Illinois Legal Malpractice Blog

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).

The lead case is the minority view on this subject.

I believe that the burden of collectibility should be on the plaintiff as part of the proof of causation, i.e. plaintiff should be required to prove what harm was caused by the negligence of the lawyer. The harm would only be the collectible damages; the plaintiff should not be able to collect more damages from the lawyer defendant than he or she could collect from the original defendant.