Campania Management, Inc. v. Rooks, Pitts & Poust

• Decision Date: 14 May 2002
• Docket Number: No. 01-1651.,No. 01-1771.,01-1651.,01-1771.
• Citation: 290 F.3d 843
• Parties: CAMPANIA MANAGEMENT COMPANY, Incorporated, Plaintiff-Appellant, v. ROOKS, PITTS & POUST, a law firm, and Frank Rowland, Defendants-Appellees. Rooks, Pitts & Poust, a law firm, Plaintiff-Appellee, v. Campania Management Company, Incorporated, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

290 F.3d 843

CAMPANIA MANAGEMENT COMPANY, Incorporated, Plaintiff-Appellant, v. ROOKS, PITTS & POUST, a law firm, and Frank Rowland, Defendants-Appellees.

Rooks, Pitts & Poust, a law firm, Plaintiff-Appellee, v. Campania Management Company, Incorporated, Defendant-Appellant.

No. 01-1651.

No. 01-1771.

United States Court of Appeals, Seventh Circuit.

Argued January 23, 2002.

Decided May 14, 2002.

COPYRIGHT MATERIAL OMITTED

Donald L. Johnson, Joseph Gentleman, Chicago, IL, plaintiff-appellant, Campania Management Co., Inc.

Donald Hubert, Hubert, Fowler & Quinn, Chicago, IL, for defendant-appellee, Rooks Pitts & Poust and Frank Rowland.

Donald Hubert (argued), Hubert, Fowler & Quinn, Chicago, IL, for plaintiff-appellee, Rooks Pitts & Poust.

Donald L. Johnson, Joseph Gentleman (argued), Chicago, IL, for Campania Management Co., Inc.

Before BAUER, COFFEY and EVANS, Circuit Judges.

COFFEY, Circuit Judge.

A third-party claims administrator, Campania Management Company ("Campania"), hired the law firm of Rooks, Pitts & Poust ("Rooks") to defend Metropolitan Rehabilitation Services, Inc. ("MRSI") in a products liability case filed against MRSI in the Circuit Court of Cook County, Ill. In spite of the fact that Rooks settled the case, Campania refused to pay Rooks, and this breach of contract suit followed. The district judge held a one-day bench trial and found that Rooks was entitled to recover attorney's fees and expenses totaling $101,300. The judge also awarded prejudgment interest of $8,700. Campania appeals, arguing that the district court abused its discretion by refusing to continue the case and by denying Campania's motions to file an amended counterclaim and an amended answer several weeks before trial. Campania also argues that the court's rulings on the breach of contract and interest claims were against the manifest weight of the evidence. We affirm.

I. FACTUAL BACKGROUND

A. Campania's Voluntary Dismissal and Proposed Amended Answer

Campania retained the Rooks law firm in October 1994, after Scott Mann, a person with disabilities, sued MRSI and a co-defendant, alleging that they were responsible for supplying him with a defective wheelchair that collapsed and caused him to fall to the ground and fracture his right arm. MRSI was insured by Credit General Insurance ("CGI"), a large insurance corporation. CGI hired Campania to retain counsel and manage the defense of any claims brought against CGI's insureds. Campania selected the Rooks law firm to represent MRSI and agreed to pay Rooks's attorneys and paralegals hourly rates of $160 and $65, respectively. The contract further required that Rooks submit monthly invoices to Campania and, in turn, be reimbursed every sixty days for all of its reasonable fees and expenses.

The lawsuit against MRSI progressed in Illinois state court and eventually settled in September 1999 after Mann backed down from his original demand for $6.1 million and dismissed his claim in exchange for $475,000 payable over seven years. Rooks thereafter presented Campania with a final invoice for $101,143 in fees and expenses. Campania refused to pay, asserting that Rooks had breached the contract by failing to submit monthly invoices to Campania between July 1998 and September 1999. Campania also maintained that Rooks had performed legal services that were substandard because Rooks was unable to convince the state trial judge to allow MRSI to bring a counterclaim for indemnity against the co-defendant, thus barring the possibility of any recovery of settlement costs from the co-defendant.

In response to Campania's actions, Rooks sued Campania in state court for breach of contract. Campania, in turn, filed a separate legal malpractice claim against Rooks. Both of these cases were removed to federal court, consolidated, and assigned to U.S. District Judge Suzanne B. Conlon, who entered a Uniform Scheduling Order immediately after the assignment of the case in August 2000. Three months later, upon a joint motion of the parties, Judge Conlon issued an amended scheduling order establishing January 22, 2001 as the deadline for completing all discovery and filing any dispositive motions. The order explicitly stated that "NO FURTHER EXTENSIONS" would be granted and that trial would commence during the March 2001 civil term.

This case moved forward uneventfully until January 16, 2001, when Campania filed two separate motions a mere six days before the date for the close of discovery. In its first motion, Campania asked the district court to dismiss its counterclaim for monetary damages caused by Rooks's alleged legal malpractice. In the second motion, Campania asked the district court for leave to amend its answer in order to: (1) deny retaining Rooks and argue that CGI — not Campania — had hired Rooks to represent MRSI in the underlying state court suit; and (2) raise an affirmative defense that, in any event, Campania was not liable for damages because Rooks breached the contract by committing legal malpractice.

Campania's amended answer reflected a complete reversal in trial strategy, for Campania had previously admitted that it was the party that hired and agreed to reimburse Rooks for the costs of defending MRSI. Campania's about-face was prompted by the fact that CGI had allegedly filed for bankruptcy in the State of Ohio on some date unspecified prior to January 16, 2001. The practical effect of CGI's bankruptcy was that Campania could no longer anticipate reimbursement from CGI if the district court entered a judgment in Rooks's favor. Thus, by moving to amend its pleadings, Campania was attempting to change its trial strategy and argue that it was acting merely as an agent for CGI and, thus, had no legal obligation to pay Rooks's fees and expenses.

Naturally, Rooks opposed the motion to amend, arguing that it would be prejudiced by Campania's newly minted theory of defense because the discovery deadline was set to expire in six days and, thus, Rooks would have no opportunity to depose any witnesses who might have knowledge about CGI's business relationship with Campania. After considering the parties' respective arguments, the trial court entered a minute order stating that Campania "fails to show good cause for its delay in asserting new theories of liability, while Plaintiffs demonstrate prejudice." The court granted Campania's motion to dismiss its legal malpractice claim but denied Campania's motion to amend its answer on file.

B. Campania's Proposed Counterclaim and Motion to Amend, Extend and Continue

In the meantime, Mann commenced a new lawsuit against Campania in the Circuit Court of Cook County. This suit was filed January 25, 2001 and alleged that Campania failed to make more than the first two installment payments required in exchange for Mann's dismissal of the case.

On January 31, 2001, a full nine days after the expiration of the discovery date, Campania sought leave in federal court to file a counterclaim that repackaged and resurrected its earlier allegations against Rooks. That is to say, Campania alleged that it was liable for the damages caused by MRSI's tortious conduct only because Rooks had negligently named Campania — rather than CGI — as a party to the settlement agreement. Campania further requested the district court to reopen discovery and stay the federal case pending the outcome of the state court lawsuit, which ostensibly would determine the exact extent of Campania's liability to Mann. The court denied the motion and barred Campania from introducing any evidence at trial in support of its new theory of defense that CGI — and not Campania — was a party to Rooks's contract to perform legal services for MRSI.

The parties waived their right to a jury trial and went to trial before the bench March 19, 2001. After considering the testimony, documentary evidence, and applicable case law, the trial judge concluded that Campania — not CGI — was the party that hired the Rooks law firm to defend MRSI. The court determined that Rooks was acting within the scope of its authority when settling the case and that the settlement was fair and reasonable. The judge also ruled that Rooks billed Campania at a reasonable rate. In addition, the court credited the testimony of Frank Rowland, a partner at Rooks, who stated that as part of his normal course of business he regularly mailed invoices to Campania during the entirety of the representation between October 1994 and September 1999. Relying mainly on Rowland's testimony, the trial judge thus found: (1) that Rooks had substantially complied with the contract's monthly billing procedures; and (2) that any extent to which Rooks failed to do so consisted of only an immaterial breach of contract that failed to absolve Campania of its duty to pay Rooks for services rendered. Thus, the court ruled in favor of Rooks on its breach of contract claim and awarded $101,143 in compensatory damages plus $8,740 in statutory prejudgment interest.

II. DISCUSSION

Campania argues that the trial court committed reversible error in four separate respects: (1) refusing to allow Campania to amend its answer; (2) refusing to allow Campania to amend its complaint or introduce evidence that Rooks committed malpractice by including Campania as a party in the settlement of the underlying state court lawsuit; (3) finding as a fact that Campania breached the contract with Rooks; and (4) awarding Rooks prejudgment interest. We have determined Campania's arguments to be without merit. We fail to perceive any abuse of discretion with the judge's pre-trial rulings, and we conclude that the judge's factual findings and damages awards were supported by the evidence presented at trial.

A. Pre-Trial Motion Practice

1. Motion to amend answer

Initially, we consider whether the district judge erred when denying Campania's motion to file an amended answer, which: (1) disavowed the earlier admission that Campania hired Rooks to represent MRSI...