In a "Defense-Type" Legal Malpractice Case, Actual Damages Can be Shown by the Entry of a Judgment Adverse to the Client, Even if the Judgment has Not Been Paid
I have been out of the blogging world for a while and have a stack of interesting cases and articles piled up on my desk to write about. Today, I am going to ease back into things and highlight an Illinois Appellate case that came down earlier this year that lays out what needs to be alleged in a legal malpractice complaint to fulfill the element of "actual damages."
In Fox v. Seiden, the Court held that a client sustained "actual damages" - for purposes of stating a claim for legal malpractice - when an adverse judgment was entered against a client, even though the client never paid the judgment (as long as it is alleged in a legal malpractice complaint that an adverse judgment was entered in the underlying case the payment of the judgment by the client is not required).
In the opinion, Justice Garcia, distinguished between an attorney's negligence prosecuting a case and negligence in defending a case, holding that to show actual damages in a "prosecution-type" case, the client must show - in the case within the case - the damages the client would have recovered but for the attorney's negligence. However, to show actual damages in a "defense-type" case, damages may be shown by the entry of an adverse judgment against the client, even though the judgment has not been paid.
In alleging "actual damages" the Court points out that it is the plaintiff's burden in a legal mal case that she was injured and suffered a loss for which she can seek monetary damage. The argument here is that since the judgment has not been paid the plaintiff has not yet suffered a monetary loss and therefore, cannot allege actual damages. However, with this opinion (which relies on the opinion of the Illinois Supreme Court in Northern Illinois Emergency Physicians v. Landau) holds that the adverse judgment is enough - the fact that the plaintiff has yet to pay the judgment is irrelevant - she still has suffered a damage because she now owes a debt that she wouldn't have owed if her attorneys would not have been negligent.| Posted By Cassandra Crotty In Recent Caselaw | 0 Comments | Permalink
Failure to List Legal Malpractice Lawsuit as an Asset In a Bankruptcy Leads to Dismissal of Lawsuit
Illinois Appellate Court Holds Client's Settlement of Underlying Case Does Not Preclude Malpractice Claim
An Illinois appellate court recently held that under the doctrine of judicial estoppel, a client's statement in court that she understood and agreed to the terms of her divorce settlement did not bar the client from bringing a legal malpractice claim alleging her attorney failed to conduct adequate discovery and gave her negligent advice.
The doctrine of judicial estoppel is designed to protect the integrity of the judicial process by precluding a party from asserting a position in a judicial proceeding that is totally inconsistent with a position the party asserted in a prior judicial proceeding. In the instant case, the defendant attorney argued that the client's testimony at the divorce settlement prove up hearing that she understood and agreed to the terms of the divorce settlement precluded the malpractice action. The Court rejected this argument finding that because the client's testimony in the dissolution proceeding was predicated on her attorney's negligent failure to conduct adequate discovery and the attorney's negligent advice, the testimony in the prove up was not inconsistent with the allegations of malpractice.
The case probably would have been decided differently if the plaintiff client had alleged in her malpractice action that she did not understand the terms of the divorce settlement; instead it was alleged that the attorney's malpractice prevented the client from making an informed decision as to whether to accept the divorce settlement. See, Wolfe v. Wolfe, 2007 WL 2350187 (Ill.App., Aug. 2007).
*Source: Professional Liability Reporter, Volume 32, Number 10, October 2007.| Posted By Cassandra Crotty In Recent Caselaw | 0 Comments | Permalink
Illinois Appellate Court Holds That Defendant's Solvency is Required Element of Plaintiff's Legal Malpractice Action
The Illinois Apellate Court Clarifies When the Two-Year Statute of Limitations Period Begins to Run in Legal Malpractice Cases
A recent Illinois Appellate decision (Warnock v. Karm Winand & Patterson) stemming from a failed real estate sale addresses the issue of when the two-year statute of limitations begins to run in a legal malpractice case - is it 1) when the underlying action is first filed and the client is put on notice that his attorney(s) may have been negligent or 2) when a decision is rendered in the underlying action resulting in a monetary loss for the client due to the lawyer's negligence. In it's decision the Appellate Court found that in the majority of legal malpractice cases the answer is the latter, saying "in Illinois, a 'cause of action for legal malpractice will rarely accrue prior to the entry of an adverse judgment, settlement, or dismissal of the underlying action in which the plaintiff has become entangled due to the purportedly negligent advice of his attorney.'" (citations omitted). The Court further stated, "[t]he existence of actual damage...is essential to a viable cause of action for legal malpractice."
In trying to establish that the two-year statute of limitations began to run when the plaintiffs hired their new lawyers to represent them in the underlying action, the defendant relied on the Appellate Court's decision in Goran v. Glieberman, 276 Ill. App. 3d 590 (1995). The Goran decision stands for the proposition that subsequently incurred attorney fees automatically give rise to a cause of action for legal malpractice against a former attorney (i.e. Once a client is sued in an underlying case and that client hires new lawyers to represent him in that case the fees paid to the new lawyers are a monetary damage the client has suffered and therefore, those damages can give rise to a legal malpractice case against the former negligent lawyer). The Appellate Court in the Warnock decision pointed out that while it still believes the Goran case was correctly decided, their holding in Goran is a limited one: "the incurring of additional attorney fees may trigger the running of the statute of limitations for legal malpractice purposes, but only where it is clear, at the time the additional fees are incurred, that the fees are directly attributable to former counsel's neglect (such as through a ruling adverse to the client to that effect)."
In Warnock, the Court made it clear that in almost all cases the two-year statute of limitations will begin to run on a legal malpractice case only when there has been some conclusion (adverse judgment, settlement, dismissal) to the underlying case that has left the client monetarily damaged. This is because meritless claims and nuisance lawsuits are a fairly commonplace occurrence, and the Illinois courts don't want to require every client to seek a second legal opinion whenever he finds himself threatened with a lawsuit.| Posted By Cassandra Crotty In Recent Caselaw | 0 Comments | Permalink
Insurer Able To Proceed With Legal Malpratice Lawsuit
An Illinois appellate court recently reversed a circuit court entry of summary judgment in favor of a lawyer and his Park Ridge law firm, holding that an insurance company can proceed with its legal malpractice lawsuit against the law firm that represented the insurer in connection with a coverage dispute. The appellate court found that the "defendants failed to meet their burden of production on their motion for summary judgment because they did not present evidence that, left unrebutted, would entitle them to judgment as a matter of law or demonstrate that the [insurer] would be unable to prove any element of its cause of action."
The case-within-a case stemmed from a car accident that occurred in 1991. The insurer, Universal Underwriters Insurance Co., had issued an insurance policy to Carriage Chevrolet Inc., a car dealership in St. Louis. Michele Heflin, a Carriage Chevrolet salesperson, was driving a car owned by the dealership when she pulled over to help a driver with a disabled vehicle on the side of the road. While Heflin was rendering assistance, another car struck and injured her. Heflin filed suit against the driver and received $25,000 - the limit of the driver's policy. Heflin then turned to the Universal umbrella policy issued to her employer, Carriage Chevrolet, arguing that it provided under-insured motorist coverage. When Universal denied her claim, Heflin then filed a declaratory judgment suit asking the court to determine and adjudicate the rights and liabilities of the parties with respect to the umbrella policy. Universal then hired the defendants in this action, Jay Judge and his law firm, Judge & James, to defend it in the dec action. 1n 2001, after litigating the action (in court and in arbitration), the trial court entered an order requiring Universal to pay $2,975,000 plus interest, and two weeks later, Universal, through new counsel, settled Heflin's claim for $3 million.
Universal then filed this legal malpractice suit against it's former lawyers. In its amended complaint, Universal contended that the lawyers owed it a duty of care, which included the obligation to take timely appeals and to timely seek other remedies in the event of adverse and erroneous judgments. Additionally, Universal contended that the lawyers breached their duties by failing to raise the $1 million umbrella policy limit as a defense or limitation on damages in the arbitration proceeding.
The defendants argued that a 1995 court order in Heflin's declaratory judgment action finding that Heflin was insured under Universals umbrella policy, was not final and appealable and that a 2001 order confirming the arbitration award was void because the 1995 order was not final and appealable - the appeals court, however, disagreed. See Universal Underwriting Insurance Co. v. Judge & James Ltd., and Jay S. Judge.
| Posted By Cassandra Crotty In Recent Caselaw | 0 Comments | Permalink
Puncturing of Large Inflatable Rat Leads to Defamation Suit Against an Attorney
Not only did I find the law interesting in this case, but it also caught my attention because lately as I have been heading out for lunch with my colleagues in downtown Chicago we have spotted inflatable rats (like the one at issue in the case) being displayed and wondered what the purpose of them was - now I know. The Illinois appellate court recently held that an absolute privilege applies to a lawyer's defamatory statements to a potential party before a lawsuit is initiated. Atkinson v. Affronti.
The case stemmed out of the picketing of a construction site because of the use of non-union workers. The picketers displayed a large inflatable rat to draw attention to their cause. The rat was punctured by someone who then left the scene, and one of the picketers then filed a police report and accused the superintendent from the work-site of puncturing the inflatable rat. It was later discovered that someone else was the culprit. However, before police charges were dropped against the superintendent, the union retained a lawyer to bring a claim against the general contractor from the work-site based on the destruction of the inflatable rat. The lawyer then wrote a letter to the general contractor informing him of the union's intention to sue for damage to the union's property. No lawsuit was ever filed. The superintendent then sued the lawyer for defamation and for placing him is a false light due to the accusations the lawyer made in the letter to the general contractor.
The appellate court held that the litigation privilege applies to defamatory communications made before a lawsuit is commenced and application of the privilege does not require a showing that the defendant acted in good faith. They further explained that the privilege applies as long as the communication is pertinent to a proposed lawsuit and irrespective of the lawyer's knowledge of the statements falsity or the lawyer's motives.
*Some of the information for this post was gathered from the Professional Liability Reporter, Volume 32, Number 2.| Posted By Cassandra Crotty In Recent Caselaw | 1 Comments | Permalink
Oregon Supreme Court Addresses The Issue Of A Lawyer Aiding & Abetting Their Client's Breach of Fiduciary Duty
Those of us who work on legal malpractice cases in Illinois are familar with the Thornwood, Inc. v. Jenner & Block decision which I have posted about previously, here. Thornwood recognized a claim in Illinois against a lawyer for aiding and abetting a client's breach of fiduciary duty by knowingly providing substantial assistance to a client in the breach of his duty. Thornwood Decision here. However, the Supreme Court in Oregon recently took a contrary position, holding that an attorney whose advice and assistance to a client is within the scope of the attorney-client relationship may not be liable to a third party for assisting the client in a breach of fiduciary duty. Oregon Decision: Reynolds v. Schrock here.
In the Oregon case, a dispute over a joint venture developed between Schrock and Reynolds. The parties reached a settlement and agreed that Reynolds would convey his interest in a piece of recreational property to Schrock and that the parties would sell another piece of timber property, with the proceeds going to Reynolds. In the event the timber property did not yield the money needed for Reynolds to recoup his investment, it was agreed that Schrock would pay any shortfall. Reynolds was to hold a security interest in the recreational property to secure the obligation of Schrock to pay any shortfall. Schrock's attorney darfted this agreement. After Reynolds conveyed his interest in the recreational property to Schrock, the attorney advised Schrock that she could sell the recreational property, and advised her that she was not required to keep the recreational property in case the timber property yielded less than Reynold's original investment. The attorney then assisted Schrock in selling the recreational property to a third party and went on to ask the escrow officer from the sale to refrain from telling Reynolds about the sale. Reynolds then sued Schrock and her attorney and eventually settled with Schrock. Reynolds case against Schrock's attorney alleged that the attorney was jointly liable for Schrock's breach of fiduciary duty because the attorney assisted Schrock in the improper transaction.
In its holding in favor of the attorney, the Oregon Supreme Court held that in order for an attorney to be liable to a third party for assisting a client in a breach of fiduicary duty, an attorney must act outside the scope of the attorney-client relationship. Therefore, since the attorney acted within the scope of his attorney-client relationship with Schrock, his advice and conduct were protected by qualified privilege.
The court gave three exceptions to this qualified privilege: 1) attorneys are not insulated from liability for conduct that is impermissible or unrelated to the representation; 2) the privilege does not apply when attorneys act for their own self-interest and contrary to the client's interest; and 3) conduct that falls within the "crime or fraud" exception isn't protected.
As I stated in my previous post on this issue, these cases bring up interesting ethical issues. Why shouldn't an attorney be liable to a third party if he or she substantially assists a client in a breach of fiduciary duty (or goes even beyond assisting, like in this case, and leads the way in the breach). Shouldn't lawyers be held accountable for their negligence? The Oregon Court would probably argue that the Reynold's decision is not insulating the lawyer from responsibility, it is just narrowing the players in these types of lawsuits. While the third party cannot sue the attorney, his client still can for the negligent advice.
* Pictured Above: The Oregon Supreme Court| Posted By Cassandra Crotty In Recent Caselaw | 0 Comments | Permalink
Botched Property Sale Results In A Legal Malpractice Case
The Illinois Appellate Court recently rendered an interesting legal malpractice decision relating to the discovery rule in legal malpractice cases. In Tuchowski v. Rochford, the plaintiff contends that while she sold her home in the later part of 2000, she did not discover until 2003 that her former attorney had included in the sale a largely vacant adjacent lot that the plaintiff had hoped to sell separately at a later time. The trial court held that the plaintiff should have known at the time of the sale that she had sold the vacant lot because the closing documents she signed included references to that lot, and dismissed the complaint because it was filed outside the two-year statute of limitations period. In reversing the trial court's decision, the appellate court held that it could be inferred from the alleged facts that the plaintiff reasonably relied on her attorney when she signed the documents without reading them, and that because the court cannot say as a matter of law that the plaintiff should have known of the sale (or discovered the alleged malpractice) more than two years before she filed her complaint - the complaint was timely and the case was remanded for further proceedings.
Here are a few key facts that appear to have swayed the court:
1. The plaintiff owned three adjoining lots and her house stood on two of the lots while the third lot held only a shed and an outdoor grill. Originally the buyers of the home signed a contract to purchase (for $575,000) the house and the two lots on which the house stood. In a letter to the buyer's attorney, the defendant/plaintiff's former attorney offered to amend the contract to provide for the sale of all three lots at the same original contract price. Importantly, the letter does not indicate that the attorney sent a copy to her client the plaintiff.
2. At the time of the home sale, the plaintiff had been offered $125,000 for the vacant property by one of her neighbors.
3. In Illinois, the discovery rule takes into account the sophistication of the plaintiff in the particular area of knowledge - the plaintiff in this case was not in the real estate business and at the time of the closing was 77 years old.
4. Since the defendant was in a fiduciary relationship with the plaintiff the court was less stringent in holding the plaintiff responsible for knowing the contents of the documents she signed at the closing. Additionally, the defendant was not helped by the fact that at the closing she had directed the plaintiff to sign the documents as quickly as possible so that the defendant could go to a closing on another property.| Posted By Cassandra Crotty In Recent Caselaw | 0 Comments | Permalink
Illinois Supreme Court Has Lots to Say About the Leal Malpractice Statute of Repose (the DeLuna Opinion)
Illinois currently has a statute of repose that bars plaintiffs from bringing a legal malpractice action more than six years after the date on which their attorney’s act or omission occurred. (Section 13-214.3 of the Illinois Code of Civil Procedure). Yesterday, the Illinois Supreme Court made some new law relating to that statute of repose in DeLuna v. Burciaga, a case we discussed previously on this blog - Part I & Part II.
Oscar DeLuna hired on behalf of himself and his children attorney Eloy Burciaga in April 1986 to pursue a medical malpractice action arising out of his wife’s death. Burciaga decided (without DeLuna’s knowledge) to use his case as a test case by deliberately refusing to attach an affidavit from a reviewing health-care professional as was required under Illinois law. Though the case was dismissed for that reason in the spring of 1992 (around the same time that the deadline on the legal malpractice statute of repose was approaching), Burciaga told DeLuna that his case was “going very well.” Burciaga and another attorney filed the medical malpractice action a second time with the proper affidavit, but ultimately the claim against the treating physician was dismissed. The DeLunas subsequently filed a legal malpractice claim that made its way up to the Illinois Supreme Court, which had a lot to say regarding the six year statute of repose and its related provisions.
First, the Court ruled that the statute of limitations and repose was tolled during the time the plaintiffs were minors. The Court next tackled the issue of whether the fraudulent concealment statute, which provides for a five year discovery statute of limitations when a person fraudulently conceals a cause of action against himself, is an exception to the legal malpractice statute of repose. The Court ruled in the affirmative, finding that “there would be an obvious and gross injustice in a rule that allows a defendant—particularly a defendant who stands in a fiduciary relationship to the plaintiff—to conceal the plaintiff’s cause of action and then benefit from a statute of repose.” (p.9). The Court further explained that silence by an attorney can equal fraudulent concealment stating, “a fiduciary who is silent, and thus fails to fulfill his duty to disclose material facts concerning the existence of a cause of action, has fraudulently concealed that action, even without affirmative acts or representations.” (p.12, emphasis in original). The Court also stated that its decision would be no different under the principles of equitable estoppel but that it was unnecessary to deal with that issue in light of its ruling on fraudulent concealment. The Court concluded that Burciaga’s comment about the case “going very well” though it had been dismissed, and his failure to inform the DeLunas about the status of their case, were sufficient to establish fraudulent concealment.
It appears that lawyers can no longer hope to avoid responsibility for their malpractice by silently hiding in their offices until the six year repose period runs.
Hat Tip to my colleague Jerry Menge who wrote this post.| Posted By Cassandra Crotty In Recent Caselaw | 1 Comments | Permalink
In Legal Malpractice Cases, Who Has The Burden Of Proving That The Judgment From the Underlying Case Would Not Have Been Collectible?
The Indiana Appellate Court recently ruled that the attorney has the burden of pleading and proving that a judgment in the underlying case would not have been collectible. Clary v. Lite Machines Corp. (2006 WL 1891180 (Ind.App. July 2006).
The Plaintiff in the case, Lite Machines Corp. was a business formed to manufacture radio-controlled model helicopters. Shortly after the company was started it purchased a machine from Techno, Inc. but the machine never worked properly and for over one year Techno attempted unsuccessfully to fix it. Because of the problems with the machine, Lite failed to produce its model helicopters on schedule - this led to a lawsuit against Techno for negligence and breach of warranty.
In the underlying case, Lite sought to recover approximately $4 million in lost profits. In the process of the lawsuit, Techno told Lite's law firm that it planned on raising a failure to mitigate defense and that Techno's expert would testify on this issue. Lite's law firm then failed to take the experts deposition and during the trial did not present evidence or argument on the issue. The trial court found that Lite sustained $2,609,608 in lost profits, but also held that Lite failed to mitigate its damages by purchasing a replacement machine, and therefore, only awarded Lite a $260,000 judgment.
Lite, represented by the same law firm appealed, and on appeal, for the first time, raised the argument that Lite did not have a duty to mitigate damages because Techno had continued to promise that it would fix the machine, however, the appellate court refused to consider the argument because the law firm had failed to raise it at the trial.
Lite then filed a legal malpractice case against its former attorneys. A jury found in favor of Lite and awarded a judgment against the law firm for over $3 million. In it's appeal the law firm unsuccessfully argued the infamous "Judgmental Immunity" defense - claiming it was the firms strategic decision not to address the failure to mitigate issue. With regard to the damages, the law firm argued that Lite's malpractice claim should have failed because the plaintiff did not present evidence that a larger judgment in the underlying case would have been collectible from Techno. The appellate court did not buy this argument, finding that Lite was entitled to recover damages for lost profits and that the issue of whether a judgment in an underlying case would have been collected is an affirmative defense that must be argued and proved by the defendant/attorney in a legal malpractice suit.
Other interesting cases on this issue
Below are some decisions from other jurisdictions that have held that for a client to recover in a legal malpractice action, a judgment in an underlying action must have been collectible.
- Garretson v. Harold I. Miller, 121 Cal.Rptr.2d 317 (Cal. App. June 20, 2002)
- Klump v. Duffus, 71 F.3d 1368 (7th Cir. 1995)
- Lavigne v. Chase, Haskell, Hayes & Kalamon, 50 P.3d 306 (Wash.App. July 24, 2002)
- Miguel v. Vollerstein, 388 N.W.2d 664 (Iowa 1986)
- Taylor Oil Co. v. Weisensee, 344 N.W.2d 27 (S.D. 1983)
- Eno v. Watkins, 429 N.W.2d 371 (Neb. 1988)
A contrary result was reached in the Illinois courts. In Bloome v. Wiseman, Shaikewitz, 664 N.E.2d 1125 (Ill. App. 1996), the Illinois Appellate Court held that in legal malpractice cases it is not necessary to show collectibility of an underlying judgment.
*Most of the information from this post came from the Professional Liability Reporter, Volume 31, Number 8 (August 2006).| Posted By Cassandra Crotty In Recent Caselaw | 1 Comments | Permalink
In "Appellate Legal Malpractice" Cases, The Trial Court Decides Whether The Appeal Would Have Been Successful
The Illinois Supreme Court has held that in legal malpractice lawsuits alleging that a lawyer committed malpractice by failing to appeal an adverse verdict, the issue of whether the appeal would have been successful is a matter for the trial courts to decide, rather than a jury. Governmental Interinsurance Exchange v. Judge, (May 18, 2006), opinion here. The Court went on to explain that the issue of proximate cause in an appellate malpractice action will never be a question of fact for the jury.
According to the Professional Liability Reporter (July 2006), The following is a list of other courts that have also held that the question of whether an appeal would have been successful is decided by the trial court, and not the jury in malpractice cases:
- Yarcheski v. Reiner, 669 N.W.2d 487 (S.D. 2003)
- Tinelli v. Redl, 199 F.3d 603 (2d Cir. 1999)
- Steeves v. Bernstein Shur Sawyer & Nelson, 718 F.Supp. 186 (Me. 1998)
- Charles Reinhart Co. v. Winiemko, 513 N.W.2d 773 (Mich. 1994)
- Millhouse v. Wiesenthal, 775 N.W.2d 626 (Tex. 1989)
- Jones v. Psimos, 882 F.2d 1277 (7th Cir. 1989)
- Daugert v. Pappas, 704 P.2d 600 (Wash. 1985)
- Floyd v. Kosko, 329 S.E.2d 459 (S.C.App. 1985)
- Hyduke v. Grant, 351 N.W.2d 675 (Minn. App. 1984)
- Bock v. Zittenfield, 672 P.2d 1237 (Or.App. 1983)
- Jablonski v. Higgins, 453 N.E.2d 1296 (Ohio Tr. 1983)
- Dow Chemical Co. v. Ogletree Deakins Nash Smoak & Stewart, 514 S.E.2d 836 (Ga.App. 1999)
- Hunt v. Foster, Waldeck, Lind & Gries, Ltd., 1998 WL 373276 (Minn. App. 1998)
| Posted By Cassandra Crotty In Recent Caselaw | 0 Comments | Permalink
The Illinois Supreme Court Rejects Lost Punitive Damages In Legal Malpractice Cases
An interesting decision came down from the Illinois Supreme Court recently reversing a portion of an Illinois Appellate Court’s judgment which upheld a jury award of $1,168,755 in lost punitive damages to a plaintiff in a legal malpractice case. Tri-G v. Burke, Bosselman & Weaver, opinion here. Following a trial on the merits, a jury found that a lawyer (Burke) had been negligent in handling his client’s (Tri-G) case against Elgin Federal Bank and that but for that negligence, Tri-G would have recovered over $1 million in compensatory damages and an equal sum in punitive damages from Elgin Federal. The jury then returned a verdict in favor of Tri-G and against the Burke firm for $2,337,550.
During the trial, the trial court had denied Burke’s motion in limine to exclude punitive damages reasoning that if the jury assessed punitives against Elgin Federal in the underlying case, the amount would be compensatory damages to Tri-G in the malpractice case. After the verdict, the Appellate Court was faced with the issue and upheld the award of punitive damages to Tri-G, with one Appellate Justice dissenting - wanting to follow the precedent from New York and California that “a plaintiff may not recover punitive damages lost by reason of attorney malpractice.” See the Tri-G Appellate Court Decision, opinion here.
In it’s opinion (split between the Justices 4 to 3), the Illinois Supreme Court appears to adopt the precedent in New York and California finding that allowing punitive damages in legal malpractice actions is against public policy because 1) allowing such recovery would defeat the punitive and deterrent purpose of punitive damages because the negligent attorney in the legal malpractice action is not the tortfeasor who gave rise to the malicious act in the first case; 2) compensatory damages in a legal malpractice case require an objective determination, however, an award of punitive damages is an expression of the jury’s moral condemnation and requires a moral judgment, and 3) allowing malpractice plaintiffs to recover lost punitives would exact a societal cost – exposing attorneys to increased legal malpractice premiums which would make it more difficult and costly for consumers to obtain legal services. See the Ferguson v. Lieff Decision which lays out the California precedent the Illinois Supreme Court adopts, opinion here.
The troubling issue that the majority of the Supreme Court rejects, but that Justice Freeman articulates in his dissent (joined by Justices McMorrow and Fitzgerald) is that disallowing lost punitive damages in legal malpractice actions means that plaintiffs may not receive as much money as they might have if the underlying action had been handled properly in the first place. Isn’t the whole focus of legal malpractices actions to make the plaintiff whole? In cases where a plaintiff can prove that in the case-within-the-case it would have been awarded punitives, awarding those punitives in the legal malpractice case would make the plaintiff whole with respect to the attorney’s negligence. Additionally, the decision does not address a situation where a plaintiff in a legal malpractice case, in the underlying case was a defendant who was ordered to pay punitive damages due to some negligence by his attorney. Unlike the Tri-G case, in this situation the punitive damages would not be speculative - it would be a quanitative amount that the client would be out do to his attorneys negligence - shouldn't the client be awarded lost punitives in such a situation?
Picture Above: The Illinois Supreme Court Justices, left to right: Justice Garman, Justice Fitzgerald, Justice Freeman, Chief Justice Thomas, Justice McMorrow, Justice Kilbride, and Justice Karmeier.| Posted By Cassandra Crotty In Recent Caselaw | 0 Comments | Permalink
Seventh Circuit Decision Holds Court Lacked Subject Matter Jurisdiction over a Legal Malpractice Lawsuit Stemming from Representation in a Federal Criminal Case
Judge Posner of the United States Seventh Circuit Court of Appeals recently authored an opinion on a novel issue stemming out of a legal malpractice case. The Seventh Circuit found that the district court lacked subject matter jurisdiction over a lawsuit alleging legal malpractice in a federal criminal case, Hays v. Bryan Cave LLP. Mr. Hays filed his lawsuit in the Illinois state courts charging his former lawyers and their law firm who represented him in a federal criminal case (in which Mr. Hays was convicted) with legal malpractice under Illinois common law. The lawyers then removed the case to the federal district court claiming the case really arose under federal law because the resolution of a malpractice claim growing out of a defense of a federal criminal case would "require a substantial evaluation of applicable federal law" - specifically an evaluation of the meaning and scope of the federal criminal statutes used to convict Mr. Hays (which is what the district court held when it refused to remand the case back to state court). Judge Posner noted in his decision that the Seventh Circuit could not find a reported decision actually ruling on this matter before. The Court then postulated that while it is true that if federal law creates a claim on which the plaintiff is suing, the plaintiff cannot abrogate the defendant's right of removal by "artful pleading" (for example: if a suit is filed in state court charging a defendant with a breach of his fiduciary duty, and the defendant is an ERISA fiduciary, the case is removable to federal court even if the complaint fails to mention the word ERISA), that is not the case here because nothing in federal law prevents a disappointed litigant in a federal case from suing his lawyer under a states malpractice law. Posner went on to explain that even though issues regarding the meaning of federal criminal statutes most likely will come up in the malpractice case, there is nothing unusual about a state court having to decide issues that arise under the law of other jurisdictions.| Posted By Cassandra Crotty In Recent Caselaw | 0 Comments | Permalink
Kentucky's Supreme Court Holds Attorneys May Be Liable for Errors in Judgment When They Fail to Exercise Reasonable Care
In submitting a legal malpractice case to the jury, a trial court in Kentucky included the following statement when instructing the jury about the standard of care,
Provided, however, a lawyer cannot be held responsible for errors in judgment or for advising a course of action even if that course of action ultimately proves to be unsuccessful.The jury then returned a verdict in favor of the attorney. But the Kentucky Supreme Court recently reversed the verdict holding that the trial court erred in instructing the jury that an attorney my not be held liable for errors in judgment (the infamous "judgmental immunity" or "mistake in judgment" defense). In its decision the Court explained that attorneys may be liable for errors in judgment that a reasonable prudent attorney would not commit, and that attorneys can avoid liability for an error in judgment only when he or she acts in "absolute good faith." See, Equitania Ins. Co. v. Slone & Garrett, P.S.C., 2006 WL 434137 (Ky., Feb. 23, 2006). | Posted By Cassandra Crotty In Recent Caselaw | 0 Comments | Permalink
A recent Northern District of Illinois decision exemplifies what can happen when two firms merge and fail to perform a thorough conflicts check. In Andrew Corp. v. Beverly Manufacturing Co., 2006 WL 408113 (N.D.Ill., February 16, 2006), Andrew sued Beverly for infringing on three of Andrew's patents. In the complaint, Andrew alleges that Beverly willfully infringed on two patents after Beverly received written notice from Andrew of the alleged infringement. Beverly wished to use three opinion letters written by its counsel from the law firm of Barnes & Thornburg in the company's defense to the willful infringement allegations. Andrews filed a motion seeking to prevent Beverly from presenting evidence regarding the three opinion letters and bar Barnes & Thornburg attorneys from testifying or otherwise participating in the case. While Barnes & Thornburg have not filed an appearance on behalf of either client in this particular case, both Andrew and Beverly are current clients of the firm on other matters.
Before the instant lawsuit was filed, but while Barnes & Thornburg represented both Andrews and Beverly, the firm issued three opinion letters to Beverly which stated positions that were adverse to Andrew. These three opinion letters were clear evidence that Beverly did not willfully infringe against Andrew's patents. Beverly had previously been represented by two partners at Barnes & Thornburg when the attorneys were members of the law firm Lee Mann, Smith, McWilliams, Sweeney & Ohlson. Back in 2000, these attorneys represented Beverly in a dispute the company had with Andrew that ended in a settlement. Two years later, while still at the Lee Mann firm the same two attorneys began working for Beverly on their opinions with regard to Andrew's patents at issue in this case and opened two legal files in the Lee Mann firm filing system regarding that work - however, in these files Andrew was not listed as the adverse party. At the beginning of 2003, the Lee Mann firm merged into Barnes & Thornburg and the two attorneys who had represented Beverly at Lee Mann now became partners at the new merged Barnes & Thornburg firm. At the time of the merger, Andrew was a client of Barnes & Thornburg.
During the merger, Barnes & Thornburg failed to recognize the conflict between Andrew and Beverly despite the fact that the work the two Lee Mann attorneys performed for Beverly analyzed Andrew's patents adversely to Andrew and the firm approved Beverly as one of its new clients. Because the conflict was not identified, Barnes & Thornburg failed to inform Andrew or Beverly of any conflict and failed to request a consent from either client. Then later in 2003, Barnes & Thornburg provided Beverly with the three opinion letters that were adverse to Andrew and the center of the current controversy. In 2004, both Andrew and Beverly contacted the firm seeking representation in the present patent dispute and Barnes & Thornburg finally recognized the conflict and declined both companies request for representation against the other. Interestingly, despite the firm's 2004 recognition of the conflict, and the firm's 2003 opinion letters that are adverse to a client, lawyers at Barnes & Thornburg still represent both Andrew and Beverly in other matters.Continue Reading | Posted By Cassandra Crotty In Recent Caselaw | 0 Comments | Permalink
Legal Malpractice Action Changes the Application of the Void Ab Initio Doctrine in Illinois
This week the Illinois Supreme Court rendered an opinion in a legal malpractice case which changes the way the doctrine of void ab initio will be applied in Illinois. Perlstein v. Wolk, Ill S.Ct., February 17, 2006, opinion here. For 92 years the Illinois courts have followed the U.S. Supreme Court case Norton v. Shelby County which states,
An unconstitutional act is not law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is, in legal contemplation, as inoperative as though it had never been passed. Norton, 118 U.S. 425, 6 S.Ct. 1121 (1886).This case led to the Norton rule which states that an unconstitutional statute is void ab initio or void "from the beginning." The Perlstein case challenged the application of this doctrine and has altered the way the rule will be applied in Illinois from here forth.
Ms. Perlstein and her son filed a legal malpractice case against an attorney Maurice Wolk and the law firm Ross & Hardies for negligently preparing the will of Ms. Perlstein's deceased husband, Lawrence, thereby preventing the Lawrence A. Perlstein Trust from being funded. When the plaintiffs filed their lawsuit they relied on the limitations period for malpractice actions set forth in section 13-214.3 of the Code of Civil Procedure, as amended by Public Act 89-7 (commonly referred to as the Tort Reform Act). See Pub. Act 89-7, eff. March 9, 1995 (amending, 735 ILCS 5/13-214.3 (West 1994)). The complaint was filed on January 8, 1998. However, 3 weeks prior to the filing, on December 18, 1997, the Illinois Supreme Court rendered its decision in Best v. Taylor Machine Works, 179 Ill. 2d 367 (1997) where the court declared Public Act 89-7 "void in its entirety" because some of the core provisions were unconstitutional. This, the defendants argued, meant that in effect, Public Act 89-7 "never was" and thus the legal malpractice complaint was filed 20 months late.
Arguments over the application of the void ab initio doctrine ensued. The plaintiffs argued the court should apply an equitable approach - that their complaint, filed 3 weeks following the court's decision in Best, was filed within a reasonable period of time after the change in the law. The defendant's argued the court should apply a strict analysis - Best declared Public Act 89-7 unconstitutional, and therefore, the act was void ab initio. In effect, it never was so the legal malpractice complaint was untimely filed.
While acknowledging that the result might be harsh, the circuit court, nonetheless, applied the void ab initio doctrine and dismissed the plaintiff's legal malpractice complaint with prejudice. The appellate court reversed, holding that such a result would be unfair and the case went up to the Illinois Supreme Court.
In affirming the appellate court's decision, the Illinois Supreme Court stated they were reluctant to extend void ab initio beyond cases involving criminal prosecutions. The court went on to explain that strict application of the doctrine creates a "Catch-22" -individuals are entitled to rely on a legislative enactment, presuming it is valid, but must suffer the consequences of doing so should the court later hold that law unconstitutional. In adopting the "modern trend" or "moderate approach" the court moved away from void ab initio doctrine toward a more equitable and realistic approach that takes into account considerations of reasonableness and good-faith reliance on the purportedly valid statute. In doing so, the court noted, however, that it was not abandoning the Norton rule by stating
in cases where a defendant's constitutionally guaranteed rights are in need of vindication, strict application of the void ab initio doctrine is appropriate, however, where no rights are at stake, other equitable and practical factors are appropriate for consideration by the court.| Posted By Cassandra Crotty In Recent Caselaw | 0 Comments | Permalink
A New Jersey U.S. District Court recently, here,
disqualified the Kaye Scholer law firm from a multidistrict patent infringement litigation (commonly referred to as the "Gabapentin action") stemming from the side-switching activities of two current Kaye Scholer lawyers. In reaching its decision, the court first held that the personal disqualification of the two lawyers who recently joined the Kaye Scholer firm could be imputed to the entire firm and second, that the parties to a Joint Defense Agreement had the right to assert a disqualifying conflict of interest based on an implied-attorney client relationship against Kaye Scholer.
Failure to Prove Proximate Cause Results in a Dismissal of a Legal Malpractice Complaint
In this case, the plaintiffs sued their former lawyers for malpractice, alleging that the lawyers were negligent when they failed to sue General Motors for strict liability of a manufacturing defect in a car the plaintiffs were in an accident in. After the defendants argued that proximate causation and damages elements could not be established because the plaintiffs' successor lawyer successfully sued GM for strict liability the trial court dismissed the plaintiffs' complaint, and on December 19, 2005, the Illinois Appellate Court affirmed this ruling.
In 1997, the plaintiffs were involved in a serious car accident (one of the plaintiffs was rendered a paraplegic as a result of the accident). Without warning the steering and brakes of the car the plaintiffs were riding in completely failed. GM, the car's manufacturer, had issued recall notices for defects in the car which the plaintiffs were riding in. One of the notices warned that while the vehicle was in motion that steering and braking control could be affected by cracks in the wheel mounting surface which could result in an accident without warning.
Shortly after the accident, the plaintiffs retained the defendants to represent them in an effort to obtain compensation from their injuries. Although the lawyers knew about the GM recalls, they chose not to file a cause of action against GM on behalf of the plaintiffs. At some point, the defendants ceased representing the plaintiffs and in 2002 a successor lawyer sued GM for strict liability, asserting that the manufacturing defects in the car contributed to the accident and plaintiffs' injuries. The lawsuit resulted in a $2,265,000 settlement which was referred to in the settlement agreement as "fair and reasonable."
After settling their strict liability case, the plaintiffs filed a legal malpractice complaint against their original lawyers for not filing suit against GM for strict liability. The plaintiffs claimed that because of the defendants' negligence, they lost the full value of their claim against GM and that the $2,265,000 was only a partial settlement and therefore, did not bar the plaintiffs from pursuing the present legal malpractice action.
The defendants successfully argued that the plaintiffs sustained no damages as a result of the defendants' representation because ultimately, with a successor lawyer, they sued GM and settled their strict liability lawsuit for a "substantial sum…which all parties deemed fair and reasonable."
In affirming the trial court, the Appellate Court found that there was no evidence that the plaintiffs received anything less than full value from their lawsuit against GM. While the Appellate Court pointed out that settlement by a successor lawyer does not necessarily bar a malpractice suit against a former lawyer. They went on to say that attorney malpractice should be allowed where the plaintiff can show that he settled for less than he could have reasonably expected without the malpractice, but that was simply not shown in this case. See, Web, et al. v. Damisch, et al.| Posted By Cassandra Crotty In Recent Caselaw | 0 Comments | Permalink
Intervening Proximate Cause Not a Defense in Recent Legal Malpractice Case
On December 12, 2005, the Illinois Appellate Court reversed a circuit court decision dismissing a legal malpractice complaint against a Chicago law firm. See Decision Here. After an accidental drowning of a young girl at a pool maintained by the Rockford School District, the girl's father retained the Clifford Law Offices to represent him and the girl's estate in a wrongful death action. Several months after being retained, an attorney from the Clifford Firm wrote a letter to the father informing him that the firm could no longer represent him and the estate. In the letter, the attorney incorrectly advised the client that the applicable statute of limitations was two years, when, in fact, it was only one year from the death of the little girl. Within one month of receiving the termination letter but before the one-year statue of limitations had run, the father consulted with another attorney about representing the family in the wrongful death action. Shortly thereafter, this second attorney declined to take the case. One month after the one-year statute of limitations expired but almost a full year before a two-year statute of limitations would have run, the father then consulted yet another attorney, who took the case and informed the father that his previous attorney (the Clifford Firm) may have committed malpractice in letting the statute of limitations expire.
During the appeal, the father argued that the circuit court erred when it dismissed his legal malpractice case because he reasonably relied on the advice in the Clifford Firm's letter that the applicable statute of limitations was two years, and that the advice was the proximate cause of his legal injuries. On the other hand, the Clifford Firm argued the dismissal was proper because the firm withdrew when the wrongful death action was still viable and that they should be absolved of liability because of the father's intervening consultation with the second lawyer (who refused to take the case) before the correct one-year statute of limitations had run. Additionally, they argued that the father did not reasonably rely on the firm's statute of limitations advice.
In reversing the circuit court, the Appellate Court found there was no superceding cause to defeat the Clifford Firm's liability as a matter of law, and that proximate cause in this case should be decided not as a matter of law, but by the trier of fact. See, Lopez v. Clifford Law Offices, et al.
Indemnity Judgments that do not Affect Amount of Client's Liability Cannot be a Basis of a Legal Malpractice Suit
The Illinois Supreme Court recently held that a client could not prove the actual damages necessary to bring a legal malpractice action by relying on the existence of an outstanding but unenforced indemnity judgment. In so holding, the court found that law firms could not be liable for malpractice for failing to challenge an indemnity claim against the firms' client when the indemnity claim did not affect the amount of the client's liability. The client in this case was found to be jointly and severally liable to a party in an underlying medical malpractice case for the entire $4 million medical malpractice judgment. So, when a third party defendant in the underlying case satisfied the judgment and asserted indemnity claims against the client, the client remained liable for the same amount $4 million. The only thing that changed was the party to whom the client was liable, and therefore, the law firms' alleged negligence (failing to adequately oppose the third party's indemnity claim) was not the proximate cause of any injury to the client. See, Northern Illinois Emergency Physicians v. Landau, Omahana & Kopka, Ltd., 2005 WL 2298171 (Ill. Sept. 2005).
Illinois Appellate Court Applies the 'Transactional Test' to a Recent Legal Malpractice Case
The Illinois Appellate Court recently affirmed a decision finding that a client's legal malpractice suit was barred by res judicata because her legal malpractice complaint grew out of the same operative facts as a prior proceeding between the client and her referring attorney, and because the client could have raised all of the claims in her legal malpractice complaint in that earlier litigation. See, Hakala v. Dowd.
During the appeal, the only question that was up on appeal was whether there was an identity of causes of action. When answering this question, the Illinois courts apply the 'Transactional Test.' "Under this test, separate claims will be considered the same cause of action for purposes of res judicata if they arise from a single group of operative facts, regardless of whether they assert different theories of relief." Id at p. 4, citing, River Park, Inc. v. City of Highland Park, 184 Ill.2d 290, 311 (1998).
The court determined that that was precisely the case here when it stated:
"In the earlier litigation, defendant sought to recover on the Contingency Agreement, and plaintiff responded that the agreement should be rescinded because of a mutual mistake. She also argued that the agreement was unreasonable in light of the amount of work defendant had performed on her case. In other words, plaintiff argued that, based on events surrounding the Contingency Agreement, she should not have to pay the money she owed under the agreement. Plaintiff's arguments did not prevail and she was ordered to pay defendant his fee. Now, in the instant case, she seeks to recover that amount. She argues that she is entitled to do so because defendant engaged in either malpractice by failing to adequately advise her regarding the Contingency Agreement or fraud by convincing the Firm to included him in the agreement [as the referring attorney]. In other words, she argues that, based on events surrounding the Contingency Agreement, she is entitled to recover the amount she paid on the agreement. Thus, plaintiff's current claims involve the same operative facts as the earlier litigation." Id.
The client failed to raise the malpractice and fraud claims when fighting the Contingency Agreement in the previous case and now was barred from doing so. The court pointed out that the doctrine of res judicata bars claims that could have been brought as a counterclaim or defense in an earlier litigation where successful prosecution of the later litigation would either nullify the earlier judgment or impair the rights established in the earlier litigation. Citing, Cabrera v. First National Bank of Wheaton, 342 Ill.App.3d 85, 92 (2001). This is important because, professional negligence or legal malpractice is a defense to a claim for attorneys fees and so the client could and should have raised the alleged malpractice as a defense to the referring attorney's fee petition.
Posted By Cassandra Crotty In Recent Caselaw
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The Illinois Supreme Court grants a PLA in the DeLuna Case
DeLuna 'Test Case' Leads to a Legal Mapractice Case (Part II)
Earlier this week, I posted about a recent Illinois appellate decision on fraudulent concealment and equitable estoppel. This lawsuit, DeLuna v. Burciaga, 843 N.E.2d 478 (2005), is an interesting legal malpractice case and I plan on tracking its progress and continuing to report on the developments.
Background facts: In 1986, Mrs. DeLuna, the mother of four young children, was admitted to a hospital for back surgery. During the surgery her doctor allegedly cut through one of her arteries causing severe bleeding which led to her death the following day. After her death, Mrs. DeLuna's family hired a lawyer to pursue her estate's medical malpractice/wrongful death case. Without the knowledge or consent of the DeLuna family, the lawyer decided to deliberately file the lawsuit without attaching an affidavit from a reviewing healthcare professional, which, at the time, was a new Illinois Code of Civil Procedure Rule - the lawyer did this to "test" the constitutionality of the requirement.
The Illinois Supreme Court, in 1992, six years after the original complaint was filed, held that the requirement to file an affidavit was constitutional. See, DeLuna v. St. Elizabeth's Hospital, 147 Ill.2d 57 (1992). The lawyer then proceeded to refile the DeLuna wrongful death case, this time attaching the appropriate affidavit. The court then dismissed the complaint on res judicata grounds. See, DeLuna v. Treister, 185 Ill.2d 565 (1999). Throughout this time, the DeLuna family was unaware that their lawyer was using their lawsuit as a "test case". It wasn't until 2000, that another lawyer who had worked on the case but had not communicated with the family in the past due to a language barrier sent a letter to the DeLuna children telling them for the first time that their lawyer had used their mother's wrongful death suit as a "test case" and that their case was now barred on res judicata grounds.
The children then filed the legal malpractice case, and as previously reported the case recently survived a motion to dismiss. Not-with-standing, the fraudulent concealment and equitable estoppel arguments which have now been decided, there are a few other interesting legal malpractice questions that have yet to be addressed. Is it a violation of 1.2, 1.4, and 3.2 of the Illinois Rules of Professional Conduct if an attorney fails to seek the consent of their client before he files that client's lawsuit as a "test case" and fails to inform the client when he, in fact, does so? If the lawyer doesn't seek the client's consent does that misstep fulfill the "common knowledge" exception or are the DeLunas required to retain an expert to testify to their lawyer's breach of the standard of care? If this case continues to be litigated, it will be interesting to see how the Illinois courts address these questions. I will keep you posted.
A lawyer who used his clients' wrongful death case to "test" the constitutionality of a section of the Illinois Code of Civil Procedure is now the defendant in a legal malpractice suit. In a recent decision, the Illinois Appellate Court overturned the trial court's dismissal of a legal malpractice complaint, finding that Illinois' six-year statute of repose had been tolled and the suit could proceed eight years after the repose period expired. See, DeLuna v. Burciaga, 834 N.E.2d 478, 359 Ill.App.3d 544 (Aug. 5, 2005).Continue Reading | Posted By Cassandra Crotty In Recent Caselaw | 0 Comments | Permalink
A Future Legal Malpractice Claim is Found to be Released in a Prior Settlement between a Lawyer and his Client
The Massachusetts Supreme Judicial Court recently held that a release entered into between a lawyer and his former client as part of a settlement of a prior legal malpractice claim applies to a second separate legal malpractice case that the same client filed against the lawyer several years after the release was signed, not-with-standing the fact that at the time the release was drafted, the future claim had not yet accrued.
In it's decision, the court reasoned that specific language in a release referring to a particular dispute does not limit or nullify broad language releasing all other claims. The court went on to hold that even though at the time the release was signed the second claim had not accrued for purposes of statute of limitation, the release still applied because the underlying harm that gave rise to the second claim was "known" at the time the release was executed. Eck v. Godbout, 2005 WL 1684030 (Mass., July 21, 2005).