Quick Takes on Illinois Supreme Court Opinions Issued Thursday, May 18
Leading appellate attorneys review the Illinois Supreme Court opinions handed down Thursday, May 18. The cases are Better Government Ass'n v. Illinois High School Ass'n, In re Estate of Shelton, Ferris, Thompson & Zweig, Ltd v. Esposito, Chultem v. Ticor Title Insurance Co., and People v. Veach.
By Joanne R. Driscoll, Forde Law Offices LLP
In the ongoing battle involving public records requests made of governmental agencies, the supreme court was asked to define the term “subsidiary bod[y]” as used in the definition of “public body” in the Freedom of Information Act (5 ILCS 140/2(a) (West 2014)) and then to determine whether the Illinois High School Association (“IHSA”) is subject to the FOIA. The IHSA governs and coordinates interscholastic athletic competitions for public and private secondary schools in Illinois.
In a unanimous decision, the supreme court adopted the tests articulated in Hopf v. Topcorp, Inc., 256 Ill. App. 3d 887 (1993), a FOIA case, and Rockford Newspapers, Inc. v. Northern Illinois Council on Alcoholism & Drug Dependence, 64 Ill. App. 3d 94 (1978), an Open Meetings Act case (5 ILCS 120/1.02). Under those tests, a court is to consider: (1) the extent the entity has a legal existence independent of government resolution; (2) the degree of government control exerted over the entity; (3) the extent to which the entity is publicly funded; and (4) the nature of the functions performed by the entity. The court rejected the attempt by the Better Government Association (“BGA”) to add two more factors – the extent to which the private entity has been found to be a state actor under federal civil rights laws and whether the private entity was entitled to governmental tort immunity. As to the latter, however, the court instructed that the requisite operational control by a unit of local government for purposes of seeking tort immunity is already subsumed in the second factor of the Hopf and Rockford Newspapers analysis.
Applying the first three factors, the court found that the IHSA was not a public body. As to the fourth factor, it held that even if the IHSA performed a governmental function, it would not be transformed into a public body for purposes of the FOIA. Otherwise, any private entity that provides education services to public schools would risk becoming a public body, a result that could not have been intended by the General Assembly.
A second issue decided by the court was whether the requested records of the IHSA qualified as “public records” of Consolidated High School District 230 (the “District”) under section 7(2) of the FOIA (5 ILCS 140/7(2) (West 2014)). Under section 7(2), a public record in the possession of a party that contracted with a public body to perform a governmental function is considered a public record of the public body. In addition to noting that the BGA had not alleged that the IHSA had contracted with the District to perform a governmental function on the District’s behalf, the court held that the function performed by the IHSA is not a responsibility of the District and, thus, the IHSA was not acting on the District’s behalf and the requested records were not public records of the District.
By Michael T. Reagan, Law Offices of Michael T. Reagan
In Estate of Shelton, a moderately intricate set of claims arising out of the administration of two spousal estates gave rise to several plainly stated principles of law. Mr. and Mrs. Shelton died within a few months of each other. In the year prior to their deaths, the husband executed two quitclaim deeds conveying two plots of land to the couple’s son. The first plot was owned solely by the husband; the second plot was alleged to have been owned jointly by the husband and wife, although there was some uncertainty as to whether the wife owned it solely. However, the quitclaim deeds purported to convey all of the interest of both husband and wife. The husband signed the deed pertaining to that second plot individually and as “attorney-in-fact” for his wife. As of the time of those transactions, neither spouse had been adjudicated to be incompetent by a court or certified by a physician as being unable to give intelligent consideration to business matters.
Prior to those transactions, each spouse had executed a durable statutory short form power of attorney for property, with each designating the other as their agent. Among the powers, each granted the agent the power to dispose of real property during the principal’s lifetime after the principal became disabled, as defined in the power. Each spouse also designated successor trustees, with their son as the first successor, and their daughter as the second successor.
The daughter of the couple was the executor of both estates. The estates both filed actions against the brother, attempting to have both farms brought back into the estates.
While the application to this case of the legal conclusions reached by the supreme court must be left to the reader of the opinion in view of the necessarily compressed nature of these summaries, the court, ruling after a divided appellate court issued three opinions, reached the following legal conclusions. The section of the Power of Attorney Act, 755 ILCS 45/2-10.3(b), which deals expressly with successor agents only imposes duties on a person initially named as a successor agent who has been, in fact, authorized to act as an agent due to the predecessor agent’s disqualifying condition or event. Because no duties are imposed on a successor agent until that person is authorized to exercise the powers, the successor agent owed no fiduciary duties.
A written power of attorney must be strictly construed so as to reflect the clear intent of the parties. As of the date of the quitclaim deeds, there had not been a judicial adjudication of incompetency, nor had a physician certified that the wife was unable to give prompt and intelligent consideration of her financial affairs, the standards set out in the power of attorney. A physician did file a report after the deaths of the parties attesting that as of the date of the deeds, the wife was incompetent and unable to give intelligent consideration to her business matters. But the power referencing “if and while” a person is incompetent is to be construed as requiring that declaration prior to the time of the exercise of the power. The court rejected the conclusion of the majority of the appellate court that the after-the-fact certification of the physician could be considered. Accordingly, the wife was not to be considered as incompetent.
Justice Burke authored the opinion for a unanimous court.
By Karen Kies DeGrand, Donohue Brown Mathewson & Smyth LLC
Lawyers from separate law firms who enter into joint retainer agreements, where an individual from one firm refers the client to counsel at a second firm for handling the case, need not state in their agreement with the client that each firm assumes joint financial responsibility for the representation. While Rule 1.5(e) of the Rules of Professional Conduct of 2010 imposes shared financial responsibility in that scenario, the lawyers need not say so in their written agreement with the client. With or without such notification, clients are protected.
The dispute in this case arose between the plaintiff, Ferris, Thompson & Zweig, Ltd., and the law offices of defendant Anthony Esposito, to whom Ferris referred matters before the Workers’ Compensation Commission. Ferris and Esposito entered into joint retainer agreements with clients to handle 10 matters, which generated over $100,000 in fees. Despite the terms of their written agreement, which required Esposito to pay Ferris 45 percent of the fees, Esposito refused to pay Ferris its share.
In defense of the breach of contract lawsuit that followed, Esposito contended that the contracts – which Esposito drafted – did not comply with Rule 1.5(e). Seeking dismissal of the case, Esposito argued that the retainer agreements, signed in each instance by the clients as well as the attorneys, did not notify the clients that each firm assumed financial responsibility for the representation. Based on a First District opinion in Fohrman & Associates, Ltd. v. Mark D. Alberts, P.C., 2014 IL App (1st) 123351, the circuit court granted Esposito’s motion to dismiss. On appeal, however, the Second District disagreed that Rule 1.5(e) imposed the requirement urged by Esposito.
Employing a plain language analysis of Rule 1.5(e), the Illinois Supreme Court agreed with the Second District. One of several ethical rule provisions addressing the topic of fees Illinois attorneys may charge their clients, Rule 1.5(e) permits a division of fees by lawyers from separate law firms if they strictly adhere to the following requirements. First, if the primary service of one of the attorneys is referral of the client to the other lawyer, the two lawyers must assume joint financial responsibility for the matter. Second, the client must agree to the referral and fee-sharing arrangement, including the financial split, and the client must assent in writing. Third, the total fee charge must be reasonable. Applying this straightforward checklist, the supreme court found that the Ferris-Esposito retainer agreements passed muster and in fact contained considerably more information than Rule 1.5(e) required.
The court recounted the history of the Illinois rules concerning the sharing of fees by lawyers practicing in separate firms where one of the lawyers serves primarily as a referral source. Although historically prohibited, the supreme court permitted the practice when it adopted the Illinois Code of Professional Responsibility in 1980. Since that time, the supreme court has reduced the conditions for such arrangements.
The supreme court found little support for Esposito’s position in the Fohrman case. In that decision, the First District had assumed the notification requirement. The appellate court in Fohrman focused its attention on other deficiencies in the conduct of the attorneys.
By Joanne R. Driscoll, Forde Law Offices LLP
Section 2607(b) of the Real Estate Settlement Procedures Act (“RESPA”) (12 U.S.C. § 2607(b)), which is incorporated into the Illinois Title Insurance Act (the “Title Act”) (215 ILCS 155/21 (West 2002)), prohibits unearned fee splitting and kickbacks given by a title company to its agent in the rendering of real estate settlement services. The issue in this class action case was whether the defendant title companies violated RESPA and, correspondingly, the Title Act, by splitting fees collected from purchasers of title insurance with referring attorneys who also served as title agents, if those attorneys performed any services, even if the fees were not proportionate to the services actually performed.
A definitive answer to the question will have to wait as the Illinois Supreme Court issued a per curiam opinion. One justice (Justice Thomas) recused himself, and the remaining members of the court were divided and could not secure the constitutionally required concurrence of four judges (Ill. Const. 1970, art. VI, § 3). Accordingly, the court dismissed the appeal, having the effect of affirmance by an equally divided court of the decision under review but with no precedential value. (The divided panel of the Illinois Appellate Court held that so long as any services were performed by the attorney, the reasonableness of the amount of the fees was irrelevant.)
By Jay Wiegman, Office of the State Appellate Defender
It can be very difficult for an appellate court to determine whether trial counsel provided effective assistance to a criminal defendant. This is so because much of a client’s defense depends on matters that are outside of the record. For instance, trial counsel may well decide to not call certain witnesses because a thorough investigation has determined that the witness would not be helpful or might even be harmful to the defendant, but failure to call certain witnesses can constitute ineffective assistance of counsel if the decision was made without the benefit of investigating or interviewing the potential witness. Therefore, direct appeal of a challenge to trial counsel’s performance is often less effective than a collateral appeal, in which the defendant may provide affidavits and bring in evidence that is not available on direct appeal. As a result, the last few decades have seen a “growing practice in the appellate court of declining to consider ineffective assistance of counsel claims on direct review.” People v. Veach, 2017 IL 120749, ¶ 1.
In Veach, the defendant appealed his convictions of two counts of attempted murder directly to the appellate court, Fourth District, where he argued that trial counsel was ineffective for stipulating to the admission of recorded statements of the State’s witnesses. Veach, 2017 IL 120749, ¶ 1. A majority of the appellate court held that the record was inadequate to resolve the issue and encouraged the defendant to raise the issue in a post-conviction petition. Veach, 2017 IL 120749, ¶ 1. In doing so, the appellate court stated that review of ineffective assistance claims falls into three categories and declared that in a “very large percentage” of these cases, the “prudent and judicious course” is to decline to address the issue, affirm the trial court’s judgment and advise the defendant that he should raise the claim of counsel’s ineffectiveness in a post-conviction petition. Veach, 2017 IL 120749, ¶ 32, citing People v. Veach, 2016 IL App (4th) 130888, ¶ 72. In dissent, Justice Appleton expressed concern that litigants who deferred their claims until they instituted collateral proceedings would risk forfeiture of their claims. The dissenting justice also believed that the record was sufficient for review and demonstrated that Veach had been prejudiced by his trial counsel’s deficient performance. Veach, 2017 IL 120749, ¶ 36.
Noting that the Fourth District’s three-part classification of ineffective assistance of counsel claims had been applied in more than a dozen cases that followed the appellate court’s decision in Veach, the Illinois Supreme Court granted leave to appeal. A unanimous supreme court reversed. People v. Veach, 2017 IL 120749. Writing for the court, Justice Kilbride observed that while the court had, in People v. Bew, 228 Ill. 2d 122 (2008), recognized a “preference” for collateral review for deciding claims of ineffective assistance “in some situations,” the court had not held that ineffective assistance of counsel claims are always better suited to collateral proceedings. Veach, 2017 IL 120749, ¶ 45. The court thus rejected what it considered to be the appellate court’s implication that waiting for collateral review of matters of ineffective assistance of counsel was “almost always” preferable. Veach, 2017 IL 120749, ¶ 31.
In the court’s view, “ineffective assistance of counsel claims may sometimes be better suited to collateral proceedings but only when the record is incomplete or inadequate for resolving the claim.” Veach, 2017 IL 120749, ¶ 46. The reason for this is that a defendant risks forfeiting his ineffectiveness of counsel claim if the defendant’s claim is apparent on the record and he does not raise it on direct review. Veach, 2017 IL 120749, ¶47. However, such claims are frequently not apparent on the record. Balancing the varying effectiveness of the two avenues of review – direct and collateral – with the concern that failing to raise ineffectiveness of counsel claims on direct appeal will cause a defendant to forfeit the claim, the court rejected a broad-sweeping categorical approach and urged reviewing courts to “carefully consider each ineffectiveness of counsel claim on a case-by-case basis.” Veach, 2017 IL 120749, ¶48. Noting that the State had conceded that the instant record was sufficient to resolve the defendant’s ineffective assistance of counsel claim on direct review, the cause was remanded for the appellate court to consider the claim. Veach, 2017 IL 120749, ¶28, 50-51.