source: Caselaw Access Project

author: MR. JUSTICE CLARK

license: Public Domain

text:
    (No. 53799.
    METROPOLITAN SANITARY DISTRICT OF GREATER CHICAGO ex rel. WILLIAM F. O’KEEFFE, Appellee, v. INGRAM CORPORATION et al., Appellees (The Metropolitan Sanitary District of Greater Chicago, Appellee; The Metropolitan Sanitary District of Greater Chicago ex rel. Aram A. Hartunian, Appellant).

      Opinion filed June 4, 1981.

    — Rehearing denied October 19, 1981.

      Aram A. Hartunian, of Chicago (Pressman 8c Hartunian, of counsel), pro se. A. Denison Weaver, of Chicago, for appellee William F. O’Keeffe.
    Sonnenschein, Carlin, Nath 8c Rosenthal, of Chicago, for appellee Ingram Corporation et al

   MR. JUSTICE CLARK

delivered the opinion of the court:

On April 18, 1979, the Cook County circuit court awarded petitioner A. Denison Weaver “the sum of $900,000.00 as and for attorney’s fees” and “$16,842.30 for the expenses incurred” on behalf of “the taxpayer William F. O’Keeffe,” and awarded petitioner George J. Cullen “$60,000.00 for services rendered on behalf of the taxpayer as co-counsel.” Taxpayer O’Keeffe had instituted a derivative suit on behalf of the Metropolitan Sanitary District of Greater Chicago (MSD) against the Ingram Corporation and various related persons and entities (Ingram), in December 1975. The suit was brought under sections 11.18 and 11.22 of the Purchasing Act for the Metropolitan Sanitary District of Greater Chicago (the Purchasing Act or the Act) (Ill. Rev. Stat. 1971, ch. 42, pars. 331.18, 331.22). This suit and related actions filed by the MSD in Federal and State courts were settled. On May 17, 1979, Aram A. Hartunian, pro se, attempted to appeal the attorney fee award derivatively on behalf of the MSD. As part of the settlement, the MSD had agreed not to appeal the fee award, and it refused Hartunian’s demand to appeal. The appellate court held that Hartunian lacked standing to appeal (85 Ill. App. 3d 859), and we granted leave to appeal. We reverse.

A contract to haul sludge, negotiated by the purchasing agent of the MSD on a noncompetitive-bid basis, was awarded to Ingram on May 12, 1971. In 1974, a Federal grand jury began investigating the circumstances under which the contract was awarded. The MSD’s records were subpoenaed. Trustees, officers, and employees of the MSD appeared before the grand jury and testified. In late 1975, William F. O’Keeffe, a lawyer and MSD taxpayer, heard “ [r] umors on the street” to the effect that the contract was let illegally, and published reports of the grand jury investigation appeared soon thereafter. He retained counsel and filed a complaint for declaratory judgment in the United States District Court for the Northern District of Illinois and in the circuit court of Cook County. The gravamen of the complaint was that the contract to haul sludge had been awarded in violation of section 11.18 of the Purchasing Act, which read, in pertinent part:

“All officers and employees [of the MSD] are expressly prohibited from accepting, directly or indirectly, from any person, association or corporation to which any purchase order, lease or contract may be awarded, any rebate, gift, money, or anything of value.” (Ill. Rev. Stat. 1971, ch. 42, par. 331.18.)

Section 11.22 of the Act provides that “[a]ny purchase order or contract executed in violation of this Act shall be null and void.” (Ill. Rev. Stat. 1971, ch. 42, par. 331.22.) The complaint averred that plaintiff was an MSD taxpayer and sought the return of all money Ingram had been paid pursuant to the contract. That sum was approximately $24 million.

The complaint was defective in several respects. The MSD was not made a party defendant. The complaint did not aver that the MSD was unwilling to sue Ingram for this violation. Nor did the complaint aver that O’Keeffe had asked the MSD to sue or why O’Keeffe had not asked the MSD to sue. Copies of the complaint, however, were sent to the MSD on December 29, 1975.

Proceedings were begun by the Illinois Commerce Commission on December 30, 1975, related to Ingram’s alleged tariff overcharges on the same contract, and the MSD hired special counsel, Aram A. Hartunian, in January 1976, to secure an adjustment on the tariff charged by Ingram. The MSD, represented by Hartunian, filed suit in March 1976 in the United States District Court for the Northern District of Illinois (Metropolitan Sanitary District of Greater Chicago v. Ingram Corp. et al., No. 76 C 1009). The gist of this action was that Ingram overcharged the MSD, breaching the contract.

The grand jury, in that same month, returned a 39-count, 66-page indictment against, variously, the president and the chairman of the board of Ingram Corporation, E. Bronson Ingram and Frederic B. Ingram, respectively, MSD trustees Valentine J. Janicki and Chester P. Majewski, the general superintendent of the MSD, Bart T. Lynam, and other individuals, the names and positions of whom are irrelevant. If convictions were had on the indictments, a violation of section 11.18 would have been established.

Ingram had originally assigned the contract to an Illinois Ingram subsidiary corporation. The assertion of Federal jurisdiction, accordingly, was problematic, and O’Keeffe nonsuited the Federal case on August 3, 1976. Repeated difficulties in obtaining jurisdiction over the Ingram individual defendants and obtaining discovery against them occupied O’Keeffe for the rest of the year.

O’Keeffe and the MSD had an arrangement whereby O’Keeffe would keep the MSD apprised of the status of his suit. One such letter was sent to the MSD on March 5, 1976. On January 17, 1977, however, the MSD, in responding to another O’Keeffe letter, advised him that it regarded “the O’Keeffe suit as being neither authorized by us nor necessary at this time. The [MSD] has this situation under review and will, at the appropriate time, enforce any rights which we may have under [the Purchasing Act] ***.” The letter continued, however, stating that the MSD intended “to be cooperative in responding to any request by you [O’Keeffe] for assistance. We hope that you will keep us informed of the status of the case. ***” O’Keeffe’s counsel argued in a responsive letter that the MSD’s position was inconsistent with his position, for the MSD’s actions in Federal court were predicated on the validity of the contract, and noted that he never requested authorization for the suit in part because the chief administrative officer and chairman of the judiciary committee of the MSD were under indictment.

Hartunian, on March 1, 1977, filed a motion to quash deposition subpoenaes directed to the MSD’s attorney by O’Keeffe and Ingram. The deposition was ordered to be taken, however, and two days after it was taken, Hartunian resigned as the MSD’s special counsel, citing adverse media publicity. A new firm, Jerome H. Torshen, Ltd., was engaged one week later.

For the next several months, problems of discovery occupied the parties. After the Ingram individuals, one MSD trustee, and others not relevant here, were convicted in the Federal criminal case in November 1977, the MSD amended its Federal-court complaint to include a count based on Ingram’s alleged Purchasing Act violations. A separate suit in the same cause of action was filed by the MSD in circuit court (Metropolitan Sanitary District of Greater Chicago v. Ingram Corp. et al., No. 77 L 24930).

On January 3, 1978, the MSD moved to appear as amicus curiae in the O’Keeffe suit, for the purpose of suggesting O’Keeffe’s lack of standing. This motion was denied. On January 20, 1978, the MSD’s motion to intervene in the O’Keeffe suit pursuant to section 26.1 of the Civil Practice Act (Ill. Rev. Stat. 1975, ch. 110, par. 26.1) was granted.

In February 1978 the Federal district court denied O’Keeffe’s petition to intervene under Federal Rule 24 (Fed. R. Civ. P. 24). The court found that theMSD’s suit was being “vigorously prosecuted.” This ruling was affirmed from the bench by the Seventh Circuit Court of Appeals.

In March 1978 O’Keeffe amended his complaint, setting forth reasons why he could maintain his action despite his failure to demand that the MSD sue Ingram. On May 12, 1978, the trial court, after an extensive hearing on the issue of O’Keeffe’s standing, ruled that a demand upon the MSD to sue would have been useless, and held that O’Keeffe had standing. The MSD unsuccessfully sought review of this ruling in the appellate court and in this court.

On May 17, 1978, the MSD filed a motion for summary judgment in Federal court on the Purchasing Act count of its complaint. In October 1978 O’Keeffe also moved for summary judgment in the circuit court. In March 1979 O’Keeffe was given leave to withdraw this motion and the case was set for trial in May. On April 4, 1979, however, O’Keeffe petitioned the court to approve a settlement. In pertinent part this verified petition stated:

“That during the pendency of this litigation and at the suggestion of this Honorable Court, the parties hereto engaged in negotiations for the purpose of determining whether a common ground existed upon which a settlement of all disputes between MSD and Ingram relating to MSD’s sludge removal program could be resolved. That pursuant to said negotiations, on March 30, 1979, an agreement was reached to settle this and all other litigation between the MSD and Ingram, subject to the approval of this Court, on the terms and conditions as stated in the form of Settlement Agreement attached hereto whereby:
(a) Ingram will pay to MSD the sum of $8,250,000. In addition, Ingram will relinquish any claims which it might have to recover any sum of money from MSD, said claims being in the approximate amount of $3,500,000.
(b) MSD has agreed to pay your Petitioner’s attorneys’ fees and expenses out of the funds recovered in such sum as awarded by this Court upon a petition to be filed by Petitioner’s counsel and after hearing in open court. MSD reserves the right to contest said petition at said hearing, but both your Petitioner and MSD have agreed to waive their respective rights of appeal from any order entered pursuant to said fee petition.
MSD has further agreed not to contest Petitioner’s standing. Petitioner has agreed with MSD that MSD’s net cash recovery after the payment of Petitioner’s attorneys’ fees and expenses shall not be less than $7,250,000.
(c) All parties agree that upon the approval of this petition, they will execute a Release in the form attached hereto.
The foregoing settlement proposal has been duly considered by Ingram, MSD’s Board of Commissioners and your Petitioner, all of whom have accepted said proposal, subject to this Court’s approval.”

The circuit court approved the settlement and established a schedule for the filing and a hearing on the fee petition. Jurisdiction was retained to fix the amount of attorney fees, but subject to that, the cause was dismissed with prejudice. On April 5 and 6, 1979, the Federal district court case and the MSD’s circuit court action were dismissed with prejudice. Ingram delivered a cashier’s check for $8,250,000 to the MSD. On April 9, 1979, the circuit court dismissed O’Keeffe’s cause of action against defendants with prejudice. On April 18, 1979, the trial court, after an evidentiary hearing, awarded $960,000 in fees and $16,842.30 in costs to be paid by the MSD. On April 19, 1979, the MSD approved this fee award and directed that it be paid.

Hartunian subsequently informed the MSD that he was disturbed by the fee award and stated his intention to appeal the award in the absence of such action by the MSD. The MSD refused to appeal and Hartunian filed his derivative notice of appeal on May 17, 1979. The MSD has refused to issue a check for the fees until this matter is resolved on appeal. There was some confusion among the parties, originally, regarding the scope of the purported appeal, but it is now clear that Hartunian is challenging only the fee award, and that part of the settlement agreement related to it. For that reason, Ingram has moved that it be dismissed from the action. Ingram has also filed a brief on the merits.

Taxpayer Hartunian initially argues that the award of attorney fees to O’Keeffe’s counsel was unauthorized because O’Keeffe had no standing to sue. Taxpayer O’Keeffe argues that taxpayer Hartunian has no standing to appeal. We consider first the status of taxpayer O’Keeffe.

Section 11.22 of the Purchasing Act (Ill. Rev. Stat. 1971, ch. 42, par. 331.22) authorizes taxpayer suits: “Public funds which have been expended *** [in violation of the Act], may be recovered in the name of the sanitary district in any court of competent jurisdiction.” This provision allows citizen access to judicial forums to enforce causes of action when public-official fiduciaries neglect or refuse to do so. No other remedy is as “direct, speedy and efficacious.” Colton v. Hanchett (1852), 13 Ill. 615, quoted in Droste v. Kerner (1966), 34 Ill. 2d 495, 506 (Schaefer, J., dissenting); see also People v. Holten (1919), 287 Ill. 225; City of Chicago ex rel. Cohen v. Keane (1976), 64 Ill. 2d 559; see generally Comment, Taxpayers’ Suits: A Survey and Summary, 69 Yale L.J. 895 (1960); 18 McQuillan, Municipal Corporations secs. 52.01 through 52.52 (3d ed. 1977); 74 Am. Jur. 2d Taxpayers’ Actions (1974).

The crux of Hartunian’s argument, however, is that O’Keeffe neither asked the MSD to sue Ingram nor demonstrated that such a request would have been futile. (A secondary argument — that O’Keeffe did not, as required, join the MSD as a party defendant — we need not address, because the MSD did ultimately intervene and become a party.) This requirement is a precondition of taxpayer actions. (People ex rel. City of Chicago v. Schreiber (1944), 322 Ill. App. 452, 483; see 74 Am. Jur. 2d Taxpayers’ Actions sec. 31 (1974).) Hartunian has cited cases in which corporation motions to dismiss shareholder derivative actions were granted for failure to demonstrate, in the complaint, that a majority of corporate directors would fail to enforce the corporate cause of action, if called upon. (See, e.g., Brooks v. American Export Industries, Inc. (S.D.N.Y. 1975), 68 F.R.D. 506; Abrams v. Mayflower Investors, Inc. (N.D. Ill. 1974), 62 F.R.D. 361; see Annot., 99 A.L.R.3d 1034 (1980).) The analogy is urged because only two of the nine MSD trustees were indicted.

We find those cases inapplicable, for the MSD here, knowing of the O’Keeffe suit, did not seek to intervene and dismiss his action for more than two years, and, meanwhile, had requested O’Keeffe to periodically apprise them of the suit’s status. The private letter to O’Keeffe in January 1977 advising him that his suit was “unauthorized” cannot, for obvious reasons, substitute for appropriate action in court. When the MSD finally filed a motion to intervene and dismiss O’Keeffe, the trial court appropriately held a hearing (cf. DePinto v. Provident Security Life Insurance Co. (9th Cir. 1963), 323 F.2d 826, cert. denied (1964), 376 U.S. 950, 11 L. Ed. 2d 969, 84 S. Ct. 965) and appropriately decided on the basis of the whole record not to eliminate the taxpayer from the suit. Green v. Jones (1924), 164 Ark. 118, 124, 261 S.W. 43, 45. Cf. Palmer v. Morris (5th Cir. 1965), 341 F.2d 577 (per curiam).

Hartunian argues that the MSD “prudently” decided to await the outcome of the Federal criminal case before suing Ingram. The short answer is that this argument admits that an original demand upon the MSD to sue would have been futile. Neither section 11.22 of the Act nor prior case law required O’Keeffe to wait until the conclusion of the criminal case to ascertain whether the MSD would follow through in accordance with its belated and ambiguous private assurances. If the MSD was willing to sue Ingram, that willingness should have been promptly brought to the attention of the trial court.

The two years prior to the conclusion of the criminal case were not wasted years. Motions, pleadings, and discovery, however time-consuming, are integral parts of litigation. O’Keeffe cannot be faulted on account of, in Hartunian’s words, procedural squabbles occurring during this time, for many of those squabbles were initiated by Ingram, obviously interested in fully litigating a lawsuit with a potential liability of many millions of dollars. Some of the squabbles, moreover, were initiated by the MSD, for reasons not fully or adequately explained. We therefore defer to the trial court’s determination that keeping O’Keeffe in the case helped assure that the public interest in the case was fully represented. We also wonder, as did the trial court, what the obstacle was to the MSD and O’Keeffe jointly litigating the case against Ingram, once the MSD decided that it, too, was interested in pursuing Ingram for the alleged Purchasing Act violations.

A necessary predicate to the trial court’s conclusion, which we have now approved, that O’Keeffe had standing, was that there were grounds to believe that the MSD was inadequately protecting the public interest. It is puzzling, therefore, that O’Keeffe suggests, as one reason for dismissing Hartunian’s appeal, that the MSD validly bound all taxpayers by its agreement, in advance of the determination, not to appeal the fee award. Nevertheless, it is true that courts favor settlements. Agreements and consent decrees generally are enforced according to their terms. A long-standing exception has existed, however, for agreements which are contrary to public policy. Massell v. Daley (1949), 404 Ill. 479.

Several sources of public policy persuade us that the agreement to forgo an appeal should not be enforced here. First, the protections afforded in two similar areas of the law, class actions and shareholder derivative actions, were absent in this proceeding. Second, the taxpayers were not adequately represented at the fee-determination proceeding. Third, this court has a policy of refusing to enforce the terms of settlement agreements which disadvantage unincluded parties.

Although class actions represent the aggregation of private causes of action (in contrast to a derivative suit), the representative character of the suit and the fiduciary nature of the relationship between the class representative and absent parties who will be bound by the outcome provide a clear analogy to taxpayer actions. Settlements in Federal and State courts generally are preceded by notice to the class of the settlement’s terms. (Fed. R. Civ. P. 23; Ill. Rev. Stat. 1977, ch. 110, par. 57.7.) Those opting in to a settlement agreement are permitted to appeal on the question of its adequacy whether or not they have signed waiver forms giving up that right as a condition to opting in. (Pettway v. American Cast Iron Pipe Co. (5th Cir. 1978), 576 F.2d 1157, cert. denied (1979), 439 U.S. 1115, 59 L. Ed. 2d 74, 99 S. Ct. 1020; see also Ace Heating & Plumbing Co., Inc. v. Crane Co. (3d Cir. 1971), 453 F.2d 30.) Some Federal courts have appointed guardians ad litem to protect the interests of absent class members at a fee-determination proceeding. (Haas v. Pittsburgh National Bank (W.D. Pa. 1977), 77 F.R.D. 382, and case therein cited.) It has been held that courts should insist on the settlement of the damage aspect of the case prior to any attorney fees determination. Prandini v. National Tea Co. (3d Cir. 1977), 557 F.2d 1015.

The analogy between shareholder and taxpayer derivative suits, though imperfect, was recognized as early as 1871 in this State and has been maintained since then. (Sherlock v. Village of Winnetka (1871), 59 Ill. 389, 398; City of Chicago ex rel. Cohen v. Keane (1976), 64 Ill. 2d 559, 568.) The actions are similar in that they each are based upon a combination of two causes of action: one against the directors or public officials for failing to sue and the other based upon the cause of action belonging to the corporation or governmental body. Recovery runs in favor of the corporation or governmental entity, which is why they are necessary parties to these suits. The suing taxpayer or shareholder represents absent members of his class, who are bound by final judgment or decree. A fiduciary duty is owed by the representative to these absent parties. See Ross v. Bernhard (1970), 396 U.S. 531, 24 L. Ed. 2d 729, 90 S. Ct. 733; Cohen v. Beneficial Industrial Loan Corp. (1949), 337 U.S. 541, 549, 93 L. Ed. 1528, 1538, 69 S. Ct. 1221, 1227; Clayton v. Mimms & Co. (1979), 68 Ill. App. 3d 443; Prunty, The Shareholders’ Derivative Suit: Notes on Its Derivation, 32 N.Y.U. L. Rev. 980 (1957); Comment, Taxpayers’ Suits: A Survey and Summary, 69 Yale L.J. 895 (1960) (noting also the analogy’s imperfections).

Shareholder derivative suits are litigated frequently in Federal court, and several principles applied there are worthy of note. Notice of proposed settlements is sent to all shareholders. (Fed. R. Civ. P. 23.1; compare C.W. Murdock, The Illinois Business Corporation Act Annotated sec. 45(a) (3d ed. 1975).) Objectors, summoned by the trial court’s notice to state their case, are allowed reasonable discovery (Girsh v. Jepson (1975), 521 F.2d 153, 156-57) and are allowed to contest the reasonableness of the settlement on appeal (In re Pittsburgh & Lake Erie R.R. Co. Securities & Antitrust Litigation (3d Cir. 1976), 543 F.2d 1058). These provisions are a clear outgrowth of the fears prompted by the uncertain positions of settling parties in a derivative suit regarding attorney fees. McLaughlin, Capacity of Plaintiff-Stockholder to Terminate a Stockholder’s Suit, 46 Yale L.J. 421 (1936); C. W. Murdock, The Illinois Business Corporation Act Annotated sec. 45(a) (3d ed. 1975).

Conflicting loyalties were present in the instant case. O’Keeffe was allowed to sue because the MSD inadequately represented the interests of the taxpayers. No change in the MSD occurred between the time its motion to dismiss O’Keeffe was denied and the time of the settlement to persuade us that we should defer to the MSD’s judgment on behalf of the taxpayers, regarding the decision not to appeal the attorney fees award. O’Keeffe’s counsel, perhaps more significantly, could not validly represent the taxpayers regarding his own fee. See Barliant v. Follett Corp. (1978), 74 Ill. 2d 226.

Public policy is traditionally found primarily in the Constitution and statutes and only secondarily in case law. Nevertheless, in Popovich v. Ram Pipe & Supply Co. (1980), 82 Ill. 2d 203, this court declined to enforce a settlement agreement according to its terms where such enforcement would have violated the long-standing policy against double recoveries. The prohibition against double recovery is one found in our case law. The companion case, Palmer v. Avco Distributing Corp. (1980), 82 Ill. 2d 211, noted, in addition, the problem with settlement agreements that prejudice unincluded parties.

Here, the advance agreement not to appeal the attorney fees award was made by parties inadequately representing absent taxpayers. It was intended, nevertheless, for the taxpayers to have been bound by the judgment entered. They had no advance notice of what the settlement entailed or how they could register a protest. (It is not clear that, and we do not decide whether, Hartunian could have intervened after the entry of the decree (see Lenhart v. Miller (1940), 375 Ill. 346; Annot., 69 A.L.R.2d 562 (1960).) There is no justifiable reliance on O’Keeffe’s part, upon the agreement not to appeal his fee, for his conclusion that the settlement’s damage figure was reasonable and that the litigation should cease could not depend upon the amount of his fee.

In the Pettway class action case (Pettway v. American Cast Iron Pipe Co. (5th Cir. 1978), 576 F.2d 1157, cert. denied (1979), 439 U.S. 1115, 59 L. Ed. 2d 74, 99 S. Ct. 1020) previously cited, the court held that “[Requiring claimants to opt into a back pay subclass before they have an opportunity to seek appellate review of the settlement would be inconsistent with the design of Rule 23(e), which bounds the court’s discretion in approving proposed settlements. Subclass members have an interest in ensuring that a settlement is reviewed by the district court in conformity with settled legal standards, and we will not allow subversion of the protections afforded by Rule 23(e) by requiring claimants to opt-out of a settlement in order to obtain appellate review.” (576 F.2d 1157, 1182.) The instant agreement not to appeal affects taxpayers in the same way, for to gain the benefits of a settlement, they were required to give up their interest in having the award of attorney fees decided “in conformity, with settled legal standards.” As the court in Pettway would not permit the subversion of Rule 23(e), we will not allow the subversion of our prior cases in which the appropriate standards for fee awards were articulated.

For the foregoing reasons, we decline to enforce the agreement not to appeal.

O’Keeffe argues that the MSD, through Hartunian, is estopped from challenging the fee award under the settlement because it has accepted payment from Ingram. The fee award is severable, however, and O’Keeffe’s counsel have not been prejudiced, for reasons we have just explained. This principle, therefore, is inapplicable. Layfer v. Tucker (1979), 71 Ill. App. 3d 333, 337; Reinken v. Reinken (1933), 351 Ill. 409; compare County of Cook v. Malysa (1968), 39 Ill. 2d 376; see generally, Morton Grove Park District v. American National Bank & Trust Co. (1980), 78 Ill. 2d 353, 359.

Ingram and O’Keeffe contend, however, that Hartunian’s failure to seek such intervention leaves the record barren as to the merits of his petition. Of course, had Hartunian been denied leave to intervene, we would be considering exactly the same issue on this appeal, for in that case, as in this one, the adequacy of the representation afforded the taxpayers and the validity of the agreement would have been the points in dispute. Ill. Rev. Stat. 1977, ch. 110, par. 26.1(1)(b).

Hartunian’s motive in entering this suit is irrelevant. (Turkovich v. Board of Trustees (1957), 11 Ill. 2d 460, 464; 74 Am. Jur. 2d Taxpayers’ Actions sec. 32 (1974).) There is no conflict of interest, as contended, for his actions can only benefit the MSD. No one else has indicated an intention to appeal on its behalf and in behalf of the inadequately represented taxpayers.

In a related argument, it is said that Hartunian’s failure to seek intervention at trial has resulted in an undeveloped record with respect to arguments about the hours O’Keeffe’s counsel charged on particular days. Ingram concludes that Hartunian’s brief represents undocumented charges of an appellate brief writer. In the sense just related, this is true. But that conclusion is equally applicable to other briefs filed in this court by parties fully represented in the trial court. We can deal with this problem here in the same way we always have dealt with it: by refusing to consider arguments on appeal to which evidence could have been presented in the trial court had the issues been raised there. Hux v. Raben (1967), 38 Ill. 2d 223.

The appellate court held, however, that Hartunian, as a nonparty, lacked standing to appeal because he was only “indirectly aggrieved in some indefinite manner in common with taxpayers generally.” (85 Ill. App. 3d 859, 866.) This holding, resting upon the nature of the taxpayers’ interest in the controversy, contravenes our holding in Paepcke v. Public Building Com. (1970), 46 Ill. 2d 330, adopting, on the standing issue, the dissent filed in Droste v. Kemer (1966), 34 Ill. 2d 495. In that dissent it was stated that a taxpayer’s interest in the litigation was grounded “upon his status as a taxpayer, and it is his equitable interest, as a taxpayer, in the public property which is being illegally disposed of that determines his standing to maintain the action.” (34 Ill. 2d 495, 511 (Schaefer, J., dissenting).) In this case, the taxpayers have an equitable interest in the monetary recovery from Ingram, which was diminished by the award of attorney fees to counsel.

Our decision in White Brass Castings Co. v. Union Metal Manufacturing Co. (1907), 232 Ill. 165, and the appellate court’s decision in Chicago & South Side Rapid Transit R.R. Co. v. Northern Trust Co. (1900), 90 Ill. App. 460, aff'd on other grounds (1902), 195 Ill. 288, are also urged as reasons for denying Hartunian derivative appellate standing. These cases, involving the denial of such standing to corporate shareholders, rest upon the failure of the shareholders to establish that their corporation’s decision to forgo an appeal was wrongful. The dual nature of the derivative action was previously referred to. In shareholder derivative actions there must be a wrongful refusal of the shareholder’s demand to take action. (Compare Dodge v. Woolsey (1855), 59 U.S. (18 How.) 331, 15 L. Ed. 401, and Hill v. Wallace (1922), 259 U.S. 44, 66 L. Ed. 822, 42 S. Ct. 453, with Hawes v. Oakland (1882), 104 U.S. 450, 26 L. Ed. 827, and In re Cutting (1877), 94 U.S. 14, 24 L. Ed. 49. See the opinion of the court and the concurring opinion in Ashwander v. Tennessee Valley Authority (1936), 297 U.S. 288, 80 L. Ed. 688, 56 S. Ct. 466.) (Compare Maldonado v. Flynn (Del. Ch. 1980), 413 A.2d 1251 (the shareholder was not precluded from suing corporate directors for breach of fiduciary duty despite an independent, “disinterested” committee of directors’ business judgment that such a suit was not in the best interests of the corporation) with Maldonado v. Flynn (S.D.N.Y. 1980), 485 F. Supp. 274 (applying Delaware law, reaching an opposite conclusion).) As this is written, both Maldonado cases are now on appeal. (Maldonado v. Flynn (Del. Ch. 1980), 417 A.2d 378 [res judicata issue); see also Burks v. Lasker (1979), 441 U.S. 471, 60 L. Ed. 2d 404, 99 S. Ct. 1831.) Thus the decisions cited by Ingram and O’Keeffe are inapposite because the record fully establishes here that neither the MSD nor O’Keeffe was adequately taking into account the interests of the taxpayers on the attorney fees issue. (See Henry v. Jeanes (1890), 47 Ohio St. 116, 24 N.E. 1077 (Per curiam).) Accordingly, we do not have to reach the question whether, due to the imperfections in the derivative shareholder/derivative taxpayer analogy (see Comment, Taxpayers’ Suits: A Survey and Summary, 69 Yale L.J. 895, 903 (1960)), taxpayers must establish a wrongful refusal to appeal because the refusal here was presumptively wrongful.

It has been argued that nonparties should be granted appellate standing in those few cases in which the public interest is adversely affected. Judicial review would thereby be permitted in situations where it is needed. Significantly, it has been contended that allowing such appeals would help prevent “public interest strike suit[s].” It has been urged that such appeals be granted even in the absence of trial court intervention, because intervention may have been neglected because it was thought that the public interest was already protected. Rotunda, The Public Interest Appellant: Limitations on the Right of Competent Parties to Settle Litigation Out of Court, 66 Nw. U.L. Rev. 199 (1971).

Research reveals that this court has on several occasions, where equitable, granted derivative appellate standing to non-trial-court parties. In Iago v. Iago (1897), 168 Ill. 339, the wife of an insane husband instituted an action for divorce and the trial court appointed a guardian ad litem for defendant. A judgment in favor of the wife was rendered, and the guardian ad litem took no further action. A writ of error was sued out by the husband’s next friend, a nonparty in the trial court. This court stated:

“The power possessed by courts of equity to provide that such defense shall be made is not exhausted by the appointment of a conservator ad litem or next friend to defend in the trial court, but may be exercised in courts of review, and further defense of the action for divorce prosecuted by any remedy provided by law whereby reversal of a decree of the trial court may be obtained. ***.
It is not essential the same person who represented the insane party as guardian ad litem in the circuit court should appear as next friend in a writ of error.” 168 Ill. 339, 342-43.

In In re Estate of Tomlinson (1976), 65 Ill. 2d 382, a will was admitted to probate in the circuit court of Peoria County. The appellate court reversed the circuit court, finding no evidence that the decedent intended to grant the remainder of her estate to the American Cancer Society. The Attorney General had received no notice of the proceedings and was not a party in the trial or appellate courts. This court permitted him to appeal nevertheless:

“He has the authority to protect a charitable trust either defensively, where an attack is made on its validity, or by an action as plaintiff, by securing the construction of the trust instrument. In a suit by others where the validity or the enforcement of a charitable trust may come into question the Attorney General should be made a party defendant. [Citations.]
*** If an outright gift of property to a charitable corporation without restrictions on its use or disposition is involved, the corporation is under a duty to apply the property to one or more of the charitable purposes for which it was organized. This duty is ordinarily enforceable by the Attorney General. [Citations.] The Charitable Trust Act (Ill. Rev. Stat. 1973, ch. 14, par. 51 et seq.) vests in the Attorney General authority to enforce and supervise charitable trusts. For these reasons we hold that the Attorney General is a proper party to this appeal.” (65 Ill. 2d 382, 387-88.)

See also People ex rel. Pollastrini v. Whealan (1933), 353 Ill. 500; Layfer v. Tucker (1979), 71 Ill. App. 3d 333, 337.

In Tomlinson it was demonstrated that the Attorney General, the guardian of the public interest, had an array of powers normally exercisable in trial court. He should have been, but was not, made a party defendant, yet this court did not confine his ability to represent the public interest to actions available in courts of original jurisdiction. The interest in judicial economy supports that decision.

Here the taxpayers must guard their own equitable interest in the disposition of the monetary recovery from Ingram, and as private attorneys general are permitted to intervene where their interests require additional representation (Dowsett v. City of Moline (1956), 8 Ill. 2d 560, 566). Here, as in Tomlinson, those able to protect the public interest received no effective notice of the proceeding. The judicial-economy interest, present in Tomlinson, also supports resolving the attorney fee issue on appeal in the instant case. And, as we have noted, the inadequate taxpayer representation, a fact not required in lago, supports granting Hartunian derivative appellate standing. Accordingly, this case is within the narrow holding of the Indiana Supreme Court that taxpayers may “sometimes take up and carry forward a pending litigation which the officers wrongfully abandon ***.” (Pipe Creek School Township v. Wagler (1924), 194 Ind. 496, 498, 143 N.E. 514.) Hartunian, therefore, has derivative appellate standing.

We turn then to the remaining issue — whether the attorney fees were excessive. The settlement petition included a schedule of services for A. Denison Weaver, O’Keeffe’s counsel, and listed expenses. On April 17, 1979, Weaver introduced in evidence his original diary entries for the years 1975 to 1977. Witnesses for Weaver testified that an hourly rate of $125 was justified due to the nature of the case. Attorney Torshen, for the MSD, called witnesses who testified that rates customarily charged to the public bodies like the MSD approximated $75 per hour. (The MSD paid Hartunian $100 per hour and Torshen $85 per hour; a lesser rate was charged for work of their associates.) The witnesses recognized that a higher rate was charged by privately retained attorneys in cases like this one.

The court ordered the hearing continued for one day to allow the MSD time to examine Weaver’s time records. The next day, in a morning session, the court and counsel reviewed purported discrepancies pointed out by the MSD. The MSD had not been able to review all of the records, but did not object to the trial court rendering its decision in the afternoon.

In the afternoon session, the court found that the issues involved “substantial questions of law and fact with numerous complex legal issues,” that the attorney fees “were entirely contingent on success until the case was settled,” that “the litigation by the taxpayer was vigorously contested by the Ingram Group and [the MSD],” that the MSD “benefitted substantially by the suit,” and that “Mr. Weaver and Mr. Cullen [O’Keeffe’s cocounsel] were very well qualified to prosecute this litigation and did so in an outstanding manner.” The trial court, however, disallowed 421/2 hours from Weaver’s petition and 31 hours from Cullen’s petition. (Cullen’s petition had been submitted on April 17.) Weaver had earlier agreed to strike another 40 hours from his petition, as it was time spent collecting his time records. Nor was 250 hours of law clerk time included. The trial court had spot-checked the records for accuracy. It was found, therefore, that Weaver had spent 3,600 hours and that Cullen had spent 300 hours on this litigation. The court compared these hours to the 1,262 hours spent on the case for the MSD by Hartunian and his associates and 3,056 hours of time spent by Torshen, his associates, and his law clerks on this litigation. The total billings of Hartunian and Torshen, amounting to $273,413.75, were also used as a benchmark. The court expressed its belief that Ingram Corporation attorneys had spent more than 3,600 hours on this litigation, although no documentation was available, and noted that “I have personal knowledge of the hours that were spent before me because I have spent at least 100 days of my court time and office time on this case in the last year and a half.”

In setting an hourly rate, the court explicitly found that since Weaver and Cullen were not retained by the MSD, they should be paid at the “going rate” for counsel privately retained for complex civil litigation. The court found $125 per hour for Weaver and $100 per hour for Cullen reasonable under that standard.

The court held that the principles enunciated in Fiorito v. Jones (1978), 72 Ill. 2d 73, applied and, therefore, multiplied this hourly rate by two. The court reasoned that the case was very contingent, asserting that section 11.18 of the Purchasing Act (Ill. Rev. Stat. 1971, ch. 42, par. 331.18), if interpreted literally to result in total forfeiture, was of doubtful constitutionality. The court noted that a multiplier of three undoubtedly would have been applied if the case had been tried.

We agree with the trial court that the principles of Fiorito v. Jones (1978), 72 Ill. 2d 73, Leader v. Cullerton (1976), 62 Ill. 2d 483, and Flynn v. Kucharski (1974), 59 Ill. 2d 61, apply here. (Alyeska Pipeline Service Co. v. Wilderness Society (1975), 421 U.S. 240, 257, 44 L. Ed. 2d 141, 153, 95 S. Ct. 1612, 1621; Sprague v. Ticonic National Bank (1939), 307 U.S. 161, 83 L. Ed. 1184, 59 S. Ct. 777; Trustees of International Improvement Fund v. Greenough (1882), 105 U.S. 527, 26 6L. Ed. 1157.) On this record we cannot say that the trial court erred in its determination that Weaver spent 3,600 hours and that Cullen spent 300 hours on this litigation. (We cannot validly rule on several challenges to the hours charged on particular days because evidence could have been produced in the trial court on these issues.) We do not reach the issue of whether Weaver and Cullen should be compensated at a rate comparable to other privately retained attorneys because they were hired by O’Keeffe, because that issue was not argued here. We note, however, the conceptual difficulty in allowing that rate in a derivative action, in which the client is a public entity and customarily pays less than the going rate for privately retained counsel.

We disagree with the trial court, however, regarding the multiplier of two. This litigation was complex and bitterly contested, and the fee was contingent to be sure. However, the Federal prosecution provided the facts necessary to establish the violation (Fiorito v. Jones (1978), 72 Ill. 2d 73, 91). No case has been presented, moreover, which would demonstrate that an action under section 11.18 of the Purchasing Act (Ill. Rev. Stat. 1971, ch. 42, par. 331.18) would result in an insubstantial recovery. It is also significant that the MSD filed its motion for summary judgment in Federal court prior to the time O’Keeffe filed his motion in the circuit court. The filing of that motion certainly aided O’Keeffe.

The problem of excessive attorney fees is at least a century old. (See Trustees of International Improvement Fund v. Greenough (1882), 105 U.S. 527, 26 L. Ed. 1157.) We have now allowed for the first time derivative appellate standing to a taxpayer to challenge an attorney fees award. This holding is new but not unforeshadowed by prior cases. Taxpayer suits significantly supplement the public’s remedial arsenal for combatting official wrongdoing, and we will not permit excessive fee awards to undermine their value.

Accordingly, we reverse the judgments of the circuit and appellate courts, eliminate the multiplier, and remand the cause to the circuit court of Cook County for entry of the appropriate fee award, amounting to $450,000 for Weaver, and $30,000 for Cullen, plus costs, and to dismiss Ingram from the cause.

Reversed and remanded, with directions.

MR. JUSTICE SIMON took no part in the consideration or decision of this case.


author: MR. JUSTICE WARD

text:
    (No. 53137.
    CLARICE R. SALTIEL v. SIDNEY R. OLSEN, Recorder of Deeds and Registrar of Titles, et al. (William J. Scott, Appellant and Cross-Appellee; Harry A. Young, Jr., et al., Appellees and Cross-Appellants).

      Opinion filed June 26, 1981.

      Tyrone C. Fahner and William J. Scott, Attorneys General, of Springfield (Robert G. Epsteen, Special Assistant Attorney General, of Chicago, of counsel), for appellant.
    Bilandic, Neistein, Richman, Hauslinger & Young, Ltd., of Chicago (Harry A. Young, Jr., and Lee J. Schwartz, of counsel), for appellee.
    Sidney Z. Karasik, of Chicago, appellee, pro se.

   MR. JUSTICE WARD

delivered the opinion of the court:

In a prior appeal of this case, reported as Saltiel v. Olsen (1979), 77 Ill. 2d 23, we affirmed ajudgment of the circuit court of Cook County in favor of the plaintiff, Clarice R. Saltiel, holding that section 3 of the Real Estate Transfer Tax Act (Ill. Rev. Stat. 1977, ch. 120, par. 1003), as it stood prior to its amendment in 1978 (1978 Ill. Laws 985), violated article VII, section 9(a), of the Illinois Constitution. After the filing of our opinion, further proceedings were held in the circuit court in which the court awarded attorney fees to the plaintiff. The Attorney General, who had been permitted to intervene in the post-appeal proceeding, appealed to the appellate court, and we allowed his motion for a direct appeal under Rule 302(b) (73 Ill. 2d R. 302(b).

The proceeding began with the filing of a complaint in the circuit court of Cook County by the plaintiff, an Illinois taxpayer, on her own behalf and on behalf of all other taxpayers, against the defendants, Sidney R. Olsen, as the recorder of deeds and registrar of titles for Cook County, and Edward J. Rosewell, as the Cook County treasurer. The complaint, which was filed February 16, 1978, sought a judgment enjoining the defendants from retaining for the county’s use one half of the proceeds received from the sale of revenue stamps, and directing the defendants to pay that portion of the proceeds to the Department of Revenue. The Department of Revenue was not made a party to the case. The defendants were represented by the State’s Attorney of Cook County.

On June 20, the circuit court issued a temporary injunction requiring the defendants to pay the tax proceeds retained by the county into a special fund administered by a court-appointed trustee. The sums subject to the injunction continued to accumulate until August 7, when an amendment to section 3 deleted the provision challenged by this suit. On August 24, when the sums in dispute were turned over to the trustee, they amounted to $516,117. Thereafter the trustee invested the fund in interest-bearing obligations, and by October 31, 1980, the fund had grown to $621,212, according to a statement in the trustee’s brief which the Attorney General does not challenge.

The circuit court’s judgment in favor of the plaintiff was entered October 4, 1978. In it the court retained jurisdiction of the cause to determine what sums, if any, should be awarded from the fund for the fees and expenses of the plaintiff’s attorneys and those of the trustee, and to deliver what remained to the Department of Revenue or the State Treasurer. On October 31 the defendants filed a notice of appeal from the judgment, and the appeal was transferred to this court under Rule 302(b). On N ovember 8 the plaintiff’s attorneys filed a petition in the circuit court for fees and costs. A like petition was filed by the trustee. The defendants moved that disposition of these petitions be deferred pending the outcome of the appeal. The defendants also filed objections to the allowance of attorney fees in which they contended, inter alia, that any allowance would violate the sovereign immunity of the State.

No action was taken by the circuit court on the matter of fees while the case was pending on appeal. On September 24, 1979, shortly after this court’s opinion was filed, the Attorney General filed a petition in circuit court to intervene, and also filed objections to the petitions for fees. The Attorney General represents that he never received any notice of the institution of this litigation, of the judgment of the circuit court, or of the decision of this court, and that he did not become aware of the latter until a few days before he filed his petition to intervene.

The circuit court granted the petition to intervene. Its order provided that the Attorney General should be bound by all prior judgments and orders, and that he might raise “only the issue of the right to fees and the amount thereof, if any.” The circuit court overruled the Attorney General’s objections, and on October 30, 1979, it entered an order awarding the plaintiffs attorneys $108,000 in fees and $904 in costs, and awarding the trustee $6,794 in fees and $478 in costs, for a total allowance of $116,176. The trustee was directed to hold the balance of the fund until further order of the court. The Attorney General’s appeal followed. The plaintiff’s attorneys have cross-appealed, seeking an award of $148,563 in fees, the amount prayed for in their petition.

The chief ground urged by the Attorney General for reversal of the circuit court is that an award of attorney fees and costs, whatever the amount, violates the sovereign immunity of the State. Sovereign immunity, which formerly had a constitutional basis (Ill. Const. 1870, art. IV, sec. 26), was abolished by article XIII, section 4, of the Constitution of 1970, “[e]xcept as the General Assembly may provide by law ***.” Sovereign immunity thus may now be asserted only if there is some statute which confers it. The statute on which the Attorney General bases his claim of sovereign immunity here is the act (Ill. Rev. Stat. 1979, ch. 127, par. 801) which declares “the State of Illinois shall not be made a defendant or party in any court” except by way of an action brought in the Court of Claims under section 8 of the statute creating that body (Ill. Rev. Stat. 1979, ch. 37, par. 439.8).

A determination of whether sovereign immunity is applicable in the present case requires an analysis of the decisional law of this State as to the right of the prevailing party in civil litigation to recover attorney fees from some other source, be it the State or a private person. Beginning with its decision in Ritter v. Ritter (1943), 381 Ill. 549, this court has followed the prevailing rule in the United States that in the absence of a statute or an agreement the successful litigant in a civil action may not recover attorney fees or the ordinary expenses of litigation from his adversary. (See 1 S. Speiser, Attorneys Fees sec. 12:3 (1973).) This rule has been adhered to in later decisions. See, e.g., House of Vision, Inc. v. Hiyane (1969), 42 Ill. 2d 45, 51-52; Meyer v. Marshall (1976), 62 Ill. 2d 435, 442; cf. City of Chicago v. Fair Employment Practices Com. (1976), 65 Ill. 2d 108.

On the other hand we have held in a number of cases that a successful plaintiff may recover attorney fees from other persons to the extent that as an incident to the litigation a fund was created from which the fees could be drawn. Many of these cases are of particular pertinence here since they involved a statute or a local ordinance which diverted the proceeds of tax collections from one governmental entity to another and which was held unconstitutional for that reason. See, e.g., Flynn v. Kucharski (1974), 59 Ill. 2d 61; City of East Peoria v. Tazewell County (1975), 60 Ill. 2d 263; Leader v. Cullerton (1976), 62 Ill. 2d 483; Fiorito v. Jones (1978), 72 Ill. 2d 73.

These decisions are not inconsistent with the rule of Ritter v. Ritter, nor are they exceptions to that rule, as the parties would characterize them. In these cases a plaintiff’s attorney fees and expenses are not charged against the adversary because the latter lost the case. On the contrary they are charged against a person or an entity that is benefited by the fund which was created or preserved by the plaintiff’s success in causing a tax to be invalidated. While the beneficiary thus charged may be a member of the class on whose behalf the suit was brought, the beneficiary may also be the governmental unit whose officer was the defendant in the action.

Flynn v. Kucharski (1974), 59 Ill. 2d 61, is illustrative. As is more fully explained in the opinion filed on a prior appeal (Flynn v. Kucharski (1970), 45 Ill. 2d 211), this case involved a method of tax collection under which a portion of the taxes collected by township collectors from residents of Cook County living outside the city of Chicago could be diverted from general countywide purposes to local purposes. Certain taxpayers of the city of Chicago brought a class action against the Cook County collector and several township collectors, which terminated in a decision that the statute was invalid. In the course of the litigation the circuit court had ordered the township collectors to deposit the disputed monies with a court-appointed trustee for ultimate payment to the county. Over the objection of the county treasurer the circuit court awarded fees out of this fund to the plaintiffs’ attorneys. Although we found the amount of the fee excessive and reduced it, we upheld the principle that payment of attorney fees could properly be made from the fund. Although actions on the part of the Cook County collector formed a part of the invalid system of tax collections, the county was the immediate beneficiary of the plaintiff’s victory, since its treasury was thereby augmented. It was for that reason that the county’s windfall could properly be reduced by the attorney fees and expenses incident to its creation.

In City of East Peoria v. Tazewell County an ordinance authorized the county to impose upon municipalities and other local taxing districts a service charge for the collection of taxes. Several of the 140 local taxing districts brought a class action which resulted in a judgment that the ordinance was invalid. Pending final disposition of the case the circuit court had ordered the county to sequester the sums collected but not yet spent for return to the local districts. We held that the plaintiffs could recover attorney fees out of this fund from the other local districts in proportion to the extent to which the latter had benefited from the invalidation of the county’s collection charge. Some municipalities who objected to the allowance of the fees argued that whatever benefit was received by a taxpayer of a local taxing district was offset by the benefit which would have been received had the county been permitted to retain the funds in question. This court rejected that argument, however, since the benefit would not be the same for all taxpayers (60 Ill. 2d 263, 265-66).

The doctrine that a plaintiff’s attorney fees may be charged against a fund which has been created by his success in invalidating a tax is subscribed to by other jurisdictions as well as Illinois. See Annot., 89 A.L.R. 3d 690 (1979); 1 S. Speiser, Attorneys Fees sec. 11:1 (1973); Dawson, Lawyers and Involuntary Clients: Attorney Fees from Funds, 87 Harv. L. Rev. 1597 (1974).

From what has been said it is clear that in the present case no objection to the allowance of attorney fees could be sustained if the governmental entity entitled to the fund were other than the State of Illinois. The Attorney General argues that the class of taxpayers on behalf of whom the action was brought was not benefited since the amount of the Real Estate Transfer Tax to be paid by individuals has not been reduced, no refunds to taxpayers were provided, and Cook County will have to generate additional revenue to make up for the monies which have been declared to belong to the State. The argument is reminiscent of that which was made and rejected in City of East Peoria v. Tazewell County (1975), 60 Ill. 2d 263, referred to above. The Attorney General’s argument also overlooks that the circuit court defined the class in this action as the class of Illinois taxpayers, not the class of Illinois taxpayers living in Cook County. While some question might be raised as to whether all persons who are Illinois taxpayers constitute a “class,” that question is not now open, for the court defined the class before the Attorney General’s intervention, and his intervention was made subject to orders already entered in the case.

We do not consider that the statutory immunity of the State from being made a party in any court requires a reversal of the judgment of the circuit court. Although the case did not involve the question of attorney fees, City of Springfield v. Allphin (1978), 74 Ill. 2d 117, supports our conclusion in this regard.

In that case the State, as the result of an erroneous determination by its Director of Revenue as to the effective date of an amendment to the provisions of the Illinois Municipal Code authorizing the State to charge municipalities for the collection of the municipal retailers’ occupation tax and municipal service occupation tax (Ill. Rev. Stat. 1979, ch. 24, pars. 8 — 11—1, 8 — 11—5), had withheld from the city of Springfield for a 6-month period an amount of money greater than that permitted. The city and other municipalities similarly affected filed an action against the Director for a judgment declaring that his interpretation of the amendment was incorrect, and asking reimbursement of the amount wrongfully withheld out of funds being currently collected.

The defendant’s contention that the relief sought made this action a suit against the State was rejected. After reviewing several cases the court stated:

“Our review of the foregoing cases leads us to conclude that the issues involved in the instant case (the effective date of a statute) and the relief requested (a declaratory judgment and the withholding of certain funds from the State treasury) do not render the instant case a suit against the State. That the relief requested necessarily will have an impact on the State’s General Revenue Fund is not dispositive.” 74 Ill. 2d 117, 126.

The conclusion reached by the court is in no way vitiated by the holding in the sequel, City of Springfield v. Allphin (1980), 82 Ill. 2d 571, that interest on the amounts withheld could not be awarded.

The facts in City of Springfield presented a far stronger claim for sovereign immunity than those of the present case. Here the money retained by Cook County was never in the State’s hands, and no claim to it was ever asserted during the seven years since the law in question was enacted. This case is one of many in which a constitutional flaw has been brought to light and corrected only by a taxpayer’s private action. New taxpayers could afford to finance out of their own pockets the proceedings necessary to mount a successful challenge to legislative enactments, particularly the often intricate provisions of the Revenue Code, and the position taken by the Attorney General would thus place taxpayers as well as local governments at the mercy of State officers in charge of tax collections. “Neither our constitution nor any act of the General Assembly contemplates that State officers be given such unlimited power.” City of Springfield v. Allphin (1978), 74 Ill. 2d 117, 127.

In his brief the Attorney General states repeatedly that the fees cannot be allowed because the circuit court had already determined that the money held by the trustee “belonged to the State.” For this proposition he cites a decision of the appellate court in Layfer v. Tucker (1979), 71 Ill. App. 3d 333, where the facts were similar in many respects to those before us here. In holding that attorney fees could not be allowed against the court-established fund the appellate court in Layfer also reasoned that the fund belonged to the State (71 Ill. App. 3d 333, 338). In Layfer the statutory provision in question had been invalidated in a different case (Goldstein v. Rosewell (1976), 65 Ill. 2d 325) brought by a different plaintiff,

represented, however, by the same attorneys. Quite apart from that consideration, nevertheless, we do not agree that the question of sovereign immunity can be resolved by the question-begging assertion that the fund is already the property of the State. Such a rationale ignores the realities of the situation.

We are also unable to agree with the Attorney General’s contention that the allowance of fees constitutes the payment of fees to private attorneys for the collection of taxes in violation of article V, sections 15 and 21, of the Illinois Constitution. The State did not engage the plaintiff’s attorneys, and the claim that they were paid by the State rests upon the same erroneous assumption which has just been discussed.

The Attorney General’s remaining contention — that the fees awarded were excessive — is directed only to those of the plaintiff’s attorneys, not to the fees awarded to the trustee. The trial judge assigned an hourly rate of $100 to each of the attorneys, and applied that rate to a total of 400 hours, a figure closely approximating the hours logged in the petition for fees, thus arriving at a lodestar amount of $40,000. To the latter the trial judge applied a multiplier of 2.5, yielding $100,000. As previously noted, the petition for fees had sought $148,563.

The Attorney General does not object to the multiplier, which is within the guidelines given in Fiorito v. Jones (1978), 72 Ill. 2d 73, 92-93. Unlike Metropolitan Sanitary District ex rel. O’Keeffe v. Ingram Corp. (1981), 85 Ill. 2d 458, the use of any multiplier at all is not rendered inappropriate because of prior litigation. Fiorito v. Jones (1978), 72 Ill. 2d 73, 91.

The Attorney General does object, however, to the refusal of the trial court to assign different hourly rates for different categories of service, a procedure which Fiorito stated might be appropriate, and which the Attorney General proposed here. According to the Attorney General the plaintiff’s attorneys performed some services on the appeal which duplicated services already performed at the trial, and spent some time on matters which were necessary to the success of the litigation but did not call for the exercise of legal skills. The plaintiff’s attorneys were nevertheless allowed fees for such services at the full hourly rate, which, when multiplied, came to $250 per hour. See Johnson v. Georgia Highway Express, Inc. (5th Cir. 1974), 488 F.2d 714, 717.

We intimate no opinion whether or not the award of fees should be reduced, but in view of the Attorney General’s contentions we remand the cause to the circuit court with directions to examine the evidence with a view to determining whether a lower hourly rate should be set for any of the services which the plaintiff’s attorneys rendered.

The plaintiffs attorneys do not press their cross-appeal here, and they advance no specific reasons why the circuit court’s dismissal of their counterclaim should be deemed erroneous. The judgment of the circuit court dismissing the counterclaim is therefore affirmed.

Affirmed and remanded, with directions.


author: MR. JUSTICE MORAN

text:
    (No. 53874.
    COMMONWEALTH EDISON COMPANY, Appellee, v. THE DEPARTMENT OF LOCAL GOVERNMENT AFFAIRS et al., Appellants.

      Opinion filed May 22, 1981.

    — Rehearing denied October 19, 1981.

      Tyrone C. Fahner, Attorney General, of Springfield (Karen Konieczny, of Chicago, of counsel), for appellant Department of Local Government Affairs.
    Richard G. Ferguson, Lawrence D. Lasky, Paul F. Hanzlik, and William P. Suriano, of Isham, Lincoln 8c Beale, of Chicago, for appellee.
    Frederic S. Lane and Ralph E. Loomis, of Sonnenschein, Carlin, Nath 8c Rosenthal, of Chicago, for amici curiae Zion Park District et al.

    Fred L. Foreman, State’s Attorney, of Waukegan, for amicus curiae County of Lake.
   MR. JUSTICE MORAN

delivered the opinion of the court:

The plaintiff, Commonwealth Edison Company (Edison), filed a complaint for administrative review in the circuit court of Cook County on November 28, 1978. Edison sought to reverse the assessment for tax purposes of 12 pollution-control facilities located in Cook County, which service Edison’s electrical-generating stations. The assessment was made by the defendant Department of Local Government Affairs (Department). The circuit court affirmed the assessment and held that the pollution-control facilities were properly assessed under sections 21a — 1 and 21a — 3 of the Revenue Act of 1939 (Act) (Ill. Rev. Stat. 1977, ch. 120, pars. 502a — 1, 502a — 3). The court reasoned that to the extent that pollution-control facilities are included in Edison’s rate base from which its rates are determined they are economically productive to their owners. The appellate court reversed and held that the Department’s assessment was contrary to the Act, which allows the taxation of pollution-control facilities only to the extent that the facility produces a product or service. (86 Ill. App. 3d 768.) We allowed the Department’s petition for leave to appeal.

The sole issue is the proper method of assessing Edison’s pollution-control facilities under the Act. The Department does not dispute Edison’s assertion that the pollution-control facilities in question do not produce a product or service or reduce Edison’s cost of production in any manner.

In 1977, Edison filed annual tax returns with the Department. The return form, provided by the Department, requested information concerning each facility’s original cost, present fair cash value, and salvage value. The form also asked the following question: “Does the control facility have any enhancement to the manufactured product or is there a by-product derived from the control facility?” Edison responded “No” to this question for each facility. The Department, under the authority of section 21a — 1 of the Act, assessed each facility on the basis of the information furnished on the return at 33 1/3% of its present cash value. This section provides:

“Statement of policy. It is hereby declared to be the policy of the State of Illinois that pollution control facilities should be valued, for purposes of the real and personal property tax laws of this State, in relation to 33 1/3% of the fair cash value of their economic productivity to their owners.” (Ill. Rev. Stat. 1977, ch. 120, par. 502a — 1.)

Section 21a — 3 enumerates guidelines by which the Department may assess pollution control facilities.

“Method of valuation for pollution control facilities. For the purpose of determining 33 1/3% of the fair cash value of any certified pollution control facilities in assessing said facilities under the real and personal property tax laws of this State, the Department shall take into consideration the actual or probable net earnings attributable to the facilities in question, capitalized on the basis of their productive earning value to their owner; the probable net value which could be realized by their owner if the facilities were removed and sold at a fair, voluntary sale, giving due account to the expense of removal and condition of the particular facilities in question; and such other information as the Department may consider as bearing on 33 1/3% of the fair cash value, to their owner, of the pollution control facilities in question, consistent with the principles set forth herein.” Ill. Rev. Stat. 1977, ch. 120, par. 502a — 3.

Edison protested the 1977 assessments and requested a review and correction, claiming that the Department’s assessment violated sections 21a — 1 and 21a — 3 of the Act. It asserted that under the Act assessments were to be based on “economic productivity,” taking into account the “productive earning value” of the facilities. In that the facilities produced nothing, Edison claimed that the assessments based on present cash value were erroneous. It further claimed that it was denied equal protection of law in that its pollution-control facilities are assessed by a different method than pollution-control facilities of non-regulated industry.

A hearing was held before the Department on February 8, 1978. The transcript of a hearing concerning the Department’s 1977 assessment of Edison’s Lake County pollution-control facilities was made part of the record on appeal. Dr. John L. Langum, an economic consultant, testified on behalf of Edison. He stated that “ ‘economic productivity’ of property can only mean the contribution by that property to the goods or services produced by that property and sold to customers.” He also stated, “Pollution-control facilities of an electric utility have no ‘economic productivity’ because they make no contribution to the kilowatt hours of electricity produced and sold by the utility.”

Dr. Langum also explained that Edison’s rates are regulated by the Illinois Commerce Commission to allow Edison to recover all of its operating expenses and to earn a fair rate of return on all of its invested capital. Ralph Olson, auditor for the Illinois Commerce Commission, testified that the total cost of all of Edison’s pollution-control facilities is included in its rate base on an equal basis with the cost of all other invested capital. That rate base is then used as the foundation for the computation of a fair rate of return on invested capital.

Ron Deloney, an assessor, testified on behalf of the Department. He explained that the Department may utilize either one of two approaches: (1) a cost approach by which the Department assesses the facilities at 33 1/3% of their net salvage value or (2) an income approach by which the facilities are assessed at 33 1/3% of the present fair cash value. He stated that pollution-control facilities of nonregulated industries are normally assessed utilizing the cost approach. Deloney further stated that the income approach is used in assessing pollution-control facilities of utilities since the facilities are included in the base from which rates are determined.

The Department issued its administrative decision on October 27, 1978, and confirmed the assessment. The hearing officer found that utilities “are unique in that they are a monopoly and do receive through rate increases, additional revenues for the investment. *** The facility produces an extra price increment on the electricity sold.” The hearing officer properly characterized pollution-control facilities as one element includable in the utility’s rate base for rate-making purposes. The rate base and rate of return, as determined by the Illinois Commerce Commission, are the components used to develop a reasonable return to compensate investors for their capital investments.

This court in Illinois Bell Telephone Co. v. Illinois Commerce Com. (1953), 414 Ill. 275, 286, stated:

“In the final analysis, the rates fixed by [the Commission] *** should be sufficient to provide for the operating expenses, depreciation, reserves that are necessary in good business judgment and operations and a reasonable return to the investor on the basis of the fair value of the utility property.”

Thus, the return to utility investors on their investment in these types of facilities is clearly includable in the rates which the utility may charge, thereby increasing the price of the product sold and the revenues which the utility may receive.

The correctness of the assessment of Edison’s pollution-control facilities is dependent upon the interpretation accorded the terms “economic productivity” and “productive earning value” as employed by sections 21a — 1 and 21a — 3 of the Act (Ill. Rev. Stat. 1977, ch. 120, pars. 502a — 1, 502a — 3). The Department urges that the terms be accorded a broad meaning. It argues that section 21a — 3 does not outline an all-inclusive formula to be utilized by the Department in assessing pollution-control facilities. Rather, the statute lists some factors which may be considered but grants broad discretion to the Department by allowing it to consider “such other information as the Department may consider as bearing on the 33-1/3% of the fair cash value *** consistent with the principles set forth herein.” Thus, the Department interprets the phrases “economic productivity” and “productive earning value” to mean the facilities are productive of income. The Department concludes that Edison’s pollution-control facilities produce income by their inclusion in the rate base upon which the rate of return is computed.

Edison’s position is that the terms “economic productivity” and “productive earning value” refer only to the extent to which pollution-control facilities actually contribute to production of a product. Edison, in its brief, asserts, “Only when they increase the quantity of goods or services sold by their owner, reduce production costs or enhance production, are they to be assessed as productive equipment.”

After the circuit court rendered its judgment and prior to the decision of the appellate court, section 21a — 3 was amended. The amendment became effective January 1, 1980. (Ill. Rev. Stat. 1979, ch. 120, par. 502a-3.) The Department concedes that “this amendment codifies the position taken by Edison throughout the litigation.” The amendment restates the language of the former statute in total and adds the following:

“For the purposes of this Act, earnings shall be attributed to a pollution control facility only to the extent that the operation thereof results in the production of a commercially saleable by-product or increases the production or reduces the production costs of the products or services otherwise sold by the owner of such facility. ***
This amendatory Act of 1979 is not intended to nor does it make any change in the meaning of any provision in this Section but is intended to remove possible ambiguities, thereby confirming the existing meaning of this Section in effect prior to the effective date of this amendatory Act of 1979.” (Ill. Rev. Stat. 1979, ch. 120, par. 502a-3.)

The Department argues that this amendment cannot be used to determine the meaning of the disputed terms, for to do so would aUow the General Assembly to retroactively alter the meaning of previously enacted statutory language. Edison, on the other hand, argues that the amendment makes no substantive change in the meaning of the 1977 statute. It claims that the amendment merely clarifies the legislative intent of the previously ambiguous terms.

In support of its argument, the Department relies on Roth v. Yackley (1979), 77 Ill. 2d 423. In Roth, the sole issue was the effect to be given to an amendatory act of the General Assembly. The basis of the action brought in Roth was this court’s decision in People v. DuMontelle (1978), 71 Ill. 2d 157. DuMontelle held that fines and costs were not “reasonable terms and conditions” of probation as that term was used in section 10 of the Cannabis Control Act. In so holding, the court specifically found that “the clear import of the statutory language” was that an order of probation was not a “conviction” as that term is used in the Unified Code, and that therefore fines and costs could not be imposed by statute. (71 Ill. 2d 157, 163.) Three months after the DuMontelle decision was rendered, the General Assembly enacted amendments to section 10 of the Cannabis Control Act and to section 410 of the Illinois Controlled Substances Act. The amendments expressly authorized the imposition of fines and costs as conditions of probation and further provided:

“The General Assembly declares that the changes made by this amendatory Act *** are declaratory of existing law and are therefore applicable in relation to events which occurred before the effective date of this amendatory Act. The ‘terms and conditions’ of probation as specified in this amendatory Act are declared to be reasonable terms and conditions for probation under the affected Sections as those Sections were in effect before the effective date of this amendatory Act.” (Pub. Act 80-1202, sec. 3, eff. June 30, 1978, Ill. Rev. Stat. 1979, ch. 56½, par. 1410.)

In discussing the application of this amendment, the court in Roth held that “although the General Assembly asserted that the changes made by the amendatory act were merely a declaration of existing law, it is manifest that the amendatory act changed the statutory language and prior law as determined by this court in DuMontelle from the clear import of the original statutory language.” (Roth v. Yackley (1979), 77 Ill. 2d 423, 428.) Therefore, the court in Roth determined that the amendment could not be used to alter the previously clear statutory language as interpreted by this court in DuMontelle.

We find that the recent opinion of this court in O’Connor v. A & P Enterprises (1980), 81 Ill. 2d 260, is analogous to the question here posed. In O’Connor, over 500 owners of real estate paid their taxes under protest and filed objections to “the multiplier” used for the assessment of farm property. The objectors relied on section 20e of the Act, which became effective in 1977. (Ill. Rev. Stat. 1977, ch. 120, par. 501e.) The section established a new procedure for establishing valuation for assessment purposes on farmland, farm buildings, and farm dwellings. The section (Ill. Rev. Stat. 1977, ch. 120, par. 501e), similar to the statutory language of the case before us, provided that farmland of lesser value than that classified as the highest or best grade within the county shall be valued for assessment purposes by local assessment officials on the basis of its productivity. (O’Connor v. A & P Enterprises (1980), 81 Ill. 2d 260, 265-66.) One of the issues raised by the county collector was that the section was invalid. The challenged portion provided:

“Any owner of a ‘farm’, as defined in Section 1 of this Act, *** shall be eligible for a farm value assessment on such farm real property pursuant to this Section.” (Ill. Rev. Stat. 1977, ch. 120, par. 501e.)

The county collector argued that “the section does not provide for an automatic application of farm-value assessment and that there is no direction to the collector as to when and under what circumstances a farm value assessment is to be applied.” This court resorted to a subsequent amendment (Pub. Act 81 — 774, effective January 1, 1980, Ill. Rev. Stat. 1979, ch. 120, par. 501e.) In doing so, the court found that section 20e was intended by the legislature to apply automatically, thereby resolving the ambiguity raised by the collector. The court stated:

“In 1979 the General Assembly adopted Public Act 81 — 774, which amended section 20e, changing the language questioned by the collector. The words ‘any owner’ and ‘eligible for farm value assessment on such farm real property’ have been deleted. The section now reads, ‘The equalized assessed value of a “farm” * * * shall be determined pursuant to this Section.’ (Ill. Rev. Stat. 1979, ch. 120, par. 501e.) There is now no question but that the assessment procedures of section 20e apply automatically.” O’Connor v. A & P Enterprises (1980), 81 Ill. 2d 260, 271.

The court in O’Connor found that although the passage of an amendment raises a presumption that the legislature intended to change the substantive law, the presumption will be rebutted if the circumstances show that the legislative intent was to clarify previously ambiguous language. (See Bruni v. Department of Registration & Education (1974), 59 Ill. 2d 6, 11-12; People v. Bratcher (1976), 63 Ill. 2d 534, 543; People v. Scott (1974), 57 Ill. 2d 353, 358; Creel v. Industrial Com. (1973), 54 Ill. 2d 580, 584; People ex rel. Spitzer v. County of La Salle (1960), 20 Ill. 2d 18, 28.) The court found that “the purpose of the amendment was to clarify the ambiguity which the collector contended existed as to whether or not the assessment procedures applied automatically to farm real estate.” (O’Connor v. A & P Enterprises (1980), 81 Ill. 2d 260, 272.) To determine the intent of section 20e, the court resorted to the amendment in interpreting the previously ambiguous language.

The holding of Roth is not contrary to the law as enunciated in O’Connor and the related cases cited above. In Roth, the statutory language in question had been interpreted by this court in DuMontelle, and that interpretation became law. At the time the amendatory act became law, the statute had been rendered unambiguous by this court’s pronouncement, and, consequently, the subsequent amendment was necessarily an attempt to change the law and not merely a device to clarify existing ambiguity.

We do not believe that Roth is analogous to the present case. Here, the terms “economic productivity” and “productive earning value” of the 1977 statute are ambiguous. It is impossible to ascertain from the language of the Act if pollution-control facilities which do not “produce” goods or services but which are part of a utility’s rate base for purposes of rate regulation are considered “economically productive” and thus subject to assessment at their present fair cash value. Therefore, the presumption that the General Assembly intended to change the law by passage of the 1979 amendment does not arise. Moreover, no change in the language of the 1977 statute was made. Rather, the amendment expressly clarified the previously ambiguous terms by stating that earnings are attributable to a pollution-control facility only to the extent that the operation of the facility “results in the production of a commercially saleable by-product or increases the production or reduces the production costs of the products or services otherwise sold by the owner of such facility.” (Ill. Rev. Stat. 1979, ch. 120, par. 502a — 3.) Further, the amendment itself states that the intent of its passage was “to remove possible ambiguities, thereby confirming the existing meaning” of the statute prior to the amendment’s enactment. (Ill. Rev. Stat. 1979, ch. 120, par. 502a — 3.) Unlike Roth, sections 21a — 1 and 21a — 3 of the Act had not been interpreted by this court to resolve the ambiguity.

We therefore hold that the amendment to section 21a — 3, effective January 1, 1980, may be used to interpret the phrases “economic productivity” and “productive earning value” as used in sections 21a — 1 and 21a — 3 of the 1977 act. Having reached this conclusion, it necessarily follows, as the Department concedes, that the 1977 assessments of Edison’s 12 pollution-control facilities did not comply with sections 21a — 1 and 21a — 3 of the Act (Ill. Rev. Stat. 1977, ch. 120, pars. 502a — 1, 502a — 3). In reaching this result, we find it unnecessary to address the constitutional issue raised by Edison.

For the reasons stated, we affirm the judgment of the appellate court.

Judgment ajfirmed.