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Damage

Related Litigation Did Not Forestall Suit for Legal Malpractice

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Joseph Mizrachi (“Mizrachi”) retained attorney Lawrence Ordower (“Ordower”) to represent him in connection with his plan to invest in an LLC. Mizrachi intended the transaction to give himself, Ordower, and Seymour Holtzman (“Holtzman”) equal ownership interests in the LLC. After the transaction, however, Mizrachi alleged that Ordower and Holtzman converted his ownership share for their own use. Mizrachi sued Ordower and his law firm for legal malpractice and breach of fiduciary duty.  Id. at 1.

At the time, lawsuits involving the same underlying transaction were pending in Florida and California as well. Ordower moved to stay Mizrachi’s lawsuit.  He explained that Mizrachi’s entitlement to damages for legal malpractice depended upon the outcome of one or both of the other two lawsuits and that Illinois law did not permit recovery for legal malpractice or breach of fiduciary duty without damages.  Id. at 2.  Mizrachi responded that he had already been injured when he paid $1.3 million for rights he did not receive.  He added that Ordower was not even a party to the Florida case, and that the Florida case had been stalled by the inaction of another party. The motion was denied.

Ordower later renewed his motion to stay.  His arguments were “largely the same as before,” except that he had become a party to the Florida matter and that it had progressed.  Id.  The Court rejected this distinction.  As previously, “no case cited by Ordower holds or suggests that a client must prosecute a separate lawsuit against the lawyer or others before he can sue the lawyer for malpractice—let alone for breach of fiduciary duty.”  Id. at 4.  In addition, the Court considered ten factors as to whether exceptional circumstances warranted abstention.  One of two factors favoring abstention was that “the Florida case […] could resolve the parties’ claims to the Brentwood LLC interests—though it might not definitively resolve everything […].”  Id. at 5.  However, eight factors weighed against abstention including that Ordower did not become a party to the Florida case until over a year after Mizrachi filed the present action and that the Florida case had languished for so long.  The motion was therefore denied.  Ordower later renewed his motion to stay.  His arguments were “largely the same as before,” except that he had become a party to the Florida matter and that it had progressed.  Id. The Court rejected this distinction.  As previously, “no case cited by Ordower holds or suggests that a client must prosecute a separate lawsuit against the lawyer or others before he can sue the lawyer for malpractice—let alone for breach of fiduciary duty.”  Id. at 4.  In addition, the Court considered ten factors as to whether exceptional circumstances warranted abstention. One of two factors favoring abstention was that “the Florida case […] could resolve the parties’ claims to the Brentwood LLC interests—though it might not definitively resolve everything […].”  Id. at 5. However, eight factors weighed against abstention including that Ordower did not become a party to the Florida case until over a year after Mizrachi filed the present action and that the Florida case had languished for so long.  The motion was therefore denied.

Mizrachi v. Ordower, No. 17 C 8036, 2020 WL 1914646 (N.D. Ill. Apr. 19, 2020)

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

 

Legal Fees as a Measure of Damages

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Maria Freda (“Freda”) sued her attorney, Michael Canulli (“Canulli”), in connection with his representation of her during her divorce.  Canulli’s professional liability insurer, the Illinois State Bar Association Mutual Insurance Company (“ISBA Mutual”), initially agreed to defend him.  However, Freda amended her complaint to allege that “‘as a direct and proximate result’ of Canulli’s (1) professional negligence and (2) breach of contract, she had been damaged ‘in an amount in excess of $100,000 in that she has incurred attorney’s fees and costs for useless and unnecessary legal proceedings initiated by *** Canulli.’”  Id. at ¶24.  Per Canulli’s policy from ISBA Mutual, a plaintiff must seek damages against the insured in order to trigger a duty to defend, and legal fees are explicitly excluded from the policy’s definition of damages.  Id. at ¶23.  Consequently, ISBA Mutual filed a declaratory judgment action seeking a finding that it was not obligated to defend Canulli.  The circuit court found in ISBA Mutual’s favor.

On appeal, the Appellate Court of Illinois, First District, held that Freda’s damages were not fees.  It explained that Freda’s damages were “not a consequence of Canulli’s fees but a consequence of his alleged failure to handle [Freda’s] divorce proceedings expeditiously and appropriately—i.e., his negligence and breach of contract in representing her.”  Id. at ¶30, emphasis in original.  In other words, “Freda’s complaint stem[med] from the allegedly negligent way Canulli represented her in the divorce, and it is that negligent representation that caused her to expend more money than necessary.”  Id.

Illinois State Bar Ass’n Mut. Ins. Co. v. Canulli, 2020 IL App (1st) 190142

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

Nothing Is Not a Plan: District Court Holds Doing Nothing Does Not Involve Judgment, Strategy, or Tactics

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Michael Cadena retained attorney Helen Ogar to represent him in a child custody dispute.  Cadena won custody of his minor son, and was encouraged by the Department of Children and Family Services to relocate for the child’s safety.  Cadena e-mailed Ogar repeatedly asking if there were any legal barriers to him moving to another state with his son.  Ogar did not respond substantively.  After Cadena moved to Massachusetts, he was arrested and jailed.  He also lost custody of his son.  Cadena, now a citizen of Massachusetts, sued Ogar and her law firm in federal court based upon diversity jurisdiction.

The defendants moved to dismiss, arguing that the domestic relations exception to federal diversity jurisdiction barred Cadena’s lawsuit from federal court.  The court denied the motion, explaining that Cadena was “suing his lawyer for malpractice pursuant to lack of advice on whether or not he could cross state lines… an independent civil action.”  Id.  at 2.

Ogar and her firm also moved to dismiss for failure to state a claim.  They alleged that Cadena did not explain how counsel’s deficient performance did not involve an exercise of judgment, strategy, or trial tactics as required in Person v. Behnke, 242 Ill. App. 3d 933, 940 (4th Dist. 1993), which required such an allegation in a legal malpractice action arising out of allegedly deficient advice in a child custody case.  The court disagreed, and held that while Cadena “failed to expressly plead” that the alleged malpractice did not involve judgment,  his assertion that the defendants did “nothing” implicitly pleaded as much.  Id.  Ogar did find success in arguing that Cadena was not entitled to damages for emotional distress or loss of normal life.  There, the court held that “legal malpractice is not sufficient basis to support damages for emotional distress,” even in custody cases.  Id. at 3.  Regarding loss of normal life, the court held that such damages “belong almost universally to the realm of personal injury cases.”  Id.

Cadena v. Ogar, No. 19-CV-01092, 2019 WL 3325787 (C.D. Ill. July 24, 2019)

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

Atkins v. Robbins, Salomon & Patt, Ltd. , 2018 IL App (1st) 161961

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The First District reversed a directed finding in favor of a malpractice defendant.   The trial court had found that a professional corporation paid all of its “income” as salaries and therefore had no “profit.” As a result, it could not prove it was damaged by malpractice that allegedly caused it to lose income.   The Appellate Court reversed and allowed the corporation to prove its shareholder’s lost income as a method of proving damage to the corporation.

Atkins v. Robbins, Salomon & Patt, Ltd. , 2018 IL App (1st) 161961

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

Killian v. Minchella, 2017 IL App (1st) 163429-U, appeal denied, 98 N.E.3d 65 (Ill. 2018)

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In this unpublished opinion, the First District affirmed the dismissal of a legal malpractice case. The court examined whether unpaid judgments constituted damages to the plaintiff. Although the court noted that an unpaid judgment could damage a malpractice plaintiff, it held that the malpractice complaint failed to state a claim because it failed to allege that the plaintiffs had paid or would have to pay a judgment in excess of what they would have paid in the absence of negligence.

The court also affirmed on statute of limitations grounds. It held that the entry of a non-final summary judgment order put the plaintiff on notice of the alleged malpractice. Thus, the statute began to run at that time. The court rejected the argument that the statute of limitations did not run until the summary judgment became final and appealable.

Killian v. Minchella, 2017 IL App (1st) 163429-U, appeal denied, 98 N.E.3d 65 (Ill. 2018)

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

R.F. Techs., Inc. v. LeClair Ryan, P.C., No. 17 C 1886, 2018 WL 835349 (N.D. Ill. Feb. 12, 2018)

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The Northern District held that a complaint that alleged that lawyers’ malpractice caused a client to pay more to settle a case than it otherwise would have had to pay adequately plead proximate cause and damages.   The court also refused to take judicial notice of an order assessing sanctions against the malpractice plaintiff and, therefore, held that there was no evidence to support unclean hands and in pari delicto defenses at the motion to dismiss stage.

R.F. Techs., Inc. v. LeClair Ryan, P.C.

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

Laurent v. Johnson

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The Third District affirmed the grant of summary judgment in a legal malpractice case.  The court held that plaintiff had no evidence that she would have been successful in the underlying case within a case but for the legal malpractice because she failed to satisfy the “discrepancy rule” for an insurance case.  The court also held that there was no evidence that the settlement of the underlying case was depressed by the alleged malpractice because the plaintiff settled her underlying case before the court dismissed it.  Thus, there was no evidence of either causation or damage.

Laurent v. Johnson, 2017 IL App (3d) 160627

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

West Bend Mutual Ins. Co. v. Schumacher

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The Seventh Circuit affirmed the dismissal of a legal malpractice claim because it did not adequately allege causation and damages.   The court held that the allegations as to how the malpractice plaintiff would have prevailed in the underlying litigation but for the attorney’s malpractice were insufficiently specific to state a claim.

West Bend Mutual Ins. Co. v. Schumacher, Case No. 14-2731, 2016 WL 7395708 (7th Cir. Dec. 21, 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: Goldfine v. Barack Ferrazzano Kirschbaum & Perlman

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The Illinois Supreme Court addressed malpractice damages arising out of the negligent failure to preserve an Illinois Securities Law Claim. The Court held that, had the lawyers properly preserved the Securities Law Claim, statutory damages would have been awarded. Thus, actual damages in the malpractice action included the statutory damages, such as interest and attorneys’ fees, that would have been awarded pursuant to the Securities Law Claim.

The Court rejected the defendants’ argument that such damages were barred by Illinois’ prohibition on awarding punitive damages against attorneys. The Court also held that interest should be awarded from the date of the purchase of stock through the date that the plaintiff settled the underlying claim, not through the date of the malpractice judgment. Finally, the court held that interest should be calculated before the underlying settlement is deducted from the malpractice damages.

Goldfine v. Barack Ferrazzano Kirschbaum & Perlman, 2014 IL 116362

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