A Cook County judge has been asked to take another look at a ruling that would give nearly $15 million to a group of lawyers who pursued a lawsuit among business partners for nearly two decades – a fee award that could include more than $2 million for a fellow Cook County judge and his former law partner.
In late July, Cook County Associate Judge Neil Cohen ruled that attorneys with the firm of Edward T. Joyce & Associates should receive a 20% cut of the so-called “common funds” created by Judge Cohen as part of his judgment in favor of the plaintiffs in the decades-old court fight.
However, the defendants in the case say the judges fee award is “unreasonable” and “disproportionate” to the amount of money that will actually change hands in the case.
Cook County Circuit Judge Patrick Sherlock
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Further, they said, the method chosen by the judge to calculate the attorney fee award boosts the payday for Cook County Judge Patrick Sherlock and his ex-law partner Peter Carey.
This, they said, “increases the appearance of impropriety,” because the decision would involve an allegedly inflated payout to a current Cook County judge ordered by another Cook County judge.
TWO DECADES IN COURT
The case landed in Cook County court in 2001, when a group of investors in partnerships created in the 1990s to invest in bonds issued by suburban Broadview and Bedford Park, filed suit against the majority partners in their groups.
The lawsuit accused the defendants, including Dennis Hiffman, John Shaffer, E. Thomas Collins Jr. and Richard Hulina, of allegedly steering the proceeds from those investments to themselves, shortchanging the partnerships of $24 million to $50 million.
The defendants, collectively identified in court documents as “HCH,” have contested the accusations in court ever since.
Initially, the plaintiffs in the action were represented by Carey and Sherlock, who then worked as a lawyer in partnership with Carey. Sherlock and Carey stepped out of the case in 2003, claiming a dispute with one of the initial plaintiff investors over her desire to accept an “inadequate” settlement deal.
Carey and Sherlock were then replaced by the attorneys from the Joyce firm, led by attorney Robert Carroll, representing the remaining plaintiffs.
Attorney Edward T. Joyce is now Sherlock’s father-in-law.
Sherlock was later appointed by the Illinois Supreme Court to the Cook County court as a judge. He was elected as a circuit judge in 2014. He is assigned to cases in the cook County Circuit Court Law Division.
The HCH lawsuit is assigned to the Cook County court’s Chancery Division.
At the end of 2018, Judge Cohen ruled in favor of the plaintiffs, and ordered HCH to pay damages of about $80 million. The money was divided into so-called “common funds,” designed to reimburse the partnerships for the alleged losses.
Since then, however, court proceedings have largely focused on how much the plaintiffs’ lawyers should be paid.
In early 2019, Carey and Sherlock reentered the fray, as Carey asked Judge Cohen to award him and Sherlock $2.4 million in fees for their work on the case.
HCH opposed the request, and asked Judge Cohen to send the case outside Cook County, because it would involve one Cook County judge asking another Cook County judge to award him millions of dollars.
Judge Cohen refused to step aside, however, though he later said he would award fees only to the Joyce firm and not Carey and Sherlock.
However, Carey, Sherlock and the Joyce firm then reached a deal under which Carey and Sherlock would receive 7% of whatever fees the Joyce firm was awarded in the case.
$15 MILLION FEES, $1.9 MILLION "REAL DAMAGES?"
The Joyce lawyers later filed a request for $24.7 million in fees for their work on the case, equal to about 30% of the common funds.
HCH opposed that request, also calling it “unreasonable.”
HCH noted that, since the partnerships were still 97% owned by the defendants, only about $1.9 million would actually be paid to the plaintiff investors.
Thus, they said, the plaintiff lawyers would receive tens of millions in fees, while their clients would get less than even Carey and Judge Sherlock would receive from any such award.
Without holding a hearing with live arguments, Judge Cohen issued an order on July 30 granting the Joyce lawyers fees of 20% from the common fund.
Cohen acknowledged the financial reality in the case, saying he was “not oblivious” to the fact that HCH corporate entities will receive 97% of whatever amount from the $80 million common fund isn’t paid to lawyers.
He said his decision “strikes the appropriate balance between adequately and equitably compensating (the Joyce lawyers) while still protecting the interests of all the beneficiaries of the common fund.”
After deducting a $1.6 million settlement from much earlier in the case, the judge set the payout to plaintiffs’ lawyers at about $14.88 million. That could set Carey and Sherlock up to each receive more than $1 million from the fee award.
In late August, the HCH defendants asked the judge to reconsider that decision.
They said the judge erred in not double-checking his decision against an alternative method of awarding attorney fees. That method, known as the “lodestar,” calculates a fee award using actual or estimated hours spent on a case by attorneys, multiplied by what a judge deems to be a reasonable hourly rate.
The HCH defendants’ lawyers noted, in earlier filings, the plaintiffs’ lawyers had assigned values of around $475 an hour to their work on the case.
Yet, in awarding a 20% take of the common funds, the judge had instead substituted hourly rates of more than $2,300.
They noted the judge had accepted billing records estimating the Joyce lawyers had devoted 6,300 hours of work to the case over nearly 18 years.
Further, the HCH defendants said Judge Cohen’s chosen fee calculation method had improperly failed to account for the contributions of Carey and Sherlock to the case, thereby boosting the payouts to the Cook County judge and former law partner. They said Carey and Sherlock would still be due to receive more than $1 million each.
They said Carey and Sherlock would have been due much less, if the lodestar method had been used to calculate the fees, or at least double-check the award.
And, the defendants asserted again that a $15 million to $16 million fee award was “disproportionate” to the actual amount of money that will go to their clients.
“At bottom, Petitioning Counsel (the Joyce firm) was awarded seven to eight times what the Court itself exposed as the ‘real damages’ here … based on the legal fiction that (HCH) are going to pay themselves over $67 million,” the defendants wrote in their motion to reconsider.
“This fundamental fact cannot be ignored and illustrates the unreasonableness of the current fee award.”
The motion to reconsider has been opposed by the Joyce lawyers.
In a brief filed Sept. 14, they noted Judge Cohen addressed the possibility of using lodestar to calculate the attorney fees, but found the case, with its twisting history, was so complex, using lodestar was “nigh impossible.”
They further noted Cohen was within his rights to award attorney fees, by whatever method he deemed best, at his “sole discretion.”
“The bottom line is that under Illinois law, this Court has discretion in selecting either lodestar or percentage-of-the-fund and is not required to perform a lodestar cross-check,” the Joyce lawyers wrote. “Consistent with Illinois law, this Court awarded a reasonable fee that adequately and equitably compensates Derivative Counsel (the Joyce lawyers) while protecting the interests of all the beneficiaries of the fund.”
And, the plaintiffs’ lawyers asked Cohen to reject the HCH defendants’ assertions that the fee award improperly boosts the payments to Judge Sherlock and Carey.
They said Cohen’s decision allowed the parties and the court to avoid protracted “satellite litigation” over how much Carey and Sherlock should be paid.
“This Court was more than competent to determine from both Derivative Counsel’s (the Joyce lawyers’) submissions and its own first-hand experiences in this case what an appropriate percentage was to compensate Derivative Counsel for the work that it did in this case and for the results that it achieved, without regard to Carey and Sherlock,” the Joyce lawyers wrote (emphasis original.)
The HCH defendants are under Judge Cohen’s order to reply by Sept. 28 to the Joyce lawyers’ brief.
Judge Cohen has not yet ruled on HCH’s request to reconsider the July 30 fee award order.
HCH is represented in the case by attorneys Robert H. Lang, of the firm of Thompson Coburn LLP; John D. Burke, of Ice Miller LLP; and Matthew T. Furton, of Locke Lord LLP, all of Chicago.