A state appeals panel vacated an agreed judgment between a husband and wife — both Northwestern law professors — after finding “the entire agreed judgment was the product of fraud or collusion.”
The 1st District Appellate Court’s Nov. 22 ruling was the latest turn in the heavily litigated distribution of the $3.5 million estate of Renata Black.
Bernard S. Black, Renata’s son, persuaded a Colorado probate judge to appoint him as his sister Joanne’s conservator in December 2012, months after Renata’s death. Joanne was experiencing homelessness in Denver, while at the time, suffering from mental illness.
In 1997, Renata Black created a supplemental needs trust for Joanne. Her will left two thirds of her $3.5 million estate to Joanne’s trust and gave one third to a trust for Bernard’s family.
But before her May 2012 death, Renata designated Joanne as the payable-on-death beneficiary of much of her estate, meaning those funds would go directly to her and wouldn’t be part of the funds split among the siblings.
Bernard was named his sister’s conservator after he petitioned a Denver Probate Court judge, pleading that Joanne’s illness “interferes with her ability to manage her assets.”
The probate judge authorized Bernard to disclaim Joanne’s payable-on-death interest in their mother’s accounts, believing he had put the millions into the supplemental needs trust started for her benefit.
Instead, the disclaimer routed those funds through Renata’s estate, where under the terms of the will, one third of the value — about $1 million — went to Bernard.
In February 2015, Joanne’s counsel asked the Denver Probate Court to void the disclaimer. Her attorney alleged Bernard breached his fiduciary duty by not disclosing how the disclaimer would benefit him.
Joanne’s guardian ad litem filed a motion arguing Bernard’s actions amounted to civil theft under Colorado law. The probate court agreed, removed him and entered treble damages against him totaling more than $4.5 million.
While that case awaited appeal in Colorado, Bernard sued Joanne in Chicago federal court to regain the authority to spend the trusts’ funds by judges in Colorado and New York as its trustee, even though a trial judge in Staten Island, N.Y., restrained him from making any distributions.
When Denver Probate Judge Elizabeth D. Leith learned of the Chicago litigation, she wrote that Bernard’s complaint was “rife with inaccuracies.” Leith allowed Joanne to use trust funds to defend herself in the federal case.
Leith stated she would keep signing orders “to prevent wasting of Joanne Black’s funds and to prevent further wrongdoing.”
Leith also criticized Bernard and his wife, Katherine Litvak, who testified they are both professors at Northwestern Pritzker School of Law.
“As such, each of these individuals has an enhanced duty for full and complete candor to the [c]ourt and to conduct themselves and this matter with dignity becoming judicial officers and professors,” Leith wrote. “The taking of his sister’s funds, the multiple suits initiated by Mr. Black against his family members, the inaccuracies in his pleadings before this court and his apparent refusal to accept the changes his mother made to her estate plan are absolutely appalling and are not in keeping with his status as a law professor.”
U.S. District Judge Virginia M. Kendall dismissed Bernard’s suit with prejudice in July 2016 after finding the court lacked personal jurisdiction over Joanne.
In September 2017, Litvak sued her husband and his son in their capacity as trustees of the trusts.
The complaint in Cook County Circuit Court alleged the trusts owed her more than $376,000 based on a demand note entered in October 2016.
Litvak moved for entry of an agreed judgment on Oct. 3, 2017, and Associate Judge James A. Snyder entered the judgment a few weeks later.
Soon after, Anthony Dain — a cousin and co-trustee on Joanne’s trusts — learned of the judgment. Dain and Joanne’s new conservator, Jeanette Goodwin, moved to intervene in the Cook County case and vacate the judgment.
Litvak argued Dain and Goodwin could not intervene because they were not trustees or beneficiaries of Bernard’s trust.
Snyder denied Dain’s motion to intervene, but granted Goodwin’s, finding she sufficiently argued Joanne’s ability to collect the wrongfully taken money would be hindered by letting the judgment stand.
Snyder vacated part of the judgment but ruled the portion involving Bernard’s trust would stand. Goodwin could address her issue through a collection proceeding, Snyder held.
Goodwin argued Snyder abused his discretion and should have vacated the judgment entirely. The appeals panel agreed.
“Our [S]upreme [C]ourt has made clear that agreed judgments entered into through litigation that is not truly adversarial but collusively brought for the purpose of having such a judgment entered by a court of law are presumed to be collusive and fraudulent and may be challenged as void by adversely affected third parties,” Justice Mary L. Mikva wrote.
The court can infer impropriety in a deal when “the facts demonstrate that a suit was ‘an adversary proceeding only in form’ and the resulting judgment was ‘not entered on a hearing on the merits, but by the default, acquiescence and tacit consent’ of the parties,” Mikva wrote.
“Here, the trustees, as defendants to Ms. Litvak’s suit, never answered her complaint and within one week agreed to a judgment against the trusts for the full amount requested,” she wrote.
The filings show how Joanne’s interests were negatively affected by the judgment, Mikva wrote.
“Recovery of the funds the Colorado court found Mr. Black stole from Joanne may certainly — as the circuit court in this case noted — require separate collection proceedings,” Mikva wrote. “But that does not prevent Ms. Goodwin from protecting Joanne’s interests in this action to prevent further wasting or dissipation of those assets that Mr. Black strategically moved into the one trust established by his mother that was not set up for Joanne’s benefit.
“ In our view, the motion to vacate raises meritorious arguments for why — her lack of beneficiary status notwithstanding — the funds in the Issue Trust that Mr. Black and Ms. Litvak seek access to belong to Joanne.”
If the judgment were vacated, Litvak would still have a chance to present her own claim to the funds, the justices wrote.
“The import of this order is simply this: [T]hat determination should be made only after the court has fully considered Joanne’s competing interest in those funds.”
Justices Joy V. Cunningham and Maureen E. Connors concurred in the opinion.
Goodwin was represented on appeal by Peter M. Stasiewicz of the Arcturus Law Firm. He could not be reached for comment.
Litvak was represented by Eugene E. Murphy Jr., David F. Hyde and Daniel J. Scheeringa of Murphy Law Group LLC. They could not be reached for comment.
The case is Katherine Litvak v. Bernard S. Black, et al., 2019 IL App (1st) 181707.