IL: Underlying trade secret theft litigation
Facts: Learning Curve filed legal malpractice action against its former attorneys for allegedly failing to advise it that it was at risk of having to pay significant damages if it took trade secret litigation to trial. In 1995 PlayWood sued plaintiff in federal court for misappropriating a trade secret. In 1998 PlayWood demanded $350,000 to settle. Defendant rejected the demand but counter offered $225,000. The parties did not settle. In August 2000, after going to trial, a jury returned a verdict in favor of PlayWood. An officer of Learning Curve estimated that the verdict would cost Learning Curve about $6 million. Learning Curve later merged with RC2 who settled the PlayWood litigation for over $11 million. Learning Curve and RC2 filed a malpractice action claiming defendants negligently failed to advise them that it faced a significant risk of incurring an adverse judgment. The Circuit Court entered summary judgment for attorneys and corporation appealed.
1. Did Learning Curve violate Illinois law by assigning its malpractice claim?
2. Did Learning Curve sustain any damages from payment of the settlement and attorney fees incurred after the merger?
1. No. Learning Curve’s assignment of part of its legal malpractice claim to its former shareholders did not violate public policy because it assigned it to shareholders who actually suffered the loss due to the alleged malpractice.
2. No. Learning Curve did not suffer any damages therefore it had no claim for legal malpractice because the indemnity provision in the merger agreement eliminated its loss even though the new company was reimbursed from an escrow account that former shareholders would have otherwise received.
Lesson: There is no claim for legal malpractice if there aren’t any damages.
Posted in: Illinois