Attorney-Client Relationship

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.)

Cox as Trustee for Estate of Central Illinois Energy Cooperative v. Evans, 2018 WL 6706666

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A group of farmers formed a coop to construct and operate an ethanol facility.  Michael Evans (“Evans”) an attorney at Froehling, Weber, Evans & Schell, LLP (“FWES”), prepared the articles of incorporation.  He and his wife, Ginger, became shareholders in the coop, and Evans served as the it’s attorney and registered agent.  When the coop had trouble paying for construction, Evans and his partner, Nancy Schell (“Schell”) informed the coop board that Green Lion Bio-Fuels, L.L.C. (“Green Lion”) wanted to invest in the project.  Evans disclosed that Green Lion was one of FWES’ other clients and that various FWES employees and their family members had equity stakes in it.  However, he did not disclose that his wife’s stake in Green Lion was nearly 96%.

The chairman of the coop board signed a conflict waiver which referred to Ginger as a “minority” shareholder, and Green Lion loaned the coop $5 million to complete its project.  Id. at 2.  Pursuant to the loan, Green Lion would also purchase the coop’s grain handling facility, which the coop would still manage and eventually buy back.  Evans drafted the corresponding purchase and buyback agreements.  He gave copies of the agreements to Kenneth Eathington (“Eathington”), an attorney at Husch Blackwell, to review.  Eathington returned the agreements with his edits.  Schell circulated various revised agreements over the next week, until the coop finally executed the sale.  Six months later, the coop filed for bankruptcy.  Clay Cox (“Cox”), trustee for the coop, sued Evans, Schell, and FWES (collectively “Defendants”) for legal malpractice and breach of fiduciary duty through self-dealing.  Defendants moved for summary judgment.

Defendants allege that there was no attorney-client relationship between themselves and the coop such that they could be held liable for malpractice.  They argue that the coop’s general manger had retained Eathington as separate counsel for the coop.  Cox countered, and the Court agreed, that Eathington was merely additional counsel consulted by Evans.  Indeed, the coop’s general manager testified that he sent his questions about the agreements to FWES, not Eathington.  As for Cox’s breach of fiduciary duty claim, the Court agreed that there were genuine disputes of material fact.  For example, Defendants argued that they had made a full and frank disclosure of their interests in the sale of the holding facility, but the conflict waiver signed in this matter listed Ginger as a “minority” shareholder despite her 96% interest in Green Lion.  The court also held that there was a genuine dispute as to the adequacy of the consideration given for the grain handling facility and whether the coop received independent advice on its sale.  Evans argued that the coop had engaged Eathington for his independent advice, while the coop maintained that Eathington was only supplemental counsel, not separate.  With all of the above issues in dispute, the question of proximate causation was likewise in dispute.  Summary judgment was therefore denied.

Cox as Trustee for Estate of Central Illinois Energy Cooperative v. Evans, 2018 WL 6706666

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

Zombro v. Jones, 2018 IL App (4th) 170442-U

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The third-party plaintiff, Vicky Jones, sued the third-party defendant, attorney Kevin Hammer, for legal malpractice in a real estate transaction where Hammer had represented her.

Jones alleged that Hammer had grossly understated the price of her land in the contract he drafted, threw the contract at Jones during a meeting, and lambasted the deal in front of the buyers, thereby inducing Jones to sell her land for one eighth its supposed market value. Conversely, Hammer and the buyer alleged that Hammer had correctly stated the agreed-upon price in the contract, and that Hammer didn’t throw anything at Jones. Hammer also said Jones had read the final contract and asked him questions before signing.

The Trial Court granted summary judgment in Hammer’s favor. When Jones appealed, Hammer argued that he had not breached any duty to Jones, because he had technically performed the two tasks she had hired him to do. The Appellate Court rejected this “scope-of-engagement” argument, holding that Hammer, as Jones’ attorney and therefore his agent, was not merely obligated to perform certain tasks, but also owed Jones a fiduciary duty “to treat his principal with the utmost candor, rectitude, care, loyalty, and good faith—in fact to treat the principal as well as the agent would treat himself.” Id. at ¶41. This fiduciary duty extended to all tasks he was hired to perform and “all matters connected” with those tasks. Id.

Nevertheless, the Appellate Court found that there was no genuine issue of material fact with respect to one critical element of Jones’ claim: damages. Specifically, the deal Hammer allegedly ruined didn’t actually exist, since the deal Jones claimed she had hired Hammer to pursue differed from the deal the buyers believed they were entering into. In fact, the buyers swore that they could not have afforded the land at the price to which Jones believed they had agreed. Moreover, the Court explained that even if it were to assume “for the sake of argument, that Hammer did indeed bully Jones into selling the land for only $5,000, it appears she suffered no resulting harm, because […] Jones presented no admissible evidence that the land was worth more” and “the arm’s-length transaction […] is evidence of the highest rank to determine the true value of property.” Id. at ¶55. Summary judgment was therefore affirmed.

Zombro v. Jones, 2018 IL App (4th) 170442-U

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

 

 

Geraci v. Cramer

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In this unpublished decision, the Fifth District affirmed the dismissal of claims against attorneys.  Many of the claims were dismissed because they were time barred.   The court focused on the fact that the statute of limitations begins to run when a plaintiff has sufficient information to be on inquiry notice that he might have a claim.   Other claims were dismissed because an attorney hired by a condominium association did not have an attorney client relationship with or owe a duty to the individual members of the association.

Geraci v. Cramer

 

Bay Group Health Care, LLC v. Ginsberg Jacobs, LLC

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The district court granted summary judgment in favor of a law firm.   The court held that signing a confession of judgment did not create an attorney client relationship between the law firm and the judgment debtor.  The court also noted that, under Illinois law, a violation of the Rules of Professional Conduct does not give rise to a cause of action or duty in tort. There is no “ethical malpractice” or “professional responsibility tort” in Illinois.

BAY GROUP HEALTH CARE, LLC v. GINSBERG JACOBS, LLC, Dist. Court, ND Illinois 2017

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

Recent Illinois Case: Short v. Grayson

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The Northern District of Illinois enforced an arbitration clause in an attorney retainer agreement.  In doing so, the Court rejected the plaintiff’s argument that it was against public policy to enforce an arbitration agreement in an attorney retention agreement where the lawyer fails to fully explain the clause.

Short v. Grayson, No. 16 C 2150, 2016 WL 7178463 (N.D. Ill. Dec. 9, 2016)

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

Recent Illinois Case: Bachewicz v. Holland & Knight

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In this unpublished opinion, the First District affirmed the trial court’s grant of summary judgment to a law firm.

The court held that the case was time-barred despite the plaintiff’s argument that he did not know the amount of his damages until less than two years from the time he brought his claim. The court held that it is not necessary to know the amount of damages for the statute of limitations to begin to run.

The court also held that the plaintiff failed to create a genuine issue of fact sufficient to defeat summary judgment because he did not identify the documents that allegedly led him to discover his damages.

Finally, the court affirmed summary judgment for the defendants on the plaintiff’s legal malpractice claim arising out of a transfer of real estate with which the defendants assisted because the plaintiff admitted that the transfer occurred after the attorney-client relationship had terminated.

Bachewicz v. Holland & Knight, 2016 IL App (1st) 153394-U

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

Recent Illinois Case: Barry v. Galloni

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The district court affirmed the bankruptcy court’s determination that a judgment in favor of an intended beneficiary against a lawyer who forged a witness’s signature on a will — resulting in the intended beneficiary losing the benefit of the will – could not be discharged in the lawyer’s Chapter 7 bankruptcy proceeding.

Barry v. Galloni, 2016 WL 245912

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

Recent Illinois Case: KS Trucking Enterprise Inc v. Albukerk

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In this unpublished order, the First District affirmed the dismissal of a malpractice claim arising out of an underlying action that was dismissed by default after the defendant lawyer had withdrawn as counsel for the malpractice plaintiff.  The court held that: (a) the malpractice complaint did not sufficiently allege that there was an attorney client relationship at the time of the default dismissal; and (b) the complaint failed to allege causation despite the fact it alleged that the malpractice defendant waived certain procedural defenses because it did not allege that other substantive defenses would have succeeded.

KS Trucking Enterprise Inc v. Albukerk, 2015 IL App (1st) 151230-U

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