Punitive Damages

Clients Can Recover Punitive Damages From Their Attorneys

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As a matter of first impression, the Fifth District Appellate Court held that punitive damages assessed against a litigant that were proximately caused by an attorney’s professional negligence can be recovered as compensatory damages in a subsequent legal malpractice case. Midwest Sanitary Serv., Inc. v. Sandberg, Phoenix & Von Gontard, P.C., 2021 IL App (5th) 190360. In Midwest, the plaintiff brought a legal malpractice claim against the law firm Sandberg, Phoenix & Von Gontard, P.C. (“Sandberg”) asserting that it negligently managed a wrongful termination case and that “but for” Sandberg’s actions the jury would not have awarded punitive damages. The Court reasoned that Illinois’ prohibition on punitive damages in legal malpractice cases does not apply to these facts. 735 Ill. Comp. Stat. Ann. 5/2-1115. The Court distinguished Tri-G, Inc. v. Burke Bosselman & Weaver, 222 Ill. 2d 218 (2006), in which the Supreme Court held that an unsuccessful plaintiff cannot recover wrongfully “lost” punitive damages in a subsequent malpractice action because the bases for denying lost punitive damages did not apply to wrongfully incurred punitive damages. The court held that allowing recovery of the punitive damages is the only way to compensate the plaintiff for its total out-of-pocket losses and must be permitted.

Midwest Sanitary Services, Inc. v. Sandberg, Phoenix & Von, 2021 IL App (5th) 190360

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

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

Facts, facts, everywhere facts. Factual issues preclude summary judgment.

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Joseph Mizrachi (“Mizrachi”) sued attorney Lawrence Ordower (“Ordower”) and Ordower’s law firm for legal malpractice and breach of fiduciary duty. The defendants moved for summary judgment and Mizrachi also moved for summary judgment.

This case involves a very complicated fact pattern in which Ordower and Mizrachi disagreed over whether Ordower represented Mizrachi. The court examined virtually every element of a legal malpractice claim and held that there were issues of fact involving: whether Ordower and Mizrachi had an attorney client relationship; whether Ordower breached any duty to Mizrachi; whether Ordower caused Mizrachi’s alleged damages; and whether Mizrachi had suffered individual damages or whether entities he was associated with had been damaged. The court did conclude that Mizrachi could not recover punitive damages because Illinois law forecloses such claims in malpractice claims and Mizrachi’s breach of fiduciary duty claim also involved alleged legal malpractice.

Mizrachi v. Lawrence Ordower and Ordower & Ordower, P.C., 2020 WL 4607231 (N.D. IL August 11, 2020)

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

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

Breach of Contract May Be Plead in the Alternative to Legal Malpractice, but Punitive Damages are not an Option

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Signal Financial Holdings LLC and Signal Funding LLC (together “Signal”) accused a former Signal executive, Farya Jafri (“Jafri”), of misappropriating trade secrets while separating from Signal and using them to compete against Signal.  Signal sued Jafri as well as the law firm Sugar Felsenthal Grais & Helsinger LLP (“Sugar”) for allegedly aiding Jafri in this scheme.  Sugar moved to dismiss the various counts against it.  The United States District Court for the Northern District of Illinois granted the motion in part, and denied in part.  It denied the motion with respect to legal malpractice, explaining that “Signal alleges two clear incidents where a conflict was present” and “plausibly demonstrates that the Firm’s conflict of interest caused Signal’s injuries.”  Id. at 5.  It also allowed a breach of contract claim to stand exclusively in the alternative to the count for legal malpractice as “a complaint against a lawyer for professional malpractice may be couched in either contract or tort and… recovery may be sought in the alternative.”  Id. at 6.  Conversely, the Northern District granted dismissal of the count for breach of fiduciary duty, which was duplicative since “Illinois law prohibits claiming legal malpractice and breach of fiduciary duty based on the same facts.”  Id.  Lastly, the Court struck all claims for punitive damages because under Illinois law, “in all cases whether in tort, contract, or otherwise, in which the plaintiff seeks damages by reason of legal… malpractice, no punitive, exemplary, vindictive or aggravated damages should be allowed.”  Id. at 8, 735 ILCS 5/2-1115.

Signal Fin. Holdings LLC v. Looking Glass Fin. LLC, No. 17 C 8816, 2019 WL 6467323 (N.D. Ill. Dec. 2, 2019)

(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.)

Los Amigos Supermarket, Inc. v. Metro. Bank and Trust Co., 306 Ill. App. 3d 115, 713 N.E.2d 686 (1st Dist. 1999)

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Los Amigos Supermarket, Inc. v. Metro. Bank and Trust Co., 306 Ill. App. 3d 115, 713 N.E.2d 686 (1st Dist. 1999)

Brush v. Gilsdorf, 335 Ill. App. 3d 356, 783 N.E.2d 77 (3d Dist. 2002)

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Brush v. Gilsdorf, 335 Ill. App. 3d 356, 783 N.E.2d 77 (3d Dist. 2002) (breach of fiduciary duty and legal malpractice duplicative; breach of fiduciary duty claim was within statutory bar on punitive damages)

Doe v. Roe, 289 Ill. App. 3d 116, 681 N.E.2d 640 (1st Dist. 1997)

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Doe v. Roe, 289 Ill. App. 3d 116, 681 N.E.2d 640 (1st Dist. 1997) (sex with client; breach of fiduciary duty controlled by principles of agency, contract and equity, not tort)

Safeway Ins. Co. v. Spinak, 267 Ill. App. 3d 513, 641 N.E.2d 834 (1st Dist. 1994)

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Safeway Ins. Co. v. Spinak, 267 Ill. App. 3d 513, 641 N.E.2d 834 (1st Dist. 1994)

Kennedy v. Grimsley, 361 Ill. App. 3d 511, 837 N.E.2d 131 (3d Dist. 2005)

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Kennedy v. Grimsley, 361 Ill. App. 3d 511, 837 N.E.2d 131 (3d Dist. 2005) (alleged misrepresentation was claim for legal malpractice)

Tri-G, Inc. v. Burke, Bosselman & Weaver, 222 Ill. 2d 218, 856 N.E.2d 389 (2006)

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Tri-G, Inc. v. Burke, Bosselman & Weaver, 222 Ill. 2d 218, 856 N.E.2d 389 (2006)