Rodriguez O'Donnell Gonzalez & Williams P.C. v. Yusen Logistics (Americas) Inc.

Filing 26

MEMORANDUM Opinion and Order. Signed by the Honorable Manish S. Shah on 2/4/2016: For the reasons discussed above, counter-defendants' motion to dismiss the counterclaim, 11 , is granted in part and denied in part. The motion to dismiss Coun ts II and III is denied to the extent Yusen bases either claim on the Rodriguez firm's exercise of undue influence in extracting from Yusen an unreasonably-high fee. The motion is otherwise granted. The parts of the counterclaim that are dismissed may be cured through re-pleading, and are dismissed without prejudice. [For further detail see attached order.] Notices mailed by Judicial Staff. (psm, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
RODRIGUEZ O’DONNELL GONZALEZ &
WILLIAMS, P.C. f/k/a RODRIGUEZ
O’DONNELL ROSS,
Plaintiff,
v.
YUSEN LOGISTICS (AMERICAS) INC. f/k/a
YUSEN AIR & SEA SERVICE (U.S.A.) INC.,
Defendant.
and

No. 15 CV 3030
Judge Manish S. Shah

YUSEN LOGISTICS (AMERICAS) INC. f/k/a
YUSEN AIR & SEA SERVICE (U.S.A.) INC.,
Counter-Plaintiff,
v.
RODRIGUEZ O’DONNELL GONZALEZ &
WILLIAMS, P.C. f/k/a RODRIGUEZ
O’DONNELL ROSS; THOMAS J. O’DONNELL;
R. KEVIN WILLIAMS; CARLOS RODRIGUEZ;
and HENRY GONZALEZ,
Counter-Defendants.
MEMORANDUM OPINION AND ORDER
In 2007, Yusen Logistics (Americas) Inc., a transportation-services company,
had the law firm of Rodriguez O’Donnell Ross on retainer to address customs issues
as they arose. Thomas O’Donnell, an attorney at the firm, met with some of Yusen’s
representatives in July 2007 to discuss a pending class-action lawsuit concerning

antitrust violations in the air-cargo shipping industry. O’Donnell knew that Yusen
was a member of the putative class, and suggested to Yusen’s representatives that
the Rodriguez firm represent Yusen in the antitrust litigation. Yusen agreed, and
executed on November 3, 2007, an engagement letter to that effect. Yusen
committed to paying the firm 25% of any monies recovered by Yusen in the suit.
Yusen ultimately paid the firm over $478,000 in fees from several settlements.
Before an additional settlement was distributed, however, Yusen terminated its
relationship with the Rodriguez firm (with respect to the antitrust case). The firm
sued Yusen for quantum meruit, and Yusen filed a counterclaim for fraud and
fiduciary breach against the firm and its shareholders. Counter-defendants move to
dismiss the claims against them. For the reasons discussed below, the motion is
granted in part and denied in part.
I.

Legal Standard
Rule 8(a)(2) of the Federal Rules of Civil Procedure requires that a claim for

relief contain “a short and plain statement of the claim showing that the pleader is
entitled to relief.” In general, the complaint (or, here, counterclaim) need not
include specific facts, but it must provide the defendant with fair notice of what the
claim is, and the grounds upon which it rests. Olson v. Champaign Cnty., Ill., 784
F.3d 1093, 1098–99 (7th Cir. 2015) (citing Erickson v. Pardus, 551 U.S. 89, 93
(2007); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The pleading
must present enough factual matter, accepted as true, that the claim to relief “is
plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly,

2

550 U.S. at 570). Where the claim to relief sounds in fraud, however, it must be
pleaded with particularity, Fed. R. Civ. P. 9(b), including the “who, what, when,
where, and how” of the fraud, Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 950
(7th Cir. 2013) (citation omitted). In considering a motion to dismiss under Rule
12(b)(6), a district court accepts as true all well-pleaded factual allegations and
draws all reasonable inferences in the plaintiff’s favor. Id. at 946 (7th Cir. 2013)
(quoting Reynolds v. CB Sports Bar, Inc., 623 F.3d 1143, 1146 (7th Cir. 2010)).
II.

Facts
Yusen Logistics is a logistics and transportation-services firm. [7] ¶ 1.1 In

2007, Yusen had on retainer the law firm of Rodriguez O’Donnell Ross (later
Rodriguez O’Donnell Gonzalez & Williams, P.C.) to address customs issues on an
as-needed basis. See id. ¶¶ 3, 7, 11. The firm had been performing similar legal
services, addressing tariff classifications, free-trade agreements, etc., for more than
ten years. See id. ¶ 9. In July 2007, an attorney at the firm named Thomas
O’Donnell spoke with one of Yusen’s customs supervisors about the firm
representing Yusen in a federal class-action suit in the Eastern District of New
York. See id. ¶¶ 3, 12, 14. The litigation concerned alleged antitrust violations in
the air-cargo shipping industry. See id. ¶ 12. O’Donnell knew that Yusen, as a
frequent purchaser of air-freight shipping services, was a member of the putative

Citations to the record are designated by the document number as reflected on the district
court’s docket, enclosed in brackets; referenced page numbers are from the CM/ECF header
placed at the top of filings. Unless otherwise indicated, citations to document [7] are to
Yusen’s counterclaim. Citations to the portion of this document comprising plaintiff’s
complaint (or Yusen’s answers thereto) are designated as [7-C].
1

3

class in the antitrust action, and told the customs supervisor that Yusen should
participate in the suit. O’Donnell also suggested that Yusen hire the Rodriguez law
firm to represent the company’s interests in the litigation. See id. ¶¶ 13–14.
O’Donnell continued to talk to Yusen about the antitrust action over the next
several months, and in October 2007, O’Donnell met with the customs supervisor,
and one of Yusen’s customs brokers, to further discuss the issue. See id. ¶¶ 11, 14–
16. At the meeting, O’Donnell again offered to represent Yusen in the class-action
suit, and proposed a contingent-fee arrangement whereby the law firm would be
awarded 25% of any monies recovered by Yusen in the antitrust litigation. See id.
¶ 16. (Yusen claims that the proposal was a departure from the company’s past
dealings with the firm, as the firm usually billed at an hourly rate or sought a fixed
retainer fee for its services. See id.) On October 26, another attorney at the firm
(Henry Gonzalez) filed an appearance in the antitrust case on Yusen’s behalf. See
id. ¶ 18.
A week later, on November 2, 2007, O’Donnell sent a formal engagement
letter to Yusen. See id. ¶ 19. The letter stated:
This [letter] is further to the meeting . . . regarding the [antitrust
litigation]. We wish to thank you for selecting our firm to provide legal
services in connection with the potential recovery of damages from
various airlines because of anticompetitive activities which may be in
violation of U.S. laws. Our firm’s policy requires that we send you a
formal engagement letter to cover the services that you have asked us
to provide. This letter constitutes our contract covering the
performance of those legal services as hereafter described and the
charges for those services.
1.
Scope of Engagement.
You
are
requesting
Rodriguez
O’Donnell Ross to assist your company in obtaining the maximum
4

possible monetary recovery for damages incurred because of the
anticompetitive activities of various airlines in fixing prices for certain
fuel surcharges, security charges, U.S. Customs surcharges, and war
risk surcharges. This includes filing appearances in the courts having
jurisdiction of this matter, handling discovery and objections thereto,
filing and responding to motions, filing pleadings, and all other
matters necessary to achieve the highest monetary recovery for Yusen
Air & Sea Services. . . .
We will provide those legal services reasonably required to represent
you for the task outlined above. . . . Unless we make a different written
agreement, this agreement governs all services we perform for you. . . .
4.
Legal Fees. Our legal fees will be contingent upon the recovery
in this case, and shall be 25% of all monies Yusen actually recovers in
this action. If no monies are recovered, then there will be no charge for
our services.
5.
Costs. In addition to our contingent fees, we incur expenses for
costs we customarily advance on our client’s behalf, such as . . . out of
town travel . . . . [O]ccasional travel to the courts having jurisdiction of
this matter will be necessary for the purpose of arguing motions,
advising the Courts of status and answering questions, etc. These may
be billed separately or together with invoices for legal services
rendered, and must be reimbursed promptly.
November 2, 2007 Letter from Thomas J. O’Donnell to Mark Hogan, [1-1] at 17–18
(referenced in Yusen’s counterclaim at [7] ¶ 19).2 Yusen executed the agreement on
November 3, 2007. [1-1] at 18; [7] ¶ 20. O’Donnell did not advise Yusen to seek
independent legal review of the proposed contingent-fee agreement, and Yusen
agreed to the representation without seeking any such review. See [7] ¶ 21.
On October 29, 2013, and again on April 10, 2014, the Rodriguez firm sent
invoices to Yusen, each seeking payment of 25% of settlements recovered by Yusen
in the antitrust action. See id. ¶ 33. Yusen paid the firm $478,783.90 in response to
In resolving a motion to dismiss, the district court may consider documents that are
critical to the complaint and referenced in it. Geinosky v. City of Chicago, 675 F.3d 743, 745
n. 1 (7th Cir. 2012) (citations omitted).
2

5

these demands. See id. ¶ 34. Yusen received notice in September 2014 of an
additional settlement (the fourth thus far), which was anticipated to exceed $362
million in funds for the class. See [7-C] ¶ 30. In October 2014, before any funds from
the new settlement were distributed, Yusen contacted the Rodriguez firm and
demanded that, moving forward, the firm bill only on an hourly basis. See id. ¶ 29.3
The firm would not agree to hourly billing, and Yusen terminated the attorneyclient relationship with respect to the antitrust case. See id. ¶¶ 35–38.
The Rodriguez firm sued Yusen in March 2015 in Illinois state court,
bringing claims under Illinois law for quantum meruit, unjust enrichment, and
promissory estoppel. [1-1]. Yusen removed the case to federal court on the basis of
diversity jurisdiction4, [1], and filed counterclaims for fraud (Count I) and breach of
fiduciary duty (Counts II and III) against the firm and its individual shareholders
(O’Donnell, Gonzalez, Carolos Rodriguez, and Kevin Williams), [7] ¶¶ 36–58.
Counter-defendants filed a motion to dismiss Yusen’s claims, arguing that none of
them states a proper claim to relief. [11].

Yusen disputes this allegation, though it admits that it contacted O’Donnell on October 3,
2014, to offer to compensate him and any of his colleagues at their regular hourly rates. See
[7-C] ¶ 29.
3

Yusen is a New York corporation with its principal place of business in New Jersey, see [7]
¶ 1, and thus is a citizen of both states, see 28 U.S.C. § 1332(c)(1). The Rodriguez firm and
its principals Thomas O’Donnell and Kevin Williams are Illinois citizens. Id. ¶¶ 2–4.
Principals Carlos Rodriguez and Henry Gonzales are citizens of Maryland and the District
of Columbia, respectively. Id. ¶¶ 5–6.
4

6

III.

Analysis
A.

Fraud (Count I)

Yusen’s fraud claim is presented in two parts. The first is based on
representations that the Rodriguez firm made in the November 2007 engagement
letter; the second is based on facts that Yusen says the law firm concealed from the
company.
1.

Fraudulent Misrepresentation

To state a claim for fraudulent misrepresentation in Illinois, the plaintiff
must allege: (1) a false statement of material fact; (2) that the party making the
statement knew of its falsity; (3) an intent to induce the plaintiff to act; (4) that the
plaintiff reasonably relied on the truth of the statement; and (5) damages to the
plaintiff as the result of their reliance. See Antonacci v. Seyfarth Shaw, LLP, 39
N.E.3d

225,

238

(Ill.

App.

Ct.

2015)

(citing

Neptuno

Treuhand-Und

Verwaltungsgesellschaft MBH v. Arbor, 295 Ill.App.3d 567, 571 (1998)).5 Yusen
alleges that the law firm, through O’Donnell, knowingly misrepresented the scope of
legal services its attorneys would need to perform for Yusen by writing in the
engagement letter that the firm would be filing pleadings, filing and responding to
motions, and handling discovery in the antitrust case, as well as traveling to courts
in other jurisdictions to argue motions and answer questions. See [7] ¶ 37. Counter-

A district court sitting in diversity applies the substantive law of the forum state. See, e.g.,
Piltch v. Ford Motor Co., 778 F.3d 628, 631–32 (7th Cir. 2015) (citing Erie R.R. Co. v.
Tompkins, 304 U.S. 64 (1938)).
5

7

defendants contend that these are not statements of fact, but of non-actionable
opinion. See [12] at 8.
Counter-defendants are correct that a statement of opinion generally cannot
support a fraud claim. See, e.g., Antonacci, 39 N.E.3d at 238 (citing Neptuno, 295
Ill.App.3d at 572)); Merrilees v. Merrilees, 998 N.E.2d 147, 160 (Ill. App. Ct. 2013)
(citing Duhl v. Nash Realty, Inc., 102 Ill.App.3d 483, 489 (1981)). The same is true
of promises or predictions about future conduct (as these are often just opinions
about what will or will not occur). See Madison Assocs. v. Bass, 158 Ill.App.3d 526,
540 (1st Dist. 1987) (explaining that a party has no right to rely on another’s
conjecture (citing Hofner v. Glen Ingram & Co., 140 Ill.App.3d 874 (1985))); see also
Illinois Non-Profit Risk Mgmt. Ass’n v. Human Serv. Ctr. of S. Metro-East, 378
Ill.App.3d 713, 723 (4th Dist. 2008) (citing Ault v. C.C. Servs., Inc., 232 Ill.App.3d
269, 271 (1992)). Here, the engagement letter states that the law firm will perform
all services needed to maximize Yusen’s recovery in the antitrust litigation. This is,
in a broad sense, a promise of future conduct, but it is not a promise that Yusen
claims was broken. There is no allegation that the law firm failed to satisfy its
general obligation to do all that was necessary for Yusen in the pending lawsuit.
Yusen instead complains that what was “necessary” was not all that O’Donnell
promised it would be. This “promise” is also a statement of future conduct: it is a
statement of what representing Yusen in the antitrust case will entail.6
Counter-defendants argue that O’Donnell was merely reciting in the engagement letter
his personal understanding of what Yusen had requested the law firm do to obtain a
“maximum possible monetary recovery” in the case. See [18] at 2–3. If this was O’Donnell’s
intent, it is not at all clear from the face of the letter. O’Donnell wrote:
6

8

False promises are actionable as fraud, however, if they were made as part of
a scheme to defraud. See Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 570 (7th
Cir. 2012) (applying Illinois law). If the Rodriguez firm knowingly overrepresented
the kind of legal work it would perform for Yusen in order to persuade the latter to
pay a higher fee, this kind of misrepresentation would be grievous enough to invoke
the scheme-to-defraud exception. See id. (observing that “one particularly egregious
fraudulent statement” may establish a scheme to defraud (quoting BPI Energy
Holdings, Inc. v. IEC (Montgomery), LLC, 664 F.3d 131, 136 (7th Cir. 2011))). It is
in the particular province of the attorney to know what class-action suits involve
procedurally and, therefore, to know what kinds of legal services (if any) may be
needed from non-class counsel in such cases. Leveraging this knowledge to engage
in deceptive bargaining for a larger contingent fee is a form of fraudulent billing—
and thus a breach of a lawyer’s duty to his client, see Cripe v. Leiter, 184 Ill.2d 185,
198 (1998). Here, the bargain was presumptively fraudulent because of Yusen’s
preexisting relationship with the Rodriguez firm. See Maksym v. Loesch, 937 F.2d
1237, 1241–42 (7th Cir. 1991) (explaining that, when a lawyer enters into a bargain

You are requesting [the Rodriguez firm] to assist your company in obtaining
the maximum possible monetary recovery for damages incurred because of
the anticompetitive activities of various airlines . . . . This includes filing
appearances in the courts having jurisdiction of this matter, handling
discovery and objections thereto, filing an responding to motions, filing
pleadings, and all other matters necessary to achieve the highest monetary
recovery for Yusen . . . .
[1-1] at 17. The pronoun “this,” as it is used to begin the second sentence above, is
presumed to refer to the nearest reasonable antecedent, i.e., the firm’s “assist[ance] in
obtaining [a] maximum possible monetary recovery.” In other words, the letter states that
the law firm’s “assistance” includes filing motions, etc.—not that Yusen’s general request
for legal assistance includes a more specific demand that certain activities be performed.

9

with an existing client, the law presumes that the transaction was a result of the
attorney’s self-dealing and undue influence) (applying Illinois law); see also In re
Marriage of Pagano, 154 Ill.2d 174, 185 (1992); Lustig v. Horn, 315 Ill.App.3d 319,
325–26 (1st Dist. 2000).7 The presumption may ultimately be rebutted, see Pagano,
154 Ill.2d at 186, but the question is one of fact, and Yusen has not pleaded itself
out of court on this issue. (Yusen alleges that it did not receive independent legal
advice before it signed the engagement letter, see [7] ¶ 21, and claims that the law
firm hid from it relevant information—namely, which services the firm would not
need to perform because class counsel would be doing so—in drafting the
agreement, see id. ¶ 22.) To the extent Yusen alleges that it agreed to pay a larger
fee because of the representations in the letter, those representations are actionable
as promissory fraud.
But is this what Yusen has alleged? Yusen says that it relied on the
statements in the engagement letter, and suffered damages from that reliance, “in
retaining [the Rodriguez firm] and making or authorizing payments to [the firm]

7

Counter-defendants argue that the presumption does not apply here, because the fee
agreement (as set forth in the engagement letter) concerns payment for work only on the
antitrust case, and the parties’ existing relationship was unconnected to that lawsuit. See
[18] at 7. According to Yusen, it had the Rodriguez firm on regular retainer (to address
customs issues) when it signed the November 2007 engagement letter. See [7] ¶ 11. This is
enough to suggest that, when Yusen agreed to the terms of the letter, Yusen had with the
firm a preexisting attorney-client relationship such that the presumption of undue
influence applies. See Durr v. Beatty, 142 Ill.App.3d 443, 449 (5th Dist. 1986) (emphasizing,
in concluding that the parties had an attorney-client relationship when they entered a fee
contract, that the attorney had previously represented the client in other matters). The
presumption is triggered by an existing relationship, and the client’s corresponding trust in
and reliance on its counsel, even if the existing relationship concerns different legal matters
than does the agreement at issue.

10

from the monies Yusen recovered from settlement funds that had been procured for
Yusen [by] class counsel in the Antitrust Litigation.” Id. ¶ 38. It is unclear what
Yusen means by this. Yusen could not have relied on the engagement letter when
retaining the firm, since, before Yusen even received the letter, a Rodriguez
attorney entered an appearance for Yusen in the case—and Yusen does not allege
that the appearance was entered without its consent. See [7] ¶¶ 15–16, 18. Perhaps
the letter contained new representations not yet discussed—such as statements
about the precise scope of the legal representation—and Yusen relied on those
statements in agreeing to pay the 25% fee. The letter could in that case form the
basis of a promissory-fraud claim (assuming, that is, that Yusen did not agree to the
fee when it was first proposed at the meeting with O’Donnell in October 2007).8 But
this is not what Yusen has alleged. Fraud-based claims must be pleaded with
particularity, Fed. R. Civ. P. 9(b), and Yusen has not done so here. Counterdefendants’ motion to dismiss Yusen’s fraudulent-misrepresentation claim is
granted.
2.

Fraudulent Concealment

The second part of Yusen’s fraud claim is based not on the law firm’s
misrepresentations, but on the concealment of certain facts from its client. To plead
Counter-defendants also argue that Yusen could not have relied on the letter because,
when Yusen signed it, Yusen already knew about a settlement in the litigation. See [18] at
4. What the counterclaim actually says is that O’Donnell, not Yusen, was aware of the
settlement when Yusen signed the engagement letter. See [7] ¶ 13; see also id. ¶ 22. But
even assuming that Yusen also knew about it, it was only a partial settlement, involving
only one of several defendants. See id. ¶ 12. There is no reason to assume that, when Yusen
agreed to pay the firm a 25% fee, it had reason to believe the entire lawsuit was almost over
and, consequently, that none of the services enumerated in the engagement letter would
ever be needed.
8

11

a fraudulent-concealment claim, a counter-plaintiff must allege: (1) the counterdefendant concealed a material fact under circumstances that created a duty to
speak; (2) the counter-defendant intended to induce a false belief; (3) the counterplaintiff could not have discovered the truth through reasonable inquiry or
inspection, or was prevented from making a reasonable inquiry or inspection, and
justifiably relied upon the counter-defendant’s silence as a representation that the
fact did not exist; (4) the counter-plaintiff would have acted differently had they
been aware of the concealed information; and (5) the counter-plaintiff’s reliance
resulted in damages. Abazari v. Rosalind Franklin University of Medicine and
Science, 40 N.E.3d 264, 274 (Ill. App. Ct. 2015) (quoting Bauer v. Giannis, 359
Ill.App.3d 897, 902–03 (2005)). Yusen alleges that the Rodriguez firm concealed
from it the following facts: that the actual scope of the firm’s services was not as
promised, and consisted instead of submitting and responding to inquiries about
claim forms; that on December 31, 2012, the firm ceased operating as a law firm
and delegated its work in the antitrust case to attorneys at another firm; and that
the 25% contingent fee was unreasonable under the circumstances. See [7] ¶ 39; see
also id. ¶¶ 23, 25, 27, 29, 32.
Whether a fee arrangement is “reasonable” under the circumstances is an
opinion or legal conclusion, not a fact whose concealment may support a claim of
fraud. Whether a firm is operating as a law firm, or whether its attorneys have
delegated their work to another firm, are facts, and a third party could conceivably
rely on a belief arising from the concealment of those facts. But even supposing that

12

Yusen relied on such a belief here, Yusen has not alleged any damages from this
reliance.
Yusen alleges that, as of January 2013, the Rodriguez firm was no longer
authorized to provide legal services in Illinois, so its principals went elsewhere—
O’Donnell and Williams to Clark Hill PLC in Chicago, and Rodriguez and Gonzalez
to firms in Washington, D.C.—to practice law. See id. at ¶¶ 29, 39(C). Because the
Rodriguez firm could no longer provide legal services, says Yusen, the firm
delegated to Clark Hill any remaining work required under the engagement
agreement. See id. ¶¶ 32, 39(D). Counter-defendants do not disagree that, under
the Illinois Rules of Professional Conduct, a lawyer may not delegate to an attorney
from another firm any work for a particular client without first obtaining that
client’s informed consent. See ILL. RULES

OF

PROF’L CONDUCT R. 1.2(e). Nor do

counter-defendants dispute that the Rodriguez firm ought to have disclosed (indeed,
had a duty to disclose) to Yusen that the firm was contemplating such a delegation
here. See id.; see also id. R. 1.4(a)(1) (mandating that lawyers “promptly inform
the[ir] client of any decision or circumstance with respect to which the client’s
informed consent . . . is required”); cf. D’Attomo v. Baumbeck, 36 N.E.3d 892, 913
(Ill. App. Ct. 2015) (explaining that “a duty to speak arises if the [parties] are in a
fiduciary . . . relationship,” which “exists as a matter of law between . . . attorneys
and clients”) (citations omitted). But where is the injury to Yusen from the
concealment of these facts?

13

Yusen says that the Rodriguez firm withheld the above information to
deceive Yusen into paying the firm from settlements recovered in the case, which
Yusen did. See [7] ¶¶ 39–40. However, the payments Yusen made—and thus the
basis for its damages in the present action—were from the first three settlements in
the antitrust litigation. The attorneys from Clark Hill worked on preparing and
submitting claim forms in connection with the fourth settlement, and the funds
from that settlement had not yet been distributed as of the counterclaim’s filing. See
id. ¶ 35; [7-C] ¶¶ 17–18. Thus, to the extent Yusen believed that the invoices it paid
were invoices for fees earned by the Rodriguez firm instead of Clark Hill, this was
not a false belief, and did not result in any damages.
Yusen also claims that it falsely believed the firm would perform or had
performed the specific legal services outlined in the engagement letter. Instead of
handling discovery and filing or responding to motions, says Yusen, the Rodriguez
firm needed only to prepare and submit several claims forms (and to respond to
inquiries made by the claims administrator), see [7] ¶ 39(A)—information that the
firm knowingly withheld from Yusen beginning in October 2007, see id. ¶ 25
(incorporated into Count I at id. ¶ 36). It is not evident from the pleading, however,
how exactly Yusen claims to have relied on the firm’s silence. In pleading reliance
here, Yusen employs the same ambiguous language addressed above with respect to
the fraudulent-misrepresentation claim. See id. ¶ 40 (alleging that Yusen relied on
its false beliefs when it “retained . . . and made or authorized payments” to the
Rodriguez firm from monies recovered in the antitrust suit). What precisely Yusen

14

means by this statement is still unclear. To state a fraudulent-concealment claim
with the requisite particularity, Yusen must explain with specificity the actions it
would not have taken—and thus the injuries it would not have sustained—but for
the counter-defendants’ concealment. And if the concealment occurred at more than
one point in time, and affected Yusen’s actions differently as time progressed, the
pleading must be precise about that, too. As currently drafted, the counterclaim
lacks this kind of precision. Yusen’s fraudulent-concealment claim does not pass
muster under Rule 9(b).9
B.

Fiduciary Breach (Counts II and III)

To state a claim for fiduciary breach, Yusen must allege: (1) the existence of a
fiduciary relationship; (2) a breach of the duties imposed by that relationship; and
(3) damages from the breach. See Kovac v. Barron, 6 N.E.3d 819, 833 (Ill. App. Ct.
Counter-defendants also argue that Yusen has not pleaded a proper claim for fraudulent
concealment because Yusen has not alleged that it was unable to discover the truth about
what the Rodriguez firm was actually doing on its behalf. See [18] at 9. In general, counterplaintiffs seeking to recover on a fraudulent-concealment claim must plead justifiable
reliance by alleging that they could not have discovered the truth through reasonable
inquiry or inspection. See Abazari, 40 N.E.3d at 274 (citation omitted); see also D’Attomo,
36 N.E.3d at 913 (affirming dismissal of a concealment claim, in part because the plaintiffs
had not included such allegations in their complaint). But a failure to inquire—or, as is
more relevant here, a failure to allege that the counter-plaintiff could not have learned the
truth through reasonable inquiry—is not necessarily fatal. “The question is whether, under
the circumstances and in light of the information open to the plaintiff, . . . the law may
properly say that the loss is his own responsibility.” Schrager v. N. Cmty. Bank,
328 Ill.App.3d 696, 709 (1st Dist. 2002) (quoting Chicago Title & Trust Co. v. First
Arlington Nat’l Bank, 118 Ill.App.3d 401, 409 (1983)) (internal brackets and quotation
marks omitted). And a plaintiff is not responsible for its loss, for example, where it did not
have the same ability as the defendant to discover the truth, or where the latter’s
statements have created in the plaintiff a false sense of security. Id. at 709–10 (quoting
Gerill Corp v. Jack L. Hargrove Builders, Inc., 128 Ill.2d 179, 195 (1989); Miller v. William
Chevrolet/GEO, Inc., 326 Ill.App.3d 642, 652 (2001)). Because the fraudulent-concealment
claim is inadequate for other reasons, I do not decide at this time whether the failure to
allege an inability to make a reasonable inquiry also warrants a dismissal.
9

15

2014) (citations omitted). Yusen brings two fiduciary-breach claims—one alleging
breach by O’Donnell, acting on behalf of himself and “the former Rodriguez Law
Firm” (Count II), and the other alleging, in the alternative, a breach by the firm
(Count III). See [7] ¶¶ 47, 54. With Count II Yusen seeks damages from
shareholders O’Donnell, Williams, Rodriguez, and Gonzales, jointly and severally.
See id. at 58. Under Count III Yusen seeks damages from the same individuals and
the firm (now known as Rodriguez O’Donnell Gonzalez & Williams, P.C.), also
jointly and severally. See id. at 63. The claims are otherwise identical, and the
parties do not distinguish between them in their briefs. (Though defendants do
argue that there is a kind of “group pleading” problem, addressed below at Part C.)
For simplicity, the counts (and conduct) are treated collectively.
The fiduciary-breach claims are based on much the same conduct as the
conduct underlying the fraud claims. See id. ¶¶ 47(A)–(D), (F), (I)–(J); id. ¶¶ 54 (A)–
(D), (F), (I)–(J). Fraudulent conduct by an attorney violates the latter’s duty to act
with honesty and good faith—obligations that all lawyers owe to their clients as a
matter of law, see Pippen v. Pederson & Houpt, 986 N.E.2d 697, 704 (Ill. App. Ct.
2013) (citing Metrick v. Chatz, 266 Ill.App.3d 649, 656 (1994)); see also Coughlin v.
SeRine, 154 Ill.App.3d 510, 515 (1st Dist. 1987) (“[I]t is incumbent upon the
attorney that he exercise the utmost good faith and fairness in dealing with the
client.” (citing Drake v. Becker, 14 Ill.App.3d 690, 696 (1973))); cf. Burdett v. Miller,
957 F.2d 1375, 1381 (7th Cir. 1992) (“A fiduciary duty is the duty of an agent to
treat his principal with the utmost candor, rectitude, care, loyalty, and good

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faith . . . .”) (citations omitted). As Yusen has not adequately pleaded injury from
the frauds, however, the conduct alleged in support of those claims similarly cannot
support a claim for fiduciary breach.
The absence of injury likewise renders inadequate Yusen’s claim that the
firm breached its fiduciary duty by demanding to be reinstated as Yusen’s counsel
after it was fired. According to Yusen, after it terminated its relationship with the
Rodriguez firm (with respect to the antitrust litigation), the firm demanded to be
brought back on as counsel. This demand, says Yusen, was part of the firm’s scheme
to deceive Yusen into believing that the former was still able to provide legal
services. See [7] ¶¶ 47(H), 54(H). Yusen did not agree to the reinstatement,
however, see [7-C] ¶¶ 37–38; and, as far as can be gleaned from the pleadings,
Yusen had already made the fee payments from which it now claims financial injury
by the time the discussion about reinstatement even took place, compare [7] ¶¶ 33–
34 (alleging that Yusen paid invoices dated October 29, 2013 and April 10, 2014)
with [7-C] ¶ 37 (agreeing that the firm sought reinstatement through a letter dated
November 5, 2014). Yusen has pleaded no reliance on—and thus no damages from—
this alleged deception.
Yusen also claims that the Rodriguez firm committed a fiduciary breach by
obtaining through undue influence Yusen’s agreement to pay the 25% contingent
fee—an unreasonable fee, which Yusen ultimately did pay. See [7] ¶¶ 47(E), (G);
id. ¶¶ 54(E), (G). Attorneys are prohibited from overcharging their clients, see
Cripe, 184 Ill.2d at 198; Coughlin, 154 Ill.App.3d at 515, and the presumption of

17

undue influence leads me to assume, for now, that the fee Yusen agreed to and did
pay was excessive in this case. (Whether the fee was actually excessive is a factual
question that cannot be resolved at this stage of the litigation.) Inasmuch as Yusen
bases Count II or III on the firm’s exercise of undue influence to collect an
unreasonably-high fee, that claim may proceed.
C.

Group Pleading

In a case with multiple counter-defendants, to comply with Rule 8 or 9(b), the
counter-plaintiff generally must plead sufficient facts to notify each counterdefendant of what he or she supposedly did wrong. See United States v. SanfordBrown, Ltd., 788 F.3d 696, 705 (7th Cir. 2015) (citation omitted); Bank of America,
N.A. v. Knight, 725 F.3d 815, 818 (7th Cir. 2013). Counter-defendants here argue
that Yusen has not satisfied this requirement as to Williams, Rodriguez, or
Gonzales. See [12] at 7; [18] at 13. But Yusen does not contend that Williams,
Rodriguez, or Gonzales is liable because he himself committed unlawful acts. Yusen
instead claims that these individuals are liable by operation of Illinois Supreme
Court Rule 721(d), which provides:
Unless [a] corporation [engaged in the practice of law in Illinois]
maintains minimum insurance or proof of financial responsibility in
accordance with Rule 722, the articles of incorporation . . . shall
provide, and in any event the shareholders of the corporation . . . shall
be deemed to agree by virtue of becoming shareholders, . . . that all
shareholders . . . shall be jointly and severally liable for the acts,
errors, and omissions of the shareholders . . . and other employees of
the corporation . . . arising out of the performance of professional
services by the corporation . . . while they are shareholders . . . .
Ill. S. C. Rule 721(d). “Minimum insurance” is in turn defined as a professionalliability insurance policy for wrongful conduct, applicable to the conduct of the
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corporation, its owners, or employees, in amounts set forth in the Rule. See Ill. S. C.
Rule 722(b)(1). “Proof of financial responsibility” refers to funds specifically
designated and segregated for the satisfaction of any judgments of wrongful conduct
against the corporation, its owners, or employees. Ill. S. C. Rule 722(b)(3).
Yusen alleges that the Rodriguez firm, a corporation organized under Illinois
statute, does not maintain minimum insurance as defined in Illinois Supreme Court
Rule 722(b)(1). See [7] ¶¶ 2, 43, 50, 57. Accordingly, says Yusen, the firm’s
shareholders—which include Williams, Rodriguez, and Gonzales—are now liable
under Rule 721(d) for the misdeeds of other employees or shareholders, such as
O’Donnell, as set forth in the counterclaim. See [17] at 11–12. Counter-defendants
do not argue otherwise, and the issue is waived. See Bonte v. U.S. Bank, N.A.,
624 F.3d 461, 466 (7th Cir. 2010) (“Failure to respond to an argument . . . results in
waiver.” (citing United States v. Farris, 532 F.3d 615, 619 (7th Cir. 2008))).
D.

Voluntary-Payment Doctrine

Counter-defendants also argue that Yusen’s counterclaim is barred under the
voluntary-payment doctrine. The voluntary-payment doctrine provides that,
“[a]bsent fraud, coercion or mistake of fact, monies paid under a claim of right to
payment but under a mistake of law are not recoverable.” Spivey v. Adaptive Mktg.
LLC, 622 F.3d 816, 822 (7th Cir. 2010) (quoting Randazzo v. Harris Bank Palatine,
N.A., 262 F.3d 663, 668 (7th Cir. 2001)) (applying Illinois law); see also King v. First
Capital Financial Services Corp., 215 Ill.2d 1, 27–31 (2005). The doctrine is a
corollary to the mistake-of-law doctrine, and reflects the principle that one who

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voluntarily pays another with full knowledge of the facts is not entitled to
restitution. Randazzo, 262 F.3d at 667–68 (citations omitted).
Counter-defendants assert that the doctrine applies to Yusen’s claims here,
because Yusen paid the Rodriguez firm more than $478,000 “with full knowledge of
what occurred prior to agreeing to those payments.” [12] at 7. Even if this is true,
the doctrine is inapplicable here. Voluntary payment does not bar suits based on
excessive attorney fees—the gist of Yusen’s surviving claim. See Coughlin,
154 Ill.App.3d at 515.
E.

Statute of Limitations

Yusen’s claims are subject to a two-year statute of limitations, which began to
run when Yusen knew or reasonably should have known of its injuries. See 735
ILCS 5/13-214.3(b) (governing actions against attorneys arising out of acts or
omissions in the performance of professional services).10 The injuries of which
Yusen complains here are the fees it says the Rodriguez firm collected in connection
with the antitrust litigation. So when did Yusen discover, or when should it have
discovered, that the fees it paid were wrongfully charged?

Counter-defendants say that there is a five-year limitations period, see [12] at 6, but this
is incorrect. It is true that a five-year statute of limitations generally applies to claims
sounding in fraud or fiduciary breach. See 735 ILCS 5/13-205; Halperin v. Halperin,
750 F.3d 668, 669, 671 (7th Cir. 2014) (citations omitted); Havoco of Am., Ltd. v. Sumitomo
Corp. of Am., 971 F.2d 1332, 1337 (7th Cir. 1992) (citations omitted). However, Section 13214.3 of the Illinois Code of Civil Procedure specifically provides that claims against
attorneys, when based on the attorney’s provision of legal services, is two years, not five.
The more specific statute trumps the general one. See, e.g., Marseilles Hydro Power, LLC v.
Marseilles Land & Water Co., 518 F.3d 459, 468 (7th Cir. 2008) (citing Commonwealth
Edison v. Walsh Constr. Co., 177 Ill.App.3d 373, 532 N.E.2d 346, 350 (1988)); DeMarco v.
Ecklund, 341 Ill.App.3d 225, 227 (2d Dist. 2003) (citing Tosado v. Miller, 188 Ill.2d 186, 191
(1999)).
10

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This question cannot be answered from the pleadings—nor need it be.
Statute-of-limitations defenses are affirmative defenses, and thus plaintiffs and
counter-plaintiffs need not anticipate or overcome them in their complaints. See
Sidney Hillman Health Ctr. of Rochester v. Abbott Labs., Inc., 782 F.3d 922, 928
(7th Cir. 2015) (explaining that these defenses “typically turn on facts not before the
court at [the motion-to-dismiss] stage”) (citations omitted). Dismissal based on a
statute-of-limitations defense is proper at the pleadings stage only where the
claimant has alleged facts establishing the claim’s tardiness. See id. (citations
omitted). Yusen has not done so here.11

11

Counter-defendants argue that Yusen should have figured things out by at least
February 2009, when claims to the first settlement were due. See [18] at 11. By that time,
say counter-defendants, Yusen should have realized that what the firm had stated
previously as to the scope of the representation might not be true. See id. But the first
settlement, as discussed above at note 8, was with only one of many defendants in the case.
Counter-defendants have not explained, and nor is it apparent from the pleadings, why
Yusen would or should have assumed that the remaining defendants would soon settle with
no actual litigating to be done in the interim.

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IV.

Conclusion

For the reasons discussed above, counter-defendants’ motion to dismiss the
counterclaim, [11], is granted in part and denied in part. The motion to dismiss
Counts II and III is denied to the extent Yusen bases either claim on the Rodriguez
firm’s exercise of undue influence in extracting from Yusen an unreasonably-high
fee. The motion is otherwise granted. The parts of the counterclaim that are
dismissed may be cured through re-pleading, and are dismissed without prejudice.
ENTER:
___________________________
Manish S. Shah
United States District Judge

Date: 2/4/16

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