Without reaching the merits of an interesting fight about Cook County Circuit Court Rule 6.4 — which governs settlements and judgments involving minors and the estates of disabled persons in cases that aren’t assigned to the Probate Division — a split decision from the Illinois Appellate Court vacated orders issued more than 30 days after a bad-faith claim against a hospital’s insurance carrier was dismissed with prejudice as part of a $2,750,000 settlement agreement.
Rule 6.4 says, among other things, “attorneys’ compensation shall not exceed one-third of the recovery if the case is disposed of in the trial court by settlement or trial.”
In the underlying medical-malpractice case, The Law Office of Kenneth C. Chessick, M.D., obtained a $10 million judgment for a minor, Beau Sullivan, and his parents in Ogle County (population 53,497) against Rochelle Community Hospital, which only had $6 million in liability insurance.
The hospital’s insurer, OHIC, paid the policy limit. And an Ogle County judge approved paying Chessick a contingency fee of 37 percent.
After the hospital assigned its rights against OHIC to the Sullivans, Chessick represented them in suing the insurance company in Cook County for the $4 million excess judgment.
When the Chicago case settled seven years later, the order that dismissed the suit with prejudice — dated Nov. 12, 2009 — said (a) statutory interest would start running if OHIC didn’t pay within a month and (b) the court would “retain jurisdiction of to enforce the terms of the settlement.”
Back in Ogle County, a probate judge issued an order on Dec. 3, 2009, that “received and approved” a “final litigation inventory” from Chessick that included payment of $1,292,500 in fees under a 47 percent contingency fee agreement. Chessick was also ordered to hold the rest of the settlement proceeds — $1,482,071 — pending a ruling on allocation between the Sullivans.
A month later, the Sullivans discharged Chessick. And on March 12, 2010 — four months after the bad-faith case was dismissed — the Sullivans (represented by new counsel) filed a motion in Cook County invoking Rule 6.4.
Chessick’s response argued, among other things, that Rule 6.4 didn’t apply to the bad-faith claim (because that lawsuit involved the hospital’s rights against its insurer); the circuit court no longer had subject-matter jurisdiction to issue rulings in the dismissed case; and the cap imposed by Rule 6.4 is unconstitutional.
While their motion was being briefed, the Sullivans filed a petition under Section 2–1401 of the Code of Civil Procedure to vacate the dismissal. But the Sullivans failed to present any evidence that they served the petition on OHIC. And they used an improper method (facsimile transmission) for serving Chessick.
As part of its reply, the Chessick firm asserted that Section 2-1401 didn’t apply because the Sullivans approved the settlement and dismissal.
On July 8, 2010, a Cook County judge — concluding that the Nov. 12, 2009, order provided the court with continuing jurisdiction — reinstated the bad-faith case.
At a status hearing in August, the judge explained: “There is no Section 2-1401 issue at this juncture. Those issues are moot.” Then later in August, the judge — applying the fee limit in Rule 6.4 — ruled that Chessick was only entitled a 33.33 percent contingency fee for the bad-faith case.
Vacating the orders on Rule 6.4 as void — because “the circuit court lacked subject-matter jurisdiction” — the 1st District (with Justice Bertina E. Lampkin dissenting) also “respectfully decline[d] to consider the Sullivans’ Section 2-1401 petition as a vehicle to review the circuit court’s orders as urged by the dissent.”
“We fully agree with the dissent that the rights of Beau Sullivan, a minor, must be zealously guarded,” Justice Mary K. Rochford explained. “We agree that it is unfortunate the issues cannot be decided on their merits in this appeal. Because a minor’s interests are involved here, we wish to make sure any determination of his rights is made without jurisdictional challenge.” Sullivan v. OHIC, 2014 IL App (1st) 111125 (June 27, 2014).
Here are brief highlights of Rochford’s analysis (with omissions not noted in the text):
After 30 days have elapsed from the entry of a final judgment, a trial court lacks jurisdiction to amend or modify the judgment.
A trial court possesses the power to retain jurisdiction to enforce a settlement agreement. The intent of the trial court to retain jurisdiction may be found in an express statement of retained jurisdiction. A court’s retention of jurisdiction cannot be construed as a retention of jurisdiction to reverse its ruling or to “non-enforce” the agreement.
The circuit court found it had subject-matter jurisdiction, both to hear the motion for Rule 6.4 review and enter its subsequent orders, based on its statement in the order dismissing the bad-faith action with prejudice that it retained jurisdiction to enforce the settlement.
Our holding in Holwell v. Zenith Electronics Corp., 334 Ill.App.3d 917 (2002), is instructive as to whether the circuit court had subject-matter jurisdiction on this basis.
In the Holwell case, the plaintiff agreed to settle her minor-son’s suit against Zenith and filed a petition seeking approval of the settlement and distribution of attorney fees to both the plaintiff’s current attorney and her discharged attorney, [Susan E. Loggans & Associates P.C.]. The circuit court granted the petition and dismissed the action on Dec. 14, 2000. In its order, the circuit court allowed the distribution of fees to the Loggans firm as was requested in the petition.
On April 25, 2001, the Loggans firm filed a motion asserting that it had not received the full amount of the awarded fees and sought an order directing Zenith to pay the remaining fees owed. On May 14, 2001, John B. Petrulis, an attorney who had done work on the case before being suspended from the practice of law, sought a portion of the Loggans firm’s fees.
The circuit court denied both motions and also ordered that the remainder of the fees, which had previously been awarded to the Loggans firm, be paid to the estate of the minor.
On appeal we first addressed the question of whether the circuit court had jurisdiction over Mr. Petrulis’ motion for fees. We set forth the applicable law as follows:
“In the absence of a timely filed post-judgment motion, a trial court loses jurisdiction over a case pending before it 30 days after the entry of a final judgment terminating the litigation. After the expiration of that 30-day period, the trial court lacks the necessary jurisdiction to amend, modify or vacate its judgment.
“These general propositions of law are not without exception, though. A court may at any time modify its judgment to correct a clerical error or a matter of form so that the record conforms to the judgment actually rendered. This power may not, however, be employed to correct judicial errors or supply omitted judicial action. Additionally, courts retain jurisdiction to enforce the terms of a judgment.” Id. at 922.
Based on these principles, we concluded that the circuit court lacked jurisdiction to consider Mr. Petrulis’ motion as it sought an order awarding fees which could not “be deemed the correction of a clerical error or the enforcement of the court’s Dec. 14, 2000, order.” Id. at 923.
We then considered whether the circuit court continued to have jurisdiction to order the Loggans firm to return fees which had been approved at the time of the dismissal to the estate of the minor.
“The minor’s estate argued the circuit court had continuing jurisdiction to modify the fee award under Rule 6.4 because the award to the Loggans firm, at the time of the dismissal, should have been made on a quantum meruit basis. We held:
“The pertinent question, however, is not whether the trial court applied an incorrect standard when it awarded the Loggans firm $500,000 in fees on Dec. 14, 2000, but whether, on Sept. 14, 2001, the trial court had jurisdiction to modify the terms of its earlier order. The minor’s estate offers no authority to support a finding that the trial court had such jurisdiction. We conclude that it did not.” Id. at 925.
In this case, the bad-faith action was dismissed with prejudice on Nov. 12, 2009. The Sullivans filed their motion for Rule 6.4 review on March 12, 2010, four months after the dismissal. Thus, the circuit court had lost jurisdiction to grant any additional relief, or to amend, modify or vacate the dismissal order.
As set forth in Holwell, the circuit court did retain jurisdiction to correct a clerical error or matters of form in the dismissal order. It cannot be argued that the Sullivans’ motion for Rule 6.4 review and the circuit court’s orders dealt with such corrections.
The circuit court here expressly retained jurisdiction to enforce the settlement in the Nov. 12, 2009, dismissal order.
By the time the motion for Rule 6.4 review was filed, OHIC had timely paid the settlement amount, the releases had been signed and the Ogle County Probate Court had begun to distribute the proceeds.
The circuit court’s orders at issue here did not serve to enforce the settlement terms between the Sullivans and OHIC. Instead, the circuit court vacated the dismissal order and, pursuant to Rule 6.4, then determined how the settlement proceeds should be distributed and awarded attorney fees.
Those orders of the circuit court were designed to correct perceived errors as to noncompliance with Rule 6.4 and, thus, were beyond the circuit court’s retained jurisdiction to enforce the settlement.