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Campania Management Company v. Rooks

May 14, 2002

CAMPANIA MANAGEMENT COMPANY, INCORPORATED, PLAINTIFF-APPELLANT,
v.
ROOKS, PITTS & POUST, A LAW FIRM, AND FRANK ROWLAND, DEFENDANTS-APPELLEES.
ROOKS, PITTS & POUST, A LAW FIRM, PLAINTIFF-APPELLEE,
v.
CAMPANIA MANAGEMENT COMPANY, INCORPORATED, DEFENDANT-APPELLANT.



Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 00 C 4397 & 00 C 4577--Suzanne B. Conlon, Judge.

Before Bauer, Coffey and Evans, Circuit Judges.

The opinion of the court was delivered by: Coffey, Circuit Judge

Argued January 23, 2002

A third-party claims administrator, Campania Management Company ("Campania"), hired the law firm of Rooks, Pitts & Poust ("Rooks") to defend Metropolitan Rehabilitation Services, Inc. ("MRSI") in a products liability case filed against MRSI in the Circuit Court of Cook County, Ill. In spite of the fact that Rooks settled the case, Campania refused to pay Rooks, and this breach of contract suit followed. The district judge held a one-day bench trial and found that Rooks was entitled to recover attorney's fees and expenses totaling $101,300. The judge also awarded prejudgment interest of $8,700. Campania appeals, arguing that the district court abused its discretion by refusing to continue the case and by denying Campania's motions to file an amended counterclaim and an amended answer several weeks before trial. Campania also argues that the court's rulings on the breach of contract and interest claims were against the manifest weight of the evidence. We affirm.

I. FACTUAL BACKGROUND

A. Campania's Voluntary Dismissal and Proposed Amended Answer

Campania retained the Rooks law firm in October 1994, after Scott Mann, a person with disabilities, sued MRSI and a co-defendant, alleging that they were responsible for supplying him with a defective wheelchair that collapsed and caused him to fall to the ground and fracture his right arm. MRSI was insured by Credit General Insurance ("CGI"), a large insurance corporation. CGI hired Campania to retain counsel and manage the defense of any claims brought against CGI's insureds. Campania selected the Rooks law firm to represent MRSI and agreed to pay Rooks's attorneys and paralegals hourly rates of $160 and $65, respectively. The contract further required that Rooks submit monthly invoices to Campania and, in turn, be reimbursed every sixty days for all of its reasonable fees and expenses.

The lawsuit against MRSI progressed in Illinois state court and eventually settled in September 1999 after Mann backed down from his original demand for $6.1 million and dismissed his claim in exchange for $475,000 payable over seven years. Rooks thereafter presented Campania with a final invoice for $101,143 in fees and expenses. Campania refused to pay, asserting that Rooks had breached the contract by failing to submit monthly invoices to Campania between July 1998 and September 1999. Campania also maintained that Rooks had performed legal services that were substandard because Rooks was unable to convince the state trial judge to allow MRSI to bring a counterclaim for indemnity against the co-defendant, thus barring the possibility of any recovery of settlement costs from the co-defendant.

In response to Campania's actions, Rooks sued Campania in state court for breach of contract. Campania, in turn, filed a separate legal malpractice claim against Rooks. Both of these cases were removed to federal court, consolidated, and assigned to U.S. District Judge Suzanne B. Conlon, who entered a Uniform Scheduling Order immediately after the assignment of the case in August 2000. Three months later, upon a joint motion of the parties, Judge Conlon issued an amended scheduling order establishing January 22, 2001 as the deadline for completing all discovery and filing any dispositive motions. The order explicitly stated that "NO FURTHER EXTENSIONS" would be granted and that trial would commence during the March 2001 civil term.

This case moved forward uneventfully until January 16, 2001, when Campania filed two separate motions a mere six days before the date for the close of discovery. In its first motion, Campania asked the district court to dismiss its counterclaim for monetary damages caused by Rooks's alleged legal malpractice. In the second motion, Campania asked the district court for leave to amend its answer in order to: (1) deny retaining Rooks and argue that CGI--not Campania--had hired Rooks to represent MRSI in the underlying state court suit; and (2) raise an affirmative defense that, in any event, Campania was not liable for damages because Rooks breached the contract by committing legal malpractice.

Campania's amended answer reflected a complete reversal in trial strategy, for Campania had previously admitted that it was the party that hired and agreed to reimburse Rooks for the costs of defending MRSI. Campania's about-face was prompted by the fact that CGI had allegedly filed for bankruptcy in the State of Ohio on some date unspecified prior to January 16, 2001. The practical effect of CGI's bankruptcy was that Campania could no longer anticipate reimbursement from CGI if the district court entered a judgment in Rooks's favor. Thus, by moving to amend its pleadings, Campania was attempting to change its trial strategy and argue that it was acting merely as an agent for CGI and, thus, had no legal obligation to pay Rooks's fees and expenses.

Naturally, Rooks opposed the motion to amend, arguing that it would be prejudiced by Campania's newly minted theory of defense because the discovery deadline was set to expire in six days and, thus, Rooks would have no opportunity to depose any witnesses who might have knowledge about CGI's business relationship with Campania. After considering the parties' respective arguments, the trial court entered a minute order stating that Campania "fails to show good cause for its delay in asserting new theories of liability, while Plaintiffs demonstrate prejudice." The court granted Campania's motion to dismiss its legal malpractice claim but denied Campania's motion to amend its answer on file.

B. Campania's Proposed Counterclaim and Motion to Amend, Extend and Continue

In the meantime, Mann commenced a new lawsuit against Campania in the Circuit Court of Cook County. This suit was filed January 25, 2001 and alleged that Campania failed to make more than the first two installment ...


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