Proximate Cause

CLO’s Wage Arbitration Did Not Bar Employer’s Malpractice Suit Under Res Judicata

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Richard Fisher (“Fisher”) was the Chief Legal Officer for UFT Commercial Finance, LLC (“UFT”).  UFT’s CEO was Joanne Marlowe (“Marlowe”) (together with UFT, “the Plaintiffs”).  As CLO, Fisher allegedly advised the Plaintiffs they did not need directors and officers insurance (“D&O Insurance”) and that such insurance would not protect Marlowe from personal liability should the company lose a wage claim or something similar.  Fisher also drafted employment agreements for UFT, some of which included supplements with accrual and deferment provisions.  He also drafted and executed his own agreement.  During Fisher’s third year as CLO, Marlowe told Fisher his employment would not be extended and Fisher resigned. Fisher then initiated arbitration proceedings against UFT and Marlowe for wages owed.  The arbitrator found the Plaintiffs jointly and severally liable to Fisher, with UFT individually liable for an additional sum.  In response, the Plaintiffs sued Fisher for professional negligence in that he, among other things, failed to fully and properly advise them of the legal consequences of the employment agreements and arbitration clauses, failed to advise them of the conflict of interest he had in executing his own agreement, and wrongly discouraged their purchase of D&O insurance.  Fisher moved for dismissal and sanctions.

Fisher first argued that the earlier arbitration award barred the Plaintiffs’ action under res judicata.  The Court disagreed, explaining that the arbitration concerned whether Fisher was entitled to wages while the instant case concerned whether Fisher was negligent in giving, or failing to give, legal advice.  The court also did not agree that the majority of the Plaintiffs’ claims were time-barred by the two-year statute of limitations for legal malpractice since the Plaintiffs “could not have reasonably known that they were injured until they lost the arbitration.”  Id. at 5.  Nevertheless, allegations of negligence related to Fisher’s employment agreement were still barred by the six-year statute of repose for legal malpractice because UFT and Marlowe filed suit more than six years after it was executed.  The Court also held that Fisher did not owe a duty to Marlowe since “[a]n attorney for an organization owes a duty to the organization, and not its individual shareholders, officers, or directors” unless that individual is an intended third-party beneficiary.  Id. at 6.  Moreover, the Court agreed that the Plaintiffs failed to establish proximate causation as to their use of supplemental employment agreements, not acquiring D&O Insurance, and not retaining independent counsel. Regarding employment agreements, the Court held that the Plaintiffs failed to allege damages from the agreements with employees other than Fisher himself.  However, the Court denied Fisher’s motion for sanctions.  It explained that it did “not believe that the claims brought by Plaintiffs are wholly baseless or frivolous” or that “this suit was brought for the sole purpose of harassing and embarrassing Fisher.”  Id. at 8.

UFT Commercial Fin., LLC v. Fisher, No. 19 C 7669; 2020 WL 2513097 (N.D. Ill. May 15, 2020)

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

 

 

 

Defendant May File Untimely Counterclaim if Plaintiff’s Claim Arose Before Counterclaim Was Barred

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Paul Abramson (“Abramson”) had hired attorney Alisa Levin of Levin Law, Ltd. (together “Levin”) in October, 2015, but terminated Levin after a dispute arose over the amounts billed.  In March, 2017, Abramson published a scathing review on Levin Law’s Yelp profile.  Levin published a response and sued Abramson for defamation and false light invasion of privacy.  Abramson then counterclaimed for legal malpractice, breach of fiduciary duty, and defamation. Levin moved to dismiss Abramson’s counterclaims.  Id. at 1.

Levin argued that Abramson’s counterclaims were time-barred and failed to state a claim. The Court disagreed as to timeliness, citing  735 ILCS 5/13-207, which “specifically states that the defendant in a lawsuit is permitted to bring a counterclaim that would otherwise be barred by the statute of limitations” provided the plaintiff’s claim arose “before the cause of action brought as a counterclaim was barred.”  Id. at 4.  With respect to Abramson’s claims for legal malpractice and breach of fiduciary duty, the Court held that even if their accrual had begun in December, 2015 when Levin’s representation of Abramson ended, the two-year statute of limitations for claims arising out of the provision of legal services would not have ended until December, 2017.  However, Levin’s claims arose when the Yelp review went up in March, 2017 and so were timely.  Id. at 5.  The court reached the same conclusion as to Abramson’s defamation claim.  Id. at 4.

Though not time-barred, the Court did conclude that Abramson had failed to state claims for legal malpractice and breach of fiduciary duty.  Specifically, Abramson’s claim for legal malpractice did “not explain how he lost the case or why Levin’s actions caused him to lose” nor did it explain how he “would have prevailed on the underlying claim in the absence of [Levin’s] missteps.”  Id. at 12.  His claim for breach of fiduciary duty likewise “fail[ed] to plausibly allege that this breach proximately caused any injury.”  Id. at 13.

Levin v. Abramson, No. 18-cv-1723, 2020 WL 2494649 (N.D. Ill. May 13, 2020)

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

Attorney May Testify as Expert on Standard of Care, Not on Legal Conclusions that Determine Outcome of the Case

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Clay Cox (“Cox”), successor trustee for a coop formed to build and operate an ethanol facility, sued attorneys Michael Evans and Nancy Schell and their law firm, Froehling, Weber, Evans & Schell, LLP, (together “Defendants”) for legal malpractice. Defendants designated attorney Walker Filbert (“Filbert”) as their expert witness concerning whether Defendants “met the standard of practice for attorneys practicing law in central Illinois and that their conduct did not proximately cause any injury to the Coop.” Id. at 6. Cox moved to bar Filbert’s testimony, memorandum in support, and Defendants’ response. The motion was granted in part and denied in part.

In ruling on Cox’s motion, the Court applied the Daubert analysis, which requires evaluation of “(1) the proffered expert’s qualifications; (2) the reliability of the expert’s methodology; and (3) the relevance of the expert’s testimony.” Id. at 7, see Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993). With respect to Filbert’s qualifications, Cox argued that his “experience as a lawyer in central Illinois and a CEO of an ethanol company” did not qualify him to give testimony in this matter because he had “no experience with professional responsibility and legal malpractice.” Id. at 9. The Court disagreed, explaining that as “a practicing attorney, Filbert would have been required to understand the rules of professional conduct governing his practice of law and to follow those rules. Those obligations encompassed the dispute at issue here—ascertaining the standard of care for an attorney.” Id. at 10. As to Filbert’s methodology, Cox claimed his report was devoid of any proposed methodology and rested “entirely on his alleged expertise as a lawyer, drawing conclusions without any analysis.” Id. The Court sided with Defendants again, holding that Filbert’s opinions “were informed by his legal experience and his knowledge of practicing law in central Illinois” and that his “report and proposed testimony sufficiently link the facts he relies upon with his conclusions so as to be reliable.” Id. at 11. The Court also held that Filbert’s testimony was relevant, as the “touchstone of admissibility under Rule 702 is helpfulness to the jury” and “the lay juror is unlikely to have a strong understanding of the business considerations surrounding the purchase or sale of commercial property” as in this case. Id.

Cox did find success in arguing that some aspects of Filbert’s report “invade[d] the province of the jury and are based upon unsupported assumptions.” Id. Specifically, Cox objected to Filbert’s conclusion that Defendants’ alleged acts or omissions did not proximately cause the damages claimed. The Court agreed that this was an impermissible conclusion, explaining that expert testimony “as to legal conclusions that will determine the outcome of the case is inadmissible.” Id. at 12. It clarified that “while Filbert may not offer an opinion in front of the jury as to proximate cause, he may opine, consistent with his deposition testimony, that market forces and the state of the ethanol industry following the transaction affected the viability of the grain handling facility and the prospects of obtaining financing.” Id.

Cox v. Evans, No. 18-CV-1105-JES-JEH, 2020 WL 2093371 (C.D. Ill. May 1, 2020)

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

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

 

Withdrawal as Counsel on the Eve of Trial

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Vanessa Wereko (“Wereko”) retained The Law Office of Tiffany M. Hughes (the “Firm”) to represent her throughout her divorce proceedings.  One month before trial, the Firm withdrew as counsel for Wereko’s alleged failure to pay all of her bills and then sued Wereko for breach of contract.  Wereko filed counterclaims for breach of contract and negligence. The circuit court found in favor of the Firm and dismissed Wereko’s counterclaims.

On appeal, Wereko asserted with respect to the parties’ breach of contract claims that the retainer agreement only permitted the Firm to withdraw under specific circumstances. These circumstances included nonpayment, but Wereko explained that the Firm had billed her more often than was agreed upon thereby improperly triggering her obligation to pay.  The court noted however that “in her email communications with the firm, Wereko did not question the frequency of the invoices, but instead communicated her inability to fully pay the billed amounts.”  Id. at ¶32.  Moreover, “the retainer agreement did not expressly provide that the enumerated bases were the exhaustive bases for withdrawal.”  Id. at ¶30.  To that, the Firm asserted that Wereko refused to comply with certain of the Firm’s advice and had not maintained a valid credit card on file with the Firm as required by the agreement.  Id. at ¶¶34, 35. The court held therefore that “the withdrawal was consistent with the terms of the parties’ agreement and appears compliant with our supreme court rules.”  Id. at ¶33.

As for Wereko’s negligence claim, the court explained that “it would be unreasonable to expect the firm to foresee that its conduct would result in” the damages suggested by Wereko. Id. at ¶46. At their core, they were expenditures resulting from Wereko’s husband’s decision to dismiss his counter-petition and refile in a new county.  Id. at ¶46. The court also noted that “the [lower court] approved the firm’s withdrawal.” Id. Thus, it concluded that “Wereko failed to prove her counterclaims.”  Id. at ¶47.

Law Office of Tiffany M. Hughes v. Wereko, 2020 IL APP (1st) 190428-U

(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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Richard Sharif (“Sharif”) sued his former attorney, William Stevens (“Stevens”), for legal malpractice in an underlying matter.  He alleged that Stevens failed to comply with discovery and failed to properly raise arguments that would have resulted in a more favorable outcome.  The United States District Court for the Northern District of Illinois ruled in Stevens’ favor on all counts.  With respect to discovery, Sharif accused Stevens of not producing documents that Sharif tendered to him.  Here, the District Court held that Sharif was actually to blame because he “did not give Stevens certain documents that should have been given to him.”  Id. at 3.  As to whether Stevens should have raised a particular argument, the Northern District found that Stevens had violated the standard of care owed to Sharif.  However, the District Court still had to consider whether the court in the underlying matter “would have decided […] differently had the issue been properly raised.”  Id.  at 5.  This is because a successful claim for malpractice requires that a plaintiff establish “but for the negligence of the attorney, the plaintiff would not have suffered actual damages.”  Id. at 2.  On that point, Sharif made “no argument that a reasonable court would have made a different decision.”  Id. at 5.

Stevens v. Sharif, No. 15 C 1405, 2019 WL 4862171 (N.D. Ill. Sept. 30, 2019)

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

 

No Proximate Causation for Alleged Malpractice in an Unwinnable Case

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Debra and William Elam (“Plaintiffs”) hired the law firm O’Connor & Nakos, Ltd. and attorney Daniel V. O’Connor (“Defendants”) to represent them in a wrongful death action against several entities following the death of their daughter.  Once the underlying matter settled, Plaintiffs sued Defendants for alleged failure to investigate their claim, conduct discovery, and plead certain theories of liability.  Plaintiffs argued that they would have recovered more from one of the defendant entities, Live Nation Worldwide, Inc.,  but for Defendants’ malpractice.  The Trial Court granted Defendants’ motion for summary judgment, and Plaintiffs appealed.  The Appellate Court of Illinois, First District, affirmed.  It explained that, “in malpractice cases based upon the attorney’s conduct during litigation, i.e., the prosecution or defense of a prior claim, a plaintiff must generally prove a case-within-a-case to establish proximate cause.”  Id. at ¶ 24.  Here, the Appellate Court found that “as a matter of law, plaintiffs could not have prevailed against Live Nation” in their underlying matter.  Id. at ¶ 37.  Therefore, Plaintiffs could not establish that they suffered an injury “as a proximate result” of Defendants’ alleged malpractice.  Id. at ¶ 24.

Elam v. O’Connor & Nakos, Ltd., 2019 IL App (1st) 181123

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

Legal Malpractice Requires Causation and Damages

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McHenry Savings Bank (“MSB”) sued attorney Michael Cortina and his law firm, SmithAmundsen (“Defendants”), for legal malpractice arising from their representation of MSB in an unsuccessful foreclosure action.  The trial court granted Defendants’ motion to strike and dismiss.  The Appellate Court of Illinois, Second District, affirmed.  With respect to alleged pretrial errors, it explained that “a trial was held in the foreclosure case” and so “it cannot be said that, but for Cortina’s alleged negligent pretrial conduct, MSB lost its case and suffered damages.”  Id. at ¶ 36.  As for any errors during the trial, the Appellate Court held that the Foreclosure Court’s basis for granting judgment against MSG was “legally unsound,” meaning “Cortina cannot be held accountable.”  Id. at ¶ 42.  Even if causation could have been shown, the Appellate Court explained that no damage resulted since MSB would be “seeking damages from defendants that it was never entitled to due to mortgagors’ discharge in bankruptcy.”  Id. at ¶ 51.

McHenry Sav. Bank v. Cortina, 2019 IL App (2d) 180901-U

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

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.)

Counsel Cannot Claim Judicial Error if Client is not Properly Informed of His Rights

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Iurii Rypninskyi (“Rypninskyi “) and Joseph Hope (“Hope”) were involved in a vehicular accident.  Hope sued Rypninskyi for negligence in Illinois state court.  American Inter-Fidelity Exchange (“AIFE”), the insurer for the owner of the truck Rypninskyi was driving, agreed to defend Rypninskyi and retained the law firm Cassiday Schade to do so.  Throughout the discovery phase and the subsequent trial, Cassiday Schade had repeated trouble contacting Rypninskyi and ensuring his presence.  Rypninskyi did not even appear at trial to testify.  Id. at 1.  The trial court sanctioned him for this by ordering in limine that he could not introduce a report prepared by the trooper who had responded to the accident or Hope’s statements to the trooper.  When the trial court found that Rypninskyi, through Cassiday Schade, violated that order, it entered a default judgement against him as to liability.  Id.  The jury then returned a $400,000 verdict for Hope, but Cassiday Schade did not file an appeal.  Rypninskyi sued Cassiday Schade for legal malpractice, arguing that their failures had caused him not to appear at trial and suffer the judgment against him.

Cassiday Schade moved for summary judgment, invoking the “judicial error” doctrine.  Id. at 2.  They asserted that the trial court had erred in defaulting Rypninskyi as to liability, and that its error was an intervening cause “that severed the causal connection between its alleged malpractice and Rypninskyi’s injury.”  Id.   The Court rejected this argument, pointing out that “had Rypninskyi known about the judgment, he would have asked Cassiday Schade to appeal it.”  Id. at 1.  This indicated that Cassiday Schade had not kept Rypninskyi apprised of the progress of his case.  Having failed to inform Rypninskyi that there was a judgment against him that warranted reconsideration, the Court found that “Cassiday Schade was responsible for failing to appeal.”  Id. at 2.  It explained that “where an allegedly negligent attorney elects not to appeal a judgment that the attorney contends resulted from a judicial error, the attorney may not invoke judicial error as a defense to the client’s malpractice claim.”  Id.

Am. Inter-Fid. Exch. v. Hope, No. 17 C 7934, 2019 WL 4189657 (N.D. Ill. Sept. 4, 2019)

(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.)