Monco v. Zoltek Corp.

DEAN A. MONCO; JOHN S. MORTIMER; WOOD, PHILLIPS,KATZ, CLARK & MORTIMER Plaintiffs, v. ZOLTEK CORPORATION, Defendant.

Case No. 17-cv-06882

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

March 31, 2021

Judge Martha M. Pacold

MEMORANDUM OPINION AND ORDER

Plaintiffs Dean A. Monco, John S. Mortimer, and Wood, Phillips, Katz, Clark, & Mortimer ("Wood Phillips") seek recovery of legal fees from defendant Zoltek Corporation on a quantum meruit theory for their representation of Zoltek in patent litigation spanning the course of 20 years. Monco has moved for summary judgment on Counts 2 and 3 of Zoltek's counterclaim and Zoltek's second, third, and fifth affirmative defenses. [305]. Zoltek has moved for summary judgment on Plaintiffs' affirmative defenses and certain additional issues. [367]. For the following reasons, both motions are denied.

Monco has also filed a motion for leave to add judicial estoppel as an affirmative defense to Zoltek's counterclaims [387] and a motion to strike portions of Zoltek's response to the latter motion [409]. The motion for leave to add judicial estoppel as an affirmative defense [387] is granted; the motion to strike [409] is denied.

BACKGROUND

The court assumes familiarity with Judge Durkin's decisions in the case. See Monco v. Zoltek Corp., No. 17-cv-06882, 2018 WL 5311904 (N.D. Ill. Oct. 26, 2018); 2019 WL 952138 (N.D. Ill. Feb. 27, 2019); 397 F. Supp. 3d 1165 (N.D. Ill. July 25, 2019). These decisions describe the background facts and procedural history in additional detail. The court restates those facts only as necessary.

In evaluating the parties' motions for summary judgment, the court draws from the parties' statements of material fact. See Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 704 (7th Cir. 2011) (citation omitted). The following facts are derived from the parties' statements of undisputed material facts. The court includes in this background section only those portions of the statements of fact that are appropriately presented, supported, and relevant to resolution of the pending motions.

Defendant Zoltek is a carbon fiber manufacturer. MSOF, [325] ¶ 4.¹ Plaintiff Wood Phillips is a law firm organized as a legal partnership, and plaintiffs Monco and Mortimer are attorneys who were partners or of counsel with Wood Phillips throughout the Zoltek representation. [325] ¶¶ 1-3.

In 1996, Zoltek hired Plaintiffs to represent it in litigation concerning a Zoltek patent (the "Stealth litigation"). [325] ¶ 6. The parties set forth their legal relationships and the fee arrangements for the Stealth litigation in several agreements. [325] ¶¶ 6-10.

In 1996, Zoltek, represented by Plaintiffs, began the litigation by filing suit in the Court of Federal Claims against the government, alleging that the B-2 bomber used carbon fiber sheet products that infringed Zoltek's patent. [371] ¶¶ 2-3.

The Stealth litigation continued for about 20 years. The litigation included multiple appeals to the Federal Circuit and a trial in the Court of Federal Claims. The parties agree that Plaintiffs represented Zoltek as lead counsel for almost all of the 20 years, though they dispute how to characterize Plaintiffs' role during a period between 2009 and 2011. See ZSOF, [371] ¶ 4; M.'s Resp. ZSOF, [380] ¶ 4.

Five years into the case, in 2001, Zoltek, relying on Plaintiffs' advice, filed an amended complaint alleging (in addition to the existing B-2 bomber claim) that materials used in the F-22 fighter jet infringed Zoltek's patent. [371] ¶ 5. As Plaintiffs explained to Zoltek, the theory of infringement for the F-22 relied on thedoctrine of equivalents, since the F-22 used silicon carbide fibers instead of exclusively carbon-based fibers. [371] ¶ 9. Many of the legal proceedings in the case arose from the F-22 claim. [371] ¶ 11.

After a three-day trial, the Court of Federal Claims held in March 2014 that Zoltek's patent was invalid. [325] ¶ 33. Monco and Mortimer briefed and argued an appeal before the Federal Circuit. In February 2016, the Federal Circuit reversed and held that Zoltek's patent was valid. [325] ¶ 41.

On July 16, 2016, Zoltek terminated Plaintiffs as counsel in the Court of Federal Claims proceedings. In September, Zoltek removed Plaintiffs from all further involvement in the case. [325] ¶ 42; [380] ¶ 42. Shortly after, on October 12, 2016, Zoltek (represented by new counsel) and the government engaged in mediation and settled the case for $20 million. [325] ¶ 43. The court entered judgment in that amount on March 20, 2017. [325] ¶ 44.

For present purposes, the following procedural history is relevant: Plaintiffs filed this lawsuit in September 2017. [1]. Plaintiffs filed the operative second amended complaint in October 2018, which among other things seeks recovery of attorneys' fees from Zoltek on a quantum meruit theory. [217]. Zoltek filed a three-count counterclaim, the operative version of which seeks a declaratory judgment that a certain attorney-client agreement and modification were void (Count 1) and alleges breach of fiduciary duty and professional negligence by Monco, Mortimer, and Wood Phillips (Counts 2 and 3). [243] at 45-49.

Plaintiffs moved to dismiss Zoltek's counterclaim. In February 2019, Judge Durkin granted in part and denied in part that motion. The court dismissed Count 1 (regarding the attorney-client agreement and modification) but declined to dismiss Zoltek's professional negligence and breach of fiduciary duty claims (Counts 2 and 3). [257]; 2019 WL 952138, at *4-10.

In July 2019, Judge Durkin denied Zoltek's partial motion for summary judgment and held that Wood Phillips, Monco, and Mortimer are all real parties in interest and could seek attorneys' fees directly from Zoltek. [288]; 397 F. Supp. 3d at 1183-84.

Monco now moves for summary judgment on Counts 2 and 3 of Zoltek's counterclaim and Zoltek's second, third, and fifth affirmative defenses, [305], while Zoltek moves for summary judgment on Plaintiffs' affirmative defenses and the issue of how any quantum meruit award would be calculated. [367]. Monco also moves for leave to add judicial estoppel as an affirmative defense to Zoltek's counterclaims [387] and to strike portions of Zoltek's response to that motion [409].

DISCUSSION

Monco and Zoltek have each filed a motion for summary judgment.² Rule 56's procedural requirements apply separately to each one. See Hotel 71 Mezz Lender LLC v. Nat'l Ret. Fund, 778 F.3d 593, 603 (7th Cir. 2015); Brownlee v. Catholic Charities of the Archdiocese of Chicago, No. 16-cv-00665, 2020 WL 977968, at *2 (N.D. Ill. Feb. 28, 2020) ("Each movant and nonmovant 'must individually satisfy the requirements of Rule 56.'" (quoting United Transp. Union v. Ill. Cent. R.R. Co., 998 F. Supp. 874, 880 (N.D. Ill. 1998))).

Summary judgment is proper where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A genuine dispute as to any material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The substantive law controls which facts are material. Id.

The party seeking summary judgment has the burden of establishing that there is no genuine dispute as to any material fact. See Celotex, 477 U.S. at 323 (1986). After a "properly supported motion for summary judgment is made, the adverse party must set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 250 (quotation omitted). The court construes the evidence and facts supported by the record in favor of the non-moving party, and gives the non-moving party "the benefit of reasonable inferences from the evidence, but not speculative inferences in [its] favor." White v. City of Chi., 829 F.3d 837, 841 (7th Cir. 2016) (citations omitted). "The controlling question is whether a reasonable trier of fact could find in favor of the non-moving party on the evidence submitted in support of and opposition to the motion for summary judgment." Id. (citation omitted). On cross motions for summary judgment, the court draws inferences "in favor of the party against whom the motion under consideration was made." Bentrud v. Bowman, Heintz, Boscia & Vician, P.C., 794 F.3d 871, 874 (7th Cir. 2015) (citing McKinney v. Cadleway Props., Inc., 548 F.3d 496, 500 (7th Cir. 2008)).

For cross motions aimed at the same claim or defense, the court adopts "a dual, 'Janus-like' perspective." Hotel 71, 778 F.3d at 603 (citing Shiner v. Turnoy, 29 F. Supp. 3d 1156, 1160 (N.D. Ill. 2014)). For the first motion, the court views the facts and inferences in the light most favorable to the nonmovant. If that motion is denied, the court turns to the cross motion and gives the unsuccessful movant "all of the favorable factual inferences that it has just given to the movant's opponent." Id.(citing R.J. Corman Derailment Servs., LLC v. Int'l Union of Operating Engrs., Local Union 150, 335 F.3d 643, 647-48 (7th Cir. 2003)). This dual perspective may result in a denial of both motions. See Shiner, 29 F. Supp. 3d at 1160.

I. Zoltek's Counterclaims

The court begins with Zoltek's remaining counterclaims for breach of fiduciary duty (Count 2) and professional negligence (Count 3).³ Again, Count 1 has already been dismissed.

According to Zoltek, the "primary act of malpractice" underlying both these claims was Plaintiffs' decision to pursue a legal theory under which the F-22 fighter jet infringed a Zoltek patent. [354] at 39 ¶ 7. Indeed, this is the only act of malpractice that Zoltek relies on to oppose Plaintiffs' motion for summary judgment or to press its own motion for summary judgment. According to Zoltek, a reasonable patent attorney would have known the F-22 did not infringe the patent "under any patent law...