Quantum Meruit Basics – Illinois Law

QMQuantum meruit (Latin derivation: “as much as he deserved”) has repeatedly saved the day in situations where my client has performed services for a defendant but there is a contractual defect (such as missing price terms or an unclear completion date)that makes suing under a breach of contract impossible.  Time and again, quantum meruit has proved to be a valuable fallback or “Plan B” to a failed breach of express contract claim.  The remedy has ensured that my client at least gets something in situations where it would normally get nothing.

I’ve found quantum meruit to be especially useful in view of the realities of modern-day business transactions.  In my experience, it seems that contracts are often entered into by people (usually non-lawyers) who are bound and determined to get a deal done.  No matter what.  This single-mindedness of purpose often results in a myopic focus on finalizing the agreement instead of a meaningful consideration of a deal’s details or the possible consequences that could flow from a future breach.  It’s no surprise then, that key contract terms are often omitted, agreements aren’t signed, or are signed by the wrong parties.

Bernstein and Grazian, P.C. v. Grazian and Volpe, P.C., 402 Ill.App.3d 961 (1st Dist. 2010) provides a good summary of  quantum meruit’s pleading and proof elements.  The case is a partnership dispute between two law firms fighting over  – what else? – fees.  The plaintiffs (a dissolved law firm and representative of a deceased partner of that firm) filed suit for monetary and injunctive relief against defendants,  two former law partners of the plaintiff firm and those partners’ current firm. 

The trial court ruled against plaintiffs on breach of fiduciary duty and breach of contract claims but entered judgment for plaintiffs on a quantum meruit theory – awarding them 10% of the attorneys’ fees collected on open files which defendants’ firm assumed after plaintiff firm’s dissolution.  Id. at 965-966.   The First District reversed.  It held that there was insufficient evidence for the court to award 10% of attorneys’ fees earned on all pending cases which were formerly plaintiff’s (and were now defendants’ cases).  Volpe, 402 Ill.App.3d at 980. 

The black letter quantum meruit elements: (1) plaintiff performed a service to benefit the defendant; (2) he did not perform the  service gratuitously; (3) defendant accepted plaintiff’s service; and (4) no contract existed to prescribe payment for this service. 

The quantum meruit plaintiff has the burden of proving that valuable services were rendered by him, that the services were received by defendant, and the circumstances are such that it would be unjust to allow the defendant to retain the benefits of plaintiff’s services.  The measure of quantum meruit recovery is the “reasonable value of work” and the plaintiff must show that its uncompensated services were of measurable benefit to defendant.  Volpe, 402 Ill.App.3d at 979. 

The Court held that while defendants did benefit from plaintiff’s legal services, plaintiff failed to offer sufficient evidence to substantiate the trial court’s quantum meruit award.  Id. at 979-80.  The plaintiff didn’t offer the court any basis to quantify the value of the plaintiff’s services.  As a result, the plaintiffs ended up with nothing.

Conclusion – I always file quantum meruit as an alternative claim to a breach of contract claim.  Illinois  Code Sections 2-604 and 2-613 permit alternative pleading.  This does two things: (1) it ensures that my client at least gets something in the event of a contract defect or if my client is in breach; and (2) it mitigates the all-or-nothing nature of only proceeding on a breach of contract theory.  When pleading quantum meruit, I also make sure I don’t incorporate by reference my breach of contract allegations.  

By definition, quantum meruit can’t co-exist with a breach of express contract claim.  Some firms love (and I do mean love) to file motions to strike complaints on this basis.  The Volpe case ( and others like it) shows that a quantum meruit plaintiff must do more than simply allege that he benefitted a defendant.  Instead, the plaintiff must produce competent evidence that quantifies the monetary value of plaintiff’s services.

 

7th Circuit Tackles Registering State Court Judgments In Fed. Court, Removal Jurisdiction

GE Betz, Inc. v. Zee Company, Inc., 2013 WL 1846541 (7th Cir. 2013) examines Federal jurisdiction and removal practice and how those rules impact creditors’ rights in post-judgment proceedings. 

Facts and Procedural History: Plaintiff obtained a multi-million dollar judgment in North Carolina state court against Defendant.  

The defendant then secretly transferred several million dollars to a Chicago bank that recorded liens against the funds and all other defendant assets.

When plaintiff found out about the transfer, it registered the NC judgment in Illinois and issued a third-party citation against the bank to whom defendant transferred its assets.

The judgment debtor (and defendant in the NC state court case) moved to transfer the case to the Northern District of Illinois under diversity jurisdiction rules.  

Plaintiff objected to removal based on lack of subject matter jurisdiction and sought remand back to NC state court.  The Northern District denied Plaintiff’s remand attempt and kept the case. 

Held: Reversed.  The District Court should have granted plaintiff’s motion for remand based on the “forum defendant” rule.  See 28 U.S.C. § 1441(b)(2). 

Rules/Reasoning: The Northern District had original jurisdiction over the action since there was complete diversity  among the parties: plaintiff is a Pennsylvania corporation, defendant is a Tennessee corporation, and the third-party respondent bank is a Delaware corporation whose principal place of business is in Illinois. 

The Seventh Circuit also held that the District Court had jurisdiction to enforce a state court judgment under section 28 U.S.C. § 1963, which permits a Federal court to register the judgment of another “district court.” 

Giving a broad reading to Section 1963, the Court noted that several state courts use the “district court” moniker.  Because of this, the Court held that the Illinois Northern District could register the NC state court judgment.  *8

But the argument that carried the day for the Plaintiff was the “forum defendant” rule.  This rule states that “a civil action otherwise removable solely on the basis of [diversity jurisdiction] may not be removed if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.”  28 U.S.C. § 1441(b)(2). 

But the forum defendant rule involves a statutory defect rather than a jurisdictional one: meaning that the defect is waived if not objected to within 30 days of the removal notice. (*9), 28 U.S.C. § 1447(c)(motion to remand – other than for lack of subject matter jurisdiction – must be brought within 30 days after filing the notice of removal). 

Since the bank’s principal place of business was Illinois, it clearly met the “forum” component of the “forum defendant” test.  The Court also held that the bank was a “defendant” within the rule because its interest in the defendants assets were completely opposed to the plaintiff’s interest. (*11-14). 

Lastly, the Court found that Plaintiff properly objected to removal within 30 days – as evidenced by its motion to reconsider filed 16 days after the Northern District denied its remand motion. 

Take-away:

– If an Illinois party is sued by a foreign plaintiff and the damages exceed $75K, removal isn’t proper.  However, if the plaintiff fails to timely seek a remand, he will have waived the defect and the removal will stand;

a foreign state court judgment can arguably be registered in a Federal District Court.

 

 

Judgments By Confession: How to Open (Not Vacate) Them (IL Law)

confessional

The two key rules that govern challenging  a confessed judgment in Illinois are Supreme Court Rule 276 and  Code Section 2-1301 (735 ILCS 5/2-1301).  The latter provides that “any person for a debt bona fide due may confess judgment by himself or herself or attorney duly authorized, without process” and that the “application to confess judgment shall be made in the county in which the note or obligation was executed or in the county in which one or more of the defendants reside or in any county in which is located any property, real or personal, owned by any one or more of the defendants.”  735 ILCS 5/2-1301(c).

Confession of judgment provisions in consumer transactions are void.  A “consumer transaction” is a sale, lease, assignment, loan, or other disposition of an item of goods, services, or intangibles where the primary purpose is for personal, family, or household use.  Id.

Rule 276 provides that a motion to open a judgment by confession (“JBC”) shall be supported by (1) affidavit in the manner provided by Rule 191 for summary judgments, and be accompanied by a (2) verified answer the defendant proposes to file.

Rule 276 states that if the motion to open and supporting affidavit disclose a prima facie defense on the merits to all or part of plaintiff’s claim, the court shall set the motion for hearing. The plaintiff (the party opposing your motion to open the JBC) may file counter-affidavits.

Rule 276 continues: “If, at the hearing upon the motion, it appears that the defendant [the moving party] has a defense on the merits to the whole or a part of the plaintiff’s [the party that entered the JBC] claim and that he has been diligent in presenting his motion to open the judgment, the court shall sustain the motion either as to the whole of the judgment or as to any part thereof as to which a good defense has been shown, and the case shall thereafter proceed to trial upon the complaint, answer, and any further pleadings which are required or permitted”.  Ill. Sup. Ct. R. 276.

The defendant (or party opening a confessed judgment) can also assert counterclaims.  SCR 276.  Even if the moving party fails to establish a defense, he can still proceed on a counterclaim if the court finds that the moving party pled facts to support a counterclaim.

The burden on a party moving to open a JBC is lighter than on a summary judgment or  Section 2-619 motion to dismiss.  In fact, all the trial court does is determine whether the moving party’s motion and affidavits disclose a prima facie defense.  Kim v. Kim, 247 Ill.App.3d 910, 913-14 (2nd Dist. 1993).

On a motion to open a JBC, the court doesn’t look into disputed facts.  Instead, the court accepts as true all facts asserted by the moving party in his affidavits.

While a plaintiff (or party contesting the motion to open) may file counter-affidavits in opposition to a motion to open, the trial court may not try the merits of the case on the affidavits or counter-affidavits because this would encroach on the right to trial by jury.

A motion to open a confessed judgment is addressed to the sound discretion of the trial court and will not be overturned on review absent an abuse of discretion.

Take-aways: Rule 276 provides clear and simple requirements for a motion to open a JBC.  The moving party must attach a supporting affidavit and a proposed responsive pleading (which is verified).  The movant must also show meritorious defense and diligence in bringing the motion (similar to Section 2-1401 standards).

Once the JBC is opened, it proceeds like any other civil lawsuit, with motion practice, oral and written discovery and ultimately a trial.  I have to stress again that opening a JBC shouldn’t be a cause for too much (premature) celebration.  All it means is you can now defend a suit on the merits.  I say this because I have seen multiple instances where a defendant successfully opened a JBC, acted like he won the case (and taunted me too!), only to lose on a 2-619 motion or summary judgment motion a very short time later.