Argument Report: The Constitutional Implications of Advance Payment Retainers and Divorce Claw-Back

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Earlier this week, the Illinois Supreme Court heard oral arguments in Earlywine v. Earlywine. In a fascinating, albeit one-sided argument (there was no appearance for the appellee), the Justices actively debated a wide variety of issues, including the "leveling the playing field" policy in the disgorgement provisions of the Illinois Marriage and Dissolution of Marriage Act ("IDMA"), advance payment attorney retainers, and a host of United States Supreme Court decisions which may (or may not) impact whether or not disgorgement orders are constitutionally permissible under such circumstances. Although I won't hazard a prediction since there was no opportunity to see the Court's reaction to an argument for appellee, the Court was highly engaged in the proceedings, asking (by my count) nineteen questions of counsel in only seventeen minutes. Our detailed preview of the facts and lower court opinions in Earlywine is here. The video and audio of the argument is available here.

Earlywine began when the husband agreed to pay his attorney an advance payment retainer financed by his mother, her fiancé, his father and his father's wife. The wife's attorney petitioned for an award of $5,000 in interim attorney's fees pursuant to 750 ILCS 5/501(c-1), the Illinois Marriage and Dissolution of Marriage Act. The wife's attorney asked the court, if necessary, to order the husband's attorney to disgorge amounts already paid to him. The Circuit Court granted the motion. The husband's attorney moved to reconsider, arguing that as an advance payment retainer, the funds had become his property at the moment of payment. The Circuit Court denied reconsideration. The Appellate Court affirmed the order of disgorgement, holding that counsel's advance payment retainer would frustrate the "leveling the playing field" policy of IDMA.

At oral argument before the Supreme Court, counsel for the appellant characterized the case as a conflict between IDMA and Dowling v. Chicago Options Associates, Inc., in which the Supreme Court recognized advance payment retainers. Justice Burke asked counsel whether the result would be different if the husband had paid the retainer himself. Counsel responded that the Dowling rule that advance payment retainers are not subject to turnover orders would still apply; if a spouse paid fees from marital funds, the opposing spouse might have a claim for dissipation. Justice Burke asked whether the advance payment retainer was for the advantage of the client or the attorney. Counsel responded that it was intended to protect the attorney-client relationship, which is both a personal and property right, for the benefit of the client. Justice Garman asked counsel whether IDMA reflected a policy of parity between the parties. Counsel agreed it was, but argued that there was another policy at issue. Parties had a right of constitutional import to retain counsel to petition government.   Counsel argued that under Arizona Free Enterprise Club v. Bennett, leveling contending parties' playing field is not a legitimate interest under strict scrutiny review.  Justice Thomas returned to Justice Burke's question, pointing out that when a third party pays a retainer which is not subject to disgorgement, that gives one party the ability to retain an attorney when they might otherwise not be able to. Counsel responded that the issues in Arizona Free Enterprise were similar - payments from third parties to a political candidate triggered equalizing payments to his or her opponent.

Justice Thomas asked counsel what would happen when the advance payment retainer was taken from marital funds - under appellant's rule, one side would have an attorney, but the other spouse wouldn't. Counsel responded that under Arizona Free Enterprise, NAACP v. Button, United Mine Workers of America v. Illinois State Bar Association and Arizona v. Davis, the state was not permitted to burden the right to retain counsel for purposes of speech. Justice Thomas again pointed out the statutory purpose of IDMA - creating parity between the parties, and counsel responded that that was the exact conflict at issue in Arizona Free Enterprise. Chief Justice Kilbride pointed out that under Rule 1.15(c) of the Rules of Professional Conduct, an advance payment retainer must have a stated special purpose, whereas the retainer agreement at issue seemed to be intended solely to defeat the leveling the playing field rule. Counsel responded that the agreement was not about defeating the leveling the playing field rule, but rather about obtaining representation, since no counsel would take a case where the fee was certain to be clawed back pursuant to a disgorgement order. Justice Garman asked whether counsel was arguing that an advance payment retainer immune from disgorgement was constitutionally required. Counsel responded that the simple use of an advance payment retainer under Rule 1.15(c) avoided the constitutional problem.

Earlywine should be decided within three to six months.

 

Topics:  Advance-Payment Retainers, Attorney's Fees, Disgorgement, Divorce

Published In: Civil Remedies Updates, General Business Updates, Constitutional Law Updates, Family Law Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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