Tri-G, Inc. v. Burke, Bosselman & Weaver

• Court: Illinois Supreme Court
• Writing for the Court: Karmeier
• Citation: Tri-G, Inc. v. Burke, Bosselman & Weaver, 222 Ill. 2d 218, 305 Ill.Dec. 584, 856 N.E.2d 389 (Ill. 2006)
• Decision Date: 22 June 2006
• Docket Number: No. 99584.,No. 99595.,99584.,99595.
• Parties: TRI-G, INC., et al., Appellees, v. BURKE, BOSSELMAN & WEAVER et al., Appellants.

856 N.E.2d 389

222 Ill.2d 218

305 Ill.Dec. 584

TRI-G, INC., et al., Appellees, v. BURKE, BOSSELMAN & WEAVER et al., Appellants.

No. 99584.

No. 99595.

Supreme Court of Illinois.

June 22, 2006.

Rehearing Denied September 25, 2006.

Michael L. Shakman, Edward W. Feldman, Diane F. Klotnia and Thomas M. Staunton, of Miller, Shakman & Hamilton, L.L.P., Chicago, for appellant and appellee Burke, Bosselman & Weaver.

Daniel A. Edelman, Cathleen M. Combs, James O. Latturner, Francis R. Greene, of Edelman, Combs, Latturner & Goodwin, L.L.C., Chicago, and Thomas W. Gooch, Wauconda, for appellee and appellant Tri-G, Inc.

Thomas P. McGarry, Stephen R. Swofford and Terry Wand, of Hinshaw & Culbertson, L.L.P., Chicago, for amicus curiae The Illinois Association of Defense Trial Counsel.

Kimball R. Anderson, David E. Koropp and Linda T. Coberly, of Winston & Strawn, L.L.P., Chicago, for amici curiae The Illinois Civil Justice League et al.

Justice KARMEIER delivered the judgment of the court, with opinion:

Tri-G, Inc. (Tri-G), brought a legal malpractice action in the circuit court of McHenry County against the law firm of Burke, Bosselman & Weaver (Burke) to recover damages it sustained as a result of Burke's failure to prosecute a complaint Tri-G had previously filed against Elgin Federal Bank (Elgin Federal). Following a trial on the merits, a jury found that Burke had been negligent in handling Tri-G's case against Elgin Federal and that but for that negligence, Tri-G would have recovered $1,168,775 in compensatory damages and an equal sum in punitive damages from Elgin Federal. Accordingly, the jury returned a verdict in favor of Tri-G and against Burke for $2,337,550.

After the circuit court entered judgment on the jury's verdict, Burke appealed. Tri-G cross-appealed. The appellate court affirmed the judgment in part, reversed in part, and remanded the cause to the trial court for further proceedings. 353 Ill. App.3d 197, 288 Ill.Dec. 580, 817 N.E.2d 1230. In so ruling, the appellate court expressly rejected Burke's arguments that the award of punitive damage to Tri-G was either improper as a matter of law or excessive in light of the evidence adduced at trial. It held that Illinois law permits a legal malpractice plaintiff to receive an award of lost punitive damages from a defendant attorney and concluded that the punitive damages award made in this case was justified by the evidence. 353 Ill. App.3d at 232, 288 Ill.Dec. 580, 817 N.E.2d 1230.

Burke and Tri-G each filed petitions for leave to appeal. 177 Ill.2d R. 315(a). We allowed their respective petitions and consolidated the appeals for review. The primary issue before us is whether the appellate court erred in upholding the award of lost punitive damages to Tri-G. For the reasons that follow, we hold that it did. The judgment of the appellate court is therefore affirmed in part and reversed in part.

The basic principles governing legal malpractice claims are well established. To prevail on a legal malpractice claim, the plaintiff client must plead and prove that the defendant attorneys owed the client a duty of due care arising from the attorney-client relationship, that the defendants breached that duty, and that as a proximate result, the client suffered injury. Northern Illinois Emergency Physicians v. Landau, Omahana & Kopka, Ltd., 216 Ill.2d 294, 306, 297 Ill.Dec. 319, 837 N.E.2d 99 (2005).

The injury in a legal malpractice action is not a personal injury, nor is it the attorney's negligent act itself. Rather, it is a pecuniary injury to an intangible property interest caused by the lawyer's negligent act or omission. The fact that the attorney may have breached his duty of care is not, in itself, sufficient to sustain the client's cause of action. Even if negligence on the part of the attorney is established, no action will lie against the attorney unless that negligence proximately caused damage to the client. The existence of actual damages is therefore essential to a viable cause of action for legal malpractice. Northern Illinois Emergency Physicians v. Landau, Omahana & Kopka, Ltd., 216 Ill.2d at 306-07, 297 Ill. Dec. 319, 837 N.E.2d 99.

The theory underlying a cause of action for legal malpractice is that the plaintiff client would have been compensated for an injury caused by a third party, absent negligence on the part of the client's attorney. Where the alleged legal malpractice involves litigation, no actionable claim exists unless the attorney's negligence resulted in the loss of an underlying cause of action. If the underlying action never reached trial because of the attorney's negligence, the plaintiff is required to prove that but for the attorney's negligence, the plaintiff would have been successful in that underlying action. A legal malpractice plaintiff must therefore litigate a "case within a case." See Cedeno v. Gumbiner, 347 Ill.App.3d 169, 174, 282 Ill.Dec. 600, 806 N.E.2d 1188 (2004).

The "case within a case" on which Tri-G's malpractice claim is predicated was Tri-G's cause of action against Elgin Federal. That cause of action arose from certain construction loans Tri-G received from the bank to build residential homes in a development known as Huntington Point. Tri-G's complaint, filed in 1981, alleged breach of contract, common law fraud, and violation of the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (Ill.Rev.Stat.1983, ch. 121½, par. 261 et seq. (now 815 ILCS 505/1 et seq. (West 2002))).

Trial of the case was postponed for several years, during which time Tri-G was represented by a succession of law firms. Eventually, a May 11, 1987, trial date was set by the court. Approximately three months before the trial was scheduled to begin, Tri-G retained Burke to handle the case. The attorney from Burke assigned to represent Tri-G did not file an appearance, however, until May 4, 1987. When the case was called for trial as scheduled the following week, the attorney answered "not ready."

Because the attorney was not prepared to proceed, the trial court dismissed Tri-G's case with prejudice. Tri-G, still represented by Burke, appealed the dismissal. On November 13, 1987, the appellate court dismissed the appeal sua sponte on the grounds that Tri-G had failed to comply with a previous order of that court.

Tri-G subsequently replaced Burke with new legal counsel, who filed a second complaint against Elgin Federal. The new complaint alleged the existence of oral construction loan contracts between the parties, numerous breaches by Elgin Federal of those contracts, and fraud. On Elgin Federal's motion, the circuit court dismissed the complaint based on res judicata. The court also imposed sanctions against Tri-G and its attorneys. The appellate court affirmed. Tri-G, Inc. v. Elgin Federal Savings & Loan Ass'n, 182 Ill.App.3d 357, 131 Ill.Dec. 418, 538 N.E.2d 793 (1989).

With the failure of its substantive claims against Elgin Federal, Tri-G looked to Burke for recourse. In 1989 it filed a legal malpractice action against the law firm. It voluntarily dismissed that action in 1994 and refiled it in 1995. Burke then moved to dismiss the complaint. Although Burke's motion was allowed by the circuit court, the appellate court reversed and remanded. Tri-G, Inc. v. Burke, Bosselman & Weaver, No. 2-96-0980, 289 Ill. App.3d 1142, 239 Ill.Dec. 303, 713 N.E.2d 834 (1997) (unpublished order under Supreme Court Rule 23).

Tri-G's original and amended complaints against Burke each consisted of a single count claiming negligence. In its original complaint, Tri-G alleged that Burke was negligent for (1) failing to file an appearance until May 4, 1987; (2) failing to advise Tri-G's witnesses and discuss their testimony in advance of depositions; (3) failing to attend certain depositions; (4) failing to properly prepare the case for trial; and (5) failing to seek a voluntary nonsuit on the date of trial.

The 1981 complaint against Elgin Federal was attached as an exhibit to the malpractice complaint. The 1981 complaint contained 10 counts, claiming breach of contract, common law fraud, and violations of the Consumer Fraud Act (Ill.Rev.Stat. 1981, ch. 121½, par. 261 et seq. (now 815 ILCS 505/1 et seq. (West 2002))). It alleged that in 1976, Tri-G was the general contractor for a residential real estate development in McHenry County known as the Huntington Point subdivision. First National Bank of Woodstock (First National) owned Huntington Point as the trustee of a land trust with Tri-G as beneficiary. In 1978, Elgin Federal made construction loans to Tri-G to build residential homes on vacant lots in Huntington Point, specifically enumerating 13 lots. Tri-G entered into a contract with Chain of Lakes Group (CLG), in which CLG agreed to complete construction on eight of those lots, specifically 7, 24, 25, 30, 32, 35, 36, and 37.

Counts I through VII of Tri-G's complaint asserted claims for breach of contract regarding lots 7, 24, 25, 30, 32, 36, and 37, respectively. Tri-G alleged that Elgin Federal breached its construction loan agreements by making payouts to CLG from the construction loans without the written authorization of Tri-G and allowing CLG to submit new contractor's affidavits that Elgin Federal used as a basis for additional payouts in excess of the amounts stated in the original contractor's affidavits submitted by Tri-G.

Concurrent with the construction loans, Elgin Federal made a land loan to Tri-G for improvements to land surrounding the lots. In count VIII of its complaint, Tri-G alleged that Elgin Federal breached that land loan agreement by withholding payouts owed to Tri-G after it entered into the contract for CLG to complete construction on the eight above-listed lots.

In count IX, Tri-G alleged that Elgin Federal committed common law fraud by: (1) making unauthorized payouts on the construction loans for lots 16, 17, 26, 28, and 31; (2) withholding money from Tri-G at the time of...