The Fifth District Appellate Court held that punitive damages are recoverable in legal malpractice cases, concluding that in such circumstances the punitive damages are “compensatory in nature.”
“In short, we agree that punitive damages that are assessed against a litigant as a proximate result of the professional negligence of its attorney are not, in the context of a subsequent legal malpractice action against the attorney, punitive in nature but are, indeed, compensatory in nature and therefore not barred …” wrote Justice James Randy Moore in the ruling.
Moore delivered the April 28 opinion with justices Mark Boie and John Barberis concurring.
The appellate court addressed the punitive damages question in a de novo standard of review after former Madison County Circuit Judge David Dugan denied a motion to dismiss and strike portions of a legal malpractice claim alleging St. Louis law firm Sandberg Phoenix & von Gontard and attorneys John Gilbert and Narcisa Symank should be held liable for compensatory and punitive damages awarded in a wrongful termination suit. Dugan denied the motion to dismiss on June 3, 2019. The defendants sought appellate review regarding the punitive damages claim. Dugan, who now serves as a federal judge at the Southern District of Illinois, granted the request on Aug. 9, 2019.
The question on appeal states, “Does Illinois’ policy on punitive damages and/or the statutory prohibition on punitive damages … bar recovery of incurred punitive damages in a legal malpractice case where the client alleges that, but for the negligence of the attorney in the underlying case, the jury in the underlying case would have returned a verdict awarding either no punitive damages or punitive damages in a lesser sum?”
After eight continuances, the appellate court answered the certified question in the negative and affirmed Dugan’s order denying dismissal. The case has been remanded to Madison County Circuit Court for further proceedings.
The appeal was filed in regards to a legal malpractice suit alleging negligent representation resulted in a $785,000 jury verdict for former Midwest Sanitary Service employee Paul Crane Jr.
“On appeal, the defendants argue that the statutory prohibition on the recovery of punitive damages in a legal malpractice case, as well as Illinois public policy, bars the plaintiffs from recovering the punitive damages they claim they were required to pay as a result of the defendants’ negligence in representing them in the underlying action,” Moore wrote.
“The plaintiffs counter that as between them and the defendants, these damages are compensatory in nature because they are a direct result of the defendants’ negligence in representing them,” he continued.
The appellate court cited Tri-G Inc.’s 2006 case against Burke Bosselman & Weaver. Specifically, the appellate court cited the circuit court’s holding in Tri-G’s case rather than the Illinois Supreme Court’s decision. The supreme court concluded in a split decision that the plaintiff could not recover punitive damages from its attorney in a legal malpractice action alleging the attorney failed to prosecute the complaint because it would “defeat the punitive and deterrent purposes of punitive damages.” However, the circuit court concluded that the punitive damages would shift from “an allegedly innocent party to a negligent party” when the damages are incurred due to the attorney’s conduct.
The appellate court agreed with the circuit court’s finding that there “exists no just reason to deny the plaintiff in this case the opportunity to recover its actual loss.”
The Fifth District originally denied the appeal on Oct. 9, 2019, in a 2-1 vote. Moore and Justice Thomas Welch voted to deny the application while former Justice David Overstreet voted to grant the application. Overstreet now serves on the Illinois Supreme Court.
Then on Feb. 20, 2020, the Illinois Supreme Court allowed the motion for supervisory order and, “in the exercise of its supervisory authority,” directed the appellate court to vacate its previous order and allow the appeal.
The defendants filed their motion to reconsider or to certify the issue through attorney Gary Meadows of HeplerBroom in Edwardsville, arguing that the court misinterpreted relevant case law when denying their motion to dismiss and strike the amended complaint.
They had filed their motion to dismiss and strike in response to an amended complaint filed by plaintiffs Midwest Sanitary Service, Nancy Donovan and Bob Evans Sr.
In their motion, the defendants argued that the plaintiffs’ attempt to recoup punitive damages of the underlying jury verdict is improper.
They also argued that the plaintiffs failed to assert that the alleged negligence caused them to lose a defense that would have been successful.
The defendants further argued that counts I and II of the amended complaint are duplicative as they both allege negligence and seek to recover $225,000 in attorney’s fees for the underlying plaintiff and $218,932 in defense costs paid to Sandberg Phoenix.
In their motion to reconsider, the defendants argued that recovery of punitive damages are prohibited in legal malpractice cases.
They asserted that the amended complaint “alleges only that the verdict would have been lesser or none, seemingly allowing the jury in this case a roving commission to speculate about what amount of punitive damages the original jury would have awarded had it heard additional evidence at the trial.”
“As noted by this court in its June 3 decision, it is ‘an invitation for speculation to ask a jury to decide whether the evidence, had it not been excluded, would have led the first jury to award a lesser or no amount in punitive damages.’ Yet that speculation is precisely what this court’s decision is endorsing,” the motion stated.
The defendants argued that Dugan’s order denying their motion to dismiss comes with a “vast societal cost.”
“[W]hile plaintiffs’ attorneys will never be exposed to lost punitive damage, defense attorneys will hereafter have potentially unlimited liability for lost punitive damages to its clients.
“For defense lawyers, this will ‘result in increased professional liability insurance premiums or denials of coverage’ altogether.
“This may also effectively preclude or deter many lawyers from undertaking representation of defendants in controversial cases and ‘make it more difficult for consumers to obtain legal services,’’ the motion stated.
The plaintiffs filed a response to the defendants’ motion to reconsider or certify the issue through attorney George Ripplinger of Ripplinger & Zimmer LLC in Belleville.
They argued that the defendants had not presented any “newly discovered evidence” nor “cited newly discovered changes in the law.”
“None of the cases hold that a lawyer’s malpractice must have cost the defendant in a case a complete defense to the action. None of them deal with loss of a defense to one element of damage in a case,” the response stated.
However, the plaintiffs had no objection to the court certifying the case for immediate appeal to answer the question on recover of punitive damages.
According to the amended complaint, the plaintiffs claim the defendants were retained as counsel on April 20, 205 in a trial where Crane alleged he was wrongfully terminated.
Crane filed his suit in March 2014 (14-L-501). He alleged he worked as a truck driver for the Wood River company. He claimed he observed Midwest employees engaging in “unauthorized and illegal dumping and/or storage of toxic waste and other substances hazardous to the health and well-being of the public.”
On Nov. 18, 2015, the Environmental Protection Agency sent Midwest a letter noting the “numerous environmental violations” after Crane reported photos of the alleged violations to state regulators. Crane was terminated the same day.
Sandberg Phoenix took the defense over from the plaintiffs’ prior defense counsel in Crane’s case.
The trial began Nov. 9, 2015.
The one-week trial in Madison County Circuit Judge Dennis Ruth’s court ended on Nov. 17, 2015, after jurors returned a verdict awarding Crane $160,000 in compensatory damages and $625,000 in punitive damages for a total of $785,000. Evans and Donovan were only found to be liable for compensatory damages.
Then on July 15, 2016, Crane was awarded $225,000 for his attorney fees.
The plaintiffs in this case allege Gilbert responded in an email, “They will get nothing, of course, when the appellate court overturns the judgment.”
Donovan, Evans and Midwest Sanitary Service claim Gilbert reassured them that the appellate court would rectify “this miscarriage of justice.”
According to the Rule 23 decision by appellate justice Thomas Welch, the defendants sought a new trial following the verdict after a juror reached out to Midwest and the defendants’ counsel, suspecting juror misconduct and speculation based upon a testimony that had been excluded for improper disclosure.
According to the juror’s affidavit, the jury had concluded that a voicemail complaining of Crane’s behavior must have been fabricated because the customer never testified at trial.
Ruth denied the motion. Midwest, Donovan and Evans appealed.
However, the Fifth District Appellate Court affirmed the jury’s verdict and Ruth’s handling of the trial on May 26, 2017.
“Generally, a verdict may not be impeached by testimony or affidavits relating to the motive, method, and process of jury deliberations,” Welch wrote.
The appellate court concluded that the trial court did not abuse its discretion in concluding “jurors were not influenced and prejudiced by the juror misconduct to such an extent that they would not, or could not, be fair and impartial.”
In their complaint against Sandberg Phoenix, the plaintiffs allege their counsel failed to list all witnesses intended to be called at trial, resulting in six witnesses for defense being barred.
They allege the defendants failed to identify a voice mail recorded message from a Midwest customer regarding a lost or destroyed document in response to a request to produce, resulting in a “missing evidence” instruction given to the jury. They also allege the defendants failed to object to jury instructions.
Then while the case was pending in the appellate court, the plaintiffs claim the defendants failed and refused to discuss potential settlement with opposing counsel. The defendants allegedly simply responded with “No” and failed to discuss or even inform their client.
Madison County Circuit Court case number 18-L-811