Transcraft, Inc. v. Galvin, Stalmack, Kirschner & Clark

• Decision Date: 28 December 1994
• Docket Number: Nos. 93-3684,94-2717,s. 93-3684
• Citation: 39 F.3d 812
• Parties: 41 Fed. R. Evid. Serv. 275 TRANSCRAFT, INCORPORATED and Cunningham Enterprises, Incorporated, Plaintiffs-Appellees, v. GALVIN, STALMACK, KIRSCHNER & CLARK, Francis J. Galvin, Jr., and Eric L. Kirschner, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 812

39 F.3d 812

41 Fed. R. Evid. Serv. 275

TRANSCRAFT, INCORPORATED and Cunningham Enterprises Incorporated, Plaintiffs-Appellees, v. GALVIN, STALMACK, KIRSCHNER & CLARK, Francis J. Galvin, Jr. and Eric L. Kirschner, Defendants-Appellants.

Nos. 93-3684, 94-2717.

United States Court of Appeals Seventh Circuit.

Argued Sept. 9, 1994.

Decided Nov. 14, 1994.

Rehearing and Suggestion for Rehearing En Banc Denied Dec. 28, 1994.

William A. Alexander, Troutt, Alexander, Popit & Warner, Benton, IL, Rodney V. Taylor (argued), Christopher & Taylor, Indianapolis, IN, Frederic C. Sipe, Sipe, Pankow, Han & Free, William L. Schlosser, Indianapolis, IN, Thomas G. Brackman, St. Louis, MO, for plaintiffs-appellees.

Nancy G. Lischer (argued), D. Kendall Griffith, Hinshaw & Culbertson, Chicago, IL, Mark D. Bauman, Brian D. Malkmus, Hinshaw, Culbertson, Moelmann, Hoban & Fuller, Belleville, IL, for defendants-appellants.

Before POSNER, Chief Judge, EASTERBROOK, Circuit Judge, and GORDON, District Judge. ^*

POSNER, Chief Judge.

The appeals in this diversity suit for legal malpractice raise a variety of issues, mainly but not only of causation and of computation of damages. The principal plaintiff, Transcraft Corporation, is a manufacturer of flatbed truck trailers. In 1985 a man named Weekley was driving a semitractor hauling a loaded Transcraft trailer. His wife was in the cab. While Weekley was attempting to exit from an interstate highway, the rig left the road and turned over. Weekley's head was injured in the accident. His wife broke a couple of vertebrae in her neck, but apparently her husband's injury was the more serious, unless its gravity has been exaggerated--of which more later. The Weekleys sued Transcraft, claiming that the accident had been due to grossly negligent welding of a key part of the trailer.

Liberty Mutual, Transcraft's products-liability insurer, assumed the defense of the suit and hired Galvin, Stalmack, Kirschner & Clark, an Indiana law firm, to handle it. A jury awarded the Weekleys $3.5 million in compensatory damages and $1.25 million in punitive damages. Liberty then settled the case before appeal by paying the Weekleys the $3.5 million in compensatory damages that the jury had awarded them; the Weekleys waived punitive damages in exchange for Liberty's not appealing.

Transcraft paid nothing. But the following year Liberty refused to renew Transcraft's insurance, precipitating this suit by Transcraft against Liberty, the Galvin firm, and the partners (now former partners, the firm having dissolved) who had handled the Weekleys' suit. The claim is that the law firm--and Liberty, by failing to supervise the firm and in other ways--botched the defense of the suit and that as a result of having a $3.5 million loss on its record Transcraft is unable to buy liability insurance on reasonable terms and has therefore been forced to "go bare," jeopardizing its survival and reducing its market value. The jury agreed and awarded Transcraft $1.5 million in damages (all compensatory) for the diminution in Transcraft's value, which it apportioned $1 million to the law firm and $500,000 to the insurance company. It should not have apportioned liability for compensatory damages, as we shall see. Liberty has settled with Transcraft and is not a party to the appeals.

The defendants (collectively "Galvin") argue that no rational jury could have found negligence in the defense of the Weekleys' suit. We agree that the evidence of negligence was meager and equivocal, that a number of the alleged acts of negligence were either nothing of the kind or unrelated to the outcome of the lawsuit, and that the logic and credentials of the plaintiff's expert witness on standards of professional competence in litigation were unimpressive. But we do not think that Transcraft's case was so weak that the jury can be said to have acted irrationally in finding that there was negligence which affected the outcome of the Weekleys' suit.

The plaintiff in a case of malpractice, legal as well as medical, must prove that the defendant failed to come up to minimum standards of professional competence, or to higher standards if he represented himself to be a specialist or to have unusual qualities. Hays v. Sony Corp. of America, 847 F.2d 412, 419 (7th Cir.1988); 1 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice Sec. 15.4 (1989). The malpractice claimant must also prove that as a result of the lawyer's incompetence he, the client, lost his case, or paid a larger judgment than would have been awarded had the defendant performed competently, or suffered some other harm. Picadilly, Inc. v. Raikos, 582 N.E.2d 338, 344 (Ind.1991); Cornett v. Johnson, 571 N.E.2d 572, 575 (Ind.App.1991); Winskunas v. Birnbaum, 23 F.3d 1264 (7th Cir.1994); Mitchell v. Transamerica Ins. Co., 551 S.W.2d 586 (Ky.App.1977). The evidence of negligence in this case consists of a litany of alleged mistakes made by Galvin in the handling of the Weekleys' lawsuit. First, it is argued, Galvin should have moved for a change of venue, from Indiana to Illinois. The accident had occurred in Ohio. The Weekleys live in Indiana and brought their suit there. Transcraft is an Illinois corporation, and communication between it and Galvin would have been easier had the lawsuit been conducted in a court nearer its headquarters. This is a trivial theory of legal malpractice, and should not have been allowed to go to the jury. Venue was proper in the Northern District of Indiana, where the Weekleys reside and Transcraft has its largest dealership. A motion to transfer the case to Illinois would almost certainly have failed, since Illinois could not be considered on balance more convenient for the parties, the lawyers, and the witnesses; and the legal standard for the grant or denial of a motion for a change of venue is the balance of conveniences. Cote v. Wadel, 796 F.2d 981, 984-85 (7th Cir.1986). It is not malpractice to fail to make a motion that has little chance of being granted and if granted would confer a merely speculative benefit on the movant. So courts long have held with reference to motions for change of venue. Nave v. Baird, 12 Ind. 318, 319 (1859); Woodruff v. Tomlin, 616 F.2d 924, 931 (6th Cir.1980); 1 Mallen & Smith, supra, Sec. 15.5, p. 874 n. 13. Judges ought not by taking an expansive view of the tort of legal malpractice create incentives for lawyers to engage in busy "motion practice" in order to insulate themselves from legal liability. Judges ought not, in other words, encourage the practice of "defensive law" in the bad sense in which the term "defensive medicine" is used of physicians who feel impelled by threat of malpractice liability to order tests that cost more than their expected benefits.

Another dubious allegation of professional misconduct is that Galvin had a conflict of interest because of the firm's prior representation of the Weekleys. It was in an unrelated matter but in the course of it Galvin had learned about the unsound condition of Mrs. Weekley's neck prior to the accident. How this alleged conflict of interest could have hurt Transcraft is difficult to fathom. Only the Weekleys could have been hurt. Or so it seems. But Transcraft argues that since the knowledge of Mrs. Weekley's preexisting condition had been obtained in the course of legal representation, Galvin was inhibited in cross-examining Mrs. Weekley about the extent of the injuries that she suffered in the trailer accident. Even if this is true, its relevance to the litigation is unclear. For suppose that the accident broke Mrs. Weekley's neck only because the neck was abnormally weak; this would not make a straw of difference to damages (let alone liability); the "eggshell skull" rule makes the tortfeasor take his victim as he finds him. Ficken v. Alton & Southern Ry., 255 Ill.App.3d 1047, 193 Ill.Dec. 51, 625 N.E.2d 1172, 1178 (1993); Pace v. Ohio Dept. of Transportation, 62 Ohio Misc.2d 184, 594 N.E.2d 187, 188 (Ohio Ct.Cl.1991); Niehus v. Liberio, 973 F.2d 526, 528 (7th Cir.1992); cf. Defries v. State, 264 Ind. 233, 342 N.E.2d 622, 630 (1976). We say this with confidence although we have not been able to discover what state's substantive law was believed to furnish the rule of decision in the Weekleys' lawsuit. Recall that while the accident occurred in Ohio, the plaintiffs were domiciled in Indiana and the defendant is an Illinois corporation. Probably Ohio law applied, Rice v. Nova Biomedical Corp., 38 F.3d 909 (7th Cir.1994), but it hardly matters, because the parties have not made an issue of it and because the eggshell-skull rule is in force in all three states having some connection to the suit, as are the other legal doctrines applicable to the Weekleys' suit.

Still another questionable charge is that Galvin impaired the defense of the Weekleys' suit by failing to give timely notice to Transcraft of the plaintiffs' reinstatement of their claim for punitive damages. Since Liberty's policy did not protect Transcraft against the consequences of willful misconduct, of which an award of punitive damages would be one, Galvin, whose primary loyalty was to Liberty, was required to notify Transcraft of any claim for punitive damages so that Transcraft could hire a lawyer to protect its uninsured interest. But since Liberty in the end paid the whole judgment, Transcraft was actually benefited by not being notified of its exposure to punitive damages--it saved the expense of hiring its own lawyer.

Unless that lawyer would have taken steps that would have avoided the award of punitive damages. Although the Weekleys dropped their claim of punitive damages in exchange for Liberty's not appealing from the award of compensatory damages, had the jury not awarded punitive damages the Weekleys would have lacked this bargaining chip and would undoubtedly have accepted a reduction in the award of compensatory damages in order to avoid jeopardizing the award if...