attomney time. Vance contends thal some of the
services for which CMG has billed Vance are inappropriate or excessive: 1) Forty-six occasions
on which an attorney or paralegal billed Vance for more than 10 hours of time in a single day; 2)
456.4 hours ($119,601) spent drafting and responding to cross motions for summary judgment;
3) 67.1 hours ($19,690) spent correcting deficiencies identified by this court in CMG’s materials
submitted in support of its motion for summary judgment and in response to the Gallaghers’
motion for summary judgment; 4) 124.2 hours ($32,229.50) spent reviewing and responding to
the Gallaghers’ amended statements of matcrial facts and preparing motions to strike; 5) nearly
13 hours spent by Brown editing, again, CMG’s motion for summary judgment and amended
statement of material facts; 6) 27.8 hours ($7,645) spent reviewing local rules, locating examples
of other pre-trial orders, and writing memos regarding the requirements of pre-trial orders; 7)
78.3 hours ($4,785) of secretarial billings. Rather than request that the court disallow each of the
specific instances of alleged improper billing, Vance suggests that the court simply reduce
CMG’s total fees by 10%, or approximately $65,000.

Vance’s allegation of excessive billing is well-founded. The Gallaghcrs incurred total
fecs and disbursements in connection with this casc and the related arbitration in the amount of
approximately $1,166,707.48. According to the declaration of Howard Priess, the Gallaghers’

lead counsel, less than fifteen percent of those fees were incurred between May 14, 2004 and

12


is entitled to the contract fee, Vance concedes that she received a benefit from CMG’s services.
Since there is no question regarding the integrity of Vance’s present counsel, there is no rcason to
disregard Vance’s own assessment of the value of those services in favor of the Gallaghers, who,
while well-intentioned, are nevertheless the aggricved defendant in the underlying lawsuit. In
this court’s experince, rare is the case in which a defendant believes that the plaintiffs lawsuit
was anything but frivolous.

Moreover, finding that CMG’s services were worthless would lead to an incquitable
result since Vance has already agrecd to pay the Clark DeMay firm $1,050,000, the Anderson
Rasor firm $31,480.28, and the Foley and Lardner firm in excess of $300,000 in costs and fees
for representing her in this litigation. If Vance has seen fit to compensate those attorneys for
their cfforts in pursuing her claims against the Gallaghers, CMG should be compensated as well.

So the issue remains what does CMG deserve. Having considered the various factors in
relationship to the evidence adduced by the parties, the court finds that CMG is entitled to a
quantum meruit recovery of a reasonable hourly fee multiplied by the reasonable number of
hours spent on the case. The contingency fee agreement entered into between Vance and CMG
provided for a $275 per hour billing rate in the event that Vance terminated CMG. While the
court is not required to accept that agreed-upon rate, there is no compelling reason not to do so.
The parties contemplated the possibility that CMG’s attorneys’ fecs would be calculated based
on an hourly rate rather than a percentage of Vance’s recovery and agreed that $275 is the
reasonable valuc of one hour of CMG’s services. Whilc that hourly rate is lower than the rate
charged by many attorneys, including both CMG’s predecessor and successor, it is reasonable

since Morgan was relatively inexperienced and Brown was the subject of a disciplinary

11


through a trust. There is no evidence whatsoever (hat Vance’s siblings’ owned such stock, that
they offered to sell it to the Gallaghers but were refused, or that they sold such stock to the
Gallaghers as part of the buyout of their interests for less than Vance sold hers. As such, it is
inappropriate to include Vance’s sale of her bank stock as part of the comparison of Vance’s and
her siblings’ scttlements.

Afier accounting for these factors, therc is no basis to conclude that the difference in
value between Vance’s scttlement and those of her siblings is attributable to the legal work
performed on her behalf. Even if it was, though, such excess value could hardly be attributed to
CMG, CMG contends that the impetus for the settlement in this case was the many years of hard
work it invested in the case. The evidence demonstrates, however, that the true catalyst for
settlement was CMQ’s exit from and Foley & Lardner’s entrance into the case. Indeed, the
acrimony that characterized this litigation for the several years during which CMG or Brown was
a participant quickly dissipated following their discharge and no less swiftly resurfaced with their
reappearance upon the filing of CMG’s charging lien. Much of the difficult legal work necessary
lo develop Vance’s claims was performed by CMG’s predecessor and most if not all of the
flexibility and reasonableness necessary to a achieve a settlement was brought to the case by its
successor, Foley & Lardner. Thus, it is fair to say, CMG ranks at or near the bottom among the
various allomcys claiming credit for Vance’s settlement.

The court is unmoved by Brown’s declaration that he “made the decision that [he] was
going to terminate all of [his] clients with the exception of Ms. Vance.” During the ten months it
represented Vance, CMG consisted of two atlomeys, Brown and Morgan. For those ten months,

CMG billed Vance for 2573.3 hours. At that rate, CMG was already working near capacity and



in determining a reasonable fee may justify a finding that the entire contract fee is the reasonable
value of services rendered.” Rhoades, 399 N.E.2d at 686.7

In this case, to permit CMG to recover the entire contract fee would be grossly
inequitable. While CMG’s billing records suggest that it indeed performed considerable legal
work on Vance’s behalf, a review of the court’s docket reveals that by the time CMG’s motion to
substitute as counsel was granted on August 17, 2004, the litigation was nearly complete and the
foundation for the subsequent arbitration more than adequately laid. Before CMG was retained,
its predecessor, Brown, Clark, DeMay, and Forman (“the Clark DeMay firm’) commenced the
action, represented Vance at depositions, accumulated records, conducted a complete legal and
factual investigation, analyzed the various issues, and engaged in extensive motion practice,
including filing Vance’s motion for summary judgment on the accounting, breach of fiduciary
duty, breach of trust agreements, and negligence in the administration of a trust claims and the
accompanying 270 paragraphed Local Rule 56.1 statement of undisputed material facts. While
the partics completed the briefing on those motions as well as the Gallaghers’ own motion for
summary judgment and later amended those filings following CMG’s substitution, the wide-
ranging discovery and onerous document and financial record review that CMG cites as the

principal evidence of the unusually burdensome nature of this case was already completed prior

20MG relics on Padilla v. Sansivieri, 815 N.Y.S.2d 173 (N.Y. Sup. Ct. 2006), to support its position that it
is entitled to the entire contract fee. In Padilla, the New York Supteme Court found that the trial court's calculation
of an award of legal fees to outgoing counsel as a portion of incoming counsel’s contingent fee was not an improper
quantum menu determination since outgoing counsel had undertaken the suit on a contingent fee basis and had an
agreement with incoming counsel that provided for an apportionment of the contingent fee. Setting aside the fact
that Padilla is distinguishable, at most it stands for the limited proposition that under certain circumstances the
calculation of an award of legal fees as a portion of a contingent fee is an appropriate quantum meruit determination.
See Padilla, 815 N.Y.S.2d at 176. Since Rhoades states as much, albeit as dicta, CMG’s reliance on Padilla is
unnecessary.



the Gallaghers had conceded both before and throughout the litigation that Vance was entitled to
under the various partnership agreements. Accordingly, the Gallaghers contend, Vance should
not be required to compensate CMG or rcimburse it for the expenses it incurred on her behalf.
ANALYSIS

Under Illinois law, a client may discharge her allorney at any time, with or without cause.
Rhoades v. Norfolk & W. Ry. Co., 399 N.E.2d 969, 686, 78 Ill.2d 217, 35 Ill-Dec. 680 (III. 1979).
After termination, the contract ceases to exist and the contingency term wins is no longer
operative. Jn re Lstate of Callahan, 144 Ill.2d 32, 40, 161 Ill.Dec. 339, 578 N.E.2d 985 (1991).
A discharged attorncy is entitled only to a reasonable fee for services rendered before discharge,
which is often determined by multiplying the reasonable hourly rate for the services by a
reasonable number of hours provided by the attorney. See, e.g., Johns v. Klecan, 556 N.E.2d
689, 694, 198 IIL. App.3d 1 (II. App. Ct. 1990). The trial judge has broad discretion in matters of
atlomey fees, however, and should consider all relevant factors in making its determination,
including “the skill and standing of the attorney employed, the nature of the casc and the
difficulty of the questions at issuc, the amount and importance of the subject matter, the degree
of responsibility involved in the management of the case, the time and labor required, the usual
and customary fee in the community, and the benefit resulting to the client.”’ Estate of Callahan,
578 N.E.2d 985, 990, 140 Ill.2d 32, 161 Ill Dec. 339 (Il, 1991). “In cases in which an attorney

has done much work and is fired immediately before settlement is reached, the factors involved

‘CMG contends that the court should apply a “lodestar” analysis. Contrary to CMG’s contention and
citation to Spellan v. Bd. of Educ. for Dist, 111, 59 ¥.3d 642 (7" Cir, 1995), Mlinois courts do not employ a
“lodestar” analysis to determine the quantum meruit value of a discharged attorney’s services. CMG's
tisidentification of the proper analysis is, however, of no consequence, All of the parties agree that the court’s
assessment of the reasonable value of a discharged attomey’s services must be based on an evaluation of the factors
identified above.



addressed what recovery, if any, CMG is entitled to recover in guantum meruit, the court
reserved final ruling on the Gallaghers’ motion to adjudicate and void CMG’s charging lien,
directed CMG to file a brief consistent with this court’s Local Rule 54.3(d)(1)-(3) detailing the
reasonable valuc of its services and allowed the Gallaghers and Vance an opportunity to respond.
CMG initially requested an cvidentiary hearing to assess the reasonable value of its services but
withdrew that request after Vance advised the court that she believed an evidentiary hearing is
unnecessary to resolve the fee dispute, The Gallaghers, however, requested an evidentiary
hearing. On July 25, 2006, the court declined to hold an evidentiary hearing and advised the
parties that it would assess the reasonable value of CMG’s services based on the parties’ written
submissions,

In its submission, CMG argues that il is entitled to recover the contingent fee set forth in
its retainer agreement with Vancc, plus costs (with interest), for a total recovery of $4,588,323
because it performed considerable legal work on Vance’s behalf and was terminated shortly
before Vance settled her suit against the Gallaghers. Vance disagrees, arguing that CMG has
failed to establish why the court should go beyond the application of the standard quantum
meruit recovery of a reasonable hourly fee multiplied by the reasonable number of hours spent on
the case. As such, according to Vance, the court should multiply the 2573.3 hours billed by
CMG timekeepers to Vance by the $275 hourly rate provided for in the retainer agreement in the
event of discharge, reduce that figure by 10% to account for instances of excessive billing,
disallow the requested 18% interest on expenses, for a total fee award of $ 587,868.75. The
Gallaghers argue that CMG’s services were of no value to Vance, and in fact prejudiced her

interests, because Vance ultimately received in settlement nothing above or beyond that which


April 26, 2005, or approximately $175,000, CMG, in contrast, billed Vance for $653,187.50
during the same time period. In a rare show of restraint, CMG appropriately does not even
attempt to justify the outrageously disproportionate fees billed to Vance during its approximately
ten month tenure as Vance’s counsel. Indeed, 25% of the hours billed were devoted to the
submissions on the summary judgment motion which ended up entirely unhelpful lo the court
because of the partics’ failure to identify the genuine material issues of law and fact in dispute.
Under the circumstances, then, Vance’s modest request of a 10% across-the-board-reduction is
more than charitable.

Finally, the court rejects CMG’s request that the court include 18% interest on any
expenses incurred by it during Vance’s representation as part of its quantum meruit award. There
is no evidence that CMG ever insisted that Vance reimburse CMG for expenses incurred on her
behalf as those expenses were incurred, and thus, CMG waived any right it may have had to
immediate reimbursement. Since payment for the reasonable value of the services rendered and
expenses incurred by CMG does become duc until entry of this Memorandum Opinion and
Order, CMG has no claim to penalty interest, 18% or otherwise.

The court finds that CMG is entitled to a fee of 2573.30 hours multiplied by a billing rate
of $275 per hour, less 10% for excessive billing, for a total of $587,868.75. CMG is also entitled
to recover costs in the amount of $358,209.41, CMG is not entitled to recover the $8,762.76 in
interest reflected on its billing statement, nor any interest included in the $344,374.53 of costs
that comprise the vast majority of the $358,209.41 costs already awarded. Thus, to the extent
any interest is included in the $344,374.53, it should be excluded and the $358,209.41 award of

costs reduced accordingly.