Alper v. Bickel & Brewer

• Decision Date: 12 July 2001
• Docket Number: No. 00-3192,00-3192
• Citation: 257 F.3d 680
• Parties: (7th Cir. 2001) Pamela J. Alper and Michael N. Alper, Plaintiffs, v. Altheimer & Gray, an Illinois partnership, Myron Lieberman, and Robert L. Schlossberg, Defendants-Third/Party Plaintiffs-Appellants, v. Bickel & Brewer, a Texas partnership, Third/Party Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 680

257 F.3d 680 (7th Cir. 2001)

Pamela J. Alper and Michael N. Alper, Plaintiffs, v. Altheimer & Gray, an Illinois partnership, Myron Lieberman, and Robert L. Schlossberg, Defendants-Third/Party Plaintiffs-Appellants, v. Bickel & Brewer, a Texas partnership, Third/Party Defendant-Appellee.

No. 00-3192

In the United States Court of Appeals For the Seventh Circuit

Argued November 6, 2000

Decided November 16, 2000

July 12, 2001^*

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 97 C 1200--Rebecca R. Pallmeyer, Judge.

Robert P. Cummins, Cummins & Cronin, Chicago, IL, for Plaintiffs.

Thomas P. Sullivan, David Jumenez-Ekman (argued), Jenner & Block, Chicago, IL, for Defendants-Appellants.

J. Kent Mathewson, Karen Kies DeGrand (argued), Donohue, Brown, Mathewson & Smyth, Chicago, IL, for Defendant-Appellee.

Before Kanne, Diane P. Wood, and Williams, Circuit Judges.

Kanne, Circuit Judge.

We are occasionally presented with corporate transactions gone awry, and it is a characterization that aptly describes the case before us. Pamela J. Alper and Michael N. Alper (the Alpers) owned 100% of the shares of Terrific Promotions, Inc. (TPI). Through TPI, the Alpers engaged in two businesses: 1) a retail business, Dollar Bill$, whose 136 stores sold consumer goods priced mostly at one dollar and 2) a wholesale merchandising business, which sold manufacturers' brand-name products to distributors and wholesalers. In late 1995 and early 1996, the law firm of Altheimer & Gray represented the Alpers in a transaction in which the Alpers transferred all of the capital stock of TPI to Dollar Tree Stores (DTS) for $53 million.

After the transaction's January 1996 closing date, the Alpers realized that all was not as they had intended. They allege that, contrary to their wishes, both the retail business and the wholesale merchandising business had been transferred to DTS, rather than just the former. Further, a key TPI employee, Timothy Avers, had gone to work for DTS, which the Alpers allege was in violation of a non-compete agreement. The Alpers hired the law firm of Bickel & Brewer ("Bickel") to sue DTS and Avers on a variety of claims, including fraudulent inducement, breach of contract, civil conspiracy, and unfair competition. Bickel filed suit in state court, and later filed a second suit in federal court alleging violations of the federal securities and antitrust laws in addition to the aforementioned state law claims. The Alpers voluntarily dismissed the claims in state court, though their reason for doing so is disputed. The dis trict court subsequently dismissed the Alpers' federal claims under Rule 12(b)(6) of the Federal Rules of Civil Procedure and declined to exercise supplemental jurisdiction over the state law claims. See Terrific Promotions, Inc. v. Dollar Tree Stores, Inc., 947 F. Supp. 1243, 1249 (N.D. Ill. 1996). The Alpers, who were at that time represented by Bickel, did not appeal these rulings. Under Illinois law, a plaintiff who voluntarily dismisses an action is only permitted one refiling of that cause of action, thus it is possible that the Alpers are now procedurally barred from pursuing further litigation against DTS and Avers. See 735 Ill. Comp. Stat. Ann. 5/13-217 (West Supp. 2001); Timberlake v. Illini Hosp., 676 N.E.2d 634, 636 (Ill. 1997) (holding that section 13-217 barred refiling by plaintiff who had already voluntarily dismissed action in state court and had action dismissed for lack of pendent jurisdiction in federal court).

In light of the above events, the Alpers filed suit pursuant to 28 U.S.C. sec. 1332 in the United States District Court for the Northern District of Illinois, alleging, inter alia, professional negligence on the part of Altheimer & Gray and two of the firm's attorneys-- Myron Lieberman and Robert L. Schlossberg (collectively referred to as "Altheimer"). The Alpers claim that Altheimer failed to protect the Alpers' interests by negligently drafting the documents that transferred TPI to DTS. This negligence allegedly gave DTS control of the TPI wholesale merchandising business and allowed DTS to hire Avers and other key merchandising personnel. The claim is still pending in the district court.

Altheimer subsequently filed a third- party complaint against Bickel, pursuant to 28 U.S.C. sec. 1367, alleging that Bickel committed malpractice in the course of pursuing the Alpers' claims against DTS and Avers. Altheimer denies that it acted negligently, but asserts that Bickel is liable to Altheimer for contribution to the extent that Altheimer is held liable for causing any injury to the Alpers. The district court determined that Altheimer could not seek contribution because the third-party contribution claim did not meet the requirements of the Illinois Joint Tortfeasors Contribution Act (the "Contribution Act" or "Act"), 740 Ill. Comp. Stat. Ann. 100/0.01-100/5 (West 1993, Supp. 2001), and dismissed the claim. On Altheimer's motion, the court directed the entry of final judgment on the third- party complaint pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, in order to permit immediate appeal to this court. Altheimer appealed the district court's dismissal and we reversed and remanded for the following reasons.

I. Analysis

We review dismissals under Rule 12(b)(6) de novo, examining a plaintiff's factual allegations and any inferences reasonably drawn therefrom in the light most favorable to the plaintiff. See Marshall- Mosby v. Corp. Receivables, Inc., 205 F.3d 323, 326 (7th Cir. 2000). Dismissal under 12(b)(6) is proper only if the plaintiff could prove no set of facts in support of his claims that would entitle him to relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957); Veazey v. Communications & Cable of Chi., Inc., 194 F.3d 850, 854 (7th Cir. 1999). "[I]f it is possible to hypothesize a set of facts, consistent with the complaint, that would entitle the plaintiff to relief, dismissal under Rule 12(b)(6) is inappropriate." Veazey, 194 F.3d at 854 (citing Graehling v. Vill. of Lombard, Ill., 58 F.3d. 295, 297 (7th Cir. 1995)).

The Contribution Act provides that "where 2 or more persons are subject to liability in tort arising out of the same injury to person or property, . . . there is a right of contribution among them, even though judgment has not been entered against any or all of them." 740 Ill. Comp. Stat. Ann. 100/2(a) (West 1993, Supp. 2001). For a complaint to properly allege a right of contribution pursuant to the Act: 1) the defendant and the third party "must both be subject to liability in tort to the [plaintiff], and 2) their liability must arise out of the same injury." People v. Brockman, 592 N.E.2d 1026, 1029 (Ill. 1992). Bickel contends that neither of these requirements are satisfied here. Bickel also contends that Altheimer's third-party complaint is inconsistent with the goals of the Contribution Act. We address each argument in turn.

A. The Elements of the Contribution Act

1. Subject to Liability in Tort

With respect to the first requirement, Bickel alleges that we must ask whether it was liable in tort to the Alpers at the time of the injury alleged in the Alpers' complaint. Because Bickel was not even hired until after Altheimer's allegedly negligent conduct occurred, Bickel asserts that it is not liable in tort within the meaning of the Contribution Act. This reading of the Act, however, is inconsistent with Illinois case law. To determine whether Bickel is potentially liable in tort, we look to "the time of the injury out of which the right to contribution arises." Vroegh v. J & M Forklift, 651 N.E.2d 121, 125 (Ill. 1995). Altheimer's alleged right to contribution is based on the allegation that Bickel negligently represented the Alpers.

Under Illinois law, "[a]n action for legal malpractice must plead facts which establish the existence of an attorney- client relationship; the breach of a duty owed by virtue of that relationship; and that such negligence was the proximate cause of injury or of loss to the client." Jackson Jordan, Inc. v. Leydig, Voit & Mayer, 557 N.E.2d 525, 527 (Ill. App. Ct. 1990), aff'd in part and rev'd in part on other grounds, 633 N.E.2d 627 (Ill. 1994). Altheimer's third-party complaint asserts that Bickel had an attorney-client relationship with the Alpers, that Bickel's negligence led to the triggering of section 13-217, that section 13-217 might prevent the Alpers from pursuing further litigation against DTS and Avers, and that such a bar would prevent the Alpers from obtaining compensation from DTS and Avers. While each of these elements will have to be proven at trial, Altheimer has properly pleaded that Bickel negligently caused the loss of the Alper's cause of action.

Bickel relies on Vroegh, 651 N.E.2d 121, and Delaney v. McDonald's Corp., 634 N.E.2d 749 (Ill. 1994), for the proposition that it cannot be held liable in contribution because it was not retained until after the Alpers were injured by Altheimer. The discussions in those cases, however, explained that a defendant may seek contribution from a tortfeasor so long as the plaintiff had a valid cause of action against the tortfeasor at the time of the injury caused by that tortfeasor's conduct, even if the plaintiff's direct claim against the tortfeasor is later barred for a procedural reason. See Vroegh, 651 N.E.2d at 125; Delaney, 634 N.E.2d at 750. Rather than undermining Altheimer's claims, these cases demonstrate that even if the Alpers are now barred from suing Bickel (due to operation of 735 Ill. Comp. Stat. Ann. 5/13-217 or otherwise), Altheimer can still seek contribution from Bickel. We thus find that Altheimer's complaint satisfies the first element of the Contribution Act.

2. The Same Injury Requirement

We thus turn to the primary dispute between the parties, which is whether Bickel's potential liability arises out of...