Morad Elusta v. City of Chicago ( 2012 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 11-2261
M ORAD E LUSTA,
Plaintiff-Appellant,
v.
C ITY OF C HICAGO, et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 06 C 4264—Amy J. St. Eve, Judge.
A RGUED A PRIL 11, 2012—D ECIDED S EPTEMBER 4, 2012
Before W OOD , W ILLIAMS, and T INDER, Circuit Judges.
W OOD , Circuit Judge. This is a case about attorney’s
fees.1 But it is not the typical attorney’s fees case in which
1
For an entertaining meditation on the proper spelling
of “attorney’s fees,” see Stallworth v. Greater Cleveland Reg’l
Transit Auth., 105 F.3d 252, 253 n.1 (6th Cir. 1997) (“Should
we refer to ‘attorney fees,’ ‘attorneys fees,’ ‘attorney’s fees,’ or
‘attorneys’ fees?’ In federal statutes, rules and cases, we
find these forms used interchangeably, nay, promiscuously.
(continued...)
2 No. 11-2261
an attorney seeks review of a court’s award, perhaps
arguing about an improperly calculated lodestar. In-
stead here, a client—Morad Elusta—seeks to compel two
of his former attorneys, Zane Smith and Shelia Genson,
to turn over some of the fee award to him. Smith and
Genson represented Elusta in a civil rights suit against
the City of Chicago, in which he won a $40,000 judg-
ment. Pursuant to 42 U.S.C. § 1988, the court then
awarded Elusta $82,696.50 for his attorney’s fees, which
the City has since paid to Smith and Genson.
In addition, the court entertained fee claims from
two more of Elusta’s former attorneys, David Cerda
and John De Leon, who represented Elusta in the same
matter before Smith and Genson took over. The dis-
trict court determined that although Cerda and De Leon
could not assert an attorney’s lien on Elusta’s judg-
ment, Elusta should still pay them $15,000 in quantum
meruit for their services. Elusta now insists that the City
of Chicago, not he, should pay the quantum meruit
award, and on top of that, he is entitled to retain 60% of
the amount awarded for the attorneys. Like the district
court, we find these arguments to be entirely without
merit. We thus affirm.
1
(...continued)
There is sometimes no consistency within even the same body
of law.”). In this decision, we will follow the text of 42 U.S.C.
§ 1988 and refer to the awards at issue as “attorney’s fees,”
even though of course we recognize that more than one
attorney stands to benefit from the fees in this case.
No. 11-2261 3
I
In the underlying case, Elusta sued the City of Chicago
and several of its police officers for excessive force,
false arrest, and intentional infliction of emotional dis-
tress that he suffered in conjunction with their search of
his home and his subsequent arrest. He first retained
Cerda and De Leon to bring these claims. Cerda and
De Leon conducted discovery and obtained a settle-
ment offer of $100,000 from the City of Chicago. But
Elusta rejected this offer, apparently because he was
upset that his retainer agreement with Cerda and De Leon
contained a 40% contingent fee provision. Although
the parties attempted mediation to resolve the dispute
over the fee arrangement, the district court eventually
permitted Cerda and De Leon to withdraw from the case.
Elusta had difficulty finding new attorneys to repre-
sent him, but he ultimately retained Smith and Genson.
They took the case to trial before a jury, which found
in Elusta’s favor on two of the counts (excessive force
and intentional infliction of emotional distress) and
awarded him a total of $40,000. Smith and Genson
then petitioned the court for attorney’s fees on behalf
of Elusta pursuant to 42 U.S.C. § 1988. Before the court
could rule on the petition, Elusta retained a third set of
attorneys—Donald Johnson and Joseph Gentleman—to
litigate the fee issue. Johnson and Gentleman filed a
motion seeking to direct payment of some of the fees to
Elusta, rather than to Smith and Genson. The court dis-
missed that motion as premature, as it had not yet ruled
on the fee petition.
4 No. 11-2261
Smith and Genson’s petition languished for nearly
16 months without a ruling. At that point, Cerda and
De Leon filed their own motion for fees, asserting an
attorney’s lien on the judgment or in the alternative, a
right to recover the value of their work under quantum
meruit.
On December 13, 2010, the district court resolved the
various fee motions. It granted Smith and Genson’s
request that it award $82,696.50 in fees pursuant to § 1988.
Cerda and De Leon, it concluded, had not complied
with Illinois state law requirements to perfect an attor-
neys’ lien, but the court decided that they could re-
cover $15,000 in quantum meruit. Elusta then refiled his
motion seeking to have 60% of both amounts paid
to him directly by the City of Chicago, with the
remainder going to the attorneys. The district court
denied Elusta’s motion, thereby concluding its work on
the fee issues, and Elusta now appeals.
II
We begin with Elusta’s assertion that he has a right
to a portion of the fees awarded to Smith and Genson.
It is well established that statutory attorney’s fees are
awarded to a prevailing party, but that the party is free
to waive or negotiate her right to the fees in her
contract with counsel. Venegas v. Mitchell, 495 U.S. 82, 87-90
(1990). We thus must look to Elusta’s retainer agree-
ment with Smith and Genson to see if that agreement
supports Elusta. Interpretation of this contract raises
questions of law that we review de novo. Thomas v.
No. 11-2261 5
General Motors Acceptance Corp., 288 F.3d 305, 307 (7th
Cir. 2002).
The pertinent language in the agreement is the fol-
lowing:
[T]he Client(s) acknowledges his/her understanding
of and consent to the fact that [Genson and Smith]
will divide the attorney’s fees recovered in the Cli-
ent(s)’s claim.
Elusta argues that the phrase “the attorney’s fees” does
not clearly cover all of the attorney’s fees. (This reminds
us of Humpty Dumpty’s comment about meaning in
Through the Looking-Glass, but we will let that pass.) Elusta
believes that other language in the agreement—namely,
the contingent provision—controls the amount of at-
torney’s fees that are available for Smith and Genson
to divide between themselves. He is referring to the
language providing that the client (Elusta) would
pay his attorneys “[a] sum equal to 40% of the gross
amount recovered from the claim by settlement or Judg-
ment.” Elusta thinks that the attorney’s fee award is part
of the amount recovered “by settlement or Judgment.”
He then concludes that he is entitled to 60% of the fee
award and that Smith and Genson collectively receive
the remaining 40%, to divide as they wish.
The contract cannot bear Elusta’s interpretation. What
it does, in effect, is to say that counsel is entitled to
receive 40% of any damages (the contingent fee); if fees
are awarded to Elusta pursuant to § 1988, the attor-
neys receive all of that award. The language that the
attorneys “will divide the attorney’s fees recovered”
unambiguously covers all of the attorney’s fees recov-
6 No. 11-2261
ered. To come out Elusta’s way, the agreement would
have to be reworded to say something like “the attorneys
will divide their portion of the attorney’s fees recovered.”
The contingent fee provision plainly does not have any-
thing to say about statutory fees. The contract awards
60% of a “settlement or Judgment” to Elusta, not “fees.”
Elusta argues that the contract’s use of the term “Judg-
ment” must also encompass “fees,” but he cannot
support this idiosyncratic view. The contract dis-
tinguishes between judgments and fees in the two
clauses quoted above, and that distinction is almost
universal in the case law. See, e.g., Budinich v. Becton
Dickinson & Co., 486 U.S. 196, 200 (1988) (attorney’s fees
are “not generally treated as part of the merits judg-
ment”). We thus agree with the district court that Elusta
is not entitled to any of the $82,696.50 fee award that
the City of Chicago paid to Smith and Genson.
III
Elusta’s argument with respect to the $15,000 awarded
to Cerda and De Leon in quantum meruit presents an
additional difficulty, because there is a threshold
question whether the district court had jurisdiction to
consider this claim in the first place. The district court
believed that it had supplemental jurisdiction over this
state-law matter because Cerda and De Leon’s claims
for fees were intimately related to the underlying litigation.
In our view, the court correctly concluded that it
could exercise jurisdiction over this part of the dispute.
Attorney’s fee disputes are closely enough related to
No. 11-2261 7
the underlying litigation to be the basis for supple-
mental jurisdiction, even if other attorney-client disputes,
such as malpractice actions, are not. See Abbott Laboratories
v. CVS Pharmacy, Inc., 290 F.3d 854, 858 (7th Cir. 2002)
(recognizing that “supplemental jurisdiction has been
capacious enough to include claims by or against third
parties” such as claims about attorney’s fees); Clarion
Corp. v. American Home Products Corp., 464 F.2d 444, 445
(7th Cir. 1972) (“There is no question . . . that a Federal
District Court may adjudicate the attorney’s fee ques-
tion pursuant to the lien created by [a state] statute;
the theory being that if the original action has a proper
basis for Federal jurisdiction then any recovery achieved
by that suit creates an attachable interest upon which
the attorney may assert his claim for fees.”). In Matthews
v. Homecomings Fin. Network, Inc., 264 F. App’x 536,
537-38 (7th Cir. 2008), a nonprecedential disposition, we
noted that “because of a high degree of relatedness,
supplemental jurisdiction extends to suits over
attorney’s fees for work in underlying litigation that
is already within the court’s jurisdiction.” The court in
Matthews, as here, entertained the adjudication of a
state law attorney’s lien and an alternative argument
for recovery in quantum meruit. Id. at 539.
We thus turn to the merits of Elusta’s argument that
he should share in the quantum meruit award. It fails for
much the same reason that sank his claim to part of the
Smith and Genson award. Elusta points to a similar
contingent fee clause in his agreement with Cerda and
De Leon and argues that this means he should keep 60%
of the $15,000. We agree with the district court that this
8 No. 11-2261
argument “defies logic.” The purpose of quantum meruit
is to prevent unjust enrichment. In re Estate of Callahan,
578 N.E.2d 985, 988 (Ill. 1991). The court awarded $15,000
to Cerda and De Leon precisely because it concluded
that it would be unjust for Elusta to keep that money
after he had received the benefits of Cerda and De Leon’s
services. Elusta is thus, by definition, not entitled to
keep any of it. See Much Shelist Freed Denenberg & Ament,
P.C. v. Lison, 696 N.E.2d 1196, 1199 (Ill. App. Ct. 1998)
(“In quantum meruit recovery, the former client is liable
for the reasonable value of the services received during
the attorney’s employment.”).
The same principle also dooms Elusta’s argument that
the City of Chicago should be on the hook for the $15,000.
The entire purpose of the quantum meruit claim is to
disgorge wrongfully retained money from the party
who received the benefit of the work—that is, the “former
client,” Elusta. It is not a statutory attorney’s fee to be
paid by the City of Chicago.
IV
We finally address the motion brought by Smith and
Genson during this appeal for sanctions against Elusta’s
current attorneys, Johnson and Gentleman. Smith and
Genson argue that these attorneys should be sanctioned
because “the Order that they appeal from [the denial of
the motion to direct payment of fees] is not an appealable
Order.” In Smith and Genson’s view, “the final Order
was entered on October 16, 2008, rendering the June 3,
2011 Appeal untimely.”
No. 11-2261 9
It is hard to know what to make of this argument. It
is true that judgment in the underlying case was
entered in 2008, but the district court had not yet
received the attorneys’ petitions for fees. The district
court ruled on the fee motions on December 13, 2010.
Elusta then filed a motion to direct payment on Decem-
ber 23, 2010, which the district court denied on May 4,
2011. Elusta next timely filed a notice of appeal, on June 2,
2011. Smith and Genson read Budinich, 486 U.S. at
199-200, as supporting the argument that the June 2011
appeal was untimely because Elusta should have
appealed in 2008. But Budinich merely holds that a
plaintiff may appeal a judgment on the merits when the
merits are decided, even though later proceedings may
still take place to determine fees. Budinich has nothing
to say about this case: Elusta could obviously not
appeal the denial of a motion to direct payment of fees
before the fees had even been sought or awarded. Smith
and Genson’s argument otherwise is itself frivolous,
and we therefore decline their request for sanctions.
***
We A FFIRM the decision of the district court denying
Elusta’s motion to direct payment of the fee awards,
and D ENY Smith and Genson’s motion for sanctions.
9-4-12