In re Estate of Klehm

Second Division
January 24, 2006

No. 1-04-3512

In re ESTATE OF Lois E. KLEHM, ) Appeal from the
Deceased (Kathleen Klehm-Marinangel, ) Circuit Court of
Executor of the Estate of ) Cook County
Lois E. Klehm, Petitioner-Appellant, )
v. Arnold J. Klehm, Roy G. Klehm, and ) No. 99 P 119
Susan Klehm, individually and as )
Executor of the Estate of ) Honorable
Carl H. Klehm, Respondents-Appellees). ) James W. Kennedy
) Judge Presiding.

JUSTICE HALL delivered the opinion of the court:

The central issue for review is whether the trial court

abused its discretion in granting a motion disqualifying

attorneys Frederick C. Cappetta (Cappetta) and Ronald E. Shadle

(Shadle) and their respective law firms from further representing

executor Kathleen Klehm-Marinangel in a citation proceeding she

initiated against certain family members and their business

entities for the purpose of discovering information and

recovering monies and assets allegedly belonging to the estate of

her deceased mother, Lois E. Klehm.

Kathleen petitioned this court for review pursuant to

Supreme Court Rule 306(a)(7) (166 Ill. 2d R. 306(a)(7)). For the

reasons that follow, we find that the trial court abused its

discretion in this case and therefore we reverse.

While the parties disagree regarding certain specific facts,

those that follow are uncontroverted. Lois E. Klehm (Mrs. Klehm)

died testate on December 8, 1998. In addition to a number of

grandchildren, she was survived by three adult children, Roy G.
1-04-3512

Klehm, Arnold J. Klehm, and Kathleen Klehm-Marinangel; another

son, Carl H. Klehm (Chuck), predeceased her and was survived by

his wife Susan Klehm, who is a party to these proceedings.

In January 1999, Kathleen filed a petition to probate her

mother's last will and for letters testamentary. The will was

drafted by attorneys from the law firm of Sidley & Austin. At

the time she filed the petition, Kathleen was represented by the

law firm of Cappetta & Shadle, Ltd. On February 4, 1999, the

circuit court entered an order admitting the will to probate and

appointing Kathleen as executor of her mother's estate.

Mrs. Klehm's will had nominated Roy, Arnold, and Kathleen as

coexecutors. The sons, however, declined to act as coexecutors

under the will and in August 1999, filed a petition contesting

the will based on undue influence.

From January 1999 through 2003, Cappetta and Shadle

represented Kathleen in the will contest and in numerous out-of-

court negotiations concerning the estate's claims against the

sons and their business entities. On August 15, 2003, after

negotiations stalled, Kathleen filed a three-count citation

petition against Roy, Susan (individually and as administrator of

Chuck's estate), Arnold, and their business entities

(collectively Klehm movants), for the purpose of discovering and

recovering monies and assets allegedly belonging to the estate.

On September 30, 2003, the Klehm movants filed a motion to

disqualify Cappetta and Shadle from representing Kathleen in the

-2-
1-04-3512

citation proceedings or, in the alternative, in any estate

proceedings other than the will contest. The Klehm movants

contended that Cappetta and Shadle had previously represented

them in various transactions at issue in the pending citation

proceedings and therefore the attorneys' representation of

Kathleen in her capacity as executor of their mother's estate

violated Rule 1.9 of the Rules of Professional Conduct 1 because

1
Rule 1.9 of the Code of Professional Responsibility

provides, in pertinent part:

"Conflict of Interest: Former Client

(a) A lawyer who has formerly represented a client in a

matter shall not thereafter:

(1) represent another person in the same or a

substantially related matter in which that person's

interests are materially adverse to the interests of

-3-
1-04-3512

it constituted involvement in litigation adverse to a former

client's interest in a matter substantially related to the former

representation.
The Klehm movants also filed a motion requesting the trial

court to strike the citation petition on the grounds that: all

requested documents and information had already been provided and

therefore the citation was moot; the petition was not a proper

petition for citation to discover assets because it did not

actually seek issuance of a citation but rather attacked the

validity of the transfers themselves; and the petition was

unsupported by either current law or facts and was therefore

sanctionable.

On November 4, 2004, following five days of hearings, the

trial court entered an order disqualifying Cappetta and Shadle

from further representing Kathleen in the citation proceedings,

but not as to any other supplemental proceedings in the estate.

Kathleen filed a timely petition for leave to appeal the order on

the former client, unless the former client consents

after disclosure[.]" 134 Ill. 2d R. 1.9.

-4-
1-04-3512

December 6, 2004. On February 3, 2005, the trial court granted

Kathleen's petition for leave to appeal.

ANALYSIS

I. Waiver of Right to Seek Disqualification of Counsel

Kathleen first contends that the trial court abused its

discretion by failing to find that the Klehm movants waived their

right to seek disqualification of attorneys Cappetta and Shadle

and their respective law firms, where the movants waited

approximately four years before raising the issue. We agree.

Courts have vital interests in "protecting the attorney-

client relationship, maintaining public confidence in the legal

profession and ensuring the integrity of judicial proceedings."

S K Handtool Corp. v. Dresser Industries, Inc., 246 Ill. App. 3d

979, 989, 619 N.E.2d 1282 (1993). To protect these vital

interests, courts have the authority to disqualify an attorney

from representing a particular client. See, e.g., LaSalle

National Bank v. Triumvera Homeowners Ass'n, 109 Ill. App. 3d

654, 664, 440 N.E.2d 1073 (1982) (rationale for disqualification

"is to enforce the attorney's duty of absolute fidelity and to

guard against the danger of inadvertent use of confidential

information").

At the same time, however, it is well settled that since

disqualification serves to destroy the attorney-client

relationship by preventing a party from freely retaining counsel

of his choice, it is regarded as a drastic measure that courts

-5-
1-04-3512

should apply only when absolutely necessary. S K Handtool Corp.,

246 Ill. App. 3d at 989; Schwartz v. Cortelloni, 177 Ill. 2d 166,

178, 685 N.E.2d 871 (1997). In addition, motions to disqualify

are generally viewed with caution since they can be used as a

tool to harass opposing counsel. Chemical Waste Management, Inc.

v. Sims, 875 F. Supp. 501, 505 (N.D. Ill. 1995).

In an effort to discourage tactical gamesmanship, courts

have determined that motions to "disqualify should be made with

reasonable promptness after a party discovers the facts which

[led] to the motion." Kafka v. Truck Insurance Exchange, 19 F.3d

383, 386 (7th Cir. 1994), quoting Central Milk Producers

Cooperative v. Sentry Food Stores, Inc., 573 F.2d 988, 992 (8th

Cir. 1978). Consequently, waiver is a valid basis for denying a

motion to disqualify. See, e.g., International Insurance Co. v.

City of Chicago Heights, 268 Ill. App. 3d 289, 302-03, 643 N.E.2d

1305 (1994) ("[a] party waives any objection to an alleged

attorney conflict of interest if it fails to assert that conflict

promptly").

In determining whether a moving party has waived its right

to object to an attorney's representation of an adverse party on

conflict of interest grounds in civil cases, courts have

considered such factors as the length of the delay in bringing

the motion to disqualify; when the movant learned of the

conflict; whether the movant was represented by counsel during

the delay; why the delay occurred; and whether disqualification

-6-
1-04-3512

would result in prejudice to the nonmoving party. See Chemical

Waste Management, Inc., 875 F. Supp. at 505.

In this case, the record indicates that the Klehm movants

and their counsel knew or should have known of a potential

conflict and adverse representation since at least August 1999,

when the sons declined to act as coexecutors under their mother's

will and instead hired lawyers to contest the will. The Klehm

movants, contested, among other things, deletion of the

"forgiveness of debt" provision that was contained in Mrs.

-7-
1-04-3512

Klehm's 1984 will 2 and reiterated in her 1994 will.

2
The forgiveness of debt provision contained in the 1984

will stated as follows:

"D. Forgiveness of Debt:

1. all indebtedness of any kind and nature due to

LEK [Lois E. Klehm] from sons, KPI [Klehm Properties,

Inc.], KBP [Klehm Boys' Partnership], CKSN [Charles

Klehm & Son Nursery], or their other entities

2. all indebtedness of any kind and nature due to

-8-
1-04-3512

LEK from KKM [Kathleen Klehm-Marinangel]."

The forgiveness of debt provision contained in the 1994 will

stated as follows:

"G. Forgiveness of Debt:

1. 'I forgive all indebtedness of every kind and

nature due me from my sons, Klehm Properties, Inc.,

Klehm Boys' Partnership, Klehm Nursery Development,

Inc., and Charles Klehm & Son Nursery.'"

-9-
1-04-3512

In the 1996 will, the "forgiveness of debt" provision was

deleted, and the will that was admitted to probate in February

1999 contained section 5.2, which stated:

"Most of my estate consists of investments made in

businesses conducted by my sons and loans made in connection

with said businesses. Since these businesses are currently

invested in real estate which may be difficult to liquidate,

I direct my Executors to grant these businesses sufficient

time to raise the cash necessary to meet the obligations to

pay the bequests contained in Article 2, so that the value

of such businesses will not be unduly sacrificed."

In light of the language contained in section 5.2 directing

the executor to recover money/debt from business entities owned

by the sons, and the fact that the "forgiveness of debt"

provision was deleted from the 1996 will, the Klehm movants

evidently realized that their interests were potentially adverse

to the estate when they contested the will.

The Klehm movants placed themselves in a potentially

conflicting position with the estate when they initiated

adversarial proceedings contesting the will. Cappetta and

Shadle's defense of the terms of the will resulted in a

potentially adversarial relationship between the attorneys and

the Klehm movants and their attorneys. See Jewish Hospital of St.

Louis, Missouri v. Boatmen's National Bank of Belleville, 261

Ill. App. 3d 750, 763, 633 N.E.2d 1267 (1994) (noting that

-10-
1-04-3512

defending the terms of the will often results in an adversarial

relationship between the estate and a beneficiary of the estate);

In re Estate of Kirk, 292 Ill. App. 3d 914, 919, 686 N.E.2d 1246

(1997) (same); Neal v. Baker, 194 Ill. App. 3d 485, 488, 551

N.E.2d 704 (1990) (adversarial relationship resulted between

attorney for the estate and income beneficiary where beneficiary

contested attorney's contention that she, rather than the estate,

should pay inheritance tax).

The Klehm movants and their attorneys knew or should have

known of the potential conflict and adverse representation at the

time they filed their will contest in August 1999. Nonetheless,

they permitted the probate case to proceed for approximately four

years before filing their motion to disqualify Cappetta and

Shadle on September 30, 2003. Courts have denied motions to

disqualify brought after comparable and even shorter periods of

delay. See, e.g., Tanner v. Board of Trustees, 121 Ill. App. 3d

139, 146-47, 459 N.E.2d 324 (1984) (nine months); First National

Bank of Elgin v. St. Charles National Bank, 152 Ill. App. 3d 923,

932-33, 504 N.E.2d 1257 (1987) (16 months); Roth v. Roth, 84 Ill.

App. 3d 240, 244-45, 405 N.E.2d 851 (1980) (two years); In re

Estate of Kirk, 292 Ill. App. 3d at 922 (3.5 years).

The Klehm movants maintain that the conflict did not arise

until August 15, 2003, when Kathleen filed her citation petition.

The Klehm movants contend that it was only when Kathleen filed

the citation petition that they became aware that certain

-11-
1-04-3512

transactions were being challenged and that their interests were

adverse to the estate. The evidence does not support the Klehm

movants' argument.

As previously discussed, the Klehm movants and their

attorneys knew or should have known of the potential conflict and

adverse representation when they filed their will contest in

August 1999. Contrary to the Klehm movants' contention, the

potential conflict did not arise on the date the citation

petition was filed. Rather, the potential conflict and adverse

representation arose when the sons declined to act as coexecutors

under their mother's will and immediately hired lawyers to

contest the will and strike the citation petition.

It is noteworthy that the Klehm movants were represented by

counsel during the entire four-year delay. Moreover,

disqualifying Cappetta and Shadle at this stage of the

proceedings would unfairly prejudice the estate because it would

deprive the estate of lawyers with substantial knowledge of the

proceedings and require substitute counsel to perform work that

most likely would duplicate the work already performed by

Cappetta and Shadle.

II. Substantial Relationship

Even if the Klehm movants had not waived their right to seek

disqualification of attorneys Cappetta and Shadle, the attorneys

still should not have been disqualified from representing

Kathleen in the citation proceedings, because the record shows

-12-
1-04-3512

that the movants failed to meet their burden of establishing a

"substantial relationship" between the attorneys' earlier

representation of the movants and their subsequent representation

of Kathleen. Under Rule 1.9 of the Illinois Rules of

Professional Conduct, an attorney's subsequent representation of

a party with interests adverse to a former client is prohibited

if the matters involved in the two representations are

substantially related. Schwartz, 177 Ill. 2d at 177. A party

seeking disqualification of counsel under Rule 1.9 bears the

burden of proving that the former and subsequent representations

are substantially related. Schwartz, 177 Ill. 2d at 177-78.

A trial court's decision on whether to disqualify counsel

will not be disturbed absent an abuse of discretion.

International Insurance Company, 268 Ill. App. 3d at 302. An

abuse of discretion occurs where a trial court's decision is

arbitrary, fanciful, or unreasonable, or where no reasonable

person would adopt the court's view. Agnew v. Shaw, 355 Ill. App.

3d 981, 990, 823 N.E.2d 1046 (2005). Moreover, in cases such as

this one, where the question on appeal involves the resolution of

factual issues, the trial court's determination will not be

disturbed unless it is unsupported by the evidence. Schwartz, 177

Ill. 2d at 176.

A party seeking disqualification based on prior

representation must establish the existence of a prior attorney-

client relationship and then establish that the prior and

-13-
1-04-3512

subsequent representations are substantially related. Gagliardo

v. Caffrey, 344 Ill. App. 3d 219, 226, 800 N.E.2d 489 (2003).

Our supreme court adopted the three-part test set forth in

LaSalle National Bank v. County of Lake, 703 F.2d 252 (7th Cir.

1983), as a means of determining whether prior and subsequent

representations are substantially related. See Schwartz, 177 Ill.

2d at 180; Hasco, Inc. v. Roche, 299 Ill. App. 3d 118, 127, 700

N.E.2d 768 (1998).

Under the "substantial relationship" test, the court first

makes a factual reconstruction of the scope of the prior legal

representation; second, the court determines whether it is

reasonable to infer that the confidential information allegedly

given would have been given to a lawyer representing a client in

those matters; and third, the court determines whether the

information is relevant to issues raised in the pending

litigation against the former client. See Schwartz, 177 Ill. 2d

at 178; Franzoni v. Hart Schaffner & Marx, 312 Ill. App. 3d 394,

400, 726 N.E.2d 719 (2000).

If the court finds a substantial relationship between the

prior and subsequent representations, then the court is entitled

to assume that client confidences, relevant to the subsequent

litigation, were revealed during the course of the prior

representation. LaSalle National Bank, 703 F.2d at 256. The

primary concern under the substantial relationship test is

whether "'confidential information that might have been gained in

-14-
1-04-3512

the first representation [may be] used to the detriment of the

former client in the subsequent action.'" INA Underwriters

Insurance Co. v. Nalibotsky, 594 F. Supp. 1199, 1206 (E.D. Pa.

1984), quoting Realco Services, Inc. v. Holt, 479 F. Supp. 867,

871 (E.D. Pa. 1979).

In answering the first question regarding the scope of the

prior representation, the court should focus on the reasons why

counsel was retained and the tasks which counsel was employed to

perform. INA Underwriters Insurance Co., 594 F. Supp. at 1206.

"Once the purposes for which the attorney was employed are clear,

it is then possible to consider the type of information which a

client would impart to an attorney performing such services for

him." INA Underwriters Insurance Co., 594 F. Supp. at 1206.

The Klehm movants contend that Cappetta's and Shadle's prior

representation of the movants in various real estate and loan

transactions in the 1970s constitutes grounds for disqualifying

the two attorneys from representing Kathleen in the citation

proceedings. The Klehm movants maintain that there is a

substantial relationship between issues encompassed in the prior

representation and those of the citation proceeding, because both

representations concern the same transactions. The Klehm movants

also contend that the attorneys' representation of the movants as

beneficiaries of the estate of their father, Mr. Klehm, provides

additional grounds for disqualifying the attorneys. We must

reject the Klehm movants' contentions.

-15-
1-04-3512

Cappetta's and Shadle's representation of the coexecutors of

Mr. Klehm's estate does not constitute prior representation of

the Klehm movants justifying disqualification of the attorneys

under the rules of professional conduct, because under the facts

in this case, such representation did not create an attorney-

client relationship between the movants and the attorneys. See

Jewish Hospital of St. Louis, Missouri, 261 Ill. App. 3d at 763

("[e]ven though beneficiaries of a decedent's estate are intended

to benefit from the estate, an attorney for an estate cannot be

held to a duty to a beneficiary of an estate, due to the

potentially adversarial relationship between the estate's

interest in administering the estate and the interests of the

beneficiaries of the estate"). Without an attorney-client

relationship, there is no basis for disqualification under the

rules of professional conduct. See Schwartz, 177 Ill. 2d at 174.

In regard to a factual reconstruction of the nature and

scope of Cappetta's and Shadle's prior legal representation of

the Klehm movants, the record shows the following. Cappetta

represented the Klehm sons (Roy, Arnold, and Chuck) from 1972 to

1975, performing such services as representing Roy and his wife

Sara in preparing their estate planning documents; creating the

Klehm Boys Partnership (Roy, Arnold, and Chuck) and the Klehm

Children's Partnership (Roy, Arnold, Chuck, and Kathleen) for the

purpose of holding title to certain real estate; representing

Arnold in the purchase of two parcels of real estate;

-16-
1-04-3512

representing Chuck in acquiring 16 parcels of real estate

(Corridor purchases); representing Klehm family members in regard

to Klehm Properties, Inc., and maintaining the corporate minute

books for this business entity until sometime after 1975; and

representing the Klehm family, their business entities, and the

estate of Mr. Klehm in negotiating and closing the equitable loan

transactions.

Mrs. Klehm terminated Cappetta's representation of her,

individually, in March 1975, after which he no longer represented

the Klehm family. Cappetta, however, continued to represent Mrs.

Klehm and the Continental Illinois National Bank, as coexecutors

of the estate of Mr. Klehm, until November 1981.

Shadle started working for Cappetta in 1974 as an unlicensed

law clerk. After he received his license to practice law in

1976, Shadle joined Cappetta, and from 1976 to 1981, he served as

attorney for the coexecutors of the estate of Mr. Klehm,

participating in various real estate transactions.

The Klehm movants maintain that this evidence establishes

the existence of a substantial relationship between Cappetta's

and Shadle's prior representation of the movants and the

attorneys' subsequent representation of Kathleen in the citation

proceedings. We disagree.

The evidence establishes that the nature and scope of

Cappetta's and Shadle's former representation of the Klehm

movants in the various real estate and loan transactions does not

-17-
1-04-3512

entail disclosure of confidential information relevant to the

citation proceedings. "The mere disclosure of confidential

information to counsel in the course of the prior representation

is not, itself, sufficient grounds for disqualification of that

counsel when he later represents an adverse party. The

confidential information must be of the type which one would

expect to be related to the issues in the present litigation."

INA Underwriters Insurance Co., 594 F. Supp. at 1207.

Relevance is gauged by the violations alleged in the

complaint and an assessment of the evidence useful in

establishing those allegations. Westinghouse Electric Corp. v.

Gulf Oil Corp., 588 F.2d 221, 226 (7th Cir. 1978). The complaint

in this case is in the form of a three-count citation petition to

discover and recover assets.

The purpose of a citation proceeding is to "obtain the

return of personal property belonging to the estate but in the

possession of or being concealed by others, or to obtain

information needed to recover estate property." Lombardi v.

Lepkowicz, 28 Ill. App. 3d 79, 81, 328 N.E.2d 328 (1975). In the

instant case, any confidential information Cappetta and Shadle

obtained during their representation of the Klehm movants in real

estate and loan transactions in the 1970s has little relevance to

the current citation proceeding.

Count I of the citation alleges as follows: the Klehm

movants have information and knowledge concerning the existence,

-18-
1-04-3512

ownership, and location of common stock of Klehm Properties, Inc.

(KPI), belonging to the estate of Mrs. Klehm and withheld by the

movants from the executor (Kathleen); the Klehm movants have in

their possession or control evidence of title to stock belonging

to the estate of Mrs. Klehm, which movants wrongfully refuse to

deliver to the executor; corporate records and documents do not

reflect certain stock transfers; and, since the alleged or

claimed transfers were purportedly gifts, gift tax returns should

have been filed regarding this stock.

Count II alleges that the Klehm movants and certain other

family members have in their possession or control, or have

converted, KPI stock belonging to the estate of Mrs. Klehm, which

movants wrongfully refuse to deliver or account for the value

thereof; and corporate records and documents do not reflect

certain stock transfers.

The issues presented in counts I and II concern allegations

of conversion of estate assets and whether purported transfers of

KPI stock by Mrs. Klehm during the period of 1980 through 1995

constituted valid gifts or transfers. It is undisputed that

neither Cappetta or Shadle nor their respective law firms

represented Mrs. Klehm or the Klehm movants in connection with

the purported transfers during this period.

The record shows that Shadle served as attorney for the

coexecutors of the estate of Mr. Klehm and that he never directly

represented the Klehm movants. Cappetta was fired in 1975, five

-19-
1-04-3512

years before the transfers at issue occurred. Consequently, any

confidential information Cappetta and Shadle obtained during

their representation of the Klehm movants in real estate and loan

transactions in the mid 1970s has little relevance in regard to

allegations concerning the conversion of estate assets or the

validity of gifts made in 1980 through 1995. See, e.g., Moniuszko

v. Moniuszko, 238 Ill. App. 3d 523, 529, 606 N.E.2d 468 (1992)

("elements of a valid gift are donative intent, the donor's

parting with the exclusive dominion and control over the subject

of the gift, and delivery to the donee"); IOS Capital, Inc. v.

Phoenix Printing, Inc., 348 Ill. App. 3d 366, 370, 808 N.E.2d 606

(2004) (party claiming conversion must establish a right to the

property, a right to immediate possession, wrongful control by

the defendant, and a demand for possession).

Count III alleges that a fiduciary relationship existed

between Mrs. Klehm and certain Klehm movants, and as a result of

an alleged breach of that fiduciary duty, asks for an accounting

and recovery of assets. With respect to the issues raised in

count III, the record indicates that neither Cappetta or Shadle

nor their respective law firms represented the Klehm movants in

any actions that could result in a court finding that the movants

breached their fiduciary duty to Mrs. Klehm. The prior

representation was not related to the commission or omission of

actions of the Klehm movants resulting in a breach of their

fiduciary duty to Mrs. Klehm during the 1980s and 1990s. See,

-20-
1-04-3512

e.g., Neade v. Portes, 193 Ill. 2d 433, 444, 739 N.E.2d 496

(2000) (to state a claim for breach of fiduciary duty, a party

must establish that a duty exists, that the fiduciary duty was

breached, and that such breach proximately caused the injury).

In conclusion, the evidence establishes that no substantial

relationship existed between Cappetta's and Shadle's prior

representation of the Klehm movants and the attorneys' subsequent

representation of Kathleen in the citation proceedings.

Moreover, even if the Klehm movants had established a substantial

relationship between the prior and subsequent representations,

Cappetta and Shadle still should not have been disqualified,

because the movants waived their right to seek disqualification

of the attorneys by waiting approximately four years before

raising the issue.

Accordingly, for the reasons set forth above, we reverse the

order of the circuit court of Cook County disqualifying attorneys

Cappetta and Shadle from representing Kathleen in the citation

proceedings.

Reversed.

WOLFSON and SOUTH, JJ., concur.

-21-