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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.)

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.)

 

A Plaintiff not Prosecuted or Threatened with Prosecution Lacks Standing to Contest the Prosecution or Nonprosecution of Another

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Attorney Louis Fasullo (“Fasullo”) was arrested and Assistant Public Defender Rojelio Garza (“Garza”) was assigned to represent him.  Fasullo complained to the Attorney Registration and Disciplinary Commission (“ARDC”) that Garza was not communicating with him.  The ARDC investigated Fasullo’s complaint, but concluded that it “would be unable to show […] that Mr. Garza neglected [Fasullo’s] defense or that he failed to communicate with [Fasullo] in a reasonable manner.”  Id. at ¶11.  Nevertheless, Fasullo was late to a hearing, which resulted in him being jailed for 18 days.  Among other things, Fasullo blamed his tardiness on “failure of his public defender to adequately and timely communicate the court date to him.”  Id. at ¶10.  Fasullo filed a pro se action for a declaratory judgment against the ARDC for its failure to discipline Garza.  Id.  The ARDC moved successfully to dismiss for lack of standing and failure to state a claim.

On appeal, Fasullo argued that the circuit court erred because “the judge did not declare Rights just, and fair, and denied [Fasullo] the cause of action which recovery might be had” and “did not allow discovery, and dismissed the complaint […].”  Id. at ¶19.  The Appellate Court of Illinois, First District, responded that “Fasullo misunderstood the purpose of a declaratory judgment and wanted the trial court to tell him what cause of action he might have, as opposed to arguing one himself.”  Id. at ¶30.

The court also quoted the Supreme Court of the United States, which said “a private citizen lacks a judicially cognizable interest in the prosecution or nonprosecution of another…[and therefore] lacks standing to contest the policies of the prosecuting authority when he himself is neither prosecuted nor threatened with prosecution.”  Id. at ¶26, (citation omitted).  Here, Fasullo’s brief contained facts “that may have been relevant to a timely claim for legal malpractice or ineffective assistance of counsel, but these are not the claims Fasullo made.”  Id. at ¶27. The court concluded that “the sole authority to impose disciplinary sanctions on attorneys is with the supreme court, and the appropriate forum to investigate the conduct of an attorney and conduct hearings is the Attorney Registration and Disciplinary Commission.”  Id. at ¶28, (citation omitted).

Fasullo v. Attorney Registration and Disciplinary Commission, 2020 IL App (1st) 190670-U

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

Non-Answers, Conclusions, Opinions, and Deductions are not Perjury

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Edwin Johnson (“Johnson”) sued the law firm Gardiner Koch Weisberg & Wrona (“GKWW”) and one of its partners for legal malpractice. In that matter, Johnson’s attorneys deposed attorney Jacqueline Bammert (“Bammert”) of GKWW. Many of their questions called for Bammert’s recollection and interpretation of events, communications, and documents from more than four and a half years prior. Johnson believed Bammert’s answers to seven sequences of questions in her deposition were false, and petitioned the Court to hold Bammert in criminal contempt.

In a petition concerning alleged perjury, a petitioner must adequately allege that (1) the deponent’s testimony was false and untrue when made; (2) the deponent knew the testimony was false when she gave it; and (3) the deponent had a willful and malevolent intention of assailing the dignity of the court or of interfering with its procedure and the due administration of justice. The Court added to this standard that “an alleged false statement must be a statement of fact and not a conclusion, opinion or deduction drawn from given facts. [internal citation omitted]. Moreover, a truthful answer to a question subject to various interpretations is not perjury.” Id. at 2.

Applying this framework, the Court found that none of Bammert’s contested responses constituted perjury. For example, Bammert was asked to interpret a document, to which she responded “no, I can’t answer that question.” Id. at 3. The Court explained that a non-answer is not a basis for perjury, and that “had a direct answer been given, a witness’ interpretation cannot be the basis for perjury.” Id. Bammert was also asked if she was told Johnson had done anything fraudulent. She answered, “no, I can’t recall, no.” Id. at 4. Johnson claimed that this was false because Bammert participated in an investigation of him. “However,” the Court declared, “the question wasn’t whether Bammert participated; the question was whether anyone told her.” Id. As to whether Bammert “assail[ed] the dignity of the court or […] interfere[ed] with its procedures and the due administration of justice” by her actions, the Court found the allegation insufficient on its face given there was no allegation of intent. Id.

The Court found it “clearly apparent” that Johnson’s allegations were factually insufficient and dismissed with prejudice. Id. “Being a witness in hotly contested litigation is difficult enough,” it explained. Id. “If in addition we permit the sword of Damocles to be poised over [witness’] heads in the threat that for any false statement made on the witness stand they may be summarily punished for contempt, we are hindering and not advancing the cause of justice.” Id.

Order dated May 29, 2020

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

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

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.)

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.)

 

 

 

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.)