Lawrence Hess v. Kanoski & Associat ( 2012 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 11-1850
L AWRENCE J. H ESS and V ICKIE C. W ARREN,
Plaintiffs-Appellants,
v.
K ANOSKI & A SSOCIATES, et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of Illinois.
No. 09-3334—Michael P. McCuskey, Chief Judge.
A RGUED S EPTEMBER 28, 2011—D ECIDED F EBRUARY 2, 2012
Before B AUER, W OOD , and T INDER, Circuit Judges.
W OOD , Circuit Judge. This case involves a spat over
attorneys’ fees—in particular, the fees that the firm of
Kanoski & Associates allegedly owes to its former associ-
ate, Lawrence Hess. After some five years at the firm,
Hess was abruptly dismissed. Afterwards, the firm
settled several of the cases on which Hess had been
working and refused to pay Hess bonuses or fees based
on those settlements. Hess believes that he is entitled to
2 No. 11-1850
some of that money. He first tried to obtain the pay-
ments by filing attorney’s liens in Illinois state courts.
When that strategy failed, he filed this action in federal
court against the firm, its president Ronald Kanoski,
and Kennith Blan, Jr., a lawyer loosely associated with
the firm who took over Hess’s cases.
The district court granted the defendants’ motion
for summary judgment. It held that the Illinois courts
had already determined that the firm did not owe Hess
any payments based on cases that had settled after he
was fired. As we explain below, this was error. No
court—neither the Illinois state courts nor the district
court below—has ever decided whether Hess’s employ-
ment agreement entitles him to compensation for work
he did on those cases. Hess makes a plausible case that
the agreement entitles him to at least some portion of
these revenues. He notes that his contract required the
firm to give him 30 days’ notice before terminating his
employment, but it failed to do so. At the very least, in
his view, he is entitled to a share in the settlements
reached during that period. We agree with Hess that
summary judgment was inappropriate for his contract
theories, which he raises in Count I under the Illinois
Wage Payment and Collection Act (IWPCA) and in
Count IV under general contract law. The remainder of
Hess’s complaint, however, was correctly dismissed.
Accordingly, we affirm in all other respects.
I
Kanoski & Associates bills itself as the “largest personal
injury law firm in central Illinois.” Kanoski & Associates,
No. 11-1850 3
http://www.kanoski.com/ (last visited Jan. 30, 2012). The
firm hired Hess on May 9, 2001, to work primarily
on medical malpractice cases. His employment was
governed by an agreement that set out his salary and
bonus pay. At first Hess apparently performed well for
the firm and obtained several favorable settlements. But
by 2007, things had gone south; on February 14 of that
year, Ronald Kanoski (the firm’s president, as we men-
tioned earlier) fired Hess. In the wake of that action,
the firm transferred several of Hess’s cases to Kennith
Blan, Jr., a lawyer working as an independent contractor
for the firm. Over the course of the next year and a half,
the firm—largely through Blan’s efforts—settled many
of these cases. For example, in June 2008, one case
settled for $1.25 million.
Hess believed that Blan and the firm had pushed him
out in order to settle his cases without sharing with him
the generous compensation that accompanied the settle-
ments. In May 2008 Hess began pursuing the fees
to which he thought he was entitled. In a letter, he de-
manded payment from the firm for $316,616.21 in
unpaid bonuses. He also filed attorney’s liens in Illinois
state court in two of the cases the firm had settled with-
out him. Neither claim was successful, for the simple
reason that Hess no longer had an attorney-client rela-
tionship with the clients.
Hess then turned to federal court, which had jurisdic-
tion under 28 U.S.C. § 1332 because both plaintiffs are
citizens of Missouri and all defendants are citizens
of Illinois; the amount in controversy easily exceeded
4 No. 11-1850
$75,000. His complaint raised a slew of state-law allega-
tions against the firm. It contains eleven counts in all,
including such claims as consumer fraud, conspiracy,
and “intentional/negligent” spoliation of evidence. His
wife, Vickie Warren, raised her own claim for loss of
consortium.
At its essence, this case boils down to a single question
of contract interpretation: Was Hess entitled under his
employment agreement to compensation arising out of
any of the post-termination settlements? The district
court did not decide this question. Instead, it granted
summary judgment to the defendants on the ground
that the state court litigation had already resolved this
issue in the firm’s favor and thus Hess was collaterally
estopped from litigating it anew.
We review the district court’s grant of summary judg-
ment de novo, drawing all reasonable inferences in the
light most favorable to Hess, the nonmoving party. Egan
v. Freedom Bank, 659 F.3d 639, 642 (7th Cir. 2011). Sum-
mary judgment is appropriate only when there is no
genuine issue as to any material fact and the moving
party is entitled to judgment as a matter of law. Id. As
we explain, summary judgment was appropriate for
most, but not all, of Hess’s claims.
II
A
We begin with the two counts in Hess’s complaint
that rest most directly on his employment agreement:
No. 11-1850 5
Count I, the claim under the IWPCA; and Count IV, the
claim for breach of contract. Stating that Hess “had no
right to bonus money for any recoveries which
occurred after his termination,” the district court granted
summary judgment for the firm. It gave two reasons for
that conclusion: first, it believed that Hess had admitted
in his deposition that he was paid all that he was due;
and second, it understood that the state lien decisions
had already determined that Hess had no right to
post-termination payment and therefore that Hess was
precluded from reopening the point. Neither rationale,
however, stands up to scrutiny.
The district court’s reading of Hess’s deposition testi-
mony failed to construe all facts and reasonable infer-
ences in Hess’s favor, as it should have done at this
stage of the litigation. Cedar Farm, Harrison Cnty., Inc. v.
Louisville Gas & Elec. Co., 658 F.3d 807, 810 (7th Cir.
2011). The court focused on Hess’s admission that when
he left the firm the bonuses he already had been paid
were in the correct amounts. Later during the deposition,
Hess clarified this response. He emphasized that he
had not received all of the bonuses he believed he was
owed because some settlements occurred after he
was fired. As he put it, “there’s a handful [of cases] out
there that, as an example, went to Mr. Blan. I didn’t get
bonuses on those.” It was error for the district court to
construe Hess’s statement that he had received some
bonuses in the correct amounts as a broader admission
that he had no claim to any other bonus. Nowhere in his
deposition does Hess admit that the firm paid him
the latter bonuses.
6 No. 11-1850
Nor does any state court decision preclude Hess from
raising the issue of his post-termination bonuses. In the
state lien matters the courts rejected Hess’s claims
because Hess no longer had an attorney-client relation-
ship with the clients. See Thompson v. Skeffington, et al.,
4-09-076 (Ill. App. Ct. May 26, 2010) (“Hess did not have
an attorney-client relationship with Thompson when
he served his notice of an attorney’s lien. On that basis
alone, the trial court’s striking Hess’s invalid attorney’s
lien was proper.”); Lloyd v. Billiter, et al., 5-09-0065 (Ill.
App. Ct. Oct. 15, 2010) (“Any attorney-client relation-
ship between Hess and plaintiffs had long ceased.”).
The district court focused on one sentence in Lloyd—
that Hess’s “employment contract would bar any claim
he has for further compensation for his work on the
Lloyd litigation”—and thought that this settled the mat-
ter. But the state court’s decision must be read in con-
text. The state court was not evaluating Hess’s rights
against the firm; it was looking at whether Hess could
assert a right against the clients to be paid. The state
court concluded that he could not pursue the clients
both because he was no longer in an attorney-client
relationship with the clients and because his contract
gave him “no proprietary right or interest in representa-
tion of [the firm’s clients].” The court never considered
whether Hess had a claim for payment against his
former employer. Since the issues were different, nothing
in the state court decisions serves as a basis for issue
preclusion. See, e.g., Wakehouse v. Goodyear Tire & Rubber
Co., 818 N.E.2d 1269, 1275 (Ill. App. Ct. 2004).
No. 11-1850 7
This brings us to the merits of Hess’s claims. To
succeed on his breach of contract claim, Hess must show
“(1) the existence of a valid and enforceable contract;
(2) performance by the plaintiff; (3) breach of contract
by the defendant; and (4) resultant injury to the plain-
tiff.” Henderson-Smith & Assoc., Inc. v. Nahamani Family
Serv. Ctr., Inc., 752 N.E.2d 33, 43 (Ill. App. Ct. 2001). To
prevail on his IWPCA claim, Hess must first show that
he had a valid contract or employment agreement.
Illinois courts have explained that an agreement under
the IWPCA is “broader than a contract.” Zabinsky v. Gelber
Group, Inc., 807 N.E.2d 666, 671 (Ill. App. Ct. 2004) (the
IWPCA “requires only a manifestation of mutual assent
on the part of two or more persons; parties may enter
into an ‘agreement’ without the formalities and accompa-
nying legal protections of a contract”). The IWPCA re-
quires an employer to pay an employee any final compen-
sation due under that contract or agreement at the time
of separation; it defines final compensation to include
“wages, salaries, earned commissions, earned bonuses, . . .
and any other compensation owed by the employer
pursuant to an employment contract or agreement
between the two parties.” 820 ILCS 115/2 (2006).
The parties do not dispute that Hess had a valid
contract with the firm (his “employment agreement,” not
to be confused with “agreement” as it is used by the
IWPCA) and that, until his termination, he adequately
performed as an employee under that contract. The
dispute is solely over whether Hess’s employment agree-
ment entitled him to bonuses on settlements that were
8 No. 11-1850
collected after he left the firm. The employment agree-
ment originally provided that Hess would receive “15%
of all fees generated over the base salary (or $5,000
per month) with a guarantee of One Hundred and Twenty
Five Thousand ($125,000). Bonus shall increase to 25% of
all fees received annually in excess of $750,000.00.” The
firm later modified Hess’s compensation on June 21,
2002, increasing his base salary and changing the bonus
structure to “40% of all fee revenue generated” (with
some exceptions). (While the district court was ap-
parently unsure whether the agreement included the
terms found in a June 21 letter from the firm to Hess
that Hess had never signed, we see no reason not to
include that material. The critical signature is that of the
party against whom the contract is being enforced, and
that signature was present.)
No court has ever resolved the question whether
this contract requires the firm to pay Hess bonuses
from post-termination settlements. The language of the
contract is not clear because the contract does not define
when fees are “generated.” Fees might be “generated”
when work is performed on a case, because the work
ultimately leads to the settlement. This does not seem
odd if one considers the scenario in which an attorney
works on a case until it is nearly ready for settlement,
is fired, and then the next day the firm accepts a settle-
ment without her. If, on the other hand, fees are “gener-
ated” only when received by the firm, Hess would not
be entitled to the post-termination settlement earnings.
Under Illinois law, undefined terms are generally
given their “plain, ordinary, and popular meaning” as
No. 11-1850 9
found in dictionary definitions. Outboard Marine Corp. v.
Liberty Mut. Ins. Co., 607 N.E.2d 1204, 1215 (Ill. 1993); see
also Frederick v. Prof’l Truck Driver Training Sch., Inc., 765
N.E.2d 1143, 1152 (Ill. App. Ct. 2002). Resort to dic-
tionary definitions often, however, does not settle the
question; that is the case here. The infinitive “to generate”
means (among other things) “to bring into existence”
or “to be the cause of.” M ERRIAM-W EBSTER D ICTIONARY
O NLINE, http://www.merriam-webster.com/dictionary/
generated (last visited Jan. 30, 2012); see also O XFORD
E NGLISH D ICTIONARY O NLINE , http://www.oed.com/
viewdictionaryentry/Entry/77518 (defining “generated” as
“[p]roduced, created; caused”) (last visited Jan. 30, 2012).
Work performed before a settlement is obtained in
some sense produces or brings that settlement into exis-
tence. On the other hand, it is possible that the parties
intended “generated” to be limited to the final act of
bringing a fee into existence, i.e., actually obtaining
the cash in hand. Where language in a contract appears
to be “susceptible to more than one meaning,” Illinois
courts will “consider extrinsic evidence to determine
the parties’ intent.” Thompson v. Gordon, 948 N.E.2d 39, 47
(Ill. 2011).
Even if the district court concludes that Hess’s inter-
pretation is too broad and thus the contract does not
entitle Hess to bonuses on all of the post-termination
settlements, Hess has a good argument that he is
entitled at least to the fees related to settlements
obtained within the 30-day period after he was fired. The
contract required the firm to give Hess 30 days’ notice
before it ended his employment, but it did not do so. A
10 No. 11-1850
30-day provision is consistent with an at-will contract,
H. Vincent Allen & Associates, Inc. v. Weis, 379 N.E.2d
765, 771-72 (Ill. App. Ct. 1978), but breach of the 30-day
provision requires the firm to pay Hess whatever com-
pensation he was due during that time. See, e.g., Equity
Ins. Managers of Ill., LLC v. McNichols, 755 N.E.2d 75, 81 (Ill.
App. Ct. 2001). At least one of the settlements Hess
has identified—the Hoelscher settlement—was obtained
within that 30-day period. He is entitled to press his
argument that the contract gave him the right to bonuses
in connection with that settlement, no matter what
the parties meant by the term “generated.”
Contract interpretation is something on which we
conduct independent review, Holmes v. Potter, 552 F.3d
536, 538 (7th Cir. 2008), but “[w]here, as here, there is
more than one reasonable way to read the parties’
contract, it is not our role to choose among the com-
peting reasonable interpretations.” Curia v. Nelson,
587 F.3d 824, 832 (7th Cir. 2009). Especially in light of the
fact that the parties have not fully briefed this question
before our court, we remand for the district court to
interpret the contract and consider the merits of Hess’s
theories under Counts I and IV.
B
Hess has also asserted that the defendants induced a
breach of contract (Count V) and tortiously interfered
with his contracts (Count VI). These two counts are
functionally the same: Illinois courts address allegations
that parties have improperly induced breach under the
No. 11-1850 11
tortious-interference framework. See, e.g., Complete Con-
ference Coordinators, Inc. v. Kumon N. Am., 915 N.E.2d
88 (Ill. App. Ct. 2009); Cress v. Recreation Serv., Inc., 795
N.E.2d 817, 844 (Ill. App. Ct. 2003).
To prove tortious interference, Hess must show “(1) the
existence of a valid and enforceable contract between
the plaintiff and another; (2) the defendant’s aware-
ness of the contract; (3) the defendant’s intentional and
unjustified inducement of a breach of the contract;
(4) a subsequent breach by the other, caused by the defen-
dant’s conduct; and (5) damages.” Complete Conference
Coordinators, Inc., 915 N.E.2d at 93. We agree with the
district court that Hess cannot meet these elements
with respect to any defendant. As to the claim against
the firm and Kanoski in his capacity as firm president,
Hess founders because his contract with the firm is not
with “another.” In Illinois, “[i]t is well established that
a party cannot tortiously interfere with a contract to
which he is a party.” Fiumetto v. Garrett Enter., Inc.,
749 N.E.2d 992, 1004 (Ill. App. Ct. 2001).
This leaves only Hess’s tortious interference claim
against Blan. Hess had to point to some evidence in
the record that could support a finding that Blan’s in-
tentional conduct caused the firm to breach Hess’s em-
ployment contract. The only evidence Hess offered was
an allegation that Blan disparaged Hess’s work to a
client, but he had no proof that anyone at the firm
heard this comment. Without any evidence that Blan’s
conduct caused the firm to breach its contract with
Hess, summary judgment for Blan was appropriate.
12 No. 11-1850
Hess also alleged that the defendants interfered with
a variety of other rights, such as his attorney’s liens and
alleged contractual arrangements he had with his former
clients. The district court correctly dismissed all of
these claims because the only contract to which Hess was
a party was his employment contract, and under that
contract, Hess had no right to an ongoing relationship
with the firm’s clients. We therefore affirm the grant
of summary judgment on Counts V and VI of the com-
plaint.
C
The remainder of Hess’s complaint is a ragtag of
poorly pleaded claims, and like the district court, we
can quickly dispose of them. A few of Hess’s claims lack
any support in Illinois law. Hess has no claim under the
Illinois Consumer Fraud Act, Count II, because Hess
was an employee, not a “consumer.” 815 ILCS 505/1(e). His
claim for wrongful discharge, Count III, fails because
Hess was an at-will employee and an at-will employee
cannot sue for wrongful discharge. Hartlein v. Ill. Power
Co., 601 N.E.2d 720, 728 (Ill. 1992). Even though at-will
employees in Illinois can sometimes sue for retaliatory
discharge, id., this does not apply to attorneys like Hess.
Jacobson v. Knepper & Moga, P.C., 706 N.E.2d 491, 494 (Ill.
1998). Hess’s claim in Count IX for breach of fiduciary
duty is doomed because Hess’s relationship with the
firm was that of employer/employee, and in Illinois, this
relationship does not give rise to a fiduciary duty. Hytel
Group, Inc. v. Butler, 938 N.E.2d 542, 548 (Ill. App. Ct. 2010).
No. 11-1850 13
Partners in a law firm may owe one another a fiduciary
duty because of their profit-sharing arrangements, Dowd
v. Dowd, Ltd. v. Gleason, 693 N.E.2d 358 (Ill. 1998), but
that doctrine does not help Hess because he was an
employee, not a partner.
Hess’s claims for unjust enrichment and quantum
meruit in Count VII are also unsupported by Illinois law.
Unjust enrichment is an equitable remedy that lies where
a “defendant has unjustly retained a benefit to the plain-
tiff’s detriment and . . . the defendant’s retention of the
benefit violates the fundamental principles of justice,
equity, and good conscience.” A.P. Properties, Inc. v.
Rattner, ___ N.E.2d ___, 2011 WL 5321174, *3 (Ill. App. Ct.
2011). Quantum meruit is a quasi-contract doctrine
that allows courts to imply the existence of a contract
to prevent injustice. Hayes Mech., Inc. v. First Indus., L.P.,
812 N.E.2d 419, 426 (Ill. 2004). A plaintiff cannot pursue
either action, however, if his relationship with a
defendant is—like Hess’s with the firm—governed by
an express contract. See Stathis v. Geldermann, Inc., 692
N.E.2d 798, 812 (Ill. App. Ct. 1998) (unjust enrichment);
Keck Garrett & Assoc., Inc. v. Nextel Commc’ns, Inc., 517 F.3d
476, 487 (7th Cir. 2008) (quantum meruit).
All that is left of Count VII are Hess’s claims for quantum
meruit and unjust enrichment against Blan and Kanoski
in his individual capacity, but they too lack merit. A
plaintiff cannot recover under quantum meruit if he has
no expectation that the defendant would be the one to
pay for the services. Paradise v. Augustana Hosp. & Health
Care Ctr., 584 N.E.2d 326, 329 (Ill. App. Ct. 1991). Any
14 No. 11-1850
payment Hess expected to receive would have been
from the firm, not Blan or Kanoski individually. Nor can
Hess show that either Blan or Kanoski were unjustly
enriched. If Blan worked on the cases and was entitled
to receive bonuses under his own contract, then he
should have received those bonuses; Blan’s bonus was
not received to Hess’s detriment. And Hess makes no
allegation that Kanoski retained Hess’s bonus in his
individual capacity. It is the firm that would have wrong-
fully retained Hess’s bonus payments (assuming Hess
succeeds on his contract and wage claims), not Kanoski
individually.
The district court properly disposed of the remaining
counts because they lacked adequate development or
support. This court has repeatedly explained that “per-
functory and undeveloped arguments, and arguments
that are unsupported by pertinent authority, are waived.”
United States v. Hook, 471 F.3d 766, 775 (7th Cir. 2006).
Hess has made no argument on appeal to support his
claim in Count VIII for spoilation of evidence and thus
has waived this claim. As to his claim in Count VIII for
conversion, on appeal Hess focuses only on a dispute
over vacation pay, but Hess admitted in his deposition
that the parties had “worked . . . out” the vacation pay
issue.
Hess’s civil conspiracy claim in Count XI fares no
better. Hess’s pleadings are bare of any factual allega-
tions that support this claim. The complaint stated,
without elaboration, that the “defendants combined
with each other to commit unlawful acts mentioned
No. 11-1850 15
above or to cover up the unlawful acts mentioned
above.” This is not enough. See Seng-Tiong Ho v. Taflove,
648 F.3d 489, 502 (7th Cir. 2011). The only facts Hess
has pointed to in this case with respect to Blan’s involve-
ment—the disparaging remarks previously discussed—are
insufficient to support a finding of causation, which is
one of the elements of civil conspiracy. See Clarage v.
Kuzma, 795 N.E.2d 348, 358-59 (Ill. App. Ct. 2003).
Finally, we turn to Warren’s complaint for loss of con-
sortium, raised in Count X. This claim is “necessarily
predicated on the claim of a directly injured spouse.”
Monroe v. Trinity Hosp.-Advocate, 803 N.E.2d 1002, 1005
(Ill. App. Ct. 2003). Because Hess no longer has any live
tort claims against defendants, his wife’s claim was
correctly dismissed.
****
We R EVERSE the district court’s grant of summary
judgment on Counts I and IV and A FFIRM on all other
counts. The case is R EMANDED for further proceedings
consistent with this opinion. Each side is to bear its
own costs.
2-2-12