Articles Posted in Legal Ethics

After plaintiffs successfully prosecuted their cases, the Treasury Department determined that plaintiffs had outstanding debts to various government entities. However, plaintiffs had assigned to counsel any legal fees to which they might be entitled under the Equal Access to Justice Act (EAJA). The Treasury Department, rather than paying out the fees directly, reduced plaintiffs' debts by equal amounts under the Treasury Offset Program and thus the attorneys received nothing. The Seventh Circuit held that it would be imprudent to entertain new administrative claims that were only minimally related to the judgments, and declined to exercise ancillary jurisdiction over plaintiffs' collateral challenges to the regulations. Accordingly, the court affirmed the district courts' judgments. In this case, the district courts properly granted attorney fees under the EAJA, and the government properly applied those fees to plaintiffs' outstanding debts. View "Harrington v. Berryhill" on Justia Law

Reynolds claimed that the law firm (H&L) gave bad advice that led him to violate federal disclosure laws when he drafted his LLCs’ financial statements. The district court granted H&L summary judgment, stating that Reynolds could not bring a malpractice suit on his own behalf because he did not have a personal attorney-client relationship with H&L. The Seventh Circuit affirmed. Although H&L had an attorney-client relationship with the LLCs that Reynolds co-owned and managed, and it was in his capacity as a managing member of these LLCs that Reynolds communicated with, and was advised by, H&L, Illinois courts consistently have held that neither shared interests nor shared liability establish third-party liability. For third-party liability in Illinois, Reynolds must have been a direct and intended beneficiary; simply because the officers of a business entity were at risk of personal liability does not transform the incidental benefits of the law firm’s representation of the business entity into direct and intended benefits for the officers. View "Reynolds v. Henderson & Lyman" on Justia Law

Holcomb did not pay her credit-card bill. The creditor hired the Freedman law firm, which sued Holcomb on the creditor’s behalf in state court. Holcomb initially appeared pro se but later retained Attorney Finko. When Freedman moved for default judgment, Finko had not yet filed a written appearance. Freedman served the motion on both Holcomb and Finko. Holcomb alleges that Freedman violated the Fair Debt Collection Practices Act, which prohibits a debt collector from directly contacting a debtor who is represented by counsel absent “express permission” from “a court of competent jurisdiction,” 15 U.S.C. 1692c(a)(2). Freedman argued that it had “express permission” because Illinois Supreme Court Rule 11 requires service of court papers on a party’s “attorney of record,” if there is one, but “[o]therwise service shall be made upon the party.” Freedman argued that Finko was not yet Holcomb’s “attorney of record” for purposes of Rule 11, requiring service on Holcomb directly. The district judge rejected this argument as “hyper-technical.” The Seventh Circuit reversed. An attorney becomes a party’s “attorney of record” for Rule 11 purposes only by filing a written appearance or another pleading with the court. Finko had done neither, so Rule 11 required Freedman to serve the default motion on Holcomb directly. View "Holcomb v. Freedman Anselmo Lindberg, LLC" on Justia Law

In 2009 Blanchard, a Chicago law firm, provided legal services to an Indian pharmaceutical company, Lupin India, and its American subsidiary, Lupin USA, concerning the patentability of a generic birth‐control drug that Lupin India planned to launch in the U.S. through Lupin USA. When the Lupin companies initially sought Blanchard’s advice, the firm sent an engagement letter outlining its hourly fees and other terms. Neither Lupin India nor Lupin USA signed the letter, but Blanchard provided the requested legal services and the companies, at first, paid the firm for its work. In October 2009 Blanchard sent its two final invoices, which went unpaid. Seven years later Blanchard sued the Lupin companies for breach of contract and unjust enrichment. A district judge dismissed both claims as untimely. The Seventh Circuit affirmed in part. The unjust enrichment claim is untimely, having accrued in 2009 when Blanchard furnished the services and the Lupin companies did not pay. The five‐year statute of limitations expired long before suit was commenced. The contract claim is timely, however. Though the engagement letter is unsigned, it counts as a written contract under Illinois limitations law, and the claim for breach is therefore governed by a ten‐year statute of limitations. View "Blanchard & Associates v. Lupin Pharmaceuticals, Inc." on Justia Law

Fuery, her friends Sciortino and Tomaskovic, and Chicago police officer Szura were involved in an altercation on the side of the road. The three women were arrested for battery of a police officer; each was acquitted. The women sued the City and Officer Szura under 42 U.S.C. 1983 and 1985. At trial, the defendants objected to various testimony as violating the court’s rulings on motions in limine, moved for a mistrial, and requested dismissal of all claims and attorneys’ fees as a sanction. The judge stated, “[t]here are plenty of options once the trial is concluded to deal with the misconduct … I am not letting it go.” The jury awarded Tomaskovic $260,000 against Szura on her excessive force claim, finding that Szura was acting within the scope of his employment, but found in favor of the defendants on all other claims. The court entered judgment in favor of the City and Szura on all claims but denied the claims for attorneys’ fees. The court found misconduct by plaintiffs’ attorney and that “plaintiffs actively participated.” The Seventh Circuit affirmed, stating that it was apparent, “even from the two-dimensional record, the judge’s patience being tried.” District courts “possess certain inherent powers, not conferred by rule or statute, to manage their own affairs so as to achieve the orderly and expeditious disposition of cases. That authority includes the ability to fashion an appropriate sanction for conduct which abuses the judicial process.” View "Fuery v. City of Chicago" on Justia Law

A class action stemming from Southwest’s decision to stop honoring drink vouchers for “business select” customers settled with the customers receiving replacement vouchers. The Seventh Circuit affirmed, holding that 28 U.S.C. 1712, the Class Action Fairness Act, allowed the court to award class counsel (Siprut) attorney fees ($1,365,882) based on the lodestar method rather than the value of the redeemed vouchers. On remand, Siprut sought supplemental fees. For its work on the motion to amend the fee award and the prior appeal, The court called the number of hours requested “grossly excessive,” stating that counsel was trying to reach “some of the originally hoped‐for $3,000,000 that Southwest agreed not to oppose.” The court awarded $455,294 plus expenses, then vacated so that the class would receive notice. In exchange for dismissal of an appeal, by objector Markow, Siprut agreed to take $227,647 plus $3,529.68 in expenses; Southwest agreed to issue two additional vouchers for each one claimed. The court was notified that the number of vouchers claimed under the original settlement was less than one-third what the parties earlier indicated and approved the new settlement. Southwest distributed the vouchers and paid Siprut. Markow then unsuccessfully moved for $80,000 in attorney fees and an incentive award of $1,000 from Siprut’s fee award. The Seventh Circuit reversed. Unless the parties to a class action settlement, including objecting parties, expressly agree otherwise, settlement agreements should not be read to bar objectors from requesting fees for their efforts in adding value to a settlement. View "Markow v. Southwest Airlines Co." on Justia Law

Indiana Child Protective Services removed Swallers’s daughter from his custody. Swallers responded with a deluge of federal filings and filed “Common Law Liens” (each $10,000,000) against all the judges in the Southern District of Indiana except Judge Young. Judge Pratt ordered the Marion County Recorder to expunge any liens that Swallers had filed against Judges Lawrence, Barker, Magnus‐Stinson, Pratt, and Young. Swallers was charged with filing a false lien and encumbrance against a federal judge, 18 U.S.C. 1521, and with possessing ammunition as a felon, 18 U.S.C. 922(g)(1). That case was assigned to Judge Young. Swallers moved for Judge Young’s recusal; 28 U.S.C. 455(a) requires recusal in any proceeding in which a judge's impartiality might reasonably be questioned, Judge Young denied the motion. Swallers pled guilty to the false lien charge; the felon‐in‐possession charge was dismissed. None of the judges named in Swallers’s liens submitted a victim‐impact statement. Judge Young imposed the agreed‐upon "time served" sentence. Swallers sought to vacate his conviction on the ground that Judge Young should have recused himself. The Seventh Circuit affirmed. Judge Young was not a victim of Swallers’s liens; there was little risk that his professional relationship with the victims would interfere with the case because the crime had little effect on them. This is not a case in which a well‐informed observer would perceive a significant risk that Judge Young would decide this case on a basis other than its merits. View "United States v. Swallers" on Justia Law

Camp Drug Store filed a proposed class action, alleging that Cochran Wholesale had violated the Telephone Consumer Protection Act, 47 U.S.C. 227, by faxing unsolicited advertisements to class members. The parties entered into early mediation and reached a settlement. Cochran would “make up to $700,000.00 available” but was not required to create a separate account to hold the funds or to deposit them with the court. Each class member could submit a claim for $125; if the value of the claims exceeded the total available funds, each timely claim would be subject to a pro‐rata reduction. Any funds that were not claimed by class members were to be kept by Cochran. Each representative plaintiff was entitled to an incentive award of $15,000, and class counsel was to be paid one-third of the Settlement Fund ($233,333.33). The total Cochran actually paid to claimants was $220,625.00. The court approved the settlement but reduced the proposed attorney fee to $73,468.13 and incentive awards to $1,000. Camp argued that the settlement created a common fund against which the reasonableness of the fee award should be assessed. The Seventh Circuit affirmed, rejecting the “common fund” argument.. Given the early stage at which the litigation settled, the reductions in the fee and incentive awards were not an abuse of discretion. View "Camp Drug Store, Inc. v. Cochran Wholesale Pharmaceutic, Inc." on Justia Law

In 2005, World Outreach, a Christian religious organization, purchased a Chicago building from the YMCA, which had operated a community center and 168 single-room occupancies (SROs) for 80 years. The community center was a “legal nonconforming use,” which, under Chicago’s zoning ordinance, “is not affected by changes of tenancy, ownership, or management.” The city nonetheless insisted that a Special Use Permit was required. While the city was unlawfully withholding licenses, Hurricane Katrina struck New Orleans. Thousands of residents were evacuated and transplanted. WO claimed that it had a verbal agreement with Federal Emergency Management Agency to use the SRO rooms at $750 per room, per month, for one year, but never received any evacuees. The city sued WO for operating the community center without a permit but later voluntarily dismissed. WO then sued the city, citing the Religious Land Use and Institutionalized Persons Act (RLUIPA), 42 U.S.C. 2000cc. In August 2007, the city issued the licenses. Following a remand, the district court granted WO summary judgment on its claim for defending the frivolous lawsuit, awarding $15,000, but rejected all other claims. On remand of the RLUIPA claim regarding the city’s unlawful deprivation of the licenses. WO ultimately reduced its damages claim from $2.44 million to $363,000 in February 2016. In April 2016, the city made an offer of judgment of $25,001 “plus reasonable costs and attorney’s fees.” WO accepted and sought $1,913,929.20 in attorney’s fees. The Seventh Circuit affirmed the district court’s modification of the lodestar to $1,559,991.50, application of a 70% across-the-board reduction, and award of $467,973.45, noting that the award of $40,001 was a “dismal failure” in contrast to the damages sought for nearly nine years. View "World Outreach Conference Center v. City of Chicago" on Justia Law

In 2011-2012 a million people received phone calls asking them to take political surveys in exchange for a chance to go on a free cruise. Some recipients filed a class action under the Telephone Consumer Protection Act, 47 U.S.C. 227, seeking damages from defendants who had not placed the calls but had directed them. The district court certified a class and later granted plaintiffs partial summary judgment. The parties settled. Plaintiffs agreed to release their claims against all defendants and their agents. Defendants agreed to pay into a fund between $56 million and $76 million, depending on the number of approved claims submitted. Out of the fund will come payments to the class, incentive awards to the named representatives, about $2 million in administrative expenses, and attorneys’ fees. The class will receive payments in two rounds. If some claimants do not cash the checks during the second round, remaining funds will go to “an appropriate cy pres recipient.” Over the objections of a class member, the court approved the settlement, estimating that each claimant will receive $400. Class counsel will receive 36% of the first $10 million, 30% of the next $10 million, 24% of the next $36 million, and 18% of any additional recovery. The Seventh Circuit affirmed, rejecting arguments that the award of fees overcompensates class counsel and that the settlement’s approval was improper. View "McCabe v. Caribbean Cruise Line, Inc." on Justia Law