July 29, 2016 brought to Illinois a dramatic schism regarding a hot issue for Illinois matrimonial lawyers involving interim fees and disgorgement: In re Marriage of Altman, 2016 IL App (1st) 143076.
As you will see, the appellate court held, differing from the Second district in Squire, that earned fees are not subject to disgorgement, as a matter of law. The First District appellate court stated that the issue was whether “in cases where both parties lack the financial ability or access to assets or income to pay for reasonable attorney fees and costs, *** funds already paid to a party’s attorney for past services rendered are “available” to be allocated within the meaning of the Act.” The Altman appellate court concluded that these funds are not “available” to be allocated. Therefore the appellate court reversed the order holding respondent’s former counsel in contempt for failing to comply with an order directing him to disgorge sums paid to him for past services rendered.
The Altman court concluded:
We recognize that we are addressing only interim fee awards and that, at least in theory, accounts will be “trued up” when a final dissolution order is entered. See In re Marriage of DeLarco, 313 Ill. App. 3d 107, 113 (2000) (interim fees may be deemed to be advances from the parties’ marital estate and a court can order any portion of an interim award constituting an overpayment to be repaid at conclusion of case). But when a disgorgement order is specifically predicated on a trial court’s finding that both parties lack financial ability or access to assets or income for reasonable attorney fees, we must ask how realistic it is to assume that the attorneys will ever be paid. We simply do not believe the legislature intended through section 501(c-1)(3) that the financial burden of leveling the playing field should be borne, in substantial part, by lawyers who must refund, under pain of contempt, fees they have earned. For these reasons, we conclude that funds earned by and paid to a party’s lawyer in the normal course of representation for past services rendered are not “available funds” within the meaning of section 501(c-1)(3) and thus reverse the disgorgement order to the extent it required Gerage to disgorge fees he had already earned.
Expect the split among the districts to be resolved by the Illinois Supreme Court. Stay tuned for whether cert. is sought.