Michael Needle, P.C. v. Cozen O'Connor ( 2020 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 19-2241
MERLE L. ROYCE,
Plaintiff,
v.
MICHAEL R. NEEDLE P.C.,
Defendant-Appellant,
v.
COZEN O’CONNOR,
Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 15-cv-00259 — Rebecca R. Pallmeyer, Chief Judge.
____________________
ARGUED JANUARY 14, 2020 — DECIDED FEBRUARY 20, 2020
____________________
Before WOOD, Chief Judge, and ROVNER and ST. EVE, Circuit
Judges.
ST. EVE, Circuit Judge. After Michael R. Needle P.C. (“Nee-
dle P.C.”) went months without counsel in a fee dispute
2 No. 19-2241
action and was on the verge of a default judgment, three part-
ners from the law firm Cozen O’Connor stepped in to repre-
sent Needle P.C. Their representation successfully staved off
the pending default motion but was otherwise short-lived.
Less than three months after appearing as counsel, Cozen
O’Connor understandably withdrew due to irreconcilable
differences and a total breakdown of the attorney–client rela-
tionship. Cozen O’Connor sought to be compensated for its
work, though, under a quantum meruit theory and perfected
an attorney’s lien. The district court then granted Cozen
O’Connor’s petition to adjudicate and enforce the lien. Be-
cause Cozen O’Connor is entitled to recover in quantum meruit
and the district court properly concluded that the petitioned
fees were reasonable, we affirm.
I. Background
This appeal represents just a small, discrete slice of the un-
derlying litigation—the activities at issue here span only three
months out of a three-and-a-half-year row.1 That action is a
dispute over attorney’s fees between an attorney, Michael R.
Needle of Needle P.C., on the one side, and his former co-
counsel, Merle L. Royce, and their former clients on the other.
In short, after Needle and Royce settled a lawsuit on behalf
of their clients for $4.2 million, Needle argued the attorneys
(i.e., he and Royce) were entitled to $2.5 million—or about
sixty percent—of the settlement as attorney’s fees. But the par-
ties’ contingent fee agreement plainly provided, and the dis-
trict court held, that the attorneys were entitled only to one-
third of the settlement as their fee. Needle and Royce also
1 This is one of two appeals that we decided today regarding Needle’s
efforts to obtain a larger portion of the settlement.
No. 19-2241 3
disagreed over the appropriate split of the aggregate attor-
ney’s fee pursuant to a co-counsel agreement, which the dis-
trict court also determined. We affirmed both of those deci-
sions in a separate appeal.
During the course of the fee dispute, however, Needle P.C.
went long stretches of time without an attorney of record. The
court intermittently permitted Needle to appear pro hac vice
and represent Needle P.C., but Needle invariably failed to ad-
here to deadlines, disobeyed court orders, and generally en-
gaged in “obstructionist” and vexatious tactics that delayed
the case. So Needle’s admission pro hac vice was revoked, on
more than one occasion, and the district court numerous
times ordered Needle to retain independent counsel to repre-
sent Needle P.C.
Finally, with no clear end in sight and Needle’s refusal to
obtain counsel for Needle P.C. bringing the case to a stand-
still, Royce filed a motion for default on account of Needle
P.C.’s failure to defend. Needle was again ordered to find an
attorney for Needle P.C. and was given thirty days to do so.
On the last day of the deadline, three partners from Cozen
O’Connor filed appearances for Needle P.C.
When Cozen O’Connor first entered the case, it had been
going on for more than two-and-a-half years and had over
seven hundred docket entries. Cozen O’Connor, predictably,
spent a great deal of time familiarizing itself with the massive
record to even take on the representation. The attorneys also
engaged Royce in settlement discussions, which included par-
ticipating in settlement conferences. Cozen O’Connor then
sought and was granted leave to file a sur-reply in opposition
to the motion for default. As a result of Cozen O’Connor
4 No. 19-2241
appearing and filing the sur-reply, Needle P.C. avoided de-
fault judgment.
But less than three months after first appearing, Cozen
O’Connor moved to withdraw as counsel for Needle P.C., cit-
ing irreconcilable differences. No small part of those differ-
ences was the fact that Needle had given another law firm,
Mayer Brown—who represented one of the former clients—a
lien on any Needle P.C. recovery from the underlying lawsuit
so that Mayer Brown would continue to represent that client.
It is not clear why Needle did this, and the district court too
was “puzzled” by it, but the reason makes no difference here.
The bottom line is that Mayer Brown asserted a priority inter-
est in the same source of funds that Cozen O’Connor sought
to be paid out of under a contingent fee arrangement. There-
fore, before Cozen O’Connor withdrew from the case, it
served a Notice of Attorneys’ Lien pursuant to the Illinois At-
torneys Lien Act via certified mail. See 770 ILCS 5/1.
After it withdrew, Cozen O’Connor filed a petition to ad-
judicate and enforce its attorney’s lien and for an award of its
fees and costs. The petition sought attorney’s fees in the
amount of $124,458.00, which was broken down by hours and
rates, and costs in the amount of $2,205.66, for an aggregate
amount of $126,663.66 in fees and costs. Both Needle P.C. and
Mayer Brown filed objections to Cozen O’Connor’s petition.
The district court overruled Needle P.C.’s objections and spe-
cifically found that, contrary to Needle P.C.’s claims, even af-
ter Cozen O’Connor gave notice of its intent to withdraw, the
firm “continued vigorous efforts on [Needle P.C.’s] behalf—
drafting pleadings, appearing in court, engaging in settlement
efforts, and communicating with the client—until the court
granted leave to withdraw.” And as to Mayer Brown’s
No. 19-2241 5
objection, the court found, in a well-reasoned opinion, that
Mayer Brown’s prior perfected lien was superior and enforce-
able against Cozen O’Connor’s later-filed lien. The priority of
the liens was also later separately and extensively briefed by
Cozen O’Connor and Mayer Brown, and Cozen O’Connor
does not appeal the district court’s determination that Mayer
Brown’s lien was superior to its attorney’s lien.
II. Discussion
Needle P.C. haphazardly challenges the district court’s de-
termination that Cozen O’Connor is entitled to an attorney’s
lien and the award of fees and costs without an evidentiary
hearing. After wading through a sea of factual misrepresenta-
tions, we conclude that none of the legal arguments have
merit.
A. Cozen O’Connor’s quantum meruit claim
Needle P.C. retained Cozen O’Connor pursuant to a con-
tingent fee agreement, but Cozen O’Connor withdrew before
any contingency came to pass. The contract stated that if Nee-
dle P.C. terminates the representation then Cozen O’Connor
will have a claim for quantum meruit but was silent on any po-
tential fee in the event Cozen O’Connor withdraws. Thus
Needle P.C. argues—without citation to authority—Cozen
O’Connor cannot recover any fee. But after Cozen O’Connor
terminated the representation, the agreement was no longer
operative here.
“When an attorney-client relationship that was originally
established under a contingent fee contract terminates, the
contract no longer exists and neither party can therefore seek
to enforce the terms of the nonexistent contract.” Forest Pres.
Dist. of Cook Cty. v. Cont’l Cmty. Bank & Tr. Co., 98 N.E.3d 459,
6 No. 19-2241
472 (Ill. App. Ct. 2017). Instead, “when the attorney has with-
drawn and the court finds the attorney justifiably withdrew
from the case, then the attorney is entitled to proceed on a
claim to recover fees based on quantum meruit.” Id.; Kannewurf
v. Johns, 632 N.E.2d 711, 716 (Ill. App. Ct. 1994) (holding attor-
ney that withdrew from case “was entitled to the reasonable
value of his services up to the date of withdrawal”); Leoris &
Cohen, P.C. v. McNiece, 589 N.E.2d 1060, 1065 (Ill. App. Ct.
1992) (“If the court finds that the plaintiff justifiably withdrew
from the case, then the plaintiff will be allowed to proceed on
its claim for fees on a quantum meruit basis.”); Reed Yates
Farms, Inc. v. Yates, 526 N.E.2d 1115, 1124–25 (Ill. App. Ct.
1988) (“We perceive no reason why the quantum meruit stand-
ard should not also apply in situations where an attorney
withdraws from representation of a client for good cause.”).
Under a quantum meruit theory, the trial court is to award, as
the term literally means, “as much as he deserves.” Lee v.
Ingalls Mem’l Hosp., 597 N.E.2d 747, 749 (Ill. App. Ct. 1992).
Cozen O’Connor’s withdrawal was justifiable under the
circumstances and it is, therefore, entitled to recover on a
quantum meruit basis. Needle P.C. retained Cozen O’Connor
on a contingency arrangement whereby Cozen O’Connor’s
fees were to come solely from any Needle P.C. recovery in the
fee action. Unbeknownst to Cozen O’Connor at the time,
however, Needle P.C. had already given Mayer Brown a se-
cured interest in any recovery from that action. Thus, Cozen
O’Connor faced the stark reality that it would not be paid for
its continued legal services even if Needle P.C. recovered
money. In Reed Yates Farms, the Illinois Appellate Court held
that a client’s refusal to pay attorney fees during the course of
litigation was good cause to withdraw and the attorney was
entitled to compensation on a quantum meruit basis.
No. 19-2241 7
526 N.E.2d at 1120–21. We see no practical difference here.
Needle P.C. effectively refused to pay any attorney’s fee to
Cozen O’Connor, just without Cozen O’Connor knowing it.
Additionally, in its motion to withdraw, Cozen O’Connor
cited irreconcilable differences that prevented it from contin-
uing its representation. Needle P.C. has never contested this
assertion, either in the district court or even now on appeal.
Irreconcilable differences and a breakdown of the attorney–
client relationship provide good cause to withdraw that al-
lows the attorney to recover the value of his or her services in
quantum meruit. McGill v. Garza, 881 N.E.2d 419, 421, 423 (Ill.
App. Ct. 2007); Leoris & Cohen, 589 N.E.2d at 1065.
B. Illinois’s attorneys lien statute
Needle P.C. next asserts that, even if Cozen O’Connor can
recover quantum meruit fees, Cozen O’Connor cannot have an
enforceable attorney’s lien at all because its actions did not
“result in recovery” as Needle P.C. contends is required by
the Illinois lien statute.
The Illinois Attorneys Lien Act creates a “means of enforc-
ing the right of a lawyer to his fee” in the form of “a lien in
favor of the lawyer on the proceeds of the litigation or its set-
tlement.” Anastos v. O’Brien, 279 N.E.2d 759, 763 (Ill. App. Ct.
1972). The statute provides that attorneys “shall have a lien
upon all claims, demands and causes of action … which may
be placed in their hands by their clients for suit or collection,
or upon which suit or action has been instituted, for the
amount of any fee” for the services rendered. 770 ILCS 5/1.
Such lien attaches “to any money or property which may be
recovered, on account of such suits, claims, demands or
causes of action, from and after the time of service of the
8 No. 19-2241
notice.” Id. Because the Illinois attorneys lien is a statutory
creature, attorneys must strictly comply with that statute’s re-
quirements for perfecting a lien. People v. Philip Morris, Inc.,
759 N.E.2d 906, 911 (Ill. 2001). Needle P.C. does not challenge
Cozen O’Connor’s compliance with the Attorneys Lien Act to
perfect its lien. And “[o]nce the attorney’s lien is perfected,
upon petition ‘any court of competent jurisdiction’ may adju-
dicate the lien.” Id. (quoting 770 ILCS 5/1).
Needle P.C. nevertheless argues that the district court
erred because it enforced Cozen O’Connor’s lien without first
finding that the firm’s actions resulted in any recovery. It re-
lies on Robert S. Pinzur, Ltd. v. The Hartford, 511 N.E.2d 1281
(Ill. App. Ct. 1987), to support its so-called resulted-in-recov-
ery test. As pertinent here, the Pinzur court interpreted the
Act’s phrase that an attorney’s lien shall attach to any money
or property “recovered, on account of such suits, claims, de-
mands or causes of action.” Id. at 1288. “[W]hen the Act says
the recovery is to be ‘on account’ of various actions,” the court
“believe[d] it means the recovery must be a result of action
taken by the attorney.” Id. “To construe the statutory lan-
guage otherwise would result in unjust windfalls for attor-
neys in cases where a defendant acts wholly on its own and
no attorney services were rendered.” Id. In other words, there
must be some relation between the attorney’s activities for
which the attorney seeks a fee and the suit in which the money
or property is recovered.
But Needle P.C. takes Pinzur’s “result of action” language
in isolation and morphs it into a requirement that the attor-
ney’s actions must have “resulted in recovery,” or “substan-
tially or primarily produced” the recovery. First, “result of ac-
tion” is not synonymous with “resulted in recovery,” which
No. 19-2241 9
implies a but-for causation standard. Needle P.C. does not of-
fer any support for such a standard. And as we just explained,
the Pinzur court was concerned with a situation in which an
attorney rendered absolutely no services in the case, not
where an attorney in fact rendered services.
Second, and more fundamentally, Needle P.C. is conflat-
ing the requirements for an attorney’s lien under Illinois law
and a charging lien under Pennsylvania law. In determining
the priority between Cozen O’Connor’s lien and Mayer
Brown’s lien, the district court also discussed whether Cozen
O’Connor had an enforceable charging lien under Pennsylva-
nia law (because Needle P.C. is located in Pennsylvania). The
court stated that Cozen O’Connor had failed to establish that
its services “substantially or primarily secured the fund out
of which it sought to be paid,” which is a requirement of
Pennsylvania charging lien law. So Needle P.C. attempts to
take this finding and graft it on to Illinois law. It cannot do
that. These are two different types of liens under two different
states’ laws.
Finally, not only is Needle P.C.’s argument flawed legally,
it is flawed factually as well. There is no question that Needle
P.C.’s ultimate recovery was in no small part a result of Cozen
O’Connor’s actions in the matter. Recall, Needle P.C. was on
the verge of default judgment and was down to its final day
to retain counsel—Cozen O’Connor’s representation alone let
Needle P.C. stay in the game. The district court found that
Cozen O’Connor “invested substantial time and effort in rep-
resenting [Needle P.C.] and successfully defending it against
Royce’s default motion,” which allowed Needle P.C. “to con-
tinue pressing its claim that it was entitled to more than fifty
percent of the fund.” More specifically, the district court also
10 No. 19-2241
found that Cozen O’Connor’s “services were substantially re-
lated to the court’s determination of the share of those funds
ultimately awarded to [Needle P.C.], and in this sense, re-
sulted in a significant award for Needle.” Cozen O’Connor
has a valid attorney’s lien.
C. Reasonableness of Cozen O’Connor’s fees
Because Cozen O’Connor is entitled to recover its fees in
quantum meruit, Needle P.C. seeks an evidentiary hearing on
the reasonableness and amount of the claimed services. We
review a district court’s decision not to hold an evidentiary
hearing on attorney’s fees for an abuse of discretion. Pickett v.
Sheridan Health Care Ctr., 664 F.3d 632, 652 (7th Cir. 2011);
Small v. Richard Wolf Med. Instruments Corp., 264 F.3d 702, 709
(7th Cir. 2001). Further, it is not an abuse of discretion to de-
cline to conduct an evidentiary hearing “that would only ad-
dress arguments and materials already presented to the court
in the parties’ briefings.” Pickett, 664 F.3d at 652.
Under Illinois law, the trial court has “broad discretion in
matters of attorney fees due to the advantage of close obser-
vation of the attorney’s work and the trial judge’s deeper un-
derstanding of the skill and time required in the case.”
Kannewurf, 632 N.E.2d at 716; see also Kovitz Shifrin Nesbit, P.C.
v. Rossiello, 911 N.E.2d 1180, 1187 (Ill. App. Ct. 2009) (“The
trial court has broad discretionary powers in awarding rea-
sonable attorney fees and its determination is based on the
evidence presented by the parties.”). The relevant factors in-
clude “the time and labor required, the attorney’s skill and
standing, the nature of the cause, the novelty and difficulty of
the subject matter, the attorney’s degree of responsibility in
managing the case, the usual and customary charge for that
No. 19-2241 11
type of work in the community, and the benefits resulting to
the clients.” Kannewurf, 632 N.E.2d at 717 (emphasis omitted).
The district court was intimately familiar with the unique
difficulties this case presented and the work that Cozen
O’Connor did in the short time that it represented Needle P.C.
The court noted Cozen O’Connor’s “vigorous efforts on [Nee-
dle P.C.’s] behalf—drafting pleadings, appearing in court, en-
gaging in settlement efforts, and communicating with the cli-
ent”—continued even after it moved to withdraw and until
the court granted the motion. And, in several other instances,
the district court remarked that Cozen O’Connor “worked
diligently” for Needle P.C., “engaged in substantial efforts re-
viewing the file and preparing pleadings,” “made a meaning-
ful effort to analyze [Needle’s reconstructed time records] and
present them to the court,” and even recognized that “the rep-
resentation was a challenging one.”
Further, Cozen O’Connor submitted detailed billing rec-
ords along with an affidavit explaining the requested fees.
And Needle P.C. filed objections to the reasonableness of
those fees, which the district court considered and rejected. A
district court is not required to hold an evidentiary hearing on
attorney’s fees where a party has an opportunity to respond
and make specific objections to the fee petition. See Small,
264 F.3d at 709. Here, the only purpose a hearing would have
served would be for Needle P.C. to simply reargue its objec-
tions. Based on its deep understanding of the case and the ma-
terials submitted by the parties, the district court appropri-
ately determined the reasonableness of Cozen O’Connor’s
fees without an evidentiary hearing.
12 No. 19-2241
III. Conclusion
Cozen O’Connor withdrew from the representation of
Needle P.C. for good cause and is therefore entitled to quan-
tum meruit recovery. The district court correctly granted
Cozen O’Connor’s petition to enforce its attorney’s lien and
properly awarded the firm its reasonable fees. We affirm the
district court’s judgment.