Legal Malpractice — What Constitutes a Frivolous Appeal

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In Ring v. Schencker, 2021 IL App (1st) 180909-U, the 1st District Appellate court agreed that a legal malpractice claim requires proof of damages, but was divided on what constitutes a frivolous filling.  The majority opinion found that Plaintiff’s filling was not frivolous and therefore affirmed the lower court’s decision not to award sanctions.  The majority reasoned that although counsel for the Plaintiff knew that the alleged legal malpractice did not result in damages, this knowledge alone did not make the filing frivolous.  However, Justice Hyman disagreed.  In his concurring opinion, the Justice noted that Plaintiff’s briefing was “replete with misstatements of fact” and therefore should have resulted in punishment.  Id. at ¶¶ 40-41.  Further, Justice Hyman asserted that the suit was clearly motivated by “a personal feud” and Plaintiff’s attorney should have withdrawn his representation instead of advancing his client’s “false and vindictive claims for three years.”  Id. at ¶ 47.

Ring v. Schencker, 2021 IL App (1st) 180909-U

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

Disability Disclosure — What is an Attorney’s Duty?

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Attorneys may have a duty to inform the Probate Division of the Circuit Court of Cook County of a client’s potential mental disability or diminished capacity according to a recent decision by the Illinois Appellate Court. Estate of Barbara Rose Christo v. The Law Offices of Thomas Leahy, et al., 2021 IL App (1st) 200575-U. The legal malpractice case stemmed from a 1998 wrongful death case in which the Law Office of Thomas Leahy (“Leahy & Hoste”) represented Barbara Rose Christo and her two siblings.  In 2002, Leahy & Hoste obtained approximately $550,000 in damages for each client.  Six years later, in 2008, Barbara Rose was adjudicated to be a disabled person and the Cook County Public Guardian was appointed to serve as her guardian.  At that time, the Public Guardian discovered that Barbara Rose’s brother had been stealing her damages award.  In 2010, the Public Guardian sued Leahy & Hoste and several of its attorneys alleging professional negligence for failing to seek a guardianship for Barbara Rose prior to releasing the damages award.  The trial court concluded that Leahy & Hoste did not commit legal malpractice, but on July 16, 2021, an Illinois Appellate Court reversed the lower court’s decision.

Citing to the trial record, the opinion describes Barbara Rose as having “mild mental retardation … an IQ of 51, [and] a second-grade reading level…” Id. at ¶ 5.  Further, Barbara Rose’s guardian stated that she was “unable to tell time or make telephone calls.”  Id. at ¶ 9.  Evidence was also presented that  Barbara Rose collected Supplemental Security Income for “mental retardation with an onset date of September 13, 1984.”  Id. at ¶ 14.  Dr. Jaffe, a clinical and forensic psychologist, testified that Barbara Rose’s handicap “would be observable to the untrained person within just a couple of minutes of interacting with her.  Id. at ¶ 23.  Relying on these facts, and others, the Public Guardian asserted that Leahy & Hoste should have notified the court of their client’s disability before handing her over half a million dollars.  In response, Leahy & Hoste claimed it was ignorant of Barbara Rose’s disability.  One Leahy & Hoste attorney testified that he “didn’t have the impression that she had a diagnosed disability.”  Id. at ¶18.  But, the wrongful death trial paints a different story.  While Barbara Rose was on the witness stand, her attorney asked her if she had a disability and she answered, no. That attorney then described Barbara Rose as a “special person” adding, “We could tell… from the witness stand… She denied it, and good for her, but I think we can tell…” during his closing argument.  Id. at ¶ 13. 

While the trial court granted Leahy & Hoste’s motion for a partial directed finding and ultimately entered judgment in its favor, on appeal, the Court remanded the case and stated, “evidence plausibly shows that the Leahy defendants knew the extent of Barbara’s disability and yet still failed to notify the court.”

Estate of Barbara Rose Christo v. The Law Offices of Thomas Leahy, et al., 2021 IL App (1st) 200575-U

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

  

Illinois Appellate Court Holds that Violations of the Rules of Professional Conduct are Only Enforceable in Disciplinary Proceedings

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Last month, on July 7, 2021, the Illinois Appellate Court for the Second District held that the Circuit Court of DuPage County erred in ordering the disgorgement of $16,313 in attorney’s fees and the forfeiture of an additional $125,472 in outstanding fees related to a complicated divorce proceeding. The case began on November 6, 2015, when Sara C. Weber, represented by Botti Law Firm, P.C. (“Botti Law”), filed a petition for dissolution of her marriage to Karl Weber.

During the proceeding, Mr. Weber alleged that Mrs. Weber’s caregiver was exerting undue influence over his wife and misusing the parties’ marital and business assets. On June 9, 2016, Mr. Weber subpoenaed the caregiver’s bank records. In response, Botti Law appeared on behalf of the caregiver and began representing her.

On March 9, 2017, Mrs. Weber terminated Botti Law’s representation, but the firm continued to represent the caregiver. Later, Botti Law filed a petition for the setting of final fees and costs pursuant to sections 508(a) and 508(c) of the Illinois Marriage and Dissolution of Marriage Act (Act) (750 ILCS 5/508(a). In ruling on Botti Law’s petition, the trial court reasoned that the firm “was made aware of allegations that [the caregiver] was unduly influencing Sara Weber …” and therefore should have clearly recognized there was “at least a potential of a conflict” between Mrs. Weber and her caregiver.

The trial court concluded, there was “… no doubt that there was a conflict between Sara Weber and Mary Barton …” and decided the conflict arose when Botti Law filed its appearance on behalf of the caregiver on June 12, 2016. The court asserted that this action violated the Illinois Rule of Professional Conduct 1.7. Because the firm violated Rule 1.7, Botti Law was barred from collecting any billings after June 13, 2016. The trial court added that Botti Law’s fees were not “unreasonable, unnecessary or—and/or excessive” and that the firm would be entitled to recover its fees accrued through June 12, 2016.

On appeal, the Appellate Court disagreed. The Court held that disciplinary proceedings are the only appropriate forum for enforcing the Illinois Rules of Professional Conduct. The Court reasoned that disciplinary proceedings provide attorneys with protections not available in district courts including due process protections (e.g., removal of evidentiary obstacles like the Dead-Man’s Act) and a heighten burden of proof. As the Court summarized: “Again, the focus therein is on the ARDC proving attorney misconduct, and the burden is not on the attorney to prove that he or she did not commit misconduct.” In re Est. of Weber, 2021 IL App (2d) 200354, ¶ 28. In scolding the trial court, the Appellate Court stated:

This case is precisely the type of case that subverts the purpose behind the Rules. See Ill. R. Prof’l Conduct (2010), Scope ¶ 20 (eff. Jan. 1, 2010). The trial court’s decision completely violates the supreme court’s stated philosophy behind the Rules: “The fact that a Rule is a just basis for a lawyer’s self-assessment, or for sanctioning a lawyer under the administration of a disciplinary authority, does not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the Rule.” Id. In re Est. of Weber, 2021 IL App (2d) 200354, ¶ 24.

The Court remanded the case with directions to enter judgment in favor of Botti Law on all of its claimed fees.

In re: Estate of Sara C. Weber, Deceased, 2021 Il App. (2nd) 200354

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

Court Again Affirms Inquiry Notice Standard

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The First District Appellate Court concluded that Plaintiffs, Brian Scheinblum and Chicago Hotel Partners, LLC (“CHP”), did not timely file their legal malpractice complaint against the law firm of Schain Banks Kenny & Schwartz, Ltd.’s (“Schain Banks”).  Brian Scheinblum, et al., v. Schain Banks Kenny & Schwartz, LTD, 2021 IL App (1st) 200798. 

According to Plaintiffs, they retained Schain Banks in 2015 to file a complaint for declaratory judgment and specific enforcement of a contract related to developing a hotel on certain floors of a building located at 55 East Washington Street in Chicago (the “Pittsfield Building”).  Schain Banks helped Plaintiffs’ successfully settle the dispute.  At the same time, without Plaintiffs’ knowledge, Schain Banks was advising another party on how to stop the development of a hotel at the Pittsfield Building.  Subsequently, the City of Chicago passed a downzoning ordinance related to the Pittsfield Building on March 16, 2016 that killed Plaintiffs’ plan to open a hotel causing them a “tremendous financial loss.”  Id. at ¶ 7.

In granting Schain Banks’ motion to dismiss, the Court held that Plaintiffs should have known they were injured when the City passed the downzoning ordinance.  On appeal, Plaintiffs argued that they had “no way of knowing” they should have investigated their own attorneys’ involvement in the passage of the ordinance.  Id. at ¶ 21.  Plaintiffs alleged that they only became aware of Schain Banks’ involvement after it sued the City, and obtained a 2015 Schain Banks’ email providing legal advice on how to rezone the building, through discovery in October 2017.  The Court disagreed.  The Court concluded, “Because plaintiffs developed a reasonable belief that the downzoning was caused by wrongful conduct, they had an obligation to inquire further on that issue.”  Id. at ¶ 19.  The court stressed that it was not necessary for Plaintiffs to know that their lawyers were involved in wrongdoing; they needed only know that there was wrongdoing by somebody in order for them to be required to inquire whether their lawyers were involved.

Brian Scheinblum, et al., v. Schain Banks Kenny & Schwartz, Ltd., 2021 IL App (1st) 200798

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

Legal Malpractice Claims Do No Always Require An Expert

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The Second District Appellate Court affirmed the circuit court’s decision in Bruning & Associates v. Michael Eversman granting summary judgment to a law firm on its claim for fees and denying the defendant’s malpractice counterclaim.  Bruning & Assocs., P.C. v. Eversman, 2021 IL App (2d) 200502-U.  The defendant argued that the trial court erred by denying his motion for extra time to retain an expert to respond to the summary judgment motion.  The Appellate Court held that the defendants’ failure to comply with Illinois Supreme Court Rule 191 was sufficient grounds to deny his motion requesting time to retain an expert.  The court also found that the defendant failed to raise a genuine issue of fact as to whether the marital settlement agreement that plaintiff advised him to enter into was unreasonable and failed to raise a genuine issue of fact with respect to any of the other issues he raised.

Bruning & Associates v. Michael Eversman, 2021 IL App (2d) 200502-U.

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

Three Months And A Day Is “More Than” Reasonable

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The Second District Appellate Court affirmed the Circuit Court of McHenry County’s decision to not apply the five-year statute of limitations for fraudulent concealment when (1) Plaintiff’s concealment claim was identical to his legal malpractice claim; and (2) Plaintiff had a “reasonable time” to file his legal malpractice claim within the normal two-year limitations period.  Harold Crowe v. Randall Taradash & The Taradash Law Offices, 2021 IL App (2d) 200316-U.  The court reasoned that this case was analogous to Barratt v. Goldberg, 296 Ill. App. 3d 252, 258 (1998), and further held that three months and one day was “more than a reasonable time” for Plaintiff to file his claim. Id. at ¶ 30.

Harold Crowe v. Randall Taradash & The Taradash Law Offices, 2021 IL App (2d) 200316-U.

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

Accountant’s Assertion that Plaintiff “Potentially [had] A Real Problem” Amounts to Inquiry Notice

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In a nineteen-page opinion, the Illinois Appellate Court for the First District affirmed the dismissal of a legal malpractice case against the law firm of Michael Best & Friedrich, LLP as time barred.  The court stated that legal malpractice claims must be brought within the two-year statute of limitations period set forth in section 13-214.3(b) of the Illinois Code of Civil Procedure.  It added that this statute of limitations incorporates the “discovery rule,” and that discovery “may rest upon so-called inquiry notice.”  Carlson v. Michael Best & Friedrich LLP, 2021 IL App (1st) 191961, ¶ 81.  A party is on inquiry notice when s/he knows or reasonably should have known of an injury and that the injury was wrongfully caused.  Inquiry notice starts the statute of limitations clock.

In this case, the court held that the Plaintiff should have been aware that he was wrongfully injured when his accountant informed him that he “potentially [had] a real problem” regarding a proposed settlement agreement and further stated, “I don’t know what happened here… but you left 12 million on the table.  You should be able to go back and get it.”  Id. at ¶ 82.  The court rejected Plaintiff’s claim that he believed these statements were made in “jest” and were not reasonably calculated to put him on notice of a potential legal malpractice claim.  Id.  Instead, the court concluded that the statements put the Plaintiff on inquiry notice and he should have investigated his attorneys’ actions.

Carlson v. Michael Best & Friedrich LLP, 2021 IL App (1st) 191961

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

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

Claim Based On Failure To Discover Phony Screen Shot Dismissed on Statute of Limitations Grounds

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Plaintiff alleged that he retained lawyers to conduct due diligence with respect to film investments he was contemplating.   The lawyers allegedly failed to discover that a screen shot of a bank statement provided to prove that others had invested in the film was “phony.”  Plaintiff alleged that this negligence caused him to invest funds that he lost.

The defendant lawyers moved to dismiss and the circuit court granted the motion on statute of limitations grounds. 

The appellate court affirmed dismissal.  The court held that the two year statute of limitations began to run when the plaintiff had enough knowledge to inquire whether it was injured and that the injuries were wrongfully caused.  The court held that there were at least four dates by which plaintiff had such knowledge: when the defendants sent plaintiff an email pointing out the phony screen shot, which necessarily told plaintiff that they had not previously discovered the phony screen shot; when defendants filed two lawsuits on plaintiff’s behalf that described the fraud; and when judgment was entered against the fraudster in one of those suits.  The court rejected plaintiff’s argument that equitable estoppel tolled the statute of limitations for several reasons.  First, the court held that a lawyer has no duty to advise a client that the lawyer may have committed malpractice; second, acts constituting alleged malpractice cannot be the same acts invoked to create equitable estoppel; third, regardless of defendants’ alleged conduct, the plaintiff had sufficient information to know that it had a malpractice claim.

Bill A. Busbice, Jr., an individual, Ollawood Productions, LLC, Ecibsub, LLC v. Troutman Sanders, LLP, Robert E. Browne, Jr., Michael D. Friedman and Paul Gale, 2021 IL App (1st) 200848-U

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

Legal Malpractice Claims Require Damages

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An Illinois Appellate Court held that a legal malpractice claim cannot be proven without a showing of damages.  RealWheels Corp. v. John Crossan, 2021 IL App (1st) 120809-U. RealWheels Corporation (“RealWheels”) sued attorney John Crossan for legal malpractice claiming that Crossan was responsible for its failure to patent a “twist and lock” wheel cover. According to RealWheels, Crossan filed a provisional patent application and promised to remind RealWheels to file a regular patent the following year. Crossan then retired and did not communicate with RealWheels regarding the regular patent.  Having missed the regular patent deadline, RealWheels lost the ability to patent its wheel cover. In Crossan’s motion for summary judgment, he argued that RealWheels could not prove that anyone had copied its invention, that it was unsuccessful in selling the invention, and that it experienced a significant decrease in sales of the wheel covers long before the patent issue.  RealWheels provided no evidence to rebut Crossan’s claims.  Therefore the circuit court granted his motion.  The Appellate Court affirmed.

RealWheels Corporation v. John Crossan, 2021 IL App (1st) 120809-U

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

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

Northern District of Illinois Grants Motion to Dismiss On Statute of Limitations Grounds

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The Northern District of Illinois granted a motion to dismiss a legal malpractice claim on statute of limitations grounds.   The plaintiff alleged that his lawyer negligently failed to advise him that a settlement agreement with his former employer would adversely affect his pension.

The court held that the plaintiff’s malpractice claim accrued when he signed the settlement agreement.  Because that was more than six years before he filed suit, his malpractice claim was barred by the statute of repose.

The court held that because the plaintiff did not allege that the lawyer purposefully misled him or that he could not have discovered the truth, his complaint was not saved by the fraudulent concealment or equitable estoppel doctrines.

William Saunders v. Michael S. Hedrick; 2021 WL 63370

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

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

Clients Can Recover Punitive Damages From Their Attorneys

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As a matter of first impression, the Fifth District Appellate Court held that punitive damages assessed against a litigant that were proximately caused by an attorney’s professional negligence can be recovered as compensatory damages in a subsequent legal malpractice case. Midwest Sanitary Serv., Inc. v. Sandberg, Phoenix & Von Gontard, P.C., 2021 IL App (5th) 190360. In Midwest, the plaintiff brought a legal malpractice claim against the law firm Sandberg, Phoenix & Von Gontard, P.C. (“Sandberg”) asserting that it negligently managed a wrongful termination case and that “but for” Sandberg’s actions the jury would not have awarded punitive damages. The Court reasoned that Illinois’ prohibition on punitive damages in legal malpractice cases does not apply to these facts. 735 Ill. Comp. Stat. Ann. 5/2-1115. The Court distinguished Tri-G, Inc. v. Burke Bosselman & Weaver, 222 Ill. 2d 218 (2006), in which the Supreme Court held that an unsuccessful plaintiff cannot recover wrongfully “lost” punitive damages in a subsequent malpractice action because the bases for denying lost punitive damages did not apply to wrongfully incurred punitive damages. The court held that allowing recovery of the punitive damages is the only way to compensate the plaintiff for its total out-of-pocket losses and must be permitted.

Midwest Sanitary Services, Inc. v. Sandberg, Phoenix & Von, 2021 IL App (5th) 190360

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

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