N. League of Prof'l Baseball Teams v. Gozdecki, Del Giudice, Americus & Farkas, LLP

2018 IL App (1st) 172407

123 N.E.3d 590

428 Ill.Dec. 861

The NORTHERN LEAGUE OF PROFESSIONAL BASEBALL TEAMS, d/b/a The Northern League, Plaintiff-Appellant,

v.GOZDECKI, DEL GIUDICE, AMERICUS & FARKAS, LLP, and Steven Leech, Defendants-Appellees.

No. 1-17-2407

Appellate Court of Illinois, First District, Sixth Division.

December 28, 2018

Siprut, PC, of Chicago (Joseph J. Siprut and Richard S. Wilson, of counsel), for appellant.

Hinshaw & Culbertson LLP, of Chicago (Peter D. Sullivan, Barry F. MacEntee, and Adam R. Vaught, of counsel), for appellees.

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

¶ 1 Plaintiff, The Northern League of Professional Baseball Teams (plaintiff or Northern League), appeals the circuit court's judgment entered in favor of defendants, Gozdecki, Del Giudice, Americus & Farkas, LLP, and Steven Leech, after a jury trial on plaintiff's legal malpractice claim. On appeal, plaintiff contends that a new trial is warranted where the court below (1) improperly allowed witnesses to testify that they would not have signed a contract containing an exit fee provision; (2) improperly barred as hearsay testimony that an attorney told the witness an attempt to enforce the expulsion provision in the league agreement would be futile; (3) erroneously found that plaintiff failed to disclose all of the league agreements its expert relied on in his opinion; (4) erred in finding that defendants' expert witnesses were qualified to testify as experts in this case; (5) gave jury instructions that precluded the jury from finding defendants liable for legal malpractice, and improperly allowed defendants to argue that plaintiff waived its legal malpractice claim where it entered into a settlement agreement with defendants; and (6) erroneously submitted special interrogatories to the jury that were misleading, confusing, and substantially prejudicial to plaintiff. For the following reasons, we affirm.

¶ 2 JURISDICTION

¶ 3 The trial court entered a final judgment upon the jury's verdict on May 9, 2017. Plaintiff filed a motion for judgment notwithstanding the verdict or a new trial, which the trial court denied on September 26, 2017. Plaintiff filed a notice of appeal that same day. Accordingly, this court has jurisdiction pursuant to Illinois Supreme Court Rules 301 (eff. Feb. 1, 1994) and 303 (eff. July 1, 2017), governing appeals from final judgments entered below.

¶ 4 BACKGROUND

¶ 5 The following facts are relevant to the issues on appeal. Plaintiff, organized as a South Dakota corporation in 1993, operated as an independent baseball league unaffiliated with major league baseball. Independent leagues field their own teams, sign their players, and govern themselves.

Plaintiff filed its legal malpractice action against defendants on May 2, 2012. In its first amended complaint, plaintiff alleged that defendants failed to include a damages provision in the league agreement that would impose $1 million in liquidated damages on teams that voluntarily withdrew from the league. Plaintiff alleged that Gary, Kansas City, Fargo, and Winnipeg gave notice that they would depart the league after the 2011 season to join a rival association, and as a result of defendants' malpractice, plaintiff did not receive compensation "upon the mass exodus of fifty percent of the League's membership." The departures caused plaintiff to suffer devastating financial losses and eventually, the league ceased operations. Plaintiff sought as compensatory damages "the $4 million that the Northern League should have been able to collect from" the departing teams, but for defendants' malpractice. During the time period relevant to the lawsuit, plaintiff was comprised of these four teams, as well as teams from Joliet, Lake County, Rockford, and Schaumburg.

¶ 6 At the trial, Richard Ehrenreich, a lawyer and owner of the Schaumburg and Lake County teams, testified that in 1993, plaintiff "never had any real competition" and "[t]eams weren't leaving the Northern League to go anywhere because there weren't any other independent leagues." By 2005, however, other leagues had come into existence so plaintiff's teams began to discuss the concept of exit fees, which would require exiting teams to pay an amount as liquidated damages.

¶ 7 As the league started having these discussions, 4 of plaintiff's 12 teams left the league. According to Ehrenreich, the exit fee discussions "may have been what sped up those four teams leaving that year. They didn't want to have to deal with that in a league agreement." Ehrenreich testified that after the four teams left, the remaining league members "were panicking" because they "didn't see it coming." They determined that the league agreement should have an exit fee provision. Ehrenreich drafted an addendum to the league agreement (the Agreement of Eight), and all of the remaining teams signed the agreement. The Agreement of Eight provided as follows:

"Any Team that voluntar[ily] terminates its membership in the Northern League for any reason shall reimburse the remaining Teams for all damages caused by such departure. It is acknowledged that the exact amount of damages suffered by the remaining Teams will be difficult to proof [sic ] or ascertain, and therefore, the terminating Team shall pay to the remaining Teams as liquidated damages the sum of $2 million or the Current Membership Expansion Fee, whichever is greater."

¶ 8 In 2007, the Calgary and Edmonton teams left the league. Ehrenreich testified that plaintiff filed suit against them based on the Agreement of Eight exit fee provision. While the suit was pending, the Gary team was sold to attorney Pat Salvi. Salvi offered to take the case against Calgary and Edmonton on a contingency fee basis so the league could save money. Steven Leech, an associate at Salvi's firm, sent an e-mail to the league's board informing them that he "would be one of the attorneys principally responsible for pursuing the case against Calgary and Edmonton."

¶ 9 Ehrenreich testified that some time in 2009, Salvi advised the board to settle the suit. They "didn't ask a lot of questions" because they "were getting ready to start a season. It was just kind of a nuisance at that point * * *." Ehrenreich did not remember much about the situation, only that the defendants were "very litigious" and had threatened counterclaims against plaintiff. Also, "there were procedural matters involved, problems with the lawsuit * * * and we were provided with a settlement agreement." Pursuant to the agreement, Calgary and Edmonton did not pay any money, but they did return their stock.

¶ 10 In January 2009, plaintiff looked for outside counsel to assist in changing its structure. Leech, who now worked with the firm of Gozdecki & Del Giudice, LLP, offered his services. Plaintiff retained Leech and the firm to draft a new league agreement. Ehrenreich testified that the owners never discussed "doing away with an exit fee provision altogether," and Leech was not told to "do[ ] away" with the fee. To keep attorney fees low, the league's commissioner, Clark Griffin, provided Leech with a first draft of the agreement. This draft did not contain a liquidated damages/exit fee provision. Leech submitted his first draft in March 2009. His draft also did not contain an exit fee provision. Instead, it provided for expulsion on eight grounds, which required a two-thirds vote of disinterested directors. Upon expulsion, a team is liable for liquidated damages in the amount of $2 million. Leech's e-mail also included a draft of a separate membership agreement, which new members would be required to sign upon entering the league. This agreement did contain an exit fee provision that stated that if a new team "ceases to operate as a League professional baseball team or operates as a professional baseball team in a different league," that team would pay $2 million as liquidated damages. Ehrenreich testified that in his mind, an exit fee differs from an expulsion fee in that "an exit fee should be automatic. If a team leaves, they pay the money."

¶ 11 On June 4, 2009, Leech had discussions with the owner of the Fargo team, Bruce Thom. Thom had concerns about the $2 million liquidated damages provision and indicated that he did not want to sign with that provision but "would be very open to discussing some other type of provision to deter teams from bolting the league." Soon after, Leech sent an e-mail to the board members detailing his discussions with Thom. In the e-mail, Leech provided suggestions including reducing the current $2 million fee and providing for a notice period to allow a team to find a replacement franchise. Leech stated, however, that ultimately the procedure and price to exit "is a business decision that must be made by the team owners * * *." Leech had a conference call with the owners and afterwards circulated a second draft of the agreement. In the second draft, the liquidated damages due upon expulsion was reduced to $1 million.

¶ 12 After various discussions with the owners, including Ehrenreich, Leech circulated a fifth and final draft of the league agreement. This draft was substantially the same as the first draft circulated in March, except that the liquidated damages provision for expulsion was reduced from $2 million to $1 million. The draft also did not contain an exit fee provision. As an owner, Salvi testified that he would not have agreed to an automatic exit fee provision because it was important that a liquidated damages provision be triggered "only if you had a hearing and an opportunity to make your case, and only if two thirds of the disinterested directors voted to expel. That was crucial." Owner Katz also testified that he would not have signed an agreement containing an automatic exit fee provision.

¶ 13 League commissioner Griffin reviewed the agreement and e-mailed Leech that "the docs are fine." Representatives from the remaining six teams executed the league agreement on July 7, 2009...