Please note that I was one of the lawyers who represented the plaintiff in this case. The case was designed to challenge the confession of judgment by a law firm that had previously represented a bank that filed a collection lawsuit.
So, the Bank, represented by Ginsberg Jacobs filed suit on a promissory note and on personal guarantees. An associate with Ginsberg Jacobs then confessed a judgment against the plaintiffs. They sued alleging that the confession of judgment created a conflict of interest in that the law firm was representing opposing parties in a lawsuit.
The Defendants moved for summary judgment on the ground that the mere act of confessing a judgment did not create an attorney-client relationship. The District Court, in a thoughtful opinion by Magistrate Rowland, agreed with the defendants. The Court explained:
In March 2011, Open Arms Health Care, Inc. took out a loan from Bridgeview Bank (Bank). (Dkt. 67, ¶ 13). Open Arms issued a promissory note to the Bank evidencing its obligations pursuant to the loan agreement (Note), and each Plaintiff signed a commercial guarantee promising payment on the Note (hereafter, “Guarantees”). (Id. ¶¶ 13-15). Under the terms of the Guarantees, Plaintiffs “irrevocably authorize[d] and empowere[d] any attorney-at-law to appear in any court of record and to confess judgment against [Plaintiffs] for the unpaid amount of this Guaranty . . .” (Id. ¶ 16). The same provision stated that Plaintiffs “waive[d] and release[d] any and all claims or causes of action which Guarantor might have against any attorney acting under the terms of authority which Guarantor has granted herein arising out of or connected with the confession of judgment hereunder.” (Id.)
Open Arms failed to make the payments required under the Note. (Id. ¶ 18). Pursuant to the Guarantees, the Bank represented by the law firm Ginsberg Jacobs, filed an action for confession of judgment against each Plaintiff. (Id. ¶ 20). Mathless, an attorney at Ginsberg Jacobs, signed documents confessing judgment on behalf of Plaintiffs. (Id. ¶¶ 21-22). Based on these confessions, on February 28, 2013, the Circuit Court of Cook County entered a judgment in favor of the Bank and against Plaintiffs in the amount of $823,018.18. (Id. ¶ 23). Plaintiffs were later successful in moving to disqualify Ginsberg Jacobs as counsel for the Bank and also in vacating the judgment against them in the state court. (Id. ¶ 24; Dkts. 33-3, 33-4). Plaintiffs eventually settled the Bank’s claims. (Dkt. 67, ¶ 25).
Plaintiffs never sought an agreement for legal services from either Ginsberg Jacobs or Mathless. (Id. ¶ 26). Plaintiffs never paid Ginsberg Jacobs or Mathless for legal services. (Id. ¶ 30). Plaintiffs never sought or received legal advice from Ginsberg Jacobs or Mathless, and never divulged or received confidential information. (Id. ¶¶ 27-29). Plaintiffs never had any direct communication with Ginsberg Jacobs or Mathless. (Id. ¶ 31). Plaintiffs never relied on any representation by Defendants that they were Plaintiffs’ legal counsel. (Id. ¶ 32).
An attorney-client relationship is required for a legal malpractice claim in Illinois. A plaintiff must prove: “(1) the defendant attorney owed the plaintiff client a duty of due care arising from an attorney-client relationship, (2) the attorney breached that duty, (3) the client suffered an injury in the form of actual damages, and (4) the actual damages resulted as a proximate cause of the breach.” See Bourke, 639 F.3d at 347 (citations omitted).
The undisputed facts establish that no attorney-client relationship was created by the conduct of the Plaintiffs: Plaintiffs never sought, much less entered into, an agreement for legal services with either Ginsberg Jacobs or Mathless. (Dkt. 67 at ¶ 26). Plaintiffs never paid Ginsberg Jacobs or Mathless for legal services (Id. ¶ 30); never sought or received legal advice from Ginsberg Jacobs or Mathless (Id. ¶¶ 27-28); never discussed confidential information (Id. ¶29); never had any direct communication with Ginsberg Jacobs or Mathless (Id. ¶ 31); and never relied on any representation by Defendants that they were Plaintiffs’ legal counsel. (Id. ¶ 32).
C. No attorney-client relationship was established by the signing of the confessions of judgment
Knowing that they did not engage Mathless’ legal services, Plaintiffs argue that Mathless’ act of signing the confession of judgment created the attorney-client relationship that in turn gives rise their legal malpractice claim against Defendants. Confessions of judgment have long existed in Illinois. See Gardner v. Bunn, 132 Ill. 403, 408 (1890). The confession of judgment statute states in part: “any person for a debt bona fide due may confess judgment by himself or herself or attorney duly authorized, without process.” 735 ILCS 5/2-1301(c). The statute allows a debtor to move to vacate a judgment, as Plaintiffs did in their state court case. See Oakland Nat’l Bank v. Tomei, 215 Ill. App. 3d 638, 640 (4th Dist. 1991).
In 1972, the U.S. Supreme Court upheld Ohio’s confession of judgment statute as constitutional and explained that the “cognovit is the ancient legal device by which the debtor consents in advance to the holder’s obtaining a judgment without notice or hearing, and possibly even with the appearance, on the debtor’s behalf, of an attorney designated by the holder. . .”. D. H. Overmyer Co. v. Frick Co., 405 U.S. 174, 176 (1972). Two years earlier, the Illinois Supreme Court upheld the constitutionality of Illinois’ confession of judgment statute. First Nat’l Bank v. Keisman, 47 Ill. 2d 364, 366 (1970). The Seventh Circuit has also recognized the enforceability of confession of judgment clauses in loan documents. See IFC Credit Corp. v. United Bus. & Indus. Fed. Credit Union, 512 F.3d 989, 994 (7th Cir. 2008) (citing Overmyer Co., 405 U.S. 174).
It is not surprising that in both Blanck v. Medley, 63 Ill. App. 211 (4th Dist. 1895)and Gecht v. Suson, 278 N.E.2d 193 (1st Dist. 1971), the appellate courts affirmed judgments against a debtor and rejected the argument that the signing of the confession by an attorney of the same firm as creditor’s attorney invalidated the judgment. The Blanck court reasoned that “the signing of the cognovit by an attorney is largely a matter of form, both the declaration and cognovit being usually prepared by the plaintiff’s attorney.” 63 Ill. App. at 213. See also Citibank, N.A. v. Bearcat Tire, A.G., 550 F. Supp. 148, 150-51 (N.D. Ill. 1982) (rejecting a similar argument to the ones raised in Blanck and Gecht, in declining to vacate the judgment because “the Note . . . specifically allows Citibank to designate `any attorney’ to confess judgment, and Illinois courts have squarely held confession of judgment by an attorney of the same firm as plaintiff’s counsel does not invalidate the judgment.”); Atl. Leasing & Fin., Inc. v. IPM Tech., Inc., 885 F.2d 188, 195 (4th Cir. 1989) (attorney’s appearance to execute the confession of judgment is “purely a ministerial act”). These cases direct this Court toward a conclusion that there is no attorney-client relationship created by the signing of the confession of judgment, but do not fully answer the question.
A legal malpractice case from Ohio arising out of facts similar to those here is instructive. DiBenedetto v. Miller held that there was no attorney-client relationship and thus no cause of action for legal malpractice because “the attorney [confessing judgment] is only acting as authorized under both contract and the statute.” 2008-Ohio-6506, 180 Ohio App. 3d 69, 72 (2008). This Court finds that DiBenedetto‘s holding is consistent with Illinois courts’ instruction that (a) judgments by confession “are circumspectly viewed” (Grundy Cty. Nat’l Bank v. Westfall, 49 Ill. 2d 498, 500 (1971)); and (b) an attorney acting pursuant to a power of attorney to confess judgment has limited authority. See First Bank v. Kaiser, 2012 IL App (1st) 112505-U, ¶ 9 (“[t]he authority was special, and limited to entering an appearance to, and the confession of a judgment on, one particular instrument”) (citations omitted). It is also in line with the language of the statute (735 ILCS 5/2-1301(c)) and cases including Blanck, Gecht, and Citibank, approving the practice in Illinois of the signing of the confession of judgment by any attorney authorized by warrant of attorney.
A final note: I no longer represent the plaintiffs. They may wish to appeal this adverse decision.