A state appeals panel determined a Cook County judge correctly dismissed a lawsuit in which a former financial tech executive alleged his lawyers were responsible for him being sued over breaking terms of a confidential settlement agreement.
Igor Oystacher and 3Red Group of Illinois filed a Cook County Circuit Court lawsuit against Edwin Johnson, alleging Johnson breached a settlement agreement. Johnson, who had been chief operating officer, compliance officer and risk officer of the Oystacher’s proprietary trading firm, then filed a third-party complaint against attorney Jeffrey Katz and Patterson Law Firm, alleging they were responsible for the alleged improper disclosure.
When Katz and Patterson retained a separate firm to defend them, Johnson filed a motion to disqualify that firm, claiming he’d shared information with that firm when preparing wrongful termination litigation. Cook County Judge Patrick Sherlock denied that motion, then granted Patterson’s subsequent motion to dismiss Johnson’s complaint.
Illinois First District Appellate Justice Jesse Reyes
| Illinoiscourts.gov
Johnson appealed both the dismissal and the denial of the order to negate the representation to the Illinois First District Appellate Court. Justice Jesse Reyes wrote the opinion on that appeal, issued May 12; Justices Bertina Lampkin and LeRoy Martin concurred. The order was issued under Supreme Court Rule 23, which may restrict its use as precedent.
According to court documents, 3Red fired Johnson in June 2013, claiming he misrepresented how much capital he contributed, withdrew money for personal use, leveraged "company funds for personal travel and submitted a fraudulent operating agreement containing provisions to which Oystacher had never agreed,” Reyes wrote. The parties reached a settlement agreement two months later.
The release of protected information happened while Patterson was representing Johnson in a June 2014 legal malpractice suit against a firm that represented 3Red when it fired him. While responding to a motion to dismiss, Reyes said, a copy of his settlement agreement was attached without filing it under seal, meaning it was visible to the public.
In December 2014, 3Red sued Johnson, alleging he breached the agreement. During that litigation, the court sanctioned Johnson for discovery violations and barred him “from introducing any and all evidence denying his disclosure of confidential information about plaintiffs and the confidential settlement agreement to the press, in lawsuits, or to any third party unless such disclosure was required by process of law.”
While his third-party complaint against Patterson was pending, 3Red moved for summary judgment. Judge Sherlock granted that request in January 2017, while also denying Johnson’s motion to strike Patterson’s representation, finding his complaint against them over the disclosure wasn’t substantially related to his termination lawsuit. Sherlock also noted a substantial delay between Johnson's knowledge of the firm’s involvement and his motion to disqualify, thereby waiving his concerns over potential conflict.
The panel ultimately agreed with Sherlock’s reasoning and affirmed those decisions.
In a July 2017 order granting Patterson’s motion to dismiss, Sherlock wrote “there is no conjecture that Johnson’s actions were the cause of some of his injuries." Although his dispute with Katz over alleged negligence might have merit, Johnson’s behavior related to discovery sufficiently intervened in a chain of causation that might allow him to hold Patterson liable, Sherlock said.
“As the third-party plaintiff, Johnson bears the burden of pleading and ultimately proving that the Patterson parties’ conduct caused his liability in the underlying action — it is not the Patterson parties’ burden to disprove Johnson’s claims by speculating as to possible avenues by which Johnson could have prevailed,” Reyes wrote.
He added Patterson wasn’t a party to the settlement agreement and can’t be held liable for any violations of that document. The panel further agreed Sherlock was right to determine Johnson failed to prove the Patterson firm was solely responsible for the release of the settlement agreement, which led to the lawsuit from 3Red.
“Instead, the court found that plaintiffs intended to pursue claims relating to Johnson’s own actions in failing to return property, providing confidential information to the media and failing to inform 3Red of governmental inquiries, meaning that Johnson was subject to litigation even absent the Patterson parties’ conduct,” Reyes wrote, adding that any claims he might have against Katz and Patterson are not properly advanced in the form of third-party litigation connected to the 3Red lawsuit against Johnson.