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STEDMAN v. HOOGENDOORN

February 18, 1994

W. DAVID STEDMAN, Plaintiff,
v.
HOOGENDOORN, TALBOT, DAVIDS, GODFREY & MILLIGAN, et al., Defendants.



The opinion of the court was delivered by: MILTON I. SHADUR

 Remaining defendants Hoogendoorn, Talbot, Davids, Godfrey & Milligan (a Chicago law firm referred to here as "Hoogendoorn Firm") and Edward Willey d/b/a Edward Willey Commercial Investigations ("Willey") have moved for summary judgment in this multi-count diversity-of-citizenship action brought against them by W. David Stedman ("Stedman"). Their motions target all of Stedman's claims as advanced against Hoogendoorn Firm and Willey in the Third Amended Complaint (the "Complaint"). To prepare the motions for resolution, all the parties have now complied with the requirements of Fed. R. Civ. P. ("Rule") 56 (except for fully satisfying the provisions of this District Court's implementation of that Rule in its General Rule ("GR") 12(m) and 12(n), a subject discussed briefly a bit later). For the reasons stated in this memorandum opinion and order, Hoogendoorn Firm's and Willey's motions are granted and this action is dismissed.

 Procedural Background

 Initially (in late August 1992) Stedman joined with four related plaintiffs -- his wife Sarah W. Stedman ("Sarah"), the W. David Stedman and Sarah White Stedman Foundation and Stedman's daughter Nancy Jane Calloway and her husband Thomas D. Calloway, Jr. (collectively "Calloways")--in the filing of an ill-thought-through (at least in procedural and jurisdictional terms) Complaint against three defendants: Hoogendoorn Firm, Willey (then named only as "Edward D. Willey Commercial Investigations") and Joseph Mahr ("Mahr," then named only as "Joseph Mahr Investigations"). This Court's prompt sua sponte August 27, 1992 memorandum opinion and order directed the attention of plaintiffs' counsel to some obvious jurisdictional flaws in the original Complaint and dismissed it, granting leave to cure those flaws via amendment.

 Although the resulting Amended Complaint and a later pleading captioned "Revised Amended Complaint" did somewhat better, it quickly became clear to everyone except plaintiffs' counsel that the named plaintiffs other than Stedman himself had no place in this litigation--after all, Stedman was the only person with whom Hoogendoorn Firm had dealt and as to whom there was any reason on any defendant's part to foresee the action that Stedman took in claimed reliance on the work for which he had retained Hoogendoorn Firm. This Court so ruled orally on November 13, 1992.

 Stedman's promptly-filed Second Amended Complaint dropped all of the plaintiffs other than Stedman, but that pleading too was then met with Rule 12(b)(6) motions to dismiss filed by each of the three defendants. This Court proceeded to rule on those motions orally, and on January 5, 1993 Stedman's final version of his pleading (as already stated, it is referred to here as the "Complaint" for convenience) emerged:

 
1. Complaint Count I charged Hoogendoorn Firm with breach of contract.
 
2. Count II asserted breach of contract claims against Mahr and Willey.
 
3. Count III charged all three defendants with negligent misrepresentation.
 
4. Count V (there was no Count IV) charged Hoogendoorn

 Firm alone with negligence--a lawyer malpractice claim. After the matter was then brought to issue (at last), summary judgment motions followed from all three defendants.

 One last procedural (and substantive) step preceded the current ruling. In his response to the Hoogendoorn Firm and Willey Rule 56 motions, Stedman stated in part that "in a separate motion [he] will voluntarily dismiss Mahr as a defendant in this action." On November 29, 1993 this Court ruled orally that Mahr was entitled to more than that -- that it was unnecessary for him to wait on Stedman's voluntary action to take Mahr out of litigation that it had long been apparent was brought against him improvidently. Accordingly this Court ruled that there was no genuine issue of material fact as to Mahr and that he was entitled to a judgment as a matter of law (the Rule 56 standard). That determination was coupled with a Rule 54(b) determination of finality (see National Metalcrafters v. McNeil, 784 F.2d 817 (7th Cir. 1986)). *fn1"

 Summary Judgment Standards and Documentation

 This Court regularly repeats the operative standards for dealing with Rule 56 motions. Here is its recent summarization as set out in Donato v. Metropolitan Life Ins. Co., 822 F. Supp. 535, 536-37 (N.D. Ill. 1993):

 
Rule 56 imposes on the movant the burden of establishing the lack of a genuine issue of material fact ( Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)). For that purpose a "genuine" issue does not exist unless record evidence would permit a reasonable factfinder to adopt the nonmovant's view ( Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986)), and only facts that would prove outcome-determinative under substantive law are "material" ( Pritchard v. Rainfair, Inc., 945 F.2d 185, 191 (7th Cir. 1991)). In both respects this Court is "not required to draw every conceivable inference from the record--only those inferences that are reasonable" in the light most favorable to the nonmovant ( Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir. 1991)).

 No doubt because of the checkered history of the litigation, with all of its false starts, neither Hoogendoorn Firm nor Willey complied fully with this District Court's GR 12(m) implementation of Rule 56. Stedman understandably then tendered no GR 12(n) submission, having nothing to which such a response could be directed. Less understandably, however, the principal part of the Appendix that Stedman filed in support of his response to the summary judgment motions (cited "Stedman App. Ex. --") consists of information that postdated Stedman's retainer of Hoogendoorn Firm and the ensuing investigative activity that forms the gravamen of the Complaint. Because Stedman has not been so presumptuous as to charge either defendant with the lack of a crystal ball to foresee the future, those submissions are wholly irrelevant and will of course be ignored.

 Facts2

 Before March 1990 Stedman (a North Carolina resident and citizen) had the occasion to retain Hoogendoorn Firm partner Edward Tiesenga ("Tiesenga") to handle a few legal matters here in Chicago. Then on March 26, 1990 Stedman telephoned Tiesenga about Stedman's prospective purchase of some valuable rare coins from a Minneapolis (Hennepin County) dealer named Michael Blodgett ("Blodgett"), president of T.G. Morgan, Inc. ("Morgan"). Stedman told Tiesenga that he had already checked Blodgett and Morgan out in his own way and had engaged in similar business transactions with them *fn3" but that he wanted to check them out more carefully before buying any more coins (Stedman Dep. 12). To that end Stedman orally retained Hoogendoorn Firm (through Tiesenga) to obtain a further background investigation of Blodgett and Morgan.

 Although to be sure a summary judgment motion is not the occasion for "weighing the evidence and determining the truth of the matter" ( Anderson, 477 U.S. at 249), the fact remains that the Rule 56 standard equates to that under Rule 50(a) ( id. at 250-52) -- and here there are portions of Stedman's testimony that are so at odds not only with Tiesenga's testimony but also with all the objective facts (and often with any notions of reasonableness) that they need not be credited for Rule 56 purposes. In that respect 10A Charles Wright, Arthur Miller & Mary Kay Kane, Federal Practice & Procedure: Civil 2d ยง 2727, at 170 (2d ed. 1983) quotes a statement from Judge Learned Hand as having established the principle "that the evidence offered must have the force needed to allow a jury to rely on it and the court may disregard an offer of evidence that is too incredible to be believed" (also see cases cited there and in the 1993 pocket part). Judge Hand's statement (and that of Wright, Miller & Kane) of course preceded Anderson, which stated the Rule 56 and Rule 50(a) inquiry in somewhat less demanding terms: "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law" (477 U.S. at 251-52). This opinion applies that standard.

 For example, Tiesenga was very explicit that Stedman imposed an express 72-hour time limit within which the investigation had to be completed (garnering as much information as was possible within that period), because that was the time frame within which Stedman said he had to make his new investment decision (Tiesenga Dep. 17-19). *fn4" In sharp contrast, Stedman waffled on the subject in his deposition, conceding only that "it's quite possible that" he imposed such a time limit (Stedman Dep. 22). Under those circumstances this Court is entirely justified in crediting Tiesenga's version, and it does so.

 On a closely related subject, Tiesenga swore that he responded to Stedman's tight deadline by saying that he would have to use a private investigator to conduct the investigation (Tiesenga Dep. 19). Tiesenga's recollection is that Stedman then asked how much that would cost, that Tiesenga responded that it should be possible for "somewhere in the ballpark of $ 500 . . . to fund an investigator who can devote a great deal of time to it between now and 72 hours," and that Stedman then authorized the use of an investigator in that range of cost (id.). *fn5" But Stedman's testimony sought to paint a different picture -- that he expected Tiesenga to perform the investigation himself (Stedman Dep. 19), though he conceded that he didn't ask Tiesenga to do so (id.). Later Stedman backpedaled from that statement in a meaningful way by saying (in response to questions about Willey's written report) that he "looked to Mr. Tiesenga and Hoogendoorn to do -- to handle that, to choose the people, if they chose them" (id. at 60, emphasis added).

 Here too the required favorable inferences cannot aid Stedman. After all, he was hiring a Chicago lawyer and not a Minneapolis lawyer to do the work of investigating a Minneapolis individual and his company on a crash basis. If Stedman had been calling a Minneapolis lawyer, his story of imposing an obligation on the lawyer to do the work in person could have been plausible. But the circumstances here put the lie to any suggestion of that sort. *fn6" Especially in light of Stedman's current insistence that the key information he wanted was as to any criminal record of Blodgett and his company -- information that could be obtained only by an on-site examination of Hennepin County records -- Stedman's obvious effort to do reconstructive surgery to historical fact must be rejected. Again it is Tiesenga's version of the conversation that properly forms part of the factual matrix for the current motions.

 Consistently with that conversation and with Stedman's extremely short timetable, Tiesenga immediately telephoned Mahr, a private investigator operating in Hinsdale, Illinois with whom Hoogendoorn had previously done business. Mahr did not have the time to conduct the inquiry, so he referred Tiesenga to Willey, a private investigator based in northern Wisconsin--more precisely in Sayner, Wisconsin. Willey accepted the time-limited assignment when Tiesenga telephoned him in the afternoon of March 26 (though by then an entire working day of the three-day time frame had elapsed). At 5:30 p.m. on March 26 Tiesenga faxed Willey a letter confirming the nature of the assignment and containing all of the information that Stedman had given to Tiesenga (Willey Dep. Ex. 1). Here is how that letter described the investigatory assignment:

 
Our objective is to determine whether Blodgett, his company (Morgan) or any other company or affiliate has any negative history such as a bankruptcy, civil or criminal investigation, litigation, or conviction of any kind.

 During the next two days Willey covered a great deal of ground (metaphorically, not literally, for his investigative procedures involve a good deal of sophisticated electronic information-gathering in preference to on-site activity). In the course of his investigation Willey reported his findings back to Tiesenga, who in turn passed the information along to Stedman by fax on March 27, by phone on March 28 and then again by fax on March 29. Excerpts from the text of the two faxes (both of which are Exhibits to the Complaint) are set out in more detail in the course of the later discussion. For the moment, however, it is fair to summarize that the reports contained numerous reservations in terms of incomplete data as well as some very substantial "red flag" warning signs, though Willey had not uncovered any express incriminating evidence as to Blodgett or Morgan.

 After being apprised of the results of the investigation, Stedman elected to ignore the warnings that he had been given (including Tiesenga's orally expressed misgivings, as to which Stedman -- clearly a person of strong views -- considered Tiesenga as overstepping the bounds of his responsibility) and to proceed with the investment. Stedman made substantial additional purchases of rare coins from Blodgett and Morgan, both for his own account and for the account of other members of his family: his daughters Sarah Elizabeth Stedman ("Sarah") and Ann Louise Stedman ("Anne") as well as the Calloways. *fn7" Stedman borrowed funds to finance the purchases from financial institutions under the condition that Stedman would act as guarantor, backing Calloways' loan in part and the loans to Stedman's other two daughters in full.

  It turned out that the strong warnings by both Willey and Tiesenga (both of whom had suspected that Blodgett might be working a scam) were dead right and that Stedman -- who thought that he knew better -- was dead wrong. Blodgett's representations proved to have been false, and the coins that Stedman purchased for himself and his clan were in reality worth but a fraction of their cost. It also turned out that although both the Minnesota State Police Bureau of Criminal Investigation and the Minnesota Attorney General's Office had given Blodgett a clean bill of health in response to Willey's inquiries, Hennepin County records that Willey had not sought to search (more on this subject later) would have provided adverse information. Those records (which were later obtained by an investigator that Stedman hired to dig into the matter after the investment turned sour) reveal that in August 1984 Blodgett had been accused of four felony charges described as "theft by swindle of $ 2,500." Stedman's later investigator also obtained a statement by an investigator for the Hennepin County Attorney's Office describing Blodgett's modus operandi as involving the falsification of sales contracts to acquire bogus sales commissions from his then employer. At Blodgett's sentencing hearing (a transcript of which was also part of the public record) he confessed and entered into a plea bargain under which he pleaded guilty to a reduced charge, served a 12-month probationary period and agreed to repay his ex-employer $ 30,150.60 in restitution (Stedman App. Ex. 8).

 In this action Stedman seeks to use that conviction as the springboard for shifting the entire loss from his ill-considered investment to Hoogendoorn and Willey. To do so he falsely portrays the sole focus of the investigation that he asked Tiesenga to arrange for as directed to Blodgett's criminal record. As Stedman portrays the matter, the presence or absence of such a record was the only on-off switch for his $ 3 million investment -- his simplistic statement of the causal nexus is essentially:

 
Criminal record equals no investment, while no criminal record equals investment (despite all of the other danger signals that were sounded by Tiesenga and Willey but were ignored by Stedman).

 But the extreme nature of that contention on Stedman's part (one that is at such substantial odds with the facts) does not excuse the need to analyze his claims one by one. This opinion turns to that task.

 Breach of Contract Claims

 Stedman launches a breach of contract claim against each defendant. Count I alleges that Hoogendoorn Firm breached its contract with Stedman -- one that (as already indicated) Stedman labels solely as an undertaking to investigate Blodgett's criminal background, while Count II avers that Willey breached his own separate contract with Hoogendoorn -- an agreement upon which Stedman seeks to recover as a third-party beneficiary (Complaint P25). Elements essential to a cause of action for breach of contract under Illinois law *fn8" are (1) the existence of a valid and enforceable contract containing both definite and certain terms; (2) performance by the plaintiff; (3) breach of the contract by the defendant; (4) resultant injury to the plaintiff -- that is, damages resulting from the breach ( Nielsen v. ...


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