Hoagland v. Sandberg, Phoenix & Von Gontard, 385 F. 3d 737 (2004)
7th Cir.: Underlying legal malpractice claim
Student Contributor: Clem Durham
Facts: The district court determined after a bench trial that Hoagland’s suit failed as a suit for legal malpractice. Hoagland doesn’t disagree. His grievance is that he should have been allowed either to amend his complaint to make clear that his claim, which he believes the district judge misunderstood, is not malpractice but is rather breach of contract or alternatively breach of fiduciary duty, or allowed to dismiss his suit without prejudice and start over. The claim, in substance and without regard to how it might be characterized, is that the Sandberg law firm represented the adversaries — a corporation (Midwest) and its swindling president — in a derivative action and used its dual representation to prevent the corporation from recovering assets of which the president had wrongfully deprived the corporation; that the law firm had wrongfully accepted payment of its fees from the corporation (the client whose interests the firm had sacrificed); and that it should therefore be required to rebate ("disgorge") the fees to Hoagland for the benefit of the corporation.
Issue: Is it proper to dismiss a claim as duplicative, when a breach of fiduciary duty claim is based on the same operative facts as a legal malpractice claim, and results in the same injury?
Ruling: Yes. Hoagland cannot be permitted, by recharacterizing the claim — whether by calling the conflict of interest a breach of fiduciary obligation or by contending that his contract with the law firm contained an implied promise not to commit such conflicts — to get around the requirement of presenting expert testimony. That is the kind of formalist move that courts rightly reject. Illinois courts hold that "when a breach of fiduciary duty claim is based on the same operative facts as a legal malpractice claim, and results in the same injury, the later claim should be dismissed as duplicative." The fact that restitution was sought instead of conventional damages also does not alter the nature of the suit. Restitution is a remedy, at least when sought as here as reparations for a tort. Asking for restitution doesn’t change the cause of action.
Lesson: Make sure all claims are included in the initial complaint, because if a new theory of recovery is brought too late, it may be deemed duplicative.
Tagged with: Commercial, Conflicts of Interest, Corporate Law, diversity of citizenship, duplicative claims, Expert Witnesses, Federal, federal jurisdiction, Fiduciary Duty, jurisdiction, Legal Ethics, Litigation
Posted in: Commercial, Conflicts of Interest, Corporate Law, Expert Witnesses, Federal, Fiduciary Duty, Legal Ethics, Litigation