Attorney-Client Relationship

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

Posted on Updated on

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

Posted on Updated on

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

Posted on Updated on

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

Posted on Updated on

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.)

Stevens v. Sharif

Posted on Updated on

The court held that the plaintiff failed to state a claim against a lawyer, in part, because she failed to allege the existence of an attorney client relationship.   The fact that the plaintiff was represented by other counsel made it implausible that the defendant lawyer represented her.   The court further held that the claim was barred by the statute of limitations.   The claim accrued when the underlying bankruptcy court made its initial decision; accrual did not depend upon the result of the subsequent appeal.

Stevens v. Sharif, No. 15 C 1405, 2017 WL 449175 (N.D. Ill. Feb. 2, 2017)

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

Recent Illinois Case: Short v. Grayson

Posted on Updated on

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

Posted on Updated on

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.)