Articles Posted in Case Within A Case

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This is a case of litigation malpractice. In Best Choice Products, Inc. v. Hendrick, Bryant, Nerhod, Sanders & Otis, Ltd, No. COA21-163, the Court of Appeals of North Carolina reinstated a legal malpractice action. Law Firm had represented Best Choice in an underlying case. According to the Complaint, the Law Firm failed to produce certain documents in the underlying case and the case was dismissed. The opinion at paragraph 4 quotes the key allegations of the Complaint:

¶ 4 On 20 July 2020, Best Choice filed its complaint against Defendants for professional malpractice. Best Choice attached to its complaint as exhibits the summary judgment order entered 24 July 2017, and an order granting sanctions on 25 January 2018 from the Prior Lawsuit. Best Choice made several allegations in its complaint relating to Defendants’ negligent representation and listed specific instances in which Defendants failed to meet the standard of care in rendering legal services in the Prior Lawsuit, which it designated as “Defendants’ Failures.” Best Choice made the following allegations pertinent to our review:

33. Defendants’ Failures continued in the Prior Lawsuit through the Orders referenced below, prevent Best Choice from avoiding or mitigating the adverse consequences imposed by the Orders.

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Like many other states Illinois prohibits a legal malpractice plaintiff from obtaining punitive damages. However, if the plaintiff is a litigant who had punitive damages awarded against him, can he recover against his attorney? A recent decision answered that question with a “Yes.”  In Midwest Sanitary Service, Inc. v. Sandberg, Phoenix & Von Gontard, P.C., 2021 IL App (5th) 190360, Midwest was assessed punitive damages. Midwest sued its former lawyers for negligence alleging that, but for the negligence of the attorneys, no punitive damages would have been awarded.

¶ 15 Having examined the reasoning of the circuit court in distinguishing the case at bar from Tri-C, we agree with its conclusion that

“it appears that the unique characteristics associated with legal negligence claims for lost punitive damages, and for which the Illinois Supreme Court [in Tri-C] and the Ferguson court expressed concern, do not necessarily attend legal negligence claims for the recovery of paid or incurred punitive damages. Absent those unique characteristics, it seems to this court that there * * * exists no just reason to deny the plaintiff in this case the opportunity to recover its actual loss. It should be remembered that `[t]he general rule of damages in a tort action is that the wrongdoer is liable for all injuries resulting directly from the wrongful acts * * *, provided the particular damages are the legal and natural consequences of the wrongful act imputed to the defendant, and are such as might reasonably have been anticipated. * * *’ Haudrich v. Howmedica, Inc., 169 Ill. 2d 525, 543 (1996).”

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In Ring v. Schencker, 2021 IL App (1st) 180909-U, Barry Ring sued his former father-in-law, Richard Schencker for legal malpractice. During the marriage Ring was represented by Schencker in his business dealings. When he was divorced, Ring alleged that Schencker divulged confidential information to the attorneys for Ring’s wife (Schencker’s daughter). According to Ring, they used that information to obtain orders blocking Ring from selling or transferring assets. Judge Thomas Mulroy held a bench trial and held that the alleged disclosures of confidential information did not cause harm to Ring. The Appellate Court affirmed the judgment in favor of the lawyer.

The opinion summarizes Ring’s allegations as follows:

¶ 7 Barry alleged in his amended complaint:

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The case, Herren v. Armenta, No. 1-CA-CV-18-0381 (Arizona Court of Appeals January 14, 2020) is a legal malpractice case where Herren lost her underlying case, a business dispute. As we shall see, despite evidence of negligence she also lost the legal malpractice case.

In the underlying matter, Herren hired Armenta to defend a lawsuit by Tonto Supply over a gravel-mining contract. The defense did not go well as we can see from this quote:

¶4 Tonto Supply then filed a multi-claim lawsuit against Herren, and Herren hired Arizona-licensed Holden and her firm to assist with the lawsuit. After Appellees filed an answer and counterclaims on Herren’s behalf, Tonto Supply filed five motions for partial summary judgment on various claims and counterclaims and sent Herren a request for admission of 25 factual matters. Appellees did not respond to the request for admissions and failed to timely respond to the partial summary judgment motions. Appellees were late responding to four of the motions, even after obtaining an extension following the initial deadline, and Appellees neglected to respond at all to one of the motions.

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Generally, in Illinois, the successful plaintiff in a legal malpractice action can recover from the lawyer the same damages that he could recover in the underlying case. So, in a personal injury case, the plaintiff can recover (a) economic damages, such as medical bills and lost wages and (b) pain and suffering damages. If a lawyer causes the plaintiff to lose a valid claim, the plaintiff should be able to recover the same damages from the lawyer.  In Webster Bank v. Pierce & Associates, P.C., 16-cv2522, (2-19-2020) the district court held that a plaintiff bank can recover prejudgment interest in a legal malpractice claim against its former lawyer.

The underlying case was a collection action on a promissory note. The opinion does not describe the act of legal malpractice. The defendant law firm filed a motion in limine to bar the bank from seeking pre-judgment interest. The court denied the motion because the bank (had it been successful in the underlying case) could have obtained the same prejudgment interest.  The pertinent discussion follows:

Here, Webster alleges Pierce’s malpractice in a suit-on-note claim against Kristen Jasinski caused its damage. According to Webster, had Pierce been successful in the underlying suit-on-note claim, Webster would have been entitled to a judgment in the amount of the principle of the note plus interest from the date of Jasinski’s default to the date of judgment under the terms of Jasinski’s loan agreement or the Illinois Interest Act, 815 ILCS 205/2. (Dkt. 182, Ex. 1, p. 3) (finance charge calculated by applying the periodic interest rate to the Daily Balance of the loan); 815 ILCS 205/2 (“Creditors shall be allowed to receive at the rate of five (5) per centum per annum for all moneys after they become due on any … promissory note … In the absence of an agreement between the creditor and debtor governing interest charges, upon 30 days’ written notice to the debtor, an assignee or agent of the creditor may charge and collect interest as provided in this Section on behalf of a creditor.”). Webster asserts that the

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One defense to a legal malpractice case is that the plaintiff could never have collected any money from the defendant in the underlying case. This defense is rarely asserted, but it can be very effective. In a malpractice case, you must prove what the outcome of the underlying case would have been absent negligence. This type of proof is imperfect because some speculation is involved.

For example, client sues an entity that is insolvent. Client’s lawyer makes an error that causes the client to lose the case (such as missing the statute of limitations). Client sues his former lawyer. Under the insolvency defense, client loses the case because he could not have collected anyway and thus the lawyer did not “cause” the loss of his recovery.

In Ewing v. Westport Insurance Company, CA – 19-551, the court rejected the insolvency defense. The opinion explains that the defense of insolvency was not proven:

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Illinois has a rule that allows a plaintiff to dismiss a case once. The plaintiff can then refile the case. The rule does not allow multiple dismissals. In Webster Bank v. Pierce & Associates, P.C., No. 16 C 2522 (N.D. IL March 14, 2019), the court denied a defendant law firm’s motion for summary judgment because the law firm had violated the refiling rule.

The Illinois single refiling rule provides that if:

the action is voluntarily dismissed by the plaintiff, or the action is dismissed for want of prosecution, * * * the plaintiff, his or her heirs, executors or administrators may commence a new action within one year or within the remaining period of limitation, whichever is greater, after * * * the action is voluntarily dismissed by the plaintiff.735 Ill. Comp. Stat. Ann. 5/13-217. This provision is understood to “permit[] one, and only one, refiling of a claim.” Flesner v. Youngs Development Co., 145 Ill.2d 252, 254 (1991). The single refiling rule is considered to be an extension of res judicata. Carr v. Tillery, 591 F.3d 909, 915 (7th Cir. 2010) (“The one-refiling rule is thus the extension of the doctrine of res judicata to a class of cases in which the decision deemed to be res judicata is a dismissal without prejudice.”)

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This case, Alerding Castor Hewitt, LLP v. Paul Fletcher, et al, 16-cv-02453 (S.D. Indiana, Indianapolis Division) (April 18, 2019) illustrates the necessity of obtaining expert testimony to support a claim. Fletcher brought a malpractice claim against his former counsel after counsel sued for legal fees. Fletcher alleged that the attorneys were negligent when they represented him in a civil forgery case. The court disagreed and granted summary judgment for the attorneys.

Fletcher could not show that any alleged error by the attorneys proximately caused his loss because he had no expert testimony to support his claims:

To establish the applicable standard of care, Alerding Castor has presented an expert report from attorney David C. Jensen. Jensen’s thorough report discusses his review of the record from the Forgery Lawsuit in light of the applicable standard of care. Dkt. 130-3. Jensen concludes that Alerding Castor exercised ordinary skill and knowledge in litigating the Forgery Lawsuit and met the standard of care they were obligated to provide in its representation of Defendants. Id. at 16. Jensen’s conclusions are amply supported by the facts in the record.

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In this case, Eskridge v. Fletcher, Court of Appeals of Washington, Division One, No. 78013-1-l, a medical doctor sued the lawyers who unsuccessfully represented him in his license revocation proceeding. The record indicated that there was substantial evidence that Dr. Eskridge had acted inappropriately towards other doctors and patients. As a result, the hospital revoked his admission privileges. After an internal review, Dr. Eskridge’s privileges were revoked. On the advice of the defendant lawyers, Eskridge elected not to appeal that determination.

The malpractice lawsuit alleged that, had the appeal been filed, it would have been successful and Eskridge would have retained his privileges.

The trial court disagreed. The Court of Appeals affirmed, holding that he could not show by clear and convincing evidence (the standard used in the medical revocation proceeding) that, but for the error by the lawyer, he would have prevailed in his appeal. The discussion follows:

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In a malpractice case, the plaintiff must show that the lawyer breached the standard of care and that the lawyer’s error cost the client money. In most cases, the only way to prove this is to examine the underlying case. The underlying case is the prior case that was handled by the lawyer who allegedly breached the standard of care.

Because underlying cases can come in a variety of disciplines, we have to learn how to analyze (and sometimes prove-up) the allegations of the underlying case.

An example would be a personal injury case that was dismissed because the lawyer missed the statute of limitations. To prove that the error caused the client to lose the case, we must show that the underlying personal injury case had merit and prove the allegations contained in that case. If the underlying case was not well-founded, the lawyer’s error did not cause the loss. The client would have lost the case anyway.

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