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The Attorney Litigation Privilege in Action

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Randy Brown (“Brown”) sued his former attorney, Elizabeth Bacon (“Bacon”), for malpractice.  During that litigation, Bacon’s counsel, Thomas McGarry (“McGarry”), sent allegedly defamatory letters to Brown’s attorneys, including Ed Clinton (“Clinton”). Brown then sued McGarry and his firm for defamation.  The trial court dismissed, holding that McGarry’s statements were protected by the litigation privilege.  The appellate court affirmed.  It explained that the attorney litigation privilege applies to publications (1) made in a judicial proceeding, (2) that have some connection or logical relation to the action, (3) that are made to achieve the objectives of the litigation, and (4) that involve only litigants or other participants authorized by law.

To the first element, Brown argued that the communications were not made in a judicial proceeding because Clinton no longer represented him when he received them.  The appellate court disagreed, stating “the only requirement is that the communication pertain to proposed or pending litigations.”  Id. at ¶30.  Here, the communications in question “clearly pertained to an ongoing judicial proceeding.”  Id. at ¶31.  Brown lost on the second point as well because the letters in question “both relate[d] directly to the merits” of the malpractice litigation.  Id. at ¶38.  As for the third factor, the appellate court held that McGarry’s communication was made to achieve the objectives of the litigation by “resolv[ing] the Malpractice Litigation favorably for his client without a potentially expensive and time-consuming appeal” and “apparently sought to secure Clinton’s cooperation in confirming that plaintiff made statements in open court that were refuted” by Bacon.  Id. at ¶32.  As to the last element, Brown asserted that McGarry’s communications with Clinton went to an e-mail account Clinton allegedly shared with nine other people.  However, a representative from Clinton’s e-mail provider confirmed that usernames are unique and that it does not permit the sharing of master accounts. “At most,” the Court concluded, “a third party might have gained unauthorized access to Clinton’s email account […] but, even if true, it would not defeat the litigation privilege.” Id. at ¶42.

Randy M. Brown v. Thomas P. McGarry & Hinshaw & Culbertson, LLP 2020 IL App (1st) 190427-U

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

False Advertising and the Unauthorized Practice of Law

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Access Care MSO, LLC (“Access”) hired Oberheiden Law Group, PLLC (“Oberheiden Law”) to advise it with respect to medical compliance issues in Texas and Illinois. It chose Oberheiden Law based on the firm’s web-based advertisements which stated that the firm had both Texas and Illinois practices.  Despite these assertions, no Oberheiden Law attorney was licensed to practice in Illinois at the time Access retained the firm.  Access eventually terminated the representation and sued Oberheiden Law and its principal, Nick Oberheiden, on multiple counts.  The defendants filed a motion to dismiss, which the Northern District of Illinois granted in part.

To start, the court dismissed Access’ breach of contract claim. This is because “Texas courts have only allowed independent breach of contract claims against attorneys for excessive legal fees.”  Id. at 3.  It continued that Access “alleges only that […] Oberheiden Law did not provide” the agreed upon services, “which amounts to a legal malpractice claim” under Texas law.  Id.  Access’ claim for tortious interference with a contract was also dismissed.  The court held there that Access did not explain how the defendants’ actions affected its contractual relationship with various Texas medical practices.  Id. at 4.

Conversely, the Northern District declined to dismiss Access’ claim for violation of the Illinois Attorney Act (705 Ill. Comp. Stat. 205/1), which “prohibits an unlicensed attorney from advertising the provision of legal services in Illinois” and practicing law in the state without a license.   Id. at 2.   Here, Oberheiden Law’s website described the firm as “providing ‘Illinois health care fraud defense’” and Oberheiden as an “Illinois health care fraud defense attorney.”  Id.  Moreover, a non-attorney employee of Oberheiden Law and Oberheiden himself had personally provided legal advice to Access while in Illinois.  The court refused to dismiss Access’ claim of fraud as well. It noted that Access specifically set forth four allegedly false statements from Oberheiden Law’s website and sufficiently explained why it relied on them.  Id. at 5.

Access Care MSO, LLC v. Oberheiden Law Grp. PLLC, No. 18 C 7273, 2020 WL 1139257 (N.D. Ill. Mar. 9, 2020)

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

 

 

 

Attorney Aiding and Abetting and Assignment of Malpractice Claims

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Rabbi Stanley Kroll (“Kroll”) had a thirty-year employment contract with his Synagogue. The contract included a deferred compensation plan (the “Plan”) to fund Kroll’s retirement.  The Synagogue was allowed to amend the Plan unilaterally, but not in any way that divested credits to the account or rights to which Kroll would be entitled if the Plan were terminated before an amendment took effect.  Id. at 1.  The Synagogue asked Kroll to retire six years early. Kroll agreed, but on his last day, a Synagogue officer told him that a tax issue had arisen, promising it would be resolved.  Kroll found out later that the issue had not been resolved, thereby subjecting his deferred compensation to heavy taxes and penalties.  Moreover, the Synagogue did not have sufficient funds to pay Kroll, and had amended the Plan to eliminate benefits to which Kroll would otherwise be entitled. Kroll sued the Synagogue, which settled and assigned to him all causes of action related to the Plan that it might have against the law firm it used to amend it: Cozen O’Connor (“Cozen”). Kroll then sued Cozen on multiple counts, but Cozen moved to dismiss. The motion was granted in part and denied in part.

To begin, the Court noted that legal malpractice claims may not be assigned in Illinois except under three exceptions.  However, none of these exceptions applied. It explained that “Kroll is a stranger to [the Synagogue] and Cozen’s attorney-client relationship and was owed no duty by Cozen.”  Id. at 4.  The Court also granted dismissal of Kroll’s aiding and abetting breach of fiduciary duty claim.  It said that no fiduciary duty existed between Kroll and the Synagogue, so Cozen could not have aided a breach of that duty. Id. at 7.  The Court dismissed Kroll’s fraudulent concealment claim as well, since Kroll did not allege facts sufficient to explain how a Cozen attorney used his position of superiority and legal knowledge to take advantage of Kroll’s trust and confidence in him, “especially given that [the attorney] represented the opposing party.”  Id. at 8, emphasis in original.

Conversely, the Court rejected Cozen’s argument that Kroll’s claims were barred by Illinois’ two-year statute of limitations for claims arising out of an attorney’s performance of professional services.  Here, it held that Kroll had demonstrated possible equitable tolling or estoppel when he asserted that a Synagogue officer misled him about resolving the tax issue and that a Cozen attorney misrepresented the enforceability of the Plan’s amendment.  Id. at 5.  Kroll’s claim that Cozen aided and abetted the Synagogue’s fraud was allowed to stand as well.  The Court, quoting an Illinois case, saw “no reason to impose a per se bar that prevents imposing liability upon attorneys who knowingly and substantially assist their clients in causing another party’s injury.”  Id. at 6. Here, the Court agreed that Kroll had pleaded facts sufficient to assert the Synagogue’s fraud and Cozen’s assistance therein.

Rabbi Stanley Kroll, Plaintiff, v. Cozen O’Connor, 2020 WL 919005

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

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.)

Experience is Enough for Experts

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Webster Bank (“Webster”) sued Pierce & Associates, P.C. (“Pierce”) in connection with its alleged mishandling of a loan collection matter on Webster’s behalf. t issue was the standard of care and whether Pierce breached it.  The United States District Court for the Northern District of Illinois held that the question must be answered based on expert testimony at trial.  However, Pierce moved to strike the testimony of Webster’s expert: G. Patrick Murphy (“Murphy”).  Pierce argued that Murphy, a retired Federal District Court Judge and litigator, was unqualified to speak on the “highly idiosyncratic rules and customs of high volume debt collection practices” and that Murphy’s report failed to show specifically how his experience informed his conclusions.

The Court denied the motion, holding that Murphy was “qualified by knowledge and experience to address the standard of care for Illinois civil litigators.”  Id. at 3.  It explained that “the crux of this case is not about nuances and intricacies” of the underlying matter, but rather “the standard of care for a reasonable attorney practicing in Illinois under similar circumstances.”  Id.

As for Murphy’s report, the Court held that an expert’s reliance on experience, rather than a particular methodology, did not necessarily render his opinion unreliable.  The report was therefore admissible insofar as it explained what the standard of care was.

However, the Court barred any conclusion by Murphy as to whether Pierce violated that standard.  It explained that “Murphy can testify as to the standard of care, what reasonably careful lawyers would have done, and what mistakes Pierce made.  Murphy cannot tell the jury that Pierce violated the standard of care—that is the very question the jury will answer.  It is the jury’s role to determine whether Pierce violated the standard of care, not Murphy’s.”  Id. at 5.

Webster Bank, N.A. v. Pierce & Associates, P.C., No. 16-CV-2522, 2020 WL 616467 (N.D. Ill. Feb. 10, 2020)

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

 

 

 

Economic Loss Doctrine Prevents Set-Off Under Illinois’ Joint Tortfeasor Contribution Act

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Kevin Driscoll (“Driscoll”), the court-appointed receiver of AlphaMetrix Group, LLC (“AMG”), sued AMG’s former lawyers Juris Kins and Davis McGrath, LLC for legal malpractice.  The defendants moved to resolve the question of whether they were entitled to a set-off under Illinois’ Joint Tortfeasor Contribution Act (the “Act”), arguing that they could set-off up to $4 million due to a previous settlement agreement between Driscoll and former officers of AMG.  The Northern District of Illinois held that the Act did not apply because of the prior settlement related to breach of contract and breach of fiduciary duty claims.   It explained that, under the Act, “[w]hen a release or covenant not to sue […] is given in good faith to one or more persons liable in tort arising out of the same injury […] it reduces the recovery on any claim against the others to the extent of any amount stated in the release.”  740 Ill. Comp. Stat. 100/2(c).  Moreover, under the economic loss doctrine, “[w]hen only economic loss is incurred, the plaintiff may only raise contract theories even if the defendant’s alleged conduct constituted a tort as well as a breach of contract.”  Id. at 3.  In this case, the Court found that “no matter how Defendants creatively reframe the Receiver’s allegations [against the former officers], the claims could not have been brought in tort.”  Id.  Consequently, the lawyers were not entitled to set-off the prior settlement of claims against the former officers.

Driscoll v. Kins, No. 16 C 9359, 2019 WL 4014089 (N.D. Ill. Aug. 26, 2019)

(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.)

Revisions to the Illinois Rules of Professional Conduct — Effective January 2016

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By Shelby L. Drury

Shelby Drury Aug 2012 #3A
Shelby L. Drury

On October 15, 2015, the Illinois Supreme Court announced the adoption of various changes to the Illinois Rules of Professional Conduct that will take effect on January 1, 2016. The text of the changes can be found here. Link. The changes are summarized below.

According to a press release issued by the Court, several of the rule changes were “designed to bring attorney ethics rules up to date with advances in technology and developments in global legal practices.” (10/15/15 Press Release.) The Court also “approved changes to [Supreme Court] Rules 705 and 716 to address client needs and market demands in an increasingly borderless world.” (Id.)

The changes to the Rules of Professional Conduct that appear to be directed at advances in technology are summarized below:

• Rule 1.0: Terminology Sub-section (n) was changed to include “electronic communications” within the definition of the terms “writing” or “written”. The definition previously referenced email but that was expanded to electronic communications.

• The comments to Rule 1.0 regarding the term “Screened” were revised to make clear that if lawyers who are screened from a matter due to a conflict of interest are required to sign an undertaking to avoid contact with firm files related to the matter, the screen should include “information in electronic form” related to the matter.

• The Court revised the comments to Rule 1.1: Competence to provide that in order to maintain competence a lawyer must, among other things, keep abreast of “the benefits and risks associated with relevant technology.”

• The comments to Rule 1.4: Communication were changed to provide that “A lawyer should promptly respond to or acknowledge client communications.” This comment previously referred only to acknowledging “client telephone calls.”

• Rule 1.6: Confidentiality of Information added section (e) which provides that “A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.” This change “makes explicit the duty to safeguard confidential client information in an electronic age.” (See 10/15/15 Press Release.) The comments list a number of factors to be considered in determining whether the lawyer has made the required “reasonable efforts,” including “the cost of employing additional safeguards . . . and the extent to which the safeguards adversely affect the lawyer’s ability to represent clients (e.g., by making a device or important piece of software excessively difficult to use.).”

• Rule 4.4: Respect for Rights of Third Persons now makes clear that a lawyer’s duty to promptly notify the sender when he or she receives a document relating to the representation of the lawyer’s client that he or she knows was inadvertently sent also applies to “electronically stored information” (which, in some circumstances, includes metadata). The comments describe when electronically stored information is considered to have been “inadvertently sent.” The rule does not address whether the lawyer is required to return or delete inadvertently received information. The comments provide that “[w]here a lawyer is not required by applicable law to do so” that is a matter of “professional judgment ordinarily reserved to the lawyer.” The rule also does not address whether the inadvertent disclosure waives the privileged status of the information.

• The title and comments to Rule 5.3: Responsibilities Regarding Nonlawyer Assistance were amended and comments were added regarding the lawyer’s duties when using nonlawyers outside of the lawyer’s firm to assist in rendering legal services to a client, including document management services and Internet-based services to store client information.

• The comments to Rule 7.2: Advertising have been revised to address Internet advertising, among other things.

• Rule 7.3’s title has been changed from “Direct Contact With Prospective Clients” to “Solicitation of Clients” and the language of the rule and comments have been changed consistent with the new title. The comments also address permissible and impermissible solicitation by electronic means.

Other changes effective January 1, 2016:

• The Court added comments to Rule 1.1: Competence regarding a lawyer’s responsibility when retaining or contracting with lawyers outside of the lawyer’s firm on a matter.

• The Court amended Rule 1.2 Scope of Representation and Allocation of Authority Between Client and Lawyer, to provide an express exception to the Rule’s prohibition on a lawyer counseling or assisting a client to engage in criminal conduct. The addition of Section (d)(3) clarifies any uncertainty with respect to whether an Illinois lawyer may provide legal advice on the matters covered by the passage of the Illinois Compassionate Use of Medical Cannabis Pilot Program Act effective January 1, 2014, which legalized the use of marijuana in certain circumstances. The amended rule provides that “a lawyer may . . . counsel or assist a client in conduct expressly permitted by Illinois law that may violate or conflict with federal or other law, as long as the lawyer advises the client about that federal or other law and its potential consequences.” With respect to this change, the comments provide, among other things, that the amendment “is not restricted in its application to the marijuana law conflict. A lawyer should be especially careful about counseling or assisting a client in other contexts that may violate or conflict with federal, state, or local law.” (Link to Shelby Drury’s blog entry on this ‘proposed’ rule change.)

• Rule 1.6: Confidentiality of Information, was amended to add a seventh circumstance under which a lawyer may reveal information related to the representation of a client to the extent the lawyer “reasonably believes necessary.” Per the amendment, a lawyer may reveal such information “to detect and resolve conflicts of interest if the revealed information would not prejudice the client.” Comments were added explaining this change.

• The comments to Rule 1.17: Sale of Law Practice were amended to clarify that a lawyer must obtain client consent before providing a purchaser access to client information beyond that allowed by new rule 1.6(b)(7).

• The amendment clarifies some of the language in Rule 1.18: Duties to Prospective Clients. The amended language and additional comments clarify how a person becomes a prospective client and emphasizes that “[n]ot all persons who communicate information to a lawyer are prospective clients.”

• Rule 3.8: Special Responsibilities Of A Prosecutor was amended “to clearly state that prosecutors have an obligation to disclose evidence that creates a reasonable likelihood a convicted defendant did not commit the offense and to seek to remedy the conviction.” (See amended rule & 10/15/15 Press Release.)

• Rule 5.5: Unauthorized Practice of Law; Multijurisdictional Practice of Law, as amended, allows a lawyer admitted to practice and in good standing in a foreign jurisdiction to provide legal services through an office in Illinois if the legal services are provided to the lawyer’s employer or its organizational affiliates and do not require pro hac vice admission and the lawyer is otherwise authorized by federal or other law or rule to provide services in this jurisdiction. This part of the rule previously only applied to lawyers in other U.S. jurisdictions. The comments provide that a foreign lawyer must also satisfy the requirements of Illinois Supreme Court Rule 716 to be admitted as house counsel.

• There are minor changes to the comments of Rule 7.1: Communications Concerning A Lawyer’s Services and Rule 8.5: Disciplinary Authority; Choice of Law.

Other changes this year that have already taken effect:

• Rule 1.15: Safekeeping Property was amended effective July 2015 to instruct a lawyer how to handle unidentified funds in an IOLTA account. The rule defines “unidentified funds” as amounts “that cannot be documented as belonging to a client, a third person, or the lawyer or law firm.”