author: JUSTICE BUCKLEY JUSTICE BUCKLEY

text:
    THOMAS O. HOLSTEIN, Plaintiff-Appellant, v. RICHARD J. GROSSMAN et al., Defendants-Appellees.
    First District (1st Division)
    No. 1 — 90—3470
    Opinion filed February 8, 1993.
    Rehearing denied June 18, 1993.
    Supplemental opinion filed July 6, 1993.

      Michael Long and Thomas O. Holstein, pro se, both of Chicago, for appellant.
    Richard J. Grossman and Steinberg, Burtker & Grossman, Ltd., of Chicago, appellees pro se.

   JUSTICE BUCKLEY

delivered the opinion of the court:

In July 1981, plaintiff-attorney Thomas Holstein allegedly entered an oral fee-referral agreement with defendants attorney Richard Grossman (Grossman) and his law firm, now named Steinberg, Burtker & Grossman, Ltd. (SB&G). Under the claimed agreement, plaintiff was to refer personal injury cases to SB&G in exchange for a one-half share of any attorney fees which defendants might receive. Plaintiff claims to have subsequently referred 10 cases to defendants and to have received a 50% referral fee on five of the cases.

Plaintiff alleges that defendants secretly settled referred cases refusing thereafter to pay plaintiff any referral fees. Plaintiff thereafter filed a two-count complaint which sought an accounting from defendants on all referred cases and judgment in his favor for past-due referral fees. Cross-motions for summary judgment were filed, and the circuit court, finding that the oral agreement amounted to nothing more than unethical lawyer brokering violative of public policy, granted defendants’ motion. On appeal, plaintiff requests this court to vacate the summary judgment award and instruct the circuit court on remand to enter summary judgment in his favor.

Plaintiff and defendant. Grossman are licensed Illinois attorneys with plaintiff primarily practicing bankruptcy law and Grossman concentrating in personal injury law. Plaintiff, as part of his law practice, operates “LAWLINE,” a telephonic information' service which offers its callers free legal advice from licensed attorneys and an intra-attorney referral service. LAWLINE is subsidized by referral fees.

In July 1981, plaintiff claims that he and Grossman discussed the creation of a referral arrangement in which plaintiff would refer personal injury claimants, from time to time to defendants in exchange for a referral fee. During the meeting, plaintiff and Grossman reviewed Rule 2 — 107 of the Illinois Code of Professional Responsibility (107 Ill. 2d R. 2 — 107) to insure that their fee-referral agreement complied with all ethical obligations.

Following their review, plaintiff claims that he and Grossman entered the following oral agreement: (1) in exchange for a one-half share of attorney fees which defendants may ultimately receive, plaintiff would refer personal injury claimants to defendants from time to time; (2) defendants would primarily pursue settlement or litigation of the claimants’ claims; (3) plaintiff would assume responsibility for the referred clients as if he were a partner of SB&G; (4) defendants would make written disclosure of the parties’ forwarding-fee agreement to referred clients in accordance with Rule 2 — 107; and (5) no fee collected would exceed a reasonable fee.

Plaintiff subsequently drafted a “model” attorney-client contract which plaintiff tendered to Grossman and which, according to plaintiff, Grossman bound defendants to use. Under the contract, the following disclosures were to be made to the referred client:

“6. I acknowledge, understand and agree that initially I consulted with Attorney(s) for ‘LAWLINE,’ owned and operated by Attorney Thomas Holstein, who, after evaluating the facts of my case, referred me to this law firm. Referring Attorney(s) will monitor my case from time to time, and assume full responsibility for the performance of the services described herein. Referring attorney(s) shall be listed on all disclosure affidavits and liens, if any, filed with any court by attorney above and may appear as co-counsel when appropriate.
My attorney will make a division of fees of 50% of the attorneys’ fees received with the referring attorney(s) when and if any fee is realized. Attorney above represents and agrees that any fee for services herein is reasonable in nature for said legal services and does not exceed reasonable compensation for services to be performed for the benefit of the Client herein named below.”

Plaintiff alleges that the parties thereafter began performing under their agreement. Plaintiff claims to have referred 10 cases to defendants and received referral fees on five of those cases. The cases upon which referral fees were paid are not involved in this appeal.

The instant dispute began when plaintiff learned that defendants had secretly settled referred cases and failed to pay plaintiff any referral fee. When defendants refused to discuss the matter, plaintiff filed a complaint which, in its present form, alleges that defendants are in breach of contract and have also breached a joint-venture agreement. This latter theory is predicated on defendants’ breach of fiduciary duties to plaintiff, including the duties of good faith and loyalty. Plaintiff alleges that defendants owe plaintiff over $50,000 on the remaining five cases.

Defendants subsequently moved for summary judgment asserting that the alleged fee-referral agreement violated Rule 2 — 107 of the Illinois Code of Professional Responsibility and was therefore illegal and unenforceable. Defendants cited to the following actions or inactions by plaintiff which allegedly violated Rule 2 — 107: (1) plaintiff never had an attorney-client relationship with any referred client and never disclosed the parties’ arrangement to the referred clients prior to any referral; and (2) no referred client ever signed the model contract plaintiff had prepared; rather, the referred clients only signed a standard SB&G contingency contract which contained no disclosures whatsoever regarding the parties’ arrangement.

Defendants contended alternatively that even if plaintiff had an attorney-client relationship with the referred clients, his failure to fully disclose the parties’ fee-referral arrangement to his “clients” vi- ' dated his fiduciary duty to them. Defendants contended further that plaintiff’s fiduciary duty and Rule 2 — 107 prohibited any delegation of plaintiff’s disclosure obligations.

As evidentiary support for their position, defendants presented the circuit court with the affidavits of Flynn and Bronson, two referred clients with large settlements, stating that they only hired Grossman by written contingency fee agreement; that neither hired plaintiff at any time to represent them in any matter; and that no one ever disclosed at any time that plaintiff would share in any fee or undertake any responsibility for their respective cases.

Defendants further directed the circuit court to plaintiff’s deposition testimony. In his deposition, plaintiff stated that he could not recall ever meeting personally or speaking directly with Danny Flynn, the referred client. Rather, due to plaintiff’s prior relationship with Danny’s brother, Timothy, plaintiff was retained by Timothy Flynn or the Flynn family on Danny’s behalf, and all disclosures were made to the Flynn family. As for the other referred clients in question, plaintiff’s deposition testimony is that he only generally recalls speaking to each client, being retained and making full disclosure to each. Plaintiff rested his belief not on any specific meeting which he could recall in detail, but rather on a general belief that a certain procedure was followed in his office by all attorneys in his office, including himself.

Plaintiff responded to defendants’ motion with a motion for summary judgment directed at count II of his complaint. In support of his motion, plaintiff asserted that he and defendants had entered a joint-venture agreement; that the agreement was ethical when entered; that defendants owed plaintiff a fiduciary duty with respect to joint-venture matters; that defendants breached their fiduciary duty by omitting plaintiff from the contingency agreements into which the referred clients entered and by failing to account for money received in settled cases; and that defendants should be estopped from raising Rule 2 — 107 as a defense because it was their conduct, not plaintiff’s, which caused any violation of the rule.

In evidentiary response to defendants’ summary judgment motion, plaintiff submitted an affidavit pursuant to Supreme Court Rule 191(b) (134 Ill. 2d R. 191(b)) stating that, because of hostility, he is unable to procure affidavits from individuals who would corroborate his testimony that all referred clients were first retained by him, fully informed of the fee splitting agreement and consented to the referral and fee splitting arrangement prior to their referral. Plaintiff also submitted an affidavit from Timothy Flynn reflecting that, because of his brother’s significant injury, he retained plaintiff on his brother’s behalf, and on behalf of James Bronson, another referred client, who was also injured at the same time as Daniel Flynn.

At the hearing of the parties’ respective motions, the court made a factual assumption that a fee-referral agreement existed between the parties in which they agreed to share equally any fees which defendants might receive on referred cases. The court also refused to consider any of plaintiff’s nonparty affidavits in view of their noncompliance with certain provisions of the Code of Civil Procedure (Ill. Rev. Stat. 1989, ch. 110, par. 1 — 101 et seq.). Plaintiff has not appealed this ruling.

Based on the evidentiary matters properly before the court, the court determined that no issue of fact existed as to whether plaintiff had an attorney-client relationship with any of the referred clients or that any oral disclosures took place. The court predicated this determination on the uncontradicted affidavits of Flynn and Bronson, and plaintiff’s deposition testimony that he could not specifically recall speaking to any referred client. The court also determined that because the record revealed without dispute that no referred client ever signed a writing disclosing the parties’ fee-sharing agreement, the agreement violated Rule 2 — 107 and public policy and that defendants could properly assert this violation as an affirmative bar to plaintiff’s action. Accordingly, the court granted defendants’ motion for summary judgment and, correspondingly, denied plaintiff’s motion.

On appeal, we need not address whether, as a factual matter, plaintiff had an attorney-client relationship with the referred clients prior to their referral or whether the clients ever received oral disclosure of the parties’ arrangement. Rather, we believe it sufficient to affirm the circuit court with respect to count I based on the undisputed fact that no referred client ever consented in writing to the parties’ arrangement. For the reasons that follow, we believe that an intra-attorney fee-sharing agreement which is primarily based on a client referral is unenforceable as a matter of public policy where the undisputed facts show that the referred client never consented in writing to the attorneys’ arrangement.

As a general rule, courts will not enforce a private agreement which is contrary to public policy. (O’Hara v. Ahlgren, Blumenfeld & Kempster (1989), 127 Ill. 2d 333, 341, 537 N.E.2d 730, 734; see generally 12 Ill. L. & Prac. Contracts §163 (1983).) While the term “public policy” lacks precise definition, it may be stated generally as a legal principle that no one may lawfully do that which has a tendency to injure the public welfare. (O’Hara, 127 Ill. 2d at 341, 537 N.E.2d at 734.) The public policy of this State is reflected in its constitution, its statutes and its judicial decisions. (O’Hara, 127 Ill. 2d at 341, 537 N.E.2d at 734.) The question of whether a contract is enforceable under considerations of public policy is a conclusion of law (Zeigler v. Illinois Trust & Savings Bank (1910), 245 Ill. 180, 91 N.E. 1041) and turns on the particular facts and circumstances of each case. O’Hara, 127 Ill. 2d at 341-42, 537 N.E.2d at 734.

Our courts apply a strict test in determining whether a contract violates public policy. (Schniederjon v. Krupa (1985), 130 Ill. App. 3d 656, 659, 474 N.E .2d 805, 808.) A court, therefore, will not declare a contract illegal unless it expressly contravenes the law or a known public policy of this State. (Schniederjon, 130 Ill. App. 3d at 659, 474 N.E.2d at 808.) Public policy itself strongly favors freedom to contract. McClure Engineering Associates, Inc. v. The Reuben H. Donnelley Corp. (1983), 95 Ill. 2d 68, 72, 447 N.E.2d 400, 402; Schniederjon, 130 Ill. App. 3d at 659, 474 N.E.2d at 808.

The Illinois Supreme Court adopted the Illinois Code of Professional Responsibility (the Illinois Code) on June 3, 1980, effective July 1, 1980 (107 Ill. 2d art. VIII, Committee Commentary, at 604), thereby establishing the first “official” guideline for the professional conduct of Illinois attorneys. Prior to the adoption of the Illinois Code, special committees of the Illinois State and Chicago Bar Associations, acting under the auspices of the supreme court, were responsible for investigating, prosecuting and hearing disciplinary complaints brought against Illinois lawyers. (Vernon, The Illinois Code of Professional Responsibility: A Blueprint for Disciplinary Enforcement, 30 De Paul L. Rev. 365, 365-66 (1981) (hereinafter Vernon); see 50 Ill. 2d R. 751.) The bar organizations acted in this capacity until 1973, when the Illinois Supreme Court’s Attorney Registration and Disciplinary Commission was created. Vernon, 30 De Paul L. Rev. at 384-85; see 58 Ill. 2d R. 751.

Both before and after 1973, Illinois attorneys seeking' ethical guidance in their practices turned to the ethical codes passed by the American, Chicago and Illinois State Bar Associations. The bar organizations’ codes, while not binding on the Illinois Supreme Court, “constitute[d] a safe guide for professional conduct and an attorney may be disciplined for not observing them.” See In re Kutner (1975), 78 Ill. 2d 157, 164, 399 N.E .2d 963, 965; In re Taylor (1977), 66 Ill. 2d 567, 571, 363 N.E.2d 845, 847; In re Krasner (1965), 32 Ill. 2d 121, 129, 204 N.E.2d 10, 14.

In 1978, the Illinois Supreme Court appointed a committee on professional responsibility to make recommendations concerning the adoption of comprehensive rules. The committee responded with a draft code which the Illinois Supreme Court ultimately adopted as the Illinois Code. 107 Ill. 2d art. VIII, Committee Commentary, at 604.

The principal guideline used by the drafters of the Illinois Code was the American Bar Association Model Code of Professional Responsibility (the ABA Model Code) (107 Ill. 2d art. VIII, Committee Commentary, at 604), which the ABA adopted in August 1969 to become effective January 1, 1970. (Sutton, Symposium — The American Bar Association Code of Professional Responsibility: An Introduction, 48 Tex. L. Rev. 255, 255 (1970) (hereinafter Symposium).) The ABA Model Code in turn was predicated on the ABA’s 1908 Canons of Professional Ethics. Vernon, 30 De Paul L Rev. at 366 n. 6 (1981); see generally Symposium, 48 Tex. L Rev. 255,

Canon 34 of the original ABA Canons first addressed fee sharing between attorneys. Canon 34 provided:

“[N]o division of fees for legal services is proper, except with another lawyer based upon a division of service or responsibility.” ABA Canons of Professional Ethics, Canon 34 (1965), quoted in Leoris v. Dicks (1986), 150 Ill. App. 3d 350, 353, 501 N.E.2d 901, 904.

When the ABA enacted its Model Code, Canon 34 became Disciplinary Rule (DR) 2 — 107. (Corti v. Fleisher (1981), 93 Ill. App. 3d 517, 529, 417 N.E.2d 764, 773-74; Symposium, 45 Tex. L. Rev. 296-97.) Subsequently, when the Chicago Bar and Illinois State Bar Association adopted their own codes, they accepted DR 2 — 107 of the ABA Model Code without change. (Corti, 93 Ill. App. 3d at 529, 417 N.E.2d at 774.) DR 2 — 107 provided:

“DIVISION OF FEES AMONG LAWYERS
(A) A lawyer shall not divide a fee for legal services with another lawyer who is not a partner in or associate of his firm or law office, unless:
(1) The client consents to employment of the other lawyer after a full disclosure that a division of fees will be made.
(2) The division is made in proportion to the services performed and responsibility assumed by each.
(3) The total fee of the lawyers does not clearly exceed reasonable compensation for all legal services they rendered the client.
(B) This Disciplinary Rule does not prohibit payment to a former partner or associate pursuant to a separation or retirement agreement.” (ABA Model Code, DR 2 — 107 (1980), quoted in Corti, 93 Ill. App. 3d at 529, 417 N.E.2d at 774.)

The companion ethical consideration (EC 2 — 22) to DR 2 — 107 provided:

“Without the consent of his client, a lawyer should not associate in a particular matter another lawyer outside his firm. A fee may properly be divided between lawyers properly associated if the division is in proportion to the services performed and the responsibilities assumed by each lawyer and if the total fee is reasonable.” ABA Model Code, EC 2 — 22 (1980), quoted in Corti, 93 Ill. App. 3d at 529-30, 417 N.E.2d at 774.

Corti v. Fleisher (1981), 93 Ill. App. 3d 517, 417 N.E.2d 764, is the leading pre-Illinois Code case discussing the public policy implications of fee-sharing agreements under the fee-sharing provisions of the various bar codes where the plaintiff-attorney’s claim for a fee is based solely on his referral of a client to another attorney.

In Corti, the plaintiff-attorney, after being terminated by his law firm-employer, filed suit to recover fees pursuant to a written employment agreement which the parties had entered. The agreement provided “that upon termination of the employment agreement, all files that were directly or indirectly referred to the firm by plaintiff were to become the sole and absolute property of plaintiff and that any future fees derived therefrom were to be remitted to plaintiff.” Corti, 93 Ill. App. 3d at 519, 417 N.E.2d at 766.

During plaintiff Corti’s employ, he became acquainted with an attorney who subsequently referred about 100 personal injury cases to plaintiff’s firm. Following plaintiff’s termination, the law firm informed plaintiff that the referring attorney had issued written instructions to the firm to maintain personal custody and control of any files he had referred. Plaintiff’s employer refused to turn over the files or share in any of the fees. Corti, 93 Ill. App. 3d at 519, 417 N.E.2d at 766.

We addressed two issues in Corti. First, can an attorney and his law firm agree in advance that upon termination, the employee-attorney shall receive files of cases he indirectly referred to the firm without the client’s consent. Second, pursuant to the same agreement, can the employee-attorney claim all fees generated by the referred files in the absence of the performance of legal services or assumption of responsibility. Corti, 93 Ill. App. 3d at 520-21, 417 N.E.2d at 767-68.

With respect to the first issue, we referred to the plaintiff’s complaint, which contained no allegations that an attorney-client relationship existed between plaintiff and the clients in question or that the clients were aware of and consented to plaintiff’s ownership of their files. (Corti, 93 Ill. App. 3d at 521, 522, 417 N.E.2d at 768, 769.) The absence of these allegations compelled us to find that part of the agreement requiring transfer of files unenforceable on public policy grounds. We stated:

“To rule that the instant agreement is enforceable would be tantamount to condoning a lawyer’s practice in exchanging clients with another member of the profession without the client’s consent. We decline to do so because we believe that each person must have the untrammelled right to the counsel of his choice. A contrary decision would allow clients to be unknowingly treated like objects of commerce, to be bargained for and traded by merchant-attorneys like beans and potatoes.” Corti, 93 Ill. App. 3d at 523, 417 N.E.2d at 769.

Regarding issue two, we refused to lend approval to an agreement in which the plaintiff-attorney would recover all fees generated by the defendant-law firm without having performed any work on the file in question himself. We stated our public policy objections to this portion of the agreement as follows:

“In reaching this decision, we have concluded that the agreement is injurious to the best interests of the clients concerned because it reduces the motivation of defendants to use their best efforts in resolving the clients’ cases. *** [I]f this agreement were enforceable, defendants would be required under paragraph 15 to perform all the legal work on these files and then to remit all fees to plaintiff who ‘earned’ them solely by indirectly referring the files to defendants. In our view, it defies common sense to believe that defendants would be inclined to give the clients under these circumstances the same caliber of professional treatment that they would render to a client originating from their office. Defendants, instead, would be encouraged to dispose of the matters as quickly as possible without regard to the clients’ best interests, realizing that all fees arising therefrom would accrue to plaintiff, who rendered no services and assumed no responsibility for the files. We will not lend judicial approval to an agreement of this nature, because it endangers the clients’ rights to receive their attorneys’ complete care and consideration in the disposition of their legal affairs.” Corti, 93 Ill. App. 3d at 523-24, 417 N.E.2d at 769-70.

To support our decision on issue two — that public policy rendered unenforceable fee-splitting agreements premised solely on a client referral — we reviewed in Corti several Illinois cases which had previously discussed the enforceability of such agreements. (See Kravis v. Smith Marine, Inc. (1975), 60 Ill. 2d 141, 324 N.E.2d 417; Monahan v. Heirich (1955), 4 Ill. App. 2d 373, 124 N.E.2d 39 (abstract of opinion); Parker v. Gartside (1913), 178 Ill. App. 634.) We noted that in each case, the court upheld the agreement, with the common thread running through each case being that an attorney must perform services or exercise some degree of responsibility other than the mere referral of a case before sharing in the fee. Corti, 93 Ill. App. 3d at 527, 417 N.E.2d at 772.

Apart from Illinois cases on the subject, we reviewed cases from other jurisdictions which held unenforceable fee-sharing agreements that were based solely on the referral of a client. One such case, McFarland v. George (Mo. App. 1958), 316 S.W.2d 662, interpreted the phrase “service or responsibility” as used in Missouri’s version of Canon 34, the predicate to DR 2 — 107. The case arose within the context of an attorney’s claim for a portion of a fee based on a referral of a will contest case to another attorney. Because the referring attorney failed to present any evidence showing the assumption and discharge of responsibility in the handling of the will contest, McFarland held that the referring attorney violated Missouri’s Canon 34 and was, therefore, entitled to no fee. See Corti, 93 Ill. App. 3d at 528-29, 417 N.E.2d at 773.

In reaching its conclusion, McFarland relied upon the following comments by Henry S. Drinker, author of a book on legal ethics, given in a panel discussion reported in 7 University of Florida Law Review 433, 434 (1954):

“ ‘It makes the law too much of a business if you are practicing the way you would as a broker. The lawyer is not supposed to get paid for anything but the legal services that he renders, and selling a man a client is not a legal service.’ ” Corti, 93 Ill. App. 3d at 528-29, 417 N.E.2d at 773, quoting McFarland, 316 S.W.2d at 671.

McFarland concluded with defining the terms “service” and “responsibility” as used in Missouri’s version of Canon 34:

“ ‘The primary meaning of “responsibility” as found in the dictionaries is the state of being answerable for an obligation. [Citation.] The term “responsibility” includes judgment, skill, ability and capacity. [Citation.] Legal responsibility is the state of one who is bound or obliged in law and justice to do something. [Citation.] *** The word “responsibility” as used in the rule means the doing of something. Any other meaning would render the rule meaningless.’ ” (Emphasis in original.) Corti, 93 Ill. App. 3d at 529, 417 N.E.2d at 773, quoting McFarland, 316 S.W.2d at 671.

Apart from McFarland, we discussed in Corti opinions rendered by the ABA’s Standing Committee on Professional Responsibility which addressed the propriety of dividing fees solely on a referral under DR 2 — 107 of the ABA Model Code. The ABA opinions, we noted, interpreted that disciplinary rule to prohibit the division of fees based solely on a referral. We further noted that Palmer v. Breyfogle (1975), 217 Kan. 128, 535 P.2d 955, a leading case interpreting DR 2 — 107, reached a similar conclusion. From our review of the law on fee referrals, we concluded:

“It is evident from this review that attorneys have long been ethically and legally prohibited from sharing with other members of the profession fees generated from the disposal of a legal matter when the only ‘service’ rendered by the claimant attorney is the referral of the case. Profiting from the solicitation of professional employment is injurious to the legal profession and to the public. As the various authorities reveal, this practice is injurious to the legal profession since the public loses confidence in those who treat clients as merchandise in a market place rather than the recipients of the attorneys’ skills and abilities. More importantly, the best interests of the clients are jeopardized by the arrangements when it becomes more profitable for attorneys to sell clients than to give them a legal service. The unique terms of the present agreement not only permitted plaintiff to profit from the mere indirect referral of personal injury cases, but also diminished defendants’ incentive to provide the clients with the time and effort that their cases merited. As such, the relevant provision in the agreement is contrary to public policy.” Corti, 93 Ill. App. 3d at 531-32, 417 N.E.2d at 775.

We have discussed Corti at length because it represents pre-Illinois Code public policy on the enforceability of intra-attorney fee-sharing agreements where the fee claim is based solely on the referral of a client between two attorneys. Prior to July 1, 1980, the effective date of the Illinois Code, intra-attorney fee-splitting agreements based solely upon a client referral were unenforceable on public policy grounds. Any split under DR 2 — 107 of the ABA Code, and its counterparts under the Illinois bar organizations’ codes, required that the division be made “in proportion to the services performed and responsibility assumed by each.” (ABA Model Code, DR 2 — 107 (1980).) Absent the performance of some service, for which the mere referral of a client did not qualify, the fee-sharing agreement violated public policy.

When the Illinois Code was adopted, however, the Illinois Supreme Court changed public policy. Rule 2 — 107 of the Illinois Code now expressly sanctions fee-referral" agreements even though the only “service” the referring attorney provides is the mere referral of a client to another attorney:

“Rule 2 — 107. Division of Fees Among Lawyers (a) A lawyer shall not divide a fee for legal services with another lawyer who is not a partner in or associate of his law firm, unless
(1) the client consents in a writing signed by him to employment of the other lawyer, which writing shall fully disclose (a) that a division of fees will be made, (b) the basis upon which the division will be made, including the economic benefit to be received by the other lawyer as a result of the division, and (c) the responsibility to be assumed by the other lawyer for performance of the legal services in question;
(2) the division is made in proportion to the services performed and responsibility assumed by each, except where the primary service performed by one lawyer is the referral of the client to another lawyer and (a) the receiving lawyer fully discloses that the referring lawyer has received or will receive economic benefit from the referral and the extent and basis of such economic benefit and (b) the referring lawyer agrees to assume the same legal responsibility for the performance of the services in question as if he were a partner of the receiving lawyer; and
(3) the total fee of the lawyers does not exceed reasonable compensation for all legal services they rendered to the client.
(4) For purposes of this rule, ‘economic benefit’ shall include (a) the amount of participation in the fee received with regard to the particular matter; (b) any other form of remuneration passing to the referring lawyer from the receiving lawyer, whether or not with regard to the particular matter; and (c) an established practice of referrals to and from or from and to the receiving lawyer and the referring lawyer.” 107 Ill. 2d R. 2 — 107.

The Illinois Supreme Court’s motivation to depart from the prior prohibition against fee-referral agreements was that attorneys discovered ways around the blanket prohibition. This end run, however, had just as serious public policy implications as those justifying the blanket prohibition in the first place. As the Committee Comments to Rule 2 — 107 indicate:

“The rule expands and attempts to clarify the ABA provisions respecting division of fees among lawyers. In particular, it expressly sanctions payment of a fee to the referring lawyer where that lawyer takes no part in the actual handling of the case — a practice which is apparently prohibited by the ABA rule — so long as the referring lawyer assumes responsibility for the work of the other as though he were the other’s partner, and the total fee of the lawyers does not exceed reasonable compensation for the legal services performed. ***
To require actual participation in a case before a fee may be earned discourages some lawyers from referring cases they know could be better handled by another. This is not in the interest of the client or the lawyer. Currently, referring lawyers are sometimes given make-work tasks after referral to ‘earn’ a fee. This practice does not encourage the efficient delivery of legal services and may drive up legal fees. The public is best served by encouraging lawyers to refer matters to those more skilled in a particular area by permitting them to earn a referral fee so long as there is full disclosure to the client and responsibility is maintained by the referring lawyer.” 107 Ill. 2d R. 2 — 107, Committee Comments, at 625.

While Rule 2 — 107 of the Illinois Code removed the outright prohibition against fee sharing based solely on a client referral, the supreme court’s sanctioning of such conduct was not without significant safeguards designed to protect the client. In Corti, we expressed that the actual effect of fee-sharing agreements on the clients themselves was our paramount concern. The rule’s significant safeguards demonstrate this continued judicial concern.

Under DR 2 — 107 of the ABA Code, which again prohibited fee sharing based solely on a referral, a certain level of client consent was required. DR 2 — 107 provided that fee sharing amongst attorneys was prohibited unless, in part, “the client consents to employment of the other lawyer after a full disclosure that a division of fees will be made.” (ABA Model Code, DR 2 — 107 (1980).) Under Rule 2 — 107 of the Illinois Code, the theme of client consent has not only been continued, the disclosure requirements upon which such consent must be based have been enhanced. (See 107 Ill. 2d R. 2— 107, Committee Comments, at 625 (“Additional language seeks to improve the ABA rule by increasing disclosure to the client ***”).) Client consent must also be in writing.

Relative to fee sharing based “primarily” on a client referral under Rule 2 — 107(a)(2), the signed written disclosure required in subsection (a)(1) must disclose the “extent and basis” of the “economic benefit” which the receiving lawyer has received or will receive. (See Phillips v. Joyce (1988), 169 Ill. App. 3d 520, 523 N.E.2d 933; Vernon, 30 De Paul L. Rev. at 384-85 (discussing requirements of rule).) Economic benefit is broadly defined under the rule to include not only remuneration the referring attorney is to receive in the referred matter, but also “any other form of remuneration passing to the referring lawyer *** whether or not with regard to the particular matter.” 107 Ill. 2d R. 2 — 107(a)(4).

Based on the above articulated history of Rule 2 — 107, we believe that the enhanced consent provision and signed writing requirement represent an integral part of the Illinois Supreme Court’s public policy trade off which the court struck in giving its official sanction to intra-attorney fee-sharing agreements where the primary service performed by the referring attorney is the referral of a client. Before the rule, the actual effect of fee-sharing agreements on the clients themselves was our paramount concern. This concern, firmly rooted in public policy, required intra-attorney fee-sharing agreements based upon a mere client referral to be held violative of public policy. After the rule, public policy still requires that all such agreements be evaluated with this same concern in mind.

In this case, we are faced with an intra-attorney fee-sharing agreement primarily based on a client referral to which no referred client ever consented in writing. We believe that the signed writing requirement’s significant public policy roots require a holding in this case that plaintiff is entitled to no referral fee. The client’s right to counsel of his choosing must be preserved, and the signed writing requirement guarantees this result.

Relying on Kross v. American Country Insurance Co. (7th Cir. 1989), 875 F.2d 625, and Phillips v. Joyce (1988), 169 Ill. App. 3d 520, 523 N.E.2d 933, plaintiff advocates that we adopt a “substantial compliance” standard when assessing the enforceability of fee-referral agreements. Under this standard, plaintiff asserts that no signed writing should be required. We find Kross and Phillips distinguishable factually and inapplicable to the present case.

In Kross, the court assessed the enforceability of a contingent fee contract for purposes of determining whether plaintiff could maintain a cause of action for intentional interference with contract. Defendant argued that plaintiff’s contingent fee agreement was unenforceable because it was not in writing and failed to disclose when expenses were to be deducted as required by Rule 2— 106 of the Illinois Code. The court disagreed, finding that the violations of Rule 2 — 106 were “minor technical deficiencies.” We distinguish Kross on the grounds that it deals with Rule 2 — 106 within the context of a claim for intentional interference with contract. We further find Kross unpersuasive as its analysis does not adequately address the public policy underpinnings of the Illinois Code.

In Phillips, certain individuals hired Phillips in 1982 to represent them in a lawsuit against a financial brokerage firm. They agreed that Phillips would receive as attorney fees one-third of amounts recovered by settlement or verdict. Phillips, 169 Ill. App. 3d at 522, 523 N.E.2d at 934.

Phillips subsequently filed an action in State court on behalf of nine individuals and all persons similarly situated. On the same day, defendant Joyce filed a class action in Federal court arising from the same conduct. Joyce then approached Phillips and suggested that Phillips’ clients be added to the Federal case and that the two attorneys work together. Phillips and Joyce reached an oral agreement to jointly represent the clients.

Joyce thereafter sent a letter to all class clients informing them that he and Phillips were “jointly representing” their interests and that each client must sign a new contingent fee agreement. The clients signed the new contingency contract. Phillips, 169 Ill. App. 3d at 523, 523 N.E.2d at 934-35.

Phillips’ complaint alleged that Joyce began actively pursuing the litigation without dividing the work with Phillips, keeping him informed or even returning his phone calls. Phillips also alleged that Joyce prepared and sent to all of the class action clients a new fee agreement which only referred to Joyce as the clients’ attorney. The class action was subsequently settled, and Phillips thereafter filed his action against Joyce, seeking the imposition of a constructive trust and an accounting. Joyce moved to dismiss the complaint for failing to state a cause of action. The circuit court granted the dismissal, finding that the agreement violated Rule 2 — 107 of the Illinois Code. Phillips, 169 Ill. App. 3d at 523-24, 523 N.E.2d at 934-35.

On appeal, we adopted a standard of substantial compliance in applying Rule 2 — 107 to attorney fee-referral agreements. (Phillips, 169 Ill. App. 3d at 531, 523 N.E.2d at 939.) Under this standard, plaintiff stated a cause of action: The clients on whose behalf Phillips filed the State court action retained him, not Joyce, in the first instance. Although unclear from the opinion, most, and perhaps all, of these clients executed new fee agreements consenting to the joint representation. Although the clients were not informed that Joyce and Phillips were making a 50/50 split of fees, work or responsibility, the letter Joyce sent to the clients informed them that he and Phillips were “jointly representing” their interests. Phillips, 169 Ill. App. 3d at 530, 523 N.E.2d at 939.

We find Phillips factually distinguishable because there, the clients consented in writing to the joint representation of Phillips and Joyce. No such written consent occurred here. Absent such written consent, there can be no substantial compliance. We distinguish Phillips on this ground.

Plaintiff next asserts that SB&G and Grossman should be estopped from asserting the unenforceability of the fee-sharing agreement because it was their conduct in not obtaining the signed writing as promised. Plaintiff asserts that “ ‘[disciplinary Rule 2— 107 should not be too readily construed as a license for attorneys to break a promise, go back on their word, or decline to fulfill an obligation, in the name of legal ethics.’ ” Phillips, 169 Ill. App. 3d at 535, 523 N.E.2d at 942, quoting Baron v. Millinax, Wells, Mauzy & Baab, Inc. (Tex. App. 1981), 623 S.W.2d 457, 462; see also Watson v. Pietranton (W. Va. 1987), 364 S.E.2d 812; Carter v. Katz, Shandell, Katz & Erasmous (1983), 120 Misc. 2d 1009, 465 N.Y.S.2d 991; Moran v. Harris (1982), 131 Cal. App. 3d 913, 182 Cal. Rptr. 519 (endorsing estoppel argument).

We reject plaintiff’s argument. In O’Hara v. Ahlgren, Blumenfeld & Kempster (1989), 127 Ill. 2d 333, 537 N.E.2d 730, our supreme court rejected a similar estoppel argument. There, a widow sought to enforce a fee-sharing agreement with a law firm. The widow and the law firm had agreed for the widow to turn over her deceased husband’s cases in exchange for the firm paying her a portion of fees received. To counter the court’s holding that the agreement was unenforceable on public policy grounds, the widow argued that she was not in pari delicto and that the firm should be estopped from asserting illegality. The court disagreed on both counts and held the agreement to be unenforceable.

Here, plaintiff is no better off than the widow in O’Hara. The public policy considerations which the court in O’Hara relied upon are as strong in this case. Our paramount concern must be the effect these fee-sharing agreements have on the clients, not the attorneys involved. “It does not matter whose ox is gored.” (Schniederjon v. Krupa (1987), 162 Ill. App. 3d 192, 195, 514 N.E.2d 1200, 1202.) We will not enforce a fee-sharing agreement which violates public policy. Accordingly, we affirm the circuit court’s grant of summary judgment against plaintiff on count I of his complaint.

We next address whether the circuit court properly granted summary judgment against plaintiff on count II of his complaint. While count I of plaintiff’s complaint asserts breach of contract against defendants, count II asserts breach of fiduciary duty. Count II posits that the parties’ arrangement constituted a joint venture. At the summary judgment hearing, the circuit court made no specific finding relative to whether a joint-venture relationship existed. Nevertheless, summary judgment against plaintiff was entered on this theory because the court believed that the entire agreement was void as against public policy as no client ever consented in writing to the parties’ arrangement.

On review, we must first determine whether a genuine issue of material fact exists relative to whether the parties’ arrangement can properly be characterized as a joint venture and, if so, whether defendants can assert as an affirmative bar their alleged failure to obtain the referred clients’ consent to the referral arrangement.

Generally, a joint adventure is an association of two or more persons to carry out a single enterprise for profit. (23 Ill. L. & Prac. Joint Adventures §2 (1979).) The existence of a joint venture may be inferred from facts and circumstances showing such an enterprise was in fact entered into and the intent of the parties is the most significant element. (Ambuul v. Swanson (1987), 162 Ill. App. 3d 1065, 1068, 516 N.E.2d 427, 429.) In general, the following elements are determinative of such an intent: (1) an express or implied agreement to carry on some enterprise; (2) a manifestation of intent by the parties to be associated as joint venturers; (3) a joint interest as shown by the contribution of property, financial resources, effort, skill or knowledge by each joint venturer; (4) some degree of joint proprietorship or mutual right to exercise control over the enterprise; and (5) provision for the joint sharing of profits and losses. Ambuul, 162 Ill. App. 3d at 1068, 427 N.E.2d at 429.

Where the relationship is established, a fiduciary duty exists between joint adventurers, requiring good faith between them. “Each member *** has the duty to act for the benefit of the others as to matters within the scope of the relation.” (23 Ill. L. & Prac. Joint Adventures §21 (1979).) “Each party is required to make a complete disclosure to the other of all matters affecting their enterprise. Each party is entitled to a formal account as to the operations and affairs of the joint adventure, and each party is liable to the other for misrepresentation or other fraud in the course of the enterprise.” 23 Ill. L. & Prac. Joint Adventures §21 (1979).

Recently, in In re Johnson (1989), 133 Ill. 2d 516, 552 N.E.2d 703, our supreme court addressed whether a joint-venture relationship could arise between an attorney and a law firm which the client retained to jointly represent his case. There, Johnson agreed to represent Walter-Geldzahler in connection with a claim on a disability insurance policy. Johnson asked Moore, another attorney, to join him in. representing Geldzahler. Geldzahler entered into a written contingent fee retainer agreement whereby he jointly retained the respondent and Moore’s law firm, Kelly & Moore, on a one-third contingency basis. Johnson and the firm orally agreed to a one-half division of the attorney fee. The case subsequently settled, with Johnson receiving a settlement check in the names of Johnson, the client and Kelly & Moore. Johnson later negotiated the check in his own name and in the name of Kelly & Moore.

On review, the court addressed the issue of whether Johnson’s relationship with Kelly & Moore vested him with implicit authority to negotiate the settlement check in their name despite lacking express authority to so act. The court stated:

“Although the precise issue has not been previously addressed by this court, it appears well accepted in other jurisdictions that where lawyers between whom no general partnership relation exists jointly undertake to represent a client in a case, they may be regarded as joint venturers, or ‘special partners,’ for the particular transaction. [Citations.] ‘Thus, where an attorney retained on a contingent fee to prosecute a claim engages another lawyer to assist in the litigation, upon an agreement to share the fee in case of success, otherwise to receive nothing, they become joint venturers.’ [Citations.] We accept this characterization of the relationship between two attorneys, like [Johnson] and the firm of Kelly & Moore in the present case, jointly representing a client on a contingent fee basis. This court has defined a joint venture as an association of two or more persons to carry out a single enterprise for profit. [Citations.] This definition aptly characterizes the relationship between the respondent and the firm of Kelly & Moore with regard to the representation of Walter Geldzahler.” (In re Johnson, 133 Ill. 2d at 525-26, 552 N.E.2d at 707.)

The court went on to hold that the parties’ relationship vested Johnson with implicit authority to endorse the settlement check in the name of Kelly & Moore.

We believe that Johnson is persuasive authority for the proposition that a genuine issue of material facts exists as to whether the relationship between plaintiff and defendants in the instant case constituted a joint-venture relationship. First, a jury could find that the parties entered “some” enterprise. Documentary evidence from defendants to plaintiff exists in which defendants thank plaintiff for the referral of 10 cases. Other record evidence indicates checks from defendants to plaintiff. Plaintiff asserts that these checks reflect payment of his referral fee in five of the referred cases.

Second, a jury could conclude that the enterprise entered was indeed a joint venture. To the venture, plaintiff contributed clients while defendants contributed legal services. A 50/50 sharing of profits was contemplated. Plaintiff claims that he agreed to assume the same responsibility for the services rendered as if he were one of defendants' partners. This shared responsibility gave plaintiff “some degree of joint proprietorship or mutual right to exercise control over the enterprise” (Ambuul, 162 Ill. App. 3d at 1068, 516 N.E.2d at 429), even though the parties agreed that plaintiff would not in fact exercise any.

Assuming the trier of fact on remand finds a joint-venture relationship, the trier of fact could further find that defendants breached their fiduciary duties to plaintiff. A jury could find from the evidence that, soon after entering the alleged fee-sharing arrangement with plaintiff, defendants failed to obtain the referred clients’ signatures on the model contract as agreed. Instead, defendants signed the referred clients, with whom otherwise they would have had no contact, to their own standard contingency contract, omitting plaintiff entirely. A jury could find from this evidence that defendants breached their fiduciary duties of loyalty and good faith to plaintiff.

We must next address whether the undisputed absence of Rule 2 — 107’s signed writing requirement necessitates that the parties’ joint-venture agreement be held unenforceable on public policy grounds. We think not.

Plaintiff’s count I sought enforcement of the fee-sharing agreement. Because no referred clients ever consented in writing, we held that allowing plaintiff to obtain a fee in such instance would violate public policy. This holding was predicated on Illinois public policy, which requires that the client’s right to representation by the attorney of his choosing be preserved. The effect of such fee-sharing agreements on the clients involved was our paramount concern.

Plaintiff’s count II deals with the fiduciary duty one attorney owes to another upon entering a joint-venture agreement in which clients are referred and fees shared. Breach of fiduciary duty actions are not contract actions. This distinction, we believe, requires that our paramount concern becomes the effect such agreements have on the attorneys involved.

It is clear that Illinois public policy cannot endorse defendants’ alleged misconduct in this case. Receiving attorneys cannot be allowed to induce a referring attorney to make a referral under the belief that the receiving attorney will obtain Rule 2 — 107’s signed writing requirement. Clearly, the profession will be better served if attorneys are bound to their word.

Finally, we note that the result we reach on count II comports with the framework of Rule 2 — 107. Contrary to defendants’ assertions, Rule 2 — 107 did not require plaintiff, as the referring attorney, to have an attorney-client relationship with the referred clients prior to referral. (Accord Ryder v. Farmland Mutual Insurance Co. (1991), 248 Kan. 352, 807 P.2d 109 (interpreting the word “client” to mean the status of the client with regard to the receiving attorney, not the referring attorney).) Rather, relative to retention, the plain language of the rule requires only that the client consent in writing to the retention of both attorneys prior to a fee division.

Nor does the rule require the referring attorney to obtain the signed writing containing the necessary disclosures prior to the referral. Rule 2 — 107(a)(2) specifically states that “the receiving lawyer fully disclose[ ] that the referring lawyer has received or will receive economic benefit from the referral and the extent and basis of such economic benefit.” (Emphasis added.) (107 Bl. 2d R. 2— 107(a)(2).) Given this structure of the rule, the referring and receiving attorney may agree in advance as the parties allegedly did here as to who shall obtain the signed writing required by the rule. Of course, absent the signed writing, no fee-sharing agreement is enforceable on contractual grounds. Consequently, the referring attorney may wish to obtain the signed writing prior to the referral, but under the rule, such a result is not required.

In summary, as to count II, we reverse and remand the circuit court’s award of summary judgment against plaintiff.

For the foregoing reasons, the judgment of the circuit court of Cook County is affirmed in part and reversed in part and remanded for further proceedings consistent with this opinion.

Affirmed in part, reversed in part and remanded.

MANNING, P.J., and O’CONNOR, J., concur.

SUPPLEMENTAL OPINION ON DENIAL OF REHEARING

JUSTICE BUCKLEY

delivered the opinion of the court:

Defendants’ petition for rehearing raises numerous arguments which we believe warrant discussion.

Defendants first argue that our finding of unenforceability as to count I requires that plaintiff’s recovery under count II be barred as well. We disagree.

In our opinion, we found that Rule 2 — 107 (107 Ill. 2d R. 2 — 107) does not require a referring attorney to have an attorney-client relationship with the referred client prior to the referral. Also, we found that Rule 2 — 107 does not require the referring attorney to obtain the signed writing containing the necessary disclosures prior to the referral. These findings were based on the plain language of Rule 2 — 107.

These two observations are of critical importance in this case. Plaintiff has alleged that he and Grossman sat down together and developed their arrangement after reading Rule 2 — 107. Their arrangement envisioned total compliance with that rule. Because plaintiff did not practice personal injury law, personal injury claimants would be referred to Grossman and his firm where they would sign a model retainer contract. This contract disclosed to the client, inter alia, that plaintiff would receive a referral fee and the nature and extent thereof. We agree with plaintiff that the alleged agreement envisioned compliance with Rule 2 — 107.

This conclusion in turn bears directly on the viability of plaintiff’s count II, which asserts that the relationship entered between the parties constituted a joint venture and that defendants’ conversion of the referred clients amounted to a breach of fiduciary duty. Unlike count I, plaintiff’s recovery under count II does not require this court to enforce an agreement which is unenforceable on public policy grounds. As to that count, if this court were to enforce the parties’ alleged agreement, we would be enforcing a fee-sharing agreement, to which the referred clients never consented in writing. The signed writing requirement is firmly rooted in public policy and, in its absence, no fee-sharing agreement is enforceable on contract grounds.

However, as to count II, this court need only find that the parties’ alleged agreement initially envisioned compliance with the applicable ethical rules. We believe, as noted, that it did. A joint venture, valid when entered, gives rise to fiduciary duties between its membérs.' A subsequent breach of fiduciary duty, which by its nature just so happens to render the underlying agreement unenforceable on public policy grounds, does not destroy the existence of the underlying agreement. It exists as do the fiduciary duties arising therefrom. Thus, a breach of fiduciary duty action may nevertheless lie. For these reasons, defendants’ argument that count I and II must rise and fall together fails.

Defendants also raise the argument that plaintiff’s recovery under count II is barred because plaintiff breached his own fiduciary duty to the referred clients. Defendants assert that plaintiff has alleged an attorney-client relationship with each referred client. Relying on Schniederjon v. Krupa (1987), 162 Ill. App. 3d 192, 514 N.E.2d 1200, defendants assert that plaintiff had a fiduciary duty to make full disclosure of the parties’ arrangement to each referred client. Defendants assert that, absent such disclosure, plaintiff is not entitled to share in any fee.

Our review of plaintiff’s verified, fourth-amended complaint reveals that plaintiff indeed alleges the existence of an attorney-client relationship with each referred client prior to referral. Plaintiff asserts: “[He] reviewed the facts surrounding the aforesaid claims with the claimants, analyzed the law applicable to the facts, evaluated the merits of each claim and accepted the offer to be retained by the client.”

Schniederjon holds that attorneys have a fiduciary duty to their clients to make full disclosure of fee-sharing agreements. We agree with Schniederjon that this duty arises apart from Rule 2 — 107 and the ethical rules; it arises pursuant to common law. “Generally, an attorney .is required to disclose to his clients all facts and circumstances within his knowledge which might be likely to affect the performance of his duty.” (4 Ill. L. & Prac. Attorneys and Counselors §104 (1971).) As Schniederjon noted: “We need not comment about the difference in the financial inducement between a one-third and one-sixth fee.” (Schniederjon, 162 Ill. App. 3d at 195, 514 N.E.2d at 1202.) Clearly, an attorney’s fiduciary duty to his client includes full disclosure of the existence and nature of any fee-sharing agreement.

We agree with defendants’ assertion that Schniederjon acts to bar plaintiff’s recovery where plaintiff has failed to make full disclosure of his fee-referral agreement to his own clients. We will not aid an attorney in recovering a referral fee where that attorney has himself breached his fiduciary duty to the referred client. This is so whether the referring attorney seeks recovery of a portion of the fee itself or whether the fee sought is labelled a “profit” of a claimed “joint venture.”

Our agreement with defendants, however, does not entirely bar plaintiff’s recovery here. This case is an appeal from a summary judgment. Thus, we must construe the evidence produced on defendants’ motion in the light most favorable to plaintiff. Upon doing so, we believe there exists a genuine issue of material fact as to the referral of Danny Flynn to defendants.

The relationship of attorney and client is a contractual one. (Corti v. Fleisher (1981), 93 Ill. App. 3d 517, 521, 417 N.E.2d 764, 768.) It is only created by a retainer or an offer to retain or fee paid. It cannot be created by the attorney alone or by an attorney and a third party who has no authority to act. (Corti, 93 Ill. App. 3d at 521, 417 N.E.2d at 768.) Implicit within Corti is the principle that a third party with authority from another can create an attorney-client relationship for the benefit of the other.

Plaintiff’s deposition illustrates the very real situation of family members retaining an attorney to pursue a personal injury matter on behalf of an injured family member. Plaintiff was Timothy Flynn’s friend and had acted as his attorney in a workers’ compensation case. Plaintiff there had a 50/50 relationship with another attorney.

Plaintiff testified that Timothy called him from the hospital where Danny had been brought following an automobile accident in which Danny and James Bronson, another referral, were injured. Timothy wished to hire plaintiff on Danny’s behalf. Because of plaintiff’s relationship with Timothy Flynn, the Flynns generally knew, including Danny Flynn, of plaintiff’s 50/50 arrangement with other personal injury attorneys. At the time of the accident, plaintiff again explained his arrangement to the Flynn family.

Plaintiff testified that he recalled that he arranged a conference call between himself, Grossman and Timothy Flynn. Timothy Flynn was supposed to go to Grossman’s office and obtain the model retainer agreement for Danny to sign. Timothy Flynn did obtain paperwork from Grossman. However, it was Grossman’s standard-form contingency contract. This is the contract which Danny Flynn signed. Apparently, Timothy Flynn delivered to Bronson at this time a similar retainer contract for Bronson to sign as well. It was not until after settlement of the cases involving these individuals did plaintiff first learn that he had been excluded by Grossman from the Flynn case. Plaintiff testified he was at a bar having drinks with Timothy Flynn when Flynn joked that plaintiff could at least have taken him out to dinner in light of Danny’s case being settled. Up to that point, plaintiff believed Grossman was living up to his part of the bargain and, indeed, had even received referral fees from Grossman on other referrals.

We recognize that defendants have submitted the affidavit of Danny Flynn in which he swears, inter alia, that “at no time prior to or after signing of this [Grossman retainer] Agreement did Thomas Holstein or any body on his behalf make any representations to me that would suggest that Thomas Holstein and Richard Grossman were going to split any of the fees Richard J. Grossman received from this case.” We also recognize that plaintiff admits in his deposition that he never met with Danny Flynn at or immediately after the accident for purposes of retention and that he made no disclosures to Danny Flynn at such times. Plaintiff in his deposition, however, claims that Danny Flynn had “absolute knowledge” that plaintiff was to obtain one-half of any fee which Grossman received.

We cannot enter summary judgment against plaintiff where such a conflict in the testimony exists. Suffice it to say that a genuine issue of material fact exists as to whether plaintiff satisfied his fiduciary duty to Danny Flynn by making disclosures to Timothy Flynn or other family members who, at the time of such oral disclosure, were acting as the authorized agent of Timothy Flynn.

Relative to Bronson, no genuine issue of material fact exists as to whether plaintiff satisfied his fiduciary duty of making full disclosure to Bronson. Plaintiff in his deposition states that he did not know Bronson prior to the accident. Further, he only had a general “belief” of having made oral disclosure to Bronson or a Bronson family member of the parties’ fee-referral arrangement. Bronson in an affidavit has denied retaining plaintiff or receiving any disclosure that plaintiff would share in any fees.

Plaintiff failed as a matter of law. An attorney’s general belief that the necessary disclosures were made, without more, is insufficient to comply with his fiduciary duty. Some specifics as to where the conversation took place, when it occurred, and what was said are, at a minimum, required to demonstrate compliance.

The same can be said of the other referrals at issue. The record reveals the names of the individuals referred to be Lindsey, Guilotty and Cobb. These referrals were all generated by LAWLINE.

Plaintiff at his deposition had no independent recollection of speaking to these individuals. He believed, however, that pursuant to standard operating procedure, which he and other attorneys in his office followed, the necessary disclosures were made. Otherwise, the referrals to defendants would not have been made. Such disclosures were always made prior to Grossman being contacted.

This is not compliance with a fiduciary duty. “A contrary decision would allow clients to be unknowingly treated like objects of commerce, to be bargained for and traded by merchant-attorneys like beans and potatoes.” (Corti, 93 Ill. App. 3d at 523, 417 N.E.2d at 764.) This we cannot allow.

In summary, we deny defendants’ petition for rehearing. However, their argument that plaintiff breached his own fiduciary duty to the referred clients is well taken. Plaintiff’s recovery, if any, is limited to the referral involving Danny Flynn. As to all others, summary judgment in favor of defendants is affirmed. For the foregoing reasons, the case is remanded for further proceedings consistent with this opinion.

Affirmed in part; reversed in part and remanded.

MANNING, P.J., and O’CONNOR, J., concur.

      The Illinois Code was repealed effective August 1, 1990, by the Illinois Supreme Court and replaced by the Illinois Rules of Professional Conduct. (See 134 Ill. 2d art. VIII.) Rule 2 — 107 of the Illinois Code is now codified in substantially the same form as Rules 1.5(f) through (j) of the new Code.


source: Caselaw Access Project

author: JUSTICE McMORROW

license: Public Domain

text:
    COMPASS HEALTH CARE PLANS, Plaintiff-Appellee, v. BOARD OF EDUCATION OF THE CITY OF CHICAGO et al., Defendants-Appellants.
    First District (4th Division)
    No. 1 — 91—2790
    Opinion filed November 25, 1992.
    Rehearing denied January 22, 1993.

      Iris E. Sholder, of Board of Education of City of Chicago, of Chicago (Respicio F. Vazquez, of counsel), for appellants.
    Thomas E. Johnson and Phillip H. Snelling, both of Johnson, Schaaf, Jones & Snelling, of Chicago, for appellee.
   JUSTICE McMORROW

delivered the opinion of the court:

Defendants, the Board of Education of the City of Chicago and Ted Kimbrough, general superintendent of the Chicago Public Schools (collectively, the Board), appeal from orders denying their motion to dismiss and granting summary judgment for plaintiff Compass Health Care Plans (Compass) in an action to require the Board to comply with the competitive bidding provisions of the Illinois School Code (Ill. Rev. Stat. 1989, ch. 122, pars. 34 — 21.3, 10 — 20.21) (the Code) in the award of contracts to health maintenance organizations (HMOs) for the provision of medical benefits to employees of the Chicago Public School (CPS) system. On appeal, the Board contends that the orders in favor of plaintiff were in error because contracts with HMOs are excepted from the competitive bidding statute.

On November 5, 1990, Compass filed a two-count verified complaint against the Board seeking mandamus and/or declaratory relief. Count II, which sought an order requiring the Board to apply its minority and women business enterprise contracting regulations to the award of HMO contracts, was nonsuited by Compass and is not at issue in this appeal.

In count I, Compass alleged that it is a not-for-profit HMO established by the Chicago Hospital Council with 32 participating Chicago-area hospitals. From 1985 through August 1990, Compass was one of eight HMO plans available to CPS employees. In a letter dated June 29, 1990, the Board notified Compass that the number of HMO plans offered to CPS employees would be reduced from eight to four for the 1990-91 school year, and that Compass HMO would not be among the four offered. In response to a protest from Compass, the Board’s chief operating officer, Robert Sampieri, wrote a letter, dated July 26, 1990, explaining that outside consultants had recommended the reduction in HMOs offered, and that the four HMOs with the highest enrollment were retained. On August 15, 1990, the Board entered into contracts with the four HMOs with the largest enrollments.

Compass subsequently filed this action seeking a declaration that the health care service contracts with those HMOs were null and void, and an order requiring the Board to contract with HMOs on the basis of competitive bidding. On January 9, 1991, Compass served the Board with interrogatories and requests for production of documents and admissions of facts. On January 25, the Board filed a motion to dismiss Compass’ complaint, arguing that HMO contracts were excepted from the Code section and the Board rules requiring competitive bidding. On February 25, 1991, Compass filed a motion for summary judgment and a memorandum in response to the Board’s motion to dismiss and in support of summary judgment; reply memoranda were filed in June 1991. On June 14, 1991, after a hearing, the Board’s motion to dismiss was denied; and, following argument on July 26, the trial court granted Compass’ motion for summary judgment and ordered the Board to comply with the competitive bidding requirements of the School Code. Compass subsequently filed a motion for a rule to show cause or, alternatively, the establishment of a deadline for the Board’s compliance with the order of July 26. The Board filed a motion for a stay, and after argument on the motions, the trial court denied Compass’ motions and granted the Board a stay pending appeal. This timely appeal followed.

Included among the powers granted the Board by the School Code are:

“To provide for or to participate in provisions for insurance protection and benefits for its employees and their dependents including but not limited to *** medical, surgical and hospitalization benefits ***. *** Such insurance or benefits may be contracted for only with an insurance company authorized to do business in this state, or any non-profit hospital service corporation organized under the non-profit Hospital Service Plan Act ***.” (Ill. Rev. Stat. 1989, ch. 122, par. 10-22.3a.)

Section 34 — 21.3 of the Code, dealing with contracts, provides in relevant part:

“The board shall let all contracts (other than those excepted by Section 10 — 20.21 of The School Code) for supplies, materials, work, and contracts with private carriers for transportation of pupils, involving an expenditure in excess of $10,000 by competitive bidding as provided in Section 10 — 20.21 of The School Code.” (Ill. Rev. Stat. 1989, ch. 122, par. 34 — 21.3.)

Section 10 — 20.21 of the Code requires the Board:

“To let all contracts for supplies, materials or work or contracts with private carriers for transportation of pupils involving an expenditure in excess of $5000 to the lowest responsible bidder after due advertisement, except contracts which by their nature are not adapted to award by competitive bidding, such as contracts for the services of individuals possessing a high degree of professional skill where the ability or fitness of the individual plays an important part ***.” (Emphasis added.) (Ill. Rev. Stat. 1989, ch. 122, par. 10 — 20.21.)

Board Rule 5 — 4 contains nearly identical language regarding the awarding of contracts in excess of $10,000.

The Board moved for dismissal of Compass’ complaint based upon the italicized portion of section 10 — 20.21. The Board contends that, as restrictions on the contracting power of public bodies, competitive bidding statutes should be narrowly construed (People ex rel. Adamowski v. Daley (1959), 22 Ill. App. 2d 87, 159 N.E.2d 18 (interpreting statute to require competitive bidding where an exception is clearly stated would be restrictive)); and, that by ordering competitive bidding for HMO contracts, the trial court erroneously expanded the competitive bidding requirement of the statute. It was the Board’s position, as it is on appeal, that HMO contracts are not adapted to award by competitive bidding because they are health care contracts which involve the services of individuals, i.e., medical care providers, possessing a high degree of professional skill; and that in contracting for professional services the lowest bid should not be the determinative factor.

In support of its position, the Board relies primarily on Hassett Storage Warehouse, Inc. v. Board of Election Commissioners (1979), 69 Ill. App. 3d 972, 387 N.E.2d 785. In Hassett, the Board solicited bids for the storage and cartage to and from polling places of 1,300 voting booths, ballots, registration binders and various other election materials six times during the two-year term of the contract. Hassett alleged that the firm which was awarded the contract did not satisfy certain specifications required by the sealed bid and that the contract therefore violated the competitive bidding requirements of the municipal purchasing statute. The court held that the contract was excepted from the competitive bidding provision because the contract placed, in the court’s words,

“a tremendous responsibility on the contractor for the efficient administration of the electoral process. It requires that trust and confidence be placed in the [contractor] and requires near perfect performance under extreme time pressures. The failure of the contractor to perform his obligations properly could disenfranchise *** voters *** and do irreparable damage to an election.” (69 Ill. App. 3d at 982.)

The Board analogizes that HMOs are authorized to provide health care services and that such services involve no less trust and confidence than the storage and transportation of election materials.

In our view, Hassett is dissimilar from the case before us and not determinative of the issue presented. First, in the document soliciting competitive bids, the Board in Hassett expressly reserved the right to reject any and all proposals, • and, notably, counsel for Hassett conceded in the trial court that the Board had not been obligated to let the contract out for competitive bidding in the first instance. Further, Hassett’s complaint admitted that the contract involved expert professional skills. Those are the very matters at issue in the present case. Also, the Hassett court noted that Hassett’s claim that competitive bidding was legally required was directly contradicted by its request that the trial court discard all of the other bids and order that the contract be awarded to it without competitive bidding. In this case, Compass did not seek an order compelling the Board to award it a contract, but merely to allow it to competitively bid for one of the four HMO contracts awarded by the Board. Further, the time and performance pressures of ensuring the safe delivery of 1,300 voting machines as well as registration binders, ballots and other voting materials to, from and among numerous polling places on each of six specific election days do not exist in the provision of HMO services.

We agree with the trial court that an HMO contract is not a contract for the direct furnishing of medical services, such as physical examinations of students, but is, instead, merely a contract for the administration of an employee health care program in which CPS employees select their own personal medical providers from a list of hospitals and doctors associated with the HMO. See Raglin v. H M O Illinois, Inc. (1992), 230 Ill. App. 3d 642, 595 N.E.2d 153.

The court’s ruling is supported by the uncontradicted affidavit of David Dranove, the co-director of the graduate program in health administration at the University of Chicago and author of several publications in the health care economics field. In that affidavit, Dranove stated that the vast majority of Chicago-area HMOs are “individual practice association” types which do not directly provide medical services. Their principal activities are.insuring the enrollees against the financial risks of health care costs, processing claims, and contracting with independent medical care providers for the provision of medical services to the enrollees of the HMO, none of which requires professional medical training. Compass and two of the HMOs awarded contracts by the Board are of this type. Only 3 of the 22 HMOs operating in the Chicago area in 1989 were “staff model” HMOs, i.e., those which directly provide medical services. According to Dranove, even “staff model” HMOs contract out for most hospital services. Although each HMO offers a different combination of doctors and hospitals, there is considerable overlap of providers, in that most doctors and hospitals contract with several HMOs.

Dranove further asserted that nothing about the nature of an HMO contract makes it not adapted to competitive bidding in response to employer solicitation. He stated that the practice of “comparison shopping” or “selective contracting” by employers for health care benefit packages results in substantial savings, as high as 15% to 20%, due to the increasingly high level of competition in the health care marketplace.

The purposes for requiring public bodies to engage in competitive bidding are to invite competition, to guard against favoritism, improvidence, extravagance, fraud and corruption and to secure the best work or supplies at the lowest price practicable. (O’Hare Express, Inc. v. City of Chicago (1992), 235 Ill. App. 3d 202, 208; Smith v. F.W.D. Corp. (1982), 106 Ill. App. 3d 429, 436 N.E.2d 35; 10 E. McQuillin, Municipal Corporations §29.29, at 302 (3d ed. 1981).) Contrary to the Board’s argument, however, the competitive bidding statute does not automatically compel it to award a contract solely on the basis of the lowest cost. (S.N. Nielsen Co. v. Public Building Comm’n (1980), 81 Ill. 2d 290, 410 N.E.2d 40.) The statute expressly provides that contracts be awarded to the “lowest responsible bidder” after due advertisement. (Emphasis added.) (Ill. Rev. Stat. 1989, ch. 122, par. 10 — 20.21.) It is the public body which specifies the terms of the contract for which it solicits bids and the criteria which bidders must meet in order to be considered a “responsible bidder.” (E.g., Smith v. F.W.D. Corp., 106 Ill. App. 3d at 431.) As the Nielsen court, quoting 10 E. McQuillin, Municipal Corporations §29.73a, at 429-30 (3d ed. 1981), stated, “ ‘[i]n proper circumstances a contract may be awarded to one who is not the lowest bidder, where this is done in the public interest, in the exercise of discretionary power granted under the laws, without fraud, unfair dealing, or favoritism, and where there is a sound and reasonable basis for the award as made.’ ” (S.N. Neilsen Co., 81 Ill. 2d at 299.) Similarly, in Cardinal Glass Co. v. Board of Education of Mendota Community Consolidated School District No. 289 (1983), 113 Ill. App. 3d 442, 448, 447 N.E.2d 546, 550, the court, citing Nielsen and McQuillin, stated that “[wjhile it is clear that under the statute the Board has discretion to determine who is the lowest responsible bidder, and that it need not be the lowest bidder in terms of contract price, nevertheless, under the statute, the Board has the duty to award the contract to the lowest responsible bidder and that bidder, having so established himself, has a right to be awarded the contract.”

In the instant case, the Board has failed to present any facts to support its assertion that contracts with HMOs are not adapted to competitive bidding. The Board acknowledged its authority to establish criteria and specifications for contracts with HMOs; indeed, the Board argued that it awarded the four contracts at issue on the basis of both cost effectiveness and program offerings. These are the same factors which the Board would consider in determining the lowest responsible bidder of the HMOs submitting competitive bids. The Board offers no persuasive facts or arguments why a State-certified HMO, such as Compass, should not be allowed to participate in a competitive bidding process which would inure to the benefit both of CPS employees and, ultimately, the taxpayers who fund their health care plans.

The court also found that despite the Board’s reliance on the professional skills exception of the statute in its pleadings and arguments, its decision to contract with certain HMOs and to discontinue contracts with others was not based upon the professional skills of the HMOs or of the health care providers associated with the HMOs. Rather, the court found, the decision was “strictly a matter of numbers,” the four HMO plans with the largest enrollment of CPS employees being retained.

These factual findings are supported by the record. Attached to Compass’ complaint is the July 1990 letter to Compass from the Board’s chief operating officer, Robert Sampieri, explaining the Board’s decision regarding future HMO contracts. That letter states in pertinent part:

“[0)ur outside consultants recommended that we reduce the number of HMO’s offered from eight to four. The four HMO’s with the fewest number of our employees were discontinued. In the case of Compass, our fifth largest HMO, this proved to be a very tough decision. We have been very satisfied with your service since you joined us in 1985. You showed a steady growth in the enrollment of our employees in the past five years, but, we had to draw the cut-off line somewhere. Unfortunately, that line fell on Compass.
If any of your prospective clients require a reference from the Chicago Public Schools, please have them call me or *** our Director of Risk Management. We will be very happy to recommend Compass to anyone.”

The court also had before it the facts in Compass’ request for admissions which were not denied by the Board: that from 1985 through August 1990, Compass satisfactorily performed as an HMO in the CPS employee medical health care program; that Compass was discontinued as an HMO available to CPS employees because it was not one of the four with the largest employee enrollment; and that during the contracting period ending August 1990, Compass’ rates were less and its premium increases had been lower than any of the other participating HMOs.

Although the Board argues that its official report of August 15, 1990, states that the contracts at issue were awarded on the basis of cost effectiveness and program offerings, there is nothing in the record which substantiates that summary statement in the Board’s report. To the contrary, the fact that the Board did not solicit bids allowing each HMO to delineate its program offerings and cost for the 1990-91 school year contradicts the Board’s official report statement.

The documents submitted in support of Compass’ allegations stand unrefuted. Thus, we concur in the trial court’s findings that the HMO industry is highly competitive; that HMO contracts do not involve the type of professional skills which would render them not adapted to competitive bidding; and that the contracts at issue were not awarded on the basis of the professional skills, program offerings or cost effectiveness of each HMO, but, rather on the number of enrollees in each of the HMO plans offered to CPS employees as of June 1990. Consequently, we find no error in the trial court’s ruling that HMO contracts are not exempt from the competitive bidding provision of the Code.

For the reasons stated, the orders of the trial court denying the Board’s motion to dismiss, granting summary judgment for Compass, and ordering the Board to comply with the competitive bidding requirements of the Code are affirmed.

Affirmed.

JOHNSON and LINN, JJ., concur.


author: JUSTICE SCARIANO

text:
    HELLER FINANCIAL, INC., Plaintiff-Appellee, v. JOHNS-BYRNE COMPANY, Defendant-Appellant.
    First District (2nd Division)
    No. 1 — 91—1551
    Opinion filed September 29, 1992.
    Rehearing denied November 9, 1992.
    Paul F. Schofield, of Chicago, for appellant.
    Dardick & Denlow, of Chicago (Nathan H. Dardick and Michael D. Richman, of counsel), for appellee.
   JUSTICE SCARIANO

delivered the opinion of the court:

In September 1985, Microdot Lithoplate Company (Microdot) entered into an equipment lease agreement with EC. Leasing Corporation (P.C. Leasing), as to which Johns-Byme Company (defendant) gave a written guaranty. Several months later, P.C. Leasing assigned its interest in the lease to Heller Financial, Inc. (plaintiff). When, in July of 1989, Microdot defaulted under the terms of the lease, plaintiff notified both Microdot and defendant thereof and, as permitted by the terms of the lease, accelerated the remaining payments due and made a demand in the amount of $132,594. In January 1990, Microdot, plaintiff and defendant agreed to sell the equipment to a third party for the agreed price of $89,000. On the day of the contemplated sale, however, plaintiff presented to defendant a voluntary repossession agreement containing a waiver of certain of defendant’s rights, and a blank promissory note. Although defendant agreed to the repossession of the equipment, it did not agree to sign the repossession agreement or the blank promissory note because it did not want to “make itself liable for any obligations in excess of the amount owed under the lease and guaranty”; plaintiff therefore refused to complete the sale.

On February 9, 1990, plaintiff filed suit to collect the sum of $132,594 which it claimed to be due under the lease, plus interest, late charges, attorney fees and costs. In its answer defendant admitted that (1) Microdot had entered into the lease, (2) it had entered into the guaranty, (3) Microdot had defaulted on its lease, and that (4) plaintiff had demanded certain payments from it. Defendant denied, however, that it owed $132,594 to plaintiff. Defendant also asserted certain affirmative defenses: (1) plaintiff had materially altered the guaranty agreement when it refused to permit the sale to a third party for $89,000, and when it subsequently refused to credit defendant with that amount; (2) defendant had been discharged under the guaranty agreement because plaintiff failed to mitigate damages; (3) the obligations under the original lease agreement were unenforceable because the lease agreement contained a “confession of judgment” clause which is void and illegal; (4) the original obligation was void and unenforceable because plaintiff had waived its rights to prompt payments from the obligor; and (5) defendant had been discharged from further performance because of plaintiff’s material breach of the guaranty agreement by demanding that defendant execute a blank promissory note and a waiver of certain of its rights as a condition of plaintiff’s obligation to mitigate damages.

Plaintiff moved the court to strike all five of these affirmative defenses and to grant summary judgment in its favor on the ground that, pursuant to the language of the guaranty, defendant was unconditionally obligated to pay the amount due under the lease; thus, there were no genuine issues of material fact to be tried. In its answer to plaintiff’s motion for summary judgment and affidavit in support of damages, defendant admitted that certain monies were due under the lease. In an affidavit from Timothy Uchwat, controller for defendant, it admitted that

“[i]f all payments are allocated solely to rent due under the lease, the gross balance of rent due does not exceed $120,034.43 as of September 25, 1989. *** The equipment was carried as a capital asset at the initial net cost of $264,890.00 under generally accepted accounting principles on the books and records of Microdot Lithoplate Company. Full amortization at 13% per annum resulted in monthly principal and interest payments of $6,027.00, which are identical to the lease payments. As such, payments were allocated between principal and interest and, as of September 25, 1989, the outstanding principal balance as shown on the books of Microdot Lithoplate Company is $117,418.98.”

Also, at the hearing on the summary judgment motion, defense counsel admitted that prior to the proposed sale, defendant owed certain monies under the guaranty to plaintiff. The court subsequently struck defendant’s third and fourth affirmative defenses, and on October 17, 1990, granted partial summary judgment in favor of plaintiff on the sole issue of liability, the judge having reasoned that “there [was] no question *** there is liability for something. Now how much remains to be determined.”

After having been given leave to do so, defendant filed three affirmative defenses which were essentially a restatement of those that the court had allowed to stand, and two new “affirmative defenses and counterclaims.” The “sixth affirmative defense and counterclaim” alleged that under the lease agreement, the damages claimed by plaintiff were not a reasonable estimate of the actual damages incurred. The “seventh affirmative defense and counterclaim” alleged that the lease was a “security agreement” under section 1 — 201(37) of the Illinois Uniform Commercial Code (Code) (Ill. Rev. Stat. 1989, ch. 26, par. 1 — 101 et seq.), and that, as such, section 9 — 504 of the Code required that a sale of collateral be commercially reasonable, which was not the case here. Because of these affirmative defenses and counterclaims, defendant claimed that it was entitled to “in excess of $97,000.00” in damages.

After conducting numerous proceedings and ordering briefs on the issue of damages, the trial court, on January 8,1991,

“ordered *** summary judgment *** entered in favor of plaintiff and against defendant in the amount of $31,797.05, the calculation of which was explained orally by the court and will be reflected in the transcript. It is further ordered that the remaining issues raised by defendant’s objections to plaintiff’s claim, including the proper present value discount, the proper credit for proceeds from sale of the equipment and attorneys’ fees and costs, be determined by a trial court at a future date.” (Emphasis added.)

The transcript of the hearing held on the summary judgment motion reflects the trial court’s intention to “enter a judgment for the amount, which I believe, are [sic] unequivocally due and leave for the trier of fact the question whether there may be additional sums due.” On February 7, 1991, plaintiff moved to certify this January 8, 1991, order as a final one pursuant to Rule 304(a). (134 Ill. 2d R. 304(a).) On February 19, 1991, the court, after plaintiff had moved to strike them, allowed defendant’s first, second and fifth affirmative defenses to stand, finding them to have “superseded defendant’s original first, second and fifth affirmative defenses”; it also allowed defendant’s sixth affirmative defense and counterclaim to stand, but struck the seventh affirmative defense.

On April 30, 1991, the trial court, relying on Bloom v. Landy (1979), 72 Ill. App. 3d 383, granted plaintiff’s motion for a Rule 304(a) finding that “there shall be no just reason for delaying enforcement or appeal of this judgment pursuant to Illinois Supreme Court Rule 304(a).” It also reduced the “minimum amount” owed to plaintiff to “$29,754.28 plus interest at the statutory judgment rate as computed from January 8, 1991.” The court arrived at this figure by reducing to present value the amount due under the lease, $132,594, using defendant’s suggested rate of 13%. The resulting figure was $117,418.98. The court then set off from this amount the agreed sale price of the equipment, $89,000, thus arriving at $28,418.98 due under the lease. To this amount the court added prejudgment interest for 343 days at the statutory rate of 5%, to arrive at the “minimum amount” owed of $29,754.28. On May 8, 1991, defendant filed its notice of appeal, and on May 16, 1991, plaintiff filed its answer to defendant’s remaining affirmative defenses.

I

It is defendant’s contention that the trial court erred in certifying under Supreme Court Rule 304(a) its January 8, 1991, order because the rule applies only to cases involving multiple claims or parties and this case involves neither; that there exists only one plaintiff and one defendant, and plaintiff’s entire claim rests on the enforcement of a single guaranty. Plaintiff insists, however, that the trial court had the authority to enter a Rule 304(a) order on a one-count complaint even though the judgment reflected the amount due as “minimum,” and despite the possibility that additional sums might also be due.

Our supreme court, in Ariola v. Nigro (1958), 13 Ill. 2d 200, held that a “claim” is not limited only to “causes of action,” but includes a more “flexible and reasonable meaning.” (Ariola, 13 Ill. 2d at 206.) In a later case the court declared “that the rule applie[s] even ‘when the judgment or decree determines fewer than all the rights [or] liabilities in issue or fewer than all the matters involved in the case.’ ” (Marsh v. Evangelical Covenant Church (1990), 138 Ill. 2d 458, 465, quoting Getzelman v. Koehler (1958), 14 Ill. 2d 396, 400.) Marsh went-on to define a claim, for the purposes of Rule 304(a), as “any right, liability or matter raised in an action.” Marsh, 138 Ill. 2d at 465.

Plaintiff relies on Bloom v. Landy (1979), 72 Ill. App. 3d 383, and Cahn v. Northwestern Mutual Life Insurance Co. (1915), 192 Ill. App. 172, in support of its contention that the trial court’s partial summary judgment on the issue of “minimum damages owed” requires this court to hear and decide this appeal pursuant to Rule 304(a). In Bloom, the issue before the court was “whether summary judgment on part of a single money claim — i.e., on $20,677.50 of Bloom’s $30,000 contract claim — is a final order” for purposes of appeal. In deciding in the affirmative, the court concluded that section 57 of our former Civil Practice Act (Ill. Rev. Stat. 1975, ch. 110, par. 57, now superseded by section 2 — 1005 of our Code of Civil Procedure, but containing the same provisions), provided that a plaintiff could move for summary judgment on “any part of the relief sought,” and that, thus, the grant of partial summary judgment was a final order for purposes of appeal. (Bloom, 72 Ill. App. 3d at 398.) In making its determination, the court stated:

“Our conclusion is supported by the fact that section 57 has ‘some historical background in section 55 of the Practice Act of 1907.’ (Ill. Ann. Stat., ch. 110, par. 57, Committee Comments, at 60 (Smith-Hurd 1968).) Section 55 provided in relevant part:
‘If the plaintiff in any suit upon a contract, express or implied, for the payment of money, shall file with his declaration an affidavit showing the nature of his demand, and the amount due from the defendant, after allowing to the defendant all his just credits, deductions, and set-offs, if any, he shall be entitled to judgment, as in case of default, unless the defendant, or his agent or attorney, shall file with his plea an affidavit, stating that he verily believes the defendant has a good defense to said suit upon the merits to the whole or a portion of the plaintiffs demand, and specifying the nature of such defense, and if a portion specifying the amount, (according to the best of his judgment and belief) *** If the affidavit of defense is to only a portion of the plaintiffs demand, the plaintiff shall be entitled to a judgment for the balance of his demand and the suit shall thereafter proceed as to the portion of the plaintiffs demand in dispute as if the suit had been brought therefor ***.’ (Emphasis added.) (Ill. Rev. Stat. 1907, ch. 110, par. 55.)
Pursuant to section 55, the Illinois courts consistently held that partial summary judgment for a portion of the damages claimed by a plaintiff in a contract action was a final judgment for purposes of appeal. Cahn v. Northwestern Mutual Life Insurance Co. (1915), 192 Ill. App. 172.
Since we conclude that the partial summary judgment entered below is a final order, and since the trial court made the requisite finding of ‘no just reason for delaying enforcement or appeal,’ [appellant’s] appeal of this order properly lies under Supreme Court Rule 304(a).” Bloom, 72 Ill. App. 3d at 398-99.

We agree with the reasoning employed by the Bloom court; accordingly, we hold that the court’s January 8, 1991, order is a final one since it clearly disposes of the rights of the parties in regard to some definite part of the controversy. Defendant admitted owing at least $117,418.98 to plaintiff for payments due under the lease, and at a minimum, taking into account a setoff for the $89,000 agreed to by the parties as the sales price of the equipment, as well as statutory interest, plaintiff is entitled to the amount awarded by the court. Consequently, there being no dispute between the parties as to that sum being the minimum amount due plaintiff, there was no genuine issue of material fact to be tried. (Colt Construction & Development Co. v. North (1988), 168 Ill. App. 3d 913.) It would be manifestly unfair under such circumstances to delay plaintiff in the collection of a claim so indefeasibly due to it. The trial court, having entered an absolute and unconditional order for the payment of that amount, retains jurisdiction to determine what additional amounts are due, if any; but, it would defeat the salutary purposes of summary judgment to relegate plaintiff to await a trial of the remaining portions of its case before it could enforce the orders at issue in this appeal, especially in light of the inordinate length of time it takes to reach a case for trial in our county.

Nor was the circuit court’s holding affected by defendant’s affirmative defenses charging a material alteration of the guaranty. In this connection, we note that defendant argues only its first, second, fifth and sixth affirmative defenses on appeal. According to McHenry State Bank v. Y & A Trucking, Inc. (1983), 117 Ill. App. 3d 629, a case for which defendant vouches, “any action taken by a creditor without the guarantor’s consent which varies the terms of the principal obligation, increases the guarantor’s risk, or deprives the guarantor of the opportunity to protect himself, will result in a discharge pro tanto of the guarantor from his obligation.” (McHenry, 117 Ill. App. 3d at 633.) Assuming, arguendo, as did the trial court, that plaintiff’s actions varied the terms of the principal obligation, defendant would be discharged from liability only “to the extent of the loss occasioned by such conduct on the part of the payee” (Watkins Products, Inc. v. Walter (1973), 11 Ill. App. 3d 417, 420), and the trial court adhered faithfully to this formula in assessing defendant’s damages.

Although plaintiff sold the equipment in October of 1990 for $82,000, the amount of the judgment was determined by giving defendant credit for $89,000, the amount defendant contended should have been the proceeds of the sale. Indeed, the trial court based the amount of the judgment on defendant’s own calculations. This was a simple collection matter. Defendant admitted Microdot’s entering into the lease with P.C. Leasing. It admitted also the guaranty, Microdot’s failure to make the payments required by the lease, and plaintiff’s demands for payment by defendant. Uchwat admitted also Microdot’s owing the sum used by the trial judge in rendering his judgment; and he admitted also that plaintiff fulfilled its obligations under the lease, that both Microdot and defendant failed to make their payments because of cash flow problems, and that there was no other reason why defendant did not pay plaintiff.

Therefore, the essential elements of a simple contract case were established: the existence of a valid and enforceable contract, a breach thereof, plaintiff’s performance and damages. Accordingly, we find that there exists no genuine issue of material fact regarding liability, the central holding of the circuit court’s order of October 17,1990.

Furthermore, merely because plaintiff did not file a timely answer to defendant’s amended counterclaims and affirmative defenses, it does not follow that it conceded that those affirmative defenses were meritorious. While it is true that

“the failure to reply to new matter raised by way of affirmative defense in an answer or countercomplaint results in an admission of the allegations contained therein (Ill. Rev. Stat. 1979, ch. 110, par. 40(2); First Federal Savings & Loan Association v. American National Bank & Trust Co. (1968), 100 Ill. App. 2d 460, 241 N.E.2d 615), *** such failure does not necessarily amount to an admission that the new matter constitutes a valid legal defense.” (Becovic v. Harris Trust & Savings Bank (1984), 128 Ill. App. 3d 107, 118, rev’d on other grounds, Schwaner v. Belvidere Medical Building Partnership (1987), 155 Ill. App. 3d 976.)

More important, defendant’s affirmative defenses were given the consideration properly due them by the trial court within the confines of McHenry.

For the above-stated reasons, we hold that the court’s January 8, 1991, order is both final and appealable, and that the court’s October 17, 1990, order properly granted summary judgment in plaintiff’s favor.

Affirmed.

DiVITO and McCORMICK, JJ., concur.

      The equipment was eventually sold to the same third party in the fall of 1990 for $82,000.

      Rule 304(a) provides as follows:
      “(a) Judgments As To Fewer Than All Parties or Claims — Necessity for Special Finding. If multiple parties or multiple claims for relief are involved in an action, an appeal may be taken from a final judgment as to one or more but fewer than all of the parties or claims only if the trial court has made an express written finding that there is no just reason for delaying enforcement or appeal. Such a finding may be made at the time of the entry of the judgement or thereafter on the court’s own motion or on motion of any party. The time for filing the notice of appeal shall be as provided in Rule 303. In computing the time provided in Rule 303 for filing the notice of appeal, the entry of the required filing shall be treated as the date of the entry of final judgment. In the absence of such a finding, any judgment that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties is not enforceable or appealable and is subject to revision at any time before the entry of a judgment adjudicating all the claims, rights, and liabilities of all the parties.” 134 Ill. 2d R. 304(a).