September 20, 2018
A recent Law 360 story by Lauraann Wood, “Ill. Firm Can’t Collect Fees for Work on Its’ Qui Tam Suit,” reports that the Illinois Supreme Court sided with an appellate panel's ruling rejecting fee awards for lawyers of a firm that brought whistleblower claims accusing My Pillow Inc. of failing to collect taxes on certain sales to Illinois customers, citing 150-year-old precedent that the court said puts the issue to bed.
The state's high court said it "expressly rejected" the notion that attorneys can charge for legal work they perform on their own behalf in its 1861 Willard v. Bassett ruling, which deemed the practice "forbidden by every sound principle of professional morality as well as by the policy of the law." And while ideas of professional morality have evolved since that ruling came down, the court has still followed the principle that it defies state policy to allow lawyers to become their own clients and then charge for professional services that advance their cause, the Supreme Court said.
That means the unanimous state appeals court that reversed more than $600,000 in attorneys' fees awarded the firm Schad Diamond & Shedden PC for work its attorneys performed in bringing the firm's successful qui tam action against the upscale pillow manufacturer was right to do so, the opinion said. "There was nothing that could fairly be characterized as an attorney-client relationship from which an obligation or need to pay an attorney fee might arise," Chief Justice Lloyd Karmeier wrote in the court's 14-page opinion. "When Diamond the law firm made a legal decision, it was not counseling a client. It was talking to itself."
The ruling constitutes a near-final reversal of a trial court ruling whose fee award to Diamond made up nearly all of the money My Pillow was ordered to pay on top of the $889,637 judgment it got slapped with after losing a bench trial over relator Stephen Diamond's claims. The trial court also awarded the firm $266,891 as a statutory award for recovering those proceeds on behalf of the state, which declined to intervene in the case.
Diamond launched the suit in 2014, claiming My Pillow violated the state's False Claims Act and acted with reckless disregard in failing to collect and pay the state its fair share of taxes on products it sold to its Illinois customers, while also falsifying records to hide its conduct.
My Pillow lost its appeal of the trial court's damages award but, in the same ruling, won on its argument that the firm should not have been awarded attorneys' fees. The ruling sided with My Pillow's argument that the firm was essentially acting as a pro se litigant in the suit and should therefore be held to the same fee standard, since self-represented litigants cannot recover attorneys' fees for their own work.
In agreeing with the appellate court, the Supreme Court noted there was "no factual or legal distinction between Diamond the relator and Diamond the law firm." "They were one and the same," Justice Karmeier wrote. "Their interests in the litigation were identical, and their contributions to the case were indistinguishable."
The case is The People ex rel. Schad Diamond & Shedden PC v. My Pillow Inc., case number 122487, in the Supreme Court of the State of Illinois.