photo: www.ourcourts.org

After losing the wrongful death suit, Blackwater filed suit against the attorneys who represented them arguing that the law firm should have had the wrongful death case removed from state court in North Carolina to federal court - where the company alleges it had a better chance of winning. The theory for removal was based on a statute that requires all suits against "federal officers" be heard in federal court.  In both dismissals of the case, the judges found that Blackwater's argument that a federal court would have ruled differently from the state court purely speculative since the federal court might well have ruled that the private security company's employees were not federal officers.

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.

The insurance carrier is seeking for the court to find it has no obligation to defend or indemnify the lawyers in their malpractice suit.  The carrier argues a lawyer's silence about a client's displeasure over the size of a settlement and her threat to consult with separate counsel because of her displeasure is enough to void the lawyers' malpractice coverage.  In defending its position, the carrier cites language very commonplace in legal malpractice insurance policies.  The dec. action claims the lawyers "knew or had a reasonable basis to believe that an act, error or omission committed by them during their representation of the client might be expected to result in a claim or suit."  See, General Star National Ins. Co. v. Law Offices of Robert A. Olkowitz, P.C.

Generally, settlements are inherently unpopular on both sides - that is why they are "settlements".  If the carrier is successful here it would most likely lead to a slew of notices by attorneys of possible causes of action which would be unduly burdensome on the carriers and a huge pain for lawyers, as well.  Also, how are lawyers supposed to define a client's "displeasure" - is a client's off-the-cuff comment on her displeasure with a settlement enough to trigger the notice requirement or is the threat to go to another lawyer the trigger? 

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.

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. 

According to the article, the malpractice lawsuit stems from two underlying cases.  In one, Randy Steidel spent 17 years in prison for the 1986 murders of an Illinois couple.  In 2004, Steidel's petition for habeas corpus was granted by a federal judge who found that acquittal would have been probable if Steidel's jury had heard all of the evidence.  Prosecutors then made the decision not to retry Steidel.  Steidel then proceeded to file a federal lawsuit against officials who originally investigated his case and state police officials who he maintained blocked a full reinvestigation of his case.

In 2000, Lt. Michaele Callahan was assigned to investigate the case and found evidence that undermined the case against Steidel and uncovered another potential suspect, a Paris businessman, however, after allegedly deciding the case was "too politically sensitive," Carper and others supposedly limited the investigation of the businessman to "intelligence gathering" and attempted to discredit Callahan's work.  This led to Callahan, in 2005, filing a federal complaint against Carper and other police officials asserting that they abused their authority as state employees and deprived him of his right to free speech under the Constitution. 

The attorney generals office initially represented Carper and the other two defendants in the Callahan litigation.  Madigan assigned two of her assistant A.G.s to the case.  One of these assistants A.G.s supposedly assured those involved that there were no conflicts of interest precluding them from representing all three of the defendants, and allegedly also reassured the defendants that there was little, if any, chance of the case not being dismissed on a motion for summary judgment and proceeding to trial.  

However, the judge denied the defendants' motion for summary judgment in mid-March 2005 and set a trial date for a few weeks later.  At that point, it is alleged that the A.G.'s office realized the potential for conflicts of interest among their clients  and authorized the hiring of an outside counsel to represent the three defendants two weeks before the trial was to start.  A jury then found Carper and one of the other defendants liable and awarded compensatory and punitive damages to Callahan.

According to the Law Bulletin article - In her legal malpractice complaint, Carper now maintains that Madigan accepted the defense of Carper which created an attorney-client relationship and delegated her duty to defend to two of her assistant A.G.s who breached their duty to Carper by "placing undue reliance on the motion for summary judgment focusing on the affirmative defense of qualified public official immunity, to the exclusion of adequate preparation for trial."  See, Diane G. Carper v. Karen L. McNaught, et al., No. 07 L 4513. 

This is an interesting case I will continue to follow.  Especially of interest to me is what possible defense the AGs will have as to why they did not recognize the conflicts sooner and advise the three defendants to get independent counsel.

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.

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.