Illinois Law Firm Recovers No Attorney’s Fees After Trial Court Concluded The Firm Breached Its Fiduciary Duties

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Scot and Patricia Vandenberg (the “Vandenbergs”) retained the McNabola Law Group, P.C. (“MLG”) to represent them in a lawsuit against RQM, LLC (“RQM”), Brunswick Corporation, and Brunswick Boat Group (together “Brunswick”). The Vandenbergs promised to pay all of MLG’s expenses, plus a contingency fee. The Vandenbergs agreed that, if they dropped MLG as counsel, they would pay MLG an hourly rate or contingency fee for services rendered up to that point, whichever was greater. Id. at ¶5. Mark McNabola (“McNabola”) of MLG represented the Vandenbergs during the trial of their case.

While the jury deliberated, Charles Patitucci (“Patitucci”), a representative for Brunswick, presented a settlement offer to McNabola. The Vandenbergs instructed him to accept that same day at 3:40 p.m. Before McNabola could reach Patitucci, the judge’s clerk called McNabola at 3:52 p.m. to tell him that the jury had sent the judge a note asking if they could find fault with RQM alone. McNabola said the answer to the jury’s question was “no,” but to “hold-off, don’t do anything yet, I’m going to try to settle this.” Id. At 4:01 p.m., he called the clerk back to say that he still could not reach Patitucci. The clerk responded that the judge wanted all parties back in court. McNabola then called Brunswick’s lead counsel, John Patton (“Patton”), to get Patitucci’s cell phone number and did not mention the note. McNabola finally reached Patitucci at 4:03 p.m. and accepted the settlement offer, still not mentioning the note. McNabola informed Patton of the settlement at 4:11 p.m. At 4:19 p.m., the clerk called Patton to say that the judge wanted the parties to come to court to discuss the note. This was the first Patton or Patitucci had heard of it. At approximately 4:40 p.m., the judge informed the parties about the note which went out “at approximately 3:50 p.m.” Id. at ¶11. All counsel present viewed it. At 4:50 p.m., the settlement was entered on the record and the case was dismissed. The jury was still allowed to deliberate and reached a verdict in Brunswick’s favor at approximately 5:00 p.m. Patton then informed the judge that the settlement had occurred without him having knowledge of the jury’s note or the clerk’s call to McNabola. Brunswick therefore moved to vacate the settlement and for judgment to be entered on the jury’s verdict instead. A new judge did so on the grounds of fraud in the inducement, unilateral and mutual mistake, absence of due process, and public policy, noting however that the Vandenbergs had “clean hands.” Id. at ¶16. Moreover, the parties did not dispute that the Vandenbergs “formed this intent [to accept Brunswick’s settlement offer] prior to the 3:50 p.m. note.” Id.

Ultimately, the Circuit Court entered judgment in favor of Brunswick and against the Vandenbergs due to alleged misconduct by McNabola. Months later, the Vandenbergs discharged MLG and with new counsel moved to vacate and enforce the original settlement. A third judge did so, finding that prior to the settlement being entered, all parties were made aware of the content of the jury’s note and the time at which it was published and had an opportunity to participate in discussion as to how to respond to it. Brunswick appealed, but was unsuccessful. The Vandenbergs then moved to adjudicate any claimed attorney’s liens MLG had for fees and expenses. They argued that McNabola engaged in misdeeds that caused their initial loss of the settlement and that “to reward him with fees out of the reinstated settlement would be wholly unfair and contrary to public policy.” Id. at ¶20. MLG responded that it was entitled to one-third of the settlement plus interest and a deferred fee, but excluding the Vandenbergs’ current attorney’s quantum meruit. Id. at ¶21. The circuit court determined that McNabola breached his fiduciary duties to the Vandenbergs by violating the professional rules of conduct in eleven specific ways. In addition, it found that he “failed to provide any evidence of the total number of hours his firm engaged in the underlying case, thus failing to properly plead and prove Quantum Meruit fees for his hourly rate.” Id. at ¶22. The circuit court denied McNabola’s petition for fees and adjudicated his lien to nothing.

On appeal, MLG argued that the only proper award was the full contingency amount given how much work it had performed prior to being discharged, less the hourly fees earned by it’s successor counsel. The Appellate Court disagreed, explaining that contingency fee arrangement requires a firm “bear the full risk of loss” and “often bear[s] little relation to the true value of the time a firm has spent on a case.” Id. at ¶36. MLG also contended that the Circuit Court erred in denying fees based on the eleven alleged breaches of the firm’s fiduciary duty to the Vandenbergs, which can be broadly categorized as “improperly charging legal fees as expenses, failing to obtain the Vandenbergs’ consent for bringing in other lawyers, putting the $25 million settlement at risk, and putting the firm’s interests ahead of the Vandenbergs in the posttrial proceedings.” Id. at ¶38. The Appellate Court disagreed here as well, explaining that these were “serious breaches that the circuit court was entitled to consider.” Id . It continued that although “adjudication of a firm’s fees to zero dollars is relatively uncommon, […] this was an unusual case” in that the firm “had repeatedly breached its duty to the Vandenbergs throughout the attorney-client relationship.” Id. at ¶40. The fact that the Vandenbergs had clear cause for terminating their representation by MLG weakened the firm’s position. Ultimately, MLG failed to make any showing of the hours it spent in connection with the Vandenberg’s claims as expressly required in the parties’ contract. The Appellate Court did rule in MLG’s favor regarding litigation expenses, explaining that “to the extent that the circuit court might have had some discretion to deny these requested payments despite the contracts, the court provided no explanation for its actions,” which seemed “to be an abuse of any discretion the court might have had.” Id. at ¶55.

Scott Vandenberg and Patricia Vandenberg v. RQM, LLC, Brunswick Corporation and Brunswick Boat Group, 2020 IL App (1st) 190544, June 26, 2020

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

Retention Agreement That Specified New York Jurisdiction Enforced by Illinois Court

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The United States District Court for the Northern District of Illinois interpreted a retention agreement that provided that “Client expressly agrees to in personam jurisdiction in New York . . . .” The court granted a motion to transfer on the basis of forum non conveniens based on the quoted language. The fact that the quoted language did not specifically provide for exclusive jurisdiction in New York did not stop the court from finding that the provision established an exclusive forum for a malpractice action.

Molon Motors and Coil Corp. v. Mishcon De Reya, LLP, John Petersoric, and Mark Raskin; 2020 WL 5702163; September 24, 2020

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

Malpractice Claim of Plaintiff Who Fired Her Attorneys And Proceeded Pro Se Dismissed Because She Had A Viable Claim When She Fired Her Attorneys

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In this unpublished opinion, the Fifth District of the Appellate Court affirmed the dismissal of a legal malpractice claim. The plaintiff had consented to the defendant lawyer’s withdrawal and waived her right to hire a new attorney. According to the appellate court, at that time, the plaintiff had a viable divorce claim and had not yet entered into the alleged unconscionable marital settlement agreement.

Bobbi Jo Fults, n/k/a Bobbi Jo Baron v. Edward J. Blake Jr., Megan M. Gilbreth, and Blake Behme Law Group, P.C., 2020 IL App (5th) 190413-U, September 1, 2020

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

Statute of Limitations Dooms Malpractice Claim Because Adverse Court Decision Educated Plaintiff About Counsel’s Error

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In this unpublished opinion, the Fifth District affirmed the dismissal of a legal malpractice claim on statute of limitations grounds. The court held that the plaintiff/condominium owner knew of improper advice by the condominium association’s attorney when a court held that the attorney’s advice regarding a special assessment was incorrect.

Sunil Sekhri v. Chuhak & Tecson, P.C., K. Shaylan Baldwin, David Bloomberg, and James R. Stevens, 2020 IL App (1st) 192494-U, July 31, 2020

(This is for information purposes only and is not legal advice.)

No Advice, No Causation

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Various members of the Nelson family attempted to transfer business and personal assets among themselves so as to substitute one party for another in the Nelson Family Farms, LLC (“LLC”). Plaintiffs Brian and Rebecca Nelson drafted the contract controlling these transactions, which consisted of “handwriting on two sides of a single sheet of paper.” Id. at ¶2. Without consulting an attorney or exercising due diligence, the parties began exchanging money and equipment. Id. One of the parties, Doug Nelson, retained attorney Bruce Carmen (“Carmen”) and the Carmen Law Office, P.C. (“Carmen Law”) to complete the title work necessary to transfer certain parcels of real estate contemplated in the contract and to effectuate the substitution of members in the LLC.

After a dispute arose, Brian and Rebecca sued Carmen and Carmen Law for legal malpractice, claiming to be “clients of Carmen or intended beneficiaries of his services.” Id. at ¶45. The Circuit Court granted summary judgment in favor of Carmen and Carmen Law, and Brian and Rebecca appealed. The Appellate Court affirmed, explaining that the plaintiffs could not prove the proximate causation necessary in a legal malpractice claim. It pointed to the fact that “Carmen did not give Brian and Rebecca any legal advice that they relied on in making their decisions.” Id. at ¶47. Brian and Rebecca also claimed that Carmen did not request a copy of the underlying contract, meaning his representation was legally deficient. However, the Appellate Court countered that the contract, which was drafted before Carmen was retained, “contained no mention” of the point of contention and so “would not have alerted Carmen” to the issue. Id. at ¶48. Having found Carmen was not the proximate cause of Brian and Rebecca’s damages, the Appellate Court added that any allegation as to a conflict of interest was without merit. Id. at ¶49.

Nelson v. Nelson, 2020 IL App (3d) 190080-U

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

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

Malpractice Case Dismissed Because Later-Hired Counsel Could Have Corrected Prior Counsel’s Error.

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The Northern District of Illinois dismissed a count of a legal malpractice complaint based upon the subsequent counsel rule.  The court held that because subsequent counsel could have filed a claim, the prior counsel did not cause damage to the malpractice plaintiff.

Yusoff Allian, et al. v. Perry Smith, et al., 2020 WL 4547877 (N.D. IL August 6, 2020)

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

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.)