Conspiracy Requires Knowing the Co-Conspirators, Malpractice Requires Knowing the Underlying Outcome

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Natalja Vildziuniene (“Vildziuniene”) sued attorney Bradley Foreman (“Foreman”) for conspiracy to commit fraud and legal malpractice.  Specifically, she alleged that Foreman conspired to defraud her, breached the duty of care, and represented her in various court proceedings without her knowledge.  Foreman moved successfully to dismiss these counts and Vildziuniene appealed.  The Appellate Court of Illinois, First District, affirmed.  With respect to the conspiracy to commit fraud, it stated that Vildziuniene’s accusations were a “mere characterization of acts as a conspiracy.” Id. at ¶47.  Moreover, “there were no allegations that Foreman knew the other defendants, spoke with the other defendants, or knew anything about the allegedly fraudulent purpose behind these” supposedly fraudulent transactions.  Id. at ¶50.  Regarding the alleged malpractice, the Appellate Court noted that “there are no allegations as to what happened in any of the cases in that Foreman allegedly represented plaintiff” such as whether Vildziuniene even prevailed in those matters.  Id. at ¶54.  It was therefore impossible to ascertain whether she would have prevailed in the underlying actions but for Foreman’s negligence.

Vildziuniene v. Rieff, 2019 IL App (1st) 181324-U

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

Attorney’s Omissions or Inaction May Constitute Fraudulent Concealment

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Robert Brandolino (“Brandolino”) retained Douglas Schlak (“Schlak”) to assist him in a real estate sale.  Brandolino held a life estate in the property to be sold, while his three sons (the “Plaintiffs”) held remainder interests.  The Plaintiffs granted Schlak power of attorney so that he could represent them and their father in the transaction .  When the sale was concluded, Brandolino gave each son $100,000, which they believed was a gift for their help in facilitating the sale.  Thirteen years later, however, the Plaintiffs discovered previously unknown papers in Brandolino’s home explaining their true interest in the property.  These included several documents signed by Schlak on the Plaintiffs’ behalf without their knowledge or consent, tax and closing forms, and papers explaining that Brandolino’s supposed gift to the Plaintiffs was actually payment for their interest in the property.

The Plaintiffs sued Schlak for legal malpractice.  They alleged that Schlak never explained their interests to them or advised them to seek separate counsel given the possible conflict with Brandolino’s interests.  Rather Schlak purportedly induced them not to attend the closing, signed documents on their behalf without permission, failed to deliver various documents to them after the sale, and otherwise intentionally withheld material information.  Had they been properly counseled, the Plaintiffs insisted they would have demanded more money for their remainder interests.

Schlak moved to dismiss the Plaintiffs’ complaint as untimely, since it had been filed more than thirteen years after his alleged malpractice.  At hearing, the Court explained that “in Illinois, a statute of repose provides that legal malpractice claims ‘may not be commenced in any event more than 6 years after the date on which the act or omission occurred.’” Id. at 2, 735 ILCS 5/13-214.3(c).  However, the Court noted that fraudulent concealment tolls the statute of repose “until the plaintiff has had a reasonable opportunity to discover the malpractice.”  Id. at 3, 735 ILCS 5/13-215.  Here, the Plaintiffs argued that Schlak’s deliberate failure to provide them with material information relating to the property sale constituted fraudulent concealment, which tolled the statute of repose until they uncovered the fraud many years later.  Schlak countered that fraudulent concealment requires “affirmative actions, as opposed to mere silence.”  Id.  The Court conceded that Schlak’s position is generally correct, except where two parties maintain a special relationship like that of an attorney and client.  In this case, the Court held that discovery could reveal Schlak’s actions or lack thereof amounted to fraudulent concealment that prevented the Plaintiffs from discovering their claim.  Schlak’s motion to dismiss was therefore denied.

Brandolino v. Schlak, No. 19-CV-00102, 2019 WL 3287891 (N.D. Ill. July 22, 2019)

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

Illinois Labor Relations Board has Exclusive Jurisdiction Over Malpractice Claims Against Union-Provided Lawyers

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The Village of Fox Lake (“Village”) sought to terminate the employment of police officer Russell Zander (“Zander”).  At the advice of attorney Roy Carlson (“Carlson”) whose services were provided to him by the Fraternal Order of Police (the “FOP”), Zander waived his right to a hearing before the local police board and chose instead to challenge his dismissal through an arbitration in which Carlson represented him.  When the arbitrator ruled against him, Zander sued Carlson and the FOP for legal malpractice.  The Circuit Court dismissed Zander’s complaint, holding that Carlson was immune from personal liability for actions taken on behalf of a union and that Zander’s claim against the FOP must be brought before the Illinois Labor Relations Board.  Zander appealed.

The Appellate Court of Illinois, First District, affirmed dismissal.  It reiterated the Circuit Court’s holding that “the Labor Relations Act vests the [Illinois Labor Relations] Board with exclusive jurisdiction over claims that a union has violated its duty of fair representation.”  Id. at ¶13.  Similarly, with respect to any personal liability on Carson’s part, the Appellate Court explained that “when a union instead hires an attorney to act for it in the collective bargaining process—including in an arbitration proceeding where the underlying grievance belongs to a particular union member—the union itself continues to represent, and is ultimately responsible to, the member.”  Id. at ¶14.  To hold otherwise, it continued, would be to “hold certain agents or employees of the union to a far higher standard of care than the union itself.”  Id. at ¶15.  Zander countered that he had a direct attorney-client relationship which permitted him to sue Carlson independently.  The Appellate Court rejected this argument as well, saying “to invoke this exception, the union member must show that the attorney specifically agreed to provide direct representation to the union member as an individual client” rather than “acting pursuant to his obligation to provide representation for or on behalf of the union.”  Id. at ¶18.  Zander’s complaint did not allege any specific agreement to that effect.

Zander v. Carlson, 2019 IL App (1st) 181868

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

Breach of the Standard of Care Must be the Proximate Cause

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In 2006, insurance executive Steven Menzies (“Menzies”) sold over $64 million worth of his company’s stock without reporting any capital gains on his federal tax return.  He alleged that this was due to a fraudulent tax shelter presented to him and others by tax attorney Graham Taylor (“Taylor”), Taylor’s law firm Seyfarth Shaw (“Seyfarth”), and two financial services firms: Northern Trust and Christiana Bank.  Menzies brought claims against all four defendants under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and Illinois law.  The defendants moved successfully to dismiss all counts, and Menzies appealed.  The Seventh Circuit affirmed in part, reversed in part, and remanded.  With respect to Menzies’ RICO claim, it held that it “falls short on the statute’s pattern-of-racketeering element” in that Menzies “failed to plead not only the particulars of how the defendants marketed the same or similar tax shelter to other taxpayers, but also facts to support a finding that the alleged racketeering activity would continue.”  Id. at 332.  The Court added that finding otherwise would allow “an ordinary (albeit grave) claim of fraud to advance in the name of RICO.”  Id.  Conversely, Menzies’ state law claims against Taylor and Seyfarth were barred by the Illinois’ two-year statute of limitations for attorney misconduct.  Id. at 346.   However, his claims against Northern Trust and Christiana Bank were allowed to proceed on remand.  Id.  The court did not address whether the RICO claims against Taylor and Seyfarth would be barred by the two-year attorney statute as well.

Menzies v. Seyfarth Shaw LLP, 943 F.3d 328 (7th Cir. 2019)

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

Disputing Fees and Disputing Performance

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Jonathan Waldman (“Waldman”) retained attorney Benjamin Edlavitch (“Edlavitch”) to prepare and file two patent applications in May, 2008.  For this, Waldman promised to pay Edlavitch $7,000 in advance, and signed attorney engagement agreement to that effect.  However, three months later, Edlavitch requested an additional $1,000.  Waldman agreed.  Two months after that, Edlavitch persuaded Waldman to give him another $530.  In December, 2008, Edlavitch contacted Waldman about yet more charges.  This time Waldman demanded that Edlavitch “honor the contract by completing performance without requiring additional fees.”  Id. at ¶9.  In response, Edlavitch threatened to send Waldman a termination letter and a bill, but never did so.

Nothing happened until September, 2017 when Waldman sued Edlavitch for anticipatory repudiation.  He claimed that Edlavitch had a duty to complete performance under the agreement for the “agreed flat fee of $7,000, or alternatively for the $8,000 or $8,530” he had paid, and that Edlavitch had “repudiated the contract by clear manifestation of intention that he would not complete the promised performance except on terms that went beyond the contract.”  Id. at ¶10.  Edlavitch moved to dismiss, arguing that Waldman’s complaint was barred by the two-year statute of limitations applicable to claims arising out of the provision of legal services.  The Circuit Court granted his motion.

When Waldman appealed, the Appellate Court had to consider which statute of limitations applied: ten years for breach of contract (735 ILCS 5/13-206) or two years for legal malpractice (735 ILCS 5/13-214.3(b)).  On one hand, it recognized that Waldman’s claim was “unquestionably an action for breach of contract.” Id. at ¶17.  On the other hand, Waldman’s claim also arose “out of an act or omission in the performance of professional services.”  Id. at ¶18.  The Appellate Court recognized that the language of the legal malpractice statute of limitations “indicates an intent by the legislature that the statute apply to all claims against attorneys concerning their provision of professional services.”  Id. at ¶19.  Moreover, it noted that “Waldman is not merely asserting that he should have been charged” a different amount and “wants the difference.”  Id. at ¶22.  Instead, “Waldman is saying that Edlavitch breached the contract, and he is thus entitled to a full refund of all money paid, $8,530, plus other consequential damages.”  Id. at ¶22.  According to the Appellate Court, “that is not a dispute over fees; that is a dispute over Edlavitch’s performance of legal services.”  Id. at ¶20.  Dismissal was therefore affirmed.

Waldman v. Edlavitch, 2019 IL App (1st) 181127-U

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

 

Time Enough to Disclose Experts Even Without a Due Date

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William Feda (“Feda”) represented William Schmid (“Schmid”) in the dissolution of Schmid’s marriage.  At issue in the divorce proceedings were Schmid’s unemployment and ability to pay maintenance and his former wife’s health and ability to work.  The Circuit Court ordered Schmid to pay his wife $1,500 per month or 40% of his gross income, whichever was greater.  Schmid, displeased by the outcome, sued Feda for legal malpractice.  He claimed that Feda’s negligent conduct of the discovery process led to the judgment against him.  Feda moved for summary judgment, asserting that his actions were protected by the judgmental immunity doctrine.  Feda also maintained that even if he should have taken the steps Schmid wanted, Schmid could not prove that their absence was the proximate cause of the judgment against him.  At a hearing on the motion, Schmid argued that the summary judgment was premature since the Trial Court had not yet set a date for disclosure of expert witnesses, though he admitted not raising that issue in his response to the motion.  The motion was granted.

On appeal, Schmid argued that the Trial Court erred in not allowing him sufficient time to disclose expert opinions on whether Feda had breached the applicable standard of care.  The Appellate Court disagreed, declining to disturb the Trial Court’s ruling on a discovery matter absent “a manifest abuse of discretion.”  Id. at ¶19.  In this case, although no date for expert disclosure had been set, six years had passed since Feda’s alleged negligence and the hearing on the motion for summary judgment.  Despite that, no plaintiff’s expert was ever disclosed.  Id. at ¶23.  As Feda “was unable to prove his malpractice case without any expert testimony,” summary judgment was affirmed.  Id.

Schmid v. Feda, 2019 IL App (2d) 181005-U

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

 

Guardians Ad Litem Protected by Quasi-Judicial Immunity

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When she was eleven years old, Alexis Nichols (“Nichols”) received $600,000 as part of a settlement for injuries she sustained in a motor vehicle accident.  The probate court appointed her mother as guardian to administer her estate and David Fahrenkamp (“Fahrenkamp”) as guardian ad litem.  On reaching majority, Nichols sued Fahrenkamp for negligence in failing to adequately scrutinize her mother’s improper expenditures or report such irregularities to the court.  Nichols also asserted that Fahrenkamp never met with her, consulted with her regarding her mother’s actions, or even told her of his appointment.  Fahrenkamp moved for summary judgment, arguing that the order appointing him only required that he provide recommendations regarding Nichols’ best interests.  Having fulfilled that obligation at the Probate Court’s direction, he claimed quasi-judicial immunity from liability.  The Circuit Court granted Fahrenkamp’s motion, but the Appellate Court reversed, holding that “outside the antagonistic context created by litigating parents, guardians ad litem do not need protection from unwarranted harassment and do not require quasi-judicial immunity.”  Id. at ¶9.

Fahrenkamp appealed to the Supreme Court of Illinois, which reversed.  The Court explained that the primary issue was what Fahrenkamp’s function as a guardian ad litem was.  Determining that would establish whether Fahrenkamp’s role was sufficiently connected to the judicial process to warrant immunity.  The Court explained that, “rather than looking at the title ‘guardian ad litem’ to determine whether Fahrenkamp has quasi-judicial immunity, the court must consider what function he performed.”  Id. at ¶16.  To that end, Fahrenkamp defined his role based on the Illinois Marriage and Dissolution of Marriage Act (750 ILCS 5/101 et seq .).  Nichols disagreed, claiming Fahrenkamp’s role was defined by the Probate Act (755 ILCS 5/art. IX).  The Court agreed with Fahrenkamp, noting that “most Illinois cases in the twenty-first century that involve a guardian ad litem treat that guardian ad litem as a reporter or witness and not as an advocate.”  Id. at ¶35.  By contrast, “cases in which the guardian ad litem represented a ward as an advocate” were from earlier in Illinois’ history.   Id.  Moreover, the Court cited to “other state supreme courts” which have “granted immunity to actors who fulfill a comparable function” even though “no Illinois court has specifically considered whether this position merits quasi-judicial immunity.”  Id. at ¶42.  The Court cited to federal appellate courts as well, which have found that “ guardians ad litem are immune when their function is to report to the court on a child’s best interests.”  Id. at ¶43.  With that, the Court held that “guardians ad litem who submit recommendations to the court on a child’s best interests are protected by quasi-judicial immunity.”  Id. at ¶49.

Nichols v. Fahrenkamp, 2019 IL 123990

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