Washington Group Intern. v. Bell, Boyd & Lloyd

• Decision Date: 09 September 2004
• Docket Number: No. 03-2389.,03-2389.
• Citation: 383 F.3d 633
• Parties: WASHINGTON GROUP INTERNATIONAL, INC., Plaintiff-Appellant, v. BELL, BOYD & LLOYD LLC, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

383 F.3d 633

WASHINGTON GROUP INTERNATIONAL, INC., Plaintiff-Appellant, v. BELL, BOYD & LLOYD LLC, Defendant-Appellee.

No. 03-2389.

United States Court of Appeals, Seventh Circuit.

Argued October 27, 2003.

Decided September 9, 2004.

Appeal from the United States District Court for the Northern District of Illinois, James B. Zagel, J Philip C. Stahl (argued), Grippo & Elden, Chicago, IL, for Plaintiff-Appellant.

Kevin M. Forde (argued), Chicago, IL, for Defendant-Appellee.

Before RIPPLE, DIANE P. WOOD, and EVANS, Circuit Judges.

DIANE P. WOOD, Circuit Judge.

While the technical issue before us concerns the relation between this litigation and an earlier bankruptcy proceeding, the underlying dispute alleges that the firm of Bell, Boyd & Lloyd (Bell Boyd) committed legal malpractice in conjunction with a mechanic's lien. Washington Group, the successor to Raytheon Engineers & Constructors, Inc. (Raytheon), claimed that Bell Boyd negligently handled both the drafting of certain liens and the litigation related to those liens. In response, Bell Boyd claimed that all the issues Raytheon was raising in this case had been resolved against it in an adversary proceeding before the Delaware bankruptcy court in a case between Raytheon and Acme, a client for whom Raytheon was building a plant. The district court agreed with Bell Boyd and dismissed all claims. We affirm.

I

In 1994, Raytheon entered into a contract with Acme Steel Company for the construction of a steel mill. Raytheon in turn signed a subcontract with United Steel Erectors, Inc. (USE) for construction of the buildings at the steel mill. USE enlisted Calumet Construction Corporation (Calumet) for the erection of the structural steel for the steel mill buildings. In 1996, Calumet filed a sub-subcontractor's claim for a mechanic's lien related to its work on the steel mill. It followed up on that action with a lawsuit in February 1997 to enforce its mechanic's lien against Acme, Raytheon, and USE (the Calumet litigation). In March 1997, USE filed its own mechanic's lien and then cross-claimed against Raytheon and Acme seeking to enforce that lien.

Faced with this array of disputes, Raytheon retained Bell Boyd to represent it in the Calumet litigation and to protect its rights vis-a-vis Acme. Over a year later, in September 1998, Acme voluntarily filed in the Delaware bankruptcy court for Chapter 11 relief. Later, on November 13, 1998, Bell Boyd filed a $12,006,799 mechanic's lien (the Acme Lien) on Raytheon's behalf in connection with its work on the steel mill. The property description Bell Boyd used in the Raytheon lien was the same description as the one that had been used in the Calumet and USE liens. Shortly after filing the lien, Bell Boyd withdrew from further representation of Raytheon because of a conflict of interest.

On February 7, 2000, Acme brought an adversary action in its bankruptcy proceeding seeking a declaration that Raytheon's Acme Lien was invalid because (1) the property description was incorrect; and (2) even if the property description was acceptable, that the Illinois Mechanic's Lien Act, 770 ILCS 60/6, requires completion of work within three years of commencement for a lien to be valid. Raytheon vigorously defended the validity of the property description, ultimately convincing the bankruptcy court that the description was valid. The bankruptcy court determined, as a matter of law, that the property description included in the November 1998 lien was "`sufficiently correct' to put anyone on notice of [Raytheon's] claims" and "to effect a lien on [Acme's] Plant." In re Acme Metals, Inc., 257 B.R. 714, 720-21 (Bankr.D.Del.2000). Nonetheless, the bankruptcy court held the lien invalid because Raytheon had not completed the work within three years of commencement. Id. at 723. While the case was on appeal, Acme and Raytheon settled both their adversary proceeding and the Calumet litigation. The appeal was dismissed with prejudice on April 22, 2002.

On December 11, 2002, Raytheon's successor, the Washington Group (an Ohio corporation with its principal place of business in Ohio) brought this action under the diversity jurisdiction, alleging that Bell Boyd (an Illinois limited liability company, none of whose members are citizens of Ohio) had committed malpractice. Raytheon claimed that Bell Boyd should have discovered the incorrect property description in the Calumet and USE liens in 1997 and that Bell Boyd prepared Raytheon's 1998 lien negligently because it used that same incorrect property description. Raytheon also claimed that Bell Boyd was negligent in failing to advise Raytheon that the three-year rule might invalidate Raytheon's lien. In addition to damages, Raytheon sought reimbursement of the attorneys' fees it spent litigating the bankruptcy and Calumet cases.

Ruling on Bell Boyd's 12(b)(6) motion, the district court held that the bankruptcy court's conclusion that the property description was valid barred Raytheon's claims related to the property description. The district court also held that Bell Boyd was not negligent in failing to advise Raytheon of the three-year rule. Because Raytheon did not retain Bell Boyd until close to the end of the three-year period, Raytheon could not have taken any action based on Bell Boyd's advice that would have prevented the application of the rule to its lien.

Before this court, Raytheon makes two principal arguments: first, that the property description was indeed invalid and that it should not be bound by the bankruptcy court's conclusion on that point; and second, that an Illinois court might have interpreted the three-year rule differently than the bankruptcy court did, and the possibility of such a discrepancy proves Bell Boyd was negligent in not informing Raytheon of the rule's effect. We find it unnecessary to consider the first point in detail, because we conclude that Raytheon was bound by the bankruptcy court's ruling on the three-year rule, and that it is plain on the face of the pleadings that nothing Bell Boyd could have done, given its late entry into the fray, could have made a difference.

II

An action for legal malpractice in Illinois requires the plaintiff to prove five elements: "(1) an attorney-client relationship; (2) a duty arising out of that relationship; (3) a breach of that duty; (4) causation; and (5) actual damages." Griffin v. Goldenhersh, 323 Ill.App.3d 398, 257 Ill.Dec. 52, 752 N.E.2d...