Facts, facts, everywhere facts. Factual issues preclude summary judgment.

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Joseph Mizrachi (“Mizrachi”) sued attorney Lawrence Ordower (“Ordower”) and Ordower’s law firm for legal malpractice and breach of fiduciary duty. The defendants moved for summary judgment and Mizrachi also moved for summary judgment.

This case involves a very complicated fact pattern in which Ordower and Mizrachi disagreed over whether Ordower represented Mizrachi. The court examined virtually every element of a legal malpractice claim and held that there were issues of fact involving: whether Ordower and Mizrachi had an attorney client relationship; whether Ordower breached any duty to Mizrachi; whether Ordower caused Mizrachi’s alleged damages; and whether Mizrachi had suffered individual damages or whether entities he was associated with had been damaged. The court did conclude that Mizrachi could not recover punitive damages because Illinois law forecloses such claims in malpractice claims and Mizrachi’s breach of fiduciary duty claim also involved alleged legal malpractice.

Mizrachi v. Lawrence Ordower and Ordower & Ordower, P.C., 2020 WL 4607231 (N.D. IL August 11, 2020)

Illinois Legal Malpractice and Defense of Lawyers Blog — Novack and Macey LLP

(This is for informational purposes and is not legal advice.)

No Matter How Far Removed, Attorney Cannot Be Sued for Malpractice If Underlying Suit Was Unwinnable

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Veerasikku Bommiasamy (“Bommiasamy”) consulted attorney Kevin Conway (“Conway”) about filing a legal malpractice lawsuit against another attorney.  Conway allegedly told Bommiasamy that a lawsuit could not be filed until the underlying matter, which was still on appeal, had been resolved.  Conway eventually filed a complaint on Bommiasamy’s behalf, but the complaint was dismissed with prejudice because the limitations period had passed . Bommiasamy then sued Conway for legal malpractice. Conway moved for summary judgment, arguing that Bommiasamy could not establish proximate causation since he could not have won his first suit against the hospital where he used to work (the “Hospital”), an administrator (the “Administrator”), and a colleague. If Bommiasamy could not have won the underlying case against the hospital and others, he could not have won a malpractice suit against his first attorney, and  he likewise could not win a malpractice suit against his second attorney, Conway. Summary judgment was granted and Bommiasamy appealed.

The Appellate Court affirmed.  In so doing, it reviewed all five counts in Bommiasamy’s original lawsuit.  Count I alleged that the Hospital and Administrator fraudulently induced Bommiasamy to terminate his contract early.  The Appellate Court believed that Bommiasamy could not have reasonably relied on the Hospital’s promise.  Id. at ¶ 35. Count II alleged that the Hospital and Administrator tortuously interfered with Bommiasamy’s oral agreement with a service provider by pressuring the service provider to terminate its affiliation with him.  Here the Appellate Court concluded that any purported contract was terminable at will and so a claim for tortious interference with it was inapplicable.  Id. at ¶ 41.  Count III alleged tortious interference with a prospective advantage.  The Appellate Court found no problem here either, explaining that “to the extent a party acts to enhance its own business interests, it has a privilege to act in a way that may harm the business expectancy of others.”  Id. at ¶ 44.  Counts IV and V accused one of Bommiasamy’s colleagues of aiding and abetting the Hospital and Administrator in committing counts II and III.  However, because it was impossible for Bommiasamy to prove counts II and III, he could not prove that his colleague aided and abetted their perpetration.  As a result of Bommiasamy’s inability to win the first lawuit, both subsequent malpractice actions were doomed.

Veerasikku Bommiasamy, M.D., & V. Bommiasamy, M.D., S.C., v. Kevin J. Conway, 2020 IL App (1st) 190339-U

(This is for informational purposes and not legal advice.)

 

At-Issue Waiver in Legal Malpractice Case Not Automatic

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Rabbi Stanley Kroll (“Kroll”) had an employment contract with his Synagogue which included a deferred compensation retirement plan (the “Plan”).  In 2016, the Synagogue asked Kroll to retire early.  Kroll agreed, but on his last day a Synagogue officer told him that a tax issue had arisen with the Plan, promising it would be resolved. Kroll found out later that the issue had not been resolved, thereby subjecting his deferred compensation to heavy penalties.  Kroll also alleged that the Synagogue had not set aside enough money to fund the Plan and had retained the law firm Cozen O’Connor (“Cozen”) without his knowledge to help it reduce payments to him.  Kroll sued the Synagogue, settled, and then sued Cozen.  Cozen issued subpoenas “to obtain [Kroll’s] confidential communications with the lawyers who advised or represented him after his departure from the Synagogue.”  Id. at 3.  It argued that because Kroll had relied on the discovery rule to toll the running of the statute of limitations, he had placed the question of when his claims accrued and when he learned of his injuries at issue.  Cozen claimed that this constituted a waiver of the attorney-client privilege and the work-product doctrine as to communications between Kroll and his attorneys that showed when he learned of his injury.  Id.

Kroll moved to quash or modify the subpoenas and the Court granted his motion in full. It explained that although the privileged communications sought might address what Kroll knew about his injuries and when, they were not vital to Cozen’s defenses.  Id. at 5. The matter was “early in discovery” at the time, and the Court “had no basis to conclude […] that [Kroll’s] privileged communications […] are the only source of evidence about when [Kroll] learned, and what he learned, about the nature of his alleged injuries.”  Id. at 5.

Kroll v. Cozen O’Connor, 2020 WL 3077556 (N.D. Ill. June 10, 2020)

(This is for informational purposes and is not legal advice.)

 

Plaintiff in a Legal Malpractice Case Cannot Obtain Recovery That Would Make It Better off Than If It Had Been Successful in the Underlying Matter

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Hilco Capital, LP (“Hilco”) entered into a junior secured credit facility to provide financing to Payless Cashways (“Payless”).  It did so in reliance upon certifications Payless had given to another one of its financiers.  However, Hilco was unaware that Payless was actually near insolvency.  Before making any payments to Hilco, Payless filed a voluntary Chapter 11 petition.  Hilco retained counsel to pursue claims against the officers of Payless, which was covered by three layers of insurance valued at $10 million each.  Hilco ultimately executed a settlement agreement drafted by attorneys Terence Thum (“Thum”) and Lawrence Eagel in reliance upon their advice.  Id. at ¶14-17.  Subsequent to entry of judgment, one of Payless’ insurers refused to pay and won a declaratory action to that effect.  Hilco then sued several defendants for legal malpractice.  After multiple amended complaints and motions, only one count of Hilco’s third amended complaint against Thum and his law firm Bryan Cave, LLP remained. These defendants were ultimately granted summary judgment.

On appeal, Hilco first argued that the Trial Court should not have granted defendants’ motion to dismiss or limited its damages.  The Appellate Court disagreed, explaining that the amount to which Hilco believed it was entitled was higher than what it would have actually recovered and that “a plaintiff who obtains recovery in a legal malpractice case can be in no better position by bringing suit against the attorney than if the underlying action against the third-party had been successful.”  Id. at ¶60.  Hilco next argued that the Court erred in striking allegations concerning the defendants’ failure to disclose conflicts of interest.  Id. at ¶63.  The Appellate Court disagreed there as well because the allegations in question had not been asserted until Hilco’s third amended complaint. That complaint had been filed five years after the applicable statute of limitations had expired and after discovery “had been closed for an extended period of time,” thereby denying sufficient notice to the defendants.  Id. at ¶67.  Hilco’s third grievance was that the Court should not have partially granted defendants’ motion for summary judgment and further limited its damages.  Id. at ¶70.  There too the Appellate Court disagreed.  Per the Illinois Joint Tortfeasor Contribution Act, a good-faith settlement reduces the recovery of a nonsettling tortfeasor to the extent of the amount stated in the release or actually paid for it.  n the underlying action, Hilco executed a settlement agreement with one of Payless’ insurers that capped its potential recovery as a percent of money recovered from one of the other insurers.  Id. at ¶74.  Consequently, the Appellate Court affirmed that damages should have been limited further.  Finally, Hilco asserted that the Court erred in granting the defendants’ motion for summary judgment on its legal malpractice claim.  The Appellate Court affirmed on that point as well.  It explained that Hilco could not prove a causal link between the defendants’ actions and its damages.  “It does not necessarily follow,” the Appellate Court clarified, “that defendants’ allegedly negligent advice… was the proximate cause of the loss…”  Id. at ¶82.

Hillco Capital, LP v. Bryan Cave, LLP et al., 2020 IL App (1st) 180174-U

(This is for informational purposes and is not legal advice.)

Law Firm Can Be Held Responsible for Malpractice Against an Insolvent Party

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World Marketing, LLC, World Marketing Atlanta, LLC, and World Marketing Dallas, LLC (together “World Marketing”) retained the law firm Crane, Heyman, Simon, Welch & Clar (“Crane”) and filed petitions for bankruptcy. A putative class of former World Marketing employees sued World Marketing for failure to serve timely notice of plant closings or mass layoffs. The matter was eventually settled and the liquidating trustee for the World Marketing Liquidating Trust (“Trustee”) sued Crane for failing to advise World Marketing of its obligations.

Crane moved for summary judgment, arguing that that only World Marketing’s creditors, not the Trustee, had suffered any actual damages. Crane explained that its alleged failure to advise World Marketing had no practical effect, as World Marketing was going out of business and the claim against it merely “added another unpayable liability onto [its] mountain of unpayable debts.” Id. at 2. Moreover, Crane insisted that in a legal malpractice action based on an attorney’s failure to properly prosecute a claim, “the plaintiff must plead and prove the existence of a solvent defendant in the underlying claim.” Id. at 1. The Court disagreed, explaining that Illinois courts distinguish between legal malpractice claims involving attorneys hired to prosecute rather than defend a claim. In the latter situation, an unpaid judgment constitutes proof of actual damages in a legal malpractice action. Thus, “an insolvent estate can be damaged by a judgment against it,” and the “very fact of entry of judgment constitutes damage and harm sufficient to permit recovery.” Id. at 3.

Crane also asserted that public policy supports its position because the Trustee and its law firm defended against the former employees’ claim in bad faith, which the Trustee denies. Even if that were true, the Court responded, the law provides other remedies in lieu holding that law firms may commit malpractice against insolvent defendants with impunity. Crane’s motion was therefore denied.

Newman as Tr. of World Mktg. Tr. v. Crane, Heyman, Simon, Welch, & Clar, 2020 WL 3250742 (N.D. Ill. June 16, 2020)

Illinois Legal Malpractice and Defense of Lawyers Blog — Novack and Macey LLP

(This is for informational purposes and is not legal advice.)

CLO’s Wage Arbitration Did Not Bar Employer’s Malpractice Suit Under Res Judicata

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Richard Fisher (“Fisher”) was the Chief Legal Officer for UFT Commercial Finance, LLC (“UFT”).  UFT’s CEO was Joanne Marlowe (“Marlowe”) (together with UFT, “the Plaintiffs”).  As CLO, Fisher allegedly advised the Plaintiffs they did not need directors and officers insurance (“D&O Insurance”) and that such insurance would not protect Marlowe from personal liability should the company lose a wage claim or something similar.  Fisher also drafted employment agreements for UFT, some of which included supplements with accrual and deferment provisions.  He also drafted and executed his own agreement.  During Fisher’s third year as CLO, Marlowe told Fisher his employment would not be extended and Fisher resigned. Fisher then initiated arbitration proceedings against UFT and Marlowe for wages owed.  The arbitrator found the Plaintiffs jointly and severally liable to Fisher, with UFT individually liable for an additional sum.  In response, the Plaintiffs sued Fisher for professional negligence in that he, among other things, failed to fully and properly advise them of the legal consequences of the employment agreements and arbitration clauses, failed to advise them of the conflict of interest he had in executing his own agreement, and wrongly discouraged their purchase of D&O insurance.  Fisher moved for dismissal and sanctions.

Fisher first argued that the earlier arbitration award barred the Plaintiffs’ action under res judicata.  The Court disagreed, explaining that the arbitration concerned whether Fisher was entitled to wages while the instant case concerned whether Fisher was negligent in giving, or failing to give, legal advice.  The court also did not agree that the majority of the Plaintiffs’ claims were time-barred by the two-year statute of limitations for legal malpractice since the Plaintiffs “could not have reasonably known that they were injured until they lost the arbitration.”  Id. at 5.  Nevertheless, allegations of negligence related to Fisher’s employment agreement were still barred by the six-year statute of repose for legal malpractice because UFT and Marlowe filed suit more than six years after it was executed.  The Court also held that Fisher did not owe a duty to Marlowe since “[a]n attorney for an organization owes a duty to the organization, and not its individual shareholders, officers, or directors” unless that individual is an intended third-party beneficiary.  Id. at 6.  Moreover, the Court agreed that the Plaintiffs failed to establish proximate causation as to their use of supplemental employment agreements, not acquiring D&O Insurance, and not retaining independent counsel. Regarding employment agreements, the Court held that the Plaintiffs failed to allege damages from the agreements with employees other than Fisher himself.  However, the Court denied Fisher’s motion for sanctions.  It explained that it did “not believe that the claims brought by Plaintiffs are wholly baseless or frivolous” or that “this suit was brought for the sole purpose of harassing and embarrassing Fisher.”  Id. at 8.

UFT Commercial Fin., LLC v. Fisher, No. 19 C 7669; 2020 WL 2513097 (N.D. Ill. May 15, 2020)

(This is for informational purposes and is not legal advice.)

 

 

 

Defendant May File Untimely Counterclaim if Plaintiff’s Claim Arose Before Counterclaim Was Barred

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Paul Abramson (“Abramson”) had hired attorney Alisa Levin of Levin Law, Ltd. (together “Levin”) in October, 2015, but terminated Levin after a dispute arose over the amounts billed.  In March, 2017, Abramson published a scathing review on Levin Law’s Yelp profile.  Levin published a response and sued Abramson for defamation and false light invasion of privacy.  Abramson then counterclaimed for legal malpractice, breach of fiduciary duty, and defamation. Levin moved to dismiss Abramson’s counterclaims.  Id. at 1.

Levin argued that Abramson’s counterclaims were time-barred and failed to state a claim. The Court disagreed as to timeliness, citing  735 ILCS 5/13-207, which “specifically states that the defendant in a lawsuit is permitted to bring a counterclaim that would otherwise be barred by the statute of limitations” provided the plaintiff’s claim arose “before the cause of action brought as a counterclaim was barred.”  Id. at 4.  With respect to Abramson’s claims for legal malpractice and breach of fiduciary duty, the Court held that even if their accrual had begun in December, 2015 when Levin’s representation of Abramson ended, the two-year statute of limitations for claims arising out of the provision of legal services would not have ended until December, 2017.  However, Levin’s claims arose when the Yelp review went up in March, 2017 and so were timely.  Id. at 5.  The court reached the same conclusion as to Abramson’s defamation claim.  Id. at 4.

Though not time-barred, the Court did conclude that Abramson had failed to state claims for legal malpractice and breach of fiduciary duty.  Specifically, Abramson’s claim for legal malpractice did “not explain how he lost the case or why Levin’s actions caused him to lose” nor did it explain how he “would have prevailed on the underlying claim in the absence of [Levin’s] missteps.”  Id. at 12.  His claim for breach of fiduciary duty likewise “fail[ed] to plausibly allege that this breach proximately caused any injury.”  Id. at 13.

Levin v. Abramson, No. 18-cv-1723, 2020 WL 2494649 (N.D. Ill. May 13, 2020)

(This is for informational purposes and is not legal advice.)

Failure to Return Clients’ Documents Covered by Two-Year Statute of Limitations

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The law firm Deer, Stone & Maya (“DSM”) represented Carlos Rocha and Arize 11, Inc. (together “Plaintiffs”) in various matters related to their business with FedEx.  Id. at ¶13. Plaintiffs sued DSM for conversion, among other things, claiming that DSM failed to return certain legal files to them.  Id. at ¶79.  DSM moved to dismiss this claim as untimely, and the motion was granted.

On appeal, DSM maintained that the conversion claim was governed by the two-year statute of limitations for acts or omissions in performance of professional legal services. Id. at ¶82.  The appellate court agreed, citing various allegations in the complaint such as when the plaintiffs “made repeated demands of DSM for the sale agreement and other documents […] and neither Deer nor Stone complied.”  Id.  Moreover, the plaintiffs’ brief described the conversion count as “aris[ing] solely from the DSM Defendants’ assumption of unauthorized control and dominion over undisbursed amounts deposited in DSM’s client trust account for Plaintiffs and Plaintiffs’ legal files and other documents never returned on account of DSM’s unsubstantiated claim for fees.”  Id., (emphasis added by court).

As for whether the statute of limitations had passed, the court noted that the allegations in the plaintiffs’ conversion count were similar to the allegations in a termination letter Rocha sent to Jeffrey Deer of DSM in May, 2012.  Id. at ¶85.  Thus, “the statute of limitations period against the DSM defendants commenced at the latest in May 2012, when Rocha sent the termination letter.”  Id.  Plaintiffs countered that the statute of limitations should have tolled in this matter due to their need for discovery, but they cited no case law supporting this assertion.  Id. at ¶86.  Consequently, the argument was forfeited.

Rocha v. FedEx Corp., 2020 IL App (1st) 190041

(This is for informational purposes and is not legal advice.)

 

Jury Instruction Is Harmless Error Unless Plaintiff Shows Verdict Is Unsustainable On All Other Defenses Presented

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Whirlpool Corporation (“Whirlpool”) requested an opinion from attorney William Rucker (“Rucker”) on whether certain products it imported would be subject to new duties imposed by the U.S. Department of Commerce.  Rucker responded that he believed the products were not subject to these duties and so Whirlpool continued to import them.  However, a shipment of the product was later tagged as subject to the new duties, forcing Whirlpool to pay duty deposits of 407% of their value.  Id. at ¶7.  Whirlpool retained new counsel and sued Rucker and his firm, Faegre Drinker Biddle & Reath LLP (together with Rucker, “the Defendants”), for legal malpractice.  The jury returned a verdict in favor of the Defendants.

Whirlpool appealed, arguing that the Trial Court made multiple errors, including giving a jury instruction on the “informed judgment” defense.  Id. at ¶49.  The Appellate Court affirmed.  With respect to the “informed judgment” defense, it explained that “[u]nder the two-issue rule, where the jury returns a general verdict, multiple claims or defenses were presented to the jury, and the challenging party did not request a special interrogatory that would test the basis of the jury’s verdict, the verdict will be upheld so long as there was sufficient evidence to support any one of the presented claims or defenses.”  Id. at ¶51.  In such a situation, the Appellate Court continued, “unless plaintiff can show that the jury’s verdict cannot be sustained on any of the other defenses presented to the jury, we must conclude that any error in giving the informed judgment defense instruction was harmless.”  Id.  Here, no special interrogatories were given to the jury that would reveal the basis of the verdict and Whirlpool made no arguments that the jury’s verdict could not be sustained on the other defenses presented.  Id. at ¶61.  As for the other errors alleged by Whirlpool, the Appellate Court held that it “need not address these issues” because “even if plaintiff is correct… they would not have affected the outcome of the trial because the jury’s verdict can be sustained on the unrelated grounds of general negligence, causation, and plaintiff’s contributory negligence.”  Id. at ¶66.

Whirlpool Corporation v. Faegre Drinker Biddle & Reath LLP & William Randolph Rucker, 2020 IL App (1st) 191042-U

(This is for informational purposes and is not legal advice.)

Attorney May Testify as Expert on Standard of Care, Not on Legal Conclusions that Determine Outcome of the Case

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Clay Cox (“Cox”), successor trustee for a coop formed to build and operate an ethanol facility, sued attorneys Michael Evans and Nancy Schell and their law firm, Froehling, Weber, Evans & Schell, LLP, (together “Defendants”) for legal malpractice. Defendants designated attorney Walker Filbert (“Filbert”) as their expert witness concerning whether Defendants “met the standard of practice for attorneys practicing law in central Illinois and that their conduct did not proximately cause any injury to the Coop.” Id. at 6. Cox moved to bar Filbert’s testimony, memorandum in support, and Defendants’ response. The motion was granted in part and denied in part.

In ruling on Cox’s motion, the Court applied the Daubert analysis, which requires evaluation of “(1) the proffered expert’s qualifications; (2) the reliability of the expert’s methodology; and (3) the relevance of the expert’s testimony.” Id. at 7, see Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993). With respect to Filbert’s qualifications, Cox argued that his “experience as a lawyer in central Illinois and a CEO of an ethanol company” did not qualify him to give testimony in this matter because he had “no experience with professional responsibility and legal malpractice.” Id. at 9. The Court disagreed, explaining that as “a practicing attorney, Filbert would have been required to understand the rules of professional conduct governing his practice of law and to follow those rules. Those obligations encompassed the dispute at issue here—ascertaining the standard of care for an attorney.” Id. at 10. As to Filbert’s methodology, Cox claimed his report was devoid of any proposed methodology and rested “entirely on his alleged expertise as a lawyer, drawing conclusions without any analysis.” Id. The Court sided with Defendants again, holding that Filbert’s opinions “were informed by his legal experience and his knowledge of practicing law in central Illinois” and that his “report and proposed testimony sufficiently link the facts he relies upon with his conclusions so as to be reliable.” Id. at 11. The Court also held that Filbert’s testimony was relevant, as the “touchstone of admissibility under Rule 702 is helpfulness to the jury” and “the lay juror is unlikely to have a strong understanding of the business considerations surrounding the purchase or sale of commercial property” as in this case. Id.

Cox did find success in arguing that some aspects of Filbert’s report “invade[d] the province of the jury and are based upon unsupported assumptions.” Id. Specifically, Cox objected to Filbert’s conclusion that Defendants’ alleged acts or omissions did not proximately cause the damages claimed. The Court agreed that this was an impermissible conclusion, explaining that expert testimony “as to legal conclusions that will determine the outcome of the case is inadmissible.” Id. at 12. It clarified that “while Filbert may not offer an opinion in front of the jury as to proximate cause, he may opine, consistent with his deposition testimony, that market forces and the state of the ethanol industry following the transaction affected the viability of the grain handling facility and the prospects of obtaining financing.” Id.

Cox v. Evans, No. 18-CV-1105-JES-JEH, 2020 WL 2093371 (C.D. Ill. May 1, 2020)

(This is for informational purposes and not legal advice.)

Illinois Legal Malpractice and Defense of Lawyers Blog — Novack and Macey LLP