## Facts

- Dean Monco (an attorney) and Ronald Janus jointly pursued commercialization of an invention and formed JI-SCO-NI Enterprises, Inc. (Jisconi) to hold the patent rights.
- Each assigned their interests in the invention/patent to Jisconi and each owned 50% of the corporation.
- Janus claimed he originated the idea, believed Monco was acting as his personal attorney, relied on Monco to protect his interests, and was not advised to seek independent counsel.
- Monco claimed the parties were co-venturers, Janus invited him into the venture on a 50/50 basis, and Monco advised Janus to obtain outside counsel regarding the business arrangement; Monco contributed about $13,000 in capital.
- Monco petitioned to dissolve Jisconi based on deadlock.
- Janus counterclaimed to vacate the assignment and compel transfer of Monco’s shares, alleging undue influence and breach of fiduciary duty arising from Monco’s acquisition of a one-half interest.
- Janus alleged he was not advised that corporate dissolution would result in each shareholder holding 100% nonexclusive rights in the patent.
- Monco admitted he did not understand until shortly before seeking dissolution that dissolution would result in each owner holding nonexclusive patent rights.
- Monco sought sanctions against Janus and his counsel, asserting the counterclaim contained false factual allegations, lacked adequate prefiling investigation, and involved improper threats of disciplinary proceedings.

## Issues

1. Whether an attorney who enters a business venture with a client and acquires a substantial ownership interest breaches fiduciary duties by failing to make full and frank disclosure and ensure an opportunity for independent legal advice.
2. Whether the client’s continued participation in the venture constituted ratification that barred equitable relief despite the attorney’s fiduciary breach.
3. Whether sanctions were warranted based on the alleged lack of factual support and improper litigation conduct connected to the counterclaim.

## Decision

- The appellate court accepted that an attorney-client relationship existed between Monco and Janus and that Monco breached fiduciary duties in the transaction.
- The court held the trial court erred in denying Janus equitable relief on the ground of ratification; Janus’s conduct did not amount to knowing ratification given the absence of full knowledge of material facts and legal consequences.
- The court reversed the ratification-based denial of relief and remanded for further proceedings consistent with its analysis.
- The court affirmed the denial of sanctions against Janus and his counsel.

## Legal Principles

- Business transactions in which an attorney obtains a pecuniary interest from a client are subject to close scrutiny and are presumed improper unless the attorney proves fairness, voluntary consent, and full disclosure.
- The attorney bears the burden to show full and frank disclosure of relevant facts, including material legal consequences, and that the client had a genuine opportunity to seek independent legal advice.
- Ratification requires the client’s full knowledge of the material facts and the transaction’s legal significance; continued participation alone is insufficient where disclosure was incomplete or conflicted advice impaired informed consent.
- Sanctions are inappropriate where claims have a reasonable factual and legal basis; a counterclaim is not frivolous when supported by evidence and trial-level findings of an attorney-client relationship and fiduciary breach.

## Conclusion

The court treated the attorney’s acquisition of a client-related ownership interest as presumptively improper absent proof of fairness and complete disclosure, rejected ratification without informed knowledge, and remanded for consideration of equitable relief while affirming denial of sanctions.


Monco v. Janus, 583 N.E.2d 575 (Ill. App. Ct. 1991)