UNION PLANTERS BANK v. LLP
| Decision Date | 03 June 2010 |
| Docket Number | No. 5-08-0497.,5-08-0497. |
| Parties | UNION PLANTERS BANK, N.A., Plaintiff-Appellant and Cross-Appellee, v. THOMPSON COBURN LLP, Defendant-Appellee and Cross-Appellant. |
| Court | United States Appellate Court of Illinois |
OPINION TEXT STARTS HERE
COPYRIGHT MATERIAL OMITTED.
COPYRIGHT MATERIAL OMITTED.
COPYRIGHT MATERIAL OMITTED.
Rex Carr, The Rex Carr Law Firm, LLC, East St. Louis, IL, for Appellant.
Carol A. Hogan, Morgan R. Hirst, Jones Day, Chicago, IL, Michael J. Nester, Donovan, Rose, Nester & Joley, P.C., Belleville, IL, for Appellee.
The plaintiff, Union Planters Bank, N.A., formerly known as Magna Trust Company (Magna), brought the present action against its attorneys, the defendant, Thompson Coburn LLP (Thompson Coburn), seeking to recover $11,789,053.24 in damages Magna paid in settlement and legal expenses as a result of legal malpractice allegedly committed by Thompson Coburn in the performance of transactional work (giving advice or preparing documents for a business transaction) regarding Magna's termination as a trustee and the transfer of the trust funds following that termination. A jury returned a verdict in favor of Magna in the amount of $3,654,606.40.
Magna appeals, and Thompson Coburn cross-appeals. Magna contends that the trial court erred in (1) “refusing to grant a new trial on the issue of damages [ ] or alternatively failing to grant a new trial on all the issues” and (2) “requiring the plaintiff to elect between [c]ount I, the professional negligence count, and [c]ount II, the contract count.” Thompson Coburn argues that we should reverse the trial court and enter a judgment notwithstanding the verdict in its favor because the trial court erred as a matter of law when it found that Magna owed a fiduciary duty to the creditors of the trusts at issue. For the following reasons, we affirm.
This case is a part of the aftermath of litigation that arose out of the scheme orchestrated primarily by James Gibson to defraud several personal injury plaintiffs or their heirs (the injured plaintiffs) of their personal injury settlements that they had structured with Gibson's companies-SBU, Inc., and SBU of Illinois, Inc. (collectively SBU). SBU offered tax-advantaged structured settlements to personal injury plaintiffs under section 130 of the Internal Revenue Code (26 U.S.C. § 130 (1994)). In short, under section 130, the injured plaintiffs received a tax shelter by disclaiming any power of direction over the trust funds. In other words, to take advantage of the tax benefits, the injured plaintiffs could not have actual or constructive receipt of the economic benefit of the payments. See Western United Life Assurance Co. v. Hayden, 64 F.3d 833, 839-40 (3d Cir.1995). This meant that the injured plaintiffs could not be designated as beneficiaries of the structured settlement trusts; rather, they were designated as creditors of the trusts.
Recognizing a demand for this type of service, SBU and Magna (it was actually Magna's predecessor, but for simplicity purposes we refer only to Magna) entered into an agreement in 1985 (the 1985 agreement) to offer injured plaintiffs tax-advantaged structured settlements in personal injury cases. Under the terms of the 1985 agreement, Magna agreed to act as the trustee for trusts created pursuant to numerous injured plaintiffs' settlements. SBU agreed that all the bonds it purchased would “be purchased in the name of [Magna] as [t]rustee on behalf of the plaintiff in question” and that the trusts would “show that SBU is the [t]rustor.” The agreement further provided that “either party may cancel or terminate the relationship * * * upon thirty days['] written notice” and that in the event of a termination SBU retained the right to change trustees. The agreement provided the following as it related to Magna's duties:
Under the 1985 agreement, Magna also agreed to produce a brochure “for the benefit of both SBU and [Magna]” and “to actively market the concept of structured settlements funded by government obligations and to be placed in trust with [Magna] in conjunction with SBU.” A brochure was produced and distributed to plaintiffs' attorneys primarily in Madison and St. Clair Counties. The brochure advertised SBU's structured settlement services and stated that the funds were trusteed with Magna. The brochure claimed that utilizing SBU's services could “[a]ssure the safety of income and principal through appropriate irrevocable trusts that will protect the plaintiff and designated beneficiaries.” The brochure provided the following in regards to Magna:
For several years after the execution of the 1985 agreement, numerous injured plaintiffs settled their lawsuits against various tortfeasor defendants and agreed to structure their settlements with SBU. In creating these structured settlement trusts, three documents were used: (1) the settlement agreement and release between the injured plaintiff and the defendant (the settlement agreement), (2) the assignment and assumption agreement entered into by the injured plaintiff, the settling defendant, and SBU (the assignment agreement), and (3) a separate trust agreement between SBU and Magna for each of the structured settlements (the trust agreement).
The settlement agreement entered into by the injured plaintiff and the defendant set forth that it was “anticipated and contemplated, through documents executed contemporaneously [t]herewith, that the [d]efendant [would] cause a lump[-]sum payment to be made to [SBU].” It provided that if that assignment was made, SBU would be the trustor and sole beneficiary of the trust. The agreement also provided, “[N]o other representations, promises [,] or settlement[s] of any nature whatsoever have been made to or with them and this [settlement agreement] contained the entire agreement between the parties * * *.” The trust agreement between SBU and Magna, described more fully below, was attached to the settlement agreement.
The assignment agreement, entered into by the injured plaintiff, the settling defendant, and SBU, attached the settlement agreement and set forth that the parties intended to assign to SBU the right to receive the performance of the defendant's obligations. It provided that promptly following the execution of this agreement, SBU would establish, as the trustor and sole beneficiary, the trust described in the settlement agreement.
Each trust agreement between Magna and SBU stated that it was being entered into pursuant to a settlement agreement and assignment agreement. It provided that SBU was to fund the periodic payments through the purchase of United States government bonds using the proceeds from the settling defendants, and it stated that the trust was irrevocable and could not be amended by the trustor. Depending on when the trust agreement was entered into, some of the injured plaintiffs were described as secured creditors and others were described as general creditors. The agreement provided, “If the [t]rustee of this trust shall for any reason cease to act as [t]rustee, the [t]rustor shall promptly appoint a successor corporate [t]rustee, subject to confirmation by a court of competent jurisdiction.” Further, the agreement provided, “If said [t]rustee shall so cease to act as such, said [t]rustee and the [t]rustor shall give prompt notice thereof to the persons entitled to receive the lump[-]sum and periodic payments provided for herein, and [the][t]rustor shall give those same persons prompt notice of any appointment or proceedings to confirm the appointment of any such successor corporate [t]rustee.”
Attached to the trust agreement for the injured plaintiffs described as secured creditors was a letter addressed to each respective injured plaintiff. The letter was signed by SBU as the trustor and Magna as the trustee and provided, “On behalf of [Magna], the undersigned hereby acknowledges that the following bonds are registered in the name of [Magna] as trustee of the [t]rust * * * between [SBU] as [t]rustor/beneficiary[ ] and [Magna] as [t]rustee * * *.” The letter also set forth the face value, date due, and identifying numbers of the respective United States Treasury bonds purchased for the injured plaintiff.
Through the use of these three documents, Magna and SBU created approximately 77 structured settlement trusts over the course of roughly eight years. In 1993, however, SBU decided that it wanted to remove Magna as the trustee. SBU sent Magna notice that it intended to cancel their agreement and would be transferring 46 bonds to PrivateBank...
To continue reading
Request your trial
-
John Z. Huang, Individually, & John Z. Huang, P.C. v. Brenson
...“a plaintiff must generally prove a case-within-a-case to establish proximate cause.” Union Planters Bank, N.A. v. Thompson Coburn LLP, 402 Ill.App.3d 317, 343, 343 Ill.Dec. 770, 935 N.E.2d 998 (2010). For the case-within-a-case, as a matter of law, in Zhou v. Huang, the trial court should ......
-
Gaylor v. Campion, Curran, Rausch, Gummerson & Dunlop, P.C.
...recovering damages for consequences which that party could reasonably have avoided.’ " Union Planters Bank, N.A. v. Thompson Coburn LLP, 402 Ill.App.3d 317, 356, 343 Ill.Dec. 770, 935 N.E.2d 998 (2010) (quoting Maere v. Churchill, 116 Ill.App.3d 939, 946, 72 Ill.Dec. 441, 452 N.E.2d 694 (19......
- JACKSON v. REID, 3-09-0512.
-
Terra Found. for Am. Art v. DLA Piper LLP
...part, because that case involved malpractice in the context of litigation). See also Union Planters Bank, N.A. v. Thompson Coburn LLP, 402 Ill.App.3d 317, 344, 343 Ill.Dec. 770, 935 N.E.2d 998 (2010) (where court compared proof of damages in a litigation malpractice case with a transactiona......