In The United States Court of Appeals For The Seventh Circuit
In The United States Court of Appeals For The Seventh Circuit
2001)
Appeal from the United States District Court for the Northern District of
Illinois, Eastern Division. No. 97 C 1200--Rebecca R. Pallmeyer, Judge.
Robert P. Cummins, Cummins & Cronin, Chicago, IL, for Plaintiffs.
Thomas P. Sullivan, David Jumenez-Ekman (argued), Jenner & Block,
Chicago, IL, for Defendants-Appellants.
J. Kent Mathewson, Karen Kies DeGrand (argued), Donohue, Brown,
Mathewson & Smyth, Chicago, IL, for Defendant-Appellee.
Before Kanne, Diane P. Wood, and Williams, Circuit Judges.
Kanne, Circuit Judge.
After the transaction's January 1996 closing date, the Alpers realized that all
was not as they had intended. They allege that, contrary to their wishes, both
the retail business and the wholesale merchandising business had been
transferred to DTS, rather than just the former. Further, a key TPI employee,
Timothy Avers, had gone to work for DTS, which the Alpers allege was in
violation of a non-compete agreement. The Alpers hired the law firm of Bickel
& Brewer ("Bickel") to sue DTS and Avers on a variety of claims, including
fraudulent inducement, breach of contract, civil conspiracy, and unfair
competition. Bickel filed suit in state court, and later filed a second suit in
federal court alleging violations of the federal securities and antitrust laws in
addition to the aforementioned state law claims. The Alpers voluntarily
dismissed the claims in state court, though their reason for doing so is disputed.
The dis trict court subsequently dismissed the Alpers' federal claims under Rule
12(b)(6) of the Federal Rules of Civil Procedure and declined to exercise
supplemental jurisdiction over the state law claims. See Terrific Promotions,
Inc. v. Dollar Tree Stores, Inc., 947 F. Supp. 1243, 1249 (N.D. Ill. 1996). The
Alpers, who were at that time represented by Bickel, did not appeal these
rulings. Under Illinois law, a plaintiff who voluntarily dismisses an action is
only permitted one refiling of that cause of action, thus it is possible that the
Alpers are now procedurally barred from pursuing further litigation against
DTS and Avers. See 735 Ill. Comp. Stat. Ann. 5/13-217 (West Supp. 2001);
Timberlake v. Illini Hosp., 676 N.E.2d 634, 636 (Ill. 1997) (holding that section
13-217 barred refiling by plaintiff who had already voluntarily dismissed action
in state court and had action dismissed for lack of pendent jurisdiction in
federal court).
In light of the above events, the Alpers filed suit pursuant to 28 U.S.C. sec.
1332 in the United States District Court for the Northern District of Illinois,
alleging, inter alia, professional negligence on the part of Altheimer & Gray
and two of the firm's attorneys-- Myron Lieberman and Robert L. Schlossberg
(collectively referred to as "Altheimer"). The Alpers claim that Altheimer failed
to protect the Alpers' interests by negligently drafting the documents that
transferred TPI to DTS. This negligence allegedly gave DTS control of the TPI
wholesale merchandising business and allowed DTS to hire Avers and other
key merchandising personnel. The claim is still pending in the district court.
The Contribution Act provides that "where 2 or more persons are subject to
liability in tort arising out of the same injury to person or property, . . . there is a
right of contribution among them, even though judgment has not been entered
against any or all of them." 740 Ill. Comp. Stat. Ann. 100/2(a) (West 1993,
Supp. 2001). For a complaint to properly allege a right of contribution pursuant
to the Act: 1) the defendant and the third party "must both be subject to liability
in tort to the [plaintiff], and 2) their liability must arise out of the same injury."
People v. Brockman, 592 N.E.2d 1026, 1029 (Ill. 1992). Bickel contends that
neither of these requirements are satisfied here. Bickel also contends that
Altheimer's third-party complaint is inconsistent with the goals of the
Contribution Act. We address each argument in turn.
With respect to the first requirement, Bickel alleges that we must ask whether it
was liable in tort to the Alpers at the time of the injury alleged in the Alpers'
complaint. Because Bickel was not even hired until after Altheimer's allegedly
negligent conduct occurred, Bickel asserts that it is not liable in tort within the
meaning of the Contribution Act. This reading of the Act, however, is
inconsistent with Illinois case law. To determine whether Bickel is potentially
liable in tort, we look to "the time of the injury out of which the right to
contribution arises." Vroegh v. J & M Forklift, 651 N.E.2d 121, 125 (Ill. 1995).
Altheimer's alleged right to contribution is based on the allegation that Bickel
negligently represented the Alpers.
Under Illinois law, "[a]n action for legal malpractice must plead facts which
establish the existence of an attorney- client relationship; the breach of a duty
owed by virtue of that relationship; and that such negligence was the proximate
cause of injury or of loss to the client." Jackson Jordan, Inc. v. Leydig, Voit &
Mayer, 557 N.E.2d 525, 527 (Ill. App. Ct. 1990), aff'd in part and rev'd in part
on other grounds, 633 N.E.2d 627 (Ill. 1994). Altheimer's third-party complaint
asserts that Bickel had an attorney-client relationship with the Alpers, that
Bickel's negligence led to the triggering of section 13-217, that section 13-217
might prevent the Alpers from pursuing further litigation against DTS and
Avers, and that such a bar would prevent the Alpers from obtaining
compensation from DTS and Avers. While each of these elements will have to
be proven at trial, Altheimer has properly pleaded that Bickel negligently
caused the loss of the Alper's cause of action.
Bickel relies on Vroegh, 651 N.E.2d 121, and Delaney v. McDonald's Corp.,
634 N.E.2d 749 (Ill. 1994), for the proposition that it cannot be held liable in
contribution because it was not retained until after the Alpers were injured by
Altheimer. The discussions in those cases, however, explained that a defendant
may seek contribution from a tortfeasor so long as the plaintiff had a valid
cause of action against the tortfeasor at the time of the injury caused by that
tortfeasor's conduct, even if the plaintiff's direct claim against the tortfeasor is
later barred for a procedural reason. See Vroegh, 651 N.E.2d at 125; Delaney,
634 N.E.2d at 750. Rather than undermining Altheimer's claims, these cases
demonstrate that even if the Alpers are now barred from suing Bickel (due to
operation of 735 Ill. Comp. Stat. Ann. 5/13-217 or otherwise), Altheimer can
still seek contribution from Bickel. We thus find that Altheimer's complaint
satisfies the first element of the Contribution Act.
We thus turn to the primary dispute between the parties, which is whether
Bickel's potential liability arises out of the same injury as does Altheimer's
potential liability. Past Illinois cases have determined that "the proper focus [of
this inquiry] . . . is not the timing of the parties' conduct which created the
injury, but the injury itself." People v. Brockman, 592 N.E.2d 1026, 1030 (Ill.
1992). Thus, if a trier of fact could find that Altheimer's and Bickel's conduct
combined to produce the same injury, Altheimer has properly pleaded a third
party action for contribution, even though the conduct of the two parties
occurred at different times. See id.
11
12
With this proviso in mind, we will compare the Alpers' complaint to the
allegations in Altheimer's third-party complaint to determine whether a
reasonable fact finder could find that Altheimer's and Bickel's liability arose out
of the same injury. The Alpers' First Amended Complaint seeks relief from
Altheimer for misconduct relating to "defendants' misrepresentations and
failure to competently represent the Alpers and protect the Alpers' legitimate
business interests." First Amended Complaint para. 1. The Alpers allege that
Altheimer had a duty, with respect to the Dollar Bill$ transaction, to
competently represent them and to exercise a reasonable standard of care, skill,
and diligence. Plaintiffs assert that defendants breached these duties by:
13
(a) Failing to take all necessary steps to maximize the benefits of the Dollar
Bill$ transaction to the Alpers;
14
(b) Failing to properly document the terms of the Dollar Bill$ transaction as
specified by the Alpers; [and]
15
16
Id., para. 59.1 Plaintiffs allege damages "to the extent of $200,000 in attorney's
fees [the amount paid to Altheimer for their services in connection with the
original transaction] and in excess of $1.5 million attributable to the loss of
their wholesale merchandising business." See Memorandum in Support of
Plaintiffs' Motion for Summary Judgment at 12.
17
In comparison, Altheimer alleges that Bickel was negligent in its pursuit of the
Alpers' claims against DTS and Avers and that the Alpers' inability to obtain
compensation from DTS and Avers for their alleged injuries is the proximate
result of Bickel's negligence. Altheimer asserts that, if the Alpers were
successful on the claims they advanced against DTS and Avers, they could
have obtained relief for all the losses they claimed to have sustained as a result
of the Stock Purchase Agreement and DTS' subsequent dealings with Avers.
This argument overlooks the fact that those suits would not have returned the
$200,000 the Alpers had already paid to Altheimer. Nonetheless, if "the bases
for liability among the contributors" do not have to be the same, Vroegh v. J &
M Forklift, 651 N.E.2d 121, 125 (Ill. 1995), then the fact that the monetary
damage caused by Altheimer's and Bickel's actions is not equivalent should not
be an obstacle to holding both liable for contributing to the same injury.
18
Whether we find that Altheimer and Bickel have caused the same injury
depends on how broadly or narrowly we define the injury. Under a broad
definition of injury, a fact-finder could find that both parties failed to
competently represent the Alpers and protect the Alpers' legitimate business
interests. For example, if the injury encompasses DTS's fraudulent acquisition
and continued retention of the diverting business, and the Alpers' inability to
obtain relief for Avers' defection to DTF, then Altheimer and Bickel could both
have contributed to that injury. In contrast, if the Alpers' injury is that
Altheimer drafted flawed transaction documents, then Bickel cannot be held
liable for that injury because Bickel had no part in the drafting.
19
and by drilling in a manner that caused the discharge of contaminants into the
groundwater. The engineering firm argued that its liability and the defendants'
liability did not arise out of the same injury, but the Illinois Supreme Court
rejected this argument. See id. at 1029-30. Because the State alleged that
defendants created a water pollution hazard, and defendants alleged that the
engineering firm's conduct "contributed to the same water pollution hazard,"
the court determined that "the trier of fact could find that the conduct of the
defendants and [the firm], although separate in time, contributed to produce the
same injury for purposes of the Contribution Act." Id. at 1030.
20
21
A broad characterization of the injury thus seems appropriate here. The district
court's discussion focused on one particular injury: "the inability of the Alpers
to obtain relief for Avers' joining DTS to run a wholesale diverting business."
Alper v. Altheimer & Gray, No. 97 C 1200, 2000 WL 1006740, at *2 (N.D. Ill.
July 19, 2000). The court determined that Bickel2 could not have caused this
same injury based upon the following analysis: 1) Altheimer alleged that the
Alpers never instructed it not to transfer the wholesale business to DTS; 2) If
this were true, the non-compete claims filed in state court would have had little
merit because the Alpers would then have had no protectable interest in
preventing Avers from competing; 3) If the jury finds that Altheimer failed to
provide an adequate cause of action for Avers' defection, then, to seek
contribution, Altheimer will have to argue that Bickel was negligent in failing
to maintain a state court claim cause of action that was inadequate; 4) Under
Roberts v. Heilgeist, 465 N.E.2d 658, 661 (Ill. App. Ct. 1984), attorneys do not
have a duty to pursue fruitless litigation. See Alper, 2000 WL 1006740, at *2-3.
The district court thus held that Bickel could not have caused the same injury
as did Altheimer. See id.
22
This analysis does not address the fact that what is at issue here is a motion for
dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure. When
reviewing such a motion, a court must be careful not to require more than what
is mandated by Rule 8: "a short and plain statement of the claim showing that
the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Altheimer does not
have to prove its factual and legal allegations at this stage, it must only show
that relief is possible. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2
L. Ed. 2d 80 (1957); Bartholet v. Reishauer A.G. (Zurich), 953 F.2d 1073, 1078
(7th Cir. 1992). Further, it is entitled to plead in the alternative, even if the
pleadings are inconsistent. 5 Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure sec. 1283 (2d ed. 1990, Supp. 2001).
23
24
We thus find that Altheimer has properly stated a claim for contribution under
the Contribution Act because Bickel and Altheimer both allegedly failed to
protect the Alpers' interests with respect to DTS and Avers. We note that our
decision today does not speak to the merits of Altheimer's contribution claim. If
the Alpers prevail on their claim against Altheimer, the trier of fact will then
determine whether Bickel is liable for contribution.
B. Public Policy Considerations
25
The district court found that Altheimer could not pursue a contribution claim in
part based upon its determination that public policy considerations militated
against this type of third-party malpractice claim. Though no Illinois case has
declared such a bar, the district court was persuaded by a state court case from
Utah, Hughes v. Housley, 599 P.2d 1250 (Utah 1979). As noted by the district
court, Hughes expressed "policy concerns about imposition of a duty on
successor counsel in favor of his predecessor." Alper v. Altheimer & Gray, No.
97 C 1200, 2000 WL 1006740, at *5 (N.D. Ill. July 19, 2000). A subsequent
Illinois case, Roberts v. Heilgeist, 465 N.E.2d 658, 662 (Ill. App. Ct. 1984), did
cite to Hughes, but only in dicta. Roberts did not reach the issue of "whether
public policy considerations prevent a malpractice plaintiffs' former attorney,
who is the defendant in the malpractice action, from seeking contribution in
that action from the plaintiff's current attorney" but noted that "there is
substantial merit to the rationale of other courts that have considered this
question and have held that . . . suits by a former lawyer against a current or
succeeding lawyer contravene public policy." Id.
26
It does not appear, however, that any Illinois courts have ever followed the
rationale of Roberts. See, e.g., Horizon Fed. Sav. Bank v. Selden Fox & Assoc.,
No. 85 C 9506, 1988 WL 71244, at *2 (N.D. Ill. June 29, 1988). The Illinois
Supreme Court has since recognized that an attorney may bring a third-party
action for contribution against a successor attorney. See Faier v. Ambrose &
Cushing, P.C., 609 N.E.2d 315, 316 (Ill. 1993); see also Brown-Seydel v.
Mehta, 666 N.E.2d 800 (Ill. App. 1996); Goran v. Glieberman, 659 N.E.2d 56
(Ill. App. Ct. 1995). The district court distinguished Faier, Brown-Seydel, and
Goran, and found that Altheimer could still be barred from pursuing its claim
because Altheimer and Bickel did not work "'on the same underlying cause.'"
Alper, 2000 WL 1006740, at *5 (quoting Faier, 609 N.E.2d at 316). It is not
appropriate for a federal court, however, to distinguish state precedent for the
purpose of adopting the reasoning of a non-binding state court decision. The
proper role of a federal court sitting in diversity jurisdiction is to apply state
substantive law, and only "in the absence of" state authority may the district
courts "consider decisions from other jurisdictions." Lexington Ins. Co. v.
Rugg & Knopp, Inc., 165 F.3d 1087, 1090 (7th Cir. 1999). Here was Illinois
authority recognizing the right of an attorney, under Illinois law, to "seek
contribution for a legal malpractice claim." Goran, 659 N.E.2d at 561. Unless
the Illinois courts decide that this type of contribution action is barred by public
policy, or the Illinois legislature sees fit to amend the Contribution Act, the
district court is bound to recognize this right.
II. Conclusion
27
The district court dismissed Altheimer's contribution claim for failure to state a
claim upon which relief could be granted under Rule 12 (b)(6) of the Federal
Rules of Civil Procedure. The judgment of dismissal has been REVERSED and
the case REMANDED for proceedings consistent with this opinion.
Notes:
*
The Alpers also alleged that Altheimer failed to memorialize the fee agreement
Robert Cummins, a lawyer at Bickel & Brewer, was the lawyer engaged by the
Alpers to file the lawsuit against DTS and Avers. The district court opinion thus
refers to the Third-Party Defendant as "Cummings." Cummings subsequently
departed from Bickel and founded his own firm, Cummins & Cronin, which
represented the Alpers in the district court.