Just how far can your money go in the hands of your attorney? In the recent case of Dowling v. Chicago Options Associates, Inc., 365 Ill.App.3d 89, 847 N.E.2d 821, 301 Ill.Dec. 811 (1st Dist. 2006), the Illinois Appellate Court addressed this question in the context of a judgment debtor™s attempts to shield his assets from creditors by placing over $100,000 with his counsel on retainer. Though the Court focused its opinion on the narrow question of what constitutes a retainer in the hands of an attorney, the implications of this decision should give pause to any debtor or debtor™s counsel seeking to employ the attorney/client relationship as a judgment-proof safe zone.
In Dowling, judgment debtor Michael Davis entered into a retainer agreement with DLA Piper, Rudnick, Gray and Cary LLP (Piper Rudnick) just two days before creditor Brian Dowling™s $817,830 judgment against Davis became final. Dowling, 365 Ill. App. 3d at 90, 847 N.E.2d at 822. In the retainer letter, Davis allocated $100,000 cash to Piper Rudnick to be kept on hand as a retainer. Id. The letter also specifically provided that the funds were to be used for work performed by Piper Rudnick in connection with Davis™s purchase of a home in Florida and general advice regarding asset protection. Id. Piper Rudnick was to invoice Davis on a monthly basis, and return any funds remaining at the conclusion of its relationship with Davis. Id. Several weeks later, on March 19, 2003, Davis transferred $100,094.72 to Piper Rudnick. Id. Between March and July 2003, Piper Rudnick applied approximately $12,518 of this money to invoices for work regarding Davis™s Florida home. Id.
Dowling instituted supplemental proceedings seeking to collect on his judgment against Davis in September of 2003, and served a citation to discover Davis™s assets on Piper Rudnick on October 17, 2003. Dowling, 365 Ill.App.3d at 91, 847 N.E.2d at 822. Shortly thereafter, Piper Rudnick applied part of Davis™s $100,000 retainer towards bills in connection with Dowling™s supplementary proceedings. Dowling, 365 Ill.App.3d at 91, 847 N.E.2d at 823. At a subsequent hearing on the citation to discover assets, an attorney from Piper Rudnick represented to the Court that his firm was holding no funds in its trust account for Davis. Id. Based on Piper Rudnick™s representation, the Court denied Dowling™s motion as moot. Id.
But Davis™s citation examination only a few weeks later quickly revealed that the attorneys had varying understandings of what qualified as money belonging to Davis. Piper Rudnick insisted that the retainer funds in its accounts were not due to Mr. Davis. Dowling, 365 Ill.App.3d at 93, 847 N.E.2d at 824. On the other hand, Dowling™s attorneys contended that any unearned monies held by Piper Rudnick should have been disclosed to the court as Davis™s assets, and that Dowling had a right to any such funds in Piper Rudnick™s possession at the time the citation to discover assets was issued. Id. Nonetheless, Piper Rudnick continued to apply portions of Davis™s retainer towards its work on the citation matter, exhausting the original $100,000, and in June received another $50,000 from Davis™s wife. Id. Following a second citation to discover assets, Dowling requested relief based on 735 ILCS 5/2-1402(c)(1), (c)(3), (c)(4), (c)(5), and (f)(1) of the Illinois Code of Civil Procedure. Dowling, 365 Ill. App. 3d at 93-94, 847 N.E.2d at 825. The trial court granted Dowling™s motion, relying partly on the different billing codes used by Piper Rudnick in invoicing Davis, and ordered Piper Rudnick to turn over $137,576.53 the balance of the funds remaining on the March retainer at the time that the original citation was issued, and of the $50,000 June deposit. Id.
On appeal, the Illinois Appellate Court, First District, Second Division, analyzed two similar cases, Itasca Bank & Trust Co. v. Thorleif Larsen & Son, Inc., 352 Ill.App.3d 262, 815 N.E.2d 1259 (2004) and Business Service Bureau, Inc. v. Martin, 306 Ill.App.3d 907, 715 N.E.2d 764 (1999), in determining whether section 2-1402 authorized the circuit court to order Piper Rudnick™s turnover of Mr. Davis™s assets. The Court found neither Itasca Bank nor Business Service Bureau applicable. In Itasca Bank, the appellate court held that the trial court could not require Mark Larsen to turn over his membership interest in a country club, where specific terms and conditions of the country club contract made liquidation of the asset almost impossible. Dowling, 365 Ill. App. 3d at 96, 847 N.E.2d at 827. The court also distinguished Business Services Bureau, where the trial court had ordered the debtor to get a job in order to pay his obligations an action clearly not authorized by statute. Id. The Court explained that in Dowling, the main issue was not the scope of the court™s authority, but simply whether the unearned retainer funds belonged to Davis or to Piper Rudnick. Id.
The Court analyzed the connection between the attorney/client relationship and the retainer, and determined that Davis properly owned the money until such as time as Piper Rudnick invoiced him for its services. It stated as follows:
In its reply brief, Piper Rudnick gives no credence to Dowling™s suggestion that if Davis requested a refund of the retainers™ balance, it would not have signaled the end of Piper Rudnick™s representation. If fact, in response to Dowling™s suggestion, Piper Rudnick commented in a footnote, [i]f Dowling is serious about this argument * * * [h]e displays considerable naivete about the economics of a law firm™s taking on the representation of a judgment debtor. . . . Piper Rudnick asserts that it did not divulge it was holding the March 2003 retainer fund because [it] was not holding, nor had ever held, any portion of the $100,094,72 retainer it received from Davis * * * in its clients™ fund account. The account in which Piper Rudnick placed Davis™s May 2003 retainer funds is not determinative of Piper Rudnick™s obligation to disclose that it held these funds.
Dowling, 365 Ill.App.3d at 97-98, 847 N.E.2d at 828. Finding that Piper Rudnick should have disclosed the money it held on retainer for Davis at the time of the original citation hearing and that the money had belonged to Davis, the appellate court upheld the circuit court™s order directing Piper Rudnick to turn over $137,576,53 to Dowling. Id.
The Court™s message to attorneys™ seems to be clear: if you want the money, you™ve got to work for it. In his dissent, however, Justice Hall cautioned that Dowling may have a more sweeping negative impact on judgment debtors seeking to acquire legal representation: The majority™s decision in this case will have a chilling effect on a person™s ability to obtain legal counsel, if retainers paid to law firms to establish the attorney-client relationship were subject to turnover orders as in this case. . . . As a practical matter, law firms will be reluctant, understandably, to take on representation of such individuals, thus depriving them of legal representation. Dowling, 365 Ill.App.3d at 99, 847 N.E.2d at 829 (Hall, J., dissenting).
While the Dowling opinion is seemingly narrow, it implicates not only the attorney/client retainer relationship, but also issues of professional responsibility and potential for perjury. Though Davis™s attorneys in this case landed on the safe side of the law despite what can be termed, at best, misleading testimony, Dowling suggests that in the future, not everyone may be so lucky.
