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Four Recent Court Decisions

This month we cover four recent decisions three by the Illinois Supreme Court and one by the Illinois Appellate Court, First District: the first is on the doctrine of forum non conveniens; the second is on the actual-damages requirement in an attorney malpractice case; the third is on the applicability of the saving provision of section 13-207 of the Code of Civil Procedure to allow an otherwise time-barred counterclaim to proceed; and the fourth is on the economic loss doctrine in an architectural malpractice case.    

1. The Illinois Supreme Court dismisses another case filed in Madison County based on the doctrine of forum non conveniens.

The Illinois Supreme Court recently held that a circuit court judge in Madison County erred when he refused to dismiss a class action complaint against State Farm Mutual Automobile Insurance Company (State Farm) based on the doctrine of forum non conveniens since all of the forum non conveniens factors favored dismissal in favor of a Louisiana forum.  Gridley   v. State Farm Mut. Ins. Co., No. 94144, 2005 WL 3071729 (Ill. Nov. 17, 2005).

Plaintiff, Christopher Gridley, a resident of Louisiana, filed a class action complaint in the circuit court of Madison County on behalf of himself and a proposed nationwide class against State Farm.  Gridley™s complaint alleged unjust enrichment and violations of the Illinois Consumer Fraud and Deceptive Practices Act in connection with State Farm™s sale of salvage vehicles.  State Farm moved to dismiss the complaint on the basis of forum non conveniens arguing that Louisiana, not Illinois, was the most convenient forum.  Alternatively, State Farm argued that the case should be transferred to McLean County where State Farm™s principal place of business is located.  The circuit court denied State Farm™s motion.  The appellate court subsequently remanded the case for entry of a detailed discovery order that would produce information relevant to the issues raised in the forum non conveniens motion.  The Supreme Court then granted State Farm™s petition for leave to appeal and reversed the judgments of the circuit and appellate courts and remanded the case to the circuit court for entry of an order granting State Farm™s motion to dismiss based on forum non conveniens.

The facts of the case revealed that Gridley, the only named plaintiff, was a resident of Louisiana, the events giving rise to the complaint were alleged to have occurred in Louisiana, and Gridley alleged violations of Louisiana™s title law.  In addition, State Farm argued that the Illinois Consumer Fraud Act could not apply to an act that took place in another state.

The Supreme Court agreed with State Farm that the appellate court improperly focused on the putative class allegations in deciding to remand the case for further discovery.   (In holding that the appellate court erred in remanding the case for further discovery concerning the putative class, however, the court emphasized that it was not holding that a court can never consider the identity, number and location of potential class members in deciding a forum non conveniens motion. Rather, the court noted that every request to transfer based upon forum non conveniens must be decided pursuant to an individualized, case-by-case consideration of convenience and fairness.) 

The court referred to its recent holding in Avery v. State Farm, 216 Ill.2d 100 (2005), that the Illinois Consumer Fraud Act does not apply to fraudulent transactions which take place outside of the state of Illinois, and concluded that Gridley did not have a cognizable cause of action under the Illinois Consumer Fraud Act.

After concluding that Gridley could not state a claim under the Illinois Consumer Fraud Act, the Supreme Court then determined that the trial court erred in denying State Farm™s motion to dismiss the remaining unjust enrichment claim based on the doctrine of forum non conveniens.   The court examined the relevant private and public interest factors and determined that those factors strongly favored dismissal in favor of a Louisiana forum.  The court again reaffirmed that the fact that a defendant conducts business in the plaintiff™s chosen forum is not dispositive of the forum non conveniens issue.  Consequently, the court reversed the judgments of the circuit court of Madison County and the appellate court, and remanded the case to the circuit court of Madison County with directions to dismiss the cause of action.       

2. Plaintiff cannot prevail on an attorney malpractice claim without proof of actual damages.

The Illinois Supreme Court recently held that a plaintiff could not establish a cause of action against its attorneys because it did not suffer actual damages.  Northern Illinois Emergency Physicians v. Landau, Omahana & Kopka, Ltd., et al., Nos. 97895 and 97899, 2005 WL 2298171 (Ill. September 22, 2005).

The events giving rise to the proceedings began when 22-month-old Erica Johnson became ill and was taken by her parents to the emergency room at St. Therese Medical Center in Waukegan. The child was treated by Dr. Bruce Sands, a partner in Northern Illinois Emergency Physicians (NIEP).  Dr. Sands misdiagnosed the child™s condition and she was discharged from the hospital and died a short time later.    

Erica's parents filed a medical malpractice claim against Dr. Sands, NIEP and St. Therese Medical Center. St. Therese then filed a third-party claim for common-law implied indemnity against Dr. Sands and NIEP based on vicarious liability.   Following a jury trial, judgment was entered against all of the defendants in the amount of $4 million.  The trial court then granted a directed verdict against Dr. Sands and NIEP and in favor of St. Therese on the hospital™s indemnity claim.  The defendants all appealed, arguing that they should not have been found liable, that they were entitled to a new trial, and that the jury™s damage award was excessive and not supported by the evidence.

The appellate court subsequently affirmed the judgments against the defendants.   While the appeal was pending, Erica™s parents initiated post-judgment collection proceedings against Dr. Sands and all but one of the NIEP partners. While the litigation continued, St. Therese satisfied the judgment by paying the $4 million to Erica™s parents.

The partners for NIEP, including Dr. Sands, then filed a legal malpractice claim against the lawyers who represented them.  The legal malpractice claim alleged that the NIEP partners had meritorious defenses to the third-party indemnity action asserted by St. Therese but that the attorneys never moved to dismiss that claim or raised an affirmative defense that it was time-barred.  NIEP sought recovery of $4 million from the attorneys.  The attorneys subsequently moved for summary judgment, arguing that the malpractice claim could not be sustained because NIEP suffered no actual damages.  The trial court granted the attorneys™ motion, finding that NIEP had paid nothing to St. Therese and the attorneys™ alleged malpractice could not be said to have caused any actual damages.  The appellate court reversed the trial court ruling, holding that the fact that the indemnity judgment had been entered and remained outstanding could constitute proof of actual damages as a result of the alleged negligence. The Illinois Supreme Court subsequently granted the attorneys™ petition for leave to appeal.

The Supreme Court agreed with the attorneys that summary judgment was properly entered in their favor and that the appellate court erred in reversing the trial court™s summary judgment order.  The court determined that because NIEP was already liable for the entire $4 million judgment, entry of the indemnity judgment on St. Therese™s third-party claim did not impose any greater burden on the partnership than it already had.  The court recognized that [e]ven if the attorneys had succeeded in defeating the indemnity claim as time-barred, NIEP™s situation would be unchanged.  It would still have been liable for $4 million in damages,  The only difference is that it would have owed those damages directly to Erica™s parents rather than to St. Therese.  A mere change in the judgment creditor, without more, entails no quantifiable damages.  It is therefore insufficient to meet the requirement of actual damages necessary to sustain a cause of action for legal malpractice.  Accordingly, the circuit court was correct in granting the motion for summary judgment filed by the defendant attorneys in this case.                 

3. The saving provision of Section 13-207 of the Code of Civil Procedure allows time-barred counterclaim for contribution to proceed.

The Illinois Supreme Court recently addressed the issue of whether section 13-207 of the Code of Civil Procedure, which allows counterclaims to proceed even when otherwise barred by the statute of limitations, should have been applied to save a responsive counterclaim for contribution that was admittedly time-barred by the two-year statute of limitations set forth in section 13-204 of the Code.  The court answered in the affirmative.  Barragan v. Casco Design Corp. (2005).

On July 7, 1997, Jesus Barragan was injured and his brother, Roberto Barragan, was    killed when a masonry wall collapsed at the construction site where the two were working.  At the time of the accident, the Barragans were employed by Masonry Construction Corporation, a   subcontractor on the project.  Osman Construction Company was the general contractor and defendant Casco Design Corporation was the architect that designed the specifications for the project.

Jesus Barragan and Veronica Barragan, the special administrator of Roberto™s estate, filed suit against Osman and Casco.  Casco later filed a counterclaim for contribution against Osman and Osman filed a counterclaim for contribution against Casco.

 In January 2001, the trial court approved a settlement agreement between the plaintiffs   and Osman that required Osman to pay plaintiffs $4.65 million.  The agreement extinguished plaintiffs™ claims against both Osman and Casco but noted that Osman had retained the right to proceed with its counterclaim against Casco.

Casco subsequently moved to dismiss Osman™s counterclaim for contribution on the basis that it was barred by the two-year statute of limitations set forth in section 13-204 of the Code because it was filed more than two years after the date Osman was served with process on plaintiffs™ underlying complaint.  Osman argued that section 13-207 of the Code is a saving provision that allows a counterclaim to be filed in response to a pleading despite the two-year limitation period set forth in section 13-204.  The trial court rejected Osman™s position and the appellate court affirmed. Osman™s petition for leave to appeal was subsequently granted by the Illinois Supreme Court.

The Supreme Court reversed the judgments of the appellate and circuit courts.  The court recognized that section 13-207 is a saving provision that allows a counterclaim to proceed despite the failure to comply with the appropriate statute of limitations.  The court noted that one purpose of section 13-207 is to protect parties who have shorter limitations periods than their opponents.  The court stated that it has been often noted that section 13-207 prevents plaintiffs from intentionally filing their claims as late as possible in order to preclude defendants from a reasonable opportunity to file their counterclaims within the original limitations period.  The court also noted that application of section 13-207 is premised on the notion that a plaintiff waives application of the statute of limitations with regard to potential counterclaims, and that potential litigants do not always promptly file every claim they have and that some litigants may refrain from filing until after a claim is brought against them.  Accordingly, the court held that the interplay between sections 13-204 and 13-207 allows Osman™s otherwise time-barred counterclaim to proceed.          

4. Trial court properly dismissed malpractice claim against architect brought under theory of negligent design.

The Illinois Appellate Court, First District, recently held that a plaintiff may not recover economic damages against an architect under a theory of negligent design because it is barred by the economic loss doctrine.  Martusciello v. JDS Homes, Inc., No. 1-04-1495, 2005 WL 2347683 (Ill.App.1st Dist. Sept. 26, 2005).

Plaintiffs Frank and Lisa Martusciello filed a lawsuit claiming that they hired defendant Larson Kramer and Associates ("Kramer") to design a luxury home for them.  Defendant JDS Homes Inc. ("JDS") was hired to build the house.  Plaintiffs alleged that Kramer's design was not sufficient in detail, leaving JDS Homes to "fill in the blanks."  Plaintiffs also alleged that JDS  made inappropriate or improper decisions in "filling in the blanks," resulting in defects in their home.  These alleged defects included window breakage, drainage problems, water leaks, crumbling balustrades, improperly sloped stairs and porch, and a poorly constructed deck.  Plaintiffs sought recovery for economic loses in an amount necessary to repair the defects.  Count I of the Complaint was for negligence against Kramer and alleged that Kramer negligently designed Plaintiffs™ home.

Kramer moved to dismiss Count I of the complaint arguing that it was barred by the Moorman doctrine which prohibits economic loss in tort cases and requires claims for economic loss to be brought in contract.  The trial court agreed with Kramer and granted its motion to dismiss.  Plaintiffs then appealed.   The appellate court affirmed the trial court's dismissal of  Count I  of Plaintiff's complaint citing to  2314 Lincoln Park West Condominium Association v. Mann, Gin, Ebel & Frazier, Ltd, 136 Ill.2d. 302 (1990), a case in which the Illinois Supreme Court held that there is no exception to the rule set forth in Moorman, which would allow plaintiffs to recover economic losses for negligent design of an architect.  The appellate court reasoned that the Plaintiffs™ claim concerns quality, rather than safety of the building, and therefore is more appropriately resolved under contract law.  The court rejected Plaintiffs' argument that Congregation of the Passion, Holy Cross Province v. Touche Ross & Company, 159 Ill.2d 137 (1994), reinterpreted 2312 Lincoln Park to apply only where a contract exists between the architects and the plaintiff-client.  The court explained that Congregation of the Passion case only permitted recovery of economic damages caused by breach of professional duty which is of an intangible nature that cannot be measured in contract terms, such as the intangible services that are created by  an attorney or accountant for their client.  In contrast, the court held that an architect creates something tangible such as a blueprint or the structure of a building that can be memorialized in a contract and, therefore, there is no exception to the economic loss doctrine for the negligence of an architect.