A group of businessmen are continuing their efforts to stop lawyers, including a sitting Cook County judge and his former law partner, from taking home $15 million in fees, as they say the people those lawyers are representing will gain nothing from a legal fight that has stretched over two decades.
For the past month, attorneys for both sides have exchanged briefs in Cook County Circuit Court, in arguments over just how much the named individual plaintiffs in the litigation will actually receive from a judgment in the case – and, ultimately, by extension, how much the defendants should be forced to fork over to pay the lawyers who have spent the past 20 years suing them.
The flurry of filings comes as the latest steps in the long-running litigation that began as a dispute between partner investors over bond proceeds.
The case first landed in Cook County court in 2001, when minority partners in the investment group accused the majority partners of improperly steering as much as $50 million to themselves from the proceeds of bonds the partnership had purchased from the suburban communities of Broadview and Bedford Park in the 1990s.
The lawsuit included claims on behalf of the individual named plaintiffs and a so-called derivative claim, brought on behalf of the partnership’s corporate entities.
Named defendants in the lawsuit included businessmen Dennis Hiffman, John Shaffer, E. Thomas Collins Jr. and Richard Hulina. In court documents, those defendants are known as “HCH.”
The HCH partners have contested those claims ever since.
In recent years, much of the action has centered on efforts by the HCH defendants to prevent current Cook County Judge Patrick Sherlock and Sherlock’s former law partner, Peter Carey, from grabbing a cut of millions of dollars in attorney fees that could be awarded.
Sherlock and Carey initially filed the case 20 years ago.
However, they withdrew from the case in 2003, purportedly in a dispute with one of the initial plaintiff investors over her desire to accept an “inadequate” settlement.
Sherlock and Carey were then replaced by attorneys from the firm of Edward T. Joyce & Associates, of Chicago. The Joyce firm continues to represent the plaintiffs in the action, now along with attorney Robert D. Carroll, formerly of the Joyce firm, and now of the firm of Latimer LeVay Fyock, of Chicago.
Edward T. Joyce has since become Sherlock’s father-in-law. And Sherlock later became a judge in Cook County, assigned to cases in the Cook County Circuit Court’s Law Division.
The HCH lawsuit is assigned to Judge Neil Cohen in the Cook County Circuit Court’s Chancery Division.
In 2018, Judge Cohen ruled in favor of the plaintiffs, and ordered HCH to pay damages of about $80 million.
He followed that with an order directing 20% of that total to the Joyce firm, amounting to about $15 million. According to court documents, the Joyce firm has also agreed to pay 7% of any fee award to Sherlock and Carey, or about $1 million each, for work performed in the first two years of the litigation against HCH.
Judge Cohen refused to recuse himself from hearing the case, brushing aside objections raised by the HCH defendants that it was unseemly for a judge to award his colleague money from a judgment. He also said it was not his place to insert himself into a law firm’s internal decision of how to spend any fees that may be awarded.
However, in the most recent filings, the HCH defendants indicate there may be no basis for any fee award at all.
The reason lies in the structure of their partnerships, and earlier decisions from Judge Cohen.
Since the HCH partnerships are still 97% owned by the HCH defendants, the named plaintiffs – referred to in court documents as “nominal plaintiffs” – would only be eligible to get about $2 million of the total fund. The bulk of the funds would be paid to the partnerships held by the defendants.
Essentially, the defendants have noted, they would largely be paying themselves, aside from the $2 million award for the individual plaintiffs and $15 million in fees to the Joyce firm.
However, in the new filings, the HCH defendants point to an earlier settlement accepted by the plaintiffs to settle claims against defendant John Schaffer. The Joyce lawyers received more than $2 million in fees under the Shaffer settlement.
In February 2021, Judge Cohen ruled the proceeds of that settlement would be setoff from the overall judgment. And since the proceeds from that settlement exceed the $2 million in damages they would receive under the larger $80 million judgment, the defendants said, the individual plaintiffs have lost any real stake in the outcome of the case.
Without that stake, the HCH defendants asserted, the individual plaintiffs can no longer claim to be the “driving force” behind the litigation, creating a “disqualifying conflict” between the plaintiffs and their attorneys.
“In this case, the Nominal Plaintiffs have a disqualifying conflict because they will not gain anything from a final judgment on their derivative claims, whereas their counsel stands to gain more than ($15 million),” the HCH defendants wrote in a brief filed June 16.
The judgment sought by the plaintiffs “does not advance the interests of anyone that owns equity” in the partnerships, the defendants argued.
The defendants assert that “economic antagonism” between the named plaintiffs and the HCH defendants also disqualifies the plaintiffs from standing as representatives of the investment partnerships.
Without that stake, the HCH defendants argued, those individual plaintiffs have lost standing to press their derivative claims, meaning the lawsuit, for all practical effect, is over, and the attorneys have no further claim to their fees.
In a response filed June 24, the Joyce lawyers argued the court should reject HCH’s assertion that the setoff means the named plaintiffs will receive nothing from the judgment.
“Defendants’ argument ignores the fact that plaintiffs will receive over ($2 million) from the common fund. It is that money against which the setoff will be applied,” the Joyce lawyers wrote.
“Defendants’ argument is also illogical in that it is premised on entry of a judgment in favor of the limited partnerships, while at the same time asserting that no judgment should be entered at all. This argument ignores the fact that plaintiffs will receive a substantial monetary award from the final judgment order (i.e., more than $2 million), so that they clearly have standing…
“The set off will be only applied to that award.”
Further, the Joyce lawyers wrote their plaintiffs still have standing in the derivative action because they were still partners in the venture at the time the alleged misconduct occurred, and were still partners at the time the lawsuit was filed.
The plaintiffs also pointed to a 2015 Illinois Supreme Court decision which, they asserted, undercuts the defendants’ position that the plaintiffs could lose standing, simply because the Shaffer settlement setoff exceeds the amount they could collect under the judgment in the derivative action.
The HCH defendants responded on July 9, reasserting their claims that the plaintiffs had lost standing, because their alleged injury had been “redressed” by the earlier settlement.
They argued the legal concept of standing is one that must be considered by courts at every step of the litigation process, not only at the beginning of the action.
“It simply does not matter that a business entity was harmed by the defendants in the past when the injury has already been redressed,” HCH wrote in its July 9 brief. “For a court to enter a judgment in an action brought by a representative, there must be someone capable of pursuing the claims, which includes the requirement of standing.
“… In short, the Nominal Plaintiffs are not seeking anything for themselves, and they are not seeking anything for anyone else. They are therefore disqualified to serve as plaintiffs…”
HCH is represented in the action by attorneys Robert H. Lang, John J. Cullerton and Renato Mariotti, of the firm of Thompson Coburn; Matthew T. Furton, of the firm of Locke Lord; Christopher D. Liguori, of Tabet DiVito & Rothstein; and John D. Burke, of Ice Miller, all of Chicago.