Legal Malpractice Decisions

Understanding The New ABA Model Rules

2012-02-10T13:12:00.000-08:00

An article by Wilmer Cutler Pickering LLP. The article summarizes the new ABA Model Rules of Professional Conduct.

California Court Holds That Estate Lawyer Had No Duty To Intended Beneficiaries

2012-02-05T15:17:00.000-08:00

Handelman v. Hackman, Cal: Court of Appeal, 2nd Appellate Dist., 3rd Div. 2012 - Google Scholar:

The California decisions rejects an effort to impose liability on an estate planning attorney. The claim was apparently that the estate planning documents did not properly express the testator's intent. The court explained: "The Heirs' lawsuit is based upon their belief that the decedent intended a different bequest than the one set forth in the testamentary documents. Just as inChang, the duty Hackman owed to the decedent cannot be extended to the Heirs because it would expose Hackman to impossible duties and limitless liability to potential beneficiaries."

Edward X. Clinton, Jr.

www.clintonlaw.net

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Seventh Circuit Reinstates Legal Malpractice Claim Against Neal Gerber & Eisenberg

2012-01-25T21:08:00.000-08:00

Scanlan v. Eisenberg, Court of Appeals, 7th Circuit 2012 - Google Scholar:

The Seventh Circuit has reversed a decision to dismiss a legal malpractice and breach of fiduciary duty claim against Neal Gerber & Eisenberg and two of its members.

The plaintiff, Mary Bucksbaum Scanlan, is a beneficiary of several trusts. Plaintiff's father was one of the founders of General Growth Properties, Inc., a real estate investment trust.

The value of Scanlan's interest in the trust dropped by $200 million after the Defendant Trustees purchased additional shares of stock of General Growth Properties. Scanlan alleged that they breached their fiduciary duties to her in purchasing the additional stock. She also alleged that the stock was purchased not to benefit the trust or her, but rather to strengthen Neal Gerber's relationship with General Growth Properties.

The Seventh Circuit described the relationships between the parties as follows:

"The law firm of Neal, Gerber & Eisenberg, LLP (the "Law Firm"), through two of its partners, Marshall Eisenberg ("Eisenberg") and Earl Melamed ("Melamed") generally represented Scanlan throughout her adult life when she needed legal advice. At the same time, they represented both the Trustee and GGP. In addition to his legal representation of GGP, Eisenberg also served as the Secretary of GGP from April 1993 through October 2008; Eisenberg and Melamed both own GGP stock.

Eisenberg and Melamed personally control General Trust Company. For example, Eisenberg is its majority owner, its president, a member of its board of directors, and one of the three members of its Trust Committee. Melamed serves on General Trust Company's board of directors, serves as its Secretary, and is the second member of its Trust Committee."

The district court dismissed the claim on the ground that the trust assets were sufficient to pay Scanlan any discretionary distributions to which she was entitled. The Seventh Circuit explained the district court's ruling as follows:

"On October 14, 2010, the district court ruled that Scanlan lacked Article III standing and dismissed all of her claims with prejudice. Specifically, the district court held that Scanlan lacked standing unless she could allege "facts showing a likelihood that the corpus of the trusts would ever be insufficient to pay all of her discretionary distributions to which [she] might become entitled during her lifetime." This appeal followed."

The Seventh Circuit held that Scanlan had alleged Article III standing because she was a beneficiary of the trust, and, under Illinois law, a beneficiary of a trust has a right to sue to enforce a trust.

The court explained: "Comment b to § 94 then explains who qualifies as a "beneficiary" with standing to bring suit to redress a breach of trust:

A suit to enforce a private trust ordinarily . . . may be maintained by any beneficiary whose rights are or may be adversely affected by the matter(s) at issue. The beneficiaries of a trust include any person who holds a beneficial, present or future, vested or contingent . . . . This includes a person who is eligible to receive a discretionary distribution . . . .

Id. § 94, cmt. b."

The Seventh Circuit reversed the dismissal.

Edward X. Clinton, Jr.

www.clintonlaw.net

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Plaintiffs Cannot Establish Attorney-Client Relationship - Case Dismissed

2012-01-22T17:43:00.000-08:00

Kirby v. CHASE HOME FINANCE. LLC, NJ: Appellate Div. 2012 - Google Scholar:

This is an appeal of a dismissal of a complaint against Chase Home Finance, LLC, U.S. Mortgage Corporation, American Title & Settlement LLC, and Chicago Title Insurance Company and Janet Rinaldi attorney at law.

The Kirbys sought to refinance their home mortgage. They did not retain counsel. Instead, they dealt directly with Chase Bank and the mortgage company. Later, they were unhappy with the documents they signed and filed suit. American Title acted as the settlement agent at the closing.

According to the opinion, Janet Rinaldi was employed by American Title to generate new business. Ms. Rinaldi did not attend the closing. The opinion states: "At some point after the closing, Rinaldi allowed a notary employed by American Title to use her attorney signature stamp to notarize the disbursement of settlement funds. The notary affixed the signature stamp on the HUD document with limited permission to verify the disbursements."

In addition to their claims against Chase Bank and the other defendants, the Kirbys sought to plead a legal malpractice claim against Mr. Rinaldi. The trial court granted summary judgment for Ms. Rinaldi and the New York appellate division affirmed. It explained its ruling as follows: "Plaintiffs cannot establish that defendants owed them a duty of care. Their legal malpractice claim rests principally on the limited use of Rinaldi's signature stamp to notarize the accuracy of disbursements. However, it is undisputed that Rinaldi did not attend the closing, had no communication with plaintiffs, never entered into a retainer agreement with them, and was never paid an attorney review fee. Moreover, Rinaldi's signature stamp was not placed on any documents until after the closing. Plaintiffs' asserted reliance on the blank form documents pertaining to legal representation and provided to them at the closing with the other closing papers does nothing to help plaintiffs build an attorney-client relationship with Rinaldi, whose name did not even appear on those documents."

Comment: this is a clear-cut case where the plaintiff failed to allege the existence of an attorney-client relationship. There was no relationship between the Kirbys and Ms. Rinaldi and, therefore, no attorney-client relationship.

Edward X. Clinton, Jr.

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Attorney's Lien Reduced to Zero Because Lawyer Failed to Prove Up Services Rendered

2012-01-20T16:35:00.000-08:00

A new case is instructive on attorney lien adjudication. The case is captioned In re Estate of Ian A. F. McFadden, a Minor, 2011 IL App (2d) 101157.

The lawyer filed a personal injury action on behalf of a minor. The trial court held that the lawyer's attorney's lien was invalid. The appellate court disagreed and reversed. However, it held that the value of the lien was $0 because the lawyer had not proved up the services he rendered. Thus, the trial court's decision was affirmed, albeit on different reasoning.

The court explained its ruling as follows:

¶ 29 The amount of compensation owed to respondent for work done before it was put on noticeremains undetermined. However, an exhaustive review of the record reflects that respondent failedto put forth any evidence supporting its assertion that it did work on Ian’s personal injury claim. Therecord fails to include time sheets, billing documents, or affidavits evidencing work conducted byrespondent. Respondent’s bare-bones assertion of the work it claims it performed on Ian’s behalfis, without more, unpersuasive. The record reflects that respondent’s fee request was not based on the amount of work actually done by respondent, but instead was based on a percentage of thesettlement awarded to Ian. Although we note respondent’s argument that time sheets are notrequired in a personal injury matter where the client will ultimately pay a contingent fee, thisargument does not excuse respondent’s failure to evidence its work through affidavit or other means.Because respondent failed to include in the record any evidence that it performed work on Ian’spersonal injury suit, we determine that respondent is not entitled to any compensation from theultimate award to Ian. See Benson v. Stafford, 407 Ill. App. 3d 902, 912 (2010) (holding that theappellate court can affirm on any basis in the record, regardless whether the trial court relied on thatbasis or its reasoning was correct).

Comment: this is a cautionary tale. Lawyers who wish to collect fees on an attorney's lien must take the time to prepare a verified fee petition that lays out what work the lawyer did and how that work was of value to the client. Fee fights are unpleasant, but like any case, the lawyer has the burden of proof and must supply evidence from which the finder of fact can make a determination on the value of the services rendered.

Edward X. Clinton, Jr.

www.clintonlaw.net

Breach of Fiduciary Duty Claim Duplicates Accounting Negligence Claim And is Dismissed

2012-01-13T20:58:00.000-08:00

Kurtz v. TOEPPER, Dist. Court, ND Illinois 2012 - Google Scholar:

The Northern District of Illinois has dismissed a breach of fiduciary duty claim against an accountant. The complaint also contained a negligence claim against the accountant.

The case follows the well-established doctrine from the lawyer-client context that where a legal malpractice claim and a breach of fiduciary claim "arise out of the same operative facts," the breach of fiduciary claim will be dismissed as duplicative.

The district judge explained it in this way:

"Claims are duplicative if they are based upon the same operative facts and allege the same injury. Id.; see also Fed. R. Civ. P. 12(f)(allowing a court to "strike from a pleading. . . any redundant, immaterial, impertinent, or scandalous matter"); Neade v. Portes,739 N.E.2d 496, 502-03 (Ill. 2000)(dismissing breach of fiduciary duty claim as duplicative of medical malpractice claim); Nettleton v. Stogsdill, 899 N.E.2d 1252, 1267 (Ill. App. Ct. 2008)(dismissing breach of fiduciary duty claim as duplicative of a legal malpractice claim);Fabricare Equipment Credit Corp. v. Bell, Boyd & Lloyd, 767 N.E.2d 470, 476 (Ill. App. Ct. 2002)(same); Majumdar v. Lurie, 653 N.E.2d 915, 920-21 (Ill. App. Ct. 1995)(dismissing breach of contract and breach of fiduciary duty claims as duplicative of legal malpractice claim). All of the claims brought by Kurtz are based upon Toepper's alleged failure to provide the IRS with required documentation during a routine audit, and thus the claims all involve the same set of operative facts."

Edward X. Clinton, Jr.

www.clintonlaw.net
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Important Rule 137 Sanctions Decision By Illinois Appellate Court

2012-01-07T20:45:00.000-08:00

In a family law case captioned, In re Marriage of Johnson, 2011 IL App (1st) 102826, the Appellate Court reversed a Rule 137 sanctions award on the ground that the lawyers were not given a sufficient opportunity to obtain counsel and defend themselves in an evidentiary hearing. The case is important because it gives each lawyer accused of wrongdoing the right to defend himself.

In 2004, Pamela and Eric Johnson entered into a divorce settlement agreement. In December 2006, Pamela filed a petition seeking relief from a final judgment. She alleged that the settlement agreement, and the divorce judgment based on that agreement, should be set aside because Eric had allegedly failed to disclose certain material facts during the divorce proceedings.

Eric filed a motion for summary judgment, which was granted. He also filed a motion for Rule 137 sanctions against Pamela's lawyers, Arthur Berman and Daniel Meenan.

In the petition to set aside the judgment, Pamela alleged that Eric failed to disclose certain material facts about the Baldwin Richardson Food Company, in which she and Eric owned stock. Pamela argued that Eric failed to disclose an important corporate deal affecting the food company before the settlement. Eric moved for summary judgment on the ground that Pamela and her lawyers were aware of the business deal before she signed the settlement agreement. Pamela was arguing that she was unaware that the food company was worth far more than she thought it was worth.

In October 2008, the trial court granted Eric's motion for summary judgment, holding that it was uncontroverted that Pamela was aware of the business deal before she signed the settlement agreement. Shortly thereafter, Eric moved for sanctions against Pamela, but did not request sanctions against the attorneys.

In February 2009, after a hearing, the court entered a written order granting the motion for sanctions. The trial court held that the lawyers and the client (Pamela) were liable for Eric's reasonable attorney fees and costs incurred in defending the motion to set aside the judgment.

The trial court concluded that Pamela's motion contained falsehoods in that Pamela and her attorneys were aware that the allegations in the petition were false. In August 2010, the trial court awarded sanctions of $112,000 in respondent's attorney fees - one half to be paid by Pamela the other half to be paid by Berman and Meenan. Berman and Meenan filed notices of appeal.

The court found that the sanctions procedure was flawed. "'[H]ere, the trial court conducted a hearing on respondent's motion for sanctions against petitioner, but did nto give notice to Berman and Meenan that the court could find their actions sanctionable. The attorneys did not have the opportunity to raise an objection or otherwise contest the sanction because the trial court issued its order and sue sponte sanctioned the attorneys."

The court further notes: "although the record contains information relating to what petitioner knew, the record discloses very little information about what the attorneys knew. The record is devoid of any testimony, deposition or evidence regarding the attorneys' own knowledge and actions. The attorneys did not have the opportunity to defend their actions separate from the actions of their client."

Comment: this decision is a welcome one for any lawyer facing a Rule 137 sanctions motion. Such motions can request huge fee awards from clients and/or lawyers. Now it is clear that the lawyer respondent has the right to (a) develop evidence on what he or she knew before he or she signed the pleading at issue and (b) possibly to argue that the client misled the lawyer. It also means that the judge should give the lawyer adequate time to (a) get a lawyer or (b) defend himself. This is welcome news for Illinois lawyers.

Edward X. Clinton, Jr.

www.clintonlaw.net

Member of ARDC Hearing Board Suspended For One Year

2012-01-06T14:05:00.000-08:00

Filed January 4:

A member of the ARDC hearing board should be suspended for one year according to the ARDC review board.

Obviously, this is a sad tale of an attorney who fell on hard times and converted funds.

Edward X. Clinton, Jr.

www.clintonlaw.net

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ARDC Hearing Board Recommends Probation for Cannabis Possession Conviction

2012-01-03T17:45:00.000-08:00

Filed November 23:

The attorney respondent was convicted of cannabis possession in 2007. The respondent paid $15 to a former client for cannabis.

In 1994, he had been convicted of a misdemeanor - driving under the influence of alcohol.

The Review Board found that the length of time between the convictions was significant as well as the "lack of any mental disorder."

The Review Board recommended the following: "We recommend that the Hearing Board's findings of fact and misconduct be affirmed and that the license of Respondent, Bruce A. Brennan, be suspended for four months with the suspension stayed in its entirety by one year of probation."

Comment: the lawyer did well by expressing remorse and introducing evidence that he has abstained from alcohol and drug use.

Edward X. Clinton, Jr.

www.clintonlaw.net

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The Third Circuit Weighs In On The Discovery Rule Under Pennsylvania Law

2012-01-03T17:14:00.000-08:00

Knopick v. Connelly, 639 F.3d 600 (3rd Cir. 2011).

This is an appeal from a grant of summary judgment to the lawyer defendant, Philip Downey. The district court had held that the claim was time-barred. Knopick argued that the statute of limitations should have been tolled based on the discovery rule or the fraudulent concealment doctrine. The Third Circuit held that the discovery rule applied and the claim was timely.

The Underlying Case:

The malpractice claim arose out of Knopick's divorce case. Knopick hired the Connelly law firm to represent him in the case. According to Knopick, the Connelly firm informed him that a property settlement agreement he entered into with his wife was valid and binding. In the divorce case, Knopick's wife claimed that the agreement was not valid or binding because Knopick concealed significant financial assets from her. Knopick claimed that his wife was lying and that she was aware of his assets. He claimed that he informed the Connelly firm of the witnesses who could support his claim but they elected not to call those witnesses at the trial.

The divorce case went poorly for Knopick. On July 7, 2006, the divorce court held that he had concealed assets from his wife and that the property would be subject to equitable distribution.

On July 28, 2006, Knopick met with defendant Philip Downey to discuss bringing a legal malpractice claim against the Connelly law firm.

On October 26, 2006, Downey sent a letter to the Connelly firm accusing them of legal malpractice.

On February 25, 2008, Downey sent a letter to Knopick terminating the representation.

On July 6, 2009, Knopick brought a legal malpractice claim against the Connelly firm and Downey.

The district court granted summary judgment to the Connelly firm. [Knopick did not appeal this ruling]. Downey's motion for summary judgment was also granted. The district court found that the statute of limitations for legal malpractice on the Connelly claims had begun to run on the date of the divorce hearing. Thus, since Knopick had no claim against the Connelly defendants he could not sue Downey for malpractice. The district court held that the discovery rule did not apply.

Knopick appealed and the Third Circuit reversed as to defendant Philip Downey. It held that Knopick's legal malpractice claim was timely and that the discovery rule should have applied to toll the applicable statute of limitations.

The Third Circuit's Analysis:

Like Illinois, Pennsylvania uses a two-year statute of limitations for legal malpractice. 42 Pa.C.S.A. Section 5524. As the court explained the discovery rule is "'grounded on considerations of basic fairness.'" Taylor v. Tukanowicz, 290 PaSuper. 581, 435 A.2d 181, 183 (1981). The reasoning behind the rule is that the plaintiff cannot be reasonably required to file suit until he is aware of the injury. As the court wrote" "Although the discovery rule has evolved in its application, its purpose has remained the same. A plaintiff, unable to know of his injury or its cause because nothing has yet put him on notice of such injury, should not be held responsible for investigating until something gives him reason to do so."

Knopick argued that the statute of limitations for his malpractice action against the Connelly defendants was tolled until July 5, 2007, the date of the adverse divorce ruling. Downey argued that Knopick knew that Connelly had not called witnesses on the date of the hearing, August 2, 2004, and that the occurrence rule should apply. The Third Circuit disagreed. The opinion explains: "although it is undisputed that Knopick knew the witnesses were not called, it remains in dispute, and a question which we believe a jury should decide, when Knopick knew that he was injured as a result of witnesses not being called. In this case we believe the District Court inappropriately equates the breach of duty with the injury suffered from that breach."

In sum, "we find that reasonable minds could disagree in determining whether Knopick know or should have known, through the exercise of reasonable diligence, of his alleged injury as early as early as August 2, 2004, the date of the hearing. ... Reasonable minds could disagree as to whether Knopick had the necessary clues that set off his obligation to investigate the implications of the Connelly Defendants' failure to call witnesses prior to the date of the court's July 7, 2005 order."

Comment:

The law of Pennsylvania in this area is almost a mirror image of the law of Illinois.

As so often occurs in statute of limitations cases, the court of appeals applied the discovery rule to reverse a dismissal of a legal malpractice claim.

Edward X. Clinton, Jr.

www.clintonlaw.net

Kansas City Chiefs QB Kyle Orton sues former Chicago lawyers - ESPN Chicago

2012-01-03T13:05:00.000-08:00

Kansas City Chiefs QB Kyle Orton sues former Chicago lawyers - ESPN Chicago:

Kyle Orton has sued a Chicago law firm and has alleged that the firm gave him bad legal advice related to energy investments. The plaintiffs claim that the law firm of Chuhak & Tecson assured them that they would be eligible for certain tax breaks. Later they learned that they were not eligible for the tax breaks.

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No Legal Malpractice Claim Where Client Discharged Lawyer Before SOL Expired

2011-12-23T11:48:00.000-08:00

Dolce v. Gamberdino, 376 N.E.2d 273 (Ill. App. 1st. Dist. 1978)

This is an old case in which the client filed a legal malpractice lawsuit against the lawyer alleging that the lawyer had failed to prosecute a worker's compensation claim. Later, she learned that the claim was barred by the statute of limitations.

The appellate court affirmed the dismissal of the claim. It stated: "The plaintiff discharged him as her attorney on January 6, 1971, several weeks prior to the time the workmen's compensation filing period ended. After this discharge Gamberdino had no authority to act in the plaintiff's behalf. ... He, therefore, had no further duty to the plaintiff."

Comment: this is an important case because it recognizes the obvious - the lawyer could not act for the client after he was terminated. It also encourages the practicing lawyer to make a written record when the client terminates him. The written record of termination need not be argumentative or lengthy. It simply needs to explain that the lawyer was terminated and will no longer be handling the matter. There is no question that the lawyer defendant was exonerated because he kept written records of the client's instructions.

Edward X. Clinton, Jr.

www.clintonlaw.net

Court Refuses to Vacate Dismissal of Complaint For Discovery Sanctions

2011-12-21T20:57:00.000-08:00

RM LUCAS COMPANY v. PEOPLES GAS LIGHT AND COKE COMPANY, Ill: Appellate Court, 1st Dist., 3rd Div. 2011 - Google Scholar:

This is an appeal from a motion to vacate a judgment. The judgment, a dismissal with prejudice, was entered by the Circuit Court of Cook County after Plaintiffs failed to comply with numerous discovery orders over a two-year period. Plaintiffs moved to vacate the dismissal on the ground that their lawyer was negligent and did not inform them of the court's discovery orders.

The Appellate Court affirmed the dismissal. The court noted: "¶ 18 A litigant is generally bound by the mistakes or negligence of its counsel. Ameritech Publishing of Illinois, Inc. v. Hadyeh, 362 Ill. App. 3d 56, 60 (2005). A party must follow the progress of its case, and a section 2-1401 petition will not relieve a party of the consequences of its attorney's neglect of a matter. Paul v. Gerald Adelman & Associates, Ltd., 223 Ill. 2d 85, 105 (2006). Thus, plaintiffs are bound by Beeler's actions, and section 2-1401 does not provide them with relief from the consequences of their failure to respond to defendant's discovery requests or comply with the circuit court's orders."

The Appellate Court also held that the underlying misconduct by the Plaintiffs justified the dismissal. "¶ 27 The record shows that defendant filed a motion requesting sanctions against plaintiffs pursuant to Illinois Supreme Court Rule 219(c)(v) and that the circuit court granted that motion. Rule 219(c)(v) provides that a party's claims may be dismissed with or without prejudice as a sanction for unreasonably failing to comply with discovery rules. Ill. S. Ct. R. 219(c)(v) (eff. July 1, 2002). Dismissal of a cause of action is a drastic sanction that is justified only when the sanctioned party has shown a deliberate, contumacious, or unwarranted disregard for the court's authority. Shimanovsky v. General Motors Corp., 181 Ill. 2d 112, 123 (1998).

¶ 28 In this case, defendant provided plaintiffs with its discovery requests on August 19, 2008, and the circuit court directed that discovery was to be completed by October 28, 2008. Despite defendant's numerous requests for responses to its discovery requests and the court's orders setting discovery deadlines and directing plaintiffs to respond to the discovery requests, plaintiffs had not yet provided any response on October 5, 2009, when the court granted defendant's motion for sanctions. In dismissing plaintiffs' action, the court indicated that it might consider vacating the dismissal if plaintiffs complied with all outstanding discovery requests by November 9, 2009, but plaintiffs failed to do so. As such, the circuit court did not abuse its discretion by dismissing plaintiffs' action with prejudice where they defied discovery deadlines set by the court and ignored defendant's discovery requests.Vaughn v. Northwestern Memorial Hospital, 210 Ill. App. 3d 253, 261-62 (1991)."

Comment: this opinion encourages the clients to file a legal malpractice claim against their former lawyer. This is an unpleasant result for the lawyer who was no longer of record and could not defend himself.

Edward X. Clinton, Jr.

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Reprimand for Failure to Appoint Guardian For Disabled Plaintff

2011-12-19T19:58:00.000-08:00

BEFORE THE HEARING BOARD OF THE:

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A lawyer and the ARDC have agreed to a reprimand pursuant to a joint stipulation of facts.

The lawyer obtained a settlement for an adult plaintiff with diminished mental capacity. The lawyer failed to make sure that a guardian was appointed for the plaintiff. Instead the lawyer distributed the money to the disabled plaintiff and his mother (another plaintiff) who spent the money.

The Joint Stipulation states: "Based on Respondent's experience throughout his legal career, he was aware of the proper procedures to disburse settlement proceeds to disabled adults, but failed to ensure that the proper procedures for appointment of a guardian were followed."

Edward X. Clinton, Jr.

www.clintonlaw.net

Attorney disqualified for defendant in death of 5-year-old Elgin boy - Aurora Beacon News

2011-12-19T07:51:00.000-08:00

Attorney disqualified for defendant in death of 5-year-old Elgin boy - Aurora Beacon News:

This is an unusual decision to disqualify a criminal defense lawyer who did not represent an adverse party, merely a potential witness.

We will post any further updates concerning this case.

Edward X. Clinton, Jr.

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District Court Denies Motion to Dismiss In Fraud Case

2011-12-15T18:47:00.000-08:00

CRAFTWORK, INC. v. Robinson, Dist. Court, ND Illinois 2011 - Google Scholar:

Plaintiffs alleged that a Chicago law firm participated in a fraudulent scheme to convert two investments they made. Plaintiffs sustained losses exceeding $600,000.

The plaintiffs in this case were investors in two separate transactions. According to the complaint, plaintiffs money disappeared in an investment scheme promoted by Defendant Theodore Robinson. Robinson informed the plaintiffs that he would use a proprietary trading scheme to increase their investment tenfold over several months. The law firm became involved when it agreed to hold the investment, $341,500 in its client trust account. The court described the trading scheme as follows:

"According to Plaintiffs' amended complaint, with respect to the first scheme, Robinson marketed to Minnix a "confidential, proprietary securities trading program," and Plaintiffs bit. Plaintiffs were to deposit significant sums of money with Robinson and his "business partners," who would then make "trades" via affiliates on the West Coast and in Europe and Australia. According to Plaintiffs, Robinson told them how he would take his clients' cash and "leverag[e] it up to ten times to permit significant trading volume to occur, thereby generating cash to repay the principal invested and to pay a significant return (50% to 100%) within four (4) months—all with no risk to the principal invested." Amended Complaint at ¶ 16. On November 21, 2008, Plaintiffs wired a $15,000 "investment" to DS&M's client funds account at Bank Financial in Deerfield, Illinois. On December 24, 2008, Plaintiffs wired $300,000 to the client funds account. On January 8, 2009, Plaintiffs wired another $26,500 directly to Robinson's bank."

Of course, the money was apparently distributed by Deer & Stone to Robinson and plaintiffs' money disappeared.

Plaintiffs also invested in a second scheme to loan money to a purported real estate development, "the Lake Bluff Transaction." Plaintiffs loaned $260,000 to a real estate development. Plaintiffs believed that Deer & Stone was acting as their attorneys in the transaction. Plaintiffs alleged that Deer & Stone was actually representing the other parties to the transaction and was not protecting their interests. Plaintiffs alleged that their loan was never repaid. Further, they alleged that Deer & Stone converted $60,000 of their $260,000.

The plaintiffs alleged claims for breach of contract, conversion, fraud and professional negligence. The district court denied defendants' motion to dismiss in its entirety.

Plaintiffs alleged that Deer & Stone misled them as to whether it represented them. The district court found that their legal malpractice claim, arising out of the Lake Bluff transaction, stated a claim. The opinion states: "Plaintiffs allege that Deer told them that he was their "escrow attorney" with respect to the Lake Bluff transaction.^[4] Plaintiffs also allege that the Deer Defendants breached that duty by failing to disclose that the Deer Defendants (i) "were not looking out for Craftwork's interests with respect to the loan"; (ii) "were negotiating against the interests of Craftwork"; and (iii) "were negotiating on behalf of an attorney associated with his firm (i.e., Eisenberg) against Craftwork." Plaintiffs further contend that the Deer Defendants should have told Craftwork to hire another attorney with respect to the loan rather than tell them that Deer was their "escrow attorney." Plaintiffs contend that but for Deer's breach of duty, they would have hired their own independent legal counsel to negotiate and review the loan agreement. Finally, Plaintiffs have alleged that they were damaged. These allegations are sufficient to state a claim for professional negligence. See also Wendt v. Handler, Thayer & Duggan, LLC, 613 F. Supp. 2d 1021, 1034-35 (N.D. Ill. 2009)."

As to the conversion claim, the court found that the defendants' explanation failed the "straight face test." The court explained: "Plaintiffs allege that the contract at issue provided that (i) Plaintiffs would lend $260,000 to Wimbledon; (ii) the money would be put in escrow at the Village of Lake Bluff; and (iii) Plaintiffs would be repaid in four months and receive a fee of $50,000. The Deer Defendants contend that because the letter does not explicitly prohibit Deer from taking $60,000 for its own use—in other words, "[n]owhere in that agreement did defendants state that the entire loan would be applied directly to the municipal escrow fund"—they were allowed to do just that. See Deer Def. Memorandum in Support of Motion to Dismiss at 6. This argument fails the straight face test."

Comment: one must remember that this is a decision on a motion to dismiss, not a motion for summary judgment. The court is required to accept the plaintiffs' factual allegations as true. Only later, after discovery is taken, will these allegations be subjected to the test of proof. These are serious allegations, but they have not been proven at this time.

Edward X. Clinton, Jr.

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People v. Rivera - Potential Ethics Issues

2011-12-15T13:38:00.000-08:00

Appellate court reverses Juan Rivera murder conviction - Lake County News-Sun:

I would not be surprised to see some form of ethics complaint against the prosecutors who brought this flawed prosecution. How they could prosecute Rivera when the DNA evidence excluded him is highly questionable and probably violates the Rules of Professional Conduct. Under Rule 3.8 the prosecutor must refrain from "prosecuting a charge that the prosecutor knows is not supported by probable cause." If ever there was a case that was not supported by probable cause, it was this one. The science simply cannot be doubted.

Edward X. Clinton, Jr.

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Chicago Law Firm Wins Summary Judgement In Estate Planning Case

2011-12-14T16:54:00.000-08:00

Scott v. CHUHAK & TECSON, PC, Dist. Court, ND Illinois 2011 - Google Scholar:

This is a complex case in which the district court granted summary judgment to the law firm and the lawyers involved. Plaintiff's wife, Maureen Scott, was a beneficiary of a trust. Plaintiff alleged that the defendants caused Ms. Scott damages because they failed to inform her about certain trust provisions and because they failed to obtain her consent to represent her and her sister Diane.

The Defendants sought to strike the opinion of plaintiff's expert on the ground that "he opines that defendants violated the Illinois Rules of Professional Conduct, not a common-law duty of care." The Court correctly rejected this argument noting a long line of Illinois cases that hold that breaches of the Illinois Rules of Professional Conduct are relevant to the duty of care required of a lawyer in the context of a legal malpractice claim.

The court, however, granted summary judgment to the Defendants on the ground that, even if they breached their duties to Ms. Scott, she was not damaged by the breach. The court concludes that Ms. Scott was not damaged because she died two months before her father's estate tax return was completed. The completion of the estate tax return was, in the court's view, a condition precedent to the creation of the separate trusts.

Comment: this is a complex case and I would predict an appeal to the Seventh Circuit by the Plaintiff.
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District Court enters summary judgment against Chicago Law Firm on Malpractice case

2011-12-10T08:40:00.000-08:00

Patterson v. LANE & LANE, LLC, Dist. Court, ND Illinois 2011 - Google Scholar:

This is a rare occurrence. The district court entered summary judgment against Lane and Lane in a legal malpractice case on the question of liability. The court did not enter judgment on the damages issue, which was left for the trier of fact.

Plaintiff alleged that the underlying case was a medical malpractice case in which the hospital and physicians were negligent in handling the delivery of her daughter.

The alleged negligence against the lawyers was the failure to file the case within the 8 year statute of repose for medical negligence. Plaintiff alleged and the law firm admitted that it had sufficient time to prepare the case before the deadline set forth in the statute of repose. Plaintiff contacted the law firm in October 2001, but the case was not filed until March 2003, two days after the deadline imposed by the statute of repose.

As a result, the plaintiff claimed that she was only able to recover $170,000, far less than the fair value of the case if it had been timely filed.

The controversial issue in the case is the plaintiff's failure to retain an expert witness. Plaintiff argued that there was no reason to retain an expert because the negligence was obvious and apparent. The court reasoned as follows: "Based on the fact that Defendants do not contest that they had knowledge of the claims in time to file within the statute of repose period, the admission by Defendants of the untimely filing, and the absence of any evidence to justify the untimely filing, the court finds as a matter of law that Defendants breached the standard of care by failing to initiate the Medical Malpractice Action within the 8-year statute of repose."

Comment: This is an interesting case with a bad outcome for the lawyers, who, according to the district court, failed to file a medical malpractice action within the time limit imposed by the Illinois statute of repose.

Edward X. Clinton, Jr.

www.clintonlaw.net

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Illinois Supreme Court Grants ARDC Authority To Investigate the Unauthorized Practice Of Law

2011-12-08T11:15:00.001-08:00

Yesterday, the Illinois Supreme Court granted the Attorney Registration and Disciplinary Commission the authority to investigate and prosecute the unauthorized practice of law.

The Illinois Supreme Court amended Rule 751 of the Illinois Supreme Court Rules to authorize the ARDC to investiate the unauthorized practice of law. The revised rule provides in part:

"(a) Authority of the Commission. The registration of, and disciplinary proceedings affecting, members of the Illinois bar, and unauthorized practice of law proceedings instituted under the authority of Rule 752(a), shall be under the administrative supervision of an Attorney Registration and Disciplinary Commission...."

Amended Rule 752 provides in part:

"Administrator
Subject to the supervision of the Commission, the Administrator shall: (a) on his own motion, on the recommendation of an Inquiry Board or at the instance of an aggrieved party, investigate conduct of attorneys licensed in Illinois and attorneys admitted in another United States jurisdiction who provide legal services on a temporary basis in Illinois pursuant to Rule 5.5 of the Illinois Rules of Professional Conduct, whose conduct tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute, and investigate allegations of the unauthorized practice of law, including investigations involving disbarred lawyers and other persons, entities, or associations that are not authorized to practice law by this court.

(b) Assist each Inquiry Board in its investigations and prosecute disciplinary cases before the Hearing Boards, the Review Board and the Court and prosecute the unauthorized practice of law proceedings pursuant to Rule 279...."

Edward X. Clinton, Jr.

www.clintonlaw.net

Seventh Circuit Criticizes Lawyers Who Fail to Acknowledge Controlling Law

2011-11-28T18:50:00.000-08:00

GONZALEZ-SERVIN v. FORD MOTOR COMPANY - Submitted October 27, 2011.:

The Seventh Circuit has issued a decision affirming two lower court rulings on forum nonconveniens grounds. Both cases were governed by two rulings by the United States Supreme Court. The Seventh Circuit criticized lawyers who failed to acknowledge the controlling precedent, one of whom failed to cite the precedent after his opponent cited it.

Comment: it is all too common in litigation that lawyers ignore controlling law and controlling legal precedent and, instead, cite irrelevant cases and opinions. The Seventh Circuit is correct to bring attention to this issue.

Edward X. Clinton, Jr.
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In Illinois Expert Testimony Is Required To Establish Legal Malpractice

2011-11-25T18:58:00.001-08:00

This is a discussion of Barth v. Reagan, 139 Ill. 2d 399 (1990), a case decided twenty-one years ago by the Illinois Supreme Court. The case stands for the proposition that the plaintiff in a legal malpractice action must present the testimony of an expert to establish the standard of care.

Barbara Barth brought the lawsuit against her former lawyer, James Reagan. Reagan had represented Barbara and her husband, Edward, in a number of matters. According to the complaint Barbara and Edward had acquired a number of investment properties and placed those properties into land trusts.

In 1979, Edward allegedly took out a second mortgage on the couple's home without informing his wife. He also took out a third mortgage on that property, again concealing this action from his wife. He failed to make the mortgage payments that were due on the investment properties and foreclosure cases were filed. Barbara alleged that, in all but one instance, Edward intercepted any notices concerning the mortgages or properties, before she could read them.

Reagan filed answers to several of the foreclosure actions and filed documents which contained Barbara's notarized signature. She claimed that her signature was forged on those documents.

Reagan testified that he never met with Barbara concerning the foreclosures, but the record contained evidence that he addressed several letters to her and Edward.

Barth sued for legal malpractice to recover the equity she lost when the properties were foreclosed upon.

Barth failed to disclose her expert on time and the witness was barred. The trial court denied Reagan's motion for a directed verdict on the ground that there was no expert testimony in the record. The appellate court reversed and the Illinois Supreme Court affirmed.

As the court noted: "attorneys are liable to their clients for damages in malpractice actions only when they fail to exercise a reasonable degree of care and skill." id. at 406. Barth argued that there was no need for expert testimony. As the court summarized the test, "Illinois courts have recognized that where the common knowledge or experience of lay persons is extensive enough to recognize or infer negligence from the facts, or where an attorney's negligence is so grossly apparent that a lay person would have no difficulty in appraising it, expert testimony as to the applicable standard of care is not required." Id. at 408.

The court disagreed holding that the issue was whether Reagan had sufficiently communicated with Barth. "It is not clear that defendant's failure to communicate directly with plaintiff was a breach of his duty to communicate, because any question of the applicable standard of care in defendant's professional relationship with plaintiff and her husband turned on questions of 'conflicting interest.'" Id. at 410.

Thus, Barth could not recover without presenting the testimony of an expert witness and her claim was lost.

Edward X. Clinton, Jr.

www.clintonlaw.net

Failure to Retain Expert Fatal To Malpractice Claim

2011-11-23T14:17:00.000-08:00

Marciano v. Kraner, 10 A. 3d 572 - Conn: Appellate Court 2011 - Google Scholar:

The Connecticut Appellate court has affirmed a dismissal of a legal malpractice claim. The plaintiff sued his former attorney, apparently alleging that the attorney did not do enough to see to it that the plaintiff would receive a parcel of real estate from another person.

After a verdict in favor of plaintiff, the court dismissed the action on the ground that the plaintiff had no expert to establish a legal duty.

The court wrote: "On April 23, 2009, in a memorandum of decision, the court granted the defendants' motion to set aside the verdict, ruling that "expert testimony was needed to establish whether . . . Kraner had a particular duty to the plaintiff and whether that duty was violated." As the court reasoned, the jury's verdict in favor of the plaintiff for breach of fiduciary duty had to be set aside because the plaintiff failed to present any "expert testimony as to what conduct by the defendants constituted a breach of fiduciary duty." The court also explained that "[t]here was no evidence that . . . Kraner could have taken any legal action to interfere with Francis, Jr.'s ability to dispose of his property as he saw fit." Therefore, "there was no evidence that any conduct by . . . Kraner caused the plaintiff to sustain any damages . . . [and][t]his lack of any evidence of a causal relationship between the defendants' alleged misconduct and the $196,000 awarded by the jury [was] an additional basis for setting aside the verdict." This appeal followed."

The appellate court agreed, explaining its decision to affirm as follows: "To summarize, we conclude that the plaintiff's failure to present any expert testimony whatsoever as to the attorney-client relationship was fatal to his cause of action for breach of fiduciary duty. Further, we conclude that, even if the plaintiff adequately established the nature of the applicable fiduciary duty, the verdict in his favor was properly set aside in light of the dearth of evidence that "any conduct by. . . Kraner caused the plaintiff to sustain any damages."

Edward X. Clinton, Jr.

www.clintonlaw.net

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Chicago Law Firm Loses Venue Battle

2011-11-22T23:58:00.000-08:00

BURKE, WARREN, MacKAY & SERRITELLA, PC v. TAMPOSI, Dist. Court, ND Illinois 2011 - Google Scholar:

This is a decision of the Northern District of Illinois in which a legal fee lawsuit was transferred to the District of Massachusetts, where the Defendant has already filed a legal malpractice counterclaim.

The plaintiff filed the lawsuit to collect over two hundred thousand dollars in unpaid legal fees. At the same time, the defendant filed a lawsuit against the law firm for legal malpractice in the District of Massachusetts arising out of the same set of facts. The Defendant moved to transfer the legal fee case to the District of Massachusetts.

The court explained the transfer statute as follows: "The transfer statute, 28 U.S.C. § 1404(a), provides that: "For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." See also Baird v. Blue Cross Blue Shield of Texas, 2011 WL 4345845, at *5 (N.D. Ill. Sept. 14, 2011). There are several factors courts consider in deciding whether to transfer a case to another federal district court. As a threshold matter, the court considering transfer must determine whether venue is proper in the district where the action was originally filed and whether venue would be proper in the transferee court. Where jurisdiction is founded solely on diversity of citizenship, venue is proper in: "(1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought." 28 U.S.C. § 1391(a)."

The court's ruled the venue was proper in the District of Massachusetts and transferred the case to that forum. The advantage of the ruling is that the entire case will be litigated in one forum. One judge can make the rulings and set the case for trial.

Comment: many litigants are surprised that the federal transfer statute applies to their case. They learn much to their dismay that the case will be heard in a forum a long way away from where the legal work was done. One solution for the lawyer is to specify a chosen venue in the engagement letter. This specification can avoid cross-country fee litigation.

Edward X. Clinton, Jr.

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Legal Malpractice - Lawyer Had No Duty To Corporation's Shareholders

2011-11-18T14:24:00.001-08:00

TheAppellate Court of Illinois’s recent decision in Reddick v. Suits, 2011 IL App (2d) 100480, considers liability for legalmalpractice in a corporate context. The primary issue was whether an attorney can be held liable for damagesto directors of a corporation resulting from that attorney’s failure to reinstatea dissolved corporation.

In Reddick,a corporation was administratively dissolved. At the time, the president and director mistakenly believedthat a corporation’s shareholders could be held personally liable for adissolved corporations obligations. Therefore, after learning of the dissolution, he directed that thecorporation be reinstated so that it would be in good standing, could be sold,and so that the corporation’s shareholders would not be personally liable. The task of getting the corporationreinstated was forwarded to the defendant attorney. However, after multiple attempts, the defendant failed totake the necessary steps for reinstatement and the corporation remaineddissolved. Eventually, thecorporation’s president and director had the corporation reinstated by adifferent law firm.

Under Illinois law, when a dissolved corporationcontinues its normal operations, the directors, not the shareholders, of thatcorporation are held personally liable for the dissolved corporation’sobligations. Furthermore, thatpersonal liability is not retroactively extinguished upon reinstatement of thecorporation. Regarding Reddick, between the time of administrative dissolution and reinstatement,the corporation continued its normal operations. During that time, the plaintiffs, including the presidentand director of the corporation as well as the corporations two other directors,were held personally liable for failing to a pay a supplier and failing to paythe corporation’s rent. Subsequently,the plaintiffs alleged that the defendant should be held liable for proximatelycausing the damages to the plaintiffs because he committed attorney malpracticein negligently failing to have the corporation reinstated. The lower court granted the defendant’smotion for summary judgment. Thecourt reasoned that the defendant’s sole client was the corporation and therewas no clear indication that the defendant’s representation of the corporationwas to incur a direct benefit on the plaintiffs. Therefore, the plaintiffs were not intended beneficiaries ofthe attorney-client relationship between the defendant and the corporation. As a result, the court found that thedefendant did not owe a duty to the plaintiffs and was not liable for theirdamages.

On appeal, the plaintiffs’ principal arguments werethat Illinois law does not require privity of contract between a third-party non-clientsand an attorney to support a legal malpractice cause of action, and that theplaintiffs were intended beneficiaries of the attorney-client relationshipbetween the defendant and the corporation. However, the Illinois Court of Appeals affirmed the lowercourt’s holding.

For an attorney to have a duty to a third-partynon-client, privity of contract is not required. However, the third-party non-client must be an intendedbeneficiary of an existing attorney-client relationship. To obtain status as an intendedbeneficiary of an attorney-client relationship the third-party must prove thatthe “primary purpose and intent of the attorney-client relationship itself wasto benefit or influence the third-party.” The ‘key consideration’ for determining this requirement is whether theattorney “was acting at the direction of or on behalf of the client to benefitor influence [the] third-party.” For example, in cases of drafting a will, the “primary purpose” of theattorney-client relationship is to benefit a third-party. Therefore, in those cases, the attorneydoes have duty to the third-party non-client, even though there is no privityof contract.

In Reddick,the court found that the “primary purpose and intent” of the attorney-clientrelationship between the defendant and the corporation was not to “benefit orinfluence” the plaintiffs, it was solely to reinstate the corporation so thatit would be in good standing and would be eligible to be sold. Although reinstatement would haveinsulated the plaintiffs from personal liability and enabled them to sell thecorporation, that benefit was merely incidental because the defendant’srepresentation of the corporation was not designed to do so. Therefore, the defendant did not owe aduty to the plaintiffs and could not be held liable for the damages theyincurred. The court acknowledgedthat courts seem to be more willing to extend an attorney’s duty to third-partiesin cases of non-adversarial attorney-client relationships. However, the court found thatregardless of the relaxed approach, a finding that the attorney was acting “atthe direction of or on behalf of the client to benefit or influence the third-party”in still “paramount” in creating a duty to third-party non-clients.

Appellate Court Explains The "Advance Payment Retainer"

2011-11-15T21:29:00.000-08:00

HANNAFAN AND HANNAFAN, LTD. v. Bloom, Ill: Appellate Court, 1st Dist., 2nd Div. 2011 - Google Scholar:

This was a dispute between two law firms. Plaintiff Hannafan obtained a judgment for $52,190.23 against the Eric A. Bloom Living Trust.

Hannafan then instituted collection proceedings and learned that Bloom had retained another Chicago Law Firm, Cotsirilos, Tighe and Streicker, to represent it in the citation proceedings. Hannafan then sought a turnover order in the amount of $25,000 from the Cotsirilos firm. The Cotsirilos firm argued that: "since Bloom had made the payment pursuant to an advance payment retainer, the monies became property of the firm not subject to a turnover order."

The Cotsirilos retainer agreement contained the following language:

"Before we begin work on this engagement, our firm requires payment by you of an advance payment retainer in the amount of $50,000.00. An `advance payment retainer' is recognized and approved under Illinois law as a present payment by you to us as your attorneys, in exchange for our commitment to provide legal services to you. Ownership of this sum passes to our firm immediately upon receipt of your advance payment retainer, and therefore the funds will not be held in a client trust account. Illinois law permits other forms of retainer, such as the `security retainer,' in which a client pre-pays an amount which remains the client's property but that must be held in trust by your attorney until it is applied toward fees. As we discussed, Cotsirilos, Tighe & Streicker has determined that your interests in this matter and the nature of our practice are best served by the `advance payment retainer' and so we require such payment in this engagement.

After we receive this advance payment retainer we will bill you on a monthly basis for the fees and expenses we incur on your behalf each month, and you agree to pay those monthly bills in full within 30 days of receipt. The advance payment retainer will be applied to our last invoice for services to you. If the amount of advance payments made by you during this engagement exceeds the amount of fees and expenses we charge during the course of the engagement, we will make a payment to you for the amount of such difference at the conclusion of our representation."

Hannafan argued that the retainer agreement, although using the words "advance payment retainer" did not meet the requirements set forth in Dowling v. Chicago Options Associations, Inc., 226 Ill. 2d 277 (2007). The trial court disagreed, holding that there was substantial compliance with the Dowling test.

The Appellate Court affirmed on the ground that there was substantial compliance with the Illinois Supreme Court's decision in the Dowling case. The Court explains its holding as follows: " The retainer agreement between Bloom and Cotsirilos is in writing and explicitly contains the term "advance payment retainer." It clearly provides for the separation of funds by stating that payments made pursuant to the agreement belong to the firm "immediately upon receipt" and will not be deposited into a client trust account. The agreement explicitly lays out the manner of billing and how Cotsirilos will refund excess payments. It also advised Bloom of the security retainer option. The agreement does not state that Bloom alone has the option to choose a retainer, or set forth in detail why Cotsirilos deemed an advance payment retainer advantageous to Bloom and required use of such a retainer."

Comment: this decision is well-reasoned. The parties made it clear in the engagement letter that they intended to use an Advance Payment Retainer. They also made it clear that the funds would not be placed into the law firm's client trust account, but would become the property of the law firm upon receipt. Hannafan's position is highly technical and would rewrite the agreement.

Edward X. Clinton, Jr.

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Illinois Appellate Court Finds Waiver of Attorney-Client Privilege

2011-11-11T09:57:00.001-08:00

In the case captioned Center Partners, Ltd., v. Growth Head GP, LLC, 2011 IL App (1st) 110381, the Illinois Appellate Court held that the disclosure of attorney-client communications resulted in a waiver of the attorney-client privilege. The case is significant because of its clear holding.

All of the parties to the lawsuit were in the business of owning and operating shopping malls across the country.

In 2001 and 2002, Westfield, Rouse and Simon (three of the defendants) negotiated a transaction with a Dutch company (Rodamco) under which certain assets of Rodamco were purchased.

Plaintiffs filed such alleging breach of fiduciary duty and contractual duties relating to the purchase of the Rodamco assets. Plaintiffs sought discovery of communications between Westfield, Rouse and Simon concerning the acquisition of Rodamco. As the court then summarizes: "Westfield and Rouse acknowledged that during the negotiations leading up to the purchase of Rodamco, they shared among one another legal advice each of them received from their attorneys regarding the purchase."

Plaintiffs moved to compel. They argued "that because certain attorney-client communications were disclosed among Westfield, Rouse and Simon, a subject-matter waiver occurred as to all of the communications regarding the purchase of Rodamco, even those not disclosed." The trial court agreed and granted the motion to compel.

To obtain appellate review, the defendants asked the court to hold them in contempt.

The appellate court affirmed. It explained: "notwithstanding the application of the privilege, the privilege can be waived by the client when the client voluntarily discloses the privileged documents to a third party. ...The scope of the waiver extends to all communications relating to the same subject matter....Most courts refer to this type of waiver as the subject-matter waiver doctrine. The doctrine requires a party who discloses some privileged communications to reveal all the privileged communications on the same subject matter." The court held that the disclosure of the communications to a third-party waived the privilege as to all documents on that subject matter.

Comment: This is a thoughtful opinion with a clear and easy holding for lower courts to follow.

Update: The Illinois Supreme Court has accepted this case for review next fall, indicating that this issue may require further thought.

Edward X. Clinton, Jr.

www.clintonlaw.net

Legal Malpractice Action Dismissed Because Plaintiff Cannot Satisfy Diversity Amount

2011-11-09T22:54:00.000-08:00

Jaworski v. Cohn, Dist. Court, ND Illinois 2011 - Google Scholar:

This is an unusual case in which the plaintiff sued in federal court and claimed legal malpractice. The district court dismissed the case on the ground that the plaintiff could not establish diversity jurisdiction, specifically that more than $75,000 was in dispute.

The problem was that the defendants in the underlying case were insolvent or bankrupt so there was no possibility of any recovery and thus no possibility of plaintiff recovering the diversity amount.

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Oklahoma Law Prohibits Assignment of Legal Malpractice Claim

2011-11-06T07:28:00.000-08:00

TRINITY MORTGAGE COMPANIES, INC. v. Dreyer, Dist. Court, ND Oklahoma 2011 - Google Scholar:

This is a legal malpractice case filed by a mortgage company against its former attorney. The plaintiff alleged that the lawyer negligently allowed a default judgment in the amount of $71,000,000 to be entered against his client.

After the default judgment was entered, the plaintiff mortgage company assigned its rights to the legal malpractice action to the judgment creditor.

The district court dismissed the lawsuit on the ground that there was an unlawful assignment of the malpractice claim. The court also noted that the assignment raised further concerns because it was an assignment of a claim to an adversary.

The Court reasoned:

"Even absent the clear legislative prohibition which exists in this instance, the assignment at issue should not be permitted because it is clearly against public policy. The various dangers involved in this assignment — namely, the assignment of a legal malpractice claim to a former adversary — have been amply discussed in cases prohibiting such claims as contrary to public policy. See, e.g., Edens Tech., LLC v. Kile Goekjian Reed & McManus, PLLC, 675 F. Supp. 2d 75, 79-82 (D.D.C. 2009) (granting law firm defendant's motion to dismiss legalmalpractice claim on public policy grounds where claim was assigned to Golf Tech, named plaintiff's former litigation adversary, and assignment gave Golf Tech right to controlmalpractice litigation and recover proceeds therefrom) (discussing overriding public policy concerns that render such assignments invalid, including the opportunity and incentive for collusion in stipulating to artificially inflated damages and the illogical position of lawyers and clients switching positions concerning the same incident); Gurski v. Rosenblum and Filan, LLC, 885 A.2d 163, 168, 175 (Conn. 2005) ("A majority of [j]urisdictions have concluded thatlegal malpractice claims are not assignable based on several overlapping public policy concerns.") (directing judgment for law firm defendant on legal malpractice claim because such claim was assigned to adversary in underlying litigation and contrary to public policy) (reasoning that assignment of such a claim would "convert a legal malpractice action into a commodity; undermine the sanctity of the attorney-client relationship; result in decreasing the availability of legal services to insolvent clients; impact negatively on the duty of confidentiality and further the commercialization of malpractice claims that in turn would spawn an increase in unwarranted malpractice actions"); Picadilly, Inc. v. Raikos, 582 N.E.2d 338, 342 (Ind. 1991), abrogated on other grounds by Liggett v. Young, 877 N.E.2d 178 (Ind. 2007) (affirming lower court's grant of summary judgment on legal malpractice claim on grounds that assignment of claim to former adversary was contrary to public policy) (concluding legal malpractice claims should not be assigned based on "particular concern about two issues: the need to preserve the sanctity of the client-lawyer relationship, and the disreputable public role reversal that would result during the trial of assigned malpractice claims")."

Comment: Illinois also prohibits assignment of legal malpractice claims, but Illinois courts have allowed some exceptions to this rule.

Edward X. Clinton, Jr.

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Neuman v. Frank, 2011 NY Slip Op 2215 - NY: Appellate Div., 4th Dept. 2011 - Google Scholar

2011-11-05T07:44:00.000-07:00

Neuman v. Frank, 2011 NY Slip Op 2215 - NY: Appellate Div., 4th Dept. 2011 - Google Scholar:

This is an appellate ruling on a discovery dispute in a legal malpractice case. The defendant attorney appealed from orders requiring him to produce his (a) personal tax returns and (b) his cellular phone records.

The Appellate Division ordered that the trial court conduct an in camera review of the cellular phone records to protect the confidentiality of the lawyer's communications with other clients. The Appellate Division also ordered the trial court to conduct an in camera review of the tax returns.

Comment: This is a New York case - but the concerns about confidentiality of client communications are important in every lawyer v. client case.

Edward X. Clinton, Jr.

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Legal Malpractice Plaintiff Cannot Prevail Without An Expert

2011-10-25T18:44:00.000-07:00

Nicholas v. Millstein, Cal: Court of Appeals, 1st Appellate Dist., 5th Div. 2011 - Google Scholar:

The plaintiff attempted to prove a malpractice claim against his former lawyer. The trial court entered judgment for the defendant at the close of plaintiff's case because the plaintiff did not present expert testimony.

Plaintiff also failed to obtain a transcript and file the transcript with the record on appeal.

Comment: Plaintiff made two errors - failing to obtain an expert and failing to make sure the record was preserved for any appeal.

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8th Circuit Rejects Statute of Limitations Defense - Missouri Law

2011-10-22T07:56:00.000-07:00

Joyce v. Armstrong Teasdale, LLP, 635 F. 3d 364 - Court of Appeals, 8th Circuit 2011 - Google Scholar:

This is a statute of limitations case. The key issue is when did the claim accrue.

James Joyce filed suit against Armstrong Teasdale on September 12, 2008.

Joyce had invented certain computer technology. He retained Armstrong to represent him. At the same time, Armstrong also represented TechGuard, LLC (a company Joyce owned with his wife). In 2001, Armstrong prepared documents assigning Joyce's rights in the computer technology to to TechGuard. Later, when Joyce divorced he lost half his rights to the technology.

The Court describes the issue as follows: "At the same time the law firm represented Joyce individually, it prepared several documents for TechGuard Security, L.L.C. (a company Joyce formed with his wife) granting TechGuard an exclusive license to sell certain computer firewall technology Joyce had invented. Joyce later lost half of the patent rights to his invention when he and his wife divorced. The district court concluded Joyce's alleged claim accrued on January 1, 2001, at the moment he signed the license agreement, and dismissed Joyce's complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure based on the ground it was barred by the five-year statute of limitations applicable to legal malpractice claims in Missouri. See Mo.Rev. Stat. § 516.120(4)."

The key issue is when the claim accrued - 2001 or later. Joyce argued that he did not know he was injured by Armstrong's actions until many years later (after the divorce). Joyce also alleged that Armstrong informed him that he would not be injured by the transfer of the technology to TechGuard.

The Court ruled that because Missouri does not impose a duty on the client to check the attorney's work - Armstrong could not establish (in a motion to dismiss under Rule 12(b)(6)) that the statute of limitations had expired.

The court explains: "Armstrong Teasdale represented Joyce when the firm allegedly told him he would not be injured by signing the agreements, and thus he had a right to rely upon such representation. During the course of an attorney-client relationship, Missouri does not impose upon a layperson the duty to double-check the attorney's work or to understand that an attorney's conduct caused harm unless a source external to the attorney-client relationship reasonably puts the layperson on notice the attorney has caused harm. See Klemme v. Best, 941 S.W.2d 493, 497 (Mo.1997) (indicating the plaintiff "was under no duty to double check [his attorney's] work as long as [he] was his attorney" and concluding the statute of limitations did not begin to run until the plaintiff retained separate counsel and "the fact of damage could have been discovered or made known."); Zero Mfg. Co. v. Husch, 743 S.W.2d 439, 441 (Mo.Ct.App.1987) (indicating a plaintiff was reasonably put on notice of his contract attorney's wrongdoing only after opposing counsel identified the error in the ensuing contract negotiations); see also Wright v. Campbell, 277 S.W.3d 771, 777 (Mo.Ct.App.2009) ("In the absence of any known or reasonably knowable circumstances which would impose on the client a duty to double-check the attorney's proper performance of his professional obligations, the mere passage of a mandatory time deadline on an underlying claim is not sufficient to commence the limitations period on a legal malpractice action.")."

The court made clear that Armstrong could prevail in the case - if it later demonstrated that Joyce understood that the assignment of the technology "cause him harm."

Comment: the law firm may well prevail in a summary judgment motion.

Edward X. Clinton, Jr.

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New Jersey Censures A Lawyer Who Altered His Law School Transcript

2011-10-12T08:07:00.000-07:00

New Jersey has censured a lawyer who changed a grade from a "C" to an "A."

His law firm turned him after firing him and giving him a chance to self-report.

http://www.judiciary.state.nj.us/drb/decisions/Prothro_11_061.pdf

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Ohio - Client Must Obtain Expert Testimony To Contest Attorney Fee Claim

2011-10-08T19:27:00.000-07:00

Fincher v. Phillips, 2011 Ohio 968 - Ohio: Court of Appeals, 6th Appellate Dist. 2011 - Google Scholar:

Here, the client, Fincher, brought a legal malpractice claim against his criminal defense counsel - alleging that the lawyer overcharged him.

The client had no expert and the trial court granted summary judgment against the client. The appellate court affirmed. The Court explained:

" In the present case, appellant asserts that appellee committed malpractice by charging him excessive legal fees. Generally expert testimony is required to establish a claim of legalmalpractice unless the alleged breach "is within the ordinary knowledge and experience of laymen." Bloom v. Dieckmann (1984), 11 Ohio App.3d 202, 203. The determination of legalfees involves several factors including the time and labor required, the difficulty of the issues involved, and the requisite skill needed to provide the legal service. Prof.Cond.R. 1.5. This is not within the ordinary knowledge of laymen. Establishing malpractice for charging excessive fees clearly necessitates expert testimony.

{¶ 13} In his motion for summary judgment, appellee provided expert testimony that the $15,000 retainer was reasonable. Appellant's brief in opposition provided no expert testimony or other evidence refuting this claim. Unopposed expert testimony is sufficient to determine that there is no genuine issue of material fact. See Hoffman v. Davidson (1987), 31 Ohio St.3d 60, 62. Accordingly, appellant failed to establish any legal grounds for his claim of legalmalpractice. No genuine issue of material fact remained in dispute. As such, summary judgment was proper. Appellant's assignment of error is found not well-taken."

Edward X. Clinton, Jr.

www.clintonlaw.net

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New York Court Reviews Continuous Representation Doctrine

2011-10-07T20:24:00.001-07:00

Morson v. KREINDLER & KREINDLER, LLP, Dist. Court, ED New York 2011 - Google Scholar:

Plaintiff sued a New York law firm for legal malpractice. The District Court concluded that either Illinois or Massachusetts law applied and that the claim was barred by the statute of limitations.

The decision contains an excellent summary of the distinctions between New York, Massachusetts and Illinois law on the statute of limitations.

"Therefore, for purposes of applying New York's borrowing statute to plaintiff's malpractice claims, New York and Massachusetts provide for a three-year limitations period, and Illinois for a two-year period, regardless of the fact that plaintiff brings his malpractice claim under more than one theory.

As to the date of accrual of the malpractice claims, New York looks to the date in which the malpractice was committed, while Illinois and Massachusetts consider the date in which the plaintiff discovers his or her injury arising out of such misconduct. McCoy v. Feinman, 99 N.Y.2d 295, 301, 785 N.E.2d 714 (2002) (A claim accrues "when all the facts necessary to the cause of action have occurred and an injured party can obtain relief in court." (citingAckerman v. Price Waterhouse, 84 N.Y.2d 535, 541, 644 N.E.2d 1009 (1994))); Shumsky v. Eisenstein, 96 N.Y.2d 164, 166, 750 N.E.2d 67 (2001) (citing Glamm v. Allen, 57 N.Y.2d 87, 95, 439 N.E.2d 390 (1982)("What is important is when the malpractice was committed, not when the client discovered it.")); Hester v. Diaz, 346 Ill. App. 3d 550, 553 (Ill. App. Ct. 5th Dist. 2004)("In Illinois, the statute of limitations for legal malpractice is two years `from the time the person bringing the action knew or reasonably should have known of the injury for which damages are sought.'" (citing 735 Ill. Compiled Statutes 5/13-214.3(b))); Lyons v. Nutt, 436 Mass. 244, 247, 763 N.E.2d 1065 (Mass. 2002)("The statute of limitations applicable to a legal malpractice claim begins to run when a client `knows or reasonably should know that he or she has sustained appreciable harm as a result of the lawyer's conduct.'" (citing Williams v. Ely, 423 Mass. 467, 473, 668 N.E.2d 799 (1996))). Here, the purported malpractice was committed by defendant, and the resulting injury was discovered by plaintiff in or around January 15-22, 2003. See discussion supra. Plaintiff's malpractice claims therefore accrued under the law of all three states during that period."

Illinois does not recognize the doctrine of continuous representation. Serafin v. Seith, 284 Ill. App. 3d 577, 585 (Ill. App. Ct. 1st Dist. 1996); Witt v. Jones & Jones Law Offices, P.C., 269 Ill. App. 3d 540, 544 (Ill. App. Ct. 4th Dist. 1995)(noting that the state's highest court has also not recognized a continuous treatment doctrine in medical malpractice cases)."

Massachusetts would not apply the doctrine in this situation.

Comment: the legal principles are routine, but the case provides an excellent review of how New York, Massachusetts and Illinois analyze statute of limitations arguments. Illinois does not recognize the continuous representation doctrine.

Edward X. Clinton, Jr.

www.clintonlaw.net

Too Much Student Loan Debt And No Plan To Repay It = No Law License

2011-10-02T09:30:00.000-07:00

The Ohio Supreme Court has denied the application of Hassan Jonathan Griffin on the ground that he has too much student loan debt and no plan to repay it.

Mr. Griffin has $170,000 in student loan debt - sadly a common amount for a new law graduate. Obviously, he has no job and no ability to repay the debt.

The Ohio Supreme Court says that Mr. Griffin has neglected his financial responsibilities by failing to pay the debt. The court mentioned that Mr. Griffin is raising his nine year old daughter and has suffered financial hardship.

The student was a hardworking person who had held jobs before law school and after law school as noted:

"Before attending law school, the applicant had worked full-time as a stockbroker for approximately five and a half years, earning enough money to meet his expenses. Since completing his first year of law school, however, respondent has worked part-time, 24 to 32 hours a week, at the Franklin County Public Defender’s Office, earning $12 per hour. Although the applicant lives with his nine-year-old daughter and her mother in the mother’s home and contributes minimally toward the household expenses, he has been unable to make any payments on his student loans, which began to come due in July 2009. He has also been unable to meet his credit-card obligations since approximately December 2008, and one creditor has obtained a default judgment against him."

The court thus admits the obvious - that even a hard working person can have troubles in the recession.

Comment: Contrary to the Ohio Supreme Court's opinion, lots of students have debt that exceeds $150,000. The Court appears to be picking on someone who is poor and a minority - a man who is also raising his own child. This decision illustrates a problem - a judicial system that appears to be out of touch with reality and appears not to grasp the basic realities of this recession. In my opinion, if this decision were actually enforced and followed, hundreds of law students around the country would be denied admission to the bar simply because they can't pay their students loans. Notice to the Ohio Supreme Court - in my opinion this decision reflects that you fail to understand basic economic realities of this recession and have issued a decision that if taken literally would disqualify thousands of people from the practice of law.

Edward X. Clinton, Jr.

www.clintonlaw.net

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Lawyer Argues Client's Claim Preempted By ERISA

2011-10-01T07:56:00.000-07:00

McMillan v. UAW-FORD LEGAL SERVICES PLAN, Dist. Court, MD Florida 2011 - Google Scholar:

The district court for the Middle District of Florida rejected an argument that a legal malpractice claim was preempted by ERISA.

The lawyer was employed by the UAW-Ford Legal Services Plan and he allegedly committed malpractice in estate planning for the client.

The client sued in state court - the lawyer removed the case to federal court.

The district court granted the motion to remand to state court.

The Court explained its ruling as follows:

"The question before the Court is whether McMillan's claim can be re-characterized as a federal claim under § 1132. Although the first three Butero elements are arguably met in this case, the Court finds that the fourth element has not been met. The compensatory relief being sought by McMillan is not akin to relief available under ERISA. If a plaintiff's state law claim is "actually (1) a claim for recovery of benefits due under the terms of the plan, (2) a claim seeking to enforce his rights under the terms of the plan, or (3) a claim for clarification of future benefits under the terms of the plan," then it is properly re-characterized as a federal civil action under § 1132(a) and properly preempted by ERISA. Ervast, 346 F.3d at 1014. McMillan is not asserting a claim to benefits due under the terms of a plan; she is not seeking to enforce her rights under the terms of a plan; nor is she asserting a claim for clarification of future benefits under the terms of a plan. In this case, McMillan is seeking to recoup the monetary value of the assets that she argues should have been passed to her had Geraldine Provost's intentions been properly carried out by Defendants. In other words, the financial loss suffered by McMillan for which she seeks compensation was not a loss of benefits under the plan.^[2]Having reached the conclusion that McMillan's claim cannot be re-characterized as a federal claim under § 1132, the Court finds that McMillan's claim is not preempted by ERISA and that remand is appropriate."

Comment: this is a unique argument raised by the lawyer and this may be a case of first impression.

Edward X. Clinton, Jr.

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Legal Profession Blog: Left In The Lurch, Attorney Reprimanded

2011-09-30T10:24:00.000-07:00

Legal Profession Blog: Left In The Lurch, Attorney Reprimanded:

Nebraska has publicly reprimanded an attorney who improperly notarized pleadings he had signed for a colleague, apparently with the colleague's consent. Again, this is a sign of the times - state regulators punish lawyers who improperly notarize signatures.

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Sanctions Imposed On Defendants For Failing To Preserve Electronic Evidence

2011-09-27T15:28:00.000-07:00

UNITED CENTRAL BANK v. KANAN FASHIONS, INC., Dist. Court, ND Illinois 2011 - Google Scholar:

The United States District Court for the Northern District of Illinois has imposed sanctions on defendants in a breach of contract action by a Bank. The Defendants failed to safeguard a computer server and, as a result, it was lost. What is interesting about this case is that the Court rejected the Defendants' efforts to blame the loss of the server on their lawyers.

The Magistrate Judge conducted a five-day evidentiary hearing on the issue and awarded sanctions to the Plaintiff Bank. The District Court affirmed all the major aspects of the decision.

The Defendants attempted to blame their lawyers, but the Magistrate Judge and the District Judge rejected these contentions.

The Court wrote:

"First, invoking an advice of counsel defense, Defendants contend that because Bailey instructed them that "nothing should be done with or to any of the computers, servers or related equipment" and that they were "not to take any action," they cannot be sanctioned for "doing nothing" to preserve the server. Doc. 434 at 3-4. The argument fails to persuade. Neither the letter nor the spirit of Bailey's instruction to "do nothing" reasonably suggested that Defendants would meet their discovery obligations by not taking the affirmative steps to safeguard critical ESI. What Bailey meant by "do nothing" obviously was to "do nothing" that would compromise the information contained on the server. In any event, "do nothing" in no way characterizes Defendants' conduct regarding the server. As the magistrate judge found:

[T]he ultimate responsibility for the spoliation of the warehouse server rests with Defendants. . Defendants [engaged in a] scheme to avoid producing the warehouse server. Defendants repeatedly put [Bailey] off without explaining their delay in transporting the server. They deliberately kept [Bailey] out of the loop regarding their agreement with [First Midwest Bank] and their ongoing negotiations with Associated to purchase the server. ... Defendants even orchestrated the sale of the server to a foreign corporation in order to eliminate whatever information is on the server.

Doc. 425 at 48. That is, Defendants did precisely what Bailey instructed them not to do: they took affirmative steps that, apparently by design, resulted in the loss of the server and its data."

Here, in addition to sanctions (legal fees) the court also gave the Plaintiff an adverse inference instruction as set forth in this quote:

"Specifically, the magistrate judge recommended: (1) that United be awarded fees and expenses incurred in bringing and prosecuting the sanctions motion; (2) that Defendants be precluded from introducing any evidence related to data that was on the server and that cannot be found elsewhere; (3) that an adverse inference is warranted; and (4) that the adverse inference be implemented by informing the jury that Defendants abandoned the server and instructing the jury that Defendants' failure to preserve the server may be considered evidence that the server contained information unfavorable to Defendants."

Comment: the loss of computers and electronic information can often lead to costly satellite litigation and sanctions against the party that caused the evidence to be lost. Here, the lawyers escaped blame for the client's failure to preserve evidence because they were apparently able to show that they instructed the Defendants to preserve the computer server.

www.clintonlaw.net

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Illinois Supreme Court suspends lawyer for bad faith failure to pay student loans

2011-09-27T11:43:00.000-07:00

Illinois Supreme Court disbars 12, suspends 43, censures 10 | Illinois Lawyer Now:

Rule 8.4(i) (formerly 8.4(a)(8)) of the IllinoisProfessional Rules of Conduct states that “it is professional misconduct for alawyer to avoid in bad faith the repayment of an education loan guaranteed bythe Illinois Student Assistance Commission or other governmental entity.” As a result, in a time where studentloans are high and the job market is unforgiving, we believe some guidance forlawyers struggling with debt is in order.

Earlier this year, the Illinois AttorneyRegistration and Disciplinary Commission entered an order suspending anIllinois attorney from practicing law for 6 months in response to his failureto pay student loans pursuant to the above rule. In In re Olufemi F.Nicol, the Illinois Student Assistance Commission, d/b/a the IllinoisDesignated Account Purchase Program (ISAC), made thirty-five phone calls, sentnineteen e-mails, and sent thirty-four letters to the offending attorneyregarding his failure to pay his outstanding student loans. The ISAC was unable to reach theoffending attorney in the majority of those attempted contacts. As a result, the ISAC requested thatthe ARDC investigate the offending attorney’s conduct. The ARDC then proceeded to attempt tocontact the offending attorney, and eventually subpoenaed him. However, the offending attorney did notrespond to the ARDC’s attempted contacts, and did not appear in compliance withthe subpoena. He eventually testifiedthat he did not receive the attempted contacts from the ISAC or the ARDCbecause he had moved from his former address. However, his testimony was ultimately inconsistent withother testimony as to where he was residing and how he had actually been incontact with the ISAC at some points in the past. Furthermore, he alsotestified that he was notified of the ARDC’s action against him by a friend,but did not contact the ARDC as soon as he learned of the matter.

The ARDC’s decision was also based on numerous otherfactors. First, the offendingattorney had been sued for failure to repay student loans in the past therebyaggravating his present misconduct. Furthermore, the offending attorney was employed at a high paying jobfor two years while avoiding repayment of his loans. Additionally, the offending attorney lied to the ISACstating he could not repay the loans because he had been suspended frompracticing law and was out of the country, both of which were not true. Moreover, the offending attorney failedto fulfill his obligation to notify the ARDC of any address changes pursuant toSupreme Court Rule 756(c). Thus,the ARDC found against him.

Comments and Possible Lessons:

There a variety of lessons to be learned fromthis case. First, if you arestruggling with student debt, be vigilant in your correspondence with yourstudent loan organizations. Hadthe offending attorney in this case been honest with the ISAC, his misconductwould have been aggravated much less. Second, be aware that the ARDC may have an action against you even ifthere is no judgment against you. In this case, there was no civil judgment against the offending attorneyregarding his failure to repay his debt. Regardless, the ISAC contacted the ARDC explaining the offendingattorney’s conduct, and the offending attorney was subject to sanctions. Third, failure to be on notice of anARDC action against you is not a valid defense. Every attorney has an obligation to notify the ARDC of howhe or she can be contacted. Fourth,if you are subject to an ARDC action for failure to pay student loans, explainto them why you failed to repay them without hiding behind ineffectiveexcuses. Things happen whererepayment of loans is simply not an option. Had the attorney in this case explained to the ARDC that becauseof what was going on in his life he was simply unable to pay the loans, andthat he did not intend on avoiding repayment in bad faith, the ARDC may havebeen more sympathetic towards his position, and he may not have been sanctioned.

This case will no doubt cause many young lawyers to be afraid that their failure to pay their loans will cause professional discipline. Estimates are that perhaps one-third of the law school graduates in the next ten years will never get a law job. Those unfortunate students should maintain a paper trail of their sufferings by keeping copies of correspondence and documenting expenses.

Edward X. Clinton, Jr.

www.clintonlaw.net

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A Shareholder Lacks Standing To Sue For Malpractice to His Corporation

2011-09-26T16:33:00.000-07:00

Singh v. Duane Morris, LLP, 338 SW 3d 176 - Tex: Court of Appeals 2011 - Google Scholar:

The Texas Court of Appeals held that the Plaintiff Robin Singh lacked standing to sue Duane Morris for legal malpractice because he was a shareholder of the corporate client.

The Court framed the issue as follows:

It is undisputed that all of appellant's alleged damages in this malpractice suit were incurred by Singh Corporation after January 1, 2003. In his first issue, appellant contends this undisputed fact does not impact the viability of his malpractice claim against appellees. In support of this contention, appellant asserts that since Singh Corporation is a Subchapter S corporation and he is the sole shareholder, this court can ignore the existence of the corporation, a separate legal entity, and determine that he was "harmed directly by the actions of [appellees] and he has standing to recover damages." We disagree."

The court concluded that the corporation was the client of Duane Morris - not Mr. Singh. Therefore the corporation should have been the plaintiff in the malpractice lawsuit.

Edward X. Clinton, Jr.

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Court Holds Non-Client Lacks Standing To Sue For Legal Malpractice

2011-09-16T16:58:00.000-07:00

MENGLE v. Goldsmith, Dist. Court, MD Florida 2011 - Google Scholar:

The Complaint alleged that the defendants committed legal malpractice in connection with six real estate projects in Florida. Plaintiff alleged that the Defendants "provided legal services for each of the projects, and were tasked to draft the operating agreements, term sheets, and subscription agreements. Plaintiff alleges that none of the documents prepared by the defendants were properly executed or in accordance with state or federal law."

The Defendants moved to dismiss on the ground that there was no personal jurisdiction and that the Plaintiff failed to allege an attorney-client relationship. The court agreed.

The Court held that there was no privity of contract between the Plaintiff and the Defendants. Thus, there was no duty owed by the law firm to the Plaintiff.

"In Florida, the general rule is that an attorney's liability for negligence in the performance of his or her professional duties is limited to clients with whom the attorney shares privity of contract. Espinosa v. Sparber, Shevin, Shapo, Rosen and Heilbronner, 612 So. 2d 1378, 1379 (Fla. 1993); Moss v. Zafiris, Inc., 524 So. 2d 1010, 1011 (Fla. 1988); Angel, Cohen & Rogovin v. Oberon Inv., N.V., 512 So. 2d 192, 194 (Fla. 1987); Hunt Ridge at Tall Pines, Inc. v. Hall, 766 So. 2d 399, 400 (Fla. 2d DCA 2000); Littell v. Law Firm of Trinkle, Moody, Swanson, Byrd and Colton, 345 F. App'x 415, 418 (11th Cir. 2009). In this context, "privity" describes the relationship of persons who are parties to a contract. Espinosa, 612 So. 2d at 1379-80; Brennan v. Ruffner, 640 So. 2d 143, 145 (Fla. 4th DCA 1994).

Establishment of the attorney-client relationship-and thus the attachment of the concomitant rights and duties of each side to the relationship-does not require a written agreement or evidence that fees have been paid or agreed upon. The Florida Supreme Court has said that the test for an attorney-client relationship "is a subjective one and hinges upon the client's belief that he is consulting a lawyer in that capacity and his manifested intention is to seek professional legaladvice. However, this subjective belief must . . . be a reasonable one."

It appears that the complaint was filed by an investor in the real estate projects - an investor who may not have had any contact with the lawyers.

Mansur v. Podhurst Orseck, P.A., 994 So. 2d 435, 438 (Fla. 3d DCA 2008)(footnote and citations omitted). However, "[t]he subjective belief test is only applied after a putative client consults with an attorney, and is used to emphasize that, following a consultation, it is the belief of the putative client and not the lawyer's actions that determines whether a lawyer-client relationship has developed." Jackson, 372 F.3d at 1281 n.29 (citing Dean v. Dean, 607 So. 2d 494, 496-97 (Fla. 4th DCA 1992)). "[T]he test Florida courts have used to determine if an attorney-client relationship exists is: (1) the putative client consults with an attorney and, subsequently, (2) the client has a reasonable subjective belief that he is consulting a lawyer in that capacity and his manifested intention is to seek professional legal advice." In re Lentek Int'l, Inc., 346 F. App'x 430, 433 (11th Cir. 2009)(citations and internal quotation marks omitted). Additionally, "it is not sufficient merely to show that an attorney-client relationship existed between the parties, it is essential that the plaintiff show that the relationship existed with respect to the acts or omissions upon which the malpractice claim is based." Lane v. Cold, 882 So. 2d 436, 438 (Fla. 1st DCA 2004)."

This case was decided on a motion to dismiss. While the Complaint was dismissed, the Court granted Plaintiff leave to amend the complaint.

Edward X. Clinton, Jr.

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Court Holds That The Client Waives the Attorney-Client Privilege When It Sues Its Former Lawyers

2011-09-13T21:01:00.000-07:00

LYON FINANCIAL SERVICES, INC. v. VOGLER LAW FIRM, PC, Dist. Court, SD Illinois 2011 - Google Scholar:

This case is an apparently complex legal malpractice dispute between Lyon Financial Services, Inc. (Plaintiff), the Vogler Law Firm (Defendant) and two other lawfirms (Third-Party Defendants) that replaced the Vogler law firm as counsel in a lawsuit.

The case teaches the often painful lesson that the client that sues its lawyers must often disclose communications to successor counsel. The resulting discovery can often be very uncomfortable for both the client and the lawyers.

The Procedural History of the Underlying Case:

The Court explained the history as follows:

"The Vogler Defendants originally represented Lyon in Christopher Greater Area Rural Health Planning Corp. v. Lyon Financial Serv., Inc., et al., Case No. 5-L-8, an action filed in the Circuit Court of the Second Judicial Circuit of Franklin, County, Illinois. Due to alleged professional misconduct during discovery, Lyon dismissed the Vogler Defendants as counsel and retained Craig and McKeown as counsel for trial. A jury returned a verdict against Plaintiff for $67,926,728.31. After trial, Lyon dismissed Craig and McKeown as counsel and retained Stinson for the appeal. The case settled while on appeal (Docs. 73 and 74).

Plaintiff Lyon filed the instant action against the Vogler Defendants alleging lega lmalpractice and professional negligence, breach of fiduciary duty, and breach of contract (Doc. 2). The Vogler Defendants filed a third-party complaint against Craig and McKeown seeking to indemnify them for contribution in the malpractice and professional negligence claims (Doc. 41). The Vogler Defendants now seek the production of attorney-client communications and work product between Lyon and Craig and McKeown, and between Lyon and Stinson."

Obviously, the Vogler law firm served discovery on the Plaintiff and successor counsel. The Plaintiff and the successor counsel objected on the ground that the communications were privileged. Under Illinois law, however, a party can waive the attorney-client privilege by putting in issue the communications. Here, the Vogler law firm alleged that the legal malpractice claim against it was sufficient to waive the attorney-client privilege.

The Court agreed. It noted that there can be an implied waiver of the attorney-client privilege:

Under certain circumstances, the attorney-client privilege may be waived either expressly or impliedly. See Lama v. Preskill, 818 N.E.2d 443, 448 (Ill. App. Ct. 2004). An implied waiver results from "a party voluntarily inject[ing] either a factual or legal issue into the case, the truthful resolution of which requires an examination of the confidential communications." Id. (citing Pyramid Controls, Inc. v. Siemens Indus. Automations, Inc., et al., 176 F.R.D. 269, 272 (N.D. Ill. 1997)).

"District courts in this circuit have held that in order to implicitly waive the attorney-client privilege, a party "must affirmatively put at issue the specific communication, document or information to which the privilege attaches." Dexia Credit Local v. Rogan, 231 F.R.D. 268, 275 (N.D. Ill. 2004). The Third Circuit Court of Appeals has found that placing a privileged communication "at issue" occurs when "the client asserts a claim or defense, and attempts to prove that claim or defense by disclosing or describing an attorney client communication."Rhone-Poulenc Rorer Inc. v. Home Indem. Co., 32 F.3d 851, 863 (3d Cir. 1994)."

The Vogler law firm argued that it needed the communications to show that successor counsel (the Third Party defendants) was negligent and caused the loss. The Court agreed and explained as follows:

"Lyon's arguments against waiver fall short for several reasons. First, Lyon's complaint seeks damages for the amount of the verdict rendered after trial and after the Vogler Defendants had ceased their representation of Lyon. If Lyon were seeking to prove the cause of damages that occurred prior to trial, and only during the Vogler Defendants' representation, then attorney-client communications could arguably be irrelevant. Because, however, the specific party, if any, that caused Lyon's trial loss remains unresolved, Lyon has implicitly placed its attorney-client communications with subsequent counsel "at issue" by introducing a "factual or legal issue in [this] case" that must be determined by invading the attorney-client privilege. SeeLama, 818 N.E.2d at 448.

Second, Lyon has argued that the Vogler Defendants' negligence—and their negligence alone—"hamstrung" subsequent counsel with "no chance" to alter the eventual outcome at trial (Doc. 47; Doc. 73). But, implicit within Lyon's argument is the fact that the alleged legalmalpractice of which it accuses the Vogler Defendants—or at least the effects thereof—must have continued beyond the duration of Defendants' representation. This contradicts Lyon's contention that Defendants' alleged legal malpractice was "prior to and independent[] from" subsequent counsel's involvement (Doc. 73). Whether it was day-one or day-one hundred of trial, subsequent counsel would have been affected by the Vogler Defendants' alleged legalmalpractice. Thus, this case is distinguished from Fishel & Kahn because that court held that the legal malpractice had already ceased well before subsequent counsel was retained. SeeFishel & Kahn, 727 N.E.2d at 245."

Comment: the decision to file a malpractice claim often puts successor counsel in the spotlight. The successor can be accused of negligence or worse.

Edward X. Clinton, Jr.

www.clintonlaw.net

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New Jersey District Court Denies Lawyer's Motion To Dismiss Breach of Fiduciary Duty case

2011-09-05T22:49:00.000-07:00

WIATT v. WINSTON & STRAWN, LLP, Dist. Court, D. New Jersey 2011 - Google Scholar:

This case is still in the pleading stage. Plaintiffs alleged that their former financial adviser Kenneth Starr and Starr's attorney, Jonathon Bristol, conspired to steal $2.0 million of Plaintiff's money by wrongfully transferring those funds to Bristol's attorney trust account. I will focus in this post on the breach of fiduciary duty count.

Winston & Strawn, which employed Bristol when the transfers were made, moved to dismiss the complaint, but its motion was denied.

The Plaintiffs alleged that they relied upon Starr to manage all aspects of their finances from 2003 to 2010. Starr also referred the Plaintiffs to his attorney, Jonathon Bristol, who joined Winston & Strawn in 2008.

The Court describes the complicated relationship among the Plaintiffs, Starr, Bristol and Winston & Strawn as follows:

Defendant Jonathan Bristol, a New Jersey resident, was, at all times relevant to this litigation, a capital partner at the law firm of Winston & Strawn, an Illinois limited liability partnership. (Compl., ¶¶ 16, 17). The Complaint refers to Bristol and Winston & Strawn collectively as the "Winston & Strawn Defendants."

Bristol had provided legal representation to Starr and his companies since at least 2007, at which time he served as a partner at the law firm of Thelen, LLP. (Compl., ¶¶ 31, 32). In 2008, Bristol left the firm of Thelen, LLP and was hired as a capital partner at Winston & Strawn, LLP. (Compl., ¶ 34). While at Winston, Bristol performed substantial work on behalf of the Starr Defendants, generating over $1 million in legal fees for Winston & Strawn in 2009 alone. (Compl., ¶ 38). For instance, on March 17, 2010, Winston received a $100,000 payment for services purportedly rendered by Bristol on behalf of Starr. (Compl., ¶ 39). This money did not come directly from Starr, however; it came from Bristol's attorney trust account. (Id.). The Complaint alleges that Bristol was aware that such funds belonged to defrauded clients of Starr. (Id).

In addition to representing the Starr Defendants, Winston & Strawn and Bristol also represented the Wiatts. (Compl., ¶¶ 41, 49). Starr had referred James Wiatt to Bristol in 2009 in connection with his departure from his employment at the William Morris Agency. (Compl., ¶ 42). Based on such recommendation, James Wiatt engaged the Winston & Strawn Defendants — by way of e-mail exchange with Bristol on Bristol's Winston & Strawn e-mail account — to provide him with legal services and advice regarding his separation agreement with the William Morris Agency. (Compl., ¶ 45). Bristol and Winston & Strawn continued to provide legal services to James Wiatt on a variety of matters through late May 2010, including but not limited to coordinating an interview with the SEC that was, unbeknownst to the Wiatts, related to wire transfers from the Wiatts' account into Bristol's attorney trust account. (Compl., ¶¶ 46, 58). During this time, Bristol communicated with the Wiatts through his Winston e-mail account, in writing on Winston & Strawn letterhead and/or by telephone. (Compl., ¶ 47). Bristol (on behalf of Winston & Strawn) was also copied on correspondence concerning certain contractual disputes in which James Wiatt was involved. (Compl., ¶ 51). Bristol also prepared at least two legal memoranda for James Wiatt (both of which were written on Winston letterhead, designated as "Attorney-Client Privileged" and saved on Winston's network) relating to complex legal employment and corporate issues in or around January 2010. (Compl., ¶ 52)."

The Complaint goes on to allege that in 2010 Starr and Bristol conspired to steal $2.0 million from the Wiatts by transferring funds from Starr's accounts directly to Bristol's attorney trust account.

The Complaint also describes how the Wiatts were contacted by the SEC, which was investigating Starr. Starr recommended that the Wiatts retain Bristol in connection with the investigation, even though Bristol was already representing Starr.

The opinion recites the facts as follows:

"In or around mid-May 2010, James Wiatt was contacted by an attorney for the SEC. (Compl., ¶ 93). Wiatt contacted Starr for his advice. (Compl., ¶ 96). Starr reassured Wiatt that there was "nothing to worry about," recommended that Wiatt contact Bristol for guidance, but failed to acknowledge that: (a) he was a target in the investigation, (b) he had been interviewed by the SEC in March 2010 and/or (c) that Bristol was representing him in connection with the SEC investigation. (Compl., ¶¶ 96-98).

James Wiatt subsequently contacted Bristol who explained that it was his understanding that the SEC investigation was a "routine investigation" "in the wake of the Madoff case." (Compl., ¶ 100). Wiatt asked Bristol whether he should be worried about entrusting his finances with Starr; Bristol told him "there was nothing . . . to worry about." (Id.). Bristol then advised Wiattthat his law firm, Winston & Strawn, was representing the Starr entities with regard to other matters and that he would need Wiatt to waive any potential conflicts that might exist if he wanted Bristol to represent him. (Compl., ¶ 101). Bristol did not, however, disclose that he and his attorney trust account were targets of the SEC investigation or that he was already representing Starr in connection with said investigation. (Compl., ¶ 102).

Bristol began representing Wiatt in connection with the SEC investigation after Wiatt agreed to waive any conflicts. (Compl., ¶ 103). In this regard, over the course of several weeks in mid-May 2010, Bristol communicated with the SEC, via e-mail and telephone calls, on behalf ofJames Wiatt; Bristol and Wiatt also communicated with each other, via e-mail and telephone calls, concerning said investigation. (Compl., ¶¶ 105-108). Throughout the course of Bristol's representation of James Wiatt in connection with the SEC investigation, Bristol learned that he and his law firm were also involved in the investigation (in connection with the transfer of funds from Bristol's attorney trust account). (Compl., ¶ 108). Bristol never conveyed this information to Wiatt; instead, he continued to represent Wiatt, not only with respect to the SEC investigation, but also in connection with his separation agreement from William Morris as it pertained to prospective employment opportunities. (Compl., ¶¶ 108, 109)."

Bristol was terminated by Winston & Strawn and both he and Starr were ultimately indicted by a federal grand jury.

The Opinion:

First, the Court first decided that New Jersey law would apply.

Second, the court dismissed a negligent misrepresentation claim against Winston & Strawn.

Third, the court held that the count for breach of fiduciary duty stated a claim against Winston & Strawn. Winston & Strawn argued that, although a lawyer owes a fiduciary duty to his clients, he does not owe a duty to manage investments. The Wiatt's alleged that Bristol provided investment advice and represented them in an effort to get some of their money back from Starr's business associate.

The Court concluded the discussion on the breach of fiduciary duty claim as follows: "Based on such allegations, Plaintiffs have adequately alleged the existence of a fiduciary relationship between the Wiatts and Bristol which extended to matters concerning management of their Starr investments. Plaintiffs have also alleged a breach of that trust by alleging, among other things, Bristol's representations concerning the January and April transfers as investments in UBS despite the fact that the Wiatts' funds had been transferred into his attorney trust account and that none of such funds were transferred by him to anyone at UBS in January 2010. (Compl., ¶¶ 63-66, 75,). See generally MacDonell, 150 N.J. at 563-65. In light of the foregoing, the Court finds that Plaintiffs have adequately stated a claim for breach of fiduciary duty under New Jersey law. See, e.g., MacDonell, 150 N.J. at 563 ("The essence of a fiduciary relationship is that one party places trust and confidence in another who is in a dominant or superior position.")."

Comment: this case is unusual in that the lawyer allowed his trust account to be used by an investment adviser. Even if the lawyer knew nothing of the underlying fraud, he erred in becoming a middleman for the investment manager. This is the type of bizarre event that large law firms fear when they hire lateral partners. Bristol was hired by Winston & Strawn in 2008. It would have been difficult to expect any firm to anticipate that a lawyer would become intertwined with a financial adviser and would agree to represent the adviser's clients on matters dealing with the adviser. The facts of this case are reminiscent of law exam question.

Edward X. Clinton, Jr.

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Illinois Appellate Court Gives Family Law Lawyers One Extra Day to File Fee Petitions

2011-09-03T21:19:00.000-07:00

On August 5, 2011, the Illinois Appellate Court decided the case of In Re Marriage of Baniak, 1-09-2017. The only issue in the appeal was whether it was proper for the trial court to hear a fee petition from a lawyer who missed the statutory deadline in which to file the fee petition.The attorney, Dean Dussas, represented Kristina Baniak in the divorce case. The engagement letter was signed on April 8, 2008. The final judgment in the case was entered on October 31, 2008.

Dussias filed his fee petition against Kristina Baniak on December 1, 2008, thirty-one days after the final judgment. The key issue is whether the trial court had jurisdiction to hear the fee petition when the attorney missed the statutory deadline.Section 508(c)(5) of the Act provides that: "A [fee] petition ... shall be filed no later than the end of the period in which it is permissible to file a motion pursuant to Section 2-1203 of the Code of Civil Procedure," 750 ILCS 5/508(c)(5). Under Section 2-1203(a) of the Code of Civil Procedure: "In all cases tried without a jury, any party may, within 30 days after the entry of the judgment..., file a motion, ... for other relief." 735 ILCS 5/2-1203(a).

Kristina argued that the trial court lacked subject matter jurisdiction over the fee petition. The trial court and the appellate court disagreed on the ground that the Illinois Legislature does not have the power to control the court's subject matter jurisdiction. The Court cited Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc., 199 Ill. 2d 325, 334-35 (2002), for the proposition that the courts have power to hear justiciable matters. The Appellate Court then went on to reject cases that hold that the legislature may "impose "conditions precedent" to the court's exercise of jurisdiction that cannot be waived."Thus, the trial court had jurisdiction to hear the fee petition which was a justiciable matter.

Comment: in my opinion this case was wrongly decided. The Illinois Marriage and Dissolution of Marriage Act allows a lawyer to file a fee petition 30 days after judgment. Because divorce did not exist at common law, the Illinois legislature had the power to limit the Court's jurisdiction. Moreover, the ability to file a fee petition is a creation of statute - a privilege that exists in divorce cases, not all cases. The holding, taken to its logical conclusion, allows the lawyer to file a fee petition at any time after the judgment is entered. There is thus, no limit on the lawyer's ability to litigate fee disputes. This holding is, in my opinion, unjust to divorce clients who have a right to rely on well-settled law and is far too forgiving to a lawyer who missed a deadline.

In sum, I respectfully disagree with this decision, and would urge Ms. Baniak to appeal to the Illinois Supreme Court.Edward X. Clinton, Jr.

Illinois Appellate Court Holds That A Court-Appointed Child Representative Is Immune From Liability

2011-08-21T16:38:00.000-07:00

VLASTELICA v. BREND, Ill: Appellate Court, 1st Dist., 1st Div. 2011 - Google Scholar

The plaintiffs were Milijana Vlastelica and her minor son Kristian Chehaiber. Milijana filed a three count complaint against Jeffrey Brend of Levin and Brend, P.C. for (a) legal malpractice; (b) intentional breach of fiduciary duty; and (c) intentional interference with Milijana's custody rights. Milijana alleged that Brend wrongfully attempted to force her to agree to a visitation schedule and that Brend ignored the child's best interests.

The circuit court held that the defendants were absolutely immune from civil liability for Brend's work as a child representative. The Appellate Court affirmed.

Brend had acted as the child's representative in the dissolution of marriage case for more than five years. Milijana made a host of complaints against Brend and accused Brend of causing the parties to litigate child custody for an additional five years. Milijana filed several motions in the dissolution action - including one to remove Brend which was denied.

The Appellate Court followed the reasoning of an opinion of the Seventh Circuit to hold that the child's representative - appointed by the Court - was immune from civil liability. The Appellate Court reasoned as follows:

"The Supreme Court has recognized that the common law provides for absolute immunity for judges (see Briscoe v. LaHue, 460 U.S. 325, 334-35 (1983)), and the Seventh Circuit Court of Appeals (hereinafter, the Seventh Circuit) has held that guardians ad litem and child representatives are entitled to the same absolute immunity because they are "arms of the court." Cooney v. Rossiter, 583 F.3d 967, 970 (7th Cir. 2009). The Cooney court stated:

"Guardians ad litem and court-appointed experts, including psychiatrists, are absolutely immune from liability for damages when they act at the court's direction. [Citations.] They are arms of the court, much like special masters, and deserve protection from harassment by disappointed litigants, just as judges do. Experts asked by the court to advise on what disposition will serve the best interests of a child in a custody proceeding need absolute immunity in order to be able to fulfill their obligations `without the worry of intimidation and harassment from dissatisfied parents.' [Citation.] This principle is applicable to a child's representative, who although bound to consult the child is not bound by the child's wishes but rather by the child's best interests, and is thus a neutral, much like a court-appointed expert witness." Cooney, 583 F.3d at 970.
¶ 22 Plaintiffs here argue that as a federal court decision, Cooney is not binding on us (see Werderman v. Liberty Ventures, LLC, 368 Ill. App. 3d 78, 84 (2006)) and should not be followed unless its logic is persuasive. Plaintiffs contend Cooney's logic is not persuasive, because it wrongly equated a child representative with a guardian ad litem. Plaintiffs note that, under section 506(a)(2) of the Act (750 ILCS 5/506(a)(2) (West 2010)), the guardian ad litem acts as a witness who is empowered to advocate for the child's best interests via his written reports and recommendations, whereas section 506(a)(3) provides that the child representative advocates for the child's best interests while "participat[ing] in the litigation as does an attorney for a party." 750 ILCS 5/506(a)(3) (West 2010). Plaintiffs contend that as an attorney representing the child's best interests, the child representative stands in a fiduciary relationship with the child, owes a duty of confidentiality to the child, and is no more an "arm of the court" than the parties' own attorneys. Plaintiffs also contend the Cooney court improperly equated a child representative with a "neutral" court-appointed expert witness. Plaintiffs argue that while a child representative "is neutral to the interests of the parents," he is not "neutral" to the best interests of the child.

¶ 23 Contrary to plaintiffs' arguments, we find Cooney's logic persuasive. For a court deciding a custody matter, "`the issue that singly must be decided is the best interest of the child.'" In re Austin W., 214 Ill. 2d 31, 49 (2005) (quoting In re Ashley K., 212 Ill. App. 3d 849, 879 (1991)). The child representative appointed by the court assists in this determination by meeting with the child and the parties, investigating the facts of the case, and advocating for the child's best interests after reviewing the facts and circumstances of the case. We agree with Cooney's characterization of a child representative as a "hybrid" of a child's attorney and a child's guardian ad litem who acts as an arm of the court in assisting in a neutral determination of the child's best interests. Cooney, 583 F.3d at 969-70. We also agree with Cooney's holding that to best aid the court in its determination of the child's best interests, the child representative must be accorded absolute immunity so as to allow him to fulfill his obligations without worry of harassment and intimidation from dissatisfied parents. Cooney, 583 F.3d at 970."

Comment: this case appears to be correctly decided. It would be very difficult to get lawyers to accept appointments as a child's representative in dissolution cases if they were subject to liability. The alleged negligent acts - urging a particular visitation schedule and allegedly "ignoring" the child's extracurricular activities - are normal activities of a child's representative. Even without any immunity, the alleged actions of the child's representative did not rise to the level of negligence.

Edward X. Clinton, Jr.

When Does A Legal Malpractice Claim Accrue? The Eighth Circuit Weighs In

2011-08-11T22:18:00.000-07:00

Joyce v. Armstrong Teasdale, LLP, 635 F. 3d 364 - Court of Appeals, 8th Circuit 2011 - Google Scholar

The Eighth Circuit reversed the dismissal of a legal malpractice case against Armstrong Teasdale, a large law firm. The case is important because the plaintiff convinced the Court of Appeals that his malpractice claim accrued when he discovered his injury - years after the law firm completed the work at issue.

The plaintiff, James Joyce, filed his legal malpractice lawsuit on September 12, 2008.

He alleged that the defendant law firm negligently drafted an exclusive license to sell certain computer firewall technology that Joyce had invented.

Prior to 2000, Joyce retained Armstong Teasdale to represent him in connection with certain patents. Later, the Armstrong firm formed TechGuard, a company that Joyce and his wife, Magee, partially owned.

Joyce obtained a patent for certain Heuristic Firewall technology.

In 2000, the Armstrong firm represented TechGuard in negotiations with Joyce, under which Joyce granted TechGuard an exclusive license to use and sell the
Heuristic Firewall technology.

Later, when Joyce and his wife divorced, she was awarded one-half of the Heuristic Technology patent.

Joyce filed suit against the law firm in September 2008.

The District Court held that the action for malpractice accrued when the exclusive license was signed (January 1, 2000) and thus the complaint was time-barred.

The Court of appeals reversed on the ground that Joyce
would not have reasonably discovered the conflict and resulting injury in 2000.

The court wrote:

Armstrong Teasdale represented Joyce when the firm allegedly told him he would not be injured by signing the agreements, and thus he had a right to rely upon such representation. During the course of an attorney-client relationship, Missouri does not impose upon a layperson the duty to double-check the attorney's work or to understand that an attorney's conduct caused harm unless a source external to the attorney-client relationship reasonably puts the layperson on notice the attorney has caused harm. See Klemme v. Best, 941 S.W.2d 493, 497 (Mo.1997) (indicating the plaintiff "was under no duty to double check [his attorney's] work as long as [he] was his attorney" and concluding the statute of limitations did not begin to run until the plaintiff retained separate counsel and "the fact of damage could have been discovered or made known."); Zero Mfg. Co. v. Husch, 743 S.W.2d 439, 441 (Mo.Ct.App.1987) (indicating a plaintiff was reasonably put on notice of his contract attorney's wrongdoing only after opposing counsel identified the error in the ensuing contract negotiations); see also Wright v. Campbell, 277 S.W.3d 771, 777 (Mo.Ct.App.2009) ("In the absence of any known or reasonably knowable circumstances which would impose on the client a duty to double-check the attorney's proper performance of his professional obligations, the mere passage of a mandatory time deadline on an underlying claim is not sufficient to commence the limitations period on a legal malpractice action.").

Comment: This is a constant issue in legal malpractice cases - when did the client's injury accrue? When would the client have reasonably discovered the injury?
Here as in many cases the statute of limitations defense succeeds in the trial court, only to be rejected by the Court of Appeals.

Edward X. Clinton, Jr.

Lawyer and ARDC Agree To A Public Reprimand For Disclosure of Confidences

2011-07-31T09:41:00.000-07:00

BEFORE THE HEARING BOARD OF THE

This is a hearing board decision by Joint Stipulation. The lawyer was accused of wrongfully disclosing client confidences absent a court order when the client apparently made a claim that she had been coerced into a settlement agreement.

The lawyer represented a client in a dissolution of marriage action and then withdrew. Her former client apparently filed a motion to set aside an "oral settlement agreement." The former client claimed that the lawyer "had not provided her with sufficient information to give informed consent to the agreement; that the agreement was unconscionable; and that Respondent coerced her into entering into the agreement."

The former client then "attached to the motion copies of six email communications between herself and Respondent in which they communicated regarding Bauch's divorce case."

The Joint Stipulation then provides:

"Between November 2, 2007, and November 17, 2007, Bauch's husband's attorney, Ron A. Cohen, telephoned Respondent and told her that he intended to call her as a witness at the hearing on Bauch's motion to set aside the oral settlement agreement. Respondent told Cohen that she had information that would refute Bauch's allegations of attorney coercion.

Shortly thereafter, Respondent caused copies of at least 32 distinct email communications between Bauch and Respondent or her employees to be sent to Cohen. The materials sent to Cohen consisted of 519 pages, in part because they contained duplicate copies of some of the emails. The correspondence included information pertaining to Respondent's representation of Bauch that was confidential or secret."

The Joint Stipulation provides for a reprimand of the lawyer.

The error was disclosing confidential communications absent a court order. The penalty was a public reprimand.

Comment: Obviously, lawyers have to be careful before disclosing confidential client communications. The lawyer may disclose a communication to respond to a charge of wrongdoing, but here there may not have been a charge of wrongdoing.
The better practice would have been for the lawyer to insist upon a subpoena and then to request a court order. Obviously, the lawyer believed that she was complying with the rules. The Joint Stipulation is somewhat vague - was there a charge of wrongdoing? - What should the lawyer have done?

Finally, this is not a final decision, but only a Joint Stipulation of Facts.

Edward X. Clinton, Jr.

Client Loses Appeal To Compel Arbitration of Legal Malpractice Case

2011-07-24T21:38:00.000-07:00

Augusta v. Keehn & Associates, 193 Cal. App. 4th 331 - Cal: Court of Appeals, 4th Appellate Dist., 1st Div. 2011 - Google Scholar

Usually, it is the lawyer who wants to arbitrate the attorney-client fee dispute or malpractice case. Here, the client filed a malpractice suit and conducted discovery.

The client filed the case in December 2008, but did not move to compel arbitration until July 2009.

The California Court of Appeals held that he had waived the right to arbitrate by (a) unreasonably delaying in seeking arbitration and (b) participating in the litigation by conducting discovery.

Edward X. Clinton, Jr.

Higgins v. Thurber, 14 A. 3d 745 - NJ: Supreme Court 2011 - Google Scholar

2011-07-24T21:28:00.000-07:00

Higgins v. Thurber, 14 A. 3d 745 - NJ: Supreme Court 2011 - Google Scholar

The New Jersey Supreme Court has concluded that a legal malpractice action against a lawyer was not barred by res judicata or otherwise barred. The lawyer argued that the probate proceeding, an action to settle a probate account, gave the plaintiff a "full and fair opportunity" to litigate the malpractice claims.

The New Jersey Supreme Court concluded that the action for the settlement of an account is "a formalistic proceeding, unique to probate." The Court explained its holding:

"The Appellate Division in the present case rightly detected that it would be anomalous to assume that Thurber's intervention in the specialized probate accounting proceeding that focused on the executor somehow converted the proceeding into an action binding as to any and all other potential actions in respect of other parties. As Judge Pressler observed fifteen years ago in Perry, supra, an action for an accounting on an estate provides a means for addressing "the conduct of the executor, not the conduct of others." Ibid. While it certainly may be permissible for a chancery court to expand a probate proceeding to encompass a claim of legal malpractice, that was not done here."

Comment: res judicata or collateral estoppel is sometimes raised as a defense to a legal malpractice case. Most courts have rejected these arguments and have required the lawyer to defend the malpractice lawsuit.

Edward X. Clinton, Jr.

The Federal Circuit Holds that federal courts have subject-matter jurisdiction over a legal malpractice case arising out of a patent dispute

2011-07-24T21:20:00.000-07:00

Warrior Sports, Inc. v. Dickinson Wright, PLLC, 631 F. 3d 1367 - Court of Appeals, Federal Circuit 2011 - Google Scholar

This holding of the Sixth Circuit flatly contradicts the recent decision by the Illinois Appellate Court that held that the state courts have subject matter jurisdiction over legal malpractice claims arising out of patent disputes.

Obviously, this is an emerging debate in the legal malpractice area. The debate may well reach the United States Supreme Court in the near future.

Edward X. Clinton, Jr.

www.clintonlaw.net

Rhode Island Supreme Court Enforces Statute of Limitations

2011-07-24T21:15:00.000-07:00

Zanni v. Voccola, 13 A. 3d 1068 - RI: Supreme Court 2011 - Google Scholar

This case holds that the statute of limitations begins to run when the adverse event occurs - here the dismissal of the underlying case. Thus, the statute of limitations began to run in 2000 and expired in 2003 - two years before the case was filed.

A Plaintiff Cannot Recover For Excessive Fees Without Introducing Expert Testimony

2011-07-17T17:55:00.000-07:00

Fincher v. Phillips, 2011 Ohio 968 - Ohio: Court of Appeals, 6th Appellate Dist. 2011 - Google Scholar

This is another in a long line of decisions reaffirming the old rule that a plaintiff cannot recover in a legal malpractice case without introducing expert testimony. Here, the plaintiff wanted to recover what he believed were excessive fees paid. With no expert testimony, the lawyer obtained summary judgment. The Ohio Appellate Court affirmed.

Edward X. Clinton, Jr.

Stephen v. Sallaz & Gatewood, Chtd., 248 P. 3d 1256 - Idaho: Supreme Court 2011 - Google Scholar

2011-07-14T16:16:00.000-07:00

Stephen v. Sallaz & Gatewood, Chtd., 248 P. 3d 1256 - Idaho: Supreme Court 2011 - Google Scholar

The Idaho Supreme Court has affirmed a malpractice judgment against a divorce lawyer, holding that the award was supported by "substantial evidence."

The plaintiff claimed that the lawyer failed to conduct an adequate inquiry into the value of certain real property at issue in the divorce. The court's holding was as follows:

Pamela argues that Gatewood breached the duties he owed to her by failing to properly investigate, inform, and advise her as to the value of the Crescent Rim property, separate and apart from his breach for failing to investigate her diminished capacity. She argues that Gatewood never told her about the $500,000 valuation made by Stephen and that no competent attorney would have knowingly advised a client to provide a substantially lower valuation. Pamela also argues there was sufficient evidence to support the malpractice finding regarding her diminished capacity.

The district court found that Gatewood breached duties he owed to Pamela by failing to investigate, inform, and advise her regarding the value of the Crescent Rim property when such a disparity existed between the valuations provided by the parties. The court found that Gatewood's failure to inquire into Pamela's mental state and to take appropriate protective measures also breached the duties he owed her.

We affirm the district court's finding that Gatewood committed legal malpractice by failing to investigate, inform, and advise Pamela regarding the value of the Crescent Rim property.

Edward X. Clinton, Jr.

Legal Malpractice Claims on the Rise « Swartz Campbell Professional Liability Blog

2011-07-14T10:19:00.000-07:00

Legal Malpractice Claims on the Rise « Swartz Campbell Professional Liability Blog

The Insurance Journal suggests that legal malpractice claims are increasing.

An Illinois Lawyer, Representing Himself, Defeats the ARDC Before The Hearing Board

2011-07-12T07:32:00.000-07:00

Filed July 8

A Illinois lawyer, representing himself before the ARDC Hearing Board, won a complete dismissal of all charges against him. He was accused of drafting a will for a client where the will contained a gift to the lawyer. The charges were dismissed after a hearing where the lawyer demonstrated that he documented the clients' requests and had another lawyer travel with him to the will signing to explain the transaction to the clients.

Please note that the administrator does have the right to appeal to the Review Board, and, perhaps, the Illinois Supreme Court.

Edward X. Clinton, Jr.

MAGNETEK, INC. v. KIRKLAND AND ELLIS, LLP, Ill: Appellate Court, 1st Dist., 2nd Div. 2011 - Google Scholar

2011-07-12T02:44:00.000-07:00

MAGNETEK, INC. v. KIRKLAND AND ELLIS, LLP, Ill: Appellate Court, 1st Dist., 2nd Div. 2011 - Google Scholar

The Appellate Court has ruled that the Illinois courts have subject matter jurisdiction over a malpractice case against a large Chicago law firm. The alleged malpractice arose out of an arbitration of a patent dispute. The defendant law firm moved to dismiss the case on the ground that the federal courts have exclusive jurisdiction over patent cases. The Appellate Court disagreed on the ground that the current case was a legal malpractice case, not a patent case. Further, the Appellate court ruled that there were no issues of patent law remaining to be adjudicated in the case.Thus, there was no federal question.

The Court explained its holding as follows: "Having determined that there is no disputed federal patent issue implicated by the underlying lawsuit, we also conclude that there is no substantial issue of federal patent law remaining to confer federal jurisdiction. Because the Osram cases answer the question of whether Magnetek would have been successful on the merits of its underlying claim, all that remains of patent law is "the mere presence of a patent as relevant evidence to a [state-law legal malpractice] claim[, which] does not by itself present a substantial issue of patent law." Laboratory Corp. of America Holdings, 599 F.3d at 1284. A legal malpractice claim, too, is a "fact specific application of state law," which the Federal Circuit deems insufficiently substantial to confer jurisdiction. See Laboratory Corp. of America Holdings, 599 F.3d at 1284. Like the Federal Circuit, we conclude that there is nothing inherent in a state-law claim that "require[s] `resort to the experience, solicitude, and hope of uniformity that a federal forum offers,'" and for that reason, there is no substantial issue of federal patent law involved to confer federal jurisdiction. Laboratory Corp. of America Holdings, 599 F.3d at 1285 (quoting Grable, 545 U.S. at 312). With respect to the remaining elements of Magnetek's claim, legal malpractice cases proceed no differently than any other malpractice case. Magnetek still must establish through expert testimony that Kirkland breached the applicable standard of care and prove that it suffered damages as a result of the breach."

Edward X. Clinton, Jr.

GROCHOCINSKI v. MAYER BROWN ROWE & MAW LLP, Dist. Court, ND Illinois 2011 - Google Scholar

2011-07-11T17:36:00.000-07:00

GROCHOCINSKI v. MAYER BROWN ROWE & MAW LLP, Dist. Court, ND Illinois 2011 - Google Scholar

This long-running legal malpractice case led to a rare grant of sanctions against a Chicago attorney under 28 U.S.C. Section 1927.

As the court noted: "Section 1927 provides that an attorney "who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." 28 U.S.C. § 1927. Section 1927 sanctions are appropriate in situations in which "counsel acted recklessly, counsel raised baseless claims despite notice of the frivolous nature of these claims, or counsel otherwise showed indifference to statutes, rules, or court orders." Kotsilieris v. Chalmers, 966 F.2d 1181, 1184-85 (7th Cir. 1992) (collecting cases)."

The court sanctioned the plaintiff's lawyer for what it characterized as deposition misconduct. The court described the lawyer's conduct as follows: "Edward Joyce's conduct in Grochocinski's deposition is another matter. As the Court found in its March 31, 2010 Opinion, during that key deposition Joyce repeatedly obstructed questioning with improper interruptions, objections, insults ("You're either hard of hearing or dumb"), and accusations that Mayer Brown's motions were "a fraud." His unprofessional and childish behavior culminated with a threat to Mayer Brown's counsel: "Could you imagine if [another lawyer] was defending this dep? There would be a footprint on your head right now." (Op. at 23-24.) Joyce's behavior cannot be excused as zealously defending his client — it is obvious he was improperly trying to make it harder for Mayer Brown's counsel to reach the truth. In his opposition to Mayer Brown's motion, Joyce does not defend Joyce's behavior at the deposition; it notes only that it ultimately won the only discovery dispute fully adjudicated on the merits."

Comment: in recent years courts have been more willing to issue sanctions against lawyers who act inappropriately during depositions. It is a good idea to remember that what is said in a deposition is part of the transcript and can be a source of future trouble, particularly if the litigation later turns out badly for the lawyer.

Edward X. Clinton, Jr.

LPP MORTGAGE LTD. v. HARTZELL, GLIDDEN TUCKER & HARTZELL, Dist. Court, CD Illinois 2011 - Google Scholar

2011-07-02T11:05:00.000-07:00

LPP MORTGAGE LTD. v. HARTZELL, GLIDDEN TUCKER & HARTZELL, Dist. Court, CD Illinois 2011 - Google Scholar

This is a ruling by the United States District Court for the Central District of Illinois.

The plaintiff is a mortgage company that sued a law firm that allegedly negligently handled a mortgage foreclosure case.

In this ruling the plaintiff obtained summary judgment against the defendant lawyers on two affirmative defenses, the defenses of mitigation of damages and proximate cause.

The court rejected the mitigation of damages defense on the ground that, in the underlying case, the Illinois Appellate Court held that the lawyers had failed to meet their burden of proof, which was a decision on the merits. Thus, in the district court's view, the plaintiff could not mitigate its damages by hiring other attorneys, because any new case would be barred by res judicata.

The proximate cause defense was rejected on the ground that the Illinois Appellate Court held that the defense was waived. The federal court correctly declined to revisit state court rulings.

It wrote: "No aspect of this legal malpractice case can include evaluation of the question whether the State courts were correct in their rulings. Thus, Hartzell's assertion that it did in fact sufficiently raise the ownership issue is a non-starter. The Appellate Court's finding of waiver was not based on inadequacy of the briefing on the question; it was based on the failure to raise the issue in the trial court. Any conduct by successor counsel with respect to the substance or adequacy of the legal brief on this question is therefore precluded by the finding that the argument was not made by Hartzell in the first instance. This Court lacks jurisdiction to review these rulings."

Thus, the lawyers have lost their affirmative defenses in this case. Their options are (a) trial or (b) appeal.

Edward X. Clinton, Jr.

Snyder v. HEIDELBERGER, Ill: Supreme Court 2011 - Google Scholar

2011-07-02T10:49:00.000-07:00

Snyder v. HEIDELBERGER, Ill: Supreme Court 2011 - Google Scholar

The Illinois Supreme Court has reversed a decision of the Illinois Appellate Court and has held that a legal malpractice claim is barred by the statute of repose.

The underlying malpractice allegation concerned the alleged failure to properly prepare a quitclaim deed in a real estate transaction.

Ms. Snyder filed a legal malpractice claim against Elliot Heidelberger "alleging that defendant negligently prepared a quitclaim deed that failed to convey certain real estate to plaintiff and her husband, Wilbert, as joint tenants with right of survivorship."

In Illinois, property that is held in a joint tenancy with the right of survivorship passes to the surviving joint tenant.

The alleged malpractice was discovered after Wilbert died. Plaintiff discovered that the legal title to the property was held by a trustee in a land trust and upon her husband's death, the property passed to Wilbert's son by his first marriage. The negligent act was failing to discern that the property was held in a land trust. Thus, Wilbert did not own the property, the land trust did. Thus, the deed from Wilbert to Wilbert and his wife as joint tenants was null and void.

The problem for plaintiff was that the deed was prepared more than six years prior to the commencement of the litigation. Defendant argued that the case should be dismissed pursuant to the Illinois Statute of Repose.

The Illinois Statute of Repose and Statute of Limitations for legal malpractice states:

"Section 13-214.3 of the Code sets forth the limitations and repose period applicable to actions for legal malpractice. It states, in relevant part, as follows:

"(b) An action for damages based on tort, contract, or otherwise (i) against an attorney arising out of an act or omission in the performance of professional services or (ii) against a non-attorney employee arising out of an act or omission in the course of his or her employment by an attorney to assist the attorney in performing professional services must be commenced within 2 years from the time the person bringing the action knew or reasonably should have known of the injury for which damages are sought.

(c) Except as provided in subsection (d), an action described in subsection (b) may not be commenced in any event more than 6 years after the date on which the act or omission occurred.

(d) When the injury caused by the act or omission does not occur until the death of the person for whom the professional services were rendered, the action may be commenced within 2 years after the date of the person's death unless letters of office are issued or the person's will is admitted to probate within that 2 year period, in which case the action must be commenced within the time for filing claims against the estate or a petition contesting the validity of the will of the deceased person, whichever is later, as provided in the Probate Act of 1975." 735 ILCS 5/13-214.3(b), (c), (d) (West 1994)."

As the Court explained, the statute of limitations in Illinois does not begin to run until the wrongful act is discovered. However, the discovery rule does not apply to the six-year statute of repose.

The court wrote: "The statute of limitations set forth in section 13-214.2(b) incorporates the "discovery rule," which serves to toll the limitations period to the time when the plaintiff knows or reasonably should know of his or her injury. Hester v. Diaz, 346 Ill. App. 3d 550, 553 (2004). The purpose of a statute of repose like the one found in section 13-214.3(c) operates to curtail the "long tail" of liability that may result from the discovery rule. Sorenson v. Law Offices of Theodore Poehlmann, 327 Ill. App. 3d 706, 708 (2002). A statute of repose begins to run when a specific event occurs, regardless of whether an action has accrued. Ferguson v. McKenzie, 202 Ill. 2d 304, 311 (2001). Thus, a statute of repose is not tied to the existence of any injury, but rather it extinguishes liability after a fixed period of time. Id. The statute of repose applicable in the case at bar prohibits the commencement of an action more than six years "after the date on which the act or omission occurred." 735 ILCS 5/13-214.3(c) (West 1994)."

Here, because the wrongful act (the preparation of the deed occurred more than six years before the lawsuit was filed, the claim was barred.

The court explained as follows:

"Here, the record shows the last act of defendant's representation of Wilbert in this matter took place on June 25, 1997, when defendant mailed the original recorded quitclaim deed to Wilbert. Thus, the statute of repose expired several years before plaintiff filed her malpractice action. Accordingly, the circuit court properly granted defendant's motion to dismiss count I of plaintiff's complaint as time-barred."

Comment: this case is one of many construing the Illinois Statute of Repose. This case, decided by the Illinois Supreme Court, will most certainly resolve some of the conflicting opinions in the lower courts.

Edward X. Clinton, Jr.

CERTAIN UNDERWRITERS AT LLOYD'S v. JOHNSON & BELL, LTD., Dist. Court, ND Illinois 2011 - Google Scholar

2011-06-23T21:49:00.000-07:00

CERTAIN UNDERWRITERS AT LLOYD'S v. JOHNSON & BELL, LTD., Dist. Court, ND Illinois 2011 - Google Scholar

This case is part of a growing area of malpractice law - the insurance company sues the lawyers it retained to provide a defense to one of its insureds.

In recent years, courts have been more willing to hear these claims and have rejected the lawyer's argument that the only the client can sue for malpractice. Here, the District Court deferred a ruling on this issue.

The Defendants also argued that some of the claims were premature because the underlying case (where the alleged negligence happened) had not reached a judgment. The District Court agreed and dismissed those claims.

The District Court, however, ruled that the insurance company could sue the lawyers for allegedly failing to name the proper party in interest in the underlying lawsuit. The insurance company, according to the Complaint, was required to retain new counsel and amend its pleadings to add the proper party to the case. The Court explained its decision as follows:

"Based on the analysis in Goran and Sorenson, the Court finds that plaintiff's claims relating to these allegations are neither premature nor barred under Illinois law. Defendants' omission of FCC as a defendant in the Lewis and Zarndt declaratory judgment actions allegedly necessitated correction of the pleadings at a fixed cost to plaintiff. At the time the fees were incurred, it was clear that the fees were directly attributable to counsel's neglect. SeeSorenson, 90 Ill. App. 3d at 374, 413 N.E.2d at 53 (reasoning that "Illinois law does not preclude [courts] from awarding attorneys' fees when those fees constitute nothing more than ordinary losses resulting from the defendant's conduct."). The mistake was independent of the outcome of the underlying lawsuit and was analogous to the submission of defective appellate filings in Goran. Because no underlying state court action bears on the matter, the allegations do not implicate the Illinois courts' concern with judicial economy. The Court concludes that damages relating to these allegations are actionable under Illinois law."

Edward X. Clinton, Jr.

Federal Court Fines Lawyer $1K for 'Extensive Use of Improper Confidentiality Markings' - News - ABA Journal

2011-06-23T11:35:00.000-07:00

Federal Court Fines Lawyer $1K for 'Extensive Use of Improper Confidentiality Markings' - News - ABA Journal

A Katten Muchin Rosenman lawyer was fined $1,000 by a federal appeals court for "extensive use of improper confidentiality markings."

This is the first fine I have ever seen for confidentiality markings.

Edward X. Clinton, Jr.

Mitchell v. Schoen, Dist. Court, ND Illinois 2011 - Google Scholar

2011-06-10T10:41:00.000-07:00

Mitchell v. Schoen, Dist. Court, ND Illinois 2011 - Google Scholar

This decision is a denial of a motion to dismiss a malpractice case. The client alleged that the lawyer failed to file a personal injury case within the applicable statute of limitations and then requested the client to execute a false affidavit in an effort to keep the claim alive.

The District Judge denied the motion to dismiss the legal malpractice case and also denied the motion to dismiss the breach of fiduciary duty count, which was based on the request that the client execute a false affidavit.

The Court dismissed a breach of contract claim on the ground that it was based on the same set of operative facts as the legal malpractice count.

Edward X. Clinton, Jr.

Kentucky Court Holds that Lawyer's Letters Concerning Fees were Ambiguous - CLARK v. HECTUS & STRAUSE PLLC - February 25, 2011.

2011-05-19T22:08:00.000-07:00

CLARK v. HECTUS & STRAUSE PLLC - February 25, 2011.

This is a legal fee case where a client paid a lawyer $10,000 to handle a criminal case. When the case did not go to trial (there was a guilty plea) the client asked for some of his money back and the lawyer refused.

The Court held that the engagement letter was ambiguous, requiring the parties to try the case. The Court explained its reasoning in a concise statement:

"Appellant contended that he was entitled to reimbursement of all or some of this amount because his case did not go to trial. Because the written fee agreement between the parties is ambiguous as to the question of whether Appellant would be entitled to partial reimbursement of the subject fee in the event that the case did not proceed to trial, we hold that summary judgment was entered erroneously. Thus, we reverse and remand for further proceedings."

The court described the ambiguous correspondence between the lawyer and his client as follows:

"In their letter of February 13, 2004, Appellees advised Appellant that the initial $10,000 retainer paid by Appellant would "not cover the preparation and trial of this case." Thus, Appellees requested "[t]he remainder of the trial fee, an additional $10,000." A plain reading of this letter certainly suggests that this $10,000 payment was intended to compensate Appellees for their efforts in trial preparation and trial. Appellant responded to this request with a letter agreeing to pay Appellees an additional flat fee of $10,000 "for preparation and trial fee of for [sic] my case."

Comment: the obvious point is to make certain that the engagement letter contains clear language explaining what will happen to the legal fees.

Keith v. Gibson, Dist. Court, D. Delaware 2011 - Google Scholar

2011-05-14T23:07:00.000-07:00

Keith v. Gibson, Dist. Court, D. Delaware 2011 - Google Scholar

This legal malpractice case was dismissed by the United States District Court for the District of Delaware.

Keith sued lawyers who represented an adverse party in a real estate transaction. Keith argued that the lawyer defendants also acted as his lawyers. The Court did not agree and dismissed the lawsuit on the ground that there was no evidence of an attorney-client relationship between Keith and the lawyers. The Court commented:

The court concludes that Keith has failed to state a claim upon which relief can be granted with respect to the negligence claim because the complaint fails to establish either a direct or implied attorney-client relationship with Wright or MJHW in the underlying action. Absent an express contract, a claim of legal representation can be made by implication where, among other requirements, the attorney expressly or impliedly agreed to render such assistance and it is reasonable for the putative client to believe the attorney was representing him. Atkinson v. Haug, 622 A.2d 983, 986 (Pa. Super. 1993) (citing Sheinkopf v. Stone, 927 F.2d 1259, 1264 (1st Cir. 1991)). The court finds the complaint to be devoid of factual allegations suggesting that Keith had reason to believe that Wright or MJHW represented Keith or Ernest Keith. Rather, all of Keith's alleged discussions with Wright appear to have occurred in the context ofMJHW's representation of the Koutoufarises in their real estate and financing transactions.

Specifically, the complaint alleges that Keith and Ernest Keith sought advice from Wright and MJHW in connection with the Von Croy transaction, which involved the sale of a parcel owned by the Koutoufarises to pay the Koutoufarises' creditors, including Keith and Ernest Keith. (D.I. 1 at ¶ 18.) It was not reasonable for Keith and Ernest Keith, as major creditors of the Koutoufarises, to believe that Wright and MJHW would represent Keith and Ernest Keith's interests in the transaction despite knowing that Wright and MJHW had been retained by the Koutoufarises. Other alleged topics of discussion between Keith and Wright, such as the planned expansion of Koutoufaris-owned property onto land titled to Ernest Keith and Ernest Keith's subordination of a second mortgage held by him against the Koutoufarises, were part of the anticipated refinancing in which Wright and MJHW represented the Koutoufarises. (Id. at ¶ 19.) Moreover, contrary to Keith's characterization, the October 6, 1994 letter drafted by Wright for the Koutoufarises' creditors further indicates that Wright and MJHW's relationship with Keith and Ernest Keith was adversarial. (Id. at ¶¶ 22-23.).

Comment: this case addresses a major area of concern in the legal malpractice area - when is a person justified in believing that a lawyer represents him in a transaction. I agree with the decision, which was well-written.

Edward X. Clinton, Jr.

Indiana Asserts Personal Jurisdiction Over Ohio Lawyer Who Rendered Services in Indiana

2011-05-14T22:59:00.001-07:00

Indiana Asserts Jurisdiction Over Ohio Lawyer
Foley v. Schwartz, Ind: Court of Appeals 2011 - Google Scholar

This legal malpractice case arose out of an accident that occurred in Indiana while she was a passenger on an ATV. The plaintiff was a resident of Ohio. The defendant, Robert Schwartz, was also an Ohio resident.

Schwartz moved to dismiss the complaint on the ground that Indiana did not have personal jurisdiction over him. He argued that he was an Ohio resident with very limited contacts with Indiana.

The trial court agreed and dismissed the Complaint. The Court of Appeals reversed.

The Court of Appeals noted that Schwartz and the plaintiff had signed a Contract for a Contingent Fee Case and that Schwartz had done work on the matter. He had obtained records and searched for an Indiana lawyer to act as co-counsel. The alleged negligence was the failure to timely file the case under the Indiana statute of limitations for personal injury actions.

The Court held that Schwartz had sufficient "minimum contacts" with Indiana to be subject to personal jurisdiction. The court explained: "Here, Schwartz contracted with Foley to represent her in "all claims arising out of said accident claim or incident," which occurred in Switzerland County, Indiana. Appellant's Appendix at 256. Thus, it was predictable or foreseeable that, if Schwartz committed malpractice in handling Foley's Indiana claim, he may be haled into an Indiana court on a legal malpractice action."

Moreover, the Indiana Court of Appeals concluded that it was not unfair for him to be sued in Indiana. Under the analysis set forth in the Burger King case, it was fair and reasonable for an Indiana court to exercise jurisdiction over Schwartz. As the court noted, Indiana law governed the accident and the applicable statute of limitations. Also, Schwartz lived fairly close to the site of the accident (one hour's drive) and had visited Indiana casinos many times.

Comment: this decision is correct. A lawyer who holds himself out as able to handle a matter in another state should understand that he can be subject to that State's legal malpractice law.

The Seventh Circuit Rejects a Malpractice Claim Based Upon Jury Selection

2011-04-26T22:22:00.001-07:00

Bourke v. Conger, Court of Appeals, 7th Circuit 2011 - Google Scholar

David Bourke filed a legal malpractice action against his former trial lawyers for alleged negligence in the handling of his criminal case. The district court granted them summary judgment and the Seventh Circuit affirmed that decision.

In 1988, Bourke was charged with murder for the killing of Roger Johnson. At trial, Bourke was convicted. His conviction was overturned on appeal on the ground that the State of Illinois had not proved the elements of murder beyond a reasonable doubt. In particular, the State failed to negate Bourke's affirmative defense of self-defense. Bourke was thus acquitted by the Illinois Appellate Court.

Bourke claimed that his former lawyers committed legal malpractice by failing to exercise reasonable care in jury selection. Bourke retained an expert, who testified that the lawyers were negligent in failing to ask follow-up questions of some of the potential jurors and that they failed to strike one juror who did not like guns.

The Seventh Circuit summarized the testimony as follows: "Bourke submitted the expert report of David Thomas, a clinical professor at IIT-Chicago Kent College of Law and a trial attorney with thirty-five years of experience. Thomas's report stated that the Appellees should have asked further questions from or struck a juror who stated that he disliked firearms and that he disliked individuals keeping firearms in their homes. The Thomas report also stated that the Appellees should have questioned the jurors about their views on alcohol consumption because it was an issue that was likely to assume importance during the trial. It concluded that, because of these errors, 'the selection of the jury ... did not meet the standard of care reasonably to be expected from criminal defense counsel in 1999.'"

The lawyers moved for summary judgment and their motion was granted. The Court held that Bourke had not introduced sufficient evidence that the alleged errors of his trial counsel proximately caused his wrongful conviction. The Court of Appeals agreed with the district court that the expert report submitted by Bourke was insufficient. The Court held as follows: "While expert testimony is one of the types of evidence that a plaintiff like Bourke could normally rely on to ward off summary judgment, it is well established that an expert report that lacks foundation and depth will be given little consideration by courts. In order for "an expert report to create a genuine issue of fact, it must provide not merely ... conclusions, but the basis for the conclusions." Vollmert v. Wis. Dep't of Transp., 197 F.3d 293, 298 (7th Cir. 1999). See also McMahon v. Bann-o-matic Corp., 150 F.3d 651, 658 (7th Cir. 1998) ("[A]n expert who supplies nothing but a bottom line supplies nothing of value to the judicial process.") (citing Mid-State Fertilizer Co. v. Exchange Nat'l Bank, 877 F.2d 1333, 1339 (7th Cir. 1989))."

Comment: To my knowledge this is the first malpractice case brought in Illinois on the theory that the criminal defense lawyer failed to adequately question jurors and negligently failed to strike certain jurors. It seems to me that this type of allegation should not be sufficient to proceed to trial on a legal malpractice theory. The selection of jurors and the decision to strike some jurors and keep others is a classic trial lawyer judgment call and it should not be second-guessed by courts or experts years after the fact. Those lawyers who questioned that jury had the ability to look at the jurors and gauge their credibility and demeanor. An expert reviewing a cold transcript years after the fact cannot possibly understand what the trial lawyers were thinking.

Edward X. Clinton, Jr.

Illinois Lawyers May Be Able to Collect Their Legal Fees In Prosecuting Fee Claims Against Former Clients.

2011-04-19T21:14:00.000-07:00

TIMOTHY WHELAN LAW ASSOCIATES, LTD. v. KRUPPE, Ill: Appellate Court, 2nd Dist. 2011 - Google Scholar.

This case contains multiple holdings, but the most significant for the practicing attorney is the holding that the attorney can recover his attorney fees in pursuing a collection case against a client who does not pay his fee bill. This holding breaks new ground for lawyers and is a departure from previous Illinois decisions, which have been hostile to the attorney's right to seek collection costs and legal fees in a lawsuit to collect unpaid fees.

The lawyer-plaintiff included a provision in his engagement letter which allowed him to seek legal fees and costs of collection from the client.

The court summarized it as follows:

Defendant first contends that a provision in the fee agreement between him and plaintiff violated public policy. Specifically, defendant complains of the following provision: "In the even [sic] it becomes necessary to bring a collection proceeding against you for nonpayment of fees and costs, I may include reasonable attorney fees and cost [sic] in those proceedings." In this case, the jury first awarded plaintiff $30,339.14, and the trial court then awarded plaintiff an additional $19,660.86 based upon this provision.

Whether a provision of a contract violates public policy is a question of law subject to de novo review. In re Marriage of Rife, 376 Ill. App. 3d 1050, 1054 (2007). When the resolution of an issue turns upon public policy, it is not the role of a court to make policy; rather, the court must ascertain the public policy of this state with reference to the Illinois Constitution, statutes, and long-standing case law. In re Estate of Feinberg, 235 Ill. App. 3d 256, 265 (2009). Defendant believes he has found such a manifestation of public policy in Lustig v. Horn, 315 Ill. App. 3d 319 (2000).

The Court then went on to distinguish the Lustig v. Horn case and hold that the provision does not violate public policy.

The Court held that while there was a presumption of undue influence, the attorney could rebut the presumption if there was evidence that he made full disclosure to the client and the transaction was fair:

To rebut this presumption, the Lustig court continued, the attorney would have to show that "(1) he made a full and fair disclosure to [his client] of all the material facts affecting the transaction and (2) the transaction was fair." Lustig, 315 Ill. App. 3d at 327. Initially, the court noted that there was little evidence indicating that the attorney explained the implications of the provision at issue in that case to his client. Lustig, 315 Ill. App. 3d at 327. Subsequently, the court held that the transaction could not be deemed fair, and, in support, it set forth the paragraph upon which defendant here relies (which we set forth above).

Comment: this holding is a huge win for lawyers in Illinois, who can now, in appropriate cases, include a provision allowing the attorney to collect his fees and costs in a legal fee collection case. This development strengthens the attorney's legal position in certain collection cases where the provision is contained in the engagement letter.

Edward X. Clinton, Jr.
Copyright 2011

ESTATE OF BARNEY v. Manning, 2011 Ohio 480 - Ohio: Court of Appeals, 8th Appellate Dist. 2011 - Google Scholar

2011-04-18T17:58:00.000-07:00

ESTATE OF BARNEY v. Manning, 2011 Ohio 480 - Ohio: Court of Appeals, 8th Appellate Dist. 2011 - Google Scholar

This is an Ohio case that rejects respondeat superior liability for a law firm that employed an associate who allegedly converted trust funds. The lawyer was the successor trustee of an estate planning trust. He became the trustee of the trust before he joined the firm. The allegations are that he depleted the balance of the trust to invest money in a separate company that he controlled. Eventually, the trust was entirely depleted and the beneficiaries of the trust sought to impose vicarious liability on the law firm.

The Ohio Court of appeals found that the actions of the associate amounted to an intentional tort and that those actions were beyond the scope of his employment.

The firm was not aware of the conversion because the associate had the trust statements sent to his home address.

Comment: some courts might have found that the firm was negligent in failing to supervise the associate and in failing to safeguard the trust funds. My opinion is that the firm was lucky.

Edward X. Clinton, Jr.

HERRERA-CORRAL v. Hyman, Ill: Appellate Court, 1st Dist., 1st Div. 2011 - Google Scholar

2011-04-17T20:20:00.000-07:00

HERRERA-CORRAL v. Hyman, Ill: Appellate Court, 1st Dist., 1st Div. 2011 - Google Scholar

This decision affirms the long-standing rule that a criminal defendant must prove that he was innocent to recover for legal malpractice by his attorney.

Here, the lawyer allegedly failed to timely file an appeal from a criminal conviction. The defendant-client had pleaded guilty but had reserved the right to appeal on the ground that the evidence against him should have been suppressed. The client later obtained habeas corpus relief after a decision by the SEventh Circuit Court of Appeals, holding that, by failing to timely file the appeal, the lawyer rendered inefffective assistance of counsel. On remand, the indictment against the defendant (plaintiff in the malpractice case) was dismissed.

Plaintiff's counsel argued that there should be an exception to the actual innocence rule where the lawyer's malpractice robbed the defendant of the benefit of his bargain. The Court rejected the argument.

Comment: Plaintiff should appeal this case to the Illinois Supreme Court. If the allegations of the complaint are true, plaintiff was robbed of the benefit of his bargain and should be allowed to recover.

Edward X. Clinton, Jr.

Illinois Appellate Court Upholds Release In Favor of Lawyer - Second Malpractice lawsuit dismissed

2011-04-17T20:11:00.000-07:00

This is a legal malpractice case, which holds that the client who litigates one legal malpractice case against a lawyer, cannot file a second case arising out of the same set of facts.

The First Issue is Whether the Release Barred The Second Malpractice Claim.

The Court describes the factual setting and the procedural history of the two lawsuits as follows:

Plaintiff brought suit against defendant Per K. Hanson and his former law firm, Erickson, Papanek, Peterson, and Erickson(EPPE), for legal malpractice based on Hanson’s allegedly negligent failure to file an Illinois estate and generation-skipping transfer tax return. That suit was settled, and the parties entered into a “Settlement Agreement and Mutual General Release” (release). The lawsuit was then dismissed with prejudice.

Plaintiff later filed a second malpractice claim based upon Hanson’s failure to take allowable deductions on the federal estate tax return.

The Appellate Court affirmed the dismissal of the case on the ground that the release governing the first lawsuit was sufficiently specific to include all claims arising out of the representation. The court noted: In the case at bar, the release as a whole is general, because it releases “any and all manner of actions, *** whatsoever, known or unknown, in law or in equity, or for any other reason whatsoever, from the beginning of the world to the date hereof.” This type of language has been held to constitute a general release. See Whitlock, 144 Ill. 2d at 447; Thornwood, 344 Ill. App. 3d at 22; Carona, 203 Ill. App. 3d at 951. Under the express language of the general release, the claim involving the Federal return would be barred even if unknown, because the language provides a release of claims “known or unknown.”

The Court also noted: "Similarly, in the case at bar, the release is unambiguous and specifically releases claims that could have been previously raised in the first lawsuit and claims that relate to the administration of the estate. Accordingly, we need not consider plaintiff’s extrinsic evidence indicating that he did not specifically contemplate claims relating to the Federal return because the claim falls within the scope of the claims specifically released."

Plaintiff claimed that he was unaware of the second cause of action when he signed the first release. After some waffling, the Illinois Appellate Court held that the release barred the second claim as well.

Comment: Had this case been decided for plaintiff - it would be terrible news for lawyers - it would allow successive malpractice lawsuits against a lawyer whenever a client (or an imaginative lawyer) could come up with a new theory of recovery. The opinion reaches the correct result, but it waffles quite a bit on the way there and it appears that it was a close call for the Appellate Court. The case was decided correctly and the issue was an easy one.

This case should be studied by anyone settling a legal malpractice case. The release should be specific enough to terminate any future litigation.

The Second Issue - Whether Res Judicata Barred the Second Lawsuit.

The court also held that the doctrine of res judicata did not bar the second lawsuit because the first lawsuit was settled and was not decided on the merits.

The Court explained its holding as follows:

"`The doctrine of res judicata provides that a final judgment on the merits rendered by a court of competent jurisdiction bars any subsequent actions between the same parties or their privies on the same cause of action.'" Hudson v. City of Chicago, 228 Ill. 2d 462, 467 (2008) (quoting Rein v. David A. Noyes & Co., 172 Ill. 2d 325, 334 (1996)). Res judicata bars relitigation of issues that were actually decided in the first lawsuit, as well as issues that could have been decided in that suit. River Park, Inc. v. City of Highland Park, 184 Ill. 2d 290, 302 (1998). Three requirements must be satisfied for res judicata to apply: (1) a final judgment on the merits has been reached by a court of competent jurisdiction; (2) an identity of cause of action exists; and (3) the parties or their privies are identical in both actions. Hudson, 228 Ill. 2d at 467 (citing Downing v. Chicago Transit Authority, 162 Ill. 2d 70, 73-74 (1994)).

Here, there is no dispute as to the third requirement: the parties are identical in both actions. However, although not argued by either party, we cannot find that the first requirement is satisfied because the first lawsuit was resolved through a settlement agreement. We have noted in prior cases that there is a split of authority on the question of whether a dismissal with prejudice pursuant to a settlement agreement operates as a final judgment on the merits. See Jackson v. Callan Publishing, Inc., 356 Ill. App. 3d 326, 340 (2005) (noting split of authority). However, we agree with the cases that find that the dismissal does not operate as a final judgment on the merits for purposes of res judicata, because "an agreed order is not a judicial determination of the parties' rights, but rather is a recordation of the agreement between the parties." Kandalepas v. Economou, 269 Ill. App. 3d 245, 252 (1994). Since there was no actual decision on the merits, we cannot find that the first requirement is satisfied and thus claim would not be barred by res judicata.

Comment: the court is correctly reciting the applicable law, but the decision is incorrect. Where few cases are ever tried on the merits and most are settled through mediation or by negotiation, the limitation of res judicata to cases that went to verdict is absurd. What this exception to the doctrine essentially does is greatly limit the operation of res judicata and it encourages multiple litigation. Worse still, it encourages clients to hold back claims and then assert them in later litigation, as the plaintiff may have done here.

In sum, in my opinion, this limitation on the doctrine of res judicata is pernicious and will encourage multiple litigation and will encourage litigants to hold back claims.

This issue needs to be resolved by the Illinois Supreme Court.

Edward X. Clinton, Jr.

Carr v. Abel, La: Court of Appeals, 5th Circuit 2011 - Google Scholar

2011-04-07T21:42:00.000-07:00

Carr v. Abel, La: Court of Appeals, 5th Circuit 2011 - Google Scholar

In this case, an insurance adjuster sued his attorney for malpractice. The Fifth Circuit affirmed the dismissal of his complaint for legal malpractice.

The underlying litigation was brought by the Louisiana State Bar Association which sought to enjoin Earl T. Carr, Jr. from the unauthorized practice of law. The Bar Association prevailed in the lawsuit, obtaining a preliminary injunction and later a permanent injunction.

Carr alleged that his attorney was negligent in failing to timely appeal the grant of the preliminary injunction.

The district court dismissed the claim on the ground that, although there was no appeal of the preliminary injunction, the lawyer was not negligent because the trial court made the preliminary injunction permanent. Mr. Carr's lawyer appealed the permanent injunction all the way to the United States Supreme Court.

Because the permanent injunction was affirmed, Carr could not show that, but for the negligence of the attorney, he would have won his case.

As the Court held: "as the propriety of the injunction entered against Carr has now become a final judgment, Carr cannot prove his claim for legal malpractice, i.e., that the preliminary injunction would have been reversed on appeal or that Abel's negligence in failing to properly and timely appeal the injunction caused any loss to Carr. Under these circumstances, the trial court correctly granted Abel's Motion to Dismiss Carr's claims for legal malpractice. Further, although Carr contends he is entitled to pursue a claim to recover attorney's fees paid to Abel, we find that the entry of a final permanent injunction against Carr precludes Carr's efforts to claim the injunction and damages arising therefrom were due to Abel's negligence. Accordingly, we find no error in the trial court's ruling dismissing Carr's original action for legal malpractice against Abel."

Edward X. Clinton, Jr.

New York Appellate Division Grant Summary Judgment to Lawyer

2011-03-28T14:16:00.000-07:00

New York Appellate Division Grant Summary Judgment to Lawyer where the Plaintiff cannot establish but/for causation.

SNOLIS v. Clare, 2011 NY Slip Op 1455 - NY: Appellate Div., 2nd Dept. 2011 - Google Scholar

In New York, the lawyer appealed from the trial court's denial of the motion for summary judgment and Appellate Division reversed and entered summary judgment for the lawyer.

The underlying case was a motor vehicle accident. Plaintiff, who was represented by the defendant attorneys, alleged that they were negligent by failing to promptly amend the complaint to add another defendant.

As the court notes, when one of the defendant's depositions was taken (in the underlying auto accident case) the parties learned that the car was leased.

The Court describes the relevant procedural history as follows:

"When Biondo was deposed in February 2003, long after the expiration of the statute of limitations, it was learned for the first time that he had leased the car he drove on the day of the accident. In April 2003 the defendants were provided with documentary evidence showing that the vehicle was actually owned by American Suzuki Automotive Credit (hereinafter the owner) at the time of the accident. The defendants did not move for leave to amend the complaint to add the owner as a defendant, and filed a note of issue in September 2003.

In May 2004 the defendants were replaced by different counsel, who immediately moved for leave to amend the complaint to add the new defendants. That motion was denied."

The Appellate Division reasoned that the plaintiff could not prove legal malpractice because, even had the defendants moved to amend the complaint in February 2003, it would have been time-barred. Since it was already too late to amend the complaint, failing to move to amend promptly was not malpractice.

Plaintiff could not establish the important but/for causation - that, but for the attorney's negligence the plaintiff would have prevailed in the underlying lawsuit.

As the Court noted:

To establish the element of causation, a plaintiff must show that he or she would have prevailed in the underlying action or would not have incurred any damages but for the attorney's negligence (see Rudolf v Shayne, Dachs, Stanisci, Corker & Saver, 8 NY3d at 442; Kluczka v Lecci, 63 AD3d at 797; Wray v Mallilo & Grossman, 54 AD3d 328, 329). The failure to demonstrate proximate cause requires dismissal of a legal malpractice action regardless of whether the attorney was negligent (see Theresa Striano Revocable Trust v Blancato, 71 AD3d at 1124; Von Duerring v Hession & Bekoff, 71 AD3d 760; Kluczka v Lecci, 63 AD3d at 797).

Comment: the law of New York appears to be identical to Illinois law, except that Illinois Courts do not allow a defendant to appeal the denial of summary judgment.

Edward X. Clinton, Jr.

Legal Malpractice Claim cannot be Assigned - Oklahoma Law

2011-03-13T08:27:00.000-07:00

TRINITY MORTGAGE COMPANIES, INC. v. Dreyer, Dist. Court, ND Oklahoma 2011 - Google Scholar

An insolvent company attempted to assign a legal malpractice claim against its lawyers to a former adversay.

This court dismissed a legal malpractice claim that was assigned by the client to its former adversary. The Court reasoned that the assignment was against public policy.

Even absent the clear legislative prohibition which exists in this instance, the assignment at issue should not be permitted because it is clearly against public policy. The various dangers involved in this assignment — namely, the assignment of a legal malpractice claim to a former adversary — have been amply discussed in cases prohibiting such claims as contrary to public policy. See, e.g., Edens Tech., LLC v. Kile Goekjian Reed & McManus, PLLC, 675 F. Supp. 2d 75, 79-82 (D.D.C. 2009) (granting law firm defendant's motion to dismiss legal malpractice claim on public policy grounds where claim was assigned to Golf Tech, named plaintiff's former litigation adversary, and assignment gave Golf Tech right to control malpractice litigation and recover proceeds therefrom) (discussing overriding public policy concerns that render such assignments invalid, including the opportunity and incentive for collusion in stipulating to artificially inflated damages and the illogical position of lawyers and clients switching positions concerning the same incident); Gurski v. Rosenblum and Filan, LLC, 885 A.2d 163, 168, 175 (Conn. 2005) ("A majority of [j]urisdictions have concluded that legal malpractice claims are not assignable based on several overlapping public policy concerns.") (directing judgment for law firm defendant on legal malpractice claim because such claim was assigned to adversary in underlying litigation and contrary to public policy) (reasoning that assignment of such a claim would "convert a legal malpractice action into a commodity; undermine the sanctity of the attorney-client relationship; result in decreasing the availability of legal services to insolvent clients; impact negatively on the duty of confidentiality and further the commercialization of malpractice claims that in turn would spawn an increase in unwarranted malpractice actions"); Picadilly, Inc. v. Raikos, 582 N.E.2d 338, 342 (Ind. 1991), abrogated on other grounds by Liggett v. Young, 877 N.E.2d 178 (Ind. 2007) (affirming lower court's grant of summary judgment on legal malpractice claim on grounds that assignment of claim to former adversary was contrary to public policy) (concluding legal malpractice claims should not be assigned based on "particular concern about two issues: the need to preserve the sanctity of the client-lawyer relationship, and the disreputable public role reversal that would result during the trial of assigned malpractice claims"). Therefore, for the reasons outlined herein, the Court grants summary judgment as to Trinity's tort claims.

This is an excellent discussion of this issue. Illinois courts have been more forgiving to those who attempt to assign malpractice claims and have, in limited circumstances, permitted assignements.

Edward X. Clinton, Jr.
Copyright 2011

Roehl v. GISSELMAN, Wis: Court of Appeals, 3rd Dist. 2011 - Google Scholar

2011-03-03T08:08:00.000-08:00

Roehl v. GISSELMAN, Wis: Court of Appeals, 3rd Dist. 2011 - Google Scholar

The plaintiff alleged that the lawyer negligently represented him in a fifth-offense OWI (operating a motor vehicle while intoxicated) and that as a result he was subjected to a harsh sentence and was unable to operate his flooring business. The alleged negligent act was the failure to collaterally attack a prior conviction for OWI.

The Court, citing long-standing precedent, affirmed the dismissal of the case on the ground that plaintiff could not establish that he was innocent of the crime - therefore, plaintiff could not recover for malpractice.

The Court summarized the law as follows:

To prevail in a legal malpractice suit, a plaintiff must prove: (1) that a lawyer-client relationship existed; (2) that the defendant committed acts or omissions constituting negligence; (3) that the defendant's negligence caused the plaintiff's injury; and (4) the nature and extent of the injury. Hicks v. Nunnery, 2002 WI App 87, ¶ 33, 253 Wis. 2d 721, 643 N.W.2d 809. Furthermore, because Roehl's malpractice claim stems from legal representation in a criminal case, public policy considerations preclude the imposition of liability unless Roehl can establish he was innocent of the charges of which he was convicted. See id.

Comment: this defense to malpractice - the criminal defendant cannot prove his innocence has been under attack in recent years, but this Court did not accept those arguments.

Edward X. Clinton, Jr.

Lyon v. Aguilar, Court of Appeals, 10th Circuit 2011 - Google Scholar

2011-02-26T23:09:00.000-08:00

Lyon v. Aguilar, Court of Appeals, 10th Circuit 2011 - Google Scholar

In this case the 10th Circuit affirmed a grant of summary judgment for the lawyer. The lawyer, who had handled some litigation for the Plaintiffs, won because the plaintiffs failed to obtain an expert witness to prove causation.

In legal malpractice cases an expert is an absolute must - no matter how clear the negligence seems to be.

KOPULOS v. Scott, Mich: Court of Appeals 2011 - Google Scholar

2011-02-25T19:01:00.000-08:00

KOPULOS v. Scott, Mich: Court of Appeals 2011 - Google Scholar

This case involves the close line between an attorney-client relationship and a consultation by an attorney. Here the Court affirmed the grant of summary judgment for the lawyer on the ground that there was no attorney-client relationship.

Here, after an automobile accident the plaintiff contacted the lawyer. The lawyer recommended that the client seek a medical evaluation of her injuries. The lawyer apparently took no further action concerning the client and there was, apparently, no engagement letter or agreement to take the case.

As the court wrote: "However, Warba's recommendation that plaintiff obtain a medical evaluation to differentiate the causes of her ailments was not a "rendering of legal advice" from which this Court can conclude that an attorney-client relationship existed. The parties' conduct in this case was consistent only with a consultation and investigation, not an agreement that defendants would represent plaintiff."

Comment: this case is one of a group of many cases in which there is no clear attorney-client relationship. Malpractice carriers and ethics experts recommend that, where a matter is declined, the lawyer write to the prospective client and advise the person that the lawyer declined the matter.

Edward X. Clinton, Jr.

Smith v. CHHABRA, Miss: Court of Appeals 2011 - Google Scholar

2011-02-24T20:58:00.000-08:00

Smith v. CHHABRA, Miss: Court of Appeals 2011 - Google Scholar

Here the legal malpractice claim was dismissed and, on appeal, the dismissal was affirmed. Plaintiff alleged that the lawyer committed legal malpractice and committed fraud.

The lawyer obtained summary judgment, however, because he was able to show that after he withdrew as counsel to plaintiff in the underlying workers' compensation claim, plaintiff pursued the case pro se. Because the lawyer did not participate in the resolution of the claim, there was no claim for malpractice.

Comment: in malpractice cases clients often attempt to blame the lawyer for something that happened after the lawyer withdrew and the client was pro se. The Court correctly rejected this argument.

MORRISON COHEN LLP v. Parrish, 2011 NY Slip Op 30354 - NY: Supreme Court 2011 - Google Scholar

2011-02-24T20:54:00.000-08:00

MORRISON COHEN LLP v. Parrish, 2011 NY Slip Op 30354 - NY: Supreme Court 2011 - Google Scholar

The New York Court rejected the legal malpractice affirmative defense on the ground that it was time-barred.

Unfortunately, Illinois has no such rule. If an attorney files a claim for fees, the attorney waives any statute of limitations defense to the malpractice claim.

Chambers v. Cottrell, 2011 Ohio 144 - Ohio: Court of Appeals, 6th Appellate Dist. 2011 - Google Scholar

2011-02-24T20:51:00.000-08:00

Chambers v. Cottrell, 2011 Ohio 144 - Ohio: Court of Appeals, 6th Appellate Dist. 2011 - Google Scholar

Plaintiff failed to file before the one-year Ohio statute of limitations had run. Plaintiff tried to reframe the claim as one for breach of contract, not legal malpractice. Plaintiff hoped to obtain the benefit of the longer breach of contract statute of limitations.

The Ohio Court of Appeals rejected that argument - holding that the claim was really a malpractice claim, not a breach of contract claim.

GROCHOCINSKI v. MAYER BROWN ROWE & MAW LLP, Dist. Court, ND Illinois 2011 - Google Scholar

2011-02-11T18:01:00.000-08:00

GROCHOCINSKI v. MAYER BROWN ROWE & MAW LLP, Dist. Court, ND Illinois 2011 - Google Scholar

An attempt to intervene in this long-running case against Mayer Brown has been rejected.

Koczor v. Melnyk, 1-10-1859 Dismissal on SOL Grounds Affirmed

2011-02-09T21:54:00.000-08:00

In February 2009, plaintiffs filed a legal malpractice complaint against an attorney for alleged malpractice. The alleged malpractice was the attorney's failure, in 1997, to record a deed after a real estate transaction.

The trial court granted summary judgment for defendant on the ground that the Illinois Statute of Repose barred the claim.

In 1997, plaintiffs had purchased two adjoining parcels of land. Defendant allegedly failed to record one of the deeds. Defendant did record the other deed. Plaintiffs claimed that they did not discover the problem until 2007.

Plaintiffs conceded that the Statute of Repose had expired. The last day the deed could have been recorded was January 14, 2001; thus, under the Statute the plaintiffs had six years from that date to file the lawsuit.

The statute of repose "begins running when a specific event occurs, regardless of whether an action has accrued or whether an injury has resulted." Opinion at 7 (quoting Ferguson v. McKenzie, 202 Ill. 304, 311 (2001)). The discovery rule does not apply. As the Ferguson court noted the purpose of the statute of repose is to "terminate the possibility of liability after a defined period of time, regardless of a potential plaintiff's lack of knowledge of his or her cause of action." Id. The statute begins to run with "'the last act of representation upon which the malpractice is founded.'" Id. (quoting Trogi v. Diabri & Vicari, P.C., 362 Ill. App. 3d 93, 96 (2005)).

Plaintiffs argued that the defendant should be equitably estopped from relying upon the Statute of Repose. As the Court noted: "a party claiming equitable estoppel must demonstrate that (1) the other person misrepresented or concealed material facts; (2) the other person knew at the time he or she made the representations that they were untrue; (3) the party claiming estoppel did not know that the representations were untrue when they were made and when that party decided to act, or not, upon the representations; (4) the other person intended or reasonably expected that the party claiming estoppel would determine whether to act, or not, based upon the representations; (5) the party claiming estoppel reasonably relied upon the representations in good faith to his or her detriment; and (6) the party claiming estoppel would be prejudiced by his or her reliance on the representations fi the other person is permitted to deny the truth thereof." Opinion at 8-9 quoting DeLuna v. Burciaga, 223 Ill. 2d 49, 83-83 (2006).

The court rejected the equitable estoppel doctrine because the defendant made no representations to the plaintiffs. "The record shows that defendant did nothing to cause plaintiffs to delay filing their legal malpractice suit or to preclude plaintiffs from discovering their malpractice cause of action." It was undisputed that the plaintiffs had no contact with the defendant from 1997 to 2007.

Comment: plaintiffs' position is sympathetic and the result is harsh. Most clients would not understand that only one of two deeds had been recorded by the lawyer. If they paid the real estate taxes, they might not notice the error. It is reasonable for the plaintiffs to rely on the lawyer and believe that he knew what he was doing.

There is, however, no question that the statute of repose barred the claim. Plaintiffs only remedy is a lawsuit to quiet title in the second parcel.

Edward X. Clinton, Jr.

Judicial Estoppel Is Not A Defense To A Legal Malpractice Claim

2011-02-07T21:56:00.000-08:00

The case, Wolfe v. Wolfe, 874 N.E.2d 582, 375 Ill. App.3d 702 (1st Dist. 2007) deserves a brief discussion even though it dates from three years ago.

Plaintiff brought a legal malpractice claim against her divorce lawyer (apparently no relation) alleging that, based on the lawyer's bad advice, she entered into an unfavorable settlement of her divorce case with her then-husband. Plaintiff also alleged that the lawyer had failed to discover substantial assets that had been concealed by her ex-husband.

The lawyer moved to dismiss on judicial estoppel grounds. As the court explained, "judicial estoppel provides that a party who asserts a particular position in a legal proceeding is estopped from asserting a contrary position in a subsequent legal proceeding." Id. at 583. For judicial estoppel to apply "five elements must be present: (1) the party estopped must have taken two positions; (2) that are factually inconsistent; (3) in a separate judicial or quasi-judicial administrative proceeding; (4) intending the trier of fact to accept the truth of the facts alleged; and (5) have succeeded in the first proceeding and received a benefit thereby."

The basis for the judicial estoppel argument was that, during the divorce proceedings, Plaintiff informed the Court that she "understood and agreed to all the terms of the marital settlement agreement" and participated in the negotiations.

The Court rejected the estoppel argument because the testimony at the divorce hearing was not "totally inconsistent" with the allegations in the malpractice claim. In particular, Plaintiff alleged that the lawyer had failed to take appraisals of her ex-husband's business ventures, failed to retain a forensic accountant and failed to conduct appropriate discovery in a valuation case. The Plaintiff alleged that had she known the truth about her husband's finances she would not have entered into the settlement agreement. The Appellate Court relied on a case decided by the Seventh Circuit, Mungo v. Taylor, 355 F.3d 969 (7th Cir. 2004) in which the Seventh Circuit also rejected the judicial estoppel defense in a legal malpractice case arising out of a divorce settlement.

The Appellate Court also held that the allegations of the malpractice claim were sufficient to state a claim under Illinois law. In particular, plaintiff had alleged but/for causation - but for the lawyer's alleged negligence - plaintiff would have prevailed in the underlying case.

Comment: Illinois courts have allowed clients to sue their lawyers for malpractice even where the client voluntarily settled the underlying case. The issue of judicial estoppel appears to be a close question. In a different context (with more comprehensive questions and answers in the divorce hearing) judicial estoppel might possibly have applied.

Edward X. Clinton, Jr.

Premier Networks v. Stadheim and Grear, Ltd., 918 N.E.2d 1117 (Ill. App. 2009).

2011-02-03T22:05:00.000-08:00

This case is significant for the practicing attorney because it upholds the dismissal of a legal malpractice complaint against a law firm, where the plaintiff alleged that a 40% contingent fee was "too high."

Plaintiff and the attorney defendants entered into a written contingent fee contract for the prosecution of a patent infringement lawsuit against Lucent Technologies. Under the agreement the law firm was to receive 40% of the future income derived from one patent. The Court rejected the claim that the 40% contingent fee was unreasonable. The court noted that there is no statutory prohibition on such a contingent arrangement and commented: "the facts of the underlying case suggest the need for highly skilled legal representation in a very technically narrow area of patent practice. Premier obviously had confidence in Stadheim's ability to represent its interests in this narrow, technical area of patent law."

Edward X. Clinton, Jr.

Illinois Appellate Court Holds Malpractice Claim Is Time-Barred

2011-02-03T21:52:00.000-08:00

In the case captioned, Kaheirkhahvash v. Baniassadi, 1-10-0151, the Illinois Appellate Court for the First District (Fourth Division) has held that the plaintiff's legal malpractice claim was time-barred. The case is interesting to the practicing lawyer because the former client's ARDC claim was used to disprove the claim that the lawyer had concealed the facts from the client.

In Illinois the statute of limitations for a legal malpractice claim provides that the lawsuit "must be commenced within 2 years from the time the person bringing the action knew or reasonably should have known of the injury for which damages are sought." 735 ILCS 5/13-214.3(b). There is also a statute of repose which provides that an action for legal malpractice "may not be commenced in any event more than 6 years after the date on which the act or omission occurred." 735 ILCS 5/13-214.3(c).

In an statute of limitations case, the timeline is crucial.

Plaintiff sought the assistance of defendant in obtaining asylum in the United States.

On August 1, 2000 Defendant filed the asylum application.

On April 15, 2002, the immigration judge held a hearing and, on April 24, 2002, denied the petition for asylum.

On October 10, 2002, Plaintiff was taken into custody by the Department of Homeland Security. She was released in February 2003.

On October 8, 2003, the Board of Immigration Appeals affirmed the denial of the asylum application.

On November 24, 2003, Defendant withdrew as Plaintiff's attorney.

On November 24, 2003, Plaintiff filed a grievance with the ARDC.

The lawsuit for legal malpractice was filed on August 21, 2009.

The trial court dismissed the Complaint as time-barred.

The appellate Court affirmed.

First, it held that the complaint was not filed within the 2 year statute of limitations period. The Court held that, on November 24, 2003, when Plaintiff obtained a new immigration attorney she should have reasonably known that she had a cause of action against Defendant. Thus, the statute of limitations began to run at the latest on November 25, 2003, which gave plaintiff until November 25, 2005 to sue.

Second, the Court held that Plaintiff could not rely on either the (a) fraudulent concealment doctrine or the (b) equitable estoppel doctrine.

Section 13-215 of the Illinois Code of Civil Procedure provides that if a person liable to an action fraudulently conceals the cause of action from Plaintiff, the action may be commenced at any time within five years after the person discovers that he or she has a cause of action. 735 ILCS 5/13-215. Because a lawyer is a fiduciary to a client, the lawyer who is silent has fraudulently concealed the action, even if there is no affirmative misrepresentation. See DeLuna v. Burciaga, 223 Ill. 2d 49 (2006). The fraudulent concealment argument did not save the cause of action because plaintiff discovered her injury on November 25, 2003. Even with an additional five years (provided by the fraudulent concealment statute), the time to file expired on November 25, 2008, long before the case was filed.

Third, the Court rejected the equitable estoppel argument. To invoke equitable estoppel, "the plaintiff must have relied on acts or representations of the defendant which caused the plaintiff to refrain from filing suit within the applicable statute of limitations." Slip Opinion at 9 (quoting Leffler v. Engler, Zoghlin & Mann, Ltd., 157 Ill. App. 3d 718, 722-23 (Ill. App. 1987). The equitable estoppel doctrine did not apply because, when defendant withdrew on November 24, 2003, plaintiff still had two years in which to file her claim.

Comment: this case shows that the lawyer's withdrawal from the representation often begins the running of the statute of limitations. The client's decision to file an ARDC grievance was not helpful because it showed that she believed that the lawyer's conduct had caused her an injury, again suggesting that the case was not timely filed.

Edward X. Clinton, Jr.

Article in Litigation Magazine Urges Lawyers To Send Non-Engagement and Disengagement Letters

2010-12-03T21:28:00.000-08:00

Lawrence J. Fox has written an article titled, "Nonengaging, Engaging, and Disengaging Clients," in Litigation Magazine, Volume 36 No. 4 (Summer 2010).

Mr. Fox argues that the lawyer should send a written communication to each prospective client whose matter is declined. This protects the lawyer from a legal malpractice claim at a later date.

In my view, this idea while a good one is virtually impossible to put into place in a typical small law firm. In my experience, someone will call up and then promptly hang up before I can get their name and address. The call goes like this: "Hello, my son's in jail in Kentucky. Me: sir, we don't handle criminal cases. Then the phone goes dead. Is it reasonable for a practicing lawyer to write a letter to that caller?

Mr. Fox also recommends sending closing letters to clients when their case has concluded. This also is an excellent idea and it protects the lawyer because it creates a definite end point in the relationship with the client. In some cases it may help start the running of the statute of limitations.

Mr. Fox also discusses engagement letters and why it is such a good idea to be as specific as possible in writing them.

Edward X. Clinton, Jr.

Ball and Witteried v. Kotter, et. al, 08 CV 1613 N.D. Illinois October 18, 2010 - Case Dismissed For Lack of An Expert

2010-12-03T21:16:00.000-08:00

This is a thorough opinion by Judge Robert Dow, dismissing a legal malpractice claim against a real estate attorney, Hope Geldes.

The attorney was accused of legal malpractice for allegedly representing two persons at the same time in the purchase of two condominiums in Lake Point Tower, Donald Hedstrom and his ex-wife Cherie Kotter.

One unit was titled in the names of Hedstrom and Kotter as "joint tenancy with the right of survivorship." The other unit was titled in the name of the Kotter Family trust. Hedstrom later executed a will and trust directing that one of the units was to be sold and the proceeds added to his trust. That direction was ineffective because the units were held in joint tenancy with Kotter. Upon Hedstrom's death, Kotter became the owner of the property.

The legal malpractice claim against Geddes was dismissed on the ground that plaintiffs had failed to obtain an expert witness to testify as to the appropriate duty of care. As the court noted, under Illinois law "'failure to present expert testimony is usually fatal to a plaintiff's legal malpractice claim.'" Barth v. Reagan, 546 N.E.2d 1196, 1200 (Ill. 1990).

The Court noted that there is an exception to the expert testimony requirement when "the common knowledge or experience of lay persons is extensive enough to recognize or infer negligence from the facts, or where an attorney's negligence is so grossly apparent that a lay person would have no difficulty in appraising it." Id at 8 (quoting Barth, 546 N.E.2d at 1200).

The Court concluded that the alleged conflict was not so obvious to allow plaintiffs to proceed without expert testimony. The lawyer obtained summary judgment on the malpractice claims. As the court stated, "[a]ssuming that an attorney-client relationship had in fact developed between Geldes and Kotter (a hotly disputed question of fact), an expert would be needed to opine at least as to when a reasonably competent attorney would recognize that a conflict existed between clients such that she would know to seek a knowing waiver."

Edward X. Clinton, Jr.

New Jersey Legal Malpractice Blog

2010-11-09T09:09:00.000-08:00

This is the web address of a superb legal malpractice blog. Unfortunately, I'm not sure how to post a link, so I will just put the address here.

www.newjerseylegalmalpracticeblog.com

Kurtz & Perry v. Emerson, 2010 ME 107 (Me., 2010) - Maine Recognizes Arbitration of Fee Disputes

2010-11-02T09:40:00.000-07:00

The case captioned Kurtz & Perry, P.A. v. Emerson, 2010 ME 107 was decided by the Maine Supreme Judicial Court.

The case is significant because it holds that certain factual issues previously decided by a panel of the Maine Fee Arbitration Commission are entitled to res judicata effect in later legal malpractice litigation.

The underlying dispute arose out of a divorce case. The law firm represented Emerson in connection with her divorce. The parties to the divorce case entered into a settlement agreement, which provided that each party would bear its own costs and legal fees.

After the divorce case settled, the law firm sought to collect legal fees from Emerson. Emerson then filed a claim before the Fee Arbitration Panel. The Fee Arbitration Panel concluded that, although there was no written fee agreement, the law firm had met its burden of showing that there was an agreement to pay fees. The Fee Arbitration Panel further concluded that the fees claimed by the law firm were reasonable and appropriate.

Emerson then filed a malpractice claim - the malpractice alleged was that the law firm had failed to incorporate a provision in the settlement agreement requiring the husband to pay the legal fees. The law firm then moved for summary judgment on the ground that the claims were barred by res judicata. The trial court agreed that the litigation of the factual issues by the arbitration panel meant that Emerson was barred, under res judicata, from relitigating those issues. The trial court granted summary judgment for the law firm.

The Supreme Court affirmed under the doctrine of collateral estoppel which "prevents a party from relitigating factual issues already decided 'if the identical issue necessary was determined by a prior final judgment, and the party estopped had a fair opportunity' and incentive to litigate the issue in the prior proceeding."

Because the underlying issue, whether Emerson agreed to pay her own legal fees in the divorce case, had been litigated in the arbitration, she was collaterally estopped from raising it again.

Comment: the end result shows that in some forums lawyers are obtaining success in arbitrating legal fee disputes. Here the arbitration was extremely beneficial because the end result also undercut the malpractice claim.

Edward X. Clinton, Jr.

Noonan v. Harrington - Lawyer Obtains Summary Judgment Because Plaintiffs Cannot Establish Damages

2010-10-05T22:36:00.000-07:00

The United States District Court for the Central District of Illinois has issued another opinion in the Noonan v. Harrington case. The case has the number 09-CV-03191. The opinion is dated September 16, 2010.

Plaintiffs were minority shareholders who alleged that they were harmed when the Defendant wrote a legal opinion under which the corporation reduced the amount of dividends from 85-90% of earnings to a much lower percentage. Prior to December 1, 2004, the company distributed 85-90% of its earnings as dividends. On December 1, 2004, the majority shareholders agreed to sell their shares to George Shapland. The Defendant attorney allegedly wrote a memorandum which "stated, in essence, that after the stock purchase was complete, the Corporation was required only to wihhold a minimum of 10% of earnings annually" and distribute $600,000 to shareholders each year.

Plaintiffs alleged that the attorney had a conflict of interest because he represented them and Shapland and that he breached his duty to Plaintiffs by engaging in a conflict of interest and giving his approval to the reduced distributions.

However, in May 2008, Plaintiffs sold their stock to Shapland for $2,334.812 and their interest in certain real estate for $1,517,000.

The record contained conflicting expert opinions. Plaintiff's expert opined that the plaintiffs were forced to sell the real estate at a low price and lost out on distributions. Defendant's expert testified that the Plaintiffs' suffered no loss because the purchase price was fair and because the future cash flow was converted to present value (the purchase price).

The Court ruled that the amount the plaintiffs received for the stock and real estate could be considered in determining damages.

Plaintiffs argued that the amount they received should be barred by the collateral source rule. The Court recognized the general rule that "payments made to or benefits conferred on the injured party from other sources are not credited against the tortfeasor's liability."

The Court reasoned that the collateral source rule would not apply in a legal malpractice case because the purpose of malpractice recovery is to compensate the plaintiff for losses. See Sterling Radio Stations v. Weinstine, 765 N.E.2d 56 (Ill. App. Ct. 2002) (plaintiff could not recover because he "personally paid nothing in satisfaction of the judgment rendered against him ...as a result of defendants' malpractice.").

Essentially, the Court reasoned that the plaintiffs, who admitted that they received the present value of the future distributions when they sold their stock, would obtain a double recovery if they were allowed to recover from their lawyer. The court noted" "Plaintiffs could and may very well have invested the proceeds from the sale to realize the same effective future income stream as that from the dividends."

Thus, according to the Court, plaintiffs suffered no economic loss.

Comment: This case may well be appealed. I predict that the grant of summary judgment will be affirmed because plaintiffs, in suing the lawyer, were seeking a double recovery or windfall.

Edward X. Clinton, Jr.

Weidner v. Karlin, 932 N.E.2d 602 (Ill. App. 2010): Plaintiff's Fraud Claim Against Lawyer Dismissed

2010-10-05T20:53:00.000-07:00

In Weidner v. Karlin, 3-09-0936, (Illinois Appellate Court Third District), Weidner alleged that she hired Karlin to represent her in connection with her worker's compensation claim.

The centerpiece of the claim was the allegation that Karlin negligently failed to file the worker's compensation claim within the three year statute of limitations. There was no dispute that the Complaint adequately stated a cause of action for negligence.

Plaintiff also sought to allege fraud. Plaintiff alleged that Karlin advised her to accept a settlement but "failed to advised the plaintiff that her claim for the April 2000 injury was time-barred because he did not file a timely application for adjustment of claim and the claim had been dismissed." The plaintiff alleged that she relied upon the lawyer's misstatements, but that she decided to seek a second opinion.

The trial court dismissed the fraud claim.

The Appellate Court affirmed because plaintiff did not adequately allege reliance or damages. She failed to allege reliance because she sought out a second opinion and failed to allege damages in that "the plaintiff has not alleged any facts indicating that she was damaged by relying upon Karlin's failure to inform her that her April 2000 claim was time-barred." In other words, because the lawyer allegedly covered up his failure to file on time, plaintiff was not damaged because the false statement occurred after the claim was already barred.

Comment: it is hard to imagine that the plaintiff did not adequately allege reliance - plaintiff was a layperson who was relying on her lawyer's advice. The legal system is governed by rules based on the expectation that a lay person will rely on the advice of the lawyer. The Court is correct that plaintiff suffered no damage as a result of the alleged false statements because - the claim was already barred by the time the statements were made. The result is contrary to instinct - the lawyer somehow obtains the dismissal of the fraud claim even though he allegedly covered up his own misconduct. This case may well be appealed to the Illinois Supreme Court.

Edward X. Clinton, Jr.

Joint Representation Leads to Waiver of Attorney-Client Privilege

2010-09-11T21:51:00.000-07:00

In Mueller Industries, Inc. v. Peter D. Berkman, 927 N.E.2d 794 (Ill. App. 2010) 2-09-0134, the Illinois Appellate Court for the Second District decided an important legal privilege case. The Appellate Court held that - because the law firm jointly represented the President and the Corporation - the President could not assert the attorney-client privilege.

The Facts:

Peter Berkman was the President of Mueller for many years. Beginning in 1997, Berkman's attorney was David Shevitz of Katten, Muchin & Rosenman ("Katten"). In 2003, Shevitz and Katten began representing Mueller for certain intellectual property issues.

Also in 2003, Berkman formed an investment partnership that acquired a 10% interest in Lota USA, a company that had annual sales to Mueller in excess of $10 million. According to the Court "it does not appear that Katten advised either Mueller or Berkman of any potential conflict of interest in the dual representation."

In late 2005, Berkman's employment contract with Mueller expired. However, Berkman continued to work for the company under "an open-ended employment agreement."

In 2006, Berkman asked Katten to assist him in forming a new company, Homewerks, "to compete with Mueller."

In August 2006, Berkman resigned his position with Mueller and began working full time at Honewerks.

In 2007, Mueller sued Berkman alleging (a) a breach of fiduciary duty and (b) a breack fo the employment agreement by failing to disclose his interest in the Woodland partnership and, allegedly, by accepting certain kickbacks from Lota, USA.

Amazingly, Katten appearing the litigation on Berkman's behalf and filed a counterclaim against Mueller, its former client.

In 2008, Mueller served discovery requests on Berkman and Katten requesting that Berkman produce all of his communications with Katten. Berkman refused to produce the documents. Mueller moved to compel. The trial court granted the motion to compel on the ground that the "Katten's dual representation of Berkman and Mueller destroyed any claim of privilege." Berkman also asserted a Fifth Amendment Privilege, but the trial court rejected that claim as well.

Berkman was held in contempt when he refused to obey the order. The Appellate Court agreed with the trial court that there was no basis for Berkman to believe that he could keep his communications with Katten secret.

"The trial court held that Katten's dual representation of both Berkman and Mueller during a time when Berkman was an officer of Mueller meant that, once the parties were adverse, neither party could have a reasonable expectation of confidentiality in its communications with Katten about any matter germane to the Mueller business. Under both Illinois law and foreign law cited by the parties, the trial court's reasoning is sound." In sum, Berkman had no "reasonable expectation of confidentiality" for his communications with Katten, once its dual representation of Berkman and Mueller began.

Comment: The Court, while it held that the documents were not subject to the attorney-client privilege, was highly critical of Katten, Muchin & Rosenman. The Court stated:

"The Illinois Rules of Professional Conduct required that before Katten could engage in dual representation of Berkman and Mueller it should have, at the very minimum, advised both Berkman and Mueller about the possibility of a conflict arising between them, explained the implications and limitations imposed by dual representation, and obtained the consent of both parties to the dual representation. 134 Ill. 2d R 1.7(b). There is no indication in the record that Katten did so, however."

In sum, the lawyer's apparent failure to document the joint representation and secure the consent of both clients, caused the lawyer to be blamed for the loss of the attorney-client privilege.

Edward X. Clinton, Jr.

Quantum Meruit - Fee Award To Attorney Is Reversed for Failure to Prove Value of Work

2010-09-05T22:51:00.001-07:00

The case captioned Bernstein and Grazian, P.C. v. Grazian and Volpe, P.C., No. 1-09-0149 involved a fee dispute between lawyers who had once been partners in the same firm. The firm later dissolved with the Grazian firm completing most of the work on the cases.

After a trial, the Court awarded Grazian and Volpe 90% of the fees earned on the cases and awarded the Bernstein firm 10% of the fees.

The award to the Bernstein firm, however, was reversed by the Illinois Appellate Court because the Bernstein firm had failed to substantiate the work performed.

The Court noted that "the burden is on the provider, who 'must show that valuable services' were furnished by him, that they were received by the defendant, and that the circumstances are such that it would be unjust for the defendant to retain these services without paying for them....Accordingly, 'the measure of recovery is the reasonable value of work," and, in order to recover under this doctrine, the provider must prove that the services performed were 'of some measurable benefit to the defendant.'" citing Van C. Argiris & Co. v. FMC Corp, 144 Ill. App. 3d 750, 753 (Ill. App. 1986). Under this standard, Bernstein could not recover because "he did not go to court, take depositions, or argue motions on any B&G cases." Nor did he review documents or case records. He was unable to identify any specific work that he did. Thus, the quantum meruit award was against the manifest weight of the evidence.

Comment: obviously, in a quantum meruit situation, the lawyer must be able to show the specific work he did and how that work benefitted the client.

Flatow v. Ingalls, 932 N.E.2d 726 (Ind. App. 2010).

2010-09-05T21:50:00.000-07:00

The Indiana Court of Appeals has decided an important case that recognizes the principle of limited representation.

The Underlying Case

Ingalls sued his former employer, Indianapolis Power & Light ("IPL") alleging breach of employment contract, wrongful termination/retaliatory discharge, failure to pay wages owed and defamation.

For most of the litigation, Ingalls was apparently pro se. In 2007 he hired the Flatow firm to represent him as to the defamation claim only. Specifically, the Flatow firm was to draft a motion for summary judgment on that claim and a reply brief.

In September 2007, the Flatow Firm filed a Motion for Partial Summary Judgment on the Defamation claim. Indianapolis Power and Light filed a response and its own Motion for Summary Judgment on all three remaining counts of Ingalls complaint. Ingalls did not file a response to the motion for summary judgment. In April 2008, the Court granted Indianapolis Power & Light's Motion for Summary Judgment and the case was dismissed. Ingalls did not appeal.

Ingalls filed a malpractice complaint against the Flatow firm alleging that the firm had failed to respond to IPL's Motion for Summary Judgment thus causing Ingalls to lose his case against IPL. The trial court denied the motion and the Flatow firm appealed.

The Court of Appeals reversed on the ground that the Flatow firm met its obligations under the "contract for limited representation." Since the firm was never retained to respond to IPL's summary judgment motion (and presumably not paid to do that work) the firm was entitled to summary judgment. The firm's position was strengthened by its carefully drafted engagement letter which laid out exactly what the firm was going to do for the client.

As the Court notes, "under the terms of that agreement, the Flatow Defendants' only duty was to file a motion for summary judgment on Ingalls' defamation claim, reply to any response thereto, and keep Ingalls informed on the status of that matter."

This opinion is significant and, hopefully, it will be followed by other jurisdictions.

In Illinois Punitive Damages Are Not Allowed In Legal Malpractice Cases

2010-07-30T23:13:00.000-07:00

Illinois law is clear that punitive damages may not be recovered in legal malpractice claims. 735 ILCS 5/2-1115.

The unpublished opinion, dated May 5, 2010, in Noonan v. Harrington, No. 09-3191 (United States District Court, Central District of Illinois) provides an excellent reminder that punitive damages are not available in legal malpractice actions.

In the Noonan case the plaintiffs were minority shareholders of a corporation. Together with the Majority Shareholders, plaintiffs were represented by Defendant Harrington, an attorney. Harrington prepared a Shareholders Agreement and represented all the shareholders in connection with that agreement.

Prior to its sale, the corporation distributed almost all of its earnings to its stockholders. Plaintiffs wanted the corporation to continue to make these distributions.

In 2003, a buyer, Shapland, emerged. He began negotiating with the Majority Shareholders to purchase a controlling interest in the corporation.

Shapland was initially represented by the Defendant. The Defendant allegedly advised plaintiffs that the sale of a controlling interest to the buyer would not affect their rights. On May 22, 2006, the Defendant attorney "issued a written opinion to [the Buyer] in which he opined that [the Buyer] could retain additional earnings in the Corporation after he completed all payments for the Majority Shareholders' stock in January 2008."

The Defendant moved to dismiss Count III of the Complaint, a breach of fiduciary duty claim against Harrington. Because Count III was based on the attorney-client relationship and was therefore really a legal malpractice claim. Thus, the punitive damages count did not survive.

Edward X. Clinton, Jr.

Fitch v. McDermott, Will and Emery, LLP, 929 N.E.2d 1167 (Ill. App., 2nd Dist. 2010)

2010-07-08T13:44:00.000-07:00

This is a legal malpractice case arising out of the handling by McDermott, Will and Emery of the estate of Victoria R. Fitch. The case contains a number of claims of interest. However, most of plaintiff's claims could not be appealed due to procedural defaults.

The lesson of this case is very simple - in cases involving disputes over estates and wills, the claim against the lawyer must be filed very promptly - or a dismissal on statute of limitation grounds may occur.

Background Facts:

Prior to her death, Victoria hired McDermott Will & Emery to handle her estate plan. McDermott also represented Victoria's husband and her son in preparing their estate planning documents. McDermott was assisted by Diedrich & Diedrich, an accounting firm. According to the opinion, Victoria's assets were valued in the tens of millions of dollars.

The estate plan was highly complex and consisted of a marital trust, a GST exempt trust, certain appointive trusts and a farm preservation trust. Joseph Diedrich and the Harris Bank were co-trustees of the farm preservation trust.

Victoria died on May 19, 2005. Thus, under Illinois law, the last day to contest her will was January 8, 2006.

Under the will, Joseph and John Dietrich received gifts totaling $1.1 million.

The Complaint:

The Complaint was filed on January 25, 2007, long after the period for contesting the will had ended.

The Complaint had three counts. Count I sought to impose a constructive trust on the monies received by the Dietrichs because there was a presumption of undue influence. Count II alleged a conspiracy by the Dietrichs and McDermott to unduly influence Victoria. Count III alleged that McDermott aided and abetted the Dietrichs to unduly influence Victoria.

The Defendants moved to dismiss on statute of limitations grounds, arguing that the claims were a belated effort to challenge the validity of a will. The Court granted the motion and the Appellate Court affirmed on the ground that Counts I and II were a belated effort to challenge the will.

Under Illinois law, "if no proceeding is brought to contest the will within the six months prescribed by the Probate Act, the validity of the will is established for all purposes." 755 ILCS 5/8/-1. Since the plaintiffs knew about the bequests to the Dietrichs and did not challenge the will, the claims were untimely under the statute of limitations.

Victoria's son, Michael, also brought two claims against McDermott. First, he claimed that he was an intended third party beneficiary of Victoria-McDermott client-attorney relationship. However, this claim was untimely under the probate rule. Because Michael's claim did not accrue until Victoria died, Michael had six months after the will was admitted to probate to file his claim. Section 13-214.3(d).

Michael also had a client-attorney relationship with McDermott, in that McDermott handled his own estate work. He claimed that McDermott breached its duty of reasonable care by failing to advise Michael about Victoria's estate plan. However, the trial court dismissed that count on the ground that Michael did not allege that McDermott had a duty to advise Michael about Victoria's estate plan. As the Court held, "McDermott would not have had a duty to advise Michael, a non-client as to this matter, about its performance of services for Victoria."

The dismissal of other counts was affirmed because the Plaintiffs failed to identify the proper order dismissing those counts in their notice of appeal. The Court held that it lacked jurisdiction to review the dismissal of those counts.

Thus, a potentially interesting legal malpractice case was rendered somewhat mundane by plaintiff's failure to (a) file a proper notice of appeal; and (b) file their claims in timely fashion. No doubt, the six month claim period for probate claims is a trap for the unwary legal malpractice lawyer.

Edward X. Clinton, Jr.