Murphy v. Kinnally Flaherty Krentz Loran Hodge & Masur

242 N.E.3d 436

2023 IL App (2d) 230019

William F. MURPHY, Executor of the Estate of William C. Murphy, Deceased, Plaintiff-Appellant,

v.KINNALLY FLAHERTY KRENTZ LORAN HODGE & MASUR, P.C., f/k/a Kinnally, Krentz, Loran, Hodge & Herman, P.C., Defendant-Appellee.

No. 2-23-0019

Appellate Court of Illinois, Second District.

Filed November 15, 2023

Appeal from the Circuit Court of Kane County. Nos. 18-L-143, 17-MR-1142, Honorable Kevin T. Busch, Judge, Presiding.

Michael T. Reagan, of Ottawa, and Thomas A. Demetrio, Michael D. Ditore, and Mitchell W. Bild, of Corboy & Demetrio, P.C., of Chicago, for appellant.

Daniel F. Konicek and Amanda J. Hamilton, of Konicek & Dillon, P.C., of Geneva, and Patrick M. Flaherty, of Kinnally Flaherty Krentz Loran Hodge & Masur, P.C., of Aurora, for appellee.

OPINION

JUSTICE SCHOSTOK delivered the judgment of the court, with opinion.

¶ 1 In this breach of contract action, the trial court barred the estate of William C. Murphy (Murphy), acting through the plaintiff, its representative, William F. Murphy (William), from introducing several items of evidence and then entered a directed verdict, finding that the estate had not submitted sufficient evidence to support its claim. The estate appeals. We vacate the directed verdict and remand for a new trial.

¶ 2 BACKGROUND

¶ 3 The decedent, William C. Murphy, was a graduate of Harvard Law School and practiced law with distinction for almost 70 years. For decades, he practiced with the defendant firm, Kinnally Flaherty Krentz Loran Hodge & Masur, P.C.

¶ 4 In 1999, Murphy and his partner Robert Hupp entered into an agreement under which they became "of counsel" to the firm (then known as Murphy Hupp & Kinnally). Under the 1999 agreement, Murphy and Hupp would continue to receive office space, administrative support services, and professional liability and health insurance, and were not required to devote any specific amount of hours to practicing law. They would be paid one-third of any time they billed, and a one-third share of any net fees received by the firm for any probate or contingent personal injury cases they brought to the firm, when those fees were collected. The 1999 agreement also required the firm to pay Hupp, who worked on transactional matters, 50% of the monthly retainer received by the firm from the Fox Valley Park District. The agreement could be terminated upon 90 days’ written notice by either party or by corporate dissolution.

¶ 5 Hupp died in 2003. Under the 1999 agreement, the firm continued to pay Hupp’s widow his share of the monthly retainer fees collected after his death.

¶ 6 In 2004, Murphy and the firm entered into a revised "of counsel" agreement. At trial, Gerald Hodge (one of the firm’s current principals) testified that he was the primary drafter of the 2004 agreement. He agreed that the "Hupp problem" of "extensive lingering obligations" following the death of an "of counsel" lawyer was a concern that led to the drafting of the 2004 agreement. The revised agreement addressed this concern in part through section 6(c), which expanded termination events to include the death of Murphy or any of the firm’s principals. The revised agreement also changed section 4, which addressed the issue of compensation:

"4. Compensation.

A. WCM [(Murphy)] shall receive Thirty-Three and one-third (33?%) Percent of the net fee to KKLHH [(the firm)] when actually collected for all probated estates or trusts which he generates, regardless of whether the estate work was performed by KKLH [sic] or WCM.

B. For all contingent fee personal injury cases and for worker’s compensation cases, will contests, condemnation, or commercial contingent fee cases brought to KKLHH by WCM, the latter shall receive the following compensation when the fee is collected by KKLHH:

(1) One-third (?) of any contingent fee case resulting in a net fee to KKLHH unless a referral fee to another attorney or professional corporation is owed;

(2) If a referral fee is owed to another attorney or professional corporation, then WCM shall receive one-fourth (¼) of the net contingent fee. Net contingent fee means the fee to KKLHH before the payment of any referral fees or a portion of the fees to WCM.

C. To the extent that WCM bills work for his own time, he shall receive Thirty-three and one-third (33?%) Percent of his personal time billed when it is collected.

D. WCM and KKLHH agree that any matter not covered by this agreement which results in income from the practice of law shall be referred to KKLHH exclusively unless the latter shall consent to a referral to another attorney/law firm.

E. In the event this agreement is terminated for any reason, KKLHH’s payment obligations are limited to paying WCM any amounts collected for which it owes WCM fees for a period of two months following the month in which the termination becomes effective."

The first four provisions were carried over from the 1999 agreement, albeit organized slightly differently. Paragraph 4E was new, added to address the "Hupp problem."

¶ 7 In 2012, Murphy referred Terry and Amy Seyller to the firm. In October 2012, the firm filed a personal injury lawsuit on behalf of the Seyllers (Seyller case) in the circuit court of Cook County.

¶ 8 On February 29, 2016, Murphy wrote a letter to William, his son, a lawyer like himself, whom he had named as executor of his testamentary estate. The letter stated in relevant part:

"Dear Bill,

I wanted to outline for you my relationship with Kinnally Flaherty. I attach my ‘of counsel’ agreement with the firm which is still in effect. It has worked well with no problems over the years.

[I]n the event of my death, however, there are two cases in which I have an interest:

1. Seyller v. BNSF et al.: This is the case which Maire Ann Snider got for me and which I referred to the firm. They have proceeded with it in the Circuit Court of Cook County *** and it is set for trial in March 2017. No settlement offers have been made. In the event of a recovery, I am entitled to ? of the total fee as a forwarder." (Emphases in original).

Attached to the letter was a copy of the 2004 agreement.

¶ 9 Murphy died on November 25, 2016, while the Seyller case was still pending. William, as the executor of his father’s estate, retained Hodge as attorney for the estate. On April 26, 2017, William e-mailed Hodge about various estate matters. Among other things, William asked, "Whatever happened with the Seyller v. Burlington Northern case ***?" Hodge e-mailed back the next day, saying "My recollection is that Seyller was continued to the fall by motion of the defendants (I will check on that and let you know, if different)."

¶ 10 On June 30, 2017, one of the principals of the firm, Mark Masur, wrote a letter to William, informing him that the Seyller case had tentatively settled.¹ Masur also wrote:

"Upon final resolution and funding, we will distribute $150,000.00 for your Dad’s interest in this case. We did not have a written agreement with [your father] related to compensation. *** In the absence of a written agreement, your father’s estate is entitled to quantum meruit as the means of calculating any compensation."

Masur also wrote that, while quantum meruit would warrant a fee of less than $20,000 because Murphy did very little work on the case, the firm would pay $150,000 to the estate out of "respect and admiration for your father."

¶ 11 Hodge testified at trial that he saw a copy of the 2004 agreement in June 2017, before Masur sent this letter. Although the copy he saw was unsigned, he believed that it had been signed and "was in effect," although he also believed that the agreement had terminated following Murphy’s death. He also knew of Masur’s letter offering the estate $150,000, and he spoke with the firm’s other principals about the offer. He could not say for sure whether he mentioned the existence of the 2004 agreement to anyone at the firm; no one asked him about it. He testified that, in his opinion, the statement in Masur’s letter that the firm "did not have a written agreement" with Murphy regarding compensation was accurate because, on the date of the letter, "there was no such agreement."

¶ 12 The estate retained different counsel who, on July 10, 2017, wrote Masur asserting that in fact the firm did have a written agreement with Murphy regarding compensation. Masur asked for a copy of the agreement, and the estate responded that he should have one already, as the firm had drafted the agreement. Masur then confirmed that the firm indeed had a copy of the 2004 agreement. (At trial, several principals testified that they could not find a copy of the 2004 agreement. Joseph Loran testified that he eventually found a signed copy in his desk, filed with unrelated documents.) On July 21, the firm again wrote to the estate, asserting for the first time that paragraph 4E of the 2004 agreement meant that its obligations to pay the estate anything terminated two months after Murphy died.

¶ 13 Thereafter, the firm filed an action (No. 17-MR-1142), seeking a declaratory judgment that the 2004 agreement had terminated on Murphy’s death and that the firm had no obligation to pay his estate any amount from the Seyller settlement because the settlement proceeds were not received within two months of Murphy’s death. The estate filed an action (No. 18-L-143) for breach of contract against both the firm and its individual principals, arguing that, under the 2004 agreement, the estate was owed $777,777.77 under paragraph 4B. By agreement, the two cases were consolidated for further proceedings and trial.

¶ 14 The firm filed a motion to dismiss the complaint as to the individual principals because the 2004 agreement was between Murphy and the firm, and there was no provision for individual liability. It also filed a motion for judgment on the pleadings, arguing that the 2004 agreement was unambiguous and that, by its terms, nothing was due to the estate. The trial court agreed with the firm...