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22157 LB reprint Schaffer Dec07 2017 .pdf


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THURSDAY, DECEMBER 7, 2017

CHICAGOLAWBULLETIN.COM

®

Volume 163, No. 239

Serving Chicago’s legal community for 163 years

Long and winding road to Goesel
and family law disgorgement
n Nov. 30, the Illinois
Supreme Court, in
In re Marriage of
Christine Goesel and
Andrew Goesel, 2017
IL 122046 (2017), held that
earned attorney fees — as in fees
received for actual services rendered — are not “available” for
turnover, or disgorgement, pursuant to a petition for interim attorney fees brought under
Section 5/501(c-1) of the Illinois
Marriage and Dissolution of
Marriage Act and, thus, resolving a contentious split in the circuits.
This article will touch upon
the history, as well as the main
cases cited in Goesel, which got
us to where we are today.
The statute, 750 ILCS 5/501(c1), affectionately known as the
“leveling the playing field” provision, governing the award of interim attorney fees in actions
brought under the act, became
law June 1, 1997. It allows one attorney to effectively reach into
the pocket of his or her opponent
for an equal share of the retainer
or fees received by the latter for
legal representation.
This, after the court makes a
finding that both parties lack the
financial resources to fund litigation brought under the act. This
logically started a journey for
family law attorneys to keep
their pockets out-of-bounds from
their opponent’s hands. Application of Dowling v. Chicago Options
Associates Inc., et al., 875 N.E.2d
1012, 226 Ill.2d 277 (2007), was
certainly worth a try.
In Dowling, the Illinois
Supreme Court recognized the
existence and validity of advance-payment retainers. Unlike a security retainer (which
remains the client’s property
and is held in the attorney’s
client’s funds account until
earned), an advance-payment
retainer is deposited directly

O

into the attorney’s general account — effectively shielding it
from the claims of any of the
client’s creditors.
As such, it is considered the
attorney’s property, subject to
refund to the client of any unearned funds remaining when
the attorney’s retention ends.
After Dowling, the Illinois
Supreme Court amended portions of the Illinois Code of Professional Conduct to cover
advance-payment retainers,
which by definition, are not held
in one’s client’s funds account.
(iardc.org/DowlingFAQs.html
“Frequently Asked Questions for
Retainers and Dowling” — put
out by the Attorney Registration
& Disciplinary Commission is
must reading for anyone contemplating accepting advance-payment retainers.)
With Dowling in mind, perhaps
an advance-payment retainer
could also act as a shield from
750 ILCS 5/501 (c-1). In In re Marriage of John J. Earlywine and Jessica A. Earlywine, 2013 IL 114779,
996 N.E.2d 642, 374 Ill.Dec. 947
(2013), the Illinois Supreme
Court held otherwise.
In Earlywine, after finding that
both parties lacked sufficient financial resources to fund litigation brought under the act, the
trial court ordered petitioner’s
attorney, Thomas James, to turn

FRONT LINES OF
FAMILY LAW

DAVID N.
SCHAFFER

David N. Schaffer with Schaffer Family
Law Ltd. in Naperville has been in
private practice for 33 years.
Concentrating in domestic and
international family law, he is a Fellow of
the American Academy of Matrimonial
Lawyers, as well as the International
Academy of Family Lawyers. A former
chair of the ISBA Family Law Section
Council, he was also a member of the
Illinois General Assembly’s Family Law
Committee that rewrote the entire body
of Illinois family law statutes. He can be
reached at Schaffer@familylawltd.com.

turnover order. The trial court
held James in “friendly”
contempt at his request so that
he could appeal the turnover
order.
The concept of “friendly” contempt can be explored in In re
The Marriage of Beyer and Parkis,
753 Ill. Dec. 406 (Ill. App. Ct.
2001), a case that also remains
the must-read primer for Section

It allows one attorney to ... reach into the pocket
of his or her opponent for an equal share of the
retainer or fees received by the latter ...
over, or disgorge, to respondent’s
attorney half the fees previously
paid to him as an advance-payment retainer.
James had accepted an advance-payment retainer specifically to circumvent the “leveling
of the playing field” rules and
specifically to thwart just such a

5/501(c-1) proceedings. Beyer
pointed out that, while a
turnover order for interim attorney fees is not final and appealable, Illinois Supreme Court Rule
304(b)(5) allows for interlocutory
appeal of an order for contempt
imposing monetary or other
penalties.

Earlywine held that advancepayment retainers could not be
used to thwart the intent of Section 501(c-1). Earlywine held that
to allow attorney fees to be
shielded with an advance-payment retainer arrangement
would directly undermine the
“level the playing field” policies
as well as strip the statute of its
power.
If the court were to accept
James’ argument, an economically advantaged spouse could
obtain an unfair advantage in any
dissolution case simply by stockpiling funds in an advance-payment retainer held by his or her
attorney. The Illinois Supreme
Court affirmed the trial court’s
turnover order while ordering
the contempt order to be vacated. What followed was a contentious split in the circuits.
In In re Marriage of Michael
Squire and Catherine D. Squire,
2015 IL App (2d) 150274 (Ill. App.
Ct. 2015), an unemployed wife
borrowed $130,000 from her parents to pay the Stogsdill Law
Firm P.C. in Wheaton to represent her in dissolution of marriage proceedings.
Pursuant to the husband’s petition for interim attorney fees,
William J. Stogsdill was ordered
to disgorge $60,000, or about
half of the $130,000 in fees his
firm had billed its client. It did
not matter to the Squire court
that the fees were from nonmarital funds. (Under the act, courts
lack jurisdiction to divide nonmarital property in predecree
proceedings. However, once nonmarital property is put into play
by being used for attorney fees,
that protection disappears.)
After being held in contempt
for refusing to turn over the
funds, the turnover order made
it to the 2nd District Appellate
Court, bringing into play what
Section 501(c-1) meant by “available” funds.

Copyright © 2017 Law Bulletin Media. All rights reserved. Reprinted with permission from Law Bulletin Media.

Foreshadowing the final Goesel
opinion, Stogsdill argued that
truly “earned” fees were no
longer “available” for an interim
fee award. He also argued that
Earlywine was not applicable because his firm did not receive an
advance-payment retainer, suggesting that such a retainer is essentially an accounting device to
shield the funds from the client’s
creditors, whereas he had earned
his retainer by performing legal
services.
The Squire panel believed that
Earlywine did not intend to limit
its holding to advance-payment
retainers. It also stated that in
construing the intent of a
statute, it was allowed to consider not only the language of the
statute, but also the purpose and
necessity for the law, evils sought
to be remedied and goals to be
achieved.
It suggested that one of the
“evils” was the attorney representing the financially advantaged spouse filing voluminous
pleadings and motions early in
the case, thus “earning” the retainer, while leaving the other
spouse to respond to a mountain
of paperwork with little chance
of obtaining resources to do so
properly.
The Squire panel also opined,
that earned or not, funds were
always “available” somewhere.

The Squire court affirmed the
trial court’s disgorgement order
against Stogsdill, while vacating
its order of contempt.
The 1st District saw things differently.
In In re Marriage of Altman,
2016 IL App (1st) 143076 (Ill.
App. Ct. 2016) the trial court
record indicated that the proceedings have been “extremely
contentious” and the parties
“overly litigious.” The court
found that both parties lacked
sufficient access to assets or income to pay reasonable attorney
fees and costs and that the case
presented a classic scenario for
invocation of the act’s “leveling of
the playing field” provisions.
In addition to divvying up
funds remaining in his client
fund account, the court ordered
the husband’s attorney to disgorge a total of $16,000 in fees
paid for services already rendered. The 1st District reversed
the second part of that order, requiring disgorgement of earned
fees.
Altman clearly created the
template for the final Goesel opinion, including a primer on the
mechanics of statute interpretation. After paying its de rigueur
“respect” to “our colleagues’ decision in Squire,” the Altman
court proceeded to shred it to
pieces.

In fairness, Squire did not address many issues raised in Altman. The court assumed it was
because Stogsdill did not raise
them in Squire. It seemed to the
Altman court a “tortured” reading of Section 501 (c-1) to say
that even though the firm has
earned the fees, paid itself (as it
was entitled to do), and used
that income to pay salaries, overhead and litigation expenses for
items such as experts and court
reporters, it can nonetheless be
required to refund those fees,
not to its client, but to a third
party.
As such, Altman held that
funds earned by and paid to a
party’s lawyer in the normal
course of representation for past
services rendered are not “available funds” within the meaning
of Section 501(c-1). It reversed
the disgorgement order to the extent it required appellant-contemnor and husband’s attorney
Steven Gerage to disgorge fees
he had already earned and then
vacated the contempt order
against him.
In In re Marriage of Christine
Goesel and Andrew Goesel, 2017 IL
App (3d) 150101 (Ill. App. Ct.
2017), the 3rd District also sided
with Altman, with a slight twist.
The essences of the main
cases cited in the Illinois
Supreme Court’s Goesel opinion

have already been discussed,
above. As such, what follows will
be a brief, albeit anti-climactic
additional discussion of that
opinion.
In its Goesel opinion, the 3rd
District sided with Altman, but
held as “available” fees earned
after an attorney receives an opponent’s petition for interim attorney fees.
Somehow, the court got to that
place by equating an interim fee
petition with a trial court lacking
jurisdiction to modify a support
order retroactive to before the
filing and notice of a motion to
modify. That loophole for grabbing truly earned fees was jettisoned by the Illinois Supreme
Court in its subsequent Goesel
opinion.
In Goesel, the Illinois Supreme
Court adopted the Altman opinion along with the discussions
and rationale behind it, holding
that fees that have been earned
(not earned as in Dowling, but
truly earned) are not subject to
disgorgement. Period.
End of story?
Food for thought: In rendering
its ruling, the Illinois Supreme
Court noted the parties had stipulated the fees already earned
were reasonable and necessary.
What if a portion of the fees were
shown to be not reasonable
and/or not necessary?

Copyright © 2017 Law Bulletin Media. All rights reserved. Reprinted with permission from Law Bulletin Media.


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