NO. 5-08-0497
N O T IC E
Decision filed 06/03/10, corrected
IN THE
06/18/10. The text of this decision
may be changed or corre cted prior to
APPELLATE COURT OF ILLINOIS
the filing of a Petition for Rehearing or
the disposition of the same.
FIFTH DISTRICT
___________________________________________________________________________
UNION PLANTERS BANK, N.A., ) Appeal from the
) Circuit Court of
Plaintiff-Appellant and ) Madison County.
Cross-Appellee, )
)
v. ) No. 04-L-791
)
THOM PSON COBURN LLP, )
) Honorable
Defendant-Appellee and ) Daniel J. Stack,
Cross-Appellant. ) Judge, presiding.
___________________________________________________________________________
JUSTICE WEXSTTEN delivered the opinion of the court:
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 M agna 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
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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.
BACKGROUND
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 C ir. 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 M agna (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
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retained the right to change trustees. The agreement provided the following as it related to
Magna's duties:
"16. Nothing in this document or any other agreement to the contrary
notwithstanding, [Magna] shall not have any duty with respect to the safekeeping
account to any party to a structured settlement or to the beneficiaries of any trust to
be established[,] but it shall hold the account for the sole benefit of SBU and may pay
over any and all funds in this account to SBU or its designee at any time provided that
said payment does not jeopardize the safe funding of any settlement agreement
entered into by SBU or any structured settlement and trusts to be established in
conjunction therewith."
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:
"The settlement will be funded through U.S. government obligations and held
in an irrevocable trust administered by [Magna]. [Magna] will make all payments to
the plaintiff or plaintiff's estate of the funds related to the settlement in accordance
with the trust agreement. In addition, the trust company will perform appropriate
services, if requested by the parties. Founded in 1901, [Magna] offers complete trust,
investment[,] and farm management services through offices located in Belleville,
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Bloomington, Centralia, Decatur, Granite City[,] and Springfield, Illinois. A
subsidiary of Magna Group, Inc., a holding company comprised [sic] of financial
institutions, [Magna] manages approximately $1 billion in assets."
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 M agna 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 w as 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.
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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 M agna as the trustee. SBU sent Magna notice that it
intended to cancel their agreement and would be transferring 46 bonds to PrivateBank and
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Trust Company. Magna, desirous of maintaining its trustee business, sought the advice of
its long-standing law firm, Thompson Coburn.
In response to SBU's notice, Magna sent SBU a letter stating that Magna would not
voluntarily relinquish its position as trustee because SBU "did not have the authority under
the trust documents to unilaterally terminate [Magna's] position as trustee" and because
Magna felt it had "a fiduciary duty to the third-party beneficiaries of these trusts to carry out
the duties for which [they] were originally retained." Within two weeks of receiving this
letter, SBU, Inc., filed suit against Magna in St. Clair County circuit court, alleging two
counts: (1) a declaratory judgment action requesting that the trial court determine and
adjudicate SBU's rights and terminate Magna as trustee pursuant to the 1985 agreement and
(2) a breach-of-contract count seeking money damages for M agna's refusal to voluntarily
relinquish its position as the trustee. SBU, Inc. v. Magna Trust Co., No. 93-MR-165 (Cir.
Ct. St. Clair Co.) (SBU v. Magna).
I. SBU v. Magna Litigation
Thompson Coburn agreed to defend Magna in SBU v. Magna and primarily assigned
its attorneys Kurt Shroeder and Tom Hennessy to work on the case. After discussing with
Magna its position, Thompson Coburn filed a combined motion to dismiss or add necessary
parties on Magna's behalf, claiming that the claim should be dismissed because SBU, Inc.,
failed to reserve in the trust instruments the power to remove the trustee or, alternatively, that
the court should require SBU, Inc., to add the injured plaintiffs to the lawsuit because the
plaintiffs were necessary parties. SBU, Inc., filed a motion for a summary judgment in
support of both of its counts.
On October 15, 1993, Judge Robert Hillebrand denied Magna's motion to dismiss,
finding that SBU, Inc., reserved the power to discharge Magna and appoint a new trustee,
and found that the injured plaintiffs were not necessary parties. On November 29, 1993,
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Judge Hillebrand granted SBU, Inc.'s motion for a summary judgment regarding SBU, Inc.'s
right to terminate Magna and denied that motion regarding SBU, Inc.'s breach-of-contract
claim. In making this ruling, Judge Hillebrand relied on the 1985 agreement in finding that
SBU had the right to terminate Magna. Judge Hillebrand stated the following as it related
to Magna's duties following its termination as the trustee:
"After termination [SBU, Inc.,] then has the power to appoint a successor
corporate trustee and present such nomination to the court for confirmation. At that
time notice must be given to the [injured plaintiffs] of each trust. *** Such
requirement of notice, however, is not the same as a requirement that the [injured
plaintiffs] be made parties to this litigation as necessary parties. The [injured
plaintiffs] have no power to prevent the termination of [Magna] as trustee, only the
right to be notified and heard as to the appointment of [Magna's] successor."
On August 29, 1994, SBU, Inc., filed an amended complaint adding SBU of Illinois,
Inc., as a plaintiff. Because SBU of Illinois, Inc., was not a party to the 1985 agreement,
SBU filed a motion for a partial summary judgment, changing its theory that it had the right
to terminate Magna under the terms of the 1985 agreement and requesting a declaratory
judgment that it had a common-law right as the settlor and sole beneficiary to change the
trustee of the trust.
On June 29, 1995, Judge Ellen Dauber took up SBU's second motion for a partial
summary judgment. Judge Dauber granted the motion, finding that SBU, as the settlor and
sole beneficiary of the trusts in question, was entitled to terminate the trusts "even though the
trusts expressly state that they are irrevocable." Magna appealed, requesting that both the
November 29, 1993, order and the June 29, 1995, order granting a summary judgment in
SBU's favor be reversed.
On August 22, 1995, Magna advised SBU that it was prepared to turn over the subject
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trust accounts to another trustee, on the condition that if it was successful on appeal, the trust
accounts would be returned to Magna and it would be reinstated as the trustee. Magna and
SBU then discussed transferring the trusts to First National Bank of Carbondale (First
National), and an agreement was reached to transfer the trusts to First National. Despite this
agreement, SBU then requested Magna to send the trusts to Crews & Associates (Crews).
Thompson Coburn investigated Crews and discovered that Crews was not a qualified
corporate trustee. The evidence at the trial established that a qualified corporate trustee was
licensed under a regulatory body as a corporation to be engaged in the offering of trust
services to the public. In this case, that regulatory body would be the State of Illinois.
Magna questioned Crews' trust powers with SBU, and SBU changed its request, again
requesting that the trust funds be sent to First National. Magna then transferred 15 trusts to
First National (the 1995 transfers), based upon the terms mentioned above, but agreed with
SBU to keep the remainder of the trusts until the appeal was decided. The 15 trusts
transferred to First National are not at issue in this case.
A few days after transferring these trusts, Magna notified SBU that under the trust
agreements, Magna and SBU were required to give prompt notice to the injured plaintiffs
that Magna was ceasing to act as the trustee. SBU responded by sending Magna a letter
stating the following: "If you carefully review the orders of Judge Hillebrand, you will
readily come to the conclusion that the only entity to whom notice is to be given is [SBU].
Notice sent to anyone else will constitute an additional breach of [M agna's] fiduciary duty
to [SBU]."
Seeking clarification, Magna filed an application for the advice and the instructions
of the court, requesting, inter alia, the court to confirm the successor trustee, instruct SBU
and Magna on the proper procedures to be followed by SBU in obtaining the confirmation
of a successor trustee, and state the proper procedures to be followed in the transfer of trust
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assets to a confirmed successor trustee.
On October 16, 1995, Judge Hillebrand heard argument on M agna's application for
advice and instructions. At that hearing, Judge Hillebrand asked Thompson Coburn if it
thought it had any right to object to whom SBU appointed as successor trustee. Magna's
attorney, Hennessy, replied as follows:
"I think, your Honor, in one of the instances–and this is more than a
hypothetical–we're not suggesting any malicious intent on the part of SBU or any
improper intent, but one of the–their proposed transferee trust fiduciaries, we
questioned the corporate powers of that fiduciary to serve as a trustee. So to answer
your question, I think as long as we're in the role of fiduciary we would have an
obligation to look at that and bring to the attention of the [c]ourt matters that pertain
*** to the proper administration of the trust and as, of course, SBU can do that, and
if I heard [SBU's attorney, Tom Ducey,] correctly, it was my understanding that they
were going to seek confirmation of these individuals in any event. If that is done and
done properly, we certainly have no desire to take the lead in that. We just want to
make sure it's done and done properly before we transfer any assets."
Later on in the hearing, Hennessy stated the following to the court:
"The only thing that [Magna] as fiduciary is concerned about, we do not want
to rely upon the hope that SBU will discharge its contractual responsibility to the
plaintiffs and, your Honor, we are holding this money. We hold this money in trust.
Now there may be more than one fiduciary obligation owed, which is another reason
why we should have court guidance on this thing. The notice, your Honor, I think, is
absolutely essential, and obviously the notice, the form of it, the substance of it would
be perfectly appropriate for this [c]ourt to approve. It would not be a pejorative SBU
[is] bad and [Magna] is good. It would just be a notice, factual notice of proof. That's
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all with–or if the [c]ourt is not inclined to do that–I want to make that clear
though–we need some protection against–we need clear guidance and direction. If
the [c]ourt believes that notice is not required and that we are not to provide notice,
then the [c]ourt should so indicate, so that when the–when these folks find out that the
Last National Bank of Jamaica is now administering their trust assets, they can't come
back at us. On the other hand, if we–the [c]ourt thinks we should and wants us to, the
[c]ourt should direct us to so that SBU doesn't come back and sue for a breach of
fiduciary duty because we told these injured people about the transfer of the assets."
Judge Hillebrand responded by stating as follows:
"The question as I see it is one of relationships, and that's why I asked the
questions that I asked, and as I see this, the relationship of fiduciary exists between
Magna and SBU and SBU of Illinois. There's [sic] two entities. Magna owes its
fiduciary relationship to SBU. SBU has the authority under the agreements, as
previously has been found, to terminate, and SBU has–and the only obligation that
Magna has at the present time is to join with SBU to give notice of the fact that
Magna is no longer trustee, which is provided in [the trust agreement], and the notice
is to be given to the persons to whom periodic and lump[-]sum payments are provided
for, and that is clearly the injured plaintiffs or whoever is receiving the money under
the settlement agreements. Any other kind of construction of those words would be
absolutely meaningless, and there is adequate evidence to indicate that those are the
persons described because, in fact, it says that they are the persons to whom the
payments are to be made. So, [Magna], your job is to join with SBU in giving notice
to those persons that you are no longer trustee. That is your sole obligation."
The next day, Hennessy wrote Magna's president, Roger Beaman, stating in relevant
part as follows:
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"In ruling on [Magna's] [a]pplication for [a]dvice and [i]nstructions of [c]ourt,
Judge Hillebrand stated that the only fiduciary obligation [Magna] has is owed to
[SBU]. This is a significant ruling because it relieves us from the worry of what the
payee beneficiaries may do if we comply with the instructions of [SBU]."
Two days later, Hennessy hand-delivered Judge Hillebrand a letter regarding a
proposed order. In that letter, Magna stated in pertinent part as follows:
"[O]ur proposed order clearly requires us to join in giving notice as to the
termination of [Magna]. The SBU draft purports to require us to join in providing
notice regarding the appointment of a successor trustee. Under the provisions *** of
the trust it is the [t]rustor who '. . . shall give those same persons prompt notice of any
appointment or proceedings to confirm the appointment of any such successor
corporate [t]rustee' ***. Additionally, our proposed order in that paragraph clearly
reflects the court's statement that upon [Magna's] termination its only obligation is to
provide notice regarding termination."
On November 3, 1995, the court entered its order on Magna's application for advice
and instructions. In its order, the court ruled that "[t]he only fiduciary relationship of
[Magna] under the subject trust agreements is with [SBU]," that Magna had "no fiduciary
obligations under said trust agreements to any other persons," and that "[u]pon the
termination of [Magna] as trustee of the subject trusts, [Magna's] obligation is to join with
[SBU] in giving notice as to the termination of [Magna] as trustee to the persons entitled to
receive the lump[-]sum and periodic payments." As Thompson Coburn requested, Magna
was not ordered to provide notice of the successor corporate trustee to the injured plaintiffs.
About a week later, on November 10, 1995, Magna and SBU sent a joint notice of the
termination of the trustee to the injured plaintiffs. The notice provided as follows:
"PLEASE TAKE NOTICE that pursuant to [SBU's] direction, [Magna] has
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been terminated as [t]rustee of that certain [t]rust [a]greeement *** by and between
[SBU] and [Magna]. This [j]oint [n]otice of [t]ermination of [t]rustee is given to you
as a person to receive the lump[-]sum and periodic payments under said [t]rust
[a]greement. Inquiries should be directed to [SBU]."
Despite sending this notice of Magna's termination, Magna continued to act as the trustee for
the 62 trusts that it had agreed with SBU to keep until after its appeal was decided. (As
mentioned previously, 15 other trusts had been transferred to First National before the notice
was sent.)
About a year after this notice was sent, Ducey withdrew as counsel for SBU. After
the hearing on Ducey's motion to withdraw, Ducey "volunteered" to Hennessy that all the
trusts that had been transferred to First National had been transferred subsequently to a
company called Flag Finance Company (Flag), "which is apparently a Missouri [c]orporation,
apparently associated with SBU, with offices in Missouri." Two days later, Hennessy sent
Magna a letter advising it that Ducey was apparently at odds with SBU, that Ducey
volunteered that all the trusts had been transferred to Flag, and that Ducey said an
"inexperienced" lawyer from another law firm gave Flag a legal opinion that it could exercise
trust powers without being qualified to do business as a trust company. Hennessy also
indicated that Ducey "thought that the legal advice allegedly given by [the other law firm]
was incorrect and that as a result, all of the trusts have been transferred in breach of a
fiduciary duty." Hennessy wrote, "All of this information may prove very helpful when the
trial court considers this case after the case on appeal is resolved."
At this point, Thompson Coburn began to investigate Flag. Magna and Thompson
Coburn discovered that Flag was not authorized or regulated to be a trust company under the
laws of Illinois or Missouri and that Flag was controlled by Gibson, his wife, and his
daughter. Thompson Coburn and Magna became suspicious that Gibson had diverted the
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money it had previously transferred to First National and began monitoring Gibson and his
publicly known grocery store venture.
On May 2, 1997, concerned that Magna might be liable for its involvement in the
1995 transfers, Magna requested Thompson Coburn to send its auditor a letter in regards to
Magna's potential culpability. That letter provided in relevant part as follows:
"We have recently learned that the trust assets [that were transferred to First
National] were transferred shortly after transfer to [First National] at the direction of
or to an entity named [Flag], a Missouri corporation whose first stated purpose in its
[a]rticles of [i]ncorporation is 'To provide consumer loans.' Nothing in its articles
describes one of its purposes as providing trust services and we have no reason to
believe it is so licensed by the Missouri Division of Finance. We are currently
attempting to determine the facts in this matter but it would appear that Magna acted
following a valid order of court in taking the action it took and that the trust funds
may have been improperly transferred by [First National]. We note that the registered
agent of Flag and the principal of [SBU] are the same individual.
It is not possible to predict the outcome of this matter of the extent of
[Magna's] liability, if any, at this time."
In May 1997, Thompson Coburn met with SBU's new attorney, David Helfrey. At
this meeting Thompson Coburn informed Helfrey that Magna was concerned "because of a
recent revelation that the trust assets transferred from Magna to [First National] had
subsequently been transferred by [First National] to [Flag], which [Magna and Thompson
Coburn] understood to be controlled by Mr. Gibson." Thompson Coburn told Helfrey that
Magna "would consider accepting the return of the trust assets at this time conditioned upon
an agreement between SBU and [Magna] for Magna's administration of the trusts at a level
of compensation to be mutually agreed upon by the parties." "In the alternative, [Thompson
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Coburn] suggested that SBU consider providing [Magna] with assurances that the trust assets
are being held by an entity that is financially responsible and that possesses trust powers."
SBU took no action and assured Thompson Coburn that if Magna won on appeal, the issue
would be resolved then.
On July 29, 1997, this court issued its unpublished order in SBU, Inc. v. Magna Trust
Co., affirming both of the circuit court's summary judgments. SBU, Inc. v. Magna Trust Co.,
No. 5-95-0557 (1997) (unpublished order under Supreme Court Rule 23 (166 Ill. 2d R. 23)).
This court found that the personal injury plaintiffs were merely general creditors and not
necessary parties to the litigation and that the "termination of Magna as trustee [did] not alter
SBU's promise to the personal injury plaintiffs that it [would] pay them a certain amount of
money on specific dates." SBU, Inc., order at 9. The court noted as follows: "Based upon
our review of the briefs in this case, the only real issue is as follows: Can SBU terminate
Magna as trustee of the trusts in question? The resolution of this issue in no way impacts
upon the personal injury plaintiffs. SBU continues to be responsible to pay the plaintiffs
even if Magna is terminated as trustee. As such, the personal injury plaintiffs cannot be
necessary parties to this litigation." SBU, Inc., order at 9.
II. Magna's Termination as Trustee and Subsequent Transfer of Trust Funds
After the appellate court decision was filed, Thompson Coburn advised Magna that
an appeal to the supreme court would likely be unsuccessful, but Magna was still concerned
about future litigation with the injured plaintiffs if something happened to the trust funds
after the funds left Magna. Ultimately, Magna decided not to appeal. Magna, however, still
held the trust funds and went to Thompson Coburn for advice regarding how to proceed.
Thompson Coburn assigned Robert Brownlee to be involved in the termination of Magna as
the trustee. Hennessy and Shroeder were not heavily involved in Magna's termination.
After hearing nothing for several months from SBU regarding Magna's termination,
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Magna became frustrated that it was still administering these trusts and desired to begin the
process of its termination as the trustee. Thus, Magna discussed with Thompson Coburn its
desire to transfer the remaining trusts and requested Thompson Coburn to take the lead in
that regard. Magna knew that Gibson was preoccupied with litigation involving his grocery
store venture and therefore did not want to wait on Gibson to begin this process. Unfamiliar
with the previous court rulings in SBU, Inc. v. Magna Trust Co. and the fact that Magna had
fought to prevent its having to take part in the appointment of the successor corporate trustee,
Magna's new president, Matt Finn, who had replaced Beaman as president and point man
with Thompson Coburn in January 1997 when Magna became a part of Union Planters Bank,
asked Brownlee if Magna could add a sentence to the original notice Magna and SBU had
sent to the injured plaintiffs back in November 1995 naming the successor corporate trustee.
Brownlee advised Magna that it could add the name of the successor corporate trustee to the
notice and, in fact, advised Magna that getting a court order naming the successor corporate
trustee would help protect it against any actions by the injured plaintiffs.
Around October 1997, approximately three months after the appellate court decision
in SBU, Inc. v. Magna Trust Co. was filed, discussions ensued between SBU and Magna
regarding "Magna's willingness to voluntarily allow trusts remaining at Magna to be moved
to another corporate trustee." Brownlee informed Helfrey that Magna intended to comply
with the "substance" of the appellate court's ruling in SBU, Inc. v. Magna Trust Co. and with
Judge Hillebrand's October 16, 1995, ruling, whereby the court ordered Magna to join with
SBU to give prompt notice to the injured plaintiffs that Magna was no longer the trustee.
Brownlee noted as follows:
"While the duty to obtain court approval is not Magna's, it would appear that
since the St. Clair County [c]ircuit [c]ourt has reacquired jurisdiction it should be a
simple matter for SBU to obtain that approval. If it is possible to obtain such
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approval promptly through a stipulation and agreed order, we would request that the
joint notice to the ultimate payees identify the new trustee and [c]ourt's confirmation
thereof."
Four days later, on October 10, 1997, Gibson wrote Magna indicating that SBU
"would like to begin the timely and orderly transfer of [his] personal trusts and those of
[SBU] to the successor trustee." He indicated that Flag would be the successor trustee, and
he said that a representative from Flag would be in contact with Magna on October 15, 1997,
to initiate the necessary steps. It is unclear from the record whether a representative from
Flag ever contacted M agna.
Almost a month after receiving Gibson's letter indicating that someone from Flag
would contact Magna to begin transferring the trusts, Brownlee again contacted Helfrey,
requesting SBU to give joint notice of Magna's termination as it had done in the past and also
asking Helfrey to get SBU's authorization "to join with Magna in a stipulation for
presentation to the [c]ircuit [c]ourt for approval of the form of that notice and, for SBU's
protection, acknowledgment and approval of the identity of the new [t]rustee." About a week
later, Brownlee sent a fax to Helfrey with a revised stipulation and proposed order. In the
fax, Brownlee stated as follows:
"I contacted the [c]ivil [d]ivision's clerk's office and was told that the preferred
approach from the [c]ourt's point of view would be for us to sign and present the
[s]tipulation and [p]roposed [o]rder, accompanied by a letter asking the [c]ourt to
enter the [o]rder if we wish, and since it is not contested, the [o]rder should be entered
in the ordinary course. I asked if we could expedite the entry of the [o]rder and was
told that Judge Hillebrand is not really hearing any informal matters at present."
On November 25, 1997, Brownlee and Helfrey appeared before Judge Annette Eckert,
with the stipulated and proposed order prepared by Brownlee. SBU and Magna filed the
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stipulation and proposed order, and Judge Eckert approved it. Brownlee did not tell Judge
Eckert that Flag was not a qualified corporate trustee or that he knew that Flag and SBU were
controlled by Gibson. The order stated in relevant part as follows:
"4. On October 16, 1995, at a hearing before this [c]ourt pending the above-
referenced appeal, Judge Hillebrand stated that '. . . the [c]ourt therefore orders
[Magna] as current [t]rustee to join with the [t]rustor to give prompt notice to all of
those persons that [Magna] is no longer the [t]rustee' [relating to the trusts which were
the subject of the appeal herein]. Thereafter, Magna and SBU did forward a [j]oint
[n]otice of [t]ermination of [t]rustee to those persons entitled to receive the
lump[-]sum and periodic payments under the involved trust agreements.
5. As the appeal has been concluded and the issues raised therein adjudicated
by the Illinois Appellate Court, Magna is desirous of complying with the rulings
therein and is preparing to transfer the remaining trusts to Flag as successor corporate
trustee as requested by SBU. Magna also desires, however, to comply with the
substance of Judge Hillebrand's ruling as to notice entered October 16, 1995, and
SBU is desirous that Flag be confirmed as successor trustee by this [c]ourt, which is
a court of competent jurisdiction for such purpose."
The same day, Judge Eckert entered an order confirming Flag as the successor
corporate trustee and ordering Magna and SBU to send a joint notice to the injured plaintiffs
in the form attached to the proposed order.
On December 22, 1997, Magna sent a letter to SBU and enclosed documentation for
the timely transfer of all SBU assets from Magna to Flag. The next day, Brownlee faxed
Helfrey, indicating Magna's desire to wire the funds. On December 24, 1997, apparently
unable to wire the funds, Finn sent a letter to Gibson stating the following:
"Under court order dated November 25, 1997, a copy of which is enclosed[,]
17
[Flag] has been confirmed as successor corporate trustee and [Magna] has been
terminated. Therefore we believe we have no authority to continue to hold these
assets. Please find enclosed a check for $347,675.07 representing the cash in the
accounts. We are attempting to transfer the remaining assets as soon as we receive
delivery instructions. If you do not provide us with delivery instructions, the
remaining assets will be placed in escrow."
On December 26, 1997, Flag sent the check back to Magna. Around this time Magna
knew that Flag was unqualified to administer these trusts and even joked about how
incapable it thought Flag was to act as the trustee over these trusts. On December 29, 1997,
Brownlee wrote Helfrey indicating Magna's frustration that Magna was continuing to serve
as the trustee after Magna and SBU had agreed early the previous week to transfer the
remaining trusts to Flag. Brownlee told Helfrey: "If we cannot resolve this matter on an
immediate basis, we will proceed in St. Clair County [c]ircuit [c]ourt to compel acceptance
of the assets and seek the earliest possible hearing. I hope we can avoid such proceedings
by simply receiving wire instructions on which we are prepared to act at once."
Apparently shortly thereafter, a resolution took place, and Magna did not file a motion
to compel in the circuit court. Sometime between January 1, 1998, and January 19, 1998, the
trust funds were transferred from Magna to Flag (the 1998 transfers). Magna and SBU sent
a joint notice of the termination of the trustee to the injured plaintiffs following those
transfers. That notice stated as follows:
"PLEASE TAKE NOTICE that pursuant to the direction of [SBU], [Magna]
has been terminated as the trustee of that certain trust agreement *** by and between
[SBU] and [Magna]. This [j]oint [n]otice of [t]ermination of [t]rustee is given to you
as a person to receive a lump[-]sum and/or periodic payments under said trust
agreement. Inquiries should be directed to [SBU]. The successor corporate trustee
18
is [Flag]."
On May 6, 1999, a confidential source informed Thompson Coburn, inter alia, that
the trust funds Magna had transferred to Flag flowed from Flag to SBU and then from SBU
into Gibson's failing grocery stores. Thompson Coburn notified Finn that it had received this
information, but Magna chose to take no action because it thought that it was too late and it
assumed that the trust funds were already gone.
The injured plaintiffs continued to receive their payments until approximately April
or May 2000. As it turns out, Magna's and Thompson Coburn's suspicions about Gibson had
merit, and Gibson spent his clients' money on unauthorized business transactions, high-risk
investments, and purchases of real estate and luxury items for his own use. When Gibson
found out that his scheme was about to go bust, Gibson fled to Belize and wired more of his
clients' trust funds to Belize bank accounts. Eventually, Gibson was arrested in Belize and
was returned to the United States. Gibson was indicted and convicted and was eventually
sentenced to 40 years' imprisonment. United States v. Gibson, 490 F.3d 604 (7th Cir. 2007).
Thereafter, the injured plaintiffs brought lawsuits to recover the structured settlement funds.
The plaintiffs sued many defendants, including Gibson's accountants and trust companies,
like Magna, that had administered these trusts. The total loss to the injured plaintiffs was
more than $156 million. The lawsuits filed by the injured plaintiffs relevant to this case are
Topsakalyan v. Gibson, No. 00-L-011030 (Cir. Ct. Cook Co.); Gaudreault v. Union Planters
Bank, N.A., No. 01-L-535 (Cir. Ct. Madison Co.); McCracken v. Magna Bank, N.A., Cons.
Nos. 01-L-437, 01-L-569 (Cir. Ct. St. Clair Co.); James v. Union Planters Bank, No. 02-L-
103 (Cir. Ct. St. Clair Co.); and Hicks v. Magna Bank, No. 00-L-88 (Cir. Ct. Marion Co.).
III. The Injured Plaintiffs' Litigation Against Magna
Initially, when the injured plaintiffs filed suit against Magna, Thompson Coburn
continued to represent Magna. One of the first cases to be filed against Magna and several
19
other defendants was brought in the circuit court of Cook County on behalf of approximately
55 of the injured plaintiffs (Topsakalyan). Oddly enough, the injured plaintiffs' attorney in
Topsakalyan was SBU's former attorney, Ducey. Ducey alleged "that in violation of the trust
agreements and their fiduciary duties, the defendant banks transferred their respective trusts
to non[]corporate trustees, namely [Flag], [Crews], and CIBC World Markets Corporation."
Ducey claimed that Magna owed the injured plaintiffs fiduciary duties because the injured
plaintiffs were trust beneficiaries. On behalf of Magna, Thompson Coburn filed a motion
to dismiss the count against it, arguing that Magna owed the plaintiffs no fiduciary duties.
Meanwhile, while Magna's motion to dismiss was pending in Topsakalyan,
approximately 60 injured plaintiffs filed a class action lawsuit in St. Clair County circuit
court (James). The injured plaintiffs in James originally claimed, inter alia, that Magna
violated the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1
et seq. (West 2000)) by wrongfully and intentionally concealing the existence of the 1985
agreement from the injured plaintiffs. The plaintiffs alleged that had they known of the 1985
agreement, they would not have entered into the structured settlements and therefore would
not have suffered their losses.
In another St. Clair County case, Bernard Ysursa represented many of the same James
plaintiffs in McCracken. In McCracken, the "plaintiffs allege[d] Magna knew and did not
disclose Gibson owned SBU and [Flag] and that Flag was not qualified to act as a fiduciary."
The plaintiffs alleged that Magna "breached its trust duty to plaintiffs at the time of the
transfer of the trust assets to Flag."
Rex Carr, Magna's attorney in this case, also brought a lawsuit in Madison County
circuit court against Magna on behalf of four of his former clients (Gaudreault). In
Gaudreault, the plaintiffs were all secured creditors under the terms of their structured
settlement agreement, and they claimed that Magna breached its duty by transferring the
20
plaintiffs' security interest to Flag, which was not a proper corporate trustee, in violation of
the trust agreement between SBU and M agna.
Finally, in Marion County, another lawsuit was brought on behalf of a single plaintiff,
Blake Hicks (Hicks). In Hicks the complaint stated, "[T]he theory of liability centers upon
the 1997 stipulation and joint notice." The distinguishing characteristic of the Hicks case
was "that Magna acted not only as trustee[] but as guardian of the minor plaintiff's estate."
The plaintiff alleged "that Magna (as guardian) should have done more to protect the assets
of its ward."
While this litigation was pending, Magna and Thompson Coburn discovered that
Thompson Coburn might be implicated for the injured plaintiffs' losses. Recognizing a
potential conflict, Thompson Coburn withdrew from representing Magna in any cases
involving SBU and recommended that Magna hire the law firm of Freeark, Harvey,
Mendillo, Dennis, Wuller, Cain & Murphy, P.C. (the Freeark Firm). Magna is suing
Thompson Coburn in this case for the $1,084,419 it paid Thompson Coburn in defending
Magna in the cases brought against Magna by the injured plaintiffs.
On December 5, 2002, the Cook County circuit court in Topsakalyan granted Magna's
motion to dismiss with prejudice. After this ruling, Ducey orally made a motion to amend
the plaintiffs' complaint, but the court denied the plaintiffs' request for leave to amend the
complaint against M agna. Ducey did not present a proposed amended pleading at the time
he made the oral motion. The injured plaintiffs appealed, contending, inter alia, that the trial
court erred in granting Magna's motion to dismiss and in denying their motion for leave to
amend the complaint. Ducey was eventually removed as counsel for the injured plaintiffs,
but the record is unclear about the reasons for his removal. Ysursa became new appellate
counsel and filed a supplemental brief, contending that the injured plaintiffs should be
granted leave to amend their complaint to include two new theories of liability.
21
While Topsakalyan was pending on appeal, however, the St. Clair County circuit court
in McCracken entered an order granting the plaintiffs' motion for a summary judgment on
liability only. In that order, the court concluded that based upon all the circumstances,
Magna owed the injured plaintiffs a duty in trust. Further, the court specifically rejected
Magna's defense that it acted in good faith in relying on Judge Hillebrand's November 3,
1995, order. The court found that when Magna and SBU presented the joint stipulation and
proposed order to Judge Eckert on November 25, 1997, "Magna cast aside Judge Hillebrand's
directive of November 3, 1995[,] to limit [its] participation in the transfer to no more than
sending notice of its termination to the plaintiffs." The court concluded that Magna
acknowledged that it had not complied with Judge Hillebrand's order by using the phrase that
it intended to "comply with the substance of Judge Hillebrand's ruling since the point of the
instruction was to take Magna out of the confirmation process." The court's order continued
as follows:
"Magna's use of the stipulated order to confirm Flag is not a minor deviation
from Judge Hillebrand's instructions and its obligations under the [t]rust [a]greement.
Had Magna limited its participation in the manner determined by Judge Hillebrand,
Magna would have sent plaintiffs a [n]otice that it was no longer engaged to act as
corporate trustee of the structured settlement accounts. This would have put plaintiffs
on notice of the change in trustee. Under Judge Hillebrand's instruction, SBU, acting
alone, would then have been required to seek confirmation of Flag as successor
trustee. Under the [t]rust [a]greement, SBU was then required to give plaintiffs
prompt notice of 'proceedings to confirm the appointment of any such successor
corporate [t]rustee.' [Citation.] Had plaintiffs been on notice that SBU was switching
horses, they would have had the option to intervene in 'proceedings to confirm' [Flag].
By concocting the [s]tipulation and [o]rder appointing Flag, Magna joined together
22
with SBU to gut the very purpose of the notice provision of the [t]rust [a]greement,
i.e.[,] to allow the plaintiffs an opportunity to be heard in the court proceedings to
confirm its successor trustee. With its insistence on seeking court confirmation of
Flag by stipulation on November 25, 1997, Magna annihilated any defense premised
upon good faith or upon the Restatement (Second) of Trusts Section 201, Comment
(b).
Magna's actions lacked good faith in another regard. In the [s]tipulation and
[p]roposed [o]rder presented to Judge Eckert, Magna represented to the [c]ircuit
[c]ourt that Flag was a corporate trustee. With knowledge of Gibson's control of Flag
and knowledge that Flag was not a qualified fiduciary, Magna asked Judge Eckert to
confirm Flag as successor corporate trustee. This misrepresentation to the court
vitiates any good[-]faith defense reliant on the stipulated c/y/a1 court order
consequently obtained by Magna. The misrepresentation was compounded in [the]
[j]oint [n]otice of [t]ermination of [t]rustee sent to the structured settlement plaintiffs
dated January 1, 1998. In the [n]otice Magna announced the untruth that Flag was a
'corporate trustee.'
Instead of providing a defense to Magna, Magna's conduct created additional
duties to the plaintiffs. After the circuit court proceedings before Judge Hillebrand,
Magna engaged in a course of conduct designed to protect its interests and maintain
control of plaintiffs' accounts. Ultimately, Magna's conduct allowed Flag's
appointment. A party may assume a duty to disclose information accurately by its
conduct. In so conducting itself Magna undertook a duty not to deliberately conceal
or misrepresent. See Union Nat. Bank and Trust Co. of Joliet v. Carlstrom, 134 Ill.
App. 3d 985, 989, 481 N.E.2d 300, 302 (1985)."
1
Testimony adduced at the trial indicates that "c/y/a" stands for "cover your ass."
23
The court went on to grant a summary judgment in favor of the injured plaintiffs on
counts I (breach of contract), II (consumer fraud), and IV (breach of fiduciary duty), leaving
only the issues of proximate cause and damages for the finder of fact under those counts.
The court also found that factual issues remained on counts III (common-law fraud) and V
(conspiracy and consumer fraud).
After this order came down, the Freeark Firm recommended that Magna sue
Thompson Coburn for malpractice. To that end, about a week after this order was entered,
the Freeark Firm sent a letter to Thompson Coburn on behalf of Magna, asking Thompson
Coburn to indemnify it in McCracken and in the other cases against Magna in which its
liability is based upon Thompson Coburn's acts on behalf of Magna. Thompson Coburn
refused to indemnify or represent Magna. In April 2003, Magna filed suit against Thompson
Coburn.
On September 12, 2003, about a week before the Gaudreault case was set to go to
trial, at the Freeark Firm's recommendation Magna decided to settle the Gaudreault case with
Carr. Ransom Wuller, of the Freeark Firm, testified that M agna chose to settle Gaudreault
because the court had denied its motion with regard to duty. He testified, "It was my
determination at that time that if the [c]ourt had ruled there was a duty, and the [c]ourt had
clearly I think done that by–by denying [Magna's] [m]otions to [d]ismiss, by striking our
affirmative defenses with regard to that, I felt there was no defense to what was done in 1997
so that we had to settle the case at that point." Magna paid approximately $2.2 million to
settle Gaudreault, representing 100% of the injured plaintiffs' losses. Magna brought third-
party claims against several parties and recovered $917,609 from other defendants. Magna
is not suing Thompson Coburn for the amount it recovered in contributions from other
defendants. Magna is seeking $1,478,721 for the amounts it paid in settling Gaudreault.
After settling the Gaudreault case, the Freeark Firm recommended that Magna hire
24
Carr to represent Magna in this malpractice action against Thompson Coburn. Wuller
testified he did this because he knew that his firm would likely be a witness in this case and
because Carr was a good lawyer.2 Carr agreed to represent Magna. Around this time, Wuller
wrote a letter to Magna's legal division, providing a brief synopsis of the cases Magna had
pending against it by the injured plaintiffs. In that letter, Wuller stated the following with
regard to Magna's defense and settlement strategy:
"The simple fact of these cases is that few if any of the defendants can afford
to take the risk of going to trial. Thus, the overall goal is to posture the cases in such
a way as to achieve the most favorable settlement possible. *** Thompson Coburn
is not included in the list above [ranking culpability among all the parties] for the
reason that only [Magna] has a viable cause of action against it, but we are optimistic
that we will be able to pass a significant portion of the cost of this litigation on to
Thompson Coburn."
At some point after the trial court's summary judgment in McCracken, the attorney for
the injured plaintiffs in McCracken, Ysursa, entered an appearance to also represent the
injured plaintiffs in James. James and McCracken were both in front of Judge Robert P.
LeChien, the judge who had authored the summary judgment in McCracken. In James, Judge
LeChien granted the plaintiffs' motion to amend their complaint to assert the same claims
upon which the court had entered a partial summary judgment in favor of the plaintiffs in
McCracken. Because of this, these two cases were negotiated and settled together, rather
than separately.
2
Ironically, Carr himself also became a witness in this case when Thompson Coburn
insinuated that Carr and the other injured plaintiffs' personal injury attorneys, who advised
their clients to enter into the structured settlement trusts with SBU, were to blame for the
injured plaintiffs' losses.
25
During the settlement negotiations in McCracken and James, an agreement was
reached between Magna and the injured plaintiffs' attorneys whereby the injured plaintiffs'
attorneys agreed to file an amended complaint against Magna as a part of the settlement
agreement. The Freeark Firm drafted the amended complaint against its own client, Magna.
The Freeark Firm then had the plaintiffs' attorneys file the amended complaint it had drafted
against M agna. Three days later, McCracken and James were settled.
Ultimately, Magna settled McCracken and James for approximately $5,728,425.
Magna agreed to pay 50% to 90% of the net losses associated with the 1998 transfers, but it
only ended up paying 50%. The other defendants in that case paid the other 50%. The
Freeark Firm estimated the total net exposure in McCracken to be $17.5 million. Ysursa
testified that he obtained a partial summary judgment on the consumer fraud count and could
have had a nonjury trial on that claim. He claimed that he could have collected 100% of the
damages against Magna and could have recovered attorney fees and punitive damages.
Wuller agreed, testifying as follows:
"If we went to trial in the [McCracken] case or if we went to trial in front of
Judge LeChien with regard to these cases, he was going to find against [Magna]. He
was going to award [100%] damages, and he was going to award punitive damages
against my client. And there was no question about it."
He further stated as follows:
"I think, first of all, with regard to the [James] case and with regard to [the
consumer fraud count], I think the [j]udge would have [had] a lot of discretion as to
what the award would be, and I certainly *** think that at a minimum we would have
had a 20 million dollar judgment. I don't think there is any doubt about that. It
certainly could have gone higher. It could have gone up to 40 million[;] that was
certainly a consideration."
26
In Hicks, Magna settled for $2.5 million. Wuller testified that the plaintiff was
seeking $20 million in damages and that he thought it would take $5 million, without
attorney fees, to put the injured plaintiff back in the same position he would have been in had
Gibson not stolen the trust funds. He testified that Magna paid substantially more than any
other defendant paid to get out of the Hicks case. He also admitted that he had stated in his
deposition that he did not believe that Magna would be able to recover any damages from
Thompson Coburn in Hicks because of the theory alleged in that case and the fact that Magna
was also the guardian of the minor plaintiff's estate. Like in McCracken and James, Wuller
testified that he had drafted an amended complaint against Magna which he had the injured
plaintiffs file. Similarly, three days after it was filed, the joint motion to approve the
settlement was filed.
On March 25, 2005, the First District Appellate Court issued a Rule 23 order in
Topsakalyan v. Gibson, No. 1-03-0539 (2005) (unpublished order pursuant to Supreme Court
Rule 23). The court affirmed the circuit court's judgment of dismissal in Topsakalyan,
finding that SBU was the sole beneficiary of the trusts and that, therefore, because the
plaintiffs were not beneficiaries of the trusts, Magna did not owe them fiduciary duties. The
court also found that the trial court did not abuse its discretion in denying the plaintiff's
motion to amend its complaint, noting, "Plaintiffs have not provided a record citation to their
request to amend or to the court's denial of that request so as to aid us in evaluating their
contention." Topsakalyan, order at 10. The court stated, "In effect, plaintiffs desire a 'do
over' as the result of what they perceive as missteps by their original appellate counsel."
Topsakalyan, order at 20. The court continued: "[The plaintiffs] simply want a chance to
plead theories of recovery that their original counsel could have presented to the trial court
but did not. We decline to exercise our equitable powers to grant plaintiffs the extraordinary
relief which they seek." Topsakalyan, order at 21.
27
IV. Magna v. Thompson Coburn
On March 20, 2008, several weeks into the trial, Magna filed its second amended
complaint, alleging two counts: (1) negligence and (2) breach of contract. Magna claimed
that it should be awarded approximately $11,789,053, consisting of $1,084,419 it paid
Thompson Coburn in attorney fees, $997,486 it paid the Freeark Firm in attorney fees,
$1,478,721 it paid to settle Gaudreault, $2.5 million it paid to settle Hicks, and $5,728,425
it paid to settle McCracken and James. In its contract count, the count that ultimately went
to the jury, Magna, alleged, inter alia, as follows:
"11. That in the months of October and November, 1997, Thompson Coburn
agreed, and undertook in providing said legal services, to obtain the approval of, and
confirmation from, the [circuit court] of the appointment of a proper successor
corporate trustee to which Magna could transfer certain treasury bonds in the face
value amount of $20,000,000.00 to $40,000,000.00, more or less, including those
bonds held by Magna for the benefit of the injured plaintiffs ***.
12. That Thompson Coburn breached said contract by obtaining [c]ircuit
[c]ourt appointment, on the 25th day of November, 1997, in collaboration with SBU,
of [Flag], the alter ego of SBU and Gibson, as successor trustee, merging SBU,
beneficiary of the trusts, with Flag, trustee of said trusts, resulting, thereby, in a
termination and dissolution of said trusts when a reasonably well[-]qualified attorney
would know that a merger and dissolution would result, if the court appointed a
trustee which was the alter ego of the beneficiary.
13. That Thompson Coburn breached the said contract when it failed to advise
the [c]ourt, to whom the joint-stipulated order was presented for entry, of the
knowledge that it had as to the fact[s] that Flag was not a qualified successor
corporate trustee under the trust agreements authorized under the laws of the States
28
of Illinois and Missouri to conduct a trust business[,] was not empowered by its
charter to act as a trustee such as a bank or trust company[,] was not a licensed
corporate trustee under the laws of Missouri or Illinois[,] [and] was owned by
Gibson[,] who believed the trust funds were his to invest as he so chose to invest[,]
and[] that the entry of the order appointing Flag as trustee would cause a dissolution
and termination of the trusts.
14. That Thompson Coburn breached the said contract when it failed to advise
Magna of the consequences and risks of the actions of its attorney, an officer of the
court, in failing to inform the [c]ourt of the facts known about Flag prior to the time
the [c]ourt entered the order presented by Thompson Coburn.
15. That Thompson Coburn breached the said contract when it failed to advise
Magna, prior to having said order entered appointing [Flag] successor trustee, that if
such appointment took place a merger, as described in [p]aragraph 12, would occur
and of the consequences and risks of such merger.
16. That Thompson Coburn breached said contract when it advised Magna to
transfer the trust assets, including the trust bonds, which it held without a trust after
said dissolution and termination took place, to Flag with out [sic] a court order
compelling it so to do.
17. That Thompson Coburn breached said contract when it failed to advise
Magna of the consequences and risks of transferring said trust assets to Flag with out
[sic] a court order compelling it so to do.
18. That Thompson Coburn breached said contract when it failed to advise
Magna that the injured plaintiff-payees were not bound by any order entered in the
[t]rial or [a]ppellate [c]ourts in the SBU v. Magna litigation.
19. That Thompson Coburn breached said contract when it failed to advise
29
Magna that a transfer of the trust assets and bonds to Flag was the equivalent to
transferring said trust assets and bonds to Gibson.
20. That Thompson Coburn breached said contract when it failed to advise
Magna that a stipulated agreed order cannot be enforced against anyone except the
parties to the stipulation.
21. That Thompson Coburn breached said contract when it failed to advise
Magna that a [d]eclaratory [j]udgment [a]ction, or [m]otion, should be filed with the
injured plaintiffs and SBU as parties thereto seeking a declaration as to the
appropriate disposition of the bonds and trust assets being held by Magna with out
[sic] the existence of a trust prior to the transfer of said trust assets and bonds to Flag.
22. That Thompson Coburn breached said contract when it failed to advise
Magna of the consequences and risks of transferring said trust assets and bonds to
Flag without an order issued pursuant to such a [d]eclaratory [j]udgment action or
[m]otion.
23. That Thompson Coburn breached said contract when it failed to advise
Magna that an equitable constructive trust could be imposed on the trust assets, or an
equitable estoppel could be applied, to prevent the said trust assets from being given
to Gibson.
24. That Thompson Coburn breached said contract by advising M agna to join
with SBU in notifying the injured plaintiffs that Flag was a corporate trustee, well
knowing that Flag was not a corporate trustee as required by the trust agreements,
intending thereby to induce the injured plaintiffs into believing that Flag was an
appropriate corporate trustee as required by the agreement.
25. That Thompson Coburn breached said contract by failing to advise Magna
of the consequences and risks of performing a deceptive act in falsely representing to
30
the injured plaintiffs that Flag was a corporate trustee with the possibility of liability
under the Consumer Fraud and Deceptive Practices Act.
26. That Thompson Coburn breached said contract by advising and allowing
Magna to join with SBU in presenting Flag to the [c]ircuit [c]ourt for appointment and
confirmation as successor corporate trustee and in joining in with SBU in identifying
Flag as successor corporate trustee.
27. That Thompson Coburn breached said contract by advising Magna to join
SBU in obtaining the appointment of Flag as successor corporate trustee with out [sic]
notice to the injured plaintiffs of such presentation.
28. That Thompson Coburn breached said contract by failing to advise Magna
not to join in any notice to the injured plaintiffs of the appointment and identity of a
successor corporate trustee without any order of the court requiring Magna so to do.
29. That as a consequence and direct result of one or more of said breaches of
Thompson Coburn's contract with Magna, Magna violated its contractual and
fiduciary obligations to the injured plaintiffs, transferred the trust assets and bonds to
the nominee of Flag and Gibson in January, 1998, and as a result of which, [Magna]
has paid and expended large sums of money in settling and paying damages to the
injured plaintiffs and in legal fees and expenses in defending actions brought against
Magna by the said injured plaintiffs, when Gibson, the alter ego of both SBU and
Flag, came into possession of the said bonds and dissipated same for his own
purposes, causing the injured plaintiffs to lose large sums of money, thereby, and to
bring damage suits against Magna seeking payment for their losses."
After several weeks of trial, the jury found in favor of Magna, awarding Magna
$3,654,606.40 in damages. Magna moved for a new trial on the issue of damages or, in the
alternative, for a new trial on all the issues. Thompson Coburn moved for a judgment
31
notwithstanding the verdict. The trial court denied both motions. This appeal follows.
ANALYSIS
As mentioned above, Magna appeals, contending 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 cross-
appeals, arguing that we should reverse the trial court and enter a judgment notwithstanding
the verdict because the trial court erred as a matter of law when it found that Magna owed
the injured plaintiffs a fiduciary duty. Due to the nature of Thompson Coburn's cross-claim,
we address it first.
I. Thompson Coburn's Cross-Appeal
A. Magna's "Case Within a Case"
The issue presented here calls for us to determine whether M agna was required to
prove a "case within a case" to recover damages for Thompson Coburn's alleged malpractice.
This issue has been complicated by the fact that Magna has failed to cite any legal authority
in support of its positions and by Thompson Coburn's insistence that its "appeal is
straightforward" and that but for the trial court's ruling that Magna owed the injured plaintiffs
a fiduciary duty, Magna's case would have been dismissed or a pretrial judgment would have
been entered in Thompson Coburn's favor.
This appeal is not "straightforward," and Thompson Coburn's argument misses the
mark. It is a long-standing principle that it is the duty of the attorneys to present to the court
the authorities supporting their position and to assist the court in reaching the correct result.
Kelley v. Kelley, 317 Ill. 104, 107 (1925). "Reviewing courts are entitled to have issues
clearly defined [and] to be cited pertinent authorities and are not a depository in which an
appellant is to dump the entire matter of pleadings, court action, argument[,] and research[,]
32
as it were, upon the court." In re Estate of Kunz, 7 Ill. App. 3d 760, 763 (1972); 47th & State
Currency Exchange, Inc. v. B. Coleman Corp., 56 Ill. App. 3d 229, 232 (1977).
Nevertheless, "in the interest of doing substantial justice between the litigants and although
it is not the duty of this court to search the record to determine what the real issues are or to
seek material for the disposition of such issues" (Martin v. 1727 Corp., 120 Ill. App. 3d 733,
740 (1983)), we have done so in this case.
In the matter at hand, no matter how Magna chose to frame its claim, i.e., negligence
or breach of contract, Magna's cause of action sounded in legal malpractice. See Land v.
Greenwood, 133 Ill. App. 3d 537, 541 (1985) ("[A]n action for legal malpractice is one
sounding in tort which arises out of a contract, express or implied, for legal services");
Hanumadass v. Coffield, Ungaretti & Harris, 311 Ill. App. 3d 94, 99-100 (1999). "The basic
principles governing legal malpractice claims are well established." Tri-G, Inc. v. Burke,
Bosselman & Weaver, 222 Ill. 2d 218, 225 (2006). "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." Tri-G, Inc., 222 Ill. 2d at 225-
26. "The injury in a legal malpractice action is not a personal injury, nor is it the attorney's
negligent act itself." Tri-G, Inc., 222 Ill. 2d at 226. "Rather, it is a pecuniary injury to an
intangible property interest caused by the lawyer's negligent act or omission." Tri-G, Inc.,
222 Ill. 2d at 226. "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." Tri-G, Inc., 222 Ill. 2d at 226. "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." Tri-G, Inc., 222 Ill. 2d at
226. "The existence of actual damages is therefore essential to a viable cause of action for
legal malpractice." Tri-G, Inc., 222 Ill. 2d at 226 (citing Northern Illinois Emergency
33
Physicians v. Landau, Omahana & Kopka, Ltd., 216 Ill. 2d 294, 306-07 (2005)).
On cross-appeal, Thompson Coburn contends that the trial court erred when it ruled
that a fiduciary duty ran from M agna to the injured plaintiffs. Thompson Coburn alleges that
but for that ruling, Magna's case would have been dismissed or a pretrial judgment would
have been entered in its favor. It reasons that absent a duty running from Magna to the
injured plaintiffs, nothing Thompson Coburn did or did not do could have caused Magna to
breach a duty and expose it to liability in the underlying injured plaintiffs' lawsuits. In
support of its argument Thompson Coburn relies on Claire Associates v. Pontikes, 151 Ill.
App. 3d 116, 123 (1986), for this proposition of law: "[A malpractice plaintiff must] plead
a valid underlying claim, lost because of [the defendants'] negligence. [Citations.] Absent
such a valid cause of action, no set of facts would entitle [the plaintiffs] to any recovery."
Thompson Coburn avers that the trial court's fiduciary duty ruling was Magna's case-within-
a-case and that, without that ruling, Magna is unable to prove the required elements of
proximate cause and damages. Magna counters that it was not required to prove that it owed
fiduciary duties to the injured plaintiffs. Rather, Magna argues, "[Magna] had only to prove
that it was forced to settle because of the likelihood that the injured plaintiffs could recover
damages on any theory when Magna followed Thompson Coburn's faulty advice and 'but for'
that advice, M agna would have never been put in such position."
Causation requires both proof of "cause in fact" and proof of "legal cause." Thacker
v. UNR Industries, Inc., 151 Ill. 2d 343, 354 (1992). There are generally two tests used by
courts when considering cause in fact: (1) the traditional "but for" test and (2) the "substantial
factor" test. Thacker, 151 Ill. 2d at 354. Under the but-for test, "a defendant's conduct is not
a cause of an event if the event would have occurred without it." Thacker, 151 Ill. 2d at 354.
Under the substantial-factor test, "the defendant's conduct is said to be a cause of an event
if it was a material element and a substantial factor in bringing the event about." Thacker,
34
151 Ill. 2d at 354-55. Magna in the present case sought to prove causation through the but-
for test.
"Legal cause 'is essentially a question of foreseeability: a negligent act is a proximate
cause of an injury if the injury is of a type which a reasonable man would see as a likely
result of his conduct.' " Lee v. Chicago Transit Authority, 152 Ill. 2d 432, 456 (1992)
(quoting Masotti v. Console, 195 Ill. App. 3d 838, 845 (1990)). "Thus, an injury will be
found not to be within the scope of the defendant's duty if it appears 'highly extraordinary'
that the breach of the duty should have caused the particular injury." Lee, 152 Ill. 2d at 456.
"Illinois law does not require unequivocal or unqualified evidence of causation." Donaldson
v. Central Illinois Public Service Co., 199 Ill. 2d 63, 91 (2002).
Here, Magna did not have to prove its case-within-a-case to recover damages for
Thompson Coburn's transactional malpractice. The gist of Thompson Coburn's claim is that
Magna could not prove proximate cause without proving a case-within-a-case. We
acknowledge that in malpractice cases based upon the attorney's conduct during litigation,
i.e., the prosecution or defense of a prior claim, a plaintiff must generally prove a case-
within-a-case to establish proximate cause. Governmental Interinsurance Exchange v.
Judge, 221 Ill. 2d 195, 200 (2006); Tri-G, Inc., 222 Ill. 2d at 226. "This is required because
of the damages element of the action; no malpractice exists unless counsel's negligence has
resulted in the loss of an underlying action." Beastall v. Madson, 235 Ill. App. 3d 95, 100
(1992). "The objective is to establish what the result should have been ***." (Emphasis in
original.) Nika v. Danz, 199 Ill. App. 3d 296, 308 (1990). We hold, however, that proving
a case-within-a-case is not always required in transaction-based legal malpractice cases
where damages can otherwise be established. See Glass v. Pitler, 276 Ill. App. 3d 344, 351
(1995) ("[I]f damages resulting from the legal malpractice action can be otherwise factually
established, a judicial determination in the underlying action is not required").
35
In the case at bar, Magna could recover all the damages proximately caused by
Thompson Coburn's breach. See Metrick v. Chatz, 266 Ill. App. 3d 649, 655 (1994); Glass,
276 Ill. App. 3d at 349; Gruse v. Belline, 138 Ill. App. 3d 689, 697 (1985). This is so
because a successful legal malpractice claim places the plaintiff in the same position that the
plaintiff would have occupied but for the attorney's negligence. Nettleton v. Stogsdill, 387
Ill. App. 3d 743, 749 (2008); Sterling Radio Stations, Inc. v. Weinstine, 328 Ill. App. 3d 58,
64 (2002). "[A]n attorney's liability for failing to advise a client of the foreseeable risks
attendant to a given course of legal action is not predicated upon the impropriety of the
recommended course of action; rather, it is predicated upon the client's exposure to a risk that
the client did not knowingly and voluntarily assume." Metrick, 266 Ill. App. 3d at 654-55.
"Consequently, to establish the element of proximate cause, it is necessary for the client to
both plead and prove that had the undisclosed risk been known, he or she would not have
accepted the risk and consented to the recommended course of action." Metrick, 266 Ill.
App. 3d at 655. "Such is not the case, however, when the course of action the attorney
recommends is in itself improper under the circumstances presented." Metrick, 266 Ill. App.
3d at 655. "If an attorney's advice falls below the standard of reasonable legal services, any
damages which proximately flow from the client's acceptance of that advice are recoverable
in a negligence action against the attorney." Metrick, 266 Ill. App. 3d at 655.
Here, Magna alleged and the jury found that because of Thompson Coburn's faulty
advice it was sued by the injured plaintiffs and forced to pay legal expenses to defend itself
against those lawsuits, which Magna ultimately had to settle. Thus, Magna could have
recovered the legal expenses it paid in defending the cases brought against it even if Magna
had not settled those cases and had ultimately succeeded on the merits. See Belden v.
Emmerman, 203 Ill. App. 3d 265, 270 (1990) ("We believe that plaintiffs should have
realized that even if the circuit court's order were reversed and the settlement were set aside,
36
damages would still be present. A reversal of the settlement order between Adler and the
landlord would not have alleviated the additional damages occasioned by the loss of the
business or the additional expenses caused by defendants' alleged malpractice. In short, the
only difference between affirmance and reversal is the amount of damage sustained"); but
see Lucey v. Law Offices of Pretzel & Stouffer, Chartered, 301 Ill. App. 3d 349, 355 (1998)
("Admittedly, where an attorney's neglect is a direct cause of the legal expenses incurred by
the plaintiff, the attorney fees incurred are recoverable as damages. [Citations.] However,
the converse of this rule is equally true: where an attorney's neglect is not a direct cause of
the legal expenses incurred by the plaintiff (i.e., the plaintiff prevails when sued or loses for
reasons other than incorrect legal advice), the attorney fees incurred are generally not
actionable. Since it is also possible the former client will prevail when sued by a third party,
damages are entirely speculative until a judgment is entered against the former client or he
is forced to settle" (emphasis in original)). Whether it was reasonable for Magna to settle
those cases against it and whether the amount Magna paid in defending those cases was
reasonable were questions of fact for the jury.
Indeed, in Nettleton v. Stogsdill, 387 Ill. App. 3d 743 (2008), the appellate court
dismissed an argument similar to Thompson Coburn's allegation that Magna must prove a
case-within-a-case in order to maintain its malpractice claim. In Nettleton, the plaintiff
alleged that as a direct result of her lawyer's negligence in her dissolution proceeding, she
incurred additional attorney fees. The trial court granted a summary judgment in the law
firm's favor, "finding that plaintiff failed to present evidence that she suffered actual damages
that were proximately caused by defendants' alleged negligence." Nettleton, 387 Ill. App. 3d
at 747.
On appeal, the law firm argued that the trial court correctly determined that its alleged
malpractice was not proximately related to the plaintiff's claimed injuries because the law
37
firm did not cause the plaintiff to lose her dissolution cause of action. Nettleton, 387 Ill.
App. 3d at 754. The law firm argued, "[A] legal malpractice plaintiff must demonstrate that,
as a result of the defendant's negligence, the plaintiff lost his cause of action, and, if the
plaintiff's cause of action remained viable at the time the defendant was discharged, the
plaintiff cannot prove any set of facts that would demonstrate that the defendant's conduct
caused the plaintiff's injury." Nettleton, 387 Ill. App. 3d at 754.
In rejecting the law firm's argument, the appellate court stated, "[T]his argument must
fail because the law upon which defendants rely does not apply except where a plaintiff
alleges that but for the defendant's malpractice the plaintiff would not have irretrievably lost
the cause of action." Nettleton, 387 Ill. App. 3d at 754. "None of the cases cited by
defendants involves a plaintiff who alleges that, as a result of the defendant's negligence, the
plaintiff incurred attorney fees in an attempt to rectify the damage caused by the defendant's
negligence." Nettleton, 387 Ill. App. 3d at 755. "Where a plaintiff alleges that the
defendant's malpractice caused her to incur attorney fees to rectify the defendant's
malpractice, the plaintiff need not demonstrate that her cause of action was lost to establish
the existence of her injury, because she has not alleged that she was injured by the loss of her
cause of action." Nettleton, 387 Ill. App. 3d at 755. "Rather, to establish her injury, the
plaintiff must establish that she incurred additional attorney fees." Nettleton, 387 Ill. App.
3d at 755. "If she is unable to do so, then she is also unable to establish that the defendant's
malpractice caused her to incur additional attorney fees, because she has not established that
she actually did incur additional attorney fees." Nettleton, 387 Ill. App. 3d at 755.
Similarly, in Sorenson v. Fio Rito, 90 Ill. App. 3d 368 (1980), the plaintiff brought an
attorney malpractice action against her attorney as the result of her attorney's failure to timely
file certain inheritance and estate tax forms. The circuit court awarded the plaintiff damages
in the form of penalties and interest that the plaintiff was required to pay because the forms
38
were filed late and attorney fees which arose from unsuccessful attempts to obtained refunds
of the penalty and interest charges. The attorney appealed, alleging, inter alia, that the trial
court had erred in awarding as damages the attorney fees incurred by the plaintiff in her
unsuccessful attempts to obtain refunds of the penalty and interest charges.
In analyzing the attorney's argument, the court stated as follows:
"We do not believe [that the policy against awarding attorney fees] was intended to
preclude a plaintiff from recovering losses directly caused by the defendant's conduct
simply because those losses happen to take the form of attorneys' fees. The plaintiff
here is not attempting to recover the attorneys' fees she expended in bringing this
lawsuit. Rather, she seeks to recover losses incurred in trying to obtain refunds of tax
penalties which were assessed against her solely as a result of the defendant's
negligence. Had the plaintiff been forced to hire an accountant to repair the damage
caused by the defendant's conduct, she would undoubtedly have been entitled to
recover the accountant's fee as an ordinary element of damages. There is no basis in
logic for denying recovery of the same type of loss merely because the plaintiff
required an attorney instead of an accountant to correct the situation caused by the
defendant's neglect. In holding the defendant liable for the plaintiff's losses, we are
not violating the policy against 'penalizing' a litigant for defending a lawsuit. We are
simply following the general rule of requiring a wrongdoer to bear the consequences
of his misconduct." Sorenson, 90 Ill. App. 3d at 372.
Here, Magna alleged that Thompson Coburn breached its duty to Magna in advising
Magna regarding its termination as the trustee, not in the prosecution or defense of a claim.
To explain it another way, Magna did not allege that Thompson Coburn was negligent in its
representation of Magna in the SBU v. Magna litigation or in its representation of Magna
when Thompson Coburn represented Magna after the injured plaintiffs brought suit against
39
Magna. Rather, Magna alleged that, in giving Magna faulty advice, Thompson Coburn
breached its duty to Magna and that, because of the faulty advice, Magna was sued by the
injured plaintiffs and forced to defend and ultimately settle those lawsuits. As a result,
Magna claimed as damages the legal expenses it paid in defending the cases against it and
the amounts it paid in ultimately settling those cases.
Magna pled and proved that had the undisclosed risks been known regarding
appointing Flag as the successor corporate trustee, Magna w ould not have accepted those
risks and would not have consented to the recommended course of action. See Metrick, 266
Ill. App. 3d at 655; Serafin v. Seith, 284 Ill. App. 3d 577, 587 (1996); Owens v. McDermott,
Will & Emery, 316 Ill. App. 3d 340, 351 (2000). In fact, that was the sole reason Magna
hired Thompson Coburn: to protect it from potential lawsuits by the injured plaintiffs if their
suspicions about Gibson came to be true. The jury determined that Thompson Coburn failed
in that regard, and it found that Magna was damaged by being forced to engage in litigation
it otherwise would not have been required to engage in. This was the proximate-cause
determination in this case, and we will not invade the province of the jury. See Judge, 221
Ill. 2d at 210 (" 'The issue of proximate causation in a legal malpractice setting is generally
considered a factual issue to be decided by the trier of fact' " (quoting Renshaw v. Black, 299
Ill. App. 3d 412, 417 (1998))). Further, the jury was not given an instruction requiring
Magna to prove a case-within-a-case, and Thompson Coburn has not alleged that it was error
for the court not to do so.
Magna's case-within-a-case went to the amount of damages Magna could recover, not
to whether Magna could recover at all. In any event, the jury must have found that Magna
proved its case-within-a-case because it awarded Magna more than just its legal expenses.
It was not error for the jury to do so. In reality, the legal landscape facing Magna in early
2002 was unclear. Magna was being sued by the injured plaintiffs in James, Topsakalyan,
40
McCracken, Gaudreault, and Hicks on a number of different legal theories for transferring
the trusts to Flag. While in Topsakalyan Magna received a favorable ruling when the trial
court granted Magna's motion to dismiss with prejudice on December 5, 2002, that ruling
was being appealed, and on April 24, 2003, Magna received an unfavorable ruling in
McCracken when Judge LeChien granted a partial summary judgment against Magna
regarding liability. Magna had been dealt two inconsistent hands and had to decide whether
to fold and settle or to play through with the uncertainty of not knowing what hand it would
be dealt next. Magna settled, and it had the right to do so. See N.E. Finch Co. v. R.C. Mahon
Co., 54 Ill. App. 3d 573, 575 (1977) ("Without question, the law favors amicable settlements
between litigants. In furtherance of this policy, rules should not be encouraged which allows
a defendant no alternative but to litigate the question of his liability to a plaintiff in order to
preserve his cause of action over against a prospective indemnitor. It is therefore
unnecessary for a party seeking indemnity to obtain a judicial determination that it is liable
to an injured party [citation], so long as that in settling the principal action, the prospective
indemnitee is responding to a reasonable anticipation of personal liability"); see also Faier
v. Ambrose & Cushing, P.C., 154 Ill. 2d 384, 387 (1993) ("[A] claim against an attorney for
recovery of a settlement may be based upon implied indemnity"); cf. Praxair, Inc. v. Hinshaw
& Culbertson, 235 F.3d 1028, 1032 (7th Cir. 2000) ("A plaintiff in a legal malpractice suit
is not required to prove to a certainty that he would have won (or lost less) had it not been
for the negligence of its lawyer, but he must show that a victory of some sort, even if just
partial, was more likely than not"). This is nothing more than the long-standing principle that
"where the natural and proximate consequences of a wrongful act have been to involve the
plaintiff in litigation with others, there may be a recovery in damages against the author of
such act, measured by the reasonable expenses incurred in such litigation" (Ritter v. Ritter,
381 Ill. 549, 554-55 (1943)).
41
Here, the question of whether Magna was responding to a reasonable anticipation of
personal liability when it settled with the injured plaintiffs was a question for the trier of fact.
See Sorenson, 90 Ill. App. 3d at 376 (finding that it is the province of the trier of fact to
determine whether the plaintiff's efforts in her unsuccessful attempts to mitigate damages
were reasonable). If Thompson Coburn thought that Magna did not owe the injured plaintiffs
a duty, fiduciary or otherwise, or that the claims brought against Magna by the injured
plaintiffs had no merit, Thompson Coburn could have defended Magna when it had the
opportunity to do so. Thompson Coburn was asked to idemnify Magna after Judge LeChien
entered the summary judgment against Magna, and Thompson Coburn declined. Thompson
Coburn cannot now ask the court to go back and determine that Magna had no right to settle
the cases against it. See N.E. Finch Co., 54 Ill. App. 3d at 577 (" '[W]here the indemnitor
denies liability under the indemnity contract and refuses to assume the defense of the claim,
then the indemnitee is in full charge of the matter and may make a good[-]faith settlement
without assuming the risk of being able to prove absolute legal liability or the actual amount
of the damage. *** A contrary rule would make the right to settle meaningless in cases
where the indemnitor has denied liability' " (quoting Chicago, R.I. & P.R. Co. v. Dobry Flour
Mills, Inc., 211 F.2d 785, 788 (10th Cir. 1954))). Again, whether Magna show ed that the
settlement was reasonable and made in good faith was a question of fact for the jury.
We find our analysis consistent with the supreme court's logic and reasoning in
Jackson Jordan, Inc. v. Leydig, Voit & Mayer, No. 70410 (Ill. December 4, 1992), different
results reached on reh'g, 158 Ill. 2d 240 (1994), an opinion that we acknowledge was
superseded and vacated by a later opinion. See Long v. City of New Boston, 91 Ill. 2d 456,
462 (1982) ("Though decisions of this court are final when the opinion is filed [citation], a
later modification of a filed opinion supersedes and vacates the earlier opinion").
Nevertheless, we believe that the language employed and the reasons set forth in the earlier
42
opinion provide some guidance to the case at hand. See Welton v. Hamilton, 344 Ill. 82, 98
(1931) (denial of second petition for rehearing) ("When a rehearing is allowed and the cause
further considered it is the decision of the court, rather than the language employed or the
reasons given in the opinion, which is the subject of reconsideration"); cf. People v. Brooks,
173 Ill. App. 3d 153, 157 (1988) ("While a modification to an opinion following a rehearing
does supersede and vacate the earlier opinion [citation], this did not occur here. Rather, the
petition for rehearing was denied, and the modification concerned a matter completely
unrelated to the voir dire issue originally addressed by the supreme court in the July 31, 1984,
Zehr opinion. Therefore the modification of the unrelated issue did not supersede and vacate
that portion of Zehr dealing with voir dire. As a result, the law as set forth in Zehr on July
31 was clearly applicable to the voir dire proceeding in defendants' case").
In Jackson Jordan, Inc., the plaintiff, a manufacturer and seller of railroad-track-
maintenance equipment, asked its law firm whether a new track-maintenance machine it was
planning to build and market would infringe on any existing patents. The law firm concluded
that the new machine would not infringe on any unexpired patents, and the firm sent a letter
to the plaintiff stating that it did " 'not find any unexpired patents that would present any
infringement problems.' " Jackson Jordan, Inc., No. 70410, slip op. at 1 (December 4, 1992).
Following this advice, the plaintiff proceeded with its plans to manufacture and market the
machine and other similar machines. Several years later, however, a competitor in the
railroad-track-maintenance-equipment industry alleged that the plaintiff's track-maintenance
machines infringed on its patent. After several rounds of litigation, the United States Court
of Appeals for the Federal Circuit agreed. See Jackson Jordan, Inc. v. Plasser American
Corp., 824 F.2d 977 (Fed. Cir. April 23, 1987) (table). All that remained to be resolved was
the amount of the competitor's damages.
The plaintiff then invited the law firm to take part in the settlement negotiations with
43
the competitor and, at the same time, advised the law firm of its intention to sue it for
malpractice. The law firm declined to participate in the negotiations and withdrew as the
plaintiff's counsel. The plaintiff and the competitor settled the dispute for $1.9 million.
The plaintiff then filed a legal malpractice suit against the law firm, alleging that the
law firm had failed to examine and review the competitor's patent when it was issued and
when the plaintiff requested the opinion regarding its new machine and had negligently failed
to advise it that its machines might infringe upon its competitor's patent. The plaintiff
requested the $1.9 million it settled for, along with $350,000, the approximate amount of the
legal fees it had incurred over the course of its patent litigation with the competitor.
The circuit court granted a summary judgment in favor of the law firm on the ground
that the action was barred by the five-year limitations period applicable to legal malpractice
claims. The court found that the applicable limitations period began to run against the
plaintiff no later than the date of the letter in which the competitor announced its intention
to pursue a patent infringement action against the plaintiff. The plaintiff appealed, and the
appellate court affirmed. Jackson Jordan, Inc. v. Leydig, Voit & Mayer, 199 Ill. App. 3d 728
(1990).
On appeal to the Illinois Supreme Court, the issue was the determination, under the
discovery rule, of the date the plaintiff knew, or reasonably should have known, that the
plaintiff had been injured. The supreme court gave the following analysis:
"As we have noted, [the plaintiff's] primary contention before this court is that
the company's malpractice action against the *** law firm could have accrued as late
as September 1987, when the amount of [the plaintiff's] liability to [its competitor]
was finally determined, but no earlier than November 1984, when the appeals court
first delivered an adverse decision in that litigation. [The plaintiff] maintains that its
malpractice action would have been premature if it had been filed prior to that span
44
of time. [The plaintiff] asserts that the decisions of the courts below, which place the
discovery date before that period, effectively abolish the requirements of proximate
cause and actual damages, elements of a legal malpractice action. In support of this
contention, [the plaintiff] cites a number of legal malpractice cases in which the
occurrence of the clients' injuries was found to depend on the results eventually
achieved in the underlying litigation. [Citations.] Applied to the circumstances of
this case, [the plaintiff's] argument necessarily implies that if [its competitor's] patent
had been found invalid, or if the [plaintiff] machines had been found not to infringe
on it, then [the plaintiff] could not have brought a cause of action for legal
malpractice. We do not believe that [the law firm's] duty to its clients was as narrow
as [the plaintiff's] argument assumes.
We agree with [the law firm] that the malpractice allegedly committed in the
present case [could not] be characterized as involving simply 'the loss of an
underlying cause of action or the loss of a meritorious defense if the attorney was
defending in the underlying suit.' [Citation.] The basis for [the plaintiff's] claim of
negligence in the present case is the [law firm's] failure in 1973, and earlier, to
properly search the patent records and to advise the company that its planned track
maintenance machines 'infringed or possibly infringed' on [its competitor's patent].
Accordingly, [the law firm's] duty in preparing the patent clearance letter in
1973 was not merely to protect its client from meritorious patent infringement actions,
but, in a broader sense, to protect it against the uncertainty and expense even of
ultimately unsuccessful challenges to its products. A company's proportionate share
of the relevant market, its relationships with its competitors, and its relationships with
its customers can all be important considerations when the company determines how
aggressive or cautious it wishes to be in the development of new products. In the
45
present case, [the plaintiff] wanted to be sure, before it expended substantial sums in
the development and production of [its product] and its progeny, that the new track
maintenance machines would not be the target of competitors' patent infringement
claims.
Thus, [the plaintiff's] twin arguments–that its cause of action for malpractice
could not accrue until it settled the infringement claim with [its competitor] or, at the
earliest, until it suffered its first adverse judicial decision in that litigation–fail to
accommodate the full extent of [the law firm's] undertaking. ***
In the present case, [the law firm] allegedly breached its duty of care to its
client when, in 1973, it advised [the plaintiff] that the company's planned track
maintenance machine faced no 'infringement problems.' Injury thus would have
occurred once the client was faced with the expense of defending a patent
infringement claim, regardless of its eventual outcome. Although a finding of
infringement in the underlying litigation with the patent holder would support a claim
of malpractice, [the plaintiff] could have maintained its action even without a judicial
declaration of infringement. For example, a finding that [the competitor] was barred
from recovering damages for the alleged infringement on the grounds of laches or
estoppel, the two defenses [the law firm] proposed, would not defeat [the plaintiff's]
claim that the law firm was negligent in having failed to advise the company of the
[competitor's] patent. By the same token, even a finding of patent invalidity would
still mean that the client had been unnecessarily subjected to the expense and
uncertainty of litigation. As a manufacturer preparing to embark on the development
and production of a major new product, [the plaintiff] sought its attorneys' assurance
that its new machine would not leave the company vulnerable to the expense and
distraction of patent infringement claims. Having given [the plaintiff] that advice, the
46
[law] firm could later be responsible for simply exposing its client to unwanted
litigation.
As [the law firm] notes, expenses occasioned by the wrongful acts of a third
party may be compensable as damages. [Citations.] Here, the injury is not only the
cost to [the plaintiff] of its settlement with [its competitor], but includes as well legal
fees incurred by [the plaintiff] in ascertaining the status and significance of the
[competitor's previous] litigation in 1980 and, later, in defending its products against
[the competitor's] eventual claim. In the present case, then, the outcome of the patent
litigation would have determined the extent, but not the existence, of the client's
damages. See Belden v. Emmerman (1990), 203 Ill. App. 3d 265, 270, 560 N.E.2d
1180 (client sustained injury without regard to result reached in underlying litigation;
with respect to appeal of that judgment, 'the only difference between affirmance and
reversal is the amount of damage sustained' by the client).
For these reasons, we conclude that [the plaintiff's] claim against [the law firm]
could have accrued prior to November 1984 and did not need to await a determination
of [the plaintiff's] damages in the settlement of its claim, or even an adverse judicial
declaration upholding [the competitor's] patent. Adopting [the plaintiff's] theory in
the circumstances shown here would require–or permit–a party to delay bringing suit
until all possible consequences of the alleged malpractice are known. That result is
neither necessary nor desirable. If in any particular case an accurate assessment of the
client's damages depends on the outcome of other, pending litigation, proceedings on
the malpractice claim need only be stayed until those damages are more definitely
known." Jackson Jordan, Inc., No. 70410, slip op. at 8-11 (December 4, 1992).
The supreme court then went on to determine there was no question of fact regarding
the time of the discovery of the malpractice claim, and it affirmed the judgment of the
47
appellate court. Jackson Jordan, Inc., No. 70410, slip op. at 12-15 (December 4, 1992).
After this opinion was filed, a petition for rehearing was allowed and the supreme court
subsequently modified its decision. In the later opinion, the supreme court reversed the
appellate court, finding that a question of fact existed regarding when the plaintiff discovered
its injury. Jackson Jordan, Inc., 158 Ill. 2d at 250-51. While the later opinion did not
include the language and reasons set forth in the earlier opinion that we find helpful today,
the later opinion did not discredit this language and we find that it provides some guidance
to our decision today. In fact, the original dissenting justice in Jackson Jordan, Inc., who
authored the later majority opinion, stated in his original dissent, "I fully agree that the
defendant's duty was as broad as the majority describes it ***." Jackson Jordan, Inc., No.
70410, slip op. at 17 (December 4, 1992) (Heiple, J., dissenting). This strengthens our belief
in the validity of the principles set forth. See Lebron v. Gottlieb Memorial Hospital, Nos.
105741, 105745, slip op. at 12-13 (February 4, 2010) (discussing the weight to be afforded
dicta).
Like in Jackson Jordan, Inc., the malpractice committed here cannot be characterized
as simply involving the loss of any underlying cause of action or the loss of a meritorious
defense to an underlying suit. The basis for Magna's claim was Thompson Coburn's failure
to properly advise it how to terminate its position as the trustee while exposing it to the least
amount of risk. Thompson Coburn failed to do that and as a result could be found liable for
the reasonable exposure and expenses to which Magna was subjected. Our decision today
is limited to transaction-based legal malpractice cases.
B. Collateral Estoppel
Thompson Coburn contends that the circuit court never should have analyzed the
question of whether or not Magna owed a fiduciary duty to the injured plaintiffs. Thompson
Coburn argues that Magna was collaterally estopped from raising that issue in this lawsuit
48
because that issue had already been litigated by the First District Appellate Court in
Topsakalyan.
"Collateral estoppel is an equitable doctrine that prevents a party from relitigating an
issue that has been decided in a prior proceeding." Preferred Personnel Services, Inc. v.
Meltzer, Purtill & Stelle, LLC, 387 Ill. App. 3d 933, 944 (2009). "When properly applied,
collateral estoppel, also referred to as issue preclusion, promotes fairness and judicial
economy by preventing the relitigation of issues that have already been resolved in earlier
actions." Du Page Forklift Service, Inc. v. Material Handling Services, Inc., 195 Ill. 2d 71,
77 (2001). "Collateral estoppel may be applied when [1] the issue decided in the prior
adjudication is identical with the one presented in the current action, [2] there was a final
judgment on the merits in the prior adjudication, and [3] the party against whom estoppel is
asserted was a party to, or in privity with a party to, the prior adjudication." Du Page Forklift
Service, Inc., 195 Ill. 2d at 77.
"In order to operate as an estoppel, the facts sought to be relitigated must have been
specifically litigated and necessarily decided." Gelsomino v. Gorov, 149 Ill. App. 3d 809,
812 (1986) (citing Oberman v. Byrne, 112 Ill. App. 3d 155, 160 (1983)). "There must have
been a decision with respect to a specific fact in the prior judgment that was material and
controlling in that case and also material and controlling in the pending case." Gelsomino,
149 Ill. App. 3d at 812. " 'It must also conclusively appear that the matter of fact was so in
issue that it was necessarily determined by the court rendering the judgment interposed as a
bar by reason of such estoppel.' " Gelsomino, 149 Ill. App. 3d at 812-13 (quoting People ex
rel. Chicago & Eastern Illinois R.R. Co. v. Fleming, 42 Ill. 2d 231, 235 (1969)).
"Nonetheless, even w here the threshold elements of the doctrine are satisfied[] and an
identical common issue is found to exist between a former and current lawsuit, collateral
estoppel must not be applied to preclude parties from presenting their claims or defenses
49
unless it is clear that no unfairness results to the party being estopped." Preferred Personnel
Services, Inc., 387 Ill. App. 3d at 944-45 (citing Kessinger v. Grefco, Inc., 173 Ill. 2d 447,
467-68 (1996)).
Here, the threshold requirements for collateral estoppel have not been met. The issue
decided in the prior adjudication is not identical with the issue presented in this case. A close
reading of Topsakalyan reveals that the issue decided there was limited to whether Magna
owed a fiduciary duty to the injured plaintiffs as trust beneficiaries. See Topsakalyan v.
Gibson, No. 1-03-0539 (2005) (unpublished order pursuant to Supreme Court Rule 23).
Here, however, the injured plaintiffs brought suit against Magna under a number of different
legal theories, not simply on the basis that the injured plaintiffs were trust beneficiaries.
These theories were not addressed in Topsakalyan. See Topsakalyan, order at 20 (ruling that
the trial court did not abuse its discretion in denying the plaintiffs' motion to amend its
complaint because "[i]n effect, [the] plaintiffs desire a 'do over' as the result of what they
perceive as missteps by their original appellate counsel").
Further, even if the threshold requirements of the doctrine were met, we find that it
would be highly unfair to Magna to apply collateral estoppel to it. On December 5, 2002,
when the Cook County circuit court granted Magna's motion to dismiss in Topsakalyan,
Magna had several downstate claims pending against it brought by the injured plaintiffs.
Topsakalyan was being appealed and the appellate court decision was not filed until March
25, 2005. In the meantime, Magna had a summary judgment entered against it in McCracken
and other adverse rulings in the downstate cases, which led Magna to settle. Magna could
not use Topsakalyan as a bar in the downstate claims that were eventually settled, and it
would be highly unfair to allow Thompson Coburn to use collateral estoppel to now bar
Magna from proving its malpractice case.
Furthermore, we fail to see how applying collateral estoppel in this case would
50
promote the other purpose behind the doctrine of collateral estoppel–judicial economy. This
case has already been fully litigated and tried by a jury. Applying collateral estoppel at this
point would not promote judicial efficiency because we would not be preventing the
relitigation of issues that have already been resolved in earlier actions. See Du Page Forklift
Service, Inc., 195 Ill. 2d at 77 ("When properly applied, collateral estoppel *** promotes
fairness and judicial economy by preventing the relitigation of issues that have already been
resolved in earlier actions"). Collateral estoppel does not apply in this case.
II. Magna's Motion for a New Trial
Magna contends that the trial court erred in denying it a new trial on the issue of
damages alone or, alternatively, a new trial on all the issues. Magna contends, "An award
of damages in the amount of $3,654,606.40 is 'manifestly inadequate.' " We disagree.
"It is well established that, in an appeal from a jury verdict, a reviewing court may not
simply reweigh the evidence and substitute its judgment for that of the jury." Snelson v.
Kamm, 204 Ill. 2d 1, 35 (2003). "Indeed, a reviewing court may reverse a jury verdict only
if it is against the manifest weight of the evidence." Snelson, 204 Ill. 2d at 35. "A verdict
is against the manifest weight of the evidence where the opposite conclusion is clearly
evident or where the findings of the jury are unreasonable, arbitrary, and not based upon any
of the evidence." Snelson, 204 Ill. 2d at 35.
"The determination of whether a new trial should be granted rests within the sound
discretion of the trial court, whose ruling will not be reversed unless it reflects an abuse of
that discretion." Snelson, 204 Ill. 2d at 36. " 'If the trial judge, in the exercise of his
discretion, finds that the verdict is against the manifest weight of the evidence, he should
grant a new trial; on the other hand, where there is sufficient evidence to support the verdict
of the jury, it constitutes an abuse of discretion for the trial court to grant a motion for a new
trial.' " Snelson, 204 Ill. 2d at 36 (quoting Maple v. Gustafson, 151 Ill. 2d 445, 456 (1992)).
51
"In determining whether the trial court abused its discretion, the reviewing court should
consider whether the jury's verdict was supported by the evidence and whether the losing
party was denied a fair trial." Maple, 151 Ill. 2d at 455. "Verdicts are to be liberally
construed, however, and may be amended to conform to the pleadings and evidence
contained in the record whenever the intention of the jury is clear." Congregation of the
Passion, Holy Cross Province v. Touche Ross & Co., 159 Ill. 2d 137, 171-72 (1994).
"Illinois courts have repeatedly held that the amount of damages to be assessed is
peculiarly a question of fact for the jury to determine [citations] and that great weight must
be given to the jury's decision [citations]." Snelson, 204 Ill. 2d at 36-37. "Indeed, a court
reviewing a jury's assessment of damages should not interfere unless a proven element of
damages was ignored, the verdict resulted from passion or prejudice, or the award bears no
reasonable relationship to the loss suffered." Snelson, 204 Ill. 2d at 37. "If a jury's award
falls within the flexible range of conclusions reasonably supported by the evidence, it must
stand." Jones v. Chicago Osteopathic Hospital, 316 Ill. App. 3d 1121, 1138 (2000); see also
Posner v. Davis, 76 Ill. App. 3d 638, 645 (1979). "Illinois has long recognized the
applicability, in questions of damages, of the doctrine of avoidable consequences, which
prevents a party from recovering damages for consequences which that party could
reasonably have avoided." Maere v. Churchill, 116 Ill. App. 3d 939, 946 (1983). In making
this determination, we consider the record as a whole. Snelson, 204 Ill. 2d at 37.
As mentioned previously, at the trial, Magna argued that it should be awarded
approximately $11,789,053, consisting of $1,084,419 it paid Thompson Coburn in attorney
fees, $997,486 it paid the Freeark Firm in attorney fees, $1,478,721 it paid to settle
Gaudreault, $2.5 million it paid to settle Hicks, and $5,728,425 it paid to settle McCracken
and James. In its verdict, the jury found that Magna lost the full amount of damages claimed
by Magna as a result of Thompson Coburn's breach but found that Magna could have saved
52
approximately $8,134,446 had it exercised reasonable effort and ordinary care. Thus, the
jury awarded Magna approximately $3,654,606. We find this award to be reasonably related
to the loss suffered and within the flexible range of conclusions supported by the evidence.
Thus, the circuit court did not abuse its discretion in denying Magna a new trial.
Magna argues in its reply brief, however, that because Thompson Coburn had the right
to defend M agna and mitigate damages in the cases brought against it by the injured plaintiffs
but refused to defend M agna, Thompson Coburn has no right to quarrel with the settlements
reached by Magna. See Karas v. Snell, 11 Ill. 2d 233, 247-49 (1957). While Magna did ask
Thompson Coburn to indemnify it in the cases brought against it by the injured plaintiffs,
Magna did not make this argument to the trial court or in its opening brief, and therefore, this
issue has been waived. E.g., People v. Bounds, 171 Ill. 2d 1, 56 (1995); Gruse, 138 Ill. App.
3d at 697; 210 Ill. 2d R. 341(h)(7) ("Points not argued [in an appellant's initial brief] are
waived and shall not be raised in the reply brief, in oral argument, or on petition for
rehearing"). In truth, throughout the trial, evidence was presented regarding whether it was
reasonable for Magna to settle the cases it had against it, and the jury was instructed on
whether Magna could have mitigated its damages.
Over the course of the trial, the jury heard conflicting testimony on the amount of
damages Magna sustained as a result of Thompson Coburn's breach. Evidence was presented
by experts on both sides regarding the reasonableness of Magna's decision to settle and
regarding the amounts it paid to settle the Gaudreault, McCracken, James, and Hicks cases.
Expert testimony was also presented on whether it was reasonable for Magna to recoup the
attorney fees it had paid Thompson Coburn and the Freeark Firm in defending Magna in the
lawsuits brought against it by the injured plaintiffs. Based upon this conflicting evidence,
the jury could have reduced the award to Magna relying upon a number of things.
For example, the Freeark Firm testified that it thought that Judge LeChien was wrong
53
in granting Magna a partial summary judgment in the McCracken case and that Magna had
a very high likelihood of having that ruling reversed on appeal. Nevertheless, Magna chose
to settle McCracken and James rather than appeal the partial summary judgment. The
McCracken and James settlements totaled $5,728,425, with Magna agreeing to pay between
50% and 90% of the net losses associated with the 1998 transfers. Based upon this evidence,
the jury could have concluded that Magna was not reasonable in settling these cases or not
reasonable in settling for this amount, especially considering Magna's attorney's belief that
Magna had a "very high likelihood" of having the McCracken ruling reversed on appeal.
Further, there was also testimony from the Freeark Firm that Magna's liability in Hicks
did not stem from Thompson Coburn's acts and that Magna would not be able to recover
from Thompson Coburn any amounts it paid in settling Hicks. Magna settled the Hicks case
for $2.5 million. Nevertheless, Magna argued that it should recover this $2.5 million.
Experts argued both for and against whether Magna should be able to recover this amount.
Again, the jury could have concluded that all or portion of this amount was unreasonable.
Furthermore, in a letter to Magna from the Freeark Firm prior to settling McCracken
and James and Hicks, the Freeark Firm ranked the trust companies as the least culpable of
all the other parties involved, including Gibson, SBU, Helfrey, Ducey, and others associated
with SBU. The Freeark Firm also represented to Magna that of all the trust companies,
Magna was "probably in the best position." Despite this, evidence was presented that Magna
paid more to settle than any other defendant. Thompson Coburn's expert testified that it was
not reasonable for M agna to settle because Magna had minimal exposure at best and paid
nearly twice as much as any other defendant. The jury certainly could have used this
evidence in determining the amount of its verdict.
The jury also heard evidence that Magna's attorneys, the Freeark Firm, agreed to settle
the James, McCracken, and Hicks cases on the agreement that the Freeark Firm would draft
54
an amended complaint against its own client, Magna, alleging for the first time in those cases
that Magna, through the actions of Thompson Coburn, had breached fiduciary duties to the
injured plaintiffs by transferring the trusts to Flag, and that the injured plaintiffs' attorneys
would file that complaint in their respective cases. Again, evidence was presented on both
sides regarding the propriety of this conduct.
Additionally, there was evidence that Thompson Coburn notified Magna in May 1999
that a confidential source informed Thompson Coburn that it believed that the trust money
Magna transferred to Flag flowed from Flag to SBU and then from SBU to Gibson. M agna's
president at that time, Finn, testified that the confidential source had suggested that Magna
perform a "laundry list of things" but that Magna told Thompson Coburn that Magna thought
it was too late. Magna did not authorize Thompson Coburn "a significant amount of money
to go chasing these rabbits down these holes" because there was not enough direct evidence
to go forward with–"it was simply allegations from an anonymous source." The jury could
have inferred from this that Magna should have taken some action at this point to try and
mitigate the damages.
In sum, the jury heard evidence across the board regarding the amount of damages in
this case. Not surprisingly, the experts on both sides disagreed with everything from whether
Magna should have settled the cases in the first place to the amount Magna paid in
settlement. At the end of the day, the jury took this conflicting testimony into deliberations
and determined that Magna should recover $3,654,606 of the $11,789,053 in alleged
damages incurred by Magna. It was the jury's role to resolve the conflicts in the evidence,
to make credibility determinations, and to decide the weight to be given to the witnesses'
testimony. We will not usurp that function. See Orzel v. Szewczyk, 391 Ill. App. 3d 283, 293
(2009). A review of the record reflects that this verdict was far from being against the
manifest weight of the evidence, and the trial court did not abuse its discretion in denying the
55
request for a new trial on the issue of damages or on all the issues.
III. Magna's Election Between the Contract Count and the Negligence Count
Magna's second point is that the circuit court erred in requiring it to elect between
count I, the professional negligence count, and count II, the contract count. Thompson
Coburn counters that Magna was not required to make this election but, instead, elected to
go to the jury solely on the contract count of its second amended complaint. While we agree
with Magna that "a complaint against a lawyer for professional malpractice may be couched
in either contract or tort and that recovery may be sought in the alternative" (Collins v.
Reynard, 154 Ill. 2d 48, 50 (1992)), we disagree with Magna that it was required by the court
to elect which count would go the jury.
"It is well established that a plaintiff may have only one satisfaction for an injury."
Touche Ross & Co., 159 Ill. 2d at 172. Here, both the tort count and the contract count were
based upon the same facts and sought a recovery for the same injury. Thus, Magna could not
have recovered under both theories. Nevertheless, Magna contends the trial court erred by
making it go forward with only the breach-of-contract count.
Looking at all the circumstances, we disagree. From the moment the contract theory
was added (approximately six weeks into the trial), Magna's attorney, Carr, declared that
Magna was "not going to the jury on both counts." He further stated, "I would elect before
we go to the jury, because I think it's very confusing if I don't." The same day, Carr
contended: "I have the right under the law to let both counts go the jury and make the
election after judgment, but I'm going to waive that right at this point in time. I'm not going
to waive the right as to when I get to make the election." (Emphasis added.) At this point,
Magna waived its right to take both counts to the jury. See Tri-City Jewish Center v. Blass
Riddick Chilcote, 159 Ill. App. 3d 436, 440 (1987) ("W aiver occurs whenever a party
intentionally relinquishes a known right, either expressly or by conduct inconsistent with an
56
intent to enforce that right").
While Magna was not required to elect which count it wished to pursue before final
judgment, once Magna waived its right, which Carr indicated he was aware Magna had, it
became irrevocable and could not be revived. See Blass Riddick Chilcote, 159 Ill. App. 3d
at 440 ("A waiver once made is irrevocable and cannot be revived"); cf. Kel-Keef
Enterprises, Inc. v. Quality Components Corp., 316 Ill. App. 3d 998, 1011 (2000) (holding
that once the plaintiff expressly elected it wished to abandon its remedy of damages in favor
of being excused from the contract, the plaintiff's election became final and irrevocable);
Sluka v. Bielicki, 335 Ill. 202, 210 (1929) ("Where the doctrine of election of remedies
applies[,] the bar arises as soon as the choice is made[] and becomes full and absolute against
the other remedy at the time of the filing of the petition, declaration[,] or claim").
Indeed, Magna acknowledged twice that it elected which count it would proceed upon
after waiving its right to send both counts to the jury. At the jury-instruction conference,
when Thompson Coburn tried to offer an instruction related to legal malpractice, Carr
objected and argued: "We dismissed that count. We elected to go on the contract, and it is
not a legal malpractice case."
Later at the trial, while examining his last rebuttal witness, Carr stated to the witness,
"You understand that the court had decided that this case is going to be submitted under the
part of the pleading that discusses an implied contract?" Immediately following this
question, Thompson Coburn's attorney interjected and stated, "The court didn't decide that,"
to which Carr replied, "Well, the plaintiff has elected and the court has approved that this
case would go to the jury on the *** complaint that alleges an implied contract was entered
between Magna and Thompson Coburn." Magna cannot waive a right in open court,
repeatedly state on the record that it elected which count would go to the jury, and then claim
that the trial court erred by requiring it to elect which count to proceed with.
57
While the court did later tell Carr, after he had told the court that he had waived
Magna's right to take both counts to the jury, that Magna's election would have to be made
prior to closing argument, by this point Magna had already waived its right to take both
counts to the jury. Further, when Thompson Coburn requested the court to compel Carr to
elect which count he would take to the jury, prior to the court ruling anything, Carr stated:
"Well, I'm not going to keep you in suspense anymore. Once I get my exhibits in and offered
*** I am going to elect to go on the contract count." Carr then reassured Thompson Coburn
and the court of Magna's decision by stating: "We're going to go on the contract. Don't worry
about it." Carr never objected or stated that he was being forced to elect, and he did not
argue to the court that he wanted to submit both counts to the jury. To the contrary, he
consistently informed the court that only one count would go to the jury.
Later on during the instruction conference, Carr did state to the court that he was
withdrawing his election. Shortly after this statement, however, a brief recess was taken, and
once the parties were back in open court, Thompson Coburn stated that Carr had elected to
proceed with the contract count. Again, Carr never objected or said anything to the court
after this statement was made.
Further, even if we found that Magna had not waived its right and had been required
by the court to elect which count would go to the jury, we would not be inclined to reverse
the judgment because Magna has failed to demonstrate how it was prejudiced. Schaffner v.
Chicago & North Western Transportation Co., 161 Ill. App. 3d 742, 754 (1987) ("Generally,
an error is not reversible unless it is shown that the error was substantially prejudicial and
thereby unduly affected the outcome of the trial"), aff'd, 129 Ill. 2d 1 (1989); Greig v.
Johnson, 22 Ill. App. 3d 646, 652 (1974) ("[W]e would not be inclined to reverse the
judgment unless [the] defendant *** demonstrated that she was prejudiced by the change
[citation], especially where the result on remand would likely be the same").
58
Here, Magna has not alleged how it was prejudiced or how the alleged error would
have affected the outcome of the trial. Magna was allowed to present all of its evidence to
the jury and acknowledged that it would have been foolish to take both counts to the jury, and
from a practical standpoint, this was likely a part of Carr's trial strategy to avoid the jury
receiving instructions on tort affirmative defenses, like contributory negligence, by choosing
to proceed only on the contract count. Thus, we find Magna's contention to be without merit.
Not only that but if anything, Carr, by informing the court that he was not going to
take both counts to the jury and by waiving that right, induced the court to allegedly require
him to elect which count to take to the jury. Carr cannot now complain of this alleged error.
See In re Detention of Swope, 213 Ill. 2d 210, 217 (2004) ("Simply stated, a party cannot
complain of error which that party induced the court to make or to which that party
consented").
CONCLUSION
For the foregoing reasons, the judgment of the circuit court is affirmed.
Affirmed.
SPOMER and STEWART, JJ., concur.
59
NO. 5-08-0497
IN THE
APPELLATE COURT OF ILLINOIS
FIFTH DISTRICT
___________________________________________________________________________________
UNION PLANTERS BANK, N.A., ) Appeal from the
) Circuit Court of
Plaintiff-Appellant and ) Madison County.
Cross-Appellee, )
)
v. ) No. 04-L-791
)
THOM PSON COBURN LLP, )
) Honorable
Defendant-Appellee and ) Daniel J. Stack,
Cross-Appellant. ) Judge, presiding.
___________________________________________________________________________________
Opinion Filed: June 3, 2010
___________________________________________________________________________________
Justices: Honorable James M . Wexstten, J.
Honorable Stephen L. Spomer, J., and
Honorable Bruce D. Stewart, J.,
Concur
___________________________________________________________________________________
Attorney Rex Carr, The Rex Carr Law Firm, LLC, 412 M issouri Avenue, East St. Louis,
for IL 62201
Appellant
___________________________________________________________________________________
Attorneys Carol A. Hogan, Morgan R. Hirst, Jones Day, 77 West Wacker Drive, Chicago, IL
for 60601; Michael J. Nester, Donovan, Rose, Nester & Joley, P.C., 8 East Washington
Appellee Street, Belleville, IL 62220
___________________________________________________________________________________
Union Planters Bank, N.A. v. Thompson Coburn LLP
Combined Opinion