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defendant sought to recover on the Contingency Agreement, and plaintiff responded that the agreement should be rescinded because of a mutual mistake.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.