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.)

Making Allegations in Another Case Demonstrates Knowledge for Statute of Limitations

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Edward Shrock (“Shrock”) and Robert Meier (“Meier) were both members of Baby Supermall, LLC (“BSM”).  In November, 2016, Shrock and BSM sued Ungaretti & Harris Ltd. (“Ungaretti”) and others for aiding and abetting Meier in violating an injunction Schrock had obtained against him.  Ungaretti moved to dismiss because, among other things, Shrock’s claims were time-barred under the two-year statute of limitations for legal malpractice.  The motion was granted, and Shrock appealed.  The Appellate Court of Illinois, First District, affirmed.  It explained that the statute of limitations begins to run when “the plaintiff knew or reasonably should have known of the injury and that it may have been wrongfully caused.”  Id. at ¶ 49.

In this case, Shrock had sufficient information to bring this lawsuit more than two years before he actually filed it.  For example, in July 2014, Shrock’s filing in a bankruptcy action against Meier “out-and-out accused defendant Ungaretti of ‘conspiring with Meier to evade the injunction.’”  Id. at ¶ 61.  Shrock objected that courts may not take judicial notice of the substance of claims made in other cases.  The Appellate Court countered that it was not taking notice of the facts themselves, but that such facts were in Shrock’s possession.   BSM raised the same arguments and lost, but added that the statute of limitations was tolled under the “adverse domination” doctrine.  It states that a statute of limitations is tolled “for claims by a corporation against its officers and directors during the time the corporation is controlled by those wrongdoing officers or directors.”  Id. at ¶ 73.  Here, Meier was the sole manager and overwhelming majority owner of BSM until 2015, and so allegedly would never have permitted himself to be sued or admitted to any wrongdoing.  However, the presumption created by the adverse domination doctrine is rebuttable by evidence “that someone other than the wrongdoing directors had knowledge of the cause of action and both the ability and the motivation to bring suit.”  Id. at ¶ 77.  The Appellate Court held that Shrock, a fellow member of BSM, met all of these prerequisites “long before the two-year window.”  Id. at ¶ 85.

Shrock v. Ungaretti & Harris Ltd., 2019 IL App (1st) 181698

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

Consulting Another Attorney Starts the Clock

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Anne Anderson (“Anderson”) sued attorney Denise Kuzniewski (“Kuzniewski”) for legal malpractice during the dissolution of Anderson’s marriage.   Kuzniewski moved for summary judgment, arguing among other things that Anderson’s action was time-barred.  The motion was granted, and the Appellate Court of Illinois, Second District, affirmed on that basis.  It explained that, “the statute of limitations for attorney malpractice incorporates the discovery rule: an action must be filed within two years of when the plaintiff ‘knew or reasonably should have known of the injury for which damages are sought.’”  Id. at ¶ 28; 735 ILCS 5/13-214.3(b).  Here, Anderson filed her complaint on December 21, 2016.  However, she had expressed dissatisfaction with the dissolution of marriage judgment as early as March, 2011, and had consulted with another attorney about the judgment in October, 2011 because she “knew [the settlement] was not right.”  Id. at ¶ 12.  The Appellate Court explained that, “not only did this consultation start the limitations period (had it not started earlier), it ended any fraudulent concealment by defendant.”  Id. at ¶ 39.Anne Anderson (“Anderson”) sued attorney Denise Kuzniewski (“Kuzniewski”) for legal malpractice during the dissolution of Anderson’s marriage.   Kuzniewski moved for summary judgment, arguing among other things that Anderson’s action was time-barred.  The motion was granted, and the Appellate Court of Illinois, Second District, affirmed on that basis.  It explained that, “the statute of limitations for attorney malpractice incorporates the discovery rule: an action must be filed within two years of when the plaintiff ‘knew or reasonably should have known of the injury for which damages are sought.’”  Id. at ¶ 28; 735 ILCS 5/13-214.3(b).  Here, Anderson filed her complaint on December 21, 2016.  However, she had expressed dissatisfaction with the dissolution of marriage judgment as early as March, 2011, and had consulted with another attorney about the judgment in October, 2011 because she “knew [the settlement] was not right.”  Id. at ¶ 12.  The Appellate Court explained that, “not only did this consultation start the limitations period (had it not started earlier), it ended any fraudulent concealment by defendant.”  Id. at ¶ 39.

Anderson v. Kuzniewski, 2019 IL App (2d) 190020-U

(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.)

 

 

Plaintiffs Entitled to Substantial Deference in Choice of Forum

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Rebecca Kujawa (“Kujawa”) sued attorney John Hopkins (“Hopkins”) in the Circuit Court of Madison County, Illinois for legal malpractice in an underlying medical malpractice matter.  Hopkins moved to transfer the case to Effingham County for forum non conveniens.  Among other things, Hopkins asserted that the underlying medical malpractice occurred in Effingham county, that essential witnesses and records relevant to the underlying case were located there, and that jurors in that county had an interest in determining whether their local medical providers were negligent.  Kujawa countered that Hopkins resided in Madison County, that his alleged malpractice took place there, that the parties would be inconvenienced by having to travel to Effingham County, and that the people of Madison county had an interest in determining whether their local attorneys committed legal malpractice.

The motion was denied, and the Appellate Court of Illinois, Fifth District, affirmed.  It explained that a plaintiff’s choice of forum “is entitled to substantial deference and should rarely be disturbed,” although it is entitled to “somewhat less deference when the plaintiff chooses a forum other than his place of residence or the location where some part of the action arose.”  Id. at ¶ 18.  Beyond that, neither public nor private factors strongly favored transfer.  As to private factors, the Court noted that Hopkins had an office across the street from the Madison County courthouse and that no medical witness in the underlying matter had provided an affidavit attesting to the inconvenience of attending trial there.  Furthermore, Hopkins had not demonstrated that any records in Effingham county could not be easily transported or electronically transmitted to Madison County.  As for public factors, such as local interest in deciding local matters, the Court found no abuse of discretion.

Kujawa v. Hopkins, 2019 IL App (5th) 180568, appeal denied, 135 N.E.3d 566 (Ill. 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.)