Articles Posted in Professional Malpractice & Ethics

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In 2008, West Bend filed a legal malpractice action based on the performance of attorney Schumacher and his firm, RLGZ, in a 2005-2006 workers’ compensation matter. The parties agreed to a dismissal of that claim and entered into a tolling agreement pending the resolution of related actions. After the resolution of those claims, West Bend filed a malpractice suit against Schumacher in 2013. The district court dismissed the first and an amended complaint, concluding that the allegations were too speculative or vague. The court stated that allegations about failure to depose a doctor, failure to contact witnesses prior to the hearing, the disclosure of certain facts to opposing counsel, and that Schumacher had represented that West Bend would accept liability, did not explain “how any of these alleged acts and omissions harmed its defense.” The Seventh Circuit affirmed. The complaint did not adequately plead a claim for legal malpractice under Illinois law; it fails to allege plausibly that the outcome of the underlying action would have been more favorable to West Bend, had it not been for Schumacher’s alleged litigation conduct View "West Bend Mutual Insurance Co v. Schumacher" on Justia Law

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When Chelsea was five months old, she was dropped and suffered a skull fracture. As the fracture expanded, a cyst formed. The fracture and cyst were not a problem until, at age 17, she was hit in the head and suffered a loss of consciousness, blurred vision, and dizziness. After CT and MRI scans confirmed the extent of the fracture and the cyst, Chelsea underwent “cranioplasty” surgery. She was discharged after one day and was found dead in her bed three days later. A board‐certified forensic pathologist was unable to identify a cause of death and, based on the opinion of a neuropathologist, concluded that Chelsea had died from a seizure brought about by surgical damage. Neither doctor was aware of or had reviewed the pre‐surgery CT and MRI scans when they made their findings. Chelsea’s mother sued the hospital and doctors, arguing that anti-seizure medicine should have been prescribed. The defendants argued that no seizure had occurred and that a heart‐related ailment was the likely cause of death. A jury found in the defendants’ favor. The Seventh Circuit vacated, finding that one defense expert lacked the requisite qualifications to opine that a heart ailment was the likely cause of death and that there was a significant chance that the erroneous admission of the testimony affected the trial’s outcome. View "Hall v. Flannery" on Justia Law

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The Joyce law firm purchased professional liability insurance from Professionals Direct. In 2007 the firm won a large damages award for a class of securities-fraud plaintiffs and hired another law firm to sue to collect the money from the defendant’s insurers. Some class members thought the Joyce firm should have handled enforcement of the judgment itself under the terms of its contingency-fee agreement. They took the firm to arbitration over the extra fees incurred. Professionals Direct paid for the firm’s defense in the arbitration. After the arbitrator found for the clients and ordered the firm to reimburse some of the fees they had paid, the insurer refused a demand for indemnification. The district judge sided with the insurer, concluding that the award was a “sanction” under the policy’s exclusion for “fines, sanctions, penalties, punitive damages or any damages resulting from the multiplication of compensatory damages.” The Seventh Circuit affirmed. While the arbitration award was not functionally a sanction, another provision in the policy excludes “claim[s] for legal fees, costs or disbursements paid or owed to you.” Because the arbitration award adjusted the attorney’s fees owed to the firm in the underlying securities-fraud class action, the “legal fees” exclusion applies. View "Edward T. Joyce & Assocs. v. Prof'ls Direct Ins. Co." on Justia Law

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Illinois attorney Jahrling was contacted and paid by attorney Rywak to prepare documents for the sale of 90-year-old Cora’s home. Rywak’s clients paid $35,000 for Cora’s property, which was worth at least $106,000 and was later resold by the purchasers for $145,000. Cora later alleged he understood that he would keep a life estate to live in the upstairs apartment of the home rent-free. Jahrling’s sale documents did not include that life estate. Jahrling and Cora could not communicate directly and privately because Cora spoke only Polish and Jahrling spoke no Polish. Jahrling relied on counsel for the adverse parties for all communication with Cora. After the buyers tried to evict Cora, Cora sued Jahrling in state court for legal malpractice. After a partial settlement with a third party and offsets, the court awarded Cora’s estate $26,000, plus costs. Jahrling filed for Chapter 7 bankruptcy protection. Cora’s estate filed an adversary proceeding alleging that the judgment was not dischargeable under 11 U.S.C. 523(a)(4) because the debt was the result of defalcation by the debtor acting as a fiduciary. The bankruptcy court found in favor of the estate. The Seventh Circuit affirmed.Jahrling’s egregious breaches of his fiduciary duty were reckless and the resulting malpractice judgment is not dischargeable. View "Jahrling v. Estate of Cora" on Justia Law

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Hassebrock hired the Bernhoft Law Firm in 2005 to help with legal problems, including a federal criminal tax investigation, a civil case for investment losses, and a claim against Hassebrock’s previous lawyers for fees withheld from a settlement. Hassebrock was ultimately found guilty, sentenced to 36 months in prison, and ordered to pay a fine and almost $1 million in restitution. In 2008, Hassebrock fired the Bernhoft firm. In a malpractice suit against the Bernhoft attorneys and accountants, Hassebrock waited until after discovery closed to file an expert-witness disclosure, then belatedly moved for an extension. The court denied the motion and disallowed the expert, resulting in summary judgment for the defendants. The Seventh Circuit affirmed, rejecting an argument that the judge should have applied the disclosure deadline specified in FRCP 26(a)(2)(D) rather than the discovery deadline set by court order. The disclosure deadline specified in Rule 26(a)(2)(D) is just a default deadline; the court’s scheduling order controls. It was well within the judge’s discretion to reject the excuses offered by Hassebrock to explain the tardy disclosure. Because expert testimony is necessary to prove professional malpractice, summary judgment was proper as to all defendants. View "Hassebrock v. Bernhoft" on Justia Law

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In 1988, Department of Professional Regulation investigator visited Gekas, a Springfield, Illinois dentist, and expressed concern that Gekas had administered nitrous oxide to a child. He ordered Gekas to provide information on all prescriptions on a continuing basis. Gekas contacted Deputy Governor Riley for assistance. After a meeting, the Department imposed less onerous requirements. In 2002, a Department investigator raided Gekas’ offices, with the assistance of the Federal Drug Enforcement Agency. After failed negotiations, the Department issued a cease and desist order against Gekas for the unlicensed practice of medicine and prescribing controlled substances while not a licensed physician and sought to have his license suspended, on grounds that Gekas had prescribed 4,600 doses of Hydrocodone and Vicoprofen to a patient. Gekas contacted his Senator. In 2008, the cease-and-desist was vacated and the complaint dismissed. Gekas submitted a FOIA request concerning the administrative complaint. The Department responded that no public documents were available. In 2009, Gekas filed suit; it was dismissed by stipulation in 2010. Meanwhile, a Chairman on the Illinois Board of Dentistry issued subpoenas against Gekas, stating that there was reasonable cause to believe that Gekas had violated the Illinois Dental Practice Act. Gekas filed suit, alleging First Amendment retaliation. The district court granted defendants summary judgment, finding no evidence of retaliatory motive. The Seventh Circuit affirmed. View "Gekas v. Vasiliades" on Justia Law

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Bell established mutual funds, raised $2.5 billion, and invested in vehicles managed by Petters, who said that he was financing Costco’s electronics inventory. Instead he was running a Ponzi scheme, which collapsed in 2008. The scheme involved a claim that money lent to Petters entities was secured by Costco’s inventory and that repayment was ensured by a “lockbox” arrangement under which Costco would make payments into accounts that the Funds (not Petters) controlled. Petters insisted that the Funds not contact Costco, to avoid upsetting his favorable business relations. Bell and Petters went to prison for fraud. The Funds’ trustee in bankruptcy filed multiple suits. The district court dismissed a claim of legal malpractice. The Seventh Circuit reversed. Even if Bell was determined to do business with Petters, the Fund’s lawyers ould have explained how to structure the transactions in a less risky way, and if Petters refused to cooperate then Bell might have reconsidered lending the Funds’ money. The Trustee alleges that the firm did not offer any advice about how relative risks correspond to different legal devices, and its complaint states a legally recognized claim. Whether the law firm has a defense, and whether any neglect on its part caused injury, are subjects for the district court. View "Peterson v. Katten Muchin Rosenman LLP" on Justia Law

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Choice Hotels sued SBQI, its managers, and investors, for breach of a franchise agreement. The defendants did not answer the complaint. The court entered a default. One defendant, Chawla, an Illinois attorney, had represented the others. Other defendants asked Chawla to find a new attorney. They claimed that they had been unaware that their signatures were on the franchise agreement and that the signatures are forgeries. Johnson agreed to try to vacate the default, negotiate a settlement, and defend against the demand for damages. Johnson filed an appearance and took some steps, but did not answer the complaint or move to vacate the default, engage in discovery concerning damages, or reply to a summary judgment motion on damages. In emails, Johnson insisted that he was trying to settle the litigation. He did not return phone calls. The court set damages at $430,286.75 and entered final judgment. A new attorney moved to set aside the judgment more than a year after its entry, under Fed. R. Civ. P. 60(b)(6), which covers “any other reason that justifies relief” and requires “extraordinary circumstances.” The Seventh Circuit affirmed. The defendants must bear the consequences of their inaction. They were able to monitor the proceedings, but did not follow through. View "Choice Hotels Int'l Inc. v. Grover" on Justia Law

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Moje, playing minor league hockey, lost an eye during a game, and sued Oakley, which made his visor, and the League. Instead of notifying its insurer, the League hired LoFaro. Oakley’s attorney called the League’s President, to ask why it had not answered the complaint. LoFaro claimed that an answer had been filed, but the docket did not reflect any filing. Moje moved for default. LoFaro did not respond, nor did he respond after the court entered the default and permitted Moje to prove damages. The court entered a final judgment of $800,000 against the League. After the League learned of collection efforts, it notified its insurer. A lawyer hired by the insurer unsuccessfully moved, under Fed. R. Civ. P. 60(b)(1) to set aside the judgment within six months of its entry. Rule 60(b)(1), allows relief on account of “mistake, inadvertence, surprise, or excusable neglect.” The Seventh Circuit affirmed. Abandoned clients who take reasonable steps to protect themselves can expect to have judgments reopened under Rule 60(b)(1), but the League is not in that category. Its remedy is against LoFaro. View "Moje v. Federal Hockey League LLC" on Justia Law

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Spencer stopped paying her mortgage in 2008. In Wisconsin state court foreclosure proceedings, Spencer’s attorney, Nora, adopted an “object-to-everything litigation strategy and buried the state court in a blizzard of motions.” While a hearing on a summary judgment motion was pending in state court, Nora removed the case to federal court. Finding no objectively reasonable basis for removal, the district court remanded the case and awarded attorney’s fees and costs to the lender, 28 U.S.C. 1447(c). The Seventh Circuit dismissed Spencer’s appeal as frivolous; the district court did not order her to pay anything. The court affirmed the award as to Spencer “because she has not offered even a colorable argument that removal was reasonable” and ordered Nora to show cause why she should not be sanctioned for litigating a frivolous appeal. Several months later, noting Nora’s similar behavior in another case, the court imposed an increased sanction of $2,500, suspended until the time, if ever, that Nora submits further inappropriate filings, and directed the clerk of court to forward a copy of the order and earlier opinion to the Office of Lawyer Regulation of the Wisconsin Supreme Court. View "PNC Bank v. Spencer" on Justia Law