No Liability Ruling in Favor of Attorney in Legal Malpractice Trial Upheld by Indiana Appellate Court

It’s fairly rare to see cases handled by a pro se plaintiff reach trial if the defendant is represented by counsel.  A plaintiff handling a legal malpractice case pro se and reaching trial is almost unheard of.  While the Plaintiff in Miletic v. O’Brien, was able to survive summary judgment, he wound up short in proving his legal malpractice case at trial.  2017 Ind. App. Unpub. LEXIS 1606 (Ind. App. Ct. 2017).

In this case, Miletic was represented by O’Brien in her divorce to Dragan Miletic (“Dragan”).  While the divorce was pending, Miletic was diagnosed with cancer, went on disability, and had no other income.  When completing his financial declaration forms, Dragan indicated that he was also unemployed.  But, he was maintaining health insurance for Miletic through COBRA.

Prior to the parties’ dissolution, Dragan moved to California for employment.  O’Brien filed a Verified Petition for Maintenance Due to Spousal Incapacity requesting that Dragan pay Miletic “a reasonable monthly maintenance, in addition to continuation of the COBRA.”  Thereafter, the court held a final hearing on the dissolution. During the proceedings Miletic and Dragan informed the court that they had reached an agreement on all of the issues.  The parties represented that everything had already been divided and Dragan agreed to continue provide health insurance for Miletic until she was healthy or obtained her own.  However, she would not receive any other form of spousal maintenance.  Miletic represented to the court that she understood the terms of this agreement and would abide by it.

Thereafter, the court requested that O’Brien memorialize the terms of the agreement.  A few months later, the court was informed that O’Brien was subsequently terminated by Miletic and refused to sign an agreement with the terms agreed upon before the trial court earlier.  The trial court would eventually enter an order consistent with those terms.  Miletic subsequently filed a legal malpractice claim against O’Brien where she claimed that he breached his duty of care by failing to obtain monthly spousal support payments from Dragan.  Additionally, Miletic alleged that O’Brien failed to properly conduct discovery and if he had he would have learned that Dragan was “earning over $164,00 per year” and she therefore would have obtained maintenance.

O’Brien filed a motion for summary judgment which the trial court denied and the case proceeded to a bench trial.  After Miletic’s case-in-chief, O’Brien moved for directed verdict which the court granted because Miletic failed to meet her burden of proof by not providing any expert testimony to establish that O’Brien deviated from the standard of care.

An appeal followed where Miletic argued that the common knowledge exception applied in her case and she therefore did not require expert testimony to prove her claim.  The common knowledge exception applies when the attorney’s negligence is so grossly apparent that a non-attorney would have no difficulty in understanding a breach occurred.  Storey v. Leonas, 904 N.E.2d 229, 238 (Ind. App. 2009).  Typically, the exception arises in cases where an attorney fails to file a case within the applicable statute of limitations period and the claim is then barred.  The appellate court was not persuaded by this argument, indicating that the common knowledge exception only applies to obvious cases.  However, at trial and in her briefs Miletic failed to address the fact that she represented to the court that she understood the terms of the settlement and approved it.  Therefore, the common knowledge exception could not apply and an expert was required to explain how O’Brien breached his duty of care.

Alex and the Patterson Law Firm, LLC handle legal malpractice cases throughout Illinois and Indiana.  If you have a matter you would like to discuss with Alex, you can reach him at (312) 750-1820 or apasso@pattersonlawfirm.com.

Indiana Attorney Suspended for Lying to Client about Filing Appeal

A Northern Indiana attorney was suspended for 90 days for lying to one of his clients.  The attorney was retained by the client to seek an appeal of the denial of a petition for expungement of a misdemeanor theft conviction.  During the course of representation, the client requested updates on the status of the appeal and the attorney made statements which implied that he had filed the appellate brief.  However, no brief was ever filed by the attorney and the appellate court eventually dismissed the appeal with prejudice.  The attorney never explained to the client of the dismissal or any of the available options, which led to the client filing a grievance.  The Indiana Supreme Court Disciplinary Commission found that the attorney violated several Indiana Professional Conduct Rules – 1.1, 1.3, 1.4(a)(3), 1.4(b), 3.3(a)(1), 8.1(a), and 8.4(c).

Alex Passo and Patterson Law Firm, LLC handle legal malpractice claims throughout Illinois and Indiana.  If you have a matter that you would like to discuss with Alex you can reach him at (312) 750-1820 or apasso@pattersonlawfirm.com.

Law Firm Can’t Dodge Legal Malpractice Claim on Blown Statute Despite Withdrawal Before its Lapse

A common misconception by attorneys is that there is no potential liability in the event they terminate representation before filing a complaint on the behalf of a client when the applicable statute of limitations has not yet run and the complaint is never subsequently filed.  But, this is not true.  If an attorney terminates their representation before a statute of limitations lapses, and the former client fails to file on time, the former attorney can nevertheless may face defending themselves in a suit in the event the attorney terminates the representation without providing the former client sufficient time to investigate and file a claim within the appropriate time period.  Wall v. Domnick, Cunningham, Whalen, PLLC, is illustrative of this point. 17-cv-5372, 2017 U.S. Dist. LEXIS 195235 (N.D. Ill. Nov. 28, 2017).

In Wall, an administrator of an estate retained Domnick, Cunningham, Whalen, PLLC (DCW) to file a lawsuit against two nursing homes that caused the death of an elderly individual.  The nursing homes neglected the elderly individual in 2012, which caused her to experience significant health issues that eventually resulted in her death on April 16, 2014.  After her death, in July 2014, Wall retained DCW to pursue any claims that estate possessed relating to the elder abuse and neglect in addition to any claims relating to her death.  However, DCW did not file an action by December 2014 – or ever.

Instead, on February 18, 2016, DCW sent Wall a termination letter notifying him that it would no longer be filing a complaint in the matter relating to the death of the individual.  The letter did not advise Wall that statute of limitations on this claim would expire on April 16, 2016.  After DCW’s withdrawal, Wall failed to file the complaint on time on the behalf of the estate. A legal malpractice complaint soon followed brought by Wall against DCW.

After filing his legal malpractice complaint against DCW for its failure to investigate and bring the estate’s claim in a timely manner, DCW argued that Wall could not establish the third element of legal malpractice actions – proximate cause – because Wall had 59 days to file the action (a superseding cause defense). However, the Court was not persuaded with this argument, and explained that an attorney terminating representation in this instance when their acts or omissions leave a question of whether the claim is viable.  Id. at ¶¶8-10 (quoting Mitchell v. Schain, Fursel, & Burney, Ltd., 332 Ill. App. 3d 618, 1194-95 (1st Dist. 2002).

Alex Passo and the Patterson Law Firm, LLC handle legal malpractice actions throughout Illinois and Indiana. If you have a matter that you would like to discuss with Alex, you can reach him at (312) 750-1820 or apasso@pattersonlawfirm.com.

Reformation of Settlement Agreement Terms Improper Equitable Remedy Regardless of Breach

It is well established in Indiana that the reformation of terms of a contract as an equitable remedy for a breach is an extreme remedy.  Courts may only reform a written contract if (1) there has been a mutual mistake by the parties in the formation; or (2) one party makes a mistake while the other party commits fraud or inequitable conduct.  See Meyer v. Marine Builders, Inc., 797 N.E. 760, 722 (Ind. Ct. App. 2003); see also New Life Cmty. Church of God v. Admomatis, 672 N.E.2d 433, 438 (Ind. Ct. App. 1996).  Misconduct by a party that amounts to a breach does trigger a court’s ability to reform a contract.

For example, in Wagner v. Wagner, a court attempted to modify a settlement agreement provision that was in breach by one of the parties, but was reversed because the facts did not trigger the availability of the equitable remedy of reformation.  Here, a father and son were general partners of numerous partnerships that owned apartment buildings.  A business dispute arose between them which resulted in litigation.  The father alleged during this litigation that funds had been misappropriated from the business.  Ultimately the matter was settled, and one provision that was incorporated in the settlement agreement was that the father would prepare all partnership tax returns.

A subsequent suit was filed by the son because the father failed to prepare partnership tax returns as required by the settlement agreement.  After a bench trial, the court concluded that the father breached the agreement because he refused to prepare the tax returns, which was an obligation he agreed to undertake under the settlement agreement.  As a result of this breach, the trial court entered an order stating that the son was entitled to use a different account for future tax returns.  However, the Court reversed this equitable remedy imposed by the trial court because there was no basis to support rescission or modification of the contract as there was no fraud, illegality, mutual mistake, or a contract provision providing for rescission in the event of breach. 

Wagner v. Wagner, 02A03-1610-PL-2473 (Ind. Ct. App. 2017).

Nixon Peabody Faces $8.8 Million Legal Malpractice Lawsuit Brought by New York County's Sewer District

Nixon Peabody recently was hit with a legal malpractice suit arising from its handling of eminent domain litigation while representing New York’s Rockford County Sewer District.

In the underlying case, Nixon Peabody represented Rockford County’s Sewer District against a group called the Split Rock Partnership in a valuation case with respect to land that was seized.  Split Rock previously owned a piece of property that was steep and rocky.  Nevertheless, a portion of the property was deemed suitable for commercial construction and Split Rock found a development company that entered into a contract with it for $10 million for the sale of the property for development purposes.  However, the contract contained a contingency clause that stated the contract would be deemed void in the event the county (for its Sewer District) asserted eminent domain for the property. 

After the contract was executed, the county asserted eminent domain and the development group backed out of the $10 million contract.  Eventually, the land was acquired by the county for $250,000 which led to the underlying case brought by Split Rock against the Sewer District (which was defended by Nixon Peabody) that resulted in a loss to the Sewer District.

The subsequent legal malpractice suit was brought against Nixon Peabody for its negligent handling of the eminent domain case.    For example, the Sewer District asserts that Nixon Peabody failed to obtain evidence relating to the true value of the property to rebut Split Rock. It also asserts that Nixon Peabody failed to adhere to the rules of civil procedure which led to an expert witness in the fields of engineering and site planning to be barred from testifying.  Lastly, the firm failed to disclose environmental reports during discovery which led the trial judge to make a negative inference against the Sewer District.

Alex Passo and the Patterson Law Firm, LLC handle legal malpractice actions throughout Illinois and Indiana.  If you have a matter that you would like to discuss with Alex you may reach him at (312) 750-1820 or apasso@pattersonlawfirm.com.

Receiver's Accounting Malpractice Claim Not Barred by in Pari Delicto Doctrine

The in pari delicto doctrine is a rather rare defense to see asserted in a case.  The doctrine bars a plaintiff from recovering damages when they are a participant in the wrongdoing that creates the damages.  In Nicholson v. Shapiro & Associates, LLC, the First District Appellate Court examined whether the doctrine should be applied to bar claims brought by a court-appointed receiver of a company (that was appointed because of illegal acts by the company’s owner) against the company’s outside auditor for failing to detect the fraudulent and illegal acts.  2017 IL App (1st) 162551 (2017).

In this case, the Illinois Stock Transfer Co. (“IST”) hired Shapiro & Associates, LLC (“Shapiro”) to assist it with its tax returns and annual audits as required by the SEC Act.  However, the SEC discovered that IST’s sole-owner was converting client funds.  After this discovery, the SEC filed an action in the Northern District of Illinois and a court-appointed receiver was appointed for IST’s and the sole-owner’s estates.

After her appointment, the receiver filed an accounting malpractice action against Shapiro for failing to detect the fraudulent and illegal acts.  In response, Shapiro filed a motion to dismiss arguing, in part, that the doctrine of in pari delicto should be imputed to the receiver by arguing that the sole-owner’s actions are what caused the damages.

But, the Court disagreed reasoning that any award to the estate of the company would benefit the investors and creditors of IST rather than the actual wrongdoer – the owner – who had been removed.  (citing Albers v. Continental Illinois Bank & Trust Co., 296 Ill. App. 592 (1938); McRaith v. BDO Seidman, LLP, 391 Ill. App. 3d 565 (2009)). Therefore, the doctrine was inapplicable.

Nicholson v. Shapiro & Associates, LLC, 2017 IL App (1st) 162551 (2017).

Alex Passo and the Patterson Law Firm, LLC handle accounting malpractice actions throughout Illinois and Indiana.  If you have a matter that you would like to discuss with Alex, you can reach him at (312) 750-1820 or apasso@pattersonlawfirm.com.

Hamilton County Adoption Attorney Receives Public Reprimand For Several Violations of Rules of Professional Conduct

A Hamilton County Indiana adoption attorney was recently publicly reprimanded by the Indiana Supreme Court for violating Professional Rules of Conduct 1.7 (Conflicts of Interest), 1.8 (Conflicts of Interest), and 8.4 (General Misconduct).  Here, the attorney was hired by a couple to represent them in the adoption of a child.  Before the attorney’s retention, the couple had previously already reached an agreement with the birth mother to allow them to adopt the child.

However, when the attorney contacted the birth mother, she expressed concerns with his current clients and asked the attorney for profiles of other prospective adoptive parents.  Despite representing the couple, the attorney nevertheless showed the birth mother the profiles of other potential adoptive parents.  Eventually the birth mother selected a different couple than the attorney’s original clients. 

The attorney never informed his original clients that the adoptive mother had concerns with them or that he showed her different options until after the decision was made.  Thereafter, the attorney sat down with them to discuss reimbursement of fees the couple advanced to him.  The couple and the attorney appeared to have resolved the issue at this meeting, however, at the conclusion of the meeting, the attorney presented them with a release purporting to bar them from filing a “claim” to the Indiana Supreme Court disciplinary commission.

The attorney erred in this circumstance by failing to disclose to his clients that the birth mother had concerns with selecting them as adoptive parents.  But, the most critical error was then representing the birth mother in her selection of an alternative set of adoptive parents without obtaining consent from the original clients.

Alex Passo and the Patterson Law Firm, LLC handle legal malpractice actions throughout Illinois and Indiana.  If you have a matter that you would like to discuss with Alex, you may reach him at (312) 750-1820 or apasso@pattersonlawfirm.com.

Legal Malpractice Claim against Corporate Law Firm of Commodity Pool Operator and Trading Firm Survives Motion to Dismiss

In 2013, the U.S. Commodity Futures Trading Commission initiated an action against Alphametrix, LLC (AML), a CFTC registered commodity pool operator and trading advisor, along with its parent company, for injunctive relief, disgorgement of misappropriated funds, and penalties.  This action was due to AML failing to reinvest $2.8 million in rebates back into commodity pools in accordance with rebate agreements.  Rather than reinvesting the funds, AML had transferred the funds into accounts held by its parent company which had never been registered with the CFTC.  Due to the lawsuit, a receiver was appointed for AML and its parent.  Eventually, the lawsuit against the officers was settled.

The receiver then brought a legal malpractice claim against the corporate law firm of AML for its failure to properly advise it of risks relating to amendments of promissory notes between the corporation and its managing member.  From 2006 to 2012, the managing member of AML made numerous undocumented loans to himself which totaled over $1,000,000.00.  However, in 2012, AML’s auditor became concerned over the amount of the receivable and that it was undocumented.  To accommodate the auditor, the managing member had AML’s corporate attorney prepare a promissory note which required him to pay monthly installments of over $7,000 on the loan with a balloon payment in 2015.

Despite the loan repayments, the auditor became increasingly concerned with AML’s cash flow problems in subsequent audits and made the officers aware.  The problems did not dissipate though and in February 2013, AML’s primary lender claimed it was in violation of certain loan covenants and it therefore received additional guaranties from AMG and its other related entities.  AML’s corporate attorney was aware of the auditor’s apprehension to the situation as well as the re-negotiated financial terms with the primary lender.  Nevertheless, when AML’s managing member requested that the law firm amend the promissory note terms, he obliged him.  Critically, the amended notes eliminated the monthly payments to AML and also extended the due dates for the balloon payment to 2023.  Furthermore, the amended notes also eliminated AML’s protection against default in the event that the managing member was subject to bankruptcy proceedings.

After the receiver was appointed, he brought a legal malpractice action against the corporate attorney for preparing the amended notes without first advising AML that the amendments would eliminate its ability to immediately demand payment of the loans in the event of a default.  The corporate law firm then filed a motion to dismiss with its best arguments being standing and duty. 

First, the firm argued that the receiver lacked standing because in the CFTC Action an order was entered stating that the primary lender’s security interest had priority over other general unsecured creditors.  However, this argument was disposed of by the Court which noted that the order only related to the CFTC action and not the claims in the instant case.  Further, it acknowledged that the primary lender entered into a settlement agreement with the primary lender which set out terms of what the primary lender would recover in the event the instant suit had a successful recovery.  Lastly, it recognized that the claim could not be assigned to the creditor because it is well-established in Illinois that legal malpractice claims are unassignable.

With respect to lack of duty, the Court also swiftly struck down the law firm’s arguments.  The Court noted that the law firm represented AMG and its subsidiaries from 2005 through 2013, and thus owed a duty to the entities and not the managing member.  Citing Peterson v. Katten Muchin Rosenman, LLP, 792 F.3d 789, 790 (7th Cir. 2015), the Court further noted that the law firm had a duty to advise the corporation of the various risks in amending the notes. 

The case is styled Driscoll v. Kins, 16-c-9359, (N.D. Ill. Sept. 18, 2017).

Alex and the Patterson Law Firm, LLC handle legal malpractice actions throughout Illinois and Indiana.  If you have a matter you would like to discuss, you can contact him at (312) 750-1820 or apasso@pattersonlawfirm.com.

Investors' Amended Legal Malpractice Complaint Seeks $764 Million in Damages from Duane Morris

The stakes have been raised in the ongoing 2-year battle between a group of oil and gas investors of American Energy-Utica (“AEU”) and the company’s former counsel, Duane Morris.  The Investors filed their complaint in Texas principally due to the actions of Chesapeake’s (and later AEU’s) past CEO, Aubrey McClendon.  In 2016, McClendon was indicted for bid-rigging and died the subsequent day in a one-vehicle accident.

The plaintiffs, who are investors in American Energy-Utica (“AEU”), claim that Duane Morris committed malpractice due to a conflict of interest between them and McClendon, and also failing to advise them about claims Chesapeake was going to bring against them.  The investors claim that they were represented by Duane Morris at the same time as the firm represented McClendon; but, failed to disclose that their interests were materially adverse. 

The investors allege that Chesapeake issued a demand letter to McClendon in January 2015 claiming that the investors and McClendon stole its trade secrets.  Duane Morris allegedly never informed the investors and attempted to negotiate on McClendon’s and their behalf.  Their efforts failed however and Chesapeake ultimately filed a lawsuit which was eventually settled.

The investors are seeking the recovery of the settlement amount.  But, now claim that they have lost profits and business as a result of Chesapeake’s allegations in the underlying suit which should have been prevented. 

The case is styled Ascent Resources – Utica, LLC, et. al v. Duane Morris, LLP, No. 2015-46550 and is pending in the District Court of Harris County, Texas.

Alex Passo and the Patterson Law Firm, LLC handle legal malpractice actions throughout Illinois and Indiana.  If you have a legal malpractice claim that you would like to discuss with Alex, you may reach him at (312) 750-1820 or apasso@pattersonlawfirm.com.

NY Court Reverses Dismissal of Legal Malpractice Claim Against Willkie Farr

A securities broker prevailed in his bid to reverse the dismissal of a legal malpractice claim he brought against Willkie Farr.  In this matter, the securities broker, Palmeri Jr., was a client of Willkie, but his representation was terminated by the firm when his former employer, Ramius Securities, LLC, was being investigated by FINRA.  Willkie cut ties with Palmeri, Jr. due to a conflict that emerged when his interests diverged from Ramius.  Ramius was investigated by FINRA due to its suspicion that it was using stock finders.  Stock finders locate securities for lending and borrowing in exchange for a fee from the lenders.  Stock finders must be registered because they can create unjustifiable increases in the costs of the loan to the detriment of the borrower.  Palmeri Jr.’s father had previously been convicted for orchestrating illegal stock loan functions, and FINRA believed that he may have influenced Ramius to use unauthorized stock finders.    Palmeri Jr. was eventually cleared by FINRA; but, expended over $700,000 in legal fees defending the allegations brought against him.

Initially, the trial court dismissed the suit finding that it was filed after New York’s three year statute of limitations.  However, the Court of appeals reversed finding that the alleged wrongful conduct continued beyond the date considered by the trial court.

The case is Palmeri v. Willkie Farr & Gallagher, LLP, case number 2016-1473, in the Supreme Court of the State of New York.

Alex Passo and Patterson Law Firm, LLC handle legal malpractice matters throughout Illinois and Indiana.  If you have a matter that you would like to discuss with Alex, you may reach him at (312) 750-1820 or apasso@pattersonlawfirm.com.