Published on:

Legal Malpractice Claim Arises From Securities Law Error

Goldfine v. BARACK, FERRAZZANO, KIRSCHBAUM AND PERLMAN, Ill: Appellate Court, 1st Dist., 6th Div. 2013 – Google Scholar.

The Illinois Appellate Court, First District, Sixth Division, has affirmed a judgment entered in favor of the plaintiff and against a defendant law firm. The allegation of negligence was that the law firm failed to preserve the plaintiffs’ claims under the Illinois Securities laws against Shearson Lehman. In short, the alleged error was the failure to timely file a claim for rescission against Shearson Lehman.

In a legal malpractice case, the court must always begin with an analysis of the underlying transaction or the underlying lawsuit. Here, the plaintiffs had a valid claim under the Illinois Securities Laws against Shearson Lehman. Under the Illinois Securities Law, the purchaser has six months from the time he learns of the right of rescission. The law firm failed to serve the notice of rescission and the Illinois courts rejected the plaintiffs’ claims as time-barred.

The case also contains a discussion of the damages available in legal malpractice cases. Generally, the plaintiff in a legal malpractice case can recover economic losses, but not punitive damages or damages for emotional distress.

In an action under the Illinois Securities law, the purchaser is entitled to recover the entire stock price plus 10% interest on the purchase, plust attorney fees and costs.

The law firm argued that the plaintiffs should not be able to recover the 10% interest because it was a penalty akin to punitive damages. The Appellate Court disagreed and held that the plaintiffs were entitled to the full statutory damages they would have recovered if the law firm had filed the rescission claim on time.

The case contains an excellent discussion of the case within a case requirement for legal malpractice cases and a thoughtful discussion of the methods of calculating damages under the Illinois Securities law, 815 ILCS 5/13(A).